STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL )

REGULATION, DIVISION OF )

REAL ESTATE, )

)

Petitioner, )

)

vs. ) CASE NO. 88-1316

)

RICHARD A. DUNHAM, JR., )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a hearing was held in this cause on April 19, 1988, in Sarasota, Florida, before Diane A. Grubbs, a Hearing Officer with the Division of Administrative Hearings.

APPEARANCES

For Petitioner: James H. Gillis, Esquire

Senior Attorney Division of Real Estate

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

For Respondent: Robert P. Rosin, Esquire

ROSIN & DAVIS

1900 Main Street, Suite 210

Sarasota, Florida 34236 ISSUES

Whether respondent committed the act alleged in the Administrative Complaint and, if so, whether respondent's license should be revoked or suspended, or whether other disciplinary action should be imposed.

BACKGROUND

On February 23, 1988, petitioner filed an Administrative Complaint against respondent. The complaint alleged that respondent was at all times material to the complaint a licensed real estate salesman in the State of Florida; that on or about September 22, 1986, Kathryn E. Kelly entered into a written lease agreement and tendered a security deposit to Elizabeth Mitchell, an employee of respondent's; that Elizabeth Mitchell immediately delivered the $500 security deposit to respondent; that when Kathryn E. Kelly vacated the premises, respondent, as landlord, failed to return the security deposit to her or give her written notice by certified mail of his intention to impose a claim on the deposit as required by Section 83.49, Florida Statutes; that Kathryn Kelly has

demanded the return of the security deposit from respondent; that on or about June 30, 1987, Kathryn Kelly obtained a default judgment against the respondent in the total amount of $785; and that respondent has failed to return the security deposit or pay the judgment against him. Based on the foregoing factual allegations, respondent was charged with violating Subsection 475.25(1)(b) and (d), Florida Statutes.

Respondent disputed the allegations of fact contained in the Administrative Complaint and requested a formal administrative hearing. The matter was referred to the Division of Administrative Hearings on March 18, 1988. On April 12, 1988, the respondent filed an answer to the Administrative Complaint. At the hearing, the parties stipulated to certain facts. Petitioner presented the testimony of Richard A. Dunham, Jr., the respondent; Elizabeth Poole Mitchell, and Kathryn E. Kelly. Petitioner's exhibits 1-5 and 7 were admitted into evidence. The respondent testified on his own behalf. Respondent did not offer any exhibits into evidence.

A transcript of the hearing has not been filed. Both parties have submitted proposed findings of fact and conclusions of law, and a ruling on each of the proposed findings of fact is included in the Appendix to this Order.

FINDINGS OF FACT

1. Petitioner is a state licensing and regulatory agency charged with the responsibility and duty to prosecute administrative complaints pursuant to the laws of the State of Florida, in particular, Section 20.30, Florida Statutes, Chapters 120, 455 and 475, Florida Statutes, and the rules promulgated pursuant thereto.

   
   

2. Respondent, Richard A. Dunham, Jr., is now and was at all times material to the complaint a licensed real estate salesman in the State of Florida having been issued License No. 0130830 in accordance with Chapter 475, Florida Statutes. The last license issued was as a salesman, c/o Merrill Lynch Realty, operating partnership L.P. LTD., 1234 West Palm Avenue, Sarasota, Florida 34236.

   
   

3. Respondent was the sole stockholder of Guaranteed Leasing, Inc., a corporation that was not licensed with the Florida Real Estate Commission. Respondent formed Guaranteed Leasing, Inc., for the purpose of engaging in real estate ventures. Respondent was also the sole stockholder in other corporations established for the same purpose.

   
   

4. On August 21, 1986, Guaranteed Leasing, Inc., entered into a lease agreement with Gail Walker whereby Guaranteed Leasing, Inc., leased a furnished townhouse for two years at $500 per month. Thereafter, respondent contacted Elizabeth Mitchell, a business associate and friend of respondent, to obtain her help in subleasing the townhouse. Respondent agreed to let Ms. Mitchell live in the townhouse in return for her maintaining the property and showing it to prospective sublessees. Respondent also agreed to pay Ms. Mitchell $200 if she subleased the property.

