Hart v. Real Estate Commission

NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER

Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
27-MAR-2024
07:46 AM
Dkt. 57 SO

NO. CAAP-XX-XXXXXXX

IN THE INTERMEDIATE COURT OF APPEALS

OF THE STATE OF HAWAI#I

TODD E. HART and HART OF KONA, REALTY, INC.,
Appellants-Appellants, v.
REAL ESTATE COMMISSION and REGULATED INDUSTRIES
COMPLAINTS OFFICE, Appellees-Appellees

APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
(CIVIL NO. 17-1-1214-07)

SUMMARY DISPOSITION ORDER
(By: Leonard, Acting C.J., and Wadsworth and McCullen, JJ.)

In this secondary appeal, Appellants-Appellants Todd
E. Hart (Hart) and Hart of Kona, Realty, Inc. (collectively, the
Hart Appellants) appeal from the May 11, 2018 Judgment, entered
in favor of Appellees-Appellees Real Estate Commission (the
Commission) and Regulated Industries Complaints Office (RICO),1/
in the Circuit Court of the First Circuit (Circuit Court).2/ The
Hart Appellants also challenge the Circuit Court's May 11, 2018
"Order Affirming the Final Order of the . . . Commission Dated
July 3, 2017" (Order). The Order and the Judgment affirmed the
Commission's July 3, 2017 final order (Final Order), which (1)
adopted in part the administrative hearings officer's August 26,
2016 Findings of Fact, Conclusions of Law, and Recommended Order

1/
RICO is an agency within the Department of Commerce and Consumer
Affairs, State of Hawai#i.
2/
The Honorable Keith K. Hiraoka presided.
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(Recommended Decision),3/ and (2) ordered the imposition of a
$10,000 fine against, and the revocation of the real estate
broker's license of, each of the Hart Appellants.
On appeal, the Hart Appellants contend that the Circuit
Court erred in affirming the Commission's decision because: (1)
there was no evidence that the Hart Appellants failed "to
maintain a reputation for or record of competency, honesty,
truthfulness, financial integrity, and fair dealing," and because
Hawaii Revised Statutes (HRS) § 467-14(20) is unconstitutionally
vague; (2) the Commission did not rule on which party had the
burden of proof in the proceedings; (3) the Commission should not
have given collateral estoppel effect to an arbitration award
against the Hart Appellants; (4) the Hart Appellants' failure to
report past judgments to the Commission did not involve
reportable "conduct in the practice of the licensee's
profession," HRS § 436B-16(a); (5) the Commission "assum[ed] that
Hart acted dishonestly" without findings of dishonesty in the
record; (6) the disciplinary actions taken against the Hart
Appellants, i.e., license revocation and fines of $10,000 each,
"were inappropriate based upon the record assembled here"; (7)
RICO's attorney addressed the Commission ex parte at a hearing;
and (8) the Commission's findings were inadequate as to whether
the Hart Appellants acted dishonestly or intentionally
misrepresented "anything."
We determine whether the Circuit Court was right or
wrong in its decision, applying the standards of HRS § 91–14(g)4/

3/
David H. Karlen was the administrative hearings officer ( Hearings
Officer). The Commission adopted the Hearings Officer's findings of fact
(FOFs) in their entirety.
4/
HRS § 91-14(g) (Supp. 2016) provides in relevant part:
Upon review of the record, the court may affirm the
decision of the agency or remand the case with instructions
for further proceedings; or it may reverse or modify the
decision and order if the substantial rights of the
petitioners may have been prejudiced because the
administrative findings, conclusions, decisions, or orders
are:
(1) In violation of constitutional or statutory
provisions;
(continued...)

