STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 88-4695

)

CHARLES RANDOLPH LEE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to written notice, a formal hearing was held in this case before Daniel Manry, a duly designated Hearing Officer of the Division of Administrative Hearings, on April 10, 1989, in West Palm Beach, Florida.

APPEARANCES

For Petitioner: Steven W. Johnson, Esquire

Department of Professional Regulation Division of Real Estate

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

For Respondent: Charles Randolph Lee, pro se

Post Office Box 18391

West Palm Beach, Florida 33416 STATEMENT OF THE ISSUES

The ultimate issue for determination at hearing was whether disciplinary action should be taken against Respondent's real estate broker license for the reasons alleged in the Administrative Complaint.

PRELIMINARY STATEMENT

Petitioner filed an Administrative Complaint against Respondent on August 21, 1988, alleging inter alia that Respondent is guilty of: (1) fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence, and breach of trust in a business transaction in violation of Subsection 475.25(1)(b), Florida Statutes (1987); (2) failure to account and deliver a deposit in violation of Subsection 475.25(1)(d); and (3) failure to maintain funds in Respondent's real estate brokerage escrow account or some other proper depository until disbursement was properly authorized in violation of Subsection 475.25(1)(k).

Respondent requested a formal administrative hearing on or about September 16, 1988, and the matter was referred to the Division of Administrative Hearings on September 20, 1988, for assignment of a hearing officer. By Notice of Hearing dated December 7, 1988, a formal hearing was scheduled for February 22, 1989. Respondent's Motion for Continuance was granted on March 15, 1989, and the formal hearing was rescheduled for April 10, 1989.

At the formal hearing, the parties stipulated to Petitioner's Exhibits 1-9 and Respondent's Exhibits 1-13. No other exhibits were admitted into evidence. The rule was invoked. Petitioner designated Jodi Fischer, Investigative Officer, Department of Professional Regulation, as its representative to remain in the hearing room during the formal hearing. Respondent designated no representative. Petitioner presented the testimony of Ms. Fischer, Carol S. Pearson, former real estate salesman for Respondent, and Christopher and Lee Ann Germano, the complaining witnesses in this case. Respondent testified in his own behalf and called Petitioner's witnesses for direct examination on matters beyond the scope of Petitioner's direct examination.

Respondent requested additional time to submit Proposed Findings of Fact and Conclusions of Law ("Proposed Findings") without objection from Petitioner. Proposed Findings were initially due on May 1, 1989, but the due date was extended to May 8, 1989, upon the telephone request of Respondent. Petitioner's Proposed Findings were filed on May 1, 1989. Proposed Findings submitted by the parties are addressed in the appendix to this Recommended Order.

Based upon all of the evidence, the following findings of fact are determined:

FINDINGS OF FACT

1. At all times relevant hereto, Respondent Charles Randolph Lee was the holder of a Florida real estate license number 0455641 in accordance with Chapter 475, Florida Statutes.

   
   

2. The license issued was as a broker, c/o Show-N-Save of West Palm Beach, Inc., 1800 Forest Hill Blvd., West Palm Beach, Florida 33406.

   
   

3. Christopher and Lee Ann Germano made a written offer to purchase Lot 41, Block 72, Sugar Pond Manor, Palm Beach County, Florida (the "construction site") from Charles and Ruby Collins (the "owners") by executing a Contract for Sale and Purchase of the construction site on April 14, 1987, and submitting a check for $500 payable to and held in escrow by Hank Keene Real Estate Escrow Account. 1/

   
   

4. On April 15, 1987, the Germanos executed an Agreement for Construction of a house that was to be constructed on the construction site by J. Long Construction, Inc. A check payable to J. Long Construction, Inc., in the amount of $3,755, was submitted by the Germanos with the Agreement for Construction, which was expressly contingent upon the Germanos' purchase of the construction site.

