ROY L. McCUTCHEON, )
vs. ) CASE NO. 81-2936
Respondent. )
This matter came on for hearing in Orlando, Florida, before the Division of Administrative Hearings, by its duly designated Hearing Officer, Robert T. Benton II, on May 25, 1982. The parties were represented by counsel:
For Petitioner: Clayton D. Simmons, Esquire
For Respondent: Alfred T. Gimbel, Esquire
By application dated May 4, 1981, petitioner sought registration as a mortgage broker with respondent Office of the Comptroller (DBF). On October 20, 1981, DBF entered its "Findings of Fact, Conclusions of Law and Final Order," proposing to deny petitioner's application. No issue has been raised as to the timeliness with which DBF processed petitioner's application.
DBF concluded that petitioner "lacks the honesty, truthfulness, integrity and competency . . . required to properly act as a mortgage broker," citing Section 494.04(4), Florida Statutes (1981), because, it was alleged, petitioner, while "salaried by Mr. Brooks [president of a mortgage company] on a full-time basis was also working as an employee of one of Mr. Brooks' company's largest builders"; and because he allegedly "mishandled and misappropriated various funds, in addition to creating a slush fund, all for his own personal gain and benefit" while employed by Southeastern Home Mortgage Company. At the hearing, by stipulation of counsel, another specification was added: That petitioner received a check dated February 25, 1982, drawn by Howard Sobin on behalf of HSR Financial Corporation in the amount of $1,750 as payment for mortgage brokerage services or activities while being unlicensed, in violation of Sections 494.041, 494.05(g)1 494.051, and 494.08(4)(a) and (b), Florida Statutes (1981).
Petitioner Roy L. McCutcheon, born June 21, 1924, in College Park, Georgia, began in the mortgage brokerage business in Atlanta in 1946, as an employee of the Jefferson Mortgage Company. Nights he attended Georgia State University. He moved, in 1950, to Albany, Georgia, where he worked for Southeastern Mortgage Company. In 1958, he received a bachelor's degree in business administration from Georgia State University.
He obtained a Florida mortgage broker's license in 1963, the year he moved to Florida, and became active in the business both as a principal of Peachtree Mortgage Corporation and as a principal of Peachtree Development Corporation. On December 4, 1974, in the middle of a divorce and in an unfavorable business climate, petitioner and both companies with which he was associated filed for bankruptcy, and petitioner did not renew his mortgage broker's license. He has not been licensed as a mortgage broker since.
STARTING OVER
Petitioner ended up remarried and working in a trailer park in Palm Beach County, as an employee of Southeastern Home Mortgage Company (SHMC), owner of the park. He started work for SHMC, of which Cecil A. Moore was the president, chairman of the board, and sole stockholder, on December 1, 1974, but began managing the trailer park in late May or early June of 1975, when the trailer park had a 90 percent occupancy rate. Mr. McCutcheon had responsibility for the trailer park's books and records of account. Because various discrepancies pertaining to the trailer park's revenues were detected in paperwork reaching SHMC's home offices, Mr. Moore caused George R. Hollingsworth II, a C.P.A. employed by SHMC as comptroller at the time, to investigate the situation. The investigation began in January of 1979.
Among other things, Mr. Hollingsworth discovered that some of the trailer park's 302 lots had trailers on them, even though they had been reported vacant to SHMC's home office. The trailer park accounts did not balance. Mr. Hollingsworth was unable to account for something in excess of six thousand dollars ($6,000). One explanation petitioner offered at the time was that cash had been used to pay retail trailer dealers (or their employees) an "incentive fee" of $160 per trailer for steering new owners of trailers to SHMC's Meadow Brook Mobile Park. At the hearing, however, petitioner put the "incentive fee" at $200 per trailer.
At some point in 1977 or 1978, there was a glut of trailer park lots for rent in Palm Beach County; a competing park offered three months' free rent to prospective tenants. During 1977 and 1978, Vivian Elaine Grossi worked with petitioner for approximately two years as a "Girl Friday." She answered the telephone, typed, filed, kept various records, and made deposits to SHMC's bank account from time to time.
Petitioner agreed to pay Alan Lindner, manager of Mustang Mobile Homes, money for every trailer he caused to he placed at Meadow Brook Mobile Park. He made 13 to 18 such payments. Some half-dozen like payments were made to Better Mobile Homes and Mobile Home Resales. Cecil Moore knew of these payments, if not their amount. When a trailer lot was rented to a new tenant Mr. Lindner had referred, Ms. Grossi noted the fact on a slip of paper. Ordinarily, she did not report the new tenant to SHMC's home office for two months, at least. Instead, monthly rents, typically $89.50, $94.50, or $99.50, were diverted to a slush fund. If the new tenant paid by check, an equivalent amount of cash, paid by
somebody else as rent for another lot, was diverted into the slush fund. Ms. Grossi testified that Mr. Lindner's incentive fee was $200 but that she got a
$10 rebate on three or four occasions for her own personal use. On this point, Mr. Lindner testified "[w]hen she handed me $200, it was nothing for me to drop
$20 down in her purse. Whether she claimed it on her income tax is entirely up to her, but I was never a pig." Deposition of Alan Lindner, p. 68. Mr. Lindner did not share any of his "incentive payments" with petitioner. This system of "incentive" or "bird dog" payments persisted into a period when there was a shortage of trailer park lots in Palm Beach County.
