STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL ) REGULATION, FLORIDA REAL )

ESTATE COMMISSION, )

)

Petitioner, )

)

vs. ) CASE NO. 84-0650

)

ROBERT H. KARN and )

ROBERT H. KARN, INC., )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case in Ft.

Lauderdale, Florida on July 20, 1984, before Michael M. Parrish, a duly designated Hearing Officer of the Division of Administrative Hearings. At the hearing the following appearances were made:

For Petitioner: John Huskins, Esquire

Department of Professional Regulation

400 West Robinson Street Orlando, Florida 32801

For Respondent: Mr. Robert H. Karn

Post Office Box 291500 Davie, Florida 33329-1500

INTRODUCTION

At the hearing the Petitioner presented the testimony of the following witnesses: Letitia Daugherty, Lois Rutkin, Dan Drew, Joseph A. Capraro, Alfred Supine, and Marilyn Ann McKelvey. The Petitioner also offered four exhibits, all of which were reviewed in evidence without objection. The Respondents presented the testimony of the following witnesses: Robert H. Karn (the individual Respondent), Gwendolyn Karn (his wife), and Anthony Nicola. The Respondents also offered six exhibits; Respondents' Exhibits Number 1 and 2 were rejected, but Respondents' Exhibits Number 3, 4, 5 and 6 were received in evidence without objection.

Subsequent to the hearing a transcript of the hearing was filed with the Division of Administrative Hearings on August 6, 1984. Pursuant to agreement (Tr. 229) the parties were allowed until September 5, 1984, within which to file proposed findings of fact, proposed conclusions of law, proposed recommended orders and/or memorandums of law. On September 5, 1984, the Respondents filed a letter which contains a summary of their view of the case. 1/ The Petitioner did not file any post hearing submission to the Hearing Officer.

ISSUES

This is a case in which the Petitioner seeks to suspend or revoke the Respondents' licenses, or take other disciplinary action against the Respondents, for reasons which are alleged in a five-count Administrative Complaint. All of the allegations of the Administrative Complaint arise from two transactions; a rental agreement involving property owned by Mr. and Mrs. Capraro and another rental agreement involving property owned by Ms. Supino. The Administrative Complaint alleges that as a result of the Respondents' actions in connection with these two transactions the Respondents have violated Section 475.25(1)(b), (d), and (k) Florida Statutes. The Respondents dispute some of the factual allegations and deny that there was any violation.

FINDINGS OF FACT

1. Based on the stipulations of the parties, on the testimony of the witnesses at the hearing, and on the exhibits received in evidence, I make the following findings of fact: 2/

   
   

2. At all times relevant and material, Robert H. Karn has been licensed as a real estate broker, having been issued license number 0122138. At all times relevant and material, Robert H. Karn, Inc., has been a corporation licensed as a real estate broker, having been issued license number 0214562. The street address of both Respondents is 5211 Southwest 91 Terrace, Cooper City, Florida 33328. (Tr. 6-7)

   
   

   Findings regarding the transaction involving the Capraro property

   
   

3. During May of 1983, Robert H. Karn was the listing broker for the rental of a residence owned by Joseph A. Capraro and Vita M. Capraro. (T. 51,

   156) Letitia Daugherty was interested in renting a residence and another broker, Lois Rutkin, showed the Capraro property to Daugherty. Negotiations followed and thereafter, on May 13, 1983, Letitia Daugherty, as prospective tenant, and Joseph A. Capraro and Vita M. Capraro, as landlords, signed a document titled Agreement To Enter Into A Lease. The Agreement required that Daugherty pay the amount of $950.00 "as an earnest money deposit and as a part of the rental price on account of offer to rent the property . . . ." The Agreement provided that the rent would be $475.00 per month, that the "pre- payments" would be $475.00 for the last month's rent, and that a security deposit in the amount of $475.00 would be paid as follows: $150.00 on June 14, 1983, $150.00 on July 14, 1983, and $175.00 on August 14, 1983. The agreement also provided that rent would be due on the 14th of each month. (Pet. Ex. #1; Tr. 21, 22, 24, 97-98)

   
   

4. During the negotiations which led up to the agreement to enter into a lease, Daugherty was represented by Lois Rutkin, a real estate broker associated with Drew Realty, and the Capraros were represented by Robert H. Karn. All of the terms of the agreement to enter into a lease were agreed to by all parties prior to that document being signed. It was also specifically understood that the $950.00 paid by Daugherty represented the first and last month's rent. The cashier's check for the $950.00 was made payable to the order of Robert H. Karn because he specifically requested that it be made payable to him. (Tr. 21, 23- 26, 33, 49, 54, 57, 171)

