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describing purpose of RELA as protection for the public in its dealings with real estate agents
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No. 01–12–00563–CV.
2013-07-9
Brian SHANKLIN and Todd Rimmer, Appellants v. BASSOE OFFSHORE (USA) INC., Mike Smith, and Jonathan Fairbanks, Appellees.
Martin A. Shellist, Shellist Lazarz Slobin L.L.P., Todd J. Zucker, E. Michelle Bohreer, Bohreer & Zucker LLP, Houston, TX, for Appellants. Stacy R. Obenhaus, James G. Munisteri, Gardere Wynne Sewell L.L.P., Houston, TX, for Appellees.
Martin A. Shellist, Shellist Lazarz Slobin L.L.P., Todd J. Zucker, E. Michelle Bohreer, Bohreer & Zucker LLP, Houston, TX, for Appellants. Stacy R. Obenhaus, James G. Munisteri, Gardere Wynne Sewell L.L.P., Houston, TX, for Appellees.
Panel consists of Justices JENNINGS, BLAND, and MASSENGALE.
OPINION
TERRY JENNINGS, Justice.
Appellants, Brian Shanklin and Todd Rimmer, challenge the trial court's partial summary judgment rendered against them in their suit against appellees, Bassoe Offshore (USA) Inc. (“Bassoe”), Mike Smith, and Jonathan Fairbanks, for breach of contract, fraud, breach of fiduciary duty, misappropriation of trade secrets, tortious interference, and violations of the Texas Real Estate License Act (“RELA”).
In three issues, Shanklin and Rimmer contend that the trial court erred in granting Bassoe partial summary judgment on their RELA claim on the ground that they did not have standing to assert the claim.
SeeTex. Occ.Code Ann. §§ 1101.01–1101.806 (Vernon 2012).
We affirm.
Background
In their second amended petition, Shanklin and Rimmer allege that in April 2006, Shanklin received a presentation from Pride International (“Pride”), wherein Pride announced that it would be willing to sell certain “operational and idle offshore rigs in the United States Gulf of Mexico, although Pride was not actively marketing those assets.” Shanklin and Rimmer were interested in the assets and through October 2006 conducted due diligence on Pride's rigs, consisting of “12 platform drilling and workover rigs and related equipment.” Shanklin and Rimmer intended to form a new company, Contender Offshore Services (“Contender”), and to raise “up to $60 million in capital” to acquire Pride's rigs in the Gulf of Mexico.
Shanklin and Rimmer contacted Bassoe representatives Fairbanks and Smith regarding whether they would be able to assist in their negotiations with Pride. Fairbanks and Smith represented that Bassoe was “interested in [the] engagement,” and they agreed that any information shared with them by Shanklin and Rimmer “would be held in the strictest of confidence.” Eventually, Bassoe represented that it was willing to raise the capital for the purchase and expected a broker's fee of two to three percent of the total transaction price, but Bassoe requested an equity position in Contender and a seat on Contender's board of directors. Shanklin and Rimmer reached an agreement with Bassoe to “pursue the acquisition on an exclusive basis.” Thus, Shanklin and Rimmer “terminated their discussions with other investment bankers and lenders and dealt exclusively with Bassoe.”
In late January 2007, Smith notified Pride's director of business planning, Chris Weber, that Bassoe was interested in purchasing the Gulf of Mexico rigs. From February 14 to February 19, 2007, Smith collaborated with Shanklin and Rimmer to prepare an offer to Pride, but on February 22, 2007, Smith informed Shanklin and Rimmer that Weber was “busier than before” and “did not expect the negotiations to go rapidly.” From March to September 2007, Smith repeatedly told Shanklin that “he had communicated the Contender proposals to Pride's representatives” but “Pride was busy on unrelated deals,” causing delays in the negotiation. However, in early September, Shanklin asked Smith several times about a rumor that Pride was considering an offer from a third party, Blake International, but Smith did not respond.
On May 27, 2008, Pride completed the sale of the Gulf of Mexico rigs to Blake International. During a deposition, one of Bassoe's lawyers admitted that Bassoe had acted as a broker for Blake International in its transaction with Pride. Shanklin and Rimmer asserted that Bassoe, “while purporting to represent” them, “was actively promoting an acquisition proposal for the same Pride assets on behalf of one or more other clients, ultimately doing so on behalf of Blake International.” They further asserted that Bassoe “affirmatively represented that Pride was too busy” to negotiate so as to “induce” Shanklin and Rimmer “not to pursue negotiations with Pride independently.”
