Findings Of Fact Respondent is licensed as a real estate broker and was so licensed at all times relevant hereto. He has taught real estate salesman courses at Hillsborough Junior College for about eight years. In February, 1982, Thomas E. Webb and Johnnie M. Webb, husband and wife, signed an offer to purchase real estate owned by Ruby Carline (Exhibit 1). This document was prepared by Respondent as broker and signed by him as witness and escrow agent. The offer was not accepted by the seller. Respondent had a listing agreement (Exhibit 6) on property owned by Ruby Carline in Seffner, Florida, giving him exclusive right to sell this property until June 12, 1982, at a price of $65,800, with buyer assuming an existing mortgage of $27,000 at ten (10) percent. There was also a second mortgage on the property in the amount of $10,000 at eighteen (18) percent. Shortly after Exhibit 1 was not accepted by Carline, the Webbs' trailer burned and they needed a residence quickly. Respondent inquired of Carline how much she would take to move out of her house and she told him $10,000, but needed $2,000 to actually relocate her furniture. On March 5, 1982, Respondent acknowledged receipt of $2,000 from Webb (Exhibit 7). Shortly thereafter, this money was paid to Carline and she vacated her house. Webb moved in during the latter part of March and commenced paying rent. Following this, Respondent prepared an updated contract for sale and purchase which was signed by Thomas Webb and Ruby Carline in early May (Exhibit 3). This contract provided for a purchase price of $59,900, with 7,000 deposit held in escrow by Respondent, and the balance of the purchase price comprising the existing first mortgage of $27,000 to be assumed by the buyer; a purchase money mortgage in the amount of $15,900 to be obtained; and the second mortgage in the amount of $10,000. Special Clause XII provided: Buyer shall rent property for $560 per month with an option to purchase by June 12, 1982, which shall be extended an additional 90 days at time of purchase. Buyer shall assume first mortgage and pay balance to seller. At the time this contract was executed Webb had paid Respondent $7,000. The additional $5,000 cashier's check was given to Respondent by Webb on April 27, 1982 (Exhibit 7) and Exhibit 3 was thereafter prepared. The $5,000 was not placed in escrow but in Respondent's operating account. By check dated May 1, 1982, Respondent disbursed $2,666 to Carline from the proceeds of this down payment plus some rent moneys collected from Webb and claimed the balance of $3,594 as commission on the sale of the property. Carline testified that she received only $1,000 from Respondent in the form of a check when she moved out of the house. Respondent actually paid her $2,000, of which $1,000 was in cash. In her letter to Respondent dated January 1, 1983 (Exhibit 11), Carline acknowledged the $2,000 as a gratuitous payment to her vacating the property and resettling elsewhere. Webb was expecting fire insurance money on his trailer which was to provide funds necessary to pay off the second mortgage. They expected to get additional financing either from a bank or from the seller, or both. When it became evident Webb was experiencing difficulty obtaining financing, Respondent prepared Exhibit 2, another contract for sale and purchase, executed by seller October 22, 1982, which, in Special Clause XII stated: This is a lease option contract, buyer has 30 days to close on property. Rent shall be $560 per month until property is transferred. Property is being purchased "as is". Commission has been paid by seller. This contract also provided for purchase price of $59,900. Deposit (paid to owner-seller Ruby Carline) of $7,000, buyer to assume existing first mortgage of $27,000, the second mortgage to General Finance Corporation in the amount of $10,000 to be paid off and balance to close of $25,900. Clause III provided that if any part of the purchase price is to be financed by third party loan, the contract is contingent upon the buyer obtaining a firm commitment for said loan within 30 days at a rate not to exceed 18 percent for 15 years in the principal amount of $25,000. At the time this contract was signed, all parties knew the buyer needed additional financing to close. While the Webbs occupied the house, Respondent collected the rent, usually in cash, and remitted same to Carlile in the manner received. By the time the closing date of September 12, 1982, arrived, it became evident Webb was having difficulty obtaining financing and would be unable to close. Webb demanded return of the $7,000 deposit from Respondent and Carline. Carline demanded Respondent pay her all of the moneys received by him from Webb; and Respondent claimed a set-off of fees paid by him for appliance repairs, for the institution of eviction proceedings against Webb and for services in collecting the rent for Carline. Respondent paid Webb some $1,200 and attempted to get Carline to release him from liability for further payment to Carline (Exhibit 15). Carline reported the incident to the Real Estate Commission.
Findings Of Fact The Respondents at all times pertinent hereto are licensed real estate brokers having been issued, in the case of Lorraine B. Anthony individually, license number 0123486, and in the case of Lorraine Anthony Realty, Inc., as a corporate broker, license number 0181092. At all times pertinent hereto, Respondent Lorraine B. Anthony was licensed and operating as a real estate broker and the sole "qualifying" broker and officer of Respondent Lorraine Anthony Realty, Inc. The Petitioner is an agency of the State of Florida charged with enforcing the provisions of Chapter 475, Florida Statutes and appurtenant rules governing the licensure standards and practice standards for real estate brokers, broker salesmen and salespersons in the State of Florida and conducting disciplinary proceedings inconnection therewith. On or about May, 1982, Mr. Leif Rosenquist journeyed to Lee County, Florida from his native Sweden with the intention of purchasing real property for the purpose of building a residence for himself and his wife. He became acquainted with Ida Chacko, a real estate salesperson operating in Lee County, Florida, and ultimately entered into a real estate sales contract partly at her behest. Ida Chacko was not then employed by the Respondent, Lorraine B. Anthony nor the Lorraine Anthony Realty, Inc. Mr. Rosenquist gave Ida Chacko approximately $10,000 to place in an escrow account for him in order to effect a deposit and down payment on that real estate purchase. This transaction ultimately did not occur. Ida Chacko, however, retained $7,000 of those funds which were placed in an escrow account with Tri-County Title Company in approximately May of 1982. Shortly thereafter Ms. Chacko became an employee and salesperson with the Respondents real estate firm, with the Respondent Lorraine Anthony as her managing broker. In approximately August, 1982, Mr. and Mrs. Rosenquist entered into a "deposit, receipt and sales contract" with Santa Barbara Development Corporation and Thomas Romano, its president, for the purchase of a piece of property upon which they wished Mr. Romano to construct a duplex which they would use as their residence. The transaction was arranged by Ida Chacko. Mr. Romano owned that property and contracted with the Rosenquists to construct the dwelling. The contract terms required the payment of a $500 earnest money deposit to Mr. Romano and Santa Barbara Development Corporation. Ida Chacko assured Mr. and Mrs. Rosenquist that the $500 earnest money deposit required by the contract would be paid to Mr. Romano from the $7,000 escrow account which she maintained on their behalf. In fact, Ms. Chacko had, prior to that time, withdrawn the $7,000 from the escrow account with Tri-County Title Company for unknown purposes. Further, Ms. Chacko never paid over the $500 earnest money to the Respondent's escrow account nor to Mr. Romano or Santa Barbara Development Corporation. The contract, moreover, was contingent in its terms on the Rosenquists being able to obtain financing at terms stated on the face of the contract, secured by a mortgage with Barnett Bank. The Rosenquists however, were unable to secure compatible financing in accordance with the contractual terms regarding that financing and so that contingency was never satisfied and the Rosenquists elected to never consummate that transaction. That contingency never being satisfied, the Rosenquists never actually defaulted on the contract. Moreover, during the pendency of the Rosenquists attempts to obtain the financial arrangements with Barnett Bank, the time period stated in the contract during which it could be enforceable, expired. Pursuant to a later contract entered into September 26, 1982, the real estate involved in the Rosenquist transaction was sold to Ida Chacko's daughter. Mr. Romano sold