640 DOS 09
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, DECISION
-against-
ANGELICA LANDETTA,
Respondent.
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The above matter was heard by the undersigned, Scott NeJame, on September 4, 2008 at the office of the Department of State located at 123 William Street, New York, New York.
The respondent failed to appear.
The complainant was represented by David Mossberg, Esq.
COMPLAINT
The complaint alleges that the respondent: breached fiduciary duties to her principal; retained an unearned commission; failed to present and obtain a disclosure form; permitted an unlicensed real estate salesperson to provide real estate services without being associated with her; failed to cooperate with a Department of State investigation; and failed to maintain a segregated escrow account for client funds.
FINDINGS OF FACT
1) On January 31, 2008, the complainant served the respondent with the notice of hearing scheduling the hearing for April 1, 2008 and a copy of the complaint, at the respondent’s last known business and home address (State’s Ex. 1). The mailing to the respondent’s business address was returned by the Postal Service marked “unclaimed.” The certified mailing to the respondent’s home address was returned by the Postal Service marked “addressee unknown.” On February 8, 2008 and March 4, 2008, the complainant re-served the respondent with the notice of hearing and complaint by first class mail at her home and last known business address, respectively. There is no evidence regarding the results of those mailings.
2) By two letters from the respondent to the tribunal that were dated, notarized and faxed on March 28, 2008, the respondent requested an adjournment because she had just received the notice of hearing and complaint, she contacted Mr. Mossberg to settle the matter, and she was in the process of complying with the terms of the settlement agreement (State’s Ex. 2).
3) The tribunal adjourned this case with the understanding that the parties were entering into a settlement agreement. However, the respondent did not sign the consent order and the complainant requested that the hearing be re-opened. The tribunal re-opened the hearing and scheduled it for September 4, 2008. On July 14, 2008, the tribunal sent a notice to the respondent of the re-opening (State’s Ex. 1). At the hearing, Mr. Mossberg represented that he spoke with the respondent on September 3, 2008, at which time he told her to appear at the hearing and bring the necessary documents with her if she wished to settle. She failed to appear.
4) The respondent is licensed as an individual real estate broker for the period of at least July 29, 2005 to July 29, 2009. She was licensed as a corporate real estate broker representing Centurion 2000 Real Estate Inc. (“Centurion 2000") for the period of August 9, 2001 to August 9, 2007 (State’s Ex. 3).
5) In or about May 2007, Aldi Palacio contacted the Centurion 2000 office to assist him in locating an apartment to rent beginning June 2007. He met with a person by the name of Willy Calderon, who was not licensed by the Department of State as either a real estate salesperson or broker (State’s Ex. 3). Mr. Calderon was the estranged husband and business partner of the respondent. Mr. Calderon had Mr. Palacio fill out a rental application on Centurion 2000's letterhead (State’s Ex. 5). Mr. Calderon stated that he knew of an available apartment and requested Mr. Palacio pay a $750 real estate commission in addition to the amounts he was required to pay the landlord. On May 24, 2007, Mr. Palacio paid Centurion 2000 $300 of the $750 commission. On May 25, 2007 and June 8, 2007, Mr. Palacio submitted either to Mr. Calderon or the landlord a check payable to the landlord in the amount of $1,500 check and a cash $581 payment, respectively, for an apartment located on Elbertson Street in Elmhurst (State’s Ex. 4 and 6). In total, Mr. Palacio paid the landlord $750 first month’s rent, a $750 security deposit, and a $750 real estate fee. He moved into the apartment on June 8, 2007. Mr. Palacio did not pay the $450 balance to Mr. Calderon, Centurion 2000 or the respondent.
6) Mr. Palacio did not appear and testify at the hearing.
7) Department of State License Investigator Eric Apel (“Inv. Apel”) interviewed the landlord of the apartment and was told that the landlord did not employ the services of a real estate broker to rent the apartment and that he rents his apartments directly. According to Inv. Apel, the landlord told Mr. Palacio that he was under no obligation to pay a real estate commission to any broker to get the apartment.
