STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BANKING AND ) FINANCE, )

)

Petitioner, )

)

vs. ) CASE NO. 89-4985

) ALL STATES MORTGAGE AND ) INVESTMENT, CORP. and LYNN )

F. SMITH, )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held before J. Stephen Menton, a duly designated Hearing Officer from the Division of Administrative Hearings, on February 13 and 14, 1990, in Miami, Florida.

APPEARANCES

For Petitioner: Randall Rubin, Esquire

Office of the Comptroller

401 N.W. Second Avenue Miami, Florida 33128

For Respondent: Marie A. Mattox, Esquire

Douglass, Cooper, Coppins and Powell

Post Office Box 1674 Tallahassee, Florida 32302

STATEMENT OF THE ISSUES

The issue in this case is whether disciplinary action should be taken against Respondents' mortgage brokerage licenses for the reasons set forth in the Order to Cease and Desist, Administrative Complaint and Notice of Rights filed by Petitioner on January 18, 1989 (the "Administrative Complaint".) The Administrative Complaint alleges that Respondents violated the following statutory and rule provisions: Section 494.055(1)(b), Florida Statutes, by charging borrowers closing costs that were in excess of the actual amount incurred by the mortgagor; Section 494.08(3), Florida Statutes, and Rule 3D- 40.008(9), Florida Administrative Code, by charging excess brokerage fees; Section 494.055(1)(b), Florida Statutes, by engaging in deceit, misrepresentation, negligence or incompetence in mortgage financing transactions and for breach of the fiduciary duty of a broker as a result of the manner in which escrow accounts were handled; Section 494.055(1)(h), Florida Statutes, due to the misuse, misapplication or misappropriation of funds, mortgage documents or other property entrusted to Respondents as a result of the excess charges assessed to borrowers and the misuse of monies in the escrow accounts; Rule 3D-

40.006(6)(a), Florida Administrative Code, for failing to maintain trust, servicing and escrow account records in accordance with good accounting practices; and Section 494.0393(2), Florida Statutes by failing to operate the company under the full charge, control and supervision of a principle who is a licensed mortgage broker.

PRELIMINARY STATEMENT

After an audit and examination, Petitioner filed the Administrative Complaint against the Respondents alleging various violations of the Mortgage Brokerage Act, Chapter 494, Florida Statutes, and the rules promulgated thereunder. Respondents filed a timely Petition for Formal Hearing and the Department of Banking and Finance (the "Department") referred the matter to the Division of Administrative Hearings which noticed and conducted the hearing.

Both the Administrative Complaint and the Petition for Formal Hearing list All States Mortgage and Investment Corporation ("All States Mortgage") and Lynn

F. Smith, individually and as an officer of All States Mortgage, as the Respondents. The Notice of Hearing issued in this case only listed All States Mortgage as a Respondent. However, at the commencement of the hearing, counsel for the Petitioner and counsel for Respondents stipulated that Lynn F. Smith should properly be considered a Respondent in this action and, therefore, any defect regarding notice has been waived.

Prior to the commencement of the hearing, the Department announced that it no longer intended to pursue all of the violations alleged in the Administrative Complaint. The evidence presented at the hearing related only to the following charges: (a) that Respondents charged a fee in excess of the maximum allowable brokerage fee in connection with one particular transaction (the Donald Salvog loan) as set forth in paragraph 6 of the Administrative Complaint; (b) that credit report fees charged by Respondents were not supported by back-up documentation as alleged in paragraph 7 of the Administrative Complaint; (c) that the Respondents failed to properly maintain funds held in escrow as set forth in paragraphs 8 and 9 of the Administrative Complaint; and (d) that All States Mortgage was not operating under the full control, charge and supervision of a licensed mortgage broker as alleged in paragraph 10 of the Administrative Complaint.

At the hearing, Petitioner presented the testimony of Sueni Champagne, a financial examiner analyst with the Department and Donna Kocak, the area financial manager for the Department. The Petitioner offered fourteen exhibits into evidence, all of which were accepted.

Respondents presented the testimony of Burton Horowitz, president of All States Financial Services Corporation (which is a successor to All States Mortgage,) and Respondent Lynn F. Smith, a licensed mortgage broker in the state of Florida and the principle broker for All States Mortgage. Respondents offered twenty-five exhibits into evidence, all of which were accepted. Some of Respondents' exhibits were credit reports relating to certain customers of All States Mortgage. Copies of those credit reports were not available at the hearing. At the conclusion of the hearing, the record in this proceeding was left open so that those exhibits could be submitted as late-filed exhibits. By Notice of Filing Additional Exhibits dated March 20, 1990, the Respondents have submitted those documents. No objection to these late-filed exhibits has been received from the Petitioner.

