I. BACKGROUND
A. Substantive Facts
Apart from the factual dispute about petitioner's state of mind, most of the facts that led to this proceeding are not disputed. In accordance with our standard of review, as noted, we draw the facts from the unchallenged findings in the order. Augustus v. Board of Nursing ,
Petitioner has held an Oregon real estate license since 1988 and has been licensed in Oregon and Washington for more than 20 years. Petitioner's background in real estate extends back farther. He began working with his father in his father's Corvallis real estate company when he was 15 years old. His father's business specialized in income properties, as has petitioner's. Petitioner primarily buys,
In 2004, petitioner purchased a 65-acre parcel of property from one of his former clients, Radke. The property is on Skyline Boulevard in Portland, is flat, and has views of the Columbia River and the Cascades. The property consists of three tax lots; petitioner bought them in a single transaction. The property has a house, a storage and shop building, and several other storage units. At the time of petitioner's purchase, it was zoned CFU (commercial forest use) 1.
Radke had acquired the bulk of the 65-acre property in 1966. It consisted of two separate tax lots at the time, and there had been a house on the property since at least 1942. The next year, Radke built a new house on the property approximately 100 feet away from the original home site. In subsequent years, Radke added the shop and storage structures.
Publishers Paper Company owned land adjacent to Radke's 65-acre parcel. In 1981, Radke exchanged with Publishers Paper 17.92 acres of heavily wooded land on the
In 1980, shortly before the trade between Radke and Publishers Paper, Multnomah County changed by map the zoning applicable to the 65-acre parcel, increasing the minimum acreage required for residential use to 80 acres. It confirmed that zoning change by rule in 1982. As a result of that change, the property, as of 1982, was not large enough for a new residential use.
When petitioner purchased the property from Radke in 2004, he knew that a new residence could not be built on the property because of the zoning. He also knew that the plumbing and electrical systems in the existing residence were not up to code. His plan was to bring the
The property turned out to be more of a project than petitioner had anticipated. Petitioner's interest in the property did not include the logging rights. Approximately two months after petitioner purchased it, the party with the logging rights harvested the timber on the property. This revealed that Radke had disposed of "60 to 70% more waste on the property than was readily apparent prior to the harvest." The additional waste included 30 to 40 barrels of oil or solvents, 30 cars, and years of accumulated waste from apartments and ruined buildings. Then, in December 2004, a windstorm caused significant additional damage to the house and property.
When petitioner first purchased the property, he hired several people to help clean it up and bring the improvements up to code. One of those people introduced petitioner to Ernie Casella, and petitioner contracted with Casella to perform repair work after the windstorm. Casella told petitioner that he had experience resolving zoning issues with the city and county, and had helped other homeowners address issues similar to petitioner's. Casella had worked on projects in the Pearl District and other areas and, according to petitioner's research, had a reputation in the community for being thorough and professional. Petitioner then decided to hire Casella to resolve the zoning and building code issues with the property.
In March 2005, petitioner wrote a detailed letter to Casella that outlined the issues with the property and possible solutions. Among other things, he explained that the 19-acre tax lot created as a result of the 1981 land exchange had been red-flagged by the county as illegally created under the zoning at the time. He suggested that one way to solve the problem might be to merge the 19-acre lot with the other two tax lots to recreate the original 65-acre parcel. However, he also asked Casella to look into whether the
After contracting with Casella, petitioner spent approximately $80,000 toward resolving the permitting and land use issues with the property. However, the clean up work on the property ultimately used up all of petitioner's funds and he decided to sell the property. Acting under his real estate broker's license, petitioner listed the property for sale on the Regional Multiple Listing Service (RMLS) in August 2005.
The RMLS listing format included an area for "Remarks" that allows the listing agent to include important information about the property. Petitioner's listing did not include any information about the 1981 land exchange or the zoning issues that arose from that exchange.
