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.
Findings Of Fact On November 20, 1985, petitioners, Richard Schulze and Constable Atlantic, Inc., made application with respondent, Department of Banking and Finance, Division of Securities (Divi- sion), for licensure as a principal and broker-dealer, respec- tively. In response to a Division request, petitioners submitted amended applications containing additional information on January 31, 1986. After conducting an investigation of petitioners' backgrounds, the agency issued a proposed final order on February 18, 1986, denying the application on the grounds (a) Schulze had violated the federal Commodity Exchange Act and had been the subject of a final administrative order in the State of Minnesota involving a violation of that state's security laws, and (b) an officer or director of Constable Atlantic, Inc. (Schulze) had been guilty of an act which would be cause for denying or revoking the registration of an individual dealer. The agency action prompted the instant proceeding. Schulze is president of Wyndwood Merchantile Corporation (Wyndwood) and various affiliated organizations. Wyndwood is involved in the sale of precious metals and is currently doing business in the State of Florida and other states. Constable Atlantic, Inc. is a Delaware corporation authorized to do business in the State of Florida. Schulze is Constable's president, his wife Theodora treasurer, and his son Otto secretary. The three are also the directors and shareholders of the corporation. Constable is now registered as a broker and dealer with the federal Securities and Exchange Commission. Just recently, Schulze was licensed as an associated person and a commodity pool operator by the National Futures Association, which is the licensing arm of the Commodities Futures Trading Commission (CFTC), a federal agency in Washington, D.C. Schulze has been involved in selling securities for the last six or seven years. At one time he was also a principal with Atlantic Futures, Inc. (AFI), which was then licensed as a commodity pool operator and trading advisor with the CFTC. AFI and Schulze were both under the regulatory jurisdiction of that agency. On October 2, 1984 the CFTC issued a complaint and notice of hearing alleging that AFI and Schulze had violated various provisions of the federal Commodity Exchange Act and CFTC regulations. More specifically, it alleged that: ...AFI and Schulze, aided and abetted by each other,...cheated and defrauded or attempted to cheat and defraud AFI's pool participants in violation of Section 46(A) of the Commodity Exchange Act, as amended...; that AFI, aided and abetted by Schulze, violated Section 40(1) of the Act and Sections 4.41(a) and 166.3 of the Commission's regulations; and that AFI violated Sections 4.21(a) and 4.21(a)(3) of the Commission's regulations. Thereafter, Schulze and AFI submitted an offer of settlement to the CFTC which was accepted and formalized in a consent decree entered by the CFTC on April 23, 1985. The consent decree made no adjudication of law or fact, or an adjudication on the merits of the case. Rather, it was entered solely for the purposes of accepting the offer of settlement and terminating the proceeding. Under the terms of that decree, which has been received in evidence as respondent's exhibit 2, Schulze and Atlantic paid a $100,000 fine and agreed to cease and desist from any violations. In addition, AFI agreed to a suspension of its registrations for six months and to never apply for any other registrations with the CFTC. Finally, for purposes of the settlement only, the CFTC found Schulze had violated certain portions of the Act and regulations and noted that "these findings may be used only in any other proceedings brought by the Commission." Schulze later made application with the CFTC for licensure as a dealer, and this application was approved on September 11, 1986. On or about July 26, 1984 the State of Minnesota issued an ex parte cease and desist order against Wyndwood, Schulze and others requiring them to stop selling securities in that state without being registered. The order, which has been received in evidence as respondent's exhibit 1, required Schulze to request a hearing within a prescribed time, or the order would become final. Schulze did not timely request a hearing. However, after the prescribed time to request a hearing had expired, he filed a request with the State Commissioner and the order of July 26 was subsequently vacated on September 18, 1986. The outcome of the proceeding is not known. Constable Atlantic, Inc. is a member firm of the National Association of Security Dealers (NASD) and is registered as a broker and dealer with the Securities and Exchange Commission (SEC). In obtaining their registrations, Constable and Schulze furnished the SEC and NASD the same information that was submitted to respondent.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the applications of Constable Atlantic, Inc. and Richard Schulze for registration as a broker- dealer and principal, respectively, be APPROVED. DONE and ORDERED this 26th day of November, 1986, in Tallahassee, Florida. DONALD R. ALEXANDER 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 26th day of November, 1986. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-1065 Petitioners: 1. Covered in finding of fact 4. 2. Covered in finding of fact 4. 3. Covered in finding of fact 4. 4. Covered in finding of fact 3. 5. Covered in finding of fact 3. 6. Covered in finding of fact 3. 7. Covered in finding of fact 3. 8. Covered in finding of fact 3. 9. Covered in finding of fact 3. Covered in finding of fact 3. Covered in finding of fact 2. Covered in finding of fact 2. Rejected as being irrelevant. Covered in finding of fact 5. Respondent: Covered in finding of fact 1. Covered in finding of fact 1. Covered in finding of fact 1. Covered in finding of fact 4. Covered in finding of fact 4. Covered in finding of fact 3. Rejected as being irrelevant. Rejected as being irrelevant. COPIES FURNISHED: Edward Brodsky, Esquire Sarah S. Gold, Esquire SPENGLER, CARSON, OUBAR, BRODSKY and FRISCHLING 280 Park Avenue New York, New York 10017 Calianne P. Lantz, Esquire Office of the Comptroller 401 Northwest 2nd Avenue Suite 870 Miami, Florida 33128 Honorable Gerald Lewis, Comptroller The Capitol Tallahassee, Florida 32301-8054 Charles E. Scarlett, Esquire Room 1302, The Capitol Tallahassee, Florida 32301-8054
The Issue The issue in Case No. 90-4722 was whether B & B Mortgage Equity, Inc. was entitled to licensure as a mortgage broker in the State of Florida. As discussed in more detail below, B & B Mortgage Equity subsequently withdrew its application for licensure and that case is now moot. The issue in Case No. 90- 6577 is whether Respondents committed the offenses alleged in the Amended Administrative Complaint filed in that case, and, if so, what disciplinary action should be imposed.
