The Issue Whether petitioner should impose fines and other administrative sanctions against respondents, and order them "to cease and desist from further violating Florida laws and take appropriate corrective action," for the reasons alleged in the administrative complaint?
Findings Of Fact Credicorp, Incorporated (Credicorp) is a Texas corporation whose principal place of business is located in Dallas, Texas. Credicorp is not licensed pursuant to Chapter 520, Florida Statutes, and never has been. Originally incorporated in 1990 under the name FAFCO, Credicorp began mailing solicitations to Florida in November of 1990. John Rheinfrank was president of Credicorp from November of 1990 until October of 1992. T. at 15. Since then, Stevan Brown, who has been corporate secretary at all pertinent times, has served as president. Credicorp has no employees or agents in Florida, and owns no property in Florida. Credicorp has not registered to do business in Florida and does not collect Florida sales or use taxes. Credicorp mails solicitations, also called invitations, to Florida residents and others. Before the corporate name change, invitations sent to prospects read as follows: TELEGRAM APPROVAL NO: [account number specified] APPROVAL EXPIRATION DATE: [date specified] [Name and address of targeted individual] YOU HAVE BEEN PRE-APPROVED FOR A GOLD CARD WITH A $10,000.00 LINE OF CREDIT. *MAIL YOUR $29.95 ANNUAL FEE BY CHECK OR MONEY ORDER BY (specified date) ALONG WITH THIS SIGNED NOTICE TO ACTIVATE YOUR CREDIT IMMEDIATELY. FAILURE TO DO SO WILL RESULT IN OUR REEVALUATION OF YOUR ELIGIBILITY. PLEASE RETURN THIS TELEGRAM WITH PAYMENT BY (date specified). MAKE CHECK OR MONEY ORDER PAYABLE TO FAFCO GOLD CARD. SINCERELY, ROBERT J. ARMSTRONG, NEW ACCOUNTS MANAGER RESPOND TODAY! Petitioner's Exhibit No. 19. Robert J. Armstrong, the putative accounts manager, does not exist. T. at 121. Recently invitations have included a 60- day money-back guarantee and a disclaimer in small type disclosing Credicorp's lack of affiliation with a financial institution. Petitioner's Exhibit No. 19. The solicitation arrives in an envelope stamped "DATED MATERIAL: YOUR IMMEDIATE REPLY REQUESTED," and the return address is shown as "CREDIT APPROVAL DEPT." Petitioner's Exhibits Nos. 8 and 21; Admission No. 13. Ordinarily the solicitation contains all the information an individual receives before paying money to Credicorp to secure its services. Respondents offer potential customers residing in Florida a "Gold Card" with "a $10,000 line of credit" at a 12 percent annual interest rate, in exchange for a $29.95 fee. Petitioner's Exhibits Nos. 19 and 20; Admission 46. The services Credicorp in fact provides to members are offers to sell merchandise, loans for purchasing the merchandise that Credicorp sells, assorted coupons, and hotel and rental car discounts. Petitioner's Exhibits Nos. 15 and 29, line 23. Not one of these services is clearly identified on the initial solicitation sent to potential members. Petitioner's Exhibit No. 19; T. at 120- 121. After the customer submits a pre-approved application and pays the membership fee, Credicorp mails a "fulfillment package." Petitioner's Exhibit No. 15, p.77, line 22. The customer must pay a $29.95 fee before Credicorp performs any service on the customer's behalf. Petitioner's Exhibit No. 20; Admission No. 47. The fulfillment package contains a letter that states, in part: WELCOME TO CREDICORP, YOUR LINE OF CREDIT IS $10,000 HERE IS YOUR CREDICORP MEMBERSHIP CARD! ACCOUNT # START USING YOUR CREDICORP MEMBERSHIP AND BONUS COUPONS IMMEDIATELY TO PURCHASE NAME BRAND PRODUCTS FROM OUR HOME VALUES AND GIFT CATALOG. ENCLOSED IS OUR GIFT TO YOU, YOUR PREFERRED MEMBER SAVINGS COUPON BOOKLET WORTH UP TO $1,000.00 IN COUPONS REDEEMABLE IN YOUR AREA. ALSO SEE INFORMATION ENCLOSED ABOUT 50 percent DISCOUNTS AT THOUSANDS OF LOCATIONS THROUGH OUT THE U.S. Petitioner's Exhibit No. 6. This letter is the first notice Credicorp gives the "new member" that he or she has joined a catalogue shopping club. The fulfillment package also contains a second letter addressed "Dear New Credicorp Member," a copy of the Credicorp Rules and Regulations, a collection of Home Values and Gifts Bonus Coupons, a booklet of Super Saver coupons, and the Home Values and Gifts catalogue. For the past six months or so, Petitioner's Exhibit No. 16, p.44, the package has contained an application for a "Privilege Card." Petitioner's Exhibits Nos. 1, 2 6, and 15, p. 78 1. 22. A member can purchase merchandise listed in the Home Values and Gifts catalogue by completing order forms contained in the catalogue and mailing them, along with payment, to Credicorp. T. at 108. Credicorp extends members a line of credit of up to $10,000 to purchase this merchandise. T. at 108, 111. The member's "Gold Card" number must be included when ordering products from the catalogue. Petitioner's Exhibit No. 15, p. 83, line 9. A member cannot use the "Gold Card" to purchase goods or services from retail sellers other than Credicorp. T. at 111-114. Members cannot use their "Gold Cards" or their membership to obtain cash from anybody. The Better Business Bureau of Texas received over 34,000 inquiries in 1992 regarding Credicorp's activities. T. at 122-123. Credicorp receives a mark-up on the merchandise it sells members. Petitioner's Exhibit No. 16, p.60, line 5. Members who purchase merchandise on credit must initially submit a specified down payment with the order. Petitioner's Exhibits Nos. 1, 2 and 14. Two prices are available to a Credicorp member, a cash price and a "credit price," which reflects a 12 percent financing fee. Petitioner's Exhibits Nos. 1, 2, 14. Merchandise purchased on credit arrives with an installment coupon book for each item ordered. Petitioner's Exhibit No. 6, Credicorp Rules and Regulations p. 2. The Credicorp Rules and Regulations, the order forms contained in the catalogue, and all other materials Credicorp provides members make no mention of any contingency once the member completes, signs and sends in a form order for merchandise with the amount of money required. Petitioner's Exhibits Nos. 1, 2, 6, 12, 14, 17. Many Florida residents complete and sign these order forms in Florida. Petitioner's Exhibit No. 17. Credicorp has received at least 378 form orders for merchandise from Florida residents. Id. Approximately 1,600,000 individuals have submitted to Credicorp membership applications, each accompanied by $29.95. New members' names and addresses are entered into a computer data base and "batch edit sheets," each listing 100 names of new members, are printed. Petitioner's Exhibits Nos. 4 and 5; Petitioner's Exhibit No. 15, page 73, line 1; T. at 47. Sample batch edit sheets obtained from Credicorp by the Department listed the names of 640 Florida residents who had sent a membership application form and $29.95 to Credicorp to obtain membership. Petitioner's Exhibit Nos. 4, 5, 18. On a single day, June 24, 1992, money and membership application forms from 243 residents of Florida reached Credicorp. Petitioner's Exhibit No. 18.
