Coldwell Banker Residential Real Estate Services, Inc. v. Bishop , 26 Ohio App. 3d 149 ( 1985 )

I respectfully dissent. In my judgment, Coldwell Banker's providing the purchaser with a Sears "Home Buyer's Savings Book" (entitling purchaser to discounts on purchases of Sears merchandise) violates R.C. 4735.18(N). Further, that subsection of the statute is a constitutionally valid regulation. I would enter final judgment to that effect. A brief, summary statement of my reasons follows.

Extensive search has not disclosed any Ohio decision construing R.C. 4735.18(N), reported or unreported.

A fair interpretation of the statute, in my opinion, is that it prohibits a broker's offer to furnish a discount scheme as an added inducement to the prospective buyer to sign the real estate contract, over and above the consideration recited in the contract. I agree with the majority's conclusion that the offer or promise qualifies as "consideration" even though it flows from a third party; we must use the customary, commonlaw meaning of that term, in the absence of any statutory definition. However, I do not believe the inquiry ends there. In my opinion, the "consideration" referred to in the subdivision isthe "consideration recited in the sales contract," by which is meant the promises or things of value that support the real estate transaction. In other words, the statute is designed to prohibit offers by real estate licensees (brokers or salesmen) to furnish anything of value as an inducement for a buyer to sign a real estate contract, other than (or in addition to) the consideration flowing between buyer and seller as specifically recited in the contract.

This conclusion springs from my view that subdivision (N) is not clear on its face, but ambiguous. Interpretation requires us to look at the several factors listed in R.C. 1.49, which in turn lead us to the following deductions: (1) the objects of the subdivision are (a) to keep the broker a broker and not allow him to become a participant in the real estate transaction, and (b) to protect the ordinary house buyer from being distracted and perhaps misled by extraneous considerations; (2) the consequence of this interpretation is to foreclose a flood of flashy inducements that would tend to convert real estate transactions into prize-winning games, whether the inducements are disclosed or undisclosed in the real estate contract; (3) this prohibition is closely related to the other prohibition in subdivision (N), which forbids the offering of real estate or improvements "as a prize in a lottery or scheme of chance"; (4) the legislative history of subdivision (N) suggests that if the legislature had desired simply to require a disclosure of the inducement by reciting it in the contract, the legislature could have used language to that effect ("undisclosed"), as was done in subdivisions (M) and (O); and (5) the administrative construction of subdivision (N) is shown to be consistent with this interpretation by American Homeowners Assn., Inc. v. Ohio Dept.of Commerce (Mar. 21, 1974), Cuyahoga App. No. 32891, unreported, and by the pronouncement dated August 25, 1983, by the Ohio Real Estate Commission (communicated to Coldwell Banker by letter of April 12, 1984). These deductions lead me to conclude that all broker-offered inducements are prohibited if they go beyond the consideration flowing between buyer and seller as set forth in the contract.

The third-party inducement cannot be made a part of "the consideration recited in the sales contract" by the simple device of a so-called agreement between the seller and the buyer.

The prohibition against offering extraneous inducements is constitutional. A legislative regulation is presumed to be constitutional unless its invalidity is clearly demonstrated,Ohio Pub. Interest Action Group, Inc. v. Pub. Util. Comm. (1975),43 Ohio St.2d 175 [72 O.O.2d 98], paragraph four of the syllabus, and in this case, Coldwell Banker has failed to demonstrate clear incompatibility with any constitutional protection. R.C. 4735.18(N) does not violate substantive due process because its purposes (recited above) fall within the scope of the state's police power; the subdivision is reasonably designed to accomplish those purposes (essentially consumer protection), Ohralik v. Ohio State Bar Assn. (1978),436 U.S. 447; and the subdivision is not arbitrary, discriminatory, oppressive or otherwise unreasonable. It does not violate the Equal Protection Clause because it applies uniformly to all real estate licensees, even though it is not uniformly applicable to all persons performing the middleman function of a broker. SeeNebbia v. New York (1933), 291 U.S. 502, 529-530; and Benjamin v.Columbus (1957), 167 Ohio St. 103, 116-118 [4 O.O.2d 113]. Finally, contrary to the conclusion of my brothers, the statute as interpreted in this dissent does not violate Coldwell Banker's right to free speech. That right is to communicate "commercial speech," which is not entitled to the same degree of protection as other forms of speech. Since the offer of extraneous inducements is reasonably regulated by the statute, the communication of this offer is merely a component of the forbidden conduct. Coldwell Banker's right to advertise its services as a broker performing services allowed by Ohio law is not infringed.