Azam Mohammed Khan v. Commonwealth,Auctioneers Boar

COURT OF APPEALS OF VIRGINIA
Present: Chief Judge Fitzpatrick, Judge Annunziata and Senior Judge Willis
Argued at Alexandria, Virginia
AZAM MOHAMMED KHAN
v. Record No. 0497-03-4
COMMONWEALTH OF VIRGINIA, OPINION BY
AUCTIONEERS BOARD JUDGE JERE M. H. WILLIS, JR.
FEBRUARY 17, 2004
PARK ROYAL GALLERIES, LTD.
v. Record No. 0498-03-4
COMMONWEALTH OF VIRGINIA,
AUCTIONEERS BOARD
FROM THE CIRCUIT COURT OF LOUDOUN COUNTY
James H. Chamblin, Judge
Howard B. Silberberg (August Bequai, on briefs), for appellants.
William A. Diamond, Assistant Attorney General (Jerry W. Kilgore,
Attorney General, on briefs), for appellee.
Azam Mohammed Khan, a licensed auctioneer, and Park Royal Galleries, Ltd., a licensed
auction firm, (together appellants) appeal decisions by the trial court affirming orders of the
Auctioneers Board (the Board) dated January 10, 2002, imposing monetary penalties upon
appellants and suspending Khan’s auctioneer’s license. On appeal, appellants contend: (1) the
Board was not authorized to take action in the cases because it lacked the statutorily required
number of members; (2) the dismissal of two circuit court cases was binding on the Board; (3)
the trial court erroneously disregarded legal precedent; (4) the trial court erroneously relied on
law school notes as a basis for its decision; (5) the Board failed to follow its regulations; and (6)
the Board erroneously considered a prior consent order in determining whether to impose a
sanction on Khan. We affirm the judgment of the trial court.
Background
On March 15 and 16, 1997, Khan, on behalf of Park Royal Galleries (Park Royal),
conducted an auction on the grounds of the residence of Robert Gray, a cabinet secretary under
President Dwight D. Eisenhower. Appellants placed in the Washington Post an advertisement
which mentioned Gray’s name and stated that the auction would be an “important” estate
auction. Patricia Brockbank attended the auction, believing the items for sale belonged to the
Gray family.
Brockbank was interested in an oriental carpet that Khan told her was part of the Gray
estate and was worth $100,000. She purchased the rug from Khan for $20,000, plus a ten
percent buyer’s premium. She later learned that the carpet had not belonged to Gray. After she
failed to receive a certificate of authenticity from Khan as promised, she had the carpet appraised
and was told that the rug’s value was $10,800.
Brockbank filed in Arlington County Circuit Court a lawsuit against appellants, alleging
they had misrepresented the rug to her and seeking a refund of her money. The case did not go
to trial. By order entered October 9, 1998, the circuit court dismissed the case with prejudice. In
1999, Brockbank filed a similar suit in Fairfax County Circuit Court. The court dismissed that
suit on grounds of res judicata and collateral estoppel.
In 1998, Brockbank filed a complaint with the Department of Professional and
Occupational Regulation, which regulates the licensure of auctioneers through the Board. In her
complaint, Brockbank alleged that Khan had represented to her that the rug had belonged to Gray
and that it was valued at $100,000. During an investigation of the incident by the Board’s agent,
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Khan failed to produce requested records concerning the Gray estate auction, stating that the
records had been lost.
On September 6, 2001, Samuel Updike, a member of the Board, held an informal fact
finding conference in which appellants participated. The charges against appellants were set
forth in four counts.
Count I charged that the advertisement placed in the Washington Post by appellants
concerning the Gray estate auction violated one of the Board’s regulations. See 18 VAC
25-21-100(A).1
Count II charged that Khan made oral misrepresentations to Brockbank concerning the
rug. The Board dismissed Count II, finding insufficient evidence to impose sanctions for this
count.
Counts III and IV related to appellants’ record keeping. Count III alleged that appellants
failed to retain records of the Gray estate auction for four years as required by 18 VAC
1
18 VAC 25-21-100(A) provides: “All advertising must be truthful. Advertising shall
contain no false, misleading or deceptive statements, with respect to types or conditions of
merchandise offered at auction, why merchandise is being sold, who has ownership, where the
merchandise was obtained, or the terms and conditions of the auction and sale.”
