STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA REAL ESTATE COMMISSION, )

Jack King, )

)

Petitioners, )

)

vs. ) CASE NO. 76-1651

) THEODORE DORWIN and INTERMART, ) INC., )

)

Respondents. )

)

RECOMMENDED ORDER

A hearing was held in the above-captioned matter, after due notice, at Coral Gables, Florida, on January 1213, 1977, before the undersigned Hearing Officer.

APPEARANCES

For Petitioners: Richard J. R. Parkinson, Esquire and

Louis B. Guttmann, Esquire Florida Real Estate Commission 2699 Lee Road

Winter Park, Florida 32789

For Respondents: Harold Mendelow, Esquire

Manners and Amoon, P.A.

4349 Northwest 36th Street, Suite 106

Miami, Florida 33166 ISSUE PRESENTED

Whether the real estate licenses of Respondents should be revoked or suspended for alleged violations of subsections 475.25(1)(a) and 475.25(3), Florida Statutes.

FINDINGS OF FACT

1. Respondent Theodore Dorwin is a registered real estate broker, registration certificate number 0022474, 561 N.E. 79th Street, Miami, Florida. He also is now and was at all times alleged in the Administrative Complain the president and active firm member of Respondent Intermart, Inc., a registered corporate broker located at the same address. As broker with Intermart, Respondent holds registration certificate number . 0157090. Intermart is registered under certificate number 0157081. The registrations of both Dorwin and Intermart were suspended by Petitioner on July 21, 1976, for a period of ninety (90) days. By order, dated December 16, 1976, Petitioner denied Respondents' petition for reactivation and return of registration certificates. (Petitioner's Composite Exhibit 1)

2. Intermart, Inc. was formed in the middle of 1975, but did not commence active operations until February, 1976. Prior to 1975, Dorwin had been a general real estate broker for various land companies in Florida. In 1975, he became associated for a brief period of time with a firm called Property Resales Service, Inc., of Miami, an organization that solicited listings for the resale of property. During the period February, 1975, until 1976, Dorwin was connected successively with International Land Brokers, Inc. (hereinafter "International") and Florida Landowners Service Bureau (hereinafter "Service Bureau"), both of which firms engaged in the solicitation of advance fees from out of state property owners for listing agreements whereby they undertook to advertise and sell the property for a ten percent commission. The listing agreements of these firms provided that the advance fee would be credited against the commission.

   In February, 1976, Intermart, Inc. was activated and began operations at the same office and with the same salesmen who had been used by Dorwin in his activities for the Service Bureau. It used virtually the identical "Listing and Brokerage Agreement" and promotional material as had the other firms. The change was brought about by the fact that commission checks received from the Service Bureau had "bounced." (Testimony of Dorwin, Petitioner's Exhibits 2,5,6,7,23,26,27,28)

   
   

3. Respondents operated the advance fee business in the following manner: Lists of primarily out of state owners of land in large developments in Florida and other states were purchased by Respondents from individuals who sold such lists "on the street." In like manner, lists of prospective purchasers of such land were purchased. Information was placed on cards containing the name, address and phone number of the landowner, together with information as to the development where the land was located. A staff of some fifteen to twenty real estate salesmen were utilized to solicit listings from the prospective sellers over the telephone. Each salesman had a cubicle in a small office with a

   .telephone. These individuals worked in two shifts, six days a week, during the evening hours. Each salesman averaged about twenty to twenty-five telephone calls a night. When Intermart succeeded Dorwin's operation for the Service Bureau, there was little or no change in any of the above procedures. The average, listing fee was $350 , of which the soliciting salesmen received approximately one-third. The salesmen were provided a "script" or "opening statement" by Dorwin to use as a selling "pitch." The persons called were asked if they were interested in reselling their property. They were told that foreign investors around the world were interested in buying blocks of land in Florida and were quoted a sale price that usually was somewhat in excess of the current market value of the property. If the property owner expressed interest in listing his land for sale, literature was mailed to him which consisted of information about Intermart and the experience and qualifications of its officers, together with a form "Listing and Brokerage Agreement," and reprints of newspaper and other articles concerning the interest of foreign investors in land in the United States, and similar subjects. About two weeks later, the salesman would call the individual again to urge that he send in his advance fee, along with the signed listing agreement.

