97-000876 Division Of Real Estate vs. Leonard Ohlsson, T/A Spruce Creek Fly-In Status: Closed Recommended Order on Tuesday, July 15, 1997.

Summary: Respondent failed to notify and institute appropriate steps when presented with a good faith doubt about a deposit in escrow.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION , )

DIVISION OF REAL ESTATE , )

)

Petitioner , )

)

vs. ) Case No. 97-0876

)

LEONARD OHLSSON, t/a SPRUCE )

CREEK FLY-IN REALTY , )

)

Respondent. )

__________________________________)

RECOMMENDED ORDER

Notice was provided and on May 30, 1997, a formal hearing

was held in this case. Authority for conducting the hearing is

set forth in Sections 120.569 and 120.57(1), Florida Statutes

( Supp. 1996). The hearing location was the Grand Jury Room,

Volusia County Courthouse, 120 West Indiana Avenue, DeLand,

Florida, Charles C. Adams, Administrative Law Judge, conducted

the hearing.

APPEARANCES

For Petitioner: Andrea D. Perkins, Esquire

Department of Business and

Professional Regulation

400 West Robinson Street, Suite N-308

Orlando, Florida 32801

For Respondent: William A. Parsons, Esquire

Woerner & Parsons

2001 South Ridgewood Avenue

South Daytona, Florida 32219

STATEMENT OF THE ISSUES

Should Petitioner impose discipline against Respondent's

real estate broker's license for alleged violations of Section

475.25(1), Florida Statutes and Rule 61J2-10.032(1), Florida

Administrative Code?

PRELIMINARY STATEMENT

On October 10, 1996, an administrative complaint was issued

by the State of Florida, Department of Business and Professional

Regulation, Florida Real Estate Commission, under FDBPR Case No.

96-81064, charging Respondent with violations of the

aforementioned statute and rule. The administrative complaint

advised Respondent that he could contest the facts and

allegations, among other matters. On January 9, 1997, Respondent

requested resolution of the dispute through a formal hearing

pursuant to Section 120.57(1), Florida Statutes. On February 25,

1997, the case was received by the Division of Administrative

Hearings and was assigned to the undersigned. The hearing

proceeded on the date described.

Petitioner served a Request for Admissions on Respondent.

Respondent admitted some facts contained within the request and

those admissions have been considered in preparing the

Recommended Order. Additionally, Respondent filed an answer to

the administrative complaint in which he conceded certain factual

allegations contained in the complaint. Those concessions were

considered in preparing the Recommended Order.

In view of the admissions and answer to the administrative

complaint, as part of Petitioner's Exhibits A-F, Petitioner

concluded its presentation without calling witnesses. The

Petitioner's Exhibits A-F were admitted. Respondent's composite

Exhibit No. 1 was admitted. Respondent testified in his own

behalf and presented his wife, Patricia Ann Ohlsson, as a

witness.

A transcript of the hearing was prepared and filed with the

Division of Administrative Hearings on June 16, 1997. Petitioner

filed a proposed Recommended Order on June 26, 1997. On June 20,

1997, Respondent filed a proposed Recommended Order together with

written argument. The proposals and argument have been

considered in preparing the Recommended Order.

FINDINGS OF FACT

1. Petitioner is a state government 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, Petitioner gains its authority

from Chapters 120, 455 and 475, Florida Statutes, and rules

promulgated in accordance with those chapters.

2. Respondent is, and at all times material to this case,

was a licensed Florida real estate broker, issued license number

05125020 in accordance with Chapter 475, Florida Statutes.

3. The last license issued to Respondent was as a broker

t/a Spruce Creek Fly-In Realty, 210 Cessna Boulevard, Daytona,

Florida 32124.

4. At times relevant to the inquiry, Respondent served as a

selling broker for N.E. Cornish related to property located in

Volusia County, Florida. The property was described as lot M-211

and the North 1/2 of lot M-212, Fly-In Spruce Creek, Inc.,

subdivision unit 1, as recorded in MB 33, Page 108, the Public

Records of Volusia County, Florida.

5. In furtherance of the sale of the property, Respondent

prepared a real estate sales contract. Pursuant to the contract,

Alan Wright and Sara Wright agreed to purchase the property from

Mr. Cornish, subject to contingencies set forth in the contract.

The contract was entered into by the principals and accepted by

Respondent as real estate broker. The last person to sign the

contract executed the contract on December 13, 1995.

