The Issue As stipulated by the parties and as reflected in the Amended Administrative Complaint dated September 28, 1992 the issues for resolution are whether Respondent misrepresented property for sale at auction or made false promises concerning the use, value or condition of such property; whether this conduct demonstrates bad faith or dishonesty; whether Respondent failed to appropriately conduct and maintain control of the auction; and whether the Respondent used false bidders, cappers or shills. (Joint Prehearing Statement filed 9/28/92) If those violations occurred, an appropriate penalty must be determined.
Findings Of Fact Respondent, Ronald Ray Kool, Sr., (Kool) has been licensed continually as an auctioneer in the State of Florida since approximately 1988, having been issued license number AU 0000510. He is the registered owner of the business, A-Plus Auctions, which is issued license number AB 0000071. On July 9, 1990, Respondent contracted with Dr. Florence Alexander for the conduct of an auction at the Ebon Center, in Titusville, Florida. The contract was renegotiated, and a subsequent written contract was entered between the parties on July 26, 1990, for the auction to be held on July 28, 1990. The latter contract provided that the auction was a reserve auction, that is, minimum bids were provided by Dr. Alexander for the items offered for sale. Prior to the auction, on July 27, 1990, some items originally included in the list for the auction were sold by Ebon Galleries, and numerous other items were substituted. This was satisfactory to Kool as the potential commission on the substitute items was considerably larger. This transaction constituted an oral amendment by the parties. As advertised, the auction commenced at 10:00 a.m., July 28, 1990 at the Ebon Center in Titusville. The goods for sale were on display and available for inspection by the bidders prior to, and during the auction in a large warehouse area where the auction was being held. The items were mostly oriental pots, vases, lamps, ceramic figures, mugs, frames, and other decorator pieces and bric-a-brac. There were approximately 200-250 bidders. As they entered the auction area all bidders were given a perforated card to fill out. The lower portion included their name, address, phone number and assigned bidder identification number. This was detached and given to the auction clerk. The top portion was retained by the bidder and included the assigned bidder number and this text: EVERYTHING MUST BE PAID IN FULL ON THE DAY OF THE AUCTION regardless of when it is picked up. Everything will be sold "as is, where is", with no guarantees of any kind, regardless of statement of condition made from the auction block. Buyers shall rely entirely on their own inspection and information Every effort is made to "guard" merchandise throughout the auction; however, the bidder becomes solely responsible for all items purchased by him immediately following his winning bid. Therefore, he is advised to further guard his items at his own discretion. The Bidder is responsible for knowing which items he is bidding on. If he is unsure, he should inquire or not bid. When you become the winning bidder at auction you have effected a contract and will be expected to pay for items in which you were evidenced to be the successful bidder. Auctioneer will not honor "mistakes". The Auctioneer reserves the right to accept bids in any increment he feels is in the best interest of his client, the seller. The Auctioneer reserves the right to reject the bidding of any person whose conduct, auctions, or adverse comments he feels are not in the best interest of the seller. (Petitioner's Ex. #14, deposition of Kool, ex. 6 to deposition) At the commencement of the auction Kool announced various ground rules or terms of the auction, including the fact that this was not an absolute auction, that bidders had an obligation to inspect merchandise because they were responsible for what they bought and that there was a ten percent buyer's premium on the sales. "Buyer's premium" is a surcharge on the bid price, which surcharge is received by the auctioneer, along with his commission from the seller. Kool also introduced his employees and informed the gathered bidders that he and his employees would bid if they wished and the bidders would know when employees were bidding. Kool and his employees were assigned bidder numbers 502 through 509. The male employees wore gray slacks and gray shirts with "A-Plus Auctions" embroidered on the shirts. The women employees wore blue dresses with "A-Plus Auctions" inscribed. The employees were up front working behind the table and in front of the auctioneer. When they bid, they raised their hands like anyone else. Max Algase and Herbert Michaels arrived at the auction just as the introduction was being completed. Max Algase was assigned bidder number 569 and received the card described above. Max Algase describes himself as a "liquidator"; he buys and sells merchandise, including entire stores or chains of stores and occasionally attends auctions. Herbert Michaels is a good friend and sometimes business associate of Algase. Michaels is on disability retirement from Zayre's Department Stores, where he was merchandise manager for twenty years and was responsible for twenty-eight stores' apparel, comprising $85 million in sales. At some point during the auction, Shirley Thompson (now Shirley Thompson Effron) sat down next to the two men and introduced herself. The three individuals decided to form a partnership, each putting up a third for the purchases at the auction, and then reselling the items later in a shop that they would open for that purpose. Algase considered the venture "a lark" rather than a serious business deal. (Transcript, p. 51) So many purchases were made by bidder number 569 (Algase, or Liquidators III, the ad hoc partnership) that during the course of the auction, the computer program utilized by Kool ran out of data space for that number, and another number, 626, was assigned. During the auction the seller, Dr. Alexander obtained bidder number 604 and she purchased three items. When Kool recognized her as a purchaser, he turned the auction block over to another auctioneer and confronted Dr. Alexander, telling her that it was inappropriate for her to bid. The items she had purchased were put back up for sale. Towards the end of the auction, Dr. Alexander approached Kool and asked about placing some racks of clothing up for sale. He agreed, reluctantly, because clothing sales are time-consuming, and the racks of clothes were wheeled out to the warehouse floor. The clothes were in two categories, one group was a large number of heavy woolen items, coats, capes, jackets, suits and the like; the other, smaller group was mostly lightweight dresses, bathing suits and similar items. Kool announced the clothes would be placed for sale and invited the bidders to go look at them. About five or ten minutes later bidding started on the items, "bidders choice". That means the individual who bid highest would get the first choice of the multiple items. The reserve, or lowest bid acceptable, was $75.00 each. After ten or fifteen minutes, only a few items had been sold and Kool told Dr. Alexander to remove them from the floor. She and her father wheeled the racks back into the front showroom of the building. One of the participants interested in the clothing was Herbert Michaels. He inspected the racks, felt and touched the clothing and convinced Algase that the items were well worth $35.00 a piece. The partners bought the woolen items for $35.00 each, and the lighter items at $10.00 each. All three partners have a different version of how the sale took place. Herbert Michaels claims that Kool, while off the auction block, negotiated the sale with Max Algase and Shirley Thompson Effron; Max Algase claims that after the woolen items were offered at "bidders choice", they were offered from the block at "bidder take all", and he won the bid at $35.00 apiece. Shirley Thompson Effron claims that after the clothing was removed from the floor, Dr. Alexander approached their group and negotiated the sale with Max Algase. The latter version is consistent with Kool's testimony and that of his other witnesses and is credited. The latter version is also consistent with a tally sheet identified by Kool as a paper brought to him by Dr. Alexander approving the transaction. (Petitioner's Ex. 14, Kool deposition, exhibit 6 to the deposition) During the clothing deal, Algase, Herbert Michaels and Shirley Thompson Effron went to the showroom while Kool's employees counted the items. There were 550 woolen items and 88 lighter items, with a total cost of $19,250.00 for the former and $880.00 for the latter. The counts are reflected on the tally sheet given to Kool. Algase paid for these and other items purchased at the auction with a check. Later, he made arrangements with Mrs. Kool to substitute cash and he did so on Tuesday of the following week, when he had all of the clothing loaded into large trucks for removal from the Ebon Center. The Liquidators III venture was not successful. Few of the items were resold as they had hoped. The relationship between Shirley Thompson Effron and Max Algase deteriorated and he is suing her husband's corporation. On November 7, 1990, Shirley Thompson Effron, as secretary of the partnership, and at the insistence of Max Algase, sent a letter to Ron Kool complaining that they bargained for, and bought, coats, but that more than half of the items were dresses, suits or skirts. The letter demanded "full restitution immediately". (Petitioner's Ex. 11) In March 1991, Algase complained to the Department of Professional Regulation, and Investigator Bobby Hunter conducted interviews and gathered documents, including the records maintained by A-Plus Auctions for the July 1990 auction. Those records reflect the bidder number 500 for many items, with a "0" final settlement price. That is a number assigned by Mrs. Kool, a licensed auctioneer and the business manager for the company, to account for items which were offered for sale but did not reach the minimum bid set by the seller, Dr. Alexander. Bidder numbers assigned to A-Plus employees show purchases of several items, mostly small, less than $10.00, the largest amount being $40.00. The records also reflect that the 550 woolen items bought by Algase and his partners are described as "coats" on the final settlement printout. This description was assigned by an employee of A-Plus Auctions when the items were offered for sale. There is no credible evidence that Kool described the items from the auction block as only coats. Rather, he described woolen clothing, including alpaca coats from Central or South America. Herbert Michaels conceded that he knew the items were not all coats before the sale was made because he had inspected the racks on the floor. He found capes as well as coats, and tops to ensembles. (Transcript, p. 34) Several expert auctioneers testified on behalf of the parties, one on behalf of Petitioner and two for the Respondent, with a combined experience of 62 years in auctioneering. Their opinions did not vary substantially. They expressed concern with the fact that the owner, Dr. Alexander, managed to bid on several lots, but they agreed that Kool handled the problem properly after he discovered it. They also agreed that side deals like the one involving the clothing deprive the general public of an opportunity to participate, but they are not illegal so long as records are kept and funds, including the commission, are disbursed and accounted for. The experts described the practice, more common in the past than now, of "dropping on the house number". An auctioneer can falsely raise bids by acknowledging a phony bid. If the phony bid is not raised, the auctioneer is stuck with it and announces the sale to a "house number", not associated with any real bidder, but in the words of R. L. Huntsinger, bid by "Mr. Wall", "Mr. Floor", "Mr. Ceiling", etc. The appearance of the number 500 without a bidder identified, in Kool's records of the auction, raised the suspicion that this illegal practice was used. Respondent and his witnesses adequately explained why the number was used, however, to account for items that did not reach the reserve minimum bid. Even Petitioner's expert conceded that he could not say that the practice was used in this case. (Transcript, p. 180) Petitioner's expert also opined that any errors committed by Respondent were due to lack of knowledge and not because of an intent to defraud the public or the seller. (Transcript, p. 193) The weight of evidence, taking into consideration the demeanor and credibility of the witnesses, fails to support a finding that Respondent Kool committed the violations alleged. He did not misrepresent the property being sold. The clothing was described as such, and not as only "coats". The complainants, sophisticated and experienced business people, had an opportunity to inspect the items and knew what they were buying. There is no evidence of bad faith or dishonesty and the evidence presented by Respondent effectively forecloses a finding that he used or permitted the use of false bidders. Although Max Algase was not required to re-register when he was assigned a subsequent number, the records produced at hearing confirm the testimony of Mrs. Kool that Algase was bidder number 626. The auction on July 28, 1990 was an all-day affair with a high volume of goods to be moved. As principal auctioneer, Kool was in charge and maintained control. He hired experienced, competent employees and utilized only licensed auctioneers in calling the bids. Certain tasks were appropriately delegated to his wife, also a licensed auctioneer. Recordkeeping was thorough and substantially accurate. While Respondent regrets that the seller, Dr. Alexander, was given a bidder number and managed to bid, her participation, as concluded below, is not prohibited.
