STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) CASE NO. 96-4384

)

ROBERT CONNER HAMPTON, )

)

Respondent. )

)

RECOMMENDED ORDER

The formal proceeding was conducted in the above-styled cause before P. Michael Ruff, duly designated Administrative Law Judge of the Division of Administrative Hearings. Pursuant to notice the cause came on for formal hearing on January 14, 1997, in Pensacola, Florida, at which the following appearances were entered.

APPEARANCES

For Petitioner: Steven W. Johnson, Esquire

Department of Business and Professional Regulation

Division of Real Estate

400 West Robinson Street Orlando, Florida 32802

For Respondent: Robert Conner Hampton, pro se

4066 Coachman Road

Milton, Florida 32583

STATEMENT OF THE ISSUE

The issues to be resolved in the proceeding concern whether the Respondent’s license as a Florida real estate broker should be subjected to discipline for allegedly being guilty of culpable negligence or breach of trust in a business transaction, in purported violation of Subsection 475.25(1)(b), Florida Statutes.

PRELIMINARY STATEMENT

This cause was initiated upon the filing of an administrative complaint on May 23, 1996, by the above-named petitioner. It was thus alleged that the Respondent violated the statute cited above and that discipline against the Respondent’s real estate licensure should be imposed.

The Respondent timely responded to and disputed the charges, requesting a formal proceeding pursuant to Section 120.57(1), Florida Statutes. The cause was assigned to the undersigned Judge and ultimately a formal hearing was held on January 14, 1996, in Pensacola, Florida.

The hearing was conducted that date and Petitioner’s exhibits 1 through 7 were admitted into evidence. Additionally, witnesses Ruby Crawford and Monica Uher testified on behalf of the Petitioner. The Respondent testified on his own behalf but called no other witnesses and produced no exhibits. Upon conclusion of the proceeding the parties availed themselves of their right to submit proposed recommended orders which were timely submitted.

FINDINGS OF FACT

1. The Petitioner is an agency of the State of Florida charged with licensing and regulating the practice and entry into practice of real estate brokers and salesperson. Included within that responsibility is a duty to prosecute administrative complaints upon findings of probable cause that regulated licensees have violated the laws of Florida pertaining to real estate licensure and practice, most particularly in this proceeding Section 475.25, Florida Statutes.

2. The Respondent at all time pertinent hereto was and still is a real estate broker licensed as such in the State of Florida. He has been issued license number 0505444 in accordance with relevant provisions of Chapter 475, Florida Statutes. The Respondent is also a licensed general contractor or residential contractor in the State of Florida.

3. On December 1, 1993, the Respondent, as President of Sandlot Construction Company, negotiated a contract between that firm, as seller, and Edward D. and Ruby M. Crawford, as buyers, whereby the buyers purchased Lot 23 at Holley by the Sea Subdivision in Santa Rose County. The purchase price for the lot paid by the Crawfords was $13,000. On that date the Respondent, as Pesident of Sandlot Construction Company, negotiated a construction agreement between Sandlot Construction Company and the Crawfords for construction of a home for the Crawfords residence on that lot.

4. Months later, on September 8, 1994, the Crawfords paid Sandlot Construction Company $800, by check, to pay for the building of a fireplace in the house under construction by Sandlot Construction Company.

5. When the construction was completed in the latter part of 1994, the buyer discovered that certain sub-contractors and suppliers had placed mechanics’ and materialmens’ liens on the property. This was a surprise to the Crawfords because they had paid all outstanding amounts agreed upon for the construction of the home. This situation occurred, however, because the Respondent had received the moneys for the various items of labor and materials for the construction of the house but had failed to pay the subcontractors and suppliers who had filed the subject liens on the real property in question. This difficulty arose because the Respondent diverted the funds which should have been used to pay the subcontractors and suppliers to other purposes. This situation caused the unhappy result that, in December 1994, the Crawfords were forced to pay these subcontractor and suppler lienors approximately $6,547.50 to defray their outstanding claims and to secure the satisfaction of their liens on the property.

6. In December of 1994, the buyers also discovered that the Respondent had failed to pay the fireplace vendor, “Hearth and Home” the $800 price for the fireplace which had been ordered. The vendor built the fireplace in the home under construction and

   the buyers were thus obligated to pay for the fireplace. The Respondent failed to pay for the fireplace out of the construction moneys derived from the buyers which had been placed at his disposal as contractor and President of Sandlot Construction Company, to pay for all construction costs. The fireplace vendor filed a mechanics lien against the property for failure to pay the $800 claim. On December 20, 1994, the buyers thus were forced to pay an additional $800 to the Hearth and Home Company in order to satisfy the lien placed on their real property. Consequently, the buyers, as a result of the Respondent’s use of their funds for other purposes, which may even have included other aspects of the construction, were forced to pay the subcontractors and suppliers $7,347.50 more for the construction of the home than they had contracted with the Respondent to pay.

