98-002722 Division Of Real Estate vs. Noel D. Clark, Jr., And Abc Home Brokers, Inc. Status: Closed Recommended Order on Wednesday, July 28, 1999.

Summary: Petitioner failed to prove material allegation of fraud, breach of fiduciary duty, or failure to comply with a subpoena.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 98-2722

)

NOEL D. CLARK, JR. and )

ABC HOME BROKERS, INC., )

)

Respondents. )

______________________________)

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 98-4081

)

NOEL D. CLARK, JR.; BETSY L. )

BRENNAN; and ABC HOME )

BROKERS, INC., )

)

Respondents. )

______________________________)

RECOMMENDED ORDER

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

Administrative Hearings, conducted the final hearing by

videoconference in Tallahassee, Florida, on May 7, 1999. The

parties, attorneys for the parties, witnesses, and court reporter

participated by videoconference in Fort Myers, Florida.

APPEARANCES

For Petitioner: Geoffrey T. Kirk, Senior Attorney

Division of Real Estate

Department of Business and

Professional Regulation

Post Office Box 1900

Orlando, Florida 32802-1900

For Respondents: Noel D. Clark, pro se

Betsy L. Brennan, pro se

18060 North Tamiami Trail

North Fort Myers, Florida 33917

STATEMENT OF THE ISSUES

The iss ues are whether Respondents failed to comply with the

requirements of keeping and producing records, committed fraud in

any business transaction, and, if so, the penalty.

PRELIMINARY STATEMENT

Petitioner commenced DOAH Case No. 98-2722 by filing, on

May 5, 1998, an Administrative Complaint alleging that Respondent

Noel D. Clark, Jr., is a licensed real estate broker serving as

the qualifying broker of Respondent ABC Home Brokers, Inc., which

is a corporation registered as a Florida real estate broker.

Th e Administrative Complaint alleges that Petitioner's

investigator served a subpoena upon Respondents requiring the

production of depository information in the transaction from

Betty A. Smith, Trustee, to John E. and Elizabeth M. Crawford and

escrow records and monthly reconciliations from October 1, 1997,

through March 27, 1998. This was subpoena number 041706.

The Administrative Complaint alleges that Respondents did

not produce the subpoenaed items on March 31, 1998, except for a

copy of the Crawford contract and incomplete trust account

records.

The Administrative Complaint alleges that another

investigator served two more subpoenas on April 6, 1998, ordering

the production of all bank statements, canceled checks, receipts,

deposit book slips, checkbooks, and reconciliations from

January 1, 1997, through April 7, 1998. These were subpoena

numbers 041707 and 041708.

The Administrative Complaint alleges that Respondents did

not produce the subpoenaed items on April 9, 1998. The

investigator asked Respondent Clark to set an alternative date

for production, but he did not do so.

The Administrative Complaint alleges that Respondents Clark

and ABC Home Brokers failed to prepare the required written

monthly escrow-statement reconciliations, in violation of Section

475.25,(1)(e), Florida Statutes, and Rule 61J2-14.012(2) and (3),

Florida Administrative Code; failed to preserve and make

available to Petitioner all books, records, and supporting

documents and failed to keep an accurate account of all trust

fund transactions, in violation of Section 475.25(1)(e), Florida

Statutes, and Rule 61J2-14.012(1), Florida Administrative Code;

and failed to keep and make available to Petitioner such books,

accounts, and records as would enable Petitioner to determine

whether the broker is in compliance with the provisions of

Chapter 475, Florida Statutes, in violation of Section 475.5015,

Florida Statutes, and thus Section 475.25(1)(e), Florida

Statutes.

Petitioner commenced DOAH Case No. 98-4081 by filing, on

July 9, 1998, an Administrative Complaint alleging that

Respondents Clark and ABC Home Brokers are real estate brokers,

as noted above, and Betsy L. Brennan is a licensed real estate

salesperson.

