Court Opinion

ID: 9705148
Source: CourtListenerOpinion
Date Created: 2023-08-26 00:58:01.659853+00
Date Added: 2024-06-11T18:22:08.297723
License: Public Domain

MACK, Associate Judge,
dissenting:
I
The trial court was acting in the noblest of judicial traditions when it ordered the rescission of this real estate sales contract, the cancellation of corresponding deeds of trust and the return to the purchaser of her $7,000 down payment. The majority of this court, in reversing, is preoccupied with cold principles of ordinary business transactions with which no lawyer would disagree; in blindly adhering to the principles however, and glossing over the special factual circumstances that remove this case from the ordinary mold, it is compelling a result that no court of equity should sanction.
I read the facts of this case as amply supporting the trial court’s findings of unconscionable contractual dealings and breach of a broker’s duty. In oversimplifying the transactions I run the risk of distortion but since I see the facts as supporting my conclusion, I take that risk. This record essentially shows that experienced real estate dealers have, by active and passive misrepresentations pressured an elderly widow, with little formal education and no business experience whatever, into turning over to them practically all the money she possessed for the down payment on the purchase price of a house which the dealers themselves owned and which they could with confidence expect to continue to own. The trial court, in a position to judge credibility, described it thusly:
The Court is satisfied that the defendants, upon learning that the plaintiff had $7,000 which she was willing to apply to the purchase of real estate, rushed through a contract and settlement without making any effort to apprise her of the various steps which she might consider to protect her interests.... In short, the defendants realized that they had hooked a prize fish and were careful to avoid leaving any slack in the line.
*102In my view, the manner in which this contract was made alone would support such procedural unconscionability as to require affirmance. See Bennett v. Fun & Fitness of Silver Hill, Inc., 434 A.2d 476 (D.C.1981). Moreover, there are special circumstances here which remove this case from the operation of the general rule that a real estate broker acts for the exclusive benefit of his principal. See Hiltpold v. Stern, 82 A.2d 123 (D.C.Mun.App.1951); Brown v. Coates, 102 U.S.App.D.C. 300, 253 F.2d 36 (1958); Hammett v. Ruby Lee Mi-nar, Inc., 60 App.D.C. 286, 53 F.2d 144 (1931). -
The facts show that this was no ordinary business relationship between a prospective purchaser and the vendor’s broker. For all practical purposes, here the broker was the vendor. When Mrs. Branham (a widow with income from Veteran’s Benefits and Social Security totalling $393 per month)1 entered the A-l Realty office on January 12,1978, she was in fact entering the office of the wholly-owned subsidiary of appellant Urban Investments, Inc. She expressed interest in a vacant house if it would be made habitable. In doing so she told the office manager, Elaine Willis, who was also secretary of Urban Investments, how much money she had received from her late husband’s estate, and where the balance of that money was deposited, and Ms. Willis promptly verified this fact. Six days later Ms. Willis was escorting Mrs. Branham and one of her children into the office of her brother, Irvin Greenbaum, a licensed real estate broker (who was the president of Urban Investments), where Mrs. Branham not only wrote a check for $7,000 and signed a contract for the purchase of the house from Urban Investments, but where, in the absence of any representative of a title company, she signed all the papers necessary to complete settlement on the property including the issuance of 1st and 2nd deeds of trust to Urban Investments. Mrs. Branham testified that she did not understand what she was signing. She said she thought she was signing a contract for rental with an option to buy — an arrangement she said she had learned about from a newspaper ad. She did not read the fine print of the contracts because she had no reading glasses with her. Mr. Greenbaum urged her to sign without explanation and she relied upon both Greenbaum and Willis.
In this respect, the trial court found that Mr. Greenbaum at the time held himself out as a broker, that he did not inform Mrs. Branham that he was also acting in the capacity of the owner of the property, that he did not point out that the owner was a corporation, that he and Ms. Willis were officers of that corporation, or that Mrs. Branham should seek advice from an independent person. Noting that appellants gave assurances of timely repairs to the property which were not, and were not intended to be, kept, the trial court also relied upon facts showing that appellants did not inform appellee of the then-existence of a cloud on the title of the property or the availability of title insurance to protect her interest (although Urban Investments subsequently procured insurance for its own protection). The trial court found incredible the testimony of Irvin Greenbaum that a title search, for which Mrs. Branham was charged, had been instituted prior to settlement.
