SC Administrative Law Court Decisions

STATEMENT OF THE CASE

This matter is before the Administrative Law Judge Division ("Division") pursuant to an appeal filed by Kevin Robinson ("Appellant") on June 21, 2000. Appellant is appealing the decision issued June 7, 2000, by the South Carolina Department of Labor, Licensing and Regulation, South Carolina Board of Manufactured Housing ("Respondent" or "Board").

The Board held a contested case hearing in this matter on July 13, 1999, and issued its decision on July 21, 1999, denying Appellant's request for a license. Appellant appealed that decision to the Division. When the Board was unable to provide a verbatim transcript of the contested case hearing, the undersigned issued an order dated January 12, 2000, remanding the case to the Board to conduct a new hearing.

The Board conducted the contested case hearing on May 9, 2000, and issued its decision on June 7, 2000. On June 21, 2000, Appellant appealed the Board's decision. After a thorough review of the record and the briefs and after hearing oral arguments, I conclude the Board's decision of June 7, 2000, should be reversed.

ISSUES ON APPEAL

• Did the Board erroneously admit hearsay evidence and unauthenticated documents into the record?

• Did the Board erroneously find that Appellant was a new applicant rather than a renewal applicant?

• Did the Board erroneously deny Appellant's motion to reinstate his license pending the exhaustion of his administrative remedies pursuant to S.C. Code Ann. § 1-23-270 by treating his application as a request for a new license rather than a renewal?

• Did the Board erroneously place the burden of proof on Appellant to prove his qualification for the license?

• Did the Board, through its attorney/advisor, violate Appellant's due process rights by actively prosecuting Appellant instead of remaining impartial during the hearing?

• Did the Board violate Appellant's due process rights by commenting on questions asked by Appellant's attorney during the hearing?

• Did the notice of hearing violate Appellant's due process rights by failing to notify Appellant of the issues to be addressed at the hearing?

STANDARD OF REVIEW

S.C. Code Ann. § 1-23-600(D) (Supp. 1999) provides an Administrative Law Judge will preside over all appeals from final decisions of contested cases before professional and occupational licensing boards or commissions within the Department of Labor, Licensing, and Regulation. The Administrative Law Judge reviews the licensing board's final decision in the same manner and has the same authority as prescribed in § 1-23-380(A) for circuit court review of final agency decisions. S.C. Code Ann. § 1-23-380(B) (Supp. 1999). The Administrative Law Judge, therefore, must not substitute its judgment for that of the licensing board as to the weight of the evidence. The judge, however, may reverse or modify the decision if the administrative findings, inferences, conclusions, or decisions are "clearly erroneous in view of the reliable, probative and substantial evidence on the whole record," or are "arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion." S.C. Code Ann. § 1-23-380(A)(6)(e), (f) (Supp. 1999).

FACTS

In May 1999, Appellant had a valid multi-lot retail sales license issued by the Board. The license authorized Appellant to engage in the business of selling manufactured homes in South Carolina for Galaxie Homes, 2305 Old Edisto Drive, Orangeburg, South Carolina 29115. ⁽¹⁾ On June 9, 1999, Appellant filed with the Board an application for a multi-lot retail sales license which would enable him to sell manufactured homes for Rivers Edge Inc. d/b/a Royal Homes. ⁽²⁾ On June 18, 1999, David Bennett with the Department sent a letter to Appellant denying his application "due to allegations by a lender of misrepresentations of material facts provided to the lender for the purpose of securing financing." Appellant requested a hearing, which the Board held on July 13, 1999. The Board issued its decision on July 21, 1999, denying Appellant's application for a license.

Appellant timely appealed the Board's decision. The Board, however, did not and could not provide a verbatim transcript of the hearing held July 13, 1999. On January 12, 2000, the undersigned issued an order remanding the case to the Board to conduct a new hearing.

On January 31, 2000, the Board served Appellant with a Notice of Hearing which indicated the hearing would be held on March 14, 2000. The Notice of Hearing specifically provided that the hearing had been set to "consider your application for renewal of your license." It also informed Appellant that he would be expected to show he was qualified for licensure pursuant to S.C. Code Ann. §§ 40-29-100(B) and 40-29-120. According to the Notice of Hearing, the Board also might ask Appellant to answer questions pursuant to S.C. Code Ann. §§ 40-1-130 and 40-29-150(4), (10), and (16) and 23 S.C. Code Ann. Regs. 19-425.18.

