vs. ) CASE NO. 83-1173
BERTRAM F. GOULD, d/b/a )
Respondent. )
Pursuant to notice, this cause came on for hearing before P. Michael Ruff, duly designated Hearing Officer of the Division of Administrative Hearings on August 30, 1983, in Orlando, Florida.
For Petitioner: Harold F. X. Purnell, Esquire
Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301
For Respondent: Ladd H. Fassett, Esquire
This matter comes before the undersigned Hearing Officer on a Notice to Show Cause filed by the Petitioner and the Respondent's response thereto. In the Notice to Show Cause, the Division of Florida Land Sales and Condominiums (Division) has alleged that the Respondent, Bertram Gould, participated in an offer and/or disposition of interest in property in violation of Section 498.023(1) by participating in an offer or disposition of "subdivided lands" as that term is defined in Section 498.025(17). The subject real property is allegedly neither exempt pursuant to Section 498.025, Florida Statutes, nor is the subdivision registered pursuant to Section 498.027, Florida Statutes. It is further alleged that the subdivision of Indian Woods and the Respondent has not been approved by the Division for the taking of reservation deposits, pursuant to Section 498.024, Florida Statutes. The transactions upon which these alleged violations are based concern "Indentures of Lease" entered into between Mohican Valley, Inc., signed by Bertram Gould, as president, and dated June 14, 1982; August 6, 1982; August 31, 1982; and January 10, 1983, between, respectively, Mohican Valley, Inc. and Warren and Sylvia Krummel, Dorothy M. Merritt, Roy and Lydia Ardizzone, and George and Alice Woodward. Also serving as a predicate for the alleged violation is an assignment of numerous lease indentures executed on May 20, 1982, between Winter Springs Mobile Home Corporation, d/b/a Mohawk Village and Mohican Valley, Inc., with a related "acceptance of assignment" by Mohican Valley, Inc., signed by Bertram Gould as its president. The Respondent
is also charged with false and misleading advertising involving the offer and/or disposition of subdivided lands. Finally, the Respondent is charged with violating Section 498.023(2), Florida Statutes, by participating in the offer and/or disposition of "subdivided lands," by failing to deliver to each purchaser a current public offering statement.
The Petitioner offered seven exhibits into evidence. Petitioner's Exhibits
1 and 2 were admitted pursuant to Section 90.803(10), Florida Statutes (1981), that portion of Petitioner's Composite Exhibit 3 consisting of the leases to Sylvia Joyce Krummel, Roy Ardizzone and George Woodward was admitted. That portion of Petitioner's Exhibit 4, consisting of a deed and schedules B and C to that exhibit were admitted. Petitioner's Exhibit 5 was not admitted, nor was Petitioner's Exhibit 7. Additionally, the Petitioner presented two witnesses. The Respondent presented three witnesses. At the conclusion of the proceeding, the parties requested a transcript of the proceeding and the right to file proposed findings of fact and conclusions of law and memoranda. All proposed findings of fact and conclusions of law and memoranda were timely filed on or before October 31, 1983.
All proposed findings of fact and conclusions of law and supporting arguments have been considered. To the extent that proposed findings and conclusions are in accordance with the findings, conclusions and views stated herein, they have been accepted. To the extent that such proposed findings and conclusions and such arguments made are inconsistent herewith, they have been rejected. Certain proposed findings and conclusions have been omitted as not relevant or as not necessary to a proper determination of the material issues presented. To the extent that the testimony of various witnesses is not in accord with the findings herein, it is not credited.
The Respondent, Bertram Gould, is president and stockholder of Mohican Valley, Inc., d/b/a Indian Woods Subdivision. The Indian Woods Subdivision is located in Seminole County and consists of in excess of 150 subdivided lots. On May 20, 1982, Mohican Valley, Inc. purchased a mobile home park located in Seminole County, Florida, from Winter Springs Mobile Home Corporation. The park was formerly known as Mohawk Village, but is now known as the Indian Woods Subdivision. Bertram Gould and Mohican Valley, Inc. acquired their interest in the subdivision by virtue of a purchase and sale agreement, deed and assignment of lease indentures from Winter Springs Mobile Home Corporation.
Individuals desiring to live in the mobile home park purchase their mobile home and contemporaneously sign a 99-year lease on the lots upon which the mobile homes are to be placed. The mobile homes purchased by prospective residents in the subdivision are typically purchased from Vaughn Motors, Inc., a corporation of which Mr. Gould is president.