The Administrative Complaint alleges that, on December 4,

1997, Respondent Brennan, as Trustee of the Driftwood Family

Trust, offered to purchase a mobile home owned by Lauren and

Patricia Hanson. The Administrative Complaint alleges that

Respondent Clark had a verbal listing with Patricia Hanson to

sell the mobile home and informed her that Respondent Brennan

would offer $30,000, less his commission. Although Lauren Hanson

allegedly never signed the contract, Respondent Clark nonetheless

allegedly allowed Charles and Cynthia Harvey to move into the

mobile home.

The Administrative Complaint alleges that Respondents had

offered to sell the Harveys the mobile home for $42,000, despite

the fact that the Hansons had not sold the mobile home. The

Administrative Complaint alleges that the Harveys paid $12,000

down, in the form of a truck and other credits. The

Administrative Complaint alleges that Respondents never advised

the Hansons of the price or terms of the resale to the Harveys.

The Administrative Complaint alleges that Respondent Brennan

tried to void the sale to the Harveys, but Respondents kept

furniture of the Hansons and declined to return the truck to the

Harveys.

The Administrative Complaint alleges that Respondents Clark,

Brennan, and ABC Home Brokers are 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

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

Respondents demanded a formal hearing.

The Administrative Law Judge consolidated the two cases.

At the hearing, Petitioner called six witnesses and offered

into evidence 14 exhibits: Petitioner Exhibits 2-4, 9, 13-14,

16-21, and 23-24. Respondents called four witnesses and offered

into evidence four exhibits: Respondents Exhibits 4, 5, 15, and

16. All exhibits were admitted except Petitioner Exhibit 21 and

Respondents Exhibit 15, which were proffered.

The court reporter filed the Transcript on June 15, 1999.

FINDINGS OF FACT

1. Respondent Noel D. Clark, Jr. (Clark), has been a

licensed real estate broker at all material times. From

August 24, 1994, through November 9, 1997, he was the qualifying

broker for ABC Brokers, Inc. From November 10, 1997, through

April 21, 1998, Clark was the qualifying broker for Respondent

ABC Home Brokers, Inc. (ABC). From April 22, 1998, through the

present, Clark has been an individual real estate broker.

2. ABC was a licensed real estate brokerage corporation

from November 10, 1997, through April 21, 1998. Since April 22,

1998, ABC has not held a valid registration due to the lack of a

qualifying broker.

3. Respondent Betsy L. Brennan (Brennan) has been a

licensed real estate salesperson since December 8, 1997. From

December 8, 1997, through April 13, 1998, she was a salesperson

under ABC. Since April 14, 1998, Brennan has been a licensed

real estate salesperson under Clark.

4. At all material times, Patricia and Lauren Hanson owned

a mobile home located on a rented lot in North Fort Myers. By a

listing agreement entered into in October 1996, the Hansons

listed the home for sale with ABC. The listing price was $34,500

cash.

5. Charles and Cynthia Harvey contacted Brennan and

expressed an interest in purchasing the mobile home. They told

Brennan that they were interested in buying a home after they

sold Mr. Harvey's 1977 Ford dump truck.

6. Brennan and Clark showed them several mobile homes. The

Harveys decided that they wanted to purchase the Hansons' home.

Brennan told the Harveys that she, as Trustee of the Driftwood

Family Trust, would sell them the mobile home after buying it

from the current owner. Most of the beneficiaries of the

Driftwood Family Trust are related to Clark or Brennan.

7. On December 4, 1997, Brennan, as Trustee of the

Driftwood Family Trust, as purchaser, executed an ABC dealer

order form to purchase the Hansons' mobile home for $28,000,

which with tax and miscellaneous items rose to $30,430. On

December 6, 1997, Brennan, as Trustee of the Driftwood Family

Trust, as purchaser, executed an Agreement and Promissory Note

reflecting the same purchase price. ABC faxed these materials to

the Hansons on or about December 6.