her the property and ultimately constructed a duplex dwelling for Ms. Chacko's daughter on that property according to the same construction plans referenced in the Rosenquist contract and for a higher purchase price. He thus incurred no financial detriment caused by the failure of the Rosenquist transaction, nor did the Santa Barbara Development Corporation. Some two months after the failure of the Rosenquist transaction, Mr. Romano sought payment of the $500 earnest money deposit he believed he was due from the Respondent Lorraine B. Anthony and Lorraine Anthony Realty, Inc. She initially refused to pay him the $500. The Respondent had no knowledge that the Rosenquist's agreement had been entered into, knew nothing of its particulars, nor of any representations made by any of the parties to the agreement, nor Ida Chacko, until approximately two days after the contract was executed. She learned of the contract when her office manager, Ellen Smith, told her that no earnest money deposit had been obtained on that contract. She immediately instructed Mrs. Smith to ascertain that an earnest money deposit was immediately obtained according to the terms of the contract. After later consulting with Ida Chacko and learning that the transaction never reached fruition, she did not inquire further concerning the earnest money deposit or other particulars regarding that transaction, believing that she had no reason or duty to do so. The Respondent, Lorraine B. Anthony never met with the Rosenquists nor discussed any facet of the transaction with them nor made any representations to them with regard to the transaction. She never discussed the transaction or made any representations regarding it to Mr. Romano, until he finally demanded the $500 earnest money deposit some two months after the failure of the contract with the Rosenquists and after the consummation of the second contract with Ida Chacko's daughter. The Respondents had had a successful business relationship with Mr. Romano prior to these occasions and desired to continue such relationship and therefore, in an abundance of caution, ultimately paid the $500 to Mr. Romano. He has no claim presently pending against the Respondents. Helen Smith, the Respondents' office manager, established that it was the Respondents' consistent policy to always obtain an earnest money deposit contemporaneously with the execution of a real estate sales contract in which she or her agents were involved, and to deposit such money in her escrow account. Ida Chacko was well aware of this policy at the time the Rosenquist transaction was entered into, but never obtained the earnest money deposit either directly from the Rosenquists nor carried out her assurance to the Rosenquists that she would obtain the required $500 earnest money deposit from the $7,000 "escrow account" supposedly on deposit on their behalf with Tri- County Title Company (or another unidentified party). The $7,000 which Ms. Chacko had on deposit on behalf of the Rosenquists was obtained before she was ever employed with the Respondents' firm as an agent of the Respondent and the Respondent never knew of the existence of those funds. The only connection Respondent and her firm had with this transaction and her only representation made with regard to this transaction was that Mrs. Smith should make sure that agent Chacko placed the $500 earnest money deposit in the proper escrow account in favor of Mr. Romano and Santa Barbara Development Corporation. In any event the Respondents never received the $500 earnest money deposit. The only representation made to the Rosenquists with regard to the earnest money deposit was that of Ida Chacko to the effect that she would pay it over to the Respondents' escrow account from the funds she supposedly had on deposit on the Rosenquists' behalf, which of course, she failed to do. Neither the Respondent, Lorraine B. Anthony, nor any of her agents, ever represented to Mr. Romano or Santa Barbara Development Corporation that the $500 was held on deposit on his behalf or otherwise. Finally, because the Respondents never received the $500 deposit, they could not possibly have return edit to the purchasers without the prior knowledge or consent of the seller, as alleged in Count II of the Complaint. In summary, the Respondent instructed her office manager to see that Ida Chacko received the deposit money and placed it in the escrow account at the time she believed the contract to be valid and enforceable and Ida Chacko failed to comply, thus flouting the Respondent's clearly defined office policy regarding the escrowing of deposit money, of which policy Ida Chacko was previously well aware. The Respondent had had prior and subsequent difficulties with Ida Chacko concerning her failure to follow this and other office policies required by the Respondents. The Respondent only learned definitely that no deposit money had been received nor deposited in her escrow account, approximately two months after the contract was executed and long after the contract was automatically cancelled. She at no time received any commission related to any transaction involving the subject parcel of real property. She never made any representations of any kind to any of the parties to the deal.
Recommendation Having considered the foregoing Findings of Fact and Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is, therefore RECOMMENDED that the Administrative Complaint against Lorraine B. Anthony and Lorraine Anthony Realty, Inc. be DISMISSED in its entirety. DONE and ENTERED this 30th day of April, 1984, in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of April, 1984. COPIES FURNISHED: Fred Langford, Esquire Department of Professional Regulation Post Office Box 1900 Orlando, Florida 32801 Harvey Rollings, Esquire PAVESE, SHEILDS, GARNER, HAVERFIELD, DALTON & HARRISON Post Office Box 88 Cape Coral, Florida 33910 Harold Huff, Director Division of Real Estate Post Office Box 1900 Orlando, Florida 32801 Fred M. Roche, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, the documentary evidence received and the entire record compiled herein, the following relevant facts are found. Respondent, Evon E. Brewton, is a licensed real estate broker/salesman whose license has been in an inactive (dormant) status for approximately one year. Respondent has been a resident of Bay County since approximately 1924. On March 29, 1978, Respondent assisted Mildred C. Webber, a real estate developer, in the search of property suitable for development purposes in Bay County, Florida. Such efforts led Respondent to seek out Walter 13. West, who had a parcel of property in Bay County that he desired a "quick sale". To accomplish such a sale, local T.V. advertisements were used. Respondent's efforts resulted in a contract between Mildred C. Webber and Walter B. West (Seller) for the purchase and sale of the West property for a purchase price of $115,500.00. Mr. West, the Seller, in unequivocal terms and conditions, made clear to Respondent that he was desirous of selling the property to the first purchaser who was able to tender an acceptable cash offer. Seller West also made clear to Respondent that all offers must contain a sizeable cash deposit to secure the property and which deposit he would consider forfeited provided the transaction failed to close. These conditions were made clear to Ms. Webber by Respondent and she agreed to place a $5,000.00 deposit in the form of a check which was turned over to the Seller. Mr. West accepted Ms. Webber's offer to purchase the property described as Parcel No. 1 for the price of $115,500.00. The $5,000.00 deposit check tendered by Ms. Webber was signed over to the Seller and was immediately negotiated by Mr. West. Also on March 29, 1978, Respondent secured a contract from Seller West for Ms. Webber to purchase a second parcel of property for which Ms. Webber placed a $500.00 earnest money deposit to secure the offer. Although Mr. West granted Ms. Webber two extensions of time to secure funds to finance the purchase of the two parcels of property, she was unable to secure financing to close the transaction. As a result, Seller West considered Ms. Webber's deposits to be forfeited and, accordingly, he retained the deposit monies. Real estate salesmen R. B. Ballard and J. K. Watts appeared and expressed their familiarity with the West/Webber real estate transactions. Witnesses Ballard and Watts corroborated the pertinent testimony of Respondent respecting the facts that prospective purchaser Webber understood Seller West's conditions and the resulting consequences should she be unable to secure financing to purchase the property. In this regard, testimony herein indicates that Ms. Webber, a knowledgeable real estate developers has not made any demands upon Mr. West to obtain a refund of the deposit monies, nor has any litigation been instituted by her to recover such deposit monies.
