Roberts Real Estate, Inc. v. New York State Department of State, 80 N.Y.2d 116 (1992)
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A corporate real estate broker’s license cannot be suspended or revoked based on the “actual knowledge” of salesperson employees; rather, the broker must have actual knowledge through its principals (representative brokers, directors, or officers) to justify such disciplinary action.
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Summary
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The New York State Department of State (Department) sought to suspend the license of Roberts Real Estate, Inc. (Roberts Inc.) for untrustworthiness and incompetence, alleging the company failed to inform purchasers of methane gas contamination in their well water. The Department argued that the knowledge of Roberts Inc.’s salespersons should be imputed to the corporation. The New York Court of Appeals held that for license suspension or revocation, the “actual knowledge” requirement of Real Property Law § 442-c necessitates that a principal of the brokerage (representative broker, director, or officer) have actual knowledge of the violation. The court annulled the license suspension and remanded for consideration of lesser sanctions.
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Facts
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Roberts Inc. was hired in 1986 to market homes in a new subdivision. The Albany County Health Department initially approved construction based on satisfactory water tests from one well. Roberts Inc. listed the properties and assigned marketing to its Guilderland branch. Sales agent Curren was designated the listing agent for the subdivision. Curren attended meetings where the developer represented an excellent water source existed. Sales contracts were contingent on a sufficient water supply. Complaints arose from 13 buyers between April 1986 and January 1987 alleging methane gas contamination. The Department investigated and alleged Roberts Inc.’s sales associates knew of the contamination by late September 1986 but failed to disclose it to buyers.
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Procedural History
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The Department’s Administrative Law Judge (ALJ) found Roberts Inc. derivatively knew of the methane gas contamination because its sales people knew, and recommended suspending the corporate broker’s license for three months or imposing a fine. The Secretary of State approved the ALJ’s findings. The Appellate Division annulled the determination. The Department appealed to the Court of Appeals from the annulment of that determination.
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Issue(s)
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Whether the Department can revoke or suspend a corporate broker’s license by imputing the knowledge of its sales agents under Real Property Law § 442-c, which requires “actual knowledge” for license revocation or suspension.
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Holding
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No, because Real Property Law § 442-c requires