STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA REAL ESTATE COMMISSION, )

)

Petitioner, )

)

vs. ) CASE NO. 89-1445

)

E. DARRELL TRAYLOR, t/a )

SALT SPRINGS REALTY & )

CENTRASTATE DEVELOPMENT, )

)

Respondents. )

)

RECOMMENDED ORDER

Upon due notice, this cause came on for formal hearing on July 26, 1989 in DeLand, Florida, before Ella Jane P. Davis, a duly assigned Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: James H. Gillis, Senior Attorney

Department of Professional Regulation Division of Real Estate, Legal Section

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

For Respondent: John V. Baum, Esquire

John V. Baum, P.A.

Attorney and Counselor at Law

111 South Maitland Avenue Maitland, Florida 32751-5607

STATEMENT OF THE ISSUES

Whether Respondents' real estate licenses should be disciplined for the reasons set forth in the Administrative complaint, as more fully detailed infra.

PRELIMINARY STATEMENT

In an eight (8) count Administrative Complaint filed on February 22, 1989, Petitioner charged that Respondents, both licensed and registered as real estate brokers, have violated the provisions of Subsections 475.25(1)(b), (e), (h), and

1. F.S., more particularly:

   
   

   1. Counts I and II allege fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealings, culpable negligence and breach

      of trust in a business transaction on the part of the Respondents Traylor and Centrastate Development Corporation.

   2. Counts III and IV allege a failure on the part of the Respondent Traylor t/a Salt Springs Realty and on the part of Centrastate Development Corporation to maintain trust funds in an escrow account until their disbursement was properly authorized.

   3. Counts V and VI allege a failure on the part of the Respondents Traylor and Centrastate Development Corporation to maintain complete and accurate records evidencing deposits to, and withdrawals from, the escrow account aforementioned.

   4. Counts VII and VIII allege the payment of the Respondents Traylor and Centrastate Development Corporation of a brokerage commission to one Michael Brooker, an individual not properly licensed as a real estate agent at the time those services which resulted in the payment of such commissions were rendered.

Respondents disputed the foregoing allegations and requested a formal hearing pursuant to Section 120.57(1) F.S. The matter was referred by Petitioner to the Division of Administrative Hearings on March 9, 1989, with a request that a Hearing Officer be assigned to conduct a formal hearing.

At the commencement of formal hearing, there was pending Respondents' Motion for Reconsideration before the Florida Real Estate Commission and a Motion for Continuance before the Division of Administrative Hearings.

Respondents orally withdrew each of these at the commencement of formal hearing.

The parties' Prehearing Stipulation was also filed by agreement at the commencement of formal hearing and was admitted as HO Exhibit A. It has been utilized to the degree appropriate in this Recommended Order. Petitioner presented the oral testimony of two witnesses, Robert N. Miller and J. Glenn Nold, and had seven exhibits admitted in evidence. Respondents had two exhibits admitted in evidence and presented no oral testimony.

Official recognition has been taken of Section 20.30 and Chapters 120, 455, and 475 F.S., and those statutory subsections and Florida Administrative Code rules cited in the Administrative Complaint.

Transcript of the formal proceedings herein was duly filed with the Division of Administrative Hearings, and all timely-filed proposed findings of fact have been ruled upon, pursuant to Section 120.59(2) F.S. in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. Petitioner is the state government 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 F.S., Chapters 120, 455, and 475 F.S. and the rules promulgated pursuant thereto.

   
   

2. Respondent E. Darrell Traylor is now and was at all time material hereto a licensed real estate broker in the State of Florida having been issued license number 0192773 in accordance with Chapter 475 F.S.

3. The last license issued Respondent E. Darrell Traylor was as a broker, t/a Salt Springs Realty, 1200 Deltona Boulevard 20, Deltona, Florida, 32752.

   
   

4. Respondent Centrastate Development Corporation is now and was at all times between July 31, 1987 through March 31, 1988 a corporation registered as a real estate broker in the State of Florida having been issued license number 0251203.

   
   

5. The last license issued Respondent Centrastate Development Corporation was at the business address of 1200 Deltona Boulevard 20, Deltona, Florida, 32752, the same address as Salt Springs Realty.

   
   

6. At all times material hereto, that is, July 31, 1987 through March 31, 1988, Respondent E. Darrell Traylor was also the licensed and qualifying broker for Respondent, Centrastate Development Corporation.

   
   

7. On or about August 4, 1988, Petitioner's investigators Robert N. Miller and Crawford Richardson visited the office of Respondent Traylor at 1200 Deltona Boulevard 20, Deltona, Florida 32752. Both Centrastate Development Corporation and Centrastate of Florida, Inc. occupy these offices.

   
   

8. When Messrs. Miller and Richardson spoke with Respondent Traylor and his attorney, they were told that an audit was not possible due to confusion arising from employment of a new bookkeeper; that there were two companies: one was a real estate company and one was a construction and development company; and that Mr. Traylor did not view selling homes he built as dealing as a real estate broker but as a builder. The investigators requested that Traylor furnish them with a copy of the escrow account books as soon as possible. Mr. Miller testified he felt sure Traylor and his attorney understood that the investigators wanted the "information pertaining to the real estate brokerage, Centrastate of Florida, Inc."

   
   

9. There is nothing in this record clearly to demonstrate the non-party Centrastate of Florida Inc., as opposed to Respondent Centrastate Development Corporation, Inc. is licensed as a real estate brokerage with Respondent Traylor as its qualifying agent. They are separate corporate entities. Respondent Centrastate Development Corporation, the real estate brokerage, was registered and recognized as a corporation by the Florida Secretary of State as of December 9, 1985 as corporation H88712. (R-2). Centrastate of Florida, Inc. which is not a party hereto, was registered and recognized by the Florida Secretary of State as of July 2, 1986 as corporation J22204. (R- 1)

   
   

10. Three and a half months after Messrs. Miller and Richardson's visit to Respondent Traylor, Miller received from Traylor, via his attorney, what Miller described at formal hearing as a lot of ledger cards and sheets "that made no sense to me." He could not explain any items he had received, but claimed they were impossible to audit. The ledger cards received in evidence show that "Michael" or "Mike" or "Brooker" received some money, but they do not specify from which corporation; the inference is that they are cards of the non-party corporation. The ledger sheets were not offered as a separate exhibit. Likewise, there are no checks in evidence to verify that the amounts listed on the ledger cards were actually paid out to Brooker by either corporation or by Respondent Traylor.

11. Mr. Miller revealed on cross examination that he did not know the difference, if any, among Centrastate of Florida, Centrastate Homes of Florida, Centrastate of Florida, Inc., or Respondent Centrastate Development Corporation.

    
    

12. Although Mr. Miller testified that no one named Michael Brooker was licensed by the Florida Real Estate Commission, there was insufficient predicate laid by which he could know this. No computer search for Brooker was introduced as a business record, and Mr. Miller did not testify that he conducted a personal document search. Mr. Miller's attempts to locate any Michael Brooker, licensed or not, in the appropriate venue were fruitless.

    
    

13. Upon the whole of Mr. Miller's testimony, it is found that his and Mr. Richardson's initial visit was prompted by a complaint previously filed with the Petitioner alleging certain improprieties in the corporate affairs of the non- party on the part of Centrastate of Florida, Inc. Prior to the date of their visit, the investigators had copies of certain bank records and cancelled checks drawn on the account of Centrastate of Florida, Inc., and it was the banking records of that entity which Investigator Miller then requested from the Respondents and which he ultimately reviewed. Therefore, it can be inferred that Miller and Richardson never formally asked for the records of Respondent Centrastate Development Corporation and that Respondents provision of Centrastate of Florida, Inc. materials cannot be considered uncooperative or evasive.

    
    

14. However, by letter of November 21, 1988, referring to Centrastate of Florida, Inc., Respondent's attorney informed the investigators of numerous deficiencies with regard to the accounts of Centrastate of Florida, Inc., including overdrafting and commingling of clients' escrow accounts and withdrawal of funds by Respondent Traylor. The attorney also advanced the theory, on behalf or his clients, that none of the transactions posted to that account involved purchase or sale of real estate. (P-4). The investigators did not pursue any further investigation of, or accept the Respondents' attorney's offer of, additional bank statements and supporting documentation. Thereafter, Petitioner did not attempt a reconciliation of those or any other banking records.

    
    

15. J. Glenn Nold was a bookkeeper in charge of Respondent Traylor's accounting operations for Respondent Centrastate Development Corporation and for the non-party, Centrastate of Florida, Inc. for eight months. According to Mr. Nold, one corporation built houses and one sold the houses and lots, but he could not even recall which company issued his or anyone else's paychecks. Therefore, he knew of no paychecks issued to Michael Brooker.

    
    

16. Mr. Nold also represented that Respondent Traylor owned an inventory of empty lots and sometimes would build on such an empty lot a home in a design selected by the buyers and then sell that lot and the finished home together to those buyers. He stated that Traylor sometimes built houses for other people on their own lots, but Nold could not remember if Traylor ever sold other peoples' empty lots for them. Indeed, Nold did not know if Traylor ever engaged in selling the real property (house and/or lots) of third persons.