After Ms. Grossi had worked at the trailer park for about a year, she and Mr. McCutcheon decided to expand the slush fund, even though they regularly received checks for petty cash from SHMC's home office. Rents paid by new tenants not reported to SHMC's home office continued to be the main source of funds, although occasionally fees paid by nonresident golfers or swimmers for use of the trailer park's golf course or swimming pool might be added in. Ms. Grossi purchased swimming caps, which were for sale at the trailer park, but she never saw anybody buy one.
Sometimes a new tenant would occupy a lot for six months before being reported to SHMC's home office. Mr. Lang, whose trailer stood on one lot, rented an adjacent lot, No. 274, on which he kept a picnic table, and paid Mr. McCutcheon fifty dollars ($50) a month from June 1, 1977, to July 1, 1979. Those rent payments, aggregating some $1,200, were never reported to SHMC and are in addition to the $6,100 or $6,200 Mr. Hollingsworth could not account for at all. SHMC's board of directors decided not to pursue the matter. Mr.
McCutcheon resigned effective July 31, 1979, after four-and-a-half years without a raise.
A NEW JOB
On August 1, 1979, petitioner went to work as comptroller of Charles E. Brooks Mortgage Company, Inc. (BMC). Mr. McCutcheon performed draw inspections, as an employee of BMC, including three or four at building sites where construction by Raymond W. Tompkins or one of the companies with which he was associated was in progress. These draw inspections were at the builder's request, presumably as a prerequisite to the disbersal of moneys by or through BMC.
On or before July 10, 1980, Mr. McCutcheon complained to Charles E. Brooks, BMC's president and chairman of its board, that he could not live comfortably on his salary. Mr. Brooks authorized petitioner at that time to look for other employment. After further discussions, petitioner's salary at BMC "almost doubled" to $30,000 annually. Thereafter, Sam Shaw called Mr. Brooks and reported that petitioner was working for Mr. Tompkins, at the time BMC's largest account, and parking his car in the garage of a model home used by Mr. Tompkins as an office, so that the car would not be visible from the street. Mr. Brooks drove to the model home but did not find petitioner there. When Mr. Brooks arrived at his office on the following day, September 10, 1980, he found a note typed by his secretary, Elaine Marie Kennedy, to the effect that Mr. McCutcheon would be out of town for the day on personal business.
Suspicious, Mr. Brooks again visited the model home, this time finding Mr. McCutcheon ensconced in one of the bedrooms talking on the telephone. Mr. Brooks closed the door and said something like, "I think we need to have a talk," to which Mr. McCutcheon responded, "I am sorry. I hope God will forgive me," or words to that effect. Before their 90-minute conversation was over, Mr.
Brooks had told petitioner never to return to the BMC office. Mr. Tompkins told Mr. Brooks that Mr. McCutcheon had told him (Tompkins) that he (Mr. McCutcheon) had quit the employ of BMC. In fact, petitioner was employed by BMC until he was discharged by Mr. Brooks on September 10, 1980. See Petitioner's Exhibit No. 1. Mr. Brooks called Ernest James Rourke, a mortgage broker then associated with BMC in Tampa, and told him that he had fired petitioner because he was working for Roy Tompkins on the side.
As of September 8, 1980, petitioner was on the payroll of Tompkins Land and Housing (TLH), the result of a couple of nocturnal telephone conversations, during the preceding month, between petitioner and Mr. Tompkins. Mr. McCutcheon worked for TLH through April 3, 1981, at a salary of $400 weekly, together with a weekly $100 automobile allowance.
CURRENT EMPLOYMENT
Howard Sobin, a licensed mortgage broker, is the principal in an Orlando firm, HSR Financial Corporation (HSR), organized in December of 1981, to arrange mortgages and leasing. Since his affiliation with HSR, petitioner has taken credit applications, ordered credit reports, sent out verification forms, worked with title companies, and taken pictures of houses.
In December of 1981, Mr. Sobin promised to pay petitioner $10,000 during the ensuing six months, although he was not sure at the time just how he would "handle it." That was Mr. Sobin's explanation for having taken no deductions for F.I.C.A. or anything else from a $1,750 payment by HSR to petitioner in the form of a check dated February 25, 1982, on which was typed "Centrella Commission." Respondent's Exhibit No. 2. According to Mr. Sobin, the $1,750 payment represented petitioner's wages and "Centrella Commission" referred only to the source of the money. There was no other evidence that petitioner did any work on either of the loans HSR has closed for Jim Centrella.
GOOD REPUTATION IN SOME QUARTERS
Howard Sobin testified that petitioner was well qualified to work as a mortgage broker even though petitioner had forgotten more than Mr. Sobin ever knew about the business. Elton F. Fletcher, a deacon in Orlando's First Baptist Church, testified that petitioner is an honest, moral, ethical, godly man. Mr. Tompkins testified that he would rehire petitioner. Ernest James Rourke, a licensed mortgage broker who met petitioner in 1979, testified that builders enjoyed petitioner's company and his honesty.
