The Issue Whether Mortgage Broker License No. 3534 should be suspended or revoked under Section 494.05, F.S. At the hearing, the Respondent filed an answer to the charges in the Petitioner's Administrative Complaint, incorporating therein affirmative defenses. Rule 28-5.25(2), Florida Administrative Code, provides that the party may file an Answer which may contain affirmative defenses within 20 days of service of the Petition. Respondent's basis for late filing was inadvertence and neglect of its counsel. The Answer contained a general denial of the allegations and set forth affirmative defenses asserting lack of jurisdiction of the Petitioner to pursue its claims for alleged actions which took place on or before October 19, 1974, which was prior to the issuance of the mortgage broker license to Respondent. Further defenses included the claim that the Administrative Charges and Complaint are vague and ambiguous, that Petitioner had taken written action against Respondent without a hearing and denied it due process of law prior to the filing of the Administrative Charges and Complaint, thereby constituting double jeopardy, that Petitioner has unilaterally and without hearing denied Respondent renewal of its license, therefore denying it due process of law and claiming that petitioner is estopped from proceeding on the ground that it violated Section 494.06(5), in not keeping confidential the examination and investigation of the Respondent by giving press releases designed to influence the outcome of the hearing. The Hearing Officer permitted the late filing of the Answer and Affirmative Defenses at the hearing, over the objection of the Petitioner who claimed lack of notice as to the affirmative defenses. Respondent made a motion at the hearing to quash or abate the charges on the grounds of lack of jurisdiction on the basis set forth in its aforesaid pleading and on the grounds that Section 494.05(1) permits the petitioner only to investigate actions of licensees and not to suspend or revoke such licenses. The motion was denied by the Hearing Officer under the authority granted to deny, suspend or revoke licenses pursuant to Section 494.05, F.S. From statements of counsel at the hearing, it appears that Respondent's application for yearly renewal of its license was denied by Petitioner on September 3, 1975. However premature such a denial might have been, the question is not in issue in the instant proceeding. Nor is any purported violation by Petitioner of Section 494.06(5), concerning confidentiality of its investigations of Respondent. Both parties made opening statements and closing arguments. The Petitioner presented its case through two witnesses and submitted documentary evidence. The Respondent did not call, any witnesses. Petitioner also called Frank H. Roark, Jr. President of Respondent Corporation as a witness. Mr. Roark, after being sworn, declined to testify on the grounds of possible self-incrimination. The Hearing Officer thereupon excused the witness. Upon a showing by the Petitioner that the books and records of Respondent Corporation had been requested by Subpoena Duces Tecum and its request that Mr. Roark be required to identify the corporate books and records in his capacity as an officer of the corporation, over objection of Respondent's counsel, the Hearing Officer permitted Mr. Roark to testify for this limited purpose.
Findings Of Fact The Department of Banking and Finance of the State of Florida issued Mortgage Broker License Number 3534 to Respondent on October 10, 1974 (Petition and Answer). The transactions of the Respondent which are the subject of the Administrative Charges and Complaint, concern the purchase by investors/lenders of corporate promissory notes issued by a land development company which are secured by mortgages on its land. The purpose of selling the note is for the land development company to raise funds for the development of real property. The sales of the notes were made by Respondent to individual investors. Usually these transactions were handled through what was termed a "Master Broker" who was a middle man between the land developer and the Respondent mortgage broker which actually made the individual sales of the notes. Typical of the manner in which Respondent conducted these transactions was to enter into an agreement with an investor termed an "Application To Purchase a Mortgage" for a certain face amount at a specified interest rate with interest payable monthly and with concurrent delivery by the investor to Respondent of the stated sum under the conditions that the note would be executed, the mortgage recorded, and the note and recorded mortgage delivered to the investor-purchaser. In due course, a promissory note issued by the land development corporation (the borrower), was delivered to the investor, along with a mortgage deed to specified real property to secure the note. Some notes were payable on an interest only basis and some on a principal and interest basis. Some involved the issuance of title insurance policies and others did not. In some cases, Respondent remitted funds involved in the transaction to the "Master Broker" and in some cases directly to the land developer, less an amount retained by Respondent, ostensibly for its fees, commissions, and/or other charges. The funds were placed into escrow bank accounts when they were received from the investors by Respondent and then sometimes on the same day or in most cases several days or weeks later, the funds less the amount retained by Respondent, were forwarded on to the "Master Broker" or directly to the developer (testimony of Mr. Hunt, Petitioner's Exhibits 1, 3 & 4). Acting upon a request of the State Comptroller to have all mortgage companies examined, in the latter part of July, 1975, Mr. Lawrence W. Hunt, a Financial Examiner Supervisor of Petitioner's Division of Finance along with three assistants went to the Respondent's office to examine its records and determine from the examination whether or not violations of the Mortgage Brokerage Act had been committed. Utilizing source documents from the company records, Mr. Hunt and his associates prepared a worksheet and listed thereon various items of information gleaned from these records (Petitioner's Exhibit 1). After preparation of the worksheet, overcharges as to the 402 transactions identified in the worksheet were computed by Mr. Joseph Ehrlich, Deputy Director of the Division of Finance, solely from the worksheet obtained by the examiners (Petitioner's Exhibit No. 2). Such overcharges were computed with respect to maximum fees or commissions which a broker could charge in accordance with the provisions of Rule 3-3.08, Florida Administrative Code, in consideration of the amount of funds retained by Respondent, Mr. Hunt is not a state auditor and his examination of records did not go into the depth of an audit such a compilation of financial statements. His work consists basically of an examination which involves obtaining information from corporate records and placing it on worksheets so it can be analyzed. During Mr. Hunt's visit to Respondent's place of business, he received full cooperation of its officers and employees and found the records to be in good order. He also had no reason to question any of the entries in any of the records that he observed. Neither he nor Mr. Ehrlich had received complaints from any individual or organization about Respondent's operations prior to his visit. He did not at any time contact any of the lenders or borrowers involved in Respondent's transactions (Testimony of Mr. Hunt, Mr. Ehrlich, Petitioner's Exhibits 1 and 2). On October 11, 1974, the Division of Finance issued a "Memorandum to all Mortgage Brokers" in which it was stated that it had been brought to the Division's attention that a number of mortgage brokers in transactions (such as those under consideration here), were remitting investors' funds to the land developer rather than placing the funds in an escrow account, and that such funds were being remitted in anticipation of receiving a recorded mortgage and note. The Memorandum warned that this practice could result in substantial losses to the broker in repaying investors should the land developer fail and was also in violation of the Mortgage Brokerage Act and could lead to the suspension or revocation of a license under Section 494.05, (1)(f), Florida Statutes. This section concerns placement of funds received in escrow accounts where they shall be kept until disbursement thereof is properly authorized (Respondent's Exhibit A). The Memorandum was sent to Respondent among others Mr. Hunt, during his examination of Respondent's records, found that Respondent ,had changed its escrow procedures approximately the date that the bulletin was issued and that there were no discrepancies after that date concerning escrow monies. By further correspondence in December, 1974, and May and June of 1975, Respondent's President posed various questions to Mr. Ehrlich to clarify certain aspects of escrow account requirements and received replies thereto (Respondent Composite B - Respondent's Exhibit C, D, F and G. (Note: There is no Exhibit E) In 402 separate transactions conducted by Respondent during the years 1973, 1974, and 1975, the mortgages which were purchased by the investors were delivered to the investor within varying periods from one day from the sale date until almost two months from the sale date. Forwarding of funds by the Respondent to the "Master Broker" or to the land development company was also accomplished in these transactions within varying periods of time from the sale date. These ranged from the same date as the sale to periods of a month or so thereafter, but usually on the date of delivery of the mortgage to the investor. The amounts forwarded by Respondent consisted of the face amount of the note and mortgage, less a certain amount which was retained by the Respondent (Petitioner's Exhibit 1). No effort was made by Petitioner's examiner to determine either the basis for the amount retained by Respondent or its composition. For example, he did not determine whether there were any "points" for service charges or discounts of any sort included in the retained sum. The examination was made solely on the basis of examining the business records of Respondent which did not reflect a breakdown of the retained amount. However, it could be deduced from various documents in individual investor files that certain amounts had been paid by someone unknown for title insurance premiums, recording fees and intangible taxes. The dates of mortgage delivery shown by Mr. Hunt in his worksheet were dates which he assumed were correct but he had not verified by any person the exact dates the mortgage was delivered to the investors. Neither could he ascertain from the records whether or not an investor had authorized Respondent to disburse funds at a particular time. The overcharges were determined in accordance with the formula set forth in Rule 3- 3.08, F.A.C., which is on a "gross proceeds" loan in which the borrower indicates that he wished to borrow a specified amount with all fees and charges to come out of the gross amount, thereby resulting in a reduced amount being provided to the borrower. The overcharges were computed without knowledge of whether the amount retained by the Respondent, as shown in Petitioner's Exhibit 1, included payment for state intangible tax, documentary stamps, and recording fees (Testimony of Mr. Hunt, Mr. Ehrlich, Petitioner's Exhibit 1 and 2). The overcharges set forth in Petitioner's Exhibit 2 were unrebutted by Respondent and are deemed correct. In a transaction between Respondent and Cary G. Anderson, who applied for purchase of a mortgage on May 7, 1974, in the face amount of $3,500.00, the file relating to the transaction did not reflect the amount of any costs to be paid by Respondent in the matter, nor did it reveal a specific figure for brokerage fee or commission charged by Respondent. The file did reflect a bill for title insurance premium in the amount of $45.00 and recording fees in the amount off $22.25, $5.25 documentary stamps, and $7.00 for intangible tax. The amount of overcharge was $175.46. In another $2,500 transaction with Mr. Anderson, the amount remitted to the land developer was $2,075.00. The amount retained by Respondent was $425.00. Petitioner's Exhibit number 2 establishes an overcharge from this transaction of $61.37. There was no copy of the mortgage in the file and therefore no information upon which to determine the payment of intangible taxes, documentary stamps and recording fees (Petitioner's Exhibit 3). In a $5,000 transaction between Walter L. and Thelma T. Beach and Respondent with application for purchase mortgage dated July 30, 1974, a check was written on Respondent's escrow account to Kingsland Development in the amount of $4,100. The maximum allowable brokerage fee or commission under the law would have been $590.90. The amount retained by Respondent was $900.00. The mortgage indicated that documentary stamps in the amount of $7.50 and intangible tax of $10.00 were paid. Assuming that Respondent paid the intangible taxes, and documentary stamps, the excess fee charged according to calculation under Rule 3-3.08, was $281.60 (Testimony of Mr. Hunt, Petitioner's Exhibits 1, 2 and 4). In respect to the above three transactions Petitioner's examiner did not find closing statements in the file, nor did he go to the Florida title ledger or Attorney's ledger of Respondent's records. However, he had, at the outset of his investigation, asked Respondent to make available all records concerning the transactions (Testimony of Mr. Hunt).
The Issue In this proceeding pursuant to Section 120.56(4), Florida Statutes, Petitioner Dave Taylor (“Taylor) alleges that various purported “statements” which he attributes to Respondent Department of Banking and Finance (the “Department”) constitute rules-by-definition that were not adopted under, and therefore violate, Section 120.54(1)(a), Florida Statutes.
Findings Of Fact The evidence adduced at final hearing established the facts that follow. The Department of Banking and Finance is the state agency charged with the administration of Chapter 494, Florida Statutes, titled “Mortgage Brokerage and Mortgage Lending.” As such, it is responsible for regulating all persons, including mortgage brokers and lenders, licensed under that chapter. Taylor is licensed under Chapter 494 as a mortgage broker and as a “continuing education school.” His firm, Florida Compliance Specialists, Inc., provides consulting services to Chapter 494 licensees. The present dispute stems from amendments to Chapter 494 that the legislature enacted during the 2001 regular session. See Ch. 2001-228, Laws of Florida. These amendments were contained in a bill (CS/HB 455) approved by the governor on June 13, 2001, and became effective on October 1, 2001; they created a new position called “principal representative.” As defined by the legislature, the term “principal representative” means “an individual who operates the business operations of a licensee under part III.” Section 494.001(29), Florida Statutes (2001) (emphasis added).4 This statutory definition is amplified in a mandate that requires all licensees (and applicants) to designate a “principal representative who exercises control of the licensee’s business[.]” Sections 494.0061(8) and 494.0062(11), Florida Statutes. (Emphasis added). Notably, the terms “operates” and “exercises control of” are not defined. As mentioned, the statute requires all licensees and applicants to designate a PR. Although PRs do not engage in a licensed occupation (i.e. there is no PR license), an individual appointed to the post of PR after October 1, 2001, must satisfy certain educational and testing requirements (the details of which are not important here), and the designating lender must submit documents showing that its PRD has complied with those requirements.5 After the governor signed CS/HB 455 into law but before the amended statutes took effect, the Department began making rules to implement the new provisions. Before long, proposed rules were published in the August 31, 2001, issue of Florida Administrative Weekly. One provision of these proposed rules instructed that “[a]n individual can only be a principal representative for one [lender].” This “one lender to a PR” proposal did not implement an explicit statutory directive but arose from the Department’s then-prevailing interpretation of the statutory description of a PR as one who “operates” and “exercises control of” the lender’s business. Further illuminating the Department’s understanding of these terms were the Designation forms that it proposed to adopt, wherein the PRD was required to acknowledge that he or she would be “in full charge, control, and supervision of the [lender’s] business.” A person, the Department reasoned, could be “in full charge,” etc., of but one company at a time. In the course of rulemaking, however, the Department receded from its original interpretation. As a result, revised proposed rules——from which the bright line, “one lender to a PR” directive had been deleted——were published in the October 5, 2001, Florida Administrative Weekly.6 An amended Designation, which unlike earlier versions lacked language requiring a PRD to confirm (with his or her signature) having “full charge, control, and supervision” of the applicant’s or licensee’s business, was proposed as well.7 By the end of January 2002, the Department’s proposed rules relating to PRs had been adopted and, at the time of this Final Order, were among the agency’s duly promulgated, existing rules. See Rule 3D-40.242, Florida Administrative Code. Although the Department does not presently have a bright line rule or policy that flatly forbids an individual from serving simultaneously as PR to more than one licensee, the Department continues to be skeptical that a dual designee can effectively perform, for more than one lender at a time, the responsibilities that it believes inhere in the office of PR. Accordingly, whenever a lender or applicant nominates an XPR for PR, the Department without exception subjects that lender’s Designation to stricter scrutiny than would be given if its PRD were not an XPR. (Indeed, if the PRD is not an XPR, then the Department presumes that he or she will be able to carry out the duties of a PR and hence makes no inquiry as to how the PRD will function as PR.) The first outward manifestations of the Department’s internal decision to scrutinize any Designation in which an applicant’s PRD is an XPR emerged in late November 2001 after the agency had received four separate applications naming Taylor as PR.8 As the Department had discovered upon review of these four applications, Taylor was already serving as PR to an existing licensee. This situation had given rise to a dilemma for which the Department was not fully prepared, as evidenced by a November 26, 2001, e-mail message from an agency attorney to the responsible policy makers in which she (the attorney) had advised that: There are two pending applications in which there are no deficiencies and we need to decide how will [sic] we will proceed since we took out the language in the rule that specifically stated an individual could only be a PR for one company at a time. Let me know what times you would be available [for a meeting to decide what to do]. The Department quickly decided what to do. Between November 27 and November 29, 2001, the Department issued four nearly identical letters, one sent by certified mail to each applicant who had chosen Taylor as its PR, which provided, in pertinent part: We are in receipt of your company’s application to become licensed as a mortgage lender in the State of Florida. A review of the application materials indicates that [applicant’s name] has designated Dave Taylor at [address] as the company’s Principal Representative. [The next four paragraphs quote Sections 494.001(29); 494.0062(11); 494.0062(1)(f); and 494.0062(12), Florida Statutes, which pertain to PRs.] Sections 494.0072(1) and (2)(c), Florida Statutes, provide as follows: Whenever the department finds a person in violation of an act specified in subsection (2), it may enter an order imposing one or more of the following penalties against that person: Revocation of a license or registration. Suspension of a license or registration, subject to reinstatement upon satisfying all reasonable conditions that the department specifies. Placement of the licensee or applicant on probation for a period of time and subject to all reasonable conditions that the department specifies. Issuance of a reprimand. Imposition of a fine in an amount not exceeding $5,000 for each count or separate offense. Denial of a license or registration. Each of the following acts constitutes a ground for which the disciplinary actions specified in subsection (1) may be taken: (c) A material misstatement of fact on an initial or renewal application.[9] Dave Taylor has already been designated as a principal representative for another licensed lender under part III of Chapter 494, Florida Statutes. Please advise in detail how Mr. Taylor will operate and exercise control over your business.