Kentucky Ass'n of Realtors, Inc. v. Musselman, s. 90-SC-664-T

• Decision Date: 29 August 1991
• Docket Number: Nos. 90-SC-664-T,90-SC-665-TG,s. 90-SC-664-T
• Parties: KENTUCKY ASSOCIATION OF REALTORS, INC., Appellant, v. Chester W. MUSSELMAN; Wallace G. Wilkinson, Governor of the Commonwealth of Kentucky; and Kentucky Real Estate Commission, Appellees. Frederic J. COWAN, Attorney General of the Commonwealth of Kentucky, Appellant, v. Chester W. MUSSELMAN and Kentucky Real Estate Commission, Appellees.
• Court: United States State Supreme Court — District of Kentucky

Page 213

817 S.W.2d 213

KENTUCKY ASSOCIATION OF REALTORS, INC., Appellant, v. Chester W. MUSSELMAN; Wallace G. Wilkinson, Governor of the

Commonwealth of Kentucky; and Kentucky Real

Estate Commission, Appellees.

Frederic J. COWAN, Attorney General of the Commonwealth of

Kentucky, Appellant, v. Chester W. MUSSELMAN and Kentucky Real Estate Commission,

Appellees.

Nos. 90-SC-664-TG, 90-SC-665-TG.

Supreme Court of Kentucky.

Aug. 29, 1991.

Rehearing Denied Nov. 21, 1991.

Fred E. Fugazzi, Jr., W. Terry McBrayer, Lexington, for Kentucky Assoc. of Realtors.

Peter L. Ostermiller, Robert G. Stallings, Louisville, for Musselman.

Kevin J. Hable, William H. Hollander, Sheryl G. Snyder, Louisville, for Wilkinson.

T. Kennedy Helm, III, Judith A. Villines, Frankfort, for amicus curiae.

John L. Ackman, Jr., Louisville, for Kentucky Real Estate.

Frederic J. Cowan, Atty. Gen., Robert V. Bullock, Asst. Atty. Gen., Frankfort, Kelly Mark Easton, Louisville, for Cowan.

LEIBSON, Justice.

This is a declaratory judgment action filed by the appellee, Chester W. Musselman, a licensed real estate agent, against:

(1) The Kentucky Association of Realtors, Inc. (the "Association"), a private, voluntary non-profit organization of professional real estate agents;

(2) The Kentucky Real Estate Commission (the "Commission"), a state agency charged with the responsibility of licensing and regulating Kentucky real estate brokers and salesmen;

(3) The Governor of Kentucky; and

(4) The Attorney General of Kentucky.

The appellee seeks to have a portion of KRS 324.281 declared unconstitutional. The statute provides the statutory structure for the Real Estate Commission, and specifically limits the Governor's power of appointment of real estate agents to serve as members of the Commission to a list supplied by the Association. The Complaint alleges "there are approximately 24,000 real estate licensees in the Commonwealth of Kentucky, of which approximately one-third are members of the KAR [the Association]," that the statute is arbitrary and in violation of Section 2 of the Kentucky Constitution, and that it violates the separation of powers principle in Sections 27 and 28 of the Kentucky Constitution, thus also infringing on Section 69, which vests the "supreme executive power of the Commonwealth" in the Governor.

Based on these enumerated sections of the Kentucky Constitution, the trial court entered Judgment on the Pleadings declaring unconstitutional so much of KRS 324.281 as requires the Governor to appoint from the list supplied by the Association. The Association and the Attorney General appealed separately from the trial court's final judgment. On its own motion the Kentucky Court of Appeals recommended transfer to the Kentucky Supreme Court because the "decision on this matter has the potential to affect a large variety of regulatory administrative agencies and will have statewide implications for many regulated groups." ¹ We have granted transfer, and for reasons that follow we hold the statute in question does not violate the sections of the Kentucky Constitution in question. Thus we reverse the trial court's decision.

The portion of the statute in question, KRS 324.281(3), provides:

"For each appointment or vacancy, the Kentucky Association of Realtors shall supply a list of not less than three (3) names of licensees to the governor each year from which the broker or sales associate appointments are to be made. The governor may fill vacancies arising in the middle of the year from those remaining on the list or from a new list supplied by the association."

The statute limits the power of the Governor to appoint two names on a list provided by the Association, but it neither limits appointees to members of the Association nor does it compel the Governor to appoint someone on the list. Strictly speaking, the Association may nominate any licensed real estate agent who meets the qualifications in Subsection (1) of KRS 324.281, without regard to membership in the Association, and the Governor may reject all the names on the list provided by the Association and forego making an appointment until provided with a list that includes a person whom the Governor deems suitable for appointment to the office.

