NEW JERSEY REAL ESTATE COMMISSION v. ESTRELLA PIEMONTESE

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2561-09T1

NEW JERSEY REAL ESTATE COMMISSION,

Claimant-Respondent,

v.

ESTRELLA PIEMONTESE,

Respondent-Appellant.

________________________________

May 12, 2011

Submitted April 4, 2011 Decided

Before Judges Reisner and Ostrer.

On appeal from the New Jersey Real Estate Commission.

Estrella Piemontese, appellant pro se.

Paula T. Dow, Attorney General, attorney for respondent (Lewis A. Scheindlin, Assistant Attorney General, of counsel; Kristine A. Maurer, Deputy Attorney General, on the brief).

PER CURIAM

Estrella Piemontese appeals from a December 15, 2009 order of the New Jersey Real Estate Commission (Commission) revoking her broker license for ten years and imposing a monetary penalty of $25,000. For the following reasons, we affirm the license revocation, but remand for reconsideration of the penalty in light of our conclusion that some of the Commission's findings are not supported by substantial evidence in the record.

The Commission is charged with the high responsibility of maintaining ethical standards among real estate brokers and salesmen, Goodley v. N.J. Real Estate Comm'n, 29 N.J. Super. 178, 182 (App. Div. 1954), as well as protecting the public from fraud, incompetence and unethical practices. In re Pipes, 329 N.J. Super. 391, 397 (App. Div.), certif. denied, 165 N.J. 487 (2000). Our standard of review of the Commission's final decisions is well settled. We will sustain the Commission's findings if supported by "sufficient credible evidence." See R. 2:11-3(e)(1)(D); Henry v. Rahway State Prison, 81 N.J. 571, 579-80 (1980); see also Maple Hill Farms, Inc. v. Div. of N.J. Real Estate Comm n, 67 N.J. Super. 223, 226 (App. Div. 1961). When the Commission's conclusions are supported by adequate proof, we shall not supplant the agency by weighing the evidence anew, determining credibility of witnesses, or drawing our own inferences and conclusions from the evidence. Id. at 226-27.

This case arose out of appellant's role in the sale of a house in Pompton Lakes. Appellant voluntarily absented herself from the hearing on the order to show cause charging her with violating the Real Estate License Act, N.J.S.A. 45:15-1 to -29.5, and the Commission's implementing regulations. According to the evidence presented at the hearing, appellant represented Marisol DeNegri and her mother, Grinilda Marrero (Buyers), in their search for a two-family home. DeNegri stated that appellant never discussed the nature of her agency relationship with her, nor could she recall whether appellant provided her with any document describing appellant's relationship to her.

DeNegri wanted a house with two separate living quarters with separate entrances, so she could maintain a separate home for her family, but be close to her mother, to whom she provided care and assistance. After appellant showed DeNegri various two-family homes, appellant showed her 2 Willow Avenue in Pompton Lakes. It appeared to be a two-family home. It had two levels, with two separate entrances.

The Buyers offered to purchase the house for $600,000 by signing a proposed contract dated July 12, 2004. The contract described the property as follows: "UPPER LEVEL TO BE VACANT AT TIME OF CLOSING. MOTHER/DOUGHTER [sic] TYPE OF HOUSE, LOWER LEVEL COULD BE OCCUPY [sic] BY MY NEAR RELATIVES AND MY MOTHER, AS SOON AS POSSIBLE." The contract also disclosed that the seller would pay appellant a commission of six percent plus a $1200 bonus.

Appellant also entered into a commission agreement with the seller, dated July 12, 2004, providing for the six percent commission plus the $1200 bonus, based on a $600,000 purchase price. That agreement described the property as "a one family house." Appellant did not provide a copy of that agreement to the Buyers.

The seller initially declined the $600,000 offer made in July, but ultimately accepted it in December 2004. To assist in consummating the transaction, appellant sent a letter to the Buyers' proposed mortgage lender on December 6, 2004. The letter stated, "THIS OFFICE CERTIFY: THE PROPERTY LOCATED AT 2 WILLOW AVE. POMPTON LAKES N.J. AND SELLER MRS. KIRIAKI FASSILIS REPRESENTED TO THE PURCHASER MISS. LUZ DENEGRI THAT THIS HOUSE IS A BILEBEL [sic] MOTHER/DAUTHGTER [sic], ONE FAMILY HOUSE." The sale closed, and the Buyers moved into the house in January 2005.