Recommendation Based on the foregoing, it is, hereby, RECOMMENDED: That a final order be entered finding no violation by Respondent and dismissing the amended administrative complaint. DONE AND RECOMMENDED this 24th day of May, 1993, in Tallahassee, Leon County, Florida. MARY CLARK 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 24th day of May, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-3112 The following are specific rulings on the findings of fact proposed by the parties: Petitioner's Proposed Findings 1.-2. Adopted in paragraph 1. Adopted in paragraph 2. Rejected as irrelevant. Included in paragraph 3. Rejected as irrelevant. Adopted in paragraph 4. Rejected as irrelevant (see paragraph 3.) Rejected as irrelevant. Included in paragraph 9. Adopted in paragraph 8. 12.-14. Rejected as unnecessary. The clothing was not described at auction as only coats. Rejected as contrary to the weight of evidence. (see 12-14, above) Rejected as unnecessary. Adopted in paragraph 11. 18.-19. Adopted in paragraph 12. Rejected as unnecessary, but addressed by implication in paragraph 21. Adopted in paragraph 13. Adopted in paragraph 14. Adopted in paragraph 13. and 14. Addressed in paragraph 21, but the implication of illegality is rejected as contrary to the law and rules. Rejected as irrelevant. Adopted in paragraph 16. Rejected as unnecessary. Adopted in summary in paragraph 16. Rejected as contrary to the weight of evidence. 30.-31. Rejected as irrelevant, and contrary to the weight of evidence. Adopted in paragraph 17. Rejected as contrary to the weight of evidence and a misstatement of the expert's testimony. The witness was responding to a hypothetical question. 34.-35. Adopted in paragraph 6. 36. Addressed in paragraphs 21. and 26. 37.-44. Rejected as unnecessary. 45. Adopted in paragraph 10. 46.-50. Rejected as immaterial. 51. Rejected as contrary to the weight of evidence. "Control" also means delegation to competent staff. See Rule 21BB-5.001(2), F.A.C. 52.-55. Rejected as irrelevant. These proposed facts do not relate to any alleged violation of statute or rule. Respondent's Proposed Facts 1.-3. Adopted in paragraph 1. 4. Adopted in paragraph 2. 5.-6. Adopted in paragraph 4. 7. Adopted in paragraph 5. 8. Adopted in paragraph 7. 9. Adopted in paragraph 2. and 6. 10. Adopted in paragraph 4. 11. Adopted in paragraph 5. 12. Adopted in paragraph 6. 13. Adopted in paragraph 19. 14. Adopted in paragraph 10. 15. Adopted in paragraph 11. 16. Adopted in paragraph 8. 17. Adopted in paragraph 15. 18. Adopted in paragraph 12. 19. Adopted in paragraph 15. Rejected as unnecessary. Adopted in paragraph 26. Rejected as unnecessary; included by implication in paragraph 24. COPIES FURNISHED: Anthony Cammarata, Senior Attorney Department of Professional Regulation 1940 North Monroe Street, Suite 60 Tallahassee, Florida 32399-0792 Joseph E. Miniclier, Esquire 1970 Michigan Avenue Building E Cocoa, Florida 32924-8248 Jack McRay, General Counsel Department of Professional Regulation 1940 North Monroe Street, Suite 60 Tallahassee, Florida 32399-0792 Suzanne Lee, Executive Director Department of Professional Regulation Board of Auctioneers 1940 North Monroe Street, Suite 60 Tallahassee, Florida 32399-0792
The Issue The issue is whether Rule 5J-10.001, Florida Administrative Code, constitutes an invalid exercise of delegated legislative authority, pursuant to Section 120.52(8), Florida Statutes.
Findings Of Fact Pursuant to Sections 559.801(2) and 559.813(2), Florida Statutes, Respondent has exclusive administrative jurisdiction over the Sale of Business Opportunities Act, Chapter 559, Part VIII, Florida Statutes, and shares judicial enforcement over the Act with the Florida Department of Legal Affairs and the applicable office of the state attorney. (Unless stated otherwise, all references to "Sections" shall be to Florida Statutes, all references to the "Act" shall be to the Sale of Business Opportunities Act, and all references to "Rules" shall be to the Florida Administrative Code.) The Act governs the sale or lease of certain business opportunities in Florida. Sections 559.803 and 559.804 respectively require sellers of covered business opportunities to provide timely disclosures to prospective purchasers and to file annual disclosure statements with Respondent prior to advertising or offering covered business opportunities for sale. More relevant to this case, Section 559.801 sets forth the definitions that establish the coverage of the Act: 559.801 Definitions.--For the purpose of ss. 559.80-559.815, the term: (1)(a) "Business opportunity" means the sale or lease of any products, equipment, supplies, or services which are sold or leased to a purchaser to enable the purchaser to start a business for which the purchaser is required to pay an initial fee or sum of money which exceeds $500 to the seller, and in which the seller represents: That the seller or person or entity affiliated with or referred by the seller will provide locations or assist the purchaser in finding locations for the use or operation of vending machines, racks, display cases, currency or card operated equipment, or other similar devices or currency-operated amusement machines or devices on premises neither owned nor leased by the purchaser or seller; That the seller will purchase any or all products made, produced, fabricated, grown, bred, or modified by the purchaser using in whole or in part the supplies, services, or chattels sold to the purchaser; That the seller guarantees that the purchaser will derive income from the business opportunity which exceeds the price paid or rent charged for the business opportunity or that the seller will refund all or part of the price paid or rent charged for the business opportunity, or will repurchase any of the products, equipment, supplies, or chattels supplied by the seller, if the purchaser is unsatisfied with the business opportunity; or That the seller will provide a sales program or marketing program that will enable the purchaser to derive income from the business opportunity, except that this paragraph does not apply to the sale of a sales program or marketing program made in conjunction with the licensing of a trademark or service mark that is registered under the laws of any state or of the United States if the seller requires use of the trademark or service mark in the sales agreement. For the purpose of subparagraph 1., the term "assist the purchaser in finding locations" means, but is not limited to, supplying the purchaser with names of locator companies, contracting with the purchaser to provide assistance or supply names, or collecting a fee on behalf of or for a locator company. "Business opportunity" does not include: The sale of ongoing businesses when the owner of those businesses sells and intends to sell only those business opportunities so long as those business opportunities to be sold are no more than five in number; The not-for-profit sale of sales demonstration equipment, materials, or samples for a price that does not exceed $500 or any sales training course offered by the seller the cost of which does not exceed $500; or The sale or lease of laundry and drycleaning equipment. "Department" means the Department of Agriculture and Consumer Services. "Purchaser" includes a lessee. "Seller" includes a lessor. An important question in this case is the extent to which the Act addresses affiliates of a seller. In fact, the Act does so only once. In describing the various disclosure requirements imposed upon a "seller," Section 559.803 mentions an affiliate in Section 559.803(1), which requires the disclosure of "the name of any parent or affiliated company that will engage in business transactions with the purchasers or who takes responsibility for statements made by the seller." In describing the annual filings, Section 559.805 does not mention "affiliates." Nor do the main enforcement provisions of the Act mention "affiliates." Section 559.809 prohibits 14 specified acts by "sellers". Section 559.813(2)(a) specifies five violations by "a seller or any of the seller's principal officers or agents" that may result in the penalties set forth in Section 559.813(2)(b). In connection with the sale or lease of business opportunities, Respondent has adopted three rules at Chapter 5J-10, Florida Administrative Code. Petitioners have challenged, in its entirety, Rule 5J-10.001, which supplies several definitions. Rule 5J-10.001 states: 5J-10.001 Definitions. The definitions contained in Section 559.801, Florida Statutes, and the following apply: “Initial Fee or sum of money,” as used in Section 559.801(1)(a), F.S., shall include the total funds paid by the purchaser to the seller, including all monies paid for deposits, down payments, prepaid rents, equipment costs, materials, samples, products, training, services or inventory purchases. “Material change” shall include any fact, circumstance, or set of conditions which has a substantial likelihood of influencing a purchaser or a reasonable prospective purchaser in the making of a significant decision relating to a named business opportunity or which has any significant financial impact on a purchaser or prospective purchaser. “Sales program or marketing program” means: A written or oral procedure or plan provided by the seller to a purchaser of a business opportunity concerning products, equipment, supplies, services or training that the seller represents will be provided on how to sell or market the product or service; or Where the seller provides to the purchaser the following devices, techniques, training or materials which will assist the purchaser in deriving income from the business opportunity: Sales or display equipment or merchandising devices; Specific sales or marketing techniques; or Sales, marketing or advertising materials which are intended for use by the purchaser to influence a consumer to purchase a product or service. “Seller” includes any person who has an ownership interest of 10% or greater in an entity which sells or leases business opportunities. Specific Authority 570.07(23) FS. Law Implemented 559.801, 559.803, 559.805 FS. History–New 11-15-94, Amended 6-4-95. Respondent adopted Rule 5J-10.001 effective November 15, 1994, and amended it effective June 4, 1995. The specific authority cited for the rule, Section 570.07(23), provides only that Respondent "shall have and exercise the following functions, powers, and duties: To adopt rules pursuant to ss. 120.536(1) and 120.54 to implement provisions of law conferring duties upon it." However, in 1997, the Legislature adopted Section 559.813(8), which broadens Respondent's rulemaking authority under the Act by providing: "The department has the authority to adopt rules pursuant to chapter 120 to implement this part." In defining "seller" in Rule 5J-10.001(4), Respondent relied on the Federal Trade Commission (FTC) regulations at 16 Code of Federal Regulation (CFR) Part 436 (collectively, the "Franchise Rule"). In particular, Respondent relied on 16 CFR 436.2, explaining in a response to an interrogatory that Rule 5J-10.001(4) "was intended to clarify the identity of persons sufficiently affiliated with the sale of a business opportunity by virtue of their share ownership (16 C.F.R. 436.2) upon whom a duty should be imposed to make the required statutory disclosures in the sale of a business opportunity." In 16 CFR Sections 436.2(a)(1)(i) and (ii), the FTC identifies two types of franchises covered under the FTC Act: the package and product franchise and the business opportunity. As the name implies, the business opportunity described in 16 CFR Section 436.2(a)(1)(ii) bears the closer resemblance to the Act. Under 16 CFR Section 436.2(a), both types of franchises require an arrangement and, more importantly, "any continuing commercial relationship." For the business opportunity, 16 CFR Section 436.2(a)(1)(ii)(A) requires that a franchisee offer, sell, or distribute to a person other than the franchisor goods or services that are supplied by the franchisor, supplied by a third person with whom the franchisor requires the franchisee to do business, or supplied by an affiliate of the franchisor with whom the franchisee is advised by the franchisor to do business. In addition, for the business opportunity, 16 CFR Section 436.2(a)(1)(ii)(B) requires that the franchisor secure for the franchisee retail outlets or accounts, locations or sites for product sales displays (such as vending machines or rack displays), or the services of a person to secure these retail outlets, accounts, locations or sites. Also, 16 CFR Section 436.2(i) defines an "affiliated person" as a person that "directly or indirectly controls, or is controlled by, or is under common control with, a franchisor"; that "directly or indirectly owns, controls, or holds with power to vote, 10 percent or more of the outstanding voting securities of a franchisor"; or that "has, in common with a franchisor, one or more partners, officers, directors, trustees, branch managers, or other persons occupying similar status or performing similar functions." However, the definitions in 16 CFR Section 436.2 apply only to terms "used in this part," and 16 CFR Part 436 does not cover enforcement and liability issues--only disclosures and definitions, including coverage definitions. In fact, the sole purpose of the affiliate definition in 16 CFR Section 436.2 is to explain the disclosure requirements set forth in 16 CFR Sections 436.1(a)(7) (total funds required to be paid to franchisor or its affiliates), 436.1(a)(8) (recurring funds required to be paid to franchisor or its affiliates), 436.1(a)(9) (names of affiliates with which franchisee is required or advised to do business), 436.1(a)(11) (basis for calculating actual revenue to be received by franchisor or its affiliates), 436.1(a)(12) (financing conditions offered by franchisor or its affiliates), and 436.1(a)(14) (extent to which franchisee--or, if a corporate, franchisee's affiliates--to participate directly in the franchised operation). Nowhere in the Franchise Rule does the affiliate definition broaden the scope of the persons liable for violations of the federal law. On July 26, 2002, Respondent filed an Administrative Complaint against Petitioners and three allegedly related corporations and transmitted the matter to the Division of Administrative Hearings (DOAH) for a formal hearing. This proceeding was designated DOAH Case No. 02-3374. At the same time, Respondent imposed an Immediate Final Cease and Desist Order ordering that Petitioners and three allegedly related corporations discontinue the sale of business opportunities in Florida. (The First District Court of Appeal later stayed the enforcement of this order.) On October 11, 2002, Respondent served an Amended Administrative Complaint. The undersigned Administrative Law Judge completed the hearing in DOAH Case No. 02-3374 on November 25, 2002. As of the date of this final order, the parties have not yet filed their proposed recommended orders. In the Administrative Complaint, Amended Administrative Complaint, and Immediate Final Cease and Desist Order, Respondent relies on Rules 5J-10.001(3) and (4), but not Rules 5J-10.001(1) and (2). With respect to Rule 5J-10.001(3) ("Sales or Marketing Program Rule"), Respondent alleges that the business opportunities are covered by the Act because of the presence of a "sales program or marketing program." With respect to Rule 5J-10.001(4) ("Seller Rule"), Respondent alleges that Petitioners are liable as owners of one or more named corporations that are "sellers" who have violated the Act. With respect to Rules 5J-10.001(1) and (2), respectively, the regulatory definitions of an "initial fee or sum of money" or "material change" play no significant role in DOAH Case No. 02-3374. For this reason, Petitioners are not substantially affected by these rules, and the Conclusions of Law below determine that Petitioners lack standing to challenge Rules 5J-10.001(1) and (2), which are not further discussed in this final order.