In 1981, Vaughn Motors, Inc. sold a mobile home to Alfred and Beverly Powers, which arrived at the park and was setup on November 30, 1981, or shortly thereafter. On March 1, 1982, Vaughn Motors, Inc. sold that mobile home to Warren E. and Sylvia Joyce Krummel, since the Powers had elected not to close the purchase. On the date of the sale to the Krummels, the mobile home was already setup on Lot 1, Block E, of the subdivision and ready for occupancy. On June 14, 1982, after the May 20 purchase of the subdivision by Mohican Valley, Inc, through its president, Bertram Gould, the Krummels executed an Indenture of Lease for Lot 1, Block E. There was thus a residential building on that property subject to the lease at the time the lease was entered into.
On June 5, 1982, Dorothy Merritt signed a purchase agreement to buy a mobile home and the mobile home was delivered and setup on her lot on August 6, 1982. On that date she also signed a lease for the lot where the mobile home was placed. Thus, when the interest in that property was conveyed by lease, there was a residential building on the lot.
Roy and Lydia Ardizzone initially leased a lot in the park from Winter Springs Mobile Home Corporation before the sale to Mohican Valley, Inc. and Bertram Gould. In August, 1982, after Mohican Valley, Inc. purchased the subdivision, the Ardizzones decided to place a mobile home on their lot, but since the Phase II portion of the subdivision in which their original lot was located was not completely developed, it was not feasible to place the home on the lot at that time. Accordingly, they asked Mr. Gould to substitute their lot for a lot in Phase I in order to facilitate placing a home on the lot and begin living in the park. Mr. Gould agreed and the substitution occurred on August 31, 1982, on which date the Ardizzones also signed a lease for the lot. They ordered a mobile home to be placed on that lot, which arrived some 10 days later, on September 9, 1982. It was immediately setup on the Ardizzone's lot. Thus, at the time the lease of August 31, 1982, was executed by the Ardizzones and Bertram Gould, the Ardizzones had already ordered the mobile home for immediate delivery, which was delivered and setup some 10 days later. Thus, there was an obligation on the part of the Respondent to provide a mobile home to them in less than two years and indeed within days.
On or about September 4, 1982, Bertram Gould caused a mobile home to be placed on Lot 3, Block B of the subdivision and had it prepared for occupancy. On November 5, 1982, George W. and Alice H. Woodward signed a purchase agreement for the mobile home and ultimately executed a lease for the lot upon which that mobile home sat on January 10, 1983. They moved into their home on or about February 17, 1983. Thus, at the time the lease was executed by the Woodwards and Respondent, a residential building was present on the property subject to the lease.
Mohican Valley, Inc.'s predecessor in title, Winter Springs Mobile Home Corporation, had, during the course of its development of the mobile home park, entered into approximately 156 ground leases for mobile home lots. In conjunction with the acquisition of title to the park by Mohican Valley, Inc., Mohican Valley Inc. was assigned all rights of Winter Springs Mobile Home Corporation in those 156 leases which had already been recorded by Winter Springs Mobile Home Corporation prior to the acceptance of assignment by Mohican Valley, Inc. It was not established that Mohican Valley, Inc. or Bertram Gould had participated in any offer or disposition of the property which was the subject of those leases prior to Mohican Valley, Inc.'s acceptance of their assignment. Prior to May 20, 1982, the Respondent had no ownership interest in either the mobile home park or in Winter Springs Mobile Home Corporation, which owned and managed the Park. He was not an officer, director, employee, salesman or any type of agent for the owner of the mobile home subdivision prior to May 20, 1982. The only nexus between the Respondent and the mobile home park prior to May 20, 1982, was his position as president of Vaughn Motors, Inc. which had sold mobile homes to some of the residents of the park who had executed leases which ultimately became assigned to Mohican Valley, Inc.
The Respondent caused certain advertisements to be placed in the Orlando Sentinel newspaper. Although an advertisement was placed April 25, 1982, the Respondent was not involved in the publishing of that advertisement. It appeared in the newspaper approximately a month prior to purchase of the park
by Mr. Gould's company. On June 4 and 5, 1982; September 19, 1982; October 10, 1982; and January 29, 1983, the Respondent admittedly placed advertisements in the Orlando Sentinel representing amounts of monthly lot rent, terms of available bank financing, the office address, the phone number and hours of operation, as well as representing the fact that mobile homes could be purchased at the park for a listed price, including certain optional features, as well as the representation that the mobile home park then owned by Mohican Valley, Inc. offered quarter-acre lots and double-wide homes with certain amenities. The price for lot rent was represented as never increasing. Bank financing was advertised as available variously at 14 and a quarter percent interest and 13 and a half percent interest.
