1416 DOS 07
STATE OF NEW YORK
DEPARTMENT OF STATE
OFFICE OF ADMINISTRATIVE HEARINGS
----------------------------------------X
In the Matter of the Complaint of
DEPARTMENT OF STATE
DIVISION OF LICENSING SERVICES,
Complainant, DECISION
-against-
RUSSELL T. DICKSON,
NOSELLERCOST.COM INC.,
and WWW.DICKSON REALTY.COM,
Respondents.
----------------------------------------X
The above noted matter came on for hearing before the undersigned, Scott NeJame, on April 2, 2007 at the office of the Department of State located at 41 State Street, Albany, New York.
The respondents were represented by Peter G. Barber, Esq. of Murphy, Burns, Barber & Murphy, LLP, 4 Atrium Drive, Executive Woods, Albany, New York 12205.
The complainant was represented by Associate Attorney Whitney A. Clark, Esq.
COMPLAINT
The complaint alleges that the respondents: breached fiduciary duties to their principals; used an improper form of listing agreement; charged an unearned commission; offered a property for sale without the owner’s authorization; conducted their brokerage business under an unlicensed name; and placed advertisements that failed to list the license status of the individuals named therein.
FINDINGS OF FACT
1) The notice of hearing together with a copy of the complaint was served on the respondents by certified mail delivered on February 10, 2007 (State’s Ex. 1).
2) Respondent Russell T. Dickson (“Respondent Dickson”) is a licensed real estate broker doing business under the trade name WWW.Dickson Realty.com for the period of August 18, 2003 to August 18, 2007. He was issued an additional corporate real estate broker’s license representing Nosellercosts.com Inc. for the period of March 13, 2006 to March 13, 2008 (State’s Ex. 2). At some point after he received his corporate broker’s license, respondent Dickson applied to amend and received an amended license to represent Nosellercost.com. Inc. rather than Nosellercosts.com.
3) Although they do business at the same location, WWW.Dickson Realty.com and Nosellercost.com Inc. are separate entities.
4) On February 24, 2006, David and Carolyn Bayes entered into a one year exclusive listing agreement with WWW.Dickson Realty.com1 for the sale of the Bayes’ home located at 3771 State Highway 30, Amsterdam, New York (“the property”) for the sale price of $524,900 and at a commission of 10%. The sales agent who was acting on WWW.Dickson Realty.com’s behalf was Bernadette Pecora (State’s Ex. 3). Respondent Dickson became the agent for the Bayes’.
5) In addition to the listing agreement, the Bayes’ signed a “termination of listing agreement” form in which, in part, the Bayes’ agreed to pay WWW.Dickson Realty.com a $3,000 flat fee if the Bayes’ terminated the services of the broker and/or withdrew the property from the market during the term of the listing agreement (State’s Ex. 3).
6) Because respondent WWW.Dickson Realty.com’s website was not functional, the property was advertised for sale by respondent Nosellercost.com Inc. At no time did the Bayes’ authorize or consent to the respondents doing this and they were initially unaware of respondents’ actions in this regard.
7) Subsequently, Mr. Bayes saw the property listed in a brochure of respondent Nosellercost.com Inc. for the month of April 2006. On the front of the brochure, respondent Nosellercost.com Inc.’s name was set forth as “NoSellerCost!com” (State’s Ex. 4).
8) Mr. Bayes also saw the property listed in the Leader-Herald’s “Welcome Home” publication for the period of May to June 2006, in which the respondent’s name was set forth as “NoSellerCost!com.” In this ad, there is no indication that the advertiser is a broker nor did it give the name and telephone number of the broker (State’s Ex. 5).
9) Upon seeing these ads, Mr. Bayes contacted Ms. Pecora and told her that he didn’t give authority to anyone other than WWW.Dickson Realty.com to advertise the property. Ms. Pecora asked Mr. Bayes sign a new contract with Nosellercost.com Inc. Mr. Bayes agreed to sign a new contract only if the term of the listing was for four months. The respondents would not agree to a four month listing.
10) Mr. Bayes also spoke with respondent Dickson, who told him to sign a new listing with Nosellercost.com Inc. for one year. Mr. Bayes refused. Respondent Dickson told Mr. Bayes that he was already committed to the listing for a year, that Mr. Bayes would not sell the property and neither would he (respondent Dickson), and that if he wanted to get out of the listing, he would have to pay respondent Dickson $3,000.
11) Respondent Dickson testified that at no time did the respondents receive any communication from the Bayes’ that they wanted to terminate the listing agreement. I did not find this testimony credible because, either through Ms. Pecora (Hearing transcript, p. 56), through his conversation with Mr. Bayes (Hearing transcript, p. 55), through his interview with the Department of State’s license investigator (Hearing transcript, p. 37), or through other communications between the Bayes’ and the respondents (Hearing transcript, p. 74), all of which occurred during the listing period, respondent Dickson was well aware that the Bayes’ were not satisfied with the respondents’ handling of their listing agreement. At the very least, when respondent Dickson received the Bayes’ complaint in late May 2006 (Hearing transcript, p. 57), which was a little over three months after the commencement of the one year listing period, in which the Bayes’ sought to have their listing agreement with WWW.Dickson Realty.com voided, respondent Dickson knew clearly that the Bayes’ wanted to terminate the listing agreement.
