TWITE v WESTERN SURETY CO

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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: Decided: Filed: . 2 ; @ January 19, 1978 HYR / 2 M r . J u s t i c e Gene B . Daly d e l i v e r e d t h e Opinion of t h e Court. Two s e p a r a t e a c t i o n s were f i l e d by p l a i n t i f f s Ray and J a c k Twite a g a i n s t James Lackman, David Gregoryk and Lackman Realty i n t h e D i s t r i c t Court, Missoula County. Counsel f o r t h e r e s p e c t i v e p a r t i e s s t i p u l a t e d t h e two c a u s e s of a c t i o n w i t h Ray Twite and J a c k Twite a s p l a i n t i f f s could be c o n s o l i d a t e d and deemed submitted t o t h e t r i a l c o u r t upon t h e f i l i n g of b r i e f s . David Gregoryk was s e r v e d i n t h a t a c t i o n on March 1 5 , 1974, b u t did n o t appear. A d e f a u l t judgment was t a k e n a g a i n s t him on A p r i l 29, 1974. A f t e r j u r y t r i a l t h e remaining d e f e n d a n t s were found t o be n o t l i a b l e . Subsequently, J a c k and Ray Twite f i l e d a c t i o n s a g a i n s t Western S u r e t y Company (Western) on Gregoryk' s bond. The a c t i o n s were c o n s o l i d a t e d and submitted t o t h e t r i a l c o u r t on agreed f a c t s . Judgment was rendered i n ' f a v o r of Western and Twites now a p p e a l from t h e f i n a l judgment. I n t h e complaint of t h e u n d e r l y i n g a c t i o n , p l a i n t i f f s based t h e i r s u i t on t h e f a c t David Gregoryk was a l i c e n s e d r e a l e s t a t e salesman under t h e Real E s t a t e L i c e n s i n g Act of 1963. The cause p r e s e n t l y b e f o r e t h i s Court was f i l e d a g a i n s t Western S u r e t y Company a s s u r e t y f o r Gregoryk under s e c t i o n 66-1933, R.C.M. t h e Real E s t a t e L i c e n s i n g Act. 1947, o f The bond r e q u i r e d t h a t Western would be bound t o t h e Montana Real E s t a t e Commission i n t h e sum of $10,000 c o n d i t i o n e d upon t h e payment by Gregoryk of judgment recovered a g a i n s t him f o r l o s s o r damage t o any i n d i v i d u a l a r i s i n g i n t h e c o u r s e of Gregoryk's p r a c t i c e a s a l i c e n s e d r e a l e s t a t e salesman. Each p l a i n t i f f e n t e r e d i n t o a w r i t t e n c o n t r a c t t o purchase land l o c a t e d . i n t h e Garnet Range a r e a of Powell County. Title to t h i s land was i n Gregoryk and h i s wife by v i r t u e of a c o n t r a c t f o r deed. A t t h e time t h a t p l a i n t i f f s signed t h e s a l e s c o n t r a c t s , t h e Gregoryks were i n d e f a u l t under t h e i r c o n t r a c t f o r deed. The c o n t r a c t s signed by p l a i n t i f f s were commonly used forms i n t h e r e a l e s t a t e b u s i n e s s i n Montana. The form c o n t r a c t makes a number of r e f e r e n c e s t o r e a l e s t a t e brokers and a g e n t s , b u t Gregoryk signed t h e s e c o n t r a c t s a s s e l l e r r a t h e r than a s an agent o r broker. These c o n t r a c t s were signed a t Lackman Realty, where Gregoryk worked a s a salesman. I t a l s o appears t h a t Lackman Realty was s e l l i n g s i m i l a r l o t s i n t h e same a r e a . The t r i a l c o u r t made f i n d i n g s i n agreement w i t h t h e s t i p u l a t e d f a c t s , and f u r t h e r found: " 5 . That a t a l l times p e r t i n e n t h e r e t o David Gregoryk was t h e owner of t h e r e a l e s t a t e which was s o l d t o and purchased by t h e P l a i n t i f f s . " 6 . That a l l a c t s of David Gregoryk were accomplished a s owner of t h e r e a l property i n question." Upon t h e s e f i n d i n g s t h e D i s t r i c t Court concluded , matter of law: "1. That David Gregoryk i n a l l of h i s r e l a t i o n s h i p s w i t h JACK TWITE and RAY TWITE was a c t i n g a s t h e owner of t h e property i n q u e s t i o