1ST Alliance Lending, LLC v. Dep't of Banking

• Decision Date: 16 February 2022
• Docket Number: SC 20560
• Parties: 1ST ALLIANCE LENDING, LLC v. DEPARTMENT OF BANKING et al.
• Court: Connecticut Supreme Court

342 Conn. 273

269 A.3d 764

1ST ALLIANCE LENDING, LLC

v.DEPARTMENT OF BANKING et al.

SC 20560

Supreme Court of Connecticut.

Argued October 21, 2021

Officially released February 16, 2022^*

Ross H. Garber, with whom were Seth R. Klein, West Hartford, and, on the brief, Craig A. Raabe, for the appellant (plaintiff).

Patrick T. Ring, assistant attorney general, with whom were Joseph J. Chambers, deputy associate attorney general, and, on the brief, William Tong, attorney general, and John Langmaid, assistant attorney general, for the appellees (defendants).

Robinson, C. J., and McDonald, D'Auria, Mullins, Kahn and Keller, Js.

McDONALD, J.

This appeal requires us to consider, for the first time, the statutory scheme governing the suspension and revocation of a mortgage lender license. The plaintiff, 1st Alliance Lending, LLC, appeals from the judgment of the trial court dismissing its appeal from the decision of the defendant Jorge Perez, the Commissioner of Banking, revoking the plaintiff's license to serve as a mortgage lender in the state. The principal issue on appeal is whether General Statutes § 36a-492 and the relevant statutory scheme granted the commissioner the legal authority to suspend and revoke the plaintiff's mortgage lender license. We conclude that they did and, accordingly, affirm the judgment of the trial court.

The record reveals the following undisputed facts and procedural history. The commissioner, acting through the named defendant, the Department of Banking, is statutorily authorized to license and regulate the residential mortgage loan industry in Connecticut. See General Statutes §§ 36a-485 through 36a-534b. The plaintiff has been licensed by the commissioner as a mortgage lender in Connecticut for many years. During the period of time relevant to this matter, the plaintiff and the department were engaged in an enforcement proceeding, initiated by the commissioner in 2018, concerning the revocation of the plaintiff's license for reasons separate from and not relevant to this appeal. Although the substance of the allegations in that proceeding is not at issue in this appeal, the existence of that ongoing administrative enforcement proceeding is relevant.

One of the requirements for maintaining a mortgage lender license is that the mortgage lender maintain a surety bond. See General Statutes §§ 36a-488 (b) and 36a-492. The plaintiff's surety bond was issued by the Hartford Fire Insurance Company (The Hartford). In May, 2019, The Hartford issued a notice of cancellation of the plaintiff's surety bond, stating that the bond would be cancelled, effective July 31, 2019. The notice stated that the bond permitted The Hartford, as the surety, to terminate its suretyship by serving notice of its election to do so on the department, as the obligee. The Hartford sent notice of the cancellation to both the plaintiff, as the principal on the bond, and the department, as it was required to do by law. See General Statutes § 36a-492 (c). After receiving The Hartford's notice of cancellation, Amy Grillo, an administrative assistant employed by the department, created a routine entry in the Nationwide Mortgage Licensing System and Registry (NMLS),¹ stating that the notice of cancellation, effective July 31, 2019, had been received, and that the failure to replace or reinstate the bond would result in an automatic suspension and revocation of the plaintiff's mortgage lender license. Grillo also sent an e-mail to Heather Sanchez, the plaintiff's chief compliance officer. Attached to the e-mail was a letter, dated June 7, 2019, stating that § 36a-492 required the plaintiff to maintain a surety bond running concurrently with the period of the license for the plaintiff's main office, and that the plaintiff's failure to have a bond in effect on July 31, 2019, would result in the commissioner's automatic suspension of the plaintiff's license and inactivation of the licenses of each Connecticut mortgage loan originator sponsored by the plaintiff. The June 7 letter went on to state, in relevant part, that, "[i]n order to avoid these outcomes, you must submit a letter of reinstatement of the bond from [The Hartford] or a new bond from a surety company, providing for an effective date on or prior to the bond cancellation effective date [of July 31, 2019], or cease doing business and surrender the license on the [NMLS] in accordance with [ General Statutes §§] 36a-51 (c) and 36a-490 ...." The June 7 letter further stated that, "[i]n the event of automatic suspension," the commissioner shall provide the required notice and an opportunity for a hearing. The June 7 letter concluded by stating that, "if you fail to address this issue," the letter serves as notice required by General Statutes § 4-182 (c) and "provides you an opportunity to show compliance with all lawful requirements for the retention of your license." The June 7 letter was signed by a director of the department, on behalf of the commissioner.

