corporation, and JAMES P. ) BEGGINS, JR., a registered broker,)
vs. ) CASE NO. 79-480RP
Respondent. )
Pursuant to notice, a hearing was held before Charles C. Adams, a Hearing Officer with the Division of Administrative Hearings. The hearing was held at 9:30 a.m., March 29, 1979, at Room 106, Collins Building, Tallahassee, Florida.
For Petitioner: Cynthia S. Tunnicliff, Esquire
Spector & Tunnicliff, P.A. Post Office Box 82 Tallahassee, Florida 32302
For Respondent: Salvatore A. Carpino, Esquire
Whether or not the proposed Rule 21V-4.06, Florida Administrative Code, is an invalid exercise of delegated legislative authority within the meaning of Subsection 120.54(4), Florida Statutes.
This cause comes on for consideration based upon the petition filed by Century 21 of Southern Florida, Inc., a Florida corporation, and James P. Beggins, Jr., a registered broker. Both of these Petitioners are registered by the Florida Real Estate Commission and James P. Beggins, Jr., is the registered broker for the said corporation. The petition through its allegations seeks to have a certain proposed rule of the Respondent declared invalid on the basis that that proposed rule is an invalid exercise of delegated legislative authority within the meaning of Subsection 120.54(4), Florida Statutes. The rule at issue is Rule 21V-4.06, Florida Administrative Code.
The other party to this cause, the Respondent, Florida Real Estate Commission, is an agency of the State of Florida, which has as its function the regulation of those persons who are in the real estate business in the State of Florida, to include the registration of those persons through a licensing process. This process is established in the form of written conditions and requirements for holding the license.
Proposed Rule 21V-4.06, Florida Administrative Code, seeks to regulate the fictitious names used by real estate brokers practicing in the State of Florida, relating to the ability of a Florida real estate broker to register a name which is the same as, or deceptively similar to, the real or fictitious name of another registrant who has previously registered that name with the Florida Real Estate Commission. The complete language of proposed Rule 21V- 4.06, Florida Administrative Code, states:
AMENDMENT TO RULE 21V-4.06
DEPARTMENT OF PROFESSIONAL AND OCCUPATIONAL REGULATION STATE OF FLORIDA
CHAPTER 475, FLORIDA STATUTES
21V-4.06 Fictitious Names. A broker may use a fictitious name and, if so, it must be disclosed upon the request for certificate, and be placed upon the certificate, together withthe broker's real name. The fictitious name shall not be the same as, or deceptively similar to, the real or fictitious name of another registrant who has previously registered real or fictitious name of a registrant, the Commission shall deny the application and shall notify the applicant
of his right to request a hearing pursuant to the applicable provisions of the Administrative Procedures Act, Chapter 120, Florida Statutes. This provision shall not apply if the applicant files with the Commission either of the following:
the written consent of such other registrant holder of a registered fictitious name to use said name, and one or more words are added to make such name distinguishable from the previously registered name; or, (b) a certified copy of a final decree of a court of competent jurisdiction establishing the prior right of the applicant to use of the name sought to be registered. A
corporation shall be issued a certificate in none other than its corporate name.
No corporation or partnership shall be allowed to operate as an individual, and no individual shall use the name of any partnership or corporation in his sign or on letterheads or in advertising in such
manner as to indicate that such partnership or corporation is operating the business or responsible for its operation. If properly identified as such, the name of a partnership or corporate owner, the property of which is being sold by the registrant, may
be used on signs, letterheads or advertising. Fictitious names, whether used by an individual, or by a partnership, are required to be advertised and registered with the Clerk of the Circuit Court, where the principal place of business is. The actual name of the individual is not a fictitious name;
and the names of the individuals, if not obscured by such words as 'and company' or 'associates' or 'sons' or such indefinite verbiage, are not fictitious names.
General Authority 475.05 FS. Law Implemented 475.42(1)(k) FS.
History--Amended 8/20/63.
In considering the Petitioners' attack on the proposed rule, the beginning point is to examine their standing to challenge the implementation of the proposed rule.
In this particular instance, to understand the position of the Petitioners on the question of standing, and the ruling to be made on that issue, it is beneficial to excerpt the testimony of Petitioner Beggins that speak to the issue of standing. Those excerpts are as follows:
Line 16, page 9
"Q Are you also in the business of selling Century 21 franchise?
A Yes. I'm a franchisor of Century 21, licensed to sell the Century 21 name and service marts
in half the State of Florida.
Q How many franchises have you sold?
A I have actively in my corporation right now about 260.