The Issue Whether the Respondent committed the violations alleged in the Administrative Complaint dated February 5, 2007, and, if so, the penalty that should be imposed.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: The Board is created within the Department of Business and Professional Regulation and is the state agency responsible for regulating and imposing discipline on auctioneers and auction businesses. See §§ 468.384 and 468.189(2), Fla. Stat. At the times material to this matter, the Auction Depot was a licensed auction business in the State of Florida. The auction business license of Auction Depot expired effective November 30, 2007, and has been considered delinquent since December 1, 2007. Anton Rechner was the president of Auction Depot at the times material to this proceeding. Kathy Murphy is the owner of Endless Treasures Estate Sales and Service ("Endless Treasures"). On December 29, 2005, Mrs. Murphy consigned a number of items with Auction Depot for sale at auction. Auction Depot conducted an auction on January 5, 2005, and sold a number of the items Mrs. Murphy had put on consignment on December 29, 2005. On January 6, 2006, Mrs. Murphy picked up from Auction Depot a list of items sold at the auction on January 5, 2005. The list included the items Mrs. Murphy had put on consignment, with the lot numbers for each item, the sales price for each item sold, the Auction Depot's commission for each item sold, and the total due to Mrs. Murphy for each item sold. Among the items shown sold on the list Mrs. Murphy picked up on January 6, 2006, were two mahogany hutches; the sales price was shown as $600.00 for each hutch, and $450.00 was owed to Mrs. Murphy for each hutch. The list Mrs. Murphy picked up on January 6, 2006, also included several items that were not sold at the January 5, 2006, auction, and no sales price or the notation "$0.00" was shown on the list. The total amount owed to Mrs. Murphy stated on the list of items Mrs. Murphy picked up on January 6, 2006, was $4,976.25, on total sales of $6,635.00. Mrs. Murphy did not receive payment of the $4,976.25 from Auction Depot shown on the list she picked up on January 6, 2006. In February 2006, she received a check for $4,113.75, together with a revised list showing that the mahogany hutches had not been sold. Mrs. Murphy was told that the person who purchased the mahogany hutches had not paid for them. On January 10, 2006, Auction Depot picked up additional items from Endless Treasures on consignment. The items were auctioned on January 12, 19, and 26, 2006. A list of the items sold at the January 12, 2006, auction shows that two mahogany "bookcases" were sold for $450.00 each. Mrs. Murphy was at the auction and identified the "bookcases" as the mahogany hutches that she sent to Auction Depot on December 29, 2005. These two items were sold in a telephone auction, but there was no speakerphone, so that the only person who could hear the telephone bids was Mr. Rechner. Mrs. Murphy later saw the hutches for sale in an antique gallery owned by Mr. Rechner. According to the list provided by Auction Depot of the items sold at the January 12, 2006, the gross sales totaled $2,292.50, minus Auction Depot's commission of $573.13, for a total owing to Mrs. Murphy of $1,719.38. Mr. Rechner wrote a check to Endless Treasures for $1,719.38 and gave it to Mrs. Murphy; the check was dated January 12, 2006, but it was not signed, and Mrs. Murphy could not cash it. When she returned to Auction Depot and asked Mr. Rechner to sign the check, he refused with a rude remark and told her that he would see her in court. Mrs. Murphy finally received a check from Auction Depot for the $1,719.38 owed for the items sold on January 12, 2006; the check was dated January 1, 2006, and signed by Mr. Rechner. It was sent to Mrs. Murphy through the Board, after she filed a complaint against Auction Depot. The total amount owning Mrs. Murphy for the items sold on Mrs. Murphy's behalf on January 19 and 26, 2006, was $53.13 and $105.00, respectively. Mrs. Murphy received payment of these amounts in February 2006. A number of the items Mrs. Murphy placed with Auction Depot were not sold at the auctions held on January 5, 12, 19, or 26, 2006. Although Mrs. Murphy and her husband asked several times that Auction Depot return the unsold items, they were told that they had been broken or could not be found. Mrs. Murphy never received the unsold items from Auction Depot. The evidence presented by the Board is sufficient to establish with a high degree of certainty that Mrs. Murphy did not receive payment for the items sold on January 5, 2006, within a reasonable amount of time. The evidence presented is also sufficient to establish with a high degree of certainty that Auction Depot committed acts of bad faith and dishonesty in connection with the sales of Mrs. Murphy's property by not returning unsold items to Mrs. Murphy and by manipulating the sale of the two mahogany hutches for his own benefit.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Board of Auctioneers enter a final order finding that Auction Depot violated Section 468.389(1)(e) and (c), Florida Statutes, in connection with the transactions involving Endless Treasures Sales and Service and imposing an administrative fine of $2,000.00. DONE AND ENTERED this 28th day of April, 2009, in Tallahassee, Leon County, Florida. PATRICIA M. HART 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 28th day of April, 2009.
The Issue The issue for determination in this proceeding is whether the Respondents violated Section 475.25(1)(b), Florida Statutes, by inducing a seller to enter in a contract for sale of real estate, based on a $50,000.00 earnest money deposit that was never made.
Findings Of Fact Respondent Fred Marberry, Jr. is now and was at all times material hereto a licensed real estate broker-salesman in the State of Florida, having been issued license number 0369879 in accordance with Chapter 475, Florida Statutes. Respondent Bernon Earl Thomas is now and was at all times material hereto a licensed real estate salesman in the State of Florida, having been issued license number 0433736 in accordance with Chapter 475, Florida Statutes. During the relevant time, from July through September 1985, Fred Marberry was President of Marberry and Mack Development, Inc., and maintained an office in Altamonte Springs, Florida. James Mack was the Vice-president, Secretary and Treasurer of the company. During the relevant time, from July through September 1985, Bernon Thomas was a real estate salesman with General Realty Management Corporation. His office was in Kissimmee, Florida. In 1985, the two Respondents had worked together on the potential sale and development of a multi-family project in Kissimmee. Thomas was aware of the availability of some commercial property in Kissimmee known as Cross Creek that he felt would be a good deal and shared that information with Marberry. Thomas got his information on Cross Creek from Larry Heninger, who was working with the owner, R. S. Futch, in putting together a development package to present to potential buyers and developers. Heninger had expended considerable effort in working with an engineer and permit agencies and had made contacts with a number of businesses interested in locating on the property. The engineering reports, correspondence and figures supplied to Marberry by Thomas indicated that the parcel comprised 14.75 usable acres. There were letters from the City saying that sewage capacity, utilities and similar public services would be based on this amount. Marberry told Thomas that the development package looked good and to continue working on it. Some time in mid-July 1985, Larry Heninger informed Thomas that some third parties were also interested in the Cross Creek property and that if Marberry and Mack, Inc., wanted to present an offer, they would need to do so immediately as Mr. Futch was leaving on a vacation for several weeks. Thomas called Marberry to relay this information. The details of the conversation are in dispute, but it is uncontroverted that Thomas was made a Vice-president of Marberry and Mack, Inc., for the sole purpose of executing a sales contract immediately. Arrangements were made for Thomas to draw up the contract/offer and have it taken to the Orlando airport where R. S. Futch was either leaving or was en route on his vacation. Marberry and Thomas disagree on what was discussed with regard to an escrow deposit. Thomas contends that Marberry authorized him to provide for a $50,000.00 escrow deposit to be held by Fred Marberry, licensed real estate broker upon acceptance of contract. Marberry denies this and claims that he never maintained an escrow account, that escrow funds were always handled by his (Marberry's) attorney. Marberry claims that the day after signing, when he actually saw the contract, he said something to Thomas about his failure to delete the escrow language on the contract form. Thomas denies this. Both Marberry and Thomas agree that all parties should have known that the deposit could not be escrowed upon acceptance, since Marberry was not there for the signing. The contract was prepared and signed by Thomas in Thomas' Kissimmee office and was taken to the Orlando airport. The contract, prepared on the standard Florida Bar and Association of Realtors approved form, provided a purchase price of $1,600,000.00, the $50,000.00 escrow deposit, and closing on August 25, 1985. The contract provided that closing could be extended by the buyer for 30 days with an additional $50,000.00 deposit. The contract contained the following special clauses: Contingent upon financing. Above described property of [sic] being viable to building Comm. Prop. with all necessary zoning and available utilities. [Pet. Ex. #5] At the airport, R. S. Futch accepted the offer by Marberry and Mack, made a few changes on the contract, initialled them and signed the contract; the changes were also initialled by Bernon Thomas. Later Thomas called Marberry and told him about the changes. The morning after the contract was signed, Marberry and Thomas visited Heninger's engineer to review the project. They reviewed the engineering plans and learned that the property was in a floodplain. Drainage was a problem and parking was a problem and it appeared that only 4.3 acres was actually buildable. On leaving the engineer's office Marberry told Thomas that there was no way the project could work; they could never get financing for a $1.6 million parcel of 14.75 acres, with only 4.3 buildable acres. Marberry felt the contingencies in the contract could not be met and the contract was off. Thomas still believed in the project, and since he had already put so much time and effort in it, he wanted to keep working on pulling it together. Marberry did not dissuade him, but said only to keep him informed on what was going on. Thomas told Heninger that Marberry didn't want the contract. Heninger said he wanted the contract to stay intact and encouraged Thomas to keep working on it. He also tried to get Thomas to do the deal himself, but Thomas told him he did not have the funds. Thomas claims that Heninger told him not to worry about the $50,000.00; Heninger denies this. Nothing was communicated in writing regarding the contract being terminated. The $50,000.00 deposit was never made. The deadline for closing passed, and sometime in September 1985, Larry Heninger arranged a meeting between R. S. Futch and Fred Marberry in a motel in Orlando. The purpose of the meeting was to either extend the contract entered in July (according to R. S. Futch), or to negotiate a new contract for the property (according to Fred Marberry). During the meeting Futch was told that no $50,000.00 deposit had been made on the original contract. The meeting apparently terminated and shortly later Futch filed suit for the $50,000.00. The testimony of the principal witnesses in this case: Marberry, Thomas, Futch and Heninger, establish a picture of lack of communication, misunderstanding, bungling, and unprofessionalism. It is impossible to determine from the rambling and disjointed stories of these witnesses, that either Fred Marberry or Bernon Thomas, individually or together, engaged in "fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence, and breach of trust..."
