SC Administrative Law Court Decisions

This matter came before the South Carolina Real Estate Commission (Commission) for a hearing on February 21, 2001. The Commission found that the Appellant violated S.C. Code Ann. §§ 40-57-135(B)(7), (B)(11) and (C)(7) (Supp.1999) and §§ 40-57-145(A)(4) and (A)(10) (Supp.1999). The Commission suspended the Appellant's license for sixty (60) days, issued her an administrative fine in the amount of $5,000.00, and issued a public reprimand to her for the above violations. The Commission served the Appellant with its written order on March 21, 2001. Thereafter, this matter came before me pursuant to S.C. Code Ann. § 1-23-600(D) (1986 & Supp. 1999) of the Administrative Procedures Act upon appeal from that Final Order of the Commission. Oral arguments were heard before me at the offices of the Administrative Law Judge Division (Division) in Columbia, South Carolina, on November 28, 2001.

In her oral argument before me, the Appellant conceded that she violated S.C. Code Ann. §§ 40-57-135(B)(7) and (B)(11) (Supp. 1999) as found by the Commission. ⁽¹⁾ Nevertheless, she asserts that:

I. The Commission's finding that the Appellant violated S.C. Code Ann. Section 40-57-145(A)(4) (Supp. 1999) by disbursing $2,250.00 in rental income generated from the condominium/apartment units in her escrow account to 2000 Properties, Inc., was clearly erroneous in view of the evidence on the whole record;

II. The Commission's finding that the Appellant violated S.C. Code Ann. Section 40-57-145(A)(10) (Supp. 1999) by failing to account for or to remit rental income generated from the condominium/apartment units to Edward Blackwell was clearly erroneous in view of the evidence on the whole record; and

III. The Commission's finding that the Appellant did not maintain for a minimum of five (5) years and failed to provide to the Commission copies of the Management and Lease Agreements on May 30, 2000, pertaining to the subject property as required by S.C. Code Ann. § 40-57-135(C)(7)(Supp. 1999) was clearly erroneous in view of the evidence on the whole record.

The Appellant is a licensed South Carolina Real Estate Broker and is currently the Broker- in-Charge of Investors Management Corporation (IMC) in Rock Hill, South Carolina. The Appellant's son is a principal/owner of a business known as 2000 Properties, Inc., which was formerly known as Hofjen Consolidated, Inc. (Hofjen). Prior to February 2000, Hofjen owned, among other real property, ten (10) condominium units, the subject property of this matter. First Union Bank held a mortgage on these units. At that time, IMC was the property management company for these units. On February 7, 2000, First Union Bank foreclosed upon these condominium units owned by Hofjen/2000 Properties, Inc. On March 1, 2000, Edward Blackwell purchased the ten (10) condominium units from First Union Bank. In the contract of sale, First Union Bank assigned its right to rental income from the properties, dating back to the date of the foreclosure on February 7, 2000, to Mr. Blackwell. On March 7, 2000, Peter Perrill, the attorney for Mr. Blackwell, notified the Appellant that Mr. Blackwell had purchased the condominiums, advised IMC not to collect any further rent for Hofjen, and to transfer any and all keys, leases, and rental income already collected from the date of his client's purchase to Mr. Blackwell. Mr. Perrill sent additional letters to the Appellant on March 13, 2000, March 16, 2000, April 5, 2000 and April 10, 2000.

Although the Appellant knew of the sale through numerous sources and knew that Mr. Blackwell was asserting that he had a right to the rental proceeds dating back to February 7, 2000, she refused to comply with Mr. Blackwell's request. The Appellant continued to collect the rental income, did not deposit the disputed funds into a trust account, and instead, disbursed the rents for the subject property to Hofjen/2000 Properties.

Mr. Perrill, on behalf of Mr. Blackwell, filed a complaint with the Real Estate Commission with regard to the Appellant's behavior. An investigation was initiated. During the investigation, the investigator requested the Appellant's records pertaining to the collection of rents, lease agreements, journals and/or ledgers, rental receipts, bank statements for her escrow account, deposit slips and/or canceled checks, all with regard to the subject condominium units. After the Appellant failed to provide the Commission with the records, the investigator subpoenaed the records from the Appellant on May 15, 2000. Nevertheless, the Appellant failed to provide the investigator with the subpoenaed records.

A formal complaint was issued in this matter on August 23, 2000. That complaint was subsequently amended on December 20, 2000, charging the Appellant with violations of S.C. Code Ann. §§ 40-57-135(B)(7), (B)(11) and (C)(7) (Supp. 1999) and §§ 40-57-145(A)(4) and (A)(10)(Supp. 1999). A hearing was held on February 21, 2001 at which time the Commission found that the Appellant had violated those statutes. The Commission suspended the Appellant's license for sixty (60) days, issued her an administrative fine in the amount of $5,000.00, and issued her a public reprimand.

