STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL ) REGULATION, DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) CASE NO. 84-1637

)

DUDLEY COHN, )

)

Respondent. )

)

RECOMMENDED ORDER

This matter came on for hearing in Fort Lauderdale, Florida on October 8, 1981 before the Division of Administrative Hearings and its duly appointed Hearing Officer, R. T. Carpenter. The parties were represented by:

For Petitioner: James R. Mitchell, Esquire

Department of Professional Regulation Division of Real Estate

Post Office Box 1900 Orlando, Florida 32801

For Respondent: Richard P. Breger, Esquire

BREGER and BREGER, P.A.

17200 North East 19th Avenue North Miami, Florida 33162

This matter arose on Petitioner's Administrative Complaint charging Respondent with misrepresentation and breach of trust in a business transaction in violation of Subsection 475.25(1)(b), Florida Statutes. Specifically, Petitioner alleges that Respondent misrepresented the location, zoning and value of certain property sold in Broward County.

Petitioner offered 14 exhibits. All are received in evidence except numbers 5 and 10 which were rejected at hearing and 11, which was not filed. Respondent offered 15 exhibits which are all received except numbers 1 and 2 which were not filed, and 12 which was rejected at hearing.

The parties submitted proposed findings of fact and conclusions of law. To the extent these proposed findings have not been adopted or otherwise incorporated herein, they are found to be subordinate, cumulative, immaterial, unnecessary or not supported by the evidence.

FINDINGS OF FACT

1. Respondent, at all times pertinent, was a registered real estate salesman holding license number 0314085. This license is currently under suspension as a result of disciplinary action by Petitioner.

2. Respondent was, at all times pertinent, the President and a stock holder in D.S.A.E., Inc. D.S.A.E., in turn, was the owner (or co-owner with another corporation) of a tract of land located adjacent to U.S. Highway 27 in Broward County.

   
   

3. Respondent, acting in his capacity as a real estate salesman, sought buyers for segments 1/ of the U.S. 27 property. He had made earlier sales of other property to Mrs. Lottie Kay and her son Michael Kay, and contacted the former in October, 1980, regarding the U.S. 27 property.

   
   

4. The D.S.A.E. tract was zoned B-3 (business) on that portion which fronted U.S. 27. The rear segments were zoned A-1 (limited agriculture) and did not front U.S. 27. Initially, Respondent mentioned segments being offered for

   $60,000 and $24,000. However, Lottie Kay indicated that she could not afford the higher priced segments (which were zoned B-3).

   
   

5. Lottie Kay asked Respondent to show her the property, and a visit to the general area was made. However, Respondent told her they could not get to the property which he said was located "on the other side of the construction." After visiting the area, she was not aware of the actual location of her property or of its character. 2/ She continued to believe that the property was "right on" U.S. 27. She based this belief on Respondent's original sales presentation rather than her visit to the area. The segment she purchased is about one quarter of a mile from U.S. 27.

   
   

6. Lottie Kay was also confused as to the zoning on the property. She believed it was "commercial" and does not recall being told of the agricultural zoning by Respondent until about a year after the purchase. Her son, Michael Kay, who was present during a part of Respondent's initial sales presentation, heard only the B-3 zoning mentioned. Since he was not present throughout the discussion, he could have missed Respondent's reference, which he claims to have made, to the agricultural zoning on the back segments.

   
   

7. On October 8, 1980, Lottie Kay, as buyer, contracted with Respondent on behalf of D.S.A.E. and a third party corporation, as sellers, to purchase "Tract 14" for $24,000 on an "agreement for deed." Under the terms of the contract, Lottie Kay paid $4,000 down and was to pay $215.59 per month thereafter beginning in November, 1980.

   
   

8. Lottie Kay made the monthly payments through 1983. When she missed her first two payments in 1984, Respondent offered to reduce the contract price by

   $2,000 if she would resume monthly payments and make up the missing payments. Lottie Kay agreed to this modification of the contract, but discontinued further payments in April, 1984.

   
   

9. Lottie Kay bought this property for speculation in reliance on Respondent's claim that its value would increase substantially in the immediate future. Respondent showed her newspaper clippings which supported his claim that the general area was one of future growth. He predicted her segment would be worth at least $30,000 in one year and stated that as to possible appreciation, "The sky's the limit."

   
   

10. Respondent did not, however, point out that Lottie Kay's property could not be resold for any use other than agriculture since her segment was too small for even a home site under the existing zoning. Respondent also neglected to advise her that the property was underwater much of the year, and would have to be filled and probably permitted before any development could take place.

11. The testimony of a real estate appraiser called by Petitioner established that the property was worth about $750 when purchased by Lottie Kay in October, 1980. 3/ This valuation was based on the witness' study of nearby land sales over a period of years as well as his inspection of the area in which the Kay segment is located.

    
    

12. Respondent attempted to establish a higher market value by producing various warranty deeds whereby he or his affiliates had sold similar segments to other buyers for amounts approximating that agreed to by Lottie Kay. These sales do not establish value but, rather, indicate the gullibility of other buyers in making such purchases.

