Shell, Jr., Esquire, Orlando, Florida; and Respondents Mark S. Henderson and Auction World of West Florida, Inc. were represented by E. G. Couse, Esquire, Fort Myers, Florida.
Petitioner filed an administrative complaint against Respondents Barbara J. Price, Mark S. Henderson and Auction World of West Florida, Inc., charging them with violating certain statutory prohibitions in a real estate transaction.
Respondents Mark S. Henderson and Auction World of West Florida, Inc., timely requested a formal hearing on the allegations contained within that Administrative Complaint. No Election of Rights form on behalf of Barbara J. Price was transmitted to the Division of Administrative Hearings, and she is not a party to this proceeding. The issues for determination herein are, therefore, whether Respondents Mark S. Henderson and Auction World of West Florida, Inc., are guilty of the allegations contained within the Administrative Complaint filed against them, and, if so, what disciplinary action should be taken against them, if any.
Petitioner presented the testimony of John Henneberry, Joanne Henneberry Johan Ruhe, and Robert W. Prange. Respondents presented the testimony of Ronald Smalley and of Respondent Mark S. Henderson. Additionally, Petitioner's Exhibits numbered 1-8 and Respondents' Exhibits numbered 1-5 were admitted in evidence.
Although both parties requested leave to file post-hearing proposed findings of fact in the form of proposed recommended orders, only Respondents did so. Rulings on each of Respondents' proposed findings of fact can be found in the Appendix to this Recommended Order.
At all times material hereto, Respondent Mark S. Henderson (hereinafter "Henderson") has been a real estate salesman licensed in the State of Florida, having been issued License No. 0441662.
At all times material hereto, Respondent Auction World of West Florida, Inc., (hereinafter "Auction World") has been a corporate real estate broker registered in the State of Florida, having been issued License No. 0238372.
Respondent Henderson is a real estate salesman/auctioneer employed by Auction World. He moved to Florida in October, 1984, and became a licensed real estate salesman in Florida in February, 1985, some 8 months prior to the transaction forming the basis for the Administrative Complaint.
John and Joanne Henneberry signed a listing for the auction/sale of their home with Auction World through Henderson.
The Henneberrys are both educated people who had prior experience in buying and selling real estate.
The October 1, 1985 listing signed by the Henneberrys provided that it was a 30-day listings provided for a seven percent commission, provided for the Henneberrys to pay advertising costs not to exceed $750, and provided specifically that the $750 would not be considered as an advance fee. The listing further provided for an accounting to be made within 30 days. The Henneberrys gave Auction World a check for $750.
The Henneberrys' best friend is Ralph Marciano, a real estate broker. He sold his home through Auction World and referred the Henneberrys to Auction World. The Henneberrys purchased a home through Marciano and throughout the transactions involved here consulted Marciano about how to proceed.
Auction World was engaged primarily to sell the Henneberrys' home in Lehigh Acres, and Marciano was involved in the purchase or offers to purchase their new home.
Pursuant to the listings advertising for the auction was published by Auction World. The auction was held on October 19, 1985, but no sale resulted from the contract negotiated through the auction. Auction World continued to work on behalf of the Henneberrys pursuant to an oral extension.
Johan Ruhe and his wife were advised by Henderson of the availability of the Henneberrys' home in Lehigh Acres. Johan Ruhe is a retired real estate broker who now works for Lee County as its Director of Land Management.
In December, 1984, an offer of $66,000 was made by the Ruhes to the Henneberrys through Auction World, but this offer was not accepted.
On January 2 or 3, 1985, the Ruhes made an offer on the Henneberrys' home in the amount of $68,000. The offer provided for no down payment; included the range, refrigerator, dishwasher, washer, dryer, curtains and draperies to be included in the sale price; and called for financing over 30 years at an 11 percent fixed rate of interest. It further required that financing be obtained for 80 to 95 percent of the purchase price.
This offer was accepted by the Henneberrys, and all parties considered this to be a binding legal contract.
The original listing had called for a 7 percent commission, but when the $68,000 contract was signed, the Henneberrys negotiated Auction World from a
7 percent commission down to a $3,000 commission.
The Ruhes filed a loan application with B. F. Saul Mortgage Company (hereinafter "B. F. Saul") based upon the $68,000 contract.
B. F. Saul has an office in Fort Myers, Florida, which was opened on May 2, 1983, by Robert W. Prange (hereinafter "Prange") who at all times relevant to this action was a vice-president of B. F. Saul and branch manager of the local office.
