STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 88-4690

)

DONALD J. MITCHELL, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Veronica E. Donnelly, held a formal hearing on March 29, 1989, in Fort Myers, Florida.

APPEARANCES

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

Department of Professional Regulation - Division of Real Estate Post Office Box 1900

Orlando, Florida 32801

For Respondent: John C. Coleman, Esquire

Coleman & Coleman

2300 McGregor Boulevard Post Office Box 2089

Fort Myers, Florida 33902 STATEMENT OF THE ISSUES

Whether the Respondent's real estate salesman license should be disciplined based upon the charges of fraud, misrepresentation, and culpable negligence in a business transaction which are set forth in the Administrative Complaint.

PRELIMINARY STATEMENT

In a letter dated September 15, 1988, the Respondent, Donald J. Mitchell (hereinafter Mitchell), requested a formal hearing to contest the allegations of fact contained in the Administrative Complaint which seeks to discipline his real estate salesman's license based upon charges of fraud, misrepresentation, and culpable negligence in a business transaction, in violation of Section 475.25(1)(b), Florida Statutes (Supp. 1982).

During the hearing the Petitioner, Department of Professional Regulation, Division of Real Estate (hereinafter the Department), presented three witnesses and submitted four exhibits, which were admitted into evidence. The Respondent,

called one witness and testified on his own behalf. Three exhibits were identified and received into evidence.

A transcript of the proceeding was received on April 21, 1989. As the parties agreed to an extended deadline of June 16, 1989, for the filing of proposed recommended orders, the provisions of Rule 28-5.402, Florida Administrative Code, were waived by the parties. A proposed recommended order was filed by the Respondent Mitchell on June 21, 1989. Specific rulings on the proposed findings of fact are in the Appendix of the Recommended Order.

FINDINGS OF FACT

1. At all times material to these proceedings, the Respondent Mitchell was a licensed real estate salesman, having been issued license number 0364014 through the Division of Real Estate.

   
   

2. The Department is the agency charged with the responsibility to prosecute charges of violations of Chapter 475, Florida Statutes, by real estate salesman who are licensed in Florida.

   
   

3. In December 1982, while on vacation in Fort Lauderdale, Mr. Fernando Canepa accepted an invitation to take a complimentary tour of Lehigh Acres from a representative of Lehigh Corporation. Lehigh Corporation is owner of a large residential development within the community of Lehigh Acres, Florida. The community is in an undeveloped area of Lee County, Florida. A predecessor development company of Lehigh Corporation began development of Lehigh Acres as a planned community, in the early 1950's. By August 31, 1979, approximately 110,047 out of 129,000 lots had been sold within the community by the developers.

   
   

4. The purpose of the complimentary tour, which includes a trip to the Everglades, a tour of Lehigh Acres, a promotional film and a free lunch is to sell real estate lots in this isolated and independent community. Mr. Fernando Canepa was aware of the tour's purpose when he accepted the invitation. Mr. Canepa had heard of Lehigh Corporation in Venezuela, his country of residence during 1982. As he was interested in purchasing real property in the United States, he had made the decision to visit the residential development for the possible purchase of property prior to leaving Venezuela on his vacation.

   
   

5. A close friend of Mr. Canepa who resides in Peru, had also discussed a purchase of real estate in the United States with Mr. Canepa prior to his vacation. Mr. Ricardo Sahurie verbally authorized Mr. Canepa to seek out property in Lehigh Acre for him if Mr. Canepa believed that a purchase in that community would be a good idea. The two friends agreed that if land purchases were made, the two lots would have to be next to each other.

   
   

6. During his tour of Lehigh Acres on January 5, 1983, Mr. Canepa was introduced to the Respondent. The Respondent was the real estate salesman assigned by Lehigh Corporation to handle lot sales within the development to members of that particular tour group.

   
   

7. When Mr. Canepa spoke with the Respondent about a lot purchase, he was concerned about two matters: the market value of the lots and the security of his investment.

   
   

8. Mr. Canepa was informed by the Respondent that the price for each of the two lots he wanted to purchase were $12,499.00 and $11,999.00, respectively.

   The prices were non-negotiable as the market value placed upon each lot was determined by the lot control department within Lehigh Corporation.

   
   

9. Prior to the signing of Agreements for Deed on a lot for himself and a lot for Mr. Sahurie, Mr. Canepa was given the opportunity to read the Public Offering Statement on the development which had been prepared by Lehigh Corporation. On page two of the statement, potential buyers were advised of many of the inherent risks involved in a land purchase. Potential buyers were warned that land values may not increase, and that resale of lots within Lehigh Acres may be difficult or impossible.

