The Issue The issues presented are whether Respondents are guilty of the allegations contained within the Amended Administrative Complaint filed against them, and, if so, what disciplinary action should be taken against them, if any.
Findings Of Fact At all times material hereto, Respondent Emilio Faroy has been a licensed real estate broker in the State of Florida, having been issued License No. 0332008. At all times material hereto, Respondent Adriana Creel has been a licensed real estate salesperson in the State of Florida, having been issued License No. 033464. Creel has been employed as a licensed real estate salesperson with Faroy Realty since April 1, 1985. At all times material hereto, Respondent Faroy Realty Company has been a corporation registered as a real estate broker in the State of Florida, having been issued License No. 0236806. At all times material hereto, Respondent Faroy was licensed and operating as the qualifying broker and the sole officer and director of Respondent Faroy Realty Company. The real estate licenses of the Respondents are presently suspended pursuant to an emergency suspension order issued by the Secretary of the Department of Professional Regulation on July 25, 1990, because of their activities at the Dunes Beach Club. Respondent Faroy and Respondent Creel live in a unit owned by Creel at the Dunes Beach Club. Faroy Realty is registered at that same address. The Dunes Beach Club is a former motel on Miami Beach which was purchased by a developer. The units were sold to individual owners, many of whom make their units available for rental to transients and tourists. Although the Dunes Beach Club is not a condominium, there is a Homeowners' Association. The developer retained ownership of certain commercial space within the Dunes Beach Club and leased the "front desk" to a realtor who managed rentals and sales of the individual units. The Homeowners' Association became dissatisfied with that realtor and bought the lease for the front desk. At the May 19, 1986, Board of Directors meeting, the Dunes Beach Club Homeowners' Association decided that it was in the Association's best interest to hire someone to both run the operation of the front desk and manage the Association's affairs. Adriana Creel, a member of the Board of Directors, was hired for that position. Her agreement with the Board was that she would be paid $30,000.00 as a salary, that she would be given the front desk office to use at no charge, add that the Association would receive 1% of the sales price as a commission for any sales or resales of units produced through her office. No evidence was offered to show that Creel sold any units through that office or paid a commission to the Homeowners' Association during the one year that that arrangement was in effect. Creel received no commissions for renting rooms during that year since she was a salaried employee of the Homeowners' Association, and renting rooms was part of her responsibilities. In April of 1987, the Homeowners' Association decided not to renew their front desk lease with the developer and told Creel to vacate the premises immediately and to cease renting rooms. She did not do so. Instead, she and Faroy negotiated a lease with the developer, the Dunes Beach Club, Inc., which lease commenced on May 1, 1987. Pursuant to the terms of the lease, Faroy Realty was given the right to use the front desk area for "real estate rental and sales" for 36 months in exchange for Faroy Realty paying the sum of $1,050.00 per month as rent for that space. A few months later, the business address for Faroy Realty was changed to the address of the Dunes Beach Club. From that point forward until the date of the emergency suspension order entered against Respondents herein, Creel ran the front desk operation through Faroy Realty. She and Faroy set up an operating account in the name of Faroy Realty for the Dunes Beach Club operation. She arranged rentals for approximately 60 of the units at the Dunes Beach Club, collecting the rental money and depositing it Into the Faroy Realty account. She paid expenses from that account and remitted to the owners of the units the rental monies minus expenses. Although the Homeowners' Association, when it was running the front desk, had written agreements with some of the unit owners for the rental of their units, when Faroy Realty took over that operation it obtained no written agreements from any of the unit owners on whose behalf Faroy and Creel acted. In November of 1989, Creel wrote six checks to Irene Avellino for the proceeds of rentals covering May through September for units 210 and 268. At the time that those checks were written, Faroy Realty did not have sufficient funds in its checking account to cover those checks. In November of 1989, Creel wrote two checks to Samco c/o Stan Paul, representing rental proceeds for May and June for units 124, 128, and 132. At the time that those checks were written, Faroy Realty did not have sufficient funds in its checking account to cover those checks. Respondent Creel also wrote two checks to Andrew Mecca representing rental proceeds for unit 102 at the Dunes Beach Club. At the time that those checks were written, Faroy Realty did not have sufficient funds in its checking account to cover those checks. Pursuant to complaints received by Petitioner, Petitioner initiated an investigation of Respondents on November 9, 1989. The Department's investigator met with Faroy and Creel a number of times. Creel told the investigator that she had made restitution for the worthless checks she had written on the Faroy Realty account. When the investigator contacted Avellino, Paul, and Mecca in mid-December, they advised him that restitution had not been made. Faroy Realty also had an escrow account. Faroy told the investigator that although monthly reconciliation statements had been made on Faroy Realty's escrow account, none of them could be located. A subpoena was issued to Faroy Realty and Emilio Faroy on February 9, 1990, for all escrow and operating account monthly bank statements, cancelled checks, all purchase/sale contracts and leases including addenda for the period January 1987 through present, all employment agreements, and bank deposit slips. Very few records were produced pursuant to that subpoena. The few bank statements which were produced indicated that the Faroy Realty escrow account experienced overdrafts in the early part of 1989. An examination of the Faroy Realty escrow account further revealed that between March of 1987 and October of 1989, Creel wrote checks from the Faroy Realty escrow account for such personal expenses as insurance on automobiles, payments on automobiles, repairs on fax machines, dinners, health insurance, and pet supplies. She had even written checks from the escrow account to Faroy Realty with the notation that the money represented a loan. In defense of her using escrow monies for personal expenses, Creel testified at the final hearing that those checks represented earned commissions. That being the case, then the escrow account contained personal monies intermingled with trust monies. In defense of Respondent Creel writing checks on the Faroy Realty operating account when there were not monies in the account to cover those checks, Creel testified that she would write postdated checks to the unit owners commensurate with the date that she had calculated there would be sufficient monies in the account to cover those checks. Whatever her reason for doing so, the fact remains that Creel wrote checks from an account which did not have monies in the account to cover those checks. Creel's explanation for the worthless checks written in November revolved around a German tour group which, according to Respondents' exhibit, stayed at the Dunes Beach Club in October. However, the checks written by Creel in November which "bounced," on their face, represent the proceeds from rentals well prior to October. Creel testified that Emilio Faroy knew nothing of her check-writing practices. Taken in its best light, her testimony shows that Faroy failed to exercise his supervisory responsibilities over the Faroy Realty escrow account, the Faroy Realty operating account, and Faroy Realty's licensed salesperson Creel. Creel's testimony is consistent with Faroy's statement to Petitioner's investigator that he was primarily involved with his bail bond business and Creel was running Faroy Realty. Creel testified that monthly reconciliation statements had been made regarding the Faroy Realty escrow account but that they could not be found. She further testified that no attempt was made to obtain copies from the accountant who allegedly prepared those monthly statements and that she does not know whether Faroy ever signed any of the monthly reconciliation statements alleged prepared. An accountant testified on behalf of Respondents in this proceeding that he was hired in March of 1990 to do the monthly reconciliation statements on Faroy Realty's escrow account and that he had gone back to 1986 to prepare those reconciliations. None of the statements performed by that accountant have been signed by Faroy. It is found that Respondent Faroy has failed to prepare, sign, retain, and produce for inspection the required written monthly escrow account reconciliations. Creel testified that restitution had been made for the worthless checks written to Avellino, Samco c/o Stan Paul, and Mecca. Absent from her testimony was the date on which restitution was made. Respondents did offer in evidence affidavits regarding those three unit owners, which affidavits were admitted without objection. One of the affidavits was dated August 29, 1990 and two were dated August 30, 1990, one and two days prior to the final hearing in this cause. Absent from each of the three affidavits is the date on which restitution was made. The affidavits state that two of the owners have received restitution. It is noted that the affidavit from Stan Paul does not, in fact, state that restitution was made but rather that Paul has arranged a payment plan with Creel. No proof of restitution was offered to Petitioner prior to the entry of the emergency suspension order against Respondents or prior to the filing of the Administrative Complaint or Amended Administrative Complaint in this cause. It is also noteworthy that Mecca had to file a lawsuit against Creel and Faroy Realty to secure payment of the rental proceeds for which Creel had written the worthless checks to him. Respondents' failure to produce to Petitioner bank statements, cancelled checks from the escrow account, and monthly reconciliation statements has prevented a meaningful audit from being performed on the Faroy Realty accounts. Similarly, Respondents' failure to provide to Petitioner employment agreements or management agreements has made it impossible to determine Respondents' obligation to the unit owners.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered revoking the real estate certifications, licenses, permits, and registrations of the Respondents Emilio Faroy, Adriana Creel, and Faroy Realty Company. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 19th day of October, 1990. LINDA H. RIGO 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 19th day of October, 1990. APPENDIX TO RECOMMENDED ORDER DOAH CASE NO. 90-5153 Petitioner's proposed findings of fact numbered 2-17 and 19-23 have been adopted either verbatim or in substance in this Recommended Order. Petitioner's proposed findings of fact numbered 1 and 18 have been rejected as not constituting findings of fact but rather as constituting conclusions of law, argument of counsel, or recitation of the testimony. Respondents' proposed findings of fact numbered 2-6, 9-12, 14, 15, 17, 21, 25, 31-33, 36, and 37 have been adopted either verbatim or in substance in this Recommended Order. Respondents' proposed findings of fact numbered 1 and 24 have been rejected as not constituting findings of fact but rather as constituting conclusions of law, argument of counsel, or recitation of the testimony. Respondents' proposed findings of fact numbered 7, 8, 16, 22, 23, 30, and 35 have been rejected as being irrelevant to the issues under consideration herein. Respondents' proposed findings of fact numbered 13, 18, 19, 26-29, 34, and 38 have been rejected as not being supported by the weight of the credible evidence in this cause. Respondents' proposed finding of fact numbered 20 has been rejected as being unnecessary to the issues in this cause. COPIES FURNISHED: James H. Gillis, Esquire Department of Professional Regulation 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32801 Harold M. Braxton, Esquire Suite 400 - One Datran Center 9100 South Dadeland Boulevard Miami, Florida 33156 Kenneth E. Easley, Esquire General Counsel Department of Professional Regulation 1940 North Monroe Street Northwood Centre Tallahassee, Florida 32399-2450 Darlene F. Keller, Division Director Division of Real Estate Department of Professional Regulation 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32801
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 Whether Michael Jacob Piwko (Respondent), committed the violations alleged in the Administrative Complaint dated December 15, 2009, and, if so, what penalties should be imposed.