This case is before the Division as an appeal of an agency action. As such, the Administrative Law Judge sits in an appellate capacity under the Administrative Procedures Act (APA), rather than as an independent finder of fact. In South Carolina, the provisions of the APA -- specifically Section 1-23-380(A)(6) -- govern the circumstances in which an appellate body may reverse or modify an agency decision. That section states:

The court may reverse or modify the decision if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions or decisions are:

(a) in violation of constitutional or statutory provisions;

(b) in excess of the statutory authority of the agency;

(c) made upon unlawful procedure;

(d) affected by other error of law;

(e) clearly erroneous in view of the reliable, probative and substantial evidence on the whole record; or

(f) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.

S.C. Code Ann. § 1-23-380(A)(6) (1986 & Supp. 1999).

A decision is supported by "substantial evidence" when the record as a whole allows reasonable minds to reach the same conclusion reached by the agency. Bilton v. Best Western Royal Motor Lodge, 282 S.C. 634, 321 S.E.2d 63 (Ct. App. 1984). The well-settled case law in this state has also interpreted the "substantial evidence" rule to mean that a decision will not be set aside simply because reasonable minds may differ on the judgment. Lark v. Bi-Lo, 276 S.C. 130, 276 S.E.2d 304 (1981). The fact that the record, when considered as a whole, presents the possibility of drawing two inconsistent conclusions from the evidence does not prevent the agency's finding from being supported by substantial evidence. Waters v. South Carolina Land Resources Conservation Comm'n, 321 S.C. 219, 467 S.E.2d 913 (1996); Grant v. South Carolina Coastal Council, 319 S.C. 348, 461 S.E.2d 388 (1995).

In applying the substantial evidence rule, the factual findings of the administrative agency are presumed to be correct. Rodney v. Michelin Tire Co., 320 S.C. 515, 466 S.E.2d 357 (1996), citing Kearse v. State Health and Human Services Finance Comm'n, 318 S.C. 198, 456 S.E.2d 892 (1995). Furthermore, the reviewing court is prohibited from substituting its judgment for that of the agency as to the weight of the evidence on questions of fact. Grant v. South Carolina Coastal Council, 319 S.C. 348, 461 S.E.2d 388 (1995), citing Gibson v. Florence Country Club, 282 S.C. 384, 318 S.E.2d 365 (1984). Finally, the party challenging an agency action has the burden of proving convincingly that the agency's decision is unsupported by substantial evidence. Waters, supra, citing Hamm v. AT&T, 302 S.C. 210, 394 S.E.2d 842 (1994).

The Appellant argues the Commission's finding is clearly erroneous in view of reliable evidence and bases that argument upon the Commission's language in its Conclusions of Law. In its Conclusions of Law, the Commission found that the Appellant violated S.C. Code Ann. § 40-57-145(A)(4) (Supp. 1999) because she failed "to maintain the income generated from the condominium/apartment units in her escrow account until the dispute over the funds was resolved and disbursing those funds to 2000 Properties, Inc." The Appellant contends that the Commission's language that she failed to escrow money "until the dispute over the funds was resolved" means that the Appellant was not in violation of Section 40-57-145(A)(4) until she was placed on notice of "the dispute." The Appellant argues that "the dispute" arose after she got the first notice on March 7, 2000.

There is no dispute that First Union Bank had a right to the rents. When Mr. Blackwell purchased the property, it acquired First Union's undisputed right to the rents. If the rents had been held in escrow, Mr. Blackwell could have received those rents. However, the Appellant disbursed those rents to her son's company who no longer held any ownership interest in the property. Nevertheless, the Appellant contends that the question before this Division is not whether she should have held the money after the foreclosure but whether she disbursed the money after Peter Perrill sent notice of his client's claim to the rents.

S.C. Code Ann. § 40-57-145(A)(4) (Supp. 1999) provides that the Commission may take disciplinary action against a licensee who "in the practice of real estate demonstrates bad faith, dishonesty, untrustworthiness, or incompetency in a manner as to endanger the interest of the public." The language of the Commission in concluding that the Appellant violated that section can be divided into two parts:

a. The Appellant demonstrated "bad faith . . . " when she failed "to maintain income generated from the condominium/apartment units in her escrow account until the dispute over the funds was resolved;" and

b. The Appellant demonstrated "bad faith . . . " when she disbursed "those funds to 2000 Properties, Inc."

