96-005163 Division Of Real Estate vs. S. Dudley Carson Status: Closed Recommended Order on Tuesday, October 7, 1997.

Summary: Respondent did not timely complete course. Recommend $1,000 fine. Allegations that Respondent improperly disbursed and comingled personal funds with trust funds not proven by Petitioner.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case Nos. 96-5163

) 97-0062

S. DUDLEY CARSON, )

)

Respondent. )

___________________________________)

RECOMMENDED ORDER

On July 21, 1997, a formal administrative hearing was held

in this case in Sarasota, Florida, before Carolyn S. Holifield,

Administrative Law Judge, Division of Administrative Hearings.

APPEARANCES

For Peti tioner: Geoffrey T. Kirk, Senior Attorney

Department of Business and

Professional Regulation

Division of Real Estate

400 West Robinson Street

Orlando, Florida 32802

For Respondent: Frederick Wilsen, Esquire

Gillis and Wilsen, P.A.

1415 East Robinson Street, Suite B

Orlando, Florida 32801

STATEMENT OF THE ISSUES

The issues in this case are whether S. Dudley Carson, the

Respondent (1) failed to comply with a lawful order of the

Florida Real Estate Commission; (2) deposited or intermingled

personal or operating funds in the broker's trust account; (3)

concealed a violation during the course of an investigation; (4)

improperly disbursed funds from the broker's trust account; (5)

engaged in fraudulent or dishonest dealing in a business

transaction; and (6) is guilty of a course of conduct to the

extent that he is not trustworthy. If yes, to one or more of the

foregoing, what penalty should be imposed.

PRELIMINARY STATEMENT

On April 21, 1996, Petitioner Department of Business and

Professional Regulation, Florida Real Estate Commission,

(Petitioner/Commission) filed a one-count Administrative

Complaint against Respondent S. Dudley Carson (Respondent). The

Administrative Complaint (Administrative Complaint I) alleged

that Respondent failed to comply with a lawful order of the

Commission by not successfully completing certain educational

requirements within the prescribed time period. Petitioner filed

a second Administrative Complaint (Administrative Complaint II)

against Respondent on September 23, 1996. This complaint alleged

in five counts that Respondent violated multiple provisions of

Section 475.25(1), Florida Statutes.

In each instance, Respondent disputed the charges and timely

requested a formal hearing. The matters were separately

forwarded to the Division of Administrative Hearings (Division)

for assignment of an administrative law judge. Administrative

Complaint I was filed with the Division on January 7, 1997, and

Administrative Complaint II was filed on November 4, 1996. By

Order issued on February 12, 1997, the two cases were

consolidated.

At the final hearing, Petitioner called four witnesses:

Jerri Vincent, Stephanie Alcorn, Majorie G. Bennett, and Marie

Hayes. Petitioner offered seventeen exhibits that were admitted

into evidence. Respondent testified on his own behalf and

presented four other witnesses: Harry Haskins, Arthur David

Vandroff, Penelope Flanagan, and Prudence Varro. Respondent

presented seventeen exhibits that were admitted into evidence.

The transcript of the proceeding was filed on July 28, 1997.

At the conclusion of the hearing, the time set for submitting

proposed recommended orders was ten days from the filing of the

transcript. Prior to that date, Respondent requested an

extension of time in which to file the proposed recommended

order. The request was granted, and both parties timely filed

their proposed recommended orders under the extended time period.

FINDINGS OF FACT

1. Petitioner is a state licensing and regulatory agency

charged with the responsibility and duty to prosecute

administrative complaints pursuant to the laws of the State of

Florida; in particular, Chapters 455, and 475, Florida Statutes,

and Rule Chapter 61J-2, Florida Administrative Code.

2. Respondent, S. Dudley Carson, is now and was at all

times material hereto a licensed real estate broker in Florida

having been issued license number 3001085 and 3004369 in

accordance with Chapter 475, Florida Statutes.

