Case Title: Dearborn v. Real Estate Agency

Citation: 

Docket Number: S47677

State: oregon

Court: Oregon Supreme Court

Date: 2002-09-06T00:00:00Z

Document:
Filed:  September 6, 2002
IN THE SUPREME COURT OF THE STATE OF OREGON

HAROLD W. DEARBORN,
	Respondent on Review,
	v.
REAL ESTATE AGENCY,
	Petitioner on Review.
(CA A101556; SC S47677)

	On review from the Court of Appeals.*
	Argued and submitted May 8, 2001.
	Jas. Jeffrey Adams, Assistant Attorney General, Salem,
argued the cause for petitioner on review.  With him on the brief
were Hardy Myers, Attorney General, and Michael D. Reynolds,
Solicitor General.
	No appearance contra.
	Before Carson, Chief Justice, and Gillette, Durham, Leeson,
Riggs, and De Muniz, Justices.**
	GILLETTE, J.
	The decision of the Court of Appeals is affirmed in part and
modified in part.  The order of the Real Estate Commissioner is
reversed.
	*Judicial Review from an order of the Real Estate Commissioner.  165 Or App 433, 997 P2d 239 (2000).
    **Kulongoski, J., resigned June 14, 2001, and did not
participate in the decision of this case; Balmer, J., did not
participate in the consideration or decision of this case.
	GILLETTE, J.
	This is a case of judicial review of a final order of
the Real Estate Commissioner (the Commissioner).  The order
revoked the license of a real estate broker (broker) for engaging
in conduct that the Commissioner determined to be subject to
professional discipline under ORS 696.301 (1995), (1) set out post. 
On broker's petition for judicial review, the Court of Appeals
reversed the order, holding that there was not a sufficient nexus
between broker's conduct and his real estate activities to permit
disciplinary action under the statute.  Dearborn v. Real Estate
Agency, 165 Or App 433, 997 P2d 239 (2000).  Petitioner on
review, the Real Estate Agency (the Agency), (2) contends that the
Court of Appeals erred in reversing the order.  For the reasons
that follow, we affirm in part and modify in part the decision of
the Court of Appeals.
	Because broker does not challenge the factual findings
included in the Commissioner's order, we accept those findings as
true for purposes of review.  See Jefferson County School Dist.
No. 509-J v. FDAB, 311 Or 389, 393 n 7, 812 P2d 1384 (1991) (unchallenged findings of fact in agency order are considered to
be facts for purposes of judicial review).  We take our statement
of facts from those findings, supplemented with additional facts
derived from the record before the Commissioner.   
	Broker has been licensed as a real estate broker since
1973.  In the fall of 1996, Klamath County law enforcement
officers interviewed a 16-year-old male runaway whom they were
holding at a juvenile detention center on drug charges.  Among
other things, the youth reported that he had used
methamphetamine, marijuana, and alcohol provided by broker at
broker's apartment.  The youth also reported that broker had
engaged in sexual acts while the youth was present and had shown
the youth pictures of naked men. 
	Thereafter, the officers obtained a warrant to search
broker's apartment for drugs, pornographic materials, and other
evidence relating to the crimes of possession of controlled
substances, delivery of controlled substances to minors, and
furnishing obscene materials to minors.  When the officers
executed the warrant, they found pornographic materials and small
amounts of cocaine and methamphetamine.  They questioned broker
and another man who was present in the apartment when they
arrived.  Broker made some admissions.  The other man stated that
broker had picked him up in the "mission" district of the city
the day before "for the purpose of having sex with him" and that
broker had obtained drugs for him.  Broker was arrested and
ultimately was indicted on seven criminal counts:  One count of
possession of a controlled substance (cocaine); one count of
possession of a controlled substance (methamphetamine); one count
of conspiracy; one count of promoting prostitution; one count of
prostitution; one count of endangering the welfare of a minor;
and one count of furnishing obscene materials to a minor.  
	In the spring of 1997, broker pleaded guilty to the two
drug possession charges.  The court sentenced him to 18 months of
probation.  The court imposed a number of conditions, including
requiring that broker pay a fine, perform community service, and
refrain from any contact with juveniles during the probationary
period.  Prosecutors dismissed the remaining charges against
broker.
	Thereafter, the Commissioner issued a notice of intent
to revoke broker's real estate license, alleging that broker was
subject to discipline under two subsections of ORS 696.301
(1995).  At the subsequent hearing, the Commissioner received in
evidence law enforcement investigative reports and other
materials relating to broker's arrest and conviction.  Broker
testified at the hearing and acknowledged that he had possessed
