Untitled Texas Attorney General Opinion

THE ATTOWNEY GENERAL
OF ??lEXAS

November 1, 1972

Hon. Andy James Opinion Ho. M-1256
Administrator
Texas Real Estate Commission Re: Whether the Texas Real
P. 0. Box 12188, Capitol Station Estate Commission may
Austin, Texas 78711 require real estate
licensees to use only
a specific contract
form in negotiating
Dear Mr. James: real estate contracts.

You have asked for the opinion of this office on the
following questions:

"1 . Is the Texas Real Estate Commission
authorized to require that real estate li-
censees use only a specific contract form
when acting as a real estate licensee in
negotiating such real estate contracts?

”2 . What disciplinary action would the
Texas Real Estate Commission be authorized
to take against a licensee who, knowingly,
used a contract form other than the one
specified by the Commission in negotiating
a real estate contract as agent for another
or others?"

The controlling issue presented by your first question
is whether the Board would exceed its delegated powers in pro-
mulgating a rule or regulation requiring the use of some pre-
sumably legal and proper contract form to be used by real estate
licensees in their professional conduct of real estate negotiation
between buyers and sellers. We do not understand that such a
rule would require either the buyer or seller to use such a form,
since they are free to prepare their own legal instrument or to
cause it to be prepared by the attorney of their choice. Nor do
we understand that such a rule would prevent a licensee, who may
be licensed to practice law, from preparing the legal instrument

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Hon. Andy James, page 2 (M-1256)

for the parties should they desire him to do so. We are not here faced
with the situation in which a licensee may, for his own protection,
prepare a legal instrument to cover the transaction to the extent
of securing his own commission or other consideration but rather
the use of a legal instrument by a licensee to cover the substantive
legal contract as between the buyer and the seller.

In determining the controlling question, we must examine
the general puposes of the Real Estate License Act, Article 6573a,
Vernon's Civil Statutes, as well as certain specific provisions
of the act. One of the Legislature's primary purposes in passing
the Act was to assure and protect the personal and professional
business relationship between a real estate licensee and his buyer
or seller client. To make certain that such purpose is carried out,
the Act requires the real estate salesman or broker to be licensed
before he may practice within the state. He must apply for a license,
evidence his ability and qualifications, pass an examination, and
make bond under Sections 8 through 11 of the Act prior to the
issuance of his license under Section 12.

In this statutory context of fixing personal identification
and personal responsibility, certain powers are delegated to the
Commission in connection with its authority to promulgate the rule
or regulation inquired about. In 1967, the Act was amended by the
Legislature by S.B. No. 215 (ch. 272, pgs. 598-602, 60th Legis.,
R.S.), giving substantially more detailed powers to the Commission
thenhad previously been conferred. Section 2 of the present Act
was amended in its entirety and now provides, in part, that:

"The Commission is authorized to employ an
Administrator, an Assistant Administrator, and
such other employees and officers as shall be
necessary to effectively administer and enforce
this Act and regulate the real estate brokerage
business in the State of Texas. . . The Commis-
sion shall adopt such rules and regulations, not
inconsistent with this Act, as shall be necessary
or appropriate to effectively administer and en-
force this Act, regulate the real estate brokerage
business, and establish canons of professional
ethics and conduct for its licensees . . ."
(Emphasis added.)

Section 8 of S.B. 215 evidences the legislative intent
for enactment of the 1967 amendments, reciting:

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Hon. Andy James, page 3 (M-1256)

"The fact that interests in real property
are of vital importance to a sound economy and
that the intracacies and complexities of con-
tracting for sales and leases of interest in
real estate require that only persons trained
and qualified in real estate brokerage matters
be permitted to act as Real Estate Brokers and
Real Estate Salesmen; and the further fact that
Texas citizens annually entrust millions of
dollars of their funds to Real Estate Brokers

Section 16 of the Act provides that the Commission may
refuse or suspend any license it grants for numerous enumerated
reasons involving professional business conduct and ethics con-
cerning the negotiation of sales and contracts, including illegal
or dishonest dealings, bad faith, untrustworthiness, incompetancy,
and disregarding or violating any provision of the Act.

Section 17 likewise provides for cancellation by the
Commission of any license,

"upon proof that the licensee, not being
licensed and authorized to practice law in this
State, for a consideration, reward, pecuniary
benefit, present or anticipated, direct or in-
direct, or in connection with or as a part of
his employment, agency, or fiduciary relations,
as licensee, draws any deed, note, deed of trust
or will, or q other written instrument that
may transfer or anywise affect the title or
interest in land, or advises or counsels any
person as to the validity or legal sufficiency
of any such instrument above mentioned, or as
to the validity of title of real estate."
(Emphasis added.)

