92-003323 Division Of Real Estate vs. Gregory T. Franklin, And Equity Realty Of South Florida, Inc., T/A Equity Realty Status: Closed Recommended Order on Friday, January 22, 1993.

Summary: Broker who failed to designate who was to receive interest from interest hearing escrow account was given written reprimand and required to take Continuing Program of Education.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL )

REGULATION, DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) CASE NO. 92-3323

)

GREGORY T. FRANKLIN and EQUITY OF )

SOUTH FLORIDA t/a EQUITY REALTY, )

)

Respondents. )

_______________________________________)

RECOMMENDED ORDER

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

Daniel Manry, a duly designated Hearing Officer of the Division of

Administrative Hearings, on November 5, 1992, in Stuart, Florida.

APPEARANCES

For Petitioner: James H. Gillis, Esquire

Senior Attorney

Department of Professional

Regulation, Division of Real Estate

Legal Section - Suite N 308

Hurston Building North Tower

400 West Robinson Street

Orlando, Florida 32801-1772

For Respondent: Gregory T. Franklin, pro se

c/o Equity Realty of South Florida, Inc.

5809 South East Federal Highway, #200

Stuart, Florida 34997

STATEMENT OF THE ISSUE

The issues for determination in this proceeding are whether Respondents

committed multiple acts alleged in the administrative complaint and, if so,

what, if any, disciplinary action should be taken against Respondents' licenses.

PRELIMINARY STATEMENT

Petitioner filed an eight-count Administrative Complaint against

Respondents on April 23, 1992. Respondents requested a formal hearing on May

12, 1992. The matter was referred to the Division of Administrative Hearings

for assignment of a hearing officer on June 1, 1992, and assigned to Hearing

Officer Arnold H. Pollock on June 3, 1992.

A formal hearing was scheduled for August 25, 1992, pursuant to a Notice of

Hearing issued on July 1, 1992. The matter was transferred to the undersigned

on August 21, 1992, and rescheduled for formal hearing on November 5, 1992.

At the formal hearing, Petitioner presented the testimony of the

Respondent, Gregory T. Franklin ("Franklin"), and submitted 21 exhibits which

were admitted in evidence. Respondent, Franklin, testified in his own behalf

and submitted two exhibits for admission in evidence. Respondents' Exhibit 1 is

a composite exhibit consisting of two letters containing conflicting demands

from the parties to a real estate transaction. Respondents' Exhibit 2 is a

letter from the buyer requesting money to be placed in escrow. Respondents'

Exhibit 1 and Exhibit 2 were admitted in evidence without objection.

A transcript of the formal hearing was not requested by either party.

Petitioner timely filed proposed findings of fact and conclusions of law on

November 19, 1992. Respondent timely filed proposed findings of fact and

conclusions of law on November 16, 1992. The parties' proposed findings of fact

are addressed in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. Petitioner is the governmental agency responsible for issuing real

estate licenses and regulating licensees on behalf of the state. Respondent,

Gregory T. Franklin ("Franklin"), is licensed in the state as a real estate

broker; license number 0314387. The last license issued was as a real estate

broker, c/o Equity Realty of South Florida, Inc., t/a Equity Realty, 5809

Southeast Federal Highway #200, Stuart, Florida 34997. Respondent, Equity

Realty of South Florida, Inc. ("Equity"), is a corporation registered as a real

estate broker; license number 0229264. Respondent, Franklin, is the qualifying

broker for Respondent, Equity.

2. On or about January 26, 1990, Mr. Robert Warren (the "buyer") entered

into a contract to purchase real estate from Ms. J. Zola Miller and Ms. Adrianne

Miller Hill (the "sellers"). The buyer gave Respondent an earnest money deposit

in the amount of $1,000.

3. On or about April 17, 1990, a second contract was executed by the buyer

and sellers. The buyer gave Respondents a second earnest money deposit in the

amount of $24,000. Both earnest money deposits were timely deposited to

Respondents' escrow account, number 0194101404, Florida Bank, Stuart, Florida.

4. The buyer and sellers had difficulty in closing the contract due to

disagreements concerning conditions in the contract. At the buyer's request,

Respondents used the earnest money in the amount of $25,606.04 to purchase a

certificate of deposit ("CD") in the name Robert Warren Century 21 Equity Realty

Escrow Account #050-215-76, located at the First Marine Bank of Florida, Palm

City, Florida ("First Marine"). Respondents received the sellers' verbal

approval, but not written approval, for the purchase of the CD.

5. Respondents notified the Florida Real Estate Commission (the

"Commission") on August 28, 1990, that there were conflicting demands for the

$25,000 earnest money deposit. Respondents stated their intent to claim a

portion of the earnest money as an earned commission and stated that they were

preparing to file an interpleader action to resolve the parties' dispute over

the earnest money deposit. The Commission acknowledged Respondents'

notification.

