STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ROBERT R. CLARK, )

)

Petitioner, )

)

vs. ) CASE No. 87-0033

)

DEPARTMENT OF BANKING AND ) FINANCE, OFFICE OF COMPTROLLER, )

)

Respondent. )

)

RECOMMENDED ORDER

A final hearing was held in St. Petersburg, Florida on September 9, 1987, before Donald D. Conn, Hearing Officer, Division of Administrative Hearings, to consider whether Robert R. Clark, Petitioner, is qualified to be licensed by the Department of Banking and Finance, Office of Comptroller, Respondent, as a mortgage broker. The parties were represented as follows:

For Petitioner: John Swisher, Esquire

Dillinger & Swisher 5511 Central Avenue

St. Petersburg, Florida 33710

For Respondent: Stephen M. Christian, Esquire

Office of Comptroller

1313 Tampa Street, Suite 713

Tampa, Florida 33602-3394

At the hearing, the parties introduced eleven joint exhibits, and Petitioner introduced two exhibits. Petitioner testified on his own behalf, and Respondent called three witnesses. A transcript of the hearing was filed on September 28, 1987, and a ruling on each timely filed proposed finding of fact is included in the Appendix to this Recommended Order.

Following the hearing, counsel for Petitioner has sought the introduction of additional evidence and Respondent has opposed such introduction since there is no opportunity to cross-examine any witness regarding the additional information. There is no basis to allow post-hearing introduction of evidence which deprives a party of its right of cross-examination thereon, and which could result in the endless process of post-hearing filing of supplemental and rebuttal information. Therefore, Petitioner's additional information has been rejected and has not been considered. Collier Medical Center v. Department of Health and Rehabilitative Services, 462 So.2d 83 (Fla. 1st DCA 1985); Florida Department of Transportation v. J. W. C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981).

FINDINGS OF FACT

1. During 1982 and 1983, Petitioner was licensed as a mortgage broker and real estate broker in the State of Florida. His mortgage broker's license expired in September, 1983.

   
   

2. At all times material hereto, Petitioner utilized his mortgage broker's and real estate broker's license to engage in real estate development speculation. He worked closely with Jeffrey Graham, who was also licensed as a mortgage broker and who was a co-owner with Petitioner of Continental Development, Continental Mortgage Company and the Real Estate Spot. They were engaged in buying and selling existing residential properties and constructing new homes for sale.

   
   

3. Financing for Petitioner's speculative real estate transactions was provided primarily by The Bank of Florida, located in St. Petersburg, Florida. The Bank provided financing on 80 to 85 percent of his transactions, but at some point in 1982 or 1983, Petitioner and Graham found themselves unable to obtain further construction financing from the Bank.

   
   

4. In order to continue receiving financing from the Bank, Petitioner and Graham initiated the use of "stand-in" buyers. A "stand-in" buyer would not have to use any of his own money as a deposit or down payment, even though real estate contracts executed in connection with these transactions would show an earnest money deposit by such buyers. The buyer's role was simply to lend his credit to the transaction and to share in any profits on the eventual sale of the property.

   
   

5. On or about March 25, 1983, Petitioner executed, as seller, a contract for sale of real estate and deposit receipt with Norman Tanner, buyer. The transaction involved the sale of real estate in Pinellas County, Florida, and reflects a total purchase price of $25,000, with an earnest money deposit of

   $5,000 which the contract specified was to be held by Petitioner, as seller, until closing. Petitioner also executed a Settlement Statement on March 29, 1983, in connection with a loan obtained by Tanner from The Bank of Florida which indicated that Tanner had paid an earnest money deposit of $5,000.

   
   

6. Based upon the testimony of Norman Tanner at hearing, it is found that he did not provide the earnest money deposit indicated on the sales contract or Settlement Statement which Petitioner executed as seller. Petitioner testified that this transaction was carried out in his individual capacity as a personal investment, and not under the authority of his mortgage broker's license. In fact, Petitioner did not deal directly with Tanner in this transaction.

   Tanner's dealings were with Petitioner's partner, Jeffrey Graham. Nevertheless, the evidence and demeanor of the witnesses establishes that Petitioner was aware of the fact that Tanner had not paid the deposit reflected on the instruments he executed, and that such instruments were used to induce the Bank to make a mortgage loan to Tanner. Petitioner, as seller, received $19,665.56 cash at settlement from this transaction with Tanner.