Upon receipt of The Hartford's notice of cancellation and the department's June 7 letter, the plaintiff's chief executive officer, John DiIorio, considered the plaintiff's options. The plaintiff, however, did not immediately respond to the department's June 7 letter, and, approximately one month after the issuance of that letter, Grillo sent a follow-up e-mail to Sanchez, reminding her of the June 7 letter, notifying her about the bond requirements, and requesting a response. The same day, DiIorio sent Grillo an e-mail, acknowledging receipt of the June 7 letter and representing that the plaintiff was considering its options, understood the relevant deadline, and would communicate its plan to the department prior to the close of business on July 30, 2019.

The plaintiff explored the option of obtaining a replacement surety bond but, on or about July 22 or 23, 2019, ultimately decided to cease doing business in Connecticut and to surrender its license. The plaintiff did not communicate its intention to the department until several days later. More precisely, on July 29, 2019, DiIorio sent an e-mail to Grillo, stating that the plaintiff "is voluntarily surrendering its license. Our licensing manager will enter the information into [the] NMLS before [close of business on July 31, 2019]. The active pipeline contains no Connecticut consumers. Please confirm receipt of this message by reply e-mail."

The commissioner did not accept the plaintiff's purported surrender of its license, and, days later, on July 31, 2019, Grillo made an online entry in the NMLS reflecting that the plaintiff's mortgage lender license was suspended. The next day, the commissioner issued the plaintiff a Notice of Automatic Suspension, Notice of Intent to Revoke Mortgage Lender License, and Notice of Right to Hearing. Through the notices, the commissioner informed the plaintiff that its mortgage lender license was automatically suspended on July 31, 2019, and apprised the plaintiff that it could request an administrative hearing on the allegations contained in the notices. The plaintiff requested a hearing, which was held in September, 2019. Following the hearing, the commissioner upheld the suspension. The commissioner also concluded that, pursuant to General Statutes § 36a-494, the plaintiff's failure to maintain a surety bond, as required by § 36a-492, supported the revocation of the plaintiff's mortgage lender license. Accordingly, the commissioner ordered the revocation of the plaintiff's mortgage lender license. The suspension and revocation had national ramifications for the plaintiff because they hampered its ability to conduct business in other states and could result in "a series of cross-defaults with other counterparties and [other] revocations." A properly effectuated surrender would not have had these negative ramifications.

The plaintiff filed an administrative appeal from the commissioner's decision with the trial court, pursuant to the Uniform Administrative Procedure Act (UAPA), General Statutes § 4-166 et seq. See General Statutes § 4-183. The plaintiff argued, among other things, that the governing statutory scheme precluded the department from suspending its license, and that the department should be bound by the plain meaning of its June 7 letter. Following a hearing and postargument briefs, the trial court issued a memorandum of decision, affirming the commissioner's decision and dismissing the plaintiff's appeal. The trial court concluded that (1) the commissioner did not abuse his discretion in declining to accept the plaintiff's license surrender, (2) the June 7 letter did not constitute an offer from the defendants for the plaintiff to surrender its license, and, therefore, the commissioner was not compelled to accept the plaintiff's license surrender under contract principles, and (3) the commissioner was not estopped from declining to accept the plaintiff's license surrender because there was no representation or promise by the commissioner on which the plaintiff could have reasonably relied. This appeal followed.

On appeal, the plaintiff contends that the governing statutes do not permit the defendants to suspend the plaintiff's license. Failing that, the plaintiff further contends that, even if the relevant statutes gave the defendants discretion to suspend its license, the trial court incorrectly concluded that the commissioner lawfully exercised his discretion. Finally, the plaintiff also contends that the defendants were estopped from suspending the plaintiff's license.

"We begin by articulating the applicable standard of review in an appeal from the decision of an administrative agency. Judicial review of [an administrative agency's] action is governed by the [UAPA] ... and the scope of that review is very restricted. ... With regard to questions of fact, it is neither the function of the trial court nor of this court to retry the case or to substitute its judgment for that of the administrative agency. ... Judicial...