STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 91-6787

)

RICHARD IRWIN RAY, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, this cause came on for formal

hearing before P. Michael Ruff, duly-designated Hearing Officer of the Division of Administrative Hearings, in Shalimar, Florida.

APPEARANCES

FOR PETITIONER: James Gillis, Esq.

Department of Professional Regulation

Division of Real Estate

400 West Robinson Street

P.O. Box 1900

Orlando, FL 32802-1900

FOR RESPONDENT: Richard Irwin Ray, pro se

10013 Calle de Celestino Navarre, FL 32566

STATEMENT OF THE ISSUES

The issue to be resolved in this proceeding concerns whether the Respondent has violated Subsection 475.25(1)(b), Florida Statutes; Subsection 475.25(1)(d)1, Florida Statutes; Subsection 475.25(1)(k), Florida Statutes; Subsection 475.42(1)(a), Florida Statutes; Subsection 475.25(1)(e), Florida Statutes; by being guilty of culpable negligence or breach of trust; by allegedly failing to promptly deliver a deposit; by allegedly failing to maintain trust funds in a proper escrow account; by allegedly depositing or intermingling personal funds with trust funds or escrow funds; by operating as a broker without holding a valid, current license; and by failing to

preserve and make available to the agency all books, records, and supporting documents and by allegedly failing to keep an accurate account of all trust-fund transactions.

PRELIMINARY STATEMENT

This cause arose upon the filing of an Administrative Complaint against Richard Irwin Ray, the Respondent, by the above-named agency. It is alleged that the Respondent has committed various violations of Subsection 475.25(1), Florida Statutes, delineated in the Statement of Issues above. In

essence, the case concerns the alleged receipt by the Respondent, as a broker, of a check representing a deposit receipt and earnest money deposit concerning the purchase of a piece of property. The salesperson who received the check represented the sellers of the property. It is alleged that the earnest money deposit was transmitted to the broker, that he failed to maintain it in a proper escrow account and properly account for it and deliver it to the party entitled to it at the conclusion of the transaction in question. It is alleged that although he disbursed the $500.00 in question to the proper party, the proposed seller, in the transaction at issue, he did not do that timely and that he did not disburse the funds from an escrow account but rather from his personal account, which the State maintains, in essence, is evidence of the fact that he failed to maintain the funds in a proper escrow account to begin with and commingled them with his personal funds.

The cause came on for hearing as noticed, at which the Petitioner presented the testimony of Richard Walker, Paul R. Bratton, III, and Richard I. Ray. The Respondent presented the testimony of Richard Ray, on his own behalf, in his case, along with the testimony of Luvene Galfano and Charles Brannon. The Petitioner offered and had admitted five exhibits, and the Respondent offered and had admitted two exhibits. The proceeding concluded and the parties elected to order a transcript and avail themselves of the right to submit proposed findings of fact and conclusions of law in the form of Proposed Recommended Orders.

It developed, however, that no party submitted a Proposed Recommended Order.

FINDINGS OF FACT

1. The Petitioner is an agency of the State of

   Florida charged with licensing and regulating the practice of real estate brokers and salespersons licensed in the State of Florida. It has the duty to prosecute with Administrative Complaints any alleged violations of Chapter 475, Florida Statutes, and related laws and rules, involved in the licensure and regulation of real estate brokers and salespersons.

   
   

2. The Respondent, Richard Irwin Ray, is now and was, at all times pertinent to this case, a licensed real estate broker in the State of Florida. He was issued license number

   0423296, in accordance with Chapter 475, Florida Statutes. The last license issued to him was as a non-active broker, bearing an address of 10013 Calle de Celestino, Navarre, Florida 32566.

   
   

3. The Respondent, at times pertinent hereto, was the licensed and qualifying broker for the now-defunct Navarre Shores Realty, Inc. for the period from October 31, 1985 to

   approximately November 6, 1989. The Respondent and Navarre Shores Realty, Inc. failed to renew their licenses on March 31, 1989, the expiration date. Instead, the licenses were renewed effective April 5, 1989; and the Respondent continued to do business as a real estate brokerage and broker for several months thereafter through and including the time in which the transaction at issue was entered into.

