STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) Case No. 86-0088

) MARY CLUETT and CLUETT REALTY, INC. )

)

Respondent. )

)

RECOMMENDED ORDER

Final hearing in the above-styled case was held on June 12, 1986 in Ft.

Myers, Florida, before Mary Clark, Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: James H. Gillis, Esquire

Department of Professional Regulation Division of Real Estate

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

For Respondent: John J. Schiller, Esquire

2263 Main Street

Ft. Myers, Florida 33901 BACKGROUND

This proceeding commenced with Petitioner's Administrative Complaint filed on December 11, 1985, and with Respondent's timely request for a formal hearing.

The hearing had been scheduled for April 8, 1986, and the parties appeared on that date. However, the court reporter failed to appear and the hearing was continued until June 12th. (See Order dated April 14, 1986).

At the hearing Petitioner presented the testimony of Mary Cluett and Pamela Darr and proffered the testimony of a third witness, Beverly Lockner, through a deposition taken by telephone on May 13, 1986. Ms. Lockner, one of the complaining witnesses, was out of state. Because of communication difficulties between the attorneys, Respondent's attorney did not participate in the deposition. For that reason the deposition was rejected as evidence and the parties were given an opportunity to reschedule the taking of Ms. Lockner's testimony at a later date. This was accomplished on July 18, 1986, by telephone, before the hearing officer and the attorneys for the parties.

In addition to the above witnesses Petitioner presented evidence through seven exhibits.

Respondent's witnesses were Mary Cluett, Helen Weise and Ernest Cluett.

Respondent also submitted seven exhibits, each of which were admitted.

After the hearing as continued, Petitioner submitted a proposed recommended order with findings of fact and conclusions of law. These have been considered and have been incorporated in this order.

ISSUE

The issue for consideration was whether Respondents violated specified subsections of Section 475.25 Florida Statutes with regard to alleged misuse of escrow funds.

FINDINGS OF FACT

1. At all times relevant hereto Respondent Mary L. Cluett was a licensed real estate broker in the State of Florida, having been issued license number 0197523 in accordance with Chapter 475, Florida Statutes. The last license issued to Mary L. Cluett was as a broker, c/o Cluett Realty, Inc., 4720 Palm Beach Boulevard, Fort Myers, Florida 33905. (pre-hearing stipulation, Paragraph 2).

   
   

2. Respondent Cluett Realty, Inc. is now, and was at all times relevant, licensed as a real estate broker in the state of Florida, having been issued license number 0021798 in accordance with Chapter 475, Florida Statutes. The last license issued to Cluett Realty, Inc. was at the address of 4720 Palm Beach Boulevard, Ft. Myers, Florida 33905. (pre-hearing stipulation, paragraph 2). The qualifying broker for Cluett Realty, Inc. is Ernest H. Cluett, husband of Mary L. Cluett. Mary Cluett is the vice-president of the corporation.

   
   

3. On October 17, 1984, Charles and Pamela Darr signed a multiple listing agreement with Cluett Realty, Inc. to sell their home at 598 New York Drive, Ft. Myers. (Petitioner's Exhibit #2).

   
   

4. On February 4 and 5, 1985, the Darrs and Irving and Beverly Lockner signed a contract for sale and purchase of the New York Drive house. The terms provided for purchase price of $44,000.00; a $500.00 deposit in the form of a promissory note to be redeemed by February 26, 1985; the assumption of an existing mortgage; a second mortgage in the amount of $3,000.00 and a balance to close in the amount of $2500.00. The closing date was set for "March 14, 1985, or as soon as possible". (Petitioner's Exhibit #5).

   
   

5. The Darrs and Lockners were told on March 14, 1985 that the paperwork was not ready for closing. The Darrs had already moved out of the house and into a leased apartment and the Lockners had travelled from their home in Baltimore with furnishings to move in. Reluctantly, Pamela Darr agreed to let the Lockners move in that day and pay rent for the rest of the month. It was understood by Ms. Darr that the closing would be on April 1st. (tr. 27,28,29)

   
   

6. On March 14, 1985, Mrs. Lockner gave Cluett Realty $1500.00. The receipt signed by Helen Weise, an employee of Cluett Realty, is marked "escrow deposit on property, 398 New York Avenue". (Petitioner's Exhibit #1). On March 22, 1985, Beverly Lockner gave Cluett Realty $500.00; the receipt signed by Mary

   L. Cluett is marked "Escrow, Darr/Lockner". (Petitioner's Exhibit #3) On April

   15, 1985, the Lockners gave Mary Cluett another $500.00 in the form of two checks: one for $362.64 from MSC, Inc. to Irving Lockner ( a paycheck), and a personal check to Cluett Realty from Beverly Lockner in the amount of $137.36 (tr. 17,18, Petitioner's Exhibit #4, Beverly Lockner testimony p. 17) The

