No. 89-603
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
YELLOWSTONE VALLEY PROPERTIES,
a Montana General Partnership,
Petitioner and Appellant,
THE BOARD OF REALTY REGULATION, DEPART-
MENT OF COMMERCE, STATE OF MONTANA,
Respondent and Respondent.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable William J. Speare, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
James C. Reuss, Wright, Tolliver & Guthals,
Billings, Montana
For Respondent:
1
-
.
-- Mary Anne simpson, Department of Commerce, Helena,
cr, Montana
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i s c: Submitted on Briefs: April 19, 1990
:- c3 Decided: June 20, 1990
''~3ed:
Chief Justice J. A. Turnage delivered the Opinion of the Court.
Yellowstone Valley Properties, a Montana general partnership,
appeals the refusal of the Thirteenth Judicial District, Yel-
lowstone County, to review a decision of the Board of Realty
Regulation. The Board ruled that Yellowstone Valley Properties
could not recover from the real estate recovery account for an
unsatisfied judgment against one of its partners arising from the
sale of the partnership's property. We affirm.
Yellowstone Valley Properties raises the following issues:
1. Whether the Board of Realty Regulation erred in denying
Yellowstone Valley Properties1 application for payment from the
real estate recovery account on the grounds that the transactions
upon which the Yellowstone Valley Properties1 judgment was based
were not ones for which a real estate license was required.
2. Whether as a matter of public policy the recovery account
should extend to the acts of a licensed real estate agent not-
withstanding the fact that the agent committed defalcations in
selling land of which he is deemed an owner.
The facts of this case are not in dispute. Yellowstone Valley
Properties [hereinafter YVP] is a general partnership under the
laws of Montana engaged in the business of owning, subdividing,
developing and selling real estate in the Billings, Montana, area.
Kenneth Lee Eames was the managing general partner of YVP holding
a power of attorney authorizing him to act for the partnership in
property sales. Between August 1981 and September 1986, Eames
committed numerous acts of fraud and conversion in the sale of YVP
property causing substantial loss to the partnership. As a result
of those acts, YVP won a civil judgment against Eames for $166,850,
but YVP was unable to execute that judgment. YVP then applied to
the Board of Realty Regulation [hereinafter Board] for the maximum
$25,000 payment from the real estate recovery account. The Board
denied the claim, and the District Court denied YVP's petition for
judicial review.
The only question here is a question of law. An agency's
conclusion of law arises to a reversible abuse of discretion when
it is clearly contrary to legislative intent. City of Billings v.
Billings Firefighters Local No. 521 (1982), 200 Mont. 421, 431, 651
P.2d 627, 632.
On YVP1s first issue, the plain language of the relevant
statutes leaves no doubt that the Board correctly rejected YVP1s
application. Subject to a number of restrictions not relevant to
the present issue, a person may file a claim against the recovery
account for unrecoverable judgments based on "any act or transac--
tion . . . for which a license is required under this chapter
. . . . Section 37-51-503 (1), MCA. The definition of "personw
as used in the real estate licensing statutes includes a partner-
ship. Section 37-51-102(8), MCA. Thus a partnership such as YVP
is entitled to file against the recovery fund. However, at the
time this case arose, a person was statutorily exempted from the
licensing requirement when selling his own property. Sections 37-
.
51-301 (1) and -103 (1)(a), MCA (1985) A partner, such as Eames,
is a co-owner of the partnership's property. Section 35-10-
502 (I), MCA. As an owner of the property sold in the fraudulent
transactions, Eamests actions were not subject to the real estate
licensing requirements and, therefore, were not subject to the
recovery account.
On the second issue, YVP relies heavily on Twite v. Western
Sur. Co. (1978), 176 Mont. 286, 577 P.2d 1219. In Twite the
plaintiffs purchased property from the defendant, a licensed real
estate agent. The defendant held himself out as an agent of a real
estate company even though he was covertly selling his own
property. At the time of the sale, the defendant was in default
on the contract for deed under which he held title to the property.
This Court held that under the public policy of the Real Estate
Licensing Act, the plaintiffs were entitled to recover from the
defendant's bonding company notwithstanding the Act's licensing
exemption for owners selling their own property.
