Opinion
68034-0-I
02-11-2013
KARNAIL JOHAL, YEVGENI OSTROVSKI, and GRIGORY YELKIN, Appellants, v. CITY OF SEATTLE, a Subdivision of the State of Washington, Respondent/Third Party Plaintiff, v. The STATE OF WASHINGTON DEPARTMENT OF TRANSPORTATION, Third Party Defendant.
UNPUBLISHED OPINION
Schindler, J.
As part of a construction project in the mid-1980s, the Washington State Department of Transportation (WSDOT) required the City of Seattle to relocate and reconstruct an underground power line, sewer pipe, and storm drainage pipe on City-owned property. WSDOT issued a permit giving the City permission to relocate and operate the underground utilities on adjacent property owned by WSDOT until a permanent easement was executed. In October 2005, Karnail Johal, Yevgeni Ostrovski, and Grigory Yelkin (collectively Johal) entered into a real estate installment contract with WSDOT to purchase surplus highway right-of-way property. The City's underground utilities were located on the property. The real estate installment contract expressly states that Johal agreed to purchase the property "in its current conditions" and "[s]ubject to all existing encumbrances, including but not limited to, easements, restrictions, and reservations, if any." After discovering the existence of the underground utilities, Johal filed a quiet title action against the City seeking either ejectment or damages. The City filed a third party complaint against WSDOT and a counterclaim to quiet title to an easement to operate and maintain the underground utilities on the property. We affirm entry of the judgment and decree quieting title to the City for the easement.
Although the 2005 contract names only Karnail Johal and Yevgeni Ostrovski as purchasers, the trial court's unchallenged findings establish that Grigory Yelkin was "a financial participant in the transaction."
FACTS
Relocation of City-Owned Underground Utilities
In the mid-1980s as part of an Interstate 90 (I-90) construction project, WSDOT required the City of Seattle to relocate and reconstruct three underground utility lines. Those utilities included a high-voltage underground power transmission line, a sanitary sewer pipe, and a storm drain pipe located on City-owned property.
WSDOT and the City entered into a number of agreements governing the relocation and reconstruction of the utilities to adjacent property owned by WSDOT. Consistent with the terms of the August 8, 1983, "Master Construction Agreement GC-7263" (Master Agreement); the May 21, 1984, "Task Order #4"; and the October 29, 1984, "Task Order #9" (Task Orders), the City relocated and reconstructed the underground utilities. The terms of the Master Agreement specifically required WSDOT to enter into " 'a common use agreement or easement document for perpetuating the existing property rights of the City, ' " and to " 'define the existing and future rights of the City with respect to relocation of existing facilities.' " The Task Orders also state that " 'the City and State [WSDOT] shall enter into a separate easement agreement to perpetuate existing or replacement property rights of the City, and to define the locations and conditions of said easement.' "
(Alteration in original.)
On July 26, 1984, WSDOT issued an "Interim Permit to Enter Upon State-Owned Property" (Permit). The Permit authorizes the City to relocate and reconstruct the underground utilities on the adjacent WSDOT-owned property. The Permit expressly states that it "shall be in full force until the contemplated easement has been properly executed and recorded." The City completed relocation and construction of the underground utilities by 1987.
For a number of years, WSDOT and the City exchanged draft agreements that included a legal description for the underground utility easement. However, a final easement agreement was never executed or recorded. As authorized by the Permit, the City continued to operate and maintain the underground utility lines on the WSDOT property.
Real Estate Installment Contract
On October 24, 2005, Johal entered into a real estate installment contract with WSDOT to purchase surplus highway right-of-way property for $25,000. The WSDOT representatives responsible for negotiating the real estate installment contract with Johal were unaware of the existence of the underground utilities on the property.
Nonetheless, the express terms of the real estate installment contract state that Johal agrees to purchase the property "in its current conditions" and "[s]ubject to all existing encumbrances, including but not limited to, easements, restrictions, and reservations, if any." The contract requires Johal to make payments of $181.26 per month "until the balance of the purchase price is fully paid." After full payment of the purchase price, WSDOT agreed to transfer legal title "free of encumbrances except those existing at the date hereof, and any that may accrue hereafter through any person other than Seller."
The contract was recorded on October 24, 2005.
