Jeanne Emiddio v. Florida Office of Financial Regulation

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
July Term 2014
JEANNE EMIDDIO,
Appellant,
v.
FLORIDA OFFICE OF FINANCIAL REGULATION,
Appellee.
No. 4D13-723
[September 3, 2014]
Appeal from the State of Florida, Office of Financial Regulation; L.T.
Case No. 1219-FR-5/11.
H. Richard Bisbee and Dannie L. Hart of H. Richard Bisbee P.A.,
Tallahassee, for appellant.
Pamela Jo Bondi, Attorney General, Allen Winsor, Solicitor General,
and Diane G. DeWolf, Deputy Solicitor General, Tallahassee, for appellee.
FORST, J.
Appellant Jeanne Emiddio appeals the administrative order of Appellee
Florida Office of Financial Regulation (“OFR”), denying her application for
a loan originator license because she had been convicted of felonies
involving crimes of fraud. Appellant maintains that, under the doctrines
of res judicata and collateral estoppel, OFR cannot now deny her a loan
originator license because of her prior convictions where it previously
determined that the convictions did not warrant the revocation of her
previous mortgage broker’s license. We disagree and affirm.
Background
Appellant had been a licensed mortgage broker since 1993. In 2002,
she entered a plea of nolo contendere and was adjudicated guilty of one
count of organized fraud less than $20,000, one count of false statement
for public aid, and four counts of Medicaid provider fraud. These
convictions were not related to Appellant’s practice as a mortgage broker,
and Appellant has never been the subject of a customer complaint or
disciplinary action in regards to her practice.
As a result of her convictions, OFR sought to revoke her mortgage
broker’s license. At the time, section 494.0041(2)(a), Florida Statutes
(2004), provided for discretionary disciplinary action against any mortgage
broker who pled nolo contendere to a crime involving fraud. The
disciplinary actions that could be taken included revocation of a license,
suspension of a license, and placement on probation. § 494.0041(1), Fla.
Stat. (2004).
An informal evidentiary hearing was held on the sole issue of whether
Appellant’s license should be revoked because of her convictions for crimes
involving fraud. Appellant had multiple clients and friends testify on her
behalf about her reputation for being an ethical professional. The hearing
officer recommended that Appellant be permitted to retain her license and
only be put on probation because she had demonstrated remorse for her
actions and had shown that her dishonest actions in her personal life did
not affect her honesty with her professional actions. The recommendation
was adopted in a final order by OFR in 2004.
Appellant successfully renewed her license each biennium period since
the date of the 2004 final order. In 2009, the Governor restored all of
Appellant’s civil rights, except the right to possess or own a firearm.
Changes in the Law for Mortgage Broker Licensing
The federal government responded to the 2008 mortgage crisis by
enacting the Secure and Fair Enforcement for Mortgage Licensing Act
(“SAFE Act”) to establish a Nationwide Mortgage Licensing System and
Registry for the residential mortgage industry. 12 U.S.C. § 5101 (2008).
The law created the term “loan originator” to encompass mortgage brokers
and mortgage lenders, and it required all loan originators to apply through
and be registered with the national system. 12 U.S.C. § 5102(4), (6). It
also required each state to implement the SAFE Act’s minimum standards
or face federal intervention. 12 U.S.C. § 5107. The minimum standards
for issuing a loan originator license included that an applicant “has not
been convicted of, or pled guilty or nolo contendere to, a felony in a
domestic, foreign, or military court—at any time preceding such date of
application, if such felony involved an act of fraud, dishonesty, or a breach
of trust, or money laundering.” 12 U.S.C. § 5104(b)(2)(B) (emphasis
added).
In 2009, the State of Florida amended Chapter 494, regarding
regulation of the mortgage broker trade, to come in compliance with the
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SAFE Act. § 494.001, Fla. Stat. (2009). The new provisions require all
mortgage brokers to file new applications for licensure as “loan
originators” through the national system since the previous mortgage
broker licenses ceased to be valid licenses. § 494.001(14), Fla. Stat.
(2010).
Section 494.0011, Florida Statutes (2010), empowers OFR to adopt
rules for loan originator licensure in accordance with Chapter 494 and the
SAFE Act. Section 494.0011(2)(c) states that the office may adopt rules:
Establishing time periods during which a loan originator . . .
or mortgage broker license applicant . . . is barred from
licensure due to prior criminal convictions of, or guilty or nolo
contendere pleas . . . regardless of adjudication.
