Court Opinion

ID: 3118186
Source: CourtListenerOpinion
Date Created: 2015-10-16 07:58:18.436632+00
Date Added: 2024-06-11T11:45:14.113627
License: Public Domain

Concurring opinion issued May 14, 2013

                                      In The

                               Court of Appeals
                                     For The

                          First District of Texas
                            ————————————
                                NO. 12-00563-CV
                            ———————————
           BRIAN SHANKLIN AND TODD RIMMER, Appellants
                                        V.
              BASSOE OFFSHORE (USA) INC., MIKE SMITH,
                AND JONATHAN FAIRBANKS, Appellees

                    On Appeal from the 127th District Court
                             Harris County, Texas
                       Trial Court Case No. 2009-14340

                           CONCURRING OPINION
      The majority’s entire discussion of Real Estate License Act standing is dicta:

the opinion expressly acknowledges that “even if the trial court erred in concluding

that Shanklin and Rimmer lacked standing, its subsequent findings after a bench
trial preclude a reversal of the partial summary judgment.”       I agree that the

outcome of the trial on the merits is determinative of this appeal, and it requires

that we affirm. But I do not agree with the majority’s unnecessary frolic into

uncharted legal territory on the subject of RELA standing.

      Even if it were necessary to reach the standing issue, I disagree with the

majority’s interpretation of the statute. The allegations brought in this case by

appellants Shanklin and Rimmer, if true, would make them “aggrieved persons”

for purposes of the implied right of action under the RELA. See TEX. OCC. CODE

ANN. § 1101.754(b). These claimants are not harmed by the majority’s restrictive

interpretation of the RELA private cause of action, but a future claimant may be.

Accordingly, I write to explain my disagreement with the majority’s conclusion

that to be an “aggrieved person” eligible to invoke the private cause of action, a

person must have paid a fee to another person improperly acting as a real estate

broker.

I.    Bassoe acted as an unlicensed real estate broker
      Under the RELA, a person is a “broker” if he “negotiates or attempts to

negotiate the . . . purchase . . . of real estate” and “performs” such actions “for

another person” and “in exchange for a commission or other valuable consideration

or with the expectation of receiving a commission or other valuable consideration.”

TEX. OCC. CODE ANN. § 1101.002(1)(A)(iii). The statute further provides that “[a]

                                         2
person acts as a broker . . . under [the RELA] if the person, with the expectation of

receiving valuable consideration, directly or indirectly performs or offers, attempts,

or agrees to perform for another person any act described by Section 1101.002(1),

as a part of a transaction or as an entire transaction.” Id. § 1101.004 (emphasis

supplied). A person or business entity is prohibited from acting as a broker

without holding a license. Id. § 1101.351(a), (a-1).

      For purposes of their standing argument, appellees Bassoe, Smith, and

Fairbanks (hereinafter collectively referenced as “Bassoe”) concede that they were

engaged to act as Shanklin and Rimmer’s broker in their attempt to purchase the

Pride assets, including real property located in Huoma, Louisiana. Shanklin and

Rimmer alleged and the trial court found that Bassoe indicated its expectation of a

fee for brokering the transaction. But Bassoe in its capacity as business entity

lacked a real estate brokerage license, and Smith and Fairbanks likewise lacked

broker licenses in their individual capacities. Taking the plaintiffs’ allegations as

true, we thus assume that Bassoe violated the RELA by acting as a broker on the

appellants’ behalf.

II.   RELA’s implementing regulations

      The RELA establishes a private cause of action to remedy injuries resulting

from violations of the prohibition against acting as a broker without a license. The

statute provides that if “[a] person . . . receives a commission or other

                                          3
consideration as a result of acting as a broker . . . without holding a license or

certificate of registration” under the RELA, that person “is liable to an aggrieved

person for a penalty of not less than the amount of money received or more than

three times the amount of money received.”        Id. § 1101.754(a).   The RELA

imposes numerous requirements upon licensed real estate brokers, all of which

inform the question presented in this case about who might qualify as an

“aggrieved party” for purposes of bringing a private cause of action under the

RELA.

