STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS REGULATION, ) DIVISION OF FLORIDA LAND SALES, ) CONDOMINIUMS AND MOBILE HOMES, )

)

Petitioner, )

)

vs. ) CASE NO. 86-1003

)

BAILEY M. WELDON, Individual and ) as general partner, d/b/a ) POLYNESIAN ISLES DEVELOPERS, LTD., )

)

Respondent. )

)

RECOMMENDED ORDER

The final hearing in this case was held on April 28, 1988 in St.

Petersburg, Florida before Donald D. Conn, Hearing Officer, Division of Administrative Hearings. The parties were represented by:

Petitioner: Pamela S. Leslie, Esquire

Eric H. Miller, Esquire The Johns Building

725 South Bronough Street Tallahassee, Florida 32399-1007

Respondent: Charles E. Ray, Esquire

6534 Central Avenue

St. Petersburg, Florida 33707

The issue in this case is whether Bailey M. Weldon, individually and as general partner, d/b/a Polynesian Isles Developers, Ltd. (Respondent) should be assessed an administrative penalty by the Department of Business Regulation, Division of Florida Land Sales, Condominiums and Mobile Homes (Petitioner) based upon matters alleged in a Second Amended Notice To Show Cause, dated March 18, 1988 involving a time-share development. At hearing, the Petitioner called Richard W. Barcley, a general partner of Polynesion Isles Developers, and David Wheeler, financial analyst. Respondent testified on his own behalf, and also called Bill Turner, general manager of Polynesian Isles Developers. There were seven joint exhibits which were received in evidence, in addition to three exhibits introduced by Petitioner. No transcript of the hearing has been filed. The parties were given ten days following the hearing within which to file proposed recommended orders containing proposed findings of fact, and the Appendix to this Recommended Order contains a specific ruling on each timely filed proposed finding of fact.

At the commencement of the hearing, the Petitioner's Motion To Dismiss Richard W. Barcley as a co-Respondent in this proceeding, based upon a Consent Order filed on April 20, 1988, was granted, and the case proceeded, without objection, as to Respondent Weldon. Additionally, Petitioner entered an ore

tenus motion to deem certain matters admitted and to relinquish jurisdiction, pursuant to Rule 22I-6.003, Florida Administrative Code, based upon Respondent's failure to timely respond to Requests for Admissions. Responses to Petitioner's Requests for Admissions were served three days late, but had been provided prior to hearing. Petitioner's Motion was denied, based on Rule 1.370(b), Fla. R. Civ. Proc., since the presentation of the merits of this action would not be served by granting this motion, and Petitioner was not prejudiced by receiving Respondent's Responses three days late.

FINDINGS OF FACT

The following findings of fact are based upon the stipulation of the parties, as well as the evidence presented at hearing, including the demeanor of the witnesses:

1. Polynesian Isles Developers, Ltd., was a developer of a time-share property, within the meaning of Section 721.05(9), Florida Statutes, in Osceola County in 1984. Bailey M. Weldon was a general partner of Polynesian Isles Developers, Ltd., and a developer of time-share property known as Polynesian Isles Resort Condominium I from November 23, 1982 to January 16, 1985.

   
   

2. Polynesian Isles Developers, Ltd., submitted certain advertising to Petitioner for approval on January 9, 1984, and was noticed of deficiencies in its Polynesian Isles- Super Bowl advertising materials by notice issued by the Petitioner on January 17, 1984. These advertising materials were distributed in the January 18, 1984 Super Bowl Supplement to the St. Petersburg Times without correction of the noticed deficiencies. No time-share unit weeks were sold as a result of this ad.

   
   

3. It was represented in the Polynesian Isles Developers, Ltd., public offering statement, and its sales contract with purchasers of time-share unit weeks, that purchasers would obtain fee title to purchased unit weeks free and clear of encumbrances. It was also represented in such sales contracts with purchasers of time-share unit weeks that Polynesian Isles Developments, Ltd., as Seller, would provide purchasers with an owner's title insurance policy upon closing Respondent agrees and stipulates that no owner's title insurance policy was issued for some of the unit weeks sold and closed in 1984. The evidence establishes that no title insurance policies were issued for 329 unit weeks.

