Findings Of Fact Respondent is and at all material times has been a licensed real estate broker in the State of Florida. He holds license number 0404010. On or about October 14, 1985, Respondent, as seller, entered into a purchase and sale contract with William and Lois Ehmke, as buyers, with respect to Respondent's condominium known as Unit 502 of Blind Pass Lagoon Condominiums located at 9825 Harrell Avenue, Treasure Island, Florida. The Ehmke contract called for a purchase price of $85,000, which included $15,000 as an earnest money deposit. The contract form provided a paragraph for the closing date, but this was left blank. The only special clause in the contract provided that: The Buyer(s) shall pay $550.00 monthly beginning the date said unit is occupied by buyer and until buyers home in Deluth, Minn. is sold. At the time of closing upon Condo Unit 502, Phase 3, the buyers' shall reimburse the Seller the difference between $550.00 and actual costs to carry the unit per month. ($755.00 plus 90.00 maintenance, or $300.pr [i.e., $300 per month]. The Ehmkes duly paid Respondent the $15,000 deposit and moved into the condominium, which they occupied continuously from October, 1985, through December, 1986. The Ehmkes paid Respondent $550 per month for each month of their occupancy. When making the deal, the Ehmkes were aware that the average time that a house remained unsold on the market in Deluth was 210 days. They knew that the market was very slow because of a sluggish local economy. They expected their house to be sold in about 210 days. After 210 days passed and the house had not sold after the Ehmkes' good faith efforts to sell it, the Ehmkes asked Respondent to refund their $15,000 deposit. Respondent refused. Negotiations resulted in Respondent returning to the Ehmkes $10,000 of the deposit in July, 1987. Respondent did not stand in a confidential or fiduciary relationship with the Ehmkes. William Ehmke had owned and operated a restaurant in Deluth and, after meeting Respondent, initiated discussions with Respondent concerning Mr. Ehmke's desire to purchase property in Florida. Respondent showed the Ehmkes other properties and informed them from the start that Respondent and his daughter owned the condominium unit in question. The mortgage payments, insurance, taxes, and maintenance fees on the condominium unit were about $850 per month in October, 1985. During the period that the Ehmkes occupied the condominium unit, the maintenance fees went up by $30 per month and there was a $1200 special assessment. All of these expenses were borne by Respondent. However, Mr. Ehmke was aware that every month he was losing $300 of his deposit toward these expenses. The fair rental value of the condominium unit from December 1 through April 30 each year is $1400 to $1600 per month. By the time that the Ehmkes vacated the unit, Respondent had paid at least $3000 in monthly expenses over the rent received and the $1200 the special assessment. He had also lost at least $3000 in premium seasonal rentals. Mr. Ehmke has since received his real estate salesman's license. He admits that the $5000 retained by Respondent does not cover Respondent's out-of- pocket expenses. He also admits that he has no complaints about the transaction in retrospect. Frank Myles owns all of the stock of Myles, Inc., which owned Unit 202 of Blind Pass Lagoon Condominiums in Treasure Island. Having been neighbors with Respondent for two years and also involved part-time in real estate sales, Mr. Myles mentioned to Respondent that he was trying to sell his unit. After their conversation, Respondent delivered to Mr. Myles a contract for the purchase and sale of his unit. The contract was executed by all parties on July 29, 1986. The buyers were Ralph and Margaret Magno, who had recently purchased another unit in the same complex through Respondent as the broker. The purchase price was $94,000 to be paid cash at closing, as Mr. Myles had said he desired. The contract contained no contingencies, such as for financing, which was also consistent with Mr. Myles' previous instructions to Respondent. The contract called for a closing on or before August 25, 1986, and provided that time was of the essence. The Magnos paid an earnest money deposit of $8000 to Pat Jano and Associates, "reg. real estate broker." The form language of the contract provided that Respondent was to "hold said earnest money or deposit and act as escrow agent until closing of deal ..." The contract elsewhere provided that if the purchaser failed to perform any of his obligations, then he "shall forfeit said earnest money or deposit; and the same shall be retained by the Seller as liquidated damages, and the escrow agent is hereby authorized by the purchaser to pay over to the Seller the earnest money or deposit." In the event of a default by the purchaser, the earnest money would be divided equally between Respondent and the seller. On or about August 13 or 14, 1986, the Magnos discovered that the financing terms that they had arranged with a third-party lender could no longer be obtained. Respondent promptly notified Mr. Myles of the problem. Mr. Myles and Respondent tried unsuccessfully to resolve the problem with the lender, which ultimately declined to make the loan. When first informed of the buyers' financing problems, Mr. Myles told Respondent that the two of them should push the sellers through to closing. (Tr. 82.) Immediately after this conversation with Respondent, Mr. Myles stepped aside so that his lawyer could handle what had become a "shaky" deal. (Tr. 84.) On August 16, 1986, Respondent refunded all of the earnest money to the Magnos by delivering to Mr. Magno a check drawn on Respondent's escrow account in the amount of $8000 and payable to Mr. Magno. Respondent returned the deposit without the prior knowledge of Mr. Myles or consent of Myles, Inc. (Tr. 73 and 8.) Mr. Myles' lawyer sent a letter dated August 20, 1986, to Respondent informing him that Myles, Inc. intended to proceed to closing and would not consent to the release of the earnest money deposit to the Magnos. Mr. Myles appeared at the closing at the time and place specified in the contract. The Magnos did not appear. Myles, Inc. never received its share of the forfeited deposit. Myles, Inc., through Mr. Myles, stated in a letter dated May 13, 1987, that it was "no longer" pursuing any legal action against Respondent and that no suits were filed and no further action would be taken. During a lengthy meeting with Petitioner's investigator, Respondent never suggested that he had had Myles' permission to return the Magnos' deposit. Rather, he said only that he had returned the deposit out of "loyalty" to the Magnos. At the hearing, Respondent testified that he told Mr. Myles that Respondent was going to return the deposit to the Magnos and Mr. Myles' only reaction was that "those are the breaks." (Tr. 129.) This apparent inconsistency between the testimony of Mr. Myles and Respondent, both of whom were credible witnesses, is reconciled by the finding that Mr. Myles never consented to the release of the earnest money, but Respondent misunderstood their conversation in this regard. Since October 16, 1986, Respondent's principal place of business has been 7345 Bay Street, St. Petersburg, Florida. Respondent failed to maintain a sign at this location from October 16, 1986, through January 8, 1987. He was having a sign prepared by a third party during that time.
Recommendation Based on the foregoing, it is recommended that a final order be entered dismissing Counts I, II and IV of the Administrative Complaint and finding Respondent guilty of the allegations set forth in Counts III and V of the Administrative Complaint. It is recommended that the Final Order impose an administrative fine of $1000 with respect to Count III and a reprimand with respect to Count V. ENTERED this 20th day of May, 1988, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 20th day of May, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-4391 Treatment Accorded Petitioner's proposed Findings 1,3-5. Adopted. 2,6. Rejected as unnecessary and irrelevant. The location of Respondent's "principal office and each branch office" is relevant under Section 475.22 to determine where he was required to maintain a sign. The statute does not refer to the office registered with Petitioner. 7-8,16. Adopted. 9-.14. Adopted. 15,17. Rejected as unnecessary. 18. Rejected as unnecessary and irrelevant for the reason set forth for rejecting the proposed findings in paragraphs 2 and 6. Treatment Accorded Respondent's Proposed Findings Rejected as legal argument, except that Respondent and the Ehmkes entered into a contract. Last sentence - rejected as unnecessary and irrelevant. Remainder rejected as contrary to the greater weight of the evidence. Rejected as unnecessary, except that the blast sentence is adopted as to the sign being made. COPIES FURNISHED: Steven W. Johnson, Esquire Department of Professional Regulation Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Brian E. Johnson, Esquire 7190 Seminole Boulevard Seminole, Florida 34642 Darlene F. Keller Executive Director Division of Real Estate 400 West Robinson Street Orlando, Florida 32801 William O'Neil General Counsel Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750
The Issue The issues in each case are whether, pursuant to Sections 489.141 and 489.143, Florida Statutes (2003), a claimant is entitled to payment from the Construction Industries Recovery Fund, and, if so, whether, pursuant to Section 489.143(7), Florida Statutes (2003), Respondent may automatically suspend the residential contractor's license of Petitioner until Petitioner reimburses Respondent for the paid claim.
Findings Of Fact Petitioner is licensed as a certified residential contractor, holding license number CRC 013599. Respondent first issued a residential contractor's license to Petitioner in 1978, and Petitioner has been continually licensed since that time. Petitioner has never been disciplined by Respondent or any local governmental agency. On January 29, 2004, Respondent transmitted to the Division of Administrative Hearings seven files containing administrative complaints alleging disciplinary breaches against Petitioner for many of the transactions covered in the nine subject cases. These seven new cases have not yet been heard, and Respondent has not yet entered any restitution orders against Petitioner. In the past, Petitioner has placed his residential contractor's license with various corporations to qualify them to perform residential construction. In February 1999, Petitioner met with Lori Thomson, president of Thomson Homes, Inc., to discuss placing his license with her residential construction company. Now inactive, Thomson Homes, Inc., had been in the residential construction business since at least 1994, operating out of an office in Palm Beach County, which is also the location of all but one of the residential construction jobs that are the subject of these cases. Since 1994, Thomson Homes, Inc., had used the general contractor's license of Ms. Thomson's husband, Steven Thomson, to qualify to perform residential construction. During the time that his license qualified Thomson Homes, Inc., Mr. Thomson believed that he and his wife owned the corporation equally and that she served as the president and he served as the vice-president. In the summer of 1998, Mr. Thomson filed for divorce from Ms. Thomson. In February 1999, Ms. Thomson fired Mr. Thomson from Thomson Homes, Inc. Shortly thereafter, Mr. Thomson learned that Ms. Thomson had caused all of the stock to be issued to her when the corporation was formed, and that she had assumed all of the officer and director positions. In early March 1999, Mr. Thomson cancelled all of the building permits that he had obtained on behalf of Thomson Homes, Inc., and withdrew his general contractor's license from Ms. Thomson's corporation, effective March 20, 1999. When Mr. Thomson withdrew his license from Thomson Homes, Inc., it was in the process of building or preparing to build about ten homes. At no time during Petitioner's discussions with Ms. Thomson was he aware that Thomson Homes, Inc., was actively involved in construction. Eventually, Ms. Thomson and Petitioner agreed that Petitioner would place his residential contractor's license with Thomson Homes, Inc., and would supervise the corporation's construction activities. In return, Thomson Homes, Inc., would pay Petitioner $500 weekly and 35 percent of the profits. After filing the necessary documentation in April 1999, Petitioner qualified Thomson Homes, Inc. effective April 22 or 26, 1999. Petitioner advised Ms. Thomson that he had other work to do for another month, so he could not start with Thomson Homes, Inc. immediately. Ms. Thomson told him that she had to get financing arranged for several signed contracts and did not have any construction taking place at the time. The record is unclear whether this delay took place after the initial agreement between Petitioner and Ms. Thomson or after Petitioner formally placed his license with Thomson Homes, Inc. However, in either event, from the date that Petitioner formally placed his license with Thomson Homes, Inc., he never had a substantive conversation with Ms. Thomson about any construction activities of Thomson Homes, Inc. Not hearing from Ms. Thomson, Petitioner eventually called her to learn when he would start work. At first, Ms. Thomson took Petitioner's calls and kept explaining that the financing paperwork had been delayed. She promised to call Petitioner when construction was ready to proceed. However, Ms. Thomson never contacted Petitioner, and she later stopped taking or returning Petitioner's calls. In early August 1999, Petitioner called Thomson Homes, Inc., and learned that its telephone had been disconnected. He visited the office of Thomson Homes, Inc., but found it closed and the premises vacated. In fact, Thomson Homes, Inc., discontinued business on or about August 1, 1999. Between the date that Petitioner had qualified Thomson Homes and the point at which Thomson Homes ceased doing business, Thomson Homes, Inc., had entered into construction contracts, taken deposits and draws on construction loans, and performed residential construction--all unknown to Petitioner. Also unknown to Petitioner was the fact that Thomson Homes, Inc., had failed to perform its obligations under many, if not all, of its construction contracts during that period. The record is unclear when Petitioner withdrew his license from Thomson Homes, Inc. Petitioner sent Respondent a letter on August 30, 1999, advising of the withdrawal of his license from Thomson Homes, Inc. Later advised that he needed to file another form to effect the withdrawal, Petitioner did so in March 2000. The difference is not important in these cases. At no time did Petitioner receive any money from Thomson Homes, Inc., or any of the claimants who contracted with Thomson Homes, Inc. At no time did Petitioner enter into any contracts with any of the claimants. Only after Thomson Homes, Inc., had taken the claimants' money and abandoned work or failed to commence work did Petitioner learn that Thomson Homes, Inc., had done construction business under his license. DOAH Case No. 03-3540 involves the claim of Sandra Harvey. Ms. Harvey entered into a construction agreement with Thomson Homes, Inc., on September 9, 1998. Pursuant to the agreement, Ms. Harvey agreed to pay Thomson Homes, Inc., $25,500 for a lot and $115,260 for a home, which Thomson Homes, Inc., agreed to construct to "substantial completion" within 120 days from the date of slab pour. After pouring the slab, constructing