STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA DEPARTMENT OF BUSINESS AND ) PROFESSIONAL REGULATION, )

)

Petitioner, )

)

vs. ) CASE NO. 96-3582

) NORMAN RIVERS, JR., and NORMAN ) RIVERS JR. REALTY, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

Upon due notice, this cause came on for formal hearing on October 14, 1996, in Gainesville, Florida, before Ella Jane P. Davis, a duly assigned Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Steven W. Johnson, Esquire

Department of Business and Professional Regulation

Division of Real Estate

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

For Respondent: James F. Gray, Esquire

Post Office Box 7100 Gainesville, Florida 32605

STATEMENT OF THE ISSUE

Whether or not Respondents' Florida real estate licenses should be disciplined for violation of Section 475.25(1)(b) F.S., by dishonest dealing by trick, scheme, or device, culpable negligence, or breach of trust in any business transaction; Section 475.25(1)(d)1. F.S., failure to account for or deliver funds; Section 475.25(1)(k) F.S., failure to maintain trust funds in their real estate brokerage escrow bank account or some other proper depository until disbursement thereof was properly authorized; and Section 475.25(1)(e)

1. and Rule 61J2-10.032(1) F.A.C. for failure to provide written notification to the Real Estate Commission upon receiving conflicting demands within 15 business days of the last party's demand or upon a good faith doubt as to who is entitled to any trust funds held in the broker's escrow account and failure to institute one of the settlement procedures as set forth in Section 475.25(1)(d)1., F.S. within 15 business days after the date the notification was received by the Division.

   PRELIMINARY STATEMENT

   
   

   At formal hearing, Petitioner presented the oral testimony of Charles E. Smith and Investigator Russell Lambert as well as the deposition testimony of Elizabeth Smith. Petitioner had six exhibits admitted in evidence.

   
   

   Respondents' Motion to Dismiss before cross-examination of Mr. Smith was denied without prejudice. Respondents' Motion to Dismiss at the close of Petitioner's case-in-chief was taken under advisement for resolution in this recommended order.

   
   

   Respondent testified on his own behalf and presented the oral testimony of Marilyn Rivers, his wife. Respondent had twelve exhibits admitted in evidence.

   
   

   No transcript was provided. All timely-filed proposed recommended orders have been considered.

   
   

   FINDINGS OF FACT

   
   

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

      
      

   2. The Respondent Norman Rivers, Jr. is and was at all times material hereto a licensed real estate broker, issued license number 0189212 in the accordance with Chapter 475, F.S. The last license issued was as a broker c/o Route 1, Box 344, Alachua, Florida 32615.

      
      

   3. Respondent Norman Rivers Jr., Realty, Inc. is and was at all times material hereto a corporation registered as a Florida real estate broker having been issued license number 0214407 in accordance with Chapter 475, F.S. The last license issued was at the address of Route 1, Box 344, Alachua, Florida 32615.

      
      

   4. At all times material hereto, Respondent Norman Rivers, Jr. was licensed and operating as qualifying broker and officer of Respondent Norman Rivers Jr., Realty, Inc.

      
      

   5. On December 5, 1994, Respondent showed Charles E. and Elizabeth A. Smith (husband and wife) a tract of land located in Dixie County, Florida.

      
      

   6. Afterward, Respondent Norman Rivers, Jr. sent a $57,500 offer to Charles E. Smith for his signature.

      
      

   7. On December 7, 1994, Mr. Smith signed the offer and forwarded it with a

      $2,875 deposit to the Respondents.

      
      

   8. The next day, the Seller, Ed Dix, accepted the Smiths' offer.

      
      

   9. The contract provided that if the deal did not close on December 23, 1994,

      
      

      "...if the said Buyer fails to perform the covenants herein contained within the time specified, therefore said deposit made by

      the Buyer may be forfeited at the option of the Seller, as liquidated damages, upon

      10 days' notice to the Buyer, and one half thereof shall be retained by or paid to said Realtor and the remainder to the Seller, unless because of expense incurred the latter shall agree or had agreed in writing to a greater percentage being paid to the Realtor,..."