Recommendation Based on the foregoing Findings or Fact and Conclusions of Law, it is hereby RECOMMENDED: That the complaint allegations charging that Respondent violated Subsection 475.25(1)(a) and (i) Florida Statutes, be DISMISSED. RECOMMENDED this 3rd day of December, 1980, in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings The Collins Building Room 101 Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of December, 1980.
Findings Of Fact At all times material hereto, Respondent Robert Marriott has been a licensed real estate broker/salesman under the laws of the State of Florida, trading as Marriott Realty. In February of 1980, in his capacity as a real estate broker/salesman, Respondent obtained an offer to purchase commercial property in Miami from Orlando Villacis, a resident of Ecuador, as purchaser, for a total purchase price of $500,000. In conjunction with the offer, Villacis paid a $20,000 earnest money deposit to be held by Marriott Realty in escrow under the terms of the offer. Villacis' deposit check in the amount of $20,000 was deposited into the Marriott Realty escrow account on February 22, 1980. By March 11, 1980, Villacis' $20,000 had been withdrawn, leaving an escrow account balance of $40. This fact was never reported to Villacis. Having heard nothing definite from Respondent with regard to the offer, and because he spent most of his time out of the country, Villacis engaged the services of attorney Rafael Penalver. Prior to July 1980, Penalver contacted the Respondent and inquired as to the status of the offer. Each time, Respondent told him that the seller was still considering the offer. In July of 1980, Respondent told Penalver that the $500,000 offer had been rejected by the seller and recommended that Villacis present an offer for $570,000. Penalver prepared the offer in the amount of $570,000, again calling for a $20,000 earnest money deposit, which Penalver and Villacis assumed was still in the Marriott Realty escrow account. Receiving no response from Respondent on the second offer, Penalver attempted to contact Respondent by telephone on numerous occasions. When Penalver was successful, Respondent told him that the seller was reviewing the offer. In early September 1980, Respondent advised Penalver that the $570,000 offer had been rejected by the seller. By letter dated September 11, 1980, Penalver raised the offer to $600,000, set a deadline of September 19 for the acceptance of the offer, and directed Respondent to return the $20,000 immediately should the offer not be accepted. After September 19, having heard nothing from the Respondent, Penalver called him, at which time Respondent advised that the offer was being considered by the seller. Penalver then wrote a letter dated October 7, 1980, to Respondent demanding that Respondent deposit the $20,000 into Villacis' account. Again hearing nothing from Respondent, Penalver on numerous occasions attempted to contact him by telephone in order to again demand the immediate return of the $20,000 deposit. Being unsuccessful, Penalver wrote the Respondent on November 20, 1980, and January 22, 1981, both times demanding the return of the $20,000 earnest money deposit. After the letter of January 22, 1981, Respondent agreed to meet with Penalver in Penalver's office. On February 2, 1981, the Respondent and his wife met with Penalver. During that meeting, Respondent advised Penalver that the $20,000 was no longer available and that he and his wife had used the money to make mortgage payments and cosmetic improvements on their personal residence. Respondent challenged Penalver to sue him to get the money back. After discussing Respondent's position with Villacis, Penalver filed a civil action for return of the $20,000. In his Answer to the Complaint filed in that litigation, Respondent admitted that he had used the $20,000 deposit for mortgage payments and other personal household expenses and for payment of his IRS tax deficiency. Villacis obtained a Final Judgment in the civil action in the amount of $20,000 plus interest and costs on October 6, 1982. Respondent testified that he did not return the $20,000 earnest money deposit because, in approximately October 1980, Villacis verbally agreed to loan the $20,000 to Respondent. Villacis strongly denied making any offer of a loan to Respondent. The purported loan agreement would have occurred after Penalver had twice written Respondent regarding immediate return of the $20,000 and seven months after the $20,000 had disappeared from the escrow account. Further, after Penalver sent his November demand letter, Respondent wrote Villacis in December of 1980 asking that Villacis consider loaning Respondent the $20,000 in exchange for an unrecorded mortgage on Respondent's personal residence. Clearly, Respondent's testimony is not credible. As of the date of the formal hearing in this cause, the Final Judgment in favor of Villacis and against Respondent remained unpaid and Respondent had still not returned to Villacis the $20,000 earnest money deposit.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding Respondent guilty of the allegations contained within the Administrative Complaint filed against him and revoking his license as a real estate broker/salesman. DONE and RECOMMENDED this 30th day of April, 1984, in Tallahassee, Leon County, Florida. LINDA M. RIGOT, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of April, 1984. COPIES FURNISHED: Tina Hipple, Esquire Division of Real Estate 400 West Robinson Street Orlando, Florida 32801 David I. Schlosberg, Esquire 525 North 27th Avenue, Suite 100 Miami, Florida 33125 Frederick Roche, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Harold Huff, Executive Director Division of Real Estate 400 West Robinson Street Orlando, Florida 32801
Findings Of Fact Kenneth M. Olson, Jr., is a registered real estate broker with the FREC and Active Firm Member of Olson and Associates Real Estate, Inc., a corporate broker registered with the FREC. A copy of the Administrative Complaint was forwarded to the last address of Defendants registered with the FREC by certified mail numbers 4747 and 4748 and the notice of hearing was forwarded to the same address by certified mail numbers 4613 and 4614. Accordingly the Hearing Officer had jurisdiction over the Defendants and the offenses. By contract dated September 17, 1975 (Exhibit 6) Joseph J. Pillucere contracted to purchase real property from Paul L. Nave. The contract provided, inter alia, for a $500 earnest money deposit, $9500 down payment at closing with purchaser to assume existing first mortgage of approximately $28,000; and the seller taking back a purchase money second mortgage in the amount of $17,000. Thereafter, at the time scheduled for closing, the purchaser failed to produce the additional down payment required, execute the second mortgage and assume the existing first mortgage. After receiving conflicting demands from buyer and seller for the return of the earnest money deposit Defendant requested an advisory opinion from the FREC in accordance with Section 475.25(1)(c) FS. On May 13, 1976 an advisory opinion (Exhibit 5) was given by FREC to the Defendant, with copies to both parties to the contract, advising Defendant that the earnest money deposit should-be disbursed to the seller. The deposit has been disbursed to neither party to the contract.