and used the drugs in question.  Broker also acknowledged having
had sexual relations with men whom he picked up in the local
mission district and having provided drugs, and money to buy
drugs, to such individuals.  After the hearing, the Commissioner
issued an order suspending broker's license.  
	Later, on reconsideration, the Commissioner decided
that he would revoke broker's license and replace it with a
limited salesperson's license for a period of two years, at which
time (assuming that broker committed no further sanctionable
acts), he would issue broker a new, unrestricted license.  In his
order on reconsideration, the Commissioner concluded that broker
was subject to discipline under two subsections of ORS 696.301
(1995), because broker (1) had pleaded guilty to crimes "which
are substantially related to his trustworthiness to engage in
professional real estate activity"; and (2) had engaged in
conduct that "demonstrates untrustworthy and improper dealings." 
The Commissioner explained in his order that he was concerned
that broker would "indiscriminately seek sexual liaisons with
strangers, who could be juveniles, and entice them with drugs." 
The Commissioner stated:
		"Though there is no evidence of his use of his
position as a real estate licensee for soliciting
sexual partners or of his approaching clientele or
their families for such purposes, I find the risk
unacceptable.  It should be obvious that some
juveniles, confronted with an offer of drugs for sex
would find the offer very attractive.  Though he has
not been adjudicated to be a sex offender, he is under
court order not to have contact with juveniles under
the age of 18 during his probation.  If the Court is
concerned about [broker's] proximity to juveniles, the
Real Estate Agency should share in that concern.  This
would make working with clientele, listing and showing
property difficult, if not impossible.
	     "Real estate licensees typically have access to
people's homes after they are listed, including times
when juveniles might be at home alone.  Further, a
licensee using drugs, who has access to people's homes,
also has access to any prescription drugs, cash, or
other things convertible to cash found in a home.  To
allow such an individual this type of access is an
unacceptable risk."
(Emphasis added.)  The Commissioner also suggested that a broker
who abuses cocaine and methamphetamine might convert money held
in trust for clients to support his or her habit.  
		Broker sought judicial review, arguing that ORS 696.301
(1995) pertains only to actions that "were part of and directly
impact [the broker's] duties as a real estate licensee," and that
the conduct alleged was not of that kind.  The Agency conceded
that the Commissioner could suspend broker's license under ORS
696.301 (1995) only for conduct that, at the least, was
substantially connected to the broker's future real estate
activity.  The Court of Appeals therefore focused on whether the
Commissioner had shown such a connection.  Dearborn, 165 Or App
at 438.
		The Court of Appeals noted that the Commissioner had
identified two "purported connections" between broker's conduct
and his professional activities:  (1) the risk that petitioner
might use his position as a real estate broker to solicit sex
from minors; and (2) the risk that petitioner's use of addictive
drugs might lead to misbehavior in his real estate practice.  The
Court of Appeals considered each purported connection and
concluded that, although concerns respecting each might be
reasonable in the abstract, there was no "factual support" for
the view that such risks actually exist in this case.  The Court
of Appeals therefore reversed and remanded the case to the
Commissioner, because "the concerns identified by the
Commissioner * * * fail to fit the facts."  Id. at 439.
		On review in this court, the Agency argues that,
contrary to the Court of Appeals' view, the Commissioner
rationally can infer that, based on the facts in the case, there
are risks to broker's future real estate clients.  The Agency
further argues that, although the Court of Appeals might itself
draw different or more limited inferences respecting broker's
future actions than has the Commissioner, the Court of Appeals
cannot overturn the Commissioner's order on that basis.  As we
shall explain, however, that disagreement between the Court of
Appeals and Agency over brokers' future conduct is the wrong one.
		To be entitled to discipline a licensee, the
Commissioner first must be able to show that one or more acts of
a licensee violated one or more subsections of ORS 696.301
(1995).  Whether this licensee -- broker -- has committed acts
that violate those subsections is a question concerning the
meaning and scope of those subsections.  Such an inquiry is a
matter of statutory construction, for which we employ the
analytical framework set out in PGE v. Bureau of Labor and
Industries, 317 Or 606, 859 P2d 1143 (1993).   Consistent with