8. On December 5, 1997, Brennan, as Trustee of the

Driftwood Family Trust, as seller, and Charles and Cynthia

Harvey, as buyers, entered into an Agreement and Promissory Note

for the purchase and sale of the Hansons' mobile home. The price

was $42,000 with a $12,000 down payment. In the agreement,

Brennan, as Trustee, warrants that she is the lawful owner of the

property with the right to convey it.

9. For the down payment, the Harveys delivered to Brennan

the executed title to the dump truck, which Brennan accepted,

somewhat generously given the value of the truck, in full payment

of the $12,000 down payment. The delivery of the title

certificate did not take place until January 10, 1998, by which

time, probably due to her awareness of problems with the deal,

Brennan decided not to cause the issuance of a new title in her

name.

10. The Harveys began moving into the mobile home on

December 6. The evidence is especially vague as to the dealings

between Respondents and the Hansons during this period of time.

Except for faxing the Driftwood Trust offer to purchase, the

record reveals only that, on or about the day that the Harveys

moved into her mobile home, Patricia Hanson consented to their

doing so.

11. Three or four days later, though, Patricia Hanson's

sister visited the Harveys and told them that her sister had not

sold the mobile home. The Harveys informed her that they had a

binding contract to purchase the mobile home.

12. That evening, the Harveys telephoned Clark. He assured

them that everything would work out. However, the Harveys

refused to pay on the note, and Clark called them and informed

them that he would foreclose.

13. By letter dated January 26, 1998, Brennan, as Trustee,

informed the Harveys that the December 5 agreement was "void ab

initio" because they had induced the agreement through fraudulent

inducements of "their credit and financial situation,

employability and job stability."

14. The January 26 letter states that the December 5

agreement was contingent upon Brennan's closing on the mobile

home with the Hansons and that the Harveys understood that they

were not to disturb the Hansons' property or furnishings until

Brennan acquired the property from the Hansons. The January 26

letter states that the Harveys misrepresented to Brennan that

they had good credit, that Mr. Harvey earned $42 per hour with

the truck, and that Mr. Harvey would earn $15 per hour driving a

dump truck for someone else.

15. The January 26 letter states that Brennan has hired an

attorney to litigate and "will be entitled to an award of costs

and attorney fees since the agreement contains a 'prevailing

party' provision which by its nature survives the voiding of the

agreement." The December 5 agreement contains a provision for

attorneys' fees, although the provision does not appear to

survive its voiding. In any event, the Harveys made no

representations in the Agreement concerning their

creditworthiness, and no misrepresentation concerning

creditworthiness constitutes a breach of the December 5

agreement.

16. Eventually, Brennan offered to rescind the deal and

return to the Harveys their money and truck. They got the truck

back several months later.

17. In the meantime, Mr. Harvey contacted Patricia Hanson,

and they agreed on a lease/purchase arrangement. The Harveys

continue to occupy the mobile home under this arrangement.

18. Analysis of the fraudulent misrepresentations in the

Hanson/Harvey transactions case requires close consideration of

the allegations of the Administrative Complaint in DOAH Case

No. 98-4081.

1. The first material allegation is that Brennan, as

Trustee, offered to purchase the mobile home from the Hansons.

Petitioner has established this fact.

2. The second material allegation is that Clark had a

verbal listing from the Hansons to sell their mobile home.

Petitioner has established this fact by reasonable inference.

3. The third material allegation is that Clark told Hanson

that Brennan would offer $30,000, less the commission.

Petitioner has not established Clark's role in this offer, but

Petitioner has established that Brennan, as Trustee, made such an

offer.

4. The fourth material allegation is that, even though the

Hansons had not agreed to sell, Clark allowed the Harveys to move

into the Hansons' mobile home. Petitioner has established this

fact, but the record reveals that this was with the permission of

Patricia Hanson.

5. The fifth material allegation is that Respondents

"offered" to sell the mobile home to the Harveys for $42,000.

