01-003933PL Department Of Insurance vs. Matilda M. Vath Status: Closed Recommended Order on Friday, February 22, 2002.

Summary: Bail bondsman failed to properly account for and refund money paid by indemnitor.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE, )

)

Petitioner, )

)

vs. ) Case No. 01 - 3933PL

)

MILDRED M. VATH, )

)

Respondent. )

_____________________________________)

DEPARTMENT OF INSURANCE, )

)

Petitioner, )

)

vs. ) Case No. 01 - 3934PL

)

JOHN L. VATH, )

)

Respondent. )

_____________________________________)

RECOMMENDED ORDER

On November 30, 2001, a formal administrative hearing in

this case was held by videoconference in Tallahassee and Tampa,

Flori da, before William F. Quattlebaum, Administrative Law

Judge, Division of Administrative Hearings.

APPEARANCES

For Petitioner: James A. Bossart, Esquire

Department of Insurance

Division of Legal Services

200 East Gaines Street, Room 612

Tallahassee, Florida 32399

For Respondent: Joseph R. Fritz, Esquire

4204 North Nebraska Avenue

Tampa, Florida 33603

STATEMENT OF THE ISSUE

The issue in the case is whether the allegations of the

Administrative Complaints filed by the Petitioner against the

Respondents are correct and if so, what penalty should be

imposed.

PRELIMINARY STATEMENT

By Administrative Complaints filed on April 10, 2001, the

Department of Insurance (Petitioner) alleged that Matilda M.

Vath and John L. Vath (Respondents) violated various provisions

of the Florida Statutes in their bail bond business. The

Respondents requested a hearing to address the allegations. The

Petitioner forward ed the requests to the Division of

Administrative Hearings, which scheduled and conducted the

proceeding. The case was transferred to the undersigned

Administrative Law Judge on November 27, 2001.

At the hearing, the Petitioner presented the testimony of

two witnesses and had Exhibits numbered 1 - 4 and 7 - 12 admitted

into evidence. The Respondents testified on their own behalf.

A Transcript of the hearing was filed on December 17, 2001.

Both parties filed Proposed Recommended Orders on January 15,

2002.

FINDINGS OF FACT

1. The Petitioner is the state agency responsible for

licensure and regulation of limited surety agents (bail

bondsmen) operating in the State of Florida.

2. The Respondents are individually licensed as limited

surety agents in F lorida and are officers and directors of "Big

John Bail Bonds, Inc.," a bail bond agency.

3. In November of 1999, Gustavo Porro contacted the

Respondents regarding bail for Jessie James Bray, a friend of

Mr. Porro's son. Mr. Porro did not know Mr. Bray .

4. Based on the charges against Mr. Bray, four bonds were

issued, two for $1,000 each and two for $250 each, for a total

bond amount of $2,500. The $1,000 bonds were related to pending

felony charges and the small bonds were related to pending

misdemea nor charges.

5. Mr. Porro signed a contingent promissory note

indemnifying American Bankers Insurance Company for an amount up

to $2,500 in the event of bond forfeiture.

6. Bray did not appear in court on the scheduled date and

the two $1,000 bonds wer e forfeited. For reasons unclear, the

two $250 bonds were not forfeited.

7. The contingent promissory note signed by Mr. Porro

provided that no funds were due to be paid until the stated

contingency occurred, stated as "upon forfeiture, estreature or

b reach of the surety bond."

8. After Bray did not appear for court, the Respondents

contacted Mr. Porro and told him that the bonds were forfeited

and he was required to pay according to the promissory note.

9. On April 15, 2000, Mr. Porro went to the o ffice of Big

John Bail Bonds and was told that he owed a total of $2,804,

which he immediately paid. Mr. Porro was not offered and did

not request an explanation as to how the total amount due was

calculated. He received a receipt that appears to have be en

signed by Ms. Vath.

10. After Mr. Porro paid the money, Ms. Vath remitted

$2,000 to the court clerk for the two forfeited bonds. The

Respondents retained the remaining $804.

11. Bray was eventually apprehended and returned to

custody. The Responde nts were not involved in the apprehension.

12. On July 11, 2000, the court refunded $1,994 to the

Respondents. The refund included the $2,000 bond forfeitures

minus a statutory processing fee of $3 for each of the two

forfeited bonds.

13. On August 9, 2000, 29 days after the court refunded

the money to the Respondents, Mr. Porro received a check for

$1,994 from the Respondents. Mr. Porro, apparently happy to get

any of his money back, did not ask about the remaining funds and

no explanation was offe red.

14. In November of 2000, Ms. Vath contacted Mr. Porro and

informed him that a clerical error had occurred and that he was

due to receive additional funds. On November 6, 2000, Mr. Porro

met with Ms. Vath and received a check for $492.

