STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, ) DIVISION OF FLORIDA LAND SALES, ) CONDOMINIUMS, AND MOBILE HOMES, )

)

Petitioner, )

)

vs. ) CASE NO. 95-2557

)

ANTHONY J. BONGIOVI, d/b/a )

AJB YACHTS, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Claude B. Arrington, held a formal hearing in the above-styled case on September 22, 1995, in Fort Lauderdale, Florida.

APPEARANCES

For Petitioner: Tracy Sumner, Esquire

Department of Business and Professional Regulation

Division of Florida Land Sales Condominiums and Mobile Homes

1940 North Monroe Street Tallahassee, Florida 32399-1007

For Respondent: Alan P. Byrd, Esquire

1031 Ives Dairy Road, Number 228

Miami, Florida 33179 STATEMENT OF THE ISSUES

Whether the Respondents committed the offenses alleged in the Notice to Show Cause and the penalties, if any, that should be imposed.

PRELIMINARY STATEMENT

At times prior to June 21, 1991, Respondent Bongiovi was licensed by the Petitioner as a yacht broker. On June 21, 1991, Respondent's licensure as a yacht broker expired, and at no time subsequent to that date was Respondent Bongiovi licensed as a yacht broker. On February 14, 1995, Petitioner filed a "Notice to Show Cause" against the Respondents which asserted that Respondents violated provisions of the Florida Yacht and Ship Broker's Act, Chapter 326, Florida Statutes, as follows:

1. As early as May of 1993, Respondent (Bongiovi) offered, or negotiated to sell, yachts in excess of 32 feet in length for other persons, in violation of Section 326.004(1), Fla. Stat. (1993).

2. On or about May 28, 1993, Respondent (Bongiovi) entered into a conditional purchase agreement with Charles Robbins for a yacht and Respondent accepted a deposit. The closing was not consummated and Respondent failed to return the deposit to the purchaser in violation of Section 326.005(3), Fla. Stat. (1993).

Respondents denied the material allegations of the Notice to Show Cause, the matter was referred to the Division of Administrative Hearings, and this proceeding followed. At the formal hearing, two of Petitioner's witnesses, Charles Robbins and Jan Mauch, were permitted to testify by telephone. This was permitted because Mr. Robbins was out of state and Ms. Mauch was in Jacksonville, Florida, at the time of the hearing. Petitioner had taken the depositions of these two witnesses and was prepared to use those depositions in lieu of testimony. Petitioner agreed to arrange for those witnesses to testify by telephone because Respondents were not represented by counsel when the depositions were taken. This arrangement allowed Respondents's counsel to

cross-examine these two witnesses. In addition, Petitioner presented the testimony of John McCormick, Peter W. Grimm, Robert H. Badger, and Peter P. Butler, Jr. Mr. Robbins is the purchaser referred to in the Notice to Show Cause and Ms. Mauch is the yacht broker representing the seller in that transaction. Mr. McCormick is the records custodian for First Union Bank, Mr. Grimm is a yacht broker, Mr. Badger is one of Petitioner's investigators, and Mr. Butler is the section head for Petitioner's yacht broker's section.

Petitioner introduced 16 exhibits, 15 of which were admitted into evidence. By separate order entered after the formal hearing (and without objection from Respondents) Petitioner was permitted to supplement its Exhibit 4 by including in this composite exhibit a court order that was inadvertently omitted at the formal hearing. Respondent Bongiovi testified on his own behalf and had ten exhibits marked, nine or which were admitted into evidence.

A transcript of the proceedings has been filed. At the request of the parties, the time for filing post-hearing submissions was set for more than ten days following the filing of the transcript. Consequently, the parties waived the requirement that a recommended order be rendered within thirty days after the transcript is filed. Rule 60Q-2.031, Florida Administrative Code. Rulings on the parties' proposed findings of fact may be found in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. Petitioner is the agency of the State of Florida charged with the responsibility to administer and to enforce the Florida Yacht and Ship Broker's Act, Chapter 326, Florida Statutes.

   
   

2. At times prior to June 21, 1991, Respondent Bongiovi was licensed by Petitioner as a yacht broker. Respondent Bongiovi did not hold any license as a yacht broker at any time after June 21, 1991. Respondent AJB Yachts was not licensed as a yacht broker at any time pertinent to this proceeding. Respondent Bongiovi does business as AJB Yachts or AJB Yacht Sales, Inc. There was no evidence that AJB Yacht Sales, Inc., is legally incorporated.