   
   

4. On or about July 27, 1989, Richard Walker, a

   salesman working for the Respondent's brokerage firm, solicited and obtained an executed contract for the sale and purchase of certain real property owned by Myra Lee Philips, the seller, and Charles W. and Pamela S. Brannon, the proposed buyers. The buyers gave the salesman, Mr. Walker, a $500.00 earnest money deposit called for by the terms of the contract, which terms also provided that the earnest money deposit was to be held in escrow by Navarre Shores Realty, Inc., the Respondent's real estate brokerage firm.

   
   

5. Mr. Walker maintains that he turned in the check

   or submitted it to the broker or to one of his representatives or to someone who was "running the office at the time". He does not recall to whom he actually tendered the check when he received it; however, he recalls making a copy of the check and then making a copy of the check and the front page of the contract, with the check copy overlaid on it, which was the procedure in the office required by the Respondent in order that he could keep a record of sales transactions.

   
   

6. In addition to Mr. Walker, the salesman, having no recollection of who, if anyone, he might have given the check to with the Respondent's brokerage firm, the Respondent has no recollection of receiving the check, ever seeing the check nor the manner or means by which the check was handled, as, for instance, whether it was deposited in his firm's escrow account or not. Mr. Charles Brannon, the proposed buyer in the subject transaction, testified that he executed a $500.00 earnest money deposit check in accordance with the terms of the contract referenced above and that the $500.00 check did clear his bank account; that is, it was paid upon being tendered to his bank. The Respondent maintains that he does not know the location of any records he might have, if any, related to this transaction and the subject earnest money deposit check.

   
   

7. During the time in question immediately following

   the transaction date of July 27, 1989 and the time in November of 1989 when the Respondent closed his real estate office, the Respondent apparently had some disagreements with salespersons, including Mr. Walker. During this time period, the Respondent and his secretary, Ms. Galfano, learned that some client and sales transactions files were removed from the Respondent's brokerage office by Mr. Walker and others. Apparently, Ms.

   Galfano was able to retrieve some of the files; however, the Respondent was unable to, or in any event, failed to provide the Department's investigator, Mr. Bratton, with any records related to the subject transaction, including the escrow account records, which might have revealed whether the earnest money deposit check

   was deposited in the Respondent's escrow account or not, although the Respondent did advise Mr. Bratton by telephone on two occasions that he was endeavoring to have the bank prepare his escrow account records.

   
   

8. The escrow account had been closed by Emerald

   Coast State Bank because service charges had been applied to it which resulted in its having a negative balance. This may mean that no $500.00 earnest money deposit check had been deposited in that account, and the Respondent does not know what happened to the check once the Brannons executed it and presumably gave it to Mr. Walker. He does not feel that it was ever placed in his escrow account, nor that he ever had any possession of it because the account was closed for having a negative balance due to the debiting of monthly service charges. In any event, the Respondent did not obtain and provide to the Petitioner the escrow account records.

   
   

9. The Respondent stated in his testimony that if the buyers, the Brannons, could provide their bank records and produce the cancelled check involved, that would show how the check was cashed and, therefore, whether it was processed through his escrow account. The cancelled check was not produced and admitted into evidence at the hearing. Mr. Brannon, one of the buyers, merely testified that the check had cleared his bank and had been debited from his account upon which the check was written.

   
   

10. Check number 3642 in evidence is the $500.00

    check drawn on the account of Richard I. or Maryanne Ray, which is the check by which the Respondent paid the seller, Ms.

    Philips, the earnest money deposit funds which she was due because the transaction failed to close. A receipt for that check was issued to the Respondent by witness, Richard Walker, the Respondent's former salesman. The receipt indicates that the funds in question were received from R. Ray Construction, a/k/a Navarre Shores Realty, Inc. Mr. Walker did not adequately explain why he issued a receipt to the Respondent for the check drawn on his personal account and represented it as being from R. Ray Construction, a/k/a Navarre Shores Realty, Inc. He merely testified that he went to Mr. Ray, who "...was operating out of his personal account with his construction company. I did it because that's what he was known as at the time. OK. I did it in good faith." Mr. Walker does not have any knowledge concerning where the earnest money deposit check from the buyer, the Brannons, was actually deposited, nor whether the Respondent ever received it.

