Gaston Bd. of Realtors, Inc. v. Harrison, 8227SC642

• Decision Date: 20 September 1983
• Docket Number: No. 8227SC642,8227SC642
• Citation: 64 N.C.App. 29,306 S.E.2d 809
• Parties: GASTON BOARD OF REALTORS, INC. a North Carolina corporation v. Charles A. HARRISON.
• Court: North Carolina Court of Appeals

Page 809

306 S.E.2d 809

64 N.C.App. 29

GASTON BOARD OF REALTORS, INC. a North Carolina corporation v. Charles A. HARRISON.

No. 8227SC642.

Court of Appeals of North Carolina.

Sept. 20, 1983.

Mullen, Holland & Cooper by Graham C. Mullen and William E. Moore, Jr., Gastonia, for plaintiff-appellee.

Lloyd T. Kelso, Gastonia, for defendant-appellant.

Atty. Gen. Rufus R. Edmisten by Asst. Atty. Gen. Harry H. Harkins, Jr. and Thomas R. Miller, Raleigh, for North Carolina Real Estate Licensing Bd., amicus curiae.

Smith, Moore, Smith, Schell & Hunter by Richmond G. Bernhardt, Jr. and Peter J. Covington, Greensboro, for North Carolina Ass'n of Realtors, Inc., amicus curiae.

PHILLIPS, Judge.

Defendant first contends the trial court should have dismissed the declaratory judgment action due to lack of a case or controversy between the parties. Whether an actual controversy exists must be determined on the facts of each case, but reported decisions do provide some guidelines. Declaratory judgment actions must focus on real and present problems; they must adjudicate the rights, status, or other legal relations of antagonistic litigants. Adams v. N.C. Dept. of N.E.R. and Everett v. N.C. Dept. of N.E.R., 295 N.C. 683, 249 S.E.2d 402 (1978). Additionally, "it is necessary that the Courts be convinced that the litigation appears to be unavoidable." (Citation omitted). North Carolina Consumers Power, Inc. v. Duke Power Co., 285 N.C. 434, 450, 206 S.E.2d 178, 189 (1974).

The controversy in the present case is whether expulsion proceedings have been conducted against defendant without violating his legal rights. The controversy is real and present because (1) plaintiff intends to expel defendant as soon as the legality of the hearings is established; and (2) defendant stated in a letter to plaintiff that expulsion would deprive him of his rights under the law, and that he would take action to protect himself. The present declaratory judgment action clearly adjudicates the rights of antagonistic litigants. Defendant's threat to take action is substantial evidence that litigation appeared unavoidable. Consequently, we hold the declaratory judgment action did involve an actual controversy, and the trial court correctly denied defendant's motion to dismiss.

The defendant's contention that the plaintiff's case has been pre-empted by State action in creating the North Carolina Real Estate Licensing Board, which has taken no action against him, is likewise without merit. The lack of action by the North Carolina Real Estate Licensing Board relates to defendant's qualifications for a state license and is distinct from the right of a voluntary association to regulate conduct of its members. There is no language in the real estate licensing statutes that can be construed as pre-empting reasonable self-regulation by private real estate boards. G.S. 93A-1 et seq.

Defendant next contends the trial court erred in denying defendant's Rule 12(b)(6) motion to dismiss without making findings of fact. The order denying defendant's motion to dismiss shows that the trial court considered matters outside the pleadings. Consequently, "the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56...." Rule 12(b), N.C.Rules Civil Proc. Rule 56(d) states that if summary judgment is not rendered on the whole case, then the trial court shall, "if practicable," ascertain what material facts exist without substantial controversy, and shall make an order specifying those facts. Defendant has not shown that it was practicable for the trial court to find what facts were uncontroverted. Since defendant did not even file an answer until a week before the trial court ruled on the motion to dismiss, the trial court's refusal to make premature findings of fact is understandable and consistent with the requirements of Rule 56.

Defendant also contends the trial court erred in not reviewing the substantive aspects of plaintiff's decision to expel him. Defendant claims he is entitled to substantive due process review because expulsion from the plaintiff organization would harm his right to pursue his occupation.

