# FILED
May 29, 1998 Cecil W. Crowson Appellate Cou rt Clerk IN THE COURT OF A

PPEALS OF TENN ESSEE AT NASHVILLE
TENNESSEE REAL ESTATE ) COMMISSION, ) ) Plaintiff/Appellee, ) Davidson Chan cery No. 96-3330-I II ) VS. ) Appeal No . 01A01-9707-CH- 00320 ) THOMAS HOWARD HA MILTON, ) ET AL, ) ) Defendants/Appellants. )
APPEAL FROM

THE CHANCE RY COURT O F DAVIDSON COUNTY AT NASHVILLE, TENNESSEE THE HONORABLE ELLEN HOBBS LY LE, CHANCELLOR
ALFRED H. KNIGHT WILLIS & KNIGHT Nashville, Tennessee Attorney for Appellants JOHN KNOX WALKUP ATTORNEY G ENERAL & REP ORTER CHRISTINE LAPPS ASSI STAN T ATTO RNE Y GE NER AL Nashville, Tennessee Attorney for Appellee J. R USS ELL FARRAR PAUL D. CAVER, JR. FARRAR & BATES, L.L.P. Nashville, Tennessee Attorneys for Amicus Curiae Tennessee Association of Realtors

AFFIRMED

ALAN E. HIGHERS, J.

CONCUR: W. FRANK CR

AWFORD, P.J., W.S . HOLLY KIRBY LI LLARD, J.2

Defendants/Ap pellants, Thomas H. Hamilton and Jeanet te Hamilton individuall y and d/b/a LeConte Chalet

Rentals and LeConte Chalet Rentals, Inc. (“LeConte”) (collectively “defendants”), appeal the judgment of the trial court enjoining them from, inter alia , soliciting, representing, or promoti ng the overni ght renta l of chalets or cabins and the undertaking to rent,license the occupancy of, or lease such chalets or cabins. For reasons stated hereinafter, we affirm the j udgment of the trial court.

The essential facts of this action are not in dispute. LeConte is located in Gatlinburg, Tennessee. It is owned by Jeanette Hamilton, who w as in the business of manag ing a nd renting vacation chalets and cabins for numerous individual owners. Thomas Hamilton, Jeanette’s husband, w as an affiliate real estate b roker working for LeConte

. At the time the plaintiff, Tennessee Rea l Estate Commission (“Commission”), initiated this action against defendants, they were handli ng the property of at least sixty people.

The Commission first initiated proceedings again st Tho mas Hamilton in June of 1994. T he charges levied against him emanated from his conduct w hile employed as a broker at LeConte. After a hearing before the Commission,Thomas Hamilton’s real estate licens e was revoked for v iolations of Tenn. Code Ann. § 62-12- 312(b). Amon g th e violations

cited by the Commission i nclud ed making willful and subs tantial misrepresentations

when marketing chalets, fail in g properly to document th e receipt of checks, failing properly to account for monies coming into LeConte’s possession, handling all escrow and operating accounts without superv ision by a principal

broker and advertisi ng without the approval or direction of the principal broker.

Due to Thomas H amilt on’s affiliation with LeCont e, the Commission assessed chargesagainst LeConte that wer e closely connected to the chargeslevied against Thomas Hamilton. The charges brou ght against LeConte w ere founde d upon a n audit conducted by

the Commission. The allegations against LeConte mirrored many of those levied against Thomas Hamilton. They included making substant ial a nd willful3

misrepresentations, using mislead in g or untruthful adverti sing, and failing to acc ount for funds coming into its possess ion. In resolution of these char ges, LeConte ent ere d an Agreed Order with the Commission surrendering its firm license.
Despite the revocation and surr endering of Thomas Hamilton’s and LeCont e’s licenses, LeConte continued with its busi ness. Consequently, the Commis sion sought an injunction against defendants andinitiated the suit whi ch is the subject of this appeal . At the hearing for the temporary injunction, the defendants claimed that they were no longer subject to licensure. Indeed, the defendants asserted that they exempted themselves from the Licensing Act b

y reques ting their clients to grant them powers of attor ney. LeConte
was granted numerous powers of attorney authorizing it to act on behalf of the grantors as follows: My

attorney in fact shall have the full authority to do all things necessaryto care for, manage, exploit and otherwise overs ee Grantor’s r eal pr operty loc ated at . . . in Sevier County, Tennessee, (th e “Prop erty”) including , but not by way of limitation, th e following: (a) To exercise, d o, or perform any act, rig ht, power, duty, or obligation whatsoever the Granto r now has or may acq uire the legal right, power, or capacity to exerci se, do, or per for m in conn ectio n with, arising out of, or relating to owne rship, managementor use of the P r operty with a vi ew towards generating income from the use of the Property. My attorney is specifically authoriz

ed and di re cted to make the property available to and to rentthe Property to third persons and to do all things incident thereto including collecting, accounting for, and making periodic remittances to me for income generated from the use of th e Propert y. (b) To enter into and u po n the Property and to maintai n, let, and manage same or

any par t thereo f.