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25-21-160.2 Count IV alleged that appellants violated 18 VAC 25-21-180(A)(5)3 by
failing to produce records of the Gray estate auction when requested by the Board.
Mr. Updike recommended that the Board impose upon each appellant monetary penalties
of $1,000 for each violation of Counts I, III and IV. The parties failed to agree to a consent order
and on October 18, 2001, the Board considered the cases. Three members of the Board were
present at the meeting. The minutes of the meeting reported a fourth member was absent, but
that a quorum was present.
Counsel representing both appellants argued to the Board their disagreements with the
summary and recommendations from the fact finding conference. Khan also made a presentation
to the Board. Mr. Updike was not present during these presentations and he did not participate in
the Board’s deliberations, pursuant to Code § 54.1-110(B). The two remaining members of the
Board deliberated in closed meeting. The Board adopted Mr. Updike’s summary, finding that
2
18 VAC 25-21-160 provides:
The contract drawn with each owner; auction records,
including but not limited to lists of buyers and their addresses; and
clerk sheets showing the items sold including the buyers’ numbers
or names and the selling prices and the final settlement papers shall
be retained for a period of four years from the date of settlement.
These business records shall be available for inspection by the
board or its designees as deemed appropriate and necessary.
3
18 VAC 25-21-180(A)(5) provides:
The board has the power to fine any individual or firm
licensee, or to suspend or revoke any license issued under the
provisions of Chapter 6 (§ 54.1-600 et seq.) of Title 54.1 of the
Code of Virginia and the regulations of the board pursuant to the
provisions of the Administrative Process Act . . . if it finds that:
The licensee, auction firm, or firm owner refuses or
fails, upon request or demand, to produce to the
board or any of its agents any document, book, or
copy thereof in licensee’s or owner’s possession
concerning the performance of auctioneering duties.
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appellants had committed the acts alleged in Counts I, III and IV. The Board imposed monetary
sanctions and suspended Khan’s auctioneer’s license for a period of six months.
Having determined that its summaries and recommendations contained errors, on January
10, 2002, the Board reconsidered appellants’ cases with amended summaries and
recommendations. Four members of the Board, including Mr. Updike, attended that meeting.
The minutes state that “finding a quorum present,” the meeting was called to order. Mr. Updike
did not participate in appellants’ cases.
Counsel for appellants presented arguments to the Board members via telephone.
Counsel asserted that Code §§ 54.1-200 and 54.1-602(A) required that the Board have at least
five members in order to act, noting that at that time, the Board consisted of only four members.
Counsel presented further arguments concerning the four counts. The three board members then
convened in closed session to consider the cases. Based on the facts of the case, the seriousness
of appellants’ actions, and Khan’s record with the Board, the Board found violations as charged
in Counts I, III and IV. The Board imposed $3,000 in monetary penalties upon each appellant
and suspended Khan’s auctioneer’s license for a period of one year.
On appeal, the trial court affirmed the Board’s decisions.
Analysis
I.
Relying on Code §§ 54.1-200 and 54.1-602(A), appellants contend that because the
Board consisted of fewer than five members, it could take no action and impose no sanctions.
Code § 54.1-200 provides, in part: “A regulatory board established to administer a system of
certification or licensure . . . unless otherwise specified by law, shall consist of at least five
members.” Appellants argue that because the Board consisted of fewer than five members,
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rather than “at least” five members, it was not legally constituted and could not act on the
charges against them.
Code § 54.1-200 is located in the “General Provisions” chapter of the statutes concerning
the Department of Professional and Occupational Regulation. However, Code § 54.1-602(A) is
located in the chapter that addresses auctioneers and the Auctioneers Board specifically. Code
§ 54.1-602(A) provides, in part: “The Auctioneers Board shall be composed of five members
. . . .” When statutes conflict, we presume the legislature intended that the more specific
provision control. See Tharpe v. Commonwealth, 18 Va. App. 37, 43-44, 441 S.E.2d 228, 232
(1994). Although the two statutes have similar wording, Code § 54.1-602(A) specifically
addresses the Auctioneers Board. Therefore, Code § 54.1-602(A) applies here.
