97-002675 Division Of Real Estate vs. Richard Michael Regazzi And Atlantic Rentals, Inc. Status: Closed Recommended Order on Tuesday, December 23, 1997.

Summary: Respondent is guilty of fraud, of breach of trust, of failure to maintain trust funds, and of failure to prepare monthly escrow reconciliations. Recommend revocation and require Respondent to pay restitution.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, DIVISION )

OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 97-2675

)

RICHARD MICHAEL REGAZZI and )

ATLANTIC RENTALS, INC., )

)

Respondents. )

____________________________________)

RECOMMENDED ORDER

A formal hearing was held by the Division of Administrative

Hearings, before Administrative Law Judge, Daniel M. Kilbride, in

Melbourne, Florida, on October 17, 1997. The following

appearances were entered:

APPEARANCES

For Petitioner: Daniel Villazon, Senior Attorney

Department of Business and

Professional Regulation

Post Office Box 1900

Orlando, Florida 32802

For Respondents: Richard Michael Regazzi, pro se

6211-B North Atlantic Avenue

Cape Canaveral, Florida 32920

STATEMENT OF THE ISSUE

Whether the Respondents' Florida real estate licenses should

be disciplined based upon the following charges, as alleged in

the administrative complaint:

COUNTS I and II: Whether Respondent Richard Michael Regazzi

("Regazzi") is guilty of fraud, misrepresentation, concealment,

false promises, false pretenses, dishonest dealing by trick,

scheme or device, culpable negligence, or breach of trust in any

business transaction in violation of Section 475.25(1)(b),

Florida Statutes.

COUNT III: Whether Respondent Regazzi is guilty of failure

to maintain trust funds in the real estate brokerage escrow bank

account or some other proper depository until disbursement

thereof was properly authorized in violation of Section

475.25(1)(k), Florida Statutes.

COUNT IV: Whether Respondent Atlantic Rentals Realty, Inc.

is guilty of failure to maintain trust funds in the real estate

brokerage escrow bank account or some other proper depository

until disbursement thereof was properly authorized in violation

of Section 475.25(1)(k), Florida Statutes.

COUNT V: Whether Respondent Regazzi is guilty of failure to

prepare the required written monthly escrow statement-

reconciliations in violation of Rule 61J2-14.012(2) and (3),

Florida Administrative Code, and therefore in violation of

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

COUNT VI: Whether Respondent Atlantic Rentals, Inc. is

guilty of failure to prepare the required written monthly escrow

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

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

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

COUNT VII: Whether Respondent Regazzi is guilty of having

been found guilty for a third time of 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 safely be entrusted to him in

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

PRELIMINARY STATEMENT

By an Administrative Complaint filed February 14, 199 7, the

Petitioner, Department of Business and Professional Regulation,

Division of Real Estate, alleged that the Respondents violated

various statutes and rules. The Respondents disputed the

allegations of fact and requested a formal hearing. This matter

was referred to the Division of Administrative Hearings on

June 4, 1997 and set for hearing. This matter was continued once

at the request of the Petitioner.

A formal hearing was held on October 17, 1997, in Melbourne,

Florida. At hearing, Petitioner called one witness, Investigator

Maria Ventura, and five exhibits were admitted in evidence.

Respondent Regazzi testified on his own behalf and called William

Pace as an adverse witness. Respondents offered one exhibit into

evidence. A transcript of the proceeding was filed on

November 10, 1997. Petitioner filed its proposed recommended

order on November 21, 1997. Respondents have not filed proposals

as of the date of this order. Based on the evidence, the

following findings of fact and conclusions of law are determined.

FINDINGS OF FACT

1. Petitioner is a state government licensing and

regulatory agency charged with the responsibility and duty to

prosecute Administrative Complaint pursuant to the laws of the

State of Florida, in particular Section 20.165, Florida Statutes,

and Chapters 120, 455 and 475, Florida Statutes, and the rules

promulgated pursuant thereto.

