STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL ) REGULATION, DIVISION OF )

REAL ESTATE, )

)

Petitioner, )

)

vs. ) CASE NO. 92-7543

)

HENRY M. WEISS, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to written notice, a formal hearing was held in this case before Errol H. Powell, a duly designated Hearing Officer of the Division of Administrative Hearings, on March 10, 1993, in Fort Lauderdale, Florida.

APPEARANCES

For Petitioner: James H. Gillis, Esquire

Department of Professional Regulation

Division of Real Estate Hurston Building, North Tower

400 West Robinson Street Orlando, Florida 32801-1772

For Respondent: Henry M. Weiss, pro se

5100 Dupont Boulevard

Fort Lauderdale, Florida 33308 STATEMENT OF THE ISSUE

The ultimate issue for determination at formal hearing was whether Respondent committed the offenses set forth in Petitioner's administrative complaint, and if so, what disciplinary action should be taken against Respondent's real estate license.

PRELIMINARY STATEMENT

On October 22, 1992, the Department of Professional Regulation, Division of Real Estate, hereinafter Petitioner, filed an administrative complaint dated October 21, 1992, against Henry M. Weiss, hereinafter Respondent. Petitioner alleged in the administrative complaint that Respondent had violated Subsection 475.25(1)(b), Florida Statutes, by being guilty of fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence, or breach of trust in a business transaction; Subsection 475.25(1)(d)1, Florida Statutes, by being guilty of having failed to account or deliver a deposit; and Subsection 475.25(1)(k), Florida Statutes, by

being guilty of having failed to maintain trust funds in the real estate brokerage escrow bank account or some other proper depository until disbursement thereof was properly authorized.

On November 11, 1992, Respondent executed an election of rights requesting a formal hearing. The matter was referred to the Division of Administrative Hearings for assignment of a Hearing Officer on December 30, 1992. A formal hearing was scheduled on March 10, 1993, pursuant to Notice of Hearing dated January 28, 1993.

At the formal hearing Petitioner entered 17 exhibits without objection by Respondent. Respondent entered one exhibit without objection by Petitioner. No other exhibits were admitted into evidence. Petitioner presented the testimony of three witnesses. Respondent testified in his own behalf. Petitioner and Respondent entered into a prehearing stipulation on material facts.

No transcript of the formal hearing was ordered. Both parties timely submitted proposed findings of fact and conclusions of law. 1/

FINDINGS OF FACT

1. Petitioner is the state licensing and regulatory agency charged with the responsibility and duty to prosecute administrative complaints filed pursuant to Chapters 455 and 475, Florida Statutes, and rules promulgated pursuant thereto.

   
   

2. Respondent is a Florida licensed real estate broker and has been at all times material hereto, having been issued license number 0094373.

   
   

3. On or about October 18, 1991, a contract to purchase real estate was entered into by Michael E. Toppin and Velma Richardson, as buyers, with Steven and Kenneth Halpern, as sellers. In accordance with the terms of the contract, an earnest money deposit of $3,000 was given to Respondent to be placed in escrow. The deposit was paid by Ms. Richardson in two checks: one for $1,000 on October 15, 1991, and one for $2,000 on October 29, 1991.

   
   

4. The contract did not close because the buyers failed to qualify for sufficient financing, which was a contingency of the contract. Since the contract did not close, Ms. Richardson and Mr. Toppin requested Respondent to return the $3,000 earnest money deposit, but Respondent refused. Ms. Richardson and Mr. Toppin contacted Petitioner for assistance in obtaining the return of the deposit.

   
   

5. Respondent was unsure as to who--the buyers or the sellers--should receive the earnest money deposit, so he requested, pursuant to Section 475.25(1)(d), Florida Statutes, the Florida Real Estate Commission to issue an escrow disbursement order. In an order, dated May 20, 1992, the Commission ordered Respondent to disburse the earnest money deposit to the buyers, Mr. Toppin and Ms. Richardson.

   
   

6. In accordance with the Commission's order, Respondent issued a $3,000 check, dated June 3, 1992, from his escrow account to the buyers.

   
   

7. The buyers endorsed the check and deposited it into Ms. Richardson's account on or about June 8, 1992. The check was returned for non-sufficient funds in Respondent's escrow account.

