Judges: J. LAWRENCE JOHNSTON
Agency: Department of Business and Professional Regulation
Latest Update: Feb. 28, 1985
Summary: Respondent was not guilty of fraud or dishonest dealing. Dismiss petition.
84-1946STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF PROFESSIONAL )
REGULATION, FLORIDA REAL )
ESTATE COMMISSION, )
)
Petitioner, )
)
vs. ) CASE NO. 84-1946
)
ARNOLD H. FLEISHMAN, )
)
Respondent. )
)
RECOMMENDED ORDER
The final hearing was held in this case in Ft. Myers on November 9, 1984.
The issue is whether the Florida Real Estate Commission should discipline respondent Arnold H. Fleishman (Fleishman) for alleged fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence, or breach of trust in a business transaction in violation of Section 175.25(1)(b), Florida Statutes (1983). Specifically, the Department of Professional Regulation (Department) alleges in its Administrative Complaint (1) that in order to induce an investor in a construction project to disburse a $20,000 investment before she previously had agreed to disburse, Fleishman misrepresented to the investor that his company already had obtained a construction loan and building permit for the project; and (2) that Fleishman used the $20,000 for his own personal benefit and returned only $17,000 after the investment agreement was rescinded.
APPEARANCES
For Petitioner: Fred Langford, Esquire
Orlando, Florida
For Respondent: Thomas M. Brondstetter, Esquire
Ft. Myers, Florida FINDINGS OF FACT 1/
Respondent Arnold H. Fleishman (Fleishman) is now, and was at all times material, a licensed real estate broker, having been issued license number 0117993.
In approximately 1973, Fleishman met Doris Swor, a fellow real estate broker, while co-brokering a real estate transaction. Since then, Fleishman and Swor had real estate business dealings from time to time and became personal friends.
Sometime during or before 1980, Fleishman and Gene Locander, a licensed general contractor, formed a corporation named Huckleberry Homes, Inc. (Huckleberry Homes) for the purpose of doing business building and selling
homes. Locander was president and Fleishman vice-president of the corporation. Generally speaking, Locander was responsible for building the homes Huckleberry Homes developed, and Fleishman was responsible for selling them.
In approximately December 1980, Huckleberry Homes began a development in Lee County known as the Golf Course Villas. The residences were pre-sold, and construction was financed by North First Bank. Construction progressed smoothly on the six residential units in the Golf Course Villas, and Huckleberry Homes had no difficulty repaying the construction loan even though not all of the pre-sales closed.
By April 1981, Fleishman made it known to Doris Swor, among others, that Huckleberry Homes was interested in beginning another development project and was looking for investors. After a condominium project in Cape Coral became unfeasible, Fleishman and Huckleberry Homes decided to build a model on two lots in Cape Coral to serve as the starting point for further development and sales of homes in Cape Coral. In addition, Huckleberry Homes proposed to build several duplexes in another part of Lee County known as San Carlos Park.
Swor, on behalf of a group of investors, orally agreed in April of 1981 to invest $144,500 in Huckleberry Homes' two proposed developments. Under the agreement, Swor and her investors were to put up $12,000 to buy the lots in Cape Coral for construction of the model. The parties contemplated that the model would be built first so that it would be ready far the peak sales season the following winter. As needed, additional sums of at least $20,000 would be invested by Swor and her fellow investors. The investors would be repaid the
$12,000 lot cost out of construction draws. The additional investments would be repaid out of net profits from the Cape Coral sales effort, if any. If all of the additional investment was repaid, additional profits would be divided 2/3 for Huckleberry Homes and 1/3 for the investors. Meanwhile, as security, Swor was to hold title to the lot and model home.
The parties' agreement as to the San Carlos Park duplexes was substantially the same. The investors would pay $112,500 to buy 15 lots. The investors would be repaid their investment as construction financing was placed on the lots, $7,500 per lot. Arrangements for security and distribution of profits was essentially the same as for the Cape Coral project.
