386-DOS-13. The Division of Licensing Services ( DLS ) was represented by Senior Attorney David Mossberg, Esq. PROCEDURE

Transcription

1 STATE OF NEW YORK DEPARTMENT OF STATE OFFICE OF ADMINISTRATIVE HEARINGS X In the Matter of the Complaint of DEPARTMENT OF STATE DIVISION OF LICENSING SERVICES, Complainant, DECISION -against- RICHARD M. SHANE, corporate real estate broker, and COLDWELL BANKER ESTATES, real estate brokerage Respondents X The above noted matter came on for hearing before the undersigned, Dolores Franco, on September 21, 2012 and June 25, 2013 at the office of the Department of State located at 123 William Street, New York, New York. Richard M. Shane ( Respondent Shane ) and Coldwell Banker Estates ( Respondent Company ) were represented by Cathleen Quinn, Esq., 8 Claremont Court, Smithtown, New York at the September 21, 2012 hearing. Respondents were represented by Daniel S. Dornfeld, Esq., and Elbert F. Nasis, Esq., 145 Marcus Boulevard - Suite 4, Hauppauge, New York at the June 25, 2013 hearing. The Division of Licensing Services ( DLS ) was represented by Senior Attorney David Mossberg, Esq. PROCEDURE This decision integrates two separate complaints ( and ) and hearings. At the hearing on September 21, 2012, DLS made an application to bifurcate this matter due to the unavailability of a necessary witness on complaint , and to proceed on complaint The application was granted and complaint was adjourned to June 25, 2013.

2 COMPLAINT The complaint ( ) alleges that the Respondents have engaged in the following acts of misconduct (State s Ex.1): by failing to properly execute an agency disclosure statement, Respondents demonstrated untrustworthiness and incompetency; by extending the term of the exclusive listing agreement, without knowledge or consent of the client and doing so surreptitiously, Respondents breached the fiduciary duty owed to a client; by extending the term of the exclusive listing agreement, without knowledge or consent of the client and doing so surreptitiously, Respondents failed to deal honestly, fairly and in good faith with the public; by extending the term of the exclusive listing agreement without his client s signature and in violation of the 2001Agreement, Respondents demonstrated untrustworthiness and incompetency; and by demanding an unearned real estate commission, Respondents breached the fiduciary duty owed to a client. The complaint ( ) alleges that the Respondents have engaged in the following acts of misconduct: by listing real property without the consent of the property owner, Respondents demonstrated untrustworthiness and incompetence; by failing to present and and/or maintain an agency disclosure statement and/or prepare an affidavit regarding the refusal to acknowledge receipt of said disclosure statement, Respondents demonstrated untrustworthiness and incompetence; by listing real property without the consent of the property owner, Respondents failed to deal honestly and fairly with the public; by listing real property for less than the desired sum of the property owner, Respondents failed to deal honestly and fairly with the public; and by providing false and misleading information to the Department of State, Respondents have failed to cooperate with a Department of State investigation, Respondents demonstrated untrustworthiness and incompetence. At the June 25, 2013 hearing, the complaint ( ) was amended to include (State s Ex. 10): by contacting a witness to litigation and making disconcerting comments which caused the witness to become alarmed and/or annoyed, Respondents demonstrated untrustworthiness and incompetence; by contacting the mother-in-law of a witness to litigation and making disconcerting comments regarding the witness which caused said individual to become alarmed and/or annoyed, Respondents demonstrated untrustworthiness and incompetence.