5. If a formal lease had been entered into pursuant to the terms of the Agreement To Enter Into A Lease, Daugherty's $950.00 deposit would have been applied as follows: $475.00 for the first month's rent from May 14 to June 13, 1983, and $475.00 for the last month's rent. Further, if such a lease had been entered into consistent with the Agreement, Daugherty would not have been obligated to pay any further amounts until June 14, 1983, at which time she would have been obligated to pay $475.00 for one month's rent from June 14 through August 13, 1983, plus a $150.00 payment towards the security deposit. (Pet. Ex. #1)

   
   

6. Consistent with her obligation under the Agreement To Enter Into A Lease, and at the specific request of Robert H. Karn, Daugherty obtained a cashier's check in the amount of $950.00 payable to the order of Robert H. Karn and delivered the cashier's check to Robert H. Karn. The cashier's check was thereafter cashed by Robert H. Karn without being deposited in any trust or escrow account. (Pet. Ex. #2)

   
   

7. Robert H. Karn prepared a formal written lease for the rental of the Capraro property by Daugherty. The lease prepared by Robert H. Karn contained several provisions which were materially different from the terms contained in the Agreement To Enter Into A Lease. Among the changes were a provision that the rent would be due on the first of each month, that the security deposit would be $950.00, that $285.00 of the money previously paid by Daugherty would be applied as rent from May 14 to May 31, 1983, that $665.00 of the money previously paid by Daugherty would be applied towards the security deposit, that additional payments of $142.50 each would be due towards the security deposit on July 1, 1983, and August 1, 1983, and that the next month's rent in the amount of $475.00 would be due on June 1, 1983. (Pet. Ex. #3, Tr. 55, 60)

   
   

8. The written lease prepared by Robert H. Karn also contained the following provisions:

   
   

   1. Tentant (sic) will have first option to Buy said property at the end of

      this lease.

   2. Drew Realty will receive $142.50 on July 1, 983, for renting this property

      to the "Tentant (sic). Drew Realty will receive a 3 percent Real Estate Commission if Tentant (sic) buys the property.

   3. Robert H. Karn, Inc. will receive

      $142.50 on August 1, 1983 for the rental listing. Robert H. Karn, Inc. will receive a 3 percent Real Estate

      Commission if Tentant (sic) buys the property.

      
      

9. The written lease which was prepared by Robert H. Karn was given to Daugherty on the evening of May 16, 1983. When Daugherty read the lease and saw that it contained provisions different from the provisions in the Agreement To Enter Into A Lease, she refused to sign it. That same evening she told Lois Rutkin, Dan Drew, and Robert H. Karn that she refused to sign the lease because it was different from what she had agreed to, and she demanded the return of her

   $950.00 deposit. The $950.00 deposit has never been returned to her. (Tr. 27- 30)

10. On the evening of May 16, 1983, extensive discussions took place between Daugherty, Lois Rutkin, Dan Drew, and Robert H. Karn in an effort to resolve the problem. Robert H. Karn's excuse for changing the terms in the lease was that Daugherty had two dogs, but Robert H. Karn had known about the dogs before the parties signed the Agreement To Enter Into A Lease. During the discussions on the evening of May 16, 1983, Lois Rutkin told Robert H. Karn she wanted him to return the cashier's check he had received from Daugherty and Dan Drew told Robert H. Karn not to disburse the funds from that cashier's check, but to return the money to Daugherty. Robert H. Karn did not return the cashier's check nor did he otherwise make any reimbursement to Daugherty. (Tr. 40, 58-59, 85-86)

    
    

11. By the time Lois Rutkin, Dan Drew, and Daugherty asked for the return of the $950.00 cashier's check, Robert H. Karn had already cashed the check and had spent the money. Most, if not all, of the money was spent on behalf of the Capraros to pay for such things as mortgage payments and painting on the Capraro's rental property. After Daugherty refused to sign the lease, Robert H. Karn told the Capraros to treat Daugherty's $950.00 deposit as "default money." Actually, the default was by the Capraros who, through their agent Robert H. Karn, tried to change the terms of the agreement. (Tr. 42, 84, 100, 105, 160- 161, 167, 170, 173-175)

    
    

12. Subsequently, Daugherty sued Robert H. Karn in County Court in an attempt to collect her 950.00 deposit. On September 12, 1983, a Default And Final Judgment gas entered in Case No. 83-2532-SPH in County Court in Broward County against Robert H. Karn and in favor of Letitia Daugherty in the sum of

