All Am. Title Agency, LLC v. Dep't of Fin.

• Citation: 2013 IL App (1st) 113400,373 Ill.Dec. 867,994 N.E.2d 636
• Decision Date: 16 July 2013
• Docket Number: No. 1–11–3400.,1–11–3400.
• Parties: ALL AMERICAN TITLE AGENCY, LLC, and Title Zone, LLC, Plaintiffs–Appellants, v. The DEPARTMENT OF FINANCIAL AND PROFESSIONAL REGULATION; Brent Adams, Secretary of the Department of Financial and Professional Regulation; and Harry Stirmell, Supervisor of the