Recommendation Based on the foregoing, it is hereby, RECOMMENDED: That the Administrative Complaint against both Fred Marberry and Bernon Thomas, be dismissed. DONE and ORDERED this 11th day of August, 1987, in Tallahassee, Florida. MARY CLARK 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 11th day of August, 1987. COPIES FURNISHED: James R. Mitchell, Esquire Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Robert D. Gatton, Esquire Maitland Center 1051 Winderley Place Maitland, Florida 32751 Bernon Earl Thomas 4226 Match Point Drive Augusta, Georgia 30909 Van Poole, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750 Joseph A. Sole, Esquire General Counsel Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750 Harold Huff, Executive Director Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802
The Issue The issue is whether Respondents are guilty of misrepresentation or breach of trust and, if so, what penalty should be imposed.
Findings Of Fact In October 1993, Respondent Sylvester (Respondent) took his daughter, whose last name was Rodriguez by marriage, to a real estate sales office that was selling units of a new condominium building. Respondent's daughter was 42 years old at the time. Speaking to the qualifying broker for the selling broker, Respondent advised her that he was a real estate salesperson for Respondent Lyric Realty Group, Inc. and wanted to show a unit to his daughter. Respondent referred to his daughter by name, rather than as his daughter, and did not mention to the broker that his customer was his daughter. Respondent gave the qualifying broker his card and signed his name in a log to protect his interest in the cooperating broker's sales commission. After touring a model unit, Mrs. Rodriguez expressed sufficient interest that Respondent obtained a form contract from the qualifying broker before leaving the premises. Respondent completed the contract, but left negotiations to Respondent Mitulinsky because Respondent was going out of town. Respondent Mitulinsky is the qualifying broker for Respondent Lyric Realty Group, Inc. Her involvement with the transaction was limited to contact with the listing broker, transmitting prices between Mrs. Rodriguez and the seller. Respondent Mitulinsky did not disclose that Mrs. Rodriguez was Respondent's daughter. But the evidence fails to suggest that Respondent Mitulinsky was in any way aware that the seller's broker was ignorant of the relationship between Respondent and Mrs. Rodriguez. The evidence also fails to suggest that the nature and extent of the conversations between Respondent Mitulinsky and the qualifying broker were such as to support an inference of concealment of the relationship by Respondent Mitulinsky. Prior to agreeing upon a final price, the seller's qualifying broker agreed to increase the commission to be paid Respondent Lyric Group Realty, Inc. by one percentage point to three percent. The listing price for the unit was $285,000. Mr. and Mrs. Rodriguez submitted the contract with a price of $240,000. Following verbal negotiations, the seller returned the same contract with a price of $268,000, which the buyers accepted on October 29, 1993. A salesperson employed by the listing broker admits that she knew of the relationship between Respondent and his daughter prior to closing. After the contract was signed but prior to closing, Respondent, Mrs. Rodriguez, a home inspector, and the salesperson visited the unit. As the inspector worked, Mrs. Rodriguez and her father spoke freely, as they had in past visits, with Mrs. Rodriguez referring to Respondent as "dad" and he referring to her by her first name. The salesperson immediately informed her broker, who immediately reported the information to the seller. However, the seller elected to do nothing with the information because he was satisfied with the sales price and net proceeds. Mr. and Mrs. Rodriguez were purchasing the first unit to be sold at the seller's project. This makes the first transaction especially risky for both the seller and the buyers. The purchase price represented the fair market value for the unit. The unit appraised at $271,000 at the time of the sale to Mr. and Mrs. Rodriguez. On January 6, 1994, the parties closed on the unit pursuant to the provisions of the contract. The $16,080 sales commission was split evenly between the listing broker and Respondent Lyric Realty Group, Inc.
Recommendation It is RECOMMENDED that the Division of Real Estate enter a final order dismissing the administrative complaint against all respondents ENTERED on September 30, 1996, 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 this September 30, 1996. COPIES FURNISHED: Henry M. Solares, Division Director Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802-1900 Lynda L. Goodgame General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Daniel Villazon, Senior Attorney Department of Business and Professional Regulation 400 West Robinson Street Orlando, Florida 32802 Peter Hobson, Esquire 606 East Madison Street Tampa, Florida 33602
Findings Of Fact At all times pertinent to the issues herein the Respondent, Linda H. Abraham, was licensed by the State of Florida as a real estate broker under license number 0323486. During the months of February and March 1983 Martha L. Tew owned a parcel of waterfront property located in Panama City Beach which was identified as being for sale by a sign on the property reflecting her husband's real estate company. Her husband was Ronald Eugene Tew and Mrs. Tew also held a salesman's license. Mr. Tew was contacted by Gregory A. Peaden, a contractor and developer in the Panama City Beach area on several occasions prior to March 1983 with offers to purchase the Tew property. The contacts with Mr. Peaden subsequently culminated in a contract dated March 8, 1983, between Greg Peaden, Inc., and the Tews in the amount of, initially, $180,000.00. During the negotiations for the property, Mr. Peaden had introduced the Respondent to the Tews as his broker. When, at the time of Use contract, Mr. Peaden advised the Tews he wanted Respondent to get a commission for the sale, Mr. Tew refused to pay any commission indicating that Respondent had performed no service for him; that he, Tew, was a broker himself; and that he had no intention of paying any commission to the Respondent or to anyone, for that matter. After some further negotiation, a second contract was prepared and agreed upon wherein the contract price was raised to $189,000.00 and the Respondent's commission was to be paid with the additional money from Mr. Peaden. The contract in question executed by the parties on March 8, 1983, reflected that the sum of $5,000.00 deposit was paid to Linda Abraham, Inc., by check. Mr. Tew contends that at this point he was led to believe that Respondent had the $5,000.00 check and, he contends, he would not have signed the contract if he had known that the check had not been delivered and placed in Respondent's escrow account. The actual signing of the contract took place in Respondent's office, a mobile home which she shared with Mr. Peaden's business. This trailer home was described as having Mr. Peaden's office on one end, and Respondent's on the other, with the living-kitchen area in the middle used as a reception area for both businesses. Mr. Peaden contends that once the contract was signed by the Tews, he gave a check drawn on one of his business accounts, that of Peaden and Guerino, a property management company he owned, to his secretary, Judy White, to deposit in Respondent's escrow account and thereafter promptly forgot about the matter until the date scheduled for closing, two months in the future. Ms. white, on the other hand, contends that Mr. Peaden at no time gave her a check for $5,000.00 to deposit to Respondent's escrow account. It is her contention that when she received the contract after it was signed, she, on her own, inserted the receipt portion on the bottom of the second page and signed as having received it merely to complete the contract. At the time, she contends, she did not know if the deposit was received from Peaden or not. She has never signed a contract like this before without a deposit and cannot give any other reason why she did it on this occasion. She is certain, however, that at no time did Mr. Peaden ever give her a $5,000.00 check or tell her to draw one for his signature on March 8, 1983, or, for that matter, at any time thereafter. What is more, neither Mr. Peaden nor the Respondent, at any time after the signing of the contract and prior to her departure under less than friendly circumstances approximately a week or so later, ever asked her whether she had made the escrow deposit or discussed it with her at all. Ms. white contends that she left Mr. Peaden's employ because he expected her to perform certain functions she was unwilling to do. When she left his employ, she did not feel there was any unfinished business that needed her immediate attention. To the best of her recollection, there were no sales contracts or deposits left in or on her desk - only bills. According to Respondent, the $5,000.00 deposit by Mr. Peaden was to stay in her escrow account. She understood Mr. Peaden was going to arrange with the bank to borrow the entire cash payment called for under the contract, including the deposit, and when that was done, it was her intention to give him back his $5,000.00 check. Under these circumstances, the amount in escrow would never be paid to the sellers but would be returned to Mr. Peaden and the Tews would receive the entire cash amount called for by the contract from the proceeds of the bank loan. Respondent also indicated that this procedure had been followed at least once, in a prior transaction. Under the circumstances, it is clear that no deposit was ever received from Mr. Peaden nor was it placed in Respondent's escrow account. Therefore, the contract, dated on March 8, 1983, was false in that it represented a $5,000.00 deposit had been received. The check for $5,000.00 dated March 8, 1983, payable to Linda Abraham, Inc. and drawn by Mr. Peaden on the Peaden and Guerino account with the stub admitted to show the date of issuance, does not establish that it was written on March 8, 1983, as contended. This check, number 1349, comes after two other checks, 1347 and 1348, which bear dates of April 4 and September 7, 1983 respectively. Mr. Peaden's explanation that the checks were drafted out of sequence is non-persuasive. Of greater probative value is the fact that neither Mr. Peaden nor Respondent bothered to review their bank statements on a regular basis. The check in question was drawn on an account not related to the construction and development business of Greg Peaden, Inc. Further, examination of Respondent's escrow account reflects that there were approximately eleven transactions over a three year period even though, according to her, she handled numerous other closings as well as this. Her explanation is that in most cases the attorney handling the closing served as escrow agent even though she was the sales broker. Her explanation is not credible. This appears to be a classic situation of movement of accounts to satisfy a particular end. The contract called for closing of the sale to be held on or before May 8, 1983, in the office of Panama Title Company. May 8, 1983, fell on a Sunday. As a result, the closing would not have been held that day, but it was not held the following day, Monday, May 9, 1983 either. Mr. Peaden admits that he had not checked with Panama Title prior to May 9 to see if everything was prepared for the closing. Instead, he contacted the title company for the first time at approximately noon on May 9. Apparently he received disquieting information because he thereafter called his attorney, Mr. Hutto, and asked him to check with the title company to see if and when the closing would be held. Mr. Hutto's inquiry reflected that the title insurance binder was ready but the closing statement and the package were not because the title company required a copy of the contract. At this point Mr. Peaden immediately had a copy of the contract delivered to the title company but later that day was advised that the closing still could not be held because of the failure to provide a survey. Mr. Hutto indicates that the reason given was that the release clauses called for in the contract required the survey to be furnished though he did not necessarily agree with that. In any event, closing was not held on May 9. At this time both Mr. Peaden and Respondent allegedly became concerned about the $5,000.00 deposit. Admittedly, neither had concerned themselves with it from the time of the signing of the contract. At this point, Mr. Peaden indicates that he examined his bank records which failed to show the deposit being made and his subsequent search of Ms. White's desk finally revealed the check, undeposited, still there. On May 11, 1983, a $5,000.00 deposit was made to the account on which the deposit check was drawn and on the same day, May 11, 1983 check number 1349, in the amount of $5,000.00 was presented against the account. When on May 10, 1983, Mr. Peaden and Respondent went to Mr. Hutto's office the primary reason for the visit was because Mr. Peaden had heard that the Tews were planning to sell the property in question to someone else at a price much higher than that agreed upon for the sale to Peaden. At this point Mr. Hutto indicated that if Peaden so desired, Hutto could "fix up the contract to jam up the works" until he could do something about it. His examination of the contract revealed that it was not recorded or acknowledged and under the laws of Florida, acknowledgment is required in order for a contract to be recorded. Hutto asked the Respondent if she had seen the parties sign the contract and when she said that she had, he had his secretary prepare a jurat. Unfortunately, his secretary prepared an affidavit type notary jurat rather than an acknowledgment and Hutto quickly admits that he did not look at it when it was given back to him. He says that if he had, he would have had it changed but in any event, without looking at what was given him, he gave it to the Respondent with the implication, at least, that she should notarize it and have the contract recorded. According to Hutto, Peaden, and the Respondent, the sole purpose for notarization and recordation was to preserve the status quo to protect Mr. Peaden's interest in the property so that the matter could be adjudicated in a lawsuit which was soon to be filed. Respondent contends she never intended any misconduct throughout this transaction nor did she do any of the things alleged in the Administrative Complaint. She contends she never saw the check which Mr. Peaden allegedly gave to his secretary for deposit to her escrow account. She merely assumed that it was given and never checked to insure that it had been placed in her account. She does not know why Mr. Peaden did not give her the check. When she took the contract to the Tews, she was operating under the assumption that the check had been received but did not verify this to insure that it had. She contends that since she represented the buyer, her duties were limited to insuring that he performed and this made it simple. She did not check on him because she had had so much experience with him, him being by far her largest account, if he said something, she believed him and when the contract was executed, she merely instructed the secretary, Judy White, to make the file and did not check on it again. As to the recordation and the notarization after the fact, she acted upon the advice of counsel, she states, and did what was suggested to her by Mr. Hutto. It should be noted, however, that Mr. Hutto did not represent her but instead represented Mr. Peaden and while because of her long-standing relationship with him and Mr. Hutto, she may have felt safe in relying on his advice, the fact remains that Hutto was not her attorney.
