The Issue Whether respondent committed the acts alleged in the Administrative Complaint, and, if so, whether respondent's license should be revoked, suspended or otherwise disciplined.
Findings Of Fact At all times pertinent to the charges, Reynold Diaz was a licensed real estate broker in the State of Florida, having license number 0379909. The respondent was registered under the trade name of "Progressive Developers" from August 20, 1983 to July 25, 1986. Respondent, in his capacity as a real estate broker, managed four rental units owned by John H. Stephen located at 3405-3407 Nebraska Avenue, Tampa, Florida. Mr. Stephen initially met Mr. Diaz when Mr. Stephen purchased the rental properties from him in 1984, and Mr. Stephen retained respondent to manage the properties at a fee of ten percent of the monies collected. At the end of April, 1985, respondent rented one of the units owned by Mr. Stephen to Ms. Roslyn Thompson. During the course of Ms. Thompson's tenancy, the respondent received from Ms. Thompson a total of $630.00, which represented two months rent and a security deposit of $180.00. None of this money was returned to Ms. Thompson and none of it was delivered to Mr. Stephen by respondent. When Mr. Stephen inquired about the rental money from the unit, in June or July of 1985, Mr. Diaz advised Mr. Stephen that the tenant had not paid her rent for a couple of months. Thereafter, Mr. Stephen went to the rental unit to talk to Ms. Thompson about her payments. Ms. Thompson advised Mr. Stephen that she had paid her rent and produced receipts for the $630.00 which she had paid to respondent. Mr. Stephen terminated respondent's services in June of 1985. In September of 1985 Mr. Stephen met with Mr. Diaz in an attempt to obtain an accounting of the monies received by respondent from Mr. Stephen's tenants. Although respondent had provided monthly statements and payments to Mr. Stephen throughout 1984, respondent stopped providing statements in 1985. Thus, Mr. Stephen had not received a statement in April, May, or June of 1985. When Mr. Stephen met with respondent in September, respondent failed to provide a full accounting of the money he had received from Mr. Stephen's tenants and failed to deliver the money he had received. However, subsequent to the meeting, Mr. Stephen did receive from respondent the amount he was owed on two of the rental units. However, respondent failed to deliver the money he had received from Ms. Thompson. Respondent contends that of the $630.00 he received from Ms. Thompson, he paid Mr. Stephen $225.00 in September and then paid the $405.00 balance in two installments. However, the evidence does not support this contention, and I accept Mr. Stephen's testimony that he never received any rent payments on the Thompson unit. Further, although the evidence does show that respondent paid Mr. Stephen $405.00 in two checks, these payments were for the money owed on the other rental units. Mr. Diaz has failed to account for or deliver to Mr. Stephen the $630.00 received from Ms. Thompson. Respondent, in his capacity as a real estate broker, also managed rental property owned by Sandra K. Nelson located at 1208 East Chelsea Street, Tampa, Florida. Ms. Nelson first met Mr. Diaz when she purchased the rental property, and she retained respondent to manage the property at a fee of ten percent of the monies collected. In August of 1984, the respondent rented the Nelson property to Joseph Ira Pasco. At the time of renting the unit, the respondent received from Mr. Pasco a security deposit of $325.00. However, Mr. Diaz advised Ms. Nelson that Mr. Pasco had not paid his security deposit, and withheld $275.00 from a rental payment to hold as a security deposit. Subsequently, after Ms. Nelson started eviction proceedings, she discovered that Mr. Pasco had a receipt signed by Mr. Diaz for a $325.00 security deposit. However, despite Ms. Nelson's demands, the respondent failed to deliver to Ms. Nelson the $325.00 security deposit or any portion thereof. Further, the security deposit was not returned to Mr. Pasco. However, respondent did ultimately deliver to Ms. Nelson the $275.00 that he had retained from the rental payment. Respondent maintained an escrow account at the Hay Gulf Federal Credit Union from August 8, 1984 until November 26, 1984, when the account was closed. When petitioner's investigator, Leo Huddleston, requested of the respondent all documentation associated with the Stephen and Nelson transactions, respondent produced the carbon copies of three deposit slips and twenty checks drawn on the Bay Gulf account. The documents covered only the months of September and October of 1984, and none of the documents appear to be connected to the Stephen and Nelson transactions. The respondent failed to produce his real estate brokerage escrow account statements, his business records, leases, contracts or other documentation required to be kept by the respondent and produced to the petitioner upon request. At no time did respondent place or maintain the $325.00 security deposit on the Nelson property in an escrow or trust account. Further, since respondent's escrow account was closed at the times respondent collected the rent money and deposit from Ms. Thompson, it is apparent that none of the $630.00 was placed in an escrow or trust account. Respondent admitted that he did not properly handle the funds received from the Nelson and Stephen properties, stating that he managed the properties on the basis of friendship rather than a professional basis. However, he did admit retaining ten percent of all the money collected. From August 20, 1983, until July 25, 1986, the respondent was registered with the Real Estate Commission under the trade name "Progressive Developers." However, at various times during this period, the respondent transacted business both as "Progressive Real Estate Developers" and "Progressive Real Estate Developers, Inc." These names were not registered with the Real Estate Commission.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Florida Real Estate Commission enter a final order suspending respondent's license for a period of two (2) years and imposing an administrative fine of $1,150 to be assessed as follows: Counts I and VI, $200 for each count; Counts II and VII, $200 for each count; Counts III and VIII, $100 for each count; Count IV, $100; and Count V, $50. Respectfully submitted and entered this 9th day of March, 1987, in Tallahassee, Florida. DIANE A. GRUBBS 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 9th day of March, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-3775 Petitioner's Proposed Findings of Fact: Accepted in paragraph 1. Accepted in paragraph 2. Accepted in paragraph 3. Accepted in paragraphs 5 and 6. Accepted in paragraph 7. 6-7. Accepted in paragraph 8. Accepted generally in paragraphs 6 and 8. Accepted in paragraph 10. Accepted in paragraph 9. Accepted in paragraph 11. Respondent's Proposed Findings of Fact: Accepted that respondent managed Mr. Stephen's property. Second sentence rejected as irrelevant; further, the evidence established that Mr. Stephen first met Mr. Diaz when Mr. Stephen purchased the subject property from Mr. Diaz and retained him to manage it. Third sentence accepted in paragraph 10. Fourth sentence rejected as to the money received from Ms. Thompson, but accepted that money was delivered to Mr. Stephen in paragraph 6. Last sentence rejected as not a finding of fact. Accepted that $275 was paid to Ms. Nelson in paragraph 8; however, reject by contrary finding that the $275 payment was partial payment on the $325 security deposit. Reject, for lack of any evidence that improper name registration was computer error. Remainder rejected as not findings of fact. COPIES FURNISHED: James R. Mitchell, Esquire Harold Huff, Executive DPR - Division of Real Estate Director 400 West Robinson Street DPR - Division of Real Estate Orlando, Florida 32802 400 West Robinson Street Orlando, Florida 32802 Reynold Diaz 7908 N. Florida Avenue Tampa, Florida 33604
The Issue The issue for consideration in this case is whether the Respondents' Florida licenses as real estate broker, salesperson and brokerage corporation, respectively, should be disciplined because of the matters alleged in the Administrative Complaint filed herein.
