STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 90-6136

)

ARMANDO CLEMENTE and AMIGO )

REALTY, INC., )

)

Respondents. )

)

RECOMMENDED ORDER

This matter was heard by William R. Dorsey, Jr., the Hearing Officer designated by the Division of Administrative Hearings, on September 17, 1991, in Fort Lauderdale, Florida.

APPEARANCES

For Petitioner: Steven W. Johnson, Esquire

Department of Professional Regulation

Post Office Box 1900 Orlando, Florida 32802-1900

For Respondent: Karen Coolman Amlong, Esquire

AMLONG & AMLONG, P.A.

101 Northeast Third Avenue Suite 203

Fort Lauderdale, Florida 33301 STATEMENT OF THE ISSUE

The issues are whether the real estate licenses of the corporate and individual Respondents should be disciplined for misconduct arising from a transaction in which Clemente and a business partner purchased property which they intended to renovate and sell. The Department alleges Mr. Clemente claimed to have made a $500 deposit toward his purchase which was never actually placed in the escrow/trust account of his real estate firm, that Mr. Clemente represented on a loan application which he made in connection with his purchase of the property that he had made a $5,000 deposit into the Amigo Realty escrow/trust account when he did not, that Mr. Clemente short changed his partner in connection with the profits made from the resale of the property, and that when Mr. Clemente was short $1,750 at closing he wrote a check to cover that amount from the Amigo Realty escrow/trust account at a time when there were no funds credited to that account available for that purpose.

PRELIMINARY STATEMENT

The Department filed its Administrative Complaint against the Respondents on August 24, 1990, charging each with violations of Subsections 475.25(1)(b), (1)(d)(2), and (1)(k), Florida Statutes. The Respondents disputed the charge and requested a hearing, which was held September 16, 1991. The Real Estate Commission presented the testimony of Mr. Clemente's business partner, Candido Proenza through an interpreter; the testimony of Joe Gonzalez, an employee of the mortgage company from which Mr. Clemente sought and obtained a mortgage for his purchase of the property; and of Mr. Edward Gruskin, the investigator for the Department. Exhibits lettered A, B, C, D, E, G, H, I, J, and L were received into evidence, but exhibits F and K were withdrawn. The Respondents presented the testimony of John Prior, a lawyer; Mike De Rosa, a real estate broker who now employs Mr. Clemente; Debbie Thomas, the membership director and records custodian for the Fort Lauderdale Board of Realtors; and the testimony of Mr. Clemente. One exhibit was admitted in evidence on behalf of Mr.

Clemente. No transcript of proceedings was filed. Proposed recommended orders were filed by October 7, 1991.

FINDINGS OF FACT

1. Armando Clemente is licensed as a real estate broker, and has held license 315166 at the times pertinent to the allegations of the Administrative Complaint. Amigo Realty, Inc., was a corporation licensed as a real estate broker, and held license 229372. The Respondents' business address was 2728 Davie Boulevard, Fort Lauderdale, Florida. Mr. Clemente was the sole qualifying broker for Amigo Realty, Inc.

   
   

2. In 1989, Mr. Clemente solicited and obtained the exclusive right to sell a residence located at 2840 Southwest Eighth Street, Fort Lauderdale, Florida. It was owned by Louise McNally, a widow who had recently obtained the property through foreclosure. The property was located in an undesirable neighborhood, and in need of cleanup and substantial repair and renovation before it could be sold or leased.

   
   

3. Ultimately Mr. Clemente agreed with Ms. McNally that Clemente would repair the house and then try to sell it, or buy it himself.

   
   

4. Mr. Clemente contacted an old friend of his, Candido Proenza, about the property. Both Mr. Clemente and Mr. Proenza are Cuban. Mr. Proenza agreed to undertake the renovations and repair of the property through his own labor, while Mr. Clemente was to find a buyer for the property. They agreed that Mr. Clemente would initially pay for the materials used in the repair and renovation, and the parties were to split the net profit equally after Mr. Clemente was repaid for materials from the sale proceeds.

