STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DIVISION OF FLORIDA LAND SALES, ) CONDOMINIUMS AND MOBILE HOMES, )

)

Petitioner, )

)

vs. ) Case No. 85-1010

)

LINDA BURR, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above-styled case on October 27, 1986, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Thomas L. Barnhart, Esquire

Department of Business Regulation

725 South Bronough Street Tallahassee, Florida 32399-1007

For Respondent: Peter T. Roman, Esquire

1022 Main Street, Suite K Dunedin, Florida 33528

By Notice to Show Cause dated February 19, 1985, the Division of Florida Land Sales, Condominiums and Mobile Homes, Petitioner, seeks to take disciplinary action against Linda Burr, on allegations she violated certain provisions of Chapter 498, Florida Statutes. As grounds therefor, it is alleged that Respondent materially participated in various mortgages given by Kingsland, Inc., Ferndale Estates and Fairwood Villas, Inc. one subdivided land without obtaining prior approval from Respondent.

It is further alleged that these liens were placed on lands previously sold to third party purchasers which sales were unrecorded. It is also alleged that Respondent materially participated in the bulk sale of registered property from Kingsland, Inc. to Richard Winokur and in nine separate

conveyances of this same property to third party purchasers. All of these mortgages and bulk sales occurred in 1981 and 1982.

At the hearing, Petitioner called Respondent and two other witnesses, Respondent testified in her own behalf and fifty exhibits were offered into evidence. All were admitted except Exhibits 19, 20, 28, 32, 43, and all but pages 2 and 3 of Exhibit

30 which were withdrawn by Petitioner.

Proposed findings have been submitted by the parties.

Treatment according to those proposed findings are contained in the Appendix attached hereto and made a part hereof.

BACKGROUND

This case involves allegations similar to those considered by this Hearing Officer in DOAH Case No. 83-3768, Department of susineSs Regulation, Division of Florida Land Sales, Condominiums and Mobile Homes vs. Petersen, Recommended Order entered September 17, 1984, and adopted by Final Order entered October 26, 1984. The one major difference in these charges and those considered in the Petersen case is that Petersen was the principal, if not sole, owner of the corporations involving those transactions and was the president and chief operating officer of those corporations.

FINDINGS OF FACT

1. At all times relevant hereto, Respondent was secretary to Kingsland, Inc., Ferndale Estates, Inc., and Fairwood villas, Inc., all corporations controlled by C. Thomas Petersen.

   
   

2. Kingsland, Inc., is engaged in land development. Ferndale Estates and Fairwood Villas are corporations holding title to real estate for investment purposes. Respondent was not a director in any of these corporations.

   
   

3. By mortgage dated June 30, 1981 (Exhibit 1), Kingsland, Inc. mortgaged certain registered properties to secure a loan from Metropolitan Bank and Trust Company without approval from Petitioner. Respondent's signature appears on that conveyance as corporate secretary attesting to the signature of Petersen as president of Kingsland, Inc. Similarly, Respondent attested to Petersen's signature on mortgage dated July 9, 1981 (Exhibit 2), on modification of mortgage dated February 8, 1982 (Exhibit 4), on mortgage dated May 12, 1982 (Exhibit 7), on mortgage dated May 20, 1982 (Exhibit 8), on deed to Winokur dated May 27, 1981 (Exhibit 9), and on deeds to nine separate third party purchases (Exhibit 10).

4. On mortgage from Kingsland, Inc. to City National Bank of Miami (Exhibit 3), encumbering lots previously sold to third party purchasers and on mortgage dated March 5, 1982 (Exhibit 6), Respondent's signature does not appear. By mortgage dated March 9, 1982 (Exhibit 5), Respondent signed as a witness.

   
   

5. All of those mortgages and deeds in Exhibits 1-10 involve the encumbering registered land without prior approval from Petitioner, or conveying to the mortgagee or buyer lands- previously sold to third party purchasers on contract for deed or unrecorded deed. Proceeds from those mortgages and sales went into bank accounts controlled by Petersen.

   
   

6. At the time of these transactions, Respondent was handling the accounts of the so called Pan American Investors, a group of individuals who had purchased the land installment sales contracts from Kingsland, Inc., and was entitled to the monthly payments with interest being paid by the purchasers of lots in these subdivisions. During this period, Respondent exchanged letters with several of these investors and knew many of these lots were paid for or nearly so and that interim deeds were being issued to the original purchasers.

   
   

7. No credible evidence was presented regarding who picked the lots to be included in those transactions involved in Exhibits 1-10, or that Respondent had any responsibility for or control in those selections.

   
   

8. In 1977, when Suncoast Highlands Corporation owned by Petersen and Leonard Lenhardt acquired the stock of Kingsland, Inc. and Illinois Corporation from the Oehlerking family, Kingsland owned registered subdivisions in Marion County, Florida, known as Ocala Waterway Estates, Section 27 and 34, Kingsland Country Estates, Units 1 and 22, Kingsland Country Estates, Whispering Pines and Forest Glen. On the date of acquisition of Kingsland, Section 34 had 19 unsold lots, Section

   27 had 51 unsold lots, and Unit 22 had 43 unsold lots.

   
   

9. The most accurate office record of the transactions involving lands sold by Kingsland were the Alpha listings (Exhibits 11 and 12), a computer printout showing the names of purchasers alphabetically by subdivision. This listing contained numerous errors.

   
   

10. No evidence was presented that Respondent was made aware, before attesting to Petersen's signature, that the mortgages and deeds in Exhibits 1 through 10 were being prepared or that she was given any opportunity to have input into the specific lots to be included in those instruments. She received

    no recognizable benefit from the proceeds received by Kingsland from those mortgages and deeds.

    
    

    CONCLUSIONS OF LAW

    
    

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

    
    

12. The mortgages placed on registered land constitute a material change in the status of the offering and when accomplished without first notifying the Division of Land Sales, is a clear violation of Section 498.033(3), Florida Statutes.

    The issue here is not whether a violation of various statutes and rules regulating the sale of subdivided land occurred, as that was resolved in the Petersen case DOAH Case No. 83-3768, but whether Linda Burr violated those provisions.

    
    

13. Section 698.049, Florida Statutes, provides in pertinent part:

    
    

    The Division may, by order, impose civil penalties against any person for violations of this chapter by rules relating thereto . .

    . . Each person who materially participates in any offer or disposition of any interest in subdivided lands in violation of this chapter or rules related thereto, which violation involves fraud, deception, false pretenses, misrepresentation, or false advertising or involves the disposition, concealment or diversion of any funds or assets of any person so as to adversely affect the interests of a purchaser of any interest in subdivided lands and who directly or indirectly controls a subdivided or is a general partner, officer, director, agent, or employer, of a subdivider shall also be liable under this subsection, jointly and severally with and to the same extent as the subdivider, unless such person did not know, and in the exercise of reasonable care could not have known, of the existence of the facts by which such liability is alleged to exist .

    . . .

    
    

14. At the time these mortgages were placed on registered land, Respondent was an officer and employee of Kingsland, Inc., which corporation thereby violated various statutory and rule provisions relating to subdivided lands. The first hurdle before

    finding Respondent in violation of the statutory provision above. quoted is that she was a material participant. If that is accomplished, Respondent is liable as an officer or employee unless she did not know, and in the exercise of reasonable care, she could not have known of the existence of the fact that these mortgages and deeds violated various provisions of statutes and rules administered by the Division of Florida Land Sales and Condominiums.

    
    

15. Petitioner contends that Respondent materially participated in these transactions by attesting to the signature of the president of the corporation on these mortgages and deeds and because she was the corporate secretary. Florida Statutes (1979) provides that a corporation shall have one or more directors (s. 607.114) and the officers shall consist of a president, a secretary, and a treasurer. (s. 607.151). In 1981, Petersen and Lenhardt were the only directors and during 1982, Lenhardt withdrew from the corporation, thereby leaving Petersen as the sole director (Exhibit 40). While in the corporation, Lenhardt was vice-president and director while Burr was secretary from 1980 forward.

    
    

16. In signing the deeds and mortgages attesting Petersen's signature, Respondent performed an act that was once considered to be a necessary formality to the deed or mortgage, i.e., attest or verify that Petersen was who he purported to be. Section 692.01, Florida Statutes (1979), provides any corporation may execute instruments conveying or mortgaging any interest in land by instrument sealed with the corporate seal and signed in its name by its president or any vice president or chief executive officer. Accordingly, Respondent's signature was not even necessary to the validity of these instruments and the attestation did not constitute material participation in the transactions since her signature was the only evidence connecting her to these instruments.

    
    

17. In addition to being a material participant a finding of liability also requires one to control the subdivider or "is a general partner, officer, . . . or employee of a subdivider . . . unless such person did not know, and in the exercise of reasonable care, could not have known of the existence of the facts by which such liability is alleged to exist." Respondent had no duty to maintain records of all lot purchasers from Kingsland and, even if she had been so required, no evidence was presented that she had any connection whatsoever with preparing the legal description of the land mortgaged or conveyed, or being in a position to advise that certain lots being mortgaged had already been conveyed to third parties.

18. Petitioner has the burden to prove, by a preponderance of the evidence, that Respondent violated the statutes and regulations as alleged. Balino vs. Department of Health and Rehabilitative Services, 348 So. 2d 349 (Fla. 1st DCA 1979). This burden Respondent has failed to meet.

    
    

19. From the foregoing, it is concluded that Petitioner has failed to show that Linda Burr materially participated in the fraudulent conveyances of registered land by Kingsland, Inc. during 1981 and 1982 while she was secretary of the corporation. It is

RECOMMENDED that all charges contained in the Notice to Show Cause dated February 19, 1985, against Linda Burr be dismissed.

ENTERED this 5th day of December, 1986, in 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 5th day of December, 1986.

COPIES FURNISHED:

Thomas L. Barnhart, Esquire Department of Business

Regulation

725 S. Bronough Street Tallahassee, Florida 32301

Peter Roman, Esquire 1022 Main Street Suite K

Dunedin, Florida 33528

James Kearney, Secretary Department of Business

Regulation

The Johns Building

725 S. Bronough Street Tallahassee, Florida 32301

Richard Coates, Director Division of Florida Land Sales

Condominiums and Mobile Homes 725 S. Bronough Street Tallahassee, Florida 32301

APPENDIX

TREATMENT ACCORDED PETITIONER'S PROPOSED FINDINGS OF FACT

1. Included in HO #8.

2. Included in HO #8.

3. Accepted insofar as included in HO #1.

4. Included insofar as included in HO #3, 4 and 5. Otherwise rejected as irrelevant to the issues.

5. Accepted insofar as included in HO #3, 5.

6. Accepted insofar as included in HO # 6, 9.

7. Accepted. Not included as immaterial to Conclusions reached.

8. Accepted insofar as included in HO #6.

9. Accepted. Included in HO 17, 10..

10. Rejected.

TREATMENT ACCORDED RESPONDENT'S PROPOSED FINDINGS OF FACT

1. Accepted. However these documents were identified and admitted into evidence.

2. Rejected.

3. Included in HO #5.

4. Included in HO #5, 10.

5. Accepted. Not included because irrelevant.

6. Rejected as immaterial.

7. Included in HO #7, 10.

8. Rejected insofar as inconsistent with HO #9.

Docket for Case No: 85-001010

Orders for Case No: 85-001010