                           ATTORNEYGENERAL                 OF TEXAS
                                      GREG       ABBOTT



                                         August 17,2004



Mr. Stephen D. Thomas                             Opinion No. GA-0233
Executive Director
Texas Residential Construction   Commission       Re: Whether the Texas Residential Construction
Post Office Box 13 144                            Commission Act excludes from its definition of
Austin, Texas 78711                               “builder” businesses and individuals engaged
                                                  in residential construction    and licensed by a
                                                  municipality, and whether the Texas Residential
                                                  Construction Commission may seek to enjoin
                                                  builders who have failed to obtain a certificate of
                                                  registration from the Commission (RQ-0176-GA)

Dear Mr. Thomas:

        You ask two questions about title 16 of the Property         Code, the Texas Residential
Construction Commission Act (the “Act”).’

I.     Background

         During its Seventy-eighth Regular Session, the Texas Legislature enacted House Bill 730,
which created the Texas Residential Construction Commission (the “TRCC”) to regulate the
residential construction industry at the state level. See Act ofMay27,2003,78th  Leg., R.S., ch. 458,
2003 Tex. Gen. Laws 1703 (enacting title 16, chapters 401 to 438 of the Texas Property Code). The
Act charges the TRCC with adopting limited statutory warranties and developing performance
standards for residential construction. See TEX.PROP.CODEANN. $5 430.001-,011 (Vernon Supp.
2004) (chapter 430). A significant portion of the Act is devoted to establishing a state-sponsored
inspection and dispute resolution process designed to significantly reduce the need for litigation
when residential construction disputes arise between builders and their customers. See HOUSE
COMM.ONREGULATED           INDUSTRIES,  BILLANALYSIS,Tex. Comm. Substitute, H.B. 730,7Sth Leg.,
R.S. (2003) (Background and Purpose); see also generally TEX. PROP. CODEANN. $5 426.001-
430.01 1 (Vernon Supp. 2004) (subtitle D). Participation in the dispute resolution process is a
prerequisite to legal action resulting from home construction transactions governed by the Act. See
id. 9 426.005.


         ‘SeeLettersfrom StephenD. Thomas,ExecutiveDirector,TexasResidentialConstiction Commission,to
HonorableGregAbbott,TexasAttorneyGeneral(Jan.2X,2004andFeb. 19,2004)(on file withopinion Committee,
also available uf http://www.oag.state.tx.us)
                                          [hereinafterRequestLetterand SupplementalLetter].
Mr. Stephen D. Thomas - Page 2                   (GA-0233)




        Germane to your questions, the Act defines those individuals and entities subject to the
TRCC’s rules and regulations, see id. 5 401.003, and gives the TRCC the authority to adopt rules
necessary to implement the Act’s provisions, see id. 5 408.001. Your first question asks about the
extent to which TRCC may enforce the Act’s provisions. See Request Letter, supra note 1, at 1.
Your second question concerns the meaning of “builder” as it has been defined under the Act. See
Supplemental Letter, supva note 1, at 1. For conceptual simplicity, we address your questions in
reverse order.

II.     “Builder”

        Section 401.003 of the Act defines “builder” as

                any business entity or individual who, for a fixed price, commission,
                fee, wage, or other compensation,       constructs or supervises or
                manages the construction of:

                        (1) a new home;

                       (2) a material improvement      to a home, other than an
                improvement solely to replace or repair a roof of an existing home;
                or

                        (3) an improvement to the interior of an existing home when
                the cost of the work exceeds $20,000.

See TEX. PROP.CODEANN. 4 401.003(a) (Vernon Supp. 2004). The term includes:

                        (1) an owner, officer, director, shareholder, partner, affiliate,
                or employee of the builder;

                        (2) a risk retention group governed by Article 21.54,
                Insurance Code, that insures all or any part of a builder’s liability for
                the cost to repair a residential construction defect; and

                        (3) a third-party warranty company and its administrator.

Id. 3 401.003(b).   However, the term “builder” in the Act excludes

                any business entity or individual who has been issued a license by this
                state or an agency or political subdivision of this state to practice a
                trade or profession related to or affiliated with residential construction
                if the work being done by the entity or individual to the home is
                solely for the purpose for which the license was issued.

