STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL ) REGULATION, DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 85-1719

)

MICHAEL J. JAMES, )

)

Respondent. )

)

RECOMMENDED ORDER

The final hearing in this case was held in Orlando on January 17, 1986. The parties requested until February 19, 1986, in which to file proposed recommended orders. No proposed recommended orders were filed as of April 14, 1986.

APPEARANCES

For Petitioner: Arthur R. Shell, Jr., Esquire

Department of Professional Regulation

400 W. Robinson Street Orlando, Florida 32801

For Respondent: Michael J. James

Post Office Box 3801 Longwood, Florida 32750

ISSUE

The issue in this case is whether the Florida Real Estate Commission should discipline Respondent, Michael J. James (James), for the reasons set forth in the Administrative Complaint filed against him by Petitioner, Department of Professional Regulation, Division of Real Estate (Department). Count I of the Administrative Complaint alleges that James is guilty of fraud, misrepresentation, concealment, false promises, false pretense, dishonest dealing by trick, scheme or device, culpable negligence and breach of trust in a business transaction in violation of Section 475.25(1)(b), Florida

Statutes (1983), in connection with his handling of an escrowed real estate purchase deposit. Count II of the Administrative Complaint alleges that James failed to account and deliver the

$5,000 deposit to the rightful owners in violation of Section 475.25(1)(d), Florida Statutes (1983). Finally, Count III of the Administrative Complaint alleges that James, while licensed as a salesman, operated as a broker or as a salesman for someone not registered as his employing broker in violation of Sections 475.42(1)(b) and 475.25(1)(a), Florida Statutes (1983).

EVIDENTIARY MATTERS

The Department offered in evidence Petitioner's Exhibits 1 through 13, all of which were received in evidence. James offered in evidence Respondent's Exhibits 1 through 6 and 8 through 11. (Respondent's Exhibit 7 was not offered in evidence.) Respondent's Exhibits 2 and 3 were objected to on grounds of irrelevancy. Ruling was reserved, and it is now ruled that Respondent's Exhibits 2 and 3 are admissible.

Therefore, all Respondent's exhibits that were offered in evidence are received in evidence.

FINDINGS OF FACT

1. Respondent, Michael J. James (James), has been at all relevant times a licensed real estate salesman having been issued license number 0361739.

   
   

2. On or about November 6, 1983, James solicited and obtained two $2,500 earnest money deposits from Skarian M. Kakkanatt and K. Thomas Idiculla, as purchasers, who entered into two different sales contract offers to purchase two separate motel properties, one in Kissimmee and the other in Osceola County. The total deposits of $5,000 were placed in the escrow account of International Marketing and Manufacturing Services, Inc. (International), by its registered broker, Harold

   C. Jacobsen, who was also James' registered employing broker.

   
   

3. On or about November 14, 1983, being dissatisfied with the inspection of the financial records of the two motel operations, the purchasers, sent a telegram to International and all interested parties providing notice that the two sales contract offers were cancelled under the terms of the contracts and that all monies deposited by the purchasers should be refunded. On December 8, 1983, the purchasers reiterated their demand for a refund of all deposits by letter to James.

4. Between November 1983 and April 1984, Jacobsen became increasingly seriously ill. To a greater and greater extent, James assumed Jacobsen's responsibilities to International under the increasingly general supervision of Jacobsen. Jacobsen and James agreed that International was entitled to the deposit under the contracts as brokerage commission, rationalizing that the purchasers were not entitled to cancel the contracts because their two checks in the amount of $22,500 each for additional deposits were returned unpaid because of insufficient funds. Jacobsen and James therefore agreed to disburse the $5,000 from escrow and did so over the course of time through January 1984.

   
   

5. The contracts negotiated by James on behalf of International for the purchase of the two motel properties clearly entitled the purchasers to inspect the financial records of the two motel operations and to cancel the contracts on or before November 15, 1983. Payment of the deposits was not a condition precedent to their entitlement to cancel. Having exercised their option to cancel, the purchasers were no longer obligated to make any deposits. The contracts having been cancelled, no brokerage commission was due to International.

   
   

6. While Jacobsen was James' employing broker, both c James and Jacobsen worked for International. International, in turn, was wholly owned by American Paper Company, which was wholly owned by James. Under Jacobsen's employment contract with International, Jacobsen was entitled to only 2% of any broker's commission earned by James. The balance of such broker's commissions would go to International or, in effect, to James. James, therefore, had a greater pecuniary interest in the $5,000 deposit than Jacobsen.

   
   

7. Between November 1983 and April 1984, James hoped the purchasers would not vigorously assert their rights to the

   $5,000 deposit. The purchasers resided in New York, and assertion of their rights was not easy. James obtained from the selling broker a waiver of any interest of the seller or the selling broker to the deposit.

