ORDERS:
CEASE AND DESIST ORDER
STATEMENT
OF THE CASE
This
matter is before the Administrative Law Court (“ALC”) upon a petition filed May 2, 2007 by the South Carolina Department of Consumer Affairs (“Department”) seeking,
among other relief, an order from this court enjoining Respondents JMAC
Mortgage and James Berry (“Respondents”) from employing, compensating, or
appointing as their agent unlicensed originators in violation of the Licensing
Requirements Act of Certain Brokers of Mortgages on Residential Real Property
(“Act”), S.C. Code Ann. §§ 40-58-10 et seq. (Supp. 2006). The court
issued a Notice of Hearing scheduling a hearing for June 7, 2007 at 10:00 a.m. The Notice of Hearing provided a deadline by which the Respondents could
file a response to the Petition. Additionally, the Notice of Hearing stated
that a failure to appear at the hearing may result in a finding that the party
that fails to appear does not object to the relief of which notice is given.
Respondents
failed to file a return to the Petition. Further, the Respondents did not
appear at the scheduled hearing and did not notify the court that they would
not be sending a representative to the hearing. At the hearing, the Department
presented evidence in support of its Petition. After carefully weighing the
evidence, the court finds that the Respondents should be permanently enjoined
from further violations of the Act.
FINDINGS
OF FACT
Having
observed the witness and exhibits presented at the hearing and closely passed
upon their credibility, the court makes the following Findings of Fact by a
preponderance of the evidence.
In
March 2007, an advertisement promoting Josh Collins as a “mortgage consultant”
was sent to the Department. The advertisement contained a JMAC Mortgage logo
and provided a contact e-mail address with a domain name of jmac.mortgage.com.
Department staff investigated and confirmed that Josh Collins was not licensed as
an originator for Respondents, nor has he ever been licensed. Testimony showed
that the Department considers a mortgage consultant and an originator as
definitionally equivalent. Respondent James Berry is a licensed mortgage
broker and is the sole owner of JMAC Mortgage.
The
Department sent a certified letter, return receipt requested, to Respondents
dated April 4, 2006 (which contained a typographical error and should have been
2007). The letter referenced “Employing Unlicensed Originators” and identified
the above suspected violation. In the letter, the Department requested that
the Respondents furnish broker fee agreements and settlement statements for all
loans originated by unlicensed originators. The return receipt was signed and
date stamped April 5, 2007. The Respondents have not, as of this date,
responded to the Department’s letter. The Department filed a petition with
this court based on the above alleged violations requesting that the court
issue an order:
(1)
Requiring Respondent JMAC Mortgage, its agents, or assigns to cease and desist from
employing, compensating, or appointing as its agents unlicensed originators in
violation of the Act;
(2)
Requiring Respondent JMAC Mortgage, its agents, or assigns to provide copies of
all contracts, files, and documents related to mortgages that were originated
by unlicensed originators on residential real estate located in South Carolina
after January 13, 2005, at or through its office at 107-A Vista Oaks Drive,
Lexington, South Carolina 29072 or at or through other locations;
(3)
Requiring JMAC Mortgage, its agents, or assigns to refund all monies collected
under any contracts entered into or mortgages originated by unlicensed
originators with consumers on residential real property located in South
Carolina after January 13, 2005, at or through its office at 107-A Vista Oaks
Drive, Lexington, South Carolina 29072 or at or through other locations. This
includes any monies paid by the lender for these contracts or mortgage to
respondent;
(4) Assessing
Respondent JMAC Mortgage an administrative fine of five hundred ($500.00)
dollars for each violation of the Act, pursuant to S.C. Code Ann. §
40-58-80(C);
(5)
Restraining the Respondent JMAC Mortgage from violating the Act;
(6)
That this Order take effect immediately; and
(7)
Granting such other relief as may be necessary, just, and appropriate.
CONCLUSIONS OF LAW
Based
on the forgoing Findings of Fact, the court concludes the following as a matter
of law.
Jurisdiction
over this case is vested with the South Carolina Administrative Law Court
pursuant to S.C. Code Ann. § 40-58-80 (Supp. 2006) and S.C. Code Ann. §
1-23-600(E) (Supp. 2006).
Under
the South Carolina Licensing Requirements Act of Certain Brokers of Mortgages
on Residential Real Property, a mortgage broker or an originator may not engage
in the business of processing, placing, or negotiating a mortgage or offering
to process, place, or negotiate a mortgage in this State without first being
licensed with the administrator of the Department. S.C. Code Ann. §
40-58-30(A) (Supp. 2006). Additionally, a mortgage broker cannot employ or compensate
an originator or appoint an originator as its agent unless the originator is licensed.
