122 DOS 98
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-
SIGALIT HAZOR, RACHEL L. ARFA, ALEX SHPIGEL and MASSADA REALTY, INC.,
Respondents.
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The above noted matter came on for hearing before the undersigned, Roger Schneier, on May 7, 1998 at the office of the Department of State located at 270 Broadway, New York, New York.
The respondents, of 114-15 Jamaica Avenue, Jamaica, New York 11435, did not appear.
The complainant was represented by Litigation Counsel Laurence Soronen, Esq.
COMPLAINT
The complaint alleges that Massada Realty, Inc. (hereinafter "Massada"), a licensed real estate broker, wrongfully continued to engage in business after having been dissolved for failure to pay taxes and/or file required tax returns, and that the respondents are responsible for those unlawful business operations; that Ms. Arfa failed to advise the complainant of the dissolution in renewal licenses signed and filed in 1994 and 1996; that the respondents failed to comply with a request that they appear at the complainant's office with their business records or with a subpoena for those records; and that Mr. Shpigel, a licensed real estate salesperson, is an officer and holder of voting shares of Massada in violation of Real Property Law (RPL) §441-b[2] and 19 NYCRR 175.22.
FINDINGS OF FACT
1) Notices of hearing together with copies of the complaint were served on the respondents by certified mail delivered on March 19, 1998 (State's Ex. 1).
2) Rachel L. Arfa has been licensed as a real estate broker representing Massada since at least March 31, 1990 (State's Ex. 1).
3) From July 24, 1990 until May 1, 1993 Sigalit Hazor was licensed as a real estate salesperson in association with Massada. From May 1, 1993 until December 21, 1993 she was licensed as a real estate salesperson in association with Cordial Realty Group Inc. From December 21, 1993 until October 31, 1997 she was licensed as a real estate broker associated with Massada, and since October 31, 1997, pursuant to an application on which she averred that upon approval thereof she would be made an officer of the corporation, she has been licensed as a real estate broker representing Massada. She is also licensed as a real estate broker representing Brenner Realty Corp. d/b/a Realtec Relocation (State's Ex. 1 and 4).
4) Since at least October 31, 1991 Alex Shpigel has been licensed as a real estate salesperson in association with Massada (State's Ex. 1).
5) Massada was incorporated pursuant to a certificate of incorporation which was filed with the Department of State on June 5, 1985 and which named Ms. Arfa as the sole incorporator. At various times in 1992 and 1993 corporate filings were made with the Department of State in which Mr. Shpigel was named as the President, as a director, and as Chairman of the Board of Directors of Massada (State's Ex. 1).
6) Massada was dissolved by proclamation of the Secretary of State published on June 23, 1993 pursuant to §203-a of the Tax Law, and the dissolution has not been annulled (State's Ex. 1).
7) By applications dated March 31, 1994 and January 28, 1996 Ms. Arfa applied for renewal of her license representing Massada. On neither of those applications did she disclose the dissolution of Massada (State's Ex. 2 and 3).
8) By letter dated December 26, 1997 and delivered on December 29, 1997, Ms. Hazor and Ms. Arfa were requested to appear at the complainant's office on January 7, 1998 with corporate books, records, and accounts demonstrating the business conducted by Massada since June, 1993. When they failed to comply with that request, they were each served by certified mail with a subpoena commanding them to appear at the complainant's office on February 19, 1998 to testify and to produce Massada's business records regarding its real estate brokerage business since June, 1993, including records of sale and lease transactions, commissions received, and bank operating and escrow account records (State's Ex. 1). They failed to comply with that subpoena.
OPINION
I- Tax Law §203-a provides that a corporation which has not filed required tax reports for two consecutive years may be dissolved by proclamation. Pursuant to Business Corporations Law §1005[a][1], after such a dissolution the only business which a corporation may carry on is that which is required for the winding up of its affairs.
Massada was dissolved pursuant to Tax Law §203-a on June 23, 1993. In spite of that, Ms. Arfa submitted applications for the renewal of its real estate broker's license on March 31, 1994 and January 28, 1996. Clearly, those applications were for the purpose of enabling the continuation of the business, and not for the winding up of the corporation's affairs. Thus, they were in violation of Business Corporations Law §1005[a][1], and, inasmuch as a representation by Ms. Arfa that the corporation was lawfully constituted to engage in the business of real estate brokerage was implicit in the submission of the applications was, their filing was a demonstration of untrustworthiness and incompetency by her. Ms. Hazor, as an officer and representative broker of Massada, and Mr. Shpigel, as an officer, director, and Chairman of the Board of Massada, are also guilty of incompetency for participating in the business operations of the dissolved corporation.
