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Heywood v. Department of Commerce

Court of Appeals of Utah

December 21, 2017

Austin G. Heywood Jr., Petitioner,
Department of Commerce, Division of Real Estate, Respondent.

         Original Proceeding in this Court

          Harold L. Reiser and Adam H. Reiser, Attorneys for Petitioner

          Sean D. Reyes and Brent A. Burnett, Attorneys for Respondent

          Judge Diana Hagen authored this Opinion, in which Judges Michele M. Christiansen and Jill M. Pohlman concurred.


          HAGEN, Judge.

         ¶1 In 2006, a bankruptcy court found that Austin G. Heywood Jr., a real estate agent, committed fraud by concealing a bona fide purchase offer from his client so that he could force a short sale of the property to his own investment group (the 2006 transaction). Several years later, in November 2014, Heywood submitted an application to the Utah Department of Commerce, Division of Real Estate (the Division) to renew his license as a real estate sales agent. In light of the bankruptcy court's finding, the Division found that Heywood did not demonstrate the "honesty, integrity, truthfulness, reputation, and competency" required for renewal and denied his renewal application. After exhausting his administrative review options, Heywood now petitions this court to review the denial of his license. We decline to disturb the Division's decision.


         The 2006 Transaction

         ¶2 In 2006, Heywood acted as a real estate agent for a client who wanted to sell her home. The client was delinquent on her mortgage payments and had been unsuccessful in finding a buyer. Heywood told the client that he knew of a group of short-sale investors who were interested in purchasing her home. Heywood did not disclose that he had a personal interest in this group of investors, which included Heywood and his spouse.

         ¶3 In March 2006, Heywood listed the client's property as under contract, although no offer had been made at that time. The house was ultimately sold to Heywood's investment group for $352, 000-a price below its appraised value of $380, 000. Prior to the short sale, Heywood had received an offer from another buyer to purchase the property for $441, 000, but he did not disclose the offer to the client or her lenders. The same day that the investment group purchased the property, Heywood resold it to the other buyer for a substantial profit.

         The Bankruptcy Proceedings

         ¶4 Shortly after the 2006 transaction, the client filed a petition for relief under chapter 7 of Title 11 of the United States Code in the United States Bankruptcy Court for the District of Utah. The bankruptcy trustee eventually brought several causes of action against Heywood, including a claim for common law fraud. Heywood was represented by counsel and had the opportunity to present evidence during a five-day bench trial.

         ¶5 Following briefing and oral argument, the bankruptcy court entered a memorandum decision in July 2009 (the 2009 Memorandum Decision), concluding that Heywood was liable to the bankruptcy estate under common law fraud because his conduct was "intentionally fraudulent or manifested a knowing and reckless indifference toward and disregard of [the client's] rights."

         ¶6 Heywood did not appeal the bankruptcy court's findings of fact and conclusions of law. Instead, he elected to enter into a settlement agreement with the bankruptcy trustee. Heywood agreed to pay damages to the trustee in exchange for the trustee releasing Heywood from "all claims, demands, debts, obligations, liabilities, costs, expenses, rights of action, causes of action, or judgments of any kind or character whatsoever" arising out of the client's bankruptcy estate. The bankruptcy court approved the settlement agreement and then dismissed the case against Heywood. In doing so, the bankruptcy court did not vacate the 2009 Memorandum Decision.

         Licensing and Disciplinary Proceedings before the Division

         ¶7 In November 2009, the Division received a complaint about Heywood's conduct during the 2006 transaction. The Division notified Heywood that it had initiated an investigation.

         ¶8 In 2010, Heywood applied for and was issued a renewed license. In his license renewal application, Heywood disclosed that the Division was conducting an investigation into the 2006 transaction.

         ¶9 In 2012, Heywood again applied for and was issued a renewed license. In completing his online application, Heywood did not disclose that the Division's investigation was still ongoing.

         ¶10 On the same day Heywood renewed his license online, the Division filed a notice of agency action and petition, initiating a disciplinary proceeding against Heywood to revoke his license. A year later, the parties stipulated to the dismissal of the disciplinary action to allow for further review and investigation.

         ¶11 In 2014, Heywood submitted another license renewal application. This time, the Division denied his application. Heywood subsequently filed a request for agency review.

         Review by the Utah Real ...

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