STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

STATE OF FLORIDA, DEPARTMENT ) OF BANKING AND FINANCE, DIVISION ) OF FINANCE, )

)

Petitioner, )

)

vs. ) CASE NO. 75-1238

)

EDWARD J. LENAHAN, JR., )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, an administrative hearing was held in Room 417, Broward County Courthouse, Fort Lauderdale, Florida, at 9:30 A.M. on October 1, 1975, before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Barry Chapnick, Esquire

Assistant General Counsel Office of the Comptroller The Capitol, Legal Annex Tallahassee, Florida 32304

For Respondent: Steve E. Moody, Esquire

MOODY & JONES

207 East Broward Boulevard, Suite 200 Fort Lauderdale, Florida 33301

Jack E. London, Esquire 2134 Hollywood Boulevard

Hollywood, Florida 33020

Attorney for Carl Sciacca and George Williams,members of the general public.

INTRODUCTION

The issue presented for decision at the hearing was whether grounds exist for the suspension or revocation of the respondent's mortgage brokerage license, pursuant to F.S. Section 494.05.

The Division of Finance filed an administrative complaint against respondent charging him with violations of F.S. Section 494.05(1)(a), (b) , (c)

, (e) , (f) and (g) ; Section 494.05(2); and F.A.C. Rule 3-3.06(7) in that he accepted a check in the amount of $7,500.00, which represented a partial brokerage fee to be held in escrow, and that he cashed said check, failed to

produce an acceptable mortgage loan commitment within the time limitation agreed upon and failed to return the deposit upon demand.

It was respondent's contention at the hearing that it was never intended by the parties involved in the subject transaction that the $7,500.00 check would be placed in escrow, and therefore he is not guilty of the charges filed by the Division of Finance. It was further contended that the necessary documents required for the mortgage loan commitment were never delivered to respondent and therefore the time limitation had not yet expired.

The attorney for the other parties to this transaction was permitted to make a statement at the close of the evidence.

FINDINGS OF FACT

Having heard the testimony and considered the evidence presented at the hearing, the undersigned finds as follows:

1. At all relevant times, respondent was a licensed mortgage broker, holding license number 3256. (Exhibit A)

   
   

2. On November 26, 1974, Carl Sciacca and George Williams, the general partners of a limited partnership known as University Professional Plaza Ltd., entered into a written contract with respondent to procure a mortgage loan commitment. Mr. Sciacca first went to respondent because respondent had been highly recommended to him. The amount of the mortgage was to be $2,450,000.00 and the commitment was to be procured "on or before 21 days from date all required exhibits are presented...". The agreement further provided that University would pay to respondent a brokerage fee in the amount of $24,500.00 upon funding of the loan. (Exhibit B)

   
   

3. On the same date, November 26, 1974, University delivered to respondent a check in the amount of $7,500.00. This check bears the notation "For partial brokerage commission to be held in escrow." (Exhibit C)

   
   

4. On November 27, 1975, respondent used said check to purchase a cashier's check and the money was never placed in escrow by respondent.

   
   

5. While some correspondence from someone denoting an interest in the loan did transpire, the loan was never consummated. Sometime after the expiration of

   21 days from November 26, 1974, Mr. Sciacca requested respondent to refund the deposit. A dispute arose between respondent and University regarding whether or not respondent had received from University all the required documents pertaining to the procurement of the loan. Respondent stated that University had not acted in good faith and thus was not entitled to a refund of the deposit. When attorneys were brought into the picture, it was learned that respondent no longer had all the deposit money.

   
   

6. Respondent still has not refunded the $7,500.00 to University, however, respondent and University have now entered into an agreement whereby respondent and his wife executed a mortgage note to University in the amount of $9,000.00 secured by a second mortgage on their condominium apartment. This arrangement is satisfactory to University and represents complete settlement of the

   $7,500.00 owed to University, along with attorney

   
   

7. There is some dispute in the evidence as to the parties' understanding of both the disposition to be made of the $7,500.00 deposit when the check was

   delivered to respondent and the actual terms of the mortgage loan commitment agreement. It was Sciacca's and William's opinion that all necessary documents for the procurement of the loan had been delivered to respondent and that if a loan were not procured within 21 days, the deposit was to be returned to University. It was respondent's opinion that the 21 days was to run from the date of receipt. of all necessary documents and that respondent had never received from University an accurate financial statement. Respondent further testified that he informed Mr. Sciacca of some problems involved with procuring the loan and that he would need some of the $7,500.00 to straighten out those problems. It was respondent's testimony that, despite the notation on the check "to be held in escrow", Sciacca told respondent to use whatever he needed to procure a loan.

   
   

   CONCLUSIONS OF LAW

   
   

8. Respondent is charged with violations of F.S. Sections 494.05(1)(a),(b),(c),(e),(f) and (g), as well as Section 494.05(2) and F.A.C. Rule 3-3.06(7). In administrative proceedings involving disciplinary action or suspension or revocation of licenses, the burden is on the licensing agency to prove misconduct. From the evidence adduced at the hearing, the undersigned can find no violation of Sections 494.05(1)(a) or (b). These two subsections involve the making of false promises and misrepresentation, circumvention or concealment. There has been absolutely no showing that any of these prohibited acts transpired during the transactions involved in this case. Nor does there appear to be a violation of 494.05(1)(c) regarding the "failure to disburse funds". What the respondent did here was fail to place the deposit in escrow and fail to return the deposit to University. Other subsections of Section 494.05(1) cover these actions. Likewise, there has been no showing that respondent demonstrated "by a course of conduct negligence or incompetence", so as to support the revocation of his license under Section 494.05(2). One transaction does not constitute a "course of conduct". There was no evidence as to prior or future acts of misconduct on respondent's part and there was evidence that respondent had been "highly recommended" prior to this incidence.

