STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA DEPARTMENT OF )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) CASE NO. 90-4783

) MAX S. LONG, JR., STONEGATE ) PROPERTY MANAGEMENT CORPORATION, ) STONEGATE REALTY, INC. AND ) QUEENS HARBOUR REALTY, INC., )

)

Respondents. )

)

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Daniel M. Kilbride, held a formal hearing in the above-styled case on July 31, 1991, in Clearwater, Florida.

APPEARANCES

For Petitioner: Janine B. Myrick, Esquire

Senior Attorney

Florida Department of Professional Regulation

Division of Real Estate

400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 (407) 423-6134

For Respondent: Kelli Hanley Crabb, Esquire

Battaglia, Ross, Hastings and Dicus

P.O. Box 41100

St. Petersburg, Florida 33743 (813) 381-2300

STATEMENT OF THE ISSUES

1. Whether the Respondents' real estate licenses in Florida should be disciplined based upon the charge that the Respondents are guilty of failing to maintain the required entrance sign on or about the entrance to the principal office in violation of Subsection 475.22, Florida Statutes and Rule 21V-10.024, Florida Administrative Code and are therefore in violation of Subsection 475.25(1)(e), Florida Statutes.

2. Whether the Respondents' real estate licenses in Florida should be disciplined based upon the charge that Respondents are guilty of failing to register a branch office in violation of Subsection 475.24, Florida Statutes, and Rule 21V-10.023, Florida Administrative Code, and therefore are in violation of Subsection 475.25(1)(e), Florida Statutes.

   
   

3. Whether the Respondents' real estate licenses in Florida should be disciplined based upon the charge that the Respondent Max S. Long, Jr., is guilty of failing to be a signatory on all escrow accounts in violation of Rule 21V-14.010, Florida Administrative Code and therefore is in violation of Subsection 475.25(1)(e), Florida Statutes.

   
   

4. Whether the Respondents' real estate licenses in Florida should be disciplined based upon the charge that the Respondents' are guilty of failing to maintain trust funds in the real estate brokerage escrow bank account or some other proper depository until disbursement thereof was properly authorized in violation of Subsection 475.25(1)(k), Florida Statutes.

   
   

5. Whether the Respondents' real estate licenses in Florida should be disciplined based upon the charge that Respondents' are guilty of culpable negligence or breach of trust in any business transaction in violation of Subsection 475.25(1)(b), Florida Statutes.

PRELIMINARY STATEMENT

By an Administrative Complaint filed on June 21, 1990, and orally amended at hearing on July 31, 1991, the Petitioner, Department of Professional Regulation, Division of Real Estate, alleges that the Respondent has violated Subsections 475.22, 475.24, and 475.25(1)(b),(e) and (k), Florida Statutes and seeks to discipline the Respondents' real estate licenses. The Respondents disputed the charges and requested a Section 120.57(1), Florida Statutes hearing and thereafter this hearing followed.

At hearing, the Petitioner presented the Administrative Complaint filed in this cause, and orally amended paragraph 29 to read: "As a result of Petitioner's audit of Respondents' escrow accounts on October 17, 1989, Respondents' escrow account titled Queens Harbour Realty - Escrow account number 0089798317 maintained at C & S Bank of Pinellas County on September 30, 1989, had a current liability of $54,010.66, a reconciled bank balance of $8,537.99 thus indicating a shortage of approximately $45,472.67. Ultimately, the Respondents reduced the shortage to zero and the accounts balanced. A copy of the deposit ticket, check and transaction receipt is attached hereto as Administrative Complaint Exhibit 2." The Respondents stipulated to the facts as alleged in the Amended Administrative Complaint.

Respondents presented the testimony of certified public accountant, Ed Perry, and Max S. Long, Jr., who testified in his own behalf. Respondents' Exhibits 1-3 were received into evidence. The record was kept open for the admission of the deposition of George Patterson taken by Respondents on July 17, 1991 and attended by Petitioner's counsel, which was filed on August 1, 1991.

Petitioner filed its proposed recommended order on August 8, 1991, and Respondents' was filed on August 13, 1991. A transcript has not been filed. Each of the parties proposal have been given careful consideration. My specific rulings on proposed findings of fact are contained in the appendix attached hereto.