Findings Of Fact Petitioner is an agency of the State of Florida created by Section 20.165, Florida Statutes. Petitioner is charged with the responsibility of regulating the real estate industry in Florida pursuant to Chapters 455 and 475, Florida Statutes. As such, Petitioner is fully authorized to prosecute disciplinary cases against real estate licensees. Respondent was at the times material to this matter, the holder of a Florida real estate associate license, license number 707518, issued by Petitioner. As last known, Respondent was an active sales associate with All Star Investment Realty, Inc., 9425 Sunset Drive #180, Miami, Florida 33173. From January 2008 through May 2008, Respondent was employed as a sales associate with Enrique Piwko, the qualifying broker for All Star Investment Realty, Inc. In January of 2008, Joaquin Inigo, a buyer, sought to purchase a condominium in Tampa, Florida. He gave Respondent a deposit for the purchase, but was later advised the deal had “fallen through.” On or about May 17, 2008, Mr. Inigo executed a contract for purchase and sale seeking to acquire a second condominium, unit number 208, at 310 Crestwood Circle, Royal Palm Beach, Florida 33411. As part of the transactions with Respondent, Mr. Inigo tendered approximately $77,000.00 to Respondent to be applied to the purchase price of unit 208. Monies were tendered to Respondent directly because Mr. Inigo expected Respondent to get an employee discount related to the sale and pass that on to him. The closing date in July passed without unit 208 being conveyed to Mr. Inigo. Efforts to achieve a refund of the deposit monies were fruitless. Upon investigation of the matter, Petitioner discovered that Respondent never deposited Mr. Inigo’s funds in escrow with his broker. Petitioner did not negotiate the purchase of unit 208. Petitioner did not refund the deposit monies. All monies provided by Mr. Inigo to Respondent were for the purchase of unit 208 and were not a personal loan to Respondent. Respondent asserted in pleadings that the monies from Mr. Inigo were a personal loan. Respondent did not, however, present written evidence of the alleged loan or its terms and declined to respond to the investigatory efforts made by Petitioner. Petitioner did not present evidence regarding the cost of investigating this matter.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Florida Real Estate Commission finding Respondent in violation of the provisions of law set forth in the Administrative Complaint as alleged by Petitioner, imposing an administrative fine in the amount of $2,000.00, and imposing a suspension of Respondent’s real estate license for a period of five years. DONE AND ENTERED this 18th day of June, 2010, in Tallahassee, Leon County, Florida. S J. D. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of June, 2010. COPIES FURNISHED: Joseph A. Solla, Esquire Department of Business and Professional Regulation 400 West Robinson Street, Suite 801N Orlando, Florida 32801-1757 Heather A. Rutecki, Esquire Rutecki & Associates, P.A. Bank of America Tower 100 Southeast Second Street, Suite 4600 Miami, Florida 33131 Roger P. Enzor, Chair Real Estate Commission Department of Business and Professional Regulation 400 West Robinson Street, N801 Orlando, Florida 32801 Thomas W. O’Bryant, Jr., Director Division of Real Estate 400 West Robinson Street, N801 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 The Respondent licensee, Martin County Properties, Inc., was at all times material registered with the Commission as a real estate corporate broker and the Respondent licensee, Jackson L. Smith, was at all times material registered with the Commission as a real estate broker. On May 8, 1974, the G. H. I. Inc., as purchaser, offered to purchase property described as: "132 plus or minus lots, Parcel #1, and 154 plus or minus acres, Parcel #2, in the County of Okeechobee" for a purchases price of $567,600.00 from Nachman Tevlo, et al., seller. Accompanied with this officer, the corporation submitted a $10,000.00 security deposit to be held in trust by the Respondent, Martin County Properties, Inc. In count one of the complaint, it is alleged that the Respondents failed to place that deposit in a trust or escrow account and that on December 31, 1974, Respondent Smith issued a check to the buyer for $7,700.00, which was drawn from its escrow account and that said check was returned for insufficient funds. The complaint alleges that at the time of issuing this check, the Respondent Smith overdrew the firm's escrow account by $402.80 and that by reason thereof, Respondents are guilty of failing to immediately place upon receipt the monies received from persons they dealt with as brokers in an escrow account in violation of Section 475.25(1)(i), Florida Statutes. Robert F. Cochran, Secretary-Treasurer of G.H.I., Inc., the corporate purchaser, acknowledged tendering the deposit in connection with the above referenced transaction. The proposed offer was conditioned on acceptance by two undisclosed partners of which the corporate purchaser had no knowledge of and Respondent Smith was advised to retain the deposit check until such time as the two undisclosed partners accepted the terms of the contract. Respondent Smith was unable to obtain such approval from the undisclosed partners and when the transaction fell through, Respondent returned the original deposit check within one week of the time that he advised the purchasers that the proposed offer was not accepted. Mr. Cochran had no recollection of Respondent Smith ever tendering him a check drawn in the amount of $7,700.00 as alleged in count one of the administrative complaint. (See Commission's Exhibit #1). In count five of the administrative complaint, the Commission alleges in pertinent part that Respondent Smith issued Dwight L. Clemons a check from his trust account drawn in the amount of $4,842.95, which created a deficit in his escrow account of $1,202.20. By such act, it is alleged that the Respondent failed to maintain sufficient monies in his escrow or trust bank account, monies received and entrusted to them by persons dealing with them as brokers until disbursements are properly authorized in violation of Subsection 475.25(1)(i), F.S. Mr. Clemons acknowledged the transaction with Respondent Smith in which he received a return of an escrow deposit in the amount of $4,842.95 which was received in the form of a check which was returned by the bank for "uncollected funds." Mr. Clemons testified that he presented the check to the bank and knowing Respondent Smith, tendered the necessary funds to cover the deficiency and that Respondent Smith returned his money approximately one week later. (See Commission's Exhibit 2). In count six of the administrative complaint, it is alleged that William A. and Agnes Foster, as buyers, made an offer to purchase one half of a duplex in Jensen Beach, Florida, and to secure such offer, they made a security deposit of $1,000.00 to Respondent Smith. It is alleged that Respondent Smith failed to deposit the $1,000.00 in his escrow account and on October 10, 1974, he deposited only $500.00 in his account from this transaction. By reason thereof, it is alleged that the Respondent failed to immediately place in his escrow or trust bank account, upon receipt, monies etc. entrusted to him until disbursements thereof were properly authorized in violation of Subsection 475.25(1)(a), F.S. William Foster acknowledged the subject transaction and his tender of the $1,000.00 deposit. He testified that the seller, Miriam Fell, accepted his offer on or about November 8, 1974, and that the transaction closed without difficulty. However, an examination of Martin County Properties, Inc., trust account statement for the month ending October 1, 1974, reveals that on October 10, 1974, a $500.00 credit was entered on the subject trust account and an examination of the September 4, 1975, check drawn in the amount of $1,000.00 and issued by William A. Foster revealed that the check was deposited in Martin County Properties' trust account on October 10, 1974, the same date that the $500.00 deposit appears on the October trust account statement. Count eight alleges in pertinent part that Respondent Smith received an escrow deposit of $2,500.00 from Jansje Welm, toward the purchase of the "Gideon Property" on Indian River Drive in Jensen Beach. It is further alleged that approximately eight (8) days later, without permission of Jansje Welm, Respondent issued to Martin County Properties, Inc., a check in the sum of $1,000.00 which left a balance in his escrow account of approximately $1,597.00 and that by reason thereof, Respondent Smith is guilty of failing to maintain in an escrow or trust bank account monies received from persons dealing with him as a broker, where such funds should have been kept until properly disbursed or otherwise authorized, in violation of Subsection 