STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

BOARD OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) CASE NO. 80-263

)

DOVARD J. EVERS, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, R.L. Caleen, Jr., conducted a formal hearing in this cause on July 7, 1980, in Jacksonville, Florida.

APPEARANCES

For Petitioner: John Huskins, Esquire

Department of Professional Regulation 2009 Apalachee Parkway

Tallahassee, Florida 32301

For Respondent: James L. Harrison, Esquire

218 East Forsythe Street Jacksonville, Florida 32202

ISSUE PRESENTED

Whether Respondent, prior to being licensed as a real estate salesman, committed, among other things, fraud and misrepresentation in violation of Section 475.25(1) and negligence in violation of Section 475.25(3), Florida Statutes (1978), by selling promissory notes which he represented were secured by first mortgages, when they were, in fact, secured by subordinate mortgages; and, if so, the appropriate disciplinary penalty which should be imposed by the Board of Real Estate.

CONCLUSION AND RECOMMENDATION

Conclusion:

The Board is without statutory authority and jurisdiction to discipline the Respondent for misconduct which occurred prior to his being licensed as a real estate salesman. The Amended Administrative Complaint, and the charges therein, should he dismissed.

Recommendation:

That the Board dismiss its Amended Administrative Complaint.

Background

By Amended Administrative Complaint filed January 18, 1979, the Petitioner Hoard of Real Estate ("Board") charged Respondent Dovard J. Evers ("Evers") with three counts of violating Sections 475.25(1)(a) and 475.25(3), Florida Statutes (1978), by selling notes which he represented were secured by first mortgages when, in fact, they were secured by second mortgages. The alleged misconduct occurred during 1972 and 1973, before Evers qualified for and received his real estate salesmans license.

On February 6, 1979, Evers timely requested a Section 120.57 hearing to dispute the allegations in the Board's Administrative Complaint and filed a Motion to Quash Complaint. After oral arguments, Evers' Motion to Quash was denied by the Board on March 14, 1979. It was not until February 13, 1980, that Evers' request for a hearing was forwarded to the Division of Administrative Hearings for assignment of a Hearing Officer.

The final hearing was initially set for April 15, 1980. On April 11, 1980, upon motion of the Board and without objection by Evers, the hearing was continued in order to allow the Board to reconsider its decision to prosecute this complaint. Subsequently, final hearing was reset for July 7, 1980.

At hearing, the Board called Gerald Pendry, Richard C. Tymick, and Eva Baird as its witnesses and offered Petitioner's Exhibits No. 1-6, 1/ inclusive, each of which was received into evidence. Respondent Evers called James Bradfield as his witness and testified in his own behalf. Evers offered Respondent's Exhibits No. 1-10, 1/ inclusive, each of which was received.

At the outset, the Board dropped Count IV and moved to amend its complaint by adding an allegation that Evers' alleged misconduct was of such a nature that had the Board been aware of it at the time Evers applied for his real estate salesman's license the application would have been denied. The proposed amendment fell within the scope of the complaint, and the motion was granted.

Evers also renewed his previous motion to quash the amended complaint on the ground that he was not a licensed real estate salesman at the time of the alleged misconduct; the motion was denied.

At close of hearing, the parties requested the opportunity to submit memoranda of law by July 23, 1980, which request was granted. The parties further agreed that the thirty-day time period for filing the recommended order in this case would begin on July 23, 1980.

Based upon the evidence submitted at hearing, the following facts are determined:

FINDINGS OF FACT

1. Respondent Evers qualified for, and was issued real estate salesman's license no. 0132634 by the Board on June 28, 1974. His license, at his request, has been placed on inactive status since April, 1979. (Testimony of Evers, P.E. 1)

   
   

2. During 1972 and 1973, Evers was a mortgage broker and registered security salesman licensed by the Florida Division of Finance and Department of Banking and Finance, Division of Securities. He was employed as a mortgage broker and security salesman by the Washington Development Corporation, with headquarters in St. Petersburg, Florida. (Testimony of Evers, P.E. 2)

3. As a mortgage broker and security salesman, Evers agreed to advertise and sell promissory notes, secured by what purported to be first mortgages, prepared and executed by the Washington Development Corporation ("Corporation"). He was to receive a commission on each completed sale. The Corporation supplied Evers with advertising forms and its promissory notes and mortgage forms. Its salesman, Gary George, taught him how to effectively explain and sell the notes and mortgages, and pointed out the express provision in the mortgage form where the Corporation covenants that the property covered by the mortgage was free and clear of all encumberances except real estate taxes. . . ." George advised Evers to inform prospective purchasers that they would receive a first mortgage, advice which Evers customarily followed. Evers' representations made in connection with sales to Gerald Pendry, Richard C. Tymick, and Eva Baird form the basis for this disciplinary proceeding.

