DEPARTMENT OF STATE

OFFICE OF THE SECRETARY OF STATE

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In the Matter of

JOY H. GOLDBERG, Trade Name Real Estate Broker

and Notary Public,

                                    Appellant,

                                                                                                            DECISION ON APPEAL

                        -against-                                                           10 DOS APP 10

DEPARTMENT OF STATE  

DIVISION OF LICENSING SERVICES,

                                    Respondent.

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            Joy H. Goldberg (the Appellant) has appealed an adverse determination of the Office of Administrative Hearings (OAH) (675 DOS 09). In a decision dated June 19, 2009, Administrative Law Judge (the ALJ) Roger Schneier found that Appellant violated Real Property Law § 441-c and Executive Law § 130, by assisting another person in facilitating a real estate transaction in which “the mortgage lender was induced to make a loan under false pretenses” (675 DOS 09, at p. 3). Pursuant to Real Property Law § 441-c and Executive Law § 130, the ALJ suspended Appellant’s licenses as real estate broker and notary public, effective August 1, 2009, for a minimum term of 3 months and continuing thereafter until such time as Appellant produces proof satisfactory to the Department of State that she has refunded the sum of $10,475.00 (the commission received from the seller) plus interest from November 28, 2009 (the date of the closing) at the legal rate of 9 percent to the seller, Julio Alejandro, Jr. (675 DOS 09, at p. 4).  

            On July 17, 2009, the Secretary of State received Appellant’s memorandum of appeal as well as her request for a stay. On July 31, 2009, the First Deputy Secretary of State granted Appellant’s application for a stay of the suspension of Appellant’s licenses pending determination of this appeal, subject, however, to the condition that the accrual of interest on the restitution will not be tolled due to the issuance of the stay should the restitution order be ultimately confirmed herein (see 41 DOS APP 09, at p. 4). On August 10, 2009, the Secretary of State received a memorandum in opposition to the appeal from Respondent Division of Licensing Services. The appeal will now be decided on the merits.

FINDINGS OF FACT

            Appellant was continuously licensed as a trade name Real Estate Broker representing Accurate Realty from at least September 4, 2003 through September 4, 2009 and as a notary public from June 14, 2001 to the present (State’s Ex. 2). In September 2006, Appellant became aware that Julio Alejandro, Jr. was experiencing difficulty satisfying the mortgage payments on real property located at 48 Locust Street, Islip, New York (Transcript, at p. 140-141). Shortly thereafter, Appellant contacted Alejandro and Maria Morales (Alejandro’s adult niece who resided at the subject property) and informed them that she could assist in avoiding foreclosure (State’s Ex. 7; Transcript, at 116-117, 142). Alejandro testified that his initial goals were to save himself and his property from foreclosure proceedings and to ensure that his niece would be able to continue living at the subject property (Transcript, at p. 34-35). After concluding that refinancing the mortgage was not a viable option, Appellant suggested that the property be sold (Transcript, at p. 158). On October 20, 2006, a contract of sale, listing agreement and agency disclosure statement were prepared and executed, stating a sale price of $320,000 for the subject property (State’s Ex. 3; State’s Ex. 4; State’s Ex. 5). On October 23, 2006, Appellant had an appraisal of the property completed, which referenced the October 20^th contract sale price and, in so doing, valued the subject property at $320,000 (State’s Ex. 8; Transcript, at p. 120-122).

            Alejandro transferred the subject property to Valentin Sanchez (buyer/borrower) at a closing which took place in November of 2006 (Transcript, at pp. 7, 173-174). Appellant served as a dual agent for the transaction (State’s Ex. 5). The purchase price of the subject property was listed on the closing documents as $320,000 (State’s Ex. ; Transcript, at p. 120). A new FHA mortgage was obtained by Sanchez from People’s Choice Home Loan, Inc. in the amount of $255,000 (Respondent’s Ex. A). On October 22, 2006, a check was written by the purchaser, Sanchez, to the seller, Alejandro, in the amount of $65,000 as a deposit, which was never negotiated (State’s Ex. 4; State’s Ex. 9; State’s Ex. 10; Transcript, at pp. 123-125, 127). A “seller’s concession” from Alejandro to Sanchez of $16,850 was also included to cover Sanchez’s settlement costs as borrower (Respondent’s Ex. A). Appellant received a commission of $10,475 (State’s Ex. 3; State’s Ex. 6; Transcript, at pp. 77, 148). Further, Sanchez, the buyer, received a “proceeds” check at the closing for $20,000 (Transcript, at p. 191). The transfer tax was computed using $320,000 as the amount of consideration for the conveyance (Respondent’s Ex. D).

