Michael Ruff, duly designated Hearing Officer of the Division of Administrative Hearings on October 6, 1981, in Jacksonville, Florida.
For Petitioner: Barry S. Sinoff, Esquire
The Petitioner, the Department of Professional Regulation, Board of Real Estate, has filed an administrative complaint against the Respondent alleging generally that various acts of fiscal irresponsibility and misrepresentation were committed by the Respondent to the detriment of a number of real estate clients. Specifically, the Petitioner alleges that the Respondent demanded a two hundred-dollar deposit from one Lacy Cole, a prospective real estate purchaser for a Veterans Administration-sponsored purchase (and mortgage) of a residence. Allegedly, under the Veterans Administration program the purchaser was not responsible for the two hundred dollars represented to be closing costs and upon being informed of this by the purchasers' attorney the Respondent allegedly drew, uttered and issued his escrow account check in the amount of two hundred dollars to reimburse the purchaser, which check proved to be invalid.
Similarly, the Respondent is charged with failure to recompense Mr. Lacy Cole for the sixty-five dollars initial deposit he paid at the time he entered into the contract of sale.
Additionally, with regard to one Mrs. Joanne Wesley the Respondent is charged with failing to deposit various "binder" checks from Mrs. Wesley in his escrow account, instead cashing them for personal use. Ultimately, Mrs. Wesley failed to qualify for FHA financing with regard to her contract of sale for a residence and thus became entitled to a refund of her deposit totaling nine
hundred sixty dollars. The Respondent is charged with failing to timely refund the total of the deposit monies and with issuing an escrow account check in the amount of two hundred and fifty dollars upon insufficient funds. The Petitioner acknowledges that ultimately the Respondent paid that check. Finally, it is charged in Count three that the Respondent commingled his personal funds with deposits entrusted to him by clients for placement in his escrow account and that over a period of time from October to December 1978 he disbursed these escrow funds for his personal use without proper authorization.
Based upon all three of these counts in the Administrative Complaint the Respondent is charged with fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device in a business transaction in violation of Section 475.25(1)(a) and (b), Florida Statutes (1979), as well as making misleading, deceptive, untrue or fraudulent representations in the practice of his profession in violation of Section 455.227(a), Florida Statutes (1979). The Petitioner thus seeks revocation, suspension or other disciplinary action with regard to the Respondent's license.
At the hearing the Petitioner presented four witnesses and eight exhibits.
The Respondent presented one witness (the Respondent) and no exhibits. The Petitioner's witnesses consisted of the two complaining witnesses, Lacy Cole and Joanne Wesley, as well as the Records custodian of Barnett Bank and an investigator for the Department. After the hearing the undersigned was under the impression that consistent with its usual practice, the Petitioner would order a transcript of the proceedings. After a substantial period of time it has become apparent that that is not the case, hence the entry of this Recommended Order at this time.
The Respondent, Robert Watson, Jr., is a real estate broker-salesman, having been issued license Number 0093690. He resides and has his business in Jacksonville, Florida.
On or about September 1, 1978, the Respondent negotiated and drafted a contract for sale of a certain piece of residential real estate, the purchaser for which was one Mr. Lacy Cole. The Respondent was Mr. Cole's broker in that transaction. The Respondent informed Mr. Cole that he would have to pay a two- hundred-dollar deposit as prospective buyer pursuant to the deposit receipt, sales contract agreement drafted by the Respondent. Mr. Cole did not pay the entire two-hundred-dollar deposit, but he did pay the Respondent sixty-five dollars.
The closing was held October 20, 1978, at which time Mr. Cole's attorney directed the Respondent to pay Mr. Cole a two-hundred-dollar refund as the contract for sale provided that financing would be through the Veterans Administration and that in such a Veterans Administration sponsored transaction the buyer is precluded from paying closing costs. Mr. Cole cashed the two- hundred-dollar check in good faith and later was informed that the Respondent had stopped payment on it, which resulted in Mr. Cole having to make the check good. The Respondent has failed to recompense Lacy Cole for the sixty-five- dollar deposit he had already paid pursuant to the contract for sale drafted by the Respondent. Mr. Watson has also never repaid the two hundred dollars which Mr. Cole had to expend in order to provide payment on the two-hundred-dollar check on which the Respondent had stopped payment.
