Findings Of Fact For the past ten years, James. S. Fortiner, a registered real estate broker, has owned substantially all of the stock of Fortiner Realty Company, which has recently surrendered its certificate of registration to petitioner. In the summer of 1976, Fortiner Realty Company employed 63 licensed real estate salespersons and was involved in some seventeen commercial real estate ventures, but all was not well. Work was stalled on a proposed high rise condominium in which Mr. and Mrs. Fortiner had invested substantial sums of money, including most of their available cash. On another front, of 146 units in one apartment complex controlled by the Fortiners, only 100 units were rented; the complex did not produce enough revenue to meet payments under the mortgage agreement with which the Fortiners had financed the complex. Eventually, North American Mortgage Investors, a principal creditor, filed suit against Mr. and Mrs. Fortiner seeking ore than three million dollars. On July 24, 1976, this was reported in the Fort Myers News-Press. Other creditors pressed the Fortiners for payment. Other lawsuits were filed against Mr. and Mrs. Fortiner and Fortiner Realty Company. the Fortiners were advised to file for bankruptcy and filed personally on October 28, 1976. On November 3, 1976, Fortiner Realty Company filed its petition for bankruptcy. Freda L. Hamilton was a real estate salesperson employed by Fortiner Realty Company in the summer of 1976. Under her agreement with the Company, she was entitled to one half of commissions the Company received as a result of real estate transactions she handled. The Company owed Ms. Hamilton a total of two thousand six hundred forty dollars and forty cents ($2,640.40) at the time of its collapse, which represented shares of commissions and forfeited deposits Ms. Hamilton had not been paid. One of the transactions on which Ms. Hamilton earned a share of a commission which went unpaid was a sale of property by the Reynoldses to the Morauskis. This transaction closed on August 31, 1976. Another such transaction closed on July 30, 1976. At one point Ms. Hamilton loaned James S. Fortiner five thousand dollars ($5,000.00), which he repaid. On another occasion, she invested twenty thousand dollars ($20,000.00) in a limited partnership managed by respondent Fortiner. When she approached him about selling the interest in the limited partnership she had acquired, he told her he did not have twenty thousand dollars ($20,000.00) available, but agreed on behalf of the Company to buy her interest and, on behalf of the Company, signed a 90 day promissory note in her favor on March 25, 1975. Apparently unable to pay the full amount of the note when due, Mr. Fortiner on behalf of the Company agreed with Ms. Hamilton to satisfy the debt by paying her 75% of all commissions the Company received as a result of real estate transactions she handled, with the extra 25% going toward payment for her limited partnership interest and with the understanding that she need not convey her limited partnership interest to the Company until it had been paid for in full. In this fashion, the Company's indebtedness to Ms. Hamilton on account of the purchase of her limited partnership interest had been reduced to fifteen thousand six hundred twenty-eight dollars and four cents ($15,628.04) at the time the Company filed its petition for bankruptcy. Ms. Iris Thirtle worked for respondents as a real estate salesperson in the summer of 1976. She has never been paid her share of three commissions the Company received because of transactions she facilitated, viz., McCormick to Myrick, Whidden to Harrington, and Reynolds to Morouski. Respondent Fortiner acknowledged these debts in a letter to Ms. Thirtle dated September 23, 1976. Petitioner's exhibit No. 4. On August 17, 1976, respondent Fortiner drew a check on the Company's operating account at Southeast Bank of Fort Myers in favor of Iris Thirtle in the amount of seven hundred twelve and one half dollars ($712.50). Petitioner's exhibit No. 2. Ms. Thirtle deposited the check to her account at the Lee County Bank. The check was returned to her together with a memorandum from Lee County Bank dated August 24, 1976, stating that the check had not cleared because there were not sufficient funds. Ms. Lanna McCormack worked for respondents as a real estate salesperson in the summer of 1976. As a result of the sale of a lot, she became entitled to a three hundred eighty dollar ($380.00) share in a real estate commission. On August 11, 976, respondent Fortiner drew a check on the Company's operating account at Southeast Bank of Fort Myers in favor of Lanna McCormack in the amount of three hundred eighty dollars ($380.00). Petitioner's exhibit No. 5. Ms. McCormack deposited the check to her account at The Cape Coral Bank. The check was returned to her together with a memorandum from the Cape Coral Bank dated August 27, 1976, stating that the check had not cleared because there were not sufficient funds. Mr. George H. Marshall worked for respondents as a real estate salesman in the summer of 1976. Because of the Tenneys' sale of a house to the Echolses, which transaction closed on September 1, 1976, Mr. Marshall was entitled to a share of the commission in the amount of nine hundred six dollars and thirty cents ($906.30). When Mr. Marshall first asked respondent Fortiner for the money, Mr. Fortiner told him that he was trying to raise the money. A week or two later Mr. Fortiner told Mr. Marshall that he did not have the money and had little prospect of obtaining it. On this occasion, respondent Fortiner told Mr. Marshall "there was no use giving [Mr. Marshall] a check because it wouldn't be any good." (T. 129) Afterwards two other sales which Mr. Marshall helped to effect closed. At Mr. Marshall's request, Mr. Fortiner wrote a letter authorizing half of the Company's commission on each of the two sales to be disbursed directly to Mr. Marshall. These dispersals were made but the Company's trustee in bankruptcy eventually recovered from Mr. Marshall the moneys that Mr. Marshall had collected directly, on the authority of Mr. Mortiner's letter. Mr. William James Swartz worked for respondents from November or December of 1971, until October or November of 1976. On March 15, 1974, respondent Fortiner executed a 90 day promissory note on behalf of the Company in favor of Mr. Swartz, in the amount of eighty thousand dollars ($80,000.00). The note represented the partial proceeds of sales of certain limited partnership interests belonging to Mr. Swartz and shares of commissions owed to Mr. Swartz, payment of which Mr. Swartz asked to be deferred for tax reasons. Although Mr. Swartz made repeated written and oral demands for payment of the promissory note, it remains unpaid. Mr. Donald E. Swagler began working for respondents in October of 1974, as the Company's general sales manager. At that time, Mr. Swagler was a registered real estate salesman. Shortly before Mr. Swagler left respondents' employ on September 9, 1976, he was licensed as a real estate broker and became vice-president of the Company. As sales manager, Mr. Swagler was paid a salary and also received five per cent shares of commissions earned by the Company. On July 22, 1976, Mr. Swagler received two checks drawn on the Company's payroll account, one in the amount of eighty-five and one half dollars ($85.50), and the other in the amount of sixty-two dollars and forty-four cents ($62.44). Mr. Swagler received another check from the Company, drawn on the same account, dated August 31, 1976, in the amount of nine hundred eighty-four dollars and forty cents ($984.40). On or about September 2, 1976, Mr. Swagler tried unsuccessfully to cash these checks at Southeast Bank of Fort Myers, the bank on which they were drawn. Mr. Swagler has never been paid his salary for the last two weeks of August or the first nine days of September. As late as July of 1976, Mr. Swagler gave the Company his contribution toward a health insurance premium on the Company's group policy. On the basis of hearsay, Mr. Swagler concluded that the Company did not use his contribution as partial payment for the premium. In June of 1976, respondent Fortiner approached a Mr. Haase and asked Mr. Haase if he would be interested in buying the Company's office furniture and leasing it back to the Company, giving the Company first refusal in the event of resale. Mr. Haase was agreeable and gave respondents seventeen thousand dollars ($17,000.00) under an arrangement calling for monthly lease payments of six hundred dollars ($600.00). after Mr. Swagler left respondents' employ to start his own office, he negotiated with Mr. Haase for some of the office furniture acquired from respondents. At that time, Mr. Swagler claimed in excess of five thousand dollars ($5,000.00) from respondents in unpaid salary and commission shares or "overrides." Mr. Haase agreed to accept three thousand dollars ($3,000.00) for the furniture Mr. Swagler agreed to buy. At the same time, respondent Fortiner executed a promissory note in favor of Mr. Swagler in the amount of three thousand dollars ($3,000.00) "in part consideration for past and present debts." Petitioner's exhibit No. 8. Testimony from several residents of Fort Myers showed that respondent Fortiner had enjoyed a reputation as a generous and civic-minded community leader until his finances deteriorated. Generally speaking, since the adoption of petitioner's Rule 21V-14.06, Florida Administrative Code, and even before, real estate brokers in southwest Florida have deposited funds distributed to them from another broker's escrow account, from a title company, from an attorney's escrow account or from some other similar source in their operating accounts rather than depositing such funds in their escrow or trust accounts, even when portions of the funds were owed to real estate salesmen in their employ. In the summer of 1976, respondent Company had four checking accounts at Southeast Bank of Fort Myers, No. s 004049, 004634, 004618 and 001899. These accounts were designated leasehold, payroll, operating and trust accounts. During the same period, Southeast Bank of Fort Myers was a major creditor of respondents. According to bank records, all of respondents' checking accounts were formally "frozen" on September 10, 1976. Mr. Louis W. Woodson, who has since joined Southeast Bank of Fort Myers and is an executive vice-president of the bank, testified that an informal hold or freeze may have preceded the computer entry reflected by the bank's records. After respondent Fortiner learned that the Southeast Bank of Fort Myers was not honoring the Company's checks, he stopped signing checks on the Company's accounts, but persons in his employ continued keeping accounts and filling out checks for signature as a matter of office routine. Eventually, Mr. Fortiner had unsigned checks stacked in piles on his desk. The foregoing findings of fact should be read in conjunction with the statement required by Stuckey's of Eastman, Georgia v. Department of Transportation, 340 So. 2d 119 (Fla. 1st DCA 1976), which is attached as an appendix to the recommended order.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That petitioner suspend respondent Fortiner's registration as a real estate broker for thirty (30) days. DONE and ENTERED this 27th day of July, 1978, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 904/488-9675 APPENDIX Paragraphs one, two, three, five, six, seven, thirteen, fourteen, fifteen, seventeen, nineteen, twenty, twenty-one, thirty, thirty-two, thirty-three, thirty-nine, forty-one, forty-two, forty-four, forty-six, fifty, fifty-two, fifty-three, fifty-four, fifty-five, fifty-eight, fifty-nine, sixty, sixty- three, sixty-four, seventy-two, seventy-three and seventy-seven of respondents' proposed findings of fact have been adopted, in substance, insofar as relevant. Paragraph four of respondents' proposed findings of fact is irrelevant. In addition, it was not proven either that respondent Fortiner was discharged honorably or that he was decorated. Paragraph eight of respondents' proposed findings of fact is substantially correct, although the Company has had other names. Paragraph nine of respondents' proposed findings of fact has been adopted in part but has been largely rejected as not having been established by the evidence. Paragraph ten of respondents' proposed findings of fact is irrelevant to the merits. The evidence established that respondent Fortiner served on Canterbury School's board of directors and contributed money to the School. The testimony was not clear as to whether the other charitable gifts were respondent's own property. Paragraph eleven of respondents' proposed findings of fact is irrelevant to the merits. There was no evidence that respondent was anybody's "representative . . . to State and Federal projects." Respondent Fortiner testified that he served on the Fort Myers Planning Board, not the Lee County Planning Board; on the Fort Myers Zoning Board, not the Fort Myers Zoning Commission; as president of the Florida chapter of the Farm and Land Institute, not as president of the Florida Institute of Farm and Land Brokers. Paragraph twelve of respondents' proposed findings of fact is irrelevant to the merits. The evidence was that respondent Fortiner taught on the two named campuses but not under the auspices of the universities. Paragraph sixteen of respondents' proposed findings of fact is largely irrelevant. All of the witnesses did not attest to respondent's generosity. The evidence did not establish who "the leading business man in Fort Myers" is. Paragraph eighteen of respondents' proposed findings of fact has been adopted, in substance, insofar as relevant. The "total mortgage" figure was not proven. Paragraph twenty-two of respondents' proposed findings of fact has not been adopted because, although not inconsistent with the evidence, it was not established by a preponderance of the evidence. Paragraphs twenty-three, twenty-four, twenty-five, twenty-six and twenty- seven of respondents' proposed findings of fact have largely been rejected as being based on hearsay. Paragraphs twenty-eight and twenty-nine of respondents' proposed findings of fact are wholly irrelevant and were not established by the evidence, in any event. Paragraph thirty-one of respondents' proposed findings of fact has not been adopted because it was not established by the evidence. All the persons named did not attend. Nobody abandoned any claim to any money. Paragraph thirty-four of respondents' proposed findings of fact is substantially accurate, but the testimony was that $900.00, not $600.00, would be the cap. Paragraph thirty-five of respondents' proposed findings of fact is irrelevant but substantially accurate. Paragraph thirty-six of respondents' proposed findings of fact is completely irrelevant to the merit and is almost completely inaccurate. The hearing in this case was originally set for July 19, 1977, by which time all parties should have been prepared for hearing. Paragraph thirty-seven of respondents' proposed findings of fact is irrelevant except to the extent that the publicity bears on respondents' employees' reasonable cause to know that respondents were insolvent. Paragraph thirty-eight of respondents' proposed findings of fact is irrelevant and was not proven, in any event. Paragraph forty of respondents' proposed findings of fact accurately reflects the evidence adduced, except that the identity of respondent Fortiner's present employer was not established. Paragraph forty-three of respondents' proposed findings of fact has not been adopted because the evidence did not establish that no salesperson made any written demand at any time. Paragraph forty-five of respondents' proposed findings of fact has not been adopted because the evidence did not establish where the money was originally deposited. Paragraph forty-seven of respondents' proposed findings of fact has not been adopted for the same reason. Paragraph forty-eight of respondents' proposed findings of fact has not been adopted because it was not established by the evidence. Paragraph forty-nine of respondents' proposed findings of fact has not been adopted because the evidence showed that Ms. Hamilton never relinquished her claim to the real estate commissions due her, even temporarily. Paragraph fifty-one of respondents' proposed findings of fact has been rejected insofar as it draws legal conclusions. Paragraphs fifty-six and fifty-seven of respondents' proposed findings of fact have been rejected for the most part as not having been established by the evidence. Paragraph sixty-one of respondents' proposed findings of fact has been rejected as contrary to the evidence. Paragraph sixty-two of respondents' proposed findings of fact is actually proposed conclusions of law and has not been adopted as a fact finding for that reason. Paragraph sixty-five of respondents' proposed findings of fact has been rejected as contrary to the evidence. Paragraphs sixty-six and sixty-seven of respondents' proposed findings of fact is actually a proposed conclusion of law and has not been adopted as a fact finding for that reason. Paragraph sixty-eight of respondents' proposed findings of fact has been largely rejected as contrary to the evidence. Paragraph sixty-nine of respondents' proposed findings of fact accurately reflects the evidence in reciting that the note was not renewed but otherwise amounts to a proposed conclusion of law. Paragraph seventy of respondents' proposed findings of fact accurately reflects the evidence in reciting that respondents failed to pay Mr. Swartz but is based on hearsay otherwise. Paragraph seventy-one of respondents' proposed findings of fact mistakes the date Mr. Swagler's employment terminated. Paragraph seventy-four of respondents' proposed findings of fact is actually a proposed conclusion of law. Paragraph seventy-five of respondents' proposed findings of fact puts the value of the furniture well above the highest figure mentioned in the testimony and consists in part of (a highly problematic) proposed conclusion of law. Paragraph seventy-six of respondents' proposed findings of fact is actually a proposed conclusion of law. COPIES FURNISHED: Frederick H. Wilsen, Esquire 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 H. Stephen Frank, Esquire Suite 202, Can-Am Building 2180 West First Street Fort Myers, Florida 33901
Findings Of Fact Talbott and Drake, Inc. is and was at all times alleged herein a registered real estate broker corporation. William F. Talbott is now and was at all times alleged herein a registered real estate broker and active firm member of Talbott and Drake, Inc. Paul P. Drake is now and was at all times alleged herein a registered real estate broker and active firm member of Talbott and Drake, Inc. Helen C. Drake is now and was at all times alleged herein a registered real estate broker and active firm member of Talbott and Drake, Inc. On or about January 18, 1977, William F. Talbott, on behalf of Talbott and Drake, Inc., negotiated a contract for sale and purchase between the High Ridge Water Company -- John H. McGeary, Jr., sellers, and William Montaltos and Genevieve L. Montaltos, his wife, buyers, for the purchase of lot in a new housing area known as River Forest in the Boca Raton area, Palm Beach County. A copy of said contract, Petitioner's Exhibit 1, is received into the record pursuant to the Stipulation of the parties. Said contract, Petitioner's Exhibit 1, was subject to the declarations of restrictions filed by High Ridge Water Company as seller on June 28, 1976, wherein, in Paragraph 7, the developer retained the right to approve or disapprove the plans and specifications for the construction of any structure, building, fence, wall or sign in the River Forest area. A copy of said declarations of restrictions is received into the record as Petitioner's Exhibit 2, pursuant to the Stipulation of the parties. As a part of the restrictions and provisions of the contract, the purchasers, Mr. and Mrs. Montaltos, were required to use a builder selected from a list of designated builders, approved and designated by Talbott and Drake, Inc. and the High Ridge Water Company. Mr. and Mrs. Montaltos decided to build on the subject property and contacted numerous builders designated by Talbott and Drake, Inc. to submit the bids for the construction of a home on the property. On or about June 9, 1976, the McGeary partnership, as developer of the River Forest area, entered into a joint venture agreement with Group Six Developers Collaborative, Inc., whereby Group Six Developers Collaborative, Inc. purchased lots in the River Forest area and agreed to pay Talbott and Drake, Inc. a five-percent commission on all homes constructed on said lots by Group Six Developers Collaborative, Inc. in the River Forest area. A copy of said joint venture agreement is received into the record as Petitioner's Exhibit 3 pursuant to the Stipulation of the parties. Petitioner's Exhibit 3 recites on the first page of said agreement as follows: WITNESSETH: WHEREAS, by that certain Purchase Agreement intended to be executed this date, BUILDER (Group Six Collaborative, Inc.) is agreeing to purchase certain real property as set forth herein, a copy of which Purchase Agreement is attached hereto as Exhibit 1; . . . (emphasis added) WHEREAS, the parties hereto are desirous of forming a joint venture for the purpose of finan- cing, constructing and selling single family residences upon the property described in Exhibit 1; NOW THEREFORE, in consideration of the pro- mises and of the mutual covenants of the parties hereto, and for other good and valuable considera- tion, the parties agree as follows: 9. BROKER. The parties agree that TALBOTT AND DRAKE, INC., a Florida real estate brokerage corporation, shall have an exclusive listing agree- ment with BUILDER, as owner and joint venturer, for the sale of residences to be constructed pursuant to this Agreement, a copy of which Agreement is attached hereto as Exhibit 2. As a commission for their services, which shall include but not be limited to, advertising, manning model houses, showing receiving of deposits, qualifying prospects, assisting in obtaining financing for purchasers, they shall receive five percent (5 percent) of the pur- chase price, according to the provisions contained in Exhibit 2. The joint venture agreement, Petitioner's Exhibit 3, is clearly limited to houses to be constructed on the lots purchased from the McGeary partnership. The agreement does not constitute an agreement to pay Talbott and Drake, Inc. a fee of five percent of the construction cost of any custom home built by one of the designated builders on a lot purchased by an individual. When Mr. and Mrs. Montaltos received the bid statement from Group Six Developers Collaborative, Inc. there was noted thereon: "Add Real Estate Commission as per Talbott and Drake contract." A copy of said bid statement is received into the record as Petitioner's Exhibit 4 pursuant to the Stipulation of the parties. Although Mr. and Mrs. Montaltos were informed that Talbott and Drake, Inc. was to be paid a ten-percent commission by the seller on the sale of the property to Mr. and Mrs. Montaltos, they were at no time informed directly by the Respondents that the builders on the "approved list" were required to pay a five-percent commission to Talbott and Drake, Inc., nor that the said five- percent commission would be passed on to Mr. and Mrs. Montaltos when they contracted with an "approved" builder to construct a home on the subject property. On or about February 4, 1977, William F. Talbott, on behalf of Talbott and Drake, Inc., negotiated the contract for sale and purchase between High Ridge Water Company, as seller, and Donald James Kostuch and Mary Louise Kostuch, his wife, buyers, for purchase of a lot in the River Forest area of Palm Beach County. A copy of said contract is received into the record as Petitioner's Exhibit 5 pursuant to the Stipulation of the parties. Mr. and Mrs. Kostuch were required by the contract to select a builder from an approved list of designated builders approved and supplied by Talbott and Drake, Inc. and seller, High Ridge Water Company. Mr. and Mrs. Kostuch selected Snow Realty and Construction, Inc. from the list supplied by Talbott and Drake, Inc. Snow Realty and Construction, Inc. had an agreement with the McGeary partnership and Talbott and Drake, Inc. similar to that outlined in the joint venture agreement between the McGeary partnership in Group Six Developers Collaborative, Inc., Petitioner's Exhibit 3, whereby Snow Realty and Construction, Inc. agreed to pay Talbott and Drake, Inc. a five-percent commission on any residence that Snow Realty and Construction, Inc. built in the River Forest area. The bid supplied by Snow Realty and Construction, Inc. on March 7, 1977, to Talbott and Drake, Inc. contained a listing of real estate commission to Talbott and Drake, Inc. in the amount of $3,652. A copy of said bid statement is received into the record as Petitioner's Exhibit 6 pursuant to the Stipulation of the parties. The Kostuchs were advised of a five-percent fee to be paid by the builder by a salesman working for another broker who first introduced the Kostuchs to the real property in River Forest. The salesman advised the Kostuchs prior to their entry into the contract for the purchase of the lot in River Forest in which they agreed to limit their choice of builder to one approved by the McGeary partnership and Talbott and Drake, Inc. This disclosure would be sufficient to comply with the provisions of Rule 21V-10.13, Florida Administrative Code, because the fee was revealed by a salesperson involved in the transaction prior to the execution of the contract under which the favor, if any, was granted. Talbott and Drake, Inc., in addition to performing services as listing agent for the sale of homes in River Forest, also functioned as the prime developer in this project pursuant to an agreement with High Ridge Water Company and the McGeary partnership. Regarding the Montaltos' transaction, the limitation of the owners to the use of one of the approved builders constitutes the granting or placement of favor, because it narrows the competition to one of five builders out of all the builders available in the Fort Lauderdale area. The affidavits introduced indicate that, notwithstanding the absence of a written agreement, the designated builders had agreed to pay to Talbott and Drake, Inc. a fee of five percent of the cost of construction of any custom home as compensation for the efforts of Talbott and Drake, Inc. in developing the property. While compensation for these services is reasonable, it still constitutes a fee to be paid Talbott and Drake, Inc. from one of the five designated builders who would benefit from the contract. The potential adverse effect of this arrangement was to transfer a cost generally allocated to the cost of the lot to the cost of the house. Therefore, people shopping for a lot could be misled in the comparison of similar lots in different subdivisions in the absence of being advised of the fee to be paid by the builders to Talbott and Drake, Inc. However, the evidence shows no attempt to keep this fee a secret and thereby mislead buyers. The existence of such a fee is referred to in sales literature prepared by Talbott and Drake, Inc. The Kostuchs were advised of the fee by a participating salesman for another real estate company. The builders set out the fee as a separate cost item as opposed to absorbing it in general costs within their bids. While the Respondents could not produce evidence that the Montaltos' had been advised of the existence of the fee, and the Montaltos' testified that they had not been advised, this appears to be an isolated incident as opposed to a course of conduct. Notwithstanding proof of the above, no evidence is presented that the Montaltos' contracted with a designated builder to build their house, and that a designated builder paid a fee to Talbott and Drake, Inc. To the contrary, the testimony of William Talbott was that the Montaltos' had breached the terms of their contract regarding the use of a designated builder.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law the Hearing Officer recommends that the Florida Real Estate Commission issue a letter of reprimand to Talbott and Drake, Inc. which, in fairness to the Respondents, should set out the specifics of the violation and to further apprise other registrants of the potential dangers of such fee arrangement. DONE and ORDERED this 4th day of June, 1979, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Frederick H. Wilsen, Esquire Florida Real Estate Commission 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Charles M. Holcomb, Esquire 653 Brevard Avenue Post Office Box 1657 Cocoa, Florida 32922
Findings Of Fact Respondent Donald E. Swagler is now and was at all times material a licensed real estate broker or broker/salesman in the State of Florida, having been issued license number 0139756, in accordance with Chapter 475, Florida Statutes. At all times alleged in the Administrative Complaint, respondent Donald Swagler was licensed and operating as a qualifying broker for and an officer of respondent Swagler Realty, Inc., which is now and was at all times material a corporation licensed as a real estate broker in the State of Florida, having been issued license number 0169035, in accordance with Chapter 475, Florida Statutes. At all times material, Fern Z. Taylor was a licensed real estate broker with an office in Bonita Springs, approximately a twenty-minute drive south from the offices of Swagler Realty Company in Ft. Myers. On April 10, 1980, Andrew W. Kuchmaner was working part-time as a licensed real estate salesman in the employ (as that term is defined in Section 475.01(2), Florida Statutes) of Swagler Realty Company. Kuchmaner was a new salesman and had not yet had occasion to present a buyer's purchase offer to a client seller. During the early months of 1980, Kuchmaner was also working in the employ of, and receiving a salary from, Jim Walter Homes Company. Philip R. and Susan B. Workman first met Kuchmaner in January or February 1980 while visiting a Jim Walter's Homes sales office in Ft. Myers where he was working in his capacity as a Jim Walter Homes salesman. Kuchmaner advised the Workmans to find and purchase a lot for the Jim Walter home they had selected, and then they could purchase the Jim Walter home. Jim Walter Homes Company requires lot ownership prior to building one of their homes. Prior to selecting a lot, the Workmans had already decided on the Jim Walter home they were going to purchase, and Kuchmaner was going to do the paperwork for Jim Walter. Throughout the first quarter of 1980, the Workmans searched for a lot on which to construct their home in the Bonita Springs area of southern Lee County. During their search, the Workmans came upon a vacant lot with a sign saying it was for sale by Fern Z. Taylor. Upon seeing her real estate for sale sign, the Workmans went to Fern Taylor's office to inquire about the property and seek her assistance in their purchase of a lot in the Bonita Springs area. Fern Taylor advised the Workmans that, in addition to the lot they had already seen bearing her sign, she had Dust that morning listed and had for sale another lot in the Bonita Springs area which they would be interested in seeing. Earlier that same morning, Taylor took a long distance telephone call from a Charles A. Bennett, a resident of Arizona. Bennett said he had a lot he wanted to sell and gave Taylor the price ($7,000) and a description--Lot 20, Block E, Rosemary Park No. 2, in Bonita Springs. Bennett had not seen the property in some time and gave no landmarks or street address for Taylor's guidance. Back in 1925, Rosemary Park No. 2 was subdivided into eight blocks of 24 140' x 50' lots each and two larger blocks containing 16 larger 162' x 300' lots each. One of the smaller lots bore the legal description: "Lot 20, Block E of Rosemary Park No. 2 according to the Plat thereof recorded in Plat Book 6 at Page 30, of the Public Records of Lee County. This is the lot Bennett owned and was trying to sell. It is located on First Street. In 1926, Rosemary Park No. 2 was re-subdivided. The two larger blocks of the prior subdivision were re-subdivided into eight blocks of 24 140' x 50' lots each. Unfortunately, in a stroke of singular lack of vision, the new blocks and lots were designated with the same letters and numbers already assigned to the smaller blocks and lots in the original 1925 subdivision. As a result, there is another lot in Rosemary Park No. 2 designated as Lot 20, Block E: Lot 20, Block E, Rosemary Park, resubdivision of the East 1/2 of No. 2, according to the plat thereof, as recorded in Plat Book 8, Page 32, in the Public Records of Lee County, Florida. This other Lot 20, Block E, is owned by the Fyfes of Maine and is on Fifth Street. Taylor, who was quite busy, quickly checked a plat book in her office to locate the lot and the tax rolls to attempt far to verify Bennett's ownership and left to put her sign on the lot she thought Bennett owned and was trying to sell. Through a combination of the confusing legal description, the incomplete description and paucity of information Bennett gave Taylor, and Taylor's admitted negligence, Taylor put her for sale sign on the Fyfes' lot on Fifth Street instead of on Bennett's lot on First Street. Taylor had no listing agreement with the Fyfes, and the Fyfes' property was not for sale. Fern Taylor drew a map for the Workmans providing them with directions to this purportedly newly listed lot on which she had placed her "For Sale" sign. In reliance on Fern Taylor's map and representations as to her listing agreement, the Workmans drove to the Fifth Street lot and viewed the property as well as Fern Taylor's "For Sale" sign. Approximately one week after seeing the Fifth Street lot, the Workmans summoned Andrew Kuchmaner to Bonita Springs to view the lot and give them his opinion as to how the Jim Walter home they had previously selected would sit on the lot. The Workmans had their minds pretty well made up that they wanted to purchase the Fifth Street lot before summoning Kuchmaner. Kuchmaner never took the Workmans to any property but, upon their request, traveled to Bonita Springs to meet them and was thereupon shown the Fifth Street lot. While viewing the Fifth Street lot, Kuchmaner advised the Workmans that the Jim Walter's home they had selected would sit nicely on that lot. He also told the Workmans for the first time that he had a real estate license and would be glad to help them out with placing an offer for the lot on their behalf. The Workmans used Kuchmaner to make their $6,000 offer on the lot to save time because it was late in the afternoon and they lived in North Ft. Myers. When Fern Taylor first met Kuchmaner, he had been represented to her by the Workmans as a Jim Walter salesman. Kuchmaner went to Taylor's office and requested she prepare the contract because he would have to go all the way back to Ft. Myers to write it up. Taylor provided Kuchmaner with the legal description "Lot 20, Block E, Rosemary Park #2" and advised him he would have to write his own contract. Kuchmaner also proposed to Taylor that they not tell Swagler or Swagler Realty about the sale so they could divide Swagler's quarter of the 10 percent commission ($150 of the total $600 commission). Taylor refused and told Swagler what had happened. Swagler had an angry confrontation with Kuchmaner and was about to fire him, but Kuchmaner begged for a second chance and promised not to try to cut Swagler out of a commission again. Swagler relented and kept Kuchmaner on as a salesman. Kuchmaner filled out a contract on a Swagler Realty form and brought it to Donald Swagler for his review. He advised Swagler that he had gotten the legal description from Fern Taylor and had been to see the property. Swagler generally does not sell property in the Bonita Springs area and is not familiar with the area. He relied on Taylor to provide an accurate legal description of the property being sold. Kuchmaner hand delivered the contract offering to purchase the Bennett parcel to Taylor. Taylor checked the contract before she sent it to Bennett to see that the legal was the same that she had, and it was. She also checked it again when it was sent back from Bennett. Fern Taylor had received and checked the contract, title insurance binder, seller's closing statement and a copy of the warranty deed from Bennett to Workman prior to the closing The Workmans had the property they thought they were purchasing surveyed by William R. Allen, a registered and licensed land surveyor. He received the request to survey the property from Susan Workman. Over the phone, she advised Mr. Allen she had purchased a lot in Rosemary Park, Specifically lot far 20, block E. Mr. Allen informed Mrs. Workman that there are two Block E's in Rosemary Park and that they should be careful. He inquired as to which street she had purchased property on and was told, "We're on Fifth Street." Allen surveyed the Fifth Street lot and certified his survery, using the actual legal description of the Fifth Street (Fyfes') lot. Allen never saw any document with the legal description of the Bennett lot. Fern Taylor did not know that the Workmans had ordered a survey and did not see a copy of the survey until well after the closing. Although she attended the closing, she saw no discrepancies among the documents cursorily reviewed at the closing. Neither did the Workmans or the closing agent. The evidence was not clear whether there was a copy of the survey among the documents at the closing. The lender (Jim Walter Homes) and the title insurance company got a copy of the survey before closing. Neither of their professionals noticed that the legal description on the survey (the Fyfe lot) did not match the legal description on the deed and other documents (the Bennett lot). When a real estate broker has placed his sign ("For Sale") on a parcel of property, it is a reasonable conclusion that he is authorized to sell that parcel. It is customary for a broker to rely on the listing broker to provide a correct legal description for the property they have listed. At no time before the closing did Swagler or Kuchmaner have reason to suspect that the Workmans were purchasing a parcel of property different from the parcel they believed they were purchasing. Neither Swagler nor Kuchmaner were at the closing of the Workmans' purchase. But their presence would not have made any difference. It is not the real estate broker's or salesman's lob to scrutinize the documents being signed to make sure the legal descriptions on all the documents match (unless he has reason to believe the legal descriptions might be wrong.) He has the right to rely on the other professionals--the listing broker (especially since Fern Taylor was familiar with the Bonita Springs area and Swagler was not), the lender's attorney, the title company, the closing agent and, if any, the surveyor and the buyer's attorney. Fern Taylor and perhaps others were culpably negligent. Swagler and Kuchmaner were not. What happened to the Workmans is not their fault.
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 dismissing the Administrative Complaint against respondents, Donald E. Swagler and Swagler Realty Company, in this case. RECOMMENDED this 9th day of February, 1987 in Tallahassee, Leon County, Florida. J. LAWRENCE JOHNSTON 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 February, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-3502 These rulings on proposed findings of fact are made in compliance with Section 120.59(2), Florida Statutes (1985). Petitioner's Proposed Findings of Fact. 1.-4. Accepted and incorporated. 5. Rejected as contrary to facts found. (Kuchmaner did not "solicit" or "obtain" them.) 6.-14. Accepted and incorporated. 15. Rejected as contrary to facts found. (Taylor's "investigation" or "attempt" to ascertain the legal description was deficiently and negligently performed.) 16.-17. Accepted and incorporated. First sentence, rejected as incomplete ("compare the deed" with what?); second sentence, rejected because it was not proved Taylor had access to a copy of the survey before the closing. Rejected as unnecessary and potentially misleading. (A Final Judgment was entered; Taylor paid the portion against her; the other defendants have not paid the portions against them.) Rejected. Swagler Realty Company was a defendant in the case; Donald E. Swagler was not. 21.-24. Accepted and incorporated. Rejected as not proved whether they "failed," "refused" or "neglected." (The fact is that neither has paid the Workmans any money in satisfaction of the portion of the Final Judgment against Swagler Realty Company.) Accepted but unnecessary. B. Respondents' Proposed Findings Of Fact. 1. Accepted but unnecessary. 2.-10. Accepted and incorporated. 11. Accepted but unnecessary. 12.-23. Accepted and incorporated. 24.-28. Accepted and incorporated. 29. Accepted but unnecessary. 30.-36. Accepted but cumulative. 37.-42. Accepted and incorporated, along with additional findings. 43. Accepted but unnecessary. COPIES FURNISHED: James H. Gillis, Esquire Division of Real Estate Post Office Box 1900 Orlando, Fl 32802 J. Michael Hussey, Esquire 3443 Hancock Bridge Parkway Suite 501 North Ft. Myers, Fl 33903 Van B. Poole Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Fl 32301 Wings S. Benton, Esquire General Counsel Department of Professional Regulation 130 North Monroe Street Tallahassee, Fl 32301 Harold Huff Executive Director Division of Real Estate Post Office Box 1900 Orlando, Fl 32802
The Issue Whether Respondent's license issued by Petitioner should be revoked or suspended, or the licensee be otherwise disciplined, for alleged violations of Sections 475.25(1)(a) and 475.25(3) Florida Statutes as set forth in the Administrative Complaint. This case was consolidated for hearing with that of other respondents by Order of the undersigned Hearing Officer dated August 8, 1977. The consolidated cases heard on November 7, 1977 are as follows: Case No. 77-1269, Florida Real Estate Commission vs. John Glorian and General American Realty Corporation Case No. 77-1275, Florida Real Estate Commission vs. James Henkel Case No. 77-1277, Florida Real Estate Commission vs. Alfred Landin Case No. 77-1278, Florida Real Estate Commission vs. Joseph Macko The evidence in this case consisted solely of the testimony of the Respondents in the above listed four cases, and Petitioner's Composite Exhibit 2 (Petitioner's Exhibit 1 withdrawn) which consisted of certain written material furnished to prospective clients by the Florida Landowners Service Bureau, including a listing and brokerage agreement sample form. Petitioner sought to elicit the testimony of Kenneth Kasha and Theodore Dorwin, but both of these prospective witnesses invoked their Fifth Amendment privilege against self-incrimination and declined to testify in this case. After inquiring into the basis of their claims, the Hearing Officer permitted the same and they were excused from the hearing. Both individuals based their claims on the fact that they are currently under criminal investigation by state law enforcement authorities with respect to their prior activities as real estate brokers in advance fee transactions. Although Petitioner contended that Dorwin had waived his privilege by testifying in prior administrative proceedings brought by the Florida Real Estate Commission which led to the revocation of his broker's license, and that Kasha also had waived his privilege by testifying in am administrative proceeding brought by the Florida Division of Land Sales and Condominiums concerning advance fee sales, it was determined by the Hearing Officer that any such waivers did not extend to the instant proceeding. Petitioner then sought to introduce into evidence the prior testimony of Dorwin and Kasha in the aforementioned administrative proceedings, but such admission was not permitted by the Hearing Officer because the Respondents herein had not been afforded an opportunity to cross examine the witnesses at the time they gave such testimony. Respondent Joseph Macko appeared at the hearing unaccompanied by legal counsel. The Hearing Officer advised him of his rights in the administrative hearing. Respondent is now a registered non-active real estate salesman, and was at all times alleged in the Administrative Complaint, a registered salesman in the employ of General American Realty Corporation, a registered corporate broker (Petitioner's Composite Exhibit 3).
Findings Of Fact General American Realty Corporation was first registered by petitioner as a corporate broker in 1970. In 1972 John Glorian became the president of the firm and active broker. He was hired by Richard T. Halfpenny who was the owner and principal stockholder at the time. Alfred Landin, a registered real estate salesman, joined the firm in February, 1975. At that time, General American was in the business of selling acreage property in Florida. In the summer of 1975, Glorian recommended to Halfpenny that the firm become involved in the "advance fee" business. Such transactions in the trade involved the telephone solicitation of out-of-state landowners to list their land in Florida for sale with a Florida broker for a prescribed fee which would become part of any sales commission if and when the particular property was sold. Halfpenny expressed no objections to the idea and Glorian thereafter contacted Theodore Dorwin who was then associated with Florida Landowners Service Bureau in Miami. Kenneth Kasha was the president of that firm which was involved in the advance fee business. Glorian introduced Dorwin to the firm's salesmen, who included Joseph Macko, James H. Henkel, and Landin. Dorwin instructed these personnel in the method of soliciting prospective clients and provided an outline of the information that was to be given to those individuals called by the salesmen. He told the General American personnel that once the property was listed with Florida Landowners Service Bureau, it would be advertised in newspapers and catalogs, and that bona fide efforts would be made by his organization to sell the property. (Testimony of Glorian, Landin, Petitioner's Composite Exhibits 5-6). General American commenced its advance fee operation approximately August, 1975. The procedure followed was for a salesman to call an out-of-state landowner picked from a computer print-out list and inquire if he would be interested in selling his property at a higher price than he had paid for it. This was termed a "front" call and the salesman was termed as "fronter". If the prospect expressed interest in listing his property, his name was provided to Florida Landowners Service Bureau who then mailed literature to the property owner describing the efforts that would be made by that organization to sell his property. Also enclosed with this material was a listing and brokerage agreement. This agreement provided that the owner of the property would pay a prescribed listing fee to Florida Landowners Service Bureau which would be credited against a ten percent commission due that firm upon sale of the property. In return, Florida Landowners Service Bureau agreed to include the property in its "listing directory" for a one-year period, direct its efforts to bring about a sale of the property, advertise the property as deemed advisable in magazines or other mediums of merit, and to make an "earnest effort" to sell the property. The accompanying literature explained that the listing fee was necessary in order to defray administrative costs of estimating the value of the property, merchandising, advertising, brochuring, and cataloging the information. The material also stated that advertising would be placed in various foreign countries and cities of the United States. In addition, it stated that Florida Landowners Service Bureau would "analyze" the property, comparing it to adjacent property to arrive at a price based on recent sales of neighboring property, and also review the status of development and zoning in the immediate area of the property to assist in recommending a correct selling price for approval by the owner. During the course of their calls to prospects, Macko, Henkel, and Landin advised them that the property would be advertised internationally and in the United States, and that bona fide efforts would be made by Florida Landowners Service Bureau to sell the property. All salesmen represented themselves to be salesmen for that organization. Henkel told prospects that foreign investors were buying Florida property; however, in fact, he was unaware as to whether any property had ever been sold by Florida Landowners Service Bureau and never inquiried in this respect. Henkel and Landin had observed copies of the literature sent to prospects in the General American office, but Macko had only seen the listing agreement. After the promotional literature was sent to a prospect, the General American salesmen made what were called "drive" calls to answer any questions and to urge that the property be listed. After making these calls, the salesmen had no further contact with the property owner. The listing fee initially was $250 and was later raised to $350. The salesman received approximately one third of the fee. Glorian was paid several hundred dollars a month by General American, but received no portion of the listing fees. He was in the office once or twice a week to supervise the activities of the salesmen who made their telephone calls during the evening hours. Halfpenny was seldom there and did not take an active part in the advance fee operation. None of the salesmen or Glorian were aware that any of the property listed with Florida Landowners Service Bureau was ever sold and none of them ever saw any advertising, although Land in saw a catalog of listings at one time. Although Macko customarily recommended a listing price of the property to prospects based on the general rise in value of land since the date of purchase, Henkel merely accepted the price desired by the property owners. General American terminated its advance fee business in early 1976 after being advised that petitioner was conducting investigations into the advance fee business (Testimony of Macko, Landin, Henkel, Glorian). All of the Respondents in these cases testified at the hearing that they had made no false representations to prospects during the course of their telephone conversations and otherwise denied any wrongdoing.
Recommendation That the charges against Respondent Joseph M. Macko be dismissed. DONE and ENTERED this 16th day of December, 1977, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304 COPIES FURNISHED: Richard J.R. Parkinson and Louis Guttman, Esquire Associate Counsel Florida Real Estate Commission 2699 Lee Road Winter Park, Florida 32789 Joseph M. Macko 13990 Northeast 6th Ave. Miami, Florida 33161
The Issue Respondents are charged with misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme, or device, culpable negligence, or breach of trust in any business transaction in violation of Section 475.25(1)(b), Florida Statutes; failure to account or deliver funds in violation of Section 475.25(1)(d), Florida Statutes; and failure to maintain trust funds in the real estate brokerage escrow bank account or some other proper depository until disbursement is properly authorized, in violation of Section 475.25(1)(k), Florida Statutes, as more specifically set out in the following Conclusions of Law.