A transcript of the hearing has been filed. Both parties have filed proposed recommended orders. A ruling on each of the proposed findings of facts submitted by the parties is included in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. At all times pertinent hereto, Respondent All States Mortgage and Investment Corporation ("All States Mortgage") was licensed by the Department as a mortgage brokerage company having been issued License Number HB-592582215.

   All States Mortgage had its principle place of business in Davie, Florida.

   
   

2. All States Mortgage did not typically engage in traditional "mortgage broker functions." Instead, it generally worked with other mortgage brokers in providing funds for loans brought to All States Mortgage by other brokers.

   
   

3. At all times pertinent hereto, Respondent, Lynn F. Smith ("Smith") was a licensed mortgage broker having been issued License Number HA-265-72-0045. Smith was the principle mortgage broker for All States Mortgage.

   
   

4. Smith has been the principle mortgage broker for All States Mortgage since its inception and has been registered with the Department as a licensed mortgage broker since before a license was issued to All States Mortgage. In addition to being the principle broker for All States Mortgage, Smith was an officer and director of the company and had responsibility for the direction, control, operations and management of the company.

   
   

5. In May of 1988, Respondents were affiliated with a licensed consumer finance company known as All States Finance Company. Currently, both All States Mortgage and All States Finance are inactive and an application has been filed to transfer the license of All States Mortgage to a new company known as All States Financial Services.

   
   

6. As a result of an audit and examination conducted by the Department in May, 1988, it was determined that one client of All States Mortgage, Donald Salvog, was charged a brokerage fee in excess of the maximum allowable fee under Chapter 494. After notification by the Department, Respondents admitted that they inadvertently charged an excess fee to Mr. Salvog and Respondents immediately proceeded to refund the excess of $82.63 to the customer.

   
   

7. There is no evidence that Respondents charged any other customers with a brokerage fee in excess of the maximum allowed under Chapter 494.

   
   

8. In a number of the individual mortgage transactions in which it was involved, Respondents charged a standard credit report fee of $25.00 to the borrowers. The following chart reflects the individual loan files where such a fee was charged and the total amount of the invoices in the respective loan file to support the charges.

a "standard factual" credit report was included in the file. The typical cost for a "standard factual" is $45.00. No invoices were included in those files to reflect this cost.

1. In obtaining credit reports for an individual mortgage transaction, Respondents did not generally order a credit report from an existing service. Instead, All States Mortgage had an on-line computer terminal with a direct phone modem linked to the individual credit reporting agency's computer data base. An employee of All States Mortgage, usually Burton Horowitz, used this computer link-up to conduct a credit report on the borrower. "Standard Factual" reports were ordered from existing services as necessary to supplement the computer search. The standard $25.00 fee charged by All States Mortgage was based upon an estimate of the overhead and indirect costs associated with producing credit reports in this manner.

   
   

2. The overhead and indirect costs involved in obtaining credit reports as described in Findings of Fact 10 include the cost of leasing the equipment, the labor involved in obtaining the computer report (it typically takes an operator

   30 minutes to obtain the credit reports) and the cost of the materials involved in producing a copy of the report. The standard $25.00 fee charged by All States Mortgage was not based on a specific allocation of the indirect costs associated with producing a particular report, but, instead, was simply based upon an estimate of the costs involved.

   
   

3. During the course of its operations, All States Mortgage would periodically receive funds that were to be held in escrow. These escrow funds were kept in an interest-bearing account that was used by All States Mortgage and All States Finance. (This account is hereinafter referred to as the "Commingled Account.") The escrow funds in this Commingled Account were mixed with other funds of All States Mortgage as well as money belonging to All States Finance. Respondents contend that the escrow funds were commingled with the other funds because the companies had only one interest bearing account and that account had limited check writing ability. Respondents transferred money between the interest bearing Commingled Account and their other operating accounts on a continuous basis. At the end of each month, Respondents attempted to perform a reconciliation as to the escrow balances in the Commingled Account. On several occasions during the period from July 1987 through May 1988, the balance in the Commingled Account was less than the total funds that Respondents were supposed to be holding in escrow.

4. No evidence was introduced to indicate that Respondents' handling of the escrow funds and/or the Commingled Account ever resulted in a loss to any of their borrowers or customers. Thus, while the evidence does indicate that, on occasion, the balance of the Commingled Account was less than the funds that should have been in escrow, the difference on each occasion was ultimately corrected in the reconciliation process.

   
   

5. Respondents failed to use good accounting principles in the handling of the escrow funds.

   
   

6. The Department has not adopted any rules requiring a mortgage broker to handle escrow funds in a separate account. Prior to the initiation of this Administrative Complaint, Respondents were never informed that they were required to do so.

