STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) CASE NO. 93-3634

)

ANTHONY S. CASERTA, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was conducted in this case on November

9 and 10, 1994 in Miami, Florida before J. Stephen Menton, a duly designated hearing officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Theodore R. Gay, Senior Attorney

Department of Business and Professional Regulation

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

For Respondent: Gary J. Nagle, Esquire

Harbour Point Plaza, Suite 203 11000 Prosperity Farms Road

Palm Beach Gardens, Florida 33410 STATEMENT OF THE ISSUES

The issue in this case is whether disciplinary action should be taken against Respondent's real estate broker license based upon the alleged violations of Chapter 475, Florida Statutes, set forth in the Administrative Complaint filed by Petitioner.

PRELIMINARY STATEMENT

In a three count Administrative Complaint dated May 24, 1993, Petitioner charged Respondent with violating Sections 475.452 and 475.25(1)(b), (d), and (e), Florida Statutes. The allegations in the Administrative Complaint are based upon Respondent's alleged involvement in the acquisition of certain property in Brevard County, Florida. The property was acquired by Respondent individually and/or as trustee in three closings which took place on May 22, 1984, August 23, 1984 and February 27, 1985 (the "Closings"). Respondent disputed the allegations contained in the Administrative Complaint and requested

a formal hearing. The case was referred to the Division of Administrative Hearings which noticed and conducted a hearing pursuant to Section 120.57(1), Florida Statutes.

At the hearing, Petitioner presented the testimony of four witnesses: Burt Bloom; 1/ Richard Siegmeister; Caron Balkany; and Gerald Tobin. In addition, the deposition testimony of Harvey Goldstein taken on February 2 and 14, 1994 was received into evidence over Respondent's objections as Petitioner's Exhibit 2. Petitioner offered 36 exhibits into evidence, all of which were accepted except Petitioner's Exhibit 33, which was not authenticated.

Respondent's objections to Petitioner's Exhibits 3-16, 21-29, 31, 32, 34, 35 and

36 were overruled. Petitioner's Exhibits 17 and 20 were also accepted over Respondent's objections. Petitioner's Exhibit 17 was a composite of six (6) closing statements. As discussed in more detail in the Findings of Fact below, there is confusion and dispute regarding the closing statements used at the Closings. No evidence was presented to establish when the closing statements marked as Petitioner's Exhibit 17 were signed and/or who signed them. The evidence did establish that these closing statements were found in Respondent's records and they were identified by certain witnesses as having been given to them by Respondent shortly after the Closings. Petitioner's Exhibit 20 was a letter from Respondent to James Bloom dated August 20, 1985. The evidence established that this letter was found in Respondent's records, but no evidence was presented that Petitioner's Exhibit 20 was mailed.

As discussed during the hearing, Petitioner offered into evidence certain portions of Respondent's depositions taken in related bankruptcy and civil actions. These excerpts were accepted as Petitioner's Exhibit 30. Respondent requested and was granted an opportunity to supplement the record with additional excerpts from those depositions. To date, Respondent has not filed any such supplemental deposition excerpts.

Respondent presented no witnesses at the hearing but offered two exhibits into evidence both of which were accepted.

A transcript of the proceedings has been filed. Both parties have filed proposed recommended orders in accordance with the schedule established at the conclusion of the hearing. A ruling on each of the parties' proposed Findings of Fact is included in the Appendix to this Recommended Order.

FINDINGS OF FACT

Based upon the oral and documentary evidence adduced at the hearing and the entire record in this proceeding, the following findings of fact are made:

1. Respondent, Anthony S. Caserta, is licensed by Petitioner as a real estate broker in the State of Florida having been issued license number 0013806. Respondent has been a licensed broker since approximately 1982. There is no evidence of any prior disciplinary action taken against Respondent's license.

   
   

2. Gerald Tobin is a Florida lawyer who met Respondent in 1962. Tobin and his family have been close personal friends of Respondent and his family since that time.

   
   

3. Tobin is a trial lawyer and he has not been heavily involved in real estate work. Tobin's former law firm, Tobin and Fisch, engaged in real estate transactions with Respondent. Tobin's partner, Ralph Fisch, handled all of the real estate transactions.

4. In the early 1970's, attorney Harvey Goldstein joined Tobin and Fisch as a partner resulting in the formation of the law firm Tobin, Fisch and Goldstein. Goldstein was also a trial attorney who did very little real estate work. Goldstein's initial contacts with Respondent arose from Respondent's involvement with Tobin and Fisch. Goldstein became a personal friend of Respondent's.

   
   

5. Harvey Goldstein left Tobin, Fisch and Goldstein and became president and trial counsel for a new law firm, Goldstein Professional Association ("Goldstein, P.A."). The members of that law firm were Harvey Goldstein, his brother Phil Goldstein, and Caron Balkany. Harvey Goldstein and Caron Balkany were married at the time the firm was started. They subsequently divorced sometime in 1986 or 1987, around which time Goldstein, P.A. was dissolved.

   
   

6. In 1983, the Goldstein, P.A. Defined Benefit Pension Plan and Trust (the "Pension") had some funds to invest. Respondent recommended to Harvey Goldstein that the Pension acquire certain property in Melbourne, Florida (the "Sarno Road Property"). This was the first time that Goldstein had a discussion with Respondent about investing in real estate. Goldstein understood Respondent to be a real estate broker.

   
   

7. Respondent told Goldstein that a prominent investor and developer in the middle Florida area by the name of James Bloom had expressed a strong interest in the property and had enlisted Respondent's assistance to "inventory" it. Goldstein never met or spoke with Bloom.

   
   

8. Ultimately, the Pension joined with other investors, to acquire the Sarno Road Property. The Pension put up the money for and acquired a 65 percent interest in the Sarno Road Property. The exact terms and conditions of the purchase are not clear from the record in this case. Goldstein thinks that Respondent put up some of his own money to acquire an interest in the deal.

   
   

9. Shortly thereafter, a contract was entered into to sell the Sarno Road Property at a profit to James Bloom.

   
   

10. The sale of the Sarno Road Property to Bloom closed sometime in 1983 or 1984. As part of the purchase price, the sellers took back a purchase money mortgage.

    
    

11. It is not clear whether Respondent was entitled to and/or received a commission in connection with the acquisition of the Sarno Road Property. With respect to the sale of the Sarno Road Property to James Bloom, Respondent was to receive a real estate commission as broker for the transaction in the amount of

    10 percent of any funds received from Bloom.

    
    

12. About a year or two after the closing of the sale of the Sarno Road Property to Bloom, Bloom defaulted on the mortgage payments. Title to the property was re-acquired from Bloom through foreclosure. Respondent's entitlement to receive further commission payments for the sale to Bloom terminated when Bloom quit making payments.

13. As of the date of the hearing in this case, the successors in interest to the Pension and the other investors who put up the acquisition funds still hold title to the Sarno Road Property. The Property has been actively marketed for sale ever since it was re-acquired. Apparently, there are no liens or mortgages on the Sarno Road Property and it is not clear how much, if any, loss has been incurred by the investors to that transaction.

    
    

14. Beginning some time around the early part of 1984, Respondent solicited funds from Harvey Goldstein, Gerald Tobin and others (hereinafter collectively referred to as the "Investors") to be used by Respondent to acquire some real property in the Town of Malabar in Brevard County (the "Malabar Property"). Ultimately, three investment trusts were established to acquire the Malabar Property. Those investment trusts were not introduced into evidence and the terms and conditions of those trusts are not clear from the record in this case.

    
    

15. As discussed below, the Malabar Property was acquired in three separate transactions which culminated in the Closings which took place on or about May 22, 1984, August 23, 1984 and February 27, 1995.

    
    

16. The evidence established that neither Harvey Goldstein, who handled the investments on behalf of the Goldstein, P.A. Pension and Profit Sharing Plans, Gerald Tobin nor Burt Bloom (another Investor who is not related to James Bloom) were involved in negotiating the acquisition of the Malabar Property and none of them participated in the Closings. All of the Investors relied upon Respondent to handle the acquisition and they deferred to his judgment with little or no scrutiny of the details of the transactions.

    
    

17. Respondent told the Investors that, although the seller of the Malabar Property would be taking back a purchase money mortgage, a portion of the Property equal in value to the initial investment would be acquired free and clear of the purchase money mortgage. Respondent represented to the Investors that, as additional funds were paid on the purchase money mortgage, more of the property would be released from the mortgage.

    
    

18. It was understood by all parties to the transactions that Respondent was to acquire the entire Malabar Property, including the portions that would not be encumbered by the seller's purchase money mortgage, in trust for the benefit of those who put up the acquisition funds.

    
    

19. Respondent told Goldstein that he already had an agreement to resell part of the property to James Bloom for a good profit. This representation was a strong inducement to Goldstein. At this point in time, the Sarno Road Property had not yet gone into default and Goldstein had a favorable view of that earlier transaction with Bloom.

    
    

20. As further inducement to Goldstein, Respondent told Goldstein that Respondent was putting up his own funds to acquire a 30 percent interest in the Malabar Property.

    
    

21. On our about April 3, 1984, Goldstein gave Respondent $180,000 from the Pension for Respondent to use to acquire for the Pension a 30 percent interest in a portion of the Malabar Property known as the "Industrial Piece", consisting of approximately 226 acres.

22. Some time after that and before August 23, 1984, Goldstein gave Respondent funds (the exact amount was not established by the evidence in this case) from the Goldstein, P.A. Profit Sharing Plan (the "Plan") to be used by Respondent to acquire for the Plan a one-third interest in a portion of the Malabar Property known as the "Commercial Piece", consisting of approximately 28 acres.

    
    

23. On or about December 17, 1984, Goldstein gave Respondent $117,500 from the Pension for Respondent to use to acquire for the Pension a 30 percent interest in a portion of the Malabar Property known as the "Residential Piece," consisting of approximately 335 acres.

    
    

24. In soliciting funds from Gerald Tobin for acquisition of the Malabar Property, Respondent told Tobin that he (the Respondent) was taking a third of the deal himself.

    
    

25. Respondent also advised Tobin that he had a contract to sell the Industrial Piece to James Bloom for a good profit and that the rest of the Property was going to be resold, or "flipped", to Bloom as well. Respondent told Tobin about Bloom's purchase of the Sarno Road Property and indicated that the transaction was successful. Respondent represented to Tobin that the resale to Bloom was virtually certain to occur.

    
    

26. As indicated above, at the time of these transactions, Tobin had known Respondent for a number of years and knew Respondent was a real estate broker.

    
    

27. On or about April 12, 1984, Tobin gave Respondent $80,000 to use to acquire for Tobin a 10 percent interest in the Industrial Piece.

    
    

28. On or about June 20, 1984, Tobin gave Respondent $90,000 to use to acquire for Tobin a one-third interest in the Commercial Piece.

    
    

29. On or about November 16, 1984 and December 17, 1984, Tobin gave Respondent $20,000 and $184,000, respectively, to use to acquire for Tobin a one-third interest in the Residential Piece.

    
    

30. Burt Bloom (who, as noted above, is not related to James Bloom), was one of the other Investors from whom Respondent solicited funds to acquire the Malabar Property. Burt Bloom is an accountant and CPA who became acquainted with Respondent around 1979 when he began doing some accounting work for Respondent.

    
    

31. Respondent told Burt Bloom that a resale of the Malabar Property at a nice profit was already lined up with a buyer named James Bloom. Respondent claimed that he had already received a good faith deposit from James Bloom and that the resale to James Bloom was certain to occur. Respondent also indicated to Burt Bloom that he (the Respondent) was taking 95 percent of the investment for himself.

    
    

32. As a result of their discussions, Burt Bloom gave Respondent $10,000 in 1984 to be used by Respondent to acquire for Burt Bloom a 1.25 percent interest in the Industrial Piece. In 1985, Burt Bloom gave Respondent another

    $17,000 to be used by Respondent to acquire for Burt Bloom a 2.5 percent interest in the Residential Piece.

33. Respondent did not deposit the funds received from the Pension, the Plan, Tobin and/or Burt Bloom for acquisition of the Malabar Property into an escrow account.

    
    

34. Respondent arranged for the acquisition of the Malabar Property through separate closings for the Industrial Piece, the Commercial Piece and the Residential Piece. The Closings were conducted on or about May 22, 1984, August 23, 1984, and February 27, 1985. The cash to close the acquisitions came from the money which Respondent obtained from the Pension, the Plan, Gerald Tobin, Burt Bloom, and others. The total amount of money put up by the Investors is not clear from the evidence presented. It does not appear that Respondent contributed any of his own funds for the acquisition of the Malabar Property.

    
    

35. As indicated above, none of the Investors participated in the closings. They had all known Respondent a long time and were relying upon Respondent to properly handle the transactions. None of them made any independent assessment of the fair market value of the Property and the evidence presented in this case did not establish the fair market value.

    
    

36. After the closings, the following deeds were recorded in the public records of Brevard County: with respect to the Industrial Piece, one deed covering all but five acres was recorded in the name of Anthony D. Caserta, (Respondent's son) as trustee and a second deed for the remaining five acres was recorded in the name of Respondent individually (not as trustee); with respect to the Commercial Piece, one deed for all but two acres and a second deed for the remaining two acres were recorded in the name of Respondent personally (not as trustee); with respect to the Residential Piece, one deed for ten acres was recorded in the name of Respondent individually and not as trustee and the remaining acreage was deeded via two separate deeds to Respondent as trustee.

    
    

37. No explanation has been given regarding the manner in which title to the property was deeded. None of the investors agreed that Respondent should receive unencumbered title to any of the property in his own name. Respondent's explanations in his depositions for why some of the property was deeded to him individually rather than trustee are vague, evasive and unconvincing.

    
    

38. The five acres of the Industrial Piece, the two acres of the Commercial Piece, and the ten acres of the Residential Piece which were deeded to the Respondent personally were not encumbered by any purchase money mortgage. All of the rest of the Malabar Property was encumbered by purchase money mortgages to the sellers. The terms and conditions of the purchase money mortgages varied somewhat for each parcel. The purchase money mortgage from the May 22, 1984 Closing secured a Mortgage Note in the amount of $2,344,442.50 with semiannual interest only payments for three years. Principal payments (together with interest) were to be made in ten equal annual payments commencing three years from the Closing. The purchase money mortgage for the August 23, 1984 Closing secured a Mortgage Note in the amount of $527,840 with principal and interest payments commencing one year from the Closing and continuing for ten years until paid off. The purchase money mortgages from the February 27, 1985 Closing secured Mortgage Notes of $720,000 and $1,700,000. The two Mortgage Notes called for payment of interest and total principal of $80,000 during the first two years following which the principal was to be paid in ten equal annual installments (with interest). It does not appear that any of the Investors seriously contemplated what their obligations would be under the purchase money mortgage(s) since they expected the Property to be quickly resold.

39. As a result of each closing, Respondent received a portion of the real estate commission which the seller was obligated to pay. Specifically, Respondent and/or his company was to receive two-thirds of the total seller's commission and Leonard Keller, who was apparently the listing broker but whose involvement in the transactions is not entirely clear from the evidence presented, was to receive the other one-third. It appears that for at least two of the Closings, the seller's commission was paid in part in cash at Closing with the remainder to be paid through a partial assignment of the seller's purchase money mortgages. For the May 22, 1984 Closing, $58,888.50 was apparently paid at the Closing with a partial assignment of the purchase money mortgage securing an additional $230,000. For the August 23 Closing, it is not clear whether any of the seller's commission was paid at closing, but there was a partial assignment of the purchase money mortgage to secure the deferred real estate commission of $49,445.70. With respect to the February 27, 1985 Closing, it appears that $55,000 of the seller's commission was paid at closing with an additional $222,000 being secured through a partial assignment of the purchase money mortgage.

    
    

40. There are two sets of Closing Statements for each of the Closings. The existence of two closing statements for each of the three Closings causes some confusion as to how all of the money was disbursed. One set of closing statements indicates that in addition to the portion of the seller's commission described in Findings of Fact 39, Respondent also received a real estate commission from the purchasers. These Closing Statements indicate that from the May 22, 1984 closing, Respondent received $200,000; from the August 23, 1984 closing, Respondent received $135,000; and from the February 27, 1985 closing, Respondent received $315,000.

    
    

41. Respondent claims that the Closing Statements reflecting the "purchaser's" commission were sent to the Investors shortly after the Closings. However, the clear and convincing evidence established that Respondent sent at least some of the Investors copies of Closing Statements which did not disclose the payment of any commissions from the purchasers to Respondent. Some of these investors did not learn of the existence of separate closing statements detailing the "purchaser's" commissions until much later.

    
    

42. There is no dispute that Respondent received the "purchaser's commissions" described in Findings of Fact 40. None of the Investors were specifically advised that the purchasers would be paying a commission to Respondent in connection with the acquisition of the Malabar Property. Moreover, none of the Investors approved and/or consented to Respondent receiving a real estate commission from the acquisition funds for the anticipated resale of its Malabar Property to James Bloom.

    
    

43. Respondent has claimed in some of the ensuing litigation that the "purchaser's commissions" were in fact an advance commission on the anticipated resale of the property to James Bloom. Respondent's justifications for the commissions charged to the purchasers and apparently paid from the closing funds are unsatisfactory.

    
    

44. No resale of any of the Malabar Property to James Bloom ever occurred. A written contract dated October 16, 1984 for resale of the Malabar Property to James Bloom was admitted into evidence as Petitioner's Exhibit 19. The evidence did not explain the circumstances surrounding this contract. The contract called for a fifty thousand dollar ($50,000.00) deposit. The contract

    apparently only relates to the Industrial Piece. The contract reflected a purchase price of five million, six hundred fifty seven thousand, four hundred dollars ($5,657,400) and anticipated a closing on or before June 15, 1985.

    
    

45. James Bloom did not close on the contract and apparently declared or was forced into bankruptcy. The date of his bankruptcy is not clear from the evidence presented. Respondent apparently applied the fifty thousand ($50,000) dollar deposit received from James Bloom on the contract to the purchase money mortgages.

    
    

46. Even though the resale to James Bloom never closed, Respondent has not repaid any money to the Pension, the Plan, Gerald Tobin or Burt Bloom to refund the commissions taken or received by Respondent.

    
    

47. When the resale to James Bloom did not occur and the payments began coming due on the purchase money mortgages, the Investors began looking into the transactions more closely. Respondent was apparently able to defer or extend the payments that began coming due on the purchase money mortgages. Respondent advised the Investors that he was continuing to work on the refinancing of the Property.

    
    

48. Ultimately, a refinancing of the purchases was arranged through AmeriFirst Federal. The terms and conditions of that refinancing have not been established in this case. It is not clear whether Investors were required to come up with any additional money in connection with the refinancing.

    
    

49. Caron Balkany, a successor to part of the interests of the Pension and the Plan in the Malabar Property, has been named as a substitute trustee for at least some of the land trusts that were established by Respondent to acquire the Malabar Property. After reviewing all of the available records, she felt that title to all of the Malabar Property should have been taken in trust and that there was no basis for Respondent to hold any of the Property in his own name, and not as trustee. Balkany requested that Respondent execute and record corrective deeds. Respondent eventually recorded affidavits addressing the issue, but in those affidavits he claimed an interest of between twenty-five to fifty (25-50 percent) percent for he and/or his son in each of the parcels. The basis for these claims is not clear.

    
    

50. The free and clear acreage that had been deeded to Respondent personally from the Industrial Piece were encumbered by the AmeriFirst Mortgage during the refinancing. Balkany claims this was done without her consent although it is not clear whether any of the other individuals with an equitable interest in the property were aware of the details of the refinancing. In any event, the end result is that the Investors do not have clear title to any part or the Industrial Piece despite Respondent's representations that unencumbered title would be received for property equal in value to their initial investment. It is not clear whether the two (2) acres of the Commercial Piece and the ten

    (10) acres of the Residential Pierce that were not encumbered by the purchase money mortgages were subsequently encumbered as part of the refinancing.

    
    

51. Except for a small part of the Commercial Piece which was sold and then re-acquired via foreclosure on a purchase money mortgage, none of the Malabar Property has been resold. Thus, the Investors or their successors currently own the Malabar Property. All of the Malabar Property is apparently the subject of pending foreclosure proceedings and other litigation. The exact

    status of these cases is not clear from the evidence presented. The Investors have incurred substantial legal fees. The exact amount of their losses as a result of these transactions cannot be quantified from the evidence presented.

    
    

52. In approximately 1991, Respondent filed a bankruptcy petition. There has been extensive litigation in that bankruptcy case, the status and results of that litigation has not been established in this proceeding.

    
    

    CONCLUSIONS OF LAW

    
    

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

    
    

54. Pursuant to Section 475.25, Florida Statutes, the Florida Real Estate Commission is empowered to take disciplinary action against a licensed real estate broker who is found guilty of any of the violations enumerated in that statute.

    
    

55. Petitioner has the burden of proof in this license disciplinary case and must prove the allegations set forth in the Administrative Complaint by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987); Evans Packing Company v. Department of Agriculture and Consumer Services, 550 So.2d 112, 116 (Fla. 1st DCA 1989); Pascale v. Department of Insurance, 525 So.2d 922 (Fla. 1st DCA 1988).

    
    

56. The nature of clear and convincing evidence has been described in Slomowitz v. Walker, 429 So.2d 797, 800 (Fla. 4th DCA 1983), as follows:

    
    

    We therefore hold that clear and convincing evidence requires that the evidence must be found to be credible; the facts to which the witnesses testify must be precise and explicit and the witness 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.

    
    

    See also, Smith v. Department of Health and Rehabilitative Services, 522 So.2d 956, 958 (Fla. 1st DCA 1988), which quotes with approval the above-quoted language from Slomowitz, and adds, the following:

    
    

    "Clear and convincing evidence" is an intermediate standard of proof, more than the "preponderance

    of the evidence" standard used in most civil cases, and less than the "beyond a reasonable doubt" standard used in criminal cases. See State v.

    Graham, 240 So.2d 486 (Fla.2d DCA 1970).

    
    

57. Disciplinary action with respect to a professional license is limited to offenses or facts alleged in the administrative complaint. Sternberg v. Department of Professional Regulation, Board of Medical Examiners, 465 So.2d 1324, 1325 (Fla. 1st DCA 1985); Kinney v. Department of State, 501 So.2d 129,

    133 (Fla. 5th DCA 1987).

58. The Administrative Complaint in this case contains three counts charging Respondent with violating Subsections (b), (d) and (e) of Section 475.25, Florida Statutes.

    
    

59. In determining whether a licensee has violated Section 475.25, Florida Statutes, as charged in an administrative complaint, one "must bear in mind that it is, in effect, a penal statute...this being true the statute must be strictly construed and no conduct is to be regarded as included within it that is not reasonably proscribed by it. Furthermore, if there are any ambiguities included such must be construed in favor of the . . . license." Lester v. Department of Professional and Occupational Regulations, 348 So.2d 923, 925 (Fla. 1st DCA 1977).

    
    

60. Section 475.25(1)(b), (d), and (e), Florida Statutes, provide in pertinent part, as follows:

    
    

    475.25 Discipline.--

    (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 a person in confidential relation with the licensee or was an identified member of the general public.

    * * *

    1. 1. Has failed to account or deliver to any person, including a licensee under this chapter, at the time which has been agreed upon or is required by law or, in the absence of a fixed

       time, upon demand of the person entitled to such accounting and delivery, any personal property such as money, fund, deposit, check, draft, abstract of title, mortgage, conveyance, lease, or other document or thing of value, including a share of a real estate commission,

       or any secret or illegal profit, or any divisible share or portion thereof, which has come into his hands and which is not his property or which he is not in law or equity entitled to retain under the circumstances.

       * * *

    2. 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.

    
    

61. With respect to the alleged violation of Subsection (e), the Administrative Complaint charges Respondent with violating Section 475.452, Florida Statutes. Section 475.452, Florida Statutes, provides in pertinent part as follows:

    
    

    475.452 Advance fees; deposit; accounting; penalty; damages.--

    (1) It is unlawful for any broker to contract for or collect any advance fee for the listing of real property from any principal without depositing 75 percent of such amount, when collected, in a trust account with a bank or other recognized depository located and doing

    business in this state. Such funds shall be held as trust funds and may not be commingled with the funds of the broker who has collected the fee.

    Prior to the withdrawal of any fees from the trust account, the broker shall furnish a state- ment to the principal itemizing how the advance fees are to be expended and the amounts thereof.

    Amounts may be withdrawn for the benefit of the broker only when actually expended for the benefit of the principal or 5 days after verified accounts have been mailed to the principal. If the listed property is not sold within the period of time specified in the broker's contract date, or within

    18 months after the contract date, whichever period is shorter, any funds held by the broker in the trust account shall be refunded to the principal, together with a final accounting relating to any

    or all funds expended by the broker

62. In its posthearing submittals, Petitioner claimed that Respondent has also violated Rule 21V-10.018, 2/ Florida Administrative Code. This allegation is specifically included in the Administrative Complaint. However, the Rule does not appear to be specifically applicable. The Rule in effect during the pertinent time provided as follows:

    
    

    21V-10.018 Promises to Re-Sell. It shall be deemed fraudulent and dishonest dealing by trick, scheme or device and false promises for any

    broker or salesman to procure, induce or influence any person to buy any property, by promising, representing or guaranteeing that he, his employer, or the owner will re-sell or repurchase the property at any future time. Proof that such promise, representation or guarantee plan has been approved for use by another Agency of the State of Florida

    or has been strictly performed shall be prima

    facie evidence that such activity was not fraudulent or dishonest. (Emphasis added).

    
    

63. To the extent Respondent made any promises or representations about the resale of the Malabar Property, his comments only related to a sale to a third party (James Bloom). Thus, the cited Rule does not apply.

    
    

64. The law in Florida imposes a high standard of ethical conduct upon real estate brokers. For example, in Zichlin v. Dill, 25 So.2d 4 (Fla. 1946), the Florida Supreme Court stated:

    
    

    The broker in Florida occupies a status under the law with recognized privileges and responsibilities. The broker in this state belongs to a privileged class and enjoys a monopoly to engage in a lucrative business....

    
    

    The state, therefore, has prescribed a high standard of qualifications and by the same law granted a form of monopoly and in so doing the old rule of caveat emptor is cast aside. Those dealing with a licensed broker may naturally assume that he

    possess the requisites of an honest, ethical man.

    
    

65. Similarly, in Ahern v. Florida Real Estate Commission, 6 So.2d 857 (Fla. 1942), the Florida Supreme Court said that "...the real estate broker is now the confidant of the public in much the same manner as the lawyer and the banker. His relation to the public exacts the highest degree of trust and confidence. "

    
    

66. The clear and convincing evidence in this case established that Respondent is guilty of the violations alleged in the Administrative Complaint. Specifically, the evidence established that Respondent procured, induced or influenced Harvey Goldstein, Gerald Tobin, and Burt Bloom to purchase interests in the Malabar Property by representing that the property would be resold to James Bloom even though there was no written contract with James Bloom until October of 1984 and that contract only specifically covered the Industrial Piece. The inherently speculative nature of these investments was hidden by Respondent's optimistic overstatements and deliberate omissions. Respondent

    also substantially and materially overstated the extent to which he was participating personally in the investment risk. Respondent's actions constitute fraudulent and dishonest dealing by trick, scheme or device.

    
    

67. In addition, there was no justification for Respondent to take title to any of the Malabar Property in his own name without disclosing or discussing this arrangement with the Investors who expected that the entire property would be acquired in trust and that Respondent was only participating to the extent that he had personally advanced funds. When confronted by Caron Balkany, Respondent agreed to clarify the title, but he failed to do so until after some of the previously unencumbered property was mortgaged during the refinancing without the express consent of all of the beneficial owners. In attempting to correct the title, Respondent continued to assert significant claims to the Property on behalf of himself and his son even though there was no documentation to justify those claims.

    
    

68. Most significantly, Respondent took real estate commissions totalling approximately $650,000 from the purchasers of the Malabar Property without their express consent, concealed the fact from them by sending them copies of closing statements that did not reflect the commissions, and failed and refused to return the commissions when the Investors learned of and objected to them.

    These commissions constitute "secret profits" within the meaning of Section 475.25(1)(d)1., Florida Statutes.

    
    

69. Respondent's contention that he took these sums as advance commissions on the anticipated resale of the Malabar Property to James Bloom is sufficient to establish a violation of Section 475.452, Florida Statutes, since Respondent failed to place any of this money in an escrow account and failed to return the money after 18 months without a sale of the property.

    
    

70. In summary, the clear and convincing evidence established that Respondent's actions and/or omissions constitute violations of Sections 475.452 and 475.25(1)(b), (d), and (e), Florida Statutes, as alleged in the Administrative Complaint.

    
    

71. Pursuant to Section 475.25(1), Florida Statutes, disciplinary action by the Florida Real Estate Commission may, as circumstances warrant, include any one or more of the following penalties: a reprimand; an administrative fine not to exceed $1,000 per violation; probation; suspension of license, registration or permit for a period not to exceed 10 years; or revocation or denial of the license, registration or permit.

    
    

    Rule 61J2-24.001, Florida Administrative Code, sets forth the disciplinary guidelines adopted by the Commission. Subsection 3 of that rule provides that the minimum penalty for all listed sections is a reprimand and/or a fine up to

    $1,000 per count.

    
    

72. Pursuant to Rule 61J2-24.001(3)(c),(e) and (f), Florida Administrative Code, the maximum penalty for a violation of Section 475.25(1)(b), Florida Statutes, is up to 5 years suspension or revocation, the maximum penalty for a violation of Section 475.25(1)(d), Florida Statutes, is up to 5 years suspension, and the maximum penalty for a violation of Section 475.25(1)(e), Florida Statutes, is up to 8 years suspension or revocation.

73. Rule 61J2-24.001(4), Florida Administrative Code, authorizes deviation from the prescribed penalty guidelines if aggravating or mitigating circumstances are demonstrated by clear and convincing evidence. Such 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;

    7. The degree of financial hardship incurred by a licensee as a result of the imposition of a fine or suspension of the license;

    8. Whether a letter of guidance has been previously issued to the licensee.

       
       

74. In this case, clear and convincing evidence was presented with respect to items (a) and (b) of the proceeding paragraph. Respondent's misrepresentations, concealments, dishonest dealings and breaches of trust were numerous, and resulted in significant losses to several investors. After considering all of the evidence, it is concluded that Respondent's actions justify the imposition of the most severe sanctions available.

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

finding the Respondent guilty of violating Sections 475.452 and 475.25(1)(b),

(d), and (e), Florida Statutes, as alleged in the Administrative Complaint, revoking the Respondent's real estate license, and imposing a $3,000 administrative fine.

DONE AND RECOMMENDED this 16th day of June, 1995, in Tallahassee, Leon County, Florida.

J. STEPHEN MENTON 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 16th day of June, 1995.

ENDNOTES

1/ Respondent's blanket objections to the testimony of Burt Bloom based upon the accountant-client privilege, Section 90.5055, Florida Statutes, was overruled and Respondent was directed to assert the objection on a question by question basis. No such objections were made.

2/ This rule has subsequently been re-promulgated and re-numbered with only slight modifications as Rule 61J2-10.018.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-3634

Rulings on the proposed findings of fact submitted by the Petitioner:

1. Subordinate to findings of fact 1.

2. Adopted in substance in findings of fact 2 and 3.

3. Adopted in substance in findings of fact 4 and 6.

4. Adopted in substance in findings of fact 5.

5. Adopted in substance in findings of fact 6 and 8.

6. Adopted in substance in findings of fact 7, 9 and 10.

7. Adopted in substance in findings of fact 11-13.

8. Adopted in substance in findings of fact 14 and 19.

9. Adopted in substance in findings of fact 17 and 20.

10. Adopted in substance in findings of fact 18, 21, 22 and 23.

11. Adopted in substance in findings of fact 14, 17, 24, 25 and 26.

12. Adopted in substance in findings of fact 27, 28 and 29.

13. Adopted in substance in findings of fact 14, 30, 31 and 32.

14. Adopted in substance in findings of fact 15 and 34.

15. Adopted in substance in findings of fact 34.

16. Adopted in substance in findings of fact 33.

17. Adopted in substance in findings of fact 36.

18. Adopted in substance in findings of fact 38.

19. Adopted in substance in findings of fact 39.

20. Adopted in substance in findings of fact 40 and 42.

21. Adopted in substance in findings of fact 41 and 42.

22. Adopted in substance in findings of fact 44, 46 and 51.

23. Subordinate to findings of fact 49 and 50.

Rulings on the proposed findings of fact submitted by the Respondent:

1. Adopted in substance in findings of fact 1.

2. Adopted in substance in findings of fact 14.

3. Rejected as vague. This subject matter is addressed in findings of fact 19, 25 and 31.

4. Subordinate to findings of fact 3, 4, 16 and 35.

5. Subordinate to findings of fact 14, 16 and 35.

6. Subordinate to findings of fact 34, 36, and 37.

7. Subordinate to findings of fact 40-43.

8. Subordinate to findings of fact 40-43.

9. Rejected as vague, argumentative and not supported by the evidence.

10. Subordinate to findings of fact 40-43.

11. Rejected as ambiguous and argumentative.

COPIES FURNISHED:

Darlene F. Keller Division Director Department of Business

and Professional Regulation Division of Real Estate

Post Office Box 1900 Orlando, FL 32802-1900

Lynda L. Goodgame General Counsel Department of Business

and Professional Regulation Northwood Centre

1940 North Monroe Street Tallahassee, FL 32399-0792

Theodore R. Gay Senior Attorney

Department of Business

and Professional Regulation

401 N.W. 2nd Avenue, Suite N-607 Miami, FL 33128

Gary J. Nagle, Esq. Harbour Point Plaza Suite 203

11000 Prosperity Farms Road Palm Beach Gardens, FL 33410

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: 93-003634

Orders for Case No: 93-003634