Court Opinion

ID: 1079394
Source: CourtListenerOpinion
Date Created: 2013-10-09 20:32:08.451351+00
Date Added: 2024-06-11T15:46:09.599355
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                               AT NASHVILLE

TENNESSEE REAL ESTATE                 )
COMMISSION,                           )
                                      )
             Plaintiff/Appellee,      ) Davidson Chancery No. 96-3330-III
                                      )
VS.                                   ) Appeal No. 01A01-9707-CH-00320
                                      )
THOMAS HOWARD HAMILTON,
ET AL,
                                      )
                                      )
                                      )
                                                                     FILED
             Defendants/Appellants.   )
                                                                      May 29, 1998

         APPEAL FROM THE CHANCERY COURT OF DAVIDSON COUNTY W. Crowson
                                                        Cecil
                       AT NASHVILLE, TENNESSEE         Appellate Court Clerk
             THE HONORABLE ELLEN HOBBS LYLE, CHANCELLOR

ALFRED H. KNIGHT
WILLIS & KNIGHT
Nashville, Tennessee
Attorney for Appellants

JOHN KNOX WALKUP
ATTORNEY GENERAL & REPORTER
CHRISTINE LAPPS
ASSISTANT ATTORNEY GENERAL
Nashville, Tennessee
Attorney for Appellee

J. RUSSELL 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 CRAWFORD, P.J., W.S.

HOLLY KIRBY LILLARD, J.
       Defendants/Appellants, Thomas H. Hamilton and Jeanette Hamilton individually 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 promoting the overnight rental 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 judgment 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 was in the business of

managing and renting vacation chalets and cabins for numerous individual owners.

Thomas Hamilton, Jeanette’s husband, was an affiliate real estate broker working for

LeConte. At the time the plaintiff, Tennessee Real Estate Commission (“Commission”),

initiated this action against defendants, they were handling the property of at least sixty

people.

       The Commission first initiated proceedings against Thomas Hamilton in June of

1994. The charges levied against him emanated from his conduct while employed as a

broker at LeConte. After a hearing before the Commission, Thomas Hamilton’s real estate

license was revoked for violations of Tenn. Code Ann. § 62-12-312(b). Among the

violations cited by the Commission included             making willful and substantial

misrepresentations when marketing chalets, failing properly to document the receipt of

checks, failing properly to account for monies coming into LeConte’s possession, handling

all escrow and operating accounts without supervision by a principal broker and advertising

without the approval or direction of the principal broker.

       Due to Thomas Hamilton’s affiliation with LeConte, the Commission assessed

charges against LeConte that were closely connected to the charges levied against

Thomas Hamilton. The charges brought against LeConte were founded upon an audit

conducted by the Commission. The allegations against LeConte mirrored many of those

levied against Thomas Hamilton. They included making substantial and willful

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misrepresentations, using misleading or untruthful advertising, and failing to account for

funds coming into its possession. In resolution of these charges, LeConte entered an

Agreed Order with the Commission surrendering its firm license.

       Despite the revocation and surrendering of Thomas Hamilton’s and LeConte’s

licenses, LeConte continued with its business. Consequently, the Commission sought an

injunction against defendants and initiated the suit which 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 by requesting their clients to grant them powers of attorney. 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
              necessary to care for, manage, exploit and otherwise oversee
              Grantor’s real property located at . . . in Sevier County,
              Tennessee, (the “Property”) including, but not by way of
              limitation, the following:

               (a) To exercise, do, or perform any act, right, power, duty, or
               obligation whatsoever the Grantor now has or may acquire the
               legal right, power, or capacity to exercise, do, or perform in
               connection with, arising out of, or relating to ownership,
               management or use of the Property with a view towards
               generating income from the use of the Property. My attorney
               is specifically authorized and directed to make the property
               available to and to rent the 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 the Property.

               (b) To enter into and upon the Property and to maintain, let,
               and manage same or any part thereof.

       Defendants have relied on these documents as their defense to the Commission’s

assertion that they were operating a business in violation of state law. Defendants assert

that because they had acquired these powers of attorneys from the individual owners, they

were now exempt from licensure under Tenn. Code Ann. § 62-13-104(2).

       The Chancellor disagreed and granted the injunction making the following findings

of fact in pertinent part:

                                              3
              (4) The business or vocation of LeConte is overseeing the real
              property interest of principals who own vacation and resort
              chalets and cottages in and near Gatlinburg, 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 services, LeConte
              receives a fee.

              (6) The power of attorney form reserves to LeConte full
              authority “to do all things necessary to care for, manage,
              exploit and otherwise oversee Guarantor’s real property”
              including “any act . . . relating to ownership, management or
              use of the Property with a view towards generating income
              from use of the Property.”