n and n o t a s a l i c e n s e d r e a l e s t a t e salesman. "2. That t h e Defendant i s n o t l i a b l e under s a i d bond f o r t h e a c t s of David Gregoryk s i n c e t h e a c t i o n s comp l a i n e d of were a c t s accomplished by t h e owner of t h e property and n o t w i t h i n the course of Gregoryk's b u s i n e s s a s a r e a l e s t a t e salesman." The i s s u e s on appeal a r e : 1. Whether o r n o t under t h e Montana Real E s t a t e Licensing Act t h e r e a l e s t a t e agent Gregoryk, i n s e l l i n g h i s own p r o p e r t y , can be covered on t h e r e a l e s t a t e bond provided by Western? 2. Whether a t t o r n e y f e e s and i n t e r e s t can be recovered i n a d d i t i o n t o t h e f u l l amount of t h e bond? W f i n d t h e major problem i n t h i s c a s e i s t h e misapplicae t i o n of t h e Real E s t a t e License Act. Section 66-1924, R.C.M. 1947, simply r e q u i r e s anyone dealing d i r e c t l y o r i n d i r e c t l y i n t h e r e a l e s t a t e business buy a broker o r salesman l i c e n s e . This means t h e person so engaged must comply with s e c t i o n s 66-1929 through 66-1935, R.C.M. 1947, which s e t f o r t h t h e e d u c a t i o n a l , p r o f e s s i o n a l , and monetary requirements t o o b t a i n t h e l i c e n s e required f o r t h e job o r p o s i t i o n t o be h e l d by the person d e a l i n g in real estate. The Act, f u r t h e r , i n s e c t i o n 66-1937, R.C.M. e n t i t l e d "Grounds f o r r e f u s a l - 1947, suspension o r revocation of l i c e n s e " , s e t s out t h e e t h i c a l standards t o be observed by a l i c e n s e e under t h i s Act. There i s no provision i n t h e Act t h a t r e l a x e s t h e e t h i c a l standards f o r a l i c e n s e e who happens t o be s e l l i n g property t i t l e d o r contracted t o the l i c e n s e e . The contrary i s demonstrated under s e c t i o n 66-1937(7), which p r o h i b i t s a c t i n g i n d u a l c a p a c i t y a s a broker and undisclosed p r i n c i p a l i n a t r a n s a c t i o n . This i s t h e sum t o t a l of our concern, given t h e agreed f a c t s i n t h i s case. Section 66-1926 - "Exempted c l a s s e s " , has nothing t o do with t h e problem presented by t h e agreed f a c t s of t h i s case and i t s i n s e r t i o n i n t o t h i s case i s e r r o r . Section 66-1926 merely enumerates t h e persons who may be a s s o c i a t e d with a r e a l e s t a t e t r a n s a c t i o n , y e t a r e not i n t h e r e a l e s t a t e business and t h e r e f o r e a r e "exempted" from purchasing a r e a l e s t a t e license, i.e., an i n d i v i d u a l s e l l i n g h i s own home, an a t t o r n e y a c t i n g f o r a c l i e n t , an a t t o r n e y - i n - f a c t , and many o t h e r s . auctioneers The f a c t t h a t a person can s e l l h i s own property w i t h o u t being i n v i o l a t i o n of t h e Real E s t a t e 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 l i c e n s e , does n o t lend i t s e l f t o t h e p r o p o s i t i o n t h a t a l i c e n s e d r e a l e s t a t e salesman i s r e l i e v e d of h i s r e s p o n s i b i l i t y under s e c t i o n 66-1937, merely because he h a s taken p r o p e r t y i n t o h i s name b e f o r e defrauding a purchaser. T h i s would render t h e Act a n u l l i t y . Furthermore, it w i l l s t a n d w i t h o u t d i s c u s s i o n t h a t t h i s kind of arrangement would be s t r i c t l y a g a i n s t p u b l i c policy,which i s t o p r o t e c t t h e p u b l i c from unscrupulous and i n s o l v e n t r e a l e s t a t e a g e n t s and b r o k e r s . A number of j u r i s d i c t i o n s have r u l e d on t h i s m a t t e r i n conjunction w i t h a s t a t u t o r y exemption when d e a l i n g i n a p e r s o n ' s own p r o p e r t y . W a r e concerned only t o t h e e x t e n t t h a t they e