STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 87-2575

) JAMES E. BLACK and JIM BLACK ) & ASSOCIATES, INC., )

)

Respondent. )

)

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 January 6, 1988, at Tampa, Florida.

APPEARANCES

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

Department of Professional Regulation

400 West Robinson Street Orlando, Florida 32802

For Respondent: Edward C. Adkins, Esquire

Post Office Box 3239 Tampa, Florida 33601-3239

By Administrative Complaint filed March 4, 1987, the Department of Professional Regulation, Division of Real Estate, Petitioner, seeks to revoke, suspend or otherwise discipline the license of James E. Black as a real estate broker and the license of Jim Black and Associates, Inc. (Respondents) as a corporate real estate broker. As grounds therefor it is alleged in some 84 counts that Respondents induced some 12 buyers to enter into contracts with Lawrence Edwin Construction Company, owned by Black, to have homes built on the buyers' lots, that the construction company failed to construct or to complete construction of those homes or to refund deposits to the buyers, and that these acts constitute misrepresentation, fraud, dishonest dealing and culpable negligence in a business transaction in violation of Section 475.25(1)(b), Florida Statutes; failed to account for and deliver a deposit to a party entitled thereto in violation of Section 475.25(1)(d) , Florida Statutes; and failed to maintain trust funds in its real estate brokerage escrow account until disbursement was properly authorized in violation of Section 475.25(1)(k), Florida Statutes. It is also alleged that the Construction Industry Licensing Board suspended the license of James E. Black to practice contracting for 10 years in violation of Section 475.25(1)(e), Florida Statutes; and that Respondents are guilty of a course of conduct or practices that show they are so incompetent, negligent, dishonest or untruthful that the money, property,

transactions and rights of investors may not be safely entrusted to them in violation of Section 475.25(1)(o), Florida Statutes.

At the hearing, Petitioner called 10 of the complaining witnesses shown in the Administrative Complaint, two witnesses from Hillsborough County Building Department, the salesman who negotiated the contracts forming the bases of the complaints, Respondent testified in his own behalf, and 18 exhibits were admitted into evidence.

The parties were given 10 days to submit proposed recommended orders, but none have been received.

FINDINGS OF FACT

1. At all times relevant hereto James E. Black and Jim Black and Associates, Inc. were registered as real estate brokers as alleged.

   
   

2. Various parties, as alleged in the Administrative Complaint, entered into contracts with Lawrence Edwin Construction (Edwin) to have houses built on the buyers lots. All of these individuals (and couples) saw ads in a Tampa paper listing a price for a house to be built on buyer's lot with floor plan shown in the ad with a price below prevailing prices. These people contacted Edwin and entered into contracts negotiated by H. H. Howard, who was hired by the construction company to sell these houses to be built.

   
   

3. James E. Black was general manager at Edwin, and apparently made all final decisions affecting the company, although he claimed no ownership in the company. No evidence was presented to rebut Black's testimony that he owned no stock in Edwin.

   
   

4. Floyd B. Long held a general contractor's license and associated himself with Black and the construction company as the qualifying contractor for the company. Permits for these houses started was obtained under the authority of Long's license.

   
   

5. These contracts entered into were standard form contracts between the buyer and Lawrence Edwin Construction Company, the builder, whereby the latter agreed to build a house pursuant to a given plan on the buyer's lot for a specified sum. The contract provided for the buyer to make a 10% down payment when the contract was executed, 20% of the total price on the pouring of the slab, 40% of total price when the roof is dried in, 25% of total price when kitchen cabinets are installed, and the balance upon substantial completion and acceptance. All payments were payable to Lawrence Edwin Construction Company and generally delivered to Howard who gave them to Black for deposit. No separate bank accounts were established for each house to be built, and no funds received were placed in escrow.

   
   

6. Bruce Carter entered into a contract with Edwin to build a house on Carter's lot for $39,000 (Exhibit 1). Carter made a $500 down payment and a

   $2500 payment to cover items not on standard plan, arranged financing, and one draw in the amount of $1942.75 was also paid. At this time, the house was at the drying in stage and considerably later in progress than Carter had been led to expect. About this time, Carter became dissatisfied, Black was unhappy with the draw made payable to Carter and the construction company, both parties breached the contract, and no further work was done by the builder. Carter was unsuccessful in getting any refund of payments made to the builder.

