STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE, )

)

Petitioner, )

)

vs. ) Case No. 01-3933PL

)

MILDRED M. VATH, )

)

Respondent. )

) DEPARTMENT OF INSURANCE, )

)

Petitioner, )

)

vs. ) Case No. 01-3934PL

)

JOHN L. VATH, )

)

Respondent. )

)

RECOMMENDED ORDER

On November 30, 2001, a formal administrative hearing in this case was held by videoconference in Tallahassee and Tampa, Florida, before William F. Quattlebaum, Administrative Law Judge, Division of Administrative Hearings.

APPEARANCES

For Petitioner: James A. Bossart, Esquire

Department of Insurance Division of Legal Services

200 East Gaines Street, Room 612 Tallahassee, Florida 32399

For Respondent: Joseph R. Fritz, Esquire

4204 North Nebraska Avenue Tampa, Florida 33603

STATEMENT OF THE ISSUE

The issue in the case is whether the allegations of the Administrative Complaints filed by the Petitioner against the Respondents are correct and if so, what penalty should be imposed.

PRELIMINARY STATEMENT

By Administrative Complaints filed on April 10, 2001, the Department of Insurance (Petitioner) alleged that Matilda M. Vath and John L. Vath (Respondents) violated various provisions of the Florida Statutes in their bail bond business. The Respondents requested a hearing to address the allegations. The Petitioner forwarded the requests to the Division of Administrative Hearings, which scheduled and conducted the proceeding. The case was transferred to the undersigned Administrative Law Judge on November 27, 2001.

At the hearing, the Petitioner presented the testimony of two witnesses and had Exhibits numbered 1-4 and 7-12 admitted into evidence. The Respondents testified on their own behalf.

A Transcript of the hearing was filed on December 17, 2001.

Both parties filed Proposed Recommended Orders on January 15, 2002.

FINDINGS OF FACT

1. The Petitioner is the state agency responsible for licensure and regulation of limited surety agents (bail bondsmen) operating in the State of Florida.

2. The Respondents are individually licensed as limited surety agents in Florida and are officers and directors of "Big John Bail Bonds, Inc.," a bail bond agency.

3. In November of 1999, Gustavo Porro contacted the Respondents regarding bail for Jessie James Bray, a friend of Mr. Porro's son. Mr. Porro did not know Mr. Bray.

4. Based on the charges against Mr. Bray, four bonds were issued, two for $1,000 each and two for $250 each, for a total bond amount of $2,500. The $1,000 bonds were related to pending felony charges and the small bonds were related to pending misdemeanor charges.

5. Mr. Porro signed a contingent promissory note indemnifying American Bankers Insurance Company for an amount up to $2,500 in the event of bond forfeiture.

6. Bray did not appear in court on the scheduled date and the two $1,000 bonds were forfeited. For reasons unclear, the two $250 bonds were not forfeited.

7. The contingent promissory note signed by Mr. Porro provided that no funds were due to be paid until the stated

   contingency occurred, stated as "upon forfeiture, estreature or breach of the surety bond."

8. After Bray did not appear for court, the Respondents contacted Mr. Porro and told him that the bonds were forfeited and he was required to pay according to the promissory note.

9. On April 15, 2000, Mr. Porro went to the office of Big John Bail Bonds and was told that he owed a total of $2,804, which he immediately paid. Mr. Porro was not offered and did not request an explanation as to how the total amount due was calculated. He received a receipt that appears to have been signed by Ms. Vath.

10. After Mr. Porro paid the money, Ms. Vath remitted

    
    

    $2,000 to the court clerk for the two forfeited bonds. The Respondents retained the remaining $804.

11. Bray was eventually apprehended and returned to custody. The Respondents were not involved in the apprehension.

12. On July 11, 2000, the court refunded $1,994 to the Respondents. The refund included the $2,000 bond forfeitures minus a statutory processing fee of $3 for each of the two forfeited bonds.

13. On August 9, 2000, 29 days after the court refunded the money to the Respondents, Mr. Porro received a check for

    $1,994 from the Respondents. Mr. Porro, apparently happy to get

    any of his money back, did not ask about the remaining funds and no explanation was offered.

14. In November of 2000, Ms. Vath contacted Mr. Porro and informed him that a clerical error had occurred and that he was due to receive additional funds. On November 6, 2000, Mr. Porro met with Ms. Vath and received a check for $492.

