STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND ) PROFESSIONAL REGULATION, ) DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 98-1783

)

PETER C. FISCHBACH, )

)

Respondent. )

)

RECOMMENDED ORDER

On February 4, 1999, a formal administrative hearing was held in this case in St. Petersburg, Florida, before J. Lawrence Johnston, Administrative Law Judge, Division of Administrative Hearings.

APPEARANCES

For Petitioner: Steven W. Johnson, Senior Attorney

Department of Business and Professional Regulation

Division of Real Estate

400 West Robinson Street Orlando, Florida 32802

For Respondent: Peter C. Fischback, pro se

405 Central Avenue

St. Petersburg, Florida 33701 STATEMENT OF THE ISSUES

The issues in this case are whether the Respondent, Peter C. Fischbach, should be disciplined on the charges alleged in the Administrative Complaint, FDBPR Case No. 97-83729. Specifically,

the charges allege that, "under the guise of an alleged real estate 'consulting fee,'" Fischbach converted $10,000 of a prospective buyer's escrow money, contrary to their agreement that Fischbach only would be paid commission on the closing of a purchase, which did not occur. The three-count Administrative Complaint charges that these allegations establish violations of: Count I, Section 475.25(1)(b), Florida Statutes (1997), for fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme, or device, culpable negligence, or breach of trust in any business transaction fraud, misrepresentation; Count II,

Section 475.25(1)(d)1, Florida Statutes (1997), for failure to account or deliver funds; and Count III, Section 475.25(1)(k), Florida Statutes (1997), for failure to maintain trust funds in the real estate brokerage escrow bank account or some other proper depository until disbursement was properly authorized.

PRELIMINARY STATEMENT

When served a copy of the Administrative Complaint, FDBPR Case No. 97-83729, Fischbach disputed the charges and requested a formal administrative proceeding, and the matter was referred to the Division of Administrative Hearings (DOAH). Final hearing was set for August 7, 1998, but a Stipulation for Continuance of Final Hearing to allow completion of discovery was granted. When the parties reported that discovery was complete, the case was rescheduled for final hearing on February 4, 1999.

At final hearing, the Petitioner called two witnesses and had Petitioner's Exhibits 1 through 7 admitted in evidence.

Fischbach testified in his own behalf and had Respondent's Exhibits 1 through 3 admitted in evidence. The Petitioner ordered a transcript, and the parties were given ten days from the filing of the transcript to file proposed recommended orders. The Transcript was filed on February 16, 1999. Only the Petitioner filed a Proposed Recommended Order.

FINDINGS OF FACT

1. The Respondent, Peter C. Fischbach, is a licensed real estate broker in Florida. However, he has not been very active in actual real estate brokering; most of his involvement in the real estate business has been investing in and renting real estate on his own account.

2. In 1994, Fischbach met Peter Graf, a German national who vacationed in Florida with his wife, Kaethe. The Grafs were interested in purchasing a campground on Alligator Point in Franklin County, Florida. One of Fischbach's tenants was an acquaintance of the Grafs, and the Grafs were impressed with Fischbach's property. When the Grafs became acquainted with Fischbach, they also were impressed with Fischbach's knowledge of real estate investing.

3. In early 1995, the Grafs asked Fischbach to help him evaluate the Alligator Point property and put together an offer to purchase. Fischbach agreed; however, he attempted to explain

   that he did not do much real estate brokering and would prefer to be paid a fee for his services in an amount agreed to by the parties after Fischbach was finished with his work so that both would be in a better position to evaluate the fairness of his remuneration. Fischbach proposed that once they agreed to the amount of Fischbach's fee, Fischbach would return to the Grafs any sales commission paid to Fischbach on the transaction. The Grafs readily agreed to Fischbach's proposal.

4. Fischbach made several trips to Franklin County, discussed strategy with the Grafs, negotiated with the prospective seller, and telephoned and corresponded with the Grafs in Germany. At the request of the Grafs' attorney, Fischbach assumed the responsibility of preparing a letter of intent to memorialize the agreement between seller and buyer. The attorney planned to prepare all legal documents necessary to implement the letter of intent.

