STATE OF NEW YORK
DEPARTMENT OF STATE
OFFICE OF ADMINISTRATIVE HEARINGS
228 DOS 03
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DIVISION OF LICENSING SERVICES,
Complainant,
-against-
DECISION
ANTHONY J. TUCCI,
Partnership Real Estate Broker,
Representing Century 21 Tucci Realty,
GEORGE J. TUCCI,
Partnership Real Estate Broker,
Representing Century 21 Tucci Realty,
Respondents.
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ADMINISTRATIVE LAW TRIBUNAL
333 E. Washington Avenue, Syracuse, NY 13202
Held: February 11, 2003
Felix Neals, Supervising Administrative Law Judge
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Messrs. Anthony J. Tucci and George J. Tucci were represented by J. David Damico, Esq.
Division of Licensing Services was represented by Kristen Goussous, Esq., Assistant Litigation Counsel.
Under Real Property Law, §441-e, State Administrative Procedure Act, Articles 3 and 4, and 19 New York Codes, Rules and Regulations, §400, Division of Licensing Services alleges that the respondents demonstrated untrustworthiness and incompetence. Specifically, the complaint alleges the following:
Respondents: (1) breached fiduciary duties of full disclosure, obedience, good faith, undivided loyalty, and reasonable care, skill, diligence and judgment, (2) failed to provide agency disclosure form to principal, a violation of Real Property Law, §443; (3) engaged in misrepresentations and failed to make proper disclosures to the parties to the transactions; (4) failed to deal openly, honestly and fairly with a member of the public; (5) demanded and retained an unearned commission; (6) illegally retained and converted deposit monies; (7( engaged in the unauthorized practice of law, a violation of Judiciary Law, §478; and (8) failed to make it clear for which party respondents were acting as agents and received compensation from more than one party without the full knowledge and consent of all parties to the transaction, a violation of 19 New York Codes, Rules and Regulations, §175.7.
As copartners of Century 21 Tucci Realty, Mr. Anthony J. Tucci is licensed as a partnership broker for the term ending September 13, 2003, and Mr. George J. Tucci is licensed as a partnership broker for the term ending September 30, 2003.
The pertinent facts in this proceeding concern: first, the rental of residential real property that occurred in the duration of time from July 5, 1996, to August 1, 1996, and involved Ms. Kathleen LaMacchia, owner of the property, Mr. Anthony J. Tucci, real estate broker, Mr. Mark A. Brown, tenant, and Mr. David L. Blovat, employer of the tenant; and second, the subsequent behavior of the real estate broker as an affiant in a civil suit between the principals.
In June 1996, Ms. LaMacchia asked Mr. Anthony J. Tucci to assist in selling her property in Cicero, N.Y. After Mr. Anthony J. Tucci performed an unfavorable comparative market analysis, Ms. LaMacchia decided to rent the property.
On July 5, 1996, Ms. LaMacchia and Mr. Anthony J. Tucci executed an exclusive right to rent agreement (a multiple listing service approved form). The exclusive agreement provides as follows: a commission of one-half of one month's rent; compensation (if any) by the listing broker to a rental agent to be arranged between cooperating brokers; and an offer to purchase the property would prevail over a simultaneous offer to rent.
Also on July 5, 1996, Mr. LaMacchia signed both a seller's disclosure of property condition and an agent disclosure form wherein she acknowledges that Mr. Anthony J. Tucci and Century 21 Tucci Realty are her agents, consents to a dual agency, and gives up her rights "...to the agent's undivided loyalty."
Shortly after executing the exclusive right to rent agreement, Ms. LaMacchia left for Tampa, Florida, from where all subsequent communications with Mr. Anthony J. Tucci were conducted.
On July 11, 1996, Mr. Mark A. Brown, seeking a rental accommodation, executed a rental application with Mr. Anthony J. Tucci. Mr. Anthony J. Tucci telephoned Ms. LaMacchia in Florida and told her that he had a potential tenant, Mr. Brown. Ms. LaMacchia authorized Mr. Anthony J. Tucci to negotiate a rental agreement on her behalf at a monthly rental of $850.
Mr. Anthony J. Tucci prepared a lease agreement on a preprinted legal form for a lease term beginning August 4, 1996, and ending July 31, 1997, at a monthly rental of $850 and a security deposit of $850. The lease contract lists the landlord as Kathleen LaMacchia and the tenant as Mark A. Brown. Signators on the lease contract are, under the heading "Landlord," Anthony J. Tucci as "agent for Kathleen LaMacchia," and under the heading "Tenant" are Mark A. Brown and David L. Blovat.