   
   

5. The check to J. Long Construction, Inc., was an escrow check to be held in escrow for the Germanos until contingencies in the Agreement for Construction, including the purchase of the construction site, either failed to occur or were satisfied. Carol Pearson and Terry Gallagher, the sales agent for Hank Keene Real Estate, were present with the Germanos in a model home of J. Long Construction, Inc., when the Germanos wrote the check, and it was their

   collectively stated intent that the check was to be held in escrow pending the completion of the purchase of the construction site. The check for $3,755 was labeled by the maker as an escrow down payment for construction of the house. 2/

   
   

6. J. Long Realty, Inc., and Hank Keene Real Estate were acknowledged in the Agreement for Construction as the exclusive brokers in the transaction with commissions to be paid respectively in the amounts of 3.5 and 1.5 percent. 3/

   
   

7. The Agreement for Construction was executed by J. Long Construction, Inc., on April 15, 1987. The Agreement for Construction was null and void if not executed by both parties on or before April 19, 1987. The Germanos executed the Agreement on April 15, 1987. Their copy of the Agreement is not executed by

   J. Long Construction, Inc. However, the original Agreement, bearing a date of April 15, 1987, shows the signature of the president of J. Long Construction. The original Agreement was admitted by stipulation as Respondent's Exhibit 2. Insufficient evidence was presented to establish that the original was executed at any other time or by any one other than the purported signatory. 4/

   
   

8. Respondent began functioning as the broker for J. Long Realty, Inc., on or about April 16, 1987, 5/ at the request of the previous broker who resigned due to illness on April 15, 1987.

   
   

9. The Contract for Sale and Purchase of the construction site was rejected by the owners on April 16, 1989. 6/ The rejection was communicated to the Germanos telephonically by Terry Gallagher on the same day. 7/

   
   

10. The fact that the purchase of the construction site had failed to occur was communicated to Respondent on April 20, 1987, and return of the check to J. Long Construction, Inc., in the amount of $3,755, was requested at that time. Mr. Germano telephoned Mr. Pearson on April 20, 1989, advised him that the offer to purchase the construction site had been rejected by the owners, and requested return of the check. Mr. Pearson testified that upon receiving a telephone call from Mr. Germano, Mr. Pearson communicated those facts to Respondent. Mr. Pearson further testified that Respondent stated there would be no problem but required the request for refund and reasons to be stated in writing.

    
    

    Respondent first knew of the transaction when he received a telephone call from Mr. Germano asking for a return of the check. Respondent further testified that he opened the file, saw the check, and deposited it. The check was deposited on April 21, 1987, to the account of J. Long Construction, Inc. 8/ Respondent testified that the check was not deposited to any account of J. Long Realty, Inc. 9/

    
    

11. J. Long Construction, Inc., had no escrow account at the time of the deposit. Testimony by Ms. Fischer, and Petitioner's Exhibits 7 and 9 established that J. Long Construction, Inc., had no escrow account at the time of the deposit.

    
    

12. There was no evidence that Respondent was an officer or director of J. Long Construction, Inc., or that Respondent was authorized to sign on the account to which the check was deposited. Petitioner's Exhibit 9 established that Respondent was authorized to sign on the account of J. Long Realty, Inc., and on the account of J. Long Companies, Inc. Neither the name or account number of either of those accounts corresponded to the name or account number of the account to which the check was deposited. 10/ Respondent functioned in the capacity of accountant, bookkeeper, and employee of J. Long Construction, Inc.,

    prior to functioning as the broker of J. Long Realty, Inc. Respondent and Mr. Long reviewed each contract submitted by sales agents.

    
    

13. Respondent received written notice on April 27, 1987, and on May 1, 1987, that the Germanos' offer to purchase the construction site had been rejected by the owners. Jean Keene, Broker, Hank Keene Real Estate, advised J. Long Construction, Inc., by letter dated April 24, 1989, that the Germanos' offer had been rejected and that the $500 in escrow had been returned to the Germanos. 11/ The Germanos also wrote a letter to J. Long Construction (sic) on April 24, 1987, asking for return of the deposit because their offer to purchase the construction site had not been accepted by the owners. The Germanos' letter was by return receipt which was dated May 1, 1987.

