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Berrey v. Real Estate Agency

Court of Appeals of Oregon

December 26, 2019

Dan Lee BERREY, Petitioner,
v.
REAL ESTATE AGENCY, Respondent.

          Argued and submitted January 23, 2018

          Real Estate Agency 2012246, 2012264, 2012265, 2012266, 2012352, 2012396, 201332

          Jill F. Foster argued the cause for petitioner. Also on the briefs was Churchill Leonard Lawyers.

          Jonathan N. Schildt, Assistant Attorney General, argued the cause for respondent. Also on the brief were Ellen F. Rosenblum, Attorney General, and Benjamin Gutman, Solicitor General.

          Before DeHoog, Presiding Judge, and Aoyagi, Judge, and Hadlock, Judge pro tempore.

         Case Summary:

         Petitioner seeks judicial review of a final order of the Real Estate Agency. In that order, the commissioner concluded that petitioner had engaged in professional real estate activity during a period when his license was lapsed and subsequently falsely represented otherwise on a license-renewal application. The commissioner also determined that, at other times, petitioner violated various statutory and regulatory provisions that govern professional real estate activity. The commissioner revoked petitioner's principal broker license and imposed a $1, 500 civil penalty. On judicial review, petitioner asserts that, because of certain ownership interests he has in the properties he manages, he was not required to be licensed to engage in professional real estate activity involving those properties. Accordingly, petitioner argues, the lapse of his license was immaterial. Petitioner also challenges the other violations found by the commissioner and contends that the revocation of his license was too harsh a penalty, even if he committed some violations of the states and regulations governing real estate activity.

         Held:

         Petitioner's indirect interests in the properties he managed did not fall under the exception to the requirement of licensure for managing members of LLCs who are managing the property of that LLC. Further, the [301 Or.App. 614] record supported the commissioner's determination that petitioner violated the statutes and rules that govern professional real estate activity repeatedly and in the absence of inadvertence or good-faith mistake. Accordingly, the commissioner did not err in revoking petitioner's license or imposing a civil penalty.

         [301 Or.App. 615] HADLOCK, J. PRO TEMPORE

         Petitioner has invested in and developed real property for many years. To further that work, petitioner obtained various types of licenses issued by the Oregon Real Estate Agency (REA), starting with a sales license in 1977 and culminating with a principal real estate broker license. In 2015, the REA commissioner issued a final order revoking petitioner's principal broker license and imposing a $1, 500 civil penalty. In that order, which adopted a proposed order issued by an administrative law judge (ALJ), the commissioner determined that petitioner had engaged in professional real estate activity during a period in which his license had lapsed, that petitioner had falsely represented otherwise on a license-renewal application, and that, at other times, petitioner had violated various statutory and regulatory provisions that govern professional real estate and property-management activities. On judicial review, petitioner asserts that, because of certain ownership interests he has in the properties he manages, he was not required to be licensed to engage in professional real estate activity involving those properties. Accordingly, he contends, the lapse of his license was immaterial. Petitioner also challenges the other violations found by the commissioner and, ultimately, he contends that revocation of his license is too harsh a penalty even if he committed some violations of the statutes and regulations governing real estate activity. For the reasons set out below, we conclude that petitioner has not established that the commissioner erred in any of the ways that petitioner contends. Accordingly, we affirm.

         With a few exceptions, noted below, petitioner has not challenged the factual findings on which the commissioner's order is premised. Accordingly, we "describe the facts consistently with those found by the board and the record that supports the board's findings." McDowell v. Employment Dept, 348 Or. 605, 608, 236 P.3d 722 (2010). See also Meltebeke v. Bureau of Labor and Industries, 322 Or. 132, 134, 903 P.2d 351 (1995) (the agency's unchallenged factual findings are the facts for purposes of judicial review).[1] [301 Or.App. 616] Here, we set out the facts that relate to the "big picture" question in this case: whether petitioner was required to be licensed to engage in the property-management activities at issue. We describe some additional facts later in the opinion, in conjunction with analyzing petitioner's challenges to other aspects of the commissioner's order. To give context to the discussion that follows, we also outline some of the pertinent statutory provisions, although we discuss the law in more detail later.

