Lincoln & Judith David, Appellant's v. Richard Nord

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION ONE

LINCOLN AND JUDITH DAVID, No. 70525-3-1

Appellants,

v.

RICHARD G. NORD, GENE BRYSON, UNPUBLISHED OPINION
GEORGEAN MADDY,
FILED: July 7, 2014
Respondents.

Verellen, A.C.J. — A claim of unauthorized practice of law requires evidence of a

breach of the standard of care. Judith and Lincoln David allege that when they

purchased a condominium unit, listing agent Georgean Maddy and her broker Gene

Bryson gave them incorrect legal advice regarding age restrictions under the federal Fair

Housing Act (FHA)1 and the condominium's restrictive covenants. They also allege that

Maddy and Bryson failed to disclose potential conflicts of interest or advise the Davids to

seek independent counsel. But in opposing summary judgment, the Davids provided no

evidence that the information Maddy and Bryson relayed was incorrect or that they

otherwise violated the applicable standard of care. Additionally, the Davids' own agent

prepared their offer to purchase the condominium, including a merger clause expressly

disclaiming any reliance on representations outside the agreement and the public offering

statement. The Davids fail to establish any genuine issue of material fact.

1 42 U.S.C. §§3601-3631.
No. 70525-3-1/2

The trial court also properly dismissed the Davids' negligent misrepresentation

claims for lack of any genuine issue of material fact. The Davids did not sue the

corporation that developed the project and failed to establish any viable claim against

the individual who owned the corporation. The Davids' other arguments are not

persuasive.

We affirm the trial court's summary judgment dismissal of this lawsuit.

FACTS

The Davids sought to purchase a condominium unit in the newly-built Norwood

Glen complex. The Davids were represented by Brad Jessup, a real estate agent with

the Windermere Real Estate of Arlington brokerage. Norwood Glen was represented by

listing agent Georgean Maddy, also with the Windermere/Arlington brokerage. Gene

Bryson owns and is the designated broker for Windermere/Arlington. Richard Nord

owns Nord Northwest Corporation, the development company that built and offered

Norwood Glen.

Because the Davids intended to rent out the condominium, they were concerned

about use restrictions concerning the age of residents.2 These include the following

restrictive covenant, recorded May 2, 2005:

2 Restrictive covenants and the condominium declaration are recognized
mechanisms for limiting use rights of condominium property based on age. See
generally 18 William B. Stoebuck & John W. Weaver, Washington Practice; Real
Estate: Transactions §§ 12.4, at 29 & 12.9, at 48-49 (2d ed. 2004). The
condominium, managed by a homeowners association, had the power to enforce those
restrictions. Generally, "[t]o the extent the purchaser of a condominium unit can predict
which procedures will work advantageously or detrimentally to himself, he needs to
examine the association's control mechanisms in the declaration and bylaws." 18
Stoebuck & Weaver, § 12.10, at 51.
No. 70525-3-1/3

2.1 Use of Project. The Project is intended to be and shall be
operated as "Housing for Older Persons" pursuant to the federal Fair
Housing Act Amendments of 1988, 42 U.S.C. § 3607(b)(2)(C) and
implementing regulations thereof.

2.2 Residents of Project. No person may be a resident of the
Project, except as expressly authorized by this Article 2.

2.2.1 Residents. Except as authorized in Section 2.2.2 below, the
residents of the Project will be restricted solely to Adults [defined to mean
"a person who is 55 years of age or older, residing in a Unit" by section
1.1] and spouses/companions or caregivers of Adult Persons. A person is
deemed to be a resident of the Project ifthat person remains overnight or
sleeps in a Unit.

2.2.2 Temporary Guests. Visits by nonresidents shall not exceed
thirty (30) nights in any six (6) month period.

3.1 School Impact Fee. A school impact fee shall be paid on a
Unit in the manner and amount specified by the City of Arlington school
impact fee ordinance in effect at the time the interest in such Unit of the
Project is conveyed or occupied by any person not complying with the
restrictions set forth in Article 2 above.[3]

The condominium declaration, recorded May 30, 2006, also set forth the following

covenants:

17.1 Use of Project. The Project is intended to be and shall only
be operated as "Housing for Older Persons" pursuant to the Federal Fair
Housing Act Amendments of 1988, 42 U.S.C. § 3607(b)(2)(C) and
implementing regulations thereof and as further defined in the Arlington
code Chapter 20.90 Part II School Impact Fees. This Development must
have at least eighty percent (80%) of its Units inhabited by at least one
person 55 years or older.