475.25(1)(i), F.S. Mrs. Welm testified that she advanced Respondent Smith, a $2,500.00 deposit to secure an offer which she was led to believe consisted of a syndication of approximately six or either others who were interested in purchasing the "Gideon Properties." The transaction did not close and as of the hearing date she had not received a refund or her escrow deposit. An examination of Respondent Martin Counties, Inc., trust account for the month ending December 31, 1974, reveals that a $2,500.00 deposit was made on approximately December 12, 1974, and that for the month ending December 31, 1974, the account was overdrawn by $402.80. This of course covers the time period in which Mrs. Welm had tendered her $2,500.00 deposit toward the "Gideon Properties" and at no time during the period December 6 through December 31, did the statement reveal that Mrs. Welm's deposit was returned. It was noted that a deposit was made during the period December 23 through 27, in the amount of $5,000.00, however, this deposit apparently failed to clear based on insufficient funds. (See, Commission's Exhibit #9). It was also noted that the $2,500.00 check issued by Mrs. Welm was honored by her bank on December 16, 1974, and that during the period in which she drew her check i.e., December 9 through December 23, 1974, the firm's trust account at no time had a balance in excess of $2,297.20. (See, Commission's Exhibit #6). In count ten it is alleged that Respondent Smith also received from his salesman, Jack K. Follrath, a check in the amount of $2,500.00 to be held in escrow toward the purchase of the Gideon Properties. This check was issued by Jerry Warwin and was made payable to the firm's trust fund. It is alleged that on January 8, 1975, Respondent Smith exchanged that check for a cashier's check at the First National Bank and Trust Company which he placed in his personal account. It is further alleged that on March 18, 1975, Warwin's attorney demanded the return of the $2,500.00 which Warwin received on June 18, 1975. By this act it is alleged that the Respondents are guilty of failure to maintain in their escrow account funds entrusted to them in violation of Subsection 475.25(1)(i), F.S.; and are guilty of forming an intent, design or scheme to defraud, appropriate or otherwise convert properties entrusted to them in violation of Subsection 475.25(1)(a), F.S. Warwin testified that while he gave the Respondents no specific instructions to place the money in an escrow account, he was led to understand that the deposit would be escrowed until the sales transaction for the property closed. He testified that after making repeated demands for the return of his deposit, first by himself and ultimately through his attorney, it was returned. Jack Follrath, a salesman for Jackson County Properties, acknowledged receipt of the $2,500.00 check from Jerry Warwin and expressed his opinion that the money was not to be deposited until sufficient escrow deposits were received to effect the closing. The check representing the deposit made by Jerry Warwin was introduced and an examination thereof reveals that it was drawn on January 5, 1975, in the amount of $2,500.00 and was paid by his bank on January 8, 1975. An examination of the firm's trust account statement reveals that on January 8 a $2,500.00 deposit was in fact made, however, on January 13 the account balance was $293.20 which was the same amount remaining in the account as of January 31, 1975. And, of course, at no time during the period of January 8 through January 31, 1975, was Mr. Warwin's $2,500.00 deposit returned. In count eleven, it is alleged in pertinent part that on February 6, 1975, Respondent Smith issued check no. 259 on his trust account made payable to Commercial Trend Development, Inc., for $750.00 and marked "refund - Carter"; that on February 18, 1975, Respondent Smith deposited from the firm's operating account $457.00 in the said trust account and that on February 23, 1975, the check for $750.00 written previously cleared, leaving a total balance of $18.20 in Respondent Smith's trust account. It is alleged that based on the foregoing, Respondents failed to maintain trust funds in their escrow account until such were properly disbursed in violation of Subsection 475.25(1)(i), F.S. Roy Glancy, the real estate salesman who was involved with the Respondent in connection with the Carter transactions, testified that he intended to purchase a piece of property from the Carters which is located in the Dixie Park Subdivision of South Stuart. He acknowledged payment of the $750.00 deposit and indicated that when the transaction did not close, he received a refund of his deposit. It is alleged in count four that on July 15, 1974, Respondent Smith received a deposit of $2,200.00 to be held in trust on the purchase of property known as the "Krueger" property by C & D Contractors, which he (Smith) deposited in his escrow account; that on July 16, 1974, without the permission of C & D Contractors, issued check no. 236 from his escrow account in the amount of $900.00 payable to Martin County Properties, Inc., leaving a balance in his escrow account of $1,360.83 as of July 31, 1974, which amount represented the closing balance for the firm's escrow account for the month of July. It is further alleged that on September 6, Respondent Smith issued a check drawn on his trust account to C & D Contractors in the amount of $2,200.00 marked "deposit refund on Krueger Property" which was returned for uncollected funds. Thereafter on September 23, 1974, Respondent Smith paid C & D Contractors by cashier's check, the sum of $2,200.00 which represented the earnest money deposit placed on the Krueger property. Robert Coy, President of Coy and Deggeller Construction Co. of Stuart, Florida, testified that he made an offer to purchase the Krueger properties to Respondent Smith which offer was accompanied by an earnest money deposit of $2,200.00. Mr. Coy testified that his offer was tendered to Respondent Smith on July 16, 1974, and that when he did not receive any notification from Respondent Smith regarding whether or not his offer had been accepted, he demanded the return of the deposit which occurred during early September 1974. Commission's Exhibit #15 reveals that the $2,200.00 deposit above referred to was deposited into Respondent's trust account on the same date on which the check was drawn, i.e., July 16, 1974. (See, Commission's Exhibits #15 and #11). On that same day, a $900.00 check and/or debit was made to the account leaving a balance of $1,360.83. The firm's account statement reveals that this balance ($1,360.83) was constant throughout the period from July 17 to July 31. During the period July 17 through July 31, Mr. Coy did not receive a refund of his $2,200.00 deposit. Mrs. Betty White, the head bookkeeper of Jensen Beach Bank, the banking institution in which the Respondent Martin County Properties, Inc., maintains its trust account, testified that she provided the firm's account statements pursuant to subpoena and that the account's statements were under her custody and control, and that they were kept and maintained during the normal course of the bank's business. While the Respondent's counsel objected to the introduction of copies of the firm's trust account statements, Mrs. White creditably testified that the original of such account statements were forwarded to the firm (depositor) at the end of each month and that the bank has at its disposal, only microfilm of the originals. Based thereon, Respondent's counsel's objection to the introduction of copies was overruled.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is hereby recommended as follows: That the Respondents be found not guilty of the allegations contained in counts one, two, three, seven, nine and eleven of the administrative complaint and, therefore, that they be dismissed. That the Respondents be found guilty of the allegations contained in counts four, five, six, eight, ten, twelve and thirteen of the administrative complaint filed by the Petitioner. That the Respondent Smith's registration with the Florida Real Estate Commission as a real estate broker be revoked. That the Respondent Martin County Properties, Inc.'s, registration as a real estate corporate broker with the Florida Real Estate Commission be revoked. DONE AND ENTERED this 30th day of March 1977 in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of March 1977. COPIES FURNISHED: Frederick H. Wilsen, Esquire 2699 Lee Road Winter Park, Florida 32789 R. J. Randolph, Sr., Esquire R. Jerry Randolph, Jr., Esquire Randolph and Randolph, P.A. 201 East Osceola Street Stuart, Florida 33494
The Issue Whether the Department of Revenue properly assessed sales or use tax and local government infrastructure surtax on payments allegedly constituting "rent" that Petitioner paid to the mortgagee in accordance with an Occupancy and Indemnity Agreement and Trust Agreement.
