Bobo v. State

Decision Date05 May 2014
Docket NumberNo. M2013-02037-COA-R3-CV,M2013-02037-COA-R3-CV
CourtTennessee Court of Appeals

Appeal from the Chancery Court for Davidson County

No. 12595II

Carol L. McCoy, Chancellor

This is an appeal from an administrative decision permanently revoking a real estate broker's license. The Chancery Court reversed the decision of the administrative panel, finding that the decision was not based on substantial and material evidence, that the procedure utilized violated both statutory and constitutional principles, and that the administrative panel demonstrated "evident partiality." We reverse the decision of the Chancery Court and reinstate the decision of the administrative panel. Reversed and remanded.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed

and Remanded

J. STEVEN STAFFORD, J., delivered the opinion of the Court, in which DAVID R. FARMER, J., and HOLLY M. KIRBY, J., joined.

Robert E. Cooper, Jr., Attorney General and Reporter; Joseph F. Whalen, Acting Solicitor General; Nicholas G. Barca, Assistant Attorney General, for the appellant, State of Tennessee Real Estate Commission.

Kim G. Sims, Memphis, Tennessee, for the appellee, Donna Bobo.



In 2007, as a licensed real estate broker, Petitioner/Appellee Donna Bobo representedShalah Smith in Ms. Smith's $60,000.00 purchase of a string of rental properties located on Dungreen Avenue in Memphis, Tennessee ("the property" or "the subject property"). Ms. Smith hired Ms. Bobo and her property-management company, East Coast Properties, LLC, to manage the property.1 Ms. Smith subsequently ran into financial difficulties and was facing foreclosure on the property. In May of 2008, Ms. Smith contacted Ms. Bobo, seeking her advice concerning options for the property. Ms. Bobo advised Ms. Smith either that the property could be foreclosed, that Ms. Smith could enter into a short sale, or that Ms. Smith could quitclaim the property to Global Investment Services, LLP ("Global"), a limited liability partnership consisting of Ms. Bobo and Rick Horton formed for the purpose of holding property. Ms. Bobo and Ms. Smith drafted two Letters of Agreement and an Addendum (together "the contract"), which were based on a form contract supplied by Ms. Bobo. On May 29, 2008, Ms. Smith signed the contract on her own behalf, and Ms. Bobo signed on behalf of Global. As part of the contract, Ms. Smith quitclaimed the property to Global for $10.00. Global agreed to collect rent from the tenants, maintain the rental property, and pay the mortgages on the property each month on behalf of Ms. Smith. The mortgages remained in Ms. Smith's name. The contract provided that if Global "for any reason refuses to make the agreed scheduled monthly payments" on the mortgages, it "will sell, release, remise, quit claim, and convey" the property back to Ms. Smith "within 30-60 days." The contract further stated that the parties were "fully aware that [Global] is acting as the principal owner in this transaction and plans to make, if possible, an unconscionable profit with this property."

Global failed to timely make the mortgage payments on the property. On at least one occasion, in April of 2011, Mr. Horton misappropriated rents for his own purposes, rather than paying the mortgage. Accordingly, Ms. Smith received a notice that the property was in default and that formal foreclosure proceedings would commence May 3, 2011. Ms. Smith apparently believed that this non-payment was a triggering event under the contract upon which Ms. Smith could demand return of the property. Accordingly, Ms. Smith demanded that Global return the property to her within thirty to sixty days, but Global dissolved and Ms. Bobo allegedly refused to return the property.

Dissatisfied with Ms. Bobo's response, Ms. Smith filed an unverified complaint with the Respondent/Appellant State of Tennessee Real Estate Commission ("Real Estate Commission") on approximately August 31, 2007.2 Ms. Bobo responded to the allegationsin the complaint with a sworn Answer dated June 11, 2011.3 Based on the allegations in the complaint, on December 21, 2011, the Real Estate Commission issued a Notice of Hearing and Charges against Ms. Bobo. A contested case hearing was scheduled for January 12, 2012. Ms. Smith was to testify by telephone. Ms. Bobo filed a motion for a continuance, which was granted. Ms. Bobo then filed a Motion to Dismiss, which was denied after the Administrative Law Judge ("ALJ") determined that material issues of fact should be decided by the Real Estate Commission. The Real Estate Commission issued an Amended Notice of Charges and Hearing on January 31, 2012. Ms. Bobo filed another Motion to Dismiss on February 7, 2012, notifying the Real Estate Commission that Ms. Smith "did not wish to go forward with this matter [because] the parties have reached an agreement." Ms. Bobo attached to the motion a letter from Ms. Smith indicating that she would not be available to testify at the contested hearing and that her issues with Ms. Bobo had been resolved. The hearing occurred one day later, on February 7, 2012, but Ms. Smith did not testify. Instead, Eve Maxwell, Executive Director of the Real Estate Commission, testified as to the licensure history of Ms. Bobo, as well as her receipt of Ms. Smith's complaint and subsequent investigation. E-mails between Ms. Smith and Ms. Bobo, as well as Ms. Bobo's Answer to the unverified complaint were entered as substantive evidence in the hearing. Ms. Maxwell testified that during the events in question, Ms. Bobo was duly licensed as a real estate broker in the State of Tennessee.