   
   

5. Mr. Clemente prepared a deposit receipt and contract for the sale and purchase of the property between himself and Mr. Proenza as buyers and Ms. McNally as the seller. The purchase price was $30,000 and the contract shows that a deposit of $500 had been made toward the purchase price and that the closing was to take place as soon as possible. The special clauses contained in the contract state

   
   

   house is being bought "as is" with not [sic] guarantee or insurance for anything in the house or on property.

   Buyers guarranty [sic] that they will fix the property under safe and living conditions.

   Seller does not have to pay any additional money to attorneys or real estate office. Buyers will pay 7% commission on $30,000, at closing to Century 21 Amigo Realty, Inc. and if the house is for sale after repairs have been done it has to be listed with Century 21 Amigo Realty, Inc. or its assigns. (Exhibit B).

   
   

6. Although the contract shows on its first page that the deposit of $500 was to be held in trust by Century 21 Amigo Realty, Inc., the line on the final page of the contract which is meant to be signed by the broker to acknowledge the receipt of the deposit is not signed. The contract does bear the signature of both Mr. Clemente and Mr. Proenza as buyers and Ms. McNally as the seller.

   As will be explained more fully below, on January 10, 1990, Mr. Clemente executed a statement on the letterhead of Amigo Realty in his capacity as a real estate broker stating that Amigo Realty had received in its escrow account the sum of $5,000 towards the purchase price of the property, $2,000 having been received on November 6, 1989, and $3,000 received on December 7, 1989. See, Finding 9. None of these statements were true.

   
   

7. The repairs were more expensive than anticipated. While the repairs and renovations to the property were being carried out, Mr. Clemente and Mr. Proenza began to have disputes about such matters as the color of the kitchen cabinets, which required repainting them. During the work Mr. Proenza hurt his back, and it was necessary to have work performed by others. The cost of the renovations also was increased by custom work done for a potential buyer who later was unable to qualify to purchase the property.

   
   

8. Mr. Clemente had marital difficulties and while the renovation project was going on, Mr. Clemente separated from his wife. With the agreement of Mr. Proenza, Mr. Clemente moved into the partially renovated house. The divorce caused a financial strain on Mr. Clemente, who ultimately was forced to close down his real estate business, Amigo Realty.

   
   

9. Mr. Proenza was as eager as Mr. Clemente to obtain his share of the profit from the renovation and Mr. Clemente needed a place to live because of his divorce. They decided that Mr. Clemente would apply for a mortgage and purchase the house himself. Mr. Clemente made application for a mortgage to the Continental Trust Mortgage Company, with which he had done business in the past. In his loan application which was executed on November 22, 1989, Mr. Clemente represented that a cash deposit towards the purchase price was being held by Amigo Realty in the amount of $3,000, not $500. He later signed a statement on January 10, 1990, certifying that Amigo Realty then held $5,000 towards the purchase price, which consisted of $2,000 deposited on November 6, 1989, and

   $3,000 on December 7, 1989. The inconsistency between this statement and the loan application is not explained in the statement, but neither are correct. There were never any moneys placed in the trust account by Mr. Clemente as a down payment for his purchase of the property.

   
   

10. I do not find credible the testimony of Mr. Clemente that he was unable to recall the figure on the mortgage loan application for the amount in the Amigo Realty trust account, and reject Mr. Clemente's contention that the

    $3,000 figure was one inserted by Gonzalez on the application so that there would be something in the space. I also reject the argument that because Mr.

    Clemente was under emotional stress arrising out of his divorce during January, he did not understand the significance or appreciate the consequences of the statement he signed on January 10, 1990, that a total of $5,000 was held in the trust account of Amigo Realty towards the purchase of the property. That statement was given to the mortgage company for its use in determining whether to grant the mortgage loan. Mr. Gonzalez may not have testified directly that the representation that $5,000 was on deposit in Amigo Realty was material to the mortgage company in determining whether to grant the mortgage loan to Mr.

