Key Title Co. v. Real Estate Division

602 P.2d 663, 43 Or. App. 177, 1979 Ore. App. LEXIS 3371

• Court: Court of Appeals of Oregon
• Decided: November 13, 1979
• Docket: CA 13458
• Status: Published

Opinion

LEE, J.

Petitioner seeks judicial review of Oregon Administrative Rule (OAR) 863-50-060¹ pursuant to amended ORS 183.400.² Petitioner contends that the rule exceeds respondent Real Estate Commissioner’s statutory authority and violates the privilege and immunity provision of Art I,§ 20 of the Oregon Constitution.³ Petitioner also seeks a declaratory ruling that funds deposited in interest bearing accounts afterthe closing of an escrow are not subject to the rule.

ORS 696.508(1) vests the Commissioner with the duty to "protect the public” by "uniform and equitable regulation of all escrow agents”. ORS 696.541(1) authorizes the the Commissioner to "adopt such rules as reasonably necessary for the enforcement of ORS 696.505 to 696.585”. Petitioner contends that OAR 863-50-060 is "an arbitrary economic restriction not reasonably related to the enforcement of any of the provisions of the Law, or for the protection of any interest of the public”. No contention is made that the statutorily required procedures were not observed in adopting the rule.

Arguably, if an escrow agent were receiving interest income from escrow funds during the course of the escrow, there would be an incentive based on self interest to prolong the term of the escrow. Thus, the ule is within the Commissioner’s statutory "authority a protect the public.” ORS 696.508(1).

Petitioner next contends that the rule violates its onstitutional rights because ORS 696.241(6)⁴ permits . real estate broker to retain interest earned on trust fnds whereas escrow agents are proscribed from dong so. Again, arguably, protection against self inter-st is essential in escrow transactions as distinguished rom permissible exercise of self interest by real estate rokers. We find nothing palpably arbitrary in the istinction that exists. Cf. Plummer v. Donald M. Drake Co., 212 Or 430, 437, 320 P2d 245 (1958) and Mallatt v. Luihn, 206 Or 678, 702, 294 P2d 871 (1956). There was no violation of Art I, § 20 of the Oregon Constitution.

Finally, petitioner seeks a declaratory ruling con-eming the Commissioner’s interpretation of OAR 63-50-060 by a letter dated February 16, 1979, retarding interest bearing accounts after closure of the scrow. No request was made to the Commissioner for declaratory ruling concerning that interpretation as ermitted by ORS 183.410,⁵ which provides that an agency may "issue a declaratory ruling with respect to the applicability” of "any rule or statute enforceable by it” and that such rulings are "subject to review in this court” in the manner provided for the review of orders in contested cases. Since no declaration was sought under ORS 183.410 and the sole basis of our jurisdiction here is ORS 183.400, we do not reach the interpretation issue.

Rule upheld.

1 Oregon Administrative Rule 863-50-060 provides:

"(1) Subject to the requirements of this rule, client’s trust funds may be placed in interest-bearing accounts with the prior written approval of all principals to the escrow transaction. Such agreements shall set forth in detail how the funds are to be handled, including but not limited to whose account the interest earnings will accrue, provisions for the disbursement of such interest, and any limitations that may be imposed on the withdrawal of clients’ trust funds deposited in an interest-bearing account.

"(2) Interest earnings from the deposit of a client’s trust funds may accrue to the benefit of the escrow agent only if the escrow agent and all principals to the escrow transaction have executed, prior to or at the time of opening the escrow, a separate written agreement for payment of any interest earned to the escrow agent. The agreement shall include the names principals [sic; names of principals], the name of the escrow agent, identification of the escrow transaction and an estimate by the escrow agent of the amount of interest to be earned by placement of the clients’ funds in an interest-bearing account.

"(3) If an escrow agent intends to retain or retains any interest earned on clients’ funds under section (2) of this rule, the agent shall include an estimate of the interest earnings in his schedule of fees submitted under subsection (5) of ORS 696.541.

"(4) An escrow agent shall deposit the clients’ trust funds into an interest-bearing account denominated as a "Trust’ or 'Escrow’ account as provided by ORS 696.560.

"(5) An escrow agent shall maintain a separate accounting for the deposit of funds and disposition of interest earned in each escrow transaction and handle disposition of interest earned as a disbursement in the closing of the escrow transaction.

"(6) The escrow agent shall maintain a separate interest-bearing account for each escrow transaction subject to this rule so that the clients’ trust funds involved in one escrow transaction are not commingled with the clients’ trust funds involved in other escrow transactions.”

2 Amended ORS 183.400 was amended by Oregon Laws 1979, ch 593, § 7, p 167, and provides in pertinent part:

"(1) The validity of any rule may be determined upon a petition by any person to the Court of Appeals in the manner provided for review of orders in contested cases. The court shall have jurisdiction to review the validity of the rule whether or not the petitioner has first requested the agency to pass upon the validity of the rule in question, but not when the petitioner is a party to an order or a contested case in which the validity of the rule may be determined by a court.

"(2) The validity of any applicable rule may also be determined by a court, upon review of an order in any manner provided by law or pursuant to ORS 183.480 or upon enforcement of such rule or order in the manner provided by law.

"(3) Judicial review of a rule shall be limited to an examination of: (a) The rule under review; (b) the statutory provisions authorizing the rule; and (c) copies of all documents necessary to demonstrate compliance with applicable rulemaking procedures.

"[(3)](4) The court shall declare the rule invalid only if it finds that the rule: (a) Violates constitutional provisions or; (b) exceeds the statutory authority of the agency or; (c) was adopted without compliance with applicable rulemaking procedures.

3 Art 1, § 20 of the Oregon Constitution provides:

"No law shall be passed granting to any citizen or class of citizens privileges, or immunities, which, upon the same terms, shall not equally belong to all citizens.”

4 ORS 696.241(6) provides:

"Trust funds received by a real estate broker may be placed in a federally insuranced interest-bearing savings account, designated a "Clients’ Trust Account,” but only with the written approval of all parties having an interest in said fund. The earnings of such interest-bearing account shall not inure to the benefit of the real estate broker unless expressly approved by all interested parties.”

5 ORS 183.410 provides:

"On petition of any interested person, any agency may in its discretion issue a declaratory ruling with respect to the applicability to any person, property, or state of facts of any rule or statute enforceable by it. A declaratory ruling is binding between the agency and the petitioner on the state of facts alleged, unless it is altered or set aside by a court. However, the agency may, where the ruling is adverse to the petitioner, review the ruling and alter it if requested by the petitioner. Binding rulings provided by this section are subject to review in the Court of Appeals in the manner provided in ORS 183.480 for the review of orders in contested cases. The Attorney General shall prescribe by rule the form for such petitions and the procedure for their submission, consideration and disposition. The petitioner shall have the right to submit briefs and present oral argument at any declaratory ruling proceeding held pursuant to this section.”