Findings Of Fact At all times pertinent hereto, B & B Investors was registered with the Department as a mortgage broker pursuant to Chapter 494, Florida Statutes. Until June 15, 1990, the business address for B & B Investors was 1481 N.W. 7th Street #1, Miami, Florida 33125. B & B Investors' registration number is HB 592369518. On or about July 5, 1990, B & B Investors filed a petition for relief under the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Florida, Case No. 9090-14587-SMW. Yanks was the president and principal mortgage broker for B & B Investors until May 10, 1989. Yanks is a licensed mortgage broker in Florida having been issued license number was 262788177. He has been licensed since 1980 or 1981. There is no evidence of any prior disciplinary action against him or B & B Investors. At all times pertinent hereto, Yanks was also the President of B & B Equity. B & B Equity has never been registered pursuant to Chapter 494, Florida Statutes. Until June 15, 1990, the business address for B & B Equity was also 1481 N.W. 7th Street #1, Miami, Florida 33125. At all times pertinent hereto, Hernandez-Yanks was married to Yanks and was the Vice President and Secretary of B & B Equity. Hernandez-Yanks is an attorney, but she has never been licensed pursuant to Chapter 494, Florida Statutes. On or about March 15, 1990, Hernandez-Yanks filed a Petition for Relief under the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Florida, Case No. 90-11654-BKC-AJC. On or about January 1, 1990, B & B Equity filed an Application for Registration as a Mortgage Brokerage Business (the "Registration Application"). Paragraph 6 of the Registration Application stated in part: List all officers, directors, partners, joint-ventures, and ultimate equitable owners. Ultimate equitable owner means natural person who owns 10 percent or more of applicant. NAME ADDRESS TITLE Barry Yanks 1481 NW 7 St. Pres. Ana Hernandez-Yanks 1481 NW 7 St. VP/Scty Yanks was designated as the principal mortgage broker on the Registration Application. The Department denied the Registration Application by notice dated June 4, 1990. CALVARY CHAPEL TRANSACTION At the time of the hearing in this matter, Marie Hall was 66 years old. She was last employed in 1988 by the Broward County School System as an adult vocational education instructor teaching students how to operate sewing machines. Her husband, the late Reverend Arthur Hall, died on March 22, 1988, at the age of 75. Because of health problems, he had been unable to work since 1962. The late Reverend Hall had very little education. Prior to the transactions involved in this case, the only other real estate deal in which the late Reverend and Mrs. Hall had been involved was the purchase of their home many years ago. In the summer of 1987, the late Reverend and Mrs. Hall sought to purchase Mount Bethel Baptist Church (the "Church"). To assist in their effort to purchase the Church, the Halls contacted Reverend Frank Lloyd. Reverend Frank Lloyd was the pastor of Hope Outreach, Church of God in Christ and the Chairman of the State of Florida Prison Ministry. Reverend Lloyd was also engaged in a consulting business through a company called Professional Proposal and Financial Consultants, Inc. ("PPFC"). In the summer of 1987, the Halls entered into an agreement with PPFC pursuant to which they paid PPFC $800 for PPFC's assistance in securing a loan of $250,000 to purchase the church. The agreement called for an interest rate of approximately 11 3/4 percent. The Halls deposited a total of $15,000 in escrow with Reverend Lloyd and/or PPFC. At the time the first $10,000 was deposited with PPFC, the parties entered into an agreement which provided as follows: ...This money is not to be used for down payment, or services rendered. It is to be escrowed only. At the closing of the loan this entire amount is to be returned to Elder Hall or his designate. If in the event no loan is secure [sic] all funds is [sic] to be returned to Elder Arthur Hall, President Calvary Chapel Church of God in Christ or his designate. Reverend Lloyd attempted to obtain a mortgage for the Halls from several companies including Ft. Lauderdale Mortgage and Horizon Development Mortgage ("Horizon"). The Halls decided not to pursue a loan from Horizon because Horizon wanted a non-refundable $3,000 up-front fee. There was also some question whether either company would handle a loan for a church. Reverend Lloyd introduced the late Reverend and Mrs. Hall to Yanks because Reverend Lloyd knew that Yanks had successfully obtained loans for other churches. The Halls met with Yanks on a couple of occasions in late 1987 and early 1988. Other members of the Hall's congregation attended some of these meetings. During those meetings, the need for some of the other church members to sign on the loan and/or pledge additional collateral was discussed. Yanks advised the late Reverend and Mrs. Hall that he might be able to secure a loan for them to purchase the Church, but the amount of the loan would be smaller and the interest rate would be higher than they had anticipated in their agreement with PPFC. Yanks did not require an up-front loan application fee. On January 14, 1988, the late Reverend and Mrs. Hall met with Reverend Lloyd and Yanks at the office of B & B Investors in Miami. As noted above, the Halls were initially seeking a loan of $250,000. During the January 14, 1988 meeting, Yanks advised the representatives of Calvary Chapel that he could arrange a loan of $162,000 at 17 percent if additional collateral was provided. At the January 14 meeting, the late Reverend and Mrs. Hall executed a mortgage loan application (the "Loan Application") with B & B Investors. The Halls executed the Loan Application on behalf of Calvary Chapel Church of God in Christ, Inc. (hereinafter Calvary Chapel). Yanks executed the Loan Application on behalf of B & B Investors. The Loan Application was for a $162,000 loan and stated that the loan origination fee would be $4,860.00 and the loan discount fee would be $4,860.00. The Loan Application did not indicate when those fees would be due or to whom they would be paid. The Loan Application noted that there would be an appraisal fee of $600.00 and attorneys' fees of $750.00. The evidence established that, in the mortgage brokerage business, a loan origination fee is often considered synonymous with a broker's fee. The origination fee is traditionally charged at closing. However, the agreement between a mortgage broker and a client determines when the mortgage broker is entitled to his fee. In certain circumstances, a mortgage broker may be entitled to payment upon obtaining a firm commitment for a loan irrespective of whether the loan closes. Although there was no statutory or rule requirement at the time of this transaction, it was customary in the industry for a mortgage broker to set forth in writing the terms as to when he is to be paid. The Application in this case did not state when the fees were to be considered as earned. The Loan Application also provided in part: If the above commitment or a commitment in an amount and/or upon terms acceptable to the undersigned is obtained and said mortgage loan is not closed because (I)(We) have not fulfilled our part of this agreement. (I)(We) agree to pay $ , the application deposit being a part, for obtaining said commitment. If an acceptable commitment is not obtained, the mortgage application deposit will be refunded, except $ to cover expenses actually incurred. A loan discount fee is the cost to the lender to discount the interest rate on a mortgage loan for sale in the secondary market. The discount fee is owed to the lender or investor and was collected at closing. A broker is not entitled to a loan discount fee. Yanks tries to ignore the terminology used in the Loan Application he prepared and claims that all parties knew that he and/or B & B Investors would receive both the loan origination fee and loan discount fee. He contends that he explained to the late Rev. Hall and Mrs. Hall that the loan origination fee and the loan discount fees were fees that would be paid to him when he arranged a firm commitment for a loan at the agreed upon terms. However, the more persuasive evidence established that the late Rev. Hall and Mrs. Hall did not understand that the loan origination fee and/or discount fee would be paid to Yanks irrespective of whether the loan actually closed. Moreover, Yanks has provided no credible explanation as to why he would ever be entitled to receive the loan discount fee. At the January 14, 1988 meeting, Yanks orally arranged a deal with Alan Greenwald, a private investor with whom Yanks had worked in the past, to fund a $162,000 loan at 17 percent. At the time of this transaction, there was no statutory requirement that loan commitments be made in writing. No written confirmation of the commitment was provided even though it was common in the industry for commitments to be given in writing in order to bind the lender to the transaction and to provide evidence of the terms of the commitment. The only written evidence of the loan commitment is a letter from Yanks to the attorney for Alan Greenwald. That letter states that Mr. Greenwald had asked for additional