STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL )

REGULATION, BOARD OF REAL )

ESTATE, )

)

Petitioner, )

)

vs. ) CASE NO. 82-876

)

JAMES REINLIE, JR., )

)

Respondent. )

)

RECOMMENDED ORDER

This case was heard pursuant to notice on March 9, 1983, in Deland, Florida, by Stephen F. Dean, assigned Hearing Officer of the Division of Administrative Hearings. This case was presented upon a multi-count Administrative Complaint filed against the Respondent, James Reinlie, Jr., by the Board of Real Estate (now Florida Real Estate Commission) alleging that Reinlie had made certain specific false representations to Estelle Pitts, the mother of William Lambert.

APPEARANCES

For Petitioner: John G. DeLancett, Esquire, and

James R. Mitchell, Esquire

801 North Magnolia Avenue, Suite 402 Post Office Box 6171-C

Orlando, Florida 32853

For Respondent: Irving Gussow, Esquire

Highway 17-92

Post Office Box 965

Fern Park, Florida 32730

ISSUE

The Administrative Complaint presents essentially the same factual allegations in its various counts supporting different legal violations. These factual allegations are summarized as follow:

1. Reinlie represented to Estelle Pitts that if she put up the earnest money deposit for her son, William Lambert, on the commercial property that Lambert wanted to purchase in the form of notes secured by mortgages on her house: (1) the mortgages and notes would not be a lien on her property; (2) the mortgages and notes would not be recorded; (3) the mortgages and notes would be returned to her when Lambert obtained financing for the property he desired to purchase; (4) the mortgages and notes merely showed good faith on Lambert's part regarding his offer to purchase; (5) Lambert's contract for purchase was contingent upon the sale of commercial property which he owned in South Florida;

   and (6) even if the sale to Lambert did not go through, Mrs. Pitts would not be responsible for the mortgages and notes.

   
   

2. Contrary to his representations, Reinlie recorded the various mortgages and notes executed by Estelle Pitts.

   
   

3. Contrary to his representations, Reinlie advised Estelle Pitts that she would be responsible for the mortgages and notes, and that if said notes were not satisfied "foreclosure proceedings would be initiated."

Petitioner called Estelle Pitts, who testified concerning the representations made by Reinlie. Reinlie testified, denying that he had made said representations. William Lambert was the only other person present when most of these alleged representations were made. Lambert, who had suffered a physically debilitating stroke, could not attend the hearing, and his deposition was received into the record. Lambert's recollection of the events was wholly supportive of neither his mother's nor Reinlie's recollection of the events.

None of the witnesses were disinterested: Reinlie's license was in jeopardy; Mrs. Pitts' home was in jeopardy; and Lambert is Mrs. Pitts' son.

The conflicts in testimony can only be resolved from extrinsic facts and the credibility of the witnesses. Having considered the facts, the testimony of Reinlie is deemed more credible.

Both parties submitted post hearing proposed findings of fact in the form of a proposed recommended order. To the extent the proposed findings of fact have not been included in the factual findings in this order, they are specifically rejected as being irrelevant, not being based upon the most credible evidence, or not being a finding of fact.

FINDINGS OF FACT

The following Findings of Fact are based upon the prehearing stipulation of the parties:

1. At all times in question, the Respondent, James Reinlie, Jr., was a registered real estate broker in the State of Florida and is the holder of license number 0112757.

   
   

2. The parties were duly noticed pursuant to the provisions of Chapter 120, Florida Statutes (1981).

   
   

3. William C. Lambert, Estelle Pitts' son, did not have the necessary money with which to furnish a deposit to the sellers of the Robin Hood Motel at the time the contract for sale and purchase and the addendums thereto were executed.

   
   

4. A contract for sale and purchase was executed on August 11, 1979, and August 13, 1979, between Irene B. Smith, seller, and William C. Lambert, Sr., buyer, for the purchase of the Robin Hood Motel, located at 1150 North Atlantic Avenue in Daytona Beach, Florida. Respondent Reinlie was a co-broker on that contract.

