vs. ) CASE NO. 88-4573
JERRY L. DANIEL, )
Respondent. )
A hearing was held in this case in Sarasota, Florida on January 25, 1989 before Arnold H. Pollock, Hearing Officer. The issue for consideration was whether Respondent's license as a registered real estate broker should be disciplined because of the misconduct alleged in the Administrative Complaint filed herein.
For Petitioner: Steven W. Johnson, Esquire
For Respondent: Dana J. Watts, Esquire
On August 21, 1988, Lawrence A. Gonzalez, Secretary of the Department of Professional Regulation, executed an Administrative Complaint form subsequently filed with the Department of Professional Regulation (Department) on August 25, 1988, alleging that the Respondent, Jerry L. Daniel, 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 in violation of Section 475.25(1)(b), Florida Statutes.
Thereafter, on September 8, 1988, Respondent's counsel submitted an election of rights form in which he requested a formal hearing. The file was forwarded to the Division of Administrative Hearings on September 12, 1988 for appointment of a Hearing Officer, and on September 28, 1988, the undersigned set the case for hearing on December 6, 1988. However, based upon Requests for Continuance submitted independently by both counsel, the case was twice postponed and subsequently set for January 25, 1989 at which time it was held as scheduled.
At the hearing, Petitioner presented the testimony of Doteileen Mariner, the owner of the property involved in the incident under discussion here, and introduced Petitioner's Exhibits 1 through 5. Respondent testified in his own behalf and presented the testimony of Larry D. Romito, manager and president of the Florida division of Schlott Realty, the company for which Respondent now works, and introduced Respondent's Exhibits A and B.
A transcript of the proceeding was furnished and both parties have submitted Proposed Findings of Fact which have been ruled upon in the Appendix to this Recommended Order.
At all times pertinent to the incidents involved herein, the Respondent, Jerry L. Daniel, was licensed as a real estate broker in Florida under license number 365403. Petitioner, Division of Real Estate (Division), is and was the state agency charged with the responsibility for governing the conduct of real estate brokers in Florida.
On August 19, 1984, and for several years prior thereto, Doteileen Mariner owned a three bedroom home located at 1260 Schenly Street, Port Charlotte, Florida. The property was encumbered by a first mortgage held by the First Federal Savings and Loan Association in Punta Gorda, Florida. Sometime during 1983 she decided to sell this property and made inquiries toward that end. She was first contacted by Roger King, a real estate agent, with a view toward purchasing her property and in August, 1984, Mr. King presented her with a contract to buy the property. King and the Respondent, who were purchasing it together, were to assume the existing first mortgage and give her a second, balloon, mortgage in the amount of $23,000.00 for five years with a $5,000.00 down payment and payment of interest only thereafter until the end of the period of the mortgage.
Mrs. Mariner agreed to this proposal and signed a contract for sale which reflected a total purchase price of $69,500.00 on or about August 22, 1984. She was not given a copy of the contract at that time, however, and Petitioner's Exhibit 2, which purports to be a contract for the sale of the property, bearing her signature and that of the Respondent, dated August 22, 1984, reflects a total purchase price of $74,900.00 with $18,900.00 paid as deposit, and a new mortgage of $56,000.00. According to Mrs. Mariner, these were not the figures which appeared on the contract she signed.
At the same time, Mrs. Mariner also signed an addendum to the original contract, dated August 21, 1984, one day prior to the contract which it purports to supplement, which is also signed by Respondent and Mr. King and which reveals that the existing first mortgage on $29,335.00 was to be paid at closing; that the seller, Mrs. Mariner, was to receive $5,000.00 in cash at closing; and that a second mortgage for $23,000.00 would be held for 60 months with interest payments at 10% per year to be made monthly in the amount of $191.67 each. Mrs. Mariner received the $5,000.00 down payment but did not receive the $18,900.00 deposit and, to the best of her recollection, did not agree to a new first mortgage being substituted for the existing first mortgage she had with First Federal. Respondent, on the other hand, indicates he made very clear to Mrs. Mariner, and the documentation which he admits to signing reflects, that the original first mortgage was to be paid off and a second first mortgage for a larger amount substituted therefor. Examination of the contract shows it has been modified by alteration of the figures thereon. When this is done is not known.