8) In an undated letter received by the complainant on July 27, 2007, the respondent stated the following: Mr. Palacio was told at the beginning that he would have to pay one month’s rent, a security deposit and a real estate fee; the landlord does work with real estate brokers, because he called the respondent’s office and cell phone a number of times; the respondent checks different sources for available apartments for her clients, for example, the newspaper, signs, internet postings, and referrals, and she is entitled to work for tenants for a fee to find them apartments. Additionally, respondent’s partnership with Mr. Calderon ended, but it was a difficult transition because Mr. Calderon would come in and out of the office to handle transactions without her consent, and ultimately, she had to secure an order of protection against him so that he could no longer access her office (State’s Ex. 6).
9) In a further letter dated and faxed to Inv. Apel on September 13, 2007, the respondent claimed, among other things, the following: she does not have disclosure forms for the transaction involving Mr. Palacio; Mr. Calderon conducted the transaction with Mr. Palacio without her consent; Centurion 2000 is no longer operating as an [entity]; and she does not currently have an escrow or bank account (State’s Ex. 7). At some point after receiving the fax from the respondent, Inv. Apel visited the respondent’s office and noticed that the sign above her business still read “Centurion 2000.”
OPINION AND CONCLUSIONS OF LAW
I- As the party which initiated the hearing, the burden is on the complainant to prove, by substantial evidence, the truth of the charges set forth in the complaint. State Administrative Procedure Act §306(1). Substantial evidence “means such relevant proof as a reasonable mind may accept as adequate to support a conclusion or ultimate fact... More than seeming or imaginary, it is less than a preponderance of the evidence, overwhelming evidence or evidence beyond a reasonable doubt (citations omitted).” 300 Gramatan Avenue Associates v. State Div. of Human Rights, 45 NY2d 176, 408 NYS2d 54, 56-57 (1978); Tutuianu v. New York State, 22 AD3d 503, 802 NYS2d 465 (2nd Dept. 2005). “The question...is whether a ‘conclusion or ultimate fact may be extracted reasonably--probatively and logically’” City of Utica Board of Water Supply v New York State Health Department, 96 AD2d 719, 465 NYS2d 365, 366 (1983), quoting 300 Gramatan Avenue Associates, supra, 408 NYS2d at 57.
II- Being an artificial entity created by law, Centurion 2000 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, the respondent, within the actual or apparent scope of her 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 AD2d 843, 318 NYS2d 120 (2nd Dept. 1970); Real Property Law §442-c. Real Property Law §442-c provides that “No violation of a provision of this article by a real estate salesman or employee of a real estate broker shall be deemed to be cause for the revocation or suspension of the license of the broker, unless it shall appear that the broker had actual knowledge of such violation or retains the benefits, profits or proceeds of a transaction wrongfully negotiated by his salesman or employee after notice of the salesman's or employee's misconduct.” As will be seen below, the respondent either had personal knowledge of the violations or retained the proceeds of the transaction wrongfully negotiated by Centurion 2000's salesperson or employee (Mr. Calderon).
III- The complainant’s complaint alleges that the respondent permitted an unlicensed salesperson to provide real estate services.
In order for a real estate salesperson to receive a license and pocket card and to act as a salesperson, Real Property Law §§441(1-A) and 441-a(1) require that salesperson to be associated with a particular real estate broker. A real estate broker is required to supervise the real estate brokerage activities of the salespersons associated with her, and that supervision must consist of “regular, frequent and consistent personal guidance, instruction, oversight and superintendence...” 19 NYCRR §175.21(a); Real Property Law §441(1)(b).
