Schmitt v. Coad
| Decision Date | 19 November 1979 |
| Docket Number | No. 6845-8-I,6845-8-I |
| Parties | Nicholas SCHMITT, Sr., Respondent, v. Thomas COAD, Appellant, and Jane Doe Coad, his wife, and the marital community composed thereof; Charles A. Ruud and Jane Doe Ruud, his wife, and the marital community composed thereof, Defendants. |
| Court | Washington Court of Appeals |
Bogle & Gates, Ronald T. Schaps, Seattle, for appellants.
Ryan, Swanson, Hendel & Cleveland, Dale E. Kremer, Seattle, for respondent.
This case concerns the applicability of Washington's real estate-business opportunity brokers statute, RCW 18.85, to the sale of a controlling stock interest in a corporation.
Defendant Thomas Coad owned stock in two closely held Snohomish County newspaper corporations, a majority interest in one and a minority interest in the other. In 1973, Coad and plaintiff Nicholas Schmitt agreed that Schmitt would attempt to find a buyer for all of the capital stock of the two corporations, and that, if successful, Coad would pay Schmitt a percentage commission based upon the sale price of Coad's stock. Through Schmitt's efforts, Coad was put into contact with a potential buyer, The Chronicle, Inc. After direct negotiations between Chronicle, Inc. and Coad, a sale of 100 percent of the stock in both corporations was consummated in 1975.
After Coad failed to pay the commission, this suit followed. Coad's principal defense was that recovery was barred because Schmitt was not a licensed real estate broker. A bench trial resulted in a judgment in favor of Schmitt. We reverse.
The trial judge found that Schmitt had "never Acted independently and was always subject to the complete and exclusive control of (Coad)" ( of fact No. 9; italics ours) and concluded that "(t)he services rendered by (Schmitt) to (Coad) were not controlled or governed by the real estate licensing law of the State of Washington." Conclusion of law No. 3. We do not agree with his conclusion.
At all relevant times, an earlier version of RCW 18.85.010 provided:
(1) "Real estate broker," or "broker," means a natural or artificial person, Acting independently, who for commissions or other compensation, engages in the purchase, sale, exchange, rental, or negotiation therefor, of real estate, or interests including leases and/or options therein, and for business opportunities or interest therein, belonging to others, or sale of any interest in any formal or informal association in which the purchaser acquires use of real property unless the offering is registered with the state of Washington, or holds himself out to the public as being so engaged;
(2) "Real estate salesman" or "salesman" means any natural person who represents a real estate broker in any of his activities;
(3) An "associate real estate broker" is a person who has qualified as a "real estate broker" who works with a broker and whose license states that he is associated with a broker;
(5) "Business opportunity" shall mean and include business, business opportunity and good will of an existing business or any one or combination thereof;
(Italics ours.)
RCW 18.85.100 made the possession at all relevant times of a valid real estate broker's license a prerequisite to a suit for a broker's commission.
The trial judge's oral opinion reveals that he was persuaded that the statutory definition of a "broker" could be met only if a person acted independently in the sense of not being subject to his principal's control. Using this definition, he found that Schmitt had not acted independently because Schmitt only had authority to offer Coad's stock to potential purchasers and "never had any authority to enter into a sale, negotiate for a sale, make a binding commitment for sale (or) to state a firm sales price or terms of sale." Finding of fact No. 8.
Statutes must be read as a whole and construed so as to avoid unlikely consequences which could result from a literal reading. Alderwood Water Dist. v. Pope & Talbot, Inc., 62 Wash.2d 319, 382 P.2d 639 (1963). Reading former RCW 18.85.010 as a whole, we conclude that the phrase "acting independently" was intended only to differentiate between "broker" and "associate real estate broker." Were we to adopt the trial judge's construction, an anomalous result would follow: A person could not meet the definition of a "broker" unless he was free of his employer's control, but a person who worked with a broker as an "associate broker" would not be so restricted.
The trial judge further concluded that the sale of the stock was an "isolated (securities) transaction" exempted from either state or federal regulation, and that Schmitt "was not required to be a licensed security salesman, broker/dealer, or investment advisor." Conclusion of law No. 4. He found that the purchase of the stock "was for purposes of acquiring the properties therein and not for purposes of investing money in a common enterprise with profits to come solely from the efforts of others." Finding of fact No. 16.
Schmitt asserts that in Marble v. Clein, 55 Wash.2d 315, 347 P.2d 830 (1959), it was held that the sale of an incorporated business is exempt from the requirements of RCW 18.85. That characterization of Marble is not supported by a reading of the opinion. There, the sole question before the court was the applicability of the Securities Act and the opinion so states; the applicability of RCW 18.85 was not in issue.
Although a sale of corporate stock is, a fortiori, a sale of securities, it does not follow that it may not also constitute a sale of a "business, business opportunity and good will of an existing business or any one or combination thereof." Former RCW 18.85.010(5). A transfer of a controlling interest in the voting stock of a corporation is a commonly utilized means of effecting a sale of a "business." In most instances, such a sale will be exempt from regulation under Washington's Securities Act. RCW 21.20.320(1). See Yeakel v. Ralls, 9 Wash.App. 133, 511 P.2d 65 (1973). But the provisions of former RCW 18.85.010 in no way purported to exempt the sale of incorporated businesses.
Real estate-business opportunity brokers statutes are designed to protect the public from fraud and misrepresentation by dishonest persons.
Statutes regulating the real estate business, and requiring brokers and salesmen to procure a license before acting as such, have been enacted in many States. They have the same general purpose and are designed to protect the public from the fraud, misrepresentation and imposition of dishonest...
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