      To be eligible to receive a license under the RELA, a person must “satisfy

the [Texas Real Estate Commission] as to the applicant’s honesty, trustworthiness,

and integrity.” Id. § 1101.354(2). The applicant must “complete the required

courses of study, including any required core real estate courses prescribed under

[the RELA].” Id. § 1101.354(4); see also id. §§ 1101.356, .357, .359 (experience

and education requirements to obtain a broker license). The “core real estate

courses” include “agency law,” which subsumes as one of its subtopics “an agent’s

duties, including fiduciary duties.” Id. § 1101.003(1)(D). To obtain a license, a

business entity must designate a managing officer who is a licensed broker as its

agent for purposes of the RELA. Id. § 1101.355.1 These provisions serve to

1
      In addition, the RELA ensures the financial accountability of licensed
      business entities by requiring that they “provide proof that the entity
      maintains errors and omissions insurance with a minimum annual limit of
                                        4
ensure that any person or entity licensed as a broker has satisfied minimum

standards of character and education deemed necessary to provide real estate

brokerage services.

      To facilitate the regulation of real estate brokers, the RELA established the

Texas Real Estate Commission. See id. §§ 1101.051–.059. The general powers

and duties of the TREC include administering the RELA and adopting and

enforcing rules necessary to accomplish that charge. Id. § 1101.151(a)(1), (b)(1).

The TREC is also authorized to “establish standards of conduct and ethics” for

persons licensed under the RELA, both to “fulfill the purposes of” and to “ensure

compliance with” the statutory scheme.      Id. § 1101.151(b)(2).    The TREC is

statutorily authorized to “file a complaint and conduct an investigation as

necessary” to enforce the RELA or rules adopted under the RELA.                 Id.

§ 1101.204(a).

      The TREC has indicated that its understanding of the general legislative

intent of the RELA “to provide protection for the public in its dealings with real

estate agents.” TEX. REAL ESTATE COMM’N, THE HISTORY         OF   THE REAL ESTATE

LICENSE ACT, available at http://www.trec.texas.gov/pdf/rela/HistoryOfRELA.pdf.

To that end, the rules adopted by the TREC and codified in Title 22, Part 23 of the

      $1 million for each occurrence if the designated agent owns less than
      10 percent of the business entity.” TEX. OCC. CODE ANN. § 1101.355(a)(2).

                                        5
Texas Administrative Code include “Canons of Professional Ethics and Conduct”

applicable to the profession. The ethical canons include, among other things, rules

relating to fidelity and integrity:

       RULE § 531.1 Fidelity

       A real estate broker or salesperson, while acting as an agent for
       another, is a fiduciary. Special obligations are imposed when such
       fiduciary relationships are created. They demand:

              (1) that the primary duty of the real estate agent is to represent
       the interests of the agent’s client, and the agent’s position, in this
       respect, should be clear to all parties concerned in a real estate
       transaction; that, however, the agent, in performing duties to the
       client, shall treat other parties to a transaction fairly;

             (2) that the real estate agent be faithful and observant to trust
       placed in the agent, and be scrupulous and meticulous in performing
       the agent’s functions;

              (3) that the real estate agent place no personal interest above
       that of the agent’s client.

       RULE § 531.2 Integrity

       A real estate broker or salesperson has a special obligation to exercise
       integrity in the discharge of the licensee’s responsibilities, including
       employment of prudence and caution so as to avoid misrepresentation,
       in any wise, by acts of commission or omission.

22 TEX. ADMIN. CODE §§ 531.1–.2 (Canons of Professional Ethics and Conduct).

In addition, every active real estate broker licensed by the TREC is required to

display in a prominent location in each place of business a consumer information

form which provides a public notice designed to facilitate the submission to the

                                          6
commission of consumer complaints about real estate brokers. TEX. REAL ESTATE

COMM’N,          CONSUMER         INFORMATION        FORM      1-1,     available      at

http://www.trec.texas.gov/pdf/forms/miscellaneous/consumerinformationform.pdf;

see also TEX. OCC. CODE ANN. § 1101.202(a) (“The commission by rule shall

establish methods by which consumers and service recipients are notified of the

name, mailing address, and telephone number of the commission for the purpose of

directing a complaint to the commission.”); 22 TEX. ADMIN. CODE § 531.18

(Canons of Professional Ethics and Conduct).