   
   

4. The proposed selling price was fixed by the salesman from a large chart in the office that showed sample original purchase prices and amounts to be quoted as selling prices based on the number of years since purchase of the property. These amounts were used in all cases, regardless of where the property was located. The only deviation from the standard selling price was in cases where water or canal front property, golf course or business property was involved, in which case, $500 to $1,000 was added to the quoted figure. During the initial call, the salesman asked for the legal description of the lots in

   question and, if a listing was obtained, a copy of the agreement for deed or warranty deed was also requested. However, no efforts were made to check the legal descriptions of the property nor were any visits made to the property by Dorwin or other personnel of the firm. The sales man had nothing to do with actual sales of the property and did not contact prospective purchasers.

   Neither Dorwin nor one of his former salesmen who testified at the hearing was aware of any actual sales of listed property made by Intermart or the Service Bureau. No credible evidence was submitted that the property was ever checked for zoning restrictions or that prospective purchasers were contacted by anyone. Respondents did occasionally send a form letter to those listing property stating that Intermart "had the opportunity to present your property" to a named individual and that they would "endeavor to interest the prospect further." However nothing ever came of these supposed contacts.

   
   

5. During the telephone conversations with sellers, the alesmen made statements to the effect that Intermart was making sales, and that the land would usually be sold within eight to nine months. In one case, a seller was told by one of Respondents' salesmen that Intermart had sold all of the property that had been listed with it. Further representations were that Argentine buyers loaded with money" wanted to invest in American real estate. One salesman represented that Respondents advertised all over the world in all foreign countries and in every state in the Union. A letter enclosed with promotional materials stated that Respondents advertised or had proposed advertising pending in a number of countries via major magazine and newspaper publications, and in Miami, Los Angeles, New York City, Boston and Chicago. Another landowner was told that the company had been in business for a period of ten years. It was also represented that Intermart had a computer printout on the latest market values of land and that this was used in determining their estimate of a selling price. In one instance, the salesman told the seller that they had identified a buyer for his land which would be part of a large block package to be sold to the individual and that a rapid decision had to be made whether or not to list. the property so that he could participate in the deal. He was further told that it would take about three months to close the sale with a Venezuelan investor. Attempts by the property owners to obtain copies of the listing agreement signed by Respondent proved to be futile, in spite of promises from its representatives to provide the same. In one instance, to induce a listing, the sales man told the landowner to cross out the amount shown on the listing contract that previously had stated a sale price and to pencil in an increased sales price. He also told him to make pencil corrections on the proposed agreement to indicate that the purchaser rather than the seller would pay the ten percent commission of the sales price. (Testimony of Judkins, Ladabauche, Nicholas, Burke, Petitioner's Composite Exhibit 2, Petitioner's Exhibits 5,6,7 [depositions])

   
   

6. Respondents' promotional literature and information that was sent to prospective sellers of property contained various promises and representations that were not kept, as follows:

   
   

   1. Respondents stated that it would "analyze" the property to arrive at a correct selling price by reviewing the status of development and zoning in the immediate area of the property. In fact, the selling price was based solely on an arbitrary figure selected from a chart on the wall that did not take into consideration the precise location of the property or zoning considerations.

   2. Respondents stated that "Your property legals

      are checked thoroughly." In fact, any legal description of the property was obtained solely from copies of agreements for deed or warranty deeds supplied by the owner , and were not further checked in any manner.