Recommendation It is, accordingly, RECOMMENDED: That petitioner order respondents Credicorp, John Rheinfrank and Stevan Brown to cease and desist violating Chapter 687, Florida Statutes. That petitioner levy an administrative fine against Credicorp in the amount of three million five hundred seventy-eight thousand dollars ($3,578,000) to be paid within thirty (30) days of entry of the final order. That petitioner levy an administrative fine against respondent John Rheinfrank in the amount of two hundred fifty thousand dollars ($250,000) to be paid within thirty (30) days of entry of the final order. That petitioner levy an administrative fine against respondent Stevan Brown in the amount of two hundred fifty thousand dollars ($250,000) to be paid within thirty (30 days of entry of the final order. DONE AND ENTERED this 4th day of October, 1993, in Tallahassee, Florida. ROBERT T. BENTON, II 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 4th day of October, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-911 Petitioner's proposed findings of fact Nos. 1-22, 24-38, 40, 41, 42, and 43 have been adopted, in substance, insofar as material. With respect to petitioner's proposed findings of fact Nos. 23 and 39, extrapolation is problematic. Respondent's proposed findings of fact Nos. 1, 2, 3, 5, 7, 8, 9, 11, 16, 24, 25, 26, and 27 have been adopted, in substance, insofar as material. Respondent's proposed findings of fact Nos. 4 and 21 pertain to matters that are not material to petitioner's allegations. Respondent's proposed findings of fact Nos. 6, 22 and 23 pertain to subordinate matters. With respect to respondent's proposed finding of fact No. 10, it is clear from all the circumstances that it was Credicorp's intent to mislead recipients into believing that there was no such restriction. With respect to respondent's proposed finding of fact No. 12, Credicorp lends money to finance merchandise it sells on credit. With respect to respondent's proposed findings of fact Nos. 13 and 14, it is clear from all the circumstances that Credicorp used the term "Gold Card" to mislead recipients of its solicitations into believing they were being offered a credit card. With respect to respondent's proposed finding of fact No. 15, the evidence did not show that the "Credicorp Gold Card is useful to members as a reminder of their membership." With respect to respondent's proposed finding of fact No. 17, the word card does appear. With respect to respondent's proposed findings of fact Nos. 18 and 19, Credicorp so held itself out. With respect to respondent's proposed finding of fact No. 20, the sales contract comes into existence when the member mails the order and payment. COPIES FURNISHED: Honorable Gerald Lewis Comptroller, State of Florida Department of Banking and Finance 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 Bridget L. Ryan, Esquire Department of Banking & Finance Suite 1302, The Capitol Tallahassee, Florida 32399 William E. Williams, Esquire Rex Ware, Esquire 106 East College Avenue Post Office Box 1794 Tallahassee, Florida 32301
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
The Issue Whether the license #16-7170-H of Robert A. Rinehart should be suspended or revoked, or whether a civil penalty should be assessed.
Findings Of Fact The Respondent, Robert A. Rinehart, trading as 629 Apartments, was at all times pertinent to this cause licensed as a public lodging establishment, holding license control #16-7170-H. A notice to show cause and notice of hearing' was served upon Respondent Rinehart, notifying him that certain evidence had been presented which, if true, was good and sufficient reason to cause his license to be suspended or revoked or to have a fine assessed against him. The Notice to Show Cause indicated also that an administrative hearing would be held to which the Respondent would receive notice, and was dated December 5, 1978. No answer was filed to the Notice to Show Cause. The Notice of Hearing was mailed April 26, 1979, and was returned. The Respondent did not appear at the administrative hearing or send a representative to testify in his behalf. It is found that the address to which the Notice of Hearing was sent was the same address as provided on the existing license held by Respondent, which is active until December 1, 1980. This address is the same address as indicated on the standard form apartment lease entered into evidence as Petitioner's Exhibit 2. The Respondent is under obligation to keep the Petitioner Division advised of his current address to be shown on his official records in the Division of Hotels and Restaurants, Department of Business Regulation, State of Florida. In December of 1976, Respondent Rinehart rented, or permitted his agent to rent, an apartment in 629 Apartments to Carol Miller. Ms. Miller was required to pay a security deposit in the sum of $100.00 shortly after renting the apartment, and later paid an additional security deposit of $35.00 upon acquiring a pet. Subsequently Ms. Miller moved from the apartment after personally notifying Respondent Rinehart of her intent to vacate the rented premises at a time in excess of thirty (30) days before the intended date of her departure. Ms. Miller then again informed Respondent of her intent to move and requested that he give her an address where he could be contacted and to also return her security deposits, however Respondent did not do so. Ms. Miller moved from the licensed premises in September of 1978, and has not received her security deposits, nor has there been a claim submitted by Respondent Rinehart for the deposit. Entered into evidence was a typed rental agreement and a receipt for various sums of monies growing out of the rental agreement with Respondent Rinehart. The testimony of Carol Miller, together with the evidence submitted, is sufficient to show that Respondent Rinehart in fact received security deposits from Ms. Miller as a tenant and failed to return said security deposits to her or to make a claim against them. A proposed recommended order was submitted by the Petitioner Division, and this instrument was considered in the writing of this Order. To the extent the proposed findings of fact have not been adopted in, or are inconsistent with, factual findings in this Order they have been specifically rejected as being irrelevant or not having been supported by the evidence.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, the Hearing Officer recommends that a civil penalty be assessed in the amount of $250.00 to be imposed upon the Respondent, Robert A. Rinehart t/a 629 Apartments. DONE and ORDERED this 31st day of August, 1979, in Tallahassee, Leon County, Florida. DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Mary Jo M. Gallay, Esquire Robert A. Rinehart t/a Department of Business 629 Apartments Regulation 629 NE 5th Avenue 725 South Bronough Street Fort Lauderdale, Florida Tallahassee, Florida 32301
Findings Of Fact In early July, 1972, Donald R. and Pamela S. Leininger (buyer) entered into a contract to purchase a residence through Sun Up Realty with its salesman, Bernard Zapel. The real property involved and Sun Up Realty were owned by Defendant, Norman N. Zipkin either as sole proprietor or as sole shareholder of the corporation in whose name the property was held. Disclosure of the role of Defendant as owner-seller was not an issue in these proceedings. Buyer executed two contracts for the purchase of the property both dated July 9, 1972. The first contract acknowledged receipt of $100 as a deposit with a down payment to be made of $1750 with the buyer obtaining a mortgage of $33,250. Noted on this contract are two additional payments of $650 and $1,000. All of these deposits were payable to and deposited in Sun Up Realty's Escrow Account. The second deposit receipt contract was also dated July 9, 1972 and receipt of $1750 was thereon acknowledged by seller. The sale price of $35,000 applied to both contracts. The second contract provided as terms and conditions of sale that the buyer would make an additional deposit of $1700 before closing and that buyer was to apply for, qualify, and obtain a mortgage insured by FHA. Papers to so qualify were sent to the bank but buyer never qualified for the loan. The Administrative Complaint indicates that the first document executed by the buyer provided for an FHA insured mortgage; the evidence presented was as noted above. Apparently to allow buyer additional time to qualify for the loan Defendant leased the premises to buyer pursuant to lease agreement (Exhibit 5). Although Defendant testified buyer paid him nothing while he occupied the house pursuant to this lease agreement, in his deposition (Exhibit 1) buyer presented a receipt for one month's rent paid to the seller for the premises. Buyer never qualified for the mortgage because the lending agency was never satisfied from whence the additional $1700 down payment was to come. Although no evidence was presented on this point it appears that this additional deposit was required for buyer to reach a 10 percent down payment on the price of the residence. The July 9, 1972 deposit receipt contract that was in effect with respect to this transaction provides in pertinent part: "2. An additional sum of seventeen hundred dollars ($1700) shall be deposited with Escrow Agent before closing. In the event such sum is not so deposited, Seller at his option may cancel and terminate this agreement." "3. Buyer to apply for, qualify for, and obtain a Mortgage insured by the FHA Section in an amount not less than $31,550. In the event the Buyer fails to qualify for said mortgage, all said deposit shall be returned immediately, less the cost of the credit report. "14. It is mutually agreed that the trans action shall be closed and the Buyer shall pay the balance of the first payment and execute any and all papers necessary to be executed by him for the completion of this purchase within days from the aforementioned abstract of title, or such time as shall reasonably be required by seller to make such title good, otherwise the herein named Escrow Agent is hereby directed by both Seller and Buyer to divide the monies being held by said Escrow Agent, under the terms under this Contract between the Seller and Broker herein named as hereinafter provided." "It is further agreed that in case of default by the Buyers, the Seller may at his option take legal action at law and/or in equity to enforce this Contract, in which event, the Buyer shall pay reasonable attorney fees and court costs; or else the Seller may at his option retain one half of the deposit herein paid as considera tion for the release of the Buyer by the Seller from any and all further obligations under this Contract to the Seller, which release shall be implied from such act of retention by the Seller." Buyer quit the premises in October, 1972 and thereafter demanded return of his deposit from seller. By letter from buyer's attorney (Exhibit 6) dated March 19, 1973 demand was made for return of the deposit. By letter dated March 23, 1973 (Exhibit 7) Seller denied the refund of the deposit on grounds that the buyer had breached the contract as the Buyer had qualified for and been approved for a mortgage by the Collateral Mortgage Co. The money was withdrawn from the escrow account and paid to the seller. Defendant is an attorney, mortgage broker, general contractor, developer and real estate broker. For the past decade he has devoted most of his energies toward real estate development. This is the first time charges have been preferred against him by the Florida Real Estate Commission.
