STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND ) PROFESSIONAL REGULATION, )

)

Petitioner, )

)

vs. ) Case No. 98-3722

)

PETER EDMUND LAGRAVE, )

)

Respondent. )

)

RECOMMENDED ORDER

Robert E. Meale, Administrative Law Judge of the Division of Administrative Hearings, conducted the final hearing in Tallahassee, Florida, on March 24, 1999. The parties, attorneys for the parties, witnesses, and court reporter participated by videoconference in Fort Myers, Florida.

APPEARANCES

For Petitioner: Sunia Y. Marsh

Senior Attorney

Department of Professional Regulation

Post Office Box 1900 Orlando, Florida 32802

For Respondent: Peter Edmund LaGrave, pro se

4921 Southwest 11th Avenue Cape Coral, Florida 33914

STATEMENT OF THE ISSUE

The issue is whether Respondent is guilty of concealment, culpable negligence, or breach of trust in any business

transaction, in violation of Section 475.25(1)(b), Florida Statutes, and, if so, what penalty should be imposed.

PRELIMINARY STATEMENT

By Administrative Complaint dated July 23, 1998, Petitioner alleged that Respondent was a licensed real estate salesperson employed by John Harrington, a licensed real estate broker, and Professional Realty Consultants of Lee County, Inc., a registered real estate brokerage corporation.

The Administrative Complaint alleges that, on September 4, 1996, Professional Realty Consultants entered into a listing agreement with Ronald L. Davis, as trustee and co-listing agent, concerning the sale of the Mid-Cape Commercial Center located at 1020 Pine Island Road. The listing was allegedly secured by Gidget Jackson, who is another licensed salesperson employed by Professional Realty Consultants.

The Administrative Complaint alleges that Respondent told Ms. Jackson, on or about December 5, 1996, that he was interested in purchasing the property.

The Administrative Complaint alleges that, or about December 6, 1996, Renn Lamaster, a licensed real estate broker, asked Respondent for information about available commercial properties, and Respondent told Mr. Lamaster about the Mid-Cape Commercial Center.

The Administrative Complaint alleges that, on or about January 22, 1997, Steve Ramunni, an attorney and licensed real

estate salesperson, told Respondent that Hans O. Faass and LaBelle Trade Center, Inc., were interested in the Mid-Cape Commercial Center and wanted additional information. The Administrative Complaint alleges that, on or about January 24, 1997, Respondent presented to Ms. Jackson an offer from Respondent's wife, but the seller rejected the offer.

The Administrative Complaint alleges that, on the same day, Respondent transmitted additional information about the property to Messrs. Ramunni and Faass.

The Administrative Complaint alleges that, on or about January 28, 1997, Respondent presented to Ms. Jackson an offer from Ringer Corp, a corporation disclosed on the offer to be co- owned by Respondent.

The Administrative Complaint alleges that, on or about the same date, Mr. Lamaster requested from Respondent additional documentation concerning the property. Respondent allegedly responded the next day by assuring that he would supply the requested information.

The Administrative Complaint alleges that, on or about February 6, 1997, Mr. Ramunni told Respondent that Mr. Faass was preparing a contract to offer to purchase the property and Respondent would have the contract in a few days.

Respondent allegedly failed to advise Ms. Jackson or

Mr. Davis of his contacts with Messrs. Ramunni, Lamaster, and Faass. The Administrative Complaint alleges that, on or about February 12, 1997, Respondent, on behalf of Ringer, Inc., and Mr. Davis signed a contract to purchase the property. On the same date, Mr. Lamaster allegedly presented to Respondent an offer from Mr. Faass and LaBelle Trade Center, Inc.

Respondent allegedly failed to present the LaBelle contract to Mr. Davis, or advise him of the contract. Respondent allegedly offered to sell his contract to Mr. Faass or LaBelle Trade Center.

The Administrative Complaint alleges that Respondent is thus guilty of concealment, culpable negligence, or breach of trust in any business transaction, in violation of Section 475.25(1)(b), Florida Statutes.

At the hearing, Petitioner called five witnesses and offered into evidence 16 exhibits. Respondent called one witness and offered into evidence 11 exhibits. All exhibits were admitted.

The court reporter filed the Transcript on May 3, 1999.

FINDINGS OF FACT

1. At all material times, Respondent has been a licensed real estate salesperson, holding license number 0440058. During the relevant period, Respondent was licensed as a salesperson with Professional Realty Consultants of Lee County, Inc. (PRC).

