Judges: K. N. AYERS
Agency: Department of Business and Professional Regulation
Latest Update: Jun. 11, 1982
Summary: Respondents bought real estate they were to sell to third party. There was no breach of trust or dealing by trick or scheme. Recommend dismissal.
81-2435STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF PROFESSIONAL )
REGULATION, BOARD OF REAL )
ESTATE, )
)
Petitioner, )
)
vs. ) CASE NO. 81-2435
)
JOHN ARATA, SOPHIE FARKAS, )
LAURI RUTKIN, FRANK ARATA, ) JR., and THE KEYES COMPANY, )
)
Respondents. )
)
RECOMMENDED ORDER
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above- styled case on 17 May, 1982, at Miami, Florida.
APPEARANCES
For Petitioner: Theodore J. Silver, Esquire
9445 Bird Road
Miami, Florida 33165
For Respondents, Jerome Billy Ullman, Jr., Esquire Frank Arata, 1230 AmeriFirst Building
Jr., and John One Southeast Third Avenue Arata: Miami, Florida 33131
For Respondent, J. Frost Walker, III, Esquire The Keyes 2400 AmeriFirst Building
Company: One Southeast Third Avenue Miami, Florida 33131
For Respondent, Sophie Farkas, pro se Sophie Farkas: 3711 North Ocean Boulevard
Fort Lauderdale, Florida 33308
For Respondent, Lauri Rutkin, pro se Lauri Rutkin: 1685 Cleveland Road
Miami Beach, Florida 33141
By Administrative Complaint dated 30 September 1980, the Department of Professional Regulation, Board of Real Estate, Petitioner, seeks to revoke, suspend or otherwise discipline the real estate licenses of Frank Arata, Jr., John Arata, Sophie Farkas, Lauri Rutkin and The Keyes Company. As grounds therefor it is alleged that the individuals named above are real estate salesmen licensed by Petitioner and that they breached the fiduciary duty owed to a
prospective purchaser of real estate listed by The Keyes Company, in that two of Respondents purchased this property with inside information obtained in the course of negotiations between the seller and prospective purchaser. With the exception of whether the prospective purchaser and seller had agreed to all of the terms of a contract not yet reduced to writing on 22 November 1977, there was no dispute as to the facts surrounding this incident.
At the hearing two witnesses were called by Petitioner, three witnesses were called by Respondents and nine exhibits were admitted into evidence.
Proposed findings and conclusions submitted by the parties and not included below were not supported by competent evidence or were deemed immaterial to the results reached.
FINDINGS OF FACT
Frank Arata, Jr., is a vice president of The Keyes Company, the manager of The Keyes Company Miami Beach Office, a real estate broker registered by the Board of Real Estate and has been so registered for some fifteen years. He was so registered at all times here relevant.
The Keyes Company is a corporate real estate broker registered by the Board of Real Estate and was so registered at all times here relevant.
John Arata, Lauri Rutkin and Sophie Farkas are registered as salesmen by the Board of Real Estate and were so registered and employed by The Keyes Company at all times here relevant.
John Arata and Sandra Spolter, another salesman of The Keyes Company, obtained a listing (Exhibit 5) on 9/20/77 on an apartment building owned by Bernard Wachtel and Linda Wachtel located at 1121 Pennsylvania Avenue, Miami Beach, Florida. Wachtel was about to lose the building due to an inability to meet current expenses and was anxious to sell before the mortgage on the building was foreclosed. John Arata had no further connection with any event later occurring involving this property.
Several weeks after the property had been placed in the multiple listing service and further advertised for sale without success, the seller became even more anxious to get rid of the property and it became known in the Miami Beach Office of The Keyes Company that the owner would sell at a price he could walk away from without further cost.
Another Keyes salesman, Leon Kaplan, called Gilbert Sens, an investor in properties in the area, to advise Sens about the availability of this property. At this time apparently both Kaplan, and certainly Sens, were unaware that the mortgage on the property was a wraparound mortgage held by the former owner which contained a provision requiring a pay-down of $25,000 in the mortgage principal upon sale of the property. This provision made the mortgagee essential to any negotiation, particularly if a purchaser wanted to negotiate for a lower or no pay-down.
