AN ACT Relating to the real estate recovery fund; amending RCW 18.85.220; adding new sections to chapter 18.85 RCW; prescribing penalties; providing an effective date; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1. Section 7, chapter 252, Laws of 1941 as last amended by section 8, chapter 332, Laws of 1987 and RCW 18.85.220 are each amended to read as follows:

All fees required under this chapter shall be set by the director in accordance with RCW 43.24.086 and section 2 of this 1989 act and shall be paid to the state treasurer. The fees imposed under section 2 of this 1989 act shall be placed in the real estate recovery fund. The sum of five dollars from each license fee and each renewal fee received from a broker, associate broker, or salesperson, shall be placed in the general fund. The balance of such fees and all other fees paid under the provisions of this chapter shall be placed in the real estate commission account in the state treasury. All money derived from fines imposed under this chapter shall also be deposited in the real estate commission account, shall be used solely for education for the benefit of licensees and shall be subject to appropriation pursuant to chapter 43.88 RCW.

NEW SECTION. Sec. 2. From July 1, 1989, through June 30, 1990, a fifteen dollar fee shall be imposed on each license issued or renewed for a real estate broker or salesperson. If, on June 30 of any year beginning June 30, 1991, the balance remaining in the real estate recovery fund is less than two hundred thousand dollars, every broker and salesperson, when obtaining or renewing a license within the next year, shall pay, in addition to the license fee, a fee set by the director at a level to achieve approximately a two hundred thousand dollar balance in the real estate recovery fund after payment of unpaid authorized claims. The additional fee shall be paid into the real estate recovery fund.

NEW SECTION. Sec. 3. The real estate recovery fund is hereby established in the custody of the state treasurer. The department of licensing shall deposit in the fund all moneys received from the license fees for the real estate recovery fund. Moneys in the fund may be spent only for payment of orders directing payment out of the real estate recovery fund or for administrative costs of the fund up to a maximum of .......... dollars per year. Disbursements from the fund shall be on authorization of the director of the department of licensing or the director's designee. No appropriation is required for disbursements from the fund.

NEW SECTION. Sec. 4. A real estate broker or salesperson shall notify the department of licensing within thirty days of receipt of service on any action for a judgment which may result in collection from the real estate recovery fund.

NEW SECTION. Sec. 5. (1) When an aggrieved person obtains a final judgment in a court of competent jurisdiction against a real estate broker or salesperson based upon the defendant's fraud, misrepresentation, deceit, or conversion of trust funds arising directly out of any transaction in which the defendant, while licensed under this chapter, performed acts for which that license was required, the aggrieved person may file a verified claim in the court in which the judgment was entered for an order directing payment out of the real estate recovery fund of the amount unpaid upon the judgment.

(2) The claim shall be filed within one year after the judgment becomes final.

(3) A copy of the verified claim shall be served upon the director and upon the judgment debtor. A certificate or affidavit of service shall be filed by the claimant with the court.

NEW SECTION. Sec. 6. (1) The director and the judgment debtor shall each have thirty days after being served with the claim in which to file a written response. The court shall thereafter set the matter for hearing upon the petition of the claimant.

(2) At the hearing, the claimant shall be required to establish that he or she:

(a) Is not a spouse of the debtor, or the personal representative of such spouse;

(b) Has complied with all the requirements of section 5 and this section;

(c) Has obtained a judgment as set out in section 5 of this act, stating the amount thereof and the amount owing thereon at the date of the claim;

(d) Has made all reasonable searches and inquiries to ascertain whether the judgment debtor is possessed of real or personal property or other assets, liable to be sold or applied in satisfaction of the judgment;

(e) Has discovered no personal or real property or other assets liable to be sold or applied, or has discovered certain of them, describing them, owned by the judgment debtor and liable to be so applied, and has taken all necessary action and proceedings for the realization thereof, and that the amount thereby realized was insufficient to satisfy the judgment, stating the amount so realized and the balance remaining due on the judgment after application of the amount realized.

(3) If the judgment debtor fails to file a written response to the application, the claim may be compromised or settled by the director at any time during the court proceedings and the court shall, upon joint petition of the claimant and the director, issue an order directing payment out of the real estate recovery fund.

