STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA REAL ESTATE COMMISSION, ) EX REL. CALVIN V. LANE, )

)

Petitioner, )

)

vs. ) CASE NO. 76-2004

) P.D. NO. 2915 RESIDENTIAL REALTY INC., and )

WARREN M. BACH, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designed hearing officer, K. N. Ayers, held a public hearing in the above styled case on March 15, 1977 at Ft. Myers, Florida.

APPEARANCES

For Petitioner: Manuel E. Oliver, Esquire

Staff Attorney

Florida Real Estate Commission 2699 Lee Road

Winter Park, Florida 32789

For Respondent: James F. Garner, Esquire

Post Office Drawer 1507 Ft. Myers, Florida 33901

By Administrative Complaint filed July 30, 1976 the FREC ex rel. Calvin V. Lane, seeks to revoke, suspend, or otherwise discipline the corporate broker's registration of Residential Realty, Inc. and the registration of Warren M. Bach as a real estate salesman. As grounds there for it is alleged that after purchasing Residential Realty, Inc. from the former owner, Bach performed the duties of a broker in violation of 475.25(1)(a) F.S.; that Bach held himself out as being the holder of a broker's registration while only holding a salesman's registration in violation of 475.25(1)(a)(b) and (d) F.S.; and that in not receiving a payment from the buyer of an additional down payment of $900 upon acceptance of the contract and not thereafter advising the seller of the non receipt of this deposit Respondents were guilty of fraud, misrepresentation, concealment, false pretenses, etc. in violation of 475.25(1)(a) F.S.

Five witnesses were called by Petitioner; two witnesses, including Respondent Bach were called by Respondents; one witness was recalled by Respondents; and four exhibits were admitted into evidence. Original charges against Lucille M. Busch, the Active Firm Member (AFM) broker of Residential Realty Inc. were withdrawn at the commencement of the hearing due to lack of jurisdiction.

FINDINGS OF FACT

1. Residential Realty, Inc. was incorporated by Ralph R. Voss, a non broker, some two years ago. He advertised for a registered broker to act as AFM and Mrs. Lucille Busch responded. Her broker's license was then inactive but since the job offered would not require full time participation she agreed to take it after consulting with her attorney and the FREC office in Ft. Myers. Mrs. Busch signed all checks drawn upon the escrow account and kept careful records involving this account. She conferred with Voss on office policies and on hiring or firing salesmen; however, as owner, it appears that Voss had the final say in policy matters if any dispute arose. Before assuming the duties as AFM Mrs. Busch, as noted above, received confirmation that such AFM participation was not in violation of the Real Estate License Law. She be lives that she was performing the duties required of a broker and that neither Voss, nor his successor Bach, held themselves out as brokers or performed the functions that can only be performed by a broker.

   
   

2. Some twelve months ago Warren Bach and his wife purchased all shares of stock in Residential Realty, Inc. from Voss. Bach is a registered real estate salesman and he continued the office practices that existed under Voss with Mrs. Busch remaining AFM. When Bach purchased the realty corporation he too checked with an attorney and the Real Estate Commission office in Ft. Myers regarding the operation of Residential Realty, Inc. before continuing the status quo.

   Bach had been a real estate broker in Wisconsin for ten years before moving to Florida and purchasing Residential Realty, Inc.

   
   

3. One sales person in Residential Realty, Inc., Mrs. Joan Edwards, obtained an exclusive listing on property owned by her parents-in-law. Bach subsequently obtained a purchaser and presented an offer to Edwards to purchase his property. The contract provided for a purchase price of $39,900 with a $100 down payment with an additional $900 to be paid by the buyer upon acceptance of the contract by the seller. This offer was presented to Edwards by Joan Edwards and Bach. Edwards modified the contract to a total price of $40,900, initialed this counter offer, but left the balance of the contract unchanged. The contract was returned to the purchaser by Bach and was accepted by him, but the additional $900 down payment required by the terms of the contract was never paid.

   
   

4. Initially the buyer advised Bach that he would produce the $900 balance when he sold his home in Tampa, however, he never produced the $900 required by the contract and Bach failed to notify Edwards of this fact.