            The actual payments made in relation to the transaction were the following: $203,392.55 paid Alejandro’s existing outstanding mortgage; $10,475 was paid to Appellant as a commission; $2,955 was paid by Alejandro in settlement charges; $20,000 was provided to Sanchez as “proceeds;” $1,000 was paid as attorney’s fees; and $16,850 covered the settlement charges attributed to Sanchez, aggregating to approximately $254,672.55 (Respondent’s Ex. A; Respondent’s Ex. C; Transcript, at p. 191). Although the Settlement Statement indicated that Alejandro was given $38,177.45 in cash at the closing, no such payment was actually made (Transcript, at pp. 42, 57, 191-193).

            Shortly after the closing, Appellant was contacted by Morales who requested Appellant’s assistance in dealing with Sanchez (Transcript, at p. 154). Appellant declined to assist, stating that she did not get involve in landlord-tenant disputes (Transcript, at p. 154). Following the conveyance of the real property to Sanchez, Morales made only one payment to Sanchez and was evicted from the premises by Sanchez in March of 2007 (Transcript, at pp. 56-57, 61, 75, 103-104, 114).

OPINION

I.         The ALJ’s finding that Appellant demonstrated untrustworthiness based on participation in a fraud was not beyond the scope of the Complaint.

            Appellant contends that the ALJ’s finding that she participated in a fraud and, therefore, demonstrated untrustworthiness went beyond the scope of the Complaint (Appellant’s Memorandum of Appeal, at p. 6). Respondent initiated the proceedings and carries the burden of proving, by substantial evidence, the truth of the charges set forth in the Complaint (SAPA § 306(1)). The Complaint specifically charged that “by assisting another to engage in real estate fraud, [Appellant] has demonstrated untrustworthiness pursuant to Real Property Law § 441-c” (State’s Ex. 1, “Complaint,” at p. 3). The “General Allegations” of the Complaint presented the underlying factual nature of the alleged fraudulent transaction; namely, that Appellant assisted in a scheme in which Alejandro would sell the property in danger of foreclosure to Sanchez; Sanchez would obtain superior mortgage financing by purchasing the property for the amount of the outstanding mortgage and not the stated sale price; Alejandro or Morales would make Sanchez’s mortgage payments; and, in exchange, Sanchez would ultimately re-convey the property to Alejandro or Morales, or allow Morales to remain living at the property for as long as she desired (State’s Ex. 1, “Complaint,” at pp. 2-3). Thus, the Complaint informed Appellant that she was charged with assisting and participating in a fraudulent transaction, and that the fraud consisted of the factual circumstances surrounding the property conveyance from Alejandro to Sanchez, the amount of money the property was actually sold for, and the manner in which the new mortgage financing was obtained.

            Following the administrative hearing, the ALJ found that “the contract called for $65,000.00 deposit and the closing statement indicated that the deposit had been applied to the purchase price ... [h]owever no such deposit was ever paid ... [r]ather, Mr. Sanchez was required to produce at the closing a check for the deposit which it was understood by the parties and the respondent, would not be negotiated ... the apparent result is that the mortgage lender was induced to make a loan under false pretenses” (675 DOS 09, at p. 3). Considering the allegations of the Complaint, as noted above, such a finding was not beyond its scope and Appellant could not have been unfairly surprised to find that the facts of the underlying real property transaction and any fraud committed therein would be at issue.

