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FILED: WESTCHESTER COUNTY CLERK 11/20/2018 11:34 PM INDEX NO. 60767/2018
NYSCEF DOC. NO. 356 RECEIVED NYSCEF: 11/20/2018
EXHIBIT P-7
FILED: WESTCHESTER COUNTY CLERK 11/20/2018 11:34 PM INDEX NO. 60767/2018
NYSCEF DOC. NO. 356 RECEIVED NYSCEF: 11/20/2018
160 DOS 96
STATE OF NEW YORK
DEPARTMENT OF STATE
OFFICE OF ADMINISTRATIVE HEARINGS
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In the Matter of the Complaint of
DEPARTMENT OF STATE
DIVISION OF LICENSING SERVICES,
Complainant, DECISION
-against-
ANNE WERNER d/b/a 24 LIBERTY STREET
REAL ESTATE, ROBERT KIRK BRUSH, and
DONNA M. BRUSH,
Respondents.
----------------------------------------X
The above noted matter came on for hearing before the
undersigned, Roger Schneier, on May 23, 1996 at the office of the
Department of State located at 44 Hawley Street, Binghamton, New
York.
The respondents, of 24 Liberty Street, Bath, New York 14810,
were represented by George J. Welch, Esq., Welch & Welch, 17-19
East Market Street, Corning, New York 14830.
The complainant was represented by Associate Litigation
Counsel Scott L. NeJame, Esq.
COMPLAINT
The complaint alleges that on September 6, 1994 Fay E. Faucett
entered into a listing agreement for 24 Liberty Street Real Estate
(hereinafter "24 Liberty Street") to act as his agent in the sale
of real property; that the listing agreement did not contain the
language required by 19 NYCRR 175.24; that prior to entering into
the listing agreement the respondents failed to provide Faucett
with a disclosure form pursuant to Real Property Law (RPL) §443;
that on January 23, 1995 Henry and Elizabeth Frey made an offer to
purchase the property, contingent on the sale of property owned by
them; that prior to the Faucett's acceptance of the Frey's offer,
the Freys executed a listing agreement with 24 Liberty Street for
the sale of their property; that the Frey listing agreement did not
contain the language required by 19 NYCRR 175.24; that the
respondents became dual agents in mutually dependent transactions
without the informed consent and acknowledgements of the Faucetts
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and the Freys; that the respondents failed to provide the Freys
with an RPL §443 disclosure form prior to the execution of their
listing agreement; that on January 31, 1995 the Faucetts accepted
the Frey offer, which had been prepared and presented by the
respondents, and which failed to contain an attorney approval
clause and had not been approved by the local board of realtors and
bar association; that 24 Liberty Street had a policy of not co-
brokering the sale of properties listed with it for the first 30
days of such listings, but failed to inform the Faucetts and the
Freys of that policy prior to the execution of their listing
agreements, with the result that, unbeknownst to the Faucetts and
the Freys, potential purchasers could not view their properties
during that period; that when title closed on the properties on
July 10, 1995 the respondents collected and retained commissions
for the sale of each property; and that by reason of the foregoing
the respondents violated 19 NYCRR 175.24 and RPL §443, engaged in
the unauthorized practice of law in violation of Judiciary Law
§478, breached their fiduciary duties of good faith, undivided
loyalty, and full and fair disclosure, demanded, received and
retained unearned commissions, and demonstrated untrustworthiness
and/or incompetence.
FINDINGS OF FACT
1) Notices of hearing together with copies of the complaint
were served on the respondents by certified mail (State's Ex. 1).
2) Anne Werner is, and at all times hereinafter mentioned was,
duly licensed as a real estate broker under the trade name "24
Liberty Street Real Estate" (State's Ex. 1).
Robert Kirk Brush is, and at all times hereinafter mentioned
was, duly licensed as a real estate salesperson in association with
24 Liberty Street (State's Ex. 1).
Donna M. Brush is, and at all times hereinafter mentioned was,
duly licensed as an associate real estate broker in association
with 24 Liberty Street (State's Ex. 1).
3) On September 6, 1994 Fay E. Faucett, acting on behalf of
himself and his wife, Nancy C. Faucett, entered into an exclusive
right to sell agency agreement with 24 Liberty Street, as
represented by Donna Brush. The agreement provided that it would
run until March 6, 1995, and that the Faucetts would be obligated
to pay 24 Liberty Street a commission of 5% of the selling price
should the Faucetts' property located at 6220 Route 415, Savona,
New York, be sold through its efforts. It further provided that
should the property be sold, within 6 months of the expiration of
the agency agreement, to a person with whom 24 Liberty Street had
negotiated or whose name was given to the Faucetts during the term
of the listing, a commission would be payable to 24 Liberty Street.
