STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 82-3058

) GOLD COAST MORTGAGE CORPORATION, )

a Florida Corporation, )

SOUTHLANTIC MORTGAGE )

CORPORATION, a Florida )

Corporation, and THOMAS J. ) BOYLAN, Individually and as ) President and Principal ) Mortgage Broker for Gold Coast ) Mortgage Corporation and ) Southlantic Mortgage Corporation, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, this cause was heard by Linda M. Rigot, the assigned Hearing Officer of the Division of Administrative Hearings, on June 3, 1983, in Fort Lauderdale, Florida.

APPEARANCES

For Petitioner: Brian H. Brody, Esquire

Fort Lauderdale, Florida

For Respondent: Robert C. Stone, Esquire

Hollywood, Florida

Petitioner filed its Administrative Charges and Complaint seeking to suspend, revoke or take other disciplinary action against Respondents as licensees and against their licenses as mortgage brokers under the laws of the State of Florida. Respondents timely requested a formal hearing on the allegations contained within that Administrative Charges and Complaint.

Accordingly, the issues for determination are whether Respondents are guilty of the charges contained in that Administrative Charges and Complaint and, if so, what disciplinary action should be taken, if any.

Petitioner presented the testimony of Janice L. DiBella, Alfred E. Klein, Joseph M. Ehrlich, Paul Richmond, and William D. Lang, Jr. Additionally, Petitioner's Exhibits numbered 1 through 7 were admitted in evidence.

No testimony was presented on behalf of the Respondents. However, Respondents' Exhibit numbered 1 was admitted in evidence. Although leave was granted to Respondents to file a letter as Respondents' late-filed Exhibit

numbered 2 within ten days from the formal hearing in this cause, that exhibit was never filed and is not therefore part of the evidence in this cause.

Both parties submitted posthearing proposed findings of fact in the form of a proposed recommended order. To the extent that any proposed findings have not been adopted in this Recommended Order, they have been rejected as not having been supported by the evidence, as having been irrelevant to the issues under consideration herein, or as constituting unsupported argument of counsel or conclusions of law.

FINDINGS OF FACT

1. At all times material hereto, Gold Coast Mortgage Corporation (hereinafter "Gold Coast") was and is a corporation organized and existing under the laws of the State of Florida and conducting business in this state. At all times material here to, Southlantic Mortgage Corporation (hereinafter " Southlantic") was and is a corporation organized and existing under the laws of the State of Florida and conducting business in this state. At all times material here to, Thomas J. Boylan (hereinafter "Boylan") was and is the principal mortgage broker and president of Gold Coast and of Southlantic. At all times material hereto, Respondents were and are licensed as mortgage brokers by Petitioner and were and are conducting mortgage brokerage business in the State of Florida.

   
   

2. For approximately two years, Janice L. DiBella was employed by Gold Coast. Although she became licensed as a broker, she was throughout that time period responsible for the bookkeeping functions at Gold Coast. Although she wrote and posted the company's checks, she was not authorized to sign them. Rather, the checks were required to be signed by Boylan and Sol Klein.

   
   

3. Although DiBella believed that Boylan, Sol Klein, and Joel Pinsky each had a one-third interest in the company, Boylan was the head of the company, and DiBella took orders from him and worked only for him. Boylan ran the company on a day-to-day basis, Sol Klein was rarely in the office, and DiBella had only met Pinsky.

   
   

4. In late June 1952, DiBella received a telephone call from Boylan, who was at the office of Attorney Pollack. Boylan instructed her to take the checkbook and ledgers to her mother's house, which was located near the office of Gold Coast. DiBella did so. After retaining the books and records of Gold Coast in her possession for approximately two to three hours and after extracting a promise to be paid $1600 in cash before she would return them, DiBella met Boylan and Sol Klein in the parking lot of the Deli Den located across the street from the office of Gold Coast. After Sol Klein handed her

   $1600 in cash in a white envelope for which she signed a receipt, DiBella watched Boylan and Sol Klein put the books and records she gave them into the trunk of Sol Klein's car. They then asked her to return to the office with them to locate any other important documents they should have, and DiBella did so.

   DiBella then went to Pan American Bank and removed documents from a bank vault and turned them over to Sol Klein. She made no list of the documents which she removed from the vault.

   
   

5. Although none of the checks prepared by Janice DiBella payable to herself ever bounced, on occasion she wrote checks which exceeded the balance in the account at the time and informed Boylan that the amount of the check exceeded the balance in the account.

6. When Alfred E. Klein responded to Gold Coast's ad for mortgage investors, he met Boylan. In his dealings with Gold Coast thereafter, Al Klein dealt with Boylan who acted in his capacity as president of Gold Coast. As a result of that relationship, on behalf of himself and family members Al Klein invested approximately $600,000 to $700,000 with Respondents. He even began acting as an independent broker buying and selling mortgages on behalf of Gold Coast, and discussions began regarding Al Klein becoming an owner of Gold Coast. Those discussions terminated in February 1982.

   
   

7. On June 22, 1982, Al Klein went to Gold Coast's office and demanded that Boylan return to him $80,000 which Al Klein had given to Boylan for investment purposes. After a lengthy and heated "discussion" between Al Klein and Boylan, Boylan gave him two checks, one for $60,000 and one for $20,000. Both checks were written on the Gold Coast Mortgage Corp. escrow account, and both were notated that they represented an investment refund. When Boylan handed the checks to Al Klein, he told Klein that there was insufficient money in the escrow account to cover those checks but that if Klein put the checks through in the normal course of banking procedures they would be covered. After Al Klein deposited the checks, they were returned marked "insufficient funds." Those checks have never been subsequently honored, and Al Klein has never received from Gold Coast or from Boylan the money to cover those checks.

   
   

8. Al Klein contacted Petitioner, and investigation of Respondents' books and records was authorized. Representatives of Petitioner went to Gold Coast on two different occasions to commence auditing the books and records but could not gain entrance to the office. They contacted complainant Al Klein to advise him of their lack of progress, and Al Klein advised them that he was in possession of the records. Accordingly, Paul Richmond, a financial examiner for Petitioner, went to Al Klein's office in Pompano Beach to conduct his audit. Richmond spent approximately one week in Al Klein's office auditing the books and records and copying various documents. The following week the office files were given to Attorney Pollack; therefore, Richmond followed the books and records and continued his examination in Pollack's office for approximately three or four additional days. At the time of Richmond's audit, the books and records of Gold Coast were totally inadequate for examination to determine compliance with the Mortgage Brokerage Act. However, no evidence was offered as to what documents might remain in the office of Gold Coast, as to what documents went from the bank vault to Sol Klein, or as to what documents went from DiBella's mother's house to Sol Klein's automobile trunk. Further, no evidence was offered as to how the records got from the trunk of Sol Klein's car in the parking lot of the Deli Den to the Pompano Beach office of complainant Al Klein or as to the dates of transfers between persons in the unidentified chain of custody.

   
   

9. On June 17, 1951, John H. and Charlotte White executed a mortgage in the amount of $37,000 in favor of Gold Coast. Gold Coast thereafter executed a series of assignments, so that by the end of July 1951 the total amount of the

   $37,000 mortgage had been assigned by Gold Coast to various investors. On December 10, 1981, Gold Coast again assigned the White mortgage to seven different investors, which documents reflect that the White mortgage was in the amount of $37,700. The original group of investors did not reassign the White mortgage to Gold Coast until April 30, 1982. Boylan executed the assignment documents on behalf of Gold Coast as its president, as he executed the documents on behalf of one of the investors, Cius Corp., as its president.

   
   

10. On March 18, 1981, Jean and Nadine Laham executed a mortgage in the amount of $90,000 in favor of Gold Coast. On April 14, 1981, Gold Coast

    assigned that $90,000 mortgage to four different investors. On December 10, 1981, Gold Coast again assigned that $90,000 mortgage to seven investors. The original group of four investors did not reassign the Laham mortgage to Gold Coast prior to Gold Coast's reassignment.

    
    

11. On October 19, 1979, Clifford R. and Eileen Lockwood executed a

    $50,000 first mortgage in favor of Chase Federal Savings and Loan Association. On April 2, 1982, William L. and Jane C. Hubschmitt executed a $72,000 first mortgage on that same property in favor of Gold Coast. On May 5, 1982, the Lockwoods executed a warranty deed on that property to the Hubschmitts. On June 11, 1982, Gold Coast assigned its $72,000 mortgage to Marvin and Ann Tanner, who immediately reassigned $50,000 worth of that $72,000 mortgage to three investors. The assignment from Cold Coast to the Tanners and the assignments from the Tanners to those three investors are on the same Ramco form, were all witnessed and notarized by DiBella, and were all recorded simultaneously.