After petitioner listed the property, Maxson, another real estate licensee and petitioner's colleague, thought that the property might interest Donnelly, a friend of Maxson from college. Maxson previously had assisted Donnelly in buying residential and commercial
In January 2006, Donnelly, Casella, and Crane executed a preprinted form Residential Real Estate Purchase and Sale Agreement with petitioner. Although Donnelly, Casella, and Crane intended to form a limited liability company (LLC) to purchase the property, they signed the agreement in their individual capacities. About a month later, they executed an addendum stating that "[a]ll parties are aware that Purchasers will create an LLC as the purchasing entity." The form agreement that the parties executed in January contained a section labeled "Seller Representations." That section included the following statements:
"(7) Seller has no notice from any governmental agency of any violation of law relating to the Property * * * (9) Seller agrees to promptly notify Buyer if, prior to closing, Seller receives actual notice of any event or condition which could result in making previously disclosed material information relating to the Property substantially misleading or incorrect. These representations are based upon Seller's actual knowledge. Seller has made no investigations. Exceptions to items (1) through (9) are: ________. Buyer acknowledges that the above representations are not warranties regarding the condition of the Property and are not a substitute for, nor in lieu of, Buyer's own responsibility to conduct a thorough and complete independent investigation, including the use of professionals, where appropriate, regarding all material matters bearing on the condition of the Property, its value and its suitability for Buyer's intended use."
(Underscoring in original.)
Although petitioner knew that the 1981 land exchange had resulted in an illegal division of the property at the time that he signed the agreement, he did not include that information on the form. Petitioner discussed the property with Casella and Crane, but Donnelly did not participate in those discussions. Petitioner's understanding during those discussions with Crane and Casella was that the two of them represented Skyline View, LLC (Skyline View), which was the LLC that Crane, Casella, and Donnelly formed to purchase the property. Petitioner did not know what Casella told Donnelly about the issues with the property.
In July 2006, petitioner completed a form Seller's Property Disclosure Statement. He checked the box marked "No" next to the question, "Are there any zoning violations or nonconforming uses?" Approximately 10 days later, petitioner signed a warranty deed transferring the property to Skyline View. The warranty deed stated that the property was "free of encumbrances."
Around the time of purchase, the property was appraised at $1,250,000. Donnelly's family LLC, the Chatfield Family LLC, supplied the down payment, loaning it to Skyline View. Neither Casella nor Crane put in any money. Donnelly's objective at the time of the purchase was to
In 2008, the property was reappraised by a private appraiser at $1,650,000. After that appraisal, Skyline View obtained a construction loan that was secured by the property. Part of the loan was used to repay the Chatfield Family LLC for the down payment loan and part was used to pay the balance of the purchase price for the property.
At some point after Skyline View had started work on renovating the existing house, Multnomah County issued a stop work order to Skyline View. In April 2008, the county notified Skyline View, through Crane and Donnelly, that it had determined that the county's zoning requirements prohibited the project, notwithstanding the permits that the City of Portland had issued allowing the project to proceed. The letter set forth several different pathways through which the violations might be resolved.
At some point after the arbitration against petitioner, Donnelly sued Crane and Casella for fraud, and obtained money judgments against them. He then used those judgments to have Crane and Casella removed from membership in Skyline View. Skyline View has defaulted on its construction loan and, as a result, is at risk of losing
On October 14, 2011, petitioner reported the March 2010 arbitration judgment against him to the Real Estate Agency, as required by the agency's rule, OAR 863-015-0175(4) (2009), which required real estate licensees to report any adverse judgments against them. Because the rule specified that a licensee must report any adverse judgments within 20 days of receiving notice of the adverse decision, petitioner's report was roughly a year and a half late.
B. Procedural Facts
The Real Estate Agency began investigating the matter and, in July 2012, issued a notice of intent to revoke petitioner's license. The notice alleged that petitioner's acts of (1) failing to reference the zoning issues in the RMLS listing; (2) failing to complete the Residential Real Estate Sale Agreement in a way that disclosed the zoning issues; (3) answering "no" to the question about whether there were zoning or nonconforming issues; and (4) signing a warranty deed representing that there were no encumbrances on the property each constituted "fraud or * * * dishonest conduct substantially related to the fitness of the licensee to conduct professional real estate activity" under ORS 696.301(14).
Petitioner requested a contested case hearing, and the case was referred to the Office
The ALJ ultimately credited petitioner's testimony and found that petitioner's omissions and misleading statements regarding the zoning issues with the property were the result of mistakes and carelessness rather than the intent to mislead. Based on her finding about petitioner's
The ALJ did find, however, that petitioner violated ORS 696.805(2)(c), that is, that petitioner failed "to disclose material facts of which he was aware and which were not readily apparent or readily ascertainable to a party in a real estate transaction," through the RMLS listing, the purchase and sale agreement, and the seller disclosures when petitioner failed to supply accurate information about the zoning issues with the property. The ALJ also found that petitioner violated ORS 696.301(3) (requiring a real estate licensee to comply with agency rules) and OAR 863-015-0175(4) (requiring reporting of adverse decision against licensee).
