STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 87-4587

)

ROBERT F. NAGEL and )

BLUFF'S REALTY, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, James E. Bradwell, held a public hearing in this case on April 22, 1988 in West Palm Beach, Florida. Proposed memoranda were submitted by the parties and considered by me in preparation of this Recommended Order. Proposed findings which are not incorporated herein are the subject of an Appendix attached hereto.

APPEARANCES

For Petitioner: Steven W. Johnson, Esquire

Contract Attorney

Department of Professional Regulation Division of Real Estate

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

For Respondents: John L. Bryan, Jr., Esquire

Scott, Royce, Harris, Bryan & Hyland, P.A.

450 Royal Palm Way Post Office Box 2664

Palm Beach, Florida 33480 ISSUE PRESENTED

Whether the Respondents' real estate licenses should be disciplined because they failed to account and deliver a deposit and/or engaged in conduct amounting to fraud, misrepresentation and breach of trust in a business transaction.

BACKGROUND

On September 23, 1987, the Department of Professional Regulation filed its Administrative Complaint alleging that the Respondents had violated Subsections

475.25(1)(b) and (d), Florida Statutes. Based on these charges, Petitioner seeks to discipline the Respondents, who are real estate licensees as defined by statute. Respondents disputed the issues and requested a formal hearing pursuant to subsection 120.57(1), Florida Statutes. Thereafter the hearing was set for April 22, 1988 and held as scheduled in West Palm Beach, Florida.

At the hearing, Petitioner offered the testimony of the complainant Mr.

Angelo Traina, Mrs. Lila Holback, Mr. Ron Falsiano and Mrs. Edith Snyder. Petitioner's exhibits were received into evidence without objection.

Respondents appeared and cross-examined the complainant's witnesses and also presented the testimony of Mr. Carl Holback.

At the conclusion of Petitioner's case, Respondents moved to dismiss the charges based on the theory that the default clause contained in the purchase agreement was illegal, void and unenforceable, citing a decision by the 5th District Court of Appeal in the case of Golub v. Department of Professional Regulation, 457 So.2d 229 (Fla. 5th DCA 1984). Ruling on Respondents' motion was reserved and is discussed herein.

Based on the evidence presented at hearing, the following relevant facts are determined:

FINDINGS OF FACT

1. At times pertinent hereto, Respondents were the holders of Florida real estate licenses. During all times material hereto, Respondent, Robert F. Nagel was licensed and operating as a real estate broker. Additionally, Respondent Nagel was the qualifying broker for Bluff's Realty, Inc.

   
   

2. During times material, Respondents had an open listing agreement with Angelo Traina to sell his property at 401 Ocean Bluffs Boulevard, 305, in Jupiter, Florida.

   
   

3. On or about December 7, 1986, Respondents prepared a purchase-sales contract signed by Carl and Lila Holback, as purchasers and Angelo Traina, as seller, for the purchase of the above referred property for the price of

   $98,450.00. The sales contract called for a $1,000.00 deposit to be held in escrow by Respondents. An additional $8,000.00 was to be deposited in escrow with the Respondents upon acceptance by the Seller. The contract signed by the Holbacks and Traina's contained a failure of performance provision. The failure of performance provision was contained in paragraph S of the contract and provided essentially that if the buyer failed to perform as required per the terms of the contract, the deposit could be retained by the seller as liquidated damages, or seller, at seller's option, could proceed at law or in equity to enforce the seller's legal rights under the contract.

   
   

4. On the following day, December 8, 1986, the Holbacks informed the Respondents that they were no longer desirous of purchasing the Traina property. The Holbacks requested that the $1,000.00 deposit instead be transferred from the Traina/Holback transaction to a new contract to purchase a different condominium unit.

   
   

5. This was done on December 8, 1986, as directed by the Holbacks without the knowledge and consent of Angelo Traina. The Holbacks considered that they had been pressured by Mr. Traina into executing the purchase agreement and that after reflection on the "duress" exerted by Mr. Traina, the Holbacks considered that they had a 72 hour period in which they could withdraw from the

   transaction. They therefore advised Respondents that they were no longer desirous of purchasing the Traina property. The Holbacks closed on a different property on January 12, 1987.