2. Respondent Regazzi is, and was at all times material

hereto, a licensed Florida real estate broker. License number

0273453 was issued in accordance with Chapter 475, Florida

Statutes. The last license issued was as a broker in care of

Atlantic Rentals, Inc., 6811 North Atlantic Avenue, No. B, Cape

Canaveral, Florida.

3. Respondent Atlantic Rentals, Inc. is, and was at all

times material hereto, a corporation registered as a Florida real

estate broker having been issued license number 0273444 in

accordance with Chapter 475, Florida Statutes. The last license

issued was at the address of 6811 North Atlantic Avenue, No. B,

Cape Canaveral, Florida.

4. At all times material hereto, Respondent Regazzi was

licensed and operating as the qualifying broker and officer of

Respondent Atlantic Rentals, Inc.

5. On January 28, 1997, Petitioner's Investigator Maria

Ventura ("Investigator Ventura") conducted an audit of

Respondents' escrow account #3601612291, maintained at

NationsBank and titled Atlantic Rentals, Inc., Multi Unit escrow

Account (escrow account).

6. On January 28, 1997, Respondents had a reconciled bank

balance of $46,166.93.

7. As of January 28, 1997, Investigator Ventura determined

that Respondents had a total trust liability of $84,586.77.

8. By comparing Respondents' reconciled bank balance with

Respondents' trust liability, it was determined that Respondents

had a shortage of $38,419.84 in their escrow account.

9. In addition, Respondents were not performing monthly

reconciliations of their escrow account.

10. On January 28, 1997, Respondent Regazzi prepared a

monthly reconciliation statement (reconciliation statement) for

December 1996, and provided it to Petitioner on the same day.

Respondent Regazzi's reconciliation statement indicated that

there was shortage of $28,885.36 in the escrow account.

11. Respondent Regazzi's reconciliation statement is not

signed, and does not indicate what month was being reconciled.

The statement indicates that the reconciled bank balance and

trust liability agree when, in fact, the reconciliation statement

indicates a shortage of $28,885.36.

12. Respondent Regazzi's explanati on of how the funds were

removed from the escrow account by a third party is not credible.

Even if this account were credible, it does not lessen Respondent

Regazzi's culpability.

13. On April 21, 1992, the Florida Real Estate Commission

("FREC") issued a final order whereby Respondent Regazzi was

found guilty of misconduct and was fined $200, and placed on

probation for one year with a requirement to complete and provide

satisfactory evidence to the Department of having completed an

approved 30-hour broker management course. Respondent

successfully completed the terms of probation.

14. On November 12, 1996, the FREC issued a final order

whereby Respondent Regazzi was fined $250 for misconduct and

Respondent Atlantic Rentals, Inc. was reprimanded.

CONCLUSIONS OF LAW

15. The Division of Administrative Hearings has

jurisdiction over the parties and subject matter of this cause,

pursuant to Section 120.57(1), Florida Statutes.

16. The Petitioner's authority to prosecute this matter is

derived from Chapters 455 and 475, Florida Statutes.

17. Section 475.25, Florida Statutes, provides that the

Florida Real Estate Commission may suspend a license for a period

not exceeding ten years; revoke a real estate license; may impose

an administrative fine not to exceed $1,000 for each count or

separate offense; and may impose a reprimand or, any or all of

the foregoing, if it finds that a licensee has violated Section

475.25(1)(b),(e),(k), or (o), Florida Statutes.

18. Petitioner has the burden of proof as to th e

allegations contained in the Administrative Complaint. Balino v.

Department of Health and Rehabilitative Services , 348 So. 2d 349

(Fla. 1st DCA 1977). In license disciplinary proceedings, the

burden of proof is by clear and convincing evidence. Ferris v.

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

19. A real estate broker is charged with knowledge of

Chapter 475. Wallen v. Florida Department of Professional

Regulation, Division of Real Estate , 568 So. 2d 975, (Fla. 3rd

DCA 1990).

20. As real estate l icensees in Florida, the Respondents

occupy a status under law with recognized privileges and

responsibilities. Zichlin v. Dill , 25 So. 2d 4, (Fla. 1946);

United Homes, Inc. v. Moss , 54 So. 2d 351 (Fla. 2nd DCA 1963).