the shell, and completing the rough plumbing, air conditioning, and electrical, Thomson Homes, Inc., stopped work on Ms. Harvey's home in early 1999. Ms. Harvey learned of the problem when Mr. Thomson called her in early 1999 and said that he could not finish the home because Ms. Thomson had taken over the business. This call probably took place no later than late March 1999, when Mr. Thomas withdrew as the qualifier for Thomson Homes, Inc. The record does not reveal the extent of payments from Ms. Harvey or her lender or the extent of completed work at the time that Thomson Homes, Inc., abandoned the job. Although the complaint is not part of this record, Ms. Harvey commenced a legal action against Thomson Homes, Inc., but not Petitioner. She obtained a default final summary judgment against Thomson Homes, Inc., on March 30, 2001, for a total sum of $46,267.32, including attorneys' fees, costs, and prejudgment interest. The judgment states, in part: Subsequent to entering into the above referenced contract, Defendant breached its contract by accepting Plaintiff's deposits and construction loan disbursements and thereafter abandoning the project and failing to pay subcontractors and/or materialmen for their labor, services and material provided. As a result of Defendant abandoning the project, Plaintiff was compelled to retain a new contractor to complete her home at an additional cost over and above the original contract amount. As a direct result of Defendant abandoning the project, the misapplication of construction funds and financial mismanagement Plaintiff has been forced to borrow additional funds from the construction lender. On May 3, 2001, Ms. Harvey filed a claim with the Construction Industries Recovery Fund (Recovery Fund). In response to a question asking if she had made a diligent effort to collect payment from the contractor, Ms. Harvey answered "yes," explaining she had "filed lawsuit." Ms. Harvey probably filed her claim within two years of when Thomson Homes, Inc., abandoned her job. By the end of March 1999, Mr. Thomson informed Ms. Harvey that his wife had fired him, so he could not work on her home anymore. A change in qualifier does not mean that Thomson Homes, Inc., would necessarily abandon the job, but, as noted in the Conclusions of Law, abandonment presumptively arises upon the expiration of 90 days without work. No work took place on Ms. Harvey's home after Mr. Thomson withdrew as qualifier, so presumptive abandonment took place by the end of June 1999--after May 3, 1999, which is two years prior to the date on which Ms. Harvey filed her claim. By letter dated June 5, 2001, from James Brogan of WEI Consulting Group to Ms. Harvey, Mr. Brogan states that he had investigated the assets of Thomson Homes, Inc. Mr. Brogan found no bankruptcy filing by Thomson Homes, Inc., in Bankruptcy Court in the Southern District of Florida. Thomson Homes, Inc., was a party to 282 legal actions and owed tangible personal property taxes on furniture in a model home, but the furniture was no longer available. On February 28, 2003, Respondent issued an Order approving Ms. Harvey's claim of $25,000 against the Recovery Fund and automatically suspending Petitioner's license until he reimburses the Recovery Fund for the full amount of the paid claim. The Order, copies of which were served on all parties, states that Ms. Harvey is the Petitioner, the Recovery Fund is a Respondent, and "Larry Shimkus, d/b/a Thomson Homes, Inc.," is a Respondent. The Order advises that "you" may seek a formal hearing, pursuant to Section 120.57(1), Florida Statutes, if material facts are in dispute. On March 17, 2003, Petitioner filed a Petition for Section 120.57 Formal Administrative Hearing. The petition, which was served on Ms. Harvey and Respondent, contests the payment to Ms. Harvey and the automatic suspension of Petitioner's license. The petition contests the payment of Ms. Harvey's claim because she had made insufficient efforts to satisfy the judgment; she had failed to submit all required exhibits with her claim; her judgment is against Thomson Homes, Inc., and not Petitioner; her judgment does not find that Petitioner violated Section 489.129(1)(g), (j), or (k), Florida Statutes; and Ms. Thomson deceived Petitioner in violation of Section 489.132, Florida Statutes. Additionally, the petition contests the automatic suspension because the payment to Ms. Harvey is not authorized, her claim is incomplete, and her judgment is not against Petitioner. Lastly, the petition seeks attorneys' fees under Section 57.111, Florida Statutes. DOAH Case No. 03-3541 involves the claim of John and Kathleen Whitesides. The Whitesides, who lived at the time in Juno Beach, Florida, entered into a construction contract with Thomson Homes, Inc., on February 7, 1999. Pursuant to the agreement, the Whitesides agreed to pay Thomson Homes, Inc., $154,094 for a home, which Thomson Homes, Inc., agreed to construct to "substantial completion" within 120 days from the date of slab pour. After the Whitesides paid Thomson Homes, Inc., $5000 and secured a construction loan, Thomson Homes, Inc., never commenced construction. In a complaint filed April 3, 2000, the Whitesides commenced a legal action against Thomson Homes, Inc., but not Petitioner. The two-count complaint alleges a breach of contract, based on Thomson Homes' alleged "abandon[ment]" of the job "prior to any construction," and unjust enrichment, based on Thomson Homes' alleged receipt of funds and failure to complete construction. The Whitesides obtained a default final judgment against Thomson Homes, Inc., on December 21, 2000, for a total sum of $20,146.67, including attorneys' fees, costs, and prejudgment interest. The judgment states, in part: "Defendant is in breach of the Contract dated February 7, 1999, and has received unjust enrichment from Defendant's failure to fulfill the terms of the Contract to build a home for Plaintiffs." On August 9, 2001, David Tassell, the Whitesides' attorney in the circuit court action against Thomson Homes, Inc., stated, in an acknowledged statement, that he had performed "numerous" real property searches in Palm Beach and Martin counties' public records and determined that Thomas Homes, Inc., "owns no real property in Martin County." The omission of Palm Beach County in the statement is unexplained. Mr. Tassell's statement adds that he has retained a private investigator, who confirmed that Thomson Homes, Inc., owns no boats, planes, or automobiles. On August 10, 2001, the Whitesides filed a claim with the Recovery Fund. In response to a question asking if they had made a diligent effort to collect payment from the contractor, the Whitesides answered "yes," but did not supply an explanation in the following blank. The completed questionnaire accompanying the claim states that the Whitesides discovered the violation in September 1999 and that it occurred in July to August 1999. On September 17, 2002, Respondent issued an Order approving the Whitesides' claim of $18,526.67 against the Recovery Fund and automatically suspending Petitioner's license until he reimburses the Recovery Fund for the full amount of the paid claim. The Order, copies of which were served on all parties, states that the Whitesides are the Petitioners, the Recovery Fund is a Respondent, and "Larry Shimkus, d/b/a Thomson Homes, Inc.," is a Respondent. The Order advises that "you" may seek a formal hearing, pursuant to Section 120.57(1), Florida Statutes, if material facts are in dispute. The Whitesides probably filed their claim within two years of when they reasonably should have discovered that Thomson Homes, Inc., had wrongfully failed to commence construction, as is required for reasons set forth in the Conclusions of Law. As noted in the Conclusions of Law, presumptive abandonment arose when Thomson Homes, Inc., after entering the contract, performed no work for 90 days. Six months elapsed from the signing of the contract to the date that is two years prior to the filing of the claim. Although the record is not well-developed on the point, it is more likely than not that due diligence did not require that the Whitesides discover the abandonment within the first 90 days after it had presumptively arisen. The Whitesides' judgment is probably based on a violation of Section 489.129(1)(g), (j), or (k), Florida Statutes, as is required for reasons set forth in the Conclusions of Law. Although the record is not well-developed on this point either, it is more likely than not that the judgment is based on Thomson Homes' abandonment after entering into the contract. The judgment does not state this basis explicitly, but the complaint, on which the judgment is based, alleges abandonment. On December 23, 2002, Petitioner filed a Petition for Section 120.57 Formal Administrative Hearing. The petition, which was served on Respondent and the Whitesides' attorney in the circuit court action against Thomson Homes, Inc., contests the payment to the Whitesides and the automatic suspension of Petitioner's license. The petition contests the payment of the Whitesides' claim because they did not file certified copies of the final judgment and levy and execution documents and their judgment did not find that Petitioner violated Section 489.129(1)(g), (j), or (k), Florida Statutes. Additionally, the petition contests the automatic suspension because Ms. Thomson deceived Petitioner in violation of Section 489.132, Florida Statutes; Petitioner received no notice of the hearing that resulted in the Order to pay the Whitesides and suspend Petitioner's license; the Whitesides' claim is incomplete; and the Whitesides' judgment is not against Petitioner. Lastly, the petition seeks attorneys' fees under Section 57.111, Florida Statutes. DOAH Case No. 03-3542 involves the claim of Richard and Kathleen Beltz. The Beltzes entered into a construction contract with Thomson Homes, Inc., on July 13, 1999. Pursuant to the agreement, the Beltzes agreed to pay Thomson Homes, Inc., $35,500 for a lot and $140,500 for a home, which Thomson Homes, Inc., agreed to construct to "substantial completion" within 120 days from the date of slab pour. After the Beltzes paid Thomson Homes, Inc., $17,283.70, Thomson Homes, Inc., never appeared at the closing, which had been scheduled for August 10, 1999. Nor did Thomson Homes, Inc., ever commence construction. The record does not disclose the extent, if any, to which Thomson Homes, Inc., completed construction. The Beltzes' discovery of Thomson Homes' failure to commence construction was hampered by the fact that they resided in California at the time. However, the Beltzes had obviously discovered the wrongful acts and omissions of Thomson Homes, Inc., by September 29, 1999, when they sent a letter to Petitioner demanding that he return the money that they had paid Thomson Homes, Inc. On October 19, 1999, the Beltzes signed a claim under the Recovery Fund, but the record contains no indication when the claim was filed. The completed questionnaire attached to the claim does not ask if the claimants had made a diligent effort to collect payment from the contractor. For reasons set forth in the Conclusions of Law, a claim must follow a judgment, so, the Beltzes could not file a valid claim until they had obtained a judgment. Two years from September 29, 1999, at which point the Beltzes obviously knew of a violation, requires that they file the claim, on an already- secured judgment, prior to September 29, 2001. In a complaint filed February 4, 2002, the Beltzes commenced a legal action against Thomson Homes, Inc., but not Petitioner. The two-count complaint alleges a breach of contract, based on Thomson Homes' alleged "abandon[ment]" of the job "prior to any construction" and "fail[ure] and refus[al] to pay subcontractors and/or materialmen which resulted in Claims of Liens against Plaintiffs [sic] residence, which Defendant has failed and refused to satisfy," and unjust enrichment, based on Thomson Homes' alleged receipt of funds and failure to complete construction and pay for goods and services provided by subcontractors and materialmen. The Beltzes obtained a default final summary judgment against Thomson Homes, Inc., on May 22, 2002, for a total sum of $23,280.20, including attorneys' fees, costs, and prejudgment interest. The judgment states, in part: Subsequent to entering into the above referenced contract, Defendant performed some work on the project. However, Defendant breached its contract by accepting deposits and construction loan disbursements and thereafter abandoning the project and failing to pay subcontractors and materialmen for their labor, services and material provided. As a result of Defendant failing to pay Lienors who provided labor, service and materials to Plaintiffs [sic] real property, Construction Liens were recorded against same, which Plaintiffs had to satisfy. As a result of Defendant abandoning the project, Plaintiffs were compelled to retain a new contractor to complete their home at an additional cost over and above the original contract amount. As a direct result of Defendant abandoning the project, failing to pay Lienors, the misapplication of construction funds and financial mismanagement, Plaintiffs were forced to borrow additional funds from their construction lender. By unacknowledged statement dated August 23, 2002, Ms. Beltz declared that someone at the Florida Department of State advised her that Thomson Homes, Inc., was administratively dissolved on September 24, 1999. She also declared that she had found on the internet two pieces of real property owned by Thomson Homes, Inc., but they had been transferred within the past year. Ms. Beltz stated that she searched the database of the "Department of Motor Vehicles in Palm Beach County" in May 2000 and found no vehicles or boats registered to Thomson Homes, Inc. Lastly, she reported that she contacted the "Federal Aviation Association" at an unspecified time and found no "airplanes" registered to Thomson Homes, Inc. On November 26, 2002, Respondent issued an Order approving the Beltzes' claim of $17,222.78 against the Recovery Fund and automatically suspending Petitioner's license until he reimburses the Recovery Fund for the full amount of the paid claim. The Order, copies of which were served on all parties, states that the Beltzes are the Petitioners, the Recovery Fund is a Respondent, and "Larry Shimkus, d/b/a Thomson Homes, Inc.," is a Respondent. The Order advises that "you" may seek a formal hearing, pursuant to Section 120.57(1), Florida Statutes, if material facts are in dispute. On December 27, 2002, Petitioner filed a Petition for Section 120.57 Formal Administrative Hearing. The petition, which was served on the Beltzes and Respondent, contests the payment to the Beltzes and the automatic suspension of Petitioner's license. The petition contests the payment of the Beltzes' claim because they did not submit all of the necessary exhibits with their claim; their judgment is against Thomson Homes, Inc., and not Petitioner; and their judgment does not find that Petitioner violated Section 489.129(1)(g), (j), or (k), Florida Statutes. Additionally, the petition contests the automatic suspension because Ms. Thomson deceived Petitioner in violation of Section 489.132, Florida Statutes; the Beltzes' claim is incomplete; and the Beltzes' judgment is not against Petitioner. Lastly, the petition seeks attorneys' fees under Section 57.111, Florida Statutes. DOAH Case No. 03-3543 involves the claim of Keith and Karen Deyo. The Deyos entered into a construction contract with Thomson Homes, Inc., on October 31, 1998. Pursuant to the agreement, the Deyos agreed to pay Thomson