VT Assoc. of Realtors v. State
Annotate this Case
NOTICE: This opinion is subject to motions for reargument under V.R.A.P. 40
as well as formal revision before publication in the Vermont Reports.
Readers are requested to notify the Reporter of Decisions, Vermont Supreme
Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
that corrections may be made before this opinion goes to press.
No. 89-048
Vermont Association of Realtors, Inc. Supreme Court
v. On Appeal from
Washington Superior Court
State of Vermont, Vermont Real Estate
Commission May Term, 1990
James L. Morse, J.
Thomas F. Heilmann of Heilmann, Ekman & Associates, Inc., Burlington, for
plaintiff-appellant
Jeffrey L. Amestoy, Attorney General, Marilyn Signe Skoglund, Assistant
Attorney General, and John H. Chase, Montpelier, for defendant-appellee
Ralph W. Holman, Chicago, Illinois, and Thomas F. Heilmann, Burlington, for
amicus curiae National Association of Realtors
PRESENT: Allen, C.J., Peck, Gibson and Dooley, JJ., and Martin, Supr. J.,
Specially Assigned
GIBSON, J. Plaintiff, Vermont Association of Realtors, Inc., appeals
from the dismissal of its complaint, which challenges (1) the statutory
provision establishing the composition of the Vermont Real Estate Commission
and (2) various rules promulgated by the Commission. We affirm.
In 1985, the Legislature generally amended the statute dealing with the
regulation of real estate brokers and salespersons. Pursuant to the author-
ity conferred on it by that statute, the Vermont Real Estate Commission
promulgated various rules regulating the activities of real estate brokers
and salespersons. Plaintiff filed a complaint asking the superior court (1)
to declare 26 V.S.A. { 2251(b) invalid and unenforceable and (2) to enjoin
the Commission from enforcing certain rules that it contends were promul-
gated without statutory authority and in violation of the Administrative
Procedure Act (APA). On August 5, 1987, the court issued a preliminary
injunction against the enforcement of Rules 26(c)(3) and (4). On November
23, 1988, the court granted the State's motion for summary judgment and
dismissed the case.
On appeal, plaintiff argues that the court erred (1) in upholding the
constitutionality of 26 V.S.A. { 2251(b); (2) in applying the wrong standard
to determine whether the Commission exceeded the scope of its legislative
authority; (3) in deciding that the Commission did not act outside its
authority; and (4) in concluding that the Commission complied with the APA.
I.
Plaintiff first argues that 26 V.S.A. { 2251(b), which requires that
at least one of the three broker members of the seven-member Real Estate
Commission must not be a member of a professional real estate association,
is unconstitutional because it deprives plaintiff's members of their rights
of freedom of association and privacy guaranteed by the First Amendment to
the United States Constitution. (FN1) We disagree.
Although there is some uncertainty over the scope of the First
Amendment right of association and the level of scrutiny with which to
review statutes that allegedly impair associational rights, courts
generally will first consider whether the governmental action infringes on
First Amendment interests, and, if so, the significance of the infringement
and the nature of the associational right infringed. See Elrod v. Burns,
427 U.S. 347, 360 (1976); MacGuire v. Houston, 717 P.2d 948, 952 (Colo.
1986); 3 R. Rotunda, J. Nowak & J. Young, Constitutional Law: Substance and
Procedure { 20.41, at 199-204 (1986). Only significant and substantial
restraints on freedom of association require strict scrutiny. MacGuire, 717 P.2d at 952; see Elrod, 427 U.S. at 362; Kusper v. Pontikes, 414 U.S. 51,
58 (1973).
According to plaintiff, by requiring that one of the three broker
members of the Commission be unaffiliated with a real estate organization, {
2251(b) inhibits brokers who wish to serve on the Commission from being
members of a real estate association and impinges on members' privacy
interests by making it necessary for them to reveal their associations. We
cannot agree. Plaintiff's speculative predictions on the impact of this
law, which are unsupported by evidence, neither trigger a strict scrutiny
standard of review nor indicate that further factual investigation is
required. Plaintiff has failed to show a significant impairment of its
associational rights or any demonstrable injury that will result from its
members having to disclose whether they belong to a real estate association.