Line 23, page 9
* * * Line 12, page 10
"Q Are Century 21 franchises required to use the name Century 21?
A Yes, ma'am, they are.
Q Are they required to use any particular context?
A They are required to use it in a five-to-one ration, 80 percent of the name being the Century
21 name, and 20 percent their name as registered.
Q Are they required to use it in any position in the registered name?
A It's to immediately follow the Century 21 name when written in block letters, and to be immediately underneath the Century 21 registered trademark when the registered trademark is used.
Q So the name Century 21 has to be used in the beginning of the name?
A Yes, ma'am.
Q Are franchisees complying with this agreement -- with this in Florida?
A They're complying, to the best of my ability to enforce the agreement. In quite a few instances, because of the vagueness as far as what the Real Estate Commission wants, it's quite hard to get them to go a hundred percent with the policies, according to the contract."
Line 9, page 11
* * * Line 15, page 13
"Q When Century 21 then sells a franchise to an establishment broker, does it acquire something of value?
Do you, when you sell a franchise to an existing broker, then acquire something of value, of monetary value to you, continuing value?
A Sure. Absolutely. We add to the value of his name, and he locally adds to the value of the Century 21 name.
Q If the proposed franchisee you were selling to were required to change his previously registered name to comply with Real Estate Commission rules, would it be of a direct monetary loss to you and to Century 21?
A Yes. It would be a loss to me and also to the broker that was forced to change his name.
Q As a general practice, do prospective franchisees that you are selling to, are they desirous of keeping their own names?
A Yes, they are. Those that have built their name in the community want to keep the name that they built. Century 21 doesn't take away from their existing name; it adds to it.
Q Would your sales then be affected if a broker were required to change his name?
A My sales would be affected, and his profit would be affected, because of the expense involved in changing everything that is affiliated with his name."
Line 14, page 14
* * * Line 22, page 15
"Q You made some mention of the fact the Florida Real Estate Commission had refused to register the name of Century 21 over the course of about
three years, I believe you said. Is that correct?
A I believe I said that they refused to register some of the names that were sent in to -- applied for registration with Century 21. They have further registered some names. Some of my franchisees are registered as Century 21 ABC Realty --
Q Okay.
A --and then some of them have been turned down when they requested to be registered as Century
21 XYZ Realty.
Q When was the latest incident in which the Florida Real Estate Commission -- I am going to refer to it as FREC, okay?
A (Nods head affirmatively.)
Q When was the latest incident in which FREC refused to register any Century 21 franchisee?
A I would imagine it's been a year or so. But our franchisees have been advised --
Q Well, I am just --
A -- that any attempts would be --
Q -- asking you to -- A -- drawn out --
Q -- answer my question. It has been about a year? A I would say so, yes.
Q Has there been any such incident subsequent to or after the Harris case, to which Mrs. Tunnicliff alluded in her opening statement, that you know of?
A No. I don't think anyone tried to re-register; not to my knowledge.
Q Weren't you in fact informed through your legal counsel, the firm of Spector & Tunnicliff, that since the case of Harris versus the Florida Real Estate Commission, that the Florida Real Estate Commission was ready and willing to register any and all
Century 21 names in any order?
A I recently received some correspondence from Joe Stafford through Sam Spector saying that the
Real Estate Commission was ready to register names.
Q So then the problem that you described is a problem that only took place prior to the Harris case? It has not taken place since the Harris case. Is that correct?
A Not to my knowledge. I think that's correct.
Q You made reference to the business agreements, contracts between, or other agreements between the Century 21 franchisor, which in this state is yourself apparently, and its franchisees, and the difficulty with getting them to comply.
Is that 'them' the Florida Real Estate Commission? A No. 'Them' is the franchisees.
Q What is the problem there?
A Because the pressure -- there is pressure exerted by the investigators from FREC, and real estate brokers tend to fear the investigators from FREC. And there's been a lot of attempts to regulate the way these people advertise by the investigators.
It seems that because there has been no real firm decision, the investigators run off half-cocked in to our offices and spread some things that
are different in every office. Q What is an example of that?
A Well, an example of that would be in some offices the investigators have gone in and told the franchisees how to answer their phone.
In other offices --
Q Well, specifically what --
A That they would have to answer their phone ABC Realty, a Century 21 office, rather than Century
21 ABC Realty.
Q Now, is this -- or are these, if it occurred in more than one instance, brokers who are registered as ABC Realty, or are they registered with the Century 21 name?
