vs. ) CASE NO. 78-1065
) PD No. 3331 MADELINE ROSE PARR and EXHIBIT )
Respondent. )
A hearing was held in the above captioned matter, after due notice, on November 1, 1978, at Bradenton, Florida, before the undersigned Hearing Officer.
For Respondent: Richard J. R. Parkinson, Esquire
Whether Respondents' registrations with Petitioner should be suspended or revoked for alleged violation of Sections 475.25(1)(a), (c), and (i), Florida Statutes, as set forth in the Administrative Complaint dated march 24, 1978.
On October 31, 1978, counsel for Respondents filed a Motion for Continuance based on his retention as counsel on October 29th due to the purported withdrawal of former counsel, Albert I. Gordon, Tampa, Florida. At the commencement of the hearing, a Motion of Albert I. Gordon to withdraw as attorney for Respondents with their consent was presented and granted. It was agreed that ruling would be reserved on the Motion for Continuance until after the presentation of Petitioner's case. At that time, Respondents elected to proceed with the presentation of evidence and, at the conclusion of the hearing, it was stipulated by the parties with the consent of the Hearing Officer that Respondents would have a period of two weeks in which to inform the Hearing Officer if Respondents desired to depose the said Albert I. Gordon as a witness and, if so, that such deposition would be received in evidence. It was further agreed that the date of any such receipt would be considered as the conclusion of the hearing for computation of the time period in which to submit a
Recommended Order herein. On December 5, 1978, the Hearing Officer was advised by counsel for Respondents that the said deposition would not be required.
Although the Administrative Complaint herein was styled in the names of Madeline Rose Parr and Exhibit Homes Realty, Inc., as Respondents, the allegations of the complaint were directed only against Respondent Madeline Rose Parr. Further, during the course of the hearing, it was determined that Exhibit Homes Realty, Inc., is no longer a registrant with the Florida Real Estate Commission. Parr's Motion to Dismiss the said firm as a Respondent was granted.
During the course of the hearing, Respondent raised several motions to dismiss the complaint which were denied. They will be discussed hereinafter under Conclusions of Law.
This proceeding was commenced by the filing of an Administrative Complaint by Petitioner on March 24, 1978, alleging generally that Respondent (1) had failed to maintain funds in the escrow account of Exhibit Homes Realty, Inc., until disbursement thereof was properly authorized, in violation of Subsection 475.25(1)(i), F.S., (2) had failed to account and deliver a deposit in a real estate transaction, in violation of Subsection 475.25(1)(c), F.S., and (3) had been guilty of false promises, dishonest dealing and breach of trust in the transaction in question, in violation of Subsection 475.25(1)(a), F.S. Respondents thereafter petitioned for a hearing pursuant to Section 120.57, Florida Statutes.
Respondent Madeline Rose Parr is now and was at all times alleged in the Administrative Complaint a registered real estate broker in the State of Florida. She also was at the times alleged in the complaint president, treasurer and active firm member of Exhibit Homes Realty, Inc., a registered corporate broker at Sarasota, Florida. Her husband, Charles H. Parr, III, was secretary of the firm. (Testimony of C. Parr, Petitioner's Composite Exhibit 4)
In September 1973 Exhibit Homes Realty, Inc., was the listing broker for certain real property located in Sarasota County, Florida, owned by R. David Beebe, Elizabeth Beebe, Ellen Brewster, Elizabeth B. Klavun, Lucius Beebe and Dorothy Beebe. An offer was made to purchase the property by I. Z. Mann, as Trustee, which was transmitted by Respondent's firm to the sellers on September 24, 1973. On that same date, the prospective purchaser deposited with Respondent's firm a check in the amount of $25,000.00 payable to Exhibit Homes Realty, Inc.'s, escrow account as an earnest money deposit. The check was deposited on September 25 in the escrow account maintained by Exhibit Homes Realty, Inc., Account No. 082-716, in the Palmer First National Bank and Trust Company of Sarasota. The authorized signatories on this account were Respondent and her husband. The transaction was to involve co-brokerage between Respondent's firm and I. Z. Mann Realty Corporation with a 50% division of the 6% brokerage fee to each firm. (Petitioner's Exhibits 2, 3, 5, 6, Testimony of Mann, Shropshire, Respondent, C. Parr)
The contract for the sale and purchase of the property was executed by the purchaser, sellers, and Respondent for Exhibit Homes Realty, Inc., on February 8, 1974. The contract recited receipt of the $25,000.00 deposit and provided that the transaction would be closed on or before June 1, 1974. It further provided that if the buyer failed to perform the contract within the time specified, all deposits would be retained for the account of the seller or that the seller could elect to enforce any other remedy available because of
such default. The contract also stated that if the buyer should default and the earnest money was retained, it should be applied first to pay seller's expenses and the balance divided equally between the broker and the seller.
