02-002842 Department Of Business And Professional Regulation vs. Richard Walters And Arsenio Carabetta Status: Closed Recommended Order on Friday, August 8, 2003.

Summary: Respondents breeched their fiduciary duty by failing to reduce amount of assessments for all owners after doing so for one owner. They also failed to properly notice meetings and to respond to letters of inquiry.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF FLORIDA LAND SALES, )

CONDOMINIUMS, AND MOBILE HOMES, )

)

Petitioner, ) Case No. 02 - 2842

)

vs. )

)

RICHARD WALTERS AND )

ARSENIO CARABETTA, )

)

Respondents. )

)

RECOMMENDED ORDER

A formal hearing was conducted in this case on May 14 and

15, 2003, in St. Augustine, Florida, before Suzanne F. Hood,

Administrative Law Judge with the D ivision of Administrative

Hearings.

APPEARANCES

For Petitioner: Joseph S. Garwood, Esquire

Department of Business and

Professional Regulation

1940 North Monroe St reet, Suite 60

Tallahassee, Florida 32399 - 2202

For Respondents: John Bamberg, Esquire

Post Office Box 409

St. Augustine, Florida 32085

STATEMENT OF THE ISSUE

The issues are whether Respondents are guilty of the

following: (a) breach of fiduciary relationship in violation of

Section 718.111(1)(a), Florida Statutes; (b) failure to respond

in writing to written inquiries in violation of Section

718.112(2)(a)2., Florida Statutes; (c) f ailure to properly

notice a meeting in which regular assessments were discussed in

violation of Section 718.112(2)(c), Florida Statutes;

(d) failure to proportionately excuse payment of common expenses

for all units owners after doing so for one unit owner in

violation of Section 718.116(9)(a), Florida Statutes; and (e)

willfully and knowingly violating Chapter 718, Florida Statutes,

in violation of Section 718.501(d)(4), Florida Statutes.

PRELIMINARY STATEMENT

On or about June 17, 2002, Petitioner Departm ent of

Business and Professional Regulation, Division of Florida Land

Sales, Condominiums, and Mobile Homes (Petitioner) issued a

Notice to Show Cause to Ocean Gate Phase I Condominium

Association, Inc. (Ocean Gate), Respondent Richard Walters

(Mr. Walter s) and Respondent Arsenio Carabetta (Mr. Carabetta).

The Notice to Show Cause was directed to Mr. Walters and

Mr. Carabetta in their individual capacities as members of Ocean

Gate's board of directors.

On or about July 8, 2002, Petitioner received a r equest for

hearing from Mr. Walters, Mr. Carabetta, Homer Barrow, and Ocean

Gate's board of directors. Petitioner referred the case to the

Division of Administrative Hearings on July 19, 2002.

A Notice of Hearing, dated August 23, 2002, scheduled the

hea ring for September 30, 2002.

Petitioner filed a Motion for Continuance on September 12,

2002. The undersigned issued an order denying this motion.

On September 19, 2002, Petitioner filed a Second Motion for

Continuance. An order dated October 3, 2002 , granted a

continuance and rescheduled the hearing for November 13 and 14,

2002.

Petitioner filed a Motion to Compel on October 21, 2002.

The motion was granted in an order dated November 12, 2002.

On November 5, 2002, Petitioner filed a Motion to Dism iss

Ocean Gate as a party in this case. An order dated November 12,

2002, granted the motion.

On November 8, 2002, Mr. Carabetta filed a Motion for

Continuance. An order dated November 12, 2002, granted the

motion and rescheduled the hearing for Februar y 11 and 12, 2003.

On January 22, 2003, Mr. Walters and Mr. Carabetta filed a

Motion for Continuance. An order dated January 24, 2003,

granted the motion and rescheduled the hearing for February 26

and 27, 2003.

On February 7, 2003, the parties filed a Joint Motion for

Continuance. An order dated February 11, 2003, granted the

motion, requiring the parties to file a status report on or

before March 10, 2003.

Petitioner filed a Status Report and Request for Continued

Abeyance. An order dated March 13 , 2003, placed the case in

abeyance and required the parties to file a status report on or

before April 10, 2003.

On April 11, 2003, Petitioner filed a Status Report,

requesting that the case be rescheduled for hearing. A Notice

of Hearing dated April 14, 2003, scheduled the hearing for

May 14 and 15, 2003.

On April 16, 2003, Petitioner filed a Motion for Leave to

File Depositions of Witnesses in Lieu of Live Testimony. The

undersigned initially reserved ruling on this motion, then

granted it in part and denied it in part on the record during

the hearing. The motion was denied as it related to Richard

Weaver's April 22, 2003, deposition testimony prior to the

appearance of counsel for Mr. Walters and Mr. Carabetta.

On April 28, 2003, Mr. Walters and Mr. Carabetta filed a

Motion for Protective Order and a Motion to Strike. In an Order

dated April 29, 2003, the undersigned construed the Motion for

Protective Order as a response in opposition to Petitioner's

Motion for Leave to File Depositions of Witn esses in Lieu of

Live Testimony. The April 29, 2003, Order reserved ruling on

the Motion for Leave to File Depositions of Witnesses in Lieu of

Live Testimony until such time that Richard Weaver's deposition

was filed with the Division of Administrative He arings. The

Motion to Strike was denied on the record at the hearing.

On April 28, 2003, Mr. Walters filed a Motion to Dismiss.

The motion was denied in an order dated May 12, 2003.

On April 28, 2003, Mr. Walters filed a Motion for Separate

Hearing a nd Motion for Continuance. The motions were denied in

an order dated April 29, 2003.

On April 28, 2003, Mr. Carabetta filed a Motion for

Separate Hearing, Motion for Non - Attorney Representative to Also

Serve as an Interpreter and Motion for Continuance. The motions

were granted in part and denied in part in an order dated

April 29, 2003.

On May 5, 2003, Petitioner filed a Motion for Relief from

Pre - Hearing Order. The motion was granted in an order dated

May 12, 2003.

On May 5, 2003, Mr. Walters file d a letter requesting a

continuance. The request was denied in an order dated May 7,

2003.

On May 7, 2003, Mr. Walters filed a letter requesting a

continuance. After a telephone conference on May 8, 2003, the

undersigned denied the request for further c ontinuance in an

order dated May 13, 2003.

On May 12, 2003, Petitioner filed a Motion to Strike

Inadmissible Offer of Compromise and Motion in Limine. The

motion was granted on the record at the hearing.

When the hearing commenced, Mr. Walters and Mr. Carabetta

filed a Motion to Dismiss. The motion is hereby denied.

As a preliminary matter, Petitioner filed a Motion for

Official Recognition of Court Records in a Related Proceeding.

The motion is hereby granted.

During the hearing, Petitioner presen ted the testimony of

Sama Sayer Carstens, Esquire; Edna Griffith; Thomas Klinehoffer,

Rosanne Perrine, Esquire; Johnathan Peet; Eurkie McLenore; and

Tracy Corbitt. Petitioner offered nine exhibits (P1 - P9) that

were accepted into evidence. Exhibit No. P9 is Petitioner's

investigative report, which is attached as Exhibit No. 1 to

Richard Weaver's April 22, 2003, deposition (Exhibit No. P1).

For the reasons set forth on the record, Mr. Weaver's direct

testimony on April 22, 2003, prior to the appearance of counsel

for Mr. Walters and Mr. Carabetta, is not considered as

evidence.

Mr. Walters and Mr. Carabetta presented the testimony of

Allan Scott, Esquire, and John Williams.

Mr. Carabetta testified on his own behalf. He offered 13

exhibits (C1 - C13) that were admitted into evidence.

Mr. Walters was sworn in but did not testify on his own

behalf at the hearing. Mr. Walters' request to offer a

post - hearing deposition in lieu of testimony was granted.

Mr. Walters offered four exhibits (R51 - R54) that w ere accepted

into evidence.

On May 19, 2003, the undersigned issued a Posthearing

Order. The order provided the parties with the opportunity to

depose certain witnesses and to submit the depositions in lieu

of testimony.