The lease agreement was executed by the parties on July 15, 1996, at the offices of B and B Wholesale, a company owned by Mr. Blovat, Mr. Brown's employer. Mr. Anthony J. Tucci was acquainted with Mr. Blovat, prior to the rental negotiations.
The lease contract also contains the following two provisions inserted by Mr. Anthony J. Tucci:
"31. This lease shall be deemed renewed by and against the parties hereto from year to year at the same rental or such increased rental as the Lessor shall specify in the notice required by law to be given by the Lessor to the Lessee, without the necessity of a new instrument unless either party, on or before 45th day preceding the termination of any term shall give to the other notice in writing of intention to terminate this agreement. This provision is intended to give the Lessor reasonable time to lease the premises should the Lessee elect to terminate this agreement and to give the Lessee reasonable time to make satisfactory arrangements, should the Lessor elect to terminate.
"32. It is understood and agreed if the tenant buys the above property, the landlord agrees to pay Century 21 Tucci seven percent of the selling price at the time of closing. The landlord agrees to give the tenant the first option to purchase the property if and when landlord decides to sell the home."
In compliance with the business practice of Century 21 Tucci Realty to collect a commission in the amount of one month's rent, equally divided between a lessor and a lessee in the leasing of a single residential dwelling, Mr. Anthony J. Tucci collected a total commission of $850: $425 from the tenant by a check drawn against the account of B & B Wholesale on July 15, 1996, and $425 from Ms. LaMacchia by a check dated July 29, 1996.
On July 19, 1996, Mr. Anthony J. Tucci sent to Ms. LaMacchia in Florida a copy of the lease agreement and a check for $1,617.76, which represented a $850 security deposit and $767.76 prorated rent for August 4 to August 31, 1996.
Sometime prior to September 10, 1996, Ms. LaMacchia advised Mr. Anthony J. Tucci of the name of the managing agent of the rental property. On or about September 10, 1996, Mr. Anthony J. Tucci called Mr. Brown and gave him the name and telephone number of the managing agent.
At a time not disclosed by the evidence, Ms. LaMacchia and Mr. Brown agreed to a rent reduction of the monthly rent to $790. Mr. Brown occupied the premises until sometime in 1999.
In December 1998, Ms. LaMacchia employed Anthony C. LaValle, Esq., to bring a legal proceeding for rent against the tenant, Mr. Mark A. Brown. Mr. LaValle instituted an eviction action against Mr. Brown.
After further examination of the lease agreement dated July 15, 1996, and seeing Mr. Blovat's signature under the tenant heading, Mr. LaValle brought a summary action against both Mr. Brown and Mr. Blovat in the Town of Cicero Justice Court. Mr. Blovat moved to dismiss the action on ground that a landlord-tenant relationship did not exist because he was a guarantor of the lease agreement. In support of Mr. Blovat's position, Mr. Anthony J. Tucci submitted an affidavit dated April 12, 1999, in which he states that in his capacity as agent for Ms. LaMacchia he "prepared a lease agreement for said premises naming Mark A. Brown as the sole tenant...." and "...That David Blovat whom I knew and had previously found to be a man who honored his obligations, was present at the lease signing and agreed to sign as a co-signer and guarantor for said tenant Mark A. Brown." and "...it was the intent of all of the parties to that lease that David Blovat be a co-signer and guarantor only, not a tenant."
The Justice Court held that an evidentiary hearing was necessary because of the lease agreement's ambiguity as to Mr. Blovat's status and the possibility and the possibility that the drafter (Mr. Anthony J. Tucci) may have made mistakes in drawing the document.
By verified complaint dated October 18, 2000, Mr. LaValle brought an action against Mr. David Blovat, Mr. Anthony J. Tucci, and Century 21 Tucci Real Estate, Supreme Court, Onondaga County. The complaint was certified by Mr. LaValle. Ms. LaMacchia did not verify the complaint. The action was not completed. With the Court's permission, Mr. LaValle withdrew as legal counsel due to failure of Ms. LaMacchia to pay legal fees.
Mr. LaValle testified as a witness for the State. He did not have any personal knowledge of the events that occurred before December 1998 between and among Ms. LaMacchia and Messrs Anthony J. Tucci, Mark A. Brown and David Blovat. Although he was aware that the landlord and tenant had agreed to a rent reduction, Mr. LaValle did not know when that agreement was reached or whether the parties had agreed to change any other terms of the lease agreement after its execution on July 15, 1996.
Regarding Mr. Anthony J. Tucci's affidavit filed in the summary action, Mr. LaValle asked Mr. Anthony J. Tucci to recant his affidavit. Mr. Anthony J. Tucci refused and replied that the affidavit was accurate. Ms. LaMacchia did not appear and offer testimony at the administrative hearing.