    
    

17. Nold stated that either Centrastate of Florida, Inc. or Centrastate Development Corporation had an escrow account and that they shared offices, but he could not remember which entity had the escrow account. He volunteered that whichever entity had an escrow account, the escrow account was in disarray. If there were another escrow account for the other corporation, Nold did not know of it. He discovered that before he took over the bookkeeping, some

    unidentified person had twice paid out the same amount from the escrow account into an operating account. Therefore, Nold, as the new bookkeeper, elected to leave $30,000 in that escrow account to cover deficits instead of thereafter regularly transferring money out of the escrow account and into the operating account, as it was earned. He maintained that he told Respondent Traylor what he was doing and Traylor did not object, however, Nold admitted that no periodic reports were given by him to Traylor. Mr. Nold expressed the belief that many things were "wrong" with Traylor's several operations, but he was unable to articulate what he felt was "wrong" with Respondent's operation beyond the

    $30,000 incident related supra.

    
    

18. Mr. Nold had quit Traylor's employ upon the suggestion of a Department of Professional Regulation attorney he spoke with by telephone in an attempt to describe what he thought was wrong.

    
    

19. Giving Mr. Nold's testimony that construction most favorable to Petitioner, the most that has been established is that Traylor acquiesced in a short-term bookkeeping correction on paper to cover a money transfer error, but even so, for which corporate entity it was done is unclear. It is most logical, given the documentary exhibits in evidence, that even this short- term bookkeeping correction related to the non-party, Centrastate of Florida, Inc., which clearly had an escrow account. One could also infer that the Respondent real estate brokerage, Centrastate Development Corporation, was not maintaining any escrow account at all, but one could just as easily infer the Respondent brokerage was not conducting any sales at all, in which case there should be an escrow account but no escrow accounting for Mr. Nold to handle during his brief employment. However, upon the less than credible candor and demeanor of the witness Nold, it is found that his testimony is neither clear nor convincing of any of the charges of this Administrative Complaint.

    
    

20. There is insufficient credible evidence to show that a $19,000 check issued to Traylor on the Centrastate of Florida, Inc. escrow account for "permitting" was for any improper purpose.

    
    

21. There is no evidence in this record to support any finding at all with regard to Traylor t/a Salt Springs Realty.

    
    

    CONCLUSIONS OF LAW

    
    

22. The Division of Administrative Hearings has jurisdiction of the parties and subject matter of this cause. See Section 120.57(1) F.S.

    
    

23. The Respondents were charged with four (4) counts each of having violated Subsections 475.25(1)(b), (e), (k) and (h) F.S. Section 475.25(1) F.S. provides in pertinent part, that the Florida Real Estate Commission may take appropriate disciplinary action against a licensee if it finds that the licensee:

    
    

    (b) Has been guilty of fraud, misrepresen- tations, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence and breach of trust in a business transaction ...

    (e) Has violated any provision of this chapter or any lawful order or rule made or issued under the provision of this Chapter

    (475) or Chapter 455, F.S.

    (k) Has been guilty of having failed to maintain trust funds in a real estate brokerage escrow account until disbursement is properly authorized. ...

    (h) Has shared a commission with, or paid a fee or other compensation to, a person not properly licensed as a broker,

    brokersalesman, or salesman under the laws of this state, for the referral of real estate business, clients, prospects, or customers, or for any one or more of the services set forth in Section 475.02(c). ...

    
    

24. Subsection 475.01(1)(c) F.S. provides, in pertinent part as follows:

    
    

    1. "Broker" means a person who, for another, and for a compensation or valuable consideration directly or indirectly paid or promised, expressly or impliedly, or with an intent to collect or receive a compensation or valuable consideration therefor, appraises, auctions, sells, exchanges, buys, rents, or offers, attempts or agrees to appraise, auction, or negotiate the sale, exchange, purchase, or rental of business enterprises or business opportunities or any real property or any interest in or concerning the same, including mineral rights or leases, or who advertises or holds out to the public by any oral or printed solicitation or representation that he is engaged in the business of appraising, auctioning, buying, selling, exchanging, leasing, or renting business enterprises or business opportunities or real property of others or interests therein, including, mineral rights, or who takes any part in the procuring of sellers, purchasers, lessors, or lessees of business enterprises or business opportunities or the real property of another, or leases, or interest therein, including mineral rights, or who directs or assists in the procuring of prospects or in the negotiation or closing of any transaction which does, or is calculated to, result in a sale, exchange or leasing thereof, and who receives, expects, or is promised any compensation or valuable consideration, directly or indirectly therefor; and all persons who advertise rental property information or lists. The term "broker" also includes any person who is a partner, officer, or director of a partnership or corporation which acts as a broker.

25. Subsection 475.01(1)(d) F.S. provides, in pertinent part, as follows:

    
    

    1. "Salesman" means a person who performs any act specified in the definition of "broker" but who performs such act under the direction, control or management of another person.