The Issue Is Respondent, Victoria D. Wiedle, guilty of failure to account for and deliver funds, in violation of Section 475.25(1)(d)1, Florida Statutes, and, if so, what is the appropriate penalty.
Findings Of Fact Petitioner is the state agency charged with the responsibility and duty to prosecute administrative complaints pursuant to Section 20.165 and Chapters 120, 455, and 475, Florida Statutes. At all times material hereto, Respondent Wiedle was a licensed real estate broker, having been issued license number BK-0646846, and was principal broker of Escarosa Realty. Respondent's license is still active. Janice Marlene Christian is a realtor associate. She was an independent contractor with Escarosa Realty from December 1998 until April 1999. Accordingly, Respondent Wiedle was Ms. Christian's registered broker during this time. Ms. Beverly Lewis is the mother-in-law of Ms. Christian's brother. Ms. Lewis came to Ms. Christian in February 1999 because she was interested in looking for and purchasing a house. On February 16, 1999, Ms. Christian facilitated an Exclusive Buyer Brokerage Agreement (the Agreement) on behalf of Escarosa Realty with Ms. Lewis. The Agreement was on a form created by Formulator, a software company. "Florida Association of Realtors" appears on the face of the document. Paragraph 6 of the Agreement reads in pertinent part: RETAINER: Upon final execution of this agreement, Buyer will pay to Broker a non- refundable retainer fee of $0 for Broker's services ("Retainer"). Accordingly, Respondent was not entitled to any money as a retainer fee for broker services pursuant to this agreement. The agreement was signed by Ms. Lewis, Ms. Christian, and Ms. Wiedle and became effective on February 16, 1999. The specified termination date of the agreement was August 17, 1999. On or about February 27, 1999, Ms. Christian tendered an offer to sellers on behalf of Ms. Lewis, for property located at 107 Poi Avenue in Santa Rosa County (subject property). Pursuant to this offer, Ms. Lewis gave a $500.00 check dated February 27, 1999, to Ms. Christian as earnest money. The check is made out as follows: "Escarosa Realty Inc. Escrow". Ms. Lewis wrote in the memo section of the check that the check was escrow money for 107 Poi Terrace. The $500.00 check was deposited in Escarosa Realty's escrow account on March 1, 1999. Respondent accounted for the $500.00 check on the March 1999 monthly reconciliation statement for Escarosa Realty. The seller of the subject property made a counter- offer for a higher price which Ms. Lewis rejected. The testimony differs as to what happened next. According to Ms. Christian, Ms. Christian spoke to Respondent sometime after Ms. Lewis rejected the counter-offer about refunding the escrow money to Ms. Lewis. According to Ms. Christian, Respondent informed her that she did not have to give the escrow money back to Ms. Lewis yet because she had the buyer broker agreement. Ms. Christian further asserts that she filled out a written request on March 16, 1999, on a form entitled "EMD Request," which means earnest money deposit request, and gave it to Respondent who again asserted that the $500.00 did not need to be returned at that time because of the buyer brokerage agreement. Ms. Christian's testimony is consistent with Ms. Lewis's. According to Ms. Lewis, she talked to Ms. Christian about getting a refund of the $500.00 shortly after she rejected the counter-offer. She and Ms. Christian discussed the EMD form. She initially agreed that Respondent could temporarily maintain the escrow funds. However, when Ms. Lewis discovered that the financing she was seeking through the rural development program would take several months, she decided she wanted the money returned. Ms. Christian ended her contract with Escarosa Realty effective April 14, 1999. Because Ms. Christian was no longer at Escarosa, Ms. Lewis contacted Respondent by telephone on or about April 21, 1999. Ms. Lewis informed Respondent about the purchase offer and rejection of the counter-offer for the subject property. According to Ms. Lewis, Respondent initially told her she would return the money to her in the mail. When she did not receive it, Ms. Lewis again called Respondent and was told that the $500.00 would not be returned because of the buyer brokerage agreement was still in place. Ms. Lewis asserts that Respondent never told her any request for a refund of the $500.00 had to be in writing. Ms. Lewis then went to the Escarosa Realty office. Ms. Weidle was not there but Elnora Alexander was there. Ms. Alexander was also a realtor associate who was an independent contractor with Escarosa Realty. Ms. Lewis explained to Ms. Alexander about the circumstances of the subject property and that she wanted her earnest money back. Ms. Alexander gave a copy of the buyer broker agreement to Ms. Lewis. After going to Escarosa Realty, Ms. Lewis had numerous other telephone conversations with Respondent about the money. Respondent denies any knowledge of the Poi Terrace failed transaction until she spoke to Ms. Lewis on the phone. She also denied ever receiving the EMD request from Ms. Christian. Respondent asserts that she repeatedly told Ms. Lewis that she would return the $500.00 if Ms. Lewis would only make a request in writing, but that Ms. Lewis refused. This assertion is not credible. It is inconceivable that after all of the efforts made by Ms. Lewis to get her $500.00 returned to her, that she would refuse to make a written request for the money. In any event, there is no dispute that Ms. Lewis made verbal requests to Respondent for the return of the escrow monies. Respondent Wiedle admits that Ms. Lewis requested the money over the telephone. Further, in an April 2, 2001 letter from Respondent to the Division of Real Estate, Respondent acknowledged that Ms. Lewis asked for a refund of the money in the beginning of May and again in early June of 1999. Clearly, if Respondent Wiedle had not previously been aware of the failed Poi Terrace transaction, she was made aware of it during the telephone conversations with Ms. Lewis. Notwithstanding Respondent's assertion that the reason she did not refund the $500.00 to Ms. Lewis was that the request was not in writing, it is clear from Respondent's testimony and from a letter she wrote to Mr. Clanton, Petitioner's investigator, that she believed the $500.00 was connected to the buyer brokerage agreement, not to any offer for purchase of property. In an undated letter from Respondent Wiedle to Mr. Clanton, Respondent wrote: Dear Mr. Clanton, This is in response to your letter dated August 17th, 1999. First Beverly A. Lewis was refunded her money on August 20, 1999 check #111. Second I would like to respond to her complaint. Beverly A. Lewis signed a Exclusive Buyer Brokerage Agreement with EscaRosa Realty, Inc. on February 16th, 1999 with it to terminate on August 17th 1999. Beverly A. Lewis knew that her deposit was a refundable deposit after the agreement is expired not before. As the Broker of this company I had no contact with Beverly Lewis until the agent Marlene Christian was asked to leave the company. If there ever was a contract for her to purchase a house then her agent Marlene Christian never informed me of nor did she ever provide any such contract. The deposit was given to me with the Exclusive Buyer Brokerage Agreement only. Nor did her agent Marlene ever fill out the EMD refund request form requesting a refund to be given to Beverly A. Lewis. However, The result would have been the same. I asked Beverly Lewis If she had changed her mind on purchasing a house she said no she was still going to buy a house but that she knew if she didn't buy her house through Marlene at her new company that Marlene would make life very hard on her. I told her I was sorry but that is the whole purpose in the contract was to secure your buyers from just going all over the place. . . .(emphasis supplied) Respondent refunded the $500.00 to Ms. Lewis on August 10, 1999. At hearing, Respondent volunteered that there was a previous complaint against her for failing to return money she held under a buyer brokerage agreement with a former client. In that instance, the Probable Cause Panel of the Florida Real Estate Commission found no probable cause but issued a letter of guidance to Respondent.1
