STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL )

REGULATION, DIVISION OF )

REAL ESTATE, )

)

Petitioner, )

)

vs. ) CASE NO. 90-3104

)

THOMAS IRVIN MCINTOSH, )

t/a REALTY TREND, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, final hearing in the above-styled case was held in Tampa, Florida, on May 30, 1990, before Robert E. Meale, Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

The parties were represented at the hearing as follows: For Petitioner: Attorney Steven W. Johnson

Division of Real Estate Florida Real Estate Commission

400 W. Robinson St. Orlando, Florida 32801-1772

For Respondent: Thomas I. McIntosh

13542 N. Florida Ave. Tampa, Florida 33613

STATEMENT OF THE ISSUE

The issues in this case include whether Respondent is guilty of having committed culpable negligence in a business transaction or failed to maintain trust funds in a proper account until disbursement was authorized and, if so, the appropriate penalty.

PRELIMINARY STATEMENT

By Administrative Complaint dated April 26, 1990, Petitioner alleged that Respondent placed escrow money in an interest-bearing account without the prior permission of interested parties, as prohibited by Rule 21V-14.014, Florida Administrative Code, and thus in violation of Section 475.25(1)(e), Florida Statutes; committed fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence, or breach of trust in a business transaction, as prohibited by Section

475.25(1)(b), Florida Statutes; and failed to maintain trust funds in a real estate escrow account or other proper depository until disbursement was authorized, as required by Section 475.25(1)(k), Florida Statutes.

By Order of Emergency Suspension of Real Estate License dated May 16, 1990, Petitioner immediately suspended the license of Respondent.

By Election of Rights dated May 10, 1990, Respondent requested a formal hearing.

At the hearing, Petitioner and Respondent each called a witness.

Petitioner offered into evidence nine exhibits, and Respondent offered one exhibit. All exhibits were admitted into evidence. Petitioner filed a proposed recommended order. All of the proposed findings are adopted or adopted in substance except Paragraph 5, which is unsupported by clear and convincing evidence, and Paragraph 7, which is subordinate.

FINDINGS OF FACT

1. Respondent has been a licensed real estate broker in the State of Florida since 1983 and holds license number 0405933. His most current license was as a broker trading as Realty Trend.

   
   

2. Respondent started Realty Trend in 1985 for the primary purpose of managing rental properties. Although he had little or no training or experience in accounting, Respondent retained considerable responsibility for the day-to- day bookkeeping associated with his business, though at times he employed a bookkeeper.

   
   

3. Respondent maintained one account for sales transactions, in which he participated as the broker, and one account for property management activity. Respondent participated in few sales transactions and is phasing out of that part of the business. All escrow monies held by Respondent were kept in interest-bearing accounts. Although Respondent retained the interest, he disclosed this fact to the parties through the sales contract.

   
   

4. Within about 18 months, Respondent had acquired about 100 properties to manage. Respondent decided to automate the bookkeeping and purchased a computer program that would write checks, track income and expenses, generate reports, and generally handle all aspects of bookkeeping. The program was designed to assist in property management operations.

   
   

5. Emphasizing service to property owners, Respondent had always tried to send his checks for rent collected the past month between the tenth and fifteenth of each month. By August, 1989, Respondent had been warned by Petitioner that he had to allow two or three weeks for tenant's checks to clear and determine what emergency maintenance expenses might be incurred.

   
   

6. Through a combination of ignorance about bookkeeping, his responsibilities as a broker holding escrow monies, and the property management computer program, Respondent mishandled his trust account. His repeated bookkeeping errors and failure to take corrective action allowed a sizable shortage to accumulate by the time Petitioner conducted a routine office audit on November 17, 1989.

7. Respondent cooperated fully with the audit and promptly provided Petitioner's investigator with a box full of bank statements. His account was reaudited on January 8, 1990. Poor bookkeeping prevents a precise determination of the shortage, but it exceeds $10,000.

   
   

8. It is difficult to understand how Respondent's books became so confused as to become nearly worthless. There was no evidence of fraudulent intent. It appears as likely that Respondent overpaid property owners as that he overpaid himself.

   
   

9. Respondent's ongoing ignorance of his serious trust account shortages or, in the alternative, repeated failure to solve recognized trust account shortages represents culpable negligence. Even by the time of hearing, Respondent candidly admitted that he could not provide an accurate figure for the shortage and had not yet been able to repay the deficiency, although he intended to do so.

   
   

   CONCLUSIONS OF LAW

   
   

10. The Division of Administrative Hearings has jurisdiction of the parties and the subject matter. Section 120.57(1).

    
    

11. The Florida Real Estate Commission is responsible for disciplining real estate brokers. Section 475.25.

    
    

12. The Commission may revoke or suspend a license, impose an administrative fine for not more than $10,000, and issue a reprimand if it finds that a broker has failed to maintain funds in an escrow account until disbursement is authorized, in violation of Section 475.25(1)(k); has been guilty of fraud, misrepresentation, concealment, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence or breach of trust in any business transaction, in violation of Section 475.25(1)(b); or has violated any other provision of Chapter 475 or applicable rules, in violation of Section 475.25(1)(e)

    
    

13. Rule 21V-14.014 allows a broker to place earnest money deposits in an interest-bearing trust account provided certain conditions are met, including the permission of all of the parties.

    
    

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

    
    

15. Petitioner has proven that Respondent has failed to maintain funds in his escrow account until disbursement is authorized and has demonstrated culpable negligence in the operation of his property management business. Petitioner has not proven by the requisite standard that Respondent is guilty of having placed funds in interest-bearing escrow without the parties' permission, which would be in violation of Rule 21V-14.014.

    
    

16. Rule 21V-24.001(3)(l) provides that the range of penalties for the failure to maintain funds in an escrow account until disbursement is authorized is a "minimum of a 90 day suspension and $1000 fine up to revocation." Rule 21V- 24.001(3) (c) provides that the range of penalties for culpable negligence in a business transaction is "up to 5 years suspension or revocation." Rule 2IV- 24.001(2) (a) provides that the Florida Real Estate Commission may, in addition to other penalties, place a license on probation on such conditions as the

    Commission may specify. Standard conditions include requiring the completion of a post-licensure course and, if a broker, filing escrow account status reports with the Commission or an investigator at prescribed intervals.

    
    

17. Petitioner has requested in its proposed recommended order that a final order reprimand Respondent, impose an administrative fine of $1000, suspend his license for one year, and require that he complete an approved 60- hour broker's post-education course.

    
    

18. Rule 21V-24.001(4) (a) describes aggravating or mitigating circumstances that allow the Commission to deviate from the above-described disciplinary ranges. There was no evidence of any harm to the consumer or public, prior discipline of Respondent, or any other aggravating circumstances. There was evidence that a fine or suspension would represent a financial hardship and could impair Respondent's ability to secure funds sufficient to restore the trust account to its proper balance.

RECOMMENDATION

Based on the foregoing, it is hereby

RECOMMENDED that the Florida Real Estate Commission enter a final order reprimanding Respondent; imposing an administrative fine of $500; requiring Respondent to complete an approved 60-hour course; suspending his license for a period of six months, commencing retroactive to the date on which Respondent cease operations due to the emergency suspension; and placing his license on probation for a period of three years following the conclusion of the suspension, during which time Respondent shall file escrow account reports with the Commission or other person designated by the Commission at such intervals as the Commission requires.

DONE and ORDERED this 8 day of October, 1990, in Tallahassee, Florida.

ROBERT E. MEALE

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 8 day of October, 1990.

COPIES FURNISHED:

Darlene F. Keller Division Director Division of Real Estate

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

Attorney Steven W. Johnson Division of Real Estate Florida Real Estate Commission

400 W. Robinson St. Orlando, FL 32801-1772

Thomas I. McIntosh 13542 N. Florida Ave. Tampa, FL 33613

Attorney Neil F. Garfield

Envirwood Executive Plaza, Suite 200 5950 West Oakland Park Blvd.

Lauderhill, FL 33313

Kenneth E. Easley General Counsel

Department of Professional Regulation 1940 North Monroe Street

Tallahassee, FL 32399-0792

Docket for Case No: 90-003104

Orders for Case No: 90-003104