Shanklin and Rimmer brought several breach-of-contract and fraud claims, in addition to a claim under RELA. Specifically regarding their claim under RELA, Shanklin and Rimmer assert that “Bassoe, Smith, and/or Fairbanks acted as brokers in connection with their engagement.” They also assert that Fairbanks, the president of Bassoe at the time of the negotiations, “admitted that neither Bassoe nor any of its principles were licensed brokers in Texas,” but that Bassoe “acted as a broker in a transaction that involved real estate.” SeeTex. Occ.Code Ann. § 1101.754(a) (Vernon 2012). They specifically seek “an amount of not less than $1,320,000.00 and not more than $3,960,000” for the violation of RELA.
In their summary-judgment motion, Bassoe, Smith, and Fairbanks asserted that from 2006 to 2007, they presented Shanklin and Rimmer's proposals to Pride for the purchase of the Gulf of Mexico rigs. On February 20, 2007, Bassoe presented an offer to Pride, but the offer “expired by its own terms” on February 28, 2008. Pride also “confirmed it did not wish to sell rigs” to Shanklin and Rimmer. Bassoe presented Pride an offer from Blake International six months later, which was eventually accepted, and Bassoe received a commission of two percent of the transaction price. Bassoe, Smith, and Fairbanks argued that Shanklin and Rimmer's claims for fraud lacked merit because any obligations to Shanklin and Rimmer expired along with the final bid, no evidence existed of a fiduciary relationship, Bassoe provided no valuable services, Bassoe did not reveal any confidential information, and Shanklin and Rimmer's proposed damages “amount[ ] to nothing more than rank speculation.” Specifically regarding their claim under RELA, Bassoe argued:
(f) Plaintiffs lack standing to assert a private claim under the Texas Real Estate Licensing Act. Plaintiffs are not “aggrieved parties” within the meaning of the Act because Plaintiffs cannot establish that they ever paid Bassoe any commission or consideration for their services, as required under the act[.]
In their response to Bassoe's summary-judgment motion, Shanklin and Rimmer asserted that they presented evidence precluding summary judgment on their claims for breach of contract, fraud, breach of fiduciary duty, tortious interference, and misappropriation of trade secrets. Regarding their claim under RELA, Shanklin and Rimmer asserted that Bassoe, through Smith and Fairbanks, acted as their brokers despite the fact that Smith and Fairbanks were not licensed brokers in Texas. Shanklin and Rimmer attached to their motion the depositions of Smith and Fairbanks, wherein both testified that they were not licensed as real estate brokers.
After a hearing, the trial court granted Bassoe summary judgment on Shanklin and Rimmer's claim for fraudulent inducement and its claim under RELA, but it denied Bassoe summary judgment on the remaining claims. The trial court then conducted a bench trial on Shanklin and Rimmer's remaining claims, and it ordered that they recover $2000 from Bassoe. After Shanklin and Rimmer asked the trial court to make findings of fact and conclusions of law, the trial court made its findings and conclusions and later signed an amended final judgment, ordering that Shanklin and Rimmer take nothing from Bassoe. The trial court found that:
12. Shanklin spent a considerable amount of time developing a Memorandum outlining a plan to acquire the rigs, to create the management team, and to create the financial projections. This Memorandum was shared with various individuals. None of the individuals who received this Memorandum were asked to sign a Non–Disclosure Agreement or were explicitly asked to keep this information confidential.
...
21. [Bassoe] presented two offers on behalf of Shanklin and Rimmer, under the name Newco, dated February 15, 2007, and February 20, 2007, respectively.
22. Shanklin and Rimmer did not have the money or financing to close the deal with Pride at the time of the February 20, 2007, offer.
23. The February 20, 2007, offer was never accepted and expired on or about the end of February 2007. No further offers were made on the Pride Assets by Shanklin and Rimmer.
24. Shanklin and Rimmer never made another offer, and Pride never tendered a counter-offer.
25. Shanklin and Rimmer's entire business plan was predicated on the acquisition of the Pride Assets.
26. After the expiration of the offer, Smith, Fairbanks, and Bassoe began working with other interested purchasers of Pride's assets.
27. Shanklin and Rimmer remained in communication with Smith, Fairbanks, and Bassoe regarding their expired offer.
28. In July, Bassoe began negotiating with Pride on behalf of Michael Blake for the same platform rigs sought by [Shanklin and Rimmer]. Fairbanks and Blake had a long relationship.
