STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 96-1864

)

LYNNE M. MITULINSKY, ROBERT ) SYSVESTER, and LYRIC REALTY GROUP, ) INC., )

)

Respondents. )

)

RECOMMENDED ORDER

Robert E. Meale, Hearing Officer of the Division of Administrative Hearings, conducted the final hearing in Tampa, Florida, on July 17, 1996.

APPEARANCES

For Petitioner: Daniel Villazon, Senior Attorney

Department of Business and Professional Regulation

400 West Robinson Street Orlando, Florida 32802

For Respondent: Attorney Peter Hobson

606 East Madison Street Tampa, Florida 33602

STATEMENT OF THE ISSUE

The issue is whether Respondents are guilty of misrepresentation or breach of trust and, if so, what penalty should be imposed.

PRELIMINARY STATEMENT

By Administrative Complaint dated March 24, 1995, Petitioner alleged that Respondents, as cooperating real estate brokers, failed to disclose to a seller whom they were representing that the purchaser was the daughter of Respondent Sylvester. Petitioner alleged that the nondisclosure constituted misrepresentation, concealment, false pretenses, dishonest dealing by trick, scheme or device, concealment, culpable negligence, or breach of trust in a business transaction in violation of Section 475.25(1)(b), Florida Statutes.

At the hearing, Petitioner called three witnesses and offered into evidence seven exhibits, which were all admitted. Respondent called four witnesses and offered into evidence no exhibits.

The court reporter filed the transcript on August 1, 1996. Petitioner's proposed findings are adopted or adopted in substance. However, the proposed findings concerning the failure to disclose are incomplete without findings that Respondent Sylvester did not attempt to conceal, as reflected in the conversations between Respondent Sylvester and Mrs. Rodriguez where she freely referred to him as "dad," even in the presence of representatives of the seller.

FINDINGS OF FACT

1. In October 1993, Respondent Sylvester (Respondent) took his daughter, whose last name was Rodriguez by marriage, to a real estate sales office that was selling units of a new condominium building. Respondent's daughter was 42 years old at the time.

   
   

2. Speaking to the qualifying broker for the selling broker, Respondent advised her that he was a real estate salesperson for Respondent Lyric Realty Group, Inc. and wanted to show a unit to his daughter. Respondent referred to his daughter by name, rather than as his daughter, and did not mention to the broker that his customer was his daughter. Respondent gave the qualifying broker his card and signed his name in a log to protect his interest in the cooperating broker's sales commission.

   
   

3. After touring a model unit, Mrs. Rodriguez expressed sufficient interest that Respondent obtained a form contract from the qualifying broker before leaving the premises. Respondent completed the contract, but left negotiations to Respondent Mitulinsky because Respondent was going out of town.

   
   

4. Respondent Mitulinsky is the qualifying broker for Respondent Lyric Realty Group, Inc. Her involvement with the transaction was limited to contact with the listing broker, transmitting prices between Mrs. Rodriguez and the seller.

   
   

5. Respondent Mitulinsky did not disclose that Mrs. Rodriguez was Respondent's daughter. But the evidence fails to suggest that Respondent Mitulinsky was in any way aware that the seller's broker was ignorant of the relationship between Respondent and Mrs. Rodriguez. The evidence also fails to suggest that the nature and extent of the conversations between Respondent Mitulinsky and the qualifying broker were such as to support an inference of concealment of the relationship by Respondent Mitulinsky.

   
   

6. Prior to agreeing upon a final price, the seller's qualifying broker agreed to increase the commission to be paid Respondent Lyric Group Realty, Inc. by one percentage point to three percent.

   
   

7. The listing price for the unit was $285,000. Mr. and Mrs. Rodriguez submitted the contract with a price of $240,000. Following verbal negotiations, the seller returned the same contract with a price of $268,000, which the buyers accepted on October 29, 1993.

   
   

8. A salesperson employed by the listing broker admits that she knew of the relationship between Respondent and his daughter prior to closing. After the contract was signed but prior to closing, Respondent, Mrs. Rodriguez, a home inspector, and the salesperson visited the unit. As the inspector worked, Mrs. Rodriguez and her father spoke freely, as they had in past visits, with Mrs. Rodriguez referring to Respondent as "dad" and he referring to her by her first name.

