09-001219PL Department Of Business And Professional Regulation, Division Of Real Estate vs. Nestor G. Mendoza And Diamonds Realty Of Miami Beach Status: Closed Recommended Order on Tuesday, June 30, 2009.

Summary: Petitioner's evidence was insufficient to prove that Respondents, who are licensed real estate brokers, failed to preserve and make available certain records and/or obstructed or hindered Petitioner's investigators in an offical investigation.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 09-1219PL

)

NESTOR G. MENDOZA AND DIAMONDS )

REALTY OF MIAMI BEACH, )

)

Respondents. )

)

RECOMMENDED ORDER

This case came before Administrative Law Judge John G.

Van Laningham for final hearing by video teleconference on

May 8, 2009, at sites in Tallahassee and Miami, Florida.

APPEARANCES

For Petitioner: Patrick J. Cunningham, Esquire

Department of Business and

Professional Regulation

400 West Robinson Street

Hurston Building-North Tower, Suite N801

Orlando, Florida 32801

For Respondents: Nestor G. Mendoza, pro se

Diamonds Realty of Miami Beach

12501 Southwest 26th Street

Miami, Florida 33175

STATEMENT OF THE ISSUES

In this disciplinary proceeding, the issues are whether

Respondents, who are licensed real estate brokers, failed to

preserve and make available certain records relating to trust

accounts and real estate transactions, and/or obstructed or

hindered Petitioner's investigators in an official

investigation, as alleged by Petitioner in its Administrative

Complaint. If Petitioner proves one or more of the alleged

violations, then an additional question will arise, namely

whether disciplinary penalties should be imposed on Respondents,

or either of them.

PRELIMINARY STATEMENT

On July 17, 2008, Petitioner Department of Business and

Professional Regulation, Division of Real Estate, issued an

eight-count Administrative Complaint against Respondents,

wherein it was alleged that Respondents had violated various

provisions of Chapter 475, Florida Statutes, and Florida

Administrative Code Rule 61J2-14.012. Respondents timely

requested a formal hearing to contest these allegations, and the

matter was referred to the Division of Administrative Hearings

on March 5, 2009.

The Administrative Law Judge set the final hearing for

May 8, 2009. Both parties appeared at the appointed place and

time.

At hearing, Petitioner presented the testimony of one

witness: investigator Veronica Hardee. Petitioner also offered

Petitioner's Exhibits 1 through 3, inclusive, and these were

admitted into evidence. Respondents offered no evidence.

The final hearing transcript was filed on May 29, 2009.

Petitioner submitted a proposed recommended order on

June 8, 2009, which was the deadline for filing such papers, as

established at the conclusion of the final hearing. Respondents

did not file a proposed recommended order.

Unless otherwise indicated, citations to the Florida

Statutes refer to the 2008 Florida Statutes.

FINDINGS OF FACT

The Parties

1. Respondent Nestor G. Mendoza ("Mendoza") is a licensed

real estate broker subject to the regulatory jurisdiction of the

Florida Real Estate Commission ("Commission").

2. Respondent Diamonds Realty of Miami Beach, Inc.

("Diamonds Realty") is and was at all times material hereto a

corporation registered as a Florida real estate broker subject

to the regulatory jurisdiction of the Commission.

3. Mendoza is an officer and principal of Diamonds Realty,

and at all times relevant to this case he had substantial, if

not exclusive, control of the corporation. Indeed, the evidence

does not establish that Diamonds Realty engaged in any conduct

distinct from Mendoza's in connection with the charges at issue.

Therefore, Respondents will generally be referred to

collectively as "Mendoza" except when a need to distinguish

between them arises.

4. Petitioner Department of Business and Professional

Regulation ("Department"), Division of Real Estate, has

jurisdiction over disciplinary proceedings for the Commission.

At the Commission's direction, the Department is authorized to

prosecute administrative complaints against licensees within the

Commission's jurisdiction.

5. On January 15, 2008, Veronica Hardee, who was then

employed by the Department as an investigator, conducted an

audit of Mendoza's records at Mendoza's real estate brokerage

office, which was located in Miami Beach. Ms. Hardee was

accompanied by her supervisor, Brian Piper.

6. Ms. Hardee knew Mendoza because, in the latter part of

2007, she had investigated a consumer complaint against him,

which arose from a transaction that had taken place in the fall

of that year. In the course of that investigation, which

focused on the period from August 20, 2007 through November 30,

2007, Mendoza had provided Ms. Hardee with business records,

including bank statements and documents relating to the

brokerage's escrow account. Ms. Hardee's previous investigation

had not resulted in charges of wrongdoing being brought against

Mendoza.