3. On various dates in September and October 1994, Respondent Bongiovi placed two separate advertisements in the classified ads section of the Fort Lauderdale, Florida, Sun-Sentinel newspaper. The first of these ads offered for sale a 41' Hatteras yacht for the sum of $150,000. The second of these advertisements offered for sale a 43" Portofino yacht for the sum of $125,000. Both advertisements contained the Respondent's telephone number, 305-942-7425.

   
   

4. On or about May 28, 1993, Respondent, acting as a yacht broker, represented Charles Robbins in the purchase of a 66' Pacemaker yacht named the Sea Cow. The owner of the yacht, Dennis Gaultney, was represented by Mauch Yacht Sales, Inc., the listing broker. As part of the offer made by Mr. Robbins, he gave to Respondent Bongiovi a check in the amount of $33,000 as earnest money. Respondent Bongiovi deposited this money in a bank account at First Union National Bank of Florida, Pompano Beach branch on June 1, 1993. This account is entitled "AJB Yacht Sales, Inc., Escrow Account." Respondent Bongiovi was the sole signatory on this account. Respondent Bongiovi immediately began making withdrawals from this account that were not related to the Robbins transaction. 1/ As of June 10, 1993, the balance in this account was $29,575.54. As of June 21, 1993, the balance was $23,570.83. As of June 30, 1993, the balance was $21,554.04.

   
   

5. Negotiations for the sale of the Sea Cow continued between the purchaser and the owner until July 20, 1993. The final version of the owner's proposal was a response to the last proposal made by Mr. Robbins and contained several changes to the last offer made by Mr. Robbins, including a change in the price of the vessel and an extension of the closing date to July 22, 1993.

   These changes were initialed by the owner of the boat, but they were not initialed by Mr. Robbins. Mr. Robbins never received a signed copy of the final proposal from the owner of the Sea Cow.

   
   

6. A survey to evaluate the condition of the vessel was conducted and a copy of the inspection report faxed to Respondent Bongiovi by Jan Mauch of Mauch Yacht Sales on June 9, 1993. The transmittal note that accompanied the fax stated the following: "Here is the 'Schedule A' 2/ to go with the contract. After Charlie sees the survey, have him sign this and Acceptance of Vessel on contract and fax back both to me and I'll have Denny sign."

   
   

7. Included in the inspection report was the following information: ". .

. an engine inspection did not include a detailed mechanical inspection or test of components. A complete engine survey by a qualified mechanic is recommended in all cases." Mr. Robbins thereafter requested that Respondent Bongiovi arrange for an inspection of the vessel's engines before he accepted the vessel. Mr. Robbins never received an inspection report for the engines, he did not obtain his own financing for the vessel, and he never tendered the balance of the purchase price.

1. The transaction involving Mr. Robbins did not timely close because the inspection of the engines were not completed. Because there was a delay in closing the transaction, the owner sold the yacht to another buyer.

   
   

2. Neither Mr. Gaultney nor Mauch Yacht Sales demanded a portion of the

   $33,000 earnest money deposit.

3. Mr. Robbins demanded the return of his money from the Respondent after he learned that the Sea Cow had been sold to another purchaser. Respondent Bongiovi refused to return the deposit and asserted the position that he was entitled to keep all of the deposit as liquidated damages because the transaction had not closed.

   
   

4. Respondent Bongiovi relies on Paragraphs 3 and 4 of the form agreement for his contention that he was entitled to retain the $33,000 deposit as liquidated damages. Those provisions are as follows:

   
   

   1. The purchase of the vessel is subject

      to survey - seatrial - capt (sic) - inspection showing condition subject to purchasers (sic) sole judgment and approval to be conducted as soon as practicable after execution of this agreement at the option and expense of the PURCHASER. The PURCHASER shall give written acceptance or rejection of the Vessel by June 10, 1993, and if written notification is not received by the BROKER (A.J.B. Yacht Sales)

      on or before said date, it shall be construed as acceptance of the Vessel by PURCHASER.

   2. In the event, after written or construed acceptance of the Vessel, the PURCHASER fails to pay the balance of the purchase price and execute all papers necessary to be executed by

      him for the completion of his purchase, pursuant to the terms of this contract, on or before July 10, 1993, the sum this date paid shall be retained by A.J.B. Yacht Sales as liquidated

      and agreed damage and the parties shall be relieved of all obligations under this contract.

      
      

5. In paragraph 2 of the agreement executed by Mr. Robbins on May 28, 1993, there was a provision that the offer submitted by Mr. Robbins was withdrawn if not accepted by June 5, 1993. There was no evidence that there was a final and complete agreement sufficient to bind the parties by June 5, 1993, or at any time thereafter.