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Hon. Andy James, page 4 (M-1256)

In Kee v. Baber, 157 Tex. 387, 303 S.W.2d 376 (1957),
the court held that Article 4556, Vernon's Civil Statutes, which
incidentally gave the Optometry Board the same type of powers
as given the Real Estate Commission under Article 6573a, was a
broad delegation of regulatory powers to the Board to adopt such
rules as are necessary for "the regulation of the practice of
optometry." See also Texas State Board of Examiners inoptometry
412 S.W.2d.307 309-310 (Tex.Sup. 1967), cert.den. 88 S.Ct.
F-
41, 389 U.S. 52. Furthermore, it is well established in this
state that a state regulatory agency may make reasonable rules
and regulations, related to the performance of the specific
statutory duty placed upon that agency by the Legislature, when-
ever the authority to make such rules and regulations is expressly
or impliedly conferred upon the agency by statute. Gulf Land Co.-
v. Atlantic Refining Company, 134 Tex. 59, 131 s.w.2'73 )39):
Railroad Commission v. Shell Oil Co., 139 Tex. 66, 161 S.W.2d 1622
(1942); Texas Liquor Control Board v. Super Savings Stamp Co., 303
S.W.2d 536 (Tex.Civ.App. 1937, error ref. n.r.e.); Gulf C&SF Ry.
Co. v. State, 120 S.W.2d 1002 (Tex.Civ.App. 1909, error ref.); and
'1 Tex.Jur.2d 656-657, Administrative Law, Sec. 11.

It is an equally settled principle of jurisprudence that
when a statute grants the authority or power to do a thing, such
as to regulate, it impliedly authorizes whatever is reasonably
necessary and proper to the execution of the power expressly granted.
53 Tex.Jur.2d 204, Statutes, Sec. 141, and many cases there cited.

The word "regulate" is a common one of generally recognized
meaning and is defined as meaning "to govern or direct according
to rule" and "to reduce to.order, method or uniformity." Its
synonyms are "direct, regulate, order, rule, govern, and control."
Webster's New International Unabridged Dictionary (1954).

The means and methods of regulation are here left to the
broad discretion of the Commission and our research fails to reveal
any case authority which would deny the right to regulate through
the required use of a specific contract form.

If the Commission, in its discretion, should make findings
to the effect that the required use of the approved form is a nec-
essary and appropriate means of regulation to administer effectively
and enforce strictly the Act and the real estate brokerage business,
and that without the use of such a form substantial numbers of

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Hon. Andy James, page 5 (M-1256)

licensees will engage in doubtful or possibly illegal contractural
transactions involving the illegal practice of law in violation of
the statutes, resulting in confusion and reflecting upon the pro-
fessional conduct of the licensees in this unclear and uncertain
field, it is our opinion the courts will uphold the proposed regula-
tion as within the delegated powers of the Commission.

The weight of authority in this county appears to be
that the filling in the blanks on a sales contract by a licensed
broker or salesman prepared by an attorney, which conduct requires
only the use of common knowledge regarding information to be inserted
in such blanks and general knowledge concerning legal consequences?,
does not constitute the practice of law. See State v. Dinger, 109
N.W.2d 685 (Wis.Sup. 1961); Ingraham County Bar Assoc. v. Miller
co., 69 N.W.2d 713 (1955), 53 A.L.R.2d 777; Chicago Bar Assn. v.
Einlan & Tyson, Inc., 214 N.E.Zd 771 (Ill.Sup. 1966). However,
Texas courts have not decided the precise question, and the fore-
going authorities appear to be limited to the preliminary or earnest
money contract form only, the reasoning not being applied or extended
to include subsequent legal instruments, such as deeds, mortgages,
and other instruments which become recorded muniments of title.
The drawing or filling in of these instruments require the special
skill of an attorney and would constitute the practice of law. See
State v. Indiana Real Estate Assn. Inc., 191 N.E.2d 711 (Ind.Sup.
1963). Pioneer Title Ins. tiTrust Co. v. State Bar of Nevada, 326
P.2d 408 (Nev.Sup. 1958), and other authorities cited at 53 A.L.R.Zd
788, et seq.

It is our opinion that in the absence of a clear sanction
by the Commission, the drawing up or supplying of any preliminary
or earnest money contract form and the filling in of the blanks
for the parties by a real estate dealer may reasonably be deemed
suspect and possibly in violation of Section 17 of Article 6573a
under the existing state court decisions in this field. See

v. Grievance Committee, 742 Tex. 506,ikin
Title Co. v. Grievance Committee, 272 S.W.2d 948 (Tex.Civ.App. 1955).
However, it
' is our oplnron that the Commission sanctioned use of a
form as above indicated that has been duly promulgated by the Commis-
sion would not constitute a violation of the statute or the illegal
practice of law.

We therefore answer your first question in the affirmative.

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Hon. Andy James, page 6 (M-1256)

In answer to your second question, it is our opinion
that a violation of the proposed rule or regulation promulgated
by the Texas Real Estate Commission, in accordance with Section
2 of the Act, by a licensee engaged in the real estate brokerage
business, would constitute a "violation of any of the provisions
of this Act" within the purview of Section 16(c) (23) of the Act,
and upon proof of such, the Texas Real Estate Commission would
be authorized to suspend or revoke a license theretofore issued
to such broker or salesman. Attorney General's Opinion No.
O-2869 (1940).

SUMMARY

The Texas Real Estate Commission is authorized
to require its licensees to use a specified contract
form when acting as real estate brokers or salesmen.

Upon proof that a licensee knowingly uses
a contract form, other than as specified by the
Commission in negotiating a real estate contract
as agent for another, the Commission may suspend
or revoke the license theretofore issued to such
licensee.

Prepared by Bill Campbell
Assistant Attorney General

APPROVED:
OPINION COMMITTEE

Kerns Taylor, Chairman
W. E. Allen, Co-Chairman
J. C. Davis
Bill Craig

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Hon. Andy James, page 7 (M-1256)

SAMUEL D. MCDANIEL
Staff Legal Assistant

ALFRED WALKER
Executive Assistant

NOLA WHITE
First Assistant

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