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law set forth herein, the evidence of record and the demeanor of the witnesses, it is RECOMMENDED: That a final order be entered by the Florida Real Estate Commission finding the Respondent, Victoria D. Wiedle, guilty of violating Section 475.25(1)(d), Florida Statutes, in that she failed to deliver escrow money upon demand, imposing a fine of $1,000.00, and placing Respondent Wiedle on probation for a period of two years. As conditions of probation, Respondent should be required to attend a continuing education course which addresses appropriate handling of escrow funds and be subject to periodic inspections and interviews by a Department of Business and Professional Regulation investigator. DONE AND ENTERED this 14th day of June, 2002, in Tallahassee, Leon County, Florida. BARBARA J. STAROS 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 14th day of June, 2002.
The Issue The issue in this case is whether the Respondent, Michael Crudele, should be disciplined for alleged violations of the statutes and rules governing the conduct of insurance agents.
Findings Of Fact The Respondent, Michael Crudele, is currently eligible for licensure and is licensed in Florida as a life insurance agent and as a life and health insurance agent. The Respondent was the agent-of-record on two American Life and Casualty Insurance Company (American Life) annuities purchased by Mary Clem, one in the face amount of $30,000 dated October 28, 1992, and the other in the face amount of $20,000 dated December 28, 1992. Clem was 84 years old at the time and a widow. The annuities represented more than 80 percent of her life savings. The Respondent became agent-of-record on these annuities at the request of Charles Perks, a good friend and former fellow Metropolitan Life agent. Clem had been an insurance customer of Perks since approximately 1985. When Clem complained to Perks that "the bottom fell out of interest" on her certificates of deposit, he suggested the American Life annuities as a safe alternative that paid higher interest. But Perks was not an authorized agent for American Life, so he asked the Respondent to participate in the sales and split the commissions. In 1992, the Respondent became involved in the Zuma Engineering Co., Inc., a startup tire recycling venture. After being introduced to Zuma, the Respondent became very enthusiastic about its prospects. He invested $30,000 in Zuma, received stock in return for his investment, and became a thirty percent owner. He also became involved in all aspects of the startup business, from promoting the business to the public, to raising capital from and working with private investors, to cleaning up Zuma's recycling facility. He understood that he was a corporate director, but corporate filings with the Secretary of State indicate that he was a vice-president from October 27, 1993, until March 20, 1994. The Respondent not only solicited investors himself, he participated in recruiting a sales force. As part of this effort, he recruited his friend Charles Perks. In late 1993 and early 1994, Perks and the Respondent approached Mary Clem to solicit her investment in Zuma. It is not clear from the evidence how the solicitation of Mary Clem proceeded. It is believed that Clem may have initially contacted Perks around the time of the anniversary date of the $30,000 annuity to complain that she had been notified of a drop in the interest rate paid by the annuity. Mary Clem received a guaranteed 5.75 percent interest, plus a one percent interest "bonus" for a total of 6.75 percent interest during the first year of her two American Life annuities. The "bonus" interest automatically terminated at the end of the first year. In addition, the evidence was that the standard interest guarantee decreased to five percent starting with the second year. It is not clear when Clem received notice of the decrease in the interest guarantee or whether she received notice from American Life as to the elimination of the interest "bonus," but it is found that by December 2, 1993, Clem knew the interest rate on her $30,000 annuity was being decreased to five percent for the second year of the annuity. It is possible that she also knew by then that the interest on her $20,000 annuity was being decreased to five percent as well. Perks saw Mary Clem's dissatisfaction with the American Life annuities as an opportunity to sell Zuma promissory notes to her. On or about December 2, 1993, Charles Perks approached Mary Clem and sold her a $10,000 promissory note issued by Zuma. On its face, the promissory note was dated December 3, 1993, and paid twelve percent interest, with a single balloon payment of principal and interest due on June 3, 1995. The evidence was that the Respondent did not participate in this transaction on December 2, 1993. Mary Clem does not recall, and both Perks and the Respondent testified that the Respondent was not present. The Respondent testified that he was not even aware of this $10,000 Zuma note until the Department's Order of Emergency Suspension and Administrative Complaint on or about July, 1996, but this testimony is rejected as not being credible. It is found that the Respondent knew about Clem's purchase of the $10,000 promissory note either on December 2, 1993, or soon thereafter. It is found that by December 2, 1993, or shortly thereafter, Clem complained to both Perks and the Respondent about the interest on her annuities. It is found that all three of them discussed Zuma promissory notes as an alternative investment. Contrary to the Respondent's testimony, it is found that, if he did not already know about Clem's purchase of the $10,000 Zuma promissory note by then, the Respondent would have learned of the $10,000 Zuma promissory note during these discussions. It also is found that, based on those discussions, Clem decided to surrender her $20,000 annuity and use the money to buy Zuma promissory notes. It is found that Perks and the Respondent helped Clem with the surrender of her $20,000 annuity. It also is found, contrary to the Respondent's testimony, that Perks and the Respondent assisted in arranging for Clem to be able to purchase a Zuma promissory note in the face amount of $20,000 for the net cash surrender value of the $20,000 annuity, after deduction of premium tax and surrender penalty. When American Life was notified of Clem's desire to surrender the $20,000 annuity, the company contacted the Respondent and asked him to "conserve" the annuity, i.e., dissuade Clem from surrendering it. It is found that, if he did not already know about it by then, the Respondent would have learned of Clem's intentions to buy Zuma promissory notes when he contacted her on behalf of American Life to comply with American Life's request that he attempt to conserve the annuity. It also is found that, if he did not already know about Clem's purchase of the $10,000 Zuma promissory note, he would have learned of the $10,000 Zuma promissory note at this time. By letter dated January 24, 1994, American Life responded to Clem's request to surrender her $20,000 annuity. American Life's letter advised Clem that she was entitled to principal and $69.67 in interest, less premium tax in the amount of $213.69 and surrender charges in the amount of $1,625.65, for a net of $18,230.33. A check for the net amount was enclosed. A copy of American Life's January 24, 1994, letter was sent to the Respondent as the agent-of-record. On or about February 1, 1994, Perks and the Respondent went to Clem's home to complete the purchase of a $20,000 Zuma promissory note. The Respondent testified that, since all of the arrangements had been made in advance, the Respondent's role in the transaction was solely as "corporate director and verifier" on behalf of Zuma; however, the Respondent also would receive $900 of the $2,000 commission paid by Zuma on the transaction. Meanwhile, his