B.J. Hawes v. BPOA, State Real Estate Commission ( 2019 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Bryan J. Hawes, :
Petitioner :
:
v. :
:
Bureau of Professional :
and Occupational Affairs, :
State Real Estate Commission, : No. 788 C.D. 2018
Respondent : Argued: February 11, 2019
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE ANNE E. COVEY, Judge (P.)
HONORABLE CHRISTINE FIZZANO CANNON, Judge
OPINION
BY JUDGE FIZZANO CANNON FILED: March 6, 2019
Bryan J. Hawes (Hawes) petitions for review of the May 11, 2018 order
of the Bureau of Professional and Occupational Affairs (BPOA), State Real Estate
Commission (Commission) revoking his real estate salesperson license and
imposing a $1,000 fine for obtaining his license by false representation in violation
of Section 604(a) of the Real Estate Licensing and Registration Act (Act).1 Upon
review, we affirm.
1
Section 604(a) of the Act provides, in pertinent part:
The commission shall have power to refuse a license or registration
certificate for cause or to suspend or revoke a license or registration
certificate or to levy fines up to $1,000, or both, where the said
license has been obtained by false representation, or by fraudulent
act or conduct . . . .
Act of February 19, 1980, P.L. 15, as amended, 63 P.S. § 455.604(a) (emphasis added).
The following is a summary of facts found by the Commission.2 Hawes
was the owner and President of a company entitled Financial Management Advisory
Services, Inc. (FMAS), and he was licensed as an investment advisor and insurance
salesman by the Commonwealth of Pennsylvania. Findings of Fact (F.F.) 4. During
his tenure as owner and President of FMAS, he accepted more than $2 million from
consumers for investments and converted those monies to his personal use. F.F. 5.
On April 9, 2004, Hawes pled guilty in federal court to two counts of mail fraud, a
felony. F.F. 6. Following his guilty plea, the United States District Court for the
Western District of Pennsylvania (federal court) ultimately sentenced Hawes to a
term of imprisonment, followed by a period of supervised release, and ordered
Hawes to pay an assessment and restitution to consumers in the amount of
$2,276,565.31. F.F. 7-9. After his release from prison, Hawes commenced working
as a telemarketer and an inside agent for a company soliciting real estate listings.
F.F. 13.
On May 30, 2013, Hawes applied for a real estate salesperson license
with the Commission. F.F. 14. The license application asked, “[h]ave you ever . . .
been convicted of any felony or misdemeanor in a local, state or federal court or in
a foreign country?” F.F. 15. Hawes responded, “[n]o.” F.F. 15. At the time Hawes
responded to the question, Hawes was still making payments of restitution resulting
from the federal court’s sentence and “knew that his answer relating to criminal
history was false.” F.F. 16 & 17. On May 31, 2013, the Commission issued Hawes
a license to practice as a real estate salesperson, license number RS322523. F.F. 1
& 2.
2
The Commission is the ultimate finder of fact. Perez-Rocha, M.D. v. Bureau of Prof’l
and Occupational Affairs, State Bd. of Med., 933 A.2d 1102, 1108 (Pa. Cmwlth. 2007); see
Benford v. State Real Estate Comm’n, 300 A.2d 922, 925 (Pa. Cmwlth. 1973).
2
Three years later, on May 31, 2016, BPOA filed an order to show cause
against Hawes, alleging that he failed to disclose a felony conviction in his initial
license application, and seeking revocation of the license and the payment of a fine.
F.F. 18; Reproduced Record (R.R.) 68b & 83b.3 Hawes, through counsel, filed an
answer wherein he asserted that he “believed that his criminal charges, brought
nearly a decade before his application, were behind him and did not need to be
reported” and “realizes now that the charges should have been reported at the time
of application and seeks leniency from the Commission in light of his rehabilitation.”
F.F. 19 & 22; R.R. 139b.
After a hearing on the matter, the hearing examiner issued a proposed
order recommending that the Commission revoke Hawes’s salesperson license and
impose a civil penalty in the amount of $1,000. Proposed Adjudication and Order,
dated 4/17/17. With respect to the violation, the hearing examiner reasoned:
Section 604(a) only requires that [BPOA] prove by a
preponderance of evidence that [Hawes] made a false
representation on his [i]nitial [a]pplication. [BPOA] is not
required to prove that the representation was knowing,
intentional or fraudulent. Therefore, [BPOA] has satisfied
its burden of proof.