          “A broker who represents a party in a real estate transaction . . . is that

party’s agent.” TEX. OCC. CODE ANN. § 1101.557(a).2 Such a broker “shall, at a

minimum, answer the party’s questions and present any offer to or from the party.”

Id. § 1101.557(b)(3). The RELA also requires that a licensed broker provide a

written notice to the represented party to a real estate transaction “at the time of the

first substantive dialogue with the party.” Id. § 1101.558(c). The required notice

states:

          “Before working with a real estate broker, you should know that the
          duties of a broker depend on whom the broker represents. If you
          are . . . a prospective buyer or tenant (buyer), you should know that

2
          For these purposes, “‘Party’ means a prospective buyer, seller, landlord, or
          tenant or an authorized representative of a buyer, seller, landlord, or tenant,
          including a trustee, guardian, executor, administrator, receiver, or attorney-
          in-fact. The term does not include a license holder who represents a party.”
          TEX. OCC. CODE ANN. § 1101.551(2).

                                             7
the broker who lists the property for sale or lease is the owner’s agent.
A broker who acts as a subagent represents the owner in cooperation
with the listing broker. A broker who acts as a buyer’s agent
represents the buyer. A broker may act as an intermediary between
the parties if the parties consent in writing. A broker can assist you in
locating a property, preparing a contract or lease, or obtaining
financing without representing you. A broker is obligated by law to
treat you honestly.

“IF THE BROKER REPRESENTS THE OWNER: The broker
becomes the owner’s agent by entering into an agreement with the
owner, usually through a written listing agreement, or by agreeing to
act as a subagent by accepting an offer of subagency from the listing
broker. A subagent may work in a different real estate office. A
listing broker or subagent can assist the buyer but does not represent
the buyer and must place the interests of the owner first. The buyer
should not tell the owner’s agent anything the buyer would not want
the owner to know because an owner’s agent must disclose to the
owner any material information known to the agent.

“IF THE BROKER REPRESENTS THE BUYER: The broker
becomes the buyer’s agent by entering into an agreement to represent
the buyer, usually through a written buyer representation agreement.
A buyer’s agent can assist the owner but does not represent the owner
and must place the interests of the buyer first. The owner should not
tell a buyer’s agent anything the owner would not want the buyer to
know because a buyer’s agent must disclose to the buyer any material
information known to the agent.

“IF THE BROKER ACTS AS AN INTERMEDIARY: A broker may
act as an intermediary between the parties if the broker complies with
The Texas Real Estate License Act. The broker must obtain the
written consent of each party to the transaction to act as an
intermediary. The written consent must state who will pay the broker
and, in conspicuous bold or underlined print, set forth the broker's
obligations as an intermediary. The broker is required to treat each
party honestly and fairly and to comply with The Texas Real Estate
License Act. A broker who acts as an intermediary in a transaction:
(1) shall treat all parties honestly; (2) may not disclose that the owner
will accept a price less than the asking price unless authorized in
                                   8
       writing to do so by the owner; (3) may not disclose that the buyer will
       pay a price greater than the price submitted in a written offer unless
       authorized in writing to do so by the buyer; and (4) may not disclose
       any confidential information or any information that a party
       specifically instructs the broker in writing not to disclose unless
       authorized in writing to disclose the information or required to do so
       by The Texas Real Estate License Act or a court order or if the
       information materially relates to the condition of the property. With
       the parties’ consent, a broker acting as an intermediary between the
       parties may appoint a person who is licensed under The Texas Real
       Estate License Act and associated with the broker to communicate
       with and carry out instructions of one party and another person who is
       licensed under that Act and associated with the broker to
       communicate with and carry out instructions of the other party.