Findings Of Fact As of August 10, 1989, the corporation known as Panama City Toyota, Inc., owned a parcel of land where it conducted a new and used car sales business. The automobile inventory and dealer registrations with Toyota, Mitsubishi, etc., were also held in the name of the corporation or in the names of its principals. On that date, Panama City Toyota, Inc., executed a note and mortgage to Omni Finance Corporation in the amount of $1,200,000. The note was guaranteed by the three corporate shareholders, Mark Gerke, Norman Wiese, and Apryl Wiese. On July 11, 1991, a new corporation was formed, A.D.E. of Panama City, Inc. (A.D.E.). Its shares came to be held by members of the David Hill family. A.D.E. was formed for the purpose of acquiring the assets of Panama City Toyota, Inc. On July 29, 1991, A.D.E. (Buyer) and Panama City Toyota, Inc. (Seller) entered into a sale/purchase agreement whereby all the assets of Panama City Toyota were to be purchased by A.D.E. Those assets included an automobile dealership owned and operated by Toyota along with real estate associated with that dealership. The owners of Toyota were concerned that approval of the transfer of the dealership licenses from Toyota to A.D.E. might be held up for a period of several weeks or might be denied. The owners of Toyota needed cash and were anxious to close the portion of the sale transaction that involved the real property. One or more owners of Toyota also expressed the concern that if the dealership transfers were not approved by the automobile manufacturers, Toyota might not be able to "unwind the transfer" of the real property and would, effectively, be out of business. Mr. Robert Dittman, the attorney who represented Toyota in its transfer of assets to A.D.E., testified by deposition that Toyota's lender required title to the real property be held by a separate entity. He explained as follows: The best of my recollection is that the transaction lender which was World Omni Financial Corporation came up with a requirement that the real estate be owned by a separate entity and that originally the parties contemplated that A.D.E. would own both the tangible personal property and intangible personal property that was being sold as well as the real estate that was being sold, and at some point in time apparently the buyer's lender came up with a requirement for whatever reason, and I'm not privy to that reason, that they wanted a separate entity-they did not want the operating entity to own the real property. In order to assure the Buyer that title to the real property could be secured upon approval of the dealership transfers and assure the Seller that the sale could be "unwound" if the dealership transfers were not approved, the attorneys for both sides hit upon the idea of an arrangement whereby Buyer would acquire title to the real property, but transfer it to a "Trustee" who would hold the land until the dealership transfers were either approved or denied. To give the Seller greater comfort, Mr. Gerke was named to serve as the initial "Trustee." The plan was for Seller to continue operations until the dealership transfers were approved, then the payment for the inventories and dealership licenses would be made and the real property would come out of the "trust" to the Buyer. Toyota's conveyance of title to the real property to a Trustee rather than to A.D.E. enabled the parties to satisfy the lender that title would be held by a separate entity, to satisfy the Buyer (A.D.E.) that title to the real property could be secured upon approval of the dealership transfers, and to satisfy the Seller, Toyota that the sale could be "unwound" if the dealership transfers were not approved. Thus, initially the trust had a purpose for its creation. A.D.E.'s former attorney, Mr. Jerry Williams, prepared the Trust Agreement for the Trust in accordance with the agreement between A.D.E. and Toyota, that the Trustee would hold title to the real property. The trust was entered into on December 31, 1991. To give the Seller greater comfort, Mark Gerke, who was shareholder in Toyota and operated the Toyota dealership, was named to serve as the initial Trustee. Also on December 31, 1991, A.D.E. and the initial Trustee of the Trust entered into an Occupancy and Indemnity Agreement. The Occupancy Agreement gave an option to purchase the property to Petitioner, the beneficiary of the trust. The Occupancy and Indemnity Agreement provided in paragraph 3 on page as follows: 3. Note Payments. During the Term, A.D.E. shall pay $12,000 per month for its right to occupy and use the Real Estate, or such greater or lesser amount as shall be required to pay all principal, interest and costs when due under the certain promisory [sic] note to be issued by Trustee as maker in favor of World Omni Financial Corp. as payee ("Note"). Such payments shall be made to the payee or holder of the Note. At all times material to this action, A.D.E. has been the sole beneficiary under the Real Estate Trust Agreement. By specific language in the Agreement, the Trust has no authority to act in any fashion nor as to any matter except as specifically authorized by the beneficiary. The beneficiary has sole authority to authorize action by the Trustee, sole authority at any time to remove the Trustee and sole authority at anytime to terminate and dismantle the Trust entirely and demand distribution of all assets to it. Not long into this arrangement, on April 30, 1992, certain questionable business practices of Seller were discovered. A.D.E. caused Mr. Gerke to resign as "Trustee" and named David Hill, II, as his successor. Mr. Hill was selected by his father, who in effect directed the operations of A.D.E and actually caused the purchase of Toyota and the creation of the various agreements involved in that purchase. David A. Hill, II, has held a majority ownership interest in the Petitioner. At this point the beneficiary and grantor essentially became one. Several months after that on October 21, 1992, the dealership transfers were approved and the second part of the deal was closed. Toyota executed a warranty deed conveying the real property to the trust. The trust no longer had a purpose and the beneficial and title interests merged. By its terms the trust terminated. However, through an oversight, formal transfer of title did not happen. Pursuant to the finalization of the sale (and on the brink of foreclosure by Omni), Buyer assumed the note and mortgage with Omni and Omni released Toyota as maker and Mr. Gerke, Mr. Wiese, and Ms. Wiese as guarantors. Because of the fact that record title was still in Trust, the assumption of the note was in the Trust's name, rather than A.D.E. Therefore, David Hill, II, signed a Note and Mortgage Assumption and Modification Agreement in his capacity "as Trustee under Real Estate Trust Agreement dated December 31, 1991." Around March 25, 1997, financing for the business was moved to SouthTrust Bank. David H. Hill, II, as Trustee under the Trust, obtained a loan from SouthTrust Bank of Alabama, N.A. (SouthTrust Bank) in the amount of $770,990.34 to refinance the purchase of the automobile dealership from Toyota. SouthTrust's attorneys, seeing that title was in a trust, required the trustee to execute an Assignment of Rents. A.D.E. provided its financial statements for the years ending December 31, 1997, and December 31, 1996, to its mortgage holder(s). The mortgage holder relied on the financial assets of A.D.E. in making the loan. The notes to A.D.E.'s financial statements for the years ending December 31, 1997, and December 31, 1996, represented as follows: NOTE 8: INVESTMENT IN SUBSIDIARY The Company has an investment in David Hill, II, Real Estate Trust, a wholly owned subsidiary. Management has elected to use the equity method of accounting for this investment. A.D.E. of Panama City, Inc.'s Equity in the investment at December 31, 1997 and 1996 is $392,836 and $356,688, respectively. Generally accepted accounting principles require that investments in majority owned subsidiaries be accounted for as consolidated subsidiaries. The effect of the departure from generally accepted accounting principles on financial position, results, operations, and cash flows has not been determined. Additionally, the notes to A.D.E.'s financial statements prepared by A.D.E.'s accountant for the years ending December 31, 1996, and December 31, 1997, included the following statement: The Company leases buildings and land for administrative offices and operations from David Hill II Real Estate Trust with terms of monthly renewals. The Company pays the maintenance and repairs for these facilities. The terms of the loan included a requirement that A.D.E. produce a lease between David H. Hill, II, Trustee, as landlord, and A.D.E., as tenant, within 45 days after closing. Additionally, David H. Hill, II, as Trustee, was the sole mortgagor of the property pursuant to the loan by SouthTrust Bank. David H. Hill, II, as Trustee, was the sole maker of the promissory note for the loan. However the funds were used in the operations of the dealership A.D.E. owned. SouthTrust Bank required A.D.E. to execute and provide the bank a resolution of the Board of Directors of A.D.E. before the bank would close the loan. On March 25, 1997, the Board of Directors of A.D.E. approved the resolution required by SouthTrust Bank (Resolution) stating, in part, as follows: WHEREAS, the Corporation agrees to and authorizes its officers to execute any and all documents necessary to secure a loan from SouthTrust Bank of Alabama, N.A., in the approximate amount of $770,990.334 (the "loan"), which will encumber the property which is owned by David H. Hill, II, Trustee under that Trust Agreement dated December 31, 1991, ("Property Owner"), and which is being leased by the Corporation from the Property Owner, (the "property"). The Property is located at 5303 West Highway 98, Panama City, Bay County, Florida . . . . In addition to the Resolution of the Board of Directors of A.D.E., SouthTrust Bank required execution of various documents in order to close the mortgage loan with David Hill, II, Trustee. David Hill, II, as Trustee, executed and delivered to SouthTrust Bank the following documents: Directions from David H. Hill, II, to Execute Documents for the loan. Affidavit of David H. Hill, II, as Trustee, dated March 25, 1997. Title Affidavit executed by David H. Hill, II, Trustee. Again David H. Hill, II, followed his father's instructions in obtaining the SouthTrust Loan and executing the documents for the loan. He never read the trust documents. Likewise he never read the loan documents. Indeed all of the transactions involving A.D.E. or the Trust were directed and instituted by Mr. Hill's father. The Trust never functioned independently of the beneficiary or the Hill family, its stockholders At all times since the transfer of title into the Trust, A.D.E. has made all payments on all debts secured by the property. All such payments were made directly to the lenders and did not pass through the Trust. The Trust, in fact, never had a bank account, never obtained an Employer Identification Number, and never filed (nor was ever required to file) a tax return. All insurance premiums and all real estate ad valorem taxes were paid directly by A.D.E. It is also undisputed that the Internal Revenue Service forms 1120S filed by A.D.E. reflecting income in 1992- 1995 claimed a deduction for rent paid by A.D.E. to the Trustee for the Trust Assets consisting of real property. However, the deductions were matched by the income reported on K-1s to the shareholders of A.D.E. and on various tax returns. The notes to A.D.E.'s financial statements prepared by A.D.E.'s accountant for the years ending December 31, 1997 through December 31, 1999, included the following statement: The Company leases buildings and land from the David Hill II Real Estate Trust. A.D.E. of Panama City, Inc. is the grantor of the trust. Based on all these facts, the evidence established that the Trust for at least tax purposes does not have a separate identity from its beneficiary A.D.E. The Trust is not in the business of renting or leasing property, no matter how much the Trust settlor's and A.D.E. played fast and loose with formal title records. Therefore, the payments of the mortgage by A.D.E. do not constitute rent and are not subject to tax.
