STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION, DIVISION OF REAL ESTATE,

Petitioner,

vs.

LARRY A. SIMONS and HOME HUNTERS USA, INC.,

Respondents.

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) Case No. 03-2881

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RECOMMENDED ORDER

Administrative Law Judge Daniel Manry conducted the administrative hearing in this proceeding on October 14, 2003, in Fort Myers, Florida, on behalf of the Division of Administrative Hearings (DOAH).

APPEARANCES

For Petitioner: Christopher J. DeCosta, Esquire

Department of Business and Professional Regulation

400 West Robinson Street, Suite 801-N Orlando, Florida 32801

For Respondent: Larry A. Simons, pro se

Home Hunters USA, Inc.

1415 Colonial Boulevard, Suite 3 Fort Myers, Florida 33907

STATEMENT OF THE ISSUES

The issues in this case are whether Respondents violated Subsection 475.25(1)(k), Florida Statutes (1999), by failing to

maintain an escrow deposit in a trust account until properly authorized; whether Respondents violated Subsection 475.25(1)(d)1, Florida Statutes, by failing to account for or deliver funds; whether Respondents violated Subsection 475.25(1)(b), Florida Statutes, by committing a breach of trust or culpable negligence in a business transaction; and, if so, whether the proposed penalty is reasonable.

PRELIMINARY STATEMENT

On June 17, 2003, Petitioner filed an Administrative Complaint against Respondents alleging the foregoing violations of Chapter 475, Florida Statutes (1999). Respondents timely requested an administrative hearing.

At the hearing, Petitioner presented the deposition testimony of two witnesses and submitted eight exhibits, including the deposition transcripts, for admission in evidence. Respondent, Larry A. Simons (Simons), testified and submitted three exhibits for admission in evidence.

The identity of the witnesses and exhibits, and the rulings regarding each, are set forth in the Transcript of the hearing filed on November 14, 2003. Petitioner and Respondents timely filed their respective Proposed Recommended Orders (PROs) on November 24 and 26, 2003.

FINDINGS OF FACT

1. Petitioner is the state agency responsible for the regulation and discipline of real estate licensees in the state. Simons is licensed in the state as a real estate broker/officer of Respondent, Home Hunters USA, Inc. (Home Hunters), pursuant to license number BK-0159866. Home Hunters is a corporation registered as a Florida real estate broker pursuant to license number CQ-0146369.

2. On March 21, 1996, Respondents entered into a property management contract (amended contract) with Max and Mary Newman (Newmans). The amended contract authorized Respondents to lease and manage real property owned by the Newmans and located at 1555 Whiskey Creek Drive, Ft. Myers, Florida 33919 (the property).

3. The original contract that Respondents proposed to the Newmans was dated March 11, 1996. The original contract contained a clause that would have obligated the Newmans to pay a sales commission to Respondents in the event Respondents sold the property to a tenant or certain other purchasers. The Newmans deleted that language from the original contract, initialed the deletion, dated the deletion "3/21/96," signed the amended contract on March 21, 1996, and returned the amended contract to Respondents. The deleted language in the amended contract signed by the Newmans provided:

   Owner agrees to pay Agent a sales commission for the sale of said property to the tenant, or any other the tenant relates or refers.

   Agent will perform any services normally performed to consummate the sale to the tenant in a professional and diligent manner. Owner shall notify Agent at earliest possible time so that Agent may perform services (prequalify, arrange financing, closing, repairs, etc.). It is the owners [sic] responsibility to pay said fee to Agent upon closing of sale.

   
   

   Petitioner's Exhibit 5 (P-5) at 19 (the second unnumbered page of the exhibit).

4. On or about February 1, 1999, Respondents brokered a lease of the property from the Newmans to Ms. Lilly Gilson (Gilson). Mr. Newman signed the lease agreement on February 14, 1999, and Gilson signed it on February 23, 1999.

5. The lease agreement, in relevant part, obligated the Newmans to pay Respondents a "fee" in the event the "tenant should enter into a lease purchase, lease option, or purchase through their tenancy." The lease agreement states that the fee is for Respondents "serving the sale as a broker" but does not specify the amount of the fee, does not express the fee as a percentage of the purchase price, and does not otherwise specify how the fee is to be determined. Neither of the Respondents is a signatory to the lease agreement.

6. At the time Gilson entered into the lease agreement, Gilson paid a deposit of $650 to Respondents as a security

   deposit in accordance with the lease agreement. Respondents placed this deposit into a trust account.

7. At some point prior to December 1999, the Newmans entered into a purchase and sale contract to sell the property to Mr. Gary Newman (Buyer). The Buyer is unrelated to the Newmans, but is a relative of Gilson.

