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New Jersey Real Estate Commission v. Tonge

Superior Court of New Jersey, Appellate Division

October 30, 2013

NEW JERSEY REAL ESTATE COMMISSION, Complainant-Respondent,
v.
DOUGLAS R. TONGE and JUST NEW HOMES, INC., Respondents-Appellants.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued February 8, 2012

On appeal from the New Jersey Real Estate Commission, Department of Banking and Insurance, Docket No. MER-05-018.

Jeffrey S. Mandel argued the cause for appellants (Cutolo Mandel, LLC, attorneys; Mr. Mandel, of counsel and on the brief).

William B. Puskas, Jr., Deputy Attorney General, argued the cause for respondent (Jeffrey S. Chiesa, Attorney General, attorney; Lewis A. Scheindlin, Assistant Attorney General, of counsel; Mr. Puskas, on the brief).

Before Judges Fuentes, Graves and Harris.

OPINION

FUENTES, P.J.A.D.

Douglas R. Tonge and Just New Homes, Inc. (JNH) appeal from the New Jersey Real Estate Commission's (NJREC or Commission) determination that appellants paid a rebate to homebuyers in violation of N.J.S.A. 45:15-17(k). We affirm.

The undisputed record shows appellants devised a coupon-based marketing scheme to provide a one percent cash-back in the form of a reduction in buyer's closing costs. The buyer, through the internet, would access appellants' website, search for a property of interest, and send their coupon requests to appellants. The coupon was also advertised on the website.

Once registered on appellants' website, prospective buyers were instructed to present the coupon to the builder-seller's representative when visiting the builder-seller's construction site. The coupon notified the builder-seller that JNH was the broker and instructed the settlement agent to apply or rebate one percent of the real estate commission to offset the buyer's closing costs. It is important to note, however, that builder-sellers did not have a contractual listing arrangement with appellants.

The NJREC found appellants' coupon-based approach violated N.J.S.A. 45:15-17(k) as a payment of a rebate to a non-licensed broker. NJREC calculated appellants committed at least 247 violations of the statute. The Commission revoked appellants' real estate broker license for five years and imposed a $123, 500 fine, representing a $500 fine for each violation.

Distilled to its essence, appellants argue that the Commission erred as a matter of law because the undisputed evidence shows appellants merely "offered" a rebate to those potential buyers who visited their internet website. According to appellants, under these circumstances, N.J.S.A. 45:15-17(k) is inapplicable because the statute was intended to prohibit only the "payment" of rebates. We reject this argument as mere sophistry. Appellants' attempt at camouflaging the motivation that drove this rebate/coupon scheme is a specious exercise in semantics, untethered to the then prevailing public policy underpinning this legislative prohibition.

Appellants also argue that the sanctions imposed by the Commission were needlessly punitive, misapplied the factors outlined by the Court in Kimmelman v. Henkels & McCoy, Inc., 108 N.J. 123, 137-140 (1987), and failed to give proper consideration to the recent amendments to N.J.S.A. 45:15-17(k), permitting real estate brokers to offer consumers rebates of a portion of their commission pursuant to specifically described guidelines. Although we recognize that the cumulative monetary sanction is substantial, we reject appellants' argument substantially for the reasons expressed by the Commission in its October 18, 2010 order and supporting memorandum of decision.

I

Procedurally, this matter began as an order to show cause filed by the Commission charging appellants with violations of N.J.S.A. 45:15-17(k), paying rebates or compensation to persons not licensed by the Commission; N.J.A.C. 11:5-6.4(a), breach of fiduciary duty; N.J.S.A. 45:15-17(e), failing to deal fairly with all parties; and N.J.A.C. 11:5-6.1(r), making false or misleading statements in promotional materials. Appellants denied all of the allegations and the case was transferred as a contested matter to the Office of Administrative Law for evidentiary proceedings before an Administrative Law Judge (ALJ).

Because the salient facts are not disputed, the Commission filed for summary decision on the question of liability. After considering the arguments of counsel for both sides, the ALJ granted the Commission's motion for summary decision. The ALJ made his ultimate legal determinations, which the Commission later adopted, based on the following undisputed record.

Beginning in 1999, appellants began operating as licensed real estate brokers primarily over the internet. Through their internet website, a prospective client had access to search open-listed, newly-constructed properties. Appellants' website permitted these potential cyber-clients to electronically transmit their requests for information on a particular listing to appellants. The ...


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