12) After his conversation with Mr. Bayes, respondent Dickson removed ads for the property from various publications (See State’s Ex. 6). To Mr. Bayes’ knowledge, nobody looked at the property during the time it was listed with respondent WWW.Dickson Realty.com. The respondents were not associated with the multiple listing service and therefore, could not market the property there.
13) On or about August 16, 2006, Department of State License Investigator Daniel Burnetter (“Inv. Burnetter”) interviewed respondent Dickson, at which time respondent Dickson stated that he would not release the Bayes’ from their listing agreement, that he was going to sell the property and collect a commission.
14) Although requested to do so, respondent Dickson did not provide Inv. Burnetter with a list of expenses to justify the $3,000 flat fee that he charged the Bayes’. At the hearing, the respondents did not submit any proof of what expenditures they made to justify receiving a $3,000 fee from the Bayes’.
15) Immediately after the listing with respondents expired, Mr. Bayes listed the property with Coldwell Banker. Coldwell Banker had people look at the property, one of which submitted an offer.
16)_The tribunal takes official notice of the records of the Department of State, including former disciplinary proceedings against licensees. The tribunal finds, and based also on the testimony of respondent Dickson (Hearing transcript, p. 71), that in July 2003 respondent Dickson pled nolo contendere to acting as a real estate broker while licensed only as a real estate salesperson, and he agreed to pay a $250 or $500 fine.
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- When respondent WWW.Dickson Realty.com agreed to act on behalf of the Bayes’ in their attempt to sell the property, it became the agent of the Bayes’.
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 good faith, undivided loyalty, obedience, and full and fair disclosure. 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). Included with these duties is the respondents’ obligation to use reasonable care and skill in acting for their principal. Restatement (Second) of Agency §379.
It is well known New York law that, with respect to brokerage agreements, “...the right of the principal to terminate [the broker’s] authority is absolute and unrestricted, except only that he may not do it in bad faith, and as a mere device to escape the payment of the broker’s commissions.” Sibbald v. Bethlehem Iron Co., 83 NY 378, 384 (1881); Aegis Property Services Corp. v. Hotel Empire Corp., 106 AD2d 66, 484 NYS2d 555 (1st Dept. 1985); Timeless Realty Corp. v. Connecticut Diversified Holdings LLC, 11 Misc.3d 1078(A), 819 NYS2d 852 (NY Sup. Ct. 2006).
Furthermore, “Brokers’ fees must represent charges for actual services...the issue is, was the payment in fact exacted as a special premium of the type condemned, or was it received in payment of some legitimate service?” Golf v. Lomenzo, 29 NY2d 468, 329 NYS2d 805, 813 (1972).
In this case, the Bayes’ signed their listing agreement with respondent WWW.Dickson Realty.com, but as respondent Dickson was well aware, WWW.Dickson Realty.com did not provide any services to the Bayes’. The services provided to the Bayes’ were supplied by respondent Nosellercost.com Inc. because respondent WWW.Dickson Realty.com’s web site was no longer functional. When the Bayes’ realized that the brokerage services were not being provided by WWW.Dickson Realty.com, they sought to be released from their listing agreement. Rather than release them, respondent Dickson made it clear that he would not release the Bayes’ unless they paid him $3,000. The Bayes’ actions were not done in bad faith or as a device to escape paying a broker’s commission (especially since the respondents had not procured any potential buyers at that point). Respondent Dickson thereby breached his fiduciary duties of good faith, obedience, reasonable care and skill to the Bayes’ and demonstrated untrustworthiness.
Furthermore, the claiming 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). By demanding that the Bayes’ pay him a $3,000 termination fee as a condition of him releasing them from the listing agreement, respondent Dickson demanded an unearned commission.
Respondent Dickson’s arguments that he never billed or collected from the Bayes’ a termination fee, and that he provided services to the Bayes’ from which to earn a fee, are unavailing and disingenuous.
Regarding the termination fee, the fact that respondent Dickson did not bill the Bayes’ $3,000 is irrelevant. As with an improper dual agent or other misconduct committed by a real estate broker, it is not necessary that there be a showing of injury to the principals for there to be a finding of misconduct against the broker. See, New York Central Insurance Company v. National Protection Insurance Company, 14 NY 85 (1856); Department of State v. Robin, 80 DOS 97 (1997). In this case, though, there was injury to the Bayes’ because they felt threatened enough by respondent Dickson’s actions to withhold re-listing the property until after their listing agreement with respondent WWW.Dickson Realty.com expired. In effect, respondent Dickson attempted to extort money from the Bayes’ by refusing to release them from their listing agreement unless they paid him $3,000.
