Case Title: TWITE v WESTERN SURETY CO

Citation: 

Docket Number: 13873

State: montana

Court: Montana Supreme Court

Date: 1978-04-11T00:00:00Z

Document:
No. 13873 IN THE SUPREME COURT OF THE STATE OF MONTANA 1978 RAY TWITE and JACK TWITE, Plaintiffs and Appellants, WESTERN SURETY COMPANY, a corporation, Defendant and Respondent. Appeal from: District Court of the Fourth Judicial District, Honorable wward T. Dussault, Judge presiding. Counsel of Record: For Appellants: Tipp, Hoven and Skjelset, Missoula, Montana Vernon Hoven argued, Missoula, Montana For Respondent: Garlington, Lohn and Robinson, Missoula, Montana Gary Graham argued, Missoula, Montana Submitted: January 19, 1978 Decided: HYR / 2 Filed: . 2 ; @ M r . J u s t i c e Gene B. Daly delivered the Opinion of the Court. Two separate actions were f i l e d by p l a i n t i f f s Ray and Jack Twite against James Lackman, David Gregoryk and Lackman Realty i n the D i s t r i c t Court, Missoula County. Counsel f o r the respective p a r t i e s stipulated the two causes of action with Ray Twite and Jack Twite a s p l a i n t i f f s could be consolidated and deemed submitted t o the t r i a l court upon the f i l i n g of b r i e f s . David Gregoryk was served i n t h a t action on March 15, 1974, but did not appear. A default judgment was taken against him on April 29, 1974. After jury t r i a l the remaining defendants were found t o be not l i a b l e . Subsequently, Jack and Ray Twite f i l e d actions against Western Surety Company (Western) on Gregoryk' s bond. The actions were consolidated and submitted t o the t r i a l court on agreed f a c t s . Judgment was rendered in'favor of Western and Twites now appeal from the f i n a l judgment. I n the complaint of the underlying action, p l a i n t i f f s based t h e i r s u i t on the f a c t David Gregoryk was a licensed r e a l e s t a t e salesman under the Real Estate Licensing Act of 1963. The cause presently before t h i s Court was f i l e d against Western Surety Company a s surety f o r Gregoryk under section 66-1933, R.C.M. 1947, of the Real Estate Licensing Act. The bond required t h a t Western would be bound t o the Montana Real Estate Commission i n the sum of $10,000 conditioned upon the payment by Gregoryk of judgment recovered against him f o r loss o r damage t o any individual a r i s i n g i n the course of Gregoryk's practice a s a licensed r e a l e s t a t e salesman. Each plaintiff entered into a written contract t o purchase land located. i n the Garnet Range area of Powell County. T i t l e t o t h i s land was i n Gregoryk and h i s wife by virtue of a contract for deed. A t the time that plaintiffs signed the sales contracts, the Gregoryks were i n default under t h e i r contract for deed. The contracts signed by p l a i n t i f f s were commonly used forms i n the real estate business in Montana. The form contract makes a number of references t o real estate brokers and agents, but Gregoryk signed these contracts as s e l l e r rather than as an agent or broker. These contracts were signed a t Lackman Realty, where Gregoryk worked as a salesman. It also appears that Lackman Realty was selling similar l o t s i n the same area. The t r i a l court made findings i n agreement with the stipulated facts, and further found: " 5 . That a t a l l times pertinent hereto David Gregoryk was the owner of the real e s t a t e which was sold t o and purchased by the Plaintiffs. " 6 . That a l l acts of David Gregoryk were accomplished as owner of the real property in question." Upon these findings the District Court concluded , matter of law: "1. That David Gregoryk in a l l of h i s relationships with JACK TWITE and RAY TWITE was acting as the owner of the property in question and not as a licensed r e a l e s t a t e salesman. "2. That the Defendant i s not liable under said bond for the acts of David Gregoryk since the actions com- plained of were acts accomplished by the owner of the property and not within the course of Gregoryk's business as a real estate salesman." The issues on appeal are: 1. Whether or not under the Montana Real Estate Licensing Act the r e a l estate agent Gregoryk, i n selling h i s own property, can be covered on the real estate bond provided by Western? 