Cf. O'Neal v. United States, 601 F. Supp. 874, 878-80 (N.D. Ind. 1985)
(summary judgment affirmed; two members of organization unable to show that
an IRS summons requesting their telephone records significantly impacted on
their associational rights).
Assuming that the statute in question has a minimal impact on
plaintiff's associational rights, we agree with the trial court that the
requirements of the statute are rationally related to the State's legitimate
interest in creating a real estate commission with broad representation. A
large percentage of the brokers and salespersons in the state are not
members of a professional real estate organization. The State's interest in
seeing that at least one person on the Commission is in a similar situation
is legitimate, notwithstanding plaintiff's claim that such a rule will deter
those who would like to serve on the Commission from joining a professional
real estate organization. We conclude that summary judgment was appropriate
here.
II.
Next, plaintiff argues that the court applied the wrong standard in
determining whether the Commission exceeded its statutory authority, and,
further, that the court erred in concluding that the challenged rules
exceeded the authority delegated to the Commission by the Legislature. We
disagree with both contentions.
This Court has consistently held that agency actions, including the
promulgation of rules, enjoy a presumption of validity. See In re Club
107, 152 Vt. 320, 323, 566 A.2d 966, 967 (1989); Consumer Credit Ins. Ass'n
v. State, 149 Vt. 305, 308, 544 A.2d 1159, 1161 (1988); In re Agency of
Administration, 141 Vt. 68, 74-75, 444 A.2d 1349, 1351-52 (1982). Here, the
trial court examined the rules and determined that they were within the
scope of the Commission's statutory authority. The court then stated that
it did not have the authority "to determine whether these rules are the best
way to effectuate the statute," but rather that it must defer to the
agency's judgment "absent a compelling indication that the Commission mis-
interpreted this statute." We see no error in the standard of review
applied by the court.
Nor did the court err in concluding that the rules were within the
statutory grant of authority. While we presume the validity of agency
actions, "an agency's regulations must be reasonably related to its enabling
legislation in order to withstand judicial scrutiny." In re Club 107, 152
Vt. at 323, 566 A.2d at 967-68. There must be some nexus between the agency
regulation, the activity it seeks to regulate, and the scope of the agency's
grant of authority. Id. at 324, 566 A.2d at 968. Accordingly, we will not
countenance any agency rule that exceeds the authority delegated to the
agency under its enabling act. Id. at 326, 566 A.2d at 969 (Liquor Control
Board exceeded its legislative authority by promulgating regulation prohibi-
ting "obscene, lewd, or indecent entertainment").
Under the instant enabling act, the Commission
shall adopt rules in accordance with [the APA] necessary
for the performance of its duties, including:
(1) a definition of the activities which may be
performed only by a licensee . . .;
(2) qualifications for obtaining licensure . . .;
(3) explanations of appeal and other significant rights
given to applicants and the public;
(4) procedures for disciplinary and reinstatement cases.
26 V.S.A. { 2252(a) (emphasis added). The act also permits the Commission
to "adopt rules relating to the procedures to be followed in handling
complaints and conducting hearings under this chapter." Id. { 2252(c)(5).
Before examining the individual rules to determine whether they are
within the Commission's authority, we point out that the word "including" in
a statute is ordinarily a word of enlargement, not one of limitation. (FN2) In
re Hartman, 2 Ohio St. 3d 154, 156, 443 N.E.2d 516, 517 (1983) (common
usage of word "including" implies that following list is not exhaustive);
Portland Distrib. Co. v. Department of Revenue, 307 Or. 94, 97, 763 P.2d 1189, 1190 (1988) (word "including" did not limit application of statute to
taxes listed). Thus, the Commission has the authority to promulgate any
rule "necessary for the performance of its duties," even if the rule is not
within the scope of the four enumerated types. Keeping this in mind, we
acknowledge the fact that, generally, the purpose of a real estate licensing
statute "is to regulate real estate activities so as to protect the public."