3 FINDINGS OF FACT 1) Notice of hearing together with a copy of both complaints was mailed to the respondent by certified mail on March 23, 2012 and by regular mail on March 28, The certified mailing was signed and returned by the Postal Service to DLS. The regular mailing was not returned by the Postal Service to DLS (State's Ex. 2). 2) Respondent Shane was and is at all relevant times duly licensed as a Corporate Real Estate Broker representing Coldwell Banker Estates at a business address of 3242 Railroad Avenue, Wantagh, NY for the period of January 22, 2008 through January 22, Respondent Shane was issued an additional license as a Real Estate Broker representing Coldwell Banker Surf LLC., at a business address of 57 Foxhurst Road, Oceanside, NY for the period of February 8, 2005 through January 22, 2008 when he relinquished said license. Respondent Shane renewed his license as a Corporate Real Estate Broker representing All Island Estates Corp. at a business address of 3242 Railroad Avenue, Wantagh, NY for the period of March 26, 2005 through February 8, 2008 (State s Ex 3). A. Complaint ) Purnachandra Armalla ( Mr. Armalla ) testified that on or about March 29, 2009, Mr. Armalla executed a convertible exclusive listing ( convertible listing ) agreement with Respondents to list his residential property located at 2660 Mandalay Beach Road, Wantagh, NY ( Wantagh property ) with an expiration date of October 30, 2009 (State s Ex. 6). At the same time, Respondent Shane also presented Mr. Armalla with an agency disclosure statement but did not identify himself as the agent of Mr. Armalla in that there are no markings on the document indicating the agency relationship and it is unsigned by Respondent Shane (State s Ex. 7). 4) Mr. Armalla testified that several months after the execution of the convertible listing, Mr. Armalla requested that Respondents include the Wantagh property on the Long Island Multiple Listing Service ( MLS ). Thereafter Respondent Shane presented Mr. Armalla with a new exclusive listing ( exclusive listing ) agreement with an expiration of June 12, 2010 (State s Ex. 12). However, Mr. Armalla was unaware that Respondent Shane extended the expiration date of his listing agreement beyond October 30, Further, Mr. Armalla did not sign his name next to the expiration date of the exclusive listing agreement and he did not indicate he wanted to extend the term of the exclusive listing agreement. Mr. Armalla testified Respondent Shane gave him many papers to sign so he was not aware he signed an exclusive agreement nor was he provided a copy to retain for his files (Transcript p. 34, 35, 36, 38). 5) Mr. Armalla testified that subsequent to the expiration of the exclusive listing, his neighbor introduced him to Daniel Sandoval ( Mr. Sandoval ) who purchased the Wantagh property with a closing date of August, Mr. Armalla testified that Respondents did not participate in the negotiations or the sale of said property (Transcript p. 24, 26, 38). 6) In September, 2010 Respondent Shane contacted Mr. Armalla claiming he was due a commission for the sale of the Wantagh property because the exclusive listing agreement was

4 still in effect and Respondents recommended Daniel Sandoval as a prospective buyer. Subsequently Respondents filed a notice of arbitration demanding a commission in the amount of $37, (State s Ex. 8). 7) By decision dated September 19, 2011, arbitrator Hon. Harry E. Seidell determined that by extending the term of the exclusive listing agreement without the required signatures next to the expiration date, Respondents violated the 2001 Agreement and that Respondents were not the procuring cause of the sale of the subject property, and thereby denied Respondents claim for commission (State s Ex. 8). 8) By consent order settling multiple complaints brought by DLS against Respondent Shane, dated February 1, 2001 ( 2001 Agreement ), whereby Respondent Shane and All Island Estates Corp, a brokerage associated with Respondent Shane, admitted they engaged in unlawful business practices by making misrepresentations to their principals with regard to the length of the listing period and by deceptively presenting and obtaining their principals signatures on listing agreements. Pursuant to the terms of 2001 Agreement, Respondent Shane agreed [t]hat subsequent to the execution of this Consent Order by the Secretary of State or his designee, on each and every listing agreement that respondents, Richard M. Shane and All Island Estates Corp. utilize, said respondents shall require the signatories to sign their names next to the expiration date of the listing agreement (State s Ex. 4). 9) Paragraph 5 of the 2001 Agreement states in relevant part, t[]hat at any time after the execution of this Consent Order by the Secretary of State or his designee, in the event that either or both respondents Richard M. Shane and All Island Estates Corp. are found or plead nolo contendere or admit, after a disciplinary proceeding brought pursuant to Article 12-A of the Real Property Law or after an appeal pursuant to 19 NYCRR 400.2(k), to have violated any section or subsection of this Consent Order or any section or subsection of Real Property Law Article 12-A, or any rule or regulation promulgated by the Secretary of State thereunder, arising out of any actions, conduct or omissions by said respondents or any of their employees, agents or independent contractors, committed subsequent to the execution of this Consent Order, then said respondents consent to the revocation of their licenses as real estate brokers and stipulate not to have any financial or ownership interest in any business which holds a real estate broker s license, during such time that said Respondents are not licensed by DLS (State s Ex. 4). 10) By consent order settling a complaint brought by DLS against Respondent Shane regarding the employment of an unlicensed salesperson dated September 12, 2007 ( 2007 Agreement ), the 2007 Agreement amended the 2001 Agreement. The 2007 Agreement states in pertinent part, [t]hat upon execution of this Order by the Secretary of State, the Complaints in this matter shall be terminated, withdrawn and discontinued with prejudice with respect to Respondents in accordance with the terms hereof, and the provisions set forth in paragraph 5 of the Consent Order of February 1, 2001 will be rendered null and void and of no force or effect (State s Ex. 5). 11) Pursuant to the 2007 Agreement, Respondent Shane agreed Respondents are aware that the entire disciplinary record compiled by the Department of State, Division of Licensing Services, with regard to Richard Shane, Long and/or All Island and/or Coldwell