The broker’s duty to supervise has a sound basis in case law (Friedman v. Paterson, 89 AD2d 701, 453 NYS2d 819 (3rd Dept. 1982), aff’d. 58 NY2d 727, 458 NYS2d 546; Razik v. Div. of Licensing Services, 2009 N.Y. Slip Op. 01806, – AD3rd –, 875 NYS2d 184 (2nd Dept. 2009) and has been restated in numerous determinations of the Department of State. Division of Licensing Services v. Gotham Realty, 256 DOS 09 (2009) (numerous decisions regarding 19 NYCRR §175.21 cited therein). “Where, however, the salesperson has acted in such a way as to prevent the broker from being aware of his conduct, Division of Licensing Services v Bell, 21 DOS 89, and the broker has no reason to be aware that the salesperson is engaging in any sales activity, it cannot be said that the broker failed to meet his supervisory obligations.” Division of Licensing Services v. Gold Star Homes, Inc., 1008 DOS 06 (2006).
Further, Real Property Law §442-c provides, “A broker shall be guilty of a misdemeanor for having any salesperson associated with his firm who has not secured the required license authorizing such employment.” See also, Doherty v. Cuomo, 64 AD2d 847, 407 NYS2d 337 (4th Dept. 1978), app. dism. 45 NY2d 960, 411 NYS2d 566; Division of Licensing Services v. Homes & Beyond Realty Inc., 1354 DOS 08 (2008). The fact that the respondents’ claim for a commission is based on the activity of an unlicensed person requires a finding that the respondents are not entitled to a commission. Meyers v. Suffin, 203 NYS 103 (1st Dept. 1924); See also, Small v. Marchese, 98 Misc2d 295, 413 NYS2d 808 (NY Sup. Ct. 1978); Coldwell Banker Mid Plaza Real Estate Inc. v. Guindi, 23 Misc3d 1132(A), Slip Copy, 2009 WL 1477995 (Table), 2009 NY Slip Op. 51043(U) (NY Sup. Ct. 2009). In this case, the respondent, as representative broker of Centurion 2000, employed Mr. Calderon as an unlicensed salesperson, and she thereby violated Real Property Law §442-c and demonstrated incompetency in violation of Real Property Law §441-c.
In a previous disciplinary proceeding by the complainant against the respondent and Centurion 2000, on April 4, 2007, the respondent signed a consent order in which she admitted that in November 2004, she committed misconduct by permitting Mr. Calderon to negotiate an apartment rental without obtaining a broker’s or salesperson’s license (State’s Ex. 8). The present transaction took place in May 2007, two and one half years after the previous incident, but only one month after the respondent signed the consent order.
In sum, the respondent did employ an unlicensed salesperson, and that employment may have been ongoing since at least November 2004. In mitigation, however, is the fact that the respondent made it clear that she had no control over Mr. Calderon and could not prevent him from coming in and out of the office, and that she had a “difficult transition,” (State’s Ex. 6, p. 2), meaning that it took her some time to end the partnership she had with him and obtain an order of protection against him so that he could no longer come into her office. After signing the consent order in April 2007, the respondent took steps to prevent Mr. Calderon from acting as a salesperson associated with Centurion 2000. The fact that it took her a few months from the time she signed the consent order to get him barred from the brokerage is not substantial.
IV- The complaint alleges that the respondent breached her fiduciary duties of obedience and accounting to her principal by failing to return Mr. Palacio’s deposit. I assume the deposit to which the complaint is referring is the $300 real estate commission Mr. Palacio paid.
It is clear that the respondent and Centurion 2000 represented Mr. Palacio in the subject transaction. The landlord denied having any relationship with a real estate broker and Mr. Palacio did contact Mr. Calderon at Centurion 2000 to assist him in locating an apartment to rent.
