STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL ) REGULATION, FLORIDA REAL ) ESTATE COMMISSION, )

)

Petitioner, )

)

vs. ) CASE NO. 92-0105

)

RICHARD L. FAIRCLOTH, )

)

Respondent. )

)

RECOMMENDED ORDER

This matter came on for hearing in Gainesville, Florida, before Robert T. Benton, II Hearing Officer of the Division of Administrative Hearings, on May 20, 1992. Proposed findings of fact in petitioner's proposed recommended order have largely been adopted, in substance, insofar as material.

APPEARANCES

For Petitioner: Janine B. Myrick

P.O. Box 1900 Orlando, FL 33802

For Respondent: Pro Se

STATEMENT OF THE ISSUE

Whether petitioner should take disciplinary action against respondent for the reasons alleged in the administrative complaint?

PRELIMINARY STATEMENT

By administrative complaint dated October 30, 1991, petitioner Department of Professional Regulation (DPR) alleged that respondent Richard L. Faircloth, "at all times material . . . a licensed real estate salesperson in the State of Florida," received $500 from a would-be purchaser of certain real estate, and later, together with his wife, herself a real estate broker, and Discount Realty Florida, Inc., a corporate broker with whom they were both affiliated, "an additional $1,466 earnest money deposit"; that, approximately a year later, "the Wilsons [who had earlier deposited earnest money] verbally entered into a month-to-month agreement to rent an apartment from the Respondent for $450/month,"; but made "no mention of a security deposit"; that, also in "February 1991, the Respondents did issue a check in the amount of $200.00 to the Wilsons . . . [which] was to be deducted from the $1,996.00 paid to the Respondents as an earnest money deposit"; that on "or about April 17, 1991, the Respondents did issue check #454 in the amount of $1,316.00 to the Wilsons . . . [but] retained . . . $450.00 from the $1,466.00 earnest money deposit as a 'security deposit' . . . [and] have refused to return any additional funds"; on

account of all of which Mr. Faircloth "is guilty of fraud, misrepresentation, concealment, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence or breach of trust . . . in violation of Subsection 475.25(1)(b), Florida Statutes"; that he "failed to account and deliver a deposit in violation of Subsection 475.25(1)(d)1, Florida Statutes"; that he "failed to maintain trust funds in . . . escrow . . . until disbursement was properly authorized in violation of Subsection 475.25(1)(k), Florida Statutes"; and that he "delivered a deposit to the other party to a transaction before the transaction closed in violation of Rule 21V-14.011, Florida Administrative Code and . . . Subsection 475.25(1)(e), Florida Statutes."

As originally drawn, the administrative complaint named not only Richard L. Faircloth, but Lise H. Faircloth and Discount Realty Florida, Inc., as well.

Only Mr. Faircloth requested formal administrative proceedings, however. His request was forwarded to the Division of Administrative Hearings in accordance with Section 120.57(1)(b)3., Florida Statutes (1991).

FINDINGS OF FACT

1. At all pertinent times, respondent Richard L. Faircloth has held a real estate salesman's license, No. SL 0407933, issued by petitioner Department of Professional Regulation, Division of Real Estate, authorizing him to work, since July 16, 1990, as a salesman for Discount Realty-Fla., Inc., a corporate broker in Alachua, Florida, whose "qualifying broker" is respondent's wife, Lise H. Faircloth. Petitioner's Exhibit No. 1.

   
   

2. On December 1, 1990, Alvin and Betty J. Wilson came to Mr. Faircloth's office in Alachua to sign a form deposit receipt and purchase and sale agreement, Petitioner's Exhibit No. 2, by which they offered to purchase a house on Northwest 18th Terrace in Gainesville; and they gave Mr. Faircloth five hundred dollars in cash, as earnest money.

   
   

3. Mr. Faircloth did not recall at hearing whether he put the money in his pocket at that point, but the money was never deposited in an escrow or trust account. After Mr. and Mrs. Wilson left, Mr. Faircloth communicated their offer by telephone to a representative of the house's owner. The offer was declined.

   
   

4. When he telephoned the Wilsons with the news, he asked them to come back to his office. With their return later that day, a conversation lasting about an hour and a half began, at the end of which the Wilsons authorized respondent and his broker to retain the earnest money deposit for use in the event respondent located another house they decided to make an offer to purchase.

   
   

5. For the same purpose, Mrs. Wilson later wrote respondent a check in the amount of $1,500, which was duly deposited in the broker's escrow account. Shortly thereafter, respondent drew a check on the escrow account in Mr. Wilson's favor in the amount of $200 (so he could pay an electric bill), but the bank refused to cash it. Funds in the escrow account were insufficient, because the Wilsons' $1,500 check had bounced.

