STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA REAL ESTATE COMMISSION, ) STATE OF FLORIDA, )

)

Petitioner, )

)

vs. ) CASE NO. 78-1475

) PD NO. 3246 INTERNATIONAL LAND AND INVESTMENT )

CORPORATION, WALTER L.MEDLIN, ) DONNA L. ALLEN, AND THOMAS F. WELLS, )

)

Respondent. )

)

RECOMMENDED ORDER

A hearing was held in the above captioned matter, after due notice, at Orlando, Florida, on October 31, 1978, before the undersigned Hearing Officer.

APPEARANCES

For Petitioner: S. Ralph Fetner, Jr., Staff Attorney

Florida Real Estate Commission Post Office Box 1900

Orlando, Florida 32802

For Respondent: International Land and

Investment Corporation Walter L. Medlin

Post Office Box 2252 Orlando, Florida 32802

For Respondent: Donna L. Allen, Self For Respondent: Thomas F. Wells

Frank G. Finkbeiner, Esquire

341 North Magnolia Avenue Orlando, Florida 32801

ISSUE PRESENTED

Whether disciplinary action should be taken against Respondents for alleged violation of Subsections 475.25(1)(a), (c), (d), and (i), F.S., Section 475.25(3), F.S., and Rules 21V-10.07 and 21V-12.06, F.A.C., as set forth in the Administrative Complaint, dated September 29, 1977.

At the commencement of the hearing, counsel for the Petitioner announced that Respondent Walter L. Medlin is no longer registered with the Real Estate Commission, and that therefore he should be dismissed as a party Respondent. The request was granted by the Hearing Officer.

Walter L. Medlin, as authorized representative of International Land and Investment Corporation, and Donna L. Allen, were advised of their rights in an administrative proceeding and they acknowledged that they understood the same.

FINDINGS OF FACT

1. Respondent International Land and Investment Corporation, Kissimmee, Florida, is registered with Petitioner as a corporate real estate broker and was so registered during the year 1975. At that time, Walter L. Medlin was registered with Petitioner as a real estate broker and also as president and active firm member of International Land and Investment Corporation. Respondent Thomas F. Wells, Kissimmee, Florida, is registered with Petitioner as a real estate broker and was so registered in 1975. Respondent Donna L. Allen, is registered with Petitioner as a real estate salesman and was so registered in 1975 with the firm of International Land and Investment Corporation. (Petitioner's Exhibits 2-4)

   
   

2. During the month of August, 1975, Mrs. Mildred E. Bartlett, then residing in Hialeah, Florida, and her son, John B. Pate, visited Kissimmee, Florida, to make inquiries concerning the purchase of residential property in the area. At the time, Mrs. Bartlett was attempting to sell her residence in South Florida and was financially unable to purchase another residence until a sale had been effected. (Testimony of Bartlett, Pate)

   
   

3. Respondent Wells showed Mrs. Bartlett and her son Lots 10 and 12 of a platted subdivision in Osceola County known as Neptune Shores. The two lots had homes constructed thereon which were approximately 75 percent completed. Prior to 1973, Wells and Medlin had purchased the property comprising the Neptune Shores Subdivision, and Wells had dedicated the plat of same on May 15, 1973, as the owner thereof. Lots 10 and 12 were thereafter sold to one Art Raska, who constructed the unfinished homes thereon, but thereafter defaulted on a mortgage on the property. The mortgage was foreclosed by the First Merritt Mortgage Corporation, Merritt Island, Florida, who thereby became the owner of a portion of the subdivision, including Lots 7, 10, and 12. International Land and Investment Corporation purchased a number of the lots at that time. At no time during Mrs. Bartlett's discussions with Wells and Medlin did they reveal their past and present interests in the Neptune Shores Subdivision, although she was furnished a copy of the plat. (Testimony of Bartlett, Pate, Raines, Medlin, Petitioner's Exhibit 5)

   
   

