Opinion
No. 53485-8-I
Filed: May 2, 2005 UNPUBLISHED OPINION
Appeal from Superior Court of Whatcom County. Docket No. 00-2-01850-5. Judgment or order under review. Date filed: 11/14/2003. Judge signing: Hon. David a Nichols.
Counsel for Appellant(s), Derek Stebner (Appearing Pro Se), Nantucket Fund, Inc., 1307 Cornwall Avenue Suite 200, Bellingham, WA 98225.
Jeffrey B Teichert, Teichert Law Office PC, 1313 E Maple St # 223, Bellingham, WA 98225-5708.
Counsel for Defendant(s), William George Knudsen, Attorney at Law, Bellingham Towers #1340, 119 N Commercial St, Bellingham, WA 98225-4446.
Counsel for Respondent(s), Mark J. Lee, Brownlie Evans Wolf Lee, LLP, 100 Central Ave, Bellingham, WA 98225-4406.
Appellant Nantucket Fund Inc. (Nantucket) challenges the trial court's summary judgment order that reformed the scope of its easement over the adjacent property of respondent Yorkston Oil Company (Yorkston). Nantucket claims both that the reformation was improper under summary judgment because genuine issues of material fact had been raised, and that the reformation impermissibly modified an arbitrator's decision interpreting the easement. We hold that reformation of the easement by summary judgment was proper and did not modify the arbitration award. We affirm.
FACTS
This dispute arose between the owners of two adjacent parcels of land in Bellingham, Washington. The parcels were both originally owned by David Sigl. In 1997, Sigl sold one parcel to the Yorkston Oil Company (the Yorkston Parcel), dealing primarily with Barney Yorkston (Mr. Yorkston). The other parcel was later conveyed to Nantucket Fund, Inc. (the Nantucket Parcel).
Because the Nantucket Parcel required an access easement over the Yorkston Parcel, Sigl and Yorkston contemplated an access easement agreement at the time of the sale of the Yorkston Parcel. In addition to the easement itself, the parties discussed sharing costs for the easement improvements. The September 30, 1997, Addendum/Amendment to Purchase and Sale Agreement (First Addendum) (emphasis added) stated:
ITEM 3: The Seller will prepare, at Seller's sole cost and obligation, an Easement Agreement for access to and from Lot D [Nantucket Parcel] across the subject property [Yorkston Parcel] to be purchased. This Easement Agreement is to be approved by the Buyer, at a location suitable to the parties, between Dumas Street on the North and Elwood Avenue on the South.
The October 7, 1997, Addendum/Amendment to Purchase and Sale Agreement (Second Addendum, 'Item 7') (emphasis added) stated:
Item 7: At Seller's cost, reciprocal access utility corridor agreements will be prepared providing roadway accesses to Lincoln Street and Elwood Avenue. Costs to construct the roadway accesses, and deposits to construct, shall be shared equally between Buyer and Seller. Seller's share of roadway access cost participation shall not exceed $30,000. These agreements will be completed to mutual satisfaction of Buyer and Seller during the 30 day Feasibility Period.
The Second Addendum also extended the feasibility period from 30 to 45 days, such that it would expire on November 17, 1997.
A Draft Easement dated November 18, 1997, states
A letter dated November 19, 1997, from Sigl to his real estate agent forwards some materials and asks that they be sent to Yorkston. Further, Sigl declared that he asked his real estate agent to forward the materials. Yorkston denies seeing the draft easement, but the terms of the draft easement reflect the parties' initial agreement, as discussed below.
(4) Either party has the right to construct improvements on the easement, including the installation of utilities provided:
a. Such improvements are made consistent with the requirements of the City of Bellingham.
b. The improvements shall be constructed in such as way as to provide reasonable access to the Sigl remainder of the Yorkston property.
c. One-half (1/2) of the cost of construction of utilities and improvements in the easement shall be paid by Sigl and one-half (1/2) by Yorkston provided Sigl's share of the cost of such improvements shall not exceed Thirty Thousand Dollars ($30,000.00).
