Title: Coast Security Mortgage Corp. v. Real Estate Agency
Citation: N/A
Docket Number: S45845
State: Oregon
Issuer: Oregon Supreme Court
Date: December 7, 2000

Filed:  December 7, 2000
IN THE SUPREME COURT OF THE STATE OF OREGON

COAST SECURITY MORTGAGE CORPORATION,
	Petitioner on Review,
	v.
REAL ESTATE AGENCY,
	Respondent on Review.
(995-E-409G; CA A95785; SC S45845)

	On review from the Court of Appeals.*
	Argued and submitted September 9, 1999.
	Gary Roberts, Portland, argued the cause for petitioner on
review.  With him on the petition and brief was Schwabe,
Williamson &amp; Wyatt, P.C., Portland.
	Jas. Jeffrey Adams, Assistant Attorney General, Salem,
argued the cause for respondent on review.  With him on the brief
were Hardy Myers, Attorney General, and Michael D. Reynolds,
Solicitor General.
	Before Carson, Chief Justice, and Gillette, Van Hoomissen,
Durham, Leeson, and Riggs, Justices.**
	CARSON, C.J.
	The decision of the Court of Appeals and the order of the
Real Estate Agency are reversed.
	*Judicial review from the Real Estate Agency.	 155 Or App 579, 964 P2d 306 (1998).
	**Kulongoski, J., did not participate in the consideration
or decision of this case.
		CARSON, C.J.
		In this administrative law case, we must construe ORS
696.511(1), the escrow agent licensing statute, which requires a
person to obtain a license if that person "act[s] in the capacity
of an escrow agent."  The Real Estate Agency (Agency) issued a
final order concluding that Coast Security Mortgage Corporation
(Coast Security), a mortgage broker that was not licensed as an
escrow agent, had violated ORS 696.511(1) when it explained
escrow instructions and settlement statements to its customers,
obtained and notarized their signatures, and subsequently sent
the documents to an escrow company.  The Court of Appeals
affirmed the agency's final order.  Coast Security Mortgage Corp.
v. Real Estate Agency, 155 Or App 579, 964 P2d 306 (1998).  We
allowed review to consider whether such acts constitute "act[ing]
in the capacity of an escrow agent" under ORS 696.511(1).  For
the reasons that follow, we conclude that they do not.  We
therefore reverse the decision of the Court of Appeals and the
order of the Agency.
		We take the facts from the Court of Appeals' opinion
and from the record.  Coast Security is a licensed mortgage
broker in Oregon. (1)  As part of its business plan, Coast Security
attempted to differentiate itself in the marketplace by
providing, as a convenience and service to its customers, the
opportunity to sign refinancing loan documents, settlement
statements, and escrow instructions at home or at Coast
Security's office, rather than at the office of a licensed escrow
agent.  Paget, an employee of Coast Security, handled 47 such
residential refinancings.  His activities in those refinancings
provide the basis for the complaint at issue here.
		In each of the transactions, a lender prepared the loan
documents, and a California escrow company prepared the escrow
instructions and settlement statements.  Once prepared, the
lender and escrow company sent the documents to Coast Security,
which forwarded them to Paget to take to the customers.  Paget
visited the customers in their homes or met them at Coast
Security's office.  He introduced himself with his business card,
which identified him as an employee of Coast Security.  Paget
then presented and discussed with the customers all the documents
that the customers were to sign.  
		The documents that Paget explained to the customers
included the escrow instructions and settlement agreements.  The
escrow instructions were directed to the escrow company that had
drafted them.  Similarly, the escrow company that had drafted the
settlement statements was listed as the settlement agent.  The
settlement statements also set out the amount of money that the
escrow company would disburse to the mortgage broker and other
entities, such as the taxing authority or the insurance company.  
		After Paget explained the documents to the customers,
the customers signed the documents in front of him, and, where
appropriate, Paget notarized their signatures.  In each case,
Paget represented to the customers that signing at their home, or
at Coast Security's office, was in lieu of signing at an escrow
office.  After the customers signed, Paget sent the documents
back to Coast Security, which then sent them to the California
escrow company for closing.  None of the 47 customers involved in
the refinancings at issue signed their escrow documents at an
office of a licensed escrow company, and neither Coast Security
nor Paget was licensed to conduct escrow activity in Oregon.
		In May 1995, Eckardt, one of the 47 customers, filed a
complaint with the Oregon Department of Justice, claiming that
Coast Security had defrauded him in arranging refinancing for his
home.  The Department of Justice forwarded Eckardt's complaint to
the Agency, which charged Coast Security with violating ORS
696.511(1) by acting, through Paget, in the capacity of an escrow
agent without a license.  After a contested case hearing, the
Agency issued a final order, ruling that Coast Security had
violated the statute.  The Agency imposed a civil penalty of $100
for the first offense and $500 for each of the 46 remaining
offenses.  The fines totaled $23,100 -- the minimum civil penalty
allowable under ORS 696.590(1). (2)
		Coast Security petitioned for judicial review of the
Agency's order, arguing that the Agency erred in concluding that
Coast Security had "act[ed] in the capacity of an escrow agent,"
ORS 696.511(1), when neither Coast Security nor Paget had
