STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DENNIS HAVENER, MARCUS HINES, ) and BENDER-TANIS, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 87-5412F

)

DEPARTMENT OF PROFESSIONAL )

REGULATION, DIVISION OF )

REAL ESTATE, )

)

Respondent. )

)

FINAL ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, William R. Dorsey, Jr., held a formal hearing in this matter on March 29, 1988, in Key West, Florida. The petitioners have submitted proposed findings of fact and conclusions of law. Rulings on proposed findings of fact are made in the appendix to this recommended order.

APPEARANCES

For Petitioners: Michael Browning, Esquire

402 Applerouth Lane, Suite 10 Key West, Florida 33040

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

Department of Professional Regulation

400 West Robinson Street Post Office Box 1900 Orlando, Florida 32801

ISSUE

The issue is whether the petitioners should be granted costs and attorney's fees pursuant to the Equal Access to Justice Act, Chapter 57.111, Florida Statutes, et seq. for monies spent to defend an unsuccessful prosecution filed against them by the Division of Real Estate.

PRELIMINARY STATEMENT

A petition for costs and attorney's fees was filed on December 7, 1987, and, by order of the Hearing Officer, was amended on January 22, 1988. The Division of Real Estate then moved to dismiss the amended petition for attorney's fees and costs on February 15, 1988, in a pleading to which an affidavit of the attorney for the Division of Real Estate was attached. The motion to dismiss does not strictly meet the requirements of Rule 221-6.035(4), Florida Administrative Code, either by admitting the reasonableness of the fees and costs petitioners claim or by specifying each item of cost or fee in

dispute. A review of the document discloses that the Division did not agree with any of the monetary claims made by the petitioners. The motion to dismiss did not challenge the status of the petitioners as small business parties, but argued that the actions of the Division of Real Estate in bringing the prosecution was substantially justified.

FINDINGS OF FACT

The Parties

1. The petitioners are Dennis Havener, a real estate salesman; Marcus Hines, a real estate broker; and Bender-Tanis, Inc., a corporate broker. The prosecution brought by the Florida Real Estate Commission against them was dismissed by a final order of the Real Estate Commission which adopted a recommended order which found that the petitioners had engaged in no misconduct in the course of representing Lt. Commander Thomas Ciarula and his wife in the purchase of a residence on Sugar Loaf Key, in Monroe County, during 1985. The Real Estate Commission does not dispute that petitioners qualify as prevailing small business parties under Section 57.111(3)(c), Florida Statutes (1987)

   
   

   The Underlying Prosecution

   
   

2. The Department of Professional Regulation had investigated a complaint it received on July 28, 1986, from Lt. Commander Thomas A. Ciarula concerning his purchase of a home on Sugar Loaf Key. In his letter Lt. Commander Ciarula stated that the house which he and his wife had purchased on April 15, 1985, was

   439 square feet smaller than stated on the information sheet Provided to him by the relator, and this error represented over 20 percent of the supposed square footage. He enclosed information which he had sent to the Key West Board of Realtors in January 1986 in an attempt to process his complaint through the local Professional Ethics Committee. The proceeding before the Key West Board of Realtors continued while the Department of Professional Regulation was conducting its investigation and determining whether to find probable cause that the petitioners had violated Chapter 475, Florida Statutes. The Board of Realtors Professional Ethics Committee issued a decision exonerating all petitioners shortly after the Administrative complaint was filed by the Department of Profession Regulation on December 23, 1986.

   
   

3. The final order entered in the disciplinary case sets out the facts of the dispute between Lt. Commander Ciarula and the petitioners. Without reciting all of the facts pertinent to that decision, the final order may be summarized as follows:

   
   

   1. After Lt. Commander Ciarula had been transferred to the Key West area he visited Key West in an attempt to find a house to purchase. He dealt with Bender-Tanis, Inc., and one of its salesman, Dennis Havener. His only contact with the broker for Bender-Tanis, Inc., Marcus Hines, was that he shook hands with him during his visit to Key West. Ciarula had informed Havener that he was looking for a house having 2,000 or more square feet with a two-car garage in the $96-125,000 price range, and preferred a house on the water with central air conditioning. Lt. Commander Ciarula did not emphasize that any of these preferences were requirements, and he looked at a number of houses which failed to meet one or more of his preferences. He made an offer to purchase one house after his visit to Key West but that offer was not accepted.

