99-003075 Department Of Business And Professional Regulation, Division Of Real Estate vs. Larry L. Morris And Investment Marketing, Inc. Status: Closed Recommended Order on Wednesday, February 21, 2001.

Summary: Real estate license discipline hearing for false advertising and failure to maintain appropriate escrow account records.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 99-3075

)

LARRY L. MORRIS AND INVESTMENT )

MARKETING, INC., )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative

Hearings, by its designated Administrative Law Judge,

Jeff B. Clark, held a formal hearing in the above-styled case on

November 9, 2000, in Shalimar, Florida.

APPEARANCES

For Petitioner: Tonya Davis, Esquire

Nancy P. Campiglia, Esquire

Department of Business and

Professional Regulation

400 West Robinson Street

Hurston Building, Suite N308

Orlando, Florida 32801-1772

For Respondents: Steven W. Johnson, Esquire

1801 East Colonial Drive

Suite 101

Orlando, Florida 32803

STATEMENT OF THE ISSUES

1. Whether the real estate license of Respondent,

Larry L. Morris, should be disciplined for:

a. Advertising property or services in a manner which is

fraudulent, false, deceptive, or misleading in form or content

in violation of Subsection 475.25(1)(c), Florida Statutes

(1998);

b. Failure to prepare required written monthly escrow

statement-reconciliations in violation of Rule 61J2-14.012(2)

and (3), Florida Administrative Code, and, therefore, in

violation of Subsection 475.25(1)(e), Florida Statutes (1998);

c. Using a trade name without proper registration in

violation of Rule 61J2-10.034, Florida Administrative Code, and,

therefore, in violation of Subsection 475.25(1)(e), Florida

Statutes (1998); and

d. Depositing or intermingling personal funds with funds

being held in escrow or trust or on condition in violation of

Rule 61J2-14.008(1)(c), Florida Administrative Code, and,

therefore, in violation of Subsection 475.25(1)(e), Florida

Statutes (1998);

2. Whether the real estate license of Respondent,

Investment Marketing, Inc., a Florida Corporation, should be

disciplined for:

a. Failure to prepare required written monthly escrow

statement-reconciliations in violation of Rule 61J2-14.012(2)

and (3), Florida Administrative Code, and, therefore, in

violation of Subsection 475.25(1)(e), Florida Statutes (1998);

and

b. Depositing or intermingling personal funds with funds

being held in escrow or trust or on condition in violation of

Rule 61J2-14.008(1)(c), Florida Administrative Code, and,

therefore, in violation of Subsection 475.25(1)(e), Florida

Statutes (1998).

PRELIMINARY STATEMENT

On May 20, 1999, Petitioner, Department of Business and

Professional Regulation, Division of Real Estate, filed an

Administrative Complaint against Respondents, Larry L. Morris,

and Investment Marketing, Inc., a Florida Corporation. A

request for formal hearing was received by the Division of

Administrative Hearings on July 19, 1999.

The case was set for final hearing on September 17, 1999.

An Order granting Respondent's motion to continue was entered on

September 9, 1999, placing the case in abeyance at the

suggestion of the parties that they were negotiating a

settlement.

On November 12, 1999, the Administrative Law Judge was

advised that the parties were unable to settle, and the case was

rescheduled for final hearing on March 8, 2000.

On February 23, 2000, a Joint Motion to Hold Case in

Abeyance was filed again suggesting that the parties were

"negotiating a stipulated settlement." The case was again

placed in abeyance by Order dated February 25, 2000.

On May 23, 2000, Petitioner filed a Status Report

indicating that a settlement had been negotiated by the parties

and advising that the settlement would be forwarded to the Real

Estate Commission.

In an August 1, 2000, Status Report, Petitioner advised

that the "parties were unable to reach an agreement." The case

was rescheduled for final hearing on November 9, 2000.

Petitioner presented three witnesses and offered five

exhibits (Petitioner's Exhibits 1, 3, 5, 6 and 7) which were

admitted into evidence. Respondents presented two witnesses and

offered three exhibits which were admitted into evidence.

Petitioner's Exhibit No. 5, a composite of 16 pages of records

of the Division of Real Estate pertaining to Case Nos. 94-80988

and 94-81264, Department of Business and Professional

Regulation, Division of Real Estate v. Larry L. Morris and

Investment Marketing, Inc. , was admitted into evidence as a

result of Respondent, Larry L. Morris, having volunteered on

direct examination that he had a previous problem with his

escrow accounts.

The Transcript of the hearing was filed with the Division

of Administrative Hearings on January 8, 2001. The parties

jointly moved to extend the time to file proposed recommended

orders until February 9, 2001. The Motion was granted. Both

parties filed Proposed Recommended Orders which were received on

February 9, 2001.