Mrs. Mariner moved out of the property the next day after the contract was signed and at the closing, held in September, 1984, was given an envelope with certain documents in it which included a second mortgage on the property in the amount of $23,000.00 signed by both Respondent and Mr. King on September 24, 1984. This second mortgage included a clause which subordinated it to the new first mortgage on the property which was dated July 25, 1985, nine months subsequent to the date of the second mortgage. Mrs. Mariner did not examine the documents at that time but accepted her $5,000.00 down payment and left the area. She assumed the property was transferred and, in fact, received her monthly interest payments on time for several years. However, after a period of time, the payments stopped and after several months of trying unsuccessfully to reach Respondent, she finally contacted him and arranged to come back to Florida to meet with him.
When she met with Respondent, he indicated he was having financial difficulties and was unable to make the monthly payments. However, he offered to deed her property back to her and to convey to her two other properties he owned, both of which were encumbered by substantial first mortgages. Both had some equity in them which, he claims, when added to the equity in her original property, would be adequate to make her whole and enable her to avoid any financial loss on her part. On July 10, 1986, Respondent executed a Quit Claim Deed to Mrs. Mariner for the property which she originally owned. This deed showed a first mortgage of $58,000.00 compared to the $29,355.00 first mortgage she originally had. Therefore, as a result of her dealings with the Respondent, she had her property back temporarily, had received $5,000.00 in cash, and had received some monthly payments of $191.67 each. She also had an indebtedness of approximately $30,645.00 more than she had when she met Respondent and because of her inability to make the payments on the new first mortgage, lost the property to foreclosure.
Respondent and Mr. King arranged for interim financing on the Mariner property at a high rate of interest with a temporary lender until such time as they could arrange new first mortgage financing. This was done several months later and Respondent encumbered the property with a new mortgage in the amount of $58,400.00. That new first mortgage, dated June 25, 1985, was made payable to Standard Federal Savings and Loan Association and was recorded in the public records of Charlotte Count, Florida on July 2, 1985, prior to the recordation of the original second mortgage, dated September 24, 1984, which Respondent and King had given to Mrs. Mariner. It should also be noted that this second mortgage, dated September 24, 1984, reflects at the bottom of page 1,
"subject to and inferior to that certain mortgage to Standard Federal Savings and Loan Association dated June 25, 1985 [sic], filed July 2, 1985 sic; recorded in Official Records Book 823, page 779 of the Public Records of Charlotte County, Florida in the original principal amount of $58,400.00."
Respondent has not explained how a mortgage executed on September 24, 1984 can refer to as existing and legitimately be made subordinate to a first mortgage which did not come into existence until 9 months later. He claims total ignorance of how that happened. He assumed that since all documents were turned over to the title company at the time of closing, the second mortgage would be recorded at that time. This testimony is ingenuous and unbelievable.
Mrs. Mariner received approximately $3,200.00 in interest payments from Respondent in addition to the $5,000.00 down payment. In the Spring of 1986, she was served with a summons for foreclosure of the first mortgage on her property. She has now lost the property and the difference between her equity in it at the time of sale to Respondent and the Deposit she received.
Petitioner has alleged that Mrs. Mariner's loss was approximately
$39,000.00. The exact amount of loss is irrelevant. What is pertinent is not the loss to Mrs. Mariner but whether Respondent's conduct here constitutes misconduct and it obviously does.
