02-000138PL Department Of Business And Professional Regulation, Division Of Real Estate vs. Wayne Wagie Status: Closed Recommended Order on Tuesday, July 9, 2002.

Summary: Broker guilty of culpable negligence in allowing an unlicensed person to issue escrow checks without sufficient funds and other related offenses; $5,000 fine and three-year suspension.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 02 - 0138PL

)

WAYNE WAGIE, )

)

Respondent. )

________________ ______________)

RECOMMENDED ORDER

Robert E. Meale, Administrative Law Judge of the Division

of Administrative Hearings, conducted the final hearing in

Miami, Florida, on May 1, 2002.

APPEARANCES

For Petitioner: Juana Carstarphen Watkins

Senior Attorney

Department of Business and

Professional Regulation

Division of Real Estate

400 West Robinson Street

Orlando, Florida 32 801

For Respondent: Wayne Wagie, pro se

11900 North Bayshore Drive, Unit No. 5

Miami, Florida 33181

STATEMENT OF THE ISSUES

The issues are whether Respondent is guilty of issuing

checks from his escrow acco unt without sufficient funds so as to

constitute culpable negligence, breach of trust,

misrepresentation, or concealment, in violation of Section

475.25(1)(b), Florida Statutes; failing to reconcile escrow

accounts, in violation of Section 475.25(1)(e) and (k), Florida

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

employing an unlicensed person, in violation of Section

475.42(1)(c), Florida Statutes; failing to maintain business

records, in violation of Section 475.5015, Florida Statutes; and

violating a lawful order of the Florida Real Estate Commission

by failing to pay a citation within the required time, in

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

Respondent is guilty of any of these allegations, an additional

issue is the penalty that should be imposed.

PRELIMINARY STATEMENT

By Amended Administrative Complaint dated September 20,

2001, Petitioner alleged that Respondent is a licensed real

estate broker and served as the qualifying broker for Express

Realty and Investment, Inc.

The Amended Administrative Complaint alleges that on

July 15, 1999, Respondent's unlicensed employee, Novellete

Hanse, issued two checks to Fidelity Title Company on the

account of Express Realty and Investment, Inc. The Amended

Administrative Com plaint alleges that these checks were in the

amounts of $5940 and $12,229.08 and were issued in connection

with the closing of certain property known as 6360 Southwest

23rd Street in Miramar. The Amended Administrative Complaint

alleges that Respondent's escrow account had insufficient funds

to pay these checks, and Respondent did not cover the checks

until eight days after the closing.

The Amended Administrative Complaint alleges that on

August 11, 1999, Petitioner's investigator performed an audit of

Re spondent's escrow account and found an overage of $7225.52.

The Amended Administrative Complaint alleges that, in response

to the investigator's request, Respondent failed to produce

records relating to the above - described closing and has never

produced t hese records. The Amended Administrative Complaint

alleges that Respondent failed to give the appropriate notices

and disclosures, and, on August 23, 1999, Petitioner's

investigator issued Respondent a citation requiring payment

within 60 days. The Amend ed Administrative Complaint alleges

that Respondent paid the citation on December 23, 1999.

The Amended Administrative Complaint alleges that

Respondent admitted during the investigation that Ms. Hanse was

performing real estate services for Express Realt y and

Investment, Inc., while unlicensed.

The Amended Administrative Complaint alleges that on

October 20, 1999, Respondent facilitated a sale and purchase

contract between Mr. Rowland, as seller, and Mr. and

Ms. Thompson, as buyers, for property known as 850 Southwest 9th

Avenue in Hallandale. The Amended Administrative Complaint

alleges that Ms. Hanse showed the property to the Thompsons,

prepared the contract, and negotiated the counteroffers.

The Amended Administrative Complaint alleges that

Responde nt resigned as broker of record for Express Realty and

Investment, Inc., on January 28, 2000.

Count I alleges that Respondent issued escrow account

checks without sufficient funds so as to constitute culpable

negligence, breach of trust, misrepresentati on, or concealment,

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

Counts II and IV allege that Respondent failed to reconcile

escrow accounts, in violation of Section 475.25(1)(e) and (k),

Florida Statutes, and Rule 61J2 - 14.012, Florida Administ rative

Code.

