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. /
The Issue Whether Respondents assisted their client in receiving unclaimed property to which the client was not entitled, and, if so, what discipline should be imposed against Respondents’ locator registration with the Florida Department of Financial Services. Whether Respondents received and refused to return unclaimed property to which they were not entitled, and ,if so, what discipline should be imposed against Respondents’ locator registration with the Florida Department of Financial Services.
Findings Of Fact On November 26, 2014, United States Magistrate Judge Thomas B. McCoun, III, Middle District of Florida, in response to a Motion to Stay filed in a related case by Mortellaro & Sinadinos, PLLC, entered an Order denying the motion. Magistrate McCoun’s Order provides an excellent overview of the facts underlying the instant dispute. The “background facts” set forth below are, in part, taken from Magistrate McCoun’s Order. Background Facts During all times relevant hereto, the Department was responsible for examining and approving all claims for unclaimed property under chapter 717, Florida Laws (2013). Section 717.1400, Florida Statutes, provides that State of Florida licensed private investigators, certified public accountants, and attorneys must register with the Department if they desire to file claims on behalf of claimants seeking unclaimed property from the Department. Upon successfully completing the registration process, a claimant’s representative is assigned a locator identification number. During times relevant hereto, Michelangelo Mortellaro and Gina M. Sinadinos were members in good standing of The Florida Bar. Mr. Mortellaro and Ms. Sinadinos are shareholders in the law firm of Mortellaro & Sinadinos, PLLC. Attorneys Mortellaro and Sinadinos registered with the Department as representatives authorized to assist claimants and were jointly issued locator identification number 103423042. In the instant dispute, Respondents were retained by the Estate of Darlene Swaim to file with the Department a claim for unclaimed property. Diann Capwell and Darlene Swaim had a joint checking account at Wachovia Bank, N.A. (Wachovia). Ms. Capwell, who received social security benefits, passed away on April 23, 1989. From April 1989 through March 2010, the Social Security Administration (SSA) deposited approximately $247,619.00 in benefits for Ms. Capwell into the joint checking account that she held with Ms. Swaim. On March 17, 2004, Ms. Swaim passed away. According to the Department, on April 30, 2010, Wachovia reported to the Department that it held $182,248.61 in unclaimed property in the account titled in the names of Ms. Capwell and Ms. Swaim. Wachovia remitted the funds to the Department, which, in turn, held the $182,248.61 in an unclaimed property account. On November 2, 2012, a Petition for Administration of the Estate of Ms. Swaim was filed in the probate division of the Circuit Court for Broward County, Florida. Mack A. Swaim served as the personal representative of the estate. On February 14, 2013, Attorneys Mortellaro and Sinadinos, pursuant to their registered locator status, filed a claim with the Department on behalf of the Estate of Darlene Swaim for the $182,284.61 (Swaim claim). Upon approval of the claim, Attorneys Mortellaro and Sinadinos would receive 50 percent of the funds as its locator fee. On July 24, 2013, the Department approved the Swaim claim and issued a paper warrant payable to the Estate of Darlene Swaim, c/o Mack A. Swaim, in the amount of $91,142.31 (purported estate funds). The paper warrant for the purported estate funds was delivered to the Mortellaro & Sinadinos law firm. On July 26, 2013, the Department disbursed, via electronic funds transfer, the remaining $91,142.30 to the Mortellaro & Sinadinos law firm as payment of its locator fee. The Social Security Administration On August 1, 2013, SSA notified the Department that the purported estate funds should not have been deposited into the Wachovia joint checking account following Ms. Capwell’s death. SSA did not file a formal claim with the Department until August 14, 2013. The Purported Estate Funds On August 2, 2013, the following email exchange occurred between the Department and Respondents. From the Department (8/2/13 at 2:26 p.m.): I received notification from the Soc. Sec. Admin. that there was a $200,000+ overpayment into the account that was reported to this office. As such, the Soc. Sec. Admin. is entitled to these funds, not the estate or your office. I am currently in the process of cancelling the warrant that was issued to the PR and I advise you to return your fee to this office within 15 days. From Respondent (8/2/13 at 3:20 p.m.): Please be advised that the checks, including the estate check, have been negotiated. With that said, we have not disbursed any of the funds; nor will we, until this matter is resolved. Please be further advised that since the estate is still open, the probate court has exclusive jurisdiction over the estate assets. This position is clearly in line with the unclaimed property statute 717.1242, F.S., - Restatement of jurisdiction of the circuit court sitting in probate and the department. Since this law firm has a fiduciary responsibility to the Personal Representative and the beneficiaries of the estate, it will not release estate funds without the probate court entering an order directing same. On or about August 2, 2013, the paper treasury warrant representing payment to the estate was initially deposited into a checking account opened for the Estate of Darlene Swaim at SunTrust Bank. SunTrust is the same bank where Respondents maintain multiple accounts, including the firm’s IOTA trust account. At the time of presentation of the paper warrant to the bank, SunTrust provisionally made the funds available to the estate for withdrawal. Respondents, after being contacted by the Department on August 2, 2013, regarding SSA’s claim, immediately transferred the estate funds into the firms’ IOTA trust account for safekeeping. The Department, after receiving Respondents’ email reply of August 2, 2013, immediately contacted SunTrust and informed the bank that the paper warrant presented to the bank for payment to the Estate of Darlene Swaim was void. SunTrust reversed the provisional credit to the estate checking account which resulted in the estate account being overdrawn by approximately $91,000. Because SunTrust had only issued a provisional credit for the deposit of the estate funds, this meant that SunTrust needed to reconcile the estate checking account. Accordingly, SunTrust, soon after Respondents transferred the estate funds into their trust account, debited Respondents’ trust account in the amount of $91,142.31. The evidence shows that the estate funds were provisionally made available to both the Estate of Darlene Swaim and Respondents. The evidence also conclusively establishes that monies from the State treasury were never released by the Department to SunTrust, the Estate of Darlene Swaim, or Respondents. On or about August 27, 2013, Respondents filed with the probate division of the Circuit Court for Broward County, Florida, an Emergency Motion to Return Estate Funds. Respondents’ emergency motion argued, in part, that the Department lost jurisdiction of the monies at issue once it approved the estate’s claim, and that the circuit court, sitting in probate, possessed exclusive jurisdiction to resolve any dispute regarding the estate funds. On September 6, 2013, the circuit court held a hearing on Respondents’ emergency motion. The Department did not attend the hearing, and claims that it never received notice of the same. Respondents assert that the Department received proper notice of the hearing on the emergency motion but, for whatever reason, elected not to attend. Nevertheless, the circuit court, after hearing argument from Respondents on the emergency motion, verbally granted the motion and directed Respondents to provide the court with a written order outlining the court’s ruling. By correspondence dated September 9, 2013, the Department advised Respondents that they should “immediately return the $91,142.31 (locator fee) to which the firm is not entitled [and] [i]f [they] fail to return these funds within ten days, the Bureau will pursue appropriate remedies for conversion of the funds.”1/ The letter makes no mention of the emergency motion that was then pending before the circuit court. Furthermore, the September 9, 2013, letter to Respondents does not contain a Notice of Rights statement or any other language which provided Respondents with a clear point of entry to challenge the Department’s contention that Respondents possessed funds (i.e., the locator fee) to which they were not entitled. On September 23, 2013, the Department responded in writing to the emergency motion and argued to the circuit court that the Department has exclusive jurisdiction to determine the merits of claims for unclaimed property held in the State treasury. The circuit court was not persuaded by the Department’s assertions, and on October 30, 2013, entered a written Order granting Respondents’ motion and directed therein that the Department return the $91,142.31 to the Estate of Darlene Swaim on or before November 19, 2013. The Department neither appealed nor complied with the Order of the circuit court, but instead, on November 15, 2013, issued a Notice of Intent to Approve Claim (Notice of Intent) in favor of the SSA in the amount of $182,284.61. A Notice of Rights statement, for the first time, was included with the Notice of Intent. Despite the fact that Respondents were now provided with a point of entry to challenge the Department’s actions, they elected not to challenge the intended action, in part, because they had an Order from the circuit court directing the Department to return the purported estate funds. On January 9, 2014, the Department entered a Final Order Approving Claim (Final Order) in favor of the SSA in the amount of $182,284.61. In addition to the Final Order, the Department also issued a separate Notice of Intent to Offset and Notice of Rights, wherein the Department advised that it was seeking to collect the $91,142.30 locator fee that Respondents still possessed with respect to the Estate of Darlene Swaim from other claims where Respondents were owed locator fees. On February 7, 2014, Respondents appealed the Final Order approving SSA’s claim to the First District Court of Appeal, State of Florida (DCA). Among other things, Respondents requested the DCA “to reverse the final order, and order the Department to return the funds it ha[d] taken from the estate in accordance with its July 24, 201[3], approval of the estate’s claim as well as the probate court’s order directing the return of the [estate] funds.” On March 14, 2014, while Respondents’ appeal to the DCA was pending, the Federal Bureau of Investigation (FBI) seized the $91,142.30 locator fee from Respondents’ bank account. On August 19, 2014, Respondents filed a Verified Claim with the United States District Court seeking return of the seized locator fee. The Department was not a party to the seizure action, and the Estate of Darlene Swaim elected not to participate in the same. After some additional legal wrangling, and recognizing that recovery of its locator fee was contingent upon a successful recovery of the unclaimed monies by the estate (with the claim of the estate having been abandoned by Mr. Swaim), Respondents, on January 20, 2015, withdrew their Verified Claim with respect to the seized locator funds. Respondents “Received” the Locator Fee As noted above, Respondents, in their August 2, 2013, email to the Department, advised that “we have not disbursed any of the funds; nor will we, until this matter is resolved.” Respondents’ representation to the Department that none of the funds would be disbursed reasonably implies that all funds, including the locator