   
   

7. The Department's examiners prepared a schedule indicating that Respondents had diverted some of the escrow funds to their own use. However, that schedule includes several loans that had already been sold to another company on the date listed. Thus, the schedule does not accurately reflect the funds that should have been in escrow on any particular day.

   
   

8. Although Respondent Lynn Smith was only in the office approximately fifteen percent (15%) of the time while the Department's examiners were conducting their audit in May of 1988, insufficient evidence was introduced to establish the charge that Smith was not fully supervising or controlling the actions of the employees of All States Mortgage. The unrefuted testimony of Smith indicates that she often worked non-regular hours, that she reviewed all the documents for every transaction in which All States Mortgage was involved and she supervised the work of all of the employees of the company. Extenuating circumstances in May of 1988 caused her to be out of the office more than usual during regular business hours. However, this fact alone is insufficient to establish the charge that she was not fully supervising or controlling the actions of the company.

   
   

   CONCLUSIONS OF LAW

   
   

9. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this proceeding. Section 120.57, Florida Statutes (1989).

   
   

10. Petitioner has the burden to prove the violations alleged in the Administrative Complaint. It is unclear whether the standard of proof is clear and convincing evidence or simply a preponderance of the evidence. See, Ferris

    v. Turlington, 510 So.2d 292 (Fla. 1989). The result in this case is not affected by the standard of proof applied.

    
    

11. Section 494.052, Florida Statutes empowers the Department's to revoke, suspend or otherwise discipline the license of a mortgage broker who is found guilty of any of the acts enumerated in Section 494.055(1), Florida Statutes. Under Section 494.052(5), the Department can impose a fine up to $5,000 for each violation established.

12. Section 494.055 provides in pertinent part as follows:

    
    

    1. The following acts shall constitute grounds for which the disciplinary action specified in Section 494.052 may be taken:

       * * *

       (b) Fraud, misrepresentation, deceit, negligence or incompetence in any mortgaging financing transaction;

       * * *

       (f) Failure to account or deliver to any person any personal property such as money, funds, deposit, checks, draft, mortgage or other document or thing of value, which has come into his hands and which is not his property for which he is not in law or equity entitled to retain under the circumstances and at the time which has been agreed upon or is required by law or, in the absence of a fixed time upon demand of the person entitled to such accounting and delivery;

       * * *

       (h) Any breach of trust funds or escrow funds, or any misuse, misapplication, or misappropriation of personal property, such as any money, fund, deposit, checks, draft, mortgage, or other document or thing of value entrusted to his care to which he had no current property right at the time of entrustment regardless of actual injury to any person;

       * * *

       (k) Failure to comply with any department order or rule made or issued under the provisions of this chapter . . .

       
       

13. Section 494.08(3), Florida Statutes makes it unlawful for "any person to charge or exact directly or indirectly from the mortgagor a fee or commission in excess of the maximum fees or commissions set forth" in the statute. Rule

    3D-40.008(9) further details the method for determining the maximum fee that can be charged. The evidence in this case established that in one transaction the Respondents inadvertently charged a borrower a fee that was $82.63 in excess of the maximum allowed by law. The amount of the overcharge was immediately refunded to the borrower as soon as it was brought to the attention of the Respondents. While this refund is an important mitigating factor, Respondents are subject to disciplinary action under Sections 494.055(1)(f) and (k) as a result of this overcharge.

    
    

14. The Department contends that Respondents violated Section 494.055(1)(b) and (f) as well as Rule 3D-40.008(1), Florida Administrative Code, by charging and collecting expenses incidental to the processing of a loan when the charges were not itemized and supported by actual expenditures. Under Rule 3D-40.008(3)(a)8 and 3D-40.008(3)(b), a mortgage broker can only charge and collect a credit report fee if it is itemized and supported by an actual expenditure. 1/

15. The existing Rules do not permit a mortgage broker to charge a borrower for the indirect expenses involved in the preparation of a credit report generated in-house. The Respondents' contention that the indirect costs associated with their generation of credit reports can be charged to the borrowers is inconsistent with the Rule because those indirect costs have not been specifically allocated to specific transactions. Therefore, the evidence has established that the Respondents have violated Section 494.055(1)(b), (f) and (k) by charging borrowers a credit report fee that was not supported by direct expenditures related to the particular transaction. However, as a mitigating factor, it does not appear that Respondents were excessively or purposefully attempting to gouge their customers. Instead, they were simply trying to recoup some of the costs associated with their unusual method of generating credit reports.

    
    

16. The evidence established that the Respondents commingled escrow funds with other corporate monies and, on occasion, the balance in the Commingled Account was less than the total amount of funds that should have been in escrow. Thus, the evidence demonstrated that the Respondents have misused the escrow funds in violation of Section 494.055(1)(d) and (h), Florida Statutes. However, there is no evidence that any of the funds were misappropriated or that any of the borrowers lost money as a result of the Respondents' actions.