[10] We request that your response be submitted to the Department within 10 days of the date of this letter. If you have any questions regarding this matter, please call me at [phone number]. On or about November 30, 2001, the Department created a new deficiency code, DF 416, the description of which is “principal representative is designated to more than one entity.” This is an active deficiency code and is used consistently as a “red flag” on all applications to which it applies. When an application is tagged with a DF 416, the applicant is sent a letter in the form of the letters quoted in the preceding paragraph. This letter will hereafter be referred to as the “DF 416 Inquiry Letter.”11 It is important to emphasize that all applicants whose PRD is an XPR are sent the DF 416 Inquiry Letter, without exception.12 It is undisputed that Taylor has met all of the educational and testing requirements necessary to serve as a PR, and that the Department has no objection, based on facts and circumstances unique to Taylor, to Taylor’s being a lender’s PR. (In fact, he is presently a PR to one lender,13 under a designation to which the Department, consistent with its policy and practice of making no inquiry concerning PRDs who are not XPRs, raised no objection.) The Department’s concern about Taylor’s having been designated a PR by more than one company is indistinguishable from the concern that it expresses regarding all dual designees. This is why, although the contents of the DF 416 Inquiry Letter were developed to resolve a problem that specifically involved Taylor and his clients, the Department decided (and was able) to implement its Taylor-made solution on a generally applicable basis by sending the DF 416 Inquiry Letter to all applicants whose PRD is a dual designee. Each of the four applicants that had designated Taylor as its PR declined the Department’s November 2001 invitation to submit detailed information regarding the manner in which Taylor would operate and control the licensed business. Each applicant chose, instead, to designate someone else as PR. Thus, whatever advantages or considerations Taylor expected to receive in exchange for serving as these lenders’ PR were lost; the Department’s letters (the letters that became the form for the DF 416 Inquiry Letter) were the proximate cause of that loss, in that but for the letters, the lenders would not summarily have severed their respective business relationships with Taylor. After deciding how to deal with applicants whose PRDs are XPRs, the Department turned its attention to the dual designees of existing licensees. This was, in a sense, a bigger problem because, in their respective Designations, more than 50 licensees had selected an individual for PR who was a dual designee. Beginning around December 12, 2001, the Department sent all these lenders a letter similar to the DF 416 Inquiry Letter. This letter stated: We are in receipt of the principal representative designation forms for the following companies: [lender’s names]. A review of the principal representative forms indicates that [PRD’s name and address] has been designated the Principal Representative for both companies. [The next two paragraphs quote statutory provisions pertaining to PRs.] Sections 494.0072(1) and (2)(p) state as follows: Whenever the department finds a person in violation of an act specified in subsection (2), it may enter an order imposing one or more of the following penalties against that person: Revocation of a license or registration. Suspension of a license or registration, subject to reinstatement upon satisfying all reasonable conditions that the department specifies. Placement of the licensee or applicant on probation for a period of time and subject to all reasonable conditions that the department specifies. Issuance of a reprimand. Imposition of a fine in an amount not exceeding $5,000 for each count or separate offense. Denial of a license or registration. Each of the following acts constitutes a ground for which the disciplinary actions specified in subsection (1) may be taken: (p) Failure to comply with, or violations of, any other provision of ss. 494.001-494.0077. Please advise in detail how you will operate and exercise control over both of the above- mentioned businesses. We request that your response be submitted to the Department within 14 days of the date of this letter. If you have any questions regarding this matter, please call me at [phone number]. This form letter will be referred to as the “Compliance Inquiry Letter.” The evidence is unequivocal that the Department has sent, and plans to send, the Compliance Inquiry Letter to all licensees whose Designation names a person determined to be a dual designee, without exception.14 Taylor’s Description of the Alleged Rules-by-Definition In his petition, as required by Section 120.56(4)(a), Florida Statutes, Taylor described the alleged rules-by- definition. Here, in his words, are the Department’s alleged statements: Only one person can realistically “operate the business operations” of a licensee and “exercise control over the licensee’s business.” Therefore, only one individual shall prima facie be designated as principal representative for only one mortgage lender. The above rule shall not apply, however, to mortgage lenders which the Department deems to be “grand-fathered” i.e., such companies who designated their principal representative on or prior to October 1, 2001, the effective date of the statutory amendments. In such instances, an individual will be permitted multiple designations without further departmental scrutiny or inquiry as to how that individual will “operate” or “exercise control over each business.”[Footnote omitted]. Except for “grand-fathered” companies, if an individual once designated principal representative by a mortgage lender is similarly designated principal representative by a separate mortgage lender, the Department based upon the agency statement recited in (a) above, will require the subsequent mortgage lender(s) (i.e., the lender(s) other than the one first designating that individual) to provide in writing a detailed explanation to the Department, subject to potential sanctions, describing how that individual will operate and exercise control over that second mortgage lender. The Department considers as a “licensing deficiency” any mortgage lender application or principal representative designation submitted to the Department where the individual designated as the mortgage lender’s principal representative has previously been and continues to be designated principal representative by another mortgage lender. The Department, based upon this “deficiency,” shall not deem the application(s) “complete” for purposes of section 120.60, Florida Statutes. Such application(s) shall be subjected to the licensing procedures set forth in paragraphs (e) and (f) hereafter. In conformity with the agency statement set forth in (a) above, the Department will not undertake an inquiry of the principal representative designation submitted by the mortgage lender who first designated the individual as its’ principal representative. The Department will require mortgage lenders to provide the information referred to in section c above, through the use of a form, [i.e., the form letters attached as EXHIBITS “14”, “15”, & “16”, to this Petition]. Further, this form created for the purpose of soliciting information [not specifically required by statute or an existing rule] will require mortgage lenders to provide a response, specifically subject to announced sanctions, of details not otherwise required under the applicable statutes or rules. The Department, though requiring mortgage lenders to comply with the agency statements through the threat of announced sanctions, shall not provide to mortgage lenders or their designated principal representatives any clarifying or defining circumstances or criteria the Department will deem as acceptable——contractual or otherwise——for a person to be designated as principal representative for more than one mortgage lender. Any responses provided by such mortgage lenders in response to the Department’s written form shall be submitted by the applicant “at their peril.” Ultimate Factual Determinations In his just-quoted statements “a,” “c,” “d,” and “e,” Taylor described, with reasonable particularity, the essence of policies that, in fact, fall within the statutory definition of the term “rule.” Statement “a” describes (albeit somewhat imprecisely) a Departmental mindset, the view that a person is likely to have difficulty simultaneously serving more than one master as a PR; the last sentence of statement “d” accurately describes the Department’s related policy of not inquiring as to how a PRD who is not a dual designee will operate and control the lender’s business (because the agency presumes that a person will probably have no difficulty serving as PR to one lender at a time). Taken together, these views, in fact, constitute the Department’s interpretation of the PR statutes.15 Taylor’s statement “c” and the third sentence of “d” (all of which, of course, he attributes to the Department) correctly describe, for the most part,16 the Department’s policy of requiring additional information from all licensees and applicants whose Designations nominate an XPR for the position of PR. This policy is plainly driven by the Department’s interpretation of the PR statutes, and it leads, in turn, directly to statement “e.” Restated to conform to the evidence, statement “e” holds that the Department will send either the DF 416 Inquiry Letter or the Compliance Inquiry Letter, whichever is applicable, to any lender whose PRD is an XPR. It is the form letters——the DF 416 Inquiry Letter and the Compliance Inquiry Letter——that have emerged as the most visible, most readily identifiable unadopted rules of the Department, for they solicit information not specifically required by statute or by an existing rule. By the end of December 2001 at the latest, rulemaking was both feasible and practicable with regard to the above- described statements, but no effort was made to adopt them as rules. Thus, the Department failed timely to commence rulemaking with regard to these statements in accordance with Section 120.54(1)(a), Florida Statutes.17
