PDF copy: ALJDEC decisions subject to certification as final

21F-095-REL-RES · Department of Real Estate · 2022-01-21

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of the Real Estate No. 21F-095-REL-RES Salesperson's License of: ADMINISTRATIVE LAW JUDGE COREY, WILLIAM S., holder of License No. DECISION SA672403000, Respondent.

HEARING: November 4, 2021 APPEARANCES: Daniel L. Kloberdanz, Esq. represented William S. Corey. Assistant Attorney General Holly Wan represented the Arizona Department of Real Estate. ADMINISTRATIVE LAW JUDGE: Kay Abramsohn _____________________________________________________________________ FINDINGS OF FACT 1. On June 5, 2017, the Arizona Department of Real Estate (“Department”) issued Real Estate Sales Person License No. SA672403000 to William S. Corey (“Respondent”). That licensure expired on June 30, 2021. 2. Since December 22, 2016, Respondent has been the Managing Member of WSC Capital LLC (“WSC”); he is also the statutory agent. The only other member is WSC Holdings LLC. WSC is an investment company that remodels properties and also purchases, sells, and/or rents properties to other investors, buyers, or tenants with an intent to make a profit. 3. Active since February 26, 2014, Phoenix Wholesale Homes LLC (“Phoenix Wholesale”) is managed by John Bowersock; its only member is Bumpy Investments LLC. Phoenix Wholesale Homes LLC is an investment company that remodels properties and also purchases, sells, and/or rents properties to other investors, buyers, or tenants with an intent to make a profit. 4. Respondent was associated with Homesmart from March 18, 2020 to July 7, 2020. Just prior to that employment, in March of 2020, in fulfillment of his continuing education requirements, Respondent completed several courses, including ones entitled “Top 10 Disclosures” and “Code of Ethics with Case Studies.”1 5. Respondent was associated with Prestige Realty from June 7, 2017 through December 28, 2018. The Department’s records document that in June of 2017, when Respondent was first licensed, he had completed a continuing education course in “Intro to Contract Writing.”2 6. Between June 25, 2020 and July 22, 2020, the Department received three consumer complaints regarding transactions involving Respondent. Each consumer complaint dealt with the recording of liens by WSC and/or Respondent that subsequently prevented those property owners from selling their properties.3 7. In its investigation of the consumer complaints, the Department’s investigator located twenty-four (24) purchase contracts, during the period from March 2019 through June 2020, in which WSC and Phoenix Wholesale were the buyers.4 In those 24 purchase contracts, Respondent had not disclosed his real estate licensure status, despite his licensure being active from March 18, 2020 through June of 2020. 8. In its investigation, the Department’s investigator also located two (2) purchase contracts, executed in September and October of 2018, in which WSC and Phoenix Wholesale were the buyers.5 In those purchase contracts, Provision #19 in each of the contracts provided, among other items, the following disclosure: “One or more members of either LLC is a licensed realtor in Arizona.” At the time of these contracts, Respondent’s licensure was active; he was associated with Prestige Realty. 9. By letter dated August 7, 2020, the Department requested that Respondent provide a written statement explaining his failure to have disclosed his real estate licensure status in contracts.

See Exhibit 1. While the curriculum of those courses is not contained in the hearing record, it may be presumed that at least the course entitled “Top 10 Disclosures” contained information related to requisite disclosures. 2 Id. While the curriculum of this course is not contained in the hearing record, it must be presumed that this course contained information related to requisite contract provisions. 3 To the Department’s knowledge, two of the three matters were resolved between the parties. See Exhibit 4 (Listing and 9 demonstrative samples). 5 See Exhibit 7 and Exhibit 8. 2 10. By letter dated August 8, 2020, Respondent indicated that he “simply did not know [he] had to have something in writing” in his proprietary contracts disclosing his real estate salesperson status.6 Respondent further indicated that his belief was that such disclosure had to be done when using an AAR contract but that when he used his proprietary contracts he could rely on verbally disclosing. Respondent stated that he should have done more research about disclosures and stated: If you allow me to continue to keep my license I will from now on ALWAYS include a disclosure in my proprietary contracts going forward and will always make sure I am properly disclosing to the public and consumers/clients.7

