10-001237PL Department Of Business And Professional Regulation, Division Of Real Estate vs. Dennis Trage Status: Closed Recommended Order on Wednesday, July 14, 2010.

Summary: Broker/auctioneer is guilty of fraud and failing to account for a deposit. Recommend revocation of license and administrative fines.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 10-1237PL

)

DENNIS TRAGE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a hearing was conducted in this case on

April 29, 2010, in Vero Beach, Florida, before Administrative

Law Judge Claude B. Arrington of the Division of Administrative

Hearings (DOAH).

APPEARANCES

For Petitioner: Patrick Cunningham, Esquire

Department of Business and

Professional Regulation

400 West Robinson Street

Hurston Building-North Tower,

Suite N801

Orlando, Florida 32801

For Respondent: Stephen Fromang, Esquire

1620 26th Avenue

Vero Beach, Florida 32960

STATEMENT OF THE ISSUE

Whether Respondent, a real estate broker, committed the

offenses alleged in the Administrative Complaint dated

February 16, 2010, and, if so, the penalties that should be

imposed.

PRELIMINARY STATEMENT

On February 16, 2010, Petitioner filed a two-count

Administrative Complaint against Respondent alleging certain

facts pertaining to an auction of a townhouse conducted by

Respondent. Based on those factual allegations, Petitioner

charged in Count I that Respondent violated the provisions of

Subsection 472.25(1)(b), Florida Statutes, 1 and in Count II that

he violated the provisions of Subsection 475.25(1)(d), Florida

Statutes.

Thereafter, Petitioner timely denied the allegations of the

Administrative Complaint and filed a Request for Administrative

Hearing. The matter was referred to DOAH, and this proceeding

followed.

At the final hearing, Petitioner presented the testimony of

Jonathan Platt, an investigator employed by Petitioner and Aaron

Gordon, the high bidder at the subject auction. Petitioner

offered five sequentially-numbered exhibits, each of which was

admitted into evidence. Respondent testified on his own behalf

and presented the additional testimony of Robert Deutsch, a

prospective bidder at the subject auction. Respondent offered

two sequentially-numbered exhibits, both of which were admitted

into evidence.

During the course of the formal hearing, the parties

jointly moved to keep the record open for the purpose of taking

and subsequently filing the deposition of David Mover, the owner

of the subject townhouse. The undersigned granted the motion.

The deposition of Mr. Mover was taken May 21, 2010, and filed

June 8, 2010.

A one-volume Transcript of the hearing was filed June 21,

2010. The parties filed Proposed Recommended Orders, which have

been duly-considered by the undersigned in the preparation of

this Recommended Order.

FINDINGS OF FACT

1. Petitioner is the state licensing and regulatory agency

charged with the responsibility and duty to prosecute

administrative complaints pursuant to the laws of the State of

Florida, in particular Section 20.165 and Chapters 120, 455, and

475, Florida Statutes, and the rules promulgated pursuant

thereto.

2. At all times relevant to this proceeding, Respondent

was licensed in the State of Florida as a real estate broker,

having been issued license BK-575099. Respondent is registered

as a sole proprietor broker, trading as Atlantic Auction Realty.

3. On February 21, 2008, Respondent, acting through his

company, entered into a contract (auction contract) with David

Mover to auction a townhouse owned by Mr. Mover located at

8626 S.W. 94th Street, Miami, Florida (the subject property).

4. Mr. Mover had been trying to sell the subject property

for approximately two years. In March 2007, Mr. Mover became

unable to make the mortgage payments on the subject property.

On February 21, 2008, the Circuit Court in and for Dade County,

Florida, entered a Final Judgment of Mortgage Foreclosure

(Judgment of Foreclosure) against the subject property in favor

of Washington Mutual Bank, the holder of the first mortgage.

The amount of the judgment was $245,727.25. The Judgment of

Foreclosure ordered that the property be sold at public sale on

April 24, 2008.

5. At the time of the auction, there was a second mortgage

on the subject property owned by a trust. The approximate

amount of the second mortgage was $120,000.00. The trust was a

defendant in the foreclosure proceedings.

