STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 88-4667

)

PATRICIA SMITHWICK VALZ and )

EDISON PROPERTIES, INC., )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Veronica E. Donnelly, held a formal hearing in the above-styled case on September 11, October 10 and November 17, 1989, in Fort Myers, Florida.

APPEARANCES

For Petitioner: Steven W. Johnson, Esquire

Department of Professional Division of Real Estate

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

For Respondent: Howard Hadley, Esquire

827 Deltona Boulevard

Deltona, Florida 32775 STATEMENT OF THE ISSUES

Whether the Respondents are 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, all in violation of Section 475.25(1)(b), Florida Statutes.

Whether the Respondents are guilty of having failed to account and deliver a deposit entrusted to them in violation of Section 475.25(1)(d), Florida Statutes.

Whether the Respondents are guilty of having failed to inform the Florida Real Estate Commission of having received conflicting demands for an earnest money deposit in violation of Section 475.25(1)(d), Florida Statutes.

Whether the Respondents' respective real estate licenses and registration should be suspended, revoked, or otherwise disciplined as a result of the alleged violations if these violations are proven to have occurred.

PRELIMINARY STATEMENT

The Petitioner, Department of Professional Regulation, (the Department) filed an Administrative Complaint before the Florida Real Estate Commission on August 25, 1988, alleging that Respondents Patricia Smithwick Valz (Valz) and Edison Properties, Inc. (Edison) violated state law in their individual capacities as licensed real estate brokers in Florida during a business transaction. As a result, the Department seeks to have disciplinary sanctions imposed upon the licenses and the registration of the Respondents.

In an Answer and Election of Rights Form mailed September 15, 1988, the Respondents disputed the allegations of fact set forth in the Administrative Complaint and requested a formal hearing.

During the hearing, the Petitioner presented three witnesses and filed the following exhibits: 1-14, 19, 21-26, 28-29, and 34. The Respondents called one witness and submitted one exhibit. All of the exhibits were admitted into evidence.

An excerpt of the proceedings from September 11, 1989, was filed simultaneously with the proposed recommended order filed by the Respondents. Rulings on the proposed findings of fact submitted by the parties are in the Appendix to the Recommended Order.

FINDINGS OF FACT

1. At all times material to these proceedings, Respondent Valz was a licensed real estate broker in Florida, and held license number 0399628.

   
   

2. At all times material to these proceedings, Respondent Edison was a corporation registered as a real estate brokerage in Florida, and held license number 0244097. Respondent Valz was the active broker for Edison, and held the office of vice-president for the corporation.

   
   

3. Mr. Gilles A. Pageau, an owner and president of Edison, is a real estate investor and developer from Canada who does not have a real estate salesman's or broker's license. The corporation was formed and registered as a real estate brokerage in Florida in order to reduce the cost of real estate commissions paid on Florida lands purchased for development purposes. Normally, Mr. Pageau negotiates and handles Florida real estate purchases by himself, without the assistance of Respondent Valz. The corporation is named as his broker, and the customary commission on large tracts of land is split between Edison and the listing broker. Essentially, to Mr. Pageau, the placement of a portion of the real estate commission with Edison results in the saving of commission costs. Such monies do not actually go to Respondent Edison.

   Instead, Mr. Pageau pays that much less for the real property during purchase.

   
   

4. In August 1987, Mr. Pageau, as trustee, entered into formal negotiations with Frank W. Helmerich, as trustee, regarding the purchase of a large tract of raw land in Lee County, Florida. Although Respondent Valz was not involved in the negotiations, she witnessed Mr. Pageau's signature on one written offer to purchase the real property. Mr. Pageau signed the offer in his capacity as trustee, and Respondent Valz acknowledged that she had received a

   ten thousand dollar note as an earnest money deposit from Mr. Pageau in her capacity as escrow agent for Respondent Edison.

   
   

5. The proposal was rejected by Mr. Helmerich and his principals and the offer became void. Eventually, a contract for sale and purchase of the property was entered into between the parties to the transaction on November 1, 1987. Respondent Valz was not involved in the negotiations and had no personal knowledge that a contract had been completed between the parties until a later date.