   
   

10. As part of the sales transaction, the Respondent was required to contemporaneously certify that he made no representations to Mr. Canepa which were contrary to the information contained in the Public Offering Statement. Mr. Canepa was given a copy of this certification, along with specific instructions to notify the Office of Interstate Land Sale Registration and the Division of Florida Land Sales and Condominiums if representations were made to him which are contrary to those in the statement. In addition, Mr. Canepa was given seven days to cancel the Agreement for Deed signed by him on January 5, 1983.

    
    

11. Mr. Canepa chose to continue with the purchase of the lot he selected, and recommendations were made to his friend Mr. Sahurie to continue with his purchase. The two purchasers agreed between themselves to hold onto the lots for a few years for speculation purposes. A decision to build upon the lots or to sell them could be made at a later date. This plan had been discussed with the Respondent, who had voiced his approval of the plan prior to the purchase of the lots by Mr. Canepa. The Respondent discussed the recent growth in the Southwest Florida region, and the recent increases in lot valuations when Mr. Canepa informed him of his intentions. These discussions reaffirmed Mr. Canepa's confidence in his decision to purchase the lots in the development, in spite of reminders by the Respondent that future land values are unforeseeable.

    
    

12. On September 15, 1987, Mr. Canepa returned to Lehigh Acres and learned that the lots had not increased in value. Model home plans were obtained from Lehigh Corporation, and a resale agent was contacted to assist Mr. Canepa and Mr. Sahurie in their future plans for the property. During discussions with the real estate agent, Mr. Canepa was informed that the lots could be resold for a price between $2,500.00 to $3,000.00. When the agent was asked how much Mr. Canepa could have purchased a resale for in 1983, Mr. Canepa was told that he could have purchased a resale lot for around $2,000.00.

    
    

13. The price requested by Lehigh Corporation for each lot is based upon a number of factors such as the costs of advertising, engineering, and development, as well as the cost of the land itself.

    
    

14. Lehigh Acres has been a development project since 1952. During some of the earlier phases of the project, lots were sold for $500.00. Purchasers of land from the earlier phase are able to resell their vacant lots at a profit for price within the $2,000.00 price range. As an individual lot owner's expenses and motivations are different than the development corporation's expenses and motivations, lots could be obtained for less money from many individual lot owners in 1983 through 1987.

    CONCLUSIONS OF LAW

    
    

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

    
    

16. The Respondent is charged with violation of Section 475.5(1)(b), Florida Statutes (1982 Supp.), which provides that the Florida Real Estate Commission within the Department of Professional Regulation can take disciplinary action against the license of a Florida real estate salesman who:

    
    

    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 . . . has violated a duty imposed

    upon him by law or by the terms of a listing contract. . . .

    
    

17. At all times during his dealings with Mr. Canepa, the Respondent was clearly the agent of the seller. The duty owed by the Respondent to Mr. Canepa is the same duty as is owed by Lehigh Corporation to the buyer. That duty, which is governed by the Florida Uniform Sales Practices Law in Chapter 498, Florida Statutes, is to not directly and knowingly engage in any false, deceptive, or misleading promotion or sales method for the purpose of offering or disposing of any interest in subdivided lands. Section 498.045(9)(b), Florida Statutes (1981).

    
    

18. In this case, the Respondent is charged with having misrepresented the value of the two lots purchased by Mr. Canepa and Mr. Sahurie in Lehigh Acres, Florida. Mr. Canepa contends that he specifically asked the Respondent for the market value of the two lots prior to purchase. The Respondent told the potential buyer that the market value of each lot was the non-negotiable price offered by Lehigh Corporation. The response given by Respondent Mitchell was not a misrepresentation as those prices were the amount of money required for the Respondent's client to sell its two lots. If the Respondent was asked for a comparable sales valuation, including resale lots, and the same valuation had been given, a misrepresentation may have occurred. However, no such facts were presented during hearing.

    
    

19. According to Mr. Canepa, he relied upon the Respondent's approval of his proposed plan to purchase the lots for either a future homeplace or land investment. The Respondent's encouragement, as well as his comments about growth in Southwest Florida and the recent increases in lot valuations, allegedly induced Mr. Canepa to sign the Agreements for Deed. The general comments and sales puffery used by the Respondent in the course of the sales transaction cannot be used by Mr. Canepa to minimize his own responsibility to exercise ordinary care in his land purchases. The Public Offering Statement, the Agreement for Deed, and the Respondent all cautioned Mr. Canepa prior to purchase that land values may not increase, and that resale may be difficult.

    If Mr. Canepa placed greater weight upon the sales puffery than the written documentation and cautionary statements about the lack of foreseeability in land valuation made by Respondent, this reliance was unjustified. The Respondent should not be held accountable for Mr. Canepa's failure to properly assess the information provided to him during the business transaction.