3. On or about April 19, 1994, the Commission entered a

Final Order against Respondent whereby Respondent's real estate

license was placed on probation for one year. Furthermore, the

Final Order required Respondent to complete a 30-hour broker

management course within one year of the filing of the Final

Order. The Final Order was filed on May 6, 1994, and provided in

pertinent part:

4. The licensee shall enroll in and

satisfactorily complete a 30-hour broker

management course within one (1) year of

the filing date of this Order . These

course hours are in addition to any

other education required to maintain a

valid and current license.

5. Failure to complete all conditions of

probation may result in a new complaint

being filed.

This Order shall be effective 30 days

from date of filing with the Clerk of the

Department of Business and Professional

Regulation. (emphasis supplied)

4. In accordance with the provisions of the Final Order,

Respondent had until May 6, 1995, in which to satisfactorily

complete a 30-hour broker management course. When Respondent

read the Final Order, he mistakenly believed that he had one year

from the effective date of the Final Order rather than one year

from the filing date of the Final Order to complete the required

course.

5. Respondent initially registered for a 30-hour management

course to be offered in March 1995, but was unable to take the

course due to a business conflict. At that time, Respondent did

not realize that the next 30-hour course would not be offered

until June 1995. In May 1995, Respondent registered for the next

available course that was offered in June 1995.

6. After registering for the June course, but prior to

taking it, Respondent received a letter from Petitioner

requesting that Respondent provide proof of having completed the

required 30-hour course. Thereafter, Respondent immediately

contacted Petitioner by telephone inquiring to how he could

request an extension. Based on information obtained by telephone

from Petitioner's staff, by letter dated May 18, 1995, Respondent

requested an extension of time to complete the course.

7. On May 23, 1995, Petitioner placed Respondent's request

for an extension of time to comply with the educational

requirement on the Commission's June 20, 1995, agenda for

consideration. Thereafter, Petitioner advised Respondent's

attorney, Steven Voigt, that the matter had been tabled and no

formal action was taken by the Commission.

8. Respondent completed the 30-hour broker management

course on June 30, 1995, and on that same day so advised

Petitioner by letter.

9. Respondent had no further contact from Petitioner

regarding his request for an extension until eleven months after

the request was made and almost ten months after the Commission

tabled the matter. That communication was by Administrative

Complaint I that Petitioner filed against Respondent on April 21,

1996.

10. As to the Administrative Complaint II, Respondent was

licensed at all times material herein as a real estate broker for

Crescent Management, Inc., and for RE/MAX on the Key.

11. The broker is the person ultimately responsible for

properly maintaining and reconciling all escrow and trust

accounts. Further, the broker is charged with knowledge of and

compliance with applicable laws and rules relative to trust

accounts.

12. Petitioner interprets governing regulations to preclude

a broker from keeping retained earnings or commissions in an

escrow account, and to remove such earnings or commissions when

they accrue, but never less than at least once a month.

Moreover, Petitioner interprets certain relevant provisions as

prohibiting real estate brokers from maintaining "personal funds"

in their escrow or trust account to pay personal or office

expenses.

13. Where an escrow or trust account has a deficit, if

everyone who had funds in that account made a demand for the

same, there would be insufficient funds to satisfy all claims.

14. At all times material hereto, Respondent maintained

account number 1622184907 at Barnett Bank in the name of Crescent

Management, Inc. (Crescent Management Account). Rental security

deposits and owners' funds were kept in the Crescent Management

Account. The checks drawn on this account were styled "operating

escrow."

15. Stephanie Aucoin was employed by Respondent as an

officer manager for Respondent from August 1992 through April or

May 1995. While employed as the officer manager and in regard to

Crescent Management, Ms. Aucoin's duties included determining

which bills and expenses were to be paid and to whom and the

amount to be paid. Ms. Aucoin was also responsible for preparing

checks via computer and presenting the checks to Respondent for

his review and signing. Respondent trusted Stephanie Aucoin and

relied upon her to properly prepare the checks.

