STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 97-2811

)

FELIX MARTINEZ, JR., )

)

Respondent. )

)

RECOMMENDED ORDER

A hearing was held in this case by video teleconference on September 12, 1997, and continued in Tampa, Florida, on September 18, 1997, before Arnold H. Pollock, an Administrative Law Judge with the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Geoffrey T. Kirk, Esquire

Department of Business and Professional Regulation

Division of Real Estate Post Office Box 1900

Orlando, Florida 32802-1900

For Respondent: Ronald R. Swartz, Esquire

18045 Jorene Road

Odessa, Florida 33556

STATEMENT OF THE ISSUES

The issue for consideration in this case is whether Respondent's license as a real estate salesperson in Florida should be disciplined because of the matters alleged in the

Administrative Complaint filed herein.

PRELIMINARY MATTERS

By Administrative Complaint filed on May 22, 1997,

Richard T. Farrell, Secretary of the Department of Business and Professional Regulation, charged Respondent with being guilty of fraud, misrepresentation, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence or breach of trust in any business transaction in Florida; and of failing to timely satisfy a civil judgment, both in violation of the provisions of Section 475.25(1), Florida Statutes.

Respondent requested formal hearing on the allegations and this hearing ensued.

The hearing was initially convened as a video teleconference hearing on September 12, 1997, with the Administrative Law Judge sitting in Tallahassee and all remaining parties to the hearing in Tampa. However, slightly more than one hour into the hearing, due to circumstances beyond the control of any participant, it became necessary to adjourn the hearing which was immediately rescheduled for September 18, 1997, in Tampa. The second session, in Tampa, successfully concluded the hearing. During the course of the hearing in Tampa, counsel for the Real Estate Commission voluntarily dismissed Charge II of the Administrative Complaint, which charge related to the failure to timely satisfy the civil judgment.

At the hearing, Petitioner presented the testimony of Ishmael Rivera, Sr., a retired individual who was, at a time

pertinent to the issues herein, a neighbor of the Respondent and who loaned money to Respondent for the business of which Respondent was part owner. Petitioner also introduced Petitioner's Exhibits 1 through 5. Respondent testified in his own behalf and presented the testimony of his brother, Victoriano Martinez. Respondent also introduced Respondent's Exhibits 1 through 14.

A transcript of the proceedings was not filed with the Division of Administrative Hearings. Neither counsel submitted post-hearing Proposed Findings of Fact, legal authority, or argument.

FINDINGS OF FACT

1. At all times pertinent to the issues herein, the Florida Real Estate Commission was the state agency responsible for the licensing of real estate professionals, including salespersons, and the regulation of the real estate profession in this state. Respondent was licensed as a real estate salesperson and held license number 0464001.

2. On November 10, 1992, Respondent, was a partner with his three brothers and one other individual in Mars Construction Company, a building contracting firm in the Tampa area. His primary duties with the firm consisted in sales of the company's buildings, and office management. He was not actively engaged in the practice of the real estate profession in any other capacity. At the time, as a result of circumstances arising in the

   aftermath of the hurricane which had recently struck in South Florida, the company was experiencing financial difficulties. At some point during the earlier portion of the year, Respondent and his then neighbor, Mr. Rivera, engaged in a discussion regarding a possibility of a loan from Rivera which would help with the company's financial plight.

3. There is a difference in the testimony of Respondent and Mr. Rivera as to how this discussion came about. Mr. Rivera contends that Respondent approached him concerning the possibility of Rivera lending money to the Martinez’s. Respondent contends that Mr. Rivera, a retired gentlemen in his 80's, approached him and suggested that because he, Rivera, was only earning approximately 4 percent on his certificate of

   deposit investments, perhaps he could lend money to Respondent at the 12 percent interest rate which, it would appear, was the rate paid by the company to other private investors. Both agree that the discussion regarding a loan, regardless of who initiated it, took place in the yard outside the houses of the parties when Respondent was the next-door neighbor of Mr. Rivera. Respondent moved from that location in March 1992.