      
      

   2. After Ciarula returned to Texas, he was contacted by Mr. Havener and told about a house which had recently been listed with Bender-Tanis Realty,

      Inc. Based on a description of the house and a rough sketch of its layout, prepared by Havener, the Ciarulas made an offer on that+ house without having seen it.

      
      

   3. The sketch prepared by Havener showed that the house had approximately 2,000 square feet. Havener had measured the house according to the instructions for multiple listing service listings by the Key West Board of Realtors. The dimensions required to be used were outside dimensions, and included all area under roof, which is known as gross square footage.

      
      

   4. The Ciarulas had wanted a house with 2,000 square feet of total living area, the area which may be heated and cooled. The gross square footage figure for the house included an aviary and a carport in the home which are not useful as living area or for furniture storage. The Ciarulas never informed Havener that they meant total living area when they used the term square footage.

      
      

   5. When the Ciarulas arrived in Florida they inspected the house the day before the closing of the sale. After the closing, he Ciarulas were surprised to find that all of their furniture would not fit in the house. Lt. Commander Ciarula then noticed that the appraisal done for the mortgagee indicated the house had 1,756 square feet of total living area. Lt. Commander Ciarula felt that an error had been made and consulted a lawyer, who advised him not to make his complaint to the salesman or the broker, but to file a complaint with the local board of relators as a prelude to filing a suit in circuit court. Lt. Commander Ciarula did not believe that he had been intentionally misled.

      
      

   6. Although Havener and Lt. Commander Ciarula had a misunderstanding about what each other meant when discussing square feet, Havener was guilty of neither intentional misconduct or culpable negligence in the transaction.

      
      

      The Departmental Investigation

      
      

4. Lt. Commander Ciarula followed the advice of his lawyer, and instituted an action before the Professional Ethics Committee of the local Key West Board of Realtors. That complaint was filed on January 10, 1986. It took quite a while for the complaint to be processed. Frustration with the slow progress of that proceeding prompted Lt. Commander Ciarula to file his complaint with the Department of Professional Regulation.

   
   

5. Floyd M. Stevens is an investigator for the Department of Professional Regulation. He interviewed the salesman, Dennis Havener, the broker, Marcus Hines, the complainant, Lt. Commander Ciarula, and Mary Hamilton, the executive officer of the Key West Board of Realtors. The information he obtained was set out in the first portion of his investigative report dated September 17, 1986. Also included in that report were copies of exhibits Mr. Stevens believed were pertinent. These included the complaint letter from Lt. Commander Ciarula, a copy of the multiple listing service sheet for the house that he purchased, a copy of a listing contract which had granted Bender-Tanis, Inc., an exclusive right to sell the property Lt. Commander Ciarula ultimately purchased, a copy of the Ciarulas' closing statement, and copy of the seller's closing statement.

6 A review of Mr. Steven's reports of his interviews of the broker Mr. Hines and the salesman Mr. Havener make plain that the Real Estate Commission knew that exterior dimensions had been used to calculate the square footage. For example, the following quote is attributed to the broker, "Our rule here is

to measure the exterior under roof dimensions." The salesman Havener told the investigator that, "The total square feet on the information sheet provided complainant by [Havener] includes carport and closets"

1. The multiple listing service operated by the Key West Board of Realtors instructs salesmen or brokers listing properties to include as part of the information to be published the total square footage. The instructions state, "Total square footage is accomplished with external measurements." This use of external measurements to determine square footage in listings is not unique to the Florida Keys.

   
   

2. The Key West Board of Realtors permits sales persons to submit data sheets for MLS publication. They need not be countersigned or otherwise approved by their broker as a condition of publication. There is no evidence that Marcus Hines ever saw or approved the MLS listing Dennis Havener prepared for the property Lt. Commander Ciarula bought. Although it is not clear from the investigative report, Stevens knew that the Ciarulas never dealt with the broker, Marcus Hines.

   
   

3. The Real Estate Commission did not place in evidence the transcript of the probable cause panel's proceedings. Although the investigative report of Floyd Stevens was introduced into evidence, there is no evidence of what was considered in determining to find probable cause and file an administrative complaint against the petitioners.

   
   

4. The Department's prosecution proceeded on the theory that the broker is subject to discipline for misconduct by a salesman under the broker's supervision. The defense which the broker, Marcus Hines, and the corporate broker Bender-Tanis Realty, Inc., would have had to mount would have been identical whether or not the lawyer for the petitioners also represented the salesman, Mr. Havener.

