98-003870 Division Of Real Estate vs. Tracy Anne Hardman, Ruby Joyce Litton And Carrabelle Realty, Inc. Status: Closed Recommended Order on Thursday, December 31, 1998.

Summary: Where buyer breached contract and made no demand for deposit, realtor is not required to seek Commission disbursement order.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 98-3870

)

TRACY ANNE HARDMAN, RUBY )

JOYCE LITTON, and CARRABELLE )

REALTY, INC., )

)

Respondents. )

________________________________)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case

on November 30, 1998, in Carrabelle, Florida, before Donald R.

Alexander, the assigned Administrative Law Judge of the Division

of Administrative Hearings.

APPEARANCES

For Petitioner: Ghunise Coaxum, Esquire

400 West Robinson Street

Suite N-308

Orlando, Florida 32801-1772

For Respondent: Tracy Ann Hardman, pro se

(Hardman) 865 CC Land Road

Eastpoint, Florida 32328

For Respondents: Ruby J. Litton, pro se

(Litton and Post Office Box 490

Carrabelle) Carrabelle, Florida 32322

STATEMENT OF THE ISSUE

The issue is whether Respondents' real estate licenses

should be disciplined on the ground that Respondents violated a

rule and various provisions within Chapter 475, Florida Statutes,

as alleged in the Administrative Complaint.

PRELIMINARY STATEMENT

This matter began on July 23, 1998, when Petitioner,

Department of Business and Professional Regulation, Division of

Real Estate, issued an Administrative Complaint charging that

Respondents, Tracy Ann Hardman, Ruby Joyce Litton, and Carrabelle

Realty, Inc., all licensed as realtors, had violated a rule and

various provisions within Chapter 475, Florida Statutes, when

they handled a real estate transaction in 1996.

Respondents denied the allegations and requested a formal

hearing under Section 120.569, Florida Statutes, to contest the

charges. The matter was referred by Petitioner to the Division

of Administrative Hearings on August 31, 1998, with a request

that an Administrative Law Judge be assigned to conduct a formal

hearing. By Notice of Hearing dated September 24, 1998, a final

hearing was scheduled on November 30, 1998, in Carrabelle,

Florida.

At final hearing, Petitioner presented the testimony of

Benjamin F. Clanton, an agency investigator. Also, it offered

Petitioner's Exhibits 1-6. All exhibits were received in

evidence. Exhibit 6 is the deposition testimony of Thomas E.

Gavers, the complaining consumer. Respondents Hardman and Litton

testified on their own behalf. Finally, Joint Exhibits 1 and 2

were received in evidence.

The transcript of hearing was filed on December 14, 1998.

Proposed findings of fact and conclusions of law were filed by

Petitioner on December 24, 1998, and they have been considered by

the undersigned in the preparation of this Recommended Order.

FINDINGS OF FACT

Based upon all of the evidence, the following findings of

fact are determined:

1. When the events herein occurred, Respondents, Tracy Anne

Hardman and Ruby Joyce Litton, were licensed as a real estate

salesperson and broker, respectively, having been issued license

numbers 0458811 and 0424762 by Petitioner, Department of Business

and Professional Regulation, Division of Real Estate (Division).

Litton served as the qualifying broker/owner of Respondent,

Carrabelle Realty, Inc., a corporation registered as a real

estate broker and located at 104 West Highway 98, Carrabelle,

Florida. The corporation holds license number 1008111, also

issued by the Division.

2. On December 14, 1995, Thomas E. Gavers, who resides in

East Troy, Wisconsin, executed a contract offering to purchase a

vacant lot on U. S. Highway 98 in Franklin County, Florida, from

John M. Brannen for the price of $22,000.00. After a

counteroffer was made by Brannen raising the price to $25,000.00,

the contract was accepted by Gavers on January 6, 1996. It can

be inferred from the evidence that Gavers was an experienced

investor since he also owned "quite a bit of other property" in

the county.

3. The contract called for Gavers to pay $500.00 as an

earnest money deposit, to be held in escrow by Respondents. The

contract further provided that the transaction "shall be closed

on or before Feb. 15, 1996, unless extended by adding an addendum

to the contract." A special condition added by Gavers provided

that the "contract [is] contingent on [the] lot being buildable

and [the buyer] obtaining [a] permit to fill [the] lot and build

[a] driveway." Finally, paragraph 17 of the contract provided in

part that if the buyer "fails to perform any covenants of this

contract within the time specified, all deposits shall be

forfeited." Hardman was the seller's agent in the transaction.