Defendants have relied on these documents as their defense to

the Commission’s assertion that the y were opera ting a bus iness in vio lation of state law. Defendants assert that because they had acquire d these powers of

attorne ys from the individual own ers, they were now exempt from l icensure under Tenn. Code Ann. § 62- 13-104(2).

The Chancellor

disagreed and granted the injunction making the following findin gs of fact in pertinent part:4 (4) The business or

vocation of LeConte is ov erseeing the real pr opert yinterest of principals who own vacation and resort chalets and cottages in and near G atlinburg, Tennessee. When otherwise not in use by the principals, the

properties are taken care of by

LeConte and LeConte rents the properties at the request of the principals. For these service s, LeConte receives a fee. (6) The power

of attorney form reserves to LeConte full authority “to do all things necessa ry to care for, manage, exploit and othe rwi se oversee Gu arantor’ s real prop erty” including “any act . . . relating to ownership, managemen t or use of the Property with a vie w towards generati ng income from use of the Property.” (7 ) The fo rm also contains a provi sion on compensation for LeConte’s se rvices . The form provides, “My attorney in fact, and any successors, shal l be com pe nsated for services rendered at a rate

equal to40% of the gr oss receipt

s that my attorney generates from the us e of the property.” Conseque ntly, the Chancellor ordered the defendants not to engage in any of the fol lowing activities: 1. Supervising, dir ecting, managing, ow

ning or controlling any lic ense d real estate firm in the State of Tenness ee without a license. 2. Supervising, directing, mana ging, owning or controll ing any non-licensed real estate fir m in the State of Tennessee. 3. Solicitin g, rep resenting, or promoting the sale, exchange, purchase, lease or option to buy or sell any realproperty for a fee, commission, finders fee or other valuable consi deration in the State of Tennessee. 4. The undertaking by

or on behalf of the owner or owners of lots or other parcels of real es tate, at a salar

y, fee , commis sion, or any other valuable consideration, to sell or lease such real estate or any part thereof, in lots or parcels or other disposition thereof in the State of Tennessee. 5. Engagi ng in th e busine ss of chargi ng an advance fee or contracting for the collection of a fee in connection with any contract whereby the primary purpose is to

promote the sale or lease of real e stat e either through its li sting in a publication issued primarily for such purpose, or for a r eferral of information concerning such r eal estate to brokers or both. 6. The solicitation, repres enta tio n, or promotion of the overnight

rental o f chale ts or cabins and the undertaki ng to rent, license the occupancy of, or lease such chalets or cabins. 7. Enga ging i n any ac

tivit ies that

fall wi thin the definit ion of a “broker” as

stated in T.C.A. § 62-13-102, as more particularly described in this Court’s memorandum and order. 8. Defendants are per manently enjoined from performing or engaging in any of the activiti es iden ti fied in paragraphs 15 through 7, even if they purport t o do s o for a fee under the authority of a power-of-at torney. This appeal ensued. The essential issues presented to this court for review are as follows:

1. Are the defen dants, whose bus iness is managing, renting, and collecting rents for v acation chalets and cabins for a fee on behalf of private owners, required to be licensed under the Tennessee Real Estate Broker Licens e Act, Tenn. Code Ann. § 62-13-101 et seq .? 2. Did the cha ncery c ourt properly issue a permanent injunction against the defendants, who ar e no longer licensed real estate brokers, requiring them to cease any and all activities defined as real estate brokering,thereby rejecting the defendants’ claim ( a) th at they are entitled to an ex emption from the Licensing Act under Tenn.Code Ann. § 62-13-104(2) and (b) t ha t they can, therefore, continu e their real estate business pursuant to the authority given them in the powers of attorney executed by their clients?

Since we are review

ing a finding of fact by the trial court, we must conduct our review de novo

upon the record, accompanied by a presumption of the correctness of the findings of the trial judge. We may reverse only if the evidence preponderates against the finding of the trial judge. Tenn. R. App. P. 13(d).

Are the defendants, whose business is managing, renting, and collecting rents for vacation chalets and cabins for a fee on behalf of private owners, requ ired to be licensed under the Tennessee Real Estate Broker License A ct, Tenn. Code A

nn. § 62-13-101 et seq .? Tenn. Code Ann. § 62-13-102(3)(A) provides: (3)(A) "Broker" means any person who for a fee, commission, finders fee or any othe r val uable consideration, or w ith the intentor ex pec tation of receiving the same from another, solicits, negotiates or attempts to solicit or negotiat e the listing, sale, purchase, exchange, lease or option to buy, sell, rentor exchange for any real estate or of the i mprovements thereon or any time-shar

e int erval as defined in the Tennessee Time-Share Act, c ompiled in title 66, chapter 32, par t 1, collectsrents or attempts to collec t rents, auctions or

offers to auction, or who advertises or holds out as e ngaged in any of the foregoing.

The language within of the “Special Power of Attorney ” form filled out by property owners states in perti nent part:

(a) . . . [m]y attorney

is specifically author

ized and directed to make property a vailable t o and to re nt the Pro perty t o thir d1 W e note that both parti es discuss at l ength whether defendants’ efforts t o “rent” chalets and cabi ns fell within the m eaning o f Tenn . Code A nn. § 62-13-102(3)( A). In l ight of the foregoing discussion, it appears that defe ndants did “collect re nts” and thus fell und er the am bit of the sta tute. 6 persons and to do all t hings incident thereto including collecting, accounting for, and making periodic remit tances to me for in come gen erated f rom the u se of the Property. 5. COMPENSATION. My attorney in fact, and any successors, shall be compens ated for services render ed at a rate equal to forty percent (40%) of the gross rec

eipts that my attorne y generate s from th e use of t he Prope rty. After a careful review of the record in the case before us, it is undisputed the defendants
were authorized to collect rents from the properties that they were managing under their special powers of attorney. Also undisputed in the record is the fact that defendants di d, in fact, collect rents from tenants of the chalets and/or cabins and r eceived compensation of 40% of the gross receipts tha t the def endants generated from the use of said c halets and cabins. As such, defendants, for a fee, collected or attempted to collect rents and are thereby conducting themselves in a manner subject to licensi ng under the Tennessee Real Estate Broker Licensing Ac t. Accordi ngly, we affirm the finding of the Chancellor that defendants’ actions fell within the confines of Tenn. Code Ann. § 62-13-102(3)(A). 1
Did the chancery court properly issue a permanent injunction against the defendants, who are no longer licensed real estate brokers, requiring them to cease any and all activities defined as real estate brokering, thereby rejecting the defen dants’ claim (a) that they are entitled to an exemption f rom the Licensing A

ct under Tenn. Code Ann. § 62-13-104( 2) and (b) that they can, ther efor e, co ntin ue th eir r eal esta te bu sine ss pu rsua nt to the a utho rity given them in the powers of attorney executed by their clients? Defendants contend that their conduct is e xempt from the licensing requi rements of the Tennessee Real Estate Broker License Act. Specifically, defendants claim that they
are exemptfrom the act’s licensing requir ement pursuant to the attorney- in-fact exemption, codified at Tenn. Code Ann. § 62-13-104( 2) (1997). As mentioned supra , the trial court
rejected this argument finding that the defendants’ acts did not fall within this licensin g exemption of the Act. Tenn. Code Ann. § 62-13 -104(2) provides:

The provisions of this chapter do not apply to: (2) An attorney-in-fact under a duly executed an d recor ded power of attorney from the owner or lessor;7

The terms “attorney-in-fact” and “power of attorney” are not defined in the Licensing Act. As the Chancellor recognized, the fact that the legislature exempted attorneys-in-fact from the regulation placed on r eal estate brokers establi shed that the legislature vi ewed real estate brokers and attorney s-in-fact as di stinguis hable. She noted that the key to
ascertaining wh ether the defendants’ activities fall within the confines of the attorney-in-fact exemption is discerning the di stinguishing charac teristics created by

the legislature in or

de r to differentiate between a real es tate broker and an attorney- in-fact.

Defendants in sist tha t the Chancellor’s disc ernment of the differences between a real estate broker and an attorney-in-fact under Tenn. Code Ann. § 62-13-101 et seq. is “an un wa rr

an te d j ud ic ia l r

ev is io n of t he

Ac t. ” We disagree. In construing a statute, it is the duty of the court to give ev

ery word andphrase meaning. United Canners, Inc. v. Ki ng , 696 S.W.2d 525 (Tenn.1985). We must construe the statute so that no part is i noperative, sup erf luous, void or insignific ant. Tidwell v. Collins , 522 S.W.2d 674 (Te nn.1975). "Stat utes are not to be construed so str ictly as to defeat the obv ious intention of th e legislature... [q]uestions involving statutory constructi on 'must be answered in li ght of reason, having in mind the object of the statute, and the mischie f it aims at.' " State v. Netto , 486 S.W.2d 725, 728 (Tenn.1972).