Conclusions For Petitioner: H. Richard Bisbee, Esquire Law Office of H. Richard Bisbee 124 Salem Court, Suite A Tallahassee, Florida 32301-2810 For Respondent: Cynthia K. Maynard, Esquire James H. Harris, Esquire Department of Banking and Finance Fletcher Building, Suite 526 101 East Gaines Street Tallahassee, Florida 32399-0350
Other Judicial Opinions A party who is adversely affected by this Final Order is entitled to judicial review pursuant to Section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing the original notice of appeal with the Clerk of the Division of Administrative Hearings and a copy, accompanied by filing fees prescribed by law, with the District Court of Appeal, First District, or with the District Court of Appeal in the Appellate District where the party resides. The notice of appeal must be filed within 30 days of rendition of the order to be reviewed.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: Petitioner's application to take the examination to be licensed as a mortgage broker be DENIED. DONE and ORDERED this 28th day of January, 1988, in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 29th day January, 1988. COPIES FURNISHED: Scott William Katz 361 Midpines Road Palm Springs, Florida 33461 Lawrence S. Krieger Assistant General Counsel Department of Banking and Finance Office of Comptroller 111 Georgia Avenue West Palm Beach, Florida 33401-5293 Honorable Gerald Lewis, Comptroller, State of Florida The Capital Tallahassee, Florida 32399-0350 Charles L. Sutts General Counsel Plaza Level The Capitol Tallahassee, Florida 32399-0350
The Issue The issue in this case is whether the Petitioner’s application for licensure as a mortgage broker should be approved.
Findings Of Fact The parties set forth an extensive set of stipulated facts in the Prehearing Stipulation filed prior to the commencement of the hearing. The stipulated facts describe the activities of Richard Eric Watts (Petitioner) on behalf of Frederick M. Larry in relation to a $50,000 investment of Mr. Larry's funds with D. F. Owen, Inc., in May 1985. At approximately the same time as the Larry investment was made, the Petitioner contracted with D.F. Owen to act as an investment adviser for a fee of $33,500. The stipulated facts describe the activities of the Petitioner on behalf of Cynthia Halabrin Trust. The Petitioner was the trustee for the trust, which was a residence. During a period of time that the residence was under renovation, the Petitioner allowed Mr. Larry to reside without payment to the trust. The stipulated facts describe the activities of the Petitioner regarding the unregistered operation of "Watts Investment Management, Inc." during 1985 and the subsequent registration of the entity in 1986. The stipulated facts describe the activities of the Petitioner regarding his employment as a broker for Paine Webber from 1982-1985, and the failure to obtain approval for outside employment activities while working for the investment firm. The stipulated facts describe the legal action taken by Cynthia Halabrin Raybuck against the Petitioner and Paine Webber related to the activities of the Petitioner as trustee of the Halabrin trust. The parties settled the case through arbitration. The stipulated facts address the creation of "Danbury Mortgage Company," and describe the preliminary activities of the unlicensed entity. The facts also identify the Petitioner's association with the Paradigm Mortgage Company, based in Jacksonville, Florida. For purposes of this Recommended Order, all stipulated facts set forth in the prehearing stipulation filed by the parties are adopted and incorporated herein. On or about August 29, 1996, the Petitioner filed an application with the Department of Banking and Finance, Division of Finance (Department) seeking licensure as a mortgage broker. The Petitioner’s application disclosed that in 1989 he was denied admission to the Florida Bar. In January 1989, the Petitioner was notified by the Florida Board of Bar Examiners (“Board”) of their intent to deny his application for admission to the Florida Bar. A hearing was conducted in June 1989 regarding the denial. The Petitioner was represented by legal counsel and testified under oath at the hearing. On August 31, 1989, the Board of Bar Examiners denied Petitioner’s application for admission. Based on the facts set forth in the Board's order, the Board concluded that the Petitioner “engaged in acts to serve his own interest to the detriment of others, violated registration laws, neglected payment of student loan obligations and issued numerous worthless checks.” The Board also determined that the Petitioner provided misleading testimony at his Bar hearing and failed to disclose material information on his application. Although at the formal administrative hearing the Petitioner attempted to explain the circumstances under which the Board's determination occurred, the testimony at hearing and the stipulated facts support the findings made by the Board. Upon the filing of the Petitioner's application for licensure as a mortgage broker, the Department undertook a review of the application. Based on the review, the Department determined that the Petitioner had held himself out for business as a mortgage broker without an appropriate license. In December 1995, the Petitioner registered the name "Danbury Mortgage Corporation" with the Florida Department of State, Division of Corporations. In January 1996, the Petitioner established a business location for Danbury Mortgage Corporation. The Petitioner listed the business under the "mortgage brokers" section of the Sarasota Yellow Pages. At no time was the Danbury Mortgage Company licensed by the Department of Banking and Finance. At the hearing, the Petitioner suggested that no mortgage business had been conducted by Danbury Mortgage Company. The Petitioner asserted that he had affiliated with another company (Paradigm) and that the other company was handling the registration of his office as a Paradigm branch. The evidence establishes that the Petitioner was involved in completion of at least one mortgage loan application on behalf of Paradigm Mortgage Company without appropriate licensure. The Paradigm "branch" office was located in the same building as Danbury Mortgage Company, and shared the Danbury telephone number. Based on a cryptic telephone message received by the Petitioner from a Paradigm supervisor, the Petitioner assumed that he was licensed. The Petitioner did not return the telephone call and made no credible attempt at determining whether he was licensed prior to acting on behalf of Paradigm Mortgage Company.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department enter a Final Order denying the application of Richard Eric Watts for licensure as a mortgage broker. DONE AND ORDERED this 30th day of December, 1997, in Tallahassee, Leon County, Florida. _ _ WILLIAM F. QUATTLEBAUM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 30th day of December, 1997. COPIES FURNISHED: Honorable Robert F. Milligan Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 Harry Hooper, General Counsel Department of Banking and Finance The Capitol, Room 1302 Tallahassee, Florida 32399-0350 Richard E. Watts, pro se 1345 Main Street, Suite C-4 Sarasota, Florida 34236 Pamela R. Jacobs, Esquire Regional Counsel Department of Banking and Finance 1300 Riverplace Blvd, Suite 640 Jacksonville, Florida 32207
The Issue Whether Respondent Department should deny Petitioner's application for a mortgage solicitor's license upon the grounds that Petitioner violated Chapter 494, Florida Statutes (1979), and lacks the requisite honesty, truthfulness, and integrity to act as a mortgage solicitor in Florida.
