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).
Findings Of Fact At all times relevant hereto, respondent, Elliot Rosen Realty, Inc. was a licensed corporate real estate broker having been issued license number 0218821 by petitioner, Department of Professional Regulation Division of Real Estate. Respondent Elliot Rosen held real estate broker's license number 0075258 issued by petitioner and was the qualifying officer of Elliot Rosen Realty, Inc. Respondents Stanleigh M. Franklin and Maria C. Franklin were licensed real estate salesmen in Rosen's office having been issued license numbers 0318042 and 0370308, respectively. The firm is located at 8120 Coral Way, Miami, Florida 33155. On an undisclosed date Robert W. and Carol A. Bush listed for sale with Elliot Rosen Realty, Inc., a residential property located at 8295 Southwest 153rd Street, Miami. The initial asking price was $119,000, but this was later reduced to $112,000. In April 1984, Joseph and Maria Yanes were in the process of selling their home and were consequently seeking to purchase a new residence. Both are educated persons, and Mr. Yanes has a college degree. Mr. Yanes read a real estate advertisement which advertised the Bush's property. They contacted Rosen Realty, Inc. and spoke with Maria Franklin. After inspecting the house with Maria, the Franklins met with the Yanes on April 15, 1985, for the purpose of preparing and executing an offer to purchase the house. Joseph Yanes made clear to Stanleigh Franklin that his primary concern was obtaining a mortgage with monthly payments that did not exceed $1000 per month. Otherwise, he would not be able to purchase the property. Stanleigh was familiar with a new mortgage loan program offered by a local lender (American International Mortgage Company) known as the "7.5 magnet mortgage" which offered a monthly payment for the first three years at a 7.5 percent interest rate. Stanleigh computed the principal and interest payments under this plan to be $711.55 per month. When estimated taxes and insurance were added in the total payment came to approximately $850 per month. He also advised that a mortgage insurance premium would be charged each month, which he estimated to be $50 to $60 per month. This still totaled less than the $960 or $970 which the Yanes stated their existing mortgage to be. The Yanes were told that because of the low interest rate (7.5 percent) during the first 36 months, there would be negative amortization during that period of time. In other words, the principal amount owed would actually increase rather than decrease during the first three years since interest on the note was accruing at a higher rate (13 percent). Finally, Franklin advised the Yanes that a 5 percent down payment was required with this type of mortgage and that their deposit should equal this amount to qualify for the loan. The Yanes did not indicate any dissatisfaction with this type of financing, or that they did not understand how the plan worked, particularly with respect to the negative amortization. They agreed to make an offer of $107,000 on the property, to give a $500 deposit that day, and an additional $4850 later on which equated to 5 percent of the purchase price. The contract itself made no reference to the 7.5 percent financing, but provided only that the buyers would obtain a new first mortgage for the balance owed on the $107,000 purchase price. Throughout these negotiations, there was no misrepresentation of facts by Franklin concerning the mortgage or amount of deposit required. The Yanes' offer was quickly presented by the Franklins to the sellers who accepted the offer within the next few days. The Yanes then gave an additional $4850 deposit around May 1 which was deposited in Rosen's escrow account. On May 7, they filed a loan application with American International Mortgage Company and gave a check in the amount of $185 to have an appraisal made and a credit report prepared. At that time, the loan officer explained to Joseph Yanes in detail how the magnet mortgage program worked and that there would be negative amortization under this plan. The meeting lasted for an hour and a half and Yanes did not express surprise at how the mortgage worked, or that he did not understand its concept. An appraisal was then made, and a credit check run on Mr. Yanes. However, the lender was unable to confirm any credit information on Mrs. Yanes because her employer refused to return the employment verification form. On June 20, 1984, the lender sent a denial notice to the Yanes because of its inability to obtain information regarding Mrs. Yanes. The Yanes made no other efforts to obtain financing on the property. After they executed the contract to purchase, the Yanes engaged counsel in early May to represent them at closing. Their attorney (Lisa Wilson) called all pertinent parties, including the Franklins and Rosen to learn the details of the mortgage. After having the details explained to them again, the Yanes advised counsel that they wished to cancel the contract. On May 23, 1984, Wilson sent a certified letter to Stanleigh Franklin advising that because the financing arrangements had been misrepresented to her clients they were cancelling the contract. She also demanded a return of their deposit plus interest. Just prior to the receipt of the certified letter, Joseph Yanes also telephoned Stanleigh Franklin and demanded a return of his deposit. This was the first time Franklin suspected the deal had gone awry. Shortly after this, the Yanes contacted petitioner to file a complaint against respondents. When Mr. Bush learned that the Yanes were not honoring the contract, upon advice of counsel, Bush made a claim on the $5,350 deposit for breach of contract. Faced with conflicting demands for the deposit, Rosen contacted petitioner to determine how the deposit should be disbursed. The matter was eventually referred by petitioner to its local office in Miami for investigation in October 1984. On November 27, 1984, counsel for petitioner advised Rosen that because of the pending complaint of the Yanes, petitioner could not issue an escrow disbursement order. However, he was told of the remaining two alternatives for resolving the dispute prescribed in Subsection 475.25(1)(d), Florida Statutes. A complaint for interpleader was later filed in circuit court by agreement of counsel for the Yanes, Bush, and Rosen. That complaint is still pending. Rosen, as broker, was never personally involved in the transaction until a complaint with petitioner was filed. He stood to gain no commission on the sale since the Franklins were working on a "100 percent basis" and were to receive the entire commission. Rosen has been licensed for some thirty-one years and has had no prior disciplinary action in all that time.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the administrative complaint be DISMISSED with prejudice. DONE and ORDERED this 5th day of June, 1985, 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 5th day of June, 1985.
Findings Of Fact Petitioner's subdivision to which the proposed mortgage is appurtenant is registered with the Division of Florida Land Sales and subject to the provisions of Chapter 498, Florida Statutes. A copy of the proposed mortgage is attached to the STIPULATION and contains the provisions relevant to these proceedings. Those relevant portions are contained in paragraphs 43 and 45 in the Addendum to Mortgage which provides: 43. Provided Mortgagor is not in default in any of the terms and provisions of this Mortgage or the Note secured thereby, or in any other agreement now or hereafter entered into with Mortgagee, then Mortgagee agrees to release individual lots from the lien of this Mortgage upon payment to Mortgagee of the sum of One Thousand one Hundred Fifty Dollars ($1,250.00) , or an assignment to Mortgagee of the purchase money note and mort- gage generated from the sale of the lot being released. 45. Mortgagee covenants and agrees to release from the lien of this Mortgage lots sold to third party purchasers when the Pur- chase Money Mortgage encumbering said lot has been paid in full.