Appellants argue that “shall,” as employed in Code § 54.1-602(A), is mandatory, not
permissive. Thus, they argue that the Board could not conduct business while comprised of
fewer than five members serving under active appointments. This issue has not heretofore been
addressed directly in Virginia. However, the Supreme Court has interpreted “shall” to be
directory rather than mandatory in the context of actions taken by public officials.
“[T]he use of ‘shall,’ in a statute requiring action by a public
official, is directory and not mandatory unless the statute manifests
a contrary intent.” As far back as 1888, when this Court addressed
a statute that used the term “shall,” we stated that “[a] statute
directing the mode of proceeding by public officers is to be
deemed directory, and a precise compliance is not to be deemed
essential to the validity of the proceedings, unless so declared by
statute.”
Butler v. Commonwealth, 264 Va. 614, 619, 570 S.E.2d 813, 816 (2002) (citations omitted).
Code § 54.1-602(A) contains no language prohibiting the Board from acting when fewer than
five members are serving active appointments. In the absence of such language, the provision of
the statute prescribing the number of board members is directory rather than mandatory.
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Furthermore, Code § 54.1-105 sets forth and controls the authority of the Board to act.
Code § 54.1-105 is entitled “Majority of board or panel required to suspend or revoke license,
certificate or registration; imposition of sanctions.” It provides: “An affirmative vote of a
majority of those serving on a board who are qualified to vote . . . shall be required for any action
to suspend or revoke a license, certification or registration or to impose a sanction on a licensee.”
At the January 10, 2002 board meeting, the results of which appellants appealed to the trial court,
four board members had been appointed to the Board, and all four members were present. The
minutes of the meeting state that a quorum of the Board was present. One board member did not
participate in the decision of appellants’ cases. The decision was made by three members, a
majority whether the Board consisted of four or five members.
This interpretation comports with decisions of other states.
“The almost universally accepted common-law rule is . . . [that] a
majority of a quorum constituted of a simple majority of a
collective body is empowered to act for the body.” . . . A board
may act as long as there exists a quorum equal to a majority of all
the actual members of the board.
Levinson v. Connecticut Board of Chiropractic Examiners, 560 A.2d 403, 418 (Conn. 1989)
(citations omitted).
[W]here appointments of lay persons by the governor of this State
to the West Virginia Board of Optometry . . . had not been made,
the West Virginia Board of Optometry, nevertheless, had
jurisdiction to conduct license revocation proceedings against an
optometrist practicing in this State, where the record indicated that,
pursuant to W. Va. Code, 30-1-5 [1931]4, a quorum of board
members existed during the transaction of business relating to such
revocation proceedings.
Serian v. State, 297 S.E.2d 889, 893 (W. Va. 1982) (footnote added).
4
W. Va. Code § 30-1-5 provides in part: “A majority of the members of the board shall
constitute a quorum for the transaction of its business.”
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Appellants also contend that action by the Board when fewer than five members had been
appointed deprived them of their due process rights.
The right of every person to engage in any lawful profession, trade
or occupation of his choice is clearly protected by both the
Constitution of the United States and the Constitution of the
Commonwealth of Virginia. The Commonwealth cannot abridge
such rights except as a reasonable exercise of its police powers
when it is clearly found that such abridgment is necessary for the
preservation of the health, safety and welfare of the public.
Code § 54.1-100. However, the Commonwealth is authorized to impose regulations upon
professions or occupations in order to protect the public interest when, among other
circumstances, “the unregulated practice of the profession or occupation can harm [the] welfare
of the public.” Code § 54.1-100(1). The Board serves an administrative function, regulating the
licensure of auctioneers, including suspending licenses and imposing sanctions for cause. This
legislative purpose would be forestalled if transient vacancies were permitted to impair the
Board’s ability to perform its duties. Code § 54.1-105 requires an affirmative vote of a majority
of those serving on the Board to suspend a license or impose a sanction. A majority of the Board
acted in appellants’ cases. Accordingly, we hold that those decisions were properly authorized
and that no due process rights were impaired.
II.
Appellants contend the dismissals of Brockbank’s circuit court cases were binding on the
Board, precluding the Board from acting on her complaint. Res judicata “precludes relitigation
of a claim or issue once a final determination on the merits has been reached by a court of
competent jurisdiction.” Neff v. Commonwealth, 39 Va. App. 13, 18, 569 S.E.2d 72, 75 (2002).
