Legislature(1993 - 1994)

03/16/1994 01:15 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                                                                               
               HOUSE JUDICIARY STANDING COMMITTEE                              
                         March 16, 1994                                        
                            1:15 p.m.                                          
                                                                               
                                                                               
  MEMBERS PRESENT                                                              
                                                                               
  Rep. Brian Porter, Chairman                                                  
  Rep. Jeannette James, Co-Chair                                               
  Rep. Pete Kott                                                               
  Rep. Joe Green                                                               
  Rep. Gail Phillips                                                           
  Rep. Cliff Davidson                                                          
  Rep. Jim Nordlund                                                            
                                                                               
  MEMBERS ABSENT                                                               
                                                                               
  None                                                                         
                                                                               
  COMMITTEE CALENDAR                                                           
                                                                               
  HB 376:   "An Act relating to services for and protection of                 
            vulnerable adults; and providing for an effective                  
            date."                                                             
                                                                               
            HEARD AND HELD IN COMMITTEE                                        
                                                                               
  *HB 517:  "An Act relating to innocent misrepresentations by                 
            agents in real property transfers."                                
                                                                               
            CS MOVED OUT OF COMMITTEE                                          
                                                                               
  HB 472:   "An Act relating to referrals involving dental                     
            services."                                                         
                                                                               
            NOT HEARD                                                          
                                                                               
  *HB 314:  "An Act relating to the jurisdiction of the                        
            ombudsman; and providing for an effective date."                   
                                                                               
            NOT HEARD                                                          
                                                                               
  (* First public hearing.)                                                    
                                                                               
  WITNESS REGISTER                                                             
                                                                               
  CONNIE SIPE, Executive Director                                              
  Division of Senior Services                                                  
  Department of Administration                                                 
  P.O. Box 110209                                                              
  Juneau, AK 99811-0209                                                        
  465-3250                                                                     
  Position Statement:  Testified in support of HB 376                          
                                                                               
  PATRICIA DENNY, Executive Director                                           
  Older Alaskans Commission                                                    
  Department of Administration                                                 
  P.O. Box 110208                                                              
  Juneau, AK 99811-0208                                                        
  465-3250                                                                     
  Position Statement:  Testified in support of HB 376                          
                                                                               
  JUDY MATHIS, Legislative Assistant                                           
  Representative Ron Larson                                                    
  Alaska State Legislature                                                     
  State Capitol                                                                
  Juneau, AK 99801-1182                                                        
  465-3878                                                                     
  Position Statement:  Testified in support of HB 517                          
                                                                               
  GORDON SCHADT                                                                
  Attorney at Law                                                              
  3201 C Street                                                                
  Anchorage, AK 99503                                                          
  561-2022                                                                     
  Position Statement:  Testified in support of HB 517                          
                                                                               
  DAVE FEEKEN                                                                  
  100 Trading Bay Dr., Suite 6                                                 
  Kenai, AK 99611                                                              
  283-5888                                                                     
  Position Statement:  Supported HB 516                                        
                       (Spoke via teleconference)                              
                                                                               
  CRAIG JOHNSON                                                                
  Kodiak Board of Realtors                                                     
  218 Center St., Suite 200                                                    
  Kodiak, AK 99615                                                             
  486-2000                                                                     
  Position Statement:  Testified in support of HB 517                          
                       (Spoke via teleconference)                              
                                                                               
  FRANK MICHEL                                                                 
  4901 E. Parks Highway                                                        
  Wasilla, AK 99654                                                            
  376-3842                                                                     
  Position Statement:  Testified in support of HB 517                          
                       (Spoke via teleconference)                              
                                                                               
  GREG ERIKINS                                                                 
  address not provided                                                         
  562-3383                                                                     
  Position Statement:  Supported HB 517                                        
                       (Spoke via offnet)                                      
                                                                               
  GLEN RYERSON                                                                 
  Ryerson Realty                                                               
  1901 Renshaw Way                                                             
  Juneau, AK 99801                                                             
  789-6712                                                                     
  Position Statement:  Testified in support of HB 517                          
                                                                               
