vs. ) CASE NO. 81-2656
CHARLES E. MORRIS, )
Respondent. )
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above- styled case on 14 April 1982 at Clearwater, Florida.
For Petitioner: Bruce D. Lamb, Esquire
For Respondent: David F. Kern, Esquire
Jack R. St. Arnold, Esquire Post Office Box 1039 Dunedin, Florida 33628
By Administrative Complaint dated 28 September 1981 the Department of Professional Regulation, Board of Real Estate, seeks to revoke, suspend or otherwise discipline the license of Charles E. Morris, Respondent, as a registered real estate broker-salesman. As grounds therefor it is alleged that Respondent, in June 1980 while acting under his license as a real estate salesman, made several misrepresentations to Michael E. Weber and Janet Weber in connection with the sale of a business to the Webers, acted as a broker without holding a broker's license, and is guilty of misrepresentation, false promises, false pretenses, coupled with negligence or breach of trust in a business transaction. Specific allegations include representation that he was experienced in selling ongoing businesses; that he did not investigate the financial records of the business he sold to the Webers; that he told the Webers the business would immediately produce a profit sufficient to support them; that he failed to determine if the rental for the property would remain the same or increase with the new tenancy; that he failed to use the proper contract for the
sale of a business but used a contract intended to be used for a residential sale; that he assured the Webers there was no need for them to procure the services of an attorney for advice in the transaction; and that he was negligent in investigating the relevant factors involved in making a decision to purchase an ongoing business.
At the hearing, eight witnesses were called by Petitioner; three witnesses, including Respondent, were called by Respondent; and 12 exhibits were marked for identification and all except Exhibit 11 were admitted into evidence. The parties stipulated that the testimony of Anne Morrow was essential and agreed that her testimony be submitted by deposition. That deposition was received on June 7, 1982, and has been admitted as Exhibit 13.
At all times here relevant Charles E. Morris, Respondent, was duly licensed by the Florida Board of Real Estate as a real estate salesman. He is presently licensed as a broker-salesman.
Michael E. Weber and Janet Weber, his wife, while vacationing in Florida during the latter part of March 1980, decided they would like to move to Florida. Upon their return to Illinois in early April, they contacted a local realtor who referred them to Tam Bay Realty in Tampa to provide assistance in acquiring a business in the Clearwater-Dunedin area.
The Tam Bay main office in Tampa passed the referral to its Clearwater Branch Office. Barbara Morris, then wife of Respondent, who was acting as branch manager of the Tam Bay Office at 3168 U.S. Highway 19 North, Clearwater, Florida, contacted the Webers to ascertain their desires regarding the purchase of a business. Several telephone calls were made in which the Webers talked to Barbara Morris and to Respondent. During these conversations, the Webers generally outlined their financial situation and the magnitude of the business (from a profit standpoint) in which they were interested. Barbara Morris turned the Webers over to Respondent after advising them that he was more experienced in commercial sales. The Webers were told of a bakery that might suit their needs but, before they could look into it, the business became unavailable.
The Webers returned to Florida in late June and contacted Respondent, who first met them June 23, 1980, and showed them a toy store in a mall which, it turned out, would not produce enough income to satisfy their needs. Immediately thereafter, on June 24, 1980, the Webers were shown Direct Factory Mattress Sales, a company listed with Tam Bay Realty on 23 June and which was for sale for $37,500.
When the Webers arrived in Florida in June 1980 they had $17,000 which Michael Weber had accumulated in a profit-sharing plan with the company he worked for before quitting to come to Florida. The Webers also owned a home in Illinois which they were in the process of selling. Out of the sale of that residence, they expected to realize approximately $20,000. This information was passed to Respondent, as was the information that they had no other resources and expected the business they acquired to immediately generate earnings from which they could support themselves. To meet their expected requirements, approximately $40,000 per year was needed from the business they would acquire.
Prior to 24 June 1980 Respondent had never visited Direct Factory Mattress Sales and had never met the owner, Joseph Afonso. The listing agreement held by Tam Bay Realty (Exhibit 10) had attached thereto a multiple listing form on which various details of the business were contained. That form showed gross income for 1979 of $135,042 with expenses of $113,069, leaving net before taxes of under $22,000.