   
   

7. On or about February 24, 1982, Petitioner executed a contract for sale of real estate and deposit receipt with Joseph Armendinger, buyer. The transaction involved the sale of real estate in Pinellas County, Florida, and reflects a total purchase price of $48,000, with an earnest money deposit of

   $6,500 which the contract specified was to be held in escrow by The Real Estate Spot, Inc., until closing. Petitioner and Armendinger also executed an Affidavit of Purchaser and Vendor in connection with obtaining financing for

   this transaction, and said Affidavit also indicated the buyer's purported cash equity of $6,500 in the property. At the time, Petitioner was co-owner of The Real Estate Spot, and Armendinger was an electrician who was doing some work at The Real Estate Spot and became interested in the "stand-in" buyer transactions he observed while doing electrical work at Petitioner's office.

   
   

8. On or about October 27, 1982, Petitioner and Armendinger executed another contract for sale and deposit receipt for a second piece of property, which reflects a total price of $85,000 and an earnest money deposit by Armendinger of $5,000. Thereafter, they executed an Affidavit of Purchaser and Vendor and Settlement Statement reflecting Armendinger's purported cash equity of $4,250.00. Petitioner used the proceeds from this transaction to pay off an existing mortgage and judgment on the property, and realized $1,607.46 in cash, which was shared with Jeffrey Graham, co-seller.

   
   

9. Petitioner knew that the contracts for sale and Affidavits which he executed with Armendinger were to be presented to The Bank of Florida and used for the purpose of Armendinger obtaining financing for the purchase of these properties.

   
   

10. Based upon the testimony of Joseph Armendinger at hearing, it is found he did not provide any earnest money deposit or downpayment in connection with these two transactions with Petitioner. Armendinger relied on Petitioner, a licensed mortgage broker and real estate broker, in these transactions, and was told by Petitioner that he would not have to put any money of his own into these transactions. Petitioner knew that Armendinger had not made any deposit or downpayments concerning these transactions at the time he executed the contracts for sale and deposit receipts, Affidavits and Settlement Statement.

    
    

11. On December 16, 1982, Petitioner executed two mortgages in favor of Patricia G. Herren on property he had previously sold to Armendinger. These mortgages totalled $21,793.35, and were recorded in Pinellas County, Florida, on December 28, 1982. These mortgages were used by Petitioner, along with a

    $10,000 mortgage he executed in Herren's favor, to obtain a satisfaction from Herren of a mortgage she held on a piece of property she sold to Petitioner in October 1982 in St. Petersburg Beach. The $10,000 Herren mortgage was also recorded on December 28, 1982. Having obtained the satisfaction, Petitioner then sold the St. Petersburg Beach property to Juanita Murdaugh and Jeffrey Graham on December 17, 1982, prior to recording the $10,000 Herren mortgage. He did not disclose on the Affidavit of Purchaser and Vendor which he executed that he had an outstanding $10,000 mortgage in favor of Herren on this St. Petersburg Beach property, although this mortgage should have been disclosed as "secondary financing."

    
    

12. In each of the Affidavits of Vendor and Purchaser executed by Petitioner in connection with sales of property as described herein, there is the following statement in Item VII:

    
    

    The certifications of this affidavit are for the purpose of inducing the Lender named above or its assignees to make or purchase the first mortgage described by this affidavit....

13. By signing the Affidavits of Vendor and Purchaser, Petitioner, as the "Property Vendor," made the following certification:

    
    

    The PROPERTY VENDOR hereby certifies that to the extent PROPERTY VENDOR is a party, the Financial Terms, including Total Purchase Price, and the Liens are as

    set forth in Items III and IV above, [and] hereby acknowledges the inducement purpose of this affidavit as set forth in Item VII above....

    
    

    CONCLUSIONS OF LAW

    
    

14. The Division of Administrative Hearings has jurisdiction over the parties and subject matter in this cause. Section 120.57(1), Florida Statutes. The Petitioner, as an applicant for licensure as a mortgage broker, has the burden of proof in this proceeding. Rule 28-6.008(3), Florida Administrative Code; Florida Department of Transportation v. J. W. C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981).