   $2500.00 was placed in the Cluett Realty, Inc. escrow account. (tr-19)

   
   

7. The Lockner/Darr transaction closed on June 10, 1985, (Prehearing Stipulation, Paragraph 2)

   
   

8. In the meantime, on March 26, 1985 and April 25, 1985 Mary Cluett paid the Darr's mortgage payments for April and May with checks drawn on the Cluett Realty, Inc. escrow account in the amount of $425.38 each, payable to United Mortgage Company. (Prehearing Stipulation, paragraph 2)

   
   

9. Beverly Lockner did not give Mary Cluett permission to use the escrow money for the Darr's mortgage. She did not know the money was being taken out until she found Mary Cluett's handwritten note left on her door which indicated that closing would be on May 6, 1985 and showed that two payments totalling

   $850.76 had been deducted from the $2500.00 escrow account. She called Ms. Cluett and had a confrontation about the deductions. Beverly Lockner intended that the $2500.00 be used for the closing balance. When the transaction finally closed on June 10, she had insufficient funds to close so she gave Cluett Realty a third mortgage and borrowed $500.00 from Pamela Darr. (Beverly Lockner testimony, pp. 6,7,9,16 23-26)

   
   

10. The Darrs did not give Mary Cluett permission to use the escrow money to pay the mortgage, although Ms. Darr was concerned that the mortgage be paid. On March 14th, Pamela Darr was aware that the April mortgage payment would be taken out of the escrow account when she picked up a form, alleged signed by the Lockners, with a notation at the bottom about the payment. Pamela Darr went to Mary Cluett's office at 5:30 on that day to pick up the form. (tr. 25, 118, 119, 122, Respondent's Exhibit #1)

    
    

11. The form in question provides as follows: [Cluett Realty, Inc. letterhead]

    March 14, 1985

    
    

    To Whom It May Concern:

    
    

    We Irving N. and Beverly T. Lockner buyers, of property situated 598 New York Dr., Ft. Myers, Fl. inspected the above property on March 14, 1985 (date) and have found the property to be to our satisfaction and accept property "as is" and taking possession as Owners today. Sellers are not responsible for any maintenance on the house of any kind. (SIGNED)

    
    

    [Beverly Lockner Signature]

    (Buyer)

    [Irving Lockner Signature] (Buyer)

    
    

    WITNESS:

    
    

    [Mary Cluett Signature] DATE:

    [dated 3-14-85]

    NOTE: OUT OF THE ONE THOUSAND FIVE HUNDRED ($1,500,00) DOLLARS deposited with CLUETT REALTY ESCROW ACCOUNT

    THE FIRST MONTH'S PAYMENT OF $425.38 shall be made.

    
    

    (Respondent's Exhibit #1)

    
    

12. The testimony of Mary Cluett and that of her employee, Helen Weise, differ substantially from Beverly Lockner's testimony regarding Respondent's Exhibit #1.

    
    

13. Mary Cluett claims that the form was completed and signed by the Lockners in her office on March 14, 1985, and that after a phone call from Pamela Darr the note at the bottom was added before the Lockners signed. (tr-

    68) She claims that by agreeing to the notation, the Lockners's clearly knew about the intended use of the escrow money for the mortgage.

    
    

14. Beverly Lockner distinctly remembers the form. She claims that when Mary Cluett came to the house on New York Drive on March 14th, she took the blank form from her case and told the Lockners they needed to sign it that day in order to take over the house. Mrs. Lockner signed her husband's name as he had gone out to the yard. The blanks on the form were not typed in, nor was the note on the bottom. This was one of several blank forms in Mrs. Cluett's case. (testimony of Beverly Lockner, p. 6, 11-13)

    
    

15. Helen Weise claims she typed the entire form, all but the letterhead, in the office while the Lockners were there. (tr-88) This testimony is inconsistent with the appearance of the exhibit.

    
    

16. Mary Cluett's testimony about this form and about the purpose of the escrow money from Beverly Lockner is not plausible. For example, she claims that when the Lockners came in with the $1500.00 on March 14th the purpose was to pay the note for $500.00 referenced on the Contract for Purchase and Sale and to provide money for the mortgage payments. However, on the 14th of March, while no one knew for certain when the closing would be, it was anticipated that it would take place on April 1st. In that case only one mortgage payment would have been necessary. The amounts and timing of Mrs. Lockner's payments into the escrow account are consistent with her testimony that she was putting aside the funds necessary for closing. Assuming, for argument's sake that Mrs. Lockner did know about and approve the first payment, there is no evidence that she knew about or acceded to the second payment prior to its deduction from the escrow account. Respondent's Exhibits #2, 3, and 4 are dated May 28, 1985, May 6, 1985, and May 11, 1985, respectively. Each are notations on Cluett Realty, Inc. stationery showing the April and May deductions from the escrow account, the account number of the mortgage to be assumed, the balance required for closing and other information related to closing. Mary Cluett testified that these were delivered to Mrs. Lockner's house and copies were sent to the Darrs at the New York Avenue address as she did not know the Darr's apartment address. Pamela Darr denies receiving any of these notices. Beverly Lockner said she received only the one dated May 6th. (testimony of Beverly Lockner, P. 9) Ernest Cluett testified that the notice dated May 6, 1985 was delivered on that same date.(tr-

    101) By then the second payment from the escrow account had already been made.