16. The following checks drawn on the Crescent Management

Account between January 1994 and February 1995 are the subject of

the instant case: Check No. 5458 dated January 3, 1994, made

payable in the amount of $246.40 to Pelican Press; Check No. 5460

dated January 3, 1994, made payable in the amount of $74.67 to

Prestige Printing; Check No. 5347 dated January 21, 1994, made

payable in the amount of $11,100.91 to RE/MAX on the Key; Check

No. 5391 dated February 2, 1994, made payable in the amount of

$82.00 to the Division of Real Estate; Check No. 6439 dated July

25, 1994, made payable in the amount of $237.83 to Sarasota Board

of Realtors; Check No. 7388 dated December 31, 1994, made payable

in the amount of $19,700.11 to RE/MAX on the Key; and Check No.

7005 dated February 16, 1995, made payable in the amount of

$4,119.29 to American Express.

17. Respondent signed and authorized five of the seven

checks noted in the above paragraph. The checks signed by

Respondent were Check Nos. 5458, 5460, 5347, 5391, and 6439.

18. It is undisputed that Check No. 7388 dated December 31,

1994, made payable in the amount of $19,700.11 to RE/MAX on the

Key, contained Respondent's forged signature and that Stephanie

Aucoin had forged Respondent's signature. Contrary to Ms.

Aucoin's testimony, Respondent did not request or authorize Ms.

Aucoin to issue the check or sign his name to the check.

Respondent had not seen this check prior to Petitioner's

Investigator Hayes showing him a copy of the check during the May

1996 audit.

19. The last check in question is Check No. 7005 dated

February 16, 1995, made payable in the amount of $4,119.29 to

American Express. Although she was not an authorized signatory

on the Crescent Management Account, Stephanie Aucoin signed her

own name on this check. Respondent never authorized or directed

Ms. Aucoin to pay his American Express bill using the Crescent

Management Account.

20. Stephanie Aucoin's testimony lacks credibility. After

Ms. Aucoin's employment was terminated, she filed a claim for

unemployment compensation benefits. The claim was denied by the

appeals referee by decision dated August 17, 1995, finding that

she "had been signing checks without the owner's permission and

had forged the owner's signatures on some of the checks . . .

claimant was using company funds to pay her personal bills."

21. On May 16, 1996, Stephanie Aucoin made the following

statement in her sworn Petition For Injunction For Protection

Against Repeat Violence filed against the Respondent: "Dudley

Carson is under investigation for commingling of funds (escrow)

and tax fraud . . . the chief investigator (Marie Hayes) had

informed me that these charges are of a valid nature and that I

could possibly be in danger by Mr. Carson." The statement of Ms.

Aucoin is false in that Marie Hayes never made such a statement

to Stephanie Aucoin.

22. During the course of Stephanie Aucoin's employment as

officer manager for Respondent, Ms. Aucoin and Respondent

developed a romantic relationship, beginning in November 1993.

The personal relationship was an intermittent one, with

Respondent terminating the relationship with Ms. Aucoin three

different times, first in late February 1994, next in late

November 1994, and finally in early March 1995.

23. Eventually, Respondent believed that Ms. Aucoin had

been diverting business funds for her personal use. Based on

this belief, Respondent fired Ms. Aucoin on or about April 28,

1995. Soon after he fired Stephanie Aucoin, Respondent employed

Chip Harris to review the Crescent Management escrow records and

bank statements. The records were in poor order, and it was

determined that there was a shortage of escrow funds in the bank

account. As soon as practicable, Respondent deposited personal

funds into the Crescent Management Account to cover the shortage:

$25,000 on July 10, 1995, and $20,063.09 on July 13, 1995.

Respondent has made no claim to the $45,063.09 that he deposited

into the Crescent Management Account for the benefit and

protection of those persons entitled to the trust funds.

24. The proper course of action to be taken by a broker

upon discovery a shortage in an escrow account is to replace the

missing funds as soon as possible.

25. On July 25, 1995, Petitioner audited Respondent's

escrow account's maintained by Respondent for Carson and

Associates Ltd., Inc., t/a RE/MAX on the Key and Crescent

Management, Inc. Petitioner found that all accounts were in good

order and balanced.

26. The two deposits of $25,000 and $20,063.09 had been

made into the Crescent Management Account on July 10, 1995, and

July 13, 1995, respectively, and prior to the July 25, 1995,

audit. Nevertheless, the investigator did not question

Respondent about the deposits nor did Respondent volunteer

information concerning the deposits.