15. At the time, that Ms. Vath gave Mr. Porro the $492

check she explained that he had been overcharged through a

clerical error, and that the additional amount being refunded

was the overpayment minus expenses. She explained that the

expenses included clerical and "investigation" expenses and the

cost of publishing a notice in a newspaper. There was no

documentation provided of the expenses charged to Mr. Porro.

16. At the time the additional refund was made, there was

no disclosure that the two $250 bonds were ne ver forfeited.

17. At the hearing, the Respondents offered testimony

asserting that the charges were miscalculated due to "clerical"

error and attempting to account for expenses charged to

Mr. Porro. There was no reliable documentation supporting the

testimony, which was contradictory and lacked credibility.

CONCLUSIONS OF LAW

18. The Division of Administrative Hearings has

jurisdiction over the parties to and subject matter of this

proceeding. Sections 120.569 and 120.57(1), Florida Statutes.

19 . The Department has the burden of proving by clear and

convincing evidence the allegations against the Respondents.

Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987). In this case,

the burden has been met.

20. The evidence establishes that in their t ransactions

with Mr. Porro, the Respondents violated sections of the Florida

Statutes and the Florida Administrative Code as set forth

herein.

21. Section 648.295(1), Florida Statutes, provides in

relevant part as follows:

All premiums, return premiums , or other

funds belonging to insurers or others

received by a person licensed pursuant to

this chapter in transactions under her or

his license are trust funds received by the

licensee in a fiduciary capacity, and the

licensee must account for and pay the same

to the insurer, insured, or other person

entitled to such funds.

22. The Respondents have failed to properly account for

funds paid to them by Mr. Porro. The Respondents have failed to

properly return such funds to Mr. Porro.

23. Section 648.442( 1), Florida Statutes, provides in

relevant part as follows:

Collateral security or other indemnity

accepted by a bail bond agent, except a

promissory note or an indemnity agreement,

shall be returned upon final termination of

liability on the bond.

24. The Respondents have failed to return the $500 paid to

them by Mr. Porro for the two unforfeited misdemeanor bonds.

25. Section 648.442(4), Florida Statutes, provides in

relevant part as follows:

When the obligation of the surety on the

bond or bonds has been released in writing

by the court, the collateral shall be

returned to the rightful owner named in the

collateral receipt unless another

disposition is provided for by legal

assignment of the right to receive the

collateral to another person.

26. The evidence fails to establish that the two $500

bonds were ever forfeited, and therefore there is no evidence

that the court released such forfeited funds. The Respondents

have a fiduciary duty to both the client and the insurer.

Natelson v. Department of Insurance , 454 So. 2d 31,32 (Fla. 1st

DCA 1984). As the fiduciary for Mr. Porro, the Respondents were

required to determine the status of the bonds and to pursue

their release once the fugitive was returned to the custody of

law enforcement officials.

27. Section 648.45(2), Florida Statutes, provides in

relevant part as follows:

The department shall deny, suspend, revoke,

or refuse to renew any license or

appointment issued under this chapter or the

insurance code, and it shall suspend or

revoke the el igibility of any person to hold

a license or appointment under this chapter

or the insurance code, for any violation of

the laws of this state relating to bail or

any violation of the insurance code or for

any of the following causes:

* * *

(d) Willful u se, or intended use, of the

license or appointment to circumvent any of

the requirements or prohibitions of this

chapter or the insurance code.

(e) Demonstrated lack of fitness or

trustworthiness to engage in the bail bond

business.

(f) Demonstrated la ck of reasonably

adequate knowledge and technical competence

to engage in the transactions authorized by

the license or appointment.

(g) Fraudulent or dishonest practices in

the conduct of business under the license or

appointment.

(h) Misappropriation , conversion, or

unlawful withholding of moneys belonging to

a surety, a principal, or others and

received in the conduct of business under a

license.

* * *

(j) Willful failure to comply with or

willful violation of any proper order or

rule of the depart ment or willful violation

of any provision of this chapter or the

insurance code.

* * *

(l) Demonstrated lack of good faith in

carrying out contractual obligations and

agreements.

28. In this case, either the Respondents acted in an

untrustworthy and dishonest manner in willful violation of the

statutes and rules relevant to this incident or the facts

establish a lack of reasonably adequate knowledge and technical

competence on their part.

29. Section 648.45(3), Florida Statutes, provides in

relevan t part as follows:

(3) The department may deny, suspend,

revoke, or refuse to renew any license or

appointment issued under this chapter or the

insurance code, or it may suspend or revoke

the eligibility of any person to hold a

license or appointment unde r this chapter or

the insurance code, for any violation of the

laws of this state relating to bail or any

violation of the insurance code or for any

of the following causes:

* * *

(c) Violation of any law relating to the

business of bail bond insurance o r violation

of any provision of the insurance code.