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, Respondent Mary Lawhon was a licensed Florida real estate broker, issued license numbers 607847 and 3028674 in accordance with Chapter 475, Florida Statutes. Respondent Shell Point Realty, Inc., is, and at all times material was, a corporation registered as a Florida real estate broker having been issued license number 1005003 in accordance with Chapter 475, Florida Statutes. At all times material, Respondent Mary Lawhon was licensed and operating as qualifying broker and officer of Respondent Shell Point Realty, Inc. Neither Respondent has previously been prosecuted for license violations, although an Agency investigator's administrative fine of $100.00 for a minor technical violation was imposed several years ago. Between 1996 and 2002, Respondents were paid real estate commissions for the purchase or sale of several Wakulla County properties by Gerd Petrik, or his business, Stone Real Estate Holdings, Inc. For each of these transactions, there was a contract, whereby Respondents' real estate brokerage commission was based on the price of each property as disclosed before sale in the written listing agreement with the seller(s). Mr. Petrik is a foreign national residing in the United States on an investment visa. He lives in Sarasota, Florida. He "owns" several corporations,2/ and, through them, he owns at least 40 properties in the Panhandle of Florida, including a golf course and six rental houses in Wakulla County. One of these rental houses is located at 111 Razorback Road in Crawfordville. Mr. Petrik, or a corporation in which he is majority stockholder, owner-financed, by mortgage, one of the buildings from which Ms. Lawhon conducts Shell Point Realty, Inc.'s business. As an outgrowth of their real estate sales transactions, Mr. Petrik came to respect and value Ms. Lawhon's real estate skills and business acumen. He also appreciated her position and prestige in the community as the former Wakulla County Administrator. Until the incidents giving rise to this case occurred, Mr. Petrik found Ms. Lawhon to be professional and competent in real estate matters and honest and truthful. Mr. Petrik admits that he has lost no money as a result of the incidents giving rise to this license disciplinary proceeding. There has never been a written contract imposing any duty on Respondents to Mr. Petrik with regard to his six rental houses in Wakulla County, or with regard to the 111 Razorback Road property in particular. Having reconciled the witnesses' respective testimonies to the degree possible, and having assessed their respective versions upon credibility factors, it is found that Respondents were never retained or expected by Mr. Petrik to rent, lease, or manage any of his six rental houses in Wakulla County, including the 111 Razorback Road property. Respondents also did not advertise any rental properties, solicit any renters, put up any "for rent" signs, or charge any real estate or management fees to Mr. Petrik or his businesses in connection with the rentals of Mr. Petrik's properties. However, with an eye to promoting further profitable real estate sales dealings with Mr. Petrik, Ms. Lawhon gratuitously facilitated Mr. Petrik's renting his Wakulla County houses. To this end, she regularly communicated by telephone and fax with Mr. Petrik's business manager, Wendy Freed, concerning showing the properties, rent to be charged, and creation or signing of leases. At all times material, Wendy Freed worked in Mr. Petrik's office in Sarasota, as business manager for Stone Management Inc., one of Mr. Petrik's corporations. Stone Management, Inc., owns Stone Real Estate Holdings, Inc. Ms. Freed believed that Stone Real Estate Holdings, Inc., owned 111 Razorback Road, Crawfordville. Apparently no one involved in this case knew that in October 2001, 111 Razorback Road was owned by Newhouse, Inc.3/ The evidence is not clear who or what entity owned the property in March 2002. Regardless of which entity actually owned any of the rental houses, Ms. Freed, Ms. Lawhon, and Mr. Petrik all believed Ms. Freed had Mr. Petrik's complete authority to handle the rentals and to manage everything in connection with the six Wakulla County rental houses, including 111 Razorback Road. Ms. Freed possesses no real estate or other professional licenses. Her entire training for management or leasing of real estate has been "on the job" training with Mr. Petrik. As of October 2001, she possessed only about a year and a half of such training. She keeps track of multiple rentals and other property management factors without any modern property management software. She uses only an Excel spreadsheet. Despite Ms. Freed's testimony to the contrary, it is found that Ms. Lawhon is credible that Ms. Lawhon only collected rent money for Mr. Petrik, or for any of Mr. Petrik's businesses, upon Ms. Freed's specific request, until the incidents giving rise to this case; that all leases for Mr. Petrik's rental properties were usually prepared by Ms. Freed, although on occasion, Ms. Lawhon had prepared a lease for Ms. Freed to use, based on the Tallahassee Board of Realtors' Standard Form; and that usually, after one of Mr. Petrik's houses had been leased, Ms. Freed dealt directly with the lessee, unless she dealt with the lessee through Mr. or Mrs. Alward. At all times material, Kay Alward and Chris Alward, husband and wife, were employed by Mr. Petrik. They were not sure whether they were paid through Stone Management, Stone Real Estate Holdings, Inc., or Stone Management Enterprises. Mrs. Alward had been Mr. Petrik's housekeeper, and Mr. Alward had been his gardener, in Sarasota. Mr. Alward had also personally invested in Wakulla County real estate. For awhile, the Alwards assisted Ms. Freed in managing Mr. Petrik's properties in Wakulla County, by traveling to and from Wakulla County. Ultimately, they moved to Wakulla County to live and manage his properties. During the material period of time, they employed a man named "Greg" to steam clean decks, fix toilets, and be a general handyman for Mr. Petrick's Wakulla County rental properties. Before returning to Sarasota on one occasion, Mr. Alward left with Ms. Lawhon a key for 111 Razorback Road. She understood from him that workmen might need the key to get into the house for repairs and cleaning. Sometime thereafter, on or about October 12, 2001, Lorra Shepard, a local Certified Public Accountant, walked into Respondents' real estate office, because a friend of hers worked there, and asked if they had any rentals. She was shown the 111 Razorback Road property. She asked Ms. Lawhon if she could rent it, and Ms. Lawhon told her the lessor wanted $675.00 per month. Ms. Shepard asked if they could come down on the price. Ms. Lawhon testified that she telephoned Ms. Freed on October 12, 2001, and asked Ms. Freed to lower the rent for Ms. Shepard; that Ms. Freed agreed to lower the rent to $635.00 per month and agreed to draw the lease; that she, Ms. Lawhon, relayed this information to Ms. Shepard; that Ms. Shepard agreed to rent the house at that price; and that Ms. Lawhon then telephoned Ms. Freed again with this information and finally faxed written information about Ms. Shepard to Ms. Freed, so that Ms. Freed could draft the lease and collect subsequent rents. This testimony is credible.4/ Ms. Lawhon and Ms. Shepard concur that Ms. Shepard moved into 111 Razorback Road on October 15, 2001, and that day, Ms. Lawhon accepted a $450.00 cash deposit from Ms. Shepard and provided Ms. Shepard with a signed receipt, setting out the monthly rent of $635.00 per month, and signing the receipt with Ms. Lawhon's own name. Ms. Shepard is clear that at no time did Ms. Lawhon tell her 111 Razorback Road was Ms. Lawhon's house or suggest that Ms. Shepard hide her occupancy. Rather, Ms. Shepard confirms Ms. Lawhon's testimony that Ms. Lawhon told her that the lessor would be sending a lease and that the lessor was Mr. Petrik. Ms. Shepard's testimony also suggests that in October 2001, she thought Ms. Lawhon was saying that Ms. Lawhon would deliver the lease and that when Ms. Shepard signed the lease, she and Ms. Lawhon, together, would work out whether rent would be paid on the 15th or 31st of each month. Even if it were credible that Ms. Freed had told Ms. Lawhon to retain the $450.00 cash deposit, and this portion of Ms. Lawhon's testimony does not ring entirely true, there is no evidence that Ms. Lawhon timely placed the $450.00 cash in an escrow or trust account. It also was not remitted directly to Mr. Petrik or Ms. Freed in October 2001. On the other hand, there is no evidence that it was deposited into any account in Respondents' name(s). It is unclear from Ms. Lawhon's hearing testimony what, exactly, happened to the $450.00 cash deposit, but she admitted to the Agency investigator in June 2002 that she had put it in a file and forgotten about it, and this explanation is accepted. At no time material did Ms. Freed or Ms. Lawhon prepare a lease for 111 Razorback Road. At no time material did either of them send or deliver a lease to Ms. Shepard. Ms. Shepard testified credibly that several times between October 2001 and March 2002, Ms. Lawhon told Ms. Shepard that she, Ms. Lawhon, still had no lease and would call the lessor again. Ms. Lawhon did not address this aspect of Ms. Shepard's testimony in her own testimony. Ms. Lawhon testified that she thought Ms. Freed would deal directly with Ms. Shepard about all aspects of the lease and collecting rent. She also admitted that she had never discussed 111 Razorback Road with Ms. Freed in any of their frequent telephone conversations between October 15, 2001 and March 2002. Upon this evidence and Finding of Fact 24, it is found, contrary to Ms. Lawhon's hearing testimony, that Ms. Lawhon was, in fact, expecting to receive a lease from Ms. Freed and planned to then deliver that lease to Ms. Shepard for execution, but Ms. Lawhon never followed up on Ms. Shepard's request for a lease. Having no lease to guide her, Ms. Shepard did not make out checks for rent in thirty-day increments, beginning in October or November 2001. Instead, she contemporaneously made out a check dated December 21, 2001, for $1,905.00, to "Petrick" for the rent. She contemporaneously made out a check dated December 26, 2001, for $317.50, to "Petrick" for the rent. She contemporaneously made out a check dated February 7, 2002, for $952.00, to "Petrick" for the rent. She expected Ms. Lawhon to pick up these checks, but no one picked them up. Accordingly, Ms. Shepard just left these three checks, totaling $3,174.50, in her office desk drawer and went about her business until March 26, 2002. Mrs. Alward ran some advertisements for Mr. Petrik's rental houses in December 2001. Ms. Lawhon testified that she told Mrs. Alward in December 2001 not to advertise 111 Razorback Road because it was rented. Mrs. Alward was not asked to confirm or deny that conversation occurred, and Mrs. Alward's testimony at hearing does not specifically rule out that she advertised 111 Razorback Road. However, Mr. Alward's deposition and the testimony of Mr. Weltman reveal that in January 2002, the Alwards were managing all rental arrangements by referral to Ms. Freed. In January or February 2002, a maintenance person steam-cleaned the deck at 111 Razorback Road. The maintenance person was never seen by Ms. Shepard, but the maintenance person clearly knew someone was occupying the house because s/he left a note for Ms. Shepard to confine her dogs so the steam cleaning could be done the next day. Ms. Shepard assumed the steam cleaning was done at Ms. Lawhon's direction, but she did not contact Ms. Lawhon about it. Ms. Lawhon did not arrange this service and knew nothing about it. Based on the testimony of Ms. Freed, Mr. and Mrs. Alward, and Mr. Weltman, it is probable "Greg" did this steam cleaning at the Alwards' direction, but Ms. Freed takes no responsibility for it. Upon Findings of Fact 28-29, it is only reasonable to assume that the Alwards had notice that 111 Razorback Road was rented and occupied as of December 2001-January 2002, and their knowledge as of those dates can be imputed to Ms. Freed. On March 26, 2002, Ms. Shepard personally delivered to Ms. Lawhon the three rent checks she had previously written to "Petrick," on December 21, 2001, December 26, 2001, and February 7, 2002, totaling $3,174.50.5/ Ms. Shepard then returned to her office, and on March 29, 2002, she delivered to Ms. Lawhon a last check for $317.50, dated March 26, 2002, and payable to "Stone Real Estate Holdings." The undisputed evidence reveals that on March 29, 2002, Ms. Lawhon signed the first three checks as "Petrik" and deposited them under the stamped endorsement of "Shell Point Realty," into Shell Point Realty, Inc.'s, operating account. She did not deposit them into an escrow account for Mr. Petrik or into Respondents' trust account. The March 29, 2002, deposit complied with Agency rules, in that it was made "immediately" (within three business days or less) of Respondents' receipt of the funds. It did not comply with Agency rules in that it was not deposited in a trust, escrow, or other specifically designated account for Mr. Petrik's benefit. Mr. Petrik and Ms. Freed maintain that Ms. Lawhon was not authorized to endorse the checks with Mr. Petrik's name. The average daily balance of Respondents' operating account at the time Ms. Lawhon deposited Ms. Shepard's first three rent checks was over $54,000.00. There appears to be no financial motivation for Respondents to play fast and loose with the relatively minor amounts of money involved in this case. At hearing, Ms. Lawhon had several explanations for her handling Ms. Shepard's first three checks as she did: that she thought she had received permission for this procedure in a phone conversation with Ms. Freed on March 26, 2002; that Mr. Petrik had allowed herself or Mr. Alward to sign closing and disclosure documents (but not negotiable instruments or checks) for him in the past, as a matter of convenience; and that she was afraid because Ms. Shepard's checks were stale and incorrectly made out (to "Petrick" instead of "Petrik," and not to "Stone Real Estate Holdings"), they also might not be any good. She testified that her thinking was that she should run Ms. Shepard's local checks through her own local bank to be sure they were valid. She maintained that she had intended to run the checks through Respondents' trust account but deposited them into the wrong account by accident. Although Respondents' telephone records show communication with Ms. Freed's telephone on March 26, 2002, it is noted that Ms. Lawhon's explanation that she had received permission from Ms. Freed that day was never put forth prior to her testimony at the disputed-fact hearing. (See Findings of Fact 44-45 and 51-52.) March 29, 2002, was a Friday. On Monday, April 1, 2002, Ms. Lawhon telephoned her bank and verified that Ms. Shepard's three checks had cleared. That same day, Ms. Lawhon used an overnight delivery service to send Ms. Freed Shell Point Realty, Inc.'s, check for $2,355.00, made out to "Stone Real Estate Holdings." The April 1, 2002, Shell Point Realty, Inc., check specified, on its memo line, that it covered "$635/mo. Jan. 02-April 15 + 450 dep." This