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Category Archives: Ozarks economy

Cassville Aldermen take on Cassville Board of Adjustment to challenge carport variance

It might seem odd to you that the Cassville board of aldermen would appeal a decision of the Cassville board of adjustment, since the board of aldermen appoints the members of the board of adjustment, and both boards are a part of the same city government. It seems odd to me that the point was not raised by the respondent on appeal.

Under Missouri statutes, boards of adjustments have some independence, and the appeal of the board of adjustment’s decision to grant a variance is the novel method that the Cassville board of aldermen chose to maintain the uniform application of their zoning regulations.

In Board of Aldermen of Cassville v. Board of Adjustment and Gerald Shaffer, nobody raised the question of whether the Board of Aldermen had the right to attempt to control the board of adjustment by appeal to circuit court. The Southern District of the Missouri Court of Appeals reversed the decision of the board of adjustment, with the effect of requiring Shaffer to remove the portion of his carport that extend over the setback line.

What are these boards?

A board of aldermen, under Missouri’s statutes for fourth-class cities, is the governing body of the city. It is the city’s legislative body, by adopting ordinances, and also the city’s executive branch, by giving orders to the mayor and city administrator. The mayor doesn’t even vote, except to break a tie.

The board of adjustment is authorized by Missouri’s planning and zoning statutes for cities, (Missouri counties have separate planning and zoning statutes) specifically sections 89. 080 through 89.110. Section 89.090 gives boards of adjustments three kinds of power:

  1. to hear and decide appeals of errors made by the planning and zoning staff,
  2. to hear and decide other appeals, as required by city ordinances, and
  3. to hear and decide applications for variances from the city’s codes relating to construction and alteration of buildings and the use of land.

The board of adjustment has the power to reverse, affirm or modify decisions of the planning and zoning board and its staff.

Under section 89,110, persons aggrieved by the decision of the board of adjustment may appeal the board’s decision to the circuit court of the county. Rather than hear evidence, the circuit court reviews the record of the proceedings of the board of adjustment, as though the circuit court were an appellate court.

Why did the Cassville board of aldermen take this matter so seriously?

Was the Cassville board of aldermen aggrieved by the decision of the board of adjustment to allow  Mr. Shaffer to have a carport that extended closer to his property line than the five feet allowed by Cassville zoning regulations?

In most challenges to the right of a party to appeal a board of adjustment’s decision, Missouri courts have been reluctant to give that right to just anyone who claims to be aggrieved. In other cases, neighbors who did not protest the decision at the board of adjustment hearing have been denied the right to appeal, as has a St. Louis alderwoman.

Regardless of the issue of whether the Cassville board of aldermen had the right to appeal the decision, the aldermen apparently wanted to hold the board of adjustment to compliance with the standards of the Cassville ordinances pertaining to variances.

Variances for structures and uses

Variances from strict application of zoning codes are allowed when the board of adjustment (or another board having such powers) has determined that the criteria for granting variances have been met. Cassville’s ordinances required that all five criteria contained in the ordinance be met, all highly subjective except that the hardship alleged to exist must not have been created by the owner or applicant and that the condition for which the variance is required must be unique to the property.

The Court of Appeals judges agreed with the Cassville aldermen’s contention that nothing about the Shaffer property was unique and that the alleged hardship–which was that visitors might have to walk to his door in the rain–was trivial.


Strong Towns: a nice idea

Structures that keep expanding bear the risk of collapsing under their own weight. As towns and cities grow, they have more and more roads and sewer and water lines to maintain. Even though developers are generally required to install streets and sewer and water lines, at least part of the cost maintaining and replacing these facilities falls on local governments, i. e., taxpayers.

Through a mention on the always interesting land-use blog Austin Contrarian, I learned about Strong Towns, an organization whose mission statement makes the claim that our preference for growth by adding infrastructure should be replaced by a focus on getting a higher return on existing infrastructure. The existing approach, Strong Towns argues, causes economic stagnation and decline and a dependence on public subsidies, because it is a “Growth Ponzi Scheme.”

While many of the ideas mentioned on the Strong Towns website, especially the blog, include concepts that are common with New Urbanism, the Strong Towns movement is founded on the forecasts of civil engineers–not the dreams of idealistic planners–who believe that that the mechanism of developers adding infrastructure to facilitate growth is financially unsupportable.

In Missouri, where much growth takes place outside incorporated towns and cities, homeowner associations (HOAs) rather than local governments have the burdens of maintaining and replacing some of the infrastructure for planned communities and subdivisions. At the same time, no funding system is in place to support the public infrastructure (arterial roads, sewer plants, etc.) which serve planned communities that have HOAs. In addition, HOAs have their own problems, especially their dependence on volunteers to handle complex issues.

The hard reality is that residential developments rarely generate enough sales tax or property tax to make the residential development pay its way in the long run. Unless we want to raise property taxes, we need to get more from the infrastructure we’ve got.

Subdivision developer gets nailed for assessments and has no special developer rights

Missouri Western District Court of Appeals just affirmed a trial court’s judgment in a way that will resound with homeowners’ association (HOA) boards across the state, many of which are struggling to raise sufficient revenues to take care of streets and amenities, even though many of the developer-owned lands that benefit from the streets are apparently exempt from assessments.

Lenders that have foreclosed on developers may find that this opinion undermines the lenders’ ability to claim to enjoy the developer’s exemption from assessments on lender-owned land. Parties purchasing land from lenders, hoping to have the status of the former developer, may find themselves heavily in debt to the HOA, perhaps blaming the lenders who sold them the land.

In Woodglen Estates Association v. Dulaney, Dulaney obtained 17 parcels of land from the FDIC. This land had once been owned the original developer Braeman, then passed through the hands of a few different parties, before ending up with the FDIC, which had taken the parcels of land from a failed bank.

The Woodglen Estates Association hired an auditor to review its finances. The auditor discovered that land owned by Dulaney had not been assessed for several years. The association then sued Dulaney, and Dulaney asserted two defenses:

  • As successor to the original developer, Dulaney should be exempt from assessments on land it owned.
  • Much of the land that Dulaney owned in Woodglen was in “parcels,” not having been subdivided into “units,” so that it should not be assessed.

The appellate court looked at the line of Missouri case law that holds that the special rights and privileges of a developer, typically reserved in the declaration of covenants for the subdivision, do not automatically pass with ownership of the developer’s real estate. These rights, called “developer rights,” “declarant rights” or “development rights,” may be assigned, but a party claiming to hold these rights has to be able to prove to have acquired them by assignment. Dulaney had no proof of assignment of declarant rights.

To make matters worse for Dulaney, the Woodglen declaration did not contain an exemption for the developer’s real estate–which is a common feature of declarations–and the appellate court noted that developers do not receive an automatic exemption. Under current Missouri law, other than in condominiums, a developer may lawfully reserve an exemption from assessment for its own real estate. The original developer simply failed to create the exemption when filing the declaration and made the mistake of including land in the declaration that was not ready to be developed.

Dulaney argued that its “parcels” were not subject to assessment, since only “units” and “unit owners’ could be assessed. The appellate court noted that some of the declaration’s provisions were ambiguous when addressing the respective rights of owners of units and parcels, but the assessment provisions were clear:  “each owner shall be obligated to pay to the Board such sum as shall have been established….,” without distinguishing between owners of units and parcels. The legal description attached to the declaration had included Dulaney’s parcel, placing this land under the provision of the declaration.

For lenders, the lesson is that any loan documents for a development loan should include a security interest in the declarant rights, and any documents showing the recovery of the developer’s real estate should include a specific assignment of the declarant rights. When the lender sells the former developer’s property, the conveyances to the purchaser should include the assignment of declarant rights. These issues are covered in more detail in this essay.

Non-compete can be enforceable without geographic limit

The basic rule is that a non-compete covenant with an employee will not be enforced unless it is reasonable in duration and with respect to the geographic area it applies to. Otherwise, employees would be trapped in jobs, because they wouldn’t be able to work if they left the employer.

But a St. Louis judge’s order was reversed by the Missouri Court of Appeals for the Eastern District in Whelan Security Co. v. Kennebrew, even though the non-compete covenant did not define the geographic area where the former employee was prohibited from competing with his former employer.

The trial judge had granted summary judgment in the employee’s favor, after having reviewed the employment contract that prohibited Kennebrew from soliciting business from Whelan’s customers or going to work for Whelan’s competitors for 12 months after leaving Whelan. Within four months after separating from Whelan, Kennebrew successfully went after one of Whelan’s customers. The trial court concluded that Kennebrew’s employment agreement was invalid, because it was “overbroad” and “not reasonable as to time and space.”

The appellate court applied a different rule of law, stating:

a restrictive covenant without geographic limitations is not per se unreasonable if the prohibition is against the solicitation of the employer’s clients and customers.

The geographic scope of Kennebrew’s contract was essentially defined by the location of Whelan’s customers.

Non-compete agreements are recognized and limited by statute in Missouri. The statute, section 431.202 RSMo,  creates a presumption that a one-year duration is reasonable, but allows an employer to prove that a longer period might be appropriate under the circumstances.







Addressing water supply issues in the Western Ozarks

Imagine this headline:

Taneycomo trout die as officials refuse to release water from Table Rock Lake

It’s not far-fetched. Something similar happened in the fall of 2011 below Lake Tenkiller, in the Ozarks of eastern Oklahoma, where low water levels resulting from the prolonged drought left that reservoir with no unallocated water. You can get an idea of the reactions from this article in the Sequoyah County Times.  All the water in Tenkiller was spoken for, and the trout fishery suffered.

What’s this about allocation of water? In reservoirs managed by the Corps of Engineers and other federal agencies, the reservoir storage capacity is allocated to various uses. For example, some of the storage capacity in Table Rock Lake is allocated to the Southwest Power Administration, a government agency that sells electricity to private and public utilities. In some reservoirs, some of the capacity is allocated to municipal water supplies or industrial users of water, such as Sequoyah Fuels, mentioned in the article about Lake Tenkiller. The Corps of Engineers is also obligated to store and release water to meet statutory mandates relating to maintenance of adequate water levels for barge traffic downstream. In the western United States, a “recreational allocation” is made to support the whitewater rafting industry.

Water scarcity is moving east, and the pace seems to be accelerating. Jim Milton’s blog, Oklahoma Water Law, does a great job covering water supply issues in Oklahoma and neighboring states. On his blog, you can read about Oklahoma’s proposed comprehensive water plan and conflicts between rural water districts and municipalities, the Tenth Circuit Court of Appeals upholding Oklahoma’s statutes prohibiting the export of water to another state, and the fight over water in Sardis Lake, where Oklahoma City’s attempt to buy the water has been blocked, at least for now, by the assertion of federal power. In reviewing recent blog entries, I was struck by the intensity of the water disputes in eastern Oklahoma and Kansas; Missourians need to pay attention to what is occurring just over the state line.

The Tri-State Water Resource Coalition has been exploring the alternatives for future water supplies for the Western Ozarks. Its annual conference, Securing Our Water Future, will be held in Springfield on November 17 and 18. I’ ll be giving a short presentation at this conference to contrast Missouri’s lack of any allocation system with the ways that surface water and groundwater are allocated in Kansas and Oklahoma. A copy of the text of my presentation is here.

Missouri and Arkansas have had the luxury of pretending that water is free. Unfortunately, the supply is finite. The Tri-State Water Resource Coalition is providing leadership and a forum for discussion. We need wise leaders to learn from the experiences of Kansas and Oklahoma, so that we can be better stewards of the water we all need.

Elements of Ozarks civil litigation: a woman, an oral agreement, cattle, a pig, a shotgun, a deputy

Real estate law practice in the rural parts of the Ozarks, at least at the level of taking phone calls from prospective clients, often involves unwritten agreements, a woman’s role, cattle, guns, vehicles, accusations of trespass and calling the sheriff. Once in a while, a case makes it to the appellate court, as in Manley v Meyer, which has these common ingredients.

Manley had an unwritten agreement with William and Linda Meyer that allowed Manley to put cattle on 57 acres owned by the Meyers. Under the agreement, Manley could also hunt, cut hay, and ride ATVs on the property for a payment of $1,000 for a one-year period.

Over something else, the Meyers filed a suit against Manley, which they settled under the terms of a written agreement filed with the court, requiring Manley to pay the Meyers the sum of $1,000 for rent and $125 for a pig. In addition, Manley was required to remove his cattle from the Meyers’ pasture before a deadline of September 10, 2008. The Meyers were required to return a shotgun and a camper to Manley.

Manley picked up a few of the cows on September 9, but the Meyers told him not to use ATVs, dogs or horses to assist with the roundup. The Meyers offered to put up a pen with cattle panels to catch the cattle, if Manley would supply feed to lure them in. By December, Manley had been unable to schedule a time to pick up the remainder of the cattle, apparently because the times he suggested were inconvenient for the Meyers. But Manley continued to deliver feed to the locked pen.

On December 2, Mrs. Meyer asked Manley to deliver additional feed, but Manley insisted that he was going to pick up the cattle that afternoon and would bring the sheriff with him. At the pen, Mr. Meyer refused to let Manley have the cattle unless Manley gave three calves to the Meyers as compensation for feeding the cattle. Manley refused, and Mr. Meyer told him that he needed to leave because he was trespassing. The deputy advised that his orders were to keep the peace, and that if Manley could not have his cattle, he had to leave.

A few months later, Manley sued the Meyers for $28,000, alleging conversion of his cattle, his shotgun and several cattle panels and breach of the settlement agreement. Meyers fired back with a claim for $2,340 for hay fed to the cattle, $1,500 for boarding the cattle, and $500 for fence repair.

At a trial before a judge without a jury, Manley testified about the value of his cattle and shotgun, the number of cattle (they had calves and the calves had calves while on the Meyers’ pasture). The Meyers made no objection to Manley’s testimony about the value of his shotgun or the cattle. The judge awarded $28,000 to Manley for breach of the settlement agreement requiring them to return his cattle and shotgun and denied the Meyers’ counterclaim entirely.

The Meyers appealed. They claimed that Manley didn’t introduce sufficient evidence about the number of calves born and surviving and the value of the cattle for which he did not have papers showing the amount paid for them. They also claimed that Mrs. Meyer had no part of the refusal of the return of the cattle.

If the $28,000 judgment were only against Mr. Meyer, then Manley could not require that it be satisfied out of the assets jointly owned by Mr. Meyer and Mrs. Meyer. When a party refuses to pay a judgment, the holder of the judgment has the right to enlist the assistance of the courts (through garnishment) and the sheriff (through levy and execution) in seizing the assets of the judgment debtor. Typically, almost everything that married couples have is jointly owned, so the Meyers were attempting to avoid the effect of the judgment by claiming that Mrs. Meyer had nothing to do with it. But the appellate court noted that Mrs. Meyer had signed the settlement agreement requiring the return of the cattle and shotgun, so that she was jointly liable, even though only her husband had the key to the lock on the cattle pen.

Now imagine that you, blog reader, are a judge on the court of appeals. There was no detailed judgment from the trial court, which might have included specific findings of fact and legal conclusions to indicate which rules of law the judge applied. In the appeal, Manley did not file a brief that would have contained legal arguments to refute those made by the Meyers.

As appellate judge, you would be relieved to know that the appellate court has rules that apply when the judgment of the trial court does not include findings of fact and conclusions of law. When no party has asked that the judge make written findings and conclusions, the appellate court presumes that “all fact issues were found in accordance with the judgment” and that the judgment will be upheld “under any reasonable theory presented and supported by the evidence.” And the trial judge is given great deference as to his evaluation of the credibility of the witnesses and his weighing of the evidence.

In other words, the trial court’s judgment will be affirmed absent an incredibly blatant misstatement of a rule of law. Most experienced lawyers will ask for written findings of fact and conclusions of law before the start of the trial. At the end of the trial, the judge will ask one or both lawyers to prepare findings and conclusions to submit to the judge, which the judge will review, amend and sign. Sometimes, the judge has not made up his mind at the conclusion of the trial and the findings and the conclusions assist the judge in making a decision.

Taxpayers vs. Ratepayers: Taxpayers lose

St. Charles County wanted to widen a road, which required moving the gas line within the right-of-way of Pittman Hill Road. Pittman Hill Road was created by subdivision plats which designated the road’s right-of-way as a utility easement for gas lines (among other utilities), dedicating the entire right-of-way to the public. 