15. At the time, that Ms. Vath gave Mr. Porro the $492 check she explained that he had been overcharged through a clerical error, and that the additional amount being refunded was the overpayment minus expenses. She explained that the expenses included clerical and "investigation" expenses and the cost of publishing a notice in a newspaper. There was no documentation provided of the expenses charged to Mr. Porro.

16. At the time the additional refund was made, there was no disclosure that the two $250 bonds were never forfeited.

17. At the hearing, the Respondents offered testimony asserting that the charges were miscalculated due to "clerical" error and attempting to account for expenses charged to

    Mr. Porro. There was no reliable documentation supporting the testimony, which was contradictory and lacked credibility.

    CONCLUSIONS OF LAW

    
    

18. The Division of Administrative Hearings has jurisdiction over the parties to and subject matter of this proceeding. Sections 120.569 and 120.57(1), Florida Statutes.

19. The Department has the burden of proving by clear and convincing evidence the allegations against the Respondents. Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987). In this case, the burden has been met.

20. The evidence establishes that in their transactions with Mr. Porro, the Respondents violated sections of the Florida Statutes and the Florida Administrative Code as set forth herein.

21. Section 648.295(1), Florida Statutes, provides in relevant part as follows:

    All premiums, return premiums, or other funds belonging to insurers or others received by a person licensed pursuant to this chapter in transactions under her or his license are trust funds received by the licensee in a fiduciary capacity, and the licensee must account for and pay the same to the insurer, insured, or other person entitled to such funds.

    
    

22. The Respondents have failed to properly account for funds paid to them by Mr. Porro. The Respondents have failed to properly return such funds to Mr. Porro.

23. Section 648.442(1), Florida Statutes, provides in relevant part as follows:

    Collateral security or other indemnity accepted by a bail bond agent, except a promissory note or an indemnity agreement, shall be returned upon final termination of liability on the bond.

24. The Respondents have failed to return the $500 paid to them by Mr. Porro for the two unforfeited misdemeanor bonds.

25. Section 648.442(4), Florida Statutes, provides in relevant part as follows:

    When the obligation of the surety on the bond or bonds has been released in writing by the court, the collateral shall be returned to the rightful owner named in the collateral receipt unless another disposition is provided for by legal assignment of the right to receive the collateral to another person.

    
    

26. The evidence fails to establish that the two $500 bonds were ever forfeited, and therefore there is no evidence that the court released such forfeited funds. The Respondents have a fiduciary duty to both the client and the insurer. Natelson v. Department of Insurance, 454 So. 2d 31,32 (Fla. 1st DCA 1984). As the fiduciary for Mr. Porro, the Respondents were required to determine the status of the bonds and to pursue their release once the fugitive was returned to the custody of law enforcement officials.

27. Section 648.45(2), Florida Statutes, provides in relevant part as follows:

    The department shall deny, suspend, revoke, or refuse to renew any license or appointment issued under this chapter or the insurance code, and it shall suspend or revoke the eligibility of any person to hold a license or appointment under this chapter or the insurance code, for any violation of the laws of this state relating to bail or

    any violation of the insurance code or for any of the following causes:

    * * *

    1. Willful use, or intended use, of the license or appointment to circumvent any of the requirements or prohibitions of this chapter or the insurance code.

    2. Demonstrated lack of fitness or trustworthiness to engage in the bail bond business.

    3. Demonstrated lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by the license or appointment.

    4. Fraudulent or dishonest practices in the conduct of business under the license or appointment.

    5. Misappropriation, conversion, or unlawful withholding of moneys belonging to a surety, a principal, or others and received in the conduct of business under a license.

       * * *

       (j) Willful failure to comply with or willful violation of any proper order or rule of the department or willful violation of any provision of this chapter or the insurance code.

       * * *

       (l) Demonstrated lack of good faith in carrying out contractual obligations and agreements.

       
       

28. In this case, either the Respondents acted in an untrustworthy and dishonest manner in willful violation of the statutes and rules relevant to this incident or the facts establish a lack of reasonably adequate knowledge and technical competence on their part.

29. Section 648.45(3), Florida Statutes, provides in relevant part as follows:

    (3) The department may deny, suspend, revoke, or refuse to renew any license or appointment issued under this chapter or the insurance code, or it may suspend or revoke the eligibility of any person to hold a license or appointment under this chapter or the insurance code, for any violation of the laws of this state relating to bail or any violation of the insurance code or for any of the following causes:

    * * *

    (c) Violation of any law relating to the business of bail bond insurance or violation of any provision of the insurance code.

    
    

30. The evidence establishes that the Respondents have violated the law relating to the business of bail bond insurance as set forth herein.

