Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, as well as the demeanor of the witnesses, the following relevant facts are found: At all times pertinent to this proceeding, respondent T.A.S. Auto Sales held independent motor vehicle license #6VI-2652, with a licensed place of business at 117 1/2 Central Avenue in Brandon, Florida. The owner of T.A.S. Auto Sales is Donald Hunt. On May 1, 1985, the Division of Motor Vehicles issued license number 5VI-003620A to T.A.S. Auto Sales for a supplemental location at 312 East Brandon Boulevard in Brandon, Florida. The expiration date on this license was April 30, 1986. Donald Hunt leased the property at 312 East Brand on Boulevard and operated a retail car sales business there until approximately mid-June of 1985. He then decided to sell the business to Clarence W. Jenkins, and entered into an Assignment of Lease on July 1, 1985. According to Mr. Hunt, it was his intent to allow Mr. Jenkins to operate under the supplemental license of T.A.S. Auto Sales while Mr. Jenkins, doing business as Brandon Auto Brokers, obtained his own Florida Dealers License. However, according to Mr. Hunt, said arrangement was to terminate no later than July 28, 1985. A letter setting forth this agreement was received into evidence as respondent's Exhibit 4. From July 1, 1985, through July 28, 1985, Donald Hunt did supervise all title work performed through Brandon Auto Brokers and/or Mr. Jenkins. During July and early August, 1985, Brandon Auto Brokers secured a County occupational license, a Department of Revenue Certificate of Registration to collect sales and use taxes, a reassignment of telephone numbers, an insurance binder, a surety bond and membership in the Florida Independent Automobile Dealers Association. Signage indicating either Brandon Auto Brokers or "under new management" was also placed on the premises, but the date upon which such signage was erected was not established. Lois Jarvis, an inspector with the Division of Motor Vehicles, testified that she spoke on the telephone with Mr. Hunt and Mr. Jenkins on August 9, 1985, and thereafter mailed to Mr. Jenkins an application form for a dealer's license. It was Inspector Jarvis' understanding that Mr. Hunt was allowing Jenkins to operate under Mr. Hunt's supplemental license until such time as Jenkins obtained his own license. On September 4, 1985, she visited the supplemental lot to check on Mr. Jenkins' incomplete application. Her next visit with either Mr. Hunt or Mr. Jenkins occurred on September 23, 1985. At that time, while at Mr. Hunt's lot on Central Avenue, Mr. Hunt informed her that he had nothing more to do with the supplemental lot on Brand on Boulevard, and gave Ms. Jarvis his license for that location. Inspector Jarvis then went over to the supplemental lot and issued a Notice of Violation to Mr. Jenkins/Brandon Auto Brokers for offering, displaying for sale and selling motor vehicles without a license. On September 24, 1985, Ms. Jarvis requested the Department to cancel dealer license 5VI-3620A on the ground that "dealer closed lot and surrendered license." Mrs. Jarvis testified that she did not visit either the supplemental lot or the main lot in July or August of 1985. Her work records for July and August do not reflect a visit to either location. Mr. Hunt, and several witnesses testifying in respondent's behalf, testified that he told Inspector Jarvis in early July that he would have nothing more to do with the supplemental lot beyond July 28, 1985. It was their testimony that Mrs. Jarvis' response was that "there was no way Mr. Jenkins could be issued a license by July 28th, to which Mr. Hunt responded, "that's not my problem." Mr. Hunt admits that he did not specifically request Mrs. Jarvis to cancel his license for the supplemental lot as of July 28th, and that he did not deliver that license to Mrs. Jarvis until September 23, 1985. Based upon the demeanor and possible motives of the witnesses, as well as the documentary evidence received into evidence, it is concluded that Inspector Jarvis did not visit either the supplemental lot or the main lot for which T.A.S. held licenses in June, July or August of 1985. It is further found that Inspector Jarvis did not become aware that Mr. Hunt intended to cease all relationships with the supplemental lot until he delivered the license for those premises to her on September 23, 1985. By statute, an independent motor vehicle license period is from May 1 to April 30 of the following year. Licenses expire annually, "unless revoked or suspended prior to that date." Section 320.27(4), Florida Statutes. The Department has no rule, regulation, policy or established procedure for a licensee to surrender or cancel a license prior to the expiration date. On July 30, 1985, Bruce Reich purchased a 1980 Chevrolet Camero from the Jenkins at the supplemental lot. His checks were made payable to Brandon Auto Brokers. He did not think he was buying a car from T.A.S. or from Don Hunt. On or about September 30, 1985, Mr. Reich filed a Complaint Affidavit against Brandon Auto Brokers regarding this transaction. As of the date of the hearing, Mr. Reich had still not received title to the vehicle he purchased. On August 26, 1985, William S. Ryder purchased a 1981 Van from the Jenkins at the supplemental lot. On or about October 2, 1985, Mr. Ryder filed a Complaint Affidavit against T.A.S. Auto Sales on the ground that he had not received a clear title or plates for this vehicle. He had previously attempted to locate Mr. Jenkins, but was unable to find him.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the Administrative Complaint filed against the respondent be DISMISSED. Respectfully submitted and entered this 31st day of July, 1987, in Tallahassee, Florida. DIANE D. TREMOR 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 31st day of July, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-0471 The proposed findings of fact submitted by each of the parties have been fully considered and have been accepted and/or incorporated in this Recommended Order, except as noted below: Petitioner 8. Rejected; the evidence demonstrates that respondent intended that its responsibilities with regard to the supplemental lot would terminate on July 28, 1985. Respondent 1 - 3. Rejected in part as improper findings of fact. 4 - 9A. Rejected; not supported by competent, substantial evidence. 9H. Accepted, except that the evidence demonstrates that the Ryder complaint named T.A.S. Auto Sales as the dealer. COPIES FURNISHED: Michael J. Alderman, Esquire Assistant General Counsel Neil Kirkman Building Room A-432 Tallahassee, Florida 32399-0504 Michael N. Kavouklis, Esquire 419 West Platt Street Tampa, Florida 33606 Leonard R. Mellon, Executive Director Department of Highway Safety and Motor Vehicles Neil Kirkman Building Tallahassee, Florida 32399-0500
The Issue The issues in this case are whether Respondents violated Sections 517.07, 517.12, 517.301(1)(a)1-3 and (c), and 517.311(1), Florida Statutes (1995): by selling unregistered securities; by selling securities without being registered as a dealer; and by employing a scheme to defraud, obtaining money by untrue statements of material fact, engaging in transactions which operated as a fraud upon persons, and knowingly and willfully making false and fraudulent statements in connection with sales of commercial notes to Florida residents; and, if so, what, if any, penalty should be imposed against Respondents. (All references to chapters and sections are to Florida Statutes (1995) unless otherwise stated.)
