Findings Of Fact On November 15, 1976, the Outrigger Club, Inc., a Florida corporation, through its president, Ervin Freeman, and its Secretary, Joan Dimon, executed a warranty deed conveying all right, title and interest, in and to certain property located at Northeast 135th Street and Biscayne Boulevard, North Miami, Florida, to Petitioner, Biscayne South, Inc. (hereafter Biscayne South), a Florida corporation. The warranty deed was recorded with the Clerk of the Circuit Court of Dade County, Florida, on November 16, 1976. On November 22, 1976, Biscayne South executed a mortgage deed in favor of Fidelity Mortgage Investors, a Massachusetts business trust, as a second mortgage on the same parcel of land to secure the payment of a promissory note in the principal sum of $1,500,000.00 which note was made by Outrigger Club, Inc., on the same date in favor of Fidelity Mortgage Investors. On November 22, 1976, Outrigger Club, Inc., as the "borrower" executed a future advance agreement with Fidelity Mortgage Investors as "lendor". The future advance agreement provides for the advancement of the sum of $1,500,000.00 to be secured by a prior mortgage dated October 27, 1972, executed by Outrigger Club, Inc., in favor of Fidelity Mortgage Investors, which mortgage provided for future advances. On November 22, 1976, a construction loan and disbursement agreement was executed by the parties thereto which provided that the $1,500,000.00 advance be paid to Miami National Bank as disbursement agent for the benefit of Biscayne South. On November 23, 1976, the mortgage deed and the future advance agreement were recorded in the public records of Dade County, Florida, and on that same date, the warranty deed was rerecorded in the public records of Dade County, Florida. Because the 1.5 million dollars was paid to Miami National Bank to be disbursed for future construction work on a draw-down basis, Outrigger Club, Inc., the grantor, never received the 1.5 million dollars. The warranty deed provides in paragraph 9 thereof that the conveyance is subject to: a second mortgage wherein the Outrigger Club Inc., is mortgagor and the trustees of Fidelity Mortgage Investors, a Massachusetts business trust, is mortgagee, dated the day of November, 1976, which said mortgage is given as additional collateral for payment of certain sums as provided under a settlement and release agreement between the Outrigger Club, Inc., a Florida corporation, and Lawrence F. Lee, Jr., and others as trustees of Fidelity Mortgage Investors, a Massachusetts business trust dated the 16th day of January, 1976. Neither the Department of Revenue nor Biscayne South have introduced evidence to establish that such a mortgage in fact exists or if it did, the value of such mortgage. The only mortgage in evidence is Respondent, Department of Revenue's Exhibit 2, which shows Biscayne South as mortgagor rather than the Outrigger Club, Inc., as recited in the warranty deed. However, the future advance agreement introduced as Respondent's Exhibit No. 3, establishes the existence of a mortgage encumbering the subject property in which the Outrigger Club, Inc., is mortgagor and Fidelity Mortgage Investors is mortgagee. Such mortgage is dated October 27, 1972, and not dated with the month of November, 1976, as recited in paragraph 9 of the warranty deed. As recited in the future advance agreement, the mortgage of October 27, 1972, secured an indebtedness of $7,214,000.00. The mortgage provided that future advances could be made to Outrigger Club, Inc., not to exceed in the aggregate $16,500,000.00. The future advance agreement provides that an additional advance of $1,500,000.00 is to be made to Outrigger Club, Inc., thereby increasing the indebtedness represented by the October 27, 1972, mortgage to the aggregate sum of $8,715,000.00. In other words, the buyer of the property sought to borrow an additional 1.5 million dollars. The lender, in order to achieve priority of lien to secure its loan, treated the funding as an advance against a preexisting mortgage originally binding the seller, but then delivered the 1.5 million dollars directly to Miami National Bank for the benefit of the buyer. Accordingly, the seller never received the proceeds of the loan but rather participated in a "book transaction" for the benefit of the buyer and the lender.
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: Petitioner is a Florida corporation. It was incorporated on September 10, 1991. On August 25, 1995, it was administratively dissolved for failure to file its annual report. It has not been reinstated. At present, Petitioner has no assets. Its liabilities exceed $250,000.00 and include a judgment against it in the amount of $11,857.00 (plus interest) and numerous unpaid bills. Before its demise as an active corporation, 3/ Petitioner was a provider of travel services. It was registered as a "seller of travel" with the Agency in 1992 (from January 1 to December 31) and in 1993 (also from January 1 to December 31), during which time it held Seller of Travel Registration Number 14223. As part of the registration process, Petitioner posted with the Agency a $10,000.00 performance bond effective for the one year period commencing November 19, 1991 (the 1991-92 Performance Bond) and another $10,000.00 performance bond effective for the one year period commencing November 19, 1992 (the 1992-93 Performance Bond). 4/ The surety on these two performance bonds (the 1991-92 Performance Bond and the 1992-93 Performance Bond) was the Hartford Fire Insurance Company (the Hartford). Edward Volz, in his capacity as Petitioner's President, signed an indemnity agreement obligating Petitioner to indemnify the Hartford for any payments made by the Hartford "by reason or in consequence of its suretyship." 5/ Consumer claims against Petitioner were received by the Agency. By letter dated February 28, 1994, the Agency advised Petitioner of these "claims on the above referenced security" and of the Agency's intention "to make a demand under its [the security's] terms." By letter to the Hartford dated February 28, 1994, the Agency made "a demand on the surety bond." 6/ The letter read as follows: This is to notify your company that the Department of Agriculture and Consumer Services is in possession of claims made by persons who purchased travel-related services from the above-mentioned seller of travel [Petitioner]. This bond was issued by your company to secure the services of the seller of travel or to provide a refund to those customers who do not receive the services purchased. Please accept this letter as a demand on the surety bond. We would appreciate your advising this office in writing within fifteen (15) days from the date of this letter as to the form and information you require in order to make payment pursuant to the bonded obligation. If you have any questions please contact me at 904-922-2972 or Mr. Wayne Searcy, 904-922-2920. In or around March of 1994, Petitioner filed an application with the Agency to renew its "seller of travel" registration. In conjunction with the filing of its application, Petitioner posted with the Agency a $25,000.00 performance bond effective for the one year period commencing November 19, 1993 (the 1993-94 Performance Bond). The surety on the bond was the Hartford. 7/ By letter dated June 22, 1994, the Agency notified Petitioner that Petitioner's application for renewal of its registration had ben denied for failure "to provide a financial statement prepared by an independent public accountant." After receiving the Agency's June 22, 1994, letter, Petitioner discontinued its business operations. Having received additional claims against Petitioner since it had sent its February 28, 1994, demand letter to the Hartford and not having received any response from the Hartford to that letter, the Agency sent a second letter, dated September 29, 1994, to the Hartford. The letter read as follows: Subject: Excell Travel Club, Inc. 1239 East Newport Ctr., [Number] 113 Deerfield Beach, Florida 33442 Surety Bonds [Number] 41770-77 ($25,000) and [Number] 41770-77 ($10,000) Effective November 19, 1993/ Effective November 19, 1992 Dear Sir: The Department of Agriculture has claims exceeding the amount of the bonds [the 1992- 93 Performance Bond and the 1993-94 Performance Bond] from persons who purchased travel-related services from the above- mentioned seller of travel [Petitioner]. Therefore, the Department of Agriculture is making a demand on the bonds. The bonds were issued by your company to secure the services of the seller of travel or to provide a refund to those customers who do not receive the services purchased. Please accept this letter as a follow up demand on the surety bonds. We would appreciate your advising this office in writing within ten (10) days from the date of this letter as to the form and infor- mation you require in order to make payment to the bonded obligation. If you have any questions please contact me at 904-922-2820. A copy of this letter was sent to Petitioner. The Hartford sent a letter, dated October 18, 1994, to the Agency acknowledging receipt of the Agency's September 29, 1994, letter. Subsequently, the Hartford sent a second letter, dated November 2, 1994, to the Agency. The letter read as follows: RE: Our file: 319 S 26747 and 319 S 26748 Principal: Excell Travel Club, Inc. Dear Mr. Cloud: Enclosed are our checks totalling $35,000.00 which are in settlement of the two surety bonds with effective periods 11/19/92 to 11/19/93 and 11/19/93 to 11/19/94. Please acknowledge receipt of these two checks and acknowledge that our bonds are exonerated. Thank you for your advices concerning these matters. Appearing on both of the two checks that were enclosed with the Hartford's November 2, 1994, letter was the notation, "full and final settlement." Each of the checks also had a "loss date" written on it. The "loss date" written on the $10,000.00 check was November 18, 1993. The "loss date" written on the $25,000.00 check was September 29, 1994. Petitioner had no advance notice that the Hartford was going to make a "settlement" with the Agency. By letter dated May 17, 1995, the Agency advised Petitioner of its intention "to make distribution of the entire bond proceeds to the claimants on a pro rata basis." Thereafter, Petitioner filed a petition requesting an administrative hearing on such proposed action. Petitioner has not repaid any of the $35,000.00 that the Hartford paid the Agency for the benefit of those who filed claims against Petitioner, nor has the Hartford instituted legal proceedings to require Petitioner to indemnify it for having made such payment to the Agency.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Agency enter a final order dismissing, on the ground of lack of standing, Petitioner's petition requesting an administrative hearing on the Agency's proposed action to distribute the proceeds of the 1992-93 and 1993-94 Performance Bonds to claimants on a pro rata basis. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 8th day of October, 1996. STUART M. LERNER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 8th day of October, 1996.