Findings Of Fact Respondent is licensed as a real estate broker and was so licensed at all times relevant hereto. He has taught real estate salesman courses at Hillsborough Junior College for about eight years. In February, 1982, Thomas E. Webb and Johnnie M. Webb, husband and wife, signed an offer to purchase real estate owned by Ruby Carline (Exhibit 1). This document was prepared by Respondent as broker and signed by him as witness and escrow agent. The offer was not accepted by the seller. Respondent had a listing agreement (Exhibit 6) on property owned by Ruby Carline in Seffner, Florida, giving him exclusive right to sell this property until June 12, 1982, at a price of $65,800, with buyer assuming an existing mortgage of $27,000 at ten (10) percent. There was also a second mortgage on the property in the amount of $10,000 at eighteen (18) percent. Shortly after Exhibit 1 was not accepted by Carline, the Webbs' trailer burned and they needed a residence quickly. Respondent inquired of Carline how much she would take to move out of her house and she told him $10,000, but needed $2,000 to actually relocate her furniture. On March 5, 1982, Respondent acknowledged receipt of $2,000 from Webb (Exhibit 7). Shortly thereafter, this money was paid to Carline and she vacated her house. Webb moved in during the latter part of March and commenced paying rent. Following this, Respondent prepared an updated contract for sale and purchase which was signed by Thomas Webb and Ruby Carline in early May (Exhibit 3). This contract provided for a purchase price of $59,900, with 7,000 deposit held in escrow by Respondent, and the balance of the purchase price comprising the existing first mortgage of $27,000 to be assumed by the buyer; a purchase money mortgage in the amount of $15,900 to be obtained; and the second mortgage in the amount of $10,000. Special Clause XII provided: Buyer shall rent property for $560 per month with an option to purchase by June 12, 1982, which shall be extended an additional 90 days at time of purchase. Buyer shall assume first mortgage and pay balance to seller. At the time this contract was executed Webb had paid Respondent $7,000. The additional $5,000 cashier's check was given to Respondent by Webb on April 27, 1982 (Exhibit 7) and Exhibit 3 was thereafter prepared. The $5,000 was not placed in escrow but in Respondent's operating account. By check dated May 1, 1982, Respondent disbursed $2,666 to Carline from the proceeds of this down payment plus some rent moneys collected from Webb and claimed the balance of $3,594 as commission on the sale of the property. Carline testified that she received only $1,000 from Respondent in the form of a check when she moved out of the house. Respondent actually paid her $2,000, of which $1,000 was in cash. In her letter to Respondent dated January 1, 1983 (Exhibit 11), Carline acknowledged the $2,000 as a gratuitous payment to her vacating the property and resettling elsewhere. Webb was expecting fire insurance money on his trailer which was to provide funds necessary to pay off the second mortgage. They expected to get additional financing either from a bank or from the seller, or both. When it became evident Webb was experiencing difficulty obtaining financing, Respondent prepared Exhibit 2, another contract for sale and purchase, executed by seller October 22, 1982, which, in Special Clause XII stated: This is a lease option contract, buyer has 30 days to close on property. Rent shall be $560 per month until property is transferred. Property is being purchased "as is". Commission has been paid by seller. This contract also provided for purchase price of $59,900. Deposit (paid to owner-seller Ruby Carline) of $7,000, buyer to assume existing first mortgage of $27,000, the second mortgage to General Finance Corporation in the amount of $10,000 to be paid off and balance to close of $25,900. Clause III provided that if any part of the purchase price is to be financed by third party loan, the contract is contingent upon the buyer obtaining a firm commitment for said loan within 30 days at a rate not to exceed 18 percent for 15 years in the principal amount of $25,000. At the time this contract was signed, all parties knew the buyer needed additional financing to close. While the Webbs occupied the house, Respondent collected the rent, usually in cash, and remitted same to Carlile in the manner received. By the time the closing date of September 12, 1982, arrived, it became evident Webb was having difficulty obtaining financing and would be unable to close. Webb demanded return of the $7,000 deposit from Respondent and Carline. Carline demanded Respondent pay her all of the moneys received by him from Webb; and Respondent claimed a set-off of fees paid by him for appliance repairs, for the institution of eviction proceedings against Webb and for services in collecting the rent for Carline. Respondent paid Webb some $1,200 and attempted to get Carline to release him from liability for further payment to Carline (Exhibit 15). Carline reported the incident to the Real Estate Commission.
Findings Of Fact Having heard the testimony and considered the evidence presented at the hearing, the undersigned finds as follows: At all relevant times, respondent was a licensed mortgage broker, holding license number 3256. (Exhibit A) On November 26, 1974, Carl Sciacca and George Williams, the general partners of a limited partnership known as University Professional Plaza Ltd., entered into a written contract with respondent to procure a mortgage loan commitment. Mr. Sciacca first went to respondent because respondent had been highly recommended to him. The amount of the mortgage was to be $2,450,000.00 and the commitment was to be procured "on or before 21 days from date all required exhibits are presented...". The agreement further provided that University would pay to respondent a brokerage fee in the amount of $24,500.00 upon funding of the loan. (Exhibit B) On the same date, November 26, 1974, University delivered to respondent a check in the amount of $7,500.00. This check bears the notation "For partial brokerage commission to be held in escrow." (Exhibit C) On November 27, 1975, respondent used said check to purchase a cashier's check and the money was never placed in escrow by respondent. While some correspondence from someone denoting an interest in the loan did transpire, the loan was never consummated. Sometime after the expiration of 21 days from November 26, 1974, Mr. Sciacca requested respondent to refund the deposit. A dispute arose between respondent and University regarding whether or not respondent had received from University all the required documents pertaining to the procurement of the loan. Respondent stated that University had not acted in good faith and thus was not entitled to a refund of the deposit. When attorneys were brought into the picture, it was learned that respondent no longer had all the deposit money. Respondent still has not refunded the $7,500.00 to University, however, respondent and University have now entered into an agreement whereby respondent and his wife executed a mortgage note to University in the amount of $9,000.00 secured by a second mortgage on their condominium apartment. This arrangement is satisfactory to University and represents complete settlement of the $7,500.00 owed to University, along with attorney There is some dispute in the evidence as to the parties' understanding of both the disposition to be made of the $7,500.00 deposit when the check was delivered to respondent and the actual terms of the mortgage loan commitment agreement. It was Sciacca's and William's opinion that all necessary documents for the procurement of the loan had been delivered to respondent and that if a loan were not procured within 21 days, the deposit was to be returned to University. It was respondent's opinion that the 21 days was to run from the date of receipt. of all necessary documents and that respondent had never received from University an accurate financial statement. Respondent further testified that he informed Mr. Sciacca of some problems involved with procuring the loan and that he would need some of the $7,500.00 to straighten out those problems. It was respondent's testimony that, despite the notation on the check "to be held in escrow", Sciacca told respondent to use whatever he needed to procure a loan.
