STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

EMERALD COAST FINANCE, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 92-3393

) DEPARTMENT OF BANKING AND ) FINANCE, )

)

Respondent. )

) DEPARTMENT OF BANKING AND ) FINANCE, )

)

Petitioner, )

)

vs. ) CASE NO. 92-4957

) EMERALD COAST FINANCE, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, this cause came on for formal hearing before P. Michael Ruff, duly designated Hearing Officer of the Division of Administrative Hearings. The appearances were as follows:

APPEARANCES

For Petitioner: Leslie A. Meek, Esquire

Office of the Comptroller State of Florida

401 North West Second Avenue, Suite 708 Miami, Florida 33128

For Respondent: John R. Grass, Esquire

120 South Alcaniz Street Pensacola, Florida 32501

STATEMENT OF THE ISSUES

The issues to be resolved in this consolidated proceeding concern whether the Department of Banking and Finance (Department) should take disciplinary action and impose sanction on the licensure registration previously granted to Emerald Coast Finance, Inc. (Emerald), as referenced in the legal authority cited below, as well as the issue of whether the application for a consumer finance license filed by Emerald should be granted, in view of alleged false responses given on its application for that license.

PRELIMINARY STATEMENT

This cause arose upon the filing of an application for a consumer finance license by Emerald, concerning which the Department's investigation resulted in the determination that Emerald had allegedly made false responses on the application. Because of this discovery by the Department, the Department investigated and instituted the subject disciplinary action, through an administrative complaint by which it seeks to revoke, restrict, suspend or otherwise impose disciplinary sanctions against the registration already held by Emerald, the so-called "sales finance company license."

Upon denial of its licensure application and upon service of the administrative complaint instituting the proceeding against its existing licensure, Emerald, in a timely manner, sought a Section 120.57(1), Florida Statutes, proceeding in order to protect its substantial interests. The subject hearing ensued.

The cause came on for hearing as noticed. At the hearing, the Department presented the testimony of Korinne Camechis and nine exhibits. The Department's exhibits 2-9 were admitted. Emerald presented the testimony of Phyllis Godwin and William F. Duggan, Jr. Emerald's exhibit 1 was admitted into evidence. The parties obtained a transcript of the proceedings and the Department timely submitted proposed findings of facts and conclusions of law. Those proposed findings of fact are addressed in this Recommended Order and again in the Appendix attached hereto and incorporated by reference herein.

FINDINGS OF FACT

1. The Department is an agency of the State of Florida charged with regulating licensure of various types of financial institutions and finance- related businesses, including sales finance companies and consumer finance companies and their business practices.

   
   

2. Emerald, at times pertinent hereto, was registered as a sales finance company pursuant to Section 520.50, Florida Statutes. Its registration number is HI-0004555. Emerald is located at 229 Beverly Parkway in Pensacola, Florida. Its mailing address is Post Office Drawer 17308, Pensacola, Florida 32522.

   
   

3. William F. Duggan, Jr., at all times pertinent hereto, has been president, director and majority stockholder of Emerald. His address is 5568 Sound Side Drive, Gulf Breeze, Florida 32561. Mr. Duggan is thus an officer and director of the registered and applicant corporation, and the evidence establishes that he had ultimate power to direct the management or policies of the corporation, even though Ms. Godwin, as secretary and office manager, by common practice, directed the day-to-day operations of the business of Emerald.

   
   

4. On or about September 13, 1991, the Department received an application for a sales finance company license from Emerald. Questions 1-3 on the second page of that application were not answered. Consequently, the applicant was required to submit a completed application. On or about September 30, 1991, a completed application for the sales finance company license was received from Emerald. Question no. 3 on the second page of the application for that license states as follows:

   
   

   1. Has the applicant, any of the persons listed herein, or any person with power to direct the management or policies of the

      applicant had a license, registration or the equivalent, to practice any profession or occupation revoked, suspended, or otherwise acted against? Yes No

      
      

      If yes, list such persons, give details, and provide a copy of the allegations and documentation of the final disposition of the case.

      
      

      Emerald's answer to question no. 3 on that application was "No".