   
   

5. On August 13, 1979, an addendum to the contract for sale and purchase was executed between Irene B. Smith, seller, and William C. Lambert, Sr., buyer.

6. On January 7, 1980, and January 8, 1980, a second addendum was executed under the original contract for sale and

   purchase between Irene B. Smith, Gilbert Brown and Liselotte M. Brown, sellers, and William C. Lambert, Sr., buyer.

   
   

7. On August 13, 1979, a mortgage deed and mortgage note were executed by Estelle Pitts and Linda L. Smith (Mrs. Pitts' daughter) as mortgagor, to B.I.C. Realty, Inc., escrow account, as mortgagee, said note in the principal amount of

   $5,000 and secured by a first mortgage on 900 West New York Avenue, Deland, Florida, also known as:

   
   

   . . . the east 60' of the north 150' of Lot 1, Block I, Stetson Home Estates MB 10, page 79, Volusia County, Florida;

   
   

   Said property is the residential home of Estelle Pitts with title in the names of Estelle Pitts and Linda L. Smith.

   
   

8. On October 16, 1979, a second mortgage was executed by Estelle Pitts and her daughter, Linda L. Smith, dated November 1, 1979, and secured by a mortgage note in the amount of $5,000 on the residential home of Estelle Pitts, said property being described in detail in paragraph 7 above.

   
   

9. On October 16, 1979, a third mortgage was executed by Estelle Pitts and her daughter, Linda L. Smith, dated November 1, 1979, and secured by a mortgage note in the amount of $5,000 on the residential home of Estelle Pitts, said property being described in detail in paragraph 7 above.

   
   

10. On August 17, 1979, Respondent Reinlie took the first mortgage deed and mortgage note to The Abstract Corporation and instructed that it be recorded in the public records of Volusia County, Florida, said first mortgage deed and mortgage note in the amount of $5,000 dated August 11, 1979, and executed August 13, 1979.

    
    

11. On November 29, 1979, Reinlie took the second mortgage deed and note to The Abstract Corporation and instructed that it be recorded in the public records of Volusia County, said second mortgage deed and note in the amount of

    $5,000 dated November 1, 1979, and executed October 16, 1979.

    
    

12. On December 4, 1979, Reinlie took the third mortgage deed and note to The Abstract Corporation and instructed that it be recorded in the public records of Volusia County, said third mortgage deed and note in the amount of

    $5,000 dated December 1, 1979, and executed October 16, 1979.

    
    

13. On May 2, 1980, Estelle Pitts notified Reinlie that she wanted the aforesaid mortgages and notes returned to her immediately.

    
    

14. On May 14, 1980, Reinlie notified Mrs. Pitts that he would not return the mortgages and notes and had been advised by the "former" owners of the Robin Hood Motel that they desired to pursue their full deposit, plus expenses, under the contract and, if necessary, would foreclose the mortgages and notes in order to enforce their legal rights.

    
    

15. On May 19, 1982, Reinlie executed three satisfactions of mortgages on the three mortgages and notes referred to in paragraphs 7, 8 and 9 above upon the advice of counsel.

    The following Findings of Fact are based upon testimony and evidence adduced at the hearing:

    
    

16. Reinlie did not state to Mrs. Pitts that the mortgages would not be recorded and would not be a lien on her property. (See Lambert deposition, pages 11 and 12.)

    
    

17. William Lambert was aware that the mortgages and notes were to be recorded and would be a lien on his mother's property. Mrs. Pitts did not understand the transaction and the terms thereof, although Lambert explained it to her. (See Lambert deposition, page 13.)

    
    

18. The contract for purchase was not contingent upon the sale of Lambert's motel in Hollywood, Florida. Lambert signed the contract and was presumably aware of its terms. Reinlie did not represent to Mrs. Pitts that the contract for purchase was contingent upon the sale of her son's motel in Hollywood. (See transcript, page 20.)

