Court for Harford County Case No. 12-C-14-001972
Woodward, C.J., Leahy, Reed, JJ.
issues in the underlying administrative appeal boil down to
three. First: can a real estate broker, Georgeanna Garceau
(Appellee and Cross-Appellant), be found negligent for
failing to disclose the existence of a non-existent
homeowners association? We don't think so. Second: can
Ms. Garceau be held negligent for failing to disclose
potential well-water contamination in the neighborhood? We
determine she can. And third: was the sanction imposed by the
Maryland Real Estate Commission ("MREC") (Appellant
and Cross-Appellee) on Ms. Garceau in this case arbitrary and
capricious? Under the circumstances, the answer is yes.
about May 17, 2009, Victor and Eileen Yancone (collectively,
the "Sellers") entered into a contract of sale for
residential property located at 2828 Cross Country Court,
Fallston, Maryland (the "Property"), within a
subdivision called Cross Country Estates, with Tim Willig and
Debra Perseghin (collectively, the "Buyers"). Ms.
Garceau served as the listing broker for this transaction.
Buyers complained that Ms. Garceau failed to disclose that
(1) there was a putative homeowners association
("HOA") operating in the neighborhood and (2) there
was potential well-water pollution in the neighborhood
relating to an ExxonMobil gas leak. But before we begin the
saga of Ms. Garceau's journey to this point, we render a
August 14, 1975, Leo Umerly executed a "Declaration of
Restrictions" (the "1975 Declaration") for
plats one through four in Cross Country Estates and recorded
this document in the office of the Recorder of Deeds for
Harford County, Maryland. This document established certain
protective covenants and restrictions for the lots, including
the Property. The covenants governed such things as (1) the
number of dwellings, (2) the number and type of animals, and
(3) the number and size of vehicles allowed on each lot. The
1975 Declaration, signed by Leo Umerly and notarized, did
not establish an HOA. Notably, the 1975 Declaration
states that "[t]he provisions herein contained shall run
with and bind the land hereby conveyed for a period of thirty
(30) years[.]" Thus, by its own terms, the 1975
Declaration expired in August 2005.
October 16, 2006, after the expiration of the 1975
Declaration, a second "Declaration of Restrictions"
(the "2006 Declaration") was filed in the land
records of Harford County. This 2006 Declaration stated that
"Cross Country Estates Community Association, Inc.
controls this declaration of restrictions as defined by the
Maryland Homeowners Association Act." The 2006
Declaration purported to govern the same general topics as
the 1975 Declaration did. The last page was signed,
"Beth F. Scheir, Vice President of CCECA, " but was
not notarized. It was revealed during the course of the
underlying litigation, that the Cross Country Estates
Community Association ("CCECA") is a neighborhood
association, not an HOA, and the only declaration of
restrictions that governed the neighborhood-the 1975
Declaration-expired in 2005.
The Residential Real Estate Transaction and
early 2009, the Buyers were interested in purchasing a house
and hired William Fischbein, of Litehouse Realty, as their
agent. They informed him that they were not interested in
properties subject to an HOA, in part because they wanted to
build a fence for their dogs and had bad experiences in this
regard in their prior residence. The Buyers became interested
in purchasing the Property, so Mr. Fischbein contacted Ms.
Garceau of Garceau Realty, who was the listing agent. Mr.
Fischbein maintained, in the subsequent investigation, that
the existence of an HOA fee or potential groundwater
pollution was not disclosed to him, but that he did not
specifically ask Ms. Garceau about an HOA because the
existence of an HOA was not on any paperwork. The Metropolitan
Regional Information Systems ("MRIS") report did
not state that the Property was subject to an HOA or an HOA
closing on the Property, the Buyers had a standard well
inspection performed, but that inspection did not test the
water for contaminants. On May 17, 2009, the Buyers and the
Sellers executed the contract for sale of the Property for a
purchase price of $439, 900.00. The sales contract included a
Maryland Homeowner's Association disclosure form, which
was crossed out with a handwritten "NO HOA."