Homes, Inc., $25,500 for a lot and $123,400 for a home, which Thomson Homes, Inc., agreed to construct to "substantial completion" within 120 days from the date of slab pour. Although the Deyos clearly suffered damages from the acts and omissions of Thomson Homes, Inc., the record does not disclose how much they paid the company, how much they had to pay unpaid suppliers and laborers, and how much construction the company completed before abandoning the job. Thomson Homes, Inc., began construction on the Deyos' home about 30-45 days after the parties signed the contract, but all work stopped in July 1999. In an undated complaint, the Deyos commenced a legal action against Thomson Homes, Inc., but not Petitioner. The two-count complaint alleges a breach of contract, based on Thomson Homes' alleged "abandon[ment] of the project prior to completion" and "fail[ure] and refus[al] to pay subcontractors and/or materialmen which resulted in Claims of Liens against Plaintiffs [sic] residence, which Defendant has failed and refused to satisfy," and unjust enrichment, based on Thomson Homes' alleged receipt of funds and failure to complete construction and pay for goods and services provided by subcontractors and materialmen. The Deyos obtained a final summary judgment against Thomson Homes, Inc., on March 15, 2000, for a total sum of $55,458.64, including attorneys' fees, costs, and prejudgment interest. The judgment states, in part: Subsequent to entering into the above referenced contract, Defendant partially performed work under the Contract. However, it breached its contract by accepting deposits and construction loan disbursements and thereafter abandoning the project and failing to pay subcontractors and materialmen for their labor, services and material provided. As a result of Defendant failing to pay lienors who provided labor, services and materials to Plaintiffs [sic] residence, construction liens were recorded against same, which Plaintiffs had to satisfy. As a result of Defendant abandoning the project, Plaintiffs were compelled to retain a new contractor to complete their home at an additional cost over and above the original contract amount. As a direct result of Defendant abandoning the project, failing to pay lienor's [sic], the misapplication of construction funds and financial mismanagement Plaintiffs have been forced to borrow additional funds from their construction lender. On April 27, 2000, the Deyos signed a claim under the Recovery Fund, but the record contains no indication when the claim was filed. A cover letter dated May 8, 2000, suggests that the Deyos mailed their claim a couple of weeks after signing it, so it was probably filed in mid-May 2000, although their questionnaire bears a revision date of November 2001, which would be beyond two years after the violation. In the questionnaire, the Deyos did not respond to the question asking if they had made a diligent effort to collect payment from the contractor. By an undated and unacknowledged statement, Mr. Deyo declared that someone at the Florida Department of State advised him that Thomson Homes, Inc., was administratively dissolved on September 24, 1999. He also declared that he had found on the internet two pieces of real property owned by Thomson Homes, Inc., but they had been transferred within the past year. Mr. Deyo stated that he searched the database of the "department of motor vehicles in Palm Beach County" in on April 14, 2000, and found no motor vehicles or boats registered to Thomson Homes, Inc. Lastly, he reported that he contacted the "Federal Aviation Association" on April 21, 2000, and found no "airplanes" registered to Thomson Homes, Inc. On January 22, 2003, Respondent issued an Order acknowledging the Deyos' claim of $55,458.64, approving the payment of the statutory limit of $25,000 against the Recovery Fund, and automatically suspending Petitioner's license until he reimburses the Recovery Fund for the full amount of the paid claim. The Order, copies of which were served on all parties, states that Mr. Deyo is the Petitioner, the Recovery Fund is a Respondent, and "Larry Shimkus, d/b/a Thomson Homes, Inc.," is a Respondent. The Order advises that "you" may seek a formal hearing, pursuant to Section 120.57(1), Florida Statutes, if material facts are in dispute. On February 3, 2003, Petitioner filed a Petition for Section 120.57 Formal Administrative Hearing. The petition, which was served on Respondent and the Deyos' attorney who represented them in the action against Thomson Homes, Inc., contests the payment to the Deyos and the automatic suspension of Petitioner's license. The petition contests the payment of the Deyos' claim and suspension of Petitioner's license because Petitioner did not receive notice of the hearing at which Respondent entered the Order; the Deyos did not satisfy all requirements for payment from the Recovery Fund; their claim was not accompanied by certified copies of the levy and execution documents; their judgment is against Thomson Homes, Inc., and not Petitioner; their judgment does not find that Petitioner violated Section 489.129(1)(g), (j), or (k), Florida Statutes; and Ms. Thomson deceived Petitioner in violation of Section 489.132, Florida Statutes. Lastly, the petition seeks attorneys' fees under Section 57.111, Florida Statutes. DOAH Case No. 03-3544 involves the claim of Sylvia Reinhardt. Ms. Reinhardt entered into a construction contract with Thomson Homes, Inc., on October 14, 1998. Pursuant to the agreement, Ms. Reinhardt agreed to pay Thomson Homes, Inc., $45,000 for a lot and $147,150 for a home, which Thomson Homes, Inc., agreed to construct to "substantial completion" within 120 days from the date of slab pour. After Ms. Reinhardt paid Thomson Homes, Inc., $144,769, directly and indirectly, by way of her construction lender, the house was little more than half complete when Thomson Homes, Inc., abandoned the job. Thomson Homes also failed to pay various suppliers that filed liens, so Ms. Reinhardt had to pay $8550.41 to RTS Roofing, $882 to Palm Beach Garage Door, and $3421.32 to Woodworks, Inc. In an undated complaint filed in 1999 (actual date illegible), Ms. Reinhardt commenced a legal action against Thomson Homes, Inc., but not Petitioner. The two-count complaint alleges a breach of contract, based on Thomson Homes' alleged "abandon[ment]" of the job "prior to completion" and "fail[ure] and refus[al] to pay subcontractors and/or materialmen which resulted in Claims of Liens against Plaintiff's residence, which Defendant has failed and refused to satisfy," and unjust enrichment, based on Thomson Homes' alleged receipt of funds and failure to complete construction and pay for goods and services provided by subcontractors and materialmen. Ms. Reinhardt obtained a final summary judgment against Thomson Homes, Inc., on March 28, 2000, for a total sum of $61,471.15, including attorneys' fees, costs, and prejudgment interest. The judgment states, in part: Subsequent to entering into the above referenced contract, Defendant performed work under the Contract. However, it breached its contract by accepting deposits and construction loan disbursements and thereafter abandoning the project and failing to pay subcontractors and materialmen for their labor, services and materials provided. As a result of Defendant failing to pay lienors who provided labor, services and materials for the construction of Plaintiff's residence, construction liens were recorded against same, which Plaintiff had to satisfy. As a result of Defendant abandoning the project, Plaintiff was compelled to retain a new contractor to complete their [sic] home at an additional cost over and above the original contract amount. As a direct result of Defendant abandoning the project, failing to pay lienor's [sic], the misapplication of construction funds and financial mismanagement Plaintiff has been forced to borrow additional funds from her construction lender. On April 17, 2000, Ms. Reinhardt filed a claim with the Recovery Fund. In response to a question asking if she had made a diligent effort to collect payment from the contractor, Ms. Reinhardt answered "yes" and explained: "Telephone calls were unanswered. Certified mail requesting response were [sic] never answered. Our attorney made written and personal contact with the owner and there was no intention to pay." The claim states that the violation took place in July 1999. By acknowledged statement dated July 21, 2000, Ms. Reinhardt declared that she had completed a "reasonable search and inquiry" and had not found any property or assets against which to satisfy her judgment. Ms. Reinhardt stated that someone at the Florida Department of State advised her that Thomson Homes, Inc., was administratively dissolved on September 24, 1999. She also declared that she had found one parcel of property owned by Thomson Homes, Inc., and valued at $115,387, but this had been sold to "Joan Thomson" on February 1, 2000. Ms. Reinhardt stated that she had found tangible personal property worth $5000. She added that she had not found any motor vehicles registered with the Department of Highway Safety and Motor Vehicles, nor had she found anything registered with the "FAA." On November 26, 2002, Respondent issued an Order acknowledging Ms. Reinhardt's claim of $58,661.44, approving the payment of the statutory limit of $25,000 against the Recovery Fund, and automatically suspending Petitioner's license until he reimburses the Recovery Fund for the full amount of the paid claim. The Order, copies of which were served on all parties, states that Ms. Reinhardt is the Petitioner, the Recovery Fund is a Respondent, and "Larry Shimkus, d/b/a Thomson Homes, Inc.," is a Respondent. The Order advises that "you" may seek a formal hearing, pursuant to Section 120.57(1), Florida Statutes, if material facts are in dispute. On December 24, 2002, Petitioner served a Petition for Section 120.57 Formal Administrative Hearing. The petition, which was served on Ms. Reinhardt and Respondent, contests the payment to Ms. Reinhardt and the automatic suspension of Petitioner's license. The petition contests the payment of Ms. Reinhardt's claim and suspension of Petitioner's license because Ms. Reinhardt did not submit certified copies of the levy and execution documents; her judgment is against Thomson Homes, Inc., and not Petitioner; her judgment does not find that Petitioner violated Section 489.129(1)(g), (j), or (k), Florida Statutes; and Ms. Thomson deceived Petitioner in violation of Section 489.132, Florida Statutes. Lastly, the petition seeks attorneys' fees under Section 57.111, Florida Statutes. DOAH Case No. 03-3545 involves the claim of Louis and Ann Mahoney. The Mahoneys entered into a construction contract with Thomson Homes, Inc., on June 28, 1999, for the construction of a home in Martin County. Pursuant to the agreement, the Mahoneys agreed to pay Thomson Homes, Inc., $32,000 for a lot and $149,000 for a home, which Thomson Homes, Inc., agreed to construct to "substantial completion" within 150 days from the date of slab pour. After the Mahoneys paid Thomson Homes, Inc., $14,500, directly and indirectly, by way of their construction lender, they suffered damages due to the acts and omissions of Thomson Homes, Inc., although, again, the record does not describe specifically how Thomson Homes caused them damage. In an undated complaint that bears no filing date, the Mahoneys commenced a legal action against Thomson Homes, Inc., but not Petitioner. The two-count complaint alleges a breach of contract, based on Thomson Homes' alleged "abandon[ment]" of the job "prior to completion" and "fail[ure] and refus[al] to pay subcontractors and/or materialmen which resulted in Claims of Liens against Plaintiffs [sic] residence, which Defendant has failed and refused to satisfy," and unjust enrichment, based on Thomson Homes' alleged receipt of funds and failure to complete construction and pay for goods and services provided by subcontractors and materialmen. The Mahoneys obtained a final summary judgment against Thomson Homes, Inc., on April 13, 2000, for a total sum of $43,084.49, including attorneys' fees, costs, and prejudgment interest. The judgment states, in part: Subsequent to entering into the above referenced contract, Defendant breached its contract by accepting Plaintiffs' deposits and construction loan disbursements and thereafter abandoning the project and failing to pay subcontractors and/or materialmen for their labor, and/or services provided. As a result of Defendant failing to pay lienor's [sic] who provided labor, services and materials for the construction of Plaintiffs [sic] residence, a construction lien was recorded against Plaintiffs' property, which Plaintiffs will have to satisfy. As a result of Defendant abandoning the project, Plaintiffs were compelled to retain a new contractor to complete their home at an additional cost over and above the original contract amount. As a direct result of Defendant abandoning the project, failing to pay lienor's [sic], the misapplication of construction funds and financial mismanagement Plaintiffs have been forced to borrow additional funds from their construction lender. On April 30, 2000, the Mahoneys signed a claim under the Recovery Fund. Although the claim form bears no filing date, the completed questionnaire attached to the claim was filed on May 3, 2000, so that is the likely filing date of the claim. In response to a question asking if they had made a diligent effort to collect payment from the contractor, the Mahoneys answered "yes" and explained: "This is explained in General Allegations, enclosed with this paperwork." Evidently, the reference is to a copy of the circuit court complaint. By acknowledged statement dated April 8, 2002, Mr. Mahoney declared that he had completed a "reasonable search and inquiry" and had not found any property or assets against which to satisfy his judgment. Mr. Mahoney stated that someone at the Florida Department of State advised him that Thomson Homes, Inc., was administratively dissolved on September 24, 1999. He also declared that an internet search had disclosed no property owned by Thomson Homes, Inc. Mr. Mahoney stated that the "department of motor vehicles in Palm Beach County" found no motor vehicles or boats registered to Thomson Homes, Inc., and that the "FAA" had found nothing registered to Thomson Homes, Inc. On February 28, 2003, Respondent issued an Order acknowledging the Mahoneys' claim of $38,185, approving the payment of the statutory limit of $25,000 against the Recovery Fund, and automatically suspending Petitioner's license until he reimburses the Recovery Fund for the full amount of the paid claim. The Order, copies of which were served on all parties, states that the Mr. Mahoney is the Petitioner, the Recovery Fund is a Respondent, and "Larry Shimkus, d/b/a Thomson Homes, Inc.," is a Respondent. The Order advises that "you" may seek a formal hearing, pursuant to Section 120.57(1), Florida Statutes, if material facts are in dispute. On March 17, 2003, Petitioner served a Petition for Section 120.57 Formal Administrative Hearing. The petition, which was served on the Mahoneys and Respondent, contests the payment to the Mahoneys and the automatic suspension of Petitioner's license. The petition contests the payment of the Mahoneys' claim and suspension of Petitioner's license because they did not submit all of the required exhibits; their judgment is against Thomson Homes, Inc., and not Petitioner; their judgment does not find that Petitioner violated Section 489.129(1)(g), (j), or (k), Florida Statutes; and Ms. Thomson deceived Petitioner in violation of Section 489.132, Florida