9. The salesperson immediately informed her broker, who immediately reported the information to the seller. However, the seller elected to do nothing with the information because he was satisfied with the sales price and net proceeds.

   
   

10. Mr. and Mrs. Rodriguez were purchasing the first unit to be sold at the seller's project. This makes the first transaction especially risky for both the seller and the buyers.

    
    

11. The purchase price represented the fair market value for the unit. The unit appraised at $271,000 at the time of the sale to Mr. and Mrs. Rodriguez.

    
    

12. On January 6, 1994, the parties closed on the unit pursuant to the provisions of the contract. The $16,080 sales commission was split evenly between the listing broker and Respondent Lyric Realty Group, Inc.

    
    

    CONCLUSIONS OF LAW

    
    

13. The Division of Administrative Hearings has jurisdiction over the subject matter. Section 120.57(1), Florida Statutes. (All references to Sections are to Florida Statutes.)

    
    

14. Section 475.25(1)(b) prohibits "fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme, or device, culpable negligence of breach of trust in any business transaction . . .." The statute warns that "it is immaterial . . . that the victim or intended victim of the misconduct has sustained no damage or loss . . .." Id. For ease of reference, the recommended order refers to all of these acts and omissions as fraud.

    
    

15. Petitioner must prove the material allegations by clear and convincing evidence. Department of Banking and Finance v. Osborne Stern and Company, Inc., 670 So.2d 932 (Fla. 1996) and Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).

    
    

16. There is no evidence of fraud concerning Respondent Mitulinsky or Respondent Lyric Realty Group, Inc.

    
    

17. Petitioner's proof fails in two respects. First, there is no evidence of fraud or an intent to defraud. Although Respondent did not affirmatively disclose his relationship with one of the purchasers, he did nothing to conceal it and in fact disclosed it in a casual way, precluding a finding of an intent to conceal. A fraudulent nondisclosure of this relationship would have been attended by greater vigilance in preserving the secret, had this been Respondent's intent.

    
    

18. Second, and more important, there can be no fraudulent nondisclosure if the intended victim knows what is supposedly being concealed. A fraudulent act requires a defrauded party. This principle is especially true where, as here, the so-called defrauding party has no intent to conceal facts from the so- called defrauded party. But even where an intent to defraud exists, someone must be defrauded for fraud to take place; something must be concealed for a concealment to take place. See, e.g., Applefield v. Commercial Standard Insurance Company, 176 So.2d 366 (Fla. 2d DCA 1965) (no fraud if person who is subject of fraud is on notice or even on constructive notice of underlying facts).

19. The statutory warning that the absence of damage or loss is no defense does not supply what is missing from Petitioner's case of fraudulent concealment. This warning would apply if Respondent had tried to conceal something from the seller and the seller had not known what it was that Respondent was concealing, but, in the end, the seller had suffered no harm because, say, the sales price was at least equal to fair market value. Here, the seller knew the subject matter of the alleged concealment, and Respondent was not trying to conceal anything. The findings as to the relationship of the purchase price to fair market value merely support the seller's decision, after learning of the relationship, not to disturb the transaction prior to closing.

RECOMMENDATION

It is

RECOMMENDED that the Division of Real Estate enter a final order dismissing the administrative complaint against all respondents

ENTERED on September 30, 1996, in Tallahassee, Florida.

ROBERT E. MEALE, 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 September 30, 1996.

COPIES FURNISHED:

Henry M. Solares, Division Director Division of Real Estate

400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802-1900

Lynda L. Goodgame General Counsel

Department of Business and Professional Regulation

1940 North Monroe Street Tallahassee, Florida 32399-0792

Daniel Villazon, Senior Attorney Department of Business and

Professional Regulation

400 West Robinson Street Orlando, Florida 32802

Peter Hobson, Esquire 606 East Madison Street Tampa, Florida 33602

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to the 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 consult with the agency that will issue the Final Order in this case concerning their 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: 96-001864

Orders for Case No: 96-001864