Arizona State Real Estate Dep't v. American Standard Gas & Oil Leasing
Serv., 119 Ariz. 183, 186, 580 P.2d 15, 18 (Ariz. App. 1978); see Boise
Cascade Home & Land Corp. v. New Jersey Real Estate Comm'n, 121 N.J. Super
228, 240, 296 A.2d 545, 551 (1972) (real estate commission created under
regulatory licensing act to protect public from incompetent and unscrupulous
practice). The Vermont statute is no exception. (FN3)
We now examine the challenged rules. Plaintiff's most strident
arguments are raised against Rules 26(c)(3) and (4), which require that a
listing agreement contain
(3) Authorization for the broker to offer the property
for sale, and a description of the way a prospective
buyer may deliver his or her acceptance of the offer if
not to the broker.
(4) The terms and conditions upon which the licensee is
authorized to offer the property for sale.
Plaintiff asserts that the Commission has no authority to regulate listing
agreements. Plaintiff further argues that by requiring listing agreements
to specify a broker's authority to offer property, Rules 26(c)(3) and (4)
fly in the face of the established common-law rule that listing agreements
are not offers. While conceding that the Commission rules cannot be
overturned merely because they entail a nontraditional approach, amicus
National Association of Realtors asserts that Rules 26(c)(3) and (4) will be
detrimental to the orderly transfer of real property in Vermont.
These arguments are not persuasive. The Commission has the authority
to promulgate rules defining the activities performed by licensees. {
2252(a)(1). A real estate broker or salesperson is a licensee (see { 2212)
who, among other things, "lists, offers, attempts or agrees to list real
estate or any interest therein for sale or exchange." { 2211(a)(4)(A).
Thus, the enabling act gives the Commission general authority, at least, to
regulate a broker's or salesperson's listing agreements.
Regarding plaintiff's argument that Rules 26(c)(3) and (4) will disrupt
real estate transactions in Vermont, we point out that it is not the role of
a reviewing court to impose its judgment on whether administrative
regulations promulgated within the expertise of an agency are good or bad
policy. See Leimbach v. Califano, 596 F.2d 300, 304 (8th Cir. 1979) (where
agency chose procedure reasonably related to legitimate purpose of enabling
act, court will not substitute its view as to whether procedure is
appropriate); see also In re Club 107, 152 Vt. at 325, 566 A.2d at 968 ("due
deference is afforded to administrative actions which are within an agency's
area of expertise"). Such regulations are valid as long as they are
reasonably related to the purposes of the enabling act. In re Baptist
Fellowship of Randolph, Inc., 144 Vt. 636, 638, 481 A.2d 1274, 1275 (1984).
Rules 26(c)(3) and (4) are reasonably related to the general purpose of the
enabling act: to regulate the activities of real estate brokers and sales-
persons in order to protect the public. Under an exclusive listing
agreement in general use in Vermont, the broker has the "exclusive right to
offer for sale . . . and sell the property . . . upon the terms set forth
herein." The Commission's attempt to regulate such activities by requiring
that brokers be given the power to offer the property for sale and requiring
them to reveal that authorization within the listing agreements is not
outside the purview or purposes of the enabling act. Moreover, Rules
26(c)(3) and (4) are not irreconcilably inconsistent with either prior
Vermont contract case law or the other rules promulgated by the Commission.
Plaintiff also argues that Rule 27(b), which states that a "broker may
not require as a condition of employment or association that a salesperson
join any organization during any period that the salesperson is satisfying
the experience requirement," deals with matters outside the Commission's
authority. We disagree. The Legislature explicitly gave the Commission the
power to adopt rules concerning "qualifications for obtaining licensure, in
accordance with section 2292." { 2252(a)(2). Section 2292 details the
experience and education requirements that persons seeking a real estate
license in Vermont must meet. Section 2292(d) provides that licensing
standards and procedures "shall be fair and reasonable" and "shall be
designed and implemented to ensure that all applicants [whose practice
would be consistent with the public welfare] are admitted to practice."
