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37. Restitution

Kostika v. Cuomo, 41 N.Y.2d 673

164 DOS 92 Matter of Christiana & Manor Homes by Blake - offer to refund remaining escrowed funds is a mitigating factor, but complete restitution of all funds received is ordered

5 DOS 93 Matter of Mansher & Gold East Realty - requirement of restitution may be imposed even where licensee has obtained money through court awarded judgment (citing Department of State v. Fitzsimons, 3/6/72, conf'd subnom Fitzsimons v. Department of State, 40 A.D.2d 843) and certainly may be imposed where the receipt of money is the result of a settlement

6 DOS 93 Matter of Cornell Associates Realty -requirement of restitution of deposit held by developer corporation controlled by representative broker of the listing broker corporation which dealt with the consumers. "Unity of interest" such that for the purposes of the residential development the corporations were not "truly separate entities." No mention that consumers had lost small claims proceedings and had failed to persuade Department of Law's Bureau of Consumer Frauds that the deposit should be returned

86 DOS 93 Matter of DOS v. Winograd - undisclosed dual agent for tenant and subtenant; failure to provide copy of sublease violates 19 NYCRR §175.1; no suspension of broker who has no knowledge at time of event or retention of proceeds, but liability for own misconduct; refund unearned commission

128 DOS 93 Matter of DOS v. Vuksanaj - motion to conform pleadings to proof granted where (i) additional evidence wouldn't have been presented if the charge had been stated in the complaint and (ii) issue was actually litigated and was within the "broad framework of the pleadings"; broker's authorization to execute lease on behalf of landlord must be in writing to be valid (G.O.L. §5-703); no commission earned on void lease (due to lack of written authority for broker to sign for landlord); broker is undisclosed "double agent" - thus "fails to make clear" for which party he is acting (175.7); broker is not "managing agent" under NYC Rent Stabilization Code unless (i) broker has ownership or financial interest in property or (ii) performs managerial duties; separate escrow account (§175.1) not required when broker is not holding escrowed funds; holding funds overnight does not trigger requirement for escrow account (returned next day upon demand); unlicensed name used in commission agreement but lack of intent to mislead considered in mitigation; restitution of unearned commission

1 DOS 94 Matter of ERA Faza Realty - DOS is not divested of jurisdiction by voluntary surrender of license or expiration of license if action occurred while licensed, while an applicant for a license, or while eligible to automatically renew per RPL §441(2); requirement of informed consent to dual agency; concealment, misrepresentation and failure in seeking to purchase for own account (2 transactions arranged - sale to licensee and resale at profit to customer, who was qualified for mortgage, but who seller was told had failed to qualify); disgorge profit and commission; fee not related to performance of legitimate service; representative broker must be corporate officer and is vicariously liable for wrongful act of associated salesperson under RPL §442-c; restitutionnot attributed to corporate broker where no proof that funds illegally obtained were collected by or in any way benefitted the corporation; DOS has no power to assess damages; representative broker not required to supervise another representative broker and not liable for misconduct of another representative broker who meets test of RPL §442-c; complaint dismissed as to other representative broker

CRC #454 Matter of DOS v. Valladares, Consent Order - payment of buyer's closing costs out of commission proceeds is unlawful commission splitting RPL §442; unlicensed business name; failure to make clear agency relationship; restitution of $9,600 plus $1,100 interest; fine of $1,000 or suspension until compliance

Matter of Donati v. Shaffer (83 N.Y.2d 828) DOS has authority to order payment of interest on restitution; disciplinary determination does not shock the judicial conscience

17 DOS 90 Amended (50 DOS 94) Matter of DOS v. Donati - licensee may be required to pay interest on restitution; surrender of license which is accepted by DOS while appeal pending is deemed to satisfy period of suspension; on remand, may not raise new arguments not raised in Article 78 proceeding

CRC #375 Matter of DOS v. Murat, Consent Order - failure to hold deposit in escrow violation 19 NYCRR §175.1; failure to pay judgment violation RPL §441-c; drafting binder is unauthorized practice of law and violates Judiciary Law §478; restitution of $2,800; fine of $2,500

CRC #377 Matter of DOS v. Bell, Consent Order - improper acting as principal and agent in same transaction; purchasing property listed with principal; retaining of unlawful commission; restitution $510; two-month suspension

117 DOS 94 Matter of Fried - fraudulent practice in procuring loan from client, to be repaid out of commission when transaction closed; failure to disclose outstanding debts owing to broker for commission advances previously received; inability to repay is no defense; restitution not available in licensing proceeding, it is incidental to primary purpose of licensing; application for renewal denied

