Commerce File Nos. MO2106226/DMG MO2107563/DMG MO2203630/DMG

15-1005-15202-2

STATE OF MINNESOTA

OFFICE OF ADMINISTRATIVE HEARINGS

FOR THE COMMISSIONER OF COMMERCE

 

In the Matter of the Mortgage Originator License of BlackDiamond Mortgage & Real Estate Consultants Corp. d/b/a ProTech Enterprise Investment Properties Trust, License No. 20225862

ORDER DENYING MOTION TO DISMISS OR FOR SUMMARY DISPOSITION

 

          On April 18, 2003, BlackDiamond Mortgage & Real Estate Consultants Corp. (BlackDiamond) filed a Motion to Dismiss.  On  April 24 and April 29, 2003, letters in response were received from counsel for the Department of Commerce.

Michael J. Tostengard, Assistant Attorney General, 1200 NCL Tower, 445 Minnesota Street, St. Paul, MN 55101-2130, appeared on behalf of the Department of Commerce.  Berry Willis, Chief Executive Officer, BlackDiamond Mortgage & Real Estate Consultants Corporation, 4204 83^rd Avenue North, Brooklyn Park, MN 55443, appeared on behalf of BlackDiamond Mortgage & Real Estate Consultants Corporation.

There appear to be five separate bases for the Motion:

1.     That the Office of Administrative Hearings lacks jurisdiction to consider this matter because it is a branch of state government, as are the Attorney General, Department and the courts, and has a “conflict of interest”;

2.     That the Department failed to serve the proper party;

3.     That the Department cannot rely upon complaints made by two individuals who filed civil actions in district court because such reliance constitutes “double jeopardy”;

4.     That the Department has failed to name indispensable parties, the complainants; and

5.     That the Department has failed to state a claim upon which relief may be granted.

IT IS HEREBY ORDERED:

For the reasons set forth in the attached memorandum, BlackDiamond’s Motion to Dismiss or for Summary Disposition, is DENIED.

 

Dated this

13th

day of

May

2003.

                                                                

s/Beverly Jones Heydinger

BEVERLY JONES HEYDINGER

Administrative Law Judge

MEMORANDUM

 

          In reviewing the motion brought by BlackDiamond, the administrative law judge has taken into account that Mr. Willis is not represented by counsel.  The motion has been considered under the provisions of Minn. R. 1400.5500 which states that the administrative law judge may “recommend a summary disposition of the case or any part there of where there is no genuine issue as to any material fact or recommend dismissal where the case or any part thereof has become moot or for other reasons.”[1]

 

          Because BlackDiamond has submitted an Affidavit in support of its motion, this is properly considered a motion for summary disposition.

 

          Summary disposition may be granted when there are no material facts at issue and the issues presented can be resolved as a matter of law.  A material fact is one that is substantial and will affect the result or outcome of the proceeding, depending upon the determination of that fact.[2]  In considering the motion for summary disposition, the Administrative Law Judge must view the evidence in the light most favorable to the nonmoving party.[3]  To determine whether there are material facts in dispute, the pleadings and affidavits on file were reviewed.  In this instance, the record includes the Notice of and Order for Hearing with its Statement of Charges and attached exhibits, and the affidavits submitted by BlackDiamond in support of its motion.

 

          The sole function of the motion is to determine whether there are issues of fact that must be tried.  When a motion is made, summary disposition may be granted to either party.       

 

Lack of Jurisdiction.

 

          BlackDiamond asserts that the Office of Administration lacks jurisdiction over this matter, apparently because of an alleged “conflict of interest.”  The sole basis for that claim is that the Office of Administrative Hearings is part of state government, as is the Department, the Attorney General and the courts.  The authority of the Department of Commerce to regulate mortgage originators is clear. The law specifically states that “[B]eginning August 1, 1999, no person shall act as a residential mortgage originator, or make residential mortgage loans without first obtaining a license from the commissioner according to the licensing procedures provided in [chapter 58].”[4]  Although there are certain exceptions listed in statute, BlackDiamond has not alleged that any apply.

 

          BlackDiamond applied to the Department for a license, and is subject to regulation as a mortgage originator.  The Commissioner of Commerce has the power to investigate businesses licensed by the Department and to take action when there is reason to believe that the rules governing the profession have been violated.[5]  The statute specifically requires that hearings “must be conducted in accordance with chapter 14 and other applicable laws.”[6]  All hearings conducted under chapter 14 are conducted by an administrative law judge.[7]

 

          Thus, the jurisdiction of the Office of Administrative Hearings is clear as a matter of law.  To the extent that BlackDiamond’s argument is taken to mean that the hearing cannot be constitutionally heard within state government, the case law indicates that the Department itself could constitutionally conduct the licensing hearing.[8]  In this case the hearing will be conducted by an independent state agency, the Office of Administrative Hearings.

 

Service on the Proper Party

 

          BlackDiamond alleges that the Department served the wrong party.  It acknowledges that service was made on BlackDiamond, but claims that the proper party is ProTech Enterprise Investment Properties Trust (“Protech”), and that the matter should be dismissed because ProTech was not separately served.