Recommendation On the basis of the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that the Respondent's license as a registered real estate broker in Florida be suspended for six months and that she pay an administrative fine of $2,000.00. RECOMMENDED this 6th day of June, 1985, in Tallahassee, Florida. ARNOLD H. POLLOCK 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 6th day of June, 1985. COPIES FURNISHED: Arthur Shell, Esquire Department of Professional Regulation Division of Real Estate 400 W. Robinson Street Orlando, Florida 32801 John D. O'Brien, Esquire P. O. Box 1218 Panama City, Florida 32402 Harold Huff Executive Director Division of Real Estate P. O. Box 1900 Orlando, Florida Fred Roche Secretary Department of Professional Regulation 130 N. Monroe Street Tallahassee, Florida 32301 Salvatore A. Carpino General Counsel Department of Professional Regulation 130 N. Monroe Street Tallahassee, Florida 32301
The Issue The issue in this case is whether Respondent is guilty of dishonest dealing by trick, scheme or device in any business transaction in violation of Subsection 475.25(1)(b), Florida Statutes (2008),1 and if so, what penalty should be imposed.
Findings Of Fact Petitioner is the state agency responsible for issuing real estate sales associate licenses and monitoring compliance with all statutes, rules, and regulations governing such licenses. Respondent was at all times relevant to this proceeding a licensed real estate sales associate in the State of Florida and held License No. 3115665. In March 2006, Respondent was introduced to Willie Belle Lewis (Lewis) by a mutual acquaintance. Lewis was interested in selling her house, and Respondent agreed to work for Lewis in that regard. On March 13, 2006, Lewis and Respondent entered into an Exclusive Right of Sale Listing Agreement (the "Agreement"). Under the Agreement, Respondent was to act as Lewis' sales agent for sale of the house. Pursuant to paragraph 7 of the Agreement, Respondent was to receive a commission of six percent of the purchase price. Respondent initially requested a seven percent commission which was the ordinary and customary amount at that time, but agreed to six percent in deference to Lewis' request (and due to the fact that Lewis had recently lost her grandmother and Respondent empathized with her, having just lost her mother). In one version of the Agreement admitted into evidence, there is a notation that any cooperating real estate agent (presumably a buyer's agent) would receive a commission equal to three percent of the purchase price, i.e., one-half of Respondent's six percent commission. Another version of the Agreement admitted into evidence did not address sharing the commission with a cooperating agent. At some point in time (which was not clearly defined during testimony at final hearing) Lewis and Respondent re-negotiated the amount of Respondent's commission.2 Lewis maintains that the re-negotiated commission was three percent; Respondent says the re-negotiated commission was four percent. Respondent's testimony was more credible on this point. The amount of the new commission was not reduced to writing or indicated on either version of the Agreement. There is no indication, for example, what Respondent's commission would have been if a cooperating agent had been involved. It is highly unlikely that Respondent or any other agent would agree to a two percent commission, i.e., one-half of four percent (or 1.5 percent, one-half of three percent). Once the Agreement was signed, Respondent immediately began efforts to sell the Lewis house. Respondent invited Lewis to her (Respondent's) house and offered Lewis plants and flowers from Respondent's yard. Respondent and Lewis dug up various plants and transferred them to Lewis' yard to generate some "curb appeal," i.e., to dress it up for potential buyers. Within days, a potential buyer was found. A Contract for Sale and Purchase (the "Contract") was entered into between Lewis and Mrs. Bibi Khan. Respondent was listed as the seller's agent; no agent was indicated for the buyer. In fact, Respondent agreed to act as buyer's agent as well, performing services as both an agent and a broker. Again, there were two versions of the sales Contract admitted into evidence. On one version, Respondent's signature included only her first name; on the other it included her first and last name. On one version of the Contract, there appears to be "white-out" on Respondent's signature line. Contained and legible under the whited-out portion of the signature is the phrase "3%." Respondent admits she whited out the three percent figure, but that it was done after the closing occurred. The three percent figure appearing at that place in the Contract is confusing. It only makes sense if that was meant to represent Respondent's portion of a six percent commission split between a buyer's agent and a seller's agent. Respondent explained that she whited out the figure because it was not written in both places it was supposed to be. Rather than going through the process of re-doing the entire Contract and re-distributing it to all pertinent parties, she whited it out in one place. The explanation is plausible. However, it seems an unnecessary action inasmuch as the closing had already occurred. When the parties arrived at closing on April 17, 2006, the closing documents--including the HUD Settlement Statement-- indicated a six percent commission for Respondent (as originally stated on the Agreement). Lewis vehemently objected to the commission, saying that it should be three percent as verbally agreed to by her and Respondent.3 Respondent acquiesced at closing and, in front of witnesses, said the commission should be three percent. She asked that a letter be drafted by the closing agent reflecting a three percent commission. In effect, Respondent re-negotiated her commission at that time. She rues having done so and says she was confused, but she did so nonetheless. The closing was only the third closing Respondent had taken part in since becoming licensed. She was not very experienced with the process and seemed to be thinking she was getting a four percent commission, even when three percent was being discussed.4 It is clear, however, that Respondent did verbally agree to a three percent commission during the closing. The closing agent told Lewis to return on Monday and she would re-calculate the commission and provide Lewis with a final check in the appropriate amount. Meanwhile, Respondent attempted to contact Lewis over the weekend to discuss the discrepancy. Respondent wanted to remind Lewis they had agreed on four percent despite what she said at the closing. All attempts at communication with Lewis over the weekend were futile. When Lewis returned to the closing office on the following Monday, she found the check to still be in error as it reflected a four percent commission instead of a three percent commission. Apparently when Respondent advised the closing agent about her mistake regarding the amount of the commission, Respondent still maintained that the verbal agreement was for four percent. This was contrary to her statements during the closing and is not substantiated by any written documentation. Respondent directed the closing agent to issue a check reflecting a four percent commission, instead of the six percent commission reflected on the Agreement. Lewis ultimately, under protest, accepted her $74,264.92 check reflecting a four percent commission to Respondent. The check contained a shortage of $1,600, if a three percent commission had been applied. Lewis continued to seek repayment of the $1,600 she believed she was entitled to receive. Subsequently, Respondent discussed the entire dispute with her sales team and decided that the disputed amount ($1,600) was not worth fighting about. A check was then sent to Lewis in that amount.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Petitioner, Department of Business and Professional Regulation, Division of Real Estate, imposing a fine of One Thousand Dollars ($1,000) against Respondent, Marian Lemon Coaxum. DONE AND ENTERED this 26th day of November, 2009, in Tallahassee, Leon County, Florida. R. BRUCE MCKIBBEN 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 26th day of November, 2009.