2 DOS 95 Matter of Wittman - agency law forbids acting concurrently as agent and principal; broker must terminate agency relationship with seller before assuming role as buyer; same rules apply to salesperson; unlawful and unearned commission; restitution of $510

12 DOS 95 Matter of Morse - respondents' testimony which is inconsistent with documentary evidence is rejected in its entirety; salesperson failed to advise tenant of landlord's credit verification requests, causing them to lose half of their deposits; dual agency without informed consent not established, as licensee signature in space for landlord's was only intended to show who the broker was in the transaction; no failure to make escrow deposit where tenant knew money was to be delivered to landlord; failure of tenant's agent to advise of material information that in delivering deposit to landlord the tenant might lose money; use of unlicensed name; vicarious liability of broker for salesperson misconduct, broker may be fined even in absence of knowledge of salesperson's misconduct; restitution required of broker

13 DOS 95 Matter of Skydell - jurisdiction to adjudicate after expiration of license where eligible to renew; collateral estoppel as to fact findings by Division of Housing and Community Renewal; liability of broker for actions of partnership in which he was general partner irrespective of actual knowledge of wrongful acts; DOS not empowered to order restitution of illegal rent overcharges; failure to pay a fine may be challenged only in a subsequent disciplinary hearing; no direct liability for non-participation and un-involvement in corporate acts; no vicarious liability of corporate officers, directors or shareholders for wrongful acts of corporation; actual knowledge required for vicarious liability; broker presumed to know the law; failure to establish representative broker was directly responsible or vicariously liable for failure to disclose ownership interest in violation of 19 NYCRR §175.6; failure to deliver duplicate original of lease in violation of 19 NYCRR §175.12; retaining an unearned fee in violation of RPL §441-c; financial inability to pay judgments is good defense to charge of willful failure to satisfy judgment; efforts to meet obligations and refusal to file for bankruptcy demonstrate willingness to attempt to pay debts; pleading notconformed to change availing or failure of supervision, as these charges were not with in the broad composition of complaint and not actually litigated

14 DOS 95 Matter of Myers - broker who assists buyer in obtaining mortgage on other property to facilitate down payment is agent of buyer; broker is seller's agent in purchase transaction; as buyer's agent, depositing of down payment in his operating account violates 19 NYCRR §175.1; as seller's agent, depositing in operating account does not violate 19 NYCRR §175.1; conversion of deposits, but no proof of grand larceny as no proof to permanently deprive; fraudulent practices in failing to forward deposit; where only commission is for mortgage, no proof of unearned commission; vicarious liability of corporate licensee for acts of representative broker; restitution of money to which not entitled, with interest

15 DOS 95 Matter of Gafni - jurisdiction of DOS; deposit money continues to be property of prospective buyer until contract condition is achieved; unlawful retention is larceny; fraudulent practice of illegal retention of deposits, but no proof of criminal intent essential to prove fraud; failure of proof of retention of unlawful commission; vicarious liability of corporation for acts of representative broker; no authority to award damages; restitution with interest is required ($2,500; $3,000; $1,250 and $2,500)

24 DOS 95 Matter of Seplow - disciplinary charge jurisdiction where licensee's renewal has been previously denied; proof of service of process; agency relationship and duties; fraud in sale of cooperative apartment, including false information about particular sale and willful non-disclosure of material information; failure to obey buyer's obvious intent to have deposit treated as funds to be held in escrow as payments to seller; conversion; rules applicable to supplemental pleadings - absent surprise or prejudice, motion to file and serve could be granted on day of hearing, but here respondent doesn't appear, so supplemental complaint dismissed without prejudice; DOS fails its burden of proof as to extortion and retention of unlawful commission and unauthorized practice of law; when respondent became optionee to purchase subject matter, agency relationship ceased to exist; fiduciary duty precludes respondent from acting simultaneously as agent and principal in a transaction; restitution of $35,000 deposit plus interest at legal rate for judgments

35 DOS 95 Matter of Gooding - jurisdiction; amendment of complaint as of right (CPLR 3025[a]); second amendment of complaint by permission; plea of guilty with explanation; commingling of deposits in violation of 19 NYCRR §175.1; conversion of escrow funds; failure to render account is violation of 19 NYCRR §175.2; retention of unearned management fee; restitution of $28,233.85 plus interest at judgment rate

50 DOS 95 Matter of Romano - relocation of principal business address without notice results in automatic suspension; illegal to demand and receive commissions while licensed salesperson; restitution of illegal commissions; failure to settle, so proper to impose higher fine

86 DOS 97 Matter of DOS v. Samarel - unlicensed activity; requirement of restitution; administrative hearing may be held ex-parte where there is evidence that notice of the place, time and purpose of the hearing was properly served; salesperson demonstrates extreme untrustworthiness when he removes personal property from home without owner’s consent; salesperson demonstrates incompetency when he engages in regulated brokerage transactions during period when license expired; license revocation; restitution of misappropriated property and return of commissions received for activities when unlicensed, with interest, as precondition to application for relicensure