6. Negotiations between the buyer and sellers continued until December 12,

1990. At that time, the parties reached an impasse, and each made written

requests for the escrow deposit. Respondents maintained the earnest money in

the CD until February 8, 1991.

7. On February 8, 1991, Respondents were notified by First Marine that the

buyer was attempting to obtain the escrow monies directly from First Marine.

Respondents opened a CD in the name of Robert Warren Escrow Account for Equity

Realty by Gregory Franklin, Account #200-517-7320, First Union Bank of Florida,

Stuart, Florida. When the CD matured on May 15, 1991, the amount of the deposit

was $25,989.57.

8. On May 15, 1991, Respondents removed the earnest moneys and invested

them in CD #10696954 at Community Savings Bank. On June 19, 1991, Respondents

withdrew $500, paid a penalty of $6.21, and closed the CD. The remaining

balance was used to open CD #10707413 at Community Savings Bank. On June 21,

1991, Respondents withdrew $600 and paid a penalty in the amount of $8.67.

Respondents used half of the $600 withdrawal to pay an attorney to initiate a

civil interpleader action without the knowledge or consent of either the buyer

or seller. On August 23, 1991, Respondents closed the CD and withdrew the

balance.

9. On August 23, 1991, Respondents opened CD 310725647 in the name of

Equity Realty, Inc., with the balance at Community Savings Bank. On October 30,

1991, Respondents made a withdrawal in the amount of $175. On November 23,

1991, the CD was renewed. The account was closed on November 27, 1991, with a

balance of $25,456.94, and deposited into the court registry. The interpleader

action was ultimately resolved pursuant to a settlement agreement between the

parties.

10. Respondents obtained the consent of both parties, though not the

written consent of both parties, before placing the escrowed funds into an

interest bearing account on August 15, 1990. The uncontroverted testimony of

Respondent, Franklin, concerning this issue was credible and persuasive.

Neither the sellers nor the buyer ever revoked their consent.

11. Respondents deposited the earnest moneys into an interest bearing

account without designating who was to receive the interest from such an account

without the consent of both parties. Respondents took appropriate action to

resolve the conflicting demands made upon the earnest moneys deposited with

Respondents but failed to take such action in a timely manner.

CONCLUSIONS OF LAW

12. The Division of Administrative Hearings has jurisdiction over the

subject matter of this proceeding and the parties thereto. The parties were

duly noticed for the formal hearing.

13. The burden of proof is on Petitioner. Petitioner must show by clear

and convincing evidence that Respondents are guilty of the acts alleged in the

administrative complaint and the reasonableness of the disciplinary action to be

taken against Respondents' licenses. Ferris v. Turlington, 510 So.2d 292 (Fla.

1987).

14. Petitioner did not satisfy its burden of proof with respect to the

allegations in Counts III-VI of the Administrative Complaint. Petitioner

requested in its Proposed Recommended Order that Counts III-VI of the

Administrative Complaint be dismissed. The uncontroverted evidence established

that Respondents did not fail to account and deliver a real estate deposit, did

not fail to notify the Commission of a deposit dispute, and did not fail to

maintain trust funds in a proper depository in violation of Sections

475.25(1)(d)1., 475.25(1)(e), and 475.(1)(k), Florida Statutes, and Florida

Administrative Code Rule 21V-10.032.

15. Petitioner did not satisfy its burden of proof with respect to

allegations in Count I and II of the Administrative Complaint. Respondents did

not engage in dishonest dealing by trick, scheme or device, culpable negligence,

or breach of trust in a business transaction. Both the buyer and seller had

actual knowledge that the escrow funds were deposited in an interest bearing

account, that each party to the transaction demanded the escrow funds, and that

the escrow funds were subject to an interpleader action to resolve their

dispute. The testimony of Respondent, Franklin, on this issue was credible and

persuasive.

16. Petitioner did not satisfy its burden of proof with respect to the

allegation in Counts VII and VIII of the Administrative Complaint that

Respondents placed escrow funds in an interest bearing account without the

consent of the buyer and seller in violation of Florida Administrative Code Rule

21V-14.014. Rule 21V-14.014 provides in relevant part:

A licensed real estate broker is not prohibited from

placing escrow money, entrusted to him by any person

dealing with him as a broker in an interest bearing

account. The placement of escrow monies in an interest

bearing account, and designation of the party who is to

receive the interest, must be done with the written

permission of all the interested parties.

17. The requirement for "written" permission to place escrow funds in an

interest bearing account was not in Florida Administrative Code Rule 21V-14.014

when it was adopted on September 17, 1981, but was added effective April 16,

1991. Therefore, when Respondents initially placed the escrow funds in an

interest bearing account on August 15, 1990, Respondents had the requisite

consent of both parties. No evidence was presented that either party's consent

was ever revoked.