In assisting Mr. Palacio, Centurion 2000 and the respondent served in the capacity of agent for Mr. Palacio, their principal. 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 (NY Civil Ct. 1972), aff’d 77 Misc.2d 962, 357 NYS2d 589, rev’d on other grounds 48 AD2d 428, 370 NYS2d 943; Wende C. v. United Methodist Church, 6 AD3d 1047, 776 NYS2d 390 (4th Dept. 2004). Included in the fundamental duties of such a fiduciary are reasonable care, confidentiality, good faith, undivided loyalty, obedience, duty to account, and full and fair disclosure. Real Property Law §443; 19 NYCRR §175.2; L.A. Grant Realty, Inc. v. Cuomo, 58 AD2d 251, 396 NYS2d 524 (4th Dept. 1977); Precision Glass Tinting, Inc. v. Long, 293 AD2d 594, 740 NYS2d 138 (2nd Dept. 2002); Re/Max All-Pro Realty, Inc. v. New York State Dept. of State, 292 AD2d 831, 739 NYS2d 321 (4th Dept. 2002) (quoting Stevens, Inc. v. Kings Vil. Corp., 234 AD2d 287, 288, 650 NYS2d 307 (2nd Dept. 1996)). Such duties are imposed upon real estate licensees by license law, rules and regulations, contract law, the principles of the law of agency, and tort law. 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. Department of State v. Short Term Housing, 31 DOS 90, conf'd. sub nom Short Term Housing v. Department of State, 176 AD2d 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 (2nd Dept. 1988); see also, Coldwell Banker Residential Real Estate v. Berner, 202 AD2d 949, 609 NYS2d 948 (3rd Dept. 1994).
In this case, there is insufficient evidence from which to conclude that Centurion 2000 breached its fiduciary duties of obedience or to account to Mr. Palacio. No evidence was presented which established that Mr. Palacio made a demand upon Mr. Calderon or Centurion 2000 for the return of his $300 fee or to “account” for that money. Mr. Palacio did not appear at the hearing and, in his complaint to the Department of State, the person and/or firm he complained about was Mr. Calderon, and he sought the Department of State to “investigate and control “Centurion 2000 Real Estate Inc.” and stop this real estate from abuse more people.” (State’s Ex. 4). The fact that the respondent was willing to, in part, return the fee to Mr. Palacio in settlement of the charges, does not establish Mr. Palacio’s entitlement to that money on this basis.
V- The claiming and retention of an unearned commission is a demonstration of untrustworthiness. Division of Licensing Services v. Loffredo, 83 DOS 95 (1995), conf'd. sub nom Loffredo v. Treadwell, 235 AD2d 541, 653 NYS2d 33 (2nd Dept. 1997); Division of Licensing Services v. Iaboni, 2050 DOS 07 (2007); See also, Columbia Terrace Development Corp. v. Brown, 153 AD2d 832, 545 NYS2d 579 (2nd Dept. 1989). Based on the respondent’s July 2007 letter to the Department of State (that either the respondent or Centurion 2000 received a $300 real estate commission from Mr. Palacio) (State’s Ex. 6) and the fact that an unlicensed individual handled Mr. Palacio’s rental transaction (Mr. Calderon), I find that the respondent received and retained an unearned commission and thereby demonstrated incompetency in violation of Real Property Law §441-c.
VI- The charge that the respondent violated Real Property Law §443 by failing to obtain an agency disclosure statement is dismissed because it is not clear whether the property at issue is a one-to-four family dwelling. In conducting a brief search online, the tribunal notes that there are a number of apartments at that location.
VII- The complainant alleges that the respondent failed to cooperate with a Department of State investigation by providing inconsistent information, namely, State’s Exhibits 6 and 7. In State’s Ex. 6, it appears that the respondent has personal knowledge of the transaction and actively participated in it. In State’s Ex. 7, the respondent states that Mr. Calderon conducted the transaction without her consent.
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.
Implicit in this statute is the requirement that the broker or salesperson supply accurate and truthful information and not provide misleading information to the complainant’s investigator.
Without the respondent having appeared at the hearing and testified, and without the respondent having provided an explanation for the two inconsistent statements, I conclude that the respondent attempted to mislead the complainant by her letter of July 2007 (State’s Ex. 6). Since the respondent knew that Mr. Calderon was not licensed by the Department of State and that he handled the transaction with Mr. Palacio, the respondent submitted a letter that made it appear that she conducted the transaction when, in fact, she did not. She therefore failed to cooperate with a Department of State investigation and demonstrated untrustworthiness in violation of Real Property Law §441-c.