4. Mrs. Bartlett expressed interest to Wells in purchasing Lots 10 and 12 as homes for herself and son, but told him that she would have no money to purchase the property until she sold her present house, and that therefore any purchase agreement would have to be contingent upon such a sale. Wells told her that he would check into the matter and ascertain the selling price. After returning home, Mrs. Bartlett received a telephone call from Wells during which he informed her that he would need $1,500.00 as earnest money in order that he could tell the mortgage company that he had an interested party and was holding money in his escrow account. On or about September 9, Wells wrote to her and enclosed an unsigned option contract between First Merritt Mortgage Corporation and herself which recited that for a consideration of $2,000.00 the purchaser could purchase Lots 10 and 12 for an additional sum of $44,000.00 on or before January 15, 1976. It further provided as follows:

   
   

   Seller will agree to cooperate with purchasers efforts to complete construction. This contract will be null and void and deposit returned if

   purchaser is unable to obtain the necessary permits by October 10, 1975. Evidence of a Certificate of Occupancy granted by Osceola County on either Lot 10 or Lot 12 shall extend the option period until March 1, 1976.

   
   

   The letter accompanying the proposed option agreement stated: "Please sign these if everything is in order and make the checks out to Thomas F. Wells, Broker, so I can deposit to an escrow account rather than have the mortgage company hold your money." The letter further stated that a "Judge owned Lots 14 and 15 for which he had paid $9,600.00 each, and that the price of Lot 11 would be $8,000.00. Although Mrs. Bartlett and her son contemplated completion of construction on the two houses which they intended to use for future residences, they had no intention of performing such work until they had purchased the property. After receipt of the option agreement, Mrs. Bartlett informed Wells that she did not want an option contract whereby she could lose her deposit if she were unable to purchase the property, but wished to have a contract of purchase and sale contingent upon the sale of her present residence. Wells told her that he would send her another contract with different wording, but did not do so. (Testimony of Bartlett, Pate, Petitioner's Exhibit 6, Respondent's Exhibit 1)

   
   

5. During succeeding weeks, Wells urged Mrs. Bartlett to have the unfinished homes completed in order that she could qualify for a mortgage loan on Lost 10 and 12. Although she discussed this possibility with Wells, she ascertained through discussions with local financial consultants that this would be impossible due to her financial situation and that of her son. On September 21, 19975, Mrs. Bartlett and her son met with Wells and Medlin in Kissimmee. At the meeting, Mrs. Bartlett gave Medlin $200.00 for an option to purchase Lots 8, 9, and 11 in the Neptune Shores Subdivision for $6,600.00, $7,400.00 and

   $7,700.00, respectively, from International Land Investment Corporation by various dates in 1976. The option agreement, which was dated September 21, 1975, reflected a typewritten signature for Mrs. Bartlett, but she did not sign the same after being informed by Medlin that it was unnecessary for her to sign it. He scratched out her name on the contract and signed it himself as president of the corporation. The document was witnessed by Wells and Pate.

   Mrs. Bartlett was told by Medlin that he would hold the three lots in reserve for her in the event she wished to purchase them at a later date. Mrs. Bartlett had brought with her the proposed option contract previously sent to her by Wells, which provided for a $2,000.00 payment for the option to purchase Lots 10 and 12. She did not sign the contract, but gave him a check for $1,500.00 which Wells put in his escrow account on September 22. Mrs. Bartlett believed that this money was protected since it was to be placed in escrow; however, she acknowledged the fact that the $200.00 which she had given as an option on the other lots was an acceptable risk and that she did not mind losing that amount if the larger purchase of Lots 10 and 12 was not successful. Wells and Medlin both testified that Mrs. Bartlett was well aware that she was also risking the

   $1,500.00 and that she was concerned only about her ability to protect herself from being compelled to purchase the property in the event her present home did not sell or if she was unable to obtain mortgage financing on the new purchase. It is found from the evidence that their testimony is not credible in this respect. (Testimony of Bartlett, Pate, Medlin, Wells, Respondent's Exhibit 2)

   
   