5 Banker Surf may be taken into consideration by the Administrative Law Judge and/or the Secretary of State or [his] designee in assessing an appropriate penalty for any subsequent enforcement proceeding (State s Ex. 5). 12) An additional condition of the 2007 Agreement required Respondents to pay a fine in the amount of $45, 000 (State s Ex. 5). 13) Respondent Shane testified that after Mr. Armalla requested his home be included on MLS, he provided Mr. Armalla with a new exclusive listing agreement, informed Mr. Armalla of the extension of the exclusive listing agreement date, and provided him with a copy (Transcript p. 55). 14) Respondent Shane testified that after discussions with his attorney, he understood the 2001 Agreement had been undone after he had paid the staggering fine, the very unrealistic and unreasonable fine (Transcript p. 57) of $45,000 as part of the 2007 Agreement, and his signature was no longer required certainly not necessary unless it was a convertible agreement and did not apply to the standard Multiple Listing Agreement (Transcript p. 55). He further testified that he understood that after payment of the fine, the 2001 Agreement was null and void except that DLS could use his prior actions against him to determine a penalty for any future violations (Transcript p. 58). 15) Respondent Shane acknowledged that by signing the 2001 and 2007 Agreements he admitted he engaged in misconduct. After reading paragraph 3 in the 2007 Agreement on crossexamination, Respondent Shane was asked the following question: Now, in reading this agreement is it fair to say that this agreement only declares null and void specifically paragraph 5, not the entire (2001) Agreement that you executed? Respondent Shane responded, It appears that way, yes (Transcript p. 66, 67). 16) Respondent Shane admitted that Mr. Armalla did not sign his name next to the expiration date on the exclusive listing agreement and Respondent Shane did not sign the agreement (Transcript p. 71). B. Complaint ) Dean Pulsinelli ( Mr. Pulsinelli ) testified that Respondent Shane contacted him in or around December 2010 regarding Mr. Pulsinelli s residential property located at 219 Whitewood Drive, Massapequa, NY ( Massapequa property ) to request authorization to list the said property for sale. Mr. Pulsinelli testified that his exclusive listing with another broker was about to expire however his broker was negotiating a sale of the Massapequa property, and therefore he did not wish to list the Massapequa property with Respondents. He further stated he did not tell Respondents that the Massapequa property was an open listing and that Respondents could market the property (Transcript p. 121, 122).

