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1919 DOS 07
STATE OF NEW YORK
DEPARTMENT OF STATE
OFFICE OF ADMINISTRATIVE HEARINGS
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In the Matter of the Complaint of
DEPARTMENT OF STATE
DIVISION OF LICENSING SERVICES,
Complainant,
-against- DECISION
RITE BUY HOMES, NEXT HOME REALTY INC.,
YANIV EREZ, and ENA TAJUDEEN
Respondents.
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The above noted matter came on for hearing before the undersigned, Roger Schneier, on October 2, 2007 at the office of the Department of State located at 123 William Street, New York, New York.
The respondents did not appear.
The complainant was represented by Associate Attorney Whitney A. Clark, Esq.
COMPLAINT
The complaint alleges that Yaniv Erez : Wrongfully held himself out to be a real estate broker representing Next Home Realty Inc. (hereinafter Next Home) when only licensed as a real estate salesperson not associated with any broker; failed to provide clients with copies of documents executed by them; wrongfully used an MLS listing agreement; failed to make full disclosure to clients of what they would receive from a transaction and that he would receive a commission; discouraged clients from using an attorney of their own choice; failed to show the property of clients and purchased the property himself; failed to make full disclosure to clients regarding his status in a transaction; was the sole shareholder and corporate officer of Next Home in violation of 19 NYCRR 175.22; and, along with the other respondents, acted as an undisclosed dual agent and failed to cooperate with the complainant’s investigation. The complaint further alleges that Ena Tajudeen wrongfully availed her license to Mr. Erez; failed to adequately supervise the salespersons associated with Next Home; and cooperated with Mr. Erez’s violations.
FINDINGS OF FACT
1) Notices of hearing together with copies of the complaints were served by certified mail addressed to the respondents at various addresses and posted on May 18, 2007. Notices sent to Ms. Tajudeen at her last known business addresses and at two other addresses, at least one of which I take official notice was her residence, were delivered and signed for, including one signed for by Ms. Tajudeen herself. A notice sent to Next Home was delivered and signed for on May 29, 2007. Additional notices directed to the respondents at various addresses on file with the Department of State, including the business address of Next Home and Mr. Erez, were returned by the Postal Service as being undeliverable. Notices sent to Mr. Erez and Next Home posted on September 17, 2007 and addressed to the forwarding address supplied by the Postal Service have not been returned and no return receipts were provided (State’s Ex. 1).
2) From December 26, 2003 until July 2, 2004 Mr. Erez was duly licensed as a real estate salesperson in association with Empire Home Sales Inc. He was un-associated with any real estate broker until February 1, 2005 when a change of association card indicating that he was associated with Next Home was filed. His license expired on November 14, 2005 (State’s Ex. 2). There is no record of his having been licensed as a real estate broker during the period of July 7, 2004 through February 1, 2005 (State’s Ex. 6). I take official notice of the records of the Department of State that although an administrative hold was placed on it on November 14, 2005 his license as a real estate salesperson in association with Next Home was renewed on December 26, 2005 and will expire on December 26, 2007, although those same records indicate that Next Home is no longer licensed.
3) From November 17, 2004 to November 17, 2006 Ena Tajudeen was licensed as representative broker of Next Home, and she is currently licensed as a real estate broker d/b/a Rite Buy Homes (State’s Ex. 3). I take official notice of the records of the Department of State that she is also licensed as a real estate broker in her individual name under a license expiring on May 7, 2008 and with a branch office license expiring on October 24, 2007.
4) The certificate of incorporation for Next Home was filed by Blumberg/Excelsior Corporate Services on October 3, 2002. A statement of action of directors in lieu of 2003 annual meeting states that Mr. Erez is the sole stockholder and officer of the corporation and is signed by him (State’s Ex. 12).
5) On November 17, 2004, acting in accordance with an agreement she entered into with Mr. Erez, Ms. Tajudeen submitted an application for a license as a real estate broker on behalf of Next Home, falsely indicating thereon that she was an officer of the corporation (State’s Ex. 11). The application fee was paid with funds provided by Mr. Erez.
6) The operating expenses of New Home were paid for by Next Holding Group Inc., another corporation owned by Mr. Erez.
7) Ms. Tajudeen was never an officer of Next Home, rarely went to its office (to which she did not have keys), was not a signatory on its bank accounts, was unaware of any of the transactions in which it was involved, and signed blank salesperson applications and salesperson change of association cards for Next Home and supplied them to Mr. Erez at his request (State’s Ex. 15).
8) In October 2004 Mr. Erez telephoned Addington Williams, whose house located at 62 Putnam Avenue, Brooklyn, New York was in the process of being foreclosed upon. Mr. Erez held himself out to be the broker and owner of Next Home (State’s Ex. 5) which, as indicated above, was not yet licensed. He did not provide Mr. Williams with an agency relationship disclosure form (State’s Ex. 8).