FINDINGS OF FACT

Upon consideration of oral and documentary evidence

received at the hearing, the following relevant findings of fact

are made:

1. Petitioner, Department of Business and Professional

Regulation, Division of Real Estate, is the State of Florida

agency which licenses and regulates real estate professionals

pursuant to Section 20.165, Florida Statutes (1998), and

Chapters 120, 455, and 475, Florida Statutes (1998), and the

rules in the Florida Administrative Code promulgated pursuant

thereto.

2. Respondent, Larry L. Morris (hereinafter "Morris"), is

now, and was at all times material hereto, a licensed real

estate broker in the State of Florida holding License

No. 0061891. Respondent, Investment Marketing, Inc., a Florida

Corporation (hereinafter "Investment Marketing"), is now, and

was at all times material hereto, a licensed real estate broker

holding License No. 0233721. At all times material hereto,

Morris was an officer of Investment Marketing and its

qualifying broker.

4. Morris has agreed by stipulation that he is a real

estate broker and subject to the jurisdiction of Petitioner

during the period of the acts alleged in the Administrative

Complaint filed in this case.

5. In 1989, a company that Morris had an interest in,

Sunset Harbour Condominium Development Company, purchased 57

condominium units in the 72-unit Sunset Harbour Condominium

(hereinafter "Condos"). Subsequent to the initial purchase of

57 units, Sunset Harbour Condominium Development Company

acquired 10 additional units which were in foreclosure.

6. Sunset Harbor Condominium Development Company

subsequently sold all units it owned in Condos. Morris

continues to own one unit in Condos.

7. Respondents managed Condos and were sales and rental

agents for Condos pursuant to a verbal agreement with the Sunset

Harbour Condominium Association.

8. When Condos was acquired, Morris either personally or

through an entity in which he had ownership, acquired a tract of

land contiguous to Condos on which Sunset Harbour Villas

(hereinafter "Villas") was developed by Morris in 1987-1989.

9. Respondents were rental and sales agents for Villas.

10. Condos had the following amenities which are rele vant

to this case: a swimming pool, a gazebo, and a 200-foot fishing

pier. Villas has the following amenities which are relevant to

this case: a swimming pool and a clubhouse. Morris testified

that he hoped to "integrate the amenities between the two

condominium properties." According to Morris, "the Board of

Directors has the right to do that [a cross-use of amenities] on

a year-to-year basis."

13. Morris had brochures printed in 1997 for Villas which

advertised the following amenities: Two swimming pools;

Clubhouse; Gazebo; and, a 200-foot pier.

14. Morris testified that when he realized that there

would be no integration or cross-use of the amenities of Condos

and Villas which made the brochure inaccurate, he redacted,

using a "magic marker," the inappropriate amenities from the

brochure.

15. In 1997 or 1998, during the construction start-up of

Villas, David Woodard obtained an unredacted copy of the

brochure at Morris' office. Woodard did not see any redacted

brochures.

16. In January 1999, Ben jamin Clanton, a Division of Real

Estate Investigator, obtained an unredacted copy of the brochure

from Morris' office. He also saw redacted brochures in the

office.

17. Gene Daughtry, an employee of Investment Marketing,

testified that [at some non-specified date] he redacted about

2500 out of 3000 - 4000 brochures and that he never gave a

prospective buyer a brochure which had not been redacted.

18. On January 27, 1999, Mr. Clanton performed an audit on

Respondents' security account (escrow/trust account). Morris

made the requisite information available to him although the

escrow liability lists had to be reconstructed. Mr. Clanton

discovered that the monthly reconciliations had been done

improperly.

19. The trust liability account balance was $3,400 .31; the

reconciled bank balance was $4,320.31. There was $920.50 in

excess funds in the escrow account.

20. On February 10, 1999, Morris wrote Mr. Clanton a

letter in which he stated that the excess funds "came from

monies that were paid to Investment Marketing for utility bills,

etc., that were paid for owners to keep their utilities from

being disrupted, and Investment Marketing was never reimbursed.

The other overage amounts came from unpaid rental commissions."

21. Morris acknowledged that the mont hly escrow

reconciliations were not done exactly right and testified that,

"I'm guilty."

22. On April 26, 1994, Florida Department of Business and

Professional Regulation, Division of Real Estate, filed an

Administrative Complaint against Larry L. Morris and Investment

Marketing, Inc., which alleged that escrow account

irregularities had been discovered during a February 4, 1994,

audit (Case Nos. 94-80988, 94-81264).

23. On July 14, 1994, Florida Department of Business and

Professional Regulation, Division of Real Estate, and

Larry L. Morris and Investment Marketing, Inc., entered into a

stipulation which stated inter alia :

5. Respondents neither admit nor deny the allegations

contained in the Administrative Complaint, nor that

if true, they support a finding of a violation of

the Real Estate License Law.

