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747 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-
JOANNE SIMME, VICTOR L. PETERSON,
and M.J. PETERSON REAL ESTATE, INC.,
Respondents.
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The above matter was heard by the undersigned, Scott NeJame, on July 10, 2008 at the office of the Department of State located at 65 Court Street, Buffalo, New York.
The respondents were represented by Gabriel J. Ferber, Esq., Nesper, Ferber & DiGiacomo, LLP, One Towne Centre, Suite 300, 501 John James Audubon Pkwy, Amherst, New York 14228.
The complainant was represented by David Mossberg, Esq.
COMPLAINT
The amended complaint alleges that: respondent Joanne Simme (“respondent Simme”) engaged in unlicensed activity; all respondents collected and retained unearned real estate commissions based on respondent Simme’s unlicensed activity; all respondents failed to disclose and/or ascertain that a property listed for sale was encumbered by a lis pendens; and respondents Victor L. Peterson (“respondent Peterson”) and M.J. Peterson Real Estate, Inc. (“respondent Peterson Real Estate”) are responsible for the acts of and failed to adequately supervise respondent Simme.
PROCEEDINGS
Mr. Ferber moved to dismiss the complaint on the basis that Mr. Mossberg did not reveal the fact that he was not an attorney when the complainant commenced its action (the amended complaint) against the respondents.
Mr. Mossberg was authorized to act as a legal intern for the Department of State in or about September 2007 and became licensed to practice law in the State of New York in January 2008. The complainant served its amended complaint on the respondents on January 31, 2008 and the complaints were delivered by the Postal service on either February 2 or 4, 2008 (see below). For almost the entire time from when the respondents and Mr. Ferber received the amended complaint until the date of the hearing, Mr. Mossberg was a licensed attorney. Even for the very short time that Mr. Ferber may have spoken with Mr. Mossberg while he was not officially licensed as an attorney, he was fully authorized to represent the complainant and present the complainant’s case before the tribunal. See, Board of Educ. of Union-Endicott Cent. School Dist. v. New York State Public Employment Relations Bd., 233 AD2d 602, 649 NYS2d 523 (3rd Dept. 1996). Further, there is no evidence to suggest that Mr. Mossberg attempted to mislead Mr. Ferber into believing he was an attorney when he was not so licensed.
In June 2008, Mr. Ferber learned that Mr. Mossberg was not an attorney prior to January 2008. His only argument to the tribunal was that, had he known that Mr. Mossberg was not an attorney prior to January 2008, he would have “attempted to deal with the supervising attorney...” (Hearing transcript, p. 14). However, this argument made little sense to the tribunal because, when he did find out about Mr. Mossberg not being an attorney, he did not attempt to contact Mr. Mossberg’s supervising attorney, and by then, he had been dealing with Mr. Mossberg as an attorney for approximately six months. The only basis that I could glean from Mr. Ferber’s motion was his opinion that the complainant was being unreasonable in its offer(s) of settlement. Mr. Ferber did not claim that the respondents’ constitutional or other rights were being infringed upon.
FINDINGS OF FACT
1) On January 31, 2008, the complainant served respondent Simme with the notice of hearing scheduling the hearing for April 17, 2008 and a copy of the complaint, at her two licensed business addresses, by certified mail, one of which was delivered on February 4, 2008, and the other which was delivered on February 2, 2008 (State’s Ex. 1 - 3). On January 31, 2008, the complainant served respondent Peterson Real Estate with the notice of hearing scheduling the hearing for April 17, 2008 and a copy of the complaint, at its licensed Depew address, by certified mail which was delivered on February 2, 2008 (State’s Ex. 1 - 3). On January 31, 2008, the complainant served respondent Peterson with the notice of hearing scheduling the hearing for April 17, 2008 and a copy of the complaint, at his licensed business address in Amherst, New York, by certified mail which was delivered on February 4, 2008 (State’s Ex. 1 - 3). On January 31, 2008, the complainant served Mr. Ferber with the notice of hearing scheduling the hearing for April 17, 2008 and a copy of the complaint, by certified mail that was delivered on February 4, 2008 (State’s Ex. 1 - 2). The hearing was subsequently adjourned to July 10, 2008.