27. On May 10, 1996, Petitioner completed an audit of the

escrow accounts maintained by Respondent for Carson and

Associates Ltd., Inc., t/a RE/MAX on the Key and found that all

accounts balanced.

28. On May 15, 1996, Petitioner completed an audit of the

escrow account maintained by Respondent for Crescent Management,

Inc., and found the account to be in good order and balanced.

29. During the time period pertinent to this proceeding,

Crescent Management, Inc. earned a 15 percent rental management

fee on all rental funds collected. The Crescent Management

Account was labeled as an "operating escrow account" and the

source of all funds in this account consisted of rent payments by

tenants. Of the rents deposited into the account, 15 percent

belonged to Respondent as an earned rental management fee and the

balance belonged to the owners after deducting payment of the

owners' expenses.

30. As each check from the Crescent Management Account was

issued, either the "Owners'" account was charged or the "Fee,

Property" account was charged. The "Fee, Property" account

consisted solely of the funds generated by the 15 percent

management fees.

31. Each month, the accounts were reconciled and if there

was a shortage or overage of funds, corrective action was taken.

32. The accounting procedure implemented by Respondent and

described in paragraph 30 above utilized real estate property

management software program, RPM. This program had been

recommended to Respondent by one of Petitioner's investigators in

1993. Under this system, one account is set up on computer and

all transfers are made internally. Respondent is no longer using

this accounting method, but now uses Quick Books, a recognized

bookkeeping system, without any apparent problems.

33. In regard to the checks noted in paragraph 16 above,

Petitioner alleges that these seven checks were "unauthorized

disbursements" in that Respondent used the escrow account to

directly pay personal and office overhead and related expenses.

However, Petitioner acknowledged that if earned fees in the

escrow account were used for third party payments, there is no

misappropriation. Furthermore, Petitioner's investigator

supervisor testified that where there is no shortage of the

escrow funds, the practice implemented by Respondent is just

"very poor bookkeeping."

34. In January 1994, the following checks referenced above

were issued: Check No. 5458 for $246.40 to Pelican Press, Check

No. 5460 for $74.67 to Prestige Printing and Check No. 5347 for

$11,108.91 to RE/MAX on the Key. All three of these checks are

listed on the January ust Account Reconciliation form

prepared on February 8, 1994, and signed by Respondent. At the

end of January 1994, there was an overage of $1,532.09,

representing "Management Fees." The corrective action taken was

to remove the $1,532.89 overage and put it in the operating

account. Thus, the funds used for payment of these checks were

not trust funds, but fees earned by Respondent and to which he

was entitled.

35. Check No. 5391 dated February 2, 1994, for $82.00 was

payable to the Division of Real Estate for payment of renewal

fees. The check cleared the Crescent Management Account on

February 18, 1994. The bank statement for February reflects that

on February 1, 1994, the account had a beginning balance of

$52,109.45, eighteen deposits and credits totaling $95,676.64,

and 135 checks and debits totaling $71,799.87. At the end of the

statement period, on February 28, 1994, the Crescent Management

Account had a balance of $75,986.22. The funds used to pay the

$82.00 check when it cleared the bank came from the "Fee,

Property" split of the operating account and represented funds

generated from the broker's 15 percent rental commission fee.

Accordingly, trust funds were not used in regard to payment of

this check.

36. Check No. 6439 dated July 25, 1994, for $237.83 and

payable to the Sarasota Board of Realtors cleared the Crescent

Management Account on August 2, 1994. The bank statement for the

period August 1, 1994, through August 31, 1994, reflects that the

account had a beginning balance of $45,409.21, 15 deposits

totaling $50,287.19; 102 checks and debits totaling $37,184.09;

and an ending balance of $58,512.31. The funds used to pay the

$237.83 check came from the "Fee, Property" split of the

operating account and represented funds generated by the broker's

15 percent rental commissionust funds were not used to pay

this check.