On May 20, 2003, Petitioner filed a Motion for Costs

Associated with Interpreter. The motion was denied in an order

dated May 22, 2003.

On June 30, 2003, Richard Weaver filed a letter explaining

that he had accepted service of a subpoena on June 28, 2003,

requiring him to appear fo r a deposition on July 2, 2003.

According to the letter, Mr. Weaver would not be available to

testify on July 2, 2003, due to long - standing travel plans.

Mr. Walters responded with a letter requesting that Mr. Weaver

be required to testify from his trave l destination.

Additionally, Petitioner filed a Motion to Quash Subpoena and

for Protective Order. In an order dated July 2, 2003, the

undersigned quashed the subpoena.

On July 7, 2003, Mr. Walters filed the telephone deposition

of Homer Barrow in lie u of testimony at hearing. Mr. Barrow's

testimony is hereby accepted into evidence.

On July 7, 2003, Mr. Walters filed his own unsworn

statement, recorded via telephone on June 17, 2003.

Mr. Walters' statement is hereby accepted into evidence over

Peti tioner's July 8, 2003, objection for the following reasons:

(a) Mr. Walters had been sworn during the hearing with

permission to submit his testimony post - hearing;

(b) Petitioner's counsel admitted that he recognized

Mr. Walters' voice in the July 17, 20 03, telephone statement and

could vouch for him; (c) Petitioner's counsel had an opportunity

to cross - examine Mr. Walters in that instance; and

(d) Petitioner's counsel agreed to proceed with the taking of

Mr. Walters testimony/statement by telephone with out condition

as to the giving of an oath.

On July 8, 2003, Petitioner filed the telephone deposition

of James Robinson in lieu of testimony at hearing.

Mr. Robinson's deposition is accepted into evidence.

During the hearing, Mr. Walters ordered a copy of the

hearing transcript. After the hearing, the court reporters'

office advised the undersigned's office that Mr. Walters had

refused to pay for the transcript. Accordingly, no transcript

has been filed with the Division of Administrativ e Hearings.

Petitioner filed a Proposed Recommended Order on July 22,

2003. Respondents filed a Proposed Recommended Order on

July 21, 2003.

FINDINGS OF FACT

1. Ocean Gate is a unit - owner controlled condominium

located in St. Augustine, Florida. A three - member board of

directors governs Ocean Gate. However, Article V of Ocean

Gate's Articles of Incorporation states as follows in relevant

part:

This corporation shall have three (3)

directors initially. Thereafter, the number

of directors may be inc reased from time to

time in the manner provided by the Bylaws,

but shall never be fewer than three.

2. Ocean Gate's original developer was Robert

Laurence/Ocean Gate Development, Inc. On or about June 16,

1999, the developer recorded Ocean Gate's Decla ration of

Condominium in the official record book 1417, page 1932, of the

public records of St. Johns County, Florida. At that time,

Ocean Gate's directors, as set forth in the Articles of

Incorporation, were Roger W. McClain, Leslie Gallagher, and

Robert J.L. Laurence.

3. The property at issue includes two buildings (2.1 and

2.2) containing a total of 10 units. Units 600, 604, 608, 612,

616, and 620 are located in Ocean Gate's 2.1 building. Units

605, 609, 613, and 617 are located in Ocean Gate's 2. 2 building.

4. On June 16, 1999, the following deeds were recorded in

the official record book of St. Johns County, Florida: (a) unit

600 to Mr. and Mrs. Grissom (later sold to the Mr. Barrow/Flag

Development Corporation); (b) unit 604 to Mr. and Mrs. McNeely;

(c) unit 608 to Dr. and Mrs. Blankenship; (d) unit 612 to

Mr. and Mrs. Klinehoffer; (e) unit 616 to Mr. and Mrs. Pittman

(later sold to Mr. and Mrs. Weaver); and (f) unit 620 to Mr. and

Mrs. Carabetta.

5. The unit owners in the 2.1 building h ad to lend the

developer funds to complete the construction of their units.

Even so, these unit owners had to foreclose on that loan and

spend additional funds to complete the construction on their

units.

6. On or about July 1, 1999, Ocean Gate issued a Notice of

Owners Meeting. The meeting was scheduled for July 17, 1999.

The agenda attached to the notice included the following:

(a) call to order; (b) establish a quorum; (c) waiver of 60 - day

notice; (d) introduction of May Management Services, Inc. ( May

Management); (e) official approval of management contract;

(f) discussion of board members; (g) discussion of contract; and

(h) adjournment.

7. Ocean Gate held its first unit owners' meeting on

July 17, 1999. Mr. Klinehoffer, Mr. and Mrs. Pittma n, Dr. and

Mrs. Blankenship, Mr. and Mrs. McNeely, Mr. Grissom, and Mr. and

Mrs. Carabetta attended the meeting. The developer did not

attend the meeting.

8. During the July 17, 1999, meeting, the unit owners

accepted the resignation of Les R. Gallaghe r, as a director, and

elected the following directors/officers: Mr. Grissom,

president; Mr. Kleinhoffer, vice president; and Mrs. Pittman,

secretary/treasurer. The representative of May Management

announced that the developer had turned over $8,308.44 to the

unit owners.

9. Ocean Gate conducted a unit owners meeting on

December 4, 1999. Mr. Grissom and Dr. Blankenship attended the

meeting. Mrs. Pittman attended by proxy. A representative of

the developer was also in attendance. During the meeting, the

unit owners approved Ocean Gate's 2000 operating budget.

10. On or about January 14, 2000, Mrs. Pittman resigned as

a director and secretary/treasurer.

11. A unit owners meeting took place on January 29, 2000.

Mr. Grissom, Dr. and Mrs. Blankenship, Mr. Carabetta,

Mr. and Mrs. McNeely, and Mr. Weaver were in attendance.

12. In a notice dated March 22, 2000, Ocean Gate scheduled

a unit owners meeting for April 15, 2000. The agenda included

the following: (a) call to order; (b) establish a quorum;

(c) approval of minutes of January 29, 2000; (d) financial

report; (e) old business (release of lien payment for John M.

Williams); (f) new business, including election of director;

(g) date of next meeting; and (h) adjournment. During the

meeting, Mr. Weaver was elected to fill a vacancy on Ocean

Gate's board of directors.

13. The Carabettas' unit, which is located in the 2.1

building, is the largest unit on the property. Mr. Carabetta

refused to pay some of Ocean Gate's assessments because he did

n ot believe Ocean Gate was properly maintaining his unit. In

time, he filed at least one lawsuit against Ocean Gate and its

board of directors. He also filed defamation and discrimination

lawsuits against some of the unit owners in their individual

capaci ties.

14. Mr. Carabetta testified at hearing that Ocean Gate

failed to maintain his unit while expending funds to maintain

the units of the Weavers, the Blankenships, the McNeelys, and

the Klinehoffers. There is no persuasive evidence that the

director s of Ocean Gate improperly refused to pay for

maintenance/repair of the common elements in the 2.1 building,

including the limited common elements directly affecting

Mr. Carabetta's unit.

15. The 2.2 building was the subject of a foreclosure

suit. It was sold on the courthouse steps to Flag Development

Corporation on June 13, 2000. Pursuant to that sale, Flag

Development Corporation also bought two additional condominium

developments, Ocean Gate Phase II and Ocean Gate Phase III,

which are not a part of the property at issue here.

16. The record contains a Certificate of Title conveying

real and personal property to Flag Development Corporation. The

certificate refers to a description of real and personal

property, "Exhibit A," which is not attache d to the copy of the

certificate in the record.

17. John Williams and Mr. Barrow are business associates

affiliated with Flag Development Corporation. After receiving

title to the 2.2 building, their company did nothing more than

clean up the property. They did no construction, maintenance,

or repair work.

18. In two letters, Jones & Pellicer, Inc., civil

engineers and land surveyors, responded to Mr. Weaver's request

for a survey to determine the square footage for each unit. The

first letter dated May 31, 2000, referred to the survey of units

600, 604, 608, 612, 616, and 620 in the 2.1 building. The

second letter dated July 31, 2000, referred to the survey of

units 605, 609, 613, and 617 in the 2.2 building. According to

the letters, the surveys d etermined the square footage for each

unit using the floor area, as defined by Section 4.7 - Unit

Boundaries "A" and "B" in the Ocean Gate Declaration of

Condominium.

