The Issue The ultimate issue for determination at the formal hearing was whether disciplinary action should be taken against Respondent's real estate broker's license for failing to obey a lawful order of the Florida Real Estate Commission.
Findings Of Fact Petitioner is a state licensing and regulatory agency charged with the responsibility and duty to prosecute Administrative Complaints pursuant to the laws of the State of Florida. Respondent is now and was at all times material hereto a licensed real estate broker in the State of Florida. A Final Judgment was entered against Richard B. Abel, P.A., in the case of Mark Freeman v. Richard B. Abel, P.A., Case No 85-5678CA-JRT, on August 17, 1986, in the Circuit Court of the Twentieth Judicial Circuit, Lee County, Florida. The Final Judgment was for an amount of $6,839 representing real estate commissions owed by Richard B. Abel, P.A. to Mark Freeman, plus interest and attorney's fees. A two count Administrative Complaint was filed by the Florida Department of Professional Regulation, Division of Real Estate, against Respondent on June 27, 1988. The Complaint alleged inter alia that Respondent: (a) failed to satisfy a Final Judgment in Circuit Court for the payment of a real estate commission; and (b) failed to maintain trust funds in his real estate brokerage trust account or some other proper depository until disbursement in violation of Section 475.25(1)(d), (k), Florida Statutes. A Final Order was entered by the Florida Real Estate Commission (the "Commission") on December 6, 1988, accepting a Stipulation between Respondent and the Commission in settlement of the Administrative Complaint filed on June 27, 1988 (the "Final Order"). The terms of the Final Order provided that: Richard B. Abel, P.A., was reprimanded for failing to pay the Final Judgment entered against it in Circuit Court and was required to pay the amount due Mark Freeman within 45 days from the entry of the Final Order; Respondent, in his individual capacity, personally guaranteed the amount owed by Richard B. Abel, P.A., to Mark Freeman, and further agreed not to violate any provision of Chapters 455 and 475, Florida Statutes; and Respondent waived his right to contest the validity and enforcement of either the Final Order or Stipulation accepted in the Final Order. Neither Richard B. Abel, P.A., nor Respondent has paid the sums due pursuant to the terms of the Final Order entered by the Commission on December 6, 1988. The evidence submitted by Petitioner was uncontroverted. Respondent admitted that he placed the monies owed by Richard B. Abel, P.A., to Mark Freeman in the escrow account of Richard B. Abel, P.A., and disbursed the funds to himself, the sole owner, operator, director and officer. Respondent stated that he fully intended to pay Mr. Freeman when Respondent was able to do so. Respondent's sole defense was that the original debt was that of a corporation rather than a personal debt of Respondent. Respondent is in violation of the Final Order of the Comission entered on December 6, 1988.
Recommendation Based upon the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that Respondent be found guilty of failing to obey a lawful order of the Florida Real Estate Commission in violation of Section 475.25(1)(e), Florida Statutes, fined $1,000, and placed on probation for a period not to exceed 5 years. The conditions of probation may include any of those prescribe in Florida Administrative Code Rule 21V-24.001(2)(a) except those prescribing re-examination or being placed on broker-salesman status. In the event Respondent fails to pay in full any fine imposed on Respondent or to complete the terms of any probation imposed on Respondent, it is recommended that Respondent's license be suspended for 8 years. DONE and ENTERED this 4th day of December, 1989, in Tallahassee, Leon County, 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 4th day of December, 1989. APPENDIX TO RECOMMENDED ORDER, CASE NO. 89-3727 Petitioner has submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. Respondent did not submit proposed findings of fact. The Petitioner's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection Included in Finding 1 Included in Finding 2 Included in Finding 4 Included in Finding 5 5-6 Included in Finding 6 7-8 Included in Finding 7 9 Included in Finding 9 COPIES FURNISHED: James H. Gillis, Esquire Departmen of Professional Regulation 400 West Robinson Street Orlando, Florida 32801 Mr. Richard B. Abel 2478 Inagua Avenue Miami, Florida 33133
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
Findings Of Fact On February 28, 1986 Respondent submitted a revised tax assessment to Petitioner for intangible taxes for the years 1979, 1980 and 1981 on assets held by Petitioners in the Fidelity Daily Income Trust Fund. Based on recomputed taxable percentages of these assets of 25.1 percent, 21.2 percent and 36.8 percent for the years 1979, 1980 and 1981 the recomputed tax is: 1979 - $ 26.57 1980 - 22.45 1981 - 45.94 TOTAL $ 94.96 (Exhibit 1) Adding penalties and interest through January 22, 1986 to the taxes owed results in a total owed as of January 22, 1986 of $193.98 (Exhibit 1).
The Issue Whether Respondents committed the offenses set forth in the six-count Administrative Complaint dated October 15, 2003; and, if so, what penalty should be imposed.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made: The Department of Business and Professional Regulation, Division of Real Estate (the "Department"), is the state agency charged with enforcing the statutory provisions pertaining to persons holding real estate broker and sales associate's licenses in Florida, pursuant to Section 20.165 and Chapters 455 and 475, Florida Statutes (2003). At all times relevant to this proceeding, Respondent Richard R. Page, was a licensed Florida real estate broker/officer, having been issued broker license no. KB-0148248. He was the qualifying broker for Aztec Realty. At all times relevant to this proceeding, Respondent Aztec Realty, was a corporation registered as a Florida real estate broker, having been issued corporate registration no. CQ-0156640. Aztec Realty's business location was 4456 Tamiami Trail, Charlotte Harbor, Florida 33980. Barbara Kiphart was a 13-year employee of the Department who had performed thousands of audits of broker records. After conducting agent interviews on an unrelated matter in the office of Aztec Realty, she informed Mr. Page that she planned to perform an audit of the corporation's escrow accounts. Ms. Kiphart testified that it was routine for the Department to perform such audits when visiting brokers' offices for other reasons. Ms. Kiphart informed Mr. Page that she would need all documents necessary to complete an audit of Aztec Realty's escrow accounts, including bank statements, account reconciliations, and liability lists. Mr. Page referred Ms. Kiphart to Cheryl Bauer, Aztec Realty's financial manager. With Ms. Bauer's assistance, Ms. Kiphart completed the audit on June 12, 2003. Three accounts were examined: the sales escrow account; the security deposit account; and the property management account. The sales escrow account was found to be in balance, with liabilities equal to the bank balance of $382,300.52. The security deposit account was found to have liabilities of $45,533.29 but only $16,429.84 in its bank balance, a shortage of $29,103.45. The property management account was found to have liabilities of $22,545.54 but only $16,594.71 in its bank balance, a shortage of $5,950.83. Ms. Kiphart testified that the security deposit account had not been reconciled in the year 2003, and she had no way of saying when it was last reconciled. She determined the account's balance from Aztec Realty's bank statements, but had to extrapolate the liabilities from a computer printout of security deposits. Ms. Bauer testified that she handles the finances for all aspects of Aztec Realty's real estate sales business, including the sales escrow account, and that she was able to provide all the information Ms. Kiphart needed to audit that account. However, Ms. Bauer had no responsibility for the other two accounts, both of which related to the rental property management side of Aztec Realty's business. She had to obtain information about those accounts from Jill Strong, her newly- hired counterpart in property management. At the time she provided the computer printout on the property management accounts to Ms. Bauer and Ms. Kiphart, Ms. Strong told them that she knew the numbers were inaccurate. Aztec Realty had purchased Tenant Pro, a new rental management software package, in 2001. In the course of approximately 18 months, Aztec Realty had three different employees in Ms. Strong's position. One of these short-term property managers had misunderstood the software for the security deposit account. Opening balances were entered for accounts that had, in fact, already been closed out with the deposits returned. This had the effect of inflating the apparent liabilities in that account. The previous property manager was also unable to print checks on the printer attached to her computer terminal. Ms. Bauer would print the deposit refund checks on her own printer, with the understanding that the property manager was recording these entries against the security deposit account. Ms. Strong discovered that these entries had not been recorded. Thus, monies that had been paid out to