2) Respondent Simme was licensed as a trade name broker representing Good Choice for the periods of at least March 20, 2001 to March 20, 2003, February 10, 2004 to February 10, 2006 and May 26, 2006 to May 26, 2008. She was also licensed as a real estate broker associated with respondent Peterson Real Estate for the periods of at least March 12, 2004 to March 12, 2006 and August 16, 2006 to August 16, 2008. Respondent Peterson was licensed as a corporate real estate broker representing M J Peterson Corp. for the period of at least July 7, 2001 to July 7, 2009. He was licensed as a corporate real estate broker representing respondent Peterson Real Estate at 501 John James Audubon Parkway, Amherst, New York for the period of January 31, 2001 to January 31, 2009. Respondent Peterson Real Estate held a branch office license at 4779 Transit Road, Depew, New York for the period of at least October 17, 2002 to October 17, 2008 (State’s Ex. 3). The tribunal takes official notice of the records of the Department of State and finds that respondent Simme renewed her trade name and associate broker licenses for the periods of May 26, 2008 to May 26, 2010 and August 16, 2008 to August 16, 2010, respectively. Respondents Peterson and Peterson Real Estate renewed their respective licenses described above for the periods of January 31, 2009 to January 31, 2011, and October 17, 2008 to October 17, 2010.
3) From March 13, 2006 through August 15, 2006, respondent Simme was not licensed as a real estate salesperson or broker for respondent Peterson Real Estate.
4) On April 12, 2006, respondent Simme entered into a listing agreement with Susan Abbatoy and Evelyn Janis (“the sellers”) for the respondents to procure a buyer for their property located at 187 Hessland Court, Elma, New York (“the property”) (State’s Ex. 7). The respondents became an agent of the sellers. The sellers told respondent Simme that they were behind in their mortgage payments, that they believed foreclosure was imminent, and that they needed a quick sale (Hearing transcript, p. 74).
5) On April 20, 2006, counsel for Suntrust Mortgage Corporation (“Suntrust”) filed a notice of pendency of action (“lis pendens”) in the Erie County Clerk’s Office relative to the property (State’s Ex. 5). The lis pendens was filed because, on that same day, Suntrust filed a summons and complaint seeking to foreclose their mortgage on the property. None of the defendants, among which were the sellers, were served with the summons and complaint (State’s Ex. 6).
6) Prior to April 29, 2006, Kevin and Grace Kaminski (“the Kaminskis”) agreed with Jennifer Pierce, real estate salesperson associated with respondent Peterson Real Estate, to act as their agent in procuring a property to purchase. Ms. Pierce became the agent for the Kaminskis.
7) Also prior to April 29, 2006, respondent Simme came to the property to show it to prospective purchasers and found a notice of the lis pendens attached to the door of the property. She took the notice down and contacted the sellers, who lived in Florida.
8) On April 29, 2006, the Kaminskis and the sellers executed a sales contract for the Kaminskis to purchase the property (State’s Ex. 4).
9) At no time did the respondents advise the Kaminskis that there had been a lis pendens filed on the property.
10) The closing on the property was initially scheduled for June 23, 2006, but had to be changed at least a couple times. The reason for the closing date changes was due, in part, to the parties addressing and resolving the lis pendens.
11) On their first walk-through of the property prior to closing, the Kaminskis noticed that the door locks on the house had been turned around so that the keys would not work in them. Suntrust had done this apparently to enforce their lis pendens.
12) On June 30, 2006, the closing took place. Respondent Peterson Real Estate received a $16,200 commission on the sale, of which respondent Simme was paid $8,100.
13) On July 17, 2006, counsel for Suntrust discontinued its lawsuit and cancelled the lis pendens because the loan was satisfied (State’s Ex. 6).