that framework we look, first, to the statutory text and context. 
Id. at 610-11.
		Our precise inquiry is the meaning and scope of the
statutory standards cited in the Commissioner's order, viz., ORS
696.301(26) and (31) (1995).  The Court of Appeals' view is that
suspension or revocation of a broker's license under either of
those sections is authorized only if there is a "substantial
nexus" between the conduct at issue and the broker's potential or
future real estate activities.  Dearborn, 165 Or App at 438. 
		The question is what kind of nexus must exist between
particular conduct and real estate activity for the conduct to
fall into one of the categories described in ORS 696.301 (1995).
         	ORS 696.301 (1995) provides, in part:       
	     "The commissioner may suspend or revoke the real
estate license of any real estate licensee * * * who
has done any of the following:
"* * * * *"
(Emphasis added.)  The statute then sets out, in 33 subsections,
a compendium of the kinds of acts by licensees that can give rise
to discipline.  Virtually all the subsections specify, in one way
or another, that the acts that they set out must have occurred in
connection with the licensee's real estate activity, and the
others, read in context, all appear to be similarly limited in
scope.  For the sake of brevity, we set out only the specific
subsections -- (26) and (31) -- that the Agency asserts apply to
broker's acts:
	     "(26) Entered a plea of nolo contendere, or has
been found guilty of, or been convicted of, a felony or
misdemeanor substantially related to the licensee's
trustworthiness or competence to engage in professional
real estate activity.
	     "* * * * *
	     "(31) Any act or conduct, whether of the same or
of a different character specified in this section
which constitutes or demonstrates bad faith,
incompetency or untrustworthiness, or dishonest,
fraudulent or improper dealings."
	ORS 696.301(26) (1995) explicitly requires a
"substantial nexus" between the acts in question and a licensee's
professional activities.  That is, the broker's criminal acts
must have been "substantially related to the licensee's
trustworthiness or competence to engage in professional real
estate activity."  (Emphasis added.)  See also former ORS
969.060(6), repealed by Or Laws 2001, ch 30, § 84 (requiring
applicant for real estate license to disclose whether applicant
ever has been convicted of felony or misdemeanor "substantially
related to the applicant's trustworthiness or competence to
engage in professional real estate activity").
	The scope of ORS 696.301(31) (1995) is only slightly
less clear.  It is true that that section contains no explicit
requirement that the conduct that it describes have been related
to real estate activity; read in isolation, the section could be
construed to pertain to any conduct demonstrating any variety or
degree of the listed failings.  However, the idea that section
(31) extends to any instance of general untrustworthiness,
incompetence, or bad faith seems unlikely, given the virtually
unlimited kinds of behavior that would fall within so broad a
reading of subsection (31) -- anything from cheating at cards
("untrustworthiness") to mechanical ineptness at repairing a
lawnmower ("incompetence"), to name just two.
	Any doubt respecting the scope of ORS 696.301 (31) 
(1995) is eliminated by the context in which subsection (31)
appears.  As noted, all the other subsections of ORS 696.301
(1995) that surround subsection (31) refer to conduct that is
related to past real estate activity, either explicitly or by
necessary inference.  In fact, the vast majority of the sections
specifically refer to acts undertaken in the course of the
licensee's real estate dealings. 
	Applying the principle of ejusdem generis, we conclude
from the foregoing review of text and context that the reference
in subsection (31) to "any act or conduct * * * which constitutes
or demonstrates bad faith, incompetence or untrustworthiness, or
dishonest, fraudulent or improper dealing," is a reference to
conduct that is substantially related to the broker's
trustworthiness, competence, honesty, or good faith to engage in
real estate activity.
	The history of the changes in the wording of subsection
(26) provides further contextual support for that conclusion. 
The legislature has struggled to identify the acts proscribed in
that subsection with sufficient breadth and precision, but
ultimately ended that struggle by defining those acts in terms
that are similar to those that are employed in subsection (31),
i.e., in terms of the character traits that the acts reflect. 
The wording of subsection (31) has remained relatively constant
since 1929. (3)  Subsection (26), by contrast, has evolved from a
mere listing of specific crimes (extended by the phrase "and
other like offense or offenses"), (4) to a somewhat broader
description in terms of whether the crimes "involve" certain
