RICHARD L. MURPHY, as Trustee, ) and JACQUELYN W. MURPHY, )
vs. ) CASE NO. 86-1704
Respondent. )
) DOMINICA AMENDOLARO, JAMES and ) PHYLLIS VICTORIA, JANICE M. ) FOURNIER, RUTH WILSON, JIMMIE C. ) and BRENDA LEDFORD and ROBERT J. ) FOURNIER, )
Intervenors. )
For Petitioner: Dennis P. Johnson, Esquire
For Respondent: Paul C. Stadler, Jr., Esquire
For Intervenors: Christy F. Harris, Esquire
Final hearing in this case was scheduled to take place in Winter Haven on October 8, 1986. But at a prehearing conference held on October 6, 1986, the parties agreed to stipulate to all evidence and to most material facts, obviating the need for a formal administrative hearing. Despite the absence of any disputed issues of material fact, the parties also agreed to submit the stipulated facts and evidence to the Hearing Officer for entry of a recommended order.
The issue in this case is which of several claimants to payments from the Mortage Brokerage Guaranty Fund are now entitled to payment and, if any, the amount of the payments due from the Fund.
Under the provisions of the Mortgage Brokerage Act, Chapter 494, Florida Statutes, the Department of Banking and Finance (Department) is charged with the responsibility and duty of administering the Mortgage Brokerage Guaranty Fund (Fund), which includes the duty to approve or deny application for payment from the Fund, as set forth in Section 494.042(2), Florida Statutes.
From March 17, 1983, through August 31, 1984, Polk Investments, Inc.(PII) was licensed as a mortgage broker under Chapter 494, Florida Statutes, having previously been issued license number HB 11806 by the Department. Ronald Folmer (hereinafter FOLMER) was the principal mortgage broker of PII.
Amendolaro et al. Claim. On March 23, 1984, the Department received from Christy F. Harris, attorney with Harris, Midyette & Clements, P.A., by certified mail six Notices of Actions in the Circuit Court of the Tenth Judicial Circuit in and for Polk County, Florida, against FOLMER and PII on behalf of Domenica Amendolaro, Case No. CC-G-84-334, James Victoria and Phyllis Victoria, his wife, Case No. GC-G-84-339, Janice M. Fournier, Case No. CC-84-336, Ruth Wilson, Case No. GC-C-84-338, Jarnie [SIC] C. Ledford and Brenda Ledford, his wife, Case No. CC-O-84-335, and Robert J. Fournier, Case No. CC-O-84-337 (hereinafter Amendolaro et al. Claim). According to the Clerk of the Court, all six complaints were filed on February 9, 1984. Said complaints allege in part that from June 1982 until September 1983, FOLMFR represented that he and PII would invest money "in Mortgages for a prompt return at guaranteed returns egual to or exceeding thirty percent (30 percent) . . [and that at the time Defendant, FOLMER made these representations to Plaintiff], Defendant FOLMER, individually and as President of PII, knew such representations to be false," that sums of money were delivered to FOLMER for investment in mortgages; that FOLMER and PII failed to invest said monies; and that FOLMER and PII have failed to return the investment or income earned thereon. The complaints do not allege any specific violations of Chapter 494, Florida Statutes. On January 14, 1985, the Circuit Court entered the following Final Summary Judgments against FOLMER and PII to the named individuals in the following amounts:
Plaintiff Money Damages Interest
Dominica Arnendolaro | $ 1,984.24 | $ 395.76 |
James and Phyllis Victoria | 7,500.00 | 1,470.62 |
Janice M. Fournier | 41,000.00 | 7,753.41 |
Ruth Wilson | 1,000.00 | 192.68 |
Jammie and Brenda Ledford | 5,000.00 | 862.95 |
Robert J. Fournier | 18,123.00 | 3,799.33 |
The Court also awarded the above-named individuals court costs, attorney fees, and post-judgment interest at 12 percent per annum. Said Judgments have been recorded in Polk County. On March 14, 1985, the Department received from Ms. Harris six Writs of Execution which have been returned unsatisfied and an Affidavit of Reasonable Search.