   
   

   The Attorney's Fee

   
   

5. The attorney for the petitioners, Michael L. Browning, devoted 33.75 hours to the preparation of the underlying prosecution. These hours are set out in the Affidavit attached to the Amended Petition for Attorney's Fees filed January 22, 1988, and amended by testimony during the final hearing. Mr. Browning also devoted 15 hours to the preparation of the attorney's fees petition and the final hearing on it. Mr. Browning's normal hourly rate is $125 per hour, which is the fee he agreed to charge the petitioners in the underlying prosecution and in this matter. Based on the testimony of the petitioners' expert witness, this is a reasonable fee. In fact, the $125 per hour rate is somewhat low for attorneys of Mr. Browning's experience in the Key West area. The total attorney's fee attributable to these proceedings is therefore

   $6,093.75. Mr. Browning also incurred long distance telephone expenses of $23. While $480 was spent to transcribe the proceedings before the Ethics Committee of the Key West Board of Realtors, that proceeding was not relevant to the underlying prosecution, and the cost is not properly a taxable cost here.

   CONCLUSIONS OF LAW

   
   

6. The Division of Administrative Hearings has jurisdiction over this matter. Section 57.111(4)(d), Florida Statutes (1987)

   Under the Florida Equal Access to Justice Act An award of attorney's fees and costs

   shall be made to a prevailing small

   business party in any adjudicatory proceeding or administrative proceeding pursuant to Chapter 120 initiated by a state agency, unless the actions of the agency were substantially justified or special circumstances exist which would make an award unjust. Section 57.111(4)(1), Florida Statutes.

   
   

   The Real Estate Commission has not argued that there are any Special circumstances here which would make an award unjust, but it does maintain that its actions were substantially justified. According to Section 57.111(3)(e), a proceeding is substantially justified, "if it had a reasonable basis in law and fact at the time it was initiated by a state agency." It is instructive to look to the decisions of federal courts which have construed the meaning of the language of the federal legislation on which the Florida Equal Access to Justice Act is modeled. See Gentele v. Department of Professional Regulation, Board of Optometry, 513 So.2d 672 (Fla. 1st DCA 1987). In discussing the meaning of the term "substantially justified," the court in Ashburn v.U. S., 740 F.2d 843 (11th Cir. 1984) , said:

   
   

   The government bears the burden of showing that its position was substantially justified. [citations omitted) The standard is one of reasonableness; the government must show "that its case had a reasonable basis both in law and fact." [citations omitted) The fact that the government lost its case does not raise a presumption that the government's position was not substantially justified. [citation omitted) Nor is the government required to establish that its decision to litigate was based on a substantial probability of prevailing. [citation omitted]

   
   

   To the same effect, see White v. U.S., 740 F.2d 836 (11th Cir. 1984)

   
   

7. There was no factual basis for the disciplinary proceeding filed against the petitioners here. Lt. Commander Ciarula did not maintain he had been purposely misled. The investigation of the complaint by Lt. Commander Ciarula should have revealed that the square footage figures used by the salesman, Mr. Havener, were expressed in terms of gross square footage, which is typically used in the Florida Keys. The Department of Professional Regulation investigator needed to do no more than consult the multiple listing service instruction sheet to verify this, or to consult the local Board of Realtors

   about local practice. This was not done. Moreover, there were no facts indicating that the broker, Marcus Hines, had been guilty of any misconduct whatsoever with regard to this transaction. The factual argument at the final hearing in this case made by the Real Estate Commission, that the broker was required to approve the multiple listings service sheets prepared by a salesman in his office for inclusion in the multiple listings service book is wrong. A simple inquiry of the local Board of Realtors Office would have revealed this.

   
   

8. The legal argument that the broker is an absolute insurer of the actions of his salesmen, and is subject to discipline vicariously for any misconduct by a salesman is erroneous as a matter of law. The violations with which the broker and corporate broker were charged were violations of Section 475.25(1)(b), Florida Statutes. That statute proscribes fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme, or device, culpable negligence or breach of trust. These offenses have been held to require some sort of knowing wrongdoing or guilty knowledge. See, e.q., Astore v. Florida Real Estate Commission, 374 So.2d 40, 42 (Fla. 3d DCA 1979); Brod v. Jernigan, 188 So.2d 575, 578-79 (Fla. 2d DCA 1966). Even if a broker may have liability in civil damages for negligence of a salesman under the doctrine of respondent superior, the broker is not subject to professional discipline unless he is guilty of misconduct of his own. The Florida Real Estate Commissions' theory of liability for the broker, Marcus Hines, and the corporate broker, Binder- Tanis, lacked legal foundation.