(Emphasis added.) Because membership in a real estate organization is not
essential in order for an applicant to meet the prescribed requirements, the
Commission may prohibit a broker from conditioning the employment of an
applicant on the applicant's membership in a particular organization.
The other rules challenged by plaintiff -- Rules 2(7), 2(9), 2(11),
30(a), 31(a), and 32 -- are all plainly within the Commission's delegated
statutory authority; no further discussion of them is warranted.
III.
Plaintiff also contends that the court erred in concluding that the
Commission promulgated its rules in compliance with the requirements of the
Vermont Administrative Procedure Act. Plaintiff's principal contentions are
that the Commission's public summaries of its proposed rules did not ade-
quately notify real estate agents of the significance of the rules, the
rules were proposed and voted on without public input, and the Commission
proposed new rules after the public comment period ended. (FN4) We disagree.
Upon review of the record, we conclude that the Commission promulgated
the challenged rules in accordance with the requirements of the APA.
Although the published summaries did not contain the text of the proposed
rules, there was sufficient information to alert interested parties as to
the general topic of the rules, and a telephone number was listed for
interested parties to obtain additional information. Further, the later
notices stated that the Commission had made "numerous changes in the
original proposed rules," and indicated the dates of hearings at which the
public could respond to those changes. The Commission held several public
hearings on the proposed rules before it voted on their adoption, and
plaintiff had a full opportunity to respond to the rules at all stages of
the rulemaking process. Plaintiff has failed to show any violations of the
APA.
Affirmed.
FOR THE COURT:
___________________________________
Associate Justice
FN1. We need not address plaintiff's claim that the statute violates
chapter 1, article 20 of the Vermont Constitution because plaintiff has
failed to develop the state constitutional issues it raises by explaining
how or why article 20 affords greater protection than the First Amendment to
the United States Constitution. See State v. Gleason, 154 Vt. 205, 212, 576 A.2d 1246, 1250 (1990).
FN2. Plaintiff points out that { 2252's predecessor statute, former 26
V.S.A. { 2254, granted the Commission the authority to "adopt, amend and
revise, as it deems necessary, reasonable rules consistent with this chapter
in order to carry out and effectuate its purposes." Plaintiff argues that,
by amending the statute, the Legislature intended to restrict the types of
rules the Commission could promulgate. We cannot agree. Plaintiff cites no
legislative history to support its theory. The fact that the Legislature
chose to specify certain types of rules that the Commission may promulgate
does not indicate that it intended to preclude the Commission from
promulgating any other rule outside the specified areas. Indeed, as noted
above, the word "including" indicates the opposite is true.
FN3. Although the statute contains no general statement of purpose, the
specific purposes enumerated in the introduction to the original bill
indicate that the legislation's overriding concern was to protect the public
interest. Among those purposes were to "add two consumer representatives to
the membership of the real estate commission," to permit the commission to
impose sanctions where there are underlying problems, and to permit the
deposit of funds held by brokers into interest-bearing accounts. S. 26
(1985 Vt., Bien. Sess.). Moreover, various provisions of the statute
itself evidence its public-protection orientation. See, e.g., 26 V.S.A. {
2252(b)(3) and (c)(1) (Commission shall "investigate suspected unprofes-
sional conduct" and "may" report suspected cases of unauthorized practice to
the attorney general or state's attorney for possible prosecution).
FN4. In particular, plaintiff argues that the trial court did not
specifically find that 3 V.S.A. { 846(b)(2) was satisfied. Section
846(b)(2) provides that "amendment after public hearing of the text of a
proposed rule in a manner that does not cause the published summary of the
rule to become misleading or inadequate . . . shall not affect the validity
of a rule after its adoption." The court ruled that the Commission had
submitted documents showing that the requirements of the APA had been
complied with.
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CONCURRING AND DISSENTING
NOTICE: This opinion is subject to motions for reargument under V.R.A.P. 40
as well as formal revision before publication in the Vermont Reports.
Readers are requested to notify the Reporter of Decisions, Vermont Supreme
Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
that corrections may be made before this opinion goes to press.
