STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 75-1311

)

LAWRENCE H. RIPP, )

)

Respondent. )

)

RECOMMENDED ORDER

A formal hearing was held in the above-captioned matter, after due notice to the parties, on December 15, 1975, at Miami, Florida.

APPEARANCES

For Petitioner: Richard Goldstein, Esquire

Department of Legal Affairs The Capitol

Tallahassee, Florida 32304

For Respondent: Guy K. Stewart, Jr., Esquire

1230 Northeast 95th Street Miami Shores, Florida 33141

ISSUES PRESENTED

Whether the license of Respondent as a Mortgage Solicitor should be suspended for violation of Sections 494.05 (1) (a) & (b), Florida Statutes, Rule 3-3.07(1), Florida Administrative Code, and Section 494.05(1)(g), Florida Statutes.

At the commencement of the hearing, Respondent's counsel moved to dismiss the proceedings by reason of Petitioner's failure to provide witness statements of Charles R. Burke & Kathryn C. Burke, pursuant to a letter from Respondent's counsel to the Deputy Director, Division of Finance, dated August 26, 1975, requesting copies of any witness statements obtained in the course of Petitioner'S investigation. Respondent not having previously sought to compel discovery in accordance with Florida Rules of Civil Procedure, the motion was denied. At this point, Respondent's counsel announced that he had been instructed by his client, who was not present at the hearing, to leave the hearing room and take no further part in the proceedings if the motion was denied. This being the case, Respondent's counsel departed and the hearing was then conducted as an uncontested proceeding.

FINDINGS OF FACT

1. Respondent was licensed as a Mortgage Solicitor with the firm of Hartwell and Associates, Inc., from May 27, 1974 to July 24, 1974, when his license was returned to Petitioner for cancellation by that firm. On September 13, 1974, Respondent was issued a Mortgage Solicitor's License with ABC Investment Corporation. Records of the Office of the Comptroller, State of Florida, Division of Finance, Department of Banking and Finance, failed to reveal any other license as a mortgage broker or mortgage solicitor having been issued to Respondent (Testimony of Ehrlich, Petitioner's Exhibit 1).

   
   

2. In the spring of 1974, Mr. and Mrs. Charles R. Burke, Sr. of Ft. Lauderdale, Florida, met the Respondent who proposed to double the income that the Burkes were then receiving from interest on securities investments. This was to be done through the purchase of promissory notes secured by first mortgages on property located in Volusia County, ostensibly owned by LTP Properties, Inc., a land developer. Respondent showed them photographic slides of a club house at the development site and stated that there would be a golf course there and painted a bright picture of the receipt of 12 percent interest on the notes if the Burkes would liquidate the stocks that they owned and invest through him. He stated that the amounts that they would invest would represent only 40 per cent of the value of the real estate that secured their investment, and that it was a "sure thing.' Acting upon Respondent's advice, Mr. and Mrs. Burke cashed in some $180,000.00 in stocks and turned it over to the Respondent in June, 1974. In return, they received $180,000.00 in promissory notes in face amounts of $5,000.00 and$8,000.00 issued by LTP Properties, Inc. The promissory notes indicated on their face that the sale was approved by SEI, Inc., sales agent for LTP Properties, Inc., and they were signed by the president of SEI, Inc. The interest payments were to commence July 1st. Such payments were received during the months of July through December, 1974. In the fall of 1974, the Burkes invested another $100,000.00 with the Respondent for similar instruments, and again in January, 1975, they purchased another $20,000.00 in promissory notes and mortgages in face amounts of $5,000.00 each which also were issued by LTP Properties, Inc., but then owned by Respondent. At this time, the January 1st interest payment on the prior investments had not been made and, prior to making the final investment, the Burkes inquired of Respondent as to the reason for nonpayment of interest. He stated to them that LTP Properties was experiencing financial difficulties at the time but that it was endeavoring to get money from a bank overseas and from the Mellon Bank in Pennsylvania. No further interest payments have been made on any of the notes since December, 1974, and the Burkes discovered later that they did not, in fact, hold first mortgages on the real estate described in their mortgage deeds and consequently could not foreclose thereon (Testimony of Mr. and Mrs. Burke, Petitioner's Exhibit 2, Petitioner's Composite Exhibit 3).