19. Mr. Walters purchased the four units in Ocean Gate's

2.2 building from John Williams /Flag Development Corporation in

late July or early August 2000. The purchase price was

approximately one million dollars.

20. The record contains a copy of the corporate warranty

deed conveying the 2.2 building to Mr. Walters. The deed states

that th e transfer of title is "subject to taxes for the current

year, covenants, restrictions, and easements of record, if any."

The attachments to the deed describing the property include

Schedule A, Exhibit A, and Exhibit A Continued. The document

identified as Exhibit A Continued, and which appears to be

signed by the original developer, is not legible.

21. When Mr. Walters bought the four units, the 2.2

building had a roof, windows, walls, and doors from which the

square footage of each unit could be dete rmined. The building

was about 45 percent complete but not sufficiently complete to

qualify any of the units in the building for a certificate of

occupancy.

22. Mr. Walters hired a contractor to complete the

construction on his units. The construction , which involved a

considerable sum of money, included work on the common elements

and the interior of the units.

23. There were liens on the 2.2 building for Ocean Gate's

assessments when Mr. Walters purchased his four units.

Mr. Walters refused to p ay any past or ongoing assessments on

his four units. In turn, Ocean Gate refused to expend any funds

to maintain or repair the 2.2 building.

24. Ocean Gate continued to impose assessments on all unit

owners, including Mr. Walters and Mr. Carabetta. O cean Gate

also had to impose special assessments on some unit owners to

make up the shortfall when Mr. Walters and/or Mr. Carabetta

refused to pay their regular assessments.

25. On October 17, 2000, Ocean Gate filed a Revised Claim

of Lien against Mr. W alters for unpaid assessments and late

charges. The Revised Claim of Lien alleged that Mr. Walters

owed Ocean Gate a balance of $20,983.42.

26. In a letter dated October 18, 2000, Ocean Gate advised

Mr. Walters that a foreclosure suit would be institut ed if he

did not pay the assessments and charges.

27. Early in 2001, Ocean Gate filed a Complaint seeking

foreclosure of the liens against Mr. Walters in Case No. CA - 01 -

85, in the Circuit Court, Seventh Judicial Circuit, in and for

St. Johns County, Flo rida.

28. On or about March 1, 2001, Mr. Walters filed a Motion

to Dismiss in Case No. CA - 01 - 85, in the Circuit Court, Seventh

Judicial Circuit, in and for St. Johns County, Florida.

Mr. Walters took the position that he was not obliged to pay

condomi nium assessment until a certificate of occupancy was

issued and that the original developer had never relinquished

control of Ocean Gate.

29. Mr. Walters and Mr. Carabetta together owned over 51

percent of the total square footage in all units. Therefore ,

they controlled a majority of Ocean Gate's voting interests,

which are directly proportional to the square footage in each

unit. Specifically, Mr. Walters controlled a total of 36.207

percent of the membership voting interests and Mr. Carabetta

controll ed a total of 15.990 percent of the membership voting

interests.

30. Mr. Weaver was Ocean Gate's president in September

2001. Mr. McNeely and Mr. Klinehoffer were also

directors/officers. All three of the directors were named as

defendants in one or m ore of Mr. Carabetta's lawsuits.

31. On or about September 26, 2001, Mr. Weaver issued the

second notice of Ocean Gate's annual meeting of unit owners.

The notice included the following agenda items: (a) roll call;

(b) reading of minutes of last meeti ng; (c) reports of officers;

(d) election of directors; (e) unfinished business; (f) original

resolutions and new business; and (g) adjournment.

32. The annual meeting of Ocean Gate's unit owners took

place on October 27, 2001. During the meeting Mr. W alters and

Mr. Carabetta, in concert with one additional unit owner, used

their majority voting interests to elect themselves as

directors. Mr. Walters and Mr. Carabetta received 64 percent of

the votes. Dr. Blankenship, receiving 84.69 percent of the

vo tes, became Ocean Gate's third director and "acting"

president.

33. After the election of the directors, Mr. Walters

expressed his frustration about the liens on his property and

the pending foreclosure action involving at that time

approximately $50,00 0 in assessments and interest. In an effort

to resolve the conflict, Dr. Blankenship proposed the following

as a global concept:

1. Homer Barrow and the newly elected Ocean

Gate Phase I Condo Association Board will

attempt to satisfy the concerns of the

Carabetta's [sic] with regard to correction

of deficiencies on their unit.

2. The Carabettas will dismiss all lawsuits

and complaints against other unit owners and

boards and pay overdue assessments.

3. Richard Walters will contribute $10,000

to the Ph ase I Association as final

settlement of lien/foreclosure action.

4. Unit owners will end foreclosure action

against Richard Walters and forgive existing

liens against Richard Walters.

5. It is understood that the above action

and commitments are inter dependent and

sequential in the order listed above.

Minutes of Meeting of the Unit Owners, October 27, 2001.

34. Mr. Walters initially objected to paying the $10,000.

However, John Williams persuaded Mr. Walters to join in the

proposed agreement.

35. After Dr. Blankenship's motion regarding the proposed

agreement was seconded, the unit owners who were present at the

October 27, 2001, meeting verbally approved the proposed

agreement. The unit owners never reduced the proposed agreement

to writing. T hey never signed a copy of the minutes containing

the proposed agreement.

36. Mr. Klinehoffer was the only unit owner who was not

present at the meeting. Mr. Klinehoffer had not given

Mr. Weaver or any other unit owner his proxy to vote in favor of

a settlement of the pending litigation against Mr. Walters.

More importantly, the consideration of assessments and a

settlement agreement regarding the foreclosure suit were not

included as agenda items in the notice of the unit owners'

meeting.

37. On N ovember 17, 2001, Ocean Gate's directors held

another meeting. They elected the following officers:

Dr. Blankenship, president; Mr. Walters, vice - president; and

Mr. Carabetta, secretary/treasurer.

38. During the November 17, 2001, meeting, Mr. Walte rs

wanted to discuss implementing the proposed settlement agreement

from the October 27, 2001, unit owners' meeting. In other

words, Mr. Walters wanted Ocean Gate to drop the foreclosure

suit against him in exchange for $10,000. However, the minority

uni t owners asserted that Mr. Carabetta had not dropped his

lawsuits against Ocean Gate and the other unit owners in the 2.1

building.

39. Mr. Weaver took the position that the proposed

settlement agreement was not valid unless it was implemented

sequentia lly beginning with coming to terms with Mr. Carabetta

and Mr. Carabetta dropping all of his lawsuits. Mr. McNeely

asserted that he would not agree to participate in the global

agreement. Mr. Klinehoffer stated that he did not agree to the

global agreemen t and specifically objected to any change in

Mr. Walters' assessment responsibilities or liabilities.

40. On December 10, 2001, Mr. Walters and Mr. Carabetta

conducted a board of directors meeting. A facsimile

transmission had been sent to Dr. Blanken ship as notice of the

meeting, but he was out of town and had no actual prior

knowledge about the meeting or its agenda.

41. The notice for the December 10, 2001, board of

directors meeting was posted on Ocean Gate's property 48 hours

in advance of the meeting. The agenda attached to the notice

made reference to a non - specific item identified as "approval of

resolutions" without reference to the subject matter and without

mention of assessments or settlement agreements.

42. During the December 10, 20 01, board of directors

meeting, Mr. Walters proposed a resolution to allow him to pay

$10,000 in lieu of his past due assessments, to release the

liens on his four units, and to dismiss the foreclosure action.

After Mr. Walters proposed the resolution, Mr . Carabetta

provided a second and voted to pass the resolution.

43. Mr. Weaver and Mr. McNeely protested that Mr. Walters

could not vote due to a conflict of interest and that without

Mr. Walters' vote, the board of directors did not have a quorum.

