DEPARTMENT OF BUSINESS AND ) PROFESSIONAL REGULATION, DIVISION ) OF REAL ESTATE, )
vs. ) Case No. 98-3521
JUDY K. PALMER, )
Respondent. )
DEPARTMENT OF BUSINESS AND ) PROFESSIONAL REGULATION, DIVISION ) OF REAL ESTATE, )
vs. ) Case No. 98-3522
) JUDY K. PALMER and ERA SOLUTIONS ) IN REAL ESTATE, INC., )
Respondents. )
On October 13, 1998, a formal administrative hearing was held in these cases in Lakeland, Florida, before J. Lawrence Johnston, Administrative Law Judge, Division of Administrative Hearings.
For Petitioner: Steven W. Johnson, Senior Attorney
For Respondent: Judy K. Palmer
The issues in these cases are whether the Florida Real Estate Commission should discipline Judy K. Palmer (Palmer) and her real estate brokerage, ERA Solutions in Real Estate, Inc. (ERA Solutions in Real Estate), for alleged violations of Chapter 475, Florida Statutes (1997).
On May 20, 1998, the Florida Department of Business and Professional Regulation, Division of Real Estate (the Petitioner or Division) filed an Administrative Complaint against Palmer, FDBPR Case Nos. 97-84801 and 97-85465. On July 13, 1998, the Petitioner filed an Administrative Complaint against Palmer and ERA Solutions in Real Estate, FDBPR Case Nos. 97-80764, 98-80700, and 97-82812. Palmer and ERA Solutions in Real Estate requested formal administrative proceedings, and the cases were referred to the Division of Administrative Hearings (DOAH), where they first were given DOAH Case Nos. 98-3521 and 98-3522 and then were consolidated. Final hearing was scheduled for October 13, 1998.
At final hearing, the Petitioner called eleven witnesses and had Petitioner's Exhibits 1 through 12 admitted in evidence.
Palmer testified on behalf of herself and ERA Solutions in Real Estate. The Petitioner ordered the preparation of a transcript
of the final hearing, and the parties were given ten days from the filing of the transcript to file proposed recommended orders.
The transcript was filed on November 12, 1998. Only the Petitioner filed a Proposed Recommended Order.
The charges alleged violations arising out of four factual settings. At all times material to the charges, the Respondent, Judy K. Palmer (Palmer), was a licensed Florida real estate broker under license number 0574496.
Palmer was the qualifying broker for Palmer Realty of Central Florida, Inc. (Palmer Realty), from January 1996 until Palmer Realty was deactivated. Although the evidence is not clear, it appears that Palmer Realty was deactivated in June 1996. Palmer claims that she did not intend to deactivate Palmer Realty in June 1996 but only had her office inquire as to deactivation procedures.
In late 1996 (Palmer testified to late 1997, but she must have misspoken), Palmer entered into negotiations to purchase an ERA franchise. Complications arose, and the transaction was not completed until March 1997. Although it is alleged in the Administrative Complaint against Palmer that Palmer applied for licensure of the Respondent, ERA Solutions in Real Estate, Inc. (ERA Solutions in Real Estate), in March 1997, it appears from the evidence that Palmer actually applied on June 13, 1997. The application was approved, and it appears from the evidence that Palmer became the qualifying broker for ERA Solutions in Real Estate effective on June 13, 1997.
At the same time, Palmer conducted business as a principal and officer of a brokerage of mobile homes on leased property, an activity that does not require licensure as a real estate broker or salesperson. Initially, Palmer conducted her business through an entity called Affordable Lifestyle Homes, Inc. (Affordable Lifestyle). At approximately the time she began to conduct her real estate business through ERA Solutions in Real Estate in March 1997, Palmer began to conduct her mobile homes sales business through ERA Solutions, Inc. (ERA Solutions).
Palmer testified without contradiction that she was not a broker in the mobile homes sales business. However, because her real estate brokerage was conducted in the same building as her mobile home sales business, customers sometimes confused the two businesses, and mobile home customers sometimes believed that they were doing business with the real estate brokerage and that Palmer also was a broker for the sale of mobile homes on leased property.
The Hinkles and Conklin
The Administrative Complaint against Palmer alleged violations arising out of the handling of a $1,000 deposit on the purchase of real property in Lakeland, Florida. Actually, no real property was involved. It also was alleged that the deposit was placed in the Affordable Lifestyles escrow account.
Actually, the money was placed into an ERA Solutions account; it is not clear from the evidence whether it was an escrow account.
It also was alleged that the deposit eventually was returned to the buyer; actually, it eventually was returned to the seller.
In early 1997, Joanne Conklin went to the offices of Affordable Lifestyle and Palmer Realty to list and sell a mobile home on leased property that had belonged to Conklin's recently deceased father. The evidence indicated that Conklin dealt with an individual named Bruce Shefler, but it did not seem to be clear to Conklin whether Shefler worked for Affordable Lifestyle or Palmer Realty, or both, or whether there was a difference between the two. Conklin did, however, understand that not all realtors sold mobile homes on leased property and that her choices were limited. Starting approximately March 1997, Conklin began to receive documentation bearing the name of ERA Solutions.
Disillusioned with the services she was getting, Conklin complained to Palmer, who tried to satisfy Conklin by switching her property to another mobile home salesperson named Sandi Stone. Still confused as to the relationship between the realty and the mobile homes sales entity, Conklin appears to have assumed incorrectly that Shefler and Stone were realtors.
On or about July 15, 1997, Don and Janet Hinkle made an offer to purchase Conklin's mobile home at close to the asking price, with a $1,000 deposit and a September 1, 1997, closing date. Conklin considered this to be the first "major offer," and she was inclined to accept. However, Conklin did not think the deposit was enough to take the property off the market for the
September closing date.
It is not clear from the evidence what happened at that point. Conklin thought the closing date was being changed to August 16, 1997, to allay her concerns. The face of the contract itself also indicates such a change of the closing date; however, it is not clear whether the change was made before or after the Hinkles signed the contract, or if the change ever was presented to them. Stone accepted the Hinkles' deposit by check made payable to ERA Solutions and placed the money in an ERA Solutions bank account. It was not clear if it was an escrow account.
Shortly before August 16, 1997, Stone telephoned Conklin and told her that the Hinkles' financing had been delayed and that closing would have to be delayed until September 1, 1997, after all. Conklin was upset and telephoned the Hinkles directly to inform them that she would require an additional deposit to hold the property off the market until September 1, 1997. The Hinkles in turn became upset because they professed not to have any knowledge of a closing prior to September 1, 1997. They also did not like the way the transaction was proceeding and decided they no longer wanted to buy Conklin's mobile home.
When told that the Hinkles would not close the contract, Conklin asked Palmer for the $1,000 deposit. Palmer told Conklin that that the property would go back on the market and that the deposit would be returned to the Hinkles.
When the Hinkles asked for the $1,000 deposit, Palmer told them that the deposit would be paid to Conklin and that the Hinkles might also have to pay for the mobile home. Based on this advice, the Hinkles felt that they were at the mercy of Conklin as to the return of the deposit.
Palmer did not report to the Florida Department of Business and Professional Regulation, Division of Real Estate
(the Division), that the demands had been made for the return of the deposit.
The Hinkles complained to the Division that their deposit had not been returned. During the investigation of the Hinkles' complaint, Palmer returned the deposit to them on December 11, 1997. Conklin did not object to the return of the deposit but would have objected to Palmer, ERA Solutions in Real Estate, ERA Solutions or Affordable Lifestyle keeping it.
The Snow Contract
The Administrative Complaint against Palmer alleged that Palmer continued to conduct business as Palmer Real Estate after it was deactivated by entering into a listing contract with the Snows between November 1996 and March 1997. But the Administrative Complaint alleged in two places that deactivation occurred on June 20, 1997. Palmer Real Estate actually appears to have been deactivated in June 1996, perhaps accidentally. See Finding 2, supra.
Palmer and Palmer Real Estate performed the Snow listing contract without any problems and to the satisfaction of the Snows.
The Karolishyn Contract
The Administrative Complaint against Palmer alleged that Palmer conducted business as ERA Solutions in Real Estate before it was licensed.
On or about March 13, 1997, Palmer, on behalf of ERA
Solutions in Real Estate, entered into a listing contract with Beatrice Karolishyn.
Palmer and ERA Solutions in Real Estate performed the Karolishyn listing contract without any problems and to the satisfaction of Karolishyn.
Alleged Misappropriation of Escrow Funds
In addition to the allegations against Palmer arising out of the Conklin/Hinkles transactions, the Administrative Complaint against Palmer and ERA Solutions in Real Estate alleged specific as well as wholesale misappropriation of escrow funds.
The Administrative Complaint against Palmer and ERA Solutions in Real Estate alleged that, on or about December 31, 1997, Donald J. (Jack) Miller, a salesperson employed by the Respondents, accepted a $100 deposit from Geneva McCoy on the purchase of a mobile home on leased property. It further alleged that, prior to closing, the Respondents converted the $100 to their own use and that the sellers were unable to fund the purchase of tags and title.
The evidence was that, after the McCoy deposit, the sale of Palmer's ERA franchise to another broker was initiated, and there was confusion as to whom McCoy was supposed to write her check for the balance of the purchase. In addition, McCoy wanted title to the mobile home to be taken in the names of both her and her son; title was delayed while information required by the Department of Highway Safety and Motor Vehicles was obtained
from her son. There was no evidence that the $100 deposit had anything to do with the delay in obtaining title to the mobile home.
On or about February 4, 1998, Palmer's ERA franchise was transferred to another broker. Miller was permitted to, and chose to, join the successor franchisee. At the McCoy closing, Miller discovered that McCoy was $100 short because the deposit had not been made available for the closing. Miller paid the
$100 out of his own pocket.
The Administrative Complaint against Palmer and ERA Solutions in Real Estate also alleged that, on or about February 10, 1998, Miller accepted a $1,000 deposit from Maxine Reed on the purchase of real property from Barbara L. McCarty. In fact, as reflected in the sales contract and deposit check attached to the Administrative Complaint, and confirmed by the
evidence presented at the hearing, the deposit was accepted on or about January 17, 1998.
When the McCarty/Reed transaction closed on
February 20, 1998, Miller participated in the closing in his new capacity as salesperson for the successor broker. As with the McCoy deal, the deposit was not made available for the closing. In order to proceed with the closing, Miller had to charge back the $1,000 against the broker's sales commission.
The evidence was that, after agreeing to sell her ERA franchise to another broker, Palmer attempted to renege and rescind the sale. She took the position that, at the time of the agreement, she was not thinking clearly because she was on medication for continuing emotional difficulties from the sudden
and tragic death of her daughter in a car accident in 1994.
Palmer sought to rescind the sale and viewed the transaction as a hostile takeover against her will.
The evidence did not prove why the McCoy and Reed down payments were not available for their closings. The money apparently remained in the ERA Solutions in Real Estate escrow account. On or about March 18, 1998, after both the sale of the ERA franchise and the closings, Palmer withdrew all funds from her ERA brokerage accounts (including the ERA Solutions in Real Estate and ERA Solutions escrow accounts) and closed the accounts. She used the funds in the account for her own purposes. These funds included the McCoy and Reed deposits.
It was Palmer's position that the successor broker was responsible for making the funds available for the closings and that the money in the ERA brokerage accounts rightfully belonged to her. There was no evidence as to the terms of the sale of the ERA franchises or the contemplated handling of the escrow funds. There also was no evidence that either Miller or the successor broker made a claim to the funds.
There also were general allegations in the Administrative Complaint against Palmer and ERA Solutions in Real Estate that the Respondents wrote payroll checks out of the ERA Solutions in Real Estate escrow account at Barnett Bank between August 1997 and January 1998. However, those allegations were not proven.
There also were general allegations in the
Administrative Complaint against Palmer and ERA Solutions in Real Estate that the Respondents "obtained deposits and misappropriated the deposits by improperly disbursing them to the operating account at Barnett Bank and/or by directly converting them to the use of the Respondent Judy K. Palmer." The only evidence of such a direct conversion of escrow funds was that Palmer once wrote a $200 to $400 check out of the escrow account for a personal health insurance premium. However, another broker brought this to Palmer's attention, and Palmer replaced the money, saying she accidentally had picked up the wrong check book. The evidence was that this occurred in December 1996, before Palmer began operating as ERA Solutions in Real Estate.
There also were general allegations in the Administrative Complaint against Palmer and ERA Solutions in Real Estate that the Respondents "converted approximately $14,200 in trust funds to the Respondents' general account and/or to Respondent Judy K. Palmer's own use." As reflected in the bank statement attached to the Administrative Complaint, the evidence proved that $14,200 was transferred out of the ERA Solutions in Real Estate escrow account during July 1997, but the evidence did not prove who transferred the funds, where the funds were transferred, or what they were used for.
The Administrative Complaint against Palmer and ERA Solutions in Real Estate also alleged that, on or about
January 28, 1998, First Union Bank froze all of the Respondents'
accounts, including escrow accounts, because of checks (including payroll checks) returned by reason of insufficient funds. The evidence proved that there was not much activity in the escrow account but that there was a substantial problem with deposits in the general accounts and that they were overdrawn by almost
$6,500 at the end of January 1998. There also was evidence that, as before, vendors were not being paid and were dunning the brokerage for payment and that checks on the general account were bouncing, including payroll checks.
CONCLUSIONS OF LAW
The burden is on the Division to proved its charges by clear and convincing evidence. Ferris v. Turlington, 510 So. 2d
292 (Fla. 1987). Moreover, the Division legally cannot find licensees guilty of violations not charged, making it important that administrative complaints be accurate and complete. See Ghani v. Dept. of Health, 714 So. 2d 1113 (Fla. 1st DCA 1998); Sternberg v. Dept. of Prof. Reg., Bd. of Med. Exam'rs, 465 So. 2d 1324 (Fla. 1st DCA 1985).
The Hinkles and Conklin
The charges alleged that Palmer committed the following violations in connection with the Hinkles/Conklin transaction:
Count I - Failure to account or deliver funds, in violation of Section 475.25(1)(d)1, Florida Statutes (1997);
Count II - Failure to institute one of the settlement procedures set forth in Section 475.25(1)(d)1, Florida Statutes (1997), within 30 days after the last demand, in
violation of Florida Administrative Code Rule 61J2-10.032(1) and therefore Section 475.25(1)(e), Florida Statutes (1997);
Count III - Culpable negligence or breach of trust in any business transaction, in violation of Section 475.25(1)(b), Florida Statutes (1997); and
Count IV - Failure to maintain trust funds in the real estate brokerage escrow bank account or some other proper depository until disbursement was properly authorized, in violation of Section 475.25(1)(k), Florida Statutes (1997).
The evidence is clear that the Hinkles/Conklin transaction did not involve real estate but rather a mobile home on leased property. The requirements for handling real estate escrow accounts applied to the transaction. See White v. Dept. of Bus. and Prof. Reg., 715 So. 2d 1130 (Fla. 5th DCA 1998); LaRossa v. Dept. Prof. Reg., 474 So. 2d 322 (Fla. 3d DCA 1985).
The evidence proved, however, that Palmer's handling of the requests from both the Hinkles and Conklin for the return of the deposit proved at least culpable negligence and breach of trust in a business transaction, in violation of Section 475.25(1)(b), Florida Statutes (1997). The evidence proved that Palmer told the Hinkles that they had lost their deposit and told Conklin that the deposit was being returned to the Hinkles. Meanwhile, unbeknownst to either, Palmer kept the deposit and did not return it until the Division investigated the Hinkles' complaint.
The Snow and Karolishyn Contracts
The charges alleged that Palmer committed the following violations in connection with the Snow and Karolishyn contracts:
Count IV [sic] - 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 violation of Section 475.25(1)(b), Florida Statutes (1997); and
Count V [sic] - Operating as a broker under the name of a corporation or as an officer or manager thereof, without the corporation being the holder of a valid current registration in violation of Section 475.42(1)(k), and therefore in violation of Section 475.25(1)(e), Florida Statutes (1997).
The evidence as to the Snow contract proved that Palmer conducted business as Palmer Realty after the deactivation of that license. The evidence as to the Karolishyn contract proved that Palmer and ERA Solutions in Real Estate conducted business as the latter entity before it was licensed. These were both violations of Section 475.42(1)(k), Florida Statutes (1997).
As to both the Snow and Karolishyn contracts, there was evidence of confusion on the part of Palmer as to the actual date of deactivation of Palmer Realty, if not also the licensure of ERA Solutions in Real Estate. Palmer Realty may have been deactivated accidentally, and Palmer seemed to think application for licensure of ERA Solutions in Real Estate occurred in March 1998. In any event, the evidence as to these matters did not prove fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or devise,
culpable negligence, or breach of trust in a business transaction, in violation of Section 475.25(1)(b), Florida Statutes (1997).
Alleged Misappropriation of Escrow Funds
The charges alleged that Palmer and Real Estate ERA Solutions committed the following violations in connection with the handling of escrow funds (other than the Hinkles/Conklin transaction):
Counts I, II, VII, and VIII - 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 violation of Section 475.25(1)(b), Florida Statutes (1997);
Counts III, IV, IX, and X - Failure to maintain trust funds in the real estate brokerage escrow bank account or some other proper depository until disbursement was properly authorized, in violation of Section 475.25(1)(k), Florida Statutes (1997); and
Counts V, VI, XI, and XII - Failure to account or deliver funds, in violation of Section 475.25(1)(d)1, Florida Statutes (1997).
Based on the findings, it is concluded that the evidence may have proven improper maintenance of trust funds; but the evidence did not prove either failure to account and deliver, or fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or devise, culpable negligence, or breach of trust in a business transaction, in connection with the trust funds.
As found, there was confusion as to the status of Palmer and ERA Solutions in Real Estate around the time of the McCoy and Reed escrow deposits. After the deposits were made, Palmer's ERA franchise was sold to another broker; however, Palmer sought to rescind the sale and viewed the transactions as a hostile takeover against her will. After the sale of the franchise, the McCoy and Reed contracts closed. Their down payments were not available for the closing, but the evidence did not prove why not. The money apparently remained in the ERA Solutions in Real Estate escrow account. Long after the closings, Palmer withdrew the funds and closed the account.
There was no evidence as to the terms of the sale of the ERA franchise or the contemplated handling of the escrow funds. There also was no evidence that either Miller or the successor broker made a claim to the funds.
As found, the evidence did not prove that the Respondents wrote payroll checks out of the ERA Solutions in Real Estate escrow account at Barnett Bank between August 1997 and January 1998. The evidence also did not prove who transferred the $14,200 out of the ERA Solutions in Real Estate escrow account during July 1997, where the funds were transferred, or what they were used for. The evidence proved that Palmer once accidentally wrote a $200 to $400 check out of the escrow account for a personal health insurance premium, but she replaced the money when another broker brought the error to her attention.
(Also, this occurred in December 1996, before Palmer began operating as ERA Solutions in Real Estate.)
Finally, as to the chronic nonpayment of vendors and substantial overdrafts in the general accounts, the evidence did not prove fraud, misrepresentation, concealment, false promises, false pretenses, or dishonest dealing by trick, scheme or devise. However, it was proven that Palmer allowed the business and finances of ERA Solutions in Real Estate to fall into complete dissarray. This evidence was sufficient to prove culpable negligence and breach of trust in business transactions, in violation of Section 475.25(1)(b), Florida Statutes (1997).
Penalty Guidelines
Under Florida Administrative Code Rule 61J2- 24.001(3)(c), the usual penalty for violating Section 475.25(1)(b), Florida Statutes, by fraud, misrepresentation, or dishonest dealing is revocation; for culpable negligence or breach of trust, the usual penalty is in the range from an administrative fine of $1,000 to a one-year suspension.
Under Florida Administrative Code Rule 61J2- 24.001(3)(l), the minimum penalty for violating Section 475.25(1)(k), Florida Statutes, is a 90-day suspension and $1,000 administrative fine; the penalty can range up to revocation.
Under Florida Administrative Code Rule 61J2- 24.001(3)(dd), the usual penalty for violating Section 475.42(1)(k), Florida Statutes, is in the range from an
administrative fine of $1,000 to a six-month suspension.
Under Florida Administrative Code Rule 61J2- 24.001(4)(a), deviation from the usual penalties is permitted if there are aggravating or mitigating circumstances. Under Florida Administrative Code Rule 61J2-24.001(4)(b), aggravating or mitigating circumstances can include, but are not limited to:
The severity of the offense.
The degree of harm to the consumer or public.
The number of counts in the Administrative Complaint.
The number of times the offenses previously have been committed by the licensee.
The disciplinary history of the licensee.
The status of the licensee at the time the offense was committed.
The degree of financial hardship incurred by a licensee as a result of the imposition of a fine or suspension of the license.
Violation of the provision of Chapter 475, Florida Statutes, where in [sic] a letter of guidance as provided in s. 455.225(3), Florida Statutes, previously has been issued to the licensee.
The facts in this case, taken as a whole, do not
warrant a departure from the Florida Real Estate Commission's usual penalties.
RECOMMENDED that the Florida Real Estate Commission enter a final order revoking the licenses of Judy K. Palmer and ERA Solutions in Real Estate, Inc.
Tallahassee, Leon County, Florida.
J. LAWRENCE JOHNSTON Administrative Law Judge
Steven W. Johnson, Senior Attorney Department of Business and
Lynda L. Goodgame, General Counsel Department of Business and
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.