fee, would be deposited in Respondents’ trust account. Rule 5-1.1(f), of The Florida Bar Rules Regulating Trust Accounts, provides as follows: Disputed Ownership of Trust Funds. When in the course of representation a lawyer is in possession of property in which 2 or more persons (1 of whom may be the lawyer) claim interests, the property shall be treated by the lawyer as trust property, but the portion belonging to the lawyer or law firm shall be withdrawn within a reasonable time after it becomes due unless the right of the lawyer or law firm to receive it is disputed, in which event the portion in dispute shall be kept separate by the lawyer until the dispute is resolved. The lawyer shall promptly distribute all portions of the property as to which the interests are not in dispute. Rule 5-1.1(f) makes clear that when a lawyer is in possession of disputed property and the lawyer claims an interest in the same, the property shall be treated as trust property and, therefore, kept separate until such time as the dispute is resolved. If Respondents had maintained the locator fee in the firms’ trust account during the pendency of the dispute, Respondents would be in a better position to assert that the firm never actually received the locator fee because of the special character of property held in trust. In her Verified Claim filed with respect to the seized locator fee, Respondent Sinadinos attests to the following: On July 26, 2014, the Department issued a warrant in favor of [Respondents] in the amount of $91,142.30, effectuated by electronic funds transfer, to a bank account of Claimant at SunTrust Bank. Shortly thereafter, [Respondents] transferred the $91,142.31 into [Respondents’] savings account at SunTrust Bank. Subsequently, for accounting purposes, [Respondents] opened a money market account at SunTrust Bank, account number xxx0890, wherein it deposited the $91,142.31 warrant in favor of [Respondents] issued by the Department in connection with claim no. C5047499. The $91,142.30 was seized pursuant to a seizure warrant . . . from SunTrust account number xxx0890. While the Verified Claim references two different amounts, it is clear that the locator fees are the same monies that were seized by the FBI from Respondents’ money market account.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order finding that Michelangelo Mortellaro and Gina M. Sinadinos violated sections 717.1322(1)(a) and 717.1341(1)(a), Florida Statutes. It is further recommended that the Department suspend locator license number 103423042 for a period of one month.6/ DONE AND ENTERED this 21st day of November, 2016, in Tallahassee, Leon County, Florida. S LINZIE F. BOGAN 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 21st day of November, 2016.
Findings Of Fact The Petitioner is a State government agency charged with licensing and regulating the practice of real estate sales and brokerage in the State of Florida. Its authority under Chapter 475, Florida Statutes, includes the duty to prosecute Administrative Complaints against licensees who have allegedly violated the various provisions of Chapter 475 enumerated above. The Respondent, Key Realty Management, Inc., is and was at all times material hereto a corporation licensed as a real estate broker in the State of Florida, having been issued License Number 0222667 in accordance with Chapter 475, Florida Statutes. Respondent Dan Lee Issacs is an officer of and qualifying broker for the Respondent, Key Realty Management, Inc., and holds License Number 0203152. On or about September 26, 1985, Richard A. Cook, an investigator employed by the Petitioner, conducted a routine audit of the Respondents' real property rental management trust account numbered 1201145156 maintained at Barnett Bank at 315 South Calhoun Street, Tallahassee, Florida. The audit consumed about one and one-half days. The audit revealed that as of September 26, 1985, the Respondents had received in trust from their tenants, in their capacity as real estate brokers, damage and security deposits in the amount of approximately $76,566.46. The balance of record in that account at the time of the audit was only $44,232.30. Approximately $32,334.16 were thus unaccounted for. The Petitioner's investigator, Mr. Cook, admitted in his testimony that there was no basis for him to believe that the subject funds unaccounted for had been diverted to the Respondents' own use, embezzled or otherwise improperly employed. He also acknowledged that there was no evidence of intentional misconduct in these particulars. Mr. Cook further conceded in his testimony that this prosecution stems from an increased emphasis by his agency on enforcing the requirements, concerning accounting for escrow monies, expressed in the statutory provisions pled in the Administrative Complaint in the last two years. His testimony reveals that the motivation for this prosecution, at least in part, results from that policy change. No other witness was presented by the Petitioner. The Respondent presented the testimony of Gary Erdman, an accountant and computer consultant. The witness was in charge of the Respondents' accounting, records keeping and management and computer programming. He designed their computer system, which kept up with their rental property management records, receipts and disbursements. During November 1984 to January 1985, the Respondents' business was in the process of converting to a new computer management, data storage and processing system. They were a very busy firm, with a large number of clients and properties which they managed. They thus ran out of space on their old computer system. Mr. Erdman was unable to transfer all the old data and program of the firm to the new system and had to re-program the new system. Some information was lost and never was entered in the new system. Additionally, on July 16, 1985, a problem of an accidental nature, possibly due to lightning, damaged the hard computer data storage disk of the firm and some data, which contained the record of receipts and disbursements regarding the missing $32,334.16, was lost. There was no soft disk or other backup system for this data, so it was irretrievably lost. Mr. Erdman had to start trying to reconstruct the lost data at the same time he was having to keep up, on a day-to-day basis, with his records keeping and accounting responsibilities. The reconstruction process, therefore, took a substantial period of time. Through this witness, the Respondents introduced their Exhibit 1, which was the claim or notice of loss to their insurance carrier as probative of and corroborative of Mr. Erdman's testimony regarding the July 16, 1985 accidental data loss. From that point it took two months after July 16, 1985, to learn from the manufacturer of the hard disk how much of the data had been lost. The Respondents had sent the hard disk to that manufacturer for repair and damage assessment. July and August of every year is the busiest time in the Respondents' rental management business. Possibly because of this they were unaware of the accounting problem regarding the $32,334.16 until it was discovered by Mr. Cook. The Respondents were very cooperative with Mr. Cook and apparently were unaware of the problem until he discovered it. They immediately transferred funds to cover the deficit in the subject escrow account so that no client or entity entitled to the funds therein suffered any loss. No misrepresentation was made to any client, person or entity entitled to any funds in their escrow account concerning the use, location, depository or entitlement to any escrow funds. The Respondents have now corrected the problem with their computer system and have also voluntarily changed their accounting procedures and deposit procedures so that not only loss and damage security deposits, but also rental income itself goes directly to their trust account first, before any disbursement to the landlords entitled to net rentals above the Respondents' fees and costs. Formerly, everything was deposited initially in the Respondents' operating account and then withdrawn and deposited in the escrow account, as to the security and loss and damage deposit receipts. Under the new system, however, they are able to more readily track every monetary receipt and more readily and properly account for it. This change was voluntarily made only a week or two after Mr. Cook's first visit wherein he alerted them to the problem. Additionally, Respondents' Exhibit 2 reflects that apparently there was an excess of $50,000 in the subject bank account as evidenced by a bank reconciliation record contained in that exhibit, which Mr. Cook had not seen at the time of his investigation and prior to the hearing. Thus, the subject $32,334.16 may be somewhat overstated. Further, it was established with this exhibit that, as of October 23, 1985, one month after Mr. Cook's inspection, the subject trust account had a balance of $73,973.56. It was shown by the Respondent that at the time of Mr. Cook's inspection the office staff was overloaded and that transfers to the trust account were running behind schedule. Some of the deficit was merely due to non-timely deposits to the trust account, rather than funds being mistakenly placed in a different account or used for other purposes by mistake, it not having been established that any intentional wrong-doing occurred concerning the trust account and escrow account violations charged. In any event, it has been established that the Respondents' new computer system of accounting and record management has alleviated the problem discovered by Mr. Cook. The Respondents have never encountered such a problem with their deposits either before or after this instance as of the time of hearing. It was established by the Respondent, Dan Issacs, who testified, that neither he nor his firm was co-mingling rental income with funds required to be retained in their trust account but rather were simply unaware of the apparent requirement that rental receipts must first be deposited in the trust account. In any event, it was established conclusively that no funds were diverted for the Respondents' own use or benefit and that all monies are now properly on deposit and are otherwise accounted for and were within a matter of several weeks after the audit and inspection. Additionally, all computer-retained records are now subjected to back-up record keeping at the present time.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, and the candor and demeanor of the witnesses, it is, therefore RECOMMENDED that the Administrative Complaint filed against Dan Lee Issacs and Key Realty Management, Inc. be dismissed in its entirety. DONE and ENTERED this 13th day of May, 1987, in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of May, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-2911 Petitioner's Proposed Findings of Fact: Accepted. Rejected as irrelevant. 3-5. Accepted. Accepted, except as to specific amounts which are found in the Recommended Order. Accepted, but not dispositive. Rejected as not in accordance with the greater weight of the evidence. Accepted. COPIES FURNISHED: James H. Gillis, Esquire Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Elwin R. Thrasher, Jr., Esquire Post Office Box 4351 Tallahassee, Florida 32315 Van Poole, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750 Joseph A. Sole, Esquire General Counsel Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750 Harold Huff, Executive Director Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802
The Issue The issues for determination in this proceeding are whether Respondent violated Sections 475.25(1)(b), (d), and (e), Florida Statutes, 1/ through culpable negligence or breach of trust in a business transaction; by failing to account or deliver trust funds; and by failing to timely notify the Florida Real Estate Commission of a deposit dispute or to implement remedial action; and, if so, what, if any, penalty should be imposed.
