The Counsel for the Respondents admitted the factual allegations contained in Paragraph 8 of the Administrative Complaint as amended by the addition of a period after the word "property" in line 4, and the deletion of the remainder of the paragraph. The Counsel for the Respondents admitted Paragraph 11 as amended by the addition of the words "directly by the Respondents" between the word "informed" and "that" in the fifth line of the paragraph. Counsel for the
Respondents admitted the factual allegations contained in Count 2, Paragraphs 1, 2, 3, 4 and 5. Counsel for the Respondents denied the other allegations of the Administrative Complaint. The parties also stipulated to the admission of all exhibits attached to the Administrative Complaint and the Answer filed by the Respondents. The parties also stipulated that if called to testify the affiants would testify no differently in this proceeding from the statements contained in their affidavits filed in support of the Motion to Quash, and the Answer, and that these affidavits be made a part of the record for consideration by the Hearing Officer.
Talbott and Drake, Inc. is and was at all times alleged herein a registered real estate broker corporation.
William F. Talbott is now and was at all times alleged herein a registered real estate broker and active firm member of Talbott and Drake, Inc.
Paul P. Drake is now and was at all times alleged herein a registered real estate broker and active firm member of Talbott and Drake, Inc.
Helen C. Drake is now and was at all times alleged herein a registered real estate broker and active firm member of Talbott and Drake, Inc.
On or about January 18, 1977, William F. Talbott, on behalf of Talbott and Drake, Inc., negotiated a contract for sale and purchase between the High Ridge Water Company -- John H. McGeary, Jr., sellers, and William Montaltos and Genevieve L. Montaltos, his wife, buyers, for the purchase of lot in a new housing area known as River Forest in the Boca Raton area, Palm Beach County. A copy of said contract, Petitioner's Exhibit 1, is received into the record pursuant to the Stipulation of the parties.
Said contract, Petitioner's Exhibit 1, was subject to the declarations of restrictions filed by High Ridge Water Company as seller on June 28, 1976, wherein, in Paragraph 7, the developer retained the right to approve or disapprove the plans and specifications for the construction of any structure, building, fence, wall or sign in the River Forest area. A copy of said declarations of restrictions is received into the record as Petitioner's Exhibit 2, pursuant to the Stipulation of the parties.
As a part of the restrictions and provisions of the contract, the purchasers, Mr. and Mrs. Montaltos, were required to use a builder selected from a list of designated builders, approved and designated by Talbott and Drake, Inc. and the High Ridge Water Company.
Mr. and Mrs. Montaltos decided to build on the subject property and contacted numerous builders designated by Talbott and Drake, Inc. to submit the bids for the construction of a home on the property.
On or about June 9, 1976, the McGeary partnership, as developer of the River Forest area, entered into a joint venture agreement with Group Six Developers Collaborative, Inc., whereby Group Six Developers Collaborative, Inc. purchased lots in the River Forest area and agreed to pay Talbott and Drake, Inc. a five-percent commission on all homes constructed on said lots by Group Six Developers Collaborative, Inc. in the River Forest area. A copy of said joint venture agreement is received into the record as Petitioner's Exhibit 3 pursuant to the Stipulation of the parties.
Petitioner's Exhibit 3 recites on the first page of said agreement as follows:
WITNESSETH:
WHEREAS, by that certain Purchase Agreement intended to be executed this date, BUILDER (Group Six Collaborative, Inc.) is agreeing to purchase certain real property as set forth herein, a copy of which Purchase Agreement is attached hereto as Exhibit 1; . . . (emphasis added)
WHEREAS, the parties hereto are desirous of forming a joint venture for the purpose of finan- cing, constructing and selling single family residences upon the property described in Exhibit 1;
NOW THEREFORE, in consideration of the pro- mises and of the mutual covenants of the parties hereto, and for other good and valuable considera- tion, the parties agree as follows:
9. BROKER. The parties agree that TALBOTT AND DRAKE, INC., a Florida real estate brokerage corporation, shall have an exclusive listing agree- ment with BUILDER, as owner and joint venturer, for the sale of residences to be constructed pursuant to this Agreement, a copy of which Agreement is attached hereto as Exhibit 2. As a commission for their services, which shall include but not be limited to, advertising, manning model houses,
showing receiving of deposits, qualifying prospects, assisting in obtaining financing for purchasers,
they shall receive five percent (5 percent) of the pur- chase price, according to the provisions contained
in Exhibit 2.
