Unik v. Ohio Dept. of Ins.

[Cite as Unik v. Ohio Dept. of Ins., 2016-Ohio-921.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 102703
THOMAS J. UNIK, III
APPELLANT
vs.
OHIO DEPARTMENT OF INSURANCE
APPELLEE
JUDGMENT:
AFFIRMED
Administrative Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-14-831173
BEFORE: Boyle, J., Keough, P.J., and S. Gallagher, J.
RELEASED AND JOURNALIZED: March 10, 2016
ATTORNEYS FOR APPELLANT
Mitchell J. Yelsky
Angelo F. Lonardo
Yelsky & Lonardo Company, L.P.A.
323 W. Lakeside Avenue
Suite 450
Cleveland, Ohio 44113
ATTORNEYS FOR APPELLEE
Mike DeWine
Ohio Attorney General
BY: Scott Myers
Assistant Attorney General
Health & Human Services Section
30 East Broad Street, 26th Floor
Columbus, Ohio 43215
MARY J. BOYLE, J.:
{¶1} Appellant, Thomas J. Unik, III, appeals from a common pleas court
judgment granting the motion to dismiss of appellee, Ohio Department of Insurance
(“Department”), and dismissing Unik’s administrative appeal. Unik raises one
assignment of error for our review:
The trial court committed reversible error, and denied administrative
appellant due process of law, when it dismissed this administrative appeal,
without first conducting a de novo evidentiary hearing on appellant’s
“un-constitutional as applied” argument in opposition to administrative
appellee’s motion to dismiss the administrative appeal.
{¶2} Finding no merit to his appeal, we affirm the judgment of the common
pleas court.
I. Procedural History and Factual Background
{¶3} On June 27, 2014, the Department sent a certified letter to Unik, who at the
time was licensed as a resident insurance agent, notifying him that it had conducted an
investigation and found that he had violated various Ohio insurance laws. The
Department enclosed a notice of opportunity for hearing, setting forth four allegations of
misconduct against Unik. The Department further notified Unik that he “must act
within 30 days from the date the Department mailed the notice to you, to preserve
your due process rights.” (Emphasis sic.) The letter further made clear:
Please note that if you choose to request a hearing, the request must be
received by the Department within thirty (30) days from the date of
mailing, as shown by the postmark on the envelope, of this Notice. If you
do not request a hearing, then the matter will proceed on its own to the
Superintendent of Insurance for a decision based only on the information
we have in the file. The Superintendent may impose any sanction
allowed by law including revoking your insurance license or refusing to
issue you an insurance license.
{¶4} The record reflects that service was perfected on July 2, 2014. But Unik
never responded to the letter or requested a hearing. Having never heard from Unik,
the superintendent of the Department proceeded to review the allegations and evidence
against Unik. On July 28, 2014, the superintendent found the following:
1. On or about June 5, 2013, Unik accepted a premium payment from an
insured in the amount of $88,796.00 for policies written by, including but
not limited to, Travelers Insurance Company, Torus, Greenwich Insurance
Co. and Lloyds. Unik deposited the check into his business account and
failed to timely remit the entire premium payment to the respective
companies. [Violating R.C. 3905.14(B)(4).]
2. On or about June of 2013, Unik received an application for insurance
along with a premium payment. Unik failed to forward the application or
premium payment until on or about September 17, 2013. [Violating R.C.
3905.14(B)(15) and 3905.14(F)(2).]
3. On or about August 16, 2013, Unik attempted to pay the remainder
premium due. Subsequently, those attempts were unsuccessful due to
insufficient funds in Unik’s bank accounts. [Violating R.C.
3905.14(B)(9).]
4. On or about April 4, 2013, Unik was indicted on four felony counts
including engaging in a pattern of corrupt activity, theft, and having an
unlawful interest in public contract. Unik failed to report this criminal
prosecution to the Department within the required thirty day time period.
[Violating R.C. 3905.22(B) and 3905.14(F)(2).]
{¶5} In her findings, order, and journal entry, the superintendent revoked Unik’s
resident insurance license in the state of Ohio pursuant to the Department’s authority
under R.C. 3905.14(D). The order also set forth Unik’s appeal rights. The
Department sent the order to Unik via certified mail. Service was perfected on August
10, 2014.
{¶6} Unik appealed the order to the common pleas court on August 12, 2014.
