STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 82-663

)

CAVALIER GROUP, INC., )

)

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 18, 1982, in Miami, Florida.

APPEARANCES

For Petitioner: Daniel J. Bosanko, Esquire

Tallahassee, Florida

For Respondent: Charles S. Domina, Esquire

Coral Gables, Florida

Petitioner issued a five-count Notice to Show Cause why it should not impose civil penalties, enter an order to cease and desist and to take certain affirmative action, and/or suspend or revoke Respondent's registrations.

Respondent timely requested a formal hearing on the allegations in that Notice to Show Cause. Petitioner presented the testimony of Tommie Ferrell, Michael C. Slayton, Charles H. Schnepel, and Michael J. Mellion. Additionally, Petitioner's Exhibits numbered 1 through 5 were admitted in evidence, and Respondent's Exhibits numbered 1 through 6 were admitted in evidence.

Pursuant to a settlement announced at the commencement of the formal hearing in this cause, Petitioner has filed a post-hearing Motion to Dismiss count (1) of the Notice to Show Cause with prejudice and count (2) of the Notice to Show Cause without prejudice. Petitioner's Motion to Dismiss be and the same is hereby granted.

During Petitioner's direct examination of Michael Mellion, president of the Respondent corporation, objections were made to certain questions concerning certain financial transactions by the Respondent, and ruling was reserved on those objections. Those objections be and the same are hereby sustained.

Both parties have submitted post-hearing proposed findings of fact in the form of a proposed recommended order. To the extent that any proposed findings of fact 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. On August 1, 1979, Petitioner issued a Notice to Show Cause to Respondent, which notice alleged, inter alia, that Respondent had violated Chapter 498, Florida Statutes, in failing to complete, as promised, certain access roads in Miami Green Acres and therefore material change had been effected without prior notification to and approval by the Petitioner. After the conduct of a formal hearing pursuant to Section 120.57(1), Florida Statutes, a Hearing Officer of the Division of Administrative Hearings issued a Recommended Order, which found, inter alia, that Respondent's Public Offering Statement promised that graded access roads within Miami Green Acres Unit II would be completed at the time deeds were required to be delivered to purchasers; that the Respondent did not adhere to its representations; and that the lack of graded access roads in Miami Green Acres Unit II constituted a material change, alteration, or modification of Respondent's offering for which no notice to the Petitioner had been given and no approval from the Petitioner had been obtained.

   
   

2. By Final Order entered June 4, 1980, Petitioner adopted that Recommended Order and concluded that Respondent was guilty of the statutory violations alleged relating to the noncompletion of promised roads. Among its other mandates, that Final Order required that:

   
   

   1. the Respondent shall submit to the Petitioner within thirty (30) days of the date of this Order a new estimate from a duly licensed engineer of the cost of constructing all roads promised in the Florida Public Offering Statement;

   2. the Respondent shall enter into an improvement trust account based upon the estimated cost of completion of the pro- mised road work within sixty (60) days of the date of this Order . . .

      
      

3. Miami Green Acres Unit II is a subdivision registered with the Petitioner pursuant to Chapter 498, Florida Statutes. As part of that registration, Respondent's Public Offering Statement promised lot purchasers completion of graded access roads by the time a deed is delivered to the purchasers. Warranty deeds have been delivered to purchasers and have been recorded for a substantial number of lots in Miami Green Acres Unit II, which does not have completed roads as promised in said Public Offering Statement.

   
   

4. Subsequent to the June 4, 1980 Final Order, Respondent submitted to Petitioner an engineer's estimate of the cost to complete improvements in Miami Green Acres Unit II. That cost estimate did not include any cost of obtaining any required construction permits necessary for completion of the developer promised roads. That information has still not been provided.

   
   

5. Subsequent to the June 4, 1980 Final Order, Petitioner and Respondent entered into negotiations for the establishment of the required improvement trust account based upon the partial cost of completion contained within the engineer's estimate. Respondent failed to accept any of Petitioner's proposals for funding that trust account, including proposals for full funding and

   proposals for installment payments. No improvement trust account has been established or funded for the road improvements in Miami Green Acres Unit II.

