vs. ) CASE NO. 77-422
) FIRST ALLSTATE REALTY CORPORATION, ) WILLIAM M. DORN and )
Respondents. )
A hearing was held in the above-captioned matter, after due notice, at Coral Gables, Florida, on July 19, 1977, before the undersigned Hearing Officer.
For Petitioner: Louis B. Guttmann, III, Esquire
Richard J. R. Parkinson, Esquire Florida Real Estate Commission 2699 Lee Road
For Respondent Burnett Roth, Esquire William M. Dorn: 420 Lincoln Road
Respondents' alleged violations of Sections 475.25(1)(a) and 475.25(3), Florida Statutes.
Respondent Mann appeared at the hearing without counsel. Accordingly, he was advised of his rights at the hearing, including the right to testify as a witness if he so desired.
Respondent First Allstate Realty Corporation, Miami, Florida (hereinafter First Allstate) is now and was at all times alleged in the Administrative Complaint a registered real estate broker. Respondent William M.
Dorn is now a registered real estate broker and was from September 2, 1975 to December 17, 1975 a registered real estate broker, president and active firm member of First Allstate. Respondent Lawrence Mann is now a registered real estate broker and was from December 17, 1975 until January 19, 1977 registered as the president and active firm member of First Allstate. (Petitioner's Exhibits 1-3)
First Allstate was incorporated in Florida on September 3, 1975 with Respondent Dorn as president and Bonnie Weiss as secretary. The latter individual financed the business. The firm's operation consisted of securing listings on real estate located in Florida from out-of-state owners by telephone and correspondence. Larry Grabarnick, who acted as the office manager, hired some four to eight real estate salesmen who each manned a booth in the office during the evening hours to solicit prospective listings by telephone calls. A solicitation "pitch" placed on the wall was used by the salesmen to induce the individual called to list his property with First Allstate. In the course of the telephone call, the salesmen would advise the land owner that there was a
$250.00 to $360.00 listing fee charged in advance which was fully refunded when the property was sold and that it would be deducted from the standard real estate commission on the sale. If the prospective client expressed interest in listing property with the firm, a brochure and sample listing agreement were mailed. The brochure depicted First Allstate as a large sales organization that would investigate the status of development and zoning in the area of listed property to recommend a correct selling price, advertise listings in real estate publications and national newspapers, and utilize the services of National Multiple Listing Service in Ft. Lauderdale to achieve wide exposure of the property. A "guarantee of performance" certificate signed by the president of the firm which was provided to persons listing property, promised that First Allstate would advertise the property as it deemed advisable in local newspapers or "other mediums of merit," direct a "concentrated effort to sell same and to use the advance fee to "help defray the cost of preparation for merchandising" the property for sale. Item 5 of the `guarantee" stated as follows:
"I understand that this agreement does not guarantee the sale of my property, but that it does guarantee that you will make an earnest and continued effort to sell same until this agreement is terminated."
