97-002159 Department Of Business And Professional Regulation, Division Of Real Estate vs. Cmt Holding, Ltd., T/A The Prudential Florida Realty; Cmt Holdings, Inc.; And Patricia A. Brotherton Status: Closed Recommended Order on Thursday, November 6, 1997.

Summary: Real estate broker's charge of $110 for document preparation and storage is not fraudulent and not, on basis of this record, a clear violation of Real Estate Settlement Procedures Act.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA DEPARTMENT OF BUSINESS )

AND PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 97-2159

)

CMT HOLDING, LTD., T/A THE )

PRUDENTIAL FLORIDA REALTY; )

CMT HOLDINGS, INC.; and )

PATRICIA A. BROTHERTON, )

)

Respondents. )

___________________________________)

RECOMMENDED ORDER

Robert E. Meale, Administrative Law Judge of the Division of

Administrative Hearings, conducted a formal hearing in this case

on August 21, 1997, in Naples, Florida.

APPEARANCES

For Petitioner : Geoffrey T. Kirk, Senior Attorney

Daniel Villazon, Senior Attorney

Department of Business and

Professional Regulation

Post Office Box 1900

Orlando, Florida 32802-1900

For Respondent: Jeffrey D. Fridkin

Thomas G. Norsworthy

Grant, Fridkin & Pearson, P.A.

Pelican Bay Corporate Centre

5551 Ridgewood Drive, Suite 501

Naples, Florida 34108

STATEMENT OF THE ISSUES

Whether Respondents improperly charged a real estate client

a fee for document preparation and storage and, if so, what

penalty should be imposed .

PRELIMINARY STATEMENT

By Administrative Complaint filed April 18, 1997, Petitioner

alleged that, on October 2, 1995, John Iraci, as buyer, entered

into a contract with Donald J. and Beryl B. Cullette, as sellers,

for the sale of a residential property. The Administrative

Complaint alleges that Respondent CMT Holding, Ltd., which was

the selling broker and escrow agent, sent the closing agent,

attorney Louis X. Amato, a document entitled, "Fund Disbursement

Instructions," which was signed by Respondent Patricia Brotherton

as branch manager.

The Administrative Complaint alleges that the Fund

Disbursement Instructions contained a demand by Respondent CMT

Holding, Ltd. that Mr. Iraci pay it a $110 "Processing and

Documentation Preparation Fee." The Administrative Complaint

alleges that at the time, Respondent CMT Holding, Ltd ., had no

contract or agreement with Mr. Iraci in which he agreed to pay

this fee. The Administrative Complaint alleges that Respondent

CMT Holding, Ltd ., was thus attempting to obtain an improper fee.

The Administrative Complaint alleges that Respondent CMT

Holding, Ltd ., failed to advise Mr. Iraci in a clear & timely

fashion of the existence, amount, and purpose of the $110 fee.

The Administrative Complaint also alleges that Respondent

CMT Holding, Ltd., was trying to obtain an "unearned fee" for

"settlement services," in violation of the Real Estate Settlement

Procedures Act of 1974, 12 United States Code, Sections 2601 et

seq .

The Administrative Complaint alleges that Respondent

Patricia A. Brotherton allegedly aided, assisted, or conspired

with Respondent CMT Holding, Ltd.

Count I of the Administrative Complaint alleges that

Respondent CMT Holding, Ltd., is guilty of making deceptive,

untrue, or fraudulent representations in or related to the

practice of real estate or employing a trick or scheme in or

related to said practice, in violation of Sections 455.227(1)(m)

and 475.25(1)(a), Florida Statutes.

Count II alleges that Respondent CMT Holding, Ltd., is

guilty of fraud, misrepresentation, concealment, false promises,

false pretenses, dishonest dealing by trick, scheme or device,

culpable negligence, or breach of trust or fiduciary duty to a

buyer, in violation of Section 475.25(1)(b), Florida Statutes.

Count III alleges that Respondent CMT Holding, Ltd., is

guilty of violation a duty imposed by law--namely, the Real

Estate Settlement Procedures Act of 1974--in violation of Section

475.25(1) )b), Florida Statutes.

