STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA REAL ESTATE COMMISSION, ) CASIMIR SZPAK, )

)

Petitioner, )

)

vs. ) CASE NO. 76-1711

) JOAN JONES WEBB and CORONET ) REALTY CORP., )

)

Respondent. )

)

RECOMMENDED ORDER

A hearing was held in the above-captioned matter, after due notice, on November 29, 1976, at Coral Gables, Florida, before the undersigned Hearing Officer.

APPEARANCES

For Petitioner: Frederick H. Wilsen, Esquire

Staff Attorney

Florida Real Estate Commission 2699 Lee Road

Winter Park, Florida

For Respondents: H. Robert Koltnow, Esquire

3000 Biscayne Boulevard, Suite 306

Miami, Florida 33137 ISSUE PRESENTED

Whether the registrations of Respondents Joan Jones Webb and Coronet Realty Corp. should be suspended or revoked for mishandling earnest money deposits and blind advertising as more particularly stated in the Administrative Complaint filed by Petitioner on June 11, 1976.

At the hearing, counsel for Respondents renewed a Motion to Quash the Complaint which previously had been denied by the Petitioner. The Motion is denied by the Hearing Officer.

FINDINGS OF FACT

1. Respondent Joan Jones Webb is a registered real estate broker, Certificate No. 0093903, and is the active broker for

   Coronet Realty Corporation, 1300 N.W. 167th Street, Miami, Florida. Coronet Realty Corporation holds Certificate No. 0017412 as a broker corporation. Both licenses were in effect at the time of the alleged violations herein. (Petitioner's Composite Exhibits 1,2).

2. Respondents maintain a savings account, Number 3-15690, in the name of "Coronet Realty Corporation (Escrow)" with Washington Federal Savings and Loan Association of Miami Beach, Miami Beach, Florida (hereinafter Washington Federal). This interest-bearing account has been used by Respondents on relatively rare occasions as a depository for escrow deposits in real estate transactions involving personal friends of Respondent Webb or in those which required an undue length of time to close. In fact, from the time the account was opened in 1970 until the last of the transactions involved here which concluded in 1976, the account reflects only seven escrow deposits and withdrawals. At the time she opened the account, Respondent Webb was under the impression that there was no prohibition against placing real estate deposits in this type of an account and did so for the purpose of earning money for the corporation in the form of interest during the periods prior to closing a particular real estate sale. Respondents maintained another escrow account for their business in the Central Bank of North Dade, Miami, Florida, where they also had a regular business account for the firm. Most escrow deposits were placed in the escrow account of this bank. Over the years, the various deposits in the Washington Federal account earned interest amounting to $2,450.55. (Testimony of Szpak, Webb, Petitioner's Exhibit 9; Respondent's Exhibit 5).

   
   

3. The pertinent facts involved in the transactions which are the subject of the alleged violations are as follows:

   
   

   1. Respondent Webb negotiated a Contract of Sale and Purchase, dated March 11, 1975, between Maurice A. Ferre as purchaser, and Marie Gabel as seller, of real property located in Dade County, Florida for a purchase price of

      $125,000.00. Although Webb acknowledged receipt of $12,500.00 as a deposit toward the purchase price of the property from the purchaser on that date, the purchaser's check in that amount made payable to "Coronet Realty Corp. Escrow Account" was dated February 14, 1975. This amount was deposited in the Washington Federal account by a deposit slip, dated March 28, 1975, and the account passbook reflects receipt of that amount on march 31, 1975. At the time the deposit was made, Webb inquired of the attorney for the seller if it was "all right" to place the deposit in a savings account. The attorney took the matter up with the seller and she expressed no objection to this procedure nor was she interested in being paid the interest earned while the sum was in the account because Webb was a friend of hers and she had explicit faith in her integrity. The representative of the buyer, who was the same person also representing the interests of the ultimate purchaser to whom the contract was assigned, was informed by Webb after the fact that the security deposit had been placed in the Washington Federal escrow savings account. The purchasers interposed no objection to this method of handling the money. The closing of the transaction did not take place until September 24, 1975. On September 18, 1975, Webb withdrew the $12,500.00 from the Washington Federal account and issued a check in that amount to the attorneys for the purchaser. That firm, in turn, issued a check in the same amount, dated October 7, 1975, to Coronet Realty Corporation, has broker's commission in the transaction. (Testimony of Hektner, Marlin, Webb, Petitioner's Composite Exhibits 4,9; Respondent's Composite Exhibits 2,5).

