STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND ) PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 97-4950

)

EDWARD D. ARMBRUSTER, ) COLEEN MICHELE ARMBRUSTER, ) and ARMBRUSTER REALTY, INC., )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case on June 1, 1998, in DeFuniak Springs, Florida, before Donald R. Alexander, the assigned Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Christine M. Ryall, Esquire

400 West Robinson Street Suite N-308

Orlando, Florida 32801-1772

For Respondents: Edward D. Armbruster, pro se

Colleen Michele Armbruster, pro se Post Office Box 635

DeFuniak Springs, Florida 32435 STATEMENT OF THE ISSUE

The issue is whether Respondents' real estate licenses should be disciplined on the ground that Respondents allegedly

violated a rule and various provisions within Chapter 475, Florida Statutes, as charged in the Administrative Complaint.

PRELIMINARY STATEMENT

This matter began on September 18, 1997, when Petitioner, Department of Business and Professional Regulation, Division of Real Estate, issued an Administrative Complaint alleging that Respondents, Edward D. Armbruster, Colleen Michele Armbruster, and Armbruster Realty, Inc., all licensed as realtors, had violated a rule and various provisions within Chapter 475, Florida Statutes, by failing to notify the Florida Real Estate Commission of conflicting demands for an earnest money deposit held by Respondents in conjunction with a 1996 transaction.

Respondents denied the allegations and requested a formal hearing under Section 120.569, Florida Statutes, to contest the charges. The matter was referred by Petitioner to the Division of Administrative Hearings on October 22, 1997, with a request that an Administrative Law Judge be assigned to conduct a formal hearing. By Notice of Hearing dated December 4, 1997, a final hearing was scheduled on March 11, 1998, in Panama City, Florida. At Petitioner's request, the case was continued to June 1, 1998, in Defuniak Springs, Florida. On May 28, 1998, the case was transferred from Administrative Law Judge P. Michael Ruff to the undersigned.

At final hearing, Petitioner presented the testimony of James B. Patten and Joyce Patten, the complaining consumers; and

Monica Uher, a former agency investigator. Also, it offered

Petitioner's Exhibits 1-7. All exhibits were received in evidence. Respondents testified on their own behalf.

The transcript of hearing was filed on June 30, 1998.

Proposed findings of fact and conclusions of law were filed by Petitioner on July 9, 1998, and they have been considered by the undersigned in the preparation of this Recommended Order.

FINDINGS OF FACT

Based upon all of the evidence, the following findings of fact are determined:

1. When the events herein occurred, Respondents, Edward D. Armbruster and Colleen Michele Armbruster, were licensed real estate brokers having been issued license numbers 0002159 and 0362890, respectively, by Petitioner, Department of Business and Professional Regulation, Division of Real Estate (Division). Respondents served as qualifying brokers and officers of Respondent, Armbruster Realty, Inc., a corporation registered as a real estate broker and located at 1031 West Nelson Avenue, DeFuniak Springs, Florida. The corporation holds license number 0211855, also issued by the Division.

2. On July 10, 1996, Gerald and Joyce Singleton, who had just relocated to California, entered into a contract with James B. and Joyce Patten to sell their single-family residence

   located on Madison Street in the City of Freeport, Florida, for a price of $78,000.00. The contract called for the Pattens to pay

   $1,000.00 as an earnest money deposit, to be held in escrow by

   Respondents. The contract further provided that "[c]losing shall be within 30 days (more or less) after acceptance of this contract," and that "[i]n the event that buyer defaults and deposit is forfeited, it is agreed said deposit shall be divided equally between seller and broker." The transaction was handled by Geraldine Dillon (Dillon), a salesperson in Respondents' office, who is now retired.

3. Because the Pattens had recently moved to Walton County from Washington State, and they were temporarily living with a relative in a mobile home, the time for closing was of the essence. Accordingly, the Pattens inserted into the contract a provision requiring that a closing be held within "30 days (more or less)." This meant that a closing should be held on or about August 10, 1996, give or take a few days.

4. The parties acknowledge that property boundary problems were somewhat common in certain areas of Freeport, including the area where the subject property was located. To satisfy the bank and title company, a surveyor was engaged to prepare a survey of the property. However, the parties agree that the surveyor noted problems with the boundaries of the lot. When a second surveyor would not undertake the survey because of similar boundary problems, Joyce Patten, who was the principal negotiator for the couple, notified Dillon that they did not wish to close because of potential title problems and wanted a refund of their deposit.

