STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 98-5636

)

VERNON B. SHAD, )

)

Respondent. )

)

RECOMMENDED ORDER

Notice was provided and on March 1, 1999, a formal hearing was held in this case. Authority for conducting the hearing is set forth in Sections 120.569 and 120.57(1), Florida Statutes. The hearing was held by video teleconferencing. All parties and their witnesses were located at the Jacksonville Regional Service Center, 921 North Davis Street, Jacksonville, Florida. The Administrative Law Judge was located at the Offices of the Division of Administrative Hearings, the DeSoto Building, 1230 Apalachee Parkway, Tallahassee, Florida. The hearing was conducted by Charles C. Adams, Administrative Law Judge.

APPEARANCES

For Petitioner: Laura McCarthy, Esquire

Division of Real Estate Department of Business and

Professional Regulation Suite N308

400 West Robinson Street Orlando, Florida 32801-1772

For Respondent: Vernon B. Shad, pro se

Post Office Box 9750 Jacksonville, Florida 32208

STATEMENT OF THE ISSUE

Did Respondent violate Section 475.25(1)(b), Florida Statutes, through fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme, or device, culpable negligence, or breach of trust in a business transaction?

PRELIMINARY STATEMENT

Petitioner charged Respondent in an administrative complaint, FDBPR Case No. 95-84063, with the aforementioned violation. The case had been originally referred to the Division of Administrative Hearings for conduct of a formal hearing in accordance with Section 120.57, Florida Statutes. The case was returned to the Florida Real Estate Commission to conduct an informal Section 120.57(2), Florida Statutes hearing upon the belief that Respondent did not wish to pursue a formal hearing.

By order dated November 18, 1998, in FDBPR Case No. 95-84063, Petitioner determined to resubmit the case to the Division of Administrative Hearings for consideration through a formal hearing. On December 24, 1998, the Division of Administrative Hearings received the case for a second time. The formal hearing ensued.

At hearing Petitioner presented the testimony of Audrey Bamping, James A. Yeomans, Shirley Irons, and Crawford Richardson. Petitioner's Exhibits 1-3, 8-11, and 13, were

admitted. Respondent testified in his own behalf and Respondent's Exhibit 1 was admitted into evidence.

Petitioner requested official recognition of Chapter 475, Florida Statutes, and Chapter 61J-2, Florida Administrative Code. That motion was granted.

On March 16, 1999, a hearing transcript was filed with the Division of Administrative Hearings. On March 24, 1999, Respondent submitted a letter stating his position in this case as argument. The letter submitted by Respondent has been considered in preparing the recommended order. Petitioner filed a proposed recommended order on March 29, 1999. That proposed recommended order has been considered in the preparation of the recommended order.

FINDINGS OF FACT

1. Petitioner is responsible for the licensing and regulation of persons who practice real estate in Florida. Authority for the licensure and regulation is set forth in Chapters 20, 120, 455, and 475, Florida Statutes, and associated provisions of the Florida Administrative Code.

2. Respondent has been licensed as a Florida real estate broker at all times relevant to the inquiry. Respondent holds license no. 0237202 as broker for Shad and Shad Realty, Inc., located at 9955 Lem Turner Road, Jacksonville, Florida 32208.

3. At all times relevant to this case, Respondent served as a property manager for the Veteran's Administration in relation

   to property held by that governmental body. The property management function which Respondent performed for the Veteran's Administration was as a management broker. Property at 3128 Plum Street, Jacksonville, Florida, was one of the properties managed by Respondent for the Veteran's Administration. In the interest of selling the property Respondent invoiced the Veteran's Administration and charged a management fee for his services in relation to that parcel to be paid by the Veteran's Administration. Respondent's management involved the correction of problems with the home at that address.

4. Among the fee services provided by Respondent was the arrangement to have the house treated to rid the premises of fleas, the installation of signs, installing a lock, and certain other repairs. In these circumstances, Petitioner would have other persons responsible for performing the work or would perform the work himself.

5. A related responsibility which Respondent performed for the Veteran's Administration in reference to the Plum Street property was to order a wood-destroying organism inspection to be performed by a licensed firm, J. F. Yearty and Sons, Inc., of Jacksonville, Florida, and for that firm to report the results of its findings in writing. That inspection was performed on

   June 7, 1995, and a report was prepared. The report which Respondent was provided and read, pointed out visible evidence of wood-destroying organisms observed to the extent, "old signs of

   powder post beetles scattered throughout the substructure." The report referred to live wood-destroying organisms observed as subterranean termites in the wall studs, sills, and bracing of the right side of the home. The report also stated the following:

   
   

   Water rot to the siding and trim scattered around the entire house. Heavy subterranean termites damage to the wall studs, sills, and bracing on the right side. Water stains to the kitchen and bathroom subflooring. Water stains to the flooring on the porch left front corner of the house.

6. Respondent sent the inspection report to the Veteran's Administration.

7. Realizing that the report referred to active termites, Respondent ordered termite treatment for the home. In doing so he understood that there were problems with termites in the wall studs, sills, and bracing. In his experience Respondent further understood that the extent of the damage that had been found at the home could be major. Respondent obtained a termite bond following the treatment.

8. Respondent knew that there was a contract pending for the purchase of the Plum Street property. The buyer was John Harold Bamping. Mr. Bamping was represented by Shirley Jean Irons as a real estate sales agent for Lester W. Jenkins Real Estate, Inc., Lester Jenkins Broker, whose business address is 5147 San Juan Avenue, Jacksonville, Florida 32210.

