GENE S. CROWE, )
vs. ) CASE NO. 79-1777
) STATE OF FLORIDA, DEPARTMENT OF ) BANKING AND FINANCE, DIVISION OF ) FINANCE and GEORGE E. FEASTER ) d/b/a FEASTER MEMORIAL HOMES, )
Respondent. )
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, William E. Williams, held a public hearing in this cause on November 6, 1979, in St. Petersburg, Florida.
For Petitioner: Philip F. Nohrr, Esquire
For Respondent, Laura Bamond, Esquire Department of Office of the Comptroller Banking and 1313 Tampa Street Finance: Tampa, Florida 33602
For Respondent, Douglas L. Stowell, Esquire George Feaster, Barnett Bank Building
On or about June 7, 1979, Gene S. Crowe ("Petitioner") filed with the Department of Banking and Finance, Division of Finance ("Department") an application for authority to transfer a cemetery company in St. Petersburg, Florida pursuant to the provisions of Chapter 559, Florida Statutes.
Thereafter, numerous Respondents objected to the granting of the application and requested a formal hearing pursuant to the provisions of Section 120.57(1), Florida Statutes. Pursuant to the provisions of Section 120.57(1)(b)(3), Florida Statutes, the Department requested that a Hearing officer from the Division of Administrative Hearings be assigned to conduct the hearing in this cause. Final hearing was scheduled for November 6, 1979, by Notice of Hearing dated September 4, 1979.
At the final hearing, Petitioner testified in his own behalf, and called Grace Stennum, Louis H. Berman, William Joseph McLeod, Jr., Albert Vocke and Raymond H. Woodrow as his witnesses. Petitioner offered Petitioner's exhibits Nos. 1 and 2, both of which were received into evidence. Respondents called Joseph M. Ehrlich and Petitioner as their witnesses. In addition, Hearing Officer's composite exhibits Nos. 1 through 6, inclusive, were stipulated into the record by counsel for all parties.
On or about June 7, 1979, Petitioner filed with the Department an application together with the required fee, for authority to transfer a cemetery company in St. Petersburg, Florida. The name of the cemetery company sought to be transferred is Royal Palm of St. Petersburg, Inc.
A notice of receipt of the application was filed and published in the Florida Administrative Weekly, Volume 5, No. 24, on June 15, 1979. Thereafter, Respondents filed an objection to the granting of the requested transfer. Those Respondents who objected to the granting of the transfer were George E. Feaster, d/b/a Feaster Memorial Homes; Gerald B. Hubbell, d/b/a Hubbell Funeral Home; R. Lee Williams, d/b/a R. Lee Williams Funeral Home; J. Fred Bobbitt, d/b/a Bobbitt Funeral Chapel; A. Bruce Cloud, d/b/a Osgood Cloud Funeral Home; Fred H. Kenfield, d/b/a Fred H. Kenfield Funeral Home; C. James Mathews, d/b/a C. James Mathews Funeral Home; Edmund E. Thurston, d/b/a Wilhelm-Thurston Funeral Home; William J. Rhodes, d/b/a John S. Rhodes, Inc.; Donald I. Dyer, d/b/a The Palms Memorial; Patrick M. McGriff, d/b/a McGriff Funeral Chapel; David A. Dane, d/b/a
R. Lee Williams Funeral Home; Lewis W. Mohn, d/b/a Lewis W. Mohn Funeral Home; Alan R. McLeod, d/b/a Alan R. McLeod Funeral Home; William F. McQueen, d/b/a Anderson-McQueen Funeral Home; Mrs. Letha F. Rhodes; Richard H. Fairfield; Betty
W. Wilhelm; Timothy T. Brett and Terry Brett, d/b/a Thomas J. Brett Funeral Home; and William B. Gee and Edgar E. Pitts, d/b/a Gee & Pitts Funeral Home. Counsel for all parties stipulated at the final hearing that all Respondents objecting to the transfer are persons whose substantial interests would be affected by this proceeding within the meaning of Chapter 120, Florida Statutes. Respondents contend generally that Petitioner does not meet the statutory requirements contained in Section 559.34, Florida Statutes, for approval of the requested transfer.