Sigl's attorney revised the Draft Easement. This revised document, the Reciprocal Road and Utility Easement (Recorded Easement), was executed by Sigl on December 3, 1997. It was referenced in Exhibit A to the deed executed by Sigl on December 1, 1997. Both documents were filed on December 5, 1997 at 12:24 p.m. The language of the Recorded Easement did not match that of the Draft Easement.
First American Title Company of Bellingham handled the closing of the Yorkston Parcel transaction. The Recorded Easement was referenced as an 'additional document' in the Escrow Instructions. A blank space was provided on Exhibit A, attached to the deed, for the recording number identifying the to-be Recorded Easement. The Recorded Easement though referenced was not included in the paperwork at closing. Mr. Yorkston knew it was missing, but, believing the easement required his approval, he proceeded with closing. He did not see it, review it, or agree to it. Yorkston approved the form of the deed and signed the closing papers on December 4, 1997. On December 5, 1997, the statutory warranty deed transferring the Yorkston Parcel was filed with the county recorder.
Nantucket purchased the Nantucket Parcel in January 2000. Nantucket constructed improvements and sought reimbursement from Yorkston pursuant to the Recorded Easement. Yorkston filed this action challenging the validity of the Recorded Easement.
During negotiations to purchase the Nantucket Parcel, Nantucket was on notice that Yorkston disputed the enforceability of the Recorded Easement. Sigl expressly disclosed the dispute before the sale in the Option Agreement including notice of a letter written by Yorkston's counsel regarding the dispute. Therefore, Nantucket is not a bona fide purchaser for value without notice of the dispute and may not prevail on this defense to the reformation sought by Yorkston. See Thorsteinson v. Waters, 65 Wn.2d 739, 746, 399 P.2d 510 (1965), overruled on other grounds, Chaplin v. Sanders, 100 Wn2d 853, 676 P.2d 431 (1984).
The Recorded Easement contained an arbitration provision, under which Nantucket demanded and Yorkston agreed to arbitrate specific issues. The parties submitted the interpretation of the Recorded Easement to arbitration, expressly reserving other issues (including enforceability and reformation of the Recorded Easement). The arbitrator concluded that the Recorded Easement included cost sharing for improvements both inside and outside the easement, and awarded an amount in favor of the Nantucket Parcel reflecting included costs.
After the arbitrator's final award was rendered, Nantucket filed a motion seeking confirmation of the arbitration award and entry of judgment in its favor. Yorkston moved to modify the arbitration award to conform it to the order submitting limited issues to arbitration. The court had a hearing on the motions on August 21, 2003. The court agreed with Yorkston that although Nantucket was entitled to confirmation, further issues would have to be resolved prior to entry of a final monetary judgment. The court confirmed the arbitrator's award on October 17, 2003.
The court modified the wording of the arbitrator's award to conform it to the stipulated order submitting issues to arbitration. Modification is permissible under RCW 7.04.170(2) '[w]here the arbitrators have awarded upon a matter not submitted to them.' By mirroring the wording of the stipulated order submitting issues, the court ensured the award was limited in scope to the issues submitted to arbitration.
The text of the arbitrator's award was: 'The amount of fees and costs incurred by Nantucket for which it is entitled to reimbursement from Yorkston and the amount awarded Nantucket against Yorkston is . . . Subtotal $289,420.00 . . . Net Total Award $265,232.00.' The confirmation order states 'The reasonableness and scope of fees and costs incurred by Defendant Nantucket for construction within the easement that is subject to sharing under the Easement Agreement as interpreted is $289,420.' This modification tracks the language of the issues stipulated for arbitration almost exactly.
Nantucket does not assign error to the court's Order Confirming Arbitration Decision that adopted modifications sought by Yorkston. Compare the Final Award of Arbitrator with the Order Confirming Arbitration Decision.
Yorkston then moved for partial summary judgment. On October 17, 2003, the court granted Yorkston's motion and reformed the easement agreement. The order was filed November 14, 2003. Pursuant to CR 54(b), the decision was certified for immediate appeal.