9. In preparation for the closing on the Plum Street property, Ms. Irons went to Respondent's office, who was acting as the seller's representative for the Veteran's Administration in this context. Ms. Irons obtained a property receipt, the termite bond involving the treatment of the Plum Street property and the keys to the property. The bond constituted evidence that the property had been treated for termites but did not explain the degree of the problem for which treatment was necessary. At the time these items were picked up, Ms. Irons asked Respondent's wife for the termite inspection report related to the property. The wife told Ms. Irons that reports were not given out, only bonds. Ms. Irons told the wife that Ms. Irons needed the termite inspection report. The wife summoned Respondent from another part of the Respondent's office. Respondent then told Ms. Irons that he did not furnish the termite inspection report, properly referred to as wood-destroying organism inspection report. Respondent told Ms. Irons that the bond for termite treatment would be the only item provided to Ms. Irons in relation to the upcoming real estate closing.

10. At hearing, Respondent indicated that his practice is not to provide a copy of the termite inspection report unless it is specifically asked for and then that Respondent does not always give the report to the party requesting the report "because that's VA property. That belongs to the VA." The VA refers to Veteran's Administration.

11. Ms. Irons made John Bamping and Audrey Bamping his wife aware of the fact that Respondent was not providing a copy of the wood-destroying organism inspection report for purposes of the closing. This meant that the only evidence of the circumstances associated with the termite problem remained the termite bond.

12. On July 11, 1995, the transaction closed for purchase of the Plum Street property, utilizing forms prepared by the Veteran's Administration. Ms. Irons and the Bampings attended the closing.

13. Subsequent to the closing the Bampings became aware of the wood-destroying organism damage at the Plum Street house. The problems discovered were not evident when Ms. Bamping first saw the home before it was purchased. After the Bampings

    discovered the extent of the problem, they obtained a copy of the wood-destroying inspection report from Yearty and Sons which reflected the exact nature of the problems with the dwelling.

14. Attempts were made to try and resolve the issue concerning the damage to the home. Eventually, the Bampings found it necessary to hire an attorney to assist them in addressing the damage to the home caused by the wood-destroying organisms. A suit was filed against the Veteran's Administration and damages were recovered in the amount of $2,000, and the Veteran's Administration was released in full from all claims for the wood-destroying organism damage. The Bampings also authorized their lawyer to file a complaint with Petitioner

    concerning Respondent's failure to disclose the wood-destroying organism inspection report.

    CONCLUSIONS OF LAW

    
    

15. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this case in accordance with Sections 120.569 and 120.57(1), Florida Statutes.

16. To prove the violation of Section 475.25(1)(b), Florida Statutes, in association with the allegation that Respondent failed to provide the Bampings with a copy of the wood-destroying organism report prepared June 7, 1995, on a date prior to the closing that took place on July 11, 1995, that proof must be by clear and convincing evidence in relation to the business transaction involving the sale of the Plum Street property. See Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).

17. Petitioner must prove that Respondent's conduct was intentional, Munch v. Dept. of Pro. Regulation, 592 So. 2d 1136 (Fla. 1st DCA 1992). Alternatively, Petitioner may prove a violation through the culpable negligence of Respondent in this transaction.

18. Petitioner has proven the violation by clear and convincing evidence, in that Respondent intended to withhold the information concerning the findings in the termite inspection report involved in the business transaction. In this connection, Respondent had the duty of honesty, candor, and fair dealing with

    the Bampings and Ms. Irons, in carrying out his obligation to his client, the Veteran's Administration, notwithstanding the lack of a principal-agent relationship with those persons. Ellis v.

    Flink, 301 So. 2d 493 (Fla. 2d DCA 1974). By his failure to disclose the results of the termite inspection report Respondent did not act with honesty, candor, and in the interest of fair dealing.

19. In accordance with its burden, Petitioner has shown that Respondent concealed information found in the wood- destroying organism inspection report that was pertinent to the business transaction involved with the closing on the property. Respondent also breached his trust in association with that

    
    

    business transaction. Thus, Respondent violated Section 475.25(1)(b), Florida Statutes.

20. Respondent was made aware of the contents of the wood- destroying organism inspection report. He had the duty to disclose the information to the buyer's real estate agent upon request. The failure to disclose was material in nature and actionable.

21. Respondent is subject to the discipline set forth in Section 475.25(1), Florida Statutes.

22. In assigning the appropriate penalty for Respondent's misconduct, resort is also made to Rule 61J2-24.001(1), Florida Administrative Code.

RECOMMENDATION

Upon consideration of the facts found and conclusions of law reached, it is

RECOMMENDED:

That a final order be entered finding Respondent in violation of Section 475.25(1)(b), Florida Statutes, and imposing a 30-day suspension and a fine of $1,000.

DONE AND ENTERED this 9th day of April, 1999, in Tallahassee, Leon County, Florida.

CHARLES C. ADAMS

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 9th day of April, 1999.

COPIES FURNISHED:

Laura McCarthy, Esquire Division of Real Estate Department of Business and

Professional Regulation Suite N308

400 West Robinson Street Orlando, Florida 32801-1772

Vernon B. Shad

Shad and Shad Realty, Inc. Post Office Box 9750 Jacksonville, Florida 32208

Herbert S. Fecker, Division Director Division of Real Estate

Department of Business and Professional Regulation

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

William Woodyard, General Counsel Department of Business and

Professional Regulation 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: 98-005636

Orders for Case No: 98-005636