    DiBella also prepared the Hubschmitts' mortgage to Gold Coast, which mortgage instrument reflects it is a first mortgage. Al Klein was one of the investors to whom the Tanners partially assigned the mortgage assigned to them by Gold Coast. At the time, Boylan specifically represented to Al Klein that Klein was investing in a first mortgage.

    
    

12. The records of Gold Coast examined by Petitioner's representatives were incomplete in that individual files lacked mortgage loan applications, closing statements, and title insurance policies. Additionally, a portion of the escrow account records have not been located.

    
    

13. Petitioner did subpoena the records of Gold Coast's escrow account at Flagship Bank. According to those records, prior to June 17, 1982, that escrow account was overdrawn on 25 different occasions during 1982. From June 17, 1982, until the end of June, five additional overdrafts passed through that account. The balance in that account as of July 1, 1982, reflected that the account was overdrawn by $49,834.49.

    
    

14. On June 17, 1952, a $55,000 check written on the Gold Coast Mortgage Corp. trust account at Pan American Bank of Broward was deposited in the Gold Coast Mortgage Corp. escrow account at Flagship Bank and was returned with the notation that the account on which it was written had been closed.

    
    

15. On July 7, 1982, Boylan, as president of Gold Coast Mortgage Corp., filed a voluntary petition with the United States Bankruptcy Court for the Southern District of Florida.

    
    

    CONCLUSIONS OF LAW

    
    

16. The Division of Administrative Hearings has jurisdiction over the subject matter hereof and the parties here to. Section 120.57(1), Florida Statutes (1981).

    
    

17. The Mortgage Brokerage Act, Chapter 494, Florida Statutes, authorizes the Department of Banking and Finance to take disciplinary action against a licensee under that Act.

    
    

18. Sections 494.06(1) and (3), Florida Statutes, and 3D-40.06(5), Florida Administrative Code, require that every licensee maintain at the place of business for five years all books, accounts, records, and documents as will enable Petitioner to determine compliance with the Mortgage Brokerage Act. The removal of Gold Coast's records from Gold Coast's office, directed and

    authorized by Boylan, so that they were not available to Petitioner for examination constitutes a violation of those Sections as alleged in Count I of the Administrative Charges and Complaint filed herein.

    
    

19. Petitioner has met its burden of proving that Boylan and Gold Coast violated Sections 494.05 (1)(b) and (g) and 494.093(1), Florida Statutes, as charged in Count VIII of the Administrative Charges and Complaint by the failure of Boylan and Gold Coast to reacquire the White mortgage from the first group of investors before assigning that mortgage to the second group of investors.

    Since the first group did not reassign that mortgage to Gold Coast until months after the second assignment from Gold Coast, Boylan, when he executed the second set of assignment documents on behalf of Gold Coast, knew that Gold Coast had no interest in that mortgage at that time.

    
    

20. Petitioner has met its burden of proving that Boylan and Gold Coast violated Sections 494.05(4) (a), (b), (e) and (g) and 494.093(1) and (2), Florida Statutes, by assigning the Laham mortgage totally to two different groups of investors, with each assignment covering the total $90,000 mortgage given by the Lahams to Gold Coast although the second assignment took place six months after the first assignment by Gold Coast, as alleged in Count IX of the Administrative Charges and Complaint filed herein.

    
    

21. Petitioner has met its burden of proving that Boylan and Gold Coast violated Sections 494.05(1)(a), (b) and (g), 494.08(9) and 494.093(1) and (2), Florida Statutes, as alleged in Count X of the Administrative Charges and Complaint filed herein. When the Hubschmitts executed the $72,000 mortgage in favor of Gold Coast, there existed no recorded warranty deed indicating that the Hubschmitts had any interest in the real estate mortgaged by them. The warranty deed from the Lockwoods to the Hubschmitts on its face recited the existence of the first mortgage in favor of Chase Federal Savings and Loan. When Gold Coast assigned the Hubschmitts' mortgage to the Tanners, who simultaneous therewith reassigned a part thereof, the representation on the documents that Gold Coast was assigning a first mortgage misrepresents the recorded ownership of that property. In addition to signing those documents on behalf of Gold Coast, Boylan personally represented to Al Klein, one of the investors to whom the Tannes partially assigned their interest, that Klein was receiving a first mortgage.

    
    

22. Section 494.05(1)(i) , Florida Statutes, authorizes Petitioner to take disciplinary action against a licensee who has been found guilty of insolvency. The escrow account records for Cold Coast indicate that as of July 1, 1982, almost $50,000 worth of overdrafts had been written against that escrow account. Further, on July 7, 1982, Gold Coast, by and through Boylan, filed a voluntary petition in bankruptcy. Accordingly, Petitioner has met its burden of proving the insolvency of Gold Coast as charged in Count XIII of the Administrative Charges and Complaint filed herein.

