03-002881 Department Of Business And Professional Regulation, Division Of Real Estate vs. Larry A. Simons And Home Hunters Usa, Inc. Status: Closed Recommended Order on Thursday, December 4, 2003.

Summary: Respondent should impose a $1,000 fine and a 30-day license suspension on brokers who appropriated a $635 disputed security deposit without following procedures for disputed escrow funds.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 03 - 2881

)

LARRY A. SIMONS and HOME )

HUNTERS USA, INC., )

)

Respondents. )

)

RECOMMENDED ORDER

Administrative Law Judge Daniel Manry conducted the

administrative hearing in this proceeding on October 14, 2003,

in Fort Myers, Florida, on behalf of the Division of

Administrative Hearings (DOAH).

APPEARANCES

For Petitioner: Christopher J. DeCosta, Esquire

Department of Business and

Professional Regulation

400 West Robinson Street, Suite 801 - N

Orlando, Florida 32801

For Respondent: Larry A. Simons, pro se

Home Hunters USA, Inc.

1415 Colonial Boulevard, Suite 3

Fort Myers , Florida 33907

STATEMENT OF THE ISSUES

The issues in this case are whether Respondents violated

Subsection 475.25(1)(k), Florida Statutes (1999), by failing to

maintain an escrow deposit in a trust account until properly

authorized; whether Respondents violated Subsection

475.25(1)(d)1, Flori da Statutes, by failing to account for or

deliver funds; whether Respondents violated Subsection

475.25(1)(b), Florida Statutes, by committing a breach of trust

or culpable negligence in a business transaction; and, if so,

whether the proposed penalty is r easonable.

PRELIMINARY STATEMENT

On June 17, 2003, Petitioner filed an Administrative

Complaint against Respondents alleging the foregoing violations

of Chapter 475, Florida Statutes (1999). Respondents timely

requested an administrative hearing.

At the hearing, Petitioner presented the deposition

testimony of two witnesses and submitted eight exhibits,

including the deposition transcripts, for admission in evidence.

Respondent, Larry A. Simons (Simons), testified and submitted

three exhibits for admission in evidence.

The identity of the witnesses and exhibits, and the rulings

regarding each, are set forth in the Transcript of the hearing

filed on November 14, 2003. Petitioner and Respondents timely

filed their respective Proposed Recomm ended Orders (PROs) on

November 24 and 26, 2003.

FINDINGS OF FACT

1. Petitioner is the state agency responsible for the

regulation and discipline of real estate licensees in the state.

Simons is licensed in the state as a real estate broker/officer

of Respondent, Home Hunters USA, Inc. (Home Hunters), pursuant

to license number BK - 0159866. Home Hunters is a corporation

registered as a Florida real estate broker pursuant to license

number CQ - 0146369.

2. On March 21, 1996, Respondents entered into a p roperty

management contract (amended contract) with Max and Mary Newman

(Newmans). The amended contract authorized Respondents to lease

and manage real property owned by the Newmans and located at

1555 Whiskey Creek Drive, Ft. Myers, Florida 33919 (the

pr operty).

3. The original contract that Respondents proposed to the

Newmans was dated March 11, 1996. The original contract

contained a clause that would have obligated the Newmans to pay

a sales commission to Respondents in the event Respondents sol d

the property to a tenant or certain other purchasers. The

Newmans deleted that language from the original contract,

initialed the deletion, dated the deletion "3/21/96," signed the

amended contract on March 21, 1996, and returned the amended

contract to Respondents. The deleted language in the amended

contract signed by the Newmans provided:

Owner agrees to pay Agent a sales commission

for the sale of said property to the tenant,

or any other the tenant relates or refers.

Agent will perform any servi ces normally

performed to consummate the sale to the

tenant in a professional and diligent

manner. Owner shall notify Agent at

earliest possible time so that Agent may

perform services (prequalify, arrange

financing, closing, repairs, etc.). It is

the ow ners [sic] responsibility to pay said

fee to Agent upon closing of sale.

Petitioner's Exhibit 5 (P - 5) at 19 (the second

unnumbered page of the exhibit).

4. On or about February 1, 1999, Respondents brokered a

lease of the property from the Newmans to Ms. Lilly Gilson

(Gilson). Mr. Newman signed the lease agreement on February 14,

1999, and Gilson signed it on February 23, 1999.

5. The lease agreement, in relevant part, obligated the

Newmans to pay Respondents a "fee" in the event the "tenant

should enter into a lease purchase, lease option, or purchase

through their tenancy." The lease agreement states that the fee

is for Respondents "serving the sale as a broker" but does not

specify the amount of the fee, does not express the fee as a

percentage of the purchase price, and does not otherwise specify

how the fee is to be determined. Neither of the Respondents is

a signatory to the lease agreement.

6. At the time Gilson entered into the lease agreement,

Gilson paid a deposit of $650 to Respondents as a security

deposit in accordance with the lease agreement. Respondents

placed this deposit into a trust account.

7. At some point prior to December 1999, the Newmans

entered into a purchase and sale contract to sell the property

to Mr. Gary Newman (Buyer). The Buyer is unrelated to the

Newmans, but is a relative of Gilson.