The representations contained in those advertisements were true, however, at the time Mohican Valley, Inc. took title to the mobile home park, a foreclosure action and lis pendens had been filed on that property by Florida Land Company, the mortgagee on a mortgage executed by Winter Springs Mobile Home Corporation, Mohican Valley, Inc.'s predecessor in title. That foreclosure had been filed on or before March 21, 1983, as evidenced by the Motion to Intervene (in evidence as Petitioner's Exhibit 4), which was filed in that foreclosure proceeding by Mohican Valley, Inc. No representation was made in these advertisements concerning the fact that the property which was the subject of the mobile home lot leases offered by Respondent was the subject of a mortgage encumbrance which was then in foreclosure, which foreclosure predated those advertisements. Bertram Gould, as president of Mohican Valley, Inc., as the movant in that Motion to Intervene, and as the successor in title to the mortgagor-in-foreclosure, knew of the existence of the facts surrounding that foreclosure as they related to the interest in the land he sought to convey and the effects such a foreclosure might have on the persons or residents of the park who executed those leases as lessee thereafter. Bertram Gould thus materially participated in the offer or disposition of the lots for lease in the subdivision and advertised those dispositions or offerings without representing that the real property to which they related was the subject of a pending foreclosure action.
No reservation program has been approved by Petitioner for Bertram Gould, Mohican Valley, Inc. and/or Indian Woods, nor has any application for such been filed. No public offering statement for Bertram Gould, Mohican Valley, Inc. or Indian Woods, nor any application for such has, as of the time of the hearing, been filed and approved. The Indian Woods Subdivision has not been registered with the Petitioner by either Bertram Gould or Mohican Valley, Inc.
Bertram Gould has engaged in the disposition of these subdivided lands directly as well as on behalf of Mohican Valley, Inc., of which corporation he is president and stockholder. Bertram Gould has offered, disposed of or participated in the offer or disposition of interests in the subdivided lands involved herein, which are located in Florida, by offering the subject land for leases to prospective mobile home purchasers and park residents.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction of the subject matter of and the parties to this proceeding. Section 120.57(1), Florida Statutes.
Section 498.005(17), Florida Statutes (1981), defines "subdivision" to mean any contiguous land which is divided or proposed to be divided for purposes
of disposition into 50 or more lots, parcels, units or interests. Disposition is defined in paragraph 5 of that subsection to include any transaction involving any interest in subdivided land entered into for profit, including any lease for more than 5 years. In the instant case, the evidence clearly establishes that the Indian Woods Subdivision consists of in excess of 150 contiguous lots which were disposed of pursuant to 99-year leases. While the Respondent asserts that because the lessees could cancel the leases upon less than 5-year's notice, such Indentures of Lease do not fall within the definition of "disposition," this argument is fallacious since the lessor conveyed 99-year leases and is powerless to cancel it at any lesser period of time. The cancellation provision granted to the lessee does not obviate the binding legal existence of the lease since if the cancellation privilege was exercised by the lessee, the leases make no provision for return of the consideration already paid for the lease-hold interest to the date of any cancellation.
Section 498.005(16) defines "subdivider" to mean a person who owns any interest in subdivided lands or is engaged in the disposition of subdivided lands either directly or through the services of a broker or salesman.
Sections 498.023(1) and (2) provide as follows concerning the requirements for registration and provision of public offering statements concerning subdivisions and purchasers of subdivided lands:
No person may offer or dispose of, or participate in an offer or disposition of any interest in subdivided lands located In this state, nor may any person offer or dispose of, or participate in an offer or disposition of, any interest in subdivided lands located without this state to person in this state, nor may any person within this state offer or dispose of, or participate within this state in an offer or disposition of, any interest in subdivided land located without this
state to persons located without this state, unless such person has a valid order of registration there for.
No person may dispose of, or participate in the disposition of, any interest in subdivided lands unless a current public offering statement is delivered to the purchaser prior to the disposition, the purchaser is afforded a reasonable opportunity to examine the public offering statement prior to the disposition, and the contract and public offering statement used contain a provision which authorizes the purchaser to cancel the agreement without cause until midnight of the seventh day after execution by the purchaser.
