Dorak. Additionally, Petitioner's exhibits numbered 1-7 and Respondent's exhibits numbered 1-35 were admitted in evidence.
Both Petitioner and Respondent filed post hearing proposed findings of fact. Respondent then engaged the services of an attorney, who requested leave to file an amended proposed recommended order on Respondent's behalf. Upon Petitioner's agreement to such a procedure, leave to do so was granted, and Respondent's amended recommended order was timely filed. A specific ruling on all proposed findings of fact can be found in the Appendix to this Recommended Order.
Respondent Anne E. Carr is and has been at all times material hereto a licensed real estate broker in the State of Florida, having been issued license number 0268356.
In 1988 Helen B. Moser and her husband, John J. Moser, Jr., obtained their real estate salesman licenses. In 1989 they became real estate brokers. Upon becoming licensed brokers, they decided that they would like to open their own real estate office. They began contacting various real estate brokers seeking advice on how to open and operate a real estate business.
Respondent was one of the brokers the Mosers contacted for advice. She and the Mosers already knew each other from previous professional activities.
At the time, Respondent was the broker and sole stockholder of Carr Real Estate, Inc. She also was spending a substantial amount of time selling luxury condominiums for a particular developer, which required her to be on-site at the development.
Respondent suggested to the Mosers that they join Carr Real Estate, Inc., and run the office for her rather than opening their own office, which would give them immediate access to her listings and many clients and allow her to devote her time to sales for the large real estate development. The Mosers agreed that was a good opportunity for all concerned and joined Carr Real Estate, Inc., as broker/salesmen in October of 1989.
The Mosers began running the business for Respondent at her request, providing Respondent with monthly accountings. During 1990 the Mosers earned approximately $90,000 as a result of the listings they took over from Respondent and as a result of the listings Respondent referred to them. Throughout that year Carr Real Estate, Inc., remained a major presence in the Highland Beach area where Respondent was well known both for her flamboyant fashions and her ability to list and sell luxury ocean-front and water-front properties.
During the first week of December 1990 Respondent advised the Mosers that due both to financial problems she was experiencing and pressure on her from the developer to devote full time to his sales she would be closing the business on December 31 unless the Mosers wanted to purchase the company from her. They advised Respondent they were interested in doing so and that they would draft the documents for Respondent's signature.
Many discussions took place between Respondent and the Mosers over the next several weeks formulating the terms of the sale of the business, and the Mosers submitted to Respondent a number of drafts of documents. While the negotiations were on-going, Respondent filled out and executed on December 12, 1990, the documents necessary for her to file for personal bankruptcy. On December 15 she faxed written instructions to her attorney to not file the bankruptcy petition because she was selling her company.
On December 20, 1990, Respondent and the Mosers executed a Purchase and Sale Agreement and a Bill of Sale. It is noted that those documents also involved the sale of Respondent's interest in two other corporations to the Mosers but that portion of the transaction raises no issues involved in this proceeding.
The Purchase and Sale Agreement provided that its effective date would be January 1, 1991. The Agreement specifically represented that Carr Real Estate, Inc., was being sold free of any liabilities and encumbrances and that the corporation did not own any tangible assets. The Agreement further provided that Respondent would indemnify the Mosers from all obligations and liabilities incurred by Carr Real Estate, Inc., prior to January 1, 1991. The Agreement provided for no money to change hands as a result of the Mosers' purchase of Respondent's business; rather, the purchase price for the corporation was five percent of all sales commissions received by the corporation for a period of two years.
On December 29, 1990, Respondent executed the Seller's Affidavit given to her by the Mosers. The portion of the Seller's Affidavit pertinent to this dispute is that Respondent attested that there were no actions or proceedings then pending in any state or federal court in which "the Affiant or Corporations" are parties, including bankruptcy.
It was very clear in Respondent's mind that what she was selling under the Purchase and Sale Agreement and the Bill of Sale and what she was attesting to in the Seller's Affidavit was in regard to the corporation and not her personally. It never occurred to Respondent that she was representing to the Mosers that she personally had no bills and no assets. Respondent had no intention of defrauding the Mosers. Supporting this intent is the clear language contained in the Purchase and Sale Agreement, the Bill of Sale, and the Seller's Affidavit that she would personally indemnify and hold harmless the Mosers from any liabilities incurred by the corporation prior to the effective date of the sale.
In mid-January 1991, approximately two weeks after the effective date of the sale, the Mosers discovered that a bankruptcy petition had been filed on behalf of Respondent as an individual. Although that petition did not involve the corporation, John Moser immediately contacted Respondent who did not know that her attorney had filed the petition contrary to Respondent's instructions. On January 23, 1991, Respondent wrote to Helen Moser apologizing for the erroneous filing of her bankruptcy petition and assuring her that it would be corrected. Respondent immediately contacted her attorney to ascertain how the petition could be dismissed. She was advised by her attorney that the only way she could dismiss the petition was to not attend the first meeting of creditors which would cause the petition to automatically be dismissed.