37. Check No. 7388 dated December 31, 1994, for $19,700.11

payable to RE/MAX on the Key for overhead expenses cleared the

Crescent Management Account on January 31, 1995, with funds from

the "Fee, Property" split of the operating account with funds

generated by the broker's 15 percent rental commission. The bank

statement for the period ending January 31, 1995, reflects a

beginning balance of $177,991.84; 15 deposits totaling

$137,308.35; and 111 checks and debits totaling $116,469.67,

resulting in an ending balance of $197,ust funds were

not used to pay this check. This check appears on the Trust

Account Reconciliation form for the month of January 1995,

performed on February 9, 1995, and signed by Respondent on that

date. According to the Reconciliation Statement, there was a

shortage in the trust account of $961.97, resulting from an

overpayment to a customer. The amount of the shortage is the

difference between the broker's trust liability of $179,159.46

and the adjusted account balance of $178,197.49. The

Reconciliation statement further noted under "corrective action

taken" that the "customer will reimburse."

38. Check No. 7005 dated February 16, 1995, for $4,119.29,

payable to American Express appears on the Trust Reconciliation

Statement for the period ending February 28, 1995, performed on

March 10, 1995, and signed by Respondent. The Reconciliation

Statement shows that the account was in balance with no overages

or shortages. The monthly bank statements for the period ending

February 28, 1995, reflects a beginning balance of $197,830.52;

13 deposits of $95,753.08; 115 checks and debits totaling

$75,951.56, with an ending balance of $217,632.40. The check

cleared the Crescent Management Account on February 17, 1995,

with funds from the "Fee, Property" split of the operating

account with funds generated by the broker's 15 percent rental

commissionust funds were not used to pay this check.

39. Respondent has been disciplined on two prior occasions.

In Case Nos. 92-83432 and 92-84338, Petitioner entered a Final

Order on July 20, 1993, which adopted a Stipulation between

Respondent and Petitioner. Pursuant to the Stipulation,

Respondent neither admitted nor denied the allegations, but was

reprimanded, fined $300, and required to take a 30-hour broker

management course. The underlying administrative complaint in

this matter, based on an August 7, 1992, audit by Petitioner,

alleged that (1) Respondent's escrow account was not properly

reconciled and had an overage of approximately $661.50; (2)

Respondent failed to inform clients that a certain escrow account

was an interest bearing account; and (3) Respondent's required

office sign was incorrect in that letters were not all at least

an inch in height and the words "Lic. Real Estate Broker" were

not included.

40. On May 6, 1994, a second Final Order was entered

against Respondent in FDBPR Case Nos. 93-84352 and 93-5419. This

Final Order required Respondent to pay a fine of $300 and placed

Respondent on probation for a year. The administrative complaint

which served as the basis for the final order was filed on

January 25, 1994, and was based on a September 20, 1993, audit

and investigation performed by Petitioner at Respondent's

request. The Administrative Complaint alleged that Respondent

had failed to properly reconcile his rental escrow accounts for

July and August 1993 and had a total escrow shortage of $842.31.

41. The September 20, 1993, audit was performed at the

request of Respondent. During May of 1993, the Respondent had

concerns as to the proper handling of the rental property

management escrow account by his bookkeeper. As a result of

these concerns, Respondent contacted Petitioner and requested

that Petitioner conduct an audit.

42. In response to Petitioner's request, Petitioner

conducted an audit on September 20,1993, which revealed a

shortage in the escrow account of $842.31. It was determined

that this was due to errors by the bookkeeper. Therefore, the

bookkeeper immediately replaced the escrow account funds. The

Respondent then terminated the bookkeeper's employment.

Nonetheless, the Petitioner filed an eight-count Administrative

Complaint on January 20, 1994, against the Respondent charging

escrow violations.

43. The Respondent admitted the facts alleged in the

January 20, 1994, Administrative Complaint and requested an

informal hearing. The Commission heard the matter on April 19,

1994, and a Final Order was filed on May 6, 1994, providing for a

reprimand, a $300 fine and completion of a 30-hour broker

management course. The Respondent paid the fine and timely

completed the course.