      
      

   10. The property sale did not close on December 23, 1994.

       
       

   11. At some point in time, Mr. Smith conversed with Respondent Rivers by telephone and told him he could not afford to purchase the property since a greater amount would have to be financed and because his wife could not be persuaded to go through with the deal. He told Mr. Rivers that he would like Mr. Rivers to return any amount remaining in excess of Mr. River's expenses but that Mr. Rivers could retain his expenses. Mr. Rivers told Mr. Smith that his expenses had used up the entire $2,875 binder. Mr. Smith accepted this representation. He testified that he "considered the issue closed" at that point.

       
       

   12. Neither Mr. or Mrs. Smith made subsequent demands for all or part of the binder. The administrative complaint herein was urged quite some time later by Mrs. Smith.

       
       

   13. The Respondents affirmatively demonstrated that Mr. Rivers' business practice from 1991 to 1995 and continuing to date, is to promptly refund deposits upon a Buyer's request, if the Seller agrees. The significance of this evidence is that if a clear demand for refund or audit had been made by Mr. Smith, Respondents probably would have made some accounting and refund. In this case, Mr. Rivers did not do so because he did not consider that he had a clear- cut request to refund a deposit.

       
       

   14. Despite Mr. Smith's testimony that his final telephone conversation with Mr. Rivers as related above in Finding of Fact 11, occurred before Christmas 1994 and Mrs. Smith's deposition testimony that Mr. Smith's and Mr. River's phone conversation occurred on December 21, 1994, before the agreed closing date all other documentary evidence and credible testimony points to the conversation occurring in mid-January 1995.

       
       

   15. The parties stipulated that on 12/21/94, Alachua County Abstract Company sent the closing package by UPS overnight delivery to Mr. and Mrs. Smith. This package was received by Mr. and Mrs. Smith on 12/22/94. The significance thereof is that Mrs. Smith testified that the telephone call made by her husband in her presence from their home to Mr. Rivers cancelling the contract and demanding the return of their deposit occurred the night before the day they received the closing package, or December 21, 1996. However, the Smiths' long distance telephone records from 12/7/94 to 1/31/95 reveal that no long distance call was made from the Smith home to Mr. Rivers on 12/21/94 or any date other than 12/7/94, the day Mr. Smith initially signed and faxed the contract to Mr. Rivers.

       
       

   16. It is noted that at one point Mr. Smith wobbled and testified that Mr. Rivers telephoned him for the final phone conversation at some time prior to Christmas 1994. This is contrary to Mrs. Smith's testimony and Respondents'

       telephone records do not show that Mr. Rivers telephoned the Smith home on December 21, 1994, either.

       
       

   17. Between 12/30/94 and 01/17/95, Respondents' long distance telephone bills show charges for 15 calls to Mr. Smith's several work phone numbers and the home phone number. In Mr. Rivers' words, "I chased him like a hound," to find out what was going on, including when the deal could close. This demonstrates Mr. Rivers' continued belief after December 21, 1994 that the contract was still going to close and contradicts Mrs. Smith's testimony that Mr. Smith had orally cancelled the contract and demanded the return of his deposit on December 21, 1994. It further contradicts Mr. Smith's testimony this conversation occurred sometime before Christmas, 1994.

       
       

   18. The agency stipulated that Seller Dix and Norman Rivers, Jr. entered into an agreement whereby any binder forfeiture resulting from the Smiths' failure to close on December 23, 1994 would be used by Norman Rivers, Jr. and Norman Rivers, Jr. Realty, Inc. to cover their expenses incurred in marketing Mr. Dix's property.

       
       

   19. Respondents established that prior to the contract signing on December 7, 1994, they had expended at least $3,339.00 in advertising in order to market and sell Mr. Dix's property. There is no evidence Mr. Smith ever objected to paying the advertising costs incurred by Respondents or even inquired what Mr. Rivers' expenses were.

       
       

   20. Mr. Rivers did not remove any amount related to Mr. and Mrs. Smith from his escrow account before January 16, 1995. Then he did so by three checks made out to Norman Rivers Jr. Realty, Inc.

       
       

   21. Mr. Smith and Mr. Rivers concur that Mr. Smith made no specific demand for an audit of Respondents' expenses.

       
       

   22. Real Estate Commission Investigator Russell Lambert audited Respondents' accounts. He testified he "found no violations."