Findings Of Fact At all times pertinent to the issues herein, the Petitioner, Division of Real Estate, was the state agency in Florida responsible for the regulation of the real estate profession and the licensing of real estate professionals. Respondents Frank E. Smith, Elaine M Smith, and Sunshine Properties of Tampa, Inc., were licensed real estate professionals, a broker, a sales person, and a brokerage corporation respectively. Respondent Frank E. Smith was the qualifying broker for Respondent, Sunshine Properties of Tampa, Inc.. On or about July 23, 1991, the Respondents and Carolyn Chaple entered into a management agreement whereby Respondent agreed to rent and manage Ms. Chaple's residence located in Tampa. The terms of the management agreement signed by Ms. Chaple and Ms. Smith called for the company to render a monthly statement of receipts, charges and disbursements, and to remit the net proceeds each month to Ms. Chaple whose address was listed in the agreement as P.O. Box 12003, Brooksville, Florida 34601. For performing this service, Respondents were to receive a commission of 8% of the monthly gross receipts. The agreement also called for the Respondents to: ... hire, discharge and pay all engineers, janitors and other employees; to make or cause to be made all ordinary repairs and replacements necessary to preserve the premises in its present condition and for the operating efficiency thereof and all alterations required to comply with lease requirements, and to do decorating on the premises; to negotiate contracts for nonrecurring items not exceeding $100.00 and to enter into agreements for all necessary repairs, maintenance, minor alterations and utility services; and to purchase supplies and pay all bills. An amendment to the agreement, initialed by Ms. Chaple only, made the provision subject to a lease agreement purportedly attached but which was not offered into evidence. Ms. Chaple contends that lease provided she would be responsible only for those repairs costing in excess of $250.00 and which she had approved. This added provision was not, however, initialed by Respondents and, therefore, never became a binding part of the management agreement, regardless of what Ms. Chaple intended. Ms. Smith asserts that if Ms. Chaple had insisted on that change, she would not have entered into the agreement. It is found, therefore, that there was no agreement limiting Ms. Chaple's liability for repairs. Pursuant to the management agreement, Respondents solicited and obtained tenants for Ms. Chaple's property. Respondent admittedly did not send a copy of the first lease to Ms. Chaple, but the tenancy was short lived and terminated when the tenant moved out owing rent. Ms. Chaple claims the Respondents did not advise her of this situation. Instead, she claims, she heard of it from neighbors. However, on December 30, 1991, Respondents obtained another lessee for the property at a rental of $600.00 per month for 12 months. Respondents' fee was %8 of that ($48.00) resulting in a net monthly rental to Ms. Chaple, exclusive of repair expenses if any, of $552.00 per month. Ms. Chaple claims that though she repeatedly asked for a copy of the management agreement she had signed, she never got one. When she began to ask for accountings, she says she got some but not all. By the same token, she claims she did not get all the receipts relating to the repair work done on her property. Between December 4, 1991 and August 16, 1992, Ms. Chaple wrote several detailed letters to the Respondents requesting information on the status of the first tenancy and efforts being made to receive compensation, and detailed explanations for expenditures made and charged to her on the account statements that were sent. She also complained of the lateness of the statements, of the Respondents' notice of intended termination of the agreement, and an explanation of large expense charged almost every month. Respondents claim they furnished Ms. Chaple a copy of the management agreement on at least 3 separate occasions by mailing a copy to her Brooksville address, that address listed for her in the agreement. Ms. Chaple, however, was living in Houston, Texas during all this period and requested the use of the Brooksville address, apparently her father's post office box. Respondents also claim they sent Ms. Chaple a monthly statement of account along with her net rent check each month. Every check sent was cashed by Ms. Chaple indicating she received them. There is no explanation as to why she did not also receive the account statements. In light of Ms. Chaple's moves, and the use of an intermediary to transmit mail, it cannot be said Respondents did not send the agreements. This is not to say Ms. Chaple did receive them all, merely that the Respondents dispatched them to her. Ms. Chaple also claimed she never got a copy of a lease from the Respondents. Respondent, Elaine Smith, admits this indicating she did not send copies of leases to owners as a matter of practice. It is noted that Ms. Chaple repeatedly requested itemized explanations for the major expenditures deducted from the rent each month and characterized on the account statement solely as "maintenance." The management agreement obliging the owner to pay for such expenditures as a deduction from rent is silent on the need on the Respondents to explain such deductions. The agreement obliges the agent to "render a monthly statement of receipts, disbursements and charges and to remit each month the net proceeds to the [owner]." While it may be true the monthly statement of accounting showing "maintenance" might be acceptable evidence to the Internal Revenue Service, when, as here, such expenses are relatively large and frequent, it is not at all unusual or unreasonable for the owner to request and expect to receive an explanation of those deductions. To be sure, Respondents did send some receipts as requested, but it is clear they did not do so in all cases. Clearly the mere use of the word, "maintenance" does not constitute a sufficient showing of "disbursements" or "charges" as are called for in the agreement. This is so especially in light of the fact Respondents also operated a maintenance company through which they contracted for almost all maintenance and repair work except air conditioning. The charge to the owners was cost plus 10%. Ms. Chaple ultimately