Untitled Texas Attorney General Opinion ( 1957 )

7lkHE .ii”lTORNEY GENERAL
OF I’EXAS
AUSTIN~X~.TEZXAR
October 23, 1957
Honorable L. D. Ransom, Opinion No. WW-287
Administrator,
Texas Real Estate Commission, Re: Constructionand constitu-
Austin, Texas tlon,alltyof certain provis-
ions of the Real Estate
License Act of 195.5(Senate
Bill No. 209, Acts of the:54th
Legislature,Regular Session,
Chapter 383, page $36) which
defines 'RealEstate Broker"
and provides for licensing of
Dear Mr. Ransom2 such Brokers.
In your letter of September 24, 1957, you ask for an
opinion of thls office a8 to whether Lake Alaska, Inc. Is required
to obtain a license as a real estate broker by the above named
Act, which is codified as Article 6573a, Vernon's Civil Statutes.
You state that this corporationwas charteredunder the provisions
of Article 1302, Vernon's Civil Statutes, and that it acquired
title to a tract of land in Brazorla County In 1954, and there-
after subdividedthe land Into lots. It offers the lots for
sale to the public In a sales campaign via newspaper, radio and
television. Neither the corporationnor its salesmen hold
licenses as real estate brokers or salesmen.
It is not clear from the file and investigationreport
.whlchyou enclose, whether this property or other property ac-
quuiredby the Corporationin GalvestonCounty Is still owned by
it. However{,recent adv;rtlsementsshow that It is still adver-
tising both Lake Alaska and the Galveston County property
known as "Sea Isle".
The charter obtained by this corporation,on file with
the Secretary of State, discloses that It is formed "for the
purpose of . . . purchasing, selling and subdividingreal prop-
erty in towns, cities and villages in their suburbs not extend-
ing more than two miles beyond their limits" and for other pur-
poses specifiedby Subdivision47 of Article 1302, Vernon's
Civil Statutes.
The Real Estate License Act, hereafter referred to as
the Act, became effective June 1, 1955. It supplanted earlier
Acts of 1939 and 1949, the so-called "Real Estate Dealers
Honorable L. D. Ransom, Page 2 (Ww-287).
License Act". The definitionof "real estate broker" Is found
In Section 4. In subdivisions(1) and (2) of that Section, the
definition of broker conforms to the classical definitionof
broker, and contemplatesthat the real estate broker shall act
"for another" and shall be an Intermediaryor agent between two
principals.
Subdivision(3) of Section 4 reads as follows:
“(3) The term 'Real Estate Broker' shall also
include any person, partnership,association,or
corporationengaged in the business of buying, sell-
ing, exchanging,leasing, renting of property for
himself or Itself, or who holds himself, themselves
or Itself out as a bi;okerin real estate, or engages
in the activitiesof a Real Estate Broker as an occu-
pation, business or profession on either a full or
part-timebasis." (Emphasisours)
The first half of this Section gives rise to the ques-
tion of whether the Legislatureintended to bring within the
purview of the Act the owners of propert and, If so, under
what specific conditions? Subdivision (1 ) of Section 6 (relat-
lng to "exemptions")deals further with the subject. It reads:
"(4) Thls Act shall not apply to the sale,
lease or transfer of any property when such sale,
lease or transfer is made by the owner, or one of
the owners, or the attorney for said owner or owners,
or his or Its regular employees,unless the owner
or owners or the attornes for said owner or owners
is engaged wholly or in part in the business of
selling real estate." (Emphasisours)
No decision has yet been found construing these pro-
visions, nor have we been able to find statutes of other states
containingsimilar language.