II.        Substantial evidence supports the determination of the ALJ.

            Appellant contends that the ALJ’s decision was not supported by substantial evidence on the record, arguing that there is no support for the ALJ’s finding that Appellant was involved in that facilitation of a fraudulent scheme. Appellant argues that the evidence in the record does not support a conclusion that fraud occurred and demonstrates nothing more than the fact that she was “standing near [an] alleged fraud” and that her role in the transaction was peripheral to, and without knowledge of any fraudulent scheme (Appellant’s Memorandum of Appeal, at p. 5).

            As the finder of fact, an ALJ must weigh the evidence and decide whether “substantial evidence”has been adduced, which “as a burden of proof . . . demands only that a given inference is reasonable and plausable” (Miller v. DeBouno, 90 NY2d 783, 793 (1997); Oglesby v. New York City Housing Auth., 66 AD3d 905, 908 (2d Dept., 2009); see also Borchers, New York State Administrative Procedure And Practice § 3.12, at 55 (1995)). In reviewing a determination of an ALJ, the Secretary of State retains plenary authority to reverse or modify decisions, but accords due deference to the ALJ in terms of factual findings and credibility assessments (see Matter of Simpson v Wolanski, 38 NY2d 391, 394 (1975)).

            The record demonstrates that, after being informed that Alejandro was having mortgage difficulties in relation to the subject property, Appellant, who would serve as dual agent for both Sanchez and Alejandro, contacted Alejandro and Morales and informed them that she could assist them in avoiding foreclosure (State’s Ex. 7; Transcript, at 116-117, 142). Appellant assured Morales that after a transfer of the property to Sanchez, Sanchez “could sell the house, pay the mortgage, and [with] the rest of the money, [Morales] would get a little apartment for [her] and [her] kids until [she] got on [her] feet” (Transcript, at p. 64). Morales testified that Appellant informed her that there would be “no money exchanged, just names, so you don’t lose your home and your kids have a place to stay” (Transcript, at pp. 64, 83, 85). With the promise of a possible future lump-sum payment and the ability to remain in the home, Morales encouraged Alejandro to engage in the transaction (Transcript, at p. 37). As Morales testified, “[Appellant] told me to convince him” (Transcript, at 67).

            With Appellant serving as dual agent and facilitating the transaction, Alejandro transferred the subject property to Sanchez in November of 2006 (State’s Ex. 5; Transcript, at pp. 7, 50, 173-174). To complete the transaction as Appellant had described it to Morales—with “no money exchanged, just names”—the mortgage proceeds needed to cover all payments and closing costs (Transcript, at p. 64). To ensure that the lender would provide enough, the sale price had to reflect an amount greater than 100 percent of the mortgage, and therefore the illusory “deposit” of $65,000 in the form of an uncashed check was necessary to facilitate the scheme.

            The subject property was actually conveyed in exchange for $255,000, which, incidentally, was the amount of Sanchez’s mortgage from People’s Choice Home Loan, and the approximate amount needed to cover the actual costs of the transaction (Respondent’s Ex. A; Respondent’s Ex. C; Transcript, at p. 191). Thus, as Appellant had described the transaction to Morales initially, in the end there was, in effect, “no money exchanged” between the parties—other than the funds provided by the lender through the new mortgage. By structuring the transaction in such a manner, the lender was induced to loan more than the actual purchase price of the property.

            “To falsely state that a property is being sold for a certain amount of money with a specific portion of that amount to be paid in cash, knowing that no such payments would actually be made, for the purpose of obtaining financing from a lender relying on the truth of that statement, is to commit a fraud upon the lender ... to knowingly participate in such an arrangement is a demonstration of untrustworthiness” (DePass v. Division of Licensing Services, 5 DOS APP 10, at p. 10). Appellant’s admissions establish that she had knowledge of and participated in the fraudulent scheme to convey the subject property from Alejandro to Sanchez. Further, the records demonstrates that Appellant was deeply engaged in the planning and facilitation of this transaction—intially explaining the transaction to Morales, encouraging Morales to “convince” Alejandro to go through with the transaction, serving as dual agent from contract to closing, and facilitating execution of the contract for sale for $320,000 with an illusory $65,000 deposit down, commissioning an appraisal shortly thereafter which valued the property at exactly $320,000, and facilitating the closing. According due deference to the credibility determinations of the ALJ with regard to witnesses observed and heard and considering the evidence and testimony discussed above, substantial evidence supports the ALJ’s finding that Appellant participated in a transaction involving fraud and deception.