      
      

5. On or about December 2, 1991, the Department also received an application for a consumer finance license from Emerald. Question no. 3 on the second page of the consumer finance license application states as follows:

   
   

   1. Has the applicant, any of the persons listed herein, or any person with power to direct the management or policies of the applicant had a license, registration, or the equivalent, to practice any profession or occupation revoked, suspended or otherwise acted against? Yes No

      
      

      If yes, list such persons, give details, and provide a copy of the allegations and documentation of the final disposition of the case.

      
      

6. The applicant corporation answered question no. 3 of the consumer finance license application in the negative. The Department conducted an investigation which revealed that Mr. Duggan, the applicant Petitioner and Respondent's president, had had his insurance agent's license acted against by the Department of Insurance in 1989. The prosecution by the Department of Insurance was initiated upon allegations in an Administrative Complaint concerning certain alleged fraudulent or dishonest dealings with customers by Mr. Duggan as an insurance agent. That administrative prosecution never proceeded to hearing and no findings of fact or conclusions of law were made establishing that fraudulent or dishonest conduct or similar reprehensible conduct had occurred on the part of Mr. Duggan. Rather, the proceeding culminated in a stipulated settlement embodied in a consent order whereby Mr. Duggan was fined the sum of $500.00 and placed on probation for two years by the Department of Insurance.

   
   

7. Mr. Duggan paid the fine and was under the impression that that was the end of the matter and that he was not in a probationary status. The fact remains, however, that he did have his professional insurance agent's license acted against by the Department of Insurance. The corporation, of which he is president, majority stockholder, and for which he has the power to direct management and policies, in completing the subject license applications denied, in effect, that such a license possessed by him, as an officer, director, or person with power to direct the management or policies of the applicant had been "otherwise acted against".

   
   

8. The Department had no knowledge of the previous action taken against Mr. Duggan's insurance license at the time the application for the sales finance company license was submitted, approved, and the subject license issued. This

   is chiefly because the same question on the sales finance company license application had been answered in the negative. Because of this revelation concerning the past prosecution by the Department of Insurance, the Emerald application for a consumer finance license was denied by denial letter mailed to Mr. Duggan on March 22, 1992. The Department also commenced the prosecution to revoke, suspend, or otherwise impose sanction against the sales finance company license already held by Emerald.

   
   

9. The evidence thus establishes that Mr. Duggan is president, director, and majority stockholder of Emerald. His is the ultimate decision in the management and policies carried out by the business of Emerald. He has the power to direct management and policies of Emerald. While it is true that Ms. Godwin, due in large part to Mr. Duggan's ill health, makes the vast majority of the decisions involved in running the business, including hiring and firing of employees, major decisions such as large expenditures or purchases and any decisions he wishes to make and not delegate to Ms. Godwin are within the power of Mr. Duggan. Although by practice he lets Ms. Godwin run most aspects of the business, Mr. Duggan has the power to solely direct management and policy at Emerald if he so chooses.

   
   

10. When Ms. Godwin filled out and completed the subject applications and answered "no" to the relevant questions, she was unaware that by answering the questions in the negative, she was being untruthful, and that, imputedly, the corporation and Mr. Duggan, its president, in making application, were being untruthful. Ms. Godwin was aware that the insurance agent's license held by Mr. Duggan personally was acted against by the Department of Insurance; however, she did not consider that he had been "convicted" of anything and was of the impression that Emerald's and her own past history, as the executor of the application and as an officer of the company, were the past licensure history to be considered in answering that question. For Mr. Duggan's part, he, no doubt ill-advisedly, allowed Ms. Godwin to complete the applications and merely signed his name at the appropriate blank, without reading them. Consequently, his error in the process of completing the applications was failing to inform himself of what questions were asked and what answers had been supplied by Ms. Godwin. In summary, however, although a misrepresentation of material fact was made, it was not shown to have been accomplished through any fraudulent intent by Ms. Godwin, Mr. Duggan, and therefore, derivatively, Emerald, the corporation. In summary, it has been established that the president, director, majority stockholder, and person with ultimate power to direct management and policies of the applicant and licensed corporations had previously had his insurance license acted against by an agency charged with regulating such licensure. It has also been established that Emerald failed to disclose that prior action on the initial sales finance company license, resulting in a grant of that license, and failed to disclose it on the application for the consumer finance license.