20. In Brod v. Jernigan, 188 So.2d 575 (Fla. 2d DCA 1966), a real estate broker representing the sellers induced them to sign a sales contract with potential purchasers with the promise that he would buy the home himself if the sale did not close by a specific date. When neither sale occurred, charges of false promises and breach of trust in a business transaction were prosecuted by the Florida Real Estate Commission against the broker.

    
    

21. The appellate court reviewed the case and determined that the broker's conduct did not amount to a fraud or other violation of Section 475.25, Florida Statutes. In its opinion, the court relied on Volume 37 C.J.S. "Fraud" Section 11, page 231, which provides:

    
    

    . . . fraud cannot be predicated on statements which are promissory in their nature, or constitute expressions of intention, and an actionable representation cannot consist of mere broken promises, unfulfilled predications, or expectations, or erroneous conjectures as

    to future events, even if there is no excuse for failure to keep the promise, and even though a party acted in reliance on such promise; nor . . . is the mere nonperformance of a promise evidence establishing fraud or lack of intent to perform.

    
    

22. Under the reasoning relied upon by the court in Brod, supra, the predictions, expectations and erroneous conjectures made by Respondent Mitchell regarding future property values in Lehigh Acres could not be considered as substantial evidence of fraud, misrepresentation, and culpable negligence in a business transaction, even if Mr. Canepa had justifiably relied upon these predictions to his detriment.

    
    

23. A proceeding to discipline a license is penal in nature. Bach v. Florida Board of Dentistry, 378 So.2d 34 (Fla. 1st DCA 1980). In such contests, the Petitioner has the burden of proof and must prove by clear and convincing evidence that the Respondent committed the violations set forth in the administrative complaint. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).

    
    

24. The evidence presented did not support a finding that Respondent Mitchell was guilty of fraud, misrepresentation, breach of trust, or other violation of Section 475.25(1)(b), Florida Statutes, during the purchase of lots by Mr. Canepa and Mr. Sahurie. See Department of Professional Regulation v. Bennington et al., 6 FALR 6329 (Final Order 6-19-84).

RECOMMENDATION

Based upon the foregoing, it is RECOMMENDED:

That a Final Order be entered finding Respondent Mitchell not guilty of the charges filed in Case No. 88-4690, and that these charges be dismissed.

DONE and ENTERED this 8th day of August, 1989, in Tallahassee, Leon County, Florida.

VERONICA E. DONNELLY

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904)488-9675

Filed with the Clerk of the Division of Administrative Hearings this 8th day of August, 1989.

APPENDIX TO RECOMMENDED ORDER IN CASE NO. 88-4690

The Respondent's proposed findings of fact are addressed as follows:

1. Accepted. See HO #1.

2. Rejected. Irrelevant.

3. Rejected. Irrelevant.

4. Rejected. Irrelevant.

5. Rejected. Irrelevant.

6. Accepted. See HO #3.

7. Rejected. Irrelevant.

8. Accepted. See HO #9.

9. Accepted. See HO #9.

10. Accepted.

11. Accepted.

12. Accepted.

13. Accepted. See HO #10.

14. Rejected. Irrelevant.

15. Accepted. See HO #4.

16. Accepted. See HO #6.

17. Accepted. See HO #8, and #13.

18. Accepted.

19. Accepted.

20. Accepted.

21. Accepted. See HO #4.

22. Accepted. See HO #4 and #6.

23. Rejected. Irrelevant.

24. Accepted. See HO #8.

25. Accepted.

26. Accepted. See HO #5.

27. Accepted.

28. Accepted.

29. Accepted. See HO #8 and #9.

30. Rejected. See HO #11.

31. Rejected. Improper summary. See HO #11.

32. Accepted. See HO #8.

33. Accepted. See HO #9.

34. Accepted. See HO #9 and #10.

35. Rejected. Argumentative and irrelevant.

36. Accepted. See HO #12.

37. Accepted. See HO #12.

38. Rejected. Irrelevant.

39. Rejected. Irrelevant.

40. Rejected. Irrelevant.

41. Rejected. Closing argument. Conclusionary.

COPIES FURNISHED:

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

Regulation, Division of Real Estate

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

John C. Coleman, Esquire Coleman & Coleman

2300 McGregor Boulevard Post Office Box 2089

Fort Myers, Florida 33902

Darlene F. Keller, Director Division of Real Estate

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

Kenneth E. Easley, Esquire General Counsel

Department of Professional Regulation

1940 North Monroe Street, Suite 60

Tallahassee, Florida 32399-0792

Docket for Case No: 88-004690

Orders for Case No: 88-004690