STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

VERA GRETCHYN MARINO, ET AL, )

)

Petitioner, )

)

vs. ) Case No. 85-3305

)

DEPARTMENT OF BANKING AND ) FINANCE, DIVISION OF FINANCE, )

)

Respondent. )

) WILLIAM AND OLIVIA PETRUZEL, )

)

Petitioners, )

)

vs. ) CASE NO. 85-3306

)

DEPARTMENT OF BANKING AND ) FINANCE, DIVISION OF FINANCE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in the above cases before the Division of Administrative Hearings by its duly designated Hearing Officer, Donald R. Alexander, on December 12, 1985 in Miami, Florida.

APPEARANCES

For Petitioners: Vera Gretchyn Marino, Esquire Case No. 85-3305 One Denton Road

Great Neck, New York 11024

For Petitioners: Richard J. Stone, Esquire Case No. 85-3306 10671 North Kendall Drive

Miami, Florida 33176-1510

For Respondent: Paul C. Stadler, Jr., Esquire

The Capitol, Suite 1302 Tallahassee, Florida 32301

BACKGROUND

By order dated August 8, 1985, petitioner, Department of Banking and Finance, Division of Finance, issued proposed agency action to deny various claims for payment from the mortgage brokerage guaranty fund under Chapter 494, Florida Statutes; unless certain statutory requirements were met by the various claimants. The claims arose out of alleged violations of Chapter

494 by Fidelity Standard Mortgage Corporation, a licensed mortgage broker in Hollywood, Florida, which resulted in monetary damages being suffered by various investors in that firm. Thereafter, petitioners, Vera Gretchyn Marino and fifteen other individuals, filed a request for a formal hearing under Subsection 120.57(1), Florida Statutes, to contest the proposed agency action. This request was assigned Case No. 85-3305. Petitioners, William and Olivia Petruzel, also requested a formal hearing to contest the agency's proposed action. This request was assigned Case No. 85-3306. Both sets of petitioners allege they are investors in First Fidelity; and are entitled to recover a portion of their losses from the mortgage brokerage guaranty fund.

The two cases were referred to the Division of Administrative Hearings by respondent on September 20, 1985; with a request that a hearing officer be assigned to conduct a formal hearing. By notice of hearing dated October 21, 1985; the final hearing was scheduled for December 12, 1985 in Miami, Florida.

At the request of the parties both cases were heard on a consolidated record.

At final hearing, petitioners in Case No. 85-3306 presented the testimony of James H. Allen, Jr., Director of the Department's Division of Finance, and offered petitioner's exhibit 1 which was received in evidence. Respondent offered respondent's exhibits 1-4. All were received in evidence.

There is no transcript of hearing.1 Memoranda of law were filed by respondent and petitioners in Case No. 85-3306 on January 16 and February 7, 1986, respectively; and have been considered by the undersigned in the preparation of this order. None was filed by petitioners in Case No. 85-3305.

ISSUE

The issue in these cases is whether petitioners are entitled to payment from the mortgage brokerage guaranty fund, and if so, in what amounts. A further issue is in what order of priority the claims should be paid.

Based upon all of the evidence, including the pleadings filed in this cause, the following findings of fact are deter-

mined:

FINDINGS OF FACT

1. INTRODUCTION

   
   

   1. At all times relevant hereto, First Fidelity Financial Services, Inc. (First Fidelity) was a mortgage broker licensed by respondent, Department of Banking and Finance, Division of Finance (Division). Its principal offices were located in Hollywood, Florida. First Fidelity sold mortgages to various persons; including Vera Gretchyn Marino and fifteen other individuals (Merino et al).2 The total investment in First Fidelity by Marino et al is not known, but when coupled with a claim against a second licensee (Fidelity Standard Mortgage Corporation) now pending in DOAH Case No. 85-4101, the total investment is represented to be $549,300.3 The Marino et al claim against First Fidelity was assigned Case No. 85-3305. Also purchasing mortgages from First Fidelity were petitioners, William and Olivia Petruzel (Petruzels). Their investment totaled $30,000 and their claim has been assigned Case No. 85- 3306.

      
      

   2. In April, 1982, First Fidelity filed a petition for reorganization under Chapter 11, Title 11, United States Code. In January, 1983 the matter was converted to a Chapter 7 proceeding under Title 11 of this Code. By filing for bankruptcy; petitioners' investments in First Fidelity were effectively lost.