Ms. Bobo was also called to testify by the Real Estate Commission. Ms. Bobo denied that she was acting as a real estate licensee at any time during the events at issue in the Notice of Charges. However, Ms. Bobo admitted that she had entered into an agreement to purchase, for little-to-no consideration, the subject property from Ms. Smith at a time when she was representing Ms. Smith as a property manager. Further, Ms. Bobo admitted that, at all times relevant to the allegations in the Notice of Charges, she maintained a Tennessee real estate broker's license. Ms. Bobo testified that she presented Ms. Smith with several options, including attempting to sell the property, foreclosure, and quitclaiming the property to Global. According to Ms. Bobo, Ms. Smith determined that it was in her best interest to quitclaim the property to Ms. Bobo and her business partner. Accordingly, Ms. Smith would avoid a foreclosure on her credit record and the current tenants could remain in their homes. According to Ms. Bobo, Ms. Smith declined to attempt to sell the property because the value of the property was less than the indebtedness at that time.

Ms. Bobo also admitted that Global had failed to pay the mortgage on the property, but denied that its failure to do so was willful or attributable to her. Instead, Ms. Bobo testified that her business partner had misappropriated Global's funds without herknowledge, causing Global to fall behind on the mortgage and the property to go in to default. Ms. Bobo testified, however, that Global later made the scheduled payments and had made all payments since then. Further, the mortgage holder had not initiated proceedings to foreclose on the property. At the time of the hearing, the property was still ostensibly owned by Global, despite the fact that the entity had been administratively dissolved by the State of Tennessee.

Ms. Bobo admitted, however, that despite the demand for the return of the property pursuant to the contract, Global had not quitclaimed the property back to Ms. Smith. Instead, Bobo testified that Ms. Smith desired to include additional terms and conditions on the return. In addition, Ms. Bobo admitted in her Answer that Mr. Horton refused to return the property to Ms. Smith for "free." Accordingly, Ms. Bobo and Global refused to return the property within thirty to sixty days of Ms. Smith's demand. Regardless, Ms. Bobo also testified that she and Ms. Smith had reached an agreement regarding the property and that she understood that Ms. Smith no longer wanted to prosecute her complaint with the Real Estate Commission. Although Global had been administratively dissolved, Ms. Bobo admitted that, at the time of the hearing, either she or Global still retained ownership of the subject property, as the property had still not been returned to Ms. Smith.

As a result of the hearing, the Commission found that Ms. Bobo had violated several provisions of the Tennessee Real Estate Broker License Act ("Real Estate Broker Act"). The Commission assessed against Ms. Bobo $2,160.00 in hearing costs, a $5,000.00 civil penalty, and permanently revoked her broker's license.

Ms. Bobo petitioned the Chancery Court for judicial review. By Memorandum and Order dated August 2, 2013, the Chancery Court ruled in favor of Ms. Bobo, concluding that the Commission had not proceeded in compliance with the provisions of the Real Estate Broker Act and the Uniform Administrative Procedures Act ("UAPA"), that the Commission's decision was not supported by substantial and material evidence, that the hearing violated Ms. Bobo's due-process rights, and that the Commission had not acted impartially. Specifically, the trial court ruled that the complaint against Ms. Bobo was not verified, as required by Tennessee Code Annotated Section 62-13-312, discussed infra. Further, the trial court noted that Ms. Bobo was found guilty of violating a different statutory provision than the one she was initially charged with violating. Third, the trial court ruled that the Commission improperly relied on hearsay testimony from Ms. Smith, which the court did not consider "substantial and material evidence." The trial court also ruled that given the severity of the depravation, i.e., permanently losing her real estate...

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