STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CHARLES A. ALARIO, SR. and REAL ) ESTATE SERVICES UNLIMITED, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 87-4093F

)

DEPARTMENT OF PROFESSIONAL )

REGULATION, DIVISION OF )

REAL ESTATE, )

)

Respondent. )

)

FINAL ORDER

This is a proceeding for attorney's fees and costs pursuant to Section 57.111, Florida Statutes. The parties stipulated to submission of the case on the record, in lieu of formal hearing.

APPEARANCES

The parties were represented as follows:

For Petitioner: John M. Strickland, Esquire

Livingston, Patterson, & Strickland, P. A.

46 North Washington Boulevard, Number 1 Sarasota, Florida 34236

(813) 365-0550

For Respondent: Frederick H. Wilsen, Esquire

Department of Professional Regulation Division of Real Estate

400 West Robinson Street Orlando, Florida 32801 (305) 423-6134

BACKGROUND

Petitioner's initial pleading, a motion for attorney's fees and costs, was filed in the Division of Administrative Hearings on September 18, 1987.

Attached to the motion was an affidavit by counsel revealing the nature and extent of the services rendered by the attorney, as well as the costs incurred in preparing motions, hearings, and appeals incurring in DOAH Number 86-0969, Department of Professional Regulation, Division of Real Estate v. Charles A. Alario, Sr., and Real Estate Services Unlimited, Inc.

On September 28, 1987, Respondent filed its motion to deny or dismiss the application for fees based on, failure to comply with Rule 22I-6.035, Florida Administrative Code and on denial of the allegations of the initial pleading.

A pre-hearing conference was held by telephone on October 19, 1987, at which time it was determined that all issues were in controversy and an evidentiary hearing would be necessary. The final hearing was set for January 4, 1988, in Sarasota, Florida.

On November 19, 1987, Respondent filed a second motion to dismiss the application for fees and costs. The motion alleged the application was fatally defective and was not timely filed. The motion also stated that since the required application was not timely, Petitioner was note entitled to a hearing; further, it alleged that the pleadings and documents of record did not support an award for fees and costs.

On December 17, 1987, Petitioners filed an amended motion/petition for attorney's fees and costs incorporating the initial pleading and including more specific allegations and the sworn acknowledgment by Charles A. Alario, individually and as President of the corporation.

Respondent again moved for denial and dismissal on December 24, 1987. A telephone pre-hearing conference was held on December 29, 1987. That conference resulted in an order dated December 30, 1987, denying the motion to dismiss, allowing the amended motion/petition and, as stipulated by the parties, cancelling the evidentiary hearing and setting a time table for supplementation of the record.

The parties filed their supplements to the record on January 4, 1988, and thereafter, Petitioner submitted a letter summarizing his argument. Respondent filed a proposed final order. The findings of fact proposed by Respondent are substantially adopted herein, with additional findings.

ISSUE

The issues proposed by Respondent, and adopted here, are:

1. Whether the Petitioners timely filed a proper petition with all required attachments stating whether the Respondent's actions were substantially unjustified and whether circumstances exist that would make the award unjust, pursuant to Rules 22I- 6.035(1), (2)(e) and (3), Florida Administrative Code.

   
   

2. Whether the Respondent was substantially justified in bringing this action, or that special circumstances exist which would make an award of attorney's fees unjust, pursuant to Section 57.111, Florida Statutes (1985).

The Respondent has not contested the Petitioners' allegations of standing as a "prevailing small business party" nor the reasonableness of the fees and costs claimed by the Petitioners.

FINDINGS OF FACT

1. On January 20, 1986, Elizabeth Yerkes and Pilar Montes, comprising the Probable Cause Panel of the Florida Real Estate Commission (FREC), found probable cause that the Respondents violated the real estate law. They

   recommended that an administrative complaint be filed. In the record before me, the only evidence of the panel's decision is a four-page transcript of the January 20, 1986, proceeding. Any written materials which may have been considered by the panel are not included.

   
   

   The entire proceeding consisted of a brief exchange, wherein counsel for the panel was assured that the members had the opportunity to review the agenda material, and the following:

   
   

   MR. WILSEN [Counsel for DPR]: Item 6 concerns a broker and a corporate broker. The Respondents have failed to pay a cooperating broker a real estate commission in the amount of thirty-seven thousand dollars.

   
   

   Additionally, the Respondents have failed to keep the thirty-seven thousand dollars in their trust account. The final judgement in the amount of thirty-seven thousand-dollars was obtained against the company in December of 1984.