   
   

6. Subsequent to December 8, 1986, but prior to January 13, 1987, Respondents offered to pay Mr. Traina $500.00 in return for a release from any potential liability under the contract. This offer was rejected by Mr. Traina. Thereafter, on or about January 13, 1987, Mr. Traina retained counsel who demanded a payment of $10,000.00 from Respondents for alleged damages for breach of a fiduciary duty. The Respondents refused to pay $10,000.00 to or on behalf of Angelo Traina based on the listing agreement.

   
   

   CONCLUSIONS OF LAW

   
   

7. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action pursuant to subsection 120.57(1), Florida Statutes (1987).

   
   

8. The parties were duly noticed pursuant to the notice provision of Chapter 120, Florida Statutes.

   
   

9. The Petitioner's authority is derived from Chapter 475, Florida Statutes.

   
   

10. Respondents, as licensees by Petitioner, are subject to the disciplinary provisions of Chapter 475, Florida Statutes.

    
    

11. Subsection 475.25, Florida Statutes (1987) authorizes the commission to suspend a real estate license for a period not exceeding ten (10) years; revoke a real estate license; impose an administrative fine not to exceed

    $1,000.00 for each count or separate offense; and, may impose a reprimand or any or all of the foregoing, if it finds that a licensee has violated Section 475.25(1)(b) or (d), Florida Statutes (1987).

    
    

12. Subsection 475.25(1)(b), Florida Statutes (1987) proscribes breach of trust in any business transaction.

    
    

13. Subsection 475.25(1)(d), Florida Statutes (1987) proscribes failure by a licensee to account and deliver a deposit.

    
    

14. In Cortes v. Adair, 494 So.2d 523 (Fla. 3rd DCA 1986), the Third District Circuit Court of Appeal ruled on the enforceability of default clauses which were identical to the default clause involved herein in that the seller had the option, upon the buyers default, of either retaining the deposit as liquidated damages or at the seller's option, filing suit in law or equity. In Cortes, the Court determined that this type of default clause is unenforceable as a matter of law. Cortes at 524. In landlord and tenant situations, it has been held that a landlord could retain only that portion of a tenant's security deposit which reflected his actual damages. The landlord could not exploit a lease provision which operated to make the tenant pay the actual damages or lose the entire security deposit depending upon which amount would be greater. Such an option would destroy the mutuality of the agreement. Pappas v. Deringer, 145 So.2d 770 (Fla. 3rd DCA 1962). This is not a landlord-tenant dispute and the issue presented is not analogous. It is determined that Respondents were required to notify Petitioner that it has received conflicting demands for the

Holback's deposit and that Respondents were unsure who was entitled to delivery of the escrowed deposit. Thereafter, Respondents were required to promptly do either of the following acts:

1. Request that the Commission issue an escrow disbursement order determining who is entitled to the escrowed property;

   
   

2. With the consent of the parties, submit the matter to arbitration; or

   
   

3. By interpleader or otherwise, seek adjudication of the matter by a court.

Respondents, by failing to employ one of the above escape provisions, engaged in a breach of trust in a business transaction which is proscribed by section 475.25(1)(b), Florida Statutes.

Respondents failed to account and deliver an escrow deposit in violation of section 475.25(1)(d), Florida Statutes.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that:

Petitioner enter a Final Order imposing an administrative fine against Respondents for Two Thousand Dollars (2,000.00) payable within thirty (30) days of entry of Petitioner's Final Order.

RECOMMENDED this 25th day of August, 1988, in Tallahassee, Florida.

JAMES E. BRADWELL

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 25th day of August, 1988.

COPIES FURNISHED:

John L. Bryan, Jr., Esquire Scott, Royce, Harris, Bryan & Hyland, P.A.

450 Royal Palm Way Post Office Box 2664

Palm Beach, Florida 33480

Steven W. Johnson, Esquire Department of Professional Regulation- Division of Real

Estate

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

Bruce D. Lamb General Counsel

Department of Professional Regulation

130 North Monroe Street Tallahassee, Florida 32399-0750

Laurence A. Gonzalez, Secretary Department of Professional Regulation

130 North Monroe Street Tallahassee, Florida 32399-0750

Darlene F. Keller Executive Director Department of Professional Regulation

Division of Real Estate

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

Docket for Case No: 87-004587

Orders for Case No: 87-004587