FLORIDA REAL ESTATE COMMISSION ) ex rel. RONALD L. MYERS, )
vs. ) CASE NO. 76-1363
Respondents. )
Progress Docket No. 2828 )
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above styled case on March 29, 1977 at Miami, Florida.
By Administrative Complaint filed May 17, 1976 FREC ex rel. Ronald L. Myers seeks to revoke, suspend or otherwise discipline the registration of Michael William Karpan as a real estate salesman, the registration of Laverne Pariso as a real estate broker, and the registration of Scorpio, Inc. as a corporate broker. As grounds therefor it is alleged that Respondents failed to maintain and keep funds in an escrow account until disbursement thereof was authorized; that Respondents converted escrow deposits to their own uses and were thereby guilty of fraud, misrepresentation, dishonest dealing and breach of trust in a business transaction; that Respondent Karpan operated as a real estate salesman without holding a valid registration; that Respondent Pariso, as Active Firm Member (APM) of Scorpio, Inc. operated as a broker and allowed Scorpio, Inc. to operate as a corporate broker without holding valid registration; and that Respondent brokers employed Respondent Karpan as a salesman when he was not the holder of a valid registration certificate. Four witnesses were called by Petitioner, three witnesses, including two Respondents were called by the Respondents and 26 exhibits were admitted into evidence.
Scorpio, Inc. was incorporated to do business in this State on September 18, 1973 and was registered as a corporate real estate broker on 4/8/74 with certificate to expire 3/31/75.
Laverne Pariso was a registered real estate broker and Active Firm Member for Scorpio, Inc. from 4/8/74 to expiration date of license 3/31/75.
Michael W. Karpan was a registered real estate salesman from 10/1/74 to 9/30/76 the expiration date of his registration and was employed by Scorpio, Inc.
About the time Scorpio, Inc. was registered as a corporate broker the real estate market was not conducive to the success of housing developments and, since the registration of Scorpio, Inc. was obtained to facilitate sale of the developed property and no development was started, Scorpio, Inc. did no business of the type for which it was registered. No listings were obtained, no sales were made, and no effort was put forth to do either. An escrow account was opened with an initial $50 deposit but during the time the registration was effective no deposits were made to, or withdrawals from, this escrow account.
Ardina E. Karpan, the mother of Michael W. Karpan, owns all of the stock of Scorpio, Inc.
Laverne Pariso, the APM, left the employ of Scorpio, Inc. in March, 1975 but did not notify the FREC or take steps to place her registration in an inactive status.
Applications were made for renewal of the broker's license of neither Pariso nor Scorpio, Inc. when due, 3/31/75.
By Corporate Resolution dated February 1, 1974 Scorpio, Inc. authorized the establishment of an escrow account at the Barnett Bank of Miami. An initial deposit of $50 was made to this account on February 6, 1974. The resolution authorizes Laverne Pariso and Michael W. Karpan or Ardina Karpan to sign checks on this account and notes that two signatures are required. The resolution further provided authorized signers "are both Laverne Pariso and Michael William Karpan, Jr., both signature are required".
Scorpio, Inc.'s primary business was the management of shareholder's investments and real estate holdings.
In May, 1975 Michael Karpan was approached by a business associate, whose daughter was a creditor of Chandelier of the Virginia Playhouse d/b/a Track and Turf Lounge, to assist in the negotiations for the sale of the business in order to pay off the creditors and salvage his daughter's loan. The purchaser was already at hand and Karpan was selected to hold funds advanced pending the closing of the deal.
After the principals had agreed on the basic price to be paid for the business an earnest money deposit of $5,000 was given by the buyer to Karpan on or about May 21, 1975 and the agreement was memorialized in a letter of May 21, 1975 from Karpan, on Scorpio, Inc. letterhead to the buyer, Walker (Exhibit 25). Nowhere on this letter is reference made to either Karpan or Scorpio, Inc. being associated with real estate sales.
The $5,000 received from Walker was deposited in Scorpio, Inc's escrow account on deposit slip dated May 21, 1975 and the bank statement (Exhibit 10) shows $5,000 deposited in this account 5/30/75.
No other agreement between the parties was reduced to writing and signed by the buyer and seller.
At no time during the negotiations did Karpan hold himself out to be a real estate salesman or broker or indicate he expected a commission for his services if the sale was consummated.
On May 29, 1975 Karpan borrowed $5,000 from the Barnett Bank and used the $5,000 in the escrow account as cash collateral for the loan. The signature of Pariso was not on any paper to authorize the withdrawal of this money from the escrow account. The loan was placed in the regular account of Scorpio, Inc. c/o Michael Karpan and one check dated 5/30/75 in the amount of $3,699 was drawn on the account payable to the Intercontinental Bank of Miami and used to make interest payment owed by the Chandelier of the Virginia Playhouse. $1,301 was delivered to the manager of Track and Turf Lounge by Karpan (Exhibit 4).
Karpan contends that the buyer, Walker, authorized him to make whatever payments were necessary out of the $5,000 deposit to insure that the liquor license would not be lost or the Track and Turf Lounge be placed out of business before the deal was consummated.
Following the delivery of the $5,000 to Karpan the buyer brought his attorney into the proceedings. The property on which the Track and Turf Lounge is located was owned by D. Mitchell Investments, Inc. The lease arrangements (or lack thereof depending on which witness is more credible) were such that the sale could not be consummated. By letter dated June 12, 1975 the buyer, through his attorney, demanded return of the $5,000 deposit given to Karpan.
No evidence was presented as to the date the $1,301 was given to Roy O'Nan, the manager at Track and Turf. The letter evidencing such payment is dated well after the transaction had fallen through and demand for return of the
$5,000 had been made.