   
   

6. Mr. Faircloth also wrote a check the Wilsons used as a deposit when they rented a truck to move into a duplex they rented from him. The deposit check was ultimately returned to respondent, without being cashed. (When the Wilsons moved, respondent regained possession of the dog he had earlier given the Wilsons' son. He was never reimbursed $78 he expended for the care and

   feeding of this dog, after it had become the Wilsons' property.) The Wilsons paid $450 a month, in advance, while they rented the duplex, and nobody ever asked for a security deposit.

   
   

7. When Mrs. Wilson received a check from Beneficial National Bank (who lent money against an anticipated tax refund) in the amount of $1,466, Petitioner's Exhibit No. 5, she endorsed it in favor of respondent or the broker and, as far as the evidence showed, this money was put in escrow (although $200 might have been deducted beforehand.) In any event, respondent transferred $200 to the Wilsons more or less contemporaneously. Altogether, the Wilsons entrusted respondent with $1,776 ($500 + $1466 - $200 = $1,766) for possible use as earnest money.

   
   

8. After Mr. and Mrs. Wilson bought a house respondent had shown them in December of 1990, but through another broker's office, without availing themselves of Mr. Faircloth's assistance in closing the transaction, they asked him to return the money they had given him. He gave them a check signed by his wife, drawn on a Discount Realty-Fla., Inc. account in the amount of $1,316, on which was written "return of deposit less 450 00/100 security." Petitioner's Exhibit No. 6. The check was dated April 17, 1991.

   
   

9. At hearing, Mr. Faircloth testified that the $1,316 check to the Wilsons represented a $50 overpayment. He conceded that $450 had been improperly deducted from the moneys the Wilsons paid, as a claimed security deposit. But he contended that he and the Wilsons had agreed to a non- refundable, $500 "finder's fee" during their second visit on December 1, 1990.

   
   

10. In fact, the Wilsons never agreed to any finder's fee, non-refundable or otherwise. At the time it was received, respondent and his wife gave two receipts for the Wilsons' $500. Each reflected that it was to be deposited as earnest money, and no subsequent writing indicated any different agreement between the parties. As late as April of 1991, respondent's conduct, notably delivery of the $1,316 check to the Wilsons, was inconsistent with the putative agreement about a finder's fee he testified to at hearing.

    
    

    CONCLUSIONS OF LAW

    
    

11. Since DPR referred respondent's hearing request to the Division of Administrative Hearings, in accordance with Section 120.57(1)(b)3., Florida Statutes (1990 Supp.), "the division has jurisdiction over the formal proceeding." Section 120.57(1)(b)3., Florida Statutes (1990 Supp.).

    
    

12. License revocation proceedings have been said to be "'penal' in nature." State ex rel. Vining vs. Florida Real Estate Commission, 281 So.2d 487, 491 (Fla. 1973); Kozerowitz vs. Florida Real Estate Commission, 289 So.2d

    391 (Fla. 1974); Bach vs. Florida State Board of Dentistry, 378 So.2d 34 (Fla. 1st DCA 1979) (reh. den. 1980). Strict procedural protections apply in disciplinary cases, and the prosecuting agency's burden is to prove its case clearly and convincingly. Ferris vs. Turlington, 510 So.2d 292 (Fla. 1987).

    See Addington vs. Texas, 441 U.S. 426 (1979); Ferris vs. Austin, 487 So.2d 1163 (Fla. 5th DCA 1986); Anheuser-Busch, Inc. vs. Department of Business Regulation,

    393 So.2d 1177 (Fla. 1st DCA 1981); Walker vs. State Board of Optometry, 322 So.2d 612 (Fla. 3rd DCA 1975); Reid vs. Florida Real Estate Commission, 188 So.2d 846, 851 (Fla. 2nd DCA 1966). A licensee's breach of duty justifies revocation only if the duty has a "substantial basis," Bowling vs. Department of

    Insurance, 394 So.2d 165, 173 (Fla. 1st DCA 1981) in the evidence, unless applicable statutes and rules create a clear duty, which the evidence shows has been breached.

    
    

13. The Florida Real Estate Commission may, in accordance with Section 475.25(1), Florida Statutes (1991)

    
    

    place a licensee, . . . registrant, or permittee on probation; may suspend a license, certification, registration, or permit for a period not exceeding 10 years; may revoke a license, certification, registration, or permit; may impose an administrative fine not to exceed $1,000 for each count or separate offense; and may issue a reprimand, and any or all of the foregoing, if it finds that the licensee, certified appraiser, registrant, permittee, or applicant:

    
    

    . . .