1. The rules must provide:
a. Permanent bars for felonies involving fraud, dishonesty,
breach of trust, or money laundering[.]
(emphasis added).
OFR established Florida Administrative Code rule 69V-40.00112 to
implement section 494.0011, Florida Statutes. Subsection (1) of the rule
states, “As part of the application review process, the Office is required to
consider a relevant person’s law enforcement record when deciding
whether to approve an application for licensure as a loan originator.” Fla.
Admin. Code R. 69V-40.00112(1). The rule provides that an applicant is
not eligible for licensure if the applicant has ever committed a Class A
crime. Fla. Admin. Code R. 69V-40.00112(3). “Class ‘A’ crimes include all
felonies involving an act of fraud, dishonesty, or a breach of trust, or
money laundering.” Fla. Admin. Code R. 69V-40.00112(13).
OFR’s Application of New Laws to Appellant
Appellant timely filed her loan originator application through the
national registry in December 2010 pursuant to the applicable statute
because her last renewal was issued in 2009. In 2011, OFR served
Appellant with a Notice of Intent to Deny Application for Loan Originator
License, primarily because of her 2002 felony convictions involving fraud.
Appellant petitioned for a formal hearing on the matter, but was granted
only an informal hearing by OFR because the office found it was unclear
whether disputed issues of fact existed. OFR issued an amended notice of
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intent to deny Appellant’s application, limiting the grounds solely to
Appellant’s 2002 convictions.
After some delay, an informal hearing was held. Both parties submitted
various exhibits and Appellant testified on her own behalf. During the
proceedings, Appellant maintained that the issue of whether her 2002
convictions should be grounds for revoking her license was the subject of
the proceedings in 2004 and, therefore, res judicata and collateral estoppel
would operate to preclude that issue from being litigated at the present
hearing.
The hearing officer issued a detailed order, noting that Appellant’s
convictions were a result of a vulnerable time in her life and they did not
affect or harm her clients. However, the officer recommended that
Appellant’s application for licensure be denied because the officer was
“constrained by the law as it currently exists,” which mandates that an
applicant who has pled nolo contendere to a felony involving fraud is not
eligible for a license. This recommended order was adopted in full in a
final order by OFR.
Neither Res Judicata nor Collateral Estoppel is Applicable
Although we affirm the final administrative order denying Appellant’s
application, we write to address two issues raised. “Our standard of
review, where the facts are not in dispute and the administrative agency
is interpreting the law, is to determine if the agency ‘has erroneously
interpreted a provision of law.’” Fanizza v. State, Comm’n on Ethics, 927
So. 2d 23, 26 (Fla. 4th DCA 2006) (quoting § 120.68(7)(d), Fla. Stat.
(2002)).
Our Supreme Court has recognized that “the principles of res judicata
do not always neatly fit within the scope of administrative proceedings”
and should be applied with great caution. Thomson v. Dep’t of Envtl.
Regulation, 511 So. 2d 989, 991 (Fla. 1987). In Thomson, the Court held,
“The proper rule in a case where a previous permit application has been
denied is that res judicata will apply only if the second application is not
supported by new facts, changed conditions, or additional submissions by
the applicant.” Id. Likewise, with collateral estoppel, the doctrine will not
be applied if there is a change in circumstances creating a new issue to be
litigated. See Haskin v. Haskin, 781 So. 2d 431, 432 (Fla. 4th DCA 2001);
Krug v. Meros, 468 So. 2d 299, 303 (Fla. 2d DCA 1985) (“[W]e note that the
doctrine of estoppel by judgment does not apply where unanticipated
subsequent events create a new legal situation.”). “[T]he determination of
whether a significant change in circumstances has occurred lies primarily
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within the discretion of the administrative agency.” Delray Med. Ctr., Inc.
v. State Agency for Health Care Admin., 5 So. 3d 26, 29 (Fla. 4th DCA
2009).
