64 DOS 92
STATE OF NEW YORK
DEPARTMENT OF STATE
----------------------------------------X
In the Matters of
DEPARTMENT OF STATE
DIVISION OF LICENSING SERVICES,
Complainant,
-against-
NASRALLAH MISK,
DECISION
Respondent,
-and-
The Application of
DONALD J. McCLENON
For a License as a Real Estate Broker
----------------------------------------X
Pursuant to the designation duly made by the Hon. Gail S. Shaffer, Secretary of State, the above noted matters came on for hearing before the undersigned, Roger Schneier, on June 27, 1991 and April 6, 1992 at the office of the Department of State located at 270 Broadway, New York, New York 10007.
The respondent, of 3140 75th Street, Jackson Heights, New York 11370, and the applicant, of RD #2, Box 79, Walton, New York 13856, were represented by Hal R. Ginsburg, Esq., Kapson & Ginsburg, 45 N. Station Plaza, Suite 313, Great Neck, New York 11021.
The Division of Licensing Services was represented by Paul Heyman, Esq.
COMPLAINT
The complaint in the matter alleges that the respondent, a licensed real estate broker, availed his license to the applicant and permitted, authorized and suffered the applicant to act as a real estate broker and carry on the real estate brokerage business when not so licensed; failed to supervise as required by statute and regulation the activities of real estate salespersons licensed in association with him; and permitted, authorized and suffered a branch office to be maintained and operated without a proper license; and that the applicant acted as a real estate broker when not so licensed.
FINDINGS OF FACT
1) Since at least November 1, 1985 the respondent has been licensed as a real estate broker in his own name at 3140 75th Street, Jackson Heights, New York; as representative broker of George C. Johnston Jr., Inc. at 75-08 Roosevelt Avenue, Jackson Heights, New York; and under the assumed name of Rio Realty Company, 37-51 76th Street, Jackson Heights, New York. From October 31, 1987 through December 31, 1989 he was also licensed under the assumed name of Marina Realty, 37-51 76th Street, Jackson Heights, New York, and from January 20, 1987 to February 23, 1989 he was licensed under the assumed name of Doncetta Realty, RD 2, Box 79, Walton, New York.
From February 23, 1987 through June 22, 1987 the applicant was licensed as a real estate salesperson in association with Rio Realty Company, and from June 22, 1987 through February 23, 1989 he was licensed as a real estate salesperson in association with Doncetta Realty. By letter dated June 13, 1989 the applicant was advised by the Division of Licensing Services that it proposed to deny his application to renew that license because he had allegedly engaged in the unlawful operation of a real estate brokerage office in collusion with and without the supervision of the respondent and that he could request a hearing on the proposed denial, but no hearing was requested.
By application dated June 17, 1988 the applicant applied for a license as a real estate broker under the assumed name of Doncetta Realty, and by letter dated June 13, 1989 he was advised by the Division of Licensing Services that it proposed to deny his application for the same reasons as stated with regards to his salesperson's renewal application, but that he could request a hearing, which he did.
2) Misk and McClenon are neighbors in Walton, New York, where Misk has a vacation home/farm and McClenon has his permanent residence. At some time prior to his obtaining a license as a real estate salesperson in association with Rio Realty Company, McClenon suffered reverses in his dairy farming business. Misk, who is not a full time resident of Walton, hired McClenon to care for his livestock and look after his house in his absence, and paid McClenon $2,000 a month for that work.
In February 1987 McClenon and his wife, Concetta, obtained licenses as salespersons in association with Misk's Rio Realty Company, under the expectation that Misk would be obtaining a branch office license in Walton. Those plans changed, and instead of opening the branch office Misk filed an assumed name certificate for Doncetta Realty (a name created by combining the first names of the McClenons) and obtained an additional broker's license under that name, and the McClenons changed their association to that new licensee.
It was agreed that McClenon would continue to care for Misk's animals and property, but that instead of the $2,000 monthly payment he would be compensated by receiving Misk's share of any commissions earned by Doncetta Realty after deduction of the operating expenses of the business. Those payments would be in addition to McClenon's 50% share of any commissions earned as the result of his efforts, and would include Misk's share of any commissions earned through the efforts of any other salespersons associated with Doncetta Realty.
During his association with Doncetta Realty McClenon claims that he received commissions totaling $38,500.00, and he has produced copies of checks in that amount which he testified represent all of the commission payments (Comp. Ex. 18). Subsequent to the hearing, Mr. Ginsburg submitted what he claims are copies of all of the checks ever issued by Doncetta Realty (Resp. Ex. H). That exhibit, however, does not include copies of the same checks as were submitted by McClenon, but does include what purports to be copies of additional commission checks to McClenon totalling $24,000.00, bringing the total of commissions paid to McClenon to $62,500.00.