    
    

    CONCLUSIONS OF LAW

    
    

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

    
    

12. The Department is an agency of the State of Florida charged with the administration and enforcement of the regulatory programs for sales finance company licensees and candidates for licensure, as well as licensees and candidates for licensure for consumer finance companies, pursuant to the provisions of Chapters 520 and 516, Florida Statutes, and related rules.

13. Section 520.53, Florida Statutes, provides pertinently as follows:

    
    

    1. The following acts or violations of this part can constitute grounds for the disciplinary actions specified in subsection (2):

       1. failure to comply with any provision of this part, any rule or order adopted under this part, or any written agreement entered into with the department....

    2. Upon a finding by the department that any person has committed any of the acts set forth in subsection (1), the department may enter an order taking one or more of the following actions:

       1. denying an application for a license under this part;

       2. revoking or suspending a license previously granted under this part;

       3. placing a license or an applicant for a license on probation for a period of time and subject to such conditions as the department may specify;

       4. placing permanent restrictions or conditions upon issuance or maintenance of a license under this part;

       5. issuing a reprimand; or

       6. imposing an administrative fine not to exceed $1,000.00 for each such act....

    3. In addition to the acts specified in subsection (1), the following are grounds for denial of a license under this part, or for revocation, suspension, or restriction of a license previously granted:

       1. a material misstatement of fact in an initial or renewal application for a license;

       2. having a license, a registration, or the equivalent, to practice any profession or occupation denied, suspended, revoked, or otherwise acted against by a licensing authority in any jurisdiction for fraud, dishonest dealing, or any act of moral turpitude....

    4. It is sufficient cause for the department to take any of the actions specified in subsection (2) as to any partnership, corporation, or association, if the department finds grounds for such action as to any member of the partnership, as to any officer or director of the corporation or association, or as to any person with power to direct the management or policies of the partnership, corporation, or association....

14. Section 520.56(4), Florida Statutes, provides pertinently as follows:

    
    

    (4) In addition to any other powers conferred upon it to enforce and administer this part, the department may impose and collect an administrative fine against any person found to have violated any provision of this part, any rule or order adopted under this part, or any written agreement entered into with the department in an amount not to exceed $1,000.00 for each violation.

    
    

15. Section 516.07, Florida Statutes, provides:

    
    

    1. The following acts are violations of this chapter and constitute grounds for denial of an application for a license to make consumer finance loans and grounds for any of the disciplinary actions specified in subsection (2).

       1. a material misstatement of fact in an application for a license;...

    2. Upon a finding by the department that any person has committed any of the acts set forth in subsection (1), the department may enter an order taking one or more of the following actions:

       (a) denying an application for a license;...

       (f) imposing an administrative fine not to exceed $1,000.00 for each such act....

    3. The department may take any of the actions specified in subsection (2) against any partnership, corporation, or association, if the department finds that any of the acts set forth in subsection (1) have been committed by any member of the partnership, any officer or director of the corporation or association, or any person with power to direct the management or policies of the partnership, corporation or association.

    
    

16. The Department is seeking to revoke Emerald's sales company finance license. Since it seeks to revoke a valuable professional license and means of livelihood, the burden of proof is on the Department to demonstrate by clear and convincing evidence that the holder of the license committed the violations alleged in the Administrative Complaint. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987). The burden of proof is on the applicant for the consumer finance company license, Emerald, to demonstrate by a preponderance of the evidence that its application for a consumer finance license should be granted.

    
    

17. The competent, substantial evidence of record establishes that Emerald failed to disclose on either application at issue any information concerning the prior action which was taken against Mr. Duggan's insurance license. It is concluded that, as a matter of law, Mr. Duggan's insurance license had been "otherwise acted against" even though no finding of fraudulent conduct concerning the charges by the Department of Insurance or other finding that any laws were violated was ever made with regard to that prosecution. The fact

    remains that his license was proceeded against with a penal administrative complaint; however, no findings were made because the parties to that proceeding elected to settle their dispute. As a result of that settlement agreement, Mr. Duggan paid a fine and his license was placed on probationary status for two years. That is sufficient to constitute the state of his professional insurance license as having been "otherwise acted against" for purposes of the above- quoted statutory authority.

