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Date: 06-22-2021
Case Style:
Collateral Management LLC v. Ohio Department of Commerce, Division of Real Estate & Professional Licensing
Case Number: 1
1
20AP-123
Judge: IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
Court: Julia L. Dorrian
Plaintiff's Attorney:
Defendant's Attorney: Dave Yost, Attorney General, and Brian R. Honen,
Description:
Columbus, Ohio - Real Estate attorney represented Collateral Management LLC with an adjudication order issued by the Ohio Real EBstate Appraiser Board
} Collateral Management is an appraisal management company ("AMC").
Collateral Management is licensed in over 40 states. Jessica Massad is the owner and
controlling person of Collateral Management. Massad testified she holds appraisal licenses
in several other states. Massad held a residential real estate appraiser license in Ohio from
2002 until she surrendered her license on February 7, 2011 by signing an affidavit. The
affidavit states:
Now comes affiant Jessica Massad-Turner * * * who for her
affidavit averts and states the following, to-wit:
1. I am currently a licensed residential real estate appraiser in
the state of Ohio per §4763, et. seq. of the Ohio Revised Code;
2. I am hereby voluntarily surrendering my Ohio residential
real estate appraiser license;
3. Upon surrender of my Ohio residential real estate appraiser
license I shall immediately cease and desist all activity for
which a residential real estate appraiser license is required in
the state of Ohio;
4. In voluntarily surrendering my Ohio residential real estate
appraiser license, I shall not apply for an Ohio appraiser
certificate, license or registration in the future.
5. I have had the opportunity to seek legal counsel and obtain
representation and advice before executing this affidavit. I
voluntarily, knowingly and intelligently execute this affidavit
with full knowledge of its significance.
Further affiant sayeth naught.
The record reflects the affidavit was received by the Ohio Department of Commerce
Division of Real Estate and Professional Licensing ("the division") on February 9, 2011.
{¶ 3} On December 19, 2018, Collateral Management filed an application for an
Ohio AMC license with the division. On April 23, 2019, the superintendent of the division
sent a letter to Massad denying Collateral Management's application. On April 30, 2019,
Collateral Management, by and through counsel, requested a hearing to have the denial of
Collateral Management's Ohio AMC application reviewed before the Board. A hearing was
held before the Board on August 15, 2019, which was comprised of a chairman and four No. 20AP-123 3
board members. Appearing before the Board were counsel for the division, counsel for
Collateral Management, and Massad, as owner and controlling person of Collateral
Management. Counsel for the Board provided a brief history of AMC regulation under 12
U.S.C. 3353 regarding the establishment of minimum requirements and limitations to be
applied by a state in the registration of an AMC in order to provide background on Ohio's
AMC statute which was enacted just eight months prior to the hearing. Massad was the
only witness, testifying on direct and cross-examination and answering questions from the
Board.
{¶ 4} At the conclusion of testimony, and after deliberation off the record, the
chairman of the Board moved for a decision to "approve and adopt the decision of the
Superintendent to deny Collateral Management's license application to be an Ohio
appraisal management company for the same reasons as set forth in the Superintendent's
denial notice dated April 23, 2019." (Tr. at 56.) After some discussion on the record by
members of the Board, the remaining four members voted to second the chairman's motion
and ruled that the superintendent's decision was approved and adopted. An adjudication
order adopting the decision of the Board was sent to Collateral Management, in care of
Massad, on August 21, 2019.
{¶ 5} On August 28, 2019, Collateral Management filed an administrative appeal
in the common pleas court in accord with R.C. 119.12. The common pleas court affirmed
the adjudication order issued by the Board on January 22, 2020 finding it was supported
by reliable, probative, and substantial evidence and in accord with the law.
{¶ 6} Collateral Management timely appeals.
II. Assignments of Error
{¶ 7} Appellant assigns the following three assignments of error for our review:
[I.] The Common Pleas Court erred in deferring to the Real
Estate Appraiser Board's ("Board's") unreasonable
interpretation of the law regarding "substantive reason" and
erred in affirming the Board's decision as it was not in
accordance with the law.
[II.] The Common Pleas Court erred in deferring to the Board's
unreasonable interpretation of the law regarding whether the
surrender was "in lieu of revocation" and erred in affirming the
Board's decision as it was not in accordance with the law. No. 20AP-123 4
[III.] The Common Pleas Court erred in affirming the Board's
decision, which violated Appellant's due process rights.