   
   

6. As part of the contract, Mr. Pageau, trustee, agreed to place his earnest money deposit on the property with Edison in its escrow account. The contract required that twenty-five thousand dollars be placed in the escrow account. Page 2 of the offer, which became the contract, has a handwritten note over the typed provisions in paragraph Q which states, "Escrow are with agent." The first page of the contract states that the escrow agent is Edison Properties, one of the Respondents in this proceeding.

   
   

7. On November 2, 1987, an employee of Respondent Edison, acting under the direction of Mr. Pageau, in his capacity as the president of Respondent Edison, placed a promissory note signed by Gilles A. Pageau, maker, into a bank for safekeeping. The note was to be paid to Edison Properties, Inc., and was not made payable until the closing of the land purchased from Mr. Helmerich, trustee.

   
   

8. As the promissory note did not contain a date certain for payment, it was not a completed instrument at the time it was accepted by Respondent Edison, through Mr. Pageau, president, in its capacity as escrow agent. The promissory note, on its face, did not meet the requirements set forth in the contract for sale and purchase. The twenty-five thousand dollars was not in any escrow as these funds were not earmarked and reserved for use in this business transaction. Mr. Helmerich did not have the consideration or the liquidated damages reserves he believed he had acquired for the sellers under the terms of the contract.

   
   

9. The closing did not take place as set forth in the contract between Mr. Pageau, trustee, and Mr. Helmerich, trustee. On December 16, 1987, demand was made upon Respondent Valz, as the active broker for Respondent Edison, to release the escrowed twenty-five thousand dollars to Mr. Helmerich, trustee, as liquidated damages under the contract. This demand was the first time Respondent Valz was aware that an earnest money deposit was allegedly in an escrow account in Edison Properties, Inc.

   
   

10. After the initial demand for the escrow deposit was made, Mr. Pageau, as trustee, directed Respondent Valz, as broker for Respondent Edison, to hold the escrow deposit until further notice. A copy of this letter was sent to Mr. Helmerich by Mr. Pageau. In fact, pursuant to the terms of the promissory note, an escrow did not exist, and the letter was further perpetration of the fraud upon the sellers regarding the earnest money deposit.

    
    

11. On December 18, 1987, Mr. Helmerich and Mr. Pageau jointly signed a letter which directed Respondent Valz to disburse all deposit monies held by Respondent Edison to the sellers. Mr. Pageau's signature on the letter was a continued perpetration of the fraud because an escrowed money deposit still did not exist.

12. On or about January 7, 1988, the seller's attorney Truman J. Costello, demanded the earnest money deposit from Respondent Valz, as broker for Edison.

    
    

13. On January 12, 1988, Respondent Valz, as broker for Respondent Edison, responded in writing to the attorney's demand. In her letter, Respondent Valz stated that the deposit would be transferred to Chicago Title, in cash, on or before January 22, 1988. The letter further advised that the parties to the contract were attempting to settle the dispute. In response to the attorney's inquiry, Respondent Valz explained in the letter that she did not notify the Real Estate Commission of conflicting demands on the earnest money deposit because the parties were attempting to resolve their dispute and were trying to close the real estate transaction.

14 An escrowed money deposit still did not exist at the time this letter from Respondent Valz was sent. It is unknown whether Respondent Valz was aware that the promissory note was without value. The note may still have been in the bank, hidden from direct inspection by Respondent Valz.

1. The funds Respondent Valz stated would be transferred were never placed with Chicago Title, and Mr. Pageau as trustee, has not purchased the property or paid the liquidated damages.

   
   

2. No aggravating or mitigating circumstances were presented to the Hearing Officer.

   
   

   CONCLUSIONS OF LAW

   
   

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

   
   

4. Section 475.25, Florida Statutes, empowers the Florida Real Estate Commission to suspend, revoke, or otherwise discipline the licenses of the Respondents if they are found guilty of any of the acts enumerated in Section 475.25, Florida Statutes.

