The Issue Whether the "Additional Payment" made by Hernando HMA, Inc., d/b/a Brooksville Regional Hospital to Hernando County pursuant to a document entitled Lease Agreement, as amended, constitutes "rent" subject to sales tax under section 212.031, Florida Statutes.1/
Findings Of Fact Hernando HMA, Inc. (HMA) is a for-profit entity which operates Brooksville Regional Hospital, Spring Hill Regional Hospital, and other entities, as successor to an entity that was in Chapter 11 bankruptcy proceedings from 1993 to 1998, Regional Healthcare, Inc. (RHI). The Department is an agency of the State of Florida that has been delegated the responsibility to collect sales and use taxes imposed by chapter 212, Florida Statutes. In 1998, as part of RHI's bankruptcy plan, HMA and the County entered into various agreements, including a lease agreement (1998 Lease), regarding the use and operation of several RHI hospital properties and improvements owned by the County, and leased back to RHI. Under the 1998 Lease and other agreements, HMA agreed to continue to operate the hospital facilities for 30 years with possession of the real property and improvements to be returned to the County at the end of the lease term. Section 1.2W. of the 1998 Lease defined "Rental Payment" as follows: "Rental Payment" means all payments due from Lessee to Lessor or otherwise required to be paid by Lessee pursuant to the terms of this lease. The 1998 Lease further provided in section 3.3 under the heading "Rent": The annual rental payment of the Leased Premises for each year of the Lease Term (the "Rental Payment") shall be in the amount of Three Hundred Thousand and 00/100 Dollars ($300,000). This Rental Payment shall be paid to Lessor by Lessee on the Commencement Date and on each anniversary date of the Commencement Date during the Lease Term. The 1998 Lease also provided that HMA, as Lessee, would pay "all taxes, if any, prior to delinquency." Under the 1998 Lease, the County agreed to lease the premises in consideration of HMA’s timely payment of rent and timely performance of the other covenants and agreements required under the lease. It was an “event of default” under the lease if HMA failed to observe and perform any covenant, condition, or agreement on its part which could be cured by a payment of money. Remedies for default under the 1998 Lease included termination of the lease by the County and exclusion of HMA from possession of the leased premises. Even though the leased premises under the 1998 Lease were not subject to ad valorem taxes because they were owned by the County, during public discussions of the proposed 1998 Lease, an issue arose about HMA's responsibility for payment of fire assessments that would have been paid if the property was not immune or exempt from ad valorem taxes. HMA agreed, by separate agreement, to pay the fire assessments and buy a new ambulance to serve the community. The fire assessment agreement was by separate document that was included as part of the closing of the 1998 Lease and other agreements involving the hospital facilities in June 1998. The 1998 Lease was dated June 1, 1998. The 1998 Lease terms included a merger clause in section 15.6 entitled “ENTIRE AGREEMENT,” which provided: This lease may not be modified, amended or otherwise changed orally, but may only be modified, amended or otherwise changed by an agreement in writing signed by both parties. This Lease Agreement and its accompanying guaranty constitute the entire agreement between the parties affecting this Lease. This Lease Agreement supersedes and cancels any and all previous negotiations, arrangements, agreements, and understandings between the parties hereto with respect to the subject matter thereof, and no such outside or prior agreements shall be used to interpret or to construe this Lease. There are no promises, covenants, representations or inducements in addition to, or at variance with any of the terms of this Lease Agreement except the Guaranty. In 2001, the County and HMA began negotiations for relocation of the Brooksville Regional Hospital which was part of the leased premises described in the 1998 Lease. During the negotiations, HMA, through its attorney, Steven Mitchell, prepared a proposed comprehensive relocation agreement in consultation with former County Attorney Bruce Snow. Section 7.3 of the proposed relocation agreement contemplated revising the 1998 Lease and suggested the following preliminarily negotiated language for rental payments under a revised 1998 Lease: Rental Payments The Lessee shall pay to Lessor on the due date therefore as set forth in the Lease Agreement, the sum of Three Hundred Thousand and no/100 Dollars ($300,000.00) per annum. The Lessee shall pay to Lessor on an annual basis, either as rent or by virtue of a payment to Hernando County of the same sum to be used by Hernando County as it deems appropriate, an amount equal to the ad valorem taxes that would have been paid on the New Facility Site as improved with the New Facility if the New Facility Site were not owned by Hernando County but owned by a for-profit entity. In the event the New Facility Site and the New Facility located thereon are subsequently required by law to pay ad valorem taxes then the obligation to pay the amount described in Section 7.3(b) herein shall immediately terminate and Lessee shall be responsible for the payment of the appropriate ad valorem tax. The proposed comprehensive relocation agreement was discussed at public meetings held by the Hernando County Board of Commissioners on September 17 and September 25, 2001. The minutes of the September 25, 2001, meeting indicate that the County Administrator advised that the proposed relocation agreement contemplated that HMA would continue to pay $300,000 annually as rent, and “would make a payment-in-lieu of taxes annually to the County . . . .” The minutes also reflect that, in responding to a question from a commissioner regarding whether there should be language in the agreement that would protect the “payment-in-lieu of taxes” provision in the event the law changed: [Former County Attorney] Snow replied that it was his recommendation that there should be a provision that to the extent that the organic law of the State provided that facilities, such as the new hospital or other hospital under the lease, were taxable for ad valorem tax purposes, that that provision of the organic law would apply to ensure that that provision superseded. He explained that the lease provision to provide for an ad valorem tax payment was only to the extent that the organic law did not otherwise compel it so that the County would be receiving ad valorem tax under either scenario. The minutes from the September 25, 2001, meeting further state: Mr. Snow replied to County Attorney Garth Coller that there had been recent Supreme Court decisions which may have a bearing on the organic law to the extent that a decision of that nature indicated that the facilities were subject to ad valorem tax, notwithstanding the ownership issue, then they were subject to ad valorem tax and the lease would need to clarify that. He suggested that if the FS or Constitution should change, even in the absence of an interpretation of the Supreme Court decision, the change would obligate the payment of ad valorem taxes pursuant to the constitutional or statutory provisions. He explained that organic law pertained to provisions of FS or the Constitution as opposed to a Court decision. Mr. Snow’s reported reference to recent “Supreme Court decisions” regarding ad valorem taxes undoubtedly was referring the decision, among others, in Sebring Airport Authority v. McIntyre, 718 So. 2d 296 (Fla. 1998). In that decision, rendered a few months after the County entered into the 1998 Lease, the Supreme Court of Florida stated with regard to municipal (as opposed to county) property: [T]here is nothing in article VII, section 3 that allows the legislature to exempt from ad valorem taxation municipally owned property or any other property that is being used primarily for a proprietary purpose or for any purpose other than a governmental, municipal or public purpose. To the extent section 196.012(6) attempts to exempt from taxation municipal property used for a proprietary purpose, the statute is unconstitutional. Id. at 298. The Sebring case did not address tax immunity of county property as distinguished from the issue of tax exemptions for the proprietary use of municipal property. The proposed “Rental Payments” language for revisions to the 1998 Lease, however, demonstrates that the drafters of the comprehensive relocation agreement were aware of the possibility that the Sebring rationale could be expanded and applied to county property. The comprehensive relocation agreement was approved by the County, and executed in late 2001. Attached as to that relocation agreement as Schedule C was an unsigned document entitled “First Amendment to Lease Agreement” that was not to be executed until the new facility was completed and transferred to the County. Subsection 3.3 of the First Amendment to Lease Agreement entitled “Rental Payments” provided: Rental Payments The Lessee shall pay to the Lessor on the due date therefore as set forth in the Lease Agreement, the sum of Three Hundred Thousand and No/100 Dollars ($300,000.00) per annum. The Lessee shall pay to the Lessor on an annual basis, either as rent or by virtue of a payment to Hernando County of an amount (“Additional Payment”) equal to the sum of the following: An amount equal to that portion of the ad valorem taxes that would have been paid to Hernando County on the Leased Premises (as modified by the substitution of the New Facility Site for the Current Hospital Site) if the Leased Premises were not owned by Hernando County but owned by a for profit entity; and An amount equal to that portion of the ad valorem taxes that would have been paid to the Spring Hill Fire and Rescue District, the Township 22 Fire