STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 89-0139

)

CHERYL A. COOPER, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the above matter was heard before the Division of Administrative Hearings by its duly designated Hearing Officer, Donald R. Alexander, on March 28, 1989, in Sarasota, Florida.

APPEARANCES

For Petitioner: Stephen W. Johnson, Esquire

Post Office Box 1900 Orlando, Florida 32802

For Respondent: Cheryl A. Cooper, pro se

3828 Gatewood Drive

Sarasota, Florida 34232 BACKGROUND

By administrative complaint filed on December 23, 1988 petitioner, Department of Professional Regulation, Division of Real Estate, charged that repondent, Cheryl A. Cooper, a licensed real estate broker and permit holder for a real estate school, had violated Subsection 475.25(1)(b), Florida Statutes (1987) in conjunction with operating a real estate school between June and August 1988. More specifically, it was alleged that respondent had solicited persons to enroll in scheduled courses, obtained tuition money, and then cancelled courses and failed to refund the money to the customers. Thereafter, respondent requested a formal hearing to contest the agency's action. The matter was referred by petitioner to the Division of Administrative Hearings on January 11, 1989 with a request that a hearing officer be assigned to conduct a formal hearing.

By notice of hearing dated February 3, 1989 a final hearing was scheduled on March 28, 1989 in Sarasota, Florida.

At final hearing petitioner presented the testimony of Harry P. Wolfe, Mary Bellemare, Janice I. Hamann, John W. Borenski, Trudy W. Stickney, Mary S. Snider, and Ron Cooper. Also, it offered petitioner's exhibits 1-9. All

exhibits were received in evidence. Respondent testified on her own behalf and offered respondent's exhibits 1-4. All exhibits were received in evidence.

There is no transcript of hearing. Proposed findings of fact and conclusions of law were filed by petitioner on April 7, 1989. A ruling on each proposed finding is made in the Appendix attached to this Recommended Order.

Also, on April 13, 1989 respondent submitted in the form of a letter a narrative response to petitioner's proposed order.

The issue is whether respondent's real estate broker's license and real estate school permit should be disciplined for the reasons stated in the administrative complaint.

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

FINDINGS OF FACT

1. At all times relevant thereto, respondent, Cheryl A. Cooper, was licensed as a real estate broker having been issued license number 0409775 by petitioner, Department of Professional Regulation, Division of Real Estate (Division). Respondent presently resides at 3828 Gatewood Drive, Sarasota, Florida. Also, Cooper has been issued permit number ZH33902 authorizing her to operate Professional School of Business, Inc. (school), a real estate licensing school in Sarasota.

   
   

2. Respondent and her husband, Ron, began operating the school in 1985. Each owned 50% of the business. Although both Ron and Cheryl have real estate licenses, only Cheryl had the necessary broker's license to obtain a permit for the school. The school's principal office was in Sarasota while smaller branch offices were located in Fort Myers and Port Charlotte.

   
   

3. According to Ron, he promoted the business, gave examinations, answered the telephone, did the bookkeeping, and performed other assorted tasks. This description of duties was not contradicted, and it is found that Ron performed these duties as an agent for his principal. On the other hand, Ron described Cheryl's role as merely giving out handouts and occasionally teaching a few classes. The school also employed part-time instructors for the purpose of teaching most of the courses.

   
   

4. When the school was established, a bank account was opened at the Sarasota branch of the NCNB National Bank of Florida. Both Ron and Cheryl were signatories on the account.

   
   

5. Around May 27, 1988 Ron moved out of the marital home. The couple is now involved in an acrimonious dissolution proceeding. As of the date of final hearing, the court had not yet adjudicated the property rights of each party, including the assets of the school.

   
   

6. On June 21, 1988 Cheryl withdrew $3500 from the school's bank account. She pointed out that Ron had not provided any support for her and the two children since he had moved out a month earlier, and she needed the funds to live on. After learning the following day of the withdrawal of funds by his estranged wife, Ron, without authority from Cheryl, closed the school's bank account and moved the remaining funds to a new account on which he was the sole signatory. He did not disclose this action to his wife, and she did not learn what had happened until later. After June 21, all moneys given to the school by

   customers were deposited into the school's new bank account over which Cheryl had no control. Around the same time, Ron changed the locks on the school's offices so that Cheryl could not gain access. All school records were located in the Sarasota office.

   
   

7. After the new bank account was opened and the locks on the doors changed, Ron continued to promote the school and to accept new customers. He did so since he intended to continue the school's operations after the impending divorce. The administrative complaint charges that during this same time period, Cheryl solicited a number of customers for the school and accepted deposits from these customers. However, the evidence shows clearly that all solicitation was performed by Ron and, with one exception, was done after he changed the door locks and opened the new bank account on June 21. Further, all funds were deposited into the bank account over which he had exclusive control. Therefore, even though Cheryl was the permit holder, she did not have access to the business, its records or the firm's bank account. Thus, she did not know who, if anyone, had been solicited to take courses, the disposition of their deposits, or the course schedule.