filed a complaint with the Division which, on March 18, 1992, sent its investigator, J.L. Graham, to the Respondents' office. As a part of her investigations, Ms. Graham did an audit of the Respondents' escrow accounts maintained at the Sun Bank in Tampa. She discovered that Respondents maintained a security escrow account which had a shortage of $5,780.00 and a rental escrow account which had a shortage of $4,261.31. Respondents admit a shortage had existed ever since the business was purchased in 1986 and claim that due to the shrinking inventory of properties they managed, the need to pay $500.00 a month on the purchase price, and $1,300.00 a month on obligated rent, they did not have sufficient income from operations to reimburse the accounts the amount of the shortages. There is no evidence that Respondents misappropriated any of the funds represented by the shortages and it is accepted they did not cause or increase either shortage. However, it is equally true they did nothing to eradicate or reduce either, routinely drawing their lawful commissions which were placed in the company's operating account and used to pay routine expenses. In any event, within 2 days of Ms. Graham's inspection, Respondents borrowed the money to reimburse the escrow accounts for the amount of the shortages in full. Ms. Graham also found that Respondents failed to prepare and sign written monthly reconciliations of the escrow accounts and had no supporting documentation for the accounts other than the check register, leases and the management agreements. Respondents' books were primarily kept in a computer and the information in support of the escrow accounts was not being kept in a manner readily accessible to the Division's representatives. Mr. Smith admits he did not do the required reconciliations, claiming that between the computer records and the bank statements, he knew what was going on. This is insufficient to satisfy the Division's requirements. Mr. Smith contends that immediately after the audit, he began doing the required reconciliations and would be willing to furnish them to the Division on a repeated basis if necessary. Respondents also failed to prepare and furnish to the tenants of clients' properties the required disclosure of agency relationship, notifying the tenants in writing that they, Respondents, represented the respective landlords, not them. Respondents asserted they made it clear to each tenant that they did not own the units being rented, but this does not meet the rule or statutory requirement. Review of the corporation records also revealed that Mrs. Smith, a licensed salesperson, was listed as an officer of the brokerage corporation. Respondents admit this but claim they did not know it was improper and that their accountant failed to so advise them. Gennie Amick has known and been friends with Respondents for more than 7 years. She has used their services in the past as managers of property she then owned and both her son and her daughter do so at the present time. They have had absolutely no complaints about the Respondents' management. Ms. Amick knows Mrs. Smith very well and considers her to be a very honorable person. Respondent's integrity has never been questioned, to the best of Amick's knowledge, and she goes out of her way to help her clients, doing more than her contract requires of her. Mr. Smith is also an honorable person. Because of Ms. Amick's trust in the Respondents, she loaned them $6,000.00 when she learned of their difficulties with the Division and this loan was repaid when Respondents thereafter mortgaged their home. Respondents have owned Sunshine Properties of Tampa, Inc. since they bought it in 1986, paying $20,000.00 for the business. They put $1,500.00 down and agreed to pay the balance off at $500.00 per month. They also agreed with the seller to rent his office for $1,300.00 per month. It was these commitments, and the shrinking of the client list, which prevented them from making up the shortages in the escrow accounts. Mr. Smith has been in the real estate business, both in Florida and elsewhere, since 1967. He has been licensed as a broker since 1988 and he and his wife have operated Sunshine, which does not handle sales, only property management, since 1986. It is their livelihood. He became the qualifying broker for the firm in 1988. Neither he nor Mrs. Smith has been the subject of a complaint before now. At no time did either Respondent intend to break any rules or to unlawfully profit by their improper actions. They claim any infractions are as a result of ignorance rather than design and so it would appear. Their relationship with Ms. Chaple was less than an acceptable business relationship, yet Ms. Chaple did not make a good witness. It appeared she had her own agenda to follow and her memory of facts seemed selective. She appears to be difficult to deal with and it is reasonable to believe that much of the difficulty she had with the Respondents was as a result of her own attitude and approach.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore recommended that a Final Order be entered placing all Respondents' licenses on probation for a period of 1 year under such terms and conditions as may be prescribed by the Division and imposing an administrative file of $500.00 upon each Respondent Smith for a total fine of $1,000.00. RECOMMENDED this 18th day of February, 1993, in Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 18th day of February, 1993. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 92-3898 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER: 1. - 5. Accepted and incorporated herein. Accepted and incorporated herein except for the word, solicited. & 8. Accepted and incorporated herein, Rejected as not established by clear and convincing evidence. Accepted and incorporated herein. Accepted and incorporated herein. FOR THE RESPONDENT: 1. - 4. Accepted and incorporated herein 5. Accepted to the extent that the evidence shows the agree-ment and accountings were sent to the best evidence available to the Respondents. 6. Not a Finding of Fact but a Conclusion of Law, 7. & 8. More a comment on the state of the evidence, than a Finding of Fact. 9. & 10. Accepted and incorporated herein. 11. - 14. Accepted. Rejected as implying the disclosures made satisfied the rule requirements. Accepted. & 18. Accepted as to what Respondent's did and that no harm to the public or any client resulted, but rejected to the extent public benefit is asserted. 19. & 20. Accepted but relevant only to the quantum of punishment to be imposed. 21. - 23. Accepted. 24. - 26. Accepted and incorporated herein. COPIES FURNISHED: James H. Gillis, Esquire DPR, Division of Real Estate Hurston Building - N308 400 West Robinson Street Orlando, Florida 32801-1772 Sheldon L. Wind, Esquire 110 E. Hillsborough Avenue Tampa, Florida 33504 Jack McRay General Counsel DPR 1940 North Monroe Street Tallahassee, Florida 32399-0792 Darlene F. Keller Division Director Division of Real Estate 400 W. Robinson Street P.O. Box 1900 Orlando, Florida 32802-1900