The County asked Laclede Gas Company to pay for the relocation of its gas lines to the right-of-way of the reconstructed road. Laclede claimed that this amounted to an unconstitutional taking of its property. On a motion for summary judgment, the trial court ruled for the County, requiring Laclede Gas to pay for the relocation. Laclede appealed directly to the Missouri Supreme Court.

On appeal, the County made four objections: Read the rest of this entry

Missouri Supreme Court asked to re-evaluate law on calculating deficiencies after foreclosures

After a real estate foreclosure in Missouri, lenders often sue the borrower and any guarantors, seeking a “deficiency judgment,” which is the difference between the price paid at the foreclosure sale and the amount owed, which includes the costs of the foreclosure sale. Often there is no bidder at the buyer at the foreclosure sale, so whatever amount the lender bids is accepted without challenge.

Next, the lender sues the borrower (and any guarantors) for the difference between the lender’s bid and the amount owed. The borrower always wishes that the lender’s bid had been high enough to equal the amount owed, so that the amount of the deficiency would be eliminated. But the lender has no incentive to bid higher than the minimum amount needed to recover the property. A Missouri court, under existing judicial decisions,  cannot use its equitable power to adjust the amount of the deficiency unless the borrower proves the existence of fraud, unfair dealing or mistake in the conduct of foreclosure sale. There is no clear standard for determining the existence of “unfair dealing”; sales have been upheld when as little as 10% of fair market value has been offered.

In a recent case from the Eastern District of the Missouri Court of Appeals, First Bank v Fischer & Frichtel, Inc., the borrower acknowledged that the court had no power to adjust the amount of the deficiency, but asked the Court of Appeals to transfer this case to the Missouri Supreme Court, for consideration of adopting a different rule of law, such as the rule that allows court would be able to determine the foreclosed property’s fair market value, without the necessity of proof of fraud, unfair dealing or mistake in the sale proceedings. This alternate rule is applied in several other states.

Following Missouri Supreme Court Rule 83.02, the Court of Appeals ordered that this case be transferred to the Missouri Supreme Court “because of the general interest or importance of a question involved in the case or for the purposes of reexamining existing law.”

This question is important for several reasons, in my opinion:

  • There is no clear guidance in the law to assist foreclosing lenders in setting the amount that they will bid; this situation is an invitation for bids to be low, unless there are other bidders.
  • Because of the unprecedented number of properties being foreclosed, and the inability to quickly resell foreclosed property, there are relatively few bidders, whose bids would ordinarily establish the fair market value.
  • Lenders, facing the prospect of incurring expenses indefinitely for holding the foreclosed property (taxes, mowing, security, insurance, prevention of freezing pipes, etc.), bid low, and hope to collect on a deficiency judgment, maybe not now but at some future time when the borrower recovers financially. If courts have no power to determine whether a bid (from a lender or a third party) is in some sense fair, lenders have a clear incentive to bid less than the property is worth.

But does the absence of bidders mean that many foreclosed properties have no value? Perhaps not individually, but marginally. Most investors have all the property they need; nobody needs another vacant rent house or strip center. Investors and other potential buyers are content to let the foreclosing lenders hold the foreclosed properties until the market is ready to absorb them.

Why should the Missouri Supreme Court, rather than the legislature, address this issue? Rules of law in a representative democracy should be made by those elected to be lawmakers. The Missouri General Assembly has not addressed this issue, though the inequities of the present foreclosure statutes have been long apparent. Perhaps the General Assembly will take a look at a solution. The court or the legislature needs to hear from representatives of lenders, appraisers, consumer advocates, title insurers, and lawyers to create procedures that provide more fairness.

If the plat complies with the regulations, approval is mandatory

Real estate developers (remember them?) sometimes feel as though they’ve been pulled through a knothole backwards by the time they get a proposed subdivision plat to the stage at which it can be submitted to the local government for approval. According to several Missouri appellate opinions, if a proposed plat complies with the subdivision regulations, the local government has no choice but to approve it.