   
   

   Therefore, the Respondents are charged with failure to account and deliver a share of a commission and failure to keep the share of commission in their real estate brokerage trust account. Therefore, recommend [sic] this Administrative Complaint be filed.

   
   

   MS. YERKES [Panel Member]: After reviewing the file, I find probable cause to exist in

   ... is it four counts. Okay.

   
   

   MS. MONTES [Panel Member]: I find probable cause, too, in four counts.

   
   

   (Respondent's Exhibit 4, Pgs. 3, 4)

   
   

2. The Administrative Complaint was filed on February 11, 1986, alleging violations of subsections 475.25(1)(d) and (e), F.S. and Rule 21V-14.13 Florida Administrative Code, for failing to account for and deliver a real estate commission to a cooperating broker, and failing to place and maintain the funds in escrow.

   
   

3. On May 20, 1986, the Florida Real Estate Commission rejected a stipulation providing for revocation of the corporate respondent's license and reprimand of the individual respondent. The proposed stipulation included these oddly conflicting provisions:

   
   

4. Respondents neither admit nor deny the allegations contained in the Administrative Complaint.

   
   

5. Respondents admit that the stipulated facts contained in the Administrative Complaint support a finding of a violation of the Real Estate

Practice Act as follows: failed to account and deliver a real estate commission as to Respondent Real Estate Services, Inc., and failed to properly supervise the activities of the corporation as to Respondent Charles A. Alario, Sr.

(Respondent's Exhibit 5, pp. 1-2)

The cover letter from counsel for Respondents accompanying the stipulation informed counsel for DPR that the client was entering the stipulation to save the expense of proving his innocence. (Respondent's Exhibit 5)

1. The final hearing was held in Sarasota, Florida on July 21, 1986. Each party presented only one witness. A substantial portion of Petitioner's case consisted of the complaint and judgement in a civil case wherein the Respondents were sued for share of a commission.

   
   

2. The Recommended Order, dated October 6, 1986, provided, in pertinent part:

   
   

   Findings of Fact

   
   

   1. The parties' pre-hearing stipulation filed on July 18, 1986, establishes the following:

      
      

      1. Respondent Charles A. Alario, Sr. is now and was at all times material hereto a licensed real estate broker in Florida having been issued license number 0229080.

         
         

      2. Respondent Real Estate Services Unlimited, Inc. is now and was at all times material hereto a corporation licensed as a

         `real estate broker in Florida having been issued license number 0209707.

         
         

      3. Respondent Real Estate Services Unlimited, Inc.'s broker license is currently "in limbo".

         
         

      4. At all times material hereto, Respondent Alario was officer of and qualifying broker for Respondent Real Estate Services, Inc. [sic]

         
         

      5. That a judgement was entered on December 14, 1984.

         
         

      6. That the judgement has not been satisfied.

         
         

      7. That the Respondents failed to maintain

         $37,000.00 of the money or any part thereof in their real estate brokerage trust account without the prior knowledge or consent of Rider, Opitz and Seale Realty, Inc. [This

         sub-paragraph reflects the parties' amendment on the record at hearing. T-24,25]

         
         

   2. Phyllis Bell was a real estate salesperson at Rider and Opitz, Inc. [previously called Rider, Opitz and Seale] from January, 1979 through August, 1980. (T- 19). In early 1980, Ms. Bell had some dealings with Charles Alario and made some arrangements for a meeting regarding the listing of Palm Island, a property located in Charlotte County. (T-32-34). Charles Alario and Real Estate Services Unlimited represented a group of persons interested in purchasing this property. (T-31, 32).

      
      

   3. On June 19, 1980, an agreement for sale and purchase of Palm Island was entered between Palm Island Partners, Ltd. seller, and Buck Creek Development Corporation, buyer. (Respondent's Exhibit Number 8)

      
      

   4. Respondents did not have a co-buyer* agreement with Rider and Opitz nor with Ms. Bell. (T-20, 40, 41)

      
      

   5. Charles Alario offered Phyllis Bell referral fee to be paid to her broker of record. (T-41, Respondent's Exhibit Number 6). This offer was refused and Rider, Opitz and Seale Realty demanded half the Palm Island sales commission: $145,100.00.

      (T-18, 20, 21, Respondent's Exhibit Number 1 and

      Number 9)

      
      

   6. Rider, Opitz and Seale filed a civil action for the commission in 1982. Defendants were Real Estate Services

      Unlimited, Inc., Charles A. Alario and Knight Island Associates, Limited. (T-17,

      Petitioner's Exhibits Number 4 and Number 5). A judgement was entered on December 14, 1984, dismissing Charles A. Alario and confirming

      the, jury verdict of $37,000.00 against Real Estate Services, Unlimited, Inc. (Petitioner's Exhibit Number 6).