Finally, the trial court made findings as to the status and relative sophistication of the parties — noting that Mr. Greenbaum, as a witness, exhibited the confidence gained by 15 years as a licensed real estate broker and that appellee and her children had very little, if any,2 comprehension of the provisions of the various documents she signed.
*103As a matter of law, the trial court concluded that appellants owed a fiduciary duty to appellee, that appellee had the right to, and did, rely upon the competence, honesty and good faith of Mr. Greenbaum, and that appellants had breached a duty in not seeking to protect appellee’s interest. Relying upon the divergence in the expertise of the parties, the time frame in which the sale was completed, and the inability of the plaintiff to fully read and understand the contract, the trial court found that the sale of the property was not the result of an arms-length bargain and was unconscionable. Finally, the trial court found that Willis and Greenbaum, acting in concert, willfully and fraudulently made promises knowing that they could not fulfill the same, to induce appellee to sign the sales contract and immediately proceed to settlement.
II
In this court, I am somewhat puzzled by the majority’s reluctance to apply a theory of unconscionability. In Bennett v. Fun & Fitness of Silver Hill, Inc., supra, we noted that “[a] contract may be unconscionable either because of the manner in which it was made or because of the substantive terms of the contract or, more frequently, because of a combination of both” (citing J. CALAMARI & J. PERILLO, CONTRACTS § 9-40, at 325 (2d ed. 1977)). We added “we do not understand ... [the] decisions necessarily to require the presence of both elements to establish unconscionability; in an egregious situation one or the other may suffice.” Bennett, supra, 434 A.2d at 480 n. 4. As to the manner of making a contract, we noted that it was important for the trial court to consider whether the seller identified and explained the contract, particularly those which might be viewed as unusual or unfair.3 We also recognized that sales tactics were relevant — whether there was a weaker bargaining position or lack of sophistication on the part of one party exploited by the other party. Id. at 481. Applying these considerations, I would find no difficulty in concluding that the trial court was correct in finding the manner of making this contract so egregious as to be unconscionable. Appellants have exploited an unequal bargaining power to obtain a $7,000 windfall knowing full well that the windfall would become a fait accompli. In my view, no second line of inquiry into the substantive terms of the contract is necessary. If the record shows that appellee’s financial situation was such that she could not pay for the house, and that appellants, in inducing her to make a down payment and in taking over 1st and 2nd trusts for the same, knew this fact, the favorable or unfavorable terms of the contract are of no moment.
I am likewise puzzled by the majority’s strong reliance on the established principle that it is a broker’s duty to act solely for his principal’s benefit. Here the broker was acting for his own benefit. I am, therefore, unimpressed by the majority rationale in attempting to distinguish cases which have held that special circumstances create a degree of fidelity owed by a broker to a *104purchaser. Cf. Brown v. Coates, supra. In truth, such analysis, in painstakingly separating the concepts of duty and unconscion-ability does not recognize the underpinnings of these decisions — that the fiduciary relationship operates to insure that the broker, by way of his superior position, cannot through devious and unfair practices, win the trust of an unsuspecting party and lull that party into taking a loss operating to the broker’s benefit.
It is worth remembering that the common law recognizes that a realtor, in addition to the duties of loyalty and good faith he may owe to his principal, owes the public, including a prospective purchaser, the duty of fair dealing and honesty. See Funk v. Tifft, 515 F.2d 23 (9th Cir.1975); Ward v. Taggart, 51 Cal.2d 736, 336 P.2d 534 (1959) (en banc); Harper v. Adametz, 142 Conn. 218, 113 A.2d 136 (1955); Quinn v. Phipps, 93 Fla. 805, 113 So. 419 (1927).4
Moreover, the general duty that a broker owes to the public is suggested in Brown v. Coates, supra where then-Circuit Judge Burger wrote:
Appellant was a licensed real estate broker. He held himself out to the public as a person in whom the public could place trust and confidence in real estate transactions. (Footnote omitted).
Id. 102 U.S.App.D.C. at 302, 253 F.2d at 38.
Factually, Brown involved an “exchange contract,” where a broker induced homeowners to convey absolute title to their home to him, in exchange for a new home with the resulting effect that the homeowners lost all equity in the old house and were obligated to pay the full price for the new house. The circuit court had no difficulty in finding a fiduciary relationship arising out of the contract noting:
In this situation appellees had a right to rely on the competence, honesty and good faith of appellant, assured that he would guard their interests; conversely, appellant must be considered to have owed appellees a high degree of fidelity — foremost being the obligation of fair dealing and full disclosure and the utmost protection of their interests in the transaction.