Findings Of Fact At all times material hereto Respondent Marvin M. Kornicki has been a licensed real estate broker in the State of Florida, having been issued License Nos. 0265344 and 0252335. The last license issued was as a broker for Waterway Properties, Inc., t/a Waterway Properties. At all times material hereto, Respondent Waterway Properties, Inc., t/a Waterway Properties, has been a corporation registered as a real estate broker in the State of Florida, having been issued License No. 0265344. At all times material hereto, Respondent Kornicki was licensed and operating as the qualifying broker and an officer of Respondent Waterway Properties, Inc. On January 7, 1990, Respondents solicited and obtained an offer in the amount of $155,000 from Alda Tedeschi and John Tocchio, buyers, to purchase real property, to-wit: Unit 422 at Mariner Village Garden Condominium, Aventura, Florida, from Arthur Goldstein and Myra Goldstein, sellers. The buyers' offer reflected a $1,000 deposit to be held in trust by the Respondent Waterway Properties, Inc. The offer reflected that if the offer was not executed by and delivered to all parties, or fact of execution communicated in writing between the parties, on or before January 10, 1990, the deposit would be returned to the buyers and the offer would be withdrawn. The offer also reflected that "time is of the essence." On January 8, 1990, Respondents sent the buyers' offer to the sellers in New Jersey by air express. On January 10, 1990, the sellers signed the offer but made it a counteroffer by requiring the buyers to furnish an additional deposit of $14,500 by January 12, 1990, and requiring the buyers to sign a condominium rider and an agency disclosure form. The sellers returned the counteroffer with condominium rider and agency disclosure form to the Respondents. On January 12, 1990, Respondents sent the counteroffer, condominium rider, and agency disclosure form, together with a letter dated January 11, 1990, to the buyers for the buyers' initials and signatures. Although the buyers could not have received the counteroffer until after its expiration date, they advised Respondents by telephone that they had in fact initialed the counteroffer and mailed it back to Respondents. Respondents never received from the buyers that accepted counteroffer. The buyers subsequently verbally demanded the return of their $1,000 deposit, but Respondents wrote to the buyers on February 9, 1990, advising the buyers that they were in default. On February 8, 1990, Respondents had already disbursed the $1,000 deposit to Respondents' operating account since the sellers had told the Respondents to use the deposit to cover the costs incurred advertising the sellers' property. Since he was uncertain as to whether he had "conflicting demands upon an escrow deposit" Respondent Kornicki telephoned the Florida Real Estate Commission and discussed the matter with one of the Commission's attorneys. Because Respondent Kornicki believed that the buyers were "in default," Respondents failed to notify the Florida Real Estate Commission in writing that they had received conflicting demands. No explanation was offered as to why Respondent Kornicki believed the buyers were in default when the counteroffer could not have been signed by the buyers prior to its expiration and when Respondent Kornicki had never seen a fully executed document. Further, no explanation was offered as to why the sellers believed they were entitled to the money. Since that transaction, Respondents have experienced other transactions where conflicting demands were made. In those subsequent instances, they have timely notified the Florida Real Estate Commission in writing as to those conflicting demands. On June 18, 1990, Petitioner's investigator conducted an office inspection and escrow/trust account audit of Respondents' office and escrow/trust account. That audit revealed that Respondents wrote a trust account check on September 1, 1989, in the amount of $369.15, which was returned on October 3, 1989, for insufficient funds. A second trust account check in the amount of $800 was also returned for insufficient funds on October 3, 1989. Respondents had received rental monies from a tenant by check. Respondents had written checks out of those monies for the mortgage payment on the rental property, not knowing that the tenant's check would fail to clear. The worthless check written by the tenant caused these checks written by Respondents to be returned for insufficient funds. Respondents have changed their office policies so that they no longer accept checks from tenants except before tenants move into rental properties and the checks must clear before the tenants are allowed to take possession of the leased premises.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered: Finding Respondent Kornicki guilty of Counts I, III, V, VII, IX, and Finding Respondent Waterway Properties, Inc., guilty of Counts II, IV, VI, VIII, X, and XII; Dismissing Counts XIII and XIV; Ordering Respondent Marvin M. Kornicki to pay a fine of $1,000 to the Division of Real Estate within 60 days and revoking Respondents' licenses should such fine not be timely paid; Placing Respondents on probation for a period of one year if the fine is timely paid; Requiring Respondent Kornicki to complete and provide satisfactory evidence of having completed 60 hours of approved real estate post-licensure education for brokers, 30 hours of which shall include the real estate broker management course, during the probationary period; Establishing terms for the probationary period except that such probationary terms shall not require Respondent Kornicki to retake any state licensure examinations and Requiring Respondent Kornicki to appear before the Commission at the last meeting of the Commission preceding the termination of Respondents' probation. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 13th day of February, 1991. LINDA M. RIGOT 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 13th day of February, 1991. APPENDIX TO RECOMMENDED ORDER DOAH CASE NO. 90-5863 Petitioner's proposed finding of fact numbered 1 has been rejected as not constituting a finding of fact but rather as constituting a conclusion of law. Petitioner's proposed findings of fact numbered 2-4, 6-14, and 16-19 have been adopted either verbatim or in substance in this Recommended Order. Petitioner's proposed finding of fact numbered 5 has been rejected as being unnecessary for determination of the issues herein. Petitioner's proposed finding of fact numbered 15 has been rejected as not being supported by the weight of the credible evidence in this cause. COPIES FURNISHED: Darlene F. Keller, Division Director Department of Professional Regulation Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32801 Jack McCray, Esquire Department of Professional Regulation Legal Division 1940 North Monroe Street Tallahassee, Florida 32399-0792 James H. Gillis, Esquire Department of Professional Regulation 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32801 Marvin M. Kornicki Waterway Properties, Inc. 16560 Biscayne Boulevard North Miami Beach, Florida 33160
Findings Of Fact At all times pertinent to the issues herein, the Department of Insurance was the government agency in Florida responsible for the licensing of insurance agents and the regulation of the practice of the insurance profession in this state. Respondent, Alan Chappuis, was licensed in Florida as a life insurance agent, health insurance agent, general lines agent, and a life, health and variable annuity contracts salesman. Erna Swan, an 84 year old twice widowed lady, and the individual to whom Respondent sold the annuity policies in question, was unable, at the time of the hearing, to recall the names of either of her former husbands or when they passed away. She recalls that both husbands worked in insurance and that she has lived in the Pinellas County area for a long time, but cannot recall for how long. Mrs. Swan lives alone and can cook for herself and bathe and dress herself, but does not know how much her current income is or the source of that income. She was able to recognize Respondent as her insurance agent of several years standing, but cannot recall whether she ever purchased anything from him, and she does not know what Guarantee Trust Life Insurance Company is. She does not know what an annuity is or whether she ever wanted to buy one from the Respondent. By the same token, she cannot recall if he ever tried to sell her an annuity. Mrs. Swan has known Nadine Hopkins, a close friend, for about 10 years. She also recognizes Mr. Wells and Mr. Tipton, her attorney and stock broker respectively, but does not know what they do. Mrs. Swan maintains a room in her condominium apartment which she uses for an office where, before she was placed under the guardianship of Ms. Hopkins, she paid her bills and kept her business records, such as they were. She recalls that she had a brokerage account with Merrill Lynch but cannot remember what it was for or what type of securities were in it. She is familiar with Bayridge Baptist Church, of which she is a member, and she recognizes that she has given money to the church over the years. Mrs. Swan's driver's license was cancelled several years ago because, according to Ms. Hopkins, she felt she could not take the test required to renew it. Mrs. Swan does not recall this though she remembers she used to own a car. She cannot remember what kind it was. Mrs. Swan's apartment is paid for. There are no mortgage payments. She claims she still writes checks for her monthly bills by herself, but also notes that Ms. Hopkins does it. More likely it is the latter. She still answers her phone, answers her mail, and reads the newspaper. She is, however, obviously incompetent to