6. Prior to the auction conducted by Respondent, the

trustee of the trust indicated a possible willingness on the

part of the trust to accept less than the balance owed on the

second mortgage if the property were sold by private auction, as

opposed to the public auction ordered by the Judgment of

Foreclosure. However, the subject auction occurred prior to the

trustee’s making a commitment to take less than the balance owed

on the second mortgage.

7. The price listed on the auction contract was

$350,000.00. The minimum amount Mr. Mover wanted for the

townhouse was $370,000.00, which would have been sufficient to

satisfy the Judgment of Foreclosure and the second mortgage.

Mr. Mover never agreed to accept less than $370,000.00 for the

subject property. 2

8. Mr. Mover understood that the $350,000.00 figure was a

starting point for the auction. 3 This was not an absolute

auction. Mr. Mover had the right to refuse a bid less than

$350,000.00.

9. The auction contract contained the following provision

in paragraph 3:

3. 10% BUYER’S PREMIUM will be added to the

Buyer’s Bid and be the Auctioneer’s total

commission.

10. The auction contract provided that the auction would

be on March 20, 2008. Respondent prepared a flyer that

announced the terms of the auction. Prospective bidders were

notified by the flyer that a 10% deposit would be required the

day of the sale and that there would be a buyer’s premium of 10%

of the bid. Prospective bidders were required to have a

cashier’s check in the amount of $10,000.00.

11. The “Auction Terms and Conditions” included the

following provisions:

1. Bidder Registration. The auction is

open to the public and your attendance is

welcomed. To register, you must display a

cashier’s check in the amount as set forth

in each property description. Upon being

declared the top bidder, the cashier’s check

will be applied as a partial deposit, and

the deposit must be increased to equal (10%)

[sic] of each contract price. Please be

advised there are no exceptions. . . .

2. Contract and Deposit. Bids may not

be retracted once accepted by the

auctioneer. Upon being declared top bidder,

the cashier’s check will be applied as a

partial deposit. . . .

12. The auction was conducted in the driveway of the

subject property. Mr. Mover waited in the upper area of the

subject property during the auction.

13. Mr. Gordon opened the bidding at the base bid (the bid

amount prior to tacking on the buyer’s premium) of $285,000.00,

but agreed to up the base bid to $300,000.00 when Respondent

agreed to reduce the buyer’s premium to $10,000.00 from 10% of

the base bid amount ($28,500.00 for a base bid of $285,000.00 or

$30,000.00 for a base bid of $300,000.00).

14. Respondent went upstairs and wrote down the amount of

the bid and told Mr. Mover that he would reduce the buyer’s

premium to $10,000.00 if Mr. Mover would accept that price.

Mr. Mover refused to accept that bid. Mr. Mover believed that

the auction had failed to sell the property.

15. After talking with Mr. Mover, Respondent concluded the

auction by declaring Mr. Gordon, bidding on behalf of himself

and his wife, the winning bidder at the auction. Mr. Gordon’s

base bid was in the amount of $300,000.00 plus a buyer’s premium

in the amount of $10,000.00, bringing the total bid to

$310,000.00.

16. After being declared the winning bidder, Mr. Gordon

gave to the Respondent the $10,000.00 cashier’s check he had

brought to the auction. Mr. Gordon signed a document styled

which reflected a total selling price of $310,000.00 (this

figure included the buyer’s premium) and a requirement that the

closing date be on or before April 19, 2008.

17. The Purchase Contract contained the following

provision relating to the Buyer’s Premium:

8. BUYER’S PREMIUM – WHEN EARNED: it is

understood and agreed by the Seller and the

Buyer that the Buyer’s Premium is paid to

the Auctioneer at the time of the Auction

Sale and is the sole property of the

Auctioneer, and he is entitled to this money

as his fee at the time of said payment.

18. Respondent told Mr. Gordon that he would cash the

check Mr. Gordon gave to him on March 20, 2008, after Mr. and

Mrs. Gordon had an executed contract signed by both parties.

Respondent cashed Mr. Gordon’s check on March 21, 2008.