Quiet Title Action
After discovering that the City's underground utilities were located on the property, Johal filed a quiet title and ejectment action against the City. In the alternative, Johal asserted a claim for inverse condemnation and damages. Johal alleged that he held an "equitable title to the subject Property, " and the City "does not have any legal or equitable interest" or right to use the property "for an underground transmission line." Johal sought entry of a judgment quieting title in the property. Johal further alleged that any interest the City claimed "would be subordinate" to Johal's interest as a bona fide purchaser.
The City filed a third party complaint against WSDOT and a counterclaim to quiet title in the property for an easement to maintain and operate the underground utilities. The City alleged it "fully complied with WSDOT's request to remove, relocate and reconstruct" the underground utilities "to accommodate the WSDOT Project, and the City detrimentally relied on WSDOT's written promise to grant, execute and record an easement for the Facilities on the Subject Property." The City asserted it had an equitable right to an easement for the underground utilities, "created by either estoppel or part performance pursuant to the written agreements between WSDOT as legal owner of the Subject Property and the City, including the Master Agreement, the Task Orders, including but not limited to Task Order #4 and Task Order #9, and the Permit."
The City also alleged it had a permanent easement for the utilities created by estoppel.
The City also alleged that in May 2007, WSDOT informed Johal that the City " 'does have the right to be on your parcel of land' " under the agreement entered into between WSDOT and the City "during the construction of [I-90] and the reconstruction of various streets in the vicinity of the [I-90] project."
The City alleged WSDOT offered to refund the purchase price and any costs incurred to Johal.
The City sought dismissal of Johal's lawsuit and entry of a judgment quieting title in the City to an easement on the property for the underground utilities and "the right to operate, maintain, construct, build, repair, relocate, reconstruct, and rebuild electrical, water, sewer and storm drainage facilities, including reasonable rights of access for the same."
During a two-day bench trial, Johal, the City, and WSDOT presented testimony from a number of witnesses. The court admitted into evidence approximately 45 exhibits documenting the relocation and reconstruction of the City's underground utilities and the draft easement agreements.
The court ruled that the City was entitled to an easement for construction, operation, and maintenance of the existing underground utilities on the property. The court entered detailed findings of fact describing relocation of the underground utilities, WSDOT's express permission to relocate and operate the underground utilities that would remain " 'in full force until the contemplated easement has been properly executed, ' " and the duty of WSDOT to enter into an easement to " 'define the existing and future rights of the City with respect to relocation of existing facilities.' " The findings state, in pertinent part:
5) The utility work performed by the City on the Subject Property and adjacent WSDOT property was performed pursuant to Task Order #4 to the Master Agreement, dated May 21, 1984 (Trial Exhibit 201) and Task Order #9 to the Master Agreement, dated October 29, 1984 (Trial Exhibit 202) (the "Task Orders").
6) Both Task Orders provided that "the City and State [WSDOT] shall enter into a separate easement agreement to perpetuate existing or replacement property rights of the City, and to define the locations and conditions of said easement."
7) WSDOT issued an "Interim Permit to Enter Upon State-Owned Property" ("Permit") (Trial Exhibit 203) for the purpose of relocating City facilities pursuant to the Master Agreement and Task Orders.
8) The Permit provides that "it shall be in full force until the contemplated easement has been properly executed and recorded."
9) The Permit was intended to cover all City facilities on WSDOT properties pursuant to the Master Agreement, including the City Utilities on the Subject Property.
10) [T]he City relied on the Permit to locate, operate and maintain the City Utilities on the Subject Property and adjacent WSDOT property.
11) WSDOT allowed and never objected to the City entering the Subject Property and adjacent WSDOT property to perform the work required under the Master Agreement, Task Orders and Permit.
12) By 1987, the City had completed all the required work under the Master Agreement, Task Orders, and Permit on the Subject and adjacent WSDOT Property (Trial Exhibits 206, 207, 212 & 213).
13) The City Utilities have remained undisturbed in their present location and fully operational serving the public since 1987 based on rights granted to the City under the Permit.
The trial court also found that there is no evidence that WSDOT employees involved in negotiating and executing the real estate contract installment agreement were aware of either the existence of the City's underground utilities or the agreement to execute an easement to the City.
