Foley v. Smith
539 P.2d 874, 14 Wash. App. 285 (1975)
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Rule of Law:
The statute of limitations for a breach of the covenants of warranty and quiet enjoyment does not begin to run until the grantee is actually or constructively evicted by a paramount title, which, in the case of title litigation, occurs on the date a final, non-appealable judgment is entered.
Facts:
- Mr. and Mrs. Foley had a pre-existing contract to sell a 37-acre parcel of land to a third party.
- On November 11, 1965, the Foleys sold the same property to Mr. and Mrs. Smith for $70,000, conveying it via a statutory warranty deed.
- The Smiths made a down payment, and took a note and mortgage back from the Foleys.
- Mr. Foley passed away on May 26, 1967.
- After the Smiths were divested of title, they and Mrs. Foley agreed the Smiths should receive their payments back ($41,714.24), but disputed who was entitled to the remaining $20,471.16 of proceeds from the court-ordered sale.
- On September 23, 1971, Mrs. Foley and Mr. Smith signed an agreement to place the disputed $20,471.16 in a joint savings account pending a resolution.
Procedural Posture:
- A third party who had a prior contract to purchase land sued the Foleys (grantors) and the Smiths (grantees) for specific performance in a trial court.
- The trial court entered a decree of specific performance on December 20, 1968, in favor of the third party, divesting the Foleys and Smiths of title.
- This decree was appealed to the Court of Appeals, which affirmed the trial court on June 14, 1971.
- Mrs. Foley later filed suit against the Smiths in a trial court, seeking a declaratory judgment that she was the owner of disputed funds from the forced sale.
- The Smiths filed a counterclaim against Mrs. Foley for damages resulting from the breach of covenants of warranty in the deed.
- The trial court entered judgment for the Smiths on their counterclaim, awarding them the disputed funds.
- Mrs. Foley, as appellant, appealed the trial court's judgment to the Washington Court of Appeals.
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Issue:
Does the statute of limitations for a breach of the covenants of warranty and quiet enjoyment begin to run when the property is conveyed, or does it begin to run only after a final, non-appealable judgment divests the grantees of their title?
Opinions:
Majority - Andersen, J.
No, the statute of limitations for a breach of the covenants of warranty and quiet enjoyment begins to run only after a final, non-appealable judgment divests the grantees of their title. The covenants of warranty and quiet enjoyment are prospective in nature and are not breached, if at all, until an eviction occurs. In this case, the eviction was constructive and occurred when the prior purchaser obtained a final decree of specific performance that divested the Smiths of their interest in the land. The court held that where title litigation is pending, an eviction that commences the running of the statute of limitations does not occur until the final decree in that litigation is entered against the covenantee. Therefore, the statute of limitations began to run when the specific performance decree became final on June 14, 1971, and the Smiths' counterclaim was timely filed. The court also rejected Foley's other defenses, holding that a grantee's knowledge of a superior claim does not bar recovery for breach of warranty, and that a creditor's claim against Mr. Foley's estate was not required because the breach occurred after his death.
Analysis:
This decision provides a clear and definitive rule for the accrual of a cause of action for breach of prospective covenants in a deed. By holding that the statute of limitations is tolled until title litigation is finally resolved, the court protects grantees from having to file speculative or premature lawsuits against their grantors while a third party's claim is still being adjudicated. This ruling solidifies the principle that a warranty deed is a meaningful guarantee against both known and unknown title defects, ensuring grantors cannot escape liability simply because a grantee was aware of a potential cloud on the title. The case establishes that the legal event of 'eviction' is the final judgment, providing certainty for parties in real estate transactions.