Findings Of Fact A Quit-Claim Deed was executed the 3rd day of March, 1975, by Bayshore 21, Inc., first party to Marc Broxmeyer an undivided 70 percent interest; Gerald Schefflan and Pearl Schefflan, his wife, an undivided 20 percent interest; and Yetta Young an undivided 10 percent interest. The deed was recorded in Official Records Book of Dade County, Florida. The deed reflects that no documentary stamp taxes were affixed to the deed. At the time of the conveyance there existed upon the property three outstanding mortgages: one in the amount of One Million Four Hundred Fifty Thousand Dollars ($1,450,000) in favor of Washington Federal Savings and Loan; one in the amount of One Million Eight Hundred Eighty Thousand One Hundred Six Dollars ($1,880,106) in favor of Sidney Salomon, et al.; and Twelve Thousand Five Hundred Dollars ($12,500) in favor of Harold Kravitz. The total consideration for the conveyance amounted to Three Million Three Hundred Forty- Two Thousand Six Hundred Six Dollars ($3,342,606). The undisputed facts of the transaction as outlined at the hearing and agreed to by the Petitioners' attorney are as follows: Prior to August 17, 1974, all the outstanding stock of a corporation known as Tepmon of Florida, Inc., (Marvin Glick, presidents and controlling person and Eugene J. Howard, secretary) was held by Sidney Salomon, Jr., Hid Salomon, III, Elliot Stein, the Estate of Preston Estep and John Soult. On or about April 17, 1974, these people entered into an agreement for purchase and sale of corporate stock with Bayshore 21, Inc., pursuant to which Bayshore 21, Inc., agreed to purchase for Three Million Five Hundred Thousand Dollars ($3,500,000) all of the outstanding capital stock of Tepmon of Florida, Inc. At the time, Tepmon of Florida, Inc., had as its only asset a certain parcel of real property known as the Golden Strand Hotel, as shown by suit, Shoprite Air Conditioning, Inc. v. Tepmon, Inc., et al. in the Circuit Court of Dade County, Florida, Case No. 74-29983. Pursuant to the purchase and sale agreement, a closing was to be held in various stages on August 19 and 20, 1974, at which time Sidney Salomon, et al., delivered to Bayshore 21, Inc., all of the capital stock of Tepmon of Florida, Inc. Bayshore 21, Inc., in turn executed and delivered at the closing a chattel mortgage in the amount of One Million Eight Hundred Eighty Thousand One Hundred Six Dollars ($1,880,106), the security for which there was sixty-nine (69) shares of capital stock of Tepmon of Florida, Inc., which stock represented the outstanding stock of Tepmon of Florida, Inc., and carried with it the ownership and control of said corporation. Also given to Sidney Salomon, et al, by Bayshore 21, Inc., at the closing was a purchase money mortgage in the amount of One Million Eight Hundred Eighty Thousand One Hundred Six Dollars ($1,880,106), which mortgage secured the real property known as the Golden Strand Hotel. The reason for the two separate security devices, one the chattel mortgage secured by the outstanding sixty-nine (69) shares of Tepmon of Florida, Inc., stock and the other the real property mortgage secured by the Golden Strand Hotel, was that the parties contemplated that upon Bayshore 21's acquisition of the outstanding Page 3 of 7' pages capital stock of Tepmon of Florida, Inc., Tepmon would be dissolved and completely liquidated. Mindful that such liquidation would render valueless as collateral the capital stock of Tepmon, the parties provided in a collateral security agreement, dated August 20, 1974, that the purchase money real estate mortgage would constitute the substitute collateral security for repayment of the outstanding purchase money obligation owed by Bayshore 21, Inc., to Sid Salomon, et al., effective upon the dissolution of Tepmon of Florida, Inc. Subsequent to acquiring all the capital stock of Tepmon of Florida, Inc., Bayshore 21, Inc., did in fact effectuate a complete dissolution and liquidation of Tepmon of Florida, Inc. Pursuant to such dissolution, the sole asset of Tepmon of Florida, Inc, the Golden Strand Hotel, should have become titled in the name of Tepmon of Florida, Inc.'s sole stockholder, Bayshore 21, Inc., in order to give effect to the validity of the purchase money mortgage. This is not what occurred however, as Sidney Salomon, et al., point out in their Cross-Claim to the aforementioned suit, the truthfulness of which assertions have been admitted by the Petitioners. The September 5, 1974 deed of conveyance of the Golden Strand Hotel from Tepmon of Florida, Inc., to Petitioners (which should have been to Bayshore 21, Inc.) contained only minimum stamps in the amount of eighty-five cents (85). As a result of the Cross-Claim in the aforementioned suit filed by Sidney Salomon, et al., against Petitioners, a stipulation and agreement was entered into resolving the matter in a manner which gave effect to the purchase money real estate mortgage given by Bayshore 21, Inc., to the Salomons. Pursuant to such stipulation, the Petitioners agreed that "the allegations made in the Cross Claim . . . are true and correct and Cross Claimants are entitled to the relief prayed for therein. Cross Defendants [Petitioners] have no defenses thereto, legal or equitable, or any kind whatsoever Pursuant to this stipulation, the Petitioners agreed to execute Quit-Claim Deeds conveying any interest they may have received in the property pursuant to the September 5, 1974 deed of conveyance from Tepmon of Florida, Inc., to Bayshore 21, Inc., the entity which was the sole stockholder of Tepmon of Florida, Inc., at the time of its dissolution and liquidation. By Quit-Claim Deeds dated January 2, 1975, Gerald and Pearl Schefflan conveyed their interest to Bayshore 21, Inc., Yetta Young conveyed her interest back to Bayshore 21, Inc., Marc Broxmeyer conveyed his interest back to Bayshore 21, Inc., and the last Board of Directors of Tepmon of Florida, Inc., comprised of Marvin Glick and Eugene Howard, also conveyed any interest that entity may have retained back to Bayshore 21, Inc. At this point Bayshore 21, Inc., finally held the title it was supposed to have acquired upon the dissolution and liquidation of Tepmon of Florida, Inc. Also at this point the validity of the purchase money real estate mortgage given by Bayshore 21, Inc., to Sidney Salomon, et al., was reestablished and the parties were returned to the posture called for and required by their purchase and sale agreement dated April 17, 1974. When, on March 3, 1975, Bayshore 21, Inc., conveyed title to the Golden Strand Hotel to the Petitioners in this action, by unstamped deed, the conveyance was a voluntary conveyance. At the time of the conveyance, three outstanding mortgages encumbered the real property. Such mortgages were a One Million Four Hundred Fifty Thousand Dollar ($1,450,000) mortgage in favor of Washington Federal Savings and Loan; the One Million Eight Hundred Eighty Thousand One Hundred Six Dollar ($1,880,106) purchase money mortgage in favor of Sidney Salomon, et al.; and a Twelve Thousand Five Hundred Dollar ($12,500) mortgage in favor of Harold Kravitz. When Petitioners took title to this real property, they took title subject to three outstanding mortgages. The Hearing Officer further in summary finds: The transactions related in the foregoing findings of fact ultimately transferred title of real property to Bayshore 21, Inc., pursuant to an agreement dated April 17, 1974. Fee simple title was then transferred from Bayshore, Inc., to Petitioners by Quit-Claim Deed dated March 3, 1975, subject to mortgage liens.