Long and Wood Claim. On May 31, 1984, the Department received a letter by certified mail from Dennis P. Johnson, attorney with Shelnut & Johnson, P.A., on behalf of James W. Long and Brenda G. Wood notifying the Department that an action was being instituted in the Circuit Court of Polk County, Florida, to recover funds invested with FOLMER and PII. By letter dated June 1, 1984, the Department acknowledged receipt of the notice and requested that it be notified when the other statutory requirements had been met. The Department has received no other correspondence with respect to this claim.
Hammond Claim. On March 31, 1984, the Department received a letter by certified mail from Dennis P. Johnson, attorney with Shelnut & Johnson, P. A., on behalf of Maude Hammond, notifying the Department that an action was being instituted in the Circuit Court of Polk County, Florida, to recover funds invested with FOLMER and PII. By letter dated June 1, 1984, the Department
acknowledged receipt of the notice and requested that it be notified when the other statutory requirements had been met. The Department has received no other correspondence with respect to this claim.
SUPPLEMENTAL FINDINGS OF FACT (BASED ON STIPULATED EVIDENCE)
Murphy Claim. On March 5, 1984, the Department received a letter by certified mail from Dennis P. Johhson, attorney with Shelnut & Johhson, P.A., on behalf of Richard L. Murphy and Jacguelynn Murphy notifying the Department that an action was being instituted in the Circuit Court of Polk County, Florida, to recover funds invested with FOLMER and PII. By letter dated March 6, 1984, the Department acknowledged receipt of the notice and reguested that it be notified when the other statutory reguirements had been met. On March 16, 1984, the Department received from Mr. Johnson a copy of a complaint against FOLMER and PII represented to have been filed in the Circuit Court of Polk County. The complaint alleges in part that from June 1982 until September 1983, FOLMER represented that he and PII would invest "money in mortgages for a prompt return at guaranteed returns egual to or exceeding thirty percent (30 percent) [and that at] the time Defendant, Folmer, made these representations to Plaintiffs, Defendant, Folmer, individually and as President of Polk, knew such representations to be false," that $214,700 was delivered to FOLMER for investment in mortgages, that FOLMER and PII have repaid $24,950 of the investment, that FOLMER and PII failed to invest said monies, and the FOLMER and PII have failed to return the investment or income earned thereon. The complaint does not allege any specific violations of Chapter 494, Florida Statutes.
Final Summary Judgment was entered against PII and FOLMER on July 12, 1984, in Case No. GC-G-84-566. The judgment was for, among other things,
$189,500 lost investment, $41,697.53 pre-judgment interest, and post-judgment interest at 12 percent per annum. A writ of execution on the judgment issued on January 9, 1985. On or before March 1, 1986, Richard L. Murphy made all reasonable searches and inquiries to ascertain whether the judgment debtors possessed real or personal property or other assets subject to being sold or applied in satisfaction of the judgment and discovered none. The sheriff executing the writ made a return on March 21, 1986, showing that no personal or real property of the judgment debtors liable to be levied upon in satisfaction of the judgment could be found.
Murphy as Trustee Claim. On March 5, 1984, the Department received a letter by certified mail from Dennis P. Johnson, attorney with Shelnut & Johnson, P.A., on behalf of Richard L. Murphy, Trustee of Diversified Sources, Inc., notifying the Department that an action was being instituted in the Circuit Court of Polk County, Florida, to recover funds invested with FOLMER and PII. By letter dated March 6, 1984, the Department acknowledged receipt of the notice and requested that it be notified when the other statutory requirements had been met. On March 16, 1984, the Department received from Mr. Johnson a copy of a complaint against FOLMER and PII represented to have been filed in the Circuit Court of Polk County. The complaint alleges in part that from June 1982 until September 1983, FOLMER represented that he and PII would invest "money in mortgages for a prompt return at guaranteed returns equal to or exceeding thirty percent (30 percent). . . [and that at] the time Defendant, Folmer, made these representations to Plaintiff, Defendant, Folmer, individually and as President of Polk, knew such representations to be false," that $7,500 was delivered to FOLMER for investment in mortgages, the FOLMER and PII failed to invest said
monies, and the FOLMER and PII have failed to return the investment or income earned thereon. The complaint does not allege any specific violations of Chapter 494, Florida Statutes.
