vs.
Respondent.
) Case No. 03-0886PL
A final hearing was held before Daniel M. Kilbride, Administrative Law Judge, Division of Administrative Hearings, in St. Petersburg, Florida, on June 18, 2003. The following appearances were entered:
Whether Respondent failed to preserve and maintain broker records in violation of Section 475.5015, Florida Statutes.
Whether Respondent committed culpable negligence or breach of trust in any business transaction in violation of Subsection 475.25(1)(b), Florida Statutes.
In the Administrative Complaint, filed December 19, 2003, Petitioner, Department of Business and Professional Regulation, Division of Real Estate, alleged that Respondent violated certain provisions of Florida law. Respondent disputed the charges and requested a formal hearing. This matter was referred to the Division of Administrative Hearings on March 12, 2003, and it was set for hearing. This matter was transferred to the undersigned Administrative Law Judge, and a formal hearing was scheduled for June 18, 2003. Respondent, who is living in the United Kingdom, indicated he would not attend, but filed several documents that he requested this tribunal to review.
At the hearing, Respondent did not appear. After a reasonable period of time, the hearing proceeded, and Petitioner offered 29 exhibits that were received into evidence.
Petitioner called one witness, Investigator David Guerdan of the Department of Business and Professional Regulation. The Transcript was filed on July 25, 2003. At the request of Petitioner, the parties were given until August 15, 2003, in which to file proposed findings of fact and conclusions of law.
Petitioner filed its proposals on August 12, 2003. Respondent has not filed any proposals as of the date of this Recommended Order. All citations relating to Chapter 120 are to Florida Statutes (2002) unless otherwise indicated. All citations to Chapter 475 are to Florida Statutes (2001).
Petitioner is a state licensing and regulatory agency charged with the duty to prosecute administrative complaints pursuant to the laws of the State of Florida, in particular, Section 20.30, Chapters 120, 455, and 475, and the rule promulgated thereto.
Respondent is and was at all times material hereto a licensed real estate broker in the State of Florida, having been issued License No. 600642 in accordance with Chapter 475.
The last license was issued to Respondent as a broker of Cascade Referral Service, Inc., 2439 Bee Ridge Road, Sarasota, Florida.
At all times material, Respondent was the president and registered agent of Knightsbridge Park International (KPI), a corporation under the laws of Florida.
At all times material, Respondent was the registered agent of an entity called Knightsbridge Vacation Homes (KVH).
Between August 14, 1999, through May 21, 2001, Respondent was an active broker/officer of Knightsbridge Realty, Inc. (KRI).
In the Fall of 1999, Sharon Malecki (Malecki), a resident of Wisconsin, met with Respondent's wife, Janet Wilkes, who was vice-president of KPI, to discuss engaging KPI's services in managing Malecki's property in Kissimmee, Florida.
On or about February 14, 2000, as a result of this initial contact, Malecki entered into a contract with KPI to manage her property. Respondent signed the contract as president of KPI.
The contract required Respondent and KPI to provide general management services to Malecki and to provide a monthly accounting showing all income and expenses for a period of one year commencing on March 1, 2000. The contract also required Malecki to keep a balance of $500 as a "management reserve balance." Respondent and KPI were required to deposit any amounts held in excess of the reserve amount in Malecki's bank account.
Implicit in the monthly accounting requirement was that KPI and Respondent would collect the rental proceeds from Malecki's property and remit the proceeds to Malecki.
At the same time the parties executed the contract, Malecki sent KPI a check for $500 to be kept in the escrow account for incidental maintenance and repairs of the property.
Between August 10, 2000, and August 24, 2000, KPI placed a tenant by the name of "Plant" in Malecki's property and collected $1,214.29 in rent from the tenant.
Between August 29, 2000, and September 12, 2000, KPI placed a tenant by the name of "Lusted" in Malecki's property and collected $1,309 in rental income funds from the tenant.
The monthly accounting for August of 2000, purports to represent that KPI paid Malecki $616.42 toward the balance owed. Malecki never received this payment.
Respondent failed to remit any of the above-referenced funds to Malecki.
Respondent sent Malecki a letter dated November 7, 2000, in which he terminated the management contract and promised to send Malecki a final accounting "as soon as possible."
On or about January 2, 2001, Respondent sent Malecki a letter, in which he acknowledged that there had been a "major accounting breakdown." In the letter, Respondent promised to make an interim payment within the next week.
Subsequent to receipt of the two letters, Malecki made various attempts to obtain an accounting of the rental proceeds due. Respondent never remitted nor accounted for the funds.
