Virginia Real Estate Bd. v. Clay, 0837-88-3

• Citation: 384 S.E.2d 622,9 Va.App. 152
• Decision Date: 26 September 1989
• Docket Number: No. 0837-88-3,0837-88-3
• Parties: VIRGINIA REAL ESTATE BOARD v. Lowell D. CLAY. Record
• Court: Virginia Court of Appeals

Page 622

384 S.E.2d 622

9 Va.App. 152

VIRGINIA REAL ESTATE BOARD v. Lowell D. CLAY.

Record No. 0837-88-3.

Court of Appeals of Virginia.

Sept. 26, 1989.

Richard B. Zorn, Sr. Asst. Atty. Gen. (Mary Sue Terry, Atty. Gen., on brief), for appellant.

Alan D. Groseclose, Pulaski, for appellee.

Present: BENTON, COLEMAN and DUFF, JJ.

COLEMAN, Judge.

The Virginia Real Estate Board (Board), pursuant to its disciplinary regulation 8.2(36), ¹ suspended ("inoperative") for one year the real estate broker's license of Lowell D. Clay and fined him $1,000 for withholding from a prospective purchaser the fact that an oil and gas lease encumbered his fifty-two acres of Pulaski County mountain land. Clay appealed the administrative ruling to the Circuit Court of Pulaski County. The court found that Clay did not knowingly and intentionally withhold information from the purchaser about the lease on his property, but rather inadvertently failed to disclose the information. Moreover, the court held that because Clay was selling his own property, Code § 54-734(1) ² exempted him from control by the Board because its regulations apply only when one acts as an agent or broker. The Board appealed pursuant to Code § 17-116.05(1), seeking to have its administrative decision upheld.

Lowell D. Clay is a licensed real estate broker regularly conducting business in Pulaski County. In 1971, Clay acquired fifty-two acres of mountain land in Pulaski County. In 1982, he leased to Royal Resources Corporation the oil and gas rights in the property for ten years, subject to renewal for an indefinite term if the lessee maintained producing wells. The lease also granted exploration rights upon the property. In 1983, Elizabeth Southcott telephoned Clay about purchasing the fifty-two acres of mountain land, which once belonged to her family. Southcott offered him $16,500 for the property, which Clay accepted. Clay prepared a contract of sale dated October 13, 1983, on a standard form printed by the Virginia Association of Realtors in which Clay provided that the sale was "subject to [the buyer obtaining] financing" and that the "buyer understands that seller is a real estate agent." Neither the contract nor any other document from Clay disclosed to Southcott the existence or terms of the oil and gas lease. Southcott and Clay signed the contract, at which time she paid him $100 earnest money.

Southcott testified that she first learned of the lease encumbering the property from the attorney she retained to examine the title. After learning of the lease, Southcott informed Clay by letter that she considered the lease to affect adversely the property's value and that she was, as a result, willing to pay only $10,000 for the property. Clay considered her response as a counteroffer, which he rejected. He treated the counteroffer as a repudiation of the original contract and refunded Southcott's $100. Clay sold the property to another purchaser for $16,500.

Clay testified that he simply overlooked the existence of the lease and failed to inform Southcott of it because he had forgotten about it. He stated that his omission was inadvertent, not willful. Contrary to Southcott's testimony, Clay stated that shortly after the contract was signed he realized the oversight, informed Southcott and her attorney of the existence of the lease, and informed them that he considered the lease to be invalid because the lessee had not paid annual rent for two years. Clay testified that in an effort to rectify the situation he attempted to cancel the lease to satisfy Southcott's objection, but that the lease required notice to terminate for nonpayment and the lessee exercised its right to keep the lease in effect by paying the delinquent rental.

Southcott, disappointed with losing the property, filed a complaint with the Virginia Real Estate Board. The Board found that Clay had violated Regulation 8.2(36) by withholding from Southcott, a prospective purchaser, information readily available to him concerning the character and condition of the real estate he was selling. Implicitly, the Board held that its regulation imposed an absolute duty to disclose to a prospective purchaser all known information concerning the character or condition of the real estate. Under the Board's interpretation of its regulation, the fact that the withholding of available information was inadvertent is no defense but would affect the penalty to be imposed. The Board imposed a license suspension and fine sanctions for Clay's violation. On appeal, the circuit court reversed.

I.

