Title: McCoy v. Thompson

State: wyoming

Issuer: Wyoming Supreme Court

Document:

McCoy v. Thompson1984 WY 28677 P.2d 839Case Number: 83-135Decided: 03/12/1984WILLIAM E. McCOY AND MARY L. TUTTLE, APPELLANTS (DEFENDANTS), KAREN E. McCOY, (DEFENDANT),

v.

H. MASON THOMPSON AND DONNA J. THOMPSON, HUSBAND AND WIFE, AND ANTHONY A. LUCERO AND MELBA D. LUCERO, HUSBAND AND WIFE, APPELLEES (PLAINTIFFS).

Supreme Court of Wyoming
WILLIAM E. McCOY AND MARY 
L. TUTTLE, APPELLANTS (DEFENDANTS), KAREN E. McCOY, 
(DEFENDANT),

v.

H. MASON THOMPSON AND 
DONNA J. THOMPSON, HUSBAND AND WIFE, AND ANTHONY A. LUCERO AND MELBA D. LUCERO, 
HUSBAND AND WIFE, APPELLEES (PLAINTIFFS).

Appeal from the District 
Court, LaramieCounty, Paul T. Liamos, 
J.

E. James Burke 
and Thomas E. Campbell of Hanes, Gage & Burke, P.C., Cheyenne, for appellants.

Don W. Riske of 
Riske & Edmonds, P.C., Cheyenne, for appellees.

Before ROONEY, 
C.J., and THOMAS, ROSE, BROWN, and CARDINE, JJ.

BROWN, 
Justice.

[¶1.]     Appellees purchased an 
apartment building from appellants. At the time of the transaction appellants 
were licensed real estate sales persons. Because of an incorrect property 
description a lawsuit resulted. The trial court found that appellants were not 
competent in selling the property to appellees and assessed a statutory penalty 
against them.

[¶2.]     According to appellants 
the issues are:

"I. Whether the trial court erred as a matter of law in 
assessing a $13,000 penalty against the appellants.

"A. Whether the trial 
court erred in finding the appellants were incompetent under W.S. § 
33-28-111(a)(ix).

"B. Whether the trial 
court erred in applying W.S. § 33-28-114(b) to impose a penalty on the 
appellants under the circumstances of this case.

"II. Whether the 
appellants, when acting as principals in the sale of their own real estate, are 
exempt from the provisions of the real estate license act pursuant to W.S. § 
33-28-103 and W.S. § 33-28-104."

[¶3.]     We will 
reverse.

[¶4.]     In a real estate 
transaction appellees purchased from appellants an apartment building. The 
contract for sale, the deed and escrow instructions all contained an incorrect 
property description. The description was supplied by appellants. They were 
owners and developers of the property and also held Wyoming Real Estate Sales 
Licenses. Because of the erroneous legal description a title insurance policy 
provided for in the contract for sale could not be issued to appellees. The 
incorrect description created a cloud on appellees' title, and prompted them to 
file a complaint against appellants setting out seven causes of 
action.

[¶5.]     At trial some of the 
causes of action were resolved in favor of appellees and some in favor of 
appellants. In the resolution of the fifth cause of action in favor of 
appellees, a statutory penalty was awarded to appellees. The only part of the 
judgment appealed from is the assessment of the statutory penalty against the 
appellants.

[¶6.]     Appellees' cause of 
action for a statutory penalty was based on the Real Estate Brokers and Salesmen 
Act, § 33-28-101 to 33-28-117, W.S. 1977. Section 33-28-111(a)(ix), W.S. 1977, 
provides for the suspension or revocation of a Wyoming real estate license 
for:

"Any conduct in a real 
estate transaction which demonstrates bad faith, dishonesty, untrustworthiness 
or incompetency."

[¶7.]     Section 33-28-114(b), 
W.S. 1977, states:

"In case any person shall 
have received any money or the equivalent thereof as a fee, commission, 
compensation or profit by or in 
consequence of a violation of any provision of this act [§§ 33-28-101 to 
33-28-117], he shall, in addition, be liable to a penalty of not less than the 
amount of the sum of money so received and not more than three (3) times the sum 
so received as may be determined by the Court, which penalty may be recovered in 
any court of competent jurisdiction by any person aggrieved." (Emphasis 
added.)

[¶8.]     The trial court found 
that appellants were in violation of § 33-28-111(a)(ix) because of incompetency 
and assessed a $13,000 penalty as provided for in § 
33-28-114(b).