Id. at 10 (emphasis added). With respect to the license revocation, the hearing
examiner reasoned:
[Hawes] concealed his criminal history from the
Commission. Not only was the question on the form clear
and unequivocal, the instructions that follow the question
would alert any reasonable individual that he was required
3
The reproduced record here is numbered with pages designated as “b” though
Pennsylvania Rule of Appellate Procedure 2173 requires pages to be designated by a small “a.”
Pa.R.A.P. 2173.
3
to disclose relevant documentation. [Hawes’] testimony
is not deemed credible or candid by the Hearing Examiner.
Id. at 12. The hearing examiner further explained that the $1,000 fine was
appropriate because “a civil penalty is necessary as a deterrent to [Hawes] and
especially to others that they should not conceal relevant information from the
Commission, and conversely to promote the ethic of full disclosure.” Id. at 14.
After the hearing examiner issued his proposed adjudication and order,
Hawes filed exceptions, which BPOA opposed. The Commission considered the
exceptions and issued its final adjudication and order adopting the hearing
examiner’s findings of fact, conclusions of law and reasoning in total. Final
Adjudication and Order dated 5/11/19 at 2. The Commission, however, added
additional discussion to address Hawes’s exceptions, stating:
[Hawes] obtained his real estate salesperson license by
false representation by failing to disclose his prior felony
convictions. Failing to make this disclosure of felony
fraud convictions is very serious, and shows that [Hawes]
acted dishonestly. [Hawes’s] failure to disclose his felony
conviction took away the Commission’s opportunity to
protect the public and examine whether [Hawes] should
have been granted a license in the first place. The
Commission has the power to suspend or revoke a license
obtained by false representation.
The Commission fully agrees with the hearing examiner
that it is appropriate to revoke [Hawes’s] license and levy
a civil penalty of $1,000 to deter [Hawes] and others from
committing similar misconduct. Here, the Commission
finds that in order to fulfill its duty as protectorate of the
public and to the integrity of the profession it needs to send
a clear message about the severity of [Hawes’s] violations
– both to the citizens of the Commonwealth and to
[Hawes] himself.
4
Id. at 4-5. Hawes petitioned this Court for review of the Commission’s order.4
Before this Court, Hawes presents several arguments for our review
which can be reduced to two primary arguments. 5 First, Hawes argues that the
Commission erred as a matter of law when it concluded that BPOA did not have to
prove that the representation was “knowing, intentional or fraudulent” to be deemed
a violation of Section 604(a) of the Act. Hawes’s Brief at 23. Hawes asserts that he
made an “innocent mistake” when he responded “no” on the license application
because “the official Pennsylvania State Police criminal background report” that he
had to submit with the application stated that he “had no criminal record in
Pennsylvania.” Id. at 24. Relying on this report, Hawes “answered the questions on
the application truthfully based on the information he had available.” Id. at 25.
Hawes further argues that “his state of mind during the application process was that
the lengthy passage of time caused the information to be dropped off,” such that it
was no longer part of his criminal record, and therefore, the felonies did not have to
be disclosed. Id. at 12-13.
4
This Court’s review is limited to determining whether the Commission committed an
error of law, abused its discretion or made factual findings not supported by substantial evidence.
2 Pa. C.S. § 704; Smith v. Real Estate Comm’n, 450 A.2d 301, 303 (Pa. Cmwlth. 1982).
5
Hawes also contends that, at the hearing, the hearing examiner indicated that he would
access application decisions not in evidence to see if there were any examples wherein the
Commission granted or denied applications in similar cases. Hawes’s Brief at 19-20. Hawes
argues that he does not know whether the hearing examiner considered application decisions “not
in evidence” and that “[t]he consideration of application decisions not found in the record, the
subsequent absence of application decisions from the record, and their subsequent absence from
the [p]roposed [a]djudication and [o]rder” violates his constitutional due process rights. Id. at 22.
Here, the Commission explained in its final adjudication and order that it reviewed the
record of the entire case and that “since no such application decisions are referenced nor discussed
in the [p]roposed adjudication and [o]rder, this is an indication that the [h]earing examiner did not
consider any such cases in his decision, and did not abuse his discretion.” Final Adjudication and
Order at 2. We agree.