    
    

19. It was Lambert's intent to replace the mortgages on his mother's home with cash he would obtain from the sale of his motel in Hollywood. By substitution of the cash for the mortgages and notes, it was Lambert's understanding that his mother's home would not be "used," i.e., that her home was not in danger of foreclosure. However, Lambert realized that the money would have to be substituted for the mortgages and notes. Lambert felt that he could sell his Hollywood motel prior to the closing date on the Robin Hood Motel. Had Lambert sold his motel in Hollywood prior to said closing, the mortgages and notes on his mother's house would have been cancelled, i.e., "returned" to her.

    
    

20. Lambert initially advised Reinlie that his mother owned her home free and clear. At that time, both Lambert and Reinlie were seeking the means for Lambert to come up with the earnest money deposit, which does show a "good faith offer." Reinlie suggested the use of Mrs. Pitts' home to secure the deposit. Lambert discussed this matter with his mother, who agreed and executed the various mortgages and notes. Reinlie did not make the primary approach to Mrs. Pitts, and it was Lambert who primarily explained the transaction to her.

    
    

21. Both Lambert and Mrs. Pitts stated that they failed to understand the terms and effect of the mortgages and notes. The addendum to the contract provides that the buyer will provide the seller within five days of the date of the contract a mortgage title binder showing the $5,000 deposit mortgage to be a first mortgage. Their failure to understand the transaction was not due to any misrepresentations or lack of explanation to them by Reinlie.

    
    

22. The original closing date was set for late October 1979. When Lambert was unable to sell his Hollywood motel, Reinlie arranged for extensions of the closing date, the first until early December, and the second until January 1980. The considerations for these two extensions were the second and third mortgages and notes. After these were prepared, without signatures, they were delivered to Lambert, who in turn returned each of the executed documents to Reinlie shortly before Reinlie recorded them. Reinlie was not present when said mortgages and notes were executed.

    
    

23. Around Thanksgiving 1979, when it became evident that Lambert was having difficulty closing, Reinlie suggested that the contract, which was similar to an option, be sold. Although the contract would have had to be discounted, it would have reduced the potential loss. Reinlie attempted

    unsuccessfully to do this. Reinlie's suggestion of this course of action did not assure the sale of the contract. (See transcript, page 91.)

    
    

24. By late January 1980, when Lambert could not close, Reinlie attempted to obtain an additional extension, which the sellers refused to grant. At that time, the contract for purchase was in default.

    
    

25. In the spring of 1980, the sellers made demand upon Reinlie for their deposit money. Reinlie advised both Lambert and Mrs. Pitts of the sellers' demand and sought to obtain mortgage financing for Mrs. Pitts in lieu of initiating a foreclosure action. Mrs. Pitts did not elect to borrow the money. Lambert tendered $5,000 to Reinlie in order to settle the matter, which was rejected by the sellers.

    
    

26. The sellers renewed their demand that Reinlie pay them their escrowed deposit. In a meeting with the sellers, Rein lie pointed out that if he foreclosed the mortgages there would be additional delay and legal costs. Because the notes had an interest rate of ten percent and were secured by the mortgages, Reinlie suggested that nothing be done during the life of Mrs. Pitts, but a claim be made against her estate. The sellers determined that this was a better approach than forcing Reinlie to foreclose on the mortgages.

    
    

27. Thereafter, all of the parties determined that they desired to settle the matter. Reinlie advised the sellers that he would release the mortgages and notes to Mrs. Pitts if they, in turn, would release him from his obligation to pay them the escrowed money. This was finally done and the matter resolved on that basis.

    
    

    CONCLUSIONS OF LAW

    
    

28. The Board of Real Estate (now Florida Real Estate Commission) has authority to discipline the Respondent, who is its licensee, pursuant to Chapter 475, Florida Statutes. The Division of Administrative Hearings has jurisdiction to hear this cause and enter this Recommended Order pursuant to Section 120.57, Florida Statutes.