    Clemente. It is obvious that the mortgage company was sufficiently concerned to seek a certification from Amigo Realty about the monies on deposit as a follow- up to the mortgage application which Mr. Clemente submitted on November 22, 1989. It is reasonable to infer from this fact that Mr. Clemente's certification as the broker for Amigo Realty that it held $5,000 on deposit was a material representation made in connection with the loan application Mr.

    Clemente had made. That representation was made in the course of Mr. Clemente's activities as a broker, and the representation was false.

    
    

11. When the sale of the McNally home was closed on February 2, 1990, only Mr. Proenza received title, which he took as trustee. A handwritten trust agreement says that Mr. Proenza will hold title solely for the use of Mr. Clemente, and will convey the property to Clemente when told to do so by Clemente. Exhibit H, page 4. The trust agreement says nothing about payment by Mr. Proenza of any fees, commissions, discount points or other charges for the benefit of Mr. Clemente.

    
    

12. Ms. McNally received $28,423.70, which included the $500 which the contract had reflected as a deposit in the Amigo Realty trust account, but which had not been paid. No broker's commission was paid to Amigo or to Clemente and Ms. McNally had no basis for a complaint about the amount she ultimately received when the contract closed.

    
    

13. Shortly after the closing of the sale of the house from Ms. McNally to Mr. Proenza, another transaction closed which passed title from Mr. Proenza, as trustee, to Mr. Clemente individually. Mr. Clemente purchased the renovated house for a gross price of $65,000. In this transaction, Amigo Realty received a commission of $3,250 which was deducted from the proceeds payable to Mr. Proenza (Exhibit E, line 703) as was an additional $2,996.42 loan discount fee of 4.5% of the mortgage amount which was paid to Continental Trust Mortgage, (Id., line 802), plus other miscellaneous charges. These charges had the effect of reducing the amount due to Mr. Proenza as seller by $9,802.80, (Id., line 1400) leaving cash due to him of $55,092.92 (Id., line 603). After deducting the $28,423.70 which Proenza had paid to Ms. McNally to acquire title to the property (Exhibit J), the net sales proceeds were $26,669.22.

    
    

14. Mr. Proenza then paid Amigo Realty $13,160.58 for the materials Mr. Clemente had purchased for use in the renovations. This left a "profit" of

    $13,508.64. If the amount were divided equally between Proenza and Clemente each would have received $6,754.32. Mr. Proenza actually paid Clemente

    $6,348.14, which would appear to be $406.18 less than Clemente was entitled to receive if that amount were divided in two.

    
    

15. Mr. Clemente is only "shorted" if one accepts that Amigo Realty was due a 5% commission from Proenza on the sale from Proenza, as trustee, to Mr. Clemente individually, and that Mr. Proenza was responsible for paying the 4.5% loan discount to Mr. Clemente's mortgage lender, Continental Trust Mortgage. The Trust Agreement signed by Mr. Proenza contains no such provisions.

16. The Department has alleged in paragraph 11 of its Administrative Complaint that Proenza believes Clemente took advantage of his labor and that Proenza was short changed, and did not receive a fair share of the profit. Mr. Proenza's has limited fluency in English. He believes that he was entitled to

    $13,000 not $7,000. Without payments of the $3,250 commission Proenza paid to Amigo Realty and the $2,996.42 loan discount Proenza paid to Continental Mortgage Company for Mr. Clemente's mortgage loan Mr. Proenza would have been left with $6,246.46 more than the $6,160.50 he received, an amount much closer to the $13,000 Proenza believes he should have cleared when the sales of the house from Ms. McNally to him and then from him to Mr. Clemente had closed.