II- Fraudulent practices "...as used in relation to the regulation of commercial activity, is often broadly construed, but has generally been interpreted to include those acts which may be characterized as dishonest and misleading. Since the purpose of such restrictions on commercial activity is to afford the consuming public expanded protection from deceptive and misleading fraud, the application is ordinarily not limited to instances of intentional fraud in the traditional sense. Therefore, proof of an intent to defraud is not essential." Allstate Ins. Co. v Foschio, 93 A.D.2d 328, 464 N.Y.S.2d 44, 46-47 (1983) (citations omitted). A single fraudulent practice may be the basis for the imposition of disciplinary sanctions. Division of Licensing Services v Linfoot, 60 DOS 88, conf'd. sub nom Harvey v Shaffer, 156 A.D.2d 1013, 549 N.Y.S.2d 296 (1989). By filing applications for renewal of Massada's license after it had been dissolved, Ms. Arfa engaged in fraudulent practices.
III- RPL §442-e[5] states:
"The secretary of state shall have the power to enforce the provisions of this article and upon complaint of any person, or on his own initiative, to investigate any violation thereof or to investigate the business, business practices and business methods of any person, firm or corporation applying for or holding a license as a real estate broker or salesman, if in the opinion of the secretary of state such investigation is warranted. Each such applicant or licensee shall be obliged, on request of the secretary of state, to supply such information as may be required concerning his or its business, business practices or business methods, or proposed business practices or methods."
Pursuant to RPL §442-j the Secretary of State has the authority to delegate to employees of the Department of State the above powers to compel a licensee to supply information.
Ms. Arfa and Ms. Hazor failed to comply with the complainant's requests that they produce Massada's business records and with its subsequent subpoena for those records, to and of which, as officers of the corporation, they had access and control. That non-compliance was a violation of RPL 442-e[5]. Division of Licensing Services v Lawson, 42 DOS 93.
IV- RPL §441-b(2) provides that a license as a real estate salesperson may not be issued to an officer of a corporation. The evidence establishes that by December 30, 1992 the respondent was President of Massada. In view of the presumption of continuance, J. Prince and R. T. Farrell, Richardson on Evidence §74 (10th ed. 1973, 1985), I conclude that when he obtained the subsequent renewals his license as a real estate salesperson associated with Massada the respondent was an officer of that corporation, and that he continues to be such. There is insufficient evidence, however, on which to base a conclusion that he owned or owns voting shares in the corporation.
V- Massada has been dissolved. Thus, the respondents may not be allowed to retain licenses representing or in association with it.
CONCLUSIONS OF LAW
1) By continuing to operate Massada for purposes other than the winding up of its affairs after its dissolution, the respondents demonstrated incompetency.
2) By submitting applications for renewal of Massada's license as a real estate broker, which applications were submitted without disclosure of the dissolution of the corporation, Ms. Arfa demonstrated untrustworthiness and incompetency and has engaged in fraudulent practices.
3) By failing to comply with the complainant's request and subsequent subpoena for the production of Massada's business records, Ms. Arfa and Ms. Hazor violated RPL 442-e[5].
4) By being licensed as a real estate salesperson in association with Massada while serving as an officer of that corporation Mr. Shpigel violated RPL §441-b[2].
5) The complainant failed to establish by substantial evidence that Mr. Shpigel owned or owns voting shares in Massada, and, accordingly, the charge that he violated 19 NYCRR 175.22 should be, and is, dismissed.
DETERMINATION
WHEREFORE, IT IS HEREBY DETERMINED THAT Rachel L. Arfa has violated Real Property Law §442-e[5], has engaged in fraudulent practices, and has demonstrated untrustworthiness and incompetency, and accordingly, pursuant to Real Property Law §441-c, her license as a real estate broker is revoked, effective immediately, and
IT IS FURTHER DETERMINED THAT Sigalit Hazor has demonstrated untrustworthiness and incompetency, and accordingly, pursuant to Real Property Law §441-c, her licenses as a real estate broker are revoked, effective immediately, and
IT IS FURTHER DETERMINED THAT Alex Shpigel violated Real Property Law §441-b[2] and demonstrated incompetency, and accordingly, pursuant to Real Property Law §441-c, his license as a real estate salesperson is revoked, effective immediately.
The respondents are directed to immediately send their license certificates and pocket cards to Diane Ramundo, Customer Service Unit, Department of State, Division of Licensing Services, 84 Holland Avenue, Albany, NY 12208.
Roger Schneier
Administrative Law Judge
Dated: May 11, 1998