The listing agreement provided that First Allstate would perform the services contained in the "guarantee" and that it would make an "earnest effort" to sell the property. (Testimony of Dorn, Petitioner's Exhibits 7-8 Respondent's Exhibit 1)
Although Dorn was ostensibly the supervising broker for the corporation, in fact he was virtually nothing more than a mere figurehead who had "loaned" his license to Weiss in order to establish apparent legitimacy of the business. He did not hire sales personnel, issue their instructions or supervise them. The extent of his activity was to "drop by" the office in the evenings and listen to some of the telephone conversations at random. He had nothing to do with the preparation of the sales literature or the placement of the listings with the National Multiple Listing Service. He was unaware of how the list of property owners was obtained, how the listing price of the property was determined, or what the salesmen were paid. He set no policies and issued no instructions for the operation of the business. All of the corporate records were kept by Weiss and Grabarnick and he did not have access to them. There was not, to his knowledge, any method used to attempt to sell the property other
than listing with National Multiple Listing Service, nor were any newspaper advertisements ever published by the firm. Further, he was unaware of any sales that were ever made by First Allstate during the period that he was with the company. His primary function was to sign the listing contracts as broker and the "guarantee of performance document sent to the land owners. For these services, he received between $250.00 and $350.00 a week and was paid a total of
$3,475.00 during the period of his employment with the firm. He left First Allstate in December of 1975 be cause he was informed by Weiss that she was going to sell the business because it was not making enough money. At the time he left, he secured a release document from First Allstate bearing the purported signature of the successor broker, Respondent Mann, to identify him against any claims arising from the operations of First Allstate. However, Mann denied signing the release. (Testimony of Dorn, Mann, Petitioner's Exhibit 9)
In 1975, Respondent Mann became a salesman for Property Resales Service, Inc., an advance fee firm in Miami that operated similarly to First Allstate. About mid-December, that firm was taken over by Republic National Realty, a firm that conducted similar operations, During this period, Mann made sales over the telephone. First Allstate, which had been purchased by one Joel Steiner about this time, took over Republic National Realty and needed a broker for the First Allstate operation. Accordingly, Mann was made president of First Allstate and two secretaries were listed as officers of the firm. Some fifteen or twenty salesmen who had previously been working for Property Resales Service Inc., and Republic National Realty moved to First Allstate which took over the offices of the other firm. Business was conducted in a manner similar to that in previous months, except that with the increased number of salesmen, some of them served simply as "fronters" who made the initial calls to land owners. In such cases, if the owner was interested in receiving literature, a salesman known as a "driver" made the follow-up phone calls. "Fronters" received $25.00 from the
$375.00 listing fee then charged, and a "driver" received one-third of the listing fee. The salesmen operated out of booths in the office generally for a period of four hours in the evening six days a week. The same brochure that First Allstate had used in prior operations was utilized again with a sticker showing Mann's name placed over that of the former broker.
Although Mann did not hire sales personnel or have anything to do with setting policies, he did exercise some degree of supervision over the salesmen. Like Dorn, he signed the lifting contracts and the "guarantee of performance" document. He, too, was unaware of any advertising placed by the firm other than in the National Multiple Listing Service but he knew that no sales were made by First Allstate during the time he was with the firm. He further knew that the corporation made no effort to sell thee property other than to use multiple listing. For his services, he received $100.00 a week, but also manned the telephones himself on occasion and secured listings. In such instances, he would inform prospective clients that First Allstate was a big real estate firm and that it was successful in selling property. In this regard, Mann testified at the hearing that "You know, all salesmen lie a little bit." On one occasion in April, 1976, Mann called a Massachusetts resident, informed him that he had a customer for the individual's Florida property, and that he could execute the sale in one or two weeks upon receipt of the advance listing fee. Mann further stated that the fee would be refunded if the transaction did not go through because it was a guaranteed sale. Relying on these representations, the individual sent the fee and about a month later talked to Mann again who said that the deal was being processed and would soon be closed. He heard nothing further and subsequent attempts to call Mann or the firm resulted in information that the telephones had been disconnected.
In mid-December, 1975, a salesman for First Allstate telephoned a resident in Rhode Island who owned property in Florida and informed him that he had buyers available and that he thought he could get $10,5,00.00 for a lot that the individual had purchased two years previously for $3,900.00. The salesman indicated that the company had made sales of comparable property and that his lot would be widely advertised and could be sold within a few months. He was further informed that the advance fee of $375.00 was for advertising expenses. He also stated that there were foreign buyers, including South Americans and Japanese, who were looking for property for tax write-offs and investments. After paying the advance fee of $375.00 in reliance on such promises, the owner heard nothing further from the firm. In late May, 1976, after attempting to call First Allstate, he was unable to contact them and finally wrote to the State Attorney General's Office for information. He has beard nothing with respect to the matter since that time from the firm.
Another employee of the firm, a "fronter," recalled a salesman telling a prospect that he had a group ready to buy their property and heard other salesmen imply to prospects that the advance fee would be returned if no sale was made of the property.