demonstrate t h e s u r e t y ' s l i a b i l i t y i n c a s e s involving t h e s a l e of a l i c e n s e e ' s p r o p e r t y . The r u l e of t h e s e j u r i s d i c t i o n s may be s y n t h e s i z e d i n t h i s manner : Members of t h e p u b l i c have t h e r i g h t t o r e l y upon e x p r e s s o r implied r e p r e s e n t a t i o n s of a l i c e n s e d r e a l e s t a t e agent o r b r o k e r although t h e a g e n t i s i n f a c t t h e owner of t h e p r o p e r t y being s o l d . Therefore, the s u r e t y i s bound by such express o r implied r e p r e s e n t a t i o n s and t h e bond s h a l l cover such judgments e n t e r e d . See: Goody v . Maryland Casualty Co., (1933), 53 Idaho 523, 25 P.2d 1045; Mapes v. F o s t e r , (1928), 38 Wyo. 244, 266 P. 109. i P l a i n t i f f s h e r e contend they were l e d t o b e l i e v e they were d e a l i n g w i t h a r e p u t a b l e r e a l e s t a t e b r o k e r agent i n t h e purchase of t h e land. P l a i n t i f f s point t o these external factors which l e d them t o b e l i e v e 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 a g e n t (Gregoryk) never informed p l a i n t i f f s he was a c t i n g a s owner of t h e l a n d , n o t a s a l i c e n s e d r e a l e s t a t e agent. 2) The s i g n i n g of s t a n d a r d form c o n t r a c t s , a s w e l l a s o t h e r n e g o t i a t i o n s , took p l a c e i n t h e o f f i c e s of Lackman R e a l t y , a l a r g e r e a l e s t a t e agency i n Missoula, where defendant Gregoryk worked a s a salesman. 3) Lackman R e a l t y was s e l l i n g land i n t h e same a r e a and was a d v e r t i s i n g t h a t land f o r s a l e . One of t h e p l a i n t i f f s , J a c k Twite, responded t o t h e a d v e r t i s i n g and was d i r e c t e d t o M r . Gregoryk. The r e c o r d c l e a r l y d i s c l o s e s t h i s s t a t e m e n t : "A. Well, t h e land t h a t I purchased, 20 a c r e s a d j a c e n t t o i t was a r e s u l t of m r e a d i n g t h i s y ad i n t h e paper by J i m Lackman and I c a l l e d J i m Lackman and asked about t h i s land t h a t h e had a d v e r t i s e d and a t t h a t time J i m Lackman t o l d m e t h a t h i s , t h a t one of h i s a g e n t s , Dave Gregoryk, was h a n d l i n g t h e s a l e of t h i s property." From t h e s e f a c t s i t was r e a s o n a b l e f o r p l a i n t i f f s t o b e l i e v e they were d e a l i n g w i t h a bonded r e a l e s t a t e salesman. The l i c e n s e d r e a l e s t a t e a g e n t (Gregoryk) never i n formed p l a i n t i f f s t h a t he was d e a l i n g w i t h t h e p r o p e r t y a s t h e owner. I n l i g h t of t h e p u b l i c p o l i c y of t h e A c t , t h a t of pro- t e c t i o n f o r t h e b e n e f i t of t h e p u b l i c d e a l i n g w i t h r e a l t o r s o r r e a l t y salesmen who may be " i r r e s p o n s i b l e o r i n s o l v e n t " , we must conclude defendant Gregoryk i n t h i s t r a n s a c t i o n d i d n o t meet minimum s t a n d a r d s t h a t would a l e r t a l a y person t h i s was n o t a "Lackman Realty" t r a n s a c t i o n . The second i s s u e i s whether a t t o r n e y f e e s and i n t e r e s t can be recovered i n a d d i t i o n t o t h e f u l l amount of t h e bond. language of t h e s u r e t y bond p r o v i d e s : The "The a g g r e g a t e l i a b i l i t y of t h e s u r e t y hereunder, whether t o one o r more persons, s h a l l i n no event exceed t h e t o t a l sum of TEN THOUSAND DOLLARS ($10,000.00) . I 1 I n Lapke v. Hunt, (1968), 151 Mont. 450, 460, 443 P . L a 493, a p p e l l a n t i n a r e a l e s t a t e t r a n s a c t i o n urged t h a t i n t e r e s t could n o t be c o l l e c t e d i f i t exceeded t h e f a c e value of l i a b i l i t y under t h e bond. This Court reasoned: "we hold t h a t i n a n a c t i o n a g a i n s t a s u r e t y company upon'a