   
   

4. Respondent established an escrow account for the deposit and withdrawal of all funds received from, or on behalf of, time-share purchasers. Daniel Giannini served as escrow agent for Polynesian Isles Developers, Ltd., for the purpose of receiving and disbursing funds pursuant to Section 721.08 Florida Statutes. Respondent agrees and stipulates that some affidavits for release of escrow funds were delivered to Daniel Giannini as escrow agent when all conditions required by Section 721.08, Florida Statutes, had not occurred. The evidence establishes that these affidavits falsely stated that all conditions for closing had occurred when, in fact, closing had not properly occurred on 331 unit weeks in 1984 because title was not conveyed free and clear of all encumbrances. As a result, purchasers' funds in escrow were released to Respondent without the conveyance of free and clear title or the issuance of title insurance policies.

   
   

5. Goldome Savings Association held the primary mortgage on the first phase of the Polynesian Isles Development. This mortgage encumbered unit weeks sold by the Development. Respondent failed to obtain partial releases from Goldome of the mortgages on 331 unit weeks which closed in 1984, and therefore

   the sale of these weeks closed without free and clear title. Deeds to the 331 unit weeks were recorded without disclosure of the underlying mortgage. Title insurance policies were not issued on 329 of these unit weeks as a result of the failure to obtain releases.

   
   

6. Respondent Weldon was the general partner who was in charge of legal matters, closings and title insurance. He also supervised the general manager of Polynesian Isles with his other general partner, Richard Barcley. It was Weldon's general practice to sign escrow affidavits in blank and to rely on his employees to insure that they were used properly at closings.

   
   

7. The general manager of the development during 1984 was Frank Cuyler. Respondent terminated Cuyler when he learned that Cuyler had agreed to an unfavorable change in the terms of Goldome's mortgage as an inducement to obtaining financing for phase II of the development, and had failed to report such change to Respondent, or obtain his approval.

   
   

8. The effect of the change which was agreed to by Cuyler was to increase the amount the development had to pay to Goldome for a partial release on each unit-week from $1800 to approximately $3800. When it became apparent that it was not financially feasible for the development to pay this increased amount for releases, Cuyler simply proceeded to close on 331 unit-weeks without releases. Respondent was unaware of this practice, and when it came to his attention he immediately gave instructions that it be discontinued, and terminated Cuyler. In addition, he raised approximately $1.4 million, including

   $300,000 of his own money, to obtain the releases on these 331 unit-weeks, and to cure any mortgage default. However, the evidence does not establish that releases were ever obtained.

   
   

   CONCLUSIONS OF LAW

   
   

9. The Division of Administrative Hearings has jurisdiction over the parties and subject matter in this cause. Section 120.57(1), Florida Statutes.

   
   

10. In pertinent part, the Florida Real Estate Time Sharing Act provides as follows (Chapter 721, Florida Statutes, (1983)):

    
    

    721.11 Advertising materials; oral statements.--

    (1) Any advertising material relating to a time-share plan shall be filed with the division by the developer 10 days prior to use. All such advertising materials must be substantially in compliance with this chapter and in full compliance with the mandatory provisions of this chapter. In the event that any such material is not in compliance, the division may require the developer to correct the deficiency; and, if the developer fails to correct the deficiency, the division may file administrative charges against the developer using such material and exact such penalties as provided in s. 721.26.

    * * *

    1. No advertising or oral statement made by any seller shall:

       1. Misrepresent a fact or create a false or misleading impress ion regarding the time-share plan or promotion thereof.

    . . . . .

    (i) Make any misleading or deceptive representation with respect to the contents of the public offering statement and the contract or the rights, privileges, benefits, or obligations of the purchaser under the contract or this chapter.

    
    

    721.08 Escrow accounts; nondisturbance instruments; alternate security arrangements.--

    * * *

    (2) One hundred percent of all funds or other property constituting the deposit, which is received from or on behalf of purchasers of the time-share plan or time- share period, shall be deposited pursuant to an escrow agreement approved by the division. The escrow agreement shall provide that the funds or property may be released from escrow only as follows:

    * * *

    (c) Compliance with conditions.--

    1. If the time-share plan is one in which time-share licenses are to be sold and no cancellation or default has

       occurred, the escrow agent may release the escrowed funds or property upon presentation of:

       1. An affidavit by the developer that all of the following conditions have been met:

    1. Expiration of the cancellation period.

    2. Completion of construction.

    3. Closing.

    4. Execution and recordation of the nondisturbance and notice to creditors instrument, as described in this section.

    . . . . .