In the instant case, the hearing officer correctly concluded that neither
res judicata nor collateral estoppel bar OFR from deciding the issue before
the court in 2012: whether Appellant’s 2002 convictions make her
ineligible for a loan originator license under the 2010 amendments to
Chapter 494. Between 2009 and 2011, the Florida statutes and
administrative rules regarding mortgage broker licensure underwent
significant change in the wake of the 2008 mortgage crisis. Many of the
previous statutes governing Appellant’s mortgage broker license were
amended or repealed and replaced with provisions in compliance with the
federal SAFE Act. The hearing officer properly acted in her discretion to
find that this was a significant change in circumstances, as well as an
unanticipated subsequent event that created a new legal situation, to
prevent the application of res judicata and collateral estoppel in Appellant’s
case. Thomson, 511 So. 2d at 991; Delray Med. Ctr., 5 So. 3d at 29; Krug,
468 So. 2d at 303.
Appellant’s Reliance on Kauk v. Department
of Financial Services was not Preserved
In support of her arguments, Appellant filed the recent opinion of one
of our sister courts as supplemental authority. In Kauk v. Department of
Financial Services, 131 So. 3d 805 (Fla. 1st DCA 2014), the First District
was faced with the issue of whether OFR could impose a per se bar to
licensure as an insurance agent in Florida for an applicant who was
previously convicted of a felony involving a crime of fraud where OFR found
that the applicant was fully rehabilitated and his civil rights had been
restored. Id. at 806-08. The law that was applied to deny the applicant
an insurance agent license operated the same as the law applied to deny
Appellant’s license in the instant case: “to permanently preclude the
licensure of any applicant who commits a felony involving fraud.” Id. at
807.
The First District relied on Sandlin v. Criminal Justice Standards &
Training Commission, 531 So. 2d 1344 (Fla. 1988), to avoid finding the
statute unconstitutionally overbroad:
[T]he statute at issue in Sandlin barred from certification as a
law enforcement officer any person who had been convicted of
any felony or a misdemeanor involving perjury or a false
statement. The Sandlin court refused to construe this statute
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as imposing a per se bar against certification of a pardoned
felon, reasoning that such a construction would render the
statute an unconstitutional infringement on the executive’s
clemency power by diminishing the effect of a pardon. The
court held that, because the Legislature is presumed to have
intended a constitutional result when drafting any statute, the
statute could not be read as imposing an absolute bar against
certification of a pardoned felon. . . .
....
. . . The Sandlin court recognized that persons seeking to
practice certain professions or employments can be required
to demonstrate their good moral character, even though they
may have been fully pardoned for previous crimes. . . . The
court emphasized that a licensing agency is permitted to deny
a license to a pardoned felon when the serious character of
the criminal conduct underlying his conviction justifies the
decision. Ultimately, the court held that a licensing agency
may take into account and rely on the facts underlying
pardoned convictions and may give weight to the general
policy expressed in a statute precluding licensure due to
criminal convictions.
Id. at 808-09 (internal quotations and citations omitted). The First District
further explained that it was constrained, by that court’s prior precedent,
to extend the rule in Sandlin to prevent a statute from imposing a per se
bar against licensure of a felon whose civil rights have been restored, in
addition to those who have received a full pardon. Id. at 809. The court’s
opinion notes that while “there may be wisdom in the distinction between
one who has been pardoned and one who has had his civil rights restored
. . . we are not at liberty to embrace such a distinction.” Id. (citing G.W.
Liquors of Collier, Inc. v. Dep’t of Bus. Regulation, 556 So. 2d 464, 465 (Fla.
1st DCA 1990) (extending Sandlin to bar an automatic licensure rejection
of convicted felons even without a full pardon)).
The Kauk opinion concluded that “Sandlin does not allow the denial of
a license to a restored felon due to prior convictions when the licensing
agency has made findings of complete rehabilitation and fitness to hold a
license.” Id. at 810. As such, the First District reversed the denial of the
applicant’s licensure and remanded for OFR to properly consider his
application in light of its holdings. Id.