collateral. During the January 14, 1988 meeting, the late Rev. and Mrs. Hall agreed to put up their house as additional collateral. In addition, two other members of the congregation who were present at the meeting, Effie Davis and Cleveland Foreman, agreed in principal to permit a mortgage to be placed on their houses as additional collateral to secure the loan. Yanks contends that, as a result of his efforts in securing a commitment from Alan Greenwald as noted above, he was entitled to receive the loan origination fee and loan discount fee set forth in the Loan Application. After the January 14, 1988 meeting, Rev. Lloyd released to Yanks $10,000 of the $15,000 that he had been holding in escrow for the late Rev. and Mrs. Hall. The $10,000 check was made payable to B & B Investors. The $10,000 was not placed in an escrow or trust account upon receipt. Yanks apparently arranged for $1,000 of the money to be paid to Debbie Landsberg, the attorney for Alan Greenwald, as an advance on the legal fees and costs that were expected to be incurred in closing the transaction. At the time the $10,000 was transferred to B & B Investors, all of the parties to the transaction expected the loan to close and no one contemplated or anticipated that the loan would not go through. While both Yanks and Rev. Lloyd claim that the late Rev. Hall approved the release of the $10,000 as payment to Yanks for services in securing a commitment from Alan Greenwald, this testimony is rejected as not credible. The more persuasive evidence clearly established that at no time did the late Rev. and Mrs. Hall understand that if the loan did not close Yanks would keep the $10,000. After the January 14, 1988 meeting, the parties initiated the steps necessary to close the deal. These efforts were complicated by the illness of the attorney for the seller, the marriage of the attorney for the lender and the difficulty in locating the abstracts for the properties involved. Moreover, a number of title deficiencies regarding the Church were discovered and had to be corrected. The arrangements for financing the purchase of the Church changed several times. Initially, the Seller had indicated that it would take back a second mortgage for $50,000 in order to facilitate a closing. However, as the parties got closer to closing, the Seller changed its mind regarding the second mortgage. Ultimately, in September of 1988, the Seller agreed to take back a second mortgage of $35,000. Sometime during the summer of 1988, Greenwald reduced to $110,000 the amount he was willing to lend on the deal. That amount was to be secured solely by the Church property. Yanks claims that he arranged for another investor to lend between $40,000 to $45,000 with the residences of certain congregation members, including the Halls, Effie Davis and Cleveland Foreman, serving as collateral. These modifications were never memorialized in writing. As preparations for a closing proceeded, it became apparent that Effie Davis' house could not be used as security for the loan. While there is conflicting evidence as to why Effie Davis' house could not be used for additional collateral, the more persuasive evidence indicates that the presence of one or more existing liens on the property rendered it of minimal value as additional collateral. As a result of the inability to use Ms. Davis' house as part of the collateral for the loan, Yanks advised Calvary Chapel that the amount of the loan would have to be decreased from $162,000 to $150,000. Yanks also advised Calvary Chapel that an additional cash deposit of $14,000 was necessary to demonstrate to the lender that sufficient funds were available to conclude the deal. The additional money was paid in two parts. On or about August 23, 1988, Calvary Chapel paid $10,000 to the Ana-Hernandez-Yanks Trust Account. Shortly thereafter, on or about September 1, 1988, Calvary Chapel paid an additional $4,000 to the Ana Hernandez-Yanks Trust Account. These sums were received by Ana Hernandez-Yanks in trust as the attorney for the B & B Investors. No written escrow agreement was executed. No written amendment to the Loan Application was provided to reflect the new terms for the anticipated loan nor was there any written commitment letter. As noted above, the late Rev. Hall died in March of 1988. Reverend Phillip Hall, the son of the late Rev. Hall, was appointed the pastor of Calvary Chapel in April of 1988. At the time of his appointment, Rev. Phillip Hall was living in Nashville. He commuted between Nashville and Fort Lauderdale for a while before moving to Fort Lauderdale on July 31, 1988. Yanks suggests that the Reverend Philip Hall did not like the deal his parents had entered into and refused to honor it. More specifically, Yanks contends that Calvary Chapel and the seller made alternate arrangements for the sale of the property in order to avoid paying him. The evidence does not support such a conclusion. The Seller was obligated to provide clear title before the sale could close. The evidence established that the Seller was never able to provide all of the documents necessary to clear title. There is no persuasive evidence that Calvary Chapel failed to meet its obligations under the contract to purchase the Church. Instead, it appears that Calvary Chapel did everything in its power to go through with the transaction. Sometime in the fall of 1988, the seller, Mount Bethel Baptist Church, rescinded the contract to sell the Church. At some point thereafter, Calvary Chapel began occupying the Church under a lease/purchase arrangement, the terms of which have not been established in this case. As noted above, there is no persuasive evidence that the Rev. Phillip Hall and/or Calvary Chapel conspired to cheat Yanks out of his fees. In any event, even if Calvary Chapel decided for economic reasons not to go forward with the loan that Yanks was trying to arrange, it is concluded that neither Yanks nor B & B Investors had the contractual right to retain any of the money that had been advanced. After the deal failed to close, Rev. Lloyd returned to Calvary Chapel the remaining $5,000 he had been holding in escrow for the Halls. By letter dated September 19, 1988, Holly Eakin Moody, an attorney for Calvary Chapel, wrote to Yanks demanding the return of all the money that had been advanced. The letter stated: Please be advised that I have been retained by Calvary Chapel Church of God in Christ, Inc., to begin the appropriate legal action against you and your wife, Ana Hernandez-Yanks, for return of my clients [sic] escrow funds in the amount of $24,000. On or about December 24, 1988, Hernandez-Yanks tendered a check in the amount of $14,000 to Calvary Chapel. On the back of the check, the following release language was written: Full and Final Settlement of all claims against B & B Mortgage and Barry Yanks or Ana Hernandez- Yanks. Hernandez-Yanks wrote a letter dated February 7, 1989 to Holly Eakin Moody stating in part: Please be advised that as per your client's request, on December 24, 1988 I mailed them my trust account check in the amount of $14,000. I have checked numerous times with the bank and said check has not been presented for payment. I am hereby depositing said monies with the Registry of the Court. If you should have any questions, please contact me. It does not appear that Hernandez-Yanks ever deposited any money in the Registry of the Court in accordance with that February 7 letter. By letter dated March 14, 1989, Holly Eakin Moody returned the check containing the accord and satisfaction language to Hernandez-Yanks and reiterated a demand for a return of the entire $24,000. Ultimately, Hernandez-Yanks paid Calvary Chapel $14,000 by check dated March 6, 1990 on account number 020051156008 at the TransAtlantic Bank. A review of the bank records indicates that the $14,000 advanced by Calvary Chapel to B & B Investors in late August and early September of 1988 was not held in escrow. On or about September 1, 1988, $10,000 was deposited in the trust or escrow account of Hernandez-Yanks at Continental Bank (the "Continental Trust Account"). An additional $4,000 was deposited in the Continental Trust Account on or about September 6, 1988. On or about October 4, 1988, the Continental Trust Account was closed with a closing balance of or about $13,553.06. On or about October 4, 1988, Hernandez-Yanks opened a trust or escrow account at Ocean Bank (the "Ocean Trust Account"). The beginning balance of the Ocean Trust Account on or about October 4, 1988, was $13,000. On or about December 7, 1988, the balance in the Ocean Trust Account was $2,437. On or about December 15, 1988, Hernandez-Yanks opened a trust or escrow account at United National Bank (the "United Trust Account"). On or about January 19, 1990, the cash balance in the United Trust Account was $2,236.29. On or about January 5, 1990, Hernandez-Yanks opened a trust or escrow account at TransAtlantic Bank (the "TransAtlantic Trust Account"). The beginning balance of the TransAtlantic Trust Account on or about January 5, 1990, was $10,000. By check dated March 6, 1990, Calvary Church was paid $14,000 from the TransAtlantic Trust Account. There is no evidence that Yanks, Hernandez-Yanks and/or B & B Investors had