6. Medlin had previously contacted an official of the First Merritt Mortgage Corporation, but learned that it was not interested in taking Lots 10 and 12 off the market for an option agreement. He then negotiated a contract of sale and purchase of Lots 7, 10, and 12 from First Merritt Mortgage Corporation

   for a total price of $46,000.00 with an earnest money deposit of $4,000.00. It provided for closing on or before January 15, 1976. The contract was dated September 19, 195 and executed on that date by D. L. Allen on behalf of International Land and Investment Corporation. It was witnessed by Wells and Medlin. On September 23, 1975, it was executed by First Merritt Mortgage Corporation. The corporation also required that Medlin agree to guarantee performance by the buyer and he therefore signed the agreement in an individual capacity. The contract provided that no real estate commission would be paid on the transaction. Mrs. Bartlett was not informed at the September 21st meeting that these contract negotiations were pending. In late September, Wells told Mrs. Bartlett that the mortgage company wanted more earnest money and that an additional $2,500.00 would be necessary for this purpose. Mrs. Bartlett gave him a check for that amount, but later depleted her account before it cleared the bank because Wells had not provided her with a purchase contract. Wells showed Mrs. Bartlett a proposed option agreement D. L. Allen and herself which provided for a payment of $4,000.00 for the right to purchase Lots 10 and 12 on or before January 15, 1976, for the total sum of $46,000.00. It further provided as follows:

   
   

   "As a part of the consideration for the Seller having executed this Option: the Buyer agrees to diligently pursue the completion of the houses located on said property. All repairs or improvements will be made at no cost to the Seller and will provide the Seller with Lien Waiver at the completion of each improvement. All repairs or improvements will

   become the property of the Seller in the event this transaction is not completed."

   
   

   There was no signature block on the agreement for the purported purchaser of the option. Mrs. Bartlett had been told by Wells and Medlin at the September 21st meeting that "Mr." Allen was a "big investor" who would guarantee her commitments. In fact, Allen was Respondent Donna L. Allen who was then employed by International Land and Investment Corporation. On September 30, Wells wrote a check in the amount of $4,000.00 to Walter F. Medlin, Trustee, and on the same date Medlin wrote a check to First Merritt Mortgage Company in a like amount.

   Medlin's check was erroneously dated October 30, 1975. On October 3rd, the option contract was signed by D. C. Allen, and mailed to Mrs. Bartlett by Wells. On October 6, Wells' bank notified him that Mrs. Bartlett's check for $2,500.00 had been returned for insufficient funds. After various telephone conversations and a visit by Wells to Mrs. Bartlett's home, another check for $2,500.00 was sent to Wells on October 21, which he had converted to a cashier's check on October 24. The $2,500.00 represented funds that had been borrowed by Pate and given to his mother to transmit to Wells. Both Bartlett and Pate were under the impression that the additional payment would be placed in Wells' escrow account and retained until a sales contract was executed. (Testimony of Bartlett, Pate, wells, Medlin, Petitioner's Exhibit 1)

   
   

7. In November, 1975, Mrs. Bartlett telephoned Wells and told him that she wanted a return of her money. Wells told her that he would have to consult with

   D. L. Allen because he had turned the money over to that individual in payment of the option that had been taken on the property. Thereafter, Allen executed an "amendment" to the agreement which was prepared by Medlin and witnessed by Medlin and Wells. The document stated in part that if the "buyer," on or before November 25, 1975, could not provide sufficient evidence as to the availability of funds to close the transaction on or before January 15, 1976, the option would terminate and funds paid by the buyer to Allen would be refunded out of

   proceeds of closing upon the sale of the property by Allen to a third party. By letter of November 21, 1975, Allen wrote to Bartlett referring to the option amendment and stating in part:

   
   

   "In view of your recent conversation with Mr. Tom Wells in which you indicated that you had no intention of accepting that Ammendment [sic] and considering that I have not received a copy of the Ammendment [sic] signed by you indicating your acceptance, I am hereby cancelling my offer to ammend [sic] the original Option. I also

   wish to remind you that in the event that you do not exercise that Option and comply with

   each and every part of that agreement there will be 'no liability to refund the money paid therefor.'"

   
   

8. By a mailgram sent on November 24, 1975, Bartlett advised Wells that he had until November 28 to return the $4,000.00 being held in escrow which she had requested in a November 20 telephone conversation, or she would report the matter to the district attorney's office and the Real Estate Commission. Wells responded with a letter which stated that her deposit on the option contract was given to the seller as consideration for executing the option, and that he was willing to "make every effort I can to negociate [sic] the matter with Allen. Negociations [sic] seemed to be the only possible course of action for recovery of your money."