Recommendation Based upon the findings of fact and conclusions of law set forth herein, it is recommended that: Respondent be found not guilty of violations of F.S. Section 494.05(1)(a) , (b) , or (c) or Section 494.05(2); Respondent be found guilty of violations of F.S. Section 494.05(1)(e) , (f) , and (g) and F.A.C. Rule 3-3.06(7) recognizing that the latter two statutes and the Rule involve the same offense - the failure to place the deposit in a trust fund or escrow account; and The Division of Finance issue, in such manner as it deems appropriate, a public reprimand or censure regarding respondent's violations as set forth above. Respectfully submitted and entered this 31st day of October, 1975, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Joseph M. Ehrlich, Esquire Department of Banking and Finance Division of Finance The Capitol Tallahassee, Florida 32304 Barry Chapnick, Esquire Assistant General Counsel Office of the Comptroller The Capitol, Legal Annex Tallahassee, Florida 32304 Attorney for Division of Finance Steve E. Moody, Esquire MOODY & JONES 207 E. Broward Boulevard Suite 200 Fort Lauderdale, Florida 33301 Jack E. London, Esquire 2134 Hollywood Boulevard Hollywood, Florida 33020 Attorney for Carl Sciacca and George Williams, members of the general public
The Issue The issues for determination in this proceeding are whether Respondents, Samuel T. Henson and DuPont Funding Corporation, committed multiple acts in violation of applicable statutes and administrative rules and, if so, what, if any, penalties should be imposed.
Findings Of Fact Petitioner is the administrative agency charged with responsibility for administering and enforcing the provisions of Chapter 494, Florida Statutes.3 Respondent, DuPont Funding Corporation ("DuPont") is a Florida corporation engaged in the mortgage brokerage business at a single location at 7300 West Camino Real Drive, Boca Raton, Florida 33442. DuPont is registered with Petitioner under registration number HB 592710662. Respondent, Samuel T. Henson, ("Henson"), is the principal mortgage broker for DuPont. Henson is licensed by Petitioner as a mortgage broker pursuant to license number HA 247542864. As the mortgage broker for DuPont, Henson is responsible for his compliance with Chapter 494, Florida Statutes, as well as that of DuPont. Petitioner examined and investigated Respondents in response to five complaints received by Petitioner. The investigation involved events allegedly occurring between January 1, 1989 through August 31, 1990. Misuse And Misapplication Of Deposits The Smith Transaction Respondents failed to refund a deposit in the amount of $1,493.00 to Mr. J. W. Smith (the "Smith transaction"). Mr. Smith deposited $1,493.00 with Respondents to pay the costs of a mortgage applied for by the purchaser of commercial property owned by Mr. Smith. According to the terms of the Mortgage Loan Agreement and Application, the deposit was refundable if Respondents were unable to obtain financing for the proposed transaction. After Respondents were unable to obtain the financing applied for, they refused to refund Mr. Smith's deposit. Mr. Smith owned the Esmeralda Inn in Chimney Rock, North Carolina (the "Inn"). The Inn was listed for sale with Daniel Murr of First Commercial Brokers in Asheville, North Carolina, in the amount of $650,000.00. In October, 1989, Mr. Smith received a full price offer to purchase the Inn from Mr. and Mrs. William C. Robeck. Mr. and Mrs. Robeck were represented by a Mr. Castaldi as the their agent. The terms of the offer required Mr. and Mrs. Robeck to pay $25,000.00 and for Mr. Smith to carry a second mortgage in the amount of $185,000.00. The balance of the purchase price was to be paid in the form of a first mortgage in the amount of $440,000.00. Mr. Smith did not accept the offer of purchase from Mr. and Mrs. Robeck because he considered the amount of the cash invested by the purchasers to be insufficient. Sometime in December, 1989, Mr. Smith received a full price offer to purchase the Inn from Mr. Andrew Okpych. The terms of the offer required Mr. Okpych to pay $100,000.00 and for Mr. Smith to carry a second mortgage in the amount of $200,000.00. The Branch Bank and Trust Company in Asheville, North Carolina agreed to provide a first mortgage in the amount of $350,000.00. Mr. Smith wanted to minimize the amount of his second mortgage. He was advised by Mr. Daniel Murr that Respondents had represented to Mr. Murr that they could obtain a first mortgage for the purchase in the amount of $440,000.00 to finance the Smith-to-Okpych transaction. This financing proposal would reduce the second mortgage held by Mr. Smith to $110,000.00. Mr. Smith authorized Mr. Murr to contact Respondents. Henson contacted Mr. Smith by telephone to discuss the proposed financing in the amount of $440,000.00 on or about December 19, 1989. During that telephone conversation, Henson represented to Mr. Smith that Henson had located a lender which had already approved the needed $440,000.00 loan. Henson refused repeated requests by Mr. Smith to identity the lender. Henson insisted that Mr. Smith sign an agreement to pay the costs of the loan transaction and deposit $1,500.00 with Respondents before Henson would identify the lender which had pre-approved the loan in the amount of $440,000.00. Mr. Smith and Mr. Okpych signed a Mortgage Loan Agreement and Application (the "agreement") with Respondents on January 5, 1990. Mr. Okpych signed the agreement as borrower and Mr. Smith signed as the person responsible for all expenses incurred in connection with the agreement. The agreement was signed by Henson on January 5, 1992, and sent by facsimile to Mr. Smith and Mr. Okpych from the office of Mr. Smith's attorney. Mr. Smith and Mr. Okpych made several changes to the agreement and initialed the changes. One such change made the deposit from Mr. Smith a refundable deposit by deleting the prefix "non-" from the word "non-refundable" in the typed form of the agreement. Mr. Smith and Mr. Okpych sent the modified agreement to Henson by facsimile on the same day. Mr. Smith telephoned Henson on January 5, 1992, to advise Henson that the modified agreement had been sent by facsimile. Henson stated that he had received the agreement and stated that the modifications were acceptable. Henson directed Mr. Smith to wire transfer the $1,500.00 deposit. Mr. Smith wired $1,500.00, less the $7.00 charge for the wire transfer, on January 10, 1990. The wire transfer in the amount of $1,493.00 was sent to the account of Dupont Funding Corporation, account number 3601345943, NCNB, Deerfield Beach, Florida. Henson notified Mr. Smith by telephone on or about January 15, 1992, that he could not procure the needed financing. The reason given by Henson was that the lender did not want to make the loan because the property was located in North Carolina. Henson still refused to identify the lender to Mr. Smith, but suggested that the needed financing may be obtainable from "General Electric." See Exhibit 12 at 24. The next day, Henson telephoned Mr. Smith and stated that the loan was not available from any lender and that the deposit of $1,493.00 would be refunded to Mr. Smith later in the week. After repeated requests and written demands, Mr. Smith's deposit in the amount of $1,493.00 