   
   

5. On September 22, 1986, Kathryn E. Kelly entered into a written lease agreement with Guaranteed Leasing, Inc., to lease the townhouse for $600 per month. Ms. Kelly also agreed to pay a security deposit of $500. Ms. Kelly gave Elizabeth Mitchell a bank check, written to Guaranteed Leasing, Inc., in the amount of $500 for the security deposit. Ms. Mitchell thereafter delivered Ms. Kelly's check of $500 to respondent who deposited the check into the general

   corporate account of Guaranteed Leasing, Inc. Prior to signing the lease, Ms. Kelly met respondent. She was under the impression that respondent owned Guaranteed Leasing and that Ms. Mitchell worked for him.

   
   

6. In December of 1986, Ms. Kelly vacated the townhouse premises. She had paid all appropriate rental payments. Ms. Kelly asked respondent, in person, to return her security deposit. Neither respondent nor Guaranteed Leasing, Inc., returned the security deposit. Neither respondent nor Guaranteed Leasing, Inc., gave notice of intent to impose a claim for damages upon the security deposit. After repeatedly demanding return of the security deposit, which demands were ignored by respondent, Ms. Kelly obtained counsel and filed a lawsuit against respondent, Guaranteed Leasing, Inc., and Ms. Mitchell. On July 1, 1987, a default judgment was entered against respondent, Elizabeth Mitchell and Guaranteed Leasing, Inc., jointly and severally in the amount of $544, plus costs and attorney's fees, for a total judgment of $785. The judgment has not been satisfied.

   
   

7. Guaranteed Leasing, Inc., is no longer in existence. Respondent was the sole stockholder of Guaranteed Leasing, Inc., and was an officer of the corporation. Guaranteed Leasing, Inc., had no salaried employees. The only business activity of Guaranteed Leasing, Inc., was the transaction involved in this case. Respondent was in total control of the corporation's activities and was responsible for its actions. Indeed, as perceived by both Ms. Kelly and Mrs. Mitchell, Guaranteed Leasing, Inc., was, in essence, the respondent. Guaranteed Leasing, Inc., was merely the instrumentality through which respondent conducted this business transaction.

   
   

   CONCLUSIONS OF LAW

   
   

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

   
   

9. Pursuant to Section 475.25(1), Florida Statutes, the Florida Real Estate Commission "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 has committed any of the acts enumerated in Section 475.25(1). A licensee is subject to discipline if he:

   
   

   (b) Has been guilty of fraud, misrepresenta- tion, concealment, false promises, false pretenses, dishonest dealing by trick, scheme, or device, culpable negligence, or breach of trust in any business transaction

   . . . .

   * * *

   (d) Has failed to account or deliver to any person . . . at the time which has been agreed upon or is required by law or, in the absence of a fixed time, upon demand of the person entitled to such accounting and delivery, any personal property such as money, fund, deposit, . . . or other document or thing of value . . . which has come into his hands and which is not his property or

   which he is not in law or equity entitled to retain under the circumstances . . .

   
   

10. In the Administrative Complaint, petitioner charged that respondent violated Subsections 475.25(1)(b) and (d) by failing to return the security deposit to Ms. Kelly or give written notice of his intention to impose a claim on the deposit, as required by Section 83.49, Florida Statutes, and by failing to pay the judgment entered against him. The petitioner has the burden of establishing these charges by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987)

    
    

11. As a preliminary matter, it is noted that the exemption set forth in Section 475.011(2), Florida Statutes, does not divest the Florida Real Estate Commission of jurisdiction to discipline a broker or salesman simply because the business transaction involves his own or his closely-held corporation's real estate. See, e.g., Sellars v. Florida Real Estate Commission, 380 So.2d 1052 (Fla. 1st DCA 1979). The evidence presented in this case established that respondent controlled the activities of his corporation and was responsible for its actions. Just as an individual may be held liable for contractual obligations made in the name of his corporation, when the corporation is in fact the "alter ego" of the individual, Levenstein v. Sapiro, 279 So.2d 858 (Fla. 1973), a licensee may be disciplined by the Real Estate Commission pursuant to Section 475.25(1) for the commission of the acts set forth in that section, even if such acts were taken by the licensee in the name of his corporate identity.

    
    

12. Section 83.49, Florida Statutes (1985) , provides, in pertinent part, as follows:

    
    

    1. Whenever money is deposited . . . by a tenant on a rental agreement as security for performance of the rental agreement . . . the landlord or his agent shall either:

       
       

       1. Hold the total amount of such money in a separate non-interest-bearing account .

          for the benefit of the tenant The

          landlord shall not commingle such monies with any other funds of the landlord or hypothecate, pledge, or any other way make use of such monies until such monies are actually due the landlord;

          
          

       2. Hold the total amount of such monies in a separate interest-bearing account for

          the benefit of the tenant . . . in which case the tenant shall receive and collect interest The landlord shall not commingle such

          monies with any other funds of the landlord or hypothecate, pledge, or in any other way make use of such monies until such monies are actually due the landlord; or

          
          

       3. Post a surety bond . . with the clerk of the circuit court in the county in which the dwelling unit is located in the total

          amount of the security deposit . . . he holds

          on behalf of the tenant or $50,000, whichever is less . . .