30. The evidence establishes that the Respondents have

violated the law relating to the business of bail bond insurance

as set forth herein.

31. Section 648.571, Florida Statutes, provides in

relevant part as follows:

Failure to return collateral; penalty. -- A

bail bond agent who has taken collateral or

an insurer or managing general agent who

holds collateral as security for a bail bond

shall, upon demand, make a written request

for a discharge of the bond to be delivered

to the surety or the agent of the surety.

If a discharge is provided to the surety or

the agent of the surety pursuant to chapter

903, the collateral shall be returned to the

indemnitor within 21 days of said discharge

being provided. Upon demand, following the

written request for discharge and upon

diligent inquiry by the surety or the agent

of the surety to determine that the bond has

been discharged, failure of the court to

provide a written discharge to the surety or

the agent of the surety pursuant to chapter

903 within 7 days, shall cause the

cancellation of the bond by operation of law

and collateral shall be returned to the

indemnitor within 21 days of the written

request for discharge. Fees or other

charges of any nature othe r than as outlined

in this chapter or by rule of the department

may not be deducted from the collateral due.

However, allowable expenses incurred in the

apprehension of the defendant because of a

forfeiture of bond or judgment under s.

903.29 may be deduct ed if such expenses are

accounted for.

32. The evidence establishes that the Respondents failed

to properly return within the specified period of time, the

$1,994 that was eventually returned to Mr. Porro.

33. Additional funds retained by the Respond ents for

improperly undocumented "expenses" were due to Mr. Porro and

have not been refunded to him.

34. Rule 4 - 221.105, Florida Administrative Code, provides

in relevant part as follows:

4 - 221.105 Premium Charge Only Permitted.

(1) No surety, bail bon d agent, temporary

bail bond agent, or managing general agent

engaged in the bail bond business shall make

any charge, collect, or receive any fee or

consideration unless permitted by statute or

rule other than the premium based on rates

in current use. . . .

(2) No bail bond agent shall charge,

collect, or receive any fee or consideration

for services rendered to the principal or

indemnitor in connection with a bail bond,

except those fees listed in paragraph (4)

and costs necessary to apprehend the

prin cipal in the event the principal

attempts to flee the jurisdiction of the

courts.

(3) Prohibited fees include, but are not

limited to, any costs regarding arrest,

transportation, and surrender within the

specified jurisdiction of the court, charges

for s torage, maintenance or return of

collateral, including releases of liens or

satisfactions of mortgages, charges for

researching case dispositions or obtaining

bond discharges or any charge for other

services ordinarily performed by a bondsman

or their empl oyees in the regular course of

business and any other expenses not

documented by check or receipt.

(4) Allowable fees include: a) Attorney's

fees and court costs associated with filing

of motions; b) Documented transportation and

lodging expenses outside the jurisdiction of

the court; c) Law enforcement costs for

housing, re - arrest, transportation, and

extradition; and d) A maximum fee of $100

for a surrender allowed by law when there

has been no forfeiture of the bond.

(5) A bail bond agent who has sur rendered a

principal and failed to properly refund the

premium when required by law shall be

subject to discipline as provided in Chapter

648 and these rules.

35. None of the "expenses" identified by the Respondent's

is properly documented by a check or receipt. The person who

allegedly provided the "receipt" for publication of the

fugitive's photograph in a newspaper bases the "receipt" on

little more than conjecture. There is no credible documentation

for any expenses.

36. The Respondents attempted t o explain the "error"

during their testimony at hearing. The explanation was

illogical and lacks credibility.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is recommended that the Department of Insurance enter a

Fina l Order requiring that the Respondents be required to refund

$318 to Mr. Porro, which, combined with the previous payments of

$1,994 and $492, will constitute refund of the total $2,804 paid

by Mr. Porro to the Respondents. It is further recommended that

the limited surety licenses of Matilda M. Vath and John L. Vath

be suspended for a period of not less than three months or until

Mr. Porro receives the remaining $318, whichever is later.

DONE AND ENTERED this 22nd day of February, 2002, in

Tallahassee, Leon County, Florida.

___________________________________

WILLIAM F. QUATTLEBAUM

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax F iling (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 22nd day of February, 2002.

COPIES FURNISHED :

James A. Bossart, Esquire

Department of Insurance

Division of Legal Services

200 East Gaines St reet, Room 612

Tallahassee, Florida 32399

Joseph R. Fritz, Esquire

4204 North Nebraska Avenue

Tampa, Florida 33603

Mark Casteel, General Counsel

Department of Insurance

The Capitol, Lower Level 26

Tallahassee, Florida 32399 - 0307

Honorable Tom Gallagh er

State Treasurer/Insurance Commissioner

Department of Insurance

The Capitol, Plaza Level 02

Tallahassee, Florida 32399 - 0300

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of t his Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.