Upon arrival at Direct Factory Mattress Sales, Respondent and the Webers met the owner, Joseph Afonso, who showed them around the business. When the Webers told Afonso how much they needed from the business for living expenses and that some income would be needed immediately, he told them that he had similar expenses and the mattress business had satisfied those needs. When asked about the discrepancy between $40,000 and the profits generated on the profit and loss statement, Afonso told Weber that cash sales for used mattresses generated a significant part of his income and they were not included on the profit and loss statement. When asked to see his income tax returns, Afonso demurred, saying those were his private records and he would not produce them. Respondent made no independent inquiry or investigation but relied upon the statements of Afonso, to assure the Webers that Direct Factory Mattress Sales would meet their requirements and urged them to sign the Contract to Purchase. On 24 June 1980 Weber executed a contract (Exhibit 5) prepared by Respondent in which he agreed to purchase Direct Factory Mattress Sales for $37,500 and paid
$10,000 cash as a deposit. The seller agreed to take a purchase money mortgage for the $27,500 balance, $10,000 of which was to be repaid when the Webers sold their house in Illinois.
Shortly thereafter the Webers contracted to purchase a residence on which they made a $3,000 down payment and agreed to execute a mortgage, to be held by seller, payable at the rate of $750 per month. Respondent accompanied the Webers to see this house and assured them at the time they executed this contract that the income from Direct Factory Mattress Sale would be sufficient to make those payments.
The form on which the contract for the purchase and sale of Direct Factory Mattress Sales was written was a form adopted for residential sales; however, it was the only form available to Respondent in his office. After preparing the contract and getting it signed by the parties, Respondent signed as witness for all signatures and he also signed for Tam Bay Realty, Inc. in the space advising that the undersigned realtor procuring the contract is the agent of the seller. It was customary for experienced salesmen working for Tam Bay Realty in this branch office to sign contracts in this manner. Such contracts are forwarded to the main office where the active broker is located but no evidence was presented that he countersigns those contracts signed by the salesman (or office manager in some offices) as agent for Tam Bay Realty, Inc. The evidence was conflicting whether the office manager signs all of these contracts before they are sent to the main office. One witness testified (Exhibit 13) that the policy was for the manager to sign all of these contracts; however, the written policy manuals and training manuals for Tam Bay Realty do not contain such a requirement. The evidence was not disputed that the office manager is supposed to review all contracts before they are sent to the main office. Failure to do so would not impair the validity of the contract. Here, the office manager, in the branch office in which Respondent works, was the wife of Respondent, and she testified that she reviewed the contract here involved which was prepared and signed by Respondent. Although she testified that she had no independent recollection of this particular contract, her testimony that she reviewed the contract in compliance with company policy was unrebutted.
Apparently good rapport was established between Respondent and Michael Weber, and the Webers relied on Respondent to "take good care of them" in this transaction as he assured them he would. When asked by the Webers if they should have an attorney to represent them, Respondent advised that he did not think it necessary and that the attorney who handled the closing would be impartial and not represent either party.
Weber and Afonso had toured the store and checked the inventory but no list was made of the inventory and presented to the Webers until the closing on
15 July 1980. Respondent had suggested provisions in the contract that Afonso would stay around for three weeks after the closing to help them get started in business and that he would not open a competing store within a seven-mile radius for at least three years. These provisions were included in the contract.
Afonso agreed with Weber that he (Afonso) would pay the rent for July and that Weber could occupy the premises after the closing for the balance of July without cost. This provision was not inserted in the contract and at closing Weber found himself having to pay one-half of the July rent.
Prior to closing Weber negotiated a new lease with the landlord as Afonso's lease expired July 31, 1980. At Respondent's suggestion he asked for and was given a three-year lease at a cost of $25 per month more than Afonso had paid. However, this increase would have been applied to Afonso's rent had he not sold the business. In addition, the landlord had recently instituted a policy which required damage deposits equal to one month's rent and this policy was applied to Weber's lease (Exhibit 12)
At the closing on 15 July 1980 Weber did not have enough cash to cover the $437.50 in closing costs and Respondent loaned him $100. Also at the closing Afonso could not produce the title to the step-van that was included in the sale and attorney told him that he would have to get the title "squared away" and provide the buyers with title to the step-van. The written inventory provided at the closing was less than seen and agreed to at the time the contract was executed but the Webers accepted this inventory without complaint and without comment from Respondent.