After considering the factors in the agency's rule governing progressive discipline, OAR 863-027-0020(2), the ALJ recommended a one-year suspension of petitioner's real estate license, together with a period of probation. In reaching that conclusion, the ALJ explained that she was not persuaded by the evidence in the record that Donnelly had been significantly harmed by petitioner's conduct because the appraisals in the record suggested that the property was worth a lot more than Skyline View had paid for it. The ALJ also concluded that petitioner's lack of prior disciplinary issues during his lengthy career, his reputation in the community for "ethics and knowledge," and his cooperation with the agency throughout the investigation all weighed in favor of a sanction of suspension rather than revocation.
The commissioner modified the ALJ's order, including some of the ALJ's key factual findings. Most significantly,
Based on those conclusions, the commissioner determined that petitioner's license should be revoked. In so doing, the commissioner noted that the factors in its progressive discipline rule did not apply to conduct occurring before January 1, 2006, but did apply to petitioner's conduct occurring after that date. The commissioner reasoned that the fact that petitioner acted with an intent to deceive and the fact that Donnelly had "incurred substantial economic damage because of the zoning violations, and in pursuing [petitioner] through legal action," made revocation the appropriate sanction.
Petitioner filed exceptions to the order, including the commissioner's modification of the ALJ's findings that petitioner "did not intend to mislead or deceive the buyers and that [petitioner] did not cause any substantial harm to Donnelly." Petitioner also argued that the commissioner erred in concluding that its progressive discipline rule only applied to conduct occurring after January 1, 2006. Petitioner pointed out that the statute requiring the agency to promulgate that rule specifically stated that the procedures for progressive discipline would apply to the investigation of
On review, petitioner raises a number of disparate arguments in a single assignment of error.
The commissioner, in response, acknowledges that he changed the ALJ's factual findings when he rejected the ALJ's finding that petitioner did not have the intent to mislead and found, instead, that petitioner did have that intent. He also acknowledges that he changed the ALJ's finding that petitioner had not acted recklessly in publishing the RMLS listing without the information about the zoning violation, as well as the ALJ's finding that Donnelly had not suffered substantial damage. He urges us, on de novo review, to find those facts in the same manner that he did. The commissioner asserts that petitioner's argument regarding the ORS 696.805(2)(c) violations is not preserved. Finally, the commissioner asserts that he correctly concluded that the progressive discipline rule applies only to conduct occurring after January 1, 2006, but that, if the rule does apply, any error is harmless.
A. Modified Findings
As a result of the framework established by the legislature, the primary issues before us are factual ones that call on us to act as factfinders. ORS 183.650 authorizes an agency to modify a finding of historical fact by an ALJ from the OAH "only if the agency determines that there is clear and convincing evidence in the record that the finding was wrong." ORS 183.650(3). However, if an
"Notwithstanding ORS 19.415(3), if a party seeks judicial review of an agency's modification of a finding of historical fact under subsection (3) of this section, the court shall make an independent finding of the fact in dispute by conducting a review de novo of the record viewed as a whole. If the court decides that the agency erred in modifying the finding of historical fact made by the administrative law judge, the court shall remand the matter to the agency for entry of an order consistent with the court's judgment."
ORS 183.650(4) ; see Bice v. Board of Psychologist Examiners ,
We start with the commissioner's findings that petitioner had the intent to mislead when he omitted accurate information regarding the property's zoning issues from the
First, as to the documents related to the sale, the facts that (1) Casella was well versed in all of the issues with the property, including the zoning issues; (2) petitioner understood that the sale was to be to an LLC in which Casella was a member; and (3) petitioner had discussions with Casella about the sale and Casella's plans for the property, all make it unlikely that petitioner had the intent to mislead. Second, the record contains character evidence from three witnesses who are well acquainted with petitioner and the standards by which he conducts his real estate business. All opined that petitioner was an honest and ethical person who was committed to best practices in the profession.
