STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF PROFESSIONAL )
REGULATION, DIVISION OF )
REAL ESTATE, )
)
)
Petitioner, )
)
vs. ) CASE NO. 91-8098
)
JOHN A. RORABACHER, )
)
)
)
Respondent. )
)
RECOMMENDED ORDER
On February 7, 1992, a formal administrative hearing was held in this case in Brooksville, Florida, before J. Lawrence Johnston, Hearing Officer, Division of Administrative Hearings.
APPEARANCES
For Petitioner: Janine B. Myrick, Esquire
Senior Attorney
Department of Professional Regulation, Division of
Real Estate
400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802
For Respondent: John A. Rorabacher, pro se
4425 Quintara Street Spring Hill, Florida 34608
STATEMENT OF THE ISSUES
The issues in this case are framed by the Administrative Complaint filed against the Respondent on November 1, 1991. In it, the Petitioner, the Department of Professional Regulation, Division of Real Estate, charges in six counts that the Respondent:
committed dishonest dealing by trick, scheme or device, culpable negligence or breach of trust in business transactions, in violation of Section 475.25(1)(b), Fla. Stat. (Counts I and III);
operated as a broker under a trade name without causing the name to be noted in the records of the Florida Real Estate Commission and placed on his license, or operated as a member of a partnership or as
a corporation, or as an officer or manager thereof, without the partnership or corporation being the holder of a valid current registration, in violation of Section 4775.42(1)(k) and, therefore, Section 475.25(1)(e), Fla. Stat. (Count II);
failed to maintain trust funds in the real estate brokerage escrow bank account or some other proper depository until disbursement thereof was properly authorized, in violation of Section 475.25(1)(k), Fla. Stat. (Count IV);
failed to preserve and make available to the Petitioner all books, records, and supporting documents, and failed to keep an accurate account of all trust fund transactions, together with such additional data as good accounting practice requires, in violation of F.A.C. Rule 21V-14.012(1) and, therefore, Section 475.25(1)(e), Fla. Stat. (Count V); and
failed to prepare and sign required written monthly escrow reconciliation statements, in violation of F.A.C. Rule 21V-14.012(2) and, therefore, Section 475.25(1)(e), Fla. Stat. (Count VI).
The issues are whether the evidence sustains the charges and, if so, how the Respondent should be disciplined.
PRELIMINARY STATEMENT
The Petitioner, the Department of Professional Regulation, Division of Real Estate, filed the Administrative Complaint commencing this proceeding against the Respondent, John A. Rorabacher, on November 1, 1991, DPR Case No. 9184359.
The Respondent disputed the charges 1/ and requested formal administrative proceedings. The matter was referred to the Division of Administrative Hearings on December 19, 1991, and was scheduled for final hearing on February 7, 1992.
At the final hearing, the Department called two witnesses and had Petitioner's Exhibits 1 through 5 admitted in evidence. The Respondent testified in his own behalf, conceding some of the charges and disputing others. He also had Respondent's Exhibits 1 through 11 admitted in evidence. After presentation of the evidence, the parties were given ten days in which to file proposed recommended orders. Explicit rulings on the proposed findings of fact contained in the parties' proposed recommended orders may be found in the attached Appendix to Recommended Order, Case No. 91
FINDINGS OF FACT
The Petitioner, the Department of Professional Regulation, Division of Real Estate, prosecutes violations of the licensing laws and regulations governing real estate brokers in the State of Florida.
The Respondent, John A. Rorabacher, is now and was at all times material to this case, a licensed real estate broker in the State of Florida, having been issued license number 0254845 in accordance with Chapter 475, Florida Statutes. The last license issued to the Respondent, effective November 12, 1991, was as a broker, in limbo, and was issued to his home address.
Upon application filed in February, 1988, the Respondent registered The Ladysmith Group, Inc., as a real estate brokerage, effective March 1, 1988. The Respondent was the corporation's sole officer, director and shareholder. Operating through The Ladysmith Group, Inc., through October, 1991, the Respondent acted as property manager and agent for the Spring Hill Executive Center, owned by Nimit and Cattaliya Talvanna. He secured tenants and prepared leases for office space at the Spring Hill Executive Center that provided for lease payments to be made to the Talvannas "c/o The Ladysmith Group, Inc., 5467 Spring Hill Drive, Spring Hill, Florida 34606." He corresponded with tenants on the letterhead of The Ladysmith Group, Inc. He placed lease payments he received on behalf of the Talvannas into an escrow account maintained by The Ladysmith Group, Inc. He arranged for repairs and maintenance and renovations to the Talvanna property on their behalf. 2/
While maintaining the registration of The Ladysmith Group, Inc., the Respondent applied in March, 1988, to also register his broker license with Consumers Aid Realty, Inc. (Consumers Aid), which registration became effective on May 9, 1988. 3/ In addition to being a broker for the company, the Respondent also was a part owner. He was a signatory on the company's rental escrow account.