6 2) Mr. Pulsinelli testified that he was previously licensed as a real estate broker as such he is familiar with the agency relationship required between a seller and buyer and at no time did he intend to create an agency relationship with Respondents (Transcript p. 122). 3) Mr. Pulsinelli testified that on or about December 2, 2010, Respondents proceeded to list the Massapequa property on the Long Island MLS and other internet advertisement without authorization from Mr. Pulsinelli and listed said property for substantially less than Mr. Pulsinelli s asking price (Transcript p. 123, 124, 125). 4) Mr. Pulsinelli testified that he and the buyer were negotiating a price of 1.7 million for the Massapequa property however the final sale price was $1.59 million. After the buyer saw a listing of the Massapequa property advertised for $1.5 million by Respondents on Zillow, a real estate advertisement website (State s Ex. 11), Mr. Pulsinelli was forced to lower the final price of the Massapequa property. On or about January 2011, said property was sold by a broker at Long Island Village Realty (Transcript p. 120, 123). 5) Mr. Pulsinelli testified Respondents advertised the Massapequa property on Zillow using photos provided to Mr. Pulsinelli s broker (State s Ex. 11). Mr. Pulsinelli testified that at no time did he authorize the advertisement or the sale price (Transcript p. 125). Mr. Pulsinelli testified he spoke with Respondent Shane regarding the advertisement and Respondent Shane advised him it was a clerical error in his office and the Zillow advertisement would be removed immediately (Transcript p. 126). Several weeks later, Respondent Shane informed Mr. Pulsinelli he did not know how to remove the advertisement from the Zillow website and it remains listed on the website (Transcript p. 127). 6) Mr. Pulsinelli testified he filed a complaint with the Long Island MLS as well as with the Department of State. On March 31, 2011, Respondents were sanctioned by the Long Island MLS for violating the Multiple Listing Service of Long Island ( MLSLI ) (State s Ex. 14). MLSLI states that A Participant may not use on their listing, a photo which was entered into the system by another Participant without the written consent of the first Participant (State s Ex. 15). 7) Mr. Pulsinelli testified that Respondent Shane, in the presence of his attorney and his wife, contacted him by phone to inquire whether Mr. Pulsinelli intended to go forward with the hearing which caused him to feel intimidated (Transcript p. 129). 8) Mr. Pulsinelli testified his mother-in-law, Carol Klied, called him shortly after she had a conversation with Respondent Shane, crying hysterically and frantic (Transcript p. 131, 132). 9) By affidavit dated May 22, 2013, Carol Klied, affirmed that Richard Shane made disparaging comments to her regarding her son-in-law Dean Pulsinelli which caused her to become alarmed and annoyed (State s Ex. 12). 10) Based on the complaint filed by Mr. Pulsinelli, Department of State Investigator Steven Wakely ( Inv. Wakely ) commenced an investigation. He interviewed Respondent Shane regarding the MLS violation of MLSLI for publishing photographs without the written

7 permission of a third-party. Respondent Shane conceded that he violated the rule however he had no knowledge of how it occurred, indicated someone in his office must have gone into the Long Island Village Real Estate website, and hacked into it. Furthermore, Respondent Shane stated the rule was published recently when in fact it was enacted on August 22, 2007 (State s Ex. 16), two years before he committed the violation (Transcript p. 152, 153, 154). 11) Inv. Wakely testified that Respondent Shane informed him after publishing the Massapequa property on MLS that it was automatically listed on two additional websites, one was Visual Tour and the other was Zillow (Transcript p. 163,168, 169). 12) Respondent Shane testified on or about April 2010, Respondents had an open listing for the Massapequa property prior to the exclusive listing with Long Island Village Realtors. Prior to the expiration of the exclusive listing with said realty company, Mr. Pulsinelli contacted Respondent Shane and insisted he sell the Massapequa property (Transcript p. 172, 173). 13) Respondent Shane testified he did not recall if Mr. Pulsinelli was presented with an agency disclosure statement and was unable to locate a copy of the document. He acknowledged agency disclosure statements must be maintained by the broker and stated We certainly do maintain them for about ten years, but in this particular case we weren t able to find it (Transcript p. 175), and he was uncertain if an affidavit was obtained for refusal to sign an acknowledgement of said document (Transcript p. 175, 176). 14) Respondent Shane testified the Massapequa property was not listed with MLS by the Respondents. However they created an information sheet, for in-house use only (State s Ex. 11) using photos provided by Mr. Pulsinelli who claimed the photos belonged to him. Although Respondent Shane felt uncomfortable because he thought the pictures might be the property of the former broker and he thought [there] was a new rule in effect about using other broker s photographs (Transcript p. 222) nonetheless he published the pictures (Transcript p. 215, 216, 184). 15) By letter dated February 19, 2011, Respondent Shane provided a written statement to the Department of State Complaint Review Unit advising the Department he published a listing of the Massapequa property on MLS and further stated, [a]s you are aware, when a property is listed on MLS it is automatically downloaded to various websites. When it was brought to our attention that Zillow and Trulia only listed the lower price, we made every effort to remove the listing (State s Ex. 17). Respondent Shane testified, this may have been a poor choice of words. But the asterisks on that form proves that it was never officially [sent] it s like you are doing it [but] you don t hit the button that makes it go on MLS (Transcript p. 209). 16) Respondent Shane explained it is automatic feed and broker reciprocity which means we share our information with other brokers and they in turn share with us. He further stated, [a]lthough this was never formally put on MLS by us, it was just as if it had been in some ways (Transcript p. 210). Respondent Shane admitted that someone, either an employee or himself, may have created an advertisement of the Massapequa property, viewable to the public for a sales price of 1.5 million or less (Transcript p. 210).