Findings Of Fact Petitioner is the state agency responsible for regulating the sale of securities in Florida in accordance with the provisions of Chapter 517. Respondent, First American Capital Trust, Inc. ("FACT"), is a Florida corporation with its principal place of business at 2650 McCormick Drive, Suite 185, Clearwater, Florida 34619. Respondent, David A. Johnston ("Johnston"), is a director and vice-president and runs the daily operations of FACT. FACT is a specialized consumer finance company engaged in the business of acquiring and servicing installment contracts for the purchase of used cars and light trucks ("cars") by individuals. The individuals who purchase the cars have less than prime credit and have limited access to traditional financing sources. FACT facilitates the extension of credit to a variety of people, including lower income and minority individuals for whom a car is frequently essential to obtain or maintain employment. FACT purchases discounted car loans from used car dealerships in pools of not less than $25,000. The dealerships discount the car loans below their face value in consideration for a lump sum payment. FACT funds the purchase of the car loans by selling commercial notes to investors. The purchase of car loans and the sale of commercial notes to fund the purchases is a genus of arbitrage. The arbitrage, and the major element of gross profit in the business conducted by FACT, is the difference between the interest earned on car loan portfolios and the interest paid by FACT on notes sold to investors. The interest yield on car loan portfolios ranges from 18 to 22 percent. FACT pays 9.75 percent interest on the notes it sells to investors in lump sum at the time of maturity. FACT is not a passive investment company that limits its business activity to investment arbitrage. FACT engages in the active conduct of a trade or business through business activities that include loan servicing, investigation of dealerships and the suitability of investors, and regulatory compliance. FACT also incurs expenses in addition to the interest paid on FACT notes, including payroll and other operating expenses. These other expenses, as well as the interest paid on FACT notes, are among the factors that enter into the computation of profits. The Administrative Complaint (the "complaint"), in relevant part, alleges that the FACT notes sold to investors (the "FACT notes") are securities within the meaning of Section 517.021(17). The complaint then charges Respondents with three statutory violations. The first alleged violation is that Respondents sell unregistered securities to investors in violation of Section 517.07. The second alleged violation is that FACT sells securities to investors without being registered as a dealer in violation of Section 517.12. The third alleged violation is that Respondents violated Sections 517.301(1)(a)1-3 and (c), and 517.311(1) (hereinafter "Sections 517.301 and 517.311") by employing a scheme to defraud; obtaining money by untrue statements of material fact; engaging in transactions which operate as a fraud upon persons; and knowingly and willfully making false and fraudulent statements in connection with sales of commercial notes to Florida residents. Respondents admit that the FACT notes are securities within the meaning of Section 517.021(17). Respondents further admit the securities are unregistered, within the meaning of Section 517.07, and that Respondents are not registered as dealers within the meaning of Section 517.12. Respondents assert that the FACT notes are exempt from registration pursuant to Section 517.051(8) and that Respondents are exempt from registration as dealers pursuant to Section 517.12(2). Respondents deny that they have ever violated Sections 517. 301 and 517.311. The complaint does not identify the time period in which Respondents allegedly committed the statutory violations. However, the parties agree that the law applicable to this proceeding is the law in effect prior to the amendment of Section 517.051(8) on October 1, 1996. The amendment is discussed later in this Recommended Order. Petitioner filed its complaint on January 10, 1996. FACT began start-up operations in May 1993. Because Respondents began doing business in May 1993 and Petitioner filed its complaint on January 10, 1996, the charges against Respondents in the complaint concern alleged violations between May 1993 and January 10, 1996. Respondents did not violate Section 517.07. The FACT notes are securities that are not registered in accordance with Section 517.07. However, the FACT notes are securities that are exempt from registration pursuant to Section 517.051(8). In relevant part, Section 517.051 provides: The exemptions provided herein from the registration requirements of s. 517.07 are self-executing and do not require any filing with the department prior to claiming the exemption. . . . The registration provisions of s. 517.07 do not apply to any of the following securities: * * * (8) A note . . . having a unit amount of $25,000 or more which arises out of a current transaction, or the proceeds of which have been or are to be used for current transactions, and which has a maturity period at the time of issuance not exceeding 9 months exclusive of days of grace, or any renewal thereof which has a maturity period likewise limited. Petitioner admits that the FACT notes satisfy the express requirements of Section 517.051(8). The securities have a unit amount of $25,000 or more, arise out of a current transaction, and have a maturity period of 9 months or less. Petitioner argues that the provisions of Section 517.051(8) are ambiguous. Petitioner claims that Section 517.051(8) should be construed to incorporate by reference interpretations of federal law by the Securities and Exchange Commission ("SEC"). The relevant requirements of federal law are found in Section 3(a)(3) of the Securities Act of 1933, as amended, ("Section 3(a)(3)"). SEC Interpretative Release Number 33-4412, issued on September 20, 1961, and found at 17 CFR 231.4412 ("SEC Release 4412"), interprets Section 3(a)(3). The language of Section 3(a)(3) is virtually identical to the language in Section 517.051(8). Section 3(a)(3) exempts from the registration requirements of federal law: Any note . . . which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited. SEC Release 4412 interprets the exemption in Section 3(a)(3) in a manner that limits the exemption to: . . . prime quality negotiable commercial paper of a type not ordinarily purchased by the general public, that is, paper issued to facilitate recognized types of current operational business requirements and of a type eligible for discounting by Federal Reserve banks. . . . Petitioner seeks to construe Section 517.051(8) to include the quoted language from SEC Release 4412. Petitioner cites a 1996 amendment to Section 517.051(8), Florida Statutes (Supp. 1996), in support of its argument. Effective October 1, 1996, the exemption in Section 517.051(8), Florida Statutes (Supp. 1996), applies only to: . . . prime quality negotiable commercial paper of a type not ordinarily purchased by the general public; that is, paper issued to facilitate well-recognized types of current operational business requirements and of a type eligible for discounting by Federal Reserve banks. . . . In effect, Petitioner seeks to use a later statute to interpret the earlier statute. The provisions of Section 517.051(8) which were in effect prior to October 1, 1996, and which are applicable to the time period covered by the complaint, are clear and unambiguous. When the language of a statute is clear and unambiguous, the terms of the statute must be given their plain and ordinary meaning. Relevant terms in Section 517.051(8) are not assigned a statutory definition in Section 517.021. Petitioner presented no evidence that relevant terms of the statute are the province of special expertise possessed by the regulating agency. The context of Section 517.051(8) should not yield to the legislative intent arguably evidenced by subsequent amendments to the statute. Subsequent amendments should not be addressed due to the finding that Section 517.051(8) has a plain and discernible meaning. Even if the terms of Section 517.051(8) were not clear and unambiguous, Petitioner failed to show that subsequent amendments to Section 517.051(8) should be considered as evidence of legislative intent for prior versions of the statute. The 1996 amendments to Section 517.051(8) could evidence legislative intent to add requirements not included in the preceding statute, or they could evidence legislative intent to clarify intent for the preceding statute. Petitioner provided bill analyses for the 1996 amendments to Section 