recognizable common-law offenses (5) and, finally, to its present
form.  We think that the last change shows that the legislature
wished to eliminate the limitation that previously had existed
with respect to the categories of crimes that might be subject to
professional sanctions, but, at the same time, to state expressly
a limitation that had been at the core of the statute all along,
viz., that conduct of any sort is subject to professional
discipline if -- but only if -- it is related substantially to
the licensee's fitness to engage in real estate activity. 
Although that limitation is not stated expressly in any other
section of ORS 696.301 (1995), we are persuaded that it is, and
always has been, implicit in the statute as a whole, including
subsection (31).     
	We conclude that, under both subsections cited by the
Commissioner as authority for his decision to revoke broker's
license, there must be a substantial relationship between the
conduct at issue and a licensee's real estate activities. (6)  We
next consider whether the conduct at issue in this case would
support revocation of broker's license under one or both of those
subsections.  We begin with ORS 696.301(26) (1995), which
authorizes disciplinary action when a broker is convicted of a
crime that is "substantially related" to the broker's fitness to
engage in real estate activity.            
	It is important, at this juncture, to identify which
facts are relevant to our analysis.  Although the Court of
Appeals and the Commissioner appear to have treated all the
conduct identified in the Commissioner's findings as relevant to
subsection (26), it is clear to this court that only a relatively
small subset of that conduct is germane.  ORS 696.301(26) (1995)
authorizes professional discipline against brokers who have been
convicted of a felony or misdemeanor of a specified sort. 
Evidence pertaining to other, unrelated criminal charges that the
court dismissed, or to acts that the authorities discovered in
the course of the criminal investigation, do not support
revocation or suspension of a license under that subsection.
	The Agency suggests that subsection (26) is not so
limited.  It contends that the provision must be read in the
context of ORS 670.280, which provides:  
     "Except as provided in ORS 342.143 or 342.175, no
licensing board shall deny, suspend or revoke an
occupational or professional license or certification
solely for the reason that the applicant or licensee
has been convicted of a crime, but it may consider the
relationship of the facts which support the conviction
and all intervening circumstances to the specific
occupational or professional standards in determining
the fitness of the person to receive or hold such
license or certificate."
(Emphasis added.)  The Agency argues that, although it is a more
general statute, ORS 670.280 nonetheless modifies ORS 696.301(26)
(1995), thereby extending the scope of the latter statute to
include conduct and circumstances surrounding the crime and
ultimate conviction.  That category would include, in the
Agency's view, any conduct mentioned in any of the voluminous law
enforcement investigative reports that relate to broker's
convictions, including discussions of broker's sexual behavior
and his pattern of giving drugs to sex partners.
	We disagree.  Although ORS 670.280 explicitly confers
some authority to look at the "facts which support the
conviction" and "intervening facts" when applying ORS 696.301(26)
(1995), that statute cannot reasonably be read as expanding the
scope of subsection (26) to permit imposing a sanction under that
subsection for acts extraneous to broker's actual convictions. (7) 
What the Commissioner may consider, for purposes of subsection
(26), are such facts as the broker's conviction of possession of
cocaine and methamphetamine, that both substances are controlled
substances, that small amounts of those substances were found in
his home, and that he admitted to purchasing and using both
substances on more than one occasion.  If, in light of those
facts, the Commissioner can conclude that broker's crimes were
"substantially related" to his trustworthiness or competence to
engage in professional real estate activity at the time that he
committed them, then the Commissioner had authority to discipline
him under section (26).
	However, he cannot so conclude.  The Commissioner's
order on reconsideration fails to recognize that the reference in
ORS 696.301 (1995) to acts that a licensee "has done" places a
temporal element in the statutory inquiry:  The acts that give
rise to the Commissioner's authority must have occurred in the
past and, at the time that they occurred, must have been
substantially related to broker's real estate activities.  As the
Commissioner acknowledges in his order, however, there is "no
evidence" that broker's criminal activities arose out of broker's
"use of his position as a real estate licensee."  It follows that