ANALYSIS I. Reformation Did Not Modify the Arbitration Award
We first address Nantucket's argument that the trial court's order granting partial summary judgment impermissibly modified an arbitration award. The purpose of arbitration is to avoid the expense and delay of litigation. Luvaas Family Farms v. Ferrell Family Farms, 106 Wn. App. 399, 404, 23 P.3d 1111 (2001). Unless a statutory ground under RCW 7.04.160 and RCW 7.04.170 exists to vacate, modify, or correct an arbitration award, the court must confirm the arbitration award on motion of one of the parties within one year. Luvaas, 106 Wn. App. at 404; RCW 7.04.150.
The jurisdiction of arbitration is limited to those issues the parties submit in writing to arbitration. Luvaas, 106 Wn. App. at 404 (citing Price v. Farmers Ins. Co., 133 Wn.2d 490, 496, 498, 946 P.2d 388 (1997)). Here, the parties submitted several specific issues to arbitration:
a. The category, type, and amount of fees and costs that are to be shared under the Reciprocal Road and Utility Easement ('Easement Agreement') . . . for construction of improvements in the Easement.
b. The category and type of improvements that are subject to cost sharing under the Easement Agreement.
c. The reasonableness and scope of fees and costs incurred by Defendant Nantucket Fund., Inc. for construction within the Easement that is subject to sharing under the Easement Agreement.
d. All procedural issues related to arbitrating the above substantive issues.
The parties expressly limited the scope of arbitration (emphasis supplied): Unless specifically listed above, no other issues shall be submitted to or otherwise determined during any arbitration, including, but not limited to, the enforceability of the Easement Agreement against Plaintiff; Plaintiff's claims for quiet title, negligent misrepresentation and fraud, breach of Real Estate Purchase and Sale Agreement, reformation of Easement Agreement, breach of warranties, and trespass.
The stipulated order clearly and specifically excluded reformation of the contract (among many other issues) from arbitration. Therefore, the arbitrator did not and could not address the issue of reformation. The trial court expressly retained jurisdiction over the reformation claim after arbitration, and reformed the agreement pursuant to that retained jurisdiction.
The trial court could not render a monetary judgment under the confirmed award until it addressed the reserved claims that would determine entitlement to such a judgment. See Price v. Farmers Ins. Co., 133 Wn.2d 490, 493-94, 501, 946 P.2d 388 (1997). The reformation claim had to be resolved by the court prior to rendering judgment on the arbitrator's award. If the court deemed reformation was inappropriate, the award of the arbitrator interpreting the Recorded Easement would bind the parties. If the court deemed reformation of the Recorded Easement was appropriate, the interpretation given the Recorded Easement by the arbitrator would be irrelevant to the reformed easement. The trial court's reformation of the agreement, which rendered the arbitrator's award irrelevant, was not a modification of the award prohibited under chapter 7.04 RCW.
II. Reformation by Summary Judgment Was Proper
We next address Nantucket's claim that reformation by summary judgment was error because genuine issues of material fact existed. An appellate court engages in the same inquiry as the trial court when reviewing an order of summary judgment. Denaxas v. Sandstone Court, 148 Wn.2d 654, 662, 63 P.3d 125 (2003). Summary judgment is appropriate if the pleadings, affidavits, depositions, answers to interrogatories, and admissions on file demonstrate the absence of any genuine issues of material fact, and that the moving party is entitled to judgment as a matter of law. CR 56(c). The court must consider all facts submitted and all reasonable inferences drawn from them in the light most favorable to the nonmoving party. Denaxas, 148 Wn.2d at 662. The court should grant the motion only if, from all the evidence, reasonable persons could reach but one conclusion. Denaxas, 148 Wn.2d at 662.