District and/or any other special taxing district that may be established pursuant to law; and An amount equal to all special assessments levied by Hernando County through any Municipal Service Benefit Unit created by Hernando County pursuant to the provisions of Section 125.01, Florida Statutes; and An amount equal to all ad valorem tax levied by Hernando County through any Municipal Service Taxing Unit created by Hernando County pursuant to the provisions of Section 125.01, Florida Statutes. In no event shall the Additional Payments exceed an amount equal to a full ad valorem tax assessment on the New Facility Site as determined annually by the Hernando County Property Appraiser. In the event the Lessee and/or Lessor is required by law to pay ad valorem taxes on the Leased Premises or any portion thereof, the obligation to pay to Lessor the Additional Payment described in this Section 3.3 shall immediately terminate (and/or be adjusted, whichever is applicable), and Lessee shall be responsible for payment of the appropriate ad valorem tax. The First Amendment to Lease Agreement further provided, “[e]xcept as expressly modified herein, all other terms and conditions set forth in the [1998] Lease Agreement are hereby ratified and confirmed.” The new hospital facility was completed and transferred to the County in 2005. On November 15, 2005, the County commission approved documents related to the transfer, including the First Amendment to Lease Agreement in the precise form as attached to the relocation agreement approved in 2001. The approval was obtained on a consent agenda, and the minutes reflect no further discussion by the commission or the public on the documents that were approved. In 2009, the Hernando County School District sued the County Property Appraiser, alleging that the properties subject to the 1998 Lease as amended by the First Amendment to Lease Agreement should not be exempt from ad valorem taxation. In a 13-page Order dismissing the School District’s action, Circuit Judge Daniel B. Merritt, Jr., distinguished the cases disallowing statutory ad valorem tax exemptions for properties owned by special tax districts or cities from the sovereign immunity against ad valorem taxes enjoyed by real estate owned by the State of Florida and its counties. In his ruling, Judge Merritt noted that Florida law specifically makes leasehold interests in governmental property subject to taxation, noting: The Legislature defines leasehold interests as intangible personal property and, hence, assessed by the Florida Department of Revenue, when: (1) rent is due; (2) the property is used for commercial purposes; (3) is not used for agriculture; (4) not financed with revenue bonds, and; (5) the lease is for an initial term of less than 100 years; §§196.199(2)(b), Florida Statutes (2008), 199.023(1)(d), Florida Statutes (2005), specifically preserved in Chapter 2006-312, Laws of Florida (2006). However, see below for further analysis with regard to presumed ownership of property leased for 100 years or more as set forth in §196.199(7), Florida Statutes. Judge Merritt also discussed those instances where “leased” property might not qualify as State or county property where lessees are the “equitable owners,” such as leaseholds of 100 years or more or where properties do not revert to the State until the end of a lease term. In his order, however, Judge Merritt noted that the tax immunity of the County was a fundamental attribute of county property and held that “under the terms of the Lease Agreements the Court concludes that HMA has merely the right to use and possession and is not the beneficial owner as a matter of law Hernando County’s immune property and improvements.” Judge Merritt’s Order was affirmed on appeal. School Board of Hernando County v. Mazourek, Case No. H-27-CA-2009-549 (5th Cir. 2009), per curiam aff’d, 2010 WL 4323055 (Fla. 5th DCA 2010) In December, 2010, the Department notified the County it had been selected for a tax compliance audit under chapter 212, Florida Statutes, Sales and Use Tax. The audit period was from January 1, 2007, through December 31, 2009. The County’s personnel were cordial and receptive during the audit process and the Department’s auditor determined that the books and records kept by the County had adequate internal accounting controls in place and sufficient data integrity. Out of the approximately 19 tax registration accounts the County has with the Department, the Department’s auditor found exception with only tax account #12445797, the tax collected and remitted under its lease with HMA. In her record review, the Department’s auditor noticed invoices and worksheets from the County to HMA, titled “Payment in lieu of taxes.” In examining the First Amendment to the Lease Agreement, Section 3.3 “Rental Payments,” the Department’s auditor determined that the County was not collecting sales tax on a portion of the rent received under that section. The monthly tax return filed by the County under account # 12445797 reflected that it was collecting and remitting the sales tax calculated on the $300,000.00 annual rent payment, but was not collecting and remitting sales tax calculated on the additional payments in lieu of taxes. The Department’s auditor determined the additional payments, required under the lease and made as a condition of occupancy, constituted a taxable transaction as additional rent consideration. The amount of the additional payments, made January 2007 and March 2008, as revealed on the County’s “Payment in lieu of taxes worksheets,” was multiplied by 6.5 percent to arrive at the additional tax amount due of $78,710.17. On December 9, 2010, the Department issued a Notice of Intent to Make Audit Changes, Form DR 1215, advising the County of its audit findings, which included $78,710.17 in taxes due, $14,526.37 in accrued interest through December 9, 2010, and a $19,677.55 late payment penalty. On December 21, 2010, the Department issued its Notice of Proposed Assessment, Form DR 831, showing an assessment of $78,710.17 in tax and $14,707.51 in accrued interest, for a total of $93,417.68 through December 21, 2010, with interest accruing thereafter at the rate of $15.10 per diem. All penalty amounts were waived. At the final hearing, the County argued that the additional payments from HMA under the First Amendment to Lease Agreement were not rent, but rather separate payments to pay for County services. While the actual language used in the First Amendment to Lease Agreement appears to unambiguously indicate that the additional payments were rent, the County offered additional evidence of facts and circumstances beyond the terms of the lease itself in support of its argument that the additional payments were not rent. That evidence was admitted, without objection, and has been considered in determining the intention of the parties to the lease with regard to the additional payments. In addition to evidence that the lease drafters were aware of certain cases decided on the issue of whether the leased premises would be subject to ad valorem taxes, the County offered the testimony of Mr. Mitchell regarding the “Rental Payments” language found in the First Amendment to Lease Agreement. When asked whether there had been much negotiation over the format or wording of the First Amendment to Lease Agreement, Mr. Mitchell recalled: No, there really wasn’t other than, you know, the concept – what this amendment does is what we had agreed to pay rental payment. The rental payment was $300,000. And then, we also had agreed independently just to go ahead and pay the County for certain services that they were providing to us. And then we specified those. Those were independent payments, not part of the rental payment. Mr. Mitchell further testified: [B]asically, this property is free of ad valorem tax. That is why the school board filed their lawsuit because, of course, they were not getting any of the ad valorem taxes. So, the property is free of payment of ad valorem taxes. We’re paying our 300,000. It was very, very clear. However, HMA felt that the County was providing certain services, the fire districts and whatnot. So, independent of the rent, we paid this amount. If you read the section dealing – it’s 3.3.[2], or whatever it is, which I’ll read it to you, it talks about, at the very end – and they did it for whatever reason the property became taxable, you know, it effectively became taxable and we had to pay full ad valorem taxes on the property, then the specialties – these additional payments we called, you know, would go away and they, effectively, be part of rent. That's why it talks about it as such, and it was either additional payment and/or rent. Contrary to Mr. Mitchell’s recollection, section 3.3.2 of the First Amendment to Lease Agreement does not speak in terms of “additional payment and/or rent” but rather states that another payment would be made “either as rent or by virtue of a payment to Hernando County of an amount ('Additional Payment') . . .". Mr. Mitchell makes a valid point regarding the fact that HMA was concerned about having to pay both the additional payment and ad valorem taxes. Consistent with this concern, the lease amendment made it clear that HMA would not have to pay the additional amount if the property ever became subject to ad valorem taxes. Mr. Mitchell’s testimony in support of the County’s contention that HMA’s payment in lieu of taxes under the First Amendment to Lease Agreement was not rent, however, is unpersuasive. Considering the extrinsic evidence offered by the County, especially evidence of the parties concern that the subject County property might someday be subject to ad valorem taxes, together with the 1998 Lease, language negotiated for the proposed relocation agreement, and the actual terms of the First Amendment to Lease Agreement, it is found that the parties intended the language under the "Rental Payments" section to assure that HMA did not have to