    
    

11. Ms. Galfano was the secretary for Navarre Shores Realty, Inc., the Respondent's firm, at the time of the transaction in question and thereafter. Ms. Galfano established that Mr. Walker took some files from the office which contained sales contracts when the Respondent closed the office. She went to his home on a Sunday and persuaded him to give her back the records and took them back to the office. Ms. Galfano opined that certain files had been removed from the office by Mr. Walker because Mr. Walker was in a dispute at the time with one of the

    sales associates in the office. Navarre Shores Realty, Inc. had been experiencing internal problems with the associates disputing among themselves. In fact, the Respondent lost several associates from his firm due to internal dissension, presumably about credit for clients and contracts. It was because of this that the Respondent decided to close his office.

    
    

12. At the time of the transaction between the

    Philips and the Brannons, Navarre Shores Realty, Inc., through Mr. Walker, had the listing on the property. Prior to that time, the Philips' property had been listed with Mr. Lou Jakes, also a sales associate with Navarre Shores Realty, Inc. The seller, Ms. Philips, later turned the listing over to Mr. Walker because she was upset with Mr. Jakes over upkeep not being properly done on the beach house in question. She called the off ice concerning this and happened to talk to Richard Walker, who persuaded her to change the listing from Lou Jakes over to him. Thus, the subject listing and transaction caused a dispute between Mr. Jakes and Mr. Walker, and Mr. Jakes left the firm as, later, did Mr.

    Walker. One of them apparently removed the subject records from the brokerage office. Since the transaction in question and the internal dissension in his office involving Mr. Walker and the other associate, the Respondent has had difficulty conversing with Mr. Walker because they are not on good terms.

    
    

13. In summary, the evidence establishes at most that Mr. Walker received the earnest money deposit check from the

    buyers, the Brannons. It was not established that the Respondent ever received or became aware of the delivery of the earnest money deposit check to Mr. Walker. It was not established that it was ever deposited in any of the Respondent's or his corporation's accounts. It was established that the Respondent, partly out of a desire to avoid accusation of any illegality by the Petitioner, voluntarily paid the $500.00 to the seller out of his personal account, although he does not know or has no recollection that the money was ever received by him nor deposited in any of his accounts. The earnest money deposit check was not produced and placed into evidence, which could have shown in whose bank and account the check might have been deposited. Mr. Brannon only testified that the $500.00 check cleared and was debited from his account.

    
    

14. It was established that the Respondent either has

    no records of his escrow account transactions with regard to this real estate transaction or is unaware of their location. It was likewise established, however, that upon request by Mr. Bratton, Petitioner's investigator, for copies of those records, the Respondent did not produce them. The Respondent maintains that he had requested that his banks provide a copy of his account records; however, as of the time of the hearing, he had not provided those to Mr. Bratton.

    
    

15. It was also established that the Respondent and

    his brokerage firm were duly licensed at the time the transaction in question occurred and that some months later, in November of 1989, he closed his office and ceased doing business. It was established that his licensure expired on March 31, 1989 and that

    there was a six-day lapse of his licensure, with it being renewed on April 5, 1989.

    
    

16. In November of 1990, on approximately November

    6th, the buyers, the seller, and the Respondent signed a release of deposit agreement whereby the Respondent was to disburse

    $500.00 to the seller with regard to the subject transaction. See Exhibit 2 in evidence. On or about April 18, 1991, the

    Respondent made and delivered check number 3642, in the amount of

    $500.00, drawn on his personal checking account number 1322650, maintained at First National Bank of Santa Rosa, Milton, Florida, payable to Myra Lee Philips, who had been the seller in the subject transaction. Thus, in excess of five months elapsed between the time the Respondent agreed to disburse the $500.00 to Ms. Philips and the time he actually paid Ms. Philips the

    $500.00.