5. Notwithstanding this concern, Dillon advised Joyce

   Patten that a third surveyor would be hired, at the seller's expense, and he could "certify" the property. Although Joyce Patten expressed concern that the bank might not accept a third survey after two earlier ones had failed, and she did not want to pay for another survey, she did not instruct Dillon to stop the process. Accordingly, Dillon engaged the services of Tommy Jenkins, a local surveyor, to perform another survey.

6. After a certified survey was obtained by Jenkins on August 12, 1996, which Respondents represent without contradiction satisfied the lender and title company, a closing was scheduled within the next few days. This closing date generally conformed to the requirement that a closing be held by August 10, 1996, "more or less." The seller, who by now had relocated to California, flew to Florida for the closing, and the title company prepared a closing statement and package. Just before the closing, however, Respondents learned through a representative of the title company that the Pattens were "cancelling the closing," apparently in violation of the contract.

7. Shortly after the aborted closing, Joyce Patten requested that Dillon return their deposit. By this time, the Pattens had already entered into a second contract to buy another home in the same area and closed on that property before the end of August. Respondents were never informed of this fact by the Pattens.

8. On August 21, 1996, Colleen Armbruster prepared a rather lengthy letter to the Pattens (with a copy to the sellers) in which she acknowledged that they had orally requested from Dillon that their escrow deposit be returned. The letter has been received in evidence as Petitioner's Exhibit 4. Armbruster stated that she was "perplexed" that they were demanding a refund of their earnest money deposit, given the fact that the seller had "met the terms and conditions of the sale." Armbruster outlined the three reasons in the contract which would allow the Pattens to withdraw without forfeiting their deposit, but noted that none were applicable here. Accordingly, she advised them that the seller would be consulted as to his wishes regarding the deposit, and that the Pattens should contact her if they had any questions.

9. Through oversight, however, she did not include a notice to the Pattens that they must respond to her letter within a stated period of time reaffirming their demand for the trust funds, or the deposit thereafter would be disbursed pursuant to the contract. By failing to include this specific language, and sending the letter by regular rather than certified mail, return receipt requested, Respondents committed a technical, albeit minor, violation of an agency rule. Even so, the Pattens acknowledged receiving the letter, and there is no reason to believe that they did not understand its import, especially the requirement that they contact the broker if they disagreed with

   the proposed disbursement of the money. It can be reasonably inferred that the Pattens did not respond because they "figured [they weren't] going to be able to get [their] money back" due to their failure to perform.

10. On September 13, 1996, the seller's attorney advised the Pattens by letter that the seller considered the deposit forfeited pursuant to paragraph 15(a) of the contract, which pertains to the "Default" provisions.

11. The Pattens never responded to either letter, and they also failed to respond to telephone calls made by Respondents or their agents regarding this matter. In view of the Pattens' lack of response or reaffirmance of their demand, and the fact that they had already closed on another property, Respondents logically and fairly assumed that the Pattens were in agreement with the disbursement procedures outlined in Coleen Armbruster's letter of August 21.

12. Accordingly, on September 17, 1996, Edward Armbruster, who had not been involved in this transaction to date, in good faith signed two disbursement checks giving $697.50 to the seller and retaining the balance for his firm. This division was consistent with the terms of the contract. In making this disbursement, there was no intent on the part of Respondents to trick, deceive, breach their trust, or in any way unlawfully deprive the Pattens of their deposit.

13. Respondents did not notify the Florida Real Estate

    Commission (Commission) that they had received conflicting demands for a deposit, nor institute any other procedures regarding the deposit, since they no longer had any good faith doubt as to whom was entitled to their trust funds. This was because the Pattens had failed to respond to letters and telephone calls regarding the sellers' claim to the deposit.

14. There is no evidence that Respondents have ever been the subject of prior disciplinary action during their lengthy tenure as licensees. At the same time, it is noted that Respondents acted in good faith throughout the process and genuinely believed that there was no dispute. It should also be recognized that, for at least part of the time, the Pattens were working two contracts simultaneously without advising the realtors.

    CONCLUSIONS OF LAW

    
    

15. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties hereto pursuant to Sections 120.569 and 120.57(1), Florida Statutes.