    
    

17. From the testimony and evidence it is apparent that considerable confusion existed regarding the Darr/Lockner transaction. Both buyer and seller thought the deal would close on March 14th. They learned that day that it would not close and hasty arrangements were made for the Lockners to occupy the house

since they had moved their belongings from Baltimore. No firm financial arrangements were made, other than an oral agreement for the Lockners to pay a pro-rated rent for the remainder of March. The closing did not take place on April 1st or the several subsequent dates that it was set, until June 10th.

Meanwhile, the mortgage payments were due and no arrangements had been made for their payment. Mary Cluett prepared the March 14th form to satisfy Pamela Darr that the payments would be made, but neglected to clear the arrangement with Beverly Lockner. Mrs. Lockner figured the payments were not her responsibility because the house was not hers; the failure to close as scheduled on March 14th was not her fault. She blamed Mary Cluett for not notifying the parties sooner since she would not have left Baltimore. (testimony of Beverly Lockner, pp.

18-22)

CONCLUSIONS OF LAW

17. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this proceeding. Section 120.57(1) Florida Statutes, Section 455.225(4), Florida Statutes.

1. Respondents have been charged with violations of Section 475. 25(1)(b) and (k) Florida Statutes which provide in pertinent part:

   
   

   1. Discipline

      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;....

   (k) 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 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 saving and

   loan association located and doing business in this state, wherein the funds shall be kept until disbursement thereof is properly authorized; ...

   
   

2. The Petitioner bears the burden of proving by clear and convincing evidence that the violations occurred and disciplinary measures are warranted. Balino v. Department of Health and Rehabilitative Services, 348 So.2nd 349, (Fla. App. 1st DCA, 1977) Bowling v. Department of Insurance, 394 So.2nd 165 (Fla. App 1st DCA, 1981), Robinson v. Department of Professional Regulation, Board of Dentistry, 447 So 2nd 930 (Fla. App. 3rd DCA, 1984).

3. It is clear that Mary Cluett accepted the Lockner's money in her professional capacity as a licensed real estate broker. LaRossa v. Department of Professional Regulation, 474 So.2nd 322 (Flab App. 3rd DCA, 1985). It is also clear that the Lockner's did not consent to the use of the escrowed funds for mortgage payments; and, while Pamela Darr knew about the use of the funds, she did not know they were intended by the Lockner's for the balance required at closing. Neither the Lockners nor Darrs were sufficiently informed of each other's intentions. "Ratification of an unauthorized act ... must have occurred at a time when the principal was fully informed of all pertinent facts, and enjoyed a free and unhampered choice of approval, or disapproval. MacGregor

   v. Florida Real Estate Commission, 99 So.2nd 709, 713 (Fla. 1958).

   
   

4. Petitioner presented substantial convincing evidence that Mary Cluett committed a breach of trust and failed to maintain escrowed funds until properly authorized. The Respondent's testimony and that of her employee were not believable.

   
   

5. Petitioner has provided neither facts nor legal basis for disciplinary action against the Corporation, Cluett Realty, Inc. Rule 21 V-5.14, Florida Administrative Code requires the denial of registration for a corporation if the individuals controlling the Corporation ... have been denied, revoked or suspended ...[sic] This rule does not compel or even permit, the automatic discipline of a corporate licensee upon the discipline of one of its brokers. Section 475.15, Florida Statutes does not appear to be relevant when a corporation has more than one active broker. Disciplinary statutes, being penal in nature, must be strictly construed against the authorization of discipline and in favor of the person sought to be penalized. Fleischman v. Department of Professional Regulation, 441 So.2nd 1121, 1123, (Fla. App. 3rd DCA, 1983).

Based upon the foregoing, it is hereby, RECOMMENDED:

That a Final Order be entered finding that Mary L. Cluett committed the violations alleged in the Administrative Complaint, that she be fined $500.00 and her license suspended for one year. The Administrative Complaint against Cluett Realty, Inc. should be dismissed.

DONE AND RECOMMENDED this 29th day of August, 1986, at Tallahassee, Florida.

MARY CLARK

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 29th day of August, 1986.

COPIES FURNISHED:

James H. Gillis, Esquire Department of Professional Regulation, Division of Real Estate

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

John J Schiller, Esquire 2263 Main Street

Fort Myers, Florida 33901

Docket for Case No: 86-000088

Orders for Case No: 86-000088