29, 2009, the Buyers moved onto the Property, and they began
to install ground posts for a fence. Three days later, a
representative of the CCECA hand-delivered the Buyers a copy
of the 2006 Declaration and a letter stating:
Welcome to Cross Country Estates! We hope you enjoy the
We assume that the realtors involved or the previous owner
made you aware of the neighborhood association covenants,
however a copy has been attached for your records. Both the
By-Laws and Covenants are filed at the Harford County
Courthouse Land Record department and Home Owner Depository.
We have a minimal annual association fee of $10. All property
owners are bound by the agreements of the homeowners
association. As a new property owner of CCE you are eligible
to become a voting member of the association upon payment of
the $10 fee.
months after the Buyers moved onto the Property, a company
engaged by ExxonMobil arrived at the Property to test the
water for possible pollution caused by ExxonMobil. The
arrival of this inspector was the first time the Buyers
became aware of possible well-water contamination at the
March 9, 2010, the Buyers filed with MREC a complaint against
Ms. Garceau for her conduct in the real estate transaction:
namely, for failing to disclose the existence of potential
well contamination stemming from the ExxonMobil leak, and for
"[n]o disclosure in listing/contract of an HOA[.] We
were looking ONLY at homes w/out an HOA." MREC denied
the Buyers' guaranty claim,  but determined that it would
proceed with an administrative claim against Ms. Garceau.
Garceau responded to the Buyers in a letter dated March 31,
The [Buyer]s claimed that no disclosure was made of an HOA.
There is a [CACCE]. In our listing agreement the sellers
signed off that there was no HOA, there are Declaration of
Restrictions. I have attached several recent listings from
the community; listings from several brokerages all of which
state there is no HOA fee, the only exception being one of my
previous listings reflecting the $10 voluntary
On 5/14/09, prior to the contract ratification date of
5/17/09, seller Eileen Yancone responded to several of the
[Buyers'] questions. The potential buyers asked,
"Are there any restrictions with regard to putting up
fences, putting in plantings or gardens, building
outbuildings like a garden shed, satellite dishes, etc?"
The sellers responded, "Very limited covenants exist in
the Cross Country Estates Community Association. These are on
file with the county." In addition, we sent the
potential buyers the attached Declaration of Restrictions.
The potential buyers also inquired about the well on 5/14.
They asked "When was the well last sampled and what were
the results?" Eileen Yancone responded "November 5,
2008, results negative." Per seller, there was no water
problem at the time of the listing, and the owners did not
experience potability problems prior to that. The buyer had
the well tested on 5/19/09, all results passed and the buyer
by their own admission states there is nothing wrong with the
water. The listing broker/agent was not aware of any
monitoring of water at 2828 Cross Country Court until this
According to the appraisal conducted on 6/10/09, the HOA fee
was non applicable. The appraiser also noted that there were
"No neighborhood factors that would have a negative
impact on marketability." In closing, Garceau Realty did
not have any information that was withheld at the time of the
listing or contract acceptance.
J. Oliver, an MREC employee, investigated the Buyers'
complaint from June 17 to July 19, 2010. His report states
that he interviewed the Buyers and that they told their
broker, Mr. Fischbein, that they were interested only in
properties not subject to an HOA because they wanted to build
a fence for their dogs. The Buyers told Mr. Oliver that they
had not seen a series of emails between Ms. Garceau and the
Sellers concerning restrictive covenants or potential
well-water contamination. Mr. Oliver reported that he showed
the Buyers the 1975 Declaration, but that the Buyers did not
recall seeing it before. His report notes the Buyers were
unaware of any HOA until July 2, 2009, when they received a
letter from the CCECA, and that they learned of the potential
well contamination when they received the letter from
ExxonMobil about testing on October 26, 2009.
to his report, Mr. Oliver then interviewed Ms. Garceau. She
informed him that she was on vacation for part of the
transaction and that her assistants, Jessica Boyle and Julie
Bleuel, represented her when she was gone. Ms. Garceau was
aware that the Buyers did not want a property covered by an
HOA, but "the seller said there was no HOA and wrote
'NO HOA' across the MD Homeowners Act Disclosures to
Buyer Document." Ms. Garceau provided Mr. Oliver a copy
of the contract checklist with HOA marked "N/A, "
and informed him that "she was not aware of the
existence of a community association." When Mr. Oliver
told Ms. Garceau that another property on the street that she
sold in the past indicated that there was an HOA fee of $10,
Ms. Garceau explained that "at the time the fee was
voluntary and depended on the seller to inform her if they
were a member of an association or not" and that
"legally there is no HOA covering the property."
She added that the appraisal for the Property indicated there
was no HOA fee." Ms. Garceau was aware of the 2006
Declaration and said she provided a copy to the Buyers on May
14, 2009, when she answered their questions about other
restrictions and well testing.
Garceau, who lived within a mile of the Property, also
admitted to knowing about possible well contamination in the
area, saying "everyone living in the area is aware of
the dangers associated with the leak." In her affidavit,
however, Ms. Garceau explained that it was not until the Fall
of 2011 that she received a letter informing her that she
"became" a class member in the class action against
Exxon Mobil that resulted from this spill. See Exxon
Mobil Corp. v. Ford, 433 Md. 426, 435-37, as
supplemented on denial of reconsideration, 433 Md. 493
(2013); Exxon Mobil Corp. v. Albright, 433 Md. 303,
316- 17, on reconsideration in part, 433 Md. 502
Oliver then interviewed Mr. Fischbein, who told him that (1)
the Buyers informed him that they did not want property with
an HOA; (2) the existence of an HOA was never disclosed to
him or to the Buyers; and (3) "[h]e never asked [Ms.
Garceau] specifically about the subject because there ha[d]
been no disclosure in the contract or in the MLS
documents." Mr. Fischbein stated that he received no
documentation of any restrictions on the Property, and the
potential water pollution was not disclosed to him. He denied
knowledge of any class action lawsuit or any well-water
The Statement of Charges
November 8, 2010, MREC issued a statement of charges (the
"Charging Document") against Ms. Garceau. The
Charging Document identified Ms. Garceau as the listing
broker and seller's agent, alleging that: (1) the Buyers
were interested only in properties not subject to an HOA and
that Ms. Garceau was aware of that preference; (2) Ms.
Garceau "was aware, or should have been aware, that the
Cross Country Court property was part of a homeowners, or
community, association and that the property was governed by
a Declaration of Restrictions"; and (3) Ms. Garceau
"did not disclose the existence of the homeowners, or
community, association or the Declaration of
Restrictions to the buyers or their real estate agent
prior to settlement." The Charging Document then stated
that the Buyers would not have purchased the Property had
they known of the HOA.
Charging Document alleged further that the Property "was
subject to periodic testing of well water by ExxonMobil for
possible contamination" associated with a gasoline leak
and related litigation, and that Ms. Garceau lived and
provided real estate brokerage services near the Property.
Therefore, the Document alleged that Ms. Garceau "knew,
or should have known, of the possible contamination and well
testing as well as the litigation[, ]" and that Ms.
Garceau did not disclose this information. The Buyers would
not have purchased the Property, according to the charges,
had they known this information.
the Charging Document "alleged that [Ms. Garceau's]
conduct amounted to bad faith, incompetency, and/or
untrustworthiness, as well as improper dealings." For
the failure to disclose these two issues, MREC charged Ms.
Garceau with violations of Maryland Code (1989, 2010 Repl.
Vol.), Business Occupations and Professions Article
("BOP"), § 17-322(b)(4),  (25),
(33),  as well as violations of Code of Maryland
Regulations ("COMAR") 09.11.02.01A and
The Charging Document informed Ms. Garceau that there would
be a hearing on the charges, which could result in a
reprimand, suspension or revocation of her license, and/or a
penalty of $5, 000.00 for each violation.
The Administrative Hearing
3, 2011, an administrative law judge ("ALJ") from
the Office of Administrative Hearings ("OAH") held
a hearing on the charges against Ms. Garceau. The Assistant
Attorney General prosecuting the MREC complaint (hereinafter
"Presenter")called Mr. Willig as a witness. He
testified that Ms. Garceau never disclosed, in her property
listing or communications, that there was an
HOA; and that he had told Mr. Fischbein of
his desire not to purchase a residence subject to an HOA. He
also stated that he received a declaration of restrictions
purporting to govern the Property-after purchasing the
Property-once he started constructing a fence on the
Property. He further stated that he and his wife had been
paying a $10.00 annual fee, and he stated that, although he
had not consulted a lawyer, he believed that he was bound by
the declaration of restrictions. He further testified that he
and his wife would not have purchased the house, had they
known about an HOA "[b]ecause [they] did not want an
Willig then testified that no one advised him before he and
his wife purchased the house that there was an ongoing
lawsuit relating to gasoline contamination in the
neighborhood. He explained that he was informed of the
potential problem when a company engaged by ExxonMobil showed
up at the Property to test for contamination. Similar to the
HOA issue, Mr. Willig testified that he and his wife would
not have purchased the Property had they known about the
ExxonMobil gas leak and the potential well-water
contamination issue and that his wife refused to drink the
water from the house.
calling Mr. Fischbein, who attested to the same facts he
related during the investigation, the Presenter called Andrea
Swift, who, as mentioned previously, purchased a house in
2008 on Cross Country Court. She testified that Ms. Garceau
was the listing broker for the house she purchased and that
the listing contained an HOA fee of $10.00 a month and that
Ms. Garceau's office "sent [her] the bylaws."
She further testified that there was an active neighborhood
association in the Cross Country Estates neighborhood. She
also stated that there were trace amounts of the pollutant in
the water at her house and that Ms. Garceau never provided
information on the potential water pollution.
Garceau did not testify in her own defense. In closing, the
Presenter argued that Ms. Garceau failed to disclose a
material fact to the Buyers by failing to inform them of the
HOA, and asserted that "when I use the term 'HOA,
' I am referring to not just a homeowners association,
but also any type of neighborhood association or declaration
of restrictions of covenants." The Presenter argued that
there had been no court decision stating that CCECA was not a
valid HOA and that CCECA certainly seemed to be an active
association that accepts dues and takes votes on issues. As
to the well contamination issue, the Presenter argued:
In addition, there was a failure to disclose the issue of the
well contamination, the fact of the testing, the fact of the
class action litigation. And I would argue that even if Ms.
Garceau didn't have specific knowledge of it, she had
been the listing agent for many properties in that community
and development, and the law does require -- specifically
COMAR 09.11.02.01A, which is one of the charges in this case
-- that a licensee shall remain informed of matters affecting
real estate in the community, the state, and the nation.
If you are selling real estate in a community where a major
gas company has caused a leak and that leak is the subject of
class action litigation and the whole community, it sounds
like, is involved in that litigation, that is something that,
as a real estate broker, you have an obligation to know or be
informed about. The [Sellers] were part of the class action
litigation. . . . She should have known that information. She
should have disclosed that information. It simply was not
disclosed, and, therefore, there is a violation of Section
(B)(4), an intentional or negligent failure to disclose a
material fact that relates to the property, and it's to
the material facts I've been discussing.
Presenter then requested a 14-day suspension and a $4, 000.00
closing, counsel for Ms. Garceau argued that there was no
enforceable declaration of restrictions and that the Property
was not subject to a legal HOA under the Maryland Homeowners
Association Act. He argued further that Ms. Garceau had no
knowledge of the well contamination issue and that there was
no evidence in the record to support her knowing it, and that
the Buyers had contractually waived any recourse for water
pollution in the sales contract. Ms. Garceau's counsel
emphasized that there was no contamination on the Property
because every test had negative results.
rebuttal, the Presenter argued that contractual arguments
were beside the point because MREC's disciplinary power
is not coextensive with contractual immunity.
