Md. Real Estate Comm'n v. Garceau

• Decision Date: 01 September 2017
• Docket Number: No. 1671, Sept. Term, 2015,1671, Sept. Term, 2015
• Parties: MARYLAND REAL ESTATE COMMISSION v. Georgeanna GARCEAU
• Court: Court of Special Appeals of Maryland

234 Md.App. 324

172 A.3d 496

MARYLAND REAL ESTATE COMMISSION

v.Georgeanna GARCEAU

No. 1671, Sept. Term, 2015

Court of Special Appeals of Maryland.

September 1, 2017

Reconsideration Denied November 8, 2017

Argued by: Jessica B. Kaufman (Brian E. Frosh, Atty. Gen., on the brief), Baltimore, MD, for Appellant.

Argued by: Kenneth B. Frank, Baltimore, MD, for Appellee.

Panel: Woodward, C.J., Leahy, Reed, JJ.

Leahy, J.

The issues in the underlying administrative appeal boil down to three. First: can a real estate broker, Georgeanna Garceau (Appellee and Cross–Appellant), be found negligent for failing to disclose the existence of a non-existent homeowners association? We don't think so. Second: can Ms. Garceau be held negligent for failing to disclose potential well-water contamination in the neighborhood? We determine she can. And third: was the sanction imposed by the Maryland Real Estate Commission ("MREC") (Appellant and Cross–Appellee) on Ms. Garceau in this case arbitrary and capricious? Under the circumstances, the answer is yes.

BACKGROUND

A. Prologue

On or about May 17, 2009, Victor and Eileen Yancone (collectively, the "Sellers") entered into a contract of sale for residential property located at 2828 Cross Country Court, Fallston, Maryland (the "Property"), within a subdivision called Cross Country Estates, with Tim Willig and Debra Perseghin (collectively, the "Buyers"). Ms. Garceau served as the listing broker for this transaction.

The Buyers complained that Ms. Garceau failed to disclose that (1) there was a putative homeowners association ("HOA") operating in the neighborhood and (2) there was potential well-water pollution in the neighborhood relating to an ExxonMobil gas leak. But before we begin the saga of Ms. Garceau's journey to this point, we render a short prologue.

On August 14, 1975, Leo Umerly executed a "Declaration of Restrictions" (the "1975 Declaration") for plats one through four in Cross Country Estates and recorded this document in the office of the Recorder of Deeds for Harford County, Maryland. This document established certain protective covenants and restrictions for the lots, including the Property. The covenants governed such things as (1) the number of dwellings, (2) the number and type of animals, and (3) the number and size of vehicles allowed on each lot. The 1975 Declaration, signed by Leo Umerly and notarized, did not establish an HOA. Notably, the 1975 Declaration states that "[t]he provisions herein contained shall run with and bind the land hereby conveyed for a period of thirty (30) years[.]" Thus, by its own terms, the 1975 Declaration expired in August 2005.

On October 16, 2006, after the expiration of the 1975 Declaration, a second "Declaration of Restrictions" (the "2006 Declaration") was filed in the land records of Harford County. This 2006 Declaration stated that "Cross Country Estates Community Association, Inc. controls this declaration of restrictions as defined by the Maryland Homeowners Association Act." The 2006 Declaration purported to govern the same general topics as the 1975 Declaration did. The last page was signed, "Beth F. Scheir, Vice President of CCECA," but was not notarized. It was revealed during the course of the underlying litigation, that the Cross Country Estates Community Association ("CCECA") is a neighborhood association, not an HOA, and the only declaration of restrictions that governed the neighborhood—the 1975 Declaration—expired in 2005.

B. The Residential Real Estate Transaction and Complaint

In early 2009, the Buyers were interested in purchasing a house and hired William Fischbein, of Litehouse Realty, as their agent. They informed him that they were not interested in properties subject to an HOA, in part because they wanted to build a fence for their dogs and had bad experiences in this regard in their prior residence. The Buyers became interested in purchasing the Property, so Mr. Fischbein contacted Ms. Garceau of Garceau Realty, who was the listing agent. Mr. Fischbein maintained, in the subsequent investigation, that the existence of an HOA fee or potential groundwater pollution was not disclosed to him, but that he did not specifically ask Ms. Garceau about an HOA because the existence of an HOA was not on any paperwork.¹ The Metropolitan Regional Information Systems ("MRIS") report did not state that the Property was subject to an HOA or an HOA fee.