5. Fischbach first drafted an incomplete and undated Purchase and Sales Agreement for a purchase price of $1,250,000. (Petitioner's Exhibit 1). This rough draft included a provision for a 6% sales commission payable to Fischbach "at the closing." The evidence suggested that this draft was not signed by the Grafs or presented to the seller.

6. On or about March 10, 1995, Fischbach completed a revised letter of intent. (Petitioner's Exhibit 2). The revised letter of intent included a provision for a 4 percent sales

   commission payable to Fischbach "at the closing." It also provided for a $100,000 deposit payable $25,000 initially and

   $75,000 by September 1, 1995, until which time the Grafs would be entitled to investigate and inspect the property. Closing was proposed for January 1, 1996. The parties were to execute the Purchase and Sales Agreement to be prepared by the Grafs' attorney as soon as possible and within 30 days. This letter of intent apparently was signed by the Grafs and presented to the seller, but the seller declined and asked for more money.

7. On or about March 21, 1995, Fischbach again revised the letter of intent. (Respondent's Exhibit 5). This revision was for a purchase price of $1,350,000. It omitted any provision for a sales commission for Fischbach. As before, it provided for a

   $100,000 deposit payable $25,000 initially and $75,000 by September 1, 1995. But this revision only gave the Grafs until May 30, 1995, to investigate and inspect the property, and required the parties to execute the Purchase and Sales Agreement to be prepared by the Grafs' attorney on or before May 31, 1995. As before, closing was proposed for January 1, 1996.

8. This second revised letter of intent apparently was signed by the Grafs and the seller, and the Grafs paid the initial deposit of $25,000 to Fischbach to be held in escrow.

9. The day after Fischbach prepared the second revised letter of intent for signature by the parties, he met with the Grafs to discuss his fee. In Fischbach's mind, although he

   intended to continue to be available to answer questions and assist the Grafs through closing, his primary work was done, and he and the Grafs were in a position to come to an agreement on what Fischbach should be paid for his work. The Grafs were accompanied by Martin Lehner, a German friend and financial advisor to the Grafs, who Fischbach thought would be able to translate for them as necessary to assure that all parties fully understood the discussion.

10. Fischbach opened the discussion by telling the Grafs that 6% was a normal real estate commission. However, it was Fischbach's opinion that 6% of the $1,350,000 purchase price in the letter of intent was too much for what Fischbach had done for the Grafs. Fischbach suggested that they instead consider a fee in the amount of 2% of the purchase price, or $27,000. The Grafs agreed. The parties then agreed that the fee would be payable

    $10,000 in September 1995, $10,000 in September 1996, and $7,000 in September 1997. The agreement was reduced to writing in the form of a note stating: "Peter's commission (2%), 3/22/95,

    $10,000 Sept 95, $10,000 Sept 96, $7,000 Sept 97." (Respondent's Exhibit 5). Peter Graf signed the note in the presence of his friend and financial advisor, signifying the agreement of him and his wife.

11. Fischbach intended to communicate to the Grafs that he was entitled to his $27,000 fee regardless whether the transaction closed. However, Fischbach's use of the term "2%

    commission" both in the discussion about his fee and in the note intended to memorialize the agreement may have contributed to a misunderstanding as to what would happen if the transaction did not close.

12. In order to facilitate the eventual transfer of funds from the Grafs to the seller at closing, and to enable Fischbach to attend other matters on the Grafs' behalf while they were in Germany, Fischbach had the Grafs execute a power of attorney, in favor of Fischbach, on or about May 31, 1995.

13. During the summer of 1995, Fischbach participated in continued negotiations designed to achieve tax benefits for both seller and buyer. The Grafs also consulted immigration attorneys to acquire the visa necessary for him to purchase and operate the campground. By letter dated July 13, 1995, Fischbach apprised the Grafs of the status and reminded them both that a second deposit installment of $75,000 was due in escrow by September 1, 1995, and that the first $10,000 of Fischbach's fee was also due in September 1995. The Grafs received the letter but never questioned what it said about Fischbach's fee.