Although the word "ownership"is not used in the first
half of subdivision(3) of Section 4, the phrase "for himself"
contains the necessary lmpllcatlonof ownership, so that this
Section must be construedas a legislativedeclaration that an
owner of property may neverthelessbe a broker, if such owner
Is "engagedIn the business of buying, selling, exchanging,
leasing, renting of property for himself or Itself". The mean-
ing of this language is rendered difficultby the fact that
neither the word "and" nor the word "or" Is used between the
various types of activitiesreferred to. It would certainly
seem insupportableto say that the Legislatureintended to re-
qujre the licensingof any individual or corporationwhich is
Honorable L. D. Ransom, Page~3 (WW-287).
engaged only in "the business of buying . . . of property for
himself or itself". However, In this case the corporationis
both buying and selling real estate. Therefore, It is our
opinion that the combined activity of buying and selling may
constitute "engagingin a business" within the meaning of the
Act.
Under the facts of this case thenowner was buying and
selling real estate, employing salesmen on a commissionbasis,
advertisingwidely the sale of real estate, and was expressly
incorporatedfor the very purpoSfeof "purchasing,selling, and
tubdividingreal property . . . Thus the corporationis
engaged in the business of bqlng, selling, . . . of property
for himself or Itself" and Is engaged in the activitiesof a
Real Estate Broker . : .v under Section 4, Subdivision (3) of
the Act. This waald be especially true If It had transferred
title to "Lake Alaska" to someone else and is continuing to
sell the lots. Indeed, this would render it a broker under
Subdivision (1) of Section 4.
Nor Is the subject corporationexempt, as an owner,
by Section 6, Subldlvlslon(4). The sales here are not made
by either an attorney or "regular employees",but by salesmen
on a commlsslonbasis, I. e. as Independentcontractors. Great
Western Drilling Co. v. Simmons, 302 S.W.2d 400 (Sup. Ctz7
horeover, the corporationis "engagedwholly or in part In the
business of selling real estate".
Whether or not a person or a corporationis In fact
"engagedIn the business of selling real estate" would depend
upon the activities of such a person or corporationIn each
particular case. The sworn admission contained In Lake Alaska's
corporate charter that it is in the business of purchasing and
selling real property, coupled with the practices above outlined
Is, In our opinion, conclusiveof this particular case.
Turning to the question of constitutionality,we find
that the purpose of the Real Estate License Act was to protect
the public from fraudulentmisrepresentationby sellers of real
estate through the registrationand regulationof those who deal
with the cubllc in real estate. 'We hold that the enactment of
the Real Estate Dealers' License Act, regulating those who may
make sales of real estate, was a proper exercise of the police
power of the State . . .' Gregory v. Roedonbeck, 141 Tex. 543,
174 S.W.2d 585 (1943). The fact that the traditionaldefini-
tion of "broker" has been expanded to Include owners under
certain circumstancesis not obnoxious to the due process clause
or any other constitutionalprovision. In holding the analogous
provision of the Texas Securities Act to be valid it was stated:
Honorable L. D, Ransom, Page 4 (WW-287).
"The Legislaturetranscendedno constitutional
llmitatlonin requiring owners of securities to
renister when the things they do place them In the
caEe ory of dealers." -v 121 S.W.2d
353 7Tex. Grim. 1938).
An owner of real estate proper1.ymay be prohibited
from selling It without a license where he is engaged In the
business of selling real estate. Therefore, In our opinion the
provisionsbringing owners of property wlthln the provisionsof
the Act under the specified conditionsare not unconstitutional.
SUMMARY
Lake Alaska, Inc. Is engaged In the
business of selling real estate, and Is
therefore subject to the licensing requlre-
ments of the Real Estate Licensing Act.
Sections 4 (3) and 6 (4) of the Real Estate
Licensing Act are constitutional.
Yours very truly,
WILL WILSON
Attorney General of Texas
c
BY a$dpti
Ralph R. Rash
RRR:jl:pf
APPROVED: Assistant
OPINION COMMITTEE
Geo. P. Blackburn, Chairman
Fred Werkenthln
Richard B. Stone
W. V. Geppert
J. Milton Richardson
C. K. Richards
Mrs. Marietta Payne
Wayland C. Rivers, Jr.