SC Administrative Law Court Decisions

This matter is an appeal by Fantasy Homes, Inc. of Lexington (Fantasy Homes) of a decision by the Manufactured Housing Board (Board) to impose a $500 fine and six months of probation on Fantasy Homes' Retail Dealer license. On March 12, 1999, the Board's staff issued a formal complaint charging Fantasy Homes with misrepresenting a material fact in a manufactured home transaction and engaging in fraudulent practices in connection with the sales of manufactured housing in violation of S.C. Code Ann. §§ 40-29-150(4) and (10) (Supp. 1999). Specifically, the complaint alleged that Dana Risi (Risi) and Bradley Burger (Burger), employees of Fantasy Homes, fraudulently submitted a contract to Greentree Financial Servicing Corporation. ⁽¹⁾ The alleged fraudulent portion of the contract was that financing was sought for an air conditioner when no air conditioner was included in the contract signed by the buyers and the buyers had not in fact received any air conditioner.

A hearing was conducted by the Board on April 11, 2000. On May 24, 2000, the Board issued a decision finding that Fantasy Homes violated S.C. Code Ann. §§ 40-29-150(4) and (10) (Supp. 1999). As a result the Board ordered a six month probation on Fantasy Homes' Retail Dealer license and imposed a $500 fine.

Fantasy Homes argues the fine and probation should be reversed for three reasons. First, Fantasy Homes contends that the Board does not have the statutory authority to place a licensee on probation. Second, Fantasy Homes argues that several exhibits were improperly admitted into evidence with such errors requiring a reversal of the Board's decision. Third, Fantasy Homes maintains that the evidence does not support a decision to impose a fine and probation. After reviewing the record and considering the arguments, I find that the Board's decision must be affirmed.

The appellate review of an administrative agency's decision is limited by statute. In particular, the agency's decision can be reversed only when the findings, inferences, conclusions or decisions are affected by an error of law, are "arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion[,]" or are "clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record. " S.C. Code Ann. §§ 1-23-380(A)(6)(e) and 380(A)(6)(f) (Supp.1999).

III. Authority to Order Probation

Fantasy Homes contends the Board made an error of law by ordering probation since the Board has no authority to order probation. The Board disagrees and argues that probation falls within the statutorily permissible options for disposition of disciplinary cases. The Board is correct.

While it is true that none of the statutory provisions of Chapter 29 deal directly with probation as a permissible penalty, the provisions of Chapter 1 of Title 40 specifically address probation. Title 1 governs general regulation of all professions and occupations in the State and authorizes additional sanctions which a professional or occupational licensing board may impose. S.C. Code Ann. § 40-1-120 (Supp. 1999). In addition to the actions a professional or occupational licensing board is authorized to take pursuant to its respective licensing act, a board may: (1) issue a public reprimand; (2) impose a fine; (3) place a licensee on probation or restrict or suspend the individual's license for a definite or indefinite time and prescribe conditions to be met during probation, restriction, or suspension; or (4) permanently revoke the license. Id.

Therefore, the Manufactured Housing Board is specifically authorized by S.C. Code Ann. § 40-1-120(3) (Supp. 1999) to place a licensee on probation.

IV. Admissibility of Documents

Fantasy Homes maintains the Board committed an error of law requiring reversal since Complainant's Exhibits 1, 2, 4, 5 and 6 were not sufficiently authenticated to allow those documents to be properly admitted into evidence. ⁽²⁾ The Board argues the documents were properly authenticated pursuant to Rule 901, SCRE since the facts surrounding the documents and the investigator's knowledge of the documents provide reliable indicators that the documents in question are what the Board's staff claimed them to be. ⁽³⁾ Each document is addressed in turn.

A. Exhibit 1

Complainant's Exhibit 1 is not included in the Record on Appeal. However, the testimony is sufficient to identify the substance of the document and to allow a review of the matter.

The Board's investigator testified that Exhibit 1 consists of a portion of the complaint form authored by the complainant and submitted to the Board's staff on July 20, 1999. At the time of introduction, a brief discussion took place concerning the authentication of the document which discussion included an objection by Fantasy Homes on authentication grounds and a ruling by the Board to receive the document.

However, as the trial developed, subsequent actions by Fantasy Homes demonstrate that even if an error occurred in admitting the document, no grounds for reversal were established since no prejudice resulted. See Darden v. Witham, 263 S.C. 183, 209 S.E.2d 42 (1974) ("An error not shown to be prejudicial does not constitute grounds for reversal."). In the instant case, no prejudice resulted from receiving a portion of the complaint form (Exhibit 1) since the full complaint form, with attachments, was introduced into evidence as Complainant's Exhibit 7 and, most significantly, was introduced without objection by Fantasy Homes. See Tr. p. 16 ln. 20 - p. 17, ln. 14. The precise issue was addressed in JKT Co., Inc. v. Hardwick, 274 S.C. 413, 265 S.E.2d 510, 513 (1980).

