The State of Washington's highest court has considered whether a corporation owned by two licensed real estate salespeople substantially complied with the State's license laws, allowing it to proceed with a lawsuit seeking compensation from a homebuilder.
Curtis and Betsy Williamson ("Salespeople"), a married couple as well as real estate licensees, were associated with the real estate brokerage firm Masters, Inc. ("Brokerage"). Following their marriage, the Salespeople had formed a corporation named Williamson, Inc. ("Corporation"). The Salespeople were the only shareholders as well as the officers and directors of the Corporation.
Calibre Homes, Inc. ("Builder") developed single family home subdivisions. Over the years, the Builder had retained Curtis Williamson to sell various properties the Builder had developed. In 1997, the Builder designated the Brokerage as the exclusive listing agent for certain lots in a development named Pacific Pointe. The exclusive listing agreement was signed by Curtis Williamson on behalf of the Brokerage as "Williamson, Inc. Curtis Williamson- President." When the first exclusive listing agreement expired, a second agreement was entered into for six of the lots, with Curtis Williamson again signing on behalf of the Brokerage as "Williamson, Inc., by Curtis Williamson Sec./'Treas." In December 1998, the Builder terminated the listing agreement with the Brokerage. Two months later, all of the remaining six lots sold.
The Brokerage and the Salespeople filed a lawsuit against the Builder, seeking recovery from the Builder. The Builder filed a motion for judgment in its favor, arguing that the Corporation was an unlicensed salesperson and therefore could not bring a lawsuit seeking payment for real estate services. The trial court agreed, and ruled in favor of the Builder. The Brokerage and Salespeople appealed, and the appellate court reversed the trial court, finding that the lawsuit could proceed under the doctrine of substantial compliance. The Builder appealed to the state's highest court.
The Supreme Court of the State of Washington affirmed the ruling of the appellate court, sending the case back to the trial court for further proceedings. Substantial compliance is a doctrine where courts will overlook technical compliance failures so long as a party has met the overall purpose of the law. For example, a Washington court applied the doctrine when it upheld an unlicensed building contractor's mechanics lien. The court found that the legislature had created the licensing requirement to protect consumer's from fraud. The contractor had insurance and a surety bond, thereby protecting consumers from contractor fraud. Using the doctrine of substantial compliance, the court ruled that the fact that the building contractor's license application was rejected on technical grounds (failure to attach necessary materials) was not a bar to the contractor's filing a lien.
Applying the substantial compliance doctrine to this case, the court ruled that the Corporation could proceed with their lawsuit. The court found that the legislature created real estate license laws to protect the public from "negligent, unscrupulous, or dishonest real estate brokers." In order to accomplish this purpose, the legislature created certain standards real estate licensees must meet, such as passing a written examination and completing a 60-hour real estate course. Both of the Salespeople had met those requirements, and so they had complied with the critical elements of the real estate license laws. Therefore, the court ruled that the substantial compliance doctrine allowed the Corporation's lawsuit against the Builder to proceed, determining that the technical failure to properly license the Corporation was not a bar to the lawsuit since the Salespeople had met the critical requirements of Washington's license laws. Further, the court stated that the Builder would not have gained anything if the Corporation had been properly registered. Thus, the court sent the case back to the trial court for further proceedings.
Next, the court considered the Builder's argument that the court was overruling other decisions which barred the payment of a real estate commission to unlicensed individuals. The court found that this case was factually distinguishable, as this case did not involve illegal commission sharing with an unlicensed person but rather involved a payment for real estate services performed by licensed individuals to an unlicensed corporation wholly-owned by the real estate licensees. Thus, the court rejected this argument by the Builder and affirmed the appellate court ruling, sending the case back to the trial court for further proceedings.
Three judges dissented from the majority opinion. These judges felt that it was inappropriate to apply the substantial compliance doctrine in this case because the Salespeople had made no attempt to properly license the Corporation under the State's real estate license laws.
Williamson, Inc. v. Calibre Homes, Inc., 54 P.3d 1186 (Wash. 2002).