owners, renters, and vendors were never recorded anywhere besides a sheet that Ms. Bauer kept for printing out checks, again inflating the account's apparent liabilities. Ms. Strong had been working for Aztec Realty for about one month at the time of the audit. She was still in the process of sorting out the problems in the security deposit account, hence her statement to Ms. Bauer and Ms. Kiphart that she knew the numbers were inaccurate. Subsequent to the Department's audit, Ms. Bauer and Ms. Strong commenced their own audit of the security deposit and property management accounts. Their efforts were complicated by a storm and tornado that struck the area on June 30, 2003. The offices of Aztec Realty suffered over $100,000 in damage, including water damage to the roof that caused the office to be flooded. Records were soaked and Ms. Strong's computer was destroyed. By mid-July 2003, Ms. Bauer and Ms. Strong had completed their corrected audit of the security deposit account. They concluded that the actual shortfall in the account was $13,764.43. That amount was immediately transferred from the real estate operating account to the security deposit account to bring the latter account into balance. The real estate operating account was essentially Mr. Page's personal funds. As to the property management account, also referred to as a "rental distribution" account, Ms. Bauer and Ms. Strong performed a subsequent audit indicating that the account was out of balance on the positive side. They discovered that there were items paid out of the property management account that should have been paid from escrow and vice versa. When the audit brought the accounts into balance, the property management account was approximately $200 over balance. In an audit response letter to Ms. Kiphart dated July 16, 2003, Mr. Page acknowledged that the property management account had been improperly used to pay occasional expenses, but also stated that the practice had been discontinued. At the hearing, Mr. Page conceded that no reconciliations had been performed on the security deposit account or the property management account from at least January 2003 through May 2003. Mr. Page and Ms. Bauer each testified that the corrective actions taken in response to the audit have been maintained and that there have been no accounting problems since June 2003. Aztec Realty has contracted to sell its property management department. The evidence established that no client of Aztec Realty or other member of the public lost money due to the accounting discrepancies described above. Neither Mr. Page nor Aztec Realty has been subject to prior discipline. Mr. Page has worked in the real estate business in the Port Charlotte area for nearly 30 years and is a past president of the local association of realtors. He credibly expressed remorse and testified that, given his position in the community, he was "mortified" at having allowed his company to be placed in this position. Aztec Realty has operated for nearly 30 years and currently has 20 employees and approximately 65 agents.
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 Counts II and III of the Administrative Complaint against Mr. Page; Dismissing Counts V and VI of the Administrative Complaint against Aztec Realty; Imposing an administrative fine against Mr. Page in the amount of $1,000 for the violation established in Count I of the Administrative Complaint; and Imposing an administrative fine against Aztec Realty in the amount of $1,000 for the violation established in Count IV of the Administrative Complaint. DONE AND ENTERED this 27th day of July, 2004, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON 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 27th day of July, 2004.
The Issue In this disciplinary proceeding, the issues are whether Respondents, who are licensed real estate brokers, failed to preserve and make available certain records relating to trust accounts and real estate transactions, and/or obstructed or hindered Petitioner's investigators in an official investigation, as alleged by Petitioner in its Administrative Complaint. If Petitioner proves one or more of the alleged violations, then an additional question will arise, namely whether disciplinary penalties should be imposed on Respondents, or either of them.
Findings Of Fact The Parties Respondent Nestor G. Mendoza ("Mendoza") is a licensed real estate broker subject to the regulatory jurisdiction of the Florida Real Estate Commission ("Commission"). Respondent Diamonds Realty of Miami Beach, Inc. ("Diamonds Realty") is and was at all times material hereto a corporation registered as a Florida real estate broker subject to the regulatory jurisdiction of the Commission. Mendoza is an officer and principal of Diamonds Realty, and at all times relevant to this case he had substantial, if not exclusive, control of the corporation. Indeed, the evidence does not establish that Diamonds Realty engaged in any conduct distinct from Mendoza's in connection with the charges at issue. Therefore, Respondents will generally be referred to collectively as "Mendoza" except when a need to distinguish between them arises. Petitioner Department of Business and Professional Regulation ("Department"), Division of Real Estate, has jurisdiction over disciplinary proceedings for the Commission. At the Commission's direction, the Department is authorized to prosecute administrative complaints against licensees within the Commission's jurisdiction. On January 15, 2008, Veronica Hardee, who was then employed by the Department as an investigator, conducted an audit of Mendoza's records at Mendoza's real estate brokerage office, which was located in Miami Beach. Ms. Hardee was accompanied by her supervisor, Brian Piper. Ms. Hardee knew Mendoza because, in the latter part of 2007, she had investigated a consumer complaint against him, which arose from a transaction that had taken place in the fall of that year. In the course of that investigation, which focused on the period from August 20, 2007 through November 30, 2007, Mendoza had provided Ms. Hardee with business records, including bank statements and documents relating to the brokerage's escrow account. Ms. Hardee's previous investigation had not resulted in charges of wrongdoing being brought against Mendoza. During the audit, Ms. Hardee asked to review some of Mendoza's business records. She testified about this on direct examination as follows: Q. All right. Did you tell [Mendoza] what he would need to bring——or what he could expect from an audit? A. I don't remember, but usually procedure [sic], I would tell them we need to see older escrow accounts, older operating accounts, deposit slips, deposit checks, anything that has to do with their financial matters. Final Hearing Transcript ("TR.") 40-41 (emphasis added). On cross examination, Ms. Hardee elaborated: Q. (BY MR. MENDOZA) . . . I remember quite well that you did not ask me for the whole year of——for instance, of 2004, you never asked me for whole year, you asked me for a certain month; is that correct? * * * THE WITNESS: During the investigation I requested certain documents, yes. You're correct, I asked you for certain months, you had different issues with the Department that I was looking at. . . . * * * You didn't provide all the months requested and we came to the audit, you didn't provide——at that time, we asked you to see all of your accounts, it just wasn't for the investigation, we wanted to see your escrow account so you should have had for——I don't remember the——we wanted 1-15-08, we would have done from January of '08 to six months prior, let's just say. I don't remember what dates we gave you at the time. But then you would have a file with those documents in your escrow reconciliation statement, with all of your checks, all of your deposits with the bank statement attached, you know, organized. But it wasn't so and you said that you wanted to organize it properly and that's why we allowed you to organize it. So the question, did you provide me documents, yes, you provided me documents in the investigation but not all of the documents requested. TR. 58-60 (emphasis added). The undersigned attempted to elicit from Ms. Hardee a more detailed description of the materials requested during the audit, giving rise to the following exchange: THE HEARING OFFICER: Okay. And can you describe for me what it was in particular that you did request on that day in January of 2008? What did you ask [Mendoza] for? THE WITNESS: Yeah. We asked him for his escrow documents, reconciliation statements, such as the one that you see in [Petitioner's Composite] Exhibit 3. We asked about those months that were missing. We asked him——I don't know if we asked him for six months or one year. I don't remember the time frame we gave him, but pretty much when we go in to do an audit, we get the last six months, usually the months that are particularly discussed, the checks or the deposits that we're looking into for an investigation. * * * So pretty much that's what we asked, all of his escrow operating account that we had for the company, which includes the reconciliation statement, bank statement, deposit checks, as the statute statues here. THE HEARING OFFICER: Okay. You're standard procedure would have been you say in an audit like this, to have asked for the last six months of records right? So you're nodding your head, that's a yes? THE WITNESS: Yes. In