Final Summary Judgment was entered against PII and FOLMER on March 11, 1985, in Case No. GC-G-84-567. The judgmeit was for, among other things, $7,500 lost investment, no pre-judgment interest, and post-judgment interest at 12 percent per annum. On or before March 1, 1986, Richard L. Murphy made all reasonable searches and inquiries to ascertain whether the judgment debtors possessed real or personal property or other assets subject to being sold or applied in satisfaction of the judgment and discovered none. On April 10, 1986, a writ of execution on the judgment was issued, and on the same date the sheriff executing the writ made a return showing that no personal or real property of the judgment debtors liable to be levied upon in satisfaction of the judgment could be found, based on the March 21, 1986, return in Case No. CC-G-84-566. (See paragraph 6, above.)
Before February 17, 1986, the Department construed Section 494.044(1), Florida Statutes (1985), to entitle a claimant against a mortgage broker or solicitor to payment from the Fund if the person (1) gave notice of the claim within two years after the date the Department first received notice of a claim against the same mortgage broker or solicitor but (2) perfected the claim after the expiration of the two year period. On February 17, 1986, a Recommended Order was entered in Petruzel et al. v. Department of Banking and Finance, Division of Administrative Hearings' Case No. 85-4101, Hearing Officer Donald R. Alexander, recommending that the statute be construed so as not to entitle such a claimant to payment from the fund. 1/ In this case, the Department's free- form agency action follows the Petruzel Recommended Order. But there is no evidence in the record whether the Department has entered a final order in the Petruzel case. And no party proved any non-rule agency policy construing Section 494.044(1), Florida Statutes (1985).
CONCLUSIONS OF LAW
Section 494.042, Florida Statutes (1985), establishes the Mortgage Brokerage Guaranty Fund (Fund). Section 494.043, Florida Statutes (1985), provides:
Any person shall be eligible to seek recovery from the Mortgage Brokerage Guaranty Fund if:
Such person has received final judgment in a court of competent jurisdic- tion in this state in any action wherein the cause of action was based on Section 494.042(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;
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 necessary action and proceedings for the application thereof to the judgment, but the amount thereby realized was insufficient to satisfy the judgment;
Such person has applied any amounts recovered from the judgment debtor, or from any other source, to the damages awarded by the court;
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
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 Section 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 Amendolaro et al. Claim, the Murphy Claim and the Murphy as Trustee Claim meet conditions to recovery set out in Section 494.043. The Long and Wood Claim and the Hammond Claim do not.
Section 494.044, Florida Statutes (1985), provides in pertinent part:
Any person who meets all of the conditions prescribed in Section 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 Section 494.043 upon the expiration of 2 years from the date the first notice is received by the department pursuant to Section 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 $eing paid in the order notice is received.
(3) Payments for claims shall be limited in the aggregate to $100,000, regardless of the number
of claimants involved, against any one mortgage broker or mortgage solicitor. If the total claims exceed the aggregate limit of $100,000, the department shall prorate the payment based on
the ratio that the person's claim bears to the total claims filed.
However, as to causes of action arising before October 1, 1985, the limit of recovery from the Fund is $10,000 per claimant up to a maximum aggregate of
$50,000 of claims against any one mortgage broker or solicitor. See Section 494.043(6), Florida Statutes (1985), and Sections 4 and 5, Chapter 85-271, Laws of Florida (1985). All of the claims in this case relate to causes of action that arose before October 1, 1985, so the lower claim limits apply.
The first legal question raised by the facts of this case involve the method of payment of eligible claims set out in Section 494.044(1), Florida Statutes (1985). The parties concede and point out that the language of the statute does not make its meaning plain.
In one sentence, the statute provides: "As to claims against any one mortgage broker or mortgage solicitor, payments shall be made to all persons meeting the requirements of Section 494.043 upon the expiration of 2 years from the date [of] the first notice." Standing alone, this conceivably could mean that all eligible claimants are to be paid and that no payments will be made during the 2 year waiting period. On the other hand, it could mean that only claimants eligible as of the expiration of the 2 year period are entitled to be paid. The latter construction is more probable.
