ALJDEC decisions subject to certification as final

22F-361-REL · Department of Real Estate · 2022-09-21

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of the Real Estate License of:

WARD, SCOTT, holder of License No. BR006473000,

Respondent

No. 22F-361-REL

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: August 24, 2022

APPEARANCES: Scott Ward (“Respondent”) appeared, representing himself. James Rolstead, Assistant Attorney General, represented the Arizona Department of Real Estate (“Department”).

ADMINISTRATIVE LAW JUDGE: Kay A. Abramsohn

_____________________________________________________________________

FINDINGS OF FACT

Since September 30, 1985, Respondent has held Real Estate Broker License BR006473000; the license is set to expire on March 30, 2023.

Respondent is the owner and designated broker of Ward Real Estate Development LLC (“WRED”).

On February 7, 2022, the Department received an investigation request/complaint (“Complaint”) from S. Sternberg Enterprises Inc. (“SSE”) regarding a 6,67 acre parcel [Maricopa County Assessor’s Parcel No. 300-16-024R] (“Parcel”) located at 24th Drive and Dobbins Road in Phoenix (“the Property”).

The Property is/was owned by 7505/7517 North 69th Avenue, LLC (“7505”). Susan Gilman and Alexander James Gilman are the only members of 7505.

SSE held an option to purchase the Property and has/was acting as a developer of the Property.

In the Complaint, SSE alleged that Respondent: (a) listed the Property on the commercial property listing service CoStar without either SSE’s or 7505’s knowledge or authorization; (b) held himself out as the “exclusive” marketing agent for the Property in the absence of any active listing for the Property; and (c) repeatedly provided false or misleading information regarding the CoStar listing.

In the Complaint, SSE indicated that sewer connection issues have prevented completion of subdivision plans for the Property and that those sewer connection issues were ongoing (i.e., not resolved).

In October of 2018, SSE and WRED had entered into a written Commission Agreement (“Agreement”) for a stated 90-day “Listing Period” time frame of October 18, 2018 through January 13, 2019 regarding obtaining an offer to purchase the Property. The Agreement did not provide that WRED had an “exclusive” listing on the Property.

Term #1 indicated that listed price was “$1,640,000.00.”

Term #3 of the Agreement stated that WRED was permitted to advertise the Property and place a for sale sign on the Property during the Listing Period.

Term #4, included a provision stating, in pertinent part:

If an offer is received during the Listing Period and Seller and the offeror enter into an agreement for the sale and purchase of the Property with six months after the end of the Listing Period, Broker shall receive its commission (conditioned on closing of the sale). The commission shall be paid even if the closing of the sale occurs after the Listing Period.

Term #7 specified that the Agreement constituted “the entire agreement between the parties” and superseded any prior verbal or written agreements.

SSE and WRED did not enter into either an extension of the Agreement or any other written agreement after January 13, 2019.

On April 12, 2021, Respondent had requested that SSE execute another listing agreement; however, SSE refused that request.

In the Complaint, SSE indicated that, on October 26, 2019, SSE learned of a CoStar listing on the Property wherein Respondent was holding himself out to be the “exclusive” agent for the Property.

CoStar records regarding the listing reflect the following actions taken by Respondent:

On September 3, 2020, The Property was listed.

On October 16, 2020, a marketing brochure was added.

On February 7, 2021, the listing was updated to show the Property in escrow.

On July 12, 2021, the price was updated to $2,772.00.00.

On August 30, 2021, the price was updated to $2,800.000.00.

On November 22, 2021, CoStar removed the listing at the request of 7505.

By letter dated November 24, 2021, SSE notified Respondent to cease and desist from holding himself, or WRED, out as having the authority to act as an agent or broker with regard to SSE or 7505 and the Property.

By letter dated February 15, 2022, the Department contacted Respondent regarding the Complaint and sought his statement and “any and all” documentation regarding the matter.

On February 28, 2022, Respondent filed a written statement outlining a historical perspective on his involvement with SSE and the Property.

On March 3, 2021, the Department reached out to Respondent with specific questions: (a) whether he had written consent from the owner to list the Property on CoStar after January 19, 2019; (b) whether there were any other written agreements; and (c) whether there was anything in writing about changing the CoStar listing price.

