STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL ) REGULATION, BOARD OF AUCTIONEERS, )

)

Petitioner, )

)

vs. ) CASE NO. 92-3112

)

RONALD RAY KOOL, )

d/b/a A-PLUS AUCTIONS, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Mary Clark, held a formal hearing in the above- styled case on February 24, 1993, in Melbourne, Florida.

APPEARANCES

For Petitioner: Anthony Cammarata, Senior Attorney

Department of Professional Regulation 1940 North Monroe Street, Suite 60

Tallahassee, Florida 32399-0792

For Respondent: Joseph E. Miniclier, Esquire

1970 Michigan Avenue Building E Cocoa, Florida 32924-8248

STATEMENT OF THE ISSUES

As stipulated by the parties and as reflected in the Amended Administrative Complaint dated September 28, 1992 the issues for resolution are whether Respondent misrepresented property for sale at auction or made false promises concerning the use, value or condition of such property; whether this conduct demonstrates bad faith or dishonesty; whether Respondent failed to appropriately conduct and maintain control of the auction; and whether the Respondent used false bidders, cappers or shills. (Joint Prehearing Statement filed 9/28/92)

If those violations occurred, an appropriate penalty must be determined.

PRELIMINARY STATEMENT

The original administrative complaint is dated March 1, 1992, and was amended, by leave of the Hearing Officer, on September 28, 1992.

The case was scheduled for hearing and was continued, once when the prior Hearing Officer disqualified herself on motion by Respondent, and once again when the parties requested an opportunity to pursue settlement.

At the final hearing Petitioner presented the testimony of Herbert Michaels, Max Algase, Bobby Hunter, Ronald Ray Kool (Respondent) and Maurice Dawkins. Petitioner's exhibits #1-16 were received in evidence, including exhibit 14, a deposition of Respondent.

Respondent testified in his own behalf and presented the following: Shirley Thompson Effron, R. L. Huntsinger, Morris Branson, Jerry Mullins, Jennifer Kool, and Barbara Kool.

The transcript was filed on April 5, 1993, and the parties' proposed recommended orders followed on April 19, 1993. These have been carefully considered and specific rulings on the proposed findings of fact are found in the attached appendix.

FINDINGS OF FACT

1. Respondent, Ronald Ray Kool, Sr., (Kool) has been licensed continually as an auctioneer in the State of Florida since approximately 1988, having been issued license number AU 0000510. He is the registered owner of the business, A-Plus Auctions, which is issued license number AB 0000071.

   
   

2. On July 9, 1990, Respondent contracted with Dr. Florence Alexander for the conduct of an auction at the Ebon Center, in Titusville, Florida. The contract was renegotiated, and a subsequent written contract was entered between the parties on July 26, 1990, for the auction to be held on July 28, 1990. The latter contract provided that the auction was a reserve auction, that is, minimum bids were provided by Dr. Alexander for the items offered for sale.

   
   

3. Prior to the auction, on July 27, 1990, some items originally included in the list for the auction were sold by Ebon Galleries, and numerous other items were substituted. This was satisfactory to Kool as the potential commission on the substitute items was considerably larger. This transaction constituted an oral amendment by the parties.

   
   

4. As advertised, the auction commenced at 10:00 a.m., July 28, 1990 at the Ebon Center in Titusville. The goods for sale were on display and available for inspection by the bidders prior to, and during the auction in a large warehouse area where the auction was being held. The items were mostly oriental pots, vases, lamps, ceramic figures, mugs, frames, and other decorator pieces and bric-a-brac.

   
   

5. There were approximately 200-250 bidders. As they entered the auction area all bidders were given a perforated card to fill out. The lower portion included their name, address, phone number and assigned bidder identification number. This was detached and given to the auction clerk. The top portion was retained by the bidder and included the assigned bidder number and this text:

   
   

   1. EVERYTHING MUST BE PAID IN FULL ON THE DAY OF THE AUCTION regardless of when it is picked up.

   2. Everything will be sold "as is, where is", with no guarantees of any kind, regardless of statement of condition made from the auction block. Buyers shall rely entirely on their own inspection and information

   3. Every effort is made to "guard" merchandise throughout the auction; however,

      the bidder becomes solely responsible for all items purchased by him immediately following his winning bid. Therefore, he is advised to further guard his items at his own discretion.