   
   

   [SALE OF NOTE AND MORTGAGE TO GERALD PENDRY]

   
   

4. On April 1, 1973, Evers sold to Gerald C. Pendry and his wife a promissory note, with mortgage executed by the Corporation in the amount of

   $2,000. The mortgage covered Lot 1, Block 18, of the Carlton Village subdivision, Lake County7 Florida. The note obligated the Corporation to pay Pendry 1 percent interest per month, over a period of 24 months. The mortgage, on its face, purported to be a first mortgage. In negotiating the sale with Pendry, Evers expressly represented that the mortgage securing the note was a first mortgage, and such representation induced Pendry to purchase the note. (Testimony of Pendry, Evers, P.E. 4)

   
   

5. Subsequently, the Corporation defaulted on its payments; when Pendry brought a foreclosure action against the mortgaged property, he learned that his mortgage was subordinate to a prior and superior mortgage held by Melvin J. Haber. As a result of his subordinate mortgage, Pendry suffered financial loss. (Testimony of Pendry, P.E. 3)

   
   

   [SALE OF NOTE AND MORTGAGE TO RICHARD C. TYMICK]

   
   

6. On March 1, 1973, Evers sold to Richard C. Tymick and his wife two promissory notes, one in the amount of $2,500 and the other in the amount of

   $2,900, each executed and secured by a mortgage given by the Corporation. The mortgages securing the notes covered Lot 8, Block 41, and Lot 12, Block 22, Carlton Village subdivision, Lake County, Florida. The notes obligated the Corporation to pay interest of 1 percent per month over a 48-month period. In negotiating the sale of the two notes, Evers led Tymick to reasonably believe that the notes were secured by first mortgages. (Testimony of Tymick, P.E. 5)

   
   

7. The Corporation subsequently defaulted on its payments under the note. When Tymick Instituted a foreclosure proceeding, he learned that his mortgages were subordinate and inferior to a prior mortgage covering the same property held by Melvin Haber. Because of the subordinate nature of his mortgage, Tymick suffered financial loss. (Testimony of Tymick, P.E. 3)

   
   

   [SALE OF NOTE AND MORTGAGE TO EVA BAIRD]

   
   

8. On or about October 20, 1972, Evers sold two Corporation promissory notes, secured by mortgages, to Eva R. and Joseph T. Baird. The notes were issued in the total amount of $10,000. The mortgages covered lots located in the Carlton Village subdivision, Lake County, Florida, and Evers affirmatively represented to Eva Baird that they were first mortgages. Without such

   representation, Eva Baird would not have purchased the promissory notes in question. (Testimony of Eva Biard, P.E. 6)

   
   

9. Tie Corporation eventually defaulted on its payments under the notes. It was not until Eva Baird initiated a foreclosure proceeding against the properties that she learned her mortgages were subordinate and inferior to prior mortgages covering the same properties. As a result of her inferior mortgages, she suffered financial loss. (Testimony of Eva Baird)

   
   

10. In 1975, the Department of Banking and Finance, Division of Securities, brought a disciplinary action against Evers alleging that he committed fraud by selling the Corporation mortgages and notes to certain persons, including Pendry, Tymick and Baird. After a formal evidentiary hearing, the Department entered a final order dated December 22, 1976, concluding that Evers, by failing to disclose the existence of prior mortgages and ensure that the mortgages were first mortgages (as he represented), committed fraud and a violation of Section 517.301, Florida Statutes. As a result, the Department suspended Evers' security salesman's license for a period of one year. (P.E. 2)

    
    

11. At the time he sold the notes and mortgages to Pendry, Tymick and Baird, Evers did not know that the Corporation's mortgages were not, in fact, first mortgages; he believed and wholly relied on Gary George's assurances to him that the mortgages were what they purported to be-first mortgages. He made no attempt to investigate or independently verify the status of these mortgages. Evers, however, had no intent to falsely represent these mortgages to the purchasers; neither did he intend to mislead or deceive them. (Testimony of Evers)

    
    

    [EVIDENCE IN MITIGATION]

    
    

12. Evers did not learn that the mortgages in question were not first mortgages until the latter part of 1974. He then made an honest effort to notify and assist those persons who had purchased Corporation notes and mortgages through him. He helped to arrange legal representation for them and defray the cost of

    having abstracts of title prepared. (Testimony of Evers, R.E. 1-8)

    
    

13. Evers suffered considerable financial loss and interruption of Iris livelihood because of his sale of Corporation mortgages and notes. Because he had also purchased a Corporation mortgage which later turned out to be other than a first mortgage, he lost $2,700. Because of the Board's investigation and prosecution of this case, he placed his real estate salesman's license on inactive status to avoid embarrassment to his employer. (Testimony of Evers)

    
    

14. There is no evidence to indicate that Evers has been other than a competent and conscientious salesman since obtaining his real estate salesman's license in 1974. A registered real estate salesman who worked with Evers described him as an exceptional salesman who paid close attention to details and made a special effort to keep clients advised of his progress.