After Appellant retained new legal counsel and the hearing was rescheduled, the Board held the new hearing on May 9, 2000. Prior to the taking of testimony, Appellant made several motions in limine. Appellant first addressed the motion to reinstate Appellant's license pending the exhaustion of his administrative remedies regarding the renewal of his license. The Board responded that, because Appellant changed his place of employment, he had applied for a new license rather than a renewal. As a result, the Board did not reinstate the license.

Appellant next made a motion in limine regarding certain documents Respondent intended to introduce during the hearing. Appellant specifically asked the Board to "suppress any testimony relating to contracts or credit applications which are going to be hearsay and that they don't have the authentication for and they don't have the people here to testify." Transcript 16-17. Appellant argued that there were signatures missing from the copies, the copies contained hearsay, the copies were incomplete, and the introduction of the documents denied Appellant's due process right of cross-examination. The Chairman of the Board denied the motion, stating the Board had not made rulings based on hearsay in the past and "I don't think we will do it today." Transcript 17.

Respondent presented its case first. Respondent attempted to show that Appellant was unfit or unsuited to engage in the profession of a multi-lot salesman of manufactured homes. Respondent called as its first witness Michael Anderson, an investigator with Respondent for fifteen years. Through the testimony of Mr. Anderson, Respondent made a motion to introduce the following exhibits:

• a. A letter dated March 2, 2000, from Chris Kissam, Postmaster at the Blackville Post Office, addressed to Respondent. The letter refers to actions taken by the Postmaster and conversations his employee ("the clerk") had with a Ms. Johnson at the Post Office.

• A letter dated February 28, 2000, from Chris Kissam, Postmaster at the Blackville Post Office, addressed "To Whom It May Concern." The letter indicated there was no record of Onyx Corporation or Johnson Enterprises at the Blackville Post Office.

• A letter from Linda Argoe of the Department of Public Utilities, City of Orangeburg, South Carolina, addressed "To Whom It May Concern." Ms. Argoe indicated that the Department of Public Utilities did not have an account for the business "E.T. Enterprises."

• a. A Manufactured Home Retail Installment Contract containing three pages dated March 2, 1998, between Galaxie Homes, Seller, and Shirley Brown, Buyer.

• A Dealer's Assignment whereby Homes of the CSRA, Inc. assigned the contract to Bombardier Capital Inc. on March 2, 1998.

• A credit application for Shirley Brown listing her employer as "Onyx Inc. Port." The employer's address was not listed on the credit application. The salesperson was listed as "Kevin."

• a. A Manufactured Home Retail Installment Contract containing three pages dated March 27, 1998, between Homes of the CSRA, Inc., Seller, and Gladys Daniels, Buyer.

• A Dealer's Assignment whereby Homes of the CSRA, Inc. assigned the contract to Bombardier Capital Inc. on March 27, 1998.

• A credit application for Gladys Daniels listing her employer as "Johnson Enterprises." The employer's address was not listed on the credit application. The salesperson was listed as "Kevin."

• A letter from Jocelyn Royal, Sales Manager with R & J Auto, Highway 78 North, Blackville, South Carolina, addressed "To Whom It May Concern." The letter indicated Gladys Daniels purchased a 1990 Ford Tempo from R & J Auto in June 1994 and made all her payments on time.

• A pay stub for Gladys Daniels from Johnson Enterprises for the pay period March 20, 1998.

• a. A credit application for Queen Robinson listing her employer as "Johnson Enterprises" of Blackville, South Carolina. The salesperson was listed as "01 Robinson."

• A pay stub for Queen "Roberson" from Johnson Enterprises for the pay period March 27, 1998.

• A Manufactured Home Retail Installment Contract containing three pages dated March 27, 1998, between Galaxie Homes, Seller, and Queen Robinson, Buyer.

• A Dealer's Assignment whereby Homes of the CSRA, Inc. assigned the contract to Bombardier Capital Inc. on March 27, 1998.