The fact that the legislature carved out an exemption for attorneys-in-fact from the regulations

placed on real est ate brokers evinces that the legislature vi ewed real estate brokers and atto rneys-in-f act as dis tinguish able. “W here, as h ere, the parties d erive different interpretations from the statutory language, an ambiguity exists , and we must look to the entire statutory scheme in seeking to ascertain legislative intent.” Owens v. State , 908 S.W.2d 923, 926 (Tenn. 1950 (citing Lyons v. Rasar , 872 S.W.2d 895, 897 (Tenn. 1994)). In the i n stant case, it is imperati ve to look at the structu re of other similar provisions

within the same statutory scheme in interpreting

the meaning to bederived from the attorney-in-fact ex

emption. Tenn. CodeAnn. § 62-13-104(6) is particularly helpful in this fashion. (6) A corporation, f oreign or domestic, acting throug h an officer dulyauthorized to engage in such real estate transacti on8 where the transaction occurs as an incident

t o the ma nag ement, lease, sale or other disp osition of real estate owned by the corporation; how ever, this exemption doe s not apply t o a person who performs an act described in § 62 -13
- 102(3)(A) either as a vocation or for co mpensation, if the amount of the com pens ation is dependent upon, or directly related to, the value

of the real estate with r espect to which the act is performed.
This exemption is express ly premised on the understanding that such exemption doe s not exist when persons are performing such functionsas theirvocation or when suc h actions
are performed for

compensation. Turningto the definition of “broker” i n Tenn. Code Ann. § 62-13-102(3)(A), the firs t sentence of this definition commences by stating: “Broker
means any person who for a fee... ” With this in mind, it is this cour t’s opinion that the legislature did notintend to exempt those attorneys-in-fact who perform their duties as their vocation and/or for compensatio n from the provisions of the Lic ensing Act.

This conclusion is reinfo rced by the legislative history to this ex emption. When an amendment to this particula r statute was being co nsidered, the House Commerce Committee discussed the exempti on as follows:

Shirley: If I w as the, if I had the power of attor ney, could I charge them $500 and not have a l icense? Buck: I would say tha

t you would not. Sh ir ley: Now, in, in effect we’v e abolished the real estate license then. Buck: No, because if you, if you do charge them a fee, you’re not exe mpt. If you don’t charge them a fee, you woul d b e exempt. A nd that’ s the sam e way the law is now. House Commerce Committee, Februar y 9, 1988.

After looking at the definitions of “attorney -in-fact” and “power of

attorney” as seen in Black’s Law Dictionary , Corpus Juris Secundum , and American Jurisprudence , and after having reviewed similar statutory sources, the trial court concluded that the distinguishing factor between a real estate

broker and an attorney-in-fact pertai ned to whether one was undertaking the actions enumerated in Tenn. Code Ann.§ 62-13-102(3)(A) as a v ocation
or for compensation as opposed to one w ho was undertaking

said actions ministerially as9

an agent for the owners. We agree.

The literal language of the s tatute cannot be harmonized w ith the interpretation advanced by the defendants. In interpre ting a statute, legisl ative intent must be determined from the plain language it contains, read in the cont ext of the entire statute, without any f orced or subtle construction which would ex tend or limit its meaning

. See Metropolitan

Government of Nashville, etc., v. Motel Systems, Inc. , 525 S.W.2d 840, 841 (Tenn. 1975); National Gas Distribut ors, Inc. v. State of Tenness ee , 804 S.W.2d 66, 67 (Tenn. 1991). It seems abundantly clear tha t the legis lature di d not inte nd for th e attorn eyin-fact exemption to be a loophole arou nd the unequivocal req uirements of the Licensing Act. Without a distinction between these two terms, the attorney-in-fact exemption would all but swallow the r

ule. If a real estate broker and an attorney-in-fact under the Licensing act were one and the same except for the “duly executed and recorded pow er of attorney,” then the lic

ensing requir ements of

the Act would be a fa rce and nothing more than a conduit allowing persons to obtain the privileges of maintaining a real estate pra ct ice without the proper licensing. Anyone could, in fact , leg ally bypass the li censing req uirements of the Act by simply undertaking to duly execute and record a power o f attorne y. It would be entirely irrati onal for persons to bind themselv es to the responsibilities, duties, sanctio ns, and castigat ions of the Lic ensing Ac t when they can practice the business of real estate by merely procuring a “duly executed and r ecorde d power of attorney.” This is not what the legi slature intended.

Defendants undertake their renting and collecting of rents for the owners of these chalets and cabins as their vocation. Defendants charge the property owners a fee of 40% of the gross receip ts that the d efendants generate from the use of the chalet s and/or cabins. Indeed, defendants’ acts as attorneys-in-fact are not ministerial in nature but are, in fact, th e mainst

ay of the ir liv

elihood . Therefo re, defe ndants are brokers within the meaning of Tenn. Code Ann. § 62-13-102(3)(A) and do not fall within the attorney-in-fact exemption of Tenn. Code Ann. § 62-13-104 (2).10

Accordin gly, we affirm the judgment of the trial court. Costs are assessed against defendants, for which executi on may issue if necessary

.

HIGHERS, J.

CONCUR:

CRAWFORD, P.J., W.S.

LILLARD, J.