Goldman v. Bureau of Prof'l & Occupational Affairs

MEMORANDUM OPINION BY JUDGE McGINLEY

BEFORE: HONORABLE BERNARD L. McGINLEY, Judge HONORABLE PATRICIA A. McCULLOUGH, Judge HONORABLE ROCHELLE S. FRIEDMAN, Senior Judge

MEMORANDUM OPINION BY JUDGE McGINLEY

Mitchell A. Goldman (Goldman) challenges the order of the Bureau of Professional and Occupational Affairs, State Real Estate Commission (Commission) which adopted the proposed adjudication and order of the hearing examiner as the final adjudication and order of the Commission and revoked Goldman's license to sell real estate.

Goldman held a real estate salesperson (standard) license which was originally issued March 7, 1990. On or about October 16, 2000, Goldman, on behalf of Century 21 Alliance, entered into a business relationship agreement with Howard and Deborah Moore (the Moores) to represent them in the purchase of a home. On or about January 26, 2001, Goldman, on behalf of Century 21 Alliance, entered into a listing contract with William and Mary Steinborn (the Steinborns) for real estate located at 124 Jenkins Avenue, Lansdale, Pennsylvania 19446 (Property). Goldman listed the Property at $94,900 and showed it to the Moores. The Moores were interested in purchasing the Property. However, the Moores were unable to obtain a mortgage for the full price of the home and did not have money for a down payment. The Moores were only able to obtain a mortgage for seventy percent of the original listing price.

On or about February 7, 2001, the Steinborns and the Moores entered into an agreement of sale for the Property. The purchase price listed in the agreement was $144,900. The Moores were required to provide a total of $2,000 as earnest money. Goldman's commission was to be based on the $144,900 selling price. The Steinborns were scheduled to contribute $7,245 toward closing costs and to provide the Moores with a second mortgage in the amount of $36,225. Goldman told the Moores that the second mortgage would not need to be repaid. The second mortgage was never recorded. The Moores made payments on the second mortgage for thirteen months but then stopped.

The mortgage company informed Goldman that the Moores needed a certain amount of cash in order to obtain the mortgage loan. The amount of money required was the difference between the mortgage and the selling price. Goldman arranged for the Moores to open an account at National Penn Bank. He also arranged for the Moores to receive a personal loan from a bank employee, Jane McElroy (McElroy). Goldman also transferred his own money into the Moores' account at National Penn Bank. The funds placed in the bank account were withdrawn with a check payable to Neshaminy Abstract Co., Inc. The funds were redistributed to Goldman and McElroy after settlement.

The Steinborns' assistance with the closing costs and the second mortgage was thirty percent of the total sales price. Goldman was aware that the Moores were approved for a mortgage that was equal to seventy percent of the value of the Property. The July 20, 2001, HUD-1 Settlement Statement did not show a second mortgage. The Steinborns did not receive the full proceeds of the sale for $144,900. Goldman received a commission on the full amount of the sale of $8,694.00. If he had received a commission on the actual purchase price, his commission would have been $6,288.54.

On July 31, 2009, the Commonwealth issued an order to show cause (Order) why the Commission upon consideration of this transaction and the applicable law should not suspend, revoke, or otherwise restrict Goldman's real estate license or otherwise impose a civil penalty. In Count I of the Order, the Commonwealth alleged that Goldman violated Section 604(a)(1) of the Real Estate Licensing and Registration Act (Act) because he made a substantial misrepresentation. In Count II of the Order, the Commonwealth alleged that Goldman violated Section 604(a)(20) of the Act, 63 P.S. §455.604(a)(20), because his conduct in the transaction demonstrated bad faith, dishonesty, untrustworthiness, or incompetency. In Count III of the Order, the Commonwealth alleged that Goldman violated Section 604(a)(15) of the Act, 63 P.S. §455.604(a)(15), because Goldman failed to exercise reasonable professional skill and care in violation of the Commission's regulation, 49 Pa. Code §35.292(a)(1). In Count IV of the Order, the Commonwealth alleged that Goldman violated Section 604(a)(15) of the Act, 63 P.S. §455.604(a)(15), because Goldman failed to deal honestly and in good faith in violation of the Commission's regulation set forth at 49 Pa. Code §35.292(a)(2). In Count V of the Order, the Commonwealth alleged that Goldman violated Section 604(a)(15) of the Act, 63 P.S. §455.604(a)(15), because Goldman failed to ensure that all of his services were provided in a reasonable, professional, and competent manner in violation of the Commission's regulation set forth at 49 Pa. Code §35.292(a)(9). In Count VI of the Order, the Commonwealth alleged that Goldman violated Section 604(a)(15) of the Act because Goldman gave assurance or advice concerning an aspect of a real estate transaction which he knew or reasonably should have known was incorrect, inaccurate, or improbable in violation of the Commission's regulation set forth at 49 Pa. Code §35.282(a). In Count VII of the Order, the Commonwealth alleged that Goldman violated Section 604(a)(15) of the Act, 63 P.S. §455.604(a)(15), because he was knowingly a party to a material, false, or inaccurate representation in writing regarding a real estate transaction in which he acted in a representative capacity in violation of the Commission's regulation at 49 Pa. Code §35.282(b).

