97-004950 Division Of Real Estate vs. Edward D. Armbruster, Colleen Michele Armbuster, And Armbuster Realty, Inc. Status: Closed Recommended Order on Tuesday, July 28, 1998.

Summary: Realtors guilty of violating rule by not sending notice to buyer by certified mail and for not using language contained in rule.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 97-4950

)

EDWARD D. ARMBRUSTER, )

COLEEN MICHELE ARMBRUSTER, )

and ARMBRUSTER REALTY, INC., )

)

Respondents. )

________________________________)

RECOMMENDED ORDER

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

on June 1, 1998, in DeFuniak Springs, Florida, before Donald R.

Alexander, the assigned Administrative Law Judge of the Division

of Administrative Hearings.

APPEARANCES

For Petitioner: Christine M. Ryall, Esquire

400 West Robinson Street

Suite N-308

Orlando, Florida 32801-1772

For Respondents: Edward D. Armbruster, pro se

Colleen Michele Armbruster, pro se

Post Office Box 635

DeFuniak Springs, Florida 32435

STATEMENT OF THE ISSUE

The issue is whether Respondents' real estate licenses

should be disciplined on the ground that Respondents allegedly

violated a rule and various provisions within Chapter 475,

Florida Statutes, as charged in the Administrative Complaint.

PRELIMINARY STATEMENT

This matter began on September 18, 1997, when Petitioner,

Department of Business and Professional Regulation, Division of

Real Estate, issued an Administrative Complaint alleging that

Respondents, Edward D. Armbruster, Colleen Michele Armbruster,

and Armbruster Realty, Inc., all licensed as realtors, had

violated a rule and various provisions within Chapter 475,

Florida Statutes, by failing to notify the Florida Real Estate

Commission of conflicting demands for an earnest money deposit

held by Respondents in conjunction with a 1996 transaction.

Respondents denied the allegations and requested a formal

hearing under Section 120.569, Florida Statutes, to contest the

charges. The matter was referred by Petitioner to the Division

of Administrative Hearings on October 22, 1997, with a request

that an Administrative Law Judge be assigned to conduct a formal

hearing. By Notice of Hearing dated December 4, 1997, a final

hearing was scheduled on March 11, 1998, in Panama City, Florida.

At Petitioner's request, the case was continued to June 1, 1998,

in Defuniak Springs, Florida. On May 28, 1998, the case was

transferred from Administrative Law Judge P. Michael Ruff to the

undersigned.

At final hearing, Petitioner presented the testimony of

James B. Patten and Joyce Patten, the complaining consumers; and

Monica Uher, a former agency investigator. Also, it offered

Petitioner's Exhibits 1-7. All exhibits were received in

evidence. Respondents testified on their own behalf.

The transcript of hearing was filed on June 30, 1998.

Proposed findings of fact and conclusions of law were filed by

Petitioner on July 9, 1998, and they have been considered by the

undersigned in the preparation of this Recommended Order.

FINDINGS OF FACT

Based upon all of the evidence, the following findings of

fact are determined:

1. When the events herein occurred, Respondents, Edward D.

Armbruster and Colleen Michele Armbruster, were licensed real

estate brokers having been issued license numbers 0002159 and

0362890, respectively, by Petitioner, Department of Business and

Professional Regulation, Division of Real Estate (Division).

Respondents served as qualifying brokers and officers of

Respondent, Armbruster Realty, Inc., a corporation registered as

a real estate broker and located at 1031 West Nelson Avenue,

DeFuniak Springs, Florida. The corporation holds license number

0211855, also issued by the Division.

2. On July 10, 1996, Gerald and Joyce Singleton, who had

just relocated to California, entered into a contract with

James B. and Joyce Patten to sell their single-family residence

located on Madison Street in the City of Freeport, Florida, for a

price of $78,000.00. The contract called for the Pattens to pay

$1,000.00 as an earnest money deposit, to be held in escrow by

Respondents. The contract further provided that "[c]losing shall

be within 30 days (more or less) after acceptance of this

contract," and that "[i]n the event that buyer defaults and

deposit is forfeited, it is agreed said deposit shall be divided

equally between seller and broker." The transaction was handled

by Geraldine Dillon (Dillon), a salesperson in Respondents'

office, who is now retired.

3. Because the Pattens had recently moved to Walton County

from Washington State, and they were temporarily living with a

relative in a mobile home, the time for closing was of the

essence. Accordingly, the Pattens inserted into the contract a

provision requiring that a closing be held within "30 days (more

or less)." This meant that a closing should be held on or about

August 10, 1996, give or take a few days.