Recommendation Affirm the assessment of documentary stamp taxes made by the Respondent in this cause. DONE and ORDERED this 30th day of March, 1977, in Tallahassee, Florida. DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Harold F. X. Purnell, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304 Eugene J. Howard, Esquire 2212 Biscayne Boulevard Miami, Florida 33137
Findings Of Fact At all times material hereto, Respondent Robert Marriott has been a licensed real estate broker/salesman under the laws of the State of Florida, trading as Marriott Realty. In February of 1980, in his capacity as a real estate broker/salesman, Respondent obtained an offer to purchase commercial property in Miami from Orlando Villacis, a resident of Ecuador, as purchaser, for a total purchase price of $500,000. In conjunction with the offer, Villacis paid a $20,000 earnest money deposit to be held by Marriott Realty in escrow under the terms of the offer. Villacis' deposit check in the amount of $20,000 was deposited into the Marriott Realty escrow account on February 22, 1980. By March 11, 1980, Villacis' $20,000 had been withdrawn, leaving an escrow account balance of $40. This fact was never reported to Villacis. Having heard nothing definite from Respondent with regard to the offer, and because he spent most of his time out of the country, Villacis engaged the services of attorney Rafael Penalver. Prior to July 1980, Penalver contacted the Respondent and inquired as to the status of the offer. Each time, Respondent told him that the seller was still considering the offer. In July of 1980, Respondent told Penalver that the $500,000 offer had been rejected by the seller and recommended that Villacis present an offer for $570,000. Penalver prepared the offer in the amount of $570,000, again calling for a $20,000 earnest money deposit, which Penalver and Villacis assumed was still in the Marriott Realty escrow account. Receiving no response from Respondent on the second offer, Penalver attempted to contact Respondent by telephone on numerous occasions. When Penalver was successful, Respondent told him that the seller was reviewing the offer. In early September 1980, Respondent advised Penalver that the $570,000 offer had been rejected by the seller. By letter dated September 11, 1980, Penalver raised the offer to $600,000, set a deadline of September 19 for the acceptance of the offer, and directed Respondent to return the $20,000 immediately should the offer not be accepted. After September 19, having heard nothing from the Respondent, Penalver called him, at which time Respondent advised that the offer was being considered by the seller. Penalver then wrote a letter dated October 7, 1980, to Respondent demanding that Respondent deposit the $20,000 into Villacis' account. Again hearing nothing from Respondent, Penalver on numerous occasions attempted to contact him by telephone in order to again demand the immediate return of the $20,000 deposit. Being unsuccessful, Penalver wrote the Respondent on November 20, 1980, and January 22, 1981, both times demanding the return of the $20,000 earnest money deposit. After the letter of January 22, 1981, Respondent agreed to meet with Penalver in Penalver's office. On February 2, 1981, the Respondent and his wife met with Penalver. During that meeting, Respondent advised Penalver that the $20,000 was no longer available and that he and his wife had used the money to make mortgage payments and cosmetic improvements on their personal residence. Respondent challenged Penalver to sue him to get the money back. After discussing Respondent's position with Villacis, Penalver filed a civil action for return of the $20,000. In his Answer to the Complaint filed in that litigation, Respondent admitted that he had used the $20,000 deposit for mortgage payments and other personal household expenses and for payment of his IRS tax deficiency. Villacis obtained a Final Judgment in the civil action in the amount of $20,000 plus interest and costs on October 6, 1982. Respondent testified that he did not return the $20,000 earnest money deposit because, in approximately October 1980, Villacis verbally agreed to loan the $20,000 to Respondent. Villacis strongly denied making any offer of a loan to Respondent. The purported loan agreement would have occurred after Penalver had twice written Respondent regarding immediate return of the $20,000 and seven months after the $20,000 had disappeared from the escrow account. Further, after Penalver sent his November demand letter, Respondent wrote Villacis in December of 1980 asking that Villacis consider loaning Respondent the $20,000 in exchange for an unrecorded mortgage on Respondent's personal residence. Clearly, Respondent's testimony is not credible. As of the date of the formal hearing in this cause, the Final Judgment in favor of Villacis and against Respondent remained unpaid and Respondent had still not returned to Villacis the $20,000 earnest money deposit.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding Respondent guilty of the allegations contained within the Administrative Complaint filed against him and revoking his license as a real estate broker/salesman. DONE and RECOMMENDED this 30th day of April, 1984, in Tallahassee, Leon County, Florida. LINDA M. RIGOT, 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 30th day of April, 1984. COPIES FURNISHED: Tina Hipple, Esquire Division of Real Estate 400 West Robinson Street Orlando, Florida 32801 David I. Schlosberg, Esquire 525 North 27th Avenue, Suite 100 Miami, Florida 33125 Frederick Roche, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Harold Huff, Executive Director Division of Real Estate 400 West Robinson Street Orlando, Florida 32801
Findings Of Fact Upon consideration of the evidence adduced at the hearing, the Report of the hearing officer submitted on December 6, 1979, is hereby adopted and incorporated herein. It should be noted, however, that the total time and savings deposits for commercial banks in Collier County as of June 30, 1979, was $266,668,000 rather than $226,668,000 as indicated in the hearing officer's Report. The idea of establishing another savings and loan association in Naples originated with Robert E. Talley, a banker, and Allan L. McPeak, a lawyer. The name proposed for the new association is Marine Savings and Loan Association. No financial institution operating in Collier County at the time of the hearing had the word "Marine" in its name. All of the savings and loan associations in operation in Collier County at the time of the hearing had the word "federal" in their names. Applicant proposes to establish an office in downtown Naples, within a few blocks of several other financial institutions. Applicant has entered into a lease for the proposed facility, at an annual rental of $50,000, renewable for two three-month periods, during the pendency of Applicant's application. The lease provides for a ten-year term at an annual rental of $50,000, if the application is approved, with the option to renew for two additional five-year terms. The lease also contains an option to purchase which must be exercised within thirty-six months of opening or no later than March, 1983, whichever first occurs, at a purchase price of $600,000. In support of its application, Applicant caused an MAI appraisal to be prepared. According to the appraisal, the leased premises have a fair market value, as of March 14, 1979, of $433,000. According to a second, CCIM appraisal, also prepared at Applicant's instance, the property will be worth $632,400 as of February 26, 1982. Initially, Applicant plans to occupy the northern 4,285 square feet of the 6,700 square foot, single-story building it is leasing. Subleases with two tenants who are to occupy the southern portion of the building will be structured so as to provide additional space for expansion by Applicant. The leased premises include 43 parking spaces. Additional parking is available on adjacent streets. The site is easily accessible. Traffic conditions appear to pose no problems. The proposed savings and loan association would be a full service financial institution and expects to be competitive with the existing savings and loan offices in the primary service area (hereinafter PSA) with respect to interest rates and breadth of services. Some of the services that the proposed savings and loan association plans are a drive-in teller window, a night depository, safety deposit boxes, a walk-up window, extended hours on week days (from 9:00 a.m. to 6:00 p.m.), evening hours on Fridays (from 9:00 a.m. to 7:00 pm.), Saturday hours (from 9:00 a.m. to Noon), and safekeeping facilities. Most of the existing savings and loan associations in the PSA do not offer extended hours, drive-in teller windows or safekeeping facilities. The proposed PSA includes the populated portion of the city of Naples and segments of unincorporated Collier County to the north and east of the city. It is bounded on the north by Pine Ridge Road, 4.7 miles