Statutes. Lastly, the petition seeks attorneys' fees under Section 57.111, Florida Statutes. DOAH Case No. 03-3546 involves the claim of Dennis and Carolyn DeStefanis. The DeStefanises entered into a construction contract with Thomson Homes, Inc., on April 7, 1999. Pursuant to the agreement, the DeStefanises agreed to pay Thomson Homes, Inc., $137,455 for a home, which Thomson Homes, Inc., agreed to construct to "substantial completion" within 150 days from the date of slab pour. After the DeStefanises paid Thomson Homes, Inc., $15,765, directly and indirectly, by way of their construction lender, Thomson Homes, Inc. never did any work, except to contract with a surveyor, who, unpaid, filed a claim of lien against the DeStefanises's lot. In an undated complaint bearing no filing date, the DeStefanises commenced a legal action against Thomson Homes, Inc., but not Petitioner. The two-count complaint alleges a breach of contract, based on Thomson Homes' alleged "abandon[ment]" of the job "prior to completion" and "fail[ure] and refus[al] to pay subcontractors and/or materialmen which resulted in Claims of Liens against Plaintiffs [sic] residence, which Defendant has failed and refused to satisfy," and unjust enrichment, based on Thomson Homes' alleged receipt of funds and failure to complete construction and pay for goods and services provided by subcontractors and materialmen. The DeStefanises obtained a final summary judgment against Thomson Homes, Inc., on March 15, 2000, for a total sum of $36,701.87, including attorneys' fees and costs. The judgment states, in part: Subsequent to entering . . . into the above referenced contract, Defendant, [sic] breached its contract by accepting Plaintiffs [sic] deposits and construction loan disbursements and thereafter abandoning the project. [sic] As a result of Defendant abandoning the project, Plaintiffs were compelled to retain a new contractor to complete their home at an additional cost over and above the original contract amount. As a direct result of Defendant abandoning the project, the misapplication of construction funds and financial mismanagement Plaintiffs have been forced to borrow additional funds from their construction lender. On April 19, 2000, the DeStefanises filed a claim with the Recovery Fund. In response to a question asking if they had made a diligent effort to collect payment from the contractor, the DeStefanises answered "yes" and explained: "Went to DBPR Investigative Services, hired Attorney Barry W. Taylor [attorney in circuit court action], got Final Summary Judgment against Thomson Homes, Inc." On March 20, 2003, Respondent issued an Order acknowledging the DeStefanises' claim of $34,965.52, approving the payment of $15,765 against the Recovery Fund, and automatically suspending Petitioner's license until he reimburses the Recovery Fund for the full amount of the paid claim. The Order, copies of which were served on all parties, states that the DeStefanises are the Petitioners, the Recovery Fund is a Respondent, and "Larry Shimkus, d/b/a Thomson Homes, Inc.," is a Respondent. The Order advises that "you" may seek a formal hearing, pursuant to Section 120.57(1), Florida Statutes, if material facts are in dispute. On April 7, 2003, Petitioner filed a Petition for Section 120.57 Formal Administrative Hearing. The petition, which was served on the DeStefanises and Respondent, contests the payment to the DeStefanises and the automatic suspension of Petitioner's license. The petition contests the payment of the DeStefanises' claim and suspension of Petitioner's license because they did not submit all of the required exhibits; their judgment is against Thomson Homes, Inc., and not Petitioner; their judgment does not find that Petitioner violated Section 489.129(1)(g), (j), or (k), Florida Statutes; and Ms. Thomson deceived Petitioner in violation of Section 489.132, Florida Statutes. The petition contests the suspension of Petitioner's license on the additional ground that he was not the qualifier for Thomson Homes, Inc., when it and the DeStefanises entered into the construction contract. Lastly, the petition seeks attorneys' fees under Section 57.111, Florida Statutes. DOAH Case No. 03-3547 involves the claim of James and Donna Barr. The Barrs entered into a construction contract with Thomson Homes, Inc., on September 12, 1998. Pursuant to the agreement, the Barrs agreed to pay Thomson Homes, Inc., $30,000 for a lot and $140,900 for a home, which Thomson Homes, Inc., agreed to construct to "substantial completion" within 120 days from the date of slab pour. The Barrs paid Thomson Homes, Inc., $8500 in the form of a down payment. They or their construction lender paid Thomson Homes, Inc., considerably more money and suffered the imposition of claims of lien by unpaid subcontractors and suppliers, but, after negotiating with the bank, emerged from the transaction having lost only the $8500 down payment. Thomson Homes, Inc., obtained permits in April 1999 and started construction in May 1999. Before abandoning the job, Thomson Homes, Inc., worked on the home in May, June, and July of 1999. The Barrs and their lender did not make additional payments after the Barrs found the Thomson Homes, Inc., office empty on August 1, 1999. In a complaint filed October 6, 1999, the Barrs commenced a legal action against Thomson Homes, Inc., but not Petitioner. The two-count complaint alleges a breach of contract, based on Thomson Homes' alleged "abandon[ment]" of the job "prior to completion" and "fail[ure] and refus[al] to pay subcontractors and/or materialmen which resulted in Claims of Liens against Plaintiffs [sic] residence, which Defendant has failed and refused to satisfy," and unjust enrichment, based on Thomson Homes' alleged receipt of funds and failure to complete construction and pay for goods and services provided by subcontractors and materialmen. The Barrs obtained a final summary judgment against Thomson Homes, Inc., on May 8, 2000, for a total sum of $45,435.62, including attorneys' fees, costs, and prejudgment interest. The judgment states, in part: Subsequent to entering into the above referenced contract, partially performed work under the Contract. However, Defendant breached the contract by accepting Plaintiffs [sic] deposits and construction loan disbursements and thereafter abandoning the project and failing to pay subcontractors and/or materialmen for their labor services and materials provided. As a result of Defendant failing to pay lienors who provided labor, services and materials for the construction of Plaintiffs [sic] residence, construction liens were recorded against same, which Plaintiffs will have to satisfy. As a result of Defendant abandoning the project, Plaintiffs will be compelled to retain a new contractor to complete their home at an additional cost over and above the original contract amount. As a direct result of Defendant abandoning the project, failing to pay lienors, the misapplication of construction funds and financial mismanagement Plaintiffs will be forced to borrow additional funds from their construction lender. On June 2, 2000, the Barrs filed a claim under the Recovery Fund. In response to a question asking if they had made a diligent effort to collect payment from the contractor, the Barrs answered "yes" and explained: "I have looked into the assets of Thomson Homes Inc. and they do not have any. My affidavit is attached." The completed questionnaire states that the Barrs discovered the violation on August 11, 1999. They therefore failed to file their claim within two years of the discovery of the violation. By acknowledged statement dated May 23, 2000, Ms. Barr declared that she had completed a "reasonable search and inquiry" and had not found any property or assets against which to satisfy her judgment. Ms. Barr stated that someone at the Florida Department of State advised her that Thomson Homes, Inc., was administratively dissolved on September 24, 1999. She also declared she had found no property owned by Thomson Homes, Inc., in Palm Beach County. Ms. Barr stated that the Department of Highway Safety and Motor Vehicles found no motor vehicles or boats registered to Thomson Homes, Inc., and that the internet site of the "FAA" had revealed nothing registered to Thomson Homes, Inc. On November 26, 2002, Respondent issued an Order approving the payment of the Barrs' claim of $8500 against the Recovery Fund and automatically suspending Petitioner's license until he reimburses the Recovery Fund for the full amount of the paid claim. The Order, copies of which were served on all parties, states that the Barrs are the Petitioners, the Recovery Fund is a Respondent, and "Larry Shimkus, d/b/a Thomson Homes, Inc.," is a Respondent. The Order advises that "you" may seek a formal hearing, pursuant to Section 120.57(1), Florida Statutes, if material facts are in dispute. On December 27, 2002, Petitioner served a Petition for Section 120.57 Formal Administrative Hearing. The petition, which was served on the Barrs and Respondent, contests the payment to the Barrs and the automatic suspension of Petitioner's license. The petition contests the payment of the Barrs' claim and suspension of Petitioner's license because they did not submit a certified copy of the levy and execution documents; their judgment is against Thomson Homes, Inc., and not Petitioner; their judgment does not find that Petitioner violated Section 489.129(1)(g), (j), or (k), Florida Statutes; and Ms. Thomson deceived Petitioner in violation of Section 489.132, Florida Statutes. Lastly, the petition seeks attorneys' fees under Section 57.111, Florida Statutes. DOAH Case No. 03-3633 involves the Joanne Myers. Ms. Myers entered into a construction contract with Thomson Homes, Inc., on February 7, 1999. Pursuant to the agreement, Ms. Myers agreed to pay Thomson Homes, Inc., $29,500 for a lot and $125,400 for a home, which Thomson Homes, Inc., agreed to construct to "substantial completion" within 120 days from the date of slab pour. Ms. Myers directly or indirectly paid Thomson Homes, Inc., $12,840. According to Ms. Myers' claim, Thomson Homes, Inc., never commenced construction before going out of business in August 1999. In an undated complaint bearing no filing date, Ms. Myers commenced a legal action against Thomson Homes, Inc., but not Petitioner. The two-count complaint alleges a breach of contract, based on Thomson Homes' alleged "abandon[ment]" of the job "prior to completion" and "fail[ure] and refus[al] to pay subcontractors and/or materialmen which resulted in Claims of Liens against Plaintiff's residence, which Defendant has failed and refused to satisfy," and unjust enrichment, based on Thomson Homes' alleged receipt of funds and failure to complete construction and pay for goods and services provided by subcontractors and materialmen. Ms. Myers obtained a final summary judgment against Thomson Homes, Inc., on May 31, 2000, for a total sum of $28,307.77, including attorneys' fees, costs, and prejudgment interest. The judgment states, in part: Subsequent to entering . . . into the above referenced contract, Defendant breached the contract by accepting Plaintiff's deposits and construction loan disbursements and thereafter abandoning the project and failing to pay subcontractors and/or materialmen for their labor services and materials provided. As a result of Defendant failing to pay lienor's [sic] who provided labor, services and/or materials for the construction of Plaintiff's residence, construction liens were recorded against same, which Plaintiff will have to satisfy. As a result of Defendant abandoning the project, Plaintiff will be compelled to retain a new contractor to complete her home at an additional cost over and above the original contract amount. As a direct result of Defendant abandoning the project, failing to pay lienor's [sic], the misapplication of construction funds and financial mismanagement Plaintiff will be forced to borrow additional funds from her construction lender. On September 18, 2000, Ms. Myers filed a claim with the Recovery Fund. In response to a question asking if she had made a diligent effort to collect payment from the contractor, Ms. Myers answered "yes" and explained: "Contractor closed corporate office--would not answer telephone calls." By letter dated November 30, 2000, from James Brogan of WEI Consulting Group to Ms. Myers, Mr. Brogan states that he had investigated the assets of Thomson Homes, Inc. Mr. Brogan found no bankruptcy filing by Thomson Homes, Inc., in the Southern District of Florida. Thomson Homes, Inc., was a party to 282 legal actions and owed tangible personal property taxes on furniture in a model home. On February 28, 2003, Respondent issued an Order approving the payment of Ms. Myers' claim of $14,080.66 against the Recovery Fund and automatically suspending Petitioner's license until he reimburses the Recovery Fund for the full amount of the paid claim. The Order, copies of which were served on all parties, states that Ms. Myers is the Petitioner, the Recovery Fund is a Respondent, and "Larry Shimkus, d/b/a Thomson Homes, Inc.," is a Respondent. The Order advises that "you" may seek a formal hearing, pursuant to Section 120.57(1), Florida Statutes, if material facts are in dispute. On March 17, 2003, Petitioner filed a Petition for Section 120.57 Formal Administrative Hearing. The petition, which was served on Ms. Myers and Respondent, contests the payment to Ms. Myers and the automatic suspension of Petitioner's license. The petition contests the payment of Ms. Myers' claim and suspension of Petitioner's license because she did not submit evidence of a diligent search for assets; she did not submit all of the required exhibits; her judgment is against Thomson Homes, Inc., and not Petitioner; her judgment does not find that Petitioner violated Section 489.129(1)(g), (j), or (k), Florida Statutes; and Ms. Thomson deceived Petitioner in violation of Section 489.132, Florida Statutes. Lastly, the petition seeks attorneys' fees under Section 57.111, Florida Statutes. On January 4, 2004, Ms. Myers died. However, the probate court of Lancaster County, Pennsylvania, issued letters testamentary on her estate to James W. Myers III, in whose name Ms. Myers' claim is now being prosecuted. At the hearing, Petitioner contended that most, if not all, of the claims failed because the claimants had not exercised reasonable diligence in searching for assets, although Petitioner has dropped this contention in its proposed recommended order. In his petitions for hearing, Petitioner raised this contention only as to Ms. Myers. Ms. Myers, as well as the remainder of the claimants, made or caused to be made a reasonable search and inquiry for the assets of Thomson Homes, Inc. It is obvious that Thomson Homes, Inc., had no assets by the first letter from Mr. Brogan, dated November 30, 2000, nor did it have assets when Mr. Brogan issued his later letter on June 5, 2001, or when the attorney issued his affidavit on August 9, 2001. What is reasonable, in terms of a search, is dictated here by the fact that Thomson Homes, Inc., had no discoverable assets against which it could be made to answer for the considerable fraud that it perpetrated against these nine claimants. Respondent provided all of the parties, including Petitioner, with notice of its hearings at which it entered Recovery Fund orders. The petitions contend that Petitioner received no such notice in the Whitesides and Deyos cases. Although not litigated at the hearing, the presumption of notice, pursuant to the recitations set forth in each of Respondent's orders, results in a finding that Petitioner received timely notice in all cases.