The Department moved to dismiss Unik’s appeal for failure to exhaust his administrative
remedies. Unik responded, opposing the Department’s motion to dismiss or in the
alternative, requesting the matter be remanded to the Department for a hearing. In his
response, Unik did not argue that the Department failed to provide him notice as required
under R.C. 119.07. Unik maintained, however, that he never received that notice.
Unik averred that his wife signed for the original letter notifying him of the allegations
against him. Unik claimed that his wife left town soon after she signed for the letter
because she was an international flight attendant for United Airlines. Unik further
stated that his wife never told him about the certified letter before she left. Unik said
that he learned of the matter when he received the Department’s order revoking his
insurance license, which he immediately appealed.
{¶7} On February 6, 2015, the common pleas court granted the Department’s
motion to dismiss, finding that Unik failed to exhaust his administrative remedies under
R.C. 119.07. It is from this judgment that Unik appealed to this court.
II. Standard of Review
{¶8} An appeal from an administrative agency in Ohio is governed by R.C.
119.12. Our Place, Inc. v. Ohio Liquor Control Comm., 63 Ohio St. 3d 570, 571, 589
N.E.2d 1303 (1992). R.C. 119.12(A)(1) states that:
any party adversely affected by any order of an agency issued pursuant to
an adjudication denying an applicant admission to an examination, or
denying the issuance or renewal of a license or registration of a licensee, or
revoking or suspending a license, or allowing the payment of a forfeiture
under section 4301.252 of the Revised Code may appeal from the order of
the agency to the court of common pleas of the county in which the place
of business of the licensee is located or the county in which the licensee is
a resident.
{¶9} R.C. 119.12(M) provides in pertinent part:
The [common pleas] court may affirm the order of the agency complained
of in the appeal if it finds, upon consideration of the entire record and any
additional evidence the court has admitted, that the order is supported by
reliable, probative, and substantial evidence and is in accordance with law.
In the absence of this finding, it may reverse, vacate, or modify the order or
make such other ruling as is supported by reliable, probative, and
substantial evidence and is in accordance with law.
{¶10} When reviewing an order entered by an administrative agency, the court of
common pleas applies the limited standard of review set forth in R.C. 119.12 and
determines whether the order is supported by reliable, probative, and substantial
evidence and is in accordance with law. Young v. Cuyahoga Work & Training Agency,
8th Dist. Cuyahoga No. 79123, 2001 Ohio App. LEXIS 3222,*5 (July 19, 2001), citing
Univ. of Cincinnati v. Conrad, 63 Ohio St. 2d 108, 110, 407 N.E.2d 1265 (1980). When
reviewing the common pleas court’s determination, the appellate court determines only
whether the court abused its discretion in finding whether the agency’s order is
supported by such evidence. Id., citing Rossford Exempted Village School Dist. Bd. of
Edn. v. State Bd. of Edn., 63 Ohio St. 3d 705, 707, 590 N.E.2d 1240 (1992). “Absent an
abuse of discretion on the part of the trial court, a court of appeals must affirm the trial
court’s judgment.” Id. at 707.
III. Exhaustion of Administrative Remedies
{¶11} In his sole assignment of error, Unik contends that R.C. 119.07 is
unconstitutional as applied to “the unique set of facts” of his case. R.C. 119.07 sets
forth the procedures that an administrative agency must follow when providing a party
notice and opportunity to be heard before the agency can suspend or revoke the party’s
state license. Unik argues that the trial court denied him due process of law when it
dismissed his administrative appeal without conducting a de novo evidentiary hearing on
“appellant’s ‘un-constitutional as applied’ argument in opposition to administrative
appellee’s motion to dismiss the administrative appeal.” We disagree.
{¶12} In general, a party must exhaust its administrative remedies prior to
appealing an administrative decision to the court of common pleas under R.C. 2506.01.
See Lamar Outdoor Advertising v. Dayton Bd. of Zoning Appeals, 2d Dist. Montgomery
No. 18902, 2002-Ohio-3159, ¶ 17; Noernberg v. Brook Park, 63 Ohio St. 2d 26, 29, 406
N.E.2d 1095 (1980). The Ohio Supreme Court has explained, “‘[It is] the long settled
rule of judicial administration that no one is entitled to judicial relief for a supposed or
threatened injury until the prescribed administrative remedy has been exhausted.’”