• a. A Manufactured Home Retail Installment Contract containing three pages dated March 23, 1998, between Galaxie Homes, Seller, and Helen McCaskell and Debbie James, Buyers.

• A Dealer's Assignment whereby Homes of the CSRA, Inc. assigned the contract to Bombardier Capital Inc. on March 23, 1998.

• A credit application for Helen McCaskell and Debbie James listing Debbie James's employer as "Carroll Mortuary" of Bamberg, South Carolina. The salesperson was listed as "Kevin."

• A Social Security Benefit statement dated March 10, 1998, for Helen "McCaskel" showing a permanent monthly benefit of $1098.00.

• a. A Manufactured Home Retail Installment Contract containing two pages dated August 28, 1997, between Homes of the CSRA, Seller, and John Bowman, Buyer.

• A two-page credit application for John Bowman listing him as disabled. The salesperson was listed as "Kevin."

• A Social Security Benefit statement dated July 1, 1997, for John Bowman showing a permanent monthly benefit of $1290.00.

• a. A Manufactured Home Retail Installment Contract containing three pages dated October 14, 1998, between Galaxie Homes, Seller, and Sarah Sanders, Buyer.

• A Dealer's Assignment whereby Homes of the CSRA, Inc. assigned the contract to Bombardier Capital Inc. on October 14, 1998.

• A credit application for Sarah Sanders listing her employer as "Onyx Inc" of Blackville, South Carolina. The salesperson was listed as "Earline."

• A pay stub for the pay period October 9, 1998.

• a. A credit application for Earline Priester listing her employer as "Onyx Inc" of Blackville, South Carolina. The salesperson was listed as "A Ray."

• A Manufactured Home Retail Installment Contract containing three pages dated August 28, 1998, between Galaxie Homes, Seller, and Earline Priester, Buyer.

• A Dealer's Assignment whereby Homes of the CSRA, Inc. assigned the contract to Bombardier Capital Inc. on August 28, 1998.

• A pay stub for Earline Priester for the pay period August 14, 1998 through August 20, 1998.

Appellant objected to the introduction of Exhibit 1 on the basis that its content constituted hearsay and Appellant was being denied the right of cross-examination. The Board overruled the objection to allow the witness to explain how he obtained the documents contained in Exhibit 1. Mr. Wilson, an attorney with Respondent who was assigned to assist the Board in the trial of the case, then questioned the witness in an effort to clarify that the witness, through his investigation, was attempting to verify the employment information contained in the financial documents. Mr. Wilson thereafter addressed Appellant's legal counsel and advised him he could cross-examine the witness at the appropriate time to ascertain what the witness determined. Mr. Wilson further stated:

The letters from the postmaster seem to be cumulative and are harmless, if anything, if they are errant indeed. Let me remind you, too, this isn't a court of law, and the administrative process is designed to be a lot more summary and a lot more expedient than, say, a court of law is. And I understand where you're coming from on your objections about hearsay and such, but there are a lot of things in the normal business world that come to bear in an investigation such as this that lend credence to certain situations and facts that come out. And we understand you need to make your objections, but once we've heard them, I think it would be better if we just moved right on and got down to it to find out what happened.

When Appellant next offered the case of Smith v. South Carolina Department of Mental Health, 329 S.C. 485, 494 S.E.2d 630 (Ct. App. 1997), as support for his argument, Mr. Wilson interrupted him and asked, "Why don't you do that in a motion or something that we can look at later?"

Appellant's attorney then questioned who was presenting the case against his client, Mr. Wilson or Mr. Simmons. The Chairman responded that Mr. Simmons would present the case but Mr. Wilson was present to advise the Board. Transcript 30-31. The Chairman then overruled Appellant's objection to Exhibit 1, stating the exhibit was cumulative.

As Respondent offered the other seven exhibits into the record, Appellant objected on the ground of hearsay. The Board allowed all of them into the record, commenting that the witness was not testifying about the truth and accuracy of the information contained in the exhibits. The Chairman stated that the exhibits would be admitted into the record "so the Board Members can review it and try to make a determination." Transcript 36.