18. At no time were Respondents required under the terms of Florida

Administrative Code Rule 21V-14.014 to obtain consent from either party to make

changes in the interest bearing account holding the deposited escrow funds. The

operative act requiring consent under Rule 21V-14.014 is the act of placing

escrow funds in "an" interest bearing account; not changes concerning particular

interest bearing accounts. Therefore, when Respondents changed the depository

of the interest bearing account on May 15, 1991, June 19, 1991, and August 23,

1991, Respondents were not required under Rule 21V-14.014 to obtain the consent

of the parties for such changes. The parties had already given their consent to

place the escrow funds in "an" interest bearing account on August 15, 1990.

19. Petitioner satisfied its burden of proof with respect to the

allegation in Counts VII and VIII of the Administrative Complaint that

Respondents placed escrow funds in an interest bearing account without

designating who was to receive the interest in violation of Florida

Administrative Code Rule 21V-14.014. No evidence was presented by Respondents

that an agreement was ever reached between the parties, in any form, designating

who was to receive the interest from an interest bearing account. The testimony

of Respondent, Franklin, that he assumed that the interest belonged to the

seller does not satisfy the requirement in Rule 21V-14.014 that the designation

of who is to receive the interest from an interest bearing account must be done

with the permission of all interested parties. Moreover, Franklin paid himself

money from the interest for attorney fees without the consent of the parties.

20. Facts and circumstances surrounding the entire transaction should be

considered in determining the appropriateness of the penalty to be imposed in a

particular case. This case involves no intent to defraud, failure to remit, or

culpable negligence. Respondents ultimately took appropriate action to resolve

the dispute between the parties, and Respondents have no prior disciplinary

history. However, Respondents failed to take timely action to resolve the

dispute between the parties. That factor would not have been a consideration in

this case if Respondents had taken appropriate action when they notified the

Commission on August 28, 1990, of the parties' competing demands on the escrow

deposit instead of waiting until August 23, 1991, to take such action.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is

RECOMMENDED that Petitioner enter a Final Order finding Respondents guilty

of placing escrow funds in an interest bearing account without designating who

is to receive the interest in violation of Florida Administrative Rule 21V-

14.014. It is further recommended that Petitioner should issue a written

reprimand to Respondents and require Respondent, Franklin, during the next 12

months, to document to the satisfaction of Petitioner that he has completed 14

hours of the Brokerage Management Course.

RECOMMENDED this 22nd day of January, 1993, in Tallahassee, Florida.

_________________________________

DANIEL MANRY

Hearing Officer

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

[phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 22nd day of January, 1993.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-3323

Petitioner's Proposed Findings Of Fact.

1.-6. Accepted in Finding 1.

7.-8. Accepted in Finding 2.

9.-11. Accepted in Finding 3.

12. Accepted in Finding 4.

13. Accepted in Finding 5.

14. Accepted in Finding 3.

15. Accepted in Finding 6.

16. Accepted in Finding 7.

17.-20. Accepted in Finding 8.

21.-22. Accepted in Finding 9.

23.-24. Accepted in Findings 10.-11.

Respondents' Proposed Findings Of Fact.

1.-6. Accepted in Finding 1.

7.-8. Accepted in Finding 2.

9.-11. Accepted in Finding 3.

12. Accepted in Finding 4

13. Accepted in Finding 5.

14. Accepted in Finding 3.

15. Accepted in Finding 6.

16. Accepted in Finding 7

17.-20. Accepted in Finding 8.

21.-22. Accepted in Finding 9.

23.-24. Accepted in Findings 10.-11.

COPIES FURNISHED:

Darlene F. Keller, Director

Division of Real Estate

Department of Professional Regulation

400 West Robinson Street

Post Office Box 1900

Orlando, Florida 32801

Jack McRay, Esquire

General Counsel

Department of Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399-0792

James H. Gillis, Esquire

Department of Professional

Regulation, Division of Real Estate

Legal Section - Suite N 308

Hurston Building North Tower

400 West Robinson Street

Orlando, Florida 32801-1772

Gregory T. Franklin, pro se

%Equity Realty of South Fla., Inc.

5809 S.E. Federal Highway, #200

Stuart, Florida 34997

APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-3323

All parties have the right to submit written exceptions to this Recommended

Order. All agencies allow each party at least 10 days in which to submit

written exceptions. Some agencies allow a larger period within which to submit

written exceptions. You should contact the agency that will issue the final

order in this case concerning agency rules on the deadline for filing exceptions

to this Recommended Order. Any exceptions to this Recommended Order should be

filed with the agency that will issue the final order in this case.