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The following language was printed on the reverse side of the
agreement:
"EXPLANATION
EXCLUSIVE AGENCY
An 'exclusive agency' listing means that if you, the
owner of the property find a buyer, you will not have to
pay a commission to the broker. However, if another
broker finds a buyer, you will have to pay a commission
to both selling broker and your present broker.
EXCLUSIVE RIGHT TO SELL
An 'exclusive' right to sell' listing means that if
you, the owner of the property, find a buyer or if
another broker finds a buyer, you must pay the agreed
commission to the present broker.
The owner hereby states that he or she has read this
agreement, that he or she knows and understands the
contents thereof, and hereby approves and authorizes
broker to receive deposits and earnest money on the
aforesaid property." (State's Ex. 7)
When entering into that agreement Mr. Faucett believed,
although the subject was not raised or discussed, that the
respondents would abide by what he understood to be the common
practice of real estate brokers of co-brokering with other brokers
properties which were listed with them. In fact, however, it was
the normal practice of the respondents, as established by Ms.
Werner, not to co-broker properties listed exclusively with them
for the first 30 days of the listing. The evidence, however, does
not establish that the respondents ever actually had occasion to
apply that policy to the Faucett property.1
4) On or about January 23, 1995 Donna Brush presented the
Faucetts with an offer from Henry and Elizabeth Frey to purchase
their property for $84,500.00 (State's Ex. 10). The offer was
prepared by Donna Brush on a 24 Liberty Street form which did not
provide for the approval of the attorneys for the parties, and
which had not been approved by any joint bar/real estate board
committee. At the direction of the Freys' attorney, Henry M.
Hille, Esq., Mrs. Brush had typed in: the price and description of
the property; provisions for the prorating of taxes, the giving of
possession on closing of title, the delivery by the seller to the
buyer of a satisfactory water and septic test, and for the equal
division of the cost of any required survey; a 90 day contingency
1
The hearsay written statement of Century 21 Sunrise real
estate salesperson Denny LeGro that the respondents refused to co-
broker on the Faucett property (State's Ex. 4), was refuted by the
sworn testimony of Donna Brush.
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for the sale by the buyers of their house; a requirement that three
trees be removed; a requirement for a $100.00 deposit; a provision
that the offer would be good for 4 days; and a closing date of no
later than May 15, 1995. She also prepared the following addendum:
"Buyer agrees that seller may continue to list and show
the property, providing however, that the buyer shall
have option to remove the contingency of selling present
home within 7 days notice to match any subsequent offers
made on the property.
Proof must be given the buyer by the seller that such
offer has been received and is equal to or more than this
offer."
The Faucetts, with the encouragement of Donna Brush, delivered
the offer to their attorney, John K. McCarthy, Esq., who prepared
a counter offer which both modified the tree removal requirement
and established more specific details regarding the Faucetts' right
to sell to another buyer and their obligations should they choose
to do so (State's Ex. 10).
The Freys responded with a counter offer of their own further
modifying the tree removal requirement (State's Ex. 10).
Finally, on January 31, 1995, the Faucetts accepted the offer.
5) On January 24, 1995 Robert Brush presented Mr. Faucett with
the agency relationship disclosure document mandated by RPL §443,
and Mr. Faucett signed the acknowledgment that 24 Liberty Street
was acting as his agent (State's Ex. 11). No such document had
been presented to the Faucetts prior to that date.
6) On January 25, 1996 Henry and Elizabeth Frey entered into
an exclusive right to sell agency agreement with 24 Liberty Street,
as represented by Robert Brush. The agreement provided that it
would run until May 15, 1995, and that the Freys would be obligated
to pay 24 Liberty Street a commission of 5% of the selling price
should the Freys' property located at 118 Rumsey Street, Bath, New
York, be sold through its efforts. The form was the same as that
used for the Faucett transaction, and contained the same agency
explanation language on the reverse (State's Ex. 12).2 As in the
case of the Faucetts, no one told the Freys about the respondents'
policy against co-brokering.
7) At no time did any of the respondents ever discuss with
either the Faucetts or the Freys the question of 24 Liberty
2
There is insufficient evidence to determine when, if at all,
the Freys received the document mandated by RPL §443.
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Street's serving as a dual agent representing both the sellers and
buyers of the Faucett property.
8) Sometime in April, 1995 Kathryn Warren, a real estate
salesperson associated with Lucy Knapp Real Estate, spoke with
Donna Brush and attempted to make an appointment to show the Freys'
house to a prospective purchaser. She said that she would like to
show it the following week, and Mrs. Brush told her that she'd get
back to her. The purchaser, however, was anxious to view the
property sooner, so Ms. Warren called 24 Liberty Street and spoke
with Robert Brush, who said he would get back to her. When Mr.
Brush did call back, he refused to co-broker a possible sale to Ms.
Warren's customer because he was upset that that customer, who
lived across the street from the Freys' house and had bought her
house through Mr. Brush, had not come directly to him.