has not been refunded. The Robeck Transaction Respondents failed to refund a deposit in the amount of $2,500.00 to Mr. and Mrs. William C. Robeck (the "Robeck transaction"). Mr. and Mrs. Robeck deposited $2,500.00 with Respondents when the Robeck's applied for a mortgage in the amount of $440,000.00 on October 11, 1989, in their unsuccessful attempt to purchase the Inn from Mr. Smith. When Mr. Robeck questioned whether the deposit was refundable, Henson changed the typed form of the Mortgage Loan Agreement and Application (the "loan application") by deleting the prefix "non-" in the typed word "non-refundable". The modified loan agreement was signed by the Robeck's and Henson. Respondents were unable to obtain financing for the proposed transaction. After the Robecks were unable to obtain financing, Respondents refused to refund the Robeck's deposit. Mr and Mrs. Robeck made an offer to purchase the Inn from Mr. Smith sometime in October, 1989. The offer was rejected, and the Robeck's asked Henson to refund their deposit sometime in January, 1990. Henson refused to refund the deposit and told Mr. Robeck to find another bed and breakfast inn. Mr. Robeck found another bed and breakfast inn for sale in Franklin, North Carolina. He offered to acquire the inn by lease-purchase. His offer was accepted, but Mr. Robeck later found approximately $1,000,000.00 in stolen property on the premises. The owner was arrested, and the lease-purchase transaction was not consummated. Mr. Robeck again requested the refund of his deposit, and Henson again refused the request. Mr. Robeck has never been refunded any portion of his deposit. The Shuster Transaction Respondents failed to refund a deposit in the amount of $2,500.00 to Mr. Sanford Shuster (the "Shuster transaction"). Mr. Shuster deposited $2,500.00 with Respondents when he applied for a mortgage in the amount of $3,500,000.00 on February 8, 1990, to finance the acquisition of an Assisted Care Living Facility ("ACLF"). Henson changed the typed form of the Mortgage Loan Agreement and Application (the "mortgage application") by deleting the prefix "non-" in the typed word "non-refundable". The modified mortgage application was signed by Mr. Shuster and Henson. Mr. Shuster was unable to obtain financing, and Respondents refused to refund Mr. Shuster's deposit. Mr. Shuster made repeated attempts to obtain his refundable deposit from Respondents including several telephone conversations with Henson and two written demands for payment on April 10, 1990, and on June 2, 1990. In every instance, Henson agreed to refund the deposit but never did so. Mr. Shuster and Henson entered into a compromise agreement on September 10, 1990. Pursuant to the terms of the compromise agreement, Henson agreed to pay Mr. Shuster $2,000.00 in full settlement of the $2,500.00 claim by Mr. Shuster. Henson paid none of the $2,000.00 required under the settlement agreement with Mr. Shuster. Mr. Shuster sued Henson in Palm Beach County Court and obtained a Final Judgment against Henson on January 31, 1992, in the amount of $2,058.75. On May 7, 1991, Henson paid Mr. Shuster $100.00 toward the amount due under the Final Judgment, but made no other payments. Mr. Shuster has never received the balance of the deposit owed to him and has a claim pending with the Mortgage Brokerage Guaranty Fund. The Linker Transaction Respondents failed to refund deposits totaling $22,500.00 to Mr. Gerald Linker (the "Linker transaction"). Mr. Linker deposited $22,500.00 with Respondents when he applied for a mortgage in the amount of $1,250,000.00 in May, 1990, to finance the acquisition of an alcohol and drug abuse center (the "center"). Henson obtained a written loan commitment from Nationwide Funding, Inc. ("Nationwide"), on May 23, 1990. Neither Nationwide nor Respondents performed in accordance with the terms of the commitment. Mr. Linker never received his loan and never received his deposits. Mr. Linker's attorney made repeated attempts to have Mr. Linker's deposits refunded to him. Mr. Linker's attorney filed suit in the Circuit Court of the 15th Judicial Circuit in Palm Beach County, Florida, and obtained separate judgments against Henson and Dupont in the respective amounts of $69,023.01 and $69,520.78. Respondents paid none of the $138,543.79 owed to Mr. Linker. Mr. Linker has a claim pending with the Mortgage Brokerage Guaranty Fund. The Barth Transaction Respondents failed to return a refundable deposit in the amount of $10,000.00 to Mr. Andrew J. Barth (the "Barth transaction"). Mr. Barth deposited $10,000.00 with Respondents when he applied for financing in connection with the purchase of the Cardinal Retirement Village in Bradenton, Florida, on November 17, 1989. Mr. Barth was to assume an existing mortgage of approximately $9,800,000.00 in the transaction. Respondents agreed to arrange the assumption. The owners of the Cardinal Retirement Village refused to proceed and Respondents never refunded Mr. Barth's deposit. The agreement between Mr. Barth and Respondents provided in relevant part: The deposit will be refunded no later than thirty (30) days from this date if this real estate and mortgage transaction is not successfully completed and closed. Mr. Barth made repeated attempts to have his deposit refunded to him. In May, 1990, Mr. Barth's attorney negotiated a Pay Back Agreement with Respondents in which Respondents agreed to pay $1,500.00 a month to Mr. Barth to refund the deposit with interest. Respondents paid only $3,000.00 to Mr. Barth. Mr. Barth has never received the balance owed to him for his refundable deposit. Failure To Maintain Escrow Accounts Respondents failed to maintain an escrow account during 1988 and 1989 and failed to place deposits in escrow. Respondents failed to place deposits in escrow for the Smith, Robeck, Shuster, Linker, and Barth transactions. The accounts to which the monies were deposited by Respondents were not escrow accounts. Respondents failed to place deposits from numerous other transactions in escrow. Respondents failed to deposit in escrow the following amounts: an appraisal fee of $250.00 and a credit report fee of $150.00 collected from Mr. Eric Jason prior to closing a mortgage for $101,650.00 on November 30, 1989; an appraisal fee of $250.00 and a credit report fee of $50.00 collected from Francis J. and Barbara A. Lynch prior to closing a mortgage for $50,000.00 on February 5, 1990; a deposit of $2,000.00 in part payment of the brokerage fee collected from Mr. Nicholas A. Paleveda and Ms. Marjorie Ewing prior to closing a mortgage for $356,400.00 on April 20, 1990; a deposit of $350.00 collected from Mr. Richard L. Trombley prior to closing a mortgage for $40,000.00 on November 2, 1990; and a deposit of $350 collected from the Sun Bay Development Corporation prior to closing a mortgage for $292,500.00 on February 6, 1990. Excessive, Duplicate, And Undisclosed Charges Respondents imposed excessive, duplicate, or undisclosed charges in numerous mortgage transactions. The costs itemized and collected from borrowers in these transactions were not supported by actual expenditures. Respondents collected $625.00 from Mr. and Mrs. Ernest L. Sego for an appraisal that cost $250.00. Mr. and Mrs. Sego paid $325.00 for an appraisal report at the time they executed a Mortgage Brokerage