8. The Newmans closed on the sale to the Buyer on December 28, 1999. The parties to the sale used other brokers in the transaction over Respondents' objections, and neither of the Respondents served the sale as a broker. The closing statement shows that the Buyer was obligated to pay the $635 security deposit to the Newmans.

9. Subsequent to the closing, Respondents transferred the security deposit from their trust account to their operating account. Simons believed he was entitled to a commission on the sale from the Newmans to Buyer.

10. Respondents had actual knowledge that the Newmans claimed entitlement to the security deposit and disputed Respondents' entitlement to the security deposit. Simons was aware as early as December 11, 1999, that the Newmans did not knowingly consent to pay Respondents a commission on the sale transaction.

11. Respondents failed to notify the Florida Real Estate Commission (Commission) of the dispute concerning entitlement to

    the security deposit. Respondents did not institute the settlement procedures prescribed in Subsection 475.25(1)(d)1, Florida Statutes (1999).

    CONCLUSIONS OF LAW

    
    

12. DOAH has jurisdiction over the subject matter and parties in this proceeding. The parties were duly noticed for the administrative hearing. §§ 120.569 and 120.57, Fla. Stat. (2003).

13. The burden of proof is on Petitioner. Petitioner must show by clear and convincing evidence that Respondents committed the acts alleged in the Administrative Complaint and the reasonableness of any proposed penalty. Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).

14. Petitioner satisfied its burden of proof. Respondents violated Subsection 475.25(1)(k), Florida Statutes (1999), by transferring a security deposit out of the trust account without authorization and with prior knowledge that the Newmans claimed entitlement to the security deposit and contested Respondents' entitlement to the funds. Respondents violated Subsection 475.25(1)(d)(1), Florida Statutes (1999), by failing to return the security deposit to the Newmans, by failing to notify the Commission of the dispute, and by failing to institute the statutorily prescribed settlement procedures. Respondents

    violated Subsection 475.25(1)(b), Florida Statutes (1999), by breaching the trust of the Newmans in a business transaction.

15. Simons' assertion that Respondents have a valid contractual claim on the disputed funds is irrelevant to the subject matter of this proceeding. DOAH has no jurisdiction to adjudicate contractual rights between Respondents and the Newmans. Moreover, the settlement procedures prescribed by statute contemplate that a broker may be contractually entitled to disputed funds. The settlement procedures that a broker must follow when escrow funds are disputed are not limited to those disputes in which a broker does not have a valid contractual right to the funds.

16. Simons also argues that Respondents acted unilaterally because the Newmans acted in bad faith to deprive Respondents of a commission granted as a "fee" in the lease agreement. Contractual issues aside, Florida law prohibits Respondents from unilaterally appropriating disputed funds without prior authorization. In the absence of such authorization, Respondents must follow the procedures set forth in Subsection 475.25(1)(d)1, Florida Statutes (1999).

17. Florida Administrative Code Rule 61J2-24.001 prescribes the discipline that may be imposed against Respondents' licenses. The range of discipline authorized for a violation of Subsection 475.25(1)(b), Florida Statutes (1999),

    is from a $1000 fine up to a one-year suspension. The range of discipline authorized for a violation of Subsection 475.25(1)(k), Florida Statutes (1999), is from a $1000 fine up to revocation. The range of discipline authorized for a violation of Subsection 475.25(1)(d)1, Florida Statutes (1999), is from a $1000 fine up to a 5-year suspension.

18. Petitioner proposes in its PRO that the Commission impose a fine of $1,000 and suspend Respondents' licenses for

30 days. The proposed penalty is authorized by rule and is reasonable under the facts and circumstances in this case.

RECOMMENDATION

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

RECOMMENDED that the Commission enter a Final Order finding that Respondents violated Subsections 475.25(1)(b), (d), and (k), Florida Statutes (1999), by committing the acts alleged in the Administrative Complaint; imposing a fine of $1,000 against each licensee; and suspending Respondents' licenses concurrently for 30 days.

DONE AND ENTERED this 4th day of December, 2003, in Tallahassee, Leon County, Florida.

S

DANIEL MANRY

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 4th day of December, 2003.

COPIES FURNISHED:

Christopher J. DeCosta, Esquire Department of Business and

Professional Regulation

400 West Robinson Street, Suite 801-N Orlando, Florida 32801

Larry A. Simons

Home Hunters USA, Inc.

1415 Colonial Boulevard, Suite 3 Fort Myers, Florida 33907

Nancy P. Campiglia, General Counsel Department of Business and

Professional Regulation Northwood Centre

1940 North Monroe Street Tallahassee, Florida 32399-2202

Nancy P. Campiglia, Acting Director Division of Real Estate

Department of Business and Professional Regulation

400 West Robinson Street, Suite 802-N Orlando, Florida 32801-1772

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.

Docket for Case No: 03-002881

Orders for Case No: 03-002881