The Issue The issues in this case include whether Respondent is guilty of having committed culpable negligence in a business transaction or failed to maintain trust funds in a proper account until disbursement was authorized and, if so, the appropriate penalty.
Findings Of Fact Respondent has been a licensed real estate broker in the State of Florida since 1983 and holds license number 0405933. His most current license was as a broker trading as Realty Trend. Respondent started Realty Trend in 1985 for the primary purpose of managing rental properties. Although he had little or no training or experience in accounting, Respondent retained considerable responsibility for the day-to- day bookkeeping associated with his business, though at times he employed a bookkeeper. Respondent maintained one account for sales transactions, in which he participated as the broker, and one account for property management activity. Respondent participated in few sales transactions and is phasing out of that part of the business. All escrow monies held by Respondent were kept in interest-bearing accounts. Although Respondent retained the interest, he disclosed this fact to the parties through the sales contract. Within about 18 months, Respondent had acquired about 100 properties to manage. Respondent decided to automate the bookkeeping and purchased a computer program that would write checks, track income and expenses, generate reports, and generally handle all aspects of bookkeeping. The program was designed to assist in property management operations. Emphasizing service to property owners, Respondent had always tried to send his checks for rent collected the past month between the tenth and fifteenth of each month. By August, 1989, Respondent had been warned by Petitioner that he had to allow two or three weeks for tenant's checks to clear and determine what emergency maintenance expenses might be incurred. Through a combination of ignorance about bookkeeping, his responsibilities as a broker holding escrow monies, and the property management computer program, Respondent mishandled his trust account. His repeated bookkeeping errors and failure to take corrective action allowed a sizable shortage to accumulate by the time Petitioner conducted a routine office audit on November 17, 1989. Respondent cooperated fully with the audit and promptly provided Petitioner's investigator with a box full of bank statements. His account was reaudited on January 8, 1990. Poor bookkeeping prevents a precise determination of the shortage, but it exceeds $10,000. It is difficult to understand how Respondent's books became so confused as to become nearly worthless. There was no evidence of fraudulent intent. It appears as likely that Respondent overpaid property owners as that he overpaid himself. Respondent's ongoing ignorance of his serious trust account shortages or, in the alternative, repeated failure to solve recognized trust account shortages represents culpable negligence. Even by the time of hearing, Respondent candidly admitted that he could not provide an accurate figure for the shortage and had not yet been able to repay the deficiency, although he intended to do so.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Florida Real Estate Commission enter a final order reprimanding Respondent; imposing an administrative fine of $500; requiring Respondent to complete an approved 60-hour course; suspending his license for a period of six months, commencing retroactive to the date on which Respondent cease operations due to the emergency suspension; and placing his license on probation for a period of three years following the conclusion of the suspension, during which time Respondent shall file escrow account reports with the Commission or other person designated by the Commission at such intervals as the Commission requires. DONE and ORDERED this 8 day of October, 1990, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 8 day of October, 1990. COPIES FURNISHED: Darlene F. Keller Division Director Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, FL 32801 Attorney Steven W. Johnson Division of Real Estate Florida Real Estate Commission 400 W. Robinson St. Orlando, FL 32801-1772 Thomas I. McIntosh 13542 N. Florida Ave. Tampa, FL 33613 Attorney Neil F. Garfield Envirwood Executive Plaza, Suite 200 5950 West Oakland Park Blvd. Lauderhill, FL 33313 Kenneth E. Easley General Counsel Department of Professional Regulation 1940 North Monroe Street Tallahassee, FL 32399-0792
The Issue The issue in this case is whether Respondents are guilty of mishandling an escrow deposit.
Findings Of Fact Respondent Vu is and was at all material times a licensed real estate broker, holding Florida license number 0394778. He is and was at all material times the qualifying broker for Respondent American Homes and Investment Realty, Inc., which holds Florida license number 0250718. Respondent Vu owns Respondent American Homes. In 1990, Mr. and Mrs. Serge Delisfort contacted Respondents about purchasing a residence. The Delisforts eventually signed a contract to purchase a home and paid the $500 earnest money deposit to Respondents. Later learning that they would be liable to pay an annual homeowners' fee of $72, the Delisforts told Respondent Vu that they did not want to complete the purchase. The listing broker, which was not either Respondent, omitted mention of the homeowners' fee from the listing information supplied Respondents and the Delisforts. The sellers refused to release the deposit. Confronted with the dispute, Respondent Vu promptly requested an escrow disbursement order from the Florida Real Estate Commission on March 29, 1991. Due to the presence of a factual or legal dispute, the Florida Real Estate Commission informed Respondents, in a 47-word letter dated October 16, 1991, that it could not issue an escrow disbursement order. The October 16 letter warns Respondents to "immediately choose one of the other two alternatives available to you under ss. 475.25(1)(d), Florida Statutes, to settle this dispute, i.e., arbitration or a civil court." Instead, Respondents did nothing. The Delisforts periodically contacted Respondent Vu and asked if he could release their deposit. The sellers sold their house to another party and moved to Puerto Rico. The Delisforts contacted another broker and purchased a different house through the new broker. Eventually, the Delisforts contacted the Florida Real Estate Commission and asked its help in obtaining the deposit. An investigator for the Division of Real Estate interviewed Respondent Vu on March 1, 1994. Explaining the reason for the delay, Respondent Vu, possibly confused, stated that the buyers had left Orlando for awhile. In fact, the buyers had remained in Orlando. At the suggestion of the investigator, Respondent Vu contacted both parties, and they agreed to split the deposit equally. Respondent Vu prepared the paperwork, which the parties signed on March 11, 1994. At that time, Respondents paid each party $250. The Delisforts have since listed their home for sale by Respondents. While improperly holding the $500 deposit, Respondent Vu was preoccupied by the illnesses and deaths of his parents, who remained in Vietnam. Despite the possibility of trouble upon his return to Vietnam, Respondent Vu traveled to Vietnam at least once during this time to care for one or both of his parents. Respondents failed to implement timely the remedies established by law and identified by the Florida Real Estate Commission in its letter of October 26, 1991. Respondent Vu acted two and one-half years later, only after one of Petitioner's investigators contacted him. It is no excuse that the costs of arbitration or court would have consumed a large part of the amount in dispute. Confronted with that prospect, the sellers or the Delisforts would probably have settled the matter. If not, that would have been their problem, not Respondents'. The fact is that Respondents failed to discharge their obligations by presenting the dispute for resolution in a timely fashion. Nonetheless, the amount involved is modest. Neither party had a clear claim to the funds, nor was either party exceptionally troubled by Respondents' casual handling of the matter. The Delisforts contacted the Florida Real Estate Commission, but did not realize that they were in effect filing a complaint against Respondents, in whom they entrusted the sale of their current home. A final order issued July 18, 1988, involves Respondents' mishandling of a salesperson's commission. The husband of the salesperson owed Respondent Vu some money, and both men agreed that the debtor's wife would work off the debt by selling real estate at Respondent American Homes. However, the debtor's wife was of a different mind. After earning her first commission, she refused to allow Respondents to credit it against her husband's debt. When Respondent Vu ignored her demand for payment, she filed a complaint, which resulted in the final order and Respondents' proper payment of the commission.
