vs. ) CASE NO. 81-2097
Respondent. )
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, SHARYN L. SMITH, held a formal hearing in this case on December 1, 1981, in Fort Myers, Florida. The following appearances were entered:
For Petitioner: Xavier J. Fernandez, Esquire
For Respondent: James A. Neel, Esquire
The issue for determination in this case is whether the license of Respondent Marinatown Realty, Inc., should be revoked, suspended or other disciplinary action imposed for allegedly failing to account and deliver real estate commissions to Lebon E. Hutchinson, a licensed real estate broker.
At the formal hearing, Petitioner's Exhibits 1-13 were identified and Petitioner's Exhibits 1-12 were admitted into evidence. Joseph A. Furlong, Billie Robinette and L. E. Hutchinson testified on behalf of the Board of Real Estate. Respondent's Exhibits 1-6 were offered and admitted into evidence and Robert Corno, Charles C. Bundschu and Thomas P. Hoolihan testified on behalf of Marinatown Realty, Inc.
Proposed Recommended Orders have been submitted by the parties. Those findings not incorporated in this Recommended Order were not considered relevant to the issues, were not supported by competent and substantial evidence or were considered immaterial to the results reached.
The Respondent Marinatown Realty, Inc., is a corporate real estate broker, holding license number 0208680 and located at 3440 Marinatown Lane, Northwest, North Fort Myers, Florida. Marinatown Realty is a wholly owned subsidiary of Seago Group, Inc., a publicly held land development and rental corporation whose president is Thomas P. Hoolihan.
In late 1977, Hoolihan met L. E. Hutchinson, the complainant in this case, through another broker for whom Hutchinson at the time was employed. In December, 1977, Hoolihan and Hutchinson discussed the marketing of two condominium projects being developed by Hoolihan and reached an oral agreement whereby Hutchinson would be paid $18,000 in salary with a 1 1/2 percent commission on all sales. When the condominium units were completed and mostly sold, the parties' employment agreement was revised in late December, 1979. Under the new agreement, Hutchinson was to receive $30,000 a year salary, commissions on the remaining condominium units that had not yet closed and any commissions on outside property listings neither owned nor controlled by Seago. In return for the $30,000 guarantee, Hutchinson was to forego commissions on future properties owned or controlled by Seago Group, Inc.
During the period from 1977-1978 when Hutchinson was receiving $18,000 plus a 1 1/2 percent commission, sales were handled through Lee Hutchinson Realty, Inc., which held license number 0182945.
In early 1979, Marinatown Realty was incorporated to market Seago's real estate inventory, to identify and list outside properties and to act as a management agent for purposes of renting condominium units previously sold in recent projects.
When Marinatown Realty was formed, the complainant became its active broker. While employed as the broker for Marinatown and receiving $30,000 a year as a salaried employee, Hutchinson held two other broker's licenses, one as
L. E. Hutchinson Realty, Inc., and another as L. E. Hutchinson.
In January, 1980, Hoolihan agreed to pay a $15,000 bonus to Hutchinson in lieu of a salary increase. Since at that time sales were minimal, Hoolihan decided to pay the bonus in installments as sales occurred. Because Hutchinson left in May, 1980, he received only $10,000 of the bonus which represented moneys previously paid.
On April 23, 1980, Hutchinson and Chuck Bundschu, a licensed real estate broker, negotiated and obtained a sales contract between Hancock Harbor Properties, Ltd., a wholly owned subsidiary of Seago Group, Inc., seller, and Frank Hoffer, buyer and licensed real estate broker, in which Hoffer offered to purchase approximately 3.16 acres of unimproved acreage for $500,000. Thomas P. Hoolihan, general partner of Hancock Harbor, executed the contract on behalf of the partnership.
Prior to presenting the contract to Hoolihan, Bundschu, Hoffer and Hutchinson decided on a 30 percent, 40 percent 30 percent respective co- brokerage split on the $50,000 commission due on the sale of the Hancock Harbor Property. The co-brokerage fee split was typed on the bottom of the contract submitted to Hoolihan and was signed by the three brokers. The commission due to Hutchinson was made payable to L. E. Hutchinson Realty, Inc.