  PREVIOUS ACTION                                                              
                                                                               
  BILL:  HB 376                                                                
  SHORT TITLE: ASSIST & PROTECT VULNERABLE ADULTS                              
  SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                 
  JRN-DATE    JRN-PG                     ACTION                                
  01/14/94      2066    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  01/14/94      2066    (H)   HES, JUDICIARY, FINANCE                          
  01/14/94      2067    (H)   -4 FNS (3-DHSS, ADM)                             
                              1/14/94                                          
  01/14/94      2067    (H)   -ZERO FISCAL NOTE (ADM)                          
                              1/14/94                                          
  01/14/94      2067    (H)   GOVERNOR'S TRANSMITTAL LETTER                    
  02/09/94              (H)   HES AT 03:00 PM CAPITOL 106                      
  02/09/94              (H)   MINUTE(HES)                                      
  02/09/94              (H)   MINUTE(HES)                                      
  02/11/94      2341    (H)   HES RPT  4DP 3NR 1AM                             
  02/11/94      2341    (H)   DP:  BUNDE, TOOHEY, B.DAVIS,                     
                              NICHOLIA                                         
  02/11/94      2341    (H)   NR:  KOTT, G.DAVIS, OLBERG                       
  02/11/94      2341    (H)   AM:  VEZEY                                       
  02/11/94      2342    (H)   -ZERO FISCAL NOTE (DPS)                          
                              2/11/94                                          
  02/11/94      2342    (H)   -4 PREVIOUS FNS (ADM, 3-DHSS)                    
                              1/14/94                                          
  02/11/94      2342    (H)   -PREVIOUS ZERO FISCAL NOTE                       
                              (ADM) 1/14/94                                    
  03/11/94              (H)   JUD AT 01:00 PM CAPITOL 120                      
  03/11/94              (H)   MINUTE(JUD)                                      
  03/14/94              (H)   MINUTE(JUD)                                      
                                                                               
                                                                               
  BILL:  HB 517                                                                
  SHORT TITLE: REAL PROPERTY TRANSFERS                                         
  SPONSOR(S): FINANCE                                                          
  JRN-DATE    JRN-PG                     ACTION                                
  03/04/94      2608    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  03/04/94      2608    (H)   JUDICIARY                                        
  03/16/94              (H)   JUD AT 01:15 PM CAPITOL 120                      
                                                                               
                                                                               
  BILL:  HB 472                                                                
  SHORT TITLE: REFERRALS INVOLVING DENTAL SERVICES                             
  SPONSOR(S): REPRESENTATIVE(S) G.DAVIS BY REQUEST                             
  JRN-DATE    JRN-PG                     ACTION                                
  02/14/94      2375    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  02/14/94      2375    (H)   HES, JUDICIARY                                   
  03/01/94              (H)   HES AT 03:00 PM CAPITOL 106                      
  03/01/94              (H)   MINUTE(HES)                                      
  03/02/94      2575    (H)   HES RPT  3DP 3NR                                 
  03/02/94      2576    (H)   DP:  KOTT, VEZEY, TOOHEY                         
  03/02/94      2576    (H)   NR:  NICHOLIA, BUNDE, OLBERG                     
  03/02/94      2576    (H)   -ZERO FISCAL NOTE (DCED)                         
                              3/2/94                                           
  03/16/94              (H)   JUD AT 01:15 PM CAPITOL 120                      
                                                                               
                                                                               
  BILL:  HB 314                                                                
  SHORT TITLE: OMBUDSMAN'S JURISDICTION: AGENCY ACTIONS                        
  SPONSOR(S): REPRESENTATIVE(S) PHILLIPS,BARNES,Sanders                        
  JRN-DATE    JRN-PG                     ACTION                                
  01/03/94      2009    (H)   PREFILE RELEASED                                 
  01/10/94      2009    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  01/10/94      2009    (H)   JUDICIARY                                        
  01/12/94      2042    (H)   COSPONSOR(S): SANDERS                            
  03/16/94              (H)   JUD AT 01:15 PM CAPITOL 120                      
                                                                               
