ALJDEC decisions subject to certification as final

18F-DI-345-REL-RES · Department of Real Estate · 2018-11-20

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: November 7, 2018, at 1:00 p.m. APPEARANCES: The Arizona Department of Real Estate (“the Department”) was represented by Deian Ousounov, Esq., Assistant Attorney General; James B. Thornton (“Respondent”) appeared telephonically on his own behalf. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Procedural Background 1. The Department is the duly constituted authority for licensing and regulating real estate salespersons and brokers in Arizona. 2. On or about December 18, 2009, the Department issued Real Estate Salesperson License No. SA634613000 to Respondent. That license will expire on December 31, 2019.[1] 3. On or about September 12, 2016, Respondent was indicted for Fraudulent Schemes and Artifices, a Class 2 felony, Theft, a Class 2 felony, and Forgery, a Class 3 felony, in Maricopa County Superior Court Case No. CR 2016-005397-001.[2] 4. On or about April 23, 2018, after a trial and a finding by a jury that Respondent was guilty of Fraudulent Schemes and Theft in Case No. CR 2016-005397-001, Respondent was sentenced to serve three years in prison, to pay restitution in amounts not to exceed $540,000.00 and $99,999.00, and, following his release from prison, to six months’ probation.[3] 5. Respondent did not report to the Department that he had been convicted of two felonies. 6. On April 24, 2018, Respondent was moved from the Maricopa County Jail and became an inmate in the Arizona Department of Corrections’ Safford facility to begin his sentence.[4] 7. On May 10, 2018, the Department’s Commissioner issued an order summarily suspending Respondent’s License No. SA634613000 under A.R.S. §§ 32-2153 and 32-2157, finding that “the public health, safety, and welfare require[d] emergency action.”[5] 8. Respondent did not file an appeal or request a hearing on the summary suspension. 9. On or about September 19, 2018, the Department issued a Notice of Hearing and Complaint, alleging cause to revoke Respondent’s License No. SA634613000 under A.R.S. §§ 32-2153(A)(3), 32- 2153(B)(2), 32-2153(B)(5), 32-2153(B)(7), and 32-2153(B)(10) and A.A.C. R4-28-303(D). 10. The Department’s Notice of Hearing and Complaint also set an evidentiary hearing before the Office of Administrative Hearings (“OAH”), an independent state agency, on November 7, 2018, at 1:00 p.m. 11. On November 7, 2018, a hearing was held. The Department submitted five exhibits and presented the testimony of its Senior Investigator, Brandon Stuart. Respondent testified telephonically on his own behalf. Hearing Evidence 12. Mr. Stuart provided foundation for the Department’s exhibits. He testified that because Arizona statute requires that if a real estate licensee is incarcerated or is on probation for a felony conviction, the Department cannot renew his license, Respondent cannot renew his license before it is set to expire on December 31, 2019. 13. Mr. Stuart testified that a licensee must notify the Department of a felony conviction within ten days. He must also notify the Department of any other change in circumstances, such as a change of address. 14. Mr. Stuart testified that Respondent’s convictions of Fraudulent Schemes and Artifices and Theft arose from his representation of a friend on a short sale of the friend’s house.[6] Mr. Stuart testified that Respondent failed to convey two higher offers to the mortgage lender before accepting his parents’ offer, which resulted in a windfall to Respondent of $600,000.00. Respondent also removed items from the house to lower its value. Mr. Stuart testified that the felonies occurred while Respondent was representing someone in a real estate transaction. 15. Mr. Stuart testified that Respondent has been convicted of felonies that involve fraud and dishonest dealings. The Department considers a licensee’s overall character and Respondent’s criminal convictions raise concerns about his poor character, truthfulness, and honesty. 16. Mr. Stuart testified that Arizona law requires real estate salespersons to treat all parties to a transaction fairly. In a normal sale, the seller would take a shortfall in a sales price, but in a short sale, the mortgage lender takes the shortfall. 17. Respondent testified that most real estate salespersons would be horrified by the Department position that a real estate salesperson must violate his client’s and a property owner’s trust by conveying competing offers to a third-party mortgage lender. His attorney has filed an appeal and he expects the Department to reinstate his license after the appeal is successful in overturning the jury’s verdict. 18. Respondent testified that he is not currently engaged in any activities that require a real estate license. / / / / CONCLUSIONS OF LAW Pursuant to A.R.S. § 32-2153(E), the suspension of a license by an order of the Commissioner shall not deprive the Commissioner of the jurisdiction to proceed with any investigation of or disciplinary proceeding against the licensee. The Department has jurisdiction over Respondent and the subject matter in this case.[7] The Department bears the burden of proof to establish cause to discipline Respondent’s license and factors in aggravation of any penalty to be imposed by a preponderance of the evidence.[8] Respondent bears the burden to establish affirmative defenses and factors in mitigation of the penalty by the same evidentiary standard.[9] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[10] A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”[11] In Arizona, an appeal from an adverse judgment does not suspend the effect of the judgment.[12] Unless and until Respondent’s criminal convictions are reversed on appeal, the Department may discipline his real estate salesperson’s license based on his convictions. A.R.S. § 32-2153 provides as follows: 32-2153. Grounds for denial, suspension or revocation of licenses . . . .