    
    

17. Mr. Proenza's testimony that Mr. Clemente asked him to "lend" Amigo Realty money which Mr. Proenza had expected to receive, becomes understandable. Mr. Clemente manipulated the closing documents to charge Mr. Proenza $6,246.42 as (1) a real estate commission and (2) to pay the loan discount points on Mr. Clemente's mortgage, when he had no agreement from Mr. Proenza that Mr. Proenza should do so. The settlement statement which was used for the closing of the transaction from Mr. Proenza to Mr. Clemente is on a U. S. Department of Housing and Urban Development form which, at first, is quite difficult to understand. It provided a means by which Mr. Clemente was able to defraud the relatively unsophisticated Mr. Proenza.

    
    

18. At the closing of the sale from Proenza to Clemente, Clemente also had to come up with money to replace the $5,000 he had represented to the mortgage company was already in the Amigo Realty escrow account. The title company would not accept Mr. Clemente's personal check, so he wrote a check on the Amigo Realty escrow account for the $1,750 shortage. Mr. Clemente deposited this amount into the Amigo Realty escrow account at a drive through teller window at a Fort Lauderdale bank on his way to the closing, but it was after 2:00 p.m. on Friday and the bank records reflected that the check was not credited to the account until the following Tuesday, February 6th. Mr. Clemente had no basis for drawing check #278 on the escrow account of Amigo Realty for $1,750 when he did so. He knew or should have known that the $1,750 had not actually been credited to the Amigo Realty escrow account.

    
    

19. On May 2, 1990, the Amigo Realty escrow/trust account was audited. The audit showed and Mr. Clemente acknowledged that Mr. Clemente had never put the $500 earnest money deposit in his escrow/trust account toward the purchase of the McNally property, he had never put the $5,000 deposit in his escrow account which he had represented to his mortgage lender was on deposit in that account. The statement which he gave to his mortgage lender on January 10, 1990, certifying that there was $5,000 in the Amigo Realty trust account was fraudulent. No other shortages were found in the Amigo Realty escrow/trust account.

    
    

20. The Respondents have previously been disciplined and paid a fine of

    $200 for culpable negligence for breach of trust, pursuant to a stipulation executed in April of 1989. Mr. Clemente contends that that stipulation was a plea of convenience which he entered into because the fine was nominal and would have cost him a great deal more than that amount to clear himself of wrongdoing at a formal hearing.

    
    

21. Mr. Clemente is a member in good standing of the Fort Lauderdale Board of Realtors. He has not been the subject of any complaints other than the one which Mr. Proenza has filed with the Department. He no longer works as a broker, but now is a sales associate working under the supervision of broker Mike De Rosa.

    CONCLUSIONS OF LAW

    
    

22. The Division of Administrative Hearings has jurisdiction over this matter. Section 120.57(1), Florida Statutes (1989).

    
    

23. The charges brought against Mr. Clemente may be grouped into five categories: (a) that he cheated his business partner, Mr. Proenza; (b) that he cheated the seller of the house, Ms. McNally; (c) that he failed to make the

    $500 deposit into the Amigo Realty escrow account which the contract indicates had been made; (d) that he misrepresented matters to his mortgage lender, first by representing at the time the application was filed that Amigo Realty held a

    $3,000 cash deposit towards the purchase of the property, and again on January 10, 1990, when he represented to the mortgage lender that Amigo Realty held

    $5,000 towards the purchase of the property, which had been made in two payments, a $2,000 payment on November 6th and a $3,000 payment on December 7th; and (e) that Clemente improperly "borrowed" $1,750 from the Amigo Realty escrow account in order to close the sale from Mr. Proenza to him.