   
   

8. As to the single instance cited in the complaint where a customer was solicited prior to June 21, this involved a broker in Fort Myers who wished to send an employee to the school's branch office in Fort Myers. The broker dealt directly with the husband or an instructor, and not Cheryl, and sent a check through the mail to the school for the coursework. Whether the check was received and deposited before the old bank account was closed is not of record since the check was not offered in evidence, and the partial bank records received in evidence do not disclose this fact. In any event, after he was advised by letter from Ron that the course had been cancelled, the broker was told by Ron to seek a refund from his wife and to file a complaint against Cheryl with the Division. The broker eventually received a refund from Cheryl on January 9, 1989.

   
   

9. On June 27, 1988 respondent contacted the Division and explained her predicament. She advised the Division that her husband had a signature stamp that was being used without her authorization, and that she was unable to get access to her business records. She added that she hoped to gain access after a court hearing then scheduled on July 8, 1988. As it turned out, the hearing was postponed.

   
   

10. On July 12, 1988 Cheryl sent a written memorandum to all school instructors advising them not to teach any class that was scheduled to end after August 1, 1988. That date was chosen since it was the date of the final examination of the then pending evening class that had the longest time until completion. It is noted that after Ron saw a copy of this letter, he accepted a deposit from one new customer (Janice Hamann) on July 19 but no others. The school eventually shut down permanently in August or September.

    
    

11. As noted in finding of fact 9, Cheryl attempted to get legal access to the Sarasota office by an order of the circuit court. For whatever reason, however, she was unable to get a prompt hearing. When no hearing had been held by early August 1988, upon advice of her attorney, she paid a locksmith to open the Sarasota office one evening and, after gaining access, she removed what she believed to be one-half of the office equipment and furniture. Also, she found some of the school's records and learned that, since the change of bank accounts, Ron had continued to promote the school's business, had accepted deposits from customers and then cancelled classes. In addition, she found letters written to her at the school address demanding refunds of customer

    deposits previously sent to her husband. Cheryl immediately responded by letter advising those customers of the problems caused by the marital split and that their money would be refunded.

    
    

12. The complaint identifies six individuals who paid moneys to the school but were allegedly not given a timely refund. In addition, the complaint cites one individual who was guaranteed a free repeat course if she failed the examination, and who, after failing the examination, was unable to do so since the school had by then closed down. As noted above, with the exception of the broker in Fort Myers who sent a check to the school sometime in mid or late June 1988, all customers were solicited after Ron had opened a new bank account and changed the door locks to the office. Therefore, and in light of the uncertainty surrounding when the broker's deposit was received, it is found the moneys withdrawn by Cheryl on June 21 did not pertain to any customer deposits which are the subject of this complaint. Of the six customers who were solicited by Ron, one, Mary Bellemare, paid her deposit by Visa credit card and obtained a credit on her bank card statement before any money was actually paid by Visa to the school. Therefore, there was no obligation on the part of the school to make a refund to Bellemare since no funds had been exchanged. The remaining five customers received refunds from Cheryl in January 1989. One of these, who was owed $20, never made demand for a refund from Cheryl, but was paid after respondent learned of her situation through the allegations in the administrative complaint. Finally, the customer who desired to receive a free repeat course likewise did not notify respondent of her predicament.

    
    

13. Respondent has fully cooperated with the Division during the pendency of this proceeding. Indeed, as explained above, she contacted the Division before the complaint was filed seeking advice on how to properly handle this confusing situation. In addition, at least three memoranda have been sent by Cheryl to the Division. She attributed the delay in refunding the customers' money to a lack of financial resources caused by the still unresolved marital split.

    
    

    CONCLUSIONS OF LAW

    
    

14. The Division of Administrative Hearings has jurisdiction of the subject matters and the parties thereto pursuant to Subsection 120.57(1), Florida Statutes (1987).

    
    

15. Since respondent's professional license is at risk, the Division must prove the allegations in the administrative complaint by clear and convincing evidence. Lewis v. State Department of Professional Regulation, Division of Real Estate, 529 So.2d 751 (Fla. 3d DCA 1988).

    
    

16. In conjunction with the operation of the school during the summer of 1988, respondent is charged with violating all elements in Subsection 475.25(1)(b), Florida Statutes (1987). That subsection makes it unlawful for a licensee to engage in conduct which equates to 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 this state. In its proposed order, petitioner has apparently abandoned its claim that all elements were violated since it now contends that respondent is guilty only of fraud, misrepresentation, concealment, culpable negligence and breach of trust in a business transaction. However, the specific factual underpinnings for each statutory element and the legal basis for concluding that a violation occurred have not been shared.