Q It's happened with both, but it's mostly with people who are registered as ABC Realty. The Real Estate Commission hasn't seemed to recognize that there are, I guess, four or five different companies that are registered with Century 21 in their name.
It happened a long time ago, and I don't know whether you were aware of it.
Q In other words, you would have them answer the telephone, 'Century 21 ABC Realty,' even though in fact they are only registered as ABC Realty?
A Yes. That was the practice.
Q And even though, so far as you know at this time, they could register as Century 21 ABC Realty.
A There's been no firm decision on my part as to whether those companies should be registered that way. I received correspondence recently, and this hearing was scheduled, and I am waiting for this hearing to decide what to do.
There are some problems in going and taking
260 offices and reincorporating them.
Q Why would you reincorporate them?
A Because that's the way I interpreted the letter. Or go through the d/b/a practices.
In every real estate office, everything that they use for promotion would have to be changed. You're talking about a lot of money. And if it is to be
changed, it is going to take some time to do it.
Q So that what you would want is that someone could register as ABC Realty but have all their advertising reflect Century 21 ABC Realty; is
that correct?
A Sal, all I want to do is find a way to operate in accordance with what you want. And I'm not sure that the Real Estate Commission really knows what they want. It's one of the big problems.
Q So one of the things that you are looking for at this point -- you said there would be a large financial expenditure that would be necessary if there were some change that would have to be made.
Now, for example, a person doing business as ABC Realty, and registered as such, ABC Realty, but who was also a Century 21 franchisee --
A Uh-huh.
Q -would his advertising reflect Century 21 ABC, or would his advertising reflect ABC Realty?
A If we were to go and re-register every broker -- Q How would he be doing it right now?
A How is he doing it now? Q Yes.
A He's using -- he's registering as ABC Realty -- Q As --
A -- and he's using the Century 21 trademark in junction with that.
Q So that if he were to re-register as Century 21 ABC Realty, there would be no problem?
A Yes, there would, because then we would have the Century 21 trademark on every one of his signs, and ABC Realty under the trademark. Then he would have to have the trademark, and then under the trademark another Century 21 ABC Realty, which would necessitate every business card, every piece of letterhead, every property sign, of which we probably have 15,000 just in my area, and every office sign, would have to be changed, unless we could come to some agreement that --
(Pause.)
Q Then, in fact, are they not operating contrary to that which you have alleged in your petition?
A (No response.)
Q Maybe you are not familiar with it. Your petition says that Century 21 has entered into franchise agreements with literally hundreds of brokers in
the State of Florida, all of whom are required
by the franchise agreement to begin their business name with Century 21.
A That's right.
Q But now you are telling me they don't?
A I'm saying that because of pressure from the Real Estate Commission some of them refuse to, and because of pressure from the Real Estate Commission I have not chosen to litigate with those people.
In fact, I had one sell his franchise because I kept on using FREC as an excuse for not using our system. And he finally gave up and said."
Line 25, page 21
A review of the excerpted passages of the transcript pertaining to Beggins' testimony, together with an examination of the balance of his testimony and the Rule 21V-4.06, Florida Administrative Code, clearly demonstrates that Petitioner Beggins is substantially affected by that rule, within the meaning of Subsection 120.54(4)(a), Florida Statutes. Beggins, in his efforts to transact business with potential franchisees, is being hindered by the "chilling effect" which the proposed Rule 21V-1.06, Florida Administrative Code, promotes in the Petitioner's attempts to negotiate franchise agreements, which would utilize the Century 21 designation. This danger of financial harm to the Petitioner is immediate even as the specter of the passage of such rule hangs over the head of the Petitioner and his franchisee prospect, and the rule if passed would not diminish the immediacy of the danger of the financial harm to the Petitioner. The passage would in fact solidify the barrier between the Petitioner and his potential franchisee, with whom he would be negotiating for a franchise agreement because there would be missing from their negotiations the necessary certainty between contracting parties on the issue of the ability of the franchisee to have the Florida Real Estate Commission accept the contracted-for Century 21 name, and if the name is not accepted, then the franchisee has not kept faith with the terms of his franchise agreement. Being mindful of this potential breach, the parties could be expected to cease their negotiations, causing a financial detriment to Petitioner Beggins.
Therefore, this harm to Petitioner Beggins is not imaginary or illusory, as described in the case of Florida Dept. of Offender Rehab. v. Jerry,
353 So.2d 1230 (1st DCA 1978). Furthermore, unlike Jerry, this case presents an examination of a proposed rule under Section 120.54, Florida Statutes, in contrast to the Jerry case which dealt with a Section 120 56, Florida Statutes, challenge to an existing rule. The significance of the difference is the fact that when one examines a Section 120.54, Florida Statutes case, one must, of necessity, be speculative, because technically the rule does not yet exist.
