vs. ) CASE NO. 89-6932
Respondent. )
A hearing was held in this case in Bradenton, Florida on February 21, 1990, before Arnold H. Pollock, a Hearing Officer with the Division of Administrative Hearings.
For the Petitioner: Steven W. Johnson, Esquire
400 W. Robinson Street
P. O. Box 1900 Orlando, Florida 32802
The issue for consideration in this case is whether Respondent's license as a real estate broker in Florida should be disciplined because of the alleged misconduct outlined in the Administrative Complaint filed herein.
On August 17, 1989, Larry Gonzalez, Secretary of the Department of Professional Regulation, (Department), on behalf of the Division of Real Estate, filed an Administrative Complaint in this case alleging in three Counts that Respondent was guilty of various violations of Section 475.25(1), Florida Statutes. On November 7, 1989, the Respondent requested a formal hearing on the allegations and by letter dated December 14, 1989, the matter was forwarded to the Division of Administrative Hearings for appointment of a Hearing Officer.
Through Notice of Hearing dated January 17, 1990, the undersigned set the case for hearing on January 31, 1990, however, pursuant to Petitioner's Motion to Continue, on January 29, 1990, the undersigned reset the case for hearing on February 21, 1990 at which time it was held as scheduled.
At the hearing, Petitioner presented the testimony of Mary Louise Hockman, complainant herein, and Frank Maye, an investigator with the Department.
Petitioner also introduced Petitioner's Exhibits 1 through 8. Respondent testified in his own behalf but did not present any documentation or other evidence.
No transcript was provided, however, subsequent to the hearing, Petitioner submitted Proposed Findings of Fact which are accepted and have been incorporated in this Recommended Order.
At all times pertinent to the allegations in issue, the Respondent was licensed as a real estate broker in Florida. However, since April 28, 1989, his broker's license has been nonactive. The Petitioner, Division of Real Estate, is the state agency responsible for the policing of and administration of rules governing the real estate profession in Florida.
In May, 1987, Mary Louise Hockman and her husband, Elden D. Hockman, now deceased, were interested in purchasing a flea market somewhere in Florida. A requirement was that it have additional acreage on which a recreational vehicle park could be established. At just about that time, Rickey L. Reynolds, a family friend, told them of the Cypress Hut, a Florida corporation, which owned and operated a flea market near Okeechobee, Florida. The property in question was sufficiently large to accommodate a recreational vehicle park.
The Hockmans went to look at the property in question and, satisfied with what they saw, made an offer to buy it through the Respondent who was the agent for the owner, Mr. James Evans. This offer was memorialized in a purchase and sale agreement executed on May 23, 1987, signed by Mrs. Hockman and Mr. Reynolds, her partner, as buyers, and the Cypress Hut Flea Market, through James
H. Evans, as seller. The purchase price was $550,000.00. Ten Thousand dollars was paid by Mrs. Hockman to the Respondent as an initial down payment. An additional $117,500.00 was to be paid at time of closing, and the remaining
$422,500.00 was to be payable on a semiannual basis at 8% interest. The agreement also called for a commission of $27,500.00 to be paid to the Respondent, secured by a note between the buyer and the broker. Closing was to take place at a reasonable time after all contingencies, outlined separately, were fulfilled.
These contingencies were memorialized in an addendum to the purchase and sale agreement signed by both the buyer and the seller on May 29, 1987. They included:
Buyer's inspection and approval of all books and records of the corporation,
Approval of a 55 unit recreational vehicle camp ground by county and city zoning officials, including environmental approval, and
Seller's providing a survey proving that 17.2 acres was contained in the
total real estate parcel to be conveyed.
The addendum also provided that in the event these contingencies could not be satisfied to the buyer's "full satisfaction", all earnest money would be returned immediately to the buyer upon written demand.
To satisfy these requirements, the seller provided the Hockmans with several sheets of paper containing yearly figures for the operation of the flea market. These figures did not constitute the full books and records of the corporation relating to the flea market operation and were not satisfactory to the Hockmans. The Hockmans were also provided with several 1983 applications submitted by Cypress Hut corporation to the county zoning officials, which were subsequently approved, for the establishment of a mobile home park on the property. A mobile home park approval is sufficient approval for the establishment and operation of a recreational vehicle park. However, the Hockmans were never provided with a survey clearly defining the extent of the real property in question.
On September 21, 1987, Mrs. Hockman wrote to the Respondent indicating that if the formal contract for the sale was not signed by October 1, 1987, they would consider their offer withdrawn and demand a return of the earnest money paid, plus interest. This letter, sent to the Respondent by certified mail, was received by Respondent's wife who signed for it. Respondent claims, however, that he never received it. He and his wife were separated at the time, he was not living with her, and she neither gave it to him nor told him it had arrived. Respondent's wife was not called to verify his claim, but Petitioner was unable to present any evidence to disprove it, and it is accepted as fact.
Nonetheless, on or about September 27, 1987, Mrs. Hockman personally spoke with the Respondent at the Cypress Hut Flea Market and directly reiterated to him the substance and terms of that letter she had sent him. In response, Respondent indicated he would speak to Mr. Evans about the Hockmans' demand. Shortly thereafter, Respondent wrote to Mr. Hockman, referring to an alleged statement by Hockman's attorney that all contingencies had been satisfied, and acknowledging that Cypress Hut was ready and willing to close as of October 1, 1987. No independent evidence of such an opinion by Hockman's attorney was forthcoming and that claim is found to be without merit. Enclosed with Respondent's letter, was a letter he had received from Evans making a demand upon him for the disbursement of the earnest money, based on Hockman's indication of no further interest in going through with the purchase.
Notwithstanding this direct notice, neither Mr. Evans nor the Respondent contacted the Hockmans prior to October 1, 1987, and after that date, the Hockmans made several telephone calls to the Respondent which went unanswered. Finally, because they had made plans to go on vacation, they departed the area and were assured by Mr. Reynolds, their partner in the proposed purchase, that he would contact Respondent in their absence. Respondent denies he did and there is, again, no evidence to the contrary.
When the Hockmans returned to the area, they contacted Respondent and advised him again that they wanted their earnest money refunded as they were considering the agreement void. Respondent did not repay the money in question. Instead, on October 13, 1987, he withdrew the $10,000.00 paid to him by the Hockmans, which he had placed in his escrow account pending closing, and on October 15, 1987, purchased a cashier's check in the amount of $5,000.00 payable to James H. Evans. This represented one-half of the earnest money paid by the Hockmans. He converted the other $5,000.00 to his own use.
Respondent justifies doing this on the basis of a previous phone call he claims to have made to the Division of Real Estate in which he outlined the circumstances and sought the Division's guidance. He states he was advised by a gentleman, further unidentified, who indicated he had two options: to forward
the money to the Division for agency arbitration of the dispute between the Hockmans and Mr. Evans, or to adhere to the terms of the agreement, consider the deposit forfeited, disburse the funds to the seller and himself, and rely upon the courts to determine, upon claim filed by the buyer, who was entitled to the funds. He chose the latter though it is found to be unlikely he got such advice.
Suit was thereafter filed by Mrs. Hockman against not only the Respondent but also the Cypress Hut. Respondent chose not to retain counsel but to rely on counsel for his co-defendant to represent him. Prior to hearing, however, the claim against Cypress Hut was abandoned, its counsel released, and Respondent was left as sole defendant. He still did not seek a delay to retain counsel and at the very brief hearing held before the Circuit Judge in December, 1988, a Judgement was entered against him in favor of Mrs. Hockman for the full
$10,000.00, plus interest and costs.
With knowledge of the terms of the Judgement, Respondent still has not satisfied it through reimbursement of Mrs. Hockman, claiming he has no assets with which to do so. Discovery in aid of execution revealed he had no assets, either realty or personalty, upon which to execute since all his assets were transferred to his wife prior to suit.
When Mrs. Hockman filed her initial complaint with the Division, an investigation was conducted by Mr. Maye who recommended that action be taken against Respondent based on evidence of violations. However, it would appear that a contrary position was taken by the Division which advised Respondent, in writing, that a determination of no probable cause had been made. However, after the judgement was entered against Respondent, the Division reversed itself and filed the instant Administrative Complaint.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter in this case. Section 120.57(1), Florida Statutes.
Petitioner alleges in Count I of the Administrative Complaint that by failing to satisfy the judgement Mrs. Hockman secured against him, Respondent is guilty of the various venalities outlined in Section 475.25(1)(b), Florida Statutes; Count II alleges that Respondent failed to notify the Division of the conflicting demands for disbursement he received, in violation of Section 475.25(1)(d), Florida Statutes; and Count III alleges that Respondent failed to properly maintain trust funds until disbursement was properly authorized, in violation of Section 475.25(1)(k), Florida Statutes.
The burden to establish the various allegations herein rests upon the Petitioner which must establish Respondent's misconduct by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292, 295 (Fla. 1987).
Under the provisions of Section 475.25(1), Florida Statutes, the Florida Real Estate Commission is authorized to discipline a licensee if it finds that individual:
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, ... at the time which has
been agreed upon or is required by law or, in the absence of a fixed time upon the demand of the person entitled to such accounting and delivery However, if
the licensee, in good faith, has doubts
... or if conflicting demands have been made upon him for the escrowed property, [he] shall promptly notify the commission of the conflicting demands and shall promptly:
Request that the commission issue an escrow disbursement order determining who is entitled to the escrowed property;
With the consent of all parties, submit the matter to arbitration; or
By interpleader or otherwise, seek adjudication of the matter by a court.
Has failed, if a broker, to immediately place, upon receipt, any [funds received in his capacity as a broker] in escrow ... until disbursement thereof is properly authorized ....
Had the Respondent disbursed the questioned funds solely to Mr. Evans, without keeping a portion thereof for his own use, the issue as to fraud or breach of trust, would not have been so clear. However, there is ample evidence that the conditions stipulated by the parties as contingencies to be satisfied prior to closing, to the complete satisfaction of the buyers, had not been met. Assuming the permits had been secured, the description of the financial records provided should demonstrate to the least sophisticated of businessmen that they did not constitute the type of books and records of the corporation requested by the buyers. Clearly, as a real estate broker, Respondent has more business knowledge than to accept that they did. Further, the survey was not furnished at all, and taken together, Respondent could not reasonably consider the buyers to have, without legitimate justification, backed out of the transaction. He could not have reasonably. considered the deposit forfeited so as to justify disbursement to the seller and, under the terms of the agreement, to himself as well. This is so, especially in light of the demand for reimbursement by the buyers based on their clearly stated lack of satisfaction with the seller's fulfillment of the contingencies upon which both had agreed. It is clear, therefore, that by making disbursement as he did, either without or contra to the instructions of the commission, he is guilty of, at best, a breach of trust in a business transaction and, at worst, fraud.
Accepting that Respondent contacted the commission when he received the conflicting demands and had doubts as to whom the money in issue should be disbursed, he did not choose any of the statutorily permitted courses for the resolution of his dilemma. He did not request the commission to issue an escrow disbursement order; he did not submit the matter to arbitration; and he did not seek adjudication of the matter by a court in such a manner as provided by the statute. His conversion of half the money to his own use and disbursement of half on the basis of his determination of a forfeiture, thereafter waiting to be
sued, does not, reasonably, constitute seeking adjudication as called for as a permitted alternative under the terms of the statute. Therefore, his actions in this regard constitute a violation of the statute, as well.
Further, in light of the discussion in the paragraph next above, by failing to maintain the questioned funds in his escrow account until an authorized disbursement, Respondent is guilty of a violation of Section 425.25(1)(k), Florida Statutes, as well. Petitioner introduced no evidence of prior misconduct on the part of the Respondent and it is, therefore, concluded this is a first offense. Maximum disciplinary actions are outlined in Section 425.25(1), Florida Statutes, and suggested penalties, within the parameters set forth in the statute are found in Rule 21V-24.001, F.A.C. Considering the gravity of the instant offense and the fact that this is his first established offense, action less than revocation, as is recommended by Petitioner's counsel in his Proposed Recommended Order, appears appropriate.
Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore:
RECOMMENDED that Respondent, GEORGE RICHARD MCKOWEN's license as a real estate broker in Florida be suspended for three years, that he pay an administrative fine of $3,000.00, and that he be reprimanded.
RECOMMENDED this 20th day of March, 1990, in Tallahassee, Florida.
ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The DeSoto Building
Filed with the Clerk of the Division of Administrative Hearings this 20th day of March, 1990.
Steven W. Johnson, Esquire DPR-Division of Real Estate
400 W. Robinson Street
P. O. Box 1900 Orlando, Florida 32802
Kenneth E. Easley General Counsel
Darlene F. Keller, Director Division of Real Estate