The court concluded that while Johal was a bona fide purchaser of the property without constructive or actual notice of the existence of the City utilities on the property, under the express unambiguous terms of the real estate installment contract, Johal purchased the property "as is" subject to all encumbrances, including the City's right to maintain and operate the underground utilities located on the property. The court ruled that the evidence established that under the doctrine of part performance, the City had a right to an easement and did not have to comply with the statute of frauds, chapter 64.04 RCW. The court also concluded that the express terms of the Permit established a continuing right for the City to "locate, operate and maintain the City Utilities on the Subject Property . . . until a permanent easement is executed and recorded for the City Utilities and for all other City facilities pursuant to the Master Agreement." The conclusions of law state, in pertinent part:
7) The Master Agreement, Task Orders, and Permit created a duty to finalize the easement agreements for the City Utilities on the Subject Property and for other City facilities identified in the Master Agreement and Task Orders on other WSDOT properties covered by the Permit.
8) WSDOT, by executing the Permit and allowing the City to enter the Subject Property to replace and reconstruct the City Utilities, provided actual possession to the City.
9) The City provided the required consideration to WSDOT by fully performing its obligations under the Master Agreement, Task Orders, and Permit.
10) By completing its work on the City Utilities on the Subject Property, the City made permanent, substantial and valuable improvements, all pursuant and referable to a contract in the form of the Master Agreement, Task Orders, and Permit.
11) The City has easement rights on the Subject Property acknowledged by WSDOT and created by part performance of WSDOT and the City under the Master Agreement, Task Orders, Permit, and draft Easement Agreements.
12) Because part performance on the part of WSDOT and the City has been established, any alleged non-compliance with the Statute of Frauds on the part of the City is excused, and the City's easement interest in the Subject Property for the City Utilities is pre-existing and superior to Plaintiffs' claimed equitable interest in the Subject Property.'''
Accordingly, the court rejected Johal's inverse condemnation claim.
2) The City Utilities have remained undisturbed in their present locations since 1987, and there has been no act by the City that would constitute a taking of the Subject Property or any portion of it since Plaintiffs and WSDOT executed the 2005 Real Estate Contract.
3) The Plaintiffs are subsequent purchasers of the Subject Property and have no valid claim for inverse condemnation against the City for the Subject Property or any portion thereof.
The court entered a judgment and decree quieting title in the City to "a nonexclusive easement for the construction, operation, maintenance, and repair of existing utilities, " and dismissed Johal's claims for quiet title, ejectment, inverse condemnation, and damages.
The judgment and decree incorporates the legal description of the property set forth in an attachment and states that "[t]he easement area includes a portion of the Subject Property, as defined in the Findings of Fact and Conclusions of Law as well as adjacent property owned by WSDOT that was formerly part of 20th Avenue South and South Judkins Street."
ANALYSIS
Johal assigns error to the trial court's conclusion (1) that the Permit established a continuing right to locate, operate, and maintain the underground utilities on the property until a permanent easement was executed; (2) that the City had the right to an easement created by the doctrine of part performance; and (3) that noncompliance with the statute of frauds was excused. Johal further asserts that because he is a bona fide purchaser without notice of the City's easement rights, under the real estate recording statute, RCW 65.08.070, the City's easement interest is void.
We note the legislature amended RCW 65.08.070 in 2012 to add the words "or her" after "his" in the statute. Laws of 2012, ch. 117, § 208.
A quiet title action is equitable in nature. Durrah v. Wright, 115 Wn.App. 634, 639, 63 P.3d 184 (2003). In matters of equity, the trial court has broad discretion to fashion equitable relief. Blair v. Wash. State Univ., 108 Wn.2d 558, 564, 740 P.2d 1379 (1987). We review a trial court's findings of fact and conclusions of law following a bench trial to determine whether substantial evidence supports the findings of fact. Sunnyside Valley Irrigation Dist. v. Dickie, 149 Wn.2d 873, 879, 73 P.3d 369 (2003). Where, as here, the findings of fact are not challenged, we treat the findings as verities on appeal. In re Estate of Jones, 152 Wn.2d 1, 8, 93 P.3d 147 (2004). We review questions of law de novo. Sunnyside, 149 Wn.2d at 880. The construction of a contract is a legal question subject to de novo review. Yeats v. Estate of Yeats, 90 Wn.2d 201, 204, 580 P.2d 617 (1978).