Findings Of Fact Petitioner is the governmental agency responsible for issuing licenses to practice real estate and for regulating licensees on behalf of the state. Respondent is a licensed real estate broker under license number 0037920. The last license issued to Respondent was issued as a broker at Heath Realty, 4864 S. Orange Avenue, Orlando, Florida. On May 18, 1993, Mr. Anthony Rodgers and Ms. Jill Rodgers (the "buyers") entered into a contract to purchase real property from Ms. Norma A. Cash (the "seller"). The buyers entrusted Respondent with a total earnest money deposit of $1,000. The transaction failed to close. On July 8, 1993, Respondent timely notified Petitioner in writing that there were conflicting demands for the earnest money deposit and a good faith doubt regarding the deposit. However, Respondent failed to institute one of the settlement procedures described in Section 475.25(1)(d)1. until legal proceedings between the buyer and seller were amicably settled approximately seven months later. Respondent failed to institute a prescribed settlement procedure in a timely manner even though Petitioner advised Respondent in letters dated July 26, 1993, and September 9, 1993, of the action Respondent should take. On February 9, 1994, Respondent finally requested an escrow disbursement order in accordance with Section 475.25(10(d)1. The escrow deposit was paid to the seller pursuant to the agreement of the parties.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order finding Respondent not guilty of violating Sections 475.25(1)(b), 475.25(1)(d)1., but guilty of violating Section 475.42(1)(e) and Florida Administrative Code Rule 61J2-10.032. It is further recommended that the Final Order place Respondent on probation for a period of one year and, during the period of probation, require Respondent to complete courses in broker management not to exceed eight credit hours. RECOMMENDED this 8th day of February, 1995, in Tallahassee, Florida. DANIEL S. MANRY Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 8th day of February 1995.
Findings Of Fact Armando Clemente is licensed as a real estate broker, and has held license 315166 at the times pertinent to the allegations of the Administrative Complaint. Amigo Realty, Inc., was a corporation licensed as a real estate broker, and held license 229372. The Respondents' business address was 2728 Davie Boulevard, Fort Lauderdale, Florida. Mr. Clemente was the sole qualifying broker for Amigo Realty, Inc. In 1989, Mr. Clemente solicited and obtained the exclusive right to sell a residence located at 2840 Southwest Eighth Street, Fort Lauderdale, Florida. It was owned by Louise McNally, a widow who had recently obtained the property through foreclosure. The property was located in an undesirable neighborhood, and in need of cleanup and substantial repair and renovation before it could be sold or leased. Ultimately Mr. Clemente agreed with Ms. McNally that Clemente would repair the house and then try to sell it, or buy it himself. Mr. Clemente contacted an old friend of his, Candido Proenza, about the property. Both Mr. Clemente and Mr. Proenza are Cuban. Mr. Proenza agreed to undertake the renovations and repair of the property through his own labor, while Mr. Clemente was to find a buyer for the property. They agreed that Mr. Clemente would initially pay for the materials used in the repair and renovation, and the parties were to split the net profit equally after Mr. Clemente was repaid for materials from the sale proceeds. Mr. Clemente prepared a deposit receipt and contract for the sale and purchase of the property between himself and Mr. Proenza as buyers and Ms. McNally as the seller. The purchase price was $30,000 and the contract shows that a deposit of $500 had been made toward the purchase price and that the closing was to take place as soon as possible. The special clauses contained in the contract state house is being bought "as is" with not [sic] guarantee or insurance for anything in the house or on property. Buyers guarranty [sic] that they will fix the property under safe and living conditions. Seller does not have to pay any additional money to attorneys or real estate office. Buyers will pay 7% commission on $30,000, at closing to Century 21 Amigo Realty, Inc. and if the house is for sale after repairs have been done it has to be listed with Century 21 Amigo Realty, Inc. or its assigns. (Exhibit B). Although the contract shows on its first page that the deposit of $500 was to be held in trust by Century 21 Amigo Realty, Inc., the line on the final page of the contract which is meant to be signed by the broker to acknowledge the receipt of the deposit is not signed. The contract does bear the signature of both Mr. Clemente and Mr. Proenza as buyers and Ms. McNally as the seller. As will be explained more fully below, on January 10, 1990, Mr. Clemente executed a statement on the letterhead of Amigo Realty in his capacity as a real estate broker stating that Amigo Realty had received in its escrow account the sum of $5,000 towards the purchase price of the property, $2,000 having been received on November 6, 1989, and $3,000 received on December 7, 1989. See, Finding 9. None of these statements were true. The repairs were more expensive than anticipated. While the repairs and renovations to the property were being carried out, Mr. Clemente and Mr. Proenza began to have disputes about such matters as the color of the kitchen cabinets, which required repainting them. During the work Mr. Proenza hurt his back, and it was necessary to have work performed by others. The cost of the renovations also was increased by custom work done for a potential buyer who later was unable to qualify to purchase the property. Mr. Clemente had marital difficulties and while the renovation project was going on, Mr. Clemente separated from his wife. With the agreement of Mr. Proenza, Mr. Clemente moved into the partially renovated house. The divorce caused a financial strain on Mr. Clemente, who ultimately was forced to close down his real estate business, Amigo Realty. Mr. Proenza was as eager as Mr. Clemente to obtain his share of the profit from the renovation and Mr. Clemente needed a place to live because of his divorce. They decided that Mr. Clemente would apply for a mortgage and purchase the house himself. Mr. Clemente made application for a mortgage to the Continental Trust Mortgage Company, with which he had done business in the past. In his loan application which was executed on November 22, 1989, Mr. Clemente represented that a cash deposit towards the purchase price was being held by Amigo Realty in the amount of $3,000, not $500. He later signed a statement on January 10, 1990, certifying that Amigo Realty then held $5,000 towards the purchase price, which consisted of $2,000 deposited on November 6, 1989, and $3,000 on December 7, 1989. The inconsistency between this statement and the loan application is not explained in the statement, but neither are correct. There were never any moneys placed in the trust account by Mr. Clemente as a down payment for his purchase of the property. I do not find credible the testimony of Mr. Clemente that he was unable to recall the figure on the mortgage loan application for the amount in the Amigo Realty trust account, and reject Mr. Clemente's contention that the $3,000 figure was one inserted by Gonzalez on the application so that there would be something in the space. I also reject the argument that because Mr. Clemente was under emotional stress arrising out of his divorce during January, he did not understand the significance or appreciate the consequences of the statement he signed on January 10, 1990, that a total of $5,000 was held in the trust account of Amigo Realty towards the purchase of the property. That statement was given to the mortgage company for its use in determining whether to grant the mortgage loan. Mr. Gonzalez may not have testified directly that the representation that $5,000 was on deposit in Amigo Realty was material to the mortgage company in determining whether to grant the mortgage loan to Mr. Clemente. It is obvious that the mortgage company was sufficiently concerned to seek a certification from Amigo Realty about the monies on deposit as a follow- up to the mortgage application which Mr. Clemente submitted on November 22, 1989. It is reasonable to infer from this fact that Mr. Clemente's certification as the broker for Amigo Realty that it held $5,000 on deposit was a material representation made in connection with the loan application Mr. Clemente had made. That representation was made in the course of Mr. Clemente's activities as a broker, and the representation was