4. At some point in the process, but probably when the

contract was signed, Gavers sent Hardman a note which asked her

to "[c]heck to see if lot is buildable & permit is okayed to fill

lot & build driveway before spending monies to [sic] survey &

title ins." Although paragraph 16 of the contract clearly

provided that this responsibility fell upon the buyer, Hardman

undertook the process of assisting Gavers since he was then

residing in Wisconsin, and her only means of communicating with

him was by telephone or mail. In doing so, Hardman made clear

that she would assist the buyer as much as possible, but it was

the buyer's responsibility to actually secure the permits.

5. Because of time constraints in attempting to secure the

information necessary to satisfy the special condition, it was

necessary for Gavers to extend the closing date to March 15,

1996. This was accomplished by an addendum to the contract

executed by the parties around February 14, 1996.

6. After expending a considerable amount of time and effort

in assisting Gavers, Hardman eventually obtained most of the

information pertaining to requirements for filling and building

on the lot. She learned, however, that a permit would be

required from the U. S. Army Corps of Engineers in order to fill

the lot. Before that federal agency would even inspect the lot

to see if it was permittable, it was necessary that the lot be

surveyed.

7. Based on the foregoing advice, Hardman ordered a survey

for a cost of $150.00. The survey was performed on or about

February 7, 1996. Although Respondents paid for the survey when

it was performed, they were ultimately reimbursed for this

expense from Gavers' deposit. Hardman did not advise Gavers in

writing that a survey was being ordered; however, Litton believed

that Gavers was notified of such action by telephone, and this

assertion has been accepted. This testimony is especially

credible since Gavers had just authorized Hardman to spend $85.00

to file a septic tank permit application with the County. In

addition, notwithstanding the instructions in his note that

Hardman was not to spend any money until a permit was actually

obtained, Gavers subsequently told Hardman to "proceed" and "keep

going" in her efforts to help him obtain a permit. Therefore,

Hardman was not culpably negligent in ordering the survey, and

she did not breach her trust in the transaction by doing so.

8. After the property was inspected by the federal agency,

Hardman learned that it would be necessary for Gavers to

personally fill out a portion of the application for a permit

showing the type of filling and construction he desired and to

return it with a filing fee to the agency's Jacksonville office.

9. Gavers obtained the necessary documentation for Gavers

to complete, and she filled in a portion of the form. The packet

was then mailed to Gavers on a date not of record, but probably

before March 15, 1996, with instructions that he needed to

complete the application in order to obtain a permit. Gavers

claims that he "wasn't aware of" receiving it, but his testimony

is not found to be credible. He declined to complete the

application, which would have satisfied his contingency request

and allowed the contract to close. From that point on, he also

stopped communicating with Respondents.

10. The time for closing the contract expired on March 15,

1996. Although Gavers had probably breached the contract by that

date by failing to make any reasonable effort to satisfy the

contingency, as required by paragraph 16 of the contract, he

telephoned Hardman on an undisclosed date and asked that she

obtain another extension of time. The seller agreed to a second

extension, and a second addendum to the contract was eventually

prepared and executed by the seller on April 29, 1996, which

extended the closing date to May 31, 1996. The addendum was then

faxed to Gavers for his signature.

11. Although Gavers acknowledged receiving the document, he

says he did not receive it "until it was about ran [sic] out," he

did not want to make a decision on purchasing the property "that

quick," and in any event, it was the realtors' responsibility,

and not his, to obtain the permits. He declined to respond in

any fashion to Respondents.

12. During this same time period, Litton and Hardman

repeatedly attempted to contact Gavers by telephone and mail, and

in March, April, and May they left "numerous" telephone messages

with Gavers' daughter at his Wisconsin home. Although Gavers

says he returned every telephone call, his testimony is not

deemed to be credible, and it is found that he failed to return

any calls. He also claimed that he visited Florida sometime that

spring and spoke to Hardman, and that she was pressuring him into

making a decision. However, Respondents established that Gavers

never returned to Florida to speak with them after the process

began, and their testimony has been accepted on this issue.