amount would have been correct at $635 per month for only three months' rent (January-March 2002) plus a $450.00 deposit. However, it was the wrong amount, considering the 75-day period of October 15, 2001 to January 1, 2002. This check also was $819.50 short of the total amount of Ms. Shepard's first three checks, which Ms. Lawhon had received and negotiated in the names of Petrik/Shell Point Realty, Inc. Ms. Lawhon's testimony did not address when she sent Ms. Shepard's March 26, 2002, check for $317.50, which had been correctly made out to "Stone Real Estate Holdings," to Ms. Freed. Ms. Freed believed she had received this check a week after the April 1, 2002, mailing. However, because this fourth check, received by Ms. Lawhon on March 29, 2002, is also referenced on the memo line of the April 1, 2002, Shell Point Realty, Inc., check, it may be inferred that Ms. Shepard's last check also was sent to Ms. Freed in Ms. Lawhon's April 1, 2002, overnight package. Ms. Lawhon was overwrought on April 1, 2002. She had received a telephone call to come to Louisiana to care for her grandchildren because her daughter-in-law was terminally ill. The last thing she did before leaving Crawfordville, Florida, on that date was to calculate the rents, make out the Shell Point Realty, Inc., check, and send the two checks by overnight delivery to Ms. Freed. Except for returning for less than 24 hours covering part of the following Saturday and Sunday, April 6-7, 2002, to play piano in her church on Sunday, Ms. Lawhon did not return to Florida until Friday, April 12, 2002. April 12, 2002, was Ms. Lawhon's first day in the Shell Point Realty, Inc., office since April 1, 2002. That afternoon, she received a phone call from Mr. Petrik's attorney. She told him her reasons for signing Ms. Shepard's three stale checks as "Petrik" and depositing them. He said he did not think that Ms. Freed had received the whole amount owed by Ms. Shepard. Ms. Lawhon asked him to give her until Monday to recalculate and figure out what had happened. On Monday, April 14, 2002, Ms. Lawhon telephoned Mr. Petrik's attorney and admitted that she had miscalculated the rental amounts collected on March 26-29, 2002, and that she would be sending Mr. Petrik the balance owed. At the attorney's suggestion, she wrote a letter of apology to Mr. Petrik. Ms. Lawhon's April 15, 2002, letter to Mr. Petrik reads, in pertinent part: I hardly know where to begin except to say to you 'I offer my most humble apology concerning the checks from Lorra Shepard.' . . . Since the checks were so old, I signed the back and deposited three of them to make sure they would clear the bank. There was no intention to mislead any one [sic] or to take the money. I had sent the completed lease without her signature and the deposit to your office in December. I assumed you received the lease and would follow through with notification to Ms. Shepard about payment and signature of lease. Your office apparently did not receive my letter and I failed to follow up until I got a call from Wendy a few weeks ago telling me that your office had not received any rent payments. Since the checks were so old and I had signed closing papers, applications for permits, etc. for you in the past, I signed the checks and deposited them in the Shell Point Realty account. On the date that I found out that they had cleared, I ran by the office on my way out of town to write out the check to Stone Real Estate Holdings and figured the wrong amount. Enclosed is check # 3459 for the balance of the rent and Check # 3463 for the deposit . . . . (Emphasis supplied) The emphasized portions of her letter, concerning transmittal to Ms. Freed of the $450.00 deposit, contradict each other, and the information in Ms. Lawhon's letter about her sending a blank lease to Ms. Freed in Sarasota in October 2001, is contrary to Ms. Lawhon's testimony at the disputed-fact hearing and contrary to part of Ms. Freed's deposition testimony. It is further noted that Ms. Lawhon did not mention in this April 15, 2002, letter to Mr. Petrik that she had received permission from Ms. Freed in March 2002 to endorse and deposit the first three checks. It is undisputed that Ms. Lawhon mailed to Ms. Freed a Shell Point Realty, Inc., operating account check for $820.00, dated April 14, 2002, made out to "Stone Real Estate Holdings." This was intended to make up the difference as calculated from Ms. Shepard's first three checks. (See Finding of Fact 38.) It also is undisputed that on April 15, 2002, Ms. Lawhon mailed to Ms. Freed a Shell Point Realty, Inc., operating account check for $450.00, of the same date, made out to "Stone Real Estate Holdings." Apparently, this reflected the amount of the cash deposit Ms. Shepard had given Ms. Lawhon on October 15, 2001. Ms. Lawhon's explanation at the disputed-fact hearing for sending two checks on April 15, 2002, was that she had miscalculated again. With the last check, Respondents satisfied all of what was owed to Mr. Petrik and cleared any discrepancies in their professional accounts within 30 days, as required by Agency Rule. The Agency's June 2002 audit of Respondents' accounts for the material period of time found them to be substantially in compliance with all regulations and general bookkeeping standards for real estate personnel. Ms. Lawhon did not represent to the Agency investigator in June 2002 that she had been given permission by Ms. Freed on March 26, 2002, to sign three of Ms. Shepard's checks with Mr. Petrik's name, but otherwise, her admissions to the investigator are consistent with her explanation at the disputed-fact hearing that Mr. Petrik had allowed people to sign documents (not negotiable instruments or checks) for him in the past as a matter of convenience, and that she was afraid because Ms. Shepard's three checks were stale and incorrectly made out, they also might not be any good. (See Finding of Fact 36.) Telephone bills show there was communication between Respondents and Ms. Freed on March 26, 2002. However, due to what appears to be Ms. Lawhon's recent fabrication that she received oral permission from Ms. Freed on March 26, 2002, to endorse Mr. Petrik's name on Ms. Shepard's first three checks, the portion of her testimony claiming that Ms. Freed gave her permission to endorse those checks in Mr. Petrik's name is not credible. Ms. Lawhon's April 15, 2002, letter (see Finding of Fact 44) constitutes an admission, as well as a statement inconsistent with her testimony at the disputed-fact hearing, in that her letter stated that she did not realize that she had "failed to follow up" concerning the 111 Razorback Road rental until she received a phone call from Ms. Freed. It is significant that Ms. Lawhon's letter states Ms. Freed called Ms. Lawhon first. There is no direct evidence as to why Ms. Shepard chose March 26, 2002, to deliver her three stale checks to Ms. Lawhon or why she made the last check payable to "Stone Real Estate Holdings," the Petrik corporation with which Respondents had an on-going commission sales relationship, but it may be inferred therefrom that it was on March 26, 2002, that Ms. Freed inquired of Ms. Lawhon why she was not receiving rental checks and why she had no lease if the 111 Razorback Road property were occupied. Ms. Freed testified that Respondents failed to remit any of Mr. Petrik's funds due until Ms. Freed first contacted Ms. Lawhon and requested the rent proceeds, and that when contacted by Ms. Freed, Ms. Lawhon initially told Ms. Freed that she had placed Ms. Shepard in 111 Razorback Road in January 2002. The Agency suggests that this representation to Ms. Freed by Ms. Lawhon, together with Ms. Lawhon's remitting only $2,355.00 on April 1, 2002, with the January to March memo on that check, amounts to Respondents' intentional misrepresentation of the amount due Mr. Petrik. Ms. Freed also testified that she later discovered from Ms. Shepard that, in fact, Ms. Shepard had been in possession of 111 Razorback Road since October 2001, and, therefore, Ms. Freed realized that the total amount due Mr. Petrik was higher than the amount represented and remitted by Ms. Lawhon on April 1, 2002. On this basis, the Agency asserts that Respondents remitted the additional funds on April 15, 2002, only after Ms. Freed had confronted Ms. Lawhon concerning her misrepresentation. Unfortunately, Ms. Freed's version of events is not entirely credible for the following reasons: Ms. Freed testified that she knew 111 Razorback was vacant in October 2001, but did not know from October 2001 to March 2002 that it was occupied/rented. She also testified that during this period she made no effort to rent that house. This suggests that either she was not doing her job or she knew on some level in October 2001 that the property was already rented. Ms. Lawhon's notification to Mrs. Alward that it was rented in December 2001 is unrefuted, and Mr. Alward testified that approximately January 2002, he and his wife had notified Ms. Freed that someone was living in the house. Against all this, Ms. Freed testified that she had learned of the occupancy of 111 Razorback Road from the Alwards in March 2002 and from Ms. Lawhon. She further testified that when she first talked to Ms. Lawhon in March, Ms. Lawhon said she had previously sent Ms. Freed her own check and would have to determine if that check had cleared.6/ Finally, Ms. Shepard is very clear that when Ms. Freed contacted her, Ms. Freed did not dispute the $635.00 (as opposed to $675.00) per month rental amount.7/ While Ms. Freed's accepting the lesser amount is not absolute proof, it is, with all the other evidence, an indicator that she had previously approved that amount when Ms. Lawhon telephoned her in October 2001. Given the somewhat naïve and confused property management process in Sarasota, including Ms. Freed's ignorance that Newhouse, Inc. actually held title to the property, Ms. Freed's assessment of an intentional misrepresentation by Respondents is not persuasive. It is undisputed that Ms. Lawhon did not correct the discrepancy of $1,270.00 until April 15, 2002, after Mr. Petrik's lawyer (not Ms. Freed) contacted her, but she did resolve the issue by the next business day after she was alerted that there might be an error. As to the issues of whether or not Ms. Lawhon made a willful oral misrepresentation to Ms. Freed on March 26, 2002, or on the April 1, 2002, Shell Point Realty, Inc., check as to how long Ms. Shepard had occupied 111 Razorback Road or was willfully withholding funds on April 1, 2002, it is more significant that from the very beginning of this series of events on October 15, 2001, Ms. Lawhon told Ms. Shepard to make out her checks to Mr. Petrik and that none of Ms. Shepard's checks were ever in Respondents' possession until March 26, 2002. Therefore, together with Ms. Lawhon's overwrought state of mind on April 1, 2002, it is not clear whether there was a willful misrepresentation, a misunderstanding, a miscommunication, or a miscalculation with regard to the first transmittal of only part of the rental funds on April 1, 2002, and the time line is not so clear that Ms. Freed's and the Agency's sinister construction of Ms. Lawhon's communications and calculations can be the only construction. Without the Agency's sinister construction of events, there is only clear and convincing evidence that Ms. Lawhon undertook, without expectation of a direct real estate commission, to rent 111 Razorback Road for Mr. Petrik, regardless of what entity actually held title thereto. In doing so, she undertook a fiduciary relationship with him and Ms. Shepard. In this capacity, she received a $450.00 cash deposit, which she retained for over five months without clear authority to retain it, and she did not timely deposit it in a trust or other appropriate account for Mr. Petrik's benefit. She did not follow up on getting a lease executed by the parties, which, based on hers and Ms. Freed's prior course of dealing, Ms. Freed could have reasonably expected and which Ms. Shepard clearly did expect. When Ms. Freed inquired about the matter in March 2002, Ms. Lawhon, to her credit, tried to resolve the matter quickly and appropriately. However, in the course of resolving it, she did not get an executed lease as expected; she endorsed checks made out to Mr. Petrik without clear authority to do so; she did not deposit funds from those checks into an appropriate account; and she repeatedly miscalculated amounts due and remitted incorrect amounts to Mr. Petrik, via Ms. Freed. She also did not discover her errors on her own, but had to be alerted by the lawyer on April 12, 2002. While I detect no dishonest intent, nor any intent to permanently convert any funds to her personal use, the fact that Ms. Lawhon ultimately transmitted to Mr. Petrik the full amount due is not particularly to her credit, since her actions--or lack of action--had the effect of depriving Mr. Petrik of the use of a portion of those funds for nearly six months.
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 which: Finds Respondents Mary Lawhon and Shell Point Realty, Inc., guilty of Section 475.25(1)(k), Florida Statutes, Counts III and VI, respectively, of the Administrative Complaint; Provides as a penalty for Mary Lawhon the payment of a $1,000.00 fine and five months' suspension of her licenses; Provides as a penalty for Shell Point Realty, Inc., a reprimand; and Dismisses Counts I, II, IV, and V of the Administrative Complaint. DONE AND ENTERED this 21st day of April, 2003, in Tallahassee, Leon County, Florida. ELLA JANE P. DAVIS 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 21st day of April, 2003.
The Issue Whether or not the proposed Rule 21V-4.06, Florida Administrative Code, is an invalid exercise of delegated legislative authority within the meaning of Subsection 120.54(4), Florida Statutes.