[¶9.]     The critical elements 
in a cause of action for a statutory penalty are:

1) Proof of the sales 
person's incompetence.

2) Receipt by sales 
person of a fee, compensation, commission or profit.

3) In consequence of a 
violation of the Real Estate Brokers and Salesmen Act.

[¶10.]  It does not appear from the record that 
appellees proved incompetency or that they proved the profit received from the 
transaction was a consequence of appellants' violation of the act. Incompetency 
is not defined in the statute. We must assume, therefore, that the legislature 
intended the usual and ordinary meaning of the word.

[¶11.]  When construing a statute the words used 
in the statute are to be given their plain and ordinary meaning unless otherwise 
indicated. Wyoming State Department of 
Education v. Barber, Wyo., 649 P.2d 681 (1982). The term 
"incompetent" is general in its meaning and standing alone conveys no 
information of the particular act of omission, or lack of qualification which 
would permit the conclusion that an individual is incompetent. County Board of 
Education of ClarkeCounty v. Oliver, 270 Ala. 107, 116 So. 2d 566 
(1959). Negligence is not synonymous with incompetency. "There is a clear 
distinction between negligence and incompetency, and they are not synonymous, 
for one may be entirely competent to do certain work or perform certain acts and 
yet be negligent in doing or performing them; the most competent may be 
negligent. * * *" 65 C.J.S. Negligence § 1(8), p. 451 (1966). However, one who 
is habitually negligent may, because of that, be incompetent. McGowin v. Howard, 251 Ala. 204, 36 So. 2d 323 
(1948).

[¶12.]  The dictionaries most commonly used 
define incompetency as:

"Lack of ability, legal 
qualification, or fitness to discharge the required duty. * * *" Black's Law 
Dictionary, p. 688 (5th ed. 1979).

"Inefficiency; a lack of 
some requisite ability; * * * the absence of a physical, moral or intellectual 
quality, incapacitating one to perform the duties of his office, characterized 
by gross neglect of duty or gross carelessness in the performance of duty. * * 
*" Ballentine's Law Dictionary, p. 602 (3d ed. 1969).

"Lack of ability or 
fitness to discharge a required the duty." 1 Bouvier's Law Dictionary, p. 1528 
(3d rev. ed. 1914).

"The quality of being 
incompetent [defined, inter alia, as] * * * lacking specific qualifications to 
perform a legal function or duty or exercise a legal right * * *." Webster's 
Third New International Dictionary, p. 1144 (8th ed. 
1979).

[¶13.]  In discussing a statute almost identical 
to § 33-28-114(b), the court in Van 
Ettinger v. Pappin, 180 Mont. 1, 588 P.2d 988, 996 (1978), 
said:

"We agree that the Real 
Estate License Act should be construed to lend maximum efficacy to the 
enforcement of the fiduciary relationships involved in this profession. 
[Citation.] This enforcement should not be taken lightly. Yet, the heavy 
penalties allowed to be added to common law damages would certainly envision 
that willful misconduct be present as opposed to a natural or what may be 
characterized as an `honest' mistake, regardless of the argument that another 
course of conduct or the lack of some negligence would have avoided the 
situation complained about."

The Montana court was 
speaking of a violation of the Real Estate Brokers and Salesman Act (M.C.A. § 
37-51-321 (1981)).

[¶14.]  The Montana case is similar to the case here. We 
agree with the reasoning of the Montana court. We cannot agree with the 
district court that furnishing an incorrect property description rendered 
appellants incompetent. There may have been negligence, but not incompetency, 
according to the cases we have cited and the ordinary and usual definition of 
incompetency. The statutory penalty is based on incompetency, not on 
negligence.

[¶15.]  A single transaction or dereliction of 
duty under certain circumstances might be sufficient to reveal a general lack of 
ability to perform required duties, thereby supporting a finding of 
incompetency. However, a single honest failure in the performance of one's 
duties does not without more amount to incompetency. Here appellants were 
negligent in their failure to provide a correct description; however, there was 
nothing in the entire transaction that indicated a general lack of ability to 
perform the required duties. The error was not detected by others who inspected 
the property and examined the sale instruments. This appears to be a single 
honest mistake. In fact, in another context the court found in its judgment that 
it was a mutual mistake. A finding of mutual mistake is inconsistent with a 
finding of incompetency. We hold that there was insufficient evidence to find 
that appellants were incompetent.

