McAlpine v. Manson, 041211 AKRES, 3AN-10-06764CI
|Opinion Judge:||FRANK A. PFIFFNER Superior Court Judge|
|Party Name:||CHARLES MCALPINE, Appellant, v. GARY MANSON, STATE OF ALASKA, DEPARTMENT OF ADMINISTRATION, OFFICE OF ADMINISTRATIVE HEARINGS, and ALASKA REAL ESTATE COMMISSION, Appellees.|
|Case Date:||April 12, 2011|
|Court:||Superior Court of Alaska|
DECISION AND ORDER
Charles McAlpine appeals the Alaska Real Estate Commission's denial of his claim against the Real Estate Surety Fund. The appeal presents a first impression question as to the scope and applicability of the Surety Fund. The issue raised is whether the Surety Fund provides recovery to a real estate licensee who suffered losses when his licensed broker misappropriated commissions. The Commission determined that the Surety Fund did not cover internal disputes between real estate licensees over commissions and denied the claim. The court agrees and affirms the Commission's decision.
Charles McAlpine was a salesperson for and owner of McAlpine Investments. In 2006, he contracted with Gary Manson to serve as the company's licensed real estate broker.1 Under the contract, Mr. Manson was entitled to a $3, 000 per month consulting fee and 60% of the commissions on his own sales. The remaining 40% of such commissions would go to the company. Either party could terminate the contract upon thirty days notice.
Mr. McAlpine and Mr. Manson's professional relationship quickly deteriorated. In November 2006, Mr. Manson terminated the contract and sued the company to recover his $3, 000 consulting fee for November and $10, 000 in unpaid commissions. Mr. McAlpine counterclaimed for $27, 000 in commissions Mr. Manson wrongfully withdrew from a company trust account and for punitive damages. Mr. McAlpine alleged that Mr. Manson violated his fiduciary duty to the company by writing checks to himself from the company's trust account for commissions he was not entitled to.
Before the case went to trial, Mr. McAlpine filed a claim against the Surety Fund for payment of the wrongfully withdrawn commissions. The parties to the Surety Fund case agreed that an administrative hearing would not be necessary and that the District Court decision would be res judicata as to all findings of fact. The District Court judge subsequently ruled that Mr. Manson was entitled to $3, 000 for brokerage services he rendered in November 2006. The judge also found that Mr. Manson had overpaid himself $19, 800 in commissions but denied the punitive damages claim because there was insufficient evidence that Mr. Manson's actions were egregious, willful, or gross. Final judgment was entered for Mr. McAlpine in the amount of $16, 800.
Based on the facts as determined by the District Court, the Office Of Administrative Hearings (OAH) denied Mr. McAlpine's claims against the Surety Fund. The OAH found that Mr. McAlpine had failed to show that he had suffered losses "in a real estate transaction as a result of the…conversion of funds…."2 It reasoned that only the parties to a real estate transaction are protected by the Surety Fund and that "the governing statutes clearly contemplate that licensees who are not gaining or conveying an interest in the real property are not to be regarded as parties to the real estate transaction."3 Because the contract dispute between Manson and McAlpine was only incidental to the underlying real estate transactions, the OAH concluded that the Surety Fund did not cover Mr. McAlpine's claim. The OAH further concluded that to the extent Mr. McAlpine's losses could be characterized as losses "in a real estate transaction, " he had failed to show that the losses amounted to a conversion. Mr. McAlpine appeals both determinations.
A. Standard of Review
When reviewing an agency's resolution of questions of law not involving agency expertise, the court employs the substitution of judgment standard.4 The agency's interpretation of a statute is not binding on the court. 5 But when a statute is ambiguous, the agency's interpretation is entitled to some weight in deciding the correct interpretation.6 The court reviews an agency's factual findings under the "substantial evidence" test.7 Substantial evidence to support an agency's findings exists when there is "such relevant evidence as a reasonable mind might accept as adequate to support the conclusion."8
B. The Surety Fund Was Not Intended To Protect Licensees.
Mr. McAlpine argues that the statutory language regarding claims against the Surety Fund allows licensees, as well as consumers, to recover losses incurred as a result of another licensee's fraud, misrepresentation, deceit, or conversion of trust funds. The issue is novel in Alaska, but the question whether a licensed real estate salesperson is entitled to recover from a real estate broker's surety for misappropriated commissions has been considered in a number of other jurisdictions. The basic issue confronted by these courts was whether the statute establishing the bonding requirement or surety fund was intended for the protection of those in the real estate business as well as the public.9 If so, the salesperson may be regarded as a "person" within a statutory provision giving to any person injured by the broker's misconduct an action on the bond or surety fund. The majority of courts that have considered the question have concluded that the relevant statutes are intended to protect the public only and do not give real estate licensees recourse against the bond or surety fund.10 But some have concluded otherwise.11
Because neither Alaska's Real Estate Surety Fund statutes nor the relevant legislative history indicates an intent to include licensees within the protection of the Surety Fund, the court affirms the Commission's decision.
1. Statutory Provisions Limit the Scope of Coverage to Members of the General Public.
Although the language of Alaska's Surety Fund statutes is somewhat ambiguous regarding the scope of coverage, several provisions indicate that the Fund was not intended to protect licensees in their dealings with one another. The OAH reached the same conclusion based on the limiting language in AS 08.88.465(d), which established the burden of proof in a claim against the Surety Fund at the time this case originated.12 Alaska Statutes 08.88.465(d) provides:
The claimant bears the burden of proof of...
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