STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL ) REGULATION, DIVISION OF )

REAL ESTATE, )

)

Petitioner, )

)

vs. ) CASE NO. 87-4391

) PATRICK LOUIS JANTOMASO, t/a ) PAT JANO AND ASSOCIATES, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, final hearing in the above-styled action was held on April 14, 1988, in Clearwater, Florida, before Robert E. Meale, Hearing Officer of the Division of Administrative Hearings.

The parties were represented as follows:

For Petitioner: Steven W. Johnson, Esquire

Department of Professional Regulation Division of Real Estate

400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802

For Respondent: Brian E. Johnson, Esquire

7190 Seminole Boulevard

Seminole, Florida 34642 BACKGROUND

On April 22, 1987, Petitioner filed an Administrative Complaint against Respondent with respect to a real estate contract between Respondent and William and Lois Ehmke, Respondent's handling of an escrow deposit in connection with a real estate contract between Myles, Inc. and Ralph and Margaret Magno, and the signage located at Respondent's principal place of business.

Count I of the Administrative Complaint alleged that Respondent was guilty of fraud, misrepresentation, concealment, false promises, false pretense, dishonest dealing by trick, scheme or device, culpable negligence and breach of trust in refusing to rescind the Ehmke contract in which Respondent was the seller.

Counts II, III, and IV of the Administrative Complaint alleged that, in connection with the Magno contract, Respondent was guilty of the above-described types of behavior, failing to account for and deliver a deposit, and failing to

maintain trust funds in a real estate brokerage escrow bank account or other proper depository until properly authorized.

Count V of the Administrative Complaint alleged that Respondent was guilty of failing to maintain properly an office and entrance sign at his registered place of business.

Respondent filed an Election of Rights disputing the factual allegations and requesting a formal hearing.

At the hearing, Petitioner called four witnesses and offered into evidence eight exhibits. Respondent called one witness, himself, and offered into evidence five exhibits. All exhibits were admitted into evidence.

The transcript was filed on April 27, 1988. Each party filed a proposed recommended order. Treatment accorded the proposed findings is detailed in the Appendix.

FINDINGS OF FACT

1. Respondent is and at all material times has been a licensed real estate broker in the State of Florida. He holds license number 0404010.

   
   

2. On or about October 14, 1985, Respondent, as seller, entered into a purchase and sale contract with William and Lois Ehmke, as buyers, with respect to Respondent's condominium known as Unit 502 of Blind Pass Lagoon Condominiums located at 9825 Harrell Avenue, Treasure Island, Florida.

   
   

3. The Ehmke contract called for a purchase price of $85,000, which included $15,000 as an earnest money deposit. The contract form provided a paragraph for the closing date, but this was left blank. The only special clause in the contract provided that:

   
   

   The Buyer(s) shall pay $550.00 monthly beginning the date said unit is occupied by buyer and until buyers home in Deluth, Minn. is sold. At the time of closing upon Condo Unit 502, Phase 3, the buyers' shall reimburse the Seller the difference between $550.00 and actual costs to carry the unit per

   month. ($755.00 plus 90.00 maintenance, or $300.pr [i.e., $300 per month].

   
   

4. The Ehmkes duly paid Respondent the $15,000 deposit and moved into the condominium, which they occupied continuously from October, 1985, through December, 1986. The Ehmkes paid Respondent $550 per month for each month of their occupancy.

   
   

5. When making the deal, the Ehmkes were aware that the average time that a house remained unsold on the market in Deluth was 210 days. They knew that the market was very slow because of a sluggish local economy. They expected their house to be sold in about 210 days.

   
   

6. After 210 days passed and the house had not sold after the Ehmkes' good faith efforts to sell it, the Ehmkes asked Respondent to refund their $15,000

   deposit. Respondent refused. Negotiations resulted in Respondent returning to the Ehmkes $10,000 of the deposit in July, 1987.

   
   

7. Respondent did not stand in a confidential or fiduciary relationship with the Ehmkes. William Ehmke had owned and operated a restaurant in Deluth and, after meeting Respondent, initiated discussions with Respondent concerning Mr. Ehmke's desire to purchase property in Florida. Respondent showed the Ehmkes other properties and informed them from the start that Respondent and his daughter owned the condominium unit in question.

   
   

8. The mortgage payments, insurance, taxes, and maintenance fees on the condominium unit were about $850 per month in October, 1985. During the period that the Ehmkes occupied the condominium unit, the maintenance fees went up by

   $30 per month and there was a $1200 special assessment. All of these expenses were borne by Respondent. However, Mr. Ehmke was aware that every month he was losing $300 of his deposit toward these expenses.

   
   

9. The fair rental value of the condominium unit from December 1 through April 30 each year is $1400 to $1600 per month.

   
   

10. By the time that the Ehmkes vacated the unit, Respondent had paid at least $3000 in monthly expenses over the rent received and the $1200 the special assessment. He had also lost at least $3000 in premium seasonal rentals.

    
    

11. Mr. Ehmke has since received his real estate salesman's license. He admits that the $5000 retained by Respondent does not cover Respondent's out-of- pocket expenses. He also admits that he has no complaints about the transaction in retrospect.

