Hangman Ridge Training Stables, Inc. v. Safeco Title Insurance
719 P.2d 531, 105 Wash. 2d 778 (1986)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
To prevail in a private action under the Washington Consumer Protection Act (CPA) and be entitled to attorney fees, a plaintiff must establish five distinct elements: (1) an unfair or deceptive act or practice; (2) occurring in trade or commerce; (3) public interest impact; (4) injury to the plaintiff's business or property; and (5) causation between the act and the injury.
Facts:
- Mr. and Mrs. McNeil were the sole shareholders of a corporation named Hangman Ridge Training Stables, Inc.
- The McNeils were in severe financial distress, facing a federal tax lien, a judgment, and a notice of intent to forfeit real estate owned by their corporation.
- To ease financial pressures, the McNeils applied for a loan from the Farmers Home Loan Administration (FHLA).
- The FHLA agreed to the loan but required a security interest in the corporate real estate and its transfer from Hangman Ridge to the McNeils individually.
- Safeco Title Insurance Company, designated by the FHLA, acted as the escrow agent for the loan closing and prepared the quitclaim deed for the property transfer.
- The Safeco closing agent informed the McNeils that she was not an attorney, but she did not provide information or advise them to consult independent counsel or obtain tax advice regarding the transaction.
- Approximately one year after the closing, the McNeils' attorney discovered a tax liability of about $3,500 resulting from the property transfer.
- The McNeils regularly retained an attorney and an accountant, and their accountant had previously advised them that the corporation was not advantageous and should be dissolved.
Procedural Posture:
- Mr. and Mrs. McNeil, individually and on behalf of Hangman Ridge Training Stables, Inc., sued Safeco Title Insurance Company in the trial court (court of first instance), alleging unauthorized practice of law, Consumer Protection Act (CPA) violations, and legal malpractice.
- The trial court found Safeco's actions constituted the unauthorized practice of law but concluded they did not support a legal malpractice action or a CPA violation, nor did Safeco breach a duty, cause damage, or act unfairly/deceptively.
- The trial court initially awarded no injunction or attorney fees to the McNeils.
- The McNeils appealed the trial court's decision to the Court of Appeals (intermediate appellate court), which affirmed the trial court.
- The McNeils then petitioned the Washington Supreme Court for review.
- The Washington Supreme Court granted review but postponed hearing the case pending its decision in Bowers v. Transamerica Title Ins. Co., which involved similar issues.
- After Bowers was decided, the Washington Supreme Court remanded the Hangman Ridge case to the Court of Appeals with instructions to reconsider in light of Bowers.
- The Court of Appeals subsequently remanded the case to the trial court with the same instructions.
- Upon reconsideration, the trial court found that the unauthorized practice of law in this case was a 'per se CPA violation' but still found the McNeils had not been injured.
- Despite finding no injury, the trial court enjoined Safeco from certain closing activities and awarded the McNeils approximately $45,000 in attorney fees, expert witness fees, and costs.
- Safeco Title Insurance Company appealed the trial court's finding of a CPA violation and the award of attorney fees to the Washington Supreme Court (the court whose opinion is being briefed).
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a title insurance company, acting as an escrow agent, owe attorney fees in a private Consumer Protection Act action when the plaintiffs failed to establish that the company engaged in an unfair or deceptive act, caused them injury, or that its conduct had a public interest impact?
Opinions:
Majority - Brachtenbach, J.
No, a title insurance company acting as an escrow agent is not liable for attorney fees in a private Consumer Protection Act action if the plaintiffs fail to prove all five required elements. The court established that a plaintiff in a private CPA action must prove (1) an unfair or deceptive act or practice; (2) that the act occurred in trade or commerce; (3) that the act impacted the public interest; (4) that the plaintiff suffered injury to their business or property; and (5) that the act caused the injury. The court clarified that a 'per se unfair trade practice' or 'per se public interest' is established only when the Legislature specifically declares a statutory violation to be such, modifying prior judicial interpretations. The public interest element is now determined by factors specific to consumer transactions or private disputes, replacing the prior 'inducement-damage-repetition' test from Anhold v. Daniels. Applying these elements, the court found that the McNeils failed to establish the first element because the trial court found Safeco's actions were not unfair or deceptive, a conclusion supported by substantial evidence. Additionally, for illustrative purposes, the court noted that the McNeils failed to meet the third element (public interest impact) because the transaction was an essentially private dispute where the McNeils, as experienced business individuals who were advised by the lender to seek legal advice and had their own attorney and accountant, were not representative of vulnerable bargainers. The fourth element (injury) was not met as there was no verification of the alleged tax liability or its payment. Finally, the fifth element (causation) was absent, as no plausible link existed between the closing agent's actions and the alleged tax liability, which was found to be a legal requirement of the lender and thus unavoidable. Because the McNeils failed to establish multiple essential elements, they did not prevail and are not entitled to attorney fees.
Analysis:
This case significantly clarified and formalized the requirements for a private cause of action under the Washington Consumer Protection Act (CPA), moving from a less structured framework to a definitive five-element test. It restricts the judicial creation of 'per se' violations, emphasizing legislative intent for such declarations, thereby potentially making it more challenging for plaintiffs to establish initial elements. The refined public interest test, with distinct factors for consumer transactions versus private disputes, provides a clearer, though often higher, bar for demonstrating public impact, especially in professional services or private contractual settings. This ruling impacts future cases by requiring plaintiffs to rigorously prove each of the five elements, particularly injury and causation, before attorney fees can be awarded, thus limiting the scope of private CPA litigation to those cases with a demonstrable broader public effect and direct harm.