6. The Wrights paid a cash deposit of $1,000 at the

inception of the contract. That money was placed in Respondent's

escrow account for his real estate brokerage firm.

7. Under the contract, the Wrights had the option to

purchase the property at $180,000 until April 1, 1996, subject to

other offers being presented to Mr. Cornish in the amount of

$180,000 or more. In no event were the Wrights obligated to pay

more than $195,000, should Mr. Cornish receive an offer from

another buyer.

8. As part of the contract option to purchase with the

first right of refusal, should Mr. Cornish receive another

bonafide offer equal to the $180,000 option to purchase by the

Wrights, and should the Wrights exercise their option within two

working days, the Wrights were obligated to make an additional

deposit of $9,000 to perfect their purchase.

9. Once the Wrights exercised the option and paid the

additional $9,000, it was incumbent upon Mr. Cornish, at the

buyer's expense, to have the lots combined as one, with one

assessment obtaining for the monies owed to the property owners'

association for annual assessments associated with the

subdivision.

10. Finally, the contract stated that the failure by the

Wrights to exercise their option to purchase by April 1, 1996,

would cause the forfeiture of the $1,000 deposit.

11. Sometime in January 1996, Mr. Wright became convinced

that the lots could not be combined for purposes of the property

owners' association assessment. He expressed this sentiment to

the Respondent in a letter dated January 24, 1996, which the

Respondent received. In pertinent part, the correspondence

stated:

. . . I have been told by numerous property

owners, and the Manager of the POA, that it

is not possible to combine two single family

lots into one lot with one assessment. I am

told that it has never been done before and

is not likely to happen now.

Lenny, based upon the very real possibility

that the lots cannot be combined to one

assessment, I am requesting a resolution of

this question now.

Your suggestion that I initiate such action

by giving you an additional $9,000 is

unacceptable because Sara and I have not yet

decided whether or not we will eventually

purchase the lot. I am not asking that Mr.

Cornish actually combine the lots at this

time. I simply want written assurance from

the POA that it can be done. I want to know

now, not some time after we return to

Michigan having decided to buy the lot.

If you are unable or unwilling to obtain such

written assurance from the POA, please return

our $1,000 deposit.

12. In response to the correspondence dated January 24,

1996, Respondent spoke to Mr. Wright, and in that conversation

Respondent showed Mr. Wright information purportedly describing

how lot M-220 in the subdivision had been a multiple family lot

with eight assessments and the county had agreed to bring the

zoning into a single lot, resulting in a single assessment.

Respondent also told Mr. Wright that Mr. Cornish was not

interested in combining the Cornish lots into one lot without a

sale, because of the belief that it diminished the value of the

property. Mr. Cornish was only interested in combining the two

lots into one when there was a purchaser desirous of having a

single lot. Consistent with the contract, Respondent reminded

Mr. Wright that Mr. Cornish was willing to combine the two lots

upon receipt of the additional deposit of $9,000. Following this

conversation, Respondent believed that Mr. Wright was satisfied

that the lots could be combined for purposes of achieving a

single assessment by the property owner's association, but it was

not resolved whether Mr. Wright would be willing to pay the

additional deposit of $9,000. Respondent held the perception

that Mr. Wright would make that decision at a later date.

13. There were other conversations following the

January 24, 1996, correspondence. In these conversations Mr.

Wright demanded a refund of the $1,000 deposit.

14. In conversations between Respondent and Mr. Wright,

Respondent was unwilling to refund the $1,000 deposit because he

believed the lots could be combined into one.

15. Without Respondent's knowledge, Mr. Wright wrote to the

Petitioner on March 15, 1996, to complain about Respondent's

conduct. That correspondence enclosed a copy of the contract

between Mr. Cornish and the Wrights. It related Mr. Wright's

belief that the two lots could not be converted into a single lot

for purposes of the property owner's association assessment.

This belief was premised upon information purportedly obtained

from the attorney representing the property owners' association

to that effect. The complaint letter also referred to a

perceived problem concerning suitability of the subject lots for

placement of a hangar sufficiently large to accommodate an

airplane which Respondent intended to place on the property.

(The community where the subject property is located is a

community in which the property owners are allowed to maintain

airplanes and hangars for the airplanes on their real property.)

