STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 90-5818

) MARC GROSSMAN and CEL MAR ) REALTY, INC., )

)

Respondents. )

)

RECOMMENDED ORDER

This matter was heard by William R. Dorsey, Jr., the Hearing Officer designated by the Division of Administrative Hearings, on November 28, 1990, in Boca Raton, Florida.

APPEARANCES

For Petitioner: James H. Gillis, Esquire

Department of Professional Regulation

Post Office Box 1900 Orlando, Florida 32802

For Respondent: Billie T. Morrison, Esquire

1330 Southeast 4th Avenue Suite D

Fort Lauderdale, Florida 33316 STATEMENT OF THE ISSUE

The issue is whether the real estate broker's licenses held by the Respondents should be disciplined for violation of Subsections 475.25(1)(b), (d), and (k), Florida Statutes.

PRELIMINARY STATEMENT

At the hearing, the Department offered into evidence a certified copy of the license of Mr. Grossman and Cel Mar Realty, Inc., a copy of condominium leases dated December 15, 1983 and November 24, 1987; a copy of four Transaction Confirmations (bank deposit receipts) dated December 22, 1987 through March 15, 1988; an affidavit of indebtedness dated September 12, 1988 filed in the Circuit Court in Palm Beach County; a Notice of Sale issued by the Clerk of the Circuit Court of Palm Beach County; a copy of Cel Mar's Escrow Accounts Statements for April 29, 1988 through June 30, 1988. The Department presented the testimony of the Respondent Grossman, Mr. Robert C. Fallon and Mr. Larry Whitten.

At the request of the Department, official recognition was taken of Chapters 120, 455, and 475, Florida Statutes and Rule 22I-6.020, Florida Administrative Code.

FINDINGS OF FACT

1. The Petitioner is the regulatory agency charged under Section 20.34, Florida Statutes to regulate the practice of real estate in Florida.

   
   

2. The Respondent, Mark Grossman was at all material times licensed as a real estate broker, holding license 0180769. The license was issued, % of Cel Mar, Inc., 900 North Federal Highway, Boca Raton, Florida 33432. The Respondent Cel Mar, Inc., has been a corporation registered as a real estate broker, holding license 0244592 at the same address in Boca Raton. Mr. Grossman was licensed as the qualifying broker and officer for Cel Mar, Inc.

   
   

3. Since 1983, Mr. Grossman acted as a property manager for a Mr. Carlos Farner Sr., who resided in Guatemala, Central America, and found tenants for a condominium unit 632-16 in the Spanish Oaks condominiums which Farner had purchased in 1978. As of December 1, 1987, the tenants were Brenda Wigle and Gary Taroli.

   
   

4. Mr. Grossman was to collect monthly rents on the unit and place these funds in a savings account at Coral Gables Federal Savings and Loan; acount 38- 0000625-6. Mr. Farner used the funds to cover the mortgage payments due to Coral Gables Federal on the property. The principal and interest payment due monthly on the mortgage was $567.92.

   
   

5. Under his oral agreement with Mr. Farner, the tenant's rental payments were not to be placed in trust. Rather, Mr. Grossman collected the rent, and used the rental monies to perform any maintenance necessary on the property. Mr. Grossman was entitled to collect a commission equal to ten percent of the annual rental out of the monthly payments. At first, he took his commission "off the top." It is not clear whether this meant he retained all of the first month's rent and part of the second month's rent as his commission, or kept 10%

   of every rental payment. The remaining money was to be placed in the account at Coral Gables Federal.

   
   

6. From the inception of their relationship, the property rented by Mr. Grossman for Mr. Farner did not generate a rental sufficient to pay fully for upkeep, the broker's commission, and the condominium fees, taxes and principal and interest payments on the mortgage. It was not part of Mr. Grossman's duties to determine how much money, in addition to that which he deposited to the Coral Gables Federal savings account after making appropriate deductions, Mr. Farner had to add to the account to make the mortgage payments as they came due. Mr. Farner handled this matter himself, apparently through direct contact with the bank.

   
   

7. Carlos Farner, Sr. died on or about March 1, 1988, in Houston, Texas.

   
   

8. Mr. Grossman collected rents on the condominium unit for the months January through March 1988, and deposited the money into Mr. Farner's account at Coral Gables Federal Savings and Loan. The rent paid by the current tenant was

   $675 per month. As of March 15, 1988, the balance in the Coral Gables Federal savings account was $2,449.73.