2. By Listing Contract executed September 4, 1996 by both parties, Ronald L. Davis, as trustee (Mr. Davis), listed the Mid- Cape Commercial Center, located at 1020 Pine Island Road (Property), with PRC. The listing price was $850,000, and the listing expired on March 3, 1997. Davis is listed as a co- listing agent entitled to 50 percent of the listing commission.

3. On December 6, 1996, Renn Lamaster, a real estate broker, contacted Respondent and told him that he had a client who might be interested in the Property. By no later than December 10, Respondent faxed Mr. Lamaster a one-page description of the Property, Respondent's business card, and a one-page projection of 1996 income and expenses with itemized rents. Respondent also sent Mr. Lancaster a full appraisal. However, Respondent's testimony concerning his thinking at even this early stage reveals a troubling misunderstanding of his role as an agent:

   I [sent the information to Mr. Lamaster] in the expectation that possibly I might not buy the property, and I wanted then to be able to have somebody I could turn to and function as an agent and make a real estate commission if I introduced this property to them. [Transcript, p. 196.]

   
   

4. At an unspecified point in time, Mr. Lamaster transmitted the information that he had received about the Property to his sales representative, Steve Ramunni, who transmitted the information to the client, Hans Faass. Mr. Faass examined the summary information and directed Mr. Ramunni to

   obtain more detailed financial information, such as rent rolls, for the Property. The next contact that Respondent received from anyone representing Mr. Faass was on January 22, 1997, when

   Mr. Ramunni called Respondent and said that he was representing a client who might be interested in the Property. Respondent confirmed with Mr. Ramunni that it was the same client represented by Mr. Lamaster. Mr. Ramunni said that his client wanted more detailed financial information on the Property.

5. On January 24, Respondent sent more detailed information by fax to Mr. Ramunni. This information contained itemized rents by unit and tenant, for commercial office space, and unit, for mini-warehouses; a somewhat more detailed statement of income and expenses, evidently for 1996; and a 1997 statement of projected income and expenses.

6. Respondent's cover letter accompanying these materials is to Mr. Ramunni, but concludes: "I am sending this to

   Mr. Faass as he just called me and wants the info because he is unable to locate you."

7. Respondent himself had been interested in the Property since December and had been discussing purchase conditions with Ms. Jackson. These discussions probably began around the time of the first contact from the Faass group in early December 1996, although the record does not supply a basis to determine the level of detail of these discussions.

8. On January 24--the same date that he faxed additional information to Messrs. Ramunni and Faass--Respondent presented a contract to purchase the Property by his wife, as trustee. The purchase price was $625,000 cash. The contract, which required acceptance by January 30, contained numerous common contingencies, such as 45 days to secure financing of $500,000 and 45 days to obtain a building inspection.

9. However, the contract contained a more unusual contingency, which effectively reduces the contract to an option to purchase at no cost or risk to Respondent's wife. The contingency provides:

   If at any time during the buyer's 45 day due diligence period the buyer notifys [sic] the seller in writing that the buyer wishes to terminate this contract, this contract shall be terminated and any deposits given by the buyer shall be returned to the buyer without deduction. Interest accrued on the deposit shall accrue to the buyer.

10. At this point, Respondent had not mentioned his

    
    

    contacts with Mr. Faass's representatives to Mr. Davis; Gidget Jackson, the PRC salesperson who obtained the listing; or John Harrington, the qualifying broker for PRC. In fact, Respondent never mentioned to Mr. Davis, Ms. Jackson, or Mr. Harrington anything about the interest of Mr. Faass group in the Property until February 12, 1997, when, as described below, Respondent spoke to Mr. Harrington.

11. On January 29, Respondent faxed to Mr. Lamaster a note stating that Mr. Faass wanted various specific documents and

    stating where they were. The documents and their location included: survey--not available; appraisals--"gave to Renn"; and last three years' income and expense statements generated by CPA or other professional--"with Gidget."

12. Following the receipt of this information, Mr. Lamaster called Respondent and said that he had an offer to purchase the Property to deliver to Respondent. On February 12, 1997, which was the same day or the day after the call disclosing the existence of an offer, Mr. Lamaster brought the signed contract to Respondent.

13. The contract was signed February 11, 1997, by Mr. Faass on behalf of the LaBelle Trade Center, Inc., and offered $700,000 cash. The contract contained a financing contingency clause granting the buyer 45 days to find $560,000 financing, but at a more realistic interest rate (one percentage point higher) than is contained in the LaGrave/Ringer contracts. The LaBelle contract contains a contingency calling for termination only if the seller fails to provide certain financial information within

    10 days, but does not contain a buyer-termination clause of the type found in the LaGrave/Ringer contracts or even a narrower clause allowing termination if the financial information is unacceptable.

14. When Mr. Lamaster visited Respondent's office and gave the contract to Respondent, Respondent told Mr. Lamaster that Respondent was already a "vendee under contract." At this point,

    Respondent first informed Mr. Harrington about the situation. Later, Respondent offered to sell his contract to Mr. Faass. Even now, Respondent did not inform Mr. Davis of the situation; Mr. Davis learned of Mr. Faass's interest when Mr. Lamaster or Mr. Faass called Mr. Davis.

15. In the meantime, on January 24, Mr. Davis had counteroffered the offer of Respondent's wife, as trustee. He counteroffered a sales price of $730,000 and did not delete any of the cited contingencies, including the 45-day buyer- termination clause.

16. On January 28, 1997, Respondent hand delivered another contract to Mr. Davis. In this contract, the buyer is Ringer, Inc., of which Respondent was disclosed on the contract to be a "co-owner." The contract is for $650,000. The contract contains an even-stronger buyer-termination clause, which states:

    If any ANY time during this "due diligence" period [of 60 days] the buyer wishes to terminate this contract for any reason whatsoever, the buyer shall notify the seller IN WRITING of his intention to cancel and any deposits shall be returned immediately to the buyer without deduction.

    
    

17. The contract was initially to be accepted by January 30, but Ringer extended the acceptance date to

    February 7. Mr. Davis signed the contract on February 10, and Ringer did not re-execute the contract.

18. Eventually, Mr. Davis cancelled the Ringer contract. LaBelle offered $750,000 by a contract signed by Mr. Faass on

    February 14. This contract contained the same contingencies as the preceding LaBelle contract (although the financed amount increased to $600,000), but added a new contingency for a determination that Respondent did not have a valid contract to purchase the Property. Mr. Davis countered at $800,000.

19. LaBelle offered $750,000 by a contract signed by

    
    

    Mr. Faass on March 6. This contract was largely in the same form as the preceding LaBelle contract, but provided, as to the Respondent contingency:

    Seller shall pursue any & all remedies available to void or negate [Respondent's] contract on or before April 1, 1997. In the event of litigation between Seller & LaGrave, Buyer shall extend the closing date until litigation is favorably resolved for Seller.

    
    

20. Unable to obtain Respondent's agreement to rescind the Ringer contract, Mr. Davis filed an action for damages and rescission. In some fashion, Respondent or Ringer pursued Ringer's claims under the contract, and the case eventually resolved itself in mediation with both parties dropping their claims. In the meantime, though, LaBelle withdrew its offer.

21. Respondent justifiably claims that he, as an agent, is not required to notify his principal, Mr. Davis, of every expression of interest in the Property. As noted in the Conclusions of Law, Respondent is required to notify Mr. Davis only of material information, which is information that might reasonably influence Mr. Davis in his negotiations with

    Respondent or consideration of the contracts from Respondent's wife and company.

22. The materiality of undisclosed information depends on the circumstances. A casual expression of interest by a prospective purchaser, without more, may not be material, but may become material when the principal is negotiating with his agent to give the agent's affiliate a free, no-risk option to purchase the Property at a price $150,000 less than the asking price and

    $100,000 less than another buyer is willing to pay.

    
    

23. Mr. Ramunni's request for information on January 22 was material information. The materiality of this expression of interest was confirmed in the next couple of days. By

    January 24, Mr. Faass did not want to wait for this information, so he told Respondent to sent the information directly to

    Mr. Faass, rather than to Mr. Ramunni. The prospective buyer's interest in the Property had become urgent.

24. Rather than inform Mr. Davis of these material developments, Respondent instead delivered the first of two contracts in which Respondent essentially sought to purchase his principal's property.

25. By the time Mr. Faass insisted that Respondent send the information directly to Mr. Faass, Respondent's failure to disclose Mr. Faass's failure to disclose Mr. Faass's interest in the Property constituted at least culpable negligence and breach of trust. When Respondent instead submitted his wife's contract

    for a free option, Respondent's failure to disclose Mr. Faass's interest in the Property constituted fraudulent concealment.

26. On the day following the submittal of the Ringer contract, but over two weeks before Mr. Davis signed it, Respondent provided additional information to Mr. Faass and his representatives. This information, which suggested growing interest in the Property, was material, and Respondent's failure to disclose this information, while trying to obtain the signature of his principal to the Ringer contract, constitutes culpable negligence, breach of trust, and fraudulent concealment.

27. Surprisingly, Respondent's betrayal of the loyalty he owed Mr. Davis did not immediately extinguish Mr. Faass's interest in the Property. However, Respondent eventually achieved this result by attempting to enforce the Ringer contract, which, as explained in the Conclusions of Law, was unenforceable. No longer merely omitting to perform the duties that he owed his principal, Respondent unconscionably tried to force upon Mr. Davis an unenforceable contract greatly inferior to the LaBelle contract.

    CONCLUSIONS OF LAW

    
    

28. 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. All references to Rules are to the Florida Administrative Code.)

29. Section 475.25(1) provides that the Florida Real Estate Commission may discipline a license, including by revocation, suspension for up to 10 years, probation, fine of $1000 per offense, or reprimand, if it finds that a licensee has

    (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. 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).

31. A real estate agent is in a fiduciary relationship with the seller whom the agent represents and must remain loyal to the interests of the principal for the duration of the agency relationship. See, e.g., Hershey v. Keyes Company, 209 So. 2d

    240 (Fla. 3d DCA), cert. denied, 214 So. 2d 623 (Fla. 1968). This duty requires that the agent timely disclose material information to his principal. Id. Material information includes

    information that "might reasonably be expected to influence [the] principal in the negotiation." MacGregor v. Florida Real Estate Commission, 99 So. 2d 702, 712 (Fla. 1958).

32. The duty owed by a real estate agent to his principal is so great that the agent is not even entitled to his commission, nor is the principal required to sell, when the agent offers to purchase the property for the listing price, even in the absence of unfair dealing. Young v. Field, 548 So. 2d 784 (Fla. 4th DCA 1989). Thus, Respondent's continued insistence that Mr. Davis honor the Ringer contract was unlawful.

33. Rule 61J2-24.001(3)(c) provides that the usual penalty for concealment is a three- to five-year suspension and $1000 administrative fine. The usual penalty for breach of trust or culpable negligence is a one-year suspension and $1000 administrative fine.

34. Petitioner has proved by clear and convincing evidence culpable negligence, breach of trust, and fraudulent concealment, but the penalty can only be for one of these offenses. Aggravating factors include the ongoing concealment committed by Respondent as he tried to induce Mr. Davis to give Respondent's affiliates a free option on the Property. It is quite clear that any effort on Respondent's part to serve the best interests of

    Mr. Davis would have quickly produced a contract from Mr. Faass to purchase the Property for $100,000 more than the price that Respondent wanted to think about paying.

35. Petitioner did not allege that Respondent's ongoing insistence that Mr. Davis honor the Ringer contract constituted a separate offense, but this behavior constitutes another aggravating factor. Prior to this point, Respondent had failed to observe the duty he owed Mr. Davis; after this point, Respondent repudiated the duty he owed Mr. Davis, as Respondent caused Mr. Davis to lose the substantially superior LaBelle contract.

36. The sole mitigating factor is the lack of prior discipline.

37. On these facts, the maximum recommended penalty is insufficient. Respondent did not commit culpable negligence, breach of trust, and fraudulent concealment in "any" business transaction. He committed culpable negligence, breach of trust, and fraudulent concealment in the business transaction that is the cornerstone of the real estate profession--the relationship between a real estate agent and his principal. This relationship stands above even the relationship between a real estate agent and his co-professionals or a real estate agent and the licensing agencies. The concealment of Mr. Faass from Mr. Davis was ongoing, as Respondent repeatedly presented inferior contracts

from his affiliates to Mr. Davis. Respondent confirmed his betrayal of trust and fraudulent concealment when Mr. Faass presented a substantial better contract, and Respondent refused to step aside, as duty to his principal required.

RECOMMENDATION

It is

RECOMMENDED that the Florida Real Estate Commission enter a final order finding Respondent guilty of culpable negligence, breach of trust, and concealment in a business transaction and revoking his real estate salesperson's license.

DONE AND ENTERED this 11th day of June, 1999, 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

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 11th day of June, 1999.

COPIES FURNISHED:

Sunia Y. Marsh Senior Attorney

Department of Professional Regulation

Post Office Box 1900 Orlando, Florida 32802

Peter Edmund LaGrave

4921 Southwest 11th Avenue Cape Coral, Florida 33914

William Woodyard, General Counsel Department of Business and

Professional Regulation 1940 North Monroe Street

Tallahassee, Florida 32399-0792

Herbert S. Fecker, Division Director Division of Real Estate

Department of Business and Professional Regulation

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: 98-003722

Orders for Case No: 98-003722