   3. Respondents stated "In order for us to successfully merchandise and receive the highest offer for your property (ies) considerable expense is involved because a great deal of time is put forth on your behalf and many of the property(ies) are being offered for sale sight unseen." In fact, only a small amount of money and little or no time

      was expended to sell the property. After the property owner had submitted his advance fee and listing agreement to Respondents, no further efforts were made on his be half nor was he ever contacted thereafter by the firm. (Testimony of Lewis, Judkins, Ladabauche, Nicholas, Petitioners'

      Composite Exhibit 2, Petitioners' Exhibits 57, 23)

      
      

7. In the "Listing and Brokerage Agreement," Respondents a greed to use its "efforts to secure a purchaser for the property" and to include the property in its directory of "available properties, to be distributed to other real estate brokers." It also contained A the following pertinent undertakings:

   
   

   "4. In consideration of this listing, you agree:

   1. To cause said property to be included in your listing directory and in two successive issues

      of said directory within a period of one year.

   2. Contemporaneously with the appearance of said listing in the directory, you agree to direct

      the efforts of your organization to bringing about a sale of my property;

   3. To advertise said property as you deem advisable in magazines or other mediums of merit: I understand that this agreement does not guarantee the sale of my property, but that

      it does guarantee that you will make an earnest effort pursuant to the aforementioned provisions." (Petitioner's Composite Exhibit 23)

      
      

8. Respondent Dorwin testified that he planned to issue a catalog of listed properties in June, 1976 to be distributed to various investors and brokers in the United States and foreign Mailings this depend 7 countries. of catalog were to on responses to .advertisements placed in newspapers around the world and in the United States in April. No action toward any of these goals was taken until March, 1976 when Intermart entered into an agreement with Currency Control Advertising, Miami, Florida, to act as an advertising agency for brochures, printing, copy, layout, typesetting, art, newspaper and magazine advertising, public relations, radio and television. Under this contract, small, one insertion newspaper ads were placed in approximately seven newspapers of various foreign countries and Canada, and in newspapers in Chicago, Los Angeles and New York, costing approximately $500. These ads read as follows:

   
   

   "U.S. Investments Catalogue . . . $9.95 U.S. Complimentary to Investors and to the Trade."

9. Property listings for the catalog were not provided to the advertising agency until the last half of July, 1976. It was not published until August 20th but has not been mailed due to Respondents' current suspension by Petitioner. A few responses were received as a result of the newspaper advertisements but Dorwin testified that nothing was done to follow-up such inquiries because he was waiting for the catalog to be published. Five thousand copies of the catalog were printed at a cost of some $4,500. At the present time, Intermart owes the advertising firm about $2,500 for its work. Dorwin testified that he planned to distribute the catalog to several thousand investors and brokers listed in the International Real Estate Federation, of which he was a member, but that he was unable to do so because of his suspension by Petitioner in July. During the period January-June, 1976, Intermart's records reflected a gross income from the advance fee business of approximately

   $190,000. About forty-eight per cent of this amount was paid to salesmen for commissions on listing fees, twenty-eight per cent for officers salaries, and about one and one-half per cent was paid for advertising. (Testimony of Dorwin, Weinstein, Stowe, Leader, Petitioner's Exhibits 4, 825)

   
   

10. During the last half of June, 1975, Intermart, upon advice of Counsel, in anticipation of a new state law regulating advance fee contracts, stamped on their listing agreements a statement that the parties agreed the advance fee did not constitute trust funds and that the monies therefrom could be expended for expenses. Listing fees received after July 1, 1976, were placed in an Intermart, Inc. trust account of the Capital Bank of North Bay Village, Florida, Account 10452, and as of December 31, 1976, this account showed a balance of

    $5,083.35 that is being retained by Respondents pending the outcome of present proceedings. (Testimony of Dorwin, Petitioner's

    
    

11. Dorwin testified that, although he was aware the other advance fee firms with which he had been associated did not follow through on listings to attempt to make sales, he planned to do so by his newspaper advertisements and issuance of the catalog. However, he admitted that no information was ever sent to any prospective purchaser, that no advertisements were ever placed that described individual parcels of property, and that the only contact ever made with prospective purchasers was by telephone calls. He further admitted that no one from the firm ever checked public records involving the property listed for sale to assure the accuracy of information provided by the owners, and only token visits were ever made to view the listed properties by any member of the firm. He maintained that salesmen were not given a "script" to use but merely an "opening statement" and that they were free to deal with property owners as individuals. He was unaware of where the chart showing sample property values had been obtained and stated that such a chart was not used during Intermart's operations but had been used only during the previous operation at the same address. He denied ever telling salesmen to inform expected sellers that the firm was selling blocks of land but acknowledged that in monitoring telephone conversations of the salesmen, they did exaggerate at times. (Testimony of Dorwin)