A suit was subsequently filed by Walker and a default judgment was obtained against Scorpio, Inc. after a Motion to Strike Defendant's, Scorpio, Answer because Scorpio, Inc. was delinquent in paying the annual $5.00 filing fee required of Florida corporations, was granted.
At the time the transactions here being contested occurred the registration of Laverne Pariso and Scorpio, Inc. had expired. Since Karpan can only work under the supervision of a broker, his license too was not operative. Ms. Pariso renewed her license as a broker-salesman with another realty office in September, 1975 but no evidence was presented that Scorpio, Inc. ever applied for registration renewal. During the period between March and September, 1975 Ms. Pariso did no real estate work.
Numerous discrepancies appeared between the testimony and documents. Although the authorization for withdrawing funds from the escrow account provided that the signature of Pariso and Michael Karpan or his mother was required the bank apparently interpreted that to require any two of the signatures and then authorized one first deposit placed in the escrow account after the initial deposit to be withdrawn with only Karpan's signature.
Several witnesses alluded to Track and Turf leasing the premises which they occupied but evidence was presented that no lease payments were to be made until 1978. Certainly the inability of the "tenant" to transfer the "lease" was a major factor in the failure of the sale to transpire.
The sale here involved was the sale of a business as contrasted to the sale of real property.
CONCLUSIONS OF LAW
With respect to the charges made against Laverne Pariso the evidence was clear that she was no longer employed by Scorpio, Inc. after March, 1975, and had absolutely no information regarding the deposit made in the escrow account. The authorization which provided how checks could be written on the escrow account clearly required the signature of Ms. Pariso. Once she had the proper authorizations prepared so as to protect the integrity of the escrow account the APM broker cannot be held responsible if a third party, unbeknownst to the broker, allows disbursements to be made from the escrow account contrary to the authorization given.
While the APM has a duty to apply for renewal of the registration of the corporate broker when the corporate broker is remaining in business, the obligation of the AFM is less clear when he is told the corporate broker will no longer function and that his services as APM are no longer required.
The most serious question here involved is whether or not Michael W. Karpan was acting as a real estate broker or salesman as defined in Section
475.01 P.S. No one testified that Karpan held himself out to be a real estate salesman or a broker. The buyer understood Karpan to represent the seller, but never associated him with a real estate office. The owner of the Track and Turf was never advised Karpan expected a commission if the sale was consummated. Unless a lease of real property was involved in the sale of the business the sale would not qualify as a real estate transaction. The failure to determine a lease that could be assumed by the buyer led to the failure of the sale to be consummated. Section 475.01(2) F.S. defines in pertinent part a real estate salesman or real estate broker as:
"Every person who shall, in this state, for another and for a compensation or valuable consideration directly or indirectly paid or promised, expressly or impliedly, or with an intent to collect or receive a compensation of valuable consideration therefor, appraise, auction, sell, exchange, buy or rent, or offer, attempt or agree to appraise, auction or negotiate the sale, exchange, purchase
or rental of any real property, or any interest in or concerning the same ... or who shall advertise or hold out to the public by any oral or printed solicitation
or representation that such person is engaged in the business of appraising, auctioning, buying, selling, exchanging, leasing or renting real estate, or interest therein... and every person who shall take any part in the procuring of sellers, purchasers, lessors
or lessees of the real property, or interest therein, including mineral rights or leases, of another; or who shall direct or assist in the procuring of prospects, or the negotiation or closing of any transaction which does, or is calculated to, result in a sale exchange or leasing thereof, and who shall receive, expect or be promised any compensation or valuable consideration direct or indirectly therefor; each and every such person shall be deemed and held to be a 'real estate broker' or a 'real estate salesman', as herein classified unless (exceptions not relevant to the facts in
this case)."
By accepting from the buyer a check made payable to the escrow account Karpan brought himself under the provisions of the real estate license law when he might otherwise not have been. Once he placed this money on deposit in the escrow account it cod thereafter be withdrawn only when proper authorization to do so was given. Even if Karpan's testimony is fully credited that Walker authorized the disbursements made from his $5,000 deposit (and there is a ring of verity to this testimony) the disbursements must be made from the escrow account and the escrow account may not be used as cash collateral for a loan in the same amount to be placed in a different account and the money disbursed therefrom.
From the foregoing it is concluded that Laverene Pariso is not guilty of failure to maintain funds in an escrow account as alleged in Count One, that she is not guilty of fraud, misrepresentation, etc. in a business transaction as alleged in Count Two, that she is not guilty of operating as a real estate broker after the expiration of her license on March 31, 1975 as alleged in Count Four, and that she is not guilty of having employed Karpan as a salesman after March 31, 1975, as alleged in Count Five. It is further concluded that Scorpio, Inc. did not operate as a corporate broker subsequent to March 31, 1975 and was therefore not guilty as alleged. It is further concluded that Michael William Karpan was not operating as a real estate salesman subsequent to March 31, 1975 and while he was negotiating the sale of the Track and Turf Lounge because he was not doing this for a consideration. However when Karpan accepted the deposit made out to the escrow account and placed the money therein, he violated the provisions of Section 475.25 (1)(i) F.S. in not keeping the funds in the escrow account until disbursement therefrom was properly authorized. It is therefore,
RECOMMENDED that the charges against Laverne Pariso be dismissed. It is further,
RECOMMENDED that the registration of Scorpio, Inc. as a corporate broker be withdrawn. It is further,
RECOMMENDED that the real estate salesman's license of Michael William Karpan be suspended for a period of six (6) months.
DONE and ENTERED this 18th day of April, 1977, in Tallahassee, Florida.
K. N. AYERS Hearing Officer
Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304
Jack Toffer, Esquire 1700 N. W. 7th Street Miami, Florida