    
    

18. There is no question that Emerald failed to disclose that fact. The above Findings of Fact reveal, however, that the failure to disclose was not shown to be through any deceitful or fraudulent intent or attempt to conceal the facts from the Department. Rather, the failure to disclose was more the result of the lack of knowledge of the person who completed the applications, Mr. Duggan's failure to read the applications before he signed them, as well as Mr. Duggan's own mistaken impression of what had transpired as a result of the consent order entered in the Department of Insurance prosecution. Ms. Godwin was aware, however, of the prior action taken against Mr. Duggan's insurance license. Mr. Duggan, by signing the licensure applications, made a solemn declaration that the contents of the applications were true. He should, therefore, have felt a duty of care to inquire and to become familiar with the document that he was signing to make sure that its averments were true since he had not completed the document himself.

    
    

19. Pursuant to Section 520.53(3)(a), Florida Statutes, and Section 520.53(4), Florida Statutes, the fact that Mr. Duggan, as president of Emerald, with power to direct management and policies of the corporation, has previously had his insurance license acted against by the Department of Insurance, as well as the fact that Emerald failed to disclose that fact and has thus made a material misstatement of fact on its sales finance company license application is grounds for the disciplinary actions referenced in the above-quoted statutory authority. In view, however, of the somewhat extenuating circumstances surrounding the completion of the subject application, it has not been shown that any intentional, deceitful conduct was engaged in but, rather, that negligence, misunderstanding and carelessness pervaded the effort to complete the application. Consequently, revocation or suspension of the subject license would be an excessively harsh penalty under the circumstances established by the evidence of record embodied in the above Findings of Fact.

    
    

20. It is also true that the same failure to disclose was made with regard to the application for a consumer finance license, concerning the prior prosecution against Mr. Duggan's insurance license. Emerald made a material misstatement of fact on the consumer finance license application, which is a violation of Section 516.07(1)(a), Florida Statutes. Pursuant to Section 516.07(3), Florida Statutes, the fact that Mr. Duggan, as president of Emerald with authority to direct its management and policies, previously had his insurance license acted against, is also grounds for disciplinary action. In view of the foregoing extenuating circumstances proven by the evidence and embodied in the above Findings of Fact; however, it is concluded that the license should be granted. It is further concluded with regard to the sales finance company license which Emerald already holds that, because of the above- found extenuating circumstances, revocation or suspension is not in order, but that the license should be placed in a probationary status for a period of two years. It is further concluded with regard to the Administrative Complaint proceeding against Emerald, against its existing licensure status, that an administrative fine of $500.00 should be imposed.

RECOMMENDATION

Based on the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is

RECOMMENDED that a Final Order be entered by the Department of Banking and Finance finding Emerald Coast Finance, Inc. guilty of violating Sections 520.53(1)(a), 520.53(3)(a) and (b), and 516.07(1)(a), Florida Statutes, and that Emerald Coast Finance, Inc.'s sales finance company license be subjected to a probationary status for a period of two years as to its License No. HI-0004555. It is

FURTHER RECOMMENDED that an administrative fine in the amount of $500.00 be imposed against Emerald Coast Finance, Inc. It is

FURTHER RECOMMENDED that a Final Order be entered granting the application for a consumer finance license.

DONE AND ENTERED this 28th day of October, 1993, in Tallahassee, Florida.

P. MICHAEL RUFF Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 28th day of October, 1993.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-3393 and 92-4957

Department's Proposed Findings of Fact: 1-14. Accepted.

COPIES FURNISHED:

Leslie A. Meek, Esq. Office of the Comptroller State of Florida

401 North West Second Avenue, Suite 708 Miami, Florida 33128

John R. Grass, Esquire

120 South Alcaniz Street Pensacola, Florida 32501

Honorable Gerald Lewis Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Floirda 32399-0350

William G. Reeves, Esquire General Counsel

Department of Banking and Finance

The Capitol, Room 1302 Tallahassee, Florida 32399-0350

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit to the agency written exceptions to this Recommended Order. All agencies allow each party at least ten days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the Final Order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.

Docket for Case No: 92-003393

Orders for Case No: 92-003393