Recommendation It is hereby RECOMMENDED that the Florida Real Estate Commission enter a final order finding both Respondents guilty of violating Section 475.25((1)(d)1, reprimanding both Respondents, and requiring Respondent Vu to take a thirty-hour broker management course. ENTERED on February 22, 1995, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings on February 22, 1995. COPIES FURNISHED: Darlene F. Keller Division Director Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, FL 32802-1900 Steven W. Johnson, Senior Attorney Department of Business and Professional Regulation Division of Real Estate Legal Section--Suite N-308 Hurston Bldg., North Tower 400 West Robinson Street Orlando, FL 32802-1772 Dau Viet Vu 1048 Pine Hills Rd. Orlando, FL 32808
Findings Of Fact At all times relevant to the charges brought against the Respondent, Jimmy D. Hill, he was a licensed real estate broker in the State of Florida, holding license number 0144888. On June 20, 1983, a contract for the purchase of Unit 219 in Polynesian Village in Bay County, Florida, was signed by Margaret Gorshi and Glenn Coker. The buyers paid a total of $3,000 as an earnest money deposit which the Respondent deposited into his escrow account at Bay Bank and Trust Company in Panama City. This real estate transaction was subject to the buyers obtaining 90 percent financing, and it was scheduled to close on or before September 15, 1983. The transaction did not close because the buyers were not able to obtain the necessary financing, and in September of 1984 the buyers requested that their earnest money deposit be returned. On September 27, 1984, the Respondent's office manager forwarded a check for $3,000 dated September 24, 1984, to the buyers. This check was drawn on the Respondent's escrow account at Bay Bank and Trust Company in Panama City. This check was presented for payment in November of 1984, but it was not paid by the bank, and was returned because of insufficient funds in the Respondent's escrow account. The Respondent's escrow account was closed in July of 1985 without this check having been honored. Sometime prior to the issuance of the check to refund the buyer's deposit, another check in the amount of $5,400 was cashed at Bay Bank and Trust Company, drawn on the Respondent's business checking account at First National Bank. When this check was not honored by First National Bank due to insufficient funds, it was returned to Bay Bank and Trust Company. Upon receipt of this dishonored check, Bay Bank and Trust Company departed from its standard banking policy by charging the full amount thereof against the Respondent's trust or escrow account. As a result, the Respondent's escrow account became out of balance by $5,400. The Respondent's escrow account balance was at least $3,000 from June, 1983, through July, 1984. This balance was $1,600 on August 31, 1984; $1,600 on September 30, 1984; $600 on October 31, 1984; and from November 1984, through July, 1985, when the account was closed, the escrow account balance was $585. Without the unauthorized debit of $5,400, the balance was sufficient to enable the refund check to the buyers in the amount of $3,000 to clear. Although the Bay Bank and Trust Company issued a debit memo reflecting the charge of $5,400 to the Respondent's escrow account, the Respondent did not receive it. He testified that it must have been intercepted or diverted from him, by office personnel. The Respondent learned that his $3,000 check to the buyers had bounced in November or December, 1984. On February 25, 1985, the Respondent issued a replacement check for $3,000 to purchase a cashier's check which he intended to forward to the buyers. This check was given to an office employee to purchase the cashier's check, but the employee did not do so. Approximately three months later, in May of 1985, the Respondent was notified by an attorney for the buyers that they had not received the refund. The buyers had retained this attorney to obtain their refund from the Respondent, and after two or three discussions with the attorney, the Respondent finally forwarded his check for $3,400 plus, to counsel for the buyers in August of 1985. Although the Respondent's first refund check was caused to bounce by the bank's unauthorized charge of another check to his escrow account, the Respondent was negligent in not reviewing his escrow account statements so as to be informed of the bank's charge to his escrow account. The Respondent also failed to follow-up to assure that the buyers received the first replacement check when it was written in February, 1985. He did not regularly review the balances in his escrow account monthly after July of 1984, and only when he was contacted by the Real Estate Commission's investigator did he perform a thorough reconciliation of his escrow account in July, 1985. The Respondent also failed to supervise his employees and establish policies pertaining to review and verification of the balances in his escrow account.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Respondent, Jimmy D. Hill, trading as Jim Hill Associates, be assessed an administrative fine of $1,000. THIS RECOMMENDED ORDER entered this 25th day of September, 1986 in Tallahassee, Leon County, Florida. WILLIAM B. THOMAS Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 FILED with the Clerk of Division of Administrative Hearings this 25th day of September, 1986. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 86-1067 Department of Professional Regulation, Division of Real Estate vs. Jimmy D. Hill, t/a Jim Hill Associates Case No. 86-1067 Rulings on Petitioner's Proposed Findings of Fact: 1-10. Accepted. 11. Rejected because not a factual finding. 12-17. Accepted. Rulings on Respondent's Proposed Findings of Fact: (Paragraphs not numbered, but referred to in order.) Accepted. First sentence accepted. Second, third and fourth sentences rejected as not supported by corroborating evidence and thus are self-serving. Fifth, sixth and seventh sentences accepted. First sentence accepted. Second and third sentences rejected as not supported by corroborative evidence and thus are self-serving. Accepted. Accepted. First sentence accepted. Second and third sentences rejected as irrelevant. COPIES FURNISHED: Arthur R. Shell, Jr., Esquire Department of Professional Regulation Division of Real Estate Post Office Box 1900 Orlando, Florida 32802 Michael C. Overstreet, Esquire 225 McKenzie Avenue Panama City, Florida 32401 Fred Roche Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Wings S. Benton, Esquire Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Mr. Harold Huff Executive Director Department of Professional Regulation Post Office Box 1900 Orlando, Florida 32802
The Issue The issue in this case is whether the Respondents' real estate licenses should be disciplined based upon charges set forth in the Administrative Complaint which allege violations of Sections 475.25(1)(b),(e), and (k), Florida Statutes.
Findings Of Fact The Petitioner is a state government licensing and regulatory agency charged with the responsibility and duty to prosecute Administrative Complaints which allege, in particular, violations of Chapters 455 and 475, Florida Statutes, and rules promulgated thereunder. Respondent David Shihada is now and, at all times material hereto, has been licensed as a real estate broker in the State of Florida, having been issued license number 0239798. His most recent broker's license was issued to him at Shihada Real Estate, Inc., 959 S.W. 87th Avenue, Miami, Florida 33174. Respondent Shihada Real Estate, Inc., is now and, at all times material hereto, has been a corporation registered as a real estate broker in the State of Florida, having been issued license number 0239797. The last license issued was at the address of 959 S.W. 87th Avenue, Miami, Florida 33174. At all times material hereto, Respondent David Shihada was licensed and operating as the qualifying broker for Respondent Shihada Real Estate, Inc. From May 3, 1990 to May 10, 1990, Petitioner's investigator, Hector F. Sehwerert, conducted an audit of Respondents' escrow accounts. This audit revealed that Respondents' pending sales escrow account #0103005236-06 had a total current liability of $22,050, with a current bank balance of $20,596.56, thereby reflecting a shortage of $1,453.44. In a sworn affidavit dated May 10, 1990, Respondent David Shihada stated that the shortage was a bank "mistake". On or about May 10, 1990, the Respondents deposited sufficient funds, by check numbered 1931, to cover the $1,453.44 shortage in their escrow account. On or about May 8, 1990, Gabriel Sanchez, Respondents' salesman who is also an officer at Westchester Bank where Respondents maintain their escrow account, signed a sworn affidavit stating that he had just completed an attempted reconciliation of the aforementioned escrow account from May 1989 to May 2, 1990. Sanchez was unable to find any shortage in Respondents' escrow account. He will be doing monthly reconciliations for the Respondents from May 1990 forward. From May 31, 1989 to May 2, 1990, the Respondents failed to complete and sign written monthly reconciliation statements comparing their total trust liability with the reconciled bank balance of all trust accounts as required by the rules of the Florida Real Estate Commission.
