STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 87-1422

) ALEXANDER ALEXANDER, JR., )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the above matter was heard before the Division of Administrative Hearings by its duly designated Hearing Officer, Donald R. Alexander, on November 10, 1987 in West Palm Beach, Florida.

APPEARANCES

For Petitioner: James H. Gillis, Esquire

Post Office Box 1900 Orlando, Florida 32802

For Respondent: Christopher M. Larmoyeux, Esquire

Post Office Drawer 3626

West Palm Beach, Florida 33402-3626 BACKGROUND

In a two-count administrative complaint filed on February 26, 1987, petitioner, Department of Professional Regulation, Division of Real Estate, has charged that respondent, Alexander Alexander, Jr., licensed as a real estate salesman, had violated Subsections 475.25(1)(b) and (k), Florida Statutes (1985). It generally is alleged that in January 1986, respondent, while employed by Earl A. Hollis, Inc., a Palm Beach real estate firm, presented an offer from a prospective buyer to the listing broker to buy certain residential property for $1,300,000, and misrepresented to the listing broker that a $10,000 deposit was being held by his firm. It is alleged further that after a counteroffer of $1,650,000 was made and accepted by the buyer, a check in the amount of $165,000 was given by the buyer to respondent but was not deposited by him until four days later. After receiving this deposit, respondent also allegedly made representations to the listing broker that he now had $175,000 on deposit at his firm when in fact he did not. Finally, it is alleged that on February 6, 1986, the listing broker telephoned the purchaser's bank and learned that the purchaser had stopped payment on the $165,000 check and that no money was then in Earl Hollis' trust account for this transaction. According to the complaint, the foregoing conduct violated Subsection 475.25(1)(k) in that respondent failed to deposit trust funds with his employer (Count I) and that respondent was guilty of fraud, misrepresentation, concealment, false promises,

false pretenses, dishonest dealing by trick, scheme or device, culpable negligence and breach of trust in a business transaction within the meaning of Subsection 475.25(1)(b) [Count II].

Respondent disputed the above allegations and requested a formal hearing pursuant to Subsection 120.57(1), Florida Statutes (Supp. 1986). The matter was referred by petitioner to the Division of Administrative Hearings on April 2, 1987, with a request that a Hearing Officer be assigned to conduct a formal hearing. By notice of hearing dated April 20, 1987, the final hearing was scheduled on June 2, 1987, in West Palm Beach, Florida. At the request of the parties, the matter was continued while a stipulation was presented to the Division of Real Estate. When the stipulation was not approved, the matter was rescheduled to November 10, 1987, at the same location.

At final hearing, petitioner presented the testimony of respondent and Deborah M. Clark and offered petitioner's exhibits 1-7. All exhibits were received in evidence. Respondent testified on his own behalf, presented the testimony of Linda O'Connell, and offered respondent's exhibits 1-11. All exhibits were received in evidence. In addition, the undersigned took official notice of Rules 21V-14.009 and 21V-14.011, Florida Administrative Code (1987), Chapter 120, Florida Statutes (1985), and those statutes cited in the administrative complaint.

The transcript of hearing was filed on December 7, 1987. Proposed findings of fact and conclusions of law were filed by respondent and petitioner on December 10 and 16, 1987, respectively. A ruling on each proposed finding has been made in the Appendix attached to this Recommended Order.

The issue is whether respondent's real estate salesman license should be disciplined for the reasons set forth in the administrative complaint.

Based upon all of the evidence, the following findings of fact are determined:

FINDINGS OF FACT

1. At all times relevant hereto, respondent, Alexander Alexander, Jr., held real estate salesman license number 0000747 issued by petitioner, Department of Professional Regulation, Division of Real Estate (Division). He has been licensed by the Division since 1971. He has worked for Earl Hollis, Inc., a Palm Beach realty firm, since 1980. Respondent has never been the subject of disciplinary action prior to the filing of this complaint.

   
   

2. The administrative complaint alleges that respondent failed to deposit in his employer's trust account certain funds received from a prospective purchaser in conjunction with a real estate transaction handled by respondent in early 1986, and that respondent made false representations to the listing broker during the course of his dealings.

