STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL )

REGULATION, Florida Real )

Estate Commission, )

)

Petitioner, )

)

vs. ) CASE NO. 82-2344

)

WILLIAM HORVITZ and )

HOLLYWOOD, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

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 July 21, 1983, in Fort Lauderdale, Florida. The following appearances were entered:

APPEARANCES

For Petitioner: John Huskins, Esquire

Department of Professional Regulation

400 West Robinson Street Orlando, Florida 32801

For Respondent: Carlos Alvarez, Esquire

Carolyn S. Raepple, Esquire HOPPING BOYD GREEN & HAMS

Lewis State Bank Building Tallahassee, Florida 32301

The issue at the final hearing was whether the Respondents are guilty of dishonest dealing by trick, scheme or device, culpable negligence, or breach of trust for refusing to return an earnest money deposit to a purchaser.

At the final hearing, David R. Mazza, Vice President, Hollywood Federal, and Linda Medvin, the purchaser of the property and complainant, testified for the Petitioner. Theodore Stotzer, General Counsel, Hollywood, Inc., and Mildred McGehee, field representative for Hollywood, Inc., testified for the Respondents. Petitioner's Exhibits 1-4 and Respondents' Exhibits 1-15 were offered and admitted into evidence.

Proposed Recommended Orders containing findings of fact have been submitted by the parties and considered in the preparation of this Recommended Order.

When the parties' findings of fact were consistent with the weight of the credible evidence introduced at final hearing, they were adopted and are reflected in this Recommended Order. To the extent that the findings were not consistent with the weight of the credible evidence, they have been either

rejected, or when possible, modified to conform to the evidence. Additionally, proposed findings which were subordinate, cumulative, immaterial or unnecessary have not been adopted.

Following the hearing the Petitioner was granted an extension of time to file a Proposed Recommended Order. Petitioner's Proposed Recommended Order was received on September 2, 1983.

FINDINGS OF FACT

1. The Respondent Hollywood, Inc., is a licensed corporate real estate broker engaged in real estate activities. Hollywood, Inc., is also a subdivider and builder of residential homes in Broward County.

   
   

2. One of the qualifying brokers for Respondent Hollywood, Inc., is the Respondent William D. Horvitz, who also serves as President and a Director of the corporation.

   
   

3. On or about March 12, 1981, Mildred McGehee, a real estate salesman working for the Respondent Hollywood, Inc., showed a model home and building in Rock Creek, a Hollywood, Inc., development, to Andrew and Linda Medvin.

   
   

4. As a result of McGehee's efforts, the Medvins, as Buyers, signed a contract with Respondent Hollywood, Inc., as Seller, to construct and purchase a dwelling unit for a total purchase price of $118,900.

   
   

5. Pursuant to the contract, the Medvins gave the Respondent Hollywood, Inc., a good faith deposit for $11,890 at the time the contract was executed. The Medvins' deposit was not placed into a broker's escrow account by the Respondent Hollywood, Inc.

   
   

6. The subject contract required the Medvins to supply $11,910 cash at closing and to make application to a qualified lending institution for the mortgage balance, $95,100.

   
   

7. Under the provisions of paragraph (c) on page two of the contract, the contract was contingent upon:

   
   

   "BUYER obtaining a firm commitment (the term 'firm commitment' as used in this Contract shall mean a written

   agreement by a Qualified Lending Insti- tution to make a mortgage loan to BUYER on the Property in the amount of the above MORTGAGE BALANCE) for said loan within thirty (30) days from the date of execution hereof by SELLER." Respondent's Exhibit 1.

   
   

8. The mortgage balance referred to in the contract was $95,100.

   
   

9. The failure of the Medvins to make and complete an application for the mortgage financing or failure of the Medvins to timely satisfy any conditions in the firm commitment was cause for default under the contract unless the Medvins made other arrangements satisfactory to Respondent Hollywood, Inc., for payment of the total purchase price at closing.

10. The Medvins timely filed applications for $80,000 rather than $95,100 as set forth in the contract, with four lending institutions. Two of the lending institutions rejected the application, one offered a $75,000 loan and one, Hollywood Federal, offered a commitment of $80,000 subject to the Medvins' sale and verification of the sale of the home which they then owned.

    
    

11. The delivery by the Medvins of the disapproval for mortgage financing from a qualified lending institution would have resulted in the return of the Medvins' deposit and termination of the contract. A copy of a disapproval of financing was never delivered to Respondent Hollywood, Inc., by the Medvins.

    
    

12. The Medvins gave the letter of commitment with conditions issued by Hollywood Federal to Respondent Hollywood, Inc., pursuant to the contract.

    
    

13. As long as the special conditions of the mortgage loan commitment made by Hollywood Federal were met, the lender was obligated to make the loan to the Medvins.

    
    

14. The Medvins intended to personally supply at closing the difference between the amount due Respondent Hollywood, Inc., under the contract and the mortgage financing received from Hollywood Federal.

    
    

15. Upon receipt from the Medvins of the mortgage loan commitment with conditions, the Respondent Hollywood, Inc., commenced construction on their home pursuant to the contract.

    
    

16. The Respondent Hollywood, Inc., constructed a residence for the Medvins in accordance with the specifications contained in the contract and the changes and modifications to the residence requested by the Medvins during the course of construction.

    
    

17. A condition of the mortgage financing commitment from Hollywood Federal received by the Medvins was that they sell their present home prior to February 19, 1982, the scheduled date of closing.