The correspondence directed to Petitioner alludes to attempts

made by Mr. Wright to have the Respondent return the $1,000

deposit. The letter to Petitioner from Mr. Wright refers to

Respondent's refusal to return the deposit money based upon the

assumption that the two lots could be converted into one lot for

purposes of the property owners' association assessment. The

complaint letter from Mr. Wright also alleges that Respondent had

stated that the suitability of the lot for placement of the

hangar and airplane was a case of "buyer beware" and not

Respondent's problem.

16. As a result of Mr. Wright's complaint, Petitioner wrote

to Respondent with a copy of the March 15, 1996, letter from Mr.

Wright attached to Petitioner's correspondence. The

correspondence from Petitioner to Respondent was received by

Respondent on April 3, 1996. The Petitioner's correspondence

indicated that an investigator for Petitioner would visit

Respondent's office concerning the complaint by Mr. Wright.

17. Having received the Petitioner's correspondence dated

April 3, 1996, with Mr. Wright's March 15, 1996, letter attached,

Respondent replied to Petitioner with his own correspondence.

Respondent's reply stated in pertinent part:

. . .We are a Planned Unit Development with a

Property Owners Association and we have

common property for which there are

assessments made to gain revenue to maintain.

There are Single Family lots and homes with

one assessment, Commercial Lots and buildings

with three assessments and Multi Family lots

with eight assessments.

The larger Single Family lots have been sold

and several residents have tried to combine

several lots into one lot to avoid several

assessments. This cannot be done as our

rules state that combining of lots to avoid

assessments is not permitted. Several Multi

Family lots are presently being upgraded to

Large Single Family lots. These lots are not

being combined, they are being rezoned.

After rezoning they will be Single Family

with Single Family assessment. Many of our

residents prefer this to have additional

condominium units constructed. We also have

residents with opposing views.

Mr. Wright, who told me that he was in real

estate in Michigan, looked at building sites

at Spruce Creek and made a deposit on a lot

that was multi family zoned. The contract

was to hold the lot while he looked at other

lots to insure he found the most suitable for

his purpose and to see if the community was

the one in which he wished to settle. Mr.

Wright had stipulated that he wanted the lot

to be changed to a single family lot and to

have a single family Property Owners

assessment. The owner agreed and that this

would be done after Mr. Wright had decided

that this lot was the one that he actually

wanted. Mr. Wright was to make an additional

deposit before April 1, 1996 indicating he

wanted the lot and the owner would go ahead

with the change. Mr. Wright did not make the

additional deposit.

Mr. Wright, during his two month visit, in

which he and his wife rented a home from us,

decided to mount his own investigation and

unfortunately spoke mainly with persons with

opposing views of the lot owner and not many

of persons with the same views of the owner,

who is incidentally one of the original

developers of Spruce Creek, and Mr. Wright

decided that the owner could not change the

lot.

My interpretation of the contract is hat

[sic] upon the additional deposit, the owner

of the lot had to perform to the satisfaction

of the Buyer. If he could not the Seller had

to return all deposits. I don't see anywhere

where it says - upon determination of the

Buyer, all the deposits will be returned. I

kept the Seller apprised of the ongoing

situation and he does not wish to return the

deposit at this time.

I, at this time can not see a dispute. I am

holding the deposit money in my sales escrow

account and am awaiting further contact by

your office.

18. According to Respondent, after April 1, 1996, Mr.

Cornish asked Respondent whether Mr. Wright still intended to buy

the property in question. Respondent told Mr. Cornish that Mr.

Wright, "still wants the lot." In his testimony Respondent

indicated that Mr. Cornish stated that Mr. Cornish wanted

Respondent, "just to hang on to the money in the escrow account

. . . ."

19. Subsequently, by an administrative complaint signed

October 16, 1996, FDPR Case No. 96-81064, Petitioner accused

Respondent of violating Chapter 475, Florida Statutes and Rule

61J-10.032, Florida Administrative Code related to the $1,000

deposit paid by Mr. Wright.

20. In correspondence dated October 24, 1996, Respondent

addressed the administrative complaint in which he stated:

Please be advised that the undersigned is

having a dispute over escrow funds with a Mr.

Allan Wright, I understand that you are aware

of this fact but I have been told that I

still should inform the Commission in

writing.

The undersigned knows that the Commission

must be notified of any disputes over escrow

funds but I was unaware that I had a dispute

until receiving notice from Investigator

James Pierce on April 3, 1996. Once

receiving notice from I made the assumption

that you were notified.