false. When the sale of the McNally home was closed on February 2, 1990, only Mr. Proenza received title, which he took as trustee. A handwritten trust agreement says that Mr. Proenza will hold title solely for the use of Mr. Clemente, and will convey the property to Clemente when told to do so by Clemente. Exhibit H, page 4. The trust agreement says nothing about payment by Mr. Proenza of any fees, commissions, discount points or other charges for the benefit of Mr. Clemente. Ms. McNally received $28,423.70, which included the $500 which the contract had reflected as a deposit in the Amigo Realty trust account, but which had not been paid. No broker's commission was paid to Amigo or to Clemente and Ms. McNally had no basis for a complaint about the amount she ultimately received when the contract closed. Shortly after the closing of the sale of the house from Ms. McNally to Mr. Proenza, another transaction closed which passed title from Mr. Proenza, as trustee, to Mr. Clemente individually. Mr. Clemente purchased the renovated house for a gross price of $65,000. In this transaction, Amigo Realty received a commission of $3,250 which was deducted from the proceeds payable to Mr. Proenza (Exhibit E, line 703) as was an additional $2,996.42 loan discount fee of 4.5% of the mortgage amount which was paid to Continental Trust Mortgage, (Id., line 802), plus other miscellaneous charges. These charges had the effect of reducing the amount due to Mr. Proenza as seller by $9,802.80, (Id., line 1400) leaving cash due to him of $55,092.92 (Id., line 603). After deducting the $28,423.70 which Proenza had paid to Ms. McNally to acquire title to the property (Exhibit J), the net sales proceeds were $26,669.22. Mr. Proenza then paid Amigo Realty $13,160.58 for the materials Mr. Clemente had purchased for use in the renovations. This left a "profit" of $13,508.64. If the amount were divided equally between Proenza and Clemente each would have received $6,754.32. Mr. Proenza actually paid Clemente $6,348.14, which would appear to be $406.18 less than Clemente was entitled to receive if that amount were divided in two. Mr. Clemente is only "shorted" if one accepts that Amigo Realty was due a 5% commission from Proenza on the sale from Proenza, as trustee, to Mr. Clemente individually, and that Mr. Proenza was responsible for paying the 4.5% loan discount to Mr. Clemente's mortgage lender, Continental Trust Mortgage. The Trust Agreement signed by Mr. Proenza contains no such provisions. The Department has alleged in paragraph 11 of its Administrative Complaint that Proenza believes Clemente took advantage of his labor and that Proenza was short changed, and did not receive a fair share of the profit. Mr. Proenza's has limited fluency in English. He believes that he was entitled to $13,000 not $7,000. Without payments of the $3,250 commission Proenza paid to Amigo Realty and the $2,996.42 loan discount Proenza paid to Continental Mortgage Company for Mr. Clemente's mortgage loan Mr. Proenza would have been left with $6,246.46 more than the $6,160.50 he received, an amount much closer to the $13,000 Proenza believes he should have cleared when the sales of the house from Ms. McNally to him and then from him to Mr. Clemente had closed. Mr. Proenza's testimony that Mr. Clemente asked him to "lend" Amigo Realty money which Mr. Proenza had expected to receive, becomes understandable. Mr. Clemente manipulated the closing documents to charge Mr. Proenza $6,246.42 as (1) a real estate commission and (2) to pay the loan discount points on Mr. Clemente's mortgage, when he had no agreement from Mr. Proenza that Mr. Proenza should do so. The settlement statement which was used for the closing of the transaction from Mr. Proenza to Mr. Clemente is on a U. S. Department of Housing and Urban Development form which, at first, is quite difficult to understand. It provided a means by which Mr. Clemente was able to defraud the relatively unsophisticated Mr. Proenza. At the closing of the sale from Proenza to Clemente, Clemente also had to come up with money to replace the $5,000 he had represented to the mortgage company was already in the Amigo Realty escrow account. The title company would not accept Mr. Clemente's personal check, so he wrote a check on the Amigo Realty escrow account for the $1,750 shortage. Mr. Clemente deposited this amount into the Amigo Realty escrow account at a drive through teller window at a Fort Lauderdale bank on his way to the closing, but it was after 2:00 p.m. on Friday and the bank records reflected that the check was not credited to the account until the following Tuesday, February 6th. Mr. Clemente had no basis for drawing check #278 on the escrow account of Amigo Realty for $1,750 when he did so. He knew or should have known that the $1,750 had not actually been credited to the Amigo Realty escrow account. On May 2, 1990, the Amigo Realty escrow/trust account was audited. The audit showed and Mr. Clemente acknowledged that Mr. Clemente had never put the $500 earnest money deposit in his escrow/trust account toward the purchase of the McNally property, he had never put the $5,000 deposit in his escrow account which he had represented to his mortgage lender was on deposit in that account. The statement which he gave to his mortgage lender on January 10, 1990, certifying that there was $5,000 in the Amigo Realty trust account was fraudulent. No other shortages were found in the Amigo Realty escrow/trust account. The Respondents have previously been disciplined and paid a fine of $200 for culpable negligence for breach of trust, pursuant to a stipulation executed in April of 1989. Mr. Clemente contends that that stipulation was a plea of convenience which he entered into because the fine was nominal and would have cost him a great deal more than that amount to clear himself of wrongdoing at a formal hearing. Mr. Clemente is a member in good standing of the Fort Lauderdale Board of Realtors. He has not been the subject of any complaints other than the one which Mr. Proenza has filed with the Department. He no longer works as a broker, but now is a sales associate working under the supervision of broker Mike De Rosa.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that both Armando Clemente and Amigo Realty be found guilty of having violated Subsections 475.25(1)(b), (d), and (f), Florida Statutes, as charged in the Administrative Complaint. It is also recommended that Mr. Clemente be fined $1,500; that his license be suspended for two years. DONE and ENTERED this 27th day of November, 1991, at Tallahassee, Florida. WILLIAM R. DORSEY, JR. Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of November, 1991. APPENDIX TO RECOMMENDED ORDER Rulings on findings proposed by the Department: 1. Rejected as unnecessary. 2 - 4. Adopted in Finding 1. Adopted in Finding 2. Adopted in Finding 3, except for the last sentence which is rejected. I cannot understand how a promise to pay 10% interest was involved in this transaction. Adopted in Finding 4. Adopted in Finding 5. Adopted in Findings 6 and 9. Adopted in Findings 12, 13 and 17. 11a. Adopted in Finding 18. 11b. Adopted in Finding 9. 11c. Adopted in Finding 18. 12. Adopted in Findings 18 and 19. Rulings on findings proposed by the Respondent: Adopted in Finding 1. Rejected as unnecessary. Adopted in Findings 2 - 4. Adopted in Findings 4 - 6. Adopted in Finding 7. Adopted in Finding 8. 7 and 8. Adopted in Finding 9. Rejected, see, Finding 10. Adopted in Finding 12. Adopted in Findings 13 and 14, but see, Findings 15 - 17. Discussed in Finding 18. Adopted in Finding 19. Adopted in Finding 20. Adopted in Finding 21. Rejected, Mr. Proenza was injured financially. It is by no means clear that the mortgage company was uninjured. The evidence is not convincing that there was more equity in the house, as renovated, than the amount of the loan although that fact is not pivotal here. These facts are evaluated in the assessment of the penalty. COPIES FURNISHED: Steven W. Johnson, Esquire Department of Professional Regulation Post Office Box 1900 Orlando, Florida 32802-1900 Karen Coolman Amlong, Esquire AMLONG & AMLONG, P.A. 101 Northeast Third Avenue Suite 203 Fort Lauderdale, Florida 33301 Jack McRay, General Counsel Department of Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Darlene F. Keller, Division Director Department of Professional Regulation Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802-6053
The Issue Should Respondent's license as an insurance agent in the State of Florida be disciplined for the alleged violation of certain provisions of Chapter 626, Florida Statutes, as set forth in the Administrative Complaint and, if so, what penalty should be imposed?
