STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND ) PROFESSIONAL REGULATION, )

)

Petitioner, )

)

vs. ) Case No. 96-4718

)

DONALD ELBERT LESTER, )

)

Respondent. )

)

RECOMMENDED ORDER

Robert E. Meale, Administrative Law Judge of the Division of Administrative Hearings, conducted the final hearing by videoconference in Tallahassee, Florida, on April 7, 1997.

The parties, attorneys for the parties, witnesses, and court reporter participated by videoconference in Fort Myers, Florida.

APPEARANCES

For Petitioner: Geoffrey T. Kirk, Senior Attorney

Department of Business and Professional Regulation

Division of Real Estate

400 West Robinson Street Orlando, Florida 32802

For Respondent: James H. Gillis

James H. Gillis & Associates, P.A. Law Offices of Gillis & Wilsen 1415 East Robinson Street, Suite B Orlando, Florida 32801-2169

STATEMENT OF THE ISSUES

The issues are whether Respondent is guilty of violating a lawful order of the Florida Real Estate, in violation of Sections 475.42(1)(e) and 475.25(1)(e); committing fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence, or breach of trust in any business transaction, in violation of Section 475.25(1)(b) (two counts); failing to account for or deliver funds, in violation of Section 475.25(1)(d)1; failing to maintain trust funds in a real estate brokerage escrow bank account or some other proper depository until disbursement is authorized, in violation of Section 475.25(1)(k); failing to provide a written agency disclosure, in violation of Section 475.25(1)(q); being found guilty for a second time of any misconduct that warrants suspension or of a course of conduct or practices that show such incompetence, negligence, dishonesty, or untruthfulness as to indicate that Respondent may not be entrusted with the property, money, transactions, and rights of investors or others with whom Respondent may maintain a confidential relation, in violation of Section 475.25(1)(o); and failing to preserve and make available to Petitioner all books, records, and supporting documents and failing to keep an accurate account of all trust fund transactions together with such

additional data as good accounting practice requires, in violation of Rule 61J-14.012(4) and Section 475.25(1)(e).

PRELIMINARY STATEMENT

By Administrative Complaint filed August 23, 1996, Petitioner alleged that Respondent violated the statutes and rule set forth above. The eight counts of the Administrative Complaint allege that Respondent failed to complete continuing legal education within the time specified by a final order of the Florida Real Estate Commission; that Respondent, while serving as a director of a real estate company, wrote unauthorized checks to himself for personal use; that Respondent failed to cooperate with Petitioner's investigator by missing one appointment, cancelling several appointments, and attending two meetings without providing requested contracts; that Respondent maintained no escrow account during 1994 and 1995, but collected an earnest money deposit in the Patricia Turner transaction and misrepresented to an attorney that Respondent had deposited the deposit in an escrow account maintained by the company for which Respondent served as the qualifying broker; that Respondent took real estate commissions from the real estate company of which he was a director without disclosing the compensation to sellers and concealing the payments from his real estate partners; and that Respondent failed to provide a written agency disclosure

prior to the execution of the contract evidencing the sale of real property from Hanson to Houle.

At the hearing, Petitioner called eight witnesses and offered into evidence 29 exhibits. Respondent called no witnesses and offered into evidence 44 exhibits, in addition to his deposition.

Respondent did not appear at the final hearing, although his counsel did. The administrative law judge denied Respondent's requests for a continuance, but granted his request to leave the record open to allow Respondent to be deposed and to file exhibits properly identified in the deposition. Respondent filed these materials on May 14, 1997. All exhibits were admitted except Petitioner Exhibits 22-30.

The court reporter filed the transcript of the final hearing and Respondent's deposition on May 14, 1997.

FINDINGS OF FACT

1. At all material times, Respondent has been a licensed real estate broker, holding license numbers 0489551 and 3000384. Respondent is the qualifying broker for Buyers Realty of Naples, Inc., of which Respondent was a principal.

2. Respondent has been disciplined once previously. On December 8, 1994, the Florida Real Estate Commission entered a final order, pursuant to a stipulation, ordering Respondent to pay an administrative fine of $500 and complete 30 hours of professional education.

3. In late 1993, Respondent, Armand Houle, and Svein Dynge formed DSA Development, Inc. (DSA). Respondent, Houle, and Dynge were directors of the corporation.

4. On December 1, 1993, Respondent, Houle, and Dynge formed Gulf Southwest Developers, Ltd. (GSD). DSA served as the sole general partner of GSD, whose original limited partners included Houle and several foreign investors represented by Dynge, but not Respondent or Houle.

5. The investors formed GSD to assemble a vast tract of land in Collier County, through numerous purchases, for purposes of mining, development, and speculation. The initial investors contributed or agreed to contribute over $4 million to GSD.

6. Respondent's role was to find suitable parcels of land and negotiate their purchase by GSD or its agent. GSD agreed to pay Respondent $1000 weekly for these services.

7. GSD also authorized Respondent to take a broker's commission of 10 percent of the sales price for each fully executed contract presented to the closing agent. This is the customary broker's commission in the area for transactions of this type. Respondent's claim that he was entitled to a commission of 20 percent is rejected as unsupported by the evidence.

8. There is some dispute as to whether the seller or the buyer was to pay the commission. The contracts provide that

   the commission was to be deducted from the seller's proceeds. However, regardless of the source of the commission, Respondent was entitled only to 10 percent, not 20 percent.

9. Respondent knew that he was not entitled to 20 percent when he took the additional sum from GSD funds. Thus, the act of taking the funds constituted no less than concealment (due to his failure to disclose his withdrawals), dishonest dealing, culpable negligence and breach of trust, if not actual fraud.