Except for two years, Ray H. Puckett, a certified public accountant, audited Peachtree Mortgage Company's books. He also audited the books for Southeastern Mortgage Company in Albany, Georgia, when petitioner was employed there. In all he performed 24 annual audits of the books and records of companies with which petitioner was associated, and each audit was unqualified. Mr. Puckett never audited petitioner's personal books but did prepare some of his tax returns. Once or twice the Internal Revenue Service audited petitioner's tax returns and raised questions which were eventually resolved.
Sybil T. Rutherford, vice-president of Pan-American Bank of Orlando, met petitioner and dealt with him before Peachtree Mortgage Company went into bankruptcy, causing the bank she worked for at the time to sustain losses in excess of $400,000. She knows nothing adverse about Mr. McCutcheon's reputation as a mortgage broker. Harry R. Miller, a former employee of Peachtree Mortgage Company, testified that petitioner is competent, skilled, and knowledgeable, and
that there had been no mismanagement or misappropriation of moneys at Peachtree Mortgage Company. At the time of the hearing, petitioner was solvent and there were no judgments outstanding against him.
In preparing the foregoing findings of fact, the hearing officer has had the benefit of petitioner's proposed recommended order. To the extent proposed findings of fact have not been adopted, they have been rejected as irrelevant or as unsupported by the evidence.
CONCLUSIONS OF LAW
When a licensing agency like DBF has timely set forth in writing "with particularity the grounds or basis," Section 120.60 (2), Florida Statutes (1981), on which it proposes to deny a license, it is incumbent upon an applicant like petitioner to establish his entitlement for licensure by demonstrating the invalidity of the grounds proposed for denial. See Department of Transportation v. J.W.C. Company, Inc., 396 So.2d 778 (Fla. 1st DCA 1981); Zemour, Inc. v. State Division of Beverage, 347 So.2d 1102 (Fla. 1st DCA 1977)(lack of good moral character found "from evidence submitted by the applicant"). See generally Balino v. Department of Health and Rehabilitative Services, 348 So.2d 349 (Fla. 1st DCA 1977). Petitioner, who seeks to change the status quo by gaining a mortgage broker's license, has the burden of proof on disputed issues of material fact.
In the present case, DBF set out the grounds on which it proposes to deny petitioner's application in its "Findings of Fact, Conclusions of Law and Final Order" and expanded the grounds, by stipulation of counsel, at the beginning of the final hearing. The statutory language on which DBF relies as to its written specifications provides that DBF "shall require such information with regard to the applicant as it may deem desirable, with due regard to the paramount interests of the public, as to experience, background, honesty, truthfulness, integrity, and competency of the applicant as to financial transactions involving primary or subordinate mortgage financing Section 494.04(4), Florida Statutes (1981).
The parties are in apparent agreement that an applicant for licensure must have integrity, have appropriate experience and background, and be honest, truthful, and competent. See Section 494.05(4), Florida Statutes (1981). Petitioner contends that he need only show his competency "as to financial transactions involving primary or subordinate mortgage financing . . .," Section 494.04 (4) , Florida Statutes (1981) , and that any incompetence in running a trailer park does not reflect on petitioner's statutory eligibility for licensure as a mortgage broker.
Petitioner's experience and background certainly meet any statutory test, as far as training and education are concerned. Although there was some contrary evidence, the preponderance supports the view that petitioner has the requisite technical competence in mortgage financing. The moneys that went astray while he managed the trailer park reflect on petitioner adversely, however. At the very best, they evince an inability or unwillingness to oversee accounts, an incompetence in the handling of funds. Incompetence of the kind proven here relates directly to the competence necessary for licensure as a mortgage broker.
The evidence also raised questions about petitioner's honesty, truthfulness, and integrity which the evidence failed to resolve in petitioner's favor. DBF showed that petitioner, while employed by a mortgage company with
responsibility for draw inspections, was simultaneously on the payroll of the largest borrower from the mortgage company, and that he misrepresented his whereabouts to his superiors at the mortgage company to conceal the fact.
The evidence fell short of establishing that petitioner acted as a mortgage broker or solicitor in Florida without being licensed, in violation of Sections 494.04(1) and 494.08(4)(a), Florida Statutes (1981). Except for the check itself, with its suspicious reference to "Centrella Commission," Respondent's Exhibit No. 2, there is nothing in the record to show that petitioner did any work on either of the Centrella mortgages, and the uncontroverted testimony was that the check was payment for petitioner's services generally as an employee under supervision.
That respondent deny petitioner's application for licensure as a mortgage broker.
DONE AND ENTERED this 9th day of June, 1982, in Tallahassee, Florida.
ROBERT T. BENTON, II
Filed with the Clerk of the Division of Administrative Hearings this 9th day of June, 1982.
Clayton D. Simmons, Esquire Post Office Box 1330 Sanford, Florida 32771
Alfred T. Gimbel, Esquire Office of the Comptroller The Capitol, Room 1302 Tallahassee, Florida 32301