The first document was a reprint of an article appearing in a Celotex publication which was admitted into evidence. While its introduction into evidence without proper authentication may have been erroneous, Williams v. Milling-Nelson Motors, Inc., 209 S.C. 407, 40 S.E.2d 633 (1946), we fail to see how it prejudiced Celotex when the publication from which it was reprinted was admitted into evidence without objection as to its authenticity.

Accordingly, no reversible error has been shown in reference to Exhibit 1.

B. Exhibits 2, 4, 5 and 6

With respect to Complainant's Exhibits 2, 4, 5 and 6, I conclude the documents were properly admitted.

Documents are properly admitted by complying with the rules of evidence as applied in civil cases in the court of common pleas. S.C. Code Ann. § 1-23-330(1) (Supp. 1999). Complying with the rules of evidence in civil cases in the court of common pleas requires that the documents must be authenticated in order to be admitted. Rule 901, SCRE. Documents are authenticated "by evidence sufficient to support a finding that the matter in question is what its proponent claims." Rule 901, SCRE; see Winburn v. Minnesota Mutual Life Insurance Company, 261 S.C. 568, 201 S.E.2d 372 (1973). Thus, the question of authenticity is answered by addressing two questions. First, what did the proponent claim the documents to be? Second, did the Board have evidence sufficient to support a finding that the documents were what they were claimed to be?

Exhibit 2 was claimed to be a Retail Installment Agreement between the complainant and Fantasy Homes and Exhibit 4 was claimed to be a different version of the same Retail Installment Agreement as identified in Exhibit 2. Exhibit 5 was claimed to be two Purchase Contracts between the complainant and Fantasy Homes. Finally, Exhibit 6 was claimed to be two Customer Promise Sheets from Fantasy Homes.

The Board had evidence sufficient to support a finding that the documents were what they were claimed to be.

In reaching this conclusion, the appellate body must operate from the premise that the fact-finding body, here the Board, exercises significant discretion in making the authenticity determination, and that determination will not be disturbed on appeal unless a showing is made that there is no competent evidence to support the decision. United States v. Munoz, 16 F.3d 1116, 1120-21 (11th Cir.), cert. denied sub nom., Rodriguez v. United States, 513 U.S. 852, 115 S.Ct. 153, 130 L.Ed.2d 92 (1994).

In deciding if competent evidence of authenticity exists, the appellate body must recognize that the fact-finder is entitled to rely upon circumstantial evidence. McCormick on Evidence § 222 at 44 (4th ed.1992). In particular, the fact-finder is entitled to examine the contents of the document itself in passing on the authenticity of the document. See SCRE, Rule 901(b)(4) ("[a]ppearance, contents, substance, internal patterns, or other distinctive characteristics, taken in conjunction with circumstances" may establish authenticity). Likewise, the Board is entitled to acknowledge the fact that the documents were obtained from the defendant or by subpoena from a third party and to rely upon such facts to provide further evidence of authenticity. McQueeney v. Wilmington Trust Co., 779 F.2d 916, 929 (3d Cir.1985) (documents produced in response to a discovery request are probative of authenticity); Burgess v. Premier Corp., 727 F.2d 826, 835-36 (9th Cir.1984) (exhibits found in defendant's warehouse were adequately authenticated simply because they were found there).

Here, in particular, the Promise Sheet dated July 22, 1999 of Exhibit 6 is clearly authenticated. Angela Neal authored the document, testified that she authored the document, and testified that the document submitted to the Board was the document she authored. Tr. p. 30 ln. 9 - ln. 19. Such testimony is competent evidence of authenticity since Neal, the author of the document, is a witness with knowledge that the document "is what it is claimed to be." Rule 901(b)(1).

Moreover, all of the exhibits have internal markings consistent with what each is purported to be. For example, 2 and 4 purport to be Retail Installment Agreements and consistent with such a claim each shows the amount financed, states that the document is a contract and security agreement, and contains signatures. Exhibits 5 and 6 bear either the letterhead or the logo of Fantasy Homes and each document has data supporting the view that Exhibit 5 is a Contract to Purchase and Exhibit 6 is a Promise Sheet.

In addition, the exhibits were acquired in a manner lending support to the authenticity of each. Exhibit 2 was obtained from the files of Fantasy Homes and Exhibit 4 was acquired from Greentree in response to a subpoena. Exhibit 5 was obtained from the records of Fantasy homes by an investigator for the Board who obtained the documents "[t]hrough my normal investigation process." Tr. p. 14, ln. 24. Likewise, the two Promise Sheets of Exhibit 6 were also obtained from the files of Fantasy Homes by the investigator.

Accordingly, Complainant's Exhibits 2, 4, 5 and 6 were properly admitted.

V. Review of Evidence Supporting Decision

Fantasy Homes challenges the sufficiency of the evidence supporting the Board's decision. In reviewing an administrative agency's decision on evidentiary grounds, the appellate body may reverse the agency's decision if the decision is clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record. S.C. Code Ann. § 1-23-380(A)(6)(e) (Supp. 1999). In determining if substantial evidence exists, the reviewing court does not look for "a mere scintilla of evidence nor evidence viewed blindly from one side, but [rather looks for ] evidence which, when considering the record as a whole, would allow reasonable minds to reach the conclusion that the agency reached." Palmetto Alliance, Inc. v. South Carolina Pub. Serv. Comm'n, 282 S.C. 430, 432, 319 S.E.2d 695, 696 (1984). When the record is reviewed in such a light, the court must be mindful that the possibility of drawing two inconsistent conclusions from the evidence does not mean the agency's conclusions are unsupported by substantial evidence. Id. Moreover, in conducting its review of the evidence, the appellate body "shall not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact." S.C. Code Ann. § 1-23-380(A)(6) (Supp.1998). Finally, in reviewing the evidence, the appellate body places the burden on the appellant to prove convincingly that the agency's decision is unsupported by the evidence. See Hamm v. AT & T, 302 S.C. 210, 394 S.E.2d 842 (1990).

Here, Fantasy Homes has not proven convincingly that the Board issued a decision unsupported by the evidence. Indeed, substantial evidence exists to support the Board's decision that Fantasy Homes, through its employees, made a misrepresentation of a material fact in a manufactured home transaction and engaged in the employment of fraudulent practices in connection with the sales of manufactured housing. Given the record in this case, reasonable minds could have concluded from the evidence that employees of Fantasy Homes fraudulently altered a retail installment agreement.

The Board found that Fantasy Homes, through its employees Dana Risi and Bradley Burger, entered into a written contract for the sale of a manufactured home with Tanya Griesbach (Griesbach) and Gene Croft (Croft). The Board further found that the retail installment agreement submitted by Risi and Burger to the finance company showed that a washer, dryer, and an air conditioning unit were included in the price of the manufactured home, but that the agreement held by Griesbach and on file with Fantasy Homes did not indicate that an air conditioning unit would be financed. The Board found that the agreement on file with Fantasy Homes was a different document than that submitted to the finance company in that the initials and signatures of Griesbach and Croft did not match up. Most of the evidence supporting these findings comes from Fantasy Home's own witness, Angela Neal.

Ms. Neal testified that she first learned about Burger's and Risi's alteration of the Retail Installment Agreement after meeting with the Board's investigator. Ms. Neal conducted her own internal investigation into the document alteration by examining the company's file on the Griesbach transaction to determine whether the company agreement was consistent with related documents. Ms. Neal indicated that the air conditioner feature was not checked off on the company agreement and that the sales center issued a purchase order for only a washer and dryer. She further stated that she believed that Burger "whited out" the check-off of the air conditioner feature on the agreement submitted to Fantasy Homes' corporate office. She explained that Burger's motivation for including the air conditioner in the version of the agreement submitted to the finance company was the additional commission he would receive by adding that feature to the agreement. Ms. Neal further testified that as of the date of the hearing, Fantasy Homes had cut back its number of sales lots due to its difficulty in controlling employees at several different locations.

Examination of differing versions of the Retail Installment Agreement confirms Ms. Neal's testimony. The version found in the company's file does not indicate that Griesbach ordered an air conditioner (Complainant's Exhibit # 2), yet the version submitted to the finance company shows that the air conditioner feature was checked (Complainant's Exhibit # 4). Further, the purported initials and signatures of Griesbach and Croft on the version submitted to the finance company do not match with those on the version in Fantasy Homes' corporate office file. Further, the Customer Promise Sheet signed by Griesbach on March 12, 1999 shows that Griesbach declined the air conditioner option (Complainant's Exhibit 6). Finally, two differing versions of the purchase contract was generated by Burger and Risi. Although identical in all other respects, one version of the purchase contract was signed by Risi and the other version was signed by Burger. (See transcript page 20, lines 11-16, and Complainant's Exhibits 5 and 7).

Based on the foregoing, I conclude that substantial evidence exists to support the Board's decision that Fantasy Homes, through its employees, made a misrepresentation of a material fact in a manufactured home transaction and engaged in the employment of fraudulent practices in connection with the sales of manufactured housing.

Thus, based upon all of the above, the Board's decision to impose a $500 fine and place Fantasy Homes' Retail Dealer license on six months probation is affirmed.

AND IT IS SO ORDERED.

______________________

RAY N. STEVENS

Administrative Law Judge

Dated: January 18, 2001

Columbia, South Carolina

1. Risi was the manager at the Charleston Highway sales location and Burger was the sales representative at that location.

2. To the extent that Fantasy Homes argues that the challenged exhibits contained inadmissible hearsay, that argument is not preserved for appellate review since Fantasy Homes' sole ground for objection to these exhibits during the Board's hearing was the failure to properly authenticate them. (Transcript, pages 9-12, 14-16).

3. Rule 901, SCRE provides that the requirement of authenticity or identification as a condition precedent to admissibility is satisfied by evidence sufficient to support a finding that the matter in question is what its proponent claims. Rule 901(a), SCRE.