STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 92-5542

)

RHODA KURZMAN and SECURITY )

REALTY INVESTMENTS, INC., )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, the above-styled matter was heard before the Division of Administrative Hearings by its duly designated Hearing Officer, Susan B. Kirkland, on September 24, 1993, in Miami, Florida. The following appearances were entered:

APPEARANCES

For Petitioner: Theodore Gay

Senior Attorney

Department of Business & Professional Regulation

Division of Real Estate

401 Northwest 2nd Avenue, Suite N-607 Miami, Florida 33128

For Respondents: Michael J. Kurzman

David R. Elder, P.A.

Grand Bay Plaza - Suite 702 2665 South Bayshore Drive Coconut Grove, Florida 33133

STATEMENT OF THE ISSUE

Whether Respondents violated Subsections 475.25(1)(b),(e), and (q), Florida Statutes, and Rules 21V-10.033, 21V-14.012(2) and (3) and 21V-14.014, Florida Administrative Code.

PRELIMINARY STATEMENT

On June 19, 1992, Petitioner filed an Administrative Complaint seeking to discipline the Respondents. On June 30, 1992, Respondents requested a formal administrative hearing. The matter was referred to the Division of Administrative Hearings for formal proceedings on September 10, 1992. The case

was assigned to Hearing Officer Claude B. Arrington who scheduled the case for hearing on September 24, 1993. The case was transferred to Hearing Officer Susan B. Kirkland who conducted the formal hearing.

Petitioner presented the testimony of Joseph L. Wilson. Petitioner's exhibits 1-6 were entered into evidence. Respondents presented the testimony of Rhoda Kurzman. Respondent's exhibit 1 was entered into evidence.

At the hearing the parties agreed to file proposed recommended orders twenty days after the date of the filing of the transcript. The transcript was filed on November 3, 1993. On November 18, 1993, Respondents filed a Motion for Extension of Time to File Proposed Recommended Orders, requesting that the proposed recommended orders be filed on or before December 17, 1993. The motion was granted. The parties filed proposed findings of fact and conclusions of law on December 17, 1993. The parties' findings of fact are ruled upon in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. Respondent, Rhoda Kurzman (Kurzman), is currently and was at all times relevant to this proceeding a licensed real estate broker in this state.

   
   

2. Respondent, Security Realty Investments, Inc. (Security), is currently and was at all times relevant to this proceeding a licensed real estate broker corporation in this state. Security is a small company which deals primarily with the property management of its own properties.

   
   

3. Ms. Kurzman is the president of and broker for Security.

   
   

4. In April, 1992, Respondents came up for a routine audit. Joseph L. Wilson, then an investigative auditor for Petitioner, Department of Professional Regulation (DPR), conducted an office inspection and escrow/trust account audit on April 14, 1992.

   
   

5. The inspection and the audit were in four areas: 1) office 2) required office sign 3) agency disclosure and 4) broker's records, including reconciliation statements and escrow/trust accounts.

   
   

6. Respondents maintained a trust account in an interest bearing savings account with County National Bank of South Florida. Respondents received quarterly statements from the bank.

   
   

7. As part of the audit, Mr. Wilson asked Ms. Kurzman to produce the reconciliation statements for Security's escrow/trust account. She gave him a running journal (Pet. Exhibit 2) which she had prepared in her own handwriting.

   
   

8. The journal was entitled " Escrow Account # 0120056458-20, County Bank, Miami, Florida 33164." There were entries beginning June 29, 1988 through December 31, 1991. The dates listed on the left side of the journal represented the dates for either deposits or withdrawals. The last deposit in the account other than interest was on March 20, 1991. There were double check marks on the right side which represented the amounts reconciled with the bank statements. The entire document contained five double check marks.

   
   

9. Petitioner's Exhibit 2 does not reflect the dates the reconciliations took place. Petitioner's Exhibit 2 was not signed and dated by Ms. Kurzman each time the account was reconciled.

10. Petitioner did not reconcile the account on a monthly basis.

    
    

11. The bank statement for the period ending December 31, 1991 showed a balance of $375.54, as did the balance in the December 31, 1991 entry of the journal. The bank statement for the period ending March 31, 1992 showed a balance of $379.83. Respondents did not have any escrow security liability on these dates; thus these balances represented overages in the escrow account. Petitioner's Exhibit 2 did not contain a description or explanation for the overages.

    
    

12. Mr. Wilson discussed the overages with Ms. Kurzman, and she indicated that the balance in the bank account resulted from accumulated interest from 1988. Mr. Wilson advised her that prior to March, 1992, an escrow account could carry an overage of only $100, but that after March 1992, overages of up to $200 could be carried in escrow accounts.

    
    

13. Ms. Kurzman agreed to withdraw sufficient funds from the account to bring it in compliance with the allowed overage. By letter dated April 14, 1992, Ms. Kurzman advised Mr. Wilson that she had withdrawn $300 from the escrow account, bringing the balance to $79.83, and included a copy of the withdrawal slip with the letter.

    
    

14. All the sales made by the Respondents are listed in the journal maintained by the Respondents. There have been eight sales since 1988. Some of the transactions did not result in a contract.

    
    

15. From September 1, 1991 through October 1, 1992, Mr. Wilson conducted approximately 300 audits, 40 of which were done during the month of April, 1992. The audit of Respondents was approximately two to four hours long. Ms. Kurzman produced one sales contract during the audit, the other contracts were stored in a different location. During the audit, Mr. Wilson prepared an Office Inspection and Escrow/Trust Account Audit Form, which he and Ms. Kurzman signed. After the audit he prepared an investigative report. No specific transactions were mentioned in either document. Mr. Wilson destroyed the specific notes or tic sheets that he made during the audit. At hearing he admitted that if someone showed him one of the contracts for the transactions appearing in the journal, he would not be able to recall if he had looked at the contract during the audit.

    
    

16. Ms. Kurzman specifically recalls the audit and her recollection of the audit is much clearer than Mr. Wilson's.

    
    

17. At hearing Mr. Wilson was unable to recall specific transactions dealing with the alleged failure to disclose that escrow funds were being placed in an interest bearing account. He believes that they discussed names of contracts or types of situations, but can't recall because of the length of time that had passed since he performed the audit. Ms. Kurzman specifically recalls that other than the transaction in which she was the seller they only discussed one sales contract. He believes that Ms. Kurzman said that she had made oral disclosure in some but not all transactions in which there were principals other than the broker, and that there were no written disclosures. In one of the sales listed in the escrow account journal, Ms. Kurzman was the seller and had divested herself as broker during that transaction. In the Baldoria transaction, the contract required that Ms. Baldoria receive interest and the interest was paid to her. Obviously there was disclosure to Ms. Baldoria, and it appears that the disclosure was in writing. Ms. Kurzman and Mr. Wilson

    discussed the issue of the disclosure of interest bearing accounts during the audit. There was a disagreement between them as to when such disclosure had to be made. Having judged the credibility of the witnesses and in particular having considered Mr. Wilson's difficulty in recalling specifics of the audit, I find that the evidence is insufficient to conclude that the Respondents failed to disclose that escrow/trust funds were being placed in an interest-bearing account.

    
    

18. Mr. Wilson was unable to recall any contracts in which Respondents were alleged to have failed to make agency disclosure.

    
    

19. There have been no prior audits of Respondents. No prior disciplinary actions have been taken by Petitioner against Respondents.

    
    

    CONCLUSIONS OF LAW

    
    

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

    
    

21. Petitioner is a state government licensing and regulatory agency charged with the responsibility and duty to prosecute Administrative Complaints pursuant to the laws of the State of Florida, in particular Section 20.165, Florida Statutes, and Chapters 120, 455, and 475, Florida Statutes, and the rules promulgated pursuant thereto.

    
    

22. Petitioner has the burden to prove by clear and convincing evidence all the essential allegations against the Respondents. See Ferris v. Turlington, 510 So.2d 292 (Fla. 1987); Pic N' Save v. Department of Business Regulation, 601 So.2d 245 (Fla. 1st DCA 1992); Munch v. Department of Professional Regulation, 592 So.2d 1136 (Fla. 1st DCA 1992); Newberry v. Florida Department of Law Enforcement, 585 So.2d 500 (Fla. 3rd DCA 1991).

    
    

23. The court in Solomowitz v. Walker, 429 So.2d 797, 800 (Fla. 4th DCA 1983) stated the requirements for clear and convincing evidence.

    
    

    [T]he evidence must be found to be credible; the facts to which the witnesses testify must be distinctly remembered; the testimony must be precise and explicit and the witnesses must be lacking in confusion as to the facts in issue. The evidence must be of such weight that it produces in the mind of the trier of fact a firm belief or conviction, without hesitancy, as to the truth of the allegations sought to be established.

    
    

24. In Count I of the Administrative Complaint, Petitioner alleges that Ms. Kurzman violated Subsection 475.25(1)(b), Florida Statutes, in that she is guilty of concealment, culpable negligence or breach of trust in any business transaction. Petitioner alleges in Count II that Security committed the same violation.

    
    

25. In Count III of the Administrative Complaint, Petitioner alleges that Ms. Kurzman failed to prepare and sign the required written monthly escrow statement-reconciliations in violation of Rules 21V-14.012(2) and (3), Florida

    Administrative Code and, thus, violated Section 475.25(1)(e), Florida Statutes. Petitioner alleges the same violations against Security in Count IV.

    
    

26. In Count V of the Administrative Complaint, Petitioner alleges that Ms. Kurzman failed to disclose agency relationships in writing prior to the signing of a contractual offer in violation of Rule 21V-10.033, Florida Administrative Code, and, in violation of Sections 475.25(1)(e) and (q), Florida Statutes. Petitioner alleges the same violations against Security in Count VI.

    
    

27. In Count VII of the Administrative Complaint, Petitioner alleges that Ms. Kurzman held funds in an interest-bearing escrow account without the prior knowledge or consent of all parties in violation of Rule 21V-14.014, Florida Administrative Code and, thus, in violation of Section 475.25(1)(e), Florida Statutes. Petitioner alleges the same violations against Security in Count VIII.

    
    

28. Subsection 475.25(1), Florida Statutes provides in pertinent part:

    
    

    1. The commission may deny an application for licensure, registration, or permit, or renewal thereof; may place a licensee, registrant, or permittee on probation; may suspend a license, registration, or permit for a period not exceeding 10 years; may revoke a license, registration, or permit; may impose an administrative fine not to exceed $1,000 for each count or separate offense; and may issue a reprimand, and any or all of the foregoing, if it finds that the

       licensee, registrant, permittee, or applicant:

       * * *

       (b) Has been guilty of fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme, or device, culpable negligence, or breach of trust in any business transaction in this state or any other state, nation, or territory; has violated a duty imposed upon him by law or by the terms of a listing contract, written, oral, express, or implied, in a real estate transaction; has aided, assisted, or conspired with any other person engaged in any such misconduct and in furtherance thereof; or has formed an intent, design, or scheme to engage in any such misconduct and committed an overt act in furtherance of such intent, design, or scheme. It is immaterial to the guilt of the licensee that the victim or intended victim of the misconduct has sustained no damage or loss; that the damage or loss has been settled and paid after discovery of the misconduct; or that such victim or intended victim was a customer or person in confidential relation with the licensee or was an identified member of the general public.

       * * *

       (e) Has violated any of the provisions of this chapter or any lawful order or rule made or issued under the provisions of this chapter or chapter 455.

       * * *

       (q) Has failed to give written notice to a party to a sale, exchange, purchase, or lease of real property or any interest in real property, before such party has signed any contractual offer or lease agreement related to the transaction, that he is an agent, employee, independent contractor, or representative of another party in the negotiation of such sale, exchange, purchase, or lease. The commission shall implement this provision by rule.

       
       

29. Rules 21V-14.012(2) and (3) (renumbered July 1, 1993 as Rule 61J2- 14.012(2) and (3)), Florida Administrative Code provide:

1. A broker shall cause to be made at least monthly a written statement comparing the broker's total liability with the reconciled bank balance(s) of all trust accounts. The broker's trust liability is hereby defined as the sum total of all deposits received, pending and being held by the broker at any point in time. The minimum information to be included in the monthly statement- reconciliation shall be the date the reconciliation was undertaken, the date used to reconcile the balances, the name of the bank(s), the names(s) of the account(s), the account number(s), the account balance(s) and date(s), deposits in transit, outstanding checks identified by date and check number, and any other items necessary to reconcile

   the bank account balance(s) with the balance per the broker's checkbook(s) and other trust account books and records disclosing the date of receipt and the source of the funds. The broker shall review, sign and date the monthly statement-reconciliation.

2. Whenever the trust liability and the bank balances do not agree, the reconciliation shall contain a description or explanation for the difference(s) and any corrective action taken reference shortages or overages of funds in the account(s). Whenever a trust bank account record reflects a service charge or fee for a non-sufficient check being returned or whenever an account has a negative balance, the reconciliation shall disclose the cause(s) of the returned check or negative balance and the corrective action taken.

30. Rule 21V-14.014, (renumbered July 1, 1993 as Rule 61J2-14.014), Florida Administrative Code provides in pertinent part:

(1) A licensed broker is not prohibited from placing escrow money, entrusted to him by any person dealing with him as a broker, in an interest bearing account. The placement of escrow monies in an interest bearing account, and designation of the party who is to

receive the interest, must be done with the written permission of all interested parties. Said escrow account must be in a title company, banking institution, credit union, or savings and loan association doing business in Florida. The placement of escrow money must be in only these four types of institutions and not in stock or bond brokerage houses.

Rule 21V-14.014 was amended in April, 1991, to require written permission.

Prior to that time oral permission was sufficient. Since the last deposit in the escrow account was prior to April, 1991, written permission was not required for the transactions audited.

1. Petitioner has failed to meet its burden of proof concerning Counts V and VI of the Administrative Complaint and has so conceded in the Conclusions of Law of its Proposed Recommended Order. Petitioner failed to show instances when Respondents did not make agency disclosure when such disclosure was required.

   
   

2. Petitioner has failed to meet its burden of proof concerning Counts VII and VIII of the Administrative Complaint. Mr. Wilson was unable to recall specific contracts or transactions where Respondent failed to disclose that the escrow funds were being placed in an interest-bearing account when such disclosure was required. Petitioner relied on Mr. Wilson's testimony that Ms. Kurzman told him that she had made some oral disclosures on some contracts and had not made disclosures on other contracts. Based on both Ms. Kurzman's testimony and Mr. Wilson's testimony, there was an obvious disagreement at the time of the audit concerning which transactions required disclosure of interest- bearing escrow accounts. Ms. Kurzman testified there were transactions in which she was representing herself. There were also transactions in which she had used a contract form approved by the Broward County Bar Association and the Broward Board of Realtors, which she believed was in compliance with the appropriate rules and statutes. Mr. Wilson's recollection of the audit was weak. He could not recall specific transactions and admitted he would not recognize a contract he had reviewed if he saw it. No contracts or files of transactions were presented. Given the circumstances of the audit and Mr. Wilson's inability to clearly recall specifics of the audit, Petitioner's reliance on any such admission by Ms. Kurzman is insufficient in and of itself to show by clear and convincing evidence that she failed to make disclosures concerning interest-bearing escrow accounts in transactions that required such disclosure.

   
   

3. Petitioner has failed to meet its burden of proof as to the allegations set forth in Counts I and II of the Administrative Complaint.

4. Petitioner has proved by clear and convincing evidence that Respondents violated Rules 21V-14.012(2) and (3), Florida Administrative Code and Section 475.25(1)(e), Florida Statutes as set forth in Counts III and IV of the Administrative Complaint. The journal that Respondents used for the reconciliation statement was not completed and signed each month by Ms. Kurzman; did not contain the dates the reconciliations were done; and did not contain a description or explanation for the overage in the account and any corrective action taken concerning the overage.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered dismissing Counts I, II, V, VI,

VII, and VIII of the Administrative Complaint, finding Respondents guilty of

violating Rule 21V-14.012, Florida Administrative Code and Section 475.25(1)(e), Florida Statutes, reprimanding each Respondent, imposing against Rhoda Kurzman an administrative fine of $100, and requiring Rhoda Kurzman to provide within six months after the date of the Final Order satisfactory evidence to the Florida Department of Business and Professional Regulation, Division of Real Estate, Legal Section, Hurston Building, North Tower, Suite N-308, 400 West Robinson Street, Orlando, Florida 32801-1772, of having completed a 30-hour postlicensure broker management course.

DONE AND ENTERED this 20th day of January, 1994, in Tallahassee, Leon County, Florida.

SUSAN B. KIRKLAND

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 20th day of January, 1994.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-5542

To comply with the requirements of Section 120.59(2), Fla. Stat. (1993), the following rulings are made on the parties' proposed findings of fact:

Petitioner's Proposed Findings of Fact

1. Paragraphs 1-6: Accepted in substance.

2. Paragraph 7: Rejected as not demonstrated by clear and convincing evidence.

3. Paragraph 8: Accepted.

Respondent's Proposed Findings of Fact

1. Paragraph 1: Accepted.

2. Paragraphs 2-3: Rejected as subordinate to the facts actually found.

3. Paragraph 4: Accepted in substance.

4. Paragraph 5: Rejected as subordinate to the facts actually found.

5. Paragraphs 6-7: Accepted in substance.

6. Paragraph 8: Accepted in substance.

7. Paragraph 9: Accepted.

8. Paragraph 10: Accepted in substance.

9. Paragraphs 11-13: Accepted.

10. Paragraphs 14-19: Rejected as subordinate to the facts actually found.

11. Paragraphs 20-26: Accepted in substance.

12. Paragraph 27: Rejected as not supported by the evidence.

13. Paragraph 28: Accepted in substance.

14. Paragraph 29: Rejected as subordinate to the facts actually found.

15. Paragraph 30: Accepted.

16. Paragraph 31: Rejected as subordinate to the facts actually found.

17. Paragraph 32: Accepted.

18. Paragraphs 33-34: Rejected as subordinate to the facts actually found.

19. Paragraphs 35-37: Accepted in substance.

20 Paragraphs 38-40: Rejected as subordinate to the facts actually found.

COPIES FURNISHED:

Michael J. Kurzman, Esquire Grand Bay Plaza, Suite 702 2665 South Bayshore Drive Coconut Grove, Florida 33133

Theodore Gay, Senior Attorney Department of Business and

Professional Regulation Division of Real Estate

401 Northwest 2nd Avenue, Suite N-607 Miami, Florida 33128

Darlene F. Keller Divison Director

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

Jack McRay

Acting General Counsel

Department of Business Regulation Northwood Centre

1940 North Monroe Street Tallahassee, Florida 32399

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 ten 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: 92-005542

Orders for Case No: 92-005542