Untitled Texas Attorney General Opinion

7lkHE .ii”lTORNEY GENERAL OF I’EXAS AUSTIN~X~.TEZXAR October 23, 1957 Honorable L. D. Ransom, Opinion No. WW-287 Administrator, Texas Real Estate Commission, Re: Constructionand constitu- Austin, Texas tlon,alltyof certain provis- ions of the Real Estate License Act of 195.5(Senate Bill No. 209, Acts of the:54th Legislature,Regular Session, Chapter 383, page $36) which defines 'RealEstate Broker" and provides for licensing of Dear Mr. Ransom2 such Brokers. In your letter of September 24, 1957, you ask for an opinion of thls office a8 to whether Lake Alaska, Inc. Is required to obtain a license as a real estate broker by the above named Act, which is codified as Article 6573a, Vernon's Civil Statutes. You state that this corporationwas charteredunder the provisions of Article 1302, Vernon's Civil Statutes, and that it acquired title to a tract of land in Brazorla County In 1954, and there- after subdividedthe land Into lots. It offers the lots for sale to the public In a sales campaign via newspaper, radio and television. Neither the corporationnor its salesmen hold licenses as real estate brokers or salesmen. It is not clear from the file and investigationreport .whlchyou enclose, whether this property or other property ac- quuiredby the Corporationin GalvestonCounty Is still owned by it. However{,recent adv;rtlsementsshow that It is still adver- tising both Lake Alaska and the Galveston County property known as "Sea Isle". The charter obtained by this corporation,on file with the Secretary of State, discloses that It is formed "for the purpose of . . . purchasing, selling and subdividingreal prop- erty in towns, cities and villages in their suburbs not extend- ing more than two miles beyond their limits" and for other pur- poses specifiedby Subdivision47 of Article 1302, Vernon's Civil Statutes. The Real Estate License Act, hereafter referred to as the Act, became effective June 1, 1955. It supplanted earlier Acts of 1939 and 1949, the so-called "Real Estate Dealers Honorable L. D. Ransom, Page 2 (Ww-287). License Act". The definitionof "real estate broker" Is found In Section 4. In subdivisions(1) and (2) of that Section, the definition of broker conforms to the classical definitionof broker, and contemplatesthat the real estate broker shall act "for another" and shall be an Intermediaryor agent between two principals. Subdivision(3) of Section 4 reads as follows: “(3) The term 'Real Estate Broker' shall also include any person, partnership,association,or corporationengaged in the business of buying, sell- ing, exchanging,leasing, renting of property for himself or Itself, or who holds himself, themselves or Itself out as a bi;okerin real estate, or engages in the activitiesof a Real Estate Broker as an occu- pation, business or profession on either a full or part-timebasis." (Emphasisours) The first half of this Section gives rise to the ques- tion of whether the Legislatureintended to bring within the purview of the Act the owners of propert and, If so, under what specific conditions? Subdivision (1 ) of Section 6 (relat- lng to "exemptions")deals further with the subject. It reads: "(4) Thls Act shall not apply to the sale, lease or transfer of any property when such sale, lease or transfer is made by the owner, or one of the owners, or the attorney for said owner or owners, or his or Its regular employees,unless the owner or owners or the attornes for said owner or owners is engaged wholly or in part in the business of selling real estate." (Emphasisours) No decision has yet been found construing these pro- visions, nor have we been able to find statutes of other states containingsimilar language. Although the word "ownership"is not used in the first half of subdivision(3) of Section 4, the phrase "for himself" contains the necessary lmpllcatlonof ownership, so that this Section must be construedas a legislativedeclaration that an owner of property may neverthelessbe a broker, if such owner Is "engagedIn the business of buying, selling, exchanging, leasing, renting of property for himself or Itself". The mean- ing of this language is rendered difficultby the fact that neither the word "and" nor the word "or" Is used between the various types of activitiesreferred to. It would certainly seem insupportableto say that the Legislatureintended to re- qujre the licensingof any individual or corporationwhich is Honorable L. D. Ransom, Page~3 (WW-287). engaged only in "the business of buying . . . of property for himself or itself". However, In this case the corporationis both buying and selling real estate. Therefore, It is our opinion that the combined activity of buying and selling may constitute "engagingin a business" within the meaning of the Act. Under the facts of this case thenowner was buying and selling real estate, employing salesmen on a commissionbasis, advertisingwidely the sale of real estate, and was expressly incorporatedfor the very purpoSfeof "purchasing,selling, and tubdividingreal property . . . Thus the corporationis engaged in the business of bqlng, selling, . . . of property for himself or Itself" and Is engaged in the activitiesof a Real Estate Broker . : .v under Section 4, Subdivision (3) of the Act. This waald be especially true If It had transferred title to "Lake Alaska" to someone else and is continuing to sell the lots. Indeed, this would render it a broker under Subdivision (1) of Section 4. Nor Is the subject corporationexempt, as an owner, by Section 6, Subldlvlslon(4). The sales here are not made by either an attorney or "regular employees",but by salesmen on a commlsslonbasis, I. e. as Independentcontractors. Great Western Drilling Co. v. Simmons, 302 S.W. 2d 400 (Sup. Ctz7 horeover, the corporationis "engagedwholly or in part In the business of selling real estate". Whether or not a person or a corporationis In fact "engagedIn the business of selling real estate" would depend upon the activities of such a person or corporationIn each particular case. The sworn admission contained In Lake Alaska's corporate charter that it is in the business of purchasing and selling real property, coupled with the practices above outlined Is, In our opinion, conclusiveof this particular case. Turning to the question of constitutionality,we find that the purpose of the Real Estate License Act was to protect the public from fraudulentmisrepresentationby sellers of real estate through the registrationand regulationof those who deal with the cubllc in real estate. 'We hold that the enactment of the Real Estate Dealers' License Act, regulating those who may make sales of real estate, was a proper exercise of the police power of the State . . .' Gregory v. Roedonbeck, 141 Tex. 543, 174 S.W. 2d 585 (1943). The fact that the traditionaldefini- tion of "broker" has been expanded to Include owners under certain circumstancesis not obnoxious to the due process clause or any other constitutionalprovision. In holding the analogous provision of the Texas Securities Act to be valid it was stated: Honorable L. D, Ransom, Page 4 (WW-287). "The Legislaturetranscendedno constitutional llmitatlonin requiring owners of securities to renister when the things they do place them In the caEe ory of dealers." -v 121 S.W. 2d 353 7Tex. Grim. 1938). An owner of real estate proper1.ymay be prohibited from selling It without a license where he is engaged In the business of selling real estate. Therefore, In our opinion the provisionsbringing owners of property wlthln the provisionsof the Act under the specified conditionsare not unconstitutional. SUMMARY Lake Alaska, Inc. Is engaged In the business of selling real estate, and Is therefore subject to the licensing requlre- ments of the Real Estate Licensing Act. Sections 4 (3) and 6 (4) of the Real Estate Licensing Act are constitutional. Yours very truly, WILL WILSON Attorney General of Texas c BY a$dpti Ralph R. Rash RRR:jl:pf APPROVED: Assistant OPINION COMMITTEE Geo. P. Blackburn, Chairman Fred Werkenthln Richard B. Stone W. V. Geppert J. Milton Richardson C. K. Richards Mrs. Marietta Payne Wayland C. Rivers, Jr.