    
    

26. Section 475.011(2) F.S. provides, in pertinent part, as follows:

    
    

    (2) Any individual, corporation, partnership, trust, joint venture, or other entity which sells, exchanges, or leases its own real property; however, this exemption shall not be available if and to the extent that an agent, employee, or independent contractor paid a commission or other compensation strictly on a transactional basis is employed to make sales, exchanges, or leases to or with customers in the ordinary course of an owner's business of selling, exchanging, or leasing real property to the public.

    
    

27. The only escrow account records introduced into evidence at the formal hearing were those of Centrastate of Florida, Inc., an entity not a party to these proceedings. Petitioner has proved that Centrastate of Florida, Inc., did or did not do a number of things, some of which have the flavor of violations of Subsections 475.25(1) F.S. (b) and (k), and thus, the flavor of a violation of the catchall Subsection (e), but Petitioner has not charged Respondent Traylor in connection with that corporate entity. It has also not established that that entity has either real estate broker, agent, or salesman status.

    
    

28. Even were Centrastate of Florida, Inc. a party to these proceedings, there was no showing that either it or its employees were ever engaged in the activities of a "broker" within the meaning of Subsection 475.01(1)(c) F.S. or that any fund deposited to, or disbursed from, its "escrow account" were, in fact, trust funds within the meaning of Subsection 475.25(1)(k) F.S.

    
    

29. Without a showing that the Respondents were engaged in the activities of a real estate broker and that, in the course of those activities were entrusted with funds intended to be held in escrow incidental to a real estate transaction, the material allegations of Counts I through VI of Petitioner's Administrative Complaint remain unproven.

    
    

30. There is simply insufficient credible evidence to establish that any entity committed the conduct prohibited by Subsection 475.25(1)(h), payment of real estate commissions to one not licensed. See, Counts VII and VIII of the Administrative Complaint.

    
    

31. In formulating the foregoing conclusions of law, the undersigned is not unmindful of the line of case law which holds real estate personnel to such a high standard of behavior in their public and personal life that they may be disciplined for almost any commission, omission, or ethical lapse in personal or business dealing even if such occurrence is unconnected to actual real estate practice, but such a scenario has not been properly pled, and the evidence in this case completely fails to pierce "the corporate veil."

32. The burden of proof in license discipline cases is upon Petitioner to prove clearly and convincingly that the alleged violations of the above statutory provisions were committed by the Respondents charged. See, Ferris v. Turlington, 510 So.2d 292 (Fla. 1987). Petitioner has not met that test, and this cause should be dismissed.

RECOMMENDATION

Upon the foregoing findings of fact and conclusions of law, it is recommended that the Florida Real Estate Commission enter an order dismissing all counts of the Administrative Complaint as not proven.

DONE and ENTERED this 13th day of November, 1989, at Tallahassee, Florida.

ELLA JANE P. DAVIS, 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 13th day of November, 1989.

APPENDIX TO RECOMMENDED ORDER

The following constitute specific rulings pursuant to Section 120.59(2)

F.S. upon the parties' respective proposed findings of fact (PFOF): Petitioner's PFOF:

1-6 and 8 are accepted.

7 is accepted only as modified; the record reflects no meaningful attempt to audit Respondent Centrastate Development Corporation.

1. is subordinate and unnecessary.

   
   

2. is rejected; the exhibit speaks for itself and is properly characterized within the facts as found. The proposal is mere conclusionary argument by Petitioner.

11, 12, 13 are rejected as not supported by the record as a whole but are either mere unreconciled testimony or conclusionary argument by Petitioner.

14 is irrelevant in light of the other facts as found.

Respondents' PFOF:

1, 2, 3, 4, 5, 6, 7, 9, 13, and 14 are accepted.

8, 10, 11, and 12 are accepted as modified to exclude subordinate and cumulative material and to more clearly reflect the record as a whole.

COPIES FURNISHED:

JAMES H. GILLIS SENIOR ATTORNEY FLORIDA DEPARTMENT OF

PROFESSIONAL REGULATION DIVISION OF REAL ESTATE LEGAL SECTION

400 WEST ROBINSON STREET POST OFFICE BOX 1900 ORLANDO, FLORIDA 32802

JOHN V. BAUM, ESQUIRE JOHN V. BAUM, P.A.

ATTORNEY AND COUNSELOR AT LAW

111 SOUTH MAITLAND AVENUE MAITLAND, FLORIDA 32751-5607

DARLENE F. KELLER, DIRECTOR DIVISION OF REAL ESTATE

400 WEST ROBINSON STREET POST OFFICE BOX 1900 ORLANDO, FLORIDA 32802

KENNETH E. EASLEY, GENERAL COUNSEL DEPARTMENT OF PROFESSIONAL REGULATION 1940 NORTH MONROE STREET

TALLAHASSEE, FLORIDA 32399-0792

Docket for Case No: 89-001445

Orders for Case No: 89-001445