   
   

6. In order to construct the promised roads, certain permits from the Army Corps of Engineers are required. Respondent filed an application for the necessary permits. The Corps deemed Respondent's application to be incomplete and requested additional information. Respondent declined to provide that information, and Respondent's application was deactivated by the Corps. No reasonable effort was made by Respondent to obtain permits for the promised roads, and Respondent's inability to obtain those permits was caused solely by Respondent's lack of diligence in pursuing the permits.

   
   

7. In July, 1981, a cease and desist order was issued by the Army Corps of Engineers. Pursuant thereto, no road construction can be done in Miami Green Acres Unit II until the cease and desist order has been lifted and a permit for the work has been obtained. Respondent has made no request to the Corps to have the cease and desist order lifted. Respondent has not applied for permits.

   
   

8. The parties have stipulated in their Prehearing Stipulation that no material change approval request has been submitted to the Petitioner by the Respondent for the incomplete improvements in Miami Green Acres Unit II.

   
   

   CONCLUSIONS OF LAW

   
   

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

   
   

10. In exercise of its regulatory authority under Chapter 498, Florida Statutes, Petitioner has filed a Notice to Show Cause against Respondent, which notice contains five charges that Respondent has violated Chapter 498, Florida Statutes, and Chapter 7D, Florida Administrative Code. Pursuant to stipulation, Respondent has filed an appropriate affidavit and has paid an agreed upon fine and, accordingly, the charges contained in paragraphs (1) and (2) of the Notice to Show Cause have been dismissed.

    
    

11. Paragraphs (3) and (4) of the Notice to Show Cause charge Respondent with the following:

    
    

    1. In violation of Sections 498.39 [498.039] and 498.049(1)(a), Florida Statutes, 1981, and Rule 7D-6.03, Florida Administrative Code, Cavalier Group, Inc. has not provided an accurate, complete and sufficient engineer's estimate of the cost to complete improvements in Miami's Green Acres, Unit 2, which were promised in its Florida Public Offering Statement; in that, the most recent such estimate sub- mitted did not include costs of obtaining required construction permits. Said estimate is required, in part, by the Final Order issued by the Division on

       June 4, 1980 (Docket No. 79098RSD).

       
       

    2. In violation of Sections 498.039 and 498.049(1), Florida Statutes, 1981, and Rule 7D-6 et seq., Florida Administrative

       Code, Improvement Trust Account or other acceptable financial assurance of comple- tion has not been established for the incomplete improvements promised to lot purchasers in Unit 2 of Miami's Green Acres by Cavalier Group, Inc., said requirement to establish an Improvement Trust Account being required in part by the Final Order issued to Cavalier Group, Inc. by the Division on June 4, 1980 (Docket No. 79098RSD).

       
       

       These two charges arise from Respondent's alleged failure to comply with those portions of the June 4, 1980 Final Order set forth in paragraph numbered 2 of the Findings of Fact portion of this Recommended Order. Respondent argues that charges numbered (3) and (4) can only be properly pursued in an enforcement action in circuit court pursuant to Section 120.69, Florida Statutes, since it is clear that charges numbered (3) and (4) in the Notice to Show Cause are the same acts ordered to be performed within 30 days or 60 days, respectively, from June 4, 1980. Respondent is correct in its argument that enforcement of that Final Order can only be obtained in circuit court. However, charges numbered

       (3) and (4) allege that Respondent's failure to comply with the Final Order constitutes a violation of Section 498.049(1)(a), Florida Statutes, which authorizes Petitioner to revoke or suspend a registration if the registrant has failed to comply with the terms of any written order of the Petitioner. Since Respondent has failed to provide an accurate, complete and sufficient engineer's estimate of the cost to complete improvements in Miami Green Acres Unit II, and since Respondent has failed to establish an improvement trust account or other acceptable financial assurance of completion of the improvements promised to lot purchasers in Miami Green Acres Unit II, Petitioner has met its burden of proving that Respondent has failed to comply with the terms of a written order of the Petitioner and has, accordingly, violated Section 498.049(1)(a), Florida Statutes.