4. Respondent also contends that he and one or more of his brothers, all of whom Mr. Rivera knew, took Mr. Rivera out to visit the sites of several of their construction projects, one of which was a duplex located at 6901 North Blossom Avenue, in Tampa. Mr. Rivera categorically denies ever having gone to visit

   any of the properties. Regardless of who approached whom regarding the initiation of the loan, or whether Mr. Rivera visited any of the company properties, the evidence is clear that Mr. Rivera agreed to lend the money and the loan was made by him to Respondent. When a $16,000.00 certificate of deposit owned by Rivera matured, Rivera gave that amount to Respondent on or about November 13, 1992, and received a promissory note in that amount. Slightly more that one month later, Rivera gave Respondent another $10,000.00 when a second certificate matured.

5. At that time Respondent, along with his brother and business partner, Victoriano Martinez, executed a promissory note in the amount of $26,000.00, payable to Ishmael Rivera and Margaret Rivera, in trust for Alice Belin and Lorraine Tornes, the Riveras’ daughters. This promissory note was back dated to November 10, 1992, the date of the original loan of $16,000.00, and the note for that lesser amount was destroyed. The second note, in the amount of $26,000.00, also reflected that it was secured by a mortgage of even date on the Blossom Street property, but no such mortgage was ever prepared or executed. Respondent admits that no such mortgage was ever contemplated or issued, and Mr. Rivera agrees that there was no discussion of, nor did he expect, a mortgage on the property.

6. The two checks reflecting the loan by Mr. Rivera were deposited to the account of Mars Construction with the Key Bank of Florida. The loan called for monthly payment of interest only

   in the amount of $260.00 each, and provided for a final payment of the entire principal amount on November 10, 1994. After the note was issued, Mr. Rivera went to the company office each month to pick up his interest checks. After several interest payments were made with checks drawn on the account of Mars Construction, some of which were not signed and others some of which were signed by Jesus Martinez, some by Respondent, some by Jose Martinez, and some by Victoriano Martinez, Mars Construction filed for bankruptcy and ceased making interest payments on the loan. Mr. Rivera was listed as a creditor of Mars Construction and the obligation to him, evidenced by the unsecured promissory note, was discharged.

7. Respondent was not engaged in the practice of real estate at the time of or in any particular regarding the loan. He was acting in an individual capacity either for himself or on behalf of the company as a part owner thereof. The two checks reflecting the loan by Mr. Rivera were deposited to the account of Mars Construction with the Key Bank of Florida.

8. Mr. Rivera contends that the loan he made to Respondent was a personal loan to Respondent and not to the company. Therefore, even after the bankruptcy by Mars, Mr. Rivera and his wife filed suit in Circuit Court against Felix and Victoriano Martinez, the two individuals who had signed the promissory note.

9. The note does not make reference to Mars Construction as the borrower/obligor, but instead indicates Felix and Victoriano

   Martinez as the borrowers. In this regard, and regarding the listing of the Blossom Street property as security, Respondent contends that the note was prepared from a form in the company computer which was based on a generic form found in an office supply store. Though Respondent contends the loan was to the company, and though the interest payment checks were drawn on a company account, it is found that Respondent and Victoriano were personally liable to the Riveras as a result of their note.

   Neither filed an Answer to Mr. Rivera’s Complaint, and Default Final Judgment in favor of the Riveras was entered by the court on April 25, 1995.

10. Because of the suit by Mr. Rivera, and because of the contingent liability he faced as a result of the company’s bankruptcy, Respondent subsequently filed a personal bankruptcy in which the judgment by the Riveras was listed as a claim. No payments, other than those made as interest by the company before its bankruptcy, were ever made by Respondent, or any other entity on his behalf, to the Riveras whose claim for $26,000 remains unsatisfied.

11. Mr. Rivera remains convinced that Respondent used all or a portion of the loan in question for the purchase of the new house he now occupies. Records produced by Respondent, however, fail to support that claim. Respondent was able to trace the money expended on his new residence to a small amount of cash realized from the sale of his former residence, and to the proceeds of a private construction loan which was subsequently satisfied by a new loan from a financial institution to which Respondent remains obligated.