13. By this time, the seller's property had been tied up

for many months, and Brannen had another buyer ready to purchase

the property for $10,000.00 more than Gavers had offered. After

hearing nothing from Gavers for months, despite continued efforts

to contact him, in August 1996 Litton mailed Gavers a Release

From Sales Contract, which provided that Gavers would "be

released from Contract For Sale, dated 12-14-95," and that he

understood that he would "forfeit any earnest money deposit [he]

had given." Gavers acknowledged receiving this document, but

like the other messages and packets of documents, he declined to

respond in any fashion.

14. According to Gavers, he had been "patiently" waiting

for a return of his deposit, and that after receiving the

release, he immediately filed a complaint with the Real Estate

Commission (Commission) seeking a return of his money. However,

it was established that his complaint was not filed until almost

two years later. In addition, the evidence shows that Gavers

never once requested that Respondents return his money or even

hinted to them that he thought he was entitled to a refund.

15. Gavers insisted that he "cooperated" with Respondents

and "did everything [he] could" to assist Hardman in securing the

information necessary to satisfy the contingency in the contract.

This assertion has been rejected as not being credible. To the

contrary, Gavers refused to even communicate with Respondents,

and he failed to take even minimal action to satisfy his

responsibility under the contract.

16. On the reasonable belief that Gavers was not making a

claim on his deposit, and that he had failed to fulfill his

obligation under the contract, on September 13, 1998, Litton

issued checks in the amount of $172.73 to Hardman and herself

from Gavers' deposit. A part of that was used to reimburse

Respondents for the expenses incurred in having a survey

performed. The remaining part of the deposit, $172.74, was

issued to the seller on October 21, 1996. In making this

disbursement, there was no intent on the part of Litton and

Carrabelle Realty, Inc. to trick or deceive the buyer, breach

their trust in the transaction, or otherwise commit an unlawful

act.

17. Gavers never made a demand for his deposit at any point

in the process, and he had failed to make a reasonable effort to

satisfy the contingency. Under these circumstances, there was no

reasonable doubt in Litton's mind, nor should she have had one,

as to who was entitled to the $500.00 deposit, and she was not

confronted with conflicting demands for the money. Therefore,

she was under no obligation to send Gavers a letter by certified

mail requesting that he respond within a date certain or that his

deposit would be forfeited. Likewise, there was no

responsibility on Litton to request a disbursement order from the

Commission.

18. After Gavers defaulted on the contract, Brannen sold

his lot to another buyer. The new owner satisfied all

requirements necessary to build on the lot, and he thereafter

built a driveway on the lot and constructed a new dwelling. It

is clear, then, that the lot was "buildable," and a permit could

be obtained "to fill [the] lot and build [a] driveway," which

would have satisfied the contingencies in Gavers' contract.

19. Respondents have never been the subject of prior

disciplinary action. In addition, Hardman and Litton are

associated with a small real estate firm in a small community,

and the imposition of an administrative fine would create a

financial hardship. Finally, throughout this process,

Respondents acted in good faith; they cooperated with the

Division; and they expended considerable time and effort in

attempting to assist a buyer who refused to return calls,

acknowledge mail, or fill out the necessary documentation that

was required to obtain a permit.

CONCLUSIONS OF LAW

20. The Division of Administrative Hearings has

jurisdiction over the subject matter and the parties hereto

pursuant to Sections 120.569 and 120.57(1), Florida Statutes.

21. Because Respondents' professional licenses are at risk,

Petitioner bears the burden of proving by clear and convincing

evidence that the allegations in the complaint are true. See ,

e . g ., Ramsey v. Dep't of Prof. Reg., Division of Real Estate ,

574 So. 2d 291 (Fla. 5th DCA 1991).

22. In the single count involving Hardman, she is charged

with being guilty of "culpable negligence or breach of trust in

any business transaction in violation of s. 475.25(1)(b), Fla.

Stat." Count I is based on the allegation that Hardman ordered a

survey on the property without first determining that the lot was

buildable and permits approved to fill the lot and construct a

driveway.

23. Counts II and III of the complaint charge that Litton

and the corporate licensee are "guilty of failure to provide

written notification to the Commission upon receiving conflicting

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

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

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

the settlement procedures as set forth in s. 475.25(1)(d)1., Fla.

