South Carolina              
Administrative Law Court
Edgar A. Brown building 1205 Pendleton St., Suite 224 Columbia, SC 29201 Voice: (803) 734-0550

SC Administrative Law Court Decisions

CAPTION:
SCDLLR vs. James E. MacDonald

AGENCY:
South Carolina Department of Labor, Licensing and Regulation

PARTIES:
Petitioners:
South Carolina Department of Labor, Licensing and Regulation (Real Estate Commission)

Respondents:
James E. MacDonald
 
DOCKET NUMBER:
96-ALJ-11-0378-IJ

APPEARANCES:
Dwight G. Hayes, Esquire, for Petitioner

James E. MacDonald, Pro Se
 

ORDERS:

ORDER AND DECISION

STATEMENT OF THE CASE

The Department of Labor, Licensing and Regulation (Department or LLR) has filed a Motion for a Temporary Restraining Order on the basis that Mr. MacDonald has violated the Temporary Cease and Desist Order issued by the Real Estate Commission (Commission) on May 29, 1996. In its motion, LLR has alleged that Mr. MacDonald has failed to use the independent escrow agent that was approved by the Commission and has deposited funds in non-escrow accounts; that he has terminated his relationship with the independent escrow agent; and that he has failed to retain funds in escrow accounts as required; that he has tendered numerous checks that have been returned for insufficient funds; and that he has failed to cooperate with the Commission. The Department states that the actions of Respondent constitute an immediate and serious danger of irreparable injury to the public without further action. It therefore seeks an order to restrain Mr. MacDonald from engaging in any activity as a real estate broker.

Mr. MacDonald has filed a Motion for a Continuance on the basis that on June 10, 1996, he requested a hearing on the temporary cease and desist order which has not been held. He also states that he has filed a Motion to Stay the Temporary Cease and Desist Order, which also has not been heard. In addition, MacDonald filed a Motion for Discovery which is not appropriate in this injunction hearing, but more appropriate for a hearing before the Commission.

FINDINGS OF FACT

Based upon the testimony and evidence presented, I make the following findings of fact, taking into consideration the burden on the parties to establish their respective cases by a preponderance of the evidence, and taking into account the credibility of the witnesses:

1. The ALJD has subject matter and personal jurisdiction in this injunction proceeding.

2. The parties stipulated to the authenticity of the documents presented by the Petitioner.

3. Mr. James MacDonald is a licensed real estate broker and is the broker- in- charge for Realty Associates.

4. Pursuant to the Temporary Cease and Desist Order issued by the Real Estate Commission dated May 29, 1996, MacDonald and Realty Associates were required to use an independent escrow agent to collect, deposit and retain all monies involved in real estate transactions.

5. Dennis G. Bond was the escrow agent responsible for carrying out these duties. On August 3, 1996, Mr. Bond asked to be relieved as escrow agent and he was discharged by MacDonald and the Commission was so informed.

6. On numerous occasions, MacDonald attempted to obtain another escrow agent and the Commission did not approve the selection by MacDonald.

7. During the months of June and July, on at least three occasions, earnest money derived from real estate contracts were cashed or deposited in non-escrow accounts and without being given to the escrow agent.

8. In some transactions, the documents and signatures were not MacDonald's.

9. MacDonald has admitted that as broker-in-charge he was responsible for assuring that the escrow monies were accounted for properly.

10. MacDonald has been cooperative with the Real Estate Commission in providing information relating to his escrow accounts during its investigation.

11. MacDonald presented numerous documents, which he has voluntarily disclosed, other transactions evidencing irregular activities occurring at Realty Associates by other persons employed at Realty Associates. He has also discussed these matters with the Commission and specific actions of these persons.

12. MacDonald has also fired some employees that may have been involved in these transactions in which earnest money checks were cashed or improperly deposited. He has attempted to repay money to those who may have been defrauded by sales associates.

13. There was no evidence presented by any checks returned for insufficient funds. Mr. MacDonald specifically presented evidence to demonstrate that his account was charged fees for checks payable to him which he deposited that were returned for insufficient funds.

14. Mr. MacDonald has not had formal charges filed against him by the Commission.

15. The Real Estate Commission meets once a month but may only conduct hearings on disciplinary matters or other hearings quarterly.