On January 11, 1986, the Henneberrys made an offer to purchase a home from the Jamilles, which was contingent on the Henneberrys closing with the Ruhes.
Prior to signing the contract with the Ruhes, the Henneberrys discussed the contract with their best friend, real estate broker Marciano who made changes to the contract and discussed with the Henneberrys the fact that there was no deposit provided in reference to that contract.
After the Henneberrys signed the contract to purchase a home from the Jamilles, the Jamilles' broker indicated to the Henneberrys that the Jamilles would like the Henneberrys' contract with the Ruhes to have a provision for a deposit.
During this period of time, the Henneberrys were in direct contact with Prange at B. F. Saul, and Prange indicated to them that there was no problem with the Ruhe contract and loan application.
After the Jamilles' broker contacted the Henneberrys and asked for a contract showing an escrow deposit on the Henneberry home, the Henneberrys contacted Henderson at Auction World and asked him to draw a new contract to show that a down payment had been made.
Henderson prepared a new contract, and the Ruhes signed it. The new contract showed a deposit of $3,600, a purchase price increase of $3,600, and a commission increase of $3,600. In order to show the deposit requested by the Henneberrys, Auction World "gifted" by letter the $3,600 to the Ruhes. The contract was then presented to the Henneberrys.
In fact, the Ruhes were not paying $3,600 more to purchase the home for which they already had a contract. Since the new agreement increased the commission by $3,600, Auction World by letter was giving back that sum to the Ruhes so that everything actually stayed the same but an escrow was shown as requested by the Henneberrys.
The Henneberrys signed the new contract. At the time that they signed, they knew that the Ruhes were not paying the $3,600 additional purchase price.
About the same time that the Henneberrys were requesting that the contract be redrawn to reflect a down payment from the Ruhes, Prange at B. F. Saul became concerned as to whether the Ruhes had sufficient cash available to
them to consummate the transaction. When the second contract was taken by Henderson to Prange, Prange suggested that a change be made in it from a fixed interest rate to a variable interest rate so that the Ruhes could qualify for the loan.
Prange then "whited out" the listing of personal property that appeared in the contract, suggesting that the deletion of the personal property would reflect an increased value in the price of the real estate.
Although Prange was an officer of B. F. Saul, he was on a commission basis. He was not only the loan officer on the Henneberrys/Ruhes transaction, he was also the loan officer on the Henneberrys/Jamilles transaction. Accordingly, he knew that a successful consummation of the Ruhe transaction would ensure him of receiving two commissions but that a lack of success on the Ruhe transaction would automatically defeat the Jamille transaction.
Prange knew that there was no escrow of $3,600 as reflected by the second contract Henderson presented to him. Yet, he requested Henderson to execute a "Verification of Earnest Money" form, which stated that an earnest money deposit had been received in the amount of $3,600 to be held toward the down payment and/or closing costs on the Henneberrys home. The form did not represent that the money was held in escrow, nor did it differentiate between whether that money was the down payment toward the purchase or whether that money was to be used toward closing costs.
Henderson signed the verification that the $3,600 deposit was being held by Auction World because he believed the gift to the Ruhes was the same as having the deposit since it was Auction World's $3,600. Additionally, the buyer, the seller, and the loan officer were aware of the contents and reasons for the series of contracts, and the gift was evident from the series of contracts involved.
Henderson prepared another contract. He also prepared an addendum to that contract containing an agreement on the purchase of the personal property since he believed the personal property had to be mentioned somewhere in order to protect both the buyer and the seller. The addendum was signed on or about February 13, 1985.
The newest contract also provided for the seller to pay the closing costs. When the addendum was presented to the Henneberrys they insisted that an additional provision be added to the addendum that would guarantee that the buyer would pay the Henneberrys $4,000 toward the closing costs prior to the closing. Therefore, at the Henneberrys' request, language was added to the addendum to provide that $4,000 would be paid to the Henneberrys 72 hours prior to the closing by either Auction World or by the Ruhes.
Despite the efforts of Henderson and Prange to successfully structure the Henneberry/Ruhe transaction, the Ruhes were not able to obtain approval on their loan application, and the Henneberry/Ruhe sale was not consummated.
The listing agreement for the auction of the Henneberry home required that the Henneberrys pay $750 to Auction World to pay for the costs of advertising the auction. The listing contract specifically provided that the
$750 did not represent an advance fee but simply represented costs of advertising.