5
Section 604(a) of the Act expressly provides that the “[C]ommission
shall have [the] power to . . . suspend or revoke a license . . . or to levy fines up to
$1,000, or both, where the said license has been obtained by false representation, or
by fraudulent act or conduct.” 63 P.S. § 455.604(a) (emphasis added). The plain
language of the Act provides that the representation must be “false.” Hawes
contends that this language is “ambiguous” because “fraudulent act or conduct” is a
descriptive term for what is a “false representation.” Hawes’s Brief at 26. Hawes
argues that because the language is ambiguous, the rule of lenity6 requires that this
Court interpret the language “in the light most favorable” to Hawes and against
BPOA. Id. at 28. BPOA counters that the rule of lenity does not apply here because
the language of the statute is not ambiguous. BPOA’s Brief at 13. BPOA argues
that “[Hawes] essentially argues that a false representation and an act of fraud are
one in the same . . . . Fraud requires an intent to deceive, whereas a false
representation can simply be an untrue statement. . . . The use of the word “or”
indicates that a false representation is something different from a fraudulent act or
conduct.” Id.
The Statutory Construction Act of 1972 provides that we are to construe
a statute to “give effect to all its provisions.” 1 Pa. C.S. § 1921(a). Where the words
of a statute are “clear,” the letter of the statute is “not to be disregarded under the
pretext of pursuing its spirit.” 1 Pa. C.S. § 1921(b). “Words and phrases shall be
construed according to rules of grammar and according to their common and
approved usage.” 1 Pa. C.S. § 1903(a). Further, “[w]ords having a precise and well-
settled legal meaning must be given that meaning unless there is a clear expression
6
The rule of lenity provides that where a statute is penal in nature and the language of the
statute is ambiguous, the statute must be construed against the government. McGrath v. Bureau
of Prof’l and Occupational Affairs, State Bd. of Nursing, 146 A.3d 310, 316 (Pa. Cmwlth. 2016).
6
of legislative intent to the contrary.” Stanton v. Lackawanna Energy, LTD., 820
A.2d 1256, 1261 (Pa. Super. 2003) (citation omitted). When interpreting a statutory
phrase, a court must first look for the meaning of the statute’s word or term in that
statute’s definitions, then in the Statutory Construction Act, then a law dictionary
and, finally, a standard dictionary, in that order. Cogan House Twp. v. Lenhart, 197
A.3d 1264, 1268 (Pa. Cmwlth. 2018) (citing Sklar v. Dep’t of Health, 798 A.2d 268,
276 (Pa. Cmwlth. 2002)).
Applying the rules of construction, we agree with BPOA that the
language of the statute is not ambiguous. By using the term “or,” the General
Assembly intended to provide the Commission with authority to take action against
a licensee if the license was obtained in one of two ways: (1) by false representation
or (2) by fraudulent act or conduct. Section 604(a) plainly provides that the
“representation” has to be “false.” Neither the Act nor the Statutory Construction
Act provides a definition of the term “false representation.” The term “false
representation,” however, has a precise legal meaning and is defined as
“misrepresentation.” Black’s Law Dictionary 720 (10th ed. 2014). The term
“misrepresentation” is defined, in relevant part, as “[t]he act or an instance of making
a false or misleading assertion about something” and “[t]he assertion so made; an
incorrect, unfair, or false statement; an assertion that does not accord with the facts
– [a]lso termed false representation.” Id. at 1152. The General Assembly plainly
provided that a “false representation” is sufficient for the Commission to invoke the
penalty provisions. In the absence of language in the statute requiring more, we
conclude that the Commission did not err by concluding that the Act does not require
a showing that the representation made by the licensee was “knowing, intentional or
7
fraudulent.”7 The language of the Act plainly provides that BPOA has to show that
the licensee made a “false representation” – that is, a “false or misleading assertion”
or that the assertion does not “accord with the facts” – by a preponderance of the
evidence to meet its burden pursuant to Section 604(a) of the Act.
Here, there is no dispute that Hawes had been convicted of a felony in
federal court and that he responded “no” to the question on the application asking
about whether he had ever been convicted of a felony in a federal court. R.R. 139b
& 146b. By answering “no” to the question, Hawes made a false representation.
Hawes knew that his representation was false when he completed his initial license
application, as he pled guilty to the felonies. F.F. 6 & 16; R.R. 49b-50b. The
Commission’s Finding of Fact No. 16 that Hawes “knew that his answer relating to
criminal history was false” at the time he submitted his application is supported by
substantial evidence of record. See Samuel J. Lansberry, Inc. v. Pa. Pub. Util.