pay the additional amount twice. The extrinsic evidence offered by the County, however, was insufficient to support a finding that the parties intended to differentiate between “rent” and the “additional payment” or that, however characterized, the payment in lieu of taxes was not rent subject to assessment by the Department. If the parties had wanted to provide language that designated the payment in lieu of taxes as a payment for services instead of rent they could have, as they did in the Second Amendment to Lease Agreement entered into on September 13, 2011, just ten days prior to the final hearing in this case.2/ That Second Amendment to Lease Agreement changed the name of section 3.3 from “Rental Payments,” as found in the First Amendment, to “Rent and Additional Payment for County Services.” Pertinent subsections of the Second Amendment further provided: 3.3.2 Additional Payment for County Services. The Lessee shall pay to Lessor on an annual basis, as an additional payment (“Additional Payment”) for services provided by Hernando County [in its role as a service provider and local taxing authority], . . . * * * The Additional Payment is not intended to constitute “rent” and is not intended to create an event subject to Florida sales tax – but rather is intended to constitute a separate payment for the provision of services, payable to the local taxing authority, as provided in § 212.031(1)(c), Florida Statutes (which allow parties by contractual arrangement to distinguish between payments which are intended to be taxable and payments which are intended to be nontaxable), as this section may be amended or renumbered from time to time.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that, consistent with the Notice of Proposed Assessment dated December 21, 2010, and this Recommended Order, the Department of Revenue enter a final order finding that Petitioner owes tax and interest due totaling $93,417.68 through December 21, 2010, with interest accruing thereafter at the rate of $15.10 per diem, without penalties. DONE AND ENTERED this 30th day of December, 2011, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III 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 December, 2011.
The Issue The issue is whether Petitioner is qualified to be licensed as a Florida real estate sales associate.
Findings Of Fact Petitioner has a Bachelor of Science degree in accounting from Florida State University. After receiving a Florida license as a Certified Public Accountant (CPA) in 1974, Petitioner worked as a CPA in private practice until 1978. He then returned to school at Trinity University, where he earned a Master of Science degree in Health Care Administration. Petitioner worked for the Hospital Corporation of America (HCA) for approximately 20 years. In the early 1980's, Petitioner's job with HCA involved the management of physician clinics. One of the physicians requested Petitioner to prepare some financial statements and to assist with the preparations of some federal income tax returns for a private client. At that time, Petitioner was living and working in two locations: Atlanta, Georgia, and Dothan, Alabama. Petitioner was not licensed to practice as a CPA in any state except Florida. For approximately two and one-half years, Petitioner helped the private client maintain her books. During this time, Petitioner corresponded with the client, sending her letters with CPA after his name. In 1986, Petitioner decided to discontinue his business relationship with the private client. The private client, who was upset, filed a complaint against Petitioner. In 1987, the private client's complaint resulted in Petitioner’s pleading no contest to the offense of identifying himself as a CPA when he was not a licensed CPA in Georgia. Petitioner subsequently satisfied all sanctions related to the Georgia offense. The Florida Board of Accountancy has not disciplined Petitioner's CPA license. At the time of the hearing, Petitioner's Florida CAP license was inactive. In 1991, Petitioner received a stock bonus from his employer, HCA, when it purchased a private hospital. The bonus consisted of stock certificates in a spin-off company known as Quorum Health Care. The stock was restricted and could not be sold for five years. Petitioner never received a Federal Income Tax Form 1099 related to the stock bonus. Petitioner placed the stock certificates in his safe. He did not include the stock bonus on his personal federal income tax return. In 1994, the Internal Revenue Service audited Petitioner's personal tax returns. During the audit, Petitioner disclosed the stock bonus and immediately filed an amended income tax return, paying all tax and interest due and all penalties. In 1996, Petitioner filed a whistleblower lawsuit against his employer for Medicare fraud. Because the lawsuit was filed in Alabama, the United States Attorney in Birmingham, Alabama, intervened in the case. The lawsuit resulted in the recovery of $180,000,000 from Quorum Health Care. Petitioner was entitled to a whistleblower award in the amount of $5,000,000. In 1999, before Petitioner received his financial reward from the lawsuit, the United States Attorney in Birmingham, Alabama, advised Petitioner that he would be charged with failure to file a correct federal income tax return for the years 1991 and 1992. Petitioner granted the government's request to extend the statute of limitations while the government investigated the tax fraud allegations against him. In 2000, Petitioner pled guilty to income tax fraud and agreed to forego any reward for his participation in the whistleblower lawsuit. Petitioner was sentenced to serve two years in a federal prison, followed by one year of supervised probation. Petitioner also paid a $50,000 fine. Petitioner was incarcerated for 367 days. He was released from federal prison in August 2002. His supervised probation terminated February 2004. In January 2006, Petitioner's civil rights were restored. In an effort to prove rehabilitation, Petitioner presented evidence to show his involvement and/or active participation with the following: (a) his church; (b) children's sports programs; (c) Habitat for Humanity; (d) neighborhood hurricane recovery; (e) and other activities beneficial to his friends and family. The following three witnesses testified on Petitioner's behalf at the hearing: (a) Mike Papantonio, an attorney and Petitioner's brother-in-law; (b) Randal Spencer, a Florida licensed real estate broker who, along with his partners, sold a commercial building to Petitioner's wife; and (c) Carl Collins, Petitioner's neighbor since 2000. Each witness testified that Petitioner is honest, trustworthy, and of good character. At the time of the hearing, Petitioner was owner/manager of CommStructure, a company that manufactures and installs cellular towers. Petitioner oversees all financial aspects of the company. Petitioner's wife owns a real estate brokerage company, Spencer Realty. If Petitioner becomes licensed as a real estate sales associate, he would assist his wife in her business. A real estate sales associate, like a CPA, is responsible for important financial transactions where accuracy is important. Therefore, a real estate sales associate must be trustworthy regarding financial matters.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: Respondent enter a final order denying Petitioner a license as a real estate sales associate. DONE AND ENTERED this 20th day of April, 2006, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD 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 20th day of April, 2006. COPIES FURNISHED: Daniel R. Biggins, Esquire Department of Legal Affairs The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Daniel Villazon, Esquire Daniel Villazon, P.A. 1020 Verona Street Kissimmee, Florida 34741 Nancy B. Hogan, Chairman Real Estate Commission Department of Business and Professional Regulation 400 West Robinson Street, Suite 801N Orlando, Florida 32801 Josefina Tamayo, General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792
Findings Of Fact Having considered the pleadings, evidence and legal arguments presented in this cause, the following facts are found: Petitioner is a corporation duly organized under the laws of the State of New Jersey and qualified to do business is one State of Florida. Two of the subsidiaries of Petitioner are Island Properties, Inc., formerly known as Heftler International, Inc., and Island Land Corporation, formerly known as Heftler Construction Company of Puerto Rico, Inc. These corporations are organized under the laws of the State of Florida and the State of New Jersey respectively and maintain principal places of business in Puerto Rico. For the fiscal years ending July 31, 1972 and July 31, 1973, petitioners properly included losses from the operations of the Puerto Rico corporations in their consolidated income tax returns filed with the Internal Revenue Service. For the fiscal years ending July 31, 1972, and July 31, 1973, petitioners timely filed with the respondent consolidated income tax returns including therein the operations of the Puerto Rico corporations. After a timely audit, the respondent excluded, for the purposes of computing adjusted federal income as defined by 220.13, the losses sustained by the Puerto Rico corporations. The respondent also excluded from the computation of the apportionment factors defined in F.S. s. 214.71 and 220.15 the value of the property, payroll and sales utilized in the operations of the Puerto Rico corporations. The respondent cited F.S. ss. 220.13(1)(b)2.b, 220.15(3) and 214.71 as its authority. The adjustments made by the respondent results in a net proposed deficiency of $75,076.46 for the two fiscal years in question. After attempts by the parties to resolve the issues by informal means failed, the petitioner requested a formal hearing and the respondent requested the Division of Administrative Hearings to conduct the hearing.