    
    

13. After she fell behind in her payments, Lottie Kay tried to resell her property through Respondent in reliance on his claim at the time of his initial sales presentation that he could resell it for her in one week. When requested to do so he was unable to produce any prospective buyer. Thus, there appears to be no real market for this property, other than that generated by Respondent in his initial sales campaign.

    
    

14. Lottie Kay did not consult an attorney or have the land surveyed or appraised prior to contracting for the purchase. Rather, she trusted Respondent who she knew to be a real estate professional. She was also aware that he was an owner of the property, but still believed she could rely on his statements that the current market value of her segment was at least $24,000 and that future profits were assured.

    
    

15. Respondent attacks the fairness of these proceedings on the alleged misconduct of Petitioner's investigator, who encouraged Lottie Kay to come forward after she (with the help of her son) had filed a complaint with Petitioner. The investigator made statements to the Kays which indicated his belief that Respondent was engaged in fraudulent land sales, and was a menace to the public. Although the investigator's statements to the Kays were gratuitous and inconsistent with his fact finding role, there is no indication that such statements resulted in any false testimony or other unreliable evidence.

    
    

16. Respondent notes that Lottie Kay continued to make payments on her contract with Respondent even after she had filed a complaint with Petitioner and reasons that she must have considered the property a worthwhile investment. Lottie Kay demonstrated through her testimony and recitation of her dealings with Respondent that she is gullible and imprudent in financial matters. Thus, her continued investment of funds in this property indicated lack of prudence rather than an informed belief that the property had any substantial value.

    
    

    CONCLUSIONS OF LAW

    
    

17. Section 1475.25 provides in 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 not exceeding 10 years; may revoke a license or permit; may impose an administrative fine not to exceed $1,000 for each

       count or separate offense; and may issue a reprimand, or any or all of the foregoing, if it finds that the licensee, permittee, or applicant:

       * * *

       (b) Has been guilty of fraud, misrepresentation, 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 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.

       
       

       Respondent is charged with misrepresentations of property location, zoning and value in violation of the above provisions.

       
       

18. The evidence was inconclusive as to Respondent's statements on the specific location and zoning of the Kay segment. At the time of the initial sales presentation, Respondent referred to other property which fronted U.S. Highway 27 and which carried a commercial zoning designation. Thus, it is possible Lottie Kay mistakenly believed that the property she purchased was also "right on" the highway and was zoned for commercial or business use. Respondent claims to have mentioned the differences in location and zoning, and may well have done so.

    
    

19. Respondent materially misrepresented the value of the property at the time of the sale as well as its potential for growth in value. The property has no access and no development prospects without at least a zoning change and probably environmental fill permits.

20. Respondent contends that even if it is found that he overstated the value of the property, this is permissible seller's "puff" and is not a basis for disciplinary action. He further contends there was no attempt to conceal any aspect of the offer from investigation and thus the transaction was not fraudulent.

    
    

21. These contentions are rejected. Respondent misrepresented this property to an unsophisticated buyer as having substantial appreciation potential when virtually none existed. 4/ Further, Respondent's false claims regarding a near worthless property segment were made while holding himself out as a real estate professional with at least some specialized knowledge of land values.

    
    

22. The complaining witness was negligent in failing to investigate Respondent's claims prior to contracting with him, and must bear some of the responsibility for her losses. However, she reasonably relied on Respondent to engage in honest dealing, which he failed to do.

RECOMMENDATION

From the foregoing, it is

RECOMMENDED that Petitioner enter a Final Order finding Respondent guilty of misrepresenting property value as charged in Count II of the Administrative Complaint, in violation of Subsection 475.25(1)(b), Florida Statutes, and suspending his license as a real estate salesman for a period of three years to begin upon completion of his current license suspension period.

DONE and ENTERED this 3rd day of December, 1984 in Tallahassee, Florida.

R. T. CARPENTER 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 3rd day of December, 1984.

ENDNOTES

1/ This property was not platted or subdivided. Rather, each buyer was to receive about one and a fourth acres, unsurveyed, based on a D.S.A.E. grid drawing which divided the tract into numbered segments. See Respondent's Exhibit 7.

2/ There is no access to the A-1 portion of this property which is underwater much of the year. At the time of this visit, Respondent had not yet laid out the grid map delineating the A-1 segments.

3/ This figure was based on an estimated value of $500 per acre. The estimated per acre value four years later is approximately the same.

4/ A 30-fold appreciation would be required merely for the buyer to break even.

COPIES FURNISHED:

James R. Mitchell, Esquire Division of Real Estate Post Office Box 1900 Orlando, Florida 32801

Richard P. Breger, Esquire BREGER and BREGER, P.A.

17200 North East 19th Avenue North Miami, Florida 33162

Harold Huff, Director Division of Real Estate Post Office Box 1900 Orlando, Florida 32801

Fred Roche, Secretary Department of Professional

Regulation

130 North Monroe Street Tallahassee, Florida 32301

Docket for Case No: 84-001637

Orders for Case No: 84-001637