   
   

9. The most that the evidence shows here is that respondent failed to place the $7,500.00 deposit in escrow and failed to return said deposit upon demand. While this action was explained by respondent as being within the contemplation of the parties by either the written agreement or by subsequent oral agreement, the evidence does not support such explanation. The check clearly bears the notation "to be held in escrow". If, indeed, there was a later agreement that the deposit was not be be held in escrow, such agreement should have been reduced to writing in accordance with F.A.C. Rule 3-3.06(6). There is nothing in the written agreement which would authorize respondent to retain the $7,500.00 deposit. The brokerage fee was to be paid respondent "upon funding of said loan" and the loan commitment was to be procured within "21 days from date all required exhibits are presented...". While there may have been a bona fide dispute between the parties as to the presentment of all required exhibits, this does not authorize the respondent to retain the deposit. The agreement was for respondent to procure a mortgage loan commitment. If this purpose was not accomplished by respondent, it was his duty to return the deposit on the brokerage fee.

   
   

10. In conclusion, while there may have been mitigating circumstances surrounding respondent's actions, the evidence in this case does show a violation of Section 494.01(e), listing as grounds for suspension the failure to deliver a deposit which has come into the licensee's hand and which is not his property, or which he is not in law or equity entitled to retain under the

    circumstances. The evidence further shows a violation of Section 494.05(1)(f) which concerns the failure to place, immediately upon receipt, any money or deposit entrusted to the licensee by any person dealing with him as a broker, in escrow with an agent or in a trust or escrow bank account, wherein such funds shall be kept until disbursement is properly authorized. F.A.C. Section 3- 3.06(7) also requires brokers to maintain and immediately place funds entrusted to them in a trust fund account with some bank or recognized depository. Thus, respondent must be found guilty as charged of violating this rule or regulation, and failure to comply with the rules and regulations constitutes a further ground authorizing suspension under Section 494.05(1)(g) . Technically speaking, the evidence shows violations of Sections 494.05(1)(e),(f),(g) and Rule 3-3.06(7). In reality, the violations of Sections 494.05(1)(f) & (g) and Rule 3-3.06(7) were accomplished by one act - the failure to place the deposit in a trust fund or escrow account.

    
    

11. Having concluded that respondent is guilty of the sections discussed above, a determination must now be made of the penalty to be imposed. Section 494.05(1) provides that, upon a finding of guilt , the license of a licensee may be suspended for a period not exceeding two years, or until compliance with a lawful order imposed in the final order of suspension, or both.

    
    

12. As stated in Pauline v. Borer, 274 So.2d 1 (Fla. 1973) with respect to real estate licenses, the penalty of suspension

    
    

    "should always be sparingly and cautiously used and directed at the dishonest and unscrupulous broker, i.e., one who cheats, swindles or defrauds the general public."

    
    

    Also, the purpose of statutes authorizing suspension or revocation of licenses is to protect the public against financial loss through future repetition of unscrupulous practices. Reid v. Florida Real Estate Commission, 188 So.2d 846 (Fla. App. 2nd, 1966).

    
    

13. With these principles in mind, and also bearing in mind the fact that respondent and the other parties to the transaction involved herein have entered into an agreement providing for full restitution, it is felt that no legitimate purpose would be served by suspending the license of respondent. While the actions of respondent do constitute violations for which suspension is authorized, it is not believed that respondent can be characterized as dishonest and unscrupulous, or one who cheats, swindles or defrauds the general public. Respondent certainly exercised poor judgment in this transaction and, in so doing, subjected his license to a penalty of suspension. However, the other parties to the transaction are now satisfied with the settlement reached, and such settlement indicates respondent's admission of wrongdoing and good faith effort to resolve this controversy. While an agreement of settlement between the wrongdoer and the victims of the wrongdoing is not dispositive of the issue of suspension, it should be given some weight, especially with regard to the possibility of future repetition of wrongdoing.

    
    

14. In conclusion, it is felt that under the circumstances of this particular case, a public censure or reprimand of respondent by the Division of Finance would sufficiently punish the respondent commensurate with his conduct, adequately safeguard and protect the public's interest and maintain the dignity of the financing profession.

RECOMMENDATION

Based upon the findings of fact and conclusions of law set forth herein, it is recommended that:

1. Respondent be found not guilty of violations of F.S. Section 494.05(1)(a) , (b) , or (c) or Section 494.05(2);

   
   

2. Respondent be found guilty of violations of F.S. Section 494.05(1)(e)

   , (f) , and (g) and F.A.C. Rule 3-3.06(7) recognizing that the latter two statutes and the Rule involve the same offense - the failure to place the deposit in a trust fund or escrow account; and

   
   

3. The Division of Finance issue, in such manner as it deems appropriate, a public reprimand or censure regarding respondent's violations as set forth above.

Respectfully submitted and entered this 31st day of October, 1975, in Tallahassee, Florida.

DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301

(904) 488-9675

COPIES FURNISHED:

Joseph M. Ehrlich, Esquire Department of Banking and Finance Division of Finance

The Capitol

Tallahassee, Florida 32304

Barry Chapnick, Esquire Assistant General Counsel Office of the Comptroller The Capitol, Legal Annex Tallahassee, Florida 32304

Attorney for Division of Finance

Steve E. Moody, Esquire MOODY & JONES

207 E. Broward Boulevard Suite 200

Fort Lauderdale, Florida 33301

Jack E. London, Esquire 2134 Hollywood Boulevard

Hollywood, Florida 33020 Attorney for Carl Sciacca and George Williams, members of the general public

Docket for Case No: 75-001238

Orders for Case No: 75-001238