    
    

14. A letter dated May 11, 1987, from Robert E. Zensen, President, Zensen Homes, Inc., formerly J. Long Construction, Inc., 12/ advised the Germanos that they were in default under the Agreement for Construction. The letter stated the "default has been established by the contingency not being met," but in the next paragraph required documentation that the contingency had not been met. 13/

    
    

15. On May 8, 1987, Carol Pearson removed his license from J. Long Realty, Inc. 14/ Evidence suggests some acrimony between Mr. Pearson and Respondent concerning the conduct of business transactions at J. Long Realty, Inc. 15/ Mr. Pearson testified that deposits were not being returned to customers who were entitled to return of their deposits. On May 16, 1987, Mary E. Bartek, citing ill health, resigned from J. Long Realty, Inc., as Broker-Salesman and as shareholder, and resigned her position as Vice-President, director, shareholder, officer, or agent from J. Long Companies. 16/ On June 15, 1987, Respondent resigned as "Broker of Record" for J. Long Realty, Inc. 17/

    
    

16. The Germanos made numerous requests to Respondent to return their check in the amount of $3,755. Mr. Pearson received at least 3 or 4 calls from the Germanos. Each time Respondent and Mr. Long agreed that the Germanos were entitled to have their check; except the last time when Mr. Long told Mr. Pearson to "forget about it." Mr. Pearson testified that it was his impression that Mr. Long prevented Respondent from returning the check. The Germanos made numerous requests to Mr. Pearson for return of their check. Each time Mr. Pearson stated that Respondent had said he would return the check. On one occasion, Lee Germano met with Respondent to request that the money be returned, but the money was not returned.

    
    

    CONCLUSIONS OF LAW

    
    

17. The Division of' Administrative Hearings has jurisdiction over the subject matter of this proceeding and the parties thereto pursuant to Subsection 120.57(1), Florida Statutes. The parties were duly noticed for the formal hearing.

    
    

18. The burden of proof is on Petitioner to prove the allegations in the Administrative Complaint by clear and convincing evidence. Where an agency seeks to revoke a professional license, the evidence must be clear and convincing. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).

    
    

19. Respondent is charged in Counts I-III of the Administrative Complaint with violations of Subsections 475.25(1)(b), (d), and (k), Florida Statutes (1987). Count I alleges that Respondent 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

    a business transaction in violation of Subsection 475.25 (1)(b). 18/ Count II alleges that Respondent failed to account or deliver a deposit in violation of Subsection 475.25(1)(d). Count III alleges that Respondent failed to maintain funds in his real estate brokerage escrow account or some other proper depository until disbursement was authorized.

    
    

20. Count I - Culpable Negligence and Breach of Trust. The evidence was not clear and convincing that Respondent had the knowledge and intent required by law to prove fraud, misrepresentation, concealment, false promises, false pretenses, or dishonest dealing by trick, scheme, or device. However, the evidence was clear and convincing that Respondent was culpably negligent and breached the trust of persons involved in the business transaction. Respondent had actual or constructive knowledge that the Agreement for Construction was contingent upon the purchase of the construction site, that the purchase had failed to occur, and that the accompanying check was labeled by the maker and intended as an escrow deposit. No one else inadvertently deposited the check into an account to which Respondent had no access. Respondent by his own testimony opened the file, saw the check, and deposited it.

    
    

    The discrepancy on the face of the check between the identity of the payee and the designation as an escrow deposit was sufficient notice of the Germanos' intent when they entrusted the check to Mr. Pearson in the business transaction. Respondent had been licensed as a Realtor for several years and had considerable experience as an accountant for J. Long Construction, Inc. He knew that the payee on the check had no escrow account, and that the check was intended as an escrow deposit. Respondent also knew that he was not authorized to sign on that account, and that he was not depositing the check to his own escrow account. It was by Respondent's affirmative act that he placed the check beyond his control by depositing it to the account of another who was not yet entitled to the funds.

    
    

    Respondent, as the broker for J. Long Realty, Inc., was named in the Agreement for Construction as the broker entitled to 3.5 percent of the commission in the transaction. That Agreement and the right of J. Long Construction, Inc., to utilize the Germanos' check was expressly contingent upon the purchase of the construction site. Respondent opened the file, saw the check, and deposited it. Respondent either did not read the check and review the contract for which it was written or he did so but disregarded what he read. In either event, Respondent's negligence was culpable and breached the trust of participants in the business transaction.