On April 25, 1980, the contract with the original co-brokerage split was presented to Hoolihan who refused to agree to its co-brokerage split provision. In the presence of Hutchinson, Hoolihan informed Bundschu and Hoffer that he would not pay a commission to Hutchinson because he was a salaried employee of the Seago Group and not entitled to a commission on the sale of this property. Accordingly, the co-brokerage fee provision of the executed contract was never signed by the seller, Thomas P. Hoolihan. Instead, on April 25, 1980, Bundschu, Hoffer and Hoolihan agreed to a split of $20,000 to Hoffer and $15,000 to Bundschu in lieu of the split specified on the bottom of the contract.
At the closing on July 18, 1980, which was held at Coastland Title Company, a closing statement was prepared which shows that real estate commissions were disbursed to Chuck Bundschu Realty, Inc. ($15,000), Marinatown Realty, Inc., ($15,000) and Hoffer's firm, Landco, Inc., ($20,000). The checks were written and disbursed following a conversation between an official of Coastland Title Company and Hoolihan in which Hoolihan informed the official that Hutchinson was a Seago employee and he would not agree to pay a $15,000 commission to him under such circumstances.
On July 18, 1980, a check for $15,000 was issued by Coastland Title Company to Marinatown Realty, Inc. The $15,000 represented Hutchinson's share of the co-brokerage agreement. When received on July 18, 1980, by Billie Robinette, the broker for Marinatown Realty, the check was signed over by her to Seago Group, Inc., since in her opinion it did not represent commissions earned by Marinatown Realty.
The oral agreement between Hutchinson and Hoolihan was to terminate at the end of April, 1980, or approximately five days after the Hoffer contract was presented. Hoolihan offered to renew the contract without a provision for a guaranteed salary because Marinatown Realty had been consistently losing money since its incorporation. On May 6, 1980, Hoolihan received a letter of resignation from Hutchinson and concluded that his offer had been rejected.
In early May, 1980, Hoolihan received a call from Ms. Robinette, who had been employed as Hutchinson's secretary, regarding filling the open brokerage position at Marinatown Realty, Inc. Hoolihan discovered from Ms. Robinette that Hutchinson had paid himself 50 percent of the commissions due Marinatown Realty, Inc., for the management of condominium rentals. After examining the check stubs from Marinatown's bank account, Hoolihan took personal possession of all the books and records of the company and had the office locks changed.
When he examined the books and records of the realty company, Hoolihan realized that his assumption that Hutchinson Realty, Inc., became inactive when Marinatown Realty, Inc. was formed in January, 1979, was erroneous and that Hutchinson had operated his own realty company, L. E. Hutchinson Realty, Inc., while employed by Marinatown Realty, Inc.
Although he held multiple licenses, Hutchinson denied that a conflict ever existed between his duties to Marinatown Realty, Inc., and his own company,
L. E. Hutchinson Realty, Inc. When questioned during the final hearing regarding how he decided where to list properties while he was the broker for both companies, the following exchange occurred between Hutchinson and counsel for Marinatown Realty, Inc.:
Q Let me ask you, Mr. Hutchinson, how would it be decided when you were to
go out and list property as to whether or not that property would be listed under Marinatown Realty or L. E. Hutchinson Realty, Inc.? Who would make that determination?
A I would.
Q Solely on your own?
A I had no contract with anyone. I had nothing in writing to direct me where to place any business.
Q So this would be solely your decision as to how you would list the property? Either Marinatown Realty or L. E. Hutchinson Realty?
A If I secured the listing it was my dis- cretion as to where I listed the real estate. I had the choice of one of two companies.
* * *
Q If you were to list property in my hypo- thetical with Marinatown Realty, is it not a fact that they would receive, and being Marinatown Realty, would receive
one half of the commission and you, as the broker, would receive the other half?
A That was what I did.
Q So it would certainly be beneficial to Seago to have you list as much property
as you could with Marinatown Realty because they, in fact, owned the stock with Marinatown Realty, is that not true?
A Yes, sir.
Q When you would list property with L. E. Hutchinson Realty, Inc., would you do this with the full knowledge, consent
and permission of Marinatown Realty, Inc.?
A Yes, sir.
Q How would you say that you gave full consent when you just testified that it was solely up to you as to how you would list property?
A If I solely decided, I give my consent. I don't have anybody else to answer to. (T. pp. 108-110)
During the period that Hutchinson was a broker for Marinatown Realty and L. E. Hutchinson Realty, Hutchinson believed his primary duty was toward his own company as illustrated by the following exchange between counsel for Respondent and the complainant:
Q It's a fair statement to say that you, as a broker for Marinatown Realty, Inc. didn't make a whole lot of money for Marinatown Realty, did you?
