Respondent. )
Upon due notice, this cause came on for formal hearing on November 27, 1996, by video conference to Orlando, Florida, before Daniel M. Kilbride, a duly assigned Administrative Law Judge of the Division of Administrative Hearings.
For Petitioner: Steven D. Fieldman
For Respondent: Wade F. Johnson, Jr. Esquire
Wade F. Johnson, Jr., P.A.
Whether Respondent is guilty of fraud, misrepresentation, concealment, false pretenses, false promises, dishonest dealing, culpable negligence, or breach of trust in a business
On November 21, 1995, Petitioner filed a one count Administrative Complaint charging Respondent with violations of Section 475.25(1)(b), Florida Statutes (1993). Respondent denied the allegations and requested a formal hearing. This matter was referred to the Division of Administrative Hearings on June 30, 1996. After receipt of the response to the Initial Order, this case was transferred to the undersigned Administrative Law Judge. Discovery ensued and the formal hearing was held on November 27, 1996.
At the hearing, Joint Exhibits 1 through 11 were admitted in evidence. Petitioner presented the testimony of three witnesses, including two expert witnesses. Respondent offered the testimony of one witness and testified in her own behalf. One exhibit offered in evidence was denied admission on the basis of a discovery violation. Rule 60Q-2.19(4), Florida Administrative Code. The transcript of the formal hearing was filed on December 12, 1996. Petitioner did not file a proposed recommended order. Respondent filed her proposed recommended order on December 30, 1996.
The Respondent’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 0267809. The last license issued was as a broker trading as “Trendsetter Realty and Mortgage”, 977 Humphrey Boulevard, Deltona, Florida 32738.
The Respondent operated as a real estate broker during the relevant time period of approximately June 1993 through July 1995.
The Respondent is not licensed to practice law in the State of Florida or any state.
On or about June 18, 1993, the Respondent prepared certain documents in connection with the sale and purchase of real property located at 1847 North Acadian Drive, Deltona, Volusia County, Florida.
Respondent prepared the contract based upon the offer made by the buyer, Juan and Susana C. Veliz, and the counteroffer made by the seller, Jerry and Tammy Maltempi, and in accordance with the wishes of buyer and seller.
The subject property was encumbered by a first Mortgage, which secured a Note held by J.I. Kislak Mortgage
Corporation and guaranteed by the federal Department of Veterans Affairs.
The mortgage and note contained a “due on sale” clause and clearly stated on its face that “[t]his loan is not assumable without the approval of the Department of Veterans Affairs or its authorized agent.” The Buyers and the Sellers were aware of this restriction at the time of the transfer of possession.
The Buyers executed an initial, handwritten, offer that specifically stated in bold, capitalized print that "if not fully understood, seek the advice of an attorney prior to signing.”
The Buyers then received a typed counteroffer, as opposed to the handwritten original offer, which also stated the same admonition to seek advice of an attorney. The counteroffer was mailed to the Buyers for review and execution by Mr. Veliz and his wife. The Buyers read the numbers, but not the fine print, prior to signing the contract.
The sale document was executed by the Buyers and Sellers on or about June 18, 1993 and was denominated a Contract for Deed with a sale price of $85,000. The contract provided for a $1,000 initial deposit, followed by a second deposit of
$8,783.50 which was due upon acceptance by the Sellers. The transfer of title was to occur on or before July 6, 1995.
Upon payment of the full deposit, the Sellers would transfer possession to the Buyers and the escrowed funds (except for $1,200) would be disbursed. Buyers would assume the
responsibility of repair and maintenance of the property upon taking possession.
On or about July 3, 1993, Buyers tendered the sum of
$9,783.50 to the Respondent and assumed possession of the property.
Respondent explained to the Buyers about the agency relationship and her representation of the Sellers; that she owed a duty of fair dealing and honesty to the Buyers; the risks associated with an agreement for deed; the foreclosure status of the property the Buyer’s were purchasing; and the fact that the deposits were non-refundable after occupancy of the premises.
Respondent disclosed the nature of her agency relationship, both orally and in writing, to both the Buyers and the Sellers in the transaction at issue.
Respondent disclosed, in writing, to the Buyers that deposits being made by the buyer were non-refundable upon occupancy of the premises.
At the hearing, Mr. Veliz demonstrated his ability to speak, read and understand the English language.
The Buyers had ample opportunity to seek independent representation, either through a realtor or through an attorney prior to signing the contract and prior to taking possession of the premises. The Buyers chose not to do so.
Prior to Buyers taking possession of the home, Respondent, via telephone conversation, described this
transaction to J.I. Kislak Mortgage Corporation, the holder of the note and mortgage on the property, and advised them that a sale was pending and the past due mortgage payments would be brought up to date.