additional role as American Life's agent required him to attempt to "conserve" the annuity policy. At one point, the Respondent testified that, as "corporate director and verifier," he inquired into Clem's assets (presumably to ascertain if the investment was appropriate for her). But he also testified that he assumed her assets were unchanged from 1992, raising a question as to whether the Respondent undertook any inquiry into Clem's assets on February 1, 1994, at all. At another point, the Respondent testified that he understood Mary Clem to have $200,000 in assets. See Department Exhibit 6. But, if so, those assets consisted of her home, the annuities and the $10,000 Zuma promissory note. It is found that the Respondent had no reason to believe she had any other assets. The Respondent also testified that he did not determine from his alleged inquiry into Clem's assets, and did not know, that Clem already had purchased a $10,000 Zuma promissory note. As previously found, it is considered incredible that the Respondent did not already know by February 1, 1994, that Clem had purchased the $10,000 Zuma promissory note; it is all the more incredible that he would not have learned of it from a diligent inquiry into Clem's assets for purposes of determining the appropriateness of the $20,000 Zuma investment. Mary Clem testified that the Respondent and Perks touted the safety of the Zuma investment as well as the higher interest it paid. The Respondent testified that, although acting in the conflicting roles described in the preceding finding, he discussed the differences between the two investments, including the risk of the Zuma investment. The Respondent testified that he read to Mary Clem from a written disclosure statement that defined Zuma's promissory notes as being a "risk investment," but no written disclosure statement was introduced in evidence. In any event, the "verification" was a mere formality; as the Respondent knew full well, Clem already had decided to buy the promissory note. Clem wrote a personal check in the amount of $18,230, and Perks and the Respondent gave her Zuma's $20,000 promissory note bearing twelve percent interest. The note was erroneously dated February 1, 1993, and erroneously stated on its face that the single balloon payment of principal and interest was due on February 1, 1995. The note was supposed to have a 24- month term from February 1, 1994, to February 1, 1996. (This discrepancy would lead to problems later. See Findings 32-33, infra.) In view of the conflict of interest inherent in the Respondent's multiple roles in the transaction, it is found that the Respondent did not make a good faith inquiry into appropriateness of the Zuma investment for Mary Clem and did not fully disclose the risk associated with it, as compared to the American Life annuity. If the Respondent disclosed the risk, it is found that he did not do so fully and clearly, again probably due to the conflict of interest inherent in his multiple roles. Neither Mary Clem nor her late husband had ever invested in any stocks, mutual funds or even bonds. Before Mary Clem invested in the American Life annuities, she and her late husband always invested in certificates of deposit. While it is true that Clem wanted higher interest than she was getting on her annuities, she also wanted safety and security. It is found that, if the Respondent had fully and completely disclosed the risk of investing in Zuma promissory notes, Mary Clem would not have invested in them. Mary Clem also surrendered her $30,000 American Life annuity and used the money she received to buy another Zuma promissory note. The Respondent claimed not to have known anything about the third Zuma note, and the Department was not able to prove that he did. It is not clear exactly when Clem decided to surrender her $30,000 annuity and buy a third Zuma note. It was before March 3, 1994, the date of the American Life letter responding to Clem's request to surrender her $30,000 annuity. American Life's letter advised Clem that she was entitled to principal and $16.04 in interest, less premium tax in the amount of $324.71 and surrender charges in the amount of $2,474.92, for a net of $27,216.41. A check for the net amount was enclosed. As with Clem's request to surrender her $20,000 annuity, American Life contacted the Respondent and asked him to try to "conserve" the annuity. The Respondent also received a copy of American Life's March 3, 1994, letter as the agent-of- record. The Respondent admitted that he telephoned Clem on or about February 28, 1994, to try to conserve the annuity but that Clem was adamant. He claimed that Clem did not tell him what she intended to do with the money and that he did not ask. The meeting at which Clem bought the third Zuma promissory note took place on March 10, 1994. Mary Clem thought the Respondent was there but could not swear to it. Perks also testified that he thought the Respondent was there. The Respondent testified that he definitely was not there and did not know the transaction took place. By that time of the meeting on March 10, 1994, the Respondent had become suspicious and distrustful of Zuma's principals. They had diluted his thirty percent share of the company to a mere 0.3 percent. In addition, the Respondent did not think that the principals were following the business plan they had "sold" the Respondent, and which the Respondent in turn had "sold" to private investors, including Mary Clem. By early March 1994, the Respondent began to take steps to attempt to protect the investors in Zuma, including himself, and force Zuma to follow its business plan. Eventually, he emptied Zuma's accounts and placed the funds in the trust account of the lawyers he hired to sue Zuma and its principals to enjoin them to follow the business plan. The court ruled against the Respondent and required him to return the money to Zuma. The Respondent paid his lawyers' fees out of his own pocket. Based on the timing of events, it seems probable that the Respondent did not meet with Perks and Clem on March 10, 1994. By that time, he was becoming deeply involved in his dispute with Zuma and its principals. It is less clear that the Respondent was completely ignorant of Clem's intention to use the money from the surrender of the $30,000 American Life annuity to buy a third Zuma note, but he may well have lost track of Mary Clem and her intentions in the midst of his dispute with Zuma and its principals. It had been arranged before the March 10, 1994, meeting for Clem to be able to purchase a Zuma promissory note in the face amount of $30,000 for the net cash surrender value of the $30,000 annuity, after deduction of premium tax and surrender penalty. The Respondent denied participating in making these arrangements or having any knowledge of them. A similar arrangement already had been made for the $20,000 annuity and Zuma note, and it is conceivable that Perks did not require the Respondent's participation to arrange it for the $30,000 annuity and Zuma note. It is found that the evidence did not prove the Respondent's participation. On March 10, 1994, Clem wrote a personal check in the amount of $27,2126.41, and received Zuma's $30,000 promissory note dated March 10, 1994. On its face, the note paid twelve percent interest, with quarterly payments of $900 interest and the principal payable on March 10, 1996. The Respondent contacted Mary Clem in June or July, 1994, to inquire about her Zuma investment. Clem told him everything was fine. In December 1994, the notes were revised to show Mary Clem's daughter as a beneficiary on the notes in the event of Clem's death. The revised $20,000 note preserved the erroneous issuance and due dates. See Finding 21, supra. The $900 interest payment due on the $30,000 Zuma note on March 1995, was seriously past due. In addition, no payments were made on the $20,000 note. On April 1, 1995, the $20,000 note was renewed upon payment of $6,200 interest and penalties. Under the renewal note, monthly interest payments of $200 were due, and a balloon payment of principal and remaining interest was due on September 1, 1995. By mid-1995, Zuma was in default again, and Clem received no payments after August 8, 1995. Zuma paid Clem a total of just $23,400 on the three promissory notes. The Respondent conceded that there was a high risk of losing one's entire investment in Zuma and that someone investing in Zuma had to be prepared to lose the entire investment. He also conceded that Mary Clem should not have invested the bulk of her life savings in Zuma. He also conceded that it would have been significant to know, and he should have wanted to know, the extent of Clem's investment in Zuma before increasing her investment in Zuma.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance enter a final order: (1) finding the Respondent, Michael Crudele, guilty of violating Sections 626.611(7), 626.621(3), and 626.621(6), Florida Statutes (1993); and (2) suspending his license and eligibility for licensure as a life insurance agent and as a life and health insurance agent for six months. RECOMMENDED this 6th day of January, 1998, in Tallahassee, Leon County, Florida. J. LAWRENCE JOHNSTON 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 6th day of January, 1998.