517.051 from the Appropriations Committee and the Commerce Committee of the Florida House of Representatives. The historical analyses of Section 517.051 by the two committees do not state, or even suggest, that the preceding version of Section 517.051(8) was intended to include either the 1996 amendments or the substance of SEC Release 4412. The section-by-section discussions in the committee analyses provided by Petitioner do not state that the 1996 amendment to Section 517.051(8) is intended to clarify the language in the preceding statute. Rather, the section-by- section discussions state that the 1996 amendment to Section 517.051(8) is intended to qualify the existing exemption. The evidence submitted by Petitioner provides an equally plausible basis for interpreting the 1996 amendment to Section 517.051(8) as a legislative effort to preempt an unsettled issue in the federal law. SEC Release 4412 is an unsettled interpretation of federal law. Although the Supreme Court has never ruled on the issue, four justices have stated, by dicta, that Section 3(a)(3) is not limited in the manner suggested by SEC Release 4412. The evidence of legislative history provided by Petitioner provides an equally plausible basis for concluding that the 1996 amendment to Section 517.051(8) was a legislative attempt to prophylactically resolve at the state level an issue of law that remains unsettled at the federal level. Even if Section 517.051(8) were properly construed to include the requirements of SEC Release 4412, Respondents satisfy those requirements. The FACT notes are prime quality negotiable commercial paper of a type not ordinarily purchased by the general public. FACT notes are issued to facilitate well- recognized types of current operational requirements. They are of a type eligible for discount by Federal Reserve banks. FACT notes are unrated but are prime quality commercial paper. Unrated commercial paper has been determined, in numerous no-action letters issued by the SEC, to be prime quality regardless of whether the paper has received a favorable rating from a recognized rating agency. Rather than the rating given the paper by a rating agency, the SEC generally considers two other factors. The SEC considers the nature of the issuer, including the issuer's ability to repay the notes, and the extent of governmental regulation to which the issuer is subject. The nature of the business conducted by FACT satisfies the requirements for prime quality. FACT notes are secured by a perfected first lien on the pool of car loans purchased by FACT. Unlike many companies, FACT requires full recourse on all car loans that it purchases. Full recourse requires a dealer either to buy back a loan if a consumer defaults on the car loan or to provide additional loans to make up for any losses to FACT caused by consumer defaults. If a dealer is a corporation, FACT requires an individual guarantee from the principal of the corporation. In addition, FACT requires all dealers to maintain adequate cash reserve accounts to cover expenses attributable to defaults. The financial and business history of the car dealer is a significant factor that must be taken into account in assessing the quality of car loans which provide the collateral for FACT notes. FACT purchases car loans only from those dealers FACT has investigated. FACT has one of the most extensive and aggressive investigation procedures in the country. FACT purchases only seasoned car loans. Seasoned car loans are those car loans on which the consumer has made a down payment of 10-20 percent and has been making timely payments for at least three months. The default rate on seasoned car loans is lower than the default rate on car loans for which there is little or no down payment or for which there is no payment history. FACT maintains insurance on the pool of car loans that secure the FACT notes. FACT maintains all risk physical damage loan insurance, instrument non-filing insurance, confiscation and skip insurance, and repossessed vehicle insurance. Petitioner argues that FACT notes are not prime quality because FACT does not have the ability to repay the FACT notes. However, Petitioner relies only on federal income tax returns for FACT through 1996. Petitioner disregards the books and records maintained by FACT, balance sheets that show FACT's assets and liabilities, the quality of the car loan portfolio that secures FACT notes, and the business history of FACT. Petitioner relies on tax returns that state losses in accordance with tax accounting principles. Tax accounting principles allow deductions for so-called paper expenses that may not reflect actual expenses recognized by financial accounting principles. The cash reserves in FACT income tax returns are stated conservatively in an amount that exceeds FACT's actual experience. FACT states reserves at 12 percent but actually experiences write-offs of only 7-8 percent. The Internal Revenue Service has taken the position that FACT overstates its cash reserve write-offs. Assessing the financial ability to repay FACT notes on the date of an income tax return distorts the independent economic reality of business activities engaged in by FACT for legitimate business purposes. FACT incurs all of the acquisition costs for car loans, including prepaid insurance premiums and compliance costs, immediately upon purchase of the portfolios. However, FACT collects principal and interest from car loan portfolios over a period of 24-48 months. During the 24 to 48-month term of the car loans, FACT pays interest and principal on the notes it sells to investors because the FACT notes have a maturity of not more than nine months. FACT must continually obtain new notes to continue operations and expansion. Petitioner and its witnesses admit that the financial ability to repay FACT notes is best determined by the books and records maintained by FACT and the assets and liabilities evidenced in the company's balance sheets. FACT maintains its books and records and balance sheets in accordance with Generally Accepted Accounting Principles ("GAAP"). FACT has the financial ability to repay FACT notes. FACT maintains cash on hand of approximately $4 million. FACT assets exceed the company's liabilities. FACT's net worth is approximately $1.6 million. FACT calculates its net worth by assuming that FACT will not collect any of the $11 million due on the discounted car loans purchased by FACT. If FACT assumes that it will collect all of the interest due on the car loans, FACT's net worth exceeds $12 million. The financial ability to repay FACT notes is further evidenced by the business history of the company. FACT has never missed a principal or interest payment on any of the FACT notes sold to investors, has never failed to honor a rescission request, and has never received a complaint from any investor. FACT's gross finance receivables have increased from approximately $7.3 million in 1994 to approximately $39 million on December 31, 1997. FACT is subject to extensive governmental regulation that provides ample protection and control. The regulatory scheme includes the Truth and Lending Act, the Equal Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Reserve Board's Regulations "B" and "Z", various adaptations of the National Consumer Act and Uniform Commercial Code, Chapters 517 and 520, and the Securities Act of 1933. FACT operates in compliance with all relevant provisions in this regulatory scheme. FACT notes are negotiable commercial paper. FACT notes are accepted by banks and eligible for discounting by Federal Reserve banks. FACT notes are of a type not ordinarily purchased by the general public. FACT does not use general advertisement or solicitation to obtain investors. FACT imposes specific suitability requirements for its investors and obtains suitability questionnaires completed by each investor. The completed questionnaires provide prima facie evidence of the suitability of investors. FACT has rejected numerous investors for failure to meet suitability requirements. Investors are generally sophisticated and wealthier individuals. FACT solicits investors discreetly through attorneys, accountants, and insurance agents. No individual can purchase a FACT note if the note exceeds 20 percent of the individual's net worth. The 20 percent requirement is more stringent than the standards recommended by national and state blue sky agencies. FACT notes are commercial paper issued to facilitate recognized types of current operational business requirements. FACT uses the proceeds from the sale of FACT notes to facilitate such current operational business requirements as purchasing car loans, the cost of daily operational requirements, and the cost of insurance to further secure