away; on the east by County Barn Road, 4.2 miles away; on the south by Gordon Pass and Holly Avenue, 3 miles away; and on the west by the Gulf of Mexico, .7 miles away. The PSA is roughly rectangular except for an indentation in the northeastern corner. Twelve savings and loan association offices now operate within the PSA. One savings and loan association has headquarters within the PSA. Four of the eleven branch offices in the PSA are limited facilities. The Protestant's main office is located 0.2 miles southeast of the premises Applicant has leased. Protestant has filed an application to relocate its main office to a site in unincorporated Collier County, 4.8 miles north of Applicant's proposed site and to make its present main office a branch office. One branch office is now located 0.2 miles southwest of the proposed site; three are between 1.3 miles and 2.0 miles from it; and one is 8.7 miles to the north. Except for the Protestant, no savings and loan association now operating in Collier County has headquarters in Collier County. There are 14 commercial bank offices, including five main banking offices and nine branch offices in operation within the PSA. Three of the five main bank offices are located within 0.3 miles of the proposed site; one is 2.6 miles away and another is 7.5 miles away. Of the branch offices, one is located one mile southwest of the proposed site; three are 1.3 to 2.0 miles from it; four are between 2.2 and 4.0 miles from it and one is 8 miles away. In addition, there are three approved but unopened branch offices which are to be located between 3.1 and 5.3 miles-from Applicant's proposed site. The main office of Security Trust of Naples, a non-deposit trust company, is located 0.3 miles southwest of Applicant's proposed site. Applicant proposed five million dollars as the initial capitalization for the savings and loan association. The capital accounts would initially consist of $1,500,000 common stock and $3,500,000 paid-in surplus. Eighteen percent of the stock of the proposed savings and loan association has been subscribed to by nine organizers. The remaining 82 percent has been subscribed to by more-than 400 members of the general public, mostly from the Collier County area. Applicant has estimated the permanent 1979 population of the PSA at 47,000. This represents an average annual rate of growth of 11.6 percent from the PSA's 1970 population of 23,000. Applicant estimates the County's 1979 permanent population at 77,900, the seasonal population of the PSA at between 12,000 and 14,000, and the seasonal County population at between 15,000 and 20,000. The Applicant estimated the combined permanent and seasonal populations of the County at between 92,900 and 97,900 and that of the PSA at between 59,000 and 61,000. The Applicant projects for the 1982 permanent population of the PSA a figure of 53,000, representing an average annual growth rate of 4.3 percent from 1979. According to data compiled by the Bureau of Economic and Business Research, Division of Population Studies, at the University of Florida, the population of Collier County on April 1, 1970, was 38,040; on July 1, 1979, 64,761; on July 1, 1977, 68,900; on July 1, 1978, 74,572. According to the same source, the population of Naples on April 1, 1970, was 12,042; on July 1, 1976, 17,425; on July 1, 1977, 17,437; and on July 1, 1978, 17,462. The population of unincorporated areas of Collier County, including Everglade City, according to the same source, was 25,998, on April 1, 1970; 47,336, on July, 1976; 51,463 on July 1, 1977; and on July 1, 1978, The population of Collier County grew at an average annual rate of approximately 11.7 percent between 1970 and 1976. Between 1976 and 1977, the County's population grew at a slower rate, viz., approximately 6.4 percent. The rate of growth increased to approximately 8.2 percent between 1977 and 1978. Between 1970 and 1976, the population of Naples grew at an annual average rate of approximately 7.5 percent. During the years 1976, 1977 and 1978, the population of Naples did not increase significantly. The population of the unincorporated areas of Collier County grew at an average annual rate of approximately 13.7 percent between 1970 and 1976, at a rate of approximately 8.7 percent between 1976 and 1977, and at a rate of approximately 11.0 percent between 1977 and 1978. Almost all (94.14 percent) of the population growth in the County between 1970 and 1978, was the result of net migration. Between 1970 and 1978, the proportion of Collier County's population older than 65 years of age increased from 14.0 percent in 1970, to approximately 17.5 percent in 1978. Recent unemployment data for Collier County show an unemployment rate of 10.2 percent for July, 1979 (revised), and 9.8 percent for August, 1979 (preliminary), in the County as compared to the state averages of 6.6 and 6.1 percent for the same months, respectively. The per capita personal income for Collier County was $6,905 in 1976, and $7,663 in 1977. The 11.0 percent increase from 1976 to 1977, is higher than the 9.8 percent increase in the state average for the same period. Collier County's averages were above the state averages of $6,101 in 1976, and $6,697 in 1977. The proposed board of directors would be composed of nine members, at least seven of whom are full-time Florida residents and at least eight of whom are United States citizens. Robert E. Talley, the proposed president and chief executive officer, has had extensive commercial banking experience. From 1964 to 1972, he served as vice-president and loan officer for the Manatee National Bank; from 1972 through 1973, he was senior vice-president of the National Bank of St. Petersburg; from 1973 through 1977, he was president, chief executive officer, and a director of the Community Bank of Homestead; and from 1977 to 1978, he was executive vice-president and branch manager of the National Bank of Collier County. Proposed director, Roland Erickson, served as president and director of the Guaranty Bank and Trust Company, Worcester, Massachusetts, from 1947 to 1964. Proposed director, Harold S. Smith, served as a director and member of the executive committee of the Bank of Everglades from 1948 through 1951. Proposed director, Hendry P. Albrecht, is president of Gale-Realty, Inc., which is involved in investments, including rental property. Although most of the proposed board of directors appear to be successful businessmen, none of them has had direct savings and loan association experience. On June 30, 1975, commercial banks in Collier County had total deposits of $245,086,000 of which $152,499,000 were time and savings deposits. On June 30, 1976, commercial banks in Collier County had total deposits of $301,664,000, of which $193,488,000 were time and savings deposits. On June 30, 1978, commercial banks in Collier County had total deposits of $369,928,000 of which $224,982,000 were time and savings deposits. On June 30, 1979, commercial banks in Collier County had total deposits of $423,365,000 of which $266,668,000 were time and savings deposits. In March of 1979, Protestant held more than three quarters of all moneys on deposit with savings and loan associations in Collier County. At that time, $141,996,000 was on deposit at the Protestant's home office; $10,890,000 at its Tamiami North branch, even though this office first opened in September of 1977; $26,989,000 at its Lely branch; $4,728,000 at its Tamiami South satellite; and $5,537,000 at its Golden Gate facility. In March of 1979, Coast Federal's Tamiami North branch held $56,667,000. On deposit at First City Federal's Tamiami North branch was $6,855,000 in March of 1979. At the same time, Gulf Federal's Fifth Avenue branch had deposits of $7,018,000. In March of 1979, First Federal of Fort Myers had $10,256,000 on deposit at its Tamiami North branch and $235,000 at its Olde Naples facility, which opened in February of 1979. Time and savings deposits in savings and loan associations and commercial banks in Collier County amounted to $552,839,000 in 1978, up 55.62 percent from 1976. At the time of the hearing, there was commercial activity in Naples and residential development, particularly to the north of the PSA. Some thirteen financial institutions were in operation in the western part of Collier County, north of Applicant's proposed site, at the time of the hearing. Applicant has projected savings deposits at the end of the first, second and third years of operation to be $10,000,000, $15,000,000 and $20,000,000, respectively. Applicant also presented a pro forma budget which projected net profit for the first three years to be $191,700, $256,000 and $319,100, respectively. The Deputy Comptroller, Gerri Raines Dolan, and the Director of the Division of Banking, Ryland Terry Rigsby, as advisory staff members to the Comptroller, reviewed the application and the Department's entire file relating to the application. They assisted and concurred with the Comptroller in the ultimate determination of the application.