Recommendation It is RECOMMENDED that Respondent enter a final order dismissing the claims against the Recovery Fund of the Beltzes and Barrs; paying the claims against the Recovery Fund of the remaining claimants, pursuant to the provisions of the orders of Respondent already issued in these cases and pursuant to the provisions of Section 489.143(1)-(6), Florida Statutes; and dismissing Respondent's request for the automatic suspension of Petitioner's license, pursuant to Section 489.143(7), Florida Statutes, without prejudice to any separate disciplinary proceedings that Respondent has commenced or may commence against Petitioner or others for the acts and omissions involved in these nine cases. DONE AND ENTERED this 17th day of February, 2004, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE 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 17th day of February, 2004. COPIES FURNISHED: Bruce G. Kaleita Law Office of Bruce G. Kaleita, P.A. 1615 Forum Place, Suite 500 West Palm Beach, Florida 33401 Adrienne C. Rodgers Assistant General Counsel Department of Business and Professional Regulation 1940 North Monroe Street, Suite 60 Tallahassee, Florida 32399-1023 Tim Vaccaro, Director Construction Industry Licensing Board Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Nancy Campiglia, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-2202
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Respondent, Department of Banking and Finance, Division of Finance (Division), is the state agency charged with administering the mortgage brokerage guaranty fund (fund) codified in Sections 494.042 through 494.045, Florida Statutes (1987). Among other things, the Division processes claims for payment from the fund by persons who were parties to a mortgage financing transaction and who have suffered monetary damages as a result of a violation of the law by a licensed mortgage broker. In this case, the perpetrator was Stackhouse Mortgage Corporation (Stackhouse), which held mortgage brokerage license number HB-0006527 from September 19, 1976 through August 31, 1986 and operated at least part of that time in the Brevard County area. In order to perfect a successful claim and be assured of participating in the distribution of moneys from the fund, a person must satisfy a number of statutory criteria within a specified time period after the first notice is filed. This proceeding involves a number of claims by various parties who suffered monetary damages as a result of the illicit acts of Stackhouse. The principal factual issues are whether petitioners, Robert Motes, Machiko Motes, Madge Chesser and Christiane E. Driscoll, all claimants, satisfied the required statutory criteria within the specified time period, and whether the first valid and complete notice of a claim was filed on January 20, 1987 as maintained by the Division, or occurred on a later date as urged by petitioners. These issues are crucial to petitioners' interests since the amount of money to be distributed from the fund for all claimants (on a pro rata basis) is $100,000, and all of that money has been proposed to be distributed to intervenors and other claimants because of the alleged untimeliness of petitioners' claims. The Stackhouse matter first came to the Division's attention on January 20, 1987 when it received by certified mail a letter containing a copy of a complaint filed against Stackhouse by intervenors, Richard S. and Althea M. Rucki, in the circuit court of the eighteenth judicial circuit in and for Brevard County. This filing constituted the first valid and complete notice of the matter. As such, it triggered a two year time period in which other claimants had to file such notice with the Division and then satisfy all statutory criteria in order to share in the first, and in this case the only, distribution of moneys from the fund. Intervenors eventually obtained a summary final judgment against Stackhouse on January 10, 1989 in the amount of $27,200 plus $1,972 in interest, $76 in court costs, and $2,000 in attorney's fees. Copies of the judgment, unsatisfied writ of execution and affidavit of diligent search were filed with the Division on January 19, 1989, or within two years from the date the first notice was filed. After the Rucki notice was filed, a number of claimants, including the other intervenors, filed their notices with the Division within the two year time period and thereafter satisfied all pertinent statutory criteria. Their names, dates of filing their final claims with the Division, and amounts of final judgment, including costs and fees, are listed below in the order in which the claimants filed their first notice with the Division: Claimant Date of Filing Claim Amount of judgment Roberts January 19, 1989 $84,562.30 Rucki January 19, 1989 31,248.00 Gantz January 19, 1989 15,634.28 Carman January 19, 1989 48,767.87 Thomas July 21, 1988 40,103.22 Hahn January 19, 1989 14,165.14 Ulriksson January 18, 1989 14,497.00 Choate January 18, 1989 28,994.00 Anderson December 22, 1988 84,443.20 Resnick December 22, 1988 32,912.22 It is noted that each of the foregoing claimants satisfied all statutory requirements prior to the date of the filing of their respective final claims with the Division. This included the obtaining of a judgment against the debtor, having a writ of execution issued upon the judgment which was later returned unsatisfied, and thereafter having made a reasonable search and inquiry to ascertain whether the judgment debtor possessed any property or other assets to be used in satisfying the judgment. Based upon the judgments obtained by the above claimants, those persons are entitled to distribution from the fund in the following pro rata amounts: Anderson claim - $10,950.00 Resnick claim - 10,950.00 Carman claim - 10,950.00 Thomas claim - 10,950.00 Ulriksson claim - 7,937.83 Choate claim - 10,950.00 Roberts claim - 10,950.00 Gantz claim - 7,697.63 Hahn claim - 7,714.54 Rucki claim - 10,950.00 $100.000.00 On July 27, 1988 petitioners, Robert and Machiko Motes and Madge Chesser, filed their notices with the Division. On August 2, 1988, they were advised by the Division that "the first time period for payment of the Guaranty Fund claims is `two years after the first claim.'" Even so, petitioners did not complete all required statutory steps and file their final claims with the Division until March 1, 1989, or after the two year period had expired. Petitioner, Christiane E. Driscoll, filed her notice, copy of complaint and final judgment on January 23, 1989. Thereafter, she completed all required statutory steps and filed her final claim with the Division on June 6, 1989. As a consequence, none of petitioners are entitled to share in the first distribution of moneys from the fund. An attorney who once represented Driscoll, Rafael A. Burguet, made inquiry by telephone with a Division employee in either late December 1988 or early January 1989 concerning the steps required to process a claim on behalf of his client. It was his recollection that the Division employee did not advise him that the two year period for perfecting claims was triggered in January 1987. On January 20, 1989, Burguet sent a letter to the Division with a copy of the complaint and final judgment against Stackhouse. In the letter, he requested the Division to "please advise as to what further requirements you may have to file this claim." On January 23, 1989 a Division employee acknowledged by letter that the Division had received the complaint and judgment. The letter contained copies of the relevant portions of the Florida Statutes and advice that "claims for recovery against Stackhouse Mortgage Corporation are currently being forwarded to our Legal Department for the drafting of a Notice of Intent to either grant or deny payment from the Fund." There is no evidence that the Division made any positive representations to Burguet that either mislead him or caused him to delay in filing his claim. Similarly, the Division responded on August 2, 1988 to the initial filing of the Motes and Chesser notices with advice that the time period for complying with the statutory criteria was "two years after the first claim." Although there were subsequent telephone conversations (but no written communications) between their attorney and the Division, there was no evidence that the Division made any positive representations that would mislead petitioners or otherwise cause them to delay processing their claims. Petitioners Motes and Chesser contend that the first valid and complete notice was not received by the Division until May 20, 1987 when intervenor Carman filed a complaint against Stackhouse in circuit court and also filed her claim and copy of the complaint with the Division the same date. Under this theory, the two year period would not expire until May 19, 1989. This contention is based on the fact that the Rucki complaint was filed in circuit court on January 9, 1987 but the claim and copy of the complaint were not filed with the Division until January 20, 1987. Petitioners contend that subsection 494.043(1)(e) requires both acts to be accomplished the same date. However, this construction of the statute is contrary to the manner in which it has been construed by the Division. According to the stipulated testimony of an employee of the Brevard County sheriff's office, if the property to be levied on is not listed on the instructions to levy, the sheriff's office requires a court order prior to filing a return nulla bona. In this case seven claimants obtained such a court order directing the sheriff to furnish a return nulla bona as to the writ of execution. However, petitioners Motes and Chesser did not do so until after the two year time period had expired. The records received in evidence reflect that the initial inquiry made by Robert and Virginia R. Enteen was never pursued and therefore their claim should be denied.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent enter a final order distributing the moneys from the mortgage brokerage guaranty fund in a manner consistent with its proposed agency action entered on June 21, 1989. The requests of petitioners to share in the first distribution of moneys from the fund should be DENIED. DONE and ORDERED this 11th day of December, 1989 in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER 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 11th day of December, 1989.
The Issue The issue for determination is whether Respondents engaged in loan transactions with Florida consumers in which the combined rate of interest for each of the loans exceeded 18 percent in violation of Subsection 516.02(2)(a), Florida Statutes (2007).1
Findings Of Fact Petitioner is the state agency responsible for the enforcement of Chapter 516 (the Florida Consumer Finance Act) and Chapter 560, part IV (the Deferred Presentment Act). The Florida Consumer Finance Act regulates consumer lending transactions of amounts less than $25,000. The Deferred Presentment Act regulates deferred presentment transactions and provides an exception to the requirements of Chapter 516 for entities registered thereunder. Neither of the respondents is registered with Petitioner pursuant to Chapters 516 or 560, or any other chapter regulated by Petitioner. Respondent, EZPawn Florida, Inc. (EZPawn), is a Delaware corporation with its principal offices located at 1901 Capital Parkway, Austin, Texas 78746. EZPawn is licensed in Florida as a credit services organization (CSO), operating pursuant to Chapter 817, Part III, the Credit Service Organizations Act (CSO Act). Respondent, Integrity Florida Funding, L.P. (Integrity), is a Florida Limited Partnership with its principal place of business located at 84 Villa Road, Greenville, South Carolina 29615. Integrity lends money to Florida residents in consumer finance transactions. EZPawn and Integrity are independent entities. The entities are not affiliated entities and do not otherwise share common ownership, control, or management. Neither entity discloses to the other information regarding their cost of funds, profit margins, or overhead expenses. On November 30, 2005, EZPawn and Integrity entered into a business arrangement pursuant to written contract. The contract is identified in the record as the Credit Services Organization and Lender Agreement (the CSO/Lender Agreement). The CSO/Lender Agreement, in relevant part, authorizes EZPawn to take loan applications from Florida residents and submit them to Integrity for approval. Integrity charges an interest rate of 18 percent on each loan. EZPawn charges a fee of either $15.00 or $30.00 for each $100.00 loaned by Integrity. If Integrity approves a loan, Integrity funds the loan through the local EZPawn office. The EZPawn fee is added to the loan amount. If the fee charged by EZPawn was aggregated with the interest charged by Integrity, the rate of interest for the loan would exceed 18 percent. The factual issue is whether the fee charged by EZPawn is a "cost of obtaining a consumer finance loan" (cost of the loan) within the statutory definition of interest in Subsection 516.01(5). The quoted statutory phrase is not defined by statute or rule. Nor did the parties cite any controlling judicial decisions defining the quoted phrase in Florida. The trier-of-fact finds the evidence to be clear and convincing that the fee charged by EZPawn is a cost of the loan and must be aggregated with the interest charged by Integrity to determine the total amount of interest. Although EZPawn structures the legal form of its services as those provided by a CSO, the legal form is without economic substance. Economic reality demonstrates that the EZPawn fee is a cost of the loan. EZPawn casts its fee in the form of a charge for CSO services. The CSO agreement between EZPawn and each of its customers states that EZPawn will assist customers in preparing applications and compiling documentation necessary to apply for loans, will issue letters of credit (LOCs) on behalf of the customer to improve the customer's creditworthiness, will assist the customer in obtaining a loan, and will enroll customers in a credit reporting service, identified in the record as the PRBC, to report their loan payments. The enumerated CSO services are expressly authorized in the CSO Act. EZPawn does not share any of its fee with Integrity, and Integrity does not share any of the loan principal or interest with EZPawn. The two entities have separate rating, or underwriting requirements, and they do not share that proprietary information. Integrity determines the total amount of loans it will make and funds the loans out of its own capital. The LOC issued by EZPawn does not eliminate the risk of loss to Integrity. The economic substance of the loan transactions is substantially different than the legal form in which Respondents have chosen to cast the transactions. The legal form of the transactions has no economic