9. Mr. Grossman continued to collect monthly rental payments after March 1988, but these funds were not deposited with Coral Gables Federal because Mr. Grossman had not received his commission payments due on the rental for three years. Instead, he unilaterally decided to place these rental payments, less any costs incurred for maintenance of the property, in his escrow account. Mr. Grossman paid himself $2,025 as rental commissions due from the escrow account under what he claims were the subsisting terms of his oral agreement with Mr. Farner. Mr. Grossman did not seek any disbursement order from the Florida Real Estate Commission in making the payment to himself out of his escrow account. He believed that he was entitled to take that payment under his agreement with Mr. Farner.

   
   

10. Mr. Grossman had not been paid his commission for three years because Mr. Farner was in some financial difficulties due to his businesses in Guatemala. Mr. Grossman had developed a long term relationship with Mr. Farner, however, and was willing to carry the money owed to him by Farner. Mr. Grossman failed to explain what agreement he came to with Farner to stop taking his commissions "off the top," but by 1988 he was not in the practice of withholding any portion of the tenants' rental payment from the Coral Gables Federal savings account deposit and retaining that money as his commission. This course of conduct leads the Hearing Officer to find that by 1988 Mr. Grossman's agreement with Mr. Farner did not include an entitlement for Grossman to deduct rental commissions from tenants' rental payments. Although Mr. Grossman denies it, the evidence and the inferences derived from it lead the Hearing Officer to believe that Mr. Grossman learned of Mr. Farner's death shortly after the date Mr. Farner died, and placed the mortgage payments for April, May and June in his trust account because those were the only funds available to him to pay the commissions which Mr. Farner owed to Grossman. There was no effort made to notify Mr. Farner's heirs or estate of this sudden change in the application of the rental payments from deposit in the savings account to set-off for commissions due.

    
    

11. There were no further payments from the tenant under the lease agreement after June 1988. The last month's rent was paid using the security deposit, and the tenant moved out.

    
    

12. Ultimately, the property was foreclosed by Coral Gables Federal Savings and Loan Association for failure to pay the amounts due under Mr. Farner's mortgage. There is no evidence as to what happended to the $2,449.73 balance in the Coral Gables Federal savings account as of March 15, 1988.

    
    

13. The evidence is insufficient to show that the foreclosure action filed by Coral Gables Federal was a direct result of the failure of Mr. Grossman to deposit the rental payments for April, May and June in the Coral Gables Federal Savings and Loan Association rather than in his escrow account. It was not Mr. Grossman's duty to determine what amounts were owed to Coral Gables Federal.

    The evidence gives rise to the inference that the mortgage was already in default before April 1988. The interest calculation contained in the affidavit of indebtedness, exhibit 6, shows that the bank regarded the mortgage as being in default from February 10, 1988. Mr. Grossman had continued to make deposits in the Coral Gables Federal Savings and Loan Association account of Mr. Farner through March of 1988, and in mid-March the balance of that account was almost

    $2,500. See, Composite exhibit 4, page 2.

    
    

14. Sometime after the death of Carlos Farner, Sr., Mr. Grossman received a demand from his son, Carlos Farner, Jr. for monies Mr. Grossman had received as rental payments on the condominium unit. The evidence does not establish

    that the son made any demand before Mr. Grossman disbursed to himself the money held in his escrow account. Consequently, the evidence does not support a finding that Mr. Grossman made the payment to himself while he knew that there was a conflicting demand to the money in his escrow account.

    
    

    CONCLUSIONS OF LAW

    
    

15. The Division of Administrative Hearings has jurisdiction over this matter. Section 120.57(1), Florida Statutes (1987).

    
    

16. A real estate broker may be disciplined under Section 475.25(1)(b) for dishonest dealing by trick, scheme or device, for culpable negligence or for breach of trust. He may be disciplined under Section 475.25(1)(d) for failing to account or deliver to a person property, such as money, which has come into the broker's hands which he is not entitled to retain. He can also be disciplined under Section 475.25(1)(k) for failing to immediately place in escrow any deposit entrusted to him as a broker.