Conclusions As set forth in Rule 3C-20.45, Florida Administrative Code, when an application for authority to organize and operate a new state savings and loan association is filed pursuant to Chapter 3C-9, Florida Administrative Code, it is the applicant's responsibility to prove that the statutory criteria warranting the grant of authority are met. The Department shall conduct an investigation pursuant to Subsection 665.031(3), Florida Statutes, which was done in this case, and then approve or disapprove the application in its discretion. This discretion is neither absolute nor unqualified, but is instead conditioned by a consideration of the criteria listed in Subsection 655.031(4), Florida Statutes, wherein it is provided that: The Department shall approve the application upon such terms and conditions as it determines necessary to protect the public interest or disapprove the application at its discretion, but it shall not approve such application, unless in its opinion: Public convenience and advantage will be promoted by the establishment of the proposed thrift institution; Local conditions assure reasonable promise of successful operation of the proposed thrift institution and those thrift institutions already established in the community; The proposed officers and directors have good character, sufficient financial standing, and adequate experience and responsibility to assure reasonable promise of successful operation of the thrift institution; and The proposed savings account capital and organization expense fund or capital stock subscriptions comply with the requirements of this chapter. and Subsection 665.051(1), Florida Statutes, wherein it is provided that, The name of every association shall include either the words "savings association" or "savings and loan association." If in the opinion of the Department, any one of the above criteria has not been met and cannot be remedied by the applicant, it cannot approve the application. An applicant can, however, take corrective action in most circumstances to meet the criteria set forth in Subsections 665.031(4)(c), or (d), and 665.051(1), Florida Statutes, if any of these are found to be lacking. For example, if all other statutory criteria are met, the applicant may increase capital, or make certain changes in the board of directors, or change the name, or alter the provisions for suitable quarters, because these factors, at least to some degree, are within its control. It is the Department's policy to allow applicants to make certain changes to meet these criteria if all other criteria are met; to do otherwise would be to subject applicants to unnecessary red tape. However, it is the Department's opinion that there is little, if anything, that an applicant can do to alter its ability to meet the criteria set forth in Subsections 665.031(4)(a) and (b), Florida Statutes, since applicants CANNOT readily change the economic and demographic characteristics of an area. Therefore, if either one or both of these criteria are not met, the Department cannot approve the application. For purposes of applications for authority to organize and operate a new state savings and loan association, Rule 3C-20.45(1), Florida Administrative Code, defines PSA as the "smallest area from which the proposed association expects to draw approximately seventy-five percent of its deposits. It should be drawn around a natural customer base, should not be unrealistically delineated to exclude competing financial institutions or to include areas of concentrated population." Based upon, traffic patterns, natural and manmade geographic barriers and the location of other existing offices of financial institutions in the area, the Department concludes that the Applicant's PSA is realistically delineated. It is the opinion and conclusion of the Department that public convenience and advantage will be promoted by the establishment of the proposed savings and loan association. Therefore, the criterion in Subsection 665.031(4)(a), Florida Statutes, IS met. As set forth in Rule 3C-20.45(2)(a), Florida Administrative Code, the location and services offered by existing savings and loan association offices in a service area are indicative of the competitive climate of the market and should be considered. Other financial institutions such as banks and credit unions may be considered competing institutions to the extent their services parallel those of a new savings and loan association. Also, the traffic patterns in the area, as well as the general economic and demographic characteristics of the area, must be considered in evaluating this statutory criterion. Because it is recognized that the establishment of a new savings and loan association ANYWHERE would promote the convenience and advantage for at least a few people, SUBSTANTIAL convenience and advantage for a SIGNIFICANT number of people must be shown; otherwise, a new savings and loan association could be justified for every street corner in the state. Clearly, such a result was not the legislative intent in regulating entry into the savings and loan association industry, nor is it in the public interest. Based upon the facts set forth above, the Department has determined that the establishment of the proposed savings and loan association will substantially increase convenience to a significant number of residents of the PSA. This is particularly true in view of the significant growth of the various financial institutions in the area since 1976, as well as the past and projected population growth in the PSA. The Protestant, which is the only other savings and loan association with a main office in Collier County, held more than seventy-five percent of all savings and loan deposits in the County in March, 1979. Consequently, the proposed institution will served as a needed competitive alternative. The site is easily accessible and traffic patterns are favorable. Furthermore, the Applicant intends to offer a variety of new services not generally offered by other financial institutions within the PSA. Therefore, the criterion of public convenience and advantage is met. It is the opinion and conclusion of the Department that local conditions do assure reasonable promise of successful operation of the proposed thrift institution and those thrift institutions already established in the community. Therefore, the criterion in Subsection 665.031(4)(b), Florida Statutes, IS met. As set forth in Rule 3C-20.45(2)(b), Florida Administrative Code, current economic conditions and, to a lesser extent, the growth potential of the area in which the new savings and loan association proposes to locate are important considerations in determining the association's probable success. Essential to the concept of thrift institution opportunity is that there does and will exist a significant volume of business for which the new savings and loan association can realistically compete. The growth rate, size, financial strength and operating characteristics of savings and loan associations and other financial institutions in the service area are also important indicators of economic conditions and potential business for a new savings and loan association. It is noted that the statutory standards require that " . . . local conditions ASSURE reasonable PROMISE of successful operation of the proposed thrift institution and those thrift institutions already established in the community . . ." (E.S.), NOT merely that local conditions INDICATE a POSSIBILITY of such success. Thrift institutions involve a public trust. Unlike private enterprise establishments generally, a savings and loan association operates on the public's capital and therefore, the Legislature has vested in the Comptroller the responsibility to protect that public interest. Furthermore, the failure of a savings and loan association, as opposed to private enterprise establishments generally, may have an unsettling effect on the overall economic welfare of the community and that is why the Florida Legislature and the United States Congress have imposed stringent requirements for the industry. This Department is responsible for enforcing this legislative standard. Public interest is best served by having a thrift institution system whereby new competition is encouraged where appropriate, yet, at the same time, ensuring that the financial resources of the residents in the community are stable and safe. That was the obvious intent of the Legislature in regulating entry into the thrift institution industry. The Applicant's estimated 1979 PSA population of 47,000 and its projections for the near future seem more than reasonable in view of the latest official estimates by the University of Florida. The population base is healthy, a balanced mixture of residents, local businessmen and commuters, with a steady recent history of growth and projections for significant future growth. Although there are other savings and loan offices already existing in or near the PSA, the Department has concluded that the total savings potential within the PSA will readily support a new institution. The Department further concludes that the extensive deposit and loan growth of the existing financial institutions within the PSA justifies the establishment of another competitive alternative. The increasing population, the high per capita income, and the business and residential mix of the PSA point to an expanding and stimulated economy in the PSA for the present as well as the near future. Clearly, these factors are conducive to assuring the reasonable promise of success for the proposed savings and loan association and for those thrift institutions already established in the community. It is