STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) Case No. 85-2696

)

DAVID W. STUART & BENCHMARK )

BROKERS OF DESTIN, INC., )

)

Respondents. )

)

RECOMMENDED ORDER

Consistent with the Notice of Hearing contained in an Order Granting Continuance dated October 29, 1985, signed by the undersigned, a hearing was held in this case before Arnold H. Pollock, a Hearing Officer with the Division of Administrative Hearings, in Shalimar, Florida on January 3, 1986. The issue for consideration in this hearing was whether Respondents' licenses as a licensed real estate broker and licensed real estate corporation, respectively, in the State of Florida should be disciplined because of the alleged misconduct as outlined in the Administrative Complaint.

APPEARANCES

For Petitioner: Arthur Shell, Jr., Esquire

Division of Real Estate Department of Professional

Regulation

P. O. Box 1900 Orlando, Florida 32802

For Respondent: David L. Selty, Esquire

Executive Park, Building H Suite 3

11 Racetrack Road, NE

Ft. Walton Beach, Florida 32548 BACKGROUND INFORMATION

On June 24, 1985, Fred Roche, Secretary of the Department of Professional Regulation, filed an Administrative Complaint for the Division of Real Estate against the Respondents alleging in four Counts various violations of Section 475.25(1), Florida Statutes, which involved, as to each Respondent, allegations of fraud, misrepresentation, etc., in violation of Section 475.25(1)(b), and failure to deliver as required by law or upon demand, in violation of Section 475.25(1)(d).

On July 29, 1985, the Respondent, David M. Stuart, for himself and as President of Benchmark Brokers of Destin, Inc., submitted election of rights forms on which he disputed the charged contained in the Administrative Complaint and requested a formal hearing. Thereafter, on August 5, 1985, the file was forwarded to the Director, Division of Administrative Hearings for the appointment of a Hearing Officer.

The case was initially set for hearing on October 31, 1985.

However, upon Respondents' Motion for Continuance, the undersigned granted a continuance until January 3, 1986, at which time the hearing was held.

At the hearing, Petitioner presented the testimony of James F. Hardage, formerly a partner with Respondent Stuart in Respondent Benchmark Brokers of Destin, Inc. (Benchmark); and Robert Klein, a real estate broker and manager of Tops'1 Landings and by deposition, the testimony of respondent, Stuart; Daniel J. Gallagher, attorney for Boehmen Bheers, B.V. and that of John McGaha, deceased, formerly a real estate broker with Personal Properties, Inc. Petitioner also presented, including the three depositions, Petitioner's Exhibits 1 through 7.

Respondent Stuart testified in his own behalf. Respondent introduced no documentary evidence.

Subsequent to the hearing, the parties submitted proposed findings of fact relating to the testimony and evidence introduced at the hearing. These proposed findings of fact have been thoroughly evaluated and considered in the preparation of this Recommended Order. The disposition of these proposed findings of fact is indicated in an appendix attached to this Recommended Order.

FINDINGS OF FACT

1. At all times pertinent to the allegations contained in the Administrative Complaint, Respondent, David W. Stuart, was licensed by the State of Florida as a real estate broker under License No. 0193215, and Respondent, Benchmark Brokers of Destin, Inc., was also licensed as a real estate corporation in Florida under License No. 0228922.

2. James F. Hardage, currently a real estate broker with Keystone Shores Realty, Inc., in Destin, Florida, first met Stuart when he got his salesman's license and placed it with Stuart's firm, then known as Benchmark Brokers, Inc., in late 1980 or early 1981. When Benchmark Brokers, Inc. became Benchmark Brokers of Destin, Inc., Hardage was also a salesman with the company and with Stuart with an agreement that when he got his broker's license, he would become a one-half owner in the firm. In early 1982, he was successful in getting his broker's license and at that time, became a partner in the company as arranged.