Petitioner is currently licensed as a cemetery owner in the State of Florida. Petitioner is presently the sole stockholder, president and chief operating officer of Florida Memorial Cemetery, Inc. In addition, Petitioner has previously owned three other cemeteries in Florida and currently owns a cemetery in Tennessee. Petitioner has been engaged in the cemetery business for more than 19 years, the last seven of which have been in the State of Florida. He has been licensed as a cemetery owner in the State of Florida since 1975. Petitioner's prior experience in the cemetery business includes all phases of cemetery operation from salesman to owner.
In August of 1975, Petitioner purchased Florida Memorial Cemetery, Inc. At the time of purchase, Petitioner believed that he was assuming liabilities arising from the business activities of the corporation prior to purchase in the following amounts and for the following reasons:
$250,000 to provide merchandise for contracts sold prior to 1972 when the Merchandise Trust Fund Law became effective.
$150,000 to the Perpetual Care Trust
Fund and the Merchandise Trust Fund attributable to sales made by Petitioner's predecessor in interest but not required to be funded at the time Petitioner purchases the corporation.
$140,000 to build a mausoleum which the Petitioner's predecessor in interest had obligated the corporation to build.
Accordingly, Petitioner was led to believe that outstanding liabilities of Florida Memorial Cemetery, Inc., at the time of purchase totaled $540,000. However, upon an audit conducted by the Department some time after purchase, Petitioner was made aware that the $150,000 pre-1972 obligation referred to above, was, in fact, approximately $350,000. This misunderstanding was due, at least in part, to Petitioner's failure to audit the books and records of Florida Memorial Cemetery, Inc., prior to purchase. It should be noted here that Petitioner had served as general manager of Florida Memorial Cemetery, Inc., from January 1973 until the time he purchased the corporation in August 1975.
Cemetery companies selling burial rights and personal property or services on a pre-need basis are required to maintain percentages of those payments received on a pre-need basis in trust. Funds received from the sale of burial rights are maintained in a fund commonly referred to as the Care and Maintenance Trust Fund. Funds received from the sale of personal property or services are maintained in a fund commonly known as the Merchandise Trust Fund. Counsel for all parties stipulated at the hearing that Florida Memorial Cemetery, Inc., failed to timely deposit trust funds required by Florida law in the following amounts for the following audit periods:
From January 1, 1976 to June 30, 1976, the Merchandise Trust Fund was deficient in the amount of $5,051.51.
From July 1, 1976 to June 30, 1977, the care and Maintenance Trust Fund was deficient in the amount of $7,076.59, and the Merchandise Trust Fund was deficient in the amount of $17,773.23.
From July 1, 1977 to June 30, 1978, the Care and Maintenance Trust Fund was
delinquent in the amount of $26,068.60, and the Merchandise Trust Fund was deficient in the amount of $64,693.29.
From July 1, 1978 to November 30, 1978, the Care and Maintenance Trust Fund was deficient in the amount of $12,317.20, and
the Merchandise Trust Fund was deficient in the amount of $29,457.62.
From December 1, 1978 through May 1, 1979, the Care and Maintenance Trust Fund was deficient in the amount of $14,827.82, and the Merchandise Trust Fund was deficient in the amount of $33,355.36.
All deficits in the two trust funds described above were brought current within thirty days of notification from the Department. In addition, Florida Memorial Cemetery, Inc., has timely made its trust fund deposits since August 1, 1979, and was, at the time of final hearing in this cause, current on
deposits to those trust funds. However, at the time the above-described deficits occurred, Petitioner at all times knew of their existence, knew that deposits into the trust accounts were required to be paid on a monthly basis, and made a business decision not to fund those trust accounts in order to use those funds to meet other obligations of the corporation. These obligations included the construction of a mausoleum which his predecessor in title had obligated the corporation to build, and the necessity for the corporation to purchase new merchandise.
