The Issue Whether the Department of Revenue properly assessed sales or use tax and local government infrastructure surtax on payments allegedly constituting "rent" that Petitioner paid to the mortgagee in accordance with an Occupancy and Indemnity Agreement and Trust Agreement.
Findings Of Fact As of August 10, 1989, the corporation known as Panama City Toyota, Inc., owned a parcel of land where it conducted a new and used car sales business. The automobile inventory and dealer registrations with Toyota, Mitsubishi, etc., were also held in the name of the corporation or in the names of its principals. On that date, Panama City Toyota, Inc., executed a note and mortgage to Omni Finance Corporation in the amount of $1,200,000. The note was guaranteed by the three corporate shareholders, Mark Gerke, Norman Wiese, and Apryl Wiese. On July 11, 1991, a new corporation was formed, A.D.E. of Panama City, Inc. (A.D.E.). Its shares came to be held by members of the David Hill family. A.D.E. was formed for the purpose of acquiring the assets of Panama City Toyota, Inc. On July 29, 1991, A.D.E. (Buyer) and Panama City Toyota, Inc. (Seller) entered into a sale/purchase agreement whereby all the assets of Panama City Toyota were to be purchased by A.D.E. Those assets included an automobile dealership owned and operated by Toyota along with real estate associated with that dealership. The owners of Toyota were concerned that approval of the transfer of the dealership licenses from Toyota to A.D.E. might be held up for a period of several weeks or might be denied. The owners of Toyota needed cash and were anxious to close the portion of the sale transaction that involved the real property. One or more owners of Toyota also expressed the concern that if the dealership transfers were not approved by the automobile manufacturers, Toyota might not be able to "unwind the transfer" of the real property and would, effectively, be out of business. Mr. Robert Dittman, the attorney who represented Toyota in its transfer of assets to A.D.E., testified by deposition that Toyota's lender required title to the real property be held by a separate entity. He explained as follows: The best of my recollection is that the transaction lender which was World Omni Financial Corporation came up with a requirement that the real estate be owned by a separate entity and that originally the parties contemplated that A.D.E. would own both the tangible personal property and intangible personal property that was being sold as well as the real estate that was being sold, and at some point in time apparently the buyer's lender came up with a requirement for whatever reason, and I'm not privy to that reason, that they wanted a separate entity-they did not want the operating entity to own the real property. In order to assure the Buyer that title to the real property could be secured upon approval of the dealership transfers and assure the Seller that the sale could be "unwound" if the dealership transfers were not approved, the attorneys for both sides hit upon the idea of an arrangement whereby Buyer would acquire title to the real property, but transfer it to a "Trustee" who would hold the land until the dealership transfers were either approved or denied. To give the Seller greater comfort, Mr. Gerke was named to serve as the initial "Trustee." The plan was for Seller to continue operations until the dealership transfers were approved, then the payment for the inventories and dealership licenses would be made and the real property would come out of the "trust" to the Buyer. Toyota's conveyance of title to the real property to a Trustee rather than to A.D.E. enabled the parties to satisfy the lender that title would be held by a separate entity, to satisfy the Buyer (A.D.E.) that title to the real property could be secured upon approval of the dealership transfers, and to satisfy the Seller, Toyota that the sale could be "unwound" if the dealership transfers were not approved. Thus, initially the trust had a purpose for its creation. A.D.E.'s former attorney, Mr. Jerry Williams, prepared the Trust Agreement for the Trust in accordance with the agreement between A.D.E. and Toyota, that the Trustee would hold title to the real property. The trust was entered into on December 31, 1991. To give the Seller greater comfort, Mark Gerke, who was shareholder in Toyota and operated the Toyota dealership, was named to serve as the initial Trustee. Also on December 31, 1991, A.D.E. and the initial Trustee of the Trust entered into an Occupancy and Indemnity Agreement. The Occupancy Agreement gave an option to purchase the property to Petitioner, the beneficiary of the trust. The Occupancy and Indemnity Agreement provided in paragraph 3 on page as follows: 3. Note Payments. During the Term, A.D.E. shall pay $12,000 per month for its right to occupy and use the Real Estate, or such greater or lesser amount as shall be required to pay all principal, interest and costs when due under the certain promisory [sic] note to be issued by Trustee as maker in favor of World Omni Financial Corp. as payee ("Note"). Such payments shall be made to the payee or holder of the Note. At all times material to this action, A.D.E. has been the sole beneficiary under the Real Estate Trust Agreement. By specific language in the Agreement, the Trust has no authority to act in any fashion nor as to any matter except as specifically authorized by the beneficiary. The beneficiary has sole authority to authorize action by the Trustee, sole authority at any time to remove the Trustee and sole