Recommendation Based upon the foregoing, it is recommended that a Final Order be issued concluding that Respondents' actions as found above constitute a violation of Section 475.25(1)(b), Florida Statutes, and further: Imposing an administrative fine in the total amount of $500; Placing the Respondents' real estate licenses on probation for a period of one year, provided that the Respondents shall not be required to retake any state licensure examination as a result of this proceeding, and provided further that Respondent David Shihada shall provide quarterly escrow account activity reports, including evidence of compliance with Rule 21V-14.012, Florida Administrative Code, as well as evidence of successful completion of the sixty hour post-licensure examination course for brokers in addition to other continuing education required to be completed by licensees in order to maintain their active and current licensure status; Requiring the Respondent David Shihada to appear before the Florida Real Estate Commission at the last meeting of the Commission preceding termination of his period of probation; and Dismissing Counts III through VI of the Administrative Complaint. DONE AND ENTERED this 21st day of November 1990 in Tallahassee, Florida. DONALD D. CONN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 Filed with the Clerk of the Division of Administrative Hearings this 21st day of November 1990. APPENDIX (DOAH CASE NO. 90-4939) Rulings on Petitioner's Proposed Findings of Fact: Adopted in Finding 1. Adopted in Finding 2. Adopted in Finding 3. Adopted in Finding 4. Adopted in Finding 5. Adopted in Finding 6. Adopted in Finding 7. Adopted in Finding 8. 9-10. Adopted in Finding 9. 11. Adopted in Finding 10. COPIES FURNISHED: James H. Gillis, Esquire Division of Real Estate P. O. Box 1900 Orlando, FL 32802-1900 John H. Duhig, Esquire 702 City National Bank 25 West Flagler Street Miami, FL 33130-1770 Kenneth E. Easley, Esquire 1940 North Monroe Street Tallahassee, FL 32399-0792 Darlene F. Keller, Director Division of Real Estate P. O. Box 1900 Orlando, FL 32801
The Issue Is Respondent, Peter H. Myers, guilty of the allegations contained in the Administrative Complaint issued by Petitioner and, if so, what is the appropriate penalty.
Findings Of Fact Petitioner is the state agency charged with the responsibility and duty to prosecute administrative complaints pursuant to Section 20.165 and Chapters 120, 455, and 475, Florida Statutes. Respondent Myers is a licensed real estate broker, having been issued license number BK-0646846. Ocean Village Sales & Rentals, Inc. (Ocean Village) is a real estate broker corporation and Respondent is the qualifying broker for said corporation. Background Petitioner and Respondent were involved in earlier disciplinary cases in 1998 and 1999. On or about December 7, 1999, Petitioner and Respondent entered into a Stipulation which resolved DBPR Case Nos. 98-81236 and 99-80423. The Stipulation placed Respondent on probation for a period of one year from the effective date of the Final Order of the Florida Real Estate Commission (FREC), which adopted the stipulation and was issued on or about January 19, 2000. The Stipulation read in pertinent part as follows: Respondent agrees not to hold or maintain any escrow, trust or real estate related escrow or trust funds for the one(1) year probationary period. Respondent is permitted to be a signatory on the operating and payroll accounts for his brokerage firm only. Respondent shall place all escrow, trust or real estate related funds with a title company, attorney, or other proper depository as permitted under Chapter 475, Fla. Stat., and Fla. Admin. Code r. 61J2. Respondent further agrees not to be a signatory on any escrow, trust or real estate related account with the exception of the operating and payroll accounts for his brokerage firm for the one (1) year probationary period. In compliance with the terms of the stipulation, Respondent placed his escrow account with Joseph Roth, a certified public accountant and licensed real estate broker in the State of Florida. In the Stipulation, Respondent admitted to, among other things, failure to prepare the required written monthly escrow statement reconciliations in violation of Rule 61J2-14.012(2) and (3), Florida Administrative Code, and, therefore, in violation of Section 475.25(1)(e), Florida Statutes. Escrow accounts audit Gail Hand is an Investigation Specialist II with the Department of Business and Professional Regulation (the department). She has approximately 16 years of regulatory and investigative experience with the department. When she started working with the department, she conducted from 20 to 30 trust account audits per month. She routinely conducts audits and inspections of the records of real estate brokers. When reviewing escrow accounts, Ms. Hand's review of escrow accounts has two components. First, she reviews the bank statement reconciliations which compares the statement balance to the checkbook balance. Next she reviews a comparison of the bank statement reconciliations with the broker's total trust liability. The broker's total trust liability is the total of all the money that the broker is holding in his trust or escrow account. On or about January 26, 2001, Ms. Hand conducted an office inspection and escrow account audit of Respondent's business, Ocean Village. Respondent and his daughter were present. During this inspection and audit, Ms. Hand requested to inspect financial documents of the company. Respondent and his daughter provided all documents requested and were very cooperative during the course of the audit. Ms. Hand inspected the November and December 2000 bank reconciliation statements from the escrow trust account of Ocean Village and determined that they were properly prepared. However, Ms. Hand determined that the determination of the broker's trust liability was not properly prepared in that she could not identify the broker's total trust liability from a review of the documents provided by Respondent. The calculations in Respondent's financial records included broker's money, bank fees, and negative owner balances. According to Ms. Hand, the reconciled checkbook to bank statement balance should be compared to a balance that does not include broker's money, bank fees or negative owner balances. Because of this, she could not identify the total broker's trust liability. She normally does not have trouble identifying a broker's total trust liability when conducting an audit. During the audit, Respondent could not identify the total broker's trust liability. Respondent deferred to his accountant, Mr. Roth. Ms. Hand did not discuss the financial documents which she reviewed as part of the audit with Mr. Roth because, "Mr. Myers was responsible." License renewal Respondent's renewal fees for his corporate registration and his individual broker's license became due in March 1999. Respondent renewed his corporate registration in March 1999 but failed to renew his individual broker's license. Respondent did not renew his individual broker's license until February 2001. At that time, he paid for the time period in which he was in arrears and for another 24 months in the future, as well as a late fee or penalty. Respondent continued to conduct real estate transactions during the period of time that his individual broker's license was in involuntary inactive status.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law set forth herein, the evidence of record and the demeanor of the witnesses, it is RECOMMENDED: That a final order be entered by the Florida Real Estate Commission finding the Respondent, Peter H. Myers, guilty of violating Sections 475.25(1)(e) and (o), and 475.42(1)(a), Florida Statutes, and imposing a fine of $2,500.00. DONE AND ENTERED this 4th day of September, 2002, in Tallahassee, Leon County, Florida. BARBARA J. STAROS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 4th day of September, 2002.
Findings Of Fact The Petitioner is a State government agency charged with licensing and regulating the practice of real estate sales and brokerage in the State of Florida. Its authority under Chapter 475, Florida Statutes, includes the duty to prosecute Administrative Complaints against licensees who have allegedly violated the various provisions of Chapter 475 enumerated above. The Respondent, Key Realty Management, Inc., is and was at all times material hereto a corporation licensed as a real estate broker in the State of Florida, having been issued License Number 0222667 in accordance with Chapter 475, Florida Statutes. Respondent Dan Lee Issacs is an officer of and qualifying broker for the Respondent, Key Realty Management, Inc., and holds License Number 0203152. On or about September 26, 1985, Richard A. Cook, an investigator employed by the Petitioner, conducted a routine audit of the Respondents' real property rental management trust account numbered 1201145156 maintained at Barnett Bank at 315 South Calhoun Street, Tallahassee, Florida. The audit consumed about one and one-half days. The audit revealed that as of September 26, 1985, the Respondents had received in trust from their tenants, in their capacity as real estate brokers, damage and security deposits in the amount of approximately $76,566.46. The balance of record in that account at the time of the audit was only $44,232.30. Approximately $32,334.16 were thus unaccounted for. The Petitioner's investigator, Mr. Cook, admitted in his testimony that there was no basis for him to believe that the subject funds unaccounted for had been diverted to the Respondents' own use, embezzled or otherwise improperly employed. He also acknowledged that there was no evidence of intentional misconduct in these particulars. Mr. Cook further conceded in his testimony that this prosecution stems from an increased emphasis by his agency on enforcing the requirements, concerning accounting for escrow monies, expressed in the statutory provisions pled in the Administrative Complaint in the last two years. His testimony reveals that the motivation for this prosecution, at least in part, results from that policy change. No other witness was presented by the Petitioner. The Respondent presented the testimony of Gary Erdman, an accountant and computer consultant. The witness was in charge of the Respondents' accounting, records keeping and management and computer programming. He designed their computer system, which kept up with their rental property management records, receipts and disbursements. During November 1984 to January 1985, the Respondents' business was in the process of converting to a new computer management, data storage and processing system. They were a very busy firm, with a large number of clients and properties which they managed. They thus ran out of space on their old computer system. Mr. Erdman was unable to transfer all the old data and program of the firm to the new system and had to re-program the new system. Some information was lost and never was entered in the new system. Additionally, on July 16, 1985, a problem of an accidental nature, possibly due to lightning, damaged the hard computer data storage disk of the firm and some data, which contained the record of receipts and disbursements regarding the missing $32,334.16, was lost. There was no soft disk or other backup system for this data, so it was irretrievably lost. Mr. Erdman had to start trying to reconstruct the lost data at the same time he was having to keep up, on a day-to-day basis, with his records keeping and accounting responsibilities. The reconstruction process, therefore, took a substantial period of time. Through this witness, the Respondents introduced their Exhibit 1, which was the claim or notice of loss to their insurance carrier as probative of and corroborative of Mr. Erdman's testimony regarding the July 16, 1985 accidental data loss. From that point it took two months after July 16, 1985, to learn from the manufacturer of the hard disk how much of the data had been lost. The Respondents had sent the hard disk to that manufacturer for repair and damage assessment. July and August of every year is the busiest time in the Respondents' rental management business. Possibly because of this they were unaware of the accounting problem regarding the $32,334.16 until it was discovered by Mr. Cook. The Respondents were very cooperative with Mr. Cook and apparently were unaware of the problem until he discovered it. They immediately transferred funds to cover the deficit in the subject escrow account so that no client or entity entitled to the funds therein suffered any loss. No misrepresentation was made to any client, person or entity entitled to any funds in their escrow account concerning the use, location, depository or entitlement to any escrow funds. The Respondents have now corrected the problem with their computer system and have also voluntarily changed their accounting procedures and deposit procedures so that not only loss and damage security deposits, but also rental income itself goes directly to their trust account first, before any disbursement to the landlords entitled to net rentals above the Respondents' fees and costs. Formerly, everything was deposited initially in the Respondents' operating account and then withdrawn and deposited in the escrow account, as to the security and loss and damage deposit receipts. Under the new system, however, they are able to more readily track every monetary receipt and more readily and properly account for it. This change was voluntarily made only a week or two after Mr. Cook's first visit wherein he alerted them to the problem. Additionally, Respondents' Exhibit 2 reflects that apparently there was an excess of $50,000 in the subject bank account as evidenced by a bank reconciliation record contained in that exhibit, which Mr. Cook had not seen at the time of his investigation and prior to the hearing. Thus, the subject $32,334.16 may be somewhat overstated. Further, it was established with this exhibit that, as of October 23, 1985, one month after Mr. Cook's inspection, the subject trust account had a balance of $73,973.56. It was shown by the Respondent that at the time of Mr. Cook's inspection the office staff was overloaded and that transfers to the trust account were running behind schedule. Some of the deficit was merely due to non-timely deposits to the trust account, rather than funds being mistakenly placed in a different account or used for other purposes by mistake, it not having been established that any intentional wrong-doing occurred concerning the trust account and escrow account violations charged. In any event, it has been established that the Respondents' new computer system of accounting and record management has alleviated the problem discovered by Mr. Cook. The Respondents have never encountered such a problem with their deposits either before or after this instance as of the time of hearing. It was established by the Respondent, Dan Issacs, who testified, that neither he nor his firm was co-mingling rental income with funds required to be retained in their trust account but rather were simply unaware of the apparent requirement that rental receipts must first be deposited in the trust account. In any event, it was established conclusively that no funds were diverted for the Respondents' own use or benefit and that all monies are now properly on deposit and are otherwise accounted for and were within a matter of several weeks after the audit and inspection. Additionally, all computer-retained records are now subjected to back-up record keeping at the present time.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, and the candor and demeanor of the witnesses, it is, therefore RECOMMENDED that the Administrative Complaint filed against Dan Lee Issacs and Key Realty Management, Inc. be dismissed in its entirety. DONE and ENTERED this 13th day of May, 1987, in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of May, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-2911 Petitioner's Proposed Findings of Fact: Accepted. Rejected as irrelevant. 3-5. Accepted. Accepted, except as to specific amounts which are found in the Recommended Order. Accepted, but not dispositive. Rejected as not in accordance with the greater weight of the evidence. Accepted. COPIES FURNISHED: James H. Gillis, Esquire Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Elwin R. Thrasher, Jr., Esquire Post Office Box 4351 Tallahassee, Florida 32315 Van Poole, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750 Joseph A. Sole, Esquire General Counsel Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750 Harold Huff, Executive Director Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802
The Issue The issue in this case is whether the respondents committed the violations alleged in the Amended Administrative Complaint, and, if so, the penalties which should be imposed.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: The Department of Business and Professional Regulation is a state government licensing and regulatory agency charged with the responsibility and duty to prosecute administrative complaints pursuant to the laws of the State of Florida, in particular chapters 120, 455, and 475, Florida Statutes, and the rules promulgated thereunder. The Florida Real Estate Commission operates within the Department and is the entity directly responsible for licensing and disciplining those licensed under chapter 475. Section 475.02, Fla. Stat. The Division of Real Estate operates within the Department and assists the Commission in carrying out its statutory duties. Section 475.021, Fla. Stat. Respondent Michael R. Hull is now and was at all times material hereto a licensed Florida real estate broker-sales person, issued license number 0398325 in accordance with chapter 475, Florida Statutes. The Department's records show that Mr. Hull's license is voluntarily inactive. At the times material hereto, he worked out of one of the Fort Lauderdale offices of The Prudential Florida Realty. Respondent Karolyn K. Busby is now and was at all times material hereto a licensed Florida real estate broker, issued license numbers 0152284 and 0272478 in accordance with chapter 475, Florida Statutes. The last licenses issued to Ms. Busby were as a broker c/o CMT Holdings, Inc., 1988 Gulf-to-Bay Boulevard, Clearwater, Florida 34625, and c/o Preferred Rentals, Inc., 19353 U.S. Highway 19 North, Number 100, Clearwater, Florida 34624. At all times material hereto, Ms. Busby was licensed and operating as qualifying broker and officer of respondent CMT Holdings, Inc. Respondent CMT Holdings, Inc., is and was at all times material hereto a corporation registered as a Florida real estate broker, issued license numbers 0266412 and 0266434 in accordance with chapter 475, Florida Statutes. The last licenses issued were at 1988 Gulf-to-Bay Boulevard, Clearwater, Florida 34625, and as a partner to CMT Holding, Limited, t/a The Prudential Florida Realty, 19353 U.S. Highway 19 North, Number 100, Clearwater, Florida 34624. Respondent CMT Holding, Limited, t/a The Prudential Florida Realty, is, and was at all times material hereto, a limited partnership registered as a Florida real estate broker, having been issued license number 0266433 in accordance with chapter 475, Florida Statutes. The last license issued was at 19353 U.S. Highway 19 North, Number 100, Clearwater, Florida 34624. Blucher/Gautier transaction: Counts I, II, III, IV, V, VI, and VII of the Amended Administrative Complaint Carol R. Blucher listed for sale her condominium apartment, number 405 of Harbor Haven, located in Fort