At all times material, Respondent failed to account for the $500 deposit he held for the benefit of Malecki.
In June of 1999, a real estate broker by the name of John Young (Young) referred Isabel Benitez (Benitez) to Respondent after she bought a home through Young.
On or about June 23, 1999, Benitez signed a contract with Respondent to manage her property located at 7981 Magnolia Bend Court, Kissimmee, Florida. The contract period was for one year and was renewed for an additional year in June of 2000.
Although structured in the form of a lease, there was a clear understanding that KPI and Respondent were performing property management services and were obligated to pay a guaranteed amount to Benitez every month.
The contract required Benitez to place a $500 deposit with Respondent and KPI as a "management deposit" to be used for incidental expenses associated with the management of the property.
In approximately August of 2000, Benitez stopped receiving monthly payments from KPI.
During the latter part of 2000, Benitez made various attempts to contact Respondent to determine the whereabouts of the monies due her.
On or about December 14, 2000, Benitez sent Respondent a letter, in which she requested the monies due her under the contract.
On or about December 15, 2000, Respondent faxed to Benitez a response to her letter, in which he accepts her termination of the contract and confesses that he had "not been involved in property management matters, let alone accounting aspects "
On or about January 2, 2000, Respondent mailed to Benitez a letter informing her that there had been an "accounting breakdown," and promising to make an interim payment within a week.
A review of an accounting provided to Benitez, dated February 9, 2001, indicates that Respondent owes Benitez funds in excess of $8,473.
At all times material, Respondent has failed to remit the funds due or otherwise account for said funds.
Around February of 2001, Thirza Neal (Neal), a resident of Washington, D.C., engaged the services of KRI to manage her property located at 114 Dornock Street, Davenport, Florida.
Neal delivered a check for $1,000 to a Chris Turner (Turner), who was an agent of KRI, for the "start-up of utility costs."
At some point, Neal decided not to engage the services of KRI, and on March 12, 2001, Neal sent an e-mail to Turner, in which she terminated the management contract and requested a return of her deposit. The above e-mail contains an indication that it was copied to the attention of Respondent.
On or about March 26, 2001, Neal sent a certified letter to Respondent demanding a return of the deposit.
On or about March 28, 2001, Neal received a letter from a gentleman by the name of B.C. Murphy, referencing her letter to Turner, denying that the check had been deposited into KRI's account and informing Neal that he had purchased KRI during the previous year. Eventually, Neal determined that the bank had inadvertently deposited the check into KVH's account.
Neal made several attempts to contact Respondent personally and through his attorney and received no response.
Neal was eventually able to obtain a reimbursement from the bank. Respondent neither provided assistance to Neal, nor did he remit the funds on his own accord.
At some point later, Petitioner began an investigation and David Guerdan (Guerdan) was assigned to investigate the
case. During the course of his investigation, Guerdan conducted interviews of the complaining witnesses and Respondent.
On or about September 26, 2001, Guerdan conducted an interview of Respondent. During the course of the interview, Respondent was unable to address the specifics of the complaints. Respondent told Guerdan that he was not involved in the day-to-day operations of the business. He stated that his wife and son actually ran the business and that they had "poor accounting practices, overspent and ran out of the money." During the interview, Respondent could not be specific as to the amounts due each owner. Guerdan was unable to determine whether Respondent paid the funds due to each owner.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this cause pursuant to Subsection 120.57(1) and Sections 120.569 and 120.60.
Revocation of license proceedings are penal in nature; State ex. rel. Vining v. Florida Real Estate Commission, 281 So. 2d 487 (Fla. 1973), and must be construed strictly in favor of the one against whom the penalty would be imposed. Munch v. Department of Professional Regulation, Division of Real Estate,
592 So. 2d 1136 (Fla. 1st DCA 1992); Fleischman v. Department of Professional Regulation, 441 So. 2d 1121 (Fla. 3d DCA 1983).
The standard of proof required in this matter is that relevant and material findings of fact must be supported by clear and convincing evidence of record. Department of Banking and Finance v. Osborne Stern & Company, 670 So. 2d 932 (Fla. 1996). Petitioner has the burden of proving by clear and convincing evidence the allegations in the Administrative Complaint. Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).
Subsections 475.25(1)(b) and (e), as it pertains to the alleged facts in this matter reads in pertinent part:
The commission 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; . . . if it finds that the 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 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.