Mr. Walters then recused himself. Next Mr. Weaver contacted

Dr. Blankenship by telephone. However, on faulty advice from

Mr. Carabetta's personal attorney, Mr. Walters and Mr. Carabetta

refused to let Dr. Blankenship vote on the resolution.

Mr. Walters a nd Mr. Carabetta also refused to let Ocean Gate's

attorney, Roseanne Perrine, participate in the meeting by

telephone. Before the meeting adjourned, Mr. Walters declared

that the resolution had passed and the matter was closed based

on Mr. Carabetta's sol e affirmative vote.

44. Next, Mr. Walters proposed that Ocean Gate terminate

its contract with May Management. Mr. Walters then introduced a

representative of Coastal Realty and Property Management, Inc.

(Coastal). Over Mr. Weaver's objections, Mr. Walt ers and

Mr. Carabetta voted to replace May Management with Coastal. The

greater weight of the evidence indicates that May Management was

a reputable company with no major complaints from the unit

owners.

45. In a letter dated December 11, 2001, Ms. Perr ine

reminded Mr. Walters and Mr. Carabetta that her firm represented

Ocean Gate in the foreclosure action against Mr. Walters. She

claimed that the resolution passed on December 10, 2001, was

invalid. She asserted that she would withdraw as counsel of

re cord if requested to dismiss the lawsuit based on the

December 10, 2001, resolution.

46. In a letter dated December 12, 2001, Mr. Carabatta

enclosed a copy of a check made payable to Ocean Gate in the

amount of $8,062.54. According to the letter, the ch eck

represented the amount of Mr. Carabetta's assessments though

year 2001. The letter stated that the check had been delivered

to Coastal for deposit into an operating account for Ocean Gate.

Finally, the letter demanded that May Management stop all

for eclosure proceedings against Mr. Carabetta and release the

lien of record against his property.

47. On December 12, 2001, Mr. Carabetta authorized Coastal

to open new bank accounts for Ocean Gate using his check as an

initial deposit.

48. Dr. Blanken ship wrote a letter dated December 13,

2001, to Mr. Walters and Mr. Carabetta. In the letter,

Mr. Blankenship objected to the lack of notice regarding the

December 10, 2001, board of directors meeting and its agenda.

Dr. Blankenship's letter complained that he had not been allowed

to vote when he was called during the meeting.

49. On or about December 16, 2001, the Circuit Court Judge

in Case No.: CA - 01 - 85, in the Seventh Judicial Circuit, in and

for St. Johns County, Florida, entered an Order Granti ng in Part

and Denying in Part Defendants Motion to Dismiss. The order

states as follows in pertinent part:

Third, the Defendants assert the Plaintiff

is without standing to assess maintenance

fees, file liens, or foreclose any lien

because the develope r never turned over

control of the association to the unit

owners pursuant to Article 8.5 of the

Declaration of Condominium of Ocean Gate

Phase I, A Condominium. Nothing contained

in Article 8.5 of the Declaration supports

the Defendant's assertion. The Association

was given the authority to assess fees in

Paragraph 7 of the Declaration, not Article

8.5. Paragraph 7 states:

Assessments . To provide the funds

necessary for proper operation and

maintenance of the Condominium,

the Phase I Association has been

granted the right to make, levy,

and collect Assessments and

Special Assessments against all

Unit Owners and Units.

Fourth, the Defendants' assert the

condominium association had no authority to

charge condominium fees since the buildings

have not y et been completed, nor have

certificates of occupancy been issued.

According to Ris Investment Group, Inc. v.

Dep't of Business and Professional

Regulation , 695 So. 2d 357 (Fla. 4th DCA

1997), the question before the Court is

whether, in accordance with t he Declaration,

the term "unit" was intended to encompass

raw land and/or condominiums which had not

yet been purchased, or just land upon which

the condominium units had already been built

and/or purchased. A review of the pertinent

portion of the Declar ation is necessary to

answer the foregoing questions.

Paragraph 7 of the Declarations states:

Assessments . To provide the funds

necessary for proper operation and

maintenance of the Condominium,

the Phase I Association has been

granted the right to make , levy,

and collect Assessments and

Special Assessments against all

Unit Owners and Units.

Paragraph 3 of the Declaration states:

Definitions . ‘Unit’ means a part

of the Condominium Property, which

is to be subject to exclusive

private ownership as defi ned in

the Condominium Act.

‘Condominium Property’ means the

parcel of real property described

in Exhibit "A" attached hereto,

together with all improvements

built or to be built thereon, and

the easements and rights

appurtenant thereto.

A review of Ex hibit ‘A’ and ‘A - 1’ reveals

that the term "Condominium Property" refers

to the entire condominium complex, not just

one unit.

Reading the pertinent portions of the

Declaration, in toto, it appears as though

the parties intended that the Association

could assess fees from "units" which

encompass any portion of the condominium

property, whether improvements have been

built or are to be built thereon.

Accordingly the Defendant's assertion is

without merit and the Motion to Dismiss in

this regard is denied.

50. Around the first of January 2002, Mr. Walters tendered

a check to Ocean Gate in the amount of $10,000. The front side

of Mr. Walter's check, number 652, indicates that it was for

association dues in full through December 31, 2001. The

backside of the check states, "Endorsement of this instrument

constitutes payment in full for association dues on 605, 609,

613, and 617, Mediterranean Way, thru December 31, 2001." There

is no evidence that the $10,000 check was deposited to Ocean

Gate's bank accoun t.

51. After the December 2001 meeting, the Weavers,

McNeelys, Klinehoffers, and Blankenships sent numerous letters

by certified mail to Mr. Walters and Mr. Carabetta. The letters

protested the manner in which Mr. Walters and Mr. Carabetta had

conducte d the December 10, 2001, and subsequent meetings,

demanding that they remove themselves as directors, and

inquiring about many other matters relating to the operation and

management of Ocean Gate. Many of the letters specifically

requested Mr. Walters and Mr. Carabetta to respond in writing

within 30 days as required by Section 718.112(2)(a)2., Florida

Statutes.

52. Mr. Carabetta responded to one of the complaint

letters. All subsequent complaint letters were referred to Alan

Scott, Esquire. Mr. Scott did not provide a written response to

the letters unless specifically directed to do so by Mr. Walters

and/or Mr. Carabetta. Mr. Scott responded to one complaint

letter.

53. On or about January 24, 2002, Mr. Scott, writing on

behalf of Mr. Walters and Mr. Carabetta, sent a letter to

Dr. Blankenship and May Management. The letter stated that a

majority of Ocean Gate's voting interests (Mr. Walters and

Mr. Carabetta) had entered into written agreements to remove

Dr. Blankenship from his position as a director.

54. On January 29, 2002, Mr. Carabetta filed a Notice of

Voluntary Dismissal without Prejudice in one of his lawsuits

naming Ocean Gate as defendant. That case was Case No. CA01 - 858

in the Circuit Court, Seventh Judicial Circuit, in and for

St. Johns County, Florida. Competent evidence indicates the

Mr. Carabetta dismissed all of his lawsuits against his

neighbors after the December 2001 meeting.

55. Ocean Gate's directors issued a notice dated

February 4, 2002. The notice indicated t hat the directors would

meet on February 7, 2002. The agenda for that meeting included

the following: (a) call to order; (b) roll call;

(c) appointment of new director; (d) fill officer vacancies;

(e) consider discharge of association attorneys and app ointment

of new association legal counsel; (f) consider discharge of May

Management and appointment of Coastal; and (g) consider change

of association mailing address and resident agent.

56. During the directors' meeting on February 7, 2002,

Mr. Walters and Mr. Carabetta appointed Mr. Barrow as a

director. The directors then elected Mr. Walters as president,

Mr. Barrow as vice - president, with Mr. Carabetta retaining his

office as secretary/treasurer.

57. Next, the directors voted to make the following

changes: (a) to fire May Management and hire Coastal as Ocean

Gate's management company; (b) to discharge Ms. Perrine and

retain Mr. Scott as Ocean Gate's attorney; and (c) to update the

corporate report data showing Mr. Scott as registered agent.