14) Department of State Senior License Investigator Ronald Schwartz (“Inv. Schwartz”) obtained documentation from respondent Simme regarding transactions she negotiated for respondent Peterson Real Estate while she was unlicensed (State’s Ex. 9). Those documents established that, for the period of March 13, 2006 through August 15, 2006, respondent Simme negotiated the sales of at least fourteen properties which resulted in or contributed to respondent Peterson Real Estate receiving over $68,000 in commissions.
15) Respondent Simme testified that when she listed the property with the sellers, the sellers told her they were having financial difficulties and were in bankruptcy, however, they did not say anything about foreclosure. With regard to the notice of lis pendens on the door of property, respondent Simme acknowledged that it was there on the door, that she had a showing, that she took it down, and that she contacted the sellers in Florida. She stated that she did not think it was a lis pendens, that it had something to do with the sellers’ pizza place, and she said, “I don’t know if it was a judgment. It was something that they were trying to get money for back stuff that they owed with the pizza place. So that’s what it was.” (Hearing transcript, p. 111).
License Renewal
16) Prior to and at the hearing, the respondents and/or their attorney raised the issue of respondent Simme’s attempts to timely renew her associate broker’s license prior to March 13, 2006. Respondent Simme testified that she sent her renewal application in to the complainant and that she did not know what happened to the application after that. On or about May 26, 2006, she learned that her license had not been renewed (Hearing transcript, p. 120). She made calls to the complainant, but ultimately, she did not renew the license until August 16, 2006, almost three months later. Respondent Simme believed that her not being licensed was a minor clerical error and not something out of which a Federal case should be made (Hearing transcript, p. 134).
17) Timothy Scott, testifying on behalf of respondent Peterson Real Estate, stated that when respondent Simme came to him regarding her license renewal lapse, the matter was handled quickly and diligently so that her license was renewed (Hearing transcript, pp. 152-153). He also stated that it is the agent’s responsibility to send his or her renewal form with payment to the Department of State (Hearing transcript, p. 156).
18) The tribunal takes official notice that in August 2006, the complainant moved its Albany office location from 84 Holland Avenue in Albany to the Alfred E. Smith Building in Albany.
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- Pursuant to Real Property Law §440-a, it is unlawful for a person to act as a real estate salesperson or broker without being so licensed. In order for a broker to act as an associate broker (Real Property Law §440(2)) with another broker or brokerage, that broker must follow the requirements of Real Property Law §§441(1-A) and 441-a(1) pertaining to salespersons. Respondent Simme violated Real Property §440-a and thereby demonstrated incompetency by acting as a real estate broker associated with respondent Peterson Real Estate from March 13, 2006 through August 15, 2006.
The respondents’ counsel made expansive arguments concerning the complainant’s culpability in moving its office location in 2006 and in losing mail, particularly, respondent Simme’s license renewal application, as a reason for respondent Simme’s unlicensed activity. The magnitude of those arguments was significantly reduced by respondent Simme’s testimony, i.e., that as far as she could recall, she mailed in her renewal application, that she doesn’t know who lost it, the Post Office or the complainant, and that she didn’t know what happened to her license after that (Hearing transcript, pp. 115-116). These arguments are without merit.
First, respondent Simme’s license expired in March 2006 and the complainant did not move its office location until August 2006. Second, the tribunal takes official notice, and respondent Simme should know as well (since she has been licensed for over 20 years), that the complainant automatically sends out the renewal application forms 90 days before the expiration of the broker’s or salesperson’s license. Respondent Simme would have received her license renewal application in December 2005 and would have had almost three months to renew her broker’s license. Had she timely sent in her renewal application, she would have been well aware prior to March 12, 2006 that the complainant either had not received her application and had not renewed her license, and she would have had plenty of time to rectify that issue by contacting the complainant by telephone or in person at one of its offices. More likely, respondent Simme simply failed to send in her application and forgot about it.