any other escrow accounts. Based upon the foregoing, it is concluded that Yanks failed to ensure that monies received in trust were properly placed in escrow in a transaction wherein he acted as a mortgage broker. Moreover, Yanks failed to ensure that the $14,000 received by Hernandez-Yanks was returned expeditiously to Calvary Chapel. Yank's explanation that he does not tell his wife, who is an attorney, "how to run her business" does not excuse his failure to ensure that money placed in escrow with his company was promptly returned when the transaction was terminated. Yanks refused to repay any of the remaining $10,000 that was paid to B & B Investors claiming that he was entitled to keep the money as fees earned for processing a mortgage commitment from Allan Greenwald. As set forth above, the contention that the late Rev. Hall authorized payment in full of Yanks' fees is rejected as not credible. The more persuasive evidence established that the principals of Calvary Chapel did not understand that Yanks and/or B & B Investors were to be paid their fee even if the loan did not close. Since there was no agreement specifying when Yanks was to be paid, he had no legal right to retain the $10,000. Arguably, Yanks was entitled to some reimbursement for the expenses he incurred, including perhaps the $1,000 he supposedly paid to the investor's attorney. However, the evidence clearly established that Yanks was not entitled to retain the entire $10,000. 52 After the Department began its investigation of this case, Yanks offered to repay the loan discount fee of $4,860 to Calvary Chapel. As of the date of the hearing, Yanks was still refusing to repay the $4,860 loan origination fee which he claims he has earned. While Yanks' claim to the $10,000 was legally insufficient and should have been recognized as such, the evidence did not establish that Yanks was attempting to defraud the Halls and/or Calvary Chapel. There were clearly some misunderstandings between the parties. Many of these problems could have been avoided if Yanks had properly documented his fee arrangement in writing. Yanks spent a good bit of time trying to put the deal together and felt slighted when the transaction he structured fell apart, especially when Calvary Chapel ended up occupying the Church anyway. Yanks overreacted in his attempts to obtain compensation for his services. The evidence was insufficient to establish that his actions should be characterized as fraudulent. VAZQUEZ-CASTILLO TRANSACTION In approximately mid-December of 1988, Ana Vazquez began working for Yanks. Vazquez was hired by Yanks to assist in the processing of mortgages. Prior to becoming employed by Yanks, she had little experience in real estate transactions. Vazquez was employed by Yanks for only about two or three weeks. Thereafter, she was employed by Hernandez-Yanks as a secretary. Both Yanks and Hernandez-Yanks occupy space in the same building. As noted above, Hernandez- Yanks is an attorney. On or about February 27, 1989, Pura Castillo entered into a contract (the "Sales Contract") with Vazquez for the purchase of a condominium owned by Vazquez and located in Dade County, Florida, at 7440 Harding Avenue, Unit 301, Miami Beach, Florida (the "Condominium"). The sales price was $70,000. Pursuant to the Sales Contract, Vazquez was to convey title free and clear of all encumbrances, by a good and sufficient Warranty Deed. "Free and clear of all encumbrances" meant that the title being transferred from Ana Vazquez to Pura Castillo was not to be encumbered by any mortgages, judgments or other liens. The Sales Contract was not made contingent upon Pura Castillo obtaining new financing. The relationship between Ana Vazquez and Pura Castillo is not entirely clear. They were obviously well acquainted with each other. The evidence suggests that Pura Castillo's common law husband, Joseph Hardisson, was a close friend of the father of Ana Vazquez. While Pura Castillo and Joseph Hardisson were visiting with Vazquez, they began discussing the possible purchase of the Condominium by Pura Castillo. Yanks first learned about the possible sale of the Condominium to Pura Castillo when Vazquez asked Hernandez-Yanks to represent her. Hernandez-Yanks indicated that she would represent Vazquez in the sale. Vazquez also requested Yanks' assistance in obtaining a loan for Pura Castillo. Yanks advised Vazquez that he did not process loan applications for employees. He suggested that she contact one of the mortgage lenders with whom he did business. Vazquez contacted one such company, Inter-Mortgage Corporation, and obtained a loan application package. Shortly thereafter, a loan application was submitted with InterMortgage Corporation in the name of Pura Castillo. The circumstances surrounding the completion and submittal of that loan application are not entirely clear nor are they necessarily pertinent to this proceeding. The evidence did establish that the loan application contained some false information regarding Pura Castillo's residence and employment. InterMortgage contacted Yanks' office and advised that there were some problems with the application. Vazquez went to InterMortgage's office and retrieved the application. The evidence did not establish that Yanks was aware of the filing of the application with InterMortgage and/or that he knew the application contained any false information. It appears that a similar application with false information may also have been filed with another lender, Dixie Mortgage. There is no indication that Yanks was aware of the filing of this application and/or that he knew it contained false information. The Condominium was subject to a $42,000 mortgage from Standard Federal to Vazquez (the "Standard Federal Mortgage"). The Standard Federal Mortgage was a typical Fannie Mae mortgage and included a commonly used due-on- sale clause in Clause 17. That clause provided for a default by the borrower upon sale of the property unless the mortgagee had consented to the assumption of the mortgage by the purchaser. There were no federal or state laws in existence at the time prohibiting the enforceability of Clause 17. Vazquez had a contract to purchase another home which was contingent upon the sale of her Condominium. Thus, she was under some time pressure to close the sale of the Condominium. When it became apparent that a quick loan could not be arranged for Pura Castillo, Ana Vazquez turned to Yanks for advice. While there is conflicting evidence as to the discussions that took place, the more persuasive evidence established that Yanks agreed to structure a deal that would enable Ana Vazquez to sell the Condominium to Pura Castillo. As discussed in more detail below, Yanks structured a complicated and confusing arrangement whereby Pura Castillo was to make her monthly payments to B & B Equity, which was to play the role of a servicing agent and distribute the payments to the first mortgagee, Standard Federal. While Yanks now claims that after the Standard Federal Mortgage payment was made, the remainder of the monthly payments received by B & B Equity were going to be paid to Vazquez, there is no written agreement confirming this arrangement. It is the usual practice in the industry for mortgage brokers to determine whether there are outstanding mortgages on the property to be sold and to see to it that an existing mortgage is paid off or otherwise taken care of at the time of closing. It is the responsibility of the mortgage broker to contact the institution holding the mortgage to find out if it is assumable. If an existing mortgage has a due-on-sale clause, the mortgage broker would characteristically contact the first lien holder and get an estoppel letter to determine the balance of the loan. The mortgage broker might also seek a waiver from the lender so that the sale could be made without paying off the loan. Without such a waiver, a due-on-sale clause would entitle the original lender to declare the entire original loan due upon sale of the property. Yanks never obtained an estoppel letter or a waiver of the due-on-sale clause from Standard Federal. While Yanks claims that he contacted various persons regarding the enforceability of due-on-sale clauses, he never contacted Standard Federal about the specific clause in its mortgage to Vazquez. There is conflicting evidence regarding the discussions between Yanks and Vazquez regarding the structuring of the transaction. It is clear that Vazquez was more concerned with concluding the transaction rather than understanding the intricacies of it. As discussed in more detail below, the transaction structured by Yanks included several unexplained and/or inappropriate charges. In addition, the loan documentation was confusing and sometimes conflicting and/or contradictory. Vazquez indicated to Yanks that Pura Castillo was prepared to go forward with the sale and a closing was scheduled for June 16, 1989. In preparation for the closing of the sale of her condominium, Vazquez incurred several expenses. On or about March 31, 1989, she paid $275 to have the condominium appraised. On or about April 5, 1989, Vazquez paid $200 to National Title Abstract Company for an update of the abstract. On or about June 15, 1989, she paid $150 