11. In its further investigation, the Department’s investigator located multiple purchase contracts, all dated subsequent to August 8, 2020, in which WSC and Phoenix Wholesale were the buyers and Respondent had not disclosed his real estate licensure

status.8

12. In correspondence with the Department dated June 15, 2021, Respondent

indicated that he believed that the licensure status disclosure only had to be done when

his license was active and he would be performing real estate practices, further indicating

that his license had been inactive “for some time” when he provided the August 8, 2020

explanation.9 Respondent again indicated that he should not have made assumptions

and should have sought out the answers.

13. On September 14, 2021, the Department issued its Notice of Hearing and Complaint notifying Respondent of an administrative hearing and the need to file a written Answer. The Department’s position is that grounds exist to suspend or revoke Respondent’s real estate salesperson’s license based on the alleged violations of A.R.S.

See Exhibit 6. 7 There is no indication that Respondent reached out to the Department for any clarification on the matter of disclosures, whether active or inactive. 8 See Exhibit 9 (Listing and 4 demonstrative samples). The date range of these contracts is from November 30, 2020 to April 1, 2021. On August 8, 2020, Respondent had only been inactive for one month, since July 7, 2020. 3 §§ 32-2153(A)(3),10 (A)(22), (B)(7),11 (B)(8), and A.A.C. R4-28-1101(A)12 and R4-28- 1101(E)(1).13 14. On September 20, 2021, Respondent filed his Answer disputing the allegations of violations and arguing that the WSC contract transactions were not performed in the manner of a “real estate salesperson” as defined in A.R.S. § 32-2101(51) and “real estate broker” as defined in A.R.S. § 32-2101(49). Respondent argued that the

A.R.S. § 32-2153(A)(3) provides, in pertinent part, as follows: A. The commissioner may suspend or revoke a license, deny the issuance of a license, issue a letter of concern to a licensee, issue a provisional license or deny the renewal or the right of renewal of a license issued under this chapter if it appears that the holder or applicant, 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. … 22. Demonstrated negligence in performing any act for which a license is required. A.R.S. § 32-2153(B) provides, in pertinent part, as follows: B. The commissioner may suspend or revoke a license, deny the issuance of a license, issue a letter of concern to a licensee, issue a provisional license or deny the renewal or the right of renewal of a license issued under this chapter when it appears that the holder or applicant has: .... 7. Not shown that the holder or applicant is a person of honesty, truthfulness and good character. 8. Demonstrated incompetence to perform any duty or requirement of a licensee under or arising from this chapter. For the purposes of this paragraph, "incompetence" means a lack of basic knowledge or skill appropriate to the type of license the person holds or a failure to appreciate the probable consequences of the licensee's action or inaction... 12 A.A.C. R4-28-1101(A) provides, in pertinent part, as follows: A. A licensee owes a fiduciary duty to the client and shall protect and promote the client’s interests. The licensee shall also deal fairly with all other parties to a transaction.

A.A.C. R4-28-1101(E)(1) provides, in pertinent part, as follows: E. A real estate salesperson or broker shall not act directly or indirectly in a transaction without informing the other parties in the transaction, in writing and before the parties enter any binding agreement, of a present or prospective interest or conflict in the transaction, including that the: 1. Salesperson or broker has a license and is acting as a principal… 4 Department wrongfully refused to accept Respondent’s voluntary surrender of his license pursuant to A.R.S. § 32-2157(A) despite the Department’s authority to proceed with disciplinary proceedings under A.R.S. § 32-2153. Finally, Respondent argued that A.A.C. R4-28-1101(E), and any duty to disclose real estate licensure status, does not apply to the WSC contract transactions because Respondent was not acting as a real estate salesperson in those transactions. 15. The matter was not resolved informally by the parties and was subsequently referred to the Arizona Office of Administrative Hearings for an administrative hearing. 16. At the hearing, Respondent testified that, in the WSC transactions, he was only the Principal and was not acting as a real estate sales person; he indicated he never represented any of the parties in the WSC transaction contracts. Respondent stated that, for each WSC transaction, when the contract was ready to be executed, either he or John [Phoenix Wholesale] would call the seller and walk through the contract provisions.14