the car loans. The automobile finance business is a clear and long-standing use of proceeds which satisfy the current operational business requirement. Respondents are exempt from registering as a dealer pursuant to Section 517.12(2). Section 517.12(1) prohibits the sale of securities by any person who is not registered as a dealer. Section 517.12(2), in relevant part, provides that the registration requirements for dealers do not apply to issuers of securities exempted by Section 517.051(8). Because the FACT notes are exempt from registration pursuant to Section 517.051(8), Respondents are exempt from registration as dealers pursuant to Section 517.12(2). Respondents did not violate Sections 517.301(1) and 517.311. Respondents neither employed a scheme to defraud; obtained money by untrue statements of material fact; engaged in transactions which operated as a fraud upon persons; nor knowingly and willfully made false and fraudulent statements in connection with sales of commercial notes to Florida residents. The complaint includes seven factual allegations that Respondents violated Sections 517.301 and 517.311. The seven allegations are in paragraphs 10(A)-(G) of the complaint. Paragraph 10(G) in the complaint charges that Respondents, "Represented to investors that they are selling commercial notes that are exempt from securities registration." Respondents admit this factual allegation in the complaint. However, FACT notes sold to investors are exempt from registration pursuant to Section 517.051(8). The factual allegations in paragraph 10(G) do not constitute a violation of either Sections 517.301 or 517.311. Paragraph 10(A) in the complaint charges that Respondents, "Represented to investors that FACT is licensed by the State of Florida to sell securities." FACT is licensed to sell securities pursuant to license number SF597004293. FACT has been continuously licensed to sell securities in accordance with the requirements of Chapter 520. Petitioner has audited FACT on a regular basis pursuant to Chapter 520 and has never found any exceptions in any audit. Petitioner failed to prove that the factual allegations in paragraph 10(A) violate any statute. Paragraph 10(B) in the complaint charges that Respondents, "Represented to investors that the Certificate of Commercial Notes are licensed by the State of Florida." It is unclear what Petitioner means when it refers to licensed securities. If Petitioner uses the term "licensed" to mean something different from "registered" securities, Petitioner fails to explicate the distinction. The record in this proceeding does not shed much light on the distinction contemplated in the complaint between "licensed" and "registered" securities. For example, Petitioner's response to Respondents' opposition to Petitioner's "Motion for Summary Recommended Final Order" states: Lastly, Respondents say they will prove that FACT has held a sales finance license, under the provisions of Chapter 520, Florida Statutes, since 1993. Petitioner is unclear as to why. That has never been a contested fact. Neither is it a contested fact that FACT has never been licensed under Chapter 517, Florida Statutes, to sell securities, which is what this proceeding is about. . . . Petitioner's Response To Respondents' Memorandum of Fact and Law In Opposition to Petitioner's Motion For Summary Recommended Final Order, at unnumbered page 8. The quoted discussion in the previous paragraph is revealing. First, Petitioner could have cured its lack of clarity over why Respondents intended to prove that FACT held a sales finance license by reviewing the complaint Petitioner filed against Respondents. Paragraph 10(A) charges that the representation by FACT that it is licensed by the state is an act of fraud or misrepresentation of a material fact within the meaning of Sections 517.301(1) and 517.311. Yet Petitioner claims that this matter was never at issue. Petitioner goes on to say that what the case is about is whether FACT was "licensed" to sell securities. Petitioner may use the terms "licensed" and "registered" synonymously for purposes of Chapter 517. Section 517.021 defines a dealer by reference to registration, rather than by reference to licensing, and is devoid of any definition of the term "license." If Petitioner is using the term "license" synonymously with "registration", then Petitioner failed to show the allegations in Paragraphs 10(B). Respondents did not represent that the FACT notes were "licensed" or "registered" securities. Rather, Respondents represented that the FACT notes were securities exempt from registration. The first line of the Disclosure Statement clearly states: This memorandum does not constitute an offer or solicitation of exempt securities in any jurisdiction in which such an offer or solicitation would be unlawful. Petitioner's Exhibit F. The Disclosure Statement further states at page 15: The Notes are being sold as exempt securities pursuant to Section 3(a)(3) of the Securities Act of 1933, as amended. Id. Petitioner argues that a paragraph in the Disclosure Statement which immediately precedes the statement quoted in the preceding paragraph results in a misrepresentation. The paragraph at issue states: FACT is currently accepting applications only from the State of Florida, working under the Department of Banking and Finance License #SF 597004293-000 unless the noteholder is an institutional purchaser, or otherwise approved in writing. (emphasis not supplied) Id. The quoted language represents that FACT is working under a state license to accept applications. The quoted language does not represent that the securities which will be sold upon acceptance of the applications are registered or "licensed." Even if the language that is of concern to Petitioner were construed as a misrepresentation, Petitioner failed to show that it violated Sections 517.301 or 517.311. Petitioner failed to show that the misrepresentation was material, was the result of a scheme to defraud investors, was an untrue statement of a material fact, operated as a fraud upon persons, or was committed knowingly or willfully by Respondents. It is unlikely that sophisticated investors, with advice of their attorneys or accountants, would be misled by the statement that is of concern to Petitioner. That improbability is underscored by the lack of evidence that any investor relied on the statement, the lack of evidence of any investor complaints, and the absence of any complaining witness at the hearing. Paragraph 10(C) in the complaint charges that Respondents, "Represented to investors that the Certificate of Commercial Notes were insured by major, high rated insurance companies." Respondents did not make the representations. The Disclosure Statement, at pages 3 and 12, clearly states that the car loan portfolios are: . . . insured by lender's single interest policies issued by insurance carriers with a minimum AM Best rating of A or a Duff & Phelps rating of A+. . . . * * * In the event [FACT] is unable to service the Notes on a current basis . . . then, the Noteholders would be entitled to foreclose on the vehicle installment sales contracts. . . Petitioner failed to prove that Respondents made the factual representations alleged in paragraph 10(C). Paragraph 10(D) in the complaint charges that Respondents, "Represented to investors that they would earn interest of 9.75% per annum on Certificates of Commercial Notes." Respondents admit that FACT made the alleged representations, but deny that the representations violated either Sections 517.301 or 517.311. FACT made the representations described in Paragraph 10(D) of the complaint. However, those representations do not violate Sections 517.301 or 517.311. In its Disclosure Statement to investors, FACT states: The Notes will bear simple interest at the rate of 9.75% per annum (APR). The Notes will be secured by collateral consisting of insured or recoursed automobile loan portfolios and cash reserves. * * * [FACT] may not earn enough interest income and profit on its vehicle loan portfolio to pay operating costs and the debt service on the Notes. In the event it is unable to service the Notes on a current basis (i.e. within the 21 business day cure period) because of unforeseen operating expenses, then, the Noteholders would be entitled to foreclose on the vehicle installment sales contracts . . . . (emphasis supplied) First American Capital Trust, Disclosure February 1995 as revised March 1995, at pages 4 and 12 (Petitioner's Exhibit F). Paragraph 10(E) in the complaint charges that Respondents, "Represented to investors that collateral portfolios are geographically balanced." Respondents admit that FACT made such representations. Petitioner failed to show that the collateral portfolios