    (Testimony of James Bradfield)

    
    

    CONCLUSIONS OF LAW

    
    

15. The Division of Administrative Hearings has jurisdiction over the subject matter and parties to this proceeding. Section 120.57(1), Florida Statutes (1979).

16. Section 475.25(1)(a), Florida Statutes (Supp. 1978), 2/ empowers the Board to suspend the registration of the licensee upon a finding that the licensee has:

    
    

    1. 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 in this state. . ."

       
       

       Furthermore, a licensee's registration may be revoked if the Board finds him guilty of a course of conduct which shows that he is so incompetent, negligent, dishonest or untruthful that the property of investors or those with whom he may sustain a confidential relationship may not safely be entrusted to him. Section 475.25(3), Florida Statutes (Supp. 1978). 3/

       
       

17. Among other things, Evers contends that Sections 475.25(1)(a) end 475.25(3), Florida Statutes (Supp. 1978), do not provide authority for the Board to discipline a licensee where the alleged misconduct occurred prior to the issuance of a real estate salesman's license.

    
    

18. Administrative agencies are created by statute and have only such powers specifically granted by statute. They have no inherent authority. 1Fla.Jur., Administrative Law, Sections 20 and 37 (1977). Without a basis in statute, an agency is without jurisdiction and power to proceed. See Edgerton v. International Paper, 89 So.2d 4BB (Fla. 1956). When examining the statutory provision relied on by the agency, "if there is a reasonable doubt as to the lawful existence of a particular power that is being exercises, the further exercise of the power should be arrested." Id., at 490.

    
    

19. In applying these fundamental principles to the statutory provisions in question, it is concluded that Evers' contention is well-taken. The Board is without jurisdiction and power to discipline Evers on the grounds alleged in its Administrative Complaint, and the Complaint should, therefore, be dismissed.

    
    

20. Section 475.25(1)(a) and (3), Florida Statutes (Supp. 1978), does not require that the alleged misconduct occur in connection with the conducting of a real estate transaction, or when the licensee was acting in the capacity of a real estate salesman. See Roberts v. Florida Real Estate Commission, et al., 380 So.2d 1057 (Fla. 1st DCA 1979); Cf. Sellars v. Florida Real Estate Commission,

    380 So.2d 1052 (Fla. 1st DCA 1979). But no judicial or administrative precedent has been cited which supports the Board's contention that it has authority to discipline a licensee for actions occuring prior to his obtaining a license. Neither does language of the statute expressly authorize such action.

    
    

21. Misconduct, such as fraud, which occurs prior to the issuance of a license provides a basis to deny the license application. See Section 475.25(I), Florida Statutes (1979). When it issued Evers a real estate salesman's license in 1974, the Board implicitly determined that he satisfied all statutory criteria. It does not allege that Evers concealed or gave inaccurate information at the time of his application. Neither does the Board allege or show that Evers has been other than a competent and honest salesman since his licensure. It, instead, bases its disciplinary action on alleged misconduct committed by Evers more than seven years ago and two years prior to his obtaining a license.

22. Such Board action is predicated upon an unwarranted and over-broad reading of Section 475.25(1)(a) and (3), Florida Statutes (1976). License revocation statutes must be strictly construed and ambiguity construed in favor of the licensee. See Lester v. Department of Professional and Occupational Regulations, 348 So.2d 923 (Fla. 1st DCA 1977). Reasonable doubt exists as to the Board's power to take such a disciplinary action. Such doubt must be resolved against it. Edgerton v. International Paper Company, supra.

Based upon the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED:

That the Board dismiss its Amended Administrative Complaint.

DONE and ORDERED this 5th day of September, 1980, in Tallahassee, Leon County, Florida.

R.L. CALEEN, JR. Hearing Officer

Division of Administrative Hearings Room 101 Collins Building Tallahassee, Florida 32301

(904) 488-9675

Filed with Clerk of the

Division of Administrative Hearing this 5th day of September, 1980.

ENDNOTES

1/ Petitioner's and Respondent's exhibits will be referred to as "P.E. " and "R.E. ", respectively.

2/ Renumbered Section 475.25(1)(.b), Florida Statutes (1979).

3/ Renumbered Section 475.25(1)(b) and (n), Florida Statutes (1979).

COPIES FURNISHED:

John Huskins, Esquire Department of Professional Regulation

2009 Apalachee Parkway

Tallahassee, Florida 32301

James L. Harrison, Esquire

218 East Forsythe Street Jacksonville, Florida 32202

Docket for Case No: 80-000263

Orders for Case No: 80-000263