    $950.00, plus court costs in the amount of $42.00. After the judgment was entered against Robert H. Karn, Daugherty again demanded payment of the $950.00. Robert H. Karn has never paid anything to Daugherty. (Pet. Ex. #4, Tr. 30-31, 45, 47-48)

    
    

13. Robert H. Karn never asked the Florida Real Estate Commission for an escrow disbursement order regarding the transaction involving the Capraro rental property. (Tr. 169-170)

    
    

    Findings regarding the transaction involving the Supino property

    
    

14. In about the middle of July of 1983, Lucy Supino entered into an oral agreement with Robert H. Karn pursuant to which Robert H. Karn was to attempt to locate a tenant for one or more of Lucy Supino's rental units. During August of 1983 Robert H. Karn rented one of Lucy Supino's rental units to Marilyn McKelvey. Thereafter, Karn, Supino, and McKelvey had various disagreements about the transaction. (Tr. 113-116, 121, 138, 141-142) 3/

    
    

    CONCLUSIONS OF LAW

    
    

15. Based on the findings of fact and on the applicable rule and statutory provisions and principles of law, I make the following conclusions of law:

    
    

16. The Division of Administrative Hearings has jurisdictions of the parties and the subject matter of this case. Section 120.57, Florida Statutes.

17. Section 475.25(1), Florida Statutes, reads as follows in pertinent part:

    
    

    (1) The commission may deny an application for licensure, registration, or permit, or renewal

    thereof; may suspend a license or permit for a period net exceeding 10 years; may revoke a license or permit; may

    impose an administrative time net to exceed $1,000 for each count or separate offense; and may issue a

    reprimand, or any or all of the fore- going, if it finds that the licensee, permittee, or applicant:

    (a) * * *

    (b) Has been guilty of fraud, mis- representation, 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 en- gaged in any such misconduct and in furtherance thereof; or has formed an intent, design, or scheme to engage

    in any such misconduct and committed an overt act in furtherance of such intent, design, or scheme. It is

    immaterial to the guilt of the licensee that the victim or intended victim of the misconduct has sustained no damage or loss; that the damage or loss has been settled and paid after discovery of the misconduct; 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.

    (d) Has failed 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

    commission, 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 circum- stances. However, if the licensee,

    in good faith, entertains doubt as to what person is entitled to the accounting and delivery of the escrowed property, or if conflicting demands have been made upon him for the escrowed property,

    which property he still maintains in

    his escrow or trust account, the licensee shall promptly notify the commission of such doubts or conflicting demands and shall promptly:

    1. Request that the commission issue an escrow disbursement order determining who is entitled to the escrowed property;

    2. With the consent of all parties, sub- mit the matter to arbitration; or

    3. By interpleader or otherwise, seek adjudication of the matter by a court.

    If the licensee promptly employs one of the escape procedures contained herein, and if he abides by the order or judgment re- sulting therefrom, no administrative complaint may be filed against the

    licensee for failure to account for, deliver, or maintain the escrowed property;

    (e) - (j) * * *

    (k) Has failed, if a broker, to immediately place, upon receipt, any money, fund, deposit, check, or draft entrusted to him by any per- son dealing with him as a broker in escrow with a title company, banking institution,

    or savings and loan association located and doing business in this state, or to deposit such funds in a trust or escrow account maintained by him with some bank or savings and loan association located and doing business in this state, where- in the funds shall be kept until dis- bursement thereof is properly authorized;

    or has failed, if a salesman, to immediate- ly place with his registered employer any money, fund, deposit, check or draft en- trusted to him by any person dealing with him as agent of his registered employer.

    The commission shall establish rules to provide for records to be maintained by the broker and the manner in which such deposits shall be made.

18. In a matter as grave as a license revocation proceedings, the duty allegedly breached by the licensee must appear clearly from applicable statutes or rules and have a "substantial basis" in the evidence. Bowling v. Department of Insurance, 394 So.2d 165, 173 (Fla. 1st DCA 1981). Even in the absence of a recommendation of revocation, disciplinary licensing proceedings such as these are potentially license revocation proceedings since the penalty for the infractions alleged lies within the discretion of the disciplining authority, if allegations of misconduct are proved at the hearing. Florida Real Estate Commission v. Webb, 367 So.2d 201 (Fla. 1979). License revocation proceedings have been said to be penal in nature. State ex rel. Vining v. Florida Real Estate Commission, 281 So.2d 487, 491 (Fla. 1973); Kozerowitz v. Florida Real Estate Commission, 289 So.2d 391 (Fla. 1974); Bach v. Florida State Board of Dentistry, 378 So.2d 34 (Fla. 1st DCA 1979, reh. den. 1980). And, as the court said in Bowling, supra:

    
    

    [T]he violation of a penal statute is net to be found on loose interpretations and

    problematic evidence, but the violation must in all its implications be shown by evidence which weighs as "substantially" on a scale suitable for evidence as the penalty does on the scale of penalties. In other words, in a world ensnarled by false assumptions and hasty judgments, let the prosecutor's proof be as serious-minded as the intended penalty is serious.