   4. The Bidder is responsible for knowing which items he is bidding on. If he is unsure, he should inquire or not bid. When you become the winning bidder at auction you have effected a contract and will be expected to pay for items in which you were evidenced to be the successful bidder. Auctioneer will not honor "mistakes".

   5. The Auctioneer reserves the right to accept bids in any increment he feels is in the best interest of his client, the seller. The Auctioneer reserves the right to reject the bidding of any person whose conduct, auctions, or adverse comments he feels are not in the best interest of the seller.

      
      

      (Petitioner's Ex. #14, deposition of Kool, ex. 6 to deposition)

      
      

   6. At the commencement of the auction Kool announced various ground rules or terms of the auction, including the fact that this was not an absolute auction, that bidders had an obligation to inspect merchandise because they were responsible for what they bought and that there was a ten percent buyer's premium on the sales. "Buyer's premium" is a surcharge on the bid price, which surcharge is received by the auctioneer, along with his commission from the seller.

      
      

      Kool also introduced his employees and informed the gathered bidders that he and his employees would bid if they wished and the bidders would know when employees were bidding. Kool and his employees were assigned bidder numbers 502 through 509. The male employees wore gray slacks and gray shirts with "A-Plus Auctions" embroidered on the shirts. The women employees wore blue dresses with "A-Plus Auctions" inscribed. The employees were up front working behind the table and in front of the auctioneer. When they bid, they raised their hands like anyone else.

      
      

   7. Max Algase and Herbert Michaels arrived at the auction just as the introduction was being completed. Max Algase was assigned bidder number 569 and received the card described above. Max Algase describes himself as a "liquidator"; he buys and sells merchandise, including entire stores or chains of stores and occasionally attends auctions.

      
      

      Herbert Michaels is a good friend and sometimes business associate of Algase. Michaels is on disability retirement from Zayre's Department Stores, where he was merchandise manager for twenty years and was responsible for twenty-eight stores' apparel, comprising $85 million in sales.

      
      

   8. At some point during the auction, Shirley Thompson (now Shirley Thompson Effron) sat down next to the two men and introduced herself. The three individuals decided to form a partnership, each putting up a third for the purchases at the auction, and then reselling the items later in a shop that they would open for that purpose. Algase considered the venture "a lark" rather than a serious business deal. (Transcript, p. 51)

   9. So many purchases were made by bidder number 569 (Algase, or Liquidators III, the ad hoc partnership) that during the course of the auction, the computer program utilized by Kool ran out of data space for that number, and another number, 626, was assigned.

      
      

   10. During the auction the seller, Dr. Alexander obtained bidder number 604 and she purchased three items. When Kool recognized her as a purchaser, he turned the auction block over to another auctioneer and confronted Dr. Alexander, telling her that it was inappropriate for her to bid. The items she had purchased were put back up for sale.

       
       

   11. Towards the end of the auction, Dr. Alexander approached Kool and asked about placing some racks of clothing up for sale. He agreed, reluctantly, because clothing sales are time-consuming, and the racks of clothes were wheeled out to the warehouse floor.

       
       

       The clothes were in two categories, one group was a large number of heavy woolen items, coats, capes, jackets, suits and the like; the other, smaller group was mostly lightweight dresses, bathing suits and similar items.

       
       

   12. Kool announced the clothes would be placed for sale and invited the bidders to go look at them. About five or ten minutes later bidding started on the items, "bidders choice". That means the individual who bid highest would get the first choice of the multiple items. The reserve, or lowest bid acceptable, was $75.00 each. After ten or fifteen minutes, only a few items had been sold and Kool told Dr. Alexander to remove them from the floor. She and her father wheeled the racks back into the front showroom of the building.

       
       

   13. One of the participants interested in the clothing was Herbert Michaels. He inspected the racks, felt and touched the clothing and convinced Algase that the items were well worth $35.00 a piece. The partners bought the woolen items for $35.00 each, and the lighter items at $10.00 each.

       
       

       All three partners have a different version of how the sale took place.