   
   

9. On November 26, 1975, Allen wrote to Bartlett wherein she stated that since Bartlett had executed the option agreement whereby she had agreed to "deligently [sic] pursue" the completion of the houses located on the property, she had breached the terms of the option contract. It further stated that since she had made demands for reimbursement of the $4,000.00 payment, that such action could only be interpreted as abandonment of the agreement, and that she (Allen) therefore declared the option contract null and void and was retaining the $4,000.00 as partial consideration for having executed the agreement. This letter was also prepared by Medlin for Allen's signature. (Testimony of Bartlett, Wells, Medlin, Kimmig, Petitioner's Exhibit 1)

   
   

10. Wells and Medlin had previously agreed that they would split a 10 percent commission on any sale of Lots 10 and 12. After executing the purchase agreement on the property with First Merritt Mortgage Corporation, it was agreed between Wells and Medlin that Wells would receive $1,000.00 as a real estate commission. Allen had originally funded the $4,000.00 deposit to be made on the property by Medlin. Medlin had told her that she would receive Lot 7 if the deal was completed; however, he intended to give her only an "interest" in the lot. She received her original $4,000.00 back in October, 1975, when she signed the option agreement. The reasonable market value of Lot 7 was $6,000.00 to

    $8,000.00. The purported purchase of the property by International Land and Investment Corporation was not consummated on or before January 15, 1976, and the $4,000.00 was forfeited. Mrs. Bartlett never received return of the

    $4,000.00 which she had transmitted to Wells. (Testimony of Bartlett, Wells, Medlin, Raines, Kimmig)

    
    

    CONCLUSIONS OF LAW

    
    

11. Petitioner's administrative complaint alleges that Respondents International Land and Investment Corporation, Thomas F. Wells, and Donna L.

    Allen, violated subsections 475.25(1)(a) and (1)(c), Florida Statutes, and subsection 475.25(3), Florida Statutes. Additionally, Wells is charged with having failed to keep an earnest money deposit in escrow until disbursement was authorized, in violation of subsection 475.25(1)(i), Florida Statutes. He also is charged with violation of Petitioner's Rules 21V-10.07 and 12.06, Florida Administrative Code, and subsection 475.25(1)(d), Florida Statutes, for improper location and arrangement of his real estate office, but insufficient evidence was presented by Petitioner to establish any such violations.

    
    

12. The allegation of misconduct under subsection 475.25(1)(a) is couched in broad language to the effect that by reason of the actions taken by the Respondents with respect to the transaction with Mrs. Bartlett, they committed fraudulent or dishonest acts, violated duties imposed by law or by contract in a real estate transaction, and conspired to engage in misconduct. The allegation as to a violation of subsection 475.25(1)(c) is based on a failure to account or deliver to Mrs. Bartlett the money that she had entrusted to Wells pursuant to her proposed purchase or real estate.

    
    

13. Alleged violation of subsection 475.25(1)(a), Florida Statutes. The evidence clearly establishes that the Respondents, together with Walter L. Medlin, engaged in a scheme designed to produce financial gain for themselves at the expense of a prospective purchaser of real estate. From the outset, Mrs. Bartlett made it clear to Wells that she was not in a position to purchase Lots

    10 and 12 until she had sold her house and that any agreement to purchase the property must be contingent upon such a sale. Although, as the events transpired, it is true that she turned over successive sums of $1,500.00 and

    $2,500.00 to him without a deposit receipt contract, the evidence reflects that she was inexperienced in such matters and placed trust and reliance in the broker to keep that money in escrow until such time as a regular sale and purchase agreement was executed. It is obvious that the Respondents and Medlin soon determined that a contract based upon such a contingency would not be acceptable to First Merritt Mortgage Corporation and that the only hope of keeping the matter alive was to enter into an independent sales contract with the corporate owner of the property, using Mrs. Bartlett's $4,000.00 as a deposit. In this manner, they had nothing to lose if the transaction was not eventually concluded. Undoubtedly, the reason for waiving a real estate commission in the matter was to maintain the purchase price of the lots at