Respondent did fail to attend the first meeting of creditors. Due to her failure to attend, her bankruptcy petition was dismissed. She immediately contacted Helen Moser to advise her of the dismissal.
On February 1, 1991, John Moser called Respondent to inform her that a statement for a monthly automobile lease payment in the name of Carr Real Estate had been received. Respondent immediately sent the Mosers a note indicating that she had contacted G.M.A.C. but that company refused to allow her to transfer responsibility for her automobile lease payments from the corporation to herself. She acknowledged that she was responsible for any of the lease payments and requested that the Mosers acknowledge that the automobile was not
an asset of the corporation. At the time Respondent knew that she was responsible for the lease payments because she signed the lease agreement as an individual.
Respondent's contact with G.M.A.C. was unnecessary since her automobile had been leased to her as an individual in June of 1988, a date which preceded the existence of Carr Real Estate, Inc. The automobile was insured in Respondent's individual name and was registered in the name of G.M.A.C. at Respondent's address. The Bill of Sale executed by Respondent and the Mosers does not list the automobile as an asset of the corporation that was conveyed. The automobile leased by Respondent was not an asset of the corporation. The only relationship between Respondent's leased automobile and Carr Real Estate, Inc., concerns the deduction of automobile expenses as business expenses on the tax return for Carr Real Estate, Inc.
On February 6, 1992, Helen Moser asked Respondent for a copy of the 1990 corporate tax return for Carr Real Estate, Inc., and Respondent provided a copy to her that same day. The return had been prepared in August or September of 1991 by Mary Dorak, a person enrolled with the Internal Revenue Service. It contained an entry entitled "loan from shareholder" in the sum of $107,060. Respondent had been the sole shareholder of the corporation. On February 26, 1992, the Mosers obtained an opinion letter from an attorney advising them that the corporation was not liable to Respondent for any debts.
Neither the Mosers nor their accountant ever contacted Dorak or Respondent about the information contained in that tax return. Instead, the Mosers filed an amended corporate tax return for 1990 for Carr Real Estate, Inc. They removed the automobile as a corporate asset while leaving the shareholder's loan because it benefited them tax-wise. Instead of amending the return, the Mosers could have filed a 1991 return showing Respondent's stock exchange for the basis that was left of the stock in the corporation because the transaction took effect on January 1 of that year. Doing so would have caused no adverse tax consequences to the Mosers.
Respondent typically provided Dorak with a listing of Respondent's income and expenses for the year and would then simply sign the return after Dorak had prepared it without reviewing the return first. Without any input from Respondent, Dorak had listed the automobile and some personal debts of Respondent on the 1990 corporate tax return because Respondent could take advantage of certain business deductions. That action had no adverse tax consequences for the Mosers.
The Mosers never requested a tangible property tax return which would have reflected if there were any assets in the corporation. Had they made this request, they would have been told that there was none in existence because the corporation had no assets.
At the time that Respondent and the Mosers executed the Purchase and Sale Agreement, the Bill of Sale, and the Seller's Affidavit in December, all three believed that the corporation had no assets or liabilities and that any assets and liabilities of Respondent were hers personally. As of January 1, 1991, the effective date of the sale, the corporation had no assets or liabilities.
There were no tax consequences to the Mosers because of the listing of the shareholder loan in the 1990 corporate tax return because in that Subchapter S corporation the person ultimately adversely affected by the sale would be
Respondent since she owned all of the shares in 1990. On the other hand, the filing of an amended 1990 corporate tax return by the Mosers without Respondent's knowledge and consent has resulted in adverse tax consequences to her, an unnecessary result.
In November 1988 Respondent was involved in the sale of a condominium unit owned by Mr. and Mrs. Roy Heinz. Due to extended negotiations, the buyer's decision to not purchase the unit, and instructions from Heinz who was her client, Respondent delayed in placing the buyer's deposit check in her escrow account. Petitioner filed an Administrative Complaint against Respondent only and not also against Carr Real Estate, Inc., since that corporation was not yet in existence. After a formal evidentiary hearing, a Hearing Officer of the Division of Administrative Hearings specifically cleared Respondent of any intentional wrongdoing and of any culpable negligence. Respondent was found guilty, however, of what was specifically characterized to be a technical violation of failure to immediately place the deposit check into her escrow account. The minimum penalty permissible was assessed against Respondent. Respondent was also dismissed from the civil lawsuit filed by Roy Heinz which emanated out of the same circumstances for which the administrative action was brought.