Id. 3 401.003(c).   This exclusion   gives rise to your question.
Mr. Stephen D. Thomas - Page 3                    (GA-0233)




         You note that “some cities in Texas have ordinances requiring those who perform certain
home repairs and renovations to register with the city.” Supplemental Letter, supva note 1, at 2-3.
As examples, you refer to home improvement ordinances in San Antonio and Dallas that apparently
authorize the issuance of licenses to businesses and individuals engaged in home repair and
renovation, see id. at 3,* activities which we may assume place these businesses and individuals
within the Act’s general definition of “builder.” Because the Act excludes from the definition of
“builder” “any business entity or individual who has been issued a license by this state or an agency
or political subdivision,” TEX. PROP.CODEANN. 5 401.003(c) (Vernon Supp. 2004) you ask:

                Are persons who have registered under a municipal ordinance to
                perform home repairs within the municipality excluded from the
                provisions of House Bill 730 that relate to “builders” because of the
                language in Property Code 4 401.003(c)?

Supplemental    Letter, supra note 1, at 1.

         The exception to the definition of “builder” is much more narrow than your question
suggests. Section 401.003(c)‘s relevant text does not end at excluding just those business entities
and individuals that have been issued licenses by the state and its political subdivisions. Rather, the
subsection’s language modifies that clause and narrows the exclusion to those businesses and
individuals that have received licenses “to practice a trade or profession related to or affiliated with
residential construction.”   TEX. PROP.CODEANN. $401.003(c) (Vernon Supp. 2004) (emphasis
added). To properly address your question, then, we must understand what it is to be a trade or
profession related to or affiliated with residential construction.

         In this respect, we generally agree with your interpretation of the Act. You state that
“the [TRCC] interprets the exclusionary language in the definition of ‘builder’ in Property Code
5 401.003(c) to exclude trade professionals, such as state-licensed plumbers, electricians and air
conditioning contractors, if their work on a home is limited to the type of work for which they hold
a license.” Supplemental Letter, supra note 1, at 3. Section 401.003(c) also excludes trades and
professions licensed by political subdivisions of the state, provided that the licensed trades and
professions are only related to or associated with residential construction.   See TEX. PROP.CODE
ANN. 5 401.003(c) (Vernon Supp. 2004).

         “In construing a statute,   a court may consider among other matters the administrative
construction of the statute        .” TEX. GOV’T CODE ANN. 5 311.023(6) (Vernon 1998); see
Osterberg v. Pecu, 12 S.W.3d 3 1,5 1 (Tex. 2000), cert. denied, 530 U.S. 1244 (2000); Ins. Co. of
State of Pa. v. SteNtik, 995 S.W.2d 939, 943 (Tex. App.-Fort Worth 1999, pet. denied)


         ‘SanAntonio’sordinancestatesin relevantpart: “Theownerof a businessandall partnersof a partnershipand
all offkers of a corporationwhoare activelyengagedinthe performanceof homeimprovementservicemustqualifyfor
the licenserequiredby this division.”SANANTONIO,   TEL,CODEOF~RDINANES,    ch. 16,art.IV,div.2, g 16-82(2004),
availabk at http://livepublish.municode.com/l8/lpext.dll?f=templates&~~in-j.hbn&vid=l   1508. This officedoes
not interpretcity ordinancesin the opinionprocess,seeTex.Att’yGen.Op.No. X-0485 (2002)at 1,andtherefore,we
cannotcommentfurtheron theseordinances’      specificrequirements.
Mr. Stephen D. Thomas - Page 4                  (GA-0233)




(interpretation ofTexas Workers Compensation statute in memo to field officer by executive director
who is charged with enforcing statute was entitled to serious consideration in construing statute).
In addition, this office has maintained that so long as an agency’s interpretation is a reasonable one
that does not do violence to the statutory language, this office will defer to it. See Tex. Att’y Gen.
Op. No. JC-0330 (2001) at 2 (deferring to the Secretary of State’s reasonable interpretation of the
Election Code). As the agency responsible for enforcing the Act, your interpretation is entitled to
serious consideration.    Furthermore, your interpretation that section 401.003(c) excludes licensed
trades and professions that are closely associated with residential construction is reasonable, and we
defer to it.

          Indeed, this reading comports with the Act’s express goals. An essential purpose of the Act
is to create state performance standards for residential construction and establish a state-sponsored
inspection and dispute resolution process that assists consumers in resolving construction issues with
their homebuilders. See HOUSECOMM.ONREGULATED                INDUSTRIES,  BILLANALYSIS,Tex. Comm.
Substitute, H.B. 730, 78th Leg., R.S. (2003) (Background and Purpose).               “The lack of state
performance standards for residential construction in Texas and case law makes it difficult for
homeowners and homebuilders to resolve construction issues without costly and time consuming
litigation.” Id. To exclude business entities and individuals that fall within the general definition
of “builder” from the requirements of the Act because a municipality licensed them to engage in
residential construction would frustrate the obvious intent to standardize the entire residential
construction industry at the state level. The exception could easily become the rule. Because a court
will presume that the legislature in enacting a statute intended a “‘result feasible of execution,“‘see
In Re Missouri R.R. Co., 998 S.W.2d 212, 216 (Tex. 1999) (quoting TEX. GOV’T CODEANN.
§ 311.021(4) (1998)), such a construction cannot stand.