Third, it is noted that in addition to her associate broker’s license with respondent Peterson Real Estate, since 2001, respondent Simme has held an additional trade name real estate broker’s license representing Good Ghoice. Since 2001, respondent Simme has not renewed any of her licenses on time; all of her renewal applications were submitted anywhere from three to ten months late (State’s Ex. 3). Her explanations regarding those late renewals were not credible.
Respondents’ counsel also argues that, pursuant to Real Property Law §441-a(2), respondent Simme’s license did not expire until October 31, 2006. That argument is not valid. First, neither respondent Simme nor Peterson Real Estate understood or believed that respondent Simme’s license expired on October 31, 2006. When respondent Simme realized her license had expired in May 2006, she told her supervisor, who told her to take care of it immediately. Her supervisor believed that she handled it quickly and efficiently and respondent Simme testified regarding her efforts to obtain her license. Even though it did take respondent Simme almost three months to finally renew her license after realizing that it had lapsed, there is nothing in the record to suggest that the respondents were unconcerned about the renewal until the “October 31, 2006 deadline.”
Second, Real Property Law §441-a(7) originally provided that real estate salesperson and broker licenses would extend from November 1 (or later, if the applicant received a license after November 1) each year to October 31 two years later. That section of the law was amended, effective January 1, 1985, to provide for staggered licenses, which is still in effect to this day. See, 1985 New York Sess. Law Chapter 497, §8 (McKinney). The purpose of the bill was to permit the staggered renewal of real estate brokers and salespersons (and other) licenses and the statement in support of the bill provided,
The renewal schedule for various licenses issued by the Department of State is determined by the provisions of several licensing statutes. During a regular two year license cycle heavy concentrations of renewal applications are periodically received which require processing which must be completed within a short span of time. To eliminate the cycle of peaks and valleys in work flow, this bill permits a staggered renewal process which will allow for processing of a portion of the total each month. This constant work flow will not only provide for a more manageable process which may lead to personnel savings, but will also simplify inventory control, mailing procedures and fee accounting.
When the law was amended in 1985, the Legislature overlooked and did not amend Real Property Law §441-a(2). However, if the terms of §441-a(2) were to continue to be given effect, which it is not, any salesperson or broker whose license expires prior to October 31 could continue practicing and wait until October 31 of the year in which his or her license expires to renew. This would completely negate the purpose and effect of the 1985 amendment and render it meaningless. The tribunal declines to give Real Property Law §441-a(2) that meaning.
Respondent Simme claims that her failure to timely renew was a minor clerical error and not something out of which a Federal case should be made. The tribunal does not agree with that viewpoint nor does it take such a violation lightly. In other disciplines, such as the employment of an unlicensed security guard by a private investigator or watch, guard or patrol agency, or the employment of an unlicensed operator by an appearance enhancement business, whether or not there are previous violations by the same respondent, the Department of State looks sternly upon those violations and seeks and often obtains the maximum financial sanction allowable by law. See, DLS v. International Protection New York, Inc., 3 DOS APP 03 (2003); DLS v. Carrales, 705 DOS 08 (2008); DLS v. Severe, 218 DOS 08 (2008); DLS v. Maddalone, 296 DOS 08 (2008). Real estate brokers and salespersons should not be viewed or treated differently. As the Secretary of State has represented in a previous determination, “A real estate license is a privilege; those applying for, as well as those holding, such a license are expected to comply with all the regulatory requirements imposed by law.” Prince v. DLS, 26 DOS APP 04 (2004). Respondent Simme was not licensed for approximately five months, during which time she engaged in multiple real estate transactions and received a significant amount in commissions. At what point did or does her actions go from a technical violation to serious misconduct?