effect. The EZPawn fee is not a fee for separate CSO services. EZPawn does not receive a fee unless Integrity funds a loan. If Integrity does not fund a loan, nothing happens, the EZPawn customer owes EZPawn nothing, and there are no loan payments to be reported by PRBC to improve the customer's creditworthiness. The EZPawn customer owes EZPawn no fee for separate CSO services unless Integrity funds a loan. No customer of EZPawn obtains a loan from Integrity unless the customer agrees to pay the EZPawn fee. Each of the approximately 36,000 loans at issue in this case share meaningful characteristics of payday loans. Each loan is a short-term single payment loan for a relatively low dollar amount that is more than $100.00 and less than $1,000.00. Payment is due on the next day the customer is paid between seven and 37 days after the date of the loan. Integrity charged an annualized percentage rate of interest of 18 percent on each of the loans. The EZPawn fee varies directly with the amount borrowed. Payment of the EZPawn fee is financed and is due and payable at the same time the principal and interest is due and payable to Integrity. The fee charged by EZPawn is an economic function of the amount and term of the loan from Integrity. EZPawn charges a fee on loans with a term of seven to 23 days in an amount equal to $15.00 per $100.00 borrowed. For loans with a term of 24 to 37 days, EZPawn charges a fee of $30.00 per $100.00 borrowed. EZPawn charges an additional fee, in addition to the accumulated interest charged by Integrity, each time a borrower refinances his or her loan. A borrower may refinance a loan up to six times. The first six refinances result in no payment on the loan principal. After refinancing a loan six times (a rollover loan), a borrower may continue to roll the loan over. However, the borrower must pay $50.00 toward principal for each rollover loan after six. An economically significant amount of the fees that EZPawn charged for titular CSO fees consist of rollover fees. Of the total fees that EZPawn charged for denominated CSO services, approximately 28,829 transactions were charged in rollover loans and approximately 11,631 transactions were for first-time loans. EZPawn charges a fee for every loan that Integrity makes. Integrity has not made any loans to any Florida borrowers to whom EZPawn did not provide alleged CSO services. Each note conditions the loan on the agreement to pay the 18 percent interest to Integrity and the charge identified as a CSO fee to EZPawn. Each note requires the borrower to, “promise to pay [Integrity] the Total of Payments in 1 payment on the due date indicated.” The "Total of Payments" includes the reputed CSO fee. Customers do not pay the alleged CSO fee to EZPawn independently from the loan made by Integrity. Rather, the EZPawn fee is included on the face of each loan note as part of the finance charge and total of payments. The EZPawn fees are payable only through an electronic debit transaction that deducts the money from the borrowers bank account automatically on payday (ACH). The loan documents processed by EZPawn treat the so- called CSO fee as an interest charge for federal reporting and disclosure requirements. The documents that memorialize the loans are substantially the same in substantive form for each of the approximately 36,000 loans. The note treats the CSO fee as a finance charge for purposes of the federal Truth in Lending Act (TLA). The note specifically recognizes that the CSO fee is part of, “[t]he dollar amount the credit will cost you [the borrower].” The CSO fee is also included in the TLA calculation of the actual percentage rate (APR) of finance charge. The loan documents acknowledge the charge to be part of, “[t]he cost of your credit as an annual percentage rate.” The economic substance of the charge identified in the loan documentation as a CSO fee, in relevant part, is a charge by EZPawn for its extension of credit to the borrower. The extension of credit is cast in the form of an LOC. The charge for the extension of credit by EZPawn, in the form of an LOC, is not for a separate loan of a different sum of money. The charge by EZPawn and the interest charged by Integrity are each part of the aggregate economic cost of the loan to the borrower. EZPawn agrees in the LOC to pay Integrity principal, interest, and a non-sufficient funds fee in the event of default by the borrower. In every one of the loan transactions at issue, EZPawn issued an LOC. In response to over 36,000 loan applications, Integrity made a loan every time EZPawn issued an LOC. Integrity never made a loan without an LOC. EZPawn applies its own loan guidelines or underwriting requirements. Once EZPawn approves a loan application, EZPawn issues an LOC in favor of Integrity in an amount not to exceed principal, interest, and dishonored item fee as applicable to the loan arranged by EZPawn. The LOC provides that EZPawn will pay Integrity the principal and interest owed upon the loan: (1) becoming past due and unpaid, (2) the dishonoring of any ACH debit or other payment device, and (3) not more than three days elapses since the latter of the above things occurs. Upon default, Integrity collects on the LOC automatically. Integrity immediately receives payment of its principal along with any accrued interest and a non-sufficient funds fee. The economic reality of each loan transaction is that the risk of loss and burden of collection is on EZPawn. Any risk of loss shouldered by Integrity is limited to the financial health of EZPawn, which has been significantly enhanced after entering into the CSO/Lender agreement with Integrity. Integrity requires EZPawn to issue an LOC as a prerequisite for each loan. An LOC is an underwriting requirement that a borrower must satisfy to obtain the loan. Integrity will not approve a loan without an LOC. EZPawn controls the distribution of loan proceeds to the borrower. Integrity sends an electronic direct draft to EZPawn (the draft). EZPawn prints the draft, which is payable to the borrower. EZPawn then immediately provides cash to the borrower in exchange for the draft. EZPawn employees instruct borrowers that the draft can only be cashed with EZPawn or Integrity. No borrower ever leaves an EZPawn store without cash. The Operation Manual adopted by EZPawn contains specific instructions emphasizing that EZPawn employees should not give a draft to a borrower. The economic effect of each loan transaction is that two lenders charge for the same loan. Integrity funds the loan and charges interest as a cost of the loan. EZPawn charges a fee for extending credit to the borrower, assuming the risk of loss, and undertaking the burden of collection. The economic reality is that the charges imposed by both lenders are aggregated to determine the cost of the loan to the borrower. EZPawn’s Operations Manual identifies the "CSO fee" as interest in Florida. In the table identifying “Interest Rates by State” the entry for the Interest Rate in Florida includes “18% APR Lender Fee + $15 per hundred broker fee.” A determination that the charge imposed by EZPawn is part of the cost of the loan to the borrower is made based on the finding that EZPawn and Integrity are separate and independent businesses which are not associated, affiliated, or engaged in a joint venture. If two separate lenders charge interest for the same loan, and the aggregate interest exceeds the legal amount, neither party informed the ALJ of any legal authority that exonerates the two lenders. A determination that the charge imposed by EZPawn is part of the cost of the loan is not dependent on a determination that EZPawn is a loan broker for Integrity. However, the trier- of-fact considers findings relevant to the broker issue to be appropriate given the ample hearing time and evidence that the parties devoted to the issue. EZPawn is a loan broker. In addition to maintaining the exclusive contractual right to market, offer, and promote Integrity loans, EZPawn performs numerous functions on behalf of Integrity pursuant to the CSO/Lender Agreement. The CSO/Lender Agreement identifies EZPawn customers as joint customers of both entities. EZPawn is permitted to use Customer Information to market and sell other loan products without Integrity’s consent. However, Integrity must obtain written consent from EZPawn before using Customer Information in a similar fashion. Similarly, EZPawn may assign its rights or obligations to an affiliate without written consent from Integrity, but Integrity must obtain EZPawn’s permission to do so. A borrower completes one four-page application for both the stated CSO services from EZPawn and the loan from Integrity. Customers complete the application at one of EZPawn’s stores located in Florida. Before the loan is ever evaluated by Integrity, EZPawn uses the information on the application to make an independent determination based on its own underwriting criteria of whether to issue an LOC. EZPawn gives each borrower a document entitled a Credit Services Organization Disclosure Statement (CSO2). The CSO2 lists the services EZPawn will provide to the borrower for the fee identified as a CSO fee. The services include all collection functions related to the loans, maintaining substantially all records, issuing all adverse action notices on behalf of Integrity, and delivering all legally required disclosures on behalf of Integrity. The third document that EZPawn provides to a borrower is the Credit Services Organization Agreement (CSO3). The CSO3 is the actual agreement between EZPawn and the borrower regarding the services identified as CSO services. The CSO3 identifies the same CSO services as those disclosed in the CSO2. The fourth document that EZPawn provides to a borrower is the promissory note, which includes the TLA disclosure (the CSO4). The CSO4 prescribes the terms of the loan from Integrity. The cost of each loan at issue in this proceeding exceeds 18 percent. The details of the 36,000 loan transactions are well documented in the record. At the hearing, Petitioner introduced paper copies of files that contain loan documents for two representative borrowers as sample documents. The sample documents were also attached to the Amended Administrative Complaint. Respondents also introduced paper copies of representative loan documents. Petitioner’s Exhibit N is a printout of a spreadsheet file listing the name and other pertinent information of each customer. Each customer on the spreadsheet is associated with a unique Customer identification (ID) number. Petitioner’s Exhibit GG contains an electronic spreadsheet with a number of pieces of data associated with each of the loans. The information includes the customer ID number and loan number for each transaction. The disclosed APR for each of the loans is far in excess of 18 percent. The APR listed for every loan exceeds 18 percent by hundreds of percentage points. The APRs range from 210.31 percent to 1,472.23 percent. The loan made to borrower Y.M. on June 7, 2006, carries an APR of 439.18 percent. The loan made to borrower N.H. on June 6, 2006, carries an APR of 626.34 percent. The loan made to the borrower in the example loan note provided by Respondents carries an APR of 515.85 percent. On June 6, 2006, N.H. obtained a loan of $1,000.00 that matured on June 15, 2006. On May 15, 2006, N.H. obtained a rollover loan of $270.00 that matured on May 30, 2006. In the first loan to N.H., the cost of the loan included an annualized rate of interest of 18 percent, or $4.44, payable to Integrity and a stated CSO fee of $150.00 payable to EZPawn. The cost of the loan for the rollover loan to N.H. included an annualized rate of interest of 18 percent, or $1.86, payable to Integrity and a stated CSO fee of $40.50 payable to EZPawn. The TLA disclosure in the first loan to N.H. stated that the true cost of her credit was an APR of 626.34 percent. The TLA disclosure in the rollover loan stated the true cost to be an APR of 409.03 percent. The loan documents in each of the loans to N.H. required N.H. to authorize Integrity to execute an ACH debit transaction from the borrower’s checking account. The cost of the $1,000.00 loan to N.H. was $154.44, which was financed and rolled into the loan amount. The loan documents authorize EZPawn to collect a fee of $150.00 from the $154.44, or 97.1 percent of the cost of the loan. The balance of $4.44 represented interest payable to Integrity at an annualized rate of 18 percent. The rollover loan did not result in the distribution of any loan proceeds to N.H. Rather, the loan amount of $270.00 was paid on the existing account. Nevertheless, loan documents authorize EZPawn to collect $40.50 and Integrity to collect $1.86 in annualized interest. EZPawn collected approximately 95 percent of the cost of the rollover loan. The workings of the original and rollover loan to N.H. are illustrative of those in the other borrower files Petitioner entered into evidence. On May 26, 2006, Y.M. obtained a loan of $500.00 that matured on June 8, 2006. On June 7, 2006, Y.M. obtained a rollover loan of $500.00 that matured on June 22, 2006. The cost of the first loan included $3.21 charged by Integrity at an annualized rate of interest of 18 percent and a charge of $75.00 by EZPawn for a stated CSO fee. The cost of the rollover loan included a charge by Integrity of $3.45 at an annualized interest rate of 18 percent and a charge of $75.00 by EZPawn for a stated CSO fee. The TLA disclosure for the first loan to Y.M. disclosed that the true cost of credit was 439.18 percent. The true cost of credit for the rollover loan was 409.06 percent. A preponderance of the evidence showed intent to violate the statute. However, the trier-of-fact finds the evidence less than clear and convincing that Respondents intentionally violated Florida law. The legal structure of the business conducted in Florida is fashioned after a similar mechanism that is lawful in Texas. Although the statutes in the two states are different, there is ample evidence that Respondents undertook reasonable due diligence, including appropriate legal opinions, to ensure that the mechanism used in Florida complies with Florida law. This proceeding is apparently the first enforcement effort of this type by Petitioner in the state. Petitioner has not previously advised either of the respondents that Petitioner considers their business practice to be unlawful. Petitioner has not promulgated a rule, has not issued a written policy, has not issued a personal letter of advisement, and has not conducted public seminars to publish its statutory interpretation.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order requiring Respondents to cease and desist the business practices proven in this proceeding. DONE AND ENTERED this 25th day of March, 2008, in Tallahassee, Leon County, Florida. S DANIEL MANRY 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 25th day of March, 2008.