In a separate transaction, real estate salesperson Gilbert
Ferris was permitted to show the Freys' house to prospective
purchasers Duane and Rosina Will on behalf of his broker, Linda
Cohn of Century 21 Sunrise (hereinafter "Sunrise"). However, when
he attempted to make a follow up appointment for another
inspection, Robert Brush told Mr. Ferris that because he was acting
on behalf of Ms. Cohn, with whom Mr. Brush had personal problems,
he could not show the house again. Ms. Cohn then called Mr. Hille,
the Freys' attorney, who told her to call the Freys, who allowed
the house to be shown. Ms. Cohn did not discuss the matter with
Ms. Werner, and her office was allowed to show the property to
other customers, although the record does not indicate whether
those customers, or customers of any other brokers, where allowed
to view the house during the initial 30 day period of the listing.
9) The respondents were unsuccessful in marketing the Freys'
house, with the result that the contract for the sale to them of
the Faucetts' house lapsed.
10) After 24 Liberty Street's agency agreements had expired
Sunrise obtained listings for both the Faucett and Frey properties.
The Wills then contacted salesperson Ferris and asked to see the
Freys' house, and on June 11, 1996 they and the Freys entered into
a contract of purchase and sale, with Sunrise to receive a
commission of 7% of the $110,000.00 sales price (Resp. Ex. A).
Sunrise was also able to renegotiate the sale of the Faucetts'
house to the Freys, again with a 7% commission.
11) Ms. Werner took the position that 24 Liberty Street was
entitled to a full 5% commission on the Faucett sale because of the
original, expired contract (State's Ex. 13). She also claimed the
right to share in the commission on the Frey sale. A closing on the
sale of the houses took place on July 10, 1995. Ms. Werner
demanded and received commissions of $4,225.00 from the Faucetts,
and of $2,875.00 from the Freys.
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12) Ms. Werner was, at all times, aware of the actions and
omissions of the other respondents.
OPINION
I- As the party which initiated the hearing, the burden is on
the complainant to prove, by substantial evidence, the truth of the
charges in the complaint. State Administrative Procedure Act
(SAPA), §306(1). Substantial evidence is that which a reasonable
mind could accept as supporting a conclusion or ultimate fact.
Gray v Adduci, 73 N.Y.2d 741, 536 N.Y.S.2d 40 (1988). "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 A.D.2d
710, 465 N.Y.S.2d 365, 366 (1983)(citations omitted).
II- The respondents are charged with violating 19 NYCRR 175.24
because the listing agreement used in the Faucett and Frey
transactions did not contain the required language:
"EXPLANATION:
An 'exclusive right to sell' listing means that if you,
the owner of the property, find a buyer for your house,
or if another broker finds a buyer, you must pay the
agreed commission to the present broker.
An 'exclusive agency' listing means that if you, the
owner of the property find a buyer, you will not have to
pay a commission to the broker. However, if another
broker finds a buyer, you will owe a commission to both
the selling broker and your present broker."
The language on the 24 Liberty Street form is essentially the
same as that mandated in the regulation with a few minor
exceptions: First, the explanations of the two types of agency
agreements are reversed in the order in which they are presented;
second, captions have been added before each explanation; third, in
the second sentence of the explanation of "exclusive agency" the
phrase "you will have to pay a commission" is substituted for
mandated "you will owe a commission"; lastly, an acknowledgement of
receipt and authorization to receive deposits is added at the
bottom.
While the use of language which does not conform exactly to
that contained in the regulation is a demonstration of incompetency
by Ms. Werner, who as the broker for 24 Liberty Street has the
responsibility to provide forms with the proper language, in this
circumstance the violation is de minimis. She is admonished,
however, to immediately cease using forms not containing the proper
language.
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III- The complaint alleges that prior to entering into the
respective listing agreements the respondents failed to provide the
Faucetts and the Freys with the disclosure form mandated by RPL
§443. The evidence establishes, and the respondents do not
dispute, the truth of that allegation with regards to the Freys,
but fails to establish when, if at all, the form was delivered to
the Freys.
RPL §443[2] clearly and explicitly provides that the form must
be delivered to the seller prior to entering into the listing
agreement. Accordingly, Donna Brush's explanation that, having
concentrated on when the form must be delivered to buyers, she did
not know when it had to be delivered to sellers, is of no avail.
Whatever might have been taught in the continuing education courses
which Mrs. Brush took, the statute is so clear that her failure to
abide by it in her dealings with the Faucetts is a clear and
unambiguous demonstration of incompetency.
IV- The next allegation in the complaint is that the
respondents improperly became dual agents representing both the
Faucetts and the Freys in mutually dependent transactions without
the informed consent of their principals.
