STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL )

REGULATION, DIVISION OF )

REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 85-0568

)

JON BRODERICK, et al., )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, this cause came on for formal proceeding before P. Michael Ruff, duly designated Hearing Officer, in Fort Myers, Florida, on July 29, 1986. The appearances were as follows:

APPEARANCES

For Petitioner: Arthur R. Shell, Jr., Esquire

Division of Real Estate Post Office Box 1900 Orlando, Florida 32901

For Respondents

David Evans: Kevin F. Jursinski, Esquire 2231 First Street

Fort Myers, Florida 33901

Betty A. Newhouse Wade H. Parsons, Esquire Donald F. Newhouse Post Office Box 2462 Newhouse Realty Group Fort Myers, Florida 33902 Inc.:

Jon Broderick: Thomas G. Eckerty, Esquire

Suite 89

12934 Kenwood Lane, Southwest Fort Myers, Florida 33907

This matter arose on an Administrative Complaint filed by the Petitioner whereby it seeks to suspend, revoke or take other disciplinary action against the Respondents' real estate brokerage and sales. In essence, it is alleged that Joan Tomasso, a real estate salesman employed by the Respondent Newhouse Realty, Inc., obtained checks totalling $17,000 from six investors whereby she was to purchase an interest in the "Sun Village Development Project, "which was managed and co- owned by Respondent Newma Investment Group, Inc. It is alleged that the $17,000 in investment monies were placed in an escrow account of Newma Investment Group, Inc., Respondent, opened on February 14, 1984. Joan Tomasso was allegedly then due a commission for obtaining the $17,000 in investment funds. On that same day David Evans, Respondent, and Respondent Jon Broderick executed a check for $12,000 drawn on that account, which funds were then placed in the business account of Respondent Newma Investment Group, Inc. It is also alleged that on March 9, 1984, Respondent Broderick and one Philip D. Wall, an unlicensed officer of Newma Investment Group, Inc., wrote a $5,000 check drawn on the subject escrow account and deposited in Newma Investment Group, Inc.'s business account allegedly to pay business expenses of that Respondent corporation. Then, on or about the middle of March 1984, Respondents Evans, Donald Newhouse and Betty Newhouse all signed promissory notes amounting to $17,000 to the investors named in the complaint to account to them for the $17,000 which

allegedly had been transferred to Newma Investment Group, Inc. without the knowledge or consent of those investors. The complaint thereupon charges that the Respondents are guilty of fraud, misrepresentation, concealment, false promises and pretenses, dishonest dealing coupled with negligence and breach of trust, as set forth in Subsection 475.25(1)(b), Florida Statutes. It is also charged that the Respondents are guilty of failure to account and deliver the $17,000 deposited money to the persons entitled thereto in violation of Subsection 475.25(1)(d), Florida Statutes, and are in turn guilty of failure to maintain that money in an escrow account deposit in violation of Subsection 475.25(1)(k), Florida Statutes.

The cause came on for hearing on the above date after it had initially been set for hearing and continued. The Petitioner presented the testimony of Joan Tomasso, Linda Field, Helen Brittenham, Bernard Field, and Deborah Ann Matusie. The Respondent presented the testimony of David Evans, John Pletincks, Betty Ann Newhouse, Donald Newhouse, and Jon Broderick. The Petitioner presented 13 exhibits. Petitioner's Exhibits 1, 2, 3, 5, 6, and 7-13 were admitted into evidence.

Respondent Newhouse presented one exhibit which was admitted into evidence, and Respondent Evans presented one exhibit which was admitted into evidence. At the conclusion of the hearing, the parties indicated that a transcript would be ordered and reserved the right to file Proposed Findings of Fact and Conclusions of Law. Only the Respondents filed Proposed Findings of Fact and Conclusions of Law and those Proposed Findings of Fact have been addressed in this Recommended Order and treated once again, either being accepted of rejected, in the Appendix attached hereto and incorporated by reference herein.

The issue to be resolved concerns whether the Respondents or any of them committed the proscribed conduct alleged and whether that conduct, if proven, violates the statutory provisions set forth in the Administrative Complaint and finally, if so, what penalty, if any, is warranted.

FINDINGS OF FACT

1. Respondents Jon Broderick, Betty A. Newhouse, Donald

   F. Newhouse, David E. Evans, Newhouse Realty Group, Inc. and Newma Investment Group, Inc. at all times pertinent hereto were licensed brokers and salesmen and corporate brokers. The Petitioner is an agency of the State of Florida charged with enforcing the provisions of Chapter 475, Florida Statutes, as they relate to licensure and regulation of the practice of realtors, both brokers and salesmen, practicing real estate sales and brokerage in the State of Florida.