      
      

   2. Respondent Webb negotiated and secured a Contract of Sale and Purchase, dated March 17, 1975, between Agri-Life Farms, Inc., as Purchaser, and

      M.S. Marlin and Ronald O. Mackendree, Administrators C.T.A. of the estate of

      G.W. Gabel, a/k/a George W. Gabel as seller, of approximately 10 acres of real property located in Dade County, Florida, at a purchase price of $4,840.00 per acre. The contract reflects that Webb, for Coronet Realty Corporation, acknowledged receipt of the sum of $4,840 as an earnest money deposit toward the

      purchase price of the property. A cashier's check in that amount, dated March 28, 1975, payable to James A. Horland was endorsed to "Coronet Realty Corporation Escrow Account" on an undisclosed date and deposited by Respondents in the Washington Federal escrow account on April 22, 1975. As in the Ferre transaction, Webb obtained the consent of the same seller to place the deposit in the Washington Federal account. The purchaser also had acquiesced to the placement of the deposit in an escrow savings account. The transaction did not close because of title problems and therefore Respondents withdrew the said amount from the Washington Federal account on October 15, 1976 and transmitted it by check of the same date to Horland, the attorney representing Agri-Life Farms, Inc. Both parties to the transaction had been aware that the money was in an interest-bearing account and neither of them desired the accrued interest. (Testimony of Marlin, Webb; Petitioner's Composite Exhibits 5,9; Respondent's Composite Exhibits 4,5,8).

      
      

   3. Respondent Webb negotiated and secured a contract of sale and purchase dated June 15, 1975, between Hugh H. Jones, Jr. as Purchaser, and Marie Gabel, as Seller, of real property located in Dade County, Florida for the price of $85,000.00. The contract reflects that the purchaser deposited the sum of $5,000.00 with Respondents as an earnest money deposit toward the purchase price of the property on the contract date. In fact, the purchaser had given Webb a blank check made payable to "Coronet Realty-Escrow" to be filled-in by Webb at an appropriate time. The check was not so completed until November 7, 1975 on which date a deposit slip was prepared in that amount. The funds were received by Washington Federal on November 10, 1975. The seller had expressly assented to the deposit of the funds in an escrow savings account and the purchaser, from prior association with Webb, was aware that she used the said account for escrow funds and had no objection to this procedure. The transaction was not closed until April 5, 1976. On April 22, 1976, Respondent issued a check to the seller's attorney in the amount of $750.00 which reflected the difference between the amount of the deposit and the amount of her commission on the sale. Neither of the parties to the transaction desired payment of any interest earned while the funds were on deposit in Washington Federal. (Testimony of Jones, Webb, Marlin, Petitioner's Composite Exhibits 6,9; Respondent's Composite Exhibits 1,3,5).

      
      

4. On February 24, 1976, Respondents placed an advertisement in the Miami News, Miami, Florida, concerning the availability of warehouse factory space at the Sunshine State Industrial Park, Miami, Florida. The advertisement reflected the words "Coronet Realty Corporation, Miss Jones 261-6501" but the term "broker" or "realtor" did not appear in said advertisement. Webb had instructed her secretary to place the ad and had provided her a brochure on the property for use in this connection which reflected the term "realtor" and the symbol of the National Association of Real Estate Boards. The secretary failed to include this pertinent information when placing the advertisement. When such omission was brought to Webb's attention by Petitioner's investigator in March, 1976, she took immediate steps to ensure that future ads contained the term "realtor" (Testimony of Szpak, Webb, Petitioner's Exhibit 3; Respondent's Exhibits 6,7).

   
   

   CONCLUSIONS OF LAW

   
   

5. Respondent is alleged to have violated Section 475.25(1)(a),(c),(d) & (i), Florida Statutes, and Rule 21V-10.10, Florida Administrative Code, which provide pertinently as follows:

   475.25 Grounds for revocation or suspension.--

   1. The registration of a registrant may be suspended for a period not exceeding 2 years, or until compliance with a lawful order imposed in the final order of suspension, or both, upon a finding of facts showing that the registrant has:

      1. Been guilty of fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing, trick, scheme or device, culpable negligence, or breach of trust in any business transaction, in this state or any other state, nation, or territory;...

   (c) Failed to account or deliver to any person, including registrants under this chapter, any personal property such as money, fund, deposit, check, draft, abstract of title, mortgage, conveyance, lease, or other document, or thing of value, including a share of a real estate commission, or any secret or illegal profit, or any divisible share or portion thereof, which has come into his hands and which is not his property, or which he is not in law or equity entitled to retain, under the circumstances, and at the time which has been agreed upon or is required by law or, in the absence of a fixed time, upon demand of the person entitled to such accounting and delivery;...

   (i) Failed, if a broker, to immediately place, upon receipt, any money, fund, deposit, check or draft, entrusted to him by any person dealing with him as a broker, in escrow with a title company or banking institution located and doing business in Florida, or, deposit said funds in a trust or escrow bank account maintained by him with some bank located and doing business in Florida, wherein said funds shall be kept until disbursement thereof is properly authorized,...

   21V-10.10 Advertising. -- A broker shall not advertise by liner advertisements or otherwise sell, buy, exchange, rent, lease or mortgage property in a manner indicating that the offer to sell, buy, exchange, rent, lease or mortgage such property is being made by a private party, not engaged in the real estate business, and no advertisement shall be inserted in any publication where only post office box number, telephone number or street address appears. Every broker shall, when advertising real estate or a business opportunity, either through liner advertisements or otherwise state in the advertisement the registered name of the broker and the term "Broker" or "Realtor" as the case may be. ...All advertising of

   property listed by a broker must be under the direct supervision and in the name of the employing broker.