Finally, respondents’ counsel cites a previous decision, DLS v. Carro-Caputo, 482 DOS 05 (2005), in support of their position that the tribunal should be lenient with the respondents regarding the lapse of licensure. However, that case is distinguishable from this one. Carro-Caputo concerned a real estate broker applicant, not a licensed broker as in this case. In Carro-Caputo, the tribunal found that the applicant had timely submitted her renewal application and therefore, her license did not expire. In the present case, I found that respondent Simme did not timely apply to renew her license and her license did, in fact, expire. The tribunal also held in Carro-Caputo that, because the applicant took all of the required actions and believed she was licensed, she was not untrustworthy and therefore met her burden of establishing her good character, trustworthiness, and fitness to be licensed as a real estate broker. In this case, the respondent did demonstrate at least incompetency by allowing her license to expire while, at the same time, acting and holding herself out as a licensed real estate broker. Other cases of the tribunal hold just that. DLS v. Fishman, 153 DOS 92 (1992); DLS v. Cruz, 8 DOS 93 (1993); DLS v. Bhagwandin, 317 DOS 97 (1997) (broker demonstrated incompetency by employing unlicensed salesperson); DLS v. Streich, 668 DOS 00 (2000). In this case, respondent Simme is not an untrustworthy or incompetent broker such that her license should be taken away (similar to Carro-Caputo), but she did commit a violation requiring the imposition of a monetary sanction.
III- Being an artificial entity created by law, respondent Peterson Real Estate 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, respondent Peterson, within the actual or apparent scope of 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 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.” Even though it can be argued that respondent Peterson had no knowledge of respondent Simme’s misconduct, he and respondent Peterson Real Estate did retain the commissions that were earned from her unlicensed conduct.
IV- 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, respondents Peterson and Peterson Real Estate employed respondent Simme as an unlicensed salesperson and they thereby violated Real Property Law §442-c and demonstrated incompetency in violation of Real Property Law §441-c.
V- In her capacity as a real estate broker, respondent Simme had a duty to deal with prospective purchasers honestly, fairly and in good faith, to disclose to them all known facts materially affecting the value or desirability of the property, and not to mislead them. Real Property Law §443(4); DLS v. Devaney, 242 DOS 96 (1996); DLS v. Goode, 299 DOS 98 (1998); DLS v. John Linfoot, 60 DOS 88, conf'd. sub nom Harvey v. Shaffer, 156 AD2d 103, 549 NYS2d 296 (4th Dept. 1989); DLS v. Woodland, 84 DOS 99 (1999).
Gutterman v. Romano Real Estate, New York Law Journal, October 28, 1998, p. 36, col. 3 (Yks. Cty. Ct.) is a Yonkers City Court decision which is relevant and provides a good discussion of the law on the issue of a real estate broker’s knowledge and duty to disclose. In Gutterman, the plaintiff purchaser bought a house shown by defendant real estate broker, who misrepresented to plaintiff that the house was connected to a sewer system when, in fact, the house was connected to a septic tank buried in the back yard. The Court found that the plaintiff relied upon the brokers’ representations about the sewer system and had no reason to request an underground inspection be conducted.
The Court stated, “Licensed real estate brokers hold themselves out as professionals ready, willing and able to inspect homes and render accurate information which they know will be relied upon. Assuming the title and status of a “professional” brings with it a higher standard of care than may otherwise be applicable to the purveyors of goods and services (citations omitted).”
The Court concluded that the brokers misrepresented and mislead the plaintiff when they represented the house as being connected to a sewer system.
Another small claims case which contains a good analysis of a real estate broker’s and salesperson’s duty to disclose or not misrepresent conditions of the property to prospective buyers is Olukotun v. Reiff, New York Law Journal, August 18, 2004, p. 19, col. 1 (Richmond Cty. Civ. Ct.). In Olukotun, the plaintiffs purchasers alleged that the defendants owners and real estate broker negligently misrepresented the legal occupancy status of the premises as being a “two family” home when, in fact, it was a legal “one family” residence. The prospective purchasers alleged that had they known that the subject premises was a one family home, they would not have even looked at the property, let alone ordered and paid for a structural inspection.