      
      

   3. Effective September 1, 1977, the legislature established a mortgage brokerage guaranty fund (fund) from fees paid by licensed mortgage solicitors and brokers. According to Subsection 494.042(2), Florida Statutes; the fund was established to provide payments to persons "adjudged by a court of competent jurisdiction to have suffered monetary damages as a result of any (unlawful) acts by a mortgage broker . . . who was licensed under this chapter at the time the act was committed." Section 494.043; Florida Statutes, imposes certain conditions that must be met in order to be eligible for recovery from the fund. These conditions govern petitioners' eligibility to seek reimbursement for their losses.

      
      

   4. In order to perfect one's claim against the fund, five conditions must be met. First, a person must have received a "final judgment in a court of competent jurisdiction in this state" against the broker. Second; the claimant must have caused to be issued a writ of execution upon the judgment and that the return indicates insufficient assets to satisfy the judgment. Third, the claimant must make a reasonable search to discover assets of the broker; and has found none. Fourth; any amounts

      recovered from the judgment debtor must be applied to the damages awarded by the court. Fifth, "at the time the action was instituted (the claimant must give) notice to the department by certified mail," unless good cause was shown to waive such notice. The law further provides that the second and third conditions need not be met if the licensee has filed for bankruptcy.

      
      

   5. The Division entered its "notice of intention to render a final order granting or denying payment from the mortgage brokerage guaranty fund" on August 8, 1985. That order afforded parties twenty-one days in which to request a hearing. Among other things the agency order proposed to deny the Marino et al claim unless petitioners could "(1) satisfy on or before June 18, 1986, the requirements of Section 494.043(5), Florida Statutes, which mandates that at the time the action was instituted notice of said action be given to the DEPARTMENT by certified mail, and

      1. successfully seek in good faith before June 18; 1986, and; if necessary, after June 18, 1986, to satisfy the remaining statutory requirements." The agency also proposed to deny the Petruzels' claim unless they could "(1) satisfy on or, before June 18; 1986, the requirements of Section 494.043(5), Florida Statutes, and (2) successfully seek in good faith before June 18, 1986, and if necessary; after June 18; 1986, to satisfy the remaining statutory requirements."

         
         

   6. According to the proposed agency action, the first notice received by the Division concerning a suit being filed against First Fidelity was June 19, 1984.

      
      

2. THE MARINO ET AL CLAIM

   
   

   1. At final hearing counsel for Marino et al acknowledged that she had not instituted suit against First Fidelity or otherwise complied with any of the statutory criteria that must be met in order to be eligible for recovery from the fund. Therefore, eligibility has not yet been established by petitioners in Case No. 85-3305.

      
      

3. THE PETRUZELS' CLAIM

1. At final hearing counsel for the Petruzels and the Division stipulated that the Petruzels have met all applicable statutory criteria in Section 494.043 except the provision that a "court of competent jurisdiction" render a final judgment that they suffered monetary damages as the result of an unlawful act of a licensed broker. Agency counsel was unable to agree to the latter provision because he was uncertain whether a federal bankruptcy judge was a "court of competent jurisdiction." However, Division counsel has conceded by post-hearing memorandum

   that a bankruptcy judgment meets the questioned criterion. Therefore, it is found that the Petruzels have established eligibility for recovery from the fund. This is confirmed by documentation received in evidence at final hearing and was not contradicted by the other claimants.

   CONCLUSIONS OF LAW

   
   

2. The Division of Administrative Hearings has jurisdiction of the subject matter and the parties thereto pursuant to Subsection 120.57(1); Florida Statutes.

   
   

3. In its post-hearing memorandum of law; respondent raises a number of legal issues that it believes must be resolved in order to fairly adjudicate the petitioners' claims. Where relevant; these issues will be discussed in the following portions of this Recommended Order.

   
   

4. Section 494.043, Florida Statutes (1985); prescribes the following conditions that must be met by a claimant in order to "be eligible to seek recovery from the Mortgage Brokerage Guaranty Fund."