to Ticor Title Co. She also paid for a credit report on Pura Castillo. On June 16, 1989, Pura Castillo arrived at the office of Yanks and B & B Investors at 1481 N.W. 7th Street, Miami, Florida, to close on the purchase of the Condominium in accordance with the Sales Contract. Yanks and/or Hernandez- Yanks prepared the closing documents used at the closing. Much of the closing was conducted in Spanish. Yanks is not fluent in Spanish. Hernandez-Yanks, who speaks Spanish, acted as the closing agent and remained throughout the process. Yanks and Vazquez were in and out of the room throughout the closing. During the closing, Pura Castillo was told that B & B Equity was going to be the lender for the transaction. Pura Castillo inquired whether it was necessary for her to have her own attorney. Hernandez-Yanks replied that she could represent all parties and that it was not necessary for Pura Castillo to have her own attorney. At the closing, Pura Castillo presented cashiers checks for $5,800, $7,250 and $5,900 all made payable to the order of Ana Hernandez-Yanks, Trust Account. In addition, either Yanks or Hernandez-Yanks was given a check from Parker Realty in the amount of $2,800 which was the balance of the $7,000 deposit after payment of the $4,200 real estate commission. From the $21,750 brought to the closing, $14,000 was disbursed to Ana Vazquez. As noted above, Vazquez had already paid for the abstract, appraisal and credit report. In addition, as part of her mortgage payment, she had contributed approximately $1,281 to an escrow for taxes and insurance for which she was entitled to be reimbursed. Thus, the net cash that she received from the closing was less than $12,000 from the sale of a $70,000 condominium with a $42,000 mortgage. At the closing, Vazquez executed an "Agreement for Deed" in favor of Pura Castillo. An agreement for deed is a conditional sales contract pursuant to which a seller agrees to sell property to a buyer over a period of time. The seller retains the legal ownership of the property until the full consideration for the purchase is paid. After all the conditions have been met, the seller delivers a deed conveying ownership of the land to the buyer. The Agreement for Deed in this transaction provided as follows: That if said Buyers shall first make the payments and perform the covenants herein mentioned on their part to be performed, the said Sellers hereby covenant and agree to convey and assure to the Buyers or their heirs or assigns, in fee simple, clear of all encumbrances whatever, by good and sufficient Warranty Deed...[the condominium] And the Buyers hereby covenant and agree to pay to the Sellers the sum of $70,000 to be paid as follows: $19,073.12 cash in hand, the receipt of which is hereby acknowledged, and $704.32 or more per month on or before the 16th day of each and every month after the date of this instrument, to be mailed to the Sellers' address given herein, with interest at the rate of 11 percent, per annum on the whole sum remaining from time to time unpaid,... Arguably, the Agreement for Deed required Pura Castillo to make monthly payments to Vazquez of $704.32 plus interest on the outstanding balance. However, at the closing, Yanks provided Pura Castillo with a letter which explained that her monthly payments of $704.32 included $499.97 for principal and interest, $142.35 for real estate taxes and $62 for insurance. At the closing, Pura Castillo executed a mortgage (the "Mortgage") in favor of B & B Equity as mortgagee. The Mortgage stated that it secured an indebtedness of $52,500 and a promissory note for that amount was executed by Pura Castillo to B & B Equity at the closing. The Mortgage was similar in form and content to a Fannie Mae or a Freddie Mac mortgage form, except it included some additional provisions stating that it was a "Wraparound Mortgage." A wraparound mortgage is a financing device that is sometimes used when a seller of a piece of property agrees to take back and finance a portion of the difference between an existing first mortgage which is not being assumed or satisfied and the sales price for the property. Typically, the mortgagor on the first mortgage is the seller of the property and the mortgagee on the wraparound mortgage. The wraparound mortgage becomes a second or other junior mortgage behind the existing mortgage. The mortgagee of the wraparound mortgage agrees to continue making payments on the existing primary mortgage, at least so long as payments are made under the wraparound mortgage. Page 8 of the Mortgage included the following language: This is a Wraparound Mortgage. This wraparound mortgage is a second mortgage. It is inferior to certain mortgage [sic], herein called the first mortgage which covers the above described property at the time of execution of this wraparound mortgage. The wraparound mortgagee shall be excluded from any terms or conditions of the prior mortgagees. The wraparound mortgagee's obligation to pay the prior mortgages is limites [sic] to funds received from the wraparound mortgagor. For a number of reasons, the use of a wraparound mortgage in this transaction was totally inappropriate. The first page of the mortgage included a number of warranties including the following: The mortgagor hereby covenants with and warrants to the Mortgagee that the Mortgagor is indefeasibly seized with the absolute and fee simple title to said property. This warranty is inconsistent with the ownership interest that the Mortgagor, Pura Castillo, had as a result of this transaction. Pura Castillo's only claim to title was via the Agreement for Deed and she was not indefeasibly seized with the fee simple title. As noted above, the Mortgage states that it secures an indebtedness of $52,500 and a promissory note (the "Note") for that amount was executed by Pura Castillo to B & B Equity at the closing. That Note required Pura Castillo to make payments directly to B & B Equity. However, the Agreement for Deed calls for Pura Castillo to make payments to Vazquez. Moreover, Pura Castillo signed the Note obligating herself to make payments on a $52,500 indebtedness to B & B Equity even though the Standard Federal Mortgage was not satisfied and had a remaining balance of $42,000. In other words, the result of this transaction, at least as it appeared on the public records, is that a $70,000 condominium was encumbered by two separate mortgages (the Standard Federal Mortgage and the "Wraparound Mortgage") securing separate promissory notes totalling more than $94,000. At no time prior to or during the closing did Yanks or Hernandez-Yanks explain to Pura Castillo that an Agreement for Deed was being utilized in this transaction and that she would not obtain full legal title until all of the mortgages were paid off. Furthermore, neither Yanks or Hernandez-Yanks explained to Pura Castillo that the mortgage she signed in favor of B & B Equity was a wraparound second mortgage. While Yanks contends that Pura Castillo had plenty of opportunity to review the documents and ask questions regarding them, she was clearly an unsophisticated buyer who was incapable of deciphering the confusing and ambiguous documentation for this clumsily crafted transaction. In sum, the use of an agreement for deed and a wraparound mortgage in the same transaction was redundant, confusing and illogical. Moreover, Yanks' efforts in this transaction clearly violated the due-on-sale clause (Clause 17) in Standard Federal's existing first mortgage. The Department has suggested that the transaction was a calculated fraud with some undefined goal. After considering all the evidence, the transaction can more accurately be described as an awkward attempt at creative financing which included a number of hidden and inappropriate charges for the benefit of Yanks and/or B & B Equity. Yanks contends that Vazquez was desperate to close the sale and authorized him to proceed with whatever financing he could arrange so long as she netted $14,000 from the sale. He claims that she agreed to the wraparound mortgage as the only way to proceed with the deal under the circumstances. Under this arrangement, he contends that B & B was authorized to retain any additional proceeds as compensation for serving as a servicing agent on the wraparound mortgage. Even if this explanation is accepted, there are a number of problems with the actions of Yanks and B & B Equity in this transaction. First of all, there was no written servicing agreement setting forth the obligations of the servicing agent nor is there any delineation of the amount of money to be paid for servicing the wraparound mortgage. Moreover, the Agreement For Deed and the Promissory Note call for Pura Castillo to make payments of slightly more than $700 per month. These payments exceed the monthly payments due under the Standard Federal Mortgage. However, there is no written delineation of how the additional payments received each month were to be disbursed. Finally, the servicing arrangement was never explained to Pura Castillo and the documentation for the transaction was very confusing and often contradictory. There is no closing statement for the transaction that accurately reflects all of the disbursements made from the proceeds of the