Findings Of Fact Upon consideration of the testimony and documentary evidence presented at hearing, the following facts are determined: On February 4, 1980, the Department served Requests for Admissions upon the Applicant. The Requests asked the Applicant to admit or deny the truth of each alleged finding of fact contained in the Department's Order of Denial dated December 7, 1979. Those findings of fact form the basis of the Department's proposed denial of Applicant's license. By his Answers to Request for Admissions (Respondent's Exhibit 3), the Applicant admitted the truth of each and every Finding of Fact contained in the Department's Order of Denial. The relevant Findings of Fact, which are now admitted and undisputed, are set out below: The Applicant, James B. Payne, was previously licensed as a mortgage broker in the State of Florida under license number 2387 and registration number 90-1. His license expired on or about August 31, 1977. On or about July 18, 1979, the Department received Applicant's application requesting registration as a mortgage solicitor. The application was not completed until Applicant passed his mortgage brokerage license exam. On August 29, 1979, the Applicant took, but failed to pass, the mortgage brokerage examination in Miami, Florida. However, on October 9, 1979, the Applicant retook, and successfully passed, the examination. Thereafter, the Department, pursuant to Chapter 494, supra, conducted an investigation into the Applicant's background and qualifications for registration as a mortgage solicitor. On or about May 15, 1978, [prior to filing the application at issue here] the Applicant had applied to the Department for a mortgage solicitor's license, pursuant to Chapter 494, supra. After receiving his application, the Department conducted an investigation into the background and qualifications of the Applicant. That investigation resulted in an Order of Denial which was issued on August 4, 1978, in administrative proceeding number 78-9 DOF (ME). An Affidavit of Default was entered in that action on September 1, 1978. That earlier Order of Denial [which became final and is not at issue here] contained the following allegations, now admitted by the Applicant: "(i) That at all times material hereto [subparagraphs (i)-(iv), post] the Applicant was employed by Metropolitan Mortgage Company as its Chief Financial Officer at 2244 Biscayne Boulevard, Miami, Florida. "(ii) On or about August, 1976, the Applicant did knowingly and with intent to defraud Metropolitan Mortgage Company, approve payment of a purported $5,000 mortgage fee to one Robert Day by check number 8309 issued by Metropolitan Mortgage Company and dated September 2, 1976. Said check was cashed on or about September 3, 1976, at the Capital Bank of Miami. On or about September 2, 1976, a cashier's check in the amount of $4,500.00 was issued by the Capital Bank of Miami and made payable to the Applicant. The Applicant represented that said payment to Robert Day constituted a share of a brokerage commission for commitments entered into between Metropolitan Mortgage Company and Tremont Savings and Loan Association. The primary fee for said transaction was paid to Mortgage Brokerage Services, East Orange, New Jersey. No such brokerage commission sharing agreement between mortgage brokerage services and Robert Day ever existed. "(iii) On or about June 3, 1977, the Applicant did knowingly and with intent to defraud Metropolitan Mortgage Company, make a false requisition upon said Metropolitan Mortgage Company for a check disbursement in the amount of $3,150.00 payable to State Savings and Loan Association by check number 11797 dated June 3, 1977, and drawn on Flagship National Bank. The Applicant did knowingly and with intent to defraud Metropolitan Mortgage Company, misrepresent that said requisition was for a verbal commitment issued by State Savings and Loan Association to buy conventional mortgages valued at $315,000.00 at a net of 8.75 percent. The Applicant did misrepresent to State Savings and Loan Association that said check constituted rentals collected by Metropolitan Mortgage Company on two foreclosed units at Tallwood Condominiums. At no time did State Savings and Loan Association issue the above described commitments either verbally or in writing. In fact, said requisition was made for the purpose of payment to State Savings and Loan Association for the Applicant's personal misadministration of loans regarding the Tallwood Condominiums and the Segars account in the respective sums of $6,340.00 and $4,210.00. "(iv) On or about June, 1977, the Applicant did knowingly and with intent to defraud Metropolitan Mortgage Company, approve payment of a purported brokerage fee to David G. Witherspoon, in the sum of $6,500.00 by check number 11796 dated June 3, 1977, issued by Metropolitan Mortgage Company and drawn on the Flagship National Bank of Miami. The Applicant represented that said payment to Donald G. Witherspoon constituted a share of a brokerage commission for commitments entered into between Metropolitan Mortgage Company and Tremont Savings and Loan Association. On or about June 6, 1977, said check was converted to cashier's check number 070087 drawn on the Flagship National Bank of Miami and made payable to one Donald G. Witherspoon. The primary fee for said transaction was paid to Mortgage Brokerage Services, East Orange, New Jersey. No such brokerage commission sharing agreement between Mortgage Brokerage Services and Donald G. Witherspoon ever existed. Donald G. Witherspoon was never a party to such transaction nor did he ever see, receive or sign said check." Misconduct by the Applicant Subsequent to the August 4, 1978, Order of Denial The Applicant represented himself to Mr. Alan N. Schneider of Kings Way Mortgage Company of Coral Gables, Florida, as being a licensed mortgage broker/solicitor in the State of Florida. From December 22, 1978, until February 23, 1979, the Applicant was employed by Kings Way Mortgage Company as a mortgage solicitor, and did act in the capacity of a mortgage solicitor and negotiated several loans and collected fees. At all times above, the Applicant was not licensed as a mortgage broker and/or solicitor in the State of Florida. That on or about February 1, 1979, the Applicant represented himself as, and acted in the capacity of a mortgage