The unchallenged findings support the trial court's conclusion that the Permit granted the City a continuing right to maintain and operate the underground utilities located on the property until an easement was executed. The Permit states, in pertinent part:
WHEREAS, the STATE and the CITY have entered into Master Construction Agreement GC 7263 on August 8, 1983, identifying certain CITY facilities in conflict with STATE construction; and
WHEREAS, the City is now ready to begin construction of said facilities, and
WHEREAS, the Easement document to be granted by the State has not been completed, Now, THEREFORE:
THE STATE OF WASHINGTON, Department of Transportation, acting by and through the Project Development Engineer, hereinafter called the State hereby grants permission to the City of Seattle and/or its authorized representatives to enter upon the following described property: SEE EXHIBIT A ATTACHED HERETO
For the purpose of removing, relocating and/or constructing those certain facilities pursuant to Agreement GC-7263.
This interim permit shall be in full force until the contemplated easement has been properly executed and recorded.
The unchallenged findings also support the trial court's conclusion that the City had the right to an easement created by the equitable doctrine of part performance, and compliance with the statute of frauds was excused.
An express grant of an easement is an interest in land that must comply with the real estate statute of frauds. RCW 64.04.010, .020; Berg v. Ting, 125 Wn.2d 544, 551, 886 P.2d 564 (1995). The statute of frauds, RCW 64.04.010, states that "[e]very conveyance of real estate, or any interest therein, and every contract creating or evidencing any encumbrance upon real estate, shall be by deed." RCW 64.04.020 states that every deed "shall be in writing, signed by the party bound thereby, and acknowledged by the party."
In Berg, the court expressly acknowledged that the doctrine of part performance is an exception to the statute of frauds and the recording statute. Berg, 125 Wn.2d at 556.
Under the doctrine of part performance, an agreement to convey an estate in real property which is not in writing in compliance with the requisites of RCW 64.04.010 and .020 may be proved without a writing, and specifically enforced, if there is sufficient part performance of the agreement.Berg, 125 Wn.2d at 556.
In determining whether part performance takes an agreement out of the statute of frauds, the court examines three factors:
"(1) delivery and assumption of actual and exclusive possession; (2) payment or tender of consideration; and (3) the making of permanent, substantial and valuable improvements, referable to the contract." Kruse v. Hemp, 121 Wn.2d 715, 724-25, 853 P.2d 1373 (1993); Powers v. Hastings, 93 Wn.2d 709, 717, 612 P.2d 371 (1980). In addition, where specific performance of the agreement is sought, the contract must "be proven by evidence that is clear and unequivocal and which leaves no doubt as to the terms, character, and existence of the contract." Miller[ v. McCamish, 78 Wn.2d 821, ] 829[, 479 P.2d 919 (1971)]; see Williams v. Fulton, 30 Wn.App. 173, 178, 632 P.2d 920 . . . (1981); Powers, [93 Wn.2d] at 713-17 ("clear and unequivocal" evidence standard applies where specific performance sought, but lesser standard applies where damages sought); 8A George W. Thompson, Real Property § 4463, at 361 (1963 repl.).Berg, 125 Wn.2d at 556-57.
In Kirk v. Tomulty, 66 Wn.App. 231, 831 P.2d 792 (1992), we held that the doctrine of part performance applies to easements, and "[a] conveyance can be taken out of the statute of frauds where there has been part performance of a contract on one side and an acceptance of benefit by the other." Kirk, 66 Wn.App. at 237. Here, the unchallenged findings support the trial court's conclusion that the doctrine of part performance applied and the City was entitled to a permanent easement to maintain and operate the underground utilities.
Under State law, WSDOT required the City to relocate and reconstruct the underground utilities located on City-owned property to the adjacent property owned by WSDOT. Where a WSDOT highway construction project encroaches on city-owned property, full control over the property necessary for construction rests in the State. RCW 47.52.210.
The Master Agreement, Task Orders, and Permit unequivocally state that WSDOT agrees to grant the City a permanent easement for the underground utilities. The Permit grants permission to the City to relocate and construct the underground utilities on the adjacent WSDOT property. The Permit also expressly grants the City a continuing right to operate and maintain the utilities "until a permanent easement is executed and recorded for the City Utilities and for all other City facilities pursuant to the Master Agreement."