2. Findings regarding recklessness
We next address petitioner's challenge to the commissioner's modification of the ALJ's finding that petitioner's failure to include accurate information about the property's
On de novo review, we are persuaded that petitioner acted recklessly. It is undisputed that petitioner knew about the zoning issues, yet he did not disclose that information in the RMLS listing even though petitioner should have known, based on his experience as a realtor, that the information would be material to any potential purchaser. That
3. Findings regarding substantial damage
Finally, petitioner challenges the commissioner's modification of the ALJ's finding regarding the extent of harm to Donnelly. The ALJ found that it was "less than was readily apparent" that Donnelly had suffered any harm as a result of petitioner's statutory violation. The commissioner modified that finding, finding instead that petitioner's conduct caused Donnelly to incur "substantial economic damage because of the zoning violations, and in pursuing [petitioner] through legal action." Based on that factual finding, the commissioner then concluded that petitioner's conduct resulted in "significant damage" to Donnelly within the meaning of ORS 696.396(2)(c)(A).
On de novo review, we are persuaded that petitioner's conduct more likely than not caused Donnelly to suffer "substantial economic damage." In particular, we are persuaded by the evidence presented regarding the arbitration proceeding against petitioner that petitioner's misrepresentations regarding the zoning violations caused Donnelly to suffer, at a minimum, close to $700,000 in economic damages. For that reason, we uphold the commissioner's finding on that point.
B. ORS 696.805(2)(c) Violations
Petitioner argues that "there is no support for the decision that Petitioner violated ORS 696.805(2)(c)" because, in his view, the information about the property's zoning issues was "readily ascertainable" and, therefore, petitioner did not have the obligation to disclose it under ORS 696.805(2)(c). That argument is unpreserved and we reject it for that reason.
C. Application of Progressive Discipline Rule
The final issue is whether the commissioner erred when it concluded that the progressive discipline rule, OAR 863-027-0020, did not apply to petitioner's conduct occurring before January 1, 2006. Although the commissioner argues
We conclude that the commissioner erred. OAR 863-027-0020 implements the commissioner's statutory obligation under ORS 696.396(1) to "provide by rule for the progressive discipline of real estate licensees and an objective method for investigation of complaints alleging grounds for discipline under ORS 696.301." The legislature enacted ORS 696.396 in 2005 as part of a comprehensive act governing professional real estate activity. See Or. Laws 2005, ch. 393. In so doing, the legislature specified different effective dates for different parts of the measure. Specifically, the legislature provided that the amendments to ORS 696.301, which sets
Those two provisions of Oregon Laws 2005, chapter 393, section 10, persuade us that the legislature intended for the rules for progressive discipline required by ORS 696.396(1) to apply in any investigation occurring after January 1, 2006. Standing alone, Oregon Laws 2005, chapter 393, section 10(2), might be ambiguous as to whether it applies to investigations occurring after the effective date of the act (regardless of when the investigated acts or omissions occurred) or, instead, only to acts or omissions
III. CONCLUSION
On de novo review of the factual findings that the commissioner modified, we have found some of the facts differently from the commissioner. Accordingly, as required by ORS 183.650(4), we "remand the matter to the agency for entry of an order consistent with the court's judgment." In this case, the finding on which we differ from the commissioner-that petitioner's misrepresentations were more likely the product of carelessness or mistake than intent to deceive-affects only one of the commissioner's violation conclusions: the commissioner's conclusion that petitioner violated ORS 696.301(14) in connection with each of the four misrepresentations. Our divergence from the commissioner on that fact does not affect the commissioner's conclusions that petitioner's conduct in publishing the misleading RMLS listing violated ORS 696.301(4), because we, like the commissioner, have found that that conduct was reckless. Our modified finding also has no bearing on the commissioner's determinations regarding petitioner's violations of ORS 696.805(2)(c), or his violation of ORS 696.301(3), which have not been challenged in this proceeding. On remand, the commissioner thus must reconsider his legal conclusions regarding whether petitioner's conduct violated ORS 696.301(14), in view of our finding regarding petitioner's mental state at the time that he made the misrepresentations at issue,
Reversed and remanded.
DeVore, J., concurring in part, dissenting in part.
DeVORE, J., concurring in part, dissenting in part.
Tasked with de novo review of points on which the Real Estate Commissioner differs with an administrative law judge (ALJ), the majority addresses a host of issues. See ORS 183.650(4) (providing for judicial review de novo of differing findings of fact); see also Bice v. Board of Psychologist Examiners ,
Our decision leaves unchanged the agency's conclusion that petitioner violated ORS 696.301(3) and OAR 863-015-0175(4) by failing to report in a more timely fashion the adverse judgment in an arbitration decision finding petitioner liable for intentional fraud.