    
    

    Respondent suggests that he had no choice but to deposit the check to the account of the payee. This suggestion requires a credulous acceptance of one factor to the exclusion of all of the other facts and circumstances surrounding the transaction. The purchase of the construction site and construction of the house were separate steps in a single business transaction. Entitlement to funds under the second step did not ripen until the first step was completed.

    Respondent's suggestion that he had no choice but to deposit the check to the account of the payee ignores the business realities of the overall transaction.

    
    

21. Count II - Failure to Account and Deliver a Deposit. Once it is determined that a broker is not entitled to retain nonescrowed property, then the provision in Subsection 475.25(1)(d), Florida Statutes (1987), requiring a licensee to account and deliver held property is authority to discipline a broker who fails to account and deliver such property to any person entitled to possession. Golub v. Department of Professional Regulation, 450 So.2d 229 (Fla. 5th DCA 1984) review denied 459 So.2d 1040. The Germanos were entitled to

    return of nonescrowed property when the owners of the construction site rejected their offer, that fact was made known to Respondent, and demand for return of the non escrowed property was made. All of those requirements were satisfied not later than May 1, 1987. The check was personal property which had come into Respondent's hands, which was not Respondent's property, and which Respondent was not entitled to retain under the circumstances. Respondent cannot be heard to complain that he was prevented from returning the check because he had deposited it to the account of another by his own affirmative act. Accordingly, Respondent failed to account or deliver the Germanos' check upon demand of the person entitled to the check within the meaning of Subsection 475.25(1)(d).

    
    

22. Count III - Failure to Place a Check In Escrow. Respondent testified that he failed to place in his escrow account a check designated as an escrow deposit in connection with an Agreement for Construction. The Agreement was expressly contingent upon the purchase of the construction site and entitled J. Long Realty, Inc., to a commission of 3.5 percent of the contract price. Respondent opened the file, saw the check, and deposited it to the account of another. Respondent did not leave the check in the file. He did not contact the Germanos to advise them that the check could not be deposited to the account of the payee and also be held in escrow. He did not explain the situation to J. Long Construction, Inc., and request that the check be endorsed to the escrow account of J. Long Realty, Inc., until J. Long Construction, Inc., was entitled to the funds pursuant to the terms of the Agreement for Construction. Under the circumstances, Respondent failed to place the check in escrow in violation of Subsection 475.25(1)(k).

    
    

23. Disciplinary guidelines prescribed in Florida Administrative Code Rule 21V-24.001 are to be imposed based upon a single count violation of each statutory provision. A combination of violations may result in a higher penalty than that for a single, isolated violation. 19/ In addition to other disciplinary penalties, a licensee may be placed on probation subject to conditions prescribed in Florida Administrative Code Rule 21V-24.001(2)(a). Any licensee placed on probation shall appear before the Commission at the last meeting of the Commission preceding termination of the probation. 20/

    
    

24. The minimum penalty for violations of Subsections 475.25(1)(b), (d), and (k) is a reprimand and/or a fine up to $1,000 per count. 21/ The maximum penalties are: suspension or revocation up to 5 years for violation of Subsection 475.25(1)(b); suspension up to 5 years for violation of Subsection 475.25(1)(d); and suspension up to 2 years for violation of Subsection 475.25(1)(k). 22

    
    

25. When mitigating circumstances are demonstrated by clear and' convincing evidence, deviation from prescribed disciplinary guidelines is permitted. Such circumstances include without limitation: (a) the severity of the offense; (b) the degree of harm to the consumer or public; (c) the number of counts in the Administrative Complaint; (d) the number of times the offenses previously have been committed by the licensee; (e) the disciplinary history of the licensee; (f) the status of the licensee at the time the offense was committed; (g) the degree of financial hardship incurred by the licensee as a result of the imposition of a fine or suspension of a license; and (h) whether a letter of guidance has previously been issued to the licensee. 23/

    
    

26. No evidence was proffered concerning items 9(g) and 9(h) in the preceding paragraph. The severity of the offense and degree of harm to the consumer is great whenever it involves the misuse of funds. However, the evidence established that Respondent had not committed the offenses in the past

and had no disciplinary history. 24/ In addition, Respondent held his position as broker for J. Realty, Inc., for only a brief time during which he also functioned as accountant for J. Long Construction, Inc. During that time, the business climate at both companies was volatile and arguably confusing.