Respondent denies any responsibility for this situation. He claims he was approached by Roger King in 1984 with the opportunity to buy Mrs. Mariner's property. At the time, he was involved in investing in family homes owning two or three at that time and up to twenty to thirty thereafter. At the time of this transaction, he had had only one other deal with Mr. King who had done the negotiations for the purchase of the Mariner property and drafted the documents. Respondent, however, is the only buyer listed on the contract though King appears as a mortgagor on the second mortgage. Mr. Daniel claims he saw Mrs. Mariner first at the closing at Federal Title Insurance Company on September 24, 1984. He relates that the contract for the purchase of the property and the addendum were signed prior to closing and he was not present at the time Mrs. Mariner signed them. He claims not to know who got her to sign them.
Respondent claims, however, that he explained all the provisions of the transaction to Mrs. Mariner prior to the closing including the fact that her existing first mortgage would be paid off; that a new first mortgage in a higher amount would be placed on the property; and that the mortgage she was holding would be subordinate to the new first mortgage. She denies this. He asserts that he took out 90 day interim financing arrangement with Family Credit at a higher interest rate for the sole purpose of allowing the deal to close so that Mrs. Mariner could be on her way to Delaware. His assertions of concern for Mrs. Mariner's welfare are not believable.
Respondent claims he told Mrs. Mariner at closing that her second mortgage would not be recorded until after permanent financing through a new first mortgage was secured and that the new institutional mortgage would be superior to hers. She does not recall this, however, but her testimony was so indefinite, vague, and unsure, it is difficult to determine what Mrs. Mariner was told. As was found before, his contention is unworthy of belief.
Respondent also contends that the rental income from the property was supposed to be between $700.00 and $800.00 per month which would have been sufficient to pay not only the monthly payment on the first mortgage but also the interest payment on the second mortgage. However, these expectations were not realized and he received only rental income of $550.00 per month which was sufficient to pay only the first mortgage. Because of financial reverses he was having at the time with some of his commercial properties, which put him in a poor cash flow position, he stopped making payments on both the first and second mortgages early in 1986 and subsequently lost Mrs. Mariner's property to foreclosure. Respondent overlooks the fact that the lower rental he obtained,
$550.00 per month, was more than sufficient to cover the $191.67 per month owed to Mrs. Mariner and still return him a substantial return on his investment of
$5,000.00 if he had been a legitimate investor in rental property. It is obvious from the evidence that Respondent had far more in mind than that reasonable return.
Respondent contends it was never his intention not to pay Mrs. Mariner. However, Respondent bought a piece of property which had a current first mortgage of $29,335.00. He replaced that with a new first mortgage of
$58,400.00 which gave him a cash surplus of approximately $27,000.00. The second mortgage which he owed to Mrs. Mariner was for $23,000.00, well below the amount he had received in cash as a result of the refinancing. It is clear that Respondent took this money and failed to pay Mrs. Mariner even though there were adequate funds available from the refinancing to do so. It is clear that he intended for her to be in a subordinate position and that he intended to make, and did make, a substantial amount of money out of the transaction.
He tried to deed Mrs. Mariner's property back to her, along with two other properties in which he had equity, to reduce her loss, but she refused his offer. His financial difficulties resulted in his going into bankruptcy through which he lost his entire financial base.
Since his bankruptcy, Respondent has been employed as a broker/manager at the Bee Ridge office of Schlott Realtors and as a part of his duties, is responsible for hiring, training, and supervising sales associates. Larry D. Romito, manager and president of the Florida division of Schlott Realty, learned of the Respondent from two or three of his existing sales associates who spoke highly of him. As a result of their recommendations, Mr. Romito sought Respondent out and spent a substantial amount of time with him before offering him a job with the company. During more than fifteen hours of interview time, Respondent spoke quite frankly about his financial difficulties and their effect on him as well as what led up to them.