this case we asked for the months that I was missing and plus I wanted to do a whole——we were going to do a whole audit. I don't remember right now if I asked him for six months or twelve months, I don't remember that part, but usually we ask for all the documents. THE HEARING OFFICER: And if I could just ask you to clarify do there's no mistake about this, when you say the months that are missing, what months are you referring to? THE WITNESS: I'm sorry, November of '04 and December of '04. TR. 73-75 (emphasis added). The Department did not, at the time of the audit, reduce its request for records to writing, which is unfortunate for the Department because, as the above-quoted testimony shows, Ms. Hardee's memory of specifically what Mendoza had been asked to produce was spotty. Although Ms. Hardee did identify two particular months——November and December of 2004——for which contemporaneous records were sought, this detail is practically random (because no context was given to explain the description of these periods, which predated the audit by more than three years, as "missing" months) and, in any event, fails to make the testimony as a whole explicit or distinctly remembered. The undersigned finds that Ms. Hardee's testimony was insufficiently precise to constitute clear and convincing evidence concerning the particular items that the Department wanted to see. Even if Ms. Hardee's testimony were sufficient on the previous point, however, the proof regarding Mendoza's alleged failure to produce records, which is a separate issue, is less compelling. Ms. Hardee's testimony was that Mendoza made available some but not all of the documents she and Mr. Piper wanted to see. (Actually, a fairer characterization of Mendoza's relative compliance, accepting Ms. Hardee's testimony as true, would be that he produced most of the documents requested, namely six-to-12 or 13 months' worth, failing only to make available documents associated with the last two or three months of 2004.) Mendoza then requested, and was given, additional time to assemble the rest of the materials. For some reason, Mendoza never contacted the Department thereafter to produce the items he could not locate on January 15, 2008, which caused the Department to initiate the instant proceeding. The undersigned largely credits Ms. Hardee's testimony regarding this overview of the events, with the qualification that Mendoza's compliance, while less than 100 percent, was nevertheless substantial. (He might, after all, have produced satisfactorily as much as 13 months' worth of documents, according to Ms. Hardee's testimony.) Given that Mendoza is alleged to have failed only to produce specific documents relating to the particular period from October through December 2004, the undersigned infers that he produced everything else that the Department wanted to see. The Department did not, however, at the time of the audit (or later), prepare an inventory of the records Mendoza made available (or failed to produce), take copies of the materials Mendoza produced, or otherwise reduce to writing the particulars of his noncompliance (e.g. by sending him a letter, soon after the audit, reminding him of the obligation to produce the materials that were not accessible on January 15, 2008, and listing or describing those materials). The absence of a contemporaneous written record of Mendoza's alleged failure to make documents available at the audit is unfortunate for the Department because, on the question of what Mendoza did and did not produce, Ms. Hardee testified as follows: THE HEARING OFFICER: All right. And when you went back in January of 2008 to see the ——Mr. Mendoza at his office and audit his books and records, he produced nothing to you and your supervisor whatsoever on that date in response to the things that you requested to see? THE WITNESS: He may have provided certain documents but were incomplete. I do not remember which documents he provided. * * * I'm not saying he didn't provide me with anything. He didn't provide us with all of the documents we requested. TR. 71-72 (emphasis added). In sum, the evidence against Mendoza consists of the testimony of Ms. Hardee, who in a nutshell says that, while she cannot clearly remember exactly what the Department asked Mendoza to produce, she knows that she requested documents relating to November and December of 2004, and that, while she cannot remember what documents Mendoza made available, she is sure he did not produce everything associated with the fourth quarter of 2004. Assuming for argument's sake that the Department requested the specific documents Mendoza is charged with failing to produce (which is not entirely clear), and accepting that Mendoza did not produce everything that the Department asked to see, the Department's evidence is still too conclusory to support disciplinary action, in view of Ms. Hardee's testimony that the temporal scope of the Department's request for documents was not limited to the three-month period comprising the fourth quarter of 2004 and indeed might have covered 15 months or more. Because, as found above, Mendoza did produce a substantial, albeit indeterminate, amount of documentation, and because there is no clear proof regarding the contents of the records that Mendoza made available, the undersigned is unable to find, based on clear and convincing evidence as the law requires, that Mendoza failed to produce the documents he has been accused of failing to produce. The Charges In Counts I and V of the Administrative Complaint, the Department alleges that Mendoza and Diamonds Realty are guilty of failing to preserve and make available to the Department all deposit slips and bank statements associated with the broker's trust account(s), in violation of Florida Administrative Code Rule 61J2-14.012(1), which is a disciplinable offense under Section 475.25(1)(e), Florida Statutes. In Counts II and VI, it is alleged that Mendoza and Diamonds Realty failed to prepare written monthly statements comparing the broker's total trust liability to the bank balance(s) in the broker's trust account(s), in violation of Florida Administrative Code Rule 61J2-14.012(2)-(3). This alleged violation is a disciplinable offense under Section 475.25(1)(e), Florida Statutes. In Counts III and VII, the Department accuses Mendoza and Diamonds Realty of having failed to preserve and make available to the Department books, accounts, and records pertaining to the brokerage business, in violation of Section 475.5015, Florida Statutes. This alleged violation constitutes a disciplinable offense under Section 475.25(1)(e), Florida Statutes. In Counts IV and VIII of its Administrative Complaint, the Department asserts that Respondents obstructed or hindered the enforcement of Chapter 475, Florida Statutes, in violation of Section 475.42(1)(i), Florida Statutes, which is a disciplinable offense under Section 475.25(1)(e), Florida Statutes. Ultimate Factual Determinations As found and explained above, the evidence is insufficient to prove, clearly and convincingly, that Respondents failed to make available the specific records they are alleged to have withheld. At most the evidence establishes that Respondents were unable, on January 15, 2008, to produce an imprecisely identified (and not clearly proved) subset of the universe of documents that the Department's investigators sought to examine during the audit. This is insufficient to prove, much less clearly and convincingly to demonstrate, that Respondents failed to keep or preserve any particular documents. There is no persuasive evidence that Respondents obstructed or hindered the Department's audit. To the contrary, the evidence shows that Mendoza cooperated with the Department's investigators and substantially complied with their demands. Ultimately, therefore, it is found that Respondents are not guilty of the offences charged in Counts I through VIII of the Administrative Complaint.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Commission enter a final order finding Mendoza and Diamonds Realty not guilty of the offenses charged in the Administrative Complaint. DONE AND ENTERED this 30th day of June, 2009, in Tallahassee, Leon County, Florida. JOHN G. VAN LANINGHAM 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 30th day of June, 2009. COPIES FURNISHED: Patrick J. Cunningham, Esquire Department of Business and Professional Regulation 400 West Robinson Street Hurston Building-North Tower, Suite N801 Orlando, Florida 32801 Nestor G. Mendoza Diamonds Realty of Miami Beach 12501 Southwest 26th Street Miami, Florida 33175 Thomas W. O'Bryant, Jr., Director Division of Real Estate 400 West Robinson Street, Suite 802, North Orlando, Florida 32801 Reginald Dixon, General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792