3. Mr. Hardage became involved in a transaction with the Bohemen Group when that organization was looking at Benchmark Brokers of Destin, Inc., with a view toward selling some of their local properties. These properties included certain real estate being developed in Sandestin, a community near Destin, Florida. At this time, it was common knowledge throughout the

   local real estate community, that the property was for sale. There was no formal listing agreement between the Bohemen group and Benchmark Brokers of Destin, Inc., or any other real estate brokerage company in the area. It was known that any licensed broker who would bring a ready, willing and able buyer to the seller under the seller's net listing terms, could claim a commission from the buyer. It was well known that the Bohemen group did not intend to pay a commission for the sale of this property, known as Beachside IV.

4. During this same general period, the Bohemen group had sold some of its property in the Sandestin development to the Ginn Corporation, a real estate development company located in Hilton Head, South Carolina. It appears that the Ginn Corporation had not been timely in meeting its payments and the Bohemen group indicated a desire to sell the remaining property to someone other than Ginn. Consistent with this intent, in the early part of the summer of 1982, representatives of the Bohemen group advised Mr. Klein, who at the time, had just opened his own brokerage concern, of its desire to sell the property without giving a formal listing. Mr. Klein, in turn, brought Mr. McGaha who contacted Mr. Stuart advising him of the fact that the property was for sale. It must be noted here that at this time, Mr. Ginn already was aware of and had been negotiating with the Bohemen group for the purchase of the

   property in question. He was not able, however, to come up with the cash required for the transaction, however, and the Bohemen group said it was willing to accept reasonable offers from principals represented by McGaha who had indicated that he might have a prospective buyer for the property. What was unknown to the Bohemen group and all of the other parties, except Ginn, was that Ginn was the only prospect--via his direct negotiations with Mr. Gallagher, Bohemen's lawyer, and via the Benchmark, McGaha, Klein route.

5. It was at a meeting with Ginn personnel in April, 1982, that Mr. Hardage, then with Benchmark, brought up the subject of the Beachside IV property which was, he thought, for sale for between 4 and 4 1/2 million dollars. In fact, Bohemen personnel had indicated to Klein and McGaha that the net of 4 million dollars was the lowest acceptable price and there would be no commission possible on any sales price below that. Regardless of what sales price was agreed upon, however, the sales figure was a "net to seller" figure and any commission on the sale of the property would be received from the buyer, not the seller, over and above the net figure to the seller.

6. Mr. Hardage was able, on behalf of Benchmark, to arrange a joint venture for the purchase of this property, the parties to which were to be the Ginn Corporation and Audubon Federal Savings and Loan Association of New Orleans (Audubon),

   or its subsidiary, which was to provide the money. The details of the agreement were worked out and on the day that Mr. Hardage flew to New Orleans with Mr. Ginn in Ginn's personal jet to formalize the joint venture, Ginn told Hardage after they were airborne, that there would be no commission paid for the sale of the property because he had been negotiating with Bohemen direct for several months and had an option on the property already.

   This would have successfully cut Benchmark and its owners out of any commission had Mr. Hardage not had the acumen to call Ginn's bluff. Apparently, Hardage advised Ginn when told that, that he might just as well turn the plane around and go back to Destin because Hardage had no intention of following through with Audubon for Ginn unless compensated in some way for his efforts. As a result, Ginn and Hardage agreed that Benchmark was to receive a 5% fee on the anticipated sales price of $3,500,000 as a "finder's fee" for arranging the financing for the joint venture. This commission was to be paid out of the proceeds of Audubon's contribution to the joint venture. At this point neither Hardage nor Stuart were mortgage brokers or securities brokers and could not legally accept a commission for the arrangement of a mortgage or the sale of securities. However, the arrangement worked out for the joint venture was neither a mortgage nor a securities sale so the fee paid to Benchmark, regardless of how classified, was properly accepted.