   
   

   1. Such person has received final judgment in a court of competent jurisdiction in this state in any action wherein the cause of action was based on s. 494.042(2);

      
      

   2. Such person has caused to be issued a writ of execution upon such judgment and the officer executing the same has made a return showing that no personal or real property of the judgment debtor liable to be levied upon in satisfaction of the judgment can be found or that the amount realized on the sale of the judgment debtor's property pursuant to such execution was insufficient to satisfy the judgment:

      
      

   3. Such person has made all reasonable searches and inquiries to ascertain whether the judgment debtor possesses real or personal property or other assets subject to being sold or applied in satisfaction of the judgment, and by his search he has discovered no property or assets or he has discovered property and assets and has taken all neces- sary action and proceedings for the appli- cation thereof to the judgment, but the amount thereby realized was insufficient to satisfy the judgment:

      
      

   4. Such person has applied any amounts recovered from the judgment debtor, or from any other sources, to the damages awarded by the court:

   5. Such person, at the time the action was instituted, gave notice thereof to the Division of Finance of the department by certified mail however, the requirement of a timely giving of notice may be waived by the department upon a showing of good cause; and

      
      

   6. The act for which recovery is sought occurred on or after September 1, 1977. Recovery of the increased benefits allowable pursuant to the amendments to s. 494.044 which are effective October 1, 1985, shall be based on a cause of action which arose on or after that date.

      
      

      The requirements of subsections (2) and (3) are not applicable if the licensee upon which the claim is sought has filed for bankruptcy or has been adjudicated bankrupt: however, in such event the claimant shall file a claim in the bankruptcy proceedings.

      
      

      The above law differed from the prior law in three relevant respects. First, it allowed the Division upon a showing of good cause to waive the requirement that the Division be sent notice by certified mail when the claimant's action against the broker was instituted. Second, the amount of potential recovery was increased from $10,000 to $50,000 to $20,000 and $100,000; respectively. However; these increased limits were expressly made applicable to causes of action arising on or after October 1, 1985. Finally, the requirements in Subsections 494.043(2) and

      1. were made inapplicable where the licensee had filed for bankruptcy. The Division queries whether the amendments to Section 494.043 apply to the claims filed herein; or whether the pre-1985 conditions should apply.

      
      

5. The general rule is, of course, that statutes are not to be construed retrospectively unless such construction was plainly intended by the legislature. However, remedial statutes (or statutes which relate to remedies or modes of procedure) do not come within the general rule against the retrospective operation of statutes. Seaboard System Railroad, Inc. v. Clemente, 467 So. 2d 348 (Fla. 3rd DCA 1985) City of North Bay Village v. City of Miami Beach, 365 So. 2d 389 (Fla. 3rd DCA 1979) Walker and LaBerge; Inc. v. Halligan, 344 So. 2d 239 (Fla. 1977). Because the amendments in question are a remedial measure affecting a previously existing right of action, and operate only to further that existing remedy; the amendments do not fall within the conception of a prohibited retrospective law.

   Therefore; except for the provision that increases the amount of potential recoveries,4 the 1985 amendments apply to both petitioners' claims.

   
   

6. Respondent has also questioned whether a judgment by a federal bankruptcy judge constitutes a "final judgment in a court of competent jurisdiction in this state" as required by Subsection 494.043(1). In its post-hearing memorandum the agency concedes that a judgment rendered by a federal bankruptcy judge is indeed sufficient; and accordingly the undersigned concludes that the Petruzels have satisfied this criterion.

   
   

7. Also requiring resolution is in what order or priority the two claims filed herein should be paid. This issue is important since payments for claims against First Fidelity cannot exceed $10,000 per person or $50,000 in the aggregate, regardless of the number and size of the claims. In this proceeding; there are at least seventeen claimants; all seeking the maximum amount of payment authorized by law.

   
   

8. The Petruzels contend that only those persons who perfect their claims within two years after June 19, 1984 should share in the initial recovery from the fund. That is the date on which the Division first received notice that a suit had been filed against First Fidelity. It also points out that the Division interpreted a similar provision under Chapter 517 in the same fashion when paying claims under that chapter's security guaranty fund. On the other hand, the Division suggests that any person who files a claim within the first two years is entitled to a pro-rata distribution of the $50,000 so long as he continues to pursue and satisfy the criteria in Section 494.043 even after the two year period has expired.

   
   

9. Subsection 494.044(1); Florida Statutes (1985);provides the following broad guidelines on the subject:

   
   

   1. Any person who meets all of the conditions prescribed in s. 494.043 may apply to the department for payment to be made to such person from the Mortgage Brokerage Guaranty Fund in the amount 'equal to the unsatisfied portion of such person's judgment or judgments or $20,000, whichever is less, but only to the extent and amount reflected in the judgment as being actual or compensatory damages. As to claims against any one mortgage broker or mortgage solicitor, payments shall be made to all persons meeting the requirements of s. 494.043(5). Persons who give notice after 2

      years from the date the first notice is received and who have not received payment as provided above may recover up to the remaining portion of any of the $100,000 aggregate, with claims being paid in the order notice is received. (Emphasis added)

      
      

      The underscored portion of the foregoing statute provides for two classes of claimants; those "meeting the requirements of s.