While Respondent replied the same day, he indicated he had multiple emails from Mr. Sternberg and Ms. Gilman and would have to get back to the Department “early next week.” In his response, Respondent also stated “I will check” and “I know I got approval over the phone.” Respondent did not subsequently provide such information or emails to the Department.

The mater was not resolved informally by the parties and the Department subsequently referred the matter for administrative hearing.

At hearing, Respondent argued that the Agreement was really more than an agreement based on his past employment with Mr. Sternberg, his ongoing relationship as to Property, and his ongoing efforts/responsibility to resolve the sewer connection issues and find a buyer for SSE.

In his February 28, 2022 letter to the Department, Respondent described the Agreement as an “Exclusive Right to Sell” Listing Agreement. Respondent wrote that he had found a buyer in April of 2021 and that SSE and 7505 would not give the deal more time to be completed.

In his February 28, 2022, letter to the Department, Respondent wrote that he met with Mr. Sternberg and Ms. Gilman on November 15, 2021 regarding efforts to settle [matters regarding the Property] and continue to have the Property project happen. Therein, Respondent presented the argument that they would not have sent him a cease and desist letter if they had not had an ongoing agreement.

The Department’s position is that grounds exist to suspend or revoke Respondent’s license for the reasons that Respondent is in violation of applicable statue and rule, as noticed on May 18, 2022:

through Respondent’s acts and conduct of authorizing or aiding in publication, advertisement or circulation of false or misleading statement or representation concerning Respondent’s business or any land offered for sale in violation of A.R.S. § 32-2153(A)(4);

through negligent actions in the performance of an act for which the license is required in violation of A.R.S. § 32-2153(A)(22);

through substantial misrepresentation in violation of A.R.S. § 32-2153(B)(3).

The Department argued that the evidence demonstrated that Respondent was in violation of statute with regard to his various actions and, on that basis, and pursuant to A.R.S. § 32-2160.01, the Department has authority to assess civil penalties up to one thousand per violation.

CONCLUSIONS OF LAW

The Department bears the responsibility to protect the public through its enforcement of licensing statutes. This matter lies within its jurisdiction.

The Department bears the burden of proof to establish cause to discipline Respondent’s license and any factors in aggravation of any penalty to be imposed by a preponderance of the evidence. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” 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.”

A.R.S. § 32-2153 provides as follows:

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:

. . . .

Knowingly authorized, directed, connived at or aided in the publication, advertisement, distribution or circulation of any material false or misleading statement or representation concerning the licensee's business or any land, cemetery property, subdivision or membership campground or camping contract offered for sale in this or any other state.

. . . .

22. Demonstrated negligence in performing any act for which a license is required.

. . . .

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

. . . .

3. Made any substantial misrepresentation.

The hearing record established that Respondent performed acts and conduct as were stated in the complaint, and as investigated, and to the extent he admitted at hearing. Therefore, while Respondent demonstrated a continued dedication to the Property and to efforts to market the Property, the hearing record clearly demonstrated that, after January 19, 2019, Respondent had no written agreement with SSE or 7505 for any listing, let alone an “exclusive listing,” and, further, had no authorization to list the Property on CoStar.

The Department thereby established cause to discipline Respondent’s real estate licensure under A.R.S. § 32-2153(A) and (B).

The Department is charged with protecting the public and consumers who deal with licensees. The Department’s concern in this case is understandable in that Respondent took unauthorized actions and made false representations for the purpose of obtaining a commission on a purported sale transaction for the Property.

Based on the hearing record, the Administrative Law Judge concludes that the Department’s determination to impose a civil penalty is appropriate as disciplinary action based on this licensee’s actions. Based on the evidence of record, the Administrative Law Judge concludes that the Department’s proposed civil penalty of $3,000.00 is appropriate in this matter.

RECOMMENDED ORDER

The Commissioner shall impose a civil penalty of $3,000.00, the payment of which is due 30 days after the date of the Commissioner’s final order, and after which, if unpaid, Respondent’s License BR006473000 shall be suspended until the penalty is paid.

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, September 21, 2022.

/s/ Kay Abramsohn

Administrative Law Judge

Transmitted electronically to:

Louis Dettorre, Commissioner

Arizona Department of Real Estate

By Miranda Alvarez

Legal Secretary