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Yoon v. Alaska Real Estate Commission (2/23/01) sp-5364
Yoon v. Alaska Real Estate Commission (2/23/01) sp-5364
Notice: This opinion is subject to correction before publication in
the Pacific Reporter. Readers are requested to bring errors to the attention of
the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone
(907) 264-0608, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
TAE R. YOON, )
) Supreme Court No. S-9296
Appellant, )
) Superior Court No.
v. ) 3AN-98-8554 CI
)
ALASKA REAL ESTATE COMMISSION,) O P I N I O N
)
Appellee. ) [No. 5364 - February 23, 2001]
______________________________)
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
Sigurd E. Murphy, Judge.
Appearances: William D. Artus, Anchorage, for
Appellant. No appearance for Appellee.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, Bryner, and Carpeneti, Justices.
CARPENETI, Justice.
I. INTRODUCTION
Real estate agent Tae R. Yoon appeals the Real Estate
Commission's finding that he committed promissory fraud in selling
the Muldoon Z Plaza Mall to Yong Ok Moore by promising to
personally pay for roof repairs and then incurring over $15,000 in
roofing repairs at Moore's expense. The commission also found that
Yoon failed to properly disclose his dual agency, agreed to act as
a property manager even though he had no such expertise, and
violated the property management agreement by failing to relay
information to Moore. Because substantial evidence supports the
finding that Yoon committed promissory fraud, we affirm.
II. FACTS AND PROCEEDINGS
Yoon and Moore first met around the end of July 1996 to
discuss the possibility of Moore purchasing some commercial real
estate in Anchorage. Moore was inexperienced in matters of
commercial real estate, but had recently settled a personal injury
case for over $500,000 and wanted to invest her award. Moore
apparently chose Yoon as her real estate agent in part because of
his ability to translate between Korean and English. Moore, who is
Korean-born, speaks English as a second language, and used a
translator throughout the proceedings in this case.
Yoon showed Moore several properties including the
Muldoon Z Plaza Mall. When Yoon first showed the mall to Moore, he
did not disclose that he was the listing agent for the property,
in violation of the dual agency disclosure law. [Fn. 1] Yoon and
Moore conducted a brief walk-through inspection of the mall on
August 6. Because of his previous attempt to sell the mall, Yoon
was aware of the mall's leaky roof, and he disclosed this problem
to Moore. After inspecting the mall, Yoon disclosed his dual
agency status, but Moore refused to sign the dual agency form.
Moore contacted Yoon on August 8 to indicate that she
wanted to make an offer on the mall. The next day, she signed the
dual agency form for Yoon along with an earnest money agreement
offering to purchase the mall.
Moore made a written offer to buy the mall for
$1,100,000. Peter Zamarello, the mall's owner, rejected this
original offer because he did not want to be responsible for any
repairs as a part of the sale. Zamarello prepared a counteroffer
that incorporated an "as is" provision. When Moore and Yoon met
with Zamarello on August 9 to discuss the offer, Zamarello
suggested that Moore have an inspection performed to evaluate the
physical condition of the mall.
After the Zamarello meeting, Yoon provided Moore with a
list of engineering firms that could perform an inspection of the
mall. Yoon also provided Moore with the business card for First
Alaska Contractors. First Alaska was owned by Myoung S. Kim,
another member of the Korean community, and apparently a
professional acquaintance of Yoon; Moore also knew of First Alaska
and Kim because Moore attended the same church as Kim's wife. The
next day Moore asked Yoon to call First Alaska to perform the
inspection.
On August 12, First Alaska performed the inspection with
Moore, Yoon, and Zamarello present. First Alaska told Moore that
the roof was in very poor condition and needed to be replaced at an
estimated cost of at least $200,000. First Alaska also told Moore
that bubbles in the roofing needed to be repaired before winter at
an estimated cost of $30,000. After the inspection, Moore and Yoon
discussed its results and drafted a revised offer to purchase the
mall.
Moore and Yoon met with Zamarello again on August 13. In
response to the inspection, Zamarello agreed to perform some of the
necessary repairs to the mall prior to closing. Zamarello drafted
an addendum, agreeing specifically to "cut down the bubbles, [and
to] clean and patch the roof," but making no warranty or
representation that this would prevent the roof from leaking during
the coming winter. Moore signed the purchase agreement and the
repair addendum on August 14.