      
      

   7. Real Estate Services Unlimited, Inc. has lawsuits for commissions against Buck Creek Development Corporation, whom it represented in sales other than the Palm Island Associates, to whom the Palm Island contract for sale and purchase was assigned. (T-52- 54).

      *The context suggests this term was intended to be "co-broker".

      
      

      The Recommended Conclusions of Law noted that the exhibits from the civil suit were not competent evidence, in and of themselves, of violations of subsections 475.25(1)(d) and (e), F.S.:

      
      

      It is not possible to extrapolate from the complaints and the very briefly-worded judgement that the essential elements of those subsections were proven. The involuntary dismissal of Charles Alario and the jury award of $37,000.00 damages bear little resemblance to the relief sought and allegations made by the Plaintiff, Rider, Opitz, and Seale, Realty, Inc.

      
      

      Further, it was noted that the stricter standard of proof in a license proceeding effectively precluded reliance on a prior civil judgement for evidence of a license statute violation.

      
      

3. The Department of Professional Regulation never proved an essential element of the alleged violations, that Respondents actually received their commission from the sale. Respondents were in the process of suing for that commission, a fact duly noted by counsel for DPR in his presentation of the proposed stipulation to the Commission. (Respondent's Exhibit Number 6, p. 3)

   
   

4. On December 2, 1986, the Florida Real Estate Commission voted 3-2 to adopted the Recommended Order dismissing the charges.

   
   

   The members were obviously troubled by the existence of a civil judgement against the corporation that had not been satisfied. Counsel for DPR conceded, however, that the alleged violations were not failure to pay a judgement, but rather, failure to pay a commission to a real estate broker. (Respondent's Exhibit Number 7, p. 17) This distinction was also noted by Marguerite Schlitt, the Vice-chairperson. (Respondent's Exhibit Number 7, p. 20)

   
   

   Another member noted that he could not find, in his reading, anything specifically where the commission was paid. (Respondent' Exhibit Number 7, p. 18)

   
   

   As part of his argument to the Commission, counsel for DPR again made clear the essence of the case against these Respondents: [by James Mitchell, DPR staff attorney]:

   
   

   I think we have got to give that civil judgement some credence, some credibility, and you can do that by overruling the Hearing Officer's recommendations and going essentially with what the civil Court has done.

   
   

   I don't think it is necessary for us, in these proceedings, to retry a civil trial all over again. I think it is our position that the final judgement, complaint and final judgement, are sufficient to establish, in

   situations such as this, that a stipulation has

   occurred, rather than, in fact, a case like this where the judgement had to be anticipated.

   
   

   I think you can do that by overruling the Hearing Officer's Recommended Order.

   
   

   (Respondent's Exhibit Number 7, p. 15)

   
   

5. The Commission's Final Order adopting and incorporating by reference the Recommended Order was filed on December 11, 1986.

   
   

6. The Department of Professional Regulation appealed to the Fifth District Court of Appeal. The Final Order was affirmed, per curiam, without an opinion, on July 21, 1987. Petition for Rehearing was denied on August 17, 1987, and the appellate court's Mandate was issued on September 3, 1987.

   
   

7. To defend against the agency action, Petitioner incurred attorney's fees and costs in the total amount of $9,190.68. This amount is not contested by Respondent.

   
   

   CONCLUSIONS OF LAW

   
   

8. The Division of Administrative Hearings has jurisdiction over the subject matter and parties in this proceeding. Sections 57.111 and 120.57(1), F.S.

   
   

9. This case arises under the Florida Equal Access to Justice Act, Section 57.111, F.S., which provides, in pertinent part:

   
   

   (4)(a) Unless otherwise provided by law,

   an award of attorney's fees and costs shall be made to a prevailing small business party in any adjudicatory proceeding or administrative proceeding pursuant to chapter

   120 initiated by a state agency, unless the actions of the agency were substantially justified or special circumstances exist which would make the award unjust

   
   

   (b)1. To apply for an award under this section, the attorney for the prevailing small business party must submit an itemized affidavit to the court which first conducted the adversarial proceeding in the underlying action, or to the Division of Administrative Hearings which shall assign a hearing officer, in the case of a proceeding pursuant to chapter 120, which affidavit shall reveal the nature and extent of the services rendered by the attorney as well as the costs incurred in preparations, motions, hearings, and appeals in the proceeding.

   2. The application for an award of attorney's fees must be made within 60 days. after the' date that the small business party becomes a prevailing small business party.