The Commission consists of five persons, four of whom are selected in this manner, and a fifth who "shall be a citizen at large who is not associated with or financially interested in the practice or business regulated." KRS 324.281(1). No governmental or regulatory authority is delegated to the Association unless the power to "supply a list" as specified in KRS 324.281(3), quoted above, should be classified as a grant of such power. We have not been presented with any valid reason why it should be so construed.

We acknowledge that Sections 27 and 28 of the Kentucky Constitution require strict adherence to the doctrine of separation of power. Our Kentucky Constitution not only divides the "powers of the government ... into three distinct departments ["legislative," "executive" and "judicial"], "each ... confined to a separate body of magistracy (Section 27)," but adds to this another proviso expressly forbidding "persons, being of one of those departments" the "exercise of any power properly belonging to either of the others (Section 28)."

The appellee concedes the creation of a regulatory commission such as the one in question is a proper exercise of legislative power. So is the designation of qualifications or criteria for persons who shall serve on such a Commission, so long as such qualifications or criteria are not impermissibly "arbitrary" within the context of Ky.Const. Section 2. The primary question in this case is whether the General Assembly has encroached upon the exclusive power of the executive by delegating to the Association responsibility to "supply a list" from which the Governor shall choose his appointee. The almost identical question was first addressed by this Court in Elrod v. Willis, 305 Ky. 225, 203 S.W.2d 18 (1947), which now has been the controlling precedent on this point for almost 45 years.

In Elrod we held constitutional a section of the statute creating the Kentucky Disabled Ex-Servicemen's Board, a state agency with "full executive powers" to administer a claims program for disabled veterans, which specified that "all appointments to the Board shall be made by the Governor from a list of five (5) names ... submitted by" the Kentucky branch of the American Legion. The Legion was, and is, a private, voluntary organization, in the same sense as is the Kentucky Real Estate Association in the present case, and the function designated to it by statute was substantially identical to the same function provided for by KRS 324.281(3), with which we are now concerned. Now no less than twelve other state regulatory Boards and agencies utilize a similar method in an effort to insure the appointment of qualified individuals. ² Thus a large body of statutory law has developed since 1947 in reliance on Elrod v. Willis. Although we would not hesitate in overruling a longstanding precedent if presented with compelling and specific reasons why such precedent is clearly erroneous despite the unsettling nature of such a decision, no such specific and compelling reasons for overruling Elrod have been presented here. On the contrary, the appellee's argument against the Elrod case is limited to appellee's claim that Elrod has lost its vitality because of our decision in Legislative Research Com'n. (LRC) v. Brown, Ky., 664 S.W.2d 907 (1984). The appellee argues that, while Elrod v. Willis was not overruled in LRC v. Brown, it did not survive it. But there are sharp factual differences, which we will later address, between the statutory structure declared unconstitutional in LRC v. Brown and the structure validated in Elrod v. Willis.

In analyzing the function delegated by statute to the American Legion in Elrod, we stated "the legislature has not attempted to appoint administrative officers, nor has it completely denied the appointive function of the executive." 203 S.W.2d at 20. It has "simply limited the Governor's selection to a list of men named by an organization which is not affected by the limitation of Section 27." Id. Utilizing a private, voluntary organization of this nature is "a recognition that organizations whose objectives coincide with the objectives of the law creating the agency, may render a material service to the Governor by nominating men to staff that agency who are qualified by interest, experience, and background." Id.

Almost contemporaneously with the decision in Elrod v. Willis, our Court also decided Fraysure v. Ky. Unemployment Comp. Com'n., 305 Ky. 164, 202 S.W.2d 377 (1947), a suit to test the constitutionality of the statute structuring the newly created Kentucky Unemployment Compensation Commission. The statute in question provided for "... an Employment Service Commission composed of a Director of Employment Service and two members, one representing labor and the other management, to be appointed by the Commissioner of Industrial Relations, with the approval of the Governor, from lists of names submitted to him by representatives of labor and management." 202 S.W.2d at 379.

It also provided certain criteria or qualifications for the Director, including "at least four years' full time paid experience in the administration and supervision of a statewide system of public employment service offices," 202 S.W.2d at 380, which substantially narrowed the Governor's choice for this position.

Discussing first the constitutionality of the limitations on the Governor's appointive powers imposed by the statutory qualifications for the office, we said "it is only where the classifications are arbitrary and unreasonable, so as to exclude one or more of a class without a reasonable basis, that the Act is void." 202 S.W.2d at 381.

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