In his response Goldman explained that he was involved in an automobile accident ten years before in which the car in which he was sitting in the driver's seat was struck from behind. Goldman broke his spine and underwent spinal surgery. As a result of the accident, he developed clinical depression. His real estate business dropped off dramatically. Goldman explained that with the sale of the Property structured the way it was, the Steinborns could realize the same amount and the Moores would have to pay off the second mortgage. He confirmed that he and McElroy put money in the Moores' account. Goldman did not understand why the title agent at settlement listed on the settlement sheet that the Moores brought $43,000 to the transaction when they did not.

On October 19, 2010, the Commission granted the Commonwealth's motion for judgment on the pleadings. The Commission ordered that the hearing scheduled for October 26, 2010, be limited to mitigation by Goldman. That hearing was continued as were three previous hearings. The hearing was ultimately rescheduled for December 13, 2010. Goldman did not appear. His counsel requested a continuance that day which was denied.

On May 4, 2011, the Hearing Examiner issued a proposed adjudication and order in which Goldman's license to practice as a real estate salesperson would be revoked:

Each of the seven counts in the Commonwealth's OSC [Order to Show Cause] involves allegations surrounding the mortgage fraud that occurred here. Respondent [Goldman] did not deny any of the factual allegations supporting the seven counts, and in fact admitted to the basic facts of this transaction, and the documentation attached to the OSC [Order to Show Cause] also supports the Commonwealth's allegations. In his answer to the OSC [Order to Show Cause], Respondent [Goldman] stated that he followed the directions of the lender 'to the tee' and would not have proceeded with the transaction if he 'thought something was being done that was not ethical.' Respondent [Goldman] failed to appear at the hearing to present mitigating evidence and testimony, however, and we are left solely with the factual allegations in the OSC [Order to Show Cause]. As the prosecuting attorney stated in his closing statement, the transaction was basically a sham and was the type of transaction that led to the mortgage crisis in this country. Respondent [Goldman] did whatever he needed to do to get the buyers qualified for a mortgage, including inflating the price of the real estate and establishing a bank account for the buyers with his own money and that of a bank employee to show the lender that the buyers had money in the bank. Respondent [Goldman] even admitted that he realized at closing that the second mortgage was not recorded or listed on the HUD statements but did not speak up, further concealing the fraudulent nature of the transaction. The sellers received the amount of money for which the house was originally listed, Respondent [Goldman] took his commission on the inflated price of the real estate, and the buyers were left with a mortgage for which they were not qualified. This conduct is patently dishonest, and cannot be condoned.

Goldman filed exceptions to the proposed adjudication and order. On February 15, 2012, the Commission issued an order in which it adopted the proposed adjudication and order.

Goldman contends that the Commission committed a manifest abuse of discretion when it revoked Goldman's real estate license where the actions engaged in by Goldman were performed with the full knowledge and consent of all parties. Goldman asserts that the penalty of a license revocation is completely out of proportion as a sanction for his actions because he did not commit fraud. He argues that no party to the transaction was harmed in any way or suffered a loss and that he did not mislead or withhold any information from any of the parties involved.

Goldman ignores the fact that while the buyers and sellers may have acquiesced to this plan, the lender obviously did not. The lender would not approve a mortgage loan to the Moores for more than seventy percent of the purchase price. In order to facilitate the sale of the Property, Goldman persuaded the Steinborns to increase the sale price from $94,900 to $144,900. He arranged for the Moores to secure a second mortgage loan from the Steinborns and told the Moores they did not have to repay the loan. These transactions made it appear to the lender that the Moores had sufficient funds for a significant down payment when in fact they did not. Further, Goldman made it appear that the Moores had more money than they actually did when he opened a bank account and deposited his own money and money from a personal loan from McElroy. The effect of these machinations led to the Moores obtaining a mortgage for which they were really unqualified and which ended up in a falsely inflated market value for the Property. This Court does not agree that the Commission erred when it determined that Goldman committed fraud.

Goldman also asserts that the penalty imposed by the Commission, the revocation of his license, was excessive. In Slawek v. State Board of Medical Education and Licensure, 526 Pa. 316, 586 A.2d 362 (1991), our Pennsylvania Supreme Court clarified the standard for a reviewing court in a license revocation matter:

In the absence of bad faith, fraud, capricious action or abuse of power, reviewing courts will not inquire into the wisdom of the agency's action or into the details or manner of executing agency action. . . . [W]e believe that the proper review of the agency's action, assuming that it is not defective under the self-explanatory requirements of the Administrative Agency Law, is not whether its order was reasonable, but whether it was made in 'accordance with law' (i.e. whether it was made in bad faith, and whether it was fraudulent or capricious. . . . [A] reviewing court may interfere in an agency decision only when 'there has been a manifest and flagrant abuse of discretion or a purely arbitrary execution of the agency's duties or functions.' . . . Since there is no allegation of fraud or bad faith . . . our inquiry in this case resolves itself into whether the agency's action was capricious or a flagrant abuse of discretion. (Footnotes omitted).

Here, as in Slawek, Goldman does not allege any fraud or bad faith on the part of the Commission. Therefore, this Court must determine whether the Commission's revocation of the license was capricious or an abuse of discretion. Goldman committed a fraudulent real estate transaction. He did not appear before the hearing examiner and no mitigating circumstances were provided. There is nothing in the record to indicate that the Commission acted capriciously or abused its discretion.

Accordingly, this Court affirms.

/s/_________

BERNARD L. McGINLEY, Judge ORDER

AND NOW, this 3 day of December, 2012, the order of the Bureau of Professional and Occupational Affairs, State Real Estate Commission in the above-captioned matter is affirmed.

/s/_________

BERNARD L. McGINLEY, Judge