Recommendation Based upon the findings of fact and conclusions of law, it is RECOMMENDED: That the Department of Revenue enter a final order finding the payments Petitioner made to its mortgagee are not taxable as rent. DONE AND ENTERED this 2nd day of April, 2001, in Tallahassee, Leon County, Florida. DIANE CLEAVINGER 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 2nd day of April, 2001. COPIES FURNISHED: H. Cranston Pope, Esquire Post Office Box 1609 Panama City, Florida 32402-1609 J. Clifton Cox, Esquire Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32314-6668 James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-1000
The Issue Whether the Certificate of Registration of the Respondent as a real estate broker should be suspended or revoked For alleged violation of Sections 475.25(1)(a), 475.25(1)(c), 475.25(1)(i), and 475.25(3), Florida Statutes, as alleged in the Administrative Complaint filed February 11, 1976. A final hearing was scheduled to be held on June 29, 1976, but pursuant to Motion of Respondent was continued until July 6, 1976 and, pursuant to a further Motion of Respondent For continuance, the hearing was continued until November 15, 16, 1976. A prehearing Motion of Respondent to strike Counts I, II, III, V, VII, VIII, IX & X of the Administrative Complaint was denied at the commencement of the hearing. At the hearing, Petitioner moved to amend Count X of its Complaint to correct a typographical error as to the statutory provision alleged to have been violated. The Motion was granted and the said Count was amended to reflect an alleged violation of Section 475.25(3), F.S. rather than Section 475.25(1), F.S. Pursuant to further Motion of Petitioner, a typographical error appearing in Count VII of the Administrative Complaint relating to the address of the property in question shown in paragraph 1 thereof was corrected to read "1558". Pursuant to further Motion of petitioner, Count Seven was also amended to include an alleged violation of Section 475.25(1)(i), F.S. No objections to any of the above amendments were made by Respondent.
Findings Of Fact Respondent is a registered real estate broker, Certificate No. Q056337. During the year in which the alleged statutory violations occurred, i.e., 1974, she was also registered under the trade name "Watson Real Estate". Also, effective November 4, 1974, she was additionally registered in the name of Connie B. Martin. Her place of business was listed at 17031 North Dixie Highway, North Miami Beach, Florida. (Petitioner's Exhibits 1, 2) On April 16, 1974, Respondent, in the name of "Connie Martin and/or Nominees" entered into an Agreement of Sale and Deposit Receipt with Richard Infante and Susan Infante, his wife, whereby Respondent agreed to purchase real estate located at 1558 N.W. 102nd Street, Miami, Florida, For the price of $24,607.50. The contract provided For a $1,000.00 security deposit by the purchaser in the Form of a check payable to "Watson Real Estate Trust Account" and the Agreement recited an acknowledgement of receipt of these escrow funds by Constance B. Mastellone For Watson Real Estate. The Agreement further provided that closing of the transaction would be on June 23, 1974 and that, in the event of failure or refusal of the purchaser to comply with the obligations thereunder, without fault on the sellers' part, all monies paid under the contract could be retained by the sellers as liquidated damages. Respondent did not place the $1,000.00 deposit in the Watson Real Estate Trust Account that was maintained in the City National Bank of Miami Beach, Miami Beach, Florida. Instead, she wrote a letter to the Infantes on the same day that the contract was executed advising them that the money was in an interest-bearing account at Chase Federal Savings, North Miami Beach, Florida. The letter stated that she preferred to handle the matter in that manner because there was a possibility she would not be able to obtain financing and close the purchase. Although Respondent testified that Mr. Infante called and told her that he had received the letter and had expressed no objection to this disposition of the funds, no written instrument or addendum to the contract in this respect was ever executed by the parties. (Petitioner's Exhibit 14; Respondent's Exhibit 16). The transaction with the Infantes did not close on the scheduled date because Respondent was unable to obtain mortgage financing. On July 1, 1974, Respondent, in the name of "Connie B. Martin, broker" as seller, entered into a deposit receipt agreement with Carrie Clark, as purchaser to sell the Infante property For the sum of $25,000.00. The deposit receipt reflected that the sum of $1,450.00 was acknowledged to be held in escrow by Watson Real Estate as a deposit on the property. There was no showing in this Agreement that Respondent did not hold title to the property at the time. The contract was contingent upon the delivery by the seller of an FHA appraisal of not less than $25,000.00. The Agreement reflected that "Watson Real Estate, Connie B. Martin, Broker" had received the aForesaid deposit. Under the same date of July 1, 1974, another deposit receipt was executed by Carrie Clark as buyer, whereby "Watson Real Estate Trust Account, Connie B. Martin", acknowledged receipt of $1,450.00 from Carrie Mae Clark on the same property as a deposit to be held in escrow by Watson Real Estate. This document showed the purchase price to be $24,607.50. It did not reflect the name of the proposed seller of the property. At the time she executed these documents, Clark did not know who owned the property in question. Respondent viewed Clark as her "Nominee, as referred to in the original contract with the Infantes, and had contracted with Clark on the assumption that she could deliver clear title to her when she had received the same from the Infantes. Respondent considered this transaction to be what she termed a "double closing". Her original contract with the Infantes provided that she would receive as "Watson Real Estate, Connie B. Martin, Broker", 40 percent of the real estate commission on the sale with 60 percent to be paid to the listing broker, Edwin C. Bagby. (Testimony of Respondent, Clark, Petitioner's Exhibit 8; Respondent's Exhibit 6). During the next several months after June, 1974, Respondent advised Infante and his attorney Benjamin Agronow, that she was endeavoring to sell the house to Clark. Infante was desirous of selling the property and did not press to close the transaction. He hereby tacitly agreed to an extension of the time For closing. However, when the Clark deposit receipt was submitted to Agronow in early November, 1974, he advised Infante that the changed method of financing therein would result in higher costs to him. By this time Infante wanted no further dealings with the Respondent and declined to consider the offer by Clark. Thereafter, on November 12, 1974, Agronow advised the Respondent that she had breached the contract of April 16, 1974 For, failure to close the transaction, and demanded delivery of the $1,000.00 deposit under the terms of the contract. It provided that upon default of the purchaser all monies paid thereunder could be retained by the seller as liquidated damages and the contract terminated. Respondent did not pay over the deposit funds to Infante. (Testimony of Respondent, Agronow, Infante (Deposition), Respondent's Exhibit 6, Petitioner's Exhibit 14). On May 25, 1974, Respondent, in the name of "Connie B. Martin and/or Nominees" as purchaser, entered into an Agreement Of Sale And Deposit Receipt with Ruth E. Higgins, as seller, to purchase property located at 1065 N.W. 127th Street, Miami, Florida, For the sum of $31,000.00. The contract provided For the payment of $1,000.00 in the Form of a check to "Watson Real Estate trust account", escrow agent, as a security deposit, and receipt was acknowledged of this amount on the same date by Constance B. Mastellone For Watson Real Estate Trust Account. The contract further provided that it was a "back-up" contract and would not become effective until the date that Higgins was notified that a previous contract with one Hyde was known to be void. Respondent was advised several months later that the Hyde transaction had failed. Neither the listing broker, Associates Real Estate, nor Higgins saw the $1,000.00 at the time the aForesaid agreement of May 25 was