Nonetheless, if the Petitioner is actually harmed, as in this case, by the possibility of the passage of such a rule, both in his present circumstances which is dominated by the presence of the rule, and in the future, then he is indeed substantially affected, and no less so than a person who has demonstrated an immediate danger to his position in a case of a challenge to an existing rule under Section 120.56, Florida Statutes.
This theory of standing is supported by the case of 4245 Corp., Mother's Lounge v. Div. of Beverage, 348 So.2d 934 (1st DCA 1977). In that case, it was held that a person prospectively affected by agency action could seek review of that action without the necessity of having the terms and conditions of the agency action directed against him through the process of a Section 120.57, Florida Statutes, hearing. Under their rationale, the Petitioner and his prospective franchisee need not wait for the passage of the subject rule and attempt to register under its terms, be rejected and then seek review under Section 120.56, Florida Statutes, or Section 120.57, Florida Statutes, in order to challenge the rule. If this were the case, then there would be no occasion for the utilization of a Section 120.54, Florida Statutes, rules challenge hearing.
In summary, the Petitioner, James P. Beggins, Jr., has standing to institute this rules challenge. The Petitioner, Century 21 of Southern Florida, Inc., a Florida corporation, has not demonstrated its standing as a substantially affected person through any proof offered at the hearing.
In consideration of the case on its merits, there appears to be no dispute over the fact that Rule 21V-4.06, Florida Administrative Code, is in fact a proposed rule. Additionally, there is no challenge to the procedural steps which the Respondent has taken to adopt the rule; consequently, those procedural steps are presumed to have been complied with. The only question remaining to be resolved is the attack on the proposed rule in its substance, as being an invalid exercise of delegated legislative authority. When considered according to this criterion, the rule is invalid.
The Respondent was forewarned of the invalidity of such a proposed rule, even before its conception in the minds of the Florida Real Estate Commission. The court in Harris v. Florida Real Estate Commission, 358 So.2d 1123 (1st DCA 1978), unequivocally announced to the Respondent that rules of the ilk of Rule 21V-4.06, Florida Administrative Code, do not have the necessary delegated legislative authority for their passage. The Harris case involved attempts on the part of the registered real estate brokers Harris and Childers to change their corporate names in accordance with the provisions of Section 475.42(l)(k), Florida Statutes. That provision states:
"475.42 Violations and penalties.--
(1) VIOLATIONS.--
(k) No person shall operate as a real estate broker under a trade name without causing the same to be noted in the records of the commission and placed on his certificate, or so operate as a member of a partnership or as a corporation or as an officer or manager thereof, unless said partnership or corporation is the holder of a valid current registration certificate."
During the pendency of these requests, the question of guidelines and directives for franchising was presented to the Respondent and by directive of May 18, 1977, Respondent took action in the course of that meeting which stated the following:
"Any real estate broker desiring to use the name of a Franchisor in connection with his own name must register the name as a part of his own trade name and same Franchisor's name must follow rather immediately appearing above and before the broker's name."
Childers and Harris were denied the registration of their corporate names with the title "Century 21" preceding the name of the realtor and subsequently challenged the action of the Florida Real Estate Commission by a Section 120.56, Florida Statutes, hearing. The May 18, 1977, directive was held to be a rule and one not properly adopted and thus, invalid, as it pertained to the Childers' petition. The Real Estate Commission subsequently cancelled the May 18, 1977, directive; however, the Court in its review of the Harris appeal was of the opinion that the question of the validity of that rule warranted the Court's determination. The Court in Harris held that Subsection 475.42(l)(k), Florida Statutes, creates a duty on the part of the Commission to keep a current list of registrants and to issue certificates which would evidence that registration. The registrant in turn is required to maintain a registration in a current status and to supply the Florida Real Estate Commission with correct information as to their trade name under which the business might be operating.
The Court in Harris, supra, made it very apparent that the Florida Real Estate Commission could not under the statement of authority of Subsection 475.42(l)(k), Florida Statutes, refuse a requested name change that had been made by a registered broker. In view of that opinion, it follows that the Respondent may not create fictitious name requirements which prohibit the registration of same or similar names by registrants, when there is on record with the Florida Real Estate Commission names which are the same or similar to the requested name change, as is prohibited by Rule 21V-4.06, Florida Administrative Code. This is a name change much the same as were the requests being made by Harris and Childers.
