Dean, assigned Hearing Officer of the Division of Administrative Hearings.
For Petitioner: Bruce I. Kamelhair, Esquire
For Respondents: Joseph A. Scarlett, Esquire
The issue presented is whether a broker and active firm member for a corporate real estate broker can be held accountable for the wrongful handling of escrow funds by non-registered persons after the broker has resigned his employment and notified the Florida Real Estate Commission (FREC) of his resignation when another active firm member is not qualified by the corporation prior to the effective date of the broker's resignation.
This case was presented on the Administrative Complaint filed by the FREC against Robert M. Telfair (Telfair). The Administrative Complaint contains 10 counts, of which Counts 8 and 9 were applicable to another respondent and had previously been disposed of. Counts 1, 2, 3, 4, 5, 6, 7 and 10 alleged that Telfair accepted funds as a real estate broker and active firm member for LTP Realty Company, a corporate broker (LTP), and failed to deposit said funds into the escrow account of LTP, failed to properly maintain funds in the escrow account, and failed to properly deliver funds on demand from the escrow account, contrary to Section 475.25(1)(a), (c) and (i), Florida Statutes.
The parties stipulated that Telfair was a real estate broker and the sole active firm member of LTP. The parties further stipulated that the monies referred to in the complaint were, in fact, deposited to the LTP escrow account, pursuant to pending real estate contracts for the purchase and sale of real property, that demand was made for these funds to LTP and that these funds were not available for payment. Telfair testified that he had resigned as broker and active firm member of LTP that he had notified the FREC of his resignation in writing, and subsequently notified the FREC of what he felt was a wrongful act by LTP in transferring funds from the escrow account. The parties also stipulated that sufficient funds were on deposit in the LTP escrow account to meet all obligations on that account on the date when Telfair resigned.
Telfair is a registered real estate broker holding registration 0087817 issued by the FREC.
Telfair was employed by LTP as the firm's sole broker and active firm member. LTP was a registered corporate broker. Telfair was not a corporate officer of LTP.
The monies at issue in this case were deposited to the escrow account of LTP, pursuant to pending real estate contracts. These monies were maintained properly in the escrow account at all times during the period that Telfair was an active firm member. On February 14, 1975, Telfair gave notice to Frank Carcaise, President of LTP, that he was going to resign effective March 1, 1975. A copy of Telfair's letter of resignation to Carcaise as an active firm member and broker for LTP was forwarded to the FREC. On March 1, 1975, Telfair did resign, severed his relationship with LTP, removed himself from the business premises, together with his property. Prior to that date, he had advised Carcaise of the necessity to obtain a broker to serve as an active firm member for LTP, but Telfair was never replaced by Carcaise.
As of the date of Telfair's resignation, there were sufficient funds on deposit in the LTP escrow account to meet all obligations against the account. On June 4, 1975, Carcaise directed the corporate bookkeeper, in writing, to issue a check transferring the escrow funds to Gateway Consultants. The bookkeeper, who had refused to issue any checks without written direction, called Telfair and asked him what she should do. Telfair suggested that she report this matter to the FREC, and Telfair volunteered to accompany her to Orlando to the FREC offices. On June 5, 1975, the bookkeeper, and Telfair met with Mr. Jones of the FREC legal staff and advised him of the removal of the escrow funds and showed him the corporate books which the bookkeeper had brought with her. Jones advised them that there was nothing which could be done because no demand had been made for the funds, and there had been no failure to deliver the funds by LTP.
The funds were transferred, demand was subsequently made for the escrow funds by LTP's client, and they were not paid. Subsequently, the FREC brought the instant complaint against Telfair.
CONCLUSIONS OF LAW
Section 475.25(1)(c), Florida Statutes, provides that a registrant may be disciplined by the FREC for failure to deliver or account for funds on demand delivered to him which he is not entitled to retain. Section 475.25(1)(i),
Florida Statutes, provides that a broker may be disciplined for failure to deposit any monies received by him in an escrow account.
The facts show that the monies involved were received and duly deposited to the LTP escrow account. These funds were properly maintained in this account until June 4, 1975, nearly three months after Telfair's resignation as broker and active firm member with LTP. Telfair did not remove the funds and had no relationship with LTP on the date when the funds were removed. The funds were removed pursuant to the direction of Carcaise, President of LTP, who was not the registrant.
The Petitioner asserts that Telfair remained responsible for the escrow funds until they were properly disbursed or transferred to another broker for proper disbursement. The Petitioner argues in support of its assertion that the broker's responsibility is a personal one and that he cannot resign from the obligation.
The broker's obligation is a personal one and the corporate broker is able to function only through its active firm member or members. A resignation as an active firm member would not relieve a broker from responsibility for any of his actions while he was an active firm member. However, a broker can terminate his relationship with a real estate brokerage corporation and thereby limit the period for which he is responsible. The record here is clear that the escrow funds were not removed until three months after Telfair resigned and put the FREC on notice. The escrow account was a corporate account; and subsequent to his resignation, Telfair had no legal authority to control it. The replacement of the corporate broker was a corporation matter which Telfair could not control. The argument advanced by the FREC in support of the position would bind a broker to a corporation without relief because the broker could not resign until a successor broker was named by the corporation, and the broker has no way of causing the corporation to appoint the successor.
The statutes clearly present the scheme of action which is applicable in the instant case. When Telfair resigned, the corporate broker could no longer function as a real estate broker. Only an active broker could remove funds from escrow, and this would have required the appointment of a successor broker. The registration of LTP as a corporate broker was suspended by operation of law, pursuant to Section 474.15, Florida Statutes, upon Telfair's resignation. The acts of depositing funds to and transferring funds from an escrow account are solely within the power of a real estate broker to direct. See Sections 475.421(1)(d), 475.25(1)(c), 475.25(1)(i), Florida Statutes, and Rule 21V.1401, Florida Administrative Code, et seq. The funds in the LTP escrow account were technically frozen until a successor broker assumed responsibility for them. Telfair met his professional obligations and responsibilities by notifying the FREC of his resignation. Telfair went beyond his professional obligation when he assisted the bookkeeper in reporting the transfer of funds to the FREC.
Although Carcaise may not have been in violation of 475.25(1)(c), Florida Statutes, as a non-broker, Carcaise, was in violation of 475.42(1)(a), Florida Statutes, in directing the transfer of funds from the LTP escrow account. Carcaise was a non-registrant, and LTP's corporate registration was suspended. Therefore, transfer of funds after Telfair left could have been enjoined by the FREC, pursuant to its authority under Section 475.39 Florida Statutes.
Telfair cannot be responsible for the acts of Carcaise after Telfair has severed his relationship with LTP and given the FREC notice of the fact that he was no longer associated with LTP. At the point the FREC received Telfair's letter, it was incumbent upon the FREC to ensure that LTP ceased doing business, as provided by 475.15, Florida Statutes. Had LTP ceased to function, the funds could not have been transferred and the interest of LTP's clients would have been protected.
Having determined that Telfair has not violated Section 475.25(1)(c) or (i), Florida Statutes, it is clear that none of his actions constituted fraud or dishonest dealing, contrary to Section 475.25(1)(a), Florida Statutes.