Zamarello hired Rite-Way Roofing to perform the repairs
he had agreed to make prior to the closing. Myoung Suk Kim, a
Korean acquaintance of Moore's and an employee of First Alaska,
provided help and advice to Moore regarding the roof repairs to be
performed by Rite-Way. In mid August, Kim, Moore, Yoon, and Rite-
Way inspected the roof. Moore and Kim used chalk to circle bubbles
that Rite-Way was to repair at Zamarello's expense. During the
next two weeks, Kim, Moore, and Yoon circled more bubbles in four
subsequent inspections.
Closing was scheduled for September 12. Because all of
the roof repairs were not completed, Moore requested that the
closing date be postponed. However, Moore completed the purchase
of the mall on September 12, relying on Yoon's promise to "take
care of repairs" and on First Alaska's determination that the roof
repairs would "remedy any leak problems through the winter." Moore
testified that "[Yoon] led me to close" with assurances that "he
would be responsible" if any problems arose, "even after closing."
Moore also testified that Yoon had made similar assurances
concerning leaking boilers and water heaters by saying "don't
worry, I'll replace, at my expense" and by telling Moore that he
would "spend his own money if necessary."
Around September 20 Moore left for Korea to visit with
relatives. Moore left Yoon in charge of the mall through a
property management agreement, for which he received no
compensation, and by executing a limited power of attorney for Yoon
to act on her behalf regarding the mall during her absence.
Zamarello paid Rite-Way $4,800 for the roof repairs
completed by closing. Zamarello told Rite-Way that he would not
pay for any repairs made after the sale. Rite-Way had promised to
repair all circled bubbles and apparently repaired some bubbles
after closing at its expense. Yoon followed up with Rite-Way to be
sure that all the bubbles had been repaired. While admitting that
not all bubbles were repaired, Yoon testified that he was satisfied
that Rite-Way had made all of the necessary repairs.
Despite the repairs completed by Rite-Way, the mall roof
leaked during the late fall and early winter while Moore was in
Korea. Yoon hired contractors to make emergency repairs to deal
with these leaks. Yoon also hired contractors to provide snow
removal and other maintenance tasks. Although the property
management agreement obligated him to contact Moore about
emergencies and necessary expenses, Yoon did not do so. When Moore
returned, Yoon presented her with invoices totaling more than
$20,000 for the various services that had been performed at the
mall.
Moore filed a claim with the Alaska Real Estate
Commission under the statutorily created Alaska Real Estate Surety
Fund. [Fn. 2] The hearing officer for the commission held an
administrative hearing lasting seven days. The hearing officer
received testimony from seventeen witnesses, and issued a fifty-
seven-page Findings of Fact, Conclusions of Law, and Proposed
Decision. The commission adopted the hearing officer's proposed
decision that found that Yoon committed promissory fraud and
awarded Moore $10,000.
Yoon appealed to the superior court, which affirmed the
commission's decision. Yoon appeals again.
III. STANDARD OF REVIEW
We independently review the merits of an administrative
agency's determinations. [Fn. 3] We will uphold factual findings
that are supported by substantial evidence. [Fn. 4] Substantial
evidence is "such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion." [Fn. 5]
IV. DISCUSSION
The central issue is whether Yoon committed promissory
fraud. Because this issue is primarily a question of fact and
based on credibility determinations, we will affirm the Real Estate
Commission's finding if supported by substantial evidence. [Fn. 6]
Yoon argues that there is no substantial evidentiary basis that he
committed promissory fraud.
Promissory fraud requires a showing of (1) a promise, (2)
scienter, or the present intent of not following through on that
promise, (3) intention to induce reliance, (4) justifiable
reliance, and (5) damages. [Fn. 7] We review not for a
preponderance of the evidence proving each element, nor for
substantial evidence against a finding of any element; rather, we
look for substantial evidence that a reasonable mind might accept
as adequate to support a finding of each element. [Fn. 8]
We hold that substantial evidence supports the hearing
officer's finding that Yoon made a promise to take care of the
roofing problems. Moore testified that "[Yoon] promised to repair"
the roof by saying that he would "take care of repairs" and that
"he would be responsible," if any problems arose. Moore also
testified that Yoon had made similar assurances concerning leaking
boilers and water heaters by saying "don't worry, I'll replace, at
my expense" and by telling Moore that he would "spend his own money
if necessary." This evidence implies Yoon's promise to be
financially responsible for the roof repairs.