  ACTION NARRATIVE                                                             
                                                                               
  TAPE 94-43, SIDE A                                                           
  Number 000                                                                   
                                                                               
  The House Judiciary Standing Committee was called to order                   
  at 1.25 p.m. on Wednesday, March 16, 1994.  A quorum was                     
  present.  Chairman Porter announced that the committee would                 
  be hearing HB 376, HB 472, and HB 517.                                       
  HB 376 - ASSIST & PROTECT VULNERABLE ADULTS                                  
                                                                               
  CONNIE SIPE, Executive Director of the Division of Senior                    
  Services, Department of Administration, testified that this                  
  legislation is a bill that has been worked through                           
  inter-agency as part of the Governor's package of reform                     
  bills.  Currently, we have an elder abuse reporting law and                  
  a mandatory reporting requirement for abuse of adults.                       
  House Bill 376 essentially combines them into one statutory                  
  section as an act protecting vulnerable adults.  She further                 
  stated that the bill would allow the department to make more                 
  of a distinction between those who can take care of                          
  themselves and those who need the intervention of the state.                 
  It would also streamline abuse reporting and reduce the                      
  duplication of state agencies who have had the jurisdiction                  
  to investigate abuse, especially in the nursing home, or a                   
  facility situation where we would have Family and Youth                      
  Services, the Nursing Home Certification Licensing people,                   
  and the long-term care ombudsman all having jurisdiction and                 
  all investigating the same incident of abuse.  Ms. Sipe                      
  indicated that 38 percent of the reports of abuse are                        
  actually requests for services from someone and this                         
  legislation would consolidate those requests.  This                          
  legislation would allow the department to handle a case to                   
  criminal authorities for prosecution despite a request to                    
  have the case dropped by a relative or nonvulnerable adult.                  
                                                                               
  MS. SIPE stated that amendments to the state's                               
  confidentiality law incorporated in the bill would allow                     
  agencies to share certain information, on a need to know                     
  basis, with the reporter of the abuse.  Also, this bill adds                 
  a section on surrogate decision makers.  This would allow                    
  for a circumstance where a person appears to be incapable of                 
  making decisions, which would qualify them eventually for a                  
  guardianship, or they're temporarily unable to consent,                      
  temporarily, to protective services.  This would allow a                     
  decision to be made for them, especially in an emergency                     
  situation.  She stated that it was only meant to be used for                 
  certain limited situations.                                                  
                                                                               
  MS. SIPE further stated HB 376 incorporated provisions that                  
  would spell out how the division could petition the court to                 
  carry out adult protective services when the case may arise.                 
  She indicated that major changes in HB 376 are in the                        
  definition section.  The definition of abuse was redefined                   
  to focus on intentional or reckless abuse.  Next, the                        
  definition of neglect was now defined to focus on                            
  intentional failure to provide care.  It can't be                            
  interpreted as just an inability to provide care.                            
  Additionally, a new definition of "exploitation" is created                  
  which includes exploitation against a person as well as                      
  resources.                                                                   
                                                                               
  PATRICIA DENNY, Executive Director of the Older Alaskans                     
  Commission, Department of Administration, testified in                       
  support of HB 376.  She further testified that the Older                     
  Alaskans Commission has been in support of this type of                      
  legislation for several years and she felt this was a new                    
  opportunity for services not covered in existing or previous                 
  law.                                                                         
                                                                               
  REP. GREEN asked to explain the fiscal notes.                                
                                                                               
  MS. SIPE responded that the Division of Family and Youth                     
  Services was handling the caseload now and the function has                  
  never been funded, thus the fiscal notes would address this                  
  issue.  Further, Ms. Sipe indicated that training would be                   
  provided with funds in the fiscal note.  What the fiscal                     
  note shows is that all the resources in Family and Youth                     
  Services for adult protective services are going to be                       
  transferred to the Division of Senior Services.  So there is                 
  no new funding.                                                              
                                                                               
                                                                               
  REP. JAMES responded that the fiscal notes do not reflect                    
  that there are no increases or decreases in funding.                         
                                                                               