Findings Of Fact By Receipt for Deposit Offer to Purchase and Contract for Sale dated April 26, 1971 Michael J. and Mary Martha Solomon deposited with David J. Watson, Respondent herein, a $5,000 earnest money deposit on a house and tract of land in Polk County. This receipt for deposit became a contract for sale when executed by the seller and contained two special clauses that were disputed at the hearing. The first is "This contract is subject to a change in county zoning. The change is from residential to rural conservation for the purpose of keeping horses." The second special clause which purportedly led to the rescission of the contract is "Seller to convey all pumps, air conditioners, and septic tank in good condition." Michael Solomon (hereafter referred to as Solomon) apparently in response to an advertisement, entered Respondent's office to inquire about the property herein involved. Solomon was interested in purchasing the house which was advertised (Exhibit #6) provided he could buy additional land which he intended to develop as lakefront lots. His father, Dr. Solomon, expected to retire soon and move to Florida, and Solomon thought the house would be suitable for his parents who would provide a substantial part of the purchase money at the time of closing. Since his father raised Arabian horses as a hobby he wanted to be sure that he would be able to keep horses on the property. Respondent Watson, being a somewhat inexperienced broker, suggested the zoning change to rural conservation, and the special clause relating to zoning change was put in the contract. Prior to executing the contract Solomon and his wife inspected the premises and, on one occasion prior to the week in which one day was set for closing, Dr. Solomon flew down from Pennsylvania to look over the property. The testimony of the buyers and others involved in this transaction is in irreconcilable conflict with respect to the details leading to rescission of the contract by the buyers. Well prior to the date set for closing Respondent, while Solomon was in his office, called the County Zoning Department to inquire about the zoning on the property involved in the contract. He then learned that the zoning of the property was R-1 (Residential) and that horses could be kept on the property for personal use so long as the stables for feeding and housing were located not less than 100-feet from the residence. This was communicated to the buyer and he accepted this explanation. An official of the County Zoning Department confirmed at the hearing that the property was so zoned and that horses could be maintained on the premises for personal use. He also stated that an administrative determination could permit horses to be raised on the premises as a business venture; however, this issue was not raised at any time by any of the parties to the contract. Although the buyers testified that they requested the Respondent (or his salesman) to obtain in writing from the county zoning officials confirmation that horses could be kept on the property, neither the broker nor the salesman recall any issue being made of the zoning provision prior to the rescission of the contract. In view of the fact that the sale price of the entire parcel would amount to some $250,000 resulting in a commission to the brokers office of approximately $20,000 it is not conceivable that he would have risked losing such a commission by failure to ask the zoning officials for written confirmation that horses could be kept on the property if the buyers had so requested. Shortly before the day set for the closing Solomon's parents arrived and inspected the house. Apparently Mrs. Solomon was not satisfied with the house so Solomon requested a formal inspection the following day. Conditions found at this inspection rest in the eye of the beholder. The buyers all testified the house had been vandalized, paint was thrown in the garage, screens had been ripped off, windows broken, the basement was flooded, the sprinkler system and the air conditioner were inoperative. Others who visited the premises acknowledged that paint had been spilled on the concrete floor of the garage when a paint can had been turned over, but none had ever seen water in the basement, there was no evidence of vandalism, and all equipment was operable. Respondent produced a bill for repairs to the air conditioner, dated prior to the preclosing inspection, which showed charges only for installing new filters. Neither the Respondent nor anyone other than the buyers recall any complaint by the buyers during this inspection. They did recall that the elder Mrs. Solomon did not like the house. The salesman could not point out the location of the septic tank but there was no evidence that it was not functioning properly. At a preclosing conference held in the office of the attorney representing both parties to this transaction the elder Solomons became quite upset regarding the cost of title insurance on the property and indicated then that they would not close as scheduled. Apparently there are only two law offices in Auburndale and one of the lawyers in Auburndale is one of the four sellers of the property. The buyers accepted the attorney in the other office as their attorney with knowledge that he was representing both parties. The evening before the date set for closing Michael Solomon called Respondent Watson to tell him that his mother hated tide house and that he would be unable, to close. Watson advised him that he would forfeit his deposit if he didn't go through with the contract as the sellers were not the type to refund any of the deposit. Clause 11 of the contract provides that the seller may elect to retain the deposit as liquidated damages if he does not choose to sue for specific performance. At the termite inspection conducted prior to closing, termite infestation was noted and treated at the expense of the seller. N indication was raised by any witness that this issue affected the of the contract. After the date set for the closing had passed, Michael Solomon never requested return of his earnest money deposit from Respondent. Approximately one year later mesdames Solomon requested Respondent Watson to return the deposit and he advised them he was unable to do so. Some six weeks after the July 15, 1971 closing date the attorney- seller demanded that Respondent disburse funds due sellers pursuant to Clause 11 of the contract and offered to file suit against ham unless he did so. Respondent contacted the attorney representing sellers and buyers in this transaction for legal advice regarding his responsibilities. He was advised to disburse the funds. He obtained authorization: from the sellers to pay for the air conditioner repairs and for some work done in the yard at the request of Solomon. By checks dated September 7, 1971 Respondent disbursed $502.45 to each of the four sellers. This represented their share of the deposit less expenses.