Yorkston argues that the easement was to be by agreement rather than unilateral. He argues that the Recorded Easement does not reflect what he agreed to with Sigl. Therefore, the Recorded Easement must be reformed. Reformation is an equitable remedy employed to bring a writing that is materially at variance with the parties' agreement into conformity with that agreement. Denaxas, 148 Wn.2d at 669 (citing Akers v. Sinclair, 37 Wn.2d 693, 702, 226 P.2d 225 (1950)). The party seeking reformation must prove the facts supporting it by clear, cogent, and convincing evidence. Denaxas, 148 Wn.2d at 669. A party to a contract is entitled to reformation of the contract if there has been either a mutual mistake or one party is mistaken and the other party engaged in fraud or inequitable conduct. Washington Mut. Sav. Bank v. Hedreen, 125 Wn.2d 521, 525, 886 P.2d 1121 (1994). A party engages in fraud or inequitable conduct if it conceals a material fact from the other party when it has a duty to disclose that fact to the other party. Hedreen, 125 Wn.2d at 526. A duty to disclose arises when the nature of the transaction creates a relationship of trust and confidence upon which the injured party was entitled to rely. Hedreen, 125 Wn.2d at 526. A party's negligence in failing to discover the facts or read the writing to be certain it is correct need not bar the remedy of reformation. Hedreen, 125 Wn.2d at 529-31.
The Recorded Easement's cost sharing provisions dictate that costs of improvements are to be shared up to $60,000 and that Yorkston is to pay any amounts exceeding $60,000. Nantucket characterizes any mistake in this case as a mistake by Yorkston as to the total cost of the improvements. Nantucket argues that because the provision allocates the risk of unforeseen costs to Yorkston, Yorkston bore the risk of unexpected costs and cannot claim mistake. Nantucket argues that by seeking reformation, Yorkston is attempting to find recourse from an agreement that ended up being much more costly than Yorkston anticipated.
Yorkston maintains that any mistake in the Recorded Easement was not as to the total cost of the improvements, but rather as to which improvements were to be included in the cost sharing. Under the Draft Easement, the included improvements were those 'in the easement.' Under the Recorded Easement as interpreted by the arbitrator, offsite improvements were included as well as improvements in the easement. Yorkston therefore argues that the Recorded Easement does not conform to the parties' agreement, reflected in the Draft Easement, to share costs for improvements 'in the easement' and should be reformed.
Under Denaxas and Hedreen, in order for Yorkston to prevail on summary judgment, Yorkston must show by clear, cogent, and convincing evidence (a) that the final documents did not conform with the parties' initial agreement on the scope of improvements included in cost sharing, and (b) that the other party (here, Sigl, Nantucket's predecessor) engaged in inequitable conduct.
A. The Original Agreement Between the Parties
The Purchase and Sale Agreement provided for an easement agreed to by Yorkston. The Recorded Easement was not signed by Yorkston, only by Sigl. Mr. Yorkston's declaration stated:
During discussions, I was advised that the total cost of the shared improvements had been estimated by Jones Engineering to be $60,000. At no time was there any mention or discussion about any improvements needed for Elwood Avenue or Lincoln Street, or that cost of such improvements would be shared between the parties. The only area ever mentioned as being part of the cost sharing arrangement was the access driveway.
Mr. Sigl's declaration stated:
9. The only thing that both of us [Sigl and Yorkston] agreed to was that the cost of improvements for the easement access between Elwood Avenue and vacated Dumas Avenue to Lot D be shared.
10. I requested my attorney . . . to prepare [the Draft Easement]. The agreement was faxed to my real estate agent to be sent on to Mr. Yorkston for his review and comments. In the Purchase and Sale Agreement Mr. Yorkston and I both agreed that he would have a right to prior review and approval of the Easement Agreement.
11. After I reviewed the Agreement, I requested Mr. Lackey make certain changes, to also be forwarded to Mr. Yorkston for his review and approval. These included sharing of some additional costs in the event the Lincoln Street access became available by a change of position in the City of Bellingham Building Department. This cost sharing proposal went beyond what had been agreed to earlier. It was my intent to have the more expanded cost-sharing aspect reviewed by Mr. Yorkston. . . .