Lauderdale, Florida. Deborah H. Burns and her broker, Elizabeth T. Beauchamp, were the seller's and listing agents for Ms. Blucher's condominium, and Intercoastal Realty, Inc., was the listing office. On January 1, 1994, Jacques and Aimee Gautier executed a Deposit Receipt and Contract for Purchase and Sale of Ms. Blucher's condominium. The contract disclosed that Intercoastal Realty was the listing office for the transaction and that The Prudential Florida Realty was the selling office. Michael R. Hull signed the contract as an associate of The Prudential Florida Realty. In the contract, Mr. Hull acknowledged receiving as a deposit a check in the amount of $500; Mr. Hull accepted this check on behalf of The Prudential Florida Realty for deposit in its escrow account. The contract provided that the transaction would close on or before February 28, 1994, and that Mr. and Mrs. Gautier would make an additional deposit of $7,000 within seven days of acceptance of the contract. The additional deposit was to be held by The Prudential Florida Realty in its escrow account. The Gautiers were to wire the $7,000 to the Clearwater office of The Prudential Florida Realty, since the accounting department, which handles the escrow accounts, was located in that office. Mr. Hull hand-delivered the executed Deposit Receipt and Contract for Purchase and Sale to Ms. Burns, together with a letter dated January 3, 1994. In this letter, Mr. Hull requested certain information from Ms. Burns relative to the transaction, and he informed her that Mr. and Mrs. Gautier intended to wire the additional $7,000 deposit and that he would confirm receipt with her. Ms. Burns, in turn, conveyed the contract to Ms. Blucher, who accepted the offer on January 4, 1994, by executing the contract. The executed contract was delivered to Mr. Hull on January 7, and both Mr. Hull and Ms. Burns considered January 13 to be the date on which the additional deposit was due. Mr. Gautier told Mr. Hull that the additional deposit would be wired on January 10. On January 13, Mr. Hull was told by the bookkeeper in the Clearwater office of The Prudential Florida Realty that the transfer of the $7,000 had not been confirmed. For several days thereafter, Mr. Hull was in daily contact with the bookkeeper because he feared that there had been an error in the wire transfer. The transfer of the $7,000 was not confirmed as of January 21. Mr. Hull made several attempts to contact Mr. Gautier after January 13. When he finally got in contact with him, Mr. Gautier promised Mr. Hull that he would wire the $7,000 deposit "the next day." The transfer of the $7,000 deposit to The Prudential Florida Realty was not confirmed by January 31, and Mr. Gautier did not respond to Mr. Hull's further attempts to contact him. In letters dated January 13, 21, and 31, 1994, Mr. Hull advised Ms. Burns, Ms. Blucher's selling and listing agent, of the status of his efforts to secure the additional deposit and of Mr. Gautier's responses or lack thereof. These letters were properly addressed and sent either by facsimile transmittal or by United States mail on the date shown on the letters or on the day after. Mr. Hull was in San Diego, California, from February 2 through 9, 1994, attending a realtors' conference, and his next contact with Ms. Burns was on February 15 or 16, when they spoke by telephone. During that conversation, Mr. Hull advised Ms. Burns that the transfer of the $7,000 deposit to The Prudential Florida Realty had not been confirmed by the Clearwater office and that Mr. Gautier would not respond to repeated attempts to contact him. Ms. Burns waited until on or about February 22, a week before the February 28 closing date, to notify Ms. Blucher that the Gautiers had not made the additional $7,000 deposit. Ms. Blucher was "flabbergasted." Although she had not directly asked Ms. Burns about the status of the deposit, she assumed the deposit had been received because Ms. Burns had not told her anything to the contrary. Throughout the course of this transaction, Ms. Burns dealt exclusively with Ms. Blucher as selling and listing agent, and Mr. Hull dealt exclusively with Ms. Burns. Mr. Hull did not deal directly with Ms. Blucher because he believed that it would be unethical if he did so. However, he kept Ms. Burns fully informed about the status of the transaction and assumed she was passing the information on to her client. For her part, Ms. Blucher considered Ms. Burns her realtor and expected to deal exclusively with her and to be kept informed with regard to this transaction. By advising Ms. Burns that the $7,000 additional deposit had not been received within the time specified in the contract and by keeping her informed of his attempts to secure the deposit, Mr. Hull fulfilled his duty to Ms. Blucher to disclose information material to the transaction. The Department offered no proof that, by statute, rule, or industry practice, Mr. Hull was required to inform Ms. Blucher of the status of the deposit directly rather than indirectly through her agent, Ms. Burns. Under the circumstances, Mr. Hull was justified in relying on Ms. Burns to communicate with her client. The proof is not sufficient to establish that Mr. Hull was culpably negligent or committed a breach of trust with regard to this transaction. Scarborough/Krathen transaction: Counts VIII, IX, and X of the Amended Administrative Complaint On June 18, 1993, Patrice Scarborough accepted the offer of Stephen and Mary Krathen to purchase her home in Fort Lauderdale, Florida. The offer was made in a Deposit Receipt and Contract for Sale and Purchase executed by Howard Scott, attorney for Dr. and Mrs. Krathen. The agent who prepared the contract was Sidney White of The Prudential Florida Realty. Ms. Scarborough had listed the property with Sunrise Realty, and Robert F. Mann was acting as her selling agent. In accordance with the terms of the contract, Mr. Scott tendered a check made payable to The Prudential Florida Realty in the amount of $1,000 as a deposit and partial down payment on the subject property. The check was dated June 18, 1993, and the contract shows the acknowledgment of Sidney White that, on June 18, 1993, he received $1,000 as an associate of The Prudential Florida Realty. In the contract, the Krathens, through Mr. Scott, agreed to tender an additional deposit of $44,000, with $9,000 payable on or before June 22, 1993, and $35,000 payable on or before June 29, 1993. The Krathens did not remit either the additional $9,000 or the additional $35,000 deposits, and they were in default of the contract as of June 29, 1993. In July 1993, Ms. Scarborough authorized Mr. Mann to demand the $1,000 deposit on her behalf. Mr. Mann immediately telephoned Mr. White and advised him that Ms. Scarborough felt she was entitled to the $1,000 deposit because the Krathens had defaulted on the contract by failing to remit the additional $44,000 deposit. Mrs. Krathen knew shortly after the contract was entered into that she would not be able to obtain the financing necessary to purchase the Scarborough home. She contacted The Prudential Florida Realty in July 1993 and verbally requested the return of the $1,000 deposit. After demanding the $1,000 on behalf of Ms. Scarborough, Mr. Mann was in regular contact with Mr. White with regard to the deposit. Mr. Mann and Mr. White enjoyed a good working relationship, and Mr. Mann knew that Mr. White had repeatedly tried to contact Dr. Krathen and his attorney, Mr. Scott, and had gotten no response. Meanwhile, shortly after authorizing Mr. Mann to demand the $1,000 deposit, Ms. Scarborough learned that the Krathens had previously declared bankruptcy and that, once the bankruptcy was removed from their credit report, their chances of being approved for financing would improve. Ms. Scarborough told The Prudential Florida Realty that she was willing "to go along with" Dr. Krathen in his attempts to resolve the bankruptcy issue, but the contract for purchase and sale was not modified, Ms. Scarborough did not take her home off the market, and she did not rescind her demand for the $1,000 deposit. During this time, Ms. Scarborough spoke several times directly with Sidney White and was kept informed by The Prudential Florida Realty of the status of the Krathen's attempts to secure financing. Although he cannot recall the exact date, at some point Mr. Mann telephoned Joan Sher and told her of the problems he was having getting the matter of the $1,000 deposit resolved. Ms. Sher was the broker and branch manager responsible for The Prudential Florida Realty's Fort Lauderdale office out of which Mr. White worked. Mr. Mann made a formal demand to Ms. Sher for arbitration of the deposit dispute. On December 13, 1993, Ms. Sher received a written demand for the deposit from Mr. Scott, the attorney acting on behalf of Dr. Krathen. Ms. Sher then prepared a Notice of Escrow Dispute/Good Faith Doubt, dated December 14, 1993, in which she identified Kay Rehard Busby as the broker for the Scarborough/Krathen transaction. In Ms. Busby's absence and with her authorization, Ms. Sher signed the Notice of Escrow Dispute/Good Faith Doubt "Kay Rehard Busby" and included her initials under the signature line to indicate that she had signed on Ms. Busby's behalf. At the times material to this proceeding, Ms. Busby was the broker and general manager responsible for the eight branch offices of The Prudential Florida Realty located in Broward County. On December 22, 1993, Gerri Barnoske, of the Division of Real Estate, sent a letter to Ms. Busby advising her that the Notice of Escrow Dispute/Good Faith Doubt had been received by the Division on December 20. The letter further advised Ms. Busby that, within fifteen days from the date the form was received by the Division, she must either arrange for arbitration of the dispute, put the