As a fiduciary, a real estate broker or salesperson is
prohibited from serving as a dual agent representing parties with
conflicting interests in the same transaction without the informed
consent of the principals. Department of State v McGill, 21 DOS
92; Department of State v Home Market Realty, 1 DOS 90; Department
of State v Island Preferred Properties, 34 DOS 89. "If dual
interests are to be served, the disclosure to be effective must lay
bare the truth, without ambiguity or reservation, in all its stark
significance." Wendt v Fischer, 243 NY 439, 443 (1926); Guidetti v
Tuotti, 52 Misc. 657, 102 NYS 499 (Supreme Ct. App. Term, 1907).
"Therefore, a real estate agent must prove
that prior to undertaking to act either as a
dual agent or for an adverse interest, the
agent made full and complete disclosure to all
parties as a predicate for obtaining the
consent of the principals to proceed in the
undertaking. Both the rule and the
affirmative defence of full disclosure are
well settled in law. This legal principle is
amplified by the provisions of 19 NYCRR 175.7,
which mandates that a real estate broker shall
make it clear for which party the agent is
acting, and prohibits the agent from receiving
compensation from more than one party except
with the full knowledge and consent of all
parties to the transaction." Division of
Licensing Services v Short Term Housing, 31
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DOS 90 at p. 6., conf'd. 176 AD2d 619, 575
NYS2d 61 (1991).
The prohibition of dual agency without proper disclosure does
not apply only to the situation where the agent represents both the
seller and the buyer in their negotiations with each other. It
extends to situations in which the agent represents the parties in
separate, but interrelated transactions. Division of Licensing
Services v Cornell, 6 DOS 93.
It is not necessary that there be a showing of injury to the
principals for there to be a finding that the dual agent acted
improperly. New York Central Insurance Company v National
Protection Insurance Company, 14 NY 84 (1856). Nor is it necessary
for there to be a finding that the dual agent is guilty of actual
fraud. Carr v National Bank & Loan Co., 167 NY 375 (1901), aff'd.
189 US 426, 23 S.Ct. 513. See, also, Hasbrouck v Rymkevitch, 25
AD2d 187, 268 NYS2d 604 (1966). "This rule is not affected by the
existence of the usage or custom of an agent to act for both
parties to a particular transaction unless it is shown that the
principal has knowledge of it." 3 NY Jur2d, Agency §201.
On January 25, 1995 Robert Brush, acting on behalf of 24
Liberty Street, entered into an agency agreement with the Freys for
the sale of their house. Thus, while still agent for the Faucetts
in the sale of their house, which, according to the offer of
January 23, 1995 (which was accepted by the Faucetts on January 31,
1995), was contingent on the sale of the Freys' house, Mr. Brush
caused 24 Liberty Street to become a dual agent in mutually
dependent transactions. While it is clear that Mr. Frey was aware
of the dual representation from the start, and that Mr. Faucett
soon became aware of it, it is also clear that none of the
respondents specifically obtained the consent of the Freys or the
Faucetts to the dual representation or explained to them the
significance of that representation.
While the law does not require that for it to be improper a
dual agency must cause injury, it is interesting to note that in
this case it appears that such injury may have, in fact, been
caused. The sale by the Faucetts to the Freys was contingent upon
the sale of the Freys' home. The respondents, however, had a
policy against co-brokerage during the first 30 days of a listing.
That policy was clearly in conflict with their obligation to
facilitate the Faucett to Frey sale, and may very well have
prevented potential purchasers from viewing the Frey house and
making offers for its purchase. Further, potential purchasers for
the house were presented by other brokers: Lucy Knapp Real Estate
and Sunrise. However, Robert Brush refused to co-broker the sale
through Lucy Knapp Real Estate because he was upset that the
potential purchaser had not come directly to him, thereby
eliminating the possibility of a sale to that customer, and he
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tried to block the viewing of the house through Sunrise because he
didn't like Sunrise's representative broker.
V- Real Estate brokers are permitted to prepare purchase
offer contracts subject to very definite limitations.
"The line between such permitted acts by
real estate brokers and the unauthorized
practice of the law has been recognized as
thin and difficult to define and, at times, to
discern. Whether or not the services rendered
are simple or complex may have had a bearing
on the outcome, but it has not been
controlling....
The justification for granting to real
estate brokers and agents the privilege to
complete simple purchase and sale documents
has been said to be the practical aspect of
the matter, that is, the business need for
expedition and the fact that the broker has a
personal interest in the transaction. It
should be noted in this regard, however, that
the so-called 'simple' contract is in reality
not simple....The personal interest of the
broker in the transaction and the fact that he
is employed by one of the opposing parties are
further reasons to require that, insofar as
the contract entails legal advice and
draftsmanship, only a lawyer or lawyers be
permitted to prepare the document, to ensure
the deliberate consideration and protection of
the interests and rights of the parties.