CONCLUSIONS OF LAW

44. The Division of Administrative Hearings has

jurisdiction over the subject matter of this proceeding, and the

parties thereto, pursuant to Section 120.57(1), Florida Statutes.

45. The Department is statutorily empowered to suspend,

revoke, or otherwise discipline the real estate license of any

licensee in Florida found guilty of any act enumerated in Section

475.25, Florida Statutes.

46. The Department has the burden of proof in this

proceeding. Petitioner must show by clear and convincing

evidence that Respondent committed the acts alleged in the

Administrative Complaint and the reasonableness of any penalty to

be imposed. Ferris v. Turlington , 510 So. 2d 292 (Fla. 1987).

47. In Evans Packing Co. v. Dept. Of Agriculture and

Consumer Services , 550 So. 2d 112, 116, n. 5 (Fla. 1st DCA 1989),

the court explained:

"[C]lear and convincing evidence requires

that the evidence must be found to be

credible; the facts to which the witnesses

testify must be distinctly remembered; the

evidence 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 the firm belief of [sic]

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).

48. The Administrative Complaint dated April 21, 1996,

alleges that Respondent failed to comply with a lawful order of

the Florida Real Estate Commission. Such a failure constitutes a

violation of Section 475.25(1)(e), Florida Statutes, which

authorizes the commission to take disciplinary action against a

real estate license where the licensee

Has violated any of the provisions of this

chapter or any lawful order or rule made or

issued and the provisions of this Chapter or

Chapter 455.

49. It is undisputed and Respondent admits that he failed

to complete the 30-hour brokers' management course within the

time period prescribed in the Final Order filed by the commission

on April 21, 1994. Respondent argues that his failure to

complete the course was unintentional and that he made a good-

faith effort to timely take the course and to obtain an

extension. Despite his intentions and good faith, the clear and

convincing evidence established that Respondent completed the

required course on June 30, 1995, not on May 6, 1995, the date

specified in the April 21, 1994 Final Order.

50. The Administrative Complai nt against Respondent issued

on September 23, 1996, contains five counts. Count I alleges

that Respondent deposited or intermingled personal funds with

funds being held in escrow or trust or on condition. Count II

alleges that Respondent knowingly concealed a violation of Rule

61J2-14.008(1)(c), Florida Administrative Code, during the course

of an official investigation. Count III alleges that Respondent

improperly dispersed funds from an escrow or trust account.

Count IV alleges that Respondent is guilty of fraud,

misrepresentation, false promises, false pretenses, dishonest

dealing by trick, scheme or device, culpable negligence or breach

of trust in any business transaction. Finally, Count V alleges

that Respondent is guilty of having been found guilty for a

second time of any misconduct that warrants his suspension or has

been found guilty of a course of conduct or practice which shows

that he is so incompetent, negligent, dishonest, or untruthful

that the money, property, transaction, and rights of investors

may not be safely entrusted to him. It is alleged that these

offenses constitute violations of various provisions of Section

475.25, Florida Statutes.

51. In regard to Count I, Rule 61J2-14.008, Florida

Administrative Code, provides in relevant part:

(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)(c), Florida Statutes [which

includes the rental or leasing of property].

* * *

(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 with the State

of Florida. Only funds described in this

rule shall be deposited in trust or escrow

account. 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-

14.016(2), Florida Administrative Code.

(emphasis supplied)

52. The rule chapter does not provide for a definition for

"personal funds." However, Rule 61J2-14.010(2), Florida

Administrative Code provides:

(2) A broker is authorized to place and

maintain up to $200 of personal or brokerage

business funds in the escrow account for the

purpose of opening the account, keeping the

account open and/or paying for ordinary

service charges.

53. Rule 61J2-14.012, Florida Administrative Code, states,

in part:

(2) At least 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 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). . . ."

54. With regard to Count I of Administrative Complaint II,

Petitioner has not met its burden of proof. It is undisputed

that Respondent made two deposits to the Crescent Management

account: a deposit of $25,000 on July 10, 1995, and a deposit of

$20,063.09 on July 13, 1995. However, Respondent contends that

these funds were to replace funds which he believed had been

wrongfully taken by one of his employees. There is no evidence

or even an allegation that Respondent misappropriated these

missing funds.