Before closing on the Property, the Buyers had a standard well inspection performed, but that inspection did not test the water for contaminants. On May 17, 2009, the Buyers and the Sellers executed the contract for sale of the Property for a purchase price of $439,900.00. The sales contract included a Maryland Homeowner's Association disclosure form, which was crossed out with a handwritten "NO HOA."²

On June 29, 2009, the Buyers moved onto the Property, and they began to install ground posts for a fence. Three days later, a representative of the CCECA hand-delivered the Buyers a copy of the 2006 Declaration and a letter stating:

Hello Neighbors,

Welcome to Cross Country Estates! We hope you enjoy the neighborhood.

We assume that the realtors involved or the previous owner made you aware of the neighborhood association covenants, however a copy has been attached for your records. Both the By–Laws and Covenants are filed at the Harford County Courthouse Land Record department and Home Owner Depository. We have a minimal annual association fee of $10. All property owners are bound by the agreements of the homeowners association. As a new property owner of CCE you are eligible to become a voting member of the association upon payment of the $10 fee.

Several months after the Buyers moved onto the Property, a company engaged by ExxonMobil arrived at the Property to test the water for possible pollution caused by ExxonMobil. The arrival of this inspector was the first time the Buyers became aware of possible well-water contamination at the Property.

On March 9, 2010, the Buyers filed with MREC a complaint against Ms. Garceau for her conduct in the real estate transaction: namely, for failing to disclose the existence of potential well contamination stemming from the ExxonMobil leak, and for "[n]o disclosure in listing/contract of an HOA[.] We were looking ONLY at homes w/out an HOA." MREC denied the Buyers' guaranty claim,³ but determined that it would proceed with an administrative claim against Ms. Garceau.

C. The Investigation

Ms. Garceau responded to the Buyers in a letter dated March 31, 2010, stating:

The [Buyer]s claimed that no disclosure was made of an HOA. There is a [CACCE]. In our listing agreement the sellers signed off that there was no HOA, there are Declaration of Restrictions. I have attached several recent listings from the community; listings from several brokerages all of which state there is no HOA fee, the only exception being one of my previous listings reflecting the $10 voluntary fee.⁴

On 5/14/09, prior to the contract ratification date of 5/17/09, seller Eileen Yancone responded to several of the [Buyers'] questions. The potential buyers asked, "Are there any restrictions with regard to putting up fences, putting in plantings or gardens, building outbuildings like a garden shed, satellite dishes, etc?" The sellers responded, "Very limited covenants exist in the Cross Country Estates Community Association. These are on file with the county." In addition, we sent the potential buyers the attached Declaration of Restrictions.

The potential buyers also inquired about the well on 5/14. They asked "When was the well last sampled and what were the results?" Eileen Yancone responded "November 5, 2008, results negative." Per seller, there was no water problem at the time of the listing, and the owners did not experience potability problems prior to that. The buyer had the well tested on 5/19/09, all results passed and the buyer by their own admission states there is nothing wrong with the water. The listing broker/agent was not aware of any monitoring of water at 2828 Cross Country Court until this complaint surfaced.

According to the appraisal conducted on 6/10/09, the HOA fee was non applicable. The appraiser also noted that there were "No neighborhood factors that would have a negative impact on marketability." In closing, Garceau Realty did not have any information that was withheld at the time of the listing or contract acceptance.

(Internal citations omitted).

Robert J. Oliver, an MREC employee, investigated the Buyers' complaint from June 17 to July 19, 2010. His report states that he interviewed the Buyers and that they told their broker, Mr. Fischbein, that they were interested only in properties not subject to an HOA because they wanted to build a fence for their dogs. The Buyers told Mr. Oliver that they had not seen a series of emails between Ms. Garceau and the Sellers concerning restrictive covenants or potential well-water contamination. Mr. Oliver reported that he showed the Buyers the 1975 Declaration, but that the Buyers did not recall seeing it before. His report notes the Buyers were unaware of any HOA until July 2, 2009, when they received a letter from the CCECA, and that they learned of the potential well contamination when they received the letter from ExxonMobil about testing on October 26, 2009.

According to his report, Mr. Oliver then interviewed Ms. Garceau. She informed him that she was on vacation for part of the transaction and that her assistants, Jessica Boyle and Julie Bleuel, represented her when she was gone. Ms. Garceau was aware that the Buyers did not want a property covered by an HOA, but "the seller said there was no HOA and wrote ‘NO HOA’ across the MD Homeowners Act Disclosures to Buyer Document." Ms. Garceau provided Mr. Oliver a copy of the contract checklist with HOA marked "N/A," and informed him that "she was not aware of the existence of a community association." When Mr. Oliver told Ms. Garceau that another property on the street that she...