    
    

    CONCLUSIONS OF LAW

    
    

17. The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this proceeding. Section 120.57(1), Florida Statutes.

18. Subsection 475.25(1)(k), Florida Statutes, proscribes: The failure of 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..., or to deposit such funds in a trust or escrow account maintained by him..., wherein the funds shall be kept until disbursement thereof is properly authorized; or has failed, if a salesperson, to immediately place with his registered employer any money, fund, deposit, check, or draft entrusted to him by any person dealing with him as agent of his registered

    employer. ... (emphasis supplied).

    
    

    This provision reveals that the broker must place in an appropriate deposit any money, fund, or check, etc. which he has received. Here, however, it has not been proven by clear and convincing evidence that the broker, the Respondent, ever actually received the earnest money deposit check at issue written by the Brannons and given to Mr. Walker. Because it has not been proven that the Respondent ever received the earnest money check, it has likewise not been proven that he failed to deposit it in an appropriate escrow or trust account nor has it been proven that he deposited or intermingled those funds with his personal funds for purposes of the prohibition contained in Rule 21V-14.008(1)(c), Florida Administrative Code.

    
    

19. The foregoing Findings of Fact show that the Respondent was unaware or did not recall ever seeing the earnest money check nor what became of it after it was delivered to Mr. Walker. The Petitioner's evidence did not show in a clear and

    convincing way what became of the check after Mr. Walker received it, other than his vague, general statement to the effect that he turned it over to someone at the Respondent's brokerage firm office. If the check had been placed in evidence, it might be determinable as to which bank account the check was negotiated through and presented to the maker's bank for payment, which would thus have revealed whether it went into an escrow account or not. However, such evidence was not forthcoming from the Petitioner. Consequently, clear and convincing evidence that the Respondent actually received the check and that "upon receipt", the Respondent failed to deposit it and maintain it in an appropriate escrow or trust fund or other proper depository until authorized disbursement, has not been presented. Consequently, no violation of Subsection 475.25(1)(k), Florida Statutes, nor Rule 21V-14.008(1)(c), Florida Administrative Code, has been established.

    
    

20. Subsection 475.25(1)(d) 1, Florida Statutes, proscribes:

    
    

    A broker's failure to account or to deliver to any person, including the licensee under this chapter, at the time which had been agreed upon or is required by law or, in the absence of a fixed time, upon demand of the person entitled to such accounting and delivery, any personal properties such as money, fund, deposit check, draft, abstract of title, mortgage..., which has come into his hands and which is not his property or which he is not in law or equity entitled to retain under the circumstances. ...

    
    

21. Here, the release of deposit receipt document, in evidence as Petitioner's Exhibit 3, whereby the Respondent agreed to pay over to the seller, Ms. Philips, the sum of $500.00 "forthwith" might be inferred to constitute an immediate "demand" by the person entitled to the funds. The Respondent executed that release of deposit receipt document, thus, agreeing to immediately or within a reasonable time to pay the money to Ms. Philips. Thereafter, some five and one-half months elapsed before he actually made the payment. Consequently, it cannot be said that he promptly delivered, to the person entitled, the funds in question. Thus, the evidence does establish a violation of Subsection 475.25(1)(d)1, Florida Statutes.

    
    

22. It should be pointed out, however, that this is a "standard form release of deposit receipt" document; and although it references "escrow agent" and "deposit held in escrow" on the document, in fact, clear and convincing evidence has not been adduced which can establish that the Respondent actually held the funds in escrow, had received the funds in question from the buyers, the Brannons, and was actually functioning as an escrow agent in this particular situation because the record does not reveal that the funds ever actually were given to the Respondent. The Respondent, in an effort to avoid legal difficulties concerning the funds, voluntarily agreed to pay them over to Ms.

    Philips. Once he did that, however, he became obligated to pay them over immediately or within a brief, reasonable time, which he failed to do. Consequently, this violation has been established. The failure for some five and one-half months to pay the funds over to Ms. Philips has been established to constitute culpable negligence in the subject business transaction in this particular only.