7. With regard to the nature of the payment to Benchmark, however, in a letter agreement between Benchmark and the Ginn Corporation, dated September 13, 1983, the fee due from the Ginn Corporation in the amount of 5% of a maximum purchase price of

   $3,750,000 ($187,500) was for bringing in Audubon Federal Savings and Loan as a joint venture partner on the property. This letter agreement was signed by Mr. Hardage as vice president of Benchmark and by Gary Gamble, vice president of Ginn Corporation. From the above, it is clear that the fee paid to Benchmark by the Ginn Corporation was not a commission for the purchase or sale of real estate but a finder's fee for the arranging of financing in bringing Audubon into the joint venture partnership which ultimately purchased the stock in a corporation formed by Bohemen the sole asset of which was the land in question.

8. Of the $187,000 fee paid to Benchmark, $117,000 was paid to Mr. Hardage since he was the individual who arranged the joint venture financing. Of the remainder, $30,000 went to Stuart as the other partner in Benchmark, and $40,500.00 was paid to the 1st National Bank of Destin on behalf of Benchmark to settle debt established by the former Benchmark organization. None of the fee was paid to either Mr. McGaha or Mr. Klein even though they claimed that had it not been for the information

   furnished regarding the property by Mr. Klein to Mr. McGaha and then on to Stuart, the arrangement would never have transpired.

9. In December, 1983, after the arrangements were finalized but closing had not yet taken place, Mr. McGaha, Mr. Klein, Mr. Hardage and Mr. Stuart met in Mr. Stuart's office. They discussed the joint venture which was about to close and the need to file suit against Bohemen to protect the

   real estate commission which McGaha and Klein felt was due them.

   
   

10. Sometime thereafter, Ocean Reef Realty, Inc. (Klein), and Personal Enterprises, Inc. (McGaha), filed suit against Benchmark Brokers, Inc., a Florida Corporation, for a split of the "commission" received by Benchmark relative to the Beachside sale. The complaint alleged that Klein and McGaha transmitted information relating to the availability of the property to Stuart, acting for Benchmark, who in turn, secretly secured a purchaser for the property for which Benchmark received a commission and that that commission was improperly not shared with both Plaintiffs. After a trial on the merits, on

    February 1, 1985, the Circuit Judge presiding at the trial in a letter to counsel for the parties, found that regardless of how the parties described it, the fee paid by Ginn was a real estate brokerage fee, and entered an Order in favor of the Plaintiffs and against Benchmark in the amount of $125,000 plus costs.

    Subsequent to the entry of the Judgment, which neither Stuart

    nor Benchmark appealed, Stuart offered to both McGaha and Klein two thirds of what he, Stuart, received from the commission received by Benchmark in this case. This offer was made, according to Stuart, not as an acknowledgment of liability, but in an attempt to settle the outstanding judgment. He has never received any response to his offer, however. In the interim, Mr. McGaha passed away and Mr. Klein has failed to take any steps to execute the judgment.

    CONCLUSIONS OF LAW

    
    

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

12. Under the provisions of Section 475.25(1), Florida Statutes, the Petitioner may discipline the license of a broker or salesman if it finds that the licensee. . .

    (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. . . ; or

    
    

    (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,. . .any personal property such as money, fund, deposit, . .. including a share of real estate commission

    . . . which has come into his hands. . . and which he is not in law or equity entitled to retain under the circumstances.

13. In the instant case, Petitioner contends the failure of both Respondent Stuart individually and Respondent Benchmark Brokers of Destin, Inc., to pay the $125,000 called for in the Court Order to Ocean Reef Realty and Personal Enterprises, Inc., constitutes a violation of Section 475.25(1)(d), and that, in addition, the failure to account to those brokers for a share of the commission constitutes fraud, misrepresentation, concealment, false promises, dishonest dealing by trick, scheme or device, culpable negligence and breach of trust in a business transaction.

14. Notwithstanding Judge Tolton's finding that the money in issue here constituted a real estate brokerage commission, it is not necessary to determine that there was no brokerage commission involved to conclude there was no evidence of any of the operative actions identified as a basis in the statute for discipline of a license. There is no evidence of fraud, misrepresentation, or any of the misconduct set out as grounds for discipline in the cited section of the statute. Consequently, this allegation must fail as to each Respondent.