    
    

24. The Department must prove the allegations of its complaint by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987). Mr. Clemente argues that the Department's evidence does not reach the requisite standard of "clear and convincing evidence" as that standard has been explained in Slomowitz v. Walker, 429 So.2d 797, 800 (Fla. 4th DCA 1983). I find that the evidence did meet that standard. While the testimony of Mr. Proenza alone was not entirely clear, it became quite clear after listening to the testimony of Mr. Proenza, the testimony of Mr. Clemente, and reviewing the documents that Mr. Clemente purposefully took advantage of his familiarity with confusing forms in order to charge Mr. Proenza with $6,246.42 in charges: a 5% broker's commission to Amigo Realty, and the 4.5% loan discount fee to Clemente's mortgage lender. Mr. Clemente knew that Mr. Proenza would never understand those documents. Mr. Proenza very clearly did understand that he had been cheated of more than

    $6,000.

    
    

25. It is also clear that Mr. Clemente was undergoing personal problems at the time of these transactions and that the divorce from his wife made it important for him to find a new place to live. As a consequence, he was willing to put any figure on any form which he thought necessary in order to obtain a place to live. The McNally house was the immediately available shelter. He lied when he put on the McNally contract that he had $500 in the Amigo Realty escrow account towards that purchase, he lied again on the November 22, 1989, loan application by telling the lender that he had $3,000 in the Amigo Realty escrow account towards the purchase, and he lied a third time on January 10, 1990, when he told the mortgage lender that he had $5,000 in the Amigo Realty escrow account. He may not have signed the contract with Ms. McNally in his capacity as a broker when he signed as the buyer, but he was the only qualifying broker for Amigo Realty and he lied when he represented that $500 was held in the Amigo Realty trust account towards his purchase of that property. He is properly chargeable with misconduct for that misrepresentation. Amigo Realty also violated Section 475.25(1)(k), Florida Statutes (1989) when it failed to maintain trust funds in the real estate escrow account until disbursement was authorized, and Amigo Realty violated Section 475.25(1)(d), Florida Statutes, as did Mr. Clemente, when they failed to place deposit money in an escrow account when the contract required it.

26. Mr. Clemente's argument that he had no wrongful intent when he failed to maintain the $5,000 in Amigo's escrow account when he told his mortgage lender it was on deposit is baseless. He made the misrepresentation about what was in the escrow account which he controlled in order to benefit himself individually, but he signed the January 10, 1990, letter to the mortgage lender as the real estate broker for Amigo Realty, knowing that those funds were not on deposit. The misrepresentation was part of a fraud on the mortgage lender in a business transaction and violates Section 475.25(1)(b), Florida Statutes. An additional contract document which required the deposit of the $5,000 is the settlement statement for the sale of the property from Proenza to Clemente, which Mr. Clemente signed. Line 201 of that settlement statement shows the

    $5,000 deposit which was never made. Mr. Clemente did not deal honestly with Mr. Proenza, or with his mortgage lender. When faced with difficulties in his personal life, Mr. Clemente was willing to sacrifice his duty to deal fairly with those who engage in real estate transactions with him to what he perceived to be his needs of the moment.

    
    

27. The Real Estate Commission has adopted penalty guidelines in Rule 21V- 24.001, Florida Administrative Code. The penalty range for violation of Subsection 475.25(1)(b) on fraud, misrepresentation, concealment, etc. is up to five years suspension or revocation. Rule 21V-24.001(3)(c). The recommended penalty for violation of Section 475.25(1)(d), the failure to account or deliver escrowed property to any person as required by agreement or law, is up to five years suspension. Rule 21V-24.001(3)(e), Florida Administrative Code. The penalty for violation of Section 475.25(1)(k), failure to deposit any money in an escrow account immediately upon receipt until disbursement is properly authorized,carries a penalty of a minimum of a ninety day suspension and a

    $1,000 fine, up to revocation. Rule 21V-24.001(3)(l), Florida Administrative Code. These penalty guidelines are based upon a single count violation of each statute listed, and the guidelines provide that multiple counts or combinations of violations may result in a higher penalty than that prescribed for a single, isolated violation. Rule 21V-24.001(1), Florida Administrative Code. The penalty may be enhanced due to aggravating circumstances. Rule 21V- 24.001(4)(a), Florida Administrative Code. Aggravating and mitigating circumstances include such factors as the severity of the offense, degree of harm to the public, the number of counts in the Administrative Complaint, the number of times the offenses previously have been committed by the licensee, the disciplinary history of the licensee, that status of the licensee at the time the offense was committed (i.e., was he already on probation), and the degree of financial hardship incurred by a licensee as the result of an imposition of a fine or suspension of a license. Rule 21V-24.001(4)(b), Florida Administrative Code.