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to the agency's decision. See Paul's Elec. Serv., Inc. v.
Befitel, 104 Hawai#i 412, 416, 91 P.3d 494, 498 (2004).
Additionally, "[i]f the legislature has granted the agency
discretion over a particular matter, then we review the agency's
action pursuant to the deferential abuse of discretion standard
(bearing in mind the legislature determines the boundaries of
that discretion)." Id. at 419-20, 91 P.3d at 501–02.
After reviewing the record on appeal and the relevant
legal authorities, and giving due consideration to the issues
raised and the arguments advanced by the parties, we resolve the
Hart Appellants' contentions as follows and affirm.
(1) The Hart Appellants contend there was no evidence
that they failed to maintain a "reputation" for or "record" of
competency, honesty, truthfulness, financial integrity, and fair
dealing, so as to establish a violation of HRS § 467-14(20).5/
They also argue that HRS § 467-14(20) is unconstitutionally vague
because it does not identify specific wrongful acts that can
result in discipline.

4/
(...continued)
(2) In excess of the statutory authority or
jurisdiction of the agency;

(3) Made upon unlawful procedure;

(4) Affected by other error of law;

(5) Clearly erroneous in view of the reliable,
proative, and substantial evidence on the whole
record; or
(6) Arbitrary, or capricious, or characterized by
abuse of discretion or clearly unwarranted
exercise of discretion.
5/
HRS § 467-14(20) (Supp. 2015) provides:
In addition to any other actions authorized by law,
the commission may revoke any license issued under this
chapter, suspend the right of the licensee to use the
license, fine any person holding a license, registration, or
certificate issued under this chapter, or terminate any
registration or certificate issued under this chapter, for
any cause authorized by law, including but not limited to
the following:
. . . .

(20) Failure to maintain a reputation for or record
of competency, honesty, truthfulness, financial
integrity, and fair dealing[.]

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We address the latter argument first. The Hawai#i
Supreme Court has recognized that "[w]hen a statute is not
concerned with criminal conduct or first amendment
considerations, the court must be fairly lenient in evaluating a
claim of vagueness." Gardens of West Maui v. Cnty. of Maui, 90
Hawai#i 334, 343, 978 P.2d 772, 781 (1999) (quoting Doe v.
Staples, 706 F.2d 985, 988 (6th Cir. 1983)). In order "[t]o
constitute a deprivation of due process, the civil statute must
be so vague and indefinite as really to be no rule or standard at
all. To paraphrase, uncertainty in [a] statute is not enough for
it to be unconstitutionally vague; rather, it must be
substantially incomprehensible." Id. (quoting Staples, 706 F.2d
at 988) (original brackets and citations omitted).
HRS § 467-14(20) apprises real estate licensees that
they must not take actions counter to maintaining a record of
"competency, honesty, truthfulness, financial integrity, and fair
dealing[.]" The statute is not so vague as to "be substantially
incomprehensible" or "so vague and indefinite as really to be no
rule or standard at all." Thus, HRS § 467-14(20) is not
unconstitutionally vague.
We next address the contention that the Commission
erred in finding a violation of HRS § 467-14(20). The Hart
Appellants do not contest the FOFs regarding the conduct that was
deemed by the Commission to violate this provision. The FOFs are
therefore binding on appeal. Poe v. Haw. Labor Rels. Bd., 97
Hawai#i 528, 536, 40 P.3d 930, 938 (2002) (ruling that an
agency's unchallenged findings are binding on appeal). Rather,
the Hart Appellants argue that "[t]he statute is not talking
about one or two transactions" and "[n]o evidence was presented
regarding anyone's 'reputation' or general 'record'."
The Commission adopted the Hearings Officer's
conclusion of law (COL) that "the breaches of the [Sale of
Assets] Agreement with Ashley [Realty, Inc.], and the failure to
fully satisfy the Ashley [A]rbitration [A]ward and subsequent
judgments, mean that [RICO] has proven by a preponderance of the
evidence that Mr. Hart has failed to maintain a record of
financial integrity and fair dealing in violation of [HRS