Findings Of Fact Armando Clemente is licensed as a real estate broker, and has held license 315166 at the times pertinent to the allegations of the Administrative Complaint. Amigo Realty, Inc., was a corporation licensed as a real estate broker, and held license 229372. The Respondents' business address was 2728 Davie Boulevard, Fort Lauderdale, Florida. Mr. Clemente was the sole qualifying broker for Amigo Realty, Inc. In 1989, Mr. Clemente solicited and obtained the exclusive right to sell a residence located at 2840 Southwest Eighth Street, Fort Lauderdale, Florida. It was owned by Louise McNally, a widow who had recently obtained the property through foreclosure. The property was located in an undesirable neighborhood, and in need of cleanup and substantial repair and renovation before it could be sold or leased. Ultimately Mr. Clemente agreed with Ms. McNally that Clemente would repair the house and then try to sell it, or buy it himself. Mr. Clemente contacted an old friend of his, Candido Proenza, about the property. Both Mr. Clemente and Mr. Proenza are Cuban. Mr. Proenza agreed to undertake the renovations and repair of the property through his own labor, while Mr. Clemente was to find a buyer for the property. They agreed that Mr. Clemente would initially pay for the materials used in the repair and renovation, and the parties were to split the net profit equally after Mr. Clemente was repaid for materials from the sale proceeds. Mr. Clemente prepared a deposit receipt and contract for the sale and purchase of the property between himself and Mr. Proenza as buyers and Ms. McNally as the seller. The purchase price was $30,000 and the contract shows that a deposit of $500 had been made toward the purchase price and that the closing was to take place as soon as possible. The special clauses contained in the contract state house is being bought "as is" with not [sic] guarantee or insurance for anything in the house or on property. Buyers guarranty [sic] that they will fix the property under safe and living conditions. Seller does not have to pay any additional money to attorneys or real estate office. Buyers will pay 7% commission on $30,000, at closing to Century 21 Amigo Realty, Inc. and if the house is for sale after repairs have been done it has to be listed with Century 21 Amigo Realty, Inc. or its assigns. (Exhibit B). Although the contract shows on its first page that the deposit of $500 was to be held in trust by Century 21 Amigo Realty, Inc., the line on the final page of the contract which is meant to be signed by the broker to acknowledge the receipt of the deposit is not signed. The contract does bear the signature of both Mr. Clemente and Mr. Proenza as buyers and Ms. McNally as the seller. As will be explained more fully below, on January 10, 1990, Mr. Clemente executed a statement on the letterhead of Amigo Realty in his capacity as a real estate broker stating that Amigo Realty had received in its escrow account the sum of $5,000 towards the purchase price of the property, $2,000 having been received on November 6, 1989, and $3,000 received on December 7, 1989. See, Finding 9. None of these statements were true. The repairs were more expensive than anticipated. While the repairs and renovations to the property were being carried out, Mr. Clemente and Mr. Proenza began to have disputes about such matters as the color of the kitchen cabinets, which required repainting them. During the work Mr. Proenza hurt his back, and it was necessary to have work performed by others. The cost of the renovations also was increased by custom work done for a potential buyer who later was unable to qualify to purchase the property. Mr. Clemente had marital difficulties and while the renovation project was going on, Mr. Clemente separated from his wife. With the agreement of Mr. Proenza, Mr. Clemente moved into the partially renovated house. The divorce caused a financial strain on Mr. Clemente, who ultimately was forced to close down his real estate business, Amigo Realty. Mr. Proenza was as eager as Mr. Clemente to obtain his share of the profit from the renovation and Mr. Clemente needed a place to live because of his divorce. They decided that Mr. Clemente would apply for a mortgage and purchase the house himself. Mr. Clemente made application for a mortgage to the Continental Trust Mortgage Company, with which he had done business in the past. In his loan application which was executed on November 22, 1989, Mr. Clemente represented that a cash deposit towards the purchase price was being held by Amigo Realty in the amount of $3,000, not $500. He later signed a statement on January 10, 1990, certifying that Amigo Realty then held $5,000 towards the purchase price, which consisted of $2,000 deposited on November 6, 1989, and $3,000 on December 7, 1989. The inconsistency between this statement and the loan application is not explained in the statement, but neither are correct. There were never any moneys placed in the trust account by Mr. Clemente as a down payment for his purchase of the property. I do not find credible the testimony of Mr. Clemente that he was unable to recall the figure on the mortgage loan application for the amount in the Amigo Realty trust account, and reject Mr. Clemente's contention that the $3,000 figure was one inserted by Gonzalez on the application so that there would be something in the space. I also reject the argument that because Mr. Clemente was under emotional stress arrising out of his divorce during January, he did not understand the significance or appreciate the consequences of the statement he signed on January 10, 1990, that a total of $5,000 was held in the trust account of Amigo Realty towards the purchase of the property. That statement was given to the mortgage company for its use in determining whether to grant the mortgage loan. Mr. Gonzalez may not have testified directly that the representation that $5,000 was on deposit in Amigo Realty was material to the mortgage company in determining whether to grant the mortgage loan to Mr. Clemente. It is obvious that the mortgage company was sufficiently concerned to seek a certification from Amigo Realty about the monies on deposit as a follow- up to the mortgage application which Mr. Clemente submitted on November 22, 1989. It is reasonable to infer from this fact that Mr. Clemente's certification as the broker for Amigo Realty that it held $5,000 on deposit was a material representation made in connection with the loan application Mr. Clemente had made. That representation was made in the course of Mr. Clemente's activities as a broker, and the representation was false. When the sale of the McNally home was closed on February 2, 1990, only Mr. Proenza received title, which he took as trustee. A handwritten trust agreement says that Mr. Proenza will hold title solely for the use of Mr. Clemente, and will convey the property to Clemente when told to do so by Clemente. Exhibit H, page 4. The trust agreement says nothing about payment by Mr. Proenza of any fees, commissions, discount points or other charges for the benefit of Mr. Clemente. Ms. McNally received $28,423.70, which included the $500 which the contract had reflected as a deposit in the Amigo Realty trust account, but which had not been paid. No broker's commission was paid to Amigo or to Clemente and Ms. McNally had no basis for a complaint about the amount she ultimately received when the contract closed. Shortly after the closing of the sale of the house from Ms. McNally to Mr. Proenza, another transaction closed which passed title from Mr. Proenza, as trustee, to Mr. Clemente individually. Mr. Clemente purchased the renovated house for a gross price of $65,000. In this transaction, Amigo Realty received a commission of $3,250 which was deducted from the proceeds payable to Mr. Proenza (Exhibit E, line 703) as was an additional $2,996.42 loan discount fee of 4.5% of the mortgage amount which was paid to Continental Trust Mortgage, (Id., line 802), plus other miscellaneous charges. These charges had the effect of reducing the amount due to Mr. Proenza as seller by $9,802.80, (Id., line 1400) leaving cash due to him of $55,092.92 (Id., line 603). After deducting the $28,423.70 which Proenza had paid to Ms. McNally to acquire title to the property (Exhibit J), the net sales proceeds were $26,669.22. Mr. Proenza then paid Amigo Realty $13,160.58 for the materials Mr. Clemente had purchased for use in the renovations. This left a "profit" of $13,508.64. If the amount were divided equally between Proenza and Clemente each would have received $6,754.32. Mr. Proenza actually paid Clemente $6,348.14, which would appear to be $406.18 less than Clemente was entitled to receive if that amount were divided in two. Mr. Clemente is only "shorted" if one accepts that Amigo Realty was due a 5% commission from Proenza on the sale from Proenza, as trustee, to Mr. Clemente individually, and that Mr. Proenza was responsible for paying the 4.5% loan discount to Mr. Clemente's mortgage lender, Continental Trust Mortgage. The Trust Agreement signed by Mr. Proenza contains no such provisions. The Department has alleged in paragraph 11 of its Administrative Complaint that Proenza believes Clemente took advantage of his labor and that Proenza was short changed, and did not receive a fair share of the profit. Mr. Proenza's has limited fluency in English. He believes that he was entitled to $13,000 not $7,000. Without payments of the $3,250 commission Proenza paid to Amigo Realty and the $2,996.42 loan discount Proenza paid to Continental Mortgage Company for Mr. Clemente's mortgage loan Mr. Proenza would have been left with $6,246.46 more than the $6,160.50 he received, an amount much closer to the $13,000 Proenza believes he should have cleared when the sales of the house from Ms. McNally to him and then from him to Mr. Clemente had closed. Mr. Proenza's testimony that Mr. Clemente asked him to "lend" Amigo Realty money which Mr. Proenza had expected to receive, becomes understandable. Mr. Clemente manipulated the closing documents