* * *
(e) Has violated any of the provisions of this chapter or any lawful order or rule made or issued under the provisions of this chapter or chapter 455. . . .
Section 475.5015 reads in pertinent part:
Brokerage business records.--Each broker shall keep and make available to the department such books, accounts, and records as will enable the department to determine whether such broker is in compliance with the provisions of this chapter. Each broker shall preserve at least one legible copy of all books, accounts, and records pertaining to her or his real estate brokerage business for at least 5 years from the date of receipt of any money, fund, deposit, check, or draft entrusted to the broker or, in the event no funds are entrusted to the broker, for at least 5 years from the date of execution by any party of any listing agreement, offer to purchase, rental property management agreement, rental or lease agreement, or any other written or verbal agreement which engages the services of the broker. If any brokerage record has been the subject of or has served as evidence for litigation, relevant books, accounts, and records must be retained for at least 2 years after the conclusion of the civil action or the conclusion of any appellate proceeding, whichever is later, but in no case less than a total of 5 years as set above. Disclosure documents required under ss. 475.2755 and 475.278 shall be retained by the real estate licensee in all
transactions that result in a written contract to purchase and sell real property.
Rule 61J2-14.012(1), Florida Administrative Code, reads in pertinent part:
A broker who receives a deposit as previously defined shall preserve and make available to the BPR, or its authorized representative, all deposit slips and statements of account rendered by the depository in which said deposit is placed, together with all agreements between the parties to the transaction. In addition, the broker shall keep an accurate account of each deposit transaction and each separate bank account wherein such funds have been deposited. All such books and accounts shall be subject to inspection by the BPR or its authorized representatives at all reasonable times during regular business hours.
A real estate licensee can be disciplined for a violation of Subsection 475.25(1)(b) in his own personal business affairs. La Rossa v. Department of Business and Professional Regulation, 474 So. 2d 322, 324 (Fla. 3d DCA 1985). Under the above-referenced section, a licensee can be disciplined for actions that are not broker activities as defined by Section 475.01 because the Real Estate Commission reserves the right to consider issues of character when evaluating the fitness of a licensee to continue to practice. See McKnight v. Florida Real Estate Commission, 202 So. 2d 199, 200 (Fla. 2d DCA 1967).
A real estate broker is responsible for the misrepresentations and negligence of his agents. See generally Frailoli v. Bobby Bird Real Estate, Inc., 630 So. 2d 1131, 1132 (Fla. 2d DCA 1993). See also Department of Business and Professional Regulation v. Cooper, 1989 WL 644276 (DOAH
April 18, 1989) (holding allegations attributable to Respondent's agent/husband under agency theory). Here, although it appears that Respondent tried to shift the blame to his wife and son, even if this claim is credible, he would still be liable under Subsection 475.25(1)(b) based on traditional agency principles.
Petitioner has presented clear and convincing testimony and evidence that Respondent is guilty of culpable negligence or breach of trust in a business transaction by committing either gross negligence in conducting his business affairs or gross negligence in entrusting his affairs to his wife and son.
The evidence is clear that Respondent's flagrant violation of the standard of care resulted in harm to all three complaining witnesses.
Respondent received clients' funds and possession of real property and violated the trust given to him by failing to supervise or otherwise operate diligently in his affairs. These failures are further exemplified by his lack of diligence in
responding to Neal's requests for an accounting of the check that was inadvertently deposited in KVH's account.
Petitioner has proved by clear and convincing evidence that Respondent is guilty of failing to keep or maintain records to enable Petitioner to determine whether Respondent is in compliance with Chapter 475.
After Petitioner's investigator interviewed Respondent, it became clear that Respondent could not provide Petitioner with an accounting regarding the disposition of
$60,000 in client trust funds.
Relative to the above-statutory prohibitions, the Commission's disciplinary guidelines are codified in
Rules 61J2-24.001(2) and (3), Florida Administrative Code.
These rules provide that the usual penalty for a breach of trust or culpable negligence is a $1,000 fine to a one-year suspension.
For a violation of Section 475.5015 and Subsection 475.25(1)(e), the usual action is an eight-year suspension to
revocation.
DONE AND ENTERED this 22nd day of August, 2003, in Tallahassee, Leon County, Florida.
DANIEL M. KILBRIDE
Filed with the Clerk of the Division of Administrative Hearings this 22nd day of August, 2003.
Christopher J. De Costa, Esquire Department of Business and
Nancy P. Campiglia, Acting Director Division of Real Estate
Hardy L. Roberts, III, General Counsel Department of Business and
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.
