Maryland Real Estate Commission v. Garceau
172 A.3d 496
| Md. Ct. Spec. App. | 2017Background
- In 2009 Sellers listed 2828 Cross Country Ct., Fallston, MD; Georgeanna Garceau was the listing broker. Buyers expressly sought homes not subject to an HOA.
- A 1975 Declaration of Restrictions had expired in 2005; a 2006 Declaration was later recorded purporting to be governed by a neighborhood group (CCECA) but was not notarized and later conceded by CCECA officers not to create an enforceable HOA or binding covenants.
- Buyers learned post-closing (three days after move-in) that a neighborhood group solicited a $10 voluntary fee and asserted restrictions; they learned months later that ExxonMobil had tested wells for a gas leak and that testing/litigation existed.
- Buyers complained to MREC that Garceau failed to disclose (1) the existence of an HOA/declaration of restrictions and (2) potential well-water contamination related to an ExxonMobil leak.
- Administrative proceedings found Garceau violated BOP §17-322 and COMAR for failing to disclose both items; MREC imposed a 14-day suspension and $4,000 fine. The circuit court remanded to MREC to consider newly discovered evidence that no enforceable HOA existed; after MREC again imposed the same sanctions the circuit court vacated the suspension (but kept the fine). On appeal the Court of Special Appeals: affirmed liability as to nondisclosure of potential well contamination, reversed MREC’s finding as to nondisclosure of an HOA (no substantial evidence because the HOA/declarations were non‑existent), and held the combined sanction arbitrary and capricious; remanded for MREC to reconsider sanctions.
Issues
| Issue | Plaintiff's Argument (Buyers / MREC) | Defendant's Argument (Garceau) | Held |
|---|---|---|---|
| Whether failure to disclose existence of CCECA/HOA violated BOP §17-322 | CCECA functioned as an HOA; its existence and declaration were material and should have been disclosed | CCECA was not a legally enforceable HOA; the purported covenants had expired and therefore could not be a material fact | Reversed as to HOA: no substantial evidence the HOA/declaration were material because they were non-existent; Garceau did not violate §17-322 on that ground |
| Whether failure to disclose potential well-water contamination violated BOP §17-322 & COMAR | The ExxonMobil leak, well testing, and related litigation were widely known locally and were material facts that should have been disclosed | Garceau lacked actual knowledge and had no duty to investigate beyond what she knew; contract allocated environmental responsibility to Buyers | Affirmed: substantial evidence that Garceau knew or should have known and that omission was material; violations of §17-322(b)(4),(25),(33) and COMAR upheld |
| Whether MREC afforded due process when its post-remand order shifted theory from enforceable HOA to a functioning community association | MREC contends the Charging Document referenced a community association and process was adequate | Garceau argues remand order changed the factual/legal basis without adequate notice or a hearing on the new theory | Held for Garceau: MREC’s shift in theory after remand (from enforceable HOA to non-binding association) denied reasonable notice and opportunity to be heard; due process violated as to the HOA finding |
| Whether the combined sanction (14-day suspension + $4,000 fine) was arbitrary or capricious | MREC: sanction within statutory discretion and appropriate given violations | Garceau: sanction disproportionate in light of exculpatory HOA evidence, minimal harm, and contractual allocation of environmental risk; suspension harms her business | Held: sanction as imposed was arbitrary and capricious because MREC refused to revise sanctions after remand and relied in part on the invalid HOA; remanded for MREC to reconsider sanctions limited to the remaining validated violation (well contamination nondisclosure) |
Key Cases Cited
- Lopata v. Miller, 122 Md. App. 76 (discusses scope of broker duty to investigate; omissions actionable only when broker knows or has duty to discover)
- Lewis v. Long & Foster Real Estate, Inc., 85 Md. App. 754 (broker has no general duty to investigate; disclosure duty arises when specific questions are asked or a relationship of trust exists)
- Gross v. Sussex, Inc., 332 Md. 247 (statute places duty of good faith on brokers; material misrepresentations may give rise to tort liability)
- Golt v. Phillips, 308 Md. 1 (omission is material if a significant number of unsophisticated consumers would attach importance to it)
- Maryland Aviation Admin. v. Noland, 386 Md. 556 (standards for overturning agency sanctions; review for arbitrary or capricious action)