North Carolina Real Estate Licensing Bd. v. Aikens

Annotate this Case

228 S.E.2d 493 (1976)

31 N.C. App. 8

NORTH CAROLINA REAL ESTATE LICENSING BOARD v. David AIKENS, Individually and t/a Rentex.

No. 7621SC310.

Court of Appeals of North Carolina.

October 6, 1976.

*494 Atty. Gen. Rufus L. Edmisten by Associate Atty. James E. Scarbrough, Raleigh, for plaintiff-appellee.

Charles J. Alexander, II, Winston-Salem, for defendant-appellant.

CLARK, Judge.

In its complaint plaintiff Board alleges that it seeks injunctive relief under G.S. *495 150-31. This statute was repealed by Session Laws 1973, c. 1331, s. 1, originally effective 1 July 1975, but extended to 1 February 1976 by Session Laws 1975, c. 69, s. 4. However, the repealing act excepted pending hearings. Session Laws 1973, c. 1331, s. 4. This action was instituted on 1 December 1975. We note that the new Administrative Procedure Act, enacted in part to replace former G.S. Chapt. 150, contains no authority for injunctive relief applicable to the plaintiff Board and other boards who depended upon G.S. 150-31 for such authority.

G.S. Chapt. 93A, entitled "Real Estate Brokers and Salesmen", regulates the real estate business. The Chapter was declared constitutional in State v. Warren, 252 N.C. 690, 114 S.E.2d 660 (1960). "Its purpose is to protect sellers, purchasers, lessors and lessees of real property from fraudulent or incompetent brokers and salesmen. It must be construed with a regard to the evil which it is intended to suppress." McArver v. Gerukos, 265 N.C. 413, 416-17, 144 S.E.2d 277, 280 (1965).

G.S. 93A-2(a) defines a real estate broker as follows:

"Definitions and exceptions. (a) A real estate broker within the meaning of this Chapter is any person, partnership, association, or corporation, who for a compensation or valuable consideration or promise thereof lists or offers to list, sells or offers to sell, buys or offers to buy, auctions or offers to auction (specifically not including a mere crier of sales), or negotiates the purchase or sale or exchange of real estate, or who leases or offers to lease, or who sells or offers to sell leases of whatever character, or rents or offers to rent any real estate or the improvement thereon, for others. A broker shall also be deemed to include a person, partnership, association, or corporation who for a fee sells or offers to sell the name or names of persons, partnerships, associations, or corporations who have real estate for rental, lease, or sale." (Emphasis added).

The last sentence of subsection (a) was added by Session Law 1975, c. 108, and became effective upon ratification on 7 April 1975. The defendant questions the constitutionality of this amendment on the ground that it regulates an ordinary trade or occupation contrary to the provisions of the North Carolina Constitution, art. I, secs. 1 and 19.

The defendant's business activity consists only of selling for a modest fee the addresses of property for rent, some information about the features of the properties, and the phone numbers of the lessors. There is no indication that he counsels or advises the customers. He charged the lessor no fee for listing the property. There is no further contact with the customer. Nevertheless, this activity is clearly within the definition of real estate broker set out in the last sentence of G.S. 93A-2(a).

The exercise of the police power of the State in the regulation of certain sectors of the economy must be reasonably related to the protection of the health, morals, safety or general welfare of the public. Roller v. Allen, 245 N.C. 516, 96 S.E.2d 851 (1957). When there is no reasonable relationship, the courts of this State have not hesitated to strike down regulatory legislation as repugnant to the State Constitution. Roller v. Allen, supra (tile contractors); State v. Ballance, 229 N.C. 764, 51 S.E.2d 731 (1949) (photography); State v. Harris, 216 N.C. 746, 6 S.E.2d 854 (1940) (dry cleaning). And in Palmer v. Smith, 229 N.C. 612, 51 S.E.2d 8 (1948), it was held that duplicating ophthalmic lenses and furnishing frames were purely mechanical processes which did not constitute the practice of optometry, and that the legislature could not extend the definition of a trade or occupation to include ordinary activities which do not demand those special skills for which regulation is required nor have a substantial relation to the public health, safety, or welfare.

We find significant to this case the rationale in State v. Warren, supra, which held valid the regulation of real estate brokering. There the court noted two aspects *496 of real estate brokering which permitted regulation under the police power: (1) the characteristics of trust and confidence in the relationship between broker and client, which provide opportunities for collusion to extract illicit gains and which make the bond analogous to that between attorney and client; and (2) the economic significance of the real estate business, which was similar to that of the banking industry. The court pointed out that mismanagement of either could produce widespread distress and unrest, and that the need for competence in those acting as intermediaries in either field was particularly acute.

The business activity of the defendant in the sale of a list of addresses of property for rent and the telephone numbers of the lessor does not involve a confidential relationship with the customers nor negotiations or other acts as an intermediary. An established and accepted definition of a broker is "one who is engaged for others, on a commission, to negotiate contracts relative to property." 12 C.J.S. Brokers ยง 1 (1938). (Emphasis added).

The key word in this and other accepted definitions of a broker is "negotiate". In his business the defendant does not negotiate; he provides information. The definition of a real estate broker in the last sentence of G.S. 93A-2(a) is a sharp and dangerous detour from any established and accepted definition and is so broad as to include the classified ad section of a newspaper and the rental guide of a municipal chamber of commerce.

It is an arbitrary and irrational exercise of the police power to require the defendant to obtain a license as a real estate broker after first satisfying the plaintiff Board that he possessed the required knowledge of mortgages, suretyships, escrow agreements and other real property subjects, none of which is reasonably relevant to his business activity. In Real Estate Commission of Maryland v. Phares, 268 Md. 344, 302 A.2d 1 (1973), the court held that an information service virtually identical to that involved in the case before us did not constitute real estate brokering. Statutory amendments which explicitly defined advertisers and compilers of property information as real estate brokers were held unconstitutional in United Interchange v. Spellacy, 144 Conn. 647, 136 A.2d 801 (1957), and United Interchange, Inc. v. Harding, 154 Me. 128, 145 A.2d 94 (1958).

It is clear that defendant's activities do not fall within those which the legislature may constitutionally regulate as constituting the practice of real estate brokering. The reason for this conclusion is simple but profound. It has been expressed by the courts of this State many times in upholding the rights of a free people to live without undue regulation, but probably nowhere has it found a more eloquent expression than in State v. Ballance, supra. In an opinion worthy of re-reading, Ervin, J., wrote that the founding fathers of this State "possessed an acute awareness of the long and bitter struggle of the English speaking race for some substantial measure of dignity and freedom for the individual. They loved liberty and loathed tyranny, and were convinced that government itself must be compelled to respect the inherent rights of the individual if freedom is to be preserved and oppression is to be prevented. In consequence, they inserted in the basic law a declaration of rights designed chiefly to protect the individual from the State." 229 N.C. at 768, 51 S.E.2d at 734.

Two provisions of our State Constitution contain such protection and are relevant here. Art. I, sec. 1, declares that among the inalienable rights of the people are life, liberty, the enjoyment of the fruits of their own labor, and the pursuit of happiness. Art. I, sec. 19 declares that no person shall be deprived of life, liberty, or property but by the law of the land. These fundamental provisions guarantee the right to pursue ordinary and simple occupations free from governmental regulation. State v. Warren, supra.

For the reasons set forth, we hold that the amendment to G.S. 93A-2(a) enacted by Session Law 1975, c. 108, is unconstitutional as repugnant to art. I, secs. 1 and 19 of the North Carolina Constitution.

*497 Reversed and Remanded for dismissal of the action.

MORRIS and VAUGHN, JJ., concur.