The law forbids anyone to practice law who
has not been found
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FILED: WESTCHESTER COUNTY CLERK 11/20/2018 11:34 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 356 RECEIVED NYSCEF: 11/20/2018 EXHIBIT P-7 FILED: WESTCHESTER COUNTY CLERK 11/20/2018 11:34 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 356 RECEIVED NYSCEF: 11/20/2018 160 DOS 96 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- ANNE WERNER d/b/a 24 LIBERTY STREET REAL ESTATE, ROBERT KIRK BRUSH, and DONNA M. BRUSH, Respondents. ----------------------------------------X The above noted matter came on for hearing before the undersigned, Roger Schneier, on May 23, 1996 at the office of the Department of State located at 44 Hawley Street, Binghamton, New York. The respondents, of 24 Liberty Street, Bath, New York 14810, were represented by George J. Welch, Esq., Welch & Welch, 17-19 East Market Street, Corning, New York 14830. The complainant was represented by Associate Litigation Counsel Scott L. NeJame, Esq. COMPLAINT The complaint alleges that on September 6, 1994 Fay E. Faucett entered into a listing agreement for 24 Liberty Street Real Estate (hereinafter "24 Liberty Street") to act as his agent in the sale of real property; that the listing agreement did not contain the language required by 19 NYCRR 175.24; that prior to entering into the listing agreement the respondents failed to provide Faucett with a disclosure form pursuant to Real Property Law (RPL) §443; that on January 23, 1995 Henry and Elizabeth Frey made an offer to purchase the property, contingent on the sale of property owned by them; that prior to the Faucett's acceptance of the Frey's offer, the Freys executed a listing agreement with 24 Liberty Street for the sale of their property; that the Frey listing agreement did not contain the language required by 19 NYCRR 175.24; that the respondents became dual agents in mutually dependent transactions without the informed consent and acknowledgements of the Faucetts FILED: WESTCHESTER COUNTY CLERK 11/20/2018 11:34 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 356 RECEIVED NYSCEF: 11/20/2018 -2- and the Freys; that the respondents failed to provide the Freys with an RPL §443 disclosure form prior to the execution of their listing agreement; that on January 31, 1995 the Faucetts accepted the Frey offer, which had been prepared and presented by the respondents, and which failed to contain an attorney approval clause and had not been approved by the local board of realtors and bar association; that 24 Liberty Street had a policy of not co- brokering the sale of properties listed with it for the first 30 days of such listings, but failed to inform the Faucetts and the Freys of that policy prior to the execution of their listing agreements, with the result that, unbeknownst to the Faucetts and the Freys, potential purchasers could not view their properties during that period; that when title closed on the properties on July 10, 1995 the respondents collected and retained commissions for the sale of each property; and that by reason of the foregoing the respondents violated 19 NYCRR 175.24 and RPL §443, engaged in the unauthorized practice of law in violation of Judiciary Law §478, breached their fiduciary duties of good faith, undivided loyalty, and full and fair disclosure, demanded, received and retained unearned commissions, and demonstrated untrustworthiness and/or incompetence. FINDINGS OF FACT 1) Notices of hearing together with copies of the complaint were served on the respondents by certified mail (State's Ex. 1). 2) Anne Werner is, and at all times hereinafter mentioned was, duly licensed as a real estate broker under the trade name "24 Liberty Street Real Estate" (State's Ex. 1). Robert Kirk Brush is, and at all times hereinafter mentioned was, duly licensed as a real estate salesperson in association with 24 Liberty Street (State's Ex. 1). Donna M. Brush is, and at all times hereinafter mentioned was, duly licensed as an associate real estate broker in association with 24 Liberty Street (State's Ex. 1). 3) On September 6, 1994 Fay E. Faucett, acting on behalf of himself and his wife, Nancy C. Faucett, entered into an exclusive right to sell agency agreement with 24 Liberty Street, as represented by Donna Brush. The agreement provided that it would run until March 6, 1995, and that the Faucetts would be obligated to pay 24 Liberty Street a commission of 5% of the selling price should the Faucetts' property located at 6220 Route 415, Savona, New York, be sold through its efforts. It further provided that should the property be sold, within 6 months of the expiration of the agency agreement, to a person with whom 24 Liberty Street had negotiated or whose name was given to the Faucetts during the term of the listing, a commission would be payable to 24 Liberty Street. FILED: WESTCHESTER COUNTY CLERK 11/20/2018 11:34 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 356 RECEIVED NYSCEF: 11/20/2018 -3- The following language was printed on the reverse side of the agreement: "EXPLANATION EXCLUSIVE AGENCY An 'exclusive agency' listing means that if you, the owner of the property find a buyer, you will not have to pay a commission to the broker. However, if another broker finds a buyer, you will have to pay a commission to both selling broker and your present broker. EXCLUSIVE RIGHT TO SELL An 'exclusive' right to sell' listing means that if you, the owner of the property, find a buyer or if another broker finds a buyer, you must pay the agreed commission to the present broker. The