We first address the Board's contention that the trial court erred in concluding that the "owner" exemption in Code § 54-734(1) precludes it from regulating a licensed real estate broker when he sells his own property. The Board contends that the General Assembly created an "owner" exemption in Code § 54-734(1) only to exclude property owners from the licensing requirement when selling their property. According to the Board, the General Assembly did not intend to exempt licensed brokers from the regulations where the broker is dealing with his or her own property. In other words, the Board contends that the exemption designates those who must be licensed, not whether a licensee is subject to the Board's regulations when selling his or her own property. Considering the legislative purpose of Chapter 18, Title 54 and the relevant statutes, we agree with the Board's position.

The controlling statutory provision is Code § 54-734(1), which provided that this chapter shall not apply to:

Any person, partnership, association or corporation, who as owner or lessor shall perform any of the acts aforesaid with reference to property owned or leased by them, or to the regular employees thereof, with respect to the property so owned or leased, where such acts are performed in the regular course of, or as an incident to, the management of such property and the investment therein.

Read out of context, the statute appears to exempt a licensed broker from regulation by the Board in transactions involving his or her own property. But a fundamental rule of statutory construction requires that courts view the entire body of legislation and the statutory scheme to determine the "true intention of each part." McDaniel v. Commonwealth, 199 Va. 287, 292, 99 S.E.2d 623, 627 (1957). In construing statutes, courts should give the fullest possible effect to the legislative intent embodied in the entire statutory enactment. Bd. of Supervisors, King & Queen County v. King Land Corp., 238 Va. 97, 103, 380 S.E.2d 895, 897 (1989); Turner v. Commonwealth, 226 Va. 456, 459, 309 S.E.2d 337, 338 (1983).

The purpose of Chapter 18 of Title 54, the real estate licensing statutes, was "to protect the public from the fraud, misrepresentation and imposition of dishonest and incompetent persons." Grenco v. Nathaniel Greene Dev. Corp., 218 Va. 228, 231, 237 S.E.2d 107, 109 (1977) (quoting Massie v. Dudley, 173 Va. 42, 55, 3 S.E.2d 176, 181 (1939)). To effectuate that purpose, the General Assembly made it unlawful under Code § 54-749 for anyone to act as a real estate agent without a license. Thus, the General Assembly gave to those licensed by the Board the exclusive privilege of engaging in the sale or brokering of real estate for others. See Commonwealth v. Shell Oil Co., 210 Va. 163, 166, 169 S.E.2d 434, 437 (1969). The General Assembly also imposed upon the Board, under Code § 54-740, the responsibility of maintaining ethical and competency standards for licensed real estate agents and brokers. Therefore, Code § 54-734(1) must be construed in a manner consistent with the purpose of the licensing requirements--maintaining ethical and competency standards of licensed real estate agents and brokers.

If Code § 54-734(1) were construed to exempt real estate brokers from the Board's regulation in transactions involving their own property, the Board would be precluded from maintaining the integrity of their licensees in such transactions. Such an interpretation would be inconsistent with the overall statutory licensing provisions.

[T]here can be no justification of an interpretation of the licensing act which would allow a broker to be honest as a broker and dishonest as a property owner. A broker who is dishonest or incompetent in the real estate activities in which he is involved as owner, is not likely to be honest or competent in his activities which are purely brokerage in nature. The purpose of real estate licensure is to bar the dishonest or incompetent from entry into this occupation.

Real Estate Comm'n v. Tice, 200 Pa.Super. 553, 559, 190 A.2d 188, 190-91 (1963). Therefore, we find that the trial court erred in concluding that Code § 54-734(1) exempted Clay from the Board's regulations when he sold his own property. To accept Clay's argument would undermine the Board's power to protect the public from deceptive practices by real estate agents or brokers, by encouraging agents or brokers to sell their client's realty through their own account. Such an interpretation would hamper the Board's ability to carry out its statutory purpose of maintaining the integrity and competence of the profession. See Black v. Real Estate Comm'n, 275 Ark. 55, 626 S.W.2d 954 (1982); Wright v. Real Estate Comm'n, 208 Neb. 467, 304 N.W.2d 39 (1981); Tice, 200 Pa.Super. 553, 190 A.2d 188 (1963). See generally Annot., 22 A.L.R. 4th 136, 152-58 (1983) (discussing the revocation of a suspension or real estate license for conduct involving sale of a broker's own property).

Code § 54-734(1) merely exempted from the licensing requirement property owners who in the course of dealing with their own property perform acts customarily performed by licensed agents or brokers. However, once an individual is licensed as an agent or broker, that person is subject to regulation by the Board in any real estate transaction in which he or she participates.

Code § 54-740 gave the...