Findings Of Fact This cause comes on for consideration based upon the petition filed by Century 21 of Southern Florida, Inc., a Florida corporation, and James P. Beggins, Jr., a registered broker. Both of these Petitioners are registered by the Florida Real Estate Commission and James P. Beggins, Jr., is the registered broker for the said corporation. The petition through its allegations seeks to have a certain proposed rule of the Respondent declared invalid on the basis that that proposed rule is an invalid exercise of delegated legislative authority within the meaning of Subsection 120.54(4), Florida Statutes. The rule at issue is Rule 21V-4.06, Florida Administrative Code. The other party to this cause, the Respondent, Florida Real Estate Commission, is an agency of the State of Florida, which has as its function the regulation of those persons who are in the real estate business in the State of Florida, to include the registration of those persons through a licensing process. This process is established in the form of written conditions and requirements for holding the license. Proposed Rule 21V-4.06, Florida Administrative Code, seeks to regulate the fictitious names used by real estate brokers practicing in the State of Florida, relating to the ability of a Florida real estate broker to register a name which is the same as, or deceptively similar to, the real or fictitious name of another registrant who has previously registered that name with the Florida Real Estate Commission. The complete language of proposed Rule 21V- 4.06, Florida Administrative Code, states: AMENDMENT TO RULE 21V-4.06 DEPARTMENT OF PROFESSIONAL AND OCCUPATIONAL REGULATION STATE OF FLORIDA CHAPTER 475, FLORIDA STATUTES 21V-4.06 Fictitious Names. A broker may use a fictitious name and, if so, it must be disclosed upon the request for certificate, and be placed upon the certificate, together withthe broker's real name. The fictitious name shall not be the same as, or deceptively similar to, the real or fictitious name of another registrant who has previously registered real or fictitious name of a registrant, the Commission shall deny the application and shall notify the applicant of his right to request a hearing pursuant to the applicable provisions of the Administrative Procedures Act, Chapter 120, Florida Statutes. This provision shall not apply if the applicant files with the Commission either of the following: the written consent of such other registrant holder of a registered fictitious name to use said name, and one or more words are added to make such name distinguishable from the previously registered name; or, (b) a certified copy of a final decree of a court of competent jurisdiction establishing the prior right of the applicant to use of the name sought to be registered. A corporation shall be issued a certificate in none other than its corporate name. No corporation or partnership shall be allowed to operate as an individual, and no individual shall use the name of any partnership or corporation in his sign or on letterheads or in advertising in such manner as to indicate that such partnership or corporation is operating the business or responsible for its operation. If properly identified as such, the name of a partnership or corporate owner, the property of which is being sold by the registrant, may be used on signs, letterheads or advertising. Fictitious names, whether used by an individual, or by a partnership, are required to be advertised and registered with the Clerk of the Circuit Court, where the principal place of business is. The actual name of the individual is not a fictitious name; and the names of the individuals, if not obscured by such words as 'and company' or 'associates' or 'sons' or such indefinite verbiage, are not fictitious names. General Authority 475.05 FS. Law Implemented 475.42(1)(k) FS. History--Amended 8/20/63. In considering the Petitioners' attack on the proposed rule, the beginning point is to examine their standing to challenge the implementation of the proposed rule. In this particular instance, to understand the position of the Petitioners on the question of standing, and the ruling to be made on that issue, it is beneficial to excerpt the testimony of Petitioner Beggins that speak to the issue of standing. Those excerpts are as follows: Line 16, page 9 "Q Are you also in the business of selling Century 21 franchise? A Yes. I'm a franchisor of Century 21, licensed to sell the Century 21 name and service marts in half the State of Florida. Q How many franchises have you sold? A I have actively in my corporation right now about 260. Line 23, page 9 * * * Line 12, page 10 "Q Are Century 21 franchises required to use the name Century 21? A Yes, ma'am, they are. Q Are they required to use any particular context? A They are required to use it in a five-to-one ration, 80 percent of the name being the Century 21 name, and 20 percent their name as registered. Q Are they required to use it in any position in the registered name? A It's to immediately follow the Century 21 name when written in block letters, and to be immediately underneath the Century 21 registered trademark when the registered trademark is used. Q So the name Century 21 has to be used in the beginning of the name? A Yes, ma'am. Q Are franchisees complying with this agreement -- with this in Florida? A They're complying, to the best of my ability to enforce the agreement. In quite a few instances, because of the vagueness as far as what the Real Estate Commission wants, it's quite hard to get them to go a hundred percent with the policies, according to the contract." Line 9, page 11 * * * Line 15, page 13 "Q When Century 21 then sells a franchise to an establishment broker, does it acquire something of value? Do you, when you sell a franchise to an existing broker, then acquire something of value, of monetary value to you, continuing value? A Sure. Absolutely. We add to the value of his name, and he locally adds to the value of the Century 21 name. Q If the proposed franchisee you were selling to were required to change his previously registered name to comply with Real Estate Commission rules, would it be of a direct monetary loss to you and to Century 21? A Yes. It would be a loss to me and also to the broker that was forced to change his name. Q As a general practice, do prospective franchisees that you are selling to, are they desirous of keeping their own names? A Yes, they are. Those that have built their name in the community want to keep the name that they built. Century 21 doesn't take away from their existing name; it adds to it. Q Would your sales then be affected if a broker were required to change his name? A My sales would be affected, and his profit would be affected, because of the expense involved in changing everything that is affiliated with his name." Line 14, page 14 * * * Line 22, page 15 "Q You made some mention of the fact the Florida Real Estate Commission had refused to register the name of Century 21 over the course of about three years, I believe you said. Is that correct? A I believe I said that they refused to register some of the names that were sent in to -- applied for registration with Century 21. They have further registered some names. Some of my franchisees are registered as Century 21 ABC Realty -- Q Okay. A --and then some of them have been turned down when they requested to be registered as Century 21 XYZ Realty. Q When was the latest incident in which the Florida Real Estate Commission -- I am going to refer to it as FREC, okay? A (Nods head affirmatively.) Q When was the latest incident in which FREC refused to register any Century 21 franchisee? A I would imagine it's been a year or so. But our franchisees have been advised -- Q Well, I am just -- A -- that any attempts would be -- Q -- asking you to -- A -- drawn out -- Q -- answer my question. It has been about a year? A I would say so, yes. Q Has there been any such incident subsequent to or after the Harris case, to which Mrs. Tunnicliff alluded in her opening statement, that you know of? A No. I don't think anyone tried to re-register; not to my knowledge. Q Weren't you in fact informed through your legal counsel, the firm of Spector & Tunnicliff, that since the case of Harris versus the Florida Real Estate Commission, that the Florida Real Estate Commission was ready and willing to register any and all Century 21 names in any order? A I recently received some correspondence from Joe Stafford through Sam Spector saying that the Real Estate Commission was ready to register names. Q So then the problem that you described is a problem that only took place prior to the Harris case? It has not taken place since the Harris case. Is that correct? A Not to my knowledge. I think that's correct. Q You made reference to the business agreements, contracts between, or other agreements between the Century 21 franchisor, which in this state is yourself apparently, and its franchisees, and the difficulty with getting them to comply. Is that 'them' the Florida Real Estate Commission? A No. 'Them' is the franchisees. Q What is the problem there? A Because the pressure -- there is pressure exerted by the investigators from FREC, and real estate brokers tend to fear the investigators from FREC. And there's been a lot of attempts to regulate the way these people advertise by the investigators. It seems that because there has been no real firm decision, the investigators run off half-cocked in to our offices and spread some things that are different in every office. Q What is an example of that? A Well, an example of that would be in some offices the investigators have gone in and told the franchisees how to answer their phone. In other offices -- Q Well, specifically what -- A That they would have to answer their phone ABC Realty, a Century 21 office, rather than Century 21 ABC Realty. Q Now, is this -- or are these, if it occurred in more than one instance, brokers who are registered as ABC Realty, or are they registered with the Century 21 name? Q It's happened with both, but it's mostly with people who are registered as ABC Realty. The Real Estate Commission hasn't seemed to recognize that there are, I guess, four or five different companies that are registered with Century 21 in their name. It happened a long time ago, and I don't know whether you were aware of it. Q In other words, you would have them answer the telephone, 'Century 21 ABC Realty,' even though in fact they are only registered as ABC Realty? A Yes. That was the practice. Q And even though, so far as you know at this time, they could register as Century 21 ABC Realty. A There's been no firm decision on my part as to whether those companies should be registered that way. I received correspondence recently, and this hearing was scheduled, and I am waiting for this hearing to decide what to do. There are some problems in going and taking 260 offices and reincorporating them. Q Why would you reincorporate them? A Because that's the way I interpreted the letter. Or go through the d/b/a practices. In every real estate office, everything that they use for promotion would have to be changed. You're talking about a lot of money. And if it is to be changed, it is going to take some time to do it. Q So that what you would want is that someone could register as ABC Realty but have all their advertising reflect Century 21 ABC Realty; is that correct? A Sal, all I want to do is find a way to operate in accordance with what you want. And I'm not sure that the Real Estate Commission really knows what they want. It's one of the big problems. Q So one of the things that you are looking for at this point -- you said there would be a large financial expenditure that would be necessary if there were some change that would have to be made. Now, for example, a person doing business as ABC Realty, and registered as such, ABC Realty, but who was also a Century 21 franchisee -- A Uh-huh. Q -would his advertising reflect Century 21 ABC, or would his advertising reflect ABC Realty? A If we were to go and re-register every broker -- Q How would he be doing it right now? A How is he doing it now? Q Yes. A He's using -- he's registering as ABC Realty -- Q As -- A -- and he's using the Century 21 trademark in junction with that. Q So that if he were to re-register as Century 21 ABC Realty, there would be no problem? A Yes, there would, because then we would have the Century 21 trademark on every one of his signs, and ABC Realty under the trademark. Then he would have to have the trademark, and then under the trademark another Century 21 ABC Realty, which would necessitate every business card, every piece of letterhead, every property sign, of which we probably have 15,000 just in my area, and every office sign, would have to be changed, unless we could come to some agreement that -- (Pause.) Q Then, in fact, are they not operating contrary to that which you have alleged in your petition? A (No response.) Q Maybe you are not familiar with it. Your petition says that Century 21 has entered into franchise agreements with literally hundreds of brokers in the State of Florida, all of whom are required by the franchise agreement to begin their business name with Century 21. A That's right. Q But now you are telling me they don't? A I'm saying that because of pressure from the Real Estate Commission some of them refuse to, and because of pressure from the Real Estate Commission I have not chosen to litigate with those people. In fact, I had one sell his franchise because I kept on using FREC as an excuse for not using our system. And he finally gave up and said." Line 25, page 21 A review of the excerpted passages of the transcript pertaining to Beggins' testimony, together with an examination of the balance of his testimony and the Rule 21V-4.06, Florida Administrative Code, clearly demonstrates that Petitioner Beggins is substantially affected by that rule, within the meaning of Subsection 120.54(4)(a), Florida Statutes. Beggins, in his efforts to transact business with potential franchisees, is being hindered by the "chilling effect" which the proposed Rule 21V-1.06, Florida Administrative Code, promotes in the Petitioner's attempts to negotiate franchise agreements, which would utilize the Century 21 designation. This danger of financial harm to the Petitioner is immediate even as the specter of the passage of such rule hangs over the head of the Petitioner and his franchisee prospect, and the rule if passed would not diminish the immediacy of the danger of the financial harm to the Petitioner. The passage would in fact solidify the barrier between the Petitioner and his potential franchisee, with whom he would be negotiating for a franchise agreement because there would be missing from their negotiations the necessary certainty between contracting parties on the issue of the ability of the franchisee to have the Florida Real Estate Commission accept the contracted-for Century 21 name, and if the name is not accepted, then the franchisee has not kept faith with the terms of his franchise agreement. Being mindful of this potential breach, the parties could be expected to cease their negotiations, causing a financial detriment to Petitioner Beggins. Therefore, this harm to Petitioner Beggins is not imaginary or illusory, as described in the case of Florida Dept. of Offender Rehab. v. Jerry, 353 So.2d 1230 (1st DCA 1978). Furthermore, unlike Jerry, this case presents an examination of a proposed rule under Section 120.54, Florida Statutes, in contrast to the Jerry case which dealt with a Section 120 56, Florida Statutes, challenge to an existing rule. The significance of the difference is the fact that when one examines a Section 120.54, Florida Statutes case, one must, of necessity, be speculative, because technically the rule does not yet exist. Nonetheless, if the Petitioner is actually harmed, as in this case, by the possibility of the passage of such a rule, both in his present circumstances which is dominated by the presence of the rule, and in the future, then