Respondent indicated that the proprietary contract language simply changed over time

as they learned from various issues that existed in their business. Respondent testified

that he never really used his license or practiced as a real estate agent and had only

obtained the licensure to assist his sister with buying a home. 17. Respondent’s position is that A.A.C. R4-28-1101(E) does not apply to the WSC contract transactions because Respondent was not acting as a statutorily-defined real estate salesperson in those transactions. Respondent agreed that he had been acting as the Principal for WSC in those contract transactions and that the evidentiary facts are not in dispute but argued he had not been dishonest but simply inadvertently failed to disclose the licensure status. 18. The Department’s position is that A.A.C. R4-28-1101(A) and R4-28- 1101(E)(1), calling for disclosure of licensure status, apply to any real estate transaction

14 In response to the Administrative Law Judge’s question whether, when he walked someone through the contract, Respondent had “verbally” disclosed to the seller that he was licensed, Respondent indicated “no, I don’t think I did because I did not know I needed to.” 5 involving the licensed person to prevent conflicts of interest or the possibility of taking advantage of consumers due to the likely circumstances of the licensed person having more knowledge in the situation. The Department argued that Respondent was reckless or negligent in picking and choosing when to comply with the rules on disclosure, having disclosed in his early proprietary contracts in 2018 but then not disclosing in 2019 and 2020 and continuing not to disclose after he advised the Department he would disclose. The Department argued that such actions demonstrate Respondent’s failure and/or refusal to be regulated, for which actions his licensure should be revoked and a civil penalty in the amount of $12,000.00 should be imposed. CONCLUSIONS OF LAW 1. Pursuant to A.R.S. Title 32, Chapter 20, the Commissioner has jurisdiction over Respondent and the subject matter in this case. The Arizona legislature has charged the Department with protecting the public and consumers who deal with licensed salespersons when it issues licenses. 2. Pursuant to A.R.S. §32-2153, the Commissioner has authority to deny, suspend, or revoke the real estate license of a broker or salesperson for violations of statutes and rules. 3. Pursuant to A.R.S. §32-2160.01, the Commissioner has authority to assess a civil penalty up to $1,000.00 per violation of the real estate laws and rules. 4. Pursuant to A.R.S. §41-1092.07(G)(2) and A.A.C. R2-19-119(B), the Department has the burden of proof in this matter. The standard of proof is by a preponderance of the evidence. See A.A.C. R2-19-119(A). 5. 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).

6. The evidence of record established that, in multiple purchase contract transactions, Respondent failed to deal fairly with all parties to those transactions in failing to disclose his real estate licensure status prior to the execution of the purchase contract, in violation of both A.A.C. R4-28-1101(A) and R4-28-1101(E)(1). 6 7. The evidence of record established that Respondent demonstrated incompetence in performance of requirements of licensees, in violation of A.R.S. § 32- 2153(B)(8). 8. The evidence of record established that Respondent disregarded or violated rules adopted by the Commissioner, in violation of A.R.S. §32-2153(A)(3). 9. The Department has established it has grounds to revoke Respondent’s license pursuant to A.R.S. § 32-2153(A)(3), (B)(8), A.A.C. R4-28-1101(A), and A.A.C. R4- 28-1101(E)(1) as well as issue a civil penalty of $6,000.00 pursuant A.R.S. § 32-2160.01. RECOMMENDED ORDER IT IS ORDERED revoking William S. Corey’s License No. SA672403000, and issuing a $6,000.00 civil penalty. 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 24, 2021.

/s/ Kay A. Abramsohn Administrative Law Judge

Transmitted electronically to: Louis Dettorre, Commissioner Arizona Department of Real Estate

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