10. There is some evidence that Respondent took substantial sums from GSD without authorization. Without doubt, part of these sums represented the additional ten percent commission described in the preceding paragraph.

11. Petitioner has attempted to prove that Respondent took sums in excess of the extra ten percent commission without authorization. However, as to such sums in excess of the additional ten percent commission, Petitioner has failed to prove by clear and convincing evidence either that Respondent took such additional sums or, if he did so, that these withdrawals were not authorized or at least ratified.

12. As agent for GSD, Houle entered into numerous contracts in the second half of 1994 and first half of 1995. In each of these contracts, Respondent signed the contract below printed language stating that he, as broker, and Buyers

    Realty of Naples, Inc. had received the initial escrow deposit under the conditions set forth in the contract.

13. At no time did Respondent or Buyers Realty of Naples, Inc. hold the escrowed funds in an escrow account under the name of Respondent or Buyers Realty.

14. Respondent maintains that he transferred the funds to the title company to hold in escrow. The record does not permit a finding, by clear and convincing evidence, that he did not do so, although there is some evidence indicating that the title company did not hold such funds. However, it is sufficient that Petitioner has shown by clear and convincing evidence that neither Respondent nor Buyers Realty held these escrow funds, despite clear misrepresentations by Respondent in each contract that he or his company held these escrowed funds.

15. Respondent's misrepresentations constitute fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing, and breach of trust.

16. Petitioner failed to prove by clear and convincing evidence that Respondent did not make the required agency disclosures in a timely fashion or that Respondent did not make available to Petitioner's investigator the books and records that he is required to maintain.

17. Likewise, Petitioner did not prove by clear and convincing evidence that Respondent failed to complete the

    education required by the prior final order or participated in the fraudulent endorsement of Houle's signature on checks by a secretary, who later obtained Houle's consent to the act.

    CONCLUSIONS OF LAW

    
    

18. 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.)

19. 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).

20. Section 475.25(1) provides in relevant part that the Florida Real Estate Commission may place a licensee on probation, revoke a license, suspend a license for not more than 10 years, impose an administrative fine of not more than

    $1000 per separate offense, and issue a reprimand if it finds that a licensee:

    * * *

    
    

    (b) Has been 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 . . ..

    
    

    1. 1. Has failed to account or deliver to any person . . . at the time which has been agreed upon or is required by law or, in the

       absence of a fixed time, upon demand of the person entitled to such accounting and delivery, an personal property . . . which has come into his hands and which is not his property or which he is not in law or equity entitled to retain under the circumstances.

       . . .

       
       

       * * *

       
       

    2. Has violated any provisions of this chapter or any lawful order or rule made or issued under the provisions of this chapter or chapter 455.

    
    

    (k) Has failed, if a broker, to immediately place, upon receipt, any money . . . entrusted to him by any person dealing with him as a broker in escrow with a title company . . . or to deposit such funds in a trust or escrow account maintained by him with some bank . . ., wherein the funds shall be kept until disbursement thereof is properly authorized . . ..

    * * *

    
    

    (o) Has been found guilty, for a second time, of any misconduct that warrants his suspension or has been found guilty of a course of conduct or practices which show that he is so incompetent, negligent, dishonest, or untruthful that the money, property, transactions, and rights of investors, or those with whom he may sustain a confidential relation, may not safely be entrusted to him.

    * * *

    
    

    (q)1. Has failed in a single agency to give written notice to all parties to a sale

    . . . revealing the party or parties for whom the licensee is an agent. Disclosure

    to the party for whom the licensee is not an agent must be made at the time of the first substantive contact.

21. Petitioner has proved by clear and convincing evidence that Respondent was guilty of two separate violations of Section 475.25(1)(b) in his wrongful withdrawals of an additional ten percent in commissions from GSD and his misrepresentations in sales contracts that he or Buyers Realty was holding the escrow deposits.

22. Petitioner has not proved the remaining allegations. As to the alleged violation of Section 475.25(1)(o), Petitioner has not proved that the prior violation warranted suspension. The final clause of Section 475.25(1)(o) is subsumed in this case by the two violations of Section 475.25(1)(b).

23. Rule 61J2-24.001(3)(c) specifies a penalty range of suspension for five years to revocation for each violation of Section 475.25(1)(b). There are two separate series of violations of this section in this case. One involves withdrawals of commissions to which Respondent was not entitled, and one involves misrepresentations as to who was holding the escrow funds.

24. There is no evidence that the misrepresentations caused any financial harm to anyone. There is some evidence that the wrongful withdrawals of commissions caused financial harm to GSD. However, the extent of this harm is difficult to assess given the current record and complexity of the relationship that existed between Respondent and GSD.

Clearly, the present record does not allow the kind of accounting that needs to take to sort out the financial affairs of GSD and its investors and agents.

RECOMMENDATION

It is

RECOMMENDED that the Florida Real Estate Commission enter a final order suspending Respondent's license for five years.

DONE AND ENTERED this 4th day of September, 1997, in Tallahassee, Leon County, Florida.

ROBERT E. MEALE

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 4th day of September, 1997.

COPIES FURNISHED:

Geoffrey T. Kirk, Senior Attorney Department of Business and

Professional Regulation Division of Real Estate

400 West Robinson Street Orlando, Florida 32802

James H. Gillis

James H. Gillis & Associates, P.A. Law Offices of Gillis & Wilsen 1415 East Robinson Street, Suite B Orlando, Florida 32801-2169

Henry M. Solares Division Director Division of Real Estate Post Office Box 1900

Orlando, Florida 32802-1900

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 must be filed with the agency that will issue the final order in this case.

Docket for Case No: 96-004718

Orders for Case No: 96-004718