authority at anytime to terminate and dismantle the Trust entirely and demand distribution of all assets to it. Not long into this arrangement, on April 30, 1992, certain questionable business practices of Seller were discovered. A.D.E. caused Mr. Gerke to resign as "Trustee" and named David Hill, II, as his successor. Mr. Hill was selected by his father, who in effect directed the operations of A.D.E and actually caused the purchase of Toyota and the creation of the various agreements involved in that purchase. David A. Hill, II, has held a majority ownership interest in the Petitioner. At this point the beneficiary and grantor essentially became one. Several months after that on October 21, 1992, the dealership transfers were approved and the second part of the deal was closed. Toyota executed a warranty deed conveying the real property to the trust. The trust no longer had a purpose and the beneficial and title interests merged. By its terms the trust terminated. However, through an oversight, formal transfer of title did not happen. Pursuant to the finalization of the sale (and on the brink of foreclosure by Omni), Buyer assumed the note and mortgage with Omni and Omni released Toyota as maker and Mr. Gerke, Mr. Wiese, and Ms. Wiese as guarantors. Because of the fact that record title was still in Trust, the assumption of the note was in the Trust's name, rather than A.D.E. Therefore, David Hill, II, signed a Note and Mortgage Assumption and Modification Agreement in his capacity "as Trustee under Real Estate Trust Agreement dated December 31, 1991." Around March 25, 1997, financing for the business was moved to SouthTrust Bank. David H. Hill, II, as Trustee under the Trust, obtained a loan from SouthTrust Bank of Alabama, N.A. (SouthTrust Bank) in the amount of $770,990.34 to refinance the purchase of the automobile dealership from Toyota. SouthTrust's attorneys, seeing that title was in a trust, required the trustee to execute an Assignment of Rents. A.D.E. provided its financial statements for the years ending December 31, 1997, and December 31, 1996, to its mortgage holder(s). The mortgage holder relied on the financial assets of A.D.E. in making the loan. The notes to A.D.E.'s financial statements for the years ending December 31, 1997, and December 31, 1996, represented as follows: NOTE 8: INVESTMENT IN SUBSIDIARY The Company has an investment in David Hill, II, Real Estate Trust, a wholly owned subsidiary. Management has elected to use the equity method of accounting for this investment. A.D.E. of Panama City, Inc.'s Equity in the investment at December 31, 1997 and 1996 is $392,836 and $356,688, respectively. Generally accepted accounting principles require that investments in majority owned subsidiaries be accounted for as consolidated subsidiaries. The effect of the departure from generally accepted accounting principles on financial position, results, operations, and cash flows has not been determined. Additionally, the notes to A.D.E.'s financial statements prepared by A.D.E.'s accountant for the years ending December 31, 1996, and December 31, 1997, included the following statement: The Company leases buildings and land for administrative offices and operations from David Hill II Real Estate Trust with terms of monthly renewals. The Company pays the maintenance and repairs for these facilities. The terms of the loan included a requirement that A.D.E. produce a lease between David H. Hill, II, Trustee, as landlord, and A.D.E., as tenant, within 45 days after closing. Additionally, David H. Hill, II, as Trustee, was the sole mortgagor of the property pursuant to the loan by SouthTrust Bank. David H. Hill, II, as Trustee, was the sole maker of the promissory note for the loan. However the funds were used in the operations of the dealership A.D.E. owned. SouthTrust Bank required A.D.E. to execute and provide the bank a resolution of the Board of Directors of A.D.E. before the bank would close the loan. On March 25, 1997, the Board of Directors of A.D.E. approved the resolution required by SouthTrust Bank (Resolution) stating, in part, as follows: WHEREAS, the Corporation agrees to and authorizes its officers to execute any and all documents necessary to secure a loan from SouthTrust Bank of Alabama, N.A., in the approximate amount of $770,990.334 (the "loan"), which will encumber the property which is owned by David H. Hill, II, Trustee under that Trust Agreement dated December 31, 1991, ("Property Owner"), and which is being leased by the Corporation from the Property Owner, (the "property"). The Property is located at 5303 West Highway 98, Panama City, Bay County, Florida . . . . In addition to the Resolution of the Board of Directors of A.D.E., SouthTrust Bank required execution of various documents in order to close the mortgage loan with David Hill, II, Trustee. David Hill, II, as Trustee, executed and delivered to SouthTrust Bank the following documents: Directions from David H. Hill, II, to Execute Documents for the loan. Affidavit of David H. Hill, II, as Trustee, dated March 25, 1997. Title Affidavit executed by David H. Hill, II, Trustee. Again David H. Hill, II, followed his father's instructions in obtaining the SouthTrust Loan and executing the documents for the loan. He never read the trust documents. Likewise he never read the loan documents. Indeed all of the transactions involving A.D.E. or the Trust were directed and instituted by Mr. Hill's father. The Trust never functioned independently of the beneficiary or the Hill family, its stockholders At all times since the transfer