CRC #96-0636 Matter of DOS v. Marolda Properties, Inc., Consent Order - failure to timely file change of association notices for salespersons; $500 fine; recital of restitution paid without stating offense

CRC #96-2220 Matter of DOS v. Costanza, Consent Order - agreement to split a commission in violation of RPL §442; payment of restitution of $750 plus interest

359 DOS 97 Matter of DOS v. Lugo - deposits; adjournments; DOS fails its burden of proof; fraudulent practices; due process; ex parte hearing is permissible upon proof of proper notice of hearing; DOS fails its burden to prove commingling of funds; unlawful retention of deposit monies in two separate transactions is a fraudulent practice; affirmative misrepresentation of fact constitutes fraud; broker fails to pay judgment and failed to establish inability or other valid reason for failure to satisfy same; broker obtains and retains fee that was not related to the actual performance of some legitimate service by him on behalf of his principal; broker’s license revoked and restitution, with interest, directed for illegally obtained commissions and to satisfy judgment

35 DOS 98 Matter of DOS v. Harry Home Sales, Inc. - breach of fiduciary duty; vicarious liability; fraudulent practices; net listing agreement; modification of listing agreement originally providing for brokerage commission of 7% of sales price ($125,000) to a $25,000 payment to the broker to be allocated as commission and for repairs to the property with the seller to receive the $100,000 balance, is not a net listing agreement in violation of 19 NYCRR 175.19 since amount to be retained by broker is not for commission (brokerage fee not based upon difference between purchase price and specified net amount to be paid to the seller); such agreement not unconscionable due to inadequacy of consideration where broker was undertaking monetary risk and could lose financially; broker breaches fiduciary duties of reasonable care, skill, diligence and judgment where he incorrectly advises seller that, to qualify for an FHA mortgage, specific repairs would have to be made to the property when such repairs were not required and seller thereby assumed unnecessary financial obligation; broker breached fiduciary duty of full and fair disclosure when broker became aware that repairs were unnecessary and failed to advise seller thereof; broker’s breach of fiduciary duty resulted in benefit to the broker to the financial detriment of his principal; broker’s breach of fiduciary duties resulted from negligent acts equating to incompetence; broker is not entitled to fee taken in transaction and is liable for the full amount of damages caused by the breach; corporate broker is vicariously liable and law imputes to it actual knowledge of and responsibility for the cognitional acts of its representative broker; restitution in the amount of $22,000 plus interest; failure to present proof of satisfactory compliance will result in license suspension until proof of compliance is submitted

CRC #95-0868 Matter of DOS v. Persaud, Stipulation -- corporate broker and representative broker granted 2-month extension to refund $22,000 plus interest and to provide proof of compliance; failure to comply will result in license suspension until compliance

CRC #96-3666 Matter of DOS v. Wheeler, Consent Order -- corporate and representative brokers, without admission, agree to pay restitution in the amount of $590 and, in any event, if restitution is not timely made, brokers consent to entry of judgment against them in the sum of $1,000

CRC #97-3092 Matter of DOS v. Anninos, Consent Order -- corporate broker and representative broker, without admission, pay total fine of $1,000; must forward an entire original file concerning management of an apartment building and all keys to property owner and pay restitution in the amount of $3,054.20

CRC #99-1452 Matter of DOS v. Wright, Consent Order - without admission of untrustworthiness or incompetence, broker agrees to pay restitution in the amount of $500.00

32 DOS 00 Matter of DOS v. Pahl - bad check; forgery; failure to cooperate with DOS investigation; restitution; salesperson commits conversion of funds forging client’s signature to a refund check; issuance of bad check for converted funds; fraudulent business practices; failure to cooperate with DOS investigation by failing to respond to investigator’s request letter; salesperson may be required to return money received to which she is not entitled; salesperson’s license revoked

CRC #99-0681 Matter of DOS v. Dudkevich - failure to pay judgment in a timely manner; broker to pay restitution in the amount of $6,102.50; broker shall not apply to renew expired license for 10 months or until she has complied with all terms of the consent order

CRC #99-1168 Matter of DOS v. Cruz, Consent Order - restitution in the amount of $800.00 and fine of $500.00

CRC #99-1680 Matter of DOS v. Kaleck, Consent Order - $750.00 fine and restitution in the amount of $1,151.75

CRC #98-0324 Matter of DOS v. Ronning, Consent Order - restitution; without admission of charges, broker consents to restitution of $9,000.00