I concur in the majority's conclusions that petitioner was "reckless," in violation of ORS 696.301(4), when omitting mention of the zoning violation in information he published in the Regional Multiple Listing Service (RMLS); that petitioner failed to preserve a challenge to the agency's conclusion that, in violation of ORS 696.805(2)(c), he did not disclose material facts when failing to report the zoning violation in the RMLS listing, in the sales agreement, and in the disclosure statement; and that the buyers' successor entity (Skyline View, LLC) or Donnelly's family trust (Chatfield Family LLC) suffered "significant damage" within the meaning of ORS 696.396(2)(c)(A) and that the progressive discipline rule of OAR 863-027-0020 under ORS 696.396(1) applies to the investigation of all acts at issue in this case.
DISCIPLINARY FRAMEWORK
One statute describes the serious circumstances that may lead to license suspension or revocation, while other statutes provide the particular grounds for discipline of a real estate licensee. When addressing suspension or revocation, ORS 696.396(2)(c) provides that the rules that authorize the Real Estate Agency to discipline may not authorize the agency to suspend or revoke a real estate license unless
"material facts establish a violation of a ground for discipline under ORS 696.301 that:
"(A) Results in significant damage or injury;
"* * * * *
"(C) Exhibits dishonesty or fraudulent conduct; or
"(D) Repeats conduct or an act that is substantially similar to conduct or an act for which the real estate licensee was disciplined previously."
ORS 696.396(2)(c) (emphasis added). Prior discipline does not appear in the facts of this case, so suspension or revocation may occur here only if the facts show either (a) "significant damage" or (b)(1) "dishonesty" or (b)(2) "fraudulent conduct." Because those terms are provided in the alternative, suspension or revocation could be based solely on a violation of ORS 696.301 that caused significant damage, even without dishonest or fraudulent conduct.
As charged in this case, several subsections of ORS 696.301 were alleged as grounds for discipline.
"(4) Knowingly or recklessly published materially misleading or untruthful advertising.
"* * * * *
"(14) Committed an act of fraud or engaged in dishonest conduct substantially related to the fitness of the applicant or real estate licensee to conduct professional real estate activity, without regard to whether the act or conduct occurred in the course of professional real estate activity."
ORS 696.301(4), (14). In addition, ORS 696.805 imposes duties on a real estate licensee
"(c) To disclose material facts known by the seller's agent and not apparent or readily ascertainable to a party."
ORS 696.805(2)(c). The majority's opinion resolves ORS 696.301(4) against petitioner based on reckless advertising with RMLS and, given petitioner's failure to preserve any alleged error, sustains the commissioner's finding against petitioner for a disclosure failure under ORS 696.805(2)(c). On those points, I concur. I respectfully disagree as to the majority's characterization of petitioner's nondisclosures as a careless or reckless "mistake."
BACKGROUND
Petitioner testified that, at the time he sold the property through his FOXC, LLC, he knew that the county regarded the property as having been illegally divided. Some years before, in 1981, his predecessor Radke had traded about 18 acres, taken from his two tax lots, for a timber company's lot of about 19 acres, which became Radke's third tax lot. Radke had built a house on one lot and a shop building on another lot. After the land division, the house was left on a lot reduced from 26.7 acres to 16 acres. Even if all three lots could be treated as one lot, they totaled only 65 acres, which was still less than the 80-acre minimum single lot size set in the zoning of 1980, the year before the trade.
Petitioner testified that he understood that the RMLS listing includes a "remarks" section where an agent puts information that a buyer would want to know. He admitted that, in 2006, he was responsible for a listing that left the section blank without reference to the zoning violation. He signed and initialed the sales agreement in which the seller represented that the "[s]eller has no notice from any governmental agency of any violation of law relating to the property." In the sales agreement, petitioner also agreed to promptly notify the buyers if, prior to closing, he received notice of a condition that could make the information that he had provided substantially misleading or incorrect. He signed a statutorily mandated property disclosure form that checked "no" in response to the question, "Are there any zoning violations or nonconforming uses?"
Donnelly, through his family trust operating as Chatfield Family LLC, provided the money that was the down payment for the purchase. The three buyers-Donnelly, Crane, and Casella-purchased the property as individuals, although they intended to soon form Skyline View LLC. Petitioner knew that they planned to upgrade the house and resell the property. Skyline View secured a bank loan, based on Donnelly's family trust assets. Neither Crane nor Casella put any money into the transaction. Donnelly was the "money partner."
