ÆäÀÌÁö À̹ÌÁö
PDF
ePub

REAL ESTATE, MORTGAGE FORECLOSURE, AND BLUE SKY

LEGISLATION

WEDNESDAY, MARCH 19, 1930

HOUSE OF REPRESENTATIVES,

COMMITTEE ON THE DISTRICT OF COLUMBIA,

Washington, D. C.

The committee met at 10.30 o'clock a. m., Hon. Clarence J. McLeod, (acting chairman of the committee), presiding.

Mr. MCLEOD. The committee will be in order for further consideration of these two bills before the committee, H. R. 4950 and 10,476. At the end of the last meeting the committee had under advisement the report of the Subcommittee on the Judiciary on Mr. Zihlman's bill. There was some discussion as to whether or not the report of the subcommittee should be adopted. The report of the subcommittee was in favor of the bill with everything stricken therefrom except section 14; and also to correct the title to agree with what was stricken out. The amended bill is now H. R. 10,476.

There are two people here who desire to be heard, who have written in. One is Mr. Thornton and another is Mr. Rothschild from the Better Business Bureau. Mr. Patman asked Mr. Rothschild to bring certain data, and he wrote in that it was not possible for him to obtain this data before this date because there was considerable research necessary. But I guess he has it this morning. He is supposed to bring it up when he comes.

Mr. PATMAN. What was that about the data? I asked him to get some data.

Mr. MCLEOD. He couldn't get it previous to this day because there was considerable research necessary to get the figures that you wanted, but he has them this morning, I guess.

Mr. Thornton, do you care to make your statement at this time? Mr. THORNTON. Yes.

STATEMENT OF H. L. THORNTON

Mr. THORNTON. I have been in the real-estate business here for 22 years. I have long appreciated what I thought was the necessity of having a real-estate licensing board to control men who were doing unofficial real-estate business.

What prompted me to come before you to-day is that I have had a recent case where an unlicensed broker, who was operating without any license from the District government, went to a lady, the wife of a very dear friend of mine, who has been sick in bed

with T. B. for the last eight months. She had a house left her by her father and mother who died six or eight months ago, in Chevy Chase.

This man went to her on January 3 and he said that he had a deposit of $500 on this property at a price of $11,500, subject to a trust of $9,750, on what we call a regular sales contract, which has been approved by real-estate board.

He first proposed to put in stock in some bank in West Virginia, valued at $1,500, and proposed to charge her as agent $500 for the sale of the property.

The agent signs his name on the typewriter. She refuses to accept the offer; says she does not want the stock; she has got to have cash for her property. The agent takes a pen and crosses out the reference to the stock and writes in "or cash above trust $1,700, of which the deposit is a part." He says that he has got $500 deposit.

Then he goes down at the bottom part of the contract and writes in and signs it: "The above changes in ink are O. K.," and signs his name as agent, giving the purchaser's name.

On the strength of that she thought she was selling her property and the property has been tied up ever since. She has been unable to get him to close the deal. She even had an appointment at the District Title Co. to close that. Finally, she came to me about it, and I told her to leave the matter in my hands; that I would see if I could straighten it out for her.

That afternoon I went out to play golf, and a Munsey Trust Co. agent called up and said he had an offer for the house. This lady who had this other contract thought that these people were not going to close, so she went down to the Munsey Trust Co. and signed up to sell to their client. This was a regular form of contract with $500 actually put up.

Now, they come forward and want her to close this transaction. Sometime after she signed at the Munsey Trust Co., they served notice on these people that their deposit was forfeited, and called on this agent, who served a notice on the purchaser's agent and told the agent that the $500 was forfeited and demanded one-half of the deposit according to the terms of the contract.

The agent then says that he never put up $500. He says that the deposit that was put up was only $20, and the purchaser says that he put up only $20 deposit. So she is up in the air. They are threatening suit, the purchaser is, to force her to comply with the terms of the contract. We can not do anything. We are just tied up by that kind of transaction since January 3 up to the present time.