31. Section 648.571, Florida Statutes, provides in relevant part as follows:

    Failure to return collateral; penalty.--A bail bond agent who has taken collateral or an insurer or managing general agent who holds collateral as security for a bail bond shall, upon demand, make a written request for a discharge of the bond to be delivered to the surety or the agent of the surety.

    If a discharge is provided to the surety or the agent of the surety pursuant to chapter 903, the collateral shall be returned to the indemnitor within 21 days of said discharge being provided. Upon demand, following the written request for discharge and upon diligent inquiry by the surety or the agent of the surety to determine that the bond has been discharged, failure of the court to provide a written discharge to the surety or the agent of the surety pursuant to chapter 903 within 7 days, shall cause the cancellation of the bond by operation of law and collateral shall be returned to the indemnitor within 21 days of the written

    request for discharge. Fees or other charges of any nature other than as outlined in this chapter or by rule of the department may not be deducted from the collateral due. However, allowable expenses incurred in the apprehension of the defendant because of a forfeiture of bond or judgment under s.

    903.29 may be deducted if such expenses are accounted for.

    
    

32. The evidence establishes that the Respondents failed to properly return within the specified period of time, the

    $1,994 that was eventually returned to Mr. Porro.

    
    

33. Additional funds retained by the Respondents for improperly undocumented "expenses" were due to Mr. Porro and have not been refunded to him.

34. Rule 4-221.105, Florida Administrative Code, provides in relevant part as follows:

    4-221.105 Premium Charge Only Permitted.

    1. No surety, bail bond agent, temporary bail bond agent, or managing general agent engaged in the bail bond business shall make any charge, collect, or receive any fee or consideration unless permitted by statute or rule other than the premium based on rates in current use. . . .

       
       

    2. No bail bond agent shall charge, collect, or receive any fee or consideration for services rendered to the principal or indemnitor in connection with a bail bond, except those fees listed in paragraph (4) and costs necessary to apprehend the principal in the event the principal attempts to flee the jurisdiction of the courts.

       
       

    3. Prohibited fees include, but are not limited to, any costs regarding arrest,

       transportation, and surrender within the specified jurisdiction of the court, charges for storage, maintenance or return of collateral, including releases of liens or satisfactions of mortgages, charges for researching case dispositions or obtaining bond discharges or any charge for other services ordinarily performed by a bondsman or their employees in the regular course of business and any other expenses not documented by check or receipt.

       
       

    4. Allowable fees include: a) Attorney's fees and court costs associated with filing of motions; b) Documented transportation and lodging expenses outside the jurisdiction of the court; c) Law enforcement costs for housing, re-arrest, transportation, and extradition; and d) A maximum fee of $100 for a surrender allowed by law when there has been no forfeiture of the bond.

       
       

    5. A bail bond agent who has surrendered a principal and failed to properly refund the premium when required by law shall be subject to discipline as provided in Chapter 648 and these rules.

    
    

35. None of the "expenses" identified by the Respondent's is properly documented by a check or receipt. The person who allegedly provided the "receipt" for publication of the fugitive's photograph in a newspaper bases the "receipt" on little more than conjecture. There is no credible documentation for any expenses.

36. The Respondents attempted to explain the "error" during their testimony at hearing. The explanation was illogical and lacks credibility.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Insurance enter a Final Order requiring that the Respondents be required to refund

$318 to Mr. Porro, which, combined with the previous payments of

$1,994 and $492, will constitute refund of the total $2,804 paid by Mr. Porro to the Respondents. It is further recommended that the limited surety licenses of Matilda M. Vath and John L. Vath be suspended for a period of not less than three months or until Mr. Porro receives the remaining $318, whichever is later.

DONE AND ENTERED this 22nd day of February, 2002, in Tallahassee, Leon County, Florida.

WILLIAM F. QUATTLEBAUM

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 22nd day of February, 2002.

COPIES FURNISHED:

James A. Bossart, Esquire Department of Insurance Division of Legal Services

200 East Gaines Street, Room 612 Tallahassee, Florida 32399

Joseph R. Fritz, Esquire 4204 North Nebraska Avenue Tampa, Florida 33603

Mark Casteel, General Counsel Department of Insurance

The Capitol, Lower Level 26 Tallahassee, Florida 32399-0307

Honorable Tom Gallagher

State Treasurer/Insurance Commissioner Department of Insurance

The Capitol, Plaza Level 02 Tallahassee, Florida 32399-0300

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of 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: 01-003934PL

Orders for Case No: 01-003934PL