   
   

6. As to Section 475.25(1)(a) and (c). - Petitioner alleges that Respondents violated these statutory subsections by failing to account and deliver to the persons entitled thereto secret and illegal profits represented by the interest earned on earnest money deposits in the three transactions under consideration. It is also alleged that by this conduct, Respondents are guilty of fraud, concealment, dishonest dealing, trick, scheme or device, culpable negligence and breach of trust in a business transaction. The evidence fails to establish violation of these statutory provisions. It was shown that all parties to all three transactions were fully aware that the earnest money deposits had been placed in a savings and loan association account and therefore it cannot be said that Respondents garnered a secret profit as a result thereof. Although it may be speculated that the various parties to the contracts could have demanded pro rata shares of the accrued interest on the security deposits, none of them did so and in each instance specifically disclaimed any desire for such interest payments. Accordingly, it is concluded that there was no fraud, dishonest dealing or the like involved herein nor was there a failure to account or deliver money as contemplaced under the statute.

   
   

7. As to Section 475.25(1)(d) Rule 21V-10.10. -- Respondent conceded at the hearing that she failed to properly supervise her employee in the placement of a real estate advertisement in the Miami News on the date in question whereby the term "broker" or "realtor" did not appear therein. The evidence is sufficient to establish a violation of the specified rule and disciplinary sanctions are thereby authorized under Section 475.25 (1)(d) as the violation of a lawful rule made or issued under the provisions of Chapter 475.

   
   

8. As to Section 475.25(1)(i) - In the three transactions under consideration, Respondent Webb failed to immediately place upon receipt deposits received by her in an appropriate trust or escrow bank account. Respondents claim that they satisfied the requirements of the statute by depositing the funds in a savings and loan association which is a "banking institution". This claim is without merit because the term "banking institution" as used in the statute, applies only in cases where the funds are placed in escrow with such an institution for it to hold in trust on behalf of the parties. Where a broker holds the funds in escrow for the parties, the statute specifically requires that it be placed in a bank account with some "bank" located and doing business in Florida. A savings and loan association is not a "bank" as contemplated under the statute. Rule 21V-14.01(c) further limits the term "trust" or "escrow" account to mean an account in a bank or trust company or title company having trust powers. A savings and loan association does not fall within that definition.

   
   

9. Respondent also seeks to avoid application of the statute by the fact that the procedures that are used in connection with security deposits were consented to by the parties to the transactions. If the parties to each transaction had agreed between themselves as to where the deposit monies would be held and the broker had merely carried out their desires, it is probable that there would have been no violation of the law. This was not the case, however. Here, the broker chose the place of deposit and sought the consent of the parties separately to her intended use of the Washington Federal interest- bearing account. It is therefore considered that Respondents violated Section 475.25(1)(i) on the three separate instances involving earnest money deposits.

10. In determining an appropriate penalty for the aforesaid violations of the law, it is appropriate to note first that Respondent Webb has been a real estate broker for a lengthy period and there is no indication that she has been disciplined on any prior occasions. It was clear from the testimony presented at the hearing that she enjoys a fine reputation with the clients involved in the instant transactions and that they reposed a considerable amount of faith and trust in her honesty and good judgment. The earnest money deposits were placed in a segregated account from all personal, firm, or operating accounts of the Respondents and none of these funds were misappropriated, dissipated or lost, nor was anyone hurt or prejudiced thereby. On the other hand, aside from being a technical violation of the law, it is clearly inappropriate and a potential source of future dispute for a broker to earn money in this manner from funds belonging to others. If Webb was not aware of the dangers of such a practice, she should have been, as an experienced realtor. Accordingly, it cannot be said that there were mere technical violations of the law. The improper advertisement, however, is of a minor technical nature and inasmuch as it reflected the name of a real estate firm in its text, it is not reasonable to assume that anyone would have been misled thereby. Respondents recognized their inadvertent error in this respect and it is not believed that this violation is of serious consequence.

    
    

11. In view of the above, and taking into consideration a determination that Respondents' derelictions did not involve fraud or dishonesty, it is not believed that license suspension is warranted. However, Respondents should receive a written reprimand to include an order to cease and desist from the prior practice involving the handling of escrow funds.

RECOMMENDATION

That Respondents Joan Jones Webb and Coronet Realty Corporation be administered a written reprimand for violations of Section 475.25(1)(d) and (i), Florida Statutes, and Rule 21V-10.10, Florida Administrative Code.

DONE and ORDERED this 21st day of December, 1976, in Tallahassee, Florida.

THOMAS C. OLDHAM

Hearing Officer

Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304

COPIES FURNISHED:

Frederick H. Wilsen, Esquire Staff Attorney

Florida Real Estate Commission 2699 Lee Road

Winter Park, Florida

H. Robert Koltnow, Esquire

3000 Biscayne Boulevard, Suite 306

Miami, Florida 33137

Docket for Case No: 76-001711

Orders for Case No: 76-001711