Matter of Coldwell Banker Residential Real Estate, Inc. v. Department of State, 61 N.Y.2d 833 (1984)

An administrative agency’s determination will be upheld if supported by substantial evidence, even if that evidence would not be admissible in a court proceeding, and a party’s failure to raise an issue before the administrative agency precludes its consideration on appeal.

Summary

Coldwell Banker was found by the Department of State to have violated regulations prohibiting solicitation of listings from homeowners who had filed “cease and desist requests.” Coldwell Banker challenged the determination, arguing the evidence was insufficient and the hearing officer violated their due process rights. The Court of Appeals affirmed the Appellate Division’s judgment, holding that the agency’s findings were supported by substantial evidence, the failure to call homeowners as witnesses did not violate due process in the absence of a request, and the constitutional argument regarding commercial speech was not preserved for appellate review because it was not raised before the agency. This case underscores the limited scope of judicial review of administrative determinations when those determinations are supported by substantial evidence.

Facts

The Department of State determined that Coldwell Banker sent letters to homeowners who had previously filed “cease and desist requests.” The Department of State concluded that these letters constituted “solicitation for listings of the property to which the distribution was made,” violating 19 NYCRR 175.17(b). Coldwell Banker challenged this determination.

Procedural History

The Secretary of State made a determination against Coldwell Banker. Coldwell Banker appealed to the Appellate Division, which affirmed the agency’s determination. Coldwell Banker then appealed to the New York Court of Appeals.

Issue(s)

1. Whether the Secretary of State’s finding that the letters sent by Coldwell Banker constituted “solicitation for listings” was supported by substantial evidence.

2. Whether the hearing officer’s failure to call the homeowners as witnesses violated Coldwell Banker’s due process rights.

3. Whether Coldwell Banker could raise a commercial speech argument for the first time on appeal.

Holding

1. Yes, because the findings of the Secretary of State were supported by substantial evidence on the record.

2. No, because the petitioners made no request that the homeowners be called as witnesses.

3. No, because the petitioners failed to raise the commercial speech point below, precluding its consideration on appeal.

Court’s Reasoning

The Court of Appeals found that the Secretary of State’s findings were supported by substantial evidence. The Court emphasized that it no longer follows the “legal residuum rule,” meaning that administrative decisions can be based on evidence that would not be admissible in court. As the Court stated, “All the more is this so since we no longer follow the ‘legal residuum rule’, under which at least some minimum quantity of the evidence which supported an administrative decision had to be of a kind admissible in a court proceeding.” The court also held that the hearing officer’s failure to call the homeowners as witnesses did not violate Coldwell Banker’s due process rights because Coldwell Banker never requested that the homeowners be called. Finally, the Court refused to consider Coldwell Banker’s commercial speech argument because it was raised for the first time on appeal. The court cited established precedent that failure to raise an issue at the initial hearing precludes its consideration on appeal.