A I didn't run the P & L statement.
Q I'm asking you as being the broker. You didn't make a lot of money for Marinatown
Realty, Inc., did you?
A I made as much money for them as I did for the responsibility.
Q Well, did L. E. Hutchinson Realty, Inc. make a lot of money during that period of time?
MR. FERNANDEZ: Objection as to relevancy, this whole line of questioning.
MR. NEEL: Your Honor, it isn't. It's germaine.
HEARING OFFICER: Objection overruled. THE WITNESS: I'm sorry, the question?
Q Did L. E. Hutchinson Realty, Inc. make a lot of money during this period of time?
A That's relative.
Q In comparison to what money Marinatown Realty made?
A Yes, sir, because L. E. Hutchinson Realty had a thirty thousand retainer that was coming in up until April 30th.
Q From Seago?
A Certainly.
Q So L. E. Hutchinson Realty, Inc. made a lot more money than Marinatown Realty, Inc., didn't they?
A That's the way its supposed to work. Q And, again, it was at your sole dis- cretion as to how you would list the
properties; under which principal.
A Yes, but I asked for a specific con- tract and never got it.
(T. pp. 124-125)
The Administrative Complaint in this case was filed on July 22, 1981. The preliminary investigative report compiled by Robert Corno, DPR Investigator, was filed on September 24, 1981 and the final investigative report was filed on September 30, 1981. The following is a synopsis of the investigator's findings and recommendation:
That the COMPLAINANT [Hutchinson] worked for the SUBJECT [Hoolihan]
and their contractual agreement was verbal. COMPLAINANT was paid on a salary/commission basis by companies of which SUBJECT is Chief Officer.
That the COMPLAINANT filed civil action suit against SUBJECT in this case and it
was dismissed with prejudice.
That prior investigation by the DPR re- commended that no action be taken
against the SUBJECT in this case.
That two weeks after this investigation was undertaken, an Administrative Com-
plaint was being filed by the DPR against the SUBJECT.
That the existing BROKER for MARINATOWN REALTY, INC. was not involved in this
case, and that since the time of the above referenced transaction, the SUBJECT has acquired his BROKER'S license #020462 which had no effect in this case.
That conflicting statements by inter- viewers, namely former and present em- ployees and other agents involved in this case revealed that there is a reasonable doubt for probable cause against the SUBJECT. (Respondent's Exhibit 1)
As noted by Investigator Corno, this was the second time Marinatown Realty had been investigated in relation to this case. In both instances a recommendation that no action be taken against the Respondent was apparently made. At the final hearing on December 1, 1981, counsel for the Department saw the complete investigative report, including the investigator's recommendation of a lack of probable cause, for the first time.
Count II of the Administrative Complaint alleges that Hutchinson is entitled to compensation for services rendered on the following sales contracts: Seago Group, Inc. as seller, to Michael T. and Judith Marchiando as buyers, Seago Group, Inc. as seller, to John E. and Charlotte A. Ferguson as buyers, and Seago Group, Inc. as sellers, to Kenneth J. Dawson as buyer. In regard to the first transaction, the Marchiandos were personal friends of the son-in-law of Seago's major shareholder, Mr. R. Berti. Hutchinson's role in this transaction was limited to preparing the contract and mailing it to the Marchiandos for signature. Hutchinson had no part in selling this property and never met the Marchiandos. The sale of the Ferguson's arose in a manner similar to the Marchiandos. Mr. Ferguson is the manager of a Detroit company owned by Mr. Berti. Similarly, Mr. Dawson works for Mr. Berti in Detroit as an accountant. These sales were made by Mr. Berti and Hutchinson furnished administrative assistance by completing the contracts and sending them to these individuals for signature. Under the terms of the agreement between Hoolihan and Hutchinson, a commission was not due on these properties to Hutchinson since these were not outside listings and his agreement with Hoolihan did not contemplate that commissions be paid in such situations.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this proceeding. Section 120.57(1), Florida Statutes.