    
    

18. The Medvins did not sell their present home prior to February 19, 1982, the scheduled date of closing.

    
    

19. Section 2.C of the subject contract provides:

    
    

    Failure by the Buyer to timely make and complete application for mortgage financing or failure by the Buyer to satisfy any conditions in the firm commitment timely shall be cause for default of Buyer under Paragraph 7 (as hereinafter) of the Contract unless Buyer makes other arrangements satisfactory to the Seller for pay- ment of the Total Purchase Price

    at closing. (Emphasis added.) Respondent's Exhibit 1.

    
    

20. Pursuant to the contract, the Respondent Hollywood, Inc., notified the Medvins that their home was constructed and complete and a closing date of February 19, 1982, was set.

21. Although Linda Medvin had repeated contact with Hollywood, Inc.'s personnel between April 20, 1981, and February, 1982, regarding extras and changes to the house being constructed for her, the Medvins did not inform Hollywood, Inc., until February 10, 1982, that they did not intend to close on the home.

    
    

22. The Medvins failed to appear at the closing which was scheduled for February 19, 1982.

    
    

23. The contract provides that as soon as Seller notifies the Buyer of his readiness to close, it is the duty of the Buyer to execute all documents required by the lending institution in order to close the mortgage loan and home purchase simultaneously.

    
    

24. The Respondent Hollywood, Inc., was informed by legal counsel that the failure of the Medvins to make arrangements satisfactory to Hollywood, Inc., for payment of the purchase price at closing constituted a default by the Medvins as Buyers under the terms of the contract and all payments including the deposit were to be retained by the Seller as liquidated damages.

    
    

25. The Medvins through counsel demanded the return of their earnest money deposit. The Respondents have refused to return the deposit based on their belief that the Medvins were in default under the contract.

    
    

26. The Respondent, William D. Horvitz, has not personally engaged in any dealings with the Medvins and is not the only licensed broker associated with Hollywood, Inc.

    
    

27. The Respondent Horvitz was not involved either directly or in a supervisory capacity in the transaction between the Medvins and Hollywood, Inc.

    
    

    CONCLUSIONS OF LAW

    
    

28. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action. Section 120.57(1), F.S.

    
    

29. The Respondents are charged with violating Section 475.25(1)(b), Florida Statutes, which authorizes the Florida Real Estate Commission to suspend or revoke a real estate license or to impose an administrative fine not exceeding $1,000 for each separate offense, if it finds that a licensee has been guilty of:

    
    

    (b) . . . fraud, misrepresentation, concealment, false promises, false pre- tenses, dishonest dealing by trick, scheme or device, culpable negligence, or a breach of trust in any business trans- action in this state. . . .

    
    

30. It is unnecessary in this case to determine whether the Medvins actually breached the contract by failing to satisfy the condition in the loan commitment to sell their home. Instead, the only issue which must be determined is whether the Respondents' actions, considering all of the circumstances presented, constitute a violation of Section 475.25(1)(b) Florida Statutes.

    
    

31. Significantly, the contract in question is not for the purchase of an existing home, but instead, involves the construction and sale of a home

    specifically built for a purchaser. When the contract is considered with this fact in mind, it was neither unreasonable nor clearly erroneous for the Respondent Hollywood, Inc., to construe the contract in a manner which placed the Medvins in default. Further, the Respondent Hollywood, Inc., refused to return the Medvins' deposit based on advice of counsel, Theodore Stotzer, who informed the Respondent that the Medvins had breached the contract, were therefore in default, and any deposit could be withheld as liquidated damages.

    
    

32. The action of the Respondent Hollywood, Inc., in failing to return the Medvin deposit was not the result of any misrepresentation, trick, concealment, false promise, or breach of trust, but rather was based on its belief that the Medvins were in default under the contract and that it had the legal right to retain the deposit under the contract. No evidence was presented that the Respondents dealt with the Medvins dishonestly or defrauded them. Instead, what was demonstrated was a legitimate dispute between a buyer and purchaser over the construction of the terms of a contract.

    
    

33. Since it is concluded that the Petitioner failed to sustain its burden of proof that Respondent Hollywood, Inc., violated Section 475.25(1)(b), F.S., in its dealing with the Medvins, it is unnecessary to consider the allegations involving the Respondent Horvitz.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED:

That the Florida Real Estate Commission enter a Final Order dismissing the Administrative Complaint filed against Respondents Hollywood, Inc., and William

D. Horvitz.

DONE AND ENTERED this 30th day of September, 1983, at Tallahassee, Florida.

SHARYN L. SMITH, 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 30th day of September, 1983.

COPIES FURNISHED:

John Huskins, Esquire Department of Professional Regulation - Legal Section

400 West Robinson Street Orlando, Florida 32801

Carlos Alvarez, Esquire and

Carolyn S. Raepple, Esquire HOPPING BOYD GREEN & SAMS

Post Office Box 6526 Tallahassee, Florida 32314

Randy Schwartz, Esquire Assistant Attorney General Department of Legal Affairs Suite 212

400 West Robinson Street Orlando, Florida 32801

Howard Huff, Executive Director Florida Real Estate Commission Department of Professional Regulation

400 West Robinson Street Orlando, Florida 32801

Fred M. Roche, Secretary Department of Professional Regulation

130 North Monroe Street Tallahassee, Florida 32301

Docket for Case No: 82-002344

Orders for Case No: 82-002344