STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 98-0888

) GERALDINE R. SULLIVAN and GERRY ) SULLIVAN AND ASSOCIATES REALTY, )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case on May 7, 1998, by video teleconference between Tallahassee, Florida, and Fort Lauderdale, Florida, before Claude B. Arrington, a duly designated Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Geoffrey T. Kirk, Esquire

Department of Business and Professional Regulation, Division of Real Estate

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

For Respondent: Lawrence Bunin, Esquire

Lawrence Bunin, P.A.

140 C South University Drive Plantation, Florida 33324

STATEMENT OF THE ISSUES

Whether Respondents committed the offenses alleged in the Administrative Complaint and the penalties, if any, that should

be imposed.

PRELIMINARY STATEMENT

Respondent, Geraldine R. Sullivan, is a real estate broker who owns and qualifies the corporate entity, Gerry Sullivan and Associates Realty, which is a Century 21 affiliate. On

January 22, 1998, Petitioner filed against Respondents a two count Administrative Complaint pertaining to a transaction involving a seller named Elaine P. Martin. Subsequent to the execution of the listing agreement, Respondents asserted the entitlement to a transaction fee that was not disclosed when the listing contract was signed. The Administrative Complaint alleged that Ms. Sullivan (in Count One), and that the corporation (in Count Two), were ". . . guilty of dishonest dealing by trick, scheme or device, concealment, or breach of duty to a seller in a real estate transaction in this State, and [were] guilty of violating a duty imposed by law, either or both in violation of Section 475.25(1)(b), Fla. Stat."

Respondents timely challenged the allegations of the Administrative Complaint, the matter was referred to the Division of Administrative Hearings, and this proceeding followed.

At the formal hearing, Petitioner presented the testimony of three witnesses and presented seven exhibits, each of which was accepted into evidence. Respondent presented the testimony of two witnesses and presented five exhibits, each of which was accepted into evidence. In addition, official recognition was taken of Chapter 475, Florida Statutes, and Chapter 61J2, Florida

Administrative Code.

A transcript of the proceedings has been filed. At the request of the parties, the time for filing post-hearing submissions was set for more than ten days following the filing of the transcript. Consequently, the parties waived the requirement that a recommended order be rendered within thirty days after the transcript is filed. Rule 28-106.216(2), Florida Administrative Code. The Petitioner and Respondent filed proposed recommended orders, which have been duly considered by the undersigned in the preparation of this Recommended Order.

FINDINGS OF FACT

1. Petitioner is a state licensing and regulatory agency charged with the responsibility and duty to prosecute administrative complaints pursuant to the laws of the State of Florida, in particular, Chapters 455 and 475, Florida Statutes, and Title 61J2, Florida Administrative Code.

2. At all times pertinent to this proceeding, Respondent, Gerry Sullivan & Associates Realty, Inc., was a corporation registered as a real estate broker in the State of Florida, having been issued license number 0215569 in accordance with Chapter 475, Florida Statutes. The last license issued for that corporation was at the address of 7169 West Broward Boulevard, Plantation, Florida.

3. At all times pertinent to this proceeding, Respondent, Geraldine R. Sullivan, was a licensed real estate broker in the State of Florida, having been issued license number 0086238 in

   accordance with Chapter 475, Florida Statutes.

4. At all times pertinent to this proceeding, Respondent, Geraldine R. Sullivan, was the qualifying broker and office manager of the corporate Respondent.

5. At all times pertinent to this proceeding, Jim Sullivan and Pamela Sullivan were real estate salespersons in the State of Florida and employed by the corporate Respondent. Jim Sullivan is the son of Geraldine R. Sullivan and the husband of Pamela Sullivan.

6. On June 16, 1997, Elaine P. Martin entered into a listing agreement with the corporate Respondent to sell her condominium for the price of $32,900. The listing agreement provided for the seller (Ms. Martin) to pay a brokerage commission of 6% that would be reduced to 5% if Jim Sullivan or Pamela Sullivan found the buyer without the involvement of another broker. The listing agreement also provided that

   Ms. Martin would pay a processing fee in the amount of $150.1 The listing agreement did not refer to a transaction fee.2 Ms. Martin did not agree to pay any fees other than the commission and the processing fee.

7. In 1996, the corporate Respondent began a practice of charging sellers in certain transactions a fee, referred to as a transaction fee, that was in addition to the processing fee and the commission. The transaction fee was used by the salesperson to pay the salesperson's "facilitator," a person employed by the salesperson to run errands to facilitate the closing of the

   transaction. Examples of the type errands performed by the facilitator included meeting persons at the property to perform inspections and delivering documents. The practice of charging a transaction fee was not uncommon in Broward County, but it was not standard practice. Whether a particular seller would be charged a transaction fee depended, in part, on the listing salesperson. Typically, if a salesperson employed by the corporate Respondent did not us a facilitator, no transaction fee would be charged.