Comm’n, 578 A.2d 600, 601 (Pa. Cmwlth. 1990) (explaining that “substantial
evidence” is the “relevant evidence that a reasonable mind, without weighing the
evidence or substituting its judgment for that of the fact finder, might accept as
adequate to support the conclusion reached”). Hawes testified that he pled guilty to
the felonies and that he answered “no” on the application because he assumed “the
criminal history came back that it was no longer part of the record” and that it
“dropped off the record” over a period of time. R.R. 50b & 59b. The question asked
7
We agree with BPOA that Section 604(a) does not require it to meet all the elements of a
fraud claim to show a “false representation.” Hawes does not appear to support such a construction
either. Rather, Hawes seeks an interpretation of the term “false representation” to not include “a
statement that one reasonably believed to be true.” Hawes’s Brief at 24. Based on our analysis
here, however, Hawes does not meet his proposed standard because he knew that he had pled guilty
to the felonies, R.R. 58b, but answered the question suggesting that he had no criminal history. If
Hawes’s standard applied, he would not meet it here.
8
by the Commission was whether he had “ever” been convicted of “any felony”; it
did not inquire into the status of his criminal history record. Though Hawes argues
that he made a “mistake” by responding “no” on the application because his state
police criminal record did not show his conviction, the Commission did not find this
explanation credible.8 The Commission is the final arbiter of credibility, and it is
not this Court’s function to overturn the Commission’s credibility findings. Benford
v. State Real Estate Comm’n, 300 A.2d 922, 925 (Pa. Cmwlth. 1973). Further, even
if we were to accept Hawes’s argument that he made a “mistake,” under the standard
provided by the General Assembly in Section 604(a) of the Act, the statement was
false and, thus, a false representation. Therefore, the Commission had the authority
to impose the license revocation and fine.
Further, upon examination of the application here, Hawes’s argument
is less compelling. When completing the license application, an applicant is
providing information about him or herself to the Commission. See Section 522(a)
of the Act, 63 P.S. § 455.522(a) (explaining that the application “shall contain such
information as to the applicant, as the [C]ommission shall require”). The applicant
is, obviously, in the best position to know the answers to the questions asked by the
Commission and to give a truthful and complete response. The license application,
in this case, expressly directed the applicant signing it to “swear that the information
contained herein is true and complete” and that the “Commission may rely on it
when considering [the] application for licensure.” R.R. 147b. The applicant is
8
Rather, the Commission concluded that Hawes “acted dishonestly” by failing to make the
disclosure of the felony fraud convictions. Final Adjudication and Order at 4. Though Section
604(a) of the Act does not require a finding of “intent,” by concluding that Hawes acted
“dishonestly,” the Commission found that Hawes acted with deceit, which is indicative of intent.
See Black’s Law Dictionary 568 (10th ed. 2014) (defining dishonesty as “[d]eceitfulness as a
character trait; behavior that deceives or cheats people; untruthfulness; untrustworthiness”).
9
subject to the penalties of Section 4904 of the Crimes Code, 18 Pa. C.S. § 4904,
relating to unsworn falsifications by signing the certification. R.R. 147b. Before
signing the certification, Hawes’s had a duty to ensure that the information he
submitted about himself was accurate. Therefore, the Commission did not err by
concluding that Hawes obtained his license by false representation in violation of
Section 604(a) of the Act.
Next, Hawes contends that the Commission erred when it ordered that
his license be revoked because he presented evidence of mitigating factors. Hawes’
Brief at 16. Specifically, Hawes argues that he presented evidence showing that:
there have been no complaints relating to his conduct as a licensee; he has a
“reputation for being honest and trustworthy”; he has completed in excess of 100
real estate transactions without incident; and he uses his income to pay restitution.
Id. at 16-17. Hawes further asserts that because he did not act in “bad faith” or with
“dishonesty in connection with a real estate transaction, suspension of the license
should be considered instead of a full revocation.” Id. at 17. In short, Hawes asserts
that the Commission’s penalty of license revocation is “too severe.” Id. at 18.
BPOA responds that it “has the authority to impose disciplinary
sanctions in this case” because Hawes violated the Act. BPOA’s Brief at 9. BPOA
explains that Hawes’s failure to disclose his felony convictions “is very serious and
shows that [Hawes] acted dishonestly.” Id. Hawes’s failure to disclose “took away
the Commission’s opportunity to protect the public and examine whether [Hawes]
should have been granted a license in the first place.” Id. BPOA contends that based
on Hawes’s failure to disclose his felonies, Hawes “does not possess the requisite
honesty or integrity to be a real estate salesperson as required” by the Act. Id.
10
Our scope of review governs the resolution of this argument. Our
Supreme Court has explained:
It is true that the mere possession of discretionary power
by an administrative body does not make it wholly
immune from judicial review, but the scope of that review
is limited to the determination of whether there has been a
manifest and flagrant abuse of discretion or a purely
arbitrary execution of the agency’s duties or functions.