Findings Of Fact At all times here involved Theodore R. Johnson was a registered real estate salesman and managed the UFA office at DeLand, Florida. He has been a registered real estate salesman for more than 30 years. He was authorized to sign checks on the escrow account of UFA in DeLand. At all times here involved Roy Edwin Schaefer was a registered real estate salesman and an associate of Johnson at DeLand. At all times here involved Richard W. Goddard was a registered real estate broker and officer and Active Firm Member in UFA with offices in Orlando, Florida. He was the broker under whom Johnson and Schaefer worked. He supervises some 20 UFA branch offices in Florida north of Orlando. He visits the branch offices at frequent intervals (once or twice a week) and exercises general supervision over these offices headed by a salesman. At all times here involved United Farm Agency, Inc. was a corporate registered real estate broker and maintained a district office in Orlando, Florida. The practice of UFA, which was in existence in 1971 to allow salesmen who head branch offices to disburse funds from their escrow account, has been changed. Now the signature of the broker is also required before funds can be disbursed from the escrow account. On August 15, 1970 Schaefer obtained a listing agreement for UFA on property owned by Prentice L. and Vivian Glasgow in Pierson, Florida. This listing agreement provided, inter alia, that in the event there is a forfeiture of funds deposited, 1/3 of such forfeited funds would go to the seller and the balance paid to UFA as commission. By Deposit Receipt and Agreement for Sale dated July 9, 1971 (Exhibit 7) one Margaret C. Lord offered to buy the Glasgow property at the asking price and Glasgow accepted. Schaefer procured the buyer and the contract was drawn up in the UFA branch office in DeLand, apparently by Johnson and/or his secretary of some 30 years. During Schaefer's discussion with Mrs. Lord at her motel immediately prior to the drafting of the contract he observed some $4000 in cash she was carrying in her purse. At the time Lord signed the contract she put up $1500 by check and stated she would have an additional $6000 transferred to her account by her broker and would present the additional $6000 within two or three days. No one who participated in the preparation of the sales agreement doubted her intention and ability to produce the additional earnest money deposit. The contract and the $1500 deposit check was held by Johnson for several days and when the additional deposit promised by the buyer was not forthcoming Johnson deposited the $1500 in the UFA escrow account and forwarded a report of sale to UFA (Exhibit 14). By acknowledgment of sale letter dated July 20, 1971, UFA acknowledged Johnson's report of sale and a $7500 deposit. The contract provided buyer could take possession of the property July 17, 1971 and closing was set for October 11, 1971. Neither Johnson nor Schaefer were able to again contact Mrs. Lord. Shortly after the contract was executed the Glasgows were advised that only $1500 had been deposited. After Johnson had been unable to contact Mrs. Lord he advised Goddard that only $1500 had been deposited, and by memo dated October 18, 1971 (Exhibit 19) Goddard advised UFA's home office. The Glasgows were in the process of getting a divorce and Glasgow was anxious to consummate the sale. After checking several times with Johnson about the closing, Glasgow advised Johnson he needed money to move off the property (Glasgow's testimony) or that he needed money in connection with his divorce (Johnson's testimony). Early in the morning on August 25, 1971 Glasgow made an urgent request to Johnson for funds and Johnson wrote Glasgow a check for $500 on the escrow account because he, Johnson, did not have a personal check available at the time. The same morning Johnson obtained $500 from his wife and deposited this money in the escrow account. The escrow account was credited with $500 on August 25, 1971 and debited with $500 on August 31, 1971 when the check issued to Glasgow cleared. Johnson's testimony that he considered the $500 a personal loan to Glasgow was unrebutted and is supported by his deposit of a like sum in the escrow account as soon as the bank opened. Shortly after the contract was executed, but before the $1500 check was deposited, Schaefer, without Johnson's knowledge, delivered a copy of the contract to Glasgow. The contract provided, inter alia, that if either the seller or the buyer fails to perform his part of the agreement he will forthwith pay as liquidated damages to the other party a sum equal to 10 percent of the agreed price of sale. When Johnson's efforts to locate Mrs. Lord were unsuccessful and no response received to letters of August 28 and October 4, 1971, Johnson disbursed the balance of the funds in the escrow account on October 18, 1971. One check in the amount of $250 he paid to himself as reimbursement for his expenses in attempting to locate Mrs. Lord. The remaining $750 ($500 of the $1500 had already been given to Glasgow, but how the cash deposit of $500 made August 15 was withdrawn from the escrow account was not explained) was split between Johnson and UFA. After the transaction fell through Glasgow moved back on his property. By letter dated October 20, 1972 (Exhibit 8) Glasgow filed a complaint with the Florida Real Estate Commission in which he referred to the liquidated damages provision of the contract (10 percent of purchase price) and the $7500 down payment which he alleged UFA had in escrow and had not paid to him. The investigation followed which led to the complaint filed herein.
