STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA REAL ESTATE COMMISSION, )

)

Petitioner, )

)

vs. ) CASE NO. 90-4267

)

GEORGE G. WALSH, )

t/a G. G. JERRY WALSH REAL ESTATE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, this matter came on for hearing in Panama City, Florida, before the Division of Administrative Hearings, by its duly-designated Hearing Officer Diane Cleavinger, on November 29, 1990.

APPEARANCES

For Petitioner: Janine Myrick, Esquire

Department of Professional Regulation

400 W. Robinson Street Orlando, Florida 32801-1772

For Respondent: George Walsh, pro se

Post Office Box 5

Panama City, Florida 32402 STATEMENT OF THE ISSUES

The issue in this proceeding is whether the Respondent's real estate brokers licenses should be suspended, revoked or otherwise disciplined.

PRELIMINARY STATEMENT

On June 21, 1990, the Petitioner, Department of Professional Regulation, filed an Administrative Complaint against Respondent alleging that his real estate license should be subjected to discipline for violations of Chapter 475, Florida Statutes. Specifically, Respondent was charged with (1) violating Subsection 475.25(1)(b), Florida Statutes, by committing acts which constitute fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme, or device, culpable negligence or breach of trust in a business transaction; (2) violating Subsection 475.25(1)(d), Florida Statutes, by failing to account or deliver trust funds; and (3) violating Subsection 475.25(1)(k), Florida Statutes, by failing to maintain trust funds in the real estate brokerage escrow bank account or some other proper depository until disbursement thereof was properly authorized. The Respondent contested the allegations contained in the Administrative Complaint and requested a formal administrative hearing.

At the hearing, Petitioner presented the testimony of four witnesses and offered seven exhibits into evidence. The Respondent, George Walsh, testified in his own behalf and offered four exhibits into evidence.

Subsequent to the formal hearing, Petitioner took the deposition of Howard Bilford. Respondent participated in the deposition. The deposition of Howard Bilford is made a part of this record and marked as Petitioner's Exhibit Number 5.

Petitioner and Respondent filed Proposed Recommended Orders on January 7, 1990 and December 20, 1990, respectively. The parties' Proposed Findings of Fact have been considered and utilized in the preparation of this Recommended Order except where such proposals were not supported by the evidence or were immaterial, cumulative or subordinate. Specific rulings on the parties' Proposed Findings of Fact are contained in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. Respondent, George G. Walsh, is a licensed real estate broker in the State of Florida, holding license number 0117943. Mr. Walsh is the owner of and the qualifying broker for G. G. Jerry Walsh Real Estate, located in Panama city, Florida.

   
   

2. In May 1989, Respondent was the acting broker for Howard Bilford of Miami, Florida. Mr. Bilford owned a five acre parcel of property located in Bay County, Florida. Around May 15, 1989, Tama and Paul Russ, through Mr. Walsh's office, entered into a contract for the purchase of Mr. Bilford's property. The purchase price of the property was $15,000. The Russ' gave Mr. Walsh a $500 binder for deposit in his escrow account. The $500 was placed in Respondent's escrow account.

   
   

3. Simultaneous with the signing of the sales contract and deposit receipt agreement, Mr. Walsh also prepared an estimated closing cost statement. On that closing cost statement, Mr. Walsh estimated that a survey of the property would cost the Russ' $450. During this meeting, Mr. Walsh explained to the Russ' that, especially if a financial institution was involved in the financing of the property, there would be certain costs which they would probably have to pay up front. Part of those costs included a survey of the property.

   
   

4. At about the same time, the Russ' made application for a loan to a credit union located in Panama City, Florida. At the time of the loan application, the loan officers Mrs. Stokes, prepared a closing cost statement estimating the loan closing costs which the Russ' would encounter. On the credit union's closing cost statement, the cost of a survey was estimated to be

   $150 to $200. Since it was the credit union that required the survey, the Russ' believed that that estimate was the more accurate. The Russ' simply could not afford a $500 survey.

   
   

5. As part of the loan application, an appraisal of the property was required. The appraisal was ordered by the credit union on May 16, 1989, and was completed on May 31, 1989. Unfortunately, the property had been vandalized by unknown persons, and the mobile home which was on the property had suffered severe and substantial damage. The appraisal indicated that the real estate was worth $10,500. With such a low appraisal, the credit union would not lend the amount necessary to purchase the property at the negotiated price. In an effort

   to renegotiate the property's price, Tama Russ inspected the property and prepared a list of the items which would have to be repaired to make the mobile home liveable. At the same time, the Russ' placed no trespassing signs and pulled logs across the entry to the property. The Russ' also placed padlocks on the doors to the mobile home and removed the accumulated garbage inside the mobile home in an effort to secure the property. They made no other repairs to the property.

   
   

6. On June 1, 1990, the Russ' told the loan officer to hold the loan application. At some point during this process, both Mr. Walsh and the Russ' became aware that the survey would cost a considerable amount more than had been expected. By using a favor with Mr. Walsingham of County Wide Surveying, Mr. Walsh obtained a survey price of $500 for the Russ'. In an effort to help the Russ' close on the property, Mr. Walsh contacted Mr. Bilford to see if he would agree to pay the $500 survey cost. Mr. Bilford so agreed, contingent on the closure of the transaction, and sent Mr. Walsh a check made out to County Wide Surveying in the amount of $500. At that point, the Russ' believed that they were no longer obligated to pay for the survey since Mr. Walsh told them that Mr. Bilford was to pay for the survey.

   
   

7. On June 3, 1989, Mr. Bilford agreed to a renegotiated price of

   $10,500.00 on the property. Additionally the Russ' agreed to sign a ten year promissory note for $2,000 bearing 11% interest per annum. Since there were changes in the terms of the contract, the Russ' entered into a net contract with Mr. Bilford on June 3, 1989. The new contract expired on June 30, 1989. Around June 5, 1989, the Russ' learned that their credit had been preliminarily approved. However, such preliminary approval only indicated that the Russ' had sufficient income to proceed with the more costly loan underwriting requirements of the credit union. Such preliminary approval did not indicate that the loan would be finally approved by the financial institution. The preliminary approval was communicated to Mr. Walsh by Tama Russ. Ms. Russ intended the communication to mean that they had been preliminarily approved by the financial institution. Mr. Walsh in an abundance caution contacted Mrs. Stokes, the loan officer. Mrs. Stokes advised him that the Russ' credit had been preliminarily approved. She did not tell him that the loan had been finally approved.

   Through a misunderstanding of what Mrs. Stokes communicated to him, Mr. Walsh ordered the survey from County Wide Realty on June 7, 1989. There was no reliable evidence presented that the credit union had authorized him to order the survey. The credit union at no time during this process ordered the survey.

   
   

8. Mr. Walsh testified that Ms. Russ told him to order the survey. Ms. Russ denies that she gave Mr. Walsh permission to order the survey. At best this evidence goes only to demonstrate Respondent's intent with regards to the actions he undertook in this case and removes this case from a Section 475.25(1)(b), Florida Statutes, violation.

   
   

9. At some point Ms. Stokes left the employ of the credit union. On June 16, 1989, as part of her leaving, she unilaterally closed the Russ' loan application file and cancelled the loan application. Neither the Russ' nor Mr. Walsh were notified of the closure or the cancellation. The credit union's file fell into the void created between a change of employees.

   
   

10. Because Mr. Walsh was unaware of Ms. Stokes' actions, Mr. Walsh, on July 13, 1989, after the expiration of the Russ' sales contract, contacted the credit union in order to obtain the loan closing package from the institution. The credit union had to hunt for the Russ' file. The credit union president called the Russ' about the loan and he was advised that they did not want the

    loan. The credit union's president then reviewed the loan file and noted that the Russ' had insufficient income to come up with the amount of the promissory note. He also thought the real estate constituted insufficient collateral for the loan. The loan application was officially denied on July 15, 1989. The Russ' were notified of the credit union's denial credit.

    
    

11. The real estate transaction never closed. However, sometime after July 15, 1989, Mr. Walsh received the survey from County Wide. The survey indicates that the field work for the survey was completed on July 17, 1989, and that it was drawn on July 18, 1989. 1/ There was no reliable evidence which indicated any attempt had been made to cancel the survey.

    
    

12. Sometime, after July 15, 1989, Tama Russ contacted Mr. Walsh in order to obtain the return of their $500 deposit. After many failed attempts to get the Russ' to voluntarily agree to pay for the cost of the survey, Mr. Walsh, around October, 1989, unilaterally paid the Russ' deposit to County Wide Realty. Mr. Walsh followed this course of action after speaking with some local FREC members who advised him that since FREC was swamped with deposit disputes that nothing would happen as long as he used his best judgment. The payment of the deposit to the surveyor, without prior authorization from the Ruse' violates Section 475.25(1)(d) and (k) Florida Statutes.

    
    

    CONCLUSIONS OF LAW

    
    

13. The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of this proceeding. Sections 120.57 and 120.60, Florida Statutes.

    
    

14. Section 475.25, Florida Statutes, empowers the Florida Real Estate Commission to revoke, suspend, or otherwise discipline the real estate license of the Respondent if Respondent is found guilty of any of the acts enumerated in Section 475.25, Florida Statutes. Section 475.25(1), Florida Statutes, provides as follows, in pertinent part:

    
    

    1. The Commission may ... suspend a license or permit for a period not exceeding ten years; may revoke a license or permit; may impose an administrative fine not to exceed $1,000 for each count or separate offense; and may issue a reprimand, or any or all of the foregoing, if it finds the licensee, permittee, or applicant ...

(b) Has been guilty of ... false promises, culpable negligence, or breach of trust in any business transaction

has violated a duty imposed upon him by law or the terms of the listing contract, written, oral, express, or implied, in a real estate transaction.

1. Has failed to account or deliver to any person ... at the time which has been agreed upon ... or ... upon

   demand of the person entitled to such accounting and delivery, any

   property such as money, fund, deposit, 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. However, if the licensee, in good faith, entertains doubt as to what person is entitled to the accounting and delivery of the escrowed property, or if conflicting

   demands have been made upon the escrowed property, ... the license shall

   promptly notify the commission of such doubts or conflicting demands and shall promptly:

   1. Request that the commission issue an escrow disbursement order determining who is entitled to the escrowed property;

   2. With the consent of all parties, submit the matter or arbitration; or

   3. By interpleader or otherwise, seek adjudication of the matter by a court.

If the licensee promptly employs one of the escape procedures contained herein, and abides by the order or judgment resulting therefrom, no administrative complaint may be filed against the licensee for failure to account for, deliver, or maintain the escrowed property.

(k) Has failed, if a broker, to immediately replace, upon receipt, any money, fund, deposit, or draft entrusted to him by any person dealing with him as a broker in escrow with a ... banking institution... or to deposit such

funds in a trust or escrow account maintained by him with some bank ... wherein the funds shall be kept until disbursement thereof is properly authorized.

1. Petitioner must demonstrate by clear and convincing evidence that Respondent is guilty of the violations alleged in the Administrative Complaint. Balino v. Department of HRS, 348 So.2d 349 (Fla. 1st DCA, 1977); State ex rel Vining v. Fla. REC., 281 So.2d 487 (Fla. 1973).

   
   

2. A trust has been defined as a right of property, real or personal, held by one party for the benefit of another and includes any arrangement whereby property is transferred with the intention that it be administered by a trustee for another's benefit. Black's Law Dictionary 1680 (4th ed. 196)

3. A trust deposit has been defined as money or property deposited which is to be kept intact and cot commingled with other funds or property of a bank and is to be returned in time to the depositor or devoted to particular purpose or requirement of the depositor or payment of particular debts or obligations of the depositor. A trust deposit is also called a "special deposit." Black's Law Dictionary 1683 (4th ed. 1968). However, the title to money deposited in escrow remains in the depositor. 22 Fla. Jur. 2nd Escrow s. 7, p. 223. Rule 21V- 14.11, Florida Administrative Code, is entitled "Rights of Broker in Deposits" and states, in part, that a broker has no right to or lien upon a deposit except by written agreement or order of the depositor so long as the depositor has sole control of the deposit. Rule 21V-14.13, Florida Administrative Code, authorizes a broker to deduct from an escrow deposit at the time of delivery to another person, any lawful set-off or counterclaim as may at that time be due and owing to him by the other person entitled to receive the funds. Thus, under this analysis of Florida law, a real estate broker has mere possession without legal title of an escrow money deposit as a trustee and does not have an interest in the deposit unless the depositor has expressly agreed or ordered such an interest to be created (Rule 21V-14.11), or some lawful set-off or counter claim is due the broker (Rule 21V-14.13). See 1981 Op. Att'y Gen. Fla. 081-60, 174- 175 (August 20, 1981).

   
   

4. Sections 475.25(1)(d) and (k) and 475.452, Florida Statutes, are the statutory provisions that require licensed real estate brokers to follow certain procedures when receiving and holding escrow deposits and advance listing fees. Failure to comply with those procedures can result in the licensee being disciplined for that failure.

   
   

5. Clearly, by the testimony of the Respondents and the Florida case law Respondent Walsh had absolutely no title or interest in the money he held in escrow. Neither did Respondent have the express permission of the depositor to use those funds to cover the expense of a survey or to pay that deposit to a third party. Respondent did clearly have a dispute over a trust deposit. The fact that he was inquiring on the most propitious way to proceed of other FREC members demonstrates his recognition of the dispute or his doubt about who was entitled to the trust deposit. Section 475.25(1)(d), Florida Statutes, establishes the procedure a broker should follow when such a dispute arises or when there is doubt as to who is entitled to a trust deposit. It is clear that Respondent, on some bad advice, chose to ignore the statutory process and unilaterally paid out disputed trust funds to a third person.

   
   

6. Without question, Respondents' action in relation to the escrowed funds herein was improper and does constitute a violation of Section 475.25(1)(k) and 475.25(1)(d), Florida Statutes, since he failed to deliver to the Russ', after their demand, the $500 deposit and failed to immediately submit the deposit dispute which had arisen to the dispute resolution procedures of Chapter 475, Florida Statutes.

   
   

7. However, the evidence was neither clear nor convincing that Respondent is guilty of violating Section 475.25(1)(b), Florida Statutes. The evidence only showed that Respondent was a somewhat overly helpful in getting the Russ' in a position to close the transaction and that through garbled communication on both sides, inexperienced buyers and some bad advice from local FREC members paid the Russ' escrow money to a third party. There was no evidence which demonstrated the type of mens rea necessary for a violation of Section 475.25(1)(b), Florida Statutes.

RECOMMENDATION

Based on the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, the pleadings and argument of the parties, it is therefore,

RECOMMENDED that the Florida Real Estate Commission enter a Final Order finding Respondent guilty of violating Sections 475.25(1)(d) and 475.25(1)(k), Florida Statutes, issuing a letter of reprimand to Respondent with instructions to immediately replace the Russ' trust deposit and forthwith submit the matter to the commission for an escrow disbursement order and levying a $250 fine.

IT IS FURTHER RECOMMENDED that the portions of the Administrative Complaint alleging violation of Section 475.25(1)(b) be dismissed.

DONE and ENTERED this 29th day of January, 1991, in Tallahassee, Florida.

DIANE CLEAVINGER

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 29th day of January, 1991.

ENDNOTES

1/ At the hearing, Mr. Walsh testified that Mr. Walsingham of County Wide had told him that the field work and survey were completed much earlier than the dates indicated on the survey. However, this testimony is uncorroborated hearsay and cannot be relied upon to establish the dates the survey was actually prepared.

APPENDIX CASE NO. 90-4267

1. The facts contained in paragraphs 2, 3, 4, 7, 8, 9, 10, 11, 14, 15, 17, 18,

19, 20, 21, 22, 25, 28, 30 and 31 of Petitioner's Proposed Findings of Facts are adopted.

2. The facts contained in paragraphs 1, 5, 12, 13, 16, 23, 24, 26, 27, 29, 33 of Petitioner Proposed Findings of Fact are subordinate

1. The facts contained in paragraphs 6 and 32 of Petitioner's Proposed Findings of Fact were not shown by the evidence.

   
   

2. The facts contained in the 1st sentence of paragraph 1 of Respondent Proposed Findings of Fact were not shown by the evidence. The remainder of the paragraph is subordinate.

3. The facts contained in the 1st two sentences and the 7th and 15th sentence of paragraph 2 of Respondents Proposed Findings of Fact are adopted. The 3rd and 4th sentences were not shown by the evidence. The 5th and 6th sentences were legal argument as well as the 8th and 9th. The 10th through the 14th sentences were subordinate.

   
   

4. The 1st sentence of paragraph 3 of Respondents' Proposed Findings of Fact was not shown. The 2nd and 3rd sentences are adopted. The 4th sentence is subordinate.

   
   

5. The 1st sentence of paragraph 4 of Respondents' Proposed Findings of Fact was legal argument. The remainder of the paragraph is subordinate.

   
   

6. Paragraph 5 of Respondents' Proposed Finding of Fact is subordinate.

   
   

7. The 1st two sentences of paragraph 6 of Respondents' Proposed Findings of Fact are subordinate. The remainder of Respondents' letter is legal argument.

COPIES FURNISHED:

Janine Myrick, Esquire Department of Professional Regulation

400 W. Robinson Street Orlando, FL 32801-1772

George Walsh

Post Office Box 5 Panama City, FL 32402

Darlene F. Keller Division Director Division of Real Estate

400 W. Robinson Street Orlando, FL 32801

Kenneth E. Easley General Counsel

Department of Professional Regulation

Northwood Centre

1940 North Monroe Street Suite 60

Tallahassee, FL 32399-0792

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.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL ) REGULATION, DIVISION OF REAL ) ESTATE, )

)

Petitioner, )

)

vs. ) CASE NO. 90-4267

)

GEORGE G. WALSH t/a ) G G JERRY WALSH REAL ESTATE, )

)

Respondent. )

)

ORDER AMENDING RECOMMENDED ORDER

Pursuant to the remand of the Board, the Recommended Order entered in this matter is amended as follows:

The Board should enter a final order reprimanding Respondent and assessing a $250.00 fine against Respondent for violation of Chapter 475, Florida Statutes.

DONE AND ORDERED this 26th day of July, 1991, in Tallahassee, Leon County, Florida.

DIANE CLEAVINGER

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 26th day of July, 1991.

COPIES FURNISHED:

Janine B. Myrick, Esquire

Department of Professional Regulation Division of Real Estate

Legal Section

400 W. Robinson Street Orlando, Florida 32802

George G. Walsh

t/a G G Jerry Walsh Real Estate

P. O. Box 5

Panama City, Florida 32402

Jack McRay, Esquire Department of Professional Regulation

1940 North Monroe Street Suite 60

Tallahassee, Florida 32399-0792

Darlene F. Keller Division Director

400 West Robinson Street Orlando, Florida 32802

Docket for Case No: 90-004267

Orders for Case No: 90-004267