At the time the deficits in the two trust accounts existed at Florida Memorial Cemetery, Inc., Petitioner was actively engaged in other business pursuits. Petitioner and another investor purchased three other cemeteries in 1976, and borrowed approximately $75,000 to bring the trust funds of those cemeteries current. These cemeteries were later sold by Petitioner and his co- investors. In addition, in 1978 Petitioner created Florida Cemetery Products, Inc., a company engaged in the manufacture of fiberglass vaults. Petitioner invested $25,000 in this company at the time of its creation. In December 1978 or January 1979, Petitioner formed Florida Memorial Mortuary with an initial investment of $25,000. Finally, in June 1979 Florida Memorial Cemetery, Inc., purchased from Petitioner approximately five acres of land at a purchase price of $200,000, $30,000 of which purchase price was paid in cash to Petitioner. Further, during 1979 Florida Memorial Cemetery, Inc., expended $20,000 to
$25,000 for the purchase of statues to be placed on the grounds of the cemetery. All these investment activities were conducted at a time when Petitioner knew of the existence of deficits in the various trusts required to be maintained by Florida Memorial Cemetery, Inc.
Since Petitioner took over ownership of Florida Memorial Cemetery, Inc., the amount spent on maintaining the cemetery has more than doubled, new features have been added, more cemetery land has been obtained (a portion of which, as indicated above, was purchased by the corporation from Petitioner), roads have been improved, and the number of ground personnel maintaining the cemetery has been doubled. The current cost of maintaining Florida Memorial Cemetery, Inc., is approximately $80,000 to $90,000 per year. Income on the Care and Maintenance Trust Fund from the cemetery is approximately $30,000 to
$40,000 per year, which sum is applied toward maintenance expenses.
In the application form required to be filed with the Department in order to obtain authority to transfer an existing cemetery company, there is contained a series of questions. One of the questions inquires as to whether the applicant or any company with which he has been associated as an officer or member has ever been declared bankrupt. On the application form Petitioner answered this question in the negative. However, at final hearing in this cause, Petitioner admitted that he had filed for personal bankruptcy, and had been adjudicated a bankrupt in Tennessee in 1966. In explaining his failure to truthfully answer the Department's inquiry in this regard, Petitioner indicated that that period had been a particularly difficult one in his life, and that he had "wanted to put the past behind me." Another question on the application form inquired as to whether Petitioner had any judgments against him. Petitioner answered this question in the negative. At final hearing in this cause, however, Petitioner testified that he had been contacted by a collection agency or a credit bureau some time in 1973 concerning judgments outstanding in Iowa resulting from the operation of a company called "Midwest Sales." Petitioner takes the position that these judgments, copies of which were not introduced into evidence in this record, were not valid against him because
personal service of process on him had not been obtained, and the judgments were for debts of "Midwest Sales." It is, however, clear that Petitioner knew of the
existence of some dispute in this connection, and that some judgments might be outstanding against him, but failed to divulge their existence on his application form.
Petitioner did not include with his application filed with the Department a map showing land platted for burials in the cemetery which he seeks to acquire.
The owners of Royal Palm of St. Petersburg, Inc., the cemetery of which Petitioner seeks to obtain ownership, wish to sell the cemetery to Petitioner. The owners of the cemetery are not actively involved in its management, but receive frequent complaints concerning the maintenance and upkeep of the cemetery. Petitioner has apparently made plans to make capital improvements to and upgrade the maintenance of the cemetery if his application is approved.
An unaudited financial statement received into evidence at the final hearing in this cause upon Petitioner's swearing to its accuracy indicates that Petitioner and his wife possessed a net worth of $457,000 as of September 30, 1979. An earlier unaudited financial statement submitted by Petitioner to the Department with the filing of his application indicated the net worth of Petitioner and his wife was $1,616,500 as of December 31, 1978. The earlier financial statement was not sworn as required by the Department's rules. It should also be noted here that Petitioner's wife is not a party to the application here under consideration.
The parties to this proceeding submitted proposed findings of fact for consideration by the Hearing Officer. To the extent that such findings of fact are not adopted in this Recommended Order, they have been specifically rejected as being either irrelevant to the issues in this cause, or as not having been supported by the evidence.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action. Section 120.57(1), Florida Statutes.