The next sentence says: "Persons who give notice after 2 years from the date the first noticed is received and who have not received payment as provided above may recover up to the remaining portion of any of the [$50,000, in this case] aggregate, with claims being paid in the order notice is received." In light of the more probable construction of the preceding senten,,ce of the statute, the only logical construction of this sentence is that it creates only one class of claimants in addition to those entitled to payment by virtue of being eligible within the 2 year period: both those who did not even give notice within the 2 year period and those who gave notice but did not perfect their claim under 494.043 within the 2 year period. In other words, this sentence should be read: "Persons who give notice after 2 years from the date the first notice is received and [persons] who [gave notice but] have not received payment as provided above. . ." Otherwise, if the sentence is read to refer only to "[p]ersons who give notice after 2 years from the date the first notice is received," the next clause ("and who have not received payment as provided above") would be entirely superfluous in light of the more probable construction of the preceding sentence -- for "[p]ersons who give notice after 2 years from the date the first notice is received" could not have "received payment as provided above." In addition, if this sentence only refers to "[p]ersons who give notice after 2 years from the date the first notice is received," the statute would omit entirely any identification of the third class of claimants that would be created -- persons who give notice within the 2 year period but who "have not received payment as provided above" -- and any description of the method for payment to the third class of claimants.
Not all of the so-called rules of statutory interpretation are particularly helpful in construing a statute written in unfortunate language that does not make the statute's meaning plain. But the logic of one of them is compelling -- namely, the rule that a statute should not be construed in a way that would lead to illogical or absurd results. Wakulla County v. Davis, 395 So.2nd 540 (Fla. 1981); State ex vel. Register v. Safer, 368 So.2nd 620 (Fla. 1st DCA 1979). That indisputable rule supports the construction recommended in the preceding paragraph.
There also is a rule of statutory interpretation that the courts will defer to agency rule or non-rule policy construing a statute which the agency administers (unless the agency construction is clearly erroneous.) Department of Environmental Regulation v. Coldring, 477 So.2d 532 (Fla. 1985); Humhosco, Inc. v. Department of Health and Rehabilitative Services, 476 So.2d 258 (Fla. 1s DCA 1985). But in this case, the evidence did not prove any agency rule or non-rule policy interpreting Section 494.044(1), Florida Statutes (1985).
Under the facts of this case, the first notice the Department received of claims against Polk Investments, Inc. (PII) and Ronald Folmer (FOLMER) was on March 23, 1984. The two year period referred to in Section 494.044(1), Florida Statutes (1985), expired on March 22, 1986. By the expiration of the two year period, neither the Murphy Claim nor the Murphy as Trustee Claim had met the condition for eligibility set out in Section 494.043(2), Florida Statutes (1985) -- the obtaining of a sheriff's return nulla bona of a writ of execution. Of all the claimants in this case, only the Amendolaro et al. Claim met all the conditions of 494.043 within the two year period.
Because of the statutory $10,000 maximum recovery from the Fund per claimant (for causes of action arising before October 1, 1985), the amount of the Amendolaro et al. Claim, counting loss of investment only, is less than the
$50,000 maximum aggregate for any one mortgage broker or solicitor: Payee Lost Investment
Amendolaro |
| $ 1,984.24 |
Victorias |
| 7,500.00 |
Fournier, Janice |
| 10,000.00 |
Wilson |
| 1,000.00 |
Ledfords |
| 5,000.00 |
Fournier, Robert |
| 10,000.00 |
| Total | $35,484.24 |
Statutory Maximum
Therefore, the second legal question that must be determined is whether Amendolaro, the Victorias, Wilson and the Ledfords can recover additional payments for interest awarded in the judgments they recovered, as well as for loss of investment.
The language of the statute affecting the second legal question is plainer. Section 494.042(2), Florida Statutes (1985), provides in pertinent part:
(2) The Mortgage Brokerage Guaranty Fund shall be disbursed as provided in Section 494.044, upon approval by the Division of
Finance of the Department of Banking and Finance, to any person who is adjudged by a court of competentjurisdiction to have suffered monetary damages as a result of any of the following acts committed by a mortgage broker or mortgage solicitor who was licensed under this chapter at the time the act was committed . . . [enumerating the acts] . . . .
(Emphasis added.)
But that statute specifies to whom money from the Fund is to be disbursed. It does not purport to specify what is to be disbursed. Section 494.044(1), Florida Statutes (1985), on the other hand, sets the amount recoverable at "the amount equal to the unsatisfied portion of such person's judgment or judgments or [in this case, $10,000], whichever is less, but only to the extent and amount reflected in the judgment as being actual or compensatory damages."