8. The Newmans closed on the sale to the Buyer on

December 28, 1999. The parties to the sale used other brokers

in the transaction over Respondents' objections, and neither of

the Respondents served the sale as a broker. The closing

statement shows that the Buyer was obligated to pay the $635

security deposit to the Newmans.

9. Subsequent to the closing, Respondents transferred the

security deposit from their trust accou nt to their operating

account. Simons believed he was entitled to a commission on the

sale from the Newmans to Buyer.

10. Respondents had actual knowledge that the Newmans

claimed entitlement to the security deposit and disputed

Respondents' entitleme nt to the security deposit. Simons was

aware as early as December 11, 1999, that the Newmans did not

knowingly consent to pay Respondents a commission on the sale

transaction.

11. Respondents failed to notify the Florida Real Estate

Commission (Commissi on) of the dispute concerning entitlement to

the security deposit. Respondents did not institute the

settlement procedures prescribed in Subsection 475.25(1)(d)1,

Florida Statutes (1999).

CONCLUSIONS OF LAW

12. DOAH has jurisdiction over the subjec t matter and

parties in this proceeding. The parties were duly noticed for

the administrative hearing. §§ 120.569 and 120.57, Fla. Stat.

(2003).

13. The burden of proof is on Petitioner. Petitioner must

show by clear and convincing evidence that R espondents committed

the acts alleged in the Administrative Complaint and the

reasonableness of any proposed penalty. Ferris v. Turlington ,

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

14. Petitioner satisfied its burden of proof. Respondents

violated Subsection 47 5.25(1)(k), Florida Statutes (1999), by

transferring a security deposit out of the trust account without

authorization and with prior knowledge that the Newmans claimed

entitlement to the security deposit and contested Respondents'

entitlement to the funds . Respondents violated Subsection

475.25(1)(d)(1), Florida Statutes (1999), by failing to return

the security deposit to the Newmans, by failing to notify the

Commission of the dispute, and by failing to institute the

statutorily prescribed settlement pro cedures. Respondents

violated Subsection 475.25(1)(b), Florida Statutes (1999), by

breaching the trust of the Newmans in a business transaction.

15. Simons' assertion that Respondents have a valid

contractual claim on the disputed funds is irrelevant to the

subject matter of this proceeding. DOAH has no jurisdiction to

adjudicate contractual rights between Respondents and the

Newmans. Moreover, the settlement procedures prescribed by

statute contemplate that a broker may be contractually entitled

to di sputed funds. The settlement procedures that a broker must

follow when escrow funds are disputed are not limited to those

disputes in which a broker does not have a valid contractual

right to the funds.

16. Simons also argues that Respondents acted u nilaterally

because the Newmans acted in bad faith to deprive Respondents of

a commission granted as a "fee" in the lease agreement.

Contractual issues aside, Florida law prohibits Respondents from

unilaterally appropriating disputed funds without prior

a uthorization. In the absence of such authorization,

Respondents must follow the procedures set forth in Subsection

475.25(1)(d)1, Florida Statutes (1999).

17. Florida Administrative Code Rule 61J2 - 24.001

prescribes the discipline that may be imposed a gainst

Respondents' licenses. The range of discipline authorized for a

violation of Subsection 475.25(1)(b), Florida Statutes (1999),

is from a $1000 fine up to a one - year suspension. The range of

discipline authorized for a violation of Subsection

475.2 5(1)(k), Florida Statutes (1999), is from a $1000 fine up

to revocation. The range of discipline authorized for a

violation of Subsection 475.25(1)(d)1, Florida Statutes (1999),

is from a $1000 fine up to a 5 - year suspension.

18. Petitioner proposes in its PRO that the Commission

impose a fine of $1,000 and suspend Respondents' licenses for

30 days. The proposed penalty is authorized by rule and is

reasonable under the facts and circumstances in this case.

RECOMMENDATION

Based upon the foregoing Finding s of Fact and Conclusions

of Law, it is

RECOMMENDED that the Commission enter a Final Order

finding that Respondents violated Subsections 475.25(1)(b), (d),

and (k), Florida Statutes (1999), by committing the acts alleged

in the Administrative Complaint; imposing a fine of $1,000

against each licensee; and suspending Respondents' licenses

concurrently for 30 days.

DONE AND ENTERED this 4th day of December, 2003, in

Tallahassee, Leon County, Florida.

S

DANIEL MANRY

Admini strative 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 Clerk of the

Division of Admi nistrative Hearings

this 4th day of December, 2003.

COPIES FURNISHED :

Christopher J. DeCosta, Esquire

Department of Business and

Professional Regulation

400 West Robinson Street, Suite 801 - N

Orlando, Florida 32801

Larry A. Simons

Home Hunters USA, I nc.

1415 Colonial Boulevard, Suite 3

Fort Myers, Florida 33907

Nancy P. Campiglia, General Counsel

Department of Business and

Professional Regulation

Northwood Centre

1940 North Monroe Street

Tallahassee, Florida 32399 - 2202

Nancy P. Campiglia, Actin g Director

Division of Real Estate

Department of Business and

Professional Regulation

400 West Robinson Street, Suite 802 - N

Orlando, Florida 32801 - 1772

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions withi n

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.