  MS. SIPE responded that what she has in her packet was a                     
  fiscal note from the Division of Senior Services which shows                 
  a total fiscal note cost in FY 95 of $559,600 and five                       
  full-time positions.  Then, there should be a zero fiscal                    
  note from the Pioneer Homes section which shows they are                     
  going to transfer empty positions.  There should be a fiscal                 
  note from Family and Youth Services showing a deletion of                    
  $559,600 from their budget to come over.                                     
                                                                               
  CHAIRMAN PORTER inquired whether on page 5, line 18, the                     
  vulnerable adult who is 60 years of age or older was to be                   
  left as is or did she want to cover all of them again?                       
                                                                               
  MS. SIPE responded that this was the section they struggled                  
  with to reduce the number of state agencies that go in.  She                 
  elaborated that by federal law and state statute that                        
  follows it, a long-term care ombudsman who has jurisdiction                  
  to look into any complaints that occur in our out of home                    
  care facilities such as a Nursing Home, a Pioneer Home, etc.                 
  But his jurisdiction only starts at age 60 by federal and                    
  state law.  So for people over 60 there are two, a long-term                 
  ombudsman and the medical and certification licensing for                    
  that nursing home who have authority.  For people under 60                   
  they have a licensing authority.                                             
                                                                               
  CHAIRMAN PORTER inquired on page 6, line 28, the sentence                    
  which begins with "the department or its designee shall                      
  conduct a face-to-face interview with the subject of the                     
  report unless that person is unconscious or the department                   
  or its designee has determined that a face-to-face interview                 
  could further endanger the vulnerable adult."  He asked, do                  
  you mean the subject to be the same person as the vulnerable                 
  adult in that sentence?                                                      
                                                                               
  MS. SIPE responded yes.                                                      
                                                                               
  CHAIRMAN PORTER referred to page 7, line 20, where it says                   
  "upon request a person who has made a report to the                          
  department under the reporting requirement regarding a                       
  vulnerable shall be notified of the status of the                            
  investigation," and asked if we are to presume that this                     
  status information is only going to go to these people who                   
  are listed who are required to report, or is this any person                 
  who happens to file such a report?                                           
                                                                               
  MS. SIPE responded that if they are the required reporters                   
  under AS 47.24.010(a), yes, but under AS 47.24.010(d) allows                 
  any other person from reporting cases of abandonment,                        
  neglect, abuse, harm, etc.  It is going to come to the                       
  attention of that person anyway, whether in their                            
  professional duty or because they are a neighbor or they are                 
  a family member, so this applies to everyone under 010.                      
  Required reporters and voluntary reporters can get the                       
  status of the investigation or the status of the case.  The                  
  statute, though, does allow the division discretion to not                   
  necessarily give out all the confidential facts of this                      
  person's life.  Status means telling if the person is now                    
  safe.  But the term covers any reporter.                                     
                                                                               
  CHAIRMAN PORTER then asked whether the division was                          
  interpreting this to change any existing confidentiality                     
  requirements.                                                                
                                                                               
  MS. SIPE responded that this was a slight change because                     
  previously it was not mandatory that they be given this                      
  information before this status report.  It has been the                      
  practice of the division to usually do it but it has not                     
  been stated in law.                                                          
                                                                               
  CHAIRMAN PORTER inquired as to whether the division would                    
  object to changing the language to make sure this is not a                   
  requirement to otherwise disclose confidential information.                  
                                                                               
  MS. SIPE responded yes.                                                      
                                                                               
  CHAIRMAN PORTER referred to page 9, line 10, where it says                   
  "notwithstanding (a) of this section, if the department                      
  determines that an emergency situation exists that                           
  necessitates provision of the protective services to a                       
  vulnerable adult, the department may provide the necessary                   
  protective services in a manner determined..." and stated,                   
  these would be temporary protective services, would they                     
  not?                                                                         
                                                                               
  MS. SIPE responded yes.                                                      
                                                                               
  CHAIRMAN PORTER remarked that it may very well be that this                  
  would turn out to be sustained protective service, but there                 
  would be a commitment order.                                                 
                                                                               