Count III alleges that Respondent employed an unlicensed

person, in violation of Section 475.42(1)(c), Florida Statutes.

Count V alleges that Respondent failed to maintain business

records, in violation of Section 475.5015, Florida Statutes.

Count VI alleges that Respondent violated a lawful order of

the Florida Real Estate Commission by failing to pay a citation

within the required time, in violation of Section 475.25(1)(e),

Florida Statutes.

The Amended Administrative Complaint seeks vari ous

penalties ranging from a reprimand through revocation, as well

as the costs of the investigation.

At the hearing, Petitioner called two witnesses and offered

into evidence six exhibits: Petitioner Exhibits 1, 3, 5 - 7, and

9. Respondent called one w itness and offered into evidence no

exhibits. All exhibits were admitted except Petitioner Exhibits

6 and 7, which were admitted only to show what the investigator

found.

The court reporter filed the transcript on May 23, 2002.

Petitioner filed its Prop osed Recommended Order on June 11,

2002.

FINDINGS OF FACT

1. Respondent became a licensed real estate salesperson in

1987. The following year, he became a licensed real estate

broker, and he has remained a broker continuously since that

time. From Sep tember 30, 1996, through January 30, 2000,

Respondent was the qualifying broker of Express Realty and

Investments, Inc. (Express Realty).

2. At no time relevant to this case was Novellete Faye

Hanse a Florida - licensed real estate broker or real estate

sal esperson. At all relevant times, Ms. Hanse was the office

manager of Express Realty.

3. Respondent formed Express Realty in 1995. Respondent

was the sole director and president. Ms. Hanse's son was an

officer of Express Realty from the time of its form ation.

4. Respondent met Ms. Hanse in 1991. She informed

Respondent that she was a licensed mortgage broker. Respondent

and Ms. Hanse agreed in late 1991 to form a joint real

estate/mortgage broker operation in a single office. However,

when Hurricane Andrew struck in 1992, Respondent, who has been a

licensed general contractor since 1978, engaged exclusively in

construction until 1995.

5. Respondent formed Express Realty to pursue the prior

plan of a joint real estate/mortgage broker operation. The t wo

businesses occupied an office building owned by Ms. Hanse, who

did not charge Respondent's business any rent. The address was

6306 Pembroke Road in Miramar.

6. Express Realty served as an escrow agent in a contract

dated May 9, 1999, for the sale and purchase of real property

located at 6360 Southwest 23rd Street in Miramar. In this

capacity, Express Realty, held various funds in escrow for the

closing.

7. For the closing, Express Realty issued two checks

payable to the closing agent, totaling $19, 169.08, and drawn on

its escrow account. The checks, which are dated July 15, 1999,

and signed by Ms. Hanse, bear the name, "Express Realty &

Investments, Inc. Escrow Account" and bear the address 6306

Pembroke Road in Miramar. The bank failed to pay the se checks

due to insufficient funds.

8. After receiving a complaint that Express Realty had

failed to produce these escrow funds at the closing,

Petitioner's investigator conducted an audit of Respondent's

escrow account. At the audit, which took place the day prior to

the day scheduled, the investigator found Ms. Hanse, but not

Respondent, at the Express Realty office. Despite repeated

requests on and after the day of the office visit, the

investigator could not obtain relevant records from Ms. Hanse or

Respondent concerning the real estate transaction for which

Express Realty had issued escrow checks with insufficient funds.

9. On August 23, 1999, the Florida Real Estate Commission

issued a citation to Respondent at 6306 Pembroke Road in

Miramar. Th e citation was served on Respondent within one week

of the date of issuance.

10. The $100 - citation was for the failure to give the

required disclosure or notice in a real estate transaction. The

citation gave Respondent 30 days to contest the citation or 60

days to pay the citation. After the deadline, the investigator

contacted Respondent and asked him about the citation.

Respondent stated that he had forgotten about it. When

Respondent still failed to pay the citation, the investigator

called again, and Respondent stated that he had mailed the

money, but it had been returned due to a faulty address.