III. Analysis
A. Standard of Review
{¶ 8} Under R.C. 119.12, when a common pleas court reviews an order of an
administrative agency, the common pleas court must consider the entire record to
determine whether reliable, probative, and substantial evidence supports the agency's
order, and the order is in accordance with law. Univ. of Cincinnati v. Conrad, 63 Ohio
St.2d 108, 110-11 (1980); see also Andrews v. Bd. of Liquor Control, 164 Ohio St. 275, 280
(1955). Instead of appraising the weight of the evidence, an appellate court determines
whether the common pleas court abused its discretion in its examination of the record for
reliable, probative, and substantial evidence. Natoli v. Ohio State Dental Bd., 177 Ohio
App.3d 645, 2008-Ohio-4068, ¶ 13 (10th Dist.). An abuse of discretion occurs when a
decision is unreasonable, arbitrary, or unconscionable. Blakemore v. Blakemore, 5 Ohio
St.3d 217, 219 (1983). On questions of whether the agency's decision was in accordance
with law, we exercise plenary review. Gralewski v. Ohio Bur. of Workers' Comp., 167 Ohio
App.3d 468, 2006-Ohio-1529, ¶ 17 (10th Dist.).
B. First Assignment of Error
{¶ 9} Collateral Management argues in its first assignment of error that the Board
eliminated the "substantive reason" element of R.C. 4768.06(B)(4) and the common pleas
court erred in affirming the Board's misinterpretation and application of the same.
Collateral Management further argues that, in effect, the common pleas court eliminated
the requirement that a voluntary surrender be undertaken for a substantive reason to
trigger the prohibition on the granting of an AMC license. See R.C. 4768.06(B)(4). In
support of its premise that the Board misinterpreted the law, Collateral Management
maintains the Board must contemplate the reason behind the surrender, which would
include consideration of: (1) the guidance set forth in 80 Fed.Reg. 32671, (2) the merits of
the pending complaints filed by the division against Massad, and (3) the reason(s) for
voluntary surrender as given by Massad herself.
{¶ 10} R.C. 4768.06(B)(4) states: No. 20AP-123 5
Each owner and controlling person of an appraisal
management company shall * * * [h]ave not had a license,
certificate, or registration to act as an appraiser that has been
refused, denied, canceled, surrendered, or revoked in this state
or in any other state for a substantive reason. A designated
controlling person may have had a license or certificate to act
as an appraiser refused, denied, canceled, revoked, or
surrendered in lieu of revocation in a state for a nonsubstantive
reason if the license or certificate was subsequently granted or
reinstated[.]
(Emphasis added).
{¶ 11} In relevant part, the plain language states that the controlling person, in this
case Massad, shall have not had a license to act as an appraiser surrendered for a
substantive reason.
{¶ 12} In support of the argument that the Board and the common pleas court
eliminated the "substantive reason" element, Collateral Management first points to 80
Fed.Reg. 32671 and states that the Board was required to consider the same in determining
what constitutes a "substantive reason" for surrender of Massad's license. Collateral
Management asserts that 80 Fed.Reg. 32671 "unambiguously define[s]" "substantive
reason" as requiring a showing of fraud or a known failure to perform an appraisal in
compliance with the Uniform Standards of Professional Appraisal Practice ("USPAP") that
rose to the level of warranting a revocation as the definition of "substantive." 80 Fed.Reg.
32658, 32671. (Appellant's Reply Brief at 6-7.) In its brief, the Board also puts forth that
the federal register citation "specifically defines" the term "substantive," as revocation for
failure to comply with the USPAP. 80 Fed.Reg. 32671. (Appellee's Brief at 16-17.) The
Board argues the "unrebutted" allegations pending against Massad at the time of her
surrender would fall under the definition of substantive. (Appellee's Brief at 16.)
Conversely, Collateral Management believes the Board was required to look at the merits
of the complaints that reached the opportunity for hearing stage in order to determine
whether the basis would have risen to the level of a violation of the USPAP as given in the
discussion in the federal guidance. 80 Fed.Reg. 32671.
{¶ 13} Although Collateral Management did argue before the common pleas court
that the Board erred in its interpretation and application of R.C. 4768.06(B)(4) by not
considering whether the surrender was for a substantive reason, Collateral Management No. 20AP-123 6
did not specifically argue 80 Fed.Reg. 32671 in support thereof. The Board, however, did
point to the Federal Register before the common pleas court in support of its position that
"substantive" had acquired a particular meaning. The common pleas court did not address
either party's argument specific to 80 Fed.Reg. 32671.
{¶ 14} 80 Fed.Reg. 32671, Chapter III, Final Rule and Public Comments on the
Proposed Rule, Section 34.214(a),1 states:
Some commenters suggested that the Agencies consider
circumstances in which an appraiser's license lapsed or was
revoked for technical reasons unrelated to the quality of
appraisals performed by the appraiser. They asserted that
being barred from owning an AMC eligible for registration in a
State or included in the AMC National Registry in these cases
is potentially unfair. One example of this is when an appraiser
neglects to renew his or her appraiser's license on time.
Depending on the State law, an appraiser would typically be
able to be reinstated, pending payment of certain penalties. In
this situation, the lapse in the appraiser's license is unrelated to
fraud or a failure to perform an appraisal in compliance with
USPAP.
The Agencies agree that non-substantive grounds for the
revocation of an appraiser's license should not be construed to
be within the scope of the registration limitations in section
1124(d). n106 In connection with this, the Agencies agree that
an appraiser who is subsequently reinstated by the State
appraiser certifying and licensing agency should not be within
the scope of the registration limitations. For example, if an
appraiser's license lapses for non-payment of fees, and the
appraiser is later reinstated by the State appraiser certifying
and licensing agency after meeting his or her obligation, the
appraiser should not be barred from owning an AMC. If,
however, an appraiser's license or certificate is revoked, for
example, for violations of the TILA independence standards or
for failure to comply with USPAP, an AMC owned wholly or in
part by that appraiser should not be eligible to register in a
State or appear on the AMC National Registry. For these
reasons, the final rule clarifies that an appraiser is subject to
the ownership ban if the revocation of the appraiser's license or
1 According to Chapter III, supplementary information was provided within 80 Fed.Reg. 32671 that refers to
a section number of the proposed and final rule text for the Office of the Comptroller of the Currency and 12
C.F.R. 34.210 et seq. The reference to Section 34.214(a) would be found under Chapter 12 of the C.F.R. No. 20AP-123 7
certification was for a substantive cause, as determined by the
State certifying and licensing agency.
{¶ 15} We agree with Collateral Management that 80 Fed.Reg. 32671 supports its
argument that the Board was required to consider the reasons or circumstances for
surrender of Massad's license to determine if the surrender was for a "substantive reason."
However, we do not agree that 80 Fed.Reg. 32671 unambiguously or specifically defines a
"substantive reason" as Collateral Management and the Board suggest. The referenced
Federal Register citation, 80 Fed.Reg. 32671, Chapter III, Section 34.214(a), is a discussion
of public comments on a proposed rule. It is not a definition that was incorporated into the
final rule nor was it incorporated into Ohio's statute. See R.C. 4768.06(B)(4).
{¶ 16} The discussion does provide examples of what might be considered
"substantive" versus "technical." Examples of "substantive" reasons include fraud, failure
to perform an appraisal in compliance with USPAP, and violation of the Truth in Lending
Act independence standards. An example of a "technical" reason included neglecting to
renew the license. According to Massad's testimony before the Board, her purported
reasons for surrender were that she was sick, recently divorced, she did not intend to return
to Ohio to use her license, nor did she intend to renew her license. Collateral Management
argues that Massad surrendered her license "for her own convenience." The Board asserts
Massad voluntarily surrendered her license rather than defending against charges alleging
multiple violations of the USPAP by Massad. None of the purported reasons for Massad's
surrender fall under the examples of "substantive" or "technical" as provided in 80 Fed.Reg.
32671, Chapter III, Section 34.214(a).
{¶ 17} The final rule found in 12 C.F.R. 34.214(a)(1) requires:
An AMC subject to State registration pursuant to § 34.213 shall
not be registered by a State or included on the AMC National
Registry if such AMC, in whole or in part, directly or indirectly,
is owned by any person who has had an appraiser license or
certificate refused, denied, cancelled, surrendered in lieu of
revocation, or revoked in any State for a substantive cause, as
determined by the appropriate State appraiser certifying and
licensing agency.
However, the final rule does not define "substantive," suggesting that implementing
agencies have some discretion in determining what constitutes "substantive." See 12 C.F.R. No. 20AP-123 8
34.211 and 34.214. Furthermore, as we will discuss below, 12 C.F.R. 34.214(a)(1) differs
from R.C. 4768.06(B)(4) in that the federal rule modifies "surrender" with the phrase "in
lieu of revocation" as well as the phrase "substantive cause." Whereas the Ohio statute
modifies "surrender" with the phrase "substantive reason" only.
{¶ 18} As noted above, in enacting its own AMC registration law, Ohio requires:
Each owner and controlling person of an appraisal
management company shall * * * [h]ave not had a license,
certificate, or registration to act as an appraiser that has been
refused, denied, canceled, surrendered, or revoked in this state
or in any other state for a substantive reason. A designated
controlling person may have had a license or certificate to act
as an appraiser refused, denied, canceled, revoked, or
surrendered in lieu of revocation in a state for a
nonsubstantive reason if the license or certificate was
subsequently granted or reinstated[.]
(Emphasis added.) R.C. 4768.06(B)(4). "Substantive" was not defined in R.C. 4768.01 and
4768.06, suggesting that just as with 12 C.F.R. 34.214(a)(1), the board is afforded some
discretion in determining what constitutes surrender for a "substantive reason" and is not
limited to the examples set forth in 80 Fed.Reg. 32671 as suggested by Collateral
Management and the Board.
{¶ 19} In support of the argument that the Board and common pleas court
eliminated the "substantive reason" element, Collateral Management also asserts the Board
was required to examine the merits of the pending complaints filed by the division against
Massad and the reasons for voluntary surrender as given by Massad herself. In assessing
the merits of this posture, the findings made by the superintendent and the Board in this
matter are relevant.
{¶ 20} Collateral Management's application for an AMC license in Ohio was denied
by the superintendent by letter dated April 23, 2019. The superintendent detailed the
following as the basis for denial of the application:
In 2010, you maintained an Ohio residential real estate
appraiser license (License# 2001010113). The Division issued
charges against your Ohio appraiser license in case numbers
2010-259 & 2010-262 (see enclosure for copy of the charge
notice). On or about February 9, 2011, the Division received an
affidavit signed by you in which you voluntarily surrendered
your Ohio appraiser license to the Division arising out of a third No. 20AP-123 9
case (case number 2010-759). As a result of your surrendered
Ohio [a]ppraiser license, the Division closed all three case
numbers (2010-259[] 2010-262 & 2010-759) without further
action (see enclosure for copies of the notices). Consequently,
you had an Ohio real estate appraiser license that was
surrendered for substantive reasons. Based on these reasons,
your application has been denied based on your failure to
comply with or satisfy Ohio Revised Code Section
4768.06(B)(4).
{¶ 21} Collateral Management requested a hearing before the Board for review of
Collateral Management's AMC application. On August 15, 2019, Massad appeared before
five members of the Board, providing testimony on behalf of Collateral Management in
support of its application to become an AMC in Ohio. At the conclusion of the presentation
of evidence and Massad's testimony upon direct and cross-examination, the Board upheld
the superintendent's finding that Massad surrendered her license for a "substantive reason"
and the basis for this appeal. Prior to reaching their determination, the Board went off the
record for discussion at the conclusion of the hearing. Upon reconvening, three board
members stated their reasoning for moving to adopt the decision of the superintendent
denying Collateral Management's AMC application.
{¶ 22} Three of the five voting board members spoke on the record and provided the
basis on which they voted. The first, Chairman Lynch, voted to approve and adopt the
decision of the superintendent citing his approval on the same basis as stated in the
superintendent's decision. Chairman Lynch furthered: "I'm basing my opinion on the
affidavit signed by Ms. Massad back in 2011 indicated she would no longer be a licensee in
the state of Ohio. She had proper opportunity to have legal counsel at that particular time
and chose not to, and she's voluntarily surrendered her license." (Tr. at 57.) The second
board member, unnamed, concurred with the Chairman and stated: "The problem is is
what was done and when we can't go back and look at things prior. So with the signing of
the affidavit, I think that that was -- for whatever reason she did it, she did sign that and
that sets the course for what we're looking at at this point." (Tr. at 57.) The third, Ms. Hahn,
explained her review was based on state and federal regulations and the statutes. Ms. Hahn
stated:
Ms. Massad's counsel and Collateral Management's counsel
was very eloquent in his closing statement and other testimony No. 20AP-123 10
presented trying to urge us to look at the merits of the
complaints that were raised against Ms. Massad back in 2011
or 2010.
But I -- based on my review of state and federal regulations and
statutes, it appears that that is the wrong direction as to what
the Board should review and take into consideration. Instead
of the merits or trying to relitigate or litigate the underlying
complaints, we are bound to look to whether the surrender of
the license was substantive.
With those boundaries the -- the underlying complaints are not
being looked at to -- at least by me as to whether they are
meritorious or would have resulted in a revocation or other
actions by the Board at that time but whether the actions of the
surrender appeared to be based on any underlying issues and,
therefore, substantive as opposed to merely choosing no longer
to practice in Ohio.
And based on what was presented, the -- the fact that there
were three complaints pending at the time it reached the point
of a Notice of Opportunity for Hearing does appear to be new
grounds for assessing a surrender and, therefore, in my mind
the denial would be -- by the Superintendent was also. I concur
with the rest of the Board Members that have spoken so far that
it was appropriate.
(Tr. at 57-58.) The considerations of the two remaining Board members who voted to
approve and adopt the application denial were not stated on the record.
{¶ 23} Collateral Management argues the Board was required to consider the
reasons or circumstances of the surrender of Massad's license to determine if the surrender
was for a "substantive reason." Collateral Management asserts the Board failed to consider
Massad's testimony explaining why she chose to sign the affidavit and surrender her
license, and the substance of the allegations pending against Massad.
{¶ 24} As noted above, on questions of whether the agency's decision was in
accordance with law, we exercise plenary review. Gralewski at ¶ 17. This court held in Pour
House, Inc. v. Ohio Dept. of Health, 185 Ohio App.3d 680, 2009-Ohio-5475, ¶ 14 (10th
Dist.):
The interpretation of a statute is a question of law that we
review de novo. Washington Cty. Home v. Ohio Dept. of
Health, 178 Ohio App.3d 78, 2008-Ohio-4342, ¶ 27. In No. 20AP-123 11
interpreting a statute, a court's principal concern is
determining the legislative intent. State v. S.R. (1992), 63 Ohio
St. 3d 590, 594. A court must first examine the statute's
language to determine the legislative intent. Id.; Black v. Bd. of
Mecca Twp. Trustees, 11th Dist. No. 2004-T-0031, 2005-Ohio561, ¶ 9. An unambiguous statute need not be interpreted;
instead, a court simply must apply the words of the statute as
written. Guethlein v. Ohio State Liquor Control Comm., 10th
Dist. No. 05AP-888, 2006-Ohio-1525, ¶ 11; Marcum v. Rice
(July 20, 1999), 10th Dist. No. 98AP-717. Courts lack the
authority to ignore the plain and unambiguous language of a
statute under the guise of statutory interpretation or liberal or
narrow construction. Guethlein at ¶ 12; Boardman Twp. Bd. of
Trustees v. Fleming (1996), 110 Ohio App.3d 539, 542. "Rather,
a court must give effect to the words used in the statute, accord
the words their usual and customary meaning, and not delete
words used or insert words that are not used." Guethlein, citing
Cleveland Elec. Illum. Co. v. Cleveland (1988), 37 Ohio St.3d
50.
Doubts as to the interpretation of a statute should be resolved in favor of the agency if the
interpretation is reasonable. Clark v. State Teachers Retirement Sys., 10th Dist. No. 18AP105, 2018-Ohio-4680, ¶ 38. " '[I]f the statute is silent or ambiguous with respect to the
specific issue, the question for the court is whether the agency's answer is based on a
permissible construction of the statute.' " Lang v. Dir., Ohio Dept. of Job & Family Servs.,
134 Ohio St.3d 296, 2012-Ohio-5366, ¶ 12, quoting Chevron, U.S.A., Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837, 843 (1984).
{¶ 25} In hearing Massad's appeal of the Board's adjudication order, the common
pleas court held:
[I]t is not disputed that Ms. Massad learned of [the] pending
disciplinary action and surrendered her license rather than
defend against the allegations. The Board concluded that, in
doing so, Ms. Massad surrendered her residential real estate
appraiser license "for a substantive reason." See R.C.
4768.o6(B)(4). "Substantive" is not defined by statute. The
Court must defer to the Board's interpretation of R.C.
4768.o6(B)(4) because it is reasonable. See Rings v. Nichols, 13
Ohio App.3d at 260.
(Decision at 6.) The common pleas court further held: No. 20AP-123 12
Collateral also argues that the administrative hearing was
fundamentally unfair because the Board allegedly failed to
consider Ms. Massad's testimony in determining whether she
had surrendered her license "for a substantive reason." Simply
put, the record does not support Collateral's claim. The Board
was entitled to assign weight to the conflicting testimony, and
the Court finds no error in the weight so assigned.
(Decision at 8.)
{¶ 26} Of the five voting Board members, Hahn was the only member to articulate
that it was necessary to consider whether the surrender was due to a "substantive reason,"
and in doing so, Hahn concluded the surrender appeared to be based on underlying issues,
rather than merely choosing to no longer practice in Ohio. The remaining two Board
members who articulated their reasons for upholding the superintendent's finding pointed
to Massad's signing of the affidavit itself, in which Massad averred she was agreeing to
never be licensed as an appraiser in Ohio after having the opportunity to consult with legal
counsel and choosing not to, as the basis for their vote rather than considering whether the
surrender was for a "substantive reason." We cannot discern the reasoning of the
remaining two Board members as the record is silent regarding the same.
{¶ 27} We agree with Collateral Management to the extent it argues it is necessary
for the Board to consider whether the surrender was for a "substantive reason." The
common pleas court stated as much and, in this regard, did not err. However, the common
pleas court erred in not applying the interpretation it correctly determined.