The joint venture agreement, Petitioner's Exhibit 3, is clearly limited to houses to be constructed on the lots purchased from the McGeary partnership. The agreement does not constitute an agreement to pay Talbott and Drake, Inc. a fee of five percent of the construction cost of any custom home built by one of the designated builders on a lot purchased by an individual.
When Mr. and Mrs. Montaltos received the bid statement from Group Six Developers Collaborative, Inc. there was noted thereon: "Add Real Estate Commission as per Talbott and Drake contract." A copy of said bid statement is received into the record as Petitioner's Exhibit 4 pursuant to the Stipulation of the parties.
Although Mr. and Mrs. Montaltos were informed that Talbott and Drake, Inc. was to be paid a ten-percent commission by the seller on the sale of the property to Mr. and Mrs. Montaltos, they were at no time informed directly by the Respondents that the builders on the "approved list" were required to pay a five-percent commission to Talbott and Drake, Inc., nor that the said five- percent commission would be passed on to Mr. and Mrs. Montaltos when they contracted with an "approved" builder to construct a home on the subject property.
On or about February 4, 1977, William F. Talbott, on behalf of Talbott and Drake, Inc., negotiated the contract for sale and purchase between High
Ridge Water Company, as seller, and Donald James Kostuch and Mary Louise Kostuch, his wife, buyers, for purchase of a lot in the River Forest area of Palm Beach County. A copy of said contract is received into the record as Petitioner's Exhibit 5 pursuant to the Stipulation of the parties.
Mr. and Mrs. Kostuch were required by the contract to select a builder from an approved list of designated builders approved and supplied by Talbott and Drake, Inc. and seller, High Ridge Water Company.
Mr. and Mrs. Kostuch selected Snow Realty and Construction, Inc. from the list supplied by Talbott and Drake, Inc.
Snow Realty and Construction, Inc. had an agreement with the McGeary partnership and Talbott and Drake, Inc. similar to that outlined in the joint venture agreement between the McGeary partnership in Group Six Developers Collaborative, Inc., Petitioner's Exhibit 3, whereby Snow Realty and Construction, Inc. agreed to pay Talbott and Drake, Inc. a five-percent commission on any residence that Snow Realty and Construction, Inc. built in the River Forest area.
The bid supplied by Snow Realty and Construction, Inc. on March 7, 1977, to Talbott and Drake, Inc. contained a listing of real estate commission to Talbott and Drake, Inc. in the amount of $3,652. A copy of said bid statement is received into the record as Petitioner's Exhibit 6 pursuant to the Stipulation of the parties.
The Kostuchs were advised of a five-percent fee to be paid by the builder by a salesman working for another broker who first introduced the Kostuchs to the real property in River Forest. The salesman advised the Kostuchs prior to their entry into the contract for the purchase of the lot in River Forest in which they agreed to limit their choice of builder to one approved by the McGeary partnership and Talbott and Drake, Inc. This disclosure would be sufficient to comply with the provisions of Rule 21V-10.13, Florida Administrative Code, because the fee was revealed by a salesperson involved in the transaction prior to the execution of the contract under which the favor, if any, was granted.
Talbott and Drake, Inc., in addition to performing services as listing agent for the sale of homes in River Forest, also functioned as the prime developer in this project pursuant to an agreement with High Ridge Water Company and the McGeary partnership.