After viewing the property and learning of the straits of the owner, Sens concluded that he could acquire this property with a very small cash investment but would have to pay the broker's fee. In a letter dated 8 November 1977 (Exhibit 3) from Sens to Kaplan, Sens stated an intent to purchase the property at 1121 Pennsylvania Avenue, Miami Beach, Florida, by assuming the existing mortgage, paying taxes and real estate commission, all subject to the
formal contract to be prepared by his attorney. Sens also contacted the mortgage holder, Regina Halperin, or her son, Morris Mulhrad, who acted as his mother's agent in many transactions, and learned the pay-down was negotiable.
In further efforts to acquire the property with a minimum cash investment, Sens induced The Keyes Company to agree to defer the payment of the commission, if Sens bought the property, for one year with Sens executing a second mortgage for this commission (Exhibit 4). This document, dated 16 November 1977, was signed by Frank Arata, Jr., for The Keyes Company and by Sens (for corporation) as prospective purchaser. At this time Sens did not have a corporation formed to take title but expected to form one before the transaction closed.
Also on 16 November 1977, Sens executed an offer to purchase the property (Exhibit 6) for the amount of the first mortgage with the purchaser "Gilbert Sens, his Assignees or Corporate Designees." Specific provisions of this offer included the buyer would pay the real estate sales commission and contained a provision that the offer was contingent upon purchaser entering into a mortgage modification agreement with Mrs. Halperin satisfactory to the purchaser to modify or eliminate the $25,000 mortgage pay-down requirement.
This offer was presented to Wachtel by Kaplan but was never accepted, nor was a counteroffer made by the seller.
On 22 November 1977 a meeting was held in the offices of Eugene Weiss, an attorney who had represented Sens in many real estate transactions but who also had represented Mrs. Halperin. Present at the meeting were Mrs. Halperin, Morris Mulhrad, Sens, Weiss and Wachtel. Mrs. Halperin expressed reservations about having a corporate purchaser of the property, about no pay-down of the mortgage as proposed by Sens, and about Sens' refusal to commit himself to a specific sum to repair and/or replace fixtures that were in disrepair. Mr. Mulhrad testified that he and his mother had no intention of letting Sens "steal" this property by getting title for only a $3,000 cash outlay and the offer made by Sens was totally unacceptable. On the other hand, Sens and Weiss both testified that they understood an agreement was reached and the contents of that agreement were dictated by Weiss to be prepared for signature the following day. However, Weiss' calendar for 23 November 1977 (attached to Exhibit 1) had no time scheduled for such a signature meeting.
Sens' practice was to acquire investment property in the name of a corporation wholly owned by him or a family trust. He often would form such a corporation, the sole assets of which would be investment property acquired. None of the principals here involved were novices; all had considerable experience in buying and selling real estate. Mrs. Halperin had been involved in buying and selling real property in the Miami area for many years, as had Sens. Eugene Weiss, the lawyer who was representing both the buyer and the mortgagee at the 22 November 1977 meeting, specializes in the field of real estate. When he dictated his understanding of the offer being made by Hens at that meeting, he knew, as the other parties surely did, that what he was dictating was an offer to purchase under certain terms and conditions that could develop into a contract only after acceptance by the mortgagee of the modification of the mortgage agreement and by the seller. All parties certainly were aware that no oral agreement to purchase real property could be enforced in view of the statute of frauds, Section 725.01, Florida Statutes. All parties also knew that the seller had no money with which to pay the broker or to pay bills owed for taxes, overdue mortgage payments, utilities, etc., due at the apartment building and that the offer to purchase must make provisions for those debts.
Before the offer dictated by Weiss was reduced to writing, he was advised that Mrs. Halperin would not accept the provisions proposed by Sens, would not release the mortgage pay-down provision and that there was no contract. He passed this information to Sens on 23 November 1977.
Meanwhile, Frank Arata was being called frequently by Wachtel to get the property sold. At the weekly sales meeting on 22 November 1977, Arata inquired about the status of Kaplan's negotiations on behalf of Sens but Kaplan had little to report since Sens had been doing most of his own negotiations. Kaplan apparently did not know about the meeting between the parties on 22 November 1977 until long after that meeting. At this sales meeting it became known that the mortgage pay-down could be modified by the mortgage holder and Frank Arata mentioned to Sophie Farkas and Lauri Rutkin that they might be interested in buying this property. When Kaplan protested, Arata told him that he would hold off one more day to give Kaplan an additional 24 hours to get a binding offer from Sens. No such offer was obtained by Kaplan.