Findings Of Fact The Department is the agency charged with the responsibility to prosecute violations of Chapter 475, Florida Statutes, allegedly committed by real estate brokers and brokerages who are licensed in Florida. At all times material to these proceedings, Respondent Ursoleo was a licensed real estate broker, having been issued license number 0090870 through the Division of Real Estate. Respondent Jewell was a corporation registered as a real estate broker, having been issued license number 0258744. Both licenses were issued to the following address: 1154 Estero Boulevard, Fort Myers Beach, Florida 33931. Respondent Ursoleo was the active broker for Respondent Jewell, and held the office of president within the corporation. On July 10 and 11, 1989, the Respondents' accounting records were reviewed in a random, routine audit conducted by the Division of Real Estate as part of its regulatory functions. During the review, the investigator reported that financial shortages existed in two accounts kept by the corporate broker in a fiduciary capacity. A deficiency of $4,569.81 was allegedly located in the rental escrow account, and a deficiency of $1,218.83, was allegedly located in the Bigelow Shopping Center management account. The Rental Escrow Account The rental escrow account is an account that contains monies held in a fiduciary capacity by the real estate broker on behalf of a number of separate clients who own rental property in Lee County, Florida. Respondent Jewell, through its qualifying broker and corporate officer Respondent Ursoleo, manages these properties for a commission or management fee. As part of the management duties, the Respondents collect rents, maintain the property, and render periodic accountings to the clients regarding the rents collected, property repair and maintenance expenses, and other financial matters involving the properties. Each client has an independent agreement with Respondent Jewell regarding how his property is handled and how his escrow account funds are to be managed. However, the primary purpose of each account is to deduct expenses from the rents deposited prior to disbursing the balance of the rents to the property owners. Mr. James Alexander owns twenty-eight rental units which he co-manages with the Respondents. Between $8,000.00 to $9,000.00 from these properties are deposited into Respondents' rental escrow account each month. Due to a twenty- year business relationship regarding these properties, Mr. Alexander allows the Respondents to use his escrowed funds for whatever personal or business use is desired by the Respondents. Mr. Alexander is aware that some of his escrowed funds have been used for Respondent Ursoleo's personal business, real estate brokerage bills, and to advance other rental property owners the necessary funds for property maintenance and repairs. The only conditions placed upon the Respondents' use of the money for purposes beyond the needs of Mr. Alexander's properties are as follows: 1) Monthly accountings to Mr. Alexander of the amount of money due to him must be correct; and 2) The money used for the other purposes must be replaced in one month's time in order to be available for disbursement to Mr. Alexander. During the time period between June and July 1989, $13,145.26 of Mr. Alexander's funds were in the escrow account and were available for use by the Respondents. Mr. James Hall, an attorney in Indiana, is president of San Carlos Lodge, Inc., the owner of a mobile home park in Lee County, Florida. This park has been managed by the Respondents for thirteen years. Because the lot rents within the park are due at various times, and because some renters pay in advance, the Respondents' rental escrow account always contains funds belonging to San Carlos Lodge, Inc. In June and July 1989, $4,675.53 remained in the rental escrow account on behalf of the corporation after the monthly accountings and rental disbursements were made by the Respondents to Mr. Hall. Pursuant to its escrow agrement, San Carlos, Inc. allowed the Respondents to use the money as Respondent Ursoleo saw fit, without reservation. The only restrictions placed upon the use of the funds were: 1) Monies received on behalf of the corporation must be acknowledged as corporate funds; and 2) Funds removed must be returned to the rental escrow account within a one-month period for disbursement purposes. Between April and July 1989, Frank Helmerich owed the rental escrow account $5,756.28 for advances made from the account in order to manage and maintain his rental properties. All of these funds were not repaid within the one-month period required by the Respondents' clients, Mr. Alexander and San Carlos Lodge, Inc. Some repayment was made with rents collected on behalf of Mr. Helmerich, but the exact amount of timely reimbursement was not presented at hearing. The Respondents' rental escrow account records do not reflect that the funds advanced to Mr. Helmerich for rental property management expenses were removed from the funds earmarked for Mr. Alexander's escrow or San Carlos Lodge, Inc.'s escrow. In addition, the account records do not show that the funds specifically removed from either account were replaced with Respondent's Ursoleo's personal funds in the amount of $5,000.00, or with rental funds received on behalf of Mr. Helmerich. Under the escrow agreement between Mr. Helmerich and the Respondents, rental income could be used to repay any and all rental property expenses. Bigelow Shopping Center Management Account The account maintained by Respondents Jewell and Ursoleo, as agent for Bigelow Shopping Center, is an operating account for the business of managing, renting, maintaining and preserving the shopping center on behalf of its owner, the Huntingburg Corporation. Mr. Olinger, an officer and shareholder of the corporation who is a banker by profession, testified that the "deficiency" in the checking account occurred because two checks from the same shopping center tenant bounced. As the funds were never received by the corporation, they were never escrowed. A review of the mathematical calculations on page 4 of Petitioner's Exhibit No. 1 and Petitioner's Exhibit No. 5 reveal that the investigator for the Division of Real Estate consistently made the same mathematical errors when she calculated the sum of the funds held in escrow in the Bigelow Shopping Center account. The entries on line 3 and line 13 in the "Total in Escrow" column in Petitioner's Exhibit No. 1, are negative numbers because the two checks bounced. If the investigator insisted upon adding these two numbers, which totaled $1,444.50, into the "Total in Escrow" column, she should have also subtracted them out because they were negative numbers. Instead of $11,311.50, the total escrow on the front page of the Management Account Inspection relating to the Bigelow Shopping Center bank account for July 11, 1989, should have been $9,867.00. The actual bank balance for the Bigelow Shopping Center reported by the bank to the investigator on July 11, 1989, was $10,886.37. The total of outstanding checks was $793.70. When the outstanding checks are subtracted from the reported bank balance, the difference is $10,092.67. As the escrowed amount of funds was $9,867.00, and the actual bank balance after the deduction of outstanding checks was $10,092.67, there was no deficiency in this account. Mitigation Once the deficiency was located in the rental escrow account maintained by Respondent Jewell, the Respondent Ursoleo immediately transferred $5,000.00 of his personal funds into the account on July 11, 1989. The Respondents have revamped the bookkeeping procedures within the brokerage offices. The individual escrow agreements with Mr. Alexander and San Carlos Lodge, Inc. are no longer used by the Respondents to make short term loans to other clients who also own rental property in Lee County, such as Mr. Helmerich. The Respondents have reviewed the Department's rules relating to the maintenance of escrow accounts, and are prepared to comply with the law in the narrowest, strictest sense. Mr. Alexander and San Carlos Lodge, Inc., did not incur any actual monetary harm as a result of the temporary deficiency of funds in the rental escrow account. The clients were never in fear that the funds would not be returned to them upon demand. The Respondents' accountings to these clients have always been accurate. The Respondents have a long-standing reputation for honesty and reliability in their business dealings that involve financial entrustments. The Respondent Ursoleo has been an active Florida realtor for thirty- seven years. There was no evidence presented of a prior disciplinary history.