7. During the audit, Ms. Hardee asked to review some of

Mendoza's business records. She testified about this on direct

examination as follows:

Q. All right. Did you tell [Mendoza] what

he would need to bring——or what he could

expect from an audit?

A. I don't remember , but usually procedure

[sic ], I would tell them we need to see

older escrow accounts, older operating

accounts, deposit slips, deposit checks,

anything that has to do with their financial

matters.

Final Hearing Transcript ("TR.") 40-41 (emphasis added).

8. On cross examination, Ms. Hardee elaborated:

Q. (BY MR. MENDOZA) . . . I remember quite

well that you did not ask me for the whole

year of——for instance, of 2004, you never

asked me for whole year, you asked me for a

certain month; is that correct?

* * *

THE WITNESS: During the investigation I

requested certain documents, yes. You're

correct, I asked you for certain months, you

had different issues with the Department

that I was looking at. . . .

* * *

You didn't provide all the months

requested and we came to the audit, you

didn't provide——at that time, we asked you

to see all of your accounts, it just wasn't

for the investigation, we wanted to see your

escrow account so you should have had for——I

don't remember the——we wanted 1-15-08, we

would have done from January of '08 to six

months prior, let's just say. I don't

remember what dates we gave you at the time.

But then you would have a file with those

documents in your escrow reconciliation

statement, with all of your checks, all of

your deposits with the bank statement

attached, you know, organized. But it

wasn't so and you said that you wanted to

organize it properly and that's why we

allowed you to organize it.

So the question, did you provide me

documents, yes, you provided me documents in

the investigation but not all of the

documents requested.

TR. 58-60 (emphasis added).

9. The undersigned attempted to elicit from Ms. Hardee a

more detailed description of the materials requested during the

audit, giving rise to the following exchange:

THE HEARING OFFICER: Okay. And can you

describe for me what it was in particular

that you did request on that day in January

of 2008? What did you ask [Mendoza] for?

THE WITNESS: Yeah. We asked him for his

escrow documents, reconciliation statements,

such as the one that you see in

[Petitioner's Composite] Exhibit 3. We

asked about those months that were missing.

We asked him——I don't know if we asked him

for six months or one year.

I don't remember the time frame we gave

him , but pretty much when we go in to do an

audit, we get the last six months, usually

the months that are particularly discussed,

the checks or the deposits that we're

looking into for an investigation.

* * *

So pretty much that's what we asked,

all of his escrow operating account that we

had for the company, which includes the

reconciliation statement, bank statement,

deposit checks, as the statute statues here.

THE HEARING OFFICER: Okay. You're standard

procedure would have been you say in an

audit like this, to have asked for the last

six months of records right? So you're

nodding your head, that's a yes?

THE WITNESS: Yes. In this case we asked

for the months that I was missing and plus I

wanted to do a whole——we were going to do a

whole audit. I don't remember right now if

I asked him for six months or twelve months,

I don't remember that part, but usually we

ask for all the documents.

THE HEARING OFFICER: And if I could just

ask you to clarify do there's no mistake

about this, when you say the months that are

missing, what months are you referring to?

THE WITNESS: I'm sorry, November of '04 and

December of '04.

TR. 73-75 (emphasis added).

10. The Department did not, at the time of the audit,

reduce its request for records to writing, which is unfortunate

for the Department because, as the above-quoted testimony shows,

Ms. Hardee's memory of specifically what Mendoza had been asked

to produce was spotty. Although Ms. Hardee did identify two

contemporaneous records were sought, this detail is practically

random (because no context was given to explain the description

of these periods, which predated the audit by more than three

years, as "missing" months) and, in any event, fails to make the

testimony as a whole explicit or distinctly remembered. The

undersigned finds that Ms. Hardee's testimony was insufficiently

precise to constitute clear and convincing evidence concerning

the particular items that the Department wanted to see.

11. Even if Ms. Hardee's testimony were sufficient on the

previous point, however, the proof regarding Mendoza's alleged

failure to produce records, which is a separate issue, is less

compelling. Ms. Hardee's testimony was that Mendoza made

available some but not all of the documents she and Mr. Piper

wanted to see. (Actually, a fairer characterization of

Mendoza's relative compliance, accepting Ms. Hardee's testimony

as true, would be that he produced most of the documents

requested, namely six-to-12 or 13 months' worth, failing only to

make available documents associated with the last two or three

months of 2004.) Mendoza then requested, and was given,

additional time to assemble the rest of the materials. For some

reason, Mendoza never contacted the Department thereafter to

produce the items he could not locate on January 15, 2008, which

caused the Department to initiate the instant proceeding.