Recommendation Based upon the above findings of fact and conclusions of law, it is recommended that there is no basis for affording petitioners any relief from the proposed deficiency and that said deficiency in the amount of $75,076.46 be sustained. Respectfully submitted and entered this 20th day of November, 1975, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Lewis M. Kanner, Esquire WILLIAMS, SALOMON, KANNER DAMIAN 1003 du Pont Building Miami, Florida 33131 E. Wilson Crump, II, Esquire Assistant Attorney General Department of Legal Affairs Tax Division, Northwood Mall Tallahassee, Florida 32303 Mr. J. Ed Straughn Executive Director Department of Revenue Tallahassee, Florida 32304
The Issue The issue in this proceeding is whether Petitioner, Richard Ruble, is entitled to renewal of his loan originator license, pursuant to chapter 494, Florida Statutes.
Findings Of Fact The Parties Petitioner, Richard Ruble, holds a loan originator license, National Mortgage Licensing System Identification Number 209981 ("LO License"), which was issued by Respondent, Office of Financial Regulation, and is the subject of this proceeding. Respondent is the state agency charged with administering and enforcing chapter 494, including part II of that statute, which regulates loan originators. Background and Evidence Adduced at the Final Hearing Petitioner has held his LO License since approximately 2004. As required by section 494.00312(7), Florida Statutes, loan originator licenses must be annually renewed.2/ In 2005 and 2006, Petitioner earned a substantial income from his business as a loan originator for real estate mortgage loans. As a result, he incurred a substantial federal income tax liability. When the real estate market took a dramatic downturn starting in 2007, Petitioner's income also dramatically dropped. He suffered significant loss of income starting in 2007. As a consequence, he has been unable to pay his federal income taxes since 2006. As a result of Petitioner's federal income tax liability for the years of 2005 and 2006, on February 12, 2013, the Internal Revenue Service(“IRS”) recorded a Notice of Federal Tax Lien ("Tax Lien") against Petitioner's real property located at 3801 South Ocean Drive, Unit 6Z, Hollywood, Florida,3/ and in Leon County, Florida. As a consequence of the creation of the Tax Lien, information constituting "adverse credit history information," as defined in Florida Administrative Code Rule 69-40.0113(2), has been included in his credit report. The inclusion of adverse credit history in Petitioner's credit report prompted Respondent to contact Petitioner sometime after February 12, 2013, and before June 8, 2013, and request him to provide specified information about release or payment of the Tax Lien by a June 8, 2013, deadline. Petitioner, through his counsel, contacted Respondent by correspondence dated June 7, 2013, explaining the circumstances under which the Tax Lien had been created and stating that Petitioner would provide the requested information, and notifying Respondent that Petitioner's accountant would need additional time beyond the June 8, 2013, deadline to gather and provide the requested information. On July 30, 2013, Respondent proposed to deny renewal of Petitioner's LO on the basis of the Tax Lien. On August 13, 2013, Petitioner provided to Respondent the requested additional information explaining the circumstances under which the Tax Lien was created. On August 15, 2013, Respondent withdrew its notice of denial of renewal of Petitioner's LO License; this withdrawal document expressly stated: "Please consider the Notice of Denial previously issued as withdrawn and of no force and effect." Respondent renewed Petitioner's LO, effective August 15, 2013. On December 30, 2013, Petitioner applied to renew his LO license for the year 2014. On June 30, 2014, Respondent issued a notice of denial of renewal of Petitioner's LO. Petitioner timely requested a hearing challenging the proposed denial of the renewal of his LO License. However, before the final hearing in that proceeding, the parties settled the matter by executing a Settlement Stipulation, a condition of which was that Petitioner provide, by December 31, 2014, all information required by Respondent to complete review of the renewal application for his LO. To comply with this condition, on December 22, 2014, Petitioner submitted Respondent's4/ Response Pursuant to Settlement Stipulation ("Response"), consisting of an explanation of his adverse credit history due to the Tax Lien and two lines of credit he had taken out to cover his business and personal expenses after the 2007 economic downturn and his consequent loss of income. The Response was supported by extensive documentation consisting of Petitioner's personal and business federal income tax returns; correspondence from Petitioner's counsel to Respondent addressing the Tax Lien and the status of Petitioner's efforts to resolve the Tax Lien matter with the IRS; and correspondence from the IRS dated September 8, 2014, stating that due to information Petitioner had provided, it (the IRS) had refunded some taxes paid and applied them to Petitioner's 2005 tax liability, which had, in part, given rise to the Tax Lien. On December 24, 2014, a Final Order incorporating the Settlement Stipulation was issued, and the file was closed on December 29, 2014. On December 31, 2014, Petitioner filed, and Respondent deemed received, Petitioner's application to renew his LO License for the year 2015. Sometime before October 19, 2015——over nine months later——Respondent informed Petitioner that the information that he had provided was not substantively adequate to support renewal of his LO License for 2015. Thereafter, on October 19 and December 14, 2015, Petitioner, through his counsel, submitted information consisting of copies of his income tax returns filed with the IRS for years 2005 through 2010, as well as copies of his 2011, 2012, and 2013 income tax returns that were filed with the IRS by his accountant, Chris Bagnall. The last three years of tax returns (for years 2011, 2012, and 2013) were offered by Petitioner as evidence that he was working diligently with the IRS to become current with respect to his filed income tax returns. On December 28, 2015, Petitioner applied to renew his LO License for the year 2016. On February 15, 2016, Respondent issued a Notice of Intent to Deny Renewal Application for Loan Originator License Pursuant to Chapter 494, Florida Statutes (hereafter, "Notice of Intent to Deny"), proposing to deny Petitioner's application to renew his LO License for the years 2014, 2015, and 2016.5/ The Notice of Intent to Deny cited three grounds, two of which remain pertinent to this proceeding: (1) Petitioner failed to demonstrate that he possessed the general fitness and responsibility necessary to command the confidence of the community and warrant a determination that he, as the applicant, would operate honestly, fairly, and efficiently, as required by section 494.00312(4)(b) and rule 69V-40.113; and (2) a background check revealed that Petitioner's credit history contained adverse credit history information——specifically, that the IRS holds an outstanding federal income tax lien on property owned by Petitioner. At the final hearing, Respondent expressly abandoned the third ground for its proposed denial—— specifically, that Petitioner had failed to provide certain information as required under the terms of a final order of settlement (discussed in greater detail below); accordingly, that ground is no longer at issue in this proceeding.6/ At the final hearing, Petitioner presented the testimony of his accountant, Chris Bagnall, who was retained in 2013 to assist Petitioner in preparing and submitting his overdue tax returns for years 2005 through 2015, and negotiating a plan for paying his past due income taxes for these years. Bagnall explained that it is the IRS's preference to have the taxpayer make payments toward the outstanding liability, and then to issue refunds if the taxpayer has overpaid. Alternatively, if the taxpayer is not able to make payments toward resolving the outstanding tax liability, the IRS will negotiate payment plans applying the carryback rules, which allow income gains and losses to be "netted out" for purposes of determining overall tax liability. Under this approach, the IRS will not negotiate payment plans until all past due tax returns have been filed. In the meantime, interest and penalties continue to accrue on the outstanding income tax liability. Bagnall testified, credibly, that after the real estate market crash in 2008, Petitioner