       Herbert Michaels claims that Kool, while off the auction block, negotiated the sale with Max Algase and Shirley Thompson Effron; Max Algase claims that after the woolen items were offered at "bidders choice", they were offered from the block at "bidder take all", and he won the bid at $35.00 apiece. Shirley Thompson Effron claims that after the clothing was removed from the floor, Dr. Alexander approached their group and negotiated the sale with Max Algase.

       
       

       The latter version is consistent with Kool's testimony and that of his other witnesses and is credited.

       
       

   14. The latter version is also consistent with a tally sheet identified by Kool as a paper brought to him by Dr. Alexander approving the transaction. (Petitioner's Ex. 14, Kool deposition, exhibit 6 to the deposition)

       
       

   15. During the clothing deal, Algase, Herbert Michaels and Shirley Thompson Effron went to the showroom while Kool's employees counted the items. There were 550 woolen items and 88 lighter items, with a total cost of

       $19,250.00 for the former and $880.00 for the latter. The counts are reflected on the tally sheet given to Kool.

       
       

   16. Algase paid for these and other items purchased at the auction with a check. Later, he made arrangements with Mrs. Kool to substitute cash and he did

       so on Tuesday of the following week, when he had all of the clothing loaded into large trucks for removal from the Ebon Center.

       
       

   17. The Liquidators III venture was not successful. Few of the items were resold as they had hoped. The relationship between Shirley Thompson Effron and Max Algase deteriorated and he is suing her husband's corporation.

       
       

       On November 7, 1990, Shirley Thompson Effron, as secretary of the partnership, and at the insistence of Max Algase, sent a letter to Ron Kool complaining that they bargained for, and bought, coats, but that more than half of the items were dresses, suits or skirts. The letter demanded "full restitution immediately". (Petitioner's Ex. 11)

       
       

   18. In March 1991, Algase complained to the Department of Professional Regulation, and Investigator Bobby Hunter conducted interviews and gathered documents, including the records maintained by A-Plus Auctions for the July 1990 auction.

       
       

   19. Those records reflect the bidder number 500 for many items, with a "0" final settlement price. That is a number assigned by Mrs. Kool, a licensed auctioneer and the business manager for the company, to account for items which were offered for sale but did not reach the minimum bid set by the seller, Dr. Alexander.

       
       

       Bidder numbers assigned to A-Plus employees show purchases of several items, mostly small, less than $10.00, the largest amount being $40.00.

       
       

   20. The records also reflect that the 550 woolen items bought by Algase and his partners are described as "coats" on the final settlement printout. This description was assigned by an employee of A-Plus Auctions when the items were offered for sale.

       
       

       There is no credible evidence that Kool described the items from the auction block as only coats. Rather, he described woolen clothing, including alpaca coats from Central or South America. Herbert Michaels conceded that he knew the items were not all coats before the sale was made because he had inspected the racks on the floor. He found capes as well as coats, and tops to ensembles. (Transcript, p. 34)

       
       

   21. Several expert auctioneers testified on behalf of the parties, one on behalf of Petitioner and two for the Respondent, with a combined experience of

       62 years in auctioneering.

       
       

       Their opinions did not vary substantially. They expressed concern with the fact that the owner, Dr. Alexander, managed to bid on several lots, but they agreed that Kool handled the problem properly after he discovered it.

       
       

       They also agreed that side deals like the one involving the clothing deprive the general public of an opportunity to participate, but they are not illegal so long as records are kept and funds, including the commission, are disbursed and accounted for.

       
       

   22. The experts described the practice, more common in the past than now, of "dropping on the house number". An auctioneer can falsely raise bids by acknowledging a phony bid. If the phony bid is not raised, the auctioneer is

       stuck with it and announces the sale to a "house number", not associated with any real bidder, but in the words of R. L. Huntsinger, bid by "Mr. Wall", "Mr. Floor", "Mr. Ceiling", etc.