In April 2005, after the house was damaged by a flood, the Buyers became aware of several significant material facts about the house: (1) a certificate of continued occupancy was required by the Borough of Pompton Lakes, but had not been obtained; (2) use of the house as a two-family home was not permitted; and (3) use of the lower level of the house violated a 1988 New Jersey Department of Environmental Protection (DEP) stream encroachment permit that had allowed construction of the house. The permit provided that the first floor of the house was to remain unenclosed and accessible to flood water. Ultimately, the Buyers determined that the structure needed to be demolished.

The Buyers brought suit against the sellers, appellant, and the attorney who represented the Buyers in the transaction. Both appellant and the attorney defaulted, as well as an impleaded title company. Trial by the court proceeded against the sellers and judgment was entered against them, the attorney, and appellant in the amount of $479,297.61. The court allocated fifty percent against the sellers, and twenty-five percent each against appellant and the attorney.

We affirmed in part and reversed in part, reducing the judgment to $391,000 after concluding that the trial court erred by including attorneys' fees and closing costs as elements of damages. DeNegri v. Fassilis, No. A-3368-08 (App. Div. Aug. 11, 2010) (slip op. at 15). We noted in our decision that the trial court found appellant negligent "because she had assumed the task of obtaining the certificate of occupancy and allowed the transaction to close without the required certificate."1 Id., slip op. at 8. The court also found that appellant committed fraud, consisting of "her failure to disclose the absence of the certificate." Ibid. As a result of that failure, she "withheld necessary information that permitted plaintiffs to purchase a house that could not ever meet their needs or expectations." Id., slip op. at 9.

At the hearing before the Commission, a Commission investigator provided testimonial and photographic evidence that appellant conducted her real estate business from her residence, and that she lacked both a separate entrance to her office and signage indicating her place of business. The Commission also received in evidence: the July 12, 2004 contract; appellant's letter to the mortgage company; her commission agreement with the seller; the judgment in the Buyers' civil action; an October 18, 2005 letter to the Buyers from the Pompton Lakes construction official and zoning officer regarding the certificate of occupancy and permitted use of the property; and the DEP stream encroachment permit.

The original order to show cause charged the appellant with three specific violations: (1) she made substantial misrepresentations in violation of N.J.S.A. 45:15-17a by "writing to the Mortgage company that the property was a mother/daughter dwelling when it was not and her conduct in stating in the contract of sale that the property was a mother/daughter dwelling"; (2) she demonstrated incompetence and unworthiness in violation of N.J.S.A. 45:15-17e "in that she should have determined that the house was regarded by the Borough as a single unit and not a mother/daughter unit as was indicated in the contract of sale"; and (3) she failed to properly maintain a home office, in violation of N.J.A.C. 11:5-4.4(b). The Commission also charged that her "overall conduct" violated N.J.S.A. 45:15-17t.

After the hearing, the Commission amended the charges to conform to the evidence, and made the following conclusions of law:

1. Respondent Piemontese's letter to the mortgage company which advised that the Pompton Lakes property was a mother/daughter dwelling, when it was not, and her drafting of the contract of sale stating that the property was a mother/daughter dwelling, when it was not approved for use as same, constitute two substantial misrepresentations in violation of N.J.S.A. 45:15-17(a).

2. Respondent Piemontese's failure to determine whether the Pompton Lakes property was regarded by the Borough as a single unit, and not a mother/daughter unit as was indicated on the contract of sale, demonstrates incompetency and unworthiness in violation of N.J.S.A. 45:15-17(e).

3. Respondent Piemontese did not properly maintain her home office in the following respects: the office was not independent of living quarters and did not have a separate exterior entrance plainly visible from the street upon which the licensed premises shall have frontage, in violation of N.J.A.C. 11:5-4.4(b).

4. Based upon the undisputed proofs presented including the Respondent's admissions to the REC Investigator, the pleadings are hereby amended and the Commission finds that Respondent Piemontese failed to disclose her agency relationship in the contract of sale, in violation of N.J.A.C. 11:5-6.9(j)(3).

5. Based upon the undisputed proofs presented including the Respondent's admissions to the REC Investigator, the pleadings are hereby amended and the Commission finds that Respondent Piemontese received commission from a party she was not representing and Piemontese did not disclose her agency relationship or the source of her compensation, in violation of N.J.A.C. 11:5-7.1(d).2

The Commission imposed a single fine of $25,000 and revoked appellant's license for ten years.