testify to the nature of an annuity, and it is quite clear that at this time she would be unable to understand the provisions of an annuity contract and the difference between an annuity contract and an investment portfolio in another product. Mr. Tipton, formerly a stock broker with Merrill Lynch, first met Mrs. Swan in the early 1960's through a family member who worked at the family insurance agency. At that time Mrs. Swan and her husband had purchased the agency from his family, and in the years following the Swans stayed as friends of Mr. Tipton. Mr. Tipton became an investment advisor in 1981 to Mr. Swan who passed away sometime in either 1985 or 1986. He started buying U.S. Government bonds and thereafter moved to tax free investments. When Mr. Swan passed away, Mrs. Swan became the owner of the account. During 1992 and 1993, Mr. Tipton would see Mrs. Swan once or twice a month. At that time, toward the end of 1993, it was clear to him that her memory appeared to be slipping. She would not remember things they had talked about and was unable to participate fully in the decisions made on her investments. At the end of 1993, Mrs. Swan's portfolio with Merrill Lynch was valued at approximately $360,000, plus a money market balance of $18,000. The account statement for October, 1993 reflected she had 5 municipal bonds valued at $80,000, tax free bond funds valued at $273,620, and approximately $18,000 in money market funds. Her estimated annual income from the bonds was approximately $6,631, or approximately $520.00 per month. Her tax free bond funds income returned approximately $1,200 per month, and her Nuveen Fund, approximately $50.00 per month, giving her a grand total of approximately $1,800 per month investment income in addition to her Social Security monthly payment of somewhat in excess of $650. On December 20, 1993, Mr. Tipton, as a representative of Merrill Lynch, received a letter moving Mrs. Swan's account to another brokerage firm, located in Texas, but with a local representative. At that time, Mr. Tipton tried to stop the transfer by contacting his main office, but was advised that by the time he had received the letter, the transfer had been completed. Mr. Tipton wanted to stop the transfer because when he called Mrs. Swan to inquire about it, she indicated to him that she did not want her account moved. Several weeks later, Mrs. Swan called Mr. Tipton to find out where her Merrill Lynch monthly account statement was. She did not recall at that time that her Merrill Lynch account had been closed and the securities therein transferred to the Texas brokerage concern. Because of this call, sometime in early January, 1994, Mr. Tipton called Mr. Wells, Mrs. Swan's attorney, and set up a meeting for the three of them. There were approximately three meetings of the three of them between January and March, 1994. The substance of their discussions was the fact that the broker to whom the Merrill Lynch account had been transferred had liquidated her entire account and used the proceeds thereof to pay for the annuities sold to Mrs. Swan by Mr. Chappuis and his associate, Mr. Mednick. According to Mr. Tipton, up until this time, Mrs. Swan had never indicated any dissatisfaction with the interest and income she was earning on her Merrill Lynch brokerage account. Mr. Tipton absolutely denies there was any churning of her account to garner more commissions. The only transfer was a sale at a premium in February, 1993 of bonds of the Jacksonville Electric Authority to create more capital for investment to provide greater income. The brokerage account owned by Mrs. Swan was not insured against loss of principal though many of the particular funds in which much of the money was invested were, however, individually insured. In 1990, Mrs. Swan's account, which had been in her name individually, was transferred to a trust account of which she was the beneficiary for life, with the provision that at her death, the funds therein would be distributed to various religious organizations and a few friends. Mrs. Swan had no family heirs. No commission was earned by Mr. Tipton on the transfer, though he did receive a commission on both the above-mentioned sale of the Jacksonville Electric bonds and the purchase of a tax free bond fund with the proceeds. Her brokerage account permitted her to write checks on the funds in the money fund. Mr. Tipton claims he never engaged in a transaction regarding Mrs. Swan's account without first talking to her about it. In his opinion, whenever he did make a change she appeared alert and aware enough to participate effectively. The last major transaction was the 1990 bond sale, however. Mrs. Hopkins and Mrs. Swan attend the same church. In late 1993 or early 1994, Respondent's business card was always on Mrs. Swan's refrigerator. At no time did she ever speak disparagingly of him to Mrs. Hopkins, or complain about any insurance product he sold her. Mrs. Hopkins was not Mrs. Swan's guardian at that time and Mrs. Swan was paying her own bills, however not effectively. She was late getting them out and complained it was becoming difficult for her to type out the checks. According to Mrs. Hopking, Mrs. Swan was not extravagant in her spending. She did not take cruises, go to expensive restaurants or buy a lot of clothes. Mrs. Swan, in Ms. Hopkins' opinion, lived comfortably. She was generous in the terms of her charitable contributions. Since being appointed Mrs. Swan's guardian, Mrs. Hopkins had seen her financial records and she knows that Mrs. Swan donated a lot of money to various churches and religious organizations. Mrs. Swan received many requests for donations and indicated that as long as she had the money to give she would do so. In later years, however, as Mrs. Hopkins recalls, it became a physical and mental burden for Mrs. Swan to write the checks, and she frequently commented on this. Mr. Wells is Mrs. Swan's attorney, specializing in estate and trust planning. He met Mrs. Swan through a friend in 1990 and began to serve as her estate planner. In the spring of 1994 Mr. Wells met with Mr. Tipton and Mrs. Swan regarding the Respondent's sale of her security portfolio and the purchase of the two annuities in issue here with the proceeds. At that time Mrs. Swan seemed to have no knowledge of the transaction. As a result, he called Guarantee Trust Life Insurance Company to get some information on what needed to be done in order to bring about a recision of the policies, but before any action was taken, the entire matter was turned over to Mr. Keirnan, another attorney, who does trial work. As a result of Keirnan's efforts, approximately two weeks before the hearing, Mr. Wells, on behalf of Mrs. Swan, received a check in the amount of approximately $372,000 from Guarantee Trust and Life Insurance Company as full reimbursement of the premiums paid for the two annuities in issue. From the time the annuities were issued in December, 1993 and January, 1994, Mrs. Swan had only her Social Security check to live on. She also received a check from Guarantee for $5,000, at her request, at the time the policies were issued as the balance in her brokerage account over the amount required as premiums for the annuities. She received nothing from her annuities which, as set up, did not call for the payment of any monthly income. As a result, Mr. Wells felt it necessary to borrow between $15,000 and $20,000 at 8 percent for Mrs. Swan from other trusts he managed to provide funds for Mrs. Swan to live on. From the documents which Mr. Tipton and Mrs. Swan brought to him in March, 1994, Wells could determine that the two annuities were purchased for her but she, at that time, did not seem to know anything about them. Though the annuities offered several options to permit period withdrawal of principal and interest, none had been selected by Mrs. Swan and as they then existed, she would draw no income from them until she was 100 years of age. When Mr. Tipton and Mrs. Swan came to Mr. Wells' office and brought the paperwork showing she had sold her securities to buy the annuities, Mr. Wells called Respondent to find out what had happened to Mrs. Swan's money. About the same time, he drafted a letter to Respondent at Mrs. Swan's request in which she requested Respondent not contact her any more. This letter was written because Mrs. Swan had said Respondent had "pestered" her at home and upset her on some occasions before the letter was written. Guarantee's manager of Government Relations and Compliance, Mr. Krevitzky, identified the two policies issued to Mrs. Swan. According to Mr. Krevitzky, an annuity is a savings vehicle which holds funds over a period at interest with provision for single or periodic pay out. Interest on both annuities in issue here was guaranteed at a rate of 4.5 percent per year or higher. The first year, the policies earned only the guaranteed 4.5 percent interest, and the income was credited to the policy from January, 1994 until the policies were surrendered as a part of the litigation settlement on March 25, 1995. At that point, since it was considered that the policies were rescinded and therefore void ab initio, the interest earned was forfeited and not paid. Only the premiums paid in were refunded in total. The commission paid to the Respondent and his associate, Mr. Mednick, was paid out of company funds and not Mrs. Swan's funds. The annuity contracts sold by the Respondent to Mrs. Swan had options for five different pay-outs, some of which would have returned income to her during the pendency of the contract. However, none of these was selected by Mrs. Swan and there was no evidence to indicate that Respondent ever explained any of them to her. As they existed as of the date they were cancelled, and at all time up until then, Mrs. Swan would receive no income until the annuity matured at her age 100. This is an unreasonable situation for an individual of Mrs. Swan's age and situation. Mr. Krevitzky contends that the potential pay out options could have provided Mrs. Swan with a substantial income equal to or exceeding the income she was received from her securities portfolio. Most of these options would have included a partial return of principal, however, whereas the income from the prior held portfolio was interest only with her principal remaining intact. One option provided an income for a guaranteed period which, in some circumstances, could have resulted in her receiving more than the amount paid in for the contract. The ultimate fact remains, however, that at the time of sale, and at all times thereafter, notwithstanding the fact that Mr. Chappuis was directed to stay away from Mrs. Swan, he had failed to assist her in the selection of any income option and she was receiving no current income at all from the annuities. In each of the two years prior to the purchase, for 1992 and 1993, she had regular tax free investment income of between $26,000 and $27,000, in addition to the capital gains of approximately $23,000 from the sale of the bonds in 1992. It matters not that she needed little to live on or donated a great portion of her income to charity. This decision was hers to make. By the same token, it matters not that no request for income was made, during the pendency of the annuities, by or on behalf of Mrs. Swan. Annuities have several benefits over other types of investments, according to Mr. Krevitzky. One is the tax deferment provision for interest earned on the annuity. Another is the fact that, subject to local law, the principal of the annuity is not subject to garnishment. A third is the guaranteed return of principal at the end of the annuity which permits older annuitants to provide for their heirs while maintaining income during their lifetimes. Many senior citizens look to the safety of their investment rather than the taxability of the interest. Therefore, in selling annuities to seniors, the agents stress these factors and the no-probate consideration. David W. Johnson has been an independent contractor with Respondent's broker, Professional Systems Associates, since 1989 and is the annuity manager for the firm. Mr. Johnson indicates that there has been an increase in the annuity business with seniors in 1993 - 1994. Funds for the purchase of the annuities usually comes from bank certificates of deposit, but sometimes, like in the instant case, the funds come from a brokerage account. In his experience, seniors choose annuities over certificates of deposit and brokerage accounts. According to Mr. Johnson, if Mrs. Swan had wanted to stop the transfer from her account she could have done so up until the transaction was completed, even after the securities had been liquidated and the funds sent to Guarantee. This is so, he claims even though Mrs. Swan gave authority to make the transfer in the documentation accompanying her application for the annuities. Mr. Johnson indicated it takes about two weeks after the receipt of the premium before Guarantee issues the annuity contract and at any time before issue, the transaction could be cancelled and the money returned. Even after issue, there is a "free look" period during which the contract may be cancelled without penalty. Though the contract may be cancelled and the premium returned, the former securities are still liquidated and the brokerage account closed. According to Mr. Johnson, there was nothing in the paperwork regarding these annuities which he saw which would raise any flag for consideration. He did not feel it necessary to call Mrs. Swan to see if she really wanted the policy and he never received a call from her or anybody else regarding it. Mr. Chappuis' partner in this sale was Scott Mednick who has been a licensed insurance agent since 1984 and who is an independent contractor with the same agency. Mr. Mednick was solicited to accompany Mr. Chappuis to Mrs. Swan's home in December, 1994 because of his expertise in the annuity field. Respondent had described Mrs. Swan to him as a long time customer. Respondent claimed that Mrs. Swan had indicated she was concerned about her brokerage account and he wanted to show her some product, annuities, she might be interested in. Mr. Mednick has known Respondent for eleven years and knows him to be a top producer. Respondent's reputation is that he is cheap and close with the dollar. Nonetheless, Mr. Mednick claims he was not surprised that Respondent was willing to share the commission on this sale in order to be sure the client got the proper product. Mrs. Swan let Mr. Mednick examine her monthly statement from Merrill Lynch. It appeared to Mr. Mednick that the account had not grown over the years. This is not surprising in that the portfolio was made up solely of tax free bond funds, tax free municipal bonds and tax free money marts, the volatility of and fluctuation in price of which is minimal. Mr. Mednick cannot now recall if Mrs. Swan indicated she knew about her stocks. However, he relates that he and the Respondent suggested she look into annuities as an alternative which Respondent explained to her. In addition, he claims they provided her with a lot of written material. Based on Mrs. Swan's action, words and attitudes expressed, Mr. Mednick believed she completely understood what was explained to her and wanted to make the change. It was his belief she seemed to understand she would pay no commission on the purchase; that she would have a guaranteed income that she could not outlive; that the annuity avoided the volatility of the stock market; and it was not attachable by creditors. As structured and sold to Mrs. Swan, however, she was to get no income at all from this product until she reached the age of 100/. Mr. Mednick asserts that at no time did he feel that Respondent had less than the best interests of Mrs. Swan at heart and he can recall no time when Respondent lied to Mrs. Swan. All representations made by either Respondent or Mednick allegedly came from the brochures left with her. Mednick indicates that during their conversation, Mrs. Swan did not seem concerned about getting her principal out of the investment. She was most concerned about her desire to leave the principal to the church. Mednick claims that at the time of the sale, the two agents asked Mrs. Swan if she wanted her interest paid quarterly but she said to let it accrue. This representation, in light of the other evidence, is not credible. Taken together, Mednick's testimony does nothing to detract from Respondent's sale of this product, inappropriate as it was for this client, to Mrs. Swan. Mr. Mednick's credentials are somewhat suspect, and his credibility poor, however. By his own admission, he has been administratively fined by the Department on two occasions based on allegations of misconduct. He denies any misconduct, however, claiming he accepted punishment only as an alternative to a prolonged contest of the allegations. The allegations herein were referred to an investigator of the Department to look into. As is the custom of the Department, he did not interview the Respondent but merely sought to gather facts concerning each allegation to be sent to the Department offices in Tallahassee where the analysis and determination of misconduct is made. By the same token, he did not call or speak with Mrs. Swan, Mr. Mednick, or anyone at Professional Systems. He spoke with Mr. Tipton, Mr. Wells, Mrs. Hopkins and with Mr. Keirnan a couple of times.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that the insurance licenses and the eligibility for licensure of the Respondent herein, Alan Chappuis, be suspended for nine months. RECOMMENDED this 22nd day of August, 1995, in Tallahassee, Florida. ARNOLD H. POLLOCK, 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 22nd day of August, 1995. APPENDIX TO RECOMMENDED ORDER The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER: 1. - 21. Accepted and incorporated herein. 22. & 23. Accepted and incorporated herein. 24. - 27 Accepted and incorporated herein. FOR THE RESPONDENT: Respondent's post hearing submittal was entitled "Respondent's Final Argument." However, because it makes specific Findings of Fact, the submittal will be treated as though it were Proposed Findings of Fact which will be ruled upon herein. First sentence accepted. Balance rejected as contra to the weight of the evidence. & 3. Accepted that Mr. Krevitzky testified and that there was nothing in the contract which would cause Respondent to misrepresent. The product may well be a worthy product for someone in a different financial position than Ms. Swan, and the issue is whether Respondent fully explained the implications and ramifications of the contracts to her. Rejected as a misconception of the nature of the witness' testimony. Rejected as contra to the weight of the evidence. First sentence accepted. Second sentence rejected. Irrelevant. Accepted as a summary of the witness' testimony. First and second sentences accepted. Balance rejected as an unwarranted conclusion drawn from the evidence. Accepted but irrelevant. COPIES FURNISHED: James A. Bossart, Esquire Department of Insurance 612 Larson Building Tallahassee, Florida 32399-0300 Alan Chappuis, Pro se P. O. Box 86126 Madiera Beach, Florida 33738 The Honorable Bill Nelson State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Dan Sumner Acting General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, Florida 32399-0300
Findings Of Fact Respondent, Wilbur Lewis Hallock, at all times relevant thereto, was a licensed real estate broker-salesman having been issued license number 0035549 by Petitioner, Department of Professional Regulation, in 1971. He also has the designation of a Graduate of the Realtors Institute (GRI), having successfully completed its requirements. At the time the events herein occurred, Hallock was a salesman for Don Asher and Associates in Orlando, Florida. On or about August 8, 1980, Respondent, through reading the Orlando Sentinel Star, became aware of a mortgage foreclosure proceeding by Winter Park Federal Savings and Loan Association 1/ pending against James A. and Jeanie Lockwood, husband and wife, who owned a home located at 4813 and 4815 Basswood Lane, Orlando, Florida. 2/ Hallock had been told to vacate his apartment, and was in the process of finding a new home. He was "looking for a bargain" and believed he found one when he read of the Lockwoods' plight. The Lockwoods were separated at that time and only James Lockwood lived in the house on Basswood Lane. Hallock telephoned James Lockwood on Friday evening, August 8, 1980, and told him he was aware of the foreclosure proceeding and wished to meet with him to discuss a possible sale or way to avoid foreclosure proceedings. Lockwood, who was in the process of moving to Winter Haven and wished to immediately sell the property, was receptive and invited Respondent to meet with him that evening. Respondent and a lady friend (Mrs. Florence Harrison) then visited James that night. Hallock introduced himself, and showed two cards to prove his identity. Hallock made clear he did not represent his employer, Don Asher and Associates, but was simply representing himself. Although conflicting stories as to what happened during and after this first meeting were given by the various witnesses, the undersigned finds the following to be the more credible version of the sequence of events. Upon meeting Lockwood, Hallock proceeded to discuss the various alternatives available to Lockwood. These included selling the home to Hallock's brother, who lived in Miami, allowing Hallock himself to purchase the house, or simply letting the lending institution foreclose. Because the mortgage payments were in arrears and a foreclosure proceeding in progress, Lockwood offered to give the house to Hallock if he would bring the payments current. Hallock, who knew consideration for a real estate transaction was required, declined the offer and instead offered James "a minimum of $50 equity." No total purchase price was discussed since the balances on the first mortgage, and a second mortgage held by Freedom Federal Savings and Loan of Tampa, were unknown. Neither was the agreement reduced to writing. James also wished to avoid paying a commission on the sale of the house that might be due since another realtor, Area One West, Inc., held a listing. However, Hallock advised James that because Jeanie Lockwood had not signed the agreement, the listing realtor would have "no claim whatsoever." Hallock also told James that his wife needed to concur in their agreement. That same evening, Hallock telephoned Jeanie Lockwood, who resided in an apartment in Orlando. He told her he had just talked with her husband concerning a possible sale of their house, and wished to discuss the matter with her that evening. She agreed, and subsequently met Hallock and Mrs. Harrison later that evening. Also present was Jeanie's neighbor, Carol Gordon, who had been asked by Jeanie to sit in on the discussions. Hallock identified himself to the ladies, told them that he had become aware of the foreclosure proceeding by reading a newspaper, and had discussed a possible sale with the husband. He briefly described the same alternatives available to her as he had with James. When asked by Hallock whether she wished to keep the house or move into it, Jeanie stated she did not. No purchase price or equity payment was discussed that evening. However, Hallock requested Jeanie to call the two lending institutions on the following Monday morning to authorize him to ascertain the balances owed on the mortgages. He also advised her that the listing then held on the property by the other realtor was not valid because Jeanie had failed to sign the listing agreement. Hallock called James early the next morning (Saturday) and asked to meet with him. James was moving his possessions out of the home that day and told Hallock to come over right away. Upon arriving at the home, Hallock told James he had a deed prepared that conveyed the property to him and wished to have James sign it that day before he moved to Winter Haven. However, he indicated he would not record it or pay any consideration until the mortgage balances were ascertained, the chain of title checked, and final confirmation received from the Lockwoods. James agreed to meet Hallock at 10:00 a.m. that morning to sign the deed. Hallock then telephoned Jeanie and asked to meet her that morning. When they met, Hallock explained he wished her to sign the deed that day so he would not have to interrupt her work schedule during the following week. Hallock told her to meet James and himself at Wescott Realty at 10:00 a.m. to sign the papers. He also told her that "the least you will get is $100 for the house." At approximately 10:00 a.m. that morning, the Lockwoods and Hallock met at Wescott Realty in Orlando. There they executed a warranty deed conveying the property in question from the Lockwoods to Hallock (Petitioner's Exhibit 3). It was notarized by Barbara Boehmer, an employee of Wescott. Also present was Mary Black, another employee of Wescott. Prior to their signing the document, the Lockwoods were asked by Hallock if they were of legal age, were husband and wife, were under duress or threat to sign, or were subject to the influence of drugs or alcohol. Although the signing was done in a rather hasty fashion, there was no effort by Respondent to cover or conceal any portion of the document. The word "deed" was not mentioned at any time during the transaction, nor were the Lockwoods verbally advised at that time as to the nature of the document being signed. Neither was any money or other consideration exchanged. On Monday, August 11, 1980, Jeanie Lockwood called Margaret M. Norman at Winter Park Federal Savings and Loan to request the balance on the mortgage held by that institution. Mrs. Norman advised Jeanie to make the request in writing; Jeanie then prepared a letter requesting that the institution give Hallock "any information he requires regarding the foreclosure on our house at 4815 Basswood Lane." (Respondent's Exhibit 2). Hallock telephoned Jeanie on Monday evening and told her he would give her $65 equity instead of $50.00. She concurred with this amount. He also told her he was in the process of having the title checked and would not record the deed unless the title was clear. On Tuesday morning, Hallock telephoned Mrs. Norman to ascertain the balance on the mortgage held by Winter Park Federal Savings and Loan. Upon receiving preliminary information concerning the mortgage, Hallock called James in Winter Haven and advised him the wife had accepted the $65 equity offer on Monday night. The husband complained he wanted an amount closer to $100; Respondent said he would "split the difference" and upped the equity payoff to $75. The husband then gave his concurrence. At 11:43 a.m. on August 12, 1980, Hallock recorded the warranty deed signed by the Lockwoods in the Orange County Courthouse and paid $232 for documentary stamps affixed to the deed (Petitioner's Exhibit 3). He later requested and obtained from the Department of Revenue a partial refund of the stamp tax after he determined the stamp tax paid exceeded the amount actually required. After recording the deed he obtained a cashier's check in the amount of $75 and mailed it to James in Winter Haven. However, James never cashed the check and returned it to Hallock. On that same Tuesday, Jeanie called Area One West, Inc., the listing realtor, to let them know she had received foreclosure papers on the second mortgage. A salesperson told Jeanie that she had a prospective buyer for the house, and suggested they view the property that afternoon. Thereafter, two representatives of Area One West, the prospective buyer and Jeanie all met at 4815 Basswood Lane. Upon reaching the premises, they found the realtor's sign and multilock in the carport, the front door unlocked, and Hallock's car in the driveway. Inside was Hallock showing the house to a prospective buyer. Jeanie told Hallock she now had a buyer and would not sell the house for $65. Hallock told her he had bought the home, already recorded the deed she had previously signed on Saturday, and had mailed James a check for $75. Jeanie then accused Hallock of being "in cahoots" with James. On August 14, 1980, Respondent telephoned James Lockwood in Winter Haven to inquire about a lawnmower, edger and books that James had left in his house. James told Hallock to keep his books but stated he wished to keep the lawnmower and edger. During the next day or two, James came and took the lawnmower, drapes and oven racks from the house. Thereafter, Hallock called James and asked if he would swap the edger for the missing oven racks; James agreed. Hallock ultimately changed the locks on the house on Saturday, August 16, 1980. James Lockwood is a 29-year-old stockholder employed by Merrill Lynch in Winter Haven, Florida. Prior to his present employment, he worked for an Orlando automobile dealership. His wife is a secretary with the State of Florida. Although their formal education was not disclosed, James did attend college for an undisclosed period of time. Jeanie described her husband as being as honest and truthful "as the next person" but acknowledged he sometimes lied. The listing agreement with Area One West, Inc., was signed by James Lockwood and Carol Lockwood on July 3, 1980 (Petitioner's Exhibit 4). 3/ Carol is his second wife. Jeanie did not sign the agreement. The house was originally listed for $56,900 on the agreement but that figure was marked through and replaced with a figure of $49,900. Hallock purchased the house for approximately $39,600.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the complaint against Respondent Wilbur Lewis Hallock be DISMISSED. DONE AND ENTERED this 3rd day of June, 1981, 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 3rd day of June, 1981.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Respondent, Department of Banking and Finance, Division of Finance (Division), is the state agency charged with administering the mortgage brokerage guaranty fund (fund) codified in Sections 494.042 through 494.045, Florida Statutes (1987). Among other things, the Division processes claims for payment from the fund by persons who were parties to a mortgage financing transaction and who have suffered monetary damages as a result of a violation of the law by a licensed mortgage broker. In this case, the perpetrator was Stackhouse Mortgage Corporation (Stackhouse), which held mortgage brokerage license number HB-0006527 from September 19, 1976 through August 31, 1986 and operated at least part of that time in the Brevard County area. In order to perfect a successful claim and be assured of participating in the distribution of moneys from the fund, a person must satisfy a number of statutory criteria within a specified time period after the first notice is filed. This proceeding involves a number of claims by various parties who suffered monetary damages as a result of the illicit acts of Stackhouse. The principal factual issues are whether petitioners, Robert Motes, Machiko Motes, Madge Chesser and Christiane E. Driscoll, all claimants, satisfied the required statutory criteria within the specified time period, and whether the first valid and complete notice of a claim was filed on January 20, 1987 as maintained by the Division, or occurred on a later date as urged by petitioners. These issues are crucial to petitioners' interests since the amount of money to be distributed from the fund for all claimants (on a pro rata basis) is $100,000, and all of that money has been proposed to be distributed to intervenors and other claimants because of the alleged untimeliness of petitioners' claims. The Stackhouse matter first came to the Division's attention on January 20, 1987 when it received by certified mail a letter containing a copy of a complaint filed against Stackhouse by intervenors, Richard S. and Althea M. Rucki, in the circuit court of the eighteenth judicial circuit in and for Brevard County. This filing constituted the first valid and complete notice of the matter. As such, it triggered a two year time period in which other claimants had to file such notice with the Division and then satisfy all statutory criteria in order to share in the first, and in this case the only, distribution of moneys from the fund. Intervenors eventually obtained a summary final judgment against Stackhouse on January 10, 1989 in the amount of $27,200 plus $1,972 in interest, $76 in court costs, and $2,000 in attorney's fees. Copies of the judgment, unsatisfied writ of execution and affidavit of diligent search were filed with the Division on January 19, 1989, or within two years from the date the first notice was filed. After the Rucki notice was filed, a number of claimants, including the other intervenors, filed their notices with the Division within the two year time period and thereafter satisfied all pertinent statutory criteria. Their names, dates of filing their final claims with the Division, and amounts of final judgment, including costs and fees, are listed below in the order in which the claimants filed their first notice with the Division: Claimant Date of Filing Claim Amount of judgment Roberts January 19, 1989 $84,562.30 Rucki January 19, 1989 31,248.00 Gantz January 19, 1989 15,634.28 Carman January 19, 1989 48,767.87 Thomas July 21, 1988 40,103.22 Hahn January 19, 1989 14,165.14 Ulriksson January 18, 1989 14,497.00 Choate January 18, 1989 28,994.00 Anderson December 22, 1988 84,443.20 Resnick December 22, 1988 32,912.22 It is noted that each of the foregoing claimants satisfied all statutory requirements prior to the date of the filing of their respective final claims with the Division. This included the obtaining of a judgment against the debtor, having a writ of execution issued upon the judgment which was later returned unsatisfied, and thereafter having made a reasonable search and inquiry to ascertain whether the judgment debtor possessed any property or other assets to be used in satisfying the judgment. Based upon the judgments obtained by the above claimants, those persons are entitled to distribution from the fund in the following pro rata amounts: Anderson claim - $10,950.00 Resnick claim - 10,950.00 Carman claim - 10,950.00 Thomas claim - 10,950.00 Ulriksson claim - 7,937.83 Choate claim - 10,950.00 Roberts claim - 10,950.00 Gantz claim - 7,697.63 Hahn claim - 7,714.54 Rucki claim - 10,950.00 $100.000.00 On July 27, 1988 petitioners, Robert and Machiko Motes and Madge Chesser, filed their notices with the Division. On August 2, 1988, they were advised by the Division that "the first time period for payment of the Guaranty Fund claims is `two years after the first claim.'" Even so, petitioners did not complete all required statutory steps and file their final claims with the Division until March 1, 1989, or after the two year period had expired. Petitioner, Christiane E. Driscoll, filed her notice, copy of complaint and final judgment on January 23, 1989. Thereafter, she completed all required statutory steps and filed her final claim with the Division on June 6, 1989. As a consequence, none of petitioners are entitled to share in the first distribution of moneys from the fund. An attorney who once represented Driscoll, Rafael A. Burguet, made inquiry by telephone with a Division employee in either late December 1988 or early January 1989 concerning the steps required to process a claim on behalf of his client. It was his recollection that the Division employee did not advise him that the two year period for perfecting claims was triggered in January 1987. On January 20, 1989, Burguet sent a letter to the Division with a copy of the complaint and final judgment against Stackhouse. In the letter, he requested the Division to "please advise as to what further requirements you may have to file this claim." On January 23, 1989 a Division employee acknowledged by letter that the Division had received the complaint and judgment. The letter contained copies of the relevant portions of the Florida Statutes and advice that "claims for recovery against Stackhouse Mortgage Corporation are currently being forwarded to our Legal Department for the drafting of a Notice of Intent to either grant or deny payment from the Fund." There is no evidence that the Division made any positive representations to Burguet that either mislead him or caused him to delay in filing his claim. Similarly, the Division responded on August 2, 1988 to the initial filing of the Motes and Chesser notices with advice that the time period for complying with the statutory criteria was "two years after the first claim." Although there were subsequent telephone conversations (but no written communications) between their attorney and the Division, there was no evidence that the Division made any positive representations that would mislead petitioners or otherwise cause them to delay processing their claims. Petitioners Motes and Chesser contend that the first valid and complete notice was not received by the Division until May 20, 1987 when intervenor Carman filed a complaint against Stackhouse in circuit court and also filed her claim and copy of the complaint with the Division the same date. Under this theory, the two year period would not expire until May 19, 1989. This contention is based on the fact that the Rucki complaint was filed in circuit court on January 9, 1987 but the claim and copy of the complaint were not filed with the Division until January 20, 1987. Petitioners contend that subsection 494.043(1)(e) requires both acts to be accomplished the same date. However, this construction of the statute is contrary to the manner in which it has been construed by the Division. According to the stipulated testimony of an employee of the Brevard County sheriff's office, if the property to be levied on is not listed on the instructions to levy, the sheriff's office requires a court order prior to filing a return nulla bona. In this case seven claimants obtained such a court order directing the sheriff to furnish a return nulla bona as to the writ of execution. However, petitioners Motes and Chesser did not do so until after the two year time period had expired. The records received in evidence reflect that the initial inquiry made by Robert and Virginia R. Enteen was never pursued and therefore their claim should be denied.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent enter a final order distributing the moneys from the mortgage brokerage guaranty fund in a manner consistent with its proposed agency action entered on June 21, 1989. The requests of petitioners to share in the first distribution of moneys from the fund should be DENIED. DONE and ORDERED this 11th day of December, 1989 in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 11th day of December, 1989.
The Issue The central issue in this case is whether Petitioners are entitled to recover against the Mortgage Brokerage Guaranty Fund and, if so, the priority of payment to be applied to their claim. A secondary issue is whether claimants who gave notice prior to Petitioners are entitled to payment or whether they have waived or abandoned their claims.