[¶16.]  Not only have appellees failed to produce 
evidence that appellants were incompetent, they have also failed to produce 
evidence that a fee, commission, compensation or profit was derived as a 
consequence of incorrect description. This latter item of proof is an element 
that must be proved for a statutory penalty. Section 33-28-114(b), supra. There 
is nothing in the record to show that because of the incorrect legal description 
a sale was made and appellants realized a profit. Succinctly, there is no causal 
connection between the incorrect description and the profit realized by 
appellants.

[¶17.]  Because of our determination of 
appellants' first assignment of error we need not address the second 
issue.

[¶18.]  Reversed.

ROSE, Justice, dissenting, 
with whom CARDINE, Justice, 
joins.

"Real estate brokers and 
salesmen are licensed by the State of Wyoming and required to meet high 
standards of honesty, integrity, trustworthiness and competency. Theirs is a 
regulated profession. Failure to satisfy those standards is ground for 
suspension or revocation of a real estate broker's or salesperson's license. An act licensing real estate agents must be 
construed in the light of an obvious purpose of protecting the public in the 
handling of important and valuable transactions relating to real property. 
Toavs v. State, Wyo., 635 P.2d 1172 
(1981)." (Emphasis added.) Hagar v. 
Mobley, Wyo., 638 P.2d 127, 136 (1981).

Because I 
believe that the finding of incompetency and the assessment of the statutory 
penalty against appellants by the trial court are supported by the evidence and 
promote the purpose of the Real Estate License Act of 1971, §§ 33-28-101 to 
33-28-117, W.S. 1977, as set out in Hagar 
v. Mobley, supra, I would have affirmed.

[¶19.]  We are asked, in this case, to construe § 
33-28-111(a)(ix), W.S. 1977, which authorizes certain sanctions where the 
licensee is found guilty of:

"Any conduct in a real estate transaction which 
demonstrates bad faith, dishonesty, untrustworthiness or incompetency." 
(Emphasis added.)

By its plain 
language, the statute penalizes conduct rising to the level of incompetency in a particular transaction. The 
majority recognize that a single act of misconduct under certain circumstances 
can suffice to demonstrate incompetency, and this concept is supported by 
decisions from other jurisdictions. Greene v. Real Estate Commission, 
D.C.App., 263 A.2d 634 (1970); Lewis 
Realty, Inc. v. Wisconsin Real Estate Brokers' Board, 6 Wis.2d 99, 94 N.W.2d 238 (1959); Goodley v. New Jersey Real 
Estate Commission, 29 N.J. Super. 178, 102 A.2d 65 (1954). However, the 
majority appear to embrace a standard of "willful misconduct" to be applied in 
the determination of incompetency in a single transaction such as the 
transaction involved in the case at bar. See the majority's reliance on Van Ettinger v. Pappin, 180 Mont. 1, 588 P.2d 988 (1978).

[¶20.]  I am unable to agree that the 
legislature, in enacting this law to protect the public from the inept handling 
of real estate transactions, intended to place such a stringent burden of proof 
on the complainant. Van Ettinger v. 
Pappin, supra, upon which the majority rely, is the only case that I have 
been able to find which requires proof of willful or intentional behavior to 
support the imposition of a penalty under the real estate license act. Most 
courts, in construing statutes which regulate professional conduct, distinguish 
between punishable incompetence and intentional acts of wrongdoing. Helm v. Warner, Ky.App., 597 S.W.2d 159, 
160 (1980).

[¶21.]  For example, in Goodley v. New Jersey Real Estate 
Commission, supra, the corporate seller of real property had obtained a 
survey which was inconsistent with a title policy on the property as well as 
with the deed into the grantor. The licensed real estate broker, who was also 
president of the corporate grantor, prepared a warranty deed which, by map and 
references to the map, purported to convey the tract of land as indicated by the 
survey. The court upheld the commission's finding that such negligence amounted 
to incompetency:

"* * * He should have 
ascertained why the exception set forth in the title policy and the deed did not 
show up on the survey. We conclude there was sufficient proof of negligence by 
him in connection with his profession, to sustain a finding of incompetency." 
102 A.2d  at 67.

[¶22.]  In Greene v. Real Estate Commission, supra, 
the licensed real estate broker had accepted from a client a deposit of $500, 
but had failed to promptly return the deposit when it appeared that the sale 
could not be made. In affirming the 15-day suspension of the broker's license, 
the court said:

"The Commission could 
properly conclude upon its findings that petitioner's careless and callous 
failure to inform his client of the reasons for the difficulty in repaying the 
deposit, of which he was a trustee, [citation] constituted such incompetence and 
untrustworthy conduct as to endanger the public interest." 263 A.2d  at 
635.

