Coldwell Banker Residential Real Estate Services, Inc. v. Missouri Real Estate Com'n, 67204

Citation712 S.W.2d 666
Decision Date17 June 1986
Docket NumberNo. 67204,67204
PartiesCOLDWELL BANKER RESIDENTIAL REAL ESTATE SERVICES, INC., Plaintiff- Respondent/Cross-Appellant, v. MISSOURI REAL ESTATE COMMISSION, Defendant-Appellant/Cross-Respondent.
CourtUnited States State Supreme Court of Missouri

William L. Webster, Atty. Gen., Richard Baugh, Asst. Atty. Gen., Jefferson City, for defendant-appellant.

Laurence R. Tucker, Kansas City, for plaintiff-respondent.

BLACKMAR, Judge.

The plaintiff-respondent, Coldwell, is a real estate broker licensed in Missouri. It is a wholly-owned subsidiary of Sears, Roebuck & Co., (Sears), the well-known national merchandising chain.

In 1982 Coldwell developed a promotional sales program known as the "Sears Home Buyer's Savings Program" (Savings Program). Home buyers who purchase a home through Coldwell receive, after the closing of the transaction, a booklet of coupons entitling them to discounts on certain merchandise and services available at Sears. Coldwell advertises the availability of the program through radio and television shots, print advertising, mailings, telephone calls and window displays.

The coupon books are given only to home buyers who actually purchase homes through Coldwell. This circumstance raises a problem under § 339.100.2(12), RSMo 1978, reading as follows: (Emphasis supplied)

2. The commission may cause a complaint to be filed with the administrative hearing commission as provided by law when the commission believes there is a probability that a licensee has performed or attempted to perform any of the following acts:

* * *

* * *

(12) Using prizes, money, gifts or other valuable consideration as inducement to secure customers to purchase, lease, sell or list property when the awarding of such prizes, money, gifts or other valuable consideration is conditioned upon the purchase, lease, sale or listing; or soliciting, selling or offering for sale real property by offering free lots, or conducting lotteries or contests, or offering prizes for the purpose of influencing a purchaser or prospective purchaser of real property.

The appellant Commission adopted a regulation, 4 C.S.R. 250-8.070(5)(b), designed to implement the statute, in the following terms: (Emphasis supplied)

(5)(b) Conditional inducements. No licensee shall use prizes, money, gifts or other valuable consideration which is not related to the real or personal property being sold or which is not an inherent part of the finances of the transaction itself as inducements to secure customers to purchase, lease, sell or list property when the awarding of such items is conditioned upon the purchase, lease, sale or listing. This prohibition shall apply to the use of any such item as an inducement even if the item is being provided or paid for by another.

Coldwell brought an action for declaratory judgment against the Commission, arguing as follows: (1) the statute and regulation do not prohibit the Savings Program; (2) the statute and regulation violate the due process clauses of the Fourteenth Amendment to the Constitution of the United States and Article I, Sec. 10 of the Missouri Constitution; (3) the statute and regulation deprive the plaintiff of the equal protection of the laws, in violation of the Fourteenth Amendment and Article I, Sec. 2 of the Missouri Constitution; and (4) the statute and the regulation infringe Coldwell's right to free speech under the First Amendment and Article I, Sec. 8, of the Missouri Constitution. It sought injunctive relief against the enforcement of the statute and the regulation.

Both parties moved for summary judgment. The trial court found that the statute and regulation violated the due process clauses and entered an injunction against enforcement. The court rejected Coldwell's other claims. The Commission appealed from the injunctive order. Coldwell filed a purported cross appeal 1 because of the rejection of its equal protection and freedom of expression claims, but does not now argue that the program does not violate the statute. We reverse and remand with directions. 2

I.