7. Robert Bowes entered into a contract with Edwin on September 24, 1984, to have a house constructed on his lot at Crystal River to use as a vacation home. The contract was negotiated by Howard, who was given a $200 deposit by Bowes. A few days later, Bowes made a down payment of $1974 expecting construction to start in January 1985. Although Bowes testified he was told by Howard that his down payment would be refunded if the house wasn't built, the standard contract makes no such provision. Construction on this house was never started, and Bowes' request for a refund was not honored.

   
   

8. Roberta Puttie contracted to have Edwin construct a house on her lot, made $200 down payment when the contract was signed on August 24, 1984, and, after being told by Howard the construction would be expedited if additional money was paid, gave Howard an additional $3300 on October 3, 1984. When construction still did not commence, Mrs. Puttie went to the Edwin office where she met Black and told him she wanted construction started or her money back. Black visited Puttie's home adjacent to the site for the construction, had fill dirt brought in, and the crew came out to prepare the foundation, but they had the wrong blue print, and Mrs. Puttie called the county building inspector and had the work stopped before all the footing was dug. By this time, word was spreading that Edwin was not completing homes, and Mrs. Puttie attempted to get her payments returned, but was unsuccessful. No further work was done under this contract.

   
   

9. Peter Rodriguez entered into a contract with Edwin to build a house on his lot, made a $500 down payment and arranged for financing, but work was never commenced under this contract. Inquiry by Rodriguez revealed that no building permit was ever pulled for this house. Ultimately, Rodriguez obtained a general contractor's license and built the house under his license. He released Edwin under the contract, and the company released its subcontractors so they could be used by Rodriguez.

   
   

10. Wilburt and Juanita Hall entered into a contract with Edwin to build a house on their lot in November 1984 for $57,500. They paid $500 down and made subsequent payments of $34,120 before the builder stopped work. The Halls called in another contractor to complete the house at a total cost of some

    $15,000 more than the original contract price.

    
    

11. John and Eleanor Crews entered into a contract on November 27, 1984, with Edwin to build two houses on their lots for $74,200 and a second contract on December 6, 1984, to build one house on their lot for $37,500. Construction was commenced on both houses, and the Crews paid a total of $7500 to the builder before Mr. Crews fired the builder because of mistakes in preparing the footing on one lot, and because the foundation was not true on the lot for the second house. No demand for refund was made by the Crews, but they offered to pay Edwin for work performed.

    
    

12. Dr. Fernandez and wife entered into a contract with Edwin on October 31, 1984 (Exhibit 12) to construct a house on their lot. At the time the contract was signed, Fernandez paid $3610, and, pursuant to the contract provisions, made additional payments of $7220 and $14,440 in January 1985. By supplemental agreement dated June 28, 1985 (Exhibit 13), the builder agreed to complete construction and provide the buyer with an affidavit that all subcontractors had been paid. After nothing further was done on the construction, Fernandez fired the builder and had the house completed by another contractor.

13. Ernest F. Street entered into a contract with Edwin on May 27, 1984 (Exhibit 15) to construct a house on the buyer's lot for $41,000. Street made a down payment of $4012.50 and two additional draws when due under the contract. Construction on the house was abandoned by the builder before completion.

    
    

14. Phyllis Lopeman entered into a contract with Edwin on May 30, 1984, to build a house on her lot. When the house was more than one half completed, she became dissatisfied with the construction, released the builder from responsibility to complete the house and hired the builder's subcontractors to complete the project.

    
    

15. Henrietta Hagenschneider entered into a contract with Edwin to build a house on her lot and paid 10% down when the contract was signed. No permit was ever pulled for this construction, and work was never started. A letter to Black from her attorney (Exhibit 18) demanding return of her down payment was never answered.

    
    

16. Floyd B. Long, the qualifying contractor for Edwin is an elderly builder who lives in Williston, Florida, and apparently did not supervise any of the construction for which permits were pulled under the authority of Long's license. After receiving numerous complaints from buyers, Hillsborough County revoked Long's general contractor's license.

    
    

17. At all times relevant to the charges herein considered, Respondents made no real estate sales and maintained no escrow account.

    
    

18. Although Howard sold some 50 houses in 1984, these contracts were not timely completed by the builder, and Howard stopped selling. This resulted in a cash flow problem and exacerbated the inability to complete houses for which contracts had been executed. About the time Long's license was revoked, Black was arrested by the local police authorities, and all work by Lawrence Edwin Construction Company stopped. Charges preferred against Black were subsequently dismissed.

