vs. ) CASE NO. 80-1338
ROBERT E. HUGHES, )
Respondent. )
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above styled case on 25 September 1980 at Clearwater, Florida.
For Petitioner: Franklyn J. Wollett, Esquire
For Respondent: George W. Greer, Esquire
By Administrative Complaint and Order of Denial filed 13 June 1980 the State of Florida, Office of Comptroller, Petitioner, seeks to revoke, suspend or otherwise discipline the mortgage broker's license of Robert E. Hughes, Respondent, and to deny his application for renewal of this license. As grounds therefor it is alleged that while serving as vice-president and principal broker for United Companies Mortgage and Investment of St. Petersburg Inc. (UCMI), from October 25, 1977, until June 12, 1979, Respondent knowingly participated in a scheme to defraud UCMI involving the sale of a residence to James G. Anderson on which UCMI was mortgagee; demonstrated, by a course of conduct, negligence or incompetence in handling a mortgage broker transaction; and required or permitted James G. Anderson to sign several mortgage loan transaction documents containing blank spaces to be filled in later.
At the hearing four witnesses were called by Petitioner, two witnesses, including Respondent, testified on behalf of Respondent and 15 exhibits were admitted into evidence with Exhibit 12 withdrawn by Petitioner after its admission. Although the essential facts are not in dispute the details, as recalled by the various witnesses, are in irreconcilable conflict. After having heard and observed the witnesses and reviewed all documents admitted into evidence, the Prehearing Stipulation in which the parties stipulated to findings of fact 1-18 below, and the briefs submitted by the parties, I submit the following. Proposed findings submitted by the parties and not included below
were not supported by competent and substantial evidence or were deemed immaterial to the results reached.
Respondent is currently licensed, and as of the date of the Administrative Charges and Complaint, held license No. HB-0008511 as a mortgage broker and was president and principal broker of Bay Area Financial Services, Inc. He has held such license since November 1979. He sold the business in April 1980 and has reapplied within six months for an individual license. The application was received on May 16, 1980. Pursuant to Rule 3D-40.03(3), Florida Administrative Code, Respondent is treated as a current licensee, and as an applicant.
From October 25, 1977, until June 12, 1979, Respondent was employed as vice-president and principal mortgage broker by United Companies Mortgage and Investment of St. Petersburg, Inc., hereinafter UCMI, a mortgage brokerage firm.
United Companies Financial Corporation, hereinafter UCFC, is a Louisiana corporation, authorized to do business in Florida. The company engages in the business as a mortgage lender.
On August 31, 1978, UCMI by and through its broker, Respondent, made a loan to "James G. Anderson" and "Lorraine Anderson, his wife," and accepted a note in the amount of $14,500.00 made by "James G. Anderson and Lorraine Anderson," together with a first mortgage also made by "James G. Anderson and Lorraine Anderson, his wife," as security for the repayment of the loan. The first mortgage purported to encumber Lot 25, Oak Harbor Subdivision, according to the plat thereof as recorded in Plat Book 5, page 94, Public Records of Pinellas County, Florida. On August 31, 1978, UCMI, for value, assigned the note and mortgage to UCFC.
The Respondent has no objection as to the authenticity and genuineness of Exhibit 11, a copy of a contract for sale of real estate which, on its fact, was executed by "James G. Anderson and Lorraine Anderson," as purchasers of certain real property from the seller, Linda Carol Querry, a/k/a L. C. Querry. The document reflects that the purchase price be $18,500.00, payable $100.00 in cash as a deposit, $900.00 cash within twenty-four hours, $4,500.00 additional deposit at time of closing, and $13,000.00 mortgage balance. (Exhibit 2). Anderson acknowledged his signature on this document but has no recollection of signing it.
On August 31, 1978, a Notice to Customers, required by federal law, was executed by "James G. Anderson and his wife Lorraine," setting forth the disclosure requirements of Regulation Z. The lender is reflected as UCFC and the broker as UCMI of St. Petersburg. Respondent Hughes executed such document as a witness to the signatures of "Mr. and Mrs. Anderson."
