Case Title: McCaughtry v. New Mexico Real Estate Commission

Citation: 477 P.2d 292, 82 N.M. 116

Docket Number: 

State: new-mexico

Court: New Mexico Supreme Court

Date: 1970-11-23T00:00:00Z

Document:
477 P.2d 292 (1970) 82 N.M. 116 J.H. McCAUGHTRY and Dewey S. Mosley, Petitioners-Appellants, v. NEW MEXICO REAL ESTATE COMMISSION, Respondent-Appellee. No. 9065. Supreme Court of New Mexico. November 23, 1970. Howden & Turpen, Albuquerque, for petitioners-appellants. James A. Maloney, Atty. Gen., Fred M. Calkins, Jr., Sp. Asst. Atty. Gen., Santa Fe, for respondent-appellee. WATSON, Justice. This is an appeal from the judgment of the District Court of Bernalillo County affirming the decision of the New Mexico Real Estate Commission which suspended the real estate broker's license of petitioner, J.H. McCaughtry, and the real estate salesman's license of the petitioner, Dewey S. Mosley, for periods of six months each pursuant to § 67-24-29, N.M.S.A., 1953 Comp. The parties have stipulated that the court review was under the provisions of § 67-26-20, N.M.S.A., 1953 Comp., which provides for the review of any board decision under the Uniform Licensing Act set forth in §§ 67-26-1 through 67-26-28, N.M.S.A., 1953 Comp. Appellants complain that the Commission misconstrued the law which requires that deposit money in a real estate transaction be placed in a trust fund, and that its findings were not supported by substantial evidence. Appellants also claim that they *293 did not receive a fair hearing for the following reasons: In the Notice of Hearing, McCaughtry, the broker, was charged with failure to maintain trust accounts, as well as failure to deposit the money in a trust account. It was one of appellant's defenses that he was not then dealing in sales in which moneys belonging to others were involved, and that he was not required to maintain escrow accounts, and that Commissioner Morgan's remarks during the hearing were very prejudicial. Second: Because the violation of § 67-24-29, supra, is made a crime (§ 67-24-34, supra), appellants should have been warned of their right to remain silent when they appeared pursuant to the Commission's subpoena. Third: Because the Commissioners deliberated their decision in the presence of Paul Brown, the administrator or executive secretary of the Commission, who brought the charges, made the investigation, and testified against the appellants. In connection with this Third reason for unfairness, Mr. Brown was called to supplement the record pursuant to § 67-26-20, supra, and he testified as follows before the reviewing court: And Commissioner Morgan voluntarily testified as follows: A review of the evidence indicates that although McCaughtry, the broker, had a trust account with the Citizens State Bank it was dormant at the time of the receipt of the check from Mr. Dvoracek, the appellants' client. Although there is substantial evidence that the check received in the transaction was mentioned to McCaughtry by the salesman Mosley, it was not deposited in his broker's trust account. Being uncertain as to whether it was expense money, McCaughtry asked Mosley to call Mr. Brown, the administrator, about it. Although disputed, there is *294 also substantial evidence to find that the check was one which should have been deposited in such an account. The Commissioners' findings V and VI relating to McCaughtry read: McCaughtry was suspended for knowingly violating subsections E, H, J, and K of § 67-24-29, supra, and Rule 15 of the Rules and Regulations of the Real Estate Commission. Subsection H requires the deposit of money received in a real estate transaction in a custodial, trust, or escrow account maintained by the broker, and both this subsection and Rule 15, supra, require the keeping of records of all funds so deposited. Subsections E, J, and K of § 67-24-29, supra, read as follow: The factual recital of Finding V would not constitute a violation of subsection E, and the factual recital in Finding VI is not supported by the evidence. The result is that the Commission's findings will not support its judgment. Kennecott Copper Corp. v. Employment Sec. Comm., 81 N.M. 532, 469 P.2d 511 (1970). There is no evidence of McCaughtry's violation of subsections J and K, supra, or of Rule 15, supra; and no findings were made regarding their violation. The factual recital in Finding V and the evidence sustaining it probably would have been sufficient for concluding that McCaughtry violated subsection H, but such was not the Commission's finding. Thus, we can only conclude that the Commission acted arbitrarily in making this finding. Ross v. State Racing Commission, 64 N.M. 478, 330 P.2d 701 (1958). No law or regulation of the Commission has been pointed out to us, nor have we found one, which requires a custodial, trust, or escrow account prior to the receipt of funds appropriate for deposit in such account. The above findings, when considered with the