STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

JOHN C. LARKER, )

)

Petitioner, )

)

vs. ) CASE NO. 90-3624F

)

FLORIDA DEPARTMENT OF )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly- designated Hearing Officer, Stephen F. Dean, held a public hearing in the above-styled case on September 27, 1990, in Pensacola, Florida.

APPEARANCES

For Petitioner: Stephen R. Moorhead, Esquire

McDonald, Fleming and Moorhead

700 South Palafox Street, Suite 3-C Pensacola, Florida 32501

For Respondent: Steven W. Johnson, Esquire

Department of Professional Regulation, Division of Real Estate

400 W. Robinson Street Orlando, Florida 32802

STATEMENT OF THE ISSUES

Whether the Petitioner is a small business party.

Whether the Respondent was substantially justified in filing an Administrative Complaint charging Petitioner with fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme, or device, culpable negligence and breach of trust; and fraudulent, false, deceptive, or misleading advertisement of property.

PRELIMINARY STATEMENT

The Department of Professional Regulation dismissed the Administrative Complaint against John C. Larker in DOAH Case No. 89-5021 on April 24, 1990. Larker now seeks attorneys fees and costs for that proceeding. As grounds therefore, it is alleged that the Petitioner is a small business party, that the filing of the Administrative Complaint was not substantially justified, and that the Petitioner incurred attorney's fees and costs in defending against those allegations.

The Respondent filed proposed findings which were read and considered. The Petitioner's proposed order did not contain expressed findings, but was read and considered as argument. The Appendix attached hereto and incorporated by reference herein states which findings were adopted and which were rejected and why.

At the commencement of the hearing, the parties stipulated to certain findings of fact, which are incorporated with those below:

FINDINGS OF FACT

1. The Respondent is a state agency which filed an Administrative Complaint against John C. Larker after an investigation conducted by the Department of Professional Regulation Larker timely requested a formal

   hearing, and the matter was referred to the Division of Administrative Hearings pursuant to Chapter 120, Florida Statutes. A Recommended Order was entered in DOAH Case No. 89-5021 on March 23, 1990 recommending dismissal.

   
   

2. On April 24, 1990 the Department of Professional Regulation entered a Final Order dismissing the complaint filed against the Petitioner.

   
   

3. The Petitioner was at all times material to the case a licensed real estate salesman registered with Emerald Homes Realty Inc. Petitioner's wife was President, registered agent, and broker for Emerald Homes Realty Inc.

   
   

4. The charges which were the subject of Case No. 89- 5021 were related to Larker's activities as a builder/developer and were in no way related to his activities as a real estate salesman. Larker was charged with misconduct in a business transaction related to the sale of property by J.B. & N., Inc. J.B. & N., Inc. was a Florida corporation in which Larker owned 50 percent of the stock.

   
   

5. The purchasers of landward homes sold by J.B. & N., Inc., complained that Larker made misrepresentations regarding their access to the beach from their homes. The allegations were investigated by the Department of Professional Regulation.

   
   

6. The investigation revealed that Larker had represented to potential purchasers that there was access to the beach from the landward homes. Subsequently, the access was terminated by the owner of the beach lot over which access allegedly existed. That lot had been owned by Larker's partner in J.B. &

   N. prior to his partner's default and foreclosure. The new owner, who stopped access over the property, discovered he owned the access strip in a title search. These findings were presented to a probable cause panel of the Florida Real Estate Commission which found probable cause existed to bring an administrative complaint against Larker.

   
   

7. J.B. & N. had fewer than 25 employees and less than $2 million in assets. Neither Larker or Emerald Homes Realty participated in the transaction as a real estate salesman or broker. Larker is a small business party within the meaning of Section 51.111(3)(c) and (d), Florida Statutes.

   
   

8. At the final hearing, evidence was presented that Larker had taken steps to dedicate an easement, but this was never done. Larker had no knowledge that the easement was not created. A pedestrian way was fenced and

   landscaped between the edge of one of the beach lots and the adjoining property. At the time Larker made the representations about beach access, access existed and Larker thought it would continue to exist.

   
   

9. The amount of attorney's fees specified in the affidavit of Petitioner's counsel is reasonable for the representation of John C. Larker.

   
   

   CONCLUSIONS OF LAW

   
   

10. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter pursuant to Section 57.111 and Section 120.57, Florida Statutes.

11. Section 57.111(d), Florida Statutes, provides: "The term `small business Party' means:

    1. a. A sole proprietor of an unincorporated business including a professional practice, whose principal officer is in this state, who is domiciled in this state, and whose business or professional practice has, at the time the action is initiated by a state agency, not more than 25 full-time employees or a net worth of not more than $2 million, including both personal and business investments; or

       b. A partnership or corporation, including a professional practice, which has its principal office in this state and has at the time the action initiated by a state agency not more than 25 full-time employees or a net worth of not more than $2 million."

       
       

12. The Petitioner bears the burden of proving that he is small business party, that he prevailed prevailed in the prior action, and that the underlying adjudicatory proceeding was initiated by a state agency. Once this showing is made, the burden shifts to the Department of Professional Regulation to demonstrate that its actions were substantially justified or that special circumstances exist which would make the award unjust. Gentele v. Department of Professional Regulation, Board of Optometry, 513 So.2d 672 (Fla. 1st DCA 1987), 9 FALR 310,327.

    
    

13. The parties have stipulated and the record shows that the Petitioner prevailed and that the proceeding was initiated by a state agency. The Petitioner presents two theories regarding his status as a small business party.

    
    

14. The Petitioner's first theory is that, as an independent contractor with his license under a real estate broker, he qualifies under 57.111(d) (l) (a), Florida Statutes, as a small business party. This may be, however, the Petitioner's second theory, that he qualifies as a small partnership or corporation as a stock holder in J.B. & N. Inc. clearly is applicable.

    
    

15. The Florida Real Estate Commission asserts that it never claimed jurisdiction over J.B. & N. Inc. and, therefore, Larker cannot assert his status as a small business party. Larker was prosecuted for his conduct as a principal of the corporation for acts committed in a corporate transaction outside the

    practice of real estate. The provisions of Section 475.25(1)(b), Florida Statutes, allow the Commission to prosecute for acts outside the practice of real estate.

    
    

16. Therefore, although its jurisdiction is dependent upon Larker's licensed status, the complaint is based upon Larker's conduct as an officer and principal of the corporation. If the Commission extends its jurisdiction to include non-real estate related transactions for purposes of prosecuting Larker, it must prosecute Larker in the context in which it finds him for purposes of Section 57.111, Florida Statutes. Lark participated in the transaction in a corporate capacity, and it entitled to the protections of Section 57.111, supra.

    
    

17. The Respondent has the burden of proof to show its actions were substantially justified. In Gentele, supra; the court stated:

    
    

    "The conclusion that the agency must prove its actions were substantially justified, or that special circumstances exist which would make an award unjust, is buttressed by the plain language of the statute. In mandatory language, Section 57.111(4) (a) declares the general rule -- that fees and costs "shall" be awarded to a prevailing small business party. Then, following a comma, the Act creates two exceptions (actions substantially justified or special circumstances which make an award unjust) which, if proven, make the general rule inapplicable. The agency is the best party to know the factual and legal basis of its prior actions, and whether special circumstances exist which would make an award unjust. Hence, it is the agency which must affirmatively raise and prove the exception.

    
    

    Section 57.111(3) (e) provides:

    
    

    "A proceeding is `substantially justified if it had a reasonable basis in law and in fact at the time it was initiated by a state agency."

    
    

18. The standard to be applied is less restrictive than the "complete absence of a justiciable issue of either law of fact" of Section 57.105, Florida Statutes, and is more restrictive than an automatic award of fees to every prevailing small business party. McCallister v. Department of State, Division of Licensing, 9 FALR 4065 (DOAH 1987); Robaina v. Division of Professional Regulation, 9 FALR 4072 (DOAH 1987). Federal authority defining

    the standard is persuasive. Gentele, supra at 673. In discussing the meaning of the term "substantially justified,' the court in Ashburn v. U.S., 740 F.2d 843 (11th Cir. 1984), said

    
    

    "The government bears the burden of showing that its position was substantially justified. (Citations omitted) The standard is one of reasonableness; the government must show that its case had a reasonable basis both in law and fact. (Citations omitted).

    
    

    The fact that the government lost its case does not raise a presumption that the government's position was not substantially justified. (Citations omitted) Nor is the government required to establish that its decision was based on a substantial probability of prevailing. (Citations omitted).

    
    

19. Quoted with approval in Structured Shelters Financial Management, Inc., et. al. v. Department of Banking and Finance, Division of Securities, DOAH Case No. 87-1015F (Final Order December 24, 1987).

    
    

20. At the time probable cause was found, the Respondent had information and documents sufficient to support a reasonable belief that Larker had misrepresented the matter of access to potential purchasers. The Respondent followed its usual procedure in reviewing the complaint, and the evaluation by the probable cause panel met the requirements of Gentele, supra, in that the probable cause panel had evidence which indicated misrepresentations had been made by Larker. Such conduct is proscribed by Section 475.25(1)(b), supra. This is all that is required for the proceeding to be substantially justified.

    
    

21. The parties have stipulated to the amount and reasonableness of the attorney's fees and cost.

RECOMMENDATION

It is, accordingly,

RECOMMENDED: that the Petition for Attorneys Fees be dismissed because the action initiated by the probable cause panel was substantially justifiable at the time it was initiated.

DONE and ENTERED this 18 day of October, 1990, in Tallahassee, Florida.

STEPHEN F. DEAN

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 18 day of October, 1990.

APPENDIX TO RECOMMENDED ORDER IN CASE NO. 90-3624F

Petitioner's proposed order did not contain any proposed findings of fact. Respondent's Proposed Findings of Fact

1-7. Adopted.

8. Rejected, with regard to Petitioner's corporate status. 9-14. Adopted and rewritten.

COPIES FURNISHED:

Steven W. Johnson, Esq.

DPR-Division of Real Estate

400 W. Robinson Street

P.O. Box 1900 Orlando, FL 32802

Stephen R. Moorhead, Esq. 700 South Palafox St.

Suite 3-C

Pensacola, FL 32501

Kenneth E. Easley, General Counsel Department of Professional Regulation 1940 North Monroe Street

Tallahassee, FL 32399-0792

Darlene F. Keller Division Director Division of Real Estate

400 West Robinson Street

P.O. Box 1900 Orlando, FL 32801

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 90-003624F

Orders for Case No: 90-003624F