The trial court improperly applied the due process clauses in holding the statute to be unconstitutional. The apparent purpose of the statute is to foreclose one method of competition to real estate brokers. Freedom of competition is the normal rule of our economy, but it is not a constitutional imperative. Legislation which substantially restricts competition, has been frequently upheld. The milk 3 and liquor 4 industries come readily to mind. The statute appears to have been adopted as a means of preserving the traditional methods of carrying on the real estate brokerage business. We know judicially that real estate brokers are normally retained and compensated by sellers. The essential function of the broker is to locate buyers. The legislature might feel that the broker who provided inducements contingent on purchasing could obtain undue advantage over fellow brokers in attracting purchasers, not related to efficiency of service rendered. This advantage arguably might drive the smaller and weaker brokers out of business, so as to operate as a long term detriment to the housing market. We do not have to agree as to this projection of possible effects of the legislation if they represent conclusions the legislature might possibly draw. It is not for us to determine whether the enactment is wise or not. We are obliged to sustain legislation which is utterly foolish, absent a valid constitutional challenge.

The power of our General Assembly is plenary. 5 It is not necessary to point to a specific constitutional provision in order to sustain a statute. There was a time when the Supreme Court of the United States struck down economic regulations with some regularity as violative of due process, 6 but that day is past. 7 The broadest recent claim as to the extent of substantive due process is found in the concurring opinion of Justice Harlan in Griswold v. Connecticut, 381 U.S. 479, 499, 85 S.Ct. 1678, 1689, 14 L.Ed.2d 510 (1965) in which he says that the test is whether the statute "violates basic values 'implicit in the concept of ordered liberty.' " 8 The statute before us shows no such vice.

Coldwell cites some of our decisions in an attempt to demonstrate that economic regulation is subject to rather close scrutiny and that the proponents of legislation must convince the courts that the regulation is reasonable and arguably effective. The cases do not support the conclusion sought to be drawn. The statute does not prevent Coldwell from conducting a business. It simply regulates the method. The real estate business may be regulated substantially. 9

Coldwell strongly emphasizes State ex rel. Kansas City v. Public Service Commission, 524 S.W.2d 855 (Mo. banc 1975), which reversed a holding that Kansas City must share the cost of the repair of railroad viaducts. That case did not involve the issues present here. Coldwell does not cite any recent case in which economic regulation has been struck down on due process grounds. 10 Substantive due process under our Constitution is no more restrictive on the legislature than the theory of substantive due process currently espoused by the United States Supreme Court, when economic regulation is in issue. 11 Any broader holding would invite the courts to substitute their views of the wisdom of legislation for those of the General Assembly.

The proper extent of judicial review of legislation under the due process clause was described by then Justice Stone in United States v. Carolene Products Co., 304 U.S. 144, 152, 58 S.Ct. 778, 783, 82 L.Ed. 1234 (1938), as follows:

[T]he existence of facts supporting the legislative judgment is to be presumed, for regulatory legislation affecting ordinary commercial transactions is not to be pronounced unconstitutional unless in the light of the facts made known or generally assumed it is of such a character as to preclude the assumption that it rests upon some rational basis within the knowledge and experience of the legislators. ...

In a later phase of the same case, Carolene Products Co. v. United States, 323 U.S. 18, 31, 65 S.Ct. 1, 8, 89 L.Ed. 15 (1944), the Court spoke through Justice Reed in this way:

When Congress exercises a delegated power such as that over interstate commerce, the methods which it employs to carry out its purposes are beyond attack without a clear and convincing showing that there is no rational basis for the legislation; that it is an arbitrary fiat. ...

The statute is not shown to be invalid on due process grounds.

II.

We agree with the trial judge on the points raised in Coldwell's cross appeal.

The equal protection contention is not substantial. The legislature may regulate the real estate industry without imposing similar regulations on other industries, or other kinds of brokers. 12 No substantial authority supports a contrary view.

Coldwell argues, essentially, that any "inducement" to do business is protected commercial speech, so that regulation must conform to the four-part test of Central Hudson Gas & Electric Corp. v. Public Service Commission, 447 U.S. 557, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980). This argument fails to distinguish between the inducement itself and the communication of the inducement. The statute says that things of value shall not be given to attract purchasers. It does not deal with the means of communication, and would apply even if there were no advertising and Coldwell relied purely on customers who had received the benefit to spread the word. The statute regulates conduct, not speech.

The dissent argues that our construction of the statute as just advanced is not warranted by the language, and that the savings program is contrary to law only if advertised. We disagree. We are obliged to resolve doubts in favor of the constitutionality of legislation and to construe a statute so as to uphold its validity, unless such...

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