owner hereby states that he or she has read this agreement, that he or she knows and understands the contents thereof, and hereby approves and authorizes broker to receive deposits and earnest money on the aforesaid property." (State's Ex. 7) When entering into that agreement Mr. Faucett believed, although the subject was not raised or discussed, that the respondents would abide by what he understood to be the common practice of real estate brokers of co-brokering with other brokers properties which were listed with them. In fact, however, it was the normal practice of the respondents, as established by Ms. Werner, not to co-broker properties listed exclusively with them for the first 30 days of the listing. The evidence, however, does not establish that the respondents ever actually had occasion to apply that policy to the Faucett property.1 4) On or about January 23, 1995 Donna Brush presented the Faucetts with an offer from Henry and Elizabeth Frey to purchase their property for $84,500.00 (State's Ex. 10). The offer was prepared by Donna Brush on a 24 Liberty Street form which did not provide for the approval of the attorneys for the parties, and which had not been approved by any joint bar/real estate board committee. At the direction of the Freys' attorney, Henry M. Hille, Esq., Mrs. Brush had typed in: the price and description of the property; provisions for the prorating of taxes, the giving of possession on closing of title, the delivery by the seller to the buyer of a satisfactory water and septic test, and for the equal division of the cost of any required survey; a 90 day contingency 1 The hearsay written statement of Century 21 Sunrise real estate salesperson Denny LeGro that the respondents refused to co- broker on the Faucett property (State's Ex. 4), was refuted by the sworn testimony of Donna Brush. FILED: WESTCHESTER COUNTY CLERK 11/20/2018 11:34 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 356 RECEIVED NYSCEF: 11/20/2018 -4- for the sale by the buyers of their house; a requirement that three trees be removed; a requirement for a $100.00 deposit; a provision that the offer would be good for 4 days; and a closing date of no later than May 15, 1995. She also prepared the following addendum: "Buyer agrees that seller may continue to list and show the property, providing however, that the buyer shall have option to remove the contingency of selling present home within 7 days notice to match any subsequent offers made on the property. Proof must be given the buyer by the seller that such offer has been received and is equal to or more than this offer." The Faucetts, with the encouragement of Donna Brush, delivered the offer to their attorney, John K. McCarthy, Esq., who prepared a counter offer which both modified the tree removal requirement and established more specific details regarding the Faucetts' right to sell to another buyer and their obligations should they choose to do so (State's Ex. 10). The Freys responded with a counter offer of their own further modifying the tree removal requirement (State's Ex. 10). Finally, on January 31, 1995, the Faucetts accepted the offer. 5) On January 24, 1995 Robert Brush presented Mr. Faucett with the agency relationship disclosure document mandated by RPL §443, and Mr. Faucett signed the acknowledgment that 24 Liberty Street was acting as his agent (State's Ex. 11). No such document had been presented to the Faucetts prior to that date. 6) On January 25, 1996 Henry and Elizabeth Frey entered into an exclusive right to sell agency agreement with 24 Liberty Street, as represented by Robert Brush. The agreement provided that it would run until May 15, 1995, and that the Freys would be obligated to pay 24 Liberty Street a commission of 5% of the selling price should the Freys' property located at 118 Rumsey Street, Bath, New York, be sold through its efforts. The form was the same as that used for the Faucett transaction, and contained the same agency explanation language on the reverse (State's Ex. 12).2 As in the case of the Faucetts, no one told the Freys about the respondents' policy against co-brokering. 7) At no time did any of the respondents ever discuss with either the Faucetts or the Freys the question of 24 Liberty 2 There is insufficient evidence to determine when, if at all, the Freys received the document mandated by RPL §443. FILED: WESTCHESTER COUNTY CLERK 11/20/2018 11:34 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 356 RECEIVED NYSCEF: 11/20/2018 -5- Street's serving as a dual agent representing both the sellers and buyers of the Faucett property. 8) Sometime in April, 1995 Kathryn Warren, a real estate salesperson associated with Lucy Knapp Real Estate, spoke with Donna Brush and attempted to make an appointment to show the Freys' house to a prospective purchaser. She said that she would like to show it the following week, and Mrs. Brush told her that she'd get back to her. The purchaser, however, was anxious to view the property sooner, so Ms. Warren called 24 Liberty Street and spoke with Robert Brush, who said he would get back to her. When Mr. Brush did call back, he refused to co-broker a possible sale to Ms. Warren's customer because he was upset that that customer, who lived across the street from the Freys' house and had bought her house through Mr. Brush, had not come directly to him. In a separate transaction, real estate salesperson Gilbert Ferris was permitted to show the Freys' house to prospective purchasers Duane and Rosina Will on behalf of his broker, Linda Cohn of Century 21 Sunrise (hereinafter "Sunrise"). However, when he attempted to make a follow up appointment for another inspection, Robert Brush told Mr. Ferris that because he was acting on behalf of Ms. Cohn, with whom Mr. Brush had personal problems, he could not show the house again. Ms. Cohn then called Mr. Hille, the Freys' attorney, who told her to call the Freys, who allowed the house to be shown. Ms. Cohn did not discuss the matter with Ms. Werner, and her office was allowed to show the property to other customers, although the record does not indicate whether those customers, or customers of any other brokers, where allowed to view the house during the initial 30 day period of the listing. 