    
    

    CONCLUSIONS OF LAW

    
    

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

    
    

20. None of the contracts here considered were contracts for the sale of real property, and no real estate license was required to negotiate such contracts. These contracts speak for themselves and are not subject to modification by parol evidence. No payments made by the buyers pursuant to these contracts could be considered as earnest money deposits on an offer made to purchase real property. These were not deposits which the agent was required to place in escrow and, following collapse of the transaction, deliver to the one entitled to such funds. Accordingly, all charges relating to failure to deposit and maintain down payment in escrow and, upon failure of the transaction to close, deliver to the party entitled thereto, are inapposite to these proceedings and should be dismissed.

    
    

21. No credible evidence was presented that disciplinary action was taken against Respondent's contractor's license or even that Respondent had a contractor's license. Certainly no evidence was presented that any permits were pulled under Black's contractor's license in Pinellas County, if he had a license to contract in that county.

22. Of those charges made against the Respondents, only those charges relating to violation of Section 475.25(1)(b), Florida Statutes, could be applicable in the transactions here involved. That section provides in pertinent part that the Real Estate Commission may take disciplinary action against any licensee if it finds the licensee

    
    

    (b) has been guilty of fraud, misrepresenta- tion, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence or breach of trust in any business transaction.

    
    

23. The Administrative Complaint alleges that James E. Black was sole owner of Lawrence Edwin Construction Company. No evidence was presented that this allegation is true. While Black apparently ran the company as if he were sole owner, his uncontradicted testimony was that he had no ownership interest in Lawrence Edwin Construction Company.

    
    

24. All contracts forming the bases for the charges here involved were between the buyers and Lawrence Edwin Construction Company. These contracts provided the buyers would pay 10% down when the contract was executed. This was a provision in the contract in the nature of consideration paid for the builder's promise to construct a house; not an earnest money deposit as consideration for the seller's promise to convey merchantable title. The buyer had title to the lot upon which the house was to be built.

    
    

25. Further, all of these contracts were negotiated by H.H. Howard -- not by the Respondents. The broker's license of neither Respondent was involved in any of these transactions. However, to be found guilty of violation of Section 475.25(1)(b), Florida Statutes, the dishonest conduct need not involve a transaction in which Respondents' only interest was as a broker. Such charges may lie for conduct in the licensee's personal business affairs. LaRossa v. Department of Professional Regulation, 474 So.2d 322 (Fla. 3rd DCA 1985).

    
    

26. In charges involving fraud, misrepresentation, dishonest dealing, etc., "scienter" is an element of the offense. Astor v. Florida Real Estate Commission, 374 So.2d 40 (Fla. 3rd DCA 1979). "Scienter" is defined as "knowingly, to signify guilty knowledge." Brod v. Jernigan, 188 So.2d 575 (Fla. 3rd DCA 1966)

    
    

27. No evidence of an intent by anyone to defraud these buyers was presented. To the contrary, construction was started on most of the houses the builder contracted to build, and no evidence was presented that anybody "ran away" with any money paid by the buyers or used this money for any purpose other than to keep the company afloat so the construction could proceed. The fact that the price contracted was too low or the builder was not proficient does not constitute fraud or dishonest dealing.

    
    

28. Here the burden is on Petitioner to prove the allegations by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987). This Petitioner has failed to do. Absolutely no evidence was presented that the corporate broker Respondent was in any manner involved in any transaction here complained of. Accordingly, all charges against Jim Black and Associates must be dismissed.

    
    

29. With respect to Respondent James E. Black, the evidence fails to show that he was the owner of Lawrence Edwin Construction Company, or that he

    intended to defraud any of the buyers who contracted with the builder to construct a home on the buyer's lot.

    
    

30. From the foregoing, it is concluded that Petitioner has failed to prove by clear and convincing evidence, any of the charges preferred against James E. Black or Jim Black and Associates, Inc., in this Administrative Complaint. It is

RECOMMENDED that a Final Order be entered finding these Respondents not guilty of all charges.

ENTERED this 27th day of January, 1988, in Tallahassee, Florida.