21. Inasmuch as a real estate licensee in Florida belongs

to a privileged class, the State has prescribed a high standard

of qualifications. Zichlin , supra . "The law specifically

required that a person, in order to hold a real estate license,

must make it appear that he is . . . trustworthy . . . and that

he bears a good reputation for fair dealing." McKnight v.

Florida Real Estate Commission , 202 So. 2d 199 (Fla. 2nd DCA

1967), cert. denied 209 So. 2d 672 (Fla. 1968).

22. Further, in Dreyer v. Florida Real Estate Commission ,

370 So. 2d 95, 98 (Fla. 4th DCA 1979), the court stated:

No action of a real estate broker or salesman can

result in greater damage to the money and property of

investors and those with whom the registrant may

sustain a confidential relation than misusing funds

entrusted to the registrant by his client .

The Dreyer court went on to hold that the broker is ultimately

responsible for proper trust accounting practices notwithstanding

if such errors were caused by a subordinate. Dreyer , supra at

100.

23. Finally, the act that no identifiable person has been

shown to have been injured by a licensee's conduct does not

absolve the licensee of a violation of Chapter 475. Hime v.

Florida Real Estate Commission , 61 So. 2d 182, 183 (Fla. 1952);

See also Dreyer , supra , 370 So. 2d at 99.

24. Section 475.25(1)(b), Florida Statutes, provides:

(1) The commission may . . . place a licensee,

registrant, or permittee on probation; may suspend a

license, registration, or permit for a period not

exceeding 10 years; may revoke a license, registration,

or permit; may impose an administrative fine not to

exceed $1,000 for each count or separate offense; and

may issue a reprimand, and any or all of the foregoing,

if it finds that the licensee, registrant, permittee,

or applicant . . . [h]as been guilty of culpable

negligence or breach of trust in any business

transaction.

25. Petitioner has established by clear and convincing

evidence that the foregoing conduct concerning the manner in

which Respondents maintained or supervised trust funds

constituted culpable negligence and breach of trust in violation

of Section 475.25(1)(b), Florida Statutes.

26. Respondent Regazzi's conduct goes to the central theme

of professional licensure in the State of Florida. Respondent

Regazzi clearly failed to live up the standards required of

licensed real estate professionals. Respondent Regazzi used his

clients' security deposits either for his own personal benefit or

he permitted it to be used for the personal benefit of another.

In either event, Respondent Regazzi breached the trust of his

clients. His actions subjected his clients to the very real

possibility that their security deposits will not be available

when requested.

27. Therefore, there is clear and convincing evidence that

the Respondents, each of them, are guilty of having committed a

violation of Section 475.25(1)(b) (1995), Florida Statutes, as

alleged in Counts I and II of the Administrative Complaint.

28. Section 475.2(1)(k), Florida Statutes, (1995) provides:

The Florida Real Estate Commission may suspend a

license for a period not exceeding ten years; revoke a

real estate license; may impose an administrative fine

not to exceed $1,000 for each count or separate

offense; and may impose a reprimand or, any or all of

the foregoing, if it finds that a licensee failed, if a

broker, to immediately place, upon receipt, any money,

funds, deposit, check, or draft entrusted to him by any

person dealing with him as a 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. . . .

29. Respondents have violated Section 475.25(1)(k), Florida

Statutes (1995), by having negative balances in their escrow

accounts. They were not maintaining trust funds in escrow.

30. Therefore, there is clear and convincing evidence that

Respondents are guilty of having committed a violation of Section

475.25(1)(k), Florida Statutes (1995), as alleged in Counts III

and IV of the Administrative Complaint.

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

Code, provides:

[a]t 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 minimum information to included in the

monthly statement-reconciliation shall be the date the

reconciliation was undertaken, the date used to

reconcile the balances, the name of the bank(s), the

name(s) of the account(s), the account number(s), the

account balance(s) and date(s), deposits in transit,

outstanding checks identified by date and check number,

and any other items necessary to reconcile the bank

account balance(s) with the balance per the broker's

checkbook(s) and other trust account books and records

disclosing the date of receipt and the source of the

funds. The broker shall review, sign and date the

monthly statement-reconciliation.