are not geographically balanced or that the representations violate Sections 517.301 or 517.311. Paragraph 10(F) in the complaint charges that Respondents, "Represented to investors that collateral portfolios consist of loans on new and used automobiles." Respondents admit that FACT made such representations. The collateral portfolios consist of only used car loans. However, Petitioner presented no evidence that the discrepancy was a material misrepresentation, that the misrepresentation was the result of a scheme to defraud investors, was an untrue statement of a material fact, operated as a fraud upon persons, or was committed knowingly or willfully by Respondents. The evidence submitted by Petitioner consists of the testimony of two witnesses and eight exhibits. The testimony of one of the witnesses addressed FACT's income tax returns and assessed FACT's financial condition solely on the basis of those income tax returns. The testimony of the other witness essentially addressed the appropriate test for prime quality commercial paper not ordinarily purchased by the general public and the interpretation by that witness of specific court cases. Petitioner's exhibits A-H, respectively, consist of: Respondents' responses to Petitioner's request for admissions, absent the requests for admissions; two certifications that Respondents have never been registered in accordance with Chapter 517; Petitioner's interrogatories and Respondents' responses; Respondents' responses to Petitioner's second request to produce; copies of the disclosure statements and a brochure distributed by FACT; FACT's application for a sales license under Chapter 120; and FACT's income tax returns. In addition to the witnesses and exhibits submitted by Petitioner, Petitioner cross-examined Respondents' witnesses. Neither Petitioner's witnesses, its exhibits, nor its cross- examination of Respondents' witnesses provided any evidence that Respondents, intentionally or negligently, employed a scheme to defraud, obtained money by untrue statements of material fact and omissions of material fact, engaged in transactions which operated as a fraud upon persons, or knowingly and willfully made false and fraudulent statements in connection with sales of FACT notes to Florida residents within the meaning of Sections 517.301 or 517.311. Petitioner admits that it presented no evidence that Respondents intentionally or negligently engaged in the activities described in Sections 517.301 and 517.311. Rather, Petitioner argued at the hearing that Petitioner is not required to show either intent or negligence on the part of Respondents in order to show that Respondents employed a scheme to defraud, obtained money by untrue statements of material fact and omissions of material fact, engaged in transactions which operated as a fraud upon persons, or knowingly and willfully made false and fraudulent statements in connection with sales of FACT notes. At the administrative hearing, Respondents made an ore tenus motion on the record to dismiss the allegations that Respondents violated Sections 517.301 and 517.311. After extensive discussion on the record and a review of case law cited by the parties, the motion to dismiss was granted with leave to file a motion for reconsideration with Petitioner's PRO. The parties agreed that Respondents would be allowed to present additional evidence if, on reconsideration, the motion to dismiss was denied. Petitioner timely filed a motion for reconsideration. Respondents timely filed a memorandum of law in response to the motion for reconsideration. Petitioner's motion for reconsideration is denied for the reasons stated in Respondents' memorandum of law. During the hearing and in its PRO, Petitioner attempted to show that Respondents committed acts not alleged in the complaint. Petitioner seeks to prove that Respondents misrepresented the financial condition of FACT and that Respondents omitted a disclosure that FACT was a party to material litigation, i.e., this proceeding. Requirements for adequate notice, due process, and fairness prohibit a finding of guilt for acts not alleged in the complaint. Moreover, the undersigned is without jurisdiction over matters not included in the complaint when it was referred to DOAH. Even if Respondents could be "tried" for acts not alleged in the complaint, it would not affect the outcome of this proceeding. Petitioner failed to prove that Respondents misrepresented the financial condition of FACT or that Respondents failed to disclose that FACT was a party to material litigation. For reasons previously stated and not repeated here, Petitioner failed to show that Respondents misrepresented the financial condition of FACT. Petitioner relied solely on Respondents' income tax returns. The books and records of FACT, its balance sheets, and Respondents' business history show that the financial condition of FACT is sound and that FACT has the financial ability to repay the FACT notes sold to investors. Respondents did not fail to disclose that FACT was a party to this proceeding. Prior to the filing of the complaint on January 10, 1996, there was no litigation of any type against FACT. Disclosures or omissions alleged at the hearing to have occurred after the filing of the complaint cannot form the basis for charges against FACT in the complaint. Respondents did not act either intentionally or negligently to misrepresent any material fact at issue in this proceeding. Respondents acted in a manner consistent with a reasonably prudent company under the same or similar circumstances. Before FACT began its business in May 1993, FACT obtained an opinion letter from out-of-state counsel to assure its compliance with federal securities law. FACT obtained a second opinion from independent counsel in Florida. The independent counsel also reviewed FACT's compliance with state law. The independent counsel concluded that FACT complied with all applicable state laws and that the securities and Respondents were exempt from registration requirements pursuant to Sections 517.05(8) and 517.12(2). The independent counsel met with Petitioner's representatives, provided them with a detailed description of the company's proposed business activity, and provided copies of the materials to be used by FACT. At various times in 1993, Petitioner requested additional information from FACT concerning its business, and FACT promptly provided the information. In 1993, Petitioner's representatives requested information or met with FACT on June 24, November 4, November 17, and December 19. In November 1993, Petitioner's representatives visited the offices of FACT. Throughout 1994, FACT continued to discuss its operations with Petitioner and continued to provide Petitioner with any and all information. Petitioner never advised Respondents or their legal representatives that Petitioner interpreted Section 517.051(8) to include requirements not specifically included in the statute, such as SEC Release 4412. Petitioner's representatives generally instructed Respondents and their legal representatives to look at the statute and to comply with its terms. After Petitioner filed its complaint, FACT had the independent counsel review the matter again, and counsel confirmed his original opinion. FACT has made every reasonable effort to comply with state and federal law. Respondents have never received any investor complaints and have never failed to timely pay the principal and interest on any FACT note. Petitioner did not call any complaining investor as a witness during the administrative hearing.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order finding Respondents not guilty of violating Sections 517.07, 517.12, 517.301(1)(a)1-3 and (c), and 517.311(1). DONE AND ENTERED this 3rd day of February, 1999, in Tallahassee, Leon County, Florida. DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of February, 1999. COPIES FURNISHED: Honorable Robert F. Milligan Comptroller The Capitol, Plaza Level Tallahassee, Florida 32399-0350 Harry Hooper, General Counsel Department of Banking and Finance Fletcher Building, Suite 526 101 East Gaines Street Tallahassee, Florida 32399-0350 Bruce V. O'Donnell, Esquire Office of Comptroller 1313 Tampa Street, Suite 615 Tampa, Florida 33602-3394 David A. Bacon, Esquire Bacon, Bacon, Johnson and Goddard 2959 First Avenue, North St. Petersburg, Florida 33713 Darryl R. Richards, Esquire Johnson, Blakely, Pope, Bokor, Rupple and Burns, P.A. 100 North Tampa Street, Suite 1800 Tampa, Florida 33602
The Issue The issue in this case is whether Respondent, R.H. Motors, d/b/a Kia of Orange Park ("Kia"), discriminated against Petitioner, Lamar B. Waters ("Waters"), on the basis of age in derogation of the Florida Civil Rights Act of 1992.
