1462 DOS 08
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-
KENNETH KARL,
Respondent.
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The above matter was heard by the undersigned, Scott NeJame, on January 9, 2008 at the office of the Department of State located at 65 Court Street, Buffalo, New York.
The respondent was not present.
The complainant was represented by David Mossberg, Esq.
COMPLAINT
The complaint alleges that the respondent failed to disclose to a customer that he had an affiliation or business relationship with another home inspector.
The other home inspector, Douglas P. Manzella, who represented Homepro of WNY Douglas P. Manzella (“Homepro”), was initially named as a respondent in this proceeding, however, he settled the matter with the complainant by consent order on or about February 19, 2008 (State’s Ex. 7). In that consent order, Mr. Manzella admitted that, in violation of Real Property Law §444-h(1)(d), he accepted a fee from another licensed home inspector (respondent) for referring a customer to him without disclosing that agreement to the customer, and he agreed to pay a $1,000 fine (State’s Ex. 7).
FINDINGS OF FACT
1) The notice of hearing together with a copy of the complaint was served on the respondent by certified mail delivered prior to November 26, 2007 (State’s Ex. 1).
2) The respondent was licensed as a home inspector representing Distinct Home Inspections Inc. (“DHI”) for the period of January 17, 2006 through January 16, 2008 (State’s Ex. 2). The tribunal takes official notice of the records of the Department of State and finds that the respondent did not renew his license after January 16, 2008.
3) In or about May 2006, Melissa Neal, who at the time was living in Ohio, contacted Mr. Manzella for the purpose of having Homepro conduct an inspection of a home she and Joseph Skitzki were interested in purchasing located at 526 Linwood Avenue, Buffalo, New York (State’s Ex. 3). Mr. Manzella contacted and requested that the respondent perform the home inspection. The respondent performed the inspection, for which he received a $425 fee. He paid a portion of that fee to Mr. Manzella for having referred the customer to him. Neither Ms. Neal nor Mr. Skitzki was aware of nor was it disclosed to them that there was any relationship or affiliation between Mr. Manzella and the respondent or that the respondent paid Mr. Manzella a referral fee.
4) Although Mr. Manzella claimed in correspondence contained in State’s Exhibit 6 that he informed Ms. Neal that the respondent was an independent contractor, since neither he nor the respondent appeared at the hearing, I have chosen to believe the testimony of Ms. Neal, who did appear at the hearing.
5) Ms. Neal and Mr. Skitzki did not go forward with the purchase of the property.
6) In or about early June 2006, Ms. Neal contacted Mr. Manzella for the respondent to perform an inspection of another home she and Mr. Skitzki were interested in purchasing located at 766 Auburn Avenue, Buffalo, New York (State’s Ex. 4). The respondent performed the inspection and received a $400 fee from them (State’s Ex. 5). Once again, neither Ms. Neal nor Mr. Skitzki was aware of nor was it disclosed to them that there was any relationship or affiliation between Mr. Manzella and the respondent or that the respondent paid Mr. Manzella a referral fee.
7) With regard to the above two inspections, Ms. Neal and Mr. Skitzki believed that they had contracted with Homepro to do the inspections and that the respondent was employed or subcontracted by Homepro to perform the inspection.
8) Ms. Neal and Mr. Skitzki did purchase the Auburn Avenue property, but due to problems that they discovered when they moved into the home, Ms. Neal and Mr. Skitzki filed a complaint with the Department of State (State’s Ex. 6) and are seeking reimbursement and damages from both Mr. Manzella and the respondent.
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- The Department of State retains jurisdiction to conduct this proceeding even though the respondent’s home inspector’s license has expired. Albert Mendel & Sons, Inc. v. N.Y. State Department of Agriculture and Markets, 90 AD2d 567, 455 NYS2d 867 (3rd Dept. 1982), appeal denied 58 NY2d 610, 462 NYS2d 1027; Main Sugar of Montezuma, Inc. v. Wickham, 37 AD2d 381, 325 NYS2d 858 (3rd Dept. 1971); Sachs v. N.Y. State Racing and Wagering Board, Division of Harness Racing, 1 AD3d 768, 767 NYS2d 144 (3rd Dept. 2003), appeal denied 2 NY3d 706, 780 NYS2d 312. Although not clearly delineated in Article 12-B of the Real Property Law (Home Inspection Professional Licensing), the Division of Licensing Service’s policy is to renew a home inspector’s license if the Division receives the home inspector’s renewal application within two years after the expiration date.
III- A home inspector violates Real Property Law §444-h(1)(e) when he or she fails to disclose to a customer information about a business interest related to the home inspection which may reasonably affect the customer. In this case, the respondent failed to disclose his business relationship with Douglas Manzella that affected Ms. Neal and Mr. Skitzki in their purchase of a home. They believed that they had hired Homepro to conduct the inspections and that Homepro subcontracted with or hired the respondent to do the inspections. The fact that Ms. Neal and Mr. Skitzki unknowingly accepted the services of a different, independent home inspector (respondent) and could not look to Homepro to address their concerns of the inspections, affected their home inspection and purchase. The nature of Homepro’s business and what it offered its customers could have been entirely different from that of the respondent’s business, all to the detriment of Ms. Neal and Mr. Skitzki.
IV- The law regarding restitution and real estate brokers is well defined. The Department of State is “accorded broad discretion in imposing penalties designed to safeguard the public interest and discourage real estate brokers from engaging in shadowy practices (citations omitted),” and, “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). This application of the law may be applied equally to home inspectors. Additionally, by virtue of Real Property Law 444-h(1)(g), which permits this tribunal to discipline a home inspector for failing to pay restitution, implicitly permits the tribunal to order restitution.
While he may not have engaged in conduct that can be described as devious, the respondent should not benefit by retaining his home inspection fee where he committed a material violation of the Real Property Law. Beyond that, the tribunal is not permitted to evaluate or impose civil damages against the respondent.
V- In determining what penalty to impose against the respondent, the tribunal has considered the fact that the respondent did not appear at the hearing and has not been licensed for approximately ten months. It appears that the respondent no longer cares about his inspector’s license and neither a fine nor a suspension would act as a deterrent to future misconduct. Further, Ms. Neal and Mr. Skitzki have sustained damage because of respondent’s failure to make proper disclosures in that, arguably, they cannot turn to Homepro to address the problems they allege to have occurred as the result of respondent’s home inspection.
DETERMINATION
WHEREFORE, IT IS HEREBY DETERMINED THAT Kenneth Karl has violated Real Property Law §444-h(1)(e), and accordingly, pursuant to Real Property Law §444-h, his license as a home inspector is deemed revoked and he is ordered to pay restitution in the amount of $400 to Ms. Neal and Mr. Skitzki. If respondent submits an application for a license as a home inspector to the Department of State in the future, no action shall be taken on such application until respondent submits proof of payment of the ordered restitution. Such proof must be made by certified mail 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: November 13, 2008