he is indeed substantially affected, and no less so than a person who has demonstrated an immediate danger to his position in a case of a challenge to an existing rule under Section 120.56, Florida Statutes. This theory of standing is supported by the case of 4245 Corp., Mother's Lounge v. Div. of Beverage, 348 So.2d 934 (1st DCA 1977). In that case, it was held that a person prospectively affected by agency action could seek review of that action without the necessity of having the terms and conditions of the agency action directed against him through the process of a Section 120.57, Florida Statutes, hearing. Under their rationale, the Petitioner and his prospective franchisee need not wait for the passage of the subject rule and attempt to register under its terms, be rejected and then seek review under Section 120.56, Florida Statutes, or Section 120.57, Florida Statutes, in order to challenge the rule. If this were the case, then there would be no occasion for the utilization of a Section 120.54, Florida Statutes, rules challenge hearing. In summary, the Petitioner, James P. Beggins, Jr., has standing to institute this rules challenge. The Petitioner, Century 21 of Southern Florida, Inc., a Florida corporation, has not demonstrated its standing as a substantially affected person through any proof offered at the hearing. In consideration of the case on its merits, there appears to be no dispute over the fact that Rule 21V-4.06, Florida Administrative Code, is in fact a proposed rule. Additionally, there is no challenge to the procedural steps which the Respondent has taken to adopt the rule; consequently, those procedural steps are presumed to have been complied with. The only question remaining to be resolved is the attack on the proposed rule in its substance, as being an invalid exercise of delegated legislative authority. When considered according to this criterion, the rule is invalid. The Respondent was forewarned of the invalidity of such a proposed rule, even before its conception in the minds of the Florida Real Estate Commission. The court in Harris v. Florida Real Estate Commission, 358 So.2d 1123 (1st DCA 1978), unequivocally announced to the Respondent that rules of the ilk of Rule 21V-4.06, Florida Administrative Code, do not have the necessary delegated legislative authority for their passage. The Harris case involved attempts on the part of the registered real estate brokers Harris and Childers to change their corporate names in accordance with the provisions of Section 475.42(l)(k), Florida Statutes. That provision states: "475.42 Violations and penalties.-- (1) VIOLATIONS.-- (k) No person shall operate as a real estate broker under a trade name without causing the same to be noted in the records of the commission and placed on his certificate, or so operate as a member of a partnership or as a corporation or as an officer or manager thereof, unless said partnership or corporation is the holder of a valid current registration certificate." During the pendency of these requests, the question of guidelines and directives for franchising was presented to the Respondent and by directive of May 18, 1977, Respondent took action in the course of that meeting which stated the following: "Any real estate broker desiring to use the name of a Franchisor in connection with his own name must register the name as a part of his own trade name and same Franchisor's name must follow rather immediately appearing above and before the broker's name." Childers and Harris were denied the registration of their corporate names with the title "Century 21" preceding the name of the realtor and subsequently challenged the action of the Florida Real Estate Commission by a Section 120.56, Florida Statutes, hearing. The May 18, 1977, directive was held to be a rule and one not properly adopted and thus, invalid, as it pertained to the Childers' petition. The Real Estate Commission subsequently cancelled the May 18, 1977, directive; however, the Court in its review of the Harris appeal was of the opinion that the question of the validity of that rule warranted the Court's determination. The Court in Harris held that Subsection 475.42(l)(k), Florida Statutes, creates a duty on the part of the Commission to keep a current list of registrants and to issue certificates which would evidence that registration. The registrant in turn is required to maintain a registration in a current status and to supply the Florida Real Estate Commission with correct information as to their trade name under which the business might be operating. The Court in Harris, supra, made it very apparent that the Florida Real Estate Commission could not under the statement of authority of Subsection 475.42(l)(k), Florida Statutes, refuse a requested name change that had been made by a registered broker. In view of that opinion, it follows that the Respondent may not create fictitious name requirements which prohibit the registration of same or similar names by registrants, when there is on record with the Florida Real Estate Commission names which are the same or similar to the requested name change, as is prohibited by Rule 21V-4.06, Florida Administrative Code. This is a name change much the same as were the requests being made by Harris and Childers. The Respondent in its statement of authority for the promulgation of the subject rule, alludes to the general authority found in Section 475.05, Florida Statutes. That provision reads: "475.05 Power of commission to enact bylaws, rules and regulations and decide questions of practice.--The commission may enact bylaws and regulations for its own government, and rules and regulations in the exercise of its powers, not in conflict wit the constitution and laws of the United States or of this state, and amend the same at its pleasure. The commission may decide questions of practice arising in the proceedings before it, having regard to this chapter and the rules and regulations then in force. Printed copies of rules and regulations, or written copies under the seal of the commission, shall be prima facie evidence of their existence and substance, and the courts shall judicially notice such rules and regulations. The conferral, or enumeration, of specific powers elsewhere in this chapter shall not be construed as a limitation of the general powers conferred by this section." The above provision does not create the specific right to regulate fictitious names as provided through Rule 21V-4.06, Florida Administrative Code. Again, this conclusion is reached after reading the Harris case, supra. The Court, when it made its statement that the Respondent was without authority to refuse a requested name change by a registered broker, made this decision in view of all the provisions within the Chapter 475, Florida Statutes. Moreover, there does not appear to be any nexus between the type regulation created by Rule 21V-4.06, Florida Administrative Code, and the duties and powers conferred upon the Real Estate Commission by Chapter 475, Florida Statutes. Finally, the Respondent's attorney, in the course of the oral argument phase of the hearing sub judice, alluded to the fact that possible authority for the action taken by the Respondent in its proposed rule, may lie in the provision Section 475.47, Florida Statutes, which reads: "475.47 Publication of false or misleading information; promotion of sales.--It shall be unlawful for any person to publish or cause to be published by means of newspaper, periodical, radio, television, or written or printed matter, any false or misleading information for the purpose of offering for sale or for the purpose of causing or inducing any other person to purchase real estate located in the state, or to acquire an interest in the title thereto." There is some question about the utilization of this subsection as a statement of authority, in view of the fact that Subsection 120.54(1), Florida Statutes, requires that the specific legal authority being offered for adoption of the proposed rule must be stated with the proposed rule, and in this case there was no mention at Section 475.47, Florida Statutes, when the rule was enrolled. However, assuming that this failure to make reference to Section 475.47, Florida Statutes, is not fatal, the Harris court nonetheless examined Section 475.47, Florida Statutes, as a possible authority for the regulation of name changes and disposed of the argument by the Respondent with this comment: "The statute plainly deals with misleading information in the promotion of sales and requires a finding that the person is guilty of disseminating false or misleading information for the purpose of inducing the sale of real estate in Florida. The statute is not authority for action of the Commission in these cases." Harris, supra, at pages 1125 and 1126. It follows the Section 475.47, Florida Statutes, is not authority for regulating registration of fictitious names within the terms of Rule 21V.4.06, Florida Administrative Code. Finally, it has been established through the provision of Subsection 120.54(14), Florida Statutes, that an agency does not have inherent rulemaking authority. This rulemaking authority must be through duly delegated legislative means, and for the reasons expressed in Harris, supra, which reasons are felt to apply to the instant case, this rule as proposed for adoption is an invalid exercise of delegated legislative authority, and without that proper authority there can be no rule. The proposed order submitted by the Petitioners has been reviewed prior to the entry of this Order and, to the extent that it is not inconsistent with the conclusions reached herein, it has been utilized. It is otherwise rejected.
Findings Of Fact General American Realty Corporation was first registered by Petitioner as a corporate broker in 1970. In 1972 John Glorian became the president of the firm and active broker. He was hired by Richard T. Halfpenny who was the owner and principal stockholder at the time. Alfred Landin, a registered real estate salesman, joined the firm in February, 1975. At that time, General American was in the business of selling acreage property in Florida. In the summer of 1975, Glorian recommended to Halfpenny that the firm become involved in the "advance fee" business. Such transactions in the trade involved the telephone solicitation of out-of-state landowners to list their land in Florida for sale with a Florida broker for a prescribed fee which would become part of any sales commission if and when the particular property was sold. Halfpenny expressed no objections to the idea and Glorian thereafter contacted Theodore Dorwin who was then associated with Florida Landowners Service Bureau in Miami. Kenneth Kasha was the President of that firm which was involved in the advance fee business. Glorian introduced Dorwin to the firm's salesmen, who included Joseph Macko, James H. Henkel, and Landin. Dorwin instructed these personnel in the method of soliciting prospective clients and provided an outline of the information that was to be given to those individuals called by the salesmen. He told the General American personnel that once the property was listed with Florida Landowners Service Bureau, it would be advertised in newspapers and catalogs, and that bona fide efforts would be made by his organization to sell the property. (Testimony of Glorian, Landin, Petitioner's Composite Exhibits 5-6). General American commenced its advance fee operation approximately August, 1975. The procedure followed was for a salesman to call an out-of-state landowner picked from a computer print-out list and inquire if he would be interested in selling his property at a higher price than he had paid for it. This was termed a "front" call and the salesman was termed as "fronter". If the prospect expressed interest in listing his property, his name was provided to Florida Landowners Service Bureau who then mailed literature to the property owner describing the efforts that would be made by that organization to sell his property. Also enclosed with this material was a listing and brokerage agreement. This agreement provided that the owner of the property would pay a prescribed listing fee to Florida Landowners Service Bureau which would be credited against a ten percent commission due that firm upon sale of the property. In return, Florida Landowners Service Bureau agreed to include the property in its "listing directory" for a one-year period, direct its efforts to bring about a sale of the property, advertise the property as deemed advisable in magazines or other mediums of merit, and to make an "earnest effort" to sell the property. The accompanying literature explained that the listing fee was necessary in order to defray administrative costs of estimating the value of the property, merchandising, advertising, brochuring, and cataloging the information. The material also stated that advertising would be placed in various foreign countries and cities of the United States. In addition, it stated that Florida Landowners Service Bureau would "analyze" the property, comparing it to adjacent property to arrive at a price based on recent sales of neighboring property, and also review the status of development and zoning in the immediate area of the property to assist in recommending a correct selling price for approval by the owner. During the course of their calls to prospects, Macko, Henkel, and Landin advised them that the property would be advertised internationally and in the United States, and that bona fide efforts would be made by Florida Landowners Service Bureau to sell the property. All salesmen represented themselves to be salesmen for that organization. Henkel told prospects that foreign investors were buying Florida property; however, in fact, he was unaware as to whether any property had ever been sold by Florida Landowners Service Bureau and never inquired in this respect. Henkel and Landin had observed copies of the literature sent to prospects in the General American office, but Macko had only seen the listing agreement. After the promotional literature was sent to a prospect, the General American salesmen made what were called "drive" calls to answer any questions and to urge that the property be listed. After making these calls, the salesmen had no further contact with the property owner. The listing fee initially was $250 and was later raised to $350. The salesman received approximately one third of the fee. Glorian was paid several hundred dollars a month by General American, but received no portion of the listing fees. He was in the office once or twice a week to supervise the activities of the salesmen who made their telephone calls during the evening hours. Halfpenny was seldom there and did not take an active part in the advance fee operation. None of the salesmen or Glorian were aware that any of the property listed with Florida Landowners Service Bureau was ever sold and none of them ever saw any advertising, although Land in saw a catalog of listings at one time. Although Macko customarily recommended a listing price of the property to prospects based on the general rise in value of land since the date of purchase, Henkel merely accepted the price desired by the property owners. General American terminated its advance fee business in early 1976 after being advised that Petitioner was conducting investigations into the advance fee business (Testimony of Macko, Landin, Henkel, Glorian). All of the Respondents in these cases testified at the hearing that they had made no false representations to prospects during the course of their telephone conversations and otherwise denied any wrongdoing.
Recommendation That the charges against the Respondents herein be dismissed. DONE and ENTERED this 16th day of December, 1977, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Richard J. R. Parkinson, Esquire Louis Guttman, Esquires Associate Counsel Florida Real Estate Commission 2699 Lee Road Winter Park, Florida 32789 Stanley M. Ersoff, Esquire 1439 West Flagler Street Miami, Florida 33135