YVP now argues that Twite controls the present case. Like the
present statutes, the law governing Twite provided an exemption
from the real estate licensing requirements for owners selling
their own property. Section 66-1926(1), RCM (1947). In Twite,
this Court refused to rely on the owner exemption because it would
contravene public policy when a licensed real estate agent
committed fraud in the sale of his own property.
The fact that a person can sell his own prop-
erty without being in violation of the Real
Estate Act, for failure to purchase a real
estate license, does not lend itself to the
proposition that a licensed real estate sales-
man is relieved of his responsibility under
section 66-1937, merely because he has taken
property into his name before defrauding a
purchaser. This would render the Act a nul-
lity. Furthermore, it will stand without
discussion that this kind of arrangement would
be strictly against public policy, which is to
protect the public from unscrupulous and
insolvent real estate agents and brokers.
Twite, 176 Mont. at 289, 577 P.2d at 1221.
We agree with the Board that Twite is distinguishable; it was
decided under a standard which the legislature has since changed.
The law at that time allowed recovery against a real estate agent's
$10,000 bond for acts, "arising in the course of the [agent's]
practice as a real estate broker or ~ a l e s m a n . ~ ~
Section 66-1933,
RCM (1947). The plaintiffs in Twite recovered on the defendant's
bond because the defendant led the plaintiffs to believe that they
were dealing with a bonded real estate salesman. Twite, 176 Mont.
at 290-91, 577 P.2d at 1221-22. His acts, therefore, fell within
his practice as a real estate salesman.
The current standard is different. The 1985 Legislature
replaced the bonding requirement with the recovery account and
changed the standard of recovery. Act approved May 9, 1985, ch.
688, § 5, 1985 Mont. Laws 1537, 1539-40. The statute now allows
a person to file against the recovery account for judgments based
on the uconversion of trust funds or arising directly out of any
act or transaction ... for which a license is required under this
chapter . . . ." Section 37-51-503(1), MCA (emphasis added). As
noted above, no license is required, or recovery allowed, when the
act complained of arises out of the sale of property owned by the
seller.
YVP argues that, as a matter of public policy, the owner
exemption should not apply to licensed brokers and salesmen. YVP
correctly asserts that the current owner exemption may be contrary
to the public policy concerns expressed in Twite. It may allow
real estate brokers and salesmen to circumvent licensing require-
ments by simply purchasing the property they plan to transfer. As
an unintended consequence, the owner exemption would also partially
defeat the purposes of the recovery account. See e.g. Richards v.
Income Realty and Mortgage, Inc. (Colo. App. 1982), 654 P.2d 864,
866.
The problem raised by the appellant may give the legislature
reason to reconsider the current licensing provisions and, in fact,
it may have already acted. The 1989 Legislature amended the
licensing exemption for persons acting as attorneys-in-fact to
correct a similar problem. The Legislature found
that there is a potential use of the attorney-
in-fact exemption by certain persons on a
regular or consistent basis, thereby allowing
those persons to avoid license requirements
and negating adequate safeguards to the public
....
Act approved March 20, 1989, ch. 180, 1989 Mont. Laws 386, 386-
87. The 1989 Legislature also passed an amendment which might
affect all exemptions to the licensing requirements. It replaced
the obligatory Itshalll1 the exemption statute with the permissive
in
l1rnay.lt Act approved March 24, 1989, ch. 314, 5 2, 1989 Mont. Laws
669, 670. Presumably, this change will give the Board some
discretion in adopting rules and granting exemptions in the future.
Though the 1989 Legislature may have reacted to the policy
considerations presently raised by YVP, those concerns do not give
this Court authority to retroactively amend the statutes. When,
as here, the words used are unambiguous, this Court is bound by the
plain meaning of the statutes. Boegli v. Glacier Mountain Cheese
Co. (Mont. 1989), 777 P.2d 1303, 1305, 46 St.Rep. 1389, 1391. We
hold with the District Court that the Board did not abuse its
discretion in refusing to accept YVP's application for funds from
the recovery account.
Affirmed.
We concur: