STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA REAL ESTATE COMMISSION, )

ex rel. JACK KING, )

)

Petitioner, )

)

vs. ) CASE NO. 76-1216

) P.D. NO. 2804 JEFFREY S. KRAMER, WALTER J. )

PANKZ and INTERNATIONAL LAND ) BROKERS, INC., )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K.N. Ayers, held a public hearing in the above styled case on October 1, 1976 at Coral Gables, Florida.

APPEARANCES

For Petitioner: Richard J.R. Parkinson, III, Esquire

Louis B. Guttmann III, Esquire Staff Counsel

Florida Real Estate Commission 2699 Lee Road

Winter Park, Florida 32789

For Respondents: Howard Freidin, Esquire

Kutun, Freidin & Silber, P.A.

2000 South Dixie Highway, Suite 205

Miami, Florida 33133,

Theodore Klein, Esquire and Irwin J. Block, Esquire 2401 Douglas Road

Miami, Florida

Charles A. Finkel, Esquire

801 East Hallandale Beach Boulevard Hallandale, Florida 33309

Attorney for Charlene Touby, witness.

By Administrative Complaint filed February 24, 1976 the FREC ex rel. Jack King, seeks to revoke, suspend, or otherwise discipline the corporate real estate broker's license of International Land Brokers, Inc., (ILB) and the individual real estate broker's licenses of Jeffrey S. Kramer and Walter J. Pankz, Respondents. As grounds there for it is alleged that Respondent Kramer was President and Active Firm Member of ILB from October 1, 1974 to December 1, 1975, and that Respondent Pankz was registered as Active Firm Member of ILB from

November 13, 1975 until present (February 24, 1976); and that during these periods Respondent ILB, through its Active Firm Member, solicited, upon payment of an advanced fee, listings of Florida property for sale from out-of-state owners upon the representation that bona fide efforts would be made to sell said property by world wide advertising which representations were false and known to be false when made. It is alleged that thereby Respondents are guilty of fraud, misrepresentation, dishonest dealing, trick, scheme or device, or breach of trust in a business transaction in this state. Count II of the Administrative Complaint alleges that by reason of the procedures established to defraud those owners induced to pay an advance listing fee, Respondents are guilty of a course of conduct or practices which show they are so dishonest and untruthful that the money, property, transactions and rights of investors cannot safely be entrusted to them in violation of 475.25(3) F.S.

At the beginning of the hearing Respondents moved to dismiss the Administrative Complaint under the doctrine of collateral estoppel since under the same or similar facts a consent order had been entered into with the Attorney General. This motion was denied. During the introduction of documentary evidence Respondent objected to the admission of depositions marked Exhibits 4, 5, and 6 taken of out-of-state witnesses. These exhibits were admitted into evidence pursuant to Wests F.S.A. RCP Rule 1.330(a)(3).

Respondents who were not represented at the taking of these depositions further objected to specific questions and answers contained in the depositions. In order to conserve time and afford Respondents an opportunity to object to questions and answers that would have been excludable Respondents were given an opportunity to submit these objections within five days after the conclusion of the hearing. The Memorandum in Opposition to the Admission of Depositions did not go to any specific question as directed, but was related to the admissibility of these depositions which had been ruled on by the Hearing Officer when they were admitted into evidence.

When Respondents Kramer and Pankz were called by Petitioner to identify corporate records and testify regarding the operations of the corporate broker they invoked the Fifth Amendment and refused to answer questions.

After the close of Petitioner's case Respondent offered numerous documents into evidence as composite exhibits 27 and 28. Exhibit 27 for identification was one suitcase containing cards with names of individuals purportedly called for the purpose of attempting to sell them property that had been listed by Respondents. Also offered as Composite Exhibit 28 was another suitcase containing what was purported to be letters received by Respondent, ILB in response to advertisements and copies of advertisements published in various newspapers. Both of these exhibits were objected to by Petitioner on the grounds that they were hearsay and not business record exceptions to the hearsay rule, that they were not properly authenticated, and that most, if not all, of these letters, cards, and advertisements were dated subsequent to the date of February 24, 1976 when the complaint was filed. Ruling on the admission of Exhibits 27 and 28 was reserved and the parties submitted briefs on the admissibility of these exhibits.

During the proceedings ten witnesses, including Pankz and Kramer, were called by Petitioner, two witnesses were called by Respondents, and 29 exhibits were admitted into evidence. Following the testimony of Jack King, FREC investigator and nominal Petitioner, Respondent's Motion to Dismiss the Administrative Complaint on the grounds that King had no personal knowledge of the facts alleged in the Administrative Complaint, was denied.

FINDINGS OF FACT

1. During the times herein involved Respondent Kramer and Pankz were registered real estate brokers and Active Firm Member of Respondent, ILB, a registered corporate broker. Registered real estate salesmen were employed to obtain listings and WATS lines installed. Lists of out-of-state purchasers of Florida land were obtained and during the hours of 6 to 10 P.M. salesmen telephoned individuals from these lists provided them by ILB. Each salesman was provided with a script to follow in making his sales pitch. As one witness recalled the substance of the script was "if you felt you could make a profit on your property would you be interested in selling it?" Those indicating interest in selling at a profit were told that ILB was engaged in land sales on a large scale, that world wide investors were interested in acquiring Florida land, that they widely advertised the land that was listed with them in a catalog that went to brokers all over the world, that Florida land had greatly increased in price in recent years, that they would evaluate the owner's land and tell him what ILB thought the land would sell for. They inquired what the owner had paid for his land and obtained enough of the description to ascertain the size of the plot. For those interested in selling, a package was sent containing newspaper clippings about foreign investors being interested in Florida land, an "Important Facts" sheet containing much of the information passed to the owner on the first telephone call, a list indicating publications and newspapers in which ILB advertises, photocopies of what purports to be inquiries received from around the world as a result of ILB's advertising, and a copy of a Listing and Brokerage agreement.

   
   

2. When the owner was again called about a week after the first call he was quoted a price for his property, nearly double what he had paid for it, and advised if he would list the property with ILB every effort would be made to quickly obtain a buyer. It was explained that because of the expense of advertising it was necessary for the owner to pay listing fee, which was fully refundable out of the 10 percent selling commission that ILB would earn when the property was sold. The advance listing fee which the owner forwarded when he executed the listing and brokerage agreement varied between $250 and $350. The listing agreement provided, inter alia, that owner "understand(s) that this agreement does guarantee the sale of my property but that it does guarantee that you will make an earnest effort pursuant to the aforementioned provisions." Out of this listing fee the salesman was paid approximately 1/3. No arrangement was made between ILB and the salesman regarding any additional commission to the salesman if the property was sold. No effort was made by the listing salesman to sell any property listed, although one witness testified that she did ask some of those she called if they wanted to purchase property. No evidence was presented that any of the property for which listing fees were received was sold by ILB.

   
   

3. Several of the witnesses had been told by Respondents that sales had been made, but no corroboration of this hearsay was ever presented. The Respondent brokers Kramer and Pankz refused to answer any questions regarding the operation of the corporate broker ILB on grounds that such answers might tend to incriminate them. Accordingly no substantive evidence was presented that any sales or efforts to sell the properties listed was made prior to December, 1975.

   
   

4. Exhibit 29, the Consent Order between the Division of Consumer Affairs and ILB, corporate officers and salesmen of ILB, was entered on July 2, 1976. The Complaint in that proceeding, was the basis for Respondent's collateral estoppel argument to dismiss the instant proceeding, was filed April 10, 1976,

   following extensive investigation of ILB. This is pointed out solely to accentuate the fact that practically all of the documents in Exhibit 27 and 28, which were offered into evidence by Respondents to show that they were making bona fide efforts to sell the properties listed, were prepared subsequent to the commencement of the investigation of ILB.

   
   

5. Exhibits 8, 9, and 10 were admitted into evidence, were published by Respondent but no substantive evidence was presented that these listings are "advertisements" of the properties for which Respondent received a listing fee or that they were distributed to anyone other than those making inquiries about property. In the forwarding letter printed on the inside of the front cover of these exhibits the selling brokers were offered a 7 percent commission of any cash sales they arranged. As noted above, the total commission in the Listing and Brokerage agreement was 10 percent.

   
   

6. The information contained in these catalogs was not legally sufficient to locate the properties therein listed.

   
   

7. Many of the land development companies which originally sold the properties which Respondents herein were soliciting listing commissions, head many unsold lots in these developments which they were offering for sale at prices less than one-half the prices Respondent had advised the owners the property would bring.

   
   

8. Independent brokers in some of the areas involved, i.e. Lee, Collier, and Hendry counties testified that many of the lots in these developments were for resale at one-half the prices being asked by the developers.

   
   

9. Exhibit 22, the Federal Corporate Income Tax Return for ILB for 1974 shows Respondent Kramer owned all of the stock of ILB during that taxable year and that $12.00 was spent on advertising. Exhibit 23, the Corporate Federal Income Tax Return for ILB for 1975 shows that $348,305.68 in gross receipts and deductions of $344,976.96, but no schedule of such deductions was attached. No evidence was presented regarding advertising expenses for taxable year 1975.

   
   

   CONCLUSIONS OF LAW

   
   

10. Section 475.25(1)(a) F.S. provides in part that the registration of a registrant may be suspended for a period of two years upon a finding of fact showing that the registrant has:

    
    

    "(a) Been guilty of fraud, misrepresentation . . . dishonest dealing, trick, scheme or device, or breach of trust in any business transaction . . . has violated a duty imposed upon him by law

    or by the terms of a listing contract . . . in a real estate transaction . . . or has formed an intent, design, or scheme to engage

    in any such misconduct, and has committed an overt act in furtherance of such intent, design or scheme."

    
    

    Section 475.25(3) F.S. provides:

    "The registration of a registrant may be revoke if the registrant shall, for

    a second time, be found guilty of any misconduct that warrants his suspension under subsection (1) of this section,

    or if he shall be found guilty of a course of conduct or practices which show that he is so incompetent, negligent, dishonest, or untruthful that the money, property, transactions and rights of investors of those with whom he may sustain a confidential relationship may not safely be entrusted to him.

    
    

    From the evidence adduced it is obvious that Respondent Kramer was the Active Firm Member of ILB during most of the period involved in the Administrative Complaint and that Respondent Pankz was Active Firm Member after December 1, 1975. As Active Firm Member each was responsible for any violations of the Florida Real Estate License Law by ILB while serving as Active Firm Member.

    
    

11. From the facts as noted above it is concluded that ILB was organized for the primary purpose of obtaining listings of property for a fee and that salesmen who solicited listings were directed to represent that bona fide efforts would be made to sell the property listed. At the time these representations were made Respondents ILB, Kramer and Pankz knew that such representations were false and were made for the sole purpose of inducing the owners to forward a listing fee. Once Respondents became aware that their activities were under investigation they placed advertising in some newspapers both domestic and foreign.

    
    

12. Ruling on the admissibility of Exhibits 27 and 28 was deferred at the hearing. These exhibits are hearsay and do not fall within the business records exception to the hearsay rule or qualify under the Uniform Business Evidence Act

    92.36 F.S. since neither the custodian nor any other qualified person testified to the identity and mode of preparation of these documents. Furthermore the circumstances existing at the time of their preparation was not such as to justify their admission under 92.36 F.S.

    
    

13. Section 120.58 F.S. allows the admission of hearsay in administrative proceedings and pursuant to this provision Exhibits 27 and 28 are hereby admitted into evidence. However, 120.58 F.S. also provides such testimony is insufficient in itself to support a finding that Respondent made a bona fide attempt to sell the properties for which they solicited listings.

    
    

14. Under these circumstances it must be found that Respondents deliberately and intentionally failed to comply with their inducements to obtain listings, and the terms of the listing agreement that they would make a bona fide effort to sell the properties listed with them. Respondents' efforts were primarily directed at obtaining a listing fee from the clients and certainly the greatest portion of the revenues from these listing fees went to pay for the salesmen's commissions and the WATS lines used. These acts constitute a violation of 475.25(1)(a) F.S. above quoted.

    
    

15. Whether the same acts constitute a violation of 475.25(3) F.S. above quoted so as to warrant revocation of Respondents' licenses is a different question. In order to revoke a license the registrant must be found guilty of a course of conduct or practices which show that he is so dishonest or untruthful that money of investors or those with whom he may sustain a confidential

    relationship may not safely be entrusted to him. Here Respondents misrepresentations related solely to the promises to actively pursue a course of action, in consideration of payment of a listing fee, that would likely result in the sale of property so, listed. While the course of conduct or practices was established in this one segment of the real estate field that was dishonest and a violation of 475.25(1)(8) F.S. this does not constitute the course of conduct or practices intended by 475.25(3) F.S.

    
    

16. The words of the statute in referring to "money, property, transactions and rights of investors" all relate to investors or those intending to purchase property not to sellers with whom Respondents were here dealing. In addition to investor, 475.25(3) F.S. includes "or those with whom he may sustain a confidential relationship." Here no confidential relationship, as that term is normally used in the real estate field, was established between the registrants and the clients.

    
    

17. For the foregoing reasons it is concluded that the authority to revoke a license, as authorized by 475.25(3) F.S. is intended for use in those instances where, by a course of conduct involving misuse of money or property entrusted to the registrant in a fiduciary capacity, the registrant has demonstrated a disregard for the duties and responsibilities of a registrant and a fiduciary. This is not the situation in the instant case. Here there was no promise to safeguard money entrusted to the registrant; only a promise by the registrant to exert an honest effort to sell the property listed with him.

    
    

18. From the foregoing it is concluded the Respondents, Jeffrey S. Kramer, Walter J. Pankz, and International Land Brokers, Inc., are guilty of violation of 475.25(1)(a) F.S. and are not guilty of violation of 475.25(3) F.S. It is therefore,

RECOMMENDED that the registration of Jeffrey S. Kramer, Walter J. Pankz, and International Land Brokers, Inc. be suspended for a period of two years.

DONE and ENTERED this 2nd day of November, 1976, in Tallahassee, Florida.

K. N. AYERS Hearing Officer

Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304

Docket for Case No: 76-001216

Orders for Case No: 76-001216