FINDINGS OF FACT

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

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 Max S. Long, Jr. was at all times material hereto a licensed real estate broker in the State of Florida having been issued license numbers 0253744, 0253742, and 0258199 in accordance with Chapter 475, Florida Statutes. The last license issued was as a broker for Stonegate Realty, Inc., 2325 Ulmerton Road, Clearwater, Florida 34620 and Queens Harbour Realty, Inc., 711 San Pablo Road North, Jacksonville, Florida 32225. Respondent Long has been a licensed salesperson since 1974 and a licensed broker since 1978.

   
   

3. The Respondent Stonegate Property Management Corporation was at all times material hereto a corporation registered as a real estate broker in the State of Florida having been issued license number 0240617 in accordance with Chapter 475, Florida Statutes. The last license issued was at the address of 2325 Ulmerton Road, Clearwater, Florida 34620.

   
   

4. The Respondent Stonegate Realty, Inc. was at all times material hereto a corporation registered as a real estate broker in the State of Florida, having been issued license number 0182660 in accordance with Chapter 475, Florida Statutes. The last licensed issued was at the address of 2325 Ulmerton Road, Clearwater, Florida 24620.

   
   

5. The Respondent Queens Harbour Realty, Inc., is now and was at all times material hereto a corporation registered as a real estate broker in the State of Florida, having been issued license number 0257554 in accordance with Chapter 475, Florida Statutes. The last license issued was at the address of 711 San Pablo Road North, Jacksonville, Florida 32225.

   
   

6. On or about October 17, 1989, DPR investigator Marjorie G. Maye (hereinafter Maye) conducted an inspection and audit of Respondents' offices and escrow accounts in Clearwater.

   
   

7. Maye discovered that the Respondents did not display an office entrance sign for the corporations. Since the inspection Respondents have erected the proper sign which has been displayed continuously since that date.

   
   

8. Respondents were operating an unregistered branch office located at 13280 Broadhurst Loop S.W., Ft. Myers, Florida. Respondents did not register the office because the salesperson was an employee of the developer and sold only property at that project. Since the inspection Respondents have properly registered the branch office.

   
   

9. At the time of the inspection and audit Respondent Long was not a signatory on Respondents' escrow accounts. Since the inspection, Respondent Long has been added as a signatory to the escrow accounts.

10. At the time of the audit Respondents' escrow account titled Queens Harbour Realty - Escrow account number 0089798317 maintained at C & S Bank of Pinellas County on September 30, 1989, had a current liability of $54,010.66, a reconciled bank balance of $8,537.99 thus indicating a shortage of approximately

    $45,472.67. Ultimately, the Respondents reduced the shortage to zero and the accounts balanced.

    
    

11. At the time of the inspection and audit, Ed Perry, CPA, was employed by Respondent Queens Harbour in the accounting department and was in charge of the Queens Harbour Realty - Escrow account which was maintained out of Clearwater, Florida. George Patterson and Ed Perry, CPAs, and other individuals were signatories on this escrow account.

    
    

12. The escrow accounts were used for deposits on real estate sales and leases. The funds were disbursed at sale or upon termination of the lease.

    
    

13. Some of the funds received by Respondents were not required to be held in escrow. Eventually the deposits from several projects were placed in the escrow accounts.

    
    

14. Disbursements were made from the escrow accounts even though the funds were not required to be deposited in the escrow account. This resulted in confusion as to the exact amounts of funds required to be maintained in the escrow accounts and which funds were available for distribution.

    
    

15. Shortages in the escrow accounts were a result of intercompany loans and disbursements, as well as, from the co-mingling of funds. These were made at the direction of George Patterson.

    
    

16. On or about October 13, 1989, Ed Perry, CPA and George Patterson, supervisor of the accounting department, signed a $6,000.00 check from Respondents' escrow account which was used for the purchase of a vehicle for Queens Harbour Yacht and Country Club.

    
    

17. When this error was discovered the $6,000.00 was re-deposited to the escrow account.

    
    

18. Respondent Long, became the broker for Stonegate Realty at the request of his cousin, Fred Bullard, the President of the Bullard Group, and a majority shareholder in Queens Harbour Realty, Inc. He was not aware of and did not sign any of the checks representing the inter-company loans or for the purchase of the vehicle. He derived no benefit from these loans.