              (7) The form also contains a provision on compensation for
              LeConte’s services. The form provides, “My attorney in fact,
              and any successors, shall be compensated for services
              rendered at a rate equal to 40% of the gross receipts that my
              attorney generates from the use of the property.”

Consequently, the Chancellor ordered the defendants not to engage in any of the following

activities:

              1. Supervising, directing, managing, owning or controlling any
              licensed real estate firm in the State of Tennessee without a
              license.

              2. Supervising, directing, managing, owning or controlling any
              non-licensed real estate firm in the State of Tennessee.

              3. Soliciting, representing, or promoting the sale, exchange,
              purchase, lease or option to buy or sell any real property for a
              fee, commission, finders fee or other valuable consideration in
              the State of Tennessee.

              4. The undertaking by or on behalf of the owner or owners of
              lots or other parcels of real estate, at a salary, fee,
              commission, 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. Engaging in the business of charging 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 estate either through its listing in a publication
              issued primarily for such purpose, or for a referral of
              information concerning such real estate to brokers or both.

              6. The solicitation, representation, or promotion of the
              overnight rental of chalets or cabins and the undertaking to
              rent, license the occupancy of, or lease such chalets or cabins.

              7. Engaging in any activities that fall within the definition 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 permanently enjoined from performing or
              engaging in any of the activities identified in paragraphs 1

                                              4
              through 7, even if they purport to do so for a fee under the
              authority of a power-of-attorney.

This appeal ensued. The essential issues presented to this court for review are as follows:

              1. Are the defendants, whose business is managing, renting,
              and collecting rents for vacation chalets and cabins for a fee
              on behalf of private owners, required to be licensed under the
              Tennessee Real Estate Broker License Act, Tenn. Code Ann.
              § 62-13-101 et seq.?

              2. 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
              defendants’ claim (a) that they are entitled to an exemption
              from the Licensing Act under Tenn. Code Ann. § 62-13-104(2)
              and (b) that they can, therefore, continue their real estate
              business pursuant to the authority given them in the powers of
              attorney executed by their clients?

       Since we are reviewing 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, required to be licensed under the Tennessee Real
          Estate Broker License Act, Tenn. Code Ann. § 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 other valuable consideration, or with the
              intent or expectation of receiving the same from another,
              solicits, negotiates or attempts to solicit or negotiate the listing,
              sale, purchase, exchange, lease or option to buy, sell, rent or
              exchange for any real estate or of the improvements thereon
              or any time-share interval as defined in the Tennessee
              Time-Share Act, compiled in title 66, chapter 32, part 1,
              collects rents or attempts to collect rents, auctions or offers to
              auction, or who advertises or holds out as engaged in any of
              the foregoing.

       The language within of the “Special Power of Attorney” form filled out by property

owners states in pertinent part:

              (a) . . . [m]y attorney is specifically authorized and directed to
              make property available to and to rent the Property to third

                                               5
                 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 the Property.

                 5.    COMPENSATION.           My attorney in fact, and any
                 successors, shall be compensated for services rendered at a
                 rate equal to forty percent (40%) of the gross receipts that my
                 attorney generates from the use of the Property.

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 did,

in fact, collect rents from tenants of the chalets and/or cabins and received compensation

of 40% of the gross receipts that the defendants generated from the use of said chalets

and cabins. As such, defendants, for a fee, collected or attempted to collect rents and are

thereby conducting themselves in a manner subject to licensing under the Tennessee Real

Estate Broker Licensing Act. Accordingly, 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 defendants’ claim (a) that they are entitled to an exemption from
  the Licensing Act under Tenn. Code Ann. § 62-13-104(2) and (b) that they can,
      therefore, continue their real estate business pursuant to the authority
         given them in the powers of attorney executed by their clients?

        Defendants contend that their conduct is exempt from the licensing requirements

of the Tennessee Real Estate Broker License Act. Specifically, defendants claim that they

are exempt from the act’s licensing requirement 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 licensing

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 and recorded
                 power of attorney from the owner or lessor;

        1
           W e note that both parties discuss at length whether defendants’ efforts to “rent” chalets and cabins
fell within the m eaning o f Tenn . Code A nn. § 62-13-102(3)(A). In light 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
       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 real estate brokers established that the legislature viewed

real estate brokers and attorneys-in-fact as distinguishable. She noted that the key to

ascertaining whether the defendants’ activities fall within the confines of the attorney-in-fact

exemption is discerning the distinguishing characteristics created by the legislature in order

to differentiate between a real estate broker and an attorney-in-fact.