17.2 Residents of Project. No person may be a Resident of the
Project except as expressly authorized in this Article 17 and Section
17.2.1 below, the residents of the Proiect will be restricted solelv to Adults
["Adult" is not defined in the Declaration, unlike the Restrictive Covenant
filed with the county, above] and spouses/companions or caregivers of

Clerk's Papers at 43-44 (emphasis added).
No. 70525-3-1/4

Adult Persons. A person is deemed to be a resident of the Project if that
person remains overnight or sleeps in a unit.

17.2.1 Temporary Guests. Visits by nonresidents shall not exceed
thirty (30) nights in any six (6) month period.

17.4 School Impact Fee. A school impact fee shall be paid on a
Unit in the manner and amount specified by the City of Arlington school
impact fee ordinance in effect at the time the interest in such Unit of the
Project is conveyed or occupied by any person not complying with the
restrictions set forth in Article 17 of the Declaration.[4]

The public offering statement contained the following language:

The project is intended to be and shall only be operated as
"Housing for Older Persons" pursuant to the Federal Fair Housing Act
Amendments of 1988, 42 U.S.C. [§] 3607(b)(2)(C) and implementing
regulations thereof and as further defined in the Arlington code Chapter
20.90 Part II. This development must have at least eighty percent of its
occupied Units inhabited by at least one person 55 years or older. See
Article 17, Restrictive Covenants, of the Declaration for further details.t5]

Because of their interest in renting the unit potentially to families with children,

David met with listing agent Maddy to discuss the covenants. He described their initial

meeting:

In that meeting with Ms. Maddy, she specifically explained to me that 42
U.S.C. 3607 (b)(2)(C) allowed for 20% of the units to have children, while
80% could not. As I wanted to make sure, I asked her to check with her
broker to make sure that her interpretation of the statute and the
application of the restrictive covenant contained in the Public Offering
Statement was correct.[6]

Maddy described the interaction similarly:

[Bjased on what we were understanding at the time, that 20 percent of the
unit[s] could be owned by people under 55, and if they were, you know,

4 ]d. at 49-50 (emphasis added).
5 ]d. at 408 (emphasis added).
6 Id. at 365.
No. 70525-3-1/5

children-and it didn't have an age deal on it at that point-that they
basically would pay-be obligated to pay a school mitigation fee.[7]

David asked Maddy to confirm this understanding with her broker, which he claims she

did:

She told me the next day that she had checked with her broker, Gene
Bryson, an[d] that the statute and restrictive covenant allowed for 20% of
the units to have children.^

Bryson acknowledged he knew that the Davids wanted to rent the unit. Bryson

confirmed that he believed at the time that 20 percent of the units could be occupied by

families with children.

Maddy and Bryson's understanding of the covenants was based on statements

by Nord. Maddy summarized Nord's remarks:

Basically, we asked [Nord] many times to clarify that. We .. . wanted to
make sure that we were correct when we started the project: Twenty
percent could be sold to people under 55; ifthey had children, they pay a
school mitigation fee. That was what we were told. That's what we
represented.[9]

Bryson testified that Nord stated that "up to 20 percent of the units" could be occupied

by families with children.10 Bryson did not seek an independent legal opinion prior to

David's closing because Nord "made it very clear," and "we were relying ... on what our

client told us."11

7 jd, at 269.
8 Id, at 365-66.
9 id at 272.
10 id at 283.
11 Id. at 284.
No. 70525-3-1/6

After the sale, the condominium association filed a lawsuit to enforce the

covenant and enjoin the Davids from renting to persons with children. The association

prevailed in its lawsuit. The Davids did not appeal.

The Davids filed claims against Bryson, Maddy and Nord for money damages.

The amended complaint alleged causes of action for indemnification, fraudulent or

negligent misrepresentation, unauthorized practice of law, and Consumer Protection

Act12 (CPA) claims based upon the unauthorized practice of law. The trial court

ultimately granted summaryjudgment, dismissing the lawsuit in its entirety.13

The Davids appeal from the order dismissing their lawsuit.

DISCUSSION

This court reviews summary judgment orders de novo.14 Summary judgment is

appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on

file, together with the affidavits, ifany, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment as a matter of law."15

Unauthorized Practice of Law

The Davids first argue that Maddy engaged in the unauthorized practice of law

when she informed them that the FHA would allow 20 percent of the units to be

12 Chapter 19.86 RCW.
13 On August 20, 2010, the trial court granted in part Maddy's and Bryson's
motions for summary judgment, dismissing all claims except for the CPA violation based
on unauthorized practice of law and separate unauthorized practice of law claims. On
May 10, 2013, the trial court granted summary judgment in favor of Nord, Maddy and
Bryson, dismissing all remaining claims.
14 Atherton Condo. Apartment-Owners Ass'n v. Blume Dev. Co., 115 Wn.2d 506,
515-16, 799 P.2d 250 (1990).
15 CR 56(c).
No. 70525-3-1/7

occupied by families with children and that Bryson engaged in the unauthorized practice

of law when he confirmed this.

