FRANKLIN, ELLIOT ROSEN and ) ELLIOT ROSEN REALTY, INC., )
)
Respondents. )
)
RECOMMENDED ORDER
Pursuant to notice a formal hearing was held in the above case before the Division of Administrative Hearings by its duly designated Hearing Officers Donald R. Alexander, on April 15, 1985, in Miami, Florida.
APPEARANCES
For Petitioner: Arthur R. Shell, Jr., Esquire
Post Office Box 1900 Orlando, Florida 32802
For Respondents: Wayne H. Rassner, Esquire Stanleigh M. Plaza 7000, Suite 500
and Franklin 7000 Southwest 62nd Avenue Maria C. Franklin South Miami, Florida 33143
For Respondents: Richard W. Aschenbrenner, Esquire Elliot Rosen and Suite 602
Elliot Rosen 9500 South Dadeland Boulevard Realty, Inc. Miami Florida 33156-2889
BACKGROUND
By administrative complaint filed on November 14, 1984, petitioner, Department of Professional Regulation, Division of Real Estates has charged that respondents, Stanleigh M. Franklin, Maria C. Franklin, Elliot Rosen and Elliot Rosen Realty, Inc., all licensed by petitioner, had violated Subsection 475.25(1)(b), Florida Statutes. 1/ Generally, petitioner has alleged that respondents, Maria C. and Stanleigh M. Franklin, both real estate salesmen employed by respondents, Elliot Rosen and Elliot Rosen Realty, Inc., obtained a sales contract on certain property in Miami, Florida, listed in Rosen's firms that the Franklins misrepresented to prospective buyers the type of financing available on the property, that the buyers executed the contract and made a substantial deposit based upon these misrepresentations, that the contract was later terminated and cancelled by the buyers, and that despite conflicting
demands by both the buyers and sellers, respondents have failed to return the deposit to either party. In so doing, petitioner alleges this constitutes frauds misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme on device, culpable negligence, and breach of trust in a business transaction within the meaning of Subsection 475.25(1)(b).
Respondents disputed the above allegations and requested a formal hearing pursuant to Subsection 120.57(1), Florida Statutes. The matter was referred to the Division of Administrative Hearings by petitioner on December 17, 1984, with a request that a Hearing Officer be assigned to conduct a formal hearing. By notice of hearing dated January 23, 1985, the final hearing was scheduled for April 15, 1985, in Miami, Florida.
At final hearing petitioner presented the testimony of Maria Yanes, Joseph Yanes, Lisa Wilson and Robert W. Bush and offered petitioner's exhibits 1-7.
All were received in evidence. Respondents Stanleigh M. Franklin and Elliot Rosen testified on their own behalf. Rosen also presented the testimony of Richard Miller and offered respondents' exhibits 1-7 which were received in evidence.
The transcripts of hearing (two volumes) were filed on April 24, 1985.
Proposed findings of fact and conclusions of law were filed by respondents Rosen and Rosen Realty on May 15, 1985. These were adopted by respondents Stanleigh and Maria Franklin on May 23, 1985. None were filed by petitioner. A ruling on each proposed finding of fact has been made either directly or indirectly in this Recommended Order, except where such proposed findings of fact have been rejected as subordinate, cumulative, or immaterial or unnecessary.
At issue herein is whether respondents' licenses as real estate brokers and salesmen should be disciplined for the alleged violations set forth in the administrative complaint.
FINDINGS OF FACT
At all times relevant hereto, respondent, Elliot Rosen Realty, Inc. was a licensed corporate real estate broker having been issued license number 0218821 by petitioner, Department of Professional Regulation Division of Real Estate. Respondent Elliot Rosen held real estate broker's license number 0075258 issued by petitioner and was the qualifying officer of Elliot Rosen Realty, Inc. Respondents Stanleigh M. Franklin and Maria C. Franklin were licensed real estate salesmen in Rosen's office having been issued license numbers 0318042 and 0370308, respectively. The firm is located at 8120 Coral Way, Miami, Florida 33155.
On an undisclosed date Robert W. and Carol A. Bush listed for sale with Elliot Rosen Realty, Inc., a residential property located at 8295 Southwest 153rd Street, Miami. The initial asking price was $119,000, but this was later reduced to $112,000.
In April 1984, Joseph and Maria Yanes were in the process of selling their home and were consequently seeking to purchase a new residence. Both are educated persons, and Mr. Yanes has a college degree. Mr. Yanes read a real estate advertisement which advertised the Bush's property. They contacted Rosen Realty, Inc. and spoke with Maria Franklin. After inspecting the house with Maria, the Franklins met with the Yanes on April 15, 1985, for the purpose of preparing and executing an offer to purchase the house.
Joseph Yanes made clear to Stanleigh Franklin that his primary concern was obtaining a mortgage with monthly payments that did not exceed $1000 per month. Otherwise, he would not be able to purchase the property. Stanleigh was familiar with a new mortgage loan program offered by a local lender (American International Mortgage Company) known as the "7.5 magnet mortgage" which offered a monthly payment for the first three years at a 7.5 percent interest rate. Stanleigh computed the principal and interest payments under this plan to be
$711.55 per month. When estimated taxes and insurance were added in the total payment came to approximately $850 per month. He also advised that a mortgage insurance premium would be charged each month, which he estimated to be $50 to
$60 per month. This still totaled less than the $960 or $970 which the Yanes stated their existing mortgage to be. The Yanes were told that because of the low interest rate (7.5 percent) during the first 36 months, there would be negative amortization during that period of time. In other words, the principal amount owed would actually increase rather than decrease during the first three years since interest on the note was accruing at a higher rate (13 percent).