   
   

5. Mrs. Busch, the AFM, became aware of the contract and the $900 discrepancy shortly after the contract was executed and she discussed this with Joan Edwards, the daughter-in-law of the seller. Mrs. Edwards testified that she became aware of the $900 problem about one week before the scheduled closing date while Mrs. Bach, who also worked in the real estate office, recalled numerous discussions about this additional deposit with Mrs. Joan Edwards several weeks before the scheduled closing. Regardless of the knowledge within the realty office, the seller was informed of the breach of the contract by the buyer by neither Bach nor his daughter-in-law, Joan Edwards, until only a few days before the scheduled closing. Bach assumed, incorrectly, that Mrs. Edwards would inform her parents-in-law- of the fact that the buyer had failed to produce the additional deposit. Bach considered the contract still valid although the buyer had failed to comply with the provision requiring him to make the additional $900 payment upon acceptance.

   CONCLUSIONS OF LAW

   
   

6. Section 475.25(1) F.S. provides that the registration of a registrant may be suspended for a period not exceeding two years upon a finding of facts showing that the registrant has:

   
   

   "(a) Been guilty of fraud, misrepresentation, concealment, false

   promises, false pretenses, dishonest dealing, trick, scheme or device, culpable negligence or breach of trust in any business transaction. . . .

   (b) Been guilty of false advertising in, on or by, signs, billboards, newspapers, magazines, periodicals, books, pamphlets, circulars. . .of such character as to deceive or defraud investors, or prospective investors, in real property or interest therein. . . .

   * * *

   (d) Violated any of the provisions of this chapter, or any lawful order, rule or regulation made or issued under the provisions of this chapter."

   
   

7. No evidence was presented regarding any advertisement, let alone false advertisement, other than general testimony that Bach prepared newspaper ads for property listed with Residential Realty, Inc. Nor was any evidence presented that Bach performed duties for the corporate broker that can only be performed by the AFM.

   
   

8. When the seller Edwards modified the contract that was presented by Bach this constituted a counter offer and rendered void the offer made by the purchaser. However, when the purchaser accepted the contract as modified by Edwards he was then required to comply with the obligations thereby imposed upon him, one of which was to produce an additional $900 deposit. When he failed to do so he was in breach of the contract and Residential Realty, Inc. should have advised the seller that the buyer had breached the contract and was in default. While the relationship between the seller and the listing salesperson was such that Bach had reasonable grounds to believe that Joan Edwards would advise the seller, this did not relieve the corporate broker from the affirmative duty, as representative of the seller, to so advise the seller. This failure on the part of the corporate broker does not constitute fraud or dishonest dealing, however it does constitute concealment of a material fact from the seller.

   
   

9. Salesmen Bach and Edwards owed a duty to their principal, the seller, to advise him that the buyer was in default under the contract and that the seller was free to accept an offer to purchase the property from anyone else who might make such an offer. No charges were brought against the listing salesperson, therefore her culpability was not before the hearing officer.

   
   

10. From the foregoing it is concluded that the salesman, Warren M. Bach and the corporate broker, Residential Realty, Inc. are not guilty of Counts I and II but are guilty of Count III in concealing from their principal, the seller, the fact that the buyer had breached the contract. The culpability of the Respondents in this case is mitigated by the fact that they had reasonable

grounds to believe that the listing salesperson, by reason of her relationship to the seller, would or had advised the seller of the breach. It is therefore

RECOMMENDED that the corporate broker Residential Realty, Inc. and the registered salesman, Warren M. Bach, be issued letters of reprimand.

DONE and ENTERED this 7th day of April, 1977, in Tallahassee, Florida.

K. N. AYERS, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304

(904) 488-9675

COPIES FURNISHED:

James F. Garner, Esquire

P. O. Drawer 1507

Ft. Myers, Florida 33901

Manuel E. Oliver, Esquire Staff Attorney

Florida Real Estate Commission 2699 Lee Road

Winter Park, Florida 32789

Docket for Case No: 76-002004

Orders for Case No: 76-002004