Findings Of Fact Waters is a 71-year-old Caucasian male who resides in Green Cove Springs, Florida. At all times pertinent hereto, Waters was employed by Kia at its automobile dealership in Orange Park, Florida. By all accounts, Waters was extremely well liked at the dealership. He had a jovial personality and got along well with his co-workers. He was generally seen as a nice, retired man with ample financial wherewithal to enjoy life. Waters himself says that he is financially comfortable, but does not consider himself rich. He lives in a nice house that is valued at around $900,000 (or was at the time he purchased it). He owns a nice boat that some fellow employees have used for parties and gatherings. Waters is a college football fan and enjoys spending time watching and attending games, especially for his favorite team, the Georgia Bulldogs. In 2013, Waters filed for bankruptcy, but for the purpose of working out a deal on his home mortgage, not--apparently--due to significant financial problems. Waters often said that he was financially sound and was working “only to get away from his wife,” but that may have been in jest rather than serious. Kia is a dealership which sells both new and used automobiles. It has been in existence since August 2008. It is owned by R.H. Motors, a Florida corporation. The vice president of operations for R.H. Motors is Robert Hogan. The dealership, including the car lot, offices, and service department, is located on a large tract of land in Orange Park. The new car section of the dealership is located on a large lot which includes the office building and service area. Across from the new car section there is a smaller lot which was initially used for selling used cars. There is a mobile home or modular building on the used car lot which is used as an office. Waters joined the U.S. Navy at age 17; he later entered flight school with the U.S. Army. He served time in Vietnam during the conflict with that country. Waters was honorably discharged from the service in 1975. He took a job flying airplanes for AFLAC (or its predecessor company) and later became a general manager for the company. Waters retired from AFLAC in 2004 and then went to work for a Volkswagen dealership in Orange Park, Florida. He worked as a floor salesman for the Volkswagen dealership. In November 2009, when Waters was 66 years old, he was offered a job at Kia. He accepted and started work on December 1, 2009, as a floor salesman, selling new and used cars. Waters had been hired by Joe Esposito, the general manager for Kia at that time. Waters was compensated at minimum wage plus commission on cars he sold. While he was a salesman, Waters would take off from work either Tuesday or Thursday of each week and every Sunday. In June 2010--or thereabouts--Waters was offered a different position at Kia. Waters described the position as the “wholesale manager” for the dealership. He said his duties included buying and selling cars at auctions. He also managed the used car lot, did appraisals for cars being traded in, and continued to sell cars. In April 2013, general manager Esposito placed Waters on indefinite leave due to “internal issues” at the dealership. In May 2013, Esposito asked Waters to attend a class on managing customers. The class was to be held at Kia’s primary headquarters in South Carolina. Waters and another employee traveled to South Carolina, but there was no training provided. An employee at headquarters talked with the two men briefly, but there were no classes or training. Waters had understood the reason he was sent to South Carolina was so that he could be assigned a new job as some kind of customer manager. There was obviously some disconnect between what Waters was told and what he understood to have been said. When Waters returned from South Carolina, he found that Esposito had been fired as the general manager at Kia. Waters somehow met with Robert Hogan (described by Waters as "the owner") when Hogan came to visit the dealership even though Waters was supposedly on indefinite leave at that time. When Hogan found out Waters had been placed on leave by Esposito, he immediately reinstated Waters and made sure he was paid back-pay for the time he was out of work. At that time, Hogan also asked Waters to manage the used car side of the dealership. Waters remembers that he was hired as the Used Car Manager. Hogan says he was hired as the Budget Car Manager, i.e., that Waters was only to be responsible for selling the least attractive used cars. Those cars generally came onto the lot as trade-ins by persons purchasing new vehicles. Waters said that as part of this new job, he was tasked with going to auctions for the purpose of obtaining additional used cars for the Kia dealership. Hogan said Waters was never authorized to purchase cars for the dealership, and that the dealership already had too many used cars. No additional testimony was provided to rectify this disparity. Either one of the witnesses was not telling the truth or Waters was mistaken about his duties. A brief explanation of the dealership is warranted: Kia sells both new and used cars. Used cars come from various sources, including trade-ins by customers buying new cars, purchases from rental car fleets, and purchases from auctions. The used cars were for a time sold from a lot adjacent to the main Kia lot. Later, Kia moved all used cars over to the same lot with the new cars. The used car lot was then used as a place to store new car inventory. When Waters was reinstated to his job and began working with used cars, a new general manager--Mr. Record--had been hired. Record was instrumental in the change that moved all used cars over to the new car lot. He was also very harsh and unfriendly with employees at the dealership, so Hogan eventually fired him as general manager as well. He was replaced by Jeff Norman. Norman continued the practice of keeping all the cars, new and used, on one lot--except, it appears, for the cars deemed "budget" cars. Norman also took over some of Waters’ tasks and responsibilities, e.g., Norman began doing the appraisals of used automobiles. Norman also took over the acquisition of used cars, although Waters would sometimes disagree with the choices Norman made. Norman told Waters a new policy of Kia was to get rid of the budget cars as quickly as possible rather than trying to repair them for higher re-sale. At some point in time after Waters had been reinstated to his job, Hogan began to have concerns about the number of hours the used car lot office was being manned. He expected that office to be open whenever the main lot office was open, i.e., from 9:00 a.m. until 10:00 p.m. Hogan had called and/or gone by the used car lot on numerous occasions around 5:30 p.m. or 6:00 p.m. in the evening and found it closed. Hogan raised his concerns about Waters’ work schedule with the new GM, Norman, and asked him to talk to Waters, get him back on track, and tell him what was expected of him as an employee of Kia. Norman called Waters into his office on October 16 or October 17 (the date is in dispute) to discuss the matter. Norman told Waters that things were changing at Kia. He said the dealership would be trying to sell 250 cars a month. To do that, employees were going to be expected to work long, 12-hour days, six or even seven days a week. Norman allegedly asked Waters how old he was, and then said Waters was about the same age as Norman’s father. Norman allegedly told Waters that the dealership did not want to put him under that kind of stress. Waters told Norman he would not like the proposed new work schedule and hours. Norman allegedly told Waters that he (Norman) was worried that a man Waters’ age could not stand the stress of working those hours.1/ Waters took Norman’s words to mean, in essence, that Waters was being terminated from employment. He replied to Norman only, "I appreciate it," and walked toward the door. As he was exiting, Norman said that he would check with the sister Kia dealership in the Southside area of Jacksonville to see if they had any sales positions open. Waters apparently did not accept that offer. After the meeting with Norman, Waters went to his desk and gathered his personal belongings. He went back into the dealership and said goodbye to Hutchinson, the young office manager who had been friendly to Waters during his tenure at Kia. Waters hugged Hutchinson, said "I’m out of here," and indicated that he did not want to work on weekends. He then left the premises.2/ On the 17th day of October, Hutchinson was instructed to fill out a Separation Notice to reflect Waters’ cessation of employment at Kia. The reason given on the form for Waters’ leaving was "Voluntary [sic] Quit." Waters’ term of employment was listed as December 1, 2009 through October 17, 2013. Waters’ work schedule was listed as 9:00 a.m. until 10:00 p.m., seven days a week. Hutchinson said that is simply a statement of when the store is open; each person works the hours necessary to get their job done. In the description of Waters in the Separation Notice, Hutchinson wrote, "Great company guy. None better." There is not dispute that Waters was a well-liked person at the dealership. Waters did not see the Separation Notice until it was sent to his attorney in preparation for final hearing. Waters disagrees with the date of the notice, the work hours listed, and that he voluntarily quit his job. On October 1, 2013, just two weeks before leaving Kia, Waters had been given a raise from $1,500.00 per month, plus 5% of profits generated by the used car department, to $4,000.00 per month plus 5% of the profits. Waters did not contact Hogan to inquire as to whether something could be worked out concerning his continued employment. Hogan had been exceptionally nice to Waters in the past, but Waters did not pursue relief with him. Hogan remembers trying to contact Waters once via telephone but never talked to him about the matter. As far as Hogan is concerned, Waters voluntarily terminated his employment with Kia because he did not want to work the hours needed. Hogan had hired Waters at age 66 and did not have any objection to Waters working for as long as he felt healthy enough to do so. After he left his employment with Kia, Waters has sought but been unable to locate another management job. He has no interest in going back into a sales position. No testimony or evidence was presented at final hearing as to whether Waters’ position with Kia was filled or, if so, whether a younger person was hired to replace him.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Florida Commission on Human Relations, upholding its determination that no cause exists for a finding of discrimination against Petitioner, Lamar B. Waters, by Respondent, R.H. Motors, d/b/a Kia of Orange Park. DONE AND ENTERED this 30th day of October, 2014, in Tallahassee, Leon County, Florida. S R. BRUCE MCKIBBEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of October, 2014.