charge in the Notice of Hearing and with Commissioner Morgan's statement at the hearing, convince us that there was a misconception of the law as well as a lack of evidence involved in McCaughtry's suspension. Although we are familiar with the rule that erroneous *295 findings of fact, unnecessary to the final decision are not grounds for reversal, International Minerals & Chemical Corp. v. New Mexico Public Service Comm., 81 N.M. 280, 466 P.2d 557 (1970), we are here concerned with two other problems: (1) Whether the proceedings before the Commission were within the requirements of the Uniform Licensing Act, supra, or whether they are so permeated with error as to be inconsistent with the essentials of a fair trial, Ferguson-Steere Motor Co. v. State Corp. Comm., 63 N.M. 137, 314 P.2d 894 (1957); and (2) where one penalty is imposed for five separate violations and four of them cannot be sustained, can the court affirm, if the facts but not the finding support the fifth offense? We proceed to discuss the first problem. The fact that the charges are made by the same body which tries the issues does not, in itself, operate as a disqualification, Seidenberg v. New Mexico Board of Medical Exam., 80 N.M. 135, 452 P.2d 469 (1969); however, the legislature no doubt recognized this entity of court and prosecutor when it set forth the standards required in the Uniform Licensing Act, supra. The Act provides for the right to examine all opposing witnesses, § 67-26-8, supra; it requires that the decision shall be made by a majority of the members of the board, § 67-26-13, supra; and it provides for a complete transcript, § 67-26-12, supra. Relating to the court's review, a pertinent part of § 67-26-20, supra, reads: 2 Cooper, State Administrative Law, 701, states: In Morgan v. United States, 304 U.S. 1, 58 S. Ct. 773, 82 L. Ed. 1129 (1937), the Supreme Court points out the unfairness of ex parte discussions with the active prosecutors before the Secretary of Agriculture made his findings. This was deemed more than an irregularity in practice; it was a vital defect. There, the Court said: See also Monon Railroad v. Public Service Commission, 241 Ind. 142, 170 N.E.2d 441 (1960), and In re Amalgamated Food *296 Handlers, Local 653-A, 244 Minn. 279, 70 N.W.2d 267 (1955). The fact that there may be substantial and properly introduced evidence which supports the Board's ruling is immaterial if evidence outside the hearing is considered and relied upon. English v. City of Long Beach, 35 Cal. 2d 155, 217 P.2d 22 (1950), where the court said: See also State ex rel. Ellis v. Kelly, 145 W. Va. 70, 112 S.E.2d 641 (1960). Although Mr. Brown did not participate in the Commissioners' decision, his presence at their deliberations and his availability there for ex parte testimony and argument was contrary to the rudimentary requirements of fair play and a violation of the Uniform Licensing Act, supra. Although Commissioner Morgan's remarks at the hearing were a departure from desirable procedure, they probably were not prejudicial per se. The prejudice to appellant McCaughtry was in the Commission's misconception that a trust account must be maintained regardless of whether there are any trust funds applicable to it. This error is reflected in the Notice of Hearing, reiterated in Commissioner Morgan's statement and confirmed in Finding VI; it appears throughout the proceedings. We cannot affirm on such a record, nor can we approve the cloistering of the chief prosecutor with the quasi-judicial body during its deliberations. With reference to the second problem, can we conclude that these errors did not essentially enter into the Commissioners' determination of the length of the suspension or their determination that any suspension would be imposed? We think not. Section 67-26-20, supra, does not permit the court to make the findings or to fix the penalty. Such is the function of the Commission. See In re Blatt, 41 N.M. 269, 67 P.2d 293 (1937). The statute requires that we must reverse if substantial rights have been prejudiced because of administrative findings or conclusions made on unlawful procedure, failure of substantial evidence, or errors in law, all of which we have found to be present here. The court must act within the bounds of the statute. State ex rel. Transcontinental Bus Service v. Carmody, 53 N.M. 367, 208 P.2d 1073 (1949). We must reverse. We need not determine whether appellant Mosley was prejudiced by Brown's presence during the Commissioners' deliberations, or whether he and appellant McCaughtry should have been warned of their rights to remain silent. Co-appellants' activities are so interrelated that we should reverse in toto the lower court's judgment even if § 67-26-20, supra, does not so dictate. Transcontinental Bus System v. State Corp. Comm., 56 N.M. 158, 241 P.2d 829 (1952). The judgment of the trial court is reversed. It is so ordered. COMPTON, C.J., and TACKETT, J., concur.