58. In a letter dated February 8, 2002, Mr. Klinehoffer,

Mr. Weaver, Mr. McNeely, and Dr. Blankenship advised Mr. Walters

and Mr. Carabetta that the February 7, 2002, directors' meeting

had not been properly noticed. The letter alleged that the

notice had no t been posted on the property 48 hours in advance

of the meeting and that none of the minority unit owners had

received notice by fax, phone, or letter.

59. By letter dated March 1, 2002, Mr. Walters,

Mr. Carabetta and Mr. Barrows advised Ms. Perrine's law firm

that her services as counsel for Ocean Gate were terminated.

The letter directed Mr. Perrine to turn over her foreclosure

file to Mr. Scott, who would replace her as counsel for Ocean

Gate.

60. By letter dated March 25, 2002, the minority uni t

owners objected to the termination of Ms. Perrine as Ocean

Gate's attorney.

61. During an April 10, 2002, directors' meeting,

Mr. Carabetta and Mr. Barrows voted to accept Mr. Walters'

payment of $10,000 in satisfaction of his past due assessments,

pen alties and interest. Thereafter, Mr. Walters tendered his

check for $10,000 on the same day that Ocean Gate's new

attorney, Mr. Scott, dismissed the foreclosure suit against

Mr. Walters.

62. In a letter dated April 17, 2002, Mr. Weaver protested

the a ctions taken by Mr. Walters, Mr. Carabetta, and Mr. Barrows

during the April 10, 2002, directors' meeting. Additionally,

the minority unit owners continued to send Mr. Walters,

Mr. Carabetta, and Mr. Barrow letters complaining about various

problems in t he management of Ocean Gate and requesting a

response within 30 days. The minority unit owners did not

receive any responses to these letters.

63. In a letter dated April 17, 2002, Petitioner's

investigator, Eurkie McLemore, advised Mr. Walters about the

complaints filed against him and Mr. Carabetta by the minority

unit owners. Ms. McLemore requested a response to the

allegations by April 30, 2002. The letter contained the

following warning:

Please note that if you as a MEMBER OF THE

BOARD OF DIRECTORS AND OFFICER OF THE

ASSOCIATION fail to respond to this letter,

or if another complaint is received, the

Division will pursue an enforcement

resolution, which may result in civil

penalties of up to $5,000 per violation.

Therefore, you are urged to respond

appropriately to this warning letter and to

use your best efforts to comply with

sections 718.111(1)(a), 718.116(9)(a),

718.112(2)(c), 718.112(2)(a)2., Florida

Statutes, now and in the future.

64. By letter dated April 30, 2002, Ocean Gate's attorney,

Mr. Scott, responded to Ms. McLemore's letter. According to the

letter, Mr. Walters and Mr. Carabetta denied the allegations and

did not indicate that any corrective action would be taken.

65. In June 2002 Ocean Gate's directors authorized

Mr. Scott, as Ocean Gate's counsel, to file a voluntary

dismissal with prejudice in the foreclosure suit against

Mr. Walters.

66. Mr. Walters sold his units at an on - site auction in

July 2002. Mr. Walters executed warranty deeds for the three

successful bidders in August 2002.

67. As of January 31, 2002, Mr. Walters owed Ocean Gate

past - due assessments plus interest in the amount of $62,943.56.

The accrued interest on that amount as of June 16, 2003, was

$15,767.36.

68. Mr. Walters paid his quarterly assess ments at the end

of March and June 2002. He also paid Ocean Gate $10,000 when

the foreclosure suit was dismissed in June 2002. Therefore, the

total amount that Mr. Walters owed Ocean Gate as of June 16,

2003, was $68,710.92

69. During the hearing, Mr. W alters presented evidence

that he was entitled to an offset for his expense in maintaining

and repairing the 2.2 building. However, the evidence presented

is insufficient to determine whether Mr. Walters' expenses were

related to maintenance and repair of common elements. The

greater weight of the evidence indicates that Mr. Walters is not

entitled to an offset.

CONCLUSIONS OF LAW

70. The Division of Administrative Hearings has

jurisdiction over the subject matter and the parties of this

proceeding. S ections 120.569 and 120.57(1), Florida Statutes.

71. Petitioner has the burden of proving by a

preponderance of the evidence that Mr. Walters and Mr. Carabetta

are guilty of the following: (a) breach of fiduciary

relationship in violation of Section 718. 111(1)(a), Florida

Statutes; (b) failure to respond in writing to written inquiries

in violation of Section 718.112(2)(a)2., Florida Statutes;

(c) failure to properly notice a meeting in which regular

assessments were discussed in violation of Section

718 .116(2)(c), Florida Statutes; (d) failure to proportionately

excuse payment of common expenses for all unit owners after

doing so for one unit owner in violation of Section

718.116(9)(a), Florida Statutes; and (e) willfully and knowingly

violating Chapter 718, Florida Statutes, in violation of Section

718.501(d)(4), Florida Statutes. Florida Department of

Transportation v. J.W.C. Company, Inc. , 396 So. 2d 778 (Fla. 1st

DCA 1981).

72. The Declaration of Condominium states as follows in

relevant part:

3.2 ‘Assessment’ means a proportionate

share of the funds required for the payment

of Common Expenses including, without

limitation, Special Assessments, which from

time to time is assessed directly against

each Unit Owner.

* * *

3.12 ‘Condominium Documen ts’ means this

Declaration and the attached exhibits

setting forth the nature of the property

rights in the Condominium and the covenants

running with the land governing these

rights. All of the Condominium Documents

will be subject to the provisions of t his

Declaration. The order of priority of the

Condominium Documents will be as follows:

(1) this Declaration; (2) Articles of

Incorporation; (3) Bylaws; and (4) Rules and

Regulations.

3.13 ‘Condominium Property’ means the

parcel of real property desc ribed in Exhibit

"A" attached hereto, together with all

improvements built or to be built thereon,

and the easements and rights appurtenant

thereto.

* * *

3.15 ‘Developer’ means Ocean Gate

Development, Inc., a Florida corporation,

and the successors and assigns of its

development rights.

* * *

3.27 ‘Developer’ means Ocean Gate

Development, Inc., its assignees, nominees

and successors.

* * *

3.29 ‘Unit’ means a part of the Condominium

Property, which is to be subject to

exclusive private ownership a s defined in

the Condominium Act.

3.30 ‘Unit Owner or Owner of Unit’ means

the record owner of a Unit.

* * *

4.3 Share of Common Elements and Common

Expenses . There shall be appurtenant to

each Unit an undivided share of the Common

Elements. The und ivided shares, stated as a

percentage, in the Common Elements which are

appurtenant to each Unit are based upon the

total square footage of each Unit in uniform

relationship to the total square footage of

each other Unit in the Condominium as set

forth in Exhibit "D" attached hereto and

made a part hereof. The proportion and

manner of sharing Common Expenses and owning

Common Surplus shall also be calculated as

set forth in Exhibit "D".

7.0 Assessment . To provide the funds

necessary for proper operation and

management of the Condominium, the Phase I

Association has been granted the right to

make, levy and collect Assessments and

Special Assessments against all Unit Owners

and Units. The making and collection of

Assessments against Unit Owners for Common

Expenses shall be pursuant to the Bylaws and

subject to the following provisions:

7.1 Authority to Impose . The Phase I

Association, through its Board of Directors,

shall have the power to determine and fix

the sums necessary to provide for the Common

E xpenses . . . In addition, the Board of

Directors shall have the power to levy

Special Assessments against Units in their

respective percentages if a deficit should

develop in the payment of Common Expenses

during any period that the level of

Assessments h as not been guaranteed by the

Developer.

7.2 Share of Common Expense . Each Unit

Owner shall be liable for a share of the

Common Expenses and shall share in the

Common Surplus in the same proportion as his

ownership of the Common Elements . . . .

* * *

7.4 Lien for Assessments . The Phase I

Association is hereby granted a lien on each

Unit for any unpaid Assessments together

with interest in the amount of ten percent

(10%) per annum, which lien shall also

secure reasonable attorneys' fees and costs

i ncurred by the Phase I Association incident

to the collection of such Assessment or

enforcement of such lien and a late fee in

the amount of five percent (5%) of the

unpaid installment or as otherwise

determined by the Board. . . . Additionally,

a Unit Own er shall be jointly and severally

liable with the previous Owner for all

unpaid Assessments that came due up to the

time of the conveyance.

