STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL )

REGULATION, DIVISION OF )

REAL ESTATE, )

)

Petitioner, )

)

vs. ) CASE NO. 92-2861

)

HARRY PAUL, )

)

Respondent. )

)

RECOMMENDED ORDER

On October 6, 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

Hurston North Tower

400 West Robinson Street Orlando, Florida 32802

For Respondent: Ray Shaw, Esquire

4090 Commercial Way, Suite 5 Spring Hill, Florida 34606

STATEMENT OF THE ISSUE

The issue in this case is whether the Florida Real Estate Commission should take action against the Respondent, Harry Paul, for allegedly acting as a real estate broker without the license required by Florida law.

PRELIMINARY STATEMENT

On or about February 26, 1992, the Petitioner, the Department of Professional Regulation, Division of Real Estate (DPR), filed an Administrative Complaint against the Respondent, Harry Paul, DPR Case No. 9182650, alleging facts on which DPR charged the Respondent with acting as a real estate broker without the license required by Florida law. The Respondent disputed the allegations and requested a formal administrative proceeding under Section 120.57(1), Fla. Stat. (1991).

The DPR referred the matter to the Division of Administrative Hearings on or about May 8, 1992, and it was given DOAH Case No. 92-2861 and assigned to a

hearing officer. After receipt of the parties' responses to the Initial Order, final hearing was scheduled for October 6, 1992.

On or about August 6, 1992, the DPR's Motion to Amend Administrative Complaint was granted to correct the citation to Section 475.25(1)(c), in paragraph 4 of the Administrative Complaint, by replacing it with the correct citation to Section 475.01(1)(c), Fla. Stat.

At the final hearing, the DPR called two complainants and a DPR investigator, as well as the Respondent's employer. The Respondent recalled his employer and testified in his own behalf. Petitioner's Exhibits 1 through 5 and Respondent's Exhibits 1 through 8 were admitted in evidence.

Neither party ordered the preparation of a transcript of the final hearing.

The parties' request for additional time to October 30, 1992, for filing proposed recommended orders was granted. 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. 92-2861.

FINDINGS OF FACT

1. The Respondent, Harry Paul, is not, and never has been, licensed in the State of Florida as a real estate broker or salesman.

   
   

2. The Respondent is the vice president in charge of sales for Artistic Homes Enterprises, Inc. (Artistic Homes). Artistic Homes is in the residential construction business in Hernando County, Florida. It sells homes to be constructed primarily either on lots it owns or on lots owned by the customer. Less frequently, it contracts to build homes on lots to be purchased by the customer from third parties.

   
   

3. The Respondent is strictly an employee of the company; he has no ownership interest. He manages the Artistic Homes sales staff, which consists exclusively of licensed real estate salespersons or broker-salespersons. Generally, the sales staff sells the construction and, when applicable, the lot involved in transactions with the customer. The Respondent is available to answer questions the sales staff has, especially concerning requested modifications to the Artistic Homes models.

   
   

4. The sales staff is paid weekly strictly on a straight 2% commission on construction and Artistic Homes lot sales "funded" during the week. Artistic Homes considers "funding" to take place either when a closing takes place or when at least 20% of the contract price is paid in the form of an earnest money deposit.

   
   

5. Artistic Homes pays the Respondent a weekly salary, plus a monthly bonus. The Respondent's bonus is 2 basis points, or 0.2%, on construction and, up to a maximum of $50, on Artistic Homes lot sales funded during the month. Income and social security taxes are deducted from the salary portion of the Respondent's compensation, but not from the bonus override portion.

   
   

6. In addition to the Respondent's more usual function in the company, as described in Finding 3, above, the Respondent also occasionally deals with customers, either directly or through the sales staff, on the sale of lots, both owned by Artistic Homes and owned by third parties. On occasion, the Respondent shows customers lots, both owned by Artistic Homes and owned by third parties,

   prepares the contracts for execution by the parties, and accepts earnest money deposits.

   
   

7. Specifically in the case of customer Delores Mann, the customer came in to look at the Artistic Home models. She was helped by one of the licensed salespersons on the Artistic Homes sales staff. When the salesperson learned that Mann did not own a lot, she began to make suggestions and show the customer lots she might want to purchase. As usual, the Respondent tried to be helpful by answering questions on request and giving suggestions. When the customer came in on or about August 8, 1990, to purchase one of the Artistic Homes lots, the salesperson with whom she had been working was not there. In the salesperson's absence, the Respondent drew up the contract for the sale and accepted the customer's check for the purchase price--$20,900.

   
   

8. Shortly thereafter, the customer returned stating that she had changed her mind. The Respondent dealt with her, trying to save the sale, and tried to convince her that she had made a wise purchase. At the same time, he agreed to show her more lots and to exchange the one she had bought if she found another one she liked better. After the Respondent showed her many other possibilities, Mann decided to keep the lot she had.

   
   

9. For the next several weeks, both the Respondent and the licensed salesperson met with Mann repeatedly to discuss the residence she would build on the lot. After viewing the models, they discussed more than one in detail, making modifications at the customer's request, and discussing the cost of the different models, with the various modifications. This was an unusually long process, as Mann kept changing her mind. Finally, on or about Friday, August 20, 1990, Mann made her decision, signed a contract prepared by the licensed salesperson, and gave the licensed salesperson a 20% deposit on the purchase price.

   
   

10. By Monday, August 23, 1990, Mann was back again, having changed her mind again over the weekend. The licensed salesperson was not there, and the customer went to see the Respondent. She asked him how much it would cost her to back out of the deal. The Respondent answered that she "owed about $7,000." Mann expressed surprise, as construction had not begun. (In fact, only about

    $3,630 in commissions had been earned on the two sales; the evidence did not reveal what else the customer might have owed at that point.) The Respondent again tried to save the sale. He tried to persuade Mann that she had made a good decision and that she would be happy once the process was over, and she moved into her "dream home." The customer reluctantly agreed to go forward, but later wrote a letter to the owner of Artistic Homes seeking to get out of the deal.

    
    

11. In 1984, the Respondent received notice that the Florida Real Estate Commission had found probable cause to believe that the Respondent was acting as a real estate broker in Florida with a required license. Some time later, the Respondent received notice that the case was being dismissed. It was not explained to the Respondent why the case was dismissed, but the Respondent assumed that what he was doing at the time was not illegal. The only significant changes in the manner in which the Respondent operates as sales manager for Artistic Homes are that, now, the entire sales staff is licensed, and the Respondent is designated, internally at least, as a corporate officer of Artistic Homes.

    CONCLUSIONS OF LAW

    
    

12. Section 475.42(1)(a), Fla. Stat. (1991), provides:

    No person shall operate as a broker or salesperson without being the holder of a valid and current active license therefor.

    
    

13. Section 475.01(1), Fla. Stat. (1991), sets out, in pertinent part, the following pertinent definitions:

    
    

    1. "Broker" means a person who, for another, and for a compensation or valuable consideration directly or indirectly paid or promised, expressly or impliedly, or with an intent to collect or receive a compensation or valuable consideration therefor, . . . sells, exchanges, buys, [or] rents, . . . any real property or any interest in or concerning the same, . . . or who takes any part in the procuring of sellers, purchasers, lessors, or lessees of . . . the real property of

       another, . . . or who directs or assists in the procuring of prospects or in the negotiation or leasing of any transaction which does, or is calculated to, result in a sale, exchange, or leasing thereof, and who receives, expects, or is promised any compensation or valuable consideration, directly or indirectly therefor . . ..

       
       

    2. "Salesperson" means a person who performs any act specified in the definition of "broker," but who performs such act under the direction, control, or management of another person. . . ..

       
       

14. It is relatively clear under the facts of this case that the Respondent has acted as a real estate broker or salesperson, as defined by Section 475.01(1)(c) and (d), Fla. Stat. (1991). The second issue, whether the Respondent is required to be licensed, turns on the more difficult question whether Section 475.011(2), Fla. Stat. (1991), exempts the Respondent from having to be licensed.

15. Section 475.011, Fla. Stat. (1991), provides in in pertinent part: This part does not apply to:

    * * *

    (2) Any individual, corporation, partnership, trust, joint venture, or other entity which sells, exchanges, or leases its own real property; however, this exemption shall not

    be available if and to the extent that an agent, employee, or independent contractor paid a commission or other compensation strictly on a transactional basis is employed

    to make sales, exchanges, or leases to or with customers in the ordinary course of an owner's business of selling, exchanging, or leasing real property to the public . . ..

    
    

    (Emphasis added.) Whether the Respondent falls under this statutory exemption turns on whether, on the facts of this case, the Respondent is "paid a commission or other compensation strictly on a transactional basis."

    
    

16. In Dept. of Bus. Reg. v. Smith, 471 So. 2d 138, 139-140 (Fla. 1st DCA 1985), the court described the legislative history and intent of Section 475.011(2), Fla. Stat., as follows:

    
    

    Prior to 1979, section 475.01(2) required that all employees of a corporation engaging in the sale of corporate real estate, except for one appointed officer, be licensed real estate brokers or salesmen. This statutory requirement was held unconstitutional as a violation of equal protection in Florida Real Estate Commission v. McGregor, 336 So.2d 1156 (Fla.1976), and Florida Real Estate Commission

    v. Johnson, 362 So.2d 674 (Fla.1978). In 1979, chapter 475 was amended to exempt all employees of corporate property owners from the licensing requirement of chapter 475 if such employees were paid on a regular-salary basis rather than a commission basis. S. 475.011(2), Fla. Stat. (1979).

    
    

    (Footnote omitted.)

    
    

17. The case of Erfman v. Dept. of Prof. Reg., 577 So. 2d 710 (Fla. 5th DCA 1991), interpreted the similar statutory exemption from Chapter 475 regulation granted by Section 475.011(5), Fla. Stat. (1988), for condominium managers who are "employed for a salary." In that case, the appellant was a condominium manager who "was engaged in the renting of individual units to various persons for which he received a commission from the rental charges." Erfman, at 711. The court agreed with the Department of Professional Regulation that the 1987 amendment inserting the phrase "for a salary" into the statutory exemption should be interpretated "to mean that unlicensed managers can no longer collect commissions in addition to their salaries." Id.

    
    

18. In a decision on a related issue, the court in Bockar v. Sakolsky, 592 So. 2d 251 (Fla. 3d DCA 1991), considered whether Bockar, an unlicensed leasing agent of an owner and developer of a high-rise luxury building, could sue his employer for compensation. Under the employment agreement, Bockar "was to be paid $200 per week, along with a commission of four percent of the total value of all leases for space in Sakolsky's building which were procured by Bockar." Bockar, at 252. The majority of the court interpreted Section 475.42(1)(d), Fla. Stat. (1989), as preventing a person acting as a real estate broker or salesman in Florida without a required license from suing his employer for a real estate brokerage commission. The dissent questioned this interpretation but, focusing like the majority on Section 475.011(2), Fla. Stat. (1989), agreed with the majority that Bockar was required to be licensed, stating: "There is

    no question that, on the facts of this case, chapter 475 would apply as a bar had Bockar brought this action against the customers to collect commissions." Id.

    
    

19. The Respondent's bonus overrides are not the same as Bockar's and Erfman's commissions, and their legal significance are not as clear. But it is concluded that, on the facts of this case, the Respondent is "paid a commission or other compensation strictly on a transactional basis" and that he, therefore, is not exempt under Section 475.011(2), Fla. Stat. (1991).

    
    

20. Section 455.228(1), Fla. Stat. (1991), provides in in pertinent part:

    
    

    When the department has probable cause to believe that any person not licensed by the department has violated any provision of this chapter or any statute that relates to the practice of a profession regulated by the department, . . . the department may issue and deliver to such person a notice to cease and desist from such violation. . . . In addition to the foregoing remedies, the department may impose an administrative penalty not to exceed

    $5,000 per incident, pursuant to the provisions of chapter 120.

    
    

21. The dismissal of the 1984 charges against the Respondent for acting as a real estate broker without the license required by Florida law does not bar or estop this prosecution. However, it should be considered, along with the closeness of legal question raised by the facts in this case, in assessing the penalty to be imposed against the Respondent.

RECOMMENDATION

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) finding the Respondent, Harry Paul, guilty of acting as a real estate broker without the license required by Florida law; (2) ordering him to cease and desist; and (3) imposing a $1,000 administrative penalty.

RECOMMENDED this 23rd day of November, 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 23rd day of November, 1992.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-2861

To comply with the requirements of Section 120.59(2), Fla. Stat. (1991), 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.-6. Accepted but subordinate and unnecessary.

7. Accepted and incorporated to the extent necessary. 8.-10. Accepted but subordinate and unnecessary.

11. Rejected as not proven.

12.-25. Accepted and incorporated to the extent not unnecessary or subordinate.

1. Rejected in that he said $7,000, not "$7,000 to $8,000." Otherwise, accepted and incorporated to the extent not unnecessary or subordinate.

2. Rejected in that he said commissions had been earned and were owed, not that they already had been paid to the salesperson.

28.-33. Accepted but subordinate and unnecessary.

1. Accepted, but subordinate and unnecessary. (The witness did not know whether they they were discussing just construction, just lots, or both.)

2. Rejected as not proven. (He was answering questions, not "discussing sales techniques.)

36.-50. Accepted but largely subordinate to facts found, and unnecessary. Incorporated to the extent not unnecessary or subordinate.

Respondent's Proposed Findings of Fact. 1.-4. Accepted and incorporated.

5. Accepted but subordinate and unnecessary.

6.-9. Accepted and incorporated.

10. Rejected in that the bonus percentage on the sale of lots has a $50 cap. Otherwise, accepted and incorporated.

COPIES FURNISHED:

Janine B. Myrick, Esquire Senior Attorney

Department of Professional Regulation, Division of Real Estate

Hurston North Tower

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

Ray Shaw, Esquire

4090 Commercial Way, Suite 5 Spring Hill, Florida 34606

Jack McRay, Esquire General Counsel

Department of Professional Regulation

Northwood Centre

1940 North Monroe Street Tallahassee, Florida 32399-0792

Darlene F. Keller Division Director

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

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.

Docket for Case No: 92-002861

Orders for Case No: 92-002861