       “If you choose to have a broker represent you, you should enter into a
       written agreement with the broker that clearly establishes the broker’s
       obligations and your obligations. The agreement should state how
       and by whom the broker will be paid. You have the right to choose
       the type of representation, if any, you wish to receive. Your payment
       of a fee to a broker does not necessarily establish that the broker
       represents you. If you have any questions regarding the duties and
       responsibilities of the broker, you should resolve those questions
       before proceeding.”

Id. § 1101.558(d) (emphasis supplied in italics).

       Finally, the RELA generally provides that “[a] licensed broker is liable to

the commission, the public, and the broker’s clients for any conduct engaged in

under this chapter by the broker.” Id. § 1101.803.

III.   Interpretation of the RELA’s private cause of action for “aggrieved
       persons”

       The foregoing regulations demonstrate that the RELA is concerned with the

protection of the general public and anyone who does business with a broker in a

                                          9
real estate transaction, not merely those who ultimately pay a commission to a

broker. The appellants’ allegations in this case thus fall squarely within the zone

of consumer protection that the RELA was intended to provide. Shanklin and

Rimmer claim that after engaging Bassoe to act as their real estate broker, they

were harmed by Bassoe’s failure to perform its duties as required under the RELA.

Instead of timely answering questions and faithfully pursuing Shanklin and

Rimmer’s interests, Bassoe is alleged to have actively promoted the acquisition of

Pride’s assets on behalf of another client, Blake.      Bassoe is also accused of

misleading Shanklin and Rimmer by representing that Pride was merely too busy

to address their offer when Bassoe knew that Pride would not consider them as

qualified buyers.    Bassoe failed to disclose this information to Shanklin and

Rimmer, although it knew that they were not dealing with other brokers or Pride

directly to pursue the acquisition.

      All of these allegations, if true, suggested that Bassoe acted as Shanklin and

Rimmer’s real estate broker and breached a fiduciary duty arising from that

relationship. See, e.g., 22 TEX. ADMIN. CODE § 531.1. If Bassoe had been a loyal

agent, Shanklin and Rimmer contend that they could have attempted to address

Pride’s concerns. Likewise, if Bassoe had refused to act as their broker due to their

lack of a real estate license, a loyal broker could have been engaged and injury

possibly avoided. Thus, the alleged harm was of the kind which RELA is intended

                                         10
to prevent against by requiring a license for anyone who expects to receive a

commission for the sale of real estate.

      The majority nevertheless concludes that the appellants are not “aggrieved

persons” as contemplated by the RELA, solely because the appellees ultimately

collected their fee from another party. I disagree with the majority’s narrow

interpretation.   When reading statutes, we ascertain and give effect to the

legislature’s intent, as drawn from the plain meaning of the words of the statute.

See, e.g., Texas Mut. Ins. Co. v. Ruttiger, 381 S.W.3d 430, 452 (Tex. 2012).

Nothing in the text of section 1101.754 confines the concept of “aggrieved parties”

to the parties who actually paid the consideration to the offending unlicensed

broker.

      The majority focuses upon the payment of a commission as the operative

fact that makes one a possibly “aggrieved person.”                But the text of

section 1101.754 relies on the receipt of a commission or other compensation only

as the predicate condition that makes a broker an eligible defendant, without

further limitation as to the source of the payment. 3 The question presented by this

3
      Cf. Flenniken v. Longview Bank & Trust Co., 661 S.W.2d 705, 706 (Tex.
      1983) (noting, with respect to the statutory definition of “consumer” under
      the Deceptive Trade Practices Act, that it “only describes the class of
      persons entitled to bring suit . . . it does not define the class of persons
      subject to liability,” and further noting that the “range of possible defendants
      is limited only by” specific statutory exemptions).