8. The minutes of the Florida Real Estate Commission for July 16-17, 1996, contain the following entry:

   It was decided that as long as there is disclosure to all parties involved, the transaction fees indicated on closing statements is not a violation of F.S. 475.

   
   

9. The customary practice of the corporate Respondent in June of 1997 was for its salesperson to complete a "net sheet" at the time the listing agreement is executed. The "net sheet" is a good faith estimate of the seller's expenses and reflects the estimated amount the seller will net from the transaction. The evidence established that Respondent, Geraldine R. Sullivan, and Pamela Sullivan could not locate in the Martin file a net sheet was prepared on or about the time Ms. Martin executed the listing agreement on June 16, 1997. From that evidence, and from the testimony of Ms. Martin, it is found that Jim Sullivan did not complete a net sheet when he and Ms. Martin executed the listing agreement.

10. The listing agreement created a principal/agent relationship between Ms. Martin, as the seller, and the corporate Respondent, as the agent. At all times pertinent to this proceeding, the corporate Respondent and Geraldine R. Sullivan, as the qualifying broker of the corporate Respondent, were the agents of Ms. Martin and owed her the fiduciary duties of an agent.

11. In connection with the subject listing agreement, Ms. Martin executed an Agency Disclosure Statement which set forth the fiduciary duties owed by the agent to the principal, in pertinent part, as being the ". . . fiduciary duties of loyalty, confidentiality, obedience, full disclosure, accounting and the duty to use skill, care and diligence." In addition, the statement set forth that the agent owed the duty of honesty and fair dealing.3

12. A buyer working through another real estate broker made an offer to purchase the Martin property for the sum of $30,000. The offer, dated June 22, 1997, was presented to Ms. Martin by Pamela Sullivan. Because another real estate broker was involved, the real estate commission was based on 6% of the sales price.

13. On June 22, 1997, Pamela Sullivan discussed the offer with Ms. Martin by telephone and informed her, for the first time, of the transaction fee. Later that day, Pamela Sullivan and Ms. Martin met and Pamela Sullivan prepared a "net sheet"

    that reflected the seller's estimated closing costs. The transaction fee in the amount of $3004 was reflected on the net sheet as an expense of the seller.

14. As of June 22, 1997, Pamela Sullivan knew or should have known that the file on the Martin transaction maintained by

    her office did not contain a net sheet that was executed at the same time the listing agreement was executed.

15. Prior to signing the contract or the net sheet on

    
    

    June 22, 1997, Ms. Martin placed a question mark next to the line on which the transaction fee was disclosed. Ms. Martin questioned the charge because she did not understand what was being done to earn that fee. Ms. Martin did not accept the explanations Pamela Sullivan gave for the transaction fee. Ms.

    Martin thereafter had Pamela Sullivan insert the following as a special condition of the contract:

    The seller reserves the right to have her attorney review the contract at his earliest opportunity.

    
    

16. After the special condition was signed, Ms. Martin signed the contract and the net sheet.

17. The net sheet was intended to be informational. By signing the net sheet, Ms. Martin did not intend to agree to pay the $300 transaction fee.

18. Ms. Martin did not agree in writing or verbally to pay the transaction fee.

19. Between June 22 and June 25, 1997, Pamela Sullivan, on behalf of the corporate Respondent, reduced the amount of the claimed transaction fee from $300 to $200.

20. Following the execution of the Sales Contract, Ms. Martin had her attorney review the contract and the net sheet. Ms. Martin informed her attorney by memo dated June 25, 1997, in

    pertinent part, as follows:

    . . . We disputed the Transaction Fee of

    $300.00 and Century 21 lowered it to $200. We asked Pam Sullivan for a break down (sic) on the $200.00 cost. She refused to provide any; stated it was the cost of doing business. Since the housing prices in Broward County have not increased, they

    charge this extra fee along with their normal commission. . . .

21. Ms. Martin sent a copy of her memo to Pamela Sullivan.

    
    

22. Ms. Martin's attorney accepted the sales contract without any changes and informed her that he would address the issue of the transaction fee at the time of the closing.

23. On the day of the closing, Ms. Martin's attorney telephoned Respondent, Geraldine R. Sullivan, to discuss the transaction fee. Geraldine R. Sullivan would not agree to waive the transaction fee after she learned that there was a signed net sheet. She did not realize that there was no net sheet prepared when the listing agreement was first executed. This was the only direct dealing Respondent, Geraldine R. Sullivan, had with this transaction.

24. Between June 25, 1997, the date of Ms. Martin's memo, and July 7, 1997, the date of the closing, neither Ms. Martin nor her attorney voiced additional objection to the transaction fee.5

25. The transaction closed on July 7, 1997. The sum of

    
    

    $200, representing the amount of the disputed transaction fee, was placed in escrow by the closing agent, where it remained at the time of the formal hearing.

26. All other fees and costs were paid at closing,

    including a brokerage commission of $1,800 (which was split with

    the realtor representing the buyer) and a processing fee of $150 (which was retained by the corporate Respondent).

    CONCLUSIONS OF LAW

    
    

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

28. Petitioner has the burden of proving by clear and convincing evidence the allegations against Respondent. See Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987); Evans Packing Co. v. Department of Agriculture and Consumer Services, 550

    So. 2d 112 (Fla. 1st DCA 1989).

    
    

29. Section 475.25(1), Florida Statutes, provides, in pertinent part, as follows:

    1. The commission may deny an application for licensure, registration, or permit, or renewal thereof; may place a licensee, registrant, or permittee on probation; may suspend a license, registration, or permit for a period not exceeding 10 years; may revoke a license, registration, or permit; may impose an administrative fine not to exceed $1,000 for each count or separate offense; and may issue a reprimand, and any or all of the foregoing, if it finds that the licensee, registrant, permittee, or applicant:

       
       

       * * *

       
       

       (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 in this state or any other state, nation, or territory; has violated a duty imposed upon her or him by

       law or by the terms of a listing contract, written, oral, express, or implied, in a real estate transaction; has aided, assisted, or conspired with any other person engaged in any such misconduct and in furtherance thereof; or has formed an intent, design, or scheme to engage in any such misconduct and committed an overt act in furtherance of such intent, design, or scheme. It is immaterial to the guilt of the licensee that the victim or intended victim of the misconduct has sustained no damage or loss; that the damage or loss has been settled and paid after discovery of the misconduct; or that such victim or intended victim was a customer or a person in confidential relation with the licensee or was an identified member of the general public.

30. The first clause of Section 475.25(1)(b), Florida Statutes provides as follows:

    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 in this state or any other state, nation, or territory . . .

    
    

31. In Munch v. Dept. of Prof. Regulation, 592 So. 2d 1136 (Fla. 1st DCA 1992), the Court made the following observations about the first clause of Section 475.25(1)(b), Florida Statutes, at 1143-1144:

    It is clear that Section 475.25(1)(b) is penal in nature. As such, it must be construed strictly, in favor of the one against whom the penalty would be imposed.

    . . . Reading the first clause of Section 475.25(1)(b) . . . and applying to the words used their usual and natural meaning, it is apparent that it is contemplated that an intentional act be proved before a violation may be found. See Rivard v. McCoy, 212

    So. 2d 672 (Fla. 1st DCA), cert. denied,

    219 So. 2d 703 (Fla. 1968).

    (Emphasis in the original.)

    
    

32. Petitioner failed to establish by clear and convincing evidence that the conduct of the Respondents fell within the purview of the first clause of Section 475.25(1)(b), Florida Statutes. No employee of the corporate Respondent committed an intentional act in connection with the Martin transaction that should be considered to be "fraud," "misrepresentation," "concealment," "false promises," "dishonest dealing," "culpable negligence," or "breach of trust."

33. The second clause of Section 475.25(1)(b), Florida Statutes, is as follows:

    . . . has violated a duty imposed upon her or him by law or by the terms of a listing contract, written, oral, express, or implied, in a real estate transaction . . .

    
    

34. The discussion of the first clause in Munch, supra, is also pertinent to the provisions of the second clause of Section 475.25(1)(b), Florida Statutes, which essentially prohibits misconduct on the part of a real estate professional. Petitioner correctly asserts that Respondents owed Ms. Martin the fiduciary duties an agent owes to a principal. Section 475.01(1)(f), Florida Statutes, defines the term "fiduciary" as follows:

    (f) "Fiduciary" means a broker in a relationship of trust and confidence between that broker as agent and the seller or buyer as principal. The duties of the broker as a fiduciary are loyalty, confidentiality, obedience, full disclosure, and accounting and the duty to use skill, care, and diligence.

35. As reflected by the FREC minutes dated July 16-17, 1996, a transaction fee is not per se impermissible, provided that there is appropriate disclosure. How and when the disclosure of a transaction fee has to be made is not governed by

    rule. Respondents established that at least in Broward County, there was some confusion as to those disclosure requirements at the time the Martin listing was taken.

36. Because the fees and costs to be paid by a seller in a real estate transaction are governed by contract, which in this case was the listing agreement, it is concluded that any transaction fee should have been disclosed to the seller at the time the listing agreement was executed, whether by the listing agreement itself or by a contemporaneous net sheet.

37. Petitioner established by clear and convincing evidence that Jim Sullivan took the listing agreement, but that he violated company policy by not completing a net sheet when he took the listing agreement. Had he followed company policy, appropriate disclosure of the transaction fee would have been made, and Ms. Martin could have decided whether to use the services of the corporate Respondent or the services of another realtor.

38. After her husband took the listing, Pamela Sullivan became involved in the transaction and was the employee of the corporate Respondent who, along with her closing facilitator, dealt with Ms. Martin. Pamela Sullivan knew or should have known that her file did not contain a net sheet that disclosed to

    Ms. Martin that a transaction fee would be imposed at closing. Notwithstanding the absence of a net sheet, Pamela Sullivan asserted after there was an offer in hand that Ms. Martin would

    have to pay a transaction fee at the closing. The timing of the assertion took unfair advantage of the client because it placed her in the posture of acquiescing to the fee, losing the contract, or becoming involved in litigation. It is concluded that Pamela Sullivan breached her duty to fairly and fully disclose the fees to be charged to her client.

39. Based on the foregoing, it is concluded that Pamela Sullivan engaged in misconduct within the meaning of the second clause of Section 475.25(1)(b), Florida Statutes.

40. The corporate Respondent is responsible for the acts of its employee. There was no showing that Geraldine R. Sullivan personally engaged in misconduct.

41. The following recommended penalty is based on the guidelines contained in Rule 61J2-24.001(3), Florida Administrative Code.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered that finds the corporate Respondent guilty of violating Section 475.25(1)(b), Florida Statutes, and finds Geraldine R. Sullivan not guilty of that charge.

It is further RECOMMENDED that the corporate Respondent be reprimanded and fined in the amount of $1,000.

DONE AND ENTERED this 4th day of August, 1998, in Tallahassee, Leon County, Florida.

CLAUDE B. ARRINGTON

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 4th day of August, 1998

ENDNOTES

1/ In 1996, the corporate Respondent began charging sellers a fee in the amount of $150 that was in addition to the commissions charged. This fee, referred to as a processing fee, was retained by the corporation (as opposed to being disbursed to the listing salesperson) to pay overhead charges, including multiple listing service charges. The processing fee is not at issue in this proceeding and is not the transaction fee that is discussed later in this Recommended Order.

2/ Ms. Martin testified, credibly, that she was looking for a realtor with the lowest commission and that she would not have listed her property with the corporate Respondent had she known that she would be charged a $300 transaction fee.

3/ The disclosure form complied with the provisions of Section 475.278, Florida Statutes, which require such disclosure.

4/ The corporate Respondent subsequently reduced the transaction fee from $300 to $200.

5/ The inference from that testimony is that Ms. Martin agreed to the reduced fee. That inference is refuted by the clear evidence that Ms. Martin never intended to agree to pay the transaction fee, whether in the amount of $300 or $200.

COPIES FURNISHED:

Geoffrey T. Kirk, Esquire Department of Business and

Professional Regulation Division of Real Estate Post Office Box 1900

Orlando, Florida 32802-1900

Lawrence Bunin, Esquire Lawrence Bunin, P.A.

140 C South University Drive Plantation, Florida 33324

Geraldine R. Sullivan

Gerry Sullivan and Associates Realty 7169 West Broward Boulevard Plantation, Florida 33317

Henry M. Solares, Director Division of Real Estate Department of Business and

Professional Regulation 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

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.

1 In 1996, the corporate Respondent began charging sellers a fee in the amount of $150 that was in addition to the commissions charged. This fee, referred to as a processing fee, was retained by the corporation (as opposed to being disbursed to the listing salesperson) to pay overhead charges, including multiple listing service charges. The processing fee is not at issue in this proceeding and is not the transaction fee that is discussed later in this Recommended Order.

2 Ms. Martin testified, credibly, that she was looking for a realtor with the lowest commission and that she would not have listed her property with the

corporate Respondent had she known that she would be charged a $300 transaction fee.

3 The disclosure form complied with the provisions of Section 475.278, Florida Statutes, which require such disclosure.

4 The corporate Respondent subsequently reduced the transaction fee from $300 to $200.

5 The inference from that testimony is that Ms. Martin agreed to the reduced fee. That inference is refuted by the clear evidence that Ms. Martin never intended to agree to pay the transaction fee, whether in the amount of $300 or

$200.

Docket for Case No: 98-000888

Orders for Case No: 98-000888