the Commissioner had no authority to sanction broker under ORS
696.301(26) (1995).
	We recognize that the Commissioner offers two
justifications in the "Reasoning" section of his opinion that he
believes to justify disciplining broker under ORS 696.301(26)
(1995).  They are:  (1) the statement that, when a real estate
licensee has used highly addictive drugs (as broker has), there
is a risk that the licensee will use his or her access to
people's homes to steal prescription drugs, cash, or valuables;
and (2) the statement that there is an additional risk that the
licensee will use funds held in trust for clients to support his
or her drug habit.  Those statements miss the mark, because they
purport to justify the Commissioner's choice to sanction broker
on the possibility that broker might do something in the future
that would violate some subsection of ORS 696.301 (1995).  As we
have explained, however, the Commissioner's right to discipline
must arise out of something that a licensee has done, not out of
something that a licensee might do.  So far as this record
discloses, none of broker's criminal acts had anything to do with
his real estate activities.  None involved clients, real estate,
or money entrusted to broker.  Without such a nexus, the
Commissioner could not permissibly conclude that broker had
violated ORS 696.301(26) (1995).  We hold, in short, that the
Commissioner erred in concluding that broker's drug possession
convictions were "substantially related" to broker's real estate
activities.
	We turn to the question whether the Commissioner
properly could revoke broker's license for violating ORS
696.301(31) (1995).  Subsection (31) is broader than subsection
(26), inasmuch as it authorizes the Commissioner to revoke a
broker's license for engaging in any conduct that "demonstrates"
untrustworthiness, incompetence, or improper dealings.  On some
level, all the conduct described in the Commissioner's order may
be said to fit into that category.  However, as we have
discussed, the range of acts to which subsection (31) applies is
limited by the implicit requirement that the conduct in question
relate substantially to the broker's fitness and ability to
engage in real estate activity.  
	As noted, the Commissioner explained his decision to
revoke broker's license in terms of certain perceived risks to
broker's future real estate clients -- that, e.g., broker might
offer drugs in exchange for sex to a client's children or to
other juveniles whom broker might meet through his real estate
dealings, that broker might use his access to client's homes to
steal prescription drugs, cash, or valuables, or that broker
might convert money held in trust for clients to his own use to
support his possible drug habit.  In doing so, the Commissioner
is positing a predictive relationship between broker's past
conduct, which the Commissioner acknowledges did not involve real
estate activities, and broker's future professional conduct,
i.e., the Commissioner is asserting that broker's crimes, sexual
behavior, and drug use create or increase the probability that
broker will abuse his position as a real estate professional in
one or more of the suggested ways.  
	That is not the question, however.  Instead, the
question is whether the acts that broker committed, at the time
that he committed them, "demonstrated" untrustworthiness,
incompetence, or improper dealings with respect to broker's real
estate activities.  As we have explained with respect to
subsection (26), they did not:  They did not involve real estate,
clients, or funds of clients.  They were private acts, separate
from broker's professional life.  And, because they were, the
Commissioner had no authority under them to discipline broker
under ORS 696.301(31) (1995). 
	The Court of Appeals reversed the Commissioner's order
because it found "no factual support in the record to justify the
concerns [that the Commissioner] identified" therein.  Dearborn,
165 Or App at 438.  As we have explained, we see the problem
somewhat differently, but our analysis leads to the same
conclusion:  The Commissioner erred.
	We add one final note respecting the appropriate
disposition of this case.  The Court of Appeals' disposition of
the case was a reversal and remand, although that court concluded
(and, as we have explained, we also conclude) that the record
contained "no factual support" for the Commissioner's decision. 
Dearborn, 165 Or App at 441.  Under such circumstances, there is
no purpose to be served by a remand; the order simply must be
reversed.  See ORS 183.482(8)(a)(A) (authorizing reviewing court
to set aside order if court determines that agency "has
erroneously interpreted a provision of law").  The decision of
the Court of Appeals is modified in that respect.     
	The decision of the Court of Appeals is affirmed in
part and modified in part.  The order of the Real Estate
Commissioner is reversed.



1. 	The 2001 Oregon Legislature amended ORS 696.301 in Or
Laws 2001, chapter 300, section 28.  None of those changes
affects our analysis in this case.

2. 	The Real Estate Commissioner issues broker licenses in
the name of the Agency.  ORS 696.160 (1995).  The Agency is
"under the supervision and control" of the Commissioner.  ORS
696.375(2).  The Commissioner issues orders disciplining persons
who are subject to the Agency's authority.  ORS 696.301 (1995).

3. 	The wording of subsection (31) was altered and
shortened by the 2001 amendments to the statute found in Oregon
Laws 2001, chapter 300, section 28.  See also, ___ Or at ___ n 1
(slip op at 1 n 1) (discussing changes).

4. 	In 1940, for example, an earlier version of subsection
(26) gave the Commissioner the power to suspend or revoke a
broker's license if the broker was guilty of 
"(m) Forgery, embezzlement, obtaining money under false
pretenses, larceny, extortion, conspiracy to defraud,
or other like offense or offenses, and who has been
convicted thereof in a court of competent jurisdiction
of this or any other state." 
OCLA § 59-401(m).

5. 	In 1975, the legislature amended that provision to
authorize the suspension or revocation of a license of a broker
who
"[e]ntered a plea of nolo contendere, or has been found
guilty of, or been convicted of, a felony or any crime
involving forgery, theft, theft by extortion,
conspiracy to defraud, or moral turpitude, and the time
for appeal has elapsed or the judgment of conviction
has been affirmed on appeal." 
Or Laws 1975, ch 746, § 23.

6. 	Webster's Third New Int'l Dictionary, 2280 (unabridged
ed 1993), defines "substantial" as:
"1a: consisting of, relating to, sharing the nature of,
or constituting substance: existing as or in substance:
MATERIAL * * * b: not seeming or imaginary: not
illusive: REAL, TRUE * * * c: being of moment:
IMPORTANT, ESSENTIAL * * * 3a: having good substance:
firmly or stoutly constructed: STURDY, SOLID, FIRM * * * b: having a solid or firm foundation: soundly
based: carrying weight * * *."  
  

7. 	Of course, if other acts by a licensee that are
uncovered in the law enforcement reports would support charges
under other subsections of ORS 696.301 (1995), imposing sanctions
because of those other acts would be permissible.  But that is
not what the Commissioner did here.