In Counts I and II of the Administrative Complaint, the Respondent is charged with violating Section 475.25(1)(d), Florida Statutes (1979), which empowers the Board of Real Estate to suspend a license for a period not exceeding 10 years, revoke a license, impose an administrative fine not to exceed $1,000 for each Count or separate offense or issue a reprimand if it finds that a licensee:
[f]ailed to account or deliver to
any person, including a licensee under this chapter, at the time which has been
agreed upon or is required by law or in the absence of a fixed time, upon demand of the person entitled to such accounting and delivery, any personal property such as money, fund, deposit, check, draft, abstract of title, mortgage, conveyance,
lease, or other document or thing of value, including a share of a real estate commis- sion, or any secret or illegal profit, or any divisible share or portion thereof, which has come into his hands and which is not his property or which he is not in law or equity entitled to retain under the circumstances.
Based on the finding that Hutchinson received a salary of $30,000 in lieu of commissions on sales of property owned or controlled by his employer, Seago Group, Inc., no commissions were required to be paid by Marinatown Realty, Inc. to Hutchinson on the four transactions set forth in the Administrative Complaint. Accordingly, no violation of Section 475.25(1)(d), Florida Statutes (1979), was established and the Administrative Complaint should be dismissed.
Moreover, a serious question exists in this case whether commissions would be due the complainant in this case, even assuming arguendo, that he was working on a commission basis as alleged in the Administrative Complaint.
At the final hearing, Hutchinson testified that he held two active broker's licenses. Although no written contract existed between Hutchinson and Marinatown Realty concerning their respective duties and responsibilities as agent and principal, general principles of law applicable to agencies require that specific standards of conduct be followed when such a relationship exists. No principle of the law of agency is more firmly established than that which forbids one who undertakes to act as agent for another from acting for himself in relation to the subject matter of the agency, or placing himself in a position adverse to or in conflict with the interests of his principal. State ex rel. Harris v. Gautier, 147 So. 241, 246-27 (Fla. 1933); 2 Fla. Jur.2d, Agency at Section 69. The law does not permit an agent during the continuation of the agency, to put himself in a position adverse to that of his principal without the consent of the principal. State ex rel. Harris v. Gautier, supra. An agent's duty to his principal requires that his efforts be for the benefit of the principal; he cannot perform this duty if he uses his agency for his own purposes. Connelly v. Special Road and Bridge District, 126 So. 794 (Fla. 1930). It is generally recognized that an agent is subject to a duty not to compete with the principal concerning the subject matter of the agency. Am Jur.2d Agency Section 222; Restatement, Agency 2d Section 393. Thus, an agent cannot without the knowledge and consent of his principal enter into any business in competition with his principal. State ex rel. Harris v. Gautier, supra.
While these principles of agency law are clearly applicable to a real estate broker when he is acting as the agent for a seller of real property, there is no apparent reason why these general principles are not equally applicable to an agency relationship which exists between a broker and his corporate employer. In the instant case, the testimony of the complainant revealed that he operated simultaneously as a broker for his own company and his corporate employer. The two relationships were in obvious conflict since commissions paid to L. E. Hutchinson Realty, Inc. were at Marinatown Realty's
expense and vice-versa. The record in this case strongly suggests that Hoolihan the president of Seago Group, Inc., was unaware of this situation and did not give his consent to the arrangement. For example, the complainant stated that the only consent he believed was required before he placed listings with his own company as opposed to his corporate employer, was his own. As demonstrated by the complainant's testimony at the final hearing, the decision concerning whether to list properties with his own company or Marinatown Realty was made with his own interests primarily in mind as the following exchange illustrates:
Q On your own judgment you decided to list it with L. E. Hutchinson Realty, Inc. instead of Marinatown, Inc?
A Certainly.
A A Most people look after themselves, Sir. (T. p. 111)
Under such circumstances, it is questionable whether the complainant would be entitled to commissions even assuming the allegations set forth in the Administrative Complaint to be true. See Posner v. Fink, 167 Sd.2d 659 (Fla. 3rd DCA 1964); 2 Fla. Jur.2d, Agency Sections 71 and 76.
Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED:
That the Administrative Complaint filed against Marinatown Realty, Inc. be dismissed.
DONE and ORDERED this 28th day of April, 1982, in Tallahassee, Florida.
SHARYN L. SMITH
Filed with the Clerk of the Division of Administrative Hearings this 28th day of April, 1982.
Xavier J. Fernandez, Esquire NUCKOLLS JOHNSON & FERNANDEZ
James A. Neel, Esquire 3440 Marinatown Lane, N.W. Fort Myers, Florida 33903
Frederick H. Wilsen, Esquire Assistant General Counsel
Samuel R. Shorstein, Secretary Department of Professional Regulation
Carlos B. Stafford Executive Director