Substantial evidence supports the finding of scienter or
the present intent not to follow through with the promise. Moore
testified that when she confronted Yoon about the additional
roofing repair expenses, Yoon got upset, asked her, "Did I ever
guarantee anything in writing about the property?" and left. A
fair interpretation of Yoon's comment is that he did not intend to
follow through on any oral promise regarding the mall.
Additional evidence indirectly supports the finding of
scienter. Yoon knew of the existing serious problems with the roof
of the mall because of his previous attempts to sell the mall. He
also knew that Moore was a vulnerable client because she lacked
experience in real estate matters and fluency in English.
Furthermore, Yoon violated statutory law by failing to disclose his
dual agency status before showing the mall to Moore.
Substantial evidence supports a finding that Yoon
intended to induce reliance on his promise. Yoon was Zamarello's
selling agent for the mall. Yoon intended to induce Moore to buy
the mall in part to collect his commission of $66,000. Yoon
directed Moore to an inspector with whom he had previous dealings
and who provided an incomplete one-page inspection report of the
mall, decreasing the chance that the roof problems would delay the
sale. Yoon also agreed to serve as property manager without
compensation. The evidence substantially supports the finding that
Yoon intended to induce Moore's reliance on his promises to close
the sale.
Substantial evidence supports a finding that Moore's
reliance was justifiable. Moore testified that Yoon "led me to
close"; she actually relied on Yoon's promise. Also, Moore's
inexperience with real estate matters led her justifiably to rely
upon Yoon as a real estate agent. Furthermore, Yoon provided Moore
special assistance by helping her to write a business plan,
agreeing to act as property manager without compensation, and
expressly promising to replace leaking boilers and water heaters at
his expense.
Substantial evidence supports the award of $10,000
damages. Yoon incurred on Moore's account over $20,000 for
maintenance of the mall during the two months that Moore was away.
While some of this was for snow removal services, Yoon authorized
$10,120 in roofing repairs by Rite-Way alone. He further
authorized $5,000 in maintenance and emergency roofing repairs by
First Alaska.
In Yoon's defense, his testimony and other evidence
contradict many of Moore's allegations. But we are not asked
whether, nor do we find that, Yoon committed promissory fraud. Nor
do we find that Yoon has no substantial evidence in his defense.
The focus of our review is whether substantial evidence supports
the finding that Yoon committed promissory fraud; we find that it
does.
V. CONCLUSION
Because substantial evidence supports the finding of
promissory fraud, we AFFIRM the decision of the Department of
Commerce and Economic Development, Real Estate Division.
FOOTNOTES
Footnote 1:
AS 08.88.396(c) permits dual agency only with informed
consent: "A person licensed under this chapter may act as an agent
for both a prospective seller and a prospective buyer of real
estate only after the licensee informs both the seller and the
buyer of the dual agency and obtains written consent to the dual
agency from both principals."
Footnote 2:
See AS 08.88.450.
Footnote 3:
See Balough v. Fairbanks North Star Borough, 995 P.2d 245, 254
(Alaska 2000).
Footnote 4:
See id.
Footnote 5:
Id. (quoting Miller v. ITT Arctic Servs., 577 P.2d 1044, 1046
(Alaska 1978)).
Footnote 6:
See Doyon Universal Servs. v. Allen, 999 P.2d 764, 767-68
(Alaska 2000).
Footnote 7:
See Lazar v. Superior Court, 909 P.2d 981, 984-85 (Cal.
1996). Cf. Barber v. National Bank of Alaska, 815 P.2d 857, 862
(Alaska 1991) (applying similar requirements for offense of
"knowing misrepresentation"). See generally Restatement (Second)
of Torts sec. 525 (1977).
Footnote 8:
See Doyon, 999 P.2d at 767; Alaska State Comm'n for Human
Rights v. Yellow Cab, 611 P.2d 487, 490-92 (Alaska 1980).