The investigator, throughout his testimony, related conversations he had with other persons not present during the hearing. The investigator stated he talked with an employee at the social security office in Columbia to ascertain the amount of social security benefits that John Bowman received monthly. The investigator told the Board what the employee said during that conversation. Transcript 48. He also testified about the conversations with the postmaster and post office employees. Transcript 57 and 60. Respondent did not present as a witness any of the individuals with whom the investigator spoke and about whose comments he testified. The witnesses, therefore, were not available for cross-examination. When Appellant's attorney objected to Exhibit 8 and attempted to argue the "best evidence rule," the Chairman interrupted him and overruled his objection. Transcript 52.

On cross-examination, the investigator could not authenticate any of the signatures on the exhibits. He only could testify that he obtained the exhibits by subpoena from Bombardier Capital Inc. Transcript 64-65.

Respondent called as its next witness Dennis Boan, regional manager for the State of South Carolina for Bombardier Capital Mortgage. Mr. Boan testified that Appellant "was assigned by Mr. Berry to have the authority to sign and send applications to our bank." Transcript 76. He also testified that his company handles approximately 4000 loans each day. According to Mr. Boan, even though Bombardier does not review the application on the day it is submitted, the Seller must fax the application for the loan or talk with a Bombardier credit person before Bombardier accepts the contract. Transcript 75 and 78. Mr. Boan further testified that, even though he was not subpoenaed to bring the original credit applications to the hearing, he would be willing to provide the originals to the Board "if it is so important." Transcript 79-82.

Mr. Boan testified that he conducted the audits of several of the exhibits. Mr. Boan specifically testified that he tried to verify whether or not the Onyx Corporation existed. He inquired of the licensing boards of the city, county, and state as well as the post office and police station. Transcript 83. Mr. Boan ultimately determined the Onyx Corporation did not exist. With respect to Johnson Enterprises, Mr. Boan testified that he made the same type of inquiries and determined the business did not exist.

Appellant presented no evidence. The Board went into executive session to discuss the matter. When the Board reconvened, it issued its verbal decision denying the application.

The Board issued its written order on June 7, 2000, denying Appellant's "application for a license to engage in the business of selling as a manufactured home retail multi-lot salesperson." The Board first denied Appellant's application pursuant to S.C. Code Ann. § 40-1-130 (Supp. 1999), for failure to meet "all requirements for the issuance of a license, including, among other things, possession of the character and fitness for licensure and the requisite familiarity with the statutes and regulations of this Board." The Board also decided that it could deny the application because the alleged incidences of misrepresentation and omission of material facts in manufactured home transactions would be grounds for disciplinary action under § 40-29-150(4), (10), and (16). See S.C. Code Ann. § 40-1-130 (Supp. 1999) ("A board may deny an authorization to practice to an applicant who has committed an act that would be grounds for disciplinary action.").

Appellant timely appealed the Board's decision. The Board filed the Record on Appeal on July 24, 2000. A certified transcript was filed on August 28, 2000. Appellant filed his brief on August 8, 2000, and Respondent filed its brief on August 23, 2000. The undersigned heard oral arguments on November 21, 2000.

DISCUSSION

Appellant argues the Board erroneously admitted into the record hearsay evidence and unauthenticated documents. Appellant further argues the Board based its decision solely on this improperly admitted evidence.

According to S.C. Code Ann. § 1-23-370(a) (Supp. 1999), "[w]hen the grant, denial or renewal of a license is required to be preceded by notice and opportunity for hearing, the provisions of this article and Article 1 concerning contested cases apply." When the State seeks to revoke or deny a professional license, the State must afford notice and the opportunity for a hearing appropriate to the nature of the case. Brown v. South Carolina State Board of Education, 301 S.C. 326, 391 S.E.2d 866 (1990).

In this case, the Board denied Appellant a license to sell manufactured homes as a multi-lot salesperson. The provisions of Article 1 and Article 3 of Chapter 23 of Title 1 applied to the hearing before the Board. The South Carolina Rules of Evidence, therefore, applied in Appellant's contested case held by the Board on May 9, 2000. See S.C. Code Ann. § 1-23-330 (Supp. 1999).