In their briefing to both this court and the trial court, the Davids do not

consistently or precisely explain what constituted Maddy's or Bryson's alleged practice

of law. The essence of their claim is that Maddy and Bryson stated that the FHA and

the restrictive covenants together allowed for up to 20 percent of the units to be

occupied by families with children. The Davids contend that Maddy and Bryson

interpreted the FHA as allowing "20% of the units to have children notwithstanding the

Restrictive Covenant"16 and that "Nord, Bryson and Maddy all provided in some manner

to the Davids legal advice in that they provided an interpretation of the Federal Fair

Housing Statute that was incorrect."17 The Davids urge us to presume the information

relayed by Maddy and Bryson was incorrect, but they offer no expert opinion or other

evidence as to the standard of care and no argument or authority that would excuse the

absence of such evidence.

The practice of law includes providing legal advice and counsel, and preparing

legal instruments and contracts by which legal rights are secured.18 The individual

practicing law must abide by and uphold the same rules of professional conduct as

members of the Washington State Bar Association.19 A layperson engaging in the

16 Brief of Appellant at 9.
17 id at 17.
18 Jones v. Allstate Ins. Co.. 146 Wn.2d 291, 301.45P.3d 1069(2002).
RCW 2.48.180(2)(a) defines the unlawful practice of law to include instances where "[a]
non-lawyer practices law."
19 See Batten v. Abrams, 28 Wn. App. 737, 739 n.1, 626 P.2d 984 (1981) (non-
lawyer who undertakes role of lawyer "assumes the duties and responsibilities [of a
lawyer] and is accountable to the same standards of ethics and legal knowledge.").
No. 70525-3-1/8

practice of law "must comply with the standard of care of a practicing attorney" when

undertaking such limited practice of law.20

The general rule is that "expert testimony should be produced to establish the

standard of care contemplated in performing the legal function alleged to have been

done negligently."21 In some cases, it may be appropriate for a trial court to "take

judicial notice of the standard of care," especially where negligence is of a type "obvious

to anyone with legal training," and the "standard of care was so obviously breached . . .

that the court could properly so conclude as a matter of law."22 But the Davids do not

argue that this is such a case. The Davids were required to present evidence

addressing "the breach of the legal duty of care, not simply a supposed breach of the

ethics rules," and their failure to do so defeats their claim of error.23 The Davids' claims

fail because they provide no evidence regarding the applicable standard of care, the

correct legal interpretation of use restrictions, or the FHA. The Davids rely only on

20 Perkins v. CTX Morta. Co.. 137 Wn.2d 93, 106, 969 P.2d 93 (1999); see also
Jones, 146 Wn.2d at 304 n.13 ("The ultimate protection to the public is the requirement
that the broker/salesperson be held to the standard of care of a practicing lawyer.'"
(quoting Cultum v. Heritage House Realtors. Inc.. 103 Wn.2d 623, 636, 694 P.2d 630
(1985))).
21 Hecomovich v. Nielsen, 10 Wn. App. 563, 572, 518 P.2d 1081 (1974). Expert
testimony is often required in legal negligence actions to establish the attorney's duty of
care and the breach because the law is highly technical and the alleged negligence is
not within the ordinary knowledge of laymen. Geer v. Tonnon, 137 Wn. App. 838, 851,
155 P.3d 163 (2007); see also Walker v. Bangs, 92 Wn.2d 854, 857-58, 601 P.2d 1279
(1979) (expert testimony not necessary where negligence charged was within common
knowledge of laypersons but is required in action relating to special area of practice).
22 Hecomovich, 10 Wn. App. at 572.
23 Geer, 137 Wn. App. at 851 (where expert testimony was necessary to
establish breach of the duty of care and plaintifffailed to proffer any such expert
testimony, summary judgment dismissal was appropriate because "there was no
evidence that [the] attorney . . . breached any applicable duty").