entered into by the parties. A letter of Respondent to Higgins on the same date as the contract was executed stated that Respondent held the deposit of $1,000.00 in her account with Chase Federal Savings, North Miami Beach, Florida, in an interest-bearing account. It further stated that Respondent did not want to lose the interest during the time spent waiting For a mortgage commitment. Respondent testified that Higgins called her on the phone and told her she had received the letter and accepted the provisions thereof. Respondent encountered difficulties in obtaining financing For the purchase due to a tight money market and there was also a title problem to be resolved. In any event, the deal did not go through and Respondent obtained a release of the deposit receipt to herself which was executed by Higgins on December 19, 1974. Respondent admitted at the hearing that at no time was the $1,000.00 deposit ever placed in the Watson Real Estate trust account. (Testimony of Respondent, Higgins, Shaeffer; Petitioner's Exhibit 15; Respondent's Exhibits 8, 10, 11, 12, 13). On December 10, 1974, Respondent's daughter, Pamela A. Mastellone entered into an Agreement Of Sale And Deposit Receipt as purchaser of the Higgins property For the sum of $34,000.00. This agreement provided For a security deposit in the sum of $3,000.00 in the Form of a check payable to Ruth E. Higgins. The check was issued by Connnie Mastellone" on December 10, 1974 and was drawn on the City National Bank of Miami Beach. The contract further provided that if it did not close by December 24, 1974, the contract would be null and void and the parties relieved of all obligations. The agreement provided For an even split of a 7.5 percent commission between Associates Realty and Watson Realty. Respondent testified that at the time she gave the check to Higgins, she asked her to hold it until a firm commitment from a mortgage company had been received. Higgins, on the other hand, testified that Respondent had asked her to hold it For two weeks. Respondent was unable to get mortgage financing For her daughter and the contract expired by its terms on December 24, 1974. On December 27, 1974, Higgins deposited the check For payment and it was returned For insufficient funds. (Testimony of Respondent, Shaeffer; Petitioner's Exhibits 16, 17, 18; Respondent's Exhibit 14). On June 18, 1974, Respondent in the name of "Connie B. Martin" as purchaser entered into an Agreement Of Sale And Deposit Receipt with Rose Gilbert, represented by Jean Fielding, Attorney in fact, to purchase real estate located at 16150 N.E. 12th Avenue, North Miami Beach, Florida, For the price of $26,000.00. The Agreement provided that upon signing of the contract, the purchaser would place $2,00.00 in escrow with Watson Real Estate Trust Account and receipt was acknowledged of this sum by Constance B. Mastellone For Watson Real Estate. The contract provided For a 50-50 commission split between Watson Real Estate and Pete Lipinsky, listing broker. At the time the contract was executed, Lipinsky told Respondent that if she did not place the money in escrow, he would "nail her hide to the wall". Respondent testified that she instructed her daughter, Pamela Mastellone, to go to the Chase National Bank and withdraw $2,100.00 and send the same to the Watson Realty Trust Account at City National Bank of Miami Beach. She further testified that it was not until she was investigated by petitioner that she learned her daughter had neglected to follow her instructions in this regard. The contract did not close on the agreed date and thereafter, on September 20, 1974, Respondent, in the name of "Constance B. Mastellone, Broker" entered into another Agreement Of Sale And Deposit Receipt with Gilbert on the same property For a price of $29,000.00. Although this Agreement provided For a security deposit of $2,600.00 to be placed in the Watson Real Estate Account, the parties understood that these were the same funds deposited under the Former contract. This deal closed on October 14, 1974. (Testimony of Respondent, Fielding, Lipinsky; Petitioner's Exhibits 6, 7; Respondent's Exhibits 1, 2). On May 28, 1974, Peter A. Mastellone and Respondent, in the name of "Constance B. Mastellone, Broker, and/or Nominees" was purchaser entered into an Agreement Of Sale And Deposit Receipt with Roy M. Hall and Kitty H. Hall, his wife, to purchase property located at 1517 N.W. 101st Street, Miami, Florida, For the price of $17,000.00. The contract provided For a $1,000.00 check payable to Watson Real Estate Trust Account as escrow agent as a security deposit, and receipt of the said deposit was acknowledged by Constance B. Mastellone on behalf of Watson Real Estate. The contract further specified that the property was being purchased For the purpose of resale and provided For a closing within 30 days. The contract provided that there would be no real estate commission paid on the transaction. Also, on May 28, 1974, Respondent directed letters to the Halls advising them that the $1,000.00 security deposit was in her account at Chase Federal Savings, North Miami Beach, an interest- bearing account, and that she did not want to place it in an escrow account where it would earn no interest. Respondent testified that the Halls orally agreed the deposit money could stay in the savings account of Respondent. This contract did not close, but on August 9, 1974, Respondent executed an FHA deposit receipt as seller whereby she agreed to sell the property to Nicholas Torek and Mary McDonnell Torek For the sum of $23,000.00. The document acknowledged the receipt of a $500.00 security deposit, which was in the Form of a check issued to Watson Real Estate by M.L. McDonnell on August 11, 1974, to be placed in the Watson Real Estate Account. Respondent was unaware at the time that McDonnell and Torek were not married. Torek had authorized McDonell to use his name on the instrument because they were planning to be married. Respondent sent them to a mortgage company to qualify For a mortgage. Several days later, she learned that they were not married and Torek came back and signed a new contract, which was also dated August 9, with the Halls at the same purchase price as his contract with Respondent. The latest agreement provided For a security deposit of $1,250.00 to be held in escrow by Watson Real Estate Trust Account and also provided For a real estate commission to Watson Real Estate of $3,750.00 to be paid by the Halls. An addendum to this contract was executed by Torek and Respondent, dated August 9, 1974, whereby Torek agreed that the $1,250.00 escrow should not be deposited in the trust account, but be given to Peter A. Mastellone For the purpose of making repairs on the property. It further provided that he would hold $850.00 toward closing costs and "prepayables". The document reflects the receipt of $2,100.00 by Peter A. Mastellone. Respondent testified that since $2,100.00 was all that was necessary to close the transaction, her husband returned $500.00 cash to Torek to reimburse McDonnell For her original deposit on the other contract. The Halls were not a party to the addendum to the contract and Torek was not aware that the Halls were the owners of the property until after the transaction was closed on October 4, 1974. Torek testified that he had not signed the second August 9 contract which had been executed by the Halls. However, Torek had agreed to close in his own name when he learned that McDonnell could not qualify For FHA financing. Torek was not concerned about the name in which the transaction was consummated but later, after disputes with McDonnell, quitclaimed his interest to her. Although McDonnell was present at the closing on October 4, the deed to the property was issued in the name of Torek only. McDonnell testified that Respondent had told her to sign the original contract In the name of Torek and in that way the deed would come out in her married name. McDonnell was surprised when the deed was issued only in the name of Torek. McDonnell was aware that the Halls owned the property and that Respondent was attempting to sell it in order to get out from under her own contract with the Halls. McDonnell was not aware that Torek had signed the subsequent agreement in his name only. (Testimony of Respondent, Torek, McDonnell, Petitioner's Exhibits 10, 11, 12, 13; Respondent's Exhibits 5 & 20).