   
   

3. The transaction in question had its origins in late 1985 when Linda O'Connell, a well-to-do housewife from Dallas, Texas, contacted respondent and requested his services in locating a Palm Beach County residential property adjacent to the ocean or intracoastal waterway.

   
   

4. After a one month search, respondent located a waterfront property at 2020 South Ocean Boulevard in Manalapan, Florida. The property was a large home fronting the ocean on one side and the intracoastal waterway on the other. The

   house was then owned by Kudu Shipping Corporation, S.A. (Kudu), an entity with offices in London, England. When the property was first listed, the asking price was $2,300,000. By now, this price had dropped to $1,750,000.

   
   

5. Merrill Lynch Realty (MLR), a real estate firm in Palm Beach, had obtained an exclusive one-year listing on the property for calendar year 1985. This meant the property could be shown only in the presence of a sales representative of that firm. MLR's associate manager, Deborah M. Clark, was the firm's contact person for parties interested in inspecting and making offers on the house. Although the exclusive listing expired on January 1, 1986, it was renewed by Clark about thirty days later for another year.

   
   

6. On January 14, 1986, Linda O'Connell and her husband, Tom, in the presence of respondent and Clark, inspected the house in question. During the course of the inspection Clark mentioned to the O'Connells that, in light of other offers she had received, she did not think the seller would make any needed repairs or agree to owner financing. However, because the property was in disrepair, Tom O'Connell did not think $1,750,000 was a fair asking price. Linda O'Connell liked the home and requested that respondent prepare an offer in the amount of $1,300,000 with financing and inspection contingencies. She also gave respondent a check in the amount of $10,000 but specifically asked that respondent not deposit the check until she was sure Kudu was serious about accepting her offer. It was her intention that respondent merely hold the check as evidence of "good faith," and if Kudu expressed interest in the offer, she would then use the $10,000 as a part of the ten percent earnest money deposit required by the contract. According to respondent, O'Connell's instructions were not "unusual" and were occasionally made by customers on large transactions. In contrast, checks were never held by MLR, and a contract would not be presented until the check was given to the firm for immediate deposit in its trust account. In any event, when he accepted the check, respondent considered it to be "an earnest money deposit." The offer was prepared on the standard real estate contract form, was dated January 14, 1986, and listed only Linda O'Connell (but not her husband) as buyer. It contained a notation that Earl Hollis, Inc. would hold a ten percent deposit, or $130,000, in escrow, with the following explanation: "$10,000 rec'd 1/14/86; balance of $120,000 payable upon acceptance of contract." It also contained contingency clauses for O'Connell to obtain a $1,040,000 mortgage for a term of fifteen years and for the seller to repair any deficiencies found in the seawall, roof, or electrical and plumbing systems.

   
   

7. After preparing the offer, and pursuant to Clark's request, respondent carried the original contract and a copy of O'Connell's check to Clark on January 15. Consistent with O'Connell's instructions, respondent retained the original check in his office file and did not give it to his employer for deposit in the firm's escrow account. Other than advising Clark that he had a

   $10,000 check from O'Connell, there were no further conversations by the two concerning the deposit. Respondent did not tell Clark that the $10,000 check had not been deposited. Even so, there was no intent on the part of respondent to deceive or trick the seller or to conceal any material matters.

   
   

8. Clark mailed Kudu the offer on January 15. On January 24, she received by return mail the contract from Kudu. The contract carried an illegible signature of a Kudu principal, and had been amended by increasing the selling price from $1,300,000 to $1,650,000 and providing that the owner would not authorize any financing on the house or make needed repairs. Because the sellers had increased the selling price and rejected the contingencies, Clark "guessed" the O'Connells' original offer had been rejected.

9. After respondent was advised by Clark of this

   counteroffer, he relayed the information to the O'Connells. Because Tom knew his wife wanted the house, he agreed to up the price to $1,500,000. Respondent telephoned this figure to Clark. During the course of their conversation, Clark told respondent she had just received a full price offer with no contingencies from another interested buyer, Omnitek Intertrade Corporation (Omnitek), a Fort Worth, Texas firm. Believing that the house might be sold to another buyer, Linda O'Connell advised respondent around noon on Saturday, January 25, that she would accept Kudu's counteroffer of $1,650,000 with no contingencies. Linda and respondent met at the West Palm Beach airport the same day where she executed the contract and gave respondent a check in the amount of $165,000. However, she asked that he hold it for two or three days so that she could return to Dallas and transfer funds into the bank account on which the check was drawn.