undertaken any of the activities identified in the statutory
definitions of "escrow" and "escrow agent." (3)  Specifically, Coast
Security argued that, to act in the capacity of an escrow agent,
a person must engage in the business of receiving escrows.  Coast
Security also argued that the Agency's order was not supported by
substantial evidence and that Oregon law required the Agency to
define the phrase "act in the capacity of an escrow agent" by
rule and not through a contested case proceeding.
		The Court of Appeals affirmed the Agency's order.  The
court first concluded that, although acting in the capacity of an
escrow agent is not the same as engaging in the business of an
escrow agent, Coast Security nonetheless had violated ORS
696.511(1).  Coast Security Mortgage Corp., 155 Or App at 583. 
The Court of Appeals also held that the Agency was not required
to promulgate a rule to establish the meaning of the phrase "act
in the capacity of an escrow agent" under ORS 696.511(1), but,
instead, could do so through a final order in a contested case. 
Coast Security Mortgage Corp., 155 Or App at 584.  Finally, the
court held that the Agency's order was based on substantial
evidence.  Id. at 584-85.  We allowed Coast Security's petition
for review.
		We begin with the issue whether Coast Security, through
Paget, was acting in the capacity of an escrow agent.  ORS
696.511(1) provides:
"No person directly or indirectly shall engage in
or carry on, or purport to engage in or carry on the
business or act in the capacity of an escrow agent
without first obtaining a license as an escrow agent
under the provisions of ORS 696.505 to 696.590." 
(Emphasis added.)  Coast Security contends that the Agency
misinterpreted that statutory provision when it concluded that
Paget, in behalf of Coast Security, had acted in the capacity of
an escrow agent.  In response, the Agency argues that, under ORS
696.385(3), (4) the legislature has given the Agency the authority
to enforce ORS 696.511(1) and that the Agency was within its
authority to conclude that a person who delivers escrow documents
to customers, explains those documents to customers, and obtains
the customers' signatures is acting in the capacity of an escrow
agent.
		Although the legislature has given the Agency the
authority to enforce ORS 696.511(1), "[t]he determination of the
meaning of a statute is one of law, ultimately for the court."  
Springfield Education Assn. v. School Dist., 290 Or 217, 224, 621
P2d 547 (1980).  We begin our analysis by considering the
appropriate standard for reviewing the Agency's construction of
the phrase "act in the capacity of an escrow agent" in ORS
696.511(1).
		When an agency's interpretation or application of a
provision of law is at issue, the reviewing court's standard of
review depends upon whether the phrase at issue is an exact term,
an inexact term, or a delegative term.  Springfield Education
Assn., 290 Or at 223.  "Exact terms" impart relatively precise
meanings, and their applicability in a particular case involves
only agency factfinding.  Id. at 223-24.  This court reviews
agency application of "exact terms" for substantial evidence. 
Id. at 224.  "Inexact terms" are less precise.  Although they
embody a complete expression of legislative meaning, that meaning
always may not be obvious.  Id.  As to "inexact terms," the task
of the agency, and ultimately of the court, is to determine what
the legislature intended by using those words.  Id.  "Delegative
terms" express incomplete legislative meaning that the agency is
authorized to complete.  Id. at 228.  As to "delegative terms,"
the agency's task is to complete the general legislative policy
decision.  Id.  This court reviews the agency decision concerning
a "delegative term" to determine whether it is within the range
of discretion allowed by the more general policy of the statute. 
Id. at 229.
		Both parties assert that the phrase "act in the
capacity of an escrow agent" in ORS 696.511(1) is a delegative
term.  We disagree.  That phrase does not express incomplete
legislative meaning; other parts of the escrow licensing statutes
define the terms "escrow" and "escrow agent."  Further,
interpretation of the meaning of the phrase "act in the capacity
of" does not require a legislative policy determination by the
Agency.  Neither is that phrase so precisely defined as to be an
"exact term."  Although the terms "escrow" and "escrow agent" are
defined by statute, neither ORS 695.511(1) nor any other
applicable statute define the phrase "act in the capacity."  We
conclude that the phrase "act in the capacity of an escrow agent"
is an "inexact term" because, although parts of that phrase are
defined by statute and embody a complete expression of
legislative meaning, the phrase is open to various
interpretations.
		As noted above, we review the Agency's interpretation
of inexact terms for consistency with legislative intent. 
Springfield Education Assn., 290 Or at 224.  In this case, doing
so requires us to construe ORS 696.511(1) to determine the
intended meaning of the phrase "act in the capacity of an escrow
agent."  To determine the legislature's intent, we first examine
the text and context of the statute.  PGE v. Bureau of Labor and
Industries, 317 Or 606, 610, 859 P2d 1143 (1993).  Context
includes other provisions of the same statute and other related
statutes.  Id. at 611.  In analyzing text and context, "words of
common usage typically should be given their plain, natural, and
ordinary meaning."  Id.  If the legislature's intent is clear