    
    

    (b) Has been guilty of fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme, or device, culpable negligence, or breach of trust in any business transaction in this state or any other state, nation, or territory; has violated a duty imposed upon him by law or by the terms of a listing contract, written, oral, express, or implied, in a real estate transaction; has aided, assisted, or conspired with any other person engaged in any such misconduct and in furtherance thereof; or has formed an intent, design, or scheme to engage in any such misconduct and committed an overt act in furtherance of such intent, design, or scheme. It is immaterial to the guilt of the licensee that the victim or intended victim of the misconduct has sustained no damage or loss; that the damage or loss has been settled and paid after discovery of the misconduct; or that such victim or intended victim was a customer or a person in confidential relation with the licensee or was an identified member of the general public.

    
    

    . . .

    
    

    1. 1. Has failed to account or deliver to any person, including a licensee under this chapter, at the time which has 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 property such as money, fund, deposit, check, draft, abstract of title, mortgage, conveyance, lease, or other document or thing of value, including a share of a real estate commission, if a civil judgment has been obtained and not satisfied in accordance with the terms of the judgment, or any secret or illegal profit, or any divisible share or portion thereof, 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. However, if the licensee, in good faith, entertains doubt as to what person is entitled to the accounting and delivery of the escrowed property, or if conflicting demands have been made upon him for the escrowed property, which property he still maintains in his escrow or trust account, the licensee shall promptly notify the commission of such doubts or conflicting demands and shall promptly:

       
       

       . . .

       
       

    2. Has violated any of the provisions of this chapter or any lawful order or rule made or issued under the provisions of this chapter or chapter 455.

    
    

    . . .

    
    

    (k) Has failed, 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; or has failed, if a salesman, 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. The commission shall establish rules to provide for records to be maintained by the broker and the

    manner in which such deposits shall be made.

14. The specific rule which respondent is alleged to have violated, Rule 21V-14.011, Florida Administrative Code, entitled "Rights of Broker in Deposits," provides:

No broker who receives a deposit shall have any right to or lien upon said deposit, except upon the written agreement or order of the depositor so long as the depositor has sole control of said deposit, nor until the transaction involved has been completely closed, and no person has any claim thereto except the party ultimately to receive the

same, in which case the broker may deduct his agreed commission therefrom, unless the amount or time of payment thereof is disputed. In case of a dispute as to the amount of the commission, or the time of payment thereof, the broker may retain the amount only of his claim in said account and in trust, until the dispute shall be settled by agreement, arbitration or court proceedings, as provided for in Section 475.25(1)(d), Florida Statutes. A depositor had the right to demand return of a deposit until such time as another party has

acquired some interests or equity therein, subject to the right to make an express agreement to compensate the broker for his time and expense incurred prior to a demand for the return of the deposit; and such right to demand to return of the deposit shall again accrue upon a breach by the other party of the contract or agreement under which it is held, or the expiration of the time fixed or a reasonable time, for performance of the things necessary to fix the exclusive right of such other party to said deposit. A broker shall not deliver the deposit to the other party to the transaction until such transaction is finally closed, except as otherwise directed or agreed to specifically by the depositor. The interested parties involved, other than the broker may by express agreement, alter the disposal of the deposit from that herein stated, but the burden shall be on the broker to establish his good faith in the matter if such agreement is to his advantage and he shall recognize and comply with the joint directions of said parties in such cases, except where the parties act in bad faith with intent to deprive him of his

commission, in which case he shall proceed as provided in Section 475.25(1)(d).

Here petitioner has adduced clear and convincing proof of dishonest dealing by the respondent, in violation of Section 475.25(1)(b), Florida Statutes (1991),

of respondent's failure to deliver money due to the Wilsons when demanded, in violation of Section 475.25(1)(d)1., Florida Statutes (1991), of respondent's retention of a deposit based solely on a claimed parol agreement, in violation of Section 475.25(1)(e), Florida Statutes (1991) and Rule 21V-14.011, Florida Administrative Code, and of respondent's failure to place deposit money with his registered employer or in his broker's escrow account, in violation of Section 475.25(1)(k), Florida Statutes (1991).

RECOMMENDATION

It is, accordingly, RECOMMENDED:

That petitioner suspend respondent's license for one year.

DONE and ENTERED this 14 day of August, 1992, in Tallahassee, Florida.

Copies furnished to: Janine Myrick, Esquire

P.O. Box 1900 Orlando, FL 33802

Richard L. Faircloth Post Office Box 1859 Alachua, FL 32615

Jack McRay, General Counsel Department of Professional

Regulation

1940 North Monroe Street Tallahassee, FL 32399-0792

ROBERT T. BENTON, II

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 14 day of August, 1992.

Darlene F. Keller, Division Director Division of Real Estate

400 W. Robinson Street

P.O. Box 1900

Orlando, FL 32802-1900

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. 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: 92-000105

Orders for Case No: 92-000105