17. The evidence reveals clearly that the money withdrawn by Cheryl on June 21 did not pertain to deposits made by five of the individuals cited in the administrative complaint. Therefore, petitioner's principal contention that the large bank withdrawal violated some fiduciary relationship existing between Cheryl and the students in question is without merit. Also, there is less than clear and convincing evidence that the money given by a Fort Myers broker in mid or late June 1988 was deposited into the old account prior to the withdrawal. Therefore, if respondent is to be held accountable for anything, it must be on the theory that, as permit holder of the school, the actions of her employees (husband) can be imputed to her broker's license or school permit. It is noted that this theory was not relied upon or addressed by petitioner in its proposed order.

    
    

18. The basic thrust of the administrative complaint is that respondent "solicited persons to enroll in scheduled courses, obtained tuition money, then cancelled the courses, ... and the tuition money received was not returned to those persons who enrolled and were entitled to a refund." (Admin. Complaint, paragraph 5) While most, if not all, of these allegations were shown to be untrue as to Cheryl, and were instead attributable to the estranged husband, under the law of agency, such acts can be imputed to the principal (licensee) under certain circumstances.

    
    

19. There appear to be no reported appellate decisions that address, in an administrative setting, the issue of a broker's liability for a salesman's actions under the theory of agency. Even so, case law teaches us that, as a general rule, a broker is responsible for the acts of his salesman-employee so long as the agent's actions are within the scope of his express or implied (apparent) authority. Benson v. Seestrom, 409 So.2d 172, 173 (Fla. 2d DCA 1982). Apparent or ostensible authority arises where a principal allows or causes others to believe the agent possesses such authority. Tampa Sand & Material Co. v. Davis, 125 So.2d 126 (Fla. 2d DCA 1960). Even where the agent's act is unauthorized, the principal is nonetheless liable if the agent had the apparent authority to do the act and that apparent authority was reasonably relied upon by the third party dealing with the agent. Stiles v. Gordon Land Co. 44 So.2d 417 (Fla. 1950). However, apparent authority must be the result of acts or omissions by the principal in order to subject the principal to liability for the agent's actions. Taco Bell of California Zappone, 324 So.2d

    121 (Fla. 2d DCA 1976). In other words, the principal has the responsibility to do something to negate the idea of apparent authority.

    
    

20. Several acts of the agent (Ron) are relevant to this controversy. First, Ron had express authority to promote the business on behalf of the school. Therefore, until Cheryl issued her memorandum on July 12, 1988 directing all employees to stop accepting new customers, Ron was acting within the scope of his authority in soliciting new customers. Benson, supra. This is true even as to the customer who paid money on July 19 since that customer reasonably relied upon Ron's apparent authority to solicit business. Stiles, supra. Secondly, Ron was authorized to accept deposits on behalf of the school. Thus, any deposits accepted by him was with the express authority of his principal. By virtue of Ron accepting the deposits, Cheryl was obliged, as principal-broker, to refund these moneys after the classes were cancelled. Although Ron changed the school's bank account, and effectively barred Cheryl from access to the school's funds, her responsibility to the customers did not end. Put another way, even though Cheryl might have recourse against her agent for his illicit conduct in closing the bank account, it did not alter her duty to refund all moneys due her customers.

21. The evidence reveals that Cheryl refunded all moneys by January 9, 1989, or within a period of five months after learning that the customers had requested a refund of their deposits. The issue, then, is whether the failure to refund moneys for five months equates to the statutory elements specified in petitioner's proposed order.

    
    

22. Fraud is not applicable here since Cheryl did not intend to defraud her customers. Morris v. Department of Professional Regulation, 474 So.2d 841, 843 (Fla. 5th DCA 1985) [finding of wrongful intent or scienter necessary to sustain a charge of fraud against a realtor under s. 475.25(1)(b)]. Likewise, there were no misrepresentations by Cheryl since she forthrightly explained her predicament in letters to all the customers and fulfilled her promise that refunds would be made. Similarly, concealment and culpable negligence do not fit within the factual setting her. There is, however, a breach of trust in a business transaction in that Cheryl breached the trust imposed in her (through her agent) by her customers when she failed to timely refund the deposits. Therefore, as to this element, the complaint has been sustained.

    
    

23. Mitigating circumstances are clearly present here since Cheryl was effectively barred by her agent from the school bank account and, due to her marital split, did not have the financial resources to promptly refund the deposits. Even so, she repaid all moneys owed within a five month period.

Under these circumstances, a reprimand is appropriate. Such a penalty is within the range of penalties authorized by Rule 21V-24.001, Florida Administrative Code (1987).

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent be found guilty of breach of trust in a

business transaction and that she be given a reprimand. All other charges should be dismissed.

DONE AND ORDERED this 18th day of April, 1989, in Tallahassee, Leon County, Florida.

DONALD R. ALEXANDER

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 18th day of April, 1989.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 89-0139

Petitioner:

Stephen W. Johnson, Esquire Post Office Box 1900 Orlando, Florida 32802

Ms. Cheryl A. Cooper 3828 Gatewood Drive

Sarasota, Florida 34232

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

Kenneth E. Easley, Esquire

130 North Monroe Street Tallahassee, Florida 32399-0750

Docket for Case No: 89-000139

Orders for Case No: 89-000139