Bernstein v. Real Estate Commission

Horney, J., delivered the opinion of the Court. This is the first appeal governed by the Administrative Procedure Act to reach this Court since its 'enactment by Chapter 94 of the Acts of 1957 [now codified as amended as Code (1957), Art. 41, Sections 244-256, inclusive]. ²²⁵ On this appeal we are asked to review the orders of the Baltimore City Court affirming the findings and conclusions of the Real Estate Commission of Maryland (commission) that there was sufficient competent, material and substantial evidence to justify suspending the licenses of a broker and his associate. The appellants are Manuel M. Bernstein (Bernstein) and Warren S. Shaw (Shaw), trading as Manning-Shaw Realty Company (realty company or Manning-Shaw), often herein referred to collectively as “the brokers.” They are cast on this appeal in two different “acts” of unethical misconduct, combined in one record. The first (in a four-pointed complaint) charged them with violations of Code (1957), Art. 56, Section 224(b), (j), (s) and (a), which prohibits [b] “a continued and flagrant course of misrepresentation,” * * * [j] “misleading or untruthful advertising,” * * * [s] “bad faith, incompetency or untrustworthiness, or dishonest, fraudulent, or improper dealings” by real estate dealers and salesmen or agents and (as applied here to Bernstein only) [a] the obtaining of licenses by “false or fraudulent representation.” The commission concluded there had been violations of all of the charges except the last, as to which it declined to take any action at the time of the hearing.

The complainants cross-appealed the refusal of the commission to act on the last point, but when the lower court sustained the action of the commission they did not appeal to this Court. The second charge (in a separate complaint) concerned a violation of § 224(o) [of Art. 56], which forbids the acceptance of “a listing contract to sell property unless such contract provides for a definite termination date without notice from either party.” The commission also found there had been a violation of this charge. At the conclusion of the hearing, the commission ordered a three months suspension of the licenses of the brokers in each case, to run concurrently. The first complaint concerned the affixing of a “sold” sticker to a “for sale” sign placed on the property in Baltimore City known as 3800 Grantley Road and leaving it there for approximately three months.

The gist of the complaint was that there had not been a bona fide sale of the property ²²⁶ and that the sticker on the sign was a deliberate misrepresentation to induce property owners in the neighborhood to sell their homes and by immediate solicitation to induce them to use Manning-Shaw as brokers. The realty company countered by claiming that it held a contract of sale signed by Joseph Carter and wife (Carter or the purchaser), which had been executed before the sticker had been affixed to the sign, and that settlement had been delayed because the purchaser had had difficulty in disposing of several other properties then owned by him. The second complaint, as hereinbefore indicated, concerned the use of an illegal listing contract. The brokers, in denying that the contract contravened the statute, claimed that even if the statute had been violated it was not a wilful transgression.

In their petitions for judicial review by the lower court, the brokers contended, among other things, that the complaints constituted an unlawful conspiracy against the civil rights of themselves and their customers in that, in substance, they were charged with “block-busting” and that the complaints were intended to prevent Negroes from purchasing and occupying homes of their own selection in violation of constitutional guarantees. The first' complaint, although denying any prejudice on the part of the complainants, did contain allegations that Manning-Shaw had specialized in sales of residential properties to Negroes in formerly all-white neighborhoods, that such practices were intended to promote panic and instability in the vicinity for the purpose of exploiting and capitalizing on such prejudices as did exist in order to obtain as many listings as possible and that such practices had adversely affected the morale of the residents and depreciated property values. Whatever may have been the real motive of the complainants, the commission early in the proceeding before it, made it clear, and continued to reiterate, that the hearing was for the sole purpose of determining whether or not Bernstein and Shaw had violated the law in connection with the exercise of their rights under the licenses issued to them, and that the ²²⁷ commission was not concerned with “block-busting.” Furthermore, we think the lower court was correct in refusing to receive into evidence, even as “explanatory background,” the proffered exhibits with regard to publicity given the accusation. At the conclusion of the hearing on appeal below, the lower court found no basis in the record to believe the commission was either biased or arbitrary in the manner in which it had conducted the proceeding before it.