Since the statutes regulating the real estate profession do not define what constitutes an advance fee, Henderson consulted an attorney regarding the desire to obtain advertising costs in advance. The listing form used and the method of handling the Henneberrys' $750 was in compliance with the recommendation to Auction World and Henderson by that attorney. The legal advice given to them was that none of the $750 should be used on any overhead or internal expenses but rather the $750 must all be spent on independent outside advertising. Since the listing agreement specified that the $750 was not an advance fee, and since Henderson and Auction World followed the procedure recommended to them by an attorney, all parties believed that the funds were not an advance fee.
The listing called for an accounting within 30 days, and an oral accounting was provided at that time. The Henneberrys did not request a further accounting until February 27 or 28, 1985. A written accounting was provided by March 11, 1985.
No evidence was offered to show that any of the $750 was kept other than in a trust or escrow account at Auction World, and no evidence was offered to indicate that any of it was misused. In fact, the advertising expenses on the Henneberry home exceeded $750, and Auction World bore the extra expense.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter hereof and the parties hereto. Section 120.57(1), Florida Statutes.
The Administrative Complaint filed herein contains five counts, two of which relate only to Barbara Price who is not a party in this proceeding.
Counts I and III charge that Respondent Henderson and Respondent Auction World, respectively, have 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, in violation of section 475.25(1)(b), Florida Statutes. Count V of the Administrative Complaint charges Respondent Auction World with failing to deposit 75 percent of the $750 advance fee in a trust account, failing to provide an advance itemized statement before expending the $750, and failing to provide a final accounting of the those funds, in violation of section 475.452, Florida Statutes, and, therefore, section 475.25(1)(e), Florida Statutes, having violated any of the provisions of chapter 475, Florida Statutes.
As to Counts I and III Petitioner argues that the $3,600 deposit was improperly verified and that Respondents failed to disclose that the $3,600 deposit had never been received. Respondent Henderson did sign a verification on behalf of Respondent Auction World that an earnest money deposit in the amount of $3,600 had been received. Since Respondent Auction World, through Respondent Henderson, was giving the buyer the amount of $3,600 representing the buyer's deposit, the situation was in the view of Respondents the same as if the money had been received. As to whether any fraud or misrepresentation or concealment was involved, the buyer had accepted the gift and knew fully the circumstances surrounding it, the lending institution based on the information received from Respondent Henderson knew that Auction World did not have the deposit, and the seller had requested a contract which would reflect such a deposit.
Petitioner argues that the seller and lending institution may not have known the $3,600 deposit was not received. However, both the seller and the lender received the $68,000 contract that showed no deposit. This was a binding contract. Both could compare it to the $71,600 subsequent contract which reflected the $3,600 price increase, a $3,600 deposit, and an increased commission of $3,600. The new contract was drawn when the seller asked for the contract to be redone to reflect a deposit. It is not reasonable to believe that the seller or lender would believe that the buyer would agree to pay $3,600 more for no benefit to him or that the seller would agree that the total increase would go to the broker and none of it would go the seller. Thus, while all may not have specifically known about the gift letter, all were aware that there was no deposit. Lastly, the lending institution through Prange admitted that he "surmised" that there was no deposit. The practice used by the Respondents in this situation is neither approved nor recommended; however, since everyone knew what was occurring at every stage in this transaction, Petitioner has failed to prove that Respondents are guilty of fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealings by trick, scheme, or device, culpable negligence, or breach of trust in a business transaction in this state.
As to the alleged "secret addendum," the addendum was signed by everyone except Prange. Prange testified that the existence of the addendum and/or the contents of the addendum was immaterial to the loan. Since it was immaterial to the loan, it could not constitute fraud or improper dealing.
Count V of the Administrative Complaint charges that Respondent Auction World improperly handled and maintained the $750 advance fee. Section 475.452, Florida Statutes, contains no definition of what constitutes an advance fee, and Petitioner failed to offer any proof as to the meaning of that term. There is no showing that the "advance fee" regulated by statute is the same as advertising costs. Further, the listing contract entered into between Respondent Auction World and the Henneberrys specifically provided that the deposit would not be treated as an advance fee. Respondent Henderson had consulted with an attorney and had handled the $750 as recommended. There is no allegation that the funds were improperly spent. Lastly, although the listing agreement required an accounting within 30 days, the statute regulating advance fees does not contain such a requirement. The evidence shows that Respondent Henderson did orally account to the Henneberrys within the 30-day requirement by telling them that there was an overrun and that Respondent Auction World would pay the difference. When the Henneberrys did request a written accounting, it was provided 11 days later. There was no evidence that Respondent Auction World intended to violate the statutory requirements concerning advance fees or that such a violation occurred.
