CASIMIR M. SZPAK, )
vs. ) CASE NO. 77-405
Corporate Broker, and JACKSON L. ) SMITH, Broker, )
Respondent. )
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, James E. Bradwell, held a public hearing in this case on February 10, 1977, in Stuart, Florida.
For Petitioner: Frederick H. Wilsen, Esquire
For Respondent: R. J. Randolph, Sr., Esquire
R. Jerry Randolph, Jr., Esquire Randolph and Randolph, P.A.
The Florida Real Estate Commission (hereafter Commission), through its representative, Casimir M. Szpak, filed a thirteen (13) count administrative complaint on or about July 23, 1979, alleging that the Respondent licensee, Martin County Properties, Inc., a registered corporate broker and Jackson L. Smith, a registered broker, had engaged in acts of conduct amounting to a failure to maintain trust funds in an escrow or a trust bank account maintained by them until the disbursement thereof was properly authorized, in violation of Section 475.25(1)(i), Florida Statutes; that the Respondents failed to immediately place in their escrow or trust bank account, money, deposits, or other funds entrusted to them by persons dealing with them as brokers, wherein said funds should have been kept until disbursement thereof was properly authorized, in violation of Section 475.25(1)(a), Florida Statutes; that the Respondents are guilty of forming an intent, desire or scheme to defraud, appropriate and convert to their own use, or to some other use other than that for which funds and other monies were entrusted to them also in violation of Section 475.25(1)(a), Florida Statutes; that Respondent Smith is guilty of handling in his possession custody or control, as a broker or officer of a corporation, member of a copartnership or joint venture to hold or take possession, custody or control, any property, appropriating the same to his own use or that of any other person than the true owner entitled to the benefits
thereof, various sums in violation of Section 812.021(b), Florida Statutes, and therefore is guilty of a violation of Section 475.25(1)(e), Florida Statutes; and that he is further guilty of fraud, dishonest dealings and breach of trust in a business transaction in violation of Section 475.25(1)(a), Florida Statutes; and that the Respondents are guilty of a course of conduct, of practices which show that they are so incompetent, negligent, dishonest and untruthful, that the money, property, transactions and rights of investors or those with whom they may sustain a confidential relation, may not safely be entrusted to them, in violation of Section 475.25(1)(i), Florida Statutes.
Based on the foregoing allegations, the Commission seeks to revoke or suspend the licensees' license and their right to practice thereunder.
Based upon my observation of the witnesses and their demeanor while testifying, I make the following:
The Respondent licensee, Martin County Properties, Inc., was at all times material registered with the Commission as a real estate corporate broker and the Respondent licensee, Jackson L. Smith, was at all times material registered with the Commission as a real estate broker.
On May 8, 1974, the G. H. I. Inc., as purchaser, offered to purchase property described as:
"132 plus or minus lots, Parcel #1, and 154 plus or minus acres, Parcel #2, in the County of Okeechobee"
for a purchases price of $567,600.00 from Nachman Tevlo, et al., seller. Accompanied with this officer, the corporation submitted a $10,000.00 security deposit to be held in trust by the Respondent, Martin County Properties, Inc. In count one of the complaint, it is alleged that the Respondents failed to place that deposit in a trust or escrow account and that on December 31, 1974,
Respondent Smith issued a check to the buyer for $7,700.00, which was drawn from its escrow account and that said check was returned for insufficient funds. The complaint alleges that at the time of issuing this check, the Respondent Smith overdrew the firm's escrow account by $402.80 and that by reason thereof, Respondents are guilty of failing to immediately place upon receipt the monies received from persons they dealt with as brokers in an escrow account in violation of Section 475.25(1)(i), Florida Statutes.
Robert F. Cochran, Secretary-Treasurer of G.H.I., Inc., the corporate purchaser, acknowledged tendering the deposit in connection with the above referenced transaction. The proposed offer was conditioned on acceptance by two undisclosed partners of which the corporate purchaser had no knowledge of and Respondent Smith was advised to retain the deposit check until such time as the two undisclosed partners accepted the terms of the contract. Respondent Smith was unable to obtain such approval from the undisclosed partners and when the transaction fell through, Respondent returned the original deposit check within one week of the time that he advised the purchasers that the proposed offer was not accepted. Mr. Cochran had no recollection of Respondent Smith ever tendering him a check drawn in the amount of $7,700.00 as alleged in count one of the administrative complaint. (See Commission's Exhibit #1).