But reality is different, as shown by Alexander & Lindsey v. Platte County, an opinion issued last week by the Court of Appeals for the Western District of Missouri. The court reversed the trial court’s refusal to order that the Platte County Commission approve Alexander & Lindsey’s preliminary subdivision plat. But the appellate court noted that the county government would have additional opportunities to coerce Alexander & Lindsey into making more concessions if it attempted to go beyond the preliminary plat to the submittal of a final plat.

“Preliminary plats” are not mentioned in Missouri’s statutes that authorize counties to adopt and administer subdivision regulations. But the two-stage plat approval process is valuable for developers and planning and zoning boards. The preliminary plat approval process is often the means of obtaining approval for an entire project to be constructed in phases. Once the preliminary plat is approved, the developer can proceed with some confidence that final plats of each phase of the project will be approved when submitted. The preliminary plat approval process, sometimes done in conjunction with a rezoning application, introduces the proposed project to the public and the scrutiny of neighbors and a variety of government agencies.

During the preliminary plat approval process, the developer learns that the subdivision regulations, as written, do not represent the full scope of requirements. Often the government’s preferences for stormwater control, traffic signals, intersection improvements and other expensive issues are not expressed in the regulations. The preliminary plat application doesn’t seem to move forward, until the developer has agreed to install infrastructure that is beyond the requirements of the regulations.

When Alexander & Lindsey submitted a preliminary plat for a commercial subdivision with five lots ranging in size from 2 to 4.6 acres. Alexander & Lindsey completed a traffic study and a drainage study, which were approved by the county’s engineer and the Missouri Department of Transportation (MODOT).  The Platte County planning and zoning director found that it complied with the county regulations and recommended that the P&Z board approve it.

When the preliminary plat hearing took place before the P&Z board, several persons expressed concerns. Expressing “concerns” are a common manner of objecting to a project for reasons that are not based on regulations. A public water supply district represented that it could supply drinking water, but not in adequate volume or pressure for fire-suppression. An alderman from the nearby town of Weston was concerned that the project’s building setback line was only 75 feet, rather than 100 feet, as required by Weston’s ordinance; Weston had previously rejected the developer’s annexation petition. MODOT’s engineer stated that MODOT regulations did not require the elimination of a driveway, as suggested by a P&Z board member.

Even though the proposed preliminary plat fully complied with all regulations, the P&Z board voted it down. The developer appealed to the Platte County Commission, which was not bound to follow the P&Z board’s recommendation. The Commission upheld the P&Z board’s denial, citing four reasons:

  • lack of specification of proposed uses
  • lack of water for fire suppression and lack of sewer facilities
  • potential impact of possible sewer lagoons on neighboring properties and the public
  • potential for traffic hazards from the existence two driveways

The appellate court noted that these four objections were outside the scope of the county’s subdivision regulations. Therefore, the county’s refusal to deny the preliminary plat was arbitrary, and the trial court was instructed to order the Commission to approve the preliminary plat.

Missouri’s liberal Supreme Court judges dissent in favor of free enterprise, while majority protects licensed real estate leasing agents

Judge Wolff (who has announced his imminent retirement) and  Chief Justice Teitleman of the Missouri Supreme Court have often been characterized as liberals, soft on criminals and hard on business. However, when the First Amendment’s protection of free speech is at stake, Wolff and Teitleman can blow the trumpet for free enterprise. Wolff’s keen dissent (to which Teitleman joined) in Kansas City Premier Apartments, Inc. v. Missouri Real Estate Commission, stands in stark contrast to the majority’s stodgy defense of the real estate brokerage industry’s state-sanctioned cartel.

Unquestionably, licensed real estate agents perform valuable services to sellers and buyers of real estate. I refer my clients to several whom I have found to be ethical, energetic, and effective in the selection of property for buyers and in the marketing of property for sellers. Real estate commissions are often very hard-earned.

The Missouri Real Estate Commission, a government agency that issues licenses to real estate brokers and salespersons, petitioned the trial court for an injunction against KCPA’s website advertising and use of rental advisors to match prospective tenants with housing. KCPA claimed that the Missouri statutes requiring licenses for this activity were unconstitutional, denying KCPA its rights of free speech, due process and equal protection. The trial court’s injunction prohibited KCPA from contracting with property owners to receive payment for referrals of tenants, from performing other acts for which real estate licenses are required and from dispensing $100 gift cards to tenants.