6. Respondents shall not in the future violate

Chapters [sic] 455, Florida Statutes, or the Real

Estate License Law, or Rules promulgated pursuant

thereto.

7. Respondent Larry L. Morris shall be fined $3,000.

The fine shall be made payable to the Department of

Business and Professional Regulation, Division of

Real Estate, within thirty (30) days from the date

of filing of the Final Order, or the Respondent's

licenses, registrations, certificates, and permits

shall be suspended until such fine is paid. This

suspension period shall not exceed ten years.

8. Respondent Larry L. Morris shall provide original

evidence of having satisfactorily completed a 30-

hour broker management post-licensure education

course within one year. These education hours are

in addition to the hours required to maintain your

real estate license. Should these education hours

not be completed within the required one-year

period all Respondent's licenses, registrations,

certificates, and permits shall be suspended until

satisfactory evidence that such education hours are

successfully completed and that the original grade

report from the real estate school has been

received by the Florida Division of Real Estate.

9. Respondents Larry L. Morris and Investment

Marketing, Inc., shall be reprimanded.

* * *

12. The action reflected in the Final Order shall be

published in the FREC News and Report as follows:

Destin: Larry L. Morris; broker:

Reprimanded; fined $3,000; 30 hr. bk.

mgmt. course within 1 yr.: Investment

Marketing, Inc.: Reprimanded: failed to

maintain sufficient funds in escrow

account; failed to properly prepare the

required written monthly escrow

statement-reconciliations.

24. On December 3, 1998, th e following advertisement

appeared in the Pensacola News-Journal classified advertising

section:

NAVARRE BEACH

Waterfront and Waterview Condos for Sale and

Lease. Sale prices starting at $68,900.

Long and short term rentals also available.

Pool, fishing pier, gazebo, and clubhouse

Sunset Villas Development Co. 800-939-1887

25. Morris testified that he believed the name Sunset

Villas Development Company was registered with the Florida Real

Estate Commission.

26. Morris testified that the errors made i n the

December 3, 1998, ad were made by the Pensacola News-Journal .

The newspaper failed to include "Investment Marketing, Inc.",

but included Investment Marketing's broker's phone number.

Morris maintains that this ad is for both Villas and Condos.

2 7. Subsequent to the January 27, 1999, audit, Morris made

changes in his bookkeeping procedures. Mr. Clanton conducted a

later audit which revealed appropriate escrow account

management.

CONCLUSIONS OF LAW

28. The Division of Administrative Hearings has

jurisdiction over the parties and the subject matter of this

cause pursuant to Subsection 120.57(1) and Section 455.225,

Florida Statutes.

29. License revocations and discipline procedures are

penal in nature. Petitioner must demonstrate the truthfulness

of the allegations in the Administrative Complaint dated May 20,

1999, by clear and convincing evidence. Department of Banking

and Finance v. Osborne Stern and Company , 670 So. 2d 932 (Fla.

1996); Ferris v. Turlington , 510 So. 2d 292 (Fla. 1987).

30. Th e "clear and convincing" standard requires:

[T]hat the evidence must be found to be

credible; the facts to which the witnesses

testify must be distinctly remembered; the

testimony 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 a firm belief or

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).

31. Petitioner must set forth the charges against

Respondent with specificity, carrying the burden of proving each

charge, and in the final order set forth explicit findings of

fact and conclusions of law addressing each specific charge.

Davis v. Department of Professional Regulation , 457 So. 2d 1074

(Fla. 1st DCA 1984); Lewis v. Department of Professional

Regulation , 410 So. 2d 593 (Fla. 2d DCA 1982).

32. Petitioner has alleged that Morris is guilty of having

violated the following Florida Statutes and Florida

Administrative Code Rules:

a. Count I. Subsection 475.25(1), Florida Statutes

(1998):

(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:

* * *

(c) Has advertised property or services in

a manner which is fraudulent, false,

deceptive, or misleading in form or content.

* * *

(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 chapter 455.

b. Count II. Rule 61J2-14.012(2) and (3), Florida

Administrative Code:

(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.

c. Count IV. Rule 61J2-10.034, Florida Administrative

Code:

An individual broker, partnership or

corporation may use a trade name and, if so,

it must be disclosed upon the request for

license, and be placed upon the registration

or license.

d. Count V. Rule 61J2-14.008(1)(c), Florida

Administrative Code:

(1)(a) A "deposit" is a sum of money, or

its equivalent, delivered to a real estate

licensee, as earnest money, or a payment, or

a part payment, in connection with any real

estate transaction named or described in

s. 475.01(1)(a), Florida Statutes, or for

the purpose of obtaining satisfaction,

release, or assignment of mortgages, or quit

claim or other deeds deemed necessary or

desirable in acquiring or perfecting the

title to real estate, or assembling interest

therein, or such sum delivered in escrow,

trust or on condition, in connection with

any transaction conducted, or being

conducted, by such licensee within the scope

of Chapter 475, Florida Statutes.