15. The undersigned completely concurs with the argument of Petitioner's counsel that the transfer of corporate stock instead of a deed for real property does not defeat a broker's right to a commission. Also, it is agreed that the general rules regarding the entitlement to commissions are correctly

    stated. It is probably true that the Circuit Court, in awarding a judgment to the plaintiffs in the lawsuit on contract properly applied those rules, but the mere fact that civil liability was found by the court does not also necessarily establish a basis for disciplinary action.

16. It is the unsatisfied civil judgment which forms the basis for Petitioner's action against Respondent Benchmark in Count II, as a violation of Section 475.25(1)(d), in that Petitioner contends the failure to pay the judgment constitutes a failure to account for or deliver, as is required by law, any funds, including a share of a real estate commission, which has come into his hands. Once the judge determined that the amount received by Benchmark was a real estate commission, not a finder's fee, and further determined that it must be split with the Plaintiffs, it was incumbent upon that Respondent to account for or deliver the amount specified in the judgment. Its failure to do so constitutes a violation of the statute.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore

RECOMMENDED that the allegations against the Respondent, David W. Stuart, and the allegations of a violation of Section 475.25(1)(b), Florida Statutes, against Respondent, Benchmark Brokers of Destin, Inc., be dismissed, but that the license of

Benchmark Brokers of Destin, Inc., be suspended for a period of

90 days for the violation of Section 475.25(1)(d), Florida Statutes.

RECOMMENDED this 3rd day of March, 1986, in Tallahassee, Florida.

ARNOLD H. POLLOCK, 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 3rd day of March, 1986.

COPIES FURNISHED:

Arthur Shell, Jr., Esquire Division of Real Estate Department of Professional

Regulation

P.O. Box 1900 Orlando, Florida 32802

David L. Selty, Esquirer Executive Park, Building H, Suite 3

11 Racetrack Road, NE

Ft. Walton Beach, Florida 32548

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

Regulation

P.O. Box 1900 Orlando, Florida 32802

Fred Roche, Secretary Department of Professional

Regulation

130 N. Monroe Street Tallahassee, Florida 32301

APPENDIX

The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all Proposed Findings Of Fact submitted by the parties to this case.

RULINGS ON PROPOSED FINDINGS OF FACT SUBMITTED BY THE PETITIONER

1. Adopted in Finding Of Fact 1.

2. Adopted in Finding Of Fact 4.

3. Adopted in Finding Of Fact 4.

4. Adopted in Finding Of Fact 4.

5. Adopted in Finding Of Fact 4.

6. Rejected insofar as it implied that Respondents were the selling broker.

7. Adopted in Findings of Fact 6 and 7.

8. Adopted in Finding of Fact 8.

9. Adopted in Finding Of Fact 10.

10. Adopted in Finding of Fact 9.

11. Adopted in Finding of Fact 5.

12. Adopted in Finding of Fact 4.

13. Rejected as irrelevant.

14. Rejected as irrelevant.

15. Adopted in Finding of Fact 4.

RULINGS ON PROPOSED FINDINGS OF FACT SUBMITTED BY THE RESPONDENT

1. Adopted in Finding of Fact 10.

2-4. Rejected as Conclusions of Law and not Finding of Facts.

1. Adopted in Finding of Fact 4.

2. Adopted in Findings of Fact 4 and 6.

3. Rejected as contra to the weight of the evidence in that Hardage, for Respondent Benchmark, arranged the joint venture which culminated in the sale.

4. Rejected as contra to the weight of the evidence. 9-10. Adopted in Finding of Fact 6.

1. Adopted in Findings of Fact 6 and 7.

2. Rejected as contra to the weight of the evidence.

3. Rejected as a Conclusion of Law and not a Finding of Fact.

Docket for Case No: 85-002696

Orders for Case No: 85-002696