did not have the money to pay the income tax he owed, and he used what little money he did have to try to keep his business afloat. Because Petitioner was not in a position to make a payment toward his tax liability due to his drastically diminished income, and due to not having timely filed income tax returns for several years, he was not in a position to negotiate a plan with the IRS to pay the income taxes he owes. In the meantime, interest and penalties on Petitioner's past due taxes continued to accrue. As of the date of the final hearing, Petitioner's total liability was approximately $366,000, a significant portion of which was attributable to penalties and interest accruing on the outstanding tax liability.7/ Bagnall testified that since Petitioner retained him in 2013, he has been preparing and filing Petitioner's past due income tax returns in batches, as Petitioner has been able to garner the funds to pay for Bagnall's accounting services. As of the date of the final hearing, Bagnall recently had filed Petitioner's income tax return for 2014, and he testified, credibly, that he would be filing Petitioner's 2015 income tax return within a few days after the final hearing. Once Petitioner's 2015 return was filed, he would be current regarding the filing status of his income tax returns, so finally would be in a position to negotiate with the IRS to develop a plan to pay off his tax liability, with the ultimate aim of dissolving the Tax Lien. Petitioner acknowledged that as of the date of the final hearing, he had not voluntarily made any payments toward addressing his income tax liability. Additionally, Petitioner's tax returns show gambling losses of $8,782 in 2011, $2,100 in 2012, and $18,546 in 2013. However, as discussed above, the evidence shows that Petitioner, through Bagnall, is taking a comprehensive approach to resolving his income tax liability based in part on the use of the carryback rules to net out his overall tax liability. The evidence does not show that it would have been feasible for Petitioner to have made individual payments toward his outstanding tax liability until all of his returns had been filed and he was in a position to negotiate a repayment plan. Respondent elicited testimony from Petitioner that in the application for renewal of his LO License filed in December 2013 for the year 2014, he had failed to disclose the existence of the Tax Lien until Respondent brought to his attention that they were aware of the existence of the Tax Lien. Respondent also elicited testimony that until brought to his attention by Respondent, Petitioner had failed to disclose, in his LO License renewal application filed in December 2015 for the year 2016, that he had filed for personal bankruptcy in September 2015. Respondent elicited this testimony to establish that Petitioner exhibited a pattern of being untruthful and incomplete in his responses to the application questions, and, thus, lacks the character to warrant a determination that he would operate honestly, fairly, and efficiently, as required by rule 69V-40.0113(3)(b), for purposes of entitlement to renewal of his LO License.8/ However, the evidence does not clearly and convincingly show that Petitioner intended to be untruthful in his application responses or to hide the existence of the Tax Lien or his personal bankruptcy from Respondent. It is as plausible that Petitioner omitted this information in error. With respect to the Tax Lien, the evidence shows that Petitioner had previously disclosed the creation of the Tax Lien to Respondent in correspondence dated June 13, 2013, and had, at that time, provided an explanation regarding the events leading to its creation. It would simply be nonsensical for Petitioner to intentionally falsely deny the existence of the Tax Lien on his application when he had previously submitted that very information to Respondent. Similarly, with respect to disclosure of his personal bankruptcy, Petitioner credibly testified that the matter had been a topic of discussion with Respondent's staff for a period of months. Although Petitioner amended his 2016 LO License renewal application only shortly before the final hearing to correctly reflect that he had filed a personal bankruptcy petition within the past 10 years, the credible evidence indicates that Petitioner believed that Respondent was aware of his personal bankruptcy through previous discussions with Respondent's staff, so would have had no motivation to intentionally provide false information regarding that matter on his renewal application. No evidence was presented at the hearing showing that Petitioner has ever engaged, in the course of conducting his mortgage loan originator business, in any fraudulent, dishonest, or other conduct harmful to the consuming public. Findings of Ultimate Fact The undersigned found Petitioner to be credible and forthright in his explanation of the creation and status of the Tax Lien, his personal bankruptcy, the filing of his tax returns, and his ongoing efforts to resolve his adverse credit history issues that have affected renewal of his LO License.9/ As discussed in detail above, Petitioner's adverse credit history information is, at least in some significant measure, a result of circumstances largely beyond Petitioner's control. When the real estate market collapsed in 2008, Petitioner suffered an immediate, dramatic drop in income; at that point, he incurred the large tax liabilities with which he has been burdened ever since. As discussed above, due to Petitioner's lack of income during and after the real estate market crash, it took some time for him to obtain the accounting services he needed in order to file his overdue tax returns——an essential step in negotiating a tax payment plan with the IRS. Although Petitioner's efforts to resolve the Tax Lien with the IRS have taken some time, Petitioner finally is, or soon will be, in a position to negotiate a payment plan with the IRS to pay his tax liability and, ultimately, resolve the Tax Lien. Before now, Petitioner has not been in a position to comprehensively and systematically pay down his tax liability pursuant to a negotiated plan. Thus, at this juncture, Petitioner's lack of voluntary payments toward resolving his Tax Lien and his gambling losses have not been determined a basis for finding that Petitioner lacks the character, general fitness, and financial responsibility to entitle him to renewal of his LO License.10/ The persuasive evidence shows that Petitioner is making steady progress toward getting himself in the position, through bringing himself current in his income tax returns filings, to negotiate a payment plan with the IRS in order to comprehensively and systematically pay down his tax liability with the aim of dissolving the Tax Lien. For these reasons, the undersigned finds that Petitioner has shown that he possesses the character, general fitness, and financial responsibility to warrant a determination that he will operate honestly, fairly, and efficiently such that his LO License should be renewed for the year 2016.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent issue a final order approving renewal of Petitioner's loan originator license for the year 2016. DONE AND ENTERED this 27th day of January, 2017, in Tallahassee, Leon County, Florida. S CATHY M. SELLERS 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 27th day of January, 2017
The Issue The issue is whether the Application for Registration as an Associated Person filed by Petitioner should be granted.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Respondent enter a final order denying Petitioner's application for registration as an associated person of Noble Investment Company of Palm Beach. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 17th day of February 1993. WILLIAM R. DORSEY, JR. 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 17th day of February 1993. COPIES FURNISHED: Karen M. Camechis H. Richard Bisbee Assistant General Counsels Department of Banking and Finance Suite 1302 The Capitol Tallahassee, Florida 32399 Ardith H. Steele 1639 South University Drive Plantation, Florida 33324 The Honorable Gerald Lewis Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves General Counsel The Capitol Room 1302 Tallahassee, Florida 32399-0350
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that petitioners' request for a refund of corporate income taxes for the year ending January 31, 1975, be DENIED. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 14th day of January, 1981. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of January, 1981.