Agreement on August 17, 1988, for a mortgage in the amount of $151,000.00. At the closing on April 7, 1989, Mr. and Mrs. Sego were charged an additional $300.00. Respondents collected $50.00 from Mr. and Mrs. Sego for a credit report at the time the Mortgage Brokerage Agreement was executed. At the closing, Mr. and Mrs. Sego were charged an additional $45.00 for a credit report. Respondents underestimated the closing costs for: Mr. Jason in the amount of $590.00; The Lynch's in the amount of $492.50; and Mr. and Mrs. Sego in the amount of $1,140.00. Failure To Disclose Respondents failed to disclose costs incurred by numerous borrowers. Respondents failed to disclose changes in the cost of title insurance which occurred between the time the borrowers signed Good Faith Estimate forms and the time the mortgage transactions closed. The estimated cost for title insurance for the Lynch's was $460.00 while the actual cost was $637.50. The estimated cost of title insurance for Mr. and Mrs. Sego was $200.00 and the actual cost was $263.00. The Mortgage Brokerage Agreement/Good Faith Estimate was not signed by two borrowers in separate transactions. Neither Mr. and Mrs. Knowlton nor Mr. Trombley signed those documents. Respondents failed to disclose payments made to a co- broker in two separate transactions. Mr. Nicholas Cancel was hired by Respondents to process loans. Loan processing is limited to preparing the documentation necessary to close a loan. Mr. Cancel is a licensed mortgage broker who was employed by a broker other than Respondents. Respondents failed to disclose payments made to Mr. Cancel in his capacity as an independent broker in the mortgage loans to the Lynch's and Mr. Jason. Failure To Maintain Books And Records And Failure To Cooperate Respondents failed to maintain books and records at the principal place of business. Respondents maintained only one business location. When Petitioner's investigator visited Respondents' office and asked for the books and records, Henson told the investigator that there were no books and records at the office. Petitioner subsequently served Respondents with a subpoena to produce Dupont's books and records. Respondents produced 57 mortgage files and some banking records. The files produced by Respondents were incomplete. Most contained only brochures. No files were produced on the Shuster and Linker transactions. During the investigation Henson represented to the investigator that he was neither president nor a corporate officer of Dupont. However, Henson repeatedly signed loan application and loan closing documents as president of Dupont including the Smith, Robeck, and Shuster transactions. Henson also entered into numerous co-brokerage arrangements as president of Dupont including arrangements with Mr. Cancel and Ms. Patricia Towers, president of Towers Mortgage Corporation, 6971 North Federal Highway, Boca Raton, Florida 33487. Fraud, Deceit, Misrepresentation, And Gross Negligence Respondents' intent to defraud and deceive the public is evidenced by a consistent pattern and practice of incompetence, gross negligence, misrepresentation, and failure to disclose material facts in multiple transactions over an extended period of time. Respondents knew or should have known that the acts committed by them constituted violations of law. Respondents violations resulted in financial loss to numerous individuals and to the public generally. Respondents failed to comply with agreements voluntarily executed by them and failed to pay amounts due under judgments duly entered against them by Florida courts. Respondents failed to cooperate with state investigators and failed to maintain books, records, and escrow accounts required by law.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: Petitioner issue a final order revoking the license of Respondent, Henson, and revoking the registration of Respondent, Dupont. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 29th day of September 1992. DANIEL MANRY 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 29th day of September 1992.
Findings Of Fact For the purposes of these proceedings, Jager Industries, Inc. and Castle Realty Ltd. are synonymous as Petitioner. Through name changes, Castle Realty Ltd. became Jager Industries, Inc. Under the provisions of the Mortgage Brokerage Act, Chapter 494, Florida Statutes, the Office of the Comptroller, Department of Banking and Finance (Department), is charged with the responsibility and duty of administering the Mortgage Brokerage Guaranty Fund (Fund) which includes the duty to approve or deny applications for payment from the Fund, as set forth in Section 494.042, Florida Statutes. At all times material hereto, 1st Federated Realty Mortgage, Inc. (1st Federated) was licensed as a mortgage broker in this state pursuant to Chapter 494, Florida Statutes, having license number HE 7896. On or about January 8, 1981, 1st Federated filed for bankruptcy in the United States Bankruptcy Court for the Middle District of Florida, Tampa, Division. Thereafter, on or about December 16, 1981, 1st Federated was dissolved. On January 29, 1985, the Department received a letter dated January 25, 1985, by regular mail, requesting payment from the Fund on behalf of Castle Realty Ltd. Attached to the letter was a final judgment entered on April 21, 1982, in the Circuit Court for Pinellas County against 1st Federated in the principal amount of $50,000 based upon a violation of Section 494.042(2)(d), Florida Statutes, a Writ of Execution returned unsatisfied and an Affidavit of Reasonable Search. Thereafter on May 17, 1987, the Department received by certified mail a copy of the Complaint filed against 1st Federated and supporting documents including a copy of the Master Loan Commitment, Affidavit and Acceptance of Service. Pursuant to the Master Loan Commitment, Castle Realty paid $50,000 to 1st Federated as a Master Commitment Fee in exchange for a promise by 1st Federated to fund up to $4,000,000 for individual condominium loans. The individual commitments and closing of loans were subject to the lender approving the borrower's credit; however, approvals could not be unreasonable withheld. Timely notice of the institution of the action by Petitioner against 1st Federated as required by s. 494.043(5), Florida Statutes (1985), was waived by Respondent. No evidence was submitted regarding the number of claims involving 1st Federated and the amount of those claims that have been paid by Respondent from the Fund. Accordingly, no recommendation is made regarding the amount of Petitioner's claim that may be paid from the Fund pursuant to the limitations contained in s. 494.044, Florida Statutes (1985). By Notice of Intent to Deny Payment from the Mortgage Brokerage Guaranty Fund dated May 22, 1987, Respondent entered findings of fact, conclusions of law and denied Petitioner's claim. As grounds therefor, Respondent concluded that the 1985 and 1986 amendments to Chapter 494 were applicable in this case as those amendments were remedial or procedural in nature and should be given retrospective application. Thereafter, Petitioner requested formal proceedings by petition filed June 16, 1987, and this request was forwarded to the Division of Administrative Hearings by the Comptroller's letter dated July 23, 1987.