Regarding the Montaltos' transaction, the limitation of the owners to the use of one of the approved builders constitutes the granting or placement of favor, because it narrows the competition to one of five builders out of all the builders available in the Fort Lauderdale area. The affidavits introduced indicate that, notwithstanding the absence of a written agreement, the designated builders had agreed to pay to Talbott and Drake, Inc. a fee of five percent of the cost of construction of any custom home as compensation for the efforts of Talbott and Drake, Inc. in developing the property. While compensation for these services is reasonable, it still constitutes a fee to be paid Talbott and Drake, Inc. from one of the five designated builders who would benefit from the contract. The potential adverse effect of this arrangement was to transfer a cost generally allocated to the cost of the lot to the cost of the house. Therefore, people shopping for a lot could be misled in the comparison of similar lots in different subdivisions in the absence of being advised of the fee to be paid by the builders to Talbott and Drake, Inc. However, the evidence
shows no attempt to keep this fee a secret and thereby mislead buyers. The existence of such a fee is referred to in sales literature prepared by Talbott and Drake, Inc. The Kostuchs were advised of the fee by a participating salesman for another real estate company. The builders set out the fee as a separate cost item as opposed to absorbing it in general costs within their bids. While the Respondents could not produce evidence that the Montaltos' had been advised of the existence of the fee, and the Montaltos' testified that they had not been advised, this appears to be an isolated incident as opposed to a course of conduct. Notwithstanding proof of the above, no evidence is presented that the Montaltos' contracted with a designated builder to build their house, and that a designated builder paid a fee to Talbott and Drake, Inc. To the contrary, the testimony of William Talbott was that the Montaltos' had breached the terms of their contract regarding the use of a designated builder.
CONCLUSIONS OF LAW
The Florida Real Estate Commission has charged the Respondents with violation of Rule 21V-10.13, Florida Administrative Code, and thereby with violation of Subparagraphs 475.25(1)(a) and (d), Florida Statutes. The charge under Subparagraph 475.25(1)(d), Florida Statutes, is redundant because it provides that if one violates the rules or the provisions of Chapter 475 one is in violation of Subparagraph (d).
Considering Count II, the facts show the Kostuchs were advised by a participating real estate salesman that Talbott and Drake, Inc. would receive a fee from the builder prior to their execution of the contract for purchase of the lot in River Forest. Although Mr. Kostuch stated he had signed papers relating to the transaction prior to signing this contract, the subject rule states that the individual must be advised prior to the favor being placed or granted. The favor granted or the benefit conferred is the narrowing of the potential builders to those designated by the McGeary partnership and Talbott and Drake, Inc. This benefit was created by a clause in the contract for purchase. Therefore, the Kostuchs were advised of the fee prior to the signing of the contract and prior to the placement of, or favor in, the transaction. There was no violation of the rule because of the disclosure.
Considering Count I, the Montaltos' stated they were not advised until after the contract was signed of the fee arrangement. The Respondents admitted they could not rebut the Montaltos' assertion. Talbott and Drake, Inc. had entered into an agreement as reflected in the affidavits and testimony of Talbott and Drake to be compensated for their development effort by a fee of five percent of the construction cost paid by the builders to Talbott and Drake, Inc. on each custom home constructed in River Forest. While this fee was not a rebate, bonus or kickback, it was compensation or renumeration; and even though the fee was paid for services duly rendered to the parties of the joint venture agreement, it was paid by the builders who collectively obtained the placement of business compared to other "non-approved" builders under the terms of the contract for sale. The potential adverse effects of such an arrangement are discussed under the Findings of Fact. However, it is appropriate to add at this point that there is no evidence that Talbott and Drake, Inc. attempted to mislead anyone, including the Montaltos'. The pattern of business activity was one of disclosure of the fee in the sales literature on River Forest, through participating salesmen and brokers as with the Kostuchs, and by builders plainly stating this fee on their bids. There were apparently many custom homes constructed in River Forest, and this incident involving the Montaltos' is the only one presented as being in violation. The facts reveal what can only be
termed a technical violation of Rule 21V-10.13 arising from the failure to notify the purchaser in an isolated instance.
By their technical violation of Rule 21V-10.13, Florida Administrative Code, the Respondents are deemed to be guilty of Section 475.25(1)(a), Florida Statutes. While Section 475.25(1)(a) addresses such intentional conduct as fraud, misrepresentation, dishonest dealing, and breach of trust, the instant fact situation does not fall within these portions of the statute. The Respondents' course of business does not show any intent to defraud, misrepresent, breach any trust, or deal dishonestly. To the extent that the Respondents violated Rule 21V-10.13, supra, they violated the duty imposed by that rule to advise the Montaltos' of the fee arrangements prior to the couple signing the contract for purchase. It follows that the violation of the foregoing statute is as highly technical as the violation of the rule.
The Respondent, Helen Drake, has raised the defense that she was not involved in the River Forest development by Talbott and Drake, Inc. The record shows that Helen Drake was an active firm member. Although she had no specific involvement in River Forest, as an active firm member she is equally responsible for all acts of the corporation.