As noted above, the review of the findings supporting the agency's decision is limited to a determination of whether the Commission's findings, inferences, conclusions or decisions are "clearly erroneous in view of the reliable, probative and substantial evidence on the whole record." Lowe v. Am-Can Transport Services, Inc., 283 S.C. 534, 324 S.E.2d 87 (1984). More importantly, this tribunal cannot substitute its judgment for that of the Commission based solely on the possibility that there is room for a difference of intelligent opinion. Chemical Leamen Tank Lines v. S.C. Pub. Serv. Comm'n, 258 S.C. 518, 189 S.E.2d 296 (1972). To the contrary, the Appellant must establish that the record is devoid of evidence that would allow a reasonable mind to reach the Commission's conclusion. If such evidence exists, it is irrelevant as to whether the reviewing Court agrees with the position taken by the Commission.

In this case, the evidence supports both of the Commission's conclusions. The Appellant attended the foreclosure proceeding and, as a result, was clearly informed that the property did not belong to her son. Nevertheless, the Appellant disbursed proceeds in February and March not to the owner of the property, Mr. Blackwell, but to her son's business, 2000 Properties, Inc. Moreover, the March disbursements occurred even after the Appellant had been contacted by Mr. Perrill and informed that Mr. Blackwell was seeking the rents collected for the property. Though First Union Bank did not appoint a receiver for the rents, the foreclosure should have placed the Appellant on notice that her son no longer owned the property and, as such, was no longer entitled to the rents from the property.

Therefore, the dispute over the income arose not just when Mr. Blackwell asked for the rental income but when 2000 Properties, Inc., ceased to own the rental units. Once the foreclosure occurred, the Appellant should have kept the rental income in escrow pending the determination by the property owner as to who would receive those distributions. Consequently, I find that the decision of the Commission that the Appellant violated Section 40-57-145(A)(4) by failing to escrow the rental income and disbursing it to 2000 Properties, Inc., is supported by substantial evidence on the record as a whole.

After a complaint was levied against the Appellant, Harold Simons, the investigator for the Real Estate Commission, scheduled interviews with the Appellant on May 2, 2000 and May 5, 2000. Though the Appellant agreed to meet with the investigator on both of those dates, she failed to attend the meetings. Afterwards, the investigator, on behalf of the Commission, subpoenaed the Appellant's financial records for a meeting on May 30, 2000. Pursuant to that subpoena, the Appellant brought a "Disbursement Statement" which, according to the Appellant, set forth the rents she collected for the disputed properties. Mr. Simons testified that the Appellant and her daughter, Andrea Hofer (the property manager), explained that the Disbursement Statement reflected that they collected $2,205.00 in total rents. From those total rents, they subtracted $322.15 for repairs and $332.00 for her commission (15%). Therefore, the net rents collected were approximately $1,550.00.

The Appellant contends that the above evidence does not support the Commission's finding that the Appellant disbursed $2,205.00 to 2000 Properties. In that regard, the Appellant argues that neither she nor Andrea Hofer were in the posture to properly confirm what disbursements had been made to 2000 Properties. Rather, she contends that the only reliable testimony in evidence was that of her other daughter, Angelic Hofer, who is the comptroller for that company. The Appellant argues that this contention is supported by the fact that the Appellant was also found to have failed to provide financial records pursuant to a subpoena at that meeting. Therefore, the Appellant contends that it was improper for the Commission to base its finding upon these unsworn and unsubstantiated statements when 2000 Properties' comptroller testified to the contrary. In other words, the Appellant argues that the Commission improperly gave more credence to the unsworn statements of the Appellant and her daughter, Andrea Hofer, than the sworn testimony of her other daughter, Angelic Hofer, who held the position of comptroller of 2000 Properties and who supported her testimony with records of the corporation. Also, the Appellant contends that her statements on May 30, 2000 were taken out of context because what she said was that between the foreclosure date and March 31, 2000, the Appellant disbursed $2,205.00 to 2000 Properties. She argues that on the other hand, she was found guilty of disbursements that were made after the sale of the property on or about April 5, 2000. She further argued that the only evidence of any disbursement after that date was $250.00 that went not to 2000 Properties but to the title owner as of that day.

S.C. Code Ann.§ 40-57-145(A)(10) (Supp. 1999) provides that the Commission may take disciplinary action against a licensee who "fails, within a reasonable time, to account for or to remit any monies coming into his possession which belong to others." The Commission concluded that the Appellant violated Section 40-57-145(A)(10) "when she disbursed Two Thousand Two Hundred Five and no/hundredths ($2,205.00) Dollars in rental income to 2000 Properties, Inc., instead of disbursing to Blackwell when she had received several notices about his ownership of the units." (emphasis added).