Mr. Anthony J. Tucci, admitted that he did explain dual agency to and did not ask the tenant, Mr. Brown, to sign an agency disclosure form.
Substantial evidence establishes that a fiduciary agency relationship was created both between the real estate broker and the landlord and between the real estate broker and the tenant.
Agency, a consensual relationship, is created by operation of law when two factual elements, consent and control, are present in a transaction. The elements of consent and control may be actual or inferential, from words or from conduct. The agency is brought into being whether the parties intend it, understand it, mislabel it or affirmatively disavow it.
An agency relationship was established between the landlord and the real estate broker when the parties consented to have the broker act on behalf of and in accordance with the instructions of the landlord in obtaining a tenant for the premises. That agency is evidenced by the agreement between the parties. Under the exclusive right to rent agreement dated July 5, 1996, the broker was the only real estate agent authorized to lease the premises.
A subsequent agency relationship was created between the prospective tenant, Mr. Mark A. Brown, and the real estate broker. That relationship is characterized by the conduct of the parties and was created by operation of law on July 11, 1996, when Mr. Mark A. Brown executed a rental application with the broker to locate an unidentified rental accommodation and further evidenced by the broker's negotiations of the lease agreement between and on behalf of both landlord and tenant and by the broker's demand and receipt of a fee from the tenant for obtaining the rental accommodation.
The agency relationship created between the broker and the landlord existed from July 5, 1996, to July 29, 1996, the date on which Mr. Anthony J. Tucci delivered to Ms. LaMacchia a copy of the executed lease agreement and all funds due to the principal.
The agency relationship established between the broker and the tenant, Mr. Mark A. Brown, existed from July 11, 1996, to July 15, 1996, when the lease agreement was executed and a $425 commission was paid to Mr. Anthony J. Tucci on behalf of the tenant.
From July 5 to July 10, 1996, Mr. Anthony J. Tucci was the fiduciary agent of the landlord, Ms. LaMacchia. On July 11, 1996, the fiduciary agency relationship between the landlord and the broker experienced a fundamental metamorphosis: A dual agency was established when an agency between the broker and the prospective tenant was created by law.
Ordinarily, a dual agent does not have a duty to disclose, and indeed, has a duty not to disclose to one principal confidential information given to the agent by the other principal.
To the contrary, a principal may agree to give up rights to and release a dual agent from the fiduciary obligations of undivided loyalty. In the transaction involving the double employment, the landlord agreed on July 5, 1996, in writing without reservation to give up her right to the agent's undivided loyalty, thereby releasing the broker to represent the tenant.
However, Mr. Anthony J. Tucci admitted that he considered himself to be the agent only of Ms. LaMacchia; he also admitted that he did not give an explanation of the fiduciary duties of an agent and did not offer an agency disclosure form to the tenant at any time during the employment. He failed to comply with the prescription of Real Property Law, §443, that a real estate broker representing a party to a transaction involving residential, real property must provide an agency disclosure form to that party at the time of the broker's first, substantive contact with the party, or if the party refused to sign the disclosure form, the broker must prepare and keep in his files a written declaration of the facts of the refusal.
Resultantly, Mr. Anthony J. Tucci also failed to make it clear to both parties that he was acting as agent for both parties, a violation of 19 New York Codes, Rules and Regulations, §175.7.
A lease agreement is a legal document that contains provisions that affect the legal rights of both a landlord and a tenant. The preparation of a lease agreement involves the exercise of legal expertise. Completion of a lease contract involves the evaluation, the rejection of alternatives, and the selection and insertion into the contract of provisions appropriate to the tenancy being commenced.
The unauthorized practice of law by a person or entity licensed under Real Property Law means the rendering of legal advice pertaining to, or the preparation of documents or instruments affecting, legal interests in real estate by one not regularly admitted to practice as an attorney in the courts of the State of New York.
In preparing the lease agreement dated July 15, 1996, Mr. Anthony J. Tucci selected and inserted certain provisions and omitted to insert clauses into the agreement that were of considerable legal significance. He negligently prepared the contract, a finding by the Justice Court, Town of Cicero, when the Court ruled that an evidentiary hearing was required to determine the legal status of Mr. David Blovat, whether a tenant or guarantor under the lease agreement. The preparation and insertion of clauses that define the right of renewal and grant an option of purchase constitute the unauthorized practice of law.
Judiciary Law, §478, prohibits the practice of law in New York State by anyone not duly licensed and admitted to practice law in the courts of record of New York. The purpose of the statute is to protect the public from the dangers of legal representation and advice given by persons not trained, examined, and licensed for such work. The grounds for the imposition of licensure sanctions presented in the statute (Real Property Law, §441-c) encompass licensee's violation of Judiciary Law.