Since Respondent has come with the company, his performance has been exemplary. He has been involved in excess of one thousand transactions and his leadership has been remarkable. There are nine managers in the company and Respondent is to be recognized as the number one manager of all divisions at the next award period. Mrs. Romito has found Respondent to be very objective and reliable and has had no questions with regard to Respondent's honest or integrity.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and subject matter in this case. Section 120.57(1), Florida Statutes.
Section 475.25(1)(b), Florida Statutes, authorizes the Commission to discipline the license of a licensee who:
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
.... It is immaterial to the guilt of the licensee that the victim or intended victim of the misconduct has sustained no damage or loss; that the damage or loss has been settled and paid after discovery of the misconduct; or that such victim or intended victim was a customer or person
in confidential relation with the licensee....
The burden of proof in this case is on the Petitioner, Division of Real Estate, Balino v. Department of Health and Rehabilitative Services, 348 So.2d 349 (Fla. 1st DCA 1977). Since discipline of a professional license is in the nature of a penal action, Petitioner, to satisfy its burden, must establish the Respondent's guilt by clear and convincing evidence, Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).
Both Petitioner and Respondent refer to the financing arrangements entered into by the Respondent incident to the purchase of Mrs. Mariner's property as a "bridge loan" and that such an arrangement is a perfectly acceptable real estate financing tool. However, when a financing tool is used in such a fashion that it results in unfair advantage being taken of a client or property owner, with a potential for resultant financial loss, then the "regularity" of the procedure is called into question.
Mrs. Mariner's recollection of the incident is less than clear. In fact, from her testimony, it is difficult to establish what she recalls of the situation. However, it is not necessary to rely on Mrs. Mariner's testimony since the documentation speaks to the nature of the transaction.
Mr. Daniel is a registered real estate broker and case law is quite clear that the holder of a real estate license belongs to a privileged class. Inherent in those privileges is the related responsibility for honest, straightforward and ethical conduct. To acquire a license requires a showing of honesty, truthfulness, trustworthiness, good character and a reputation for fair dealing. To maintain that license, a license holder may not abandon any of these.
The evidence here demonstrates that Respondent engaged in misrepresentation, concealment, fraud and breach of trust. The manipulation of dates on the instruments here is clear evidence of a scheme. The periodic and partial payment of a second mortgage obligation payment does nothing to reduce Respondent's liability.
It is clear that Respondent's conduct in this case establishes that he is guilty of misrepresentation, fraud, dishonest dealing by scheme, and breach of trust in a business transaction in his relationship with Mrs. Mariner.
Respondent cannot successfully claim to have been misled by Mr. King so as to exculpate himself from responsibility for his actions herein. These transactions were clearly a predetermined scheme to purchase property for little cash and mostly paper and thereafter to convert it to cash by obtaining new financing made superior to the purchase money mortgage given to the original owner. This improperly affected the party with whom he dealt and cannot be justified.
Section 475.25 permits the Commission to suspend or revoke a license and to impose an administrative fine not to exceed $1,000.00 in this case. The evidence shows that Respondent has already paid a heavy personal price as a result of his manipulations and has apparently demonstrated substantial rehabilitation by his performance in a position of trust with his current employer. However, under the circumstances shown, it is imperative that sufficient corrective action be taken to convince the Respondent that a licensed real estate broker must conduct his dealings in an honest and ethical manner.
Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore:
RECOMMENDED that Respondent's license as a real estate broker be revoked and that he pay an administrative fine of $1,000.00 but that the revocation be suspended for a period of three years under such terms and conditions as may be prescribed by the Commission.
RECOMMENDED this 16th day of March, 1989 at Tallahassee, Florida.
ARNOLD H. POLLOCK
Filed with the Clerk of the Division of Administrative Hearings this 16th day of March, 1989.
APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-4573
The following constituted my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case.
Steven W. Johnson, Esquire Department of Professional Regulation
Dana J. Watts, Esquire 700 Sarasota Way
Kenneth A. Easley, Esquire General Counsel
Darlene F. Keller Division Director Division of Real Estate
