Cultum v. Heritage House Realtors, Inc., 50403-2
| Citation | 103 Wn.2d 623,694 P.2d 630 |
| Decision Date | 11 January 1985 |
| Docket Number | No. 50403-2,50403-2 |
| Parties | , 53 USLW 2387 Diane CULTUM, Respondent, v. HERITAGE HOUSE REALTORS, INC., Appellant. |
| Court | United States State Supreme Court of Washington |
Sax & MacIver, James P. Donohue, Scott J. Borth, Seattle, for appellant.
Henry Aronson, David Curtis, Elizabeth A. Greathouse, Seattle, for respondent.
Robert T. Farrell; David D. Hoff, Seattle, for appellant on behalf of Washington State Bar Association.
Williams D. North, Laurene K. Janik, Thomas L. Fishburne, James E. Horne, Tacoma, for appellant on behalf of National Association of Realtors.
Ralph Paul Teller, Issaquah, for respondent on behalf of Concerned About Interests of Real Estate Purchases.
At issue in this appeal is whether the completion by a real estate salesperson of a form earnest money agreement containing a contingency clause constitutes the unauthorized practice of law in violation of RCW 2.48.170-.190.
In deciding this issue, the trial court found that this conduct did constitute the unauthorized practice of law and was a per se violation of the Consumer Protection Act, RCW 19.86, warranting damages, attorney fees and injunctive relief. As a consequence, the trial court permanently enjoined defendant, Heritage House Realtors, Inc. (Heritage), from completing, filling in the blanks, or otherwise preparing any clause with respect to any real estate purchase or sale agreement, earnest money agreement, addenda thereto, or any other document intended to create or define contractual rights or obligations in connection with any real estate transaction. In addition, plaintiff Diane Cultum (Cultum), was awarded damages of $178.65, representing the interest lost during the time Heritage retained the earnest money. Cultum was also awarded attorney fees and costs in excess of $32,000 under the Consumer Protection Act. RCW 19.86.090. We now reverse the decision of the trial court that defendant's actions constituted the unauthorized practice of law, dissolve the injunction, and remand for a determination of contractual attorney fees.
The salient facts are as follows. In 1980 Cultum contacted Heritage in response to an advertisement in the Seattle Times and was put in touch with Yvonne Ramey (Ramey), a real estate agent for Heritage. After viewing several homes, Ramey showed Cultum the home of Arthur and Paula Smith. Cultum decided to make an offer on the Smith home but was concerned that there might be something wrong with the house. Cultum therefore told Ramey that she wanted to have the house inspected and be able to withdraw her offer on the basis of that inspection.
Thereafter Ramey prepared a real estate purchase and sale agreement (earnest money agreement) setting forth Cultum's offer to purchase the Smith home. This agreement and all other subsequent agreements contained an attorney fee clause which provided that
[i]n the event that either the Buyer, Seller, or Agent, shall institute suit to enforce any rights hereunder, the successful party shall be entitled to court costs and a reasonable attorney's fee.
All agreements were prepared on standardized forms drafted by attorneys. Cultum's offer and a subsequent offer were both rejected. About a month later, Ramey and Cultum resubmitted the earnest money agreement with an addendum which raised the purchase price. Cultum later discovered that the agreement did not contain a structural inspection contingency clause and asked Ramey to prepare a second addendum. This addendum provided: "This offer is contingent on a Satisfactory Structural Inspection, To be completed by Aug. 20, 1980." Both addendums were on forms drafted by an attorney. Ramey merely inserted the desired modifications in a blank space. Ramey did not select the form since her employer used a single standard form.
The Smiths accepted this last offer and Heritage deposited Cultum's $3,000 earnest money into a noninterest bearing trust account. Thereafter, Cultum received a report on the house from Northwest Inspection Engineers. The report noted missing siding and caulking on exterior portions of the home, damage to the siding along one corner of the north entry door, deterioration on the roof which probably caused some leakage, inadequate support on a sheet of plywood on the roof of the new addition causing some softness in the roof, rusted gutters, soft mortar on the chimney, and evidence of minor roof leakage along the living room entry. The inspector found no major problems in the plumbing, heating or electrical systems.
Cultum found the report unsatisfactory and demanded return of her earnest money. Ramey immediately prepared a rescission agreement but the Smiths refused to sign it. The Smiths claimed there was nothing structurally wrong with the house and Cultum was acting in bad faith. The Smiths argued that the language of the inspection contingency meant that the report had to be truly unsatisfactory and reveal real structural defects based upon an objective standard. They therefore threatened to sue Heritage if it returned Cultum's money.
Heritage initially gave Cultum three options: It could continue to hold the money in a noninterest bearing account pending an agreement between Cultum and the Smiths; it could pay the money into a registry of the court; or, it could refund the money to Cultum in exchange for her agreement to indemnify Heritage in an action brought by the Smiths. Subsequently, Heritage also offered to place the money in an interest bearing account pending resolution of the dispute.
Because these options were each substantially less than Cultum had believed the agreement would provide her, she refused to accept them and hired an attorney. Six months later Heritage refunded Cultum's earnest money.
Cultum then filed this action against Heritage seeking damages for loss of the use of her money during the period Heritage held it. She also requested a permanent injunction restraining Heritage from engaging in the unauthorized practice of law. In addition, she sought attorney fees under the Consumer Protection Act, RCW 19.86.090.
The holding of the trial court was not surprising. In a series of recent cases this court has broadly defined the practice of law to include
the selection and completion of form legal documents, or the drafting of such documents, including deeds, mortgages, deeds of trust, promissory notes and agreements modifying these documents ...
Bowers v. Transamerica Title Ins. Co., 100 Wash.2d 581, 586, 675 P.2d 193 (1983) (quoting Washington State Bar Ass'n v. Great W. Union Fed. Sav. & Loan Ass'n, 91 Wash.2d 48, 55, 586 P.2d 870 (1978)); Hagan & Van Camp, P.S. v. Kassler Escrow, Inc., 96 Wash.2d 443, 635 P.2d 730 (1981).
The trial court's extension of these holdings to completion of form earnest money agreements by real estate sales persons is logical since such agreements fix the legal rights and duties of both buyers and sellers of residential real estate. It therefore fits within the broad definition of the practice of law as we have previously defined it.
Nevertheless, without retreating from our rulings in those three recent cases, we think there are sound and practical reasons why some activities which fall within the broad definition of "the practice of law" should not be unauthorized simply because they are done by laypersons.
As we have so often stated, it is the duty of this court to protect the public from the activity of those who, because of the lack of professional skills, may cause injury whether they are members of the bar or persons never qualified for or admitted to the bar. Great Western, 91 Wash.2d at 60, 586 P.2d 870. We have also made it clear that the practice of law is within the sole province of the judiciary and encroachment by the Legislature may violate the separation of powers doctrine. Hagan, 96 Wash.2d at 453, 635 P.2d 730. This does not mean, however, that the attorney hegemony over the practice of law must be absolute. Hence, although the completion of form earnest money agreements might be commonly understood as the practice of law, we believe it is in the public interest to permit licensed real estate brokers or licensed salespersons to complete such lawyer prepared standard form agreements; provided, that in doing so they comply with the standard of care demanded of an attorney.
For a long time suppression of the practice of law by nonlawyers has been proclaimed to be in the public interest, a necessary protection against incompetence, divided loyalties, and other evils. It is now clear, however, as several other courts have concluded, that there are other important interests involved. See Conway-Bogue Realty Inv. Co. v. Denver Bar Ass'n, 135 Colo. 398, 312 P.2d 998 (1957). These interests include:
(1) The ready availability of legal services.
(2) Using the full range of services that other professions and businesses can provide.
(3) Limiting costs.
(4) Public convenience.
(5) Allowing licensed brokers and salespersons to participate in an activity in which they have special training and expertise.
(6) The interest of brokers and salespersons in drafting form earnest money agreements which are incidental and necessary to the main business of brokers and salespersons.
We no longer believe that the supposed benefits to the public from the lawyers' monopoly on performing legal services justifies limiting the public's freedom of choice. The public has the right to use the full range of services that brokers and salespersons can provide. Christensen, The Unauthorized Practice of Law: Do Good Fences Really Make Good Neighbors--or Even Good Sense?, 1980 Am.B.Found.Research J. 159. The fact that brokers and salespersons will complete these forms at no extra charge whereas attorneys would charge an additional fee, weighs heavily toward allowing this choice.
Another important consideration is the fact that the drafting of form earnest money agreements is incidental to the...
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