Recommendation Accordingly, it is recommended: That Respondent Ursoleo be found guilty of having violated Rule 21V- 14.012, Florida Administrative Code, and Section 475.25(1)(k), Florida Statutes, as set forth in Count IX of the Administrative Complaint. That Respondent Ursoleo be issued a written reprimand and be fined $500.00. That all other charges filed against Respondent Ursoleo in the Administrative Complaint filed October 18, 1989, be dismissed. That Respondent Jewell be found guilty of having violated Rule 21V- 14.012, Florida Administrative Code, and Section 475.25(1)(k), Florida Statutes, as set forth in Count X of the Administrative Complaint. That Respondent Jewell be issued a written reprimand and be fined $500.00. That all other charges filed against Respondent Jewell in the Administrative Complaint filed October 18, 1989, be dismissed. RECOMMENDED this 30th day of May, 1990, in Tallahassee, Florida. VERONICA E. DONNELLY Hearing Officer Division of Administrative Hearings 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of May, 1990. APPENDIX TO RECOMMENDED ORDER, CASE NO. 89-6378 Petitioner's proposed findings of fact are addressed as follows: Accepted. See HO #1. Accepted. See HO #2. Accepted. See HO #2. Rejected finding that all of the funds in the rental escrow account were security deposits. See HO #3. Accepted. See HO #3. Rejected. Contrary to fact. Accepted, except for the date of transfer. See HO #15. Rejected. See HO #13. Reject conclusion. See HO #13 and #14. Rejected. Irrelevant. Accepted. Se HO #5 thru HO #9. Accepted. Accepted. Accepted. Rejected. Improper argument and improper conclusion. Reject the first sentence. Contrary to the exhibits and Respondent Ursoleo's testimony that a general account existed. Accept the second sentence. Respondent's proposed findings of fact are addressed as follows: Accepted. See HO #1. Accepted. See HO #2. Accepted. See HO #2. Accepted. See HO #2. Accept Respondent Ursoleo was not aware of a shortage in the rental escrow account. Accept that the money was immediately replaced. See HO #15. Reject that the prior office manager was solely responsible for the deficiency. The proof provided at hearing demonstrated that the book- keeper may have failed to deposit the $862.50. Rejected. Legal argument as opposed to factual finding. Rejected. Legal argument as opposed to factual finding. Rejected. Legal argument. Rejected. Legal argument. All legal arguments were considered in the Conclusions of Law in the Recommended Order. COPIES FURNISHED: Steven W. Johnson, Esquire DPR - Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32801 Leslie T. Arenholz, Esquire 19110 San Carlos Boulevard Post Office Box 2656 Fort Myers Beach, Florida 33932 Darlene F. Keller, Executive Director, Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32801 Kenneth E. Easley, Esquire General Counsel Department of Professional Regulation 1940 North Monroe, Suite 60 Tallahassee, Florida 32399-0792
The Issue The issue in this proceeding is whether the Respondents' real estate brokers licenses should be suspended, revoked or otherwise disciplined.
Findings Of Fact Respondent, Barbara Odom, is a licensed real estate broker in the State of Florida, holding license number 0189819. Ms. Odom is the owner of and the qualifying broker for Respondent, Odom Realty, Inc., located in Pensacola, Florida. Respondent, Odom Realty, Inc. is a corporation registered as a real estate brokerage company in the State of Florida, holding license number 0226080. Ms. Odom has been licensed since 1982 and has been the owner of Odom Realty, Inc., since 1983. Rita Leonard has been the corporation's bookkeeper since Ms. Odom's acquisition of the company. Previous to her employment with Odom Realty, Ms. Leonard was the financial manager in charge of a large bank's accounting and bookkeeping department. Ms. Leonard was and is highly qualified as an accountant/bookkeeper. In addition to Ms. Leonard's bookkeeping services, Ms. Odom also has Odom Realty's books and records, including the various escrow account books and records, annually audited and reviewed by her CPA. Early in the company's history Ms. Odom entered into the rental property management business. Initially, Ms. Leonard was paying clients' repair bills on that client's rental property out of the corporation's operating account. The CPA questioned whether it was appropriate to pay those bills out of the corporation's operating account and indicated that the bills should be paid out of the corporation's rental property management escrow account, #11823890431. The CPA was not sure what the appropriate bookkeeping practice should be and indicated that Ms. Leonard should check with the Florida Real Estate Commission to discover what the appropriate procedure was. Ms. Leonard called the Florida Real Estate Commission to inquire about the proper method of paying clients' repair bills. Her impression of that conversation was that client repair bills should be paid out of the escrow account regardless of whether the individual had the money in the account. After this conversation with the Florida Real Estate Commission, Ms. Leonard began paying all the clients' repair bills out of the rental property management escrow account. All such client bills were paid promptly upon the repair bill's presentation, whether or not the individual client had the money available in the escrow account. Each client was later billed for the amount not covered by the balance in that individuals' escrow account. The client billings occurred on at least a monthly basis and the majority of the rental clients remitted their payments on a monthly basis. Occasionally, one of Respondent's clients was permitted to carry a negative balance for more than a month. These carry- overs occurred in the off-season and were paid when rentals picked back up during the areas main tourist season. As a consequence of this practice, some of Respondents' clients would have negative escrow balances on their individual escrow ledger account. Respondents were under the impression that such a practice was all right as long as the corporation had money available to cover those negative balances. In fact, the corporation always had such money available, although the actual transfers of funds were never made from the corporation's operating account to the rental property management escrow account. Respondents believed this practice was tantamount to loaning the respective clients money to cover the client's negative balance until that client corrected the deficit. No client ever complained about this practice. In fact, most of Respondents' clients wanted the repair bills paid promptly so that good repair service could be maintained on that client's property. On March 15, 1990, Elaine Brantley, Petitioner's investigator, conducted an audit of all of Respondents' escrow accounts. The only account she found a problem with was the rental property management account. During that investigation, Ms. Brantley