{¶ 28} The Board was required to consider the reason for the surrender and whether
it was "substantive." See R.C. 4768.06(B)(4). This court gleans from statements made by
two of the Board members, and that of the common pleas court, that at least two of the
Board members based their vote to approve and adopt the decision of the superintendent
solely upon the affidavit signed by Massad and, specifically, the assertions that she had
agreed to no longer be licensed in Ohio, she had legal counsel, and she voluntarily
surrendered her license. The unnamed Board member even reasoned that Massad signed
the affidavit "for whatever reason." The mere signing of the affidavit, for whatever reason,
without consideration of whether the surrender was taken for a substantive reason does not
comply with the interpretation of R.C. 4768.06(B)(4), which the common pleas court and
this court find to be correct. No. 20AP-123 13
{¶ 29} For the reasons stated herein, we agree with Collateral Management that the
common pleas court did not apply the interpretation of R.C. 4768.06(B)(4) that it is
necessary to consider whether the surrender was for a substantive reason, which the
common pleas court and this court find to be correct. We do not agree, however, that the
definition of a "substantive reason" is confined to 80 Fed.Reg. 32671 or that the Board is
required to look at the merits of the complaints pending at the time of Massad's surrender.
Furthermore, we do not agree that the Board is required to relitigate the underlying basis
for Massad's 2011 surrender. Rather, the Board is required to determine whether the
surrender was for a substantive reason, not for "whatever reason," and we afford the Board
discretion in determining whether the surrender was for a "substantive reason." We also
defer to the Board in assigning appropriate weight to the affidavit, testimony of Massad,
and any evidence presented by the division.
{¶ 30} Therefore, we sustain in part and overrule in part Collateral Management's
first assignment of error and remand to the common pleas court with instructions to return
this case to the Board for all members to review the record and consider whether Massad
surrendered her license for a substantive reason.
C. Second Assignment of Error
{¶ 31} Collateral Management argues in its second assignment of error that the
Board failed to examine whether Massad's surrender was "in lieu of revocation" and such
examination was required by R.C. 4768.06(B). Collateral Management reasons that R.C.
4768.06(B)(4) and 12 C.F.R. 225.194(a)(1), or 34.214(a)(1) as cited by the Board, require
an examination of whether the surrender was for a "substantive reason" and "in lieu of
revocation" to trigger an AMC registration restriction.2 Collateral Management argues the
2 12 U.S.C. 3353 governs appraisal management companies. The rules adopted pursuant to 12 U.S.C. 3353 are
set forth in Title 12 of the Code of Federal Regulations ("C.F.R."). Both Collateral Management and the Board
cite to Title 12, but cite to different parts and chapters within the C.F.R. Collateral Management cites to 12
C.F.R. Part 225, whereas the Board cites to 12 C.F.R. Part 34. Collateral Management's citation appears under
Chapter II of the Federal Reserve System, Subchapter A, Board of Governors of the Federal Reserve System,
Part 225 Bank Holding Companies and Change in Bank Control. The Board's citation falls under Chapter I,
Office of the Comptroller of the Currency, Department of the Treasury, Part 34 Real Estate Lending and
Appraisals. Both C.F.R regulations cited herein address the same issue within their respective subpart, the
minimum standards for appraisal management companies and the language of the regulations mirror one
another substantively. No. 20AP-123 14
Board erred in not considering whether the surrender was in lieu of revocation and that the
common pleas court erred in deferring to the Board on this.
{¶ 32} Interestingly, Collateral Management argued nearly the opposite before the
common pleas court and, therefore, it is no wonder the common pleas court did not address
surrender in lieu of revocation in its decision. Before the common pleas court, Collateral
Management argued the Board's reliance on federal law was misplaced because federal law
does not apply here. Collateral Management argued: "Federal law allows a state could
establish requirements in addition to those found in 12 USCS 3353. See 12 CFR 34.210(d).
Ohio did so. Surrenders in lieu of revocation are a ban for owners or controlling persons of
appraisal management companies. Ohio, however, also bans owners and controlling
persons of appraisal management companies who have surrendered their appraiser license
for substantive reasons." (Nov. 5, 2019 Collateral Management's Common Pleas Court
Brief at 5.) Therefore, Collateral Management argues "[f]ederal law is not akin to Ohio's
law in this matter." (Nov. 5, 2019 Collateral Management's Common Pleas Court Brief at
5.)
{¶ 33} We agree with the argument Collateral Management made before the
common pleas court but disagree with the argument Collateral Management now makes.