    $46,000.00 as had been told to Mrs. Bartlett. They ensured the possibility of a sizable gain however by the fact that the additional Lot 7, which was valued at considerably more than the amount of a real estate commission, was included as part of their proposed purchase. This factor was not revealed by any of the parties to Mrs. Bartlett at any time during the course of negotiations. Such a secret undertaking in itself constituted a breach of trust by the broker and was of such a nature as to warrant rescission of the purported option agreement between Bartlett and Allen. It was never disclosed to Bartlett that Allen was a registrant with the Real Estate Commission employed by International Land and Investment Corporation. At no time did Bartlett indicate in any manner to Respondents that she was willing to risk $4,000.00 on the mere possibility that she might be able to consummate a purchase prior to January 15, 1976. On the contrary, she insisted many times to them that she had no intentions of entering into an option agreement whereby she might lose her money, Respondents' claims to the contrary. It is inconceivable that a woman of limited financial resources would be willing to take such a gamble on the chance that her home might sell within that period or that she could otherwise arrange financing for the purchase. Non-disclosure by Wells of the above-mentioned facts constitute fraud and concealment because a person acting in a fiduciary capacity, as here, has a duty to make a full and fair disclosure of all material facts to the

    person reposing confidence in him. Such a relationship demands the utmost good faith of the broker which was sorely lacking in the instant transaction. It is thus concluded that Respondents Wells, and Allen and International Land and Investment Corporation through its president, Medlin, who also participated in formulating and carrying out the plan, violated subsection 475.25(1)(a), Florida Statutes.

    
    

14. Alleged violation of subsection 475.25(1)(c), Florida Statutes. In view of the fact that Respondent Wells failed to negotiate a sales contract on the property in question, as demanded by the prospective purchaser Bartlett, he was required upon her demand to deliver to her the deposit of $4,000.00 that she had entrusted to him. His failure to do so constituted a violation of subsection 475.25(1)(c), Florida Statutes.

    
    

15. Alleged violation of subsection 474.25(1)(i), Florida Statutes. This charge against Wells is predicated upon his failure to maintain the $4,000.00 deposit in his escrow bank account until disbursement was properly authorized. The evidence establishes that Mrs. Bartlett never authorized disbursement of these funds, but that Respondent Wells released them to Medlin in purported payment of the option to purchase the property in question. Such an unauthorized action on the part of Wells is a violation of the statutory provision.

    
    

16. Alleged violation of subsection 474.25(3), Florida Statutes. This allegation is based upon Petitioner's assertion that the Respondents' action constituted a "course of conduct or practices which show that he is so incompetent, negligent, dishonest or untruthful that the money, property, transactions and rights of investors or those with whom he may sustain a confidential relationship, may not safely be entrusted to him." It is considered that proof of fraud or misconduct in one transaction is insufficient to establish the "course of conduct or practice" contemplated under the statute. Accordingly, it is determined that no violation of the cited ground for disciplinary action has been shown against the Respondents.

    
    

17. The above conclusions support the imposition of a substantial penalty on Respondent Wells and the broker corporation International Land and Investment Corporation. The culpability of the corporation is derived from the derelictions attributable to its former broker and active firm member, Walter L. Medlin. It is considered that the misconduct of these two Respondents justifies a suspension of their registration for a period of two years. Respondent Allen's participation in the fraudulent conduct was dictated by her employer Medlin to a large extent and, accordingly, it is considered that a suspension of her registration for a period of six months is a sufficient penalty under the circumstances.

RECOMMENDATION

1. That the registration of International Land and Investment Corporation as a corporate real estate broker be suspended for a period of two years, pursuant to Section 475.25(1)(a), Florida Statutes.

   
   

2. That the registration of Thomas F. Wells as a real estate broker be suspended for a period of two years pursuant to subsections 475.25(1)(a), (c) and (i), Florida Statutes.

3. That the registration of Donna L. Allen as a real estate salesman be suspended for a period of six months, pursuant to Section 475.25(1)(a), Florida Statutes.

DONE AND ORDERED this 20th day of December, 1978, in Tallahassee, Florida.

Thomas C. Oldham Hearing Officer

Division of Administrative Hearings

530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675

COPIES FURNISHED:

S. Ralph Fetner, Jr. Esquire Staff Attorney

Florida Real Estate Commission Post Office Box 1900

Orlando, Florida 32802

International Land and Investment Corporation

Walter L. Medlin Post Office Box 2252

Orlando, Florida 32802

Frank G. Finkbeiner, Esquire

341 N. Magnolia Avenue Orlando, Florida 32801

Donna L. Allen

c/o Monarch Realty of Osceola Inc.

521 Vince Street Kissimmee, Florida 32741

Docket for Case No: 78-001475

Orders for Case No: 78-001475