We affirm Conclusions 2, 3 and 4, as well as that part of Conclusion 1 that finds that appellant misrepresented the approved use of the property in the contract of sale, and that part of Conclusion 5 that finds that appellant received a commission from a party that she was not representing and did not disclose her agency relationship. They are supported by substantial credible evidence in the record. We note that appellant's pro se brief in support of her appeal includes numerous statements of fact that were not presented to the Commission, in effect, providing to this court appellant's version of events that she chose not to provide under oath as a witness at the hearing before the Commission. We are compelled to disregard this factual presentation, to the extent it goes beyond the hearing record. R. 2:5-4(a).3

However, we reverse that part of Conclusion 1 that finds that appellant misrepresented the approved use of the property to the mortgage lender, and that part of Conclusion 5 that finds that appellant failed to disclose the source of her compensation. We address first the finding relating to the letter to the mortgage lender.

There is inadequate evidence in the record to support the conclusion that appellant made a misrepresentation when she sent the letter to the mortgage company. First, the letter to the mortgage company did not contain a representation by appellant as to the permitted use of the property; rather, it certified that the seller had made such a representation.

Second, the seller's representation related to two facts: the house was a bi-level mother/daughter home; and the house was a one-family house. The second fact was true. The first was true to the extent that the house did in fact contain two separate living quarters on two levels of the sort consistent with a mother/daughter home. Yet, it conveyed a false impression, in that the first level was to remain unenclosed and unoccupied according to the DEP permit.

However, there was no evidence presented in the hearing that appellant knew that the first level was to remain unenclosed and unoccupied. Conceivably, had appellant known of the limitation, then her misrepresentation could have consisted of a failure to disclose it. "The suppression of truth, the withholding of the truth when it should be disclosed, is equivalent to the expression of falsehood." Strawn v. Canuso, 140 N.J.43, 62 (1995) (quoting Berman v. Gurwicz, 189 N.J. Super. 89, 94 (Ch. Div. 1981), aff'd o.b., 189 N.J. Super. 49 (App. Div.), certif. denied, 94 N.J.549 (1983)), superseded by statute, L.1995, c.253, as recognized inNobrega v. Edison Glen Assocs., 167 N.J.520, 534 (2001); seealsoN.J. Econ. Dev. Auth. v. Pavonia Rest., Inc., 319 N.J. Super. 435, 436 (App. Div. 1998) ("Deliberate suppression of a material fact that should be disclosed is equivalent to a material misrepresentation (i.e., an affirmative false statement)."). However, there was no evidence in the record that appellant knew of the limitation, nor did the Commission so find.

The Commission urges us to affirm its finding of misrepresentation in part based on the judgment of the court in the Buyers' civil action, which was admitted in evidence in the Commission hearing. We decline to do so. The court's finding that appellant committed fraud should not have been given collateral estoppel effect in the Commission's proceeding. SeeSlowinski v. Valley Nat'l Bank, 264 N.J. Super.172, 182-85 (App. Div. 1993) (finding collateral estoppel does not bind party against whom default judgment was entered); Allesandra v. Gross, 187 N.J. Super. 96, 106 (App. Div. 1982) (quoting Restatement (Second) of Judgments 27 comment e (1982) (stating that judgment entered by default does not constitute an issue actually litigated and therefore subject to collateral estoppel effect). It is unclear what impact, if any, the judgment had on the Commission's decision. In any event, the fraud found by the court in the civil action pertained to appellant's failure to disclose the lack of a certificate of occupancy, and not any representation or omission in the contract of sale or the letter to the mortgage lender.

We do affirm the Commission's conclusion that appellant misrepresented the property in the contract. However, some additional comment is appropriate. The statement in the contract that the property was a "mother/daughter type of house," read in isolation, may have been deemed to describe accurately the configuration of the house when the contract was drafted. However, that descriptive statement was amplified by the additional statement that the "lower level could be occup[ied] . . . as soon as possible." That additional statement about potential use was false, inasmuch as the lower level could not be occupied according to the DEP permit.4

As noted above, there was no direct evidence in the record, and no finding by the Commission, that appellant was aware of the limitation, or the falsity of the statement in the contract. We are also unaware of a Commission regulation or case applying N.J.S.A.45:15-17(a) that expressly construes "substantial misrepresentation" to encompass false statements of fact where the licensee has no knowledge of the falsity, and no intention that the person rely. Cf.Maple Hill Farms, Inc. v. Div. of N.J. Real Estate Comm'n, supra, 67 N.J. Super.at 229-30 (construing "false promises" in N.J.S.A.45:15-17(a) to require a false statement of a present state of mind with the intention not to follow through).