{¶ 34} As noted above, 12 C.F.R. 34.214(a)(1)3 states:
An AMC subject to State registration pursuant to § 34.213 shall
not be registered by a State or included on the AMC National
Registry if such AMC, in whole or in part, directly or indirectly,
is owned by any person who has had an appraiser license or
certificate refused, denied, cancelled, surrendered in lieu of
revocation, or revoked in any State for a substantive cause, as
determined by the appropriate State appraiser certifying and
licensing agency.
(Emphasis added.)
To maintain continuity, this court will use Part 34 of Title 12 of C.F.R., which was cited by the court of common
pleas. This court notes that Collateral Management cites 12 C.F.R. 34.214 in its reply brief in the common
pleas court.
3 12 C.F.R. 225.194(a)(1) as cited by Collateral Management states: "An AMC subject to state registration
pursuant to section 225.193 shall not be registered by a state or included on the AMC National Registry if such
AMC, in whole or in part, directly or indirectly, is owned by any person who has had an appraiser license or
certificate refused, denied, cancelled, surrendered in lieu of revocation, or revoked in any State for a
substantive cause, as determined by the appropriate State appraiser certifying and licensing agency." No. 20AP-123 15
{¶ 35} As Collateral Management suggests, the federal statute prohibits state
registration if the owner surrendered their license in lieu of revocation. However, 12 U.S.C.
3353(b) states: "Relation to State law. Nothing in this section shall be construed to prevent
States from establishing requirements in addition to any rules promulgated under
subsection (a)." 12 C.F.R. 34.210(d)4 mirrors the aforementioned statute stating, "Rule of
construction. Nothing in this subpart should be construed to prevent a State from
establishing requirements in addition to those in this subpart." Consistent with 12 U.S.C.
3353(b) and 12 C.F.R. 34.210(d), Ohio enacted R.C. 4768.06(B)(4) establishing
requirements in addition to those outlined in subpart 12 C.F.R. 34.214. Specifically, Ohio
prohibits the granting of an AMC license unless certain criteria are met, including the
owners have not had a license surrendered for a "substantive reason."
{¶ 36} The relevant section of R.C. 4768.06(B)(4), the first sentence, states: "Each
owner and controlling person of an appraisal management company shall satisfy all of the
following criteria: * * * Have not had a license, certificate, or registration to act as an
appraiser that has been refused, denied, canceled, surrendered, or revoked in this state or
in any other state for a substantive reason." (Emphasis added.)
{¶ 37} As we noted above, this language is plain and unambiguous. See Guethlein
v. Ohio State Liquor Control Comm., 10th Dist. No. 05AP-888, 2006-Ohio-1525, ¶ 12. In
Ohio, even if a surrender was not in lieu of revocation, an applicant who surrendered his or
her license could still not be eligible for an AMC license if the surrender was for a
substantive reason.
{¶ 38} Furthermore, we are not persuaded by Collateral Management's argument
that the first sentence of R.C. 4768.06(B)(4) must be read in conjunction with the second
sentence in the context of this case. The second sentence of R.C. 4768.06(B)(4) states: "A
designated controlling person may have had a license or certificate to act as an appraiser
refused, denied, canceled, revoked or surrendered in lieu of revocation in a state for a
nonsubstantive reason if the license or certificate was subsequently granted or
reinstated." (Emphasis added.) This second sentence is not relevant in this case as
Massad's real estate appraiser license was not subsequently granted or reinstated.
4 As cited by Collateral Management, 12 C.F.R. 225.190(c) states "Rule of construction. Nothing in this subpart
should be construed to prevent a State from establishing requirements in addition to those in this subpart." No. 20AP-123 16
{¶ 39} Therefore, the common pleas court did not err in deferring to the Board's
interpretation and application of R.C. 4768.06(B)(4) by not considering whether the
surrender was "in lieu of revocation."
{¶ 40} Accordingly, we overrule Collateral Management's second assignment of
error.
D. Third Assignment of Error
{¶ 41} Collateral Management argues in its third assignment of error that the
common pleas court erred in affirming the Board's adjudication order because the Board's
application of R.C. 4768.06(B)(4) was a violation of due process for reasons of retroactive
application.
{¶ 42} It is not clear that Collateral Management preserved this argument at the
common pleas level. Even assuming, arguendo, Collateral Management did raise it at the
common pleas level, Collateral Management points us to no place in the administrative
record where the issue of either retroactivity or constitutionality was raised. Therefore, this
is an as-applied challenge.