       
       

       The appearance of the number 500 without a bidder identified, in Kool's records of the auction, raised the suspicion that this illegal practice was used. Respondent and his witnesses adequately explained why the number was used, however, to account for items that did not reach the reserve minimum bid. Even Petitioner's expert conceded that he could not say that the practice was used in this case. (Transcript, p. 180)

       
       

   23. Petitioner's expert also opined that any errors committed by Respondent were due to lack of knowledge and not because of an intent to defraud the public or the seller. (Transcript, p. 193)

       
       

   24. The weight of evidence, taking into consideration the demeanor and credibility of the witnesses, fails to support a finding that Respondent Kool committed the violations alleged. He did not misrepresent the property being sold. The clothing was described as such, and not as only "coats". The complainants, sophisticated and experienced business people, had an opportunity to inspect the items and knew what they were buying.

       
       

       There is no evidence of bad faith or dishonesty and the evidence presented by Respondent effectively forecloses a finding that he used or permitted the use of false bidders.

       
       

   25. Although Max Algase was not required to re-register when he was assigned a subsequent number, the records produced at hearing confirm the testimony of Mrs. Kool that Algase was bidder number 626.

       
       

   26. The auction on July 28, 1990 was an all-day affair with a high volume of goods to be moved. As principal auctioneer, Kool was in charge and maintained control. He hired experienced, competent employees and utilized only licensed auctioneers in calling the bids. Certain tasks were appropriately delegated to his wife, also a licensed auctioneer. Recordkeeping was thorough and substantially accurate.

       
       

       While Respondent regrets that the seller, Dr. Alexander, was given a bidder number and managed to bid, her participation, as concluded below, is not prohibited.

       
       

       CONCLUSIONS OF LAW

       
       

   27. The Division of Administrative Hearings has jurisdiction in this proceeding pursuant to Sections 120.57(1) and 455.225, F.S.

       
       

   28. Section 468.389(1), F.S. provides in pertinent part:

       
       

       468.389 Prohibited acts; penalties.--

       1. The following acts shall be grounds for the disciplinary activities provided in subsections (2) and (3):

          * * *

          (b) Misrepresentation of property for sale at auction or making false promises concerning the use, value, or condition of such property by an auctioneer or auction business or by

          anyone acting as an agent of or with the consent of the auctioneer or auction business.

          * * *

          1. Any conduct in connection with a sales transaction which demonstrates bad faith or dishonesty.

          2. Using or permitting the use of false bidders, cappers, or shills.

          * * *

          (j) Violating a statute or administrative rule regulating-practice under this part or a lawful disciplinary order of the board or the department.

          * * *

          
          

   29. These are the violations with which Respondent is charged in this proceeding.

       
       

   30. Respondent is also charged with violation of Rule 21BB-5.001(2), F.A.C., which provides as follows:

       
       

       21BB-5.001 Requirements for Conducting an Auction.

       1. A principal auctioneer shall be designated for each auction. The principal auctioneer is the licensed auctioneer or apprentice who has accepted responsibility for all aspects of the auction, including contract negotiations, advertising, auction organization and layout, bid calling, merchandise distribution and final settlement

       with the seller. The principal auctioneer may delegate in whole, or in part, different aspects of the auction, only to the extent that such delegation is permitted by law and that such delegation will not impede the principal auctioneer's ability to assure the proper conduct of his independent responsibility for the auction. Bid calling may only be delegated to a licensed auctioneer or licensed apprentice.

       
       

   31. Petitioner must prove the allegations of its complaint by evidence that is "clear and convincing". Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987). This standard is described in a case cited by Petitioner:

       
       

       ...a workable definition of clear and convincing evidence must contain both qualitative and quantitative standards. We therefore hold that clear and convincing evidence requires that the evidence must be found to be credible; the facts to which the witnesses testify must be distinctly remembered; the testimony must be precise and explicit and the witnesses must be lacking in confusion as to the facts in issue. The evidence must be of such weight that it

       produces in the mind of the trier of fact a firm belief or conviction, without hesitancy, as to the truth of the allegations sought to be established.

       
       

       Slomowitz v. Walker, 429 So. 2d 797, 800 (Fla. 4th DCA 1983)

       
       

   32. Petitioner has failed to meet its burden of proof. The testimony of all of the experts was informative and credible. They described preferences in their professional practices and found some minor mishaps in Kool's conduct of the auction, but no expert established a violation of the above-cited laws and rule by Respondent.