14. On or about July 17, 1995, the Grafs' attorney completed a proposed Contract for the Sale and Purchase of Real Estate and Agreement for the Sale and Purchase of Business Assets. However, before it was executed the Grafs insisted on the addition of a provision that would suspend purchase money mortgage payments for one year in the event of a catastrophic

    hurricane.

    
    

15. By letter dated September 15, 1995, Fischbach notified the Grafs that the seller refused to include the hurricane catastrophe provision in the Purchase and Sales Agreement and that the seller was giving the Grafs until October 2, 1995, to sign the proposed Contract for the Sale and Purchase of Real Estate and Agreement for the Sale and Purchase of Business Assets. Fischbach also advised the Grafs: "If we are done for now, I would like to close up your escrow account, pay myself the first $10,000 payment as agreed, and return the remaining money to Martin [Lehner] for him to invest for you." The Grafs received the letter but never questioned what it said about Fischbach's fee.

16. When Fischbach did not hear from the Grafs by the seller's deadline, Fischbach assumed the deal was off and wrote to the Grafs on October 3, 1995: "I now need to close your

    $100,000 plus interest escrow account. I also would like to pay myself the first $10,000 real estate consulting payment that was due in September. Deborah and I are getting married and we could use the money." In fact, Fischbach did not get married, and he did not need the money; the second quoted sentence was Fischbach's way of trying to ask for the overdue payment in a light-hearted manner.

17. The Grafs received Fischbach's October 3, 1995, letter and again did not question what it said about Fischbach's fee.

    However, by this time it was occurring to the Grafs that they were going to be out $10,000 and not have anything to show for it. Notwithstanding the agreement regarding Fischbach's fee, the Grafs now thought $10,000 was too much to pay Fischbach in light of the failure of the deal to close. They decided to take it up with Fischbach when they returned to Florida from Germany. The Grafs never communicated to Fischbach at any time that they had any questions whatsoever about Fischbach's fee, or Fischbach's intention to deduct it from the escrow money.

18. On October 18, 1995, Fischbach paid himself $10,000 and refunded the balance of the Grafs' deposit plus interest. Peter Graf testified at one point that he and his wife were back in the United States when the escrow account was closed, but he also testified that he did not return until November 1995. It is found both that the Grafs had not yet returned and that the Grafs still had not contacted Fischbach to object to his fee or to his intention to deduct $10,000 from escrow when Fischbach closed the escrow account.

19. Peter Graf testified that he contacted Fischbach shortly after the Grafs returned to Florida to complain about Fischbach's fee and the deduction of $10,000 from the escrow refund. Fischbach testified that he heard nothing from the Grafs until approximately the middle of February 1996. Due to irreconcilable direct conflict in the testimony, it was not proven that the conversation occurred earlier than the end of

    January or early February 1996.

    
    

20. Whenever their first conversation on the subject occurred, Graf told Fischbach there should not have been any fee since there was no closing, and Fischbach's response was that the Grafs had agreed to the fee. Fischbach thought that he was able to remind the Grafs of their fee agreement, again explain it to them, and thereby resolve their complaint.

21. Fischbach wrote to the Grafs' attorney on February 26, 1996, in response to a telephone call from the attorney, in which the fairness of Fischbach's fee was

    questioned. In the letter Fischbach again explained in detail the agreement for the fee under which the Grafs actually still owed Fischbach another $17,000. Fischbach wrote that he saw no reason why he should have to give the Grafs any money back.

    Fischbach's letter also confirmed that the Grafs had approached Fischbach the preceding week to complain about the fee, but that Fischbach thought the matter had been discussed, explained and settled.