19. Respondent never presented the Purchase Contract to

Mr. Mover, and the transaction never closed. The Gordons were

unable to secure financing because they had no contract.

Mr. Gordon has made repeated demands for the return of the

proceeds from the check he gave to Respondent. Respondent has

refused those demands. 4

20. Respondent was aware of the foreclosure proceeding

before he conducted the auction. Respondent did not disclose

the foreclosure proceeding to Mr. Gordon prior to the auction.

21. After the auction, Mr. Mover filed for bankruptcy.

Mr. Gordon filed no claim in that proceeding.

CONCLUSIONS OF LAW

22. DOAH has jurisdiction over the subject matter of and

the parties to this proceeding pursuant to Sections 120.569 and

120.57(1), Florida Statutes.

23. Petitioner has the burden of proving by clear and

convincing evidence the allegations against Respondent. See

Ferris v. Turlington , 510 So. 2d 292 (Fla. 1987); Evans Packing

Co. v. Department of Agriculture and Consumer Services , 550 So.

2d 112 (Fla. 1st DCA 1989); and Inquiry Concerning a Judge , 645

So. 2d 398 (Fla. 1994). The following statement has been

repeatedly cited in discussions of the clear and convincing

evidence standard:

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 evidence

must be precise and explicit and the

witnesses must be lacking in 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 the firm belief of (sic)

conviction, without hesitancy, as to the

truth of the allegations sought to be

established. Slomowitz v. Walker , 429 So.

2d 797, 800 (Fla. 4th DCA 1983).

24. The definition of the term broker set forth in

Subsection 475.01(1)(a), Florida Statutes, includes one who

auctions property for compensation.

25. Petitioner has charged Respondent with violating the

provisions of Subsections 475.25(1)(b) and (d), Florida

Statutes. Those provisions provide, in relevant part, as

follows:

(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:

* * *

(b) Has been guilty of fraud,

misrepresentation, concealment, false

promises, false pretenses, dishonest dealing

by trick, scheme, or device, culpable

negligence, or breach of trust in any

business transaction in this state or any

other state, nation, or territory; has

violated a duty imposed upon her or him by

law or by the terms of a listing contract,

written, oral, express, or implied, in a

real estate transaction; has aided,

assisted, or conspired with any other person

engaged in any such misconduct and in

furtherance thereof; or has formed an

intent, design, or scheme to engage in any

such misconduct and committed an overt act

in furtherance of such intent, design, or

scheme. It is immaterial to the guilt of

the licensee that the victim or intended

victim of the misconduct has sustained no

damage or loss; that the damage or loss has

been settled and paid after discovery of the

misconduct; or that such victim or intended

victim was a customer or a person in

confidential relation with the licensee or

was an identified member of the general

public.

* * *

(d)1. Has failed to account or deliver to

any person, including a licensee under this

chapter, at the time which has been agreed

upon or is required by law or, in the

absence of a fixed time, upon demand of the

person entitled to such accounting and

delivery, any personal property such as

money, fund, deposit, check, draft, abstract

of title, mortgage, conveyance, lease, or

other document or thing of value. . . .

26. Petitioner proved by clear and convincing evidence

that Respondent engaged in fraud in violation of Subsection

475.25(1)(b), Florida Statutes, as alleged in Count I of the

Administrative Complaint by declaring Mr. Gordon to be the

winning bidder at the auction when he knew that Mr. Mover had

rejected Mr. Gordon’s bid and by cashing Mr. Gordon’s check when

he knew there was no fully executed contract.

27. Petitioner also proved by clear and convincing

evidence that Respondent violated the provisions of Subsection

475.25(1)(d), Florida Statutes, by failing to account for the

money given to him by Mr. Gordon as a partial deposit.

28. There was no evidence of aggravating or mitigating

circumstances.

29. Florida Administrative Code Rule 61J2-24.001(3)(c) and

(e) provides disciplinary guidelines for violations of

Subsections 475.25(1)(b) and (d), Florida Statutes.

30. The disciplinary guideline for the violation found in

Count I is an administrative fine of $1,000.00-$2,500.00 and a

30-day suspension to revocation.