In Gardner v. City of Columbia Police Dept., 216 S.C. 219, 57 S.E.2d 308, 310 (1950), the South Carolina Supreme Court held that:

The rule generally adopted is that oral admissions as to the contents of a written instrument are competent evidence of its contents. Terry v. Husbands, 53 S.C. 69, 30 S.E. 26. "The admissions of a party are not open to the same objection which belongs to parol evidence from other sources. A party's own statements and admissions are, in all cases, admissible in evidence against him, though such statements and admissions may involve what must necessarily be contained in some writing, deed or record." Jones on Evidence, Sec. 208, Page 256. And it is generally held that the best evidence rule does not apply to parol admissions in pais and against interest, or acts equivalent thereto, and that such admissions are competent as primary evidence against the party making them, although they involve what must necessarily be contained in a written instrument. 1 Greenleaf on Evidence, Secs. 96, 97; 32 C.J.S. Evidence, § 788, Page 714; 20 Am.Jur., Sec. 425, Page 379; Llewellyn v. Atlantic Greyhound Corporation, 204 S.C. 156, 28 S.E.2d 673.

Moreover, under the South Carolina Rules of Evidence, an admission by a party-opponent is not hearsay if "[t]he statement is offered against a party and is (A) the party's own statement in either an individual or a representative capacity. . . ." Rule 801(d)(2), SCRE. See also, State v. Tucker, 334 S.C. 1, 512 S.E.2d 99 (1998). Therefore, the statements of the Appellant and her daughter to the investigator were competent evidence. Furthermore, "[t]he fact finder is imbued with broad discretion in determining credibility or believability of witnesses. Quintessentially, an operative factor in evaluating credibility of a witness is inconsistency." Small v. Pioneer Machinery, Inc., 329 S.C. 448, 465, 494 S.E.2d 835, 843 (1998). Additionally, the family relationship between a witness and a party may bear upon the witness's bias and it is the fact finder's authority to appraise the credibility of a witness in that regard. See Crewe v. Blackmon, 289 S.C. 229, 345 S.E.2d 754 (1986).

Here, the statements made by the Appellant and her daughter, Andrea Hofer, though unsworn out-of-court statements, were properly received as admissions. Additionally, the evidence presented at the hearing was inconsistent and from a family member. In fact, the Appellant did not produce any records until the hearing before the Commission in this matter and it was still unclear whether those records were all of the records. In light of the Appellant's withholding of the records and the question of whether the records finally produced were the complete records, it was certainly reasonable for the Commission to rely upon the Appellant's statements at the May 30, 2000 meeting. This reliance is even further substantiated by the fact that the Appellant argues that her daughter Angelic Hofer's testimony is the only credible testimony on the issue of the correct amount of the disbursements to 2000 Properties. Therefore, it was the Commission's prerogative to decide what part of the witness's testimony it believed and what part it disbelieved. Under such circumstances, it is not the function of this Court to weigh the evidence and determine the credibility of the witnesses.

The Appellant did not appeal the violation for the Appellant's failure to bring the financial records that were subpoenaed to the investigative meeting. She did, however, appeal the finding that she did not maintain management agreements and lease agreements for a minimum of five (5) years. The management agreements were clearly provided. The Appellant contends that she is "not sure" whether the Commission was seeking the tenant leases or other documents.

S.C. Code Ann. § 40-57-135(C)(7) provides that "[e]very broker-in-charge or property manager-in-charge shall maintain for a minimum of five years and shall furnish to the department upon request a written copy of a: (a) lease . . . [and] (e) management agreement. . . ." The Commission concluded that the Appellant failed to maintain and furnish to the Commission upon request "a written copy of management agreement[s] and lease agreements as evidenced by her failure to provide those documents to the Commission's investigator in a meeting on May 30, 2000, after being subpoenaed to do so." A management agreement is between the owner of the property and the manager of the property. On the other hand, the lease agreement is between the manager of the property and the tenant. Therefore, the Appellant failed to provide the lease agreements. Accordingly, at least half of the requested agreements were provided.

IT IS THEREFORE ORDERED that the Final Order of the Commission is hereby affirmed as to Issues I and II.

IT IS FURTHER ORDERED that this case is remanded to the Commission for the Commission to determine the appropriate disciplinary action to take in light of the findings in this Order regarding Issue III.

AND IT IS SO ORDERED.

__________________________________

Ralph King Anderson, III

Administrative Law Judge

March 20, 2002

Columbia, South Carolina

1. The Appellant conceded that she violated § 40-57-135(B)(7) (Supp. 1999) in that she failed to maintain records pertaining to the collection of rents, lease agreements, journals and/or ledgers, rental receipts, bank statements for her escrow account, deposit slips, and/or cancelled checks as evidenced by her failure to provide the same to the Commission Investigator in a meeting on May 30, 2000. The Appellant further conceded that she violated § 40-57-135(B)(11) (Supp. 1999) in that she failed to maintain for five (5) years a copy of the agency agreement as evidenced by the Appellant's failure to provide those documents to the Commission Investigator in a meeting on May 30, 2000, after being subpoenaed to do so.