S.C. Code Ann. § 40-58-30(B) (Supp. 2006). The Act further provides that
“[t]he [D]epartment may examine the books
and records of a mortgage broker and other specified documents to determine
whether there has been substantial compliance with this chapter.” S.C. Code
Ann. § 40-58-65(D) (Supp. 2006).
After
carefully weighing the evidence and applying the law as discussed above, the
court finds that the Department’s petition should be granted in part at this
time. The Department has presented uncontested evidence that the Respondents
have violated the provisions of the Licensing Requirements Act of Certain
Brokers of Mortgages on Residential Real Property by employing, compensating,
or appointing as their agent an unlicensed originator that has offered to
process, place, or negotiate a mortgage. See S.C. Code Ann. § 40-58-30(B)
(Supp. 2006) (prohibiting a person from employing, compensating, or appointing
as its agent an unlicensed originator). The court finds that the Respondents
have employed, compensated, or appointed as their agent at least one person who
is not licensed as an originator with the Department but who has solicited borrowers and offered to accept
applications for mortgages. See S.C. Code Ann. § 40-58-20(14) (Supp.
2006) (defining “originator”). Accordingly, the court finds that the Department’s
petition for a cease and desist order should be granted.
The Department
also requested that the Respondents be assessed an administrative fine of five
hundred ($500.00) dollars for each violation of the Act. The court finds that
the penalty for these violations would be more appropriately imposed by the
court after the Department has had an
opportunity, based upon a review of the Respondents’ contracts and files, to
more precisely determine the number of violations of the Act to be sanctioned with
fines. See S.C. Code Ann. § 40-58-80(C) (Supp. 2006) (authorizing
administrative law judges to assess a fine of “not more than five
hundred dollars for each offense or not more than five thousand dollars for the
same set of transactions or occurrences” and providing that “[e]ach violation
constitutes a separate offense.”).
The
Department has further requested that the court order the Respondents to refund
all monies collected under any contracts entered into or mortgages originated
by unlicensed originators with consumers on residential real property located
in South Carolina after January 13, 2005, at or through their office at 107-A Vista Oaks Drive, Lexington, South Carolina 29072 or at or through other
locations. Because the statute providing for sanctions and penalties against
licensees does not authorize administrative law judges to order the
disgorgement of profits or refund of monies unlawfully collected by a mortgage
broker, the court finds that it would not be appropriate to order such refunds
as a penalty. See S.C. Code Ann. § 40-58-80 (Supp. 2006) (permitting
ALJs to issue cease and desist orders, revoke licenses, increase bonds, and
impose administrative fines); Calhoun Life Ins. Co. v. Gambrell, 245
S.C. 406, 411, 140 S.E.2d 774, 776 (1965) (stating that an administrative
agency is a creation of the legislature and, as such, possesses only such
powers as are conferred, expressly or by reasonably necessary implication); Pa.
Nat’l Mut. Cas. Ins. Co. v. Parker, 282 S.C. 546, 320 S.E.2d 458 (Ct. App. 1984) (“A
well-established rule of statutory construction is ‘expressio unius est
exclusio alterius,’ which means that the enumeration of
particular things excludes the idea of something else not mentioned.”); cf. S.C. Code Ann. § 37-6-108(E)(3) (Supp. 2006) (specifically stating in the
Consumer Protection Act that the penalties of this subsection are “in addition
to any other penalties provided by law or any other remedies provided by law”).
However, it is unclear whether any other provision of law would authorize this
court to grant such relief. Therefore, the court finds it appropriate to allow
the Department to renew its request for such relief by motion properly supported
by law and fact once it has obtained the information described above from the
licensee.
ORDER
Based
on the Findings of Fact and Conclusions of Law stated above, it is hereby
ORDERED that the Respondents JMAC Mortgage and James Berry and their agents and assigns SHALL IMMEDIATELY CEASE AND DESIST from employing, compensating, or appointing
as their agents unlicensed originators in violation of the Act. It is further
ORDERED that the Respondents JMAC Mortgage and James Berry and their agents and assigns SHALL PROVIDE the Department, within thirty (30) days of the date of this
order, with copies of all contracts, files, and documents related to mortgages
that were originated by unlicensed originators on residential real estate
located in South Carolina after January 13, 2005, at or through their office at 107-A Vista Oaks Drive, Lexington, South Carolina 29072 or at or through
other locations. It is further
ORDERED that, within thirty (30) days of its receipt of the Respondents’ documents, the
Department may file an affidavit with this court supporting its request for the
assessment of a sum certain penalty and may renew its request for other relief
by appropriately supported motion.
IT
IS SO ORDERED.
_________________________________
PAIGE
J. GOSSETT
Administrative
Law Judge
June 28, 2007
Columbia, South Carolina
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