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§ 467-14(20)]." The Commission further concluded, inter alia,
that a single failure to violate the applicable regulations
constitutes a part of a licensee's record and, here, the Hart
parties acknowledged that a failure to pay may raise a question
as to financial integrity.
Because the Commission is tasked with enforcing the
mandates of HRS Chapter 467, see HRS § 467-4(3) (2013), the
Commission's interpretation of HRS § 467-14(20) as applied to the
evidence presented should be given deference. See Gillan v.
Gov't Emps. Ins. Co., 119 Hawai#i 109, 114, 194 P.3d 1071, 1076
(2008) ("[I]n the case of ambiguous statutory language, the
applicable standard of review regarding an agency's
interpretation of its own governing statute requires this court
to defer to the agency's expertise and to follow the agency's
construction of the statute unless that construction is palpably
erroneous[.]" (ellipsis omitted) (quoting Vail v. Emps' Ret.
Sys., 75 Haw. 42, 66, 856 P.2d 1227, 1240 (1993))). We cannot
conclude that the Commission's interpretation of HRS § 467-14(20)
in these circumstances is palpably erroneous or inconsistent with
the intent of the statutory mandate. See Haole v. State, 111
Hawai#i 144, 152, 140 P.3d 377, 385 (2006). The purpose of HRS
Chapter 467 "is the protection of the general public in its real
estate transactions[,]" HRS § 467-4(2) (2013), and the
Commission's interpretation of HRS § 467-14(20) furthers this
purpose.
On this record, we conclude that the Commission did not
err in finding that the Hart Appellants violated HRS
§ 467-14(20).
(2) The Hart Appellants contend that the burden of
proof should have been on RICO, the Commission's Final Order
"never indicates where the burden is being placed[,]" and
"[p]erhaps the Commission felt that . . . it was appropriate to
shift the burden of proof . . . ."
The Hart Appellants are correct that under Hawai#i
Administrative Rules (HAR) § 16-201-21(d) (1990), "the burden of
proof, including the burden of producing the evidence and the
burden of persuasion, [was on] the party initiating the

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proceeding" — here, RICO. The Hart Appellants are incorrect,
however, in asserting that the Commission's Final Order does not
indicate where the burden of proof was placed. Further, the Hart
Appellants provide no support for their speculation that the
Commission shifted the burden of proof to them. The Commission's
Final Order adopted all but one of the Hearings Officer's COLs
regarding Hart. The adopted COLS included the Hearings Officer's
repeated conclusion that "[RICO] has proven by a preponderance of
the evidence" that Hart violated the statute at issue. The
adopted COLS also included, for example, the Hearings Officer's
conclusion that "[RICO] has failed to prove by a preponderance of
the evidence" that Hart violated HRS § 467-14(8). In short, the
COLs adopted by the Commission make clear that the burden of
proof was placed on RICO. See also Igawa v. Koa House Rest., 97
Hawai#i 402, 409 n.6, 38 P.3d 570, 577 n.6 (2001) (presuming that
administrative appeals board applied proper evidentiary standard
of review where it did not expressly state the applicable
standard (quoting State v. Kotis, 91 Hawai#i 319, 340, 984 P.2d
78, 99 (1999))).
(3) The Hart Appellants contend that the Commission
"failed to recognize the discretionary nature of collateral
estoppel" and improperly gave "collateral estoppel effect" to the
Ashley Arbitration Award, which had been reduced to a judgment.6/
Relying on Exotics Hawaii-Kona, Inc. V. E.I. Dupont De Nemours &
Co., 104 Hawai#i 358, 372, 90 P.3d 250, 264 (2004), the Hart
Appellants do not argue that the elements of collateral estoppel,
or issue preclusion, were not met, but assert that the
Commission, in its discretion, should have decided not to apply
collateral estoppel in the circumstances of this case.