broker and/or solicitor in the State of Florida without being licensed as required by Chapter 494, supra, and in violation of Section 494.04, supra. When the Applicant filed his application at issue here, he failed to indicate, in response to Question No. 7, the existence of a Final Judgment against him in the amount of $1,482.35. Such Judgment was entered against the Applicant in Dade County, Florida, on August 15, 1978, in Case No. 78-7543 SPO5. Competence, Character, and Reputation of the Applicant Applicant has had considerable experience in the field of mortgage banking. The president and vice-president of two mortgage brokerage companies established, without contradiction by the Department, that the Applicant is extremely knowledgeable in the area of mortgage banking. (Testimony of Ruiz, Petitioner's Exhibit No. 1) Should the Applicant qualify for and receive a license, Allan Zalesky, President of First Capital Mortgage Company, and Albert Ruiz, Vice-President of Conley and Jones, a mortgage banking firm, would be willing to consider employing him as a mortgage solicitor. While no evidence was presented to indicate Zalesky was aware of the Applicant's past misconduct, or the basis for the Department's proposed denial of the Applicant's license, Ruiz was generally familiar with the Department's charges against the Applicant. Ruiz, nevertheless, affirmed that, should the Applicant be licensed, he would employ him as a competent mortgage solicitor, not just as a friend. (Testimony of Ruiz, Petitioner's Exhibit 1) The Applicant's reputation in the community, to the extent that it is known by his friend, Luiz, is one of "truthfulness, honesty, and integrity." (Testimony of Ruiz) Extenuating and Mitigating Circumstances Surrounding the Applicant's Misconduct Although the Applicant failed, in response to Question 7, to disclose on his application for licensure the existence of a Final Judgment against him, dated August 16, 1978, the Applicant had previously satisfied the Judgment, on or about November, 1978. Although the Judgment creditor had been paid by the Applicant, a Satisfaction of Judgment was not executed until March 18, 1980. (Testimony of the Applicant, Petitioner's exhibit 2) The Applicant intends to repay Metropolitan Mortgage Company for the losses it suffered due to the Applicant's prior misconduct. While the Applicant has made tentative arrangements to that end, no such payments have yet been made. (Testimony of Applicant) The Applicant admits his past misconduct as a mortgage solicitor as alleged by the Department, and sincerely regrets his actions. His fraudulent conduct, which forms the basis of the Department's previous 1978 Order of Denial, occurred, in part, because he was suffering financial difficulties, and faced mounting medical bills of his wife. He was aware that his continued functioning as a mortgage solicitor, subsequent to that Order denying a license, was unlawful but he felt compelled to do so because of mental and financial difficulties and his physical condition at that time. Further, he was encouraged by his friends at the mortgage company to engage in such activities. (Testimony of Applicant) The Applicant has never before engaged in misconduct in connection with mortgage brokerage transactions. His misconduct caused him embarrassment and great humiliation resulted in mounting family debts, and left him unemployed since February, 1979. His primary knowledge, and skills are limited to the mortgage banking field, and, unless he is able to act as a mortgage solicitor, it will be difficult to pay his debts and support his family. He freely acknowledges, and sincerely regrets his wrongful actions, and genuinely regrets the hardships which his actions have imposed on his family and friends. He professes to understand the value of and need for honesty and integrity in mortgage banking. Insisting that he has learned his lesson, he promises that, if licensed, he will never again engage in misconduct. (Testimony of Applicant)
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Applicant's application for licensure as a mortgage solicitor be DENIED, without prejudice to his right to reapply in future years with new and substantially different evidence of rehabilitation. DONE and ORDERED this 30th day of June, 1980, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Ronald B. Gilbert, Esquire Douglas Centre, Suite 807 2600 Douglas Road Coral Gables, Florida 33134 Franklyn J. Wollettz, Esquire Assistant General Counsel Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32301
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the request of petitioners to participate in the distribution of mortgage broker guaranty funds pertaining to First Fidelity Financial Services, Inc. be granted, and that they be paid their pro-rata portion of the fund in accordance with Section 494.044, Florida Statutes. It is further RECOMMENDED that the request of intervenors in Case No. 85- 3305 to be included in the above group of claimants for fund distribution purposes be denied unless they furnish the Division evidence of compliance with Subsections 494.043(1); (4) and (5), Florida Statutes (1985), by June 18, 1986. DONE and ORDERED this 17th day of February, 1986, in Tallahassee; Florida. DONALD R. ALEXANDER, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of February, 1986.
Findings Of Fact In his application for registration as a mortgage broker (Exhibit 2), David Stain, Petitioner, in response to question 7 "Have you any judgments against you?" answered "No". By letter dated May 12, 1980 (Exhibit 1), Respondent advised Stein that background investigation revealed numerous judgments against him and stated it would he necessary for Stein to advise why he chose to answer question 7 in the negative. After receiving no response from Stein, Respondent, on 2 July 1980, entered a Final Order denying Stein's application for registration as a mortgage broker. Grounds given in this Order were based upon numerous unsatisfied judgments entered against Stein in Pennsylvania. Exhibit 3, a composite exhibit of court records from Allegheny County, Pennsylvania, shows judgements entered against David Stein and in favor of: Pennsylvania Department of Revenue (2), Diner's Club, Ford Motor Credit Company, Charles Arnold, Alan Shaffer, Carl Kronander, and CNA Financial Corporation.
