Smith v. Department of Business Regulation

Citation: 504 So. 2d 1285Docket: BL-49

Court: District Court of Appeal of Florida; March 18, 1987; Florida; State Appellate Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Steven K. Smith, in his capacity as both an individual and as a general partner of Smith and Smith, appealed a final order from the Department of Business Regulation's Division of Florida Land Sales, Condominiums and Mobile Homes, which imposed a civil penalty and obligations related to time-share purchasers. The case stemmed from a 1981 agreement where The International Time-Share Consultants, Inc. (ITSC) agreed to purchase the Daytona Sands Motel from The Sands Beach Club (Sands) and convert it into a vacation time-share development. Due to under-capitalization, ITSC assigned its interest to Daytona Sands Beach Club, Inc. (Beach Club), which was formed to fund the project. Smith provided financing to Beach Club, which involved collateral from sold and unsold time-share units. However, within 60 days of Smith's involvement, the project ceased operations, and some purchasers did not receive accommodations.

The Division initiated action against ITSC, Beach Club, Sands, and Smith for non-compliance with Florida Statutes section 721.17, which requires written agreements to honor time-share purchaser rights. The hearing officer determined that Smith had received an assignment for 34 of 40 units but failed to execute a necessary written agreement to assume the seller's obligations. Consequently, the Division ordered Smith to pay a $5,000 civil penalty, honor the rights of purchasers to cancel their contracts and receive refunds, and assume Beach Club's obligations to the time-share purchasers. The court affirmed the Division's order.

Appellant's actions are regulated by Chapter 721, pertaining to Real Estate Time-Sharing Plans, particularly section 721.17 of the Florida Statutes (1981), which outlines conditions for transferring a seller's interest in time-sharing accommodations to a third party. These conditions include: the third party must agree to uphold purchasers' rights to occupy the accommodations, cancel contracts, receive refunds, comply with Chapter 721 provisions, assume seller obligations, and notify affected purchasers within 30 days of any transfer.

Smith's liability hinges on the application of Chapter 721, which he contends does not apply to him as he claims to be distinct from a 'seller' as defined in section 721.17. However, the hearing officer correctly interpreted Chapter 721, which is designed to regulate time-sharing operations comprehensively for public protection and to penalize those who operate outside statutory requirements. The chapter defines 'seller' broadly, including anyone offering time-share periods for sale in the ordinary course of business, which encompasses Smith.

Despite Smith’s assertion of being a financier, he overlooks the definition of 'offer for sale' in section 721.05(9), which includes any method of presenting time-sharing opportunities to purchasers. Evidence shows that Smith benefited financially from the time-share transaction and facilitated payments, which enhanced his profit. He argues against liability under Chapter 721 due to not receiving real property interest, but the record indicates he is a businessman familiar with time-share operations. He drafted the Agreement he relied upon and signed an Addendum clarifying that the contract involved a 'right to use' time-share units rather than ownership, with no alterations to the contract's language.

Appellant intended to engage in the sale and marketing of time-share units, actively participating in detailing aspects such as retail value, collections, and down payments. He was aware of his involvement in a "right to use" project when completing the Agreement. The Agreement mandates compliance with real estate regulations and statutes governing sales activities, yet appellant failed to provide written consent to uphold the rights of time-share purchasers, violating section 721.17 of the Florida Statutes (1981). His participation in the time-share operations fell under Chapter 721, and he did not meet the statutory writing requirements. 

Additionally, a second contract, the Assignment, executed six months after the initial Agreement, acknowledged the initial Agreement’s sufficiency. Appellant did not inform Beach Club that either contract was void or operating differently, and he acknowledged receiving six unsold unit weeks without signing a document to honor purchaser rights or notifying them within the required 30 days of the Assignment as stipulated in section 721.17(5). He informed purchasers that promissory notes were now to be paid to him instead of Beach Club, which constituted promotion of time-share sales under Chapter 721.

The hearing officer determined that Smith knowingly purchased an interest in the time-share project, supported by substantial evidence. Appellant's claim that the 1983 version of Chapter 721 was improperly retroactively applied was rejected. The statute's amendments in 1983 clarified the obligation of transferees to honor purchaser rights, but the general intent to protect purchasers was evident in the 1981 version as well. Despite the 1983 statute being more precisely articulated, the protections for purchasers were effective under the earlier statute.

Appellee contends that legislative intent can be discerned from subsequent legislative acts, referencing Watson v. Holland. The language in section 721.26, Florida Statutes (1983), authorizing penalties for violations, mirrors the 1981 statute's intent to protect purchasers. Appellant claims Beach Club violated section 721.17, rendering their contract void; however, this argument is rejected. The appellant, who drafted the contract, is not deemed an unsuspecting party and should have been aware of the statutory requirements outlined in section 721.17, which prohibits interest transfers until compliance. Appellee asserts that the appellant failed to incorporate these requirements, yet still executed the contract and collected payments. It is concluded that the appellant cannot claim the contracts are void post-acceptance of Beach Club's interests for profit. Contracts are interpreted against the drafter in case of ambiguity. The appellant's argument regarding a lack of notice from the statute is dismissed, as section 721.26(5) clarifies the Division’s authority to enforce compliance against any involved parties. Furthermore, the appellant's claims of disproportionately harsh penalties are countered by the Division's authority to impose fines up to $10,000, while only imposing a $5,000 penalty and requiring compliance with section 721.17. The hearing officer's recommendations were based on credible evidence from appellant's own testimony and documents, supporting the Final Order's validity.

Appellant contends that section 721.17 of the Florida Statutes (1981) does not impose a burden on third-party transferees and argues that the Division's interpretation imposes new obligations, thereby creating unauthorized rules. The court agrees with the appellee that the language of Chapter 721 clearly defines the duties of third-party participants towards purchasers in the time-sharing sector. It notes that had the appellant reviewed the statute prior to executing his Agreement, he would have been aware of the requirements applicable to third-party purchasers. The Division's actions were aligned with the statutory obligations, and there was no unauthorized delegation of authority. The court cites precedent confirming that the statute is a reasonable regulation aimed at protecting public welfare, affirming the hearing officer's conclusion that Smith received an assignment from Beach Club without fulfilling the necessary written agreements as required by section 721.17. The court emphasizes that statutes enacted for public benefit should be liberally construed, reinforcing the legislative intent. The Final Order of the Division is affirmed, with a clarification regarding the specifics of Smith's assignment, while maintaining that his liability under section 721.17 remains unchanged regardless of the quantity of interest assigned. Appellant's motion for rehearing is denied, except for the clarification.