6/
On September 20, 2006, the Circuit Court of the Third Circuit
entered judgment (2006 Judgment) confirming the Ashley Arbitration Award. The
Hart Appellants appealed, and on February 25, 2011, this court issued a
memorandum opinion vacating the 2006 Judgment and remanding the case for
further proceedings. See Ashley v. Hart, No. 28207, 2011 WL 682109, at *11
(Haw. App. Feb. 25, 2011) (mem.). Following further proceedings, on March 2,
2012, the Circuit Court of the Third Circuit again entered judgment ( 2012
Judgment) confirming the Ashley Arbitration Award. The Hart Appellants
appealed, and on October 24, 2014, this court issued a summary disposition
order affirming the 2012 Judgment. See Ashley v. Hart, No. CAAP-XX-XXXXXXX,
2014 WL 5420011, at *6 (Haw. App. Oct. 24, 2014).

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Initially, we note that the Hart Appellants do not
contest any of the Hearings Officer's FOFs regarding the Ashley
Arbitration Award, which are therefore binding and which the
Commission adopted. We further note that the Commission's Final
Order and the Hearings Officer's FOFs and COLs do not mention
collateral estoppel or issue preclusion. The Hart Appellants
point to a passage in the Hearings Officer's Recommended Decision
in which the Hearings Officer stated, "Mr. Hart cannot avoid the
effects of the arbitration award . . . [which] cannot be
changed." Assuming arguendo that this statement represents an
application of the collateral estoppel doctrine and that the
Commission implicitly adopted that application, it is incorrect
to say that the Hearings Officer (and by extension the
Commission) did not consider issues of fairness in determining
the effect of the Ashley Arbitration Award. Indeed, the Hearings
Officer noted that the award lacked detail and explicitly weighed
the equities of the situation. On this record, we cannot
conclude that the Commission erred in determining the effect of
the Ashley Arbitration Award.
(4) The Hart Appellants contend that the Commission
erred in concluding that the Ashley Arbitration Award7/ and the
Wills Judgment had to be reported to the Commission pursuant to
HRS § 436B-16(a).8/ They argue that they were not required to
report the Ashley Arbitration Award and the Wills Judgment
because these judgments did not involve "conduct in the practice
of the licensee's profession or vocation." HRS § 436B-16(a).
They argue that for the same reason, there was no violation of

7/
It is not entirely clear, but it appears that the Hart Appellants
may be using the phrase "Arbitration Award" to refer not only to the Ashley
Arbitration Award itself, but also to the 2006 and 2012 Judgments confirming
the award.
8/
HRS § 436B-16(a) (2013) provides:
Each licensee shall provide written notice within
thirty days to the licensing authority of any judgment,
award, disciplinary sanction, order, or other determination,
which adjudges or finds that the licensee is civilly,
criminally, or otherwise liable for any personal injury,
property damage, or loss caused by the licensee's conduct in
the practice of the licensee's profession or vocation. A
licensee shall also give notice of such determinations made
in other jurisdictions.

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HRS § 436B-19(17).9/
As to the Ashley Arbitration Award, the Commission
reasoned that the Hart Appellants violated HRS § 436B-16(a)
because "[t]he underlying transaction involved the sale of
[Hart]'s real estate business, including certain covenants
concerning Respondent Hart's actions as a real estate licensee."
In turn, FOF 2b, which the Commission adopted, states the
arbitrator's conclusion that "Hart breached the Covenant Not to
Compete [in the Sale of Assets Agreement] by representing
individuals, including buyers and sellers, in several real estate
transactions on the Island of Hawaii . . . ."
As to the Wills Judgment, which arose out of a failed
sale of property owned by Hart, the Commission reasoned:

[A] licensee does not disavow the obligation to follow the
real estate practice regulations when acting in their
private capacity. A licensee cannot "take off his licensee
hat", even when selling the licensee's own property. See
HAR § 16-99-3(a) ("To fully protect the general public in
its real estate transactions, every licensee shall conduct
business, including the licensee's own personal real estate
transactions, in accordance with this section."[).]