found that Respondents had a trust liability of $10,081.71 and a bank balance of $9,480.97, leaving a shortage of $600.74. Respondents, the same day and prior to Ms. Brantley leaving, transferred the amount of the shortage from the corporation's operating account to the escrow account. Ms. Brantley then explained to Ms. Odom and her bookkeeper her opinion of how the Commission wanted escrow accounts maintained. Since that time, Respondents have maintained the escrow accounts in the manner prescribed by Ms. Brantley and no longer follow their policy of maintaining negative balances on the individual ledger sheets of their clients. They now make the actual transfer of funds from the operating account to the escrow account prior to paying any bill which would take an individual client over the amount of money that client has in the escrow account. The Respondents' books and records for the rental property management account were meticulously kept and both total and individual reconciliations were completed on a monthly basis by Respondents. All the records, including the monthly reconciliations reflected the appropriate negative balances if a particular client should have such a balance. As a consequence of this method of bookkeeping, there were no discrepancies, as opposed to a total shortage, between the total reconciliations and the escrow account's bank statement. Likewise, there were no discrepancies on the individual ledger accounts. There were no discrepancies because everything was added and subtracted out according to the records being kept and the bookkeeping method used in maintaining those records. Importantly, Respondents' CPA never criticized or commented on Respondents' method of accounting and maintenance of negative balances in Respondents' escrow account. As indicated earlier, the temporary negative balances were maintained for the convenience of the customer in order to obtain better service from repairmen. In reality, Respondents' clients probably never thought about the intricacies and inner workings of the trust account in which that client's money was maintained. Given the desires of Respondents' customers, such payments and the maintenance of a negative balance on behalf of that individual client were impliedly authorized by those respective customers. However none of the clients expressly authorized Respondents to use that client's money to pay another client's repair bills. The clients' general desires on getting prompt payment of repair bills is, by itself, insufficient to establish express authorization for one client to use another client's escrow money. Without such express authority Respondents made improper disbursements from the property management escrow account in violation of Section 475.25 (1)(k), Florida Statutes. However, because of the client's general desires regarding their repair bills, the record keeping utilized by Respondents, the manner of billing and the obvious lack of any intent to defraud on the part of Respondents, there was no evidence of any fraud, misrepresentation, trick, scheme or device, or breach of trust or culpable negligence on the part of Respondents in the maintenance of their property management escrow account.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is recommended that the Florida Real Estate Commission enter a final order that Respondents are guilty of one violation of Section 475.25(1)(k), Florida Statutes, and issuing a letter of guidance to Respondents for the violation. It is further recommended that the Florida Real Estate Commission enter a final Order dismissing the Counts of the Administrative Complaint charging Respondents with violations of Section 475.25(1)(b), Florida Statutes. RECOMMENDED this 28th day of December, 1990, in Tallahassee, Leon County, Florida. DIANE CLEAVINGER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of December, 1990.
Findings Of Fact Petitioner is the governmental agency responsible for issuing licenses to practice real estate. Petitioner is also responsible for regulating licensees on behalf of the state. Respondent, John P. Wickersham ("Wickersham"), is licensed as a real estate broker under license number 0095775. Respondent, Aladdin Real Estate of Rockledge ("Aladdin"), is a Florida corporation registered as a real estate broker under license number 0213244. Wickersham is the qualifying broker and corporate officer for Aladdin. Respondents maintain their escrow account at the Barnett Bank of Cocoa. On April 28, 1994, Ms. Marie Ventura, Petitioner's investigator, audited Respondents' escrow account. Ms. Ventura concluded that Respondents' escrow account had a liability of $46,287.30 and a reconciled balance of $43,557.26. Ms. Ventura concluded that Respondents' escrow account had a shortage of $2,730.04. Respondents provided Ms. Ventura with additional information. On May 16, 1994, Ms. Ventura concluded that Respondents' escrow account had a liability of $43,546.21 and a reconciled balance of $42,787.26. Ms. Ventura concluded that Respondents' escrow account had an excess of $11.05. Respondents never had a shortage in their escrow account. Respondents maintained an excess of $11.05 in their escrow account since September, 1993. In September, 1993, Respondents converted their method of bookkeeping to a computer system. The computer system failed to disclose an excess of $11.05 due to Respondents' misunderstanding of the appropriate method of labeling inputs to the software system. Respondents discovered and corrected the error prior to the formal hearing. Respondents properly made and signed written monthly reconciliation statements comparing their total escrow liability with the reconciled bank balances of their escrow account. Although Respondents did not use the form suggested in Rule 61J2- 14.012(2), Respondents satisfied the substance of the requirements for record keeping and reporting. Respondents maintained the information required in Rule 61J2-14.012(2) in bank statements, ledger cards, and checkbooks. At the time of the formal hearing, Respondents presented the information in a form that complied with the requirements of Rule 61J2-14.012(2). The shortage determined by Petitioner on April 28, 1994, was caused, in part, by errors made by Petitioner's investigator. It was the investigator's first audit, and the information provided by Respondents was not in an easily discernible form. However, Respondents never withheld any information, and Respondents maintained and provided all information required by applicable law.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order finding Respondent not guilty of violating Section 475.25(1)(b) and Rule 61J2-14.012(2). RECOMMENDED this 18th day of January, 1996, in Tallahassee, Florida. DANIEL MANRY, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 18th day of January 1996.
The Issue The issue in this case is whether the allegations of the Administrative Complaints are correct and, if so, what penalties should be imposed.