8. Ms. Richardson contacted Respondent about the returned check. Respondent immediately contacted his bank and deposited sufficient funds to cover the returned check. Respondent failed to contact Ms. Richardson to inform her that sufficient funds were now in the escrow account.

   
   

9. Ms. Richardson wanted to be certain that the check would be processed the second time around, so she waited a few days before re-depositing it. On or about June 18, 1992, Ms. Richardson re-deposited the returned check. This time the check cleared.

   
   

10. Respondent's escrow account statements reveal that the buyers' checks for $1,000 and $2,000 were deposited into his escrow account on October 15, 1991, and October 29, 1991, respectively--the same day he received them. 2/ However, at no time, during the month of October 1991, did Respondent's escrow account have a balance of $3,000.

    
    

    During October 1991, Respondent made cash withdrawals from his escrow account totalling $975.00, all for personal use. 3/ Also, he paid personal obligations from his escrow account totalling $429.30.

    
    

    At the end of October 1991, Respondent's escrow account had a balance of

    $2,174.89. Consequently, the escrow account had a shortage of $825.11, as it relates to the $3,000.

    
    

11. In November 1991, Respondent's escrow account had activity of six transactions. There were cash withdrawals totalling $2,000, and only twice was the daily balance $3,000 or above.

    
    

12. In December 1991, Respondent's escrow had again six transactions of activity, with only one cash withdrawal of $300. Furthermore, Respondent withdrew $1,404.30 for his personal use. The escrow account's daily balance was below $3,000 for three of the six transactions.

    
    

13. In January 1992, there were three transactions, including a cash withdrawal of $125. No daily balance was below $3,000 for this month.

    
    

14. In February 1992, six transactions were made. Cash withdrawals were made totalling $650. 4/ For February, no daily balance was below $3,000.

    
    

15. In March 1992, only two transactions were made. Respondent's escrow account had a cash withdrawal of $320. March contained no daily balance below

    $3,000.

    
    

16. From April 1992 through June 1992, Respondent's escrow account had a daily balance consistently below $3,000. In April 1992, Respondent's escrow account had four transactions, with a cash withdrawal of $1,100.

    
    

    In May 1992, there were five transactions, with cash withdrawals totalling

    $350.

    
    

    In June, the month that the Respondent wrote Ms. Richardson a $3,000 check from the escrow account, 13 transactions were made and the daily balance was above $3,000 only on three of the transactions. At the end of June 1992, Respondent's escrow account had a negative balance of $406.87.

    
    

17. At the end of July 1992, Respondent's escrow account had a positive balance of $11.13. Only three transactions were made for the month.

18. At all times material hereto, Respondent was the only authorized signatory for the escrow account.

    
    

19. Respondent admitted that at no time did he prepare and sign written monthly reconciliation statements comparing his total trust liability with the reconciled bank balances even though he was aware that he was required to make the reconciliation statements. The Hearing Officer does not find persuasive Respondent's argument at hearing that he also believed that there were sufficient monies in the accounts at all times equalling escrowed amounts. The escrow bank's monthly statements clearly showed, if Respondent had reviewed them, that the escrow account was for several months below the escrowed amount of $3,000.

    
    

20. At all times material hereto, Respondent did not have an operating account for his real estate business. He believed that he could withdraw funds from the escrow account for his personal use if the funds withdrawn were due him in accordance with real estate contracts or agreements. 5/ Respondent did not believe that he had to or was required to transfer those monies due him to a separate account and write checks from that separate account.

    
    

21. Respondent has been licensed for approximately 20 years and has had no disciplinary action taken against his license.

    
    

22. Respondent presented mitigating circumstances in his behalf. He explained the period of time material hereto as very stressful and as a time in which real estate was not a primary concern for him. Around May 1991, his sister had a reoccurrence of cancer. His sister and his mother who had Alzheimers disease lived together in southeast Miami, Florida, and his sister took care of their mother. As his sister's condition worsened, Respondent spent more and more time with his sister and mother, and less time on his real estate business. His sister died on October 13, 1992.

    
    

    Another mitigating factor presented was that Respondent has had no disciplinary action taken against his license in his approximately 20 years of licensure.

    
    

    CONCLUSIONS OF LAW

    
    

23. The Division of Administrative Hearings has jurisdiction over the subject matter of this proceeding and the parties thereto pursuant to Subsection 120.57(1), Florida Statutes. The parties were duly noticed for the formal hearing.