The established law is clear: "Interest is not the mere incident of a debt which attaches only to contracts, express or implied, for the payment of money, but is compensation for the use or detention of money." 17 Fla. JUR. 2d, Damages Section 82 (1980)(footnote omitted). As such, the law would view interest as an element of actual or compensatory damages. There is no reason to think the Legislature intended otherwise when it enacted 494.044(1).
It is, of course, true that this reading of the statute makes it possible for a claimant who suffered the loss of an investment less than
$10,000, in sharing the maximum aggregate recovery of $50,000 to increase his pro rata share by adding interest to the lost investment while a fellow claimant who lost an investment of more than $10,000 is limited to a pro rata share
based-on the $10,000 limit of recovery per person regardless of interest. See Sections 494.044(1) and (3), Florida Statutes (1985). Cf. also Section 494.043(6), Florida Statutes (1985), and Sections 4 and 5; Chapter 86-271, Laws of Florida (1985). But inequity of that kind is inherent in the $10,000 maximum recovery per person, not in the definition of "actual or compensatory damages." And the maximum recovery per person is clear and unambiguous.
The payments from the Fund to the Amendolaro et al. Claim, including interest, "shall be made . . . upon the expiration of 2 years from the date the first notice is received by the Department," according to Section 494.044(1), Florida Statutes (1985). The interest portion of the claim should therefore be computed as of the expiration of the two year period.
Counting interest, the amounts payable from the Fund to Amendolaro et al. Claim upon the expiration of the 2 year period increase as follows:
Payee | Lost Investment | Pre-Judqment Interest | Post-Judgment Interest | Total |
Amendolaro |
$1,984.24 |
395.76 |
281.22 |
|
$ 2,661.22 |
Victorias Fournier, Janice | 7,500.00
10,000.00 | 1,470.62 | 1,065.21 |
| 10,000.00
10,000.00 |
Wilson | 1,000.00 | 192.68 | 142.03 |
| 1,334.71 |
Ledfords Fournier, Robert | 5,000.00
10,000.00 | 862.95 | 710.14 |
| 6,573.09
10,000.00 |
|
|
|
| Total | $40,569.02 |
Since the total payable from the Fund to the Amendolaro et al. Claim is less than the $50,000 aggregate maximum for any one mortgage broker or solicitor, Section 494.044(3), Florida Statutes (1985), does not come into play, and there is no need to determine whether the $10,000 maximum recovery per person would have to be used if prorating were necessary.
The balance available to be disbursed from the Fund is just $9,430.98. Under Section 494.044(1), Florida Statutes (1985):
. . . Persons who give notice after
2 years from the date the first notice is received and who have not received payment as provided above bay recover up to the remaining portion of any of the [in this case, $50,000] aggregate, with claims being paid in the order notice is received.
(Emphasis added.)
It has been recommended that this method of payment applies both to claimants who give notice after the expiration of the two year period and to claimants -- like the Murphy Claim and the Murphy as Trustee Claim -- who had given notice but did not become eligible for payment under Section 494.043 within the two year period.
In this case, the next claim "in the order notice is received" is a tie -- both the Murphy Claim and the Murphy.as Trustee Claim were received on March 5, 1984. (The Long and Wood Claim and the Hammond Claim were both received on March 31, 1984.) Those claims should be paid, up to one-half of the balance available in the Fund. Since each claim exceeds one-half of the balance, each claim should be paid one-half of the balance available in the Fund, or $4,715.49 each.
Based on the foregoing Stipulated Facts, Supplemental Findings Of Fact and Conclusions Of Law, it is recommended that Respondent, Department of Banking and Finance, enter a final order that the following disbursements from the Mortgage
RECOMMENDED this 13th day of November, 1986 in Tallahassee, Leon County, Florida.
J. LAWRENCE JOHNSON, Hearing Officer Division of Administrative Hearings The Oakland Building
Filed with the Clerk of the Division of Administrative Hearings this 13th day of November, 1986.
Paul C. Stadler, Jr., Esquire Assistant General Counsel Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32301
Dennis P. Johnson, Esquire SHELNUT AND JOHNSON, P.A.
Belvedere Professional Center 1525 South Florida Avenue Lakeland, Florida 33806-2436
Cristy F. Harris, Esquire
HARRIS, MIDYETTE & CLEMENTS, P.A.
