STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL ) REGULATION, FLORIDA REAL ESTATE ) COMMISSION, )

)

Petitioner, )

)

vs. ) CASE NO. 83-3251

)

DAVID Y. COVERSTON, )

)

Respondent. )

)

RECOMMENDED ORDER

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 August 17, 1984, at Clearwater, Florida.

APPEARANCES

For Petitioner: John Huskins, Esquire

Department of Professional Regulation Post Office Box 1900

Orlando, Florida 32802

For Respondent: Respondent was not present or represented.

By Administrative Complaint filed July 26, 1983, the Department of Professional Regulation, Division of Real Estate, seeks to revoke, suspend, or otherwise discipline the license of David Y. Coverston, Respondent. As grounds therefor, it is alleged that an earnest money deposit was placed in an escrow account in the name of Respondent on which Michael Sedwick was signatory, that when the transaction failed to close due to default of the sellers, the earnest money deposit was not returned to the buyer because it had been dissipated by Sedwick. Respondent is charged with failure to deliver upon demand funds in his possession to the parity entitled to those funds. Charges against other Respondents, viz., Bailey and Sedwick, were resolved by the Commission in informal proceedings.

Although Respondent was not present at the hearing, a Notice of Hearing was mailed to Respondent's last address on file with the Florida Real Estate Commission and was not returned as undelivered. Additionally, Respondent forwarded to the Hearing Officer on September 7, 1984, a copy of his correspondence with the State of Florida, Comptroller's Office, regarding the escrow account.

At the hearing Petitioner called three witnesses and eight exhibits were admitted into evidence.

FINDINGS OF FACT

1. At all times here relevant David Y. Coverston, Respondent, was registered as a real estate broker with the Florida Real Estate Commission and, on his registration renewal request dated February 28, 1980, he listed an office at 1231 Kapp Drive, Clearwater, Florida, and one at Gainesville, Florida.

   
   

2. The Clearwater office was managed by Eugene Bailey, a licensed real estate salesman, and Respondent visited the office at infrequent intervals. Michael Sedwick held an inactive real estate salesman's license and in 1980 was engaged in real estate development. He worked out of the Respondent's office at 1231 Kapp Drive, Clearwater, Florida, and knew Respondent. Specifically, Sedwick was developing 12 waterfront townhouse condominiums.

   
   

3. On February 4, 1980, Sedwick opened an escrow account in the Bank of Clearwater under the name of David Coverston. Checks were printed with the heading David Coverston, Registered Real Estate Broker, Escrow Account. Sedwick was the authorized signatory on this account.

   
   

4. During the month of February 1980 deposits of $42,600 were placed in this account and checks totaling $41,719.08 were written against this account, leaving a balance of $880.92. During December 1980 a deposit of $4,000 was made in this account and a check for $4,000 was written against this account. On December 20, 1980, a check for $500 drawn against this account was written payable to David Coverston. This check was endorsed by Coverston and paid by payor bank on March 20, 1981, leaving a balance of $330.92 in the account (Exhibit 2)

   
   

5. On April 8, 1981, Indian Harbor Condominiums No. 2, by its developer, Michael Sedwick, entered into a contract to sell 11 of the 12 units in this condominium to Bieder Equity Corporation and a $100,000 earnest money deposit was given by Bieder payable to David Coverston Escrow Account (Exhibit 3) and was deposited in this account.

   
   

6. Due to defects in the title this contract failed to close and by letter dated March 22, 1982, Bieder Equity Corporation demanded return of the deposit, less certain authorized expenditures, from Sedwick (Exhibit 7). A copy of that letter was sent to Respondent. Sedwick failed to refund the deposit, and by letter dated April 6, 1982 (Exhibit 8), Bieder Equity Corporation demanded return of its deposit from Respondent.

   
   

7. The $100,000 check was deposited in the David Coverston Escrow Account on April 10, 1981 (Exhibit 2). During the next few months small deposits were made to this escrow account and checks were written against this account. The final deposit of $200 in this account on October 2, 1981, brought the balance in the account to $91.33. It has remained at this balance since that time.

   
   

8. Although Respondent did not open this escrow account or have signature authority on this account, he was aware the account existed. He was also aware that the contract for the sale of the 11 condominiums was being run through the Clearwater office and he anticipated the office would receive a commission on this transaction.

   
   

9. The checkbook for this account was maintained by the real estate office secretary who prepared checks for Sedwick's signature.

10. Neither Sedwick nor Respondent have delivered the monies due Bieber Equity Corporation.

    
    

    CONCLUSIONS OF LAW

    
    

11. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings.

    
    

12. Respondent is charged with violating Section 475.25(1)(d) Florida Statutes, which provides in pertinent part the Commission may take disciplinary action against a license if it finds the licensee:

    
    

    Has failed to account or deliver to any person . . . upon demand of the person entitled to such accounting and delivery, any personal property, such as money . . . or other document of value . . . 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.

    
    

13. Respondent was aware that the check from Bieber Equity Corporation had been placed in an escrow account which was in his name and used by his branch office in Clearwater. Respondent, as a broker, is presumed to be aware of various basic requirements of brokers, such as the requirement that earnest money deposits are to be deposited forthwith in an escrow account upon receipt and remain there until disbursement is authorized.

    
    

14. Respondent's position appears to be that he did not authorize the opening of the escrow account, had no signatory authority on this account, and therefore, has no responsibility for the account. At the time of this transaction, Respondent had an active real estate office in Clearwater, was the licensed broker for that office, and had a real estate salesman, Bailey, as office manager. Bailey could operate only under the authority of Respondent's broker's license. Accordingly, Respondent is responsible for the actions of his agent which occurred while the agent was carrying out his authorized functions. Bieber Equity Corporation made out the check, representing the earnest money deposit, to David Coverston Escrow Account. They were entitled to rely on the fact that Respondent was a licensed real estate broker and, as such, had a duty to protect those escrowed funds from wrongful disbursement. Respondent failed to meet this required responsibility.

    
    

15. From the foregoing it is concluded that David Y. Coverston, in whose name an escrow account was opened for his Clearwater branch real estate office, was aware of the escrow account; was aware a $100,000 deposit had been placed in that account; and thereafter he failed to exercise any supervision over the account. As a result of his failure to supervise this account, funds therein were disbursed without authority. This constitutes a violation of Section 175.25(1)(d) Florida Statutes, above cited. It is

RECOMMENDED that a Final Order be entered finding David Y. Coverston guilty of violating Section 475.25(1)(d) Florida Statutes, and that his license as a real estate broker be suspended for six (6) months.

ENTERED this 8th day of October, 1984, at Tallahassee, Florida.

K. N. AYERS, 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 8th day of October, 1984.

COPIES FURNISHED:

John Huskins, Esquire Department of professional

Regulation - Legal Post Office Box 1900 Orlando, Florida 32892

David Y. Coverston Post Office Box 5053

Inverness, Florida 32550

Harold Huff, Director Division of Real Estate

Department of Professional Regulation Post Office Box 1900

Orlando, Florida 32002

Mr. Fred M. Roche Secretary

Department of Professional Regulation

130 North Monroe Street Tallahassee, Florida 32301

Docket for Case No: 83-003251

Orders for Case No: 83-003251