    
    

23. Count XIV of the Administrative Charges and Complaint charges Respondents with violating Section 494.05(1)(g), Florida Statutes, which provides for the suspension of a licensee who has failed to comply with the provisions of the Mortgage Brokerage Act or any lawful regulation thereunder. Petitioner has met its burden of proving that Respondents Gold Coast and Boylan have so violated that statutory prohibition.

    
    

24. Count XV of the Administrative Charges and Complaint does not charge Respondents with any violation of the Mortgage Brokerage Act but simply recites the extent of disciplinary action which can be taken by Petitioner against a

    violating licensee. Accordingly, Count XV should be dismissed as not constituting a charge against Respondents herein. Additionally, Counts II, III, VII, XI and XII should be dismissed with prejudice since Petitioner presented no evidence in support of the allegations contained within those counts.

    
    

25. Petitioner has failed to meet its burden of proving Respondents guilty of the allegations contained within Counts IV, V and VI of the Administrative Charges and Complaint filed herein. Those counts are based upon allegations regarding the completeness of the files of Gold Coast examined by Petitioner's representatives. Since none of the records of Gold Coast were examined by Petitioner until after the records had come into the hands of the man who initiated this administrative action against the Respondents, and since Petitioner made no attempt to prove the chain of custody of those records from the undisclosed time that all or part of them were removed from the bank vault or from Sol Klein's automobile trunk or from the office of Gold Coast or even when they came into the hands of Al Klein, there is no evidence upon which those records can be found to have been complete or incomplete at the time that they constituted Respondents' business records. Since no finding can be made as to whether the records were complete, no violation of the law based upon incompleteness can be concluded.

    
    

26. Section 494.05(2), Florida Statutes, provides that: "The license of a licensee may be revoked, if . . . the licensee demonstrates by a course of conduct negligence or incompetence in performing any act for which he is required to hold a license . . ." Further, Section 494.05(3), Florida Statutes, provides as follows:

(3) If a licensee is a person other than an individual, it shall be suf- ficient cause for the suspension or revocation of a license that any officer, director or members of the licensed corporation, partnership, association or other group, has so acted or failed to act as would be cause for suspending or revoking a license to such party as an individual.

The insolvency of Gold Coast requires revocation of its license to engage in the mortgage brokerage business in the State of Florida. Likewise, it is appropriate that Boylan's license should be revoked for the continued negligence, incompetence, and deception engaged in by him as president of Gold Coast and by him individually, as set forth in this Recommended Order. No evidence in mitigation of the revocation of Boylan's license has been offered.

Although no evidence was presented as to Respondent Southlantic Mortgage Corporation, the pleadings in this cause admit that Boylan is the president and principal mortgage broker of Southlantic Mortgage Corporation in addition to being the president and principal mortgage broker for Gold Coast Mortgage Corporation. Since it is clear that Boylan's license should be revoked, then so should the license of Southlantic Mortgage Corporation, pursuant to the provisions of Section 494.05(3), Florida Statutes.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is

RECOMMENDED That a Final Order be entered dismissing with prejudice Counts II, III, IV, V, VI, VII, XI, XII and XV of the Administrative Charges and Complaint; finding Respondents Gold Coast Mortgage Corporation and Thomas J. Boylan guilty of the allegations contained within Counts I, VIII, IX, X, XIII and XIV of the Administrative Charges and Complaint; and revoking all licenses issued to Respondents Gold Coast Mortgage Corporation, Southlantic Mortgage Corporation, and Thomas J. Boylan pursuant to the Mortgage Brokerage Act.

DONE and RECOMMENDED this 31st day of October, 1983, in Tallahassee, Leon County, Florida.

LINDA M. RIGOT, Hearing Officer Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 31st day of October, 1983.

COPIES FURNISHED:

Brian H. Brody, Esquire

Office of the State Comptroller

201 West Broward Boulevard, Suite 510

Fort Lauderdale, Florida 33301-1885

Robert C. Stone, Esquire 2450 Hollywood Boulevard

Hollywood, Florida 33020

The Honorable Gerald Lewis Office of the Comptroller The Capitol

Tallahassee, Florida 32301

Docket for Case No: 82-003058

Orders for Case No: 82-003058