   
   

5. A proceeding to discipline a license is penal in nature. State ex rel. Vining v. Florida Real Estate Commission, 281 So.2d 487 (Fla. 1973). In such contests, the Petitioner has the burden and must prove by clear and convincing evidence that the Respondent committed the violations set forth in the Administrative Complaint. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).

   
   

6. In this case, a real estate broker and the corporation registered as a real estate brokerage have been charged with six separate violations of Florida law. Count I of the Administrative Complaint, charges Respondent Valz with having committed 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. Count II charges Respondent Edison with the same violation.

   
   

7. The evidence adduced at hearing demonstrates that Respondent Valz did not participate in the fraudulent or dishonest dealings involved in the contract for the sale and purchase of real estate between Gilles A. Pageau, trustee and Frank W. Helmerich, trustee, as alleged in the Administrative Complaint. Accordingly, Respondent Valz is not guilty of the alleged violation of Section 475.25(1)(b), Florida Statutes. There was no showing that she was aware of the transaction up until the time she received the demand for the liquidated damages from Mr. Helmerich which was sent to her on December 16, 1987. The testimony of

   Mr. Pageau at hearing was that Respondent Valz was not involved in the transaction. Mr. Pageau, as president of Respondent Edison, had not informed her of the contract. Mr. Pageau kept all of the contract documents in his desk and they were not available for the broker's review.

   
   

8. As an owner and corporate officer of Respondent Edison, Mr. Pageau misrepresented to the sellers that $25,000 had been set aside to be used as an earnest money deposit or liquidated damages, if the real estate closing did not occur. In fact, no such earmarking of funds occurred, and the security the sellers reasonably believed they had acquired, did not exist. Contrary to the contract, the incomplete promissory note demonstrates on its face that Mr. Pageau never intended to give the sellers an earnest money deposit. Edison Properties, Inc., in its status as a registered real estate brokerage, was used by Mr. Pageau, as president of the corporation, to actively conceal this fact on numerous occasions throughout the transaction. Based upon Mr. Pageau's actions, Respondent Edison is guilty of a violation of Section 475.25(1)(b), Florida Statutes, as set forth in Count II of the complaint.

   
   

9. Count III charges Respondent Valz with having failed to account and deliver a deposit in violation of Section 475.25(1)(d), Florida Statutes. Count IV charges Respondent Edison with the same violation. The evidence presented demonstrates that Respondent Valz was not aware that an instrument, which was purportedly a promissory note, had been placed with Edison Properties, Inc. until she received the December 16, 1987 demand for funds from Mr. Helmerich. Neither the funds nor the incomplete promissory note were received by Respondent Valz. She did not consent to the escrow alleged within the Administrative Complaint, and its existence was actively concealed from her by Mr. Pageau, as president of Respondent Edison. Delivery of the instrument to the escrow agent was necessary to state a cause of action against Respondent Valz in this case. No such delivery was shown to have occurred. Abstract Corporation v. Park Avenue Paints, Inc., 235 So.2d 323 (Fla. 4th DCA 1970). As a result, Respondent Valz is not guilty of having violated Section 475.25(1)(d), Florida Statutes in Count III of the complaint.

   
   

10. The promissory note accepted by Respondent Edison from Mr. Pageau is an incomplete instrument as it does not contain a definite time for payment. Sections 673.109(2) and 673.115(1), Florida Statutes. Essentially, the piece of paper which claimed to be a promissory note was without value and could not be exchanged for currency by anyone in order to acquire funds the seller believed would be held as the earnest money deposit. As Section 475.25(1)(d), Florida Statutes, requires that an escrowed document have some value, it appears that Respondent Edison is also not guilty of having violated Section 475.25(1)(d), Florida Statutes in Count IV of the complaint.

    
    

11. Count V and VI relate to the respective failures of Respondent Valz and Respondent Edison to inform the Commission of having received conflicting demands for an earnest money deposit in violation of Section 475.25(1)(d), Florida Statutes. Because the earnest money did not exist, the Respondents are not guilty of the violations expressed in Count V and Count VI of the complaint. All of the facts presented indicate that the only improper conduct proved by the Petitioner was the fraud perpetrated by Mr. Pageau in his corporate capacity. The other allegations in the complaint incorrectly presume that the broker was involved in the fraud and that the promissory note was a negotiable instrument.

    
    

12. Chapter 21V-24, Florida Administrative Code, sets forth the disciplinary guidelines from which disciplinary guidelines will be imposed for violations of Chapter 475, Florida Statutes. For a violation of Section 475.25,

Florida Statutes, Rule 21V-24.001, Florida Administrative Code, provides as follows, in pertinent part:

(3) The minimum penalty for all below listed sections is a reprimand and/or fine up to

$1,000.00 per count... The maximum penalties are as listed:

(h) 475.25(1)(b) - Up to 5 years suspension or revocation.

RECOMMENDATION

Based upon the foregoing, it is RECOMMENDED:

1. That all violations charged against Patricia Smithwick Valz, as set forth in the Administrative Complaint, Case No. 88-4667, should be dismissed.

   
   

2. That the registration of Edison Properties, Inc. as a real estate brokerage in Florida be revoked for five years based upon the finding that the Respondent, through the acts of its corporate president, is guilty of fraud, misrepresentation, concealment, 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, as set forth in Count II of the Administrative Complaint.

   
   

3. That the violations charged against the Respondent, Edison Properties, Inc. in Count IV and Count VI, should be dismissed.

DONE and ENTERED this 14th day of February, 1990, in Tallahassee, Leon County, Florida.

VERONICA E. DONNELLY

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904)488-9675

Filed with the Clerk of the Division of Administrative Hearings this 14th day of February, 1990.

APPENDIX TO RECOMMENDED ORDER

Petitioner's proposed findings of fact are addressed as follows:

1. Accepted. See HO number 1.

2. Accepted. See HO number 2.

3. Accepted. See HO number 3.

4. Rejected. Contrary to fact. A genuine promissory note which had any value did not even exist. See HO number 5 - number 8.

5. Accepted.

6. Accepted.

7. Accepted. See HO number 9.

8. Accepted.

9. Rejected. Contrary to fact. See HO number 11.

10. Accepted. See HO number 12.

11. Rejected. No earnest money existed. Contrary to fact. See HO number 10 and number 14.

Respondent's proposed findings of fact are addressed as follows:

1. Accepted. See HO number 1.

2. Rejected. Contrary to fact. See HO number 6.

3. Rejected. Irrelevant.

4. Accepted. See HO number 3.

5. Accepted as to Respondent Valz. See HO number 5. Rejected as to Respondent Edison. Contrary to fact. See HO number 6 - number 8.

6. Accepted. But the reason was the fraud perpetrated by Mr. Pageau. See HO number 8.

7. Rejected. Irrelevant.

8. Accepted as to Respondent Valz. Rejected as to Respondent Edison. See HO number 9 - number 10

9. Accepted. See HO number 5 and number 9.

10. Accepted as to Respondent Valz. See HO number 5. Rejected as to Respondent Edison. See HO number 6 - number 8.

11. Rejected. Irrelevant.

12. Accepted.

13. Rejected. The real estate sales and purchase agreement establishes facts to the contrary.

14. Rejected. Speculative.

15. Accepted. See HO number 5.

16. Accepted.

17. Rejected. Contrary to fact. See HO number 15.

18. Rejected. Contrary to fact.

19. Accepted. See HO number 7.

20. Accepted. See HO number 9.

COPIES FURNISHED:

Steven W. Johnson, Esquire DPR - Division of Real Estate

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

Howard Hadley, Esquire 827 Deltona Boulevard

Deltona, Florida 32775

Darlene F. Keller, Director Division of Real Estate

400 West Robinson Street Post Office Box 1900 Orlando, Florida 32302

Kenneth E. Easley, Esquire General Counsel

Department of Professional Regulation

1940 North Monroe, Suite 60

Tallahassee, Florida 32399-0792

Docket for Case No: 88-004667

Orders for Case No: 88-004667