from the examination of text and context, then our inquiry is at
an end.  Id.
		To determine the legislature's intent here, we divide 
the phrase, "act in the capacity of an escrow agent," into its
essential parts -- "act in the capacity" and "escrow agent."  As
noted, the escrow statutes do not define the word "capacity." 
The word "capacity" has many definitions; in this case, the
relevant dictionary definition provides:
"4b:  a position, character, or role either duly
assigned or assumed without sanction  [.]"
Webster's Third New Int'l Dictionary, 330 (unabridged ed 1993)
(emphasis added).  Therefore, to "act in the capacity of an
escrow agent," a person need only act in the role of an escrow
agent.
		 As noted, the term "escrow agent" is defined by
statute.  ORS 696.505(3) provides:
"'Escrow agent' means any person who engages in
the business of receiving escrows for deposit or
delivery and who receives or is promised any fee,
commission, salary or other valuable consideration,
whether contingent or otherwise, for or in anticipation
of performance."  
Consequently, to be an escrow agent a person must meet two
requirements.  First, a person must receive or be promised a
"fee, commission, salary or other valuable consideration" for his
or her services.  Second, those services must include "receiving
escrows for deposit or delivery * * *."  (Emphasis added.)  
		The term "escrow" is defined in ORS 696.505(2), which 
provides, in part:
"'Escrow' means any transaction wherein any
written instrument, money, evidence of title to real or
personal property or other thing of value is delivered
to a person: 
"(a) Not otherwise having any right, title or
interest therein for the purpose of effecting the sale,
transfer, encumbrance or lease of real or personal
property, to be held by that person as a neutral third
party until the happening of a specified event or the
performance of a prescribed condition, when it is then
to be delivered by such person to a grantee, grantor,
promisee, promisor, obligee, obligor, bailee, bailor,
or any agent or employee of any of them pursuant to the
written instructions of the principals to the
transaction[.]" (5)
		We conclude that, when the foregoing statutory
definition of "escrow" is read together with the statutory
definition of "escrow agent" in ORS 696.505(3), a person "acts in
the capacity of an escrow agent" when, pursuant to the written
instructions of the principals, and for a fee, commission,
salary, or other valuable consideration, that person:  (1)
receives any written instrument, money, evidence of title to real
or personal property or other thing of value (collectively,
"matters in escrow"), to which they have no right, title, or
interest therein; (2) holds the matters in escrow as a neutral
third party until the happening of an event or the performance of
a condition specified by the principals; and (3) upon the
happening of the event or condition, delivers the matters in
escrow to a person who has right, title, or interest therein.
		In order to compare Paget's actions against the
foregoing definition of the phrase "acting in the capacity of an
escrow agent," we next turn to an analysis of the specific
activities included in receiving, holding, and delivering matters
in escrow.  We begin with the concept of receipt.
		Under ORS 696.581(1), (6) escrow agents may not receive
matters in escrow without written instructions from the
principals to the transaction or a written agreement between the
principals.  Nothing in the statutes requires the escrow agent to
receive matters in escrow in a face-to-face exchange with the
principals.  The principals, therefore, need not prepare, review,
or sign the escrow instructions or other agreement in the
physical presence of an escrow agent or at a licensed escrow
office.  Neither does the statute require the escrow agent to
answer any questions from the principals about the instructions
or settlement statement.  All that the escrow agent must do is
accept the instructions at the same time when the escrow agent
receives any funds, instruments, or property.  In short, the
escrow agent operates as a depository, in which the principals
deposit matters in escrow, together with their instructions
regarding those matters.
		The escrow statutes contemplate that, in some
instances, the principals may deposit a written agreement with
the escrow agent rather than escrow instructions.  In those
instances, ORS 696.581(3) allows the escrow agent to prepare the
instructions.  If the escrow agent does so, then the instructions
must contain the following warning:
"It is understood by the parties signing the above
or attached instructions that the instructions are the
complete instructions between this firm as an escrow
agent and you as a principal to the escrow transaction. 
These instructions may not include all the terms of the
agreement which is the subject of this escrow.  Read
these instructions carefully, and do not sign them
unless they are acceptable to you."
ORS 696.581(3).  Although the legislature requires that warning
when the escrow agent prepares the instructions, nothing in the
statutes mandates that the escrow agent be present when the
principals review and sign the escrow instructions and other
closing documents.  Further, that warning does not require the
escrow agent to assist the principals in understanding the escrow
instructions prepared by the escrow agent by explaining their
meaning.  Indeed, the law otherwise forbids an escrow agent from
drafting, selecting, or giving advice regarding real estate
documents whenever such activities require the exercise of
