97-004384 Division Of Real Estate vs. Dessie B. Castell And A Plus Service Network Realty, Inc. Status: Closed Recommended Order on Monday, February 16, 1998.

Summary: No "good faith doubt" when broker disbursed deposit to buyer after closing failed due to non-performance by seller.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 97-4384

)

DESSIE B. CASTELL and A. PLUS )

SERVICE NETWORK REALTY, INC., )

)

Respondents. )

___________________________________)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings,

by its duly designated Administrative Law Judge, Mary Clark,

conducted a formal hearing in the above-styled case on January 7,

1998, by videoconference. The parties, their counsel, witnesses

and court reporter participated from the Zora Neale Houston

Building, Orlando, Florida; the judge presided from Tallahassee,

Florida.

APPEARANCES

For Petitioner: Laura McCarthy, Es quire

Senior Attorney

Florida Department of Business

and Professional Regulation

Division of Real Estate

Post Office Box 1900

Orlando, Florida 32802

For Respondent: Dean F. Mosley, Esquire

McCrary & Mosley

Suite 211

47 East Robinson Street

Orlando, Florida 32801

STATEMENT OF THE ISSUES

An Administrative Complaint dated June 20, 1997, alleges

that the Respondents, Dessie B. Castell and A. Plus Service

Network Realty, Inc., violated certain provisions of Chapter 475,

Florida Statutes, and Rule 61J2-10.032(1), Florida Administrative

Code, by failing to notify the Florida Real Estate Commission

within 15 business days of a good faith doubt as to appropriate

disbursement of trust funds in an escrow account, and by failing

to maintain those trust funds until disbursement was properly

authorized. The issues for determination are whether those

violations occurred and, if so, what discipline should be imposed

upon the licensees.

PRELIMINARY STATEMENT

In response to the administrative complaint, Respondents

requested a formal administrative hearing and the case was

referred to the Division of Administrative Hearings (DOAH).

Petitioner presented the testimony of Valerie Crane and, by

stipulation, six exhibits were received in evidence as

Petitioner’s exhibits numbers 1 through 6.

Respondent, Dessie B. Castell, testified and presented the

additional testimony of Rosemarie Jackson and Elizabeth Sanabria

Dreier. Respondents also presented a single exhibit, a letter

dated September 25, 1996, signed by Elizabeth Sanabria Dreier,

President of ESD Lending Corporation, Inc. The exhibit, marked

for identification as Respondents’ exhibit number 1, was objected

to by Petitioner. Ms. Dreier, in her testimony, acknowledged

that she signed the letter prepared by office staff, but had no

recollection of any of the facts stated in the letter. The

letter has been read and considered by the Administrative Law

Judge and is received into evidence as it corroborates testimony

by Ms. Castell and Ms. Jackson.

The transcript of hearing was filed on January 26, 1998, and

Petitioner filed its proposed recommended order on January 28,

1998.

FINDINGS OF FACT

1. Respondent Dessie B. Castell is, and was at all material

times, a licensed real estate broker in Florida, having been

issued license number 0342283 in accordance with Chapter 475,

Florida Statutes. Ms. Castell is owner, president and qualifying

broker of A. Plus Service Network Realty, Inc., which corporation

is registered and licensed in accordance with Chapter 475,

Florida Statutes, at 901 Mock Avenue, Orlando, Florida.

2. Ms. Castell negotiated a contract for sale and purchase

of a home at 638 18th Street in Orlando, Florida. Rosemary

Jackson was the proposed buyer and Valerie Crane, trustee, was

the seller. At the time of the contract dated June 26, 1996,

Ms. Castell had already been working with Rosemary Jackson and

held a $500.00 escrow deposit from Ms. Jackson in her broker’s

escrow account.

3. Also, at the time of the contract on June 26, 1996,

Ms. Jackson had been pre-qualified for an FHA loan through ESD

Lending Corporation, Inc.

4. The contract for sale and purchase between Ms. Jackson

and Ms. Crane established July 2, 1996, as the closing date.

Ms. Jackson liked the house and needed to move in quickly.

5. The contract failed to close on July 2, 1996. Both

Ms. Jackson and Ms. Castell understood that the ESD lending

Corporation did not have an approved appraisal required by FHA

for the loan.

6. There was an appraisal done on the property for a

previous prospective buyer and Ms. Crane furnished that appraisal

to ESD before July 2, 1996. Ms. Crane’s own testimony was

confused and conflicting as to whether the appraisal she

furnished was approved. Ms. Jackson’s and Ms Castell’s testimony

was clear and credible that they were never informed that the

appraisal was approved, and Ms. Castell did not receive the HUD

settlement papers required for closing.

7. Soon after July 2, 1996, someone came to Ms. Jackson’s

workplace identifying himself as a representative of Ms. Crane

and offering to extend the closing and to provide a refrigerator

and some other items. Ms. Jackson was suspicious of this person

as she felt that he was trying to circumvent the mortgage company

staff with whom she had been dealing.

8. Ms. Jackson had looked at another house earlier that she

did not like as well as the house offered by Ms. Crane; but since

she needed to move quickly, Ms. Jackson told Ms. Castell to

transfer her escrow deposit to a contract on this prior house.

Ms. Castell did that on July 5, 1996, and that contract closed

shortly thereafter.

9. On July 6, 1996, Ms. Crane faxed to Ms. Castell a letter

offering to add the refrigerator and to extend closing to the

next Friday. The letter asked that the offer be accepted by

5:00 p.m. on that same day, the 6th or if not accepted, that the

$500.00 deposit be released to Ms. Crane.

