STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL REGULATION, )

)

Petitioner, )

)

vs. ) CASE NO. 80-1037

)

C. H. CHAPMAN and CHAPMAN REALITY ) CORPORATION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Sharyn L. Smith, held a formal hearing in this case on November 20, 1980, in Tampa, Florida. The following appearances were entered;

APPEARANCES

For Petitioner: Frederick H. Wilsen, Esquire

Staff Attorney

Department of Professional Regulation

130 North Monroe Street, Suite 310 Tallahassee, Florida 32301

For Respondent: Dale W. Vash, Esquire

DIXON, LAWSON & BROWN

620 Twiggs Street

Tampa, Florida 33602

The issue presented in this proceeding is whether the Respondents' real estate licenses should be suspended or other disciplinary action imposed for failure to properly maintain, account and deliver an earnest money deposit as required by Section 475.25(1)(c), Florida Statutes (1977), as amended at Section 475.25(1)(d), Florida Statutes (1979) and Section 475.25(h)(i), Florida Statutes (1977), as amended at Section 475.25(1)(k), Florida Statutes (1979) and for engaging in fraud in relation to the delivery of said earnest money in violation of Section 475.25(1)(a), Florida Statutes (1977) as amended at Section 475.25(1)(b), Florida Statutes (1979).

A proposed Recommended Order has been submitted by the Respondents. Those proposed findings not included in this Recommended Order were not considered relevant to the issues, were not supported by competent and substantial evidence or were considered immaterial to the results reached.

PRELIMINARY STATEMENT

At the administrative hearing held on November 20, 1980, the parties agreed that the testimony of one witness, Mr. Joseph Winston, the owner of the property on which the disputed earnest money deposit was received, would be taken by deposition after the conclusion of the hearing and admitted into the record.

Mr. Winston's deposition was taken on December 2, 1980, and he was notified by the court reporter on December 19, 1980, that the transcript of deposition was available for him to read and sign. As of March 4, 1981, Mr. Winston had neither read nor signed his deposition and the court reporter forwarded the original to the Division of Administrative Hearings with a notarized statement to that effect. After counsel for the parties were unable to stipulate to the entry of the unsigned deposition, the Hearing Officer issued an Order to Show Cause why the unsigned deposition of Mr. Winston should not be made part of the record.

Neither party raised an objection to the filing of the unsigned deposition in response to the Order and it was made a part of the record on March 23, 1981.

FINDINGS OF FACT

1. On May 18, 1978, the Respondents, C. H. Chapman and Chapman Realty Corporation (hereafter Respondents or Chapman) through a registered real estate salesman in the employ of the Respondents, negotiated and obtained a sales contract between Gerry and Ada Ball, as buyers or purchasers and Joseph Winston, as seller, for the sale of property located at 305 Ben Avon Drive, Tampa, Florida.

   
   

2. Pursuant to the terms of the sales contract, the Respondents' salesman received a $1,000.00 deposit from the purchasers which was placed in the Respondents' trust account on May 5, 1978.

   
   

3. Prior to the date of the scheduled closing, the purchasers inspected the property and requested the seller to make certain repairs and/or replacements to rectify defects which included wood borer damage, structural roof problems and an inoperable pool heater. The seller refused to make the repairs and/or replacements demanded and the offer was formally withdrawn by the purchasers on July 28, 1978, via letter to Chapman Realty requesting return of their $1,000.00 earnest money deposit. Prior to formal withdrawal of the offer, verbal demands were made by Mr. Hall upon Chapman Realty for the return of his deposit.

   
   

4. The demand for repairs and/or replacements and withdrawal of the offer was predicated on a provision of the sales contract which provided:

   
   

   Buyers themselves, or at their expense may have property inspected

   to ensure that there are no structural, electrical or plumbing defects. If any are found, buyers have the right to withdraw their offer and have all of their earnest deposit refunded to them.

   
   

5. Thereafter, Respondent Chapman disbursed the $1,000.00 as follows:

   
   

   1. $350.00 via check dated September 6, 1978, made

      payable to Robert A. Carbonell, an attorney-at-law in Florida.

   2. $500.00 via check dated January 9, 1979, made payable to purchasers Hall.

   3. $150.00 via check dated January 10, 1979, made

      payable to Robert A. Carbonell.

      
      

6. Prior to any disbursal the Respondent Chapman discussed with Mr. Hall the possibility of placing the escrowed funds with the Clerk of the Circuit Court. Respondent Chapman contacted his attorney, Robert Carbonell, regarding the conflicting demands of the parties. Mr. Carbonell was introduced to Mr. Hall by the Respondent over the telephone. The Respondent met with Mr. Carbonell on a regular basis since Mr. Carbonell was employed by the Respondent to handle real estate transactions involving Chapman Realty.

   
   

7. Respondent was never authorized by the purchasers to pay a fee to Mr. Carbonell directly from the $1,000.00 deposit held in trust. The $500.00 was paid directly by the Respondent to Attorney Carbonell from the Chapman Realty escrow account without oral or written authorization of the seller or the purchasers and in the absence of a settlement agreement between the Hall's and Mr. Winston.

   
   

8. Although Mr. Carbonell and the Respondent Chapman believed that Mr. Carbonell was representing Mr. Hall, neither Mr. Hall nor the seller, Mr. Winston, were under the same impression. Both Mr. Hall and Mr. Winston believed that Mr. Carbonell was representing the Respondents rather than Mr. Hall.