                                          11
appeal is more directly concerned with the class of eligible plaintiffs—i.e., who

qualifies as an “aggrieved person”? If the legislature had intended to restrict the

class of “aggrieved persons,” it knew how to do so explicitly, as it did for purposes

of recoveries from the Real Estate Recovery Trust Account established in the

RELA. In that part of the RELA, the statute expressly provides: “An aggrieved

person is entitled to reimbursement from the trust account if a person described by

Section 1101.601 engages in conduct described by Section 1101.652(a)(3) or (b) or

1101.653(1), (2), (3), or (4).” TEX. OCC. CODE ANN. § 1101.602. Unlike the right

of recovery described in Subchapter M, there is no statutory limitation on the

general reference to an “aggrieved person” entitled to file a private right of action

under section 1101.754.4

      Distinguished commentators have recently observed that “[p]erhaps no

interpretive fault is more common than the failure to follow the whole-text canon,

which calls on the judicial interpreter to consider the entire text, in view of its

structure and of the physical and logical relation of its many parts.” ANTONIN

SCALIA & BRYAN A. GARNER, READING LAW 167 (2012). Consideration of the full

4
      See also TEX. BUS. & COM. CODE ANN. § 17.50 (confining private DTPA
      cause of action to defined class of “consumers”); Riverside Nat. Bank v.
      Lewis, 603 S.W.2d 169, 173 (Tex. 1980) (“To ignore the Legislature’s
      definition of ‘consumer,’ and permit any aggrieved person to maintain a
      private cause of action under the DTPA, ignores the well established
      presumption that legislative choice of words is such that every word has
      meaning.”).

                                         12
scope of the RELA regulatory scheme supports a broader understanding of the

class of persons who may be considered as “aggrieved” due to the unauthorized

practice of real estate brokerage by unlicensed persons or entities, 5 and thus also

supports a broader scope of potential liability for violating the RELA. 6 In contrast,

the majority’s interpretation of “aggrieved person” can only be justified by reading

section 1101.754 in complete isolation from the remainder of the RELA.

5
      See, e.g., TEX. OCC. CODE ANN. § 1101.558 (“at the time of the first
      substantive dialogue with the party,” the broker must provide written notice
      that “[a] broker is obligated by law to treat you honestly,” that “[a] buyer’s
      agent . . . must place the interests of the buyer first,” and that “[i]f you
      choose to have a broker represent you, you should enter into a written
      agreement with the broker that clearly establishes the broker’s obligations
      and your obligations”); 22 TEX. ADMIN. CODE § 531.1 (“A real estate
      broker . . . while acting as an agent for another, is a fiduciary. . . . [1] the
      primary duty of the real estate agent is to represent the interests of the
      agent’s client, and the agent’s position, in this respect, should be clear to all
      parties concerned in a real estate transaction . . . [2] the real estate agent
      [must] be faithful and observant to trust placed in the agent, and be
      scrupulous and meticulous in performing the agent’s functions . . . [3] the
      real estate agent [must] place no personal interest above that of the agent’s
      client.”); Id. § 531.2 (“A real estate broker . . . has a special obligation to
      exercise integrity in the discharge of the licensee’s responsibilities, including
      employment of prudence and caution so as to avoid misrepresentation, in
      any wise, by acts of commission or omission.”).
6
      Cf. TEX. OCC. CODE ANN. § 1101.803 (establishing broker liability “to the
      commission, the public, and the broker’s clients for any conduct engaged in
      under this chapter by the broker”).

                                         13
IV.   Holloman and Dohalick are distinguishable

      In reaching its conclusion about the meaning of “aggrieved person,” the

majority relies upon two cases from other courts of appeals, both of which are

distinguishable.

      Thirty years ago the Waco Court of Appeals decided Holloman v. Denson,

which concerned two real-estate transactions involving a subdivision owner,

Holloman. 640 S.W.2d 417, 419 (Tex. App.—Waco 1982, writ ref’d n.r.e.). Both

transactions also involved the Densons, who purchased one lot and sold another in

the subdivision. Id. Despite being unlicensed to act as a real estate broker,

Holloman collected a broker’s fee on both transactions—one from the Densons as

sellers, and the other from the homeowner who sold his house to the Densons. Id.

The case involved no allegation of wrongdoing or injury other than the bare fact

that Holloman was unlicensed and therefore prohibited from collecting a fee. See

id. at 420. The Waco court held that the Densons were entitled to recover the fee

that they had paid to Holloman. Id. With respect to the purchase of the Densons’

house, for which Holloman’s fee had instead been paid by the seller, the court held

that there was “no way the Densons could be found to be the aggrieved persons”

when they had not been affected by the transaction. Id. They paid the price the

seller asked for the house, and it was “no concern of theirs” whether the seller paid

a commission. Id.