         Consequently, the exclusion articulated in section 401.003(c) excepts from the definition of
“builder” residential construction-related trades and professions, such as plumbers and electricians.
Any business entities or individuals falling within the general definition of“builder” that have a state
or local license to engage in residential construction, such as home repair and renovation, as opposed
to a related trade or profession, do not tit within the exclusion.

III.    Commission    Enforcement     of the Act

         You next ask us about section 416.001 of the Act, which provides that a “person may not act
as a builder unless the person holds a certificate of registration under this chapter.” TEX. PROP.
CODEANN. 5 416.001 (Vernon Supp. 2004). The commission is charged with “adopt[ing] rules as
necessary for the implementation of [the Act],” id. 4 408.001, and as such, has adopted the rule that
“all builders must register with the commission       in order to do business as a builder in the state
of Texas.” 29 Tex. Reg. 258 (2004) (emerg. rule 10 TEX.ADMIN.CODE§ 303.1) (adoptedDec. 19,
2003, expired Apr. 16,2004) (Texas Residential Construction Commission).          In light of this rule,
you write:

                It is the commission’s intention to notice those persons of their
                obligation to become registered under the Act and to give those
Mr. Stephen D. Thomas - Page 5                 (GA-0233)




               persons an opportunity to become registered.       If a person fails to
               become registered after notice from the commission, the commission
               intends to seek the assistance of the Office ofthe Attorney General in
               enforcing the provisions of the Act, including bringing an action for
               equitable relief to enjoin a person who fails to become registered as
               a builder.

Request Letter, supra note 1, at 2. You ask:

               If the commission determines that a person is operating as a builder,
               as that term is defined in Property Code 5 401.003, without having
               obtained a certificate of registration, and the person fails to register
               once having been notified by the agency of its obligation to do so,
               may the commission, with the assistance of the Attorney General,
               seek an injunction against that person to prevent further violation of
               the statute?

Id. at 1

         While the Act expressly provides for enforcement of administrative penalties levied against
registrants, see TEX. PROP.CODEANN. $3 419.001-,004 (Vernon Supp. 2004) (chapter 419), it does
not have a parallel provision for enforcing section 416.001’s registration requirement, or any rules
adopted by the commission that may be associated with this section. By contrast, other Texas
agencies have specific authority in their enabling statutes that allow them to seek injunctive relief
for future or present violations of their rules. See, e.g., TEX. EDUC. CODE ANN. fj 12.127(b)(2)
(Vernon Supp. 2004) (Texas Education Agency - “On request of the commissioner, the attorney
general may bring suit        for. . . injunctive relief.  .“); TEX. AGRIC. CODEANN. 3 12.017(b)
(Vernon 1995) (Texas Department of Agriculture - “On request of the department, the attorney
general shall sue . to enjoin a violation or threatened violation of a rule adopted under this
section.“); TEX. GOV’T CODE ANN. 5 511.014(a) (Vernon 1998) (Texas Commission on Jail
Standards - “[Tlhe commission may bring an action in its own name to            enjoin a violation of
  . . a commission rule . . . The attorney general shall represent the commission.“).       The Act,
TRCC’s enabling statute, lacks this specific language.

        However, Chapter 2001 of the Government Code, the Administrative                Procedure Act,
authorizes the attorney general to enforce state agency rules at the request of a state agency, despite
an absence of specific language in the agency’s enabling statute. See TEX. GOV’T CODE ANN.
5 2001.202 (Vernon 2000). Specifically, section 2001.202 provides:

               (a) The attorney general, on the request of a state agency to which it
               appears that a person is violating, about to violate, or failing or
               refusing to comply with a final order or decision or an agency rule,
               may bring an action in a district court    to:
Mr. Stephen D. Thomas - Page 6                   (GA-0233)




                        (1) enjoin or restrain the continuation   or commencement     of
               the violation; or

                           (2) compel the compliance with the final order or decision or
               the rule.

               (b) The action authorized by this section is in addition to any other
               remedy provided by law.

Id. (emphasis added).

        The plain language of section 2001.202 provides TRCC an avenue to notify the attorney
general of builders TRCC knows to be in violation of its registration rule and to request that the
attorney general seek relief from these violations. Once notified, the attorney general may pursue
all remedies to which the state is entitled, including injunction.