The question is not specifically before us on the appeal to this Court, and we shall not consider it further. Since there are two separate and distinct cases we shall summarize the salient parts of the oral testimony and documentary evidence and the findings of fact in each before discussing the questions presented. The 3800 Grantley Road Case On June 19, 1958, Carter and his wife entered into a contract to purchase this property from the Eutaw Realty Corporation, the capital stock of which was owned equally by Bernstein and Shaw, who, as herein stated, are partners in Manning-Shaw, the brokers in the transaction. It is this contract that is the main topic of this litigation.

The property was sold for $18,000 subject to an annual ground rent of $120. According to the terms of the contract $500 had been paid prior to its execution, $550 was payable within two days and $1950 on or before the expiration of thirty days. The balance of $15,000 was to be financed by a standard land installment contract with weekly payments of $37.50. Carter was making only $54.62 a week but claimed his income was $70.

His wife, who had an undetermined number of children, was employed as a domestic. At the time the contract was signed, the purchaser had small equities in several other properties. Through Manning-Shaw, also acting as brokers, he had previously placed a $500 deposit on another house under a contract still in effect when the Grantley Road contract was made. Shaw claimed it was understood that the prior contract had been canceled, but there was testimony that Carter and his family claimed it as their “home” for some time after June 19.

Manning-Shaw pro ²²⁸ duced mortgage loan applications to show that loans had been applied for and rejected shortly after the contract for 3800 Grantley Road had been executed. - The $500 allegedly paid prior to the signing of this contract was a credit transaction on the books of Manning-Shaw for that amount held in escrow by them as a deposit on the previously executed contract for the other property. Carter, however, paid $550 on June 21, 1958, and $850 on September 13, 1958. These transactions were verified by ledger entries in the bank account of Manning-Shaw. The complainants, who resided across the street from and next door to 3800 Grantley Road, testified that after the “sold” sticker had been affixed to the sign nothing seemed to be done with respect to the property and that it appeared to be unoccupied.

On one occasion another neighbor saw Carter doing ‘some work around the house and upon advising him that the electricity should be turned on to provide current for the sump pump, he replied that “he would see the boss.” Carter also stated, according to the neighbor, that he did not know who had bought the house. A woman police sergeant testified that when she had gone to the property on January 31, 1959, and on subsequent visits, she found Carter’s wife and eight children occupying the kitchenette where a gas stove afforded the only heat in the house. Hunger and lack of clothing were also noted. But a photograph, introduced by Manning-Shaw, showed Carter sitting with an agent of the brokers in a well furnished living room in the house.

There was also evidence that the sales agent who had made the sale had not, as late as the end of 1958, received a commission on the sale although both he and the realty company admitted a commission was due him. Manning-Shaw claimed they paid the salesman through a drawing account and in round figures, not in specific commissions. But their records indicated that previously he had been paid exact commissions by them for the specific properties which he had sold. Another witness, posing as a buyer after placement of the “sold” sticker, had been informed by another sales agent of Manning-Shaw that the property was not sold at that time.

Manning-Shaw claimed the agent had said the sale might not ²²⁹ go through and that the prospective “buyer” could have it if the pending sale was not consummated. On this evidence the commission made five findings of fact to the effect: (i) that the sales agent had not received a commission for making the sale; (ii) that another agent had offered to sell the property to a prospective buyer two months after the purported sale had been made; (iii) that the purchaser was still under contract to purchase another property through the same brokers when he purportedly purchased 3800 Grantley Road; (iv) that there were several unexplained discrepancies between the purported contract of June 19 and the transaction allegedly consummated on September 19, in which the required down payment was made less and the weekly payments were made smaller; and (v) that there had not been a normal occupancy of the property by the purchaser. The commission further found that it was difficult to give credence to the explanations of Bernstein and Shaw; that the testimony of Shaw, who was most familiar with the transaction, was vague and indefinite; and that the testimony of Carter was contradictory and inconsistent and entitled to little weight. Therefore, the commission, having concluded that the alleged sale was not bona fide, found the brokers had violated § 224(b) of Art. 56 [continued and flagrant course of misrepresentation], (j) [misleading and untruthful advertising] and (s) [bad faith and improper dealing].

Section 255(g) of Article 41, supra, provides: “The court may affirm the decision of the agency or remand the case for further proceedings; or it may reverse or modify the decision if the substantial rights of the petitioners may have been prejudiced because the administrative findings, inferences, conclusions, or decisions are: (1) In violation of constitutional provisions; or (2) In excess of the statutory authority or jurisdiction of the agency; or (3) Made upon unlawful procedure; or (4) Affected by other error of law; or (5) Unsupported by