closing. Petitioner's Exhibit 23 is a closing statement signed by both Vazquez and Pura Castillo and purports to delineate certain expenses paid from the proceeds of the sale. Petitioner's Exhibit 7 is an unsigned closing statement which Yanks contends he prepared for use at the closing of the loan. He claims that, after the closing, he found out that Vazquez substituted Petitioner's Exhibit 23 for the closing statement that he intended to be used because she thought it more accurately depicted the fees as she had discussed them with Pura Castillo. This explanation is rejected as not credible. Petitioner's Exhibit 23 was the only closing statement signed by both the buyer and seller. As noted above, Vazquez was in and out during the closing. Hernandez-Yanks was present throughout the closing. The more credible evidence established that Petitioner's Exhibit 23 was the closing statement presented at the closing and executed by the participants. Neither closing statement accurately explains how all of the funds from the sale were disbursed. Thus, it is impossible to determine conclusively how much money Yanks and/or B & B Equity received from the closing. Both statements include some charges which are inappropriate or questionable. Furthermore, it is clear that Yanks and/or B & B received more than either statement indicated. Both closing statements reflect a payment of $600 for title insurance. However, the evidence established that no title insurance policy was ever issued. Vazquez paid for a title insurance commitment prior to the closing. Such a commitment is typically issued by a title insurance company prior to a real estate transaction and is a contractual agreement by the title insurer to issue a policy of title insurance upon compliance with certain terms and conditions. The actual title insurance policy is not issued until after the transaction has closed. The title insurance policy, not the commitment, insures the main insured against certain defects in title. The $600 charge for title insurance reflected on both closing statements was totally inappropriate in this case since no title policy was ever issued. Petitioner's Exhibit 23 includes a number of charges assessed to the buyer which were wholly inappropriate to this transaction. For example, the closing statement included a $500 charge for FNMA underwriting. This fee is charged by the institution underwriting a mortgage loan for compliance with Fannie Mae guidelines. Since the Mortgage in this case was clearly not intended to be sold to a Fannie Mae pool, the FNMA charge was not appropriate. Similarly, the closing statement included a $250 charge for a warehouse fee. This is a fee paid to institutions to cover the cost of a warehouse line of credit and is totally inapplicable to the transaction involved in this case. The closing statement also included a photo fee of $25, a lender's inspection fee of $150 and a survey fee of $225. There is no indication that any photos were taken, an inspection was conducted or a survey was prepared. Petitioner's Exhibit 23 also included a loan origination fee of $1,375 and brokerage fees of $1,575. Petitioner's Exhibit 7 included a lump sum brokerage fee of $5000, but did not include any of the other charges listed in this paragraph. There is no dispute that Yanks and/or his firm were paid mortgage brokerage fees out of the proceeds of the closing. These fees are reflected on both of the closing statements (Petitioner's Exhibits 7 and 23). A mortgage broker is paid a fee to negotiate a mortgage loan transaction for another party. In other words, he is retained to find a lender for a potential borrower. Under a mortgage servicing agreement, the servicer is paid a fee to handle the collection and disbursement of payments on a mortgage loan. Any fees paid for servicing a loan should be separately itemized and disclosed. It is not appropriate for a person who is to service a loan to receive what has been disclosed as a broker fee. Irrespective of which closing statement is deemed authentic, the evidence established that Yanks and/or B & B Equity received significantly more money from the closing than was reflected on either closing statement. As indicated above, $21,750 cash was presented at the closing, of which $14,000 was paid to Vazquez. According to Petitioner's Exhibit 7, there was $6,123.35 in closing costs (including a $5,000 brokerage fee). Thus, there is at least $1,626.65 in cash that is not reflected on the closing statement. Yanks contends that Vazquez told him to keep this money in return for servicing the loan. This contention is rejected as not credible. Similarly, Petitioner's Exhibit 23 indicates closing costs of $6,379 (including the charges in paragraph 89 above). Thus, there is $1371 unaccounted for. Moreover, it is clear that Yanks and/or B & B received in excess of $6,500 which is not readily discernible from the face of the closing statement. Subsequent to the closing, B & B Equity received at least five monthly payments of $704.32 on the Wraparound Mortgage from Joseph L. Hardisson, the common law husband of Pura Castillo. B & B Equity apparently distributed some of these funds in accordance with its claimed role of "servicing agent." However, on at least one occasion in late 1989, a check issued by B & B Equity to pay the Standard Federal Mortgage was returned for insufficient funds. In addition, a check issued by B & B Equity in the amount of $700 to Ana Vazquez in December of 1989 bounced. At some point in late 1989 or early 1990, Pura Castillo became concerned when she learned that the Standard Federal Mortgage had not been paid off. In January or February 1990, Pura Castillo and her husband came to Florida and attempted to contact Yanks regarding the transaction and the irregularities surrounding it. Ultimately, Pura Castillo filed a complaint with the Department and also filed a civil suit in Circuit Court seeking cancellation of the Mortgage and the issuance of a warranty deed in her favor. On April 17, 1990, Vazquez executed a warranty deed to Pura Castillo. Vazquez states that she felt obligated to convey all of her interest in the property to Pura Castillo in view of the confusing and unfair circumstances surrounding the initial transaction. On October 23, 1990, Yanks and B & B Equity entered into a Settlement Agreement with Pura Castillo pursuant to which they paid Pura Castillo $12,000 and the wraparound mortgage was cancelled of record. The Settlement Agreement also resulted in the dismissal of the civil suit and called for Pura Castillo to withdraw her complaint filed with the Department. Despite this withdrawal, the Department has chosen to proceed with this administrative action.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: A Final Order be entered finding Respondents B & B Investors, Yanks and Ana Hernandez-Yanks guilty of the violations alleged in Counts I, II, III, and IV of the Amended Administrative Complaint, finding them not guilty of Count VI and imposing an administrative fine of $5,000 which should be payable jointly and severally. Yanks and B & B Investors should also be required to repay $9,000 to Calvary Chapel within 30 days after the rendition of the Final Order. Failure to repay this sum should be a basis for the imposition of additional penalties, including revocation. The mortgage brokerage licenses of Yanks and B & B Investors should be suspended for one (1) year for their actions in connection with the Calvary Chapel transaction. A Cease and Desist Order should also be entered against Ana Hernandez- Yanks prohibiting her from any future violations of Chapter 494, Florida Statutes, from engaging in any act within the jurisdiction of the Department pursuant to Chapter 494, Florida Statutes, and from being an ultimate equitable owner of a business license pursuant to Chapter 494, Florida Statutes. The facts surrounding her trust account should be reported to the Florida Bar for investigation. A Final Order should also be entered finding Yanks, Hernandez-Yanks, and B & B Equity guilty of the violations alleged in Counts VIII, IX, and XI, finding Yanks and B & B Equity guilty of the violations alleged in Counts XII and finding Hernandez-Yanks guilty of violations alleged in Count XIII of the Amended Administrative Complaint. The Final Order should find the Respondents not guilty of the violations alleged in Counts X and XIV. Based upon the foregoing, the Department should impose an administrative fine of $5,000. The mortgage brokerage license of Yanks should be suspended for a period of three years to run consecutively with the suspension issued in connection with the Calvary Chapel transaction. Respondents should also be required to repay $6,040.12 to Ana Vazquez for inappropriate and undisclosed charges made at the closing. The collection of all fines and/or assessments against Ana Hernandez- Yanks and/or B & B Investors should be suspended pending approval of the Bankruptcy Court. In view of the Voluntary Dismissal filed on November 9, 1993, the Final Order should formally dismiss the Application Case. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 18th day of August 1994. J. STEPHEN MENTON 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 18th day of August 1994.