      494.043 upon the expiration of 2 years from the date the first notice is received by the department;" and those "(p)ersons who give notice after 2 years from the date the first notice is received and who have not (already) received payment." While the statute is not explicitly clear, it does clearly contemplate that the first distribution of funds be made only to "persons meeting the requirements of s. 494.043 upon the expiration of 2 years from (June 19, 1984)." In other words, a claimant must have satisfied all statutory criteria by June 18, c1986, and not merely have initiated its efforts to do so. By simply meeting one or more of the criteria, but not all, a person could not "meet the requirements of s. 494.043" by June 18, 1986. Therefore, it is concluded that only those claimants who have satisfied all criteria by June 18, 1986, may share in the initial distribution of funds. Since all other claimants cannot qualify for this statutory class, it follows that they must necessarily fall within the second class, and receive payment in the order that their notices are filed with the agency.

10. Applying the above principles to the facts herein, it is concluded that the Petruzels have satisfied all statutory prerequisites for receiving payment from the mortgage brokerage guaranty fund, and are entitled to a pro-rate distribution of funds with other claims perfected on or before June 18, 1986 in the manner prescribed by Section 494.044, Florida Statutes. It is further concluded that petitioners Marino et al. may not share in the initial distribution of the funds unless they provide the Division with evidence of having satisfied Subsections 494.043(1), (4) and (5) by June 18, 1986.5

Based on the foregoing findings of fact and conclusions of law, its

RECOMMENDED that the request of petitioners in Case No. 85-3306 to participate in the distribution of mortgage broker

guaranty funds pertaining to First Fidelity Financial Services, Inc. be granted, and that they be paid their pro-rata portion of the fund in accordance with Section 494.044, Florida Statutes.

It is further

RECOMMENDED that the request of petitioners in Case No.

85-3305 to be included in the above group of claimants for fund distribution purposes be denied unless they furnish the Division evidence of compliance with Subsections 494.043(1), (4) and (5),

Florida Statutes (1985), by June 18, 1986.

DONE and ORDERED this 17 day of February, 1986, in Tallahassee, Florida.

DONALD R. ALEXANDER, 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 17 day of February, 1986.

ENDNOTES

1/ At the close of the final hearing, one of the parties indicated they intended to order a transcript of hearing and furnish the undersigned with a copy. Apparently none was ordered, and consequently this Recommended Order has been prepared without the benefit of same.

2/ They include Marino, Benjamin and Lee K. Rosenberg, Sasha Enterprises by Fenimore Storch, Marcia Krause individually, and on behalf of Eli Krause, Eugene M. Brooks, individually, and on behalf of Eugene Brooks, M.D., P.C., Steven Jankovich, Stacy Sher, Frederick Lowe and So-Yen Lowe, Patricia Worthley, Alfred

P. and Dora M. Vanderlaan, Ben and Dorothy Sakow, Thomas D. and Myra F. Shishler, and David Irving.

3/ Appended to the petition filed by Marino et al in Case No.

85-3305 are copies of mortgages purchased from Fidelity Standard. There is nothing of record to indicate the amount of mortgages, if any, purchased from First Fidelity, the licensee in this cause.

4/ Subsection 494.043(6) expressly provides that the increased benefits apply only to causes of action arising on or after the effective date of the amendments.

5/ Should Marino et al. not perfect their claim by June 18, 1986, they will then be entitled to recovery with the class of

claimants who receive secondary distribution of the funds, if any remain.

COPIES FURNISHED:

Vera Gretchen Marino, Esquire One Denton Road

Great Neck, NY 11024

Richard J. Stone, Esquire 10671 North Kendall Drive Miami, Florida 33176-1510

Paul C. Stadler, Jr., Esquire The Capitol, Suite 1302 Tallahassee, Florida 32301

Honorable Gerald A. Lewis, Comptroller Department of Banking and Finance

The Capitol

Tallahassee, Florida 32301

Docket for Case No: 85-003305

Orders for Case No: 85-003305