    
    

17. While Respondents disclaim any previous knowledge that they were required to maintain escrow funds in a separate account, they were nonetheless required to keep records in accordance with good accounting principles which they failed to do.

    
    

18. The books and records of the Respondents made it difficult to specifically verify the escrow balances related to the individual transactions at any particular point in time. Thus, Respondents have failed to maintain the escrow account records in accordance with good accounting practices as required by Rule 3D-40.006(6)(a), Florida Administrative Code.

    
    

19. Although Respondent Lynn Smith was absent during a large portion of the time the examination was being conducted, the evidence failed to establish that she was not in full charge, control, or supervision of All States Mortgage. Thus, Petitioner has not proven a violation of Section 494.0393, Florida Statutes.

    
    

20. Although the evidence in this case has established that the Respondents were guilty of certain violations of Chapter 494, there is no evidence indicating that any borrowers or customers sustained any financial loss as a result of the conduct of the Respondents. Indeed, the violations established would appear to be mostly technical in nature and do not warrant the severe sanction of revocation of license requested in the Petitioner's Proposed Recommended Order. While Respondents handling of the escrow accounts is cause for great concern, it does not appear that the funds were misappropriated or that any losses have been sustained.

RECOMMENDATION

Based upon the foregoing Findings of Facts and Conclusions of Law it is, it is RECOMMENDED that the Department of Banking and Finance enter a final order finding the Respondents guilty of violating Sections 494.055(1)(b), (d), (f),

(h) and (k) and issue a reprimand to the Respondents and impose a fine of one thousand five dollars ($1,500.00).

DONE and ORDERED this 9th day of July, 1990, in Tallahassee, Florida.

J. STEPHEN MENTON Hearing Officer

Division of Administrative Hearings

The DeSoto Building 1230 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 9th day of July, 1990.

ENDNOTES

1/ Although the Administrative Complaint only specifically charges Respondents with a violation of Section 494.055(1)(b) and does not specifically site the applicable rule provisions in connection with this count, the Administrative Complaint sufficiently alerts Respondents as to the basis for the intended disciplinary action. See, Florida Board of Pharmacy v. Levin, 190 So.2d 768 (Fla. 1968); Scharrer v. Department of Professional Regulation, Division of Real Estate, 536 So.2d 320 (Fla. 3rd DCA 1988.)

APPENDIX

Both parties have submitted Proposed Recommended Orders. The following constitutes my rulings on the proposed findings of fact.

The Petitioner's Proposed Findings of Fact

Proposed Finding Paragraph Number in the Findings of Fact of Fact Number in the Recommended Order Where Accepted

or Reason for Rejection.

1. Adopted in substance in the preliminary statement.

2. Adopted in substance in the preliminary statement.

3. Adopted in substance in Findings of Fact

   3 and 4.

4. Adopted in substance in Findings of Fact 4.

5. Adopted in substance in Findings of Fact 4.

6. Adopted in substance in Findings of Fact 6.

7. Subordinate to Findings of Fact 8.

8. Subordinate to Findings of Fact 9-11.

9. Adopted in substance in Findings of Fact 12-15.

10. Rejected as not substantiated by competent, substantial evidence. See Findings of Fact 17.

The Respondent's Proposed Findings of Fact

Proposed Finding Paragraph Number in the Findings of Fact of Fact Number in the Recommended Order Where Accepted

or Reason for Rejection.

1. Adopted in substance in Findings of Fact 1.

2. Adopted in substance in Findings of Fact

   3 and 4.

3. Adopted in substance in the preliminary statement.

4. Adopted in substance in the preliminary statement.

5. Adopted in substance in the preliminary statement.

6. Adopted in substance in the preliminary statement.

7. Adopted in substance in Findings of Fact

   6 and 7.

8. Subordinate to Findings of Fact 8-11.

9. Rejected as constituting a summary of testimony rather than a Finding of Fact.

10. Subordinate to Findings of Fact 9-11.

11. Subordinate to Findings of Fact 10-11.

12. Rejected as not substantiated by competent substantial evidence.

13. Rejected as largely irrelevant and Subordinate to Findings of Fact 12.

14. Subordinate to Findings of Fact 16.

15. Subordinate to Findings of Fact 12 and 16.

16. Subordinate to Findings of Fact 12 and 16.

17. Subordinate to Findings of Fact 12 and 16.

18. Subordinate to Findings of Fact 12.

19. Subordinate to Findings of Fact 12 and 16.

20. Subordinate to Findings of Fact 14 and 15.

21. Rejected as irrelevant and unsubstantiated by competent, substantial evidence.

22. Adopted in substance in Finding of Fact 17.

    COPIES FURNISHED TO:

    
    

    Marie A. Mattox

    Douglass, Cooper, Coppins and Powell

    Post Office Box 1674 Tallahassee, FL 32302

    
    

    Randall Rubin, Esquire Office of the Comptroller

    401 N.W. Second Avenue Miami, FL 33128

    
    

    The Honorable Gerald Lewis Comptroller, State of Florida The Capitol

    Tallahassee, FL 32399-0350

    
    

    William G. Reeves General Counsel The Capitol

    Plaza Level, Room 1302 Tallahassee, FL 32399-0350

    
    

    =================================================================

    AGENCY FINAL ORDER

    =================================================================

    
    

    STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE

    DIVISION OF FINANCE

    
    

    IN RE:

    
    

    HAROLD R. SMITH; Uptown Administrative Proceeding

    Federal Savings and Loan No. 1308-F-1/89 Association of Chicago; First DOAH CASE NO. 89-4985 Federal Savings Bank,

    
    

    Respondents.

    /

    
    

    FINAL ORDER GRANTING OR DENYING PAYMENT FROM THE MORTGAGE BROKERAGE

    GUARANTY FUND RE HAROLD R. SMITH AND NOTICE OF RIGHTS

    
    

    The State of Florida Department of Banking and Finance, Division of Finance (hereinafter Department), being author- ized and directed to administer the Mortgage Brokerage Guaranty Fund (hereinafter the Fund) codified in Sections 494.042, 494.043, 494.044 and 494.045, Florida Statutes, hereby enters this Final Order granting or denying following applications for payment from the Fund

    arising from alleged violations of the provisions of Chapter 494, Florida Stat- utes, by Harold R. Smith, (hereinafter Smith).

    
    

    FINDINGS OF FACT

    
    

    1a. Under the provisions of the Mortgage Brokerage Act, Chapter 494, Florida Statutes, the Department is charged with the responsibility and duty of administering the Fund, which includes the duty to approve or deny applications for payment from the Fund, as set forth in Section 494.042(2), Florida Statutes.

    
    

    b. On December 6, 1989, the Department issued a Notice of Intent to Grant or Deny Payment From The Mortgage Broker- age Guaranty Fund Re Harold R. Smith And Notice Of Rights (hereinafter Notice of Intent). On or before March 5, 1990, said Notice of Intent was received by Andrew A. Ostrow, Brian S. McHugh, and Charles E. Butler, III. In addition, on Decem- ber 29, 1989, the Department advertised said Notice of Intent in the Florida Administrative Weekly. To date, a Petition for hearing has only been filed by Uptown Federal Savings and Loan Association. Accordingly, all the persons who stated interests may be determined by these proceedings have waived their right to a hearing in this case.

    
    

    1. On July 22, 1983, Ozark Financial Corp. became licensed under the Act having license no. HB-12839. Said license became inactive on September 1, 1987. On July 22, 1983, Smith became licensed as the principal broker for Ozark. On September 1, 1987, Smith's license no. HA-342209707 became inactive.

       
       

    2. Uptown Federal Savings and Loan Association of Chicago. On August 26, 1986, the Department received a letter by certified mail from Gerald B. Mullin, Chairman of the Board of Directors of Uptown Federal Savings and Loan Association of Chicago, which stated in part:

       
       

       Uptown Federal is seeking a judgment against Ozark Financial Corporation, et al. in an action which is based on Section 494-042(2)(d)-(f). A Copy of the Complaint is enclosed for your informa- tion. The acts described in the Complaint for which recovery is sought occurred after October 1, 1985.

       In this action, Defendants were servicing approximately 86 mortgages which were owned by Uptown Federal and had been purchased from Ozark Financial Corporation. Defendants failed to pay over an estimated $200,000.00 which had been received as payments on Uptown's mortgages during the months of January through March, 1986. These funds were to have been held in trust by the Defendants until remitted to Uptown, but the defendants failed to do so. Defendants have since ceased to service Uptown's mortgages at our request.

       
       

       Attached to said letter is a Complaint in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida, by Uptown Federal Savings and Loan of Chicago against Ozark, Smith, and David S. Fisher. Thereafter, on October 8, 1986, the Department received by certified mail an Amended Complaint

       in the United States District Court for the District of Florida, Case No. 86- 6210-CIV-PAINE from Andrew A. Ostrow, attorney with Foley & Lardner of West Palm Beach, Florida, which stated in part:

       
       

       ALLEGATIONS COMMON TO ALL COUNTS

       
       

       1. On or about January 19, 1983 Plaintiff and OZARK entered into a Mortgage Sale and Servic- ing Agreement ("Agreement"), a copy of which is attached as Exhibit A.