the opinion and conclusion of the Department that the proposed directors, as a group, have good character, sufficient financial standing and responsibility, but do not have sufficient experience in the savings and loan field to assure reasonable promise of successful operation of the proposed association. Therefore, one of the criteria of Subsection 665.031(4)(c), Florida Statutes, IS NOT met. As set forth in Rule 3C-20.45(2)(c), Florida Administrative Code, the organizers, proposed directors and officers shall have reputations evidencing honesty and integrity. They shall have employment and business histories demonstrating their responsibility in financial affairs. At least one member of a proposed board of directors, other than the chief managing officer, shall have experience in the savings and loan field or in a business directly related thereto such as mortgage banking, real estate finance and commercial banking where real property lending has constituted an integral part of such banking experience. The organizers, proposed director's and officers shall meet the requirements of Sections 665.131 and 665.703, Florida Statutes, as applicable. A majority of the organizers and directors of a proposed thrift institution shall be, whenever possible, from the local community and shall represent a diversification of occupation and experience commensurate with the position for which proposed. Members of the initial management group, which includes directors and officers, shall require prior approval of the Department. Changes of directors or chief managing officer during the first year of operation shall also require prior approval of the Department. While it is not necessary that the names of proposed officers he submitted with an application to organize a new savings and loan association, the chief managing officer and operations officer must be named and their names submitted for departmental approval at least sixty (60) days prior to the association' opening. In addition, interlocking directorships involving existing financial institutions competitively near the proposed site of a new institution are discouraged. Such interlocking directorships could possibly restrict competition and create fiduciary problems. Although the proposed directors have, as a group, good character, sufficient financial standing and responsibility, none of the proposed directors has any direct experience in the savings and loan field. Only Robert E. Talley, as a proposed director, has demonstrated that he has the requisite related business experience by virtue of his background in commercial banking, real estate, and mortgage brokerage. Because the selection of directors for a proposed new savings and loan association is generally within an applicant's control, the Department wilt, in this case, allow the Applicant to remedy the above inadequacy in the proposed board of directors by the addition of one director with sufficient experience in the savings and loan field or in a business directly related thereto or by further demonstrating that one of the proposed board members already has the requisite related business experience. While the department has noted that Robert E. Talley has been proposed as the chief managing officer, the Department does not approve or disapprove an applicant's proposed chief managing officer until the association makes an application for insurance of its accounts. It is the opinion and conclusion of the Department that the proposed savings account capital and the organization expense fund or capital stock subscriptions comply with the requirements of Chapter 665, Florida Statutes. Therefore, the criteria of Subsection 665.031(4)(d), ARE met. As set forth in Rule 3C-20.45(2)(d), Florida Administrative Code, capital should be adequate to enable the new savings and loan association to provide the necessary services of promoting thrift and home financing to meet the needs of prospective customers. Capital should be sufficient to purchase, build or lease a suitable permanent facility complete with equipment. Generally, the initial capital (withdrawable savings for a mutual association applicant and total stock and paid-in surplus for a stock association applicant) for a new savings and loan association should not be less than $1.5 million in non- metropolitan areas and $2.0 million in metropolitan areas. To encourage community support, a wide distribution of stock ownership is desirable. A majority of the stock should be issued wherever possible to local residents of the community, persons with substantial business interests in the community, or others who may reasonably be expected to utilize the services of the association. Subscribers to five (5) percent or more of the stock may not finance more than fifty (50) percent of the purchase price if the extension of credit is predicated in any manner on the stock of the new association, whether or not such stock is pledged. Generally, all proposed stock for-a stock savings and loan association shall be subscribed to at the time the application is submitted to the Department. The organizers may initially subscribe to all proposed stock, but should disclose the anticipated amount of individual stock to be retained. It is the opinion and conclusion of the Department that the name, Marine Savings and Loan Association, meets the criterion of Subsection 665.051(1), Florida Statutes, and is not so similar as to cause confusion with the name of an existing financial institution. As set forth in Rule 3C-20.45(4), Florida Administrative Code, the Department will consider the possibility that a name similar to that of another financial institution may cause confusion in the minds of the public or be misleading and may deny the use of such name, with the exception of names specifically authorized under Subsection 665.051(1), Florida Statutes. The Department concludes that the name Maring Savings and Loan Association is not so similar as to cause confusion with the name of an existing financial institution. It is the opinion and conclusion of the Department that provision has been made for suitable quarters. Therefore, the provisions of Rule 3C- 20.45(6)(d), Florida Administrative Code, ARE met. As set forth in Rule 3C-20.45(6)(d), should temporary quarters be contemplated by an applicant until a permanent facility is completed, permission to open in temporary quarters may be granted, generally not to exceed one year. The permanent structure of a new savings and loan association should generally contain a minimum of 5,000 square feet unless the applicant satisfactorily shows that smaller quarters are justified due to the performance of certain auxiliary services off-premises. It shall be of sufficient size to handle the projected business for a reasonable period of time. The facility shall be of a nature to warrant customer confidence in the association's security, stability and permanence. Other pertinent factors include availability of adequate parking, an adequate drive-in facility if such is contemplated and possibilities for expansion. The Applicant presently plans permanent quarters in a building containing 4,285 square feet, which will have adequate parking and drive-in facilities. No temporary quarters are contemplated. Since adequate provision has been made for expansion up to 6,700 square feet, the Department considers that provision has been made for suitable quarters. It is the opinion and conclusion of the Department that the proposed acquisition of the association's proposed site has been fully disclosed and does not constitute an insider transaction. Therefore, the provisions of Rule 3C- 20.45(3) ARE met. Rule 3C-20.45(3), Florida Administrative Code, provides that any financial arrangement or transaction involving the organization of a proposed association and its organizers, directors, officers and shareholders owning five (5) percent or more of the stock, or their relatives, their associates or interests should ordinarily be avoided. Should there be transactions of this nature, they must be fair and reasonable, fully disclosed and comparable to similar arrangements which could have been made with unrelated parties. It is the opinion and conclusion of the Department that the provisions of Rule 3C-20.45(6)(e), Florida Administrative Code, have NOT been met. Pursuant to Rule 3C-20.45(6)(e), Florida Administrative Code, appraisals of land and improvements thereon shall be made by an independent qualified appraiser and be dated no earlier than six months from the filing date of the application. In those instances where the application involves a lease arrangement, the appraisal should be directed to the comparability of the proposed lease with other leasing arrangements for similar business property. The application involves a lease arrangement and, although the Applicant has submitted an acceptable appraisal as to the fair market value of the leased premises, it has not submitted an appraisal directed to the comparability of the proposed lease with other leasing arrangements for similar business property. However, since this is a criterion that is within the control of the Applicant, the Department may approve the application upon the condition that this deficiency is remedied.
The Issue The issues posed for decision herein are whether or not the Respondent, Loretta Woloszyk, failed to account for or deliver a security deposit received by her, in violation of Section 475.25(1)(c), Florida Statutes, and whether or not Respondent derivatively violated Subsection 475.25(1)(a), Florida Statutes, in that she is guilty of a breach of trust in a business transaction and, therefore, violated Subsection 475.25(1)(a), Florida Statutes.