Count IV alleges that Respondent Patricia A. Brotherton is

guilty of aiding, assisting, or conspiring with Respondent CMT

Holding, Ltd., to violate the duties of Sections 475.25(1)(b) and

455.227(1), Florida Statutes.

Count V alleg es that Respondent Patricia A. Brotherton is

guilty of fraud, misrepresentation, concealment, false promises,

false pretenses, dishonest dealing by trick, scheme or device,

culpable negligence, breach of trust, or breach of fiduciary duty

to a buyer, in violation of Section 475.25(1)(b), Florida

Statutes.

Count VI alleges that the Florida Real Estate Commission

entered a final order on July 16, 1996, finding Respondent CMT

Holding, Ltd., guilty of violating Rule 61J2-10.032 and Section

475.25(1)(e). Count VI alleges that Respondent CMT Holding,

Ltd., is thus guilty of being found guilty for a second time of

misconduct warranting suspension or is guilty of a course of

conduct or practices that shows that it is so incompetent,

negligent, dishonest, or untruthful as to jeopardize the money,

property, transactions, and rights of investors or those with

whom it may sustain a confidential relation, in violation of

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

At the hearing, Petitioner called no witnesses and offered

into evidence 11 exhibits. Respondent called one witness and

offered into evidence 10 exhibits. All exhibits were admitted

into evidence.

The court reporter filed the transcript on September 10,

1997.

FINDINGS OF FACT

1. Respondent CMT Holding, Ltd., trading as the Prudential

Florida Realty (CMT), is a limited partnership registered as a

real estate broker, holding license number 0266433. Respondent

CMT Holdings, Ltd., is registered as a real estate broker,

holding license number 0266412.

2. Respond ent Patricia A. Brotherton (Brotherton) is

registered as a real estate broker, holding license number

0601688. At all material times, Brotherton was the Naples branch

manager for CMT. At all material times, Judith Price was a real

estate salesperson employed by CMT.

3. On October 3, John Iraci, as buyer, and Donald J. and

Beryl B. Cullette, as sellers, entered into a contract for the

sale of a condominium for $210,000. The contract acknowledges

that CMT is the selling broker and an unrelated broker is the

listing broker. CMT also executed the contract as the escrow

agent holding the $1000 deposit. The Cullettes signed the

contract on October 3 and counteroffered $210,000, rejecting

Iraci's offer of $200,000. Iraci accepted the counteroffer.

4. Price and CMT entered into an agency agreement with

Iraci the previous month. The Agency Disclosure form that they

signed promised that Price and CMT would make full disclosure to

Iraci.

5. On October 2, Price presented Iraci with a Real Property

Disclosure Statement. She reviewed with him the expenses to be

paid by buyer, including an item identified as "Processing and

document preparation fee." Although the form does not disclose

actual expenses, except for the rate at which statutorily imposed

charges are imposed, Price explained to Iraci that the processing

and document preparation fee was $110 paid to CMT. Iraci

expressed no objection to the charges, and Price prepared the

October 3 sales contract.

6. On January 3, 1996, Respondent sent the closing agent,

attorney Louis X. Amato, a document entitled, "Fund Disbursement

Instructions." The document instructed Amato to divide the

$12,600 real estate commission equally between the two brokers

and pay CMT an additional $110 for a processing and document

preparation fee, which will be a buyer's expense on the closing

statement.

7. Amato refused to add the $110 fee to the closing

statement or charge Iraci for this expense. On January 8, 1996,

Amato sent a letter to Petitioner complaining of this practice.

On the next day, the sale closed without payment of the $110 fee

to CMT. At the closing, Iraci executed a first mortgage note and

lien.

8. Iraci visited Price on the day of the closing to discuss

Amato's refusal to collect this fee. Price said that she would

pay the fee, if Iraci did not. Iraci returned to Price's office

on January 15 and paid the fee.

9. Four months later, Price and CMT sold Iraci's former

condominium. Iraci paid the $110 fee on this transaction. No

litigation or complaint ensued.

10. The purpose of the $110 fee is to compensate CMT for

the costs of preparing and storing documents. There is no

evidence that the fee is disproportionate to the preparation and

storage expenses. On occasions where the $110 fee has been

inadvertently omitted from the closing statement, Price has paid

it herself.