Findings Of Fact Petitioner, Edward W. Hayden (herein Petitioner), was employed by Respondent, West Coast Regional Water Supply Authority (herein Respondent or the Authority), from April 19, 1992 until his discharge on May 5, 1993. During the entire period of his employment, Petitioner held the position of Purchasing and Property Records Manager. Respondent is a water wholesaler for the Pinellas, Pasco and Hillsborough tri-county area. Respondent is managed by a general manager, Harold Aiken, who reports to a board of directors which is comprised of elected officials from five member governments. The five member governments are Hillsborough, Pinellas and Pasco Counties, and the Cities of St. Petersburg and Tampa. Four directors report to general manager Aiken. These directors manage different parts of the Authority subject to the direction of manager Aiken. The general manager implements the policies and directives of the board of directors, administers personnel rules and oversees the day-to-day functions of Respondent. The general manager's authority specifically includes the ability to discharge employees. Petitioner, as purchasing and property records manager, was the person charged with overseeing Respondent's property and purchasing functions. Petitioner was responsible for developing and following procedures for purchasing, inventory control and maintenance of property records. In a nutshell, Petitioner was charged with protecting and safeguarding Respondent's assets. Petitioner's specific duties included developing, administering and managing the disposal of surplus property on behalf of the Authority. Petitioner reported to Koni Cassini, Respondent's director of finance, and general manager Aiken. Petitioner was hired because Respondent had experienced some difficulty maintaining inventory control and the management of its assets. In this regard, Petitioner has extensive experience in accounting and logistics management, having earned a bachelor's degree in business management and a master's degree in business administration. Additionally, he has extensive training in inventory control and management techniques. He served in the U.S. Air Force in excess of twenty years as an inventory management specialist and was assigned a number of critically responsible supervisory/leadership positions. Petitioner, while in the Air Force, managed operations as large as 72 assigned personnel and $42 million of inventory within a strict budget of taxpayer dollars. The purchasing, inventory control and property functions of the Authority are carried out through the finance department. The Authority works under a purchase order system wherein each item that is purchased must have a corresponding purchase order. Purchase orders must be approved by various officials within the Authority depending upon the purchase price. As example, if the price of the item to be purchased is anywhere from zero to $500, a manager's signature is required on the purchase order. For items priced between $500 to $1000, a department director's signature is required on the purchase order. For items priced between $1000 to $15,000, the general manager must approve and sign the purchase order. For items priced in excess of $15,000, the board of directors' approval is required to effectuate the purchase. The signatures are required as part of the Authority's checks and balance system which is used to preserve and protect public funds expended by the Authority. Respondent has specific inventory control guidelines which govern the disposal of surplus property. The guidelines encompass six different procedures to dispose of surplus property. The first, and preferred method of surplus disposal, is by donation to one of the five member governments. The Authority uses a second method of disposal of surplus property which is classified as "junk" if it has no value, is beyond repair, and cannot be donated to a member government. A third method of disposal is to sell the property by sealed bid. The sealed bid method is used when either the quality or quantity of the items for sale is insufficient to justify public auction, i.e., the items are without value to the Authority. The most common way of determining whether the property has any value is to conduct a public auction or to "spot bid" the property. The sealed bid method can be utilized by outside vendors and/or employees. The Authority uses the employee sealed bid surplus sale for items that have no value. It is generally understood throughout the Authority that items that are placed in an employee's sealed bid surplus sale are useless to the Authority or have no commercial value whatsoever. Items placed in that sale are items which are basically to be "thrown away". A fourth method of disposal is "spot bidding". This entails contacting buyers, on an informal basis, to determine whether they are interested in bidding on the surplus property. A fifth and another preferred method of disposal is to sell the property via public auction. The Authority has conducted public auctions in the past either by itself or through the use of a private entity, the Tampa machinery auction, which conducts public auctions on behalf of private and governmental bodies. Tampa machinery auction handles all administrative duties, such as advertising, marketing and operations of the auction including collection of proceeds from the sale. The final method of disposal of surplus property is by "trade-in". This method involves obtaining a trade-in value for surplus property when the Authority is purchasing new property. Upon completion of Petitioner's probationary term of employment, a six-month period, his work performance declined considerably. Specifically, Petitioner was assigned the task of drafting a purchasing manual to be used by the board of directors for the board's approval. Petitioner failed to complete the purchasing manual in a timely manner and the director of finance, Koni Cassini, undertook the drafting and completion of the manual. Cassini completed the draft of the manual and it was approved by the board. During February, 1993, Petitioner decided to conduct the employee surplus property sale which is at issue herein. Petitioner's subordinate, James Krug, who held the position of property specialist, compiled a list of surplus property to be sold at Petitioner's direction. Petitioner and Krug circulated the surplus property list to the general manager and the department directors and also notified them of their decision to conduct an employee surplus property sale to dispose of items on the submitted list. Krug prepared the surplus property list which was reviewed by Petitioner. The surplus property sale was the first employee surplus property sale conducted by Petitioner during his tenure as purchasing and property records manager. Petitioner initially considered having a public auction prior to conducting the surplus property sale, but decided against it based on his "busy schedule". When manager Aiken received Krug's memorandum attaching the list of items to be sold in the surplus sale, he noticed that the list included a telecopier machine. He directed his secretary to contact Petitioner to determine the condition of the telecopier machine. Based on his inquiry, manager Aiken learned that the telecopier machine was functional and, therefore, instructed Petitioner to remove it from the list. He subsequently contacted Cassini to advise that the list contained at least one item of value. He directed Cassini to require that Petitioner provide a detailed description of the items on the list including whether the items were functional, non- repairable, or had any value to the Authority. Subsequently, on March 19, 1993, Cassini contacted Petitioner by memorandum and directed that he provide a description of all items on the list as Aiken requested. The surplus sale was to be held on March 24, 1993. On March 22, 1993, Petitioner sent a memorandum to Cassini stating that he would not provide the requested description of the items for the current sale, but would do so at the next time that the Authority had a surplus sale. At that time, Petitioner assured Cassini that there were no items of value on the current list. Cassini did not follow up on her March 19, 1993, memorandum based on Petitioner's assurance that there were no items of value remaining on the surplus list. Petitioner conducted the surplus property sale, which sale included several items of value including three trench safety units, a three-ton air conditioning unit and a refrigerator. Trench safety units are suspension systems that are used to lower workers into the ground to inspect and repair open pipes. The trench safety units cost Respondent $5,000 each when purchased new during 1990. The surplus property list described the trench safety units as "mini- lift systems". Petitioner described the trench safety units in this manner, even though employees of the Authority referred to the units as "trench safety units" and not "mini-lift systems". Petitioner advised several Authority personnel, including manager Aiken and Cassini, that all of the items on the surplus property list were in rough to poor condition and had no value. As example, he advised the Authority's personnel manager, Holly Manning, that the items on the surplus list were "junk". Respondent purchased the trench safety units for a pipeline investigation in 1990 at the direction of Allison Adams, the Authority's special projects coordinator. The Authority only utilized the safety units during that investigation; however, it could and intended to utilize the safety units in the future for the maintenance of underground pipes or to conduct other subterranean investigations. Petitioner did not contact either the member directors or the general manager for authorization to dispose of the safety units. Likewise, Petitioner did not contact the member governments to determine whether they could use the safety units, nor did he attempt to obtain any sealed bids on the safety units other than through the employee surplus sale. Petitioner did not "spot bid" the safety units prior to including them in the employee surplus sale. Petitioner also listed a three-ton air conditioning unit in the employee surplus sale, despite the fact that it was in good operating condition and had a value of approximately $1,500. Although it was his duty to know all items of value on the surplus sale, Petitioner did not have any idea of the value of the air conditioning unit. Likewise, Petitioner did not spot bid the air conditioning unit prior to including it in the surplus property sale. Two Authority employees purchased the three trench safety units through the sale. Jim Krug, the property specialist who included the units in the surplus property list, purchased one of the units for $223. The other two safety units were sold to Rick Minjarez, a water plant operator, for $175 each. The safety units were in good condition when they were sold. Within ten days of purchasing the safety units from the Authority, Krug and Minjarez sold the items to an outside vendor, who had engaged in business with the Authority in the past, for $1,000 per unit. Cassini conducted an investigation when she learned that the surplus sale had been conducted and that items of value had been sold. Based upon her initial investigation, Cassini recommended that Petitioner and Krug be put on administrative leave without pay pending the outcome of her investigation. Petitioner and Krug were then given an opportunity to explain why the safety units and other valuable property items were included in the sale contrary to his assurance. After Hayden and Krug received pre-termination hearings, Aiken terminated Hayden and Krug on May 5, 1993, based upon Cassini's recommendation. Aiken issued Minjarez a written reprimand for his part because of his failure to bring to the Authority's attention the fact that the items which he purchased were "items of value". Minjarez was not discharged because of Respondent's determination that he was not specifically responsible for protecting the Authority's assets and did not prepare the list of items which were sold. (Minjarez and Krug's disciplinary action is not at issue herein). Petitioner was recommended for discharge by Cassini based upon the fact that he was hired to oversee the purchasing and property functions of the Authority and he failed to fulfill his duties in that regard. Cassini also determined that, by Petitioner's actions, he was insubordinate and misused the Authority's assets to its detriment. Finally, Cassini recommended that Petitioner be discharged because of his insubordination and his failure to comply with her directive that he protect the property interests of the Authority.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that: Respondent enter a final order dismissing Petitioner's petition for relief and terminate him from employment. DONE and ENTERED this 21st day of January, 1994, in Tallahassee, Leon County, Florida. JAMES E. BRADWELL 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 21st day of January, 1994. COPIES FURNISHED: Harold Aiken, General Manager West Coast Regional Water Supply Authority 2535 Landmark Drive, Suite 211 Clearwater, Florida 34621 Thomas M. Gonzalez, Esquire Gregory A. Hearing, Esquire THOMPSON, SIZEMORE Post Office Box 639 Tampa, Florida 33601 Edward W. Hayden 505 Hedgerow Brandon, Florida 33510 Edward P. de la Parte, Jr., Esquire DE LA PARTE & GILBERT One Tampa City Center, Suite 2300 Post Office Box 172537 Tampa, Florida 33672-0537