Section 498.025 provides exemptions from the coverage of Chapter 498 for such developments as minor subdivisions, disposing property to 45 or fewer persons, the sale or leases of land to persons who are engaged in construction of residential or commercial buildings, as opposed to non-exempt sales of such land to ultimate residents. In this connection, Section 498.025(h), provides an exemption for ". . . any offer or disposition of an interest in land on which
there is a residential, commercial or industrial building, or as to which there is a legal obligation on the part of the seller to construct such a building within 2 years from the date of disposition." This exemption clearly applies to the transactions involving the named lessee/purchasers referred to in the Findings of Fact above, because in each case there clearly was a residence building already on the lots in question, with the exception of the Ardizzone transaction and the Ardizzone lot was occupied by a mobile home residence only approximately 10 days after the indenture of lease was executed between Bertram Gould and Mohican Valley, Inc. and the Ardizzones, obviously well within 2 years. Thus, these transactions named above were exempt from coverage of Chapter 498 and the various prohibitions contained in the above quoted authority would not apply to them.
That exemption is operative under the facts found above since, although the Petitioner argues that there could be no binding legal obligation in those lease agreements for the Respondent to place mobile homes on the property involved in the leases to the four parties named above, because the Respondent is not a licensed mobile home dealer, the initial clause of paragraph
(h) makes it clear that the exemption applies also if a residential building is simply on the property within 2 years from the disposition of the property which was clearly the case In all 4 of the leases described above. The issue of legal capacity of Respondent to place homes on the four lots because of the question of his "dealer" status is thus irrelevant.
The Division established, however, that neither Mohican Valley, Inc. nor Bertram Gould had obtained an order of registration as a subdivision under the authority cited above, nor was an approved, current public offering statement on file with the Division. Registration of the Subsections 498.027(1)(b) and is required pursuant to Florida Statutes 498.023(1) and the public offering statement is required by the Division pursuant to subsection (2) of that section as well as Subsections 498.027(1)(b) and 498.029(2).
The evidence adduced by the Petitioner and the above Findings of Fact clearly established that Bertram Gould was aware that the Indian Woods Subdivision consisted of in excess of 150 contiguous lots which were disposed of, or to be disposed of by 99-year lease agreements. There is similarly no question, given the above Findings of Fact, that Respondent was a person offering or disposing or participating in an offer or disposition of interest in subdivided lands located in this state (there being no dispute that the mobile home park involved herein was a subdivision as defined in 498.005(17), Florida Statutes). See, Section 498.005(16), Florida Statutes. Thus, since the evidence establishes that Mohican Valley, Inc. took title on May 20, 1982, to the subdivision, and that Bertram Gould was the stockholder and resident of Mohican Valley, Inc. and that he was personally engaged in the disposition of the subdivided lands involved, as a principal or agent of Mohican Valley, Inc., that he is responsible for the subject property being properly registered with the Division and that a concomitant proper public offering statement should have been filed and approved by the Division and supplied to the prospective lessees. Since the subdivision was unregistered, with no current public offering statement filed with the Division, then the only manner in which the subdivision could be exempt from Chapter 498 was pursuant to the above cited self-executing exemption found in Florida Statutes 498.025. Although the above four transactions were shown to come within the exemption, in the face of the showing that the entire subdivision of in excess of 150 lots was unregistered and not the subject of an approved public offering statement, there was no evidence offered by the Respondent to refute this registration and public offering
statement requirement by showing that the remainder of the lots offered for lease were similarily exempt.
The Petitioner asserts that the Respondent is liable under the above authority for the failure to register the subdivision prior to May 20, 1982, as it relates to the previously executed Indentures of Lease assigned on that date in conjunction with the conveyance to Mohican Valley, Inc. The evidence does not reflect, however, that Bertram Gould had any part in the disposition of the property which is the subject of those leases prior to his corporation taking title to the subdivision on May 20, 1982. He did not execute those agreements on behalf of the lessor Winter Springs Mobile Home Park, and was not shown to have participated in any offer or disposition of any interest in those subdivided lands prior to his and his corporation accepting assignment of the leases and title to the land on that date. The disposition of the "interest in subdivided lands" involved in those assigned leases had already occurred. The Legislature clearly intended that Section 498.023(1) refers to disposition to the ultimate purchasers or lessees, that is the residents or prospective residents of the mobile home park who were the lessees in those 156 Indentures of Lease. The assignment of those Indentures of Leases, in itself, was not a statutorily proscribed disposition of the subdivided lands for which Bertram Gould was responsible. The evidence however establishes that Bertram Gould and Mohican Valley, Inc. were participants in similar offers or dispositions of subdivided lands after May 20, 1982, since they held out, offered and disposed of leases for mobile home lots after that date on their own behalf as owners and lessors of the subdivided property. The Legislature expressed its intent in promulgating Chapter 498 (in Section 498.003) to be to prohibit false, misleading, fraudulent methods in the conduct of dispositions of interests in subdivided lands and to protect the public against detrimental effects of false or misleading methods in the subdivision or conveyance of interests in subdivided lands, enacting Chapter 498 to provide safeguards in regulating subdividers. Before May 20 1982, Bertram Gould and Mohican Valley, Inc. were not regulated subdividers and therefore had no responsibility to register the subject subdivision nor to file and have approved a proper public offering statement.