informed or trained discretion.  State Bar v. Security Escrows,
Inc., 233 Or 80, 89, 377 P2d 334 (1962).  
		We next consider the concept of holding matters in
escrow.  Upon receiving the matters in escrow and the principals'
written instructions or agreement, the escrow agent holds the
matters in escrow under ORS 696.505(2)(a) "as a neutral third
party until the happening of a specified event or the performance
of a prescribed condition," as outlined in the escrow
instructions.  The specific condition or event can require the
escrow agent to hold the matters in escrow until notified to
deliver them to another escrow agent, or upon a condition that,
once satisfied, requires the escrow agent to disburse the funds
to other persons or entities.
		Finally, as to the concept of delivery, when an escrow
agent delivers matters in escrow, the escrow agent must do so
pursuant to the escrow instructions.  See ORS 696.581(2) ("[a]n
escrow agent may not close an escrow or disburse any funds or
property in an escrow without obtaining dated, separate escrow
instructions in writing from the principals").  The
delivery function ultimately is dependant upon the "receipt" and
"hold" functions, because, under ORS 696.581(2), the escrow agent
must have received funds and documents from the lender and the
principal before disbursing matters in escrow.
		To summarize, the receipt of matters in escrow involves
accepting the matters in escrow, together with either signed
written instructions from the principals directing how the escrow
agent is to hold and deliver them, or a written agreement from
the principals.  No law requires the principals to visit a
licensed escrow agent office to sign the closing documents or to
meet with the principals in person to accept the property. 
Rather, mailing the closing documents to the escrow agent is
sufficient.  Further, an escrow agent may not draft documents
when informed or trained discretion is required.  However, the
agent may prepare escrow instructions pursuant to the principals'
agreement, if the principals do not wish to do so themselves. 
Neither is the escrow agent entitled to advise the principals
concerning the documents, including the escrow instructions,
other than answering questions for which no informed or trained
discretion is required.  Finally, the escrow agent must deliver
the matters in escrow upon the happening of the particular event
or performance of a specified condition that is set out in the
escrow instructions.
		With the foregoing in mind, we turn to the
determination whether Coast Security, through Paget's acts in the
transactions at issue, engaged in the acts of receiving, holding,
and delivering matters in escrow, thereby "act[ing] in the
capacity of an escrow agent" under ORS 696.511(1).  As noted,
Coast Security provided Paget with prepared loan documents from
the loan companies and prepared escrow instructions and
settlement statements from the California escrow companies. 
Neither Paget, nor Coast Security, were asked by the principals
to prepare those instructions, or to hold the other documents
pursuant to any instructions.  Paget presented the documents to
the customers, (7) notarized their signatures, (8) and forwarded the
documents to Coast Security, which then sent the documents to the
California escrow companies.  Here again, Paget was not acting
pursuant to written escrow instructions from the principals;
neither was he required to wait for a specific event or condition
to forward the documents to Coast Security.  As to those
activities, it is apparent that Paget acted merely as a messenger
between the escrow companies and the principals, and, therefore,
cannot be said to have received, held, or delivered matters in
escrow pursuant to the principals' instructions.
		The Agency argues that, even if Paget did not receive,
hold, or deliver matters in escrow, he acted in the capacity of
an escrow agent because he explained to Coast Security's
customers the contents of the closing documents, which included
escrow instructions, settlement statements, and loan documents. 
We disagree, for two reasons.  First, as we already have noted,
the act of explaining the nature and terms of certain documents
can fall outside the scope of an escrow agent's duties, when such
an explanation requires informed or trained discretion.  See
Security Escrows, Inc., 233 Or at 89 (so stating).  Second, if
Paget's explanations did not require informed or trained
discretion and therefore were the type in which an escrow agent
may engage, those explanations alone could not have transformed
Paget into an escrow agent.  That is so because, as already
explained, acting in the capacity of an escrow agent requires a
person to receive, hold, and deliver matters in escrow pursuant
to escrow instructions for consideration.  The act of explaining
documents alone does not constitute receiving matters in escrow
or holding the matters until the occurrence of some specified
event or condition. (9)
		In summary, we conclude that the escrow statutes, taken
as a whole, do not support the Agency's conclusion that Coast
Security's actions, through its employee, Paget, were those of an
escrow agent.  Accordingly, we hold that Coast Security did not
"act in the capacity of an escrow agent" under ORS 696.511(1)
and, therefore, was not required to obtain an escrow agent
license for its activities.  In light of that holding under ORS
656.511(1), we need not address the other issues raised by Coast
Security on review.
		The decision of the Court of Appeals and the order of
the Real Estate Agency are reversed.