9) On January 4, 2005 Mr. Erez, using forms issued by the Multiple Listing Service of Long Island Inc., of which neither he nor Next Homes were members, entered into exclusive right to sell listing agreements with Mr. Williams for the Putnam Avenue house and with Elma Williams, Mr. Williams’ wife, for a house located at 230 Mofat Street, Brooklyn, New York. The asking price for the Mofat Street house was $399,000.00 (State’s Ex. 7). In both cases it was understood that an attempt would be made to effective a “short sale” of the property in order to avoid foreclosure, although Mr. Erez never described to Mr. Williams what a “short sale” was. It was orally agreed that should there be a sale the net proceeds would be split 60%/40% (there is no evidence before the tribunal to indicate who was to receive the larger share).
The Williams did not receive copies of the listing agreements.
10) Neither of the two houses were shown to prospective purchasers by the respondents and no transaction occurred with regards to the Putnam Avenue property, but Mr. Erez offered to purchase the Mofat Street property through his corporation BMNY Homes Inc. (hereinafter “BMNY”), which was incorporated on May 27, 2005 and of which he was one of two directors elected on that date (State’s Ex. 14).
11) Mr. and Mrs. Williams discussed the proposed sale with their attorney, Anyeka Hercules, Esq. She told them that the transaction did not appear to be legitimate, and when the Williams informed Mr. Erez of that he stated that they had to use Peter Goldberg, Esq., an attorney of his choosing who he said would make the transaction go smoothly.
12) On January 25, 2005 (prior to the incorporation of BMNY) a contract for the sale of the Mofat Street property for $375,000.00 was executed by Mrs. Williams as seller, and by Mr. Erez on behalf of BMNY as buyer. The contract named Next Home as broker and Mr. Goldberg as attorney for the seller (State’s Ex. 9). Mr. Erez did not provide Mrs. Williams with written disclosure of his interest in BMNY and failed to obtain informed written consent to his acting as a dual agent. The Williams did not receive a copy of the contract.
13) Title to the property closed on June 29, 2005, at which time various disbursements were made, including a commission of $11,056.18 to Next Home (State’s Ex. 10). However, in a written statement submitted to the complainant’s investigator on May 19, 2006 Mr. Erez falsely stated that neither he nor Next Home received a commission (State’s Ex. 8).
14) Mr. Goldberg arrived late at the closing in the company of Mr. Erez, with whom he had apparently been at another transaction. The various documents executed by Mrs. Williams were not explained to her.
OPINION AND CONCLUSIONS OF LAW
I- The holding of an ex parte quasi-judicial administrative hearing was permissible, inasmuch as there is evidence that notice of the place, time and purpose of the hearing was properly served. Real Property Law §441-e; Patterson v Department of State, 36 AD2d 616, 312 NYS2d 300 (1970);Roy Staley v Division of Licensing Services, 14 DOS App 01; Matter of the Application of Rose Ann Weis, 118 DOS 93.
II- Being an artificial entity created by law, Next Home can only act through it officers, agents, and employees, and it is, therefore, bound by the knowledge acquired by and is responsible for the acts committed by its representative broker, Ms. Tajudeen, and its sole officer and salesperson, Mr. Erez, within the actual or apparent scope of her or his authority. Roberts Real Estate, Inc. v Department of State, 80 NY2d 116, 589 NYS2d 392 (1992); A-1 Realty Corporation v State Division of Human Rights, 35 A.D.2d 843, 318 N.Y.S.2d 120 (1970); Division of Licensing Services v First Atlantic Realty Inc., 64 DOS 88; RPL § 442-c.
III- Pursuant to Real Property Law (RPL) §440-a it is unlawful for a person to act as, or hold himself out to be, a real estate broker without being so licensed. In violation of that Mr. Erez represented to Mr. Williams that he was the broker for Next Home, and then proceeded to engage in brokerage transactions with Mr. and Mrs. Williams without the knowledge and supervision of Next Home’s representative broker, Ms. Tajudeen. In so doing he violated RPL §440-a and demonstrated untrustworthiness.
IV- Pursuant to 19 NYCRR 175.12 a real estate broker must immediately deliver a duplicate original of any instrument to any party or parties executing an instrument which has been prepared by the broker. While that regulation does not specifically refer to salespersons, it was Mr. Erez’s obligation, particularly inasmuch as he was operating Next Home without any supervision by Ms. Tajudeen, to deliver such copies to the Williams in furtherance of the public policy expressed by that regulation. In spite of that, he failed to give the Williams copies of the listing agreements which he prepared and had them execute. His conduct was a demonstration of untrustworthiness and incompetency.