of title into the Trust, A.D.E. has made all payments on all debts secured by the property. All such payments were made directly to the lenders and did not pass through the Trust. The Trust, in fact, never had a bank account, never obtained an Employer Identification Number, and never filed (nor was ever required to file) a tax return. All insurance premiums and all real estate ad valorem taxes were paid directly by A.D.E. It is also undisputed that the Internal Revenue Service forms 1120S filed by A.D.E. reflecting income in 1992- 1995 claimed a deduction for rent paid by A.D.E. to the Trustee for the Trust Assets consisting of real property. However, the deductions were matched by the income reported on K-1s to the shareholders of A.D.E. and on various tax returns. The notes to A.D.E.'s financial statements prepared by A.D.E.'s accountant for the years ending December 31, 1997 through December 31, 1999, included the following statement: The Company leases buildings and land from the David Hill II Real Estate Trust. A.D.E. of Panama City, Inc. is the grantor of the trust. Based on all these facts, the evidence established that the Trust for at least tax purposes does not have a separate identity from its beneficiary A.D.E. The Trust is not in the business of renting or leasing property, no matter how much the Trust settlor's and A.D.E. played fast and loose with formal title records. Therefore, the payments of the mortgage by A.D.E. do not constitute rent and are not subject to tax.
Recommendation Based upon the findings of fact and conclusions of law, it is RECOMMENDED: That the Department of Revenue enter a final order finding the payments Petitioner made to its mortgagee are not taxable as rent. DONE AND ENTERED this 2nd day of April, 2001, in Tallahassee, Leon County, Florida. DIANE CLEAVINGER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 2nd day of April, 2001. COPIES FURNISHED: H. Cranston Pope, Esquire Post Office Box 1609 Panama City, Florida 32402-1609 J. Clifton Cox, Esquire Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32314-6668 James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-1000
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
The Issue The issue is whether Mr. Powell should be disciplined for irregularities in the handling of an escrow deposit by a real estate firm for which he was the qualifying broker.
Findings Of Fact The Respondent, Willie Powell, was at all relevant times a licensed real estate broker in the State of Florida, holding license number 0070494. Mr. Powell was the sole qualifying broker of Future Investments & Development II Co., Inc., trading as ERA Thompkins and Saunders Realty Company (hereafter, T & S), 2734 N.W. 183rd Street, Suite 206, Miami, Florida 33056. On or about November 12, 1990, Guillermo Castillo, a licensed real estate broker for Emerald Enterprises, Inc., received a listing agreement from Horace B. Miller to sell residential property (a duplex) owned by Miller located at 2331 N.W. 103rd Street, Miami, Florida. The property was listed with the Multiple Listing Service. On or about February 27 or 28, 1991, Mr. Castillo received a telephone call from Willie J. Thompkins of T & S saying he wanted to show the Miller property to a prospective buyer. On or about February 28, 1991, Mr. Castillo received through the mail slot at his office a written offer from George R. Howell of Dorchester, Massachusetts, to buy the Miller property, with a business card of Jerry Saunders of T & S. On or about March 6, 1991, Guillermo Castillo met with Horace Miller to review the Howell offer. At Miller's request, Castillo made some changes to the contract to reflect that Miller was selling the duplex in "as is" condition. Miller signed the contract and initialed the changes, and Mr. Castillo signed the contract on behalf of Emerald Enterprises, and called Willie J. Thompkins to tell him the contract had been signed. The next day, Mr. Castillo went to the office of T & S and dropped off the contract for the buyer to consider the seller's changes. A day or two later, a representative of T & S telephoned Guillermo Castillo and told Mr. Castillo that the buyer had accepted the seller's changes to the contract; Mr. Castillo then notified Miller. Mr. Castillo later received from T & S the signed contract with Mr. Miller's changes initialed by Mr. Howell. The contract was also signed by Mr. Thompkins of T & S. The contract called for a $1,000 deposit to be held in escrow by T & S (Exhibit 5, Paragraph IIa). Guillermo Castillo contacted T & S to check on the progress of the sale. He learned that J.P. Mortgage was handling the buyer's mortgage loan application. Castillo contacted J.P. Mortgage and was told that the loan was proceeding normally. After the contractual closing date of April 29, 1991, had passed without the closing taking place, Castillo contracted J.P. Mortgage again, but was told that they were no longer processing the loan. Castillo requested that J.P. Mortgage send him a letter to that effect, and he received a letter dated May 2, 1991, stating that J.P. Mortgage was withdrawing as the lender because the buyer failed to return the mortgage loan application. Castillo informed Horace Miller of the situation and Miller instructed Castillo to write to T & S making a claim to the buyer's deposit under the contract of sale. On May 4, 1991, Castillo sent a letter to T & S claiming the deposit for the seller. Paragraph Q of the contract provided for the seller to retain the buyer's deposit as liquidated damages if the buyer failed to perform the