    
    

12. In view of the totality of the evidence, it is found that the operations of Intermart, Inc. were designed and carried out with the sole intention of extracting monies from landowners with no intent to carry out the stated promises of "earnest efforts" to sell the property.

    
    

    CONCLUSIONS OF LAW

13. Prior to the hearing, Respondents objected to the taking of depositions of out of state witnesses on the grounds that they had insufficient funds to attend or have representation a the taking of the depositions, and requested that the witnesses be brought to this jurisdiction for said purposes. The hearing officer denied this request for failure of Respondents to allege sufficient grounds therefor. The objections were renewed at the hearing but the depositions of three individuals who had listed property with Respondents (Exhibits 5,6,7) were admitted into evidence pursuant to Fla. R. Civ. P. 1.330(a)(3) upon a showing that the witnesses were out of the State of Florida.

    
    

14. At the conclusion of Petitioner's case, Respondents moved to dismiss the allegations for failure of proof. The motion was denied in view of the posture of the evidence.

    
    

15. Petitioner offered into evidence a number of sworn statements furnished by individuals to the Attorney General's office concerning the circumstances surrounding their listing of property with Respondents during the period in question. These hearsay documents were not admitted into evidence because they lacked substantial probative value and in view of the fact that a complaint of such a nature is not "evidence of a type commonly relied upon by reasonably prudent persons in the conduct of their affairs" as contemplated under Section 120.58(1)(a), F.S. (Hearing Officer's Composite Appellate Exhibit 1)

    
    

16. Petitioner seeks to take adverse action with respect to the registration certificates of Respondents for alleged violations of subsections 475.25(1)(a) and 475.25(3), Florida Statutes, which provide pertinently as follows:

    
    

    "475.25 Grounds for revocation or suspension.

    1. The registration of a registrant may be suspended for a period not exceeding 2 years, or until compliance with a lawful order imposed

       in the final order of suspension, or both, upon a finding of facts showing that the registrant has:

       1. Been guilty of fraud, misrepresentation, concealment, false premises, false pretenses, dishonest dealing, trick, scheme or device, culpable negligence, or breach of trust in any business transaction, in this state or any other state, nation, or territory; has violated a duty

    imposed upon him by law or by the terms of a listing contract, written, oral, express or implied, in a real estate transaction; . . .

    (3) The registration of a registrant may be revoked . . . 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 or those with whom he may sustain a confidential relation, may not safely be entrusted to him."

    
    

17. Petitioner's complaint alleges that subsection 475.25(1)(a) was violated by Respondents' false representations to property owners that a bona fide effort would be made to sell property listed with Intermart, Inc. and

    therefore the solicitation of the property owners in the aforesaid manner was a scheme to fraudulently secure money from the public. The evidence establishes that Respondents indeed made or sanctioned false statements to property owners regarding the existence of prospective purchasers, the manner in which selling prices were determined, the extent of proposed advertising, the probability of future sales, the period of time that the firm had been in existence, the checking of legal descriptions and zoning of the property, and the claim that "earnest efforts" would be made to sell the property. Based on such representations, property owners were induced to pay advance listing fees under the assumption and expectation that good faith efforts would be made to sell their property. In fact, no such efforts were made. The representations of salesmen and other members of the firm are chargeable both to Intermart, Inc. and its President, Theodore Dorwin. It is therefore concluded that Respondents violated subsection 475.25(1)(a) in the manner alleged.

