ALJDEC decisions subject to certification as final

10F-DI-725-REL · Department of Real Estate · 2011-11-22

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: November 2, 2011 APPEARANCES: Assistant Attorney General Lynette Evans for the Arizona Department of Real Estate; Rose Strom did not appear at the hearing ADMINISTRATIVE LAW JUDGE: Lewis D. Kowal _____________________________________________________________________ FINDINGS OF FACT 1. The Arizona Department of Real Estate (“Department”) issued a Notice of Hearing and Complaint on July 26, 2011 (“Notice of Hearing”), setting an administrative hearing to be held with the Office of Administrative Hearings. 2. The Notice of Hearing contained allegations regarding the conduct of Rose Strom (“Respondent”) that the Department claimed were violations of the Arizona real estate laws. Through the administrative hearing process, the Department sought to have Respondent’s real estate broker’s license revoked and to impose a civil penalty of not more than $1,000.00 for each violation of the State’s real estate laws. 3. The Commissioner of the Department (“Commissioner”) has issued Findings of Fact, Conclusions of Law and Order deeming admitted the allegations set forth in the Notice of Hearing, and revoked Respondent’s real estate broker’s license. 4. Linda Bevins (“Ms. Bevins”), a Senior Investigator with the Department, testified that as a result of a complaint having been filed with the Department against Respondent, the Department conducted an investigation of Respondent’s activities. In addition, the Department conducted an audit of Respondent’s property management business and requested that Respondent produce documents required to be maintained for such business. 5. Ms. Bevins testified that Respondent’s conduct, as found by the Commissioner pursuant to the allegations in the Notice of Hearing deemed admitted, constituted violations involving Respondent’s: (i) Failing to produce all the documents requested by the Department during the course its investigation and audit; (ii) Failing to remit funds that she obtained on behalf of a client to the client; (iii) Not having clear, unambiguous language in property management agreements in that they lacked automatic renewal provisions; (iv) Not having clear, unambiguous language in property management agreements in that they did not contain assignment clauses; (v) Failing to maintain the requisite 24 CE hours within a 24 month licensure period; and (vi) Failing to complete a Broker Management Clinic within a 24 month period of licensure. 6. Ms. Bevins further testified that, pursuant to a subpoena, Respondent appeared at the Department for an interview and did not provide an excuse for failing to remit funds to a client. Respondent stated that she did not like the property management business and was depressed. Although Respondent produced some documents that were requested by the Department, she produced incomplete property management agreements and a number of them lacked specific provisions required by law. Respondent did not produce all property management agreements, remittance checks or reconciliation reports. 7. Vicky Rokkos (“Ms. Rokkos”), Business Services Manager with the Department, testified that at all times relevant to this matter, the Department required licensees (“licensees”) to complete 24 hours of CE every two years. 8. There was no showing that Respondent obtained a waiver of the CE requirements from the Commissioner. 9. Respondent did not appear at the hearing and did not present any evidence to refute or rebut the evidence or legal argument presented in support of the imposition of civil penalties in this matter.

CONCLUSIONS OF LAW 1. Because this matter is disciplinary in nature, the Department has the burden of proof. The standard of proof on all issues is by a preponderance of the evidence. See A.A.C. R2-19-119. 2. A preponderance of the evidence is “such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, Arizona Law of Evidence § 5 (1960). It is “evidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.” Black’s Law Dictionary 1182 (6th ed. 1990). 3. The Department failed to prove by a preponderance of the evidence that Respondent violated A.R.S. § 32-2173(A)(2)(a) –failing to write property management agreements in clear, unambiguous language because Respondent failed to contain an automatic renewal provision. That provision provides that an automatic renewal provision may be in a property management agreement if the property management firm sends the owner a reminder notice at least thirty days before the renewal date. However, the Notice of Hearing did not contain an allegation that Respondent sent reminder notices to her client property owners at least thirty days before the renewal date of the agreements and, even if she did, the automatic renewal provision is permissive not mandatory. Therefore, no violation of A.R.S. § 32-2173(A)(2)(a) is found to exist. 4. The Department established by a preponderance of the evidence that Respondent’s conduct, as determined by the Commissioner, constituted acts in violation of the following statutes: (i) A.R.S. § 32-2153(A)(17)-failing to produce records to the Department for inspection that were required to be maintained; (ii) A.R.S. § 32-2173(A)(1)(j)-failing to ensure that the property management agreements not be assigned to another licensee or licensed entity without the express written consent of the property owner; (iii) A.R.S. § 32-2130(A)-failing to obtain 24 credit hours of CE within a month period of licensure; (iv) A.R.S. § 32-2136(C)- failing to attend a Broker Management Clinic during a 24 month period of licensure; and (v) A.R.S. § 32-2153(A)(3)-a violation of any Department statute or rule. 5. The Department contended, as set forth above, that Respondent violated six statutes and sought the imposition of civil penalties totaling $6,000.00. The Administrative Law Judge finds that the Department proved by a preponderance of the evidence that Respondent violated five of the above-mentioned statutes. 6. The Administrative Law Judge finds that the particular acts that the Department relied upon in support of finding that Respondent violated A.R.S. § 32-2153(A)(3)) are the same that supported the violations set forth in Conclusions of Law, paragraph 4, items (i)-(iv). 7. The Administrative Law Judge concludes that if violations of A.R.S. § 32-2153(A)(3) are considered in determining the amount of civil penalty to be imposed, that would, in effect, be fining the Respondent twice for the same act, once, for the commission of the violations set forth in Conclusions of Law, paragraph 4, items (i)-(iv), and second, for the acts falling under the provisions of A.R.S. § 32-2153(A)(3). 8. The Administrative Law Judge concludes that for civil penalty purposes, there are 4 violations of law, those set forth in Conclusions of Law, paragraph 4, items (i)-(iv), that constitute grounds for the imposition of a civil penalty not to exceed $1,000.00 per violation. See A.R.S. § 32-2160.01. 9. The Administrative Law Judge concludes that the nature and number of Respondent’s violations of law warrant the imposition of a $4,000.00 civil penalty. The Department’s request that the civil penalty be paid within 60 days of the effective date of the Order entered in this matter is found to be reasonable. ORDER Within 60 days of the effective date of the Order entered in this matter, Respondent shall pay to the Department a civil penalty in the amount of $4,000.00.

In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be 5 days from the date of that certification.

Done this day, November 22, 2011.

/s/ Lewis D. Kowal Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner Arizona Department of Real Estate

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Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826