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Texas Real Estate Commission v. Asgari- Reimbursement from the Real Estate Recovery Trust Account

The following article concerns a case brought before the Fourth Court of Appeals in Texas in April of 2013. The case concerns the Texas Real Estate Commission (TREC) and its appeal from a trial court's order directing payment of judgment from the Real Estate Recovery Trust. Saied Nekoueian, a licensed real estate broker, bought a piece of commercial property at a foreclosure sale. He later traded this property for interest in another piece of property jointly shared by himself and two other business partners, Shahin Asgari and Ahmad Borghei.

Nekoueian was aware at the time of transfer that Asgari fully intended to use this piece of commercial property as a used car sales lot. He made representations to Asgari that should he want to use the property for that purpose, all Asgari would need to do is rezone it. Around the time of the trade, Nekoueian had the property surveyed. The section for plat information was left blank on the survey. Additionally, the results of the survey were not given to Asgari and Borghei until some months after the trade was complete. Asgari and Borghei then submitted a rezoning application to the City of San Antonio.

Much to their surprise, the City informed them that the property could not be rezoned due to the fact that it was not platted along with the fact that it was situated in a floodplain. In order to get the property up to rezoning standards, the two would be required to spend an additional $60,000.  The partners then decided to file suit against Nekoueian.

Their suit alleged multiple causes of action against Nekoueian-one of which was violation of the Texas Deceptive Trade Practices Act (DTPA). Asgari and Borghei alleged that they relied on Nekoueian's representations in their decision to take over ownership of the property. The appellees sought recovery based on statutory language found in Chapter 1101 of the Texas Occupations Code. Specifically, §1101.601 (a) states, "The commission shall maintain a real estate recovery trust account to reimburse aggrieved persons who suffer actual damages caused by an act described by Section 1101.602 committed by... a license holder."

The parties agree on the fact that Asgari's and Borghei's sole means of recovery is under §1101.652 (a)(3). This subsection provides for situations in which a license holder is not selling property as an agent for someone else, but instead is selling it on behalf of himself. It provides a remedy for persons aggrieved by a license holder who engages in misrepresentation, dishonesty, or fraud when selling, buying, leasing, or trading real property in his own name. Appellate courts across Texas have agreed that the purpose of this statute as well as the purpose of the Trust Account is to guarantee the fidelity and honesty of the real estate salesman in his dealings with the public.

Nekoueian's misrepresentations regarding the worth and suitability for use of the property were held to be a producing cause of Asgari's and Borghei's actual damages. Furthermore, Nekoueian's conduct violated the DTPA in that he represented that the property had characteristics, uses, benefits, and qualities that it did not have and was of a particular standard and quality when it in fact was of another.

TREC argued on appeal that Nekoueian cannot be liable for a misrepresentation as to the suitability of the property because he did not know the property was not platted or that it was located on a flood plain. Therefore, TREC argues, he cannot have known the representation he made was false. However, in Miller v. Keyser, the Texas Supreme Court rejected this argument. The Court stated, "A DTPA claim does not require that the consumer prove the employee acted knowingly or intentionally. The DTPA requires that the consumer show that the misrepresentation was false and that the false misrepresentation was the producing cause of the consumer's damages." Miller v. Keyser, 90 S.W.3d 712, 716 (Tex. 2002).

The Court in this case held that the evidence was legally sufficient to determine that Nekoueian had engaged in misrepresentations, fraud, or dishonesty. The Court confirmed the trial court's order for payment from the Trust Account.

10.0Tony Ray Bertolino

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