4. The parties acknowledge that property boundary problems

were somewhat common in certain areas of Freeport, including the

area where the subject property was located. To satisfy the bank

and title company, a surveyor was engaged to prepare a survey of

the property. However, the parties agree that the surveyor noted

problems with the boundaries of the lot. When a second surveyor

would not undertake the survey because of similar boundary

problems, Joyce Patten, who was the principal negotiator for the

couple, notified Dillon that they did not wish to close because

of potential title problems and wanted a refund of their deposit.

5. Notwithstanding this concern, Dillon advised Joyce

Patten that a third surveyor would be hired, at the seller's

expense, and he could "certify" the property. Although Joyce

Patten expressed concern that the bank might not accept a third

survey after two earlier ones had failed, and she did not want to

pay for another survey, she did not instruct Dillon to stop the

process. Accordingly, Dillon engaged the services of Tommy

Jenkins, a local surveyor, to perform another survey.

6. After a certified survey was obtained by Jenkins on

August 12, 1996, which Respondents represent without

contradiction satisfied the lender and title company, a closing

was scheduled within the next few days. This closing date

generally conformed to the requirement that a closing be held by

August 10, 1996, "more or less." The seller, who by now had

relocated to California, flew to Florida for the closing, and the

title company prepared a closing statement and package. Just

before the closing, however, Respondents learned through a

representative of the title company that the Pattens were

"cancelling the closing," apparently in violation of the

contract.

7. Shortly after the aborted closing, Joyce Patten

requested that Dillon return their deposit. By this time, the

Pattens had already entered into a second contract to buy another

home in the same area and closed on that property before the end

of August. Respondents were never informed of this fact by the

Pattens.

8. On August 21, 1996, Colleen Armbruster prepared a rather

lengthy letter to the Pattens (with a copy to the sellers) in

which she acknowledged that they had orally requested from Dillon

that their escrow deposit be returned. The letter has been

received in evidence as Petitioner's Exhibit 4. Armbruster

stated that she was "perplexed" that they were demanding a refund

of their earnest money deposit, given the fact that the seller

had "met the terms and conditions of the sale." Armbruster

outlined the three reasons in the contract which would allow the

Pattens to withdraw without forfeiting their deposit, but noted

that none were applicable here. Accordingly, she advised them

that the seller would be consulted as to his wishes regarding the

deposit, and that the Pattens should contact her if they had any

questions.

9. Through oversight, however, she did not include a notice

to the Pattens that they must respond to her letter within a

stated period of time reaffirming their demand for the trust

funds, or the deposit thereafter would be disbursed pursuant to

the contract. By failing to include this specific language, and

sending the letter by regular rather than certified mail, return

receipt requested, Respondents committed a technical, albeit

minor, violation of an agency rule. Even so, the Pattens

acknowledged receiving the letter, and there is no reason to

believe that they did not understand its import, especially the

requirement that they contact the broker if they disagreed with

the proposed disbursement of the money. It can be reasonably

inferred that the Pattens did not respond because they "figured

[they weren't] going to be able to get [their] money back" due to

their failure to perform.

10. On September 13, 1996, the seller's attorney advised

the Pattens by letter that the seller considered the deposit

forfeited pursuant to paragraph 15(a) of the contract, which

pertains to the "Default" provisions.

11. The Pattens never responded to either letter, and they

also failed to respond to telephone calls made by Respondents or

their agents regarding this matter. In view of the Pattens' lack

of response or reaffirmance of their demand, and the fact that

they had already closed on another property, Respondents

logically and fairly assumed that the Pattens were in agreement

with the disbursement procedures outlined in Coleen Armbruster's

letter of August 21.

12. Accordingly, on September 17, 1996, Edward Armbruster,

who had not been involved in this transaction to date, in good

faith signed two disbursement checks giving $697.50 to the seller

and retaining the balance for his firm. This division was

consistent with the terms of the contract. In making this

disbursement, there was no intent on the part of Respondents to

trick, deceive, breach their trust, or in any way unlawfully

deprive the Pattens of their deposit.

13. Respondents did not notify the Florida Real Estate

Commission (Commission) that they had received conflicting

demands for a deposit, nor institute any other procedures

regarding the deposit, since they no longer had any good faith

doubt as to whom was entitled to their trust funds. This was

because the Pattens had failed to respond to letters and

telephone calls regarding the sellers' claim to the deposit.

14. There is no evidence that Respondents have ever been

the subject of prior disciplinary action during their lengthy

tenure as licensees. At the same time, it is noted that

Respondents acted in good faith throughout the process and

genuinely believed that there was no dispute. It should also be

recognized that, for at least part of the time, the Pattens were

working two contracts simultaneously without advising the

realtors.

CONCLUSIONS OF LAW

15. The Division of Administrative Hearings has

jurisdiction over the subject matter and the parties hereto

pursuant to Sections 120.569 and 120.57(1), Florida Statutes.