Findings Of Fact Based upon the stipulations filed by the parties and the documentary evidence, I make the following findings of fact: The Mortgage Brokerage Guaranty Fund (the "fund") was created in 1977 to provide recovery for any person who meets all of the conditions prescribed in Section 494.043, Florida Statutes. The Department is charged to disburse the fund according to Section 494.044, Florida Statutes. Section 494.043, Florida Statutes, (Supp.1986) provides: Any person who was a party to a mortgage financing transaction shall be eligible to seek recovery from the Mortgage Brokerage Guaranty Fund if: The person has recorded a final judgment issued by a Florida court of competent jurisdiction in any action wherein the cause of action was based on s. 494.042(2); The person has caused to be issued a writ of execution upon such judgment and the officer executing the same has made a return showing that no personal or real property of the judgment debtor liable to be levied upon in satisfaction of the judgment can be found or that the amount realized on the sale of the judgment debtor's property pursuant to such execution was insufficient to satisfy the judgment; The person has made all reasonable searches and inquiries to ascertain whether the judgment debtor possesses real or personal property of other assets subject to being sold or applied in satisfaction of the judgment, and by his search he has discovered no property or assets or he has discovered property and assets and has taken all necessary action and proceedings for the application thereof to the judgment, but the amount thereby realized was insufficient to satisfy the judgment; The person has applied any amounts recovered from the judgment debtor, or from any other source, to the damages awarded by the court. The person, at the time the action was instituted, gave notice and provided a copy of the complaint to the division by certified mail; however, the requirement of a timely giving of notice may be waived by the department upon a showing of good cause; and The act for which recovery is sought occurred on or after September 1, 1977. Recovery of the increased benefits allowable pursuant to the amendments to s. 494.044 which are effective October 1, 1985, shall be based on a cause of action which arose on or after that date. The requirements of paragraphs (1)(a),(b),(c),(d), and (e) are not applicable if the licensee or registrant upon which the claim is sought has filed for bankruptcy or has been adjudicated bankruptcy; however, in such event the claimant shall file a proof of claim in the bankruptcy proceedings and shall notify the department by certified mail of the claim by enclosing a copy of the proof of claim and all supporting documents. Pertinent to this case, Section 494.044, Florida Statutes, (Supp. 1986) Provides: Any Person who meets all of the conditions Prescribed in s 494.043 may apply to the department for payment to be made to such person from the Mortgage Brokerage Guaranty Fund in the amount equal to the unsatisfied portion of that person's judgment or judgments or $20,000, whichever is less, but only to the extent and amount reflected in the judgment as being actual or compensatory damages. As to claims against any one licensee or registrant, payments shall be made to all persons meeting the requirements of s. 494.043 upon the expiration of 2 years from the date the first complete and valid notice is received by the department. Persons who give notice after 2 years from the date the first complete and valid notice is received and who otherwise comply with the conditions precedent to recovery may recovery from any remaining portion of the $100,000 aggregate, in an amount equal to the unsatisfied portion of that person's judgment or $20,000, whichever is less, but only to the extent and amount reflected in the judgment as being actual or compensatory damages, with claims being paid in the order notice is received until the $100,000 aggregate has been fully disbursed. * * * (3) Payments for claims shall be limited in the aggregate to $100,000, regardless of the number of claimants involved, against any one mortgage broker or registrant. If the total claims exceed the aggregate limit of $100,000, the department shall prorate the payment based on the ratio that the person's claim bears to the total claims filed. The first notice received by the Department alleging a claim against Barry Koltun or Oakland Mortgage Company was filed on August 13, 1984. This notice was filed on behalf of John and Mary Ahern. The Department utilized this notice in computing the two-year period addressed in Section 494.044(1), Florida Statutes. For purposes of recovery from the fund, the individual mortgage broker (Koltun) and the company qualified by the broker (Oakland) are treated as one. Petitioners filed an initial notice of their claim against the fund on October 16, 1985. This claim was asserted against Oakland Mortgage Company, Barry Koltun and Robert Tamarro. On January 23, 1987, the Department issued a "Notice of Intent to Grant or Deny Payment from the Mortgage Brokerage Guaranty Fund Re Oakland Mortgage Company." This notice outlined the status of some thirteen claims which had given notice of their civil actions against the licensee within the two year period. Two claimants, Kusich and Szafran, had provided all documentation required by Section 494.043, Florida Statutes; consequently, they were approved for payment. The Petitioner's claim was denied because they had allegedly failed to satisfy the statutory requirements of Section 494.043, Florida Statutes and had failed to do so prior to August 12, 1986 (the end of the two year period). The Petitioners timely filed a petition for formal Chapter 120 proceedings challenging the Department's denial of their claim for payment. Subsequent to January 23, 1987, Petitioners completed the conditions precedent for recovery and submitted all documentation required to satisfy the requirements of Section 494.043, Florida Statutes. On July 6, 1987, the Department received notice and a claim from the Intervenors. This claim satisfied the requirements of Section 494.043, Florida Statutes. Of the thirteen original claims filed, only two claimants (Kusich and Szafran) completed all conditions of Section 494.043, Florida Statutes, on or before August 12, 1986.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Banking and Finance, Division of Finance, enter a Final Order finding the claims of Rusich and Szafran eligible for payment, and that the claim of Petitioners be evaluated as part of the second class established in Section 494.044(1), Florida Statutes, DONE and RECOMMENDED this 1st day of December, 1987, in Tallahassee, Florida. JOYOUS D. PARRISH 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 1st day of December, 1987. COPIES FURNISHED: Paul A. Zeigler, Esquire Ruden, Barnett, McClosky, Smith, Schuster & Russell, P.A. Suite 1010, Monroe Park Tower 101 North Monroe Street Tallahassee, Florida 32301 Paul C. Stadler, Jr., Esquire Department of Banking and Finance Division of Finance Suite 1302 The Capitol Tallahassee, Florida 32399-0350 Joseph Degance, Esquire 1995 East Oakland Park Boulevard Suite 101 Fort Lauderdale, Florida 33306 Jack F. Weins, Esquire Boca Bank Building Suite 200 855 South Federal Highway Boca Raton, Florida 33432 Morey Udine, Esquire 3111 University Drive Suite 425 Coral Springs, Florida 32065-6930 Hon. Gerald Lewis Department of Banking and Finance Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350 Charles L. Stutts General Counsel Department of Banking and Finance The Capitol Tallahassee, Florida 32399-0350 =================================================================
The Issue This is a license discipline proceeding in which the Petitioner seeks to have disciplinary action taken against two individual licensees and one corporate licensee on the basis of allegations of several violations of Sections 455.227 and 475.25, Florida Statutes, by each of the Respondents. Each of the three Respondents has been charged in an Administrative Complaint with violation of the following statutory provisions: Sections 455.227(l)(j), 475.25(l)(b), 475.25(l)(j), and 475.25(l)(k), Florida Statutes.
Findings Of Fact Stipulated facts2 Petitioner is a state government licensing and regulatory agency charged with the responsibility and duty to prosecute Administrative Complaints pursuant to the laws of the State of Florida, in particular Section 20.165, Florida Statutes, Chapters 120, 455, and 475, Florida Statutes, and the rules promulgated pursuant thereto. Respondent Robert Ian Law is and was at all times material hereto a licensed real estate broker pursuant to Chapter 475, Florida Statutes, having been issued license number 3000835. The last license issued was as a broker in care of Law Property Services, Inc., t/a Century 21 Law Realty, 190 Malabar Road Southwest 120, Melbourne, Florida 32907. Respondent Benjamin Schiff is and was at all times material hereto a licensed real estate broker pursuant to Chapter 475, Florida Statutes, having been issued license number 0449353. The last license issued was as a broker at 9771 Northwest 41st Street, Miami, Florida 33178. Respondent Florida Home Finders Realty, Inc., is and was at all times material hereto a licensed real estate brokerage corporation pursuant to Chapter 475, Florida Statutes, having been issued license number 1003632. The last license issued was at 1648 Southeast Port St. Lucie Boulevard, Port St. Lucie, Florida 34952. At all times material hereto, Selma Del Carmen Schevers, Cheryl Ann Atwood, Lynn Marie Lake, Barbara Kay Davidson, Carol Ann Chandler, and Beverly J. Klemzak were licensed and operating as qualifying brokers and officers of Respondent Florida Home Finders Realty, Inc. On or about April 18, 1995, the real estate brokerage corporate license (former license number 0027454) of Florida Home Finders, Inc., was voluntarily dropped by Florida Home Finders, Inc. Simultaneously, Florida Home Finders Realty, Inc., submitted documents for and received a real estate brokerage corporate license effective April 18, 1995, from the Florida Division of Real Estate. Benjamin Schiff and Ian R. Law are directors of both Florida Home Finders, Inc., and Florida Home Finders Realty, Inc. Benjamin Schiff is the Chief Financial Officer for both Florida Home Finders, Inc., and Florida Home Finders Realty, Inc. Ian R. Law is the Chief Executive Officer for both Florida Home Finders, Inc., and Florida Home Finders Realty, Inc. On or about May 5, 1995, Selma Schevers and Cheryl Atwood notified various banking institutions of the authorized officers/directors and account signatories for Florida Home Finders, Inc., and Florida Home Finders Realty, Inc. On or about June 14, 1995, at the request of Benjamin Schiff, Selma Schevers and Cheryl Atwood authorized various banking