    
    

19. For the reasons explicated below, I am convinced that the evidence regarding the Capraro transaction is sufficient under the Bowling standard to establish the first three violations charged, but that the evidence regarding the Supine transaction is lacking in sufficient "substantiality" to support the charges alleged in that regard.

    
    

20. It is clear from the record in this case that Robert B. Karn was acting as a broker in connection with the Capraro transaction. Although he attempts to hide behind his role as "property-manager" for the Capraros, the simple fact of the matter is that Daugherty's cashier's check was given to him solely because he was a broker, and in his capacity as broker, because unless and until a formal lease was executed neither the Capraros individually, nor Karn as their property manager, were entitled to disbursement of any of the funds from Daugherty's deposit. Accordingly, Robert H. Karn is clearly guilty of a violation of Section 475.25(1)(k), Florida Statutes, as charged in Count III of the Administrative Complaint.

    
    

21. At least since the evening of May 16, 1983, Letitia Daugherty has demanded the return of her $950.00 deposit and has been entitled to an accounting and delivery of those funds from Robert H. Karn. Robert H. Karn's failure to account and deliver constitutes a violation of Section 475.25(1)(d), Florida Statutes, as charged in Count II of the Administrative Complaint. 4/

    
    

22. By disbursing Daugherty's funds before there was any entitlement to disbursement and by failing and refusing to thereafter reimburse the funds, Robert H. Karn has been guilty of culpable negligence or breach of trust in a business transaction in violation of Section 475.25(1)(b) Florida Statutes, as charged in Count I of the Administrative Complaint.

23. The evidence in this case is insufficient to establish a violation of the charges alleged in Counts IV and V of the Administrative Complaint.

    
    

24. With regard to the appropriate penalty in this case, it is not clear from the record in this case whether Robert H. Karn's conduct regarding Daugherty's deposit was the result of his ignorance of his responsibilities as a broker, his lack of understanding of his legal and ethical duties under the circumstances, or a deliberate intent to knowingly cheat Daugherty out of her deposit. Giving Karn the benefit of the doubt and assuming that his misconduct was the result of ignorance and lack of understanding, an appropriate penalty is an administrative fine of $950.00 and suspension of license for a period of ninety days or until such time as the judgment in Case Number 83-2532-SPH, Broward County Court, has been satisfied, whichever is later; provided that in any event the period of license suspension shall not exceed ten (10) years.

RECOMMENDATION

For all the foregoing reasons, it is recommended that the Florida Real Estate Commission enter a Final Order which would (a) find the Respondents guilty of the violations charged in Counts I, II, and III, of the Administrative Complaint, (b) dismiss counts IV and V of the Administrative Complaint, (c) fine the Respondents a total of $950.00, and (d) suspend the licenses of the Respondents for a period of ninety (90) days or until such time as the judgment in Case Number 83-2532, Broward County Court, has been satisfied, whichever is later; provided that in any event the period of suspension shall not exceed ten

(10) years.

DONE and ORDERED this 24th day of January, 1985 at Tallahassee, Florida.

MICHAEL M. PARRISH

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

24th day of January, 1985.

ENDNOTES

1/ The factual assertions in the Respondents' post-hearing letter have been treated as proposed findings of fact. To the extent such proposed findings are consistent with the evidence and relevant to the issues they have been adopted. The reasons for rejecting some of the Respondents' proposed findings are set forth elsewhere in this Recommended Order.

2/ In making these findings of fact I have had to resolve a number of conflicts between the testimony of Robert H. Karn and other witnesses. Robert H. Karn was not a very credible witness. A substantial amount of his testimony appeared to be argumentative, evasive, and illogical. Where there are conflicts between the testimony of Robert H. Karn and other witnesses I have generally tended to

believe the other witnesses because their testimony appeared to be more candidly given, more straight-forward, more logical, and more consistent with other evidence.

