STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA DEPARTMENT OF )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) CASE NO. 92-6154

)

CHARLES B. HARVEY, JR., ) t/a COMMERCIAL & INV. REALTY, )

)

Respondent. )

)

RECOMMENDED ORDER

Upon due notice, this cause came on for formal hearing in Tallahassee, Florida on December 7, 1992, before Ella Jane P. Davis, a duly assigned Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: James H. Gillis, Esquire

Senior Attorney

Florida Department of Professional Regulation, Division of Real Estate Legal Section - Suite N 308 Hurston Building North Tower

400 West Robinson Street Orlando, Florida 32801-1772

For Respondent: Charles B. Harvey, Jr.

Commercial & Inv. Realty 1116 D Thomasville Road Post Office Box 785

Tallahassee, Florida 32302-0785 STATEMENT OF THE ISSUE(S)

Whether or not Respondent is guilty of violating Sections 475.25(1)(b) [breach of trust], 475.25(1)(k) [failure to maintain trust funds in a proper depository], and/or 475.25(1)(e) F.S., [failure to prepare and sign the required monthly escrow statement reconciliations in violation of Rules 21V-14.012(2) and

1. F.A.C.], and if so, what discipline should be imposed against Respondent's real estate licenses and registrations.

   
   

   PRELIMINARY STATEMENT

   
   

   Petitioner presented the oral testimony of Juanita Waller and the Respondent and had three exhibits admitted in evidence.

   Respondent had one exhibit admitted in evidence. He also adopted Petitioner's Exhibit 3 as a statement of his testimony, and testified on his own behalf.

   
   

   Chapters 120, 455, and 475, F.S., and Rules 21V-10.024 and 21V-14.012(2) and (3), F.A.C. were officially recognized.

   
   

   FINDINGS OF FACT

   
   

   1. 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 20.30, F.S., Chapters 120, 455, and 475, F.S., and the rules promulgated pursuant thereto.

      
      

   2. Respondent Charles B. Harvey, Jr. is now and was at all times material hereto a licensed real estate broker in the State of Florida having been issued license number 0474466 in accordance with Chapter 475, F.S.

      
      

   3. The last license issued was as a broker t/a Commercial & Investment Realty, 1116D Thomasville Road, P. O. Box 785, Tallahassee, Florida 32317.

      
      

   4. On or about April 17, 1992, Petitioner's Investigator Juanita Waller conducted a routine office/inspection audit of Respondent at 1116D Thomasville Road, Tallahassee, Florida and discovered that Respondent's trust account #077780-00242743 had an approximate shortage of $3,343.07, calculated as

      $29,205.00 in total trust liability but only $25,861.93 as reconciled bank balance. Thereafter, the Respondent wrote Investigator Waller and provided evidence that a portion of the missing funds was caused by an $875 "bad check" which had been deposited into his escrow account.

      
      

   5. Additionally, Investigator Waller found that Respondent failed to properly reconcile his escrow account by comparing the total trust liability with the reconciled bank balance of the trust account, as required by the rules of the Commission. Rather, he had been balancing his checkbook only.

      
      

   6. Respondent has been completely cooperative with Petitioner agency and upon notification of his errors and omissions immediately began the process of correcting the procedures used in reconciling his escrow account in accord with the requirements of the agency. He also immediately made restitution from his own monies to his escrow account as soon as he was made aware what had happened. It is noted that reconciliation of monthly written statements were not required by the agency until shortly before Respondent was investigated, however he had a duty to apprise himself of all statutes and rules and to govern himself accordingly. Likewise, he accepted "full responsibility" for allowing funds from individual clients' accounts to be used to pay for expenses incurred by other clients' properties, and has taken steps to prevent such occurrences in the future. No loss has been incurred by any party. Respondent has made good any payments owed.

      
      

      CONCLUSIONS OF LAW

      
      

   7. The Division of Administrative Hearings has jurisdiction over the parties and subject matter in this cause. See, Subsection 120.57(1), F.S.

      
      

   8. Subsections 475.25(1)(b), (k), and (e), F.S. (1989) as they pertain to the alleged facts in this matter reads in pertinent part:

      1. The commission may . . . suspend a license, certification, registration, or permit for a period not exceeding 10 years; may revoke a license, certification, registration, or permit; may impose an administrative fine not to exceed $1,000 for each count or separate offense . . . if it finds that the licensee . . .:

         
         

         (b) Has been guilty of . . . 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; . . . 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 a 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.

         . . .

         (k) Has failed, if a broker, to immediately place, upon receipt, any money, fund, deposit, check, or draft entrusted to him by any person dealing with him as a broker in escrow with a title company, banking institution, credit union, or savings and loan association located and doing business in this state, or to deposit such funds in a trust or escrow account maintained by him with some bank, credit union, or savings and loan association located and doing business in this state, wherein the funds shall be kept until disbursement thereof is properly authorized;

         . . .

         
         

   9. Rule 21V-14.012(2) and (3) F.A.C., concerning escrow accounts, states:

      
      

      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 name(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 differences 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.

      
      

   10. Relative to the above statutory and rule prohibitions, disciplinary guidelines of the Florida Real Estate Commission are provided for by Rule 21V- 24.001(2) and (3), F.A.C. The rule provides that the Respondents may be placed on probation for a period of time and made subject to such conditions as the Commission may place upon all their licenses, registrations, certifications and permits penalized as follows:

       
       

       (c) 475.25(1)(b) - Up to 5 years

       suspension or revocation . . .

       (f) 475.25(1)(e) - Up to 8 years

       suspension or revocation

       1. 475.25(1)(k) - A minimum of a

          90 day suspension and a $1,000 fine up to revocation

          
          

   11. Subsection (4)(a) of the same rule provides that

       
       

       1. When . . . the Respondent is able to demonstrate aggravating or mitigating circumstances to the Commission by clear and convincing evidence, the Commission shall be entitled to deviate from the above guidelines in imposing discipline upon a licensee.

          Absence of any such evidence of aggravating

          or mitigating circumstances before the Hearing

          Office prior to the issuance of a Recommended Order shall not relieve the Commission of its duty to consider evidence of aggravating or mitigating circumstances. Whenever the Petitioner or Respondent intends to introduce such evidence to the Commission, advance notice of no less than seven (7) days shall be given to the other party or else the evidence can be properly excluded by the Commission.

          
          

       2. Aggravating or mitigating circumstances may include, but are not limited to, the following:

       
       

       1. The severity of the offense.

       2. The degree of harm to the consumer or public.

       3. The number of counts in the Administrative Complaint.

       4. The number of times the offenses

          previously have been committed by the licensee.

       5. The disciplinary history of the licensee.

       6. The status of the licensee at the time the offense was committed.

       
       

   12. The burden of proof is on the Petitioner as to the allegations in the Administrative Complaint. See, Balino v. Department of Health and Rehabilitative Services, 348 So.2d 349 (Fla. 1st DCA 1977). Revocation of license proceedings are penal in nature. See, State ex rel Vining v. Florida Real Estate Commission, 281 So.2d 487 (Fla. 1973). The burden of proof required in this matter is simply that relevant and material findings of fact must be supported by clear and convincing evidence of record. Hal Halfetz v. d/b/a/ Key Wester Inn v. Department of Business Regulation, Division of Alcoholic Beverages and Tobacco, 475 so.2d 1277 (Fla. 1DCA, 1985).

       
       

   13. The Petitioner has presented clear and convincing evidence of the violations alleged in Count II [violation of Section 475.25(1)(k), failure to maintain trust funds in a proper depository] and Count III [violation of Section 475.25(1)(e), failure to prepare and sign the required monthly escrow statement reconciliations in violation of Rules 21V-14.012(2) and (3) F.A.C.)]. However, this situation does not fall within the parameters of a "breach of trust."

       There is no intentional act of dishonesty anywhere in this case, and the worst that can be said is that certain volitional omissions of Respondent resulted in "culpable negligence." Under Count I, the charge of "culpable negligence" is an alternative to "breach of trust" under Section 475.25(1)(b) F.S. This was a case of "simple negligence," not "culpable negligence," except for the minimal mixing of some clients' funds to pay those clients legitimate expenses. In the simplest terms, the Respondent failed to properly reconcile his escrow account and, without prior consent of the parties of interest, inadvertently used one client's funds to pay another client's very minimal expenses in connection with preparing several properties for sale, causing a shortage of escrow funds. Due to the absence of a proper monthly reconciliation of his escrow account, months could pass with Respondent being unaware that he had a problem, except for the return of the bad check or the intervention of the agency in its routine investigation. On that basis and on the failure to reconcile, "culpable negligence" alone was proven under Count I.

   14. The Respondent presented matters in mitigation after having been afforded the opportunity to do so via a formal proceeding.

       
       

   15. Chapter 475, F.S., vests in the Florida Real Estate Commission a broad discretionary power and authority to supervise the privileged business of a real estate broker and to deal firmly with those engaged in it, even to the point of taking away their means of livelihood by revocation or suspension of license. However, such potent administrative weapons must always be reasonably and cautiously, and even sparingly, utilized. It has been pointed out by the courts that such a penalty as revocation should be reserved for only the unscrupulous broker, i.e., one who cheats, swindles, or defrauds members of the general public in the handling of their real estate transactions. See Brod v. Jernigan, 188 So.2d 575, 581 (Fla. 2d DCA 1966).

       
       

   16. The Respondent has "cheated, swindled, and defrauded" no one and his corrections both monetarily out of his own pocket and his corrections in his standard office operating procedure have mitigated his business situation. These mitigations have been taken into account in connection with the following penalty recommendation.

RECOMMENDATION

Upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED

That a Final Order be issued and filed by the Florida Real Estate Commission finding the Respondents not guilty of breach of trust but guilty of culpable negligence as charged in Count I of the Administrative Complaint, guilty of having failed to maintain trust funds in escrow as charged in Count II of the Administrative Complaint, and guilty of having failed to properly reconcile his escrow account as charged in County III of the Administrative Complaint and further ordering that all the Respondent's licenses, registrations, certificates and permits be reprimanded and placed on probation for a period of one year and Respondent be required to pay an administrative fine of $300 (total) within sixty (60) days of the entry of the Final Order and that before the end of the probationary period he successfully complete and provide satisfactory evidence to the Florida Real Estate Commission of having successfully completed the thirty (30) hour Brokerage Management course, these education hours to be in addition to any other professional education required by the Respondent by the licensing provisions of this state, and further providing that if all these requirements not be successfully fulfilled as required by the Final Order, then all the Respondent's licenses, registrations, certificates and permits shall be suspended until all such requirements are completed but in no event shall such suspension exceed ten (10) years.

RECOMMENDED this 12th day of January, 1993, at Tallahassee, Florida.

ELLA JANE P. DAVIS

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 12th day of January, 1993.

APPENDIX TO RECOMMENDED ORDER 92-6154 DOAH CASE NO. 92-6154

The following constitute specific rulings, pursuant to S120.59 (2), F.S., upon the parties' respective proposed findings of fact (PFOF)

Petitioner's PFOF:

1-5 Accepted.

6 Accepted as modified.

Respondent's filed no PFOF:

COPIES FURNISHED:

Charles B. Harvey, Esquire 1018-104 Thomasville Road

Tallahassee, FL 32303

James H. Gillis, Esquire

Department of Professional Regulation Division of Real Estate

P. O. Box 1900 Orlando, FL 32802

Jack McRay General Counsel

1940 North Monroe Street Tallahassee, FL 32399-0792

Darlene F. Keller Division Director

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

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: 92-006154

Orders for Case No: 92-006154