29. Smith's handwritten notes around the time of these discussions (Exhibit 65) clearly establish that he knew exactly what Pride wanted from [Shanklin and Rimmer] from day one: “Finances in place.”
30. The notes also reflect that Smith was clearly aware of [Shanklin and Rimmer's] continued interest in the Pride assets.
...
35. Blake closed the transaction and acquired the 12 platform rigs and related assets for $66 million in May 2008.
36. Bassoe, Smith and Fairbanks received a commission of $1.32 million on the sale.
...
38. A relationship existed between Shanklin and Rimmer, on the one hand, and Bassoe, Fairbanks and Smith, on the other hand. This relationship began early November 2006, or at the very latest February 15, 2007, and continued until February 28, 2007.
39. Shanklin and Rimmer did not calculate their lost profits with reasonable certainty.
40. A preponderance of the evidence does not support the allegation that Shanklin and Rimmer could have or would have concluded their purchases of the Pride assets.
41. Shanklin and Rimmer's business model was predicated on obtaining the financing/money for the project after Pride committed to Shanklin and Rimmer. Pride was not going to approach the sale in this manner.
The trial court concluded that:
1. The duties that existed between [Shanklin and Rimmer] and Bassoe in this case failed to exist after the expiration of [Shanklin and Rimmer's] February 20, 2007, offer to Pride.
2. Further, [Shanklin and Rimmer's] damage model was too speculative.
Standard of Review
To prevail on a summary-judgment motion, a movant has the burden of proving that it is entitled to judgment as a matter of law and there is no genuine issue of material fact. Tex.R. Civ. P. 166a(c); Cathey v. Booth, 900 S.W.2d 339, 341 (Tex.1995). When a defendant moves for summary judgment, it must either (1) disprove at least one essential element of the plaintiff's cause of action or (2) plead and conclusively establish each essential element of its affirmative defense, thereby defeating the plaintiff's cause of action. Cathey, 900 S.W.2d at 341. When deciding whether there is a disputed, material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548–49 (Tex.1985). Every reasonable inference must be indulged in favor of the non-movant and any doubts must be resolved in his favor. Id. at 549.
To prevail on a no-evidence summary-judgment motion, a movant must allege that there is no evidence of an essential element of the adverse party's cause of action or affirmative defense. Tex.R. Civ. P. 166a(i); Fort Worth Osteopathic Hosp., Inc. v. Reese, 148 S.W.3d 94, 99 (Tex.2004). We review a no-evidence summary judgment under the same legal-sufficiency standard used to review a directed verdict. Gen. Mills Rests., Inc. v. Tex. Wings, Inc., 12 S.W.3d 827, 832–33 (Tex.App.-Dallas 2000, no pet.). Although the non-movant is not required to marshal his proof, he must present evidence that raises a genuine issue of material fact on each of the challenged elements. Tex.R. Civ. P. 166a(i); see Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 600 (Tex.2004). A no-evidence summary-judgment motion may not be granted if the non-movant brings forth more than a scintilla of evidence to raise a genuine issue of material fact on the challenged elements. See Ridgway, 135 S.W.3d at 600. More than a scintilla of evidence exists when the evidence “rises to a level that would enable reasonable and fair-minded people to differ in their conclusions.” Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex.1997). When reviewing a no-evidence summary-judgment motion, we assume that all evidence favorable to the non-movant is true and indulge every reasonable inference and resolve all doubts in favor of the non-movant. Spradlin v. State, 100 S.W.3d 372, 377 (Tex.App.-Houston [1st Dist.] 2002, no pet.).
Standing
In three issues, Shanklin and Rimmer contend that the trial court erred in granting Bassoe summary judgment on their RELA claim because they did have standing to pursue a private cause of action under RELA as an “aggrieved party.” SeeTex. Occ.Code Ann. § 1101.754 (Vernon 2012).
Standing focuses on the question of who may bring an action. See Patterson v. Planned Parenthood of Houston and Southeast Tex., Inc., 971 S.W.2d 439, 442 (Tex.1998). Standing is a component of subject-matter jurisdiction, and subject-matter jurisdiction is essential to the authority of a court to decide a case. Tex. Ass'n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 443 (Tex.1993); see also DaimlerChrysler Corp. v. Inman, 252 S.W.3d 299, 304 (Tex.2008) (“A court has no jurisdiction over a claim made by a plaintiff without standing to assert it.”). We review standing under the same standard by which we review subject-matter jurisdiction generally. Tex. Air Control Bd., 852 S.W.2d at 446. Whether the trial court has subject-matter jurisdiction is a question of law that we review de novo. Tex. Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex.2004).