11. Petitioner filed the Administrative Complaint more than

one year after the closing and payment of the fee by Iraci.

CONCLUSIONS OF LAW

12. The Division of Administrative Hearings has

jurisdiction over the subject matter. Section 120.57(1), Florida

Statutes. (All references to Sections are to Florida Statutes.)

13. Section 475.25(1) authorizes the Florida Real Estate

Commission to impose discipline if it finds that a licensee

(a) Has violated any provision of . . .

s. 455.227(1) [or]

(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 him by law or by

the terms of a listing contract . . .; has

aided, assisted, or conspired with any other

person engaged in any such misconduct and in

furtherance thereof . . . .

14. Section 455.227(1)(m) authorizes discipline for

"[m ]aking deceptive, untrue, or fraudulent representations" in

the practice of a profession.

15. Petitioner is required to prove the material

allegations by clear and convincing evidence. Ferris v.

Turlington , 510 So. 2d 292 (Fla. 1987).

16. Petitioner has failed to prove any form of fraud or

culpable negligence by any Respondent. Petitioner has raised a

justiciable issue of fact as to the timeliness of the disclosure

of the $110 fee. Price mentioned this item as she was about to

prepare the contract offer. An earlier disclosure would have

given Iraci a more effective option of taking his business

elsewhere. But the expense was only $110, so a later disclosure

of this relatively small amount was timely, especially where, as

here, the charge appears optional; if the client fails to pay it,

the salesperson pays it.

17. Even if CMT prepared no documents in this case, the fee

is reasonably related to CMT's obligation to maintain and access

old records. Petitioner presented no evidence that the

commission was excessive or that CMT necessarily under the law,

must absorb this expense in its commission.

18. The record does not establish a violation of any

provision of the federal Real Estate Settlement Procedures Act

(RESPA).

19. The $110 fee seems to be for "settlement services," as

defined in 12 United States Code (U.S.C.), Section 2602(3) and 24

Code of Federal Regulations(C.F.R.), Section 3500.2(b)(15). The

kickback prohibitions of 12 U.S.C. Section 2607(b) and 24 C.F.R.

Section 3500.14(c) do not apply to payments "for services

actually performed."

20. Minimal preparation and storage services might preclude

liability for nonstatutory fraud, but still constitute a RESPA

violation. RESPA demands closer scrutiny of the actual

preparation and storage services performed by CMT, especially

whether CMT's services duplicate the services of the closing

attorney and lender in document preparation and storage.

Petitioner has raised a justiciable fact question regarding a

possible RESPA violation, but the record is not sufficiently

developed to find that any Respondent actually committed such a

violation.

21. Respondents claim that RESPA has a one-year

jurisdictional statute of limitations. While this is true for

private actions, certain federal and state officials (not

Petitioner) may charge Respondents with violations up to three

years after the offense, as provided by 12 U.S.C. Section 2614.

22. Because Petitioner raised a justiciable issue as to the

RESPA violation and the timeliness of Price's disclosure of the

$110 fee, Respondents' claim for attorneys' fees is denied.

RECOMMENDATION

It is

RECOMMENDED:

That the Florida Real Estate Commission enter a final order

dismissing the Administrative Complaint against Respondents and

denying their request for attorney's fees.

DONE AND ORDERED this 6th day of November, 1997, in

Tallahassee, Leon County, Florida.

___________________________________

ROBERT E. MEALE

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 6th day of November, 1997.

COPIES FURNISHED:

Geoffrey T. Kirk, Esquire

Daniel Villazon, Esquire

Division of Real Estate

Department of Business and

Professional Regulation

Post Office Box 1900

Orlando, Florida 32802-1900

James H. Gillis, Esquire

Gillis and Wilsen

Suite B

1415 East Robinson Street

Orlando, Florida 32801

Jeffrey D. Fridkin, Attorney

Thomas G. Norsworthy, Attorney

Grant Fridkin & Pearson, P.A.

Pelican Bay Corporate Centre

5551 Ridgewood Drive, Suite 501

Naples, Florida 34108

Lynda L. Goodgame, General Counsel

Department of Business and Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399-0792

Henry M. Solares, Division Director

Division of Real Estate

Department of Business and Professional Regulation

Post Office Box 1900

Orlando, Florida 32802-1900

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.