       
       

   33. Rule 21BB-5.001(3)(f), F.A.C. requires that the auctioneer "[a]nnounce at the beginning of the auction the terms of bidding and sale... ." Kool did that, and introduced his employees with the explanation they would be permitted to bid. Their bids were not, therefore, "false" or "dishonest".

       
       

   34. Bidding by a seller or owner is widely disapproved, but no one in this proceeding has cited a rule or statute prohibiting the practice in all circumstances. Rule 21BB-5.001(3)(g), F.A.C. provides:

       
       

       (g) If an auction has been advertised as absolute, no bid shall be accepted from the owner of the property or from someone acting on behalf of owner unless the right to bid is specifically permitted by law.

       
       

   35. Rule 21BB-8.020, F.A.C. defines "absolute auction" as "...an auction which requires no minimum opening bid which limits the sale other than to the highest bidder."

       
       

   36. The July 28, 1990 auction was "reserve", with minimum bids set by the owner, and was not an absolute auction in which bidding by the owner is prohibited by the rule.

RECOMMENDATION

Based on the foregoing, it is, hereby, RECOMMENDED:

That a final order be entered finding no violation by Respondent and dismissing the amended administrative complaint.

DONE AND RECOMMENDED this 24th day of May, 1993, in Tallahassee, Leon County, Florida.

MARY CLARK

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 24th day of May, 1993.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-3112

The following are specific rulings on the findings of fact proposed by the parties:

Petitioner's Proposed Findings 1.-2. Adopted in paragraph 1.

1. Adopted in paragraph 2.

2. Rejected as irrelevant.

3. Included in paragraph 3.

4. Rejected as irrelevant.

5. Adopted in paragraph 4.

6. Rejected as irrelevant (see paragraph 3.)

7. Rejected as irrelevant.

8. Included in paragraph 9.

9. Adopted in paragraph 8.

12.-14. Rejected as unnecessary. The clothing was not described at auction as only coats.

1. Rejected as contrary to the weight of evidence. (see 12-14, above)

2. Rejected as unnecessary.

3. Adopted in paragraph 11. 18.-19. Adopted in paragraph 12.

1. Rejected as unnecessary, but addressed by implication in paragraph 21.

2. Adopted in paragraph 13.

3. Adopted in paragraph 14.

4. Adopted in paragraph 13. and 14.

5. Addressed in paragraph 21, but the implication of illegality is rejected as contrary to the law and rules.

6. Rejected as irrelevant.

7. Adopted in paragraph 16.

8. Rejected as unnecessary.

9. Adopted in summary in paragraph 16.

10. Rejected as contrary to the weight of evidence. 30.-31. Rejected as irrelevant, and contrary to the weight

of evidence.

1. Adopted in paragraph 17.

2. Rejected as contrary to the weight of evidence and a misstatement of the expert's testimony. The witness was responding to a hypothetical question.

34.-35. Adopted in paragraph 6.

36. Addressed in paragraphs 21. and 26. 37.-44. Rejected as unnecessary.

45. Adopted in paragraph 10. 46.-50. Rejected as immaterial.

51. Rejected as contrary to the weight of evidence. "Control" also means delegation to competent staff. See Rule 21BB-5.001(2), F.A.C.

52.-55. Rejected as irrelevant. These proposed facts do not relate to any alleged violation of statute or rule.

Respondent's Proposed Facts

1. Rejected as unnecessary.

2. Adopted in paragraph 26.

3. Rejected as unnecessary; included by implication in paragraph 24.

COPIES FURNISHED:

Anthony Cammarata, Senior Attorney Department of Professional Regulation 1940 North Monroe Street, Suite 60

Tallahassee, Florida 32399-0792

Joseph E. Miniclier, Esquire 1970 Michigan Avenue Building E

Cocoa, Florida 32924-8248

Jack McRay, General Counsel Department of Professional Regulation 1940 North Monroe Street, Suite 60

Tallahassee, Florida 32399-0792

Suzanne Lee, Executive Director Department of Professional Regulation Board of Auctioneers

1940 North Monroe Street, Suite 60

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: 92-003112

Orders for Case No: 92-003112