       2. Pursuant to the Agreement between the parties Plaintiff purchased approximately 100 real estate mortgages from OZARK. The properties securing the mortgages are located in California, Illinois, Florida, Georgia, Arizona, New Mexico and Indiana.

       3. As part of the Agreement OZARK was to act in a fiduciary capacity as Plaintiff's agent to service the mortgages and establish a trust account for Plaintiff's benefit.

       4. As part of the Agreement OZARK further agreed to collect the monthly mortgage payments from the mortgagors, deducting the services fee for itself, set up where appropriate, escrow accounts for items such as taxes and insurance payments, and remit to Plaintiff the monthly principal and remaining interest payments. . .

       5. Since the inception of this Agreement and until in or about January, 1986, Plaintiff would receive from OZARK payments of principal and interest on approximately the 20th of each month for payments which were due from the mortgagors on the first of that month.

       6. OZARK had been servicing approximately 86 mortgage loans which had an estimated principal balance of $2,576,728.93, Interest rates on the loan varied from 12-3/4% to 15%. In or about March, 1986, OZARK ceased to service Plaintiff's loans.

       7. According to OZARK'S records as of January 31, 1986, OZARK had collected principal and interest for that month in a total amount of

          $102,918.47 which was payable to Plaintiff. OZARK has failed to remit any of this sum to Plaintiff.

       8. According to OZARK'S records for the month of February, 1986, OZARK had collected principal and interest for that month in the amount of $29,121.98, which was payable to Plaintiff. OZARK has failed to remit any of this sum to Plaintiff.

       9. According to OZARK'S records for the month of March, 1986, OZARK had collected principal and interest for that month in the amount of

          $69,388.44 which was payable to Plaintiff. A portion of this amount was paid to Plaintiff.

       10. OZARK commingled the trust fund collec- tions from Plaintiff's approximate 86 mortgages with other cash funds belonging to OZARK and others. OZARK used these collections for payment of its operating expenses and for other uses which were not permitted by the Agreement; constituting a breach of trust. Furthermore, Defendants used these collections, which were upon receipt the property of Plaintiff, for non-business expenses, for investing in other business ventures, and for other purposes which constitute the illegal conver- sion of Plaintiff's property.

           18. Despite Plaintiff's demand, OZARK has failed to remit funds it has received from the monthly mortgage payments.

           
           

           Said Amended Complaint did not refer to Chapter 494, Florida Statutes. Attached to the Amended Complaint as Exhibit A is a copy of the Mortgage Sale and Servicing Agreement, which states in part:

           
           

           1. Seller wishes to sell and Buyer wishes to buy interest in whole loans of secured as first and second liens on real property and have signed two loan purchase commitments ("Commitments") attached here to and made a part hereof;

           2. Seller and Buyer wish to set forth the requirements of the procedures for sale and servic- ing of such loans; and

           3. Buyer and Seller are legally authorized to execute this Agreement.

              
              

              NOW THEREFORE, in consideration of the mutual promises made and valuable consideration, receipt of which is hereby acknowledged, the parties agree as follows:

              1. This Agreement and the Commitments shall govern the sale and servicing of all loans and interests sold by the Seller to the Buyer in each and every secured loan, evidenced by a promissory note and secured by a mortgage.

           
           

           On October 21, 1988, the Department received a copy of a - recorded Amended Judgment entered on July 13, 1988, in Case - No. 86-6210-CIV-PAINE. Said Amended Judgment is entered against Ozark and Smith, jointly and severally, in the principal amount of $190,681.12. Attached to the Amended Judgment is a letter that represents that a reasonable search has been made for assets, but that said search has been unsuccessful. Also enclosed is an Order of Temporary Injunc- tion, Staying all Pending Suits and Enjoining all Further Suits, Appointment of Receiver in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County Florida, State of Florida v. C.E. Properties, Ozark, and Smith, Case No. 87-7130, entered on March 17, 1987. Said Order restrains all persons from doing any act to interfere with possession of or management of property in possession of the Receiver. However, on January 10, 1989, the circuit court entered an order closing the case upon the filing of receipts and other evidence of distributions. Accordingly, said injunction is no longer in effect or will not be in effect shortly. Based upon the foregoing, Claimant has filed a claim against the Fund regarding Ozark, Smith and Fisher.

           II. On or about April 26, 1989, the Department received a writ that has been returned unsatisfied.

           
           

    3. First Federal Savings Bank Claim. On September 14, 1987, the Department received a letter by certified mail, which stated:

This firm represents First Federal Savings Bank, ("First Federal") in connection with its claim against Ozark Financial Corporation, a Florida-licensed mortgage broker, ("Ozark") and Harold Smith, Ozark's President, to recover the sum of approximately $95,000.00, exclusive of pre-judgment interest, costs, attorneys' fees, etc. This sum represents monies collected by Ozark on mortgages and notes owned by First Federal, but which monies Ozark and Smith have wrongfully failed and refused to deliver to Ozark in contravention of a written agreement between these parties.