   
   

2. Joan Tomasso at all times pertinent hereto was a licensed Florida real estate salesperson. She was employed initially by J&L Realty, Inc., which merged with the Newma Group in January 1984. She thereafter became a licensed salesperson in January of 1984 for the Newma Investment Group. She was involved in a project known as the Sun Village. Her task involved finding investors to invest in shares of a land trust agreement related to the development of the Sun Village project, a multi-family residential development. The Newma Investment Group, Inc. was involved in promoting the development of the project known as Sun Village and conducted various sales meetings which Tomasso attended. Ms. Tomasso was charged by the co-trustees of the land trust agreement (in evidence as Respondent Evans' Exhibit 1), with obtaining various investors to invest in shares in the land trust as a means of financing the acquisition and development of the project, Sun Village, Inc. Ms. Tomasso represented to those investors that they would

   invest in the land trust and that they would hold shares in that land trust in return for which they would receive a 33 1/3 percent return on their investment. As a result of these representations and promotional efforts, she obtained investment monies from the following investors in the following amounts:

   
   

   Reginald Dennis	$5,000
   Linda and Bud Field	5,000
   Robert Dennis	4,000
   Rita Billi	3,000

   
   

   Ms. Tomasso was given the land trust agreement by the co- trustees to present to those investors, and she executed the land trust agreement as the agent of investors. She obtained the above funds from the investors named in the form of checks and turned those over to Respondent Jon Broderick. Respondent Broderick was at all times relevant hereto a licensed real estate broker and an employee and qualifying broker for the Respondent Newma Investment Group, Inc. Ms. Tomasso advised Mr. Broderick contemporaneously with the submission of the checks from the investors, that the money was for investment in the Sun Village project. The investment funds were not for the purchase of real property or an interest in the real property upon which the project would be built, but were in fact for purchases of interests in the land trust, i.e. shares. Respondent Broderick, upon receiving the funds, initially deposited them into the escrow account held by the Respondent Newma Investment Group, Inc. Subsequent thereto these funds were disbursed to the Newma Group, Inc. and the Newma Investment Group, Inc. These funds were disbursed to Newma Group, Inc. and Newma Investment Group, Inc. as proceeds of their efforts to obtain investment capital to finance the project through sale of shares in the subject land trust. The Respondent, Mr. Broderick, had no contact with the investors either before or after the investment funds were obtained, deposited and disbursed. No demand was ever made upon Respondent Broderick by either the investors nor their agent, Ms. Tomasso, for the return of the 4 funds. Ms. Tomasso in turn was paid a commission for her efforts in securing this investment capital.

   
   

3. Initially, by the terms of the trust agreement, the investors were guaranteed an interest return of 33 1/3 percent on their investment. At some point, the co-trustees, upon advise of counsel, learned that this was a usurious interest rate under Florida law and consequently entered into a novation of the agreement with these investors such that the investors were given, instead, four promissory notes bearing a rate of

   interest return of 18 percent in lieu of the original agreement providing that they be paid an interest rate of 33 1/3 percent.

   
   

4. At the time the transaction was entered into, Joan Tomasso had been a licensed real estate agent for four months. At the time she became involved in this investment transaction she did not know or understand the purposes or workings of a Florida land trust agreement, had never taken courses involving the use of land trusts, and had no experience operating a real estate office or managing the bank accounts for a real estate office.

   
   

5. She had represented to the investors that their monies would be investment funds for purchasing shares in the land trust agreement as an investment and that they were not thereby acquiring title to any real estate.

   
   

6. Approximately a month after the execution of the land trust agreement, Ms. Tomasso became suspicious that the investment in the project to which it related might not be successful and made demand upon Newma Investment Group for the return of her investors' money. Ultimately, on October 6, 1984, she wrote a letter to the Florida Real Estate Commission seeking to enforce the rights of her investor clients to obtain the monies she felt due them under the land trust agreement and the promissory notes. During the period from February 15, 1984, when the money was deposited in the Newma Investment Group escrow account and then disbursed therefrom, until October 6, 1984, Ms. Tomasso and her investor principals had no discussions about the status of the supposed escrowed money, however. Neither Ms. Tomasso nor any of the Respondents ever represented to the investors that they would receive their money back immediately upon demand, but rather they were to obtain their money upon maturity of the promissory notes. No Respondent nor Ms. Tomasso ever represented to the investors that they were entering into a contract to purchase an interest in real estate or that they would receive title to any real estate. Rather, they were entitled to the return of their principal investment plus the 18 percent interest on the promissory notes, all of which were timely honored. The original trust agreement had provided for repayment of the principal monies invested plus 33 percent returned to these investors in one year's time. Thus the monies invested and interest thereon was not due and owing to the investors approximately one month after the agreement was entered into and when Ms. Tomasso began seeking return of the monies. The 18 percent interest bearing notes which were given in replacement