            Substantial evidence adduced at the hearing demonstrates that, although Appellant was aware that no cash would be paid from Sanchez to Alejandro as stated on the closing and settlement statements, she participated and assisted in the orchestration of the transaction despite such knowledge. In so doing, Appellant demonstrated untrustworthiness in violation of Real Property Law § 441-c. Therefore, the ALJ’s determination that Appellant violated Real Property Law § 441-c need not be disturbed.

III.       The penalty imposed by the ALJ should be modified.

             When considering the merits of an intra-agency administrative appeal, the Secretary of State may undertake a de novo review of the matter and render a determination based on the merits (see Matter of Tajudeen, 56 DOS APP 09 (2009); Matter of Bumpers, 43 DOS APP 09 (2009)). In fashioning an appropriate penalty for the violations found, the penalty should be the relevant facts and circumstances surrounding the violation must be considered “in context with the nature of the misconduct, the degree of harm or potential for harm that the misconduct visits on the public welfare and prevailing societal views” (Vito v. Jorling, 197 AD2d 822, 824-825 (3d Dept., 1993); see Matter of Nguyen, et al., 01 DOS APP 09 (2009)). Appellant violated Real Property Law § 441-c and demonstrated untrustworthiness by knowingly participating in, assisting and facilitating a real property transaction involving fraud and dishonesty.

            Where a licensee assists in or facilitates a transaction in which they are aware that fraud and dishonesty are involved, license revocation has been deemed to be the appropriate penalty (see Matter of DePass, 05 DOS APP 10 (2010); Matter of Howell, Jr., 25 DOS APP 09 (2009); Matter of Sir Winston Realty, 15 DOS APP 08 (2008)). Here, however, in imposing a penalty of license suspension, the ALJ stated, “I have considered that while her participation in the transaction was a serious act of untrustworthiness, there is no evidence that this was more than an isolated transaction” (675 DOS 09, at p. 4). Serious acts of untrustworthiness involving participation in gross misrepresentations and the facilitation of real property transactions involving fraud warrant license revocation, and the Division of License Services is not required to prove a pattern of such conduct prior to imposition of the penalty of revocation under such circumstances. Plainly stated, once is enough. Considering the foregoing, the ALJ’s determination with regard to the penalty imposed shall be modified and Appellant’s license as a real estate broker shall be revoked.

            The ALJ also determined that Appellant’s “participation in a fraudulent mortgage transaction in which she was a party to a gross misrepresentation as to the terms of that transaction was an act of misconduct which does reflect on the question of whether [Appellant] is of sufficiently good moral character to be commissioned as a Notary Public” (675 DOS 09, at p. 4; see Executive Law § 130). Acts undertaken as a licensed broker may be considered in determining fitness to hold or maintain a commission as a notary public. The ALJ was correct in finding that Appellant’s acts as broker reflect on her fitness to serve as a commissioned notary public. For the foregoing reasons, Appellant’s commission as a notary public shall also be revoked.

DETERMINATION

            Based on the foregoing, the penalty imposed by the ALJ (675 DOS 09, at p. 4) is hereby vacated, and the determination of the ALJ is hereby modified as follows:

1.         Appellant’s license as a Real Estate Broker, UID #37GO080233, and her commission as a Notary Public, UID #01GO6026203, are hereby revoked, effective immediately; and,

2.         No action shall be taken on any real estate license application by Appellant until satisfactory proof is produced demonstrating that she has refunded the sum of $10,475.00 plus interest from November 28, 2006 at the legal rate for judgements (currently 9% per year) to Julio Alejandro, Jr.; and,

3.         Appellant is directed to send her license certificate and pocket card and Notary Public identification by certified mail addressed to Norma Rosario, Department of State, Division of Licensing Services, P.O. Box 22001, Albany, New York 12201-2201; and,

As so modified, the Decision of the ALJ is hereby confirmed.

So ordered on: March 11, 2010

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                                                                                    Daniel E. Shapiro

                                                                                    First Deputy Secretary of State