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Williams v. Commonwealth of Virginia Real Estate Board
Citations: 698 S.E.2d 917; 57 Va. App. 108; 2010 Va. App. LEXIS 369Docket: 2799092
Court: Court of Appeals of Virginia; September 14, 2010; Virginia; State Appellate Court
Original Court Document: View Document
Edward A. Williams appealed a decision by the Circuit Court of Henrico County that upheld the Commonwealth of Virginia Real Estate Board's revocation of his real estate license and a $9,000 fine. Williams argued that the Board's findings were legally unfounded, exceeded its expertise, violated his due process rights, and were arbitrary. The background of the case reveals that, in 2004, Williams, a licensed real estate agent, entered into agreements to purchase properties but failed to adhere to the terms. Specifically, he did not make the required earnest money deposits and allowed the seller to pay delinquent taxes contrary to the agreements. Complaints against him, filed by Michael Pintz from Virginia Real Estate and Development, cited multiple violations, including failure to disclose his interest in the transactions and misrepresentation of terms. Pintz provided recorded evidence from a conversation with seller Edward Waller, illustrating Waller's misunderstanding of his ownership status and the actual payment Williams made at closing. The Court ultimately affirmed some aspects of the Board's decision while reversing others. The Department investigated a complaint against Williams and offered a consent deal of $4,250 in fines and an ethics course, which Williams declined. An informal fact-finding conference (IFF) was set for March 26, 2008, but was postponed due to Williams suffering a subdural brain hematoma, leading to surgery and rehabilitation. The IFF was rescheduled for May 7, 2008, and proceeded without further continuance requests from Williams. During the hearing, presided over by Board member Byrl Taylor, both Williams and Pintz testified, while Waller and Thacker were absent. On June 4, 2008, Taylor summarized the IFF findings, determining that Williams violated several codes, including failing to disclose his brokerage relationship and not safeguarding public interests. Taylor recommended a $9,000 fine and revocation of Williams's real estate license, which the Board approved on July 10, 2008. Williams appealed to the circuit court, and prior to the hearing, Waller passed away. During court proceedings, Williams presented evidence arguing the Board's decision was erroneous, questioning Matthews, the Department's investigating officer, about his investigation process. Matthews admitted he did not interview Waller, believing he had enough information without it. Williams also queried Doug Schroder, the Director of the Department’s adjudication team, regarding the documentation submitted to Taylor after the IFF and the absence of Waller during the hearing. Schroder explained that the record closed at the IFF unless otherwise permitted and noted Waller's absence was due to illness, despite his name being on the participant list. Williams questioned Taylor regarding her recommendation to the Board, noting her failure to further investigate Waller after reviewing Pintz’s recorded interview. Taylor maintained that she found Pintz to be a credible witness despite his admission of keeping earnest money deposits in an operating account, which Williams argued could indicate improper conduct. Taylor asserted that had there been evidence of Pintz's regulatory violations, she would have initiated an investigation but instead specifically endorsed his credibility. Williams also challenged Taylor's findings regarding Waller’s understanding of the settlement statement, suggesting that Waller's lack of education contributed to his confusion. Taylor countered by stating Williams changed contract terms without notifying the parties involved and misrepresented the payment responsibility for delinquent taxes. She further claimed that the county assessment was higher than any amount Waller received, revealing that her knowledge of this assessment came from online research, which she ultimately admitted influenced her opinion. Regarding the IFF process, Williams questioned Taylor about her actions after he disclosed his health condition. Taylor recalled granting a continuance but noted that Williams appeared well at the hearing. The circuit court later admitted Matthews’s investigative notes and a consent offer into evidence. On July 13, 2009, the court issued a letter opinion indicating that while it might not have reached the same conclusion as the Board, it could not overturn the Board's decision due to sufficient factual support. The court criticized the disparity in sanctions and the investigator’s failure to contact the property sellers, suggesting a more thorough investigation could have been beneficial. Despite this, the court concluded the Board acted lawfully, affirming its decision and denying Williams’s motion for reconsideration in a final order