8 17) Regarding the MLSLI violation, Respondent Shane testified he believed the new rule was enacted recently. 18) Respondent Shane admitted he contacted Mr. Pulsinelli in the presence of his wife and his attorney to inquire if he intended to testify at the hearing to determine if we are spending another $10, 000 or $15,000 just to have the witness not show up. He stated he did not threaten Mr. Pulsinelli (Transcript p. 193, 221). 19) Respondent Shane acknowledged meeting Carol Klied however he was not initially aware of her relationship to Mr. Pulsinelli until later in the conversation in which he told her Dean is making false allegations against me to set himself up for a lawsuit (Transcript p He further stated Ms. Klied did not appear concerned or upset by their conversation (Transcript p.198). OPINION AND CONCLUSIONS OF LAW I- As the party which initiated both hearings, the burden is on the complainant to prove, by substantial evidence, the truth of the charges set forth in both complaints. 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, (1978); Tutuianu v. New York State, 22 AD3d 503, 802 NYS2d 465 (2 nd 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- Being an artificial entity created by law, Coldwell Banker Estates can only act through it officers, agents, and employees, and it is, therefore, bound by the knowledge acquired by and is responsible for the acts committed by its representative broker, Richard Shane, within the actual or apparent scope of his authority. Roberts Real Estate, Inc. v Department of State, 80 NY2d 116, 589 NYS2d 392 (1992); A-1 Realty Corporation v State Division of Human Rights, 35 A.D.2d 843, 318 N.Y.S.2d 120 (1970); Division of Licensing Services v First Atlantic Realty Inc., 64 DOS 88; RPL '442-c. A. Complaint III- The complaint alleges that by extending the term of the exclusive listing agreement without the client s signature is in violation of the 2001 Agreement, the Respondents have demonstrated untrustworthiness and/or incompetency pursuant to Real Property Law 441-c. Respondent Shane s argument that the payment of the unrealistic and unreasonable fine of $45,000 set forth in the 2007 Agreement undid the 2001 Agreement and the entire agreement was null and void, is unpersuasive.