* * *

(c) "Trust" or "escrow" account means an

account in a bank or trust company, title

company having trust powers, credit union,

or a savings and loan association within the

State of Florida. Only funds described in

this rule shall be deposited in trust or

escrow accounts. No personal funds of any

licensee shall be deposited or intermingled

with any funds being held in escrow, trust

or on condition except as provided in Rule

61J2-14.010(2), Florida Administrative Code.

33. Petitioner has alleged that Investment Marketing is

guilty of having violated Rules 61J2-14.012(2) and (3) and

61J2-14.008(1)(c), Florida Administrative Code. These Rules are

set forth hereinabove.

34. Petitioner has proved by clear and convincing evidence

that Morris caused brochures to be printed and that he made some

of the unredacted brochures available to the public which

contained fraudulent, false, deceptive, or misleading

advertising about Villas property.

35. While the information contained in the December 3,

1998, Pensacola News-Journal classified advertisement is clearly

misleading, there is no evidence to refute Morris' testimony

that it was the newspaper's error to fail to include Investment

Marketing in the advertisement. Had Investment Marketing been

included, as it was rental and sales agent for both Condos and

Villas, the advertisement would have been acceptable.

36. Petitioner has proved by clear and convincing evidence

that Morris and Investment Marketing failed to prepare written

monthly escrow statement reconciliations as required by Rule

61J2-14.012(2) and (3), Florida Administrative Code. Respondent

Morris acknowledged this in his testimony.

37. Petitioner has proved by clear and convincing evidence

that Morris and Investment Marketing deposited personal funds

with funds being held in escrow, trust or on condition as

defined in Rule 61J2-14.008(1)(c), Florida Administrative Code.

Morris' undated letter to Fred Clanton (Respondent's Exhibit 3)

acknowledged that "unpaid commissions" were retained in the

escrow account.

38. Petitioner has not proved that Morris used a trade

name without proper registration in violation of

Rule 61J2.10.034, Florida Administrative Code.

39. Chapter 61J2-24, Florida Administrative Code, provides

guidelines for determining penalties when a real estate licensee

is found guilty of violations of Chapters 455 or 425, Florida

Statutes. The discipline urged by counsel for Petitioner is

within appropriate guidelines and, therefore, is recommended.

RECOMMENDATION

Based upon the forego ing Findings of Fact and Conclusions

of Law, it is hereby

RECOMMENDED that Petitioner enter a final order finding

Morris guilty of violating Subsection 475.25(1)(c), Florida

Statutes (1998); Rule 61J2-14.012(2) and (3), Florida

Administrative Code, and, therefore, Subsection 475.25(1)(e),

Florida Statutes (1998); Rule 61J2-14.008(1)(c), Florida

Administrative Code (1998); and, therefore,

Subsection 475.25(1)(e), Florida Statutes (1998); finding that

Morris did not violate Rule 61J2-10.034, Florida Administrative

Code, and, therefore, Subsection 475.25(1)(e), Florida Statutes

(1998); dismissing Count IV of the Administrative Complaint;

finding Investment Marketing guilty of violating

Rule 61J2-14.012(2) and (3), Florida Administrative Code, and,

therefore, Subsection 475.25(1)(e), Florida Statutes (1998), and

Rule 61J2-14.008(1)(c), Florida Administrative Code, and,

therefore, Subsection 475.25(1)(e), Florida Statutes (1998);

imposing a penalty of $1,000 per count, resulting in $3000.00

for Morris and $2,000.00 for Investment Marketing; suspending

Morris' license for one year; and reprimanding Investment

Marketing.

DONE AND ENTERED this 21st day of February, 2001, in

Tallahassee, Leon County, Florida.

_______________ ____________________

JEFF B. CLARK

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 21st day of February, 2001.

COPIES FURNISHED :

Nancy P. Campiglia, Esquire

Department of Business and

Professional Regulation

400 West Robinson Street

Hurston Tower, Suite N308

Orlando, Florida 32801-1772

Steven W. Johnson, Esquire

1801 East Colonial Drive, Suite 101

Orlando, Florida 32803-4820

Herbert S. Fecker, Division Director

Division of Real Estate

Department of Business and

Professional Regulation

Post Office Box 1900

Orlando, Florida 32802-1900

Hardy L. Roberts, III, 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.