16. Because Respondents' professional licenses are at risk,

Petitioner bears the burden of proving by clear and convincing

evidence that the allegations in the complaint are true. See ,

e . g ., Ramsey v. Dep't of Prof. Reg., Division of Real Estate ,

574 So. 2d 291 (Fla. 5th DCA 1991).

17. The nine-count complaint alleges that each Respondent

(a) violated Sections 475.25(1)(d)1. and 475.25(1)(e), Florida

Statutes (Supp. 1996), and Rule 61J2-10.032(1), Florida

Administrative Code, by their "failure to provide written

notification to the Commission upon receiving conflicting demands

within 15 days of last party's demand or upon a good faith doubt

as to whom is entitled to any trust funds held in the broker's

escrow account and failure to institute one of the settlement

procedures as set forth in s. 475.25(1)(d)1. within 30 business

days after the lsat (sic) demand or good faith doubt" (Counts I,

IV, and VII); (b) violated Section 475.25(1)(k), Florida

Statutes, by their "failure to maintain trust funds in the real

estate brokerage bank account or some other proper depository

until disbursement thereof was properly authorized" (Counts II,

V, and VIII); and (c) were "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" (Counts III, VI, and IX). In

its proposed order, Petitioner has limited the charges in the

latter count to culpable negligence and breach of trust in a

business transaction.

18. By failing to follow the procedures under Rule 61J2-

10.032(1)(c), Florida Administrative Code, which contemplate that

Respondents notify the Pattens by certified mail that, absent a

reply within a stated period of time, their deposit would be

disbursed to the seller and broker pursuant to the contract,

Respondents technically violated, albeit unintentionally, the

terms of the foregoing rule, as alleged in Counts I, IV, and VII.

This in turn constituted a violation of Section 475.25(1)(e),

Florida Statutes, which makes it unlawful to violate any agency

rule.

19. Because the evidence establishes that, under the facts

of this case, Respondents were not in doubt as to whom was

entitled to the buyers' deposit, there was no obligation on their

part to notify the Commission of having received conflicting

demands for trust funds held in their escrow account. Similarly,

under the circumstances found herein, they did not unlawfully

disburse escrowed funds. Accordingly, the allegation in Counts

I, II, IV, V, VII, and VIII that they violated Sections

475.25(1)(d)1. and (k), Florida Statutes, must fail.

20. Because there was no intent on the part of Respondents

to commit culpable negligence or breach of trust in a business

transaction, Counts III, VI, and IX must also fail. See , e . g .,

Munch v. Dep't of Prof. Reg ., 592 So. 2d 1136, 1143-44 (Fla. 1st

DCA 1992)(in order to find a violation of Section 475.25(1)(b),

there must be an intentional act on the part of a licensee).

21. Rule 61J2-24.001, Florida Administrative Code, provides

a range of disciplinary guidelines from which disciplinary

penalties will be imposed upon licensees guilty of violating

Chapter 475, Florida Statutes. For a violation of Section

475.25(1)(e), the rule provides that the "usual action of the

Commission" shall be to impose a penalty ranging from "an 8 year

suspension to revocation and an administrative penalty of

$1,000."

22. Paragraph (4) of the same rule identifies aggravating

and mitigating circumstances which if present entitle the

Commission to deviate from the foregoing guidelines. Relevant to

this proceeding are the mitigating circumstances set forth in

Finding of Fact 14. Further, Edward Armbruster's involvement

here is only through imputation as the principal qualifying

broker, while Coleen Armbruster had no active role in the

transaction until after the aborted closing. Given the lack of

any intent by Respondents to violate a rule or statute, and the

extremely minor nature of the offense, a deviation from the

guidelines is clearly warranted. A reprimand is an appropriate

penalty.

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 Respondents guilty of a technical violation

of Rule 61J2-10.032(1), Florida Administrative Code, and Section

475.25(1)(e), Florida Statutes, and that they be given a

reprimand. All other charges should be dismissed.

DONE AND ENTERED this 28th day of July, 1998, in

Tallahassee, Leon County, Florida.

___________________________________

DONALD R. ALEXANDER

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 28th day of July, 1998.

COPIES FURNISHED:

Henry M. Solares, Director

Division of Real Estate

Post Office Box 1900

Orlando, Florida 32802-1900

Christine M. Ryall, Esquire

400 West Robinson Street

Suite N-308

Orlando, Florida 32801-1772

Edward D. Armbruster

Colleen M. Armbruster

Post Office Box 635

DeFuniak Springs, Florida 32433

Lynda L. Goodgame, Esquire

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 Florida Real

Estate Commission.