  MS. SIPE responded yes.  Or there may consent obtained after                 
  the emergency situation passes.                                              
                                                                               
  CHAIRMAN PORTER asked if the division would object to                        
  "temporary protective services" on line 11.                                  
                                                                               
  MS. SIPE responded that would be fine.                                       
                                                                               
  CHAIRMAN PORTER inquired if page 11, line 9, "An employer or                 
  supervisor who makes a good faith report..." was a standard                  
  whistle blower provision and if it was really necessary.                     
                                                                               
  MS. SIPE responded that each whistle blower statute is                       
  usually tied to something and there was no general whistle                   
  blower statute that covers everything.                                       
                                                                               
  CHAIRMAN PORTER then asked whether there was some case law                   
  on defining "good faith report" from other statutes.                         
                                                                               
  MS. SIPE responded that there was a body of law out there.                   
                                                                               
  CHAIRMAN PORTER referred to page 11, line 13, where it says                  
  "the person making the report may bring a civil action for                   
  compensatory and punitive damages against an employer or                     
  supervisor who violates this subsection."  He asked why are                  
  we saying so and are we asking them to do that?                              
                                                                               
  MS. SIPE responded that you can have different rights under                  
  a statute.  Usually the statute will define whether you have                 
  a right to actually be compensated for a loss.  The law will                 
  also say whether you have a right to punitive damages, for                   
  instance, in a bad faith situation where an employee blows a                 
  whistle on a nursing home or something.  So unless the law                   
  says the level you have, the only alternative would be to                    
  ask the courts for an injunction reinstating me to my job                    
  and I couldn't get compensation for the lost wages, nor can                  
  I get any punitive damages.                                                  
                                                                               
  REP. GREEN stated on page 2 of the fiscal note analysis of                   
  the senior services administration it says "purchase                         
  protective services, adult/residential" and asked if that                    
  was  home.                                                                   
                                                                               
  MS. SIPE responded that it's not a home that's purchased.                    
  Adult protective services now, if it finds a person who                      
  can't live safely at home, and they have been the victim of                  
  abuse or neglect, and if they don't have the money to buy                    
  their own placement, we'll pay for them to be placed in an                   
  adult foster home or an adult foster care center.  They chip                 
  in their own monthly resources or income and then family and                 
  youth services makes up the difference, which maxes out now                  
  at $43.00 per day.  So this is the contract money currently                  
  used which is being transferred.                                             
                                                                               
  CHAIRMAN PORTER tabled discussion on HB 376 for a later date                 
  and brought HB 517 before the committee for discussion.                      
  HB 517 - REAL PROPERTY TRANSFERS                                             
                                                                               
  JUDY MATHIS, Legislative Assistant to Representative Ron                     
  Larson, Prime Sponsor of HB 517, testified that HB 517 would                 
  remove real estate professionals from liability for innocent                 
  misrepresentation in real estate property transactions.                      
  This bill was introduced as a result of a 1989 Supreme Court                 
  decision, in Bivins vs. Ballard, that brokers who make an                    
  innocent misrepresentation to a purchaser of real property                   
  are liable for the misrepresentation.  This ruling puts an                   
  unjustified liability on real estate professionals.  She                     
  further stated that allowing innocent misrepresentation                      
  action against a broker in such circumstances is like posing                 
  strict liability and there was no reason for making the                      
  broker liable for the seller's misrepresentation.  She                       
  concluded by saving that HB 517 would overturn the Supreme                   
  Court's decision by removing real estate brokers' liability                  
  for innocent misrepresentations.                                             
                                                                               
  GORDON SCHADT, Attorney representing the Alaska Association                  
  of Realtors, testified that innocent misrepresentation is a                  
  situation where an individual does not have a reason to                      
  know, or does not know, there is a problem in their house,                   
  and they are a conduit.  So, if the seller fills out a form                  
  which says there are no problems in the basement and you, as                 
  a real estate agent, pass that on to the buyer, you have                     
  liability even though you had no reason, you were not                        
  negligent, you didn't intentionally do anything wrong, by                    
  being that conduit.  The Bivins case was a narrow decision                   
  and the court basically said that they think the broker                      
  should have the liability.                                                   
                                                                               