2. Whether attorney fees and interest can be recovered i n addition t o the f u l l amount of the bond? W e find the major problem i n t h i s case is the misapplica- tion of the Real Estate License Act. Section 66-1924, R.C.M. 1947, simply requires anyone dealing directly or indirectly i n the r e a l estate business buy a broker or salesman license. This means the person so engaged must comply with sections 66-1929 through 66-1935, R.C.M. 1947, which s e t forth the educational, professional, and monetary requirements t o obtain the license required for the job or position t o be held by the person dealing in real estate. The Act, further, i n section 66-1937, R.C.M. 1947, entitled "Grounds for refusal - suspension o r revocation of license", s e t s out the ethical standards to be observed by a licensee under t h i s Act. There i s no provision i n the Act that relaxes the ethical standards for a licensee who happens to be selling property t i t l e d or contracted t o the licensee. The contrary i s demonstrated under section 66-1937(7), which prohibits acting i n dual capacity as a broker and undisclosed principal i n a transaction. This is the sum t o t a l of our concern, given the agreed facts i n t h i s case. Section 66-1926 - "Exempted classes", has nothing t o do with the problem presented by the agreed facts of t h i s case and i t s insertion into t h i s case i s error. Section 66-1926 merely enumerates the persons who may be associated with a r e a l estate transaction, yet are not i n the real estate business and therefore are "exempted" from purchasing a r e a l e s t a t e license, i.e., an individual selling h i s own home, an attorney acting for a c l i e n t , an attorney-in-fact, auctioneers and many others. The fact that a person can s e l l h i s own property without being i n violation of the Real Estate Act, f o r f a i l u r e t o purchase a r e a l e s t a t e license, does not lend i t s e l f t o the proposition t h a t a licensed r e a l e s t a t e salesman is relieved of h i s responsibility under section 66-1937, merely because he has taken property i n t o h i s name before defrauding a purchaser. This would render the Act a n u l l i t y . Furthermore, it w i l l stand without discussion t h a t t h i s kind of arrangement would be s t r i c t l y against public policy,which is t o protect the public from unscrupulous and insolvent r e a l e s t a t e agents and brokers. A number of jurisdictions have ruled on t h i s matter i n conjunction with a statutory exemption when dealing i n a person's own property. W e a r e concerned only t o the extent t h a t they demonstrate the surety's l i a b i l i t y i n cases involving the s a l e of a licensee' s property. The rule of these jurisdictions may be synthesized i n t h i s manner : Members of the public have the r i g h t t o rely upon express o r implied representations of a licensed r e a l e s t a t e agent o r broker although the agent is i n f a c t the owner of the property being sold. Therefore, the surety is bound by such express o r implied representa- t i o n s and the bond s h a l l cover such judgments entered. See: Goody v. Maryland Casualty Co., (1933), 53 Idaho 523, 25 P.2d 1045; Mapes v. Foster, (1928), 38 Wyo. 244, 266 P. 109. i P l a i n t i f f s here contend they were led t o believe they were dealing with a reputable r e a l e s t a t e broker agent i n the purchase of the land. P l a i n t i f f s point t o these external factors which led them t o believe t h a t defendant was s e l l i n g t h i s land a s a broker: 1) The r e a l e s t a t e agent (Gregoryk) never informed p l a i n t i f f s he was acting a s owner of the land, not a s a licensed r e a l e s t a t e agent. 2) The signing of standard form contracts, a s well a s other negotiations, took place i n the o f f i c e s of Lackman Realty, a large r e a l e s t a t e agency i n Missoula, where defendant Gregoryk worked a s a salesman. 3) Lackman Realty was s e l l i n g land i n the same area and was advertising t h a t land f o r s a l e . One of the p l a i n t i f f s , Jack Twite, responded t o the advertising and was directed t o M r . Gregoryk. The record c l e a r l y discloses t h i s statement: "A. Well, the land t h a t I purchased, 20 acres adjacent t o it was a r e s u l t of m y reading t h i s ad i n the paper by J i m Lackman and I called J i m Lackman and asked about t h i s land t h a t he had advertised and a t t h a t time J i m Lackman told m e t h a t h i s , t h a t one of h i s agents, Dave Gregoryk, was handling the s a l e of t h i s property." From these f a c t s it was reasonable f o r p l a i n t i f f s t o believe they were dealing with a bonded r e a l e s t a t e salesman. The licensed r e a l e s t a t e agent (Gregoryk) never