9 Despite the fact that Respondent Shane was represented by counsel when he executed the 2001 and 2007 Agreements to resolve multiple complaints filed against him, he appears to have his own interpretation of the provisions set forth in the Consent Orders. He claims that upon execution of the 2007 Agreement, pursuant to paragraph 3, the 2001 Agreement was null and void except that the entire disciplinary record compiled by DLS may be taken into consideration in assessing an appropriate penalty for any subsequent enforcement proceeding (State s Ex. 5). Therefore, Respondent Shane contends that his signature was no longer necessary, or certainly not necessary unless it was the convertible exclusive, that it did not apply to the standard Multiple Listing agreement (Transcript p.55). However, on cross-examination after reading paragraph 3 of the 2007 Agreement, Respondent Shane conceded paragraph 3 only declares null and void specifically paragraph 5, not the entire 2001 Agreement. The 2001 Agreement unequivocally states, subsequent to the execution of this consent order by the Secretary of State or his designee, on each and every listing agreement that respondent(s), Richard M. Shane utilize, said respondent(s) shall require the signatories to sign their names next to the expiration date of the listing agreement (State s Ex. 4). The 2007 Agreement which amended the 2001 Agreement to wit the provisions set forth in paragraph 5 of the Consent Order of February 1, 2001 will be rendered null and void and of no force or effect (State s Ex. 5). According to Paragraph 5 in the 2001 Agreement any time after the Consent Order (the 2001 Agreement) respondents Shane are found or admits to after a disciplinary proceeding to have violated any section of this Consent Order or any section or subsection of Real Property Law Article 12-A arising out of any actions, conduct or omissions said respondents consent to the revocation of their licenses as real estate broker s and stipulate not to have any financial or ownership interest in any business which holds a real estate broker s license. Aside from the aforementioned provision, Respondent Shane remains bound by the terms and conditions set forth in the 2001 Agreement and therefore, Respondents are required to obtain the client s signature next to the expiration date on each and every listing agreement. In this case, by extending the expiration date on the exclusive listing agreement without securing the signature of Mr. Armalla next to the expiration date, Respondents violated the 2001 Agreement and in doing so demonstrated untrustworthiness and/or incompetency. B. Complaint The complaint alleges that by failing to present/maintain an agency disclosure statement and/or prepare an affidavit set forth under oath regarding the refusal to execute an acknowledgement of receipt of said document, Respondents violated Real Property Law 443 and demonstrated untrustworthiness and incompetency pursuant to Real Property Law 441-c. Pursuant to Real Property Law 443(3)(a), a listing agent shall provide a real estate agency relationship disclosure form to a seller or landlord and obtain a signed acknowledgment from a seller prior to entering into a listing agreement. If the seller refuses to sign an acknowledgment of receipt pursuant to this subdivision, the agent shall set forth under oath or affirmation a written declaration of the facts of the refusal and shall maintain a copy of the declaration for not less than three years.

10 Since Respondent Shane concedes that he cannot locate an agency disclosure statement nor an affidavit to show Mr. Pulsinelli refused to sign an acknowledgement of receipt of said statement, and he does not recall securing either document, the Respondents have violated this statute and demonstrated incompetence and untrustworthiness. Based on the foregoing determination, all remaining allegations are moot. In sum, I find DLS has meet its burden of proving by substantial evidence that Respondents have violated the 2007 Agreement by extending the term of the exclusive listing agreement without the client s signature and Respondents failed to obtain/maintain an agency disclosure statement and/or prepare an affidavit setting forth under oath regarding the refusal to execute an acknowledgement of receipt of said document, and in doing so Respondents violated Real Property Law 443 and demonstrated untrustworthiness and incompetency pursuant to Real Property Law 441-c. In determining the appropriate penalty for the Respondents violation on complaint , I have considered Respondent Shane s pattern of misconduct for which he was disciplined in 2001, 2007, and again now in 2013, and therefore the appropriate penalty is revocation. DETERMINATION WHEREFORE, IT IS HEREBY DETERMINED THAT Respondents Richard M. Shane, UID# 31SH and Coldwell Banker Estates, have demonstrated untrustworthiness and incompetency pursuant to Real Property Law 441-c. Accordingly, pursuant to Real Property Law 441-c, Respondents license as a Corporate Real Estate Broker is deemed revoked, effectively immediately. WHEREFORE, IT IS FURTHER DETERMINED THAT Respondents Richard M. Shane UID# 31SH and Coldwell Banker Estates, have violated Real Property Law 443, and further demonstrated untrustworthiness and incompetency pursuant to Real Property Law 441-c. Accordingly, pursuant to Real Property Law 441-c and Respondents shall pay a fine of $1, to the Department of State. Should both or either of the Respondents ever apply for a license as a Corporate Broker, Real Estate Broker or Salesperson, no action shall be taken on the application until they have produced proof satisfactory to the Department of State that they have paid the fine of $1, Respondent Shane is directed to send a certified check or money order for the fine payable to Secretary of State and his license certificate and pocket card, by certified mail, to Norma Rosario, Department of State, Division of Licensing Services, One Commerce Plaza, P.O. Box 22001, Albany, New York Date: November 27, 2013 Dolores Franco Administrative Law Judge