The Respondent in its statement of authority for the promulgation of the subject rule, alludes to the general authority found in Section 475.05, Florida Statutes. That provision reads:
"475.05 Power of commission to enact bylaws, rules and regulations and decide questions of practice.--The commission may enact bylaws and regulations for its own government, and rules and regulations in the exercise of its powers, not in conflict wit the constitution
and laws of the United States or of this state, and amend the same at its pleasure. The commission may decide questions of practice arising in the proceedings before it, having regard to this chapter and the rules and regulations then in force. Printed copies of rules and regulations, or written copies under the seal of the commission, shall be prima
facie evidence of their existence and substance, and the courts shall judicially notice such rules and regulations. The conferral, or enumeration, of specific powers elsewhere in this chapter shall not be construed as a limitation of the general powers conferred by this section."
The above provision does not create the specific right to regulate fictitious names as provided through Rule 21V-4.06, Florida Administrative Code. Again, this conclusion is reached after reading the Harris case, supra. The Court, when it made its statement that the Respondent was without authority to refuse a requested name change by a registered broker, made this decision in view of all the provisions within the Chapter 475, Florida Statutes. Moreover, there does not appear to be any nexus between the type regulation created by Rule 21V-4.06, Florida Administrative Code, and the duties and powers conferred upon the Real Estate Commission by Chapter 475, Florida Statutes.
Finally, the Respondent's attorney, in the course of the oral argument phase of the hearing sub judice, alluded to the fact that possible authority for the action taken by the Respondent in its proposed rule, may lie in the provision Section 475.47, Florida Statutes, which reads:
"475.47 Publication of false or misleading information; promotion of sales.--It shall be unlawful for any person to publish or cause to be published by means of newspaper, periodical, radio, television, or written
or printed matter, any false or misleading information for the purpose of offering for sale or for the purpose of causing or inducing any other person to purchase real estate located in the state, or to acquire an interest in the title thereto."
There is some question about the utilization of this subsection as a statement of authority, in view of the fact that Subsection 120.54(1), Florida Statutes, requires that the specific legal authority being offered for adoption of the proposed rule must be stated with the proposed rule, and in this case there was no mention at Section 475.47, Florida Statutes, when the rule was enrolled.
However, assuming that this failure to make reference to Section 475.47, Florida Statutes, is not fatal, the Harris court nonetheless examined Section 475.47, Florida Statutes, as a possible authority for the regulation of name changes and disposed of the argument by the Respondent with this comment:
"The statute plainly deals with misleading information in the promotion of sales and requires a finding that the person is guilty of disseminating false or misleading information for the purpose of inducing
the sale of real estate in Florida. The statute is not authority for action of the Commission in these cases." Harris, supra, at pages 1125 and 1126.
It follows the Section 475.47, Florida Statutes, is not authority for regulating registration of fictitious names within the terms of Rule 21V.4.06, Florida Administrative Code.
Finally, it has been established through the provision of Subsection 120.54(14), Florida Statutes, that an agency does not have inherent rulemaking authority. This rulemaking authority must be through duly delegated legislative means, and for the reasons expressed in Harris, supra, which reasons are felt to apply to the instant case, this rule as proposed for adoption is an invalid exercise of delegated legislative authority, and without that proper authority there can be no rule.
The proposed order submitted by the Petitioners has been reviewed prior to the entry of this Order and, to the extent that it is not inconsistent with the conclusions reached herein, it has been utilized. It is otherwise rejected.
CONCLUSIONS OF LAW
The Division of Administrative Hearing has jurisdiction over the parties and subject matter in this cause.
Based upon a full consideration of the facts herein, it is concluded as a matter of law that the proposed Rule 21V-4.06, Florida Administrative Code, is an invalid exercise of delegated legislative authority within the meaning of Subsection 120.54(4)(a), Florida Statutes, and therefore without force and effect.
DONE AND ORDERED in Tallahassee, Leon County, Florida, this 20th day of April, 1979.
CHARLES C. ADAMS
MAILING ADDRESS: 530 Carlton Bldg.
Cynthia S. Tunnicliff, Esq. Spector & Tunnicliff, P.A. Post Office Box 82 Tallahassee, FL 32302
Salvatore A. Carpino, Esq. Florida Real Estate Commission Post Office Box 1900
Joint Administrative Procedures Comm Room 120, Holland Bldg.
Ms. Liz Cloud Department of State Room 1802, The Capitol Tallahassee, FL 32301