Between July 9 and 12, 1993, with the consent of the parties, the Respondent disbursed: $2,962 to herself, as a real estate commission; $2,857.12 to the sellers; and $2,759.38 to J.
I. Kislak Mortgage Corporation for payment on the mortgage. Respondent retained $1,200 in escrow for future closing costs.
As a service to the parties, Respondent collected the monthly mortgage payment from the Buyer and forwarded it directly to the mortgage holder for several months. Buyers paid the agreed upon amount of $657.00 per month from August 1993 until May or June 1994.
In June 1994, J.I. Kislak Mortgage Corporation refused to accept any additional payments toward the mortgage until an adjustment was made in the escrow account for the payment of insurance premiums on the property. The mortgage company called for an upward adjustment in the approximate amount of two hundred dollars per month.
Neither the Buyers nor the Sellers were willing or able to pay the additional premium amount.
The mortgage corporation subsequently foreclosed and took possession of the property during the last half of 1994.
Buyers lost their equity in the house including
approximately eight thousand dollars in improvements to the property.
Following the foreclosure, Respondent disbursed the balance remaining in her company’s escrow account to the Buyers, in the amount of $1,205, on or about September 22, 1995.
Respondent prepared an agreement or contract for deed which a broker is not authorized to prepare.
Respondent failed to anticipate a possible increase in the mortgage payment escrow for taxes and insurance at the time the original contract was prepared.
The failure of the transaction to close, and the losses suffered by the parties, were not due to a calling of the loan by the mortgage company pursuant to the due on transfer clause of the mortgage.
The failure of the transaction to close was not due to the non-refundability of the deposits made by the Buyers.
There was no intent on the part of Respondent to commit fraud, misrepresentation, concealment, false promise, false pretense, dishonest dealing or breach of trust in this matter.
Respondent is guilty of culpable negligence in this matter.
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 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), 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 475.25, Florida Statutes (1993) reads in pertinent part:
475.25 Discipline. -
(1) The Commission way. . . suspend a license . . . may revoke a license . . . may impose an administrative fine . . . and may issue a reprimand . . . if it finds that the licensee. . . .
(b) Has been guilty of fraud, misrepresent- action, concealment, false pretenses, dishonest dealing by trick, scheme, or devise, culpable negligence, or breach of trust in a business transaction . . .
Petitioner must prove intent by Respondent in order to establish a violation of the above-cited statute. Munch v. Department of Professional Regulation, Division of Real Estate, 592 So.2d 1136 (Fla. 1st DCA 1992).
The testimony presented by Petitioner’s witnesses focused primarily upon the contract executed between the parties. Petitioner’s experts testified as to what Respondent
should have done differently in the preparation of that contract and the execution of that contract.
Respondent used an approved Contract for Sale and Purchase which she prepared and the parties executed. However, the Respondent modified it and added a significant addendum to it. By so doing, Respondent changed the nature and name of the document to “Contract for Deed”. It contained elements of a contract for sale, financing, escrow and transfer of possession.
As stated by the District Court in Cain & Bultman, Inc. v. Miss Sam Inc., 409 So.2d 114, 118 (Fla. 5th DCA 1982) an agreement for deed is “an executory contract for the sale of land.”
Most times, . . .the agreement for deed is just what it appears to be: a true good-faith time sales agreement, the primary function of which is to state the terms of a binding agreement to transfer the legal title to certain real property. In such an instance, apart from securing the seller’s right to receive payment, the agreement also secures the purchaser’s right to receive the legal title upon payment in full.
Id. At 120. The court went on to state that “when this is the true nature of an agreement for deed, there is nothing illegal, immoral or inequitable about the arrangement and under constitutional freedoms, citizens should be able to so contract and the rights and relationships between the parties should be as provided in the agreement. . .”
Preparation of an agreement for deed by Respondent is
not authorized by a broker. See: Keyes Co. v. Dade County Bar Association, 46 So.2d 605 (Fla. 1950), and Cain & Bultman, supra in Keyes, construing a version of Section 475.01, Florida Statutes that is the same in all respects material to this case to the current version of that section. The Supreme Court concluded that while the drafting of papers by a realtor are restricted, the realtor is authorized to draft those papers that are necessary for “recording his handiwork - that is the bringing together of buyer and seller.” Id. at 606. The court further stated that
We are not shaken in this view because of the argument that oftentimes the instrument to be executed is a copy of one which has been prepared by an attorney. An instrument entirely adequate in one instance may be totally inadequate in another, and even if a particular form may be common to many transactions, it may not serve to effectuate the transfer if there are errors in the parties, the descriptions, the signatures, or the acknowledgment.