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Based on the First District’s analysis in Kauk, Appellant in the instant
case attempts to raise the issue of whether the denial of her application
constitutes an unconstitutional infringement on the executive’s clemency
power under article IV, section 8(a) of the Florida Constitution. However,
Appellant raises this argument for the first time by filing Kauk as
supplemental authority on appeal, and Appellant failed to raise any
constitutional challenge in her initial brief. See Stanton v. Fla. Dep’t of
Health, 129 So. 3d 1083, 1085 (Fla. 1st DCA 2013) (“It is a well-established
maxim of appellate practice that ‘[c]laims for which an appellant has not
presented any argument . . . are insufficiently presented for review and are
waived.’” (quoting Hammond v. State, 34 So. 3d 58, 59 (Fla. 4th DCA
2010))); J.A.B. Enters. v. Gibbons, 596 So. 2d 1247, 1250 (Fla. 4th DCA
1992) (“[A]n issue not raised in an initial brief is deemed abandoned and
may not be raised for the first time in a reply brief.”). Furthermore, a
constitutional challenge based on an infringement on the executive’s
clemency power was never raised in Appellant’s pleadings before the OFR
hearing officer or at the informal hearing.1
As such, this argument has not been preserved for review and,
accordingly, we may only review the issue for fundamental error. Aills v.
Boemi, 29 So. 3d 1105, 1108-09 (Fla. 2010). The “application of an
unconstitutional statute constitutes fundamental error, whereas
unconstitutional application of an otherwise constitutional statute does
not.” B.C. v. Dep’t of Children & Families, 864 So. 2d 486, 491 (Fla. 5th
DCA 2004) (citing Alexander v. State, 450 So. 2d 1212, 1216 (Fla. 4th DCA
1984)).
No Fundamental Error exists with OFR’s
Denial of Appellant’s Application for Licensure
The First District’s decision in Kauk avoided declaring a statute’s per
se bar against insurance agent licensure for felons convicted of crimes
involving fraud as unconstitutional by presuming, in reliance on Sandlin,
1 In Appellant’s Petition for Formal Hearing as to OFR’s Amended Notice of Denial,
she challenged Chapter 2009-241, Laws of Florida (the amendments to Chapter
494, Florida Statutes), as “unconstitutional on its face and its effect to the extent
it detrimentally affects [Appellant’s] protected property interest in her
professional employment” and asked the hearing officer to take official
recognition of Wilson v. Pest Control Commission of Florida, 199 So. 2d 777 (Fla.
4th DCA 1967), and Dubin v. Department of Business Regulation, 262 So. 2d 273
(Fla. 1st DCA 1972), in support of that challenge. However, the hearing officer
declined to address the constitutional argument, stating that it lacked authority
as an executive agency officer to declare a statute or rule unconstitutional, and
Appellant did not challenge that finding on appeal.
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that the legislature intended that licensure could be granted for felons who
have demonstrated rehabilitation and fitness to hold a license and whose
civil rights have been restored under the governor’s clemency power.
Because the licensure statute in Kauk is substantially the same as the
statute and administrative rule in the instance case, the holding in Kauk
can be applied to find that the legislature did not intend for section
494.0011, Florida Statutes, or administrative rule 69V-40.00112 to have
an unconstitutional result; thus, a per se bar against licensure for felons
convicted of crimes involving fraud will be construed as to not apply to
felons whose civil rights have been restored. These applicants will then be
evaluated for their rehabilitation and fitness for licensure in light of the
past conviction(s).
This constitutional construction of the statute and rule precludes a
finding that the statute and rule are facially unconstitutional, and so
fundamental error cannot be applied. B.C., 864 So. 2d at 491. Thus, to
the extent that OFR’s application of the loan originator licensure statute,
section 494.0011, is unconstitutional,2 this would not constitute
fundamental error. Alexander, 450 So. 2d at 1216; see also Fitchner v.
Lifesouth Cmty. Blood Ctrs., Inc., 88 So. 3d 269, 285 (Fla. 1st DCA 2012)
(Schwartz, Senior Judge, dissenting), review denied, 108 So. 3d 655 (Fla.
2012) (“In common with all appellate contentions, a claim relating to
unconstitutionality is waived unless it is timely and appropriately
advanced and preserved below.”).
Agreeing with OFR that collateral estoppel and/or res judicata are not
applicable, and further finding no fundamental error, we must affirm the
administrative order below.
Affirmed.
GROSS and GERBER, JJ., concur.
* * *
Not final until disposition of timely filed motion for rehearing.
2 We note that we have not determined that OFR’s application of the loan
originator licensure statute was done in an unconstitutional manner, inasmuch
as Appellant had not received a pardon and, unlike the First District Court of
Appeal, we are not constrained by G.W. Liquors to extend the Sandlin holding.
8