8
No. 70525-3-1/9

assertions unsupported by evidence or legal analysis. As was held in Barrett v. Freise.

this is insufficient to defeat summary judgment.24

A party resisting summary judgment does not satisfy its burden of production by

providing conclusory allegations, speculative statements, or argumentative assertions.25

The limited briefing, argument, and record presented do not meet the Davids' burden to

demonstrate a genuine issue of material fact. The Davids place undue significance on

Bryson's deposition testimony about his conversation with an attorney after the Davids'

purchase.26 When asked whether the attorney told Bryson "that the 20 percent rule

would allow people to rent their condos to other people who had children," Bryson

answered "No."27 The Davids contend that from this statement "[i]t is clear. .. that an

attorney would not have given the legal advice" that Maddy and Bryson gave, and that

"[s]uch [advice] clearly establishes that Ms. Maddy and Mr. Bryson did not exercise the

same standard of care as an attorney."28 Bryson's ambiguous testimony alone is

insufficient to establish that the "20 percent rule" interpretation was an incorrect

statement of law. Bryson only stated that after talking to an attorney, he had a different

24119 Wn. App. 823, 842, 82 P.3d 1179 (2003) (expert opinion on breach of
ethics rules was inadequate to create genuine issue of fact as to breach of lawyer's
standard of care).
25 Las v. Yellow Front Stores. Inc.. 66 Wn. App. 196, 198, 831 P.2d 744 (1992).
26 The Davids argue that the defendants failed to "seek independent legal advice
. . . until after closing the David transaction" and that Bryson's testimony proved that
"had he done so[,] he would have learned that the legal advice [given to] David was in
error." Brief of Appellant at 11.
27 Clerk's Papers at 283-84.
28BriefofAppellantat13.
No. 70525-3-1/10

view. Bryson was not asked to explain what that meant, and the Davids offer no

explanation.

The Davids' citation to Burien Motors. Inc. v. Balch likewise does not

demonstrate the existence of a genuine issue of material fact as to whether Maddy or

Bryson breached the applicable standard of care.29 In Burien Motors, the court held that

a real estate broker has a duty to know the truth and that an "honest mistake" is not a

defense.30 The court found that the real estate broker failed to investigate applicable

zoning requirements, or to advise his client that he didn't know the zoning requirements,

and held that this breached the standard of care of an attorney.31 The critical distinction

is that the trial court in Burien Motors was presented with evidence showing the relevant

standards of practice and the code of ethics applicable to the real estate agent and that

agent's conduct did not conform to these standards.32 By contrast, the Davids

presented no such evidence or opinion.

The Davids rely heavily on Jones v. Allstate Insurance Co.33 The Jones court

held that where non-lawyer insurance company employees prepared legal documents

and gave advice affecting legal rights, they "should be held to the standard of care of

practicing attorneys."34 However, Jones does not support the conclusion that any

attorney-client relationship existed between the Davids and Maddy or Bryson. The

29 9 Wn. App. 573, 513 P.2d 582 (1973).
30 id at 577.
31 Jd at 577.
32 id at 578.
33 146 Wn.2d 291, 45 P.3d 1068 (2002).
34 Id. at 312.

10
No. 70525-3-1/11

Davids had their own agent, Jessup, prepare the written offer for the property. The

actions of Bryson and Maddy and their relationships to the Davids do not support the

same conclusion of an attorney-client relationship found in Jones. The Davids

acknowledged Maddy was in an adversarial position as the listing agent representing

the seller when she relayed information to him. An adversarial relationship is less

clearly imputed to Bryson, but there are no allegations that Bryson advised the Davids

to sign paperwork or drafted any contract language for them.

The Davids assert that Maddy and Bryson had a duty to advise them to seek

independent legal advice. David cites to Graham v. Findahl35 and Cultum v. Heritage

House Realtors. Inc.36 in which our Supreme Court expressly allowed real estate agents

to engage in the practice of law, limited to filling out purchase and sales forms. But the

Davids do not adequately brief the similarities and distinctions between his case and

Graham or Cultum to support their argument that Maddy or Bryson had a duty to

counsel them to seek legal advice. Moreover, because the Davids were represented by

their own agent, the practical concerns the courts addressed in Graham and Cultum are

not implicated.

The Davids also assert that Maddy was required to disclose that she and Jessup

were from the same office and shared office space pursuant to RPC 1.8 and 1.10. But

the Davids acknowledged in writing before the sale that they knew that Jessup and

Maddy worked for the same company under the same broker, Bryson, and

35 122 Wn. App. 461, 93 P.3d 977 (2004).
36 103 Wn.2d 623, 694 P.2d 630 (1985).

11
No. 70525-3-1/12

acknowledged in writing that they were aware of Bryson's financial interest in the

transaction.