bond i s s u e d 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 a d d i t i o n t o t h e amount of damages awarded, exceeds t h e amount of l i a b i l i t y s t a t e d i n t h e bond. 12 Am.Jur.Zd, Bonds, 1 545, p. 508; 1 C.J.S. Bonds 5132(b), p. 511." The Court f u r t h e r h e l d t h a t i n t e r e s t would commence a s a g e n e r a l r u l e , upon demand made upon l i c e n s e e , b u t where no demand was made on t h e s u r e t y t h e l i a b i l i t y commenced upon t h e f i l i n g of t h e complaint a g a i n s t l i c e n s e e . S e c t i o n 66-1940(c), R.C.M. 1947, s i n c e repealed by t h e 1977 l e g i s l a t u r e b u t t h e s t a t u t e i n f o r c e a t t h e time t h i s a c t i o n accrued, read i n p a r t : ** "(c)* against surety, f o r the of s u i t I n a l l c a s e s where s u i t i s brought t h e broker o r t h e salesman, and h i s t h e c o u r t s h a l l , upon e n t e r i n g judgment p l a i n t i f f , allow a s a p a r t of t h e c o s t s a reasonable amount a s a t t o r n e y ' s f e e s . " A l l p e n a l t i e s provided f o r by t h i s s e c t i o n may be c o l l e c t e d from t h e b r o k e r ' s and salesman's bonds provided by s e c t i o n 66-1933." (Emphasis added.) Costs of s u i t a r e recognized t o be c o l l e c t a b l e beyond t h e f a c e v a l u e of t h e bond and hence w i t h p r e c i s e s t a t u t o r y a u t h o r i t y a t t o r n e y f e e s i n t h i s i n s t a n c e w i l l be a p a r t of t h e c o s t of s u i t . The judgment of t h e t r i a l c o u r t i s reversed. The cause i s remanded t o t h e t r i a l c o u r t t o e n t e r judgment f o r p l a i n t i f f s and conduct a hearing t o determine t h e c o r r e c t amount of i n t e r e s t and reasonable a t t o r n e y f e e s t o be included i n t h e c o s t of s u i t . W Concur: e ......... M r . Chief J u s t i c e Frank I . Haswell, d i s s e n t i n g : I would a f f i r m t h e judgment of t h e D i s t r i c t Court. The s u r e t y bond here was issued i n conformity with t h e requirements of the Real E s t a t e Licensing Act of 1963, s p e c i f i c a l l y s e c t i o n 66-1933, R.C.M. 1947, a s amended. This s t a t u t e and t h e bond issued thereunder l i m i t t h e s u r e t y ' s l i a b i l i t y , among o t h e r t h i n g s , t o l o s s e s r e s u l t i n g from v i o l a t i o n of t h e Act by t h e salesman. The Act s p e c i f i c a l l y exempts s a l e s of h i s own property by a r e a l e s t a t e salesman: "66-1926. EXEMPTED CLASSES. A s i n g l e a c t performed, f o r a commission o r compensation of any kind, i n selling of r e a l e s t a t e *, except the a s h e r e i n a f t e r s p e c i f i e d , s h a l l c o n s t i t u t e t h e person performing any such a c t s a r e a l e s t a t e broker o r r e a l e s t a t e 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, a s owner, s h a l l perform any of t h e a f o r e s a i d a c t s with by himself reference t o property owned (Emphasis supplied.) *** I I n m v i e w t h e language o f both t h e s t a t u t e and t h e s u r e t y y bond i s c l e a r and unambiguous. Under such circumstances, t h e r e i s nothing f o r t h i s Court t o construe. Dunphy v. Anaconda Company, (1968), 151 Mont. 76, 438 P.2d 660 and cases c i t e d t h e r e i n . The f u n c t i o n of t h i s Court i s simply t o a s c e r t a i n what i n terms o r i n substance i s contained i n t h e s t a t u t e and bond and n o t t o i n s e r t what has been omitted nor t o omit what has been i n s e r t e d . Section 93-401-15, R.C.M. 1947. I n s h o r t , i t i s simply the duty of t h e Supreme Court t o accept t h e s t a t u t e and bond a s w r i t t e n . Policy c o n s i d e r a t i o n s should n o t be permitted t o c o n t r o l p l a i n language. %dg Chief 4 b s p d Justice .

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