Findings Of Fact The Respondent holds certified general contractor's license no. CG CA03134. On or about February 3, 1973, Respondent, d/b/a John B. Roberts Construction Company, entered into a contract with Dominick A. Conte, 4319 Tranquility Drive, Highland Beach, Florida to construct a home for $58,000. It is this contract which is the subject of the Administrative Complaint. In addition to that contract, the Respondent entered into another contract with Mr. Conte to build a triplex for a total contract price of approximately $152,000. Specifically, the Administrative Complaint filed on or about April 6, 1976, copy of which was duly served on the Respondent and incorporated herein by reference, alleges that the owner paid the contractor $57,000 and he left the home partially built with no work started on the triplex. Additionally, the complaint alleges that the contractor issued a check on a closed account to Mr. Conte for $16,000 and Respondent never made good on that check. The Respondent and Mr. Conte applied for and received a construction loan commitment from Delray Beach National Bank to construct the house for Mr. Conte. The above parties also applied for a construction loan commitment to construct the triplex in the total amount of $151,000. The Respondent and Mr. Conte received a construction loan commitment for that project in the amount of $131,000. Respondent suggested that Mr. Conte deposit $16,000 as equity for the construction loan commitment for the triplex in the form of a check which was given to Respondent, drawn on Delray Beach National Bank. According to the evidence, this check drawn in the amount of $16,000 was never deposited by Roberts as was the understanding that Mr. Conte had received from him to the effect that the $16,000 was to be utilized for equity for the triplex agreement. When Mr. Conte encountered difficulties with Respondent in the construction of his personal home, Mr. Conte demanded the return of the $16,000 check. The Respondent gave him a check drawn on a closed account. Respondent admitted that the account had a nominal amount i.e., less than $100 on deposit when the $16,000 check was given to Mr. Conte. When Mr. Conte could not obtain the $16,000 from the Respondent, he instituted a civil suit and received a judgement in the amount of $18,500 against the Respondent. In December, 1972, Mr. Conte advanced Respondent $1,000 to obtain various permits and on January 5, 1973, he advanced Respondent an additional $3,000. Respondent commenced construction of the home in March, 1973 and according to the contract he was scheduled to complete it in November, 1973. At that time, according to Mr. Conte, Respondent was only about 50 percent complete at that juncture. At that time the mortgage construction loan was approximately $58,800 and Respondent had received draws of approximately $36,904. Mr. Conte advised the contractor during October that construction would have to speed up or he would be unable to meet the scheduled completion date. Sometime in late October or early November, Respondent abandoned the house. Mr. Conte admits that there were some modifications to the house that he agreed to pay and they were approximately $600 for stone work and approximately $1,300 for additional air conditioning and heating capacity. He received a roofing bill in the amount of $6,000 and when it was not paid, he received a notice of intent to file a lien. He received other bills totalling approximately $800 of which approximately $300 was for window glass and $500 represented an additional amount owed for plumbing expenses. He withdrew the balance of the mortgage commitment (approximately $22,000) and he paid an additional amount of between $20,000 to $25,000 to complete the construction. Further in his testimony he recalled adding approximately $600 for stone work and approximately $500 for marble work. He testified that there were no further additions to the house. He completed the house in February, 1974. At the time the Respondent abandoned the house, he had completed the foundation, the concrete block work, framing, stucco work, the roof was partially completed and the walls were erected. For this work, the contractor received approximately $40,000 from Mr. Conte. Respondent testified that there was a problem with the mortgage commitment on the triplex and that he later returned a check for the $16,000. Respondent testified that when he left the Conte project, he had expended approximately $52,000 from the construction loan draws and that his total expenditures for the project amounted to $86,083, including his profit. It is undisputed that the parties have entered an agreement to construct a house for a total price of $58,000. Mr. Conte testified without contradiction that he made some changes in the plans which amounted to approximately ($1,900) nineteen hundred dollars which he paid over and above the contract price. Although Respondent argues that at the time that he abandoned the Conte project, he had expended approximately eighty-six thousand dollars ($86,000), there was no proof of that testimony despite the agreement and stipulation of all parties that the undersigned would consider such proof when submitted within a stated period of time. Respondent submitted a portion of his checking account which he maintains establishes his position, however, it suffices to say that the documents submitted only establish that monies were paid but the critical link of tieing such amounts to the Conte's project was not established. The undersinged has considered the various additions to the project. Additionally it was noted that Respondent is a custom home builder and is experienced in the making of contracts for homes such as the one he undertook to construct for Mr. Conte. Since he takes the position that the contract price did not cover, according to him, the numerous changes in the Conte home, he is obliged to establish via some contract or Quantum Merit theory that Mr. Conte got more than he paid for as per their agreement. For it is easy to project that according to Mr. Conte's figures, the contract price would not have been adequate to complete the house based on the draw schedule and the construction progress. Thus at this rate, the project under Respondent's cost-basis, would have exceeded ($172,000) one hundred seventy-two thousand dollars. Clearly Respondent being well versed in the construction of custom homes, knew or should have known that in order to proceed with this project, he would need to renegotiate the contract based on the cost projections at the stage when he abandoned the project. Instead he did not attempt to renegotiate the contract and abandoned the job. He left the project subject to materialmen liens which Mr. Conte paid. Based on these facts, I find and conclude that Respondent failed to account for the amount of money that he drew from the Conte construction loan. Having done so, in view of the record evidence establishing that the project could not be completed within the contract price and the failure of Respondent to establish that the amounts withdrawn from the construction loan account were utilized on the Conte project or that he would be able to fulfill the terms of his contractual obligations, I find that he has engaged in a diversion of funds as alleged.
Recommendation Having found that the Respondent has engaged in a diversion of funds as alleged, I recommend that his certified general contractor's license be suspended for a period of six (6) months. DONE and ENTERED this 20th day of September, 1976, in Tallahassee, Florida. COPIES FURNISHED: Barry Sinoff, Esquire 1010 Blackstone Building Jacksonville, Florida 32202 John B. Roberts 5172 Northeast 14th Avenue Pompano Beach, Florida 33060 JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 ================================================================= AGENCY FINAL ORDER ================================================================= Mr. John B. Roberts c/o Glenwood Builders 261 E. Palmetto Park Rd. Boca Raton, Florida 33432 Dear Mr. Roberts: At a formal hearing held in Pompano Beach, Florida on July 21, 1976, by the Division of Administrative Hearings, it was recommended that John B. Roberts' certified general contractor's license be suspended for a period of sixty days. On March 4, 1977, at the Florida Construction Industry Licensing Board's montly meeting, the Board voted to dismiss the case against you, therefore the Administrative Complaint is hereby dismissed. Your Certified General Contractor's License remains in full force and effect. Sincerely, FLORIDA CONSTRUCTION INDUSTRY LICENSING BOARD J. K. LINNAN Executive Director cc: Barry S. Sinoff, Esquire 1010 Blackstone Building 229 E. Bay Street Jacksonville, Florida 32202 Mr. James C. Brady, Esquire Zealy & Brady 2691 East Oakland Park Boulevard Suite 400, Mercede West Building Ft. Lauderdale, Florida 33306
Findings Of Fact Edward D'Alesio, Jr., is a registered general contractor with the Board and holds license no. RG00A3370. Pursuant to an agreement signed on January 26, 1976, between Respondent and Mr. Wernley, Respondent agreed to construct a home for Mr. Wernley for a price of $39,500.00. On April 21, 1975, Mr. Wernley gave Respondent a check for $2,000 made payable to "D.R.G. Builders Trust Fund Account" which was deposited in the account of D.R.G. Builders. According to the terms of the agreement entered into by Mr. Wernley and Respondent, construction of the home was to be completed within 120 days. Evidence reveals that substantial progress was made toward construction of the Wernley home during August and September, 1975, however, little if any progress was made during late 1975. Mr. Wernley registered complaints to Respondent about the progress of construction Inasmuch as he (Wernley) had secured permanent financing at a favorable Interest rate which was due to expire during January or February, 1976. On March 11, 1976, Mr. Wernley demanded the return of his $2,000 security deposit which Respondent advised, by letter dated March 23, that he was unable to return due to financial difficulties. (See Petitioner's Exhibit #5) However, Respondent advised Mr. Wernley that he "would like to offer [him] the model home which was similar ... at the purchase price we had agreed upon." Respondent also agreed to assist in securing a competitive mortgage. Mr. Wernley was allowed five days to signify his acceptance of the model home which he (Mr. Wernley) rejected. Mr. Crass, Secretary-Treasurer for D.R.G. Builders, Inc., testified that the deposit monies used as mortgage commitments were issued and that at no time were monies diverted from one project to complete construction for other projects. Evidence reveals that during November, 1976, the Board through its investigator, Mr. Wallace Norman, issued a warning to Respondent for his failure to qualify D.R.G. Builders, however, Respondent took no action to correct this because at this juncture, the corporation had been dissolved by the State of Florida. Respondent also testified that the project was abandoned inasmuch as he was unable to secure additional financing from Southeast Mortgage Company. He testified that he had approximately 13 houses under construction and Southeast Mortgage Company shut off funds and demanded full payment of a $420,000 construction loan obligation. He testified that he needed approximately $60,000 to complete the houses under construction but was unable to secure additional financing. He testified further that the Wernley home was completed except the trim work during January of 1976. He advised Mr. Wernley during January, 1976, of the firm's cash flow problems and in an effort to amicably settle their differences, offered the model home which, according to his testimony, was equal or better, in all respects, than the home he contracted to build for the Wernleys. Respondent testified that he recently filed bankruptcy which should be final on June 20, 1977. Respondent takes the position that since he converted none of the money deposited by the Wernleys, it is D.R.G. Builders, Inc. that owes the Wernleys $2,000. However, it was noted under the bankruptcy proceeding liability list, that Wernley was a possible business obligation. Respondent testified further that he was advised by the Board's predecessor investigator that it was permissible to pull permits as an owner- builder and that Cooper City, the locality which issued the permits, through its building department, advised that the procedure which D.R.G. had utilized for at least 18 months was proper and acceptable.
Recommendation Based on the foregoing findings of fact and conclusions of law, I hereby recommend that the administrative complaint filed herein be dismissed in its entirety. RECOMMENDED this 30th day of June, 1977, in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Barry Sinoff, Esquire 1010 Blackstone Building Jacksonville, Florida 32202 F. F. Mallard, Chief Investigator Florida Construction Industry Licensing Board Post Office Box 8621 Jacksonville, Florida 32211 Mr. Edward D'Alesio, Jr. 3760 North 55th Avenue Hollywood, Florida 33010 ================================================================= AGENCY FINAL ORDER ================================================================= BEFORE THE FLORIDA CONSTRUCTION INDUSTRY LICENSING BOARD FLORIDA CONSTRUCTION INDUSTRY LICENSING BOARD, Petitioner,
The Issue At issue is whether Respondent committed the offenses set forth in the Amended Administrative Complaint and, if so, what penalty should be imposed.