No. 89-048
Vermont Association of Realtors, Inc. Supreme Court
v. On Appeal from
Washington Superior Court
State of Vermont, Vermont Real Estate
Commission May Term, 1990
James L. Morse, J.
Thomas F. Heilmann of Heilmann, Ekman & Associates, Inc., Burlington, for
plaintiff-appellant
Jeffrey L. Amestoy, Attorney General, Marilyn Signe Skoglund, Assistant
Attorney General, and John H. Chase, Montpelier, for defendant-appellee
Ralph W. Holman, Chicago, Illinois, and Thomas F. Heilmann, Burlington, for
amicus curiae National Association of Realtors
PRESENT: Allen, C.J., Peck, Gibson and Dooley, JJ., and Martin, Supr. J.,
Specially Assigned
DOOLEY, J., concurring and dissenting. I concur in the opinion of the
Court with respect to the composition of the Vermont Real Estate Commission,
the validity of Commission Rules 26(c)(3) and (4), and compliance with the
procedural requirements of the Administrative Procedure Act. I conclude,
however, that Rule 27(b) is beyond the rulemaking power of the Commission,
and I dissent from the majority's opinion upholding this rule.
Rule 27 provides:
(a) A supervising broker is responsible for the
professional conduct of salespersons under his or her
supervision, as shown by the records of the Commission.
A principal broker is vicariously responsible for the
professional conduct of all licensees employed by or
associated with the licensee.
(b) A broker may not require as a condition of
employment or association that a salesperson join any
organization during any period that the salesperson is
satisfying the experience requirement.
The experience requirement is set forth in 26 V.S.A. { 2292(e). It requires
that a person desiring to become a real estate broker be "actively employed
as a licensed salesperson by or associated with a licensed broker in this
state for a period of not less than one year." See also Vermont Real Estate
Comm'n, Rule 2(7) (defines experience requirement to include training for at
least a year during which the salesperson must complete "a minimum of six
closed real estate transactions").
The Commission defends Rule 27(b) as necessary to ensure that persons
who want to become brokers are not denied the opportunity to do so because
they do not want to join a particular organization or can not afford to do
so. The testimony in support of the rule from the Commission was that the
Legislature had intended to make it easier for persons to become brokers and
the Commission did not want "any constraints or any obligations on any
salesperson" other than the minimum imposed by the statute and rules. In
its response to the comments on the rule, the Commission stated that the
rule "removes a potential barrier to satisfying the experience requirement."
Nothing in the record or in the rulemaking record suggests that salespersons
who did not want to join a particular organization were barred from
obtaining jobs to satisfy the experience requirement.
We require that rules be reasonably related to an agency's enabling
legislation. In re Club 107, 152 Vt. 320, 323, 566 A.2d 966, ___ (1989);
see also Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208 (1988) (agency's
power to promulgate legislative regulations is limited to authority
delegated by Congress). In this case, the enabling legislation limits the
Commission's rulemaking power to those "necessary for the performance of its
duties." 26 V.S.A. { 2252(a)(1). The Commission has parlayed an
authorization to establish an experience requirement for future brokers into
a regulation of a private employment contract based on potential barriers to
entry with no indication of an actual barrier. If the Commission can adopt
this rule, it can regulate all phases of the employment contract, requiring,
for example, that a certain wage be paid, that health insurance be given or
that a certain number of vacation days be available. It also appears that
subpart (b) of Rule 27 directly interferes with the ability of brokers to
comply with the requirement of subpart (a) that they ensure salesmen operate
ethically and responsibly. Plaintiff (and presumably other professional
organizations) offer training at reduced cost to members and promulgate
ethical standards. Brokers are likely to see membership in a professional
organization as the most efficient way to teach responsible practice during
the apprenticeship period.
I cannot find this regulation necessary for the Commission to perform
its duties. The Commission admits it is based on a potential problem, not
one actually found to exist. Thus, I do not believe it is reasonably
related to the enabling legislation. I dissent from the decision to uphold
Rule 27(b).
Associate Justice
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