22. The Grafs' attorney declined to take their case against Fischbach. He told the Grafs that as far as he was concerned, the dispute was "between you two." Later, the Grafs consulted a Louisiana attorney and requested that the attorney do "whatever was necessary." According to Peter Graf, the Louisiana attorney lodged a complaint with the Florida Real Estate Commission.

23. Despite the evidence that the Grafs agreed to a $27,000

    "consulting fee" for services rendered, they maintained that the fee should not be paid because there was no closing. Yet, the Grafs concede that Fischbach is entitled to something for his work, and they offered him $2,500 to $3,000. Fischbach, on his part, still maintains that he is owed another $17,000 but had not tried to collect it, he says, due to "embarrassment" about the dispute. He testified that it never occurred to him to return the $10,000 to escrow and have the Florida Real Estate Commission resolve the dispute and issue a disbursement order because he was not familiar with the procedure, not being very active in the brokerage of real estate.

    CONCLUSIONS OF LAW

    
    

24. The burden is on the Petitioner to prove its charges by clear and convincing evidence. Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).

25. Count I charges Fischbach with fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or devise, culpable negligence, or breach of trust in any business transaction, in violation of Section 475.25(1)(b), Florida Statutes (1997). But, based on the findings, this charge was not proven. At worst, Fischbach and the Grafs failed to clearly communicate their agreement as to what and how Fischbach would be paid. Until the Grafs complained to him several months after the escrow account was closed, Fischbach believed with good reason that his fee

    agreement with the Grafs was clearly understood and agreed by them.

26. Count II charges Fischbach with failure to account or deliver funds, in violation of Section 475.25(1)(d)1, Florida Statutes (1997). But again, based on the findings, this charge was not proven. It was not proven that Fischbach owed the Grafs any money (or that the Grafs did not owe him another $17,000.) At worst, the evidence proved an unresolved dispute between Fischbach and the Grafs as to what and how Fischbach was to be paid.

27. There was a suggestion during the hearing that Fischbach should be faulted for not utilizing the procedure in Section 475.25(d)1, Florida Statutes (1997) to have the Florida Real Estate Commission resolve the dispute between Fischbach and the Grafs and issue a disbursement order because Fischbach was not familiar with the procedure, not being very active in the brokerage of real estate. But the law is clear that the procedure is available and must be used prior to disbursement of disputed escrowed funds. See Golub v. Dept. of Prof. Reg., 450 So. 2d 229 (Fla. 5th DCA 1984. It does not apply when the dispute does not arise until after disbursement, as occurred in this case, and there is no requirement in the law under such circumstances for money to be returned to escrow to utilize the procedure.

28. Count III charges Fischbach with failure to maintain

trust funds in the real estate brokerage escrow bank account or some other proper depository until disbursement was properly authorized, in violation of Section 475.25(1)(k), Florida Statutes (1997). But it was found that Fischbach fully believed, and with good reason, that the Grafs agreed to his disbursement of $10,000 of escrow funds to himself when he closed the Grafs' escrow account on October 18, 1995. When the funds were disbursed, Fischbach had every reason to believe that disbursement was authorized.

RECOMMENDATION

Based 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 charges against the Respondent, Peter C. Fischbach.

DONE AND ENTERED this 23rd day of March, 1999, in Tallahassee, Leon County, Florida.

J. LAWRENCE JOHNSTON Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 23rd day of March, 1999.

COPIES FURNISHED:

Steven W. Johnson, Senior Attorney Department of Business and

Professional Regulation Division of Real Estate Suite N-308A

400 West Robinson Street Orlando, Florida 32801

Peter C. Fischbach

405 Central Avenue

St. Petersburg, Florida 33701

James Kimbler, Acting Division Director Division of Real Estate

Department of Business and

Professional Regulation

400 West Robinson Street Orlando, Florida 32802-1900

William Woodyard, Acting General Counsel Department of Business and

Professional Regulation Northood Centre

1940 North Monroe Street Tallahassee, Florida 32399-0792

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: 98-001783

Orders for Case No: 98-001783