In count five of the administrative complaint, the Commission alleges in pertinent part that Respondent Smith issued Dwight L. Clemons a check from
his trust account drawn in the amount of $4,842.95, which created a deficit in his escrow account of $1,202.20. By such act, it is alleged that the Respondent failed to maintain sufficient monies in his escrow or trust bank account, monies received and entrusted to them by persons dealing with them as brokers until disbursements are properly authorized in violation of Subsection 475.25(1)(i),
F.S. Mr. Clemons acknowledged the transaction with Respondent Smith in which he received a return of an escrow deposit in the amount of $4,842.95 which was received in the form of a check which was returned by the bank for "uncollected funds." Mr. Clemons testified that he presented the check to the bank and knowing Respondent Smith, tendered the necessary funds to cover the deficiency and that Respondent Smith returned his money approximately one week later. (See Commission's Exhibit 2).
In count six of the administrative complaint, it is alleged that William A. and Agnes Foster, as buyers, made an offer to purchase one half of a duplex in Jensen Beach, Florida, and to secure such offer, they made a security deposit of $1,000.00 to Respondent Smith. It is alleged that Respondent Smith failed to deposit the $1,000.00 in his escrow account and on October 10, 1974, he deposited only $500.00 in his account from this transaction. By reason thereof, it is alleged that the Respondent failed to immediately place in his escrow or trust bank account, upon receipt, monies etc. entrusted to him until disbursements thereof were properly authorized in violation of Subsection 475.25(1)(a), F.S.
William Foster acknowledged the subject transaction and his tender of the $1,000.00 deposit. He testified that the seller, Miriam Fell, accepted his offer on or about November 8, 1974, and that the transaction closed without difficulty. However, an examination of Martin County Properties, Inc., trust account statement for the month ending October 1, 1974, reveals that on October 10, 1974, a $500.00 credit was entered on the subject trust account and an examination of the September 4, 1975, check drawn in the amount of $1,000.00 and issued by William A. Foster revealed that the check was deposited in Martin County Properties' trust account on October 10, 1974, the same date that the
$500.00 deposit appears on the October trust account statement.
Count eight alleges in pertinent part that Respondent Smith received an escrow deposit of $2,500.00 from Jansje Welm, toward the purchase of the "Gideon Property" on Indian River Drive in Jensen Beach. It is further alleged that approximately eight (8) days later, without permission of Jansje Welm, Respondent issued to Martin County Properties, Inc., a check in the sum of
$1,000.00 which left a balance in his escrow account of approximately $1,597.00 and that by reason thereof, Respondent Smith is guilty of failing to maintain in an escrow or trust bank account monies received from persons dealing with him as a broker, where such funds should have been kept until properly disbursed or otherwise authorized, in violation of Subsection 475.25(1)(i), F.S. Mrs. Welm testified that she advanced Respondent Smith, a $2,500.00 deposit to secure an offer which she was led to believe consisted of a syndication of approximately six or either others who were interested in purchasing the "Gideon Properties." The transaction did not close and as of the hearing date she had not received a refund or her escrow deposit. An examination of Respondent Martin Counties, Inc., trust account for the month ending December 31, 1974, reveals that a
$2,500.00 deposit was made on approximately December 12, 1974, and that for the month ending December 31, 1974, the account was overdrawn by $402.80. This of course covers the time period in which Mrs. Welm had tendered her $2,500.00 deposit toward the "Gideon Properties" and at no time during the period December
6 through December 31, did the statement reveal that Mrs. Welm's deposit was returned. It was noted that a deposit was made during the period December 23
through 27, in the amount of $5,000.00, however, this deposit apparently failed to clear based on insufficient funds. (See, Commission's Exhibit #9). It was also noted that the $2,500.00 check issued by Mrs. Welm was honored by her bank on December 16, 1974, and that during the period in which she drew her check i.e., December 9 through December 23, 1974, the firm's trust account at no time had a balance in excess of $2,297.20. (See, Commission's Exhibit #6).
In count ten it is alleged that Respondent Smith also received from his salesman, Jack K. Follrath, a check in the amount of $2,500.00 to be held in escrow toward the purchase of the Gideon Properties. This check was issued by Jerry Warwin and was made payable to the firm's trust fund. It is alleged that on January 8, 1975, Respondent Smith exchanged that check for a cashier's check at the First National Bank and Trust Company which he placed in his personal account. It is further alleged that on March 18, 1975, Warwin's attorney demanded the return of the $2,500.00 which Warwin received on June 18, 1975. By this act it is alleged that the Respondents are guilty of failure to maintain in their escrow account funds entrusted to them in violation of Subsection 475.25(1)(i), F.S.; and are guilty of forming an intent, design or scheme to defraud, appropriate or otherwise convert properties entrusted to them in violation of Subsection 475.25(1)(a), F.S. Warwin testified that while he gave the Respondents no specific instructions to place the money in an escrow account, he was led to understand that the deposit would be escrowed until the sales transaction for the property closed. He testified that after making repeated demands for the return of his deposit, first by himself and ultimately through his attorney, it was returned.