   
   

9. Such an impression was reasonable in light of Mr. Carbonell's regular employment by the Respondent, the absence of a written agreement between Mr. Hall and Mr. Carbonell coupled with the lack of discussion or agreement concerning fees and the potential conflicting positions which existed between the parties and the Respondents.

   
   

10. If any fee were due to Attorney Carbonell for his efforts in securing the return of the $1,000.00 deposit, this was a matter between Mr. Carbonell and Mr. Hall. Neither Mr. Carbonell nor the Respondent Chapman discussed the amount of the fee with the Halls. Mr. Carbonell arrived at the amount he thought was reasonable, $500.00, and Respondent Chapman diverted such amount to Mr. Carbonell from the Respondent's escrow account.

    
    

    CONCLUSIONS OF LAW

    
    

11. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this case.

    
    

12. Count I of the Administrative Complaint alleges that the Respondents are guilty of fraud in the handling of the Hall's $1,000.00 deposit. At the final hearing, counsel for Petitioner conceded that "little evidence" exists that Respondent Chapman is guilty of fraud as prescribed at Section 475.25(1)(a), Florida Statutes (1977), as amended or readopted at Section 475.25(1)(b), Florida Statutes, (1979). No substantial competent evidence exists to support the allegations contained in Count I relating to fraud.

    
    

13. As to Count III, the Respondents are charged with failing to maintain an earnest money deposit in their trust bank account or in a proper depository thereof until disbursement is properly authorized as required by Section 475.25(1)i), Florida Statutes (1977), as amended or readopted at Section

    475.25(1)(k), Florida Statutes (1979). However, the evidence demonstrates that upon receipt the Respondents immediately placed the purchasers $1,000.00 deposit in Respondents' trust account where the funds remained until they were disbursed. Accordingly, the Petitioner has failed to meet its burden of showing by competent substantial evidence that the Respondents violated Section 475.25(1)(h), Florida Statutes (1977) as amended or readopted at Section 475.25(1)(k), Florida Statutes (1979) as alleged in Count III of the Administrative Complaint.

    
    

14. Count II alleges that the Respondents by their actions failed to account and deliver to purchasers Hall and/or seller Winston an earnest money deposit entrusted to Respondents in their capacity as registered real estate brokers in violation of Section 475.25(1)(c), Florida Statutes (1977) as amended or readopted at Section 475.25(1)(c), Florida Statutes (1979). Respondents argue that since the deposit was received from the purchasers in May, 1978, the former statute is applicable. Under the former statute, a realtor when faced with conflicting claims to a deposit could elect to submit the claims to arbitration, interplead the disputing parties or seek a judicial determination. Since the choice of procedures was discretionary with the broker, he could lawfully assume the risk of erroneously disbursing trust monies. Greiser v. Myers, 267 So.2d 673 (4th D.C.A. 1972). If deposit monies were wrongly disbursed, the broker would presumably be liable for the same to any aggrieved party.

    
    

15. In the instant case, Respondent Chapman paid monies from his trust account to Attorney Carbonell without the prior authorization from either the seller or purchaser, the only possible persons lawfully entitled to the money under the contract. However, based upon the testimony at the final hearing and the escape clause in the contract, the purchasers were entitled to the full return of their $1,000.00. Mr. Hall and Mr. Carbonell failed to discuss a flat or hourly fee and did not enter into any written employment agreement. The matter of Mr. Carbonell's employment and compensation was of concern to him and his client, Mr. Hall, if such a relationship in fact existed, and was unrelated to any broker-client relationship which existed between the Respondents and the purchasers.

    
    

16. The Respondents' erroneous disbursal of trust monies to Mr. Carbonell violates both the 1977 and 1979 statutes. Under either statute the disbursal which was made in this case was and is not authorized under Florida law.

    
    

17. The Respondents' actions in this case demonstrate a lack of reasonable care in the handling of trust monies. Common sense dictates that at a minimum the Respondent Chapman should have contacted the purchasers to obtain a written release prior to the disbursal of $500.00 of the Purchaser's money held in trust to a third party. By not consulting with the purchasers, the Respondents' breached their duty involving the safekeeping of trust funds. Accordingly, the Respondents are liable to the purchasers for the trust monies paid by the Respondents to an authorized third party without the purchasers approval.

    
    

18. Since the $500.00 check dated January 9, 1979, issued to the Halls did not include interest, this should also be calculated as part of the monies due the purchasers. The Respondents' licenses should be suspended until such time as full payment is made to the purchasers and satisfactory evidence of such payment is submitted to and accepted by the Board.

RECOMMENDATION

Based on the foregoing, it is RECOMMENDED:

That the Respondents', C. H. Chapman and Chapman Realty Corporation licenses to practice real estate be suspended until restitution is made to Gerry

1. and Ada A. Hall, as follows:

   
   

   1. $500.00 plus interest at 12 percent accrued since July 28, 1978, and

      
      

   2. Interest on $500.00 accrued at 12 percent for the period from July 28, 1973 until January 9, 1979.

Respondents' licenses to be reinstated upon submission and acceptance by the Board of Real Estate of satisfactory evidence of payment.

DONE and ORDERED this 7th day of April, 1981, in Tallahassee, Florida.

SHARYN L. SMITH

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 7th day of April, 1981.

COPIES FURNISHED:

Frederick H. Wilsen, Esquire Staff Attorney

Department of Professional Regulation

Staff Attorney

2009 Apalachee Parkway

Tallahassee, Florida 32301

Dale W. Vash, Esquire DIXON, LAWSON & BROWN

620 Twiggs Street

Tampa, Florida 33602

Docket for Case No: 80-001037

Orders for Case No: 80-001037