Recommendation That the registration of Constance B. Mastellone as a real estate broker be suspended For a period of six months For violation of subsections 475.25(1)(a), 475.25(1)(c), and 475.25 (1)(i), Florida Statutes. DONE and ENTERED this 3rd day of January, 1977, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Manuel E. Oliver, Esquire Staff Attorney Florida Real Estate Commission 2699 Lee Road Winter Park, Florida James, A. Baccus, Esquire Attorney For Respondent Triangle Building 595 N.W. 91st Street Miami, Florida 33150 ================================================================= AGENCY FINAL ORDER ================================================================= FLORIDA REAL ESTATE COMMISSION ANATOL ARIAN, Petitioner, PROGRESS DOCKET NO. 2788 vs. DADE COUNTY DOAH NO. 76-472 CONSTANCE B. MASTELLONE, Respondent. /
Findings Of Fact The parties Petitioner, Department of Business and Professional Regulation, Division of Real Estate, 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 20.165, Florida Statutes, Chapters 120, 455, and 475, Florida Statutes, and the rules promulgated pursuant thereto. Respondent, Christopher Chillemi (Christopher), is now and was at all times material hereto a licensed real estate broker in the State of Florida, having been issued license number 0136243. The last license issued to Christopher was as a broker- salesperson with Michael F. Chillemi, 3615 Lake Worth Road, Lake Worth, Florida 33460. Respondent, Michael F. Chillemi (Michael), is now and was at all times material hereto a licensed real estate broker in the State of Florida, having been issued license number 0014678. The last license issued was as a broker t/a Century 21 Chillemi Enterprises, 3615 Lake Worth Road, Lake Worth, Florida 33460. Counts I-III, the rental transaction On May 18, 1993, Christopher, while licensed and operating as a broker- salesperson for Michael F. Chillemi, showed a rental unit on which they had a listing, located at 752 Lori Drive, Palm Beach County, Florida, to Ms. Rose M. Bocek. Ms. Bocek liked the apartment, but since she was currently under a lease at another residence, advised Christopher that she could not take the unit unless the owner agreed to start the lease in August 1993. Christopher advised Ms. Bocek that he would present her offer to the owner, who lived out of state, and requested a deposit check should the owner agree. Thereupon, Ms. Bocek issued her check, dated May 18, 1993, payable to "C-21 Chillemi Escrow" in the sum of $375.00, as a deposit on the apartment, and delivered it to Christopher. 1/ That evening, Christopher spoke with the owner and he agreed to lease the apartment to Ms. Bocek starting in August 1993. Ms. Bocek's check for $375 was duly deposited into the Century 21 Chillemi Enterprises' escrow account on May 19, 1993. Notwithstanding that the owner had agreed to lease the premises to her as she had requested, Ms. Bocek called Christopher on May 19, 1993, and told him she had changed her mind and did not want to rent the apartment. Christopher, after checking with the owner, advised Ms. Bocek that, under the circumstances, the owner had advised him not to return her deposit. After speaking with friends, Ms. Bocek contacted the Florida Real Estate Commission to see if it could assist her in retrieving her money and, on June 24, 1993, an investigator went to Century 21 Chillemi Enterprises' office pursuant to that complaint. Subsequently, by letter of June 24, 1993, Ms. Bocek made a written demand on Michael Chillemi, Century 21 Chillemi Enterprises, for the return of her $375.00. After speaking with the owner by phone, and receiving his permission, Michael Chillemi did, on June 25, 1993, release from his escrow account and deliver to Ms. Bocek her deposit of $375.00, and by letter of the same date notified the Florida Real Estate Commission of the disposition of the deposit. The audit of June 24, 1993 While at the premises of Century 21 Chillemi Enterprises on June 24, 1993, petitioner's investigator conducted an audit inspection of Michael Chillemi's escrow account. That audit revealed that although Michael's escrow account balanced perfectly with the sums he should have in escrow, as it had on every prior audit of his office accounts, Michael did not have a written monthly statement-reconciliation document or form upon which was included the date the reconciliation was undertaken, the date used to reconcile the balances, the name of the bank, the name of the account, the account number, the account balance and date, deposits in transit, outstanding checks identified by date and check number, and which was signed and dated by the broker, as required by Rule 61J2- 14.012, Florida Administrative Code. Rather, Michael's practice was to utilize the back of his bank statement, together with a list of all pending contracts (which included the names of the parties, the date the transaction was to close, and the amount in escrow) and his check stubs, to reconcile his trust liability. These sources of information supplied the basic information required by Rule 61J2- 14.012, Florida Administrative Code, but the method employed to account for his trust liability did not result in one document reflecting the required information, and the reconciliation Michael did was not dated and signed. But for such failing, Michael's banking and accounting practices were deemed sound by petitioner's investigator.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be rendered finding Christopher Chillemi not guilty of the allegations set forth in Count I of the Administrative Complaint, Michael Chillemi not guilty of the allegations set forth in Count II of the administrative complaint, and Michael Chillemi guilty of the allegations set forth in Counts III and IV of the administrative complaint. For the violations set forth in Counts III and IV of the administrative complaint it is recommended that Michael Chillemi receive a reprimand, and that he be directed to comply with the provisions of Rule 61J2-14.012(2), Florida Administrative Code, with regard to all future reconciliations. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 8th day of April 1994. 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 8th day of April 1994.
The Issue Whether or not Respondents' registration as real estate brokers should be suspended for an alleged violation of Section 475.25(1)(i), Florida Statutes.
Findings Of Fact On or about the middle of March, 1974, Anne Land, a saleswoman for Respondent real estate brokers, met one Timothy B. Howe who had responded to an advertisement in the newspaper concerning the purchase or lease of a home at 185 West Sunrise Avenue, Coral Gable, Florida. After viewing the premises, Mr. Howe decided to lease the property and his attorney prepared a lease in the total sum of $7,200 for one years rent. This proposal was submitted to the owner of the house, Mrs. Joanne Kealy, but upon the advice of counsel, she declined the proposal. Several days later, Howe decided to purchase the home. He signed a standard sales contract, dated March 26, 1974, which provided for a total purchase price of $72,500.00, payable under the following terms: "The sum of $1,800.00 by check hereby deposited in escrow with Magruder Realty, Inc., as escrow agent, in part payment of the purchase price and as a security deposit for the faithful performance of this contract by Purchaser, and the remainder of the purchase price shall be paid as follows: Upon acceptance of this contract the purchaser to deposit with Magruder Realty, Inc., an additional $5,400.00. Purchaser to assume existing mortgage for approx. $38,816.00 with Coral Gables Federal Svgs and Loan Association and the seller to give to the purchaser a second mortgage for balance of approx. $26,500.00 at 8 1/2 percent for 12 years or less with no pre-paid clause penalty..." The contract was signed by Land as witness and also in behalf of the seller and also as an escrow agent of Magruder Realty, Inc. The document was not acknowledged before a notary public (testimony of Lands Petitioner's Exhibit 1). Land contacted the owner who was out of state at the time and asked her to indicate her acceptance of the offer by telegram. The owner did so on March 29, 1974. The evidence is conflicting as to the circumstances surrounding the disposition of the deposit check for $1,800.00. Land testified that she gave the check to Joseph P. Magruder on March 26 or 27 as was her practice in handling deposits, but said nothing about holding the check. Mr. Magruder, on the other hand, testified that at the time she gave him the check, she said Mr. Howe desired the check be held until the total down payment of $7,200.00 was received from a trust account, and that he therefore put the check in the transaction folder and gave the folder back to her to retain. His statement of the reason for not depositing the check in an escrow account immediately is supported by subsequent events and by the fact that the check was not actually deposited until a subsequent date, which was contrary to his normal office practice (testimony of Land, Magruder, O'Brien; Exhibit 2). Subsequent conversations between Land and Howe during the latter part of March and early April were to the effect that Howe's mother was sending funds for the balance of the down payment. On April 4, Land talked to Howe by telephone and he asked for the escrow account number of Magruder Realty, Inc., in order that his mother could send the additional $5,400.00 and/or $7,200.00. Land asked Respondent O'Brien, who was in the office at the time, for the firm's escrow account number and passed it on to Howe. On the same day, Land went on vacation in North Carolina and did not return to the office until April 15th. At that time, Magruder informed her that the additional funds had not been received from Howe and that although he had tried to reach him on the telephone he had been unsuccessful. Because of the difficulty in reaching Howe as to payment of the balance of the down payment, Magruder deposited the $1,800.00 check in his escrow bank account on April 17, 1974. It was not honored by the Howe's bank because Cristina I. Howe, his wife, had issued a stop payment order on the check on April 15. On March 26, 1974, the date the check was drawn, the Howe bank account was overdrawn by 26 (testimony of Land, Magruder, O'Brien, Garcia; Petitioner's Exhibits 2 & 6; Respondent's Exhibit 1). Although Respondents claimed that the Florida Real Estate Commission had disposed of the instant allegation by its letter of censure dated February 10, 1975, which referenced file CD15240, it was determined by the Hearing Officer that this letter involved other transactions and not the one under consideration at the hearing (Petitioner's Composite Exhibit 5).