Jack Follrath, a salesman for Jackson County Properties, acknowledged receipt of the $2,500.00 check from Jerry Warwin and expressed his opinion that the money was not to be deposited until sufficient escrow deposits were received to effect the closing. The check representing the deposit made by Jerry Warwin was introduced and an examination thereof reveals that it was drawn on January 5, 1975, in the amount of $2,500.00 and was paid by his bank on January 8, 1975. An examination of the firm's trust account statement reveals that on January 8 a
$2,500.00 deposit was in fact made, however, on January 13 the account balance was $293.20 which was the same amount remaining in the account as of January 31, 1975. And, of course, at no time during the period of January 8 through January 31, 1975, was Mr. Warwin's $2,500.00 deposit returned.
In count eleven, it is alleged in pertinent part that on February 6, 1975, Respondent Smith issued check no. 259 on his trust account made payable to Commercial Trend Development, Inc., for $750.00 and marked "refund - Carter"; that on February 18, 1975, Respondent Smith deposited from the firm's operating account $457.00 in the said trust account and that on February 23, 1975, the check for $750.00 written previously cleared, leaving a total balance of $18.20 in Respondent Smith's trust account. It is alleged that based on the foregoing, Respondents failed to maintain trust funds in their escrow account until such were properly disbursed in violation of Subsection 475.25(1)(i), F.S.
Roy Glancy, the real estate salesman who was involved with the Respondent in connection with the Carter transactions, testified that he intended to purchase a piece of property from the Carters which is located in the Dixie Park Subdivision of South Stuart. He acknowledged payment of the
$750.00 deposit and indicated that when the transaction did not close, he received a refund of his deposit.
It is alleged in count four that on July 15, 1974, Respondent Smith received a deposit of $2,200.00 to be held in trust on the purchase of property
known as the "Krueger" property by C & D Contractors, which he (Smith) deposited in his escrow account; that on July 16, 1974, without the permission of C & D Contractors, issued check no. 236 from his escrow account in the amount of
$900.00 payable to Martin County Properties, Inc., leaving a balance in his escrow account of $1,360.83 as of July 31, 1974, which amount represented the closing balance for the firm's escrow account for the month of July. It is further alleged that on September 6, Respondent Smith issued a check drawn on his trust account to C & D Contractors in the amount of $2,200.00 marked "deposit refund on Krueger Property" which was returned for uncollected funds. Thereafter on September 23, 1974, Respondent Smith paid C & D Contractors by cashier's check, the sum of $2,200.00 which represented the earnest money deposit placed on the Krueger property.
Robert Coy, President of Coy and Deggeller Construction Co. of Stuart, Florida, testified that he made an offer to purchase the Krueger properties to Respondent Smith which offer was accompanied by an earnest money deposit of
$2,200.00. Mr. Coy testified that his offer was tendered to Respondent Smith on July 16, 1974, and that when he did not receive any notification from Respondent Smith regarding whether or not his offer had been accepted, he demanded the return of the deposit which occurred during early September 1974. Commission's Exhibit #15 reveals that the $2,200.00 deposit above referred to was deposited into Respondent's trust account on the same date on which the check was drawn, i.e., July 16, 1974. (See, Commission's Exhibits #15 and #11). On that same day, a $900.00 check and/or debit was made to the account leaving a balance of
$1,360.83. The firm's account statement reveals that this balance ($1,360.83) was constant throughout the period from July 17 to July 31. During the period July 17 through July 31, Mr. Coy did not receive a refund of his $2,200.00 deposit.
Mrs. Betty White, the head bookkeeper of Jensen Beach Bank, the banking institution in which the Respondent Martin County Properties, Inc., maintains its trust account, testified that she provided the firm's account statements pursuant to subpoena and that the account's statements were under her custody and control, and that they were kept and maintained during the normal course of the bank's business. While the Respondent's counsel objected to the introduction of copies of the firm's trust account statements, Mrs. White creditably testified that the original of such account statements were forwarded to the firm (depositor) at the end of each month and that the bank has at its disposal, only microfilm of the originals. Based thereon, Respondent's counsel's objection to the introduction of copies was overruled.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action.
The burden of proving that a licensed real estate broker has violated the real estate licensing law lies with the Florida Real Estate Commission or its representative. State ex rel Vining v. Florida Real Estate Commission, 281 So.2d 487 (Fla. 1973).
The actions of the Respondents in failing to place, immediately upon receipt, monies entrusted to them in an escrow or trust bank account maintained by them based on the G.H.I., Inc. - Tevlo transaction does not amount to conduct violative of Subsection 475.25(1)(i), F.S., inasmuch as the expressed understanding was that the Respondents were to keep the deposit check in their custody until the offer was accepted. Such a conclusion is further supported by
the unrebutted testimony of Robert F. Cochran and Commission's Exhibit #1, the check tendered by G.H.I., Inc., as purchaser. Accordingly, the Respondent should not be found guilty of the allegations contained in count one of the administrative complaint filed herein.
Insufficient evidence was offered at the hearing to establish that the Respondents failed to maintain trust funds in their escrow or trust account in violation of Subsection 475.25(1)(i), F.S., based on the allegations contained in counts two and three of the administrative complaint filed herein.
The actions of the Respondents by failing to maintain at least
$2,200.00 in its trust or escrow account amounts to a failure to maintain monies etc. entrusted to them by persons dealing with them as brokers, in escrow or trust bank accounts maintained by them until properly disbursed in violation of Subsection 475.25(1)(i), F.S., as alleged in court four of the administrative complaint filed herein. The Respondents should therefore be found guilty of the allegations contained in court four of the administrative complaint filed herein.
The action of the Respondents in the Clemons transactions in failing to maintain adequate reserves in their escrow trust account amounts to a failure to maintain monies entrusted to them by persons dealing with them as brokers until proper disbursements are made in violation of Subsection 475.25(1)(i), F.S., as alleged in count five of the administrative complaint filed herein.
The Respondents should therefore be found guilty of the allegations contained in count five of the administrative complaint.
The actions of the Respondents by failing to place the entire
$1,000.00 deposit in its escrow account on October 10, 1974, amounts to a failure to immediately place in their escrow or trust bank account upon receipt, monies entrusted to them by persons dealing with them as brokers until proper disbursements are made or authorized in violation of Subsection 475.25(1)(a),
F.S. The Respondents should therefore be found guilty of the allegations contained in count six of the administrative complaint.
Insufficient evidence was offered at the hearing to establish that the Respondent is guilty of the conduct as alleged in count seven of the administrative complaint.
The action of the Respondent in the Welm transaction amounts to a failure to maintain in their escrow or trust bank account monies entrusted to them as brokers until proper disbursements are made within the meaning of Subsection 475.25(1)(i), F.S. Accordingly, the Respondent should be found guilty of the allegations contained in count eight of the administrative complaint filed herein.
Insufficient evidence was established at the hearing to prove that the Respondents are guilty of the allegations contained in count nine of the administrative complaint.
The action of the Respondents in the Jerry Warwin transaction amounts to a failure to maintain monies entrusted to them as brokers in their escrow account until proper disbursements are made in violation of Subsection 475.25(1)(i), F.S.; and amounts to conduct indicative of forming and intent, design or scheme to defraud, appropriate and convert to their own use, or some other use other than that for which it was intended, monies entrusted to them in violation of Subsection 475.25(1)(a), F.S.
Insufficient evidence was offered at the hearing to establish that the Respondents are guilty of the conduct alleged in count eleven of the administrative complaint filed herein.
The action of Respondent Smith, individually, and as an active firm member broker of the Respondent, Martin County Properties, Inc., as set forth above, indicate repeated acts of appropriating and converting to his own use, or some other use other than that for which intended, checks and other funds which were entrusted to him, in violation of Subsection 475.25(1)(a), F.S., and he is therefore guilty of having in his possession, custody or control, as a broker and officer of Martin County Properties, Inc., a registered corporate broker with the Commission, properties which he appropriated to his own use or to some use of other persons other than the true owner or person entitled to the benefits thereof in violation of Subsection 812.021(b), F.S., and he is therefore guilty of a violation of Subsections 475.25(1)(e), F.S., and is in further violation of fraud, dishonest dealings and a breach of trust in a business transaction in violation of Subsection 475.25(1)(a), F.S.
By their course of conduct in this case, the Respondents are guilty of a course of conduct, or practices which show that they are so dishonest and untruthful, that the money, property, transaction and rights of investors or those with whom they may sustain a confidential relation, may not safely be entrusted to them, in violation of Subsection 475.25(3), F.S. Although the complaint allegations in count thirteen refers to "a course of conduct" violative of Subsection 475.25(1)(i), F.S., the proper reference is Subsection 475.25(3), F.S. In view of the conduct alleged, the undersigned is of the considered opinion that Respondents were on notice by the pleadings that the alleged conduct, if true, amounted to a course of conduct violative of Chapter 475.25(3), F.S.
Based on the foregoing findings of fact and conclusions of law, it is hereby recommended as follows:
DONE AND ENTERED this 30th day of March 1977 in Tallahassee, Florida.
JAMES E. BRADWELL
Filed with the Clerk of the Division of Administrative Hearings this 30th day of March 1977.
Frederick H. Wilsen, Esquire 2699 Lee Road
R. J. Randolph, Sr., Esquire
R. Jerry Randolph, Jr., Esquire Randolph and Randolph, P.A.
