Fox v. Real Estate Agency, A159689

• Decision Date: 20 June 2018
• Docket Number: A159689
• Citation: 292 Or.App. 429,426 P.3d 179
• Parties: Christopher FOX, Petitioner, v. REAL ESTATE AGENCY, Respondent.
• Court: Oregon Court of Appeals

292 Or.App. 429

426 P.3d 179

Christopher FOX, Petitioner,

v.REAL ESTATE AGENCY, Respondent.

A159689

Court of Appeals of Oregon.

Argued and submitted August 2, 2017.

June 20, 2018

Michael F. Gordon, Portland, argued the cause for petitioner. With him on the briefs was Gordon Law Offices.

Judy C. Lucas, Assistant Attorney General, argued the cause for respondent. With her on the brief were Ellen F. Rosenblum, Attorney General, and Benjamin Gutman, Solicitor General.

Before Lagesen, Presiding Judge, and DeVore, Judge, and James, Judge.

LAGESEN, P. J.

This is a proceeding for judicial review under ORS 183.482 of a final order in a contested case revoking petitioner’s Real Estate Principal Broker license. In revoking petitioner’s license, the Real Estate Commissioner, carrying out the duties of the Real Estate Agency, found that petitioner provided materially misleading information in connection with the sale of residential real property, and that petitioner did so with the intent to mislead. In making those findings about petitioner’s intent, the commissioner altered findings to the contrary by an administrative law judge (ALJ), who was not persuaded that petitioner possessed the intent to deceive but instead found that he had acted carelessly and made mistakes. On de novo review of the altered findings under ORS 183.650(4),¹ we, like the ALJ, are not persuaded that petitioner’s misleading statements were the product of an intent to mislead and find that they more likely were the product of carelessness. We therefore reverse and "remand the matter to the [commissioner] for entry of an order consistent with the court’s judgment," as further elaborated below. ORS 183.650(4).

I. BACKGROUND

A. Substantive Facts

Apart from the factual dispute about petitioner’s state of mind, most of the facts that led to this proceeding are not disputed. In accordance with our standard of review, as noted, we draw the facts from the unchallenged findings in the order. Augustus v. Board of Nursing , 284 Or. App. 420, 421 & n. 2, 392 P.3d 788 (2017).

Petitioner has held an Oregon real estate license since 1988 and has been licensed in Oregon and Washington for more than 20 years. Petitioner’s background in real estate extends back farther. He began working with his father in his father’s Corvallis real estate company when he was 15 years old. His father’s business specialized in income properties, as has petitioner’s. Petitioner primarily buys, sells, and manages income property and, in the course of that business, does not regularly represent other buyers or sellers, or engage in property development.

In 2004, petitioner purchased a 65-acre parcel of property from one of his former clients, Radke. The property is on Skyline Boulevard in Portland, is flat, and has views of the Columbia River and the Cascades. The property consists of three tax lots; petitioner bought them in a single transaction. The property has a house, a storage and shop building, and several other storage units. At the time of petitioner’s purchase, it was zoned CFU (commercial forest use) 1.

Radke had acquired the bulk of the 65-acre property in 1966. It consisted of two separate tax lots at the time, and there had been a house on the property since at least 1942. The next year, Radke built a new house on the property approximately 100 feet away from the original home site. In subsequent years, Radke added the shop and storage structures.

Publishers Paper Company owned land adjacent to Radke’s 65-acre parcel. In 1981, Radke exchanged with Publishers Paper 17.92 acres of heavily wooded land on the downhill side of his property for 19.3 acres of land that were flat and fronted on Skyline. After deeding the pertinent property to each other, Radke and Publishers Paper executed a cutting boundary agreement. Publishers Paper then logged all 500 acres of its property, including the 17.92 acres it obtained from Radke.

In 1980, shortly before the trade between Radke and Publishers Paper, Multnomah County changed by map the zoning applicable to the 65-acre parcel, increasing the minimum acreage required for residential use to 80 acres. It confirmed that zoning change by rule in 1982. As a result of that change, the property, as of 1982, was not large enough for a new residential use.