55. Respondent maintains that the funds he deposited in

July 1995 were not personal funds nor brokerage business funds,

but became trust funds for the benefit of those persons who dealt

with Respondent in his capacity as a broker and with trust and

confidence. Once the funds were deposited, Respondent asserts

that he had or made no claim to the funds deposited.

56. Notwithstanding Petitioner's assertion that these

deposits were improper, Petitioner's two witnesses, Investigator

Supervisor Marjorie G. Bennett and Investigator Marie Hayes,

testified that the appropriate corrective action to be taken by a

broker upon discovering that his escrow account is short is to

deposit sufficient funds to eliminate the shortage. Accordingly,

the broker's appropriate corrective action of depositing funds in

such a case cannot be deemed a violation.

57. Petitioner has failed to establish by clear and

convincing evidence the allegation contained in County II that

Respondent knowingly concealed a violation during the course of

an official investigation. Petitioner alleges the Respondent

concealed a violation during an investigation by failing to

reveal to an investigator two deposits of $20,000 and $25,000

made in July 1995. In the first instance, Petitioner has not

established that Respondent's depositing funds into the escrow

account was, in fact, a violation. As stated above,

investigators testifying for Petitioner stated that the proper

corrective action for a broker is to deposit funds to eliminate a

shortage in a escrow account. Next, even if it is assumed that

the mere act of making the two deposits was a violation,

Petitioner did not show that Respondent knowingly concealed this

information during the course of an official investigation.

58. The investigator, John Pence, who conducted the July

1995 audit, did not testify and there is no evidence in the

record that Respondent knowingly concealed the two deposits from

Investigator Peace or Petitioner. Respondent testified that he

made the two deposits, both of which were disclosed on the July

1995 monthly reconciliation statement. Moreover, Respondent

notified Marie Hayes, Petitioner's investigator of the two

deposits during her May 1996 investigation.

59. As to Count III of the Administrative Complaint II

regarding improper disbursement of funds from a escrow trust

account, Petitioner has not met its burden of demonstrating that

Respondent violated Section 475.25(1)(k), Florida Statutes. That

section authorizes the Commission to impose disciplinary action

on a license, if the licensee

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

place, upon receipt, any money, fund,

deposit, check, or draft entrusted to him by

any person dealing with 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 account maintained by 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.

Based on the above quoted provision, upon receipt, any money,

fund, deposit, check, or draft entrusted to him in his capacity

as a broker shall be immediately placed with a title company,

banking institution, credit union, or savings and loan

association during business in this state. Moreover, such funds

shall be kept until disbursement thereof is properly authorized.

60. Petitioner argues that this rule requires that no

disbursements be made from the escrow account to third parties on

behalf of the broker. According to Petitioner, this is true even

if the disbursements are equal to or less than fees or

commissions earned by the broker which have not yet been removed

from the escrow account. Moreover, Petitioner asserts that funds

representing Respondent's commission, should not be disbursed

directly from the escrow account for payment of Respondent's

personal or office expenses. Instead, Petitioner believes that,

at least monthly commissions should be removed from the escrow

account and placed in an operating account. According to

Petitioner, the practice implemented by Respondent constituted

only "poor bookkeeping."

61. There are no allegations that Respondent failed to

properly deposit funds. Rather, Petitioner contends that several

checks were improperly written on the Crescent Management

Account, thereby resulting in improper disbursements from a trust

account. Respondent was the only person authorized to sign

checks drawn on the Crescent Management Account. But in two

instances, checks written on the account were not signed or

authorized by Respondent. With respect to Check No. 7005 and

Check No. 7388, Respondent never signed or directed anyone to

sign on his behalf. Thus, it cannot be concluded that Respondent

is guilty of improperly disbursing funds from the Crescent

Management Account that are attributable to payment of these

checks.