This letter shall serve as notice that on May 5, 1985, First Federal was granted leave to inter- vene in the lawsuit styled STATE OF FLORIDA, ex rel. GERALD LEWIS v. C.E. PROPERTIES, OZARK FINAN- CIAL CORPORATION and HAROLD R. SMITH, Case No.

87-07130 CY pending in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida. In its intervenors' Complaint, First Federal asserted against Ozark and Harold Smith the claims described above.

This notice is provided pursuant to Section 494.043, Florida Statutes (1985). The 1985 version of this section is relied upon because First Federal's loss occurred during the months of February, March, and April, 1986. Please be advised that First Federal will seek recovery from the Mortgage Brokerage Guaranty Fund if the condi- tions for recovery set forth in Section 494.043, Florida Statutes (1985), are met.

By letter dated September 18, 1987, the Division of Finance responded: Thank you for your certified letter of Septem-

ber 11, 1987. We are accepting your letter as notice to file a Guaranty Fund claim against the above named corporation.

Please keep us informed as the other require- ments of Section 494.043, Florida Statutes are met.

Based upon the foregoing, Claimant has filed a claim against - the Fund regarding Ozark and Smith.

CONCLUSIONS OF LAW

5.1. Based upon the foregoing findings of fact, the Department includes that all persons other than Uptown Federal Savings and Loan Association of Chicago have waived their right to a hearing based upon the failure to file a petition for hearing within 21-days of receipt of the Notice of Intent or within 21-days of the advertisement of said Notice of Intent in the Florida Administrative Weekly. See 28-5.111, F.A.C.

1. The requirements for perfecting a claim to the Fund may be summarized as follows:

   
   

   1. Section 494.042(2), Florida Statutes, provides that the Fund shall be disbursed upon approval by the Divi- sion to any party to a mortgage financing transaction who has been adjudged by a Florida court of competent jurisdiction to have suffered money damages as a result of any violation of this Chapter committed by a licensee or registrant.

      
      

   2. Section 494.043(1), Florida Statutes, states that any person who was a party to a mortgage financing transaction shall be eligible to seek recovery from the Fund if: a) the person has recorded, see Section 28.222, Florida Statutes, a final judgment, see McCuiston v. State, 507 So.2d 1185, 1186 (Fla. 2d DCA 1987); Whitley v. Maryland Casualty Co., 376 So.2d 476, 477 (Fla. 1st DCA 1979); issued by a Florida court of competent jurisdiction in any action wherein the cause of action was based on Section 494.042(2), Florida Statutes;

      b) the person has caused a writ of execution to be issued upon such judgment, and said writ has been returned unsatisfied because there was no property liable to be levied upon or that the amount realized on the sale of the property was insufficient to satisfy the judgment; c) the person has made all reasonable searches for property of the judgment debtor and that no property was found or chat property found was insufficient to satisfy the judgment; d) the person has applied any amounts recovered from the judgment debtor, or any other sources, to the damages awarded by the court; e) the person, at the time the action was instituted, gave notice and provided a copy of the Complaint to the Division 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 f) the act for which recovery is sought occurred on or after September 1, 1977, although for causes of action arising on or after October 1, 1985, in- creased benefits (i.e.,

      $20,000 per claimant and $100,000 per licensee) may be recovered pursuant to the amendments to Section 494.044, Florida Statutes, which go into effect on said date. Finally, Section 494.043(2), Florida Statutes, states that the requirements of Subsection (1) (a)-(e) are not applicable if the licensee or registrant upon which the claim is sought has filed for bankruptcy or has been adjudicated bankrupt; however, in such event the claimant shall file a proof of claim in the bankruptcy proceedings and shall notify the Department by certified mail of the claim by enclosing a copy of the proof of claim and all supporting documents.

      
      

   3. Section 494.044(1), Florida Statutes, states, in part, that, upon the expiration of two years from the date the first notice is received by the Department, any person who meets all of the conditions prescribed in Section 494.043, Florida Statutes, may apply to the Department for payment from the Fund. Additionally, payments from the Fund may be made only to the extent and amount reflected in the judgment as being actual or compensatory damages. In the event that amounts remain available for payment from the Fund after

paying those claimants who perfected their claims within the two-year period, payments shall be made in the order that certified mail notices were received by the Department.