At the time this contract was entered into the Webers were in a hurry to get established in a business. After executing the contracts to purchase Direct Factory Mattress Sales and a house, they returned to Illinois to move their belongings to Florida. Their primary concern appears to have been to get started in business so they could generate income with which to provide the necessities of life. However, during the first week they were in business their gross sales were less than $1,800. On August 1, 1980, they were unable to pay their rent due for August or the damage deposit. On 7 August 1980 the landlord padlocked the door for nonpayment of the rent. The Webers removed the inventory, which they sold, and closed the business and returned to Illinois.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings.
Respondent is charged with violation of Sections 475.25(1)(b) and 475.42, Florida Statutes. The former authorizes disciplinary action against a licensee if the Board finds the licensee has:
Been guilty of fraud, misrepresenta- tion, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence or breach of trust in any business transaction in this state
or any other state, nation, or territory; has violated a duty imposed upon him
by law or by the terms of a listing contract, written, oral, express
or implied, in a real estate transaction; has aided, assisted, or conspired with any other person engaged in any such misconduct and in furtherance thereof;
or has formed an intent, design, or scheme to engage in any such misconduct and has committed an overt act in furtherance of such intent, design,
or scheme. It shall be immaterial to the guilt of the licensee that the victim or intended victim of the mis- conduct has sustained no damage or loss; that the damage or loss has been settled and paid after discovery of the mis- conduct; or that such victim or intended victim was a customer or a person in confidential relation with the licensee or was an identified member of the general public;
Section 475.42(1)(b) provides in pertinent part:
No person licensed as a salesman shall operate as a broker....
It is to be noted that Respondent was the agent for the seller, not for the buyer. Accordingly, he owed to the seller the duty owed an agent to his principal, which is a higher duty than is owed the buyer. What would constitute a breach of trust of the duty owed by an agent to his principal is much less than that which would constitute a breach of trust of the duty owed to the buyer. To the buyer the agent owes the same duty as is owed by his principal to the buyer. That duty is to be truthful and not intentionally deceive the buyer.
While it is recognized that the customer is often of the opinion that the real estate salesman is his agent, the legal fact is that this is not so. Often the salesman encourages this misconception and neglects the duty he owes to the seller in a real estate transaction.
The evidence here presented will not support a finding that the Respondent was guilty of fraud, misrepresentation or breach of trust or other violation of Section 475.25(1)(b) Florida Statutes, as alleged, in procuring the contract between Afonso and Weber. Although there was no dispute regarding many of the facts alleged in the Administrative Complaint, nevertheless these facts
do not constitute the offense alleged. Respondent erred in advising the Webers that they did not need an attorney. Obviously, he was considering only the closing of the transaction and not advice on the feasibility of the business satisfying the Webers' financial needs. However, this is not the type conduct proscribed by Section 475.25(1)(b), above quoted.
With respect to Count II that alleges Respondent acted as a broker by signing the contract he negotiated between Afonso and Weber, the evidence will not support such a finding. Although the witness was the wife of Respondent at the time of the transaction complained of, and her testimony therefore somewhat suspect, nevertheless her testimony that she checked over the contract in compliance with the policy of Tam Bay Realty was not rebutted.
From the foregoing it is concluded that Respondent encouraged and abetted the Webers in entering into an improvident real estate transaction which could have been avoided by the exercise of prudence on the part of the Webers or Respondent; but that Respondent did not owe the buyers the duty to protect them from improvident transactions from which they were as well qualified as he to protect themselves. There is a significant difference between "puffing" and fraud and while Respondent may have been guilty of the former, the evidence will not support a finding of guilty of the latter. It is further concluded that the evidence will not support a finding that Respondent acted as a broker when he signed the contract (Exhibit 5) . It is, therefore,
RECOMMENDED that the Board of Real Estate enter an order finding Charles E. Morris not guilty of all allegations in the Administrative Complaint and dismiss the charges against him.
K. N. AYERS Hearing Officer
FILED with the Clerk of the Division of Administrative Hearings this 10th day of June, 1982.
Bruce D. Lamb, Esquire Samuel R. Shorstein, Secretary Department of Professional Department of Professional Regulation Regulation
130 North Monroe Street 130 North Monroe Street Tallahassee, Florida 32301 Tallahassee, Florida 32301
David F. Kern, Esquire C. B. Stafford, Executive
Post Office Box 1900 Jack R. St. Arnold, Esquire Orlando, Florida 32802 Post Office Box 1039
