STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL )

REGULATION, DIVISION OF )

REAL ESTATE, )

)

Petitioner, )

)

vs. ) CASE NO. 89-3929

)

RONOLD E. KLINE, )

)

Respondent. )

)

RECOMMENDED ORDER

On November 15, 1989, a formal administrative hearing was held in this case in New Port Richey, Florida, before J. Lawrence Johnston, Hearing Officer, Division of Administrative Hearings.

APPEARANCES

For Petitioner: Steven Wendell Johnson, Esquire

Division of Real Estate

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

For Respondent: Ronold E. Kline

1240 Meredith Drive

Spring Hill, Florida 34608 STATEMENT OF THE ISSUES

The issue in this case is whether the Florida Real Estate Commission should discipline the Respondent, Ronold E. Kline, on charges alleged in a three-count Administrative Complaint filed by the Petitioner, the Department of Professional Regulation, Division of Real Estate, on or about March 24, 1989.

PRELIMINARY STATEMENT

In a three-count Administrative Complaint, the Petitioner, the Department of Professional Regulation, Division of Real Estate, charged the Respondent, Ronold E. Kline, with: (1) 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 (1987); (2) failure to account for and deliver a deposit in violation of Section 475.25(1)(d), Florida Statutes (1987); and (3) failure to maintain trust funds in his real estate brokerage escrow bank account or some other proper depository until disbursement was properly

authorized, a violation of Section 475.25(1)(k), Florida Statutes (1987). All of the charges are based on the same alleged facts involving the Respondent's handling of an escrow deposit.

FINDINGS OF FACT

1. At all times pertinent to these Findings of Fact, the Respondent has been a licensed real estate broker in the State of Florida having been issued license number 0317497.

   
   

2. In 1985, the Respondent operated his own real estate brokerage firm, Kline Real Estate, Inc., which acted as a marketing agent for Majestic Builders, a construction company. Both Kline Real Estate, Inc., and Majestic Builders did business in and around the Spring Hill, Hernando County, Florida, area.

   Majestic Builders was owned by George Orlando. In early 1985, Majestic Builders' qualifying general contractor was Stephen Cannon.

   
   

3. In early 1985, the Respondent was contacted by the Whitmarshes of Lynchburg, Virginia, who expressed interest in having a modified version of a Majestic Builders model home built on a piece of property in Spring Hill, Florida. Eventually, the Whitmarshes selected a lot on which to have the residence built, and the Respondent brokered the purchase of the lot (from a third party) and the construction contract. Both contracts were entered into on or about April 27, 1985. Both contracts required that the Whitmarshes make a deposit, $1,000 on the lot purchase and $5,000 on the construction contract. Both deposits were made into the escrow account maintained by Kline Real Estate, Inc. The $1,000 deposit was disbursed without incident at the closing of the lot purchase on or about May 7, 1985.

   
   

4. The construction contract between the Whitmarshes and Majestic Builders provided in connection with the deposit:

   
   

   DEPOSIT TO FIX HOME PRICE FOR PERIOD OF 6 MOS. [MONTHS), DURING WHICH COMMENCEMENT MAY BEGIN WITHIN 30 DAYS OF NOTIFICATION AND INITIAL PAYMENT OF 30% OF BALANCE. SHOULD COMMENCEMENT BE AFTER 6 MOS., DEPOSIT WILL STILL APPLY BUT TO NEW PURCHASE PRICE OF

   MODEL AT TIME OF CONSTRUCTION.

   
   

5. For the balance of the spring and summer of 1985, the Whitmarshes continued to consult with the Respondent and, primarily through the Respondent, with George Orlando regarding the modifications the Whitmarshes desired to make to the Majestic Builders model, but they were not particularly anxious to commence construction for personal, family health reasons. In addition, they understood and knew from the contract provision and from conversation with the Respondent that their $5,000 deposit was supposed to be credited to the price of the home they eventually built even if commencement was more than six months from the contract date.

   
   

6. On or about November 11, 1985, the Respondent advised the Whitmarshes by telephone, confirmed in writing:

   
   

   This [is] notification, that in accordance with your contract, you are legally in default. This letter is written out of legal necessity and has no bearing on your deposit

   which will bw [sic] applied to the agreed upon purchase price of a Majestic Home. The default merely is to state the builder is no longer held to the prices quoted. And any changes either up or down will be reflected in the new contract price. (Emphasis added.)

   
   

7. Notwithstanding his November 11 letter, the Respondent withdrew the Whitmarshes' $5,000 deposit from the Kline Real Estate, Inc., escrow account and deposited it in the Kline Real Estate, Inc. operating account. Of the $5,000,

   $1,000 was used the purchase of a building lot for Majestic Builders, and $1,500 was paid directly to George Orlando, to whom the Respondent believed the $5,000 belonged. 1/ The Respondent is unable to account for the balance of the

   $5,000. 2/

   
   

8. On or about March 21, 1986, the Respondent received a letter from Mr. Whitmarsh stating: "With this letter I authorize you to use $500 from my escrow account to obtain a new floor plan and prepare a cost estimate for my revised version of your Wind and Wildfire Model Home." The Respondent, who had had a heart attack in September, 1985, and was in the process of closing out Kline Real Estate, Inc., and getting out of the real estate business, passed the letter on to George Orlando. Orlando balked at the request, taking the position that the purpose of the $5,000 was not for use to draw up revised plans. But it is the Respondent's understanding that Orlando eventually relented and agreed not to require the Whitmarshes to pay for the revised plans with new money. It is unclear from the evidence whether revised plans ever were drawn. 3/

   
   

9. In approximately June or July, 1986, the Respondent closed Kline Real Estate, Inc., and got out of the real estate business. He never heard anything else from the Whitmarshes about the transaction and assumed that Orlando and the Whitmarshes had satisfactorily concluded their business dealings. But in fact in approximately early 1987, the Whitmarshes received information that Majestic Builders was not a licensed contractor. Although, on checking, they learned that Majestic Builders then had a licensed qualifying contractor, the Whitmarshes still did not feel comfortable with Orlando and Majestic Builders. In about April, 1987, the Whitmarshes decided to hire another builder and asked Orlando for the return of their deposit. Orlando refused, saying that the Respondent had the money. 4/ Nonetheless, the Whitmarshes never contacted the Respondent for the return of the deposit. Later, the Whitmarshes and Orlando became involved in another dispute arising out of the alleged improper use of Orlando's Wind and Wildfire drawings by the Whitmarshes and the builder they eventually hired, Stephen Cannon, who had been Majestic Builders' qualifying general contractor but had left to start his own construction company with the understanding that Cannon would not use any of Majestic Builders' drawings. The Respondent had no knowledge of any of these disputes between Orlando and the Whitmarshes until he was interviewed by a Department of Professional Regulation (DPR) investigator in August, 1988. The DPR had begun an investigation of Orlando on the Whitmarshes' complaint of alleged violations of the laws regulating construction contractors and learned that the dispute involved a deposit that had been held in trust by a licensed real estate broker. DPR then began an investigation of the Respondent.

   CONCLUSIONS OF LAW

   
   

10. Section 475.25(1), Florida Statutes (1987), authorizes the Florida Real Estate Commission to discipline a licensed real estate broker who:

    
    

    (b) 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 . . .

    * * *

    (d) Has failed to account or deliver to any person, including a licensee under this chapter, at the time which has been agreed upon or is required by law or, in the absence of a fixed time, upon demand of the person entitled to such accounting and delivery, any personal property, such as money, fund, deposit, [or] check . . . 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 . . .

    * * *

    (k) Has failed, if a broker, to immediately place, upon receipt, any money, fund, deposit, check, or draft entrusted to him by any person dealing with him as a broker in escrow with a title company, banking institution, or savings and loan association located and doing business in this state, or to deposit such funds in a trust or escrow account maintained by him with some bank or savings and loan association located and doing business in this state, wherein the funds shall be kept until disbursement thereof is properly authorized . . .

    
    

11. Although the evidence did not prove that the Respondent committed fraud and some of the other violations described in Section 475.25(1)(b), the DPR did prove misrepresentation, culpable negligence and breach of trust, as well as violations of paragraphs (d) and (k) of Section 475.25(1), with respect to the escrowed $5,000 deposit. The Respondent should have maintained the deposit in his trust account until properly authorized, by both Orlando and the Whitmarshes, to disburse it, in accordance with Sections 475.25(1)(d) and (k).

    
    

12. Upon a finding of a licensee's guilt of violations described in Section 475.25(1), the Florida Real Estate Commission suspend the license for up to 10 years, revoke the license, impose an administrative fine not to exceed

$1,000 for each count or separate offense, issue a reprimand, or impose any or all of the foregoing discipline.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Florida Real Estate Commission enter a final order finding the Respondent, Ronold E. Kline, guilty of violating portions of paragraph (b) and paragraphs (d) and (k) of Sections 475.25(1), Florida Statutes (1987), and suspending his license for a period of one year.

RECOMMENDED this 15th day of December, 1989, in Tallahassee, Florida.

J. LAWRENCE JOHNSTON 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 15th day of December, 1989.

ENDNOTES

1/ There was heresay evidence--George Orland's out-of-court statement--that the Respondent retained the entire $5,000. But the hearsay would not have been admissible in a civil action, and there was no other direct or admissible hearsay evidence on which to base a finding that the Respondent retained the entire $5,000. See Section 120.58(1)(a), Florida Statutes (1987).

2/ There apparently never has been any dispute between the Respondent and George Orlando regarding the balance of the $5,000. If the balance was not paid to Orlando or spent for his benefit, it must be assumed for purposes of this proceeding that Orlando agreed to the disbursement of the balance.

3/ The Respondent testified that he has seen the revised plans, but Mr. Whitmarsh testified that he never saw any.

4/ Again, this hearsay statement cannot support a finding of fact that the Respondent had retained the deposit. See footnote 1, above.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 89-3929

To comply with the requirements of Section 120.59(2), Florida Statutes (1987), the following rulings are made on the Petitioner's proposed findings of fact (the Respondent did not file any):

1. Accepted and incorporated.

   
   

2. Second clause rejected as not proven. (There was no evidence that the Respondent had a separate agreement with Cannon.)

3-5. Accepted and incorporated.

6. This proposed finding, which appears to have been the Whitmarshes' primary complaint, is rejected as not proven. Cannon left, but it was not proven that he was not immediately replaced by another licensed contractor.

7.-9. Accepted and incorporated.

10. Rejected as not proven to the extent that it implies a proposed finding that Majestic Builders did not have a licensed qualifying contractor. See 6., above. Also rejected as not proven to the extent of the proposed finding that the Whitmarshes made a demand on the Respondent. (The evidence was that they never have made a demand on the Respondent but rather have sought the return of the deposit only from Orlando and Majestic Builders.) Otherwise, accepted and incorporated.

COPIES FURNISHED:

Steven Wendell Johnson, Esquire Division of Real Estate

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

Ronold E. Kline 1240 Meredith Drive

Spring Hill, Florida 34608

Ronold E. Kline

c/o Gary Brown Ford 8702 State Road 52

Hudson, Florida 34667

Florida Real Estate Commission c/o Darlene F. Keller

Division Director Division of Real Estate

400 West Robinson Street Post Office Box 1900 Orlando, Florida 32801

Kenneth E. Easley, Esquire General Counsel

Department of Professional Regulation

Northwood Centre

1940 North Monroe Street Suite 60

Tallahassee, Florida 32399-0729

Docket for Case No: 89-003929

Orders for Case No: 89-003929