    
    

24. License revocation proceedings are penal in nature. The burden of proof is on the Petitioner to establish the truthfulness of the allegations of the Administrative Complaint by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).

    
    

25. Regarding a violation of Subsection 475.25(1)(b), Florida Statutes, Petitioner has shown by clear and convincing evidence that Respondent is guilty of a breach of trust in a business transaction. The said subsection contemplates that "an intentional act be proved before a violation may be found." Munch v. Department of Professional Regulation, Division of Real Estate, 592 So.2d 1136 (Fla. 1st DCA 1992), at 1144, citing Rivard v. McCay, 212 So.2d 672 (Fla. 1st DCA), cert. denied, 219 So.2d 703 (Fla. 1968). Ms. Richardson and Mr. Toppin submitted to Respondent a $3,000 earnest money deposit

    in accordance with the real estate contract; however, Respondent failed to maintain a sufficient balance in his escrow account equal to the earnest money deposit. The Respondent, as the real estate broker for the real estate transaction, was in a position of trust. Respondent's bank statements clearly show that the escrow account balance fell below $3,000 on numerous occasions during the nine months from the time the $3,000 was placed in escrow until its disbursement. Each monthly statement put Respondent on notice when the escrow account was below $3,000. Nevertheless, Respondent failed to change his course of action to make sure that the escrow account contained sufficient funds as he continued to withdraw funds from the account for his personal use regardless of the balance.

    
    

26. Regarding a violation of Subsection 475.25(1)(d)1, Florida Statutes, Petitioner has proven this violation by clear and convincing evidence. Respondent availed himself of one of the "escape procedures" allowed by the said statutory subsection whereby a licensee who is unsure as to who should receive escrowed monies may request the Florida Real Estate Commission for an order determining who is entitled to the escrowed monies. The Commission ordered Respondent to disburse the earnest money deposit to the buyers. Complying with the order, Respondent issued a check for the deposit from the escrow account to the buyers. Ordinarily, a licensee utilizing this procedure would be shielded from an administrative complaint. Subsection 475.25(1)(d)1, states in pertinent part:

    
    

    If the licensee promptly employs one of the escape procedures contained herein, and if he abides by the order or judgment resulting therefrom, no administrative complaint may be filed against the licensee for failure to account for, deliver, or maintain the escrowed property.

    
    

    However, Respondent's escrow check was dishonored and returned by Respondent's bank for non-sufficient funds, even though the check eventually cleared his bank after being redeposited several days later by the buyers. Consequently, Respondent failed to abide by the Commission's order because the escrowed monies were not disbursed to the buyers due to Respondent not maintaining the escrowed monies on deposit. Hence, Respondent failed to account for or deliver a deposit upon demand of the person(s) entitled to it, namely the buyers, Ms. Richardson and Mr. Toppin.

    
    

27. The final charge against Respondent is that he violated Subsection 475.25(1)(k), Florida Statutes, by being guilty of having failed to maintain trust funds in the real estate brokerage bank account or some other depository until disbursement thereof was properly authorized. Petitioner has shown by clear and convincing evidence that Respondent violated the said subsection. In the case sub judice, the Respondent immediately placed the $3,000 earnest money deposit into an escrow account. Yet, he failed to maintain an escrow account balance equal to the earnest money deposit. Respondent's monthly escrow bank account statements showed that, during several months, the account balance fell below the $3,000 deposit. Furthermore, at the time of disbursement, as authorized by the Real Estate Commission, the account balance was below the deposit amount which caused Respondent's disbursement check to be returned for non-sufficient funds.

    
    

28. The Real Estate Commission has adopted penalty guidelines in Rule 21V- 24.001, Florida Administrative Code. The penalty range for violation of