7. The Respondent acknowledged that he was obligated to pay this amount of money to the subcontractors, suppliers and materialmen involved in the liens and that he simply had run out of funds because the funds had been used for other purposes (it was not proven that he diverted the funds for his personal use). The Respondent has thus acknowledged that he owes the Crawfords this sum of money, fully intends, and prior to this proceeding had assured them he intended, to re-pay them. He has not done so as yet. The Respondent, and the above-named company of which he is President, is in straitened financial circumstances.

   Nevertheless, at the time the Respondent had the custody and control of the construction funds in question and failed to use them for the proper purpose of paying the subcontractors, suppliers and materialmen who filed the liens, he knew that the funds in question should have been used for the proper purpose and failed to do so, causing the above-referenced pecuniary loss to the buyers.

   CONCLUSIONS OF LAW

   
   

8. The Division of Administrative Hearings has jurisdiction of the subject matter of and the parties to this proceeding pursuant to Section 120.57(1), Florida Statutes.

9. Subsection 475.25, Florida Statutes provides that the agency may suspend a realtor’s license for a period not exceeding seven (7) years; revoke the license; may impose a administrative fine not to exceed $1,000 for each count or separate offense and may impose a reprimand or any or all of the foregoing penalties if it is found that a licensee violated Subsection 475.25(1)(b), Florida Statutes. The burden of proof of such violations is on the Petitioner/agency as to the charges in an administrative complaint. Balino v. Department of Health and Rehabilitative Services, 348 So. 2d 349 (Fla. 1st DCA 1977). Licensed proceedings involving potential revocation of licensure have been deemed to be penal in nature. State ex rel Vining v. Florida Real Estate Commission, 281 So. 2d 487 (Fla. 1973). The burden of proof in such penal cases therefore requires that relevant,

   material findings of fact be supported by clear and convincing evidence. Smith v. Department of Health and Rehabilitative Services, 527 So. 2d 956 (Fla. 1st DCA 1988). Section 475.25(1)(b), Florida Statutes provides that the above disciplinary sanctions may be imposed when it is shown that a licensee has been guilty of “fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme, or devise, culpable negligence or breach of trust in any business transaction in this state or any other state, nation or territory; . . .” Real estate brokers licensed in Florida may be disciplined under the above statutory provision for dishonest conduct of business affairs for their own account as well as for such conduct and transactions where their interest is that of a broker. Even where the broker being charged was not engaged in any real estate practice transaction, as for example here, where the subject matter of the transaction was the construction of a residence by the Respondent’s construction company and the Respondent’s handling of the construction moneys involved, the law in Florida is that a real estate licensee who commits the above proscribed forms of misconduct in such a “business transaction” may be disciplined by the Florida Real Estate Commission. See Sellars v. Florida Real Estate Commission, 380 So. 2d 1052 (Fla. 1st DCA 1980) rev denied 389 So. 2d 1114; LaRosa v. Department of Professional Regulation,

   Division of Real Estate, 474 So. 2d 322 (Fla. Appeals 3rd DCA 1985).

10. It has been held that an intentional act must be established before a violation of the above statute proscribing fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or devise, culpable negligence or breach of trust in a business transaction may be established. Munch v. Department of Professional Regulation, Division of Real Estate, 592 So. 2d 1136 (Fla. Appeals 1st DCA 1992). It must be determined, therefore, whether the Respondent’s actions, established by the clear and convincing evidence supporting the above findings of fact rises to that level of intentional conduct necessary to prove a violation of this subsection.

11. The unrefuted testimony of Mr. Crawford shows that the Crawfords imposed special trust in the Respondent because they were aware of his status and licensure as a real estate broker, as well as a general contractor. His actions in this case caused the Crawfords to lose a substantial sum of money because they had to spend that much extra in order to satisfy the liens of the various contractors or subcontractors, even though they had already paid sufficient funds for the construction involved in the subject matter of those liens to the Respondent or to his custody and control.

12. The Respondent testified that two other owners of the Sandlot Construction Company, which was then having financial difficulties, refused to provide cash to satisfy the liens when it became clear that there was a shortfall for completing the Crawfords house. Nevertheless, the Respondent, as president of that company, gave false assurances to the Crawfords attorney that he would reimburse them the money. More pointedly, however, the Respondent knew that the construction moneys advanced to his company were for the purpose of paying for the relevant construction items, some of which were not paid for because the funds were diverted by the Respondent or his company, within his knowledge, and which resulted in the liens being imposed. The Respondent was fully aware of the proper use to be made of this money and failed to so use it. It matters little that he later assured the Crawfords he would re-pay them because the violation arose when he diverted the funds or allowed them to be diverted with his knowledge and failed to disclose that to the Crawfords on a timely basis wholly aside for the fact that indeed, the wrongful diversion is an act which constituted a breach of trust by the Respondent and his corporation as soon as the moneys were put to an unauthorized use.