Findings Of Fact Respondent is an applicant to register as a securities salesman with Realty Income Securities, Inc., said application having been submitted to the Division of Securities on February 2, 1975 and is currently pending (Testimony of Dove). During the period of approximately February through - September, 1973, Respondent, a registered mortgage broker, was employed by Financial Resources Corporation of Fort Lauderdale, Florida, in the sale of promissory notes secured ostensibly by first mortgages upon land located in Highlands County, Florida. These notes and security documents were issued by Equitable Development Corporation of Miami Beach, Florida. The notes were payable to "investors" at 14 percent interest per year, payable monthly for several years at which time the full principal balance would become due. The mortgage deeds recited that Equitable Development Corporation held the land which secured the notes in fee simple, free and clear of all encumbrances except real estate taxes. The mortgage deeds further recited that Equitable reserved the right to convey the land to a purchaser under an installment land contract subject to the lien of the mortgage and would deliver to the National Industrial Bank of Miami, an escrow agent, a copy of any such agreement for deed and a quit-claim deed which would be held in escrow. They also provided a procedure by which under any default of Equitable, the escrow agent would deliver the escrow documents to the investor (Testimony of Dove, Petitioner's Composite Exhibit 1). Respondent's association with Financial Resources Corporation came about as a result of a visit by Mr. Robert Rinehart, President of the firm, who explained the mortgage sales program to him and stated that the security instruments were indeed first mortgages. Additionally, Rinehart supplied Respondent with brochures, letters, and documents containing questions and answers concerning the program and the protection afforded thereby to investors. Respondent personally viewed the property in question at Highland Park Estates and observed that over a hundred homes had been constructed which were of a value from $14,000 to $40,000. He also observed that docks had been built on the lake in the project area and that almost all of the roads had been paved. He was shown the MIA appraisal on the property which stated that Rinehart's representations as to property values were accurate. Equitable further represented to him that the notes in question were exempt securities in that they came within the provisions of Section 517.06(7), F.S., concerning the issuance or sale of notes secured by a specific lien upon real property created by mortgage or security agreement. In fact, Respondent became so convinced of the merits of these transactions that he had his mother invest twenty thousand dollars in the program (Testimony of Respondent, Watts; Respondent's Exhibits 1,2). In September 1973, Respondent formed Florida Income Resources Corporation, a mortgage brokerage firm. He did not sell any of the Equitable notes for a period of some months and, prior to commencing sale of them through his firm in the Spring of 1974, his attorney looked over the various aspects of the Equitable program and advised him that everything seemed "open and above board." Respondent thereafter on April 9 and August 1, 1974 sold to William H. Mott secured promissory notes of Equitable Development Corporation in the amounts of $2,000 and $2,250 respectively (Testimony of Respondent, Zawadsky; Petitioner's Composite Exhibit 1). During the period of these sales, letters of Albert George Segal, attorney, were being sent to investors advising them that he had examined the title to the real property purchased and that it was free and clear of encumbrances and constituted valid first mortgages (Respondent's Exhibit 3, Stipulation). Administrative proceedings were brought against Respondent by the Division of Finance involving sales of the notes in question resulting in a settlement by stipulation whereby Respondent did not acknowledge any wrongdoing, but agreed to a suspension of his mortgage broker's registration for two years. Respondent's firm secured no appraisals or title searches on the property involved in the sales to Mott (Testimony of Respondent).
Recommendation That the allegations be dismissed and that Respondent Edgar A Dove be registered as a securities salesman if he otherwise meets the qualifications set forth in Section 517.12, Florida Statutes and Chapter 3E-30, Florida Administrative Code. DONE and ENTERED this 15th day of March, 1976, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Fred O. Drake, III Assistant General Counsel Office of the Comptroller The Capitol Tallahassee, Florida 32304 H. Gordon Brown, P.A. 301 W. Camino Gardens Boulevard Suite B P.O. Box 1079 Boca Raton, Florida 33432
The Issue Whether the licenses as a limited surety (bail bond) agent and as a legal expense agent held by Latesia Lashonda Chavis should be revoked.
Findings Of Fact Chavis has been licensed in Florida as a limited surety (bail bond) agent, pursuant to Chapter 648, Florida Statutes and as a legal expense agent, pursuant to Chapter 642, Florida Statutes, since 1994, and has performed related work since 1991. In an application dated April 27, 2006, Chavis sought to receive an additional license as a resident managing general insurance (bail bond) agent. On that Application, Chavis answered "NO" to the following questions: Have you ever had any insurance agency contract terminated by an insurance company or managing general agent for any alleged cause? Are you currently indebted to any insurer, managing general agent, agent, or premium finance company? The Department alleged in Count I of the Administrative Complaint that Chavis’ answers to those two questions were false. In Count II, the Department alleged that Chavis owed money for checks that had been returned for insufficient funds for premiums and a build up fund ("BUF") account due, based on a contractual relationship with the Al Estes General Agency, Inc. (the "Estes Agency"), Chavis' managing general agent. Count III alleged that Chavis misappropriated, converted and withheld funds owed to the Estes Agency. Count I Chavis testified that, on April 27, 2007, when she filed the pending application, she was not aware that her contract with the Estes Agency had been terminated, having not been informed until she was contacted by the Department's investigator, Terry Flynn, sometime in August 2006. Chavis also testified that she had been in touch with Al Estes, in January, February, and March about her family problems that were taking her away from devoting herself to the bail bond business and offered to take out a loan to pay him what she owed him. She testified that she was trying to help run a family business, a group home, that her aunt died of cancer in April, and that her mother is still battling cancer. Estes confirmed in his testimony that he recalled her telling him that her husband had used her checkbook to take money out of her account and that her mother was sick. It is undisputed that a letter from the Estes Agency, dated February 9, 2006, was sent to Chavis at her address-of- record with the Estes Agency on that date, in Cocoa, Florida. The letter was "A Termination Notice and Demand for Payment and Accounting." Chavis testified that she did not receive the letter. The Estes Agency also sent, on February 9, 2007, a "Termination Request" for Chavis to be terminated as an agent to their insurer, Safety National Casualty Corporation in Iowa. In addition, the Estes Agency notified the Department of the termination of Chavis as their agent by letter dated February 17, 2006, sent to the Department's Orlando office. In that letter, the Estes Agency listed the following reasons for its actions: Un-report [sic] executed powers, owes premium N.S.F. checks for Premium and BUF accounts Unpaid Premium an (sic) BUF Unpaid Forfeitures and judgments Business phone has been turned off. No response to correspondence sent Will not return phone calls On or about March 27, 2006, the Estes Agency sent as its representative, Norman Britten who was apparently accompanied by other people, to Chavis' Cocoa address to seize the files. When Britten arrived, a neighbor told him that Chavis had moved. The neighbor telephoned Chavis, and asked her if he should tell Britten where she had moved. Britten then also talked to Chavis by telephone and she gave him her address in Fort Pierce, and agreed to meet him at her new address to give him the files on pending cases and accounts. Chavis agreed that these activities took place in late March or early April, just before her aunt's death. The files were taken so that the Estes Agency could meet the requirements and minimize the risks of having unpaid forfeitures become judgments within sixty days that, if not paid within thirty-five days, would result in the State's prohibiting an agency from posting additional