  TAPE 94-43, SIDE B                                                           
  Number 000                                                                   
                                                                               
  MR. SCHADT continued his testimony by further stating that                   
  there is a required form that needs to be filled out from                    
  the seller to the buyer so that the buyer can then evaluate                  
  the situation relating to the property to make an informed                   
  decision.  The real estate broker, as a conduit, just passes                 
  on the information, and as a result, is liable.  Mr. Schadt                  
  concluded that HB 517 would simply take away the innocent                    
  misrepresentation aspect of the real estate transaction.                     
  Also, part of the spin-off that he sees as detrimental is                    
  that the problem typically is between the seller and the                     
  buyer and that is where the problem essentially lies.                        
                                                                               
  DAVE FEEKEN testified via teleconference in support of HB
  517.  He sighted an example of an innocent misrepresentation                 
  a buyer, who after closing on a home, sent a letter to him                   
  revealing a leak in the shower and that he wanted it                         
  repaired.  Upon investigation it was discovered that the                     
  buyer began a remodeling of the shower and broke a seal,                     
  which caused the leak.                                                       
                                                                               
  REP. NORDLUND inquired into how this bill would solve the                    
  problem of an unreasonable buyer.                                            
                                                                               
  MR. FEEKEN responded that if there wasn't a chance of using                  
  innocent misrepresentation as a claim, problems of                           
  unreasonable buyers wouldn't exist.                                          
                                                                               
  CRAIG JOHNSON, Member of the Kodiak Board of Realtors,                       
  testified via teleconference in support of HB 517 and                        
  remarked that there are limited opportunities for obtaining                  
  errors and omissions insurance coverage to protect real                      
  estate agents against innocent misrepresentations.                           
                                                                               
  FRANK MICHEL, past chair of the Alaska Board of Realtors                     
  Legislative Committee, testified via teleconference that                     
  this legislation was meant to be part of a comprehensive                     
  packet which included agency and property disclosure, both                   
  of which became law.  He further testified on the difficulty                 
  of obtaining insurance if you are not part of a national                     
  chain.  He said AS 34.55.030 contains innocent                               
  misrepresentation protection and the passage of HB 517 would                 
  extend that testimony to realtors.                                           
                                                                               
  GREG ERIKINS testified via teleconference in support of HB
  517.  He felt it was not too much to ask the state of Alaska                 
  to protect a licensed real estate practitioner from innocent                 
  misrepresentations.                                                          
                                                                               
  GLEN RYERSON, President of Southeast Board of Realtors,                      
  testified in support of HB 517.  He further testified that                   
  he sold a home which, as it turned out, during the                           
  transaction the seller disclosed that there were no                          
  easements affecting the property and that the septic system                  
  was in good working order.  The records office substantiated                 
  that there were no easements and the septic system was                       
  checked out by an engineer and it was passed and received                    
  approval by the Department of Environmental Conservation.  A                 
  year later, the new owner decided to refinance the house and                 
  during this process had to have the septic system                            
  re-certified.  During the inspection, problems were noted                    
  and it was revealed that there was no drainage field, as                     
  well as other problems.                                                      
                                                                               
  REP. NORDLUND inquired as to what sort of obligations agents                 
  have to make sure that the representations they make about a                 
  property are correct.                                                        
                                                                               
  MR. SCHADT responded that that fits into the area of                         
  negligence and negligence is decided in a standard that has                  
  not always been satisfactory and it is what a reasonable                     
  agent in this case would have done in that situation.  Thus                  
  it is not as specific as it should be and that is a problem                  
  with that area of the law; i.e., tort liabilities.  An                       
  example would be if a reasonable agent would have seen                       
  something that would put them on notice then they would need                 
  to proceed to investigate further.                                           
                                                                               
  REP. NORDLUND then inquired about a situation in which a                     
  seller says the furnace works fine and when winter comes and                 
  the buyer turns on the furnace and discovers it is                           
  inoperable. He asked, what about a situation like that.                      
                                                                               