Findings Of Fact The Petitioner is an agency of the State of Florida charged with licensing and regulating the practice of real estate salesmen and brokers by the various provisions of Chapter 475, Florida Statutes. Included in those duties and enforcement authorities is the duty to investigate conduct by realtors allegedly in violation of Chapter 475, and related rules, and prosecuting administrative proceedings filed as a result of such investigations in order to seek imposition of disciplinary measures against the licensure status of miscreant realtors. The Respondents, at all times pertinent hereto, were licensed real estate brokers or salesmen in the State of Florida, having been issued the license numbers depicted in the Administrative Complaint. Respondent Hurbanis last was issued a license as a broker/salesman located at Sanibel Realty, Inc., Sanibel, Florida. Respondent Pauline Seely was last licensed as a broker/salesman located at VIP Realty Group, Sanibel, Florida. Respondent John M. Parks was licensed as a broker/salesman, last issued for a location at The Realty Shoppe of Lee County in Fort Myers, Florida. Respondent Jean Maxwell was licensed as a broker/salesman located at Suite 205, 1619 Periwinkle Way, Sanibel, Florida. At all times pertinent hereto, the Respondents were licensed and operating in the real estate brokerage business in the employ of VIP Realty Group, Inc., a licensed corporate real estate broker. Concerning the charges in Count I, one Eric Rosen, a real estate salesman employed by VIP Realty Group, Inc., the same firm employing Respondent Pauline P. Seely, obtained Nicholas Fontana and John Priebbe as purchasers of a certain piece of property by sales contract which was owned by Clarence Liebscher and Joseph Kubosch. The sales contract was entered into June 3, 1983, and reflected a purchase price of $315,000, including the sale of certain furniture and other personal property. The complaint alleges that former Respondent Rosen and Respondent Hurbanis, together with the purchasers and sellers, conspired to enter into a second bogus sales contract (so called "double contracting") substantially similar to the first contract, except the sales price was shown to be $350,000 and the terms concerning sale of furniture and other personalty was deleted. It is alleged that this contract was prepared by Rosen under the direction and approval of Respondent Hurbanis for the purpose of obtaining a mortgage loan from a lending institution in an amount greater than the normal percentage of the sales price that the banking laws and policies of such lenders provide as the maximum amount of mortgage financing which can be obtained on a given piece of property. It is alleged that these Respondents were thus attempting to obtain a loan commitment in an amount greater than could have been obtained had the actual sales price of $315,000 been revealed to the lender. The bogus contract showing the $350,000 sales price was allegedly submitted to the lender, AmeriFirst Savings and Loan Association, without the Respondents notifying AmeriFirst that the actual sales price was $315,000. Although witness Rosen for the Petitioner, testified that he believed the contracts involved in this count had been discussed with Mr. Hurbanis he could not say for certain and could not recall the conversation. In fact, another Petitioner witness, Brandy Vallois, stated several times that Mr. Hurbanis was on vacation during the time that the contract was negotiated, executed and submitted to the lender and that, although Respondent Hurbanis was the office manager at VIP Realty Group at the time, others were serving in his stead at the time he was on vacation (the time of the incident alleged in Count I). Although the Department elicited testimony to the effect that seminars had been given where the Respondent, as well as other realtors, had discussed "creative financing," there was no testimony or other evidence that such lectures by the Respondent or others advocated a policy of "double contracting" or in effect deluding lenders into lending more money for real estate purchases than they normally would have if true purchase prices were disclosed. In any event, both the seller and buyer were aware of the situation concerning this transaction and the lender was never deceived or misled because in fact the loan never closed and no funds were disbursed. There was no evidence that the true particulars of this transaction were not disclosed to the lender. Count II Count II concerns a transaction in which Respondent John Parks was the listing and selling salesman and Respondent Hurbanis was the office manager with the same real estate firm. Allegedly, Respondent Hurbanis directed and approved Respondent Parks' preparation of two sales contracts on or about December 16, 1982, calling for the purchase and sale of certain real estate by Mike Volker from Dr. Robert Pascotto and Gaspar Turanna. Both contracts were similar and pertained to the same parcel of property, but one reflected an actual sales price of $149,000, whereas the allegedly bogus, second contract reflected a total sales price of $157,000. It is thus alleged that these two Respondents conspired with the purchasers and sellers to enter into the higher priced, bogus contract for the purpose of obtaining a mortgage loan commitment principal amount at a greater percentage of the sales price than could have been obtained if the actual sales price had been disclosed to the lender. It is alleged that these two Respondents submitted the bogus contract reflecting the $157,000 false sales price together with loan application documents to First Federal Savings and Loan Association of Fort Myers without informing that institution that the actual sales price was $149,000. No competent, substantial evidence was offered, however, to show that Respondent Parks was anything other than the listing salesman. It was not established that he drafted the contract nor that he submitted either contract to the lender. Concerning Respondent Hurbanis, although it was shown that he was the office manager at the time of the incident, it was not established that he directed or approved the drafting of either contract, directed or approved the submission of either contract to the named lender nor that he was involved in the negotiation or closing stage of the transaction in any way. In fact, although the two contracts show differing purchase prices, neither contract depicts any different amount to come from mortgage financing by First Federal. In fact, both contracts reflect that a mortgage would be obtained from First Federal in the amount of $125,600. Nothing any different was disclosed to First Federal. The difference comes in a differing deposit amount held in escrow by VIP Realty Group, Inc., according to the terms of the contract. One contract, that with the lower purchase price, reflects $7,000 in deposit money toward the purchase and the second contract reflects $15,000 deposit money held toward the purchase. This accounts for the $8,000 difference in the amount of the two contracts, but, in any event, the amount to be obtained by mortgage funds from First Federal was the same on each contract. There was no evidence to prove that the deposit amounts depicted on either contract were bogus or other than the result of bona fide arm's length negotiations between the parties. In any event, there was no evidence that First Federal or its lending officers were not aware of any of the particulars in the transaction. There was no showing that that the lender relied on either contract to its detriment. Count III Respondent Pauline Seely, as listing salesman and owner of certain real property, with former Respondent (since dismissed) James O'Neill as selling salesman, and allegedly with Respondent Charles Hurbanis' direction and approval, prepared and obtained execution of two sales contracts on or about December 30, 1982, for the purchase and sale of her real property by Thomas and Sheila Floyd. Both contracts were substantially similar and pertained to the same parcel, but one contract reflected an actual earnest money deposit of $8,660 and a purchase money mortgage in the amount of $24,000, whereas the supposed bogus, second contract reflected a total earnest money deposit of $14,000 and a purchase money mortgage in the principal amount of $18,660. It is alleged that the Respondents then submitted this to the lending institution for the purpose of obtaining a greater percentage of the sales price in mortgage funds than could have been obtained had the actual sales price, terms and conditions been revealed to the lender. In fact, testimony of record and Respondent Seely's Exhibit 2 reveals that the lender was furnished all documents with regard to this transaction which revealed to the lender, as the loan officer involved stated in the letter constituting this exhibit, that the buyers and the seller had agreed that the seller would take back a second mortgage in the amount of $24,000 and that a contract addendum existed (which is in evidence) reflecting this second agreement. Thus, AmeriFirst, the lender, did in fact have a copy of the agreement stating that the seller would hold the second mortgage for the above amount and that AmeriFirst was aware of all details concerning the transaction. In point of fact, both contracts in evidence, one of which reflects a purchase money mortgage of $18,660 which the seller would hold and which reflects that $7,000 would be paid in cash to the seller at the time of contracting, and the second contract, are identical as to purchase price. The second contract also shows a purchase price of $125,000, the difference being essentially that the second contract shows the $24,000 purchase money mortgage amount instead of the figure of $18,660 shown on the first contract. Both contracts merely call for assumption of a mortgage already made in favor of AmeriFirst in the amount of $92,340. There is no evidence that any additional funds are being sought from AmeriFirst at all. There was no evidence that any action by the Respondents would result in any impairment of the security of AmeriFirst's first mortgage lien on the premises. The purchase money mortgage referenced in the testimony and evidence, regardless of its ultimate amount as that relates to the manner in which the total purchase price would be paid the seller, would, in all events, be a subordinate mortgage lien and it is difficult to see how AmeriFirst could rely on either contract to its detriment, even had it not known of one of the contracts. They both represented a purchase price of $125,000 and merely varied as to ways the purchase price would be paid, over and above the $92,340 outstanding first mortgage loan (which was to be assumed). In all events, however, AmeriFirst and its lending officer was fully aware of all details of this transaction and had no objection to the manner in which the transaction was to be closed and disbursements made, nor to the conditions of the assumption of its mortgage. The so called "double contract" that Ms. Seely is alleged to have entered into was shown thus to be an innocent modification of terms of the original sales contract. No wrongdoing or concealment was shown to have been committed by Respondent or any person who participated in the sale of Pauline Seely's property to Thomas and Sheila Floyd. Count V Concerning Count V, it is alleged that Respondents Seely, Parks and Hurbanis obtained two sales contracts on or about January 24, 1983, for the purchase and sale of certain real property by Computer Maintenance Corporation, purchaser, from James and Loretta Cottrell as sellers. Both contracts pertain to the same piece of real property. Both contracts showed a "purchase price" item of $310,000. One contract, however, actually reflected a total price of $344,000, arrived at by combining a $279,000 "90 percent mortgage loan" with a $60,000 purchase money mortgage and a $5,000 cash deposit. This contract contains a notation at the bottom that the "seller agrees that a separate contract for purchase will be given to the Savings and Loan for loan approval." The other contract related to this sale lists a total purchase price of $310,000 only, with a $5,000 deposit noted with no purchase money mortgage being shown, rather there is shown, in addition to the $279,000 90 percent mortgage loan, a balance of $26,000 cash being paid to the seller. This contractual situation is somewhat mysterious and it may indeed be that an attempt was made to conceal the $60,000 purchase money mortgage on the first contract and make it appear to the lender that the purchaser was actually putting up an additional $26,000 in cash at the closing as an inducement to obtain the principal first mortgage of $279,000 from Naples Federal Savings and Loan, AmeriFirst or some other lender. In point of fact, however, the witness, Ms. Heavener, from AmeriFirst indicated that the bank did not act upon the advice contained on the face of the contract, but rather loaned a percentage of their own independent appraisal value and thus did not act to its detriment upon any information contained on the face of either contract. She indicated that that lender was fully informed about all aspects of this transaction in any event. The evidence does not reflect that Mr. Hurbanis nor Ms. Seely had any part in drafting the contract nor presenting it to the lender. Seely's only involvement was as listing agent, that is, the realtor who obtained the listing from the sellers. There is no evidence to indicate that she participated in any fashion in the sale of the property, the negotiations, nor the drafting or presenting of the contracts. No evidence was offered to show for what purpose, whether illicit or innocent, the two different contracts were drafted. In any event, Ms. Seely was not involved in the preparation of the contracts. Mr. Hurbanis was not connected by any competent, substantial evidence, with any activity concerning the drafting of the contracts nor the presenting of them to the lender. A representative of the lending institution testified that she did not recall any discussions at all with Mr. Hurbanis concerning this transaction and upon cross-examination clearly indicated that the lending institution had protected itself against a "double contract" situation by reliance upon its own independent appraisal in making its lending decision, rather than the contract or contracts themselves. Count VI In this count, it is alleged that Hurbanis obtained a sales contract on January 22, 1983, between T N T Partners, a general partnership as seller and Christopher Smith as purchaser. The pertinent terms of the sale were $30,000 total purchase price, $3,000 deposit and $4,500 cash to be allegedly furnished at closing, together with a $22,500 new note and mortgage on the property. It is alleged, in essence, that Respondent Hurbanis falsely represented to Naples Federal Savings and Loan Association that the purchaser would pay $4,500 cash at closing. The transaction closed on April 15, 1983, but instead of the cash, the seller took back a purchase money mortgage in the amount of $4,500. Thus, the issue here is whether the $4,500 mortgage was properly disclosed to the lender. The evidence is silent as to any connection of Mr. Hurbanis with this transaction. In any event, however, it would appear from the face of the contract itself that the lending institution could not have been deceived by the parties to the contract nor any realtor involved, since the contract itself does not require cash in the amount of $4,500 but rather requires "cash or equivalent at closing." Thus, even if there had been a participation by Respondent Hurbanis in this transaction, which was not proven, it is impossible to detect any concealment or deception since the words "or equivalent" would clearly not preclude the use of a purchase money mortgage in the amount of $4,500 as consideration for this portion of the purchase price, rather than actual cash. Indeed, any other thing of equivalent value could have been used as consideration in this particular without violating the terms of the contract, of which the lender clearly had notice.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the candor and demeanor of the witnesses and the evidence of record, it is, therefore RECOMMENDED that the Administrative Complaint be dismissed in its entirety as to all Respondents. DONE and ORDERED this 7th day of October, 1987, in Tallahassee, Florida. P. MICHAEL RUFF 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 7th day of October, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-0140 Petitioner: Petitioner filed no Proposed Findings of Fact and Conclusions of Law. Respondent Hurbanis: The Proposed Findings of Fact by Respondent Hurbanis are subsumed in those made in this Recommended Order to the extent that that Respondent's submissions constitute bona fide Proposed Findings of Fact. In the main, the "Findings of Fact" in the Post-Hearing Submission by this Respondent constitute largely recitations of evidence and testimony, discussion of the weight thereof, inextricably intermingled with Proposed Findings of Fact which cannot be separately ruled upon because of multiple factual findings, legal argument and evidence discussion intertwined in the same paragraph. Respondents Maxwell's and Seely's Proposed Findings of Fact: 1-12. Accepted. COPIES FURNISHED: James H. Gillis, Esquire Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 John P. Milligan, Jr., Esquire Suite 201, Royal Palm Square 1400 Colonial Boulevard Fort Myers, Florida 33907 Kenneth G. Oertel, Esquire Suite C 2700 Blair Stone Road Tallahassee, Florida 32301 Johnny W. Parks c/o The Realty Shoppe of Lee County 12635 Cleveland Avenue Fort Myers, Florida 33907 Tom Gallagher, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750 William O'Neil, 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 Whether there is probable cause for Petitioner to bring an action against Respondents for violation of the Florida Deceptive and Unfair Trade Practices Act?