With regard to the real estate broker’s failure to check the Building Department’s files regarding the proper occupancy of the subject premises (the broker did present copies of searches he made, none of which were from the Building Department), the Court stated,
Brokers are constantly seeking to be classified as "professionals" and on a regular basis lobby for legislation permitting them to be able to draft contracts along with or instead of lawyers; yet they are seemingly unwilling to take even a minimum step to insure that the information that is being provided to them by the seller is correct. Since the brokers claim to be the trained real estate specialists, it is not too much to expect them to check public records to verify the accuracy of information that is part of the public record especially when the broker intentionally includes this data in advertisements in which they seek to promote the premises and earn a commission.
Regarding the broker’s obligation to disclose, the Court continued:
In 1993 the legislature adopted RPL 443 which, by statute, differentiated between brokers who were acting as the seller's agent and those acting as a buyer's agent in a residential real estate transaction. One of the requirements of the disclosure is that the seller's agent in dealing with a buyer must "(c) disclose all facts known to the agent materially affecting the value or desirability of property, except as provided by law" (RPL 443(4)). Since the statute requires that the broker only disclose facts the agent knows, it can be argued that "ignorance is bliss" and if the broker does not know the true occupancy status, there is no duty to inquire. "I know nothing" may have worked for Sgt. Schultz in "Hogan's Heroes," however, it will not work in this case. The broker and salesperson are licensed by the state. They are charged with knowledge of what is a legal or illegal transaction concerning the sale of property. Whether a premises can be legally occupied is an essential element of any transaction and the real estate "professional" is charged with that knowledge. In an individual case such information may be irrelevant to the success of the transaction, for instance where the purchaser intends to tear down the existing structure, but it does not change the obligation of the broker to have accurate information in that regard.
Another case that is relevant is Jablonski v. Rapalje, 14 AD3d 484, 788 NYS2d 158 (2nd Dept. 2005), in which the Appellate Division stated, “New York adheres to the doctrine of caveat emptor and imposes no duty on the seller or the seller's agent to disclose any information concerning the premises when the parties deal at arms length, unless there is some conduct on the part of the seller or the seller's agent which constitutes active concealment (see Platzman v. Morris, 283 A.D.2d 561, 562, 724 N.Y.S.2d 502; Glazer v. LoPreste, 278 A.D.2d 198, 717 N.Y.S.2d 256; London v. Courduff, 141 A.D.2d 803, 804, 529 N.Y.S.2d 874). “If however, some conduct (i.e., more than mere silence) on the part of the seller rises to the level of ‘active concealment’ (Slavin v. Hamm, 210 A.D.2d 831, 832 [621 N.Y.S.2d 393]; see Stambovsky v. Ackley, 169 A.D.2d 254, 257 [572 N.Y.S.2d 672]), a seller may have a duty to disclose information concerning the property” ( Bethka v. Jensen, 250 A.D.2d 887, 888, 672 N.Y.S.2d 494). To maintain a cause of action to recover damages for active concealment, the plaintiff must show, in effect, that the seller or the seller's agents thwarted the plaintiff's efforts to fulfill his responsibilities fixed by the doctrine of caveat emptor (see Platzman v. Morris, supra at 562, 724 N.Y.S.2d 502). In that case, the purchasers sued the sellers and brokers for failing to disclose that the house had a seasonal infestation of bats, and the purchasers were successfully able to defeat the sellers’ and brokers’ motion to dismiss.
In Matos v. Crimmins, 40 AD3d 1053, 837 NYS2d 234 (2nd Dept. 2007), the Court dismissed the plaintiffs purchasers action, in part, because notwithstanding the plaintiffs’ contention that the defendants sellers concealed the easements that existed in the back yard, the plaintiffs conceded that the existence of the easements was readily ascertainable from the public record.