Misk was the sole signatory on the Doncetta Realty checking accounts. According to McClenon those checks were produced as the result of his sending the bills to Misk's bookkeeper in Jackson Heights. However, an examination of the checks discloses, and Mr. Ginsburg does not deny, that the checks, while signed by Misk, were written by McClenon.
The business of Doncetta Realty was operated by McClenon, who had daily contact with Misk by telephone and who met with Misk daily whenever Misk came to Walton for his weekly extended weekends. There was no indication on the Doncetta Realty business cards or stationary, or on the sign on the McClenon house (in which the Doncetta Realty office was located), that Misk was the broker. McClenon's business card, however, does indicate his status as "salesperson" (Resp. Ex. G).
The business was entirely owned by Misk. In August 1988, he and McClenon agreed to enter into a partnership (trans. p. 125, Comp. Ex. 6), but the record does not indicate whether such a partnership ever actually came into existence, or what its contemplated purpose was.
On February 4, 1988 Anita Bacchieri transferred her real estate salesperson's license to enter into association with Doncetta Realty. While she had been asked to make the transfer by McClenon, she had discussed the possibility of such an association several months previously with Misk, and she knew that Misk was the broker.
Bacchieri reported to and was supervised by McClenon (trans. p. 135). With the permission and the knowledge of Misk and McClenon she conducted most of her business out of her home, which was not a licensed branch office of Doncetta Realty, and in one instance a contract for the purchase and sale of realty in a transaction in which Doncetta Realty was broker was signed in her home. She would frequently meet with customers in her home, where she and those customers would discuss properties and binders. Misk had no direct, personal knowledge of the specifics of her activities, and claims to have supervised her through McClenon (trans. p. 103). She was permitted to use her home telephone to make business calls, and was reimbursed $549.26 by Doncetta Realty for those calls (Comp. Ex. 11).
On September 27, 1988 Bacchieri's association with Doncetta Realty was terminated after an advertisement appeared in the New York Times containing her home telephone number and without the Doncetta Realty number. She was informed of the termination by McClenon, who acted on the instructions of Misk, who had tried unsuccessfully to contact Bacchieri directly.
OPINION
I- A real estate broker may be subject to discipline by the Department of State for availing his license to another person so as to enable that person to act as a real estate broker without being so licensed. Department of State v Giuttari, 37A DOS 87, conf'd. 535 N.Y.S.2d 284 (A.D. 1st Dept., 1988); Department of State v Shulkin, 4 DOS 90; Department of State v Brooks, 3 DOS 88; Department of State v Eksteen, 49 DOS 88. "In order for the complainant to establish that such availing occurred it must show that unlicensed activity occurred and that the respondent either intended that it occur and facilitated it through making her license available, or that she knew that it was occurring and took no steps to stop it, or that she acted recklessly in placing her license in the office and then not taking reasonable steps to determine what was occurring in that office." Department of State v Braun, 28 DOS 89.
There are several elements present in this case which point toward the conclusion that Misk availed his license to McClenon: McClenon's receipt of Misk's share of any commissions paid; McClenon's preparation of all of Doncetta Realty's checks for Misk's signature; McClenon's hiring, supervising, and firing of Bacchieri; the lack of Misk's name on the stationary and sign; the discrepancies in the commission checks. On the other hand, there are the facts that McClenon was being compensated with Misk's commissions for caring for Misk's home and livestock; that McClenon was not a signatory on the Doncetta Realty checking accounts; that McClenon's hiring and firing of Bacchieri were done at the direction of Misk; that McClenon's business card indicated that he was a salesperson, not that he was a broker; and that Misk visited his home in Walton on a weekly basis, often for more than just the weekend, and conferred with McClenon about business during those visits. When all of these elements are weighed against each other, it is not possible to reach a clear conclusion as to whether Misk availed his license to McClenon.
II- A real estate broker is obligated to supervise the real estate brokerage activities of the salespersons associated with him. Real Property Law (RPL) section 441(1)(d). That supervision must consist of "regular, frequent and consistent personal guidance, instruction, oversight and superintendence by the real estate broker with respect to the general real estate brokerage business conducted by the broker, and all matters relating thereto." 19 NYCRR 175.21(a); Friedman v Paterson, 453 N.Y.S.2d 819 (1982), aff'd. 58 N.Y.2d 727, 458 N.Y.S.2d 546; Department of State v Gelinas, 38 DOS 92; Department of State v Capetanakis, 42 DOS 90; Department of State v Shulkin, 4 DOS 90. A broker's failure to fulfill his obligation to supervise salespersons has been held to be a demonstration of untrustworthiness and incompetency, and is the basis for the imposition of sanctions on him. Friedman v Paterson, supra; Department of State v Giuttari, supra; Department of State v Capetanakis, supra; Department of State v Shulkin, supra; Department of State v Su Hogar, 66 DOS 88; Department of State v First Atlantic, 64 DOS 88; Department of State v Eksteen, 49 DOS 88; Department of State v Trident, 23 DOS 88; Department of State v Strout, 20 DOS 88; Department of State v Brooks, 3 DOS 88; Department of State v Marra, 45 DOS 87; Department of State v Berman, 23 DOS 87; Department of State v Joy, 58 DOS 86; Department of State v Mandel, 5 DOS 86.