Donnelly testified that petitioner did not tell him about the zoning violation. Crane and Casella failed to tell him, too. The zoning violation was the reason the county issued its order forbidding further work on the house to
"The panel unanimously finds that Respondents [petitioner personally, FOXC, LLC, and petitioner's Estate Builders, Inc.] are liable to Claimant on Claimant's claim of intentional fraud. The panel calculates Claimant's damages to be $666,450."
In due course, a judgment was entered on the Arbitration Award against petitioner for that sum. Donnelly said, however, that the judgment has proven to be uncollectible.
DISHONESTY
As noted at the outset, this court reviews de novo on those points of disagreement where the commissioner rejects the ALJ's findings. See ORS 183.650(4) (providing judicial review de novo on factual disagreement); see also Bice ,
"Bluntly: The statute does not say that we are to determine, as between the ALJ's and the agency's conflicting findings, which comes closer to historical 'truth.' Rather we are to find the disputed fact(s) 'independent[ly].' Thus, if we determine on de novo review that the preponderance of the evidence in the record establishes that 'the light was yellow,' we must so find."
For the court to conduct this review, it is necessary to note how the ALJ and the commissioner differed.
The commissioner rejected the ALJ's findings of unintended mistakes and instead found repeated dishonesty. In each of the "Conclusions of Law" pertaining to four violations of ORS 696.301(14), the commissioner concluded that petitioner "engaged in dishonest conduct related to his fitness to conduct professional real estate activity." In those four separate findings, the commissioner did not make a specific finding of intentional fraud in those words. When explaining his four findings of "dishonesty," the commissioner elaborated in the "Opinion" portion of his Final Order.
As to the failure to disclose the zoning violation in the RMLS listing information (Allegation 2.1), the commissioner rejected the idea that it sufficed to think that the zoning violation might be remedied in the future or that some of the individual buyers were aware of the problem. The commissioner stressed that it was not a defense to say that one of the buyers was already aware of the zoning problem because petitioner, as a licensed principal broker, "has an independent duty not to publish materially misleading information." (Emphasis added.) The commissioner found that, given petitioner's experience and his knowledge of the problem, it was not credible to describe the omission as "a simple oversight." The commissioner relied on a dictionary definition of "dishonest" as meaning "characterized by lack of truth, honesty, probity, or trustworthiness, or by an inclination to mislead,
The commissioner's explanation was similar concerning the other three allegations. The commissioner concluded that petitioner's failure to disclose the problem in the Sales Agreement concealed facts and was done in a "dishonest manner" (Allegation 2.2); that petitioner's false answer in the Disclosure Statement was designed to mislead and so fit "squarely within the definition of 'dishonesty' " (Allegation 2.3); and that petitioner's failure to disclose the encumbrance in the warranty deed also fit "squarely within the definition of 'dishonesty' " (Allegation 2.4).
After those findings of "dishonesty" on the four allegations, the commissioner turned to the ensuing issue of choice of sanction. In discussing that final issue, the commissioner referred to his preceding conclusions of dishonesty and observed:
"At each opportunity to disclose, as set out in the findings of fact, Licensee failed to do so. The Commissioner rejects the ALJ's conclusion that these omissions were merely mistakes on the part of Licensee. There was a consistent pattern in his failure to disclose that the Commissioner believes is compelling and establishes that Licensee acted with an intent to deceive so that he could effect a sale of the property."
Like the majority, I recognize that the commissioner ultimately based the choice of sanction on a collective conclusion that petitioner had an "intent to deceive." The commissioner did so within the broad meaning of "dishonesty" that he had earlier recited and that appears within the context of the "independent duty" of a real estate licensee to the public. As noted, ORS 696.301(14) provides that the commissioner may suspend or revoke a license of an applicant who has "[c]ommitted an act of fraud or engaged in dishonest conduct substantially related to the fitness of the * * * licensee to conduct professional real estate activity. " (Emphasis added.)
This court's finding about the character of petitioner's conduct begins with the undisputed "historic facts" that petitioner failed four times to disclose a known zoning violation and nonconforming use despite repeated circumstances where he was expected or required to disclose the problems. The only question for this court is whether the record shows a persuasive excuse or explanation that leaves the repeated failures in the realm of careless misunderstanding or recklessness. It is a question whether petitioner's repeated omissions fall short of dishonesty in terms of his independent duty as a broker or dishonesty with intent to deceive. Ten facts point to a persuasive answer.