    
    

19. Respondent Max S. Long, Jr. understood at all times material to the allegations in the Administrative Complaint that an escrow account is one used to hold funds belonging to third parties and that he, as the real estate broker, acted in a fiduciary capacity to those third parties.

    
    

20. Respondent Long relied completely on the corporation's in-house accountants to properly prepare the accounting for the escrow funds.

    
    

21. Since the DPR investigation, there have been no shortages in the escrow account, monthly reconciliation reports are prepared and signed by Respondent Long, and the escrow accounts are routinely reviewed by Respondent Long.

22. Respondent Long has had no prior disciplinary proceedings before the Commission.

    
    

    CONCLUSIONS OF LAW

    
    

23. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter pursuant to Subsection 120.57(1), Florida Statutes (1989).

    
    

24. The parties were duly noticed pursuant to the notice provisions of Chapter 120, Florida Statutes (1989).

    
    

25. The Petitioner is charged with the duty and authority to initiate disciplinary proceedings pursuant to Chapters 455 and 475, Florida Statutes (1989).

    
    

26. Subsection 475.25, Florida Statutes (1989) provides that the Florida Real Estate Commission may suspend a license for a period of not exceeding ten

    (10) years; revoke a real estate license; may impose an administrative fine not to exceed $1,000 for each count or separate offense; and may impose a reprimand or, any or all of the foregoing, if it finds that a licensee has violated Subsection 475.25(1)(b), (e) or (k), Florida Statutes.

    
    

27. Subsection 475.22, Florida Statutes, requires that each active broker shall maintain a sign on or about the entrance of his principal office and each branch office, which sign may be easily observed and read by any person about to enter such office and shall be of such form and minimum dimensions as shall be prescribed by the Commission.

    
    

28. Subsection 475.24, Florida Statutes, requires that whenever any licensee desires to conduct business at some other location, either in the same or a different municipality or county than that in which he is licensed, such other place of business shall be registered as a branch office.

    
    

29. Subsection 475.25(1)(b), Florida Statutes (1989) proscribes fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence or breach of trust in a business transaction.

    
    

30. Subsection 475.25(1)(e), Florida Statutes, proscribes violations of provisions of Chapter 475, Florida Statutes or any lawful order or rule made or issued under the provisions of Chapter 475, Florida Statutes or Chapter 455, Florida Statutes.

    
    

31. Subsection 475.25(1)(k), Florida Statutes, proscribes failing, if a broker, to immediately place, upon receipt, any money, fund, deposit, check, or draft entrusted to him by any person dealing with him as a broker, in escrow with a title company, banking institution, credit union, or savings and loan association located and doing business in this state, or to deposit such funds in a trust or escrow account maintained by him with some bank, credit union, or savings and loan association located and doing business in this state, wherein the funds shall be kept until disbursement thereof is properly authorized.

    
    

32. Rule 21V-10.023, Florida Administrative Code, provides that if a broker desires to conduct business from more than one office, each additional office must be registered as a branch office.

33. Rule 21V-10.024, Florida Administrative Code, requires, inter alia, that all licensed real estate brokers, holding an active license, shall erect and maintain a sign on or about the entrance of their principal office and all branch offices, which sign may be easily observed and read by persons about to enter the offices.

    
    

34. Rule 21V-14.010, Florida Administrative Code, requires that every licensed real estate broker who shall receive from his salesman, principal, prospect, or other person interested in any real estate transaction, any deposit, fund, money, check, draft, personal property, or item of value shall immediately place the same in a solvent bank, savings and loan association, trust company, credit union or title company having trust powers, in an escrow account. The broker is ultimately responsible for the dollars in said escrow account; therefore, the broker must be a signatory on all escrow accounts.

    
    

35. The burden of proof is on the Petitioner as to each count of the Administrative Complaint. Balino v. Department of Health and Rehabilitative Services, 348 So.2d 349 (Fla. 1st DCA 1977) and the facts alleged must be supported by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1st DCA 1987).

    
    

36. Respondent herein readily admitted he did not have the proper signs at his office, and was operating an unregistered branch office in violation of Sections 475.22 and 24, Florida Statutes and Rule 21V-10.023, Florida Statutes. However, such violations were not willful, and were immediately rectified by Respondents upon notification of the violations.

