Opinion ID: 2499315
Heading Depth: 1
Heading Rank: 5

Heading: Absolute Exemption

Text: First, we consider McGrath's argument that K.S.A. 2011 Supp. 58-3037(c) absolutely and unqualifiedly exempts attorneys from the KREBSLA and its fee-splitting prohibitions. If we accept this argument, an attorney could act in any capacity and perform any activity as a real estate broker without a license under the KREBSLA. Yet, 58-3062(a)(10) is phrased in terms of allowing payments for activities for which a license is required, not in terms of allowing payments to certain classifications of individuals, such as attorneys. Likewise, K.S.A. 2011 Supp. 58-3037 provides the KREBSLA shall not apply to... (c) [s]ervices  that are performed as the professional duties as an attorney.  (Emphasis added.) This means that an attorney would have to have a real estate license to perform any services that are not encompassed within and incidental to the practice of law, are not within the context of an attorney-client relationship, and are not consistent with the attorney's professional duties. The Court of Appeals appears to have recognized this limitation in In re Metcalf Assocs.-2000, 42 Kan.App.2d 412, 213 P.3d 751 (2009), rev. denied 290 Kan. 1094 (2010). In Metcalf Assocs.-2000, the question was whether an attorney could receive a finder's fee as part of a real estate transaction under the exemption of 58-3037 even though the attorney was not a broker. The Court of Appeals did not answer the question because it determined it did not have jurisdiction over the attorney. Nevertheless, the court noted: Arguably, ... [the attorney] should not have been entitled to a finder's fee simply because he is an attorneyhis performance of professional duties as [an] attorney didn't involve the task of finding a buyer. Metcalf Assocs.-2000, 42 Kan.App.2d at 428, 213 P.3d 751; see Kan. Att'y Gen. Op. No. 94-6 (concluding Kansas' attorney exemption is limited to those professional activities that are encompassed within and incidental to the practice of law in the context of an attorney-client relationship). Although not directly discussing Metcalf Assocs.-2000, McGrath argues for a different interpretation of the attorney exemption, one where there would not be limitations on an attorney's activities in a real estate transaction and an attorney would be allowed to receive a portion of the brokerage commission as a finder's fee or for any other purpose. For support he cites this court's decision in Lambertz v. Builders, Inc., 183 Kan. 602, 331 P.2d 559 (1958), and several out-of-state cases. These cases are distinguishable, however, because of differences between the language of the statutes at issue in those cases and the KREBSLA's attorney exemption. In Lambertz, the court considered an early version of the laws covering real estate licensees in Kansas. Lambertz brought suit for an alleged breach of contract by his employer, Builders. Lambertz was involved in Builders' commercial real estate business, which included negotiating leases on Builders' property. Lambertz alleged he had an oral contract to receive a commission on lease agreements that he negotiated. Builders denied the factual allegations and also argued Lambertz could not bring the suit because of a statute, G.S.1949, 67-1019, which prohibited a person from bringing an action for compensation for real estate transactions without alleging and proving the person is a licensed real estate broker or salesperson. In response, Lambertz argued he did not have to be licensed because the real estate licensing act in effect at that time exempted real estate transactions made by the property owner or the owner's employee when acting on behalf of the owner. See G.S.1949, 67-1003. This court agreed with Lambertz, concluding he was not required to plead or prove that he was licensed under the act because the services he performed fell within the exemption. Lambertz, 183 Kan. at 610, 331 P.2d 559. According to McGrath, Lambertz stands for the proposition that those specifically exempt from the statute can participate in real estate transactions and receive compensation. While Lambertz can be read to stand for this principle, the holding is not directly applicable to the attorney exemption under K.S.A. 2011 Supp. 58-3037(c) because the statute does not provide that all activities performed by an attorney are exempt. Rather, as we have noted, under the clear terms of the provision, an attorney is exempt only to the extent he or she is performing such attorney's professional duties as an attorney. K.S.A. 2011 Supp. 58-3037(c). This limitation or qualification also distinguishes the KREBSLA attorney exemption from other state statutes that have been held to absolutely exempt an attorney from a state's real estate licensure act regardless of the nature of the attorney's activities. See, e.g., Weinblatt v. Parkway-St. Johns Place Corporation, 136 Misc. 743, 241 N.Y.S. 721 (1930) (section 442-f of the New York Real Property Law provided: `The provisions of this article shall not apply to . . . attorneys at law.'); Kribbs v. Jackson, 387 Pa. 611, 620, 129 A.2d 490 (1957) (Attorneys are specifically exempted from the requirements of the [Pennsylvania] Real Estate Brokers License Act.); Elin v. Neal, 720 S.W.2d 224, 225-26 (Tex.App.1986) (Texas Real Estate License Act, which states that [t]he provisions of this Act shall not apply to . . . an attorney at law licensed in this state, specifically and unequivocally exempts attorneys from requirement that commission agreements be in writing); see also Atlantic Richfield Co. v. Sybert, 51 Md.App. 74, 83, 441 A.2d 1079 (1982) (statute exempts attorneys who do not regularly engage in real estate business or `hold themselves out by sign, advertisement or otherwise as offering to the general public the services authorized by this subtitle to be performed by real estate brokers'; because attorney did not regularly engage in real estate business or hold himself out as a broker, he was entitled to standard real estate commission for procuring a willing buyer). But see Sherman v. Bruton, 497 S.W.2d 316, 321 (Tex.Civ.App.1973) (neither cited by nor overruled in Elin, 720 S.W.2d 224; holding that critical phrase of exemption statute was services rendered by an attorney of law and that this phrase qualified the exemption as distinguished from the absolute exemption of prior version of statute at issue in Burchfield meaning exemption is not absolute and is limited to services rendered by a licensed attorney whose engagement for legal services has created the relationship of attorney and client). In contrast to statutes that require only that an attorney have a law license in order to be exempt from real estate licensure requirements, K.S.A. 2011 Supp. 58-3037(c) requires an attorney, such as McGrath, to show that he or she was performing services consistent with his or her professional duties as an attorney to fall under the KREBSLA exemption. Under this plain language, it is clear the KREBSLA attorney exemption is not absolute. Despite the limiting language in 58-3037(c), McGrath argues it was the clear and unambiguous intent of the legislature to exempt attorneys because there is no concern about dishonesty, fraud, or incompetence which KREBSLA was created to preventbecause attorneys, presumably, are better regulated than real estate salespersons. See Furr v. Fonville Morisey Realty, Inc., 130 N.C.App. 541, 546-48, 503 S.E.2d 401 (1998) (splitting fee with a broker who is licensed in another state does not violate the purpose of the real estate licensing act, which is to protect the public from fraud and abuse). This argument is inconsistent with our rules of statutory interpretation. Under those rules, we give effect to the legislature's express language. Only if the statute's language or text is unclear or ambiguous does the court employ canons of construction, legislative history, or other background considerations to divine the legislature's intent and construe the statute accordingly. State v. Trautloff, 289 Kan. 793, 796, 217 P.3d 15 (2009). Here, the express language is clear and unambiguous: K.S.A. 2011 Supp. 58-3037(c) does not allow an attorney to engage generally in the business of a real estate broker but does allow an attorney to perform some activities a broker would perform if the attorney's activities are encompassed within and incidental to the practice of law, are within the context of an attorney-client relationship, and are consistent with the attorney's professional duties.