On August 31, 1978, a promissory note was executed by "James G. Anderson and Lorraine Anderson" promising to pay UCMI the sum of $14,500.00. (Exhibit 3).
On August 31, 1978, a document entitled Consummation of Loan Secured by Real Property, was executed by "James G. Anderson and Lorraine Anderson," as the borrowers. (Exhibit 4).
On August 31, 1978, a document entitled Notice to Customer Required by Federal Law was executed by "James G. Anderson and Lorraine Anderson," as the borrowers. (Exhibit 5).
On August 31, 1978, a document regarding the loan transaction was executed by "James G. Anderson and Lorraine Anderson," acknowledging receipt of the "Good Faith Estimates," and certain other materials. (Exhibit 6).
On August 31, 1978, a Notice to Purchaser-Mortgagor was executed by "James G. Anderson and his wife, Lorraine Anderson" acknowledging receipt of such notice. (Exhibit 7).
On August 31, 1978, an Owner's Affidavit was executed by "James G. Anderson and his wife, Lorraine." (Exhibit 8).
On August 28, 1978, a loan application was executed by "James G. Anderson" for the $14,500.00 to be secured by a first mortgage. Respondent personally handled the application as indicated on the application itself. (Exhibit 1).
On August 31, 1978, check No. 15-39091 was executed by Respondent Hughes, as authorized representative of United Companies, Inc., as payor, to James G. Anderson and Title Consultants, as payees, in the amount of $11,014.58. The check was endorsed by "James G. Anderson and Lorraine Anderson." (Exhibit 10).
On August 31, 1978, a Warranty Deed was executed by Linda Carol Querry, a/k/a L. C. Querry, as seller of certain real property to "James G. Anderson and Lorraine Anderson, his wife." Respondent Hughes executed the document as a witness to Linda Querry's signature and execution. The property described in the Warranty Deed is the identical property mortgaged by "James G. Anderson and Lorraine Anderson" to secure the loan from UCMI and UCFC. (Exhibit 13).
On August 31, 1978, a Mortgage Deed was executed by "James G. Anderson and Lorraine Anderson, his wife," as mortgagors, to UCMI of St. Petersburg, as mortgagee, as security for the repayment of the loan. Respondent Hughes executed the Mortgage Deed as a witness to the signatures of "Mr. and Mrs. Anderson." (Exhibit 9).
On August 31, 1978, UCMI, by and through its principal broker and vice president, Respondent Hughes, assigned the Anderson mortgage and note to UCFC.
The applicable Florida law governing this matter is Chapter 494, Florida Statutes (1977), and as amended in the 1978 Supplement, and Chapter 3D- 40, administrative rules regulating mortgage brokerage, Florida Administrative Code.
In August 1978, James G. Anderson, who worked in the Sanitation Department of the City of St. Petersburg, also worked part-time repainting houses purchased for resale by Vic Vogel, a speculator. While so employed, Anderson had seen Respondent a few times in the company of Vogel, but had never formally met Respondent.
Vogel offered to sell one of these houses to Anderson on terms that would require no down payment by Anderson, who would thereafter make monthly payments similar to the rental payments he was then making. Further, there
would be no "red tape" and Anderson would be buying a home rather than renting one. Anderson trusted Vogel, who assured Anderson he would take care of all the details.
The house Anderson agreed to buy was on 11th Street and 20th Avenue South in St. Petersburg and was one of the houses Anderson had worked on in his part-time job with Vogel. In the contract to purchase signed by Anderson (Exhibit 11) the block for the legal description of the property is blank. The various other spaces on the form now showing the purchase price, down payment, etc., were blank when signed by Anderson.
For several years prior to 1977 Anderson had been living with Lorraine Walker but never held her out as his wife. The signature "Lorraine Anderson" on all exhibits except Exhibit 14, the quitclaim deed from Anderson to United Companies Financial Corporation, were signed by someone other than Lorraine Walker. At the instigation of his attorney, Anderson and Lorraine Walker signed Exhibit 14 to clear up foreclosure proceedings that had been instituted against Anderson.