K. N. AYERS 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 27th day of January, 1988.

COPIES FURNISHED:

Arthur R. Shell, Esquire Department of Professional

Regulation

Division of Real Estate

400 West Robinson Street Orlando, Florida 32802

Edward Atkins, Esquire One Harbour Place

Post Office Box 3239 Tampa, Florida 33601

William O'Neil General Counsel

Department of Professional Regulation

130 North Monroe Street Tallahassee, Florida 32399-0750

Tom Gallagher Secretary

Department of Professional Regulation

130 North Monroe Street Tallahassee, Florida 32399-0750

Darlene F. Keller Executive Director Division of Real Estate Department of Professional

Regulation

400 West Robinson Street Orlando, Florida 32801

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AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA DEPARTMENT OF PROFESSIONAL REGULATION

FLORIDA REAL ESTATE COMMISSION

DEPARTMENT OF PROFESSIONAL REGULATION, DIVISION OF

REAL ESTATE CASE NO. 0152355 0155131

Petitioner

vs. DOAH NO. 87-2575

JAMES E. BLACK and

JIM BLACK & ASSOCIATES INC.

Respondents

/

FINAL ORDER

The Florida Real Estate Commission heard this case on May 18, 1988 to issue a Final Order. Hearing Officer K. N. Ayers of the Division of Administrative Hearings presided over a formal hearing on January 6, 1988. On January 27, 1988, he issued a Recommended Order, a copy of which is attached hereto as Exhibit A and made a part hereof.

After argument of counsel, and the Commission being otherwise fully advised in the premises, the Florida Real Estate Commission ORDERS:

1. That the Respondents' Motion for Continuance be denied, by reason that no good cause was shown to justify said continuance.

   
   

2. That the Petitioner's Exceptions to the Recommended Order be rejected as not having been timely filed.

Upon a complete review of the record and of the transcript, the Commission adopts the Hearing Officer's Findings of Fact and, further, finds that the Hearing Officer erred in not finding, as a fact, that Respondent James E. Black's license to practice contracting was suspended for ten years by the Construction Industry Licensing Board, such fact was even admitted by said Respondent in his answer to the complaint filed by the Division of Real Estate.

Therefore, the Commission rejects the Hearing Officer's Conclusion of Law that no credible evidence was presented that disciplinary action taken against Respondent James E. Black's contractor's license even that Respondent had a contractor's license; and the Commission concluded that there is clear and convincing evidence in the record to prove otherwise. Further, the Commission concludes that Respondent James E. Black is guilty of having violated Section 475.455(2), Florida Statutes, and therefore of having violated Section 475.25(1)(e), Florida Statutes.

Additionally, the Florida Real Estate Commission rejects the Hearing Officer's Recommendation that Respondent James E. Black be found not guilty, because the clear and convincing evidence in the report supports a finding that this Respondent is guilty as aforesaid. However, the Commission adopts the Recommendation as it refers to Respondent Jim Black & Associates Inc. and concludes that it is not guilty of the charges filed against it.

Therefore, it is upon consideration that the Florida Real Estate Commission ORDERS that the license of Respondent James E. Black be suspended for a period of six (6) years, commencing on the effective date of this Final Order, and that the charges filed against Respondent Jim Black & Associates Inc. be dismissed.

This Order shall be effective 30 days after filing with the Clerk of the Department of Professional Regulation. However, any party affected by this Order has the right to seek judicial review, pursuant to Section 120.68, Florida Statutes, and Rule 9.110, Florida Rules of Appellate Procedure.

Within 30 days of the filing date of this Order, review proceedings may be instituted by filing a Notice of Appeal with the Clerk of the Department of Professional Regulation at 400 West Robinson Street, Suite 309, Orlando, Florida 32801. At the same time, a copy of the Notice of Appeal, with applicable filing fees, must be filed with the appropriate District Court of Appeal.

DONE AND ORDERED this 18th day of May 1988 in Orlando, Florida.

Darlene F. Keller, Director Division of Real Estate

I HEREBY CERTIFY that a true copy of the foregoing was sent by U.S. Mail to: Edward C. Adkins, Esquire, Post Office Box 3239, Tampa, FL 33601-3239; to Hearing Officer K. N. Ayers, Division of Administrative Hearings, 2009 Apalachee Parkway, Tallahassee, FL 32399-1550; and to Arthur Shell Jr., Esquire, DPR, Post Office Box 1900, Orlando, FL 32802, this 26th day of May, 1988.

Darlene F. Keller, Director

Docket for Case No: 87-002575

Orders for Case No: 87-002575