1. 	A "mortgage broker" is one who, "[f]or compensation, or
in the expectation of compensation, either directly or indirectly
makes, negotiates or offers to make or negotiate a mortgage
loan."  ORS 59.840(6)(C).

2. 	ORS 696.590 provides, in part:
		"(1) Any person who violates ORS 696.511(1) may be
required by the Real Estate Commissioner to forfeit and
pay to the General Fund of the State Treasury a civil
penalty in an amount determined by the commissioner of:
		"(a) Not less than $100 nor more than $500 for the
first offense of unlicensed professional escrow
activity; and
		"(b) Not less than $500 nor more than $1,000 for
the second and subsequent offenses of unlicensed
professional escrow activity."

3. 	ORS 696.505(2) and (3) define those terms.  We set out
those statutory provisions later in this opinion.

4. 	ORS 696.385 provides, in part:
		"The Real Estate Agency shall have the power to:
		"* * * * *
		"(3) Make and enforce any and all such reasonable
rules as shall be deemed necessary to administer and
enforce the provisions of, and enforce and discharge
the duties defined in, any law with the administration
or enforcement of which the agency is charged."

5. 	ORS 696.505(4) defines a "principal" as, among other
things, "[t]he borrower in an escrow transaction involving the
refinancing of real or personal property * * *."

6. 	ORS 696.581(1) provides:
		  "An escrow agent may not accept funds, property
or documents in any escrow transaction without dated,
written escrow instructions from the principals to the
transaction or a dated executed agreement in writing
between the principals to the transaction."

7. 	Neither party asserts that a person who simply presents
closing documents to his or her customers must have an escrow
agent license. 

8. 	Neither party asserts that a notary public must have an
escrow agent license to notarize closing documents. 

9. 	In contending that Paget acted in the capacity of an
escrow agent, the Agency also relied upon the fact that Paget
told the customers that the signing at home or in Coast
Security's office was in lieu of a closing in an escrow office. 
That fact is irrelevant, particularly in light of our
determination that an escrow agent need not be present when the
principal executes the closing documents.