As Wolff points out, the majority of the Missouri Supreme Court affirmed an injunction against Kansas City Premier Apartments (KCPA), which had done nothing more than convey “truthful information through its website and through its ‘rental advisors’ to potential renters who are in the market for apartments.” KCPA was paid for these services by the owners of the property to be rented. Wolff calls the injunction against KCPA’s activities “the state’s suppression of KCPA’s distribution of this information.”

The statute at issue is section 339.010 RSMo, which defines real estate brokerage by listing the activities for which a real estate license is required, along with many exceptions. Under section 339.010.7(5), a license is not needed for “any person employed or retained to manage real property by, for, or on behalf of the agent or the owner of any real estate if the person’s activities are limited to delivering a lease, receiving a lease application, showing a rental unit, conveying information prepared by an owner or other clerical or administrative tasks. These exempt activities obviously encompass much of what licensed real estate agents do under listings agreements for rental property.

The court’s majority rejected KCPA’s argument that its activities fit into the exemption, stating that the legislature intended to protect the public from “the evils of fraud and incompetency” by enacting the real estate licensing statutes. The majority of the court found that KCPA’s activities “are not limited enough” to fit the exemption, because KCPA provided rental advisors who assisted with matching tenant’s desires to particular units and advised about “apartment search strategies.”

In a part of the opinion relating to KCPA’s allegation that the application of the licensing law denied KCPA’s freedom of speech, the majority cryptically stated that it would defer to the trial court’s weighing of the evidence about the extent of KCPA’s activities, then cited several federal court decisions that have upheld professional licensing statutes, applying the “intermediate scrutiny” test to hypothetical facts, rather than those found by the trial court. In free speech cases, the United States Supreme Court applies a “strict scrutiny” test to governmental regulations restricting non-commercial speech (political and artistic expression) and the “intermediate scrutiny” test to commercial speech, such as advertising.

The majority rejected KCPA’s claim of denial of equal protection, which was based on the assertion that the licensing statute creates exemptions that do not advance the purposes of the licensing statute. The court found the exempt classes of persons exempted by the licensing statute (attorneys, persons leasing their own property, trustees, governmental employees, advertising media, etc.) met the applicable standard of minimum rationality. The court briefly dispensed with the due process argument, claiming that the simple words of the statute defined with clarity which activities were prohibited without a license.

Wolff’s dissent, like the majority opinion, doesn’t contain an elaboration of the trial court’s fact-finding. Instead, Wolff merely points out that there was no evidence that KCPA conveyed anything other than truthful information. Wolff’s dissent argues that the recent U. S. Supreme Court decision, Sorrell v. IMS Health, requires that the Missouri courts apply a “heightened scrutiny” test to the licensing statute.

“Heightened scrutiny” is appropriate to evaluate a restriction on commercial speech when the regulation is “content-based” and “speaker-based.” The Missouri real estate licensing statute is directed at the content of real estate advertising (listing information and advertising of rentals and homes) and the identity of the speaker (persons not holding licenses are targeted). Without facts to show that KCPA’s activities were harmful or untruthful, Wolff asserts that the “state has no business suppressing this speech under its police power to regulate occupations, and [that] the broad injunction that the Court upholds in the principal opinion violates the First Amendment.”

Occupational licensing has replaced unionization, in some ways, as a method of restricting competition. Each regulated occupation has a trade association and many have political action committees. These organizations make campaign contributions and hire lobbyists to influence legislation that protects the occupation from competition. Legislators appear to be pro-business when they seek to protect occupational licensing, while they appear to  be anti-business if they protect unions.

In this new opinion, the majority’s opinion took a non-activist position, respecting the legislature’s creation of a system of licensing for real estate agents. The dissenting judges took a fundamental rights approach, giving less deference to the legislation and more to the constitutional protection of speech. In a sense, the majority protected property (the value of real estate licenses) at the expense of liberty (the freedom of consumers and entrepreneurs to provide a service without governmental interference).

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