   for the 33 percent return on investment provision in the trust agreement was done because the 33 percent return was illegal and the 18 percent notes were timely repaid. Investors Mary Dennis and Rita Billi, however, agreed to extend their promissory notes for an additional six months term in consideration for which those two investors were promised and received an additional 33 percent interest on their money.

   
   

7. None of the investors ever dealt with any of the Respondents directly, nor did any of the Respondents represent to them that their monies would be placed in an escrow account, although Joan Tomasso apparently told Linda Field, one of her principal investors, that the money she received from her would be placed in an escrow account. Be that as it may, when Linda Field received back 33 1/3 percent interest on her investment, she considered that as representing an investment return on money she had given to Joan Tomasso and that the promissory note she received was a negotiable instrument rather than any belief that she had purchased an interest in real property. None of the Respondents ever represented to Joan Tomasso that the investment money she was soliciting was for the purchase of real property, rather, it was represented that it was for purchase of beneficial interests in personal property, the land trust agreement.

   
   

8. Deborah Matusie was a broker salesperson at times pertinent hereto and was working for Newma Investment Group, Inc. in January 1984. In January or early February 1984 a sales meeting was called in reference to the solicitation of investment capitol for the Sun Village project. The Respondents Broderick, Evans, as well as Joan Tomasso and one Fred Spencer were present at the sales meeting. Ms. Matusie was given to understand that a commission would be paid those brokers or salespersons who obtained investment money for the Sun Village project when the monies were deposited with the Newma Investment Group, Inc. She was always of the understanding that the investment money to be obtained was to be used for a land trust agreement and not for purchases of interest in real estate itself.

   
   

9. Respondent David Jones had no personal knowledge concerning any monies coming in through the efforts of Joan Tomasso or obtained from investors by her, nor had he any contact with those investors. He did not have any control over the Newma Investment Group, Inc. escrow account, did not maintain and keep the records of that account nor have signatory powers over that escrow account. He had no authority to

   disburse any monies from that account nor did he do so. He did have authority and control over a checking account for Newma Investment Group, Inc., which was its general business account from which he paid bills for Newma Investment Group, Inc.

   Respondent Evans did not accept any monies or checks from Joan Tomasso and place them in escrow or in any other account himself. The monies obtained by Joan Tomasso from the above- named investors were actually used to purchase beneficial interests in the land trust agreement for those investors.

   Thereafter, because of the usury statute, the land trust was dissolved and the investors were given promissory notes to replace the interest they had had in the land trust agreement. The notes for 18 percent interest for these investors which replaced the 33 percent notes were prepared and executed approximately three months after the 33 1/3 percent notes which related to the land trust agreement. These notes were honored and paid in full in a timely fashion.

   
   

10. Respondent Betty Newhouse at times pertinent hereto was a licensed real estate broker and was qualifying broker for Respondent Newhouse Realty, Inc., which in turn was licensed as a corporate broker. Respondent Donald F. Newhouse was at all times pertinent hereto a licensed real estate salesman in the employ of Newhouse Realty, Inc. At all times pertinent to the Administrative Complaint, Jon Broderick was licensed as a broker and the qualifying broker and officer of the Respondent Newma Investment Group, Inc., which in turn was licensed as a corporate broker. At no time was Betty Newhouse the qualifying broker for Respondent Newma Investment Group, Inc.

    
    

11. When the investment funds were obtained by Joan Tomasso, they were delivered to Jon Broderick. Betty Newhouse never received or had custody of those funds, nor did Donald Newhouse. They were not placed in accounts established for Respondent Newhouse Realty, Inc. Neither Respondent Betty Newhouse nor Respondent Donald Newhouse participated in any disbursement of the $17,000 obtained by Ms. Tomasso from the above investors. Instead, those monies were received by Broderick, placed in the Newma Investment Group escrow account, and from there disbursed by Broderick and others with signatory powers on the account to the two above-named business accounts for payment of expenses. At no time was it represented to the investors by any of the Respondents that their funds were to be escrowed and accounted for to them as escrowed funds involved in any real estate purchase transaction. Rather, they understood and the Respondents represented to their agent, Joan Tomasso, that the funds obtained from them would be investment funds

    designed to purchase a share in the land trust agreement, entitling them-to the above-mentioned monetary return or investment, not to title in any real estate.