   
   

8. By April 1984, it became evident to James that the purchasers were indeed going to assert their rights to the deposit. Concerned that the escrowed deposit already had been disbursed, James decided to redeposit $5,000 in escrow, using a

   $5,000 broker's commission he had earned on behalf of International on another sale. By this time, Jacobsen was only coming into the office approximately once a week to sign checks and look over sales contracts and bank records. By this time,

   James was handling the matter of the deposit on his own, with Jacobsen's consent and trust.

   
   

9. On May 8, 1984, James notified the Department of Professional Regulation that a dispute had arisen with the purchasers concerning the $5,000 deposit but that James would be filing an interpleader action on behalf of International according to the instructions of Jacobsen.

   
   

10. On or about May 14, 1984, James filed against the purchasers a complaint for interpleader in the Osceola County Circuit Court on behalf of International seeking half of the

    $5,000 deposit. James signed the complaint and used a signature stamp to ascribe Jacobsen's signature as broker for International. Jacobsen had authorized James to use the signature stamp in his absence because of his illness. James had the $5,000 deposit transferred into the depository of the Circuit Court in and for Osceola County, Florida, when the complaint was filed.

    
    

11. On June 11, 1984, Jacobsen died.

    
    

12. On June 23, 1984, James filed a voluntary dismissal of the interpleader action, in part because of Jacobsen's death. The clerk of the court returned the $5,000 deposit to International on June 22, 1984. On June 25, 1984, James reopened International's escrow account at the Community National Bank in Kissimmee by depositing the 55,000 in that account.

    
    

13. On or about July 11, 1984, James requested an escrow disbursement order from the Department of Professional Regulation regarding the disposition of the $5,000.

    
    

14. Between June 25 and July 27, 1984, the Community National Bank deducted amounts from the escrow account to reimburse the bank for overdrafts on James' personal checking account. James complained about this, and some of the amounts were reinstated in the escrow account. However, the bank requested that James remove all accounts. On July 27, 1984, James withdrew the balance of the account and redeposited the

    $4,809.48 balance in International's real estate escrow account with the Barnett Bank of Kissimmee on or about August 31, 1984. However, James soon began writing checks on the account, and by September 10, 1984, the balance was down to $2,775.

    
    

15. On September 10, 1984, James reiterated his request to

    the Department for an escrow disbursement order and indicated that he was scheduled to meet with one of the purchasers to resolve the deposit dispute. On September 12, 1984, the Florida Real Estate Commission advised James that it would not be issuing an escrow disbursement order.

    
    

16. On September 24, 1984, the Department's investigator, Charles E. Kimmig, Sr., wrote James to inquire whether a settlement had been reached with the purchasers. Respondent did not reply to Kimmig's letter.

    
    

17. By October 3, 1984, James had spent all but $298.11 of the escrow account. James never has returned to the purchasers any of the $5,000 deposit to which they are entitled.

    
    

    CONCLUSIONS OF LAW

    
    

18. Section 475.25(1), Florida Statutes (1983), provides in pertinent part:

    
    

    1. The commission may deny an application for licensure, registration, or permit, or renewal thereof may suspend a license or , permit for a period not exceeding 10 years; may revoke a license or permit may impose an administrative fine not to exceed $1,000 for each count or separate offense; and may issue a reprimand, or any or all of the foregoing, if it finds that the licensee, permittee, or applicant:

       
       

       1. Has violated any provision of s. 475.42 or of S. 455.227(1).

          
          

       2. Has been guilty of fraud, misrepresentation, concealment, false promises, false pretenses, dishonesty 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 committed an overt act in furtherance of such intent, design, or scheme. It is 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.

          
          

          * * *

          
          

          (d) Has failed to account or deliver to any person, including a licensee under this chapter, at the time which has been agreed upon or is required by law or, in the absence of a fixed time, upon demand of the person/ entitled to such accounting and delivery, any personal property such as money, fund, deposit, check, draft, abstract of title, mortgage, conveyance, lease, or other document or thing of value, including a share of a real estate commission, or any secret or illegal profit, or any divisible share or portion thereof, which has come into his hands and which is not his property or which he is not in law or equity entitled to retain under the circumstances. However, if the licensee, in good faith, entertains doubt as to what person is entitled to the accounting and delivery of the escrowed property, or if conflicting demands have been made upon him for the escrowed property, which property he still maintains in his escrow or trust account, the licensee shall promptly notify the commission of such doubts or conflicting demands and shall promptly:

          
          

          1. Request that the commission issue an escrow disbursement order determining who is entitled to the escrowed property;

          2. With the consent of all parties, submit the matter to arbitration; or

             
             

          3. By interpleader or otherwise, seek adjudication of the matter by a court.

          
          

          If the licensee promptly employs one of the escape procedures contained herein, and if he abides by the order or judgment resulting therefrom, no administrative complaint may be filed against the licensee for failure to account for, deliver, or maintain the escrow d property.

          
          

          * * *

          
          

19. Section 475.42(1)(b), Florida Statutes (1983), provides: "No person licensed as a salesman shall operate as a broker or operate as a salesman for any person not registered as his employer."