   
   

6. The agreement executed by Mr. Robbins on May 28, 1993, also contained the following provision:

   
   

   In the event that this sale is not consummated by reasons of unsatisfactory survey . . . the

   deposit shall be returned, providing all expenses incurred by the PURCHASER against the Vessel have been paid, and this agreement shall be null and void.

   
   

7. Mr. Robbins verbally notified Respondent Bongiovi that he would require additional testing on the engine before accepting the vessel. Mr. Robbins did not receive the results of those additional tests and learned soon thereafter that the vessel had been sold to another purchaser.

   
   

8. Following the failure and refusal of the Respondents to return the deposit, Mr. Robbins sued the Respondents in the Circuit Court in and for Broward County, Florida, pursuant to the provisions of Sections 772.11 and 812.014, Florida Statutes. Based on the evidence presented, the Circuit Judge

   in that civil proceeding entered a final judgement for treble damages ($99,000) in favor of Mr. Robbins and against the Respondents based, in part, on the following:

   
   

   . . . On the evidence presented, the Court finds:

   * * *

   1. Plaintiff (Mr. Robbins) gave Defendants (Mr. Bongiovi and his corporation) a check in the amount of $33,000.00 on May 28, 1993, to be held in escrow as a deposit pending accep-

      tance by the owner of a vessel for the purchase of said motor vessel.

   2. Said $33,000.00 was deposited into a

      bank account owned and/or controlled by Defendants.

   3. The owner of the vessel failed to accept Plaintiff's offer within the time provided in the written contract attached to the Amended Complaint; and, therefore, Plaintiff was entitled to return of his $33,000.00 deposit.

   4. Plaintiff demanded return of said

      $33,000.00 deposit, but Defendants failed and refused to return same, which sum has been due with interest since June 5, 1993.

   5. Defendants breached the Purchase Agree- ment on June 5, 1993, by failing and refusing to return Plaintiff's deposit of $33,000.00 when the offer to purchase the vessel was not accepted by the owner by that date.

   6. Defendants had a fiduciary responsibility to Plaintiff as escrow agents under the Purchase Agreement, and they breached their fiduciary responsibility by failing and refusing to return the $33,000.00 deposit when the offer to purchase the vessel was not accepted by the owner by June 5, 1993. . . .

   
   

   CONCLUSIONS OF LAW

   
   

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

   
   

10. Section 326.002(1), Florida Statutes, defines the term "broker" as follows:

    
    

    (1) "Broker" means a person who, for, or in expectation of compensation: sells, offers, or negotiates to sell; buys, offers, or negotiates to buy; solicits or obtains listings of; or negotiates the purchase, sale, or exchange

    of, yachts for other persons.

    
    

11. Section 326.004(1), Florida Statutes, provides, in pertinent part, as follows:

    (1) A person may not act as a broker or salesman unless licensed under the Yacht and Ship Broker's Act. . . .

    
    

12. Section 326.005, Florida Statutes, provides, in pertinent part, as follows:

    
    

    (1) A broker shall place any trust funds received pursuant to a transaction into a trust account . . . until he disburses such funds. . . .

    * * *

    (3) A broker who intentionally fails to comply with the provisions of this section concerning the establishment of a trust account, deposits of funds into a trust account, and withdrawal therefrom, commits a felony of the third degree, punishable as

    provided in s. 775.082, s. 775.083, or s. 775.084. The failure to establish a trust account or to place funds therein as required in this section

    is prima facie evidence of an intentional and purposeful violation of this section.

    
    

13. Respondent Bongiovi admitted that he placed the advertisements involving the Hatteras yacht and the Portofino yacht. Pursuant to Section 326.004(3)(a), Florida Statutes, a person who sells his own yacht does not have to be licensed by the Petitioner. In defense of the allegation that he offered for sale the Hatteras without being licensed as required by Section 326.004(1), Florida Statutes, Respondent Bongiovi asserted that the Hatteras was his own yacht so that a license was not necessary. Respondent Bongiovi asserted that there was no Portofino yacht and that he had placed the advertisement merely to generate business. Respondent's self-serving testimony that he owned the Hatteras that he advertised lacks credibility and is rejected for two reasons. First, there was no Hatteras registered in the Respondent's name. Second, the evidence of Respondent's financial circumstances belie his ability to own such a vessel. Whether the Portofino yacht he advertised was readily available for sale is irrelevant since he placed the advertisement for the sole purpose of generating business as a yacht broker. By placing those advertisements, Respondent Bongiovi acted as an unlicensed "broker" within the meaning of Sections 326.002(1) and 326.004(1), Florida Statutes. In addition, Petitioner established by clear and convincing evidence that Respondent Bongiovi acted as a yacht broker in his dealings with Mr. Robbins and he represented that his company, AJB Yachts, was a yacht broker.