    
    

23. It has also been established that the Respondent failed to preserve and make available to the Petitioner/agency

    all books, records, and supporting documents concerning all trust fund transactions (escrow account), together with such additional data as good accounting practice requires. Even though the Respondent maintains that he knew nothing of the receipt of the deposit funds in question and that he had closed his business in November of 1989 and that his escrow account had been likewise closed by the bank, he was still under an obligation to provide all of his escrow account records and any supporting documents to the Petitioner/agency so that it could be determined whether or not, by that means, any transactions with regard to the escrow account might have occurred which related to the real estate transaction in question. This the Respondent failed to do in a timely fashion although, in fairness to the Respondent, his testimony establishes in an unrefuted way that he had requested that the bank or banks involved make available the records concerning his escrow account but had not yet received them. It was not established at what point he actually requested such records of the banks, however. Consequently, the Respondent has violated Rule 21V-14.012(1), Florida Administrative Code, and, therefore, derivatively, Subsection 475.25(1)(e), Florida Statutes, which prescribes the violation of any lawful order or rule made or issued under the chapter.

    
    

24. It has additionally been established that the Respondent operated as a broker without being the holder of a valid and current license in violation of Subsection 475.42(1)(a), Florida Statutes, in that his licensure lapsed for a period of six days from March 31, 1989 to April 5, 1989. Thus, technically, he was unlicensed during this period of time but the mistake was shown to be an inadvertent one and the reason the licensure lapse occurred has not really been demonstrated. Because the lapse was inadvertent and it was not shown whether it was due to slow mailing time or, conversely, to a late filed application for renewal of license, no penalty is warranted for this violation.

    
    

25. Thus, in summary, it has been established that the Respondent is culpable in failing to promptly deliver the deposit funds back to the seller, Ms. Philips, in violation of Subsection 475.25(d)(1), Florida Statutes, and in violating Rule 21V- 14.012(1), Florida Administrative Code, by failing to making available to the Petitioner all books, records and supporting documents concerning his trust or escrow fund transaction. While it is true that the request from the Petitioner's investigator was a relatively narrow one in that he requested the Respondent provide "an audit trail reference the Philips to Brannon escrow deposit.", in reality, even if he did not know of such an escrow

deposit and had not received such a deposit, the Respondent could have provided his records to the Petitioner concerning his escrow account which would in effect speak for themselves and possibly reveal that either he had not received or deposited such funds or possibly that he had. The Respondent should have made these records available to the Petitioner within a reasonable time after the request which he did not do.

RECOMMENDATION

Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, and the candor and demeanor of the witnesses, it is therefore,

RECOMMENDED that a Final Order be entered by the Department of Professional Regulation, Division of Real Estate, finding that the Respondent, Richard Irwin Ray, has violated Subsection 475.25(1)(d)1, Florida Statutes, by failing to promptly deliver a deposit; finding that he is guilty of having failed to preserve and make available to the Petitioner all books, records and supporting documents concerning trust-fund transactions in violation of Rule 21V-14.012(1), Florida

Administrative Code, as well as Subsection 475.25(1)(e), Florida Statutes, and that he be accorded the penalty for these violations of a written reprimand and a $250.00 fine. Concerning his violation of Subsection 475.42(1)(a), Florida Statutes, and the consequent derivative violation of Subsection 475.25(1)(e), Florida Statutes, by operating for six days without a license, it is recommended that due to this inadvertent, technical licensure lapse that no penalty be imposed.

DONE AND ENTERED this 1st day of July, 1992, in Tallahassee, Leon County, Florida.

P. MICHAEL RUFF 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 2nd day of July, 1992.

COPIES FURNISHED:

Darlene F. Keller, Division Director Division of Real Estate

P.O. Box 1900

Orlando, FL 32802-1900

Jack McRay, Esq.

General Counsel

Department of Professional Regulation 1940 North Monroe Street

Tallahassee, FL 32399-0792

James Gillis, Esq. Department of Professional

Regulation

Division of Real Estate

400 West Robinson Street

P.O. Box 1900

Orlando, FL 32802-1900

Richard Irwin Ray

10013 Calle de Celestino Navarre, FL 32566

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: 91-006787

Orders for Case No: 91-006787