62. With regard to the remaining checks, Check Nos. 5458,

5460, 5347, 5391, and 6439, it is undisputed that Respondent

signed these checks and that they were for office operation

expenses and license renewal fees. Petitioner contends that

these checks were improper disbursements, although there was no

showing that the checks were funded by moneys belonging to

property owners. The evidence adduced at hearing established

that each of the checks alleged to be improper disbursements

cleared payment by the bank and were charged in Respondent's

internal computer bookkeeping system to funds in the "Fees,

Property" portion of the account. For the months in question,

the monthly reconciliation statements balanced or where

explained, corrective action was promptly taken.

63. Count IV of the Administrative Complaint alleges that

the Respondent

. . . is guilty of fraud, misrepresentation,

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 in

Subsection 475.25(1)(b) Florida Statutes.

64. In Munch v. Department of Professional Regulation, Div.

of Real Estate , 592 So. 2d 1136, 1138 (Fla. 1st DCA 1992), the

Department charged a licensed broker-salesperson with "fraud,

misrepresentation, concealment, false promises, false pretenses,

dishonest dealing by trick, scheme, or device, culpable

negligence or breach of trust in a business transaction in

violation of Section 475.25(1)(b), Florida Statutes." The court

held:

It is clear that section 475.25(1)(b) is

penal in nature. As such, it must be

construed strictly, in favor of the one

against whom the penalty would be imposed.

See Holmberg v. Department of Natural

Resources , 503 So. 2d 944 (Fla. 1st DCA

1987). Reading the first clause of Section

475.25(1)(b) . . ., and applying to the words

used in their usual and natural meaning, it

is apparent that it is contemplated that an

intentional act be proved before a violation

may be found. See Rivard v. McCoy , 212 So.

2d 672 (Fla. 1st DCA), cert. denied , 219 So.

2d 703 (Fla. 1968).

Munch at 1143-44.

65. In the instant case, the record establishes that at no

time did the Respondent knowingly or intentional utilize or even

attempt to utilize trust funds to pay his personal or business

expenses. Based upon the findings of fact herein, the Petitioner

has failed to meet its burden of proving by clear and convincing

evidence the charges filed against the Respondent.

66. With regard to Count V of the Administrative Complaint

II, Respondent was charged with having been

. . . found guilty for a second time of any

misconduct that warrants his suspension or

has been found guilty of a course of conduct

or practices which shows that he is so

incompetent, negligent, dishonest, or

untruthful that the money, property,

transactions, and rights of investors, or

those with whom he may sustain a confidential

relation, may not safety be entrusted to him.

Section 475.25(1)(o), Florida Statutes.

67. The record contains no clear and convincing evidence to

support this alleged violation. The two prior Final Orders

involved minor infractions. Specifically, the first Final Order

revealed a bookkeeping error and determined an overage in the

escrow account and involved a minor sign violation. The second

Final Order also involved a bookkeeping error which resulted in a

shortage of approximately $800. Corrective action was

immediately taken. Neither of these cases involved any person

losing trust funds or any intentional misconduct by Respondent.

Likewise, there has been no pattern of wrongdoing by the

Respondent.

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 finding that Respondent has violated Section

475.25(1)(e) Florida Statutes, as alleged in the Administrative

Complaint filed on April 21, 1996, and imposing an administrative

fine of $1,000.

RECOMMENDED that all counts of the Administrative Complaint

issued September 23, 1996, be dismissed.

DONE AND ENTERED this 7th day of October, 1997, in

Tallahassee, Leon County, Florida.

CAROLYN S. HOLIFIELD

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUMCOM 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 7th day of October, 1997.

COPIES FURNISHED:

Geoffrey T. Kirk, Senior Attorney

Department of Business and

Professional Regulation

Division of Real Estate

400 West Robinson Street

Orlando, Florida 32802

Frederick Wilsen, Esquire

Gillis and Wilsen, P.A.

1415 East Robinson Street, Suite B

Orlando, Florida 32801

Lynda L. Goodgame, General Counsel

Department of Business and

Professional Regulation

Northwood Centre

1940 North Monroe Street

Tallahassee, Florida 32399-0792

Henry M. Solares, Division Director

Division of Real Estate

Department of Business and

Professional Regulation

400 West Robinson Street

Post Office Box 1900

Orlando, Florida 32802-1900

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.