    
    

14. The Circuit Court in the civil proceeding correctly determined that the Respondents had no legal right to the $33,000 deposit and that the Respondents breached their fiduciary duty to Mr. Robbins by failing to return the escrowed funds after the transaction failed to close. Respondents assertion that they were entitled to retain the deposit as liquidated damages is without merit since the owner of the vessel did not timely accept the offer and since the engine inspections were never completed. Petitioner established by clear and convincing evidence that Respondents violated the provisions of Section 326.005(3), Florida Statutes.

    
    

15. Pursuant to the provisions of Section 326.006(2)(d)4, Florida Statutes, the Petitioner ". . . may impose a civil penalty against a broker . .

    . or against an unlicensed person . . . for any violation of this chapter or a rule adopted under this chapter. A penalty may be imposed for each day of continuing violation, but in no event may the penalty for any offense exceed

    $10,000. . . ."

    
    

16. Rule 61B-60.010, Florida Administrative Code, provides certain factors that may be considered in either mitigation or aggravation of a penalty. The undersigned finds no mitigating factors. The following are found by the undersigned to be aggravating factors to be considered in determining the penalty to be imposed. There was a civil suit that resulted in a monetary judgment against the Respondents. The Respondent Bongiovi knew that yacht brokers had to be licensed in Florida and nevertheless performed services as a yacht broker without a license. The Respondent Bongiovi also knew that the

    $33,000 deposit was required to be maintained in escrow, but he failed to return those funds after the transaction failed to close. The conduct as to both Count I and Count II was intentional and fraudulent.

    
    

17. Respondent Bongiovi's entire dealings with Mr. Robbins is viewed by the undersigned as a serious violation of Section 326.004(1), Florida Statutes, that merits the imposition of the maximum penalty. Separate and apart from his other acts as an unlicensed yacht broker, his misconduct pertaining to the earnest money deposit is viewed as a serious violation of Section 326.005(3), Florida Statutes, that also merits the imposition of the maximum penalty.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Petitioner enter a final order in this proceeding that

adopts the findings of fact and conclusions of law and which imposes an

administrative fine jointly and severally against the Respondents in the amount of $10,000 for the violations of Count I and imposes an additional administrative fine jointly and severally against the Respondents in the amount of $10,000 for the violation of Count II.

DONE AND ENTERED this 29th day of December, 1995, in Tallahassee, Leon County, Florida.

CLAUDE B. ARRINGTON, 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 29th day of December, 1995.

ENDNOTES

1/ The Administrative Complaint does not charge the Respondent Bongiovi with misspending the escrowed funds, but it does charge him with failing to return those funds after the transaction failed to close and Mr. Robbins made demand

for his money. These findings are included because they help explain Respondent's failure to return the funds.

2/ Schedule A included a list of items that were not to be included in the sale of the vessel.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 95-2557

The proposed findings of fact submitted by Petitioner are adopted in material part by the Recommended Order.

The following rulings are made as to the proposed findings of fact submitted by Respondent.

1. The proposed findings of fact in paragraphs 1, 2, 3, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 19, 20, 21, 22, and 23 are adopted in material part by the Recommended Order.

2. The proposed findings of fact in paragraph 4 are adopted in part by the Recommended Order, but they are rejected to the extent they are contrary to the findings made.

3. The proposed findings of fact in paragraph 17 are rejected as being unsubstantiated by the evidence or are subordinate to the findings made.

4. The proposed findings of fact in paragraph 18 are adopted in part by the Recommended Order, but they are rejected to the extent they contain conclusions that are contrary to the conclusions reached.

COPIES FURNISHED:

Tracy Sumner, Esquire Department of Business and

Professional Regulation Division of Florida Land Sales

Condominiums and Mobile Homes 1940 North Monroe Street Tallahassee, Florida 32399-1007

Alan P. Byrd, Esquire

1031 Ives Dairy Road, Number 228

Miami, Florida 33179

Henry M. Solares, Director Division of Florida Land Sales

Condominiums and Mobile Homes 1940 North Monroe Street Tallahassee, Florida 32399-1007

Lynda L. Goodgame, General Counsel Department of Business and

Professional Regulation 1940 North Monroe Street

Tallahassee, Florida 32399-0792

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 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: 95-002557

Orders for Case No: 95-002557