12. Mr. Rivera, in his complaint to the Commission, alleged that Respondent is at least part owner of land in the Florida Keys, and is involved in a business in Miami. No supporting evidence was produced to confirm or validate these claims, and they are found to be without merit.

    CONCLUSIONS OF LAW

    
    

13. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter in this case. Section 120.57(1), Florida Statutes.

14. In an Administrative Complaint with two Counts, the Florida Real Estate Commission seeks to discipline the Respondent’s license as a real estate salesman because, it is alleged, he is guilty of fraud, misrepresentation, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence or breach of trust in any business transaction in this state, (Count I), and because he failed to timely satisfy a civil judgment, (Count II), in violation of Section 475.25(1)(b) and (d), respectively, Florida Statutes. At the hearing, Petitioner dismissed Count II of the Administrative Complaint.

15. The burden of proof in this case rests upon the Petitioner to prove the Respondent’s guilt of the remaining offense alleged by clear and convincing evidence. Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).

16. The evidence of record clearly demonstrates that Respondent was guilty of culpable negligence in his transaction with Mr. and Mrs. Rivera. There is no doubt that he was the prime contact person in arranging the loan made by the Riveras to Respondent or his family business. It is clear that the promissory note executed by Respondent and his brother is

    inaccurate and makes reference to a security for the loan in the form of a mortgage on property owned by the Martinez family business, when no mortgage existed or was ever contemplated by the owners of the property. In addition, the note was backdated to the date of the first of two loans, yet no mention was made of this fact in the note.

17. Respondent contends that the promissory note was prepared on a generic note form purchased in an office supply of stationery store, yet it is clear that no effort was made to tailor it to the actual circumstances of the transaction.

18. The evidence of record also makes it very clear that after the note was executed, and several repayment installments were made, some by Respondent and some by his brothers individually, the company filed for bankruptcy, listing Mr. and Mrs. Rivera as creditors. Neither of the Riveras considered themselves creditors of the construction company. They believed their loan was to Respondent and his brother, individually, and when the company went into bankruptcy, they thereafter filed suit against Respondent and his brother, as individuals, to collect the obligation represented by the promissory note. Respondent and his brother both defaulted, and a judgment was entered against them. Nothing has been paid in satisfaction of that judgment arising out of the promissory note by either Respondent or his brother.

19. On the other hand, notwithstanding their contention

    that the obligation to the Riveras was that of the family corporation, the evidence makes it clear that the obligation was that of the Respondent and his brother, and his failure to satisfy the judgment, even in light of the personal bankruptcy, constitutes bad faith in a business transaction under the circumstances of this case.

20. In light of Mr. Rivera’s testimony that neither side considered the Blossom Street property to be security for the loan, there is insufficient evidence to support the allegations of fraud, misrepresentation or dishonest dealing by trick, scheme or device. In addition, there is insufficient evidence of record to establish that Respondent concealed any assets in a family business operating in South Florida or in the Florida Keys, or used any of the proceeds of the loan in issue to build the house he currently occupies.

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 in this case finding Respondent guilty of acting in bad faith in a business transaction, reprimanding him, and placing his salesman’s license on probation for a period of one year under such conditions as the Commission deems appropriate.

DONE AND ENTERED this 20th day of October, 1997, in Tallahassee, Leon County, Florida.

ARNOLD H. POLLOCK

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) 921-6947

Filed with the Clerk of the Division of Administrative Hearings this 20th day of October, 1997.

COPIES FURNISHED:

Geoffrey T. Kirk, Esquire Department of Business and

Professional Regulation Division of Real Estate Post Office Box 1900

Orlando, Florida 32802-1900

Ronald R. Swartz, Esquire 18045 Jorene Road

Odessa, Florida 33556

Lynda L. Goodgame General Counsel

Department of Business and Professional Regulation

1940 North Monroe Street Tallahassee, Florida 32399-0792

Henry M. Solares Executive Director Division of Real Estate

400 West Robinson Street Post Office Box 1900 Orlando, Florida 32308-1900

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: 97-002811

Orders for Case No: 97-002811