Findings Of Fact At the time of CMNI's application, Mr. Giunta was president of CMNI and, as such, exercised primary control over the day-to-day activities of CMNI (Tr.12). Mr. Giunta is also the president of Christian Investors Network, Inc. (CINI), and exercised similar control over the activities of that corporation (Tr. 11-12). Mr. Giunta, CMNI, and CINI have never been licensed as mortgage brokers by the Department (Tr. 12-13). CINI, with the knowledge and approval of Mr. Giunta, placed advertisements in the St. Petersburg Times (Tr. 13). One such advertisement appeared in St. Petersburg Times edition of April 20, 1986, under the heading "Loan Information." That advertisement stated "Major Real Estate Financing" and "Residential Real Estate." (Exhibit 1). Sometime in the middle of 1986, Paul Mark called Mr. Giunta in response to an advertisement in the St. Petersburg Times. Mr. Mark was seeking a mortgage loan or loans to build several houses on real estate he owned and so informed Mr. Giunta, who indicated to Mr. Mark that he could arrange a mortgage loan for Mr. Mark (Tr. 28-29). Messrs. Mark and Giunta met shortly after the telephone call. Mr. Mark handed Mr. Giunta a package of documents including a site plan, survey, credit information and a completed mortgage loan application. Mr. Giunta again stated that he would have no problem arranging a mortgage loan for Mr. Mark and requested a fee for such service in the amount of $300.00 (Tr. 30-31). After the meeting, Mr. Mark sent to Mr. Giunta a check made out to Mr. Giunta in the amount of $300.00, together with a letter dated July 16, 1986, confirming that Mr. Giunta would secure mortgage financing (Tr. 31-33); Exhibit 3). In October of 1986, Clifford Clark called Mr. Giunta in response to a newspaper advertisement, seeking a mortgage loan to refinance a certain parcel of property owned by Mr. Clark. Mr. Giunta stated that he could arrange mortgage financing for Mr. Clark at an interest rate of approximately ten percent (Tr. 48-49). After the telephone contact, Messrs. Clark and Giunta met and Mr. Giunta had Mr. Clark fill out a residential loan application (Exhibit 7). Mr. Clark provided Mr. Giunta with originals of his deed to the property and other real estate related documents. Mr. Giunta indicated that he could obtain mortgage financing for Mr. Clark and requested a fee of $250.00, whereupon Mr. Clark gave Mr. Giunta a check for that amount (Tr. 49-51). In early 1986, Robert Miraglia called Mr. Giunta in response to a newspaper advertisement, seeking a second mortgage. Mr. Giunta arranged to meet with Mr. Miraglia to discuss the requested loan. In August of 1986, Russell Foreman contacted Gerald Giunta in response to a newspaper advertisement, seeking a mortgage loan to refinance his home (Exhibit 5). On August 26, 1986, Mr. Foreman met with Mr. Giunta and at Mr. Giunta's request gave him copies of his deed, a survey of the lot, the mortgages to be satisfied and other real estate related documents. Mr. Giunta assured Mr. Foreman that there would be no problem in obtaining a mortgage loan and requested a fee of $200.00. Mr. Foreman wrote a check for that amount and gave it to Mr. Giunta (Exhibit 5). Mr. Giunta never informed Messrs. Mark, Clark, Miraglia and Foreman that he was not a licensed mortgage broker. In approximately April of 1986, Mr. Giunta met with Mr. Arthur M. James, Area Financial Manager for the Department's Tampa Regional Field Office. At that meeting, Mr. James explained to Mr. Giunta that he could not offer to arrange or negotiate mortgage loans on behalf of clients and collect a fee for such service without first becoming licensed by the Department as a mortgage broker (Tr. 84). At some point prior to May 8, 1986, Mr. Giunta was contacted by the Department and informed of the statutes and regulations applicable to advertising his services in the area of real estate financing (Exhibit 2; Tr. 23-24). At some point in 1987, CMNI, with the knowledge and approval of Giunta, listed "Christian Mortgage Network, Inc." in the yellow pages of a local telephone book under the heading of "Mortgages." (Exhibit 1; Tr. 15).
Findings Of Fact The pleadings in this case, Petitioner's Notice of Intention to Suspend" and Respondent's "Petition for Formal Hearing" establish the following uncontroverted facts: William D. McCaffrey is a mortgage solicitor holding license number HK0007207. The Department of Banking and Finance is charged with the responsibility and duty of administering and enforcing the provisions of the Mortgage Brokerage Act, including the duty to suspend the license of those persons registered under the act for violations of the terms therein. William D. McCaffrey has been convicted of a federal offense and is presently in federal custody at the Federal Correctional Institute in Montgomery, Alabama. On November 13, 1985, Respondent pled guilty to "Interstate transportation of fraudulently obtained credit cards, in violation of title 15 U.S. Code, Section 1644(b) as charged in count 6 of the Indictment". (Petitioner's Exhibit #2) Count 6 of the indictment provides: Count Six On or about December 13, 1982, defendants WILLIAM D. McCAFFREY and WILLIAM BARTRAM III did knowingly, with unlawful and fraud- ulent intent, transport and cause to be transported in interstate commerce from Clarkston, Georgia, by way of Nevada, to the District of Arizona, a fraudulently obtained American Express Credit Card in the name of William Smith, knowing said credit card to have been fraudulently obtained. All in violation of Title IS, United States Code, Section 1644(b), and Title 18, United States Code, Section 2. (Petitioner's Exhibit #1) The U.S. District Court for the District of Arizona in case #CR 85-53 PHX adjudged William D. McCaffrey guilty as charged and convicted, sentenced him to imprisonment for 5 years, and ordered that he pay a fine of $10,000 and make restitution to American Express in the amount of $5,481.27. (Petitioner's Exhibit #2 Judgement and Probation/Commitment Order)
Recommendation Based upon the foregoing it is recommended that a final order be entered suspending Respondent's mortgage solicitor's license for a period of two years. DONE AND ORDERED this 23rd day of October 1986, in Tallahassee, Florida. MARY CLARK 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 23rd day of October, 1986. COPIES FURNISHED: Robert K. Good, Esquire Office of the Comptroller 400 West Robinson Street Orlando, Florida 32801 Clyde Taylor, Jr., Esquire 1105 Hays Street Tallahassee, Florida 32301