Section 559.34, Florida Statutes, provides in pertinent part, that:
In any case where a person, a group of persons, or a corporation proposes to purchase or acquire control of an existing cemetery company either by purchasing the outstanding capital stock of any cemetery company, or the interest of the owner or owners, and thereby change the control of
said cemetery company, such person shall first make application to the department for a certificate of approval of such proposed change of control of said cemetery company and said application shall contain the name and address of the proposed new owners and the said department shall issue said certificate of approval only after it has become
satisfied that the proposed new owners are qualified by character, experience and
financial responsibility to control and operate the said cemetery company in a legal and proper manner, and that the interest of the public generally will not be jeopardized by the proposed change in ownership and management. . . . [Emphasis added.]
Rule 3D-30.17(2), Florida Administrative Code, requires that upon filing of an application for authority to transfer a licensed cemetery company, an applicant shall submit as supporting data a sworn current financial statement and a map showing land platted for burials in the cemetery for which transfer is sought.
Rule 3D-30.17(4), Florida Administrative Code, requires the Department, upon filing of an application for authority to transfer a licensed cemetery company to investigate the following conditions:
Character, reputation, financial standing, business qualifications and motives of the new proponents.
Legal entity. (Name of owners changed)
Capitalization.
Whether money is due any of the trust funds, unless waived.
Current financial statement for each proponent.
Biographical sketch for each proponent.
Rule 3D-30.17(5), Florida Administrative Code, authorizes the Department to approve transfer of an existing cemetery company if it ". . . finds that the proposed owner or owners of the existing cemetery company has in good faith complied with all lawful requirements. "
Section 559.43(1), Florida Statutes, and Rule 3D-30.01, Florida Administrative Code, require that specified percentages of payments for burial rites be set aside and deposited in the Care and Maintenance Fund of licensed cemetery companies. In addition, Section 559.43(2), Florida Statutes, requires that Care and Maintenance Trust Fund deposits be made by the cemetery company no later than five days following the close of the calendar month in which payments were received. Section 559.441, Florida Statutes, requires a licensed cemetery company to deposit 100 percent of the cost of the personal property or services sold for future use or delivery into the company's Merchandise Trust Fund.
Prior to July 1, 1978, Section 559.441(3)(b), Florida Statutes, provided that required deposits into a cemetery company's Merchandise Trust Fund be made within five (5) days from receipt. This provision has subsequently been amended to allow the cemetery company thirty (30) days after the calendar month in which final payment is received to make such deposits.
Petitioner's failure to divulge accurately facts concerning his earlier declaration of bankruptcy, and the possibility that judgments were outstanding against him in Iowa, cast doubt upon his character. Perhaps more importantly, Petitioner's lack of candor effectively precluded the Department from performing the investigation required of it by the statutes and rules quoted above. In addition, Petitioner's continued failure over a period of years to adequately fund trusts required to be maintained by Florida Memorial Cemetery, Inc., evinces a conscious disregard of the above-cited legal requirements--requirements of which Petitioner admitted a working knowledge.
Petitioner's argument that trust fund deposits could not be timely made because of other financial obligations of the cemetery is not convincing in light of the fact that Petitioner failed to have the records of the corporation audited prior to his purchase of that company. Additionally, Petitioner had ample opportunity to obtain a working knowledge of the company's financial condition during his two-year tenure as general manager of the corporation prior to the time he purchased the cemetery, and thus should have known that this condition existed. Finally, Petitioner's continued pattern of making substantial investments, both individually and on behalf of Florida Memorial Cemetery, Inc., at a time when he knew of the existence of deficits in the two trust funds leads to the conclusion that, notwithstanding his sizeable net worth, he has not demonstrated sufficient financial responsibility to control and operate Royal Palm Cemetery in a legal and proper manner so that the interest of the public will not be jeopardized by the proposed change in ownership.
Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED:
That a Final Order be issued by the Department of Banking and Finance denying the application of Gene S. Crowe for authority to purchase and acquire control of Royal Palm of St. Petersburg, Inc.
RECOMMENDED this 28th day of December 1979, in Tallahassee, Florida.
WILLIAM E. WILLIAMS
Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301
Filed with the Clerk of the Division of Administrative Hearings this 28th day of December 1979.
Philip F. Nohrr, Esquire Post Office Box 369 Melbourne, Florida 32901
Douglas L. Stowell, Esquire Barnett Bank Building