in- formed p l a i n t i f f s t h a t he was dealing with the property a s the owner. I n l i g h t of the public policy of the Act, t h a t of pro- tection f o r the benefit of the public dealing with r e a l t o r s o r r e a l t y salesmen who may be "irresponsible o r insolvent", we must conclude defendant Gregoryk i n t h i s transaction did not meet minimum standards t h a t would a l e r t a lay person t h i s was not a "Lackman Realty" transaction. The second issue i s whether attorney fees and i n t e r e s t can be recovered i n addition t o the f u l l amount of the bond. The language of the surety bond provides: "The aggregate l i a b i l i t y of the surety hereunder, whether t o one or more persons, s h a l l i n no event exceed the t o t a l sum of TEN T H O U S A N D D O L L A R S ($10,000.00) .I1 I n Lapke v. Hunt, (1968), 151 Mont. 450, 460, 443 P.La 493, appellant i n a r e a l e s t a t e transaction urged t h a t i n t e r e s t could not be collected i f it exceeded the face value of l i a b i l i t y under the bond. This Court reasoned: "we hold t h a t i n an action against a surety company upon'a bond issued by t h a t company, i n t e r e s t may be awarded even i f t h a t i n t e r e s t , i n addition t o the amount of damages awarded, exceeds the amount of l i a b i l i t y s t a t e d i n the bond. 12 Am.Jur.Zd, Bonds, 545, p. 508; 1 1 C.J.S. Bonds 5132(b), p. 511." The Court further held t h a t i n t e r e s t would commence a s a general r u l e , upon demand made upon licensee, but where no demand was made on the surety the l i a b i l i t y commenced upon the f i l i n g of the complaint against licensee. Section 66-1940(c), R.C.M. 1947, since repealed by the 1977 l e g i s l a t u r e but the s t a t u t e i n force a t t h e time t h i s action accrued, read i n p a r t : "(c)* * * I n a l l cases where s u i t i s brought against the broker o r the salesman, and h i s surety, the court s h a l l , upon entering judgment f o r the p l a i n t i f f , allow a s a p a r t of t h e costs of s u i t a reasonable amount a s attorney's fees. " A l l penalties provided f o r by t h i s section may be collected from the broker's and salesman's bonds provided by section 66-1933." (Emphasis added.) Costs of s u i t a r e recognized t o be collectable beyond the face value of the bond and hence with precise s t a t u t o r y authority attorney fees i n t h i s instance w i l l be a p a r t of the cost of s u i t . The judgment of the t r i a l court is reversed. The cause is remanded t o the t r i a l court t o enter judgment f o r p l a i n t i f f s and conduct a hearing t o determine the correct amount of interest and reasonable attorney fees t o be included i n the cost of s u i t . W e Concur: . . . . . . . . . M r . Chief Justice Frank I. Haswell, dissenting: I would affirm the judgment of the District Court. The surety bond here was issued i n conformity with the requirements of the Real Estate Licensing Act of 1963, specifically section 66-1933, R.C.M. 1947, as amended. This statute and the bond issued thereunder l i m i t the surety's l i a b i l i t y , among other things, t o losses resulting from violation of the Act by the salesman. The Act specifically exempts sales of h i s own property by a r e a l e s t a t e salesman: "66-1926. EXEMPTED CLASSES. A single a c t performed, for a commission or compensation of any kind, i n the * * * selling * * * of r e a l estate * * *, except as hereinafter specified, s h a l l constitute the person performing any such acts a real estate broker or r e a l estate salesman. The provisions of t h i s a c t , however, s h a l l not: "(1) apply t o any person who, as owner, * * * s h a l l perform any of the aforesaid a c t s with reference t o property owned * * * by himself * * *.' (Emphasis supplied.) I n m y v i e w the language of both the statute and the I surety bond i s clear and unambiguous. Under such circumstances, there is nothing for t h i s Court t o construe. Dunphy v. Anaconda Company, (1968), 151 Mont. 76, 438 P.2d 660 and cases cited therein. The function of t h i s Court is simply t o ascertain what in terms or i n substance is contained i n the s t a t u t e and bond and not t o insert what has been omitted nor t o omit what has been inserted. Section 93-401-15, R.C.M. 1947. In short, it is simply the duty of the Supreme Court t o accept the statute and bond a s written. Policy considerations should not be permitted t o control plain language. % d g 4 b s p d Chief Justice .