21. In Leonard Ohlsson, d/b/a Spruce Creek Fly-In Realty,

Plaintiff vs. Alan Wright and Sarah Wright, his wife and N. E.

Cornish, Defendants , in the County Court, Seventh Judicial

Circuit, in and for Volusia County, Florida, Case No. 96-12238-

COD1-71, Respondent filed a complaint for interpleader concerning

the $1,000 deposit. This complaint was filed on December 18,

1996. On February 26, 1997, the Court disposed of the $1,000

deposit which had been interpled with the Court.

CONCLUSIONS OF LAW

22. The Division of Administrative Hearings has

jurisdiction over the subject matter and the parties to this

action in accordance with Section 120.57(1), Florida Statutes.

23. Petitioner intends to impose discipline against

Respondent's real estate broker's license. It must prove the

allegations in its administrative complaint by clear and

convincing evidence. Ferris v. Turlington , 510 So. 2d 292 (Fla.

1987). Respondent is presumed to know the responsibilities which

he has for conducting his profession in accordance with that

license. Wallen v. Florida Department of Professional

Regulation, Division of Real Estate , 568 So. 2d 975 (Fla. 3d DCA

1990).

24. Related to the business transaction between Mr. Cornish

and the Wrights, in which Respondent held the $1,000 deposit in

escrow, Respondent is accused of the failure to provide written

notification to the Petitioner upon receiving conflicting demands

within 15 business days of the last party's demand, or upon a

good faith doubt as to whom is entitled to any trust funds held

in his broker's escrow account, and the failure to institute one

of the settlement procedures set forth in Section 475.25(1)(d)1,

Florida Statutes, within 15 days after the date the notification

is received by the Petitioner, in violation of Rule 61J2-

10.032(1), Florida Administrative Code, and therefore in

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

25. In pertinent part, Section 475.25(1)(d )1, Florida

Statutes, states:

. . . if the licensee, in good faith,

entertains doubt as to what person is

entitled to the accounting and delivery of

the escrowed property, or if conflicting

demands have been made upon him for the

escrowed property, which property he still

maintains in his escrow or trust account, the

licensee shall promptly notify the commission

of such doubts or conflicting demands and

shall promptly:

a. Request that the commission issue an

escrow disbursement order determining who is

entitled to the escrowed property;

b. With the consent of all parties, submit

the matter to arbitration ;

c. By interpleader or otherwise, seek

adjudication of the matter by a court; or

d. With the written consent of all parties,

submit the matter to mediation. The

department may conduct mediation or may

contract with public or private entities for

mediation services. However, the mediation

process must be successfully completed within

90 days following the last demand or the

licensee shall promptly employ one of the

other escape procedures contained in this

section. Payment for mediation will be as

agreed to in writing by the parties. The

department may adopt rules to implement this

section.

If the licensee promptly employs one of the

escape procedures contained herein, and if he

abides by the order or judgment resulting

therefrom, no administrative complaint may be

filed against the licensee for failure to

account for, deliver, or maintain the

escrowed property.

26. Rule 61J2-10.032(1), Florida Administrative Code,

states in pertinent part:

(1)(a) A real estate broker, upon receiving

conflicting demands for any trust funds being

maintained in the broker's escrow account,

must provide written notification to the

Commission within 15 business days of the

last party's demand, and the broker must

institute one of the settlement procedures as

set forth in s. 475.25(1)(d)1., Florida

Statutes, within 30 business days after the

last demand.

(1)(b) A broker, who has a good faith doubt

as to whom is entitled to any trust funds

held in the broker's escrow account, must

provide written notification to the

Commission within 15 business days after

having such doubt and must institute one of

the settlement procedures as set forth in s.

475.25(1)(d)1., Florida Statutes, within 30

business days after having such doubt. The

determination of good faith doubt is based

upon the facts of each case brought before

the Commission. Based upon prior decisions of

the Commission, good faith doubt shall be

deemed to exist in the following situations:

1. the closing or consummation date of the

sale, lease, or other real estate transaction

has passed, and the broker has not received

conflicting or identical instructions from

all of the parties concerning the

disbursement of the escrowed funds;

2. the closing or consummation date of the

sale, lease, or other transaction has not

passed, but one or more of the parties has

expressed its intention not to close or

consummate the transaction and the broker has

not received conflicting or identical

instructions from all of the parties

concerning disbursement of the escrowed

funds;

27. The $1,000 deposit made by Mr. Wright and placed by

Respondent in his escrow account for the brokerage firm was

escrowed property. Mr. Wright made a demand for the return of

his deposit directed to Respondent. Mr. Cornish asked that the

deposit money be maintained in the escrow account. No evidence

has been presented to establish that Mr. Cornish made a

conflicting demand for the receipt of the escrowed property.