First, petitioner is licensed as a "principal broker." That designation is an advanced form of occupational licensing known better to the commissioner than many others. To become an ordinary broker, formerly known as a real estate agent, an applicant must complete a course of study at a licensed school. OAR 863-014-0035(1)(b), (c). That study requires at least 150 hours in seven courses that include real estate law, Oregon real estate practice, contracts, agency law, and real estate brokerage. OAR 863-022-0010(1), (2).
Second, although petitioner does not regularly engage in property development, he has extensive experience as a real estate broker. He buys and sells properties. In that work, he has traveled all over the state for years. He does not need to advertise because he has his own clientele. He grew up in his father's real estate practice, and has had his own practice for 20 years. He supervises four other brokers and has supervised as many as six brokers. In short, he knows well a broker's work and his responsibilities as a supervising principal broker.
Third, petitioner was familiar with the documents employed in the sale of his property on Skyline Boulevard. He is familiar with RMLS listings because about half of his inventory consists of residential listings in RMLS. The "remarks" section of a listing is one that he described as the place where a broker puts the information that a buyer
Fourth, petitioner did not testify that, at the time of the transaction, he did not understand the documents that he and the buyers employed. He did not testify that, when the RMLS listing was advertised to the general public, he believed that the public did not need to be told of the zoning violation because he already knew who he would find to buy the property (if he did) and that buyer did not need to see the disclosure. He did not testify that he misunderstood the Sale Agreement when it represented that he had no notice of a zoning violation concerning the property. Critically, he did not testify that he did not understand that the representation concerned the present-day status of the property, not its future fix. He did not testify that he checked the "no" box on the Disclosure Statement when it asked about a zoning violation and nonconforming use because he believed the hope for a future fix meant that there was no present violation. He did not testify that he did not understand the term "encumbrance" when his deed covenanted that there were none.
Fifth, petitioner did not explain his repeated omissions. To be precise, petitioner did not testify that he made a "mistake." At the hearing before the ALJ, his attorney did make that argument , but petitioner himself did not use that word in his testimony. More importantly, petitioner did not explain why a seasoned principal broker who was familiar with the meaning of all of the documents failed four times to disclose a present problem with the property-a critical problem of which he knew.
Seventh, credibility does not favor petitioner. Although petitioner made a favorable impression on the ALJ, who found him credible when his attorney argued "mistake," credibility may be determined in a variety of ways. "We have recognized that 'credibility depends not only on demeanor but also on such factors as inherent probability, or improbability of the testimony, the possible internal inconsistencies, the fact that it is or is not corroborated, that it is contradicted by other testimony or evidence and finally that human
Eighth, based on these same facts, petitioner has already been found liable in a common law claim of intentional fraud that was litigated and resolved in arbitration. That arbitration award was made a judgment.
Ninth, petitioner's evidence of his good character was offered only for purposes of showing mitigating circumstances on the issue of a choice of sanction within the scheme of progressive discipline. It was not offered by petitioner on the issue of determining the nature of his acts or omissions based on an inference to be drawn from his general good character. Administrative proceedings have lenient evidentiary rules. See ORS 183.450(1) (evidence in contested cases generally). Nevertheless, on the question of a person's motive or the nature of the person's act, a person's general character is of doubtful relevance even in an administrative hearing. See
Taken together, those facts should lead this court to the same finding-the same as that the commissioner made as to the four allegations-that petitioner "engaged in dishonest conduct related to his fitness to conduct professional real estate activity" within the meaning of ORS 696.301(14). Further, those facts should lead this court to reach a finding, like the commissioner's finding, that
Notes
Our review is de novo only as to any modified findings of fact. Otherwise, we are bound by the unchallenged findings in the order on judicial review. Augustus v. Board of Nursing ,
ORS 696.301(14) prohibits a real estate licensee from committing "an act of fraud or engag[ing] in dishonest conduct substantially related to the fitness of the * * * licensee to conduct professional real estate activity."
ORS 696.301(4) prohibits a real estate licensee from "[k]knowingly or recklessly publish[ing] materially misleading or untruthful advertising."
ORS 696.805(2)(c) imposes upon a seller's agent in a real estate transaction a duty "[t]o disclose material facts known by the seller's agent and not apparent or readily ascertainable to a party."
As noted, this rule, which was in effect at the time that petitioner received notice of the arbitration judgment, required licensees to report to the commissioner adverse decisions or judgments in any lawsuit or arbitration within 20 days of receiving notice of the decision. OAR 863-015-0175(4) (2009). ORS 696.301(3) requires real estate licensees to comply with "any rule of" the commissioner.