bonds. The files were also taken to keep an accounting of remissions, and refunds of forfeited bonds after criminal defendants have been caught. Given the conversations concerning moneys owed, notices, seizure of files, and investigations, all activities that took place in January, February and March 2006, it is reasonable to conclude that Flynn testified truthfully that he informed Chavis of her termination while he was conducting the Department's investigation of her in March 2006. Chavis's testimony to the contrary, that she did not know prior to filing the application in April 2006, that she was answering the two questions cited in the Complaint falsely is rejected as untrue. Nor is Chavis relieved of her personal responsibility to be truthful, because she testified that some other unnamed company with whom she planned to become affiliated told her to give the false answers to those questions, because her BUF account should take care of any money that she owed. There is no showing that the other company knew of the returned checks and unpaid premiums and no reasonable expectation that these debts that were not incurred in the regular course of business would be covered by a BUF account. Additional evidence of her actual knowledge of the termination of her contract with the Estes Agency is the fact that Chavis was negotiating with and seeking licensure with another company, while she admittedly was still dealing with her family's problems that were causing her to neglect her bail bond business. The Department proved the allegations in Count I of its Administrative Complaint that Chavis made material misstatements in response to two questions on an application dated April 27, 2006. Counts II and III Contrary to her explanation that she filed the pending application thinking the BUF account would cover any funds owed to the Estes Agency, Chavis testified that, in conversations with Estes in February and March, she offered to take out a loan to pay the money owed to the Estes Agency, and that he mentioned that she owed approximately $12,000. She said she offered to take out a loan because she did not have the money, but that she did not think that either of them had taken into account the BUF account at that time. Chavis agreed that once the BUF account was depleted, if she still owed money to the Estes Agency, she has not paid it. She also testified that she has not paid anything to cover the checks she issued with insufficient funds and does not deny that she owes that money to the Estes Agency. The senior agent for the Estes Agency testified that, after taking into consideration insufficient funds checks, unpaid and unremitted premiums, the BUF account, and remissions total liabilities incurred by or on behalf of Chavis are $18,851.00. The Department proved the allegations of Counts II and III that Chavis owes money to the Estes Agency, that was misappropriated, converted, or willfully and improperly withheld.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding that all licenses held by the Respondent under the Code are revoked and that her pending application be denied. DONE AND ENTERED this 6th day of November, 2007, in Tallahassee, Leon County, Florida. S ELEANOR M. HUNTER 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 6th day of November 2007.
The Issue Whether the application of the Respondent Melvin Haber for a mortgage broker's license should be approved or denied.
Findings Of Fact Respondent Melvin Haber applied for registration as a mortgage broker by filing an application for registration as a mortgage broker on December 20, 1976. On January 14, 1977, Petitioner issued to Respondent its Notice of Intent to Deny Respondent's Application for registration as a mortgage broker. The reasons for such denial were set forth in an accompanying document entitled "Administrative Charges and Complaint." Petitioner Division of Finance had determined that Respondent Melvin Haber did not meet the proper qualifications necessary to be licensed as a mortgage broker and that he had, through Guardian Mortgage and Investment Corporation, charged and received fees and commissions in excess of the maximum allowable fees or commissions provided by the Florida Statutes; and although he had stated otherwise on his application, Respondent in fact had been charged in a pending lawsuit with fraudulent and dishonest dealings; and had demonstrated a course of conduct which was negligent and or incompetent in the performance of acts for which he was required to hold a license. By letter dated January 19, 1977, to Mr. Joseph Ehrlich of the Comptroller's Office, Tallahassee, Florida, Petitioner received a request from the Respondent Melvin J. Haber in which he acknowledged receipt of his rejection for mortgage broker's license and stated, "I received notice today of my rejection for my mortgage broker's license. I would, therefore, withdraw my application and re- quest return of $75.00 as I will not answer the rejection as I can't afford an attorney at this time." A Special Appearance to Dismiss Complaint was entered on February 11, 1977. The grounds are as follows: "1. The Department of Banking and Finance does not have jurisdiction over this Respondent. There is no jurisdiction in any administrative proceeding over this Respondent. There is no pending application for any mortgage broker's license by this Respondent. The application originally filed for the mortgage broker's license was withdrawn on January 19, 1977. A copy of the letter withdrawing application is attached hereto as Exhibit A. The proceedings are moot and would serve no useful purpose. Permitting this tribunal to proceed on a non-existent request for broker's license would deny to the Respondent due process of law, equal protection of the law, and his rights under the State and Federal Constitutions applicable thereto." On March 4, 1977, the Division of Administrative Hearings received a letter from Eugene J. Cella, Assistant General Counsel, Office of the Comptroller, State of Florida, requesting a hearing in this cause be set at the earliest practical date, and enclosed in the letter requesting a hearing was a copy of the Division of Finance's Administrative Complaint and a copy of the Respondent's Special Appearance to Dismiss the Complaint. A hearing was set for April 22, 1977, by notice of hearing dated March 30, 1977. A letter was sent by Irwin J. Block, Esquire, informing the attorney for the Petitioner that the Respondent "intends to permit the matter to proceed solely upon the written Special Appearance to Dismiss Complaint heretofore filed." Evidence was submitted to show that between May 29, 1973 and continuing through November 25, 1976, Guardian Mortgage and Investment Corporation and Melvin Haber as Secretary/Treasurer charged and received fees and commissions in excess of the maximum allowed fees or commissions in violation of the Florida Statutes and the Florida Administrative Code. Respondent's application for registration as a mortgage broker indicated that Petitioner was not named in a pending lawsuit that charged him with any fraudulent or dishonest dealings. However, on August 5, 1976, a suit was filed in Dade County, Florida, which charged the Petitioner and others with fraud in violation of the Florida Securities Law. The application was filed by Respondent, was processed by Petitioner and a Notice of Intent to Deny Respondent's Application for Registration was filed together with Administrative Charges and Complaint. The Division of Administrative Hearings has jurisdiction upon request of a party for a hearing once an application has been received and the Division has investigated and fully considered the application and issued its Notice of Intent to Deny and filed a Complaint on the applicant. In this cause the question of whether the applicant is entitled to a refund of fees also must be resolved. An orderly procedure to finalize the resolution of the issues is desirable and necessary. The Proposed Order filed by the Petitioner has been examined and considered by the Hearing Officer in the preparation of this order.
Recommendation Deny the application of applicant Melvin Haber for a mortgage broker's license. Refund the Seventy-Five Dollar ($75.00) fee Respondent paid upon filing the application. DONE and ORDERED this 31st day of May, 1977, in Tallahassee, Florida. DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Richard E. Gentry, Esquire Assistant General Counsel Office of the Comptroller Legal Annex Tallahassee, Florida 32304 Irwin J. Block, Esquire Fine, Jacobson, Block, Goldberg & Semet, P.A. 2401 Douglas Road Miami, Florida 33145
The Issue The issue in these cases is whether petitioners are entitled to payment from the mortgage brokerage guaranty fund, and if so, in what amounts. A further issue is in what order of priority the claims should be paid. Based upon all of the evidence, including the pleadings filed in this cause, the following findings of fact are deter- mined:
