Droker, In re

Decision Date28 March 1962
Docket NumberNos. 2790,2881,s. 2790
Citation59 Wn.2d 707,370 P.2d 242
CourtWashington Supreme Court
Parties, 89 Ohio Law Abs. 370 In the Matter of the Disciplinary Proceedings Against Herbert J. DROKER and Eugene J. Mulholland, Attorneys at Law. C. D.

T. M. Royce, State Bar Counsel, Washington State Bar Ass'n, Seattle, for appellant.

Robbins, Oseran & Robbins, Seattle, for respondents.

RESELLINI, Judge.

The respondents have been partners in the practice of law since 1950, occupying space in the place of business of the Washington Escrow Company, a Washington corporation. Together they own a majority of the shares of stock. Both have been members of the board of directors since 1946. Mr. Mulholland is and has been president of the company; Mr. Droker is and has been executive vice-president; and the company's affairs have been under their active management, control, and direction. None of the other directors or stockholders has participated in the active management or direction of the affairs of the company.

Since 1950, the Washington Escrow Company has had its main office and principal place of business in Suite 624 Securities Building, in downtown Seattle. The offices of the law partnership are located in this suite, and Mr. Mulholland and Mr. Droker have had no other office or place of business.

The primary business of the Washington Escrow Company is to hold in escrow the documents and money involved in the sale or exchange of real estate, businesses, leases, and personal property. Such business is generally referred or brought in by real estate or business-chance brokers, and in the handling of escrows the Washington Escrow Company endeavors to satisfy the interests of the brokers, the buyers, and the sellers. In general such business involves the receiving, holding, preparing, or completing of all documents incident to the completion of such sales or trades and the transfer of title, the supervision of their execution and their ultimate delivery, and the receipt, holding, and disbursement of the purchase price.

Ordinary sales of residences are handled by employees of the company, not attorneys, who process the documents involved. Two 'lines' of employees who perform this function, are divided into sections. The receiving section receives the earnest-money agreement and records pertinent data therefrom. The 'sign-up' or 'interviewing' section checks the accuracy of the description of the real estate. The employees in this section also make a preliminary check with a title insurance company as to the apparent ownership of the property and order the title insurance. They prepare escrow instructions, and select and prepare or complete all documents that must be executed and delivered in order to complete the sale or trade.

The employees in this section interview the buyer and seller, review with them the documents necessary to complete the transaction and give whatever explanation is required to secure the execution of the documents. They determine the defects of title as shown by the title insurance report and initiate steps to clear up such defects.

In the 'closing' section, employees receive the money that is deposited with the company by the buyer; make out a financial statement, called the 'closing statement,' showing the segregation of the money received and the disbursement made; initiate action to record or file all documents that must be placed of record, and deliver to the persons entitled thereto all of the documents and funds involved in closing the transaction.

In the 'final review' section, the employees receive the closed files from the 'closing' section, check fire insurance policies to make sure they are properly endorsed for transfer, and pay the title insurance and other expenses directed by the escrow instructions.

The 'sign-up' section is operated by two persons, an interviewer and a typist. The typist sometimes fills in, completes, or otherwise prepares all of the documents involved, without instruction or direction from anyone. In other instances, the typist prepares such documents after receiving instructions from, or consulting with, the interviewer; and in some instances the interviewer consults with Mr. Droker or Mr. Mulholland before giving instructions to, or consulting with, the typist.

In some instances, the earnest-money receipts submitted to the company contain mistakes, ambiguities, or inaccuracies, or are deficient in other respects; and in some instances a question is created as to the binding nature of the contract. The employees in the 'sign-up' section write or word the escrow instructions in a form designed to cure the mistake, inaccuracy, deficiency, or ambiguity.

The escrow instructions are drafted on forms, containing blanks, printed by the company. These printed forms are used in all cases. They contain provisions similar to those in the earnest-money receipts, but almost never in the same language. The result is that the contract made by the earnest-money receipt is changed by the superseding escrow instructions.

Many types of legal instruments are prepared by the clerks in the 'sign-up' section. They include deeds, promissory notes, real-estate and chattel mortgages, real-estate contracts, affidavits, assignments of real-estate contracts, assignments and releases of real-estate mortgages, conditional-sale contracts for the sale of personal property, releases of chattel mortgages, and satisfactions of conditional-sale contracts.

Sales or trades of income-producing real estate and going businesses are not handled in the production lines, but are handled by Mr. Droker personally with the aid of a secretary. In such transactions, Mr. Droker meets the buyer and seller, discusses with them the terms of their agreement, prepares the necessary documents, explains their legal effect, and obtains their execution.

Since its incorporation, the Washington Escrow Company has solicited business. Mr. Mulholland makes personal calls on real estate brokers, and asks that the brokers include in the earnest-money receipts prepared by them the requirement that the sale or trade be closed in escrow by the Washington Escrow Company The company supplies the brokers with free printed forms of earnest-money receipts containing this requirements, and with the name of the broker printed in large type at the top. These are furnished in sets of five copies; one is marked for delivery to the Washington Escrow Company office.

Mr. Mulholland and a Mr. Bethards (who also solicits business from real-estate brokers) urge upon the brokers the advantages of using the services of the Washington Escrow Company. Among other things, they tell the brokers that the drafting by the Washington Escrow Company will catch and correct errors and omissions, will clarify ambiguities or inconsistencies, and supply legal descriptions where necessary.

Mr. Mulholland and Mr. Bethards supply the brokers with a set of instructions concerning the language to be used in filling in the blanks of earnest-money receipts, which are printed on cards, with the name, address, and telephone number of the company. These instruction are printed in the handbook of the Seattle Real Estate Board, which has 200 to 300 members in Seattle, with the statement that they are supplied by the Washington Escrow Company. The company advertises in the yellow section of the telephone book.

Since about the year 1950, the company has made a practice of making payments to some brokers and employees of brokers to induce them to see that the escrow is sent to the company.

The bookkeeper who drew the checks for these payments was not told their purpose. Mr. Mulholland told him to charge the checks to advertising. They were so shown on the income tax returns. Some checks were made payable to cash. No buyer nor seller was ever told that a part of the money he paid for escrow fees was paid secretly to his agent, the real-estate broker.

When the buyer and seller report to the offices of the company to sign the necessary documents, they are shown copies of the escrow instructions by employees, who explain the meaning and effect of the language used. By this means there is displayed, under the heading of amounts to be paid, the following: 'To Mulholland & Droker, attorneys, drafting fee $_____' (with amount filled in).

Up to 1955, the amount filled in for the buyer and the seller was the same, customarily one dollar. Since 1955, the amount filled in has been customarily $2.50 for the seller, and none for the buyer. In those cases where the drafting is considered to be so unusual as to permit a higher charge (not over five percent of a total transaction), a larger sum has been inserted, but never more than $15. When the employees are asked what this fee represents, they say that it is the legal fee of the Washington Escrow Company. The reason such a small fee is charged is that it is considered necessary in order to meet the competition of other escrow companies, some of which do not charge anything.

Coincident with displaying the escrow instructions, the interviewer or the typist asks the buyer and the seller whether they have brought with them the documents required to close the transaction. If the answer is no, the employee asks them if they have their own lawyer who will draft the documents. If the answer is again no, the employee tells them that Mr. Mulholland and Mr. Droker have already drafted the documents needed and that they are in the file ready to be signed. Then the documents which the employees have prepared are produced. Mr. Droker follows the same procedure in the transactions that he handles.

A few years ago, the company operated branch offices in Bellevue, Renton, Northgate, and Burien. Each was open for several months, except the Burien office, which was open for three years, and closed in 1958. The operation in the branch offices was the same as in the downtown office, except that in the branch offices the...

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    ... ... App. 237, 245, 848 P.2d 743 (1993) ). In Hunt , the Court of Appeals rejected the argument that "practice of law" was unconstitutionally vague in part because case law provided a sufficient definition. Id. at 801-02, 880 P.2d 96 (citing In re Disciplinary Proceedings Against Droker , 59 Wash.2d 707, 719, 370 P.2d 242 (1962) ; Bowers v. Transamerica Title Ins. Co. , 100 Wash.2d 581, 586, 675 P.2d 193 (1983) (plurality opinion)). Hunt had settled claims, researched the law, applied the results of his research to his clients, and prepared liens. Id. at 803-04, 880 P.2d 96 ... ...
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