(Alterations sic.) Jones v. Chagrin Falls, 77 Ohio St. 3d 456, 462, 674 N.E.2d 1388
(1997), quoting Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 58 S. Ct. 459, 82
L. Ed. 638, (1938).
{¶13} The doctrine of exhaustion of administrative remedies is one of judicial
abstention. Lamar Outdoor Advertising at ¶ 17. “The purpose of the doctrine of
exhaustion of administrative remedies is to prevent premature interference with the
administrative processes.” Basic Distrib. Corp. v. Ohio Dept. of Taxation, 94 Ohio
St.3d 287, 290, 762 N.E.2d 979 (2002). Moreover, the doctrine allows the
administrative body to function efficiently, correct its own errors, and apply its special
expertise. Nemazee v. Mt. Sinai Med. Ctr., 56 Ohio St. 3d 109, 111, 564 N.E.2d 477
(1990), quoting Weinberger v. Salfi, 422 U.S. 749, 95 S. Ct. 2457, 45 L. Ed. 2d 522
(1975).
{¶14} Because Unik failed to request a hearing after receiving notice from the
Department, he has waived his right to challenge the findings by the Department. Mays
v. Ohio State Dental Bd., 8th Dist. Cuyahoga No. 68864, 1996 Ohio App. LEXIS 1972,
*12 (May 16, 1996), citing Noernberg.
{¶15} Unik further argues that the trial court should have held a hearing to
address his argument that R.C. 119.07 was unconstitutional as applied to the particular
facts in this case. We disagree.
{¶16} Facial constitutional arguments are not normally within an administrative
agency’s jurisdiction. Roosevelt Properties Co. v. Kinney, 12 Ohio St. 3d 7, 8, 465
N.E.2d 421 (1984), citing S.S. Kresge Co. v. Bowers, 170 Ohio St. 405, 166 N.E.2d 139
(1960), and Herrick v. Kosydar, 44 Ohio St. 2d 128, 339 N.E.2d 626 (1975).1 Thus, a
1
S.S. Kresge has been overruled in part by implication in Petrocon v. Kosydar, 38 Ohio St. 2d
264, 313 N.E.2d 373 (1974), and Sun Fin. & Loan Co. v. Kosydar, 45 Ohio St. 2d 283, 344 N.E.2d
330 (1976). But S.S. Kresge’s holding — that facial constitutional challenges may be raised for the
first time on appeal — remains valid. Cleveland Gear Co. v. Limbach, 35 Ohio St. 3d 229, 231, 520
N.E.2d 188 (1988).
challenge to the constitutionality of a statute on its face may be raised for the first time in
an administrative appeal. Cleveland Gear Co. v. Limbach, 35 Ohio St. 3d 229, 520
N.E.2d 188 (1988), paragraph two of the syllabus. But a challenge to the constitutional
application of legislation to particular facts must be raised at the first available
opportunity during the proceedings before the administrative agency. Bd. of Edn. of the
S.W. City Schools v. Kinney, 24 Ohio St. 3d 185, 494 N.E.2d 1109 (1986), syllabus.
{¶17} In Bd. of Edn., the Ohio Supreme Court noted that “a fundamental
distinction must be recognized between the constitutional application of legislation to
particular facts, and the constitutionality of the legislation itself.” (Emphasis added.)
Id. at 185. The Supreme Court held “that a party [who] challenges the constitutionality of
the application of a tax statute in a particular situation is required to raise that challenge
at the first available opportunity during the proceedings before the [administrative
agency], and a failure to do so constitutes a waiver of that issue.” Id. at the syllabus.
{¶18} The Supreme Court explained in Bd. of Edn.:
Had the equal protection issue * * * been raised during the proceedings
before the attorney examiner, it is entirely possible that the city of
Columbus would have developed an evidentiary record sufficient to show
that the statute was applied constitutionally. By waiting until now to raise
the issue, the school board has deprived the city of an opportunity to
develop the record on this point. This itself raises due process
considerations. Furthermore, the school board’s failure to raise the
constitutional issue during the proceedings below has prevented this court
from receiving the expert commentary of the Tax Commissioner and the
Board of Tax Appeals on the equal protection issue. Finally, this court
has repeatedly stated that it reviews decisions of the Board of Tax Appeals
on appeal, and that it is not a trier of fact de novo.
Id. at 186.