Respondent paid the citation approximately four months after it

had been served on him.

11. Shortly after Respondent belatedly paid the citation,

Pe titioner received another complaint concerning a contract for

the sale and purchase of real property located at 850 Southwest

9th Avenue in Hallandale. In this transaction, Ms. Hanse

represented herself to be a licensed real estate broker, showed

the prop erty to prospects, and accepted $5000 in escrow on

behalf of Express Realty.

12. In July 2000, Petitioner's investigator conducted an

audit of Express Realty's escrow account. Again, the

investigator was unable to find any documents by which he could

und ertake an independent reconciliation of the account or

otherwise document the role of Express Realty in the subject

transaction.

13. At the hearing, Respondent claimed that he was unaware

that Ms. Hanse had been conducting real estate business without

his authority in the name of Express Realty. Although he

admitted that she was an employee of Express Realty, he

disclaimed any knowledge that she had removed him from the

escrow account and otherwise taken over the management of the

real estate broker compa ny. However, Respondent could not

explain why, after his claimed discovery of these misdeeds in

the summer of 1999, he did nothing to prevent Ms. Hanse from

continuing to use Express Realty as the means by which to

conduct unlicensed real estate activitie s, as she did a few

months later. Under the circumstances, Petitioner proved that

Respondent was at all times aware that Ms. Hanse was conducting

unlicensed real estate activities through Express Realty.

CONCLUSIONS OF LAW

14. The Division of Administrat ive Hearings has

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

Florida Statutes. (All references to Sections are to Florida

Statutes.)

15. Section 475.25(1)(b), (e), and (k) states:

The commission may deny an application for

licensure, regis tration, 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 administra tive 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, concealme nt, 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

l aw 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; tha t 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 viol ated 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.

(k) Has failed, if a broker, to immediately

place, upon receipt, any money, fund,

deposit, check, or draft entruste d to her or

him by any person dealing with her or him as

a broker in escrow with a title company,

banking institution, credit union, or

savings and loan association located and

doing business in this state, or to deposit

such funds in a trust or escrow acc ount

maintained by her or him with some bank,

credit union, or savings and loan

association located and doing business in

this state, wherein the funds shall be kept

until disbursement thereof is properly

authorized; or has failed, if a salesperson,

to imm ediately place with her or his

registered employer any money, fund,

deposit, check, or draft entrusted to her or

him by any person dealing with her or him as

agent of the registered employer. The

commission shall establish rules to provide

for records to be maintained by the broker

and the manner in which such deposits shall

be made.

16. Section 475.42(1)(c) provides:

No broker shall employ, or continue in

employment, any person as a salesperson who

is not the holder of a valid and current

license as sal esperson; but a license as

salesperson may be issued to a person

licensed as an active broker, upon request

and surrender of the license as broker,

without a fee in addition to that paid for

the issuance of the broker's active license.

17. Section 475.50 15 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

l east 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 a re 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 th e 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 a ny 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 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.

18. Rule 61J2 - 14.012, Florida Administrative Code,

provides:

61J2 - 14.012 Broker's Records.

(1) A broker who receives a deposit as

previously defined shall preserve and make

available to the BPR, or its autho rized

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

ea ch 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, pendi ng

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), th e 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 reconcil e 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). Wh enever 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 co rrective action taken.

19. 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).

20. Petitioner has proved Count I of the Amended

Administrative Complaint. Respondent is guilty of culpable

negligence in the issuance of checks from his escrow account

without sufficient funds, in violation of Section 475.25(1)(b).

Respondent's claims of ignorance and fraud are rebutted

factually by his failure to take any corrective action after the

summer of 1999 -- when he could no longer deny knowledge of

Ms. Hanse's actions -- and legally by the nondelegable nature of

this duty regarding his esc row account.

21. Petitioner has proved Counts II and IV of the Amended

Administrative Complaint. Respondent is guilty of failing to

properly reconcile his escrow accounts, in violation of Rule

61J2 - 14.012, Florida Administrative Code, and Section

475.25( 1)(e) and (k). Respondent's claims of ignorance and

fraud are rebutted factually and legally for the reasons stated

in the preceding paragraph.