   At the same time, she asked for and received her original $10,000 check which had been held by respondent but never deposited. Since it was a Saturday when the two met, respondent could not give the second check to his employer until the following Monday, January 27. This was because Gloria More was the only person in Earl Hollis, Inc. who could make deposits and she did not work on weekends. Further, the banks were closed. Respondent held the check until either Monday or early Tuesday morning and then gave it to More who deposited it in the firm's trust account on Tuesday, January 28. This is confirmed by the firm's deposit slip, which reflects the check was deposited in the bank on January 28.

   
   

10. That same weekend respondent carried the contract and a copy of the

    $165,000 check to MLR. Since Clark was not there, respondent simply left the documents at her office. However, on Monday he telephoned Clark and told her he was "holding" a $165,000 check for the transaction. There was no representation by respondent, either express or implied, that Earl Hollis, Inc. had $175,000 in its trust account for this transaction.

    
    

11. By now Mr. O'Connell was having second thoughts about paying

    $1,650,000 for the house and suspected he may have been snookered into raising his offer by Clark's vague reference to another pending full-price contract.

    These suspicions may have been well-founded since it turned out the Omnitek contract was not for the full price of $1,750,000, but was for $50,000 less, and had some standard contingencies. It also turned out that when the O'Connells inspected the property on January 14, contrary to Clark's representations, she had not yet received any written offers on the house. Mr. O'Connell accordingly requested a copy of the other so-called "full offer" contract from MLR. After having no luck, he wrote the president of Merrill Lynch stating he would not be bound by his wife's offer unless he was given information regarding the so- called "full offer" contract. On Wednesday, January 29, Linda O'Connell directed her bank to stop payment on the $165,000 check. The check was later returned to Earl Hollis, Inc. with a notation of "Insufficient Funds." 1/ For the first time, respondent and his employer learned of O'Connell's stop-payment order. There is no question that, had the O'Connells followed through with the sale, they had sufficient assets to cover the check and buy the house.

    
    

12. On February 6, an MLR secretary telephoned the Texas bank on which the

    $165,000 check had been drawn. The firm learned that a stop-payment order had been placed on the check. Clark then telephoned respondent to give him this information. Clark later filed a complaint against respondent with the Division charging that respondent had failed to deposit the initial $10,000 deposit.

    This prompted the initiation of this proceeding. The Kudu house was eventually sold to another buyer for $1,315,000.

    CONCLUSIONS OF LAW

    
    

13. The Division of Administrative Hearings has jurisdiction of the subject matter and the parties thereto pursuant to Subsection 120.57(1), Florida Statutes (Supp. 1986).

    
    

14. Respondent is charged with violating Section 475.25, Florida Statutes (1985) in two respects. As is relevant hereto, Subsection (1) thereof authorizes the Division to discipline a licensee if the licensee:

    
    

    * * *

    (b) 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; ...

    * * *

    (k) ... has failed, if a salesman, to immediately place with his registered employer any money, fund, deposit, check, or draft entrusted to him by any person dealing with him as agent of his registered employer. The commission shall establish rules to provide for records to be maintained by the broker and the manner in which such deposits shall be made.

    * * *

    
    

    It is charged that respondent violated both of the above proscriptions, and by doing so, is subject to disciplinary action against his license. Because respondent suffers the risk of losing his license, the agency must prove its allegations by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).

    
    

15. Initially, a brief comment is necessary as to petitioner's contention in its proposed order that respondent was actually an agent of the seller, and that by failing to disclose his agency relationship with Linda O'Connell to all parties, he is guilty of concealment, misrepresentation and breach of trust. 2/ Even if this statement of the law is true, respondent has not been charged with these violations, and they are accordingly deemed to be irrelevant. 3/

    
    

16. The evidence is clear and convincing that respondent failed to deliver the $10,000 check to his employer as required by Subsection 475.25(1)(k), Florida Statutes (1985). However, respondent suggests the check was not a deposit, and even if it was, he could not violate his client's instructions that he hold (and not deposit) the check. To dispel this contention, it is necessary to refer to Rule 21V-14.009, Florida Administrative Code (1987). It provides that:

    
    

    Every real estate salesman who receives any deposit, as defined above, shall immediately, at the first opportunity, pay over or deliver the same to the broker, or employer, under whom he shall be licensed as a salesman.

    A deposit is defined in Rule 21V-14.008(1)(a), Florida Administrative Code (1987), as follows:

    
    

    (1)(a) A "deposit" is a sum of money, or its equivalent, delivered to a real estate broker or salesman, as earnest money, or a payment, or a part payment, in connection with any real estate transaction named or described in Section 475.01(3), Florida Statutes, or for the purpose of obtaining satisfaction, release, or assignment of mortgages, or quit claim or other deeds

    deemed necessary or desirable in acquiring or perfecting the title to real estate, or assembling interest therein, or such sum delivered in escrow, trust or on condition, in connection with any transaction conducted, or being conducted, by such broker or salesman within the purview of Chapter 475, Florida Statutes.

    
    

    Therefore, if the $10,000 was "a sum of money ... delivered to (respondent) as earnest money, or a payment, or a part payment, in connection with any real estate transaction," respondent was obligated to "immediately ... pay over or deliver the same to (his) broker." Since the record reflects respondent considered the check to be an earnest money deposit, 4/ it is concluded that the

    $10,000 check was a "deposit" within the meaning of the rule and should have been promptly delivered to the broker. 5/ Because he failed to do this, respondent violated Subsection 475.25(1)(k), Florida Statutes (1985), as charged in Count I. In reaching this conclusion, the undersigned has rejected respondent's argument that by placing the check in his office file, respondent had "delivered" the deposit to his employer within the meaning of the law.

    
    

17. The complaint does not clearly charge respondent with failing to promptly deposit the $165,000 check. Nonetheless, if it was intended to do so, it is concluded that the evidence does not support a conclusion that a similar violation occurred with respect to the $165,000 check. In that case, respondent gave the check to his employer "at the first opportunity" (the first business day after receiving same), and it was thereafter promptly deposited in the firm's trust account.

    
    

18. Count II of the complaint alleges that respondent's conduct forms the basis for finding respondent guilty of the nine proscribed activities in Subsection 475.25(1)(b), Florida Statutes (1985). As clarified by petitioner's post-hearing filing, but tempered by the four corners of the complaint, 6/ petitioner contends respondent is guilty of concealment and misrepresentation for failing to tell Clark and the seller of his agreement with O'Connell to hold but not deposit the $10,000 check and for misrepresenting to MLR and the seller that his employer had $175,000 on deposit. Taking the last charge first, the evidence discloses that respondent did not make a representation, either express or implied, that Earl A. Hollis, Inc. had $175,000 on deposit in its trust account. Indeed, the contract itself stated there was a ten percent deposit ($165,000) given by the buyer, and this representation was later conveyed by respondent to Clark in a telephone conversation on Monday, January 27, 1986. This was not a misrepresentation since O'Connell's check was given to the employer on January 27 and deposited the following day as required by Rule 21V-

    14.009, Florida Administrative Code (1987), and Subsection 475.25(1)(k), Florida Statutes (1985). Because the factual allegation which underpins this violation has not been established, this portion of Count II must fail. 7/ Finally, it is true that respondent dice not disclose to MLR the fact that he was holding the

    $10,000 check pursuant to his client's instructions. Even so, there was no wrongful intent on the part of respondent to trick or deceive the seller or to withhold material facts. This being so, no concealment or misrepresentation within the meaning of the law has occurred. Morris v. Department of Professional Regulation, 474 So.2d 841 (Fla. 5th DCA 1985); Cf. Blume v.

    Department of Professional Regulation, 489 So.2d 880 (agency must prove building contractor intended to evade provisions of the law in order to establish statutory violation under Chapter 489).

    
    

19. Because only one charge has been proven, and respondent's conduct appears to be based on his misunderstanding of the law, a $500 fine is an appropriate penalty.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent be found guilty of violating Subsection

475.25(1)(k), Florida Statutes (1985), as alleged in Count I, and that he pay a

$500 fine.