to charge Mr. Proenza $6,246.42 as (1) a real estate commission and (2) to pay the loan discount points on Mr. Clemente's mortgage, when he had no agreement from Mr. Proenza that Mr. Proenza should do so. The settlement statement which was used for the closing of the transaction from Mr. Proenza to Mr. Clemente is on a U. S. Department of Housing and Urban Development form which, at first, is quite difficult to understand. It provided a means by which Mr. Clemente was able to defraud the relatively unsophisticated Mr. Proenza. At the closing of the sale from Proenza to Clemente, Clemente also had to come up with money to replace the $5,000 he had represented to the mortgage company was already in the Amigo Realty escrow account. The title company would not accept Mr. Clemente's personal check, so he wrote a check on the Amigo Realty escrow account for the $1,750 shortage. Mr. Clemente deposited this amount into the Amigo Realty escrow account at a drive through teller window at a Fort Lauderdale bank on his way to the closing, but it was after 2:00 p.m. on Friday and the bank records reflected that the check was not credited to the account until the following Tuesday, February 6th. Mr. Clemente had no basis for drawing check #278 on the escrow account of Amigo Realty for $1,750 when he did so. He knew or should have known that the $1,750 had not actually been credited to the Amigo Realty escrow account. On May 2, 1990, the Amigo Realty escrow/trust account was audited. The audit showed and Mr. Clemente acknowledged that Mr. Clemente had never put the $500 earnest money deposit in his escrow/trust account toward the purchase of the McNally property, he had never put the $5,000 deposit in his escrow account which he had represented to his mortgage lender was on deposit in that account. The statement which he gave to his mortgage lender on January 10, 1990, certifying that there was $5,000 in the Amigo Realty trust account was fraudulent. No other shortages were found in the Amigo Realty escrow/trust account. The Respondents have previously been disciplined and paid a fine of $200 for culpable negligence for breach of trust, pursuant to a stipulation executed in April of 1989. Mr. Clemente contends that that stipulation was a plea of convenience which he entered into because the fine was nominal and would have cost him a great deal more than that amount to clear himself of wrongdoing at a formal hearing. Mr. Clemente is a member in good standing of the Fort Lauderdale Board of Realtors. He has not been the subject of any complaints other than the one which Mr. Proenza has filed with the Department. He no longer works as a broker, but now is a sales associate working under the supervision of broker Mike De Rosa.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that both Armando Clemente and Amigo Realty be found guilty of having violated Subsections 475.25(1)(b), (d), and (f), Florida Statutes, as charged in the Administrative Complaint. It is also recommended that Mr. Clemente be fined $1,500; that his license be suspended for two years. DONE and ENTERED this 27th day of November, 1991, at Tallahassee, Florida. WILLIAM R. DORSEY, JR. 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 27th day of November, 1991. APPENDIX TO RECOMMENDED ORDER Rulings on findings proposed by the Department: 1. Rejected as unnecessary. 2 - 4. Adopted in Finding 1. Adopted in Finding 2. Adopted in Finding 3, except for the last sentence which is rejected. I cannot understand how a promise to pay 10% interest was involved in this transaction. Adopted in Finding 4. Adopted in Finding 5. Adopted in Findings 6 and 9. Adopted in Findings 12, 13 and 17. 11a. Adopted in Finding 18. 11b. Adopted in Finding 9. 11c. Adopted in Finding 18. 12. Adopted in Findings 18 and 19. Rulings on findings proposed by the Respondent: Adopted in Finding 1. Rejected as unnecessary. Adopted in Findings 2 - 4. Adopted in Findings 4 - 6. Adopted in Finding 7. Adopted in Finding 8. 7 and 8. Adopted in Finding 9. Rejected, see, Finding 10. Adopted in Finding 12. Adopted in Findings 13 and 14, but see, Findings 15 - 17. Discussed in Finding 18. Adopted in Finding 19. Adopted in Finding 20. Adopted in Finding 21. Rejected, Mr. Proenza was injured financially. It is by no means clear that the mortgage company was uninjured. The evidence is not convincing that there was more equity in the house, as renovated, than the amount of the loan although that fact is not pivotal here. These facts are evaluated in the assessment of the penalty. COPIES FURNISHED: Steven W. Johnson, Esquire Department of Professional Regulation Post Office Box 1900 Orlando, Florida 32802-1900 Karen Coolman Amlong, Esquire AMLONG & AMLONG, P.A. 101 Northeast Third Avenue Suite 203 Fort Lauderdale, Florida 33301 Jack McRay, General Counsel Department of Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Darlene F. Keller, Division Director Department of Professional Regulation Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802-6053
The Issue The issues for determination in this proceeding are whether Respondent violated Sections 475.25(1)(b), (d), (e), and (k), Florida Statutes, 1/ by committing the acts alleged in two administrative complaints; and, if so, what, if any, penalty should be imposed.
Findings Of Fact 1. Petitioner is the governmental agency responsible for issuing licenses to practice real estate and for regulating licensees on behalf of the state. Respondent is a licensed real estate broker under license number 0377781. The last license issued to Respondent was issued as a broker at Wilson Realty International, 1059 Aurora Road, Melbourne, Florida 32935. The Myrie Transaction On July 22, 1993, Respondent negotiated a property management agreement with Harold E. and Bernia L. Myrie (the "Myries") who are residents of New York. Pursuant to the property management agreement, Respondent agreed to manage a rental house owned by the Myries and located in Florida (the "Myrie property"). On August 20, 1993, Respondent negotiated a lease agreement for the Myrie property with Mr. Eric A. Bogle and Ms. Jearlene Davis, as tenants. The tenants paid Respondent $2,590.60 in rental payments for the period August 20 through November 18, 1993. Respondent failed to deposit the rental payments into her escrow account. On November 19, 1993, Respondent issued check number 1501 to the Myries in the amount of $562.50. Respondent represented to the Myries that $562.50 was the net amount due them. The Myries deposited check number 1501. However, the check was returned for insufficient funds. Respondent replaced check number 1501 with another check for $562.50. There were sufficient funds to cover the second check. On December 29, 1993, the Myries cancelled their property management agreement with Respondent. They demanded the balance of $2,028.10. Respondent claimed that $562.50 was the total amount Respondent owed the Myries. Respondent represented that she had incurred expenses for repairs and maintenance to the Myrie property. Respondent never provided an accounting of either the rental proceeds received from the tenants or the alleged expenses for repairs and maintenance. 2/ Respondent failed to produce documents Petitioner needed to conduct an audit of her escrow account. Respondent failed to produce deposit receipts for rent and cancelled checks and written receipts for expenses incurred by Respondent. After Respondent failed to comply with two requests to produce the records Petitioner needed to conduct an audit, Petitioner subpoenaed Respondent's records on August 1, 1994. 3/ Respondent agreed to produce her records for review and audit on August 12, 1994. However, Respondent failed to keep her appointment and never produced the documents subpoenaed by Petitioner. 4/ Respondent misappropriated $2,028.10 paid to her by the tenants and converted those funds to Respondent's personal use. The tenants paid those funds to Respondent in trust for the Myries. The Myries authorized Respondent to collect those funds in trust and to remit the funds to them. Respondent breached the trust of both parties in a business transaction within the meaning of Section 475.25(1)(b). Respondent misrepresented and concealed her use of escrow funds for personal purposes. Respondent engaged in false pretenses to justify her misappropriation and conversion of the escrow funds. Respondent's failure to account for escrow funds paid to her in the Myrie transaction and her failure to produce records needed by Petitioner to audit Respondent's account is culpable negligence. When considered in their totality, the acts committed by Respondent in the Myrie transaction constitute fraud and dishonest dealing by trick, scheme, or device within the meaning of Section 475.25(1)(b). Respondent failed to timely account or deliver rental trust funds within the meaning of Section 475.25(1)(d). Respondent failed to preserve and make available to Petitioner all books, records, and supporting documents and failed to keep an accurate account of all trust fund transactions within the meaning of Florida Administrative Code Rule 61J2-14.012(1). 5/ Respondent failed to maintain trust funds in her real estate brokerage escrow account until disbursement was authorized within the meaning of Section 475.25(1)(k). 