Findings Of Fact Respondents sell used cars in Pensacola, about 500 a year. On or about June 19, 1981, when Fannie Mae Tunstall bought a '76 Buick LeSabre from Fairfield Motors, Inc. (Fairfield), she dealt with Elaine Owens Atkins, who is Fairfield's general manager, secretary-treasurer and a six-year employee. The installment sales contract specified an annual percentage rate of 29.64 percent, and was stamped with the legend, "MINIMUM $25 REPO OR COLLECTION FEE." Respondent's Exhibit No. 1. Ms. Tunstall told Ms. Atkins the payments were too much but signed the papers anyway, and did so without reading them, although Ms. Atkins had told her to read them. The payments did indeed prove too much and Ms. Tunstall fell behind. She was 13 days late with a payment in November of 1981, but Ms. Tunstall and Ms. Atkins had discussed the matter and Fairfield agreed to accept the payment late. Fairfield accepted other payments late, but arranged to have Willie Easley (formerly a singer and now a minister as well as a repossessor of cars) take possession of the Quick early in the morning of January 10, 1983, and drive it away. Ms. Tunstall had failed to make the monthly payment due December 30, 1982. Ms. Atkins had telephoned her once and gotten no answer. Later on January 10, 1983, Fairfield agreed to return the car in exchange for December's payment, another payment in advance, a six dollar late fee and a $100 repossession fee. Ms. Tunstall paid the entire balance Fairfield claimed to be owed and retrieved the car. Linda Louise LaCoste and her husband Ronnie have bought several cars from Fairfield, including a 1976 Chevrolet Suburban Mr. LaCoste bought on February 7, 1983, under an installment agreement calling for interest at an annual percentage rate in excess of 30 percent. The "cash price" was $3,459.75, and the "total sale price" was $4,613.15. Respondent's Exhibit No. 3. The LaCostes understood from prior dealings that their agreement required Mr. LaCoste to maintain insurance on the vehicle, and Mr. LaCoste contracted with Allstate Insurance Company (Allstate) for appropriate coverage. Allstate sent Fairfield a notice of cancellation for nonpayment of premium effective 12:01 A.M. April 4, 1983. Petitioner's Exhibit No. 4. At 11:25 A.M. on April 4, 1983, Allstate accepted the premium Ronnie LaCoste offered in order to reinstate the policy, No. 441361747, and Allstate's Chirstine Smith also wrote a new policy to be sure there would be coverage. Ms. Smith told Fairfield that insurance was in force on April 4, 1983. On April 20, 1983, Allstate issued another notice of cancellation for nonpayment of premium on policy No. 441361747, effective 12:01 A.M. May 4, 1983. At ten minutes past three o'clock on the afternoon of May 4, 1983, Mr. LaCoste's Chevrolet Suburban was repossessed at Fairfield's instance on account of the apparent lapse of insurance. Mrs. LaCoste and here sister appeared promptly at Fairfield's place of business and tendered payment due that day. All prior payments to Fairfield were current. When Mrs. Atkins refused payment, Mrs. LaCoste and here sister protested with such vehemence that a Fairfield employee called the sheriff's office. According to Fairfield's contemporaneous records, Fairfield employees ("we") tried to give Mrs. LaCoste a letter "advising vehichle [sic] would be held for 10 days" (i.e., that it would be sold thereafter) but "she refused to accept a copy." Respondent's Exhibit No. 3. At hearing, Ms. Atkins conceded that she had not mailed a copy of the letter to Mr. LaCoste but testified that Mrs. LaCoste accepted a copy after refusing to take it initially. Mrs. LaCoste denied that she ever received the letter, and her version has been credited. On May 7, 1983, Fairfield received another communication from Allstate. Whether insurance coverage in fact lapsed on May 4, 1983 was not clear from the record. On May 17, 1983, Fairfield sold the Chevrolet Suburban for $2,050.00. Carolyn V. Kosmas purchased a 1978 Ford LTD II from Fairfield and made a downpayment of $550.00 on June 2, 1983. Under the terms of the installment sale contract, which called for an annual percentage rate in excess of 29 percent, she was to begin seventy dollar ($70.00) biweekly payments on June 22, 1983. At the time of the sales of the Ford to Ms. Kosmas on June 2, 1983, Fairfield asked for credit information about her fiance as well as about herself. On June 24, 1983, she appeared at Fairfield's place of business and tendered not only the payment due June 22 but also the payment due July 6, a total of $140.00 in cash. Ms. Atkins refused to accept the money, telling her that her references had not panned out, and asked her to surrender the keys to the car and gather up her personal effects. Ms. Kosmas made no secret of her opinion that she was not being treated fairly, but, crying and afraid, eventually agreed to treat the transaction as a rental and accepted a refund of $104.39 on that basis. Ms. Atkins "advised if she gave me another background sheet, that I could verify, I would renegotiate with her," Respondent's Exhibit No. 5, but Ms. Kosmas told Ms. Atkins that she had lost her job at West Florida Hospital and the renegotiation eventuated in the retroactive lease. Respondent Pearl Allen was present on June 24, 1983, and took the car keys from her. It was also he who wrote her on June 27, 1983 that the 1978 Ford LTD II would be privately sold on July 6, 1983. She did not appear when and where she was told the sale would occur. The Ford was in fact sold at auction in Montgomery, Alabama, on July 19, 1983. Respondent's Exhibit No. 5. Mary Lee Hobbs' husband Forace paid Fairfield $800.00 down on a 1977 Oldsmobile 98 on February 27, 1982, agreeing to maintain insurance on the car until paid for, and to pay the unpaid principal balance of $4134.25 over a two and a half year period together with interest at an annual percentage rate of 29.79. Stamped on the contract was the legend, "MINIMUM $25 REPO OR COLLECTION FEE." In part, the installment sale contract read: * NOTE: DISCLOSURES REQUIRED BY FEDERAL LAW, Respondent's Exhibit No. 6 (reduced in size), has been omitted from this ACCESS Document. For review, contact the Division's Clerk's Office. All payments were current when, at about half past five o'clock on the morning of November 1, 1983, Fairfield's agents used a wrecker to remove the Oldsmobile, damaging the Hobbses' porch in the process. Fairfield acted because it received notice of cancellation or nonrenewal of the insurance policy that Hobbs maintained on the car. Typed on the form notice as the effective date of cancellation was November 29, 1983. Someone has written in ink "should be 10-29." In fact the insurance policy never lapsed. According to Fairfield's records, they received conflicting information, on October 29, 1983, about whether an insurance premium had been paid. The Hobbses' 27-year old "daughter said they p[ai]d--Conway Spence said they did not pay." Respondent's Exhibit No. 6. This was the same day Mr. Spence, an insurance agent, erroneously informed Fairfield that the effective date of expiration "should be 10-29." Respondent's Exhibit No. 6. Even after Mr. Spence's error was known to it, Fairfield refused to return the car without payment of a $75.00 "repossession fee," and also refused to let the Hobbs children return with the laundry they were sent to fetch from the trunk of the car. It was the refusal to give up the dirty laundry that sent Mrs. Hobbs to the authorities. Karel Jerome Bell bought a 1977 Delta 88 Oldsmobile from Fair field on July 22, 1982, under an installment sale contract calling for two "pick up notes" to be paid in August of 1982 and biweekly payments of $125.00 thereafter until payments reached a total of $4161.212. Respondent's Exhibit No. 7. The "pick up notes," each for $220.00 were due August 7 and 21, 1982, and were not treated as down payments on the installment sale form. After reducing his indebtedness to $1221.21, Mr. Bell fell two payments behind, and Fairfield repossessed the Oldsmobile on July 7, 1983. The same day Fairfield wrote Mr. Bell that it intended to sell his car, but not time or date was specified. On July 8, 1983, Mr. Bell called and asked whether he could continue making payments while the car on the lot. Respondent's Exhibit No. 7. Fairfield's Ms. Gilstrap accepted $100.00 from Mr. Bell on July 12, 1983, which she applied to satisfy a reposession fee of $100.00. On the Bell contract, too, had been stamped, "MINIMUM $25 REPO OR COLLECTION FEE." Ms. Gilstrap "told him as long as he paid something something regularly on the account, I felt sure we would hold it for him." Mr. Bell indicated he would pay an additional $125.00 the following Friday and Ms. Gilstrap made a notation to this effect in his file, where she also wrote, "Pls. don't sell he intends to pay for." Respondent's Exhibit No. 7. Mr. Bell had not made any further payment when, on July 30, 1983, without notice to Mr. Bell, Fairfield sold the car for $1,000.00 to a wholesaler. Respondents use form installment sale contracts. A blank form like the one in use at the time of the hearing was received as Respondent's Exhibit No. This was the form used in the Kosmas and LaCoste transactions. The predecessor form used in the Bell, Hobbs and Tunstall transactions was similar in many respects. The earlier form provided, "LATE CHARGES: Buyer(s) hereby agrees to pay a late charge on each installment in default for 10 days or more in an amount of 5 percent of each installment or $5.00 whichever is less." On the reverse, the form provided: ACCELERATION AND REPOSSESSION. In the event any Buyer(s) or Guarantor of this Contract fails to pay any of said installments, including any delinquency charges when due or defaults in the performance of any of the other provisions of this Contract or (c) in case Buyer(s) or Guarantor becomes insolvent or (d) institutes any type of insolvency proceedings or (e) has any thereof instituted against him, or (f) has entered against him any judgment or filed against him any notice of lien in case of any Federal tax or has issued against him any distraint warrant for taxes, or writ of garnishment, or other legal process, or (g) in case of death, adjudged incompetency, or incarceration of the Buyer(s) or Guarantor or (h) in case the seller or the holder of this Contract, upon reasonable cause, determines that the prospect of payment of said sums or the performance by the Buyer(s) or his assigns of this Contract is impaired, then, or in such event, the unpaid portion of the balance hereunder shall, without notice, become forthwith due and payable and the holder, in person or by agent, may immediately take possession of said property, together with all accessions thereto, or may, at first, repossess a part and later, if necessary, the whole thereof with such accessions, and for neither or both of these purposes may enter upon any premises where said property, may be and remove the same with or without process of law. Buyer(s) agrees in any such case to pay said amount to the holder, upon demand, or, at the election of the holder, to deliver said property to the holder. If, in repossessing said property, the holder inadvertently takes possession of any other goods therein, consent is hereby given to such taking of possession, and holder may hold such goods temporarily for Buyer(s), without responsibility of liability therefor, providing holder returns the same upon demand. There shall be no liability upon any such demand unless the same be made in writing within 48 hours after such inadvertent taking of possession. Should this contract mature by its term or by acceleration, as hereinabove provided, then, and in either such event, the total principal amount due hereunder at that time shall bear interest at the rate of 10 percent per annum, which principal and interest, together with all costs and expenses incurred in the collection hereof, including attorneys fees (to be not less than 15 percent of the amount involved), plus appellate fees, if any, and all advances made by Seller to protect the security hereof, including advances made for or on account of levies, insurance, repairs, taxes, and for maintenance or recovery of property shall be due the Holder hereof and which sums Buyer(s) hereby agrees to pay. * * * LIABILITIES AFTER POSSESSION. Seller, upon obtaining possession of the property upon default, may sell the same or any part thereof at public or private sale either with or without having the property at the place of sale, and so far as may be lawful. Seller may be a purchaser at such sale. Seller shall have the remedies of a secured party under the Uniform Commercial Code (Florida) and any and all rights and remedies available to secured party under any applicable law, and upon request or demand of Seller, Buyer(s) shall, at his expense, assemble the property and make it available to the Seller at the Seller's address which is designated as being reasonably convenient to Buyer(s). Unless the property is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Seller will give Buyer(s) reasonable notice of the time and place of any public or private sale thereof. (The requirement of reasonable notice shall be met if such notice is mailed, postage prepaid, to Buyer(s) at address shown on records of Seller at least five (5) days before the time of the sale or disposition) Expenses of retaking, holding, preparing for the sale, selling, attorneys' fees, supra, incurred or paid by Seller shall be paid out of the proceeds of the sale and the balance applied on the Buyer(s) obligation hereunder. Upon disposition of the property after default, Buyer(s) shall be and remain liable for any deficiency and Seller shall account to Buyer(s) for any surplus, but Seller shall have the right to apply all or any part of such surplus against (or to hold the same as a reverse against) any and all other liabilities of Buyer(s) to Seller. Similarly, the more recent form provides, on the obverse, Late Charge: If a payment is received more than ten (10) days after the due date, you will be charged $5.00 or five (5 percent) of the payment, whichever is less. and on the reverse, has identical provisions on "Acceleration and Repossession" and "Liabilities After Repossession."
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That Petitioner find probable cause to initiate judicial proceedings against Respondents pursuant to Section 501.207(1), Florida Statutes (1981). DONE and ENTERED this 26th day of April, 1985, in Tallahassee, Florida. ROBERT T. BENTON, II 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 26th day of April, 1985. COPIES FURNISHED: William P. White, Jr., Esquire Assistant State Attorney Post Office Box 12726 Pensacola, Florida 32501 Paul A. Rasmussen, Esquire Eggen, Bowden, Rasmussen & Arnold 4300 Bayou Boulevard, Suite 13 Pensacola, Florida 32503 Curtis A. Golden, State Attorney First Judicial Circuit of Florida Post Office Box 12726 190 Governmental Center Pensacola, Florida 32501