The Issue The issue is whether respondent's independent motor vehicle license should be disciplined for the reasons set forth in the administrative complaint filed on September 6, 1996.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Background At all times relevant hereto, respondent, Charles W. Antolick, operated an independent automobile dealership under the name of C. Antolick Car & Truck Sales at 7400 Highway 21, Keystone Heights, Florida. He has been issued independent motor vehicle dealer license number VI-10846 by petitioner, Department of Highway Safety and Motor Vehicles (Department). That license authorizes respondent to engage in the business of buying, selling, or dealing in motor vehicles. Based on complaints received in June 1996 from two consumers, Florrie B. Mingo and Devon T. Ross, the Department conducted an investigation of respondent. The Department then issued an administrative complaint on September 5, 1996, alleging that respondent failed to apply for registration and title for two used automobiles sold by him to Mingo and Ross in November 1995. Respondent denies that his dealership sold the vehicles. Except for the allegations raised in this proceeding, respondent has an unblemished record as a licensee. An Employee Named Pettway In 1995, Gregory A. Pettway, a resident of Gainesville, Florida, was employed by respondent as a mechanic. Effective July 19, 1995, Pettway was authorized to "buy/sell vehicles under (respondent's) license at Big Sun Auto Auction," an automobile wholesaler and auctioneer in Ocala, Florida. This authorization only enabled Pettway to buy cars on a wholesale basis on the premises of Big Sun Auto Auction. Pettway also held similar authorization to purchase cars at a Jacksonville car auction. A disputed fact in this case is whether Pettway was authorized to sell cars on behalf of respondent on a retail basis, that is, to persons such as Mingo and Ross. To establish that fact, petitioner relies upon a letter dated June 5, 1996, from respondent’s wife to Frank Heath, a Department employee based in Ocala, Florida. In the letter, she stated that “it was always customary for me to give Greg Pettway a receipt every time he would turn in a contract and pay tax and title for his customer.” Although received in evidence as a part of petitioner’s composite exhibit 2, the statement was not clarified or explained at hearing even though the wife was present, and it was not used by petitioner when respondent was cross-examined. Given respondent’s contrary testimony at hearing, which was not seriously challenged, his testimony is accepted as being the most credible and persuasive on this issue. Accordingly, it is found that Pettway was not authorized to sell vehicles for respondent on a retail basis. In Pettway's role as respondent's representative at auctions, he would attend and bid on cars, and if successful, he would then transport the car to respondent's car lot in Keystone Heights. After a car was purchased, Pettway was instructed by respondent to turn over all paperwork related to the purchased vehicle. It can be reasonably inferred from the evidence that, although he was not authorized to sell cars on a retail basis, Pettway had access to respondent's bill of sale forms and, without respondent's knowledge, he took a number of them for his own use. He used two such forms in conjunction with the Mingo and Ross transactions. After learning that Pettway had made these two unauthorized sales, respondent terminated Pettway’s employment in January 1996. Although the evidence shows that Pettway still resides in Gainesville, it is surprising that neither party subpoenaed him to attend the final hearing. Therefore, any statements allegedly made by Pettway are hearsay in nature and cannot be used to make findings of fact. The Mingo Transaction Mingo is a resident of Brooker, Florida. Through a mutual friend, she was introduced to Pettway and learned that he sometimes went to car auctions. Mingo was interested in purchasing a 1985 Cadillac and was led to believe that Pettway could obtain one at a fair price. Accordingly, one evening in September 1995 she and Pettway traveled to a Jacksonville car auction. Respondent had authorized Pettway to attend the auction, but he was unaware of Pettway's efforts to buy a car for Mingo. Although Pettway purchased two cars that evening, he was unsuccessful in locating a 1985 Cadillac. On October 4, 1995, respondent, Pettway, and Mingo traveled together in Pettway's truck to Big Sun Auto Auction. Respondent was under the impression that Mingo was Pettway's girlfriend and was merely accompanying him to the auction. At the auction, Mingo saw a violet colored 1985 Cadillac and asked Pettway to bid on the vehicle. After Pettway made a successful bid, Mingo paid Pettway $1,500.00 cash as a deposit, and Pettway gave her a receipt. It is fair to infer that Pettway used all or part of Mingo's money to pay for the vehicle and pocketed the remainder, if any, as profit. There is no evidence that respondent was aware of the transaction, and he did not authorize Pettway to sell the car to Mingo under his dealer's license. Big Sun Auto Auction requires that all bidders sign a log book to evidence each car sale. That evening, Pettway placed his initials on the log book to indicate that he had received the paperwork for Mingo’s vehicle from the auctioneer. Respondent also purchased a car that evening and drove the car back to his dealership. Meanwhile, Pettway transported Mingo’s vehicle to Gainesville on his truck. The vehicle was never taken to respondent's lot. On November 8, 1995, Mingo gave Pettway another $684.00 making a total purchase price of $2184.00. This amount included a sales price of $1900.00, sales tax of $114.00, and tag, title and miscellaneous fees of $170.00. Pettway obviously earned a profit on the transaction. The bill of sale given by Pettway to Mingo on November 8 was on respondent's bill of sale form and contains Pettway's signature as "agent." Respondent did not sign the form and was unaware of the transaction. Mingo was led to believe that she would receive her title, tag and "paperwork" within a few weeks. Pettway never turned over any money or paperwork to respondent regarding the Mingo transaction. Also, he never disclosed the sale to respondent. When Mingo was unable to obtain a title or registration for the vehicle from Pettway, she contacted respondent, whose name was on the bill of sale. Until then, it is fair to infer that Mingo always considered the transaction to be a private one with Pettway, and not respondent. Indeed, the transaction was consummated at Pettway’s home, and not on the dealer’s licensed premises. Respondent was understandably reluctant to furnish paperwork for a transaction in which he did not participate. Even so, at the urging of the Department, respondent and Mingo met at a local tag office in June 1996 for the purpose of seeking to reach an amicable settlement. When Mingo declined to provide respondent with an original copy of the bill of sale, he balked at filling out the necessary paperwork for a title. An argument ensued, an agreement was never reached, and Mingo did not receive her title. The present status of the vehicle is not of record. The Ross Transaction In late October 1995, or just before Mingo made the final payment on her vehicle to Pettway, she asked him to locate a car for her nephew, Devon T. Ross. By chance, on October 4, 1995, Pettway had purchased a 1980 Oldsmobile Cutlass from Big Sun Auto Auction