On this record, we cannot conclude that the Commission
erred in determining that the Ashley Arbitration Award (and the
2006 and 2012 Judgments) and the Wills Judgment involved "conduct
in the practice of the licensee's profession or vocation[,]" such
that the Hart Appellants were required to report the award and
judgments to the Commission under HRS § 436B-16(a).
(5) The Hart Appellants contend there were no findings
that they "made any misrepresentation or engaged in any
fraudulent or dishonest conduct[,]" and the Final Order "seems to
assume that there was fraudulent or dishonest conduct." In this

9/
HRS § 436B-19(17) (2013) provides:
In addition to any other acts or conditions provided
by law, the licensing authority may refuse to renew,
reinstate or restore, or may deny, revoke, suspend, or
condition in any manner, any license for any one or more of
the following acts or conditions on the part of the licensee
or the applicant thereof:
. . . .

(17) Violating this chapter, the applicable licensing
laws, or any rule or order of the licensing
authority.

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regard, the Hart Appellants appear to be disputing the
Commission's conclusion that they violated HAR § 16-99-3(b).10/
In reaching this conclusion, the Commission reasoned:

Regarding HAR § 16-99-3(b), the Hearings Officer
concluded that "the breaches of the Agreement with Ashley
generally did not lead to a failure to protect 'the public'
but rather a failure to protect Ashley in their non-public
personal business capacity." Apparently, the Hearings
Officer did not consider Ashley to be a member of the
public. The Commission disagreed with and rejected this
conclusion. Individuals who engage in private business
transactions do not forfeit their right to be free from
fraud, misrepresentation, or unethical practices in the real
estate field. On the contrary, the Commission concluded
that HAR § 16-99-3(b) requires real estate licensees to
protect all members of the public, especially those with
whom they deal, from fraud, misrepresentation, or unethical
practices in the real estate field.

(Record citation omitted.) In addition, FOF 2, which the
Commission adopted, states the arbitrator's conclusions that Hart
breached: (1) the covenant not to compete in the Sale of Assets
Agreement; and (2) the Warranty of Quiet Enjoyment in the
Agreement "by failing to disclose known pending claims and/or
lawsuits to Ashley . . . ."
HAR § 16-99-3(b) requires a licensee to protect the
public not only from fraud, but also from "unethical practices in
the real estate field," and to try to eliminate "practices in the
community which could be damaging to the public or to the dignity
and integrity of the real estate profession." We cannot conclude
that the Commission's interpretation of HAR § 16-99-3(b) in these
circumstances is palpably erroneous or inconsistent with the
intent of the rulemaker, i.e., the Commission. See Gillan, 119
Hawai#i at 114, 194 P.3d at 1076; Haole, 111 Hawai#i at 152, 140
P.3d at 385; HAR § 16-99-1 ("This chapter, adopted by the real
estate commission, . . . is intended to clarify and implement
[HRS] chapter 467 . . . to the end that the provisions
thereunder, for the protection of the general public in its real

10/
HAR § 16-99-3(b) (2016) states:

The licensee shall protect the public against fraud,
misrepresentation, or unethical practices in the real estate
field. The licensee shall endeavor to eliminate any
practices in the community which could be damaging to the
public or to the dignity and integrity of the real estate
profession.