On or about April 16, 1984, Huckleberry Homes paid a deposit in escrow to hold the Cape Coral lots. In approximately June 1981, Swor and her investors contributed $12,000 which was used to close on the Cape Coral lots. The Cape Coral lots were bought and allowed to remain in the name of Huckleberry Homes so as to enable Huckleberry Homes to obtain a variance to use the lots for purposes of a model.
Meanwhile, the 15 lots in San Carlos Park were purchased, and construction began.
During June or July 1981, Swor had her attorney draft a limited partnership agreement to reflect the terms of the parties' oral agreement. However, the written draft did not reflect the intent of the parties, and it was discarded. Instead, Fleishman and Swor negotiated and prepared their own written agreements to reflect their actual intent. The parties drafted two separate agreements. It is not clear from the evidence whether the parties intended to authorized Huckleberry Homes to use funds invested on the Cape Coral contract on the San Carlos Park project. There was, however, a provision in the San Carlos Park agreement acknowledging the possibility of investments by Swor
and her fellow investors in excess of the cost of the 15 lots. The evidence also revealed that by the time of the written agreements on July 29, 1981, the San Carlos Park project already was in progress while the Cape Coral project was not, contrary to the parties' original objectives.
Although the Cape Coral project had been delayed, the parties had no reason to believe that it would not promptly begin and go forward. The parties all knew that a responsible representative of the North First Bank had given the parties verbal assurance that the bank would issue a construction loan commitment for the Cape Coral project. By August 16, 1981, Huckleberry Homes had ordered and received drawings for construction of the model. On or about September 4, 1981 Huckleberry Homes paid for the drawings. By October 20, 1981, Huckleberry Homes had ordered and paid for service to clear the Cape Coral lots in preparation for construction of the model. By November 3, 1981, Huckleberry Homes had ordered and received a revision of a survey previously performed on the Cape Coral lots on May 18, 1981. Finally, on November 3, 1981, Gene Locander ordered the trusses for use in construction of the model home.
During the last week of October 1981, Fleishman contacted Swor and told her that Huckleberry Homes needed the additional $20,000 which Swor and her fellow investors had agreed to invest in the project. Fleishman told Swor that the lot had been cleared and that Huckleberry Homes was ready to build the model. 2/ At the time, Fleishman believed that both the construction loan and building permit had been applied for and that both would be forthcoming. In fact, Locander was having difficulty getting the construction loan and therefore had not yet even applied for the building permit. Fleishman did not and should not necessarily have known the true facts at that time.
As time went by in November 1981, Fleishman became troubled by Locander's excuses for delay in obtaining the building permit. By the end of November, Fleishman also was being questioned by Swor on the progress of construction, and he realized that the delay in obtaining a building permit was becoming unreasonable.
In December 1981 or January 1982, Fleishman personally went to the construction site and saw trusses lying on the ground at the site. He reported this to Swor and assured her that Locander was getting ready to pour the foundations.
Sometime in January 1982, Fleishman learned that Locander had never even applied for the building permit and was not in fact getting ready to pour the foundation for the model.
In the early months of 1982, Swor continued to question Fleishman about progress. By this time, she was receiving some pressure from her fellow investors to ascertain the status. Frustrated in her efforts, Swor demanded a meeting with Fleishman but still did not get "straight answers to her questions." 3/
In approximately March 1982, Swor located the lots and was able to see personally that the roof trusses were still lying on the ground and that construction had not yet begun. At this point, Swor demanded and got another meeting, this time with both Fleishman and Locander, and demanded to see Huckleberry Homes' books of account.
In April 1982, Swor demanded a refund of the $20,000 and rescission of both agreements. In response, Fleishman told her that the $20,000 had been spent on the San Carlos Park project in accordance with the parties' agreement.
