ALJDEC

98A-H1973-REL · Department of Real Estate · 1998-12-04

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: December 3, 1998; 9:30 A.M.; Phoenix, Arizona APPEARANCES: Arizona Department of Real Estate: Moira A. McCarthy, Esq., Assistant Attorney General Respondent: Isaac R. Johnson ADMINISTRATIVE LAW JUDGE: George A. Schade, Jr.

The issues in this disciplinary proceeding are whether grounds exist to (1) revoke Respondent Isaac R. Johnson’s real estate broker’s license for violations of Arizona Revised Statutes (“A.R.S.”) §§ 32-2153(A)(3) and 32-2153(B)(1), -(B)(3), -(B)(5), -(B)(7), and -(B)(10), and (2) impose a civil penalty in the amount of $1,000.00 for each violation pursuant to A.R.S. § 32-2160.01. Based upon the evidence presented at the hearing, Administrative Law Judge George A. Schade, Jr. submits this Recommended Decision and Order to the Commissioner of the Arizona Department of Real Estate (“Commissioner”). FINDINGS OF FACT PROCEDURAL HISTORY 1. On October 19, 1998, the Director, Division of Administrative Actions, of the Arizona Department of Real Estate (“Department”) issued a Notice of Hearing and Complaint. Pursuant to A.R.S. ' 41-1092.01, the hearing was assigned to the Office of Administrative Hearings. 2. On November 3, 1998, Respondent Isaac R. Johnson filed an answer to the complaint. 3. On November 23, 1998, Mr. Johnson filed a motion to continue the hearing. The motion was denied on November 24, 1998. 4. On December 3, 1998, a hearing lasting 2.5 hours was held. The Department presented the testimony of Ms. Bonnie F. Carrillo, an Investigator of the Department, and submitted eleven exhibits. Mr. Johnson testified and presented the testimony of Ms. Callie G. Davies and submitted one exhibit. THE ALLEGATIONS 5. Paragraphs No. 1, 2, 3, 4 ,5, 6, 7, 9, and 10 of the Department’s Notice of Hearing issued on October 19, 1998, are adopted and are incorporated by reference. 6. The civil judgment entered against Mr. Johnson states in pertinent part: “3. With respect to counterclaimant’s claim concerning the property at 3037 East Clarendon, the Court finds:

(a) That the power of attorney given to defendant/counterclaimant by Isaac Johnson was improperly obtained, improperly notarized and not sufficiently explained to or understood by defendant/counterclaimant;

(b) The evidence of any underlying consideration for [Mr. Johnson] placing a lien on the defendant’s condominium is completely unsatisfactory;

(c) [Mr. Johnson] wrongfully borrowed money and thereafter placed a lien on defendant/counterclaimant’s condominium without his consent or authority.” Department’s Exhibit E, page 2.

7. Mr. Johnson testified he answered “No” to Question No. 5 on his March 7, 1997, Application for Renewal of Broker’s License because he had filed for bankruptcy four weeks after the Johnson v. Reed civil judgment had been entered against him in the Maricopa County Superior Court, and as the bankruptcy court had discharged the judgment debt in January, 1997, he did not believe he had to report the judgment. Moreover, he testified, he had initiated the litigation and not the defendant who ultimately prevailed on the counterclaim. This testimony is consistent with Mr. Johnson’s response to the Department’s inquiry in January, 1998, as to why he had answered “No” on Question No. 5 in light of the Johnson v. Reed civil judgment. In his response, Mr. Johnson stated: “Since the judgment had been discharged when I applied for the license renewal and since I was the one who filed the action in the judgment instead of it being filed against me I thought (sic) question number five on the application should be answered with a No.” Department’s Exhibit K, page 2.

8. The broker’s license renewal application Mr. Johnson filed on March 7, 1997, stated in bold letters at the introduction to the section which included Question No. 5: “IF YOU ARE UNCERTAIN ABOUT HOW TO ANSWER ANY OF THE FOLLOWING QUESTIONS, PLEASE REQUEST ASSISTANCE FROM THE DEPARTMENT.” Department’s Exhibit A, page 2. 9. Mr. Johnson did not request assistance from the Department as to how to answer Question No. 5 of his renewal application. 10. Mr. Johnson testified he has since learned that his “No” answer to Question No. 5 had been an “error.” 11. On October 22, 1996, the Department completed an Audit Report of Mr. Johnson’s real estate broker’s office. The auditor did not find any violations of Arizona real estate laws or the Commissioner’s rules or any deficiencies. This audit did not include a search of local court records. 12. Ms. Callie G. Davies, who worked as a secretary “for and with” Mr. Johnson for fifteen years, testified that in her opinion, Mr. Johnson, in his business practices, was “very businesslike, very courteous to people, punctual, and [presented] a very nice [working] environment.” 13. Mr. Johnson has attended continuing real estate education courses and owns a current copy of the Arizona Department of Real Estate Law book. PRIOR DISCIPLINARY RECORD 14. Paragraphs No. 11 and 12 the Department’s Notice of Hearing (October 19, 1998) are adopted and are incorporated by reference. Mr. Johnson has been the respondent in two prior disciplinary proceedings at the Department. On December 14, 1987, Mr. Johnson entered into a Consent Order with the Department as a result of which his real estate broker’s license was suspended for one month (January 15, 1988, through February 15, 1988). On December 1, 1982, the Commissioner adopted the recommendation of a hearing officer, and Mr. Johnson’s real estate broker’s license was suspended for thirty days. 15. In the 1982 proceeding, the hearing officer reported that at the hearing, Mr. Johnson “stated that, should he be allowed to keep his license, he will at all times abide by all department statutes and rules.” Department’s Exhibit M, page 4. CONCLUSIONS OF LAW APPLICABLE STATUTES AND RULE A.R.S. § 32-2153 provides in the pertinent subsections: “A. The commissioner may suspend or revoke a license, deny the issuance of a license or deny the renewal or the right of renewal of a license issued under the provisions of 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. *** B. The commissioner may suspend or revoke a license, deny the issuance of a license or deny the renewal or the right of renewal of a license issued under the provisions of this chapter when it appears that the holder or applicant therefor has:

1. Procured or attempted to procure a license under the provisions of this chapter for himself or another by fraud, misrepresentation or deceit, or by filing an original or renewal application which is false or misleading. *** 3. Made any substantial misrepresentation. *** 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.”