16. The investigation has been ongoing for over three months. The request for a hearing on the temporary cease and desist order has been pending for at least three months.

CONCLUSIONS OF LAW

Rule 65 of the South Carolina Rules of Civil Procedure governs the issuance of injunctions and temporary restraining orders. It provides that a temporary restraining order must not be issued without notice to the adverse party unless it clearly appears that immediate and irreparable injury, loss or damage will result before notice can be served and a hearing scheduled. See Baines v. City of Danville, 337 F.2d 579 (4th Cir. 1964), aff'd 384 U.S. 890 (1966) (an ex parte application for a restraining order may be granted only where it appears that the applicant will suffer irreparable injury before notice to the adverse party and a hearing can be had.)

In the present case, a full hearing was conducted after notice to MacDonald. Even though the Department seeks a temporary restraining order, the evidence and testimony presented will be judged as if a request for a temporary injunction. Rule 65 sets forth the grounds for a temporary injunction. Temporary injunctions are equitable in nature and committed to the discretion of the court and may be granted when: (1) a likelihood of irreparable injury if the injunction is not granted; (2) a likelihood of success on the merits; and (3) no adequate remedy at law exists.

The Commission has certain duties and responsibilities that it may perform pursuant to S. C. Code Ann. § 40-57-170(C) (Supp. 1995). Section 40-57-170(C)(2) states the Commission may make findings of fact in writing that the public interest will be irreparably harmed by delaying issuing an Order and in such case, may issue a Temporary Cease and Desist Order. Prior to issuing a Temporary Cease and Desist Order, the Commission, whenever possible, by telephone or otherwise, shall give notice of the proposal to issue a cease and desist order to the person. Every temporary Cease and Desist Order will include in its terms a provision that upon request, a hearing will be held promptly to determine whether or not it becomes permanent.

In this case, a temporary Cease and Desist Order was issued by the Commission on May 29, 1996. By the terms of that Order the Commission made findings based upon public complaints and affidavits and other documents that had been generated by investigators within the commission. The Commission ordered that James E. MacDonald and Realty Associates be temporarily enjoined and prohibited from making any payment from any Realty Associates real estate trust account, other than by certified cashier's check; that they also be temporarily enjoined and prohibited from engaging in any real estate transactions unless an independent escrow agent collects, deposits, and retains all monies involved in the transactions and that the escrow agent be a licensed broker or attorney, in good standing, approved by the Real Estate Commission for purposes of acting as an escrow agent. And that upon timely written request, a public hearing will be held promptly to determine whether or not the order becomes permanent.

On June 10th, Mr. MacDonald filed an appeal from Temporary Cease and Desist Order, wherein he demanded strict proof of the allegations contained in the Order and requested that a hearing be held. He also stated that information relied upon by the Commission was based upon false or misleading information. A hearing was initially scheduled in June, and upon Respondent's request was continued. The Commission would not conduct a hearing again until October of 1996, three months after the date of the request.

Under S.C. Code Ann. § 40-57-180 (Supp. 1995), before the Real Estate Commission can refuse or suspend or revoke a license or before the issuance of a public or private reprimand and assessing any fines, the Commission shall notify the applicant or licensee of the charges against him and must grant him an opportunity to be heard. The hearing must be held not less than 30 days nor more than 90 days after the applicant or licensee is notified of the charges against him. If the charges are brought against the salesman, the broker must also be notified of the charges. A hearing on the charges must be in the time and place designated by the Commission and must be conducted in accordance with the state administrative procedures act. The hearing must be attended by at least five members of the Real Estate Commission, including the member from the Congressional District in which the applicant or the licensee resides.

Counsel for the Department stated that no formal charges have been brought by the Commission against Mr. MacDonald and Realty Associates, even though the investigation has been continuing for more than three (3) months. The Commission decision to issue a temporary cease and desist order was based upon the number of complaints made against MacDonald and Realty Associates. Based upon initial investigation, it was evident to the Commission that irregularities existed in the handling of money held on behalf of the public and the likelihood of harm and injury to the public was ongoing.