However, given the remedial purpose of the Real Estate License Act, we perceive no error in the Commission applying N.J.S.A.45:15-17(a) to cover a licensee's affirmative misrepresentation, even absent proof or a finding that the licensee knew the statement was false or intended to deceive another. Cf.Ellsworth Dobbs, Inc. v. Johnson, 50 N.J.528, 553 (1967) (stating the Real Estate License Act is designed to protect the public from "fraud, incompetence, misinterpretation, sharp or unconscionable practice"); In re Pipes, supra, 329 N.J. Super.at 396-97 (affording strong presumption of reasonableness to Commission's rulemaking given Commission's expertise and public interest in regulations to protect the public).

Concepts of equitable fraud do not require knowledge of falsity and intent to obtain an unfair advantage. Jewish Ctr. of Sussex Cnty. v. Whale, 86 N.J.619, 624-25 (1981) (distinguishing between concepts of legal and equitable fraud). We are also mindful that real estate professionals are already held accountable for misrepresentations, made without knowledge of their falsity or intent to deceive, under the Consumer Fraud Act. N.J.S.A.56:8-2; see, e.g., Vagias v. Woodmont Properties, L.L.C., 384 N.J. Super. 129, 131-32 (App. Div. 2006) (in reliance on seller's representations, licensee misrepresents neighborhood and elementary school that would serve homebuyers' child, not knowing that the representation was false); Ji v. Palmer, 333 N.J. Super. 451, 462 (App. Div. 2000) (licensee misrepresents adequacy of certificate of occupancy, in lieu of certificate of land use, not knowing that a multi-family dwelling violated zoning ordinance).5

As for the Commission's fifth conclusion, we affirm with the exception of the finding that appellant "did not disclose . . . the source of her compensation" in violation of N.J.A.C. 11:5-7.1(d). Where a licensee has prepared a contract, as appellant did in this case, the regulation requires the licensee to make "full written disclosure of the agency relationship and of the compensation arrangement" to both parties to the transaction. N.J.A.C. 11:5-7.1(d). The contract of sale, which the Buyers executed, did not fully disclose the nature of appellant's agency relationship, but it did clearly state that appellant was to receive a six percent commission, plus a $1200 bonus, from the seller. Consequently, the Commission's fifth conclusion is unsupported in part by the evidence.

In light of the Commission's findings of significant violations of duty that we have affirmed, we find no error in the Commission's determination to revoke appellant's license. However, we remand to the Commission to reconsider the duration of the revocation, and the amount of the monetary penalty. Although the Commission is free to impose a single monetary penalty for multiple violations, the matter must be remanded for reconsideration of the appropriate penalty when not all of those violations are affirmed. Maple Hill Farms, Inc. v. Div. of N.J. Real Estate Comm n, supra, 67 N.J. Super. at 233-34.

In particular, the Commission found in support of its imposition of a $25,000 fine that appellant acted in "bad faith" in making the misrepresentations. The Commission relied on Kimmelman v. Henkels & McCoy, Inc., 108 N.J. 123, 137 (1987), which held that among the factors that a court should consider in setting a civil penalty for violation of Antitrust Act is the defendant's good or bad faith, including whether "defendant could have reasonably believed his conduct was legal." However, the Commission made no finding that appellant knowingly or willfully made false statements, or made them with the intention that the Buyers detrimentally rely on them. The Commission should therefore reconsider whether the "bad faith" factor applies in this case.

Affirmed in part, reversed and remanded in part.

1 The court in the civil action considered a rider to the contract of sale, which was not part of the record before the Commission, that required the seller to obtain the certificate of occupancy and smoke and carbon monoxide certificates.

2 For convenience, we will refer to these numbered conclusions as Conclusion 1, Conclusion 2 and so on.

3 We note that respondent does not challenge the Commission's decision to conduct the hearing in her absence, treating her failure to appear as voluntary.

4 Had it been permissible to occupy the first level, then the falsity of the statement that the house was a "mother/daughter type" would not be so clear. Although the Buyers sought a two-family house, conceivably, "mother/daughter type of house" might be deemed to accurately describe a house with two levels, with separate kitchens, baths, and bedrooms in each, to accommodate separate living quarters, with internal access between the mother's and daughter's quarters.

5 Where a licensee was not aware, but should have been aware of the falsity of his or her statement, the conduct, apparently, would also be encompassed by N.J.S.A. 45:15-17(e), which prohibits "unworthiness" and "incompetency" among other kinds of conduct. The Commission made such a determination in its second numbered conclusion set forth above. Alternatively, unknowingly making a false statement could constitute a violation of N.J.A.C. 11:5-6.4(b) (requiring a licensee to "make reasonable effort to ascertain all material information concerning the physical condition of every property"), or N.J.A.C. 11:5-6.4(c) (requiring a licensee to "disclose all information material to the physical condition of any property which they know or which a reasonable effort to ascertain such information would have revealed").