(Petitioner's Exhibit 1)
The closing of the transaction was scheduled for May 31, 1974. John F. Burket, Jr., the Sarasota attorney for the sellers, proceeded to obtain an executed warranty deed from the sellers on the property. On May 28, 1974, Burket was advised that the purchaser had decided to default under the contract and would not attend the scheduled closing. Burket wrote to Exhibit Homes Realty, Inc., informing it of this fact and instructing the broker to make tender of the deed of conveyance at the appointed time for closing if anyone attended in behalf of the purchaser. However, the purchaser failed to appear at the closing and, as a consequence, Respondent returned the deed and other closing documents to Burket and informed him that she would continue to hold the earnest money of $25,000.00 in the escrow account until further instructions from the sellers. The reason for the default was that the purchaser was unable to obtain financing for the prospective use of the property as a multifamily housing development. (Petitioner's Exhibits 8-11, Testimony of Mann, Burket)
Negotiations ensued between the attorneys for the sellers and the purchaser resulting in an agreement to exchange releases from liability in consideration of the purchaser's forfeiture of the $25,000.00 deposit and any portion of the real estate commission earned by I. Z. Mann Realty Corporation. In the latter half of November 1974, Burket attempted to contact Respondent by telephone to advise her that an agreement had been reached as to disposition of the deposit, but was unable to contact her. He did inform Respondent's former employee, Maxine Shropshire, who had originally listed the property and obtained the contract thereon, and asked her to advise Respondent of the status of the matter. Mrs. Shropshire did speak to Respondent and told her that Burket had stated that the deposit money was ready to be disbursed. However, Respondent did not communicate with Burket and he therefore wrote her on January 28, 1975, concerning the forfeiture of the earnest money deposit and enclosing a memorandum setting forth the seller's expenses and the division of the deposit in accordance with the contract. The memorandum reflected seller's expenses of
$7,994.86 and the amount of $8,502.57 to be retained by Respondent. The letter requested that Respondent provide an escrow check for the balance of $16,497.43 payable to Burket's trust account from which appropriate disbursements would be effected. (Petitioner's Exhibits 12-14, Testimony of Mann, Schropshire, Burket)
In the fall of 1974, Charles H. Parr was experiencing financial difficulties in connection with a real estate project in Bradenton due to the recession of that period. He testified that he was beset with creditors, liens and other problems connected with the real estate subdivision "Harbor Woods." In November 1974, he was pressed for funds and therefore wrote four checks on the Exhibit Homes Realty, Inc., escrow account during the period November 1 through November 20, 1974, in the total amount of $25,000.00, thus reducing the balance in the escrow account to $200.00. His explanation for this action was
that he intended to have Respondent obtain a $25,000.00 loan which would replace the amount disbursed from the escrow account, but that she was not present at the office. He, therefore, wrote checks on the one account of some fourteen separate bank accounts that he and his wife maintained which had any sizable amount of money in it. However, he testified that he never said anything to the Respondent about using the escrow money to pay his various debts. He subsequently embarked on a series of trips within and without the state, at times accompanied by Respondent, to attempt to obtain financing from foreign and domestic lending institutions. These trips extended into early 1975. During
their various returns from these sojourns, the Parrs avoided picking up their mail at the local post office for fear that they would be served with process. As a result, Respondent did not obtain Burket's letter of January 28, 1975, until some time in late February of that year. Mr. Parr testified that his action in writing checks on the escrow account was a mistake and that he was not actually aware that he was using escrow funds until his wife received the letter from Burket, checked the bank account records, and discovered that the deposit money had been spent. Respondent corroborated the above testimony as to the time when she first learned of the depletion of the escrow account.
Mr. Parr's testimony that he was unaware that the monies which he spent were from the escrow account is not deemed credible. He wrote checks on the account four separate times during the month of November 1974 and the checks themselves are imprinted "Exhibit Homes Realty, Inc. Escrow Account" in bold type. However, it is also found that Respondent was unaware of the disbursement of the funds until February 1975. It is further found that her failure to learn of the request for an accounting of the deposit money was due to her own negligence in not reviewing monthly bank statements and the check book for the account, or obtaining her mail and that of the firm on a timely basis. (Petitioner's Exhibits 6-7, Respondent's Exhibit 3, Testimony of Respondent, C. Parr)
Upon learning of the status of the escrow account, Respondent contacted an attorney to arrange a meeting with Burket. The meeting took place in late March or early April 1975, at which time Burket agreed to accept a third mortgage and promissory note for $16,500.00 on the Parr's residence as security for the obligation. At that time, the Parr's had no available funds and informed Burket that they were initiating Chapter XI proceedings in bankruptcy. Such proceedings were initiated in May 1975 and Burket, as Trustee, was listed as a creditor by reason of the third mortgage on the real estate. Subsequently, mortgage foreclosure proceedings were pursued by the second mortgage on the property. Burket did not receive official notice of the bankruptcy proceedings nor was he made a party to the foreclosure proceedings. Later efforts by the Parrs to negotiate a settlement of the indebtedness with Burket have been unavailing; however, the Parrs are willing to satisfy the indebtedness out of funds received from the sale of lots in the Harbor Woods development over the period of the next two years, subject to the approval of the bankruptcy court. (Petitioner's Exhibits 15-16, Respondent's Exhibits 1-2, 4-6, Testimony of C. Parr, Respondent, Ball, Burket)
Respondent enjoys a good reputation for honesty and fair dealing in real estate and other business transactions in the community. (Testimony of Tabler, Elmore, Hansen)
CONCLUSIONS OF LAW
At the commencement of the hearing, Respondent moved to dismiss the charges on the grounds that they failed to state a cause of action against her absent specific allegations that she had removed funds from the escrow account or was knowledgeable of the same. The motion was denied in that paragraph 12 of the complaint specifically charged the Respondent with violations of the statutory provisions under Chapter 475 with sufficient specificity therein and in paragraphs 2 through 11 to fairly put her on notice as to the circumstances surrounding the charges.
Respondent also moved to dismiss the proceedings on the ground that Petitioner had not complied with Section 120.60(5), F.S., by failing to provide
Respondent an opportunity to answer proposed charges prior to the institution of administrative proceedings, and to show that she had complied with all lawful requirements for the retention of her license. Although the cited statutory provision indicates that a licensee should be provided a "show cause" notice before the administrative complaint has been filed, Rule 28-6.09 of the Model Rules of Procedure specifies the procedure which was followed by Petitioner and which provides that the administrative complaint shall contain the notice of facts or conduct allegedly warranting adverse action against the licensee.
Absent a Section 120.56 F.S. rule challenge against Rule 28-6.09, the Hearing Officer is bound by its provisions.
At the conclusion of Petitioner's case, Respondent moved to dismiss the allegations on the failure of the evidence to establish the requisite intent to defraud or the making of false promises as prescribed by Section 475.25(1)(a), and that the evidence did establish that there has been an accounting of the funds under consideration, thus obviating any charge under Section 475.25(1)(c), F.S.,; and that there was no intent to remove any money from escrow, thus negating any charge under Section 475.25(1)(i), F.S. The motion was denied based on the overall posture of the evidence at that stage of the proceedings which established a prima facie case in support of Petitioner's allegations.
Petitioner alleges that Respondent has been guilty of false promises, dishonest dealing, and breach of trust, in violation of Subsection 475.25(1)(a),
F.S. However, the complaint does not allege any specific manner in which such misconduct took place other than the fact that Respondent was unable to account for and deliver the earnest money deposit upon demand by the attorney for the sellers in the transaction by his letter of January 28, 1975. Evidence presented at the hearing fails to establish that Respondent made any false promises, or otherwise dealt dishonestly or breached her trust in connection with the escrow deposit. It does show that she was unaware of her husband's expenditure of the money until some three months after he had written the checks which depleted the account. Although it is considered that Respondent was negligent in not becoming aware of the defalcation at an earlier date, she cannot be held culpable for a violation of Subsection 475.25(1)(a) which requires guilty knowledge or intent, or culpable negligence, in order to establish the elements of that ground for disciplinary action. Her negligence under the circumstances was not such as to be "culpable" in nature. It is therefore concluded that Petitioner has failed to establish a violation of the statute in that regard.
As to the allegation that Respondent failed to account or deliver the residual amount due from the deposit sum upon demand of the sellers in violation of subsection 475.25(1)(c), it is claimed by Respondent that there was no such failure to account by virtue of the fact that the sellers' attorney agreed to take a third mortgage and note in the amount of $16,500.00 as satisfaction of the obligation. It is postulated therefore that the sellers could have foreclosed on the mortgage or otherwise protected their position by filing a claim in the bankruptcy proceeding and thus eventually been repaid. The statute provides that such an accounting or delivery must take place "under the circumstances, and at the time which has been agreed upon or is required bylaw or, in the absence of a fixed time, upon the demand of the person entitled to such accounting and delivery." Here, the contract specifically provided that upon default of the purchaser, the deposit would be retained at the option of the seller. Respondent was put on notice by the sellers' attorney that the buyer had defaulted and that therefore the deposit money should be apportioned between the broker and the seller, and that the seller's portion of some
$16,500.00 should be returned to the attorney for disbursement. Since there had been no fixed time under the contract for such delivery of the deposit, the letter of Mr. Burket requesting the return of the seller's portion of the deposit dated January 28, 1975, constituted the "demand" of the person entitled to such accounting and delivery as contemplated under the statute. At no time did the buyer make a demand for return of the deposit, nor has the Respondent contested the right of the sellers to its return, less the amount to which Respondent was entitled as a broker, pursuant to the terms of the contract.
Respondent's claim that an accounting had been made by its attempt to satisfy the indebtedness with the third mortgage and promissory note is without merit because the sellers are not obliged to accept anything other than the money to which they were entitled upon demand. Further, it was specifically stipulated by the sellers' attorney, Burket, that the mortgage and note were taken only as security for and not in satisfaction of the obligation. Respondent, as the active firm member of the broker corporation must be held responsible for the failure to return the deposit upon demand and cannot evade such responsibility by the fact that the broker corporation is no longer registered with the Petitioner or that her husband, also an officer of the corporation, was the one responsible for the inability to return the money in question.
In like manner, the Respondent is considered to have violated the provisions of Subsection 475.25(1)(j), which provides that funds placed in an escrow bank account by a broker shall be kept therein "until disbursement thereof is properly authorized." Respondent, as the firm broker, was responsible for not only the deposit of deposit monies in an escrow count, but also for the maintenance of such monies until disbursement was authorized. This provision does not require knowledge or intent of removal of such funds by another corporate officer. Again, Respondent as the active firm member is chargeable with such technical violations of Chapter 475 and must be held accountable for violations which were within the control of the firm or its corporate officers.
In assessing an appropriate penalty for the derelictions of Respondent as set forth above, it should be kept in mind that not only does she enjoy a good reputation for honesty, but that the violations of the real estate law were brought about through the actions of her husband rather than herself. Further note is taken of the sincere efforts that she has made to salvage her business affairs and reimburse creditors, including the sellers in the instant real estate transaction, under Chapter XI proceedings in bankruptcy. Accordingly, it is concluded that her registration with Petitioner should be suspended for a period of six months, but that enforcement should be stayed and that the Respondent be placed on probation for a similar period, and that she be issued a public reprimand.
The proposed recommended order submitted by Respondent has been considered and those findings and conclusions justified by the law and evidence have been incorporated herein.
DONE AND ENTERED this 8th day of December 1978 in Tallahassee, Florida.
THOMAS C. OLDHAM
Filed with the Clerk of the Division of Administrative Hearings this 8th day of December 1978.
Richard J. R. Parkinson, Esquire 1800 West Colonial Drive Orlando, Florida 32804
