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Wegg v. Henry Broderick, Inc.

557 P.2d 861, 16 Wash. App. 589, 1976 Wash. App. LEXIS 1752
CourtCourt of Appeals of Washington
DecidedDecember 27, 1976
Docket3530-1
StatusPublished
Cited by8 cases

This text of 557 P.2d 861 (Wegg v. Henry Broderick, 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
Wegg v. Henry Broderick, Inc., 557 P.2d 861, 16 Wash. App. 589, 1976 Wash. App. LEXIS 1752 (Wash. Ct. App. 1976).

Opinion

Williams, C.J.

Talbot and Elizabeth Wegg brought this action against Henry Broderick, Inc., Thomas J. Cain, Morio Terayama, and Herbert J. Droker to recover losses which they sustained in a real estate transaction. Trial to the court sitting without a jury resulted in judgment of $8,504.21 against Broderick and Cain and the dismissal of Terayama and Droker. Broderick and Cain appeal and the Weggs cross-appeal.

The controlling facts are not in material dispute and may be stated as follows: In the fall of 1969, the Weggs contacted Cain and Terayama, agents of the Broderick Corporation, a licensed real estate broker, for the purpose of purchasing real property for investment purposes. Within a month, the Weggs were shown an apartment house in Seattle which they decided to buy. Broderick’s agents prepared an earnest money agreement which provided for a total purchase price of $240,000, payable $40,000 cash down and *590 the balance in monthly installments of $1,500, to be set forth on real estate contract form A-1964.

Subsequently, Droker was designated the closing agent. At the closing, all parties being present, the contract form A-1964 incorporating the terms of the earnest money agreement was presented, considered, and signed. The Weggs went into possession.

In 1971, the Boeing layoff, a rent strike, and other problems placed the apartment house venture and the Weggs’ other assets in jeopardy. Up to that time, the Weggs had been under the impression that their liability under the contract was no more than the initial and installment payments, that the seller’s remedy for default was forfeiture of the contract. In fact, contract form A-1964 provided that the seller had the option in event of default, of forfeiture or suit to collect delinquent payments.

The seller refused to forfeit the contract, but required performance. The Weggs and the seller subsequently negotiated a settlement and the Weggs commenced this action to recover losses claimed to have been sustained because they were not permitted by the contract to forfeit their equity in the contract, only.

The claim is based upon tort. The Weggs contend that Broderick, its agents, and Droker were negligent in not advising them that under the terms of the earnest money agreement including contract form A-1964 not attached, they could not be relieved of further obligation upon forfeiting the payments made.

As always with a claim of this type, the first question is what duty the broker and escrow agent owed the Weggs. The court found:

Weggs had approached defendant Henry Broderick and its agents including Thomas Caine in a manner and under circumstances which put these defendants on notice that the Weggs were relying on the superior knowledge that they possessed as real estate professionals. The Weggs, while educated and intelligent people, were not specifically knowledgeable in the area of private real estate transactions or forms.

Finding of fact No. 6.

*591 Caine inserted the reference to Real Estate Contract Form A-1964 in the earnest money agreement without consulting the Weggs as to what type of real estate contract or other form of transaction they wished and without explaining to them what their liabilities would be under Form A-1964 in event they were to default in making the agreed payments.

Finding of fact No. 7.

The real estate contract form A-1964 was not attached to the earnest money agreement prepared by Caine as agent for Broderick. The plaintiffs did not see the form of contract until it had been completed by Droker and submitted to them for signature on November 21,1969.

Finding of fact No. 8.

The defendant Caine knew that purchasers did not have a right to elect to avoid liability under the Form A-1964 by forfeiting the down payment and installments they had made and thereafter relinquishing the real property to the purchasers. The Weggs did not know that purchasers did not have that right and in fact believed that they did have such a right of election.

Finding of fact No. 9.

The general obligation of a real estate broker toward his client has been stated generally from time to time. Our Supreme Court said in Moon v. Phipps, 67 Wn.2d 948, 954, 411 P.2d 157 (1966) that, “[ljoyalty is the chief virtue required of an agent.” The court said in Mersky v. Multiple Listing Bureau of Olympia, Inc., 73 Wn.2d 225, 229, 437 P.2d897 (1968) that the broker must

make, in all instances, a full, fair, and timely disclosure to the principal of all facts within the knowledge or coming to the attention of the broker or his subagents which are, or may be, material in connection with the matter for which the broker is employed, and which might affect the principal’s rights and interests or influence his actions.

The only witness in this case on the question of the duty of a broker to his client was an expert in real estate transaction law. This witness observed:

Q All right. Do you feel that a real estate broker has the *592 duty to inform or counsel his clients, prospective purchasers, as to their legal obligations under either an earnest money or real estate contract?
A I certainly do believe that a broker or salesman has a duty to counsel. I am not going to adopt necessarily your choice of words, but he certainly does have a duty, in my opinion, to counsel his customer as to the forms of security or conveyancing—let’s put it that way—available to him and explain the various rights and duties which may be more or less advantageous to his customer, recognizing at the same time that the broker really wants to put a deal together and is less concerned with the form of the transaction, the structure of the transaction, than getting both parties together. I do appreciate that, but I believe to answer your question specifically, that a broker certainly does have the duty, and I might point out that the Federal Trade Commission has moved very heavily in this area in other states, and at the present time the Washington Association of—well, the Washington Board of Realtors has just drafted a brand new form of Earnest Money Agreement that incorporates the A-1964 contract; that is, it requires attachment of a copy.
Q To the Earnest Money Agreement?
A To the Earnest Money Agreement so that the parties are given a contract form they can look at.
Q If that is what is going to be used, assuming that one is used?
A Yes, right. That is being printed now, as I understand. This witness also observed:

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Cite This Page — Counsel Stack

Bluebook (online)
557 P.2d 861, 16 Wash. App. 589, 1976 Wash. App. LEXIS 1752, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wegg-v-henry-broderick-inc-washctapp-1976.