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 Whether Petitioner is qualified for licensure as a real estate salesperson.
Findings Of Fact Based upon the evidence adduced at hearing and the record as a whole, the following findings of fact are made: Petitioner is fifty-two years of age. He became licensed as a real estate salesperson in the State of Florida in 1981, after returning to the state (where he was born and raised) from New Jersey. The following year he obtained a license that allowed him to operate as a real estate broker in Florida. In or about 1984, Petitioner formed Landmark Realty, Inc. (Landmark), which operated in Broward County, Florida, as a Century 21 franchise. On or about June 29, 1989, in DPR Case Nos. 0163964 and 0164128, the Department of Professional Regulation, Division of Real Estate, issued an Administrative Complaint against Petitioner and Landmark containing the following allegations: Petitioner 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 is now and was at all times material hereto a licensed real estate broker in the State of Florida having been issued license number 0344112 in accordance with Chapter 475, Florida Statutes. The last license issued was as a broker c/o Landmark Realty, Inc., 1860 N. Pine Island Road, Plantation, Florida 33322. Respondent Landmark Realty, Inc., is now 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 0239155 in accordance with Chapter 475, Florida Statutes. The last license issued was at the address of 1860 N. Pine Island Road, Plantation, Florida 33322. COUNT I The Department of Professional Regulation conducted a routine office inspection/escrow account audit of Respondents' escrow accounts between June 15, 1989 and June 16, 1989. Respondents' escrow account number 55322000377 is held at First Union National Bank of Florida. Respondents' escrow account number 55322000377 had a balance of $1,368.36 on June 16, 1989. The pending sales files revealed that the escrow monies balance should have been $65,250 on June 16, 1989. The escrow account had a shortage of $63,881.64. . . . Respondent Caprio claims he transferred $80,700 from Respondents' escrow account number 55322000377 to the Keys & Keys trust account number 0304301543 on the advice of counsel. . . . Kathy Clements, Operations Officer for County National Bank of South Florida furnished a written letter that the Keys & Keys trust account number 0304301543, had a current balance of $101,901.43 on June 20, 1989. . . . The Respondents failed to furnish any validated documents detailing the dates and amounts of deposits into the aforementioned Keys & Keys trust account from the aforementioned Respondents' escrow account. The Respondents' escrow account number 55322000377 is a commercial money market investment account with the interest going to Landmark Realty, Inc., without the consent or prior knowledge of all parties. . . . The Respondents failed to timely notify the Florida Real Estate Commission of conflicting demands on the earnest money deposit on the contract, dated July 17, 1988, between David B. Perry, as seller, and Earle A. and Yvonne M. Levy, as buyers. The buyers entrusted an earnest money deposit of $1,000 with the Respondents on or about July 17, 1988, and an additional earnest money deposit of $20,000 was entrusted to the Respondents on or about August 22, 1988. The Respondents received a demand letter f[rom] the buyers on December 13, 1988 and a demand letter from the seller's attorney on February 21, 1989. . . . On or about April 19, 1989, the Respondents received or should have received a total earnest money deposit of $4,000 from Perry Silver, as buyer, and Charles Hennessey, as seller. The audit revealed no proof that the additional deposit of $2,000 as required by the contract dated April 19, 1989 was received by the Respondents. . . . The Respondents failed to timely notify the Florida Real Estate Commission of conflicting demands on the earnest money deposit on the contract, dated May 31, 1989, between C. McCanes and J. Steele, as sellers, and Jacqueline W. Mayers, as buyer. The buyer entrusted an earnest money deposit of $1,000 with the Respondents on or about May 31, 1989. The additional deposit of $4,000 as called for in the contract was never received by the Respondents. On June 1, 1989, the buyers made a demand on the earnest money deposit and on June 6, 1989 the seller made a demand for the earnest money deposit. . . . The Respondents, on or about May 16, 1989, did unlawfully disburse check number 0963 from the Respondents' escrow account number 55322000377 to the Respondents' operating account to cover office expenses. The Administrative Complaint further alleged that, "[b]ased upon the foregoing," Petitioner and Landmark were guilty of "fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence and breach of trust in a business transaction in violation of Subsection 475.25(1)(b), Florida Statutes"; "having failed to account and deliver a deposit in violation of Subsection 475.25(1)(d), Florida Statutes"; "having failed to maintain trust funds in [their] real estate brokerage escrow bank account or some other proper depository until disbursement thereof was properly authorized in violation of Subsection 475.25(1)(k), Florida Statutes"; and "having failed to notify the Florida Real Estate Commission upon receiving conflicting demands or having a good faith doubt as to who is entitled to an earnest money deposit according to Rule 21V-10.032, Florida Administrative Code and therefore in violation of Subsection 475.25(1)(e), Florida Statutes." Petitioner had never before had a complaint filed against him. On December 21, 1989, the Florida Real Estate Commission issued a Final Order in DPR Case Nos. 0163964 and 0164128 finding Petitioner guilty of the violations alleged in the Administrative Complaint and revoking his license, notwithstanding his unblemished disciplinary record. The Final Order read, in pertinent part, as follows: On December 5, 1989, the Florida Real Estate Commission heard this case to issue a Final Order. On or about June 29, 1989, an Administrative Complaint was filed against Respondents. The Respondents admitted the allegations of fact. . . . The Respondents were properly served with the Notice of Hearing, appeared and presented matters in mitigation. Based upon the allegations of fact and upon the information provided to the Commission at its meeting of December 5, 1989, the Commission finds the Respondents guilty of violating s.475.25(1)(b), 475.25(1)(d), 475.25(1)(e), and 475(1)(k), Florida Statutes, and Rule 21V-10.032, Florida Administrative Code, as charged in the Administrative Complaint. Therefore, the Commission ORDERS that the license of Respondent Philip Caprio be revoked. The Commission further ORDERS that Respondent Landmark Realty Inc. be reprimanded and that said Respondent pay an administrative fine of $1000.00 within 30 days of the date of this Order. Petitioner did not appeal the Final Order. Following the issuance of the Final Order, reimbursement was made to the victims of the violations of which Petitioner and Landmark had been found guilty. The loss of Petitioner's real estate license has adversely affected his ability to make a living and support his family. Petitioner is married to Teresa Caprio. He and Teresa have a twenty-five year old disabled daughter, who requires assistance in performing the normal activities of daily living. Before the revocation of Petitioner's license, the Caprios' daughter lived at home with them. Teresa was able to stay at home and care full-time for her daughter. After Petitioner's license was revoked, however, she no longer was able to do so, inasmuch as she needed to work outside the home to supplement the family income. The Caprios therefore had to place their daughter in a group home. Although Petitioner has not been able to earn nearly as much as he did when he had his real estate license, he has been gainfully employed since the revocation of his license. From 1989 to 1995, he worked for Potamkin Toyota (Potamkin), an automobile dealership. He started as a salesman at Potamkin. After approximately six months at the dealership, he was promoted to customer relations manager/weekend sales manager. He left the employ of Potamkin in 1995, following a change in management at the dealership. Petitioner is now, and has been since July of 1995, employed by Central Florida Investments, Inc., d/b/a Westgate Miami Beach (Westgate), a seller of timeshare plans. He currently is a salaried employee occupying the position of finance manager, a position to which he was promoted after his first six months with the company. He will be unable to advance further in the company if he does not obtain a Florida real estate license. In his position as finance manager, Petitioner takes deposits made by purchasers and prospective purchasers2 and delivers them to Westgate's contract office, which is approximately 20 feet from his office. Using hidden security cameras, Westgate management closely monitors the workplace activities of Petitioner and his coworkers. Petitioner has performed his job duties in a manner that has impressed Westgate management. He has proven to be a competent, reliable, responsible, honest, and trustworthy employee.3 Petitioner is involved in community activities. He and his wife volunteer their time to operate the Rainbow Foundation, a non-profit organization that they formed two years ago to promote the growth of residential facilities for the developmentally disabled in the South Florida area. It appears that since the revocation of his real estate license, Petitioner has rehabilitated himself and that therefore it is not likely that his relicensure would endanger the public.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Commission issue a final order finding that Petitioner is qualified to practice as a real estate salesperson. DONE AND ENTERED this 26th day of September, 1997, in Tallahassee, Leon County, Florida. STUART M. LERNER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 26th day of September, 1997.