institutions to transfer $2,492,000.00 in security deposits and rental trust funds to an account entitled "Florida Home Finders, Inc.," account number 3603969464 at NationsBank of Florida. At no time material did the Respondents obtain the authorization or permission of the owners of the trust funds to transfer the funds. Subsequent to the transfer referenced in paragraph 10 herein, the funds were used to purchase a certificate of deposit (No. 012897). After the purchase of the certificate of deposit, Cheryl Atwood, at the request of Ian Law, signed a document which placed the certificate of deposit as collateral for a commercial loan (No. 018002410263) from loan officer F. Larry Robinette of County National Bank of South Florida. The terms of the loan were: $2,000,000 principal; Benjamin Schiff and Ian Law as borrowers; proceeds payable to Atlantic Gulf Communities, Corp., as partial payment for the stock of Florida Home Finders, Inc., and two related companies. On or about August 21, 1995, Respondent Law instructed Barnett Bank to transfer $65,000.00 from Florida Home Finders, Inc., Rental Receipts Account No. 2274002335 to Florida Home Finders, Inc., Operating Account No. 2274027149.3 After this transfer Respondent Law instructed the bank to transfer the $65,000.00 from the operating account to Atlantic Gulf Communities Corporation, the former owner of Florida Home Finders, Inc., a formerly licensed real estate brokerage company and predecessor to Respondent Florida Home Finders Realty, Inc. On or about June 14, 1995, the following bank funds transfers were requested to be made to Florida Home Finders, Inc., (FHFI) account No. 3603969464 at NationsBank of Florida from the following accounts: Barnett Bank Acct. Name Acct No. Date Amt. FHFI Rental Receipts Escrow Acct 1700027712 6/22 138,000 Rental Security Deposit Acct 1700027810 6/22 398,000 FHFI Rent Receipts Acct 3388072440 6/21 38,000 FHFI Security Deposit Acct 3388072558 6/21 158,000 FHFI Rent Receipts Escrow Acct 2274002335 6/15 179,000 FHFI Rental Security Escrow 2274002343 6/15 609,000 SunBank Acct Name Acct No. Date Amt. FHFI Escrow-Rental Receipts 0809000005795 6/16 87,000 FHFI Escrow-Rental Security 0809000005806 6/16 285,000 1st Union Nat. Bank Acct Name Acct No. Date Amt. FHFI Rental Receipts-Escrow Acct 2161006787374 6/14 152,000 FHFI Rental Security Escrow Acct 2161006724586 6/14 406,000 1st Bank Acct Name Acct No. Date Amt. FHFI Rental Receipts-Escrow Acct 20-116845-06 6/15 8,000 FHFI Rental Security Escrow 20-116888-06 6/15 34,000 Additional facts based on evidence at hearing Prior to April of 1995, Florida Home Finders, Inc., then a licensed real estate brokerage corporation, engaged in soliciting, obtaining, and leasing to tenants the real property of others, pursuant to contracts between Florida Home Finders, Inc., and the property owners. A substantial majority of the money, probably more than 75 percent of the money, contained in the security deposit accounts and rental receipts accounts that was transferred in mid-June of 1995 was money collected from tenants on behalf of property owners while Florida Home Finders, Inc., was a licensed real estate brokerage corporation.4 Subsequent to the transfers of funds in mid-June of 1995, there was on at least one occasion insufficient funds in some of the security deposit and rental receipts trust accounts to meet disbursement demands. On that occasion the bank paid a number of checks for which Florida Home Finders, Inc., did not have sufficient funds on deposit and requested that Florida Home Finders, Inc., make an immediate transfer of funds to cover the insufficiencies. Shortly thereafter a transfer was made to cover the insufficiencies. Subsequent to the transfers of funds in mid-June of 1995, on some occasions funds that had been collected from new clients after those transfers took place were paid out to meet the demands of clients who were owed money that had been paid to Florida Home Finders, Inc., prior to the mid-June transfers. At the end of March of 1995, Respondents Schiff and Law purchased Florida Home Finders, Inc., a real estate brokerage corporation licensed pursuant to Chapter 475, Florida Statutes, (license number 0027464) from Atlantic Gulf Communities Corporation. The purchase price was three and a half million dollars, with the Respondents to pay $500,000.00 down and the three million dollar balance within three months. One aspect of the business plan of the Respondent's Schiff and Law was to create a separate company to conduct real estate brokerage activities and to continue to engage in property management activities with the existing corporation, Florida Home Finders, Inc. Respondents Schiff and Law met with all managers and employees of Florida Home Finders, Inc., during the first week of April of 1995 to explain the business plan to them. At that time they also explained that they intended to utilize the provisions of Section 83.49(1), Florida Statutes, to hold security deposits in a manner which would allow them to pay interest to tenants. Respondents Schiff and Law were not involved in the day to day operations of either Florida Home Finders, Inc., or Florida Home Finders Realty, Inc. At the time the Respondents Schiff and Law purchased Florida Home Finders, Inc., the corporation maintained at least three types of accounts for deposits received from its operations: sales escrow accounts, rental receipts accounts, and security deposit accounts. Each of the seven offices of Florida Home Finders, Inc., maintained its own separate set of accounts. The sales escrow accounts maintained by Florida Home Finders, Inc., contained money derived from purchasing and leasing transactions. The rental receipts accounts maintained by Florida Home Finders, Inc., contained money received from tenants for the payment of rent. The use of these funds was governed by the property management agreements with the landlords. Typically, the funds in these accounts would be used to pay for such things as maintenance and repairs to the rental properties, mortgage payments due on the rental properties, and/or property management fees, with any excess funds being periodically paid to the respective landlords. The security deposit accounts maintained by Florida Home Finders, Inc., contained money received from tenants for security deposits to be held to guarantee the tenants' performance under their respective rental agreements. Shortly after the formation of Florida Home Finders Realty, Inc., and its licensure as a real estate brokerage corporation, the sales escrow accounts of Florida Home Finders, Inc., were transferred to Florida Home Finders Realty, Inc. There were no irregularities in any of the sales escrow accounts while they were under the control of either of these two corporations. Following the creation of Florida Home Finders Realty, Inc., Florida Home Finders, Inc., did not engage in any licensed real estate brokerage activities. All such activities were conducted by Florida Home Finders Realty, Inc., after it was licensed as a brokerage corporation. On or about June 27, 1995, Florida Home Finders, Inc., posted a security deposit bond in the amount of $250,000.00 with the Florida Secretary of State in an effort to comply with Section 83.49(1)(c), Florida Statutes. None of the landlords and none of the tenants were ever provided with notice that money had been transferred from the security deposit accounts and from the rental receipts accounts. None of the landlords and none of the tenants were ever provided with notice that Florida Home Finders, Inc., had posted a bond with the Florida Secretary of State and intended to rely on the provisions of Section 83.49(1)(c), Florida Statutes. Subsequent to the transfer of the $2,492,000.00 to the NationsBank account, the funds were used to purchase three separate certificates of deposit. One certificate of deposit in the amount of $242,000.00 was purchased from NationsBank and secured a loan of the same amount. The second certificate of deposit in the amount of two million dollars was purchased from County National Bank in Miami in the name of Florida Home Finders, Inc., and was used to secure a personal loan to Respondents Schiff and Law in the amount of two million dollars. The third certificate of deposit in the amount of $250,000.00 was purchased from NationsBank in the name of Florida Home Finders, Inc., and was used as security for the bond posted with the Florida Secretary of State. The loan proceeds secured by two of the certificates of deposit described above, plus $100,000.00 from the operating account of Florida Home Finders, Inc., at Barnett Bank, were used to pay Atlantic Gulf Communities Corporation against the balance of the purchase price of Florida Home Finders, Inc. Between the time of the mid-June transfer of funds from the accounts of Florida Home Finders, Inc., and the freezing of the assets of Florida Home Finders, Inc., in September of 1995, Florida Home Finders, Inc., was able to pay all current demands for funds from tenants and landlords. As of September 21, 1995, all funds transferred from the various security deposit and rental receipt accounts of Florida Home Finders, Inc., remained in accounts and financial instruments in the name of Florida Home Finders, Inc. However, $2,242,000.00 of those financial instruments in the name of Florida Home Finders, Inc., were pledged as security for personal loans of the Respondents Schiff and Law and were not available to Florida Home Finders, Inc., while those personal debts remained unpaid.
Recommendation For all of the foregoing reasons, it is RECOMMENDED that a Final Order be entered in these consolidated cases to the following effect: Dismissing all six of the counts of the Administrative Complaint which were voluntarily dismissed by the Petitioner; Dismissing Counts X and XIX (10 and 19) against the corporate Respondent Florida Home Finders Realty, Inc., on the basis of the insufficiency of the evidence; Concluding that the Respondent Law is guilty of violations of Sections 475.25(1)(b) and 475.25(1)(k), Florida Statutes, as charged in Counts VII and XVII (7 and 17); Concluding that the Respondent Schiff is guilty of violations of Sections 475.25(1)(b) and 475.25(1)(k), Florida Statutes, as charged in Counts VIII and XVIII (8 and 18); Imposing a penalty against the Respondent Law consisting of the revocation of his real estate broker license and an administrative fine in the amount of two thousand dollars; and Imposing a penalty against the Respondent Schiff consisting of the revocation of his real estate broker license and an administrative fine in the amount of two thousand dollars. DONE AND ENTERED this 22nd day of April, 1997, in Tallahassee, Leon County, Florida. MICHAEL M. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32301-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of April, 1997.