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estate transactions, may be best effectuated and the public
interest most effectively served.").
On this record, we conclude that the Commission did not
err in finding that the Hart Appellants violated HAR § 16-99-
3(b).
(6) The Hart Appellants contend that "on the record
assembled here, license revocation and fines are too harsh."
(Formatting altered.) They provide no authority supporting this
contention.
Pursuant to HRS §§ 436B-16, 467-14, and 467-26 (2013),
the Commission was authorized to take the disciplinary actions
that it did in this matter. Based on our review of the record,
we cannot say that the Commission abused its discretion in
imposing the penalties it did under these circumstances. See
Paul's Elec. Serv., 104 Hawai#i at 419-20, 91 P.3d at 501-02.
(7) The Hart Appellants contend that "the proceedings
below were flawed because the Commission permitted . . . RICO's
lawyer to address the Commission ex parte at its December 16,
2017 meeting, when [the Hart Appellants] never received the
notice of the meeting and had no idea it was occurring."
(Formatting altered.)
In proceedings before the Commission, private
communications between a party and the Commission are prohibited.
See HAR § 16-201-25(a) (1990). Here, however, the December 16,
2016 hearing before the Commission was not an ex parte
communication.
At the June 23, 2016 administrative hearing, the
Hearings Officer asked Hart for his current address, which Hart
provided. The Hearings Officer informed Hart that after the
hearing, the Hearings Officer would write up a recommended
decision and send it to both sides, with "instructions . . . as
to what to do next, whether you object or support or partially
object and partially support . . . ." The Hearings Officer
further informed Hart:

HEARINGS OFFICER KARLEN: So it's going to be sent
certified mail, return receipt requested, and we can send it
to your P.O. Box . . . ; is that correct?

MR. HART: Yes.

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. . . .
HEARINGS OFFICER KARLEN: . . . .

If you don't pick up your mail, you may lose the
opportunity to file objections in the 15 days because we've
had lots of people who deliberately don't pick up their
mail. And I can't tell from here what you're doing in Kona,
so when you get that e-mail, know that it's coming in the
mail --

MR. HART: Yeah.
HEARINGS OFFICER KARLEN: -- and please make sure to
pick it up and sign the green card.
MR. HART: I can do that.

Thereafter, on August 26, 2016, the Hearings Officer
submitted his Recommended Decision to the Commission, copies of
which were also transmitted to the parties. On September 7,
2016, RICO filed Exceptions to Portions of the Recommended
Decision. On November 4, 2016, the Commission sent to the Hart
Appellants via certified mail, return receipt requested, a Notice
of Opportunity to Present Oral Arguments, informing the parties
that on November 23, 2016, the Commission would hear oral
arguments. The November 4, 2016 mailings were sent to the Hart
Appellants at the address provided by Hart at the June 23, 2016
administrative hearing, but were returned to the Hearings Officer
"unclaimed." On November 23, 2016, the Commission sent to the
Hart Appellants via certified mail, return receipt requested, a
Rescheduled Notice of Opportunity to Present Oral Arguments,
informing the parties that on December 16, 2016, the Commission
would hear oral arguments. The November 23, 2016 mailings were
sent to the Hart Appellants at the address provided by Hart at
the June 23, 2016 administrative hearing, but were returned to
the Hearings Officer "unclaimed."
The Hart Appellants were properly served with notice of
the December 16, 2016 hearing, pursuant to HAR § 16-201-12(a)
(1990). On December 16, 2016, RICO's attorney appeared before
the Commission and presented oral argument. No one appeared on
behalf of the Hart Appellants. In these circumstances, there was
no ex parte communication between RICO and the Commission.
(8) The Hart Appellants contend that "in view of the
ambiguities in the record, the case should be remanded for

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further proceedings." (Formatting altered.)
Based on our review of the record, we conclude that the
Commission's Final Order, which adopts the Hearings Officer's
FOFs in their entirety and adopts his COLs as specified, is
sufficient to support the Commission's decision, and that no
remand is necessary.
For the reasons discussed above, the Judgment, entered
on May 11, 2018, in the Circuit Court of the First Circuit, is
affirmed.

DATED: Honolulu, Hawai#i, March 27, 2024.

On the briefs:
/s/ Katherine G. Leonard
John Rapp Acting Chief Judge
for Appellants-Appellants.

Wendy J. Utsumi /s/ Clyde J. Wadsworth
for Appellee-Appellee Associate Judge
Regulated Industries
Complaints Office, Department
of Commerce and Consumer /s/ Sonja M.P. McCullen
Affairs Associate Judge

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