contract. On or about May 9, 1991, Guillermo Castillo received from Mr. Thompkins, the manger of T & S, a letter dated May 1, 1991, but postmarked May 6, 1991, ". . . requesting that the . . . file be cancelled" due to ". . . communication problems with . . . Mr. Howell," and citing unsuccessful attempts to contact Howell by telephone and by mail. When Castillo received that letter he contacted T & S to point out the seriousness of the matter and to press for forfeiture of the buyer's deposit. On May 9, 1991, Castillo received a telefax from Mr. Thompkins of T & S stating that the Howell deposit check had been returned for insufficient funds and attaching a copy of the returned check. Prior to his receipt of this telefax, Castillo had not taken any independent steps to verify whether T & S had actually received the Howell deposit. He had relied on the contract, which had been executed by a licensed salesman and believed he did not require further verification that the escrow deposit had been made. Neither Mr. Castillo nor Mr. Miller dealt with the Respondent, Mr. Powell, at any time concerning the sale of the Miller property. T & S received George Howell's $1,000 deposit in the form of a check on March 4, 1991, drawn on a Massachusetts bank and deposited it in its account with First Union National Bank which was used as the escrow account, account number 15462242336, on March 5, 1991. The check was charged back to the account twice, on March 11, 1991, and on March 26, 1991. Mr. Powell was a signatory on that escrow account. After Guillermo Castillo received the May 9, 1991, telefax, he notified Horace Miller. Mr. Miller had not taken any steps on his own to verify whether T & S had received the deposit because he had confidence in his broker to let him know right away if there were any problems with the sale. By May 9, 1991, Horace Miller had already incurred expenses preparing the property for closing, and had lost rent by terminating a tenancy in the property. Because the transaction never closed, Mr. Miller sustained financial damage, some of which he might have avoided if he had been notified earlier of the buyer's dishonored escrow deposit check. On or about May 28, 1991, Miller filed a complaint with the Department of Professional Regulation, which Sidney Miller investigated. He found that the person introduced to him during his investigation at T & S as Willie Powell was not actually the Respondent. In March 1991, Mr. Powell had not seen the bank statements for the T & S escrow account for several months, and had not signed the written monthly escrow account reconciliation statement for the month of October 1990 or for any subsequent month. Mr. Powell was serving as the qualifying broker of T & S for a salary of $75 per month and no commissions. He was not active in the management of the firm. He would come to the office of T & S approximately three days per week to check files and sign listing agreements, and he would call in to see if there were any problems, messages or documents to sign. He essentially loaned his brokers' license to those who operated T & S as an accommodation because he had known the Thompkins family for 25 years. Mr. Powell argues in his proposed order that "the adequacy of [Mr. Powell's] monthly reconciliations were impeded by frauds perpetrated upon him by persons at [T & S]" (PRO at page 9, paragraph 5). It is obvious that there were problems at T & S, since a person there misrepresented himself to the Department's investigator as Mr. Powell. The full extent of the misconduct there is unclear. There is no proof in this record that salespersons at T & S had fabricated escrow account statements for Mr. Powell. Had Mr. Powell proven that he performed monthly reconciliations with what turned out to be falsified records of T & S, his argument might be well taken. The record, unfortunately, shows that no reconciliations were done. Had Mr. Powell done them, the problem here should have been uncovered.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be issued finding Willie Powell guilty of violating Section 475.25(1)(b), Florida Statutes, finding him not guilty of violating Section 475.25(1)(d), Florida Statutes, and taking the following disciplinary action against him: Issuance of a reprimand. Imposition of an administrative fine in the amount of $1,000 to be paid within 30 days of the date of the final order adopting the recommended order. Placement of the license of Mr. Powell on probation for a period of one year beginning on the date of the final order and providing that during that period he shall provide satisfactory evidence to the Florida Department of Professional Regulation, Division of Real Estate, Legal Section, Hurston Building, North Tower, Suite N-308, 400 West Robinson Street, Orlando, Florida 32801-1772, of having completion a 30-hour postlicensure education course in real estate brokerage management, in addition to any other education required of him to remain current and active as a real estate broker in the State of Florida, and that he be required to submit to the Commission during that year his monthly trust account reconciliations. Cf. Rule 21V-24.002(3)(i), Florida Administrative Code, on penalties for violation of Rule 21V-14.012(2), Florida Administrative Code. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 16th day of July 1992. 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 day of July 1992. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 92-0192 Rulings on Findings proposed by the Commission: Adopted in Findings 1 and 2. Adopted in Finding 2. Adopted in Finding 3. Adopted in Finding 4. Adopted in Finding 5. Adopted in Finding 6. Adopted in Findings 7 and 8. Adopted in Finding 9. Adopted in Finding 12. Adopted in Finding 13. Adopted in Finding 11. Adopted in Finding 15. Rulings on Findings proposed by Mr. Powell: Adopted in Finding 1 with the exception of the license number. Adopted in Finding 3. Adopted in Finding 2. Adopted in Finding 4. Rejected as unnecessary. Adopted in Finding 5. Adopted in Finding 4. Adopted in Finding 6. Generally adopted in Finding 6. Implicit in Finding 10. Adopted in Finding 6. Adopted in Finding 6. Adopted in Findings 7 and 8. Adopted in Finding 9. Adopted in Finding 10. Rejected as subordinate to Finding 10. Adopted in Finding 13. Rejected as unnecessary, the reconciliation was not one done shortly following the month of March reconciling the account for March 1991. It was done during the investigation conducted by Mr. Miller and took place between approximately June 20 and July 10, 1991. Adopted in Finding 15. Rejected as unnecessary. Adopted in Finding 14. Rejected as unnecessary, or subordinate to Finding 10. Rejected as unnecessary. Rejected as unnecessary. COPIES FURNISHED: Theodore R. Gay, Esquire Department of Professional Regulation Suite N-607 401 Northwest 2nd Avenue Miami, Florida 33128 Harold M. Braxton, Esquire Suite 400, One Datran Center 9100 South Dadeland Boulevard Miami, Florida 33156 Darlene F. Keller Division Director Division of Real Estate Department of Professional Regulation 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32801 Jack McRay General Counsel Department of Professional Regulation 1940 North Monroe Street Suite 60 Tallahassee, Florida 32399-0792
Findings Of Fact At all times relevant hereto, respondent, Annette J. Ruffin, held real estate broker license number 0076385 issued by petitioner, Department of Professional Regulation, Division of Real Estate. When the events herein occurred, respondent was owner and broker for Century 21 A Little Bit Country at 915 Lithia Pinecrest Road, Brandon, Florida. She is presently employed by U. S. Homes Corporation in Tampa, Florida. James and Shirley Yaksic wished to sell their residence at 3512 Plainview Drive in Brandon, Florida. They listed their property with Century 21 Solid Gold Properties II, Inc. in Brandon in December, 1983. Deborah Cassidy was a salesman at respondent's office, and knew her parents, J. R. and Helen Anderson, were in the market for a new home. With Cassidy's assistance, the Andersons executed a contract on February 16, 1984, to purchase the Yaksics' residence. The contract called for a purchase price of $65,000 with a down payment of $10,000, including a $500.00 cash deposit which was given to respondent's firm several days after the contract was executed. The deposit was placed in Ruffin's escrow account on February 28, 1984. The Andersons were also required to seek VA financing on the balance owed. After the contract was accepted by the Yaksics on February 17, Helen Anderson made application on February 23 for a $55,000 VA loan with Norwest Mortgage, Inc., a lending institution in Tampa. Florida. Since her husband was in New York State, only Helen signed the loan application agreeing to allow verification of all representations made in the application. While filling out the loan application at Norwest, Helen Anderson learned that the Veterans Administration allowed applicants to apply for loans equal to 100% of the value of the property. Since the Andersons preferred to make no down payment, Helen Anderson wrote Norwest in early March requesting that their loan application be increased from $55,000 to $65,000. She also noted that she did not sign the "disclosure statement" on behalf of her husband since "it would be incorrect." In response to this Letter, Norwest wrote the Andersons in early April requesting a number of items needed to process the application as well as an amendment to the contract reflecting that the sellers agreed to 100% financing by the buyers. The Andersons did not respond to this inquiry. In addition, they never, advised the sellers that they had changed their loan application to 100% financing, and that the sellers would be required to pay more discount points at closing. Because no amendment to the contract was ever filed, Norwest processed the application for a $55,000 loan. Due to insufficient income and excessive obligations, the application was denied. The Andersons were so notified by letter dated May 3, 1984. After Helen Anderson received the denial letter she telephoned respondent's office manager on several occasions to seek a refund of her deposit. This information was apparently conveyed to Ruffin by the office manager. About the same time the sellers were advised by the listing salesman that the Andersons did not intend to close. On May 5, the sellers wrote a letter to Solid Gold requesting that it notify the selling broker to not "release the binder to the buyers as we are entitled to this money." For some reason, a copy of this letter was not mailed to respondent until May 31, and she received it in early June. Even though Ruffin may have been orally advised in early May of the Yaksics' intended claim by the listing office, she had no concrete evidence of this intention until she received their letter in early June. On June 29, 1984, Helen Anderson wrote respondent's office manager a letter requesting a return of her deposit no later than July 9. She also indicated the letter was being sent pursuant to instructions received from petitioner. On July 2, Ruffin