When petitioner purchased the property from Radke in 2004, he knew that a new residence could not be built on the property because of the zoning. He also knew that the plumbing and electrical systems in the existing residence were not up to code. His plan was to bring the existing residence up to code for his own personal use and to address any other compliance issues with the property through the City of Portland’s "Get Legal" program. That program assisted owners of property in rural Multnomah County in bringing unpermitted, not-to-code improvements into compliance with city and county codes.

The property turned out to be more of a project than petitioner had anticipated. Petitioner’s interest in the property did not include the logging rights. Approximately two months after petitioner purchased it, the party with the logging rights harvested the timber on the property. This revealed that Radke had disposed of "60 to 70% more waste on the property than was readily apparent prior to the harvest." The additional waste included 30 to 40 barrels of oil or solvents, 30 cars, and years of accumulated waste from apartments and ruined buildings. Then, in December 2004, a windstorm caused significant additional damage to the house and property.

When petitioner first purchased the property, he hired several people to help clean it up and bring the improvements up to code. One of those people introduced petitioner to Ernie Casella, and petitioner contracted with Casella to perform repair work after the windstorm. Casella told petitioner that he had experience resolving zoning issues with the city and county, and had helped other homeowners address issues similar to petitioner’s. Casella had worked on projects in the Pearl District and other areas and, according to petitioner’s research, had a reputation in the community for being thorough and professional. Petitioner then decided to hire Casella to resolve the zoning and building code issues with the property.

In March 2005, petitioner wrote a detailed letter to Casella that outlined the issues with the property and possible solutions. Among other things, he explained that the 19-acre tax lot created as a result of the 1981 land exchange had been red-flagged by the county as illegally created under the zoning at the time. He suggested that one way to solve the problem might be to merge the 19-acre lot with the other two tax lots to recreate the original 65-acre parcel. However, he also asked Casella to look into whether the 19-acre parcel could be split off from the other two and sold separately so that he could use the proceeds to keep the balance of the property and finish the work on the house.

After contracting with Casella, petitioner spent approximately $80,000 toward resolving the permitting and land use issues with the property. However, the clean up work on the property ultimately used up all of petitioner’s funds and he decided to sell the property. Acting under his real estate broker’s license, petitioner listed the property for sale on the Regional Multiple Listing Service (RMLS) in August 2005.

The RMLS listing format included an area for "Remarks" that allows the listing agent to include important information about the property. Petitioner’s listing did not include any information about the 1981 land exchange or the zoning issues that arose from that exchange.

After petitioner listed the property, Maxson, another real estate licensee and petitioner’s colleague, thought that the property might interest Donnelly, a friend of Maxson from college. Maxson previously had assisted Donnelly in buying residential and commercial properties. Maxson also knew Casella and his reputation for successful permitting and construction projects, and knew that Casella worked with a particular mortgage broker, Crane. Maxson thought Casella and Crane would be a good fit with Donnelly and introduced them to him for the purpose of considering a joint purchase of the property. They decided to buy the property together for $650,000.

In January 2006, Donnelly, Casella, and Crane executed a preprinted form Residential Real Estate Purchase and Sale Agreement with petitioner. Although Donnelly, Casella, and Crane intended to form a limited liability company (LLC) to purchase the property, they signed the agreement in their individual capacities. About a month later, they executed an addendum stating that "[a]ll parties are aware that Purchasers will create an LLC as the purchasing entity." The form agreement that the parties executed in January contained a section labeled "Seller Representations." That section included the following statements:

"(7) Seller has no notice from any governmental agency of any violation of law relating to the Property * * * (9) Seller agrees to promptly notify Buyer if, prior to closing, Seller receives actual notice of any event or condition which could result in making previously disclosed material information relating to the Property substantially misleading or incorrect. These representations are based upon Seller’s actual knowledge. Seller has made no investigations. Exceptions to items (1) through (9) are: ________. Buyer acknowledges that the above representations are not warranties regarding the condition of the Property and are not a substitute for, nor in lieu of, Buyer’s own responsibility to conduct a thorough and complete independent investigation, including the use of professionals, where appropriate, regarding all material matters bearing on the condition of the Property, its value and its suitability for Buyer’s intended use."

(Underscoring in original.)

Although petitioner knew that the 1981 land exchange had resulted in an illegal division of the...