matter before a civil court, arrange for mediation, or request an Escrow Disbursement Order from the Florida Real Estate Commission. On the Notice of Escrow Dispute form, there is a space marked "Optional" which can be checked to request the Division to send the paperwork necessary to request an escrow disbursement order. This space was not checked on the form prepared by Ms. Sher, and the Division did not send the paperwork necessary to request an escrow disbursement order. Ms. Sher thought that she had requested the necessary paperwork to request an escrow disbursement order when she submitted the Notice of Escrow Dispute to the Division of Real Estate. She had made an entry on her tickler system, and, when the tickler came up and she realized that she had not received the paperwork, she telephoned the Division. She was told to submit a request for the paperwork in writing. She did so in a letter dated January 20, 1994. The necessary paperwork was sent by the Division on January 26, 1994, and the completed Request for Escrow Disbursement Order form was received by the Division on February 4, 1994. The Request for Escrow Disbursement Order was prepared from information provided by Mr. White, and he identified July 15, 1993, and July 24, 1993, as the dates on which the conflicting Krathen and Scarborough demands were received. The form was reviewed by Ms. Sher, and signed "Kay Rehard Busby," as the requesting broker, "By Joan C. Sher." Ms. Sher signed Ms. Busby's name in her absence and with her authorization. On June 22, 1994, the Florida Real Estate Commission issued an Escrow Disbursement Order, ordering that the $1,000 deposit be paid to Ms. Scarborough. The funds were disbursed in accordance with the order. The evidence is clear and convincing that, even though Dr. Krathen's attorney did not respond to his messages or make a written demand for the deposit until December 13, 1993, Mr. White was aware by mid-July 1993 that Mrs. Krathen and Ms. Scarborough had made conflicting demands for the $1,000 deposit held in escrow by The Prudential Florida Realty. Accordingly, the proof establishes that Ms. Sher, acting on Ms. Busby's behalf, did not promptly submit the Notice of Escrow Dispute/Good Faith Doubt to the Division of Real Estate; rather, the notice was submitted approximately five months after it became known that there was a dispute. The responsibility to notify the Division was not obviated by Ms. Scarborough's willingness to "go along" until December to see if the Krathens were able to clear up their bankruptcy problems and obtain financing. In addition, the evidence is clear and convincing that none of the four alternatives available to resolve the escrow dispute was instituted promptly after notifying the Division of the dispute. Silberzweig/Vargas transaction: Counts XI, XII, XIII, XIV, XV, XVI, XVII, XVIII, and XIX of the Amended Complaint On December 7, 1993, the personal representative of the Estate of Cecelia Silberzweig accepted the offer of Edna Vargas to purchase a condominium apartment, number 110, Building 1-J, Oriole Gold and Tennis Club, located in Margate, Florida. In the Deposit Receipt and Contract for Purchase and Sale, Ms. Vargas agreed to make an initial deposit of $500, which was received by Jean Gilchrist, as an associate of The Prudential Florida Realty. 1/ Ms. Vargas also agreed to make an additional deposit of $3,000, payable upon acceptance of the contract. The personal representative of the Estate of Cecelia Silberzweig accepted the offer to purchase on December 7, 1993, and the additional $3,000 deposit was received by The Prudential Florida Realty and deposited in its escrow account. Pursuant to the contract, the transaction was to close on or before December 10, 1993. An Addendum to the contract, executed by Ms. Vargas on December 11 but not executed by the seller, purported to extend the closing date until December 20, 1993. Notwithstanding the purported extension, Ms. Vargas requested that her interview with the condominium association be scheduled on December 23, 1993. 2/ The closing did not take place on either December 10 or December 20. On January 25 or 26, 1994, Joanna (White) Youngblood received a letter from the attorney for Ms. Vargas demanding the return of the $3,500 deposit. Ms. Youngblood also received a letter from the seller demanding the deposit. At the times material to this proceeding, Ms. Youngblood was the broker for the Fort Lauderdale office of The Prudential Florida Realty out of which Ms. Gilchrist worked. Both before and after the demand letters were received, the transaction was "on again, off again." However, for reasons which are not clear from the record, the transaction never closed. At the times material to this proceeding, Ms. Busby was the broker and general manager for The Prudential Florida Realty's Broward County offices. On February 4, 1994, she personally signed a Notice of Escrow Dispute/Good Faith Doubt form with regard to the $3500 deposit at issue in the Silberzweig/Vargas transaction. She did not check the option on this form to request that the Division of Real Estate send her the paperwork necessary to request an escrow disbursement order. On February 16, Gerri Barnoske, of the Division of Real Estate, sent a letter to Ms. Busby advising her that the Notice of Escrow Dispute/Good Faith Doubt had been received by the Division on February 10. The letter further advised Ms. Busby that, within fifteen days from the date the form was received by the Division, she must either arrange for arbitration of the dispute, put the matter before a civil court, arrange for mediation, or request an Escrow Disbursement Order from the Florida Real Estate Commission. On March 28, 1994, the Division of Real Estate received a Notice of Settlement Procedure for Escrow Dispute indicating that interpleader or other court action "has been instituted" in the Silberzweig/Vargas escrow dispute. The form was prepared by Joanna Youngblood, who signed the form "Karolyn Kay Busby, G.M. (by JWY)." The form was signed by Ms. Youngblood in Ms. Busby's absence and with her authorization; the signature was dated March 8, 1994. At the time the form was submitted to the Division, no interpleader or other court action had been instituted. When she submitted the Notice of Settlement Procedure for Escrow Dispute to the Division, or shortly thereafter, Ms. Youngblood contacted the attorney for Ms. Vargas to advise him that she intended to turn the matter over to the courts. Ms. Vargas's attorney asked that she request an Escrow Disbursement Order rather than go to court. As a result, Ms. Youngblood called the Division's Orlando office to request the paperwork necessary to request an escrow disbursement order. After calling twice, she finally received a form, but it was a Division of Real Estate Uniform Complaint Form. Even though she knew it was not the proper form, Ms. Youngblood gave the Complaint Form to Jean Gilchrist, the associate who had been involved with the transaction. Ms. Gilchrist completed and signed the form; her signature was dated May 20, 1994. The form also carries the signature "Kay Busby G.M. (by JWY)." Ms. Youngblood signed the form for Ms. Busby in her absence and with her authorization. Ms. Youngblood was subsequently advised by Don Piersol, an investigator with the Division's Fort Lauderdale office, that she had submitted the wrong form. She obtained the correct form, and, in a letter to Ms. Barnoske dated June 17, 1994, signed "Kay Busby (JWY)," she enclosed a Request for Escrow Disbursement Order, asking that the request be expedited. On February 27, 1995, the Florida Real Estate Commission issued an Escrow Disbursement Order, ordering that the $3,500 deposit be paid to Ms. Vargas. The funds were disbursed in accordance with the order. The proof is not sufficient to establish that Ms. Busby was culpably negligent with regard to the Silberzweig/Vargas transaction, or that she committed a breach of trust. Additionally, the proof affirmatively establishes that Ms. Busby timely notified the Division of the conflicting demands made for the deposit. However, the evidence is clear and convincing that those acting on Ms. Busby's behalf, and with her authorization, failed to implement promptly any of the four alternative procedures available to resolve the escrow dispute. Ms. Youngblood represented to the Division in March that an interpleader or other court action had been instituted, when, in fact, no such action had been filed. The evidence is also clear and convincing that none of the other alternatives available to resolve the escrow dispute was instituted promptly after notifying the Division of the dispute. This failure is not excused by Ms. Youngblood's confusion with regard to the proper procedure for requesting the appropriate forms.
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 Finding respondents Karolyn K. Busby, CMT Holdings, Inc., and CMT Holding, Limited, t/a The Prudential Florida Realty, guilty of violating rule 61J2-10.032, Florida Administrative Code, and section 475.25(1)(e), Florida Statutes, as charged in the Amended Administrative Complaint, Counts VIII, IX, and X, with respect to the Scarborough/Krathen transaction, and Counts XVII, XVIII, and XIX with respect to the Silberzweig/Vargas transaction; Imposing administrative penalties consisting of A reprimand of Karolyn K. Busby, CMT Holdings, Inc., and CMT Holding, Limited, t/a The Prudential Florida Realty, and An administrative fine against Karolyn K. Busby in the amount of two thousand dollars ($2,000); and Dismissing Counts I through VII and Counts XI through XVI of the Amended Administrative Complaint. DONE AND ENTERED this 30th day of May, 1996, in Tallahassee, Leon County, Florida. PATRICIA HART MALONO, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of May, 1996.