    
    

12. Frank Myles owns all of the stock of Myles, Inc., which owned Unit 202 of Blind Pass Lagoon Condominiums in Treasure Island. Having been neighbors with Respondent for two years and also involved part-time in real estate sales, Mr. Myles mentioned to Respondent that he was trying to sell his unit.

    
    

13. After their conversation, Respondent delivered to Mr. Myles a contract for the purchase and sale of his unit. The contract was executed by all parties on July 29, 1986. The buyers were Ralph and Margaret Magno, who had recently purchased another unit in the same complex through Respondent as the broker.

    The purchase price was $94,000 to be paid cash at closing, as Mr. Myles had said he desired. The contract contained no contingencies, such as for financing, which was also consistent with Mr. Myles' previous instructions to Respondent.

    The contract called for a closing on or before August 25, 1986, and provided that time was of the essence.

    
    

14. The Magnos paid an earnest money deposit of $8000 to Pat Jano and Associates, "reg. real estate broker." The form language of the contract provided that Respondent was to "hold said earnest money or deposit and act as escrow agent until closing of deal ..." The contract elsewhere provided that if the purchaser failed to perform any of his obligations, then he "shall forfeit said earnest money or deposit; and the same shall be retained by the Seller as liquidated damages, and the escrow agent is hereby authorized by the purchaser to pay over to the Seller the earnest money or deposit." In the event of a default by the purchaser, the earnest money would be divided equally between Respondent and the seller.

    
    

15. On or about August 13 or 14, 1986, the Magnos discovered that the financing terms that they had arranged with a third-party lender could no longer

    be obtained. Respondent promptly notified Mr. Myles of the problem. Mr. Myles and Respondent tried unsuccessfully to resolve the problem with the lender, which ultimately declined to make the loan.

    
    

16. When first informed of the buyers' financing problems, Mr. Myles told Respondent that the two of them should push the sellers through to closing. (Tr. 82.) Immediately after this conversation with Respondent, Mr. Myles stepped aside so that his lawyer could handle what had become a "shaky" deal. (Tr. 84.)

    
    

17. On August 16, 1986, Respondent refunded all of the earnest money to the Magnos by delivering to Mr. Magno a check drawn on Respondent's escrow account in the amount of $8000 and payable to Mr. Magno. Respondent returned the deposit without the prior knowledge of Mr. Myles or consent of Myles, Inc. (Tr. 73 and 8.)

    
    

18. Mr. Myles' lawyer sent a letter dated August 20, 1986, to Respondent informing him that Myles, Inc. intended to proceed to closing and would not consent to the release of the earnest money deposit to the Magnos.

    
    

19. Mr. Myles appeared at the closing at the time and place specified in the contract. The Magnos did not appear. Myles, Inc. never received its share of the forfeited deposit.

    
    

20. Myles, Inc., through Mr. Myles, stated in a letter dated May 13, 1987, that it was "no longer" pursuing any legal action against Respondent and that no suits were filed and no further action would be taken.

    
    

21. During a lengthy meeting with Petitioner's investigator, Respondent never suggested that he had had Myles' permission to return the Magnos' deposit. Rather, he said only that he had returned the deposit out of "loyalty" to the Magnos.

    
    

22. At the hearing, Respondent testified that he told Mr. Myles that Respondent was going to return the deposit to the Magnos and Mr. Myles' only reaction was that "those are the breaks." (Tr. 129.) This apparent inconsistency between the testimony of Mr. Myles and Respondent, both of whom were credible witnesses, is reconciled by the finding that Mr. Myles never consented to the release of the earnest money, but Respondent misunderstood their conversation in this regard.

    
    

23. Since October 16, 1986, Respondent's principal place of business has been 7345 Bay Street, St. Petersburg, Florida. Respondent failed to maintain a sign at this location from October 16, 1986, through January 8, 1987. He was having a sign prepared by a third party during that time.

    
    

    CONCLUSIONS OF LAW

    
    

24. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter. Section 120.57(1), Florida Statutes.

    
    

25. Petitioner has jurisdiction over the disciplining of licenses of real estate brokers. Section 475.25, Florida Statutes.

26. Discipline against a license may be imposed if a broker:

    
    

    Has been guilty of fraud, misrepresentation, 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...

    
    

    Section 475.25(1)(b), Florida Statutes.

    
    

27. Discipline against a license may be imposed if a broker:

    
    

    Has failed to account or deliver to any person ... at the time which has been agreed upon ... any personal property such as money, fund, deposit, check, [or] draft ... 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.

    
    

    Section 475.25(1)(d), Florida Statutes. This section also provides three alternatives to the broker holding escrow funds as to which there are conflicting demands.

    
    

28. Discipline against a license may be imposed if a broker has failed to deposit immediately funds that have been placed in trust with him or her in escrow with a title company, bank, or savings and loan association or in his or her own trust account, where the funds must be kept until disbursement is authorized. Section 475.25(1)(k), Florida Statutes.