   
   

10. Throughout this proceeding, DPR has argued that a proper application was not timely filed. The substance of the argument is that the initial pleading did not meet the requirements of DOAH Rule 22I-6.035, Florida Administrative Code.

    
    

    The initial pleading was filed on September 18, 1987, substantially less than 60 days from the date of the appellate mandate establishing Petitioners as "prevailing" in the case. See subsection 57.111 (3)(c)1., F.S.

    
    

    The initial pleading consisted of a motion, bearing the style of DOAH Case Number 86-0969, and alleging the essential elements of Section 57.111, F.S.: That Petitioners were a prevailing small business in an Administrative Action initiated by the Department of Professional Regulation, and an ensuing appeal; that the Administrative Complaint was initiated without substantial justification; and that attorney's fees and costs were incurred.

    
    

    The affidavit, attached to the initial pleading, complied with the requirement of Section 57.111(4)(b)1., F.S., cited above.

    
    

11. The initial pleading did not comply with all the requirements of Division of Administrative Hearing's procedural rule governing these proceedings. Rule 22I-6.035, Florida Administrative Code provides, in pertinent part:

    
    

    22I-6.35 Small Business Parties' Attorney's Fees and Costs.

    
    

    1. Any small business party asserting entitlement to attorney's fees and cost under The Florida Equal Access to Justice Act

       shall file an affidavit with the Division of Administrative Hearings within sixty (60) days after becoming a prevailing small business party within the meaning of the Act. The affidavit shall itemize every cost and fee for which reimbursement is claimed.

    2. A petition shall accompany the affidavit which shall state whether the affiant requests an evidentiary hearing and shall:

       1. Set forth the style and case number

          of the administrative proceeding to which the affidavit relates;

       2. State whether the state agency:

          1. Sought a voluntary dismissal.

          2. entered into a settlement favorable to the affiant; or

          3. entered a final order sustaining the affiant's position, and if so, specify whether initially or on remand;

       3. State the amount of attorney's fees and costs sought;

       4. State where the affiant's domicile and principal office are, whether the affiant is a sole proprietor of an unincorporated business, how many employees the affiant has, and whether the affiant's net worth exceeds $2,000,000:

       5. State whether the agency's actions were substantially unjustified and whether circumstances exist that would make the award unjust;

       6. State whether the state agency was a nominal party only; and

       7. List all documents attached to the petition.

    3. Attached to the petition shall be copies of all documents on which the claim that the small business party prevailed is predicated, including, where applicable:

       1. Any pleading reflecting a state agency's request for voluntary dismissal;

       2. Any settlement agreement to which the affiant and the state agency are parties;

       3. Any final order entered by the state agency;

       4. Any court order, mandate or opinion in any judicial proceeding, appellate or trial, arising out of the administrative proceeding to which the affidavit relates; and, in addition,

       5. Any court order on costs or attorney's fees entered in any proceeding arising out of the administrative proceeding to which the affidavit relates.

    
    

    The initial pleading did not comply with Rule 22I-6.035(2)(d), (e), (f) and (g); and the pleading did not include the attachments listed in Rule 22I- 6.035(3), Florida Administrative Code.

    
    

12. Petitioners' Amended Motion/Petition filed on December 17, 1987, complied precisely with every requirement of the rule and statute.

    
    

13. An order dated December 30, 1987, permitted the amendment, as provided in Rule 22I-6.004(4), FAC. In the absence of any showing of prejudice to DPR, it would have been a gross abuse of discretion to have denied the amendment and ignored the general rule liberally allowing amendment of pleadings. Arauio- Sanchez v. Amoon, 513 So2nd 1307 (Fla 3rd DCA 1987) DPR's motion to dismiss was properly denied.

    
    

14. This conclusion leaves the primary issue:

    
    

    Whether the proceeding in DOAH Case Number 86-0969 was substantially justified or special circumstances exist which would make the award unjust. "A proceeding is `substantially justified' if it had a reasonable basis in law or fact at the time it was initiated by a state agency." Subsection 57.111(3)(e), F.S.

15. Although there are no Florida appellate cases addressing the burden of proof, Federal Courts construing a similar standard in the Federal Equal Access to Justice Act, 5 USC Section 504(a)(1), have consistently held that the agency has the burden of demonstrating that its actions were substantially justified. Ashburn v. United States of America, 740 F2nd 843 (11th Circuit 1984). A thorough discussion of this issue and accompanying Federal citations is found in Gentele v. Department of Professional Regulation, Board of Optometry, DOAH Case Number 85-3857F (Final Order dated June 20, 1986), affirmed on other bases in Gentele v. Department of Professional Regulation, Board of Optometry, 513 So2nd 672 (Fla 1st DCA 1987).