16. Because Respondents' professional licenses are at risk, Petitioner bears the burden of proving by clear and convincing evidence that the allegations in the complaint are true. See, e.g., Ramsey v. Dep't of Prof. Reg., Division of Real Estate,

    574 So. 2d 291 (Fla. 5th DCA 1991).

    
    

17. The nine-count complaint alleges that each Respondent

    
    

    (a) violated Sections 475.25(1)(d)1. and 475.25(1)(e), Florida

    Statutes (Supp. 1996), and Rule 61J2-10.032(1), Florida Administrative Code, by their "failure to provide written notification to the Commission upon receiving conflicting demands within 15 days of last party's demand or upon a good faith doubt as to whom is entitled to any trust funds held in the broker's escrow account and failure to institute one of the settlement procedures as set forth in s. 475.25(1)(d)1. within 30 business days after the lsat (sic) demand or good faith doubt" (Counts I, IV, and VII); (b) violated Section 475.25(1)(k), Florida Statutes, by their "failure to maintain trust funds in the real estate brokerage bank account or some other proper depository until disbursement thereof was properly authorized" (Counts II, V, and VIII); and (c) were "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" (Counts III, VI, and IX). In its proposed order, Petitioner has limited the charges in the latter count to culpable negligence and breach of trust in a business transaction.

18. By failing to follow the procedures under Rule 61J2- 10.032(1)(c), Florida Administrative Code, which contemplate that Respondents notify the Pattens by certified mail that, absent a reply within a stated period of time, their deposit would be disbursed to the seller and broker pursuant to the contract, Respondents technically violated, albeit unintentionally, the

    terms of the foregoing rule, as alleged in Counts I, IV, and VII. This in turn constituted a violation of Section 475.25(1)(e), Florida Statutes, which makes it unlawful to violate any agency rule.

19. Because the evidence establishes that, under the facts of this case, Respondents were not in doubt as to whom was entitled to the buyers' deposit, there was no obligation on their part to notify the Commission of having received conflicting demands for trust funds held in their escrow account. Similarly, under the circumstances found herein, they did not unlawfully disburse escrowed funds. Accordingly, the allegation in Counts I, II, IV, V, VII, and VIII that they violated Sections 475.25(1)(d)1. and (k), Florida Statutes, must fail.

    
    

20. Because there was no intent on the part of Respondents to commit culpable negligence or breach of trust in a business transaction, Counts III, VI, and IX must also fail. See, e.g., Munch v. Dep't of Prof. Reg., 592 So. 2d 1136, 1143-44 (Fla. 1st DCA 1992)(in order to find a violation of Section 475.25(1)(b), there must be an intentional act on the part of a licensee).

21. Rule 61J2-24.001, Florida Administrative Code, provides a range of disciplinary guidelines from which disciplinary penalties will be imposed upon licensees guilty of violating Chapter 475, Florida Statutes. For a violation of Section 475.25(1)(e), the rule provides that the "usual action of the

    Commission" shall be to impose a penalty ranging from "an 8 year suspension to revocation and an administrative penalty of

    $1,000."

    
    

22. Paragraph (4) of the same rule identifies aggravating and mitigating circumstances which if present entitle the Commission to deviate from the foregoing guidelines. Relevant to this proceeding are the mitigating circumstances set forth in Finding of Fact 14. Further, Edward Armbruster's involvement here is only through imputation as the principal qualifying broker, while Coleen Armbruster had no active role in the transaction until after the aborted closing. Given the lack of any intent by Respondents to violate a rule or statute, and the extremely minor nature of the offense, a deviation from the guidelines is clearly warranted. A reprimand is an appropriate penalty.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is

RECOMMENDED that the Florida Real Estate Commission enter a Final Order finding Respondents guilty of a technical violation of Rule 61J2-10.032(1), Florida Administrative Code, and Section 475.25(1)(e), Florida Statutes, and that they be given a reprimand. All other charges should be dismissed.

DONE AND ENTERED this 28th day of July, 1998, in

Tallahassee, Leon County, Florida.

DONALD R. ALEXANDER

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 28th day of July, 1998.

COPIES FURNISHED:

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

Orlando, Florida 32802-1900

Christine M. Ryall, Esquire

400 West Robinson Street Suite N-308

Orlando, Florida 32801-1772

Edward D. Armbruster Colleen M. Armbruster Post Office Box 635

DeFuniak Springs, Florida 32433

Lynda L. Goodgame, Esquire Department of Business and

Professional Regulation 1940 North Monroe Street

Tallahassee, Florida 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 Florida Real Estate Commission.

Docket for Case No: 97-004950

Orders for Case No: 97-004950