Findings Of Fact At all times pertinent to the allegations herein, the Petitioner, Department of Banking and Finance, (Department), was the state agency in Florida responsible for the regulation and licensing of mortgage brokers in this state, and Respondent, Harriet Ijames, was a licensed mortgage broker. On February 17, 1989, Respondent entered into a Stipulation, Consent Agreement and Final Order with the Department whereby she was placed on probation for 2 years for misconduct relating to the misappropriation of mortgage application fees, with the further requirement that she not act independently but under the supervision of a broker acceptable to the Department. On October 2, 1991, the Department filed a complaint against the Respondent alleging she had violated the terms of the prior Consent Order by conducting business as a mortgage broker without the requisite supervision. Thereafter, on April 29, 1992, Respondent entered into another Stipulation, Consent Agreement and Final Order with the Department regarding the October, 1991 complaint by which she was again placed on probation conditioned upon her operating only under the supervision of an approved broker. This latter Order provided that any violation thereof would be automatic grounds for immediate and summary revocation of her license and also imposed an administrative fine of $2,000.00. The Final Order incorporating that agreement was issued by the Department on July 13, 1992. In May, 1992, Respondent was contacted by Rhudine M. McGhee, a resident of Tampa, who had been referred to her by a mutual acquaintance. Mrs. McGhee indicated she was interested in purchasing another house. Somewhat later, Respondent contacted Mrs. McGhee and told her of a friend who had a house for sale. She also gave Mrs. McGhee the addresses of some other houses in the area which were for sale. Mrs. McGhee did not like any of them. Thereafter, Respondent advised Mrs. McGhee that she was a mortgage broker and not a real estate broker, and that she would have a real estate broker contact her. Respondent also offered to provide Mrs. McGhee with listings of Resolution Trust Corporation foreclosures in the desired price range. Some time later, the broker referred by Respondent showed Mrs. McGhee a house she liked and she signed a contract to buy it. In the interim, Respondent had taken a credit application from the McGhees over the phone and followed up with a visit to the McGhee home. On May 13, 1992, during the visit to the McGhee residence, Respondent had Mrs. McGhee sign a loan application. On that same visit, she solicited and received from Mrs. McGhee a check for $300.00, payable to the Respondent and subsequently endorsed and cashed by her, which reflected the check was the application fee for a loan. She specifically asked that the check be made to her, personally. When Mrs. McGhee asked Respondent about the check, she was told it would be credited to the purchase price at time of closing. This was not done and it was only later, after a complaint was filed with the Department, that Mr. Brigliadora, the mortgage broker with whom she was affiliated, repaid the fee from his company's funds. Though at hearing Respondent denied she took a loan application fee or that the check she received was for that purpose or bore any notation to that effect when received, Mrs. McGhee is quite certain she put that notation on the check at her husband's direction at the time she gave it to Respondent. Respondent claimed the check was for finding the house but Mr. McGhee specifically recalls Respondent indicating the check was to be an application fee to be credited against the purchase price. It is so found. On June 1, 1992, Respondent again returned to the McGhee home to have them sign a second loan application. This time Mr. McGhee was not at home and Respondent suggested to Mrs. McGhee that she sign her husband's name to the application. This was done. Respondent did not give the McGhees copies of the applications they signed but said she would bring them copies at a later date. This was never done. Though Respondent also denies soliciting the second application, her apparent signature appears on both application forms and it is found she did both solicit and sign the forms and the application fee check. The first application was for a loan of $80,000.00 at 8.5 percent. The second was for $36,000.00 at 8.625 percent. At the time of the solicitation, Respondent was employed by Frank Brigliadora, a licensed mortgage broker and owner of the Money Tree Mortgage Co. However, neither Respondent nor Mr. Brigliadora had notified the Department of their arrangement or obtained Departmental approval of the supervisory relationship. Clearly, Respondent knew the taking of an application fee, as the evidence indicates she did here, was inappropriate. Sometime in mid 1992, Respondent approached George Banks, a licensed mortgage broker in Tampa and owner of his own brokerage company, with a view toward working for him. In their conversation about that, they discussed the practice of application fees. Respondent indicated she wanted to take a fee of $200.00 to $300.00 up front, but Banks felt this was not proper, advised her so, and declined to accept her as a broker. Even when she claimed that other brokers took fees of this nature, he demurred, claiming he did not endorse the practice. Respondent worked for Mr. Brigliadora, a licensed mortgage broker, at his firm, Money Street Mortgage, for approximately 3 months during 1992. At the time she went to work for him, Respondent did not tell him she was under sanctions by the Department to have strict supervision and at no time did he agree to the Departmental supervision program. Mr. Brigliadora did not receive the $300.00 check Respondent obtained from the McGhees nor did he ever get the money it represented from the Respondent. It was only just before or at the closing on the property that he first became aware of the deposit. When he refunded the money to the McGhees, Respondent agreed to reimburse him but she never did. Normally, Money Street Mortgage does not take application fees on residential loans, and Mr. Brigliadora denies he ever approved or suggested to Respondent that she solicit them. When Respondent gave him the documentation on the McGhee loan application it did not include the required good faith estimate found in the brokerage agreement nor did the application form or any other document make the required disclosures. The application he got from Respondent does not constitute a brokerage agreement and Mr. Brigliadora never got one from the Respondent on this loan. What he received is no more than an application for a loan. Mr. James, the Department's Area Financial Manager, whose job includes the assignment of examiners and the review of investigations by examiners, knows Respondent as a licensed mortgage broker under Chapter 494, Florida Statutes. He is aware of prior complaints received by the Department about the Respondent in the past. Two of them relate to the Final Orders previously mentioned herein. In the instant case, he recalls receiving a telephone call regarding a deposit of $300.00 given to Respondent and commenced an investigation into the incident. The current Administrative Complaint which resulted in this hearing was the outcome of that investigation. Based