Edmonds v. John L. Scott Real Estate, Inc.

942 P.2d 1072, 87 Wash. App. 834
CourtCourt of Appeals of Washington
DecidedSeptember 8, 1997
Docket37562-8-I
StatusPublished
Cited by48 cases

This text of 942 P.2d 1072 (Edmonds v. John L. Scott Real Estate, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Washington primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Edmonds v. John L. Scott Real Estate, Inc., 942 P.2d 1072, 87 Wash. App. 834 (Wash. Ct. App. 1997).

Opinion

Ellington, J.

Cora E. Edmonds signed a buyer/ broker agreement with an agent of John L. Scott Real Estate, Inc. The agent showed her a house listed by another Scott agent and, after reassurance from the agent that a basement drainage problem would be fixed and warranted, Edmonds signed an earnest money agreement for the purchase of the house.

As the closing date approached, the basement was still wet, and Edmonds demanded the return of her earnest money. Scott’s general counsel unilaterally determined, without investigation, that the drainage problem had been fixed. He declared Edmonds in default and disbursed half of her earnest money to the sellers and half to the agents involved in the transaction. Edmonds sued. The trial court found that John L. Scott breached its fiduciary duty with respect to its disbursement of the earnest money, breached the earnest money agreement, was negligent in the preparation of the earnest money agreement, and committed two violations of the Consumer Protection Act (CPA). The court awarded Edmonds damages, including $10,000 in ex *841 emplary damages for each CPA violation, and awarded her attorney fees and costs. We affirm all the trial court’s determinations of liability and its award of costs, modify the award of exemplary damages, and remand for recalculation of the award of attorney fees.

FACTS

In 1993, in the course of looking for a home to purchase, Edmonds met with one of Scott’s agents, James Tjoa. Tjoa explained that if Edmonds signed a buyer/broker agreement, he would be her agent and work exclusively in her best interests. Edmonds signed, and Tjoa showed her the house at issue in this appeal. The house was listed by another Scott agent, Erma Zimmerman.

Edmonds planned to use the basement of her house as a home office and was concerned about puddles of water she saw in the basement. After speaking with Zimmerman, Tjoa informed Edmonds that the problem would be taken care of and warranted. After Tjoa assured Edmonds that he would draft the necessary documents to guarantee her a dry basement, Edmonds authorized him to prepare an earnest money- agreement for the purchase of the house. Tjoa added the following language to the inspection contingency addendum to the earnest money agreement: "Seller to furnish copy of warranty for drainage work done.” According to Tjoa, this language was sufficient to ensure a dry basement. Edmonds signed the agreement and paid $5,001 in earnest money. Closing was set to occur between February 17 and February 23, 1994.

The inspection contingency conditioned the agreement on Edmonds’ approval of a written general building inspection report. The report confirmed the existence of the water problem in the basement and noted that a sump pump was being installed in the basement. This was the first notice to Edmonds of the existence of, or need for, a sump pump. In the notice of disapproval of the report, Tjoa intentionally made no reference to the basement water *842 problem on the ground that the language he had added to the inspection contingency sufficiently protected Edmonds’ interest.

On January 10, 1994, Zimmerman gave Tjoa and Edmonds a property information form in which the sellers stated that they were not aware of any existing problems with flooding or drainage on the property and that Bodine Construction had corrected a prior problem. Approximately two weeks before closing, but after receiving the property information form, Edmonds discovered a significant amount of water in the basement. She again notified Tjoa who, after talking with Zimmerman, informed Edmonds two days later that Bodine had done more work at the house. Steve Bodine of Bodine Construction told Edmonds that the installation of the sump pump had been a mistake and that additional external work was needed in order to divert water away from the house and solve the problem.

Edmonds called Tjoa daily from January 26 to February 3, 1994 and expressed concern about the water problem. Despite this, Tjoa did nothing to obtain additional warranty information or to determine Bodine’s progress in completing the additional drainage work. Soon thereafter, Edmonds notified Tjoa through her counsel that she was terminating the transaction and demanded the return of her earnest money.

Pursuant to standard company practice, Edmonds’ file was turned over to Scott’s general counsel for handling. Without conducting any factual investigation into Edmonds’ complaints regarding the water in the basement, and without undertaking to ascertain whether any warranties covered the work, Scott’s counsel unilaterally determined that the drainage problem had been remedied. Less than a week later, the basement flooded again. Nonetheless, Scott’s counsel reiterated to Edmonds’ counsel *843 that the drainage problem had been fixed. 1 When Edmonds refused to close on the ground that the water problem had not been fixed, Scott’s counsel declared her in default and directed Scott’s trust department to disburse half of her earnest money to the sellers and half to Tjoa and Zimmerman.

Edmonds sued Scott, alleging unlawful forfeiture, breach of contract, breach of fiduciary duty, conversion, misrepresentation, fraudulent concealment, and violation of the CPA. After a bench trial, the court found that Scott breached the buyer /broker agreement and the earnest money agreement, its fiduciary duty as Edmonds’ agent, and the standard of care owed by a real estate agent in preparing an earnest money agreement and notice of disapproval. The court found that Zimmerman failed to disclose material facts by failing to disclose the extent of the drainage work that had been performed prior to Edmonds’ signing the earnest money agreement and by presenting a property information form containing statements she and Tjoa knew were false. These acts by Zimmerman, the court found, violated the CPA. The court also found that Zimmerman breached the earnest money agreement by failing to deliver the warranties as to the drainage work. In addition, the court found that Scott’s disbursement of the earnest money constituted conversion, a breach of fiduciary duty, and a violation of the CPA. The court awarded Edmonds the earnest money, interest, exemplary damages for each CPA violation, attorney fees, and costs. Scott appeals the court’s determinations of liability and Edmonds cross-appeals the attorney fees award.

DISCUSSION

Consumer Protection Act Disbursement of Earnest Money

Unfair methods of competition and unfair or *844 deceptive acts or practices are unlawful under the CPA. RCW 19.86.020. Actions or transactions within the statutory authority granted to the real estate commission in chapter 18.85 RCW may not be construed to be a violation of the CPA. RCW 19.86.170. Because exceptions to the CPA must be narrowly confined, Vogt v. Seattle-First Nat’l Bank,

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Bluebook (online)
942 P.2d 1072, 87 Wash. App. 834, Counsel Stack Legal Research, https://law.counselstack.com/opinion/edmonds-v-john-l-scott-real-estate-inc-washctapp-1997.