* * *

7.6 Special Assessments . The Board may

impose special or individual Assessments on

Unit Owners to meet e xpenses not anticipated

to be incurred on a regular or annual basis

or to cover the cost and expense of

maintenance, repairs or replacements of a

Unit for which the Unit Owner is responsible

hereunder.

* * *

8.4 Membership and Voting Rights . The

member s of the Phase I Association shall

consist of all of the record Owners of

Units. Voting rights shall be allocated

based upon the Unit Member's percentage

share interest in the Common Elements so

that 100% of the voting rights will be

allocated among each of the Unit Owners

based upon each Unit Owner's percentage

share interest in the Common Elements set

forth on Exhibit "D".

8.5 Transfer of Control . The initial Board

of Directors, as set forth in the Articles

of Incorporation, shall manage all of the

af fairs of this Condominium and shall

approve all of the decisions of the Phase I

Association and shall serve as the directors

of the Phase I Association until the

Developer voluntarily relinquishes control

or until the first annual members' meeting

which sh all be held not later than one (1)

year after the recording of the Declaration.

Provided, however, when Unit Owners other

than the Developer own fifteen percent (15%)

of the Units that will be operated

ultimately by the Phase I Association, the

Unit Owner s shall be entitled to elect not

less than one - third (1/3) of the members of

the Board. Unit Owners other than the

Developer shall be entitled to elect not

less than a majority of the members of the

Board (a) three (3) years after sales by the

Developer h ave been closed on fifty (50%)

percent of the Units that will be operated

ultimately by the Phase I Association, or

(b) three (3) months after sales by the

Developer have been closed on ninety percent

(90%) of the Units that will be operated

ultimately by the Phase I Association, or

(c) when all of the Units that will be

operated ultimately by the Phase I

Association have been completed and some of

them have been sold and none of the other

Units are being offered for sale by the

Developer in the ordinary co urse of

business, or (d) when some of the Units have

been conveyed to purchasers and none of the

others are being constructed or offered by

sale by the Developer in the ordinary course

of business, or (e) seven (7) years after

recordation of the Declaratio n, whichever

shall first occur. The Developer shall be

entitled to elect not less than one (1)

member of the Board so long as the Developer

holds for sale in the ordinary course of

business five percent (5%) or more of the

Units.

* * *

16. Amendment .

16.1 By Developer . An Amendment to this

Declaration of Condominium made by the

Developer shall be evidenced by a

certificate setting forth such Amendment

executed by the Developer with the

formalities of a deed . . . and shall become

effective when suc h certificate is recorded

according to law. . . . [A]s long as the

Developer owns five percent (5%) or more of

the Units, the Developer may amend this

Declaration of Condominium for any purpose

. . . and such Amendment shall be effective

without joinder o f any Unit Owners,

mortgagees or the Phase I Association;

provided, however, that any Amendment or the

Declaration of Condominium pursuant to this

paragraph 16.1 which would be material and

adverse to the interest of Unit Owners shall

first be approved in writing by each Unit

Owner and each Institutional Mortgagee

holding a first mortgage upon any Unit to

the extent such Units are affected by such

material Amendment . . . .

16.2 By Unit Owners . An Amendment to this

Declaration of Condominium made by Unit

Owners shall be evidenced by: (a) a

certificate setting forth such Amendment

executed by the appropriate officers of the

Phase I Association, with the formalities of

a deed . . . and (b) an affidavit . . .

certifying that the owners of seventy - five

perce nt (75%) or more of the Units voted in

favor of the Amendment. . . . This

Declaration of Condominium shall not be

amended without the approval of the

Developer . . . if any of the following

conditions exist: (i) the Developer owns

five percent (5%) or mor e of the units; or

(ii) such Amendment purports to modify,

restrict, limit or otherwise affect any

right of the Developer . . . [A]ny Amendment

pursuant to this paragraph 16.2 which would

be material and adverse to the interests of

Unit Owners, shall first be approved in

writing by each Unit Owner and each

Institutional Mortgagee holding a first

mortgage upon any Unit to the extent such

Units are affected by such material

Amendment.

* * *

16.5 Prohibited Amendments . Except as

otherwise provided in thi s Declaration, no

Amendment shall be passed which shall:

* * *

(a) [C]hange the proportional percentage by

which a Unit Owner shares the Common

Expenses and owns the Common Surplus unless

the record owner thereof and all record

owners of liens thereo n shall join in the

execution of such Amendment and unless a

majority of record owners of all Units

approve the Amendment;

* * *

(d) Discriminate against any Unit Owner or

against any Unit or class or group of Units

comprising part of the Condominium Pr operty,

unless the record owners of all affects

Units and Institutional Mortgagees thereon

shall join in the execution and

acknowledgment of the Amendment.

The record does not contain a copy of the following exhibits,

which are listed as attachments to the Declaration of

Condominium: (a) Exhibit A - 1, Site Plan Showing Roadway

Easement; (b) Exhibit B, Survey, Plot Plan, and Floor Plans;

(c) Exhibit C, Surveyor Certificate; (d) Exhibit D,

Identification of each Unit and Percentage Interest in Common

Eleme nts; (e) Exhibit E, Phase I Amenities Lease; and

(f) Exhibit F, Phase I Amenities.

73. Ocean Gate's bylaws provide as follows in pertinent

part:

3.1 Qualification . The members of the

Association shall consist of all Unit Owners

of Units of Ocean Gate P hase I, A

Condominium.

* * *

4.3 Regular Meetings . Regular meetings of

the members of the Association shall be held

on the first business day of the month of

March of each year.

4.4 Special Meetings . Special meetings of

the members for any purpose may be called by

the President, and shall be called by the

President or Secretary at the request, in

writing, of either a majority of the Board

of Directors or of a majority of the Voting

Members. Such request shall state the

purpose of the proposed meeti ng.

* * *

4.4.3 A special meeting of the Unit Owners

to recall a member or members of the Board

of Directors may be called by ten percent

(10%) of the voting interests giving notice

of the meeting as required for a meeting of

Unit Owners, and the noti ce shall state the

purpose of the meeting.

* * *

4.4.5 Business transacted at all special

meetings shall be confined to the objects

stated in the notice thereof.

4.5 Notice . Written notice of every

meeting, special or regular, of the members

of the A ssociation, stating the time, place,

and object thereof, shall be delivered to

each Condominium Unit or mailed to each

Voting Member at such member's address as

shown in the books of the Association at

least fourteen (14) continuous days prior to

such mee ting.

* * *

4.7 Transfer of Control of the Association .

When Unit Owners other than the Developer

own fifteen percent (15%) or more of the

Units in the Condominium, the Unit Owners

other than the Developer shall be entitled

to elect no less than one - third (1/3), but

no more than two - fifths (2/5), of the

members of the Board of Directors of the

Association. Unit Owners other than the

Developer are entitled to elect not less

than a majority of the members of the Board

of Directors of the Association up on the

earlier to occur of the following:

(a) Three (3) years after fifty percent

(50%) of the Units that will be operated

ultimately by the Association have been

conveyed to purchasers.

(b) Three (3) months after ninety percent

(90%) of the Units that will be operated

ultimately by the Association have been

conveyed to purchasers.

* * *

(d) When some of the Units have been

conveyed to purchasers and none of the

others are being constructed or offered by

sale by the Developer in the ordinary cour se

of business;

* * *

4.10 Vote Required to Transact Business .

When a quorum is present at any meeting, a

vote of the majority of the Voting Interests

present and voting shall decide any question

brought before the meeting. If the question

is one, whi ch requires more than a majority

vote by express provision of the Condominium

Act or the Declaration of Condominium,

Articles of Incorporation or these By - Laws .

. . such express provision shall govern and

control the number of votes required.

A majorit y of the Voting Interests of the

Association present in person or represented

by proxy, shall constitute a quorum at all

meetings of the members for the transaction

of business, except as otherwise provided by

statute or the Condominium Documents.