That is just an instance of the kind of conduct that may lead to more serious consequences.

Mr. MCLEOD. Just how would this bill remedy the situation?

Mr. THORNTON. In my opinion, if such a law was in effect, the commission would call upon this man for an explanation. If he could not give a satisfactory explanation, they could cancel his license to do business.

Mr. PALMISANO. Would this bill prevent me from placing my property in the hands of any individual with a contract to sell my property and take care of it if he is not a regular broker?

Mr. THORNTON. Unless he was licensed to do business under this law, I should say it would.

Mr. PALMISANO. It would prevent an individual agreement? Mr. THORNTON. It would prevent an individual from conducting a real-estate business.

Mr. PALMISANO. I am speaking of a man who is not doing a regular real-estate business; just an ordinary friend or perhaps a relative or a lawyer. Would this prevent me from placing my property in the hands of a lawyer to take care of for me?

Mr. THORNTON. I am not posted on that bill, but I think it would not have anything to do with a lawyer. I think you could put it in the hands of an attorney to handle it. But you could not, in my opinion, from what I have read in the bill, you could not place it in the hands of any outside individual. That would leave it the way it is now.

Mr. MCCLINTOCK. That is a part of the business of law, according to my understanding.

Mr. THORNTON. At the present time if I was in the real-estate business, I would go down to the District Building and pay $50 for operating a real-estate business; but the District Commissioners have no power, the license clerk told me, to cancel that in any way. I know of a number of other cases. I know of a case where a man came to me and told me that a certain real-estate agent came to him he owns some lots up in Pennsylvania-this man came to him and said, "If you will deed me those lots and make me a loan to build three houses on them "-there were three lots-"I will take them off your hands and give you a certain price for the lots."

They entered into that transaction, and he was to make the loan and to build the houses; and he did make the loan, this man did. Then he was to make certain payments as the houses went up. As the building progressed, he advanced them money. Finally this agent, who was a licensed broker, wrote that the houses were completed. The man came in my office and gave me this information first-hand, and I had every reason to think that he was telling the truth about it. He told me that the houses were completed.

The man made the final payment on the loan and turned all the money over to him.

Then he came down and found that this man had not plastered the houses-one of the houses. The other two were partially completed. One of them did not have any heating plant in.

In order to straighten out the transaction-he said he had this letter-I said, "Why in the world don't you take it down to the United States attorney?" He said, "I don't want to lose the money that I have put into this transaction. If I take it to the United States attorney, this man will not make good." He said, "I am trying to carry out some deal "-it was around four or five thousand dollars-"I want to try to work that out so as to get that back.”

So he took a piece of property that was out in Takoma Park. He took this property over in Maryland. There was a second trust on it. I said, "You haven't got anything there." He said, "I am trying to work out something." That was the reason he would not take the matter up with any authorities.

I took this matter up with the Real Estate Board. This fellow happened to be a member of the Real Estate Board. The Real Estate Board investigated it along with some other transactions; and they wrote me a letter which I have in my possession, stating that the executive committee was going to act on this case; that this man would be dropped; and he was dropped from the Real Estate Board.

Mr. PALMER. Back in my State the prosecuting attorney would take care of such cases as you are talking about.

Mr. THORNTON. Yes; but he wanted to save his money and he wouldn't take it up with the prosecuting attorney.

Mr. PALMER. If you have a criminal law covering that subject, and you take it before the prosecuting attorney, they will take care of that.

Mr. THORNTON. And in the meantime that gentleman goes on operating.

Mr. PALMER. How would the enactment of this law prevent him from operating if the criminal law does not stop him?

Mr. PALMISANO. No criminal law can protect a man's money. An individual will never be able to protect himself against a crook.

Mr. THORNTON. We have this case where $500 was supposed to be deposited on a contract. But if you took that contract to the United States attorney, I will wager you anything that he won't take any action on it.

Mr. MCLEOD. Are there any questions of the witness?