    
    

12. In any event, at the request of the investors, the Respondents, including Donald F. Newhouse and Betty A. Newhouse, signed and delivered promissory notes amounting to $17,000 plus the above rate of interest payable to the investors. No evidence or testimony was presented which would tend to show that Respondents Betty Newhouse and Donald Newhouse or Newhouse Realty, Inc. made any fraudulent or other dishonest representation to the investors nor to Joan Tomasso nor made any false promises, false pretenses or otherwise dealt in a dishonest or negligent manner or breached any trust relationship with any client in connection with this business transaction.

    
    

13. The same can be said of all the other Respondents. In fact, the only Respondent who directly received any money from Ms. Tomasso on behalf of those investors was Broderick. The record does not reflect that he or any other Respondent ever represented that the monies would be used for the purchase of real estate, that they would be escrowed and accounted to the investors as escrowed funds deposited for securing the purchase of real estate, but rather, Mr. Broderick and the other Respondents never represented anything, other than that the funds were investment capital they were seeking to finance their own project to which they or their corporation would hold title and in return for which they would sell shares in the trust agreement involved, later replaced by simple promissory notes.

    
    

    CONCLUSIONS OF LAW

    
    

14. The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this proceeding. Section 120.57(1), Florida Statutes (1985).

    
    

15. Section 475.25(1)(b) provides that the Commission may suspend or revoke a license or impose an administrative fine or reprimand or all of the foregoing if a licensee . . .

    
    

    "(b) has been guilty of fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme, or device, coupled with 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 listing contract, written, oral, express, or implied in a real estate transaction; . . ."

    
    

    It is further provided that, at Subsection (d) that the above sanctions may be imposed if a licensee . . .

    
    

    "has failed to account or deliver to any person, including the 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, 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. "

    
    

    It is further provided at Subsection (k) that the above- mentioned penalties may be imposed against a licensee who has .

    . .

    
    

    "failed, if a broker, to immediately place, upon receipt, any money, fund, deposit, check, or draft entrusted to him by any person dealing with him as a broker in escrow with the title company, banking institution, or savings and loan association located and doing business in the 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 the state, wherein the funds shall be kept until disbursement thereof is properly authorized; or has failed, if a salesman, to immediately place with his registered employer any money, fund, deposit, check, or draft entrusted to him by any person dealing with him as agent of his registered employer. "

    
    

    It should be pointed out initially, that the Petitioner is the moving party with the affirmative of the issue concerning whether the conduct charged was committed and whether it

    constituted the violations alleged. Thus, the Petitioner has the burden of proof. That burden of proof is by clear and convincing evidence, not a mere preponderance, and must be by evidence as indubitably substantial as the consequences which may be imposed, to and including revocation of licensure and the valuable right to practice a livelihood or profession by these Respondents. Walker vs. State, 322 So. 2d 612; Bowling vs.

    Department of Insurance, 394 So. 2d 165, 172 (Fla. 1st DCA 1981). But, see Turlington vs. Ferris (Case No. BH-37, opinion filed October 2, 1986), which, however, is limited by that opinion to its own circumstances.

    
    

16. There has been absolutely no proof that any Respondent made any kind of representation, fraudulent, false or otherwise, to either Ms. Tomasso or to the investors Rita Billi, Bud Field, Linda Field, Robert Dennis, Reginald Dennis and Mary Dennis.

    The most that was represented to Ms. Tomasso according to the evidence of record and the above Findings of Fact is that she should go forth and seek investors to invest in the land trust. She obtained those investors and, as depicted in the above Findings of Fact, those investors recovered all they were legally entitled to recover on their investment and in fact more than some were actually legally entitled to recover in terms of the usury statute. But clearly the record does not reflect any fraud, misrepresentation or concealment, false promises or pretenses, dishonest or culpably negligent dealing or breach of trust with regard to the facts found herein and the charges in the Administrative Complaint.