9) The respondents were unsuccessful in marketing the Freys' house, with the result that the contract for the sale to them of the Faucetts' house lapsed. 10) After 24 Liberty Street's agency agreements had expired Sunrise obtained listings for both the Faucett and Frey properties. The Wills then contacted salesperson Ferris and asked to see the Freys' house, and on June 11, 1996 they and the Freys entered into a contract of purchase and sale, with Sunrise to receive a commission of 7% of the $110,000.00 sales price (Resp. Ex. A). Sunrise was also able to renegotiate the sale of the Faucetts' house to the Freys, again with a 7% commission. 11) Ms. Werner took the position that 24 Liberty Street was entitled to a full 5% commission on the Faucett sale because of the original, expired contract (State's Ex. 13). She also claimed the right to share in the commission on the Frey sale. A closing on the sale of the houses took place on July 10, 1995. Ms. Werner demanded and received commissions of $4,225.00 from the Faucetts, and of $2,875.00 from the Freys. FILED: WESTCHESTER COUNTY CLERK 11/20/2018 11:34 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 356 RECEIVED NYSCEF: 11/20/2018 -6- 12) Ms. Werner was, at all times, aware of the actions and omissions of the other respondents. OPINION I- As the party which initiated the hearing, the burden is on the complainant to prove, by substantial evidence, the truth of the charges in the complaint. State Administrative Procedure Act (SAPA), §306(1). Substantial evidence is that which a reasonable mind could accept as supporting a conclusion or ultimate fact. Gray v Adduci, 73 N.Y.2d 741, 536 N.Y.S.2d 40 (1988). "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 A.D.2d 710, 465 N.Y.S.2d 365, 366 (1983)(citations omitted). II- The respondents are charged with violating 19 NYCRR 175.24 because the listing agreement used in the Faucett and Frey transactions did not contain the required language: "EXPLANATION: An 'exclusive right to sell' listing means that if you, the owner of the property, find a buyer for your house, or if another broker finds a buyer, you must pay the agreed commission to the present broker. An 'exclusive agency' listing means that if you, the owner of the property find a buyer, you will not have to pay a commission to the broker. However, if another broker finds a buyer, you will owe a commission to both the selling broker and your present broker." The language on the 24 Liberty Street form is essentially the same as that mandated in the regulation with a few minor exceptions: First, the explanations of the two types of agency agreements are reversed in the order in which they are presented; second, captions have been added before each explanation; third, in the second sentence of the explanation of "exclusive agency" the phrase "you will have to pay a commission" is substituted for mandated "you will owe a commission"; lastly, an acknowledgement of receipt and authorization to receive deposits is added at the bottom. While the use of language which does not conform exactly to that contained in the regulation is a demonstration of incompetency by Ms. Werner, who as the broker for 24 Liberty Street has the responsibility to provide forms with the proper language, in this circumstance the violation is de minimis. She is admonished, however, to immediately cease using forms not containing the proper language. FILED: WESTCHESTER COUNTY CLERK 11/20/2018 11:34 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 356 RECEIVED NYSCEF: 11/20/2018 -7- III- The complaint alleges that prior to entering into the respective listing agreements the respondents failed to provide the Faucetts and the Freys with the disclosure form mandated by RPL §443. The evidence establishes, and the respondents do not dispute, the truth of that allegation with regards to the Freys, but fails to establish when, if at all, the form was delivered to the Freys. RPL §443[2] clearly and explicitly provides that the form must be delivered to the seller prior to entering into the listing agreement. Accordingly, Donna Brush's explanation that, having concentrated on when the form must be delivered to buyers, she did not know when it had to be delivered to sellers, is of no avail. Whatever might have been taught in the continuing education courses which Mrs. Brush took, the statute is so clear that her failure to abide by it in her dealings with the Faucetts is a clear and unambiguous demonstration of incompetency. IV- The next allegation in the complaint is that the respondents improperly became dual agents representing both the Faucetts and the Freys in mutually dependent transactions without the informed consent of their principals. As a fiduciary, a real estate broker or salesperson is prohibited from serving as a dual agent representing parties with conflicting interests in the same transaction without the informed consent of the principals. Department of State v McGill, 21 DOS 