V- The listing agreements used by Mr. Erez were on Multiple Listing Service forms although Next Home was not a member of that organization. Therefore, the use of the forms was dishonest and misleading, and a further demonstration of untrustworthiness.
VI- When he agreed to assist the Williams in the sale of their houses Mr. Erez, and through him Next Home, became the agents of the Williams and they became Mr. Erez’s and Next Home’s principals. The relationship of agent and principal is fiduciary in nature, "...founded on trust or confidence reposed by one person in the integrity and fidelity of another." Mobil Oil Corp. v Rubenfeld, 72 Misc.2d 392, 339 NYS2d 623, 632 (Civil Ct. Queens County, 1972). Included in the fundamental duties of such a fiduciary are good faith and undivided loyalty, and full and fair disclosure. Such duties are imposed upon real estate licensees by license law, rules and regulations, contract law, the principals of the law of agency, and tort law. L.A. Grant Realty, Inc. v Cuomo, 58 AD2d 251, 396 NYS2d 524 (1977). The object of these rigorous standards of performance is to secure fidelity from the agent to the principal and to insure the transaction of the business of the agency to the best advantage of the principal. Dubbs v Stribling & Assoc., 96 NY2d 337, 728 NYS2d 413 (2001); Department of State v Short Term Housing, 31 DOS 90, conf'd. sub nom Short Term Housing v Department of State, 176 AD 2d 619, 575 NYS2d 61 (1991); Department of State v Goldstein, 7 DOS 87, conf'd. Sub nom Goldstein v Department of State, 144 AD2d 463, 533 NYS2d 1002 (1988). Mr. Erez breached his and Next Home’s fiduciary duties when he failed to fully explain to the Williams how much they could expect to receive from the sale of the houses and that he would receive a commission from the sales. He thereby further demonstrated untrustworthiness and incompetency.
VII- When the Williams expressed an interest in using an attorney of their own choosing who had expressed skepticism regarding the transactions which Mr. Erez had proposed Mr. Erez told them that they would have to use an attorney of his choosing, Peter Goldberg. In so doing he clearly placed his interests above those of the Williams, his principals, in violation of his fiduciary duties. It appears that Mr. Erez acted as he did because, having dealt with Mr. Goldberg previously, he expected that Mr. Goldberg would, as he did, facilitate the sale of the Mofat Street property. His conduct was a demonstration of gross untrustworthiness.
VIII- When Mr. Erez accepted exclusive right to sell agency agreements for the Williams’ houses he assumed the obligation to show those houses to prospective purchasers, but he failed to do so. Rather, he arranged for his corporation, BMNY, to purchase the Mofat Street house at a price which was $24,000.00 less than the asking price. Further, he failed to make full written disclosure to the Williams of his status in that transaction in violation of the policy expressed in 19 NYCRR 175.4. That conduct was a further demonstration of untrustworthiness.
IX- Pursuant to 19 NYCRR 175.22 it is unlawful for a real estate salesperson to own voting stock in any licensed real estate brokerage corporation with which he is associated. As the sole shareholder of Next Home Mr. Erez violated that regulation and demonstrated untrustworthiness and incompetency.
X- Pursuant to 19 NYCRR 175.7 a real estate broker must make it clear for which party he, she, or it is acting. The respondents violated that regulation, and thereby demonstrated untrustworthiness, when they failed to disclose to Mrs. Williams that Mr. Erez was acting both as an agent for her and as an agent of BMNY.
XI- Real Property Law §442-e[5] states:
"The secretary of state shall have the power to enforce the provisions of this article and upon complaint of any person, or on his own initiative, to investigate any violation thereof or to investigate the business, business practices and business methods of any person, firm or corporation applying for or holding a license as a real estate broker or salesman, if in the opinion of the secretary of state such investigation is warranted. Each such applicant or licensee shall be obliged, on request of the secretary of state, to supply such information as may be required concerning his or its business, business practices or business methods, or proposed business practices or methods."
Pursuant to RPL §442-j the Secretary of State has the authority to delegate to employees of the Department of State the above powers to compel a licensee to supply information.
Mr. Erez breached his duty to cooperate with the complainant’s investigation when he falsely informed the complaint’s investigator that neither he nor Next Home received a commission in the Mofat Street transaction, and he thereby further demonstrated untrustworthiness.
XII- A real estate broker may be subject to discipline by the Department of State for availing her license to another person so as to enable that person to act as a real estate broker without being so licensed. Department of State v Guittari, 37A DOS 87, conf'd. sub nom Guittari v Department of State 535 NYS2d 284 (A.D. 1st Dept., 1988); Department of State v Kavan, 49 DOS 91; Department of State v Shulkin, 4 DOS 90; Department of State v Brooks, 3 DOS 88; Department of State v Eksteen, 49 DOS 88.