    
    

17. Further, with regard to Subsection (d) quoted above, there has been no proof, as the above Findings of Fact indicate, of any failure by any of the Respondents to account or deliver to any person any money, property, funds and the like which such person or persons might be entitled to at the time they were entitled to them. Demand was made by Ms. Tomasso as agent for the investors named above for return of their funds only a month after the transaction was entered into, however, the funds were not due to those people at that early date by the very terms of the instruments which represented their investment. The evidence of record reflects that the monies invested by the above-named persons, on whose behalf Ms. Tomasso acted in this transaction, were timely and fully paid to those persons entitled to them, thus no guilt of any violation of Subsection

    (d) of Section 475.25(1), Florida Statutes, has been established by the evidence of record.

18. Finally, it has not been established that any of the Respondents failed to properly place in an escrow account any monies entrusted to them by any persons dealing with them as a broker nor that any of the Respondents licensed as salesmen failed to immediately place with their registered employer- broker any monies or funds entrusted to them by any person dealing with them as agents of their registered employers or brokers because none of the persons dealing with the Respondents herein dealt with those persons as brokers or salesmen in a real estate transaction. This is because this was not a real estate transaction in which escrowing provisions would be called into play. This was merely the sale of an investment opportunity in an intangible piece of property, i.e. a beneficial share in the land trust agreement which was later supplanted by simple promissory notes. It was never contemplated by any of the parties, Respondents or otherwise that the sale of an interest in real property was involved in the transaction at issue. No interest in the real property involved in the subject development was ever offered by the Respondents, promised by Ms. Tomasso as agent of the investors or as agent of the Respondents nor has any interest in real property ever contracted for or conveyed to these investors. Thus, it cannot be found that any of the Respondents failed to properly escrow or account for any funds because none of the persons who might have dealt with them dealt with them as brokers or salesmen in a real estate transaction as contemplated by Subsection (k) of Section 475.25, Florida Statutes. In fact, as pointed out above, only Respondent Broderick ever received any funds from these investors through Ms. Tomasso as did the corporate broker/licensee Newma Investment Group, Inc., and there is no evidence that these were not properly accounted for. Indeed Mr. Broderick deposited them in Newma Investment Group, Inc.'s escrow account briefly upon receiving them and so there is substantial doubt whether any violation was committed by him or by Newma Investment Group, Inc. as a corporate broker/licensee, even could this be properly deemed a real estate transaction.

    
    

19. Accordingly, for the above reasons expressed in the Findings of Fact and Conclusions of Law, it has not been established that any of the misconduct alleged actually occurred and the three counts of the Administrative Complaint should be dismissed.

RECOMMENDATION

Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record and the candor and demeanor of the witnesses, it is, therefore,

RECOMMENDED that the Administrative Complaint filed herein be dismissed in its entirety.

DONE and ORDERED this 23rd day of December, 1986 in Tallahassee, Florida.

P. MICHAEL RUFF, Hearing Officer Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 23rd day of December, 1986.

COPIES FURNISHED:

Division of Real. Post Office Box 1900

Orlando, Florida 32802

Kevin F. Jursinski, Esquire 2231 First Street

Fort Myers, Florida 33901

Wade H. Parsons, Esquire Post Office Box 2462

Fort Nyers, Florida 33902

Thomas G. Eckerty, Esquire Suite 89

12934 Kenwood Lane, S.W. Fort Myers, Florida 33907

Harold Huff, Executive Director Division of Real Estate

400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802

Fred Roche, Secretary Department of Professional

Regulation

130 North Monroe Street Tallahassee, Florida 32399

Wings S. Benton, Esquire General Counsel

Department of Professional Regulation

130 North Monroe Street Tallahassee, Florida 32399

APPENDIX

Respondent David E. Evans' Proposed Findings of Fact:

Respondent Evans' Proposed Findings of Fact 1-106 are hereby accepted, although not all of the Proposed Findings of Fact are relevant and material to the issues presented for resolution in this case.

Respondent Betty A. Newhouse, Donald F. Newhouse and Newhouse Realty, Inc.'s Proposed Findings of Fact:

These Respondents Proposed Findings of Fact 1-11 are also all accepted, although not all of those Proposed Findings of Fact are relevant and material to the issues presented for resolution in this case.

Respondent Jon Broderick's Proposed Findings of Fact:

Respondent Broderick's Findings of Fact numbered 1-19 are accepted, although not all of those Proposed Findings of Fact are relevant and material or necessary to a resolution of the material issues presented.

Docket for Case No: 85-000568

Orders for Case No: 85-000568