STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL )

REGULATION, FLORIDA REAL )

ESTATE COMMISSI0N, )

)

Petitioner, )

)

vs. ) CASE NO. 83-3757

)

BRETT C. MUSCATELL, BRETT ) MUSCATELL CORPORATION, MELVIN ) BERMUDEZ and THOMAS M. COTTRELL, )

)

Respondents. )

)

RECOMMENDED ORDER

A public hearing was held in the above-styled case before K. N. Ayers, Hearing Officer, on August 16, 1984, at Tampa, Florida.

APPEARANCES

For Petitioner: Fred Langford, Esquire

Florida Real Estate Commission Post Office Box 1900

Orlando, Florida 32802

For Respondent: Maxwell G. Battle, Esquire and

Thomas E. Henderson, Esquire Post Office Box 2150

Tampa, Florida 33601

By Administrative Complaint dated October 25, 1983, the Department of Professional Regulation, Division of Real Estate, Petitioner, seeks to revoke, suspend or otherwise discipline the licenses of Brett C. Muscatell, as a real estate broker, Brett Muscatell Corporation, as a corporate real estate broker, and the licenses of Melvin Bermudez and Thomas M. Cottrell, as real estate salesmen. As grounds therefor, it is alleged in the seven-count complaint that, in connection with the listing and attempted sale of property owned by Charles and Michelle Houston (hereinafter referred to as Houston), Respondents are guilty of fraud, misrepresentation, false pretenses, dishonest dealing by trick, scheme, or device, culpable negligence, and breach of trust in a business transaction; that they are guilty of a course of conduct which shows they are so incompetent, negligent, dishonest, or untruthful, that money and property of investors may not safely be entrusted to them; and that the broker and corporate broker did not adequately supervise the salesmen working under them so as to be guilty of culpable negligence.

At the hearing, petitioner called three witnesses, Respondent called four witnesses and 23 exhibits were admitted into evidence. Proposed findings submitted by Respondents, to the extent incorporated herein, are adopted;

otherwise, they are rejected as not supported by the evidence, immaterial or unnecessary to the conclusions reached.

FINDINGS OF FACT

1. At all times relevant hereto, Brett C. Muscatell was registered as a real estate broker and active firm member of Brett Muscatell Corporation which was licensed as a corporate broker, and Melvin Bermudez and Thomas M. Cottrell were licensed as real estate salesmen.

   
   

2. Charles and Michelle Houston had purchased their residence through Respondent Bermudez in 1981 and, when they desired to sell the house and leave Florida, they called Bermudez who prepared a listing agreement, Exhibit 1, which the Houstons executed. Pursuant to Exhibit 1, Brett Muscatell Corporation was given an exclusive right to sell the Houston's property for $39,500 for six months from June 2, 1982.

   
   

3. On August 23, 1983, Bermudez presented an offer from David and Catherine Shipley (hereinafter referred to as Shipley) to purchase Houston's property for $40,000 showing $4,000 deposit with the contract subject to Shipley obtaining a 90 percent GPARM first mortgage loan through Muscatell Mortgage Corporation at 10.78 percent. This offer was not accepted by Houston. Attached to Exhibit 2 as Sellers Estimated Proceeds showed a reconditioning allowance of

   $4,000 making the offer one for $36,000. A similar offer (Exhibit 3) which appears to be the original of Exhibit 2 (before penned changes on Exhibit 3) was modified by Houston, signed and returned to Shipley as a counteroffer. The Sellers Estimated Proceeds sheet attached to this offer showed a 4,000 loan carried by seller. By this time, Houston was aware that no earnest money had been deposited by the buyer and that a promissory note from buyer to seller was to represent the downpayment.

   
   

4. The contract was retyped to contain the changes, signed by the buyer on September 9, 1982, and presented to Houston for acceptance as Exhibit 4. This document provided the $4,000 deposit was to be held in escrow by Houston. Attached to Exhibit 4 is a three-year promissory note at zero interest payable from Shipley to Houston, and a further agreement between Shipley and Houston providing that the buyers would place a second mortgage on the house at the expiration of three years to pay the promissory note if buyer is unable to pay off the note in cash within ten days of maturation date on note. Exhibit 3 was signed in place for the broker's signature as Brett Muscatell Corp./Realtor, apparently by Bermudez. Exhibit 4 is blank in this space for the broker to sign.

   
   

5. Shipley's application for mortgage loan was forwarded by Brett Muscatell Corporation to Residential Finance Corporation for processing. After credit checks and after obtaining information that Shipley had not deposited the

   $4,000 shown on the contract to purchase, the application was denied because of insufficient assets of the purchaser (Exhibit 21).

   
   

6. Before these negotiations were concluded, Houston moved from the house and left Florida on September 4, 1982. Exhibit 4 with the attached promissory note notarized as requested by seller was mailed to Houston, executed by Houston and returned to Bermudez. When Shipley failed to qualify for the loan, Bermudez obtained release of deposit receipt from Houston (Exhibit 13).

   
   

7. After the Shipley deal fell through, Bermudez, who was aware Houston was in financial straits, decided to rent Houston's house. He placed a "For

   Rent" sign on the property and listed his home phone number thereon. Shortly thereafter, he obtained a tenant who wanted to move in right away. Bermudez called Houston in Ohio two or three times one day and obtained permission to rent the house. Mrs. Houston, who testified in these proceedings, denied she gave Bermudez verbal authority to rent the property. The tenant gave Bermudez

   $375 for the first month's rent and a $375 deposit before moving in. Bermudez, after consulting with Muscatell, forwarded his check in the amount of $750 to Houston with a copy of the lease to the tenant, Cote.