    
    

16. The agency has not met its burden. The investigative report is not part of the record here, but the transcript of the probable cause panel is in evidence. That transcript, as well as other supporting transcripts submitted by DPR, indicate that from the very beginning, DPR's case was based virtually exclusively on the existence of a prior civil judgement against the corporate respondent. There is no indication in the record that DPR had independent evidence that a co-broker agreement existed or that the Respondents had ever received the commission that was the subject of the dispute.

    
    

    Instead, DPR relied on a speculative and peculiarly selective reading of the intent of the circuit court in rendering judgement confirming a jury verdict in the amount of $37,000.00 against the corporate broker. That same civil court entered involuntary dismissal of Charles Alario, the individual broker.

    
    

    In his arguments to the Florida Real Estate Commission, DPR's counsel ventured the opinion that the civil court misconstrued the law regarding the individual broker being an alter ego for the corporation. See J. B. Green Realty Co. Inc. et al v. Florida Real Estate Commission 177 So2nd 535 (Fla 1937). Yet that same court, in the view of DPR's prosecuting counsel, properly read the case law holding that a broker had to actually receive a commission in order to be required to share that commission with another broker. Giles, et al v. Wilmott, 59 Fla 271, 52 So 287 (Fla 1910).

    
    

    Such speculation regarding the significance of the prior civil judgement may have presented a justiciable issue, however skimpy. But the mere existence of a justiciable issue is not, in this instance, sufficient basis to avoid an award of fees and costs.

    
    

    The standard for award is less strict than the "... complete absence of a justiciable issue of either law or fact...", the standard found in Section 57.105, F.S. It is reasonable, given the interpretations of analogous Federal law, to place the "substantially justified" standard somewhere between the Section 57.105, F.S. standard and the automatic award of fees to a prevailing party. William L. McCallister v. Department of State, Division of Licensing, DOAH Case Number 87-0724F (Final Order issued June 5, 1987).

    
    

17. DPR, in its proposed conclusions of law, describes several special circumstances which DPR suggests would make the award unjust in this case.

The first circumstance is the proposed stipulation of the parties, which stipulation was rejected on May 20, 1986. As addressed in Findings of Fact, paragraph 3, above, that stipulation was ambiguous and could not constitute an admission that the violations occurred. Moreover, it is common for a respondent in a license discipline proceeding to agree to a lesser penalty to avoid the expense of litigation. This is not a special circumstance. Nor should a respondent ever be so prejudiced by a good faith effort to resolve litigation.

The second special circumstance described by DPR is the vote of the probable cause panel and the split vote of the commission in adopting the recommended order. In many cases the action by a probable cause panel will successfully insulate the agency from a fee award when it later fails to prevail. In Gentele, supra, the Court found that DPR's determination to prosecute turned on a credibility assessment of the investigator's testimony. The Final Order by Hearing Officer, R. L. Caleen, Jr. describes an active investigative process and involvement by the probable cause panel.

No such evidence is available here. From the inception of the proceeding it was not facts, but a patently erroneous legal theory, which drove the prosecution of this case.

Finally, DPR argues that its prosecution of the complaint and its appeal of the Final Order were "...not frivolous, meritless or an abuse of the appellate process" and in denying the Petitioner's Motion for fees after the appeal, the appellate court denied that "there was a complete absence of a justiciable issue of either law or fact...". DPR cites no authority to suggest that either of those standards are the same as the applicable standard in Section 57.111, F. S There is ample authority that those are stricter standards.

The agency failed to prove that special circumstances in this case would make the award unjust.

Based on the foregoing, it is hereby, ORDERED:

That DPR pay Petitioners fees and costs in the amount of $9,190.68. DONE and ORDERED this 22nd day of March, 1988, in Tallahassee, Florida.

MARY CLARK

Hearing Officer

Division of Administrative Hearings The Oakland Building

2900 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 22nd day of March, 1988.

COPIES FURNISHED:

John M. Strickland, Esquire Livingston, Patterson, &

Strickland, P. A.

46 N. Washington Blvd. Number 1 Sarasota, FL 34236

Frederick H. Wilsen, Esquire Department of Professional

Regulation

Division of Real Estate

400 W. Robinson Street Orlando, FL 32801

Tom Gallagher, Secretary Department of Professional

Regulation

130 North Monroe Street 17 Tallahassee, FL 32399-0750

NOTICE OF RIGHT TO JUDICIAL REVIEW

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

Docket for Case No: 87-004093F

Orders for Case No: 87-004093F