12. The undersigned largely credits Ms. Hardee's testimony

regarding this overview of the events, with the qualification

that Mendoza's compliance, while less than 100 percent, was

nevertheless substantial. (He might, after all, have produced

satisfactorily as much as 13 months' worth of documents,

according to Ms. Hardee's testimony.) Given that Mendoza is

alleged to have failed only to produce specific documents

relating to the particular period from October through December

2004, the undersigned infers that he produced everything else

that the Department wanted to see. The Department did not,

however, at the time of the audit (or later), prepare an

inventory of the records Mendoza made available (or failed to

produce), take copies of the materials Mendoza produced, or

otherwise reduce to writing the particulars of his noncompliance

(e.g. by sending him a letter, soon after the audit, reminding

him of the obligation to produce the materials that were not

accessible on January 15, 2008, and listing or describing those

materials ).

13. The absence of a contemporaneous written record of

Mendoza's alleged failure to make documents available at the

audit is unfortunate for the Department because, on the question

of what Mendoza did and did not produce, Ms. Hardee testified as

follows:

THE HEARING OFFICER: All right. And when

you went back in January of 2008 to see the

——Mr. Mendoza at his office and audit his

books and records, he produced nothing to

you and your supervisor whatsoever on that

date in response to the things that you

requested to see?

THE WITNESS: He may have provided certain

documents but were incomplete. I do not

remember which documents he provided.

* * *

I'm not saying he didn't provide me with

anything. He didn't provide us with all of

the documents we requested.

TR. 71-72 (emphasis added).

14. In sum, the evidence against Mendoza consists of the

testimony of Ms. Hardee, who in a nutshell says that, while she

cannot clearly remember exactly what the Department asked

Mendoza to produce, she knows that she requested documents

relating to November and December of 2004, and that, while she

cannot remember what documents Mendoza made available, she is

sure he did not produce everything associated with the fourth

quarter of 2004. Assuming for argument's sake that the

Department requested the specific documents Mendoza is charged

with failing to produce (which is not entirely clear), and

accepting that Mendoza did not produce everything that the

Department asked to see, the Department's evidence is still too

conclusory to support disciplinary action, in view of Ms.

Hardee's testimony that the temporal scope of the Department's

request for documents was not limited to the three-month period

comprising the fourth quarter of 2004 and indeed might have

covered 15 months or more. Because, as found above, Mendoza did

produce a substantial, albeit indeterminate, amount of

documentation, and because there is no clear proof regarding the

contents of the records that Mendoza made available, the

undersigned is unable to find, based on clear and convincing

evidence as the law requires, that Mendoza failed to produce the

documents he has been accused of failing to produce.

The Charges

15. In Counts I and V of the Administrative Complaint, the

Department alleges that Mendoza and Diamonds Realty are guilty

of failing to preserve and make available to the Department all

deposit slips and bank statements associated with the broker's

trust account(s), in violation of Florida Administrative Code

Rule 61J2-14.012(1), which is a disciplinable offense under

Section 475.25(1)(e), Florida Statutes.

16. In Counts II and VI, it is alleged that Mendoza and

Diamonds Realty failed to prepare written monthly statements

comparing the broker's total trust liability to the bank

balance(s) in the broker's trust account(s), in violation of

Florida Administrative Code Rule 61J2-14.012(2)-(3). This

alleged violation is a disciplinable offense under Section

475.25(1)(e), Florida Statutes.

17. In Counts III and VII, the Department accuses Mendoza

and Diamonds Realty of having failed to preserve and make

available to the Department books, accounts, and records

pertaining to the brokerage business, in violation of Section

475.5015, Florida Statutes. This alleged violation constitutes

a disciplinable offense under Section 475.25(1)(e), Florida

Statutes.

18. In Counts IV and VIII of its Administrative Complaint,

the Department asserts that Respondents obstructed or hindered

the enforcement of Chapter 475, Florida Statutes, in violation

of Section 475.42(1)(i), Florida Statutes, which is a

disciplinable offense under Section 475.25(1)(e), Florida

Statutes.

Ultimate Factual Determinations

19. As found and explained above, the evidence is

insufficient to prove, clearly and convincingly, that

Respondents failed to make available the specific records they

are alleged to have withheld.

20. At most the evidence establishes that Respondents were

unable, on January 15, 2008, to produce an imprecisely

identified (and not clearly proved) subset of the universe of

documents that the Department's investigators sought to examine

during the audit. This is insufficient to prove, much less

clearly and convincingly to demonstrate, that Respondents failed

to keep or preserve any particular documents.

21. There is no persuasive evidence that Respondents

obstructed or hindered the Department's audit. To the contrary,

the evidence shows that Mendoza cooperated with the Department's

investigators and substantially complied with their demands.

22. Ultimately, therefore, it is found that Respondents

are not guilty of the offences charged in Counts I through VIII

of the Administrative Complaint.

CONCLUSIONS OF LAW

23. The Division of Administrative Hearings has personal

and subject matter jurisdiction in this proceeding pursuant to

Sections 120.569 and 120.57(1), Florida Statutes.

24. Section 475.25, Florida Statutes, under which

Respondents have been charged, sets forth the acts for which the

Commission may impose discipline. This statute provides, in

pertinent part:

(1) The commission may deny an application

for licensure, registration, or permit, or

renewal thereof; may place a licensee,

registrant, or permittee on probation; may

suspend a license, registration, or permit

for a period not exceeding 10 years; may

revoke a license, registration, or permit;

may impose an administrative fine not to

exceed $5,000 for each count or separate

offense; and may issue a reprimand, and any

or all of the foregoing, if it finds that

the licensee, registrant, permittee, or

applicant:

* * *

(e) Has violated any of the provisions of

this chapter[, including, as alleged here,

Sections 475.42(1)(i) and 475.5015, Florida

Statutes,] or any lawful order or rule made

or issued under the provisions of this

chapter or chapter 455[, including, as

alleged here, Florida Administrative Code

61J2-14.012].

25. Section 475.42(1), Florida Statutes, which Respondents

are alleged to have violated, committing a disciplinable offense

according to Section 475.25(1)(e), Florida Statutes, provides,

in pertinent part:

(i) A person may not obstruct or hinder in

any manner the enforcement of this chapter

or the performance of any lawful duty by any

person acting under the authority of this

chapter or interfere with, intimidate, or

offer any bribe to any member of the

commission or any of its employees or any

person who is, or is expected to be, a

witness in any investigation or proceeding

relating to a violation of this chapter.

§ 475.42(1)(i), Fla. Stat.

26. Section 475.5015, Florida Statutes, which Respondents

are alleged to have violated, committing a disciplinable offense

according to Section 475.25(1)(e), Florida Statutes, provides as

follows:

Each broker shall keep and make available to

the department such books, accounts, and

records as will enable the department to

determine whether such broker is in

compliance with the provisions of this

chapter. Each broker shall preserve at

least one legible copy of all books,

accounts, and records pertaining to her or

his real estate brokerage business for at

least 5 years from the date of receipt of

any money, fund, deposit, check, or draft

entrusted to the broker or, in the event no

funds are entrusted to the broker, for at

least 5 years from the date of execution by

any party of any listing agreement, offer to

purchase, rental property management

agreement, rental or lease agreement, or any

other written or verbal agreement which

engages the services of the broker. If any

brokerage record has been the subject of or

has served as evidence for litigation,

relevant books, accounts, and records must

be retained for at least 2 years after the

conclusion of the civil action or the

conclusion of any appellate proceeding,

whichever is later, but in no case less than

a total of 5 years as set above [sic ].

Disclosure documents required under ss.

475.2755 and 475.278 shall be retained by

the real estate licensee in all transactions

that result in a written contract to

purchase and sell real property.

27. Florida Administrative Code Rule 61J2-14.012, which

Respondents are alleged to have violated, committing a

disciplinable offense according to Section 475.25(1)(e), Florida

Statutes, contains the following requirements:

(1) A broker who receives a deposit as

previously defined shall preserve and make

available to the BPR, or its authorized

representative, all deposit slips and

statements of account rendered by the

depository in which said deposit is placed,

together with all agreements between the

parties to the transaction. In addition,

the broker shall keep an accurate account of

each deposit transaction and each separate

bank account wherein such funds have been

deposited. All such books and accounts

shall be subject to inspection by the DBPR

or its authorized representatives at all

reasonable times during regular business

hours.

(2) Once monthly, a broker shall cause to

be made a written statement comparing the

broker's total liability with the reconciled

bank balance(s) of all trust accounts. The

broker's trust liability is defined as the

sum total of all deposits received, pending

and being held by the broker at any point in

time. The minimum information to be

included in the monthly statement-

reconciliation shall be the date the

reconciliation was undertaken, the date used

to reconcile the balances, the name of the

bank(s), the name(s) of the account(s), the

account number(s), the account balance(s)

and date(s), deposits in transit,

outstanding checks identified by date and

check number, an itemized list of the

broker's trust liability, and any other

items necessary to reconcile the bank

account balance(s) with the balance per the

broker's checkbook(s) and other trust

account books and records disclosing the

date of receipt and the source of the funds.

