STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 87-5203

)

MICHAEL B. REED, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, final hearing in the above-styled action was held on March 2, 1988, in Melbourne, Florida, before Robert E. Meale, Hearing Officer of the Division of Administrative Hearings.

The parties were represented as follows:

For Petitioner: Robert K. Good, Esquire

Senior Attorney Office of Comptroller

Departments of Banking and Finance

400 West Robinson Street Orlando, Florida 32801-1788

For Respondent: Michael B. Reed, pro se

6654-B Rosewood Court

Indian Harbor Beach, Florida 32927 BACKGROUND

On September 16, 1987, Petitioner served a Notice of Intention to Revoke and Administrative Charges and Complaint ("Administrative Complaint") against Respondent with respect to a mortgage financing transaction involving Respondent and John and Audrey-Ann Marzano during the latter half of 1987. The Administrative Complaint alleged that Respondent received from the Marzanos an earnest money deposit of $2500 that was to be applied toward the purchase of a house, that he placed the funds in a personal bank account, and that he failed to refund the money when the transaction failed to close. The Administrative Complaint alleged that Respondent thereby violated Section 494.055(1)(b), (e), (f), (g), and (h), Florida Statutes.

By an undated letter to Petitioner, Respondent requested a formal hearing.

At the hearing, Petitioner called four witnesses and offered into evidence three exhibits. All were admitted into evidence. Respondent called one witness, himself, and offered into evidence no exhibits.

Both parties filed a proposed recommended order. Treatment accorded their proposed findings of fact is detailed in the Appendix.

FINDINGS OF FACT

1. Respondent is and at all material times has been a licensed mortgage broker in the State of Florida. He holds license number HK0008557. In 1986, he was employed by Cityfed Mortgage Company.

   
   

2. In July, 1986, Respondent met John and Audrey-Ann Marzano, husband and wife, at a party at the home of a mutual friend, Barbara Fieste. The Marzanos and Respondent agreed that he would pre-qualify them for a mortgage in order to determine the maximum amount of a mortgage loan that they could anticipate receiving.

   
   

3. On or about October 22, 1986, the Marzanos signed a contract to purchase a home in a subdivision known as Coventry in the Melbourne area. The contract was prepared by Ms. Feiste, who was not a licensed real estate broker or salesman. Respondent, who was a licensed real estate broker or salesman at the time, reviewed the contract to determine its sufficiency from the point of view of a mortgage lender. No counterparts or copies of the contract remain in existence. Respondent was to deliver the signed contract offer to the seller or its attorney, but never did so.

   
   

4. On October 22, 1986, the Marzanos delivered to Respondent a check drawn on their personal checking account in the amount of $2500 and payable to "EMBY Associates." "EMBY Associates" was a corporation that Respondent had recently formed or was about to form. This payment represented the Marzanos' earnest money deposit that was to accompany the contract offer.

   
   

5. Respondent deposited the check in his personal checking account on October 23, 1987. He endorsed the check, "EMBY Assoc" and, beneath that, "MB Reed." After receiving the check from the Marzanos, Respondent or someone at his direction added to the payee line on the check, "or MB Reed."

   
   

6. Respondent deposited the Marzanos' check into an account that he had opened about ten days earlier. Either Respondent or Ms. Feiste could sign checks drawn on the account. In fact, the account belonged to Respondent, who signed all of the checks drawn on it during the months of October and November, 1987. Ms. Feiste was on the account only in the event that Respondent died or became disabled.

   
   

7. The Marzanos' bank honored the check and debited their account in the amount of $2500.

   
   

8. Between the opening of the account and the day that Respondent deposited the Marzanos's check, he had written checks in the total amount of

   $2570.22 against total deposits during the same period of $937.04. All of the checks drawn on the account were for personal expenses of Respondent. The single largest check was in the amount of $2025 representing rent for Respondent's personal residence.

   
   

9. The monthly statement dated November 3, 1986, shows that one of Respondent's checks was returned for insufficient funds one week after he deposited the Marzanos' check. The monthly statement dated December 3, 1986, shows that 19 of Respondent's checks were returned for insufficient funds between November 14 and December 3, 1986.

10. The contract signed by the Marzanos was never signed by the seller. Notwithstanding the fact that Respondent stressed to the Marzanos the importance of acting quickly on the house due to its favorable price, he allowed them to submit a contract without a deadline for the time for acceptance.

    
    

11. After making the offer, the Marzanos applied for a mortgage with Cityfed Mortgage Company through Respondent. Weeks passed with the Marzanos hearing nothing about their offer. Finally, they demanded that Respondent return to them their money. Respondent offered different explanations as to what had happened to their money, but declined to repay them the $2500 that they had entrusted to him. Repeated demands were unsuccessful and the Marzanos never received their money back.