12. The Reciprocal Road Easement Agreement, which was ultimately recorded[,] was signed by me on December 3, 1997 and delivered to First American Title. Since this was an integral part of our agreement I expected that Mr. Yorkston would review this Agreement prior to closing. As of the time of closing, I had not received any input from Mr. Yorkston with respect to either the site plan or the earlier proposed Easement Agreement that had been forwarded to him in mid-November.
13. It was not until sometime long after closing that I was told by Mr. Yorkston that he had not had an opportunity to review the Reciprocal Road Easement Agreement which I had signed and submitted for recording. Thereafter we continued to discuss and negotiate cost-sharing on future development of our respective properties without ever reaching any final agreement.
14. After the initial negotiations with Mr. Yorkston, I had no conversations with him prior to closing. I fully intended for Mr. Yorkston to have an opportunity to review and comment on the various easement agreements that were proposed, and I relied on my realtor to handle negotiations either with Mr. Yorkston or with Mr. Yorkston's realtor. I have no personal knowledge whether Mr. Yorkston ever saw the proposed easement agreements before closing, and have no reason to doubt or disbelieve his position that he did not see the documents before closing. This testimony shows that the parties' initial agreement was at most that cost sharing applied to improvements in the easement area (the 'access driveway' and 'the easement access between Elwood Avenue and vacated Dumas Avenue'). The Draft Easement uses the terms 'on the easement' and 'in the easement.' This limitation mirrors the parties' testimony as to their initial agreement. Significantly, the Draft Easement's scope is different from the Recorded Easement as interpreted by the arbitrator.
Nantucket was not a party to the original purchase and sale negotiations or agreement. Nevertheless, it is required to provide evidence to dispute the original agreement of the parties. Conclusory statements cannot be the basis to prevent summary judgment; there must be actual facts showing the presence of a genuine issue. Overton v. Consol. Ins. Co., 145 Wn.2d 417, 430, 38 P.3d 322 (2002).
Nantucket points to two items to establish a question of material fact. First, Nantucket points to language in the Draft Easement that improvements must be 'made consistent with the requirements of the City of Bellingham.' Second, Nantucket points to a post-closing letter dated December 10, 1997, from Sigl to Yorkston that states 'The terms are as we discussed: right-turn only, some minor restriping, dedication construction of an acceleration-deceleration lane along the west side of our property.' Even if the these statements establish that the city would impose additional requirements with which the construction must comply, they are not sufficient to raise a question of material fact as to whether Sigl and Yorkston agreed to include the cost of any such off-site improvements under the cost-sharing provision of the easement. The only evidence on cost-sharing is contained in Sigl and Yorkston's declarations. Sigl's declaration was made well after the December 10, 1997 letter on which Nantucket relies. Both declarations indicate that the initial agreement between Sigl and Yorkston was to share costs of improvements only within the easement area.
Nantucket has failed to present facts that create a genuine issue of material fact as to the initial agreement of the parties. The evidence is clear, cogent, and convincing that the Recorded Easement did not conform to the agreement of the parties. Yorkston must next show inequitable conduct on the part of Sigl to justify reformation of the contract.
B. Inequitable Conduct
Yorkston argues that Sigl engaged in inequitable conduct by recording an easement to which Yorkston had not agreed and by failing to disclose that its terms were altered from the Draft Easement. We agree. First, the parties to this contract included an express requirement that the Recorded Easement, which was to be prepared at the seller's (Sigl) cost, must be approved by the buyer (Yorkston). Mr. Yorkston testified that approval was never sought from him, and Nantucket has failed to produce any facts to create a genuine issue on this point.