In making these findings of fact I have rejected number of the proposed findings in the Respondents' posthearing letter for the reasons mentioned immediately above, as well as for the following reasons: Some of the proposed findings in the second, third, and fourth paragraphs of the letter were not made because they are contrary to the greater weight of the evidence; the fifth paragraph of the letter is irrelevant; the sixth paragraph of the letter is contrary to the greater weight of the evidence; the seventh through thirteenth paragraphs of the letter are irrelevant in light of the disposition of Counts IV and V of the Administrative Complaint.

3/ I am unable to make any more explicit findings of fact regarding the Supino transactions on the basis of the record in this case. Lucy Spine was not available as a witness to testify about the terms and conditions of her oral agreement with Robert H. Karn, or about any modifications to that agreement which may have been agreed to during subsequent conversations. Alfred Supine testified as to what he knew about the agreement, but much of his testimony was obviously hearsay and more of it may also have been hearsay because the source of much of his information was not clearly established on the record. He may also have been mistaken about some of the details because there are some unexplained peculiarities in his testimony, typical of which is the assertion that Karn was supposed to rent the two-bedroom unit for $300 per month when it had previously been rented for $450 or $500 and, in fact, was subsequently rented to McKelvey for $425 about a month later. Further, McKelvey's testimony about the Supine transaction was at best vague; she did not appear to have much of a memory for details and seemed to readily fellow the lead whenever she was asked leading questions. This is the kind of "problematic evidence" that fails to meet the Bowling standard.

4/ In this regard it should be noted that Robert H. Karn did not attempt to take advantage of the so-called "escape procedures" in the statute. In fact he could not do so, because one of the prerequisites to the escape procedures is that the broker must have kept the disputed funds in his escrow account.

COPIES FURNISHED:

John Huskins, Esquire Department of Professional

Regulation

400 West Robinson Street Orlando, Florida 32801

Mr. Robert H. Karn P. O. Box 291500

Davie, Florida 33329-1500

Mr. Harold Huff, Director Division of Real Estate Department of Professional

Regulation

Post Office Box 1900 Orlando, Florida 32802

=================================================================

AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA

DEPARTMENT OF PROFESSIONAL REGULATION FLORIDA REAL ESTATE COMMISSION

DEPARTMENT OF PROFESSIONAL REGULATION, FLORIDA REAL ESTATE COMMISSION

Petitioner

vs. CASE NO. 0036428

0040594

ROBERT H. KARN and DOAH NO. 84-0650 ROBERT H. KARN INC.

Respondents.

/

FINAL ORDER

The Florida Real Estate Commission heard this case on February 19, 1985 to issue a Final Order.

Hearing Officer Michael M. Parrish of the Division of Administrative Hearings presided over a formal hearing on July 20, 1984. On January 24, 1985, he issued a Recommended Order, which is adopted by the Florida Real Estate Commission as to all Findings of Fact and Conclusions of Law. A copy of this Recommended Order is attached here to as Exhibit A and made a part hereof.

However, as to the Recommendation, after a complete review of the record and Petitioner's Exceptions (attached hereto as Exhibit 3 and made a part hereof), the Florida Real Estate Commission ORDERS that each Respondent be fined

$500 and that each Respondent receive a 4-year suspension, with the following proviso:

If the Respondents make restitution to Letitia Daugherty in the amount set forth in the Default and Final Judgment attached hereto as Exhibit C and made a part hereof, then the Commission ORDERS that 3 1/2 years of the suspension be suspended.

The Florida Real Estate Commission specifically cites the following pages of the transcript in support of this Order:

Pages: 21-31, 33, 40, 42, 45, 47-49, 51, 54, 57-60, 84-86,

97-98, 100, 105, 113-116, 121, 133, 141-142, 156,

160-161, 167, 169-171, 173-175.

The Florida Real Estate Commission also specifically cites Petitioner's Exhibits 1-4.

This Order shall be effective thirty (30) days from the date of filing with the Clerk of the Department of Professional Regulation.

DONE AND ORDERED this 19th day of February 1985 in Orlando, Florida.

Harold R. Huff, Director Florida Real Estate Commission

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the foregoing was sent by

U.S. Mail to: Mr. Robert H. Karn, P O Box 291500, Davie, Florida 33329-1500; to Hearing Officer Michael M. Parrish, Division of Administrative Hearings, 2009 Apalachee Parkway, Tallahassee, Florida 32301; and to John Huskins, Esquire, Staff Attorney, Dept. of Professional Regulation, P O Box 1900, Orlando, Florida 52802, this 27th day of February 1985.

RS:pep Harold R. Huff

Docket for Case No: 84-000650

Orders for Case No: 84-000650