92; Department of State v Home Market Realty, 1 DOS 90; Department of State v Island Preferred Properties, 34 DOS 89. "If dual interests are to be served, the disclosure to be effective must lay bare the truth, without ambiguity or reservation, in all its stark significance." Wendt v Fischer, 243 NY 439, 443 (1926); Guidetti v Tuotti, 52 Misc. 657, 102 NYS 499 (Supreme Ct. App. Term, 1907). "Therefore, a real estate agent must prove that prior to undertaking to act either as a dual agent or for an adverse interest, the agent made full and complete disclosure to all parties as a predicate for obtaining the consent of the principals to proceed in the undertaking. Both the rule and the affirmative defence of full disclosure are well settled in law. This legal principle is amplified by the provisions of 19 NYCRR 175.7, which mandates that a real estate broker shall make it clear for which party the agent is acting, and prohibits the agent from receiving compensation from more than one party except with the full knowledge and consent of all parties to the transaction." Division of Licensing Services v Short Term Housing, 31 FILED: WESTCHESTER COUNTY CLERK 11/20/2018 11:34 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 356 RECEIVED NYSCEF: 11/20/2018 -8- DOS 90 at p. 6., conf'd. 176 AD2d 619, 575 NYS2d 61 (1991). The prohibition of dual agency without proper disclosure does not apply only to the situation where the agent represents both the seller and the buyer in their negotiations with each other. It extends to situations in which the agent represents the parties in separate, but interrelated transactions. Division of Licensing Services v Cornell, 6 DOS 93. It is not necessary that there be a showing of injury to the principals for there to be a finding that the dual agent acted improperly. New York Central Insurance Company v National Protection Insurance Company, 14 NY 84 (1856). Nor is it necessary for there to be a finding that the dual agent is guilty of actual fraud. Carr v National Bank & Loan Co., 167 NY 375 (1901), aff'd. 189 US 426, 23 S.Ct. 513. See, also, Hasbrouck v Rymkevitch, 25 AD2d 187, 268 NYS2d 604 (1966). "This rule is not affected by the existence of the usage or custom of an agent to act for both parties to a particular transaction unless it is shown that the principal has knowledge of it." 3 NY Jur2d, Agency §201. On January 25, 1995 Robert Brush, acting on behalf of 24 Liberty Street, entered into an agency agreement with the Freys for the sale of their house. Thus, while still agent for the Faucetts in the sale of their house, which, according to the offer of January 23, 1995 (which was accepted by the Faucetts on January 31, 1995), was contingent on the sale of the Freys' house, Mr. Brush caused 24 Liberty Street to become a dual agent in mutually dependent transactions. While it is clear that Mr. Frey was aware of the dual representation from the start, and that Mr. Faucett soon became aware of it, it is also clear that none of the respondents specifically obtained the consent of the Freys or the Faucetts to the dual representation or explained to them the significance of that representation. While the law does not require that for it to be improper a dual agency must cause injury, it is interesting to note that in this case it appears that such injury may have, in fact, been caused. The sale by the Faucetts to the Freys was contingent upon the sale of the Freys' home. The respondents, however, had a policy against co-brokerage during the first 30 days of a listing. That policy was clearly in conflict with their obligation to facilitate the Faucett to Frey sale, and may very well have prevented potential purchasers from viewing the Frey house and making offers for its purchase. Further, potential purchasers for the house were presented by other brokers: Lucy Knapp Real Estate and Sunrise. However, Robert Brush refused to co-broker the sale through Lucy Knapp Real Estate because he was upset that the potential purchaser had not come directly to him, thereby eliminating the possibility of a sale to that customer, and he FILED: WESTCHESTER COUNTY CLERK 11/20/2018 11:34 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 356 RECEIVED NYSCEF: 11/20/2018 -9- tried to block the viewing of the house through Sunrise because he didn't like Sunrise's representative broker. V- Real Estate brokers are permitted to prepare purchase offer contracts subject to very definite limitations. "The line between such permitted acts by real estate brokers and the unauthorized practice of the law has been recognized as thin and difficult to define and, at times, to discern. Whether or not the services rendered are simple or complex may have had a bearing on the outcome, but it has not been controlling.... The justification for granting to real estate brokers and agents the privilege to complete simple purchase and sale documents has been said to be the practical aspect of the matter, that is, the business need for expedition and the fact that the broker has a personal interest in the transaction. It should be noted in this regard, however, that the so-called 'simple' contract is in reality not simple....The personal interest of the broker in the transaction and the fact that he is employed by one of the opposing parties are further reasons to require that, insofar as the contract entails legal advice and draftsmanship, only a lawyer or lawyers be permitted to prepare the document, to ensure the deliberate consideration and protection of the interests and rights of the parties. The law forbids anyone to practice law who has not been found