         CPM AND THE FIVE PROPERTIES; PETITIONER'S LICENSE

         Under ORS 696.020(2), a person may not engage in or carry on "professional real estate activity" in Oregon "unless the individual holds an active license."[2] The term "professional real estate activity" is defined to include certain actions, including the management of rental real estate, "when engaged in for another and for compensation" or the intention or expectation of receiving compensation. ORS 696.010(14)(h). Moreover, licensees are bound by certain provisions of ORS chapter 696 while "[e]ngaging in professional real estate activity." ORS 696.020(3)(a). Thus, unlicensed individuals generally may not engage in the management of rental real estate, when that management is "engaged in for another" and for compensation, ORS 696.010(14)(h), and licensed individuals must follow certain requirements of ORS chapter 696 when doing so. However, some individuals are exempt from certain ORS chapter 696 provisions, including the ORS 696.020(2) requirement that individuals engaging in professional real estate activity be licensed. See [301 Or.App. 617] generally ORS 696.030 (creating exemptions). As pertinent here, ORS 696.030(27) creates such an exemption for an individual "who is the sole member or a managing member of [an LLC] and who is engaging in * * * management of the real estate of the [LLC]." A fundamental question in this case is how those ORS chapter 696 statutes apply to petitioner's management of five rental properties in which he had ownership interests.

         In 2003, petitioner formed OR Management Co., a corporation that provided property-management services under the name "Certified Property Management" (CPM). Petitioner registered CPM with the REA as a property-management company in which he was the principal broker; he was also the company's designated property manager.[3]As relevant here, CPM provided property-management services for each of five properties in which petitioner held some sort of ownership interest: 340 Vista Ave. (Vista Ave), McKenna Estates (McKenna), Lakepointe Apartments (Lakepointe), Westec South Business Park (Westec), and the Candalaria properties, including Candalaria South/ Candalaria Crossing (Candalaria). As part of those services, CPM collected security deposits and rents from tenants; it also paid all taxes and expenses on the properties, subject to approval of the property owners.

         Vista Ave is a commercial property located in Salem that, at pertinent times, was leased by a state agency. It was owned by 340 Vista, LLC. 340 Vista, LLC, in turn, had several members, one of which was the Berrey Family, LLC, which had a 14.48 percent voting interest in 340 Vista, LLC. Petitioner claimed an ownership interest in Vista Ave through his membership interest in Berrey Family, LLC (of which he was the managing member). In 2009, CPM and 340 Vista, LLC, entered into a property-management [301 Or.App. 618] agreement under which CPM would receive monthly property-management fees, as a percentage of gross revenues and commissions on new leases. That agreement terminated in January 2013.

         McKenna is a residential apartment complex in Eugene. Through a tenancy-in-common agreement with other owners, 340 Vista, LLC, held a 74.841 percent interest in that property. Petitioner claimed an ownership interest in McKenna through his interest in Berrey Family, LLC, and that entity's interest in 340 Vista, LLC. CPM and the McKenna owners entered into a property-management agreement in 2007; CPM was compensated through a percentage of revenues. Management of McKenna was transferred to another company in April 2012.

         In 2006, the Lakepointe residential apartment complex was acquired by several owners, who held the property through a tenancy-in-common agreement. Among those owners was "Dan L. and Fran H. Berrey, Trustees," who had a 2.5 percent interest in the property. In 2011, the Lakepointe owners and CPM entered into a property-management agreement that specified monthly management fees equal to a percentage of revenues.

         Westec, a commercial development in Eugene, was held by several owners through a 2003 tenancy-in-common agreement. "Dan & Fran Berrey, Trustees," had a 22.281 percent ownership interest in Westec. CPM started managing Westec in 2003 according to a property-management agreement specifying that CPM would be compensated through a combination of a percentage of revenues and commissions for new or renewed leases.

         Candalaria South, LLC, had several members, including "Dan L. and Fran H. Berrey, Trustees," who had a 54.55 percent interest. Petitioner was the LLC's managing member. The LLC owned the Candalaria commercial properties in Salem. In 2009, Candalaria South, LLC, and CPM entered into a property-management ...


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