* * *

5.1 Number . The affairs of the Association

shall be managed by a Board of Directors,

consisting of three (3) directors.

5.3 First Board of Directors . The first

Board of Directors shall consist of three

(3) persons appointed by the Developer, who

s hall hold office and exercise all powers of

the Board at the pleasure of the Developer

but not later than the Unit Owners' Initial

Meeting.

5.4 Vacancy and Replacement . If the office

of any director becomes vacant by reason of

death, resignation, reti rement,

disqualification, removal from office or

otherwise, a majority of the remaining

directors at a special meeting of directors

duly called for this purpose, shall by

closed ballot vote choose a successor or

successors who shall hold office for the

une xpired term in respect to which such

vacancy occurred. If the remaining

directors are unable to agree on a

successor, then the Association shall hold

an election in accordance with the

provisions hereof.

* * *

5.5.2 Proxies . Proxies shall in no even t

be used in electing the Board of Directors,

either in general elections or elections to

fill vacancies caused by recall, resignation

or otherwise.

5.5.3 Notice .

(1) Not less than 60 days before a

scheduled election, the Association shall

mail or deli ver . . . to each unit owner

entitled to a vote, a first notice of the

date of the election.

* * *

5.5.6 Quorum . There is no quorum

requirement or minimum number of votes

necessary for election of the members of the

Board of Directors, however, at leas t 20

percent of the Voting Interests must cast a

ballot in order to have a valid election of

members of the Board of Directors.

* * *

5.5.10 Interim Vacancies . Any vacancy

occurring on the Board prior to the

expiration of a term, except in the case o f

a vacancy caused by recall, may be filled by

the affirmative vote of the majority of the

Board of Directors, even if the remaining

directors constitute less than a quorum or

by the sole remaining director.

* * *

5.6 Removal . Directors may be remove d with

or without cause by an affirmative vote of a

majority of the Voting Interests. A special

meeting of the Voting Members may be called

for this purpose by 10% of the Voting

Interest upon giving notice of such meeting

to all Voting Members as provided in Section

3.5 hereof, such notice to state the purpose

of the special meeting.

* * *

5.7 Powers and Duties of Board of

Directors . All of the powers and duties of

the Association under the Condominium Act

and the Condominium Documents shall be

exerc ised by the Board of Directors . . .

The Board of Directors shall have, without

limitation, the following powers and duties:

5.7.1 Assessments . To make and collect

Assessments and Special Assessments against

members to pay the expense incurred by the

As sociation and the power to make and assess

members for capital improvements and

replacements to the Common Elements, Units,

or other portions of the Condominium

Property pursuant to the Declaration of

Condominium . . . .

* * *

6.2 Regular Meetings . Reg ular Meetings of

the Board may be held at such time and place

as shall be determined, from time to time,

by a majority of the directors. Notice of

all regular meetings shall be given to each

director, personally or by mail, telephone

or telegraph, at leas t 48 hours in advance

of the time named for such meeting.

Adequate notice of all regular meetings,

which shall specifically incorporate an

identification of agenda items, shall be

posted conspicuously on the Condominium

Property at least 48 hours precedin g the

meeting for the attention of the Unit Owners

except in an emergency.

6.3 Special Meetings . Special meetings of

the Board may be called by the President on

48 hours notice to each director. Special

meetings shall be called by the President or

Se cretary in like manner and on like notice

upon the written request of two (2)

directors.

6.4 Waiver of Notice . No notice of a Board

meeting shall be required if the directors

meet by unanimous written consent.

* * *

6.6 Quorum . A quorum at a dir ector's

meeting shall consist of a majority of the

entire Board. The acts approved by a

majority of those present at a meeting at

which a quorum is present, shall constitute

the act of the Board, except when approval

by a greater number of directors is re quired

by the Condominium Documents.

* * *

8.1 The Association shall act through its

Board of Directors and only the following

matters shall require an affirmative vote of

the Voting Members of the Association:

* * *

(7) Amendment of the Declarat ion [by] 3/4

of the Voting Interest of the Voting Members

owning Units in the Condominium the

Declaration of which is to be amended.

* * *

(9) Election of Directors and Officers [by

a] majority of Voting Interests of the

Voting Members.

(10) Removal o f Directors and Officers [by

a] majority of Voting Interests of the

Voting Members.

* * *

10.2(a) Budget . The Board of Directors

shall adopt a detailed budget for each

calendar year which budget will include the

estimated funds required to pay common

expenses and provide and maintain funds for

the foregoing accounts . . . as may be

required by the Condominium Act.

* * *

(c)(1) The Estimated Operating Budget which

is Attachment 3 to the Prospectus is the

budget the Developer intends to adopt as the

formal budget for the Condominium. The Unit

Owners of Units that have been sold by the

Developer will be assessed for Common

Expenses at the rates as stated in said

budget, and the Developer will be assessed

for the amounts by which the Common Expenses

ex ceed the amounts assessed against the

Owners of Units sold by the Developer.

* * *

14.1 By - Laws . The By - Laws of the

corporation may be altered, amended or

repealed, unless specifically prohibited

herein, at any regular or special meeting of

the membe rs by a three - fourths (3/4) vote of

the Voting Interests of the Association. No

modification or amendment to the By - Laws

shall be valid unless set forth or annexed

to a duly recorded amendment to the

Declaration of Condominium.

The record does not cont ain a copy of the Estimated Operating

Budget or the Prospectus referred to in Section 10.2(c)(1) of

the bylaws. They are not listed as attachments to any of the

condominium documents.

Breach of Fiduciary Duty and Disproportionate

Assessments

74. Sect ion 718.111(1)(a), Florida Statutes, states that

"[t]he officers and directors of the association have a

fiduciary relationship to the unit owners."

75. The original developer relinquished control of Ocean

Gate for the following reasons: (a) he recorded the Declaration

of Condominium in June 1999; (b) he failed to attend the

properly noticed organizational meeting in July 1999 during

which the unit owners elected new directors; (c) he gave

$8,308.44 of the association's funds to the newly organized

Ocean Gate at the July 1999 meeting; (d) he sent his

representative to the December 4, 1999, meeting during which the

unit owners adopted a proposed budget for 2000. See Section 8.5

of the Declaration of Condominium.

76. Section 718.301, Florida Statutes, prov ides as follows

in pertinent part:

(1) Following the time the developer

relinquishes control of the association, the

developer may exercise the right to vote any

developer - owned units in the same manner as

any other unit owner except for purposes of

reacq uiring control of the association or

selecting the majority members of the board

of administration.

* * *

(4) At the time that unit owners other than

the developer elect a majority of the

members of the board of administration of an

association, the dev eloper shall relinquish

control of the association and the unit

owners shall accept control.

77. Section 718.116, Florida Statutes, provides as follows

in pertinent part:

(1)(a) A unit owner, regardless of how his

or her title has been acquired, inclu ding by

purchase at foreclosure sale or by deed in

lieu of foreclosure, is liable for all

assessments which come due while he or she

is the unit owner.

* * *

(9)(a) A unit owner may not be excused from

payment of the unit owner's share of common

expense s unless all other unit owners are

likewise proportionately excluded from

payment, except as provided in subsection

(1) and in the following cases.

Based on the record, none of the exceptions to Section

718.116(9)(a), Florida Statutes, are applicable here.

78. Regardless of whether Mr. Walters became a unit owner

or a successor developer when he purchased his four units, he

owed "assessments" as defined in paragraph 7 of the Declaration

of Condominium. The assessments applied to each of his "units"

locate d on the "condominium property" as defined respectively in

paragraphs 3.29 and 3.13 of the Declaration of Condominium.

79. Mr. Walters and Mr. Carabetta breached their fiduciary

relationship to the unit owners in violation of Section

718.111(1)(a), Flor ida Statutes, by acting in Mr. Walters'

interest to the detriment of other unit owners. They forgave

Mr. Walters' past due assessments in excess of $50,000 and

dismissed the foreclosure suit in exchange for his offer to pay

$10,000, without reducing the a ssessments for other unit owners

contrary to Section 718.116(9)(a), Florida Statutes. Other unit

owners were required to make up the shortfall by paying special

assessments.