         We note that in the two instances that the language of 2001.202 has been expressly
considered in case law, Texas judges have been hesitant to read it as expansively as the plain
language of the statute suggests it should be read. For example, in an opinion in which the majority
did not address the issue, the dissent observed that an injunction may not always be the appropriate
remedy, and section 2001.202 does not change the proof necessary to establish the propriety of
injunctive relief. See Priest v. Tex. Animal Health Comm’n, 780 S.W.2d 874, 882 (Tex. App.-
Dallas 1989, no writ) (Howell, .I., dissenting) (construing Act ofMay30, 1981,67th Leg., R.S., ch.
816, § 2, 1981 Tex. Gen. Laws 3094, 3095, former article 6252-13a, 5 19A of the Revised Civil
Statutes, the substantively similar precursor to section 2001.202) (“We must hold that this      statute
is no more than a general statement of principle that the State, its agencies, and its employees may
obtain injunctive relief wherever the usages of equity forged out over the centuries make injunctive
relief available and appropriate.“). In addition, the Third Court of Appeals of Texas has questioned
section 2001.202’s applicability in the situation where violation of an agency’s rule is expressly, and
singularly, covered by a civil penalty. See Tex. Health Care Info. Council v. Seton Health Care
Plan, Inc., 94 S.W.3d 841, 852 (Tex. App.-Austin 2002, pet. denied) (dictum).

        In Seton, the Texas Health Care Information Council, a state agency, required all health
maintenance organizations to tile a detailed annual report with the council. See id. at 844. Failure
to produce the report was a violation of a council rule, which violation carried a civil penalty. See
id. Seton Health Care Plan, Inc., a health maintenance organization (the “HMO”), failed to tile the
required report and was fined. See id. The HMO appealed the administrative ruling to the district
court, and the state counterclaimed seeking the additional remedy of an injunction against the HMO
by invoking section 2001.202. See id. at 844.45. The district court ruled in favor of the HMO,
denying the state’s injunction; the state appealed. See id. at 845.

        The Third Court of Appeals, on the question of injunction, noted in dicta that the relevant
section of the Health and Safety Code, which provided the council with the authority to assess the
civil penalty of a tine, only provided for the civil penalty of a tine. See id. at 852 (dictum). The
Mr. Stephen D. Thomas - Page 7                 (GA-0233)




court said, “[W]e may presume that the failure to provide for injunctive relief reflects a legislative
purpose.” Id. (dictum). Continuing, “We cannot say that the punishment provided, without the
added remedy of an injunction, completely frustrates legislative intent.” Id. (dictum). But the court
was concerned with providing cumulative remedies when the agency’s enabling statute expressly
provided for just one. The dissent in Seton took the opposite view. See id. at 855 (Puryear J.,
dissenting) (“[S]ection2001.202  speciticallydeclares that injunctive reliefmay be sought in addition
to any other remedy provided by the law.“).

         Ultimately, the Seton court based its holding on the state’s inability to meet the proof
necessary for an injunction to lie and not on section 2001.202’s applicability. See id. at 853 (“The
State’s summary judgment evidence thus fails to prove that its right to the extraordinary remedy of
a permanent mandatory injunction is so clear and compelling as to constitute an abuse of discretion
on the part of the district court.“). Even assuming a court would stand with the dicta offered in
Seton, the situation in the present case is distinguishable. In Seton, the legislature had provided the
Health Care Information Council with a remedy for a violation of the council’s rules. Here, the
legislature has not provided any remedy for a violation of TRCC’s rules made pursuant to section
416.001 of the Property Code, and thus an injunction would not be cumulative of chapter 416’s
remedies. We believe that if a court were to be faced squarely with this legal context, it would hold
that section 2001.202 provides the basis for enforcing TRCC’s rules, including by injunction.
Mr. Stephen D. Thomas - Page 8                 (GA-0233)




                                       SUMMARY

                        Section 401.003(c) of the Texas Residential Construction
               Commission Act does not exclude anybusiness entities or individuals
               falling within the general definition of “builder” that have a state or
               local license to engage in residential construction. Section401.003(~)
               does except from the definition of “builder” residential construction-
               related trades and professions, such as plumbers and electricians.
               Furthermore, section 2001.202 of the Administrative Procedure Act
               allows the Texas Residential Construction Commission to refer
               names of builders that have failed to register with the commission, a
               violation of a commission rule, to the attorney general, who may seek
               injunctive relief for those violations. The agency is permitted to do
               this even though its enabling statute lacks specific language to that
               effect.

                                              Very truly yours,




BARRY R. MCBEE
First Assistant Attorney General

DON R. WILLETT
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Daniel C. Bradford
Assistant Attorney General, Opinion Committee