The representations made in the literature of Property Resales, Inc. were used almost yerbatim in the brochures of First Allstate and when the former firm went defunct, their listings were transferred to First Allstate. (Testimony of Mann, Sherman, Reed, Glover, Petitioner's Exhibits 4-6 (Depositions of Kershaw, Andrews, Coppeta) ,Petitioner's Exhibits 10-12, supplemented by Petitioner's Exhibits 13-14)
CONCLUSIONS OF LAW
As to Count I. This count charges that Respondents violated subsection 475.25(1)(a), Florida Statutes, by securing advance fees from property owners who relied upon false representations that a bonafide effort would be made to sell the property, and that such solicitation of property owners thereby was a fraudulent scheme to secure money from the public. The statutory provision authorizes Petitioner to suspend real estate licenses if a registrant has "been guilty of fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing, trick, scheme or device, culpable negligence, or breach of trust in a business transaction in this state".
The evidence clearly establishes that the corporation and its brokers violated the statute in the manner alleged. Although promising to make an "earnest and' continued effort" to sell the listed property, the Respondent brokers both testified that they were unaware of any sales effort other than a pro-forma listing of the property with a multiple listing service. Further, neither was aware of any sales that were made during the course of their employment by First Allstate. Both attempted to disclaim responsibility for the exaggerated promises set forth in sales literature and salesmen's conversations, but the fact remains that they are responsible for the activities of the corporation and cannot escape such responsibility by disassociating themselves from the actualities of the situation. Clear and convincing evidence was presented to show that absentee land owners were duped into paying a substantial fee based upon false promises made by First Allstate's personnel, including Respondent Mann. The fact that no property sales were actually made bolsters Petitioner's contention that there was no bona fide effort made to sell the property. The facts show a scheme designed to extract lucrative advance fees from gullible individuals and then to promptly forget about their interests.
Under the circumstances, it is concluded that Respondents violated subsection 475.25(1)(a) in the manner alleged.
Respondent Dorn objected to the introduction of Petitioner's Exhibits 4-6 (depositions) on the grounds that there was an insufficient showing that the deponents were out of the state at the time of the hearing and that the testimony therein related to matters subsequent to Dorn's period of employment with First Allstate. Petitioner adequately established the basis for admission of the depositions under Fla. R. Civ. P. 1.330(a)(3) by testimony of the deponents that they would not be in the State of Florida at the time of hearing and by Petitioner's counsel's telephonic communications to establish that fact on the date of hearing. However, the testimony in the depositions has been considered only in respect to First Allstate and Respondent Mann except for testimony in Petitioner's Exhibit 6, which relates to the fact that First Allstate took over the listings of Property Resales Service, Inc.
As to Count II. Petitioner seeks to revoke the Respondents' licenses under the authority of subsection 475.25(3) which provides for same if a registrant is found guilty of "a course of conduct or practices which show that he is so . . . dishonest or untruthful that the money, property, transactions and rights of Investors or those with whom he may sustain a confidential relation, may not safely be entrusted to him." Although owners listing property with Respondents cannot be termed "investors," they do fall within the category of those with whom Respondents "sustain" a confidential relationship. Their position in this connection is no different from that of any other real estate broker and his client, and it is clear that they occupied a fiduciary relationship to the individuals solicited for advance fees. The evidence shows that Dorn's association with First Allstate continued over a period of some three months and Mann was with the firm about six months. During these periods, by their own admissions, there were no serious or bona fide efforts made to sell the listed property. In view thereof, it is concluded that clients cannot safely entrust their transactions and rights to the Respondents and that, therefore, they are subject to disciplinary action under the statute.
Although the revocation authority contained in subsection 475.25(3) is discretionary, there are no mitigating circumstances present in this case as to any of the Respondents. Their actions were reprehensible and clearly warrant revocation of their certificates of registration.
That the certificates of registration of First Allstate Realty Corporation, William M. Dorn, and Lawrence Mann be revoked pursuant to subsection 475.25(3), Florida Statutes.
Done and Entered this 24th day of August, 1977, in Tallahassee, Florida.
THOMAS C. OLDHAM
Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304
Richard J. R. Parkinson, Esquire Louis B. Guttmann, III, Esquire Florida Real Estate Commission 2699 Lee Road