    
    

29. Discipline against a license may be imposed if a broker has violated any provision of Chapter 475 or any lawful rule promulgated thereunder. Section 475.25(1)(e), Florida Statutes.

    
    

30. Each broker whose license is active "shall maintain a sign on or about the entrance of his principal office." Section 475.22, Florida Statutes.

    
    

31. Rule 21V-24.001, Florida Administrative Code, provides that the minimum penalty for each count is a reprimand and/or an administrative fine of up to $1000. The maximum penalties corresponding to violations of each of the above-cited statutory provisions are: Section 475.25(1)(b)--up to five years' suspension or revocation; Section 475.25(1)(d)--up to five years' suspension; Section 475.25(1)(e)--up to eight years' suspension or revocation; and Section 475.25(1)(k)--up to two years' suspension.

    
    

32. Petitioner must prove the allegations of the Administrative Complaint by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).

    
    

33. The Ehmke contract lacks a contingency for the resale of the Deluth residence and a provision for a firm closing date. The special clause also fails to provide whether "[a]t the time of closing" establishes a precondition-- i.e., closing--to the Ehmkes' liability for the extra $300 per month or sets the time at which the payment of this extra sum was due. Questionable draftsmanship is not tantamount to fraud, culpable negligence, or breach of trust. Without

    more, Petitioner fails to satisfy its burden of proving fraud, misrepresentation or other dishonesty, culpable negligence, or breach of trust in connection with the Ehmke contract.

    
    

34. There is insufficient evidence of fraud, misrepresentation or other dishonesty, culpable negligence, or breach of trust by Respondent in connection with the Magno contract. Petitioner proved that Mr. Myles did not wish to have the Magnos' earnest money returned to them, but Petitioner did not prove Respondent's state of mind sufficiently to establish fraud, culpable negligence, or breach of trust. The circumstances certainly do not suggest any deceit on the part of Petitioner. Respondent's misunderstand which led to the improper return of these funds, is insufficient to brand Respondent's action as culpable negligence or breach of trust.

    
    

35. Respondent has failed to account or deliver to Myles, Inc., at the time agreed upon by all of the parties to the Magno contract, the portion of the earnest money that was deposited with Respondent and which he is not in law or equity entitled to retain. Section 475.25(1)(d) does not require an inquiry into Respondent's state of mind. The contract established the parties' rights and obligations. Respondent's misunderstanding may preclude a finding of deceit, but does not relieve Respondent of his contractual obligations to account for and deliver the portion of the Magno earnest money that was due Myles, Inc. in the event of the buyers' default. Respondent's state of mind is irrelevant to, a determination that he breached an agreement with Myles, Inc.

    
    

36. Respondent properly placed the Magno earnest money deposit in his trust account upon receipt and retained the funds in that account until disbursement. The primary purpose of Section 475.25(1)(k) is to prohibit the improper handling of trust funds while they are in the custody of the broker. However, Respondent violated this provision when he made an unauthorized disbursement. This improper disbursement has already been punished under Section 475.25(1)(d), and the same act should not be punished a second time.

    
    

37. For a period of a two and one-half months, Respondent violated the requirement that he maintain a sign at the entrance of his office. There is no implied exception for the absence of a sign while a new one is being' made, especially given the length of time that the sign was absent in this case.

RECOMMENDATION

Based on the foregoing, it is recommended that a final order be entered dismissing Counts I, II and IV of the Administrative Complaint and finding Respondent guilty of the allegations set forth in Counts III and V of the Administrative Complaint. It is recommended that the Final Order impose an administrative fine of $1000 with respect to Count III and a reprimand with respect to Count V.

ENTERED this 20th day of May, 1988, in Tallahassee, Florida.

ROBERT E. MEALE

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 20th day of May, 1988.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-4391

Treatment Accorded Petitioner's proposed Findings 1,3-5. Adopted.

2,6. Rejected as unnecessary and irrelevant. The location of Respondent's "principal office and each branch office" is relevant under Section 475.22 to determine where he was required to maintain a sign. The statute does not refer to the office registered with Petitioner.

7-8,16. Adopted.

9-.14. Adopted.

15,17. Rejected as unnecessary.

18. Rejected as unnecessary and irrelevant for the reason set forth for rejecting the proposed findings in paragraphs 2 and 6.

Treatment Accorded Respondent's Proposed Findings

1. Rejected as legal argument, except that Respondent and the Ehmkes entered into a contract.

2. Last sentence - rejected as unnecessary and irrelevant. Remainder rejected as contrary to the greater weight of the evidence.

3. Rejected as unnecessary, except that the blast sentence is adopted as to the sign being made.

COPIES FURNISHED:

Steven W. Johnson, Esquire

Department of Professional Regulation Division of Real Estate

400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802

Brian E. Johnson, Esquire 7190 Seminole Boulevard

Seminole, Florida 34642

Darlene F. Keller Executive Director Division of Real Estate

400 West Robinson Street Orlando, Florida 32801

William O'Neil General Counsel

Department of Professional Regulation

130 North Monroe Street Tallahassee, Florida 32399-0750

Docket for Case No: 87-004391

Orders for Case No: 87-004391