10. When she received no response, Ms. Crane sent another

letter to Ms. Castell on July 13, 1996, demanding the $500.00

escrow deposit, reiterating that Ms. Jackson forfeited her

deposit when she did not close on the property after qualifying

for the loan and reminding Ms. Castell of her obligation as

escrow agent pursuant to Section 475.25, Florida Statutes, in the

event of a dispute over the deposit. Ms. Crane sent a copy of

her letter to the Florida Real Estate Commission.

11. Ms. Castell and her company did not notify the Florida

Real Estate Commission regarding a dispute over the $500.00

escrow deposit. She felt that it was Ms. Crane’s failure to

provide an approved appraisal that caused the contract to expire

on July 2, 1996, and thereafter, that she and the buyer were

entitled to transfer the funds to another contract.

CONCLUSIONS OF LAW

12. The Division of Administrative Hearings has

jurisdiction in this proceeding pursuant to Sections 120.569 and

120.57(1), Florida Statutes.

13. In license discipline cases such as this, the agency

must prove the allegations of its complaint with evidence that is

clear and convincing. Department of Banking and Finance v.

Osborne Stern , 670 So. 2d 932 (Fla. 1996).

14. Section 475.25, Florida Statutes, provides that the

agency may suspend a license for a period not exceeding ten (10)

years, may 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 committed any of a

series of violations described in Section 475.25(1), Florida

Statutes.

15. Subsection 475.25(1)(a)1, Florida Statutes (1994),

provides that if a licensee:

. . . in good faith, entertains doubt as to

what person is entitled to the . . . delivery

of the escrowed property, or if conflicting

demands have been made upon him for the

escrowed property, which property he still

maintains in his escrow or trust account, the

licensee shall promptly notify the [agency]

of such doubts or conflicting demands and

shall promptly:

a. Request that the [agency] issue an escrow

disbursement order determining who is

entitled to the escrowed property;

b. With the consent of all parties, submit

the matter to arbitration;

c. By interpleader or otherwise, seek

adjudication of the matter by a court; or

d. With the written consent of all parties,

submit the matter to mediation . . .

16. Subsection 475.25(1)(e), Florida Statutes (1994),

allows the agency to discipline a license if a licensee has

violated any provisions of Chapter 475 or any lawful order or

rule made or issued under the provisions of Chapter 475 or 455.

17. Rule 61J2-10.032(1), Florida Administrative Code,

provides, in part:

(b) A broker, who has a good faith doubt as

to whom is entitled to any trust funds held

in the broker’s escrow account, must provide

written notification to the agency within 15

business days after having such doubt and

must institute one of the settlement

procedures as set forth in s. 475.25(1)(d)1,

Florida Statutes, within 15 business days

after the date the notification is received

by the Division. The determination of good

faith doubt is based upon the facts of each

case brought before the [agency.] Based upon

prior decisions of the [agency,] good faith

doubt shall be deemed to exist in the

following situations:

1. the closing or consummation date of

the sale, lease or other real estate

transaction has passed, and the broker has

not received conflicting or identical

instructions from all of the parties

concerning the disbursement of the escrowed

funds;

2. the closing or consummation date of

the sale, lease, or other real estate

transaction has not passed, but one or more

of the parties has expressed its intention

not to close or consummate the transaction

and the broker has not received conflicting

or identical instructions concerning the

disbursement of the escrowed funds; and

(c) If one of the parties to a failed real

estate sales transaction does not respond to

the broker’s inquiry as to whether that party

is placing a demand on the trust funds or is

willing to release them to the other party,

the broker may send a certified notice

letter, return receipt requested, to the

non-responding party. This notice should

include the information that a demand has

been placed by the other party, that a

response must be received by a certain date,

and that failure to respond will be construed

as authorization for the broker to release

the funds to the other party. Before

releasing said trust funds, the broker must

have the return receipt as proof the notice

was delivered.

18. Section 475.25(1)(k), Florida Statutes, provides that

the agency may discipline a licensee if it finds that the

licensee:

[h]as 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 the

state . . . wherein the funds shall be kept

until disbursement thereof is properly

authorized.

19. The evidence as described in the findings of fact,

above, established that by the time Ms. Crane demanded

disbursement of the escrow deposit, the funds had already been

distributed on behalf of the buyer, Ms. Jackson, in the form of a

deposit on another property. At the time that the funds were

disbursed to Ms. Jackson, Ms. Castell had no “good faith doubt”

as to the appropriate disbursement. The agency has thus failed

to meet its burden of proof.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions

of Law, it is hereby RECOMMENDED:

That the Department of Business and Professional Regulation

enter a final order dismissing the administrative complaint in

this case.

RECOMMENDED this 16th day of February, 1998, in Tallahassee,

Leon County, Florida.

___________________________________

MARY CLARK

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCO M 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 16th day of February, 1998.

COPIES FURNISHED:

Laura McCarthy, Esquire

Department of Business and

Professional Regulation

Post Office Box 1900

Orlando, Florida 32802-1900

Dean F. Mosley, Esquire

McCrary & Mosley

Suite 211

47 East Robinson Street

Orlando, Florida 32801

Henry M. Solares, Division Director

Department of Business and

Professional Regulation

400 West Robinson Street

Post Office Box 1900

Orlando, Florida 32802-1900

L ynda 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.