13. Clear and convincing evidence establishing the above findings of fact shows that the Respondent breached his trust in this business transaction by diverting the funds to an unauthorized use and committed misconduct amounting to

    concealment by failing to inform the Crawfords of the problem he was having with his company’s financial matters as it related to the timely, cost effective completion of their house. He was culpably negligence by being woefully undilgent in not so conducting his affairs that this financial problem would not arise. If it would have occurred despite his best efforts he should have disclosed it to the Crawfords immediately and cooperated with them to devise a means to avoid harm to their interests.

14. Because he was clearly aware of the proper purpose for the Crawfords funds in the construction project and because he knowingly allowed the funds to be used for different, unauthorized purposes and failed to timely disclose the problem to the Crawfords, his conduct clearly rises to a sufficient level of “intent” or “scienter” as to amount to that intent necessary to establish misconduct by concealment, false pretenses, culpable negligence and breach of trust in a business transaction.

15. As a licensed real estate broker in the State of Florida the Respondent occupies a status under law with recognized privileges and responsibilities. Zichlin v. Dill, 25 So. 2d 4 (Fla. 2nd DCA 1946); United Homes, Inc. v. Moss, 54 So. 2d 351 (Fla. 2nd DCA 1963). Inasmuch as real estate licensees in Florida belong to a privileged class, the state prescribes a high standard of qualification for them. As the court stated in Zichlin, supra, “The law specifically requires that a person, in

    order to hold a real estate license, must make it appear that he is . . . trustworthy, . . . and that he bears a good reputation for fair dealing.” See also, McKnight v. Florida Real Estate Commission, 209 So. 2d 199 (Fla. 2nd DCA 1967).

16. The proof adduced by the Petitioner is clear and convincing in establishing the above concluded misconduct. That proof is sufficient to justify imposition of penalties within the range of those provided for in the above-cited statutory authority. Here, the Respondent’s culpably negligent behavior and his lack of due diligence in the business transaction involved harmed the buyers and could have been avoided, at least as to its magnitude, if not entirely, by a timely disclosure of the financial problems he and his company were undergoing. The behavior exhibited by the Respondent in this instance is the type of conduct, prevention of which is the central theme of the professional licensure statutory scheme in the State of Florida under Chapter 475, Florida Statutes. The Respondent clearly has failed to comply with the standards required of licensed real estate professionals in the particulars found above.

17. Thus, for the above-stated reasons, it has been proven that a violation of Subsection 475.25(1)(b), Florida Statutes has been established in the manner found and concluded above. The Administrative Law Judge acknowledges the candor and honesty of the Respondent in freely admitting that he committed the conduct involved, contritely and remorsefully apologizing for it and re-

newing his past assurances to make retribution to the Crawfords. In fact, the Respondent’s conduct does not exhibit a malicious malevolent intent to harm the Crawfords interests. Rather, the unlawful situation caused by the Respondent arose more from his lack of diligence, his negligence and probable failure to timely seek help for his financial problems at a time and in a manner which might have forestalled and prevented such a situation from occurring. His candor and forthrightness, while somewhat belated, should certainly be taken into account in imposing less than a maximum penalty. Accordingly, it is therefore

RECOMMENDED that based upon the foregoing findings of fact, conclusions of law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, that a final order be entered finding the Respondent guilty of violating Section 475.25(1)(b), Florida Statutes, as charged in the administrative complaint, and that he be formally reprimanded and fined a sum of $1,000.

DONE AND ENTERED this 25th day of April, 1997, in Tallahassee, Leon County, Florida.

P. MICHAEL RUFF

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(904) 488-9675 SUNCOM 278-9675

Fax Filing (904) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 25th day of April, 1997.

COPIES FURNISHED:

Steven W. Johnson, Esquire Department of Business and

Professional Regulation Post Office Box 1900 Orlando, FL 32802

Robert Connor Hampton 4066 Coachman Road

Milton, FL 32583

Henry M. Solares, Division Director Department of Business and

Professional Regulation Post Office Box 1900 Orlando, FL 32802-1900

Lynda L. Goodgame, Esquire Department of Business and

Professional Regulation 1940 North Monroe Street Tallahassee, FL 32399-0792

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15 days from the date of 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: 96-004384

Orders for Case No: 96-004384