Findings Of Fact At all times material to this case, Respondent Tailormade Management, Inc. ("Tailormade"), was a corporation registered as a licensed real estate broker in the State of Florida, license #0259180, located at 12811 Kenwood Lane, #218, Fort Myers, FL 33907. The president of Tailormade was R. C. Hendrickson ("Hendrickson"), an unlicensed person. At all times material to this case, Respondent Comprehensive Management, Inc. ("Comprehensive"), was a corporation registered as a licensed real estate broker in the State of Florida, license #0268646, located at 12811 Kenwood Lane, #218, Fort Myers, FL 33907. Until approximately January 30, 1991, the president of Comprehensive was Hendrickson. On or about January 30, 1991, Hendrickson resigned and relinquished her ownership and control to her son, Jay Coffing, an unlicensed person. The rental escrow account for each company was maintained by Hendrickson and the company bookkeeper. On direction of Hendrickson, the bookkeeper did not disclose information regarding rental escrow accounts to the licensed broker-salespersons. All accounts were reconciled by the bookkeeper who would provide the reconciliation data to the broker. The licensed broker- salespersons did not actually reconcile any accounts, but relied on the bookkeeper's data. At all times material to this case, Linda Futch ("Futch") was a licensed real estate broker in the State of Florida, license #0334770. The most recent license issued to Futch was as a broker-salesperson for Rawlings Realty, Inc., 1642 Colonial Boulevard, Fort Myers, FL 33907-1150. From approximately February 20, 1989 through approximately November 16, 1989, Futch was licensed and operating as qualifying broker and officer for Tailormade. On October 10, 1989, Hendrickson issued check #RE-1895 in the amount of $10,000 from the Tailormade rental escrow account to the Tailormade operating account. A check notation indicated that the funds were "advance management fees". Hendrickson admitted to the company bookkeeper that the funds were to be used to pay the outstanding balance owed to the previous co-owner of Tailormade, from whom Hendrickson had purchased the business. At no time during the period Futch acted as qualifying broker and officer for Tailormade did Futch prepare or sign written monthly escrow account statement reconciliations. Futch did not balance escrow liabilities with the escrow assets. Futch failed to make appropriate entries in monthly reconciliation statements which would note whether a shortage existed and whether corrective action had been taken. Futch maintained no records and was unable to provide any account documentation to the Petitioner's investigator. Futch resigned as Tailormade broker-salesperson effective November 16, 1989. Futch was apparently succeeded by Bette K. Potts. In November of 1990, Jeffrey C. Cooner met with a representative of Tailormade and leased a condominium unit, providing a deposit totaling $1,125 of which $350 was a pet and security deposit. Cooner eventually vacated the unit, 2/ and attempted to obtain a refund of the security deposit. By such time, the Tailormade office was vacant and closed. Cooner has received neither an accounting nor a refund of all or part of the security deposit paid to Tailormade. According to the bookkeeper, as of December, 1990, approximately $35,000 of rental escrow funds had been removed from the Tailormade rental escrow account by Hendrickson and had not been replaced. At all times material to this case, Janet Lynn Coffing ("Coffing"), Jay Coffing's wife, was a licensed real estate broker in the State of Florida, license #0268647. Coffing's most recent license was as a broker in limbo, listing her home address as 5410 Ashton Circle, Fort Myers, Florida, 33907-7828. From approximately February 21, 1991 through approximately May 28, 1991, Coffing was licensed and operating as qualifying broker and officer for Tailormade. From approximately February 14, 1991 through approximately June 14, 1991, Coffing was licensed and operating as qualifying broker and officer for Comprehensive. Coffing was aware, almost immediately after taking over as qualifying broker and officer for the companies that the escrow funds were short. She spoke to Hendrickson (her mother-in-law) and Jay Coffing about the situation, but apparently received no assistance from them. Coffing utilized operating funds to cover escrow shortages when escrow refunds were necessary, and continued to do so until all funds were depleted. On March 18, 1991, Charles W. Pease met with a representative of Comprehensive and leased a condominium unit at 13040 Tall Pine Circle in Fort Myers, Florida, providing two checks totaling $1,650 of which $500 was a security deposit. Upon vacating the unit, 3/ Pease attempted to obtain a refund of the security deposit but the Comprehensive office was vacant and closed. Pease has received neither an accounting nor a refund of all or part of the security deposit paid to Comprehensive. At some time in 1991, 4/ Debra and Kevin Campbell met with Coffing and leased a condominium unit located at 5418 Harbor Castle Drive. At the time the lease agreement was signed, the Campbells paid a $500 security deposit to Tailormade through Coffing. Upon vacating the unit, the Campbells attempted to obtain a refund of the security deposit but were unable to locate Coffing, and the Tailormade office was vacant and closed. The Campbells have received neither an accounting nor a refund of all or part of the security deposit paid to Tailormade. At no time during the period Coffing acted as qualifying broker and officer for either Tailormade or Comprehensive, did Coffing prepare or sign written monthly escrow account statement reconciliations. Coffing did not balance escrow liabilities with the escrow assets. Coffing failed to make appropriate entries in monthly reconciliation statements which would note whether a shortage existed and whether corrective action had been taken. Coffing maintained no records and was unable to provide account documentation to the Petitioner's investigator. On several occasions beginning on July 2, 1991, an investigator from the Department of Professional Regulation visited office location identified as the registered offices of the Respondent Tailormade and Comprehensive companies. The offices were vacant and closed. The investigator contacted Hendrickson and Jay Coffing, and attempted to obtain information from them, but was unable to maintain contact with them. The companies are apparently not operational.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Professional Regulation, Division of Real Estate, enter a Final Order determining Linda Futch guilty of the violations set forth herein and providing for a fine of $1,000, and a suspension of 90 days, to be followed by a probationary period of two years. During the probationary period, Futch shall complete 60 hours of continuing education, including a 30 hour management course for real estate brokers, and shall provide to the Florida Division of Real Estate all written monthly escrow account reconciliation statements for which she is responsible. That the Department of Professional Regulation, Division of Real Estate, enter a Final Order determining Janet Lynn Coffing guilty of the violations set forth herein and providing for a fine of $1,000, and a suspension of 180 days to be followed by a probationary period of three years. During the probationary period Coffing shall complete 60 hours of continuing education, including a 30 hour management course for real estate brokers, and shall provide to the Florida Division of Real Estate all written monthly escrow account reconciliation statements for which she is responsible. That the Department of Professional Regulation, Division of Real Estate enter a Final Order revoking the licensure of Respondents Tailormade Management, Inc., and Comprehensive Management, Inc. DONE and ENTERED this 15th day of July, 1992, in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of July, 1992.
