DEPARTMENT OF STATE
OFFICE OF THE SECRETARY OF STATE
In the Matter of
17 DOS APP 04
DEPARTMENT OF STATE
DIVISION OF LICENSING SERVICES,
Mr. Vernon Lemke (“Appellant”) appeals from a judgment, issued April 19, 2004, of the Office of Administrative Hearings (“OAH”) which found that Appellant violated Real Property Law §443(3) and demonstrated untrustworthiness and incompetency when he failed to provide a real estate agency relationship disclosure form and failed to transmit a counter-offer to his client. Pursuant to Real Property Law §441-c, Administrative Law Judge (ALJ), Roger Schneier suspended Appellant’s license as of June 1, 2004, terminating six months after the receipt of the license by the Division of Licensing Services.
On May 17, 2004, Appellant filed motions requesting an extension of 30 days to obtain a copy of the hearing transcript and to file his briefs and requesting a stay of the suspension of his license pending disposition of the appeal. By decision of June 2, 2004, the First Deputy Secretary of State granted his motion for a 30-day extension and provided that his briefs must be filed by June 23, 2004. The request for a stay of the suspension of his license pending the outcome of appeal was denied without prejudice to re-submission. On June 21, 2004, Appellant filed a second motion for stay of the suspension of his license, which again was denied. Additionally, Appellant was ordered to comply with the ALJ’s decision and surrender his license and pocket card to the Department. To date, neither the license nor pocket card have been received.
Appellant timely submitted a Memorandum in Support of his Appeal. Respondent, Division of Licensing Services, submitted a Memorandum in Opposition to Appeal on
July 14, 2004.
FINDINGS OF FACT
1. The Appellant is, and at all times hereinafter mentioned was, duly licensed as a representative broker of Commercial Property Holdings d/b/a Commercial Realty Associations, a limited liability company.
2. On April 10, 2003, Gladys Kingdom ("seller”) entered into an exclusive right to sell listing with Bob Harris Realty for property located in Stafford, New York (“the property”) with an asking price of $24,900.00.
3. On or about July 3, 2003, Appellant entered into a verbal broker agreement with a prospective buyer, Jerome Morris, whom Appellant agreed to represent as agent in the purchase of property. At no time did the Appellant provide Mr. Morris with an agency relationship disclosure form.
4. On or about July 3, 2003, Mr. Morris offered to purchase the property for $19,000.00 using a form purchase and sale contract furnished by Appellant, his agent in the transaction. Appellant conveyed that offer to the seller, who countered with an offer to sell the property for $23,000.00. Although the counter-offer was conveyed to Appellant, Appellant did not convey the offer to his client, even though his client informed him that he was willing and able to raise his offer. The property was placed under contract of sale by a third party for $19,000.00 less than a week later.
The issues on appeal are whether Appellant violated Real Property Law §443 (3) and demonstrated untrustworthiness and incompetency in this transaction and whether the suspension of his license for six months is a justifiable punishment pursuant to Real Property Law §441-c.
The Appellant in this transaction was acting as the agent for the buyer, Mr. Morris. The section of Real Property Law§443(3) that applies to this situation provides:
A buyer’s agent shall provide the disclosure form to the buyer prior to entering into an agreement to act as the buyer’s agent and shall obtain a signed acknowledgment from the buyer... A buyer’s agent shall provide the form to the seller or the seller’s agent at the time of the first substantive contact with the seller and shall obtain a signed acknowledgment from the seller or the seller’s listing agent...
Appellant concedes that he did not provide an agency disclosure form to Mr. Morris. Appellant argues that Respondent failed to show that this was an act of intentional wrongdoing. The Legislature in enacting Real Property Law §443 (3) did not require an element of intent. The mere failure to provide a client with the disclosure form, by itself, violates the statute.
Appellant argues that the ALJ erred in finding him untrustworthy and incompetent. However, it is well established that the failure to provide a client with a disclosure form is
sufficient proof that the broker has demonstrated incompetency. (DOS v. Finley 393 DOS 00; DOS v. Werner 160 DOS 96).
The ALJ determined that Appellant also demonstrated untrustworthiness and incompetency through the failure to disclose to his client a counter offer from the seller. After Appellant conveyed his client’s offer to purchase the property, he was advised of the seller’s counter offer. He failed to advise his client of that counter offer and no further offers were made. Several days later, the property was placed under contract of sale by a third party for the amount of the original offer of Mr. Morris. It is speculative to guess whether the property would have sold to Appellant’s client had he been informed of, and able to respond to, the counter offer. The ALJ determined that this was a breach of the fiduciary duties owed by an agent to his client of good faith, undivided loyalty, and full and fair disclosure.
Appellant in his Memorandum asserts that Respondent failed to prove that any offer was presented to the seller, or a counter offer was made by the seller. Respondent presented witness testimony at the hearing including the seller’s listing agent who testified that he contacted Appellant and informed him of the counter offer. Appellant further argues that according to the standard Purchase and Sale contract for Residential Property form, produced by the Monroe County Bar Association, in order for a counter offer to be valid it must be made in writing. Appellant has misconstrued this language which states that in order for an agreement to be “binding” it must be in writing. Appellant’s client and the property’s seller were in the midst of negotiating a deal, not finalizing a binding agreement. Therefore, Appellant breached his fiduciary duty to his client by not disclosing this counter offer.
Appellant has appealed the suspension of his license. Real Property Law §441 (c) provides:
The Department of State may revoke the license of a real estate broker or salesman or suspend the same, for such period as the department may deem proper...upon the conviction of the licensee of a violation of any provision of this article...or if such licensee....has demonstrated untrustworthiness or incompetency to act as a real estate broker or salesman. [Emphasis added].
Appellant concedes that he failed to provide his client with an agency disclosure form in violation of Real Property Law §443. The violation of Real Property Law §443 alone is enough to justify suspension under Real Property Law §441-c. Appellant compounded this violation by also demonstrating untrustworthiness and incompetency by failing to disclose a counter-offer to his client.
Further, Real Property Law §441-c (2) provides that “when a broker has been notified of the suspension of his license he has the obligation to return the license and pocket card to the Department of State within five days after the receipt of the notice.” [Emphasis added].
The Appellant was ordered by the ALJ to return his license and pocket card to DLS by his decision of April 19, 2004. Appellant did not comply. Appellant was again ordered on
July 7, 2004 by the decision of the First Deputy Secretary of State to comply with the ALJ’s decision and turn in his license and pocket card to DLS. To date, Appellant has failed to do so in further demonstration of his untrustworthiness, and indifference towards compliance with state law.
The suspension of Appellant’s license as ordered by the ALJ is hereby affirmed. The date of suspension of his license commenced on June 1, 2004, and will terminate six months after the receipt by the Department of State of his license certificate and pocket card, which he is directed to send to Usha Barat, Customer Service Unit, Department of State, Division of Licensing Services, 84 Holland Avenue, Albany, New York 12208. If the Appellant fails to surrender his license and pocket card within five (5) days following receipt of this decision, his license shall be revoked. Upon revocation pursuant to Real Property Law §441-c (4), Appellant will not be eligible to re-apply for a license for the duration of one year from the date of revocation.
So ordered on:
Frank P. Milano
First Deputy Secretary of State