4 were offered into evidence, and were received. The Defendant appeared as his only witness. Defendant's Exhibits 1 and 2 were offered into evidence and were received. Post Hearing Memoranda have been received from the Plaintiff and from the Defendant.
The Defendant was at all material times registered with tie Florida Real Estate Commission as a real estate salesman in the employ of Razook Real Estate, Inc. Razook Real Estates Inc. is a duly registered real estate broker.
During 1973, the Defendant negotiated the sale of a business known as Carvel Ice Cream Supermarket number 1034, located in Riviera Beach, Florida, between Philip Caruso and Dorothea Caruso, as sellers, and Beverly Barratt, as purchaser. The Carusos and Ms. Barratt entered into a Purchase and Sale Agreement on May 14, 1973. (See: Defendant's Composite Exhibit 1). The agreement included assignment from the sellers to the purchaser of a lease covering the property on which the business was located. The lease assignment was incidental to the sale of the business, and was not a prime factor in the transaction.
The Defendant negotiated the sale as a business broker employed by Rabern Business Associates, Inc., and not as a real estate salesman employed by Razook Real Estate, Inc. The Defendant was not registered with the Florida Real Estate Commission as a real estate salesman for Rabern Business Associates, Inc.
When she signed the contract on May 14, 1973, Ms. Barratt delivered to the Defendant a $4,060 check made out to Rabern Business' Associates, Inc. which amount was to serve as a deposit. The contract provided that the sale would be subject to the approval of Carvel Corporation the franchisor of the business.
On August 15, 1973, the transaction between the Carusos and Ms. Barratt was closed, except that the approval of Carvel Corporation had not yet been received. It was the clear understanding of the parties that the approval of Carvel Corporation was essential and that the closing was conditional upon that approval. The sellers were represented at the closing by Attorney Walter Colbath. Ms. Barratt was represented at the closing by Attorney Gustave Broberg.
Shortly after the closing, Ms. Barratt went to New York to participate in a training program offered by Carvel Corporation for franchisees. Carvel Corporation would not approve the transaction unless the new franchisee completed this program. Upon her arrival in New York, Ms. Barratt was advised by representatives of Carvel Corporation that the Carusos owed Carvel Corporation more than $8,000, which amount was not reflected in the agreement between the Carusos and Ms. Barratt nor in the closing statement dated August 15, 1973. This is the first occasion upon which Ms. Barratt was apprised of this indebtedness on the part of the Carusos to Carvel Corporation. Carvel Corporation reluctantly permitted Ms. Barratt to participate in their training program with the hope that a resolution of the indebtedness could be made. Carvel Corporation would not approve the agreement between the Carusos and Ms. Barratt unless an arrangement was made respecting the indebtedness.
When Ms. Barratt returned to Florida, negotiations respecting the
$8,000 commenced, and although at one juncture the parties were close to an agreement, no final resolution was reached. The transaction was therefore not concluded. At no time did Carvel Corporation approve the sale as set out in the contract of May 14, 1973, or in the closing statement dated August 15, 1973.
On October 23, 1973, Mr. Broberg, representing Ms. Barratt, wrote to Mr. Colbath, the attorney for the Carusos, stating that the transaction could not be consumated, and demanding that monies held by Attorney Colbath be returned to Ms. Barratt. He further stated in the letter:
"It would be appreciated if you would forthwith inform Mr. Ralph J. DePaola of Rabern Business Associates, Inc. that the sale has terminated and request that he return the $4,000, which he is holding, to Mrs. Barratt."
A copy of this letter was sent to Mr. DePaola. (See: Defendant's Composite Exhibit 1). On December 19, 1973, Mr. Colbath wrote to Mr. Broberg concerning monies that had been held by him, and with respect to the monies held by Mr.
DePaola stated as follows:
"The balance of $4,000 that was originally deposited with Mr. DePaola has, as you know, been retained by him as his commission. I am by copy of this letter informing Mr. DePaola what has transpired since we last talked and ask that you contact him directly."
A copy of this letter was sent to Mr. DePaola. (See: Defendant's Composite Exhibit 1). No further demands were made by Ms. Barratt, or on her behalf, to the Defendant for the return of the $4,000.
The Defendant did not have any agreement with Ms. Barratt that Ms. Barratt would be responsible to pay any commission to the Defendant. Four thousand dollars is listed on the August 15, 1973 closing statement as a sellers' expense. Mr. DePaola testified at the hearing that he considered the matter closed as of August 15, 1973; however, Mr. DePaola did know, or should have known, that approval by Carvel Corporation had not been obtained, and was necessary. Mr. DePaola has retained the $4,000, and it has not otherwise been returned to Ms. Barratt.
The Defendant was not aware of the additional $8,000 obligation which the sellers owed Carvel Corporation on May 14, 1973, when the Purchase and Sale Agreement was signed, or on August 15, 1973, when the transaction was preliminarily closed.
CONCLUSIONS OF LAW
If the Defendant had been acting as a real estate salesman in the transaction involved in this case, he would clearly be guilty of a violation of Florida Statutes 475.42(1)(b). The Defendant negotiated the sale as an employee of Rabern Business Associates, Inc. Defendant was registered with the Florida Real Estate Commission as a salesman in the employment of Razook Real Estate, Inc., and not as an employee of Rabern Business Associates, Inc. By virtue of Florida Statutes s. 475.25(d) therefore, the Defendant would, if he were acting as a real estate salesman, be subject to having his registration suspended for a period not exceeding two years.
If the Defendant had been acting as a real estate salesman in the transaction involved in this case, he would be guilty of a violation of Florida Statutes s. 475.25(c). Ms. Barratt deposited $4,000 as an earnest money deposit with the Defendant. Through no fault of Ms. Barratt's, the transaction did not close. Demand was made upon the Defendant to return the money to Ms. Barratt, and the Defendant was aware that Ms. Barratt wished to have the money returned to her. The Defendant did not return the money to Ms. Barratt. If a real estate broker or salesman retains a deposit erroneously when the person entitled to it has made a demand for it, the broker is subject to having his license
revoked under the provisions of Florida Statutes s. 475.25(1)(c). Shelton v. Florida Real Estate Commission 121 So.2d 711 (2 DCA Fla. 1960).
The Defendant was not acting as a real estate salesman in the transaction involved in this case. The transaction was primarily for the sale of a business. The assignment of the lease, which was the only element of the transaction involving real property, was totally incidental to the sale of the business. The lease was not for a compensation or valuable consideration, but was incidental to the business transaction. In Hughes v. Chapman, 272 F 2d 193 (5 Cir. 1959), the court held, in a diversity case involving application of Florida Law, that the sale of a franchise, which incidentally included the assignment of a lease, was not a transaction within the meaning of Florida Statutes 475.41, and that a salesman who negotiated such a transaction was not a real estate salesman within the meaning of Florida Statutes, s. 475.01(2). The Florida Courts have given the same interpretation to the Real Estate License Law. In Schindler v. Florida Real Estate Commission, 144 So.2d 863 (3 DCA Fla. 1962), the court held that the sale of a business, which incidentally involved a lease transfer, was not a transaction subject to the control of the Florida Real Estate Commission. The court stated: (at page 863)
"The remaining charges against petitioners grew out of their alleged participation with Graham and Nobbs [two persons employed by the petitioner, allegedly as real estate salesmen] in claims for commissions. The two transactions on which those charges were based, related to the sale of businesses and the leases transferred in connection therewith are incidental. These trans- actions, therefore, were not subject to control
under the Florida Real Estate License Law." (Emphasis supplied by the court).
See also: Willner v. Wilder, 280 So.2d 1 (3 DCA Fla. 1973); Florida Real Commission v. Reliable Agency, Inc. 207 So.2d 675, 676-77 (3 DCA Fla. 1968);
Reid v. Florida Real Estate Commission, 188 So.2d 846 (2 DCA Fla. 1966)
Count I of the Information against the Defendant should be dismissed on the ground that the transaction upon which the charge is based was not a transaction subject to control under the Florida Real Estate License Law, and that therefore no violation of Florida Statute 2(1)(b) has been established.
Count II of the Information against the Defendant should be dismissed on the ground that the Plaintiff failed to establish that the Defendant had knowledge of any additional indebtedness owed by the Carusos to Carvel Corporation at any material time, and that therefore no violation of Florida Statutes s. 475.42(1)(a) has been established.
Count III of the Complaint against the Defendant should be dismissed on the ground that the transaction upon which the charge is based was not a transaction subject to control under the Florida Real Estate License Law, and that therefore no violation of Florida Statutes s. 475.25(1)(c) has been established.