1. Based upon the foregoing Findings of Fact, the Department concludes that it received the first notice of an action against Ozark Financial Corp. on August 26, 1986, as previously noted in paragraph 3. Accordingly, the two-year period mandated by Section 494.044(1), Florida Statutes, as against Ozark Financial Corp. expired on August 25, 1988. -

   
   

2. There is also concern that some of the claimants - may be attempting to recover more than once from the Fund due to the alleged actions of Ozark, Smith and Fisher, although the respective injuries appear to be based on a single set of facts. Accordingly, the question arises as to whether it is permissible to make two or more Fund awards based on claims against two or more licensees based upon the same facts, should the claimants technically comply with Chapter 494, Florida Statutes. It is noted that complaints against licensees are generally made on the theory of an alleged contract breach or for fraud. While certainly only a party to a contract may breach it, it is arguable that more than one licensee could make fraudulent representations to an investor to induce the investment. By way of analogy, while "[i]ndispensable parties are necessary parties so essential to a suit that no final decision can be rendered without their joinder," Hertz Corp. v. Piccolo, 453 So.2d 12, 14 n.3 (Fla. 1984), a plaintiff has the "right to sue any one or all of the joint tort- feasors whose negligent acts or omissions united and produced his injuries." Dulman v. Seaboard Coast Line Railroad Co., 308 So.2d 53, 54 (Fla. 4th DCA 1975) (em- phasis original). Based on the foregoing, while the remedial nature of the Fund supports the conclusion that the Department will pay claims against the Fund arising out of one cause of action against one or more licensees, said payments will be limited to the statutory amount against any one licensee. However, it should be emphasized that the total payments received by the claimants against any one or more licensees will in no event exceed the total amount of actual or compensatory damages incurred by the claimant.

   
   

3. Uptown Federal Savings and Loan Association Claim. Based upon the foregoing Findings of Fact, particularly those findings contained in paragraph 3, claimant has satisfied the requirements of Section 494.043(1), Florida Statutes. Accordingly, the Department grants said claim provided that the Department receives a duly executed and recorded assignment substantially in the form of Exhibit A.

   
   

4. First Federal Savings Bank Claim. Based upon the foregoing Findings of Fact, particularly those findings contained in paragraph 4, although claimant has satis- fied the requirements of Section 494.043(1)(e) and (f), Florida Statutes, said claimant has not satisfied the re- quirements of Section 494.043(1) (a-d), Florida Statutes. Accordingly, the Department denies said claim at this time without prejudice.

FINAL ORDER

IT IS THEREFORE determined and ordered that:

1. The Department received the first proper notice of an action against Ozark and Smith on August 26, 1986. According, the two-year period mandated by Section 494.044(1), Florida Statutes, began to run on said date and expired on August 25, 1988.

2. The Department shall pay Uptown Federal Savings and Loan Association of Chicago the amount of $20,000 provided the Department receives a duly executed, recorded assignment substantially in the form of Exhibit A.

   
   

3. As no additional claimants satisfied the require- ments of Section 494.043, Florida Statutes, the Department denies the remaining claims at this time until they can satisfy the requirements of Sections 494.043 and 494.044, Florida Statutes. Payments will be made from the Fund up to the maximum amount permitted by law to those claimants who subsequently meet all the requirements of Sections 494.043 and 494.044, Florida Statutes. Payments shall be made, with- out proration, in the order in which notices of claim have been filed with the Department. The present order of notices filed with the Department

is as follows: (1) First Federal Savings Bank Claim. Assignments filed with the Department should substantially be in the form of Exhibit A.

DONE and ORDERED this 16th day of July , 1990.

GERALD LEWIS, as Comptroller of the State of Florida and Head of the Department of Banking and Finance

NOTICE OF RIGHTS TO JUDICIAL REVIEW

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE (1) COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DEPARTMENT OF BANKING AND FINANCE AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN THIRTY (30) DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

CERTIFICATE OF SERVICE

The undersigned certifies that true and correct copies of the foregoing were duly sent by Certified U.S. Mail to those specified on the list below,

this 17

day of July

1990.

PAUL C. STADLER, JR.

Assistant General Counsel Office of the Comptroller The Capitol, Suite 1302

Tallahassee, FL 32399-0350

(904) 488-9896

Andrew A. Ostrow

Attorney for the Uptown Federal Savings and Loan Association Claim

Suite 202, East Tower, Phillips Point 777 South Flagler Drive

West Palm Beach, Florida 33401-6163

Brian S. McHugh

Attorney for the First Federal Savings Bank Claim

P. O. Box 1900

Ft. Lauderdale, Florida 33302

Charles E. Butler, III Attorney for Ozark and Smith

614 S. Federal Highway, Suite 200 Ft. Lauderdale, Florida 33301

Docket for Case No: 89-004985

Orders for Case No: 89-004985