Relying heavily on the trial court's finding that Johal was a bona fide purchaser without notice of the City's right to an easement for the underground utilities, Johal asserts that under the recording statute, RCW 65.08.070, the City's unrecorded easement interest is void.
As a general rule, a bona fide purchaser of land who has no actual or constructive knowledge of an easement takes title free of the burden of the easement. Wilhelm v. Beyersdorf, 100 Wn.App. 836, 846, 999 P.2d 54 (2000); see also Tomlinson v. Clarke, 118 Wn.2d 498, 500, 825 P.2d 706 (1992). But Johal ignores the undisputed and unequivocal terms of the real estate installment contract and the trial court's finding that Johal purchased the property "as is" and "[s]ubject to all existing encumbrances, including but not limited to, easements, restrictions, and reservations, if any." The contract also states that the "Purchaser hereby accepts the Property in its current conditions." WSDOT agreed that upon full compliance with the terms of the contract, it would execute a quit claim deed "free of encumbrances except those existing at the date hereof."
Moreover, the requirements of the recording statute apply only to written instruments. The real estate recording statute, RCW 65.08.070, provides, in pertinent part:
A conveyance of real property . . . may be recorded in the office of the recording officer of the county where the property is situated. Every such conveyance not so recorded is void as against any subsequent purchaser or mortgagee in good faith and for a valuable consideration from the same vendor . . . of the same real property or any portion thereof whose conveyance is first duly recorded.Under RCW 65.08.060(3), a "conveyance" includes "every written instrument by which any estate or interest in real property is created, transferred, mortgaged or assigned or by which the title to any real property may be affected." In Mugaas v. Smith, 33 Wn.2d 429, 206 P.2d 332 (1949), the court held that conveyance of a title to a bona fide purchaser did not extinguish title acquired by adverse possession. Mugaas, 33 Wn.2d at 432. The " 'recording acts. . . . relate exclusively to written titles.' " Mugaas, 33 Wn.2d at 432 (quoting Schall v. Williams Valley R.R. Co., 35 Pa. 191, 204, 1860 WL 8240). Accordingly, certain interests in land are "beyond the ambit of the recording act." 18 William B. Stoebuck & John W. Weaver, Washington Practice: Real Estate: Transactions § 14.12, at 157 (2d ed. 2004).
(Emphasis added.)
Where a transfer is by definition non-documentary, "there is no instrument to record, nothing upon which we can expect the recording act to operate." 18 Stoebuck & Weaver, Washington Practice: Real Estate: Transactions § 14.12, at 158; see also Crescent Harbor Water Co., Inc. v. Lyseng, 51 Wn.App. 337, 346, 753 P.2d 555 (1988) (the bona fide purchaser doctrine does not apply to easements by prescription); Williams v. Striker, 29 Wn.App. 132, 136-37, 627 P.2d 590 (1981) (title obtained under the vacant land statute, RCW 7.28.080, is superior to the interest of a bona fide purchaser). Because an easement created by part performance is by definition non-documentary, we conclude the real estate recording act does not apply and the easement is not void.
Johal also relies on dicta in Berg to argue the court erred in quieting title in the City to an easement for the underground utilities. Berg, 125 Wn.2d at 555. The court in Berg identified an issue as to whether an easement agreement could be specifically enforced against a subsequent bona fide purchaser, but then states that "[o]ur refusal to address the bona fide purchaser question does not prevent resolution of this case . . . . Even if the doctrine of part performance is otherwise applicable, its requisites are not satisfied in this case." Berg, 125 Wn.2d at 556. Here, unlike in Berg, the unchallenged facts established the City's continuing right to maintain and operate the underground utilities on the property until WSDOT executed an easement agreement. As previously discussed, under the terms of the real estate installment contract, purchase of the property was subject to the City's existing right to do so. Johal's remedy, if any, is against WSDOT and not the City.
We conclude the court did not err in quieting title to the City for a permanent easement for the underground utilities, and affirm entry of the judgment and decree.
Accordingly, we need not address Johal's argument that the court erred in concluding he did not have a claim for inverse condemnation and damages.