                                         14
      The present case is thus distinguishable from Holloman on the facts. If the

appellants had neither alleged nor suffered an actual injury resulting from the

unlicensed broker’s RELA violations, then they would not become “aggrieved

parties” by the mere fact that another party had paid a commission to the appellees.

But this case is not so simple; the appellants in this case allege that they retained

the appellees to act as their agents in a proposed real estate transaction, and that

they were injured by the appellees’ breaches of duties arising from that agreement.

      The other case relied upon the majority is Dohalick v. Moody National Bank,

a case involving the interpretation of a completely different regulatory scheme

under the Texas Finance Code. 375 S.W.3d 537, 541 (Tex. App.—Houston [14th

Dist.] 2012, no pet.). Construing a different provision authorizing a recovery by an

“aggrieved person” of fees paid to an unlicensed mortgage broker, the Fourteenth

Court reasoned:

             Under the plain meaning of [Finance Code] section 156.406(b),
      the damages that an aggrieved person may recover are “damages in an
      amount that is not less than the amount of the fee or profit received
      and not to exceed three times the amount of the fee or profit received,
      as may be determined by the court.” Act of May 25, 1999, 1999 Tex.
      Gen. Laws at 4346. An “aggrieved person” may recover these
      damages based upon the mortgage broker’s receipt of “money, or the
      equivalent of money, as a fee or profit because of or in consequence
      of the person acting as a mortgage broker or loan officer without an
      active license or being exempt under [Chapter 156].” Id. Because
      this is the conduct by which the claimant is aggrieved, we conclude
      that to be an aggrieved person under section 156.406(b), the claimant
      must have paid all or part of the fee or profit to the unlicensed
      mortgage broker or loan officer.
                                         15
Id. at 541. The court acknowledged that its interpretation of “aggrieved person” in

that case was dependent on context, including “the action through which the person

is aggrieved and the remedy provided to the person aggrieved.” Id. at 542. The

Dohalick court did not address any broader regulatory considerations under the

Finance Code which may or may not have influenced that court’s conclusion about

whether a claimant bank could qualify as an “aggrieved party” when it alleged that

an unlicensed mortgage broker fraudulently induced the bank to advance funds that

the borrower then used to pay the broker’s fee. See id. at 539. Rather than

deciding an issue under the Finance Code that is not presented by this appeal in

order to justify relying upon Dohalick as a potentially persuasive authority to

support the majority’s interpretation of Occupations Code section 1101.754, I

would instead conclude that the different regulatory context of the RELA

distinguishes the Dohalick case and justifies a different interpretation in this case.

                                     Conclusion

      The Real Estate License Act private right of action must be interpreted in

light of the full scope of its statutory and regulatory context. That context compels

the conclusion that the appellants alleged a direct injury of the nature that the

RELA is intended to prevent. They alleged that Bassoe acted on their behalf as

broker when they attempted to negotiate the purchase of real estate as part of the

purchase of the Pride assets. Liberally construed, the petition alleged numerous
                                          16
violations of the RELA and its implementing regulations. Had the RELA and its

regulations been followed, appellants never may have engaged the appellees as

agents because they had no license to act as a broker, and if Bassoe had acted in

accordance with RELA regulations, none of the subsequent factual background of

this dispute may have occurred.

      The appellants are part of the class of persons intended to be protected by

the RELA regulatory scheme.        Their injury allegedly resulted from RELA

violations. Accordingly, from the perspective of the RELA’s legislative purpose of

protecting the public in its dealings with real estate agents, the appellants are

“aggrieved persons,” entitled to pursue the private cause of action created under

the RELA. Accordingly, I concur only in the result without joining the opinion of

the court.

                                             Michael Massengale
                                             Justice

Panel consists of Justices Jennings, Bland, and Massengale.

Justice Massengale, concurring.

                                        17