Regarding the services provided, at no time did the respondents present any proof of actual services that respondent WWW.Dickson Realty.com provided to the Bayes’. Any advertisements for the property were placed by respondent Nosellercost.com Inc. and not by WWW.Dickson Realty.com. The respondents were not a member of the multiple listing service and therefore, could not advertise there. Furthermore, respondent Dickson was ridiculously glib in responding to questions from his own attorney and the State’s attorney concerning his marketing of the property:
Respondent Dickson’s attorney: Did you continue the marketing [of] the property, I should say, after April or May of [2006]?
Respondent Dickson: Marketing comes in all aspects. Marketing can be, for me, walking into someone, marketing can be from someone walking into our office. (Hearing transcript, p. 61).
......
Complainant’s attorney: So, if you couldn’t go to the property under the threat of arrest, and if you’re saying that you couldn’t advertise the property in the manner that the Bayes authorized you, how could you meet th[e] fiduciary dut[y] [of reasonable care to] the Bayes?
Respondent Dickson: With every way I can, as per the contract, and as per my duty under my license, even if it means talking in my sleep. (Hearing transcript, p. 78).
III- Pursuant to 19 NYCRR §175.10, “A real estate broker shall never offer a property for sale or lease without the authorization of the owner.”
The Bayes’ entered into their listing agreement with respondent WWW.Dickson Realty.com but the property was advertised by respondent Nosellercost.com Inc. Respondent Nosellercost.com Inc. thereby violated 19 NYCRR §175.10. Respondent Dickson knew that WWW.Dickson Realty.com could not advertise the property and therefore, he is equally liable for respondent Nosellercost.com Inc.’s violation.
IV- Pursuant to Real Property Law §440-a, no person or corporation may engage in the business of real estate brokerage without being licensed to do so. A real estate broker who or which wishes to conduct brokerage business under a name other than that on his/her/its license must apply for a license under that new name. Real Property Law §441(1)(a); Division of Licensing Services v. Dorfman, 112 DOS 99 (1999).
By advertising itself as NoSellerCost!com, the respondents violated Real Property Law §440-a and demonstrated untrustworthiness and incompetency as real estate brokers.
V- Pursuant to 19 NYCRR §175.25(a), “All advertisements placed by a broker must indicate that the advertiser is a broker or give the name of the broker and his telephone number.” The respondents’ advertisement in the Leader-Herald’s “Welcome Home” publication for the period of May to June 2006 failed to comply with this regulation. The respondents thereby violated 19 NYCRR §175.25(a) and demonstrated incompetency as real estate brokers.
VI- Inasmuch as the respondents have demanded an unearned commission from the Bayes’, and although they have not as yet commenced a legal action against the Bayes’ to collect such a commission (under color of a “termination fee”), they can and should be required to release the Bayes’ from paying a commission or termination fee arising from the subject transaction. “One can hardly fathom a more effective means of removing the incentive for engaging in devious conduct...than a penalty which insures that the malefactor is denied the fruits of his misdeed.” Kostika v. Cuomo, 41 NY2d 673, 394 NYS2d 863, 865 (1977).
VII- In assessing what penalty to impose for the respondents’ violations, I have taken into consideration that respondent Dickson previously pled nolo contendere to acting in a capacity in which he was not licensed and agreeing to pay a fine. Barotti v. New York State Liquor Authority, 82 AD2d 1004, 442 NYS2d 168 (3rd Dept. 1981) (licensee’s no contest plea to the charges amounted to a waiver of a hearing and an admission of the facts as charged).
DETERMINATION
WHEREFORE IT IS HEREBY DETERMINED THAT all respondents have violated Real Property Law §440-a and 19 NYCRR §§175.10 and 175.25, and demonstrated untrustworthiness and incompetence in violation of Real Property Law §441-c. Respondent Dickson additionally has breached fiduciary duties of good faith, obedience, reasonable care and skill to his principals and demanded an unearned commission. Accordingly, pursuant to Real Property Law §441-c, all respondents shall pay a fine in the total amount of $3,000 to the Department of State on or before August 15, 2007. Should they fail to pay the fine by August 15, 2007, their licenses as real estate brokers, UID ##31DI1106736 and 37DI0995513, shall be suspended beginning on August 16, 2007 and terminating three months after the receipt, by certified mail, by the Department of State of their license certificates and pocket cards. Upon payment of the fine or termination of the suspension in lieu thereof, the respondents’ licenses shall be further suspended until they submit proof satisfactory to the Department of State that they have issued an unconditional release to David and Carolyn Bayes for any claims or actions arising out of the February 24, 2006 listing agreement and addenda thereto. They are directed to send a certified check or money order for the fine payable to "Secretary of State" and proof of issuance of the release to the Bayes’, or their license certificates and pocket cards, by certified mail, to Norma Rosario, Department of State, Division of Licensing Services, 123 William Street, 19th Floor, New York, New York 10038.
Scott NeJame
Administrative Law Judge
Dated: July 12, 2007
1At different places throughout the listing agreement and addenda thereto, the respondent’s name is set forth as WWW.Dickson Realty.com, Dickson-Realty.com or W.W.W.Dickson-Realty.com. Although respondent Dickson is licensed only under the name WWW.Dickson.com, all three names are treated as the same name. The complainant has not charged the respondent with violating the law with regard to the use of these alternate names.