The closing of the sale of property to Anderson took place at the offices of United Companies at 300 S. Duncan Street, Clearwater, Florida on 31 August 1978. Anderson was picked up by Vogel and driven to the closing. Accompanying Vogel was Mike Robertson, an associate of Vogel; Linda Querry, Vogel's girl friend, who signed the deed conveying the property to Anderson; and an unidentified black woman. While awaiting Respondent's arrival for the closing, Vogel took the group to lunch.
At the closing, Anderson signed numerous documents and other people, including the black woman who obviously signed "Lorraine Anderson," also signed these documents as witnesses and/or notary. Anderson does not recall having seen Verona Krnjaich, who notarized his signature on the documents he signed at the closing and Ms. Krnjaich does not recall a closing at which Anderson was present. However, she testified that her normal practice is to notarize only documents notarized in her presence, and that she follows this practice at all closings. On the other hand, she has good recall of faces seen at closings but does not believe she ever saw Anderson before this hearing.
Anderson testified that he trusted Vogel and signed whatever documents Vogel asked him to sign; that all the documents bearing his signature were blank when he signed them; that he did not know the black woman in the room at the closing or that when she signed these documents she did so in the name of Lorraine Anderson; that the closing took place on the second or third floor of a building just off U.S. 19 between Clearwater and St. Petersburg; that he doesn't know the address of this building but could return to it, and in fact, a few months prior to this hearing, took one of Petitioner's agents to the building where the closing took place; that he received no copy of any document signed by him at the closing; that he thought he was buying a house from Vogel; and that he expected Vogel to notify him after the closing when he could move in and how much he would pay each month. Vogel did not again contact Anderson and apparently has left the area.
A few months prior to this hearing Anderson accompanied one of Petitioner's agents to show the agent where the closing occurred. The building to which the agent was taken by Anderson is two-storied and occupied by Ellis National Bank. In August 1978 there was no other occupant of this building and the second floor was unfinished but contained restrooms and some offices occupied by bank employees.
Anderson made no cash payment before, at, or after the closing on this house; nor did he ever move into it. The legal description on the deed conveying the property to Anderson is for property located at 626-27th Avenue South, St. Petersburg, Florida, and not for the house at 11th Street and 20th Avenue South which Anderson thought he was buying.
After Anderson became delinquent on his mortgage payments Respondent went to Anderson's home one Sunday afternoon demanding payment of the delinquent monthly payments owed by Anderson. The latter told Respondent he hadn't bought any house from the lender, owed no money, and wasn't going to pay. Respondent shortly thereafter turned the case over to the United Companies' attorney, who instituted foreclosure proceedings. When served with these papers Anderson took them to his lawyer. After some of the facts surrounding this transaction became apparent, the assignee of the mortgagee accepted a quitclaim deed to the mortgaged property from Anderson. Lorraine Walker accompanied Anderson to the lawyer's office and signed the quitclaim deed "Lorraine Anderson" (Exhibit 14). The deed signed by L. C. Querry conveying Lot 25 to Anderson (Exhibit 13) conveyed the property to "James G. Anderson and Lorraine Anderson, his wife."
Respondent had known Vic Vogel for five or six years prior to August 1977 and had been involved in ten or twelve transactions in which Vogel had picked up distressed property, refurbished it and sold it.
Anderson had few debts and readily qualified for the mortgage loan without considering the income of Lorraine or his income from his part-time work. He understood he was buying the house without any down payment, and, in fact, Anderson paid nothing down when he signed the contract and he produced no cash at the closing. The only disbursement made at closing was by the mortgagee, whose check for $11,014.58 (Exhibit 10) was payable to Title Consultants and Anderson. The latter endorsed this check and presumably Title Consultants disbursed to the seller. Closing statements for the buyer and seller were not in the files of UCMI or Title Consultants, nor was a contract to purchase in which the description of the property to be bought was shown.
Respondent's witness testified that she reviewed all documents prior to a closing; that she recalls the Anderson transaction; doesn't recall who prepared those documents but believes she typed them; that documents were never signed in blank and the blanks subsequently completed; that she did the credit check on Anderson; and that all documents used in the closing were completed in full before the closing at which they were signed by Anderson and the person signing as Lorraine Anderson. A check with the credit bureau should have disclosed Anderson's marital status as not married and this witness was unable to explain the failure to pick this up when Exhibit 1, the loan application, was verified with the credit bureau.