    
    

11. The record clearly establishes that Respondent's Super Bowl Advertisement was not approved by Petitioner prior to publication and distribution. Respondent was notified of deficiencies in-said advertising prior to publication, but did not correct these deficiencies. He now claims he did not have time to make the corrections, but this was as a result of his failure to submit this ad to Petitioner until just nine days prior to publication. Respondent's action of publishing the Super Bowl Advertisement without correcting noticed deficiencies is in violation -of Section 721.11(1), Florida Statutes.

    
    

12. Petitioner has also established that Respondent violated Section 721.11(4)(a) and (i) by making false, misleading and deceptive representations in the public offering statement and sales contracts with purchasers. Contrary to representations contained therein, 331 time-share unit week purchasers in

    1984 did not obtain free and clear title, and 329 did not receive title insurance. No partial mortgage releases were recorded for any of these 331 unit weeks, and the deeds for these purchases were recorded without disclosing the underlying mortgage held by Goldome.

    
    

13. It has also been shown that affidavits for release of escrow funds were delivered to Respondent's escrow agent in blank, prior to all conditions required by Section 721.08, Florida Statutes, being met. Respondent violated Section 721.08 by executing affidavits for the release of purchasers' escrow funds when, in fact, proper closings had not occurred since free and clear title had not been conveyed.

    
    

14. Petitioner is authorized by Section 721.26(5)(d), Florida Statutes, to impose administrative penalties of up to $10,000 for violations of Chapter 721. The evidence in this case establishes that Petitioner is authorized to impose administrative penalties against Respondent Weldon for acts which he committed, and which were committed on his behalf, as general partner of Polynesian Isles Developers, Ltd. See Sections 620.125(2) and 620.63, Florida Statutes. He was the general partner responsible for all legal matters, closings and title insurance, and it was in these areas of responsibility that these numerous violations occurred.

RECOMMENDATION

Based upon the foregoing, it is recommended that Petitioner enter a Final Order assessing an administrative penalty against Respondent Bailey M. Weldon in the amount of $10,000.

DONE AND ENTERED this 17th day of May, 1988, in Tallahassee, Florida.

DONALD D. CONN

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 17th day of May, 1988.

APPENDIX

(DOAH Case No. 86-1003)

Rulings on Petitioner's Proposed Findings of Fact: 1.(a)-(c) Adopted in Finding of Fact 1.

1(d) Adopted in Finding of Fact 2.

1(e) Adopted in Finding of Fact 3. 1(f)-(g) Adopted in Finding of Fact 5 1(h)-(i) Adopted in Finding of Fact 3. 2(a)-(b) Adopted in Finding of Fact 2. 2(c)-(e) Adopted in Finding of Fact 5.

2(f) Rejected as unnecessary and cumulative. 2(g)-(h) Adopted in Finding of Fact 8.

2(i)-(j) Adopted in Finding of Fact 6. 2(k) Adopted in Finding of Fact 2.

Rulings on Respondent's Proposed Findings of Fact:

1. Rejected since this is a conclusion of law rather than a finding of fact.

2. Adopted in Finding of Fact 1.

3A Rejected as irrelevant to the charges in this case. 3B Adopted in Finding of Fact 2.

3C Adopted in Findings of Fact 3, 5.

3D Adopted in Finding of Fact 3, assuming typographical error of 229 which should be 329.

3E Adopted in Finding of Fact 4. 3F(a) Rejected in Finding of Fact 7.

3F(b) Rejected as not based upon competent substantial evidence in the record.

3F(c) Adopted in part in Findings of Fact 6, 7 and 8. 3F(d) Adopted in part in Findings of Fact 4, 6.

COPIES FURNISHED:

Pamela S. Leslie, Esquire Eric H. Miller, Esquire

Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1007

Charles Edwin Ray, Esquire 6534 Central Avenue

St. Petersburg, Florida 33707

E. James Kearney Director

Division of Florida Land Sales, Condominiums and Mobile Homes Department of Business Regulation 725 South Bronough street Tallahassee, Florida 32399-1007

Van B. Poole Secretary

Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1007

Joseph A. Sole General Counsel

Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1007

Docket for Case No: 86-001003

Orders for Case No: 86-001003