2. The Timoll Transaction In June, 1993, Respondent negotiated a property management agreement with Lawrence and Sheila Timoll (the "Timolls") who were residents of New York. Pursuant to the property management agreement, Respondent agreed to manage a rental house owned by the Timolls and located in Florida. (the "Timoll property"). On July 14, 1993, Respondent procured tenants for the Timoll property. William and Sambri Dulmage (the "Dulmages") executed a one year lease. Pursuant to the terms of the lease, the Dulmages agreed to pay a security deposit of $625 and rent at the monthly rate of $600. Respondent received $4,800 from the Dulmages as payment of rent, a security deposit, and expenses associated with the Timoll property. Respondent never delivered any part of the $4,800 to the Timolls. Respondent represented to the Timolls that they were not entitled to any of the $4,800 because the Dulmages had vacated the property and stopped paying rent. Respondent also represented that she had incurred expenses for repairs and maintenance to the Timoll property. 6/ The Dulmages in fact occupied the Timoll property for the duration of the lease and timely paid all amounts in accordance with the terms of the lease. The Timolls knew that the Dulmages were complying with the lease and arranged for the rent to be paid directly to the Timolls in February, 1994. With three minor exceptions, 7/ Respondent did not incur expenses for maintenance and repairs to the Timoll property. 8/ From July 14, 1993, through February 22, 1994, the Timolls made repeated demands for Respondent to deliver the rent and security deposit, and to account for the expenses allegedly incurred by Respondent. Respondent produced property accounting forms describing expenses for maintenance and repairs to the Timoll property. With three minor exceptions, the accounting forms provided by Respondent contained fabricated expenses for maintenance and repairs. 9/ Respondent misappropriated $4,419.45 10/ paid to her by the Dulmages and converted those funds to Respondent's personal use. Those funds were paid to Respondent in trust for the Timolls. The Timolls authorized Respondent to collect those funds in trust and to remit the funds to them. Respondent breached the trust of both parties in a business transaction within the meaning of Section 475.25(1)(b). Respondent misrepresented and concealed her use of escrow funds for personal purposes. Respondent engaged in false pretenses to justify her misappropriation and conversion of escrow funds. Respondent's failure to account for the escrow funds paid to her in the Timoll transaction and her failure to produce records needed by Petitioner to audit Respondent's account constitutes culpable negligence. When considered in their totality, the acts committed by Respondent in the Timoll transaction constitute fraud and dishonest dealing by trick, scheme, or device within the meaning of Section 475.25(1)(b). Respondent failed to timely account or deliver rental trust funds within the meaning of Section 475.25(1)(d). Respondent failed to preserve and make available to Petitioner all books, records, and supporting documents and failed to keep an accurate account of all trust fund transactions within the meaning of Rule 61J2- 14.012(1). Respondent failed to maintain trust funds in her real estate brokerage escrow account until disbursement was authorized within the meaning of Section 475.25(1)(k). 3. The Veil Transaction On November 29, 1993, Respondent entered into a short term lease agreement between Respondent, as the landlord, and Herman J. and Joyce Veil (the "Veils") as tenants (the "Veil transaction"). The Veils lived out of state. They paid Respondent a deposit of $1,919.36 to secure the seasonal rental of Unit 511, Ocean Walk Condominiums ("unit 511"). On March 1, 1994, the Veils traveled to Melbourne and discovered that unit 511 was not available. Respondent never provided the Veils with a rental unit of any kind. The Veils demanded the return of their deposit. On March 11, 1994, Respondent issued check number 1127 in the amount of $1,394.01. Respondent represented to the Veils that $1,394.01 was the total amount due. Respondent deducted $525.35 for motel charges allegedly incurred by Respondent to provide the Veils with temporary lodging for 11 days while Respondent attempted to procure an alternate rental for the Veils. The deduction of $525.35 was not authorized by the Veils. The Veils did not agree to pay for their own motel room. In addition, the motel charges deducted by Respondent included charges for two nights paid by the Veils. After Respondent issued check number 1127 for $1,394.01, Respondent ordered the bank to stop payment on the check. The bank erroneously cashed the check and subsequently requested the Veils to return the proceeds. The Veils refused. Respondent misappropriated $525.35 paid to her by the Veils and converted those escrow funds to Respondent's personal use. Those funds were paid to Respondent in trust for the Veils' seasonal condominium. Respondent breached that trust in a business transaction within the meaning of Section 475.25(1)(b). Respondent misrepresented and concealed her use of escrow funds belonging to the Veils. Respondent engaged in false pretenses to justify her misappropriation and conversion of the escrow funds. Respondent's failure to account for escrow funds paid to her in the Veil transaction and her failure to produce records needed by Petitioner to audit Respondent's accounts constitutes culpable negligence. When all of the facts and circumstances surrounding the Veil transaction are considered, Respondent's attempt to stop payment of her check to the Veils constitutes dishonest dealing by trick, scheme, or device within the meaning of Section 475.25(1)(b). Respondent failed to timely account or deliver rental trust funds within the meaning of Section 475.25(1)(d). Respondent failed to preserve and make available to Petitioner all books, records, and supporting documents and failed to keep an accurate account of all trust fund transactions within the meaning of Rule 61J2-14.012(1). Respondent failed to maintain trust funds in her real estate brokerage escrow account until disbursement was authorized within the meaning of Section 475.25(1)(k). 4. The Sella Transaction On February 14, 1994, Respondent procured a construction contract between Militano Construction, Inc. (the "seller"), and Mr. Lino Sella, (the "buyer"). The buyer lived in Italy and required an interpreter for his negotiations with Respondent. On February 14, 1994, the buyer entrusted Respondent with an escrow deposit of $12,250. The buyer authorized Respondent to administer funds entrusted to her because the buyer was in Italy. 11/ On February 15, 1994, Respondent cashed the check for the escrow deposit. Respondent obtained a cashier's check for $12,250 made payable to "Wilson Realty." Respondent then endorsed the cashier's check for her personal use. 12/ In July, 1994, the buyer authorized Respondent to release the escrow deposit to the seller upon issuance of a certificate of occupancy ("CO") by the City of Indian Harbour Beach, Florida (the "city"). The city issued the CO on September 1, 1994. After the city issued the CO, the seller repeatedly made verbal demands for Respondent to deliver the escrow deposit. On September 9, 1994, the seller wrote a letter to Respondent demanding the escrow deposit. On September 13, 1994, the buyer physically inspected the house, found that it was acceptable, and again authorized disbursement of the escrow deposit. The seller again demanded the escrow deposit. Respondent never delivered the escrow deposit. Respondent never accounted for the deposit to the seller, the buyer, or Petitioner. The seller was unable to pay approximately $9,000 to subcontractors used to construct the buyer's house. The subcontractors recorded mechanics' liens against the Sella property and precluded the seller from delivering good and sufficient title to the buyer. The seller's failure to provide the buyer with good and sufficient title precluded the seller from satisfying its obligations under the terms of the contract with the buyer and caused the seller to breach the contract. The buyer incurred legal expenses in an attempt to quiet title to his house. The seller incurred legal expenses in an attempt to recover the escrow deposit from Respondent. Respondent misappropriated a $12,250 escrow deposit in the Sella transaction and converted that escrow deposit for personal use. The escrow deposit was given to Respondent in trust. Respondent breached that trust in a business transaction within the meaning of Section 475.25(1)(b). Respondent misrepresented and concealed her use of the escrow deposit in the Sella transaction. Respondent's failure to account for the escrow deposit and her failure to produce records needed by Petitioner to audit Respondent's escrow account constitutes culpable negligence. When considered in their totality, the acts committed by Respondent in the Sella transaction constitute fraud and dishonest dealing by trick, scheme, or device within the meaning of Section 475.25(1)(b). Respondent failed to timely account or deliver trust funds within the meaning of Section 475.25(1)(d). Respondent failed to preserve and make available to Petitioner all books, records, and supporting documents and failed to keep an accurate account of all trust fund transactions within the meaning of Rule 61J2-14.012(1). Respondent failed to maintain trust funds in her real estate brokerage escrow account until disbursement was authorized within the meaning of Section 475.25(1)(k). 