 

          The name that appears on the application for a mortgage originator license is BlackDiamond Mortgage & Real Estate Consultants Corp. d/b/a ProTech Enterprise Investment Properties Trust.  The application states that the business was incorporated on October 20, 1999, and that its place of business is 4204 83 Avenue No., Brooklyn Park, MN 55443.  Berry Willis is listed as the CEO.[9]

 

          The Affidavit of Service filed with the Notice of and Order for Hearing, Notice of Prehearing Conference and Statement of Charges shows that service was made on Berry Willis, CEO, BlackDiamond Mortgage & Real Estate Consultants Corp., 4204 83^rd Avenue North, Brooklyn Park, MN 55443.  BlackDiamond was the applicant, and the notice was given to BlackDiamond at the address that appears on its application.  Mr. Willis does not deny that the notice was received.  Service was made by United States first class mail, as allowed by statute.[10] Also, Mr. Willis has filed several other pleadings in this matter as president or CEO of BlackDiamond without asserting that BlackDiamond is not the proper party to this action.  It is frivolous to argue that service on the named applicant at its business address was inadequate.

 

          The Department also submitted a Certificate of Assumed Name filed with the Secretary of State in its defense of the motion.  It shows that business will be conducted under the name ProTech Enterprise Investment Properties Trust, and the name of the corporation that owns the business is BlackDiamond Mortgage & Real Estate Consultants Corp.  Berry Willis signed the form, dated May 1, 2000, as CEO.

 

          Thus there is no merit to the claim that the Department has failed to name or serve the proper entity.

 

“Double Jeopardy”

 

          BlackDiamond contends that the Department cannot rely on complaints from persons who had initiated civil actions against him to recover payment for appraisals because to do so would constitute “double jeopardy.”  The concept of “double jeopardy” arises under the federal and state constitutions to protect a person from being subjected to criminal prosecution twice for the same offense.[11]  Only repeated criminal prosecutions are prohibited.  In this case, there is no allegation of any criminal prosecution.  Even if there had been a criminal conviction, it would not preclude a separate administrative licensing action.[12]  A professional license is a valuable privilege granted by the state.  It may not be unreasonably or arbitrarily taken away, but it is subject to regulation and control as necessary to protect the public.  Its revocation is not “punishment,” but rather an exercise of the state’s police power for the public’s protection.[13]

 

          A similar concept, res judicata, prevents bringing two civil actions when all the issues could have been raised and litigated in the first proceeding.  The Respondent and individuals who filed complaints with the Department have litigated the question of whether Respondent owed them money, and judgments were entered against the Respondent.  The issue of whether Respondent owed the complainants money has been litigated and may not be litigated again.    However, that is entirely separate from the Department’s claim in this action that such judgments are evidence that the Respondent has violated the licensing statutes.  BlackDiamond will have the opportunity to challenge those allegations at the hearing.  The licensing violations were not raised in district court, nor could the private parties have raised them there.  Only the Department can enforce the licensing statutes.  Thus, the Department is not barred by res judicata from pursuing the licensing action.

 

Failure to Name Necessary Parties

 

          BlackDiamond contends that the complainants are necessary parties.  However, it is the Department that has the authority to take action against the mortgage originator’s license, not individuals.  The Department is required to disclose the witnesses it will rely upon in support of its allegations, and BlackDiamond is free to call the complainants as witnesses if it chooses to do so.  Subpoenas are available if necessary to compel the attendance of the witnesses.[14]  No legal rights, duties or privileges of the complainants will be determined or affected by the outcome of this case.  Thus, even if a complainant attempted to intervene as a party, it is unlikely that the request would be granted.[15]

 

          Minnesota Rules of Civil Procedure 19.02, Person to be Joined if Feasible, is also instructive.  It states that a person who is subject to service of process shall be joined as a party if:

 

(a) in the person’s absence complete relief cannot be accorded among those already parties, or (b) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person’s absence may (1) as a practical matter impair or impede the person’s ability to protect that interest or (2) leave any one already a party subject to a substantial risk or incurring double, multiple, or otherwise inconsistent obligations by reason of the person’s claimed interest.  If the person has not been so joined, the court shall order that the person be made a party….

         

          BlackDiamond has failed to present any facts that would tend to show that the complainants’ status as parties is necessary to resolve the issues raised by the Department, or to assure that BlackDiamond does not risk multiple or inconsistent obligations.  As stated above, the individual efforts of complainants to recover money from BlackDiamond are separate and distinct from this licensing action.  Thus, there is no basis to dismiss this action for failure to name indispensable parties.

 

Failure to State A Claim

 

          The Department’s Statement of Charges sets forth alleged facts and eight separate violations of the licensing statutes.  In order to prevail at the hearing, the Department will be required to produce evidence to substantiate each of the factual allegations.  However, in reviewing a motion to dismiss, one must assume that the alleged facts can be proven.  Then one examines whether the facts, if true, support the alleged violations.

 

          The Department has set forth sufficient facts to support each of its eight counts.  Thus, dismissal at this stage is not warranted.

 

Accordingly, BlackDiamond’s motion is denied.  As a matter of law, the Department has established jurisdiction, and named and served the proper party. It is not barred from taking licensing action against the Respondent by prior civil actions brought by private individuals, nor are those individuals necessary parties.  The Department has alleged sufficient facts to overcome a motion to dismiss any of the eight counts included in its Statement of Charges.

 

B.J.H.