The Issue The Respondents have been charged with multiple violations of Chapter 494, (1987), the Florida Mortgage Brokerage Act, and administrative rules promulgated pursuant to the act. The violations, described in an amended administrative complaint dated April 16, 1990, are as follows: Rule 3D-40.006(5), F.A.C.: Respondents failed to issue a statement signed by both parties, when receiving a deposit on a mortgage loan, regarding disposition of the deposit and other matters. Section 494.08(10), F.S. and Rule 3D-40.091(2), F.A.C.: Respondents failed to provide a written statement with a summary of limits and conditions for recovery from the Mortgage Broker Guaranty Fund. Section 494.055(1)(b), F.S. and Rule 3D-40.008(1), F.A.C.: Respondents assessed fees for credit reports, phone calls, appraisals and courier services, which fees were not supported by the files. Section 494.055(1)(0), F.S. and Rule 3D-40.006(4), F.A.C.: The department had to issue a subpoena for compensation records. Section 494.055(1)(g) and (p), and Section 494.08(5), F.S.: Borrowers were required to pay higher closing costs than were disclosed on the good faith estimate form. Section 494.08(5), F.S.: Respondents failed to secure executed modified mortgage loan applications from the borrowers or to return excess monies to the borrowers. Section 494.08(5), F.S. and Rule 3D-40.091(1), F.A.C.: Respondents accepted deposits from loan applicants but failed to obtain executed mortgage broker agreements which would disclose the cost of the loans. Sections 494.055(1)(b) and (g), and Sections 494.093(3)(a), (b), (c), and (4), F.S.: Respondents failed to disclose that they would retain both origination fees and discount points as their compensation, and failed to disclose compensation received from the lender in addition to brokerage fees assessed the borrowers on the closing statements. Section 494.055(1)(b), F.S., Section 494.08(5), F.S. and Sections 494.093(3)(a), (b), (c) and (4), F.S.: Respondents collected a servicing release fee from the borrowers when the Respondents were not the lender, and failed to disclose the collection. Section 494.055(1)(e), F.S. and Rule 3D-40.006(b)(a), F.A.C.: Respondents failed to maintain an escrow account.
Findings Of Fact Inlet Mortgage Company, Ltd. ("IMC") is a mortgage brokerage business operating under license #HB65002147500. Its place of business is 700 Virginia Avenue, Suite 105, Ft. Pierce, Florida 34982. John Davis is the principal mortgage broker of Respondent IMC, operating under license #HA246700273. He has been licensed in Florida since approximately 1987, and opened his business in February 1988. As authorized by Section 494.065(1), F.S. (1987), the Department of Banking and Finance ("department") conducted an examination of the affairs of the Respondents for the time period February 1988 through June 1, 1988. The examination was completed on July 5, 1988, with a written report. At the time of the examination Respondents had closed only four loans and had another six in progress. The audit was conducted because a loan processor working for IMC had applied for her mortgage broker license, and her application seemed to imply that she was already practicing mortgage brokering. The audit cleared up this question and the processor was not found to be operating improperly. However, Timothy Wheaton, the department examiner, found other violations by IMC. When an audit or review is conducted by the department, the agency staff first interviews the person in charge to explain the review and to learn about the company. The staff then looks at the licenses, reviews files of closed and active loans, and examines books and accounts, payroll records, and the like. Generally, a sampling of loan files is selected from the broker's loan log, but in this first review all loans were reviewed, as so few existed. The staff writes a preliminary report and conducts an exit interview to let the broker know its findings. Later, a formal report is completed and provided to the broker, who has thirty days to respond. Timothy Wheaton conducted his review of IMC and John Davis at the company office in Ft. Pierce on June 3, 1988 and June 7, 1988. At some point on June 3rd, Wheaton was reviewing compensation records to determine how the broker, his partner and the loan processor were paid. Davis had checkbooks available, but the accountant had not prepared his books as the office had just opened. Wheaton had questions as to whether the checkbooks were all that was available; when he asked for the payroll records, Davis told him he would have to subpoena them. Wheaton returned on Monday with a subpoena and was given the same records as before. Davis admits that he made the demand for the subpoena. He was piqued because he was very busy when the audit staff arrived, and when he suggested they return later, he felt they wrongfully impugned his motives and accused him of hiding something. Respondent Davis has admitted to several "technical" violations or oversights in the loan files at the time of the first review. A summary of the limits and conditions of recovery from the Mortgage Brokerage Guaranty Fund was not being provided, but has been provided since the first audit. Deposits for credit report, appraisal fees and other costs were collected from the borrowers, but the files did not include a statement, signed by the borrowers, describing disposition of the funds in the event that the loan was not consummated, or the term of the agreement. After the first audit Davis has provided such a form statement and has included it in each file. On three closed loans, and one that was still pending, the files did not include documentation to support minimal (i.e., $25.00, $10.00, $6.56) fees for phone calls and courier fees, or fees were collected which exceeded the documentation in the file. Davis explained that these are charges made by the closing attorney, and the files now document those expenses. The difference between what was collected for a credit report and what was spent was returned to the borrower. (For example, $20.30 was returned to borrower, G. Stewart). In three loans closed at the time of the first audit, Davis and IMC received as compensation both the origination fee and a portion of the discount points. In the McCurdy loan, IMC received its 1 percent origination fee ($600.00), plus one half of the 1 percent discount fee ($300.00). In the Alexander loan, IMC received its 1 percent origination fee ($469.00), plus a .75 percent discount fee ($351.75). In the Stewart loan, IMC received its 1 percent origination fee ($612.00), plus 1/2 percent discount fee ($306.00). In each case, the Good Faith Estimate form provided to the borrowers disclosed the fees separately and did not break out which portion of the loan discount would be paid to the lender and which portion would be paid to IMC. The origination fee is sometimes called the broker's fee, although some banks also collect the fee when a mortgage broker is not involved. Discount points are a one-time payment to a lender to increase its yield on the loan. They are a percentage of the loan, paid up front, to reduce the interest rate over the term of the loan. These are distinctly different forms of charges to the borrower. Davis claims that he explained orally to each borrower how much compensation he would receive. The borrowers do not remember the specifics of that explanation, but rather consider the total origination fee and discount fee as their cost of the loan. They knew that the broker was going to be compensated for his services and understood that compensation would come from those fees in some unspecified manner. Davis claims that he checked with some lenders who told him that it was standard practice for part of the broker's compensation to be called a "discount" fee. He considered it a tax advantage to the borrower, as discount fees could be deductible, just as interest is deductible. During the audit, Davis discussed his compensation practice with the agency staff, who explained that, whatever it is called, the broker's compensation had to be fully disclosed to the borrower at the time of application on the Good Faith