Finally, Franklin advised the Yanes that a 5 percent down payment was required with this type of mortgage and that their deposit should equal this amount to qualify for the loan. The Yanes did not indicate any dissatisfaction with this type of financing, or that they did not understand how the plan worked, particularly with respect to the negative amortization. They agreed to make an offer of $107,000 on the property, to give a $500 deposit that day, and an additional $4850 later on which equated to 5 percent of the purchase price. The contract itself made no reference to the 7.5 percent financing, but provided only that the buyers would obtain a new first mortgage for the balance owed on the $107,000 purchase price. Throughout these negotiations, there was no misrepresentation of facts by Franklin concerning the mortgage or amount of deposit required.
The Yanes' offer was quickly presented by the Franklins to the sellers who accepted the offer within the next few days. The Yanes then gave an additional $4850 deposit around May 1 which was deposited in Rosen's escrow account. On May 7, they filed a loan application with American International Mortgage Company and gave a check in the amount of $185 to have an appraisal made and a credit report prepared. At that time, the loan officer explained to Joseph Yanes in detail how the magnet mortgage program worked and that there would be negative amortization under this plan. The meeting lasted for an hour and a half and Yanes did not express surprise at how the mortgage worked, or that he did not understand its concept. An appraisal was then made, and a credit check run on Mr. Yanes. However, the lender was unable to confirm any credit information on Mrs. Yanes because her employer refused to return the employment verification form. On June 20, 1984, the lender sent a denial notice to the Yanes because of its inability to obtain information regarding Mrs. Yanes. The Yanes made no other efforts to obtain financing on the property.
After they executed the contract to purchase, the Yanes engaged counsel in early May to represent them at closing. Their attorney (Lisa Wilson) called all pertinent parties, including the Franklins and Rosen to learn the details of the mortgage. After having the details explained to them again, the Yanes advised counsel that they wished to cancel the contract. On May 23, 1984, Wilson sent a certified letter to Stanleigh Franklin advising that because the financing arrangements had been misrepresented to her clients they were cancelling the contract. She also demanded a return of their deposit plus interest.
Just prior to the receipt of the certified letter, Joseph Yanes also telephoned Stanleigh Franklin and demanded a return of his deposit. This was the first time Franklin suspected the deal had gone awry. Shortly after this, the Yanes contacted petitioner to file a complaint against respondents.
When Mr. Bush learned that the Yanes were not honoring the contract, upon advice of counsel, Bush made a claim on the $5,350 deposit for breach of contract. Faced with conflicting demands for the deposit, Rosen contacted petitioner to determine how the deposit should be disbursed. The matter was eventually referred by petitioner to its local office in Miami for investigation in October 1984. On November 27, 1984, counsel for petitioner advised Rosen that because of the pending complaint of the Yanes, petitioner could not issue an escrow disbursement order. However, he was told of the remaining two alternatives for resolving the dispute prescribed in Subsection 475.25(1)(d), Florida Statutes. A complaint for interpleader was later filed in circuit court by agreement of counsel for the Yanes, Bush, and Rosen. That complaint is still pending.
Rosen, as broker, was never personally involved in the transaction until a complaint with petitioner was filed. He stood to gain no commission on the sale since the Franklins were working on a "100 percent basis" and were to receive the entire commission. Rosen has been licensed for some thirty-one years and has had no prior disciplinary action in all that time.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction of the subject matter and the parties thereto pursuant to Subsection 120.57(1), Florida Statutes.
The complaint alleges that respondents are guilty of frauds misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence, and breach of trust in a business transaction in violation of Subsection 475.25(1)(b), Florida Statutes. This allegation stems from respondents' allegedly improper conduct in the Bush-Yanes transaction.
While petitioner has not explained its theory by way of a post-hearing filing, the statutory violation is apparently based upon the following allegations in the complaint: that the buyers gave a $5,350 deposit only because of a representation by Stanleigh Franklin "that the mortgage company required a full deposit before an application could be processed" (paragraph 10); that Franklin represented the buyers could obtain financing at an interest rate of 7.5 percent for the first three years with payments of $849.63 per month when in fact there was negative amortization and the monthly payments were actually $942.10 (paragraph 11); and that respondents have failed to disburse the deposit to either the buyers or sellers even though both have made a demand (paragraphs 12 and 13).
The evidence discloses that the Franklins fully explained the financing to the Yanes, including the estimated monthly payments and negative amortization feature, that there was no misrepresentation on the part of respondents concerning the same, and that a disbursement of the deposit has not been made since respondent Rosen has properly filed a circuit court action under Subsection 475.25(1)(d) to determine who is entitled to the money. Accordingly, it is concluded that no violation of Subsection 475.25(1)(b) has occurred, and the complaint should be dismissed.