replied by letter stating that "we cannot release your deposit as the house was off the market for such a long time," and that Norwest had advised her that the Andersons "did not bring in a lot of the information until it was too late." After Helen Anderson filed a complaint with the Department of Professional Regulation (DPR), DPR wrote respondent a letter dated July 19, 1984, stating in part that Anderson had been refused her deposit and that its records did not show that respondent had notified DPR of conflicting demands for that money. On July 30, 1984, respondent replied to DPR's inquiry and gave her version of the circumstances surrounding the transaction. After receiving no reply to this letter, she wrote a second letter in late December, 1984 to the Division of Real Estate (Division) requesting advice on the deposit matter. The Division sent a her form for requesting an escrow disbursement order on January 4, 1985 which was returned by respondent within a few weeks. An escrow disbursement order was eventually issued by the Division on April 19, 1985 directing her to refund the deposit to the Andersons. She did so on May 5, 1985. In conjunction with its investigation, DPR obtained copies of respondent's escrow account bank statements during the period when the Andersons' deposit was retained by Ruffin. Although the $500.00 deposit should have been maintained in that account from February, 1984 until disbursement in May, 1985, her account dropped below $500.00 on sixteen separate days during this period of time, and continuously from February 28 through April 30, 1985. Respondent, who has been a broker since 1977, maintained a record of all escrow deposits and expenditures in a ledger book which reflected when the Anderson money was deposited and when it was paid out. Although she inferred the problem may have been attributable to her bookkeeper, no adequate explanation was given as to why her bank balances dropped below $500.00 on a number of occasions. She acknowledged that she learned of the conflicting demands in May, 1984, but felt that she could still "solve" the credit problem of the Andersons. She stated that she intended to give notice to the Division of the conflicting claims on the deposit and needed no encouragement from the Division to do so. There is no evidence that respondent has ever been disciplined on any other occasion since first receiving her salesman license around twelve years ago.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent be found guilty as set forth in the Conclusions of Law portion of this order. All other charges should be DISMISSED. It is recommended that respondent's broker license be suspended for ninety days and that she be fined $500.00. DONE and ORDERED this 5th day of September, 1985, in Tallahassee, Florida. DONALD R. ALEXANDER Bearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, FL 32301 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of September, 1985.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing the following facts were found: At all times material to these proceedings, Respondent was licensed by the State of Florida as a real estate salesman having been issued license No. 0325539. On September 24, 1984, at Respondent's request, Petitioner placed Respondent's license in an inactive status and on the day of the hearing Respondent's license was still in an inactive status. During the latter part of June or July, 1983, Respondent and his wife Merie Klink talked to George Anna Davis (Davis) in regard to renting or selling her home. Legally described as: Lot 15, Block G, Geneva Heights, as per Plat Book 2, Page 122 of the Public Records of Sarasota County, Florida. The mailing address of the Davis' property is 1804 Edmondson Road, Nokomis, Florida 33555. As a result of this conversation, Davis decided to sell rather than to rent her home and entered into a multiple listing with Venice Area Multiple Listing Service, Inc., with Respondent's broker, Ronald W. Morrison of Century 21 First Realty of Venice, Inc., as the listing Realtor, which was accepted on August 8, 1983. On October 11, 1983, Jan Leather and Janet Adams submitted an offer on the property to Davis which she refused. Davis then made a counter-offer which was refused by Jan Leather and Janet Adams. At the time of the hearing, Davis did not recollect the offer or counter-offer being made. During the term of the listing Respondent mowed the grass, made minor repairs, and generally kept the Davis property clean without any compensation from Davis. On November 2, 1983, Respondent received an offer on the Davis property from Andrew G. Szilay and Lillian Green Szilay (Szilay). The Szilay offer provided for a total purchase price of $23,000, payable $3,000 in cash and $20,000 by note secured by a purchase money mortgage based on 30 year amortization with interest at the rate of 11 percent per annum to balloon in 3 years. There was no provision for the assumption of the John Falls mortgage in the sum of $3,500 by the Szilays and the Szilays assumed that this mortgage would be paid off by Davis at closing and that they would get a clear title. The Szilay offer was communicated to Davis by Respondent on November 2, 1983 and Davis informed Respondent that she needed to talk to her son before making a decision. Respondent called Davis again on November 3, 1983 but she had not made a decision and asked that Respondent call her back on Sunday morning, November 6, 1983 and that she would have made a decision on the offer by that time. During this conversation, Respondent reminded Davis