Findings Of Fact Petitioner, Department of Business and Professional Regulation, Construction Industry Licensing Board (Department), is a state agency charged with the duty and responsibility of regulating the practice of contracting pursuant to Chapters 20, 455 and 489, Florida Statutes. At all times material to the allegations of the Amended Administrative Complaint, Respondent was licensed in Florida as a Certified General Contractor, having been issued license number CG C018621, and authorized to engage in the practice of general contracting as an individual. At the time of the hearing, Respondent's license had been suspended. At no time material was Respondent licensed to practice contracting in Florida through Florida East Coast Properties, Inc. On or about November 13, 1995, Respondent, doing business as Florida East Coast Properties, entered into a contract with Kazimierz and Maria Charchut (the Charchuts) for construction of a single family residence to be located at 8 Farmsworth Drive, Palm Coast, Flagler County, Florida. The original contract price was $124,000. At the time of the signing of the contract, the Charchuts lived in Brooklyn, New York, and continue to reside there. The Respondent's license number does not appear on the contract. The Respondent's notification of the Construction Industries Recovery Fund does not appear on the contract. Between September 13 and November 28, 1995, the Charchuts paid Respondent a total of $44,000 of the contract price towards construction of the residence. This amount constituted more than 10% of the contract amount (10% of the contract amount would have been $12,400). A closing on the construction loan was scheduled for October of 1995. Respondent called Mr. Charchut a couple of days before the first scheduled closing telling him they could stop the closing so that they could get better interest rates. Between October 1995 and June of 1997, Respondent failed to appear at a total of three scheduled closings on the construction loan. The Charchuts wrote several letters and made several phone calls to Respondent expressing concern that the closing had not yet occurred although they had already paid him a substantial amount of money. The closing finally took place in October of 1997. Because of some change orders that were to be made to the house, including wooden floors and a longer driveway, the Charchuts paid an additional $14,813.75 at the closing bringing the total cost of the construction of the home to $138,813.75. Included on the Change Order form was an amount of $2,001.75 for water and sewer assessments, which comprised part of the $14,813.75 total additional moneys paid by the Charchuts. The closing agent testified that this closing was atypical, because the bank was concerned that Respondent held too much money in the construction project. She testified that the bank requires that builders have no more than ten percent deposit. Consequently, Respondent was required to reimburse the bank $16,786.25 of the Charchut's $44,000 deposit at the closing. This was accomplished by Respondent bringing a check to the closing in the amount of $25,000 and receiving a refund overage check from Flagler County Abstract Co., (written to Florida East Coast) in the amount of $8,213.75, resulting in Respondent paying a net amount of $16,786.25 at the closing. At the closing, the bank received a check from Flagler County Abstract Co. for $31,600 to put in the construction loan account. This amount was composed of the Charchut's payment of $14,813.75 plus Respondent's payment of $16,786.25. Mr. Charchut wrote to Respondent in March of 1998 expressing concern that the closing had taken place in October of 1997 but the construction of his home had not yet begun. Respondent replied to Mr. Charchut in a letter dated April 8, 1998, stating that he was sorry for the delay in beginning construction of the home and that he intended to begin construction the week of April 20, 1998. Respondent applied for the building permit on May 7, 1998. Respondent applied for water and sewer service on May 5, 1998. He began construction of the house in June or July of 1998. By the end of July 1998, Respondent finished the slab foundation and rough plumbing of the Charchut's home. Consequently, the mortgage company paid $14,769.40 out of the first draw payment on the construction loan to Respondent's company. Of that amount, $3,485.86 was for reimbursement for payment to subcontractors. In addition to the amounts paid to Respondent, the mortgage company paid Mastercraft Plumbing $1,894 and $5,656.60 to CRS Rinker Materials Corp. The total first draw was $22,320. After payment of the first draw in August of 1998, little if any work was done on the construction of the Charchut's home. After the initial work on the slab, Respondent stopped construction and told the Charchuts that he did not want to continue to build their home and was looking for another contractor to finish the house for them. After being told that Respondent did not want to work on the home, the Charchuts wrote to Respondent on October 5, 1998, notifying Respondent to stop doing further work on the property and asking him to notify the Building Department so a transfer of the construction permit to another builder could take place. The Charchuts subsequently engaged another contractor, Mr. V. M. Zarbo. Mr. Charchut testified that he paid approximately $160,000 for the house to be built, including the money paid to Respondent. Mr. Charchut testified that when Mr. Zarbo began his work, Palm Coast Utility asked him to pay the impact fee for water and sewer. Despite the Charchut's having paid Respondent $2,001.75 toward water and sewer assessments, Respondent's check for that amount made out to Palm Coast Utility Company was returned for insufficient funds. Consequently, the Charchuts had to pay $2,116.75 for this fee again through their subsequent general contractor, notwithstanding Respondent claiming that he had incurred this expense. When added together, the Charchuts paid Respondent a total of $51,650.50 for the work Respondent did on the house. The total is composed of the sum of $27,213.75 (the net Respondent retained on the original down payment), $14,769.40 paid to Respondent from the first draw, and $1,894 and $5,656.60 paid to Respondent's suppliers/subcontractors from the first draw. Additionally, the Charchuts paid $2,116.75 for payment of the utility impact fee that the Charchuts had to pay twice. The Charchuts asked their subsequent contractor to prepare an estimate of the cost of the work that Respondent performed on the home. His written estimate was for a total of $21,536.68. The Charchuts included that written estimate in a letter to Respondent dated November 16, 1998, asking for a refund of amounts they paid in excess of his costs. Roy Brand testified as an expert witness for Petitioner. Mr. Brand has been a certified commercial contractor for about 20 years. He reviewed the estimate of Respondent's expenses that was provided by the Charchut's subsequent contractor. It was Mr. Brand's opinion that the cost estimate was appropriate and, if anything, Respondent's expenses might have been less. Respondent testified that he spent more on some items that were listed in the estimate. Respondent, during the investigation leading up to this case, was given an opportunity to provide receipts to Petitioner's investigator of expenditures made to the house. The receipts supplied to Petitioner's investigator do not total an amount in excess of the estimate made by the Charchut's subsequent builder. Based upon Respondent's failure to provide receipts to prove that the estimate total was too low, Mr. Zarbo's good faith estimate of building expenses made after his inspection of the property, and testimony of Petitioner's expert witness as to the reasonableness of the estimate, the estimate of expenses for Respondent's work in the amount of $21,536.68 is accepted as appropriate. Thus, Respondent has failed to account for or return to the Charchuts $30,113.82, the difference between the amount paid by the Charchuts and the estimate of expenses.1 As of September 20, 2000, the Department's costs of investigation and prosecution, excluding legal costs, totaled $1,498.66. Previous disciplinary action At hearing, the Department offered proof that, on two prior occasions, Respondent had been subjected to disciplinary action by the Construction Industry Licensing Board (the Board). The first occasion is reflected in the terms of a Final Order of the Board, (Final Order No. BPR-2000-01399) dated April 4, 2000, which found Respondent guilty of violating Section 489.129(1)(c), Florida Statutes, by making misleading, deceptive, or fraudulent representations to a client; Section 489.129(1)(g), Florida Statutes,2 by acting in the capacity of a contractor in a name other than as set forth on the issued certificate or registration; Section 489.129(1)(h)1, Florida Statutes, by committing mismanagement or misconduct in the practice of contracting that causes financial harm to a customer; Section 489.129(1)(l), Florida Statutes, by signing a statement with respect to a project or contract with false information; Section 489.129(1)(m), Florida Statutes, by committing fraud or deceit in the practice of contracting; and Section 489.129(1)(n), Florida Statutes, by committing incompetency or misconduct in the practice of contracting and imposing the penalties of placing Respondent on probation for two (2) years and payment of an administrative fine, costs and restitution to a customer. The second occasion that Respondent was subjected to disciplinary action is reflected in the terms of a Final Order of the Board, (Final Order No. BPR-2000-01443) also dated April 4, 2000, which found that Respondent violated Section 489.129(1)(g), Florida Statutes, by acting in the capacity of a contractor under a certificate or registration other than in the name of the certificateholder; Section 489.129(1)(h)1 and 3, Florida Statutes, by committing mismanagement or misconduct in the practice of contracting that causes financial harm to a customer; Section 489.129(1)(l), Florida Statutes, by signing a statement with respect to a project or contract falsely indicating that payment had been made for all subcontracted work; Section 489.129(1)(m), Florida Statutes, by committing fraud or deceit in the practice of contracting; and Section 489.129(1)(n), Florida Statutes, by committing incompetency or misconduct in the practice of contracting; and imposing the penalties of probation, payment of fines, costs and restitution. Respondent apparently did not satisfy the fines and costs imposed by the foregoing orders as Respondent's license was suspended on May 17, 2000, for non-payment of fines, costs or restitution.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law set forth herein, it is RECOMMENDED: That the Construction Industry Licensing Board enter a final order adopting the foregoing findings of fact and conclusions of law, and which, as penalty for the violations found, imposes an administrative fine in the total sum of $11,250, revokes Respondent's license, orders that Respondent pay restitution to the Charchuts in the amount of $30,113.82, and assesses costs of investigation and prosecution (through September 20, 2000) in the total sum of $1,498.66 against Respondent. DONE AND ENTERED this 12th day of December, 2000, in Tallahassee, Leon County, Florida. BARBARA J. STAROS 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 12th day of December, 2000.
The Issue The issue for determination is whether Respondent, Construction Industries Recovery Fund ("Respondent"), should reimburse Petitioners for damages caused by a contractor.
Findings Of Fact 1. Respondent is the governmental agency responsible for processing claims against it pursuant to Sections 489.140 through 489.143. Petitioners are natural persons within the meaning of Section 489.140(1). Except for the matters to be determined in this proceeding, Petitioners are otherwise eligible to seek recovery from Respondent within the meaning of Section 489.141. Initial Agreement On June 10, 1993, Petitioners entered into a written contract of sale with Klingshirn & Associates, Inc. ("Klingshirn") to construct a home at 6617 Southfork, Titusville, Florida (the "initial agreement"). The total purchase price was $134,000. The home was to be completed by November 24, 1993. The initial agreement required Petitioners to pay $24,000 of the total purchase price from their own funds3 and to make a good faith effort to obtain financing for the remaining $110,000. If Petitioners were unable to obtain financing, Klingshirn reserved the option to provide financing. The terms of financing were prescribed in paragraph 3 of the initial agreement. Paragraph 3 stated: . . . MORTGAGE PROVISION . . . within five (5) days [Petitioners] will make a good faith application with . . . a lender approved by [Klingshirn] for a mortgage loan in the amount set forth above at the prevailing interest rate not to exceed 8 1/2% 30 year and terms of the lender as of closing. If [Petitioners are] not approved for the mortgage within 30 days or any extension [Klingshirn gives them], or if [Petitioners] application is rejected, [Klingshirn] can either provide [Petitioners] with the mortgage on the same terms and conditions as the lender [Petitioners] applied with, or (ii) refund [Petitioners] deposits . . . and terminate this contract. . . . Petitioners and Klingshirn changed the printed text in the initial agreement. They struck through the phrase, "at the prevailing interest rate," and inserted the phrase, "not to exceed 8 1/2% 30 year." Condition Precedent A condition precedent is one which calls for the performance of some act, or the happening of some event, after a contract is entered into upon the performance or happening of which an obligation to perform depends.4 The initial agreement was subject to a condition precedent by its express terms and by oral agreement. The express terms of the initial agreement made the agreement subject to a condition precedent. Petitioners' obligation to perform was expressly dependent on the procurement of financing for $110,000, over a 30 year term, at an interest rate not to exceed 8 1/2 percent per annum. Even if the initial agreement were not expressly subject to a condition precedent, it was subject to such a condition by oral agreement. Prior to and at the time that Klingshirn and Petitioners signed the initial agreement, Petitioners and Klingshirn agreed that the initial agreement would become operative only upon the occurrence of financing. Even if the initial agreement were not subject to a condition precedent, the requisite financing was part of a contemporaneous oral agreement that induced Petitioners to enter into the initial agreement. There was no mutual intent for Petitioners to be obligated unless they procured the prescribed financing from either a commercial lender or Klingshirn. Construction Contract The condition precedent to the initial agreement was never satisfied. The initial agreement never became operative. On July 7, 1993, Petitioners obtained a financing commitment from Harbor Federal Savings & Loan Association in Fort Pierce, Florida ("Harbor"). Harbor agreed to provide financing for $105,000 rather than the $110,000 prescribed in the initial agreement. Petitioners agreed to increase their cash investment. On August 4, 1993, Petitioners and Klingshirn executed a Construction Loan Agreement for $105,000 (the "construction loan agreement"). The construction loan agreement stated: [Klingshirn] hereby . . . agrees to the terms and conditions of the [construction loan], and further agrees that where the [construction loan] conflicts with the terms and provisions of any construction contract existing with Borrower, that the [construction loan] shall control. Petitioners executed the construction loan agreement as borrowers. Klingshirn executed the builder's assent to the construction loan agreement. On August 4, 1993, Petitioners and Klingshirn executed a construction contract within the meaning of Section 489.141(1)(a) (the "construction contract"). The construction contract included the construction loan agreement and those terms in the initial agreement which did not conflict with the construction loan agreement and which Petitioners and Klingshirn adopted when they executed the construction contract.5 The construction contract was executed after July 1, 1993. It controlled the construction of Petitioners' home until it was modified on December 9, 1993. On December 9, 1993, Petitioners agreed to extend the completion date to March, 1994. Klingshirn agreed to repair specified defects and to increase the landscaping allowance. Mismanagement And Misconduct Petitioners did not know that Klingshirn was a corporation engaged in contracting without a qualifying agent in violation of Section 489.119. Mr. Michael R. Harvey, a financially responsible officer of Klingshirn and one of its employees, was licensed as a certified building contractor (the "contractor" or "licensee"). However, the contractor neglected to qualify Klingshirn. The contractor illegally used his license to obtain the necessary building permit on behalf of Klingshirn. He procured the building permit in his own name on August 27, 1993. The contractor knowingly violated Section 489.129. He committed mismanagement and misconduct in the practice of contracting that caused financial harm to Petitioners in the amount of $58,534.46. The contractor failed to ensure that the home was constructed according to either the plans and specifications of the project or the Southern Building Code. He also failed to remedy the violations. The contractor failed to satisfy subcontractor liens after Petitioners gave him the funds to do so. He obtained at least three draws of unspecified amounts from Harbor. The contractor abandoned the job. He failed to perform work without just cause for over 90 consecutive days when the percentage of completion was less than the total contract price paid to him at the time of abandonment. The project was not completed on November 24, 1993. On December 9, 1993, Petitioners and Klingshirn entered into an Addendum to the initial agreement. The Addendum extended the completion date to March, 1994. The contractor failed to meet the extended deadline. On April 4, 1994, construction ceased. On April 14, 1994, the contractor removed himself and his license from the project. Final Order On August 11, 1995, the Department of Business and Professional Regulation filed an Administrative Complaint against the contractor alleging violations of Sections 489.129(d), (h), and (k). The Construction Industry Licensing Board (the "Board") entered a Final Order on January 16, 1996. The Final Order found the contractor guilty of the allegations in the Administrative Complaint. The Board directed the licensee to pay restitution to Petitioners in an unspecified amount based on violations of Sections 489.129(d), (h), and (k) that occurred on or after July 1, 1993. Civil Action On October 23, 1995, Petitioners filed a civil action against the contractor. Petitioners filed the civil action in the Circuit Court of the Eighteenth Judicial Circuit in and for Brevard County, Florida. Daniel J. Johnson and Doris S. Johnson v. Michael R. Harvey, Case Number 95-16601-CA-F. On December 1, 1995, the contractor filed a Suggestion of the Pendency of Bankruptcy in the civil case. On November 25, 1994, the contractor had filed for bankruptcy in the United States Bankruptcy Court, Middle District of Florida. In Re: Michael R. Harvey, Debtor, Case Number 94-11514-8B7. On March 8, 1995, the Bankruptcy Court entered a Discharge of Debtor Order. On December 1, 1995, the bankruptcy trustee notified Petitioners that no assets were available for distribution from the bankruptcy estate except exempt assets. Claim Against Respondent On March 29, 1996, Petitioners filed a claim against Respondent. On June 13, 1996, the Construction Industries Recovery Fund Committee (the "Committee") denied the claim. The Committee determined that Petitioners are required by law to execute a construction contract on or after July 1, 1993, to recover from Respondent. The Committee found that Petitioners executed the required contract on June 10, 1993. On June 14, 1996, the Board ratified the Committee's action. The Board entered a Final Order on August 20, 1996. Payment To Respondent Petitioners paid money to Respondent in statutorily prescribed amounts through a surcharge of one-half cent per square foot of the project. The surcharge is imposed pursuant to Sections 489.140(2) and 468.631. Petitioners received no reimbursement from Respondent. Nor did Petitioners receive restitution from the licensee.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order and thereinGRANT Petitioners' claim for recovery against Respondent. RECOMMENDED this 20th day of March, 1997, in Tallahassee, Florida. DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 20th day of March, 1997.