    
    

37. Of greater concern is Respondent Long's actions relating to the escrow accounts. He allowed escrow accounts to be operated without his authority and responsibility. A reasonable and prudent real estate professional would know that these acts would result in injury to another.

    
    

38. Respondent Long had the responsibility imposed by his status as a professional licensee to exercise the caution of a reasonable and prudent professional. Respondent Long failed in this regard.

    
    

39. Respondent Long apparently attempts to shield himself from liability by claiming he relied on a professional certified public accountant and the President of the company to insure the escrow accounts were properly maintained. Yet Long knew of his personal fiduciary relationship to those whose funds were placed in escrow, a duty which was imposed by statute. As a licensed professional with concomitant duties and responsibilities, Respondent Long cannot disavow these responsibilities so long as he is engaged in the real estate profession. Respondent had a duty to know.

    
    

40. Florida courts elevate the level of duty of a broker to that of any attorney or banker in that the broker's relation to the public exacts the highest degree of trust and confidence. MacGregor v. Florida Real Estate Commission, 99 So.2d 709, 711 (Fla. 1958); Ahern v. Florida Real Estate Commission ex rel. O'Kelley, 149 Fla. 706, 6 So.2d 857, 858 (1942); Chism v. Moylan, 105 So.2d 186, 189 (Fla. 2d DCA 1958); Young v. Field, 548 So.2d 784, 786 (4th DCA 1989).

41. In Shelton v. Florida Real Estate Commission, 121 So.2d 711, 712 (2d DCA 1960) the Court states:

    
    

    The statutes regulating the activities of real estate brokers in their business were designed for the protection of the public and the safeguarding of persons who deposit their money and place their trust in the hands of real estate brokers. Ahern v. Florida Real Estate Commission, 1942, 149 Fla. 706, 6 So.2d 857; and Shelton v. Florida Real Estate Commission, Fla. App. 1960, 120 So.2d 191.

    
    

42. Without question, Respondent's action in relation to the escrowed funds herein was culpably negligent and improper and constitutes a violation of Subsections 475.25(1)(b), Florida Statutes.

    
    

43. For all of the above-stated reasons, the Respondents are guilty of having committed a violation of Subsections 475.25(1)(b), (e) and (k), Florida Statutes and the rules promulgated thereto.

    
    

44. The violations of Sections 475.25(1)(e), Florida Statutes were technical in nature and warrant only an administrative fine.

    
    

45. Respondent Long's violation of Section 475.25(1)(e) and (k), Florida Statutes, while serious, has been mitigated by his many years as a broker without prior misconduct; the recognition of the errors and their prompt correction; and Respondent Long's continued close supervision of the trust account since the audit.

RECOMMENDATION

Having considered the foregoing Findings of Fact and Conclusions of Law, and the evidence of the record, including the contents of the several exhibits received into evidence, it is, therefore:

RECOMMENDED that the Respondents be found guilty of having violated Subsections 475.25(1)(b), (e) and (k), Florida Statutes, (1989), as charged in the Administrative Complaint.

It is further RECOMMENDED that Respondents shall jointly pay a penalty of

$500 and that Respondent Long's real estate licenses be suspended for a period of one year, followed by a one year period of probation upon such conditions as the Florida Real Estate Commission shall reasonably impose.

DONE and ENTERED this 21st day of August, 1991, in Tallahassee, Florida.

DANIEL M. KILBRIDE

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 21st day of August, 1991.

APPENDIX TO RECOMMENDED ORDER

The following constitutes my specific rulings, in accordance with section 120.59, Florida Statutes, on findings of fact submitted by the parties.

COPIES FURNISHED:

Janine B. Myrick, Esquire Division of Real Estate Post Office Box 1900 Orlando, Florida 32802

Kelli Hanley Crabb, Esquire Post Office Box 4110

St. Petersburg, Florida 33743

Darlene F. Keller Division Director

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

Jack L. McRay General Counsel

Department of Professional Regulation 1940 North Monroe Street

Tallahassee, Florida 32399-0792

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to the Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should consult with the agency that will issue the final order in this case concerning their rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 90-004783

Orders for Case No: 90-004783