"In order for the complainant to establish that such availing occurred it must show that unlicensed activity occurred and that the respondent either intended that it occur and facilitated it through making her license available, or that she knew that it was occurring and took no steps to stop it, or that she acted recklessly in placing her license in the office and then not taking reasonable steps to determine what was occurring in that office." Department of State v Braun, 28 DOS 89.
A necessary element of availing is a lack of supervision by the broker of the salesperson. Department of State v Guittari, supra; cf. Applications of Kavan, 49 DOS 91, conf'd. sub nom Kavan v Shaffer, 199 AD2d 1089, 607 NYS2d 510 (1993).
Ms. Tajudeen applied for a license on behalf of Next Home at the instance of Mr. Erez, and falsely indicated on the application that she was an officer of that corporation. She paid none of the expenses of the business, did not supervise its operations, of which she had no knowledge, and did not even have keys to its office. This conduct was in violation of her duty to supervise as set forth in 19 NYCRR 175.21, facilitated Mr. Erez’s improper actions, and was a demonstration of untrustworthiness and incompetency.
XIII- Where a broker or salesperson has received money to which he is not entitled, he or she may be required to return it, together with interest, as a condition of retention of his or her license. Donati v Shaffer, 83 NY2d 828, 611 NYS2d 495 (1994); Kostika v Cuomo, 41 N.Y.2d 673, 394 N.Y.S.2d 862 (1977); Zelik v Secretary of State, 168 AD2d 215, 562 NYS2d 101 (1990); Edelstein v Department of State, 16 A.D.2d 764, 227 N.Y.S.2d 987 (1962).
Mr. Erez, acting through Next Home, received a commission of $11,056.18 as a result of his improper and unlawful conduct. He should be required to make restitution for that commission to Mrs. Williams. Further, inasmuch as his conduct tainted the sale of the Mofat Street property, he should be required to re-convey the property to her or, if that is no longer possible, to make a full accounting for, and restitution to Mrs. Williams of, any profit which he, BMNY, or any other entity owned or controlled by him, made from the re-sale of the property.
XIV- The fact that Next Home’s license has expired does not deprive this tribunal of jurisdiction to adjudicate the matter so far as it involves that corporation, Albert Mendel & Sons, Inc. v N.Y. State Department of Agriculture and Markets, 90 AD2d 567, 455 NYS2d 867 (1982); Main Sugar of Montezuma, Inc. v Wickham, 37 AD2d 381, 325 NYS2d 858 (1971), and any future licensure of that corporation should be contingent upon the making of restitution to Mrs. Williams.
DETERMINATION
WHEREFORE, IT IS HEREBY DETERMINED THAT Ena Tajudeen has demonstrated untrustworthiness and incompetency, and accordingly, pursuant to Real Property Law §441-c, all licenses issued to her as a real estate broker, including as an individual and under the name Rite Buy Homes, shall be suspended for a period commencing on November 1, 2007 and terminating one year after the receipt by the Department of State of her license certificates and pocket cards, which she is directed to send to Kathy Scarcella, Customer Service Unit, Department of State, Division of Licensing Services, 80 South Swan Street, P.O. Box 22001, Albany, New York 12201-2201, and
IT IS FURTHER DETERMINED THAT Yaniv Erez and Next Home Realty Inc. have violated Real Property Law §440-a and have demonstrated untrustworthiness and incompetency and accordingly, pursuant to Real Property Law §441-c, Mr. Erez’s license as a real estate salesperson is revoked effective November 1, 2007. Should Mr. Erez or Next Home Realty Inc. ever re-apply for a license or licenses as a real estate salesperson or broker no action shall be taken on such application(s) until they have submitted proof satisfactory to the Department of State that they have refunded the unearned commission of $11,056.18 plus interest from June 29, 2005 at the legal rate for judgements (currently 9%) to Elma Williams, and that title and possession to 230 Mofat Street, Brooklyn, New York has been re-conveyed to Elma Williams or, if such reconveyance is not legally possible, that a full accounting for, and restitution to Mrs. Williams of, any profit which Mr. Erez, BMNY Homes Inc, or any entity owned or controlled by Mr. Erez, made from the re-sale of the
property. Mr. Erez is directed send his license certificate and pocket card to Kathy Scarcella, Customer Service Unit, Department of State, Division of Licensing Services, 80 South Swan Street, P.O. Box 22001, Albany, New York 12201-2201.
Roger Schneier
Administrative Law Judge
Dated: October 3, 2007