80. Any argument that Mr. Walters and Mr. Carabetta merely

exercised their aut hority to implement the October 27, 2001,

settlement agreement, allegedly unanimously agreed upon, lacks

merit for several reasons. First, Mr. Klinehoffer was not at

the meeting and did not give anyone a written proxy to vote on

matters relating to assess ments and/or settlement agreements.

Second, consideration of assessments and settlement agreements

was not identified in the agenda attached to the meeting notice

as required by Sections 4.4, 4.4.5, 4.5, 6.2. and 6.3 of the

bylaws. Third, the unit owners did not reduce the agreement to

writing and sign it so as to give their written consent to an

action, material and adverse to their interests, that was

equivalent to an amendment to the Declaration of Condominium's

provisions relating to assessments. See Section 16, Declaration

of Condominium. Fourth, the proposed settlement

agreement/amendment was never approved by 75 percent of the

voting interests. See Section 16, Declaration of Condominium.

81. Finally, the minority unit owners made it clear that

they no longer supported the settlement agreement at the

November 2001 meeting during which Mr. Walters and Mr. Carabetta

attempted to implement the agreement in a manner that was not

interdependent and sequential. In fact, Mr. Carabetta took the

positio n during the November 2001 meeting that he was not

required to drop all of his lawsuits against his neighbors in

order to implement the agreement in favor of Mr. Walters.

Improper Notice

82. Section 718.112(2)(c), Florida Statutes, provides as

follows in relevant part:

Notice of any meeting in which regular

assessments against unit owners are to be

considered for any reason shall specifically

contain a statement that assessments will be

considered and the nature of any such

assessments.

83. As set forth above, the October 27, 2001, proposed

settlement agreement was improperly noticed. Additionally, it

was not properly noticed as an agenda item for the December 10,

2001, board of directors meeting because the posted notice did

not state that assess ments would be considered. Despite a lack

of quorum and the objections of the other unit owners to a lack

of notice, Mr. Walters declared the settlement agreement

approved and the matter closed.

84. The fact that Mr. Walters and Mr. Carabetta, acting i n

concert with Mr. Barrow, considered and approved the settlement

agreement in April 2002 does not excuse the violation of Section

718.112(2)(c), Florida Statutes, that occurred in October and

December 2001. However, as discussed below, their failure to

p roperly notice the discussions of assessments in October and

December 2001 does not necessarily mean that they can be held

personally accountable by the imposition of a civil penalty.

Failure to Respond to Letters

85. Section 718.112(2)(a)2., Florida Statutes, states as

follows in pertinent part:

When a unit owner files a written inquiry by

certified mail with the board of

administration, the board shall respond in

writing to the unit owner within 30 days of

receipt of the inquiry.

86. After the December 2001 meeting, Mr. Weaver, Mr. and

Mrs. McNeely, Dr. Blankenship, and Mr. Klinehoffer sent numerous

inquiry letters by certified mail to the directors. The letters

raised legitimate concerns about the management and operation of

Ocean Gate. Mr. W alters and Mr. Carabetta only responded to one

or two of these complaint letters.

87. During the hearing, it was abundantly clear that

Mr. Walters and Mr. Carabetta considered the flood of inquiry

letters from the minority unit owners to have only nuis ance

value. Accordingly, they made a conscious decision not to

respond to the letters in violation of Section 718.112(2)(a)2.,

Florida Statutes.

Willful and Knowing Violation of Statute

88. Section 718.501(1)(d)(4), Florida Statutes, states as

follows in pertinent part:

The division may impose a civil penalty

individually against any officer or board

member who willfully and knowingly violates

a provision of this chapter. . . . The term

"willfully and knowingly" means that the

division informed the offi cer or board

member that his or her action or intended

action violates this chapter . . . . The

division, prior to initiating formal agency

action under chapter 120, shall afford the

officer or board member an opportunity to

voluntarily comply with this ch apter. . . .

An officer or board member who complies

within 10 days is not subject to a civil

penalty. A penalty may be imposed on the

basis of each day of continuing violation,

but in no event shall the penalty for any

offense exceed $5,000.

89. Petit ioner sent Mr. Walters and Mr. Carabetta a

warning letter in April 2002. They responded to the letter but

took no corrective action. Thus pursuant to statute,

Mr. Walters and Mr. Carabetta acted willfully and knowingly in

the following respects: (a) th ey breached their fiduciary duty

by disproportionately relieving Mr. Walters of his obligation to

pay assessments, in violation of Sections 718.111(1)(a) and

718.116(9)(a), Florida Statutes; and (b) they failed to respond

to a minimum of 10 certified inqui ry letters in violation of

Section 718.112(2)(a)2., Florida Statutes. These were on - going

statutory violations, which Mr. Walters and Mr. Carabatta had

ample opportunity to correct after receiving Petitioner's

warning letter.

90. Mr. Walters and Mr. C arabetta did not willfully and

knowingly violate Section 718.112(2)(c), Florida Statutes. It

is true that they failed to properly notice the consideration of

assessments during the October and December 2001 meetings.

However, the settlement agreement was considered and approved

during the April 10, 2002, board of directors meeting before

Petitioner sent its April 17, 2002, warning letter.

91. There is no evidence that the consideration of

assessments was improperly noticed at the April 2002 meeting.

A pparently, Mr. Walters and Mr. Carabetta had already corrected

any problem with improper notice before receiving the

Petitioner's April 17, 2002, warning letter.

92. Rule 61B - 20.006(3), Florida Administrative Code, sets

forth the aggravating and mitigatin g factors to be used in

determining civil penalties. The following aggravating factors

are applicable here: (a) financial loss to parties or persons

affected by the violation; (b) financial gain to parties or

persons who perpetrated the violation; and (c ) failure to take

affirmative or corrective action after receiving the warning

letter. The only mitigating factor is the reliance of

Mr. Walters and Mr. Carabetta on written professional or expert

counsel or advice.

93. After consideration of the will ful and knowing

violations of Chapter 718, Florida Statutes, Mr. Walters and

Mr. Carabetta are subject to a civil penalty in the amount of

$10,000 each.

94. Section 718.501(1)(d)2., Florida Statutes, provides as

follows:

The division may issue an ord er requiring

the developer, association, officer, or

member of the board of administration, or

its assignees or agents, to cease and desist

from the unlawful practice and take such

affirmative action as in the judgment of the

division will carry out the pu rposes of this

chapter. Such affirmative action may

include, but is not limited to, an order

requiring a developer to pay moneys

determined to be owed to a condominium

association.

95. Under the facts of this case, Petitioner is justified

in requiring Mr. Walters to make restitution to Ocean Gate in

the amount of $68,710.92 in past - due assessments and interest

plus interest on this amount from June 16, 2003, until the date

payment is made.

RECOMMENDATION

Based on the foregoing Findings of Facts and Con clusions of

Law, it is

RECOMMENDED:

That Petitioner issue a final order imposing a civil

penalty on Respondents in the amount of $10,000 each and

requiring Mr. Walters to make restitution to Ocean Gate in the

amount of $68,710.92 plus interest on this amo unt from June 16,

2003, until the date payment is made.

DONE AND ENTERED this 8th day of August, 2003, in

Tallahassee, Leon County, Florida.

S

SUZANNE F. HOOD

Administrative Law Judge

Division of Administrative Hearings

T he 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 8th day of August, 2003.

COPI ES FURNISHED :

John B. Bamberg, Esquire

Post Office Box 2210

St. Augustine, Florida 32085

Joseph S. Garwood, Esquire

Department of Business and

Professional Regulation

1940 North Monroe Street, Suite 60

Tallahassee, Florida 32399 - 2202

Ross Fleetwood, Division Director

Division of Florida Land Sales,

Condominiums, and Mobile Homes

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399 - 0892

Hardy L. Roberts, III, General Counsel

Department of Busi ness and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399 - 2202

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any except ions

to this Recommended Order should be filed with the agency that

will issue the final order in this case.