Second, under our prior decision in Hedreen, Sigl had an affirmative duty to disclose the differences between the final documents and the parties' original agreement. In Hedreen, the bank and the borrower agreed in a commitment letter that a master lease would be executed to cover all unleased office space at closing. Hedreen, 125 Wn.2d at 522. The borrower's chief financial officer drafted the documents, and instead of listing all unleased office space square footage, listed a significantly reduced square footage. Hedreen, 125 Wn.2d at 524. The borrower provided the documents to the bank, and a bank attorney reviewed the documents but failed to notice that the square footage of the final documents did not include all the square footage required in the commitment letter. Hedreen, 125 Wn.2d at 524. When the borrower later defaulted on the loan, the bank realized that the master lease did not cover all the square footage that the parties had agreed it would. Hedreen, 125 Wn.2d at 524. The bank sought reformation of the master lease to conform to the parties' original agreement. Hedreen, 125 Wn.2d at 524.
'The difference represented space on which leases either shortly were to be finalized or were being negotiated.' Hedreen, 125 Wn.2d at 524. Hedreen was ultimately unable to secure tenants for the unleased space, resulting in the loan default.
The Hedreen court held that the bank was entitled to reformation because it was mistaken and the borrower engaged in inequitable conduct. Hedreen, 125 Wn.2d at 529. A party engages in fraud or inequitable conduct if it conceals a material fact from the other party when it has a duty to disclose that fact to the other party. Hedreen, 125 Wn.2d at 526. A duty to disclose arises when the nature of the transaction creates a relationship of trust and confidence upon which the injured party was entitled to rely. Hedreen, 125 Wn.2d at 526.
The Hedreen court quoted Colonial Imports, Inc. v. Carlton Northwest, Inc., for this proposition. Nantucket argues that because of this quotation, the standards for determining whether a duty exists are those listed in Colonial Imports. The Colonial Imports case may present additional grounds to find a duty to disclose, although it was a negligent misrepresentation case and not a reformation of contract case. However, the Hedreen court discussed several cases and found such a duty without discussing or explicitly adopting the Colonial Imports grounds. Therefore, Nantucket's argument that summary judgment was inappropriate because Yorkston did not prove one of the grounds in Colonial Imports fails.
The Hedreen court adopted the reasoning of two cases to find guidance as to whether a duty to disclose arises. Hedreen, 125 Wn.2d at 529. One of these was a Nebraska case in which a buyer added 'without recourse' to a note and did not inform the seller of the addition, expecting that the seller would object if it was not satisfactory. Hedreen, 125 Wn.2d at 526, 528-29 (citing Waite v. Salestrom, 266 N.W.2d 908 (Neb. 1978)). The parties had previously agreed that the buyer would be personally liable for the note. Hedreen, 125 Wn.2d at 528-29. The other was a Washington case in which a seller contracted to sell two plots of land to a buyer. Hedreen, 125 Wn.2d at 526-29 (citing Kaufmann v. Woodard, 24 Wn.2d 264, 163 P.2d 606 (1945)). The parties initially agreed that an assignment of the contract of sale for both plots would release the seller from his mortgage obligations. Hedreen, 125 Wn.2d at 527. The seller prepared the documents but included only one of the two plots in the assignment. Hedreen, 125 Wn.2d at 527-28. The mortgagee signed the documents without reviewing them first. Hedreen, 125 Wn.2d at 528.
The Hedreen court discussed, declined to follow, and overruled the analysis in Kelley v. Von Herberg, 184 Wn. 165, 50 P.2d 23 (1935), which did not impose a duty to inform. See Hedreen, 125 Wn.2d at 526-28.
In both Waite and Kaufmann, the injured party sued to have the contracts reformed to conform to the original agreement. Hedreen, 125 Wn.2d at 528. Both courts concluded that the party preparing the documents had a duty to inform the other party that the documents did not reflect the initial agreement. Hedreen, 125 Wn.2d at 528. Both cases had parties who entered into a preliminary agreement with equal access to information and negotiated at arm's length. Hedreen, 125 Wn.2d at 529. The Hedreen court concluded that the bank and the borrower were similarly situated in its case, and further that both were sophisticated and had an opportunity to review the final loan documents before they were signed. Hedreen, 125 Wn.2d at 528-29. The Hedreen court concluded that the borrower had a duty, like the parties preparing the documents in Kaufmann and Waite, to inform the bank about the discrepancy between the final documents and the initial agreement. Hedreen, 125 Wn.2d at 529.