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made: The Department is the agency of the State of Florida vested with the statutory authority to administer the disciplinary provisions of Chapter 626, Florida Statutes. Respondent, at all times material to the dates and occurrences referenced in the Administrative Complaint, was licensed as an insurance agent in the State of Florida. Respondent is also currently licensed in the State of Florida as a life and life and health insurance agent. During the late 1990's, Respondent became a selling agent for an entity known as Alliance Trust, which later merged with Chemical Trust, and is now known as Chemical Trust. Respondent first learned of Chemical Trust through Jim Hicks of West Shore Agency of Michigan. Jim Hicks provided Respondent with selling and marketing materials for the investments, which were marketed as "guaranteed contracts" (Guaranteed Contract marketing materials). Respondent gave the Guaranteed Contract marketing materials to Imogene Skipper, Edward Dandignac, Dorothy Dandignac, Theodore Dostal, Alice Lowe, Robert Marsh, Julia Marsh, Raymond Grossman and Mildred Grossman and had each of them sign a compliance verification form to that effect. The Guaranteed Contract marketing materials contained a six-page U.S. Guarantee Corporation (U.S.G.C.) Balance Sheet, dated July 13, 1999, which listed several financial representations, including U.S.G.C.'s Accounts Receivable, Real Estate, Partnerships, Total Assets, Liabilities, Net Equities, Total Net Liabilities and Net Equity, Certificates of Deposit, and various accounting representations. Respondent did not have a background in financials. However, he made no effort to verify the accuracy of U.S.G.C's financial statements in order to protect his customers' investments. U.S.G.C. did not have the financial wherewithal to guarantee investors' investments. The Guaranteed Contract marketing materials listed several members of its "Staff," including Barry Goldwater, Jr. (Vice President/Director); Kenneth R. Pinckard (Executive Director/Vice President); Stephen M. Hammer (Chief Financial Officer); Kenneth Turner (Vice President/Comptroller); etc. Respondent did not verify that any of these individuals was actually on the staff of U.S.G.C. The Guaranteed Contract marketing materials asserted that U.S.G.C. had provided financial support to various charitable organizations, including Compassion International, St. Mary's Food Bank, World Missions, Salvation Army, Food for the Poor, Tennessee, US, etc. Respondent made no attempt to verify these representations. The Guaranteed Contract marketing materials, in the "Explanation of the Trust" section, falsely states, "This is a Trust and has satellite offices throughout the USA. This Trust has been providing clients steady streams of interest and the return of their principal since its inception." Respondent made no effort to verify which, if any, of these clients existed or if the clients were being provided steady streams of interest and return of their principal. The Guaranteed Contract marketing materials, in the Explanation of the Trust section, falsely states, "Profits are made by the Trust by buying and selling financial instruments and physical properties. The US Government sells Investment Grade Paper Backed by Treasury Notes on a daily basis and the Trust has Buyers purchasing large blocks at discounts. " Respondent did not know what Investment Grade Paper Backed by Treasury Notes was, and made no attempt to determine what this term implied. The Guaranteed Contract marketing materials, in the "Explanation of the Trust" section, falsely states: "The Trust also buys distressed properties with plans already drawn for conversion and then sell at a profit immediately. The Bonding Company approves all investments. This insures the integrity of each investment and its guarantee. There is in excess of SIX Billion Dollars security on the investor's investment." Respondent made no effort to verify these financial representations in order to protect his clients. Respondent made no effort to determine if U.S.G.C. was authorized to transact insurance in the State of Florida. Respondent, after reviewing the Guaranteed Contract marketing materials, considered U.S.G.C. to be a legitimate corporation. However, Respondent made no effort to determine if U.S.G.C. was a legitimate corporation, notwithstanding his testimony to the contrary, which lacks credibility. At all times material hereto, U.S.G.C. was not licensed as an insurance company or a bonding company, and, although a registered corporation in the State of Nevada, it was not a registered corporation in the State of Florida. Respondent received a document from Clifton Wilkinson, Trustee for Alliance Trust dated August 1, 1999, which stated: "News and Information Regarding Misinformation and Opinions of Some State Agencies Concerning the Nature of Alliance Trust and Similar Entities. They are exempt from State Securities Laws." Therefore, sometime around August 1, 1999, Respondent was made aware that some state agencies took the position that the investments (Guaranteed Contracts) being offered by Alliance Trust (n/k/a Chemical Trust) were securities and were not exempt from state securities laws and regulations. Respondent did not seek advice from the agency of the State of Florida charged with the responsibility of regulating securities as to whether the State of Florida considered these investments to be securities and subject to securities regulations. Likewise, Respondent did not seek any legal advice from an independent counsel as to whether these investments were in fact securities and subject to state securities regulations. Respondent made no independent inquiry into whether these investments were in fact securities and subject to securities laws and regulations, but relied solely on information received from Chemical Trust and two other agents for Chemical Trust in coming to the conclusion that these investments were not securities and not subject to securities laws and regulations. Respondent did not personally invest in the Chemical Trust investments. However, he did tell Edward Dandignac and Theodore Dostal that he had personally invested in Chemical Trust investments. Respondent earned a commission from the sale of the Chemical Trust investments. Respondent's commission from the sale of Chemical Trust investments constituted properties involved in Virgil Womack's violation of Title 18, United States Code, Section 1956(h), and were subject to forfeiture pursuant to Title 18, United States Code, Section 982(a)(1). Respondent made a payment of $63,302.29, through his attorney to the Receiver on June 18, 2001. Chemical Trust's investment product (Guaranteed Contract) was an investment contract and thereby a security as defined under Subsection 517.021(19)(q), Florida Statutes. As a security, the Guaranteed Contract was required to be registered in the State of Florida under Section 517.07, Florida Statutes, unless it was exempt from registration under Section 517.051 or 517.061, Florida Statutes. The Guaranteed Contract was neither an exempt security under Section 517.051, Florida Statutes nor an exempt transaction under Section 517.061, Florida Statutes. Therefore, the Guaranteed Contract was required to be registered in the State of Florida. An individual must be licensed in the State of Florida in order to sell or offer securities in the State of Florida. Respondent was neither licensed to sell nor to offer securities in the State of Florida. The monies paid to Chemical Trust for the investments were deposited in the personal bank accounts of Virgil Womack, Clifton Wilkinson, Lewey Cato, and Alvin Tang, the principals of Chemical Trust, and used for their personal benefit and to promote the fraudulent scheme. The Florida Department of Banking and Finance had information concerning previous securities violations by Virgil Womack and Clifton Wilkinson. Womack committed securities violations in Georgia in 1997, and Wilkinson committed securities violations in North Dakota, Iowa, Kansas, and Illinois in June 1999. This information was contained in the National Association of Securities Dealers Regulation Central Registration Depository (NASDAQ CRD) database that was accessible to the public in general, and to the Respondent specifically, through the Florida Department of Banking and Finance through telephonic communication. Imogene Skipper, age 74, of Dover, Florida, is a retired school custodian. Skipper worked as a custodian for 19 years. Skipper met Respondent in 1997 when he came to her home as a representative of Remington Estate Services, Inc., Fort Worth, Texas, to assist her in setting up a revocable living trust. The trust agreement would allow her to plan an orderly distribution of her assets without having to go through probate. In 1999, Respondent persuaded Skipper to liquidate the existing annuities with American Investors and transfer the funds to Chemical Trust. In doing so, Skipper suffered $1,665.49 in surrender charges for policy number 303313 and $1,171.25 for policy number 303467. Respondent told Skipper that Chemical Trust would reimburse her these surrender charges. Skipper purchased these annuities when her children were young. The annuities were funded by a $5.00 deduction from Skipper's weekly paycheck. Skipper was reluctant to transfer her annuity funds to Chemical Trust. However, Respondent kept reminding her that the 10 per cent return on her investment was good. Also, Skipper considered Respondent to be an honest, decent, and well respected man. Skipper invested $17,820.00 in Chemical Trust through Respondent. This figure represented two checks, each written to Chemical Trust by Skipper, in the amount of $8,910.00 each. In return Chemical Trust issued two Guaranteed Contracts in the amount of $10,158.00 each for a total of $20,316.00. The difference in amount of the two contracts ($20,316.00) and the amount of Skipper's checks ($17,820.00) was $2,496.00, which was supposed to reimburse Skipper for the surrender fees on her annuities. However, the surrender fees were $2,836.74, which resulted in Skipper not being reimbursed for surrender fees in the amount of $340.74. Respondent supplied Skipper with documents explaining the Chemical Trust investments. Respondent had Skipper sign a compliance verification stating that Respondent had fully explained and delivered documentation concerning the Guaranteed Contracts. The Cover Page of the Guaranteed Contract marketing material had "Chemical Trust" in bold print. At the bottom of the same page, the language "A Guaranteed Contract" appeared along with Respondent's name, address, and telephone number. The second page was entitled "Explanation of the Trust." The third page was titled "CHEMICAL TRUST" and consisted of information concerning "QUALIFICATIONS," "FINANCIAL STRENGTH," and "BOND PROVIDER." This page contains certain terms such as: (a) "After funds have cleared, you will receive your Contract and Surety Bond"; (b) "With over $725 million in assets to protect clients, Chemical Trust is dedicated to provide you the safety, liquidity, and protection you expect in today's uncertain environment"; (c) "U.S. Guarantee Corporation's financial statement is in excess of 2.4 billion dollars"; and "Please note: Due to confidentially U.S. Guarantee Corporation and Fidelity National will be unable to provide any information to you without the consent of the Trust. ***If you wish to contact either of these it must be coordinated by Chemical Trust." (Emphasis furnished) After her funds cleared, Skipper was provided a "Certificate of Grantor" for each investment. The first page had a bold CHEMICAL TRUST" logo and was identified as a "Certificate of Grantor." Among the terms were: (a) "SIMPLE INTEREST AT THE FIXED RATE OF 10 PERCENT PER ANNUM"; and (b) THIS PRINCIPAL AMOUNT IS SECURED BY A SURETY BOND