Andersen v. Northwest Bonded Escrows, Inc.

• Decision Date: 19 April 1971
• Docket Number: No. 467--41388--I,467--41388--I
• Citation: 484 P.2d 488,4 Wn.App. 754
• Court: Washington Court of Appeals
• Parties: Asbjorn ANDERSEN and Margaret Andersen, his wife, Respondents, v. NORTHWEST BONDED ESCROWS, INC., a Washington corporation, and Richard B. Wall and Jane Doe Wall, his wife, a marital community, Appellants.

Page 754

4 Wn.App. 754

484 P.2d 488

Asbjorn ANDERSEN and Margaret Andersen, his wife, Respondents, v. NORTHWEST BONDED ESCROWS, INC., a Washington corporation and Richard B. Wall and Jane Doe Wall, his wife, a marital community, Appellants.

No. 467--41388--I.

Court of Appeals of Washington, Division 1, Panel One.

April 19, 1971.

Review Denied Sept. 21, 1971.

Dodd, Russell, Hamlin & Coney, Byron D. Coney, Seattle, for appellants.

Helsell, Paul, Fetterman, Todd & Hokanson, John E. Ederer, Seattle, for respondents.

WILLIAMS, Judge.

This action was brought for the purpose of recovering money for damages alleged to have been sustained in a real estate transaction. The trial was to the court without a jury and resulted in findings of fact from which the court concluded that plaintiffs (Andersens) were entitled to recover $10,700 from defendants Northwest Bonded Escrows, Inc. (Northwest) and its manager, Richard B. Wall (Mr. Wall). Defendants appeal from the judgment entered in that amount, and the Andersens cross appeal asking for a larger sum.

Upon substantial evidence, the trial court found this is what happened: In the spring of 1964, a person by the name of Leith approached the Andersens with a view to purchasing six lots which they owned in the city of Seattle. Leith, a builder, proposed that he build an apartment house upon the property. When they agreed upon the sale, Leith suggested that the Andersens deed the lots to him so that he could pledge them as security for a construction loan. He further proposed that the purchase price of $20,000 be represented by his promissory note secured by a second mortgage. At Leith's suggestion, the parties went to Northwest to put their agreement into effect. This was on April 1, 1964.

At Northwest's place of business, they met with Mr. Wall, who spent an hour and a half with them going over the details of the transaction. Mr. Wall had the following documents prepared: statutory warranty deed from the Andersens to Leith, mortgage from Leith and wife to the Andersens, promissory note from Leith to the Andersens secured by the mortgage, and escrow instructions. The mortgage was in usual form, except that the following notation was contained therein:

It is expressly understood and agreed that this mortgage is second and subordinate to any first mortgage to be secured by the mortgagors herein for building purposes, and this mortgage is not to be recorded until said mortgage is of record.

The note was for $20,000, plus interest, payable 'upon sale of the building to be built on property which is legally described in the real estate mortgage securing the payment of this note.' On instructions from Mr. Wall, a secretary prepared the documents by filling in blanks on forms provided by Northwest. The documents were signed during the conference. Leith agreed to pay the costs of the transaction, including the excise tax, title insurance premium for the policy to be issued to him, and fees of Northwest amounting to $72.80.

On June 2, 1964, the Andersens received the promissory note from Northwest, and in September, the mortgage. Both documents were placed in the Andersens' safe deposit box when received. In January, 1965, Leith and his wife conveyed the property to one Zorich, and within 4 months thereafter they were adjudicated bankrupt in a voluntary proceeding. Also, within that period, Zorich deeded the property to Business Factors, Inc., and was adjudicated an involuntary bankrupt.

Upon receiving the notice of the first meeting of creditors in the Leith bankruptcy, the Andersens immediately went to Northwest's office and notified Mr. Wall of this development. He assured them that they were secure, but suggested that they consult with an attorney, which they did. The attorney promptly recorded the mortgage and entered the bankruptcy maze, emerging over 2 years later with a settlement of $5,000 and a statement of charge for his professional services in the amount of $2,125. The Andersens then brought this action.

The 15 assignments of error raise issues of unauthorized practice of law, negligence, estoppel, indemnity, damage mitigation, excessive damages, and partnership.

In its pleadings, at the trial, and on this appeal, the main defense of appellants has been that Mr. Wall acted as a mere scrivener, ¹ that he did only what he was told to do, and that he would have violated the law if he had given the Andersens or Leith legal advice. The trial court found otherwise, and correctly so. ² Although the operation of the escrow company in the case of In re Droker, 59 Wash.2d 707, 370 P.2d 242 (1962), may have been on a grander scale, the methods and function of Northwest's office were the same. As the court found, the legal services rendered to the contracting parties cannot be differentiated from those which would have been rendered in a law office by a practicing attorney. Washington State Bar Ass'n v. Washington Ass'n of Realtors, 41 Wash.2d 697, 251 P.2d 619 (1952).

The next question is that of negligence, which raises the issue of the standard of care which should be required of appellants when they practice law and whether or not they lived up to that standard in the Andersen/Leith real estate transaction. Appellants concede that if a layman undertakes to exercise discretion in the devising of the form or substance of a legal transaction, he properly should be held to the standards of a lawyer. Certainly, that is the minimum level of competency, and it may be higher. Mattieligh v. Poe, 57 Wash.2d 203, 356 P.2d 328, 94 A.L.R.2d 464 (1960). There is an undisputed finding of the trial court, based upon the testimony of an expert witness called by the Andersens, that if a lawyer had handled the transaction and not advised the Andersens of their peril in not recording the mortgage, he would not have conformed to the standard of care, skill, diligence, and knowledge commonly observed and exercised by a reasonably careful and prudent lawyer in the practice of law in the state of Washington. The violation by appellants of this standard of care was therefore negligence for which they are liable. Mattieligh v. Poe, Supra.

Appellants seek to avoid liability by raising issues of contributory negligence, estoppel, indemnity, and mitigation of damages; and in so doing, claim dereliction on the part of the Andersens in not discerning the true nature of their transactions with Leith and in not proceeding more diligently and with greater success once they did discover it. The court made a finding, which is not challenged, that the Andersens were ignorant of the consequences of not recording the mortgage. Following the Leiths' adjudication in bankruptcy, the first thing the Andersens did was to notify appellants that their note and mortgage were in danger. Pursuant to the advice given by Mr. Wall, they immediately retained counsel to represent them in the bankruptcy proceedings. It appears that this was good advice. The Andersens are intelligent but unsophisticated people who could not have acted with any success at all in finding a solution to their tangled affairs. They could hardly be expected to prosecute their remedies on the note and mortgage through two bankrupt estates to Business Factors, Inc.

...