for $460.00 and had it parked at his house in Gainesville. On November 7, 1995, Pettway received a title to the vehicle from Big Sun Auto Auction and signed the auctioneer's log that date to acknowledge receipt of same. Pettway never told respondent that he had purchased this vehicle. In late October or early November 1995, Devon and his father, Johnny G. Ross, went to Pettway's house and inspected the car. Devon agreed to purchase it for $1670.00, which included a $1500.00 sales price, $90.00 for sales tax and $80.00 for tag, title and miscellaneous fees. On November 6, 1995, Pettway drove the car to Devon’s house where his mother paid Pettway the full price in cash. Respondent was unaware of this transaction, and he had not authorized Pettway to sell the vehicle under his license. It is fair to infer that when Devon entered into negotiations with Pettway to buy the car, he considered this to be a private transaction between he and Pettway, and not with respondent's dealership. Devon was given a bill of sale filled out on one of respondent's forms. Pettway signed the form as seller while both Devon and his father are listed as the co-owners. Devon was led to believe that he would receive the title within a few days. Pettway did not turn over any money or paperwork regarding the transaction to respondent. After Devon did not receive a title within a reasonable period of time, his mother attempted to contact Pettway on numerous occasions by telephone. Pettway, however, would not return her calls. Devon's mother then contacted respondent in December 1995 regarding the status of her son's title. Although respondent was unaware of the sale, he agreed to contact Big Sun Auto Auction and make inquiry regarding the status of the title. Throughout the months of January through April 1996, respondent continued these efforts. This was corroborated by testimony from a Big Sun Auto Auction title clerk. In April 1996, the auctioneer finally confirmed that, according to its sign-off log, the title had been picked up by Pettway in November 1995. On January 17, 1996, the title to Devon’s vehicle was sent by an unidentified person to the Department's Tallahassee office with a request that the automobile be "junked." Department regulations do not require that the person requesting such action be identified. It is noted, however, that Pettway had been given the title on November 7, 1995, and had never turned it over to respondent. In accordance with this anonymous request, the Department junked the title on January 17, 1996. Respondent was unaware that this action was taken. In February 1996, Devon was rear-ended by another vehicle and his car was totaled. He was offered $1000.00 by the other driver's insurance company as settlement, but he was required to produce a title in order to collect the money. Because he had never been issued a title, the insurance company declined to make a settlement. In an effort to resolve this matter, on July 11, 1996, respondent offered to refund Devon the money paid by Pettway ($460.00) for the vehicle if Devon would return the car to his licensed premises. Devon refused since he would be required to pay a wrecker to tow his disabled vehicle to Keystone Heights. The current status of his vehicle is not of record.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Highway Safety and Motor Vehicles enter a final order dismissing the administrative complaint with prejudice. DONE AND ENTERED this 27th day of March, 1997, in Tallahassee, Florida. DONALD R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 27th day of March, 1997. COPIES FURNISHED: Charles J. Brantley, Director Division of Motor Vehicles Room B439, Neil Kirkman Building Tallahassee, Florida 32399-0500 Michael J. Alderman, Esquire Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room 432A Tallahassee, Florida 32399-0504 Charles W. Antolick 22 Comanche Trail Hawthorne, Florida 32640-3736
The Issue At issue is whether Respondent represented to Ms. Renee Benton that she had to purchase an auto club in order to buy automobile insurance, which is not true, contrary to the law, and a violation of various statutes.
Findings Of Fact 1 On February 1, 1991, Renee Benton went to Mid County Insurance Agency in Jacksonville, Florida for the purpose of obtaining automobile insurance. At all times material hereto, Mid County Insurance Agency was a general lines insurance agency licensed by the State of Florida. Respondent, Eric Thomas Fromme, was the President and owner of Mid County Insurance Company. On February 1, 1991, Complainant, Renee Benton, purchased an automobile insurance policy from Mid County, more specifically from its owner, Eric Thomas Fromme. Complainant, Renee Benton, testified that the Petitioner told her that he could not sell her automobile insurance unless she purchased a membership in a motor club. Respondent, Eric Thomas Fromme, testified that he personally dealt with Complainant, Renee Benton, and that he did not tell Renee Benton that he could not sell her insurance without Motor Club Coverage. Complainant, Renee Benton, was in a hurry on the day and time she went to Mid County to purchase automobile insurance and as a result did not read any of the documents she signed on February 1, 1991. Renee Benton did not complain about the contract and was unaware of the matter until approached by agents of the Department. Until she reviewed the policy documents, she was unaware that she paid $100 to join the auto club. At the time of the purchase the automobile insurance policy from Respondent, Renee Benton paid Respondent $153.00 and entered into a premium finance agreement to finance a portion of the policy premium. That agreement stated that Renee Benton had paid a $53.00 down payment. (Pet. No. 4.) A fee of $100.00 for the motor club was deducted from her payment at the time she purchased the insurance and motor club. (Testimony of Renee Benton.) At the time that she purchased the automobile insurance, Renee Benton executed a form which stated that a motor club purchase was voluntary and that she was not required to purchase a motor club in order to purchase that insurance. (Pet. No. 7.) Renee Benton testified she would not have financed any of premium, had she been able to purchase the automobile insurance without purchasing a motor club. (Testimony of Renee Benton.)
Recommendation Based upon the foregoing proposed Findings of Fact and Conclusions of Law, it is, recommended that the Administrative Complaint be dismissed. RECOMMENDED this 8th day of June, 1992, in Tallahassee, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 8th day of June, 1992. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-0019 The parties presented proposed findings of fact which were read and considered. The following findings, as indicated, were adopted, or rejected for the reason stated: Petitioner's Findings of Fact: Paragraph 1-3 Rejected in favor of Respondent's statement of these facts. Paragraph 4,5 Rejected as conflicting with more credible evidence. Paragraph 6-9 Adopted, but reordered. Respondent's Findings of Fact: Paragraphs 1-8 Adopted. COPIES FURNISHED: David D. Hershel, Esquire Department of Insurance Division of Legal Services 412 Larson Building Tallahassee, FL 32399-0300 Shane C. Maddox, Esquire 337-C East Bay Street Jacksonville, FL 32202 Bill O'Neil, General Counsel Department of Legal Affairs The Capitol, Plaza Level 11 Tallahassee, FL 32399-0300 Tom Gallagher, State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, FL 32399-0300