We review the trial court's interpretation of a statute de novo. See Johnson v. City of Fort Worth, 774 S.W.2d 653, 655–56 (Tex.1989). In construing a statute, our objective is to determine and give effect to the Legislature's intent. See Nat'l Liab. & Fire Ins. Co. v. Allen, 15 S.W.3d 525, 527 (Tex.2000).
RELA defines a “broker” as “a person who, in exchange for a commission or other valuable consideration ... negotiates or attempts to negotiate the listing, sale, exchange, purchase or lease of real estate[.]” Tex. Occ.Code Ann. § 1101.002(1)(A)(iii) (Vernon 2012). Unless a person holds a license issued under RELA, the person may not “act as or represent that the person is a broker or salesperson.” Id. § 1101.351(a) (Vernon 2012). The statute provides for a private cause of action for certain violations by a broker as follows:
(a) A person who receives a commission or other consideration as a result of acting as a broker or salesperson without holding a license or certificate of registration under this chapter 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.
(b) The aggrieved person may file suit to recover a penalty under this section.
Id.§ 1101.754. The statute does not provide a definition of an “aggrieved person.”
The Tenth Court of Appeals addressed the issue of who qualifies as an “aggrieved person” under a predecessor statute in Holloman v. Denson, 640 S.W.2d 417 (Tex.App.-Waco 1982, writ ref'd n.r.e.). In Holloman, Joe and Bobbie Denson contacted Holloman for assistance in purchasing a home. Id. at 419. Holloman then arranged for the Densons to purchase a home, but after the sale was made, the Densons opted to buy a home owned by Behringer instead. Id. The Densons agreed to purchase Behringer's home as well and then sell the home they had previously purchased. Id. Holloman acted as broker both for Behringer in his sale to the Densons and for the Densons in their subsequent sale of the first house, receiving a commission for both sales. Id. The Densons sought to recover the commissions paid for both sales. Id.
The Densons sued under a predecessor statute to section 1101.754, which stated that a person who acted as a real estate agent without first obtaining a license and collected a commission was liable for a penalty up to three times the amount of the commission, “which penalty may be recovered ... by an aggrieved person.” Id. at 419–20. The court held that the Densons were not aggrieved persons as to the sale of the Behringer home because the Densons did not pay Holloman that commission. Id. at 420. However, the court further held that the Densons were aggrieved persons as to the commission they paid Holloman for the sale of their home, regardless of whether Holloman's actual services were deficient. Id. The court explained:
A person hiring a real estate agent is seeking to employ services of an expert who has been tested and found to be such, and, if unknown to him, he gets a person who has not been tested and found to be an expert, but is charged the full commission rate, that person has suffered a loss since he did not get what he was paying for.
Id.; see also Ragnell v. Town of Addison, No. Civ.A.3:03–CV–0379–K, 2004 WL 345491, at *3 (N.D.Tex. Feb. 24, 2004) (relying on Holloman and dismissing plaintiff's claims under same statute because plaintiff “did not pay any of the alleged illegal commissions”).
More recently, the Fourteenth Court of Appeals addressed a similar issue with respect to mortgage brokers in Dohalick v. Moody National Bank, 375 S.W.3d 537 (Tex.App.-Houston 2012, no pet.). In Dohalick, the defendant, Jerry Dohalick, contacted the plaintiff, Moody National Bank, in order to procure financing for Savoy Custom Homes (“Savoy”), a business that constructed houses. Id. at 538–39. Dohalick ultimately procured the loans, but he allegedly gave the bank several false and misleading statements in the process. Id. at 539. Dohalick also allegedly engaged in check kiting with Savoy's checking account with the bank. Id.
The bank brought several claims of fraud against Dohalick, in addition to a private cause of action under the Texas Finance Code, which provides,
A person who received 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 ... is liable for 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.... An aggrieved person may recover damages under this subsection.
Id. at 540–41 (citing Act of May 25, 1999, 76th Leg., R.S., ch. 1254, § 2, 1999 Tex. Gen. Laws 4334, 4346 (current version at Tex. Fin.Code Ann. § 156.406(b) (Vernon 2012)). The court noted that, under the statute, an aggrieved person's liability was calculated based on the commission the mortgage broker received “because of or in consequence” of the person acting as a mortgage broker without a license. Id. at 541. Relying in part on Holloman, the court concluded that an “aggrieved person” under the statute “must have paid all or part of the fee or profit to the unlicensed mortgage broker or loan officer.” Id. at 541–42.
