STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL )

REGULATION, DIVISION OF )

REAL ESTATE, )

)

Petitioner, )

)

vs. ) CASE NO. 90-3870

)

MICHAEL DAVID MCNALLY, )

)

Respondent. )

)

RECOMMENDED ORDER

A hearing was held in this case in Port Charlotte, Florida on June 25, 1991, and in Sarasota, Florida on August 30, 1991, before Arnold H. Pollock, a Hearing Officer with the Division of Administrative Hearings.

APPEARANCES

For the Petitioner: Steven W. Johnson, Esquire

Department of Professional Regulation

Division of Real Estate

400 W. Robinson Street

P.O. Box 1900

Orlando, Florida 32802

For the Respondent: Louise Hanaoka, Esquire

Wilkins, Frohlich, Jones, Hevia & Russell

1777 Tamiami Trail, Suite 501 Port Charlotte, Florida 33948

STATEMENT OF THE ISSUES

The issue for consideration in this matter is whether the Respondent's license as a real estate broker in Florida should be disciplined because of the matters set out in the Administrative Complaint filed herein.

PRELIMINARY MATTERS

On May 17, 1990, Fred Wilsen for Larry Gonzalez, Secretary of the Department of Professional Regulation, signed an Administrative Complaint in this case in which Respondent is alleged to be guilty of fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence, or breach of trust in a business transaction in violation of Section 475.25(1)(b), Florida Statutes, by unlawfully retaining $15,000.00 deposit money paid to him by potential home

buyers, and by falsifying verification of employment forms for those individuals pursuant to their application for a mortgage loan.

Thereafter, on June 11, 1990, Respondent requested a formal hearing on the allegations against him and by letter dated June 13, 1990, the matter was forwarded to the Division of Administrative Hearings for appointment of a Hearing Officer. After the parties responded to the Initial Order filed herein, on July 11, 1990, the undersigned set the matter for hearing in Punta Gorda on October 18, 1990, but based on the parties' Joint Motion, the matter was placed in abeyance on October 15, 1990 to allow additional discovery. The parties were to advise the undersigned by January 15, 1991, of the need for further hearing.

By Order dated December 21, 1990, the matter was again set for hearing on February 15, 1991 but on February 12, 1991, on the representation of Respondent that a settlement had been reached, was again abated until May 15, 1991 to allow the RealEstate Commission to act on the settlement agreement. When the settlement was rejected by the Commission, on April 9, 1991 the matter was again set for hearing on June 25, 1991 at which time it was begun. However, since Respondent's counsel claimed she had not had the opportunity to participate in the taking of the depositions of material witnesses by the Petitioner, the case was adjourned until August 30, 1991, at which time it was completed.

At the hearing, Petitioner presented the testimony of Jeffrey Noll, President of Esquire Pools; Holly I. Stevens, formerly a loan processor at Amerifirst Bank; John E. Harris, an investigator with the Department of Professional Regulation; and Michael F. Dolata, formerly a loan officer for Amerifirst Bank; and, by Deposition, (Petitioner's Exhibits B and C), that of Bruce and Judith Neild, the purchasers in question. It also introduced Petitioner's Exhibit A, the licensing information relevant to the Respondent. Respondent presented Respondent's Exhibits A though C.

No transcript was provided. Petitioner submitted Proposed Findings of Fact which, except for number 7, (which is more a restatement of testimony than a Finding of Fact), have been incorporated in this Recommended Order.

Respondent's counsel did not submit Proposed Findings of Fact but filed a Closing Argument which has been carefully considered in the preparation of this Recommended Order.

FINDINGS OF FACT

1. At all times pertinent to the allegations herein, thePetitioner, Division of Real Estate, was the state agency responsible for the regulation of the real estate profession in Florida and for the licensing of real estate brokers and salesmen. The Respondent, Michael David McNally was a real estate broker in this state licensed under license number 0502850.

   
   

2. In mid-1989, Bruce and Judith Neild, residents of Massachusetts, were interested in buying a home in Port Charlotte, Florida and moving their family to this state. At first they were working with a realtor in Massachusetts but ultimately came into contact with the Respondent who was working with Welcome Center Realty, a Florida agency, at the time. They found a house they liked which had been built by Presidential Homes. At the time they saw it, the house was not completed but the Neilds fell in love with it. It was expected to be completed within 60 days.

3. On July 8, 1989, the Neilds entered into a construction contract with Welcome Center Realty, signed for by the Respondent, for the construction and purchase of the house they liked, for $109,895.00, with closing to take place by September 1, 1989. In furtherance of the contract, the Neilds gave Mr. McNally a $15,000.00 deposit by check dated July 8, 1989 payable to Welcome Center Realty Escrow Account. This check was endorsed by and deposited to the account of Welcome Center Realty but was not placed in the escrow account.

   
   

4. The balance of the purchase price was to be paid by additional cash at closing from the Neilds and a mortgage for $60,000.00. Respondent referred the Neilds to Mr. Dolata, the loanofficer at Amerifirst Bank for the mortgage. The application for the loan was made by telephone by the Neilds after they returned to Massachusetts.

   
   

5. After their return to Massachusetts, the Neilds received two letters from the Respondent which were both letters of intent from businesses in the Port Charlotte area, Esquire Pools and Physicians Weight Loss Center, indicating the intent to employ Mr. and Mrs. Neild at a stated wage. However, because the Neilds had not spoken with these putative employers and had no indication of any proposed employment, they would not agree to their being used in support of their mortgage application, regardless of Respondent's urging that they do so.

   
   

6. In the interim, the Neilds had been told by Mr. McNally that an additional $15,000.00 down on the purchase price would help the approval of their loan and they could move into the house. On the basis of that representation, the Neilds moved their family of four children to Florida over the Labor Day weekend in 1989 prepared to move into their new home. On arrival, however, they found that a certificate of occupancy had not been issued and in addition, the pool was no more than a big hole in the ground.

   
   

7. The Neilds moved into a hotel for a week until the certificate was obtained. During that time, they paid an additional $17,000.00 for completion of the pool, window coverings and landscaping, and, on September 11, 1989 finally moved into their house. They stayed there until December, 1989, and after they moved in, did not see the Respondent again.

   
   

8. In mid-October, 1989, the Neilds received a phone call from Ms. Stevens, the loan processor at Amerifirst, who was trying to confirm Mr. Neild's employment and asked how long he had worked at Esquire Pools. Mr. Neild was surprised by this since he had never worked for that company and said so. In response, Ms. Stevens stated she had a verification form from the company stating not only that he worked there but how much he made each month. Ms. Stevens indicated she also had a form from Physicians Weight Loss Center indicating Mrs. Neild worked there. At that point neither Neild had worked for either concern although at one point, Mr. McNally discussed with Mr. Neild the possibility of his working for Esquire and offered to put him in contact with the firm. He never did, however.

   
   

9. After that phone call, Ms. Stevens sent the Neilds verification of employment forms for them to sign reflecting they worked for the concerns as stated. Again, they refused, indicating they had never worked for either firm. Because of that, the loan for the purchase was not approved by Amerifirst.

   
   

10. When the Neilds found out that the loan from Amerifirst had been denied, the discussed applying for a loan at a different lender. It was at this time they discovered that Respondent and Presidential Homes were in a dispute as to who actually owned the house they were buying. Recognizing they would have

    great difficulty getting any loan if the builder and the agent were both claiming ownership, the Neilds decided they wanted out of the deal and asked Respondent for a return of their depositmoney. At that time, he said he didn't have it - that notwithstanding it had been put in the realtor's account, he had used it for other things. Since that time, the Neilds have received no refund of any money from Respondent nor have they had any contact with him.

    
    

11. Because of the situation as it developed, the Neilds made arrangements to move back to Massachusetts and turned the matter over to an attorney for collection.

    
    

12. Mr. Harris, an investigator for the Department, was assigned to investigate the complaint in this matter filed by Mr. Neild. As a part of his investigation, he spoke with Mr. McNally at his office at Welcome Center Realty where Respondent admitted having shown the property in question to the Neilds, to having drawn up the contract for sale, and to having received a check from Mrs. Neild as a down payment which he placed into his operating account rather than into the escrow account.

    
    

13. Mr. McNally indicates he spoke with Ms. Stevens, the loan processor at Amerifirst, on October 10, 1989 and advised her to credit the Neilds with the down payment, but on October 17, 1989, the day closing was to take place, the Neilds called her and told her they had decided not to close on the sale. When he called them to talk about this, he claims, they told him they had decided to go back to Massachusetts and not live in Florida. At this point he claims he told the Neilds he would not give them their deposit back because the house had been off the market for several months. His suggestion to them was that if they didn't want to live in thehouse, they should buy it anyway and get their money back by reselling it. He overlooks the fact that because of the dispute as to actual ownership of the property between him and the builder, Presidential, he had no clear title to transfer to them.

    
    

14. Respondent also admits to having prepared the Letters of Intent which were signed by the putative employers in an effort to assist the Neilds in qualifying for their loan. He denies, however, having submitted the forged Verification of Employment forms to Amerifirst, but Mr. Noll, President of Esquire Pools, and whose signature appears on one of the forms, denies having either signed it or sent it in. At one point he had considered hiring Mr. Neilds and sent the letter offering to do so, but neither hired him or signed the form. There was no evidence presented as to whether the other prospective employer signed the form or not other than hearsay evidence of her denial. That hearsay evidence will not, of itself, support a finding.

    
    

15. The initial verification of employment forms sent out by the bank expired before they were returned. As a result, in an effort to expedite the loan, Ms. Stevens sent out additional copies. When that second form was sent out, Mr. Noll called her to state that Mr. Neild had never worked there. A call she made to the Physician's Weight Loss Center, which never responded to the verification form, revealed that Mrs. Neild had never worked there. As a result, Mrs. Stevens does not know who filled out the verification forms but when she compared the signatures on the forms to that of the Respondent on the sales contract, theyappeared to her to have been by the same person. She is not an expert in handwriting analysis, however, and her comparison is not considered of great weight. However, when Mr. Harris spoke with her during his investigation, she advised him that she received them, bearing the purported signatures of the prospective employers, from Respondent. Taken together, the

    evidence indicates, and it is so found, that Respondent is the individual who affixed the false signatures to the Verification of Employment forms submitted to Amerifirst in support of the Neild's loan.

    
    

    CONCLUSIONS OF LAW

    
    

16. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this proceeding. Section 120.57(1), Florida Statutes.

    
    

17. In this Administrative Complaint, the Department has alleged that Respondent, Michael David McNally, is guilty of fraud, concealment, misrepresentation, 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 47.25(1)(b), Florida Statutes. Specifically, it alleges that Respondent wrongfully failed and refused to return all or any part of the deposit the Neilds gave to him as down payment of the purchase of a piece of real property in Port Charlotte and instead used that money for his own personal use and benefit without their consent. It also alleges that Respondent falsified two verification of employment forms relating to the Neilds which were a part of the background package to a loan application they hadmade for financing of the property he had sold them.

    
    

18. The burden of proof to establish each of those allegations in upon the Petitioner, Department, which must present clear and convincing evidence of Respondent's guilt of each of the allegations made, Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).

    
    

19. Here, the evidence of record, uncontradicted, clearly establishes that the Respondent received the deposit as alleged from the Neilds as down payment on a property they wished to buy and which they had contracted for with the Respondent. Respondent admits he did not place the down payment into the broker's escrow account as is current practice in the industry, but instead co- mingled it with other non-escrow funds in his operating account. He further admits that the money in question was thereafter utilized for other purposes not related to the property in question. Though Respondent thereafter directed the closing agent to credit the Neilds with the amount of their deposit at any subsequent closing of the property, that closing did not take place and, as the evidence shows, could not have taken place because the Respondent did not have clear title to the property to convey to them. It is unreasonable to expect the Neilds to wait indefinitely for Respondent to clear title to the property to convey to them, or to expect them to go through with the purchase, with the obvious difficulties that would entail for them, merely on the possibility of recouping their deposit as the result of a subsequent resale of the property.

    
    

20. It is just this situation that broker escrow is designedto provide for. Recognizing the potential that title difficulties or other considerations might well result in the failure of a proposed closing to go through, the deposit made in anticipation of closure should not be disturbed or disbursed until closing or unless consistent with the advice of the Commission. Clearly, Respondent's use of the deposit money was improper and his failure to return it to the Neilds, when it became obvious the closing could not go through, was a violation.

    
    

21. As for the falsification of the verification forms, admittedly there is no admission by the Respondent that he signed them. However, the evidence, aliunde such an admission, is overwhelming that he did and it was so found.

22. Section 475.25(1)(b), Florida Statutes, authorizes the Department to discipline the license of a license holder when the evidence establishes that he or she is guilty of:

    
    

    ... fraud, concealment, misrepresentation, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence and breach of trust in a business transaction.

    
    

23. Clearly the evidence of record here establishes that the Respondent is guilty of fraud, misrepresentation, false pretenses, dishonest dealing be scheme or device, and breach of trust in a business transaction.

    
    

24. Having established that Respondent violated the statute, the question remains as to what authorized penalty, if any, is appropriate. The evidence demonstrates a clear case of unscrupulous dealing of a nature which has, in the past, createdso much misfortune and hardship for those who in good conscience, seek to make their homes in this state. Respondent has abused his position of trust as a real estate agent in a most egregious manner and it is clear that any disciplinary action must be sufficiently severe as to impress upon him the fact that such impropriety will not be tolerated.

    
    

25. It is noted there was no evidence of any previous disciplinary action having been taken against the Respondent.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore:

RECOMMENDED that a Final Order be entered directing that the Respondent herein, Michael David McNally's license as a real estate broker be suspended for a period of two years, that he pay an administrative fine of $5,000.00, and that he be reprimanded.

DONE and ENTERED in Tallahassee, Florida this 2nd day of October, 1991.

ARNOLD H. POLLOCK

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 2nd day of October, 1991.

COPIES FURNISHED:

Steven W. Johnson, Esquire Division of Real Estate DPR

400 W. Robinson Street

P.O. Box 1900

Orlando, Florida 32802

Louise Hanaoka, Esquire Wilkins, Frohlich, Jones,

Hevia & Russell, P.A.

1777 Tamiami Trail, Suite 501 Port Charlotte, Florida 33948

Jack McRay General Counsel

Department of Professional Regulation

1940 North Monroe Street Tallahassee, Florida 32399-0792

Darlene F. Keller Division Director Division of Real Estate

400 W. Robinson Street

P.O. Box 1900

Orlando, Florida 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 inwhich to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should consult with the agency which will issue the Final Order in this case concerning its rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should b e filed with the agency which will issue the Final Order in this case.

Docket for Case No: 90-003870

Orders for Case No: 90-003870