To the extent that petitioner's assignment of error can be construed to raise issues other than those expressly addressed in this opinion, we reject them without further written discussion.
Although the factual findings modified by the commissioner in this case were contained in the "Conclusions of Law" section of the ALJ's proposed order, rather than the "Findings of Fact" section, the agency correctly does not dispute that the facts modified by the commissioner qualify as historical facts for purposes of ORS 183.650. ORS 183.650(3) explains:
"For the purposes of this section, an administrative law judge makes a finding of historical fact if the administrative law judge determines that an event did or did not occur in the past or that a circumstance or status did or did not exist either before the hearing or at the time of the hearing."
The modified findings at issue satisfy that definition.
This limitation on our scope of review poses some concerns in this case and may undercut the OAH's capacity to carry out its legislatively intended function of ensuring neutrality in the factfinding process in administrative proceedings. See Corcoran v. Board of Nursing ,
In this record, there is little indication that the commissioner inquired whether the record contained clear and convincing evidence that the ALJ's factual findings were wrong before he modified them. Although the record in this case contains evidence that is legally sufficient to support the competing findings made by the ALJ and the commissioner, it is at least questionable whether the evidence is legally sufficient to permit an affirmative finding, by clear and convincing evidence, that the ALJ's view of the facts was the wrong one.
We note that petitioner asserts that we must apply a clear-and-convincing-evidence standard of proof in determining whether petitioner possessed an intent to mislead or defraud. For that proposition, petitioner relies on past decisions of this court. We recently overruled the line of cases on which petitioner relies, in Dixon v. Board of Nursing ,
The dissenting opinion asserts that the evidence about petitioner's character "was not offered by petitioner on the issue of determining the nature of his acts or omissions based on an inference to be drawn from his general good character" but was offered only for the purpose of demonstrating mitigating circumstances for purposes of determining the appropriate sanction for petitioner's conduct.
The dissenting opinion would reach a different result on this record and find that petitioner did have the intent to deceive when he made the misrepresentations in question. There is nothing legally incorrect about that finding. As noted, this case is not about the legal sufficiency of the evidence to support a particular finding; we are all simply discharging a statutory obligation to act as factfinders on the facts modified by the commissioner and simply do not see the evidence in the same ways. In some places, however, the dissenting opinion appears to go beyond the narrow task presented and assess the legal question of whether the commissioner was correct to conclude that petitioner's conduct violated the prohibition on fraudulent or dishonest conduct contained in ORS 696.301(14). That inquiry is beyond the scope of our review. Our job in reviewing the modified factual findings is to find those facts ourselves. Whether those facts, as we find them, demonstrate that petitioner violated a particular statute or rule is a question for the commissioner on remand in the first instance. See Bice ,
The agency found a violation of ORS 696.301(3) for petitioner's late reporting of an adverse judgment and that violation is not disputed on appeal.
There was no evidence that petitioner or his predecessor Radke had ever taken the necessary steps to secure the county's recognition of a lawful nonconforming use. Instead, petitioner testified that he had engaged Casella to seek code compliance on building, electrical, structural, or septic issues, and petitioner had deliberately minimized his own contact with the county to just one visit in order to "keep their interest low."
See ORS 105.465 (mandating use of property disclosure statement); ORS 105.464 (setting forth representations or disclosure required).
I concur in the majority's observation that "there is little indication that the commissioner inquired whether the record contained clear and convincing evidence that the ALJ's factual findings were wrong before he modified them."
This separate opinion does not seek to apply ORS 696.301(14) to the facts, contrary to our standard of review. That is, indeed, the task of the commissioner on remand. Rather, this opinion suggests that, on this record, the court's findings of fact should coincide with the commissioner's findings, which were addressed to and made with particular appreciation for that part of ORS 696.301(14) that concerns engaging "in dishonest conduct substantially related to the fitness of the * * * real estate licensee to conduct professional real estate activity."
Petitioner wrote, "I have not gone to the county, but one time about a year ago to keep their interest low."
Petitioner has resisted the effect of the arbitration determination by criticizing his attorney, a failure to offer evidence of the appraisals, and a failure to have included his argument about forest practices statutes compelling a land use solution. The arbitration, however, was a proceeding to which he agreed and in which he was represented by counsel. We need not entertain an implicit challenge to the judgment on the arbitration award, nor treat that judgment as a matter of issue preclusion on petitioner's motive. See Nelson v. Emerald People's Utility Dist. ,