       
       

       CONCLUSIONS OF LAW

       
       

   23. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this cause, pursuant to Section 120.57(1), F.S.

       
       

   24. Petitioner bears the duty to go forward and the burden of proof herein. Petitioner must prove its allegations by clear and convincing evidence. See, Ferris v. Turlington, 510 So.2d 292 (Fla. 1987)

       
       

   25. Norman Rivers, Jr. and Norman Rivers, Jr. Realty, Inc., a Florida corporation, are charged in an eight count administrative complaint by the Florida Department of Business and Professional Regulation with violations of Section 475.25 F.S.. The material factual allegation is that Mr. Smith allegedly made a telephone call to Mr. Rivers on 12/21/94, prior to the date set for closing, and thereby demanded the return of his real estate contract deposit. Flowing from that alleged demand, the agency has charged that Mr. Rivers d/b/a Norman Rivers, Jr. Realty, Inc., failed to report Mr. Smith's claim to the Florida Real Estate Commission and kept the deposit for his expenses.

       
       

   26. The parties are agreed that the statute and rules did not require a written release from the depositor at the time material. The agency only asserts that, "wise business practice would have dictated such a course."

   27. Citing Haas v. Crisp Realty Co. 65 So.2d 765 (Fla. 1953), the agency has argued that Mr. Smith meant only that Respondents could keep their "reasonable" expenses related to the Smiths' degree of fault in not closing the sale, or the actual damages to the seller. In retrospect, that may be what Mr. Smith wishes he had said, but his testimony does not support that construction. Moreover, Haas involved a different liquidated damages clause and very different circumstances. Herein, the agency has presented no evidence that Mr. Smith ever objected to paying the advertising costs before disbursement and has presented no evidence to show the advertising costs were not contemplated in the term "expenses" as used by Smith and Rivers in their phone conversation or as used within the contract signed by the Buyer and Seller. There also is no evidence to show that the Seller did not incur loss relative to the liquidated damages herein due to keeping the property off the market until January 17, 1995 or that the seller and/or Realtor was not entitled to the full binder amount for payment of the expenses of advertising.

       
       

   28. Moreover, there is no clear and convincing evidence of a timely demand from Mr. Smith for the return of any amount, no clear and convincing evidence of a demand for an audit to determine the amount due, if any, vis a vis Respondents' expenses which everyone agreed could be paid from the Smiths' deposit. There also is no clear and convincing evidence of any conflicting claims on the deposit (either between seller and buyer, or seller and realtor or buyer and realtor).

       
       

   29. Accordingly, Respondents cannot be held guilty as charged under Counts I and II, "dishonest dealing by trick, scheme or device, culpable negligence or breach of trust;" Counts III and IV, "failure to account or deliver funds;" or Counts VII and VIII, "failure to provide written notification to the commission

       . . . and institute settlement procedures . . . within 15 days."

       
       

   30. For the same reasons, Counts V and VI, alleging a violation of Section 475.25(1)(k) F.S. "failure to maintain trust funds in a real estate brokerage account or some other proper depository until disbursement thereof was properly authorized," were not proven by clear and convincing evidence, and Respondents' case in chief went on to establish a proper disbursal of funds in mid-January 1995, according to the evidence as a whole.

RECOMMENDATION

Upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Florida Real Estate Commission enter a final order

dismissing the administrative complaint herein.

RECOMMENDED this 2nd day of December, 1996, at Tallahassee, Florida.

ELLA JANE P. DAVIS

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(904) 488-9675 SUNCOM 278-9675

Fax Filing (904) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 2nd day of December, 1996.

COPIES FURNISHED:

Steve W. Johnson, Esquire Department of Business

& Professional Regulation

400 West Robinson Street, Suite N-308 Orlando, Florida 32801-1772

James F. Gray, Esquire Post Office Box 7100

Gainesville, Florida 32605

Lynda L. Goodgame, Esquire Department of Business and

Professional Regulation 1940 North Monroe Street

Tallahassee, Florida 32399-0792

Henry M. Solares Division Director Division of Real Estate Post Office Box 1900

Orlando, Florida 32802-1900

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15 days from the date of 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: 96-003582

Orders for Case No: 96-003582