Consequently, it has not been proven that Respondent violated

Rule 61J2-10.032(1)(a), Florida Administrative Code, related to

the failure to comply with notification requirements to

Petitioner and other appropriate disposition (settlement

procedures) in the event that conflicting demands have been made

upon Respondent to disburse the $1,000 deposit he maintained in

the escrow account.

28. As addressed in Rule 61J2-10.32(1)(b)2, Florida

Administrative Code, prior to the date of the sale of the subject

property, Mr. Wright expressed his intention not to consummate

the transaction. Respondent was made aware of that intention.

By inference, Mr. Cornish had a contrary intention.

Consequently, Respondent was presented with a good faith doubt.

Petitioner proved that Respondent violated Rule 61J2-

10.032(1)(b)2, Florida Administrative Code by not notifying

Petitioner within 15 business days after being presented with a

good faith doubt and instituting a settlement in accordance with

475.25(1)(d)1, Florida Statutes, 30 business days after that

occurrence.

29. As related in Rule 61J2-10.032(1)(b )1, Florida

Administrative Code, it has been proven that the consummation

date for the real estate transaction passed. Beyond that date

Mr. Wright had maintained his instructions concerning the

disbursement of the escrowed funds. Respondent was aware of

those instructions. Mr. Wright wanted the deposit returned.

Respondent did not receive identical instructions from Mr.

Cornish concerning the disbursement of the escrowed funds when

compared to the preferred outcome requested by Mr. Wright. Mr.

Cornish wanted the money held in escrow. Therefore, in

accordance with Rule 61J2-10.032(1)(b)1, Florida Administrative

Code, there was good faith doubt concerning the proper

disposition of the escrowed funds. That doubt existed from the

point in time at which Mr. Cornish expressed the desire not to

return the deposit and to hold the deposit in escrow. The exact

date that Mr. Cornish expressed that view is unknown. But it has

been proven that Respondent did not provide written notification

to the Petitioner within 15 days after having a good faith doubt.

Given that Respondent might reasonably believe that he was

relieved of the necessity to provide the written notification to

Petitioner in view of the fact that the Petitioner was already

aware of Mr. Wright's complaint, the need to file written

notification might seem a meaningless gesture. Nonetheless, it

is a requirement that Respondent failed to meet. More

importantly, Respondent failed to institute one of the settlement

procedures set forth in Section 475.25(1)(d)1, Florida Statutes,

within 30 business days after entertaining a good faith doubt.

Thus, Petitioner proved a violation of Rule 61J-10.032(1)(b)1,

Florida Administrative Code.

30. By violating Rule 61J2-10.032(1)(b), Florida

Administrative Code, Respondent has violated Section

475.25(1)(e), Florida Statutes, as alleged in the administrative

complaint. Respondent is subject to discipline in accordance

with Section 475.25(1), Florida Statutes, pursuant to the

guidelines set forth in Rule 61J2-24.001(3), Florida

Administrative Code.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED

That Final Order be entered finding Respondent in violation

of Rule 61J2-10.032(1)(b), Florida Administrative Code, and

Section 475.25(1)(e), Florida Statutes, and imposing a fine of

$1,000 and requiring the Respondent to complete a 30-hour broker

management course within 90 days of issuance of the Final Order.

DONE AND ENTERED this 15th day of July, 1997, in

Tallahassee, Leon County, Florida.

___________________________________

CHARLES C. ADAMS

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(904) 488- 9675 SUNCOM 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 15th day of July, 1997.

COPIES FURNISHED:

Andrea D. Perkins, Esquire

Department of Business and

Professional Regulation

400 West Robinson Street, Suite N-308

Orlando, Florida 32801

William A. Parsons, Esquire

Woerner & Parsons

2001 South Ridgewood Avenue

South Daytona, Florida 32119

Henry M. Solares, Division Director

Division of Real Estate

400 West Robinson Street, Suite N-308

Orlando, Florida 32802-1900

Lynda L. Goodgame, General Counsel

Department of Business and

Professional Regulation

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.