In this case, I did not find respondent Simme’s testimony regarding the lis pendens particularly credible. I found it difficult to believe that a trained real estate professional, who sees an official lis pendens notice posted on the door of a residence that she is about to show to prospective buyers, would simply remove it without paying any attention to what it is and what it states. Furthermore, the fact that she took it down and then called the sellers, without reading it, is essentially an active concealment on her part, because it deprived potential purchasers from knowing that there was a foreclosure action pending against the property. A pending foreclosure action is something that materially affects the value of the property, for which disclosure should be made, and it is irrelevant what the Kaminskis would have done with that information had it been disclosed to them.
However, a lis pendens is readily ascertainable from the public record and the Kaminskis became aware of it through a title search, which is typically performed during a house sale. Aside from respondent Simme’s actions and credibility, I conclude that the allegation in the complaint regarding her failure to disclose the lis pendens, cannot be sustained.
There was also insufficient evidence that respondent Simme was aware that the locks had been turned around at the property, and that charge is dismissed as well.
VI- The charge that respondents Peterson and Peterson Real Estate failed to properly supervise their salespeople, particularly respondent Simme, is dismissed inasmuch as there is insufficient evidence supporting this charge.
VII- 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 respondents will be required to refund the commission they received on the Kaminski transaction because it arose from respondent Simme’s unlicensed conduct.
VIII- In assessing what sanction to impose for the respondents’ misconduct, I have taken into consideration that respondent Peterson Real Estate has received over $68,000 from the at least fourteen transactions that respondent Simme engaged in while she was unlicensed (State’s Ex. 9). Said respondents can be ordered to pay the $68,000 in restitution and to pay a $28,000 fine, which represents the maximum fine of $1,000 per unlicensed transaction ($14,000 per respondent). However, respondent Simme’s unlicensed activity was not intentional, even though the respondents did fail to take immediate action to rectify the situation. To require them to pay the maximum fine and restitution in this case would not be reasonable or fundamentally fair. The sanction imposed should punish the respondents and deter them from allowing their licenses to expire and/or employing unlicensed salespersons in the future.
DETERMINATION
WHEREFORE IT IS HEREBY DETERMINED THAT respondent Joanne Simme violated Real Property §440-a and thereby demonstrated incompetency in violation of Real Property Law §441-c. Accordingly, pursuant to Real Property Law §441-c, she shall pay a fine of $3,000 to the Department of State on or before August 31, 2009, and should she fail to pay the fine by that date, her license as an associate real estate broker, UID #30SI1017596, and her license as a trade name broker, UID #37SI0926811, shall be suspended for a period commencing on September 1, 2009 and terminating three months after the receipt by the Department of State, by certified mail, of her license certificate and pocket card.
WHEREFORE IT IS HEREBY DETERMINED THAT respondents Victor L. Peterson and M.J. Peterson Real Estate, Inc. employed an unlicensed salesperson in violation of Real Property Law §442-c and thereby demonstrated incompetency in violation of Real Property Law §441-c. Accordingly, pursuant to Real Property Law §441-c, they shall pay a fine of $3,000 to the Department of State on or before August 31, 2009, and should they fail to pay the fine by that date, their licenses as real estate brokers shall be suspended for a period commencing on September 1, 2009 and terminating three months after the receipt by the Department of State, by certified mail, of their license certificates and pocket cards.
WHEREFORE IT IS HEREBY DETERMINED THAT upon payment of the fines or termination of the suspensions in lieu thereof, respondents’ licenses shall be further suspended until such time as they produce proof satisfactory to the Department of State that they have refunded the sum of $16,200 to Susan Abbatoy and Evelyn Janis, plus interest at the legal rate for judgments (currently 9%) from September 1, 2009. They are directed to send a certified check or money order for the fines payable to “Secretary of State” and proof of the ordered restitution, or their license certificates and pocket cards, by certified mail, to Norma Rosario, Department of State, Division of Licensing Services, 80 South Swan Street, P.O. Box 22001, Albany, New York 12201-2201.
Scott NeJame
Administrative Law Judge
Dated: July 15, 2009