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, the following relevant facts are found. Loretta Woloszyk, Respondent herein, is presently registered with the Board of Real Estate as a broker/salesperson. On or about April 15, 1977, Respondent Woloszyk entered into a deposit receipt contract executed with John F. and Jeannine M. Chrest as purchasers of a house owned by Respondent Woloszyk located at 210 North G Street, Lake Worth, Florida. Pursuant to the terms of said deposit receipt contract, John E. Knowles signed as broker for receipt of a $300 cash deposit from the Chrests as purchasers. On or about April 22, 1977, the $300 deposit was placed in the escrow account of Sunshine Estates, Inc., the corporate broker by which the Respondent was employed. The deposit receipt contract was contingent upon the buyer qualifying for a Veterans Administration (VA) mortgage loan in the amount of $26,900. The relevant portion of the contract provided as follows: VA Appraisal: It is expressly agreed that, notwithstanding any other provisions of this contract, the purchaser shall not incur any penalty by forfeiture of earnest money or otherwise be obligated to complete the purchase of the property described herein, if the contract price or cost exceeds the reasonable value of the property established by the Veterans Administration. The purchaser shall, however, have the privilege and option of proceeding with the consummation of this contract without regard to the amount of the reasonable value established by the Veterans Administration. By letter dated May 25, 1977, the Chrests were notified that the subject property was appraised at $18,750, and thus was not acceptable under the minimum property appraisal standards of the Veterans Administration. With this notification, John Chrest went to the offices of Sunshine Estates, Inc., and demanded a return of his $300 earnest money deposit. John E. Knowles, as broker in receipt of the Chrests' $300 deposit, returned the $300 deposit check to Respondent Woloszyk, who deducted $200 from the Chrests' $300 deposit based on a separate rental transaction with the Chrests on the same subject property. During the hearing, John Chrest testified that he contacted Respondent for purchase of her residence situated in Lake Worth Farms. Mr. Chrest agreed during cross-examination that he initially contacted Respondent to "buy or rent Respondent's residence". He also testified that upon receipt of the VA appraisal at an amount below the agreed upon purchase price of $26,900, he agreed to pay to Respondent rent in the amount of $150 plus a $50 security deposit, which amount was deducted from the Chrests' security deposit. The FHA-VA deposit receipt contract contains a special condition entered by and between the parties (Woloszyk and the Chrests) indicating that "Buyer will pay rental of $225 per month until closing, beginning on or before May 1, 1977. Buyer will honor rental agreement for Kenneth Johnson, tenant, from April 1, 1977, to March 31, 1978, or $80 per month rent." Based thereon, and on John F. Chrest' s admission that be agreed to the rental fee which was deducted from his deposit received by Respondent Woloszyk, the administrative charges alleged are without basis. I shall so recommend.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is hereby, RECOMMEND: That the Administrative Complaint filed herein be DISMISSED in its entirety. RECOMMEND this 6th day of August, 1979, in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 6th day of August, 1979 COPIES FURNISHED: John Namey, Esquire Department of Professional Regulation Board of Real Estate Post Office Box 1900 Orlando, Florida 32802 Ms. Loretta Woloszyk 733 Husiingbird Way, Apt. #3 North Palm Beach, Florida 33408
Findings Of Fact Respondent was issued Mortgage Broker License No. 3082 on September 3, 1974 by Petitioner. Respondent conducted certain transactions under its Mortgage Broker License during the period from September, 1973 until April, 1974. Respondent found client investors who had funds which they wished to invest in mortgages which would pay a greater return in interest than the average land mortgage. The transactions involved the purchase of a promissory note from a land development corporation secured by a mortgage deed on land ostensibly owned by the developer, in which the latter reserved the right and was authorized to convey the premises to a purchaser under an installment land contract subject to the lien of the mortgage. The deed further provided that the developer would deliver to a bank as an escrow agent a copy of any such agreement for deed and a quitclaim deed which would be held in escrow unless a default was established under the mortgage deed. What the investor would receive in such cases would be the developer's assignment of an agreement for deed collateralized by the mortgage deed. The issuance of these high interest notes were for the purpose of enabling the development company to make certain improvements on the land which they were obligated to do under sales contracts. In the transactions in question, Respondent dealt through Financial Resources Corporation of Ft. Lauderdale, Florida to which he remitted the investors funds, less an amount retained for fees or commissions. The land developer/borrower would then issue the note and mortgage in the face amount of the total investment made by the investor. The detailed procedure was that when an investor inquired concerning such mortgages, Respondent would determine from Financial Resources Corporation if any were available. It was the practice of Respondent's President then to look at the land development, determine if, in fact, the land was in development and had streets and the like, and to read pertinent documents concerning the development. He would then proceed to accept the full sum of the investment from the investor pursuant to an agreement by which the investor, in consideration of the stated sum, would authorize Respondent to use its best efforts to secure collateralized promissory notes at a minimum percentage of interest on the declining balance with principal and interest payable monthly if held to maturity. Respondent would then deposit the investor's check, usually on the same day as received, and then in several days send a notice to Financial Resources Corporation authorizing it to prepare and execute a self-amortizing monthly principal and interest promissory note with quitclaim deed in the amount of the investment, together with a check representing the proceeds of the Investment less the Respondent's fee or commission, and a sum for intangible tax on the transaction. Financial would thereafter return to Respondent a copy of the note and mortgage in exchange for the funds remitted. The recorded mortgages would be sent to Respondent within a month or so thereafter. Respondent had no agreements in writing with the land developer, nor with Financial Resources Corporation. Respondent claimed that its fees for services were set by Financial Resources Corporation which usually amounted to about 12 percent of the face amount of the investment, but which was sometimes more and frequently less than that authorized under the applicable statutes and regulations. Respondent did not maintain an escrow bank account and all funds received from investors were deposited into the corporate bank account of the firm. Respondent's agreements with investors set no specific term or period of time in which the secured promissory notes were to be obtained although its president would customarily tell investors that it would take some time for the transaction to be consummated, and that they could not expect to receive the recorded mortgages right away (testimony of Mr. Montague, Petitioner's Exhibits 2-10). Respondent discontinued transactions as described above in April, 1974 because he was dissatisfied with the business. He had been informed that certain lands under some of the mortgages had not been sold until after the mortgage had been executed and that this was in violation of State law. In the fall of that year, he received a memorandum from the State Comptroller on the subject of escrow accounts, dated October 11, 1974, which warned mortgage brokers in the state concerning the practice of remitting investors' funds to land developers in anticipation of receiving a recorded mortgage and note (testimony of Mr. Montague, Respondent's Exhibit 9). In 1975,a financial examiner from Petitioner's office was sent to the office of Respondent to examine his books and records. Pursuant to that examination, it was determined that Respondent had committed various violations of Chapter 494, F.S. on certain transactions. The following findings of fact are made with respect to the transactions in question: Allegation: That Respondent took and received deposits of money from Robert E. Creighton, Hazel R. Hardesty, J. Wilfred Caron, Rose A. Hoadley, Margaret A. Gregory and Willard A. Kotthaus, in the regular course of business, and failed to immediately place such said funds in an escrow or trust account as required by Section 494.05(1) , F.S. As heretofore stated, the Respondent did not maintain an escrow trust account with respect to any of the above-stated transactions. The above- mentioned individuals had authorized Respondent to disburse the funds immediately upon receipt (testimony of Mr. Montague, Supplemented by Exhibits 3- 8). Allegation: Respondent failed to maintain adequate records in violation of Section 494.06(3), F.S., in that its files contained no written agreements on transactions with Della W. Shaw, Lantana Sheet Metal and A.C. Inc., and another transaction with Lantana Sheet Metal. The agreement between Della Shaw and Respondent, although not present in Respondent's file at the time of examination of its records by Petitioner's representative, had been executed on October 15, 1975, and presently is contained in the records of the Respondent. It had been taken out temporarily by one of Respondent's associates who also had Della Shaw as a client. Respondent had entered into two transactions with the trustee of the pension fund and profit sharing plan of Lantana Sheet Metal, one for ten thousand dollars from the pension fund and one for three thousand dollars from the profit sharing plan. At the time of these investments there were written contracts which were executed by the parties. The books and records of both the pension fund and the profit sharing fund were maintained at Respondent's office by a firm which administered both plans. The agreements pertaining to the Lantana transactions were requested and withdrawn from Respondent's files by the trustee of the Lantana funds. Consequently, they did not appear in the records of the corporation at the time of examination by Petitioner's representative (Petitioner's Exhibits 2 and 4; Respondent's Exhibit 10). Allegation: Respondent failed on numerous loan purchase agreements to establish the term for which the agreement was to remain in force before the return of the deposit for nonper- formance could be required by the investor, in violation of Chapter 3-3.06, F.A.C. The transactions in question did not involve applications for mortgage loan, but agreements to purchase secured promissory notes. Respondent's clients were investors/purchasers, not borrowers (testimony of Mr. Montague; Petitioner's Exh. 2-10). Allegation: Respondent charged and accepted fees or commissions in excess of the maximum allowable in violation of Section 494.08(4), F.S., and Chapter 3-3.08(3) and (4), F.A.C., on trans- actions involving Rosa Eichelberger, overcharge of $10.90, Lantana Sheet Metal, overcharge of $62.60; Lantana Sheet Metal, overcharge of $10.91; Rose A. Hoadley, overcharge of $9.10; and Margaret A. Gregory, overcharge of $9.10.