In December, 1989, the Respondent had the Florida Real Estate Commission cancel the registration of The Ladysmith Group, Inc., and the cancellation became effective January 5, 1990. However, the Respondent continued to operate through The Ladysmith Group, Inc., as described in Finding 3, above. He did this in part to minimize confusion among tenants, who were used to making their lease payments through The Ladysmith Group, Inc., and in part to shield the payments from liens and/or seizure by the IRS, to which the Respondent owed back taxes.
Sometime in May or June, 1990, Winston Griffith acquired an ownership interest in Consumers Aid. Griffith did not then possess and never has possessed a real estate license in the State of Florida. The Respondent remained with the company as a part owner and as a broker for the company. He continued to be a signatory on the company's rental escrow account. 4/ However, by the end of July, 1990, the Respondent secured other full-time
employment and changed his status with the company from that of an active broker (involved primarily in sales and listing) to that of a consultant. Another broker remained with the company full-time.
In late October, 1990, the remaining broker at Consumers Aid gave notice of her intention to resign and cancel her registration with the company. Griffith informed the Respondent, who cooperated in Griffith's search for a replacement. The Respondent agreed to be fully responsible for the brokerage in the interim. After approximately four to six weeks, a replacement named Mr. Foster was secured in December, 1990, supposedly to act as the full-time broker for the company so that the Respondent could continue in his status as consultant. But the evidence suggests that Mr. Foster never actually served as the full-time broker and that the Respondent nonetheless continued in the status of consultant. It is not clear from the evidence who, if anyone, performed the function of broker for the company during the time Mr. Foster was the nominal full-time broker.
In April, 1991, the Respondent returned to the brokerage on a more or less full-time basis for about three months. During this time, there was no discussion of Mr. Foster, or his status with company, or whether he was ever there, or whether he would ever be back. It is clear the Respondent knew that
he was the company's only broker and that he was fully responsible for the brokerage during those three months.
In June, 1991, the Respondent, acting for the Talvannas as described in Finding 3, above, prepared a lease for office space at the Spring Hill Executive Center for execution by Griffith, for Consumers Aid, as tenant. The lease is dated June 27, 1991. Among other things, the lease provided, on the first page, that the lessee would be responsible for a pro rata share of insurance and real estate taxes.
When informed of the provision for payment of a pro rata share of insurance and real estate taxes, Griffith protested that he was unaware of the provision, notwithstanding the terms of the lease, and refused to pay those items.
At the beginning of August, 1991, the Respondent's status with Consumers Aid changed again. He secured full-time employment elsewhere and ceased acting as a broker for the company. The Respondent knew that the company had no other broker, but only two real estate sales persons and Griffith, who had no real estate license. Nonetheless, he allowed Griffith to use his license until Griffith could hire another broker.
In late August, 1991, the Respondent prepared a notice to the Florida Real Estate Commission that he was cancelling his registration with Consumers Aid. The evidence is not clear when this notification was sent to the Commission. The cancellation was not made effective until November 12, 1991.
On or about August 20, 1991, the Respondent, acting for the Talvannas as described in Finding 3, above, sent a letter to Griffith demanding unpaid rents less the pro rata share of insurance and property taxes. The letter was on the letterhead of The Ladysmith Group, Inc.
On or about August 22, 1991, Griffith paid a portion of the monies demanded in the August 20, 1991, letter and made a note of the payment in the upper right-hand corner of the letter. Still acting for the Talvannas as described in Finding 3, above, the Respondent continued to collect rents due under the Consumers Aid lease in the name of The Ladysmith Group, Inc., and deposited them in the escrow account maintained by The Ladysmith Group, Inc.
On September 27, 1991, an investigator with the Department conducted a review and audit of the rental escrow account maintained by Consumers Aid. Normally, in conducting such an audit, lease agreements are reviewed to determine the trust liability, which is compared to the reconciled bank balance. But all lease agreements, bank statements and cancelled checks for the rental escrow account of Consumers Aid were not available at the time of the audit. Instead, the company's accountant provided figures representing the amount which should have been held in escrow and totalling $11,470. The reconciled bank balance on closure of the company's rental escrow account on September 26, 1991, was $2,399.77, showing a shortage of $9,070.23.
The September 27, 1991, audit also showed that monthly reconciliation reports for the Consumers Aid rental escrow account were not being prepared despite a detailed explanation of the requirement during an audit performed approximately one year earlier. The Respondent was present, along with others from Consumers Aid, during parts of the earlier audit.
At the time of the September 27, 1991, audit, the Commission records still indicated that the Respondent was registered as a broker for Consumers Aid and showed his address as being 5467 Spring Hill Drive, Spring Hill, Florida 32606-4597, the location of Consumers Aid. For reasons not revealed by the evidence, Griffith did not give the DPR investigator the Respondent's home address, and the investigator left word at the home of the Respondent's parents for him to contact the investigator. The Respondent never contacted the investigator.
CONCLUSIONS OF LAW
Section 475.25, Fla. Stat. (1991), authorizes the Florida Real Estate Commission to place a licensee on probation, suspend his license for up to ten years, revoke his license, impose an administrative fine of up to $1,000 for each count or separate offense, or issue a reprimand, or do any or all of the above, if it finds that a licensee has violated Section 475.25.
Counts I and III of the Administrative Complaint charge the Respondent with violations of Section 475.25(1)(b), Fla. Stat. (1991). Section 475.25(1)(b) proscribes dishonest dealing by trick, scheme or device, culpable negligence or breach of trust in any business transaction.
The evidence in this case did not prove that the Respondent embezzled from the Consumers Aid rental escrow account or that he was directly involved in creating the escrow account shortage. Nor did the evidence prove that the Respondent violated Section 475.25(1)(b) by failure to disclose, or point out, to Griffith the provision in the Talvanna-Consumers Aid lease that the lessee would be responsible for a pro rata share of insurance and real estate taxes. (The evidence was that the provision was clearly and unambiguously stated on the first page of the lease. As representative of the lessor, the Respondent was under no duty to point out the provision or read it to him.) But violations of the statute were proven in several other respects. First, the Respondent practiced real estate through The Ladysmith Group, Inc., when the company was not a registered broker. (See Count II, below.) Second, the Respondent practiced real estate through The Ladysmith Group, Inc., when he was not registered as a broker with The Ladysmith Group, Inc. Third, he allowed Consumers Aid to used his broker license to maintain its licensure as a corporate broker knowing full well that no licensed broker was supervising the operations of the company, including the escrow accounts. And, fourth, he was culpably negligent in connection with the Consumers Aid escrow account violations. (See Counts IV, V and VI, below.)
Count II charges the Respondent with violation of Section 475.42(1)(k) and, therefore, Section 475.25(1)(e), Fla. Stat. (1991). Section 475.42(1)(k) prohibits a broker from operating as a broker under a trade name without causing the name to be noted in the records of the Florida Real Estate Commission and placed on his license, or from operating as a member of a partnership or as a corporation, or as an officer or manager thereof, without the partnership or corporation being the holder of a valid current registration. (Section 475.25(1)(e), Fla. Stat. (1991), simply proscribes violations of any of the provisions of Chapter 475 or any lawful order or rule made or issued under the provisions of Chapter 475 or 455, Florida Statutes.) The evidence proved that the Respondent practiced real estate through The Ladysmith Group, Inc., when the company was not a registered broker, a violation of Section 475.42(1)(k).
Count IV charges the Respondent with violation of Section 475.25(1)(k), Fla. Stat. (1991). Section 475.25(1)(k) requires a licensed
broker to maintain trust funds in the real estate brokerage escrow bank account or some other proper depository until disbursement thereof was properly authorized.
Count V charges the Respondent with violation of F.A.C. Rule 21V- 14.012(1) and, therefore, Section 475.25(1)(e), Fla. Stat. (1991). F.A.C. Rule 21V-14.012(1) requires a broker to preserve and make available to the Department all books, records, and supporting documents, and to keep an accurate account of all trust fund transactions, together with such additional data as good accounting practice requires. (Again, Section 475.25(1)(e), Fla. Stat. (1991), simply proscribes violations of any of the provisions of Chapter 475 or any lawful order or rule made or issued under the provisions of Chapter 475 or 455, Florida Statutes.)
Count VI charges the Respondent with violation of F.A.C. Rule 21V- 14.012(2) and (3) and, therefore, Section 475.25(1)(e), Fla. Stat. (1991).
F.A.C. Rule 21V-14.012(2) and (3) requires a broker to prepare and sign written monthly escrow reconciliation statements. (Again, Section 475.25(1)(e), Fla. Stat. (1991), simply proscribes violations of any of the provisions of Chapter
475 or any lawful order or rule made or issued under the provisions of Chapter
475 or 455, Florida Statutes.)
The evidence proved violations under Count IV, V and VI of the Administrative Complaint. As a broker registered with Consumers Aid, the Respondent was legally responsible for the maintenance and condition of the company's escrow account. That there may have been other brokers also responsible for the account, or other licensed and unlicensed persons handling the account in a manner contrary to law, does not excuse the Respondent from this violation. And, besides the Respondent's legal responsibility for the maintenance and condition of the Consumers Aid escrow account, the Respondent was personally and exclusively responsible for the account for some of the time in question, specifically from approximately April through July, 1991, and he cavalierly left the company without any broker to take his place when he took other employment on or about August 1, 1991. (The evidence also suggests that previously he did essentially the same thing when left Mr. Foster supposedly in charge.)
In his attempt to fend off the charges, the Respondent also argues unconvincingly that Griffith forced him out of the management of Consumers Aid. (The testimony of the Respondent himself establishes that he repeatedly left the company for other employment opportunities and returned when the other employment terminated.) On the other hand, the Respondent also seems to seek absolution by arguing that he left the company in the hands of Griffith and others when he left, and that Griffith should not be heard to complain against him about the state of escrow account. The Respondent's position reflects a basic lack of understanding of both the nature of this proceeding and the purpose of the escrow account. As for the nature of this proceeding, Mr. Griffith is not the petitioner, the Department is. As for the escrow account, the escrow account was not just for the protection of Griffith and Consumers Aid, but also for the protection of the clients of Consumers Aid. In part, it is the broker's role to provide protection for the client from the possible misdeeds or incompetence of the owner(s) and other employee(s) of the brokerage. The Respondent failed to fulfill these obligation during his tenure as registered broker for Consumers Aid, and pointing fingers at Griffith and others (especially the non-brokers) at Consumers Aid does nothing to help the Respondent's cause.
Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Florida Real Estate Commission enter a final order: (1) suspending the Respondent, John A. Rorabacher, for two (2) years; (2) conditioning reinstatement upon either successful completion of the required broker's course or approved Real Estate Commission continuing education, including in the area of escrow accounts, to be specified by the Commission; and
(3) fining the Respondent $1,000 to be paid within 30 days.
RECOMMENDED this 28th day of February, 1992, in Tallahassee, Florida.
J. LAWRENCE JOHNSTON 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 28th day of February, 1992.
ENDNOTES
1/ At hearing and in his proposed recommended order, the Respondent withdrew his dispute as to some of the charges.
2/ The Respondent claims to have been acting on behalf of the Talvannas exclusively personally as their attorney-in-fact under a power of attorney. He claims to have used The Ladysmith Group, Inc., solely in order to shield Talvanna money from the IRS, to whom the Respondent personally owed money for back taxes. The Respondent could not produce the actual power-of-attorney, which he claims was lost during the course of court litigation. But regardless of any power-of-attorney, and regardless of the Respondent's motivation, it is clear that the Respondent was operating through The Ladysmith Group, Inc., brokerage with respect to the Talvanna property.
3/ Consumers Aid utilized the same mailing address as The Ladysmith Group, Inc.
4/ The Respondent continued to be a signatory on the company's rental escrow account until the account was closed on September 26, 1991. See Finding 15, below.
APPENDIX TO RECOMMENDED ORDER
To comply with the requirements of Section 120.59(2), Fla. Stat. (1989), the following rulings are made on the parties' proposed findings of fact:
Petitioner's Proposed Findings of Fact.
1.-2. Accepted and incorporated to the extent not subordinate or unnecessary.
3.-5. These dates refer to the effective dates. Accepted and incorporated.
6.-8. Accepted and incorporated.
9. Rejected as not proven.
10.-16. Accepted and incorporated to the extent not subordinate or unnecessary.
Rejected as not proven that he picked up mail daily. Otherwise, accepted and incorporated to the extent not subordinate or unnecessary.
Accepted and incorporated.
Again, the license status date is an effective date. Accepted and incorporated.
20.-27. Accepted and incorporated to the extent not subordinate or unnecessary.
28-30. Accepted but subordinate to facts found and unnecessary. 31.-33. Accepted and incorporated.
Respondent's Proposed Findings of Fact.
1.-2. Accepted and incorporated to the extent not subordinate or unnecessary.
3.-5. Accepted and incorporated.
Accepted and incorporated.
The substance of the Respondent's dispute is rejected as contrary to facts found and to the greater weight of the evidence.
Accepted and incorporated.
Accepted and incorporated to the extent not subordinate or unnecessary.
10.-14. Accepted and incorporated to the extent not subordinate or unnecessary.
"Single, primary" is a non sequitor. Otherwise, accepted and incorporated to the extent not subordinate or unnecessary.
The substance of the Respondent's dispute is rejected as contrary to facts found and to the greater weight of the evidence.
The substance of the Respondent's dispute is accepted but subordinate and unnecessary.
Accepted and incorporated.
Rejected as not supported by the evidence when the notification was sent to the Commission. Otherwise, accepted and incorporated. (The license status date is an effective date.)
20.-21. Accepted and incorporated to the extent not subordinate or unnecessary.
22. The proposed finding does not specify time frames, so it is neither accepted nor rejected. But, in any event, the proposed would be irrelevant and unnecessary. Even accepting the Respondent's argument, he acquiesced in the owners of Consumers Aid making it impossible for the Respondent to discharge his duties. See Conclusion of Law 9, above.
23.-24. Accepted and incorporated to the extent not subordinate or unnecessary.
Argument rejected; proposed findings generally accepted but irrelevant and unnecessary. Even accepting the Respondent's argument, he acquiesced in the owners of Consumers Aid making it impossible for the Respondent to discharge his duties. See Conclusion of Law 9, above.
Accepted and incorporated to the extent not subordinate or unnecessary.
Rejected as not contrary to facts found and to the greater weight of the evidence that Mr. Foster "perform[ed] the services of managing broker." Otherwise, accepted and incorporated to the extent not subordinate or unnecessary.
Accepted but subordinate to facts found and unnecessary.
Proposed findings as to corporate dissolution rejected as not supported by the evidence. Otherwise, accepted and incorporated to the extent not subordinate or unnecessary.
30.-32. Accepted but subordinate to facts found and unnecessary.
33. Rejected as subordinate to facts contrary to those found and contrary to the greater weight of the evidence.
COPIES FURNISHED:
Janine B. Myrick, Esquire Senior Attorney
Department of Professional Regulation, Division of Real Estate
400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802
John A. Rorabacher 4425 Quintara Street
Spring Hill, Florida 34608
Darlene F. Keller, Director Division of Real Estate Department of Professional
Regulation
400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802-1900
Jack McRay, Esquire General Counsel
Department of Professional Regulation
Northwood Centre
1940 North Monroe Street Tallahassee, Florida 32399-0792
NOTICE OF RIGHT TO SUBMIT EXCEPTIONS
ALL PARTIES HAVE THE RIGHT TO SUBMIT TO THE FLORIDA REAL ESTATE COMMISSION WRITTEN EXCEPTIONS TO THIS RECOMMENDED ORDER. ALL AGENCIES ALLOW EACH PARTY AT LEAST TEN DAYS IN WHICH TO SUBMIT WRITTEN EXCEPTIONS. SOME AGENCIES ALLOW A LARGER PERIOD WITHIN WHICH TO SUBMIT WRITTEN EXCEPTIONS. YOU SHOULD CONSULT WITH THE FLORIDA REAL ESTATE COMMISSION CONCERNING ITS RULES ON THE DEADLINE FOR FILING EXCEPTIONS TO THIS RECOMMENDED ORDER.
| Issue Date | Proceedings |
|---|---|
| Jun. 26, 1992 | (Final) Order filed. |
| May 04, 1992 | Final Order filed. |
| Feb. 28, 1992 | Recommended Order sent out. CASE CLOSED. Hearing held 02/07/92. |
| Feb. 19, 1992 | (Respondent's) Proposed Recommended Order filed. |
| Feb. 14, 1992 | (Petitioner) Proposed Recommended Order filed. |
| Jan. 15, 1992 | Notice of Hearing sent out. (hearing set for 02/07/92;10:00AM;Brooksville) |
| Dec. 31, 1991 | (DPR) Unilateral Response to Initial Order filed. |
| Dec. 20, 1991 | Initial Order issued. |
| Dec. 19, 1991 | Agency referral letter; Administrative Complaint; Election of Rights;Exhibits filed. |
| Issue Date | Document | Summary |
|---|---|---|
| Apr. 21, 1992 | Agency Final Order | |
| Feb. 28, 1992 | Recommended Order | Broker found not guilty of embezzling from brokerage but found guilty of several misrepresentations, and practicing through unlicensed brokers and others. |