According to Rule 802, SCRE, hearsay is not admissible unless it qualifies as an exception to the hearsay rule. Jolly v. State, 314 S.C. 17, 443 S.E.2d 566 (1994). Rule 801(c), SCRE, provides hearsay is "a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted." Improper admission of hearsay evidence is reversible error when the admission causes prejudice. Jackson v. Speed, 326 S.C. 289, 486 S.E.2d 750 (1997).

During the hearing in this case, Respondent only called two witnesses: the Department's investigator and Bombardier's regional manager for South Carolina. Respondent introduced its exhibits, containing contracts, dealer's assignments, credit applications, and income information, during the testimony of the Department's investigator. The investigator testified that he obtained the exhibits from Bombardier pursuant to a subpoena. The investigator also testified that he investigated the information contained in the documents and determined that some of the information was false. While the investigator may have investigated the information on these forms, the investigator provided no testimony that Appellant actually was involved in preparing the documents.

The only evidence presented regarding Appellant's alleged participation in the preparation of the documents was the signatures contained on some of the documents. Respondent offered no testimony, however, that any of the signatures belonged to Appellant. While some of the contracts have similar signatures on them, two of the contracts contain different signatures. See Exhibit 3 and Exhibit 6. The contracts do not have the seller's name printed on them and Respondent failed to offer any evidence or testimony regarding whether the signatures in fact belonged to Appellant.

The only evidence offered regarding Appellant's alleged participation in the preparation of the credit applications was the name "Kevin" or "Robinson" contained on the application where it asked for the salesperson/contact. Two of the credit applications, however, did not list Appellant because the salesperson/contact listed was "Earline" and "A Ray." SeeExhibit 7 and Exhibit 8. Respondent offered no evidence during the hearing that showed Appellant was the salesperson/contact referred to in the credit applications.

The dealer's assignments included in Exhibits 2, 3, 4, 5, and 8 contain a signature and the printed name "Kevin Robinson." Respondent, however, offered no evidence that Appellant actually signed and printed his name on these documents. Exhibit 6 did not contain a dealer's assignment and Exhibit 7 merely contained a signature on the assignment. Respondent offered no evidence to verify the signature contained on the assignment in Exhibit 7 belonged to Appellant.

Respondent offered no testimony from any of the people who were present at the time these documents were filled out and signed. Respondent offered no witnesses who could testify that Appellant in fact prepared and signed any of these documents. Respondent did not offer any evidence that the signatures contained on the documents belonged to Appellant. The investigator merely testified that he investigated the information contained in the documents and some of the information was false. He could not testify that Appellant participated in the preparation of the documents and the inclusion of false information. Respondent apparently expected the Board to assume Appellant had prepared these documents; Respondent then offered testimony regarding the falsity and inaccuracy of the information contained in the documents.

The documents constituted hearsay and did not fall within any exception to the hearsay rule. The Board, therefore, should not have admitted them into the record. The Board also should not have considered the documents in making its decision regarding Appellant's application. Because these documents were the only evidence offered during the hearing, Appellant certainly was prejudiced by their admission into the record. Without these documents, there is no evidence that Appellant violated any statutes or regulations as alleged by Respondent. The Board, therefore, should not have denied Appellant's application for multi-lot sales license.

ORDER

IT IS HEREBY ORDERED that the decision of the Board dated June 7, 2000, is reversed and the Board must grant Appellant's application for a multi-lot retail sales license.

IT IS FURTHER ORDERED that, pursuant to S.C. Code Ann. § 1-23-380 (Supp. 2000), this order is stayed pending any potential appeals.

AND IT IS SO ORDERED.

__________________________________

MARVIN F. KITTRELL

Chief Administrative Law Judge

March 7, 2001

Columbia, South Carolina

1. Appellant apparently was authorized to sell manufactured homes for Homes of the CSRA, Inc., 1580 Five Chop Road, Orangeburg, South Carolina 29115 during the same time he was licensed to sell for Galaxie Homes. It is unclear from the record how Galaxie Homes is associated with Homes of the CSRA, Inc.

2. Appellant did not include a copy of the application dated June 9, 1999, in the record for this appeal. The application, however, was a part of the record in the original appeal, docket number 99-ALJ-11-0408-AP, which was remanded on January 12, 2000. I take judicial notice of the application and consider it in this order.