    
    

12. Respondent testified that he took $2500 in cash in a sealed envelope to the receptionist of the law firm that represented the seller. He testified that he neither asked for nor received a receipt and that that was the last that he saw of the money. An attorney representing the firm testified that the firm had never accepted a cash earnest money deposit. Respondent testified that the source of the cash was the repayment by a Mr. Hamel of the final installment of a note, of which Respondent had no copy. Respondent omitted mention of this critical fact in his lengthy answer to the Administrative Complaint or in any of his statements to investigators. Respondent's testimony that he delivered $2500 cash is implausible. In fact, he used the Marzanos' money for personal expenditures and never transferred cash representing their earnest money deposit to anyone.

    
    

    CONCLUSIONS OF LAW

    
    

13. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter. Section 120.57(1), Florida Statutes.

    
    

14. Petitioner has jurisdiction over the licensing of mortgage brokers. Section 494.052, Florida Statutes. Respondent's license as a mortgage solicitor was converted by law on September 1, 1986, to a license as a mortgage broker. Section 494,121(1), Florida Statutes.

    
    

15. Discipline against a license may be imposed if a broker is found guilty of "fraud, misrepresentation, deceit, negligence, or incompetence in any mortgage financing transaction." Section 494.055(1)(b), Florida Statutes. A "mortgage financing transaction" includes "the offer to negotiate, acquire, sell, or arrange for, a mortgage loan or mortgage loan commitment." Section 494.02(12), Florida Statutes.

    
    

16. Discipline against a license may be imposed if a broker "fail[s] to place, immediately upon receipt, any money . . . [or] check . . . entrusted to him by a person dealing with him as a broker, in escrow . . . or to deposit said funds in a trust or escrow account maintained by him with a bank or savings association . . ., wherein said funds shall be kept until disbursement thereof is properly authorized." Section 494.055(1)(e), Florida Statutes.

    
    

17. Discipline against a license may be imposed if a broker "fails[s] to account or deliver to any person any personal property, such as any money . .

    . [or] check . . ., which has come into his hands and which is not his property or which he is not in law or equity entitled to retain, . . . upon demand of the person entitled to such accounting and delivery." Section 494.055(1)(f), Florida Statutes.

18. Discipline against a broker may be imposed if a broker "fails[s] to disburse funds in accordance with agreements." Section 494.055(1)(g), Florida Statutes.

    
    

19. Discipline against a broker may be imposed if a broker is guilty of "any breach of trust funds or escrow funds, or any misuse, misapplication, or misappropriation of personal property, such as any money . . . [or] check . . . entrusted to his care to which he had no current property right at the time of entrustment regardless of actual injury to any person." Section 494.055(1)(h), Florida Statutes.

    
    

20. Petitioner must prove the allegations of the Administrative Complaint by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).

    
    

21. The evidence is clear and convincing that Respondent violated each of the above-cited statutory provisions.

    
    

22. Respondent's failure to reimburse the Marzanos for the financial loss that they suffered at his hands is an aggravating circumstance. Even under Respondent's version of the facts, he should have recognized his clear negligence and incompetence in delivering cash to a receptionist and not obtaining a receipt; and he thereby should have acknowledged his responsibility for the Marzanos' loss. The most aggravating circumstance, however, is that, in fact, Respondent, during a time of financial distress, intentionally converted the Marzanos' money to his own use.

Based on the foregoing, it is hereby

RECOMMENDED that a Final Order be entered finding Respondent guilty of violating Section 494.055(1)(b), (e), (f)(g), and (h), Florida Statutes, and suspending his license as a mortgage broker under Chapter 494, Florida Statutes, for a period of six months.

ENTERED this 21st day of March, 1988, in Tallahassee, Florida.

ROBERT E. MEALE

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 21st day of March, 1988.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-5203

Treatment Accorded Petitioner's Proposed Findings of Fact 1-3: adopted in substance.

4-6: rejected as unnecessary. 7-10: adopted in substance.

11-12: rejected as unnecessary. 13: adopted.

14: rejected as unsupported by clear and convincing evidence. 15, 17, 19: adopted.

16, 18: rejected as unnecessary.

20: rejected as unsupported by clear and convincing evidence. 21-23: adopted in substance.

24-25, 29: adopted.

26-28, 30-31: adopted in substance.

32-33: adopted.

Treatment Accorded Respondent's Proposed Findings of Fact 1-5: rejected as unnecessary.

COPIES FURNISHED:

Michael B. Reed

6654-B Rosewood Court

Indian Harbor Beach, Florida 32937

Robert K. Good, Esquire Senior Attorney

Office of Comptroller

Department of Banking and Finance

400 West Robinson

Orlando, Florida 32801-1788

Honorable Gerald Lewis Comptroller, State of Florida The Capitol

Tallahassee, Florida 32399-0350

Charles L. Stutts General Counsel Plaza Level

The Capitol

Tallahassee, Florida 32399-0350

Docket for Case No: 87-005203

Orders for Case No: 87-005203