    
    

28. The prior discipline is not significant because the fine was so minor ($200) that it was reasonable for Mr. Clemente to pay the fine rather to incur substantial costs to defend those allegations. The number of violations is significant here. At least three important violations were committed. No money was placed in escrow at the time Mr. Clemente entered into his contract with Ms. McNally; he lied on at least two occasions to the mortgage lender with respect to the mortgage he obtained on the McNally property, and he lied in the settlement statement used in the closing of the transaction where the property was transferred from Mr. Proenza to Mr. Clemente, and in the course of that transaction defrauded Mr. Proenza of more than $6,000. In view of all these factors, the penalty proposed by the Commission in this prosecution, suspension of licensure for two years and a fine of $1,500 appears to be appropriate.

Since Mr. Clemente has closed his business, Amigo Realty, there is no point in imposing any penalty on it.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that both Armando Clemente and Amigo Realty be found guilty of

having violated Subsections 475.25(1)(b), (d), and (f), Florida Statutes, as charged in the Administrative Complaint. It is also recommended that Mr.

Clemente be fined $1,500; that his license be suspended for two years.

DONE and ENTERED this 27th day of November, 1991, at Tallahassee, Florida.

WILLIAM R. DORSEY, JR.

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 27th day of November, 1991.

APPENDIX TO RECOMMENDED ORDER

Rulings on findings proposed by the Department:

1. Rejected as unnecessary.

2 - 4. Adopted in Finding 1.

1. Adopted in Finding 2.

2. Adopted in Finding 3, except for the last sentence which is rejected. I cannot understand how a promise to pay 10% interest was involved in this transaction.

3. Adopted in Finding 4.

4. Adopted in Finding 5.

5. Adopted in Findings 6 and 9.

6. Adopted in Findings 12, 13 and 17. 11a. Adopted in Finding 18.

11b. Adopted in Finding 9. 11c. Adopted in Finding 18.

12. Adopted in Findings 18 and 19.

Rulings on findings proposed by the Respondent:

1. Adopted in Finding 1.

2. Rejected as unnecessary.

3. Adopted in Findings 2 - 4.

4. Adopted in Findings 4 - 6.

5. Adopted in Finding 7.

6. Adopted in Finding 8.

7 and 8. Adopted in Finding 9.

1. Rejected, see, Finding 10.

2. Adopted in Finding 12.

3. Adopted in Findings 13 and 14, but see, Findings 15 - 17.

4. Discussed in Finding 18.

5. Adopted in Finding 19.

6. Adopted in Finding 20.

7. Adopted in Finding 21.

8. Rejected, Mr. Proenza was injured financially. It is by no means clear that the mortgage company was uninjured. The evidence is not convincing that there was more equity in the house, as renovated, than the amount of the loan although that fact is not pivotal here.

9. These facts are evaluated in the assessment of the penalty.

COPIES FURNISHED:

Steven W. Johnson, Esquire

Department of Professional Regulation Post Office Box 1900

Orlando, Florida 32802-1900

Karen Coolman Amlong, Esquire AMLONG & AMLONG, P.A.

101 Northeast Third Avenue Suite 203

Fort Lauderdale, Florida 33301

Jack McRay, General Counsel Department of Professional Regulation 1940 North Monroe Street

Tallahassee, Florida 32399-0792

Darlene F. Keller, Division Director Department of Professional Regulation Division of Real Estate

400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802-6053

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: 90-006136

Orders for Case No: 90-006136