ISSUED BY U.S. GUARANTEE CORPORATION." The guarantee of ten percent per annum interest was higher than the amount Skipper was receiving on the annuities that she had liquidated. The second page had the U.S. Guarantee Corporation logo at the top and was titled "Payment Surety Bond" with Chemical Trust as Principal, U.S. Guarantee Corporation, as Surety, and Imogene R. Skipper, as Trustee. Skipper identified the guarantee of ten percent interest and her full trust in Respondent as the factors that influenced her decision to make the Chemical Trust investments. Skipper lost her entire investment with Chemical Trust. Edward Dandignac, age 70, of Inverness, Florida, is a retired Boar's Head provision carrier. Dorothy Dandignac is the spouse of Edward Dandignac. Dorothy Dandignac, age 67, of Inverness, Florida, is a retired housewife. The Dandignacs first had contact with Respondent when he came to their home to set up a revocable living trust in April 1998. Several months after setting up the irrevocable living trust, Edward Dandignac told Respondent that he was having problems with his Oppenheimer funds, Fidelity funds, and other funds. Respondent advised Edward Dandignac that he would probably do better with an investment in some annuity. Subsequently, Respondent sold Edward Dandignac an annuity with Bradford Life and an annuity with United Life. Later, Respondent approached Edward Dandignac concerning Chemical Trust and reviewed the Chemical Trust documents with Edward Dandignac and explained to him that he could make a better return, up to ten percent. Respondent also advised Edward Dandignac that Chemical Trust would cover the surrender charges. Respondent went through the Guaranteed Contract marketing materials with Edward Dandignac. As to the integrity of Chemical Trust and U.S. Guarantee Corporation, Respondent advised Edward Dandignac the companies were "backed" and "protected." Based on Respondent's representations and the Guaranteed Contract marketing materials, Edward Dandignac determined that an investment with Chemical Trust would be secured and guaranteed. Subsequently, Edward Dandignac decided to invest part of his and his wife's life savings in Chemical Trust through Respondent. Edward Dandignac liquidated one of his annuities and had the funds transferred to Chemical Trust. Respondent advised Edward Dandignac that he had personally invested in Chemical Trust. Because Respondent had worked with the Dandignacs in getting them the annuities, which were making better money than their stock, and the fact that Respondent had also invested in Chemical Trust, the Dandignacs trusted Respondent in regard to their investment in Chemical Trust. One of the business cards given to the Dandignacs by Respondent listed "Insurance," "Estate Plans," and "Investments" as the areas in which he was involved. Edward Dandignac identified the Guaranteed Contract marketing material as being similar to the documents given to him by Respondent. This material was the same as the Guaranteed Contract marketing material provided to Skipper by Respondent. The Dandignacs expected a return on their investment with Chemical Trust but instead lost $25,444.89. Theodore Dostal, age 74, of Port Richey, Florida, first had contact with Respondent in October 1997, when Respondent delivered a revocable living trust to him through Senior Estates Services. Shortly thereafter, Respondent and Dostal discussed other investments. Between October 28, 1997, and July 27, 1998, Dostal transferred varying amounts from his revocable living trust to purchase three different annuities from Respondent with Bradford Life. Subsequently, Respondent furnished Dostal the Guaranteed Contract marketing materials identical to those provided to Skipper by Respondent. Based on the Guaranteed Contract marketing materials and Dostal discussions with, and his trust in Respondent, Dostal invested in Chemical Trust. Dostal's investment in Chemical Trust involved the purchase of: a Certificate of Grantor dated September 24, 1999, in the amount of $17,327.00; (2) a Certificate of Grantor dated September 28, 1999, in the amount $92,010.00; (3) a Certificate of Grantor dated October 11, 1999, in the amount of $10,000.00 and; (4) a Certificate of Grantor dated November 10, 1999, in the amount of $37,120.00. Each Certificate of Grantor was issued by Chemical Trust and was backed by a Payment Surety Bond backed by U.S. Guarantee Corporation Other than the terms specific to Dostal, the Certificate of Grantor and the Payment Surety Bond referenced above are the same as those issued to Skipper. Of the monies he invested with Chemical Trust, Dostal lost $56,000.00. Respondent told Dostal that he had personally invested in Chemical Trust Alice Lowe, an elderly lady, is a retired office manager. Lowe currently lives in Orlando, Florida. Lowe purchased an annuity product from Respondent in April 1998. Subsequently, Lowe liquidated her annuity and at the suggestion of Respondent invested $39,914.95 in the Chemical Trust investments, which she lost plus the surrender charges in the amount of $4,350.73 for a total loss of $44,229.85. Lowe could not recall receiving the Guaranteed Contract marketing materials. However, she did recognize her signature on the verification form which confirms that she received the Guaranteed Contract marketing materials. As such, the documents she received would have contained the same terms as the documents received by Skipper. The ten percent interest per annum was a factor in Lowe's decision to invest in Chemical Trust investment along with her confidence in Respondent. Robert Marsh, an elderly man, is a retired mechanic, and is married to Julia Marsh. Currently, the Marshes live in Bradenton, Florida. The Marshes became acquainted with Respondent about May 2, 1998, when Respondent delivered a revocable living trust to them through Remington Estate Services. After this initial contact, the Marshes' interaction with Respondent consisted of Respondent's stopping by a few times, talking to Respondent on the telephone, and discussing investments with Respondent. During all visits with Respondent, both Robert Marsh and Julia Marsh were present. Likewise, the Marshes discussed all financial matters jointly before making a final decision concerning financial matters. The Marshes had an existing annuity that was earning interest at the rate of 2.37 or 3.00 percent, which they were not pleased with. Subsequently, the Marshes transferred some of the money from the existing annuity to purchase an annuity with Respondent. Afterwards, Respondent visited with the Marshes every two to three months. During this time, Respondent discussed Chemical Trust investments with the Marshes and advised them that Chemical Trust was a "good company" that the company "had been around a long time" and "the investments" were a "good deal." The Marshes transferred, through Respondent, their funds from two annuities and an IRA to Chemical Trust. The Marshes invested over $23,000.00 in Chemical Trust investments. Originally the Marshes lost all of their investment. However, they recouped all but $2,300.00 through the efforts of the U.S. Government. The $2,300.00 was surrender charges for early withdrawal of their annuities. Based on Respondent's representations, the Marshes expected to be reimbursed for surrender charges, receive ten percent interest per annum, the principal amount to be secured by a surety bond, and to receive a $700.00 bonus. The Marshes were provided Chemical Trust's Guaranteed Contract marketing materials from Respondent, which was identical (contained the same terms) to the Guaranteed Contract marketing material provided to Skipper. Mildred Grossman, age 79, of Debary, Florida, is a retired secretary. Raymond Grossman, age 80, also of Debary, Florida, is the spouse of Mildred Grossman. Raymond Grossman is retired Methodist minister. The Grossmans became acquainted with Respondent when he came to their home to deliver a revocable living trust as a representative of Remington Estate Services, Inc. After his initial contact with the Grossmans, Respondent visited them every one to three months to check on their needs. Because the Grossmans were seriously considering the possibility that one of them would be going into a nursing home or some type of assisted living facility, Respondent encouraged the Grossmans to purchase annuities. Consequently, the Grossmans cashed in their life insurance policies and their certificates of deposit and purchased annuities from Respondent through American Investors. After they purchased the annuities, the Grossmans were still concerned as to whether they could afford potential retirement home expenses. The Grossmans discussed their concerns with Respondent, and he advised them that they could get a better return on their investment if they switched to Chemical Trust investment. Respondent represented to the Grossmans that their principal investment was protected by a surety payment bond issued by U.S. Guarantee Corporation, that they would receive a guaranteed ten percent interest per annum return for seven years, and that they would be reimbursed for surrender charges incurred when they transferred their funds to Chemical Trust. The Grossmans lost approximately $36,900.00 from their investment with Chemical Trust through Respondent. This amount constituted their life savings, leaving them about $2,000.00 in the bank. Respondent strongly suggested that the Grossmans invest in Chemical Trust. In fact, one of strongest motivating factors for the Grossmans' decision to invest in Chemical Trust was their faith and trust in Respondent. The Guaranteed Contract marketing materials provided to the Grossmans were identical (containing the same terms) to those provided to Skipper. As a result of the lost investments, the Grossmans: (1) were forced to move from a condo to mobile home; (2) cannot provide financial help to their children; and (3) can no longer afford an assisted living home. The Chemical Trust enterprise was a deliberate and largely transparent scheme to swindle Florida residents. Respondent either knew or should have known, had he made good faith attempt to verify the representations contained in the Guaranteed Contract marketing materials and the information furnished to him by other agents, employees, officers or staff of Chemical Trust, that Chemical Trust investments were worthless. Respondent failed to make a due diligence inquiry in this regard. Respondent employed either his past or then current insurance/client relationship with Imogene Skipper, Robert and Julia Marsh, Raymond and Mildred Grossman, Alice Lowe, and Edward and Dorothy Dandignac to gain their trust and then abused that trust by his failure to properly research and verify the claims made by Chemical Trust, a fellow insurance agent, others associated with Chemical Trust investments, and those otherwise contained in the Guaranteed Contract marketing materials. Respondent was the source of injury to Imogene Skipper, Robert and Julia Marsh, Raymond and Mildred Grossman, Alice Lowe, and Edward and Dorothy Dandignac by inappropriately attempting to act in multiple roles as their insurance agent and as an agent for Chemical Trust. As a result of Respondent's actions, Imogene Skipper, Robert and Julia Marsh, Raymond and Mildred Grossman, Alice Lowe, and Edward and Dorothy Dandignac were sold an investment that was nothing more than a scheme to swindle those who invested. The aggregate loss to the Chemical Trust investment scheme by Skipper, the Marshes, the Grossmans, Lowe, the Dandignacs, and Dostal was approximately $200,000. Under the circumstances of this case, the participation of Respondent in the sale of Chemical Trust investments to Skipper, the Dandignacs, Dostal, Lowe, the Marshes, and the Grossmans was "in the conduct of business under the [insurance license]" and "in the course of dealing under the [insurance] license."