       
       

12. Paragraph numbered (5) in the Notice to Show Cause reads as follows:

    
    

    (5) In violation of Section 478.121(3), Florida Statutes, 1977 (now Section 498.033(3), Florida Statutes), Cavalier Group, Inc. has not submitted a material change request to the Division or obtained approval for the noncompletion of the access roads which were promised in its Florida Public Offering Statement for Miami's Green Acres, Unit 2. Cavalier Group, Inc. has continued to violate these cited requirements since it was last found to have done so in the Division's Final Order of June 4, 1980 (Docket No. 79098RSD).

    
    

    Subsequent to June 4, 1980, Respondent filed an application for the required permits for the road construction, was advised by the Army Corps of Engineers that its application was not complete, declined to complete its application and, accordingly, found its application eventually "deactivated." Respondent was solely responsible for failing to obtain the required permits between June 4, 1980, and July, 1981, when the Army Corps of Engineers issued its cease and desist order prohibiting the road construction in Miami Green Acres Unit II.

    The parties hereto have stipulated in their Prehearing Stipulation that no material change approval request was submitted to the Petitioner by Respondent for incomplete improvements in Miami Green Acres Unit II. Accordingly, the allegations in paragraph numbered (5) have been admitted. Respondent's defense to its admitted violation as charged in paragraph numbered (5) is based upon an alleged condition precedent found in a letter dated September 9, 1981, from Tommie Ferrell, an employee of the Petitioner, to the now-president of Respondent. That letter transmitted to Respondent a Consent Order to be signed by the Respondent, and in her letter Ferrell explained to Mellion the fourth paragraph of that Consent Order as follows:

    
    

    Pursuant to the Item 4 of the Consent Order, a material change request to extend the completion date for the roads within Miami's Green Acres should be submitted

    to this Division within 30 days of the execution of the Consent Order . . .

    
    

    However, since Respondent never signed the Consent Order, Respondent cannot now rely upon the provisions contained within it. The signing of the Consent Order is no condition precedent to Respondent's statutory obligation to submit a material change request to the Petitioner and obtain approval for the noncompletion of the access roads which were promised in its Florida Public Offering Statement for Miami Green Acres Unit II. Section 498.033(3), Florida Statutes, provides as follows:

    
    

    (3) After an order of registration has been issued, no material change, altera- tion, or modification of the offering shall be made by the registrant without first notifying the division in writing and obtaining written approval from the division. Such approval shall not be unreasonably withheld, and in any event a decision shall be rendered within 20 days from the date adequate information has been provided the division by the registrant, unless the registrant has consented in writing to a delay for a specified period of time acceptable to the division.

    
    

13. Years ago, Respondent commenced selling to purchasers lots in a subdivision without access roads. There are still no access roads. Although Respondent is currently unable to install the subject improvements due to its inability to obtain necessary Army Corps of Engineers permits, Respondent did not diligently seek those permits in the past. Accordingly, purchasers of lots in Miami Green Acres Unit II have not received what Respondent contracted to provide them. Petitioner seeks suspension of Respondent's registration because of this continued failure to comply with the terms of its Public Offering Statement. Any lesser penalty would be unjust.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered dismissing counts (1) and (2) of

the Notice to Show Cause due to settlement of those issues; finding Respondent guilty of the allegations contained in counts (3), (4) and (5) of the Notice to Show Cause; requiring Respondent to submit to Petitioner a material change approval request for delay of completion of improvements within 30 days; and suspending Respondent's registration of Miami Green Acres Unit II until such time as (a) a full and complete improvement cost estimate, including the cost of obtaining any construction permits, is filed with the Petitioner, (b) the required improvement trust account is established and funded by the Respondent in accordance with Petitioner's directives, and (c) all improvements promised by Respondent in its Florida Public Offering Statement for Miami Green Acres Unit II are completed.

DONE and RECOMMENDED this 17th day of December, 1982, 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 17th day of December, 1982.

COPIES FURNISHED:

Daniel J. Bosanko, Esquire Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301

Charles S. Domina, Esquire

250 Bird Road, Suite 104 Coral Gables, Florida 33146

Gary R. Rutledge, Secretary Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301

Docket for Case No: 82-000663

Orders for Case No: 82-000663