Misk established a procedure under which McClenon would supervise Bacchieri and would then report to Misk on Bacchieri's activities. Such an arrangement is permitted only where the office being supervised by the salesperson is a branch office; where the salesperson has met all but the examination requirements for a broker's license; and where the arrangement has been filed with the Division of Licensing Services. 19 NYCRR 175.20(b). In this case, however, those conditions were not met. A real estate broker may not take it upon himself to alter the duties of supervision which are imposed upon him by law, Department of State v Nolan, 10 DOS 90, and a broker may not evade such responsibilities by entrusting them to another and relying on that person to perform them adequately. Department of State v Levenson, 52 DOS 91.
It is understandable that Misk established the supervision procedures that he did in light of the fact that he spent most of his time in New York City supervising several other businesses. That, however, does not excuse his conduct. He freely chose to get himself into a logistically difficult situation, and did not have the right to create, in an apparent effort to defray the costs of maintaining his vacation property, a potentially dangerous situation in which an unqualified person was supervising a salesperson.
III- RPL sections 441(1)(b) and 441-a require a broker to obtain licenses for his office and any branch offices, and the operation of a branch office without a license is forbidden. Department of State v Gelinas, supra; Department of State v Capetanakis, supra. Such unlawful branch offices have been found in cases where salespersons conducted the business of their sponsoring broker from the salespersons' homes by doing such things as making business telephone calls and meeting with clients. Department of State v Rosenshein, 65 DOS 89; Department of State v Lo Vuolo, 44 DOS 88. In this case the respondent knew that Bacchieri was operating as a real estate salesperson on his behalf out of her (unlicensed) home. She met with customers to discuss properties and binders and made business telephone calls on her home telephone, for which the respondent paid, and in one instance a contract of purchase and sale was signed in her home. All of this establishes that an unlicensed branch office of Doncetta Realty was operated in Bacchieri's home with the knowledge and consent of the respondent.
VI- RPL section 441-c provides that the maximum fine which can be imposed on a real estate broker as the result of an adverse finding in a disciplinary proceeding is $1,000.00 for each "transaction." C & R Ulrich Real Estate v Shaffer, 157 A.D.2d 646, 549 N.Y.S.2d 745 (1990), leave to appeal denied 76 N.Y.2d 708, 561 N.Y.S.2d 548. Therefore, the respondent could be fined, at most, $2,000.00 (failure to supervise and unlicensed branch office). Considering his assertion that he conducts a $15,000,000 per year business, such a fine would be little more than a minor cost of doing business, would not be a significant punishment, and could not be expected to deter future violations. Therefore, the appropriate penalty is a suspension of the respondent's licenses.
CONCLUSIONS OF LAW
1) The complainant has failed to meet its burden of proving by substantial evidence that the respondent availed his license to the applicant and permitted, authorized and suffered the applicant to act as a real estate broker and carry on the real estate brokerage business when not so licensed. State Administrative Procedure Act (SAPA) section 306.
2) The respondent violated RPL section 441(1)(d) and 19 NYCRR 175.21(a) by failing to properly supervise Bacchieri, and thereby demonstrated untrustworthiness and incompetency as a real estate broker.
3) The respondent permitted, authorized and suffered Bacchieri to conduct an unlicensed branch office of Doncetta Realty in her home, in violation of RPL sections 441(1)(b) and 441-a, and thereby demonstrated untrustworthiness and incompetency as a real estate broker.
4) The evidence is insufficient to establish that the applicant acted as a real estate broker when not so licensed and, therefore, he is entitled to be issued a license as a real estate broker. RPL section 441-e and SAPA section 306.
DETERMINATION
WHEREFORE, IT IS HEREBY DETERMINED THAT Nasrallah Misk has violated Real Property Law sections 441(1)(b), 441(1)(d), and 441-a and has demonstrated untrustworthiness and incompetency as a real estate broker, and accordingly, pursuant to Real Property Law section 441-c, all licenses issued to him as a real estate broker are suspended for a period of two months, commencing on August 1, 1992 and terminating on September 30, 1992, both dates inclusive, and
IT IS FURTHER DETERMINED THAT, pursuant to Real Property Law section 441-e, Donald J. McClenon is entitled to be issued a license as a real estate broker, and the Division of Licensing Services is directed to issue said license forthwith.
These are my findings of fact together with my opinion and conclusions of law. I recommend the approval of this determination.
Roger Schneier
Administrative Law Judge
Concur and So Ordered: GAIL S. SHAFFER
7/14/92 Secretary of State
By:
James Coon
Deputy Secretary of State