Id. At 607. The court clearly understood that there is a gray area in the drafting of real estate contracts and the court authorized the realtor to prepare the documents necessary to evidence the deal between the Buyer and the Seller, even though there may be times when those documents may be borrowed from an attorney and there may be problems arising out of those documents. Taking Keyes and Cain & Bultman together, it is clear that Respondent crossed over the line and was not authorized to prepare the contract for deed between the parties.
The contract prepared in this instance was not a proper executory contract for the sale of land. The modifications and addendums made by Respondent contained significant errors, was totally inadequate under these circumstances and resulted in the failure of the sale to close. This was culpable negligence on the part of Respondent.
The Petitioner has not shown that Respondent had an intent to defraud or commit another intentional act that violates Section 475.25(1)(b).
As to the Buyers, Respondent explained to Mr. Veliz about the agency relationship and her representation of the Sellers. Respondent also explained that she owed a duty of fair dealing and honesty to Mr. Veliz and she explained the risks associated with an agreement for deed, the foreclosure status of the property the Veliz’s were buying, and the fact that the deposits were non-refundable after occupancy of the premises.
The Buyers executed an initial, handwritten, offer that specifically stated in bold, capitalized print that "if not fully understood, seek the advice of an attorney prior to signing.” The Buyers then received a typed counteroffer, as opposed to the handwritten original offer, which also stated the same admonition to seek advice of an attorney. The counteroffer was mailed to the Buyers for review and execution by Mr. Veliz and his wife. The Buyers had ample opportunity to take this counteroffer to a realtor and/or an attorney for review prior to
signing it. The Buyers chose not to do so. Respondent was under no obligation to take affirmative actions to force the buyers to obtain independent representation.
In addition to the admonition in the contract to seek the advice of an attorney, Respondent provided the Buyers with the disclosure statement that specifically stated that Respondent represented the sellers in this transaction. That disclosure statement was signed by the Buyers on June 18, 1993.
The payment structure devised for payment of the mortgage payments after occupancy by the Buyers was intended to protect the interests of both parties. Respondent made the mortgage payments on behalf of the Buyers instead of having the Buyers paying the Sellers, and then relying on the Sellers to make the payments. Respondent made every effort to act fairly and honestly toward the Buyer, as is her duty.
Respondent did, in fact, obtain a final release for the escrow payments. This release was in writing and was signed by the Buyers after their occupancy of the premises. Obtaining a final release of the escrow payments, after the occupancy of the premises by the Buyers, was prudent.
Up to the time they occupied the premises the Buyers had an opportunity to raise any objection they may have had regarding the transaction or the non-refundability of the deposits. At that point, the non-refundability and release of the escrow deposits was the only issue being dealt with, and the
release document was a simple two sentence document. Therefore, it cannot be claimed by the Buyers that there was any confusion as to the intent with regard to the escrow deposit.
Respondent’s actions were not those of someone with an intent to defraud the buyer.
Mr. Veliz’ claim that the agency relationship was not explained to him orally by Respondent is not credible. On two separate occasions Buyers were given a copy of the contract and receipt of the Disclosure Statement. The Buyers had ample opportunity to question any provision in the contract and to question the provision for the non-refundability of the deposits. The Buyers further had an opportunity to question the
disclosure statement that indicated that Respondent represented the seller in this transaction.
The Buyer testified that when he received the contract he read the numbers but not the fine print. Mr. Veliz demonstrated his ability to speak, read and understand the English language at the hearing. The Buyer made a conscious choice not to read the contract that the buyer was executing. That is not a violation of the statute under which Respondent was charged.
The only other party against which a fraud may be alleged is J.I. Kislak Mortgage Corporation. In uncontroverted testimony, Respondent testified that she called J.I. Kislak
Mortgage Corporation and told them of the nature of this transaction and that payments were being made on the mortgage that was in default. Respondent’s actions did not demonstrate any intent to defraud J.I. Kislak, however, it was not sufficient to put the mortgage holder on notice of the intended charge of possession prior to the sale.
The structure of the payments in this transaction is a possible means by which J.I. Kislak may have been put on notice as to the nature of this transaction. Not only did J.I. Kislak receive checks where the name of the payor did not match the name of the borrower, those checks were also sent from Respondent’s office, not from the current owner. However, these actions may not necessarily put the lender on notice that a new party is responsible for the mortgage payments. But structuring a transaction in this matter is not the action of a party with an intent to defraud the lender. Therefore, no intentional acts, as is necessary to show a violation of Section 475.25(1)(b), has been proven as to J.I. Kislak Mortgage Corporation.
Steven D. Fieldman
Wade F. Johnson, Jr. Esquire Wade F. Johnson, Jr., P.A.
Henry M. Solares Division Director
Lynda L. Goodgame General Counsel
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.