A.R.S. § 32-2160.01(A) provides in pertinent part: “A. Any broker…who is subject to the jurisdiction of the department and who has violated any provision of this chapter or any rule…adopted or issued by the commissioner…may be assessed a civil penalty by the commissioner, after a hearing, in an amount not to exceed one thousand dollars for each infraction.”

Commissioner’s Rule R4-28-301(C)(2) (Licenses: Application; Use; Exemption), Ariz. Admin. Code, states: “Every licensee shall, within ten days of each occurrence, notify the Commissioner of: *** 2. Any adverse decision of a court of competent jurisdiction rendered as the result of a civil suit or judgment in which the licensee appeared as the defendant, and in which the subject matter involved a real estate transaction to which he/she was a party.”

CONCLUSIONS OF LAW 1. The Commissioner has authority to enter an appropriate order in this matter. A.R.S. §§ 32-2107(A) and (E); 32-2153(A) and (B). 2. The Commissioner has discretion to impose disciplinary sanctions. The term “may” in A.R.S. §§ 32-2153(A) and (B) is discretionary. 3. In these disciplinary cases, the standard of proof on all issues is by a preponderance of the evidence. Culpepper v. State, 187 Ariz. 431, 930 P.2d 508 (App. 1996), review denied (1997); Troutman v. Valley Nat. Bank of Arizona, 170 Ariz. 513, 826 P.2d 810 (App. 1992). 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). 4. Mr. Johnson holds a real estate broker’s license which expires on March 31, 1999. 5. The civil judgment entered on July 19, 1996, in Johnson v. Reed (Maricopa County Superior Court No. CV94-16915) was “an adverse decision [to Mr. Johnson] of a court of competent jurisdiction rendered as the result of a civil suit…in which the licensee appeared as [a counter] defendant, and in which the subject matter involved a real estate transaction to which he…was a party.” Commissioner’s Rule R4-28-301(C)(2), Ariz. Admin. Code. 6. The judgment entered against Mr. Johnson in Johnson v. Reed involved dishonesty. 7. The discharge of the Johnson v. Reed judgment by bankruptcy did not excuse Mr. Johnson from the obligation to report that adverse decision to the Commissioner as required by Commissioner’s Rule R4-28-301(C)(2), Ariz. Admin. Code, or from reporting it in his March 7, 1997, broker’s license renewal application. 8. Mr. Johnson violated A.R.S. § 32-2153(A)(3) by failing to notify the Commissioner of the judgment entered in Johnson v. Reed pursuant to the requirements of Commissioner’s Rule R4-28-301(C)(2), Ariz. Admin. Code. 9. Mr. Johnson violated A.R.S. §§ 32-2153(B)(1) and -(B)(3) by failing to report the judgment entered in Johnson v. Reed in his March 7, 1997, broker’s license renewal application and answering “No” to Question No. 5 of the application. A.R.S. § 32-2153(B)(1). As submitted, the application was “false” and “misleading.” A.R.S. § 32-2153(B)(1). The omission of the civil judgment was a “substantial misrepresentation.” A.R.S. § 32- 2153(B)(3). 10. The preponderance of the evidence does not show Mr. Johnson violated A.R.S. §§ 32-2153(B)5), -B)(7), or -(B)(10). Mr. Johnson failed to report timely a civil judgment and to report it on a renewal application. The evidence germane to this complaint does not support a conclusion that Mr. Johnson is not “a person of honesty, truthfulness and good character.” A.R.S. § 32-2153(B)(7). 11. The fact this matter is the third disciplinary proceeding lodged against Mr. Johnson during the past sixteen years is a matter of aggravation. On the other hand, in mitigation, Mr. Johnson has been licensed since September, 1972, and appears to be at the completion of a life’s active career in real estate. The preponderance of the evidence does not support revoking Mr. Johnson’s real estate broker’s license, but does support the suspension of the license for a period of twelve months. 12. Grounds exist for the assessment of a civil penalty in the total amount of $1,000.00.” A.R.S. § 32-2160.01(A). RECOMMENDED ORDER It is recommended that the Commissioner suspend Mr. Johnson’s real estate broker’s license for a period of twelve months and assess him a civil penalty in the amount of $1,000.00. SUBMITTED this 7th day of December, 1998.

George A. Schade, Jr. Administrative Law Judge

The original Recommended Decision and Order of the Administrative Law Judge was mailed on December 7, 1998, for distribution to the parties, to:

Jerry A. Holt Real Estate Commissioner Arizona Department of Real Estate 2910 North 44th Street, Suite 100 Phoenix, Arizona 85018

George A. Schade, Jr. -----------------------

Office of Administrative Hearings 1700 West Washington, Suite 602 Phoenix, Arizona 85007 (602) 542-9826