In response to the Petitioner's demonstration that the Respondent had obligated Mr. Cole for a two-hundred-dollar "binder or closing costs" which he was not obligated to pay under Veterans Administration policy, the Respondent stated that he wrote the contract with the two-hundred-dollar binder with the understanding that Cole would pay a portion of it at the first of each month until it was paid and that he only received a total of sixty-five dollars from Cole. The seller agreed to sell the property to Mr. Cole anyway. The Respondent maintained that he merely told Mr. Cole at the closing that he would write him a two-hundred-dollar check and deliver it to him at closing with the understanding that Cole would deliver it back to him immediately afterward to keep from confusing the attorney." The Respondent, however, failed to refute the showing by the Petitioner that the Respondent attempted to obligate that purchaser to pay two hundred dollars in "closing costs" which he was not legally obligated to pay and for which the seller of the property was responsible in the first place. The Respondent adduced no evidence contrary to that of Petitioner which established that, after being informed by the attorney that Mr. Cole was not responsible for any deposit or closing costs, the Respondent still retained the sixty-five dollars paid him as earnest money by Mr. Cole and, further, that after stopping payment on Cole's refund check, causing Mr. Cole to incur two hundred dollars additional expense for which he was not obligated, the Respondent failed to recompense Cole. There is thus no question that the Respondent misrepresented to his client, Mr. Cole, the obligations and expenses Mr. Cole would have to incur in order to purchase the property and thus, in effect, wrongfully obtained two hundred sixty-five dollars from Mr. Cole.
On or about September 16, 1978, Mrs. Joanne Wesley deposited a ten- dollar check with the Respondent as a partial deposit for a down payment on a home. On or about September 20, 1978, she deposited an additional one-hundred- dollar check with the Respondent as further deposit on the same contract for sale and purchase which the Respondent had at that time not yet drafted. The Respondent never made an appropriate deposit of the above referenced checks in his escrow account, but, instead, cashed them for his personal use.
On or about October 25, 1978, the contract for sale and purchase was finally drafted by the Respondent. On approximately December 4, 1978, Mrs. Wesley deposited with the Respondent an additional check for eight hundred fifty dollars as the final installment of her deposit money with regard to the proposed purchase of the home. On December 29, 1978, Mrs. Wesley learned that she had failed to qualify for FHA financing with regard to the above-referenced contract and, after looking at another home which was not to her liking offered to her by the Respondent as a "replacement dwelling," finally requested the refund of her total deposit of nine hundred sixty dollars.
The Respondent then requested Mrs. Wesley to wait until January 2, 1979, for that refund and on January 2, 1979, tendered to her four hundred dollars cash as partial reimbursement.
On January 3, 1979, the Respondent tendered to her an additional three hundred dollars cash and drew and delivered to her his escrow check, post-dated to January 10, 1979, in the amount of two hundred fifty dollars. That escrow account check was returned for insufficient funds. On February 1, 1979, Mrs. Wesley's attorney made demand on the Respondent for payment of the two hundred fifty dollars outstanding, represented by the invalid check. On approximately February 3, 1979, the Respondent ultimately paid the two hundred fifty dollars due Mrs. Wesley. Thus, at that point the Respondent had refunded nine hundred fifty dollars of the nine hundred sixty dollars in deposit money due Mrs. Wesley. The entire refund had become due on December 29, 1978, when it was
learned that she could not qualify for FHA financing with regard to the proposed purchase, which qualification for financing was a condition precedent to performance of the contract.
In his defense the Respondent stated that he attempted to arrange the purchase of another dwelling for Mrs. Wesley upon learning that she could not qualify for financing on the subject property and that he retained her deposit money in his escrow account for that reason and ultimately repaid it to her, although after over a month's delay. The Respondent contended that he had opened the subject account as a business account when he was doing appraisal work and had not considered it to be an escrow account and "did not know when they switched it over to escrow." The Respondent did acknowledge that he had used this escrow account as his business account and commingled personal and business operating funds in it and made withdrawals from time to time for business and personal reasons. With further regard to the Cole transaction, the Respondent contended that he felt it was customary for a veteran to pay two hundred dollars closing costs and even when he learned the veteran was not obligated to pay closing costs in such a transaction, that he still felt it was "customary as earnest money" even though the seller obviously was obligated to pay closing costs. The Respondent also testified that as of the time of the hearing and for an indeterminant period of tinge before the hearing, he had terminated active practice of real estate brokerage and was mostly performing appraisal work.