Id.

In my view, the instant case presents a situation analogous to that of Brown. Here, as in Brown, appellee was led to believe that the real estate broker, who conducted the entire transaction and held himself out as a broker, was looking out for her interests. In Brown, the inducement was fed by assurances leading the appellees to conclude that, in dealing with the broker, outside advice was not needed; in the instant case, the inducement was fed by assurances that appellee’s wishes would be complied with, by exerting unusual time pressures, and remaining silent on critical matters, designed to keep what was even more of an unequal bargaining position (than in Brown), unequal. In both instances, it was the broker who in fact profited independently.
For guidance as to the general concept imposing the duty of fair dealing and honesty, this court may look to other jurisdictions. Some courts have found a basis for the rule in general principles of equity (see Harper v. Adametz, supra); or in state statutes governing the conduct of professionals (see Ward v. Taggart, supra). In some cases courts have attributed the duty to the realtor’s position as a knowledgeable intermediary. See Funk v. Tifft, supra, 515 F.2d at 25.
Sound policy reasons account for this rule of fairness and honesty. First, such a duty is recognized by the real estate profession itself through the rule that a realtor, in *105addition to his duty to the seller, has an additional “obligation to treat fairly all parties to the transaction.” Code of Ethics of the National Association of Realtors, Art. 7.5 Second, the rule protects the unsuspecting and unknowing novice from exploitation by a professional with superior knowledge.
The instant case is replete with evidence from which we could find the breach of a common law duty of fairness and honesty. First, appellants did not disclose to Mrs. Branham that they were record owners of the property and were acting in their own interest; they did not tell her of the existence of a cloud on the title and the unrecorded quit claim deeds purporting to remove such cloud on the title. This would have deprived even a more sophisticated purchaser of the opportunity to fully consider the fairness of the transaction or the worth of the property. Significantly appellants charged Mrs. Branham for a title search that was never performed for her. Second, appellants rushed appellee (a woman with a limited education, poor eyesight, and children whose testimony reveals an ignorance of the distinction between rent and mortgage payments) through a combination contract-signing and settlement session without advising her that she might want outside advice and without explaining to her the significance of the documents she was signing. Moreover, reasonable inferences can be drawn here that appellants never intended to make timely repairs; the repairs so crucial to her acceptance were never itemized and, in fact, the trial judge found that the promises to make prompt repairs were fraudulently made to induce appellee to sign the contract quickly. Finally, the entire transaction was unorthodox and varied considerably from accepted real estate practice.
I would not consider affirmance in this case to pose any threat to established principles of real estate law. I would hold merely that in the circumstances here, where appellants have acted from a superi- or posture as broker, undisclosed seller, and holder of promissory note, and have led an unsuspecting purchaser to part with $7,000 in the process — to appellants’ benefit and without any hope of equitable benefit to the purchaser — rescission is justified. Such holding would be in keeping with traditional principles that
equity has carefully refrained from defining a fiduciary relationship in precise detail and in such a manner as to exclude new situations. It has left the bars down for situations in which there is a justifiable trust confided on one side and a resulting superiority and influence on the other.
Harper v. Adametz, supra, 113 A.2d at 139.
Finally, I would suggest that the majority does not tell the whole story when it categorizes this case as merely an unfortunate situation in which a party entered a sales contract for residential property and later wished she had not. It is a fact of life that there are many people who live a lifetime paying rent, not by choice, and who dream of owning a house. This dream, when coupled with lack of education, sophistication, and resources, make such people an easy prey to others who would benefit at any cost. While I am not suggesting that a broker has a duty to be his “brother’s keeper,” I do suggest that this case is not one lending itself to the application of “caveat emptor.”
I would affirm.

. Mrs. Branham’s adult children were on Public Assistance.

. Mrs. Branham’s son who accompanied her to the realty office on the first visit, thought that his mother was going to rent the house. He did not know what a “mortgage” was. Mrs. Bran-ham’s daughter, who accompanied her at the combined contract-signing, settlement session, testified:
[Ms. Willis] just kept asking questions about my father’s death and that was all she said, and Mr. Willis [sic], he gave me this *103paper to read. And as I was to read it and I told him I didn’t understand it then he took it back from me and said I didn’t have to understand it. It was just some papers saying that the house belonged to my mother and how much rent she had to pay every month.
The daughter had never seen a contract to purchase property before and she had never seen a settlement sheet. Asked if she would remember what the papers that her mother signed looked like, she replied: “I know it was white papers.”

. See Restatement (Second) Contracts, § 231 Comment d (Tent.Draft No. 5, 1970) (bad faith
performance inferred from an abuse of a power to specify terms).
If the mistake of the party who signs or accepts an instrument without reading it is induced by the artifice or misrepresentation of the other party, of course the contract is voidable by the mistaken signer. This is most often illustrated by cases in which the signer is illiterate or is unfamiliar with the language in which the contract is written but is equally applicable in any case in which one party causes the mistake that the other is making when he signs. (Footnotes omitted.)
3 Corbin, Contracts, § 607 (1960).

. In principle, this concept is incorporated in statutory provisions providing for the revocation or suspension of a broker’s license where, inter alia, the broker has made substantial or continuing misrepresentations, acted for or received compensation from more than one party without disclosures to all parties, demonstrated such unworthiness as to endanger the interest of the public, or been guilty of any other conduct “whether of the same or different character from that hereinbefore specified which constitutes fraudulent or dishonest dealing.” D.C. Code § 45-1908 (1981).

. It is interesting to note that Mr. Greenbaum testified: “I’m a licensed real estate broker. As a licensed real estate broker I offer an amount of protection to the buyer and seller as well.”