[w]henever the trust liability and the bank balances do

not agree, the reconciliation shall contain a

description or explanation for the difference(s) and

any corrective action taken in reference to shortages

or overages of funds in the account(s). Whenever a

trust bank account record reflects a service charge or

fee for a non-sufficient check being returned or

whenever an account has a negative balance, the

reconciliation shall disclose the cause(s) of the

returned check or negative balance and the corrective

action taken.

32. Section 475.25(1)(e), Florida Statutes, provides:

The Commission may suspend a license for a period not

exceeding ten years, may revoke a real estate license;

may impose an administrative fine not to exceed $1,000

for each account or separate offense; and may impose a

reprimand; if it finds that the licensee . . . [h]as

violated any of the provisions of this chapter or any

lawful order or rule made or issued under the

provisions of this chapter or chapter 455.

33. Respondents violated Rules 61J2-14.012(2) and (3),

Florida Administrative Code, and therefore are in violation of

Section 475.25(1), Florida Statutes, in that Respondents failed

to perform monthly reconciliations. The one reconciliation

statement Respondent Regazzi prepared was not signed and no

corrective action was taken to replace the $28,885.36 shortage.

34. Furthermore, there is no explanation for the shortage.

Notably, missing is any evidence, other than Respondent Regazzi's

assertions, that a third person caused the shortage.

35. There is clear and convincing evidence that Respondents

are guilty of violating Rules 61J2-14.012(2) and (3), Florida

Administrative Code. Therefore, they are in violation of Section

475.25(1)(e), Florida Statutes, as alleged in Counts V and VI of

the Administrative Complaint.

36. Section 475.25(1)(o), Florida Statutes (1995),

provides:

The commission . . . may revoke a license, . . . if it

finds that the licensee . . . [h]as 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 show 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 safely be entrusted to

him.

37. The evidence shows Respondent Regazzi violated Section

475.25(1)(o), Florida Statutes (1995). In two prior separate

cases FREC disciplined Respondent Regazzi for mishandling trust

funds.

38. Respondent Regazzi has clearly shown a course of

conduct that indicates that he cannot be trusted with others'

trust funds.

39. There is clear and convincing evidence that Respondent

Regazzi is guilty of having committed a violation of Section

475.25(1)(o), Florida Statutes (1995), as alleged in Count VIII

of the Administrative Complaint.

RECOMMENDATION

Upon the foregoing findings of fact and conclusions of law,

it is

RECOMMENDED that

1. Respond ent Regazzi be found guilty of violating Sections

475.25(1)(b), (e), (k), and (o), Florida Statutes (1995), as

charged in the Administrative Complaint.

2. Respondent Atlantic Rentals, Inc. be found guilty of

having violated Sections 475.25(1)(b), (k), and (e), Florida

Statutes, as charged in the Administrative Complaint.

3. That Respondents Regazzi's real estate license be

revoked and that he be ordered to pay restitution in the amount

of $38,419.84, plus interest.

4. That Respondent Atlantic Rental s, Inc.'s corporate

brokerage registration be revoked.

RECOMMENDED this 23rd day of December, 1997, at Tallahassee,

Leon County, Florida.

___________________________________

DANIEL M. KILBRIDE

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 23rd day of December, 1997.

COPIES FURNISHED:

Daniel Villazon, Esquire

Department of Business and

Professional Regulation

400 West Robinson Street, Suite N-308

Orlando, Florida 32801

Richard Michael Regazzi, pro se

Atlantic Rentals, Inc.

6811-B North Atlantic Avenue

Cape Canaveral, Florida 32920

Henry M. Solares, Division Director

Department of Business and

Professional Regulation

Post Office Box 1900

Orlando, Florida 32802-1900

Lynda L. Goodgame

General Counsel

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399-0792

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15

days from the date of this Recommended Order. Any exceptions to

this Recommended Order should be filed with the agency that will

issue the final order in this case.