Mr. Anthony J. Tucci's preparation of the lease agreement appears to be have been done as a service to the landlord and prospective tenant and not with intention to circumvent either licensing law or Judiciary Law.
By engaging in the unauthorized practice of law that affected the rights of and that resulted in various legal suits being commenced between landlord, tenant, and guarantor, Mr. Anthony J. Tucci also breached the agent's fiduciary duty of reasonable care, skill, diligence, and judgment owed to the principals, the landlord and the tenant.
The State questions the propriety of the affidavit of Mr. Anthony J. Tucci dated April 18, 1999, submitted in opposition to the interests of Ms. LaMacchia in a legal action brought by her against Mr. Brown and Mr. Blovat, based on the lease agreement dated July 15, 1996, that was prepared by Mr. Anthony J. Tucci.
The fiduciary obligation of confidentiality, the duty not to furnish to others or to use any information not a matter of general knowledge and confidentially given to the agent by the principal or acquired by the agent in the course of or on account of the agency is an absolute duty implicit in the fiduciary agency relationship. Accordingly, after the termination of a fiduciary relationship, there is still a subsisting confidential relation that is created during a prior agency relation, unless otherwise agreed by principal and agent. This duty of confidentiality does not extend to information that is not confidential, that is based on general business experience or that is a matter of general knowledge.
The information given in Mr. Anthony J. Tucci's affidavit was not confidential, and an agent's duty of confidentiality does not prevent its disclosure in the form of an affidavit in a civil suit between the parties to the rental transaction.
Concordantly, it is unnecessary to determine whether after termination of the agency relationship, the broker had a subsisting duty to the landlord of non-disclosure of confidential information to the tenant or to the guarantor who, as parties in a civil suit with the landlord, used the agent's information submitted in the form of an affidavit.
Partnership Law, §24, prescribes that all parties are liable, jointly and severally, for the wrongful acts or omissions of a copartner committed within the scope of the partnership business.
Accordingly, the copartner, Mr. George T. Tucci, is vicariously liable for the wrongful acts of the other copartner, Mr. Anthony J. Tucci, committed within the scope of the partnership business.
Consequently, respondents, Messrs. Anthony J. Tucci and George J. Tucci, demonstrated incompetence in violation of Real Property Law, §441-c, in that within the scope of the partnership business, Mr. Anthony J. Tucci: (1) acted as a dual agent without full, fair or adequate disclosure to the tenant; (2) breached the fiduciary duty of reasonable care, skill, diligence, and judgment; (3) failed to make it clear for which parties he was acting as an agent, a violation of 19 New York Codes, Rules and Regulations, §175.7; (4) failed to present to or to obtain the signature of a principal, the tenant, on an agency disclosure form, a violation of Real Property Law, §443; and (5) engaged in the unauthorized practice of law, a violation of Judiciary Law, §478.
The State failed to prove by substantial evidence untrustworthiness. The evidence does not establish that Mr. Anthony J. Tucci: (1) breached the fiduciary duties of full disclosure, obedience, good faith, and undivided loyalty; (2) engaged in misrepresentation; (3) demanded an unearned commission; (4) failed to deal openly, honestly and fairly with a member of the public; and (5) improperly and/or illegally retained deposit monies, and/or converted monies not belonging to him and/or retained unearned commissions. Those allegations of the complaint are dismissed.
I ORDER that on or by March 31, 2003, respondents, Messrs. Anthony J. Tucci and George J. Tucci, pay a total fine of two thousand five hundred ($2,500) dollars ($500 per violation of law) by certified check or money order made payable to the New York State, Department of State. The payment of the fine shall be sent to Ms. Usha Barat, Customer Service Unit, Department of State, Division of Licensing Services, 84 Holland Avenue, Albany, NY 12208.
I FURTHER ORDER that if respondents fail to timely pay the fine assessed: (1) all valid licenses issued under Real Property Law, Article 12-A, to respondents, Mr. Anthony J. Tucci (UID #33TU0796882), and Mr. George J. Tucci (UID #33TU0023768) shall be suspended as of April 1, 2003, and shall continue until respondent complies with the order of this tribunal; and (2) on or by April 1, 2003, respondents shall either deliver in person or by certified mail to Ms. Usha Barat, Customer Service Unit, Department of State, Division of Licensing Services, 84 Holland Avenue, Albany, NY 12208, all valid licenses and pocket cards issued to respondents under the provisions of Real Property Law, Article 12-A, or alternatively, file an affidavit in form prescribed by the Division of Licensing Services if the failure to return all licenses and pocket cards is due either to the documents' loss or destruction.
SO ORDERED: February 26, 2003
Felix Neals
Supervising Administrative Law Judge