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, and after careful consideration of both aggravating and mitigating factors set forth in Rule 4-231.160(1), Florida Administrative Code, it is RECOMMENDED that the Department enter a final order finding Respondent, Donald Dean Hooley, II, guilty of violating Subsections 626.611(4), (7), (8), (9), and 626.621(2), Florida Statutes, and revoking his license and eligibility for licensure as a life and life health insurance agent in the State of Florida. DONE AND ENTERED this 28th of January, 2002, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE 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) 921-6947 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of January, 2002. COPIES FURNISHED: Charles D. Hinton, Esquire Deane & Hinton, P.A. Post Office Box 7473 St. Petersburg, Florida 33739 Anthony B. Miller, Esquire Department of Insurance Division of Legal Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 Honorable Tom Gallagher State Treasurer/Insurance Commissioner Department of Insurance The Capitol, Plaza Level 02 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0307
The Issue The issue in this case is whether Respondents are guilty of mishandling an escrow deposit.
Findings Of Fact Respondent Vu is and was at all material times a licensed real estate broker, holding Florida license number 0394778. He is and was at all material times the qualifying broker for Respondent American Homes and Investment Realty, Inc., which holds Florida license number 0250718. Respondent Vu owns Respondent American Homes. In 1990, Mr. and Mrs. Serge Delisfort contacted Respondents about purchasing a residence. The Delisforts eventually signed a contract to purchase a home and paid the $500 earnest money deposit to Respondents. Later learning that they would be liable to pay an annual homeowners' fee of $72, the Delisforts told Respondent Vu that they did not want to complete the purchase. The listing broker, which was not either Respondent, omitted mention of the homeowners' fee from the listing information supplied Respondents and the Delisforts. The sellers refused to release the deposit. Confronted with the dispute, Respondent Vu promptly requested an escrow disbursement order from the Florida Real Estate Commission on March 29, 1991. Due to the presence of a factual or legal dispute, the Florida Real Estate Commission informed Respondents, in a 47-word letter dated October 16, 1991, that it could not issue an escrow disbursement order. The October 16 letter warns Respondents to "immediately choose one of the other two alternatives available to you under ss. 475.25(1)(d), Florida Statutes, to settle this dispute, i.e., arbitration or a civil court." Instead, Respondents did nothing. The Delisforts periodically contacted Respondent Vu and asked if he could release their deposit. The sellers sold their house to another party and moved to Puerto Rico. The Delisforts contacted another broker and purchased a different house through the new broker. Eventually, the Delisforts contacted the Florida Real Estate Commission and asked its help in obtaining the deposit. An investigator for the Division of Real Estate interviewed Respondent Vu on March 1, 1994. Explaining the reason for the delay, Respondent Vu, possibly confused, stated that the buyers had left Orlando for awhile. In fact, the buyers had remained in Orlando. At the suggestion of the investigator, Respondent Vu contacted both parties, and they agreed to split the deposit equally. Respondent Vu prepared the paperwork, which the parties signed on March 11, 1994. At that time, Respondents paid each party $250. The Delisforts have since listed their home for sale by Respondents. While improperly holding the $500 deposit, Respondent Vu was preoccupied by the illnesses and deaths of his parents, who remained in Vietnam. Despite the possibility of trouble upon his return to Vietnam, Respondent Vu traveled to Vietnam at least once during this time to care for one or both of his parents. Respondents failed to implement timely the remedies established by law and identified by the Florida Real Estate Commission in its letter of October 26, 1991. Respondent Vu acted two and one-half years later, only after one of Petitioner's investigators contacted him. It is no excuse that the costs of arbitration or court would have consumed a large part of the amount in dispute. Confronted with that prospect, the sellers or the Delisforts would probably have settled the matter. If not, that would have been their problem, not Respondents'. The fact is that Respondents failed to discharge their obligations by presenting the dispute for resolution in a timely fashion. Nonetheless, the amount involved is modest. Neither party had a clear claim to the funds, nor was either party exceptionally troubled by Respondents' casual handling of the matter. The Delisforts contacted the Florida Real Estate Commission, but did not realize that they were in effect filing a complaint against Respondents, in whom they entrusted the sale of their current home. A final order issued July 18, 1988, involves Respondents' mishandling of a salesperson's commission. The husband of the salesperson owed Respondent Vu some money, and both men agreed that the debtor's wife would work off the debt by selling real estate at Respondent American Homes. However, the debtor's wife was of a different mind. After earning her first commission, she refused to allow Respondents to credit it against her husband's debt. When Respondent Vu ignored her demand for payment, she filed a complaint, which resulted in the final order and Respondents' proper payment of the commission.
Recommendation It is hereby RECOMMENDED that the Florida Real Estate Commission enter a final order finding both Respondents guilty of violating Section 475.25((1)(d)1, reprimanding both Respondents, and requiring Respondent Vu to take a thirty-hour broker management course. ENTERED on February 22, 1995, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings on February 22, 1995. COPIES FURNISHED: Darlene F. Keller Division Director Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, FL 32802-1900 Steven W. Johnson, Senior Attorney Department of Business and Professional Regulation Division of Real Estate Legal Section--Suite N-308 Hurston Bldg., North Tower 400 West Robinson Street Orlando, FL 32802-1772 Dau Viet Vu 1048 Pine Hills Rd. Orlando, FL 32808
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: The Respondent was at all times material to this proceeding a licensed real estate broker in the state of Florida having been issued license number 0035275. The last license issued was as a broker, d/b/a Silver Springs Real Estate, Corp., 4121 East Silver Springs Boulevard, Ocala, Florida 32671. On or about August 3, 1984, the Respondent obtained Teri L. Lochman (Lochman) as a tenant of certain residential property belonging to Gail and Valerie Cox (Cox) that was involved in a sale to A. Pillot. In connection with this sale, a lease had been prepared between A. Pillot as Lessor and A. Alongi as Lessee. Lochman signed this lease as Lessee, and in connection with this lease, paid Respondent $1,600.00 representing $700.00 for the first month's rent, $700.00 for the last month's rent and $200.00 security deposit. These funds were paid by Lochman to Respondent in two separate checks in the amount of $500.00 and $1,100.00 dated August 5, 1984 and August 13, 1984, respectively. The Pillot/Cox escrow account, which had previously been established in Respondent's escrow ledger, was credited with these funds and the funds deposited in Respondent's real estate brokerage trust bank account, No. 805 0006583, in the Sun Bank of Ocala (Trust Account), on August 9, 1984 and August 17, 1984, respectively. Upon attempting to move into the home she had rented, Lochman discovered that Cox was still in possession because the sale had not gone through. At this point, August 17, 1984, Lochman and Cox signed an agreement which would allow Lochman to reside in the home rent free for two weeks while Cox was out of town in return for acting as a security guard. Sometime after the August 17, 1987 agreement was executed by Lochman and Cox, Lochman and Cox signed a handwritten month to month lease of the premises requiring Lochman to pay Cox $700.00 for the first month's rent, $700.00 for the last month's rent and a $200.00 damage deposit. This payment was conditioned upon Lochman receiving her refund from the Respondent. There was no credible evidence that Respondent agreed to release Cox from any previous agreement with Respondent wherein Respondent acted as agent for Cox in obtaining Lochman as a tenant or the handling of Cox's property, i.e. mowing grass or preparing house for rent. Additionally, there was no credible evidence that Respondent agreed to Lochman dealing directly with Cox. Respondent was at all times relevant to this proceeding acting as agent for Cox, and therefore, demanded from Cox her commission for obtaining Lochman as a tenant and reimbursement for other services rendered before returning Lochman's rental deposit. There is no credible evidence that the Respondent agreed to return Lochman's rental deposit without first obtaining her commission or reimbursement for other services rendered from Cox. There is no credible evidence to show that Cox paid Respondent her commission or reimbursed Respondent for other services rendered or that Cox made a demand on Respondent to pay the Lochman rental deposit to Lochman. There is credible evidence that Lochman made a demand on Respondent for the return of her rental deposit and that Respondent refused to return Lochman's rental deposit because there was a dispute between Respondent and Cox concerning Respondent's commission and reimbursement for other services rendered. Lochman did not pay Cox the rent for the month of September, 1984, therefore, she contends that Respondent only owes her $900.00 of the rental deposit. Upon Respondent's refusal to pay her the balance of the rental deposit, Lochman obtained a default judgment for $900.00 in civil court, however, and although the record is not clear, the default judgment may have been set aside. (See transcript, page 15, lines 9-13). The evidence is clear that check no. 257 drawn on the Trust Account in the amount of $1,465.00, paid on April 18, 1985, included $1,278.00 from the Pillot/Cox escrow account and depleted the funds in the Pillot/Cox escrow account. However, there was no evidence presented to show that the Lochman rental deposit was paid to Respondent. Likewise, there was no evidence presented to show that Cox did not receive the Lochman rental deposit. There was no evidence presented to show the payee on Check No. 257, or any other check, drawn on the Trust Account. There was no evidence presented to show that Respondent commingled trust funds and personal funds in the Trust Account in regard to deposits and withdrawals. There was insufficient credible evidence to show that Lochman was entitled to delivery of $900.00 or any funds from the Trust Account. There was no evidence that Respondent notified the Real Estate Commission (Commission) of the conflicting demands on the Lochman rental deposit or followed any of the procedures set forth in the statutes to resolve such a conflict.