dated October 19, 2009. Williams subsequently appealed, contending the circuit court erred by not dismissing the Board's findings, which he argued were unlawful, outside the agency's competence, violated his due process rights, and were arbitrary and capricious. The appeal analysis followed the structure of Williams’s assigned errors, addressing each point raised. Taylor's findings in Counts I and VII indicate that Williams violated Code § 54.1-2138 by not disclosing the absence of a brokerage relationship with Waller and Thacker. This statute mandates licensees to disclose any broker relationship when discussing specific properties with non-clients. Taylor emphasized that both the presence and absence of a brokerage relationship must be disclosed. Williams acknowledged his status as a real estate licensee in the Waller contract but failed to provide written notice of no brokerage relationship to either Waller or Thacker. Taylor recommended a $500 monetary penalty and eight hours of continuing education for each violation, which the Board accepted. Williams argues that the circuit court erred by not dismissing the Board's findings as contrary to law. The legal precedent states that if an agency operates within its statutory authority and intent, it is not in error. However, if an agency's interpretation conflicts with statutory language or is inconsistently applied, the usual deference to the agency is not warranted. Taylor noted that Code § 54.1-2138 has not been consistently enforced regarding the failure to disclose the lack of a brokerage relationship, and the Board did not provide precedent to support their sanction against Williams. Additionally, neither VARED nor Courthouse Title was involved in the transactions with Waller and Thacker, nor did they have a brokerage relationship with Williams. Code § 54.1-2130 defines "brokerage relationship" as the contractual relationship between a client and a real estate licensee engaged to facilitate real estate transactions. In this context, Williams was employed by VARED, but there is no evidence that VARED was his client during the transactions, negating the existence of a required broker relationship. Thus, Williams was not obligated to disclose the absence of such a relationship to other parties, contradicting Taylor’s interpretation of Code § 54.1-2138, which mandates disclosure of existing broker relationships, not the lack thereof. The statute specifies that a licensee must disclose their representation in a transaction but does not provide for indicating non-representation. Clear statutory language must be accepted as is, and the agency's conflicting interpretation is not entitled to deference. The circuit court erred in upholding the Board's decision that Williams violated Code § 54.1-2138 by failing to inform parties of the non-existence of a brokerage relationship. Additionally, Williams argued that the circuit court improperly upheld the Board's acceptance of Taylor’s recommendation of violations concerning five regulations, specifically Counts III and IV, which he claimed involved legal issues beyond the agency’s expertise. The level of deference to an agency's decisions varies based on whether the issues are legal or factual and if they fall within the agency’s specialized competence. Count III alleged that Williams did not safeguard public interests by failing to pay delinquent taxes as required by the Waller contract, constituting unworthy conduct as per regulation 18 VAC 135-20-260(10). Williams claims that the agreement with Waller inaccurately stated he would pay delinquent taxes and fees at closing, asserting that the intent was for Waller to cover these costs. His argument relies on the increase of the purchase price from $6,000 to $7,000 after discovering the delinquent amount of $6,106.95, suggesting such an increase indicated Waller's responsibility for those costs. Additionally, he points to Waller's signature on the settlement statement, which indicated that taxes would be deducted from the seller's proceeds. However, during the IFF proceeding, Taylor concluded that Williams had exploited his knowledge as a real estate licensee to benefit himself at the seller's expense. Taylor's findings included that Williams failed to clarify who would be responsible for the taxes in the contract, and despite raising the purchase price, he did not amend the contract to reflect the correct amounts or responsibilities. Taylor found this constituted a violation under 18 VAC 135-20-300(6) and recommended a $2,500 penalty along with the revocation of Williams's license, which the Board accepted. On appeal, Williams argues that the interpretation of the contract is a matter outside the agency's expertise and insists the intent was for Waller to pay the taxes. The court finds no error in the Board's actions, emphasizing that clear and unambiguous contract terms must be understood in their plain meaning. The contract explicitly states that Williams, as the purchaser, would pay delinquent taxes of $4,205.35 at closing. There