{¶19} Here, Unik challenges the constitutional application, not the
constitutionality of the statute itself. Thus, Unik was required to raise his
constitutional-as-applied argument before the Department. Unik has therefore waived
his right to challenge the constitutionality of R.C. 119.07.
{¶20} Unik further contends that this court has the discretion to address the
constitutionality of R.C. 119.07 as applied to the facts of his case. Assuming for the
sake of argument that Unik is correct, we decline to do so. Unik failed to develop an
evidentiary record to show that R.C. 119.07 was unconstitutional as applied to the facts
of his case. Further, Unik’s failure to raise this issue to the Department prevented the
Department from establishing that R.C. 119.07 was constitutional as applied to the facts
of Unik’s case. Thus, we decline to address Unik’s unconstitutional-as-applied
argument.
{¶21} Accordingly, Unik’s assignment of error is overruled.
{¶22} Judgment affirmed.
It is ordered that appellee recover from appellant the costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the common
pleas court to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of
the Rules of Appellate Procedure.
MARY J. BOYLE, JUDGE
KATHLEEN ANN KEOUGH, P.J., CONCURS;
SEAN C. GALLAGHER, J., DISSENTS (SEE SEPARATE OPINION)
SEAN C. GALLAGHER, J., DISSENTING:
{¶23} I respectfully dissent in this matter because I believe the majority’s decision
is contrary to concepts of due process and fundamental fairness. I would reverse the
decision of the trial court and remand the matter to the trial court for an evidentiary
hearing on the due process and constitutional issues that have been raised.
{¶24} After 33 years of practice, appellant’s professional license as a resident
insurance agent was permanently revoked. Although the Ohio Department of Insurance
sent a notice of opportunity to be heard pursuant to R.C. 119.07, appellant claims his
wife, who is an international flight attendant, signed for the notice and left town without
notifying him of the notice.
{¶25} The majority finds that appellant failed to exhaust his administrative
remedies because he did not request a hearing after receiving notice, and that appellant
was required to raise his constitutional-as-applied challenge before the Department. I
do not agree that appellant waived his right to raise due process or constitutional
challenges under the circumstances of this case. How could a party ever develop an
evidentiary record or exhaust his administrative remedies if he never in fact received
notice or the opportunity to do so? An individual must be afforded due process before
his property rights can be revoked. See Sohi v. State Dental Bd., 130 Ohio App. 3d 414,
422, 720 N.E.2d 187 (1st Dist.1998).
{¶26} Although the signed receipt for delivery of service may have been prima
facie evidence of delivery of the notice, a plaintiff may introduce evidence to rebut this
evidence and to overcome the presumption. See Tripodi v. Liquor Control Comm., 21
Ohio App. 2d 110, 110-111, 255 N.E.2d 294 (7th Dist.1970). Appellant filed with his
motion to stay the administrative decision an affidavit containing statements to rebut the
presumption of notice.
The issue then became whether or not appellee had received the required
legal notice pursuant to R.C. 119.07. The disposition of the case could
not continue until this determination was made. If appellee received legal
notice, then all administrative remedies had been exhausted and only the
lower court could continue to resolve the matter. If there was no legal
notice, then the adjudication orders were void. Based on this reasoning,
the additional evidence on the question of notice was properly admitted[.]
{¶27} In re Turner Nursing Home, 10th Dist. Franklin No. 86AP-767, 1987 Ohio
App. LEXIS 5729, *5 (Jan. 29, 1987).
{¶28} I would find appellant’s failure to exhaust his administrative remedies does
not preclude the trial court from hearing the due process and constitutional challenges
that have been raised. “On questions of law a common pleas court conducts a de novo
review in determining whether the administrative order is ‘in accordance with law.’” K
& M Deli, Inc. v. Liquor Control Comm., 2011-Ohio-6170, 969 N.E.2d 290, ¶ 6 (10th
Dist.), citing Ohio Historical Soc. v. State Emp. Relations Bd., 66 Ohio St. 3d 466, 471,
1993-Ohio-182, 613 N.E.2d 591. Given the valuable and protected property rights in
appellant’s professional license that are at stake, appellant should have been afforded
due process of law and an opportunity to develop an evidentiary record for this court’s
review.
{¶29} For these reasons, I would reverse the decision of the trial court and remand
the matter to the trial court for an evidentiary hearing.