    
    

29. The facts do not reveal any misrepresentations made by Reinlie to Mrs. Pitts. Reinlie did not explain the subject transaction to her. Mrs. Pitts was not a party to-the contract. Reinlie had no duty to explain the transaction in detail to her. Mrs. Pitts provided the mortgages and notes in her son's behalf at her son's request after he explained the transaction to her. Even if one were to assume that Mrs. Pitts was a party, Reinlie's primary duty was to the sellers. His only duty to Lambert and Mrs. Pitts was to be open and honest with them. This duty did not extend to providing Lambert and Mrs. Pitts with cautionary advice concerning the possible outcome if Lambert defaulted. The terms of the contract, notes and mortgages were clear. Lastly, Reinlie attempted to do all he could to prevent real hardship to Mrs. Pitts while protecting his principals. Reinlie did not violate Section 475.25(1)(b), Florida Statutes, as alleged in the various counts of the Administrative Complaint. Reinlie was authorized and required by the terms of the contract to file the mortgages and notes. He did not violate Section 475.42(1)(j), Florida Statutes.

    
    

30. Lastly, Reinlie is charged with violating Section 475.25(1)(d), Florida Statutes, by failing to notify the Board of conflicting demands for escrowed property. Although not so stated, it is implicit that this section presupposes that a claimant set forth some reasonable claim to the escrowed property. It is uncontroverted that Lambert defaulted on the contract. The notes

represented the money deposited by the purchaser, Lambert, which were forfeit under the contract if he defaulted. Mrs. Pitts was not a party to the contract making claim to property held in escrow under said contract. Although the notes and mortgages were on her property, she had put them up as security for her son. Her demand did not assert any claim regarding any dispute with her son which would give rise to a right to have the notes and mortgages returned to her. She did not have a reasonable claim or failed to state a reasonable claim to the escrowed property. Reinlie did not violate Section 475.25(1)(d), Florida Statutes, by failing to notify the Board of Mrs. Pitts' claim,

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law that the Respondent, James Reinlie, Jr., did not violate Sections 475.25(1)(b), (d) or (j), Florida Statutes, it is recommended that the charges filed against him in the Administrative Complaint be dismissed.

DONE and RECOMMENDED this 25th day of May, 1983, in Tallahassee, Leon County, Florida.

STEPHEN F. DEAN,

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 25th day of May, 1983.

COPIES FURNISHED:

John G. DeLancett, Esquire James R. Mitchell, Esquire 801 North Magnolia Avenue, Suite 402

Post Office Box 6171-C Orlando, Florida 32853

Irving Gussow, Esquire Highway 17-92

Post Office Box 965

Fern Park, Florida 32730

Frederick Roche, Secretary Department of Professional Regulation

130 North Monroe Street Tallahassee, Florida 32301

Harold Huff, Executive Director Florida Real Estate Commission

400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802

William M. Furlow, Esquire Florida Real Estate Commission

400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802

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AGENCY FINAL ORDER

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STATE OF FLORIDA

DEPARTMENT OF PROFESSIONAL REGULATION FLORIDA REAL ESTATE COMMISSION

DEPARTMENT OF PROFESSIONAL REGULATION, FLORIDA REAL ESTATE COMMISSION

Petitioner,

vs. CASE NO. 0008140

DOAH NO. 82-876

JAMES REINLIE JR.

Respondent.

/

FINAL ORDER

The Florida Real Estate Commission heard this case on June 21, 1983 to issue a Final Order.

Hearing Officer Stephen Dean of the Division of Administrative Hearings presided over a formal hearing on March 9, 1983. On May 25, 1983 he issued a Recommended Order which is adopted by the Florida Real Estate Commission as to all Findings of Fact and Recommendation. However, as to the Conclusions of Law, the Florida Real Estate Commission toots said Conclusions, except for the following two sentences which are rejected. Said sentences are:

1. Reinlie ad no duty to explain the transaction in detail to her.

   
   

2. Even if one were to assume that Mrs. Pitts was a party, Reinlie's primary duty was to the sellers.

A copy of this Recommended Order is attached hereto as Exhibit A and made a part hereof.

It is therefore ORDERED that the Complaint against the Respondent be dismissed.

DONE AND ORDERED this 21st day of June 1983 in Orlando, Florida.

Howard C. Babcock, Jr., Chairman Florida Real Estate Commission

Docket for Case No: 82-000876

Orders for Case No: 82-000876