was no written modification to this term, nor does Williams claim any modification occurred. The court asserts that it will not seek additional meaning beyond the contract when its terms are clear. Williams argued that evidence, including a settlement statement, indicated that Waller understood he was responsible for paying delinquent taxes and fees. However, Williams acknowledged that he did not modify the contract to reflect any changes in its terms and admitted he failed to pay the required taxes and fees as specified in the contract. The record confirms no legal error in interpreting the contract, which explicitly stated the total delinquent taxes as $4,205.35, yet Williams deducted $6,106.95 at settlement without a written modification to the contract's terms. Williams also claimed that the circuit court erred by not dismissing the Board's findings, alleging violations of his due process rights. He presented five assignments of error: (1) the imposition of higher sanctions after declining a consent offer, (2) reliance on facts outside the record by Taylor to support her recommendation, (3) omission of documents submitted for the Board's consideration, (4) Taylor's interpretation of what constitutes a "material" change to the contracts, and (5) the impact of Williams's disability on the final determination. The circuit court noted the disparity in sanctions suggested possible retaliatory motives, yet concluded that the Board acted legally and that the record did not support Williams's claims of vindictiveness, emphasizing that public officials are presumed to act correctly. The burden of proof lies with the party alleging error to demonstrate a reasonable likelihood that the increased sanction was due to actual vindictiveness from the sanctioning authority. The Department offered Williams a consent agreement that included a fine of $4,250 and the completion of an ethics course, based on several violations: failing to disclose his brokerage relationship to Waller and Thacker, not depositing $1.00 into an escrow account as required by the Waller contract, and not safeguarding public interests by failing to inform Waller about delinquent taxes and fees. After Williams rejected the offer, an Informal Fact-Finding (IFF) hearing was held, presided over by Taylor, who gathered testimony from Williams, his principal broker Pintz, and the closing agent involved in the Waller transaction. Taylor found Pintz credible, noting that Pintz never instructed Williams to keep the deposit outside of escrow and was unaware of the transaction details until after the contract was ratified. Despite aggressive questioning from Williams's counsel, Pintz's consistent testimony led Taylor to believe he was truthful. Following the rejection of the consent offer, the Department added two charges against Williams related to the Thacker contract, based on information from a conversation with Williams's counsel. Schroder, who reviewed Williams's admissions in an interview memorandum, confirmed that Williams acknowledged not submitting the deposit and retaining the file independently. The circuit court evaluated Williams's claims regarding the fairness of the sanctions, recognizing the significant disparity between the consent offer and the imposed sanctions. However, the court found no evidence of vindictiveness from the sanctioning authority, concluding that the recommendations and sanctions were supported by sufficient evidence. Taylor's consideration of a tax assessment on Waller’s property, which was not part of the official record, was scrutinized by Williams as an error. Taylor opined that Williams exploited Waller, referencing the higher county tax assessment compared to Waller's received funds. When questioned about the source of the tax assessment, Taylor revealed she found it online and acknowledged it influenced her opinion. However, administrative decision-makers must rely on evidence presented, although the rules of evidence are less strict in administrative settings. The mere consideration of external evidence does not invalidate an agency's action unless substantial prejudice can be shown. In this case, no evidence indicated that the outcome would differ without the tax assessment, and it did not affect findings related to Williams's handling of escrow or contract terms. Williams also contended that the Board did not consider Matthews's investigation notes, the consent offer, or Taylor’s notes from the IFF hearing. The burden rests on Williams to prove that these documents should have been included in the agency’s record. He argued that the Board violated statutory rights regarding the presentation of evidence. However, the Board allowed adequate opportunity for both parties to present their cases, and the circuit court found that the Board acted appropriately and within its authority. Consequently, Williams failed to demonstrate that the Board's omission of the documents constituted a due process violation or legal error justifying reversal. Schroder testified in circuit