Stat. within 30 busines days after the last demand in violation

of Fla. Admin. Code R. 61J2-10.032(1) and therefore in violation

of s. 475.25(1)(e), Fla. Stat." These counts are based on the

theory that Respondents "were required to notify FREC upon the

failure of the contract to close, which created a good faith

doubt as to whom the escrow deposit should be disbursed, since

Respondent[s] had not received authorization from Gavers."

24. Counts IV and VI allege that Litton and Carrabelle

Realty, Inc., are "guilty of failure to account or deliver funds

in violation of s. 475.25(1)(d)1., Fla. Stat." These counts are

predicated on the theory that Respondents disbursed the escrow

deposit without proper authorization.

25. Finally, Counts V and VII (the latter inadvertently

numbered in the complaint as a second Count V) charge that Litton

and the corporate licensee are "guilty of dishonest dealing by

trick, scheme or device, culpable negligence, or breach of trust

in any business transaction in violation of s. 475.25(1)(b), Fla.

Stat." on the theory that they participated "in the unauthorized

survey that was subsequently paid with the escrow deposit from

Gavers."

26. As to Count I, the more credible evidence shows that

Gavers was orally notified that a survey would be required before

the U. S. Army Corps of Engineers would even inspect the property

to see if a permit could be issued. In addition, the evidence

shows that, notwithstanding his earlier note, Gavers instructed

Hardman to "proceed" and "keep going" with her efforts to assist

him in obtaining a permit. Indeed, Gavers had just authorized

Hardman to pay $85.00 for a septic tank application. Therefore,

by ordering a survey, Hardman was not guilty of culpable

negligence or breach of trust in a business transaction, as

charged in Count I. This evidence also exonerates Litton and

Carrabelle Realty, Inc. from the charge that they participated in

the "unauthorized" survey that was paid for with the escrow

deposit and that they violated Section 475.25(1)(b), Florida

Statutes. Counts V and VII should accordingly be dismissed.

27. The underlying theory for the remaining charges in

Counts II, III, IV, and VI is that if a real estate contract does

not close due to one party's failure to perform, the provisions

of Section 475.25(1)(d)1., Florida Statutes, are automatically

triggered, even where no conflicting demands for the deposit are

made and the realtor entertains no good faith doubt as to whom is

entitled to the deposit. Section 475.25(1)(d)1., however, may be

invoked only under two specific circumstances. If the realtor

"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 the licensee for the

escrowed property," the licensee must then institute the

statutory procedures. These determinations are wholly fact

dependent.

28. In this case, the evidence does not show that

"conflicting demands" were made upon Respondents. Indeed, at no

time did the buyer ever make a demand for his deposit from the

realtor, and he did not even lodge his complaint with the

Commission until two years after he breached the contract. At

the same time, there is not even an inference, much less clear

and convincing evidence, that Respondents had, or should have

had, a reasonable doubt as to what person what entitled to the

deposit. Under this factual setting, Respondents had no

obligation to institute the statutory procedures. Therefore, the

allegations in Counts II, III, IV, and VI must fail and should be

dismissed.

29. Although the undersigned has recommended dismissal of

all charges, Paragraph (4) of Rule 61J2-24.001, Florida

Administrative Code, identifies aggravating and mitigating

circumstances which if present entitle the Commission to deviate

from the suggested disciplinary guidelines. Relevant to this

proceeding are the mitigating circumstances set forth in Finding

of Fact 19, which clearly justify a downward deviation from the

penalty guidelines, assuming arguendo that a statute had been

violated.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that the Florida Real Estate Commission enter a

Final Order dismissing the administrative complaint, with

prejudice.

DONE AND ENTERED this 31st day of December, 1998, in

Tallahassee, Leon County, Florida.

___________________________________

DONALD R. ALEXANDER

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 31st day of December, 1998.

COPIES FURNISHED:

James Kimbler, Acting Director

Division of Real Estate

Post Office Box 1900

Orlando, Florida 32802-1900

Ghunise Coaxum, Esquire

400 West Robinson Street

Suite N-308

Orlando, Florida 32801-1772

Tracy Ann Hardman

865 CC Land Road

Eastpoint, Florida 32328

Ruby J. Litton

Post Office Box 490

Carrabelle, Florida 32322

Lynda L. Goodgame, Esquire

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 Florida Real

Estate Commission.