Brockbank alleged in her civil suits that Khan gave her false and misleading information
concerning the history and value of the rug, thereby inducing her to purchase the rug. Similarly,
Count II of the Board’s action alleged that Khan made statements to Brockbank which
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misrepresented the ownership and value of the rug. However, Count I concerned the
advertisement placed by appellants in the Washington Post, and Counts III and IV involved
record keeping violations, none of which was addressed in Brockbank’s complaints. Indeed,
appellants admitted in their argument to the trial court that the res judicata argument did not
apply to Counts III and IV. The lawsuits involved issues relevant only to Count II. The Board
dismissed Count II. The resolution of Brockbank’s circuit court cases had no bearing on Counts
I, III and IV and, thus did not preclude the Board’s actions with respect to those charges.
III. and IV.
Appellants contend the trial court erred by disregarding precedent that it believed was
wrongly decided and by relying on its law school notes in making its decision. However,
appellants failed to present these arguments to the trial court. “The Court of Appeals will not
consider an argument on appeal which was not presented to the trial court.” Ohree v.
Commonwealth, 26 Va. App. 299, 308, 494 S.E.2d 484, 488 (1998). See Rule 5A:18.
Accordingly, Rule 5A:18 bars our consideration of these questions on appeal. The record
reflects no reason to invoke the good cause or ends of justice exceptions to Rule 5A:18.
V.
Appellants contend that because the Board made no finding that they possessed records
requested by the Board, it erred in finding that they violated 18 VAC 25-21-180(A)(5) by failing
to produce the requested records. Appellants also assert that, because the Board charged them in
Count III with failing to retain certain records, it was foreclosed from also charging in Count IV
that they failed to produce those records.
Appellants represented to the Board and to the trial court that when they moved their
business to a new location, they lost or misplaced the records requested by the Board concerning
the Gray estate auction. However, an employee of Park Royal told a Board investigator that
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records for the Gray auction were entered into the company’s computer system and were
“backed up” on tape. The employee stated that the history of the carpet was in the computer as
item number E2782. This supported the charge in Count IV, failing to produce records. Even if
appellants had misplaced hard copies of the Gray estate auction records during their move, they
did not explain why they did not produce copies from their computerized records.
For the same reason, appellants’ argument regarding the alleged inconsistency in
charging that they violated both the record keeping regulation and the record production
regulation is without merit. Appellants’ own assertions that they lost records supported the
violation of Count III, the failure to maintain records. Given the evidence that certain relevant
records existed in Park Royal’s computer system, the Board could have concluded that, although
some hard copies of the requested records may have been lost or misplaced, other requested
evidence existed on Park Royal’s computer system, yet was not disclosed. Therefore, the
evidence supported a violation of both regulations.
VI.
Citing Code § 2.2-4019, Khan contends the Board, in rendering its decision, erred by
considering a prior consent order in which Khan did not admit to a violation of the Board’s
regulations. Code § 2.2-4019 provides that “[a]gencies may, in their case decisions, rely upon
public data, documents or information only when the agencies have provided all parties with
advance notice of an intent to consider such public data, documents or information.”
The Board’s January 22, 2002 final opinion and order regarding Khan’s case states that
the Board based its decision on the facts of the case, the seriousness of Khan’s actions, and his
record with the Board, including several prior consent orders. On October 18, 2001, three
months before it issued its final opinion and order, the Board considered the same prior consent
order in rendering its decision. On January 10, 2002, the Board reconsidered appellants’ cases
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and appellants’ counsel participated in that proceeding via telephone. The minutes of that Board
meeting disclose that, prior to the Board’s deliberation of the cases, Khan’s counsel argued to the
Board that one of the prior consent orders did not contain an admission of a violation by Khan.
Khan knew for three months that the Board had considered this consent order in its October 2001
meeting. Thus, he clearly had “advance notice” that the Board might consider that consent order
in its reconsideration of the cases in January 2002. Under these circumstances, the Board’s
consideration of the document complied with the statute and did not prejudice Khan.
The judgment of the trial court is affirmed.
Affirmed.
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