31. The disciplinary guideline for the violation found in

Count II is an administrative fine of $250.00-$1,000.00 and

suspension to revocation.

32. No recommendation is made as to an award of costs of

investigation pursuant to Subsection 455.227(3), Florida

Statutes, because no evidence was presented as to those costs.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions

of Law, it is hereby RECOMMENDED that the Division of Real

Estate find Respondent guilty of the violations alleged in

Counts I and II of the Administrative Complaint. For the

violation found in Count I, it is recommended that the final

order impose against Respondent an administrative fine in the

amount of $1,000.00 and that it revoke his broker’s license.

For the violation found in Count II, it is recommended that the

final order impose an administrative fine in the amount of

$250.00 and that it revoke his broker’s license.

DONE AND ENTERED this 14th day of July, 2010, in

Tallahassee, Leon County, Florida.

CLAUDE B. ARRINGTON

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone]

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 14th day of July, 2010

ENDNOTES

1/ Unless otherwise noted, all statutory references are to

Florida Statutes (2009). There has been no material change to

any statute cited herein at any time relevant to this

proceeding.

2/ There was a dispute in the evidence as to whether Mr. Mover

subsequently agreed to reduce the minimum amount he would accept

to the sum of $300,000.00. Respondent testified that he did,

while Mr. Mover testified that he did not. Respondent,

Mr. Mover, and prospective bidder Robert Deutsch met for lunch

just prior to the auction. Respondent testified that it was at

that meeting that Mr. Mover agreed to reduce the minimum amount

to $300,000.00. Respondent’s Exhibit 1 purports to be a copy of

the auction contract with a strike-through of the sum of

$350,000.00 and the insertion of the amount of $300,000.00.

Someone inserted the initials D. M. above the strike-through and

next to the inserted amount. Mr. Mover testified, credibly,

that he did not alter the auction contract and that he did not

insert the initials D. M. Mr. Mover also testified, credibly,

that he first saw the altered auction contract days after the

auction. Mr. Deutsch testified that Respondent wanted Mr. Mover

to reduce the minimum price, but that Mr. Mover wanted more

money. Based on the testimony of Mr. Hover and Mr. Deutsch,

together with the undisputed fact that Mr. Mover did not accept

a bid of less than $350,000.00, and his explanation as to why he

would not do so, it is found that Mr. Mover did not agree to

reduce the minimum acceptable amount.

3/ Although Mr. Mover believed that $350,000.00 was a starting

point for the auction, the auction contract may have required

him to accept that bid. Because the high bid was less than

$350,000.00 and because Mr. Mover did not approve a figure less

than $350,000.00, it is not necessary to determine whether

Mr. Mover would have been required to accept a bid in the amount

of $350,000.00 because that issue is moot.

4/ Respondent contends that he earned the $10,000.00 by

conducting the auction. Respondent’s contention is rejected

because Mr. Mover never accepted the bid. Respondent also

contends that he provided Mr. Gordon with sufficient

documentation for Mr. Gordon to sue Mr. Mover for specific

performance. While that contention may or may not be true, it

is obvious that such a suit would not have given Mr. Gordon

relief because of the foreclosure proceeding. Even if it were

determined that Respondent was entitled to the sum of

$10,000.00, he was not entitled to take Mr. Gordon’s check as

payment for that sum before the Gordons had a valid contract

because the check was given as a “partial deposit,” The check

was not in payment of the Buyer’s Premium.

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

Stephen Douglas Fromang, Esquire

1861 10th Avenue

Vero Beach, Florida 32960

Roger P. Enzor, Chair

Real Estate Commission

Department of Business and

Professional Regulation

400 West Robinson Street, N801

Orlando, Florida 32801

Thomas W. O’Bryant, Jr., Director

Division of Real Estate

400 West Robinson Street, N801

Orlando, Florida 32801

Reginald Dixon, General Counsel

Department of Business and

Professional Regulation

Northwood Centre

1940 North Monroe Street

Tallahassee, Florida 32399-0792

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 should be filed with the agency that

will issue the Final Order in this case.