  MR. SCHADT responded that if there is an inquiry such as a                   
  buyer asking "what is the furnace like or does the furnace                   
  work?", one of the ways you can have liability is if you are                 
  asked a question and you do not undertake initiative to find                 
  out the accuracy of your answer.  He further remarked that                   
  the agent should undertake the responsibility, to avoid                      
  negligence, to follow-up on any indication that there might                  
  be a problem.                                                                
                                                                               
  CHAIRMAN PORTER inquired if an agent sees that there are                     
  water marks on the ceiling and he asked the seller, who                      
  responds that yes there was, and I had it fixed, here is a                   
  receipt and as far as he was concerned the leak was fixed.                   
  Under the current situation, as Chairman Porter understood                   
  the law, he asked if that agent was liable.                                  
                                                                               
  MR. SCHADT responded, yes, that is correct.                                  
                                                                               
  CHAIRMAN PORTER then asked if HB 517 would rectify that                      
  situation.                                                                   
                                                                               
  MR. SCHADT responded yes.                                                    
                                                                               
  REP. GREEN inquired how many times, in the number of                         
  transactions that are conducted, how many of those would                     
  result in a situation where the realtor would be brought in                  
  rather than the buyer and seller dealing directly with each                  
  other.                                                                       
                                                                               
  MR. SCHADT responded that over half innocent                                 
  misrepresentation litigation involves the realtor.                           
                                                                               
  REP. GREEN then restated the question to be of one hundred                   
  transactions, how many of those would end up with the seller                 
  going after the realtor because of a bad negotiation?                        
                                                                               
  MR. SCHADT responded that he didn't know the percentage.  He                 
  then remarked that this type of litigation is one of the                     
  most common forms of real estate litigation that may well                    
  account for half or more of the lawsuits that relate to real                 
  estate.                                                                      
                                                                               
  REP. GREEN then asked for clarification whether he meant                     
  seller and broker or buyer and broker because the buyer has                  
  been stuck with the property.                                                
                                                                               
  MR. SCHADT responded that it is typically the buyer coming                   
  after the seller and bringing in the agents, often after                     
  consulting an attorney.                                                      
                                                                               
  REP. GREEN inquired if the property disclosure statement has                 
  less than the number of these things because the seller has                  
  to disclose things that might not have otherwise done,                       
  because of fraudulent misrepresentation.                                     
                                                                               
  MR. SCHADT responded that it probably is, but it only                        
  officially went into effect last July, so there isn't a                      
  great deal of history to go with it.  He further remarked                    
  that the disclosure statement should reduce the amount of                    
  litigation overall.                                                          
                                                                               
  REP. GREEN stated that without HB 517, the real estate sales                 
  persons are at more risk than they would be with this bill.                  
  He inquired if there are some situations that really do                      
  involve negligence or something on the realtor's behalf.                     
                                                                               
  Mr. SCHADT responded that there are and if you get into a                    
  leaky roof you are looking at ten or twenty thousand                         
  dollars.  He further responded that there are several other                  
  factors which exacerbate the situation and that there are a                  
  lot of situations that result in costly litigation.                          
                                                                               
  REP. GREEN inquired if there is a perceived conflict because                 
  the sales commission comes from the seller to the broker and                 
  is there any potential, that by now giving the broker a                      
  waiver, what is my recourse, innocent fraud, by going                        
  through the broker?                                                          
                                                                               
  MR. SCHADT responded that fraud is one extreme that would be                 
  there.  Negligence is still there and that's the one that is                 
  going to be.  There has been for a long time, fraud on the                   
  agent's part, in his experience, is fairly well.  Negligence                 
  does come up in situations, such as, you should have seen                    
  those water marks, etc., and that will remain there.  He                     
  didn't think the passage of the money influences things that                 
  much.                                                                        
                                                                               
  REP. GREEN stated that perhaps there is an innocent                          
  representation because he has less (inaudible) as a broker                   
  now than he did yesterday before this thing became law.  He                  
  has a duty, but there are shades of gray.  He asked if this                  
  bill would cause the broker to fall into a little darker                     
  shade of gray on their duty to look into the water spots, or                 
  something maybe a little more subtle than that?                              
                                                                               