Here, it is undisputed that Shanklin and Rimmer did not pay Bassoe any commission from the sale of the Pride oil rigs; rather, they seek only the commission paid to Bassoe by Blake International for its purchase of the rigs. Relying on Holloman and Dohalick, Bassoe argues that a plaintiff must have paid a defendant their commission to have standing to recover a commission as an “aggrieved person” and pursue a private cause of action under section 1101.745.
We agree. The statute penalizes a person for receiving a commission “as a result of” acting as a broker without holding a license. Tex. Occ.Code Ann. § 1101.754(a). And an aggrieved person can recover a penalty from the person in an amount up to three times the amount of the money received by the person. Id. Thus, the penalty the aggrieved person can recover is based upon the commission received by the person. Because a claimant is aggrieved by the specific conduct of the person receiving a commission without having a license, we conclude that the aggrieved person must have paid that commission to have standing to pursue a private cause of action under RELA. See Dohalick, 375 S.W.3d at 541–42 (reaching same conclusion under Texas Finance Code); Holloman, 640 S.W.2d at 420 (“[T]here is no way the Densons could be found to be the aggrieved persons where the commission was paid by Behringer to Holloman[.] Behringer is the aggrieved person.”). This comports with the apparent purpose of section 1101.745 to protect those who, “seeking to employ [the] services of an expert,” have paid a full commission, but not received the services of a licensed expert. See Holloman, 640 S.W.2d at 420.
Shanklin and Rimmer attempt to distinguish Dohalick, arguing that, under section 1101.745, an aggrieved person is entitled to recover a “penalty,” while the statute at issue in Dohalick provided that an aggrieved person be entitled to recover “damages.” Regardless, under section 1101.745, the statute awards a penalty only to those “aggrieved” due to the payment of a commission to a person without a license.
Finally, Shanklin and Rimmer argue that Fairbanks and Smith are liable under RELA because they are fiduciaries under Texas law. See Fed. Deposit Ins. Corp. v. Golden Imports, Inc., 859 S.W.2d 635, 643–44 (Tex.App.-Houston [1st Dist.] 1993, no pet.). However, Shanklin and Rimmer have already brought a common law claim for breach of fiduciary duty, and this claim was fully litigated in a bench trial after partial summary judgment was granted on their RELA claim. After the bench trial, the trial court ordered that Shanklin and Rimmer take nothing on their claim for breach of a fiduciary duty. Thus, any error in granting Bassoe partial summary judgment because of its status as a fiduciary is rendered harmless by the trial court's subsequent findings. See Progressive County Mut. Ins. Co. v. Boyd, 177 S.W.3d 919, 921 (Tex.2005) (Tex.2005) (holding that trial court's error in granting defendants summary judgment without notice to plaintiff was rendered harmless by subsequent jury findings that negated plaintiff's claims); Quality Infusion Care, Inc. v. Health Care Serv. Corp., 224 S.W.3d 369, 389 (Tex.App.-Houston [1st Dist.] 2006, no pet.) (holding that any error in granting summary judgment on tort claims rendered harmless by trial court's findings, after a bench trial, that negated the claims). The trial court's bench findings preclude reversal of the partial summary judgment on that basis.
We conclude that Shanklin and Rimmer were not “aggrieved persons” under section 1101.754 and, thus, did not have standing to bring a private cause of action under the statute. And 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. Accordingly, we hold that the trial court did not err in granting Bassoe, Smith, and Fairbanks summary judgment on Shanklin and Rimmer's RELA claim.
We overrule Shanklin and Rimmer's first, second, and third issues.
Conclusion
We affirm the judgment of the trial court. Justice MASSENGALE, concurring.
MICHAEL MASSENGALE, Justice, concurring.
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. SeeTex. 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] 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 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.
These provisions serve to 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.
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 $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).
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/History OfRELA.pdf. To that end, the rules adopted by the TREC and codified in Title 22, Part 23 of the 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 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/ consumer information form. pdf; see alsoTex. 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).
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:
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).
“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 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 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 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 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.
The question presented by this 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.
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).
See alsoTex. 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.”).
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 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,
and thus also supports a broader scope of potential liability for violating the RELA.
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.”).
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.
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”).
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.
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.
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 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.