on his evaluation of the matters discovered in the investigation, he concluded that Respondent took a fee from a client without having a brokerage agreement with that client; failed to make the required full disclosure to a client; and misappropriated a fee which she received from a client; all of which are violations of various provisions of Chapter 494. In his official capacity with the Department, Mr. James had the duty to approve a supervisory mortgage broker for the Respondent as called for in the two prior Final Orders referred to previously herein. Neither Money Street Mortgage nor Mr. Brigliadora were submitted by Respondent for approval by the Department even though Respondent knew she was required to do so. Respondent claims she made it very clear to Mrs. McGhee that she was a mortgage broker and not a real estate broker. Nonetheless, Mrs. McGhee, she claims, insisted Respondent help her and offered to pay her for her efforts. Respondent claims that all Petitioner's witnesses lied about her and forged documents relating to her alleged activities. She denies she would ever cheat or disobey the rules because she knows she would lose her license if she did. Claiming she is well respected in the community, she asserts the Department did not thoroughly investigate the allegations against her and is, therefore, destroying her reputation over something which did not happen as alleged. Her assertions are not accepted, however.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: Recommended that a Final Order be entered in this case finding her guilty of the offenses alleged in the Administrative Complaint filed herein; revoking Harriett Ijames' license as a mortgage broker in Florida; and imposing an administrative fine of $5,000.00. RECOMMENDED this 24th day of May, 1993, 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 24th day of May, 1993. COPIES FURNISHED: Lisa L. Elwell, Esquire Office of the Comptroller 1313 Tampa Street, Suite 615 Tampa, Florida 33602-3394 Harriett Ijames 8341 Paddlewheel Street Tampa, Florida 33617 Gerald Lewis Comptroller State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves General Counsel Department of Banking and Finance Room 1302 The Capitol Tallahassee, Florida 32399-0350
The Issue The Administrative Complaint presents essentially the same factual allegations in its various counts supporting different legal violations. These factual allegations are summarized as follow: Reinlie represented to Estelle Pitts that if she put up the earnest money deposit for her son, William Lambert, on the commercial property that Lambert wanted to purchase in the form of notes secured by mortgages on her house: (1) the mortgages and notes would not be a lien on her property; (2) the mortgages and notes would not be recorded; (3) the mortgages and notes would be returned to her when Lambert obtained financing for the property he desired to purchase; (4) the mortgages and notes merely showed good faith on Lambert's part regarding his offer to purchase; (5) Lambert's contract for purchase was contingent upon the sale of commercial property which he owned in South Florida; and (6) even if the sale to Lambert did not go through, Mrs. Pitts would not be responsible for the mortgages and notes. Contrary to his representations, Reinlie recorded the various mortgages and notes executed by Estelle Pitts. Contrary to his representations, Reinlie advised Estelle Pitts that she would be responsible for the mortgages and notes, and that if said notes were not satisfied "foreclosure proceedings would be initiated." Petitioner called Estelle Pitts, who testified concerning the representations made by Reinlie. Reinlie testified, denying that he had made said representations. William Lambert was the only other person present when most of these alleged representations were made. Lambert, who had suffered a physically debilitating stroke, could not attend the hearing, and his deposition was received into the record. Lambert's recollection of the events was wholly supportive of neither his mother's nor Reinlie's recollection of the events. None of the witnesses were disinterested: Reinlie's license was in jeopardy; Mrs. Pitts' home was in jeopardy; and Lambert is Mrs. Pitts' son. The conflicts in testimony can only be resolved from extrinsic facts and the credibility of the witnesses. Having considered the facts, the testimony of Reinlie is deemed more credible. Both parties submitted post hearing proposed findings of fact in the form of a proposed recommended order. To the extent the proposed findings of fact have not been included in the factual findings in this order, they are specifically rejected as being irrelevant, not being based upon the most credible evidence, or not being a finding of fact.
Findings Of Fact The following Findings of Fact are based upon the prehearing stipulation of the parties: At all times in question, the Respondent, James Reinlie, Jr., was a registered real estate broker in the State of Florida and is the holder of license number 0112757. The parties were duly noticed pursuant to the provisions of Chapter 120, Florida Statutes (1981). William C. Lambert, Estelle Pitts' son, did not have the necessary money with which to furnish a deposit to the sellers of the Robin Hood Motel at the time the contract for sale and purchase and the addendums thereto were executed. A contract for sale and purchase was executed on August 11, 1979, and August 13, 1979, between Irene B. Smith, seller, and William C. Lambert, Sr., buyer, for the purchase of the Robin Hood Motel, located at 1150 North Atlantic Avenue in Daytona Beach, Florida. Respondent Reinlie was a co-broker on that contract. On August 13, 1979, an addendum to the contract for sale and purchase was executed between Irene B. Smith, seller, and William C. Lambert, Sr., buyer. On January 7, 1980, and January 8, 1980, a second addendum was executed under the original contract for sale and purchase between Irene B. Smith, Gilbert Brown and Liselotte M. Brown, sellers, and William C. Lambert, Sr., buyer. On August 13, 1979, a mortgage deed and mortgage note were executed by Estelle Pitts and Linda L. Smith (Mrs. Pitts' daughter) as mortgagor, to B.I.C. Realty, Inc., escrow account, as mortgagee, said note in the principal amount of $5,000 and secured by a first mortgage on 900 West New York Avenue, Deland, Florida, also known as: . . . the east 60' of the north 150' of Lot 1, Block I, Stetson Home Estates MB 10, page 79, Volusia County, Florida; Said property is the residential home of Estelle Pitts with title in the names of Estelle Pitts and Linda L. Smith. On October 16, 1979, a second mortgage was executed by Estelle Pitts and her daughter, Linda L. Smith, dated November 1, 1979, and secured by a mortgage note in the amount of $5,000 on the residential home of Estelle Pitts, said property being described in detail in paragraph 7 above. On October 16, 1979, a third mortgage was executed by Estelle Pitts and her daughter, Linda L. Smith, dated November 1, 1979, and secured by a mortgage note in the amount of $5,000 on the residential home of Estelle Pitts, said property being described in detail in paragraph 7 above. On August 17, 1979, Respondent Reinlie took the first mortgage deed and mortgage note to The Abstract Corporation and instructed that it