Maryland Real Estate Commission v. Johnson

COLE, Judge. We are presented in this case with two questions: (1) whether the Maryland Real Estate Commission (the Commission) has standing to appeal court decisions, and (2) if so, whether the sale of a business operating under a lease is a real estate transaction requiring the broker of the transaction to hold a real estate license. The facts giving rise to these issues may be summarized as follows. In 1986, the Commission received twenty-five claims against the Real Estate Guaranty Fund (Guaranty Fund or Fund) 1 as a result of the activities of Edward Cowal (sales agent).

The claimants alleged that Mr. Cowal, acting as a real estate broker 2 and doing business as ⁹⁴ Gibraltar Realty Company, contracted for the sale of “business enterprises,” and kept the deposits made by the claimants even though the sales did not occur. The Commission investigated and dismissed the claims, finding that the transactions in question were business transfers not relating to real estate as required for coverage by Maryland Code (1988 Repl.Vol. and 1989 Cum. Supp.) Art. 56, § 217A(a). Thus, the Fund was not liable for payment to these claimants.

This decision was reached despite the fact that leases for the businesses had to be procured by the purchasers in order for the sales to occur. Twelve of the claimants requested and received a preliminary hearing before the Commission. Subsequent to that consolidated hearing, all twelve claims were dismissed by the Commission for lack of legal sufficiency. Eight of those claimants appealed to the Circuit Court for Prince George’s County in two separate appeals.

The appeal by the first appellant was heard by Judge Jacob Levin who affirmed the Commission’s findings. The appeal by the remaining appellants was heard before Judge Audrey Melbourne. Thereafter, all appellants joined in a motion for consolidation of all cases and rehearing before both Judges ⁹⁵ Levin and Melbourne. These judges presided over a subsequent hearing on a motion for reconsideration, and they reversed the Commission’s ruling and remanded the cases for findings consistent with the circuit court’s decision.

The Commission appealed to the Court of Special Appeals but this Court granted certiorari prior to decision by the intermediate appellate court. I Regarding the issue of standing to appeal, the Commission concedes that this Court has previously questioned but did not decide whether the Commission could appeal a circuit court reversal of a Commission decision. Real Estate Commission v. Tyler, 268 Md. 641, 642-43 , 303 A.2d 778, 779 (1973). In Tyler , this Court affirmed the trial court’s order reversing the Commission’s denial of a renewal application.

The Court chose to address the merits rather than to dismiss the Commission’s appeal sua sponte because no consideration had been given to the Commission’s right to appeal. The Court cautioned the Commission that any future appeals by the Commission would have to address the issue of standing or face dismissal. Id. Therefore, the Commission now contends that its position with respect to decisions affecting the Fund is analogous to the position of the Consumer Protection Division of the Office of the Attorney General in Consumer Protection Division v. Consumer Publishing Co., 304 Md. 731 , 501 A.2d 48 (1985).

In Consumer Protection Division , we held that the Division does have standing to appeal due, among other things, to its powers of rulemaking, investigating and prosecuting alleged violators of certain statutes, and its ability to hold hearings. Additionally, the Division has a strong interest in the outcome of its cases against violators, and would be clearly aggrieved by a reversal of its orders by a court. Id. at 746 , 501 A.2d at 56 . ⁹⁶ The Commission points out that its hearings are contested cases under Md.Code (1984 Vol. and 1989 Cum.Supp.) Ann. § 10-201(c) of the State Government Article, and the Assistant Attorney General is made a party in COMAR 09.11.03.-04g. The Commission further emphasizes that its purpose, like that of the Consumer Protection Division, is the protection of the public.

Finally, the Commission notes that it has a strong policy interest in the outcome of the case as the Fund which-it administers will be bound by the decision. This extended comparison to the Consumer Protection Division is an attempt to distinguish the Commission’s position from the position of the Board of Zoning Appeals in Board of Zoning Appeals v. McKinney, 174 Md. 551 , 199 A. 540 (1938). In McKinney , the Board of Zoning Appeals denied a permit for the operation of a gasoline service station because it conflicted with the zoning established for the area in question. Subsequently, some real estate changed ownership and use in the area, and the Board, after a rehearing, reconsidered its decision and granted the gasoline station a permit.

McKinney, who operated a church in the vicinity, appealed to the Baltimore City Court which reversed and annulled the order of the Board. It was from this order that the Board appealed. McKinney is relied on by the Respondents for the proposition that administrative agencies acting in a quasi-judicial capacity cannot appeal reversals of their decisions by circuit courts unless the authority to appeal is provided by statute. Id. at 560-61 , 199 A. at 544 .

In McKinney , we held that the Board of Zoning Appeals has no inherent standing to appeal circuit court decisions because [i]t has no executive duties, it formulates no policies, its function is merely to find facts, to apply to those facts rules of law prescribed by the Legislature, and to announce the result. It has no interest, personal or official, in the matters which come before it other than to decide ⁹⁷ them according to the law and the proved fact, and it is in no sense a party to such proceedings. Id. This Court has noted, however, that the above-stated description does not apply to all agencies and boards.

See County Commissioners of Carroll County v. Gross, 301 Md. 473 , 483 A.2d 755 (1984). Consequently, if the Commission can show that it meets the criteria of Consumer Protection Division , it will have standing to appeal despite the limitations set forth in McKinney . This Court is convinced that it is not confronted with a McKinney situation. The Commission is sufficiently different from the Board of Zoning Appeals in McKinney , and sufficiently similar to the Consumer Protection Division of the Office of the Attorney General to have standing to appeal court decisions which affect the Fund managed by the Commission.

Absent statutory authority, zoning boards have no interest in the outcome of their decisions. If the Board’s decision is overruled, it is not thereby aggrieved in the legal sense by that decision. Conversely, the Commission will be aggrieved by the reversal of its decision because the Fund it manages will be required to disburse monies to the claimants. Additionally, the Commission, much like the Consumer Protection Division, has rulemaking powers over its members, investigates claims, and can punish violators.

For all of these reasons the Commission is different in kind from those quasi-judicial agencies which have no standing, absent legislative authorization, to participate as parties in the appeals of their decisions. We hold it has standing to maintain this appeal. II We now decide whether this transfer of a business subject to a lease arose out of a real estate transaction so that the broker handling the transaction was required by statute to be a licensed real estate broker. ⁹⁸ This Court has previously examined the meaning of the term “arising out of a real estate transaction.” In Sheppard v. Bay Country Realty Inc., 297 Md. 88 , 465 A.2d 857 (1983), we construed this particular language in deciding that the sale of interests in a limited partnership which would invest in real estate was not the type of transaction the legislature intended to protect through the Fund. Id. at 96 , 465 A.2d at 861 .

In Sheppard ,, a claim was made against the Fund based upon the acts and omissions of a licensed real estate broker who sold investment shares in two limited partnerships which eventually became insolvent. The Commission’s denial of relief was upheld by this Court. The Commission concluded that the claimants had been aggrieved by the acts of a licensed real estate broker who failed to return investments which he had personally guaranteed. The claims were denied, however, because the Commission determined that the losses did not arise out of a real estate transaction within the meaning of § 217A.

Id. at 94, 465 A.2d at 860 . We held that the words “arising out of a real estate transaction,” added to the statute by Chapter 309 of the Acts of 1976, were “words of limitation on the scope of eligible claims against the Fund.” Id. at 95 , 465 A.2d at 860 . Quoting from the title of the 1976 amendment, we noted that the new language was added for “the purpose of specifying that the Real Estate Guaranty Fund applies only to transactions arising out of a real estate business.” Id. at 96 , 465 A.2d at 861 . We then looked at § 212(a) and found no mention of the syndication of investments in real estate limited partnerships either by express terms or by necessary implication.

The question then is whether sales of businesses which are subject to leases are covered, either expressly or by necessary implication, by the statute. Petitioners point to Glaser v. Shostack, 213 Md. 383 , 131 A.2d 724 (1957), for support, contending the language of § 212(a) means that the transaction in question is not the kind intended to be covered by the Fund. In Glaser , the sellers of a business ⁹⁹ were claiming that the sale in question was a real estate transaction for which a real estate broker’s license was required. This claim was intended to prevent the broker, who did not have a real estate license at the time of his first contact with the sellers, from collecting a commission on the sale.

Id. at 387-88 , 131 A.2d at 726 . The Court examined the evidence and found that there had been discussions among the parties regarding the premises which housed the business involved, but that the broker’s “contract was only to sell the ... business as such and not to procure the lease.” Id. at 388 , 131 A.2d at 726 . The Court went on to note that no assignment of an existing lease was involved, and that the owners of the business were not the owners of the real estate on which the business was located. The Court concluded that the