Approximately two weeks later, Fleishman refunded $10,000 to Swor and promised the balance in a few weeks. Huckleberry Homes claims to have refunded
$7,600 of the balance by allowing her to credit the balance against money she owed the corporation on the purchase of one of the San Carlos Park duplexes. Whether Huckleberry Homes owed Swor any more money was the subject of a lawsuit for an accounting which Swor filed but later dismissed.
There was no evidence that Fleishman had received or used any part of the $20,000 for his own personal use and benefit. Rather, the funds were deposited in Huckleberry Homes' accounts and were used by Locander, whether for the San Carlos Park project or other uses.
In July 1982, Fleishman discovered that Huckleberry Homes' bank account was $23,000 short as a result of money Locander had appropriated, at least in part, for his own personal use. On grounds of financial irresponsibility, Lee County later revoked Locander's privilege to obtain building permits. Complaints of financial irresponsibility on the part of Locander have been forwarded to the Florida Construction Industry Licensing Board.
The Cape Coral project was never completed, and no profits were generated. The San Carlos Park project was only partially completed, and no profits were payable under the parties' agreement. Huckleberry Homes repaid Swor the cost of four of the lots. Swor built two duplexes on account of her and her fellow investors. Swor and the investors now own the other lots outright. They are trying to sell the duplexes and lots.
CONCLUSIONS OF LAW
Section 475.25(1)(b), Florida Statutes (1983) provides:
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.
In this case, the Department alleges fraud, misrepresentation, et cetera in connection with the manner in which Fleishman induced Swor to disburse the $20,000 she previously had agreed to invest in the Cape Coral project. But the evidence did not prove those allegations.
The Department also alleges that Fleishman used the $20,000 for his own personal benefit and also violated duties imposed on him by law by failing to return the $20,000 to Swor. But the evidence did not prove that Fleishman used any of the $20,000 for his own personal benefit. And, as to the return of the $20,000: (1) there was never an accounting to determine whether any money was owed to Swor; and (2) any money owed was owed by Huckleberry Homes, not by Fleishman, individually.
In summary, the Department did not prove that Fleishman violated Section 75.25(1)(b), Florida Statutes (1983).
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 against respondent Arnold H. Fleishman in this case.
RECOMMENDED this 31 day of December, 1984, in Tallahassee, Florida.
J. LAWRENCE JOHNSTON 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 31st day of December, 1984.
ENDNOTES
1/ Respondent submitted proposed findings of fact. Theproposed findings of fact were reviewed, and the following Findings Of Fact attempt to rule, either directly or indirectly, on each proposed finding of fact. Proposed findings of fact which were approved and adopted are reflected in the following Findings Of Fact. Where proposed findings of fact are not reflected and no direct ruling rejecting them is apparent, the proposed findings of fact have been rejected as being subordinate, cumulative, immaterial or unnecessary.
2/ The major factual issue framed by the Administrative Complaint in this case is whether Fleishman misrepresented to Swor that Huckleberry Homes already had obtained a construction loan and building permit in order to induce her to disburse the $20,000. The evidence as a whole was not persuasive enough to prove that he did.
3/ The evidence raised suspicion as to what Fleishman knew or should have known during this time period, as to what he did or did not say to Swor, and as to whether Fleishman concealed the facts from Swor during this period of time. But the Administrative Complaint did not allege any misrepresentations or concealment during this period of time, and neither party developed the evidence on this subject any further.
COPIES FURNISHED:
Fred Langford, Esquire Department of Professional
Regulation
130 North Monroe Street Tallahassee, Florida 32301
Thomas M. Brondstetter, Esquire Post Office Box 2258
Fort Myers, Florida 33902
Fred Roche, Secretary Department of Professional
Regulation
130 North Monroe Street Tallahassee, Florida 32301
Harold Huff, Executive Director Department of Professional
Regulation
Florida Real Estate Commission
130 North Monroe Street Tallahassee, Florida 32301
Docket for Case No: 84-001946
Orders for Case No: 84-001946