    
    

20. Regarding Section 475.25(1)(b), James is guilty at least of culpable negligence and breach of trust in connection with the transaction described in the Findings Of Fact. Both James and Jacobsen should have recognized the purchasers' entitlement to the return of the $5,000 deposit under the terms of the contracts. Therefore, Count I of the Administrative Complaint was proved by the evidence.

    
    

21. Regarding Section 475.25(1)(d), as stated in the immediately preceding paragraph, James failed to account or deliver to the purchasers the $5,000 deposit. Although the

    $5,000 deposit was made to International, James had as much to say about the disposition of those funds as Jacobsen, or more, due to James' practical ownership of International through the American Paper Company and control of International as a result of Jacobsen's illness. The deposit was due to be returned to the purchasers upon cancellation of the contracts on or about' November 14, 1983. The deposit still has not been returned.

    
    

22. James, on behalf of International, attempted to use several of the "escape procedures" contained in Section 475.25(1)(d). However, James' attempt to escape fell short for several reasons. First, it cannot be concluded that James entertained good faith doubt as to the purchasers' entitlement to the $5,000 deposit. Second, James had International dismiss its interpleader action before the matter could be adjudicated

    by the court. Third, James did not abide by the determination of the Florida Real Estate Commission that it would not be entering an escrow disbursement order authorizing disbursement to International.

    
    

23. James also contends that the $5,000 redeposited in one of International's escrow accounts on or about April 10, 1984, actually was James' personal money to which the purchasers Petitioners were not entitled. This defense cannot prevail for several reasons. First, James did not prove that the $5,000 redeposited in the escrow account on or about April 10, 1984, was James' personal money as opposed to brokerage commissions paid first to International before James received his personal compensation as salesman. Second, the redeposit of the $5,000 was done in recognition of the error James and Jacobsen made on behalf of International to disburse those funds from the escrow account earlier. Having redeposited the funds to correct an earlier error he made on behalf of International, James cannot now claim that the redeposit insulates him from responsibility. Therefore, Count II of the Administrative Complaint was proved.

    
    

24. Regarding Section 475.42(1)(b), whether James operated as a broker depends upon the definition of "broker." Section 475.01(1)(c), Florida Statutes (1983), provides:

"Broker" means a person who, for another, and for a compensation or valuable consideration directly or indirectly paid or promised, expressly or impliedly, or with an intent to collect or receive a compensation or valuable consideration therefor, appraises, auctions, sells, exchanges, buys, rents, or offers, attempts or agrees to appraise, auction, or negotiate the sale, exchange, purchase, or rental of business enterprises or business opportunities or any real property or any interest in or concerning the same, including mineral rights or leases, or who advertises or

holds out to the public by any oral or printed solicitation or representation that he is engaged in the business of appraising, auctioning, buying, selling, exchanging, leasing, or renting business enterprises or business opportunities real property of others or interests therein, including mineral rights, or who takes any part in the

procuring of sellers, purchasers, lessors, or lessees of business enterprises or business opportunities or the real property of another, or leases, or interest therein, including mineral rights, or who directs or assists in the procuring of prospects or in the negotiation or closing of any transaction which does, or is calculated to, result in a sale, exchange, or leasing thereof, and who receives, expects, or is promised any compensation or valuable consideration, directly or indirectly therefor; and all persons who advertise rental property information or lists. The term "broker" also includes any person who is a partner, officer, or director of a partnership or corporation which acts as a broker.

It was not proved that any of the broker activities set out in the statute were done by James other than under the direction, control, or management of Jacobsen. Later, as Jacobsen became more seriously ill, and certainly after his death, James handled the matter of the $5,000 deposit in dispute in this case entirely on his own on behalf of International. However, those activities do not come within the definition of brokering under the statute. Therefore, Count III of the Administrative Complaint was not proved.

RECOMMENDATION

Based upon the foregoing Findings Of Fact and Conclusions Of Law, it is recommended that the Florida Real Estate Commission hold Respondent, Michael J. James, guilty of Counts I and II of the Administrative Complaint in this case and revoke his real estate salesman's license, to be automatically reinstated after a one year suspension if James makes restitution to Skarian M. Kakkanatt and K. Thomas Idiculla within one year in the amount of $5,000 plus simple interest at the rate of 12% per year from November 14, 1983.

RECOMMENDED this 18th day of April, 1986, in Tallahassee, Florida.

J. LAWRENCE JOHNSTON Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 18th day of April, 1986.

COPIES FURNISHED:

Arthur R. Shell, Esq. Department of Professional

Regulation

400 W. Robinson Street Orlando, Florida 32801

Michael J. James

P. O. Box 3801 Longwood, Florida 32750

Harold Huff, Executive Director Division of Real Estate Department of Professional

Regulation

400 W. Robinson Street Orlando, Florida 32801

Salvatore A. Carpino, Esquire General Counsel

Department of Professional Regulation

130 North Monroe Street Tallahassee, Florida 32301

Fred Roche, Secretary Department of Professional

Regulation

130 North Monroe Street Tallahassee, Florida 32301

Docket for Case No: 85-001719

Orders for Case No: 85-001719