{¶ 43} Constitutionality of statutes is a question for the courts and not for a board
or commission. E. Ohio Gas Co. v. Pub. Util. Comm., 137 Ohio St. 225, 239 (1940). The
Supreme Court of Ohio has held that an appellant may raise a facial constitutional challenge
in an administrative appeal even where the appellant did not raise that challenge before the
commission or agency. See Reading v. Public Util. Comm., 109 Ohio St.3d 193, 2006-Ohio2181; see also Derakhshan v. State Med. Bd. of Ohio, 10th Dist. No. 07AP-261, 2007-Ohio5802, ¶ 25 (permitting an appellant to raise a facial constitutional challenge to the statute
upon which the medical board relied to revoke his medical license on appeal); Leon v. Ohio
Bd. of Psychology, 63 Ohio St.3d 683, 686-87 (1992) (considering argument that the
regulation upon which the board relied to revoke the appellant's psychology license was
unconstitutionally vague). A court may also consider an as-applied constitutional challenge
in an administrative appeal. State ex rel. Kingsley v. State Emp. Relations Bd., 10th Dist.
No. 09AP-1085, 2011-Ohio-428, ¶ 19.
{¶ 44} In contrast to a facial challenge, however, when a litigant challenges the
constitutionality of a statute as applied to a specific set of facts, extrinsic facts are needed,
and the litigant must raise the as-applied challenge in the first instance before the No. 20AP-123 17
administrative agency to allow the parties to develop an evidentiary record. Kingsley at
¶ 18, citing Reading at ¶ 15-16. Review of the testimony before the Board does not reflect
that Collateral Management raised the constitutionality of R.C. 4768.06(B)(4) as applied.
{¶ 45} Nevertheless, even if Collateral Management did present extrinsic facts
before the Board sufficient to preserve a claim of as-applied unconstitutionality, we note
that we are persuaded by the Board's argument that Massad had no vested right to an AMC
license. This court has held:
A "vested right" is a right that " 'so completely and definitely
belongs to a person that it cannot be impaired or taken away
without the person's consent.' " Harden v. Ohio Atty. Gen., 101
Ohio St.3d 137, 2004-Ohio-382, ¶ 9, quoting Black's Law
Dictionary (7th ed. 1999). "A right is not regarded as vested in
the constitutional sense unless it amounts to something more
than a mere expectation or interest based upon an anticipated
continuance of existing law." In re Emery (1978), 59 Ohio
App.2d 7, 11. "[W]here no vested right has been created, 'a later
enactment will not burden or attach a new disability to a past
transaction or consideration in the constitutional sense, unless
the past transaction or consideration * * * created at least a
reasonable expectation of finality.' " [State v. Cook (1998), 83
Ohio St.3d 404, 412, quoting State ex rel. Matz v. Brown
(1988), 37 Ohio St.3d 279, 281.]
Dukes v. Dir., Ohio Dept. of Job & Family Servs., 10th Dist. No. 09AP-515, 2009-Ohio6781, ¶ 20.
{¶ 46} In Dukes, we held a Medicaid provider agreement was not absolute and
therefore did not confer a vested or substantive right in the constitutional sense for
purposes of retroactivity. Dukes at ¶ 20. We reasoned the agreement had to be renewed
annually by the Ohio Department of Job and Family Services ("ODJFS"), but ODJFS was
prohibited from renewing the agreement if the appellant did not comply with the laws and
rules applicable thereto. Id. at ¶ 21. The agreement could also be revoked. Id. Likewise,
here, an AMC license must be renewed annually and can only be renewed if certain
requirements are met. See R.C. 4768.06, 4768.07, 4768.08. In addition, an AMC license
can also be revoked. R.C. 4768.13(I)(4). In Dukes, we found the appellant's Medicaid
provider agreement was similar to a day-care certification. Cosby v. Franklin Cty. Dept. of
Job & Family Servs., 10th Dist. No. 07AP-41, 2007-Ohio-6641, ¶ 21. In Cosby, we held that
the day-care certification at issue was a license as defined in R.C. 119.01(B). Id. at ¶ 26. We No. 20AP-123 18
further held that "[a] 'license' does not ordinarily confer an absolute or vested right." Id.
An AMC is a license, and Collateral Management points us to no authority that such a
license confers an absolute or vested right contrary to the general authority that a license
does not confer a vested right.
{¶ 47} Accordingly, we overrule appellant's third assignment of error.
Outcome: For the aforementioned reasons, we sustain in part and overrule in part
appellant's first assignment of error and overrule the second and third assignments of error.
We remand this matter to the common pleas court with instructions to return the case to the Board to apply R.C. 4768.06(B)(4) consistent with the interpretation that it must consider whether Massad's license was surrendered for a substantive reason.
Judgment affirmed in part, reversed in part;
and cause remanded with instructions.
Plaintiff's Experts:
Defendant's Experts:
Comments: