Upon due notice, this cause came on for formal hearing on September 24, 1996, in Orlando, Florida, before Daniel M. Kilbride, duly assigned Administrative Law Judge of the Division of Administrative Hearings.
For Petitioner: Steven D. Fieldman
For Respondent: Allen C. D. Scott, Esquire
St. Augustine, Florida 32084
Whether Respondent Banta is guilty of dishonest dealing, culpable negligence, or breach of trust in a business
Whether Respondent is guilty of operating as a real estate broker without a valid and current license, in violation of Section 475.25(1)(e), Florida Statutes (1993).
Whether Respondent is guilty of failing to provide written agency disclosure to a party in a real property transaction, in violation of Section 475.25(1)(q) and (1)(e), Florida Statutes (1993) and Rule 61J2-10.033, Florida Administrative Code.
On April 20, 1995, Petitioner filed a three count Administrative Complaint charging Respondent with various violations of Section 475.25(1), Florida Statutes. Respondent denied the allegations and requested a formal hearing. This matter was referred to the Division of Administrative Hearings on May 10, 1996, and this matter was set for hearing. This cause was continued at the request of the parties. Discovery ensued and the formal hearing was held on September 24, 1996.
At the hearing, Joint Exhibits 1 through 14 were admitted in evidence. Petitioner presented the testimony of four witnesses. Respondent testified in his own behalf. The transcript of the formal hearing was filed on October 16, 1996. Petitioner and Respondent filed their proposed recommended orders on November 1, 1996.
Each party’s proposals have been given careful consideration and adopted when supported by clear and convincing evidence.
Petitioner is a state licensing and regulatory agency charged with the responsibility and duty to prosecute Administrative Complaints pursuant to the laws of the State of Florida.
Respondent is now and was at all times material hereto a licensed real estate broker in the State of Florida having been issued license number 0165881.
As of March 31, 1992, the Respondent failed to renew his real estate broker’s license, for the 2-year period of April 1, 1992 to March 31, 1994.
Renewal would have consisted of completing the required continuing education, paying the required fee, and sending the required form to the Department of Business and Professional Regulation.
The Respondent’s license was delinquent after March 31, 1992. As of March 31, 1994, the Respondent had not renewed his broker’s license and his license remained delinquent.
On May 9, 1994, the Respondent renewed his license, in order to make a claim for a commission.
As of March 31, 1996, the Respondent failed to renew his license again. His license was delinquent after March 31, 1996, and was delinquent as of the hearing date.
The Respondent operated as a real estate broker during the period of approximately February 1993 through May 1994, specifically including a period when his license was delinquent as “involuntary inactive.”
Sam Morrow is a licensed real estate broker and is a real estate developer and home builder.
Effective February 10, 1993, Respondent entered into an Independent Contractor Agreement with Florida’s Preferred Homes, Inc. (FPH), a company in which Morrow is a principal. Respondent was originally retained on a fixed salary basis for an indefinite term to assist in finishing a number of low-income housing tax credit apartment applications for tax credits.
At the request of Morrow, Respondent assumed other duties. Respondent represented FPH, and other business entities of which Morrow was the principal, in other business dealing from February 10, 1993 through May 24, 1994, when Respondent was terminated.
The Respondent received a fixed salary throughout the period of his association with Morrow with the promise of additional undefined compensation in the future.
For the purposes of this matter, Respondent was an employee of FPH and was supervised by Morrow. Respondent’s association with Morrow was not an exclusive employment agreement.
During this same period in February 1993, Morrow became
engaged in a transaction involving affordable housing. The transaction involved the purchase of land, by a purchasing entity, the Community Housing Trust, Inc., a 501(c)(3) non-profit corporation, from the seller, Rouse Road Corporation. After this purchase the property was to be transferred to another corporation, of which Morrow was to be the principal along with another business partner, and affordable housing units would be constructed upon the land and then sold to the public. The structure of the purchasing and developing entities was complex, involving various public and private entities, including Orange County. Morrow was a principal and the overall coordinator of the entire project which came to be known as the Oak Grove Circle project.
There was no specific agreement for the Respondent to receive any particular additional compensation for the Respondent’s services in the affordable housing project.
Respondent was familiar with the property that the Rouse Road Corporation had for sale and brought it to the attention of Community Housing Trust, as a prospective purchaser. This particular property was suitable for purchase and development as an affordable housing project.
Respondent facilitated the purchase and prepared the contract for sale and purchase which was executed by the parties: Community Housing Trust, as purchaser, and Rouse Road Corporation, as seller. The contract was executed on March 5,
1993 for the property later known as the Oak Grove Circle property.
Respondent represented neither the purchaser nor the seller in the transaction. He considered himself a transactional broker. The contract indicates on its face that Respondent, J. Scott Banta, is the real estate broker in the transaction. The contract called for the payment of a 10% commission to the Respondent.
Respondent was not at any time prior to or during the purchase and sale transaction, either an agent, employee, independent contractor or representative of the seller, Rouse Road Corporation.
Respondent was not at any time prior to or during the purchase and sale transaction, either an agent, employee, independent contractor or representative of the purchaser, Community Housing Trust, Inc.
In September 1993, Morrow formed a Florida corporation known as FPH Venture 2, Inc. He was the sole incorporator.
During this period in the fall of 1993, certain negotiations took place regarding the structure and goals of FPH Venture 2, Inc. The principals of the firm were to be Sam Morrow and Long Farms North. All of the prospective partners agreed that because of the need for cash equity, the real estate commission on the Oak Grove Circle property would remain in the
FPH Venture 2 proposed project. For this consideration Respondent expected to be a principal also.
The goals for the FPH Venture 2 project were set out in some detail in a memorandum developed by the prospective venturers and typed by Respondent. Respondent was included as one of the principals.
The goals memorandum provides that the 10% commission payable to Respondent on the Oak Grove Circle purchase and sale would be assigned by Respondent to FPH Venture 2 “for cash flow and total profit benefits.”
Respondent’s understanding of the proposed FPH Venture
2 project was that he was to receive a one-third ownership participation in FPH Venture 2, Inc., which was to have included the proposed Oak Grove Circle project and another proposed project in Lakeland, Florida, in exchange for the prospective commission.
The terms of Respondent’s proposed participation in FPH Venture 2 were never reduced to any form of written agreement. Nor was Respondent ever made a principal in the company or issued any stock, or otherwise given anything to evidence his interest in the proposed venture.
The closing of the purchase and sale of the property, later known as the Oak Grove Circle property, as anticipated by the contract for sale and purchase, was consummated on May 19, 1994. James L. Bishop, vice-president of Community Housing
Trust, Inc., executed the settlement statement which provided for payment of $28,000 real estate commission to J. Scott Banta from the seller’s proceeds of closing. The commission check was delivered to Respondent at the closing without objection.
On the day after closing of the Oak Grove Circle purchase and sale, May 20, 1994, Respondent gave Morrow a memorandum suggesting a procedure for payment of the $28,000 commission into FPH Venture 2, Inc.
On May 24, 1994, the matter culminated in a conversation between Respondent Banta and Morrow. Respondent requested Morrow reduce their agreement regarding his proposed participation in FPH Venture 2, Inc., to writing. Morrow refused to do so, and at 4:45 p.m. on the same day, terminated Respondent’s employment, stopped payment on Respondent’s consulting fee check for the prior week and changed the locks on his office with Respondent’s personal property still inside.
Respondent has retained the commission from the sale of the Oak Grove Circle property.
Morrow’s account of this business relationship with Respondent and the agreed disposition of the proceeds of the commission is not credible.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this cause, pursuant to Section 120.57(1), Florida Statutes.
The Petitioner’s authority is derived from Chapter 475, Part I, Florida Statutes, and Section 475.25, provides that the Florida Real Estate Commission may suspend a license for a period not exceeding ten years; revoke a real estate license; may impose an administrative fine not to exceed $1,000 for each count or separate offense; and may impose a reprimand or, any or all of the foregoing, if it finds that a licensee has violated Section 475.25(1)(b), (e), or (q), Florida Statutes.
Revocation of license proceedings are penal in nature. State ex rel Vining v. Florida Real Estate Commission, 281 So.2d
487 (Fla. 1973). The burden of proof is on the Petitioner as to each count of the Administrative Complaint. Balino v. Department of Health and Rehabilitative Services, 348 So.2d 349 (Fla. 1st
DCA 1977).
The burden of proof required in a revocation proceeding is that relevant and material findings of fact must be supported by clear and convincing evidence. See: Ferris v. Turlington, 510 So.2d 292, (Fla. 1987); Pic’ n’ Save v. Department of Business and Professional Regulation, 601 So.2d 1136, (Fla. First DCA 1992); and Heifetz d/b/a Key Wester Inn v. Department of Business Regulation, Division of Alcoholic Beverages and Tobacco, 475 so.2d 1277 (Fla. 1st DCA 1985).
The law in Florida imposes a high standard of ethical conduct upon real estate brokers. In Zichlin v. Dill, 25 So.2d
4, (Fla. 2nd DCA 1946), for example, 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 possesses the requisites of an honest, ethical man.
Section 475.42, Florida Statutes (1993) reads in pertinent part:
475.42 Violations and Penalties,
(1) VIOLATIONS. -
(a) No person shall operate as a broker or salesperson without being the holder of a valid and current active license therefor.
Section 475.25, Florida Statutes (1993) reads in pertinent part:
475.25 Discipline. -
(1)(a) Has violated any provision of section 475.42 . .
.
. . .
(g) Has failed to give written notice to a party to a sale . . . of real property . . . before such party has signed any contractual offer . . . related to the transaction, that he is an agent, employee, independent contractor, or representative of another party in the negotiation of such sale . . .
The evidence is clear and convincing that Respondent operated as a broker at the signing of the contract for sale and purchase of the Oak Grove Circle property without being the holder of a valid and current license, as alleged in Count II of the Administrative
Complaint, in violation of sub-sections 475.42(1)(a) and 475.25(1)(e), Florida Statutes (1993).
The evidence is also clear, under the law in effect at the that time the contract for sale was executed, Respondent was required to give written notice to the seller that he was an employee, independent contractor or representative of another party in the negotiation of such sale. This was required even if he was correct that he was a transactional broker in the sale and purchase of the property. Section 475.25(1)(q), Florida Statutes (1993). Although Respondent was not a representative of the buyer, Community Housing Trust, he was associated with FPH, the ultimate purchaser.
The most serious allegation in this proceeding is the contention that the $28,000 commission received by Respondent at the closing on May 30, 1994 should have been paid by him to FPH Venture 2, Inc. as part of a plan to develop the Oak Grove Circle property into an affordable housing project.
Effective February 10, 1993, Respondent was hired by FPH, a company in which Morrow was a principal. The agreement signed by Respondent and Morrow was denominated as an Independent Contractor Agreement in which Respondent was paid a fixed amount for an indeterminate period. The parties also had an unwritten agreement that Respondent
would be paid an undisclosed “bonus” at the end of the project for his involvement in the Oak Grove Circle project. It was undisputed that Morrow controlled and directed Respondent as to what shall be done, and when and how it shall be done in regard to the development of the Oak Grove property, and other business interests of Morrow.
Although there is no absolute rule for determining whether one is an independent contractor or employee, each case must be determined on its own facts. Magarian v. Southern Fruit Distributors, So2d 858 (Fla. 1941). In this case, Respondent agreed to work subject to the orders and direction of Morrow for a fixed amount of compensation. Morrow determined both the method and measure in which the work was to be done as well as the time and tenure of service. Therefore, for the purposes of this case, Respondent was an employee of Morrow’s company, FPH. Cf. City of Boca Raton v. Mattel, 91 So2d 644, 647 (Fla. 1956).
In regard to the purchase and sale of the Oak Grove Circle property, Respondent brought the buyer and seller together. He considered himself a transactional broker. The evidence was not clear and convincing that during this transaction Respondent was acting within the scope of his employment with FPH. As such, there was insufficient proof that Respondent had an ethical obligation
to turn over the $28,000 commission to Morrow for his use in the FPH, Venture 2 project.
On May 24, 1994, in his meeting with Morrow, Respondent refused to turn over funds without assurance of an equity interest in the Oak Grove Circle project. When Morrow refused assurance, Respondent retained the funds and was terminated from his position. It appears that Morrow misled him as to his participation in FPH, Venture 2. There is insufficient evidence to show that Respondent committed a violation of Section 475.25(1)(b), Florida Statutes (1993).