Findings Of Fact At all times relevant hereto, respondent, Michael Leon Thomas (Thomas), held real estate salesman license number 00088326 issued by petitioner, Department of Professional Regulation, Division of Real Estate (Division). He has been licensed by petitioner since at least 1981. When the events herein occurred, Thomas was registered as a salesman with Mike Lally Real Estate Company, Inc., a firm in Miami, Florida. Presently, Thomas is associated with Captain Realty, Inc. in Dania, Florida. Thomas is a full-time airline captain with a major air carrier. When not flying, he has successfully pursued a second career in real estate investments. On occasion, these endeavors have involved other airline personnel with whom he works. The complaint herein relates too one such investment endeavor involving a retired flight attendant (and her brother) who felt she did not receive all monies due on a $10,000 investment made in 1982. The origins of this story go back to the late spring or early summer of 1982 when one Waler B. Duke, Jr. (Duke), also an airline captain and then a business partner of Thomas in a corporation, signed a contract, as trustee, to purchase two small but valuable parcels of property at the corner of I-95 and Stirling Road in Dania, Florida. Thomas, who has an eye for a good investment, had initially spotted the property and, with the foresight of a clairvoyant, realized that after rezoning and certain improvements, the property could be turned over for a handsome profit. According to the contracts received in evidence as petitioner's exhibits 3 and 4, Duke, as trustee for a "Florida Limited Partnership to he formed," agreed to pay a total of $271,000 for the two parcels. The closings were to be held that fall, and eventually took place on October 19 and November 23, 1982. Like other entrepreneurs, Duke and Thomas needed capital to complete the deal. To acquire such capital, Duke and Thomas contacted various acquaintances who they thought would be interested in making a good return on an investment. One of the persons contacted by Duke was Kathleen Ireland (then Kathleen De Bellas). At that time Ireland was a non-practicing lawyer and an active flight attendant for the same airline for which Thomas worked. However, Ireland and Thomas did not know each other. With other potential investors, Ireland attended a meeting hosted by Duke in September, 1982 explaining the fundamentals of the deal. Thomas was not present at that meeting, and was unaware of the representations made by Duke to Ireland. In addition to Duke's pitch, Ireland received from him an unsigned copy of a trust agreement and various other documents concerning the matter, including a proposal containing a pro forma statement. The Duke-Thomas investment was set up in the form of a limited partnership (known as Stirling 95 Land Trust) with Thomas-Duke Enterprises, Inc. (TDI) acting as the general partner, (presumably to shield Duke's and Thomas' personal liability), and the investors assuming the role of limited partners. Each share required an investment of $10,000. After she had reviewed the material given to her by Duke, Ireland decided to make an investment, and with her brother Joseph, she committed $10,000 to the project, which represented a one-seventeenth interest in the partnership. Ireland thereafter received two copies of the "trustee and joint venture agreement," one of which she signed and returned to Duke. Other investors in the venture included at least one lawyer, an array of airline pilots, and a property manager. In all, Duke and Thomas collected $155,000 in investment capital. Just exactly what Duke said to Ireland at the meeting in September, 1982 is not of record since Duke did not testify at final hearing, and the record contains only hearsay declarations concerning these statements. However, paragraph 2.3 of the trustee agreement provided that Duke and Thomas would receive a 6 percent sales commission from the transaction, while the pro forma statement reflected the partnership would acquire the property at a cost basis of $4.00 per square foot, or a total cost of $318,506. This was approximately $47,500 more than Duke would actually pay to acquire the property under the two outstanding contracts. It is this latter amount that eventually piqued the curiosity of Ireland, and resulted in her filing a complaint with the Division of Real Estate and a lawsuit against Thomas in Broward County circuit court. What Thomas did in this case was no different than his actions on numerous other prior and subsequent deals. Because he had used his expertise in locating the property, and putting together the deal, Thomas "stepped-up" or increased the cost of the property for the limited partnership to $4.00 per square foot in order to realize an entrepreneurial fee for himself and Duke. This was a common practice in limited partnership arrangements. The fee was paid to Thomas and Duke by separate checks, was not labeled as a commission, and was not intended to be one. Indeed, their fee ($47,500) was compensation for their expertise. The only problem was Ireland claimed Duke did not disclose this fee to her prior to her investment, and she now contends she is entitled to one-seventeenth of this amount. But, even if the nondisclosure contention is true, Thomas did not authorize Duke to omit this information when he explained the deal to potential investors in September, 1982. As to the investors obtained by Thomas, they are all pleased, and were aware of the markup. In the words of one investor who testified at final hearing, Thomas was entitled to this fee for putting together the deal and allowing small investors like him to participate in such a fine investment. It is noteworthy that of all the investors, only Ireland was dissatisfied. After learning of the $47,500, Ireland contacted Thomas and requested an accounting. She told him she was unaware of the fee, and that she needed the true cost of the property to compute her cost basis for tax purposes. 2/ But her real concern was her failure to get a pro rata cut of the entrepreneurial fee. After his explanation did not satisfy her, Thomas asked the trustee's attorney to have an accountant prepare an "explanation and reconciliation" of funds he received from the Stirling 95 Land Trust. An unsigned draft copy of a report was sent to her on February 29, 1984. The accountant who purportedly prepared the report was not at final hearing, and the contents of such report are clearly hearsay and are deemed to be unreliable. In 1984, Thomas bowed out of the limited partnership because of Ireland's complaints. The partnership has continued, however, and the property was sold in December, 1985 for $11.00 per square foot, or almost a 200 percent return for the investors. This was a higher return than was forecast in the pro forma statement. When Thomas learned of Ireland's dissatisfaction in 1983 or early 1984, he offered to return her $10,000, as well as the one-seventeenth of the markup on the fee. Not wanting to give up a good return on her investment, Ireland declined the offer and is now pursuing the matter in circuit court.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Counts III and VI of the administrative complaint filed against respondent be DISMISSED, with prejudice. DONE AND ORDERED this 24th day of February, 1987, in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 24th day of February, 1987.