    
    

18. Petitioner's complaint also alleges that subsection 475.25(1)(a) was violated by Respondents' action in placing a provision in listing agreements that the listing fees would not be construed as funds in trust and that thereby the printing and distribution of such a listing contract containing such a waiver provision was in derogation of 475.452, F.S., and constitutes a trick, scheme or device to circumvent the provisions of that statute dealing with advance fees. Subsection 475.452(1) provides as follows:

    
    

    "(1) It is unlawful for any real estate agent

    or broker to contract for or collect any advance fee from any person, hereinafter known as the principal, without depositing 75 percent of such amount, when collected, in a trust account with a bank or other recognized depository. Such funds are to be held as trust funds and may not be commingled with the funds of the agent or broker who has collected the fee. Prior to

    the withdrawal of any fees from the trust account, the real estate agent or broker shall furnish a statement to the principal itemizing how the advance fees are to be expended and the amounts thereof. Amounts may be withdrawn for the bene- fit of the agent only when actually expended

    for the benefit of the principal or 5 days after verified accounts have been mailed to the principal. If the listed property is not sold within the period of time specified in the broker's contract or within

    18 months of the contract date, whichever period is shorter, any funds held by the broker in the trust account shall be refunded to the property owner, together with a final accounting relating to any

    or all funds expended by the real estate agent or broker.

    
    

19. The mere placement of the words of limitation on listing agreements in June, 1976 whereby the parties agreed that advance fees would not constitute trust funds did not in itself constitute a violation of the foregoing statutory provision. The only manner in which the statute could have been violated was for Respondents to contract for or collect advance fees after July 1, 1976 (the effective date of the Act) without depositing seventy-five percent of any amounts received in a trust account with a bank or other recognized depository, or to fail to comply with the terms of the statute if any of such funds were

    withdrawn from the trust account. "Although Dorwin testified that funds received after July 1 were placed in the escrow account on July 19, there is no evidence that these sums were commingled with other funds of the Respondent and the statute does not prescribe a specific time period within which to make the trust deposit. Accordingly, although Respondents may have intended to evade the provisions of the statute in question, there is no evidence that they did so and it is therefore concluded that a violation of subsection 475.25(1)(a) in this respect has not been established.

    
    

20. The ultimate question for determination bears on Petitioner's allegation that Respondents violated subsection 475.25(3) by a course of conduct or practices which show that they are so incompetent, negligent, dishonest or untruthful that the money, property, transaction and rights. of investors or those with whom they sustain a confidential relation may not safely be entrusted them. Respondents a confidential relationship with the landowners from whom they solicited advanced fees and promised to provide a broker's services. Respondents' position in this connection was no different from that any other real estate broker and his client, and it is clear hat they occupied a fiduciary relationship to these individuals. The evidence established that their practices which continued over a period of six months involved false promises and untruths which were relied upon by their clients. The fact that no bona fide efforts made to sell the property for which a fee was received shows that the clients could not safely entrust their transactions and rights to the Respondents. Therefore, it is determined that Respondents violated subsection 475.25(3), as alleged.

    
    

21. Although the revocation authority contained in sub section 475.25(3) is discretionary, there are no mitigating circumstances present in this case. The facts reveal a cold, calculated scheme to fleece unsuspecting persons of substantial amounts of money. Court decisions have long held that the serious penalty of license. suspension or revocation should be reserved for those who cheat, swindle, or defraud the public in real estate transactions. It is considered that the circumstances of this case clearly warrant license revocation.

RECOMMENDATION

That the certificates of registration of Theodore Dorwin

and Intermart, Inc. be revoked pursuant to subsection 475.25(3), F.S.

DONE and ENTERED this 11th day of February, 1977, in Tallahassee, Florida.

THOMAS C. OLDHAM

Hearing Officer

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

COPIES FURNISHED:

Richard J. R. Parkinson, Esquire Florida Real Estate Commission 2699 Lee Road

Winter Park, Florida 32789

Louis B. Guttmann, Esquire 2699 Lee Road

Winter Park, Florida 32789

Harold Mendelow, Esquire Manners and Amoon, P.A.

4349 N.W. 36th Street, Suite 106

Miami, Florida 33166

Docket for Case No: 76-001651

Orders for Case No: 76-001651