   
   

3. Prior to advising investors to purchase notes of LTP Properties, Inc., Respondent made several trips to the site of the property, checked with the local bank of the developer, was shown a financial statement which indicated that the developer was solvent, and compared values with surrounding real estate developments. He told the Burkes that LTP was obtaining foreign financing based on information he had received from Mr. David Edstrom of SEI, Inc., who in turn had acquired the information from Mr. Frank Carcaise of LTP Properties, Inc. This statement was made to the Burkes sometime between February and June of 1975 according to the Respondent. As far as Respondent knew, LTP Properties, Inc., stopped making interest payments on their notes about February, 1975 (Deposition of Respondent).

   CONCLUSIONS OF LAW

   
   

4. Respondent is alleged to have violated Section 494.05(1)(a) and (b), Florida Statutes, in that he did on or about June 17, 1975, knowingly make false promises which were likely to persuade or induce Mr. and Mrs. Burke to purchase from him four promissory notes and mortgages in the total amount of $20,000.00. The alleged promise was that at or near the time of this sale Respondent stated to the Burkes that the debtor LTP Properties, Inc. was "obtaining foreign financing to begin operations in the near future." It is also alleged that LTP Properties, Inc., was in financial difficulties at the time Respondent sold the aforesaid notes and mortgages and that Respondent knew that it was in default and not making interest payments on other obligations that were due and owing to various other investors. The above statement and omission on Respondent's part are alleged to have constituted concealment, misrepresentation or false promises which resulted in financial loss or injury to Mr. & Mrs. Burke who relied on such statement and on Respondent's advice and judgment as a mortgage solicitor, and that this conduct or silence also constituted a breach of trust and confidence placed in him by Mr. and Mrs. Burke.

   
   

5. The pertinent provisions of the statute alleged to have been violated read as follows:

   
   

   "494.05 Denial, Suspension or Revocation of Licenses

   1. The department may, upon its motion, or upon the verified complaint in writing of any person,

      investigate the actions of any person engaged in the business or acting in the capacity of a licensee under this act, within this state. 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, upon a finding of facts showing that the licensee has been guilty of any of the following:

      1. Making any false promises likely to influence, persuade, or induce; or pursuing a course of misrepresentation or false promises through agents or solicitors, or advertising or otherwise.

      2. Misrepresentation, circumvention, or concealment by the licensee through whatever sub- terfuge or device of any of the material particulars or the nature thereof, regarding a transaction to which he is a party, and of injury to another

         party thereto.

         
         

6. At the hearing, Petitioner amended its petition as to the date of the making of the alleged false promise from June 17, 1975 to January 17, 1975. Although Mr. Burke testified that he and his wife had purchased the four notes and mortgages in the total amount of $20,000.00 from the Respondent in January, 1975, the instruments were not introduced into evidence and the exact date on which they were purchased has not been established. In like manner, the evidence did not establish precisely when the alleged false promise was made to the Burkes. Although it is clear that a statement in those or similar words was made by the Respondent, his contention is to the effect that it was made after consummation of the transaction in question, and the Burkes, in their testimony, did not establish whether it was made before or after they had purchased the

   notes and mortgages. In any event, it becomes immaterial to determine the precise date on which the statement was made in view of the fact that no evidence was presented to establish that the statement was, in fact, false or, if so, that Respondent knew that it was false. Accordingly, it is concluded that Respondent did not violate Section 494.05(1)(a).