We apply the Hedreen reasoning to this case. A preliminary agreement was reached in the Draft Easement to share the cost of expenses in the easement area. The final document, the Recorded Easement, materially altered the initial agreement of the parties to include costs outside the easement area. The Recorded Easement was written, executed, and recorded by Sigl. Sigl indicated he relied upon his attorney to forward it to Yorkston. The record does not establish this was in fact done. The evidence in the record is clear, cogent, and convincing that Sigl failed to inform Yorkston of the discrepancy between the Draft Easement and the Recorded Easement. Nantucket argues that because Yorkston had opportunity to review the final documents at closing, including the Recorded Easement, there is no inequitable conduct by Sigl (Nantucket's predecessor). Nantucket argues that the Recorded Easement was available to Yorkston for review prior to closing. Yorkston has produced facts showing that the document was not actually available. Mr. Yorkston has testified that when he signed the documents, he noticed references to the Recorded Easement but did not see the agreement. He brought it to the attention of the title company representative who said that 'We don't have one.' Mr. Yorkston testified that he responded, 'I've got to approve it anyway, so that's fine.' Nantucket has not produced any facts to controvert Mr. Yorkston's testimony as to lack of actual access to the Recorded Easement prior to closing. A party adverse to a motion for summary judgment cannot rest upon mere allegations in the pleadings, but must set forth specific facts showing a genuine issue for trial. Overton, 145 Wn.2d at 430.
Nantucket argues that because the easement and the deed were both recorded at the same time on December 5, 1997, knowledge of the Recorded Easement is imputed to subsequent purchaser. Thus, Nantucket argues that Yorkston had constructive knowledge of the contents of the Recorded Easement. Nantucket cites Ryan v. Plath, 18 Wn.2d 839, 863, 140 P.2d 968 (1943) for the proposition that the recording of an instrument pursuant to a recording statute . . . is constructive notice to those persons only who acquire interests subsequent to the execution of the instrument or who, in dealing with property, are compelled to search the public records in order to protect their own interests; it does not affect the rights of prior parties.
Under RCW 65.08.070, an 'instrument is deemed recorded the minute it is filed for record.' Here, the deed and the Recorded Easement are time stamped the same day at the same time to the minute. The record does not establish the Recorded Easement was filed before the deed, but it does establish it was not recorded when Yorkston signed the closing papers two days earlier. Thus the Plath decision does not establish that Yorkston had constructive notice of the Recorded Easement because it was not recorded prior to the recording of the deed.
Nantucket also argues that because an easement document was referenced in the deed and escrow instruction, Mr. Yorkston had a duty to inquire of the seller as to its contents. Hendricks v. Lake, 12 Wn. App. 15, 21-22, 528 P.2d 491 (1974). But, Mr. Yorkston's undisputed testimony is that he did inquire of the escrow agent and that the seller had not provided the document. Mr. Yorkston correctly noted that under the purchase agreement, any easement was subject to his approval. Under these facts further inquiry was not required at that time.
Further, if the parties' initial agreement and the terms of the final documents differ, negligence on the part of the injured party in not reviewing and verifying the accuracy of the final documents is not a bar to a reformation claim. Hedreen, 125 Wn.2d at 529. If negligence was a bar, then the remedy of reformation would be severely circumscribed, as reasonable care in reviewing the documents would often avoid such mistakes. Hedreen, 125 Wn.2d at 531 (quoting Restatement (Second) of Contracts, sec. 157, cmt. a (1979)).
The Recorded Easement did not conform to the parties' original agreement. The clear, cogent, and convincing evidence that Sigl breached both his contractual duty and his common law duty to inform Yorkston of this establishes that Sigl engaged in inequitable conduct. We conclude that the requirements of Denaxas and Hedreen are satisfied and that Yorkston was entitled to reformation on summary judgment. The trial court's reformation properly conformed the Recorded Easement to effect the parties' initial agreement.
We affirm.
KENNEDY and AGID, JJ., Concur.