Section 498.049(4) provides that the Division may impose civil penalties against any person for violations of that chapter and related rules and that each person who materially participates in an offer or disposition of interests in subdivided lands in violation of the chapter or rules, which violation involves fraud, deception, misrepresentation or false advertisement, shall be subject to civil penalties (not to exceed $10,000). Section 498.051(1) provides that the Division may issue cease and desist orders against any person who has violated a provision of Chapter 498, engaged in any false, deceptive or misleading advertising or dispose of any interest in subdivided lands not registered. By the Respondent's own admission, he did cause advertising to be published concerning the offering of the leases of the lots in the subdivision on the dates found above between June, 1982, and January, 1983. While it is true that the published information, terms and conditions of the offering of the lots for lease to prospective mobile home purchasers was accurate, it is also true that the Respondent was aware that the entire subdivision was subject to a pending foreclosure proceeding already in litigation in the Circuit Court in Seminole County. This substantial encumbrance on the title to the subject lots was not revealed to prospective lessee/purchasers in this advertising effort. The mortgagee, or its successor in interest after foreclosure, would not be bound by the terms of the leases which these lessees or prospective lessees acting in reliance on the advertising would reasonably assume to be the only terms and conditions affecting their acquisition and maintenance of their
interest in the lots and residences placed thereon. The Legislature, in the enactment of Section 498.003 and implicitly throughout various provisions of Chapter 498 noted the need to protect the public against the use of false, misleading or fraudulent methods in the conduct of offers or dispositions of subdivided lands and against the detrimental effects of default by companies and persons engaged in the disposition of subdivided lands. By failing to accurately represent the true status of matters affecting title to the lots, including the guarantee that the monthly payments would never increase, which guarantee could clearly not bind the mortgagee in foreclosure or its successor in interest, such advertising material, admittedly promulgated by the Respondent, misrepresented the true situation regarding the interest in the properties sought to be conveyed by the Respondent through this advertising. It is concluded that the advertising was misleading and false and misrepresented the interests that prospective lessees would obtain upon execution of the offered leases.
In light of the foregoing, it has been established that Bertram Gould was in violation of both Sections 498.023(1) and (2), Florida Statutes, by participating in the offer or disposition of interests in subdivided lands without the subdivision being registered and without a current public offering statement being filed, approved by the Division and provided to the purchasers or lessees and by participating in dispositions of interests in subdivided lands involving misrepresentation. Thus, the Respondent is subject to the penalties imposed by Section 498.049(4) and by the Cease and Desist provision of Section 498.051(1)(a), (b) and (d), and thus the allegations in the Notice to Show Cause to the extent delineated above have been proven.
Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence in the record and the candor and demeanor of the witnesses, it is, therefore
That Bertram Gould be found guilty of violations of Sections 498.023(1) and (2), and Section 498.049(4) and Sections 498.051(1)(a), (b), and (d); that a penalty of $2,000 be imposed and that the Respondent be ordered to cease and desist the above described activities until the requirements delineated above involving registration of the subject subdivision, approval and promulgation of a current offering statement have been accomplished.
DONE and ENTERED this 31st day of January, 1984, in Tallahassee, Florida.
P. MICHAEL RUFF Hearing Officer
FILED with the Clerk of the Division of Administrative Hearings this 31st day of January, 1984.
Harold F. X. Purnell, Esquire Department of Business Regulation
Ladd H. Fassett, Esquire Post Office Box 2747 Orlando, Florida 32802
E. James Kearney, Director Division of Florida Land Sales and Condominiums Department of Business Regulation
Gary R. Rutledge, Secretary Department of Business Regulation