court that the record closes on the day of the Initial Fact Finding (IFF) unless the hearing officer allows it to remain open. Williams submitted documents after the IFF without receiving necessary authorization, failing to prove they should be included in the agency record for Board consideration. In Count II, Taylor noted that Williams failed to deposit the required $1.00 under the Waller contract within five days of ratification. Williams contended that the deposit's amount was insignificant; however, Taylor emphasized that the proper handling of the deposit, including its placement in a correctly labeled escrow account, was crucial. Consequently, Taylor recommended that the Board find Williams in violation of 18 VAC 135-20-180(B)(1)(a), impose a $1,000 fine, and revoke his license. In Count V, it was determined that Williams did not timely notify all transaction principals of a material change regarding the Waller contract's deposit and account holder. Taylor found that Williams’ failure to inform Waller of the unmade deposit constituted a violation of 18 VAC 135-20-310(2), recommending a $1,000 penalty and revocation of his license. In Count VIII, Taylor found that Williams also failed to communicate the material change concerning the Thacker contract's $1,000 deposit, which was not made by the contractual deadline. Taylor stated this change was material and should have been promptly disclosed to Thacker, leading to another recommendation for a $1,000 penalty and license revocation. On appeal, Williams argued that Taylor incorrectly deemed these contract changes as "material." The legal standard allows for administrative agency interpretations of regulations to receive significant deference, with trial courts able to overturn such interpretations only if they are arbitrary or capricious. The purpose of escrow deposits is to safeguard the seller in case the contract is not fulfilled, and strict regulations govern the maintenance of escrow accounts. Each firm must maintain federally insured separate escrow accounts for earnest money deposits unless all transaction principals agree otherwise in writing. Escrow deposits must be placed in an account by the end of the fifth business day after ratification unless otherwise agreed in writing and remain there until the transaction is finalized or terminated. The parties established a specific deposit amount and timeline, which are deemed material to the transaction; failure to uphold these terms would undermine the purpose of the escrow. The Board found these terms material based on relevant regulations and legal standards, which the court upheld as neither arbitrary nor unreasonable. Williams claims his due process rights were violated because his disability should have been considered in evaluating his actions related to drafting errors in a contract. However, the agency, as the factfinder, is responsible for assessing credibility and the sufficiency of evidence regarding violations. The court emphasized that it will only overturn the agency's factual findings if no reasonable mind could reach the same conclusion given the evidence. Williams did not demonstrate that his alleged drafting errors were caused by his brain injury or that harm resulted from his failure to timely deposit the escrow money, as the applicable regulations do not require a finding of harm. Additionally, Williams argued that the Board's findings were arbitrary and capricious, but judicial intervention is limited to cases of clear abuse of discretion by an administrative agency. The court found no basis to dismiss the Board's findings or sanctions as such. An agency's actions are deemed arbitrary and capricious if they are willful, unreasonable, and neglectful of relevant facts or laws. Public officials are presumed to act correctly, and a reviewing court can only overturn factual findings if no reasonable mind could reach the same conclusion based on the record. In this case, the Board's conclusions were substantiated by substantial evidence, despite Williams' claims regarding the contracts. Williams acknowledged his failure to deposit money into escrow and notify parties of contract changes. The agency found Williams not entirely credible and rejected his assertion that further interviews would clarify the parties' intent regarding tax payments. Williams bore the burden of presenting evidence to support his claims but did not substantiate his arguments, including failing to summon Waller to testify about any contractual changes. The Board’s conclusion that Williams did not fulfill his obligations under the contract was supported by substantial evidence. The agency has the authority to impose sanctions for violations, with fines not exceeding $2,500 per violation. The circuit court's conclusion that the Board's sanctions were appropriate was upheld, but the decision to uphold the violation of Code 54.1-2138 was reversed, vacating the $1,000 fine and eight hours of continuing education. The court affirmed the Board's findings in all other respects.