22. Petitioner has proved Count III of the Amended

Administrative Complaint. Respondent is guilty of employin g an

unlicensed salesperson to perform activities requiring a

license, in violation of Section 475.52(1)(c). Respondent's

claims of ignorance and fraud are rebutted factually and legally

for the reasons stated in the preceding paragraph.

23. Petitioner h as failed to prove Count V, on the one

hand, and Counts II and IV, on the other hand, largely overlap

because the failure to reconcile the escrow account is largely

driven by an absence of records with which to perform a

reconciliation.

24. Petitioner has proved Count VI of the Amended

Administrative Complaint. Respondent did not timely pay the

$100 citation, in violation of Section 475.25(1)(e).

25. Rule 61J2 - 24.001, Florida Administrative Code, sets

forth the disciplinary guidelines for most of the vio lations.

For a violation of Section 475.25(1)(b) in the form of culpable

negligence, Rule 61J2 - 24.001(c) provides that the usual

penalties range from $1000 to a one - year suspension. For a

violation of Section 475.25(1)(e), Rule 61J2 - 24.001(f) provides

th at the usual penalties range from a fine of $1000 to an eight -

year suspension. For a violation of Section 475.25(1)(k), Rule

61J2 - 24.001(k) provides that the usual penalties range from a

90 - day suspension and $1000 fine to revocation. For a violation

of Section 475.42(1)(c), Rule 61J2 - 24.001(y) provides that the

usual penalties range from a 90 - day suspension and $1000 fine to

a two - year suspension. The rules do not expressly provide for a

usual range of penalties for a failure to maintain business

record s.

26. In its proposed recommended order, Petitioner seeks a

$1000 fine and three - year suspension. Although the remedy

imposed cannot be greater than that sought in an administrative

complaint, see, e.g. , Beverly Enterprises - Florida, Inc. v.

Agency for H ealth Care Administration , 710 So. 2d 106 (Fla. 2d

DCA 1998), no judicial authority extends such a principle to the

remedy sought in a proposed recommended order. As noted above,

the Amended Administrative Complaint seeks penalties up through

revocation.

27. At all material times, Respondent knew that Ms. Hanse

was unlicensed and practicing real estate without a license

through Express Realty. By the summer of 1999, Respondent knew

that she was doing so recklessly and in a way that endangered

the public . Respondent's failure to take effective action to

stop Ms. Hanse from using Express Realty is a serious

aggravating circumstance.

28. The minimum reasonable penalty in this case is $1000

fine for each of the five separate violations and a three - year

sus pension; provided, however, if Respondent fails to pay the

fine in full within 180 days of the final order, his license

shall be revoked without further notice.

RECOMMENDATION

It is

RECOMMENDED that the Florida Real Estate Commission enter a

final order finding Respondent guilty of the allegations

contained in Counts I - IV and VI of the Amended Administrative

Complaint, imposing a $5000 administrative fine, and suspending

his license for three years; provided, however, if Respondent

fails to pay the fine i n full within 180 days of the final

order, his license shall be revoked without further notice.

DONE AND ENTERED this 9th day of July, 2002, 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

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Cler k of the

Division of Administrative Hearings

this 9th day of July, 2002.

COPIES FURNISHED:

Jack Hisey, Deputy Division Director

Division of Real Estate

Department of Business and

Professional Regul ation

400 West Robinson Street

Post Office Box 1900

Orlando, Florida 32802 - 1900

Dean Saunders, Chairperson

Florida Real Estate Commission

Division of Business and

Professional Regulation

400 West Robinson Street

Post Office Box 1900

Orlando, Florida 32802 - 1900

Hardy L. Roberts, General Counsel

Department of Business and

Professional Regulation

Northwood Centre

1940 North Monroe Street

Tallahassee, Florida 32399 - 2202

Juana Carstarphen Watkins

Senior Attorney

Department of Business and

Professi onal Regulation

Division of Real Estate

400 West Robinson Street

Orlando, Florida 32801

Wayne Wagie

11900 North Bayshore Drive, Unit No. 5

Miami, Florida 33181

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptio ns 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.