   
   

9. Not only was the investigation of this case deficient, there is no proof of what, if anything, the probable cause panel considered in determining to file an administrative complaint. The record is silent on whether a "meaningful inquiry" was conducted, as the law requires See, Kibler v. Department of Professional Regulation, 418 So.2d 1031 (Fla. 4th DCA 1982). The Real Estate Commission has failed to prove that at the time the proceeding was initiated, there was a reasonable basis in law or in fact for the allegations made against Dennis Havener, Marcus Hines, or Bender-Tanis, Inc.

   
   

10. This case is distinguishable from Gentele v. Department of Professional Regulation, 513 So.2d 672 (Fla. 1st DCA 1987), which held that a determination to prosecute which turned on a credibility assessment of the investigator's testimony had a reasonable basis in law and in fact, even though the prosecution was unsuccessful. In that case, the investigator was the principal prosecution witness, testifying about the optometry examination the licensee had preformed, which allegedly was deficient. There was very little dispute as to any of the facts involved in this case. The question was whether the salesman, Mr. Havener, was subject to discipline because of the misunderstanding he had with Lt. Commander Ciarula about the meaning of the term "square footage." Lt. Commander Ciarula never maintained that Mr. Hines had purposely misled him.

    
    

11. A reasonably diligent investigation also would have revealed that this case arose from a misunderstanding between the salesman and the purchaser for which the broker was in no way responsible. Because of the respondent superior theory of liability utilized by the Department, the effort which the individual broker and the corporate broker were required to expend in the defense of this case would have been the same whether or not there was a substantial basis in law and fact for the claim made against the salesman. Thus, under Section 57.111(4)(a), Florida Statutes (1987), Marcus Hines and Bender- Tanis, Inc., are entitled to an award of attorney's fees and costs for the defense of the

underlying prosecution and for the fees incurred in this proceeding under the Florida Equal Access to Justice Act to obtain the attorney's fees.

ORDER

It is ordered that the Florida Real Estate Commission pay to Dennis Havener, Marcus Hines, and Bender Tanis, Inc., $6,093.75 for attorney's fees and

$23 in costs within thirty days as required by Subsection 57.111(5), Florida Statutes (1987).

DONE AND ORDERED in Tallahassee, Leon County, Florida, this 1st day of September, 1988.

WILLIAM R. DORSEY, JR.

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 1st day of September, 1988.

APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 87-5412F

Ruling on proposed findings by the petitioners.

1. Covered in finding of fact 1.

2. Covered in finding of fact 3.

3. Covered in the preliminary statement, timeliness is not an issue.

4. Covered in finding of fact 11.

5. Rejected as unnecessary.

6. To the extent appropriate, covered in finding of fact 9. The testimony of Arthur Shell has been rejected because Shell could not testify whether he appeared at the probable cause hearing c. not, making his testimony irrelevant.

7. Rejected as unnecessary.

8. To the extent necessary, covered in finding of fact 6. While both Havener and Hines cooperated with the investigation, that is not relevant to the inquiry at hand.

9. Covered in finding of fact 7.

10. Covered in the conclusions of law.

11. Covered in finding of fact 3a and conclusions of law.

12. Covered in the conclusions of law.

13. Covered in the conclusions of law.

14. Covered in the conclusions of law.

15. Covered in the conclusions of law.

Rulings of the findings proposed by the respondent.

No proposed recommended order was filed respondent.

COPIES FURNISHED:

Michael Browning, Esquire

402 Applerouth Lane Suite 10

Key West, Florida 33040

Arthur R. Shell, Jr., Esquire Department of Professional

Regulation

400 West Robinson Street Post Office Box 1900 Orlando, Florida 32801

Darlene F. Keller, Acting Director Department of Professional

Regulation

130 North Monroe Street Tallahassee, Florida 32299-0750

Bruce D. Lamb, Esquire General Counsel

Department of Professional Regulation

130 North Monroe Street Tallahassee, Florida 32399-0750

NOTICE OF RIGHT TO JUDICIAL REVIEW

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

Docket for Case No: 87-005412F

Orders for Case No: 87-005412F