Subsection 475.25(1)(b) [fraud, misrepresentation, concealment, false promise, false pretence, dishonest dealing by trick, scheme, or device, culpable negligence, or breach of trust in a business transaction] is up to five years suspension or revocation. Rule 21V-24.001(3)(c). The recommended penalty for violation of Subsection 475.25(1)(d) [the failure to account or deliver escrowed property to any person upon demand of the person entitled to the accounting or delivery] is up to five years suspension. Rule 21V-24.001(3)(e). The penalty for violation of Subsection 475.25(1)(k) [the failure to immediately deposit, upon receipt, money received into an escrow account until disbursement is properly authorized] is a minimum of 90-day suspension and a $1,000 fine, up to revocation. Rule 21V-24.001(3)(1). These penalty guidelines are based upon a single count violation of each statute listed, and the guidelines provide that multiple counts or combinations of violations may result in a higher penalty than that prescribed for a single, isolated violation. Rule 21V-24.001(1). The penalty may be enhanced due to aggravating circumstances or lessened due to mitigating circumstances. Rule 21V-24.001(4)(a). Aggravating and mitigating circumstances include such factors as the severity of the offense, degree of harm to the public, the number of counts in the administrative complaint, the number of times the offenses previously have been committed by the licensee, the disciplinary history of the licensee, the status of the licensee at the time the offense was committed (i.e., was the license already on probation), and the degree of financial hardship incurred by a licensee as the result of an imposition of a fine or suspension of a license. Rule 21V-24.001(4)(b).

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Real Estate Commission enter a final order:

1. Determining Henry M. Weiss guilty of violating Subsections 475.25(1)(b), 475.25(1)(d)1, and 475.25(1)(k), Florida Statutes, as set forth in the Administrative Complaint; and

   
   

2. Imposing an administrative penalty comprised of an administrative fine in the amount of Three Thousand Dollars ($3,000), a 90-day suspension, and one

1. year probation, commencing after the suspension, under such terms and conditions as may be prescribed by the Real Estate Commission.

   
   

   DONE AND ENTERED in Tallahassee, Leon County, Florida, this 8th day of April 1993.

   
   

   
   

   ERROL H. POWELL

   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 8th day of April 1993.

   ENDNOTES

   
   

   1/ Respondent submitted a one page document that contained findings and conclusions.

   
   

   2/ On or about August 7, 1992, one of Petitioner's investigators subpoenaed from Respondent's bank his escrow account statements, deposit slips, cancelled checks, signatory cards, and other documents dated from October 1991 through July 1992.

   
   

   3/ Respondent admitted that all cash withdrawals from the escrow account were for his personal use.

   
   

   4/ Some of the February 1992 bank statements were illegible.

   
   

   5/ If Respondent was due a certain amount of monies from a real estate transaction, he believed that he could withdraw that amount from the escrow account.

   
   

   APPENDIX

   
   

   Rulings on findings proposed by the Petitioner.

   
   

   1. Adopted in Finding of Fact 1.

   2. Adopted in Finding of Fact 2.

   3. Rejected as unnecessary.

   4. Adopted in Findings of Fact 3 and 5.

   5. Adopted in Finding of Fact 6.

   6. Adopted in Finding of Fact 7.

   7. Adopted in Finding of Fact 7.

   8. Adopted in Findings of Fact 8 and 16.

   9. Rejected as unnecessary.

   10. Adopted in part, only to the extent that Respondent failed to make reconciliation statements, in Finding of Fact 19. Remaining portions rejected as unnecessary.

   11. Adopted in Finding of Fact 18, and discussed in Endnote 2.

   12. Adopted in Findings of Fact 10, 12 and 20, and discussed in Endnotes 3 and 5.

   13. Adopted in Findings of Fact 10, 11 and 16, except for Petitioner's characterization that the escrowed funds were misused. At no time did the Petitioner present evidence that the procedure or process used by Respondent for the withdrawal of funds from the escrow account was improper.

Rulings on Findings proposed by the Respondent:

Respondent's proposed recommended order consisted of three unnumbered paragraphs, with the first being an introductory paragraph, the second containing findings of fact, and one numbered paragraph which addressed the penalty.

Paragraph 2 is rejected. The evidence is not convincing that Respondent's behavior was not intentional in that the escrow account monthly bank statements showed that, during

several months, the account balance was below the $3,000 escrow deposit of Ms. Richardson and Mr. Toppin.

COPIES FURNISHED:

James H. Gillis, Esquire Department of Professional

Regulation

Division of Real Estate Hurston Building, North Tower

400 West Robinson Street Orlando, Florida 32801-1772

Henry M. Weiss

5100 Dupont Boulevard

Fort Lauderdale, Florida 33308

Darlene F. Keller Division Director

Department of Professional Regulation

Division of Real Estate Hurston Building, North Tower

400 West Robinson Street Orlando, Florida 32801-1772

Jack McRay General Counsel

Department of Professional Regulation

Suite 60

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: 92-007543

Orders for Case No: 92-007543