There is thus no question that the Respondent informed Mr. Cole that he was obligated to pay two hundred dollars "earnest money" or "closing costs" and that his actions forced Mr. Cole to incur the two-hundred-sixty-five dollar expense described above, even after the Respondent was informed by the closing attorney that the purchaser was not obligated for those expenses. There is no question with regard to the Wesley transaction that he delayed an inordinate amount of time in refunding her deposit money after the condition of financial qualification for the purchase did not occur, and, further, that he commingled these purchaser deposit funds in his escrow account with personal and business funds and used a portion of them for personal purposes.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction of the parties to and the subject matter of this proceeding pursuant to Section 120.57(1), Florida Statutes.
Subsections 475.25(1)(a) and (b), Florida Statutes (1979), provide in pertinent part as follows:
475.25 Discipline.--
(1) The board may deny an application for licensure or renewal, may suspend
a license for a period not exceeding 10 years, may revoke a license, may impose an administrative fine not to exceed $1,000 for each count or separate offense, or may issue a reprimand, if it finds that the licensee or applicant has:
Violated any provision of s.475.42 or s.455.227(1)
Been guilty of fraud, misrepresentation, concealment, false promises, false pretenses,
dishonest dealing by trick, scheme, or device, culpable negligence, or breach of trust in any business transaction in this state or any other state, nation, or territory; has violated a duty imposed upon him by law or by the terms of a listing contract, written, oral, express, or implied, in a real estate transaction; has aided, assisted, or conspired with any other person engaged in any such misconduct and in furtherance thereof; or has formed an intent, design, or scheme to engage in any such misconduct and has committed an overt act in furtherance of such intent, design, or scheme. It shall be immaterial to the guilt of the licensee that the victim or intended victim of the misconduct has sustained no damage or loss; that the damage or loss has been settled and paid after discovery of the misconduct; or that such victim or intended victim was a customer or a person in confidential relation with the licensee, or was an identified member of the general public;
Section 475.42(1)(f) , Florida Statutes (1979),provides:
475.42 Violations and penalties.--
(1) VIOLATIONS.--
(f) No person shall commit any conduct
or practice set forth in s.475.25(1)(b), (c) (d), or (h)
Section 455.227(1)(a) provides, of course, that the Board shall have the power to revoke, suspend or deny renewal of a license or to reprimand, censure or otherwise discipline a licensee if the Board finds that said licensee has made misleading, deceptive, untrue or fraudulent representations in the practice of his profession.
There is no question based upon the evidence in this record that the Respondent has committed a misrepresentation and concealment and engaged in dishonest dealing with regard to the facts of the Cole transaction, especially since he, in effect, retained Mr. Cole's money even after he was informed at the closing (if he did not already know) that Mr. Cole was not obligated to pay the subject funds in order to effect closing of that transaction. Thus, he is also guilty of making misleading, deceptive, untrue or fraudulent representations in the course of the practice of his profession, with regard to both the Wesley and Cole transactions, in violation of the statutory section cited last above. This conclusion also, of course, applied to his commingling of Mrs. Wesley's deposit money in part with his personal funds in the subject escrow account, in that he used her funds in part for personal reasons and, indeed, the record reflects that her entire deposit money was unavailable upon demand at the time it became due to her after the failure of the transaction to "close." The Respondent simply did not have the money available to repay her timely because he had used it for personal reasons during the interim.
The Respondent is also guilty of a violation of Subsection 475.25(1)(d), Florida Statutes (1979), in that he failed to account for or deliver to the person to whom it was due the deposit money at the time it became due after a demand by that person entitled to the accounting or delivery of the deposit funds. The funds should have remained on deposit and available in the Respondent's escrow account. The record does not reflect that any of the escape devices contained in that subsection, involving good faith doubt as to entitlement to escrow deposit funds, were available as justification for the Respondent's failing to promptly reimburse Mrs. Wesley. In that regard also, the misuse of the escrow account renders the Respondent in violation of Subsection (k) of that Section since the funds were not kept inviolate in the escrow account until disbursement became appropriate.
The undersigned thus concludes that the Respondent has been proven guilty of the charges alleged in all three counts of the Administrative Complaint. The undersigned also concludes that the Respondent by his own admission is no longer practicing as an active broker, but instead, is merely performing appraisal duties in the course of his practice in the real estate profession. The undersigned is constrained to conclude that, inasmuch as the Respondent is guilty of the misrepresentations and other misdeeds alleged with regard to these two transactions and through those misrepresentations has caused his clients to incur pecuniary detriment for which he has not entirely reimbursed them even after he was under actual notice of their entitlement, he is no longer worthy of being licensed as a real estate broker in the State of Florida.