357 DOS 02 Matter of DOS v. Elias - failure to appear at hearing; failure to pay judgment; proper business practices; deposits; DOS fails its burden of proof; restitution; ex parte hearing may proceed upon proof of proper service; respondent failed to fully satisfy a judgment obtained against him without showing that he was unable to do so; a rental broker is entitled to compensation only after procuring a rental agreement between tenant and landlord; retaining part or all of the deposit without obtaining a rental agreement demonstrates untrustworthiness and incompetency; restitution may be ordered as a condition to retention of the broker’s license where he has received money to which he is not entitled; unlawful for broker to operate real estate brokerage business at an address other than that which was stated on his application; broker operated his real estate business out of an address prior to obtaining a license for that address; DOS failed to prove that respondent commingled and converted deposits; real estate brokers license suspended for four months and an additional period of time until respondent proves he has paid the balance of the judgment

05 DOS APP 02 Greenberg v. DOS – administrative appeal; hearsay; restitution; hearing record is not expanded although Secretary has plenary authority to do so; acceptance of hearsay evidence is within the discretion of the ALJ; penalty other than revocation is considered in light of reversal of one of the findings of the ALJ; return of entire fee on continuing contractual relationship for the management of apartment rentals is not warranted; restitution for excessive fees is warranted; determination that broker breached his fiduciary duties of reasonable care, skill, diligence and judgment, that he charged excessive and unearned fees and violated RPL §443 affirmed; determination that broker violated RPL §442e(5) reversed; order of revocation modified to sixty days suspension and payment of restitution of $345.00

452 DOS 02 DOS v. Kim – unlicensed activity; restitution; engagement in regulated real estate activities while unlicensed; demanding compensation from a principal for real estate work while unlicensed; bringing and maintaining a legal action for commissions while unlicensed; ordered to refund $3,015.00 and pay $1,000.00 fine

845 DOS 03 DOS v. Delia - disclosure of agency relationships; failure to cooperate with DOS investigation; failure to pay judgment; restitution; broker accepts deposits in two rental transactions and fails to refund deposits when prospective tenants fail to obtain lease with landlord; broker breaches fiduciary duty to tenant/client when he falsely tells tenant/client that he owns house to be rented; broker fails to pay judgment; broker lies to DOS’s investigator thereby breaching his duty to cooperate with DOS investigation; broker maybe ordered to return monies he is not entitled to, including monies that have been transferred by the broker to a third party; broker ordered to refund deposits in the amount $1,600.00 and $1,300.00; as broker’s license lapsed and was not renewed, future application shall be acted upon as if broker’s license had been revoked effective as of date of decision

979 DOS 06 DOS v. Total Realty of Westchester- failure to comply with consent order, failure to timely post bond or undertaking; failure to satisfy judgment, respondent provided with three (3) months to arrange for release of funds deposited with court or make direct payment of judgment or license will be suspended

1009 DOS 06 Matter of Younge – salesperson managed real estate and collected rents without broker knowledge (RPL §440[3]), request for or on behalf of broker, failure to account, restitution, 6-month suspension

1021 DOS 06 matter of Godard – fraudulent practices, altered check, unlicensed corporation, restitution, 6-month suspension

3 DOS 07 Matter of Clark – failure to refund deposit, bad check, equivocal evidence on agency status and disclosures, untrustworthiness, restitution and $1,000 fine

20 DOS 07 Matter of Bronx County Realty Corp. – failure to satisfy judgment; failure to cooperate; restitution and $2,000 fine

136 DOS 07 DOS v. Burkhardt- Failure to provide agency disclosure; property offered without consent of owner; failure to refund deposit; failure to cooperate with DOS investigation; restitution as condition to relicensure

1955 DOS 07 Matter of Hannays- broker applicant; improper rental practices (security deposit, escrow account, commission); unlicensed name; dishonesty; fraud and misrepresentation with intent to injure; commingling funds; escrow account violation 19 NYCRR 195.1; credible respondent testimony re: lack of good faith by complainant; unlicensed brokerage activity; must refund $1,600 deposit and pay fine of $1,000 before consideration of application for brokerage license

143 DOS 09 Matter of Sebastian – broker; dismissal of charge of wrongful procurement of exclusive agency agreement; backdating documents §175.12; duplicate original documents; unearned fee; obligation to confirm whether there was existing buyer representation agreement; $1,000 fine; $2,000 fine for untrustworthy conduct in failing to confirm existence of buyer agency and subjecting client to unearned commission; restitution of judgment by confession

237 DOS 09 Matter of Cheung – salesperson; unlicensed activity; direct receipt of deposits; revocation; restitution if reapply

433 DOS 09 Matter of Poto – associate broker; direct receipt of commission; misrepresentation; failure to pay judgment; revocation and restitution if reapply

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