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record and the candor and demeanor of the witnesses, it is, therefore, RECOMMENDED that the Commission enter a Final Order finding the Respondent guilty of failing to notify the Commission of the conflicting demands on the trust funds and failing to follow the procedures set forth for resolving such conflict in violation of Section 475.25(1)(d), Florida Statutes and that Respondent's real estate broker's license be suspended for a period of six (6) months, stay the suspension, place the Respondent on probation for a period of six (6) months under the condition that the issue of conflicting demands on the trust funds be resolved within sixty (60) days and under any other conditions the Commission feels appropriate, and assess an administrative fine of $300.00 to be paid within sixty (60) days of the date of the Final Order. It is further RECOMMENDED that the Final Order DISMISS Counts I, III, IV and V of the Administrative Complaint filed herein. Respectfully submitted and entered this 1st day of May, 1987, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of May, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-2387 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties in this case. Rulings on Proposed Findings of Fact Submitted by the Petitioner 1.-2. Adopted in Finding of Fact 1. 3. Adopted in Findings of Fact 8 and 9. 4.5 Rejected as not supported by substantial competent evidence in the record. Additionally, Petitioner has treated certain facts in this case as background in unnumbered paragraphs which I have numbered 6-10. Adopted in Finding of Fact 2 as clarified. Adopted in Finding of Fact 4 except for the phrase that Respondent agreed to the return of the rental deposit which is rejected as not being supported by substantial competent evidence in the record. I did not find Lochman's testimony credible in this regard. Adopted in Findings of Fact 8 and 9 as clarified. Adopted in Finding of Fact 10 as clarified. This paragraph is a statement of Lochman's testimony and not presented as a fact, therefore, is rejected. Rulings on Proposed Findings of Fact Submitted by the Respondent For the reasons set forth in the Background portions of this Recommended Order, there has been no rulings of Respondent's Proposed Findings of Fact. COPIES FURNISHED: Van Poole, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Harold Huff Executive Director Department of Professional Regulation Division of Real Estate 400 West Robinson Street Orlando, Florida 32801 James H. Gillis, Esquire Department of Professional Regulation Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Jeffrey J. Fitos, Esquire Valley Forge Military Academy Wayne, Pennsylvania 19087
Findings Of Fact Respondent, George G. Walsh, is a licensed real estate broker in the State of Florida, holding license number 0117943. Mr. Walsh is the owner of and the qualifying broker for G. G. Jerry Walsh Real Estate, located in Panama city, Florida. In May 1989, Respondent was the acting broker for Howard Bilford of Miami, Florida. Mr. Bilford owned a five acre parcel of property located in Bay County, Florida. Around May 15, 1989, Tama and Paul Russ, through Mr. Walsh's office, entered into a contract for the purchase of Mr. Bilford's property. The purchase price of the property was $15,000. The Russ' gave Mr. Walsh a $500 binder for deposit in his escrow account. The $500 was placed in Respondent's escrow account. Simultaneous with the signing of the sales contract and deposit receipt agreement, Mr. Walsh also prepared an estimated closing cost statement. On that closing cost statement, Mr. Walsh estimated that a survey of the property would cost the Russ' $450. During this meeting, Mr. Walsh explained to the Russ' that, especially if a financial institution was involved in the financing of the property, there would be certain costs which they would probably have to pay up front. Part of those costs included a survey of the property. At about the same time, the Russ' made application for a loan to a credit union located in Panama City, Florida. At the time of the loan application, the loan officers Mrs. Stokes, prepared a closing cost statement estimating the loan closing costs which the Russ' would encounter. On the credit union's closing cost statement, the cost of a survey was estimated to be $150 to $200. Since it was the credit union that required the survey, the Russ' believed that that estimate was the more accurate. The Russ' simply could not afford a $500 survey. As part of the loan application, an appraisal of the property was required. The appraisal was ordered by the credit union on May 16, 1989, and was completed on May 31, 1989. Unfortunately, the property had been vandalized by unknown persons, and the mobile home which was on the property had suffered severe and substantial damage. The appraisal indicated that the real estate was worth $10,500. With such a low appraisal, the credit union would not lend the amount necessary to purchase the property at the negotiated price. In an effort to renegotiate the property's price, Tama Russ inspected the property and prepared a list of the items which would have to be repaired to make the mobile home liveable. At the same time, the Russ' placed no trespassing signs and pulled logs across the entry to the property. The Russ' also placed padlocks on the doors to the mobile home and removed the accumulated garbage inside the mobile home in an effort to secure the property. They made no other repairs to the property. On June 1, 1990, the Russ' told the loan officer to hold the loan application. At some point during this process, both Mr. Walsh and the Russ' became aware that the survey would cost a considerable amount more than had been expected. By using a favor with Mr. Walsingham of County Wide Surveying, Mr. Walsh obtained a survey price of $500 for the Russ'. In an effort to help the Russ' close on the property, Mr. Walsh contacted Mr. Bilford to see if he would agree to pay the $500 survey cost. Mr. Bilford so agreed, contingent on the closure of the transaction, and sent Mr. Walsh a check made out to County Wide Surveying in the amount of $500. At that point, the Russ' believed that they were no longer obligated to pay for the survey since Mr. Walsh told them that Mr. Bilford was to pay for the survey. On June 3, 1989, Mr. Bilford agreed to a renegotiated price of $10,500.00 on the property. Additionally the Russ' agreed to sign a ten year promissory note for $2,000 bearing 11% interest per annum. Since there were changes in the terms of the contract, the Russ' entered into a net contract with Mr. Bilford on June 3, 1989. The new contract expired on June 30, 1989. Around June 5, 1989, the Russ' learned that their credit had been preliminarily approved. However, such preliminary approval only indicated that the Russ' had sufficient income to proceed with the more costly loan underwriting requirements of the credit union. Such preliminary approval did not indicate that the loan would be finally approved by the financial institution. The preliminary approval was communicated to Mr. Walsh by Tama Russ. Ms. Russ intended the communication to mean that they had been preliminarily approved by the financial institution. Mr. Walsh in an abundance caution contacted Mrs. Stokes, the loan officer. Mrs. Stokes advised him that the Russ' credit had been preliminarily approved. She did not tell him that the loan had been finally approved. Through a misunderstanding of what Mrs. Stokes communicated to him, Mr. Walsh ordered the survey from County Wide Realty on June 7, 1989. There was no reliable evidence presented that the credit union had authorized him to order the survey. The credit union at no time during this process ordered the survey. Mr. Walsh testified that Ms. Russ told him to order the survey. Ms. Russ denies that she gave Mr. Walsh permission to order the survey. At best this evidence goes only to demonstrate Respondent's intent with regards to the actions he undertook in this case and removes this case from a Section 475.25(1)(b), Florida Statutes, violation. At some point Ms. Stokes left the employ of the credit union. On June 16, 1989, as part of her leaving, she unilaterally closed the Russ' loan application file and cancelled the loan application. Neither the Russ' nor Mr. Walsh were notified of the closure or the cancellation. The credit union's file fell into the void created between a change of employees. Because Mr. Walsh was unaware of Ms. Stokes' actions, Mr. Walsh, on July 13, 1989, after the expiration of the Russ' sales contract, contacted the credit union in order to obtain the loan closing package from the institution. The credit union had to hunt for the Russ' file. The credit union president called the Russ' about the loan and he was advised that they did not want the loan. The credit union's president then reviewed the loan file and noted that the Russ' had insufficient income to come up with the amount of the promissory note. He also thought the real estate constituted insufficient collateral for the loan. The loan application was officially denied on July 15, 1989. The Russ' were notified of the credit union's denial credit. The real estate transaction never closed. However, sometime after July 15, 1989, Mr. Walsh received the survey from County Wide. The survey indicates that the field work for the survey was completed on July 17, 1989, and that it was drawn on July 18, 1989. 1/ There was no reliable evidence which indicated any attempt had been made to cancel the survey. Sometime, after July 15, 1989, Tama Russ contacted Mr. Walsh in order to obtain the return of their $500 deposit. After many failed attempts to get the Russ' to voluntarily agree to pay for the cost of the survey, Mr. Walsh, around October, 1989, unilaterally paid the Russ' deposit to County Wide Realty. Mr. Walsh followed this course of action after speaking with some local FREC members who advised him that since FREC was swamped with deposit disputes that nothing would happen as long as he used his best judgment. The payment of the deposit to the surveyor, without prior authorization from the Ruse' violates Section 475.25(1)(d) and (k) Florida Statutes.
Recommendation Based on the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, the pleadings and argument of the parties, it is therefore, RECOMMENDED that the Florida Real Estate Commission enter a Final Order finding Respondent guilty of violating Sections 475.25(1)(d) and 475.25(1)(k), Florida Statutes, issuing a letter of reprimand to Respondent with instructions to immediately replace the Russ' trust deposit and forthwith submit the matter to the commission for an escrow disbursement order and levying a $250 fine. IT IS FURTHER RECOMMENDED that the portions of the Administrative Complaint alleging violation of Section 475.25(1)(b) be dismissed. DONE and ENTERED this 29th day of January, 1991, in Tallahassee, Florida. DIANE CLEAVINGER 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 29th day of January, 1991.