Respondent testified that he recalled the Anderson transaction on 31 August 1978 but later in his testimony stated he did not recall this specific transaction. He believes he followed his usual procedure and explained the various documents to Anderson before the latter signed them. Prior to 1978 he had closed many transactions for UCMI without a contract to purchase having been executed. The loan application is mailed to the main office of United Companies in Baton Rouge, Louisiana and telephonic approval is given by Baton Rouge. Accordingly, it was not unusual for Anderson's loan application to be prepared
28 August 1978, the original mailed to Baton Rouge and approval received in time to close the transaction on 31 August 1978.
The contract upon which this house was conveyed, and the closing statements of buyer or seller, were not presented at this hearing. Witnesses testified these documents were missing from the files in which they would be expected to keep. Regardless of this, it is uncontradicted that Anderson made no payment at closing and, if any payment was made prior to closing, any such payment would have been accounted for by the escrow agent. It is also evident that no such accounting was made. By signing a note and mortgage for $14,500.00 Anderson purported to purchase a house for slightly more than $11,000.00, which is the amount of the check endorsed by Anderson at closing and which sum presumably went to the seller. Some $3,000.00 was retained by the lender as prepaid finance charges ($1,567.67) and brokerage fee ($1,545.45). (Exhibit 2.) Accordingly, the mortgage of $14,500 represented approximately 130% of the amount paid for this house. This fact was known, or should have been known, to Respondent, who presumably was representing his principal, UCMI, the lender at this closing.
Respondent was paid a fixed salary by UCMI and did not receive additional compensation for each transaction he closed.
UCMI suffered a financial loss on the repossession of the house from Anderson and filed suit against Industrial Valley Title Insurance Company (Exhibit 15).
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of these proceedings.
Section 494.05(1), Florida Statutes, provides in pertinent part:
The license of a licensee may be suspended for a period not exceeding 2 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:
(b) Misrepresentation, circumvention, or concealment by the licensee through whatever subterfuge 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.
In proceeding with the closing of the house being sold to Anderson, Respondent knew, or by the exercise of reasonable diligence should have known, that Anderson was making no financial investment in this property other than the mortgage, and that Respondent's principal was taking a note secured by a mortgage considerably more than the fair market value of the property. By placing his principal in such a position of risk, there was a very real probability that the principal would suffer the financial loss which incurred in this transaction. Respondent concealed material facts from UCMI which should have been disclosed. Had the fact that Anderson had put none of his own money into the purchase been made known to UCMI, it is extremely unlikely they would have approved the loan secured by this mortgage.
The evidence submitted will not support a finding that Anderson signed those papers in blank with the knowledge of the Respondent. It is quite
apparent that Anderson signed any document Vogel presented to him; that Anderson did not red the documents he signed at closing; and that he is no more sure these documents were signed in blank than he is of the location of the closing. On the other hand, all other witnesses testified the documents had been completed before the closing took place. Therefore, the allegations regarding Respondent allowing or encouraging Anderson to sign documents in blank were not proved.
Likewise, no evidence was presented regarding any other transaction than the one involving Anderson and which resulted in the above findings. Accordingly, there is no basis for a finding that Respondent engaged in a course of conduct which constituted a lack of honesty, truthfulness, integrity, or incompetence as to financial transactions involving primary or subordinate mortgage financing, as alleged, so as to disqualify Respondent as an applicant for a license.
From the foregoing it is concluded that Respondent was guilty of concealing material facts from UCMI involving the transaction with Anderson at which UCMI was mortgagee, and that, as a result, UCMI suffered injury. It is therefore
RECOMMENDED that Robert E. Hughes' license as a mortgage broker be suspended for a period of six (6) months.
DONE AND ENTERED this 17th day of October 1980.
Franklyn J. Wollett, Esquire Assistant General Counsel Office of the Comptroller Room 1302, The Capitol Tallahassee, Florida 32301
George W. Greer, Esquire
K. N. AYERS Hearing Officer
Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301
Filed with the Clerk of the Division of Administrative Hearings this 17th day of October 1980.