Respondent also sought advice from the Department of Legal Affairs. 25/

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent be found guilty of: culpable negligence and

breach of trust in violation of Subsection 475.25(1)(b); failure to account and deliver nonescrowed property upon demand of the person entitled to such property in violation of Subsection 475.25(1)(d); and failure to place a check in escrow in violation of Subsection 475.25(1)(k).

Since this was apparently Respondent's first offense, involving a single act, it is recommended that Respondent be reprimanded. Since the offense involved the misuse of funds, disregard of the entitlement to funds, and Respondent offered no evidence of restitution, it is recommended that Respondent be fined $1,000 for each violation.

In order to enhance Respondent's regard for the entitlement to funds in business transactions and in order to facilitate due care in his future transactions, it is recommended that Respondent be placed on probation for a period not to exceed one year. The conditions of probation may include any of those prescribed in Florida Administrative Code Rule 21V-24.001(2)(a) except those that would require the Respondent to submit to reexamination and to be placed on broker-salesman status. In the event that Respondent fails to pay any fines imposed or to complete the terms of any probation imposed, it is recommended that Respondent's license be suspended for two years.

DONE and ENTERED this 19th day of June 1989, in Tallahassee, Florida.

DANIEL MANRY

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 19th day of June, 1989.

ENDNOTES

1/ Petitioner's Exhibit 3.

2/ Petitioner's Exhibits 6 and 8; Respondent's Exhibit 7.

3/ Petitioner's Exhibit 6 at 15.

4/ Respondent's Exhibit 2 at 16. 5/ Respondent's Exhibit 4.

6/ Petitioner's Exhibit 3 at 2 (Addendum).

7/ Testimony of both Lee and Christopher Germano. 8/ Petitioner's Exhibit 8.

9/ Petitioner's Exhibit 7.

10/ Compare Petitioner's Exhibits 8 and 9.

11/ Petitioner's Exhibit 4; Respondent's Exhibit 7 date stamped received on April 27, 1987.

18/ No allegation was made that Respondent was guilty of misconduct or that Respondent breached any duty imposed on him by law or equity within the meaning of Subsection 475.25(1)(b), Fla. Stat.

24/ Petitioner's Exhibit 2. 25/ Respondent's Exhibit 3.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-4695

The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted.

The Petitioner's Proposed Findings of Fact

Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection

1-2 Included in Findings 1-2

1. Included in Findings 4-5

2. Included in Finding 12

3. Included in Findings 8, 10

4. Included in Finding 10

5. Included in Findings 10, 11, 6

6. Included in Finding 7

7. Included in Finding 16

8. Rejected as hearsay offered to prove the truth of the matter rather than to explain or corroborate other evidence.

The Respondent's Proposed Findings of Fact

Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection

1. Included in Findings 8, 12

2. Included in Findings 8, 15

3. Rejected for the reasons stated in Findings 4-6

4. Rejected for the reasons stated in Findings 4-6, 10, 13, and 16

5. Rejected because the Germanos' testimony was found to be credible and consistent.

6. Rejected for the reasons stated in Findings 4-6, 10, 13, and 16

7. Included in Finding 7

8. Included in Findings 11, 12

9. Rejected for the reasons stated in Finding 4

10. Rejected for the reasons stated in Finding 4,5

11. Rejected for the reasons stated in Finding 6

12. Included in Finding 12

13. Included in Finding 10

14. Rejected. Mr. Pearson's testimony was credible and not impeached by Respondent

15. Rejected. There is no evidence to support the proposed finding.

16. Rejected. Ms. Fischer was Petitioner's designated representative entitled to remain in the hearing room. She was questioned by Respondent and denied discussing the case in violation of the rule.

COPIES FURNISHED:

Steven W. Johnson, Esquire Department of Professional Regulation

Division of Real Estate

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

Charles R. Lee

Post Office Box 18391

West Palm Beach, Florida 33416

Kenneth E. Easley, Esquire General Counsel

Department of Professional Regulation 1940 North Monroe Street

Tallahassee, Florida 32399-0729

Docket for Case No: 88-004695

Orders for Case No: 88-004695