be recorded in the public records of Volusia County, Florida, said first mortgage deed and mortgage note in the amount of $5,000 dated August 11, 1979, and executed August 13, 1979. On November 29, 1979, Reinlie took the second mortgage deed and note to The Abstract Corporation and instructed that it be recorded in the public records of Volusia County, said second mortgage deed and note in the amount of $5,000 dated November 1, 1979, and executed October 16, 1979. On December 4, 1979, Reinlie took the third mortgage deed and note to The Abstract Corporation and instructed that it be recorded in the public records of Volusia County, said third mortgage deed and note in the amount of $5,000 dated December 1, 1979, and executed October 16, 1979. On May 2, 1980, Estelle Pitts notified Reinlie that she wanted the aforesaid mortgages and notes returned to her immediately. On May 14, 1980, Reinlie notified Mrs. Pitts that he would not return the mortgages and notes and had been advised by the "former" owners of the Robin Hood Motel that they desired to pursue their full deposit, plus expenses, under the contract and, if necessary, would foreclose the mortgages and notes in order to enforce their legal rights. On May 19, 1982, Reinlie executed three satisfactions of mortgages on the three mortgages and notes referred to in paragraphs 7, 8 and 9 above upon the advice of counsel. The following Findings of Fact are based upon testimony and evidence adduced at the hearing: Reinlie did not state to Mrs. Pitts that the mortgages would not be recorded and would not be a lien on her property. (See Lambert deposition, pages 11 and 12.) William Lambert was aware that the mortgages and notes were to be recorded and would be a lien on his mother's property. Mrs. Pitts did not understand the transaction and the terms thereof, although Lambert explained it to her. (See Lambert deposition, page 13.) The contract for purchase was not contingent upon the sale of Lambert's motel in Hollywood, Florida. Lambert signed the contract and was presumably aware of its terms. Reinlie did not represent to Mrs. Pitts that the contract for purchase was contingent upon the sale of her son's motel in Hollywood. (See transcript, page 20.) It was Lambert's intent to replace the mortgages on his mother's home with cash he would obtain from the sale of his motel in Hollywood. By substitution of the cash for the mortgages and notes, it was Lambert's understanding that his mother's home would not be "used," i.e., that her home was not in danger of foreclosure. However, Lambert realized that the money would have to be substituted for the mortgages and notes. Lambert felt that he could sell his Hollywood motel prior to the closing date on the Robin Hood Motel. Had Lambert sold his motel in Hollywood prior to said closing, the mortgages and notes on his mother's house would have been cancelled, i.e., "returned" to her. Lambert initially advised Reinlie that his mother owned her home free and clear. At that time, both Lambert and Reinlie were seeking the means for Lambert to come up with the earnest money deposit, which does show a "good faith offer." Reinlie suggested the use of Mrs. Pitts' home to secure the deposit. Lambert discussed this matter with his mother, who agreed and executed the various mortgages and notes. Reinlie did not make the primary approach to Mrs. Pitts, and it was Lambert who primarily explained the transaction to her. Both Lambert and Mrs. Pitts stated that they failed to understand the terms and effect of the mortgages and notes. The addendum to the contract provides that the buyer will provide the seller within five days of the date of the contract a mortgage title binder showing the $5,000 deposit mortgage to be a first mortgage. Their failure to understand the transaction was not due to any misrepresentations or lack of explanation to them by Reinlie. The original closing date was set for late October 1979. When Lambert was unable to sell his Hollywood motel, Reinlie arranged for extensions of the closing date, the first until early December, and the second until January 1980. The considerations for these two extensions were the second and third mortgages and notes. After these were prepared, without signatures, they were delivered to Lambert, who in turn returned each of the executed documents to Reinlie shortly before Reinlie recorded them. Reinlie was not present when said mortgages and notes were executed. Around Thanksgiving 1979, when it became evident that Lambert was having difficulty closing, Reinlie suggested that the contract, which was similar to an option, be sold. Although the contract would have had to be discounted, it would have reduced the potential loss. Reinlie attempted unsuccessfully to do this. Reinlie's suggestion of this course of action did not assure the sale of the contract. (See transcript, page 91.) By late January 1980, when Lambert could not close, Reinlie attempted to obtain an additional extension, which the sellers refused to grant. At that time, the contract for purchase was in default. In the spring of 1980, the sellers made demand upon Reinlie for their deposit money. Reinlie advised both Lambert and Mrs. Pitts of the sellers' demand and sought to obtain mortgage financing for Mrs. Pitts in lieu of initiating a foreclosure action. Mrs. Pitts did not elect to borrow the money. Lambert tendered $5,000 to Reinlie in order to settle the matter, which was rejected by the sellers. The sellers renewed their demand that Reinlie pay them their escrowed deposit. In a meeting with the sellers, Rein lie pointed out that if he foreclosed the mortgages there would be additional delay and legal costs. Because the notes had an interest rate of ten percent and were secured by the mortgages, Reinlie suggested that nothing be done during the life of Mrs. Pitts, but a claim be made against her estate. The sellers determined that this was a better approach than forcing Reinlie to foreclose on the mortgages. Thereafter, all of the parties determined that they desired to settle the matter. Reinlie advised the sellers that he would release the mortgages and notes to Mrs. Pitts if they, in turn, would release him from his obligation to pay them the escrowed money. This was finally done and the matter resolved on that basis.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law that the Respondent, James Reinlie, Jr., did not violate Sections 475.25(1)(b), (d) or (j), Florida Statutes, it is recommended that the charges filed against him in the Administrative Complaint be dismissed. DONE and RECOMMENDED this 25th day of May, 1983, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN, 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 25th day of May, 1983. COPIES FURNISHED: John G. DeLancett, Esquire James R. Mitchell, Esquire 801 North Magnolia Avenue, Suite 402 Post Office Box 6171-C Orlando, Florida 32853 Irving Gussow, Esquire Highway 17-92 Post Office Box 965 Fern Park, Florida 32730 Frederick Roche, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Harold Huff, Executive Director Florida Real Estate Commission 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 William M. Furlow, Esquire Florida Real Estate Commission 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 =================================================================