5. The Stanley Transaction In March, 1994, Respondent procured a construction contract between Atlantic Construction, Inc. (the "seller"), and Trevor and Carol Stanley (the "buyers") who are residents of New York. The buyers entrusted Respondent with an escrow deposit of $7,800. The buyers were unable to qualify for a mortgage and terminated the agreement in accordance with the terms of the construction contract. The buyers agreed to forfeit $500 of the escrow deposit to Respondent as real estate commission. On July 12, 1994, the buyers demanded that Respondent return $7,300 of their escrow deposit. Respondent claimed the entire $7,800 escrow deposit and neither delivered the $7,300 agreed to by the buyers nor accounted for any of the escrow deposit. Petitioner was unable to audit Respondent's escrow account. The bank where the escrow account was maintained closed the account because the account was overdrawn. The bank charged off $3,483.45 in overdrawn funds. Respondent misappropriated a $7,300 escrow deposit in the Stanley transaction and converted the escrow deposit to Respondent's personal use. Those funds were given to Respondent in trust. Respondent breached that trust in a business transaction within the meaning of Section 475.25(1)(b). Respondent misrepresented and concealed her use of escrow funds in the Stanley transaction. Respondent's failure to account for the escrow deposit and her failure to produce records needed by Petitioner to audit Respondent's account constitutes culpable negligence. When considered in their totality, the acts committed by Respondent in the Stanley transaction constitute fraud and dishonest dealing by trick, scheme, or device within the meaning of Section 475.25(1)(b). Respondent failed to timely account or deliver trust funds within the meaning of Section 475.25(1)(d). Respondent failed to preserve and make available to Petitioner all books, records, and supporting documents and failed to keep an accurate account of all trust fund transactions within the meaning of Rule 61J2-14.012(1). Respondent failed to maintain trust funds in her real estate brokerage escrow account until disbursement was authorized within the meaning of Section 475.25(1)(k). 6. Respondent's Conduct Respondent evidenced a gross disregard for the rights and property of others, applicable laws, and the legal process. 13/ Respondent's conduct demonstrated culpable intent to commit the offenses for which she is charged. Respondent has made no attempt at restitution to any of the five clients she harmed, and has made no attempt to pay the overdraws charged off by the bank. Respondent has made no attempt to pay the Sella subcontractors or otherwise remove any cloud on the title to the Sella property. Respondent ignored valid subpoenas issued by Petitioner. Respondent engaged in dilatory acts and misrepresentations. Respondent delayed this proceeding through repeated false pretenses that she was represented by counsel who was unable to appear for previously scheduled formal hearings. Respondent participated in this proceeding for a frivolous purpose. There was a complete absence of a justiciable issue of law or fact in Respondent's defense. Respondent's defense was baseless and a sham. It was no more than a stonewall defense presented for the purpose of delay. Respondent failed to show any of the facts asserted in her defense. She called no witnesses and submitted no material exhibits for admission in evidence. Respondent's cross examination of Petitioner's witnesses nominally attempted to create issues but failed to produce any competent and substantial evidence to support those issues. Respondent repeatedly attempted to establish issues either by unsworn representations or by arguing with witnesses during cross examination. Respondent's sworn testimony at the formal hearing was not credible and was unpersuasive. No competent and substantial evidence supported her testimony. Any evidence that Respondent adduced during her testimony, her cross examination of other witnesses, and in her exhibits was immaterial. Respondent's conduct in this proceeding constituted a reckless waste of quasi-judicial resources as well as a waste of the time and money of Petitioner and its witnesses. Many of those witnesses had already lost time and money as a result of Respondent's conduct before this proceeding began.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order finding Respondent guilty of violating Sections 475.25(1)(b), (d)1., (e), and (k); and Rule 61J2- 14.012(1); revoking Respondent's real estate license; and imposing a fine of $20,000. RECOMMENDED this 15th day of November, 1995, in Tallahassee, Florida. DANIEL S. 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 15th day of November 1995.
Findings Of Fact The parties Petitioner, Department of Professional Regulation, Division of Real Estate (Department), 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 Section 20.30, Florida Statutes, Chapters 120, 455, and 475, Florida Statutes, and the rules promulgated pursuant thereto. Respondent, Linda B. Schumacher, is now and was at all times material hereto a licensed real estate broker in the State of Florida, having been issued license number 0171642 in accordance with Chapter 475, Florida Statutes. The last license issued was as a broker, c/o Linda B. Schumacher, Inc., 155 Worth Avenue, Palm Beach, Florida 33480. Respondent, Linda B. Schumacher, Inc., is now and was at all times material hereto a corporation registered as a real estate broker in the State of Florida having been issued license number 0237256 in accordance with Chapter 475, Florida Statutes. The last license issued was at the address of 155 Worth Avenue, Palm Beach, Florida 33480. At all times material hereto, respondent Linda B. Schumacher was licensed and operating as a qualifying broker and officer for Respondent Linda B. Schumacher, Inc. The Brokerage While respondent, Linda B. Schumacher (Schumacher) was a qualifying broker and officer of respondent, Linda B. Schumacher, Inc. (the "Brokerage"), at all times material hereto, the proof also demonstrates that one Marion Jones (Jones), a licensed real estate broker in the State of Florida, was also an officer of the Brokerage and duly licensed to manage its affairs during times pertinent to this proceeding. Regarding Jones' involvement in the Brokerage, the proof demonstrates that in 1988, Schumacher had accepted a proposal of marriage from one Peter Widner, and contemplated moving to Wyoming, the state of Mr. Widner's residence, and selling the Brokerage. Consequently, in or about October 1988, with the mutual expectation that acceptable terms could be negotiated with Jones for the purchase of the Brokerage, Schumacher employed Jones to operate and manage the Brokerage. Incident to such employment, Jones acquired signature authority for the escrow and operating accounts of the Brokerage, and operated the Brokerage on a daily basis from November 1988 until March 13, 1989. From November 1988 to mid-January 1989, Schumacher resided in Wyoming with her finance and from mid-January 1989, to March 13, 1989, following the breach of her engagement, she resided in Miami, Florida. During such periods, Schumacher occasionally visited the Brokerage, but the day-to-day responsibility for its operation was reposed in Jones. On March 13, 1989, Schumacher terminated discussions with Jones concerning the proposed sale of the Brokerage, and also terminated Jones' employment as manager of the Brokerage. The predicate for such action was Schumacher's belief that Jones was diverting staff and customers of the Brokerage to her own business, and the consequent belief that Jones no longer intended to purchase the Brokerage. At the time of Jones' termination, she claimed that Schumacher owed her approximately $4,000.00 for management fees, as well as $4,000.00 for the deposit she paid Schumacher toward the purchase of the Brokerage. Schumacher disputed such sums in light of the matters set forth in paragraph 8, supra. Schumacher, concerned with the possibility that Jones might attempt to access the escrow account of the Brokerage to satisfy her claims against Schumacher, closed the escrow account of the Brokerage at Florida National Bank on March 13, 1989, and contemporaneously opened a new escrow account at that institution, over which she alone had signature authority. All funds that existed in the old escrow account were deposited into the new account. 1/ When Schumacher changed escrow accounts, a number of checks were outstanding on the old account. To address such problem, Schumacher promptly drew replacement checks on the new account, and promptly forwarded such checks to most of the affected persons. Here, there is no persuasive proof that any such person was seriously inconvenienced by the change in escrow accounts or failed to receive the monies due them. 2/ While all outstanding checks were replaced with reasonable promptness, the Department points to the return of three checks drawn on the old account as evidencing some impropriety. In this regard, the proof demonstrates that on March 3, 1989, Jones drew three checks on the old escrow account, two payable to Michael Gretschel (Gretschel) in the sum of $102.50 and $57.84, and one payable to Janet Lebedeker (Lebedeker) in the sum of $341.71. 