NEW SECTION. Sec. 7. Whenever the court proceeds upon a claim under sections 5 and 6 of this act, it shall order payment out of the real estate recovery fund only upon a determination that the claimant has a valid cause of action and has complied with sections 5 and 6 of this act.

The director may defend any such action on behalf of the real estate recovery fund and shall have recourse to all appropriate means of defense and review, including examination of witnesses and the right to relitigate any issues material and relevant in the proceeding against the real estate recovery fund which were determined in the underlying action on which the judgment in favor of the applicant was based. If the judgment in favor of the claimant was by default, stipulation, or consent, or whenever the action against the licensee was defended by a trustee in bankruptcy, the claimant shall have the burden of proving that the cause of action against the licensee was for fraud, misrepresentation, deceit, or conversion of trust funds. Otherwise, the judgment shall create a rebuttable presumption of the fraud, misrepresentation, deceit, or conversion of trust funds by the licensee, which presumption shall affect the burden of producing evidence.

The director may, subject to court approval, compromise a claim based upon the application of an aggrieved party. The director shall not be bound by any compromise or stipulation of the judgment debtor.

NEW SECTION. Sec. 8. Regardless of the number of persons aggrieved or parcels of real estate involved in a transaction or the number of judgments against a licensee, the liability of the real estate recovery fund shall not exceed ten thousand dollars for any one transaction and thirty thousand dollars for any one licensee. No payment shall be ordered from the real estate recovery fund before July 1, 1990.

NEW SECTION. Sec. 9. If the amount of liability of the real estate recovery fund is insufficient to pay in full the valid claims of all aggrieved persons by whom claims have been filed against any one licensee, the amount shall be distributed among them in the ratio that their respective claims bear to the aggregate of the valid claims, or in any other manner the court deems equitable. Distribution of any moneys shall be among the persons entitled to share therein, without regard to the order of priority in which their respective judgments may have been obtained or their claims have been filed. Upon petition of the director, the court may require all claimants and prospective claimants against one licensee to be joined in one action, to the end that the respective rights of all claimants to the real estate recovery fund may be equitably adjudicated and settled.

NEW SECTION. Sec. 10. Should the director pay from the real estate recovery fund any amount in settlement of a claim or toward satisfaction of a judgment against a licensed broker or salesperson, the license of the broker or salesperson shall be automatically suspended upon the date of payment from the real estate recovery fund. No broker or salesperson shall be granted reinstatement until he or she has repaid in full, plus interest at the prevailing legal rate applicable to a judgment rendered in any court of this state, the amount paid from the real estate recovery fund on his or her account. A discharge in bankruptcy shall not relieve a person from the penalties and disabilities provided in this chapter.

NEW SECTION. Sec. 11. If, at any time, the money deposited in the real estate recovery fund is insufficient to satisfy any duly authorized claim or portion thereof, the director shall, when sufficient money has been deposited in the real estate recovery fund, satisfy the unpaid claims or portions thereof, in the order that the claims or portions thereof were originally filed, plus accumulated interest at the rate of four percent per year.

NEW SECTION. Sec. 12. It shall be unlawful for any person or the agent of any person to file with the director any notice, statement, or other document required under the provisions of this chapter which is false or untrue or contains any wilful, material misstatement of fact. Such conduct shall be punishable by imprisonment in the county jail for a period of not more than one year or a fine of not more than five thousand dollars, or both.

NEW SECTION. Sec. 13. When the director has paid from the real estate recovery fund any sum to the judgment creditor, the director shall be subrogated to all of the rights of the judgment creditor and the judgment creditor shall assign all of his or her right, title, and interest in the judgment to the director and any amount and interest so recovered by the director on the judgment shall be deposited to the real estate recovery fund.

NEW SECTION. Sec. 14. The failure of an aggrieved person to comply with all of the provisions of this chapter shall constitute a waiver of any rights hereunder.

NEW SECTION. Sec. 15. Sections 2 through 14 of this act are each added to chapter 18.85 RCW.

NEW SECTION. Sec. 16. This act is necessary for the immediate preservation of the public peace, health, and safety, the support of the state government and its existing public institutions, and shall take effect July 1, 1989.