Farkas and Rutkin visited the property and on 25 November 1977 made an offer to purchase the apartments at 1121 Pennsylvania Avenue (Exhibit 8). In this offer the buyers agreed to pay back taxes, pay a $10,000 commission to The Keyes Company, bring the mortgage payments current, pay past due bills for utilities, exterminating, garbage, etc., and the mortgage holder agreed to enter into a mortgage modification agreement. This offer was apparently prepared by Weiss and accepted by the seller on 25 November 1977.
Morris Mulhrad testified that these buyers made a $10,000 pay-down on the mortgage but the documents attached to Exhibit 1, the deposition of Weiss, does not confirm such pay-down was required by the mortgage holder or paid by the buyers. These buyers did submit an offer more beneficial to the seller than the offer submitted by Sens.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of these proceedings.
Specifically, Respondents are charged with violating Section 475.25(1)(a), Florida Statutes (1977) as readopted in Section 475.25(1)(b), Florida Statutes (1979) which provides for disciplinary action against a licensee if licensee has:
Been guilty of fraud, misrepre- sentation, 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 further- ance of such intent, design, or scheme. It shall be immaterial to the guilt of the licensee that the violation 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 confi- dential relation with the licensee, or was an identified member of the
general public....
The Administrative Complaint charges Respondents with dishonest deafting and breach of trust in a business transaction. With respect to John Arata, no evidence was presented that he had anything to do with any of the transactions in which Sens was involved or that he even knew anything about those transactions. His only role was as co-listing agent with Sandra Spolter for the property at 1121 Pennsylvania Avenue.
The primary issue for determination is the duty owed by the Respondents to the seller and to the prospective buyer, Sens. Sens' notice of intent to purchase the property (Exhibit 3) addressed to Kaplan is hardly an offer binding on Sens. In fact, he had no intention of buying the property in his own name as Exhibit 3 would indicate. No consideration passed and, even if the seller had attempted to accept this offer, no binding contract was possible because of no consideration and because the offer was made contingent upon the execution of a formal contract to be prepared by Sens' attorney. Nor did Exhibit 3 make The Keyes Company or Kaplan the agent of Sens. It gave them no authority or responsibility to act for Sens but merely expressed Sens' interest in the property. There was only one party to Exhibit 3, therefore it could not constitute a contract. Restatement, Contracts Section 15.
Exhibit 4, on the other hand, is a valid agreement which could become a binding contract upon the occurrence of the events therein anticipated. However, this agreement also does not create a principal-agent relationship between Sens and The Keyes Company. The latter merely agreed to defer collecting the commission it would earn when and if the transaction was completed. By agreeing to pay the commission to The Keyes Company, Sens did not make The Keyes Company his agent. All parties realized that the broker would be due a commission if the sale was made to a buyer produced by the broker. The parties also recognized that the terms of the contract upon which this property would be conveyed must include provisions for this commission.
The mortgagee had the option to foreclose on the delinquent mortgage and obtain a deficiency judgment against the seller or she could agree to modify the mortgage agreement to allow a purchaser to acquire the property without making the $25,000 pay-down required by the mortgage agreement.
On the other hand, Exhibit 5 gave The Keyes Company the exclusive right of sale of the property located at 1121 Pennsylvania Avenue. By this contract, The Keyes Company agreed to expend certain efforts to acquire a
purchaser for the property and the owner agreed to pay the commission upon the broker's finding a willing and able buyer. This created a principal-agent relationship and placed upon The Keyes Company the duties owed by an agent to his principal, the seller. As stated in 2 Fla. Jur. 2d, Agency Section 69:
No principle of the law of agency
is more firmly established than that which forbids one who undertakes to act as agent for another from acting for himself in relation to subject matter of the agency, or placing him- self in the position adverse to or in conflict with his principal* * *
An agent cannot acquire any private interest of his own in opposition to that of his principal. Nor can he act for another whose interest is adverse to that of his principal. He is not allowed to assume any position incon- sistent with his duty to be loyal to his principal.
It is emphasized that the Respondents were, if anything, agents of the seller; not of the buyer. Accordingly, they owed a duty to their principal to do nothing adverse to his interests. Purchasing the property from the seller upon terms more beneficial to the seller than those offered by Sens certainly did not violate the duty the agent owed to the seller.
The discussions so far have treated all Respondents, except John Arata, the same with respect to the duties as agents. As a matter of fact, Respondents Farkas and Rutkin never acted as agents for the seller although they were employed by The Keyes Company, which was the agent for the seller. Accordingly, any duty they owed to the seller was derived from their employment with The Keyes Company and not as agents actually working for the seller. They had the right to rely on the representations of their broker, Frank Arata, Jr., that they were free to make an offer to purchase the property since no contract had been entered into and no assurances had been received by Arata that such a contract was forthcoming.
Had Farkas and Rutkin not been employed by The Keyes Company and made an offer to purchase the property, such offer would have had to be presented to the seller even if Sens had already submitted an offer which might have been accepted if the subsequent offer was withheld. Failure to present the better offer would have violated the duty owed by the agent to his principal, i.e., to sell the property at the best possible terms for the seller.
This leaves the only Respondents that could be found in violation, if the facts alleged constitute a violation, are Frank Arata, Jr., and The Keyes Company. The latter can act only through its active firm member and is responsible for the acts of that broker.
Respondent contends that Chapter 475 makes no provision for disciplinary action against a corporate broker and the charges against The Keyes Company must be dismissed. This contention is without merit. Corporate brokers
are registered as are brokers and salesmen. Registration in this context is synonymous with licensure and the authority to take disciplinary action against a broker's registration is the same as the authority to take disciplinary action against a broker's license.
Before these Respondents can be found to have violated a duty owed to the buyer, it must be determined what duty is owed. Basically, the agent owes the same duty to a third party as is owed by his principal. That duty lies in tort and not in contract. An agent is liable for deceit and false representations made by him even though he is acting in the course, of employment for his principal. 2 Fla. Jur. 2d, Agency Section 83. Here, no misrepresentations were made by any of the Respondents and the Respondents' primary duty as agent was owed to their principal, Wachtel, the owner of the property listed for sale. That duty was to obtain the best possible price and terms for the property their principal had for sale. The contract accepted by the seller was more beneficial to Wachtel than was the offer made by Sens.
Real estate agents frequently treat the buyer as their "customer" and exert their major efforts toward protecting his interests. While this may create better rapport between the salesman and the buyer, it can also lead to a failure to adhere to the duties owed by the agent to his principal, the seller. This can result in a serious legal infraction when the "customer's" interests are placed above the interests of the seller, by this agent of the seller.
From the foregoing it is concluded that no evidence was presented regarding John Arata and all charges against him should be dismissed. It is also concluded that Sophie Farkas and Lauri Rutkin committed no breach of real estate license law by accepting the advice of Frank Arata that they should consider purchasing the property as an investment and in subsequently submitting an offer that was accepted by the seller. It is further concluded that the duty owed by Frank Arata, Jr., and The Keyes Company to the seller was that of agent and principal and the duty owed to Sens was the duty owed by an agent to a third party. This duty was not breached by Respondents. It is, therefore,
RECOMMENDED that all charges be dismissed against all Respondents and this case be closed.
ENTERED this 11th day of June, 1982, at Tallahassee, Florida.
K. N. AYERS 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 11th day of June, 1982.
COPIES FURNISHED:
Theodore Silver, Esquire 9445 Bird Road
Miami, Florida 33165
Jerome Billy Ullman, Jr., Esquire 1230 AmeriFirst Building
One Southeast Third Avenue Miami, Florida 33131
J. Frost Walker, III, Esquire 2400 AmeriFirst Building
One Southeast Third Avenue Miami, Florida 33131
Sophie Farkas
3711 North Ocean Boulevard Fort Lauderdale, Florida 33308
Lauri Rutkin
1685 Cleveland Road
Miami Beach, Florida 33141
Frederick H. Wilsen, Esquire Assistant General Counsel Department of Professional Regulation
130 North Monroe Street Tallahassee, Florida 32301
C. B. Stafford, Executive Director Florida Real Estate Commission Post Office Box 1900
Orlando, Florida 32802
Samuel R. Shorstein, Secretary Department of Professional Regulation
130 North Monroe Street Tallahassee, Florida 32301
Docket for Case No: 81-002435
Orders for Case No: 81-002435
| Issue Date |
Document |
Summary |
|
Jun. 11, 1982 |
Recommended Order
|
Respondents bought real estate they were to sell to third party. There was no breach of trust or dealing by trick or scheme. Recommend dismissal.
|