    
    

17. The evidence here does not sustain the Department's contention that Mr. Grossman violated Section 475.25(1)(b) or (1)k. There was no agreement, written or oral, with Carlos Farner, Sr. which would have required Mr. Grossman to place the rental payments which he received from the tenants of the condominium in Grossman's escrow account or in any trust account. To the contrary their agreement was that, after certain deductions, the money would be deposited in Farner's savings account. The evidence shows that Carlos Farner, Sr. had retained the duty of determining how much money he would need to deposit with Coral Gables Federal Savings Loan Association to keep his mortgage on the condominium current. How Farner ordinarily transferred money from the savings account to pay the mortgage cannot be determined from the evidence.

    
    

18. Notwithstanding their oral understanding at the inception of their relationship, by 1988 Mr. Grossman had no right, under his course of dealing with the rental payments due to Carlos Farner, Sr. to apply rental payments towards the accumulated commissions due to Grossman. Grossman violated Section 475.25(1)(d) when he attempted to reverse in his earlier pattern of forbearance, and unilaterally collected the commissions which had become due to him over the past three years shortly after he learned of Mr. Farner's death. The parties' agreement no longer included any right to deduct commissions from rental payments. See, Finding 10. This is true even though the record shows Mr. Farner was, in fact, indebted to Mr. Grossman for commissions.

    
    

19. Mr. Farner's mortgage on the condominium was overdue before Mr. Grossman applied the mortgage payments received after March 1988 to Farner's indebtedness to him. This may have compounded the difficulty for the estate of Mr. Farner in keeping that mortgage current, but Mr. Grossman's actions were not the cause of the foreclosure. Apparently, in March of 1988, there was almost

    $2,500 in the Coral Gables Federal savings account. Penalty

20. Under the Board's penalty guidelines, a broker may be fined $1,000 and suspended for up to five years for violation of Section 475.25(1)(d), Florida Statutes, Rule 21V-24.001(3)(j), Florida Administrative Code. Mr. Farner was actually indebted to Grossman; his efforts to collect were misguided but directed to a valid debt. A period of suspension of less than the maximum 5 years is appropriate.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that Mr. Grossman be found guilty of violation of Section 475.25(1)(d), Florida Statutes, that he be fined $1,000 and his licensure be suspended for 2 years. The licensure of Cel Mar should be suspended for an equal period.

RECOMMENDED this 18th day of January, 1991, at Tallahassee, Florida.

WILLIAM R. DORSEY, JR.

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 January, 1991.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 90-5818

Rulings on findings proposed by the Department:

1. Adopted in paragraph 1.

2 and 3. Adopted in paragraph 2.

1. Adopted in paragraph 2.

2. Adopted in Findings 3 and 8.

3. Adopted in Finding 4.

4. Adopted in Finding 7.

5. Adopted in Finding 8.

6. Adopted in Finding 9. Except that the proposed finding that the failure to deposit the funds at Coral Gables Federal "resulted in a foreclosure action" is rejected. It is not clear why Coral Gables Federal had not received its mortgage payments, and it was not Mr. Grossman's duty to make them. It appears that there was more than adequate money in the savings account to make any mortgage payments due.

7. Generally adopted in Findings 9 and 10. It is not clear that Mr. Grossman waited until September 1988 to withdraw the funds from his escrow account.

8. Implicit in Findings 10 and 11. Though it is not clear how the tenant made the payment in July. The August payment was taken from the last month's rent which had been paid at the inception of the lease.

9. Adopted in Finding 11.

10. Implicit in Findings 8 through 11.

11. Adopted in Findings 9 and 10. Although it is not clear that the withdrawal from the escrow account was made in July 1988. There is no escrow account statement in evidence for the month of July 1988.

12. Rejected because it is not persuasive that Mr. Farner, Jr. made any claim for the escrow funds before they were disbursed out of the escrow account.

COPIES FURNISHED:

James H. Gillis, Esquire

Department of Professional Regulation

400 West Robinson Street Orlando, Florida 32801-1772

Billie T. Morrison, Esquire

1330 Southeast 4th Avenue, Suite D Fort Lauderdale, Florida 33316

Darlene F. Keller, Director Department of Professional Regulation Division of Real Estate

Post Office Box 1900 Orlando, Florida 32801

Kenneth E. Easley, 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 this 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 contact the agency that will issue the final order in this case concerning agency 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: 90-005818

Orders for Case No: 90-005818