DONE AND ORDERED this 22nd day of December, 1987, in Tallahassee, Leon County, Florida.

DONALD R. ALEXANDER

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 22nd day of December, 1987.

ENDNOTES

1/ In a letter dated February 22, 1986, the bank acknowledged it was in error by stating the account had insufficient funds and that it should have refused payment based on the stop-payment order.

2/ The support for the proposition regarding agency and disclosure comes from language in a dissenting opinion in Ivie v. Harden, 510 So.2d 1257 (Fla. 1st DCA 1987), a case not involving disciplinary action against a licensee, and excerpts from a textbook which was not offered in evidence or officially noticed.

3/ A review of the factual allegations in the complaint reveals no mention whatever of this alleged agency relationship, or that respondent failed to disclose the same to all parties.

4/ If the $10,000 was not a deposit, then respondent could not have properly represented to MLR and Kudu, as the contract did, that he had received a $10,000 cash deposit on January 14, 1986.

5/ This is not a situation like that present in Rivard v. McCoy, 212 So.2d 672 (Fla. 1st DCA 1968), where both the buyer and seller agreed that a $300 deposit would not be placed in the broker's escrow account until after the two "reached an agreement." In the case sub judice, there was no such agreement since the seller was unaware of O'Connell's instructions.

6/ Although petitioner disagrees, there is no factual allegation in the complaint that respondent was instructed by O'Connell to hold the $165,000 check for a few days before depositing it and that he failed to disclose this to the seller. The charge that respondent failed to disclose an agency relationship with O'Connell has been previously disposed of in paragraph 3.

7/ The allegation in paragraph 8 of the complaint, which underlies the charge, reads as follows: "The Respondent informed Merrill Lynch that there was now

$175,000 on deposit." (Emphasis added).

APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-1422

Petitioner:

1. Covered in background.

2. Covered in finding of fact l.

3. Covered in finding of fact 1.

4. Covered in finding of fact 7.

5. Rejected as being irrelevant.

6. Covered in finding of fact 6.

7. Covered in finding of fact 7.

8. Covered in finding of fact 8.

9. Covered in finding of fact 9.

10. Covered in finding of fact 9.

11. Covered in finding of fact 9 except that the correct deposit date is January 28, rather than January 29, as reflected on respondent's exhibit 5.

12. Covered in finding of fact 11.

13. Rejected as being irrelevant.

14. Rejected as being irrelevant.

15. Rejected as being irrelevant.

Respondent:

1. Covered in background.

2. Covered in background.

3. Covered in findings of fact 2, 3, 4, 6 and 7.

4. Covered in finding of fact 9.

5. Covered in background and finding of fact 5.

6. Rejected as being a conclusion of law or contrary to the evidence.

7. The first sentence is rejected as merely being a recitation of a rule. The remainder has been rejected as being either a conclusion of law or argument of counsel.

8. Used to the extent that respondent placed the check in his office files but not those of his employer.

9. Rejected as being argument.

10. Rejected as being argument.

11. Covered in finding of fact 9.

12. Rejected as being argument.

13. Covered in finding of fact 9.

14. Partially covered in finding of fact 11. The remainder is rejected as being irrelevant or argument by counsel.

15. Covered in finding of fact 9.

16. Partially covered in finding of fact 9. The remainder is rejected as being argument of counsel.

17. Rejected as being a conclusion of law.

Respondent filed seventeen unnumbered paragraphs containing both proposed findings of fact and conclusions of law. They have been dealt with above in sequential order.

COPIES FURNISHED:

James H. Gillis, Esquire Post Office Box 1900 Orlando, Florida 32802

Christopher M. Larmoyeux, Esquire Post Office Drawer 3626

West Palm Beach, Florida 33402-3626

Ms. Darlene F. Keller Executive Director Division of Real Estate Post Officer Box 1900 Orlando, Florida 32802

William O'Neil, III, Esquire General Counsel

Department of Professional Regulation

130 North Monroe Street Tallahassee, Florida 32399-0750

Docket for Case No: 87-001422

Orders for Case No: 87-001422