          
          

    2. The landlord shall, within 30 days of receipt of . . . a security deposit, notify the tenant in writing of the manner in which the landlord is holding the . . . security deposit . . .

       
       

       (3)(a) Upon the vacating of the premises for termination of the lease, the landlord shall have 15 days to return the security deposit together with interest if otherwise required, or in which to give the tenant written notice by certified mail . . . of his intention to impose a claim on the deposit and the reason for imposing the claim.

       
       

       Section 83.43(3), Florida Statutes (1985), defines landlord as "the owner or lessor of a dwelling unit."

       
       

13. Respondent's corporate alter ego was the landlord, or lessor, of the townhouse leased to Ms. Kelly. Respondent received Ms. Kelly's $500 security deposit, which deposit should have been held in trust by the respondent as provided in Section 83.49(1). However, respondent deposited the money in the general corporate account of Guaranteed Leasing, Inc. When Ms. Kelly vacated the premises for termination of the lease, respondent neither returned her security deposit nor provided notice of his intention to impose a claim on the deposit. Respondent is therefore guilty of a breach of trust in a business transaction and is subject to discipline pursuant to Section 475.25(1)(b) Florida Statutes.

    
    

14. Respondent is also subject to discipline pursuant to Section 475.25(1)(d), Florida Statutes, by failing to account or deliver to Ms. Kelly at the time required by law and upon demand the security deposit which he held and which was not his property and which he was not in law entitled to retain under the circumstances. Any doubt as to respondent's obligation to return the security deposit to Ms. Kelly, or his liability to Ms. Kelly for the amount of the security deposit, was resolved by the judgment entered against respondent. Even if the failure to return the security deposit was considered only a violation of a contractual right, once there was a judicial determination that respondent owed the money to Ms. Kelly, respondent's failure to deliver the money to Ms. Kelly constituted an act subjecting respondent to discipline pursuant to Section 475.25(1)(d), Florida Statutes. See, Golub v. Department of Professional Regulation, 450 So.2d 229 (Fla. 5th DCA 1984).

    
    

15. Rule 21V-24.001, Florida Administrative Code, provides the disciplinary guidelines for violations of Section 475.25(1), Florida Statutes. The minimum penalty for violating either Section 475.25(1)(b) or (d) is a reprimand and/or a fine of up to $1,000 per count. The maximum penalty for violating Section 475.25(1)(b) is up to five years suspension or revocation, and the maximum penalty for violating Section 475.25(1)(d) is up to five years suspension.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a Final Order be entered finding that respondent committed

those acts set forth in Subsections 475.25(1)(b) and (d), Florida Statutes, suspending respondent's license for a period of three months, and imposing an administrative fine of $1,000.

DONE AND ENTERED this 17th day of June, 1988, in Tallahassee, Leon County, Florida.

DIANE A. GRUBBS

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 17th day of June, 1988.

APPENDIX

Petitioner's proposed findings:

1-2. Accepted.

3. Accepted, except as to finding that Mitchell was an "employee" of respondent; however, it is clear that Mitchell was acting as respondent's agent in her dealings with Ms. Kelly.

4-9. Accepted generally. Respondent's proposed findings:

1-8. Accepted generally except as to proposed finding that Mitchell was an "employee" of Guaranteed Leasing, Inc. Mitchell was acting as respondent's agent in her dealings with Ms. Kelly.

9. Rejected as irrelevant.

COPIES FURNISHED:

James H. Gillis, Esquire Senior Attorney

Division of Real Estate Post Office Box 1900 Orlando, Florida 32802

Robert P. Rosin, Esquire ROSIN & DAVIS

1900 Main Street

Suite 210

Sarasota, Florida 34236

Darlene F. Keller Executive Director Division of Real Estate Post Office Box 1900 Orlando, Florida 32802

William O'Neil, Esquire General Counsel

Department of Professional Regulation

130 North Monroe Street Tallahassee, Florida 32399-0750

Docket for Case No: 88-001316

Orders for Case No: 88-001316