The Davids argue that the disclaimers in the agreement were insufficient to

adequately advise them of the conflict of interest, the need for independent legal advice,

and the "practical effect" of the FHA. They contend that "[t]he purpose of this rule is to

prevent sellers from hiding disclaimers in fine print boilerplate language."37 But here,

the Davids' own agent provided the disclaimers concerning the representations made

about the property and their non-reliance on any representations outside of the public

offering statement and the purchase and sale documents.

One argument advanced by Maddy and Bryson is not persuasive. They argue

that RCW 18.86.030 limited their duty to the Davids because they were "mere conduits

of information" from Nord. However, the provisions of RCW 18.86.030, which defines a

broker's duties, are inapplicable because RCW 18.86.110 specifically excludes the

unauthorized practice of law. If they engaged in the practice of law, the "mere conduit"

statute does not apply.

The Davids' claims based on the unauthorized practice of law and resulting CPA

violations fail.

Negligent Misrepresentation

The Davids contend that Nord, Maddy and Bryson assumed an independent duty

because they gave false information intending the Davids to rely upon it. Under the

theory of negligent misrepresentation:

37
Brief of Appellant at 22.

12
No. 70525-3-1/13

"(1) One who, in the course of his business . . . supplies false
information for the guidance of others in their business transactions, is
subject to liability for pecuniary loss caused to them by their justifiable
reliance upon the information, if he fails to exercise reasonable care or
competence in obtaining or communicating the information."[38]

A plaintiff claiming negligent misrepresentation must prove by clear,
cogent, and convincing evidence that (1) the defendant supplied
information for the guidance of others in their business transactions that
was false, (2) the defendant knew or should have known that the
information was supplied to guide the plaintiff in his business transactions,
(3) the defendant was negligent in obtaining or communicating the false
information, (4) the plaintiff relied on the false information, (5) the plaintiff's
reliance was reasonable, and (6) the false information proximately caused
the plaintiffdamages.[39]

The Davids do not address their arguments to these elements. Instead, they rely

heavily on Haberman v. Washington Public Power Supply System, in which our

Supreme Court held that attorneys who drafted a prospectus without disclosing the

potential risk of investing in nuclear power plants were liable for negligent

misrepresentation to those who purchased the bonds.40 The Davids contend that, like

the Haberman plaintiffs, they would not have purchased the unit but for the

misrepresentation by Maddy and Bryson that the FHA allowed them to rent the unit to

families with children. Haberman involved dismissal pursuant to CR 12(b)(6) and,

accordingly, considered hypothetical facts in determining that the claims were

improperly dismissed. By contrast, the instant case was decided under the summary

judgment standard and the Davids had the opportunity to present evidence. For lack of

38 Haberman v. Washington Public Power Supply System. 109Wn.2d 107, 161-
64, 744 P.2d 1032 (1987), amended. 750 P.2d 254 (1988) (quoting Restatement
(Second) of Torts, § 552 (1977)).
39 Ross v. Kirner. 162 Wn.2d 493, 172 P.3d 701 (2007).
40 Haberman. 109 Wn.2d at 161 -64.

13
No. 70525-3-1/14

evidence of an incorrect interpretation of the FHA and restrictive covenants, the Davids

do not establish that Maddy and Bryson were negligent in interpreting the terms of

either, or otherwise failed to exercise the required care or competence. On the record

presented, a jury would be required to speculate as to these matters. The Davids

"cannot rely on speculation and conjecture to raise a genuine issue of material fact."41

The Davids suggest that the trial court dismissed their negligent

misrepresentation claims based on Carlile v. Harbour Homes. Inc.. but do not identify

anything in the record showing the court relied on Carlile or misapplied the economic

loss rule in reaching its holding.42

Nord

The Davids sued Nord in his individual capacity, without making any showing that

would justify piercing the corporate veil. The trial court held that the Davids failed to

demonstrate that Nord was personally liable.

The Davids' only argument is that the dismissal of their claim against Nord "was

ostensibly based on the court's finding that no unauthorized practice of law occurred."43

Because we conclude that the trial court did not err in dismissing the unauthorized

practice of law claims and that the Davids do not establish any unlawful act by Nord, the

Davids' claims against Nord were properly dismissed.

41 Johnson v. Recreational Eguip.. Inc.. 159 Wn. App. 939, 956, 247 P.3d 18
(2011).
42 147 Wn. App. 193, 194 P.3d 280 (2008).
43 Brief of Appellant at 23.

14
No. 70525-3-1/15

CONCLUSION

The trial court's grant of summary judgment was appropriate. The Davids failed

to raise any issue of material fact as to either their unauthorized practice of law claims

or negligent misrepresentation claims. Their claim against Nord also fails.

Affirmed.

WE CONCUR:

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