[¶23.]  Lewis Realty, Inc. v. Wisconsin Real Estate 
Brokers' Board, supra, represents another instance in which a court upheld 
the administrative board's finding of incompetence in the absence of willful 
misconduct. There, the court concluded that incompetency was demonstrated where 
the broker obtained an unsigned purchase offer from prospective buyers. The 
court affirmed the board's order suspending the broker's salesman's license for 
one month.

[¶24.]  In the instant case, the trial court 
found that appellants had several opportunities to discover the misdescription 
of the property since they had developed the project and were familiar with 
maps, plans and specifications. The trial court concluded that the failure of 
appellants to double check and cross check the legal description to insure its 
accuracy amounted to incompetency. In light of (1) the statutory language which 
contemplates a demonstration of incompetency in the particular transaction, (2) 
the high standard of care to which real estate licensees are held, Hagar v. Mobley, supra, (3) the trial 
court's factual conclusion that the misconduct was more akin to incompetency 
than to mistake, and (4) the vital importance of strictly accurate legal 
descriptions in real estate transactions, I would have upheld the trial court's 
conclusion that the failure of appellants to accurately describe the property in 
pertinent legal documents amounted to incompetency under § 
33-28-111(a)(ix).

[¶25.]  The majority also conclude that this case 
warrants reversal because the appellees failed to prove that appellants had 
realized their profits in consequence of the incorrect legal description. A 
causal connection between the misdeed and the profits must be demonstrated, 
before the court can assess a penalty under § 33-28-114(b), W.S. 
1977:

"In case any person shall 
have received any money or the equivalent thereof as a fee, commission, 
compensation or profit by or in 
consequence of a violation of any provision of this act [§§ 33-28-101 to 
33-28-117], he shall, in addition, be liable to a penalty of not less than the 
amount of the sum of money so received and not more than three (3) times the sum 
so received as may be determined by the court, which penalty may be recovered in 
any court of competent jurisdiction by any person aggrieved." (Emphasis 
added.)

[¶26.]  In construing this provision, it is 
necessary to distinguish between the various acts specified in § 
33-28-111(a)(ix) as grounds for the imposition of a penalty. "Incompetency," 
unlike "bad faith," "dishonesty," or "untrustworthiness" is not a characteristic 
which might be assumed by the broker in an effort to reap profits. Accordingly, 
it would seem logical to focus upon whether appellants received their profits 
"by" their misdescription of the real estate, rather than "in consequence of" 
the misdescription. Section 33-28-114(b), supra. Appellees relied on appellants 
to furnish a correct legal description and testified that they would not have 
purchased the apartment had they known the description to be wrong. Therefore, 
appellants, by supplying legally deficient documents which they held out as 
being accurate, caused appellees to purchase the apartment and to confer a 
profit on appellants. This construction of the statute is consistent with those 
cases which hold that actual damages or harm need not be proven in order to 
assess statutory penalties for a broker's incompetency. Lewis Realty, Inc. v. Wisconsin Real Estate 
Brokers' Board, supra.

[¶27.]  An affirmance in this case would, in my 
opinion, have promoted the purpose of the Real Estate License Act of 1971 to 
protect the public from unprofessional practices in the handling of real estate 
transactions. As we said in Hagar v. 
Mobley, supra, 638 P.2d at 138:

"Realtors, just like 
doctors, lawyers, engineering consultants, and builders, hold themselves out as 
professionals; it is their job to know their profession. People rely on and 
trust them. Failure to comply with either the accepted standards in the field or 
the standards society is willing to recognize as acceptable, is 
actionable."

CARDINE, Justice, 
dissenting.

[¶28.]  I join in the dissent of Justice 
Rose.

[¶29.]  I would hold that § 33-28-111(a)(ix), 
W.S. 19771 concerns conduct in the real estate 
transaction involved in this litigation. If incompetency appears from that 
transaction, the judgment of the district court ought to be affirmed. For these 
reasons, I join in the dissent of Justice Rose.

FOOTNOTES

1 Section 
33-28-111(a)(ix), W.S. 1977, provides:

"Any conduct in a real 
estate transaction which demonstrates bad faith, dishonesty, untrustworthiness 
or incompetency."