    
    

15. Section 494.052(6), Florida Statutes, provides that Respondent may deny an application for licensure as a mortgage broker when an applicant has violated Section 494.055(1). The enumerated grounds for license denial set forth in Section 494.055(1)(b), Florida Statutes, include "fraud, misrepresentation, deceit, negligence, or incompetence in any mortgage financing transaction." (Emphasis Supplied) The use of the singular "any" indicates that Respondent may deny licensure for even one violation of Section 494.055(1)(b).

    
    

16. In this case, the evidence clearly establishes Petitioner's repeated practice of misrepresentation, deceit and negligence in mortgage financing transactions during 1982 and 1983. In transactions with Norman Tanner and Joseph Armendinger, Petitioner knowingly executed contracts for the sale of real estate and Affidavits of Purchaser and Vendor to be used in financing these transactions which misrepresented deposits and downpayments made by the purchasers. These documents were used to deceive The Bank of Florida from which Tanner and Armendinger obtained financing and Petitioner was aware of the intended use of these documents, as well as the material inaccuracies contained therein. Petitioner's advice to, and dealings with, Armendinger were, at best, negligent in that he knew that Armendinger was relying on him in the sale and financing of two transactions in 1982, and yet he executed, and allowed Armendinger to execute, inaccurate and deceptive documents to be used for the purpose of obtaining mortgages on the properties. The Herren and Murdaugh transactions support and confirm the pattern of deception, misrepresentation and negligence which was apparent in Petitioner's mortgage financing transactions, conducted while he was a licensed mortgage broker in the State of Florida in 1982 and 1983.

    
    

17. Petitioner has raised the affirmative defenses of laches and statute of limitations and argues that the transactions involved in this case are too remote in time to be considered as grounds for license denial. These affirmative defenses are hereby denied and are unpersuasive since these doctrines do not apply in administrative proceedings. Donaldson v. Department of Health and Rehabilitative Services, 425 So.2d 145 (Fla. 1st DCA 1983); Landes

v. Department of Professional Regulation, 441 So.2d 686 (Fla. 2nd DCA 1983), rev. den., 451 So.2d 849 (Fla. 1983) Farzad v. Department of Professional Regulation, 443 So.2d 373 (Fla. 1st DCA 1983).

RECOMMENDATION

Based upon the foregoing, it is recommended that Petitioner's application for licensure as a mortgage broker be DENIED.

DONE AND ENTERED this 19th of October, 1987, 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 19th day of October, 1987.

APPENDIX (DOAH No. 87-0033)

Rulings on Petitioner's Proposed Findings of Fact:

1. Adopted in Finding of Fact 1. 1.(a) Adopted in Findings of Fact 2, 4.

2.(a) Rejected as not based on competent substantial evidence. 2.(b) Rejected in Findings of Fact 5, 6.

2.(c) Rejected in Finding of Fact 10. 2.(d) Rejected in Findings of Fact 6-10. 2.(e), (f) Rejected in Finding of Fact 11.

Rulings on Respondent's Proposed Findings of Fact:

Findings of Fact 7, 9, 10.

1. Adopted in Findings of Fact 8, 10.

2. Adopted in Findings of Fact 8, 9, 10. 14-19. Adopted in Finding of Fact 11.

1. Adopted in Finding of Fact 12.

2. Adopted in Finding of Fact 13.

3. Rejected as not based on competent substantial evidence.

4. Adopted in Finding of Fact 11.

5. Rejected as unnecessary and cumulative.

COPIES FURNISHED:

John Swisher, Esquire Dillinger & Swisher 5511 Central Avenue

St. Petersburg, FL 33710

Stephen M. Christian, Esquire Office of Comptroller

1313 Tampa Street

Tampa, FL 33602-3394

Honorable Gerald Lewis Department of Banking and

Finance

Comptroller, State of Florida The Capitol

Tallahassee, FL 32399-0350

Charles L. Stutts General Counsel Plaza Level

The Capitol

Tallahassee, FL 32399-0350

Docket for Case No: 87-000033

Orders for Case No: 87-000033