15, 2011, counsel for Ms. Garceau sent a letter to the four
putative officers of the CCECA, stating that it was
"[his] legal opinion that there is no valid formal
Homeowner's Association regulated by the Maryland
Homeowners' Association Act in the Cross Country Estates
Development [and that i]t is further [his] legal opinion that
there are no restrictive covenants binding upon owners of
lots in the Cross Country Estates Subdivision." In his
letter, he stated that by acting as an HOA, the CCECA
officers may be found liable for negligent misrepresentation
and, if they continue to do so, they may be found liable for
intentional misrepresentation. He further suggested they
retain an attorney to explore whether there is a valid HOA
governing the community. He then provided his reasons why
there was no HOA, including (1) his investigations on SDAT;
(2) the expiration of the 1975 Declaration of Restrictions;
and (3) the defective nature of the 2006 Declaration.
29, 2011, the CCECA officers responded to Ms. Garceau's
counsel via letter, acknowledging that CCECA was not a valid
HOA within the definition of the Maryland Homeowners
Association Act, Maryland Code (1974, 2015 Repl. Vol.), Real
Property Article, § 11B-101:
On behalf of the . . . CCECA, we are writing in response to
your letter of June 15, 2011. Your letter raises issues that
we were not aware of, so we sought the advice of legal
counsel in order to determine our correct and current legal
status. Based upon that consultation, and despite our
good faith belief to the contrary, it appears that CCECA is a
community association and not an official
"homeowners" association. In light of that
fact, and again, despite our good faith belief to the
contrary, it also appears that the covenants and restrictions
which were put into effect at the time that our neighborhood
was established have expired and there are no current
valid or enforceable restrictions in effect beyond those that
would be imposed by county regulations.
12, 2011, Ms. Garceau's counsel sent the June 15 and 29
letters to the Buyers, copying the MREC Presenter. He stated
that this confirmed that there was no HOA and no valid or
enforceable restrictions in effect in Cross Country Estates.
The letter then demanded that they dismiss the action against
Ms. Garceau. Six days later, the Presenter sent the ALJ a
letter informing him of the results of Ms. Garceau's
counsel's continued research into the matter of whether
the Property is subject to an HOA.
The ALJ's Proposed Decision
August 30, 2011, the ALJ issued his recommended decision. The
ALJ stated that he would consider only the information
presented at the hearing and not consider any information
submitted post-hearing because neither party requested that
the case be reopened for submission of further evidence.
the ALJ found that, in 2009, the Buyers retained Mr.
Fischbein as their buyer's agent and communicated to him
"that they were specifically looking for property not
covered by a homeowner's association  or a Declaration
of Restrictions." He also found that Mr. Fischbein made
Ms. Garceau's assistant, Jessica, aware of the
Buyers' reticence to purchase a home subject to an HOA;
that Mr. Fischbein asked Jessica whether the Property was
subject to an HOA; and that both Jessica and the
Property's listing indicated that the Property was not
subject to an HOA. The opinion further provided that Ms.
Garceau did not inform the Buyers that the Property was
subject to an HOA or that a declaration of restrictions
applied to the Property; and that, if the Buyers had known
that the Property was subject to a declaration of
restrictions, they would not have purchased the Property
because they wanted to build a fence for their dogs on the
the ALJ found that Ms. Garceau failed to provide the Buyers
information concerning litigation against ExxonMobil
regarding possible well contamination, and that this
information was widely publicized in Fallston, where Ms.
Garceau lives. The ALJ also noted that the Sellers were part
of a lawsuit against ExxonMobil.
further found that, three days after moving in, the Buyers
"received information left at their home regarding a
Cross Country Estates HOA, notice of restrictions and a
request for $10.00 in annual association dues [and that t]he
association also informed the [Buyers] that [they] were
required to clear their fence plans with the association,
which would then grant them a 'permit' for the
fence." As further findings of fact, the ALJ stated the
23. There exists a Declaration of Rights document, filed with
the Harford County, Maryland Land Records Office on October
16, 2006, which purports to apply protective covenants and
restrictions upon properties located within the subdivision
of Cross Country Estates in Harford County.
24. The HOA is run by association officers, who charge a
$10.00 annual fee as a prerequisite for voting rights in the
organization. The association addresses matters such as the .
. . well water issue, disputes between neighbors and issues
involving restrictions it enforces within the subdivision.
25. The [Buyers] pay the annual HOA fee, retain voting rights
in the association and consider themselves subject to the
restrictions imposed by the Declaration of Restrictions