that she had to accept the Szilay offer by noon, November 7, 1983 or it would be withdrawn. On November 4, 1983, Respondent received an offer on the Davis property from Walter E. Armstrong and Lula Mae Armstrong (Armstrong). The Armstrong offer provided for a $22,500 purchase price, payable $5,000 cash, assumption of the John Falls' mortgage in the sum of $3,500 by Armstrong and a $14,000 note secured by a purchase money mortgage to Davis with interest at the rate of 10 percent per annum to balloon in 5 years. Respondent attempted to contact Davis on November 4, and 5, 1983, but was unable to contact Davis until Sunday, November 6, 1983, and at that time informed Davis of the Armstrong offer. The record is clear that Respondent received and informed Davis of the Szilay offer before receiving the Armstrong offer. During the telephone conversation on Sunday, November 6, 1983, Respondent informed Davis of the Armstrong offer and asked Davis to write down the details of both offers so that Respondent could discuss the advantages and disadvantages of each offer with Davis. After some discussion Davis could not make up her mind and asked Respondent to call her back later. Upon calling Davis back later that Sunday, November 6, 1983, Davis advised the Respondent that she preferred the Szilay offer because of the 11 percent interest and the three year balloon feature, as opposed to the 10 percent interest and five year balloon feature of the Armstrong offer. Respondent instructed Davis to send a telegram accepting the Szilay offer. On that same day, Respondent advised Louise Levering the real estate salesperson who was handling the Armstrong offer, that Davis preferred the Szilay offer and why Davis preferred it and that Davis was going to accept the Szilay offer. Later that same day, Armstrong made a counter-offer increasing the interest rate to 11 percent and with the note to balloon at 3 years. The Armstrong counter-offer was communicated by Leverling to Respondent who in turn communicated the Armstrong counter-offer to Davis on the same day (November 6, 1983) which was later confirmed in writing. Again, the Respondent asked Davis to write down the details of each offer and counter-offer and Respondent explained the comparative features of them to Davis. One of the things pointed out to Davis, by Respondent, was that the Szilay offer would require Davis to satisfy the John Falls' mortgage in the sum of $3,500, producing no cash to Davis at the closing, while the Armstrong offer would give her substantial cash at closings which she wanted. At this point, since no telegram had been sent, Davis decided to accept the Armstrong offer instead of the Szilay offer and advised Respondent that she would send a telegram to that effect on Monday, November 7, 1983. On Monday, November 7, 1983, a telephone call to the Century 21 office confirmed that a telegram had been received from Davis accepting the Szilay offer. The telegram was later reduced to writing. Respondent then called Davis to see if there was a mistake and Davis advised Respondent that she had gotten confused. Again Respondent explained both offers to Davis and she agreed that the Armstrong offer would be better for her. On November 8, 1983, Respondent received a telegram from Davis accepting the Armstrong offer. The Armstrong contract was mailed to Davis for signature on November 9, 1983. Norwood Gay the Attorney closing the transaction, corresponded with Davis on November 18, 1983, and in accordance with that correspondence, Davis executed a closing statement, a warranty deed, and an owner's affidavit and forwarded the documents to Norwood Gay for the closing. The transaction closed in a routine manner with exception that an inspection of the improvements on the property revealed visible evidence of wood destroying organism known as dry-rot in various locations around the house. The Respondent notified Davis of this prior to closing, and Davis authorized a repair escrow of $500. The closing took place on December 5, 1983 and Norwood Gay forwarded to Davis the net check less escrow and the other closing documents. Norwood Gay later sent Davis the net of the repair escrow, which she accepted. While Davis in a letter to Petitioner implies that respondent dropped the price of the home by $1,500 and sold it to a close friend, the Armstrongs, the testimony of both the Respondent and his wife and the Armstrongs that they had not known each other before this transaction and had only met the morning of the hearing, went unrebutted. Also, the evidence shows that there was only $500 difference in the purchase price of the two offers. While Davis had previously listed her house with another agency to be sold "as is", the record is clear that this matter was discussed with Davis by the Respondent and that Davis understood that the property would be listed as needing "tender loving care" (TLC). The Respondent received $441.15 as a listing commission on the Armstrong sale. Had the Szilay offer been closed rather than the Armstrong offer, the Respondent would have received approximately $377.00 as a listing commission. The record is clear that Respondent discussed the advantages and disadvantage of both the Szilay and Armstrong offers prior to Davis making a final decision to accept the Armstrong offer. There was no credible evidence that Davis was pressured by the Respondent to accept the Armstrong offer or that the Respondent informed Davis that the Szilays: (a) were unreliable; (b) not financially able to handle the payments, or (c) that they had withdrawn their offer.