A. The commissioner may suspend or revoke a license . . . issued under this chapter if it appears that the holder . . . , within five years immediately preceding, in the performance of or attempt to perform any acts authorized by the license or by this chapter, has: . . . .

3. Disregarded or violated any of the provisions of this chapter or any rules adopted by the commissioner. . . . .

B. The commissioner may suspend or revoke a license . . . issued under this chapter when it appears that the holder . . . has: . . . .

2. Been convicted in a court of competent jurisdiction in this or any other state of a felony or of any crime of forgery, theft, extortion, conspiracy to defraud, a crime of moral turpitude or any other like offense. . . . .

5. Been guilty of any conduct, whether of the same or a different character than specified in this section, which constitutes fraud or dishonest dealings. . . . .

7. Not shown that the holder or applicant is a person of honesty, truthfulness and good character. . . . .

10. Violated any federal or state law, regulation or rule that relates to real estate or securities or that involves forgery, theft, extortion, fraud, substantial misrepresentation, dishonest dealings or violence against another person or failure to deal fairly with any party to a transaction that materially and adversely affected the transaction. This paragraph applies equally to violations of which the licensee was convicted in any lawful federal or state tribunal and to any admissions made in any settlement agreement by the licensee to violations.

Respondent has been convicted of Fraudulent Schemes and Artifices and Theft, which are both Class 2 felonies involving dishonesty, based on acts he committed while he was engaged as a licensed real estate salesperson. The Department established cause to discipline Respondent’s salesperson’s license under A.R.S. §§ 32-2153(B)(2), 32-2153(B)(5), 32-2153(B)(7), and 32- 2153(B)(10). A.A.C. R4-28-303(D)(1) provides in relevant part as follows: A salesperson or broker shall notify the Department in writing within 10 days of any change in the individual’s personal information or qualifications. The salesperson or broker shall include in the notice the individual’s name, signature, license number, and:

1. If disclosing information required under R4-28-301, such as a criminal conviction . . . , a written statement providing detailed information and, upon request by the Department, the supporting documentation identified in R4-28-301(A)(2).

The Department established that Respondent failed to notify the Department of his criminal convictions within ten days, furnishing additional cause to discipline his license under A.R.S. § 32-2153(A)(3). Respondent’s real estate salesperson’s license is currently suspended. He is not due to be released from prison until April 2021, and is not due to be released from probation until October 2021. He cannot renew his license before it is due to expire on December 31, 2019, under A.R.S. § 32- 2130(I).[13] Under the circumstances, revocation is appropriate. RECOMMENDED ORDER In view of the foregoing, IT IS ORDERED revoking Respondent James B. Thornton’s Real Estate Salesperson’s License Number SA634613000. 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 shall be five days from the date of the certification. / / / / Done this day, November 20, 2018.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner Arizona Department of Real Estate ----------------------- [1] See the Department’s Exhibit 1. [2] See the Department’s Exhibit 2. [3] See the Department’s Exhibit 3. [4] See the Department’s Exhibit 4. [5] The Department’s Exhibit 5. [6] “‘[S]hort sales means real estate transactions in which the sales price is insufficient to pay the loan encumbering the property in addition to the costs of sale and the seller is unable to pay the difference.” A.R.S. § 32- 2130(A). [7] See A.R.S. § 32-2153. [8] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A) and (B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [9] See A.A.C. R2-19-119(B)(2). [10] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [11] Black’s Law Dictionary at page 1220 (8th ed. 1999). [12] See Arizona Downs v. Superior Court, 178 Ariz. 73, 76, 623 P.2d 1229, 1232 (1981) (citations omitted). [13] A.R.S. § 32-2130(I) provides in relevant part as follows: The department shall not renew the license of a person who has been convicted of a felony offense and who is currently incarcerated for the conviction, paroled or under community supervision and under the supervision of a parole or community supervision officer or who is on probation as a result of the conviction. . . .

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Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826