  MR. SCHADT responded that he didn't think so because we are                  
  not doing away with the negligence part of it.                               
                                                                               
  REP. GREEN remarked that he was not talking about                            
  negligence, he was talking about the innocent part, where he                 
  thought was the gray area, and he wanted to know if HB 517                   
  would cause him as a real estate agent to relax my duty.                     
                                                                               
  MR. SCHADT responded that the thing that keeps the agents                    
  from relaxing their duty is the fact that they have to be                    
  diligent in what they do because if they don't they are back                 
  into negligence.                                                             
                                                                               
  CHAIRMAN PORTER inquired if he knew of any situation in                      
  which the court has caused someone by definition who is                      
  innocent to be guilty.                                                       
                                                                               
  MR. SCHADT responded that he was not aware of any.  He                       
  further added that HB 517 does not change the fact that                      
  under state case law a seller is liable for an innocent                      
  misrepresentation.                                                           
                                                                               
  TAPE 94-44, SIDE A                                                           
  Number 000                                                                   
                                                                               
  REP. NORDLUND remarked that a buyer could make an innocent                   
  misrepresentation, I have had personal experience, and I                     
  find it difficult to believe that a real estate agent could                  
  not have some knowledge as to the workmanship of a                           
  structure.                                                                   
                                                                               
  MR. SCHADT commented that as the real estate profession is                   
  evolving they are becoming clearer with their buyers as to                   
  what their role is.  He thought that helps to a certain                      
  extent.  He agreed that the public comes to a real estate                    
  agent with a higher expectation and they should.                             
                                                                               
  REP. JAMES commented that she feels that if a person has a                   
  problem that somebody is at fault and that is not                            
  necessarily true.  Even in criminal cases, intent is very                    
  important and she agreed that real estate people are                         
  expected to know more, but they are not engineers or                         
  surveys, they are sales people and they are there to pass on                 
  the information from the seller.  Therefore, she felt that                   
  the law needed to be changed.                                                
                                                                               
  CHAIRMAN PORTER commented that he was going to support this                  
  bill because we have created the requirement to fill out a                   
  property disclosure form that is passed on to the buyer.                     
  This then increases the vulnerability of the broker because                  
  he has to pass the form on.                                                  
                                                                               
  REP. JAMES moved that HB 517 be moved from committee with                    
  individual recommendations.                                                  
                                                                               
  REP. NORDLUND objected and stated that he would like to be                   
  able to offer a couple of amendments.  One along the lines                   
  of there should be some protection afforded the potential                    
  buyers that real estate agents are not necessarily experts                   
  in terms of the structural, mechanical, wood aspects of the                  
  house but they are primarily agents for the financial                        
  aspects of the transactions.  The other amendment would be                   
  defining innocent misrepresentation.                                         
                                                                               
  CHAIRMAN PORTER asked Mr. Schadt whether the court would                     
  have difficulty with the term innocent misrepresentation.                    
                                                                               
  MR. SCHADT responded no because they specifically adopted                    
  that term in the Bivins case and the statute attempts to                     
  give some definition where it talks about not having                         
  personal knowledge of the error, inaccuracy or omissions.                    
  The court would find that their case clearly defined that.                   
                                                                               
  REP. GREEN remarked that he was opposed to HB 517, but he                    
  would pass it on because he doesn't see any duty in here                     
  that says that it's a duty that might be a negligent case.                   
  It just says if the agent doesn't know, it's okay.                           
                                                                               
  CHAIRMAN PORTER asked the committee for a motion to adopt                    
  the CS; and hearing no objection, the CS was adopted.                        
                                                                               
  CHAIRMAN PORTER then declared the CS for HB 517 moved from                   
  committee with individual recommendations.                                   
                                                                               
  The House Judiciary Committee was adjourned at 3:07 p.m.                     
  HB 472 - NOT HEARD TODAY                                                     
  HB 314 - NOT HEARD TODAY                                                     

Document Name Date/Time Subjects