Of the allegations made by LLR, the only ones established were that funds had been deposited in non-escrow accounts and that MacDonald failed to maintain earnest money in an escrow account. The Commission has established that the conduct engaged in by Realty Associates and the failure of Mr. MacDonald, as broker-in-charge, to have knowledge of activity regarding the escrow account demonstrates the likelihood that the public is being defrauded and that risk is likely to continue.

The Commission has also satisfied the second requirement for the issuance of an injunction. The allegations presented to the Court and the evidence cited by the Real Estate Commission in its Temporary Cease and Desist Order establish a prima facie case that Mr. MacDonald and Realty Associates have violated provisions of Title 40, Chapter 57 regulating real estate brokers. When a prima facie showing has been made, a temporary injunction will be granted without regard to the ultimate termination of the case on the merits. Columbia Broadcasting System v. Custom Recording Co., 258 S.C. 465, 189 S.E.2d 305 (1972).

Thirdly, the Commission must show that it has no adequate remedy at law. There are other remedies available to the Commission to resolve this matter. Specifically, S.C. Code Ann. § 40-57-170(C)(1) (Supp. 1995) states that Real Estate Commission may issue an order requiring a person to cease and desist from any unlawful practice and to take such affirmative action in the judgment of the commission to carry out the purposes of the chapter. If, after notice and hearing, the commission determines that a person has: violated any provisions of the chapter; violated any lawful order or rule of the commission; or that the person is directly or through any agent or employee knowingly engaged in false, deceptive, or misleading practices in the sale or rental of real estate, including advertising and promotions. The Commission has the obligation to conduct a hearing on any cease and desist orders. Mr. MacDonald has not been given a hearing on the cease and desist order. The statute establishing the real estate commission does not require that they meet only once a quarter or once a month. It is incumbent upon the real estate commission to meet as often as necessary to address the hearings and charges that are pending before its real estate agents, and they must do so in a timely manner. The Commission has the power to issue permanent cease and desist orders or take other action to carry out the purposes of the regulatory scheme for real estate brokers. And that is the appropriate remedy.

Although, the Department has not established a sufficient basis to suspend Mr. MacDonald's license pending further disciplinary action, there has been sufficient evidence presented for an injunction to enforce the temporary cease and desist order.

ORDER

Therefore, based upon the Findings of Fact and Conclusions of Law, it is hereby ORDERED,

that the Real Estate Commission and Mr. MacDonald together to select an escrow agent who will handle all funds requiring to be held in escrow. An escrow agent must be selected not later than Friday, September 20, 1996. The Real Estate Commission shall inform both the escrow agent and Mr. MacDonald in writing of the responsibilities and duties of each (MacDonald and the escrow agent) with respect to the processing and handling of funds to be maintained in escrow. Any account established for escrow purposes must be set up by the escrow agent on behalf of Realty Associates with only the escrow agent having authority on the account. In the event that the Real Estate Commission and Mr. MacDonald cannot agree on an escrow agent, both must submit a list to me from which an escrow agent will be selected.

It is further ORDERED that, all employees or salespersons and/or other brokers that may be employed by Realty Associates must be made aware of the fact that all transactions regarding contracts and funds for escrow or earnest money must be delivered to the escrow agent in a manner designated by the agent.

It is further ORDERED, that James E. MacDonald and Realty Associates are enjoined and restrained from obtaining cash or certified checks from funds derived from real estate transactions which are escrow funds; or depositing any monies from real estate transactions which are required to be held in escrow in any bank account not specifically designed for escrow funds. James E. MacDonald and Realty Associates are further enjoined and restrained from handling any funds derived from real estate transactions which are to be held in escrow. The escrow agent must collect, deposit and retain all monies and copies of the documents which give rise to the escrow funds.

It is further ORDERED, that at the Real Estate Commission meeting scheduled for September 18, 1996, the Commission shall establish a hearing date for Mr. MacDonald regarding the cease and desist order, which must be conducted not later than October 23, 1996 and an order issued on the hearing not later than October 30, 1996, and with respect to any pending disciplinary actions that are pending against him. This hearing must have priority on the hearing calendar.

AND IT IS SO ORDERED.



______________________________

ALISON RENEE LEE

Administrative Law Judge



September _____, 1996

Columbia, South Carolina.


Brown Bldg.

 

 

 

 

 

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