3/ Lebedeker deposited her check on March 13, 1989, when she knew that escrow account had been closed, and Gretschel deposited his checks on March 15, 1989. These checks were returned by the bank because of the closure of that account. Such checks were, however, replaced with reasonable promptness and, under the circumstances of this case, no impropriety is found in Schumacher's change of escrow accounts, and the consequent return by the bank of these checks. The Department's attempt to audit the Brokerage accounts On Friday, March 24, 1989, the Department's investigator, Sharon Thayer (Thayer) contacted Schumacher to schedule an audit of the Brokerage's escrow accounts. At that time, Schumacher agreed to make her books and records available during regular business hours on Monday, March 27, 1989. Later, on March 24, 1989, Schumacher, apparently uneasy least the escrow records not be in order following Jones' departure, contacted her attorney, G. Michael Keenan (Keenan). Keenan telephoned Thayer and told her that she had no authority to inspect the subject records. In response, Thayer directed Keenan to the legal authority for such inspection, and Keenan thereupon accused her of practicing law without a license, threatened to report her to the Bar Association, told her that she had no authority to review such records on Monday, and that she could see such records "when we're ready to let you see them." 4/ Notwithstanding the advice given the previous Friday by Schumacher's attorney that the records would not be produced, Thayer, along with another investigator, presented herself at the Brokerage at approximately 9:00 a.m. and again at 2:30 p.m., March 27, 1989, to conduct the audit. On each occasion the office was locked, and the person in attendance denied admission. On April 5, 1989, the Department, having been denied access to the records of the Brokerage, issued a Subpoena Duces Tecum to Florida National Bank to obtain copies of any trust account records that it might possess. Such subpoena was served by Thayer on April 10, 1989. 5/ By letter of May 8, 1989, Florida National Bank's counsel notified Thayer that it was customary to advise a customer of a request to produce bank records, and that unless she could provide the bank with legal authority to the contrary, the records could not be produced absent such notification. Apparently not receiving any authority to the contrary, Florida National Bank advised Schumacher of the pending subpoena and by letter of May 12, 1989, her counsel advised Thayer that: By means of this letter, please be advised that Linda B. Schumacher, Inc. and Linda B. Schumacher Real Estate, Inc. hereby object to the service of the Subpoena Duces Tecum on Florida National Bank and to the request that monthly bank statements for September, 1988 through March, 1989 on any and all trust accounts and escrow accounts in the name of Linda B. Schumacher, Inc. and/or Linda B. Schumacher Real Estate, Inc. be produced. Further, the undersigned on behalf of Linda B. Schumacher, Inc. and Linda B. Schumacher Real Estate, Inc. have advised Florida National Bank of their objection and directed Florida National Bank not to produce any said documents to the Department of Professional Regulation. As in the past, Linda B. Schumacher, Inc. and Linda B. Schumacher Real Estate, Inc. remain ready, willing and able to permit the Department of Professional Regulation to review their monthly bank statements for September, 1988 through March, 1989 for any and all trust accounts and escrow accounts upon being provided reasonable notice as to the time and date the Department wishes to make the inspection. In the event you wish to make the necessary arrangements to schedule an inspection, please do not hesitate to contact the undersigned immediately inasmuch as my clients remain willing to cooperate with the Department of Professional Regulation. While her counsel's letter of May 12, 1989, references Schumacher's past willingness to make her records available on "reasonable notice," the proof in this case is to the contrary. Rather, the proof supports the conclusion that Schumacher wanted to delay any audit until she could have the records reviewed to insure that they were in order following Jones' departure. 6/ As to her then willingness to produce the records, the proof supports the conclusion that she was then amenable to producing her records; however, the Department delayed contacting her until after May 31, 1989, when Schumacher withdrew her objection to the subpoena served on First National Bank. The audit The First National Bank records were delivered to Thayer on June 2, 1989. Between June 6 and 20, 1989, Thayer audited, with Schumacher's cooperation, the books and records at the Brokerage. The audit of such escrow accounts identified three transactions which the Department contends were improper: a deposit of $2,000.00 made by Val Gabaldon on November 17, 1988, which the Department asserts was not timely returned; a security deposit of $1,500.00 made by Mr. and Mrs. Marvin Silverman on December 2, 1988, which the Department asserts was not timely returned; and, a withdrawal of $50.00 by Schumacher on May 5, 1989, from the escrow account for petty cash. Regarding the Val Gabaldon (Gabaldon) deposit, the proof demonstrates that on November 17, 1988, Gabaldon placed in escrow with the Brokerage a $2,000.00 deposit toward the purchase of a unit at the Palm Beach Hotel. On January 17, 1989, and again on January 25, 1989, Lebedeker, an associate employed by the Brokerage, executed "escrow request forms" seeking the return of the deposit to Gabaldon ostensibly because the contact had been cancelled since financing had not been secured. However, such forms also reflect that on February 2, 1989, Jones, who was then managing the Brokerage, instructed that the deposit not be returned to Gabaldon. At hearing, the Gabaldon purchase agreement was not offered in evidence, Gabaldon did not testify, and no explanation was offered as to why Jones felt it necessary not to disperse the deposit as requested by Lebedeker. Accordingly, there was no competent proof as to the terms of the purchase agreement, when or how it was cancelled, and when the deposit became due to be returned to Gabaldon. The proof does, however, demonstrate that on March 15, 1989, two days after Schumacher regained control of the Brokerage and changed the escrow accounts, that she issued a check to Gabaldon for the return of his deposit, but because the Brokerage had the wrong address for Gabaldon he did not receive his deposit until April 25, 1989. Here, there was no complaint by Gabaldon that his deposit was not returned in accordance with the terms of his purchase agreement, and no impropriety shown regarding Schumacher's handling of this deposit. Regarding the deposit of Mr. and Mrs. Marvin Silverman (Silverman), the proof demonstrates that on or about December 2, 1988, they placed in escrow with the Brokerage a $1,500.00 security deposit under a "memorandum to enter into a lease" of property from Martin and Linda Perlmutter (Perlmutter). That memorandum agreement provided: 7. THIS MEMORANDUM SHALL NOT HAVE THE EFFECT OF A LEASE. THE PARTIES' RIGHTS HEREUNDER ARE CONTINGENT ON (A) FINALIZATION AND EXECUTION OF THE LEASE AGREEMENT WHICH IS CONTEMPLATED BY THIS MEMORANDUM, AND (B) IF APPLICABLE, APPROVAL BY THE CONDOMINIUM BOARD (ASSOCIATION). At hearing, the Department failed to offer the lease agreement ultimately executed by the parties, and consequently the terms of that agreement are not of record. The proof does, however, demonstrate that on March 27, 1989, Perlmutter wrote a letter to Schumacher advising her that the Silvermans had fulfilled their lease agreement, and requesting that their security deposit of $1,500.00 be released to them in full. On May 11, 1989, Schumacher returned the Silvermans' deposit. At hearing, no proof was offered as to when the Perlmutter letter was received by the Brokerage (it was apparently mailed from Nashville, Tennessee), or the reason for the delay, if any, in refunding the deposit. As importantly, neither the Perlmutters nor the Silvermans offered any testimony in these proceedings, and the lease agreement was not offered in evidence. Consequently, there is no competent proof that the deposit was not returned in accordance with the terms of the parties' agreement. Regarding the withdrawal of $50.00 by Schumacher on May 5, 1989, from the escrow account for petty cash, the proof demonstrates that such transaction was inadvertent on her part, in that it should have been withdrawn from her operating account, and that upon such transaction being pointed out to her during the audit of June 6, 1989, by Thayer that Schumacher promptly replaced such funds. Previous disciplinary proceedings Here, there was no suggestion or proof that Schumacher or the Brokerage had previously been the subject of any prior disciplinary proceeding.
Recommendation Based on the foregoing findings fact and conclusions of law, it is RECOMMENDED that a final order be entered finding respondents guilty of having violated the provisions of Section 475.25(1)(e), Florida Statutes, for having failed to produce their records as required by Rule 21V-14.12, Florida Administrative Code, that respondents be reprimanded for such failure, and that all other charges be dismissed. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 9th day of September 1991. WILLIAM J. KENDRICK 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 9th day of September 1991.