Recommendation Based upon the findings of fact and conclusions of laws recited herein, it is RECOMMENDED that the Commission enter a final order finding the Respondent not guilty of the violations as charged in Count I and Count II of the Administrative Complaint and that Count I and Count II of the Administrative Complaint be DISMISSED. Respectfully submitted and entered this 12th day of July, 1985, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 12th day of July, 1985. COPIES FURNISHED: Arthur Shell, Esquire 400 West Robinson Street Orlando, Florida 32802 William R. Hereford, Esquire 1233 South Tamiami Trail Sarasota, Florida 33579 Mr. Harold Huff Executive Director Department of Professional Regulation Division of Real Estate Post Office Box 1900 400 West Robinson Street Orlando, Florida 32801 Mr. Fred Roche, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Salvatore A. Carpino General Counsel Department of Professional Regulation 130 North Monroe Street Tallahassee, Fl 32301
Findings Of Fact At all times relevant to the issues herein, the Respondent, Raymond J. Scent was a licensed real estate broker in Florida, holding license number 0117710. He is the qualifying broker for Respondent, Buckingham Wheeler Realty, Inc., which at all material times was licensed as a brokerage corporation in Florida holding license number 0011055. On or about February 8, 1987, Raymond and Kathleen Lenau, timeshare owners of interval week 50, for unit number 120 at Hideaway Sands in St. Petersburg, Florida, received a post card solicitation from Respondent to sell their unit at auction. The notice indicated that Aardvark, Inc., with "Colonel" Ray Scent as auctioneer, would sell, for a flat fee, timeshare condominium ownerships at auction. The solicitation indicated that the seller would pay no commission. Respondent was listed on the return address as a Florida licensed real estate broker. Subsequent to receiving this Solicitation, the Lenaus, on February 23, 1987, entered into a "firm, fixed cost (no commission) interval ownership (timeshare) auction agreement" for their property which indicated that the property would be offered at a public sale in Orlando, Florida on or about March 6, 1987. The agreement further provided that the auctioneer, (Respondent), would receive as "compensation" for "promoting, advertising, and conducting said auction sale" the total sum of $279.00. If the unit was sold or withdrawn by the owner prior to the auction, Respondent was to retain the full amount paid as liquidated damages. If the Respondent failed to present the unit for sale, he would return the fixed cost fee. There were other costs incident to a consummated sale, but these are not relevant to the issues herein. The Lenaus paid Respondent the $279.00 called for in the agreement. Respondent did not place this money in an advance fee escrow or trust account but instead placed it in a business checking account maintained by him, co- mingled with other funds of his auction business. The Lenau's property was offered for sale at the March 6-7, 1987 auction along with numerous other units owned by other individuals but there were no bidders for this unit and it was not sold. When the Lenaus contacted Respondent after the auction, they were advised that the unit had not sold but if they wanted it to be re-offered at the next sale, they could pay an additional $79.00 and it would be offered. The Lenaus declined to do this. At no time has Respondent accounted to the Lenaus for the expenditure of the $279.00 received from them, nor has he returned the fee. On or about May 1, 1987, subsequent to a complaint filed by the Lenaus, Charles E. Kimmig, Sr., an investigator with the Division of Real Estate, met with Respondent to discuss the escrow books required to be maintained by Respondent as a real estate broker. Mr. Kimmig contends he requested to see the records pertaining to the fee paid by the Lenaus. In response, according to Mr. Kimmig, Respondent indicated that the money was placed in his personal account, which was private, and that he would not make the records available except by court order. Petitioner contends that the $279.00 fee paid to him was his compensation for offering the property for sale at auction and was designed to recover the cost of advertising, printing, and other expenses incident to the auction as well as a portion of profit. In addition to the fee received from the seller, he also receives a $40.00 fee from each bidder and a premium from the buyer of 15 percent of the purchase price. The actual auction company is Aardvark, Inc., which is owned by Respondent, Scent. Raymond Scent, as a registered real estate broker, is employed by Aardvark Inc., to conduct the auctions of time share units as is required by statute. In all his advertising, Respondent identified himself as a licensed broker, along with Aardvark Inc., as the auction company.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that the Administrative Complaint filed herein against the Respondents Raymond J. Scent and Buckingham Wheeler Realty, Inc., be dismissed. RECOMMENDED this 4th day of September, 1987 at Tallahassee, Florida. ARNOLD H. POLLOCK, 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 4th day of September, 1987. COPIES FURNISHED: James H. Gillis, Esquire DPR - Division of Real Estate 400 West Robinson Street Orlando, Florida 32801 Mr. Raymond J. Scent Post Office Box 6089 Vero Beach, Florida 32961-6089