The Mosers knew about the disciplinary action and the civil lawsuit pending against Respondent individually prior to their execution of the December 1990 documents transferring Carr Real Estate, Inc., from Respondent's ownership to theirs effective January 1, 1991. The "Roy Heinz matter" was specifically raised by John Moser during the negotiations among the Mosers and Respondent.
In April of 1991 Respondent sent Helen Moser a copy of the Recommended Order finding Respondent not guilty of any dishonest conduct or culpable negligence, and Helen Moser failed to even read the entire Order since she considered it unimportant and because she knew the transaction involved occurred prior to the formation of Carr Real Estate, Inc.
The Mosers continue to operate Carr Real Estate, Inc. The business has been diminishing, however, since 1991 due to the reduction in the number of salespersons affiliated with the business, John Moser's inability to attract listings and retain clients, and the amount of time the Mosers have been devoting to John Moser's computer business. Respondent's actions and/or inactions have not been the cause of the decline in Carr Real Estate, Inc.'s, business.
Moreover, the Mosers have not been harmed financially or in any other way due to any statements contained in the Purchase and Sale Agreement, Bill of Sale, or Seller's Affidavit executed by Respondent.
The sale of Carr Real Estate, Inc., by Respondent to the Mosers benefited all three of them. In her negotiations surrounding that sale, Respondent agreed to the terms desired by the Mosers, acted honestly, and did not knowingly or intentionally misrepresent any material fact. Those misrepresentations alleged by the Mosers and Petitioner to be contained in the closing documents, such as any statement that Respondent personally had no assets or liabilities, were not material to the sale and purchase of the corporation.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties hereto and the subject matter hereof. Section 120.57(1), Florida Statutes.
The Administrative Complaint filed in this cause alleges that Respondent has violated Section 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 any business transaction. Petitioner has failed to meet its burden of proving that Respondent is guilty as alleged in the Administrative Complaint.
Petitioner alleges that there were misrepresentations made by Respondent in the closing documents as revealed by the 1990 corporate income tax return since the return reflected substantial corporate liabilities in the form of a shareholder's loan in the amount of $107,060 and a corporate asset of
$14,148. The evidence reveals, however, that the tax consequences of Respondent's loan to her corporation did not survive the January 1, 1991, effective date of the Purchase and Sale Agreement. That loan was not a corporate liability once Respondent transferred her stock in the corporation to the Mosers. From that point forward, that shareholder loan did not exist as a liability of the corporation; it only existed in relation to Respondent's basis for taxation purposes.
As to the $14,000 corporate asset, that figure relates to the automobile personally leased by Respondent and for which only Respondent was responsible. The purpose for reflecting the automobile, as well as certain credit card bills, on the corporate tax return was simply to enable Respondent to take advantage of the opportunity to take deductions for that portion of her expenses which were business expenses. Accordingly, Respondent's representation in the negotiations and in the closing documents that the corporation had no liabilities and no tangible assets was in fact correct, and Petitioner has failed to prove any misrepresentations as to those matters.
Petitioner has also failed to prove its allegation that Respondent failed to disclose her pending bankruptcy proceeding and/or misrepresented that there was not pending at the time she executed the Seller's Affidavit a bankruptcy proceeding. The evidence reveals that during the time that Respondent was negotiating for the sale of her business to the Mosers, she in fact executed the documents necessary to file bankruptcy. She subsequently instructed her attorney to not file those documents. Those documents were filed without Respondent's knowledge and without her consent. As soon as the erroneous filing was discovered, Respondent took the necessary steps to have that proceeding dismissed, and it was so dismissed. Accordingly, although the representation in the Seller's Affidavit that there was no bankruptcy proceeding pending was untrue at the time it was made, Respondent did not know that it was untrue.
As to Respondent's failure to disclose the disciplinary proceeding against her individually and the civil lawsuit against her arising from the Roy Heinz matter, the evidence reveals that Respondent did disclose those matters to the Mosers during their negotiations. As to the representations made by Respondent in the closing documents that no such proceedings were pending, the representation that no such proceedings were pending against the corporation was true, and the Mosers knew those matters were pending as to Respondent personally.
The evidence is further clear that Respondent, despite the language placed in the closing documents by the Mosers, never considered that she was representing that she as an individual had no debts or assets, and it is not credible that the Mosers believed that when Respondent executed the closing documents, she personally had no debts or assets. Further, there is no showing that any representation that Respondent individually had no assets or debts was a material representation, or that such a representation was an inducement to the Mosers to enter into the agreement whereby they purchased an on-going business for no money down and only an agreement to pay a portion of their commissions for two years, if there were any.
