STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

KINGSLAND, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 82-1601

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

)

Respondent. )

)

RECOMMENDED ORDER

Prior to the 28 September 1982 hearing date the parties in this proceeding, by and through their attorneys, on 27 September 1982 submitted a STIPULATION purporting to contain all facts material to this case. By accompanying letter the parties waived formal hearing and requested a Recommended Order be submitted based upon the facts contained in the STIPULATION. The parties are represented by: Edward S. Jaffry, Esquire, Post Office Drawer 1140, Tallahassee, Florida 32302 representing Petitioner; Daniel J. Bosanko, Esquire, Staff Attorney, Department of Business Regulation, 725 South Bronough Street, Tallahassee, Florida 32301 representing Respondent.

By letter dated 1 June 1982 Kingsland, Inc., by and through its attorney, requests a formal hearing to contest the denial by the Division of Florida Land Sales and Condominiums, Respondent, of Petitioners Application for a Material change No. 1069 in the Heller Mortgage. By notice dated 10 May 1982 Respondent advised Petitioner that the Material Change requested had been denied because the Petitioner had failed to provide evidence that the release provisions of the contemplated mortgage meet the requirements of Rule 7D-6.01, Florida Administrative Code.

FINDINGS OF FACT

1. Petitioner's subdivision to which the proposed mortgage is appurtenant is registered with the Division of Florida Land Sales and subject to the provisions of Chapter 498, Florida Statutes.

   
   

2. A copy of the proposed mortgage is attached to the STIPULATION and contains the provisions relevant to these proceedings. Those relevant portions are contained in paragraphs 43 and 45 in the Addendum to Mortgage which provides:

   
   

   43. Provided Mortgagor is not in default in any of the terms and provisions of this Mortgage or the Note secured thereby, or in

   any other agreement now or hereafter entered into with Mortgagee, then Mortgagee agrees to release individual lots from the lien of

   this Mortgage upon payment to Mortgagee of the sum of One Thousand one Hundred Fifty Dollars ($1,250.00) , or an assignment to Mortgagee of the purchase money note and mort- gage generated from the sale of the lot being released.

   
   

   45. Mortgagee covenants and agrees to release from the lien of this Mortgage lots sold to third party purchasers when the Pur- chase Money Mortgage encumbering said lot has been paid in full.

   
   

   CONCLUSIONS OF LAW

   
   

3. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings.

   
   

4. Rule 7D-6.01, Florida Administrative Code, provides in pertinent part:

   
   

   1. Subdivided lands, or any portion thereof, encumbered by liens, mortgages or other encumbrances, shall net be accepted for registration and shall not be offered

      for disposition to the public unless adequate release clauses are contained in the encumbering instrument. Adequate release clauses are those' which will provide reasonable protection to the prospective purchaser and must include, but shall not be limited to the following:

      1. The release of registered lots on a random, individual basis.

      2. If the offering is a homesite

         with all promised improvements complete, the required payment for the exercise of the release privilege may not exceed

         75 percent of the sales price of the lot, the principal balance remaining in purchaser's contract for deed, whichever

         is less. If the offering is a non-immediate- site offering or a homesite offering with promised improvements not complete, the required payment for the exercise of the release privilege may not exceed 50 percent of the sales price of the lot, or the principal balance remaining on the purchaser's contract for deed, whichever is less. In either

         event, if the subdivider is unable unwilling to effect such release, the con- tract purchaser or anyone else, in his behalf, may make the required payment and effect the release of the lien on the property.

      3. The release clause must have legal efficacy up to the time of final

         decree in the event the mortgage is fore- closed.

   2. In the event the encumbering instrument does not contain adequate release clause,. as described above, or the encumbering instrument does not contain a subordination provision; (subordination is defined as a clause which recognizes that the purchaser's rights are superior to or take priority over the encumbrance and unconditionally provides that the

      purchaser can obtain legal title or other interest contracted for free and clear of such encumbrance upon compliance with the terms and- conditions of the purchase of lease) , the lien or encumbrance shall be considered objectionable unless adequate reserves are maintained in a trust or escrow account.

      
      

5. Here no evidence was presented that a trust or escrow account has been established to bring this case within the provisions of the ultimate portion of the rule above quoted. No evidence was presented that a subordination agreement was in effect which would bring the purchaser of a lot covers by this mortgage under its provisions. Nor was any evidence presented other than the proposed mortgage to provide guidelines for the interpretation of those mortgage provisions. Under these circumstances, and in almost every situation where the writing itself provides the clue to its meaning, the cardinal rule is that the words used shall be given their ordinarily understood meaning in interpreting the writing.

   
   

6. Applying that rule to these proposed mortgage provisions, it is immediately apparent that this mortgage contains a condition precedent to the release of any individual lot from the provisions of the mortgage. That condition precedent is contained in the phrase "provided mortgagor is not in default in any of the terms and provisions of this mortgage or of the note secured thereby, or in any other agreement now or hereafter entered into with mortgagee." The plain meaning of this provision is that unless those conditions are met the mortgage is not required to release any individual lot from this mortgage. Such a conditional release clause does not provide the adequate protection to the purchaser that Rule 7D-6.01(1) demands. This conclusion is fortified by Subsection 7D-6.01(1)(c) which requires the release clause to be operative even during foreclosure proceedings. The condition precedent of the proposed mortgage negates the right to a release of any individual lot any time the mortgagor is in default of any term or condition of the mortgage or the note, or the note secured thereby, or in any other agreement between the mortgagor and mortgagee. Under the Seller mortgage the release could be denied not only after foreclosure proceedings had been instituted, but also before such proceedings were commenced.

   
   

7. From the foregoing it is concluded that the release provision of the proposed (Seller) mortgage, which is the subject of Material Change No. 1069, does not meet the requirements of Rule 7D-6.01, Florida Administrative Code, and the application for Material Change No. 1069 should be denied. It is

RECOMMENDED that the Division of Florida Land Sales and Condominiums enter a final order dismissing the Petition of Kingsland, Inc., to contest the denial of its application for Material Change No. 1069.

ENTERED this 3rd day of November, 1982, ate Tallahassee, Florida.

K. N. AYERS, 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 3rd day of November, 1982.

COPIES FURNISHED:

Edward S. Jaffry, Esquire HORNE, RHODES, JAFFRY,

HORNE & CARROUTH

Post Office Drawer 1140 Tallahassee, Florida 32302

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

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

E. James Kearney, Director Division of Florida Land

Sales and Condominiums Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301

Docket for Case No: 82-001601

Orders for Case No: 82-001601