The Issue The issue presented is whether Petitioners are entitled to recover from Respondent the attorney's fees and costs incurred by Petitioners, pursuant to the Florida Equal Access to Justice Act.
Findings Of Fact At the time material hereto, Global Real Estate and Management, Inc., was a corporation registered as a real estate broker in the state of Florida, Mark H. Adler was a real estate broker licensed in the state of Florida, and Richard Shindler was a real estate salesman licensed in the state of Florida. Adler was the qualifying broker for Global, and Shindler was employed by Global. On November 17, 1989, the Department of Professional Regulation, Division of Real Estate, received a written complaint about Adler, Shindler, and Global from Jay Hirsch, a real estate broker licensed in the state of Florida. Hirsch's complaint included the following allegations. Shindler had entered into two contracts for the purchase of real estate which required Shindler to place a total of $11,000 in Global's escrow account. Requests for verification of the deposit of such funds had been ignored. Hirsch had told Shindler at the time that the contracts were executed and on numerous occasions thereafter that since Shindler had chosen to participate in the real estate commission to be earned from the transaction, Shindler had assumed a fiduciary relationship with the sellers. Shindler had arbitrarily refused to close pursuant to the contracts and on October 2, 1989, Hirsch met with Shindler, reminded Shindler of Shindler's fiduciary responsibil-ities to the sellers, made demand on Shindler for the escrow deposit on behalf of the sellers, and advised Shindler of the provisions of Florida law relating to the responsibilities of the escrow holder when demands are made for release of escrowed money. Written demand was made on Adler within days of the oral demand. Hirsch subsequently spoke with Adler, the broker of record for Global, regarding the legal requirements in escrow deposit disputes but discovered that Adler "knew nothing" about the transaction. Shindler and Adler continued to ignore the demands made on them for the escrow deposit. Hirsch also alleged that there may be "certain other irregularities" regarding fiduciary responsibilities, entitlement to commissions by Global, and conflicts of interest. An investigator was assigned to investigate Hirsch's complaint against Adler, Shindler, and Global. According to the investigative report issued on February 12, 1990, that investigation revealed possible serious violations of the laws regulating the conduct of real estate brokers and salespersons. Although the investigative report recited that Global waited two months after the initial deposit demand was made by Hirsch before it filed an interpleader action to resolve conflicting demands on the escrow deposit, the documentation attached to the investigative report clearly indicated that Global waited just a few days short of three months before filing the interpleader action. The investigative report further revealed that during the time that at least the $11,000 was required to be in Global's escrow account (if Global were not involved in any other real estate transactions at the time), the escrow account had less than an $11,000 balance for both the months of September and October of 1989. The report further indicated that the IRS had attached Global's escrow account for Global's failure to pay payroll taxes. The investigative report revealed that there had been a problem obtaining broker Adler's presence for the interview with the Department's investigator. When a joint interview with both broker Adler and salesman Shindler did take place, the broker was unable to answer any of the investigator's questions, telling the investigator that he knew little regarding the problems since he relied on salesman Shindler to operate the business on a daily basis. In response to the investigator's continued questioning as to how IRS was able to attach an escrow account, Shindler explained that although the checks were marked escrow account, the bank statements did not reflect an escrow account but rather reflected a "special account." It was further discovered during the investigation that broker Adler had not been a signatory on the escrow account; rather, salesman Shindler had been the only signatory on the escrow account. At the conclusion of that interview, Shindler, who had taken control of the interview, agreed to supply the Department's auditors with all IRS and bank correspondence relative to the escrow account attachment. During that same joint interview on January 23, 1990, when questioned about the real estate transactions which were the subject of broker Hirsch's complaint, Shindler spoke in terms of having "his" attorney file an interpleader action (although he was the buyer). He also talked about oral extensions to the written contracts. Shindler also explained that his "deposit moneys" were in the escrow account because he was using a part of sale proceeds belonging to his brother as his down payment on purchases made for himself, an explanation which suggested there might be co-mingling of funds. A complete audit of Global's escrow account by the Department's auditors was scheduled for February 7, 1990. A supplemental investigative report was issued on May 3, 1990. That report contained the following recital. Shindler and Adler had failed to comply with the Department's requests for files and bank statements so that an audit could be conducted on the escrow and operating accounts. On March 22, 1990, a subpoena was served on Global requiring those records to be made available by April 3. As of April 30, complete records were still not submitted in that case files were not available and certain checks and monthly bank statements were missing. Therefore, an appointment was made to conduct the audit in Global's office on May 1 with the requirement that broker Adler be present. On that date, files were still not available and bank records were incomplete, precluding the conduct of a proper audit. Adler told the investigator on that date that Shindler had not even told Adler that a subpoena had been served, which statement reinforced the investigator's belief that salesman Shindler had been operating as a broker and running the business operations of Global, with broker Adler merely lending his license. On that same date Shindler changed his explanation of the escrow account shortages, saying the IRS had not garnished the escrow account; rather, Global's bank had transferred $3,200 from Global's "escrow" account to Global's operating account to cover checks written on Global's operating account when the account did not have sufficient funds. It was also discovered that Adler had not been performing monthly reconciliations of Global's "escrow" account. Adler told the investigator that he would supply files and reconciliations by June 1, 1990. A supplemental investigative report was issued on June 12, 1990, advising that although the subpoena return date had been extended to June 1, 1990, as of June 12 Adler had still failed to respond by producing the required records. On June 19, 1990, the Probable Cause Panel of the Florida Real Estate Commission considered the investigative reports and determined that there was probable cause to believe that Adler, Shindler, and Global had violated statutes regulating the conduct of real estate brokers and salespersons. The administrative complaint recommended to be filed by the Probable Cause Panel was issued by the Department of Professional Regulation, Division of Real Estate, on June 21, 1990, against Mark H. Adler, Richard Shindler, and Global Real Estate and Management, Inc. That Administrative Complaint contained factual allegations regarding Shindler's contracts to purchase properties listed by broker Hirsch, regarding the alleged "verbal" extensions of the closing dates in the written contracts, regarding the repeated demands on broker Adler for release of the escrowed money as liquidated damages, and regarding the lengthy delay in responding to those demands. The Administrative Complaint also contained factual allegations regarding Shindler's use of a part of sale proceeds due to his brother as his own down payment on the properties and regarding the escrow account balance which was less than $11,000, the minimum balance required to be maintained in Global's escrow account if there were no other sales pending. Also included were factual allegations regarding the alleged attachment of Global's escrow account by the IRS for failure to pay payroll taxes, regarding the fact that broker Adler was not a signatory on the escrow account, and regarding Adler's reliance on Shindler to operate the real estate brokerage office on a daily basis. The Administrative Complaint also recited the failure of the Respondents to comply with the subpoena served on Global by the Department, which precluded the possibility of conducting a proper audit of Global's account. Factual allegations were included reciting that on May 1, 1990, Shindler had acknowledged that he had been operating as a broker and running the real estate brokerage business of Global with broker Adler "lending his license." In addition, the Administrative Complaint recited Shindler's original explanation that the IRS had attached the escrow account, which explanation was later changed by Shindler to be that Global's bank had taken $3,200 from Global's escrow account to cover checks written against Global's operating account when there were not sufficient funds in that operating account. Lastly, the Administrative Complaint alleged that Adler had not done monthly reconciliation statements of the escrow account from October of 1989 through the date of the Administrative Complaint. Based upon those factual allegations, the Administrative Complaint alleged that Adler was guilty of culpable negligence or breach of trust in a business transaction (Count I), that Shindler was guilty of culpable negligence or breach of trust in a business transaction (Count II), that Global was guilty of culpable negligence or breach of trust in a business transaction (Count III), that Adler was guilty of having failed to maintain trust funds in the real estate brokerage escrow bank account or some other proper depository until disbursement thereof was properly authorized (Count IV), that Global was guilty of having failed to maintain trust funds in the real estate brokerage escrow bank account or some other proper depository until disbursement thereof was properly authorized (Count V), that Adler was guilty of having failed to produce for inspection records when subpoenaed by the Department (Count VI), that Global was guilty of having failed to produce for inspection records when subpoenaed by the Department (Count VII), that Shindler was guilty of having failed to deposit funds with his employing broker (Count VIII), and that Shindler was guilty of having operated as a broker while being licensed as a salesman (Count IX). The Administrative Complaint sought disciplinary action against Adler, Shindler, and Global for those alleged violations. Adler did not seek a formal hearing regarding the allegations contained within that Administrative Complaint. Rather, he entered into a settlement agreement with the Department, agreeing that all of his real estate licenses, registrations, certificates, and permits would be suspended for a period of eighteen months, that he would resign as an officer and/or director of Global, and that he would testify at any formal hearing held regarding the Administrative Complaint. Adler also agreed that notice would be published that he had been suspended for 18 months for culpable negligence and failure to properly supervise a licensed salesman in his employ. That agreement was approved by the Florida Real Estate Commission in a Final Order filed of record on August 31, 1990. On the other hand, Shindler and Global did request a formal hearing regarding the allegations contained in that Administrative Complaint. The matter was subsequently transferred to the Division of Administrative Hearings for the conduct of that formal hearing and was assigned DOAH Case No. 90 That formal hearing was conducted on January 9, 1991. Based on the evidence presented during that final hearing, a Recommended Order was entered on March 20, 1991, finding that the Department had failed to prove its allegations as to Shindler and further finding that the Department had failed in its burden of proof as to two of the three counts against Global. The Recommended Order did find that Global failed to maintain trust funds as alleged in Count V of the Administrative Complaint and recommended that Global be ordered to pay an administrative fine in the amount of $500. That Recommended Order was adopted in toto by the Florida Real Estate Commission in its Final Order filed on April 24, 1991. It is clear that Shindler prevailed in the underlying administrative action and that Global prevailed as to two of the three counts against Global. The Department was substantially justified in initiating the underlying administrative proceeding against both Shindler and Global. At the time that the underlying action was initiated, it had a reasonable basis both in law and in fact.