That the court may have a different opinion or judgment
in regard to the action of the agency is not a sufficient
ground for interference; judicial discretion may not be
substituted for administrative discretion.
Slawek, M.D. v. State Bd. of Med. Educ. & Licensure, 586 A.2d 362, 365 (Pa. 1991)
(citing Blumenschein v. Pittsburgh Hous. Auth., 109 A.2d 331, 334-35 (Pa. 1954))
(emphasis in original). The weight an administrative agency assigns to evidence to
mitigate the severity of a penalty is a matter within its discretion. Burthworth v.
State Bd. of Vehicle Mfrs., Dealers & Salespersons, 589 A.2d 294, 296 (Pa. Cmwlth.
1991). While this Court is required to correct abuses of discretion in the manner or
degree of the penalties imposed, we will not, absent a manifestly unreasonable
exercise of judgment, substitute our discretion for that of the Commission, an
administrative body endowed with expertise in matters subject to its jurisdiction. Id.
Here, the Commission imposed a penalty on Hawes that is within the
scope of its authority plainly set forth in the Act. Section 604(a) gives the
Commission the power to “revoke” a license where the license has been obtained by
false representation and to impose a fine of up to $1,000. Though Hawes presented
mitigating evidence at the hearing, the Commission, adopting the hearing examiner’s
analysis, reasoned:
11
Although [Hawes] has no reported complaints or
misconduct since he obtained a license, past performance
provides little assurance of future compliance. If [Hawes]
were allowed to retain his license and he misappropriated
consumer or broker funds, the Commission’s decision
would be indefensible in light of the magnitude of
[Hawes’s] past theft. . . .
If [Hawes] had applied for a license in a profession that
did not inherently involve the handling of client funds and
the responsibility to honestly and fully disclose all
material facts related to a transaction, the risk of
permitting [Hawes] to continue licensure may not be as
compelling. However, this is a profession in which it is
imperative that a licensee handle large sums of client
money and must fully and forthrightly disclose all material
facts about the condition of real estate. In this case there
is an individual who, even if one accepts his account that
he thought felony convictions dropped off his record like
a bankruptcy, has a practice of finding a reason to believe
that he did not need to disclose his federal felony
conviction. One must ask whether [Hawes] would not be
equally likely to think of an excuse not to disclose that a
home had a history of flooding or structural damage. It
seems derelict to allow [Hawes] to retain his license after
his false representation in the application he filed to obtain
the license. If [Hawes] were permitted to continue in the
profession and misappropriated client funds, the decision
to permit [Hawes] to remain licensed would be
indefensible.
Proposed Adjudication and Order at 12-14. The Commission further explained that
Hawes requested a “suspension of six months” and that the Commission levy a fine
of $500. Final Adjudication and Order at 4. The Commission, in rejecting this
request, explained that Hawes obtained his license by failing to disclose his prior
felony convictions. Id. The Commission stated, “[f]ailing to make this disclosure
12
of felony fraud convictions is very serious, and shows that [Hawes] acted
dishonestly” and took away the Commission’s opportunity to “protect the public”
and “examine” whether Hawes should have been granted a license in the first place.
Id.
Hawes asks this Court to accept his argument that a license suspension
is more appropriate than a license revocation and issue an order to that effect.
However, to render Hawes the relief he seeks, Hawes is essentially asking this Court
to make our own judgment regarding what penalty would be appropriate for
violating Section 604(a) of the Act and then to substitute our judgment in place of
the Commission’s judgment; this we cannot do. Slawek, 586 A.2d at 365. As
provided above, the Commission provided a rational basis for its decision to revoke
Hawes’s license and impose a $1,000 fine. Because the Commission provided a
rational basis for its decision, and its sanction is within its authority, we cannot
conclude that it acted arbitrarily in the execution of its duties or manifestly abused
its discretion.
Accordingly, we affirm the order of the Commission.
__________________________________
CHRISTINE FIZZANO CANNON, Judge
13
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Bryan J. Hawes, :
Petitioner :
:
v. :
:
Bureau of Professional :
and Occupational Affairs, :
State Real Estate Commission, : No. 788 C.D. 2018
Respondent :
ORDER
AND NOW, this 6th day of March, 2019, the May 11, 2018 order of
the Bureau of Professional and Occupational Affairs, State Real Estate Commission
is AFFIRMED.
__________________________________
CHRISTINE FIZZANO CANNON, Judge