Petitioner has established this fact, but the record reveals that

the Harveys knew that Brennan, as Trustee, was acquiring the

mobile home from a third party. However, this allegation does

not inform Brennan that she is facing a charge of

misrepresentation in the contract, in which she warrants title

that she does not have. This allegation only states that the

"Harveys had been offered the mobile home by the Respondents for

$42,000, despite the fact that a bona fide sale had never taken

place between . . . Brennan and the Hansons."

6. The sixth material allegation is that the Harveys paid

$12,000 down in the form of the truck and other credits.

Petitioner established these facts, except that the value of the

truck was less than $12,000 and no other credits existed.

7. The seventh material allegation is that Respondents did

not advise the Hansons of the price or financing on the Harvey

sale. Petitioner did not establish these facts.

8. The eighth material allegation is that Brennan tried to

void the purported sale, but Respondents kept the Hansons'

furniture and refused to return the truck to the Harveys.

Petitioner established that Brennan tried to void the Harvey

transaction. Petitioner did not establish that Respondents kept

the Hansons' furniture, and the evidence established that

Respondents returned the Harveys' truck. This allegation informs

Brennan that she allegedly committed fraud in trying to void the

transaction without returning the parties to the status quo, but

this allegation does not inform her that she is facing a charge

of misrepresentation for her misstatements in the letter itself.

9. For the reasons stated, Petitioner has failed to prove

the material allegations 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.

10. By subpoena issued March 27, 1998, Petitioner ordered

"Noel D. Clark" and ABC to produce, on the same date, all records

concerning a sale from Betty A. Smith, Trustee, to John E. and

Elizabeth M. Crawford.

11. The copy of the subpoena contains no return of service.

Petitioner's investigator testified that he served the subpoena

on Clark, who is "Noel D. Clark, Jr."

12. Neither Clark nor ABC produced records in connection

with the March 27 subpoena.

13. Justifiably concerned with the enforceability of the

subpoena, Petitioner issued two more subpoenas, both dated

April 6, 1998, to produce documents relating to the Crawford

transaction. One subpoena was directed to Clark and the other to

ABC.

14. The Clark subpoena bears a return of service, but it

shows that the investigator served the subpoena on April 6 on

Brennan, not Clark. The ABC subpoena bears no return of service,

and the investigator who purportedly served the subpoena did not

testify.

CONCLUSIONS OF LAW

33. 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.

All references to Rules are to the Florida Administrative Code.)

34. Section 475.25(1) provides in 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 $1,000 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.

(e) Has violated any of the provisions of

this chapter or any lawful order or rule made

or issued under the provisions of this

chapter or part I of chapter 455.

35. Section 475.5015 provides:

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. Disclosure

documents required under ss. 475.2755,

475.276, 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.

36. Rule 61J2-14.012 provides:

(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 DPR 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.

37. Petitioner must prove the material allegations by clear

and convincing evidence. Department of Banking and Finance v.

Osborne Stern and Company, Inc. , 670 So. 2d 932 (Fla. 1996) and

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

38. Petitioner has failed to prove the material allegations

of the Administrative Complaints.

RECOMMENDATION

It is

RECOMMENDED that the Florida Real Estate Commission enter a

final order dismissing the Administrative Complaints in DOAH Case

Numbers 98-2722 and 98-4081.

DONE AND ENTERED this 28th day of July, 1999, 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

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 28th day of July, 1999.

COPIES FURNISHED:

William Woodyard, General Counsel

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399-0792

Herbert S. Fecker, Division Director

Division of Real Estate

Department of Business and

Professional Regulation

Post Office Box 1900

Orlando, Florida 32802-1900

Geoffrey T. Kirk, Senior Attorney

Division of Real Estate

Department of Business and

Professional Regulation

Post Office Box 1900

Orlando, Florida 32802-1900

Noel D. Clark

Betsy L. Brennan

ABC Home Brokers, Inc.

18060 North Tamiami Trail

North Fort Myers, Florida 33917

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.