The Fourteenth Amendment of the United States Constitution expressly requires due process of law when a state deprives a person of property. However, private action does not require due process even though it may involve a business subject to extensive state regulation. Jackson v. Metropolitan Edison Co., 419 U.S. 345, 95 S.Ct. 449, 42 L.Ed.2d 477 (1974). In distinguishing between state and private action, "the inquiry must be whether there is a sufficiently close nexus between the State and the challenged action of the regulated entity so that the action of the latter may be fairly treated as that of the State itself." (Citation omitted). Id. at 351, 95 S.Ct. at 453. The disciplinary proceedings brought by plaintiff were intended to maintain high integrity and professionalism among Gaston County realtors through enforcement of the plaintiff's Code of Ethics. The Code of Ethics and proceedings against defendant do not involve state action since they serve the interests of plaintiff and not, in any direct manner, the State. Defendant's expulsion did not occur pursuant to state law or at the request of the State. There was no joint venture between plaintiff and the State. Consequently, defendant has no claim to Fourteenth Amendment due process.

Though the law of the land clause in Article I, § 19, of the North Carolina Constitution is synonymous with Fourteenth Amendment due process-- Bulova Watch Co., Inc. v. Brand Distributors of North Wilkesboro, Inc. and Bulova Watch Co., Inc. v. Motor Market, Inc., 285 N.C. 467, 206 S.E.2d 141 (1974)--federal court interpretations of due process, though highly persuasive, are not binding on North Carolina courts. Id. Thus an independent determination of defendant's constitutional rights under the law of the land provision must be made.

Defendant has no substantive due process right to membership in the plaintiff organization, and therefore the trial court properly refused to review all the substantive aspects of defendant's expulsion. The relationship between a private voluntary association and its members is contractual in nature. Bright Belt Warehouse Ass'n, Inc. v. Tobacco Planters Warehouse, Inc., 231 N.C. 142, 56 S.E.2d 391 (1949). Defendant's substantive rights are derived solely from his contract with plaintiff. By virtue of his membership, defendant is deemed to have consented to all reasonable rules of plaintiff. Id. Plaintiff's Code of Ethics and disciplinary procedures are terms of the contract between plaintiff and defendant. Accordingly, defendant's expulsion is subject to judicial review to determine, first, that the contract terms were not contrary to public policy, Gore v. Ball, Inc., 279 N.C. 192, 182 S.E.2d 389 (1971), and, second, that the expulsion was conducted according to plaintiff's rules which are the terms of the contract with defendant. The trial court conducted this scope of judicial review when it declared that plaintiff acted within its rights and followed its rules in conducting disciplinary proceedings against defendant.

The trial court also declared that plaintiff had rendered due process in disciplining defendant. Defendant contends he did not receive due process because he lacked subpoena power and he received inadequate notice. We agree that defendant deserved some degree of procedural due process. Expulsion from plaintiff organization may harm defendant professionally and economically. He will lose the right to use the established trade name of "realtor," as well as access to the plaintiff's Multiple Listing Service, a valuable instrumentality in the sale of real estate. Given these adverse effects on defendant's standing and business, his expulsion must be done with some procedural due process.

Without attempting to define how much due process is due, we hold the procedures followed by plaintiff were adequate to protect defendant's constitutional rights. Defendant received timely notice of the complaint, was given an opportunity to present evidence and cross-examine opposing witnesses, and was represented by counsel. The hearing panel consisted of impartial persons. Subpoena power, which is part of the state's police power not available to private associations, and formal rules of evidence are not constitutionally required by private disciplinary proceedings. Although defendant claims the notice he received misled him as to what was the complaint, a letter from plaintiff to defendant expressly referred to the actual complaint. Defendant received notice that enabled him to fully respond to the complaint. The trial court properly declared that defendant had been accorded procedural due process.

Decisions in other jurisdictions are in accord with the scope of review set forth in the case sub judice. Bullard v. Austin Real Estate Board, Inc., 376 S.W.2d 870 (Tex.Civ.App.1964), affirmed the expulsion of a real estate broker from a local real estate board, where the board's rules were followed and the rules satisfied procedural due process. The court observed that a voluntary association can set its own standards as long as they are not contrary to public policy, and that those standards contractually bind members.

In Multiple Listing Service of Jackson, Inc. v. Century 21 Cantrell Real Estate, Inc., 390 So.2d 982 (Miss.1980), suspension of a realtor was affirmed were disciplinary proceedings were in conformity with board bylaws and procedural due process was given. The court noted that a private association can set its own standards as long as they are not against public policy.

Kendler v. Rutledge, 78 Ill.App.3d 312, 33 Ill.Dec. 585, 396 N.E.2d 1309 (1979), involved a declaratory judgment action by a real estate broker to challenge sanctions imposed on him by a local real estate board. The court stated it would not substitute its...