VIII- The charge that the respondent used the trade name Centurion 2000 after her partnership terminated, is dismissed. The respondent’s license as the representative of Centurion 2000 expired on August 9, 2007, after the transaction involving Mr. Palacio. The only evidence that she continued to use that company name was when the investigator visited her office in September 2007 and noticed the Centurion 2000 sign still above her office. Without more, this evidence is insufficient to establish that she continued to act and hold herself out as the representative of Centurion 2000.
IX- The complaint alleges that the respondent violated 19 NYCRR §175.1 by failing to use a business escrow account. This charge must be dismissed because there is insufficient evidence establishing that the respondent handled monies that were required to be deposited into an escrow account. The $300 that Mr. Palacio paid was a real estate commission and the $1,500 check that he tendered was made payable to the landlord (State’s Ex. 4). Mr. Palacio did make an additional cash payment of $581, but it is not clear to whom he made this payment and what happened with the payment (Mr. Palacio never claimed that this money was not given to the landlord).
X- Where a broker or salesperson has received money to which he or she 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 NY2d 673, 394 NYS2d 862 (1977); Zelik v. Secretary of State, 168 AD2d 215, 562 NYS2d 101 (1st Dept. 1990); Edelstein v. Department of State, 16 AD2d 764, 227 NYS2d 987 (1st Dept. 1962). The respondent will be required to refund to Mr. Palacio the $300 that he paid because it arose from Mr. Calderon’s unlicensed conduct.
XI- In considering what sanction to impose for the respondent’s violations, I have taken into consideration that the respondent previously signed a consent order in which she admitted to committing misconduct, including permitting unlicensed individuals (one of which was Mr. Calderon) to negotiate the rental of property (State’s Ex. 8). She also acknowledged that the complainant had extended a settlement offer to her which involved the payment of a fine and restitution. The respondent did not follow through with that settlement offer.
Where such an offer of settlement has been refused or not accepted, or has been accepted but then not complied with, and the respondent has subsequently been found guilty, the tribunal may impose a sanction higher than that encompassed in the settlement offer, provided that the tribunal determines that a higher sanction is warranted. Nguyen v. DLS, 1 DOS APP 09 (2009). In this case, the tribunal believes that more than a fine is warranted for the respondent’s misconduct. However, it is unclear to the tribunal at this point whether or not the respondent is planning to or in the process of renewing her license.
DETERMINATION
WHEREFORE IT IS HEREBY DETERMINED THAT respondent Angelica Landetta violated Real Property Law §§442-c and 442-e(5), retained an unearned commission, and demonstrated incompetency and untrustworthiness in violation of Real Property Law §441-c. Accordingly, pursuant to Real Property Law §441-c, if the respondent is in the process of applying to renew or timely applies to renew her license and the Department of State grants her renewal application, the respondent’s license as a real estate broker shall be suspended beginning on August 1, 2009 and terminating two months after the receipt, by certified mail, by the Department of State of her license certificate and pocket card. Upon termination of the suspension, the respondent’s license shall be further suspended until she submits proof satisfactory to the Department of State that she has refunded the sum of $300 plus interest at the legal rate for judgments (currently 9% per year) from May 24, 2007 to Aldi Palacio.
If the respondent’s license is not renewed for the July 29, 2009 to July 29, 2011 time period, then alternatively, the respondent is ordered to pay a fine in the amount of $3,000 to the Department of State on or before August 1, 2009. Should she ever re-apply for a license as a real estate broker or salesperson, or if she applies to renew her license as a real estate broker after July 29, 2009, no action shall be taken on such application until she has paid the $3,000 fine to the Department of State and submitted proof of payment of the ordered restitution to Aldi Palacio.
The respondent is directed to send her license certificate and pocket card and proof of the restitution to Aldi Palacio, by certified mail, and/or a certified check or money order for the fine payable to “Secretary of State,” to Norma Rosario, Department of State, Division of Licensing Services, Alfred E. Smith Building, 80 South Swan Street, 10th Floor, Albany, NY 12201.
Scott NeJame
Administrative Law Judge
Dated: June 9, 2009