   
   

7. Insofar as the allegation concerning Respondent's knowledge that LTP Properties, Inc. was in default or not making interest payments on other obligations at the time he sold his notes to the Burkes, the evidence shows that interest payments had been made on the Burkes' prior investments up to and including December, 1974, but the January 1st interest payment was not made by LTP Properties, Inc. The Burkes were aware of this fact at the time they purchased the notes from Respondent. Also, there was no showing that the Respondent knew that LTP Properties, Inc. was in default on and not making interest payments on other obligations, other than his own, that were due and owing to other investors. Therefore, it is concluded that Respondent did not knowingly conceal any material information concerning the financial status of LTP Properties, Inc. and therefore is not in violation of Section 494.05 (1)(b)

   
   

8. Respondent is also alleged to have violated Rule 3-3.07(1), Florida Administrative Code, by placing the Burkes' $180,000.00 investment through or with SEI, Inc., a licensed mortgage broker firm with which he was not then licensed as a mortgage solicitor.

   
   

   Rule 3-3.07(1) , which was in effect at the

   time of the alleged violation, reads as follows: "3-3.07 Brokers and solicitors; requirements and limitations generally.

   1. A mortgage broker who is either an officer or partner in more than one registered mortgage broker business organization must be licensed in the name of each business organization for which

      he is active in the mortgage loan field. A broker who is licensed and bonded in his own name as an individual may act as a solicitor for another li- censed broker without being required to secure a solicitor's license too. A solicitor may be lic- ensed to act as such for only one broker at a time." (emphasis supplied).

      
      

      It is alleged that a violation of the aforesaid rule is also a violation of Section 494.05(1)(g), Florida Statutes, which provides that "Failure to comply with any of the provisions of this act or any lawful order, rule or regulation made or issued under the provisions of this act," is a ground for suspension of a license.

      
      

9. The evidence shows that at the time Respondent conducted the first transaction with the Burkes, he was a licensed mortgage solicitor for Hartwell and Associates, Inc., North Palm Beach, Florida, and it was not until September, 1974, that he became licensed as a solicitor for ABC Investment Corporation. Respondent acknowledged that he placed this investment through ABC Investment Corporation who in turn handed the funds directly to SEI, Inc. The instruments in question show on their face that SEI, Inc. was the "sales agent" for LTP Properties, Inc. ,and the check for $180,000.00 issued by the Burkes was made payable to SEI, Inc. It is questionable whether under these circumstances it can be said that Respondent placed the - - investment through or with SEI, Inc., as alleged. In any event, it is considered unnecessary to consider this question

in view of the wording of the rule alleged to have been violated. The pertinent part is "A solicitor may be licensed to act as such for only one broker at a time," Although this language and the heading of the rule "Brokers and Solicitors; requirements and limitations generally" inferentially would not permit a mortgage solicitor to act for a licensed broker other than the one with whom he is licensed, there is no definite restriction placed upon a solicitor by the wording of the rule. That Petitioner recognized this defect is apparent by the fact that the rule was revised on September 29, 1975, after the transaction under consideration had been consummated, by adding words of prohibition as follow: A solicitor may be licensed to act as such for only one broker at a time and shall not negotiate a mortgage transaction for any broker other than the employing principal broker with whom the solicitor is currently licensed" (Rule 3D-40.07, F.A.C.). It is concluded that Respondent did not violate Rule

3-3.07(1) and therefore become subject to suspension under Section 494.05(1)(g).

RECOMMENDED ORDER

It is recommended that the Division of Finance, Department of Banking and Finance, issue an order dismissing the allegations against the Respondent for failure of proof.

DONE and ENTERED this 21st day of January, 1976, in Tallahassee, Florida.

THOMAS C. OLDHAM

Hearing Officer

Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301

(904) 488-9675

COPIES FURNISHED:

Richard Goldstein, Esquire Department of Legal Affairs The Capitol

Tallahassee, Florida 32304

Guy K. Stewart, Jr., Esquire 1230 N.E. 95th Street

Miami Shores, Florida 33141

Docket for Case No: 75-001311

Orders for Case No: 75-001311