Mr. MCCLINTOCK. There are a lot of cases where a man is probably guilty of moral turpitude which the criminal law will not reach. I have had that experience as a prosecutor. I could not reach them. Mr. PATMAN. I would like to ask a question. Don't you think that the present law could be amended so as to provide that in case of the indictment or conviction of a person for any of these transactions, that his name would be tentatively dropped and he would not be permitted to handle real estate? Wouldn't that be all right? Mr. THORNTON. I don't think there is much law pertaining to this. Mr. PATMAN. Pertaining to fraud?

Mr. THORNTON. Well, there may be law pertaining to fraud.

Mr. PATMAN. You don't expect to get them except for fraud, do you? You don't expect to cancel a person's permit except for fraudulent transactions or wrongdoing, do you?

Mr. THORNTON. I would not want to do it.

Mr. PATMAN. Well, if it is wrongdoing or fraud, the criminal law should cover it, should it not?

Mr. THORNTON. How are you going to handle a man like that? Take a man who owns a large number of lots, and he sells them to an agent out in the outlying States. In this case a man paid this agent 333 per cent of the amount that he sold the property for; and he went up and got people and brought them in town and took them to his house and entertained them-some he entertained down town-and sold them the lots at highway-robbery prices-there isn't any question about that-I have lots across the streetMr. PATMAN. Do you think that he sold them too high?

Mr. THORNTON. Yes.

Mr. MCCLINTOCK. The criminal law would not reach him.

Mr. PATMAN. Do you want the law to reach a man who sells at a good profit?

Mr. THORNTON. He sold them under misrepresentation.

Mr. PATMAN. If he misrepresented them, the law should be made to cover that. Misrepresentation is swindling. That is fraud. Mr. MCCLINTOCK. As a prosecutor you know how hard it is to get a criminal action on fraud.

Mr. PALMISANO. I don't see how a man who sells his own land. and no matter what price he puts on it, I don't see how you can get him under the criminal law.

Mr. PALMER. If he misrepresents, it would be fraud, when he knows that it is willful and malicious.

Mr. PATMAN. The law will reach every case like that.

Mr. MCCLINTOCK. The criminal law does not reach them.

Mr. PALMER. Oh, yes.

Mr. MCCLINTOCK. Oh, no. I have had 10 years' experience as a prosecutor and I know that it does not.

Mr. PATMAN. Besides, if this bill could be amended so as to make a broker responsible for the acts of his agent, that would cover that gentleman's case too.

Mr. MCCLINTOCK. Do you know how many States have a law like this?

Mr. LAMPERT. My State has.

Mr. MCCLINTOCK. Ohio has, too.

Mr. PALMER. My State has.

Mr. PATMAN. Wisconsin has a provision in her law that the broker is responsible for the acts of his agent. I have talked about that provision of the law, and I understand that it is very effective.

Mr. MCCLINTOCK. If it is a good thing for the States, why wouldn't it be a good thing for the District?

Mr. PATMAN. We will discuss that when we reach it.
Mr. STALKER. There are 22 States that have that law.

Mr. MCCLINTOCK. Twenty-two States have it and the District of Columbia ought to be the initial mover.

Mr. PATMAN. Don't get the idea that those 22 States have a law enacted just like this one. Some of them are hardly a law at all. Mr. MCCLINTOCK. The law will in Ohio. I know that. It has put a lot of crooked real-estate men out of business.

Mr. PATMAN. Mr. Chairman, I just want to show the difference between the Ohio law and this one. The Ohio law provides that a man can get a power of attorney from a person who owns real estate and sell it and the law shall not apply to him. It provides further that it shall not apply where a person buys and sells his own property.

Mr. MCCLINTOCK. That is not all that it covers.

Mr. PATMAN. It also provides that where one man is selling for a relative, it is all right to entrust it to a relative to sell it, who is more interested in the property than an outsider.

It also does not apply where you make one sale to a person. You can always make one sale without coming within the provisions of the law.

Mr. MCCLINTOCK. Under this law you can execute a power of attorney.

Mr. PATMAN. Oh, no. You can not.

« ÀÌÀü°è¼Ó »