The broker shall review, sign and date the

monthly statement-reconciliation.

(3) Whenever the trust liability and the

bank balances do not agree, the

reconciliation shall contain a description

or explanation for the difference(s) and any

corrective action taken in reference to

shortages or overages of funds in the

account(s). Whenever a trust bank account

record reflects a service charge or fee for

a non-sufficient check being returned or

whenever an account has a negative balance,

the reconciliation shall disclose the

cause(s) of the returned check or negative

balance and the corrective action taken.

28. Being penal in nature, the foregoing statutes and rule

provisions "must be construed strictly, in favor of the one

against whom the penalty would be imposed." Munch v. Department

of Professional Regulation, Div. of Real Estate , 592 So. 2d

1136, 1143 (Fla. 1st DCA 1992).

29. A proceeding, such as this one, to suspend, revoke, or

impose other discipline upon a professional license is penal in

nature. State ex rel. Vining v. Florida Real Estate Commission ,

281 So. 2d 487, 491 (Fla. 1973). Accordingly, to impose

discipline, the Department must prove the charges against

Respondents by clear and convincing evidence. Department of

Banking & Fin., Div. of Sec. & Investor Protection v. Osborne

Stern & Co. , 670 So. 2d 932, 933-34 (Fla. 1996)(citing Ferris v.

Turlington , 510 So. 2d 292, 294-95 (Fla. 1987)); Nair v.

Department of Business & Professional Regulation, Bd. of

Medicine , 654 So. 2d 205, 207 (Fla. 1st DCA 1995).

30. Regarding the standard of proof, in Slomowitz v.

Walker , 429 So. 2d 797, 800 (Fla. 4th DCA 1983), the court

developed a "workable definition of clear and convincing

evidence" and found that of necessity such a definition would

need to contain "both qualitative and quantitative standards."

The court held that:

clear and convincing evidence requires that

the evidence must be found to be credible;

the facts to which the witnesses testify

must be distinctly remembered; the testimony

must be precise and explicit and the

witnesses must be lacking confusion as to

the facts in issue. The evidence must be of

such weight that it produces in the mind of

the trier of fact a firm belief or

conviction, without hesitancy, as to the

truth of the allegations sought to be

established.

Id. The Florida Supreme Court later adopted the Slomowitz

court's description of clear and convincing evidence. See In re

Davey , 645 So. 2d 398, 404 (Fla. 1994). The First District

Court of Appeal also has followed the Slomowitz test, adding the

interpretive comment that "[a]lthough this standard of proof may

be met where the evidence is in conflict, . . . it seems to

preclude evidence that is ambiguous." Westinghouse Elec. Corp.

v. Shuler Bros., Inc. , 590 So. 2d 986, 988 (Fla. 1st DCA 1991),

rev . denied , 599 So. 2d 1279 (Fla. 1992)(citation omitted).

31. The undersigned has determined, as a matter of

ultimate fact, that the Department failed to establish

Respondents' guilt by clear and convincing evidence. The

undersigned further concludes that the plain language of the

particular statutory and rule provisions under which Respondents

were charged, being clear and unambiguous, can be applied to the

historical events at hand without a simultaneous examination of

extrinsic evidence or resort to principles of interpretation.

It is therefore unnecessary to make additional legal conclusions

with regard to these charges.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Commission enter a final order

finding Mendoza and Diamonds Realty not guilty of the offenses

charged in the Administrative Complaint.

DONE AND ENTERED this 30th day of June, 2009, in

Tallahassee, Leon County, Florida.

JOHN G. VAN LANINGHAM

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 30th day of June, 2009.

COPIES FURNISHED :

Patrick J. Cunningham, Esquire

Department of Business and

Professional Regulation

400 West Robinson Street

Hurston Building-North Tower, Suite N801

Orlando, Florida 32801

Nestor G. Mendoza

Diamonds Realty of Miami Beach

12501 Southwest 26th Street

Miami, Florida 33175

Thomas W. O'Bryant, Jr., Director

Division of Real Estate

400 West Robinson Street, Suite 802, North

Orlando, Florida 32801

Reginald Dixon, General Counsel

Department of Business and

Professional Regulation

Northwood Centre

1940 North Monroe Street

Tallahassee, Florida 32399-0792

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this recommended order. Any exceptions

to this recommended order must be filed with the agency that

will issue the final order in this case.