Findings Of Fact Petitioner is the governmental agency responsible for issuing real estate licenses and regulating licensees on behalf of the state. Respondent, Gregory T. Franklin ("Franklin"), is licensed in the state as a real estate broker; license number 0314387. The last license issued was as a real estate broker, c/o Equity Realty of South Florida, Inc., t/a Equity Realty, 5809 Southeast Federal Highway #200, Stuart, Florida 34997. Respondent, Equity Realty of South Florida, Inc. ("Equity"), is a corporation registered as a real estate broker; license number 0229264. Respondent, Franklin, is the qualifying broker for Respondent, Equity. On or about January 26, 1990, Mr. Robert Warren (the "buyer") entered into a contract to purchase real estate from Ms. J. Zola Miller and Ms. Adrianne Miller Hill (the "sellers"). The buyer gave Respondent an earnest money deposit in the amount of $1,000. On or about April 17, 1990, a second contract was executed by the buyer and sellers. The buyer gave Respondents a second earnest money deposit in the amount of $24,000. Both earnest money deposits were timely deposited to Respondents' escrow account, number 0194101404, Florida Bank, Stuart, Florida. The buyer and sellers had difficulty in closing the contract due to disagreements concerning conditions in the contract. At the buyer's request, Respondents used the earnest money in the amount of $25,606.04 to purchase a certificate of deposit ("CD") in the name Robert Warren Century 21 Equity Realty Escrow Account #050-215-76, located at the First Marine Bank of Florida, Palm City, Florida ("First Marine"). Respondents received the sellers' verbal approval, but not written approval, for the purchase of the CD. Respondents notified the Florida Real Estate Commission (the "Commission") on August 28, 1990, that there were conflicting demands for the $25,000 earnest money deposit. Respondents stated their intent to claim a portion of the earnest money as an earned commission and stated that they were preparing to file an interpleader action to resolve the parties' dispute over the earnest money deposit. The Commission acknowledged Respondents' notification. Negotiations between the buyer and sellers continued until December 12, 1990. At that time, the parties reached an impasse, and each made written requests for the escrow deposit. Respondents maintained the earnest money in the CD until February 8, 1991. On February 8, 1991, Respondents were notified by First Marine that the buyer was attempting to obtain the escrow monies directly from First Marine. Respondents opened a CD in the name of Robert Warren Escrow Account for Equity Realty by Gregory Franklin, Account #200-517-7320, First Union Bank of Florida, Stuart, Florida. When the CD matured on May 15, 1991, the amount of the deposit was $25,989.57. On May 15, 1991, Respondents removed the earnest moneys and invested them in CD #10696954 at Community Savings Bank. On June 19, 1991, Respondents withdrew $500, paid a penalty of $6.21, and closed the CD. The remaining balance was used to open CD #10707413 at Community Savings Bank. On June 21, 1991, Respondents withdrew $600 and paid a penalty in the amount of $8.67. Respondents used half of the $600 withdrawal to pay an attorney to initiate a civil interpleader action without the knowledge or consent of either the buyer or seller. On August 23, 1991, Respondents closed the CD and withdrew the balance. On August 23, 1991, Respondents opened CD 310725647 in the name of Equity Realty, Inc., with the balance at Community Savings Bank. On October 30, 1991, Respondents made a withdrawal in the amount of $175. On November 23, 1991, the CD was renewed. The account was closed on November 27, 1991, with a balance of $25,456.94, and deposited into the court registry. The interpleader action was ultimately resolved pursuant to a settlement agreement between the parties. Respondents obtained the consent of both parties, though not the written consent of both parties, before placing the escrowed funds into an interest bearing account on August 15, 1990. The uncontroverted testimony of Respondent, Franklin, concerning this issue was credible and persuasive. Neither the sellers nor the buyer ever revoked their consent. Respondents deposited the earnest moneys into an interest bearing account without designating who was to receive the interest from such an account without the consent of both parties. Respondents took appropriate action to resolve the conflicting demands made upon the earnest moneys deposited with Respondents but failed to take such action in a timely manner.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order finding Respondents guilty of placing escrow funds in an interest bearing account without designating who is to receive the interest in violation of Florida Administrative Rule 21V- 14.014. It is further recommended that Petitioner should issue a written reprimand to Respondents and require Respondent, Franklin, during the next 12 months, to document to the satisfaction of Petitioner that he has completed 14 hours of the Brokerage Management Course. RECOMMENDED this 22nd day of January, 1993, in Tallahassee, Florida. DANIEL MANRY Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of January, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-3323 Petitioner's Proposed Findings Of Fact. 1.-6. Accepted in Finding 1. 7.-8. Accepted in Finding 2. 9.-11. Accepted in Finding 3. Accepted in Finding 4. Accepted in Finding 5. Accepted in Finding 3. Accepted in Finding 6. Accepted in Finding 7. 17.-20. Accepted in Finding 8. 21.-22. Accepted in Finding 9. 1.-6. Accepted in Finding 1. 7.-8. Accepted in Finding 2. 9.-11. Accepted in Finding 3. 12. Accepted in Finding 4 13. Accepted in Finding 5. 14. Accepted in Finding 3. 15. Accepted in Finding 6. 16. Accepted in Finding 7 17.-20. Accepted in Finding 8. 21.-22. Accepted in Finding 9. 23.-24. Accepted in Findings 10.-11. Respondents' Proposed Findings Of Fact. 23.-24. Accepted in Findings 10.-11. COPIES FURNISHED: Darlene F. Keller, Director Division of Real Estate Department of Professional Regulation 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32801 Jack McRay, Esquire General Counsel Department of Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 James H. Gillis, Esquire Department of Professional Regulation, Division of Real Estate Legal Section - Suite N 308 Hurston Building North Tower 400 West Robinson Street Orlando, Florida 32801-1772 Gregory T. Franklin, pro se %Equity Realty of South Fla., Inc. 5809 S.E. Federal Highway, #200 Stuart, Florida 34997 APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-3323 All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.