       Defendants insist that the Chancellor’s discernment of the differences between a

real estate broker and an attorney-in-fact under Tenn. Code Ann. § 62-13-101 et seq. is

“an unwarranted judicial revision of the Act.” We disagree. In construing a statute, it is the

duty of the court to give every word and phrase meaning. United Canners, Inc. v. King,

696 S.W.2d 525 (Tenn.1985). We must construe the statute so that no part is inoperative,

superfluous, void or insignificant.     Tidwell v. Collins, 522 S.W.2d 674 (Tenn.1975).

"Statutes are not to be construed so strictly as to defeat the obvious intention of the

legislature... [q]uestions involving statutory construction 'must be answered in light of

reason, having in mind the object of the statute, and the mischief 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 estate brokers evinces that the legislature viewed real estate

brokers and attorneys-in-fact as distinguishable. “W here, as here, the parties derive

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 instant case, it is imperative to look at the structure of other similar

provisions within the same statutory scheme in interpreting the meaning to be derived from

the attorney-in-fact exemption. Tenn. Code Ann. § 62-13-104(6) is particularly helpful in

this fashion.

                (6) A corporation, foreign or domestic, acting through an officer
                duly authorized to engage in such real estate transaction

                                               7
              where the transaction occurs as an incident to the
              management, lease, sale or other disposition of real estate
              owned by the corporation; however, this exemption does not
              apply to a person who performs an act described in § 62-13-
              102(3)(A) either as a vocation or for compensation, if the
              amount of the compensation is dependent upon, or directly
              related to, the value of the real estate with respect to which the
              act is performed.

This exemption is expressly premised on the understanding that such exemption does not

exist when persons are performing such functions as their vocation or when such actions

are performed for compensation. Turning to the definition of “broker” in Tenn. Code Ann.

§ 62-13-102(3)(A), the first sentence of this definition commences by stating: “Broker

means any person who for a fee...” With this in mind, it is this court’s opinion that the

legislature did not intend to exempt those attorneys-in-fact who perform their duties as their

vocation and/or for compensation from the provisions of the Licensing Act.

       This conclusion is reinforced by the legislative history to this exemption. When an

amendment to this particular statute was being considered, the House Commerce

Committee discussed the exemption as follows:

              Shirley: If I was the, if I had the power of attorney, could I
              charge them $500 and not have a license?

              Buck: I would say that you would not.

              Shirley: Now, in, in effect we’ve abolished the real estate
              license then.

              Buck: No, because if you, if you do charge them a fee, you’re
              not exempt. If you don’t charge them a fee, you would be
              exempt. And that’s the same way the law is now.

House Commerce Committee, February 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 pertained to whether one was

undertaking the actions enumerated in Tenn. Code Ann. § 62-13-102(3)(A) as a vocation

or for compensation as opposed to one who was undertaking said actions ministerially as

                                              8
an agent for the owners. We agree.

       The literal language of the statute cannot be harmonized with the interpretation

advanced by the defendants.        In interpreting a statute, legislative intent must be

determined from the plain language it contains, read in the context of the entire statute,

without any forced or subtle construction which would extend or limit its meaning. See

Metropolitan Government of Nashville, etc., v. Motel Systems, Inc., 525 S.W.2d 840, 841

(Tenn. 1975); National Gas Distributors, Inc. v. State of Tennessee, 804 S.W.2d 66, 67

(Tenn. 1991). It seems abundantly clear that the legislature did not intend for the attorney-

in-fact exemption to be a loophole around the unequivocal requirements of the Licensing

Act. Without a distinction between these two terms, the attorney-in-fact exemption would

all but swallow the rule. 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 power of attorney,”

then the licensing requirements of the Act would be a farce and nothing more than a

conduit allowing persons to obtain the privileges of maintaining a real estate practice

without the proper licensing. Anyone could, in fact, legally bypass the licensing

requirements of the Act by simply undertaking to duly execute and record a power of

attorney.   It would be entirely irrational for persons to bind themselves to the

responsibilities, duties, sanctions, and castigations of the Licensing Act when they can

practice the business of real estate by merely procuring a “duly executed and recorded

power of attorney.” This is not what the legislature 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 receipts that the defendants generate from the use of the chalets and/or

cabins. Indeed, defendants’ acts as attorneys-in-fact are not ministerial in nature but are,

in fact, the mainstay of their livelihood. Therefore, defendants 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).

                                             9
      Accordingly, we affirm the judgment of the trial court. Costs are assessed against

defendants, for which execution may issue if necessary.

                                                            HIGHERS, J.

CONCUR:

CRAWFORD, P.J., W.S.

LILLARD, J.

                                          10