   
   

8. Upon receipt of the letter dated October 2, 1982, by which the lease and check were forwarded, Houston engaged an attorney in Tampa to have the tenant removed. Cote moved from the house in early October, 1982.

   
   

9. On October 18, 1982, Bermudez submitted an unsigned offer from Harold Jackson (Exhibit 7) to purchase Houston's property for $35,000. This offer never materialized into a contract.

   
   

10. On November 10, 1982, Houston sold the property to Scaglione (Exhibit 17), an investor, after a contract to sell to Walt Brewer Realty for $3,000 over the first mortgage (Exhibit 18) fell through.

    
    

11. Thomas M. Cottrell prepared Shipley's application for mortgage from the information supplied by Shipley. Cottrell denied he ever advised Shipley to make any misrepresentation.

    
    

    CONCLUSIONS OF LAW

    
    

12. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings.

    
    

13. At the time the first offer to purchase the Houston residence was presented to Houston, a deposit of $4,000 was shown on the offer to purchase and the Sellers Estimated Proceeds attached to the offer showed a $4,000 reconditioning allowance to buyer. The fact that no deposit had been made by Shipley was net disclosed to the seller until the second offer was submitted.

    By the time the parties agreed to the terms and executed a valid contract, Houston was aware that Shipley did not have any money for a downpayment. The deposit of $4,000 was shown in every contract thereafter prepared relating to the Shipley Houston deal. A copy of this offer to purchase accompanied Shipley's loan application when it was forwarded to Residential Financial Corporation.

    
    

14. With respect to the allegations in Count I, the evidence is clear that initially Bermudez represented to Houston that Shipley had made a $4,000 deposit which was false and known to be false by Bermudez.

    
    

15. With respect to Count II, no credible evidence was presented that Bermudez told Houston that Shipley had qualified for the mortgage loan. The contract which Houston and Shipley ultimately signed was worked out by Houston and Shipley without material input from any of the Respondents, other than the basic downpayment shown in the original offer.

    
    

16. With respect to Count III, no credible evidence was submitted that any of the Respondents advised Shipley to submit false information or to omit material information on his mortgage loan application. The evidence is clear that Cottrell submitted Shipley's loan application with a contract indicating

    Shipley had made a $4,000 downpayment which Cottrell knew, or should have known by the exercise of reasonable diligence, was false.

    
    

17. With respect to Count IV, the evidence is equivocal whether Bermudez leased the property without the knowledge and consent of of Houston. The evidence is clear that Bermudez attempted to rent Houston's property without involving his broker, Brett Muscatell, and in so doing, he attempted to act as a broker without the benefit of a license to do so as alleged in Count V. When Bermudez told Muscatell that he had received rental payments on the property and had no written authorization from Houston to rent the property, Muscatell told him to send forthwith the entire sum received for rent to Houston.

    
    

18. With respect to Count VII alleging Respondents are guilty of a course of action which indicates they may not safely be trusted with money or property of investors, it is noted that the incident charged in the Administrative Complaint was that involving the listing and attempted sale of Houston's property. One incident does not establish a course of conduct. Kopf v. Florida Peal Estate Commission, 379 So.2d 1327 (Fla. 3rd DCA, 1978).

    
    

19. By failing to review and accept contracts on behalf of Brett Muscatell Corporation, Brett C. Muscatell, the active broker for the corporate broker, failed to properly supervise the activities of Bermudez and Cottrell, even though the latter was not working under the authority of his real estate license in forwarding Shipley's mortgage loan application.

    
    

20. The charges here involved stem from a valiant effort to sell property to a person with no money for a downpayment. If "creative financing" includes such misrepresentations as were made in this instance, those making such representations violate the Real Estate Licensing Law. Furthermore, the broker and salesman are the agent of the seller, not of the buyer. As such, they owe the seller a fiduciary duty that is not met when they attempt to induce the seller to deed his property with little or no downpayment to one who is likely to default on the existing mortgage, or on a new mortgage obtained, and thereby cause the seller to lose any equity he had in the property.

    
    

21. From the foregoing, it is concluded that Bermudez presented to Houston an offer from Shipley with no consideration for the offer needed to make a binding contract, if accepted; that Bermudez presented an executed contract to Muscatell Realty, or accepted the contract on behalf of Muscatell, without authority to do so, which contained false information respecting the $4,000 downpayment; that insufficient evidence was presented to make a finding that Bermudez told Houston that Shipley had qualified for the mortgage loan; that insufficient evidence was presented to find any of the Respondents advised Shipley to present false information on his mortgage loan application; that the evidence is insufficient to find Bermudez entered into a lease agreement on behalf of Houston without the latter's knowledge and consent; that the evidence is clear that Bermudez acted as the broker without the benefit of a license in renting Houston's property: that Brett C. Muscatell failed to supervise and control the activities of Bermudez curing the contract preparations between Houston and Shipley; and that this one transaction is not enough to establish a course of conduct or practices that show Respondents may not safely be entrusted with the property or money of investors. It is

Recommended that the license of Melvin Bermudez be suspended for a period of six months and that Brett C. Muscatell and Thomas M. Cottrell be issued letters of reprimand.

Entered this 8th day of October, 1984, in 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 8th day of October, 1984.

COPIES FURNISHED:

Fred Langford, Esquire

Florida Real Estate Commission

P.O. Box 1900

Orlando, Florida 32802

Maxwell G. Battle, Esquire and Thomas E. Henderson, Esquire

P.O. Box 2150

Tampa, Florida 33601

Harold Huff Executive Director

Division of Real Estate

400 W. Robinson Street Orlando, Florida 32801

Docket for Case No: 83-003757

Orders for Case No: 83-003757