Estimate form. Between June 3rd and June 7th, Davis attempted to redisclose his compensation to the borrowers, but this resulted in unsigned disclosure forms in the file when the agency review staff returned on June 7th to complete the audit. At the time of the first audit, Davis and IMC maintained an escrow account for the deposits received from applicant/borrowers for audit reports, appraisal fees and other costs. Davis later closed his escrow account because he felt it was costing him money and because he did not consider the funds he received at the time of application to be escrow deposits. In most cases, the credit report and appraisal and other relevant services were ordered the same day as the loan application. Whether the loan was eventually consummated, the customer was still responsible for paying the charge if the services were provided. This is disclosed in a statement at the bottom of the Good Faith Estimate form and in a separate "Notice to Borrower", signed by the applicant which, since the first audit, is maintained in the loan file. According to the Notice to Borrower, if the loan is cancelled or denied, and the services have not been performed, the funds will be returned to the customer, less any cancellation charge by the appraisal or credit firm. These funds are deposits. When the escrow account was closed, Davis deposited the money for appraisals and credit report in his operating account. After services were rendered and an invoice received, he would pay the bill. Barbara Janet (Jan) Hutchersien, conducted the department's second audit of IMC in January 1990. This review covered the period from July 1, 1988 through December 31, 1989. John Davis provided the boxes of loans and bank records and loan log. The auditor used the logs to review a sample of loans from each lender with whom IMC works. The bank records were used to trace funds reflected in the loan files. Ms. Hutchersien found, and noted in her examination report, that no escrow account was maintained, although deposits were received in a sample of loan applications. In the Fishman loan, which closed on 4/11/89, closing costs were disclosed by IMC as $1,822.00 on the Good Faith Estimate form dated 1/12/89, yet those costs actually amounted to $2,075.00, disclosed at closing on the U.S. Housing and Urban Development (HUD) Settlement form, for a difference of $253.00. In determining consistency between a good faith estimate and actual closing costs, the agency staff looks at items which are predeterminable costs. In the Fishman case, the estimate for survey was $225.00, but the actual cost was $400.00, due, according to John Davis, to an oddly-shaped lot. In two loans financed by Greentree Mortgage Corporation, IMC received a substantial fee from the lender, which fee was not disclosed on the Good Faith Estimate form, on the HUD Settlement form, or anywhere in writing to the borrower. File documents call these fees "discount for pricing". In the Meslin loan, closed on 8/11/89, the fee from the lender to broker was $432.00; in the Krueger loan, closed on 7/21/89, the payment was $820.00. These paybacks are called "par plus pricing", a relatively new (within the last five years) form of loan pricing. Par plus pricing allows a borrower who does not wish to pay cash at closing, but who would qualify for a higher interest rate in terms of monthly payments, to avoid paying discount points fee at closing. Instead, the lender pays the points to the broker, and the borrower gets a higher interest rate. This is contrasted with the discount point system where the borrower pays cash points at closing in return for a lower interest rate. Par plus pricing can work to the advantage to all parties: The borrower avoids a large cash outlay at closing, the lender enjoys a higher interest rate over the term of the loan, and the broker receives his money from the lender. The borrower, however, should understand his options, including the option to pay cash at closing for a lower interest rate. Davis did not disclose the payback from the lender in writing because that is the way he says he was told to handle the loan by Greentree's representative. Davis told the borrowers that he was getting his money from the lender. He did not, however, explain that the borrower would be paying a higher interest rate in return, and Roger Krueger did not understand why his loan was at 10 1/4 percent, rather than 9 3/4 percent, which he thought was the going rate at the time of closing. IMC also received funds from the lender in the Barnes loan, closed on 12/30/88. Cobb Financial Partners was the original lender, yet they paid IMC a service release fee ordinarily paid by one lender to another for release of servicing a loan. Although the fee from Cobb to IMC was not disclosed in writing to the borrowers, the Barnes' were told that the fee for IMC's services would come from the lender, rather from them. They were told, and it is disclosed on the Good Faith Estimate form, and on the HUD Settlement Form, that Cobb Partners Financial was paid $900.00 (1.25 percent loan discount) by the borrowers. Of this, $810.00 was returned by Cobb to IMC. John Davis concedes that Cobb, not IMC, was the lender and was not "comfortable" with how Cobb told him to handle his fee. He has not done business with Cobb since this loan and was simply trying to avoid having to charge his fee to Barnes, who had just arrived in town to become the newspaper editor. The borrowers who were the subject of the files in which the agency found violations generally did business with Davis and IMC because they thought he would get the best deal for them. They were financially unsophisticated and trusted him to represent them. They understood that he was being paid for his services and felt that he should be paid. Except for Mr. Krueger, they were generally satisfied with their mortgage rates. The mortgage broker's fiduciary responsibility is to the borrower, rather than the lender, although he must deal fairly and honestly with the lender. The service that the broker provides to the borrower is his knowledge and his ability to shop for the best product. Par plus pricing and other mechanisms by which the broker receives his fee in whole or part from the lender are not considered by the department to be a violation of standards governing the practice of mortgage brokerage, so long as the customer is fully apprised of his options and is informed of the role of those payments in the product or service they are receiving. The Barnes' and Kruegers clearly were not so apprised, nor does the record establish that the Meslins were informed, although they did not testify. Categorizing brokerage fees or compensation as "discount points" is patently misleading, as discount points are used to buy down an interest rate. When the points are diverted instead to the broker, the consumer does not receive the loan for which he has paid. John Davis admits certain technical violations, but unequivocally denies that he wilfully misled his customers or committed fraud. Since the second audit, he has restored his escrow account. He now discloses his compensation as brokers fees rather than discount points, and has learned how to disclose in writing the par plus pricing loans. In considering certain violations as "technical", and in recommending a penalty in this case, the undersigned has considered Respondents' willingness to correct the errors addressed by the department and Respondents' inexperience at the time of the first audit. Although he was involved in banking, insurance, and accounting, John Davis had not practiced mortgage brokering before moving to Florida and starting his business. In his early practice, as evidenced by his own testimony, he was willing to rely on the advice of lenders, rather than to seek guidance from his licensing authority. He misconceived his role as being jointly responsible to the borrowers and lenders with whom he worked, rather than a primary fiduciary duty to the borrowers, his clients. Although the concealment of compensation as discount points was a willful misrepresentation, the record establishes a pattern of ignorance, albeit inexcusable, rather than fraud.
Recommendation Based on the foregoing, it is hereby, RECOMMENDED That a Final Order be entered, finding that Respondents violated Sections 494.055(1)(e), (o), and (q), F.S. (1987); Sections 494.08(5) and (10), F.S. (1987); and Section 494.093(4), F.S. (1987), and imposing a penalty of $1,000.00 fine, and one year probation, with the conditions that Respondent Davis successfully complete a specified amount and type of professional short course work and undergo periodic review and supervision by the agency. DONE AND RECOMMENDED this 30th day of July, 1990, in Tallahassee, Leon County, Florida. MARY CLARK, 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 30th day of July, 1990. APPENDIX The following constitute specific rulings on the findings of fact proposed by the parties. Petitioner's Proposed Findings of Facts Rejected as unnecessary. Adopted in paragraphs 3 and 6. Adopted in paragraphs 5 and 6. Rejected as redundant. - 8. Rejected as unsupported by the weight of evidence except as found in paragraph 6. The department was required to obtain a subpoena due to Respondents' feigned or real refusal to produce certain records. Rejected as unnecessary. Adopted in substance in paragraph 13. Adopted in substance in paragraph 7. Adopted in substance in paragraph 7. - 18. Rejected as unnecessary. Adopted in summary in paragraph 8. Rejected as immaterial. The telephone charges were incurred by the closing agent, not Respondents. Rejected as unnecessary. Rejected as contrary to the weight of evidence. Rejected as unnecessary. Adopted in summary in paragraph 7. and Rejected as unnecessary and - 48. Adopted in summary in paragraph 8. 49. - 52. Adopted in summary in paragraph 14. Adopted in paragraph 15. Rejected as unnecessary. Adopted in paragraph 13. and Rejected as unnecessary. Adopted in paragraphs 16 and 20. 59 - 74. Adopted in summary in paragraphs 16-19. Rejected as unnecessary. The conclusion that the handling of "par plus pricing" was fraudulent is rejected as contrary to the weight of evidence. 77. - 81. Adopted in summary in paragraphs 20 and 21. 82. Rejected as contrary to the weight of evidence. 83. Adopted in paragraphs 10 and 12. 84. Adopted in paragraph 10. 85. - 89. Rejected as unnecessary. 90. Adopted in paragraph 22. 91. - 93. Rejected as unnecessary. 94. Adopted in part in paragraph 26. Respondent's Proposed Findings of Fact Adopted in paragraphs 1 and 2. Rejected as unnecessary. Adopted in paragraph 6. Rejected as contrary to the weight of evidence. Adopted in paragraph 3. Adopted in paragraph 13. - 9. Adopted in summary in paragraph 7. Rejected as contrary to the evidence. Liability for payment occurs when the service is rendered, as reflected in Respondent's "Notice to Borrower". Rejected as unnecessary. Adopted in paragraph 12. Rejected as unnecessary and immaterial. Rejected as unnecessary. - 19. Adopted in summary in paragraph 8. 20. - 22. Rejected as unnecessary. Adopted in paragraph 14. Adopted in substance in paragraph 13. Adopted in substance in paragraph 16. Adopted in substance in paragraph 19. Rejected as unnecessary. - 29. Rejected as contrary to the weight of evidence. Included in conclusion of law number 9. Rejected as immaterial. - 33. Rejected as contrary to the evidence. The terms implied that the loans would be at a discounted rate, but were not, because the "discount" (partial) went to the broker. Adopted in paragraphs 19 and 20. Rejected as immaterial. COPIES FURNISHED: Elise M. Greenbaum, Esquire Office of the Comptroller 400 W. Robinson St., Suite 501 Orlando, FL 32801 John O. Williams, Esquire Renaissance Square 1343 East Tennessee St. Tallahassee, FL 32308 Hon. Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, FL 32399-0350 William G. Reeves General Counsel Dept. of Banking & Finance The Capitol Plaza Level, Rm. 1302 Tallahassee, FL 32399-0350 =================================================================
Findings Of Fact Having heard oral argument on the issues and considered the pleadings and the record transmitted to the respondent by the BTA, the following pertinent facts are found: For seven years prior to the tax year 1973, petitioners property had received an educational exemption from ad valorem taxation. By letter dated June 1, 1973, petitioner was advised by the tax assessor that its property had been denied tax exemption for the reason that no application for exemption had been received. Upon receipt of this letter, which wascorrectly addressed, petitioner immediately contacted the Exemption Department of the assessors office, advised them that he had not received an application form in the mail, and was informed that the application had been mailed to the wrong address, apparently the address of one of the former owners of petitioner. The reason for the application being sent to the wrong address was because, for the first time, the assessor's office was using new application forms prepared by data processing and the old address had not been changed in posting. Upon receipt of the application form, petitioner completed it and returned it to the assessors office on June 11, 1973. Had the application form, petitioner completed it and returned it to the assessors office on June 11, 1973. Upon appeal to the Broward County BTA, the BTA unanimously granted the tax exemption upon the recommendation of the tax assessor. The BTA notified the respondent's Executive Director of the change. It was the respondent's staff recommendation to invalidate the change for the reason that the BTA did not have before it information legally sufficient to warrant such change. Petitioner requested a hearing to review the staff recommendation, the respondent's Executive Director requested the Division of Administrative Hearings to conduct the hearing and the undersigned was assigned was assigned as the Hearing Officer.
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that the action of the Broward County Board of Tax Adjustment in granting petitioners property an educational exemption from ad valorem taxation be validated and affirmed. Respectfully submitted and entered this 23rd day of February, 1976, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675
Findings Of Fact Having considered the pleadings and the record as reconstructed by the parties, as well as oral argument on the issues, the following pertinent facts are found: For the years previous to 1973 and for the years subsequent to 1973, petitioner has been granted a partial charitable exemption from ad valorem taxation, pursuant to F.S. 196.012(6). Petitioner's secretary, who was the only full-time salaried employee and officer of petitioner's organization, had the responsibility of reviewing and answering all correspondence addressed to petitioner. Due to the secretary's illness and subsequent demise, an application for ad valorem tax exemption for 1973 was not timely filed, and the property appraiser thus denied the exemption. For the tax year 1973, a charitable exemption would have been granted petitioner had it timely filed its application and return by April 1, 1973. Upon appeal by petitioner to the Broward County BTA on the stated grounds of "change of officers," the BTA granted the exemption upon the recommendation of the tax assessor. The BTA notified the respondent of the change in the assessor's action. The staff recommendation of the respondent was to invalidate said change on the ground that petitioner failed to demonstrate that it came within an exception to the waiver rule of Section 196.011 and therefore the change by the BTA lacked legal sufficiency and/or the evidence presented was insufficient to overcome the assessor's presumption of correctness. Petitioner requested a hearing to review the staff recommendation, the Executive Director of the respondent requested the Division of Administrative Hearings to conduct the hearing, and the undersigned was assigned as the Hearing Officer.
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that the action of the Broward County Board of Tax Adjustment granting the exemption be invalidated. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 12th day of February, 1976. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings Carlton Building, Room 530 2009 Apalachee Parkway Tallahassee, Florida 32304 (904) 488-9675 NOTE: Text within the *-* is unreadable on the document on file with the Division. Therefore, the complete text is not available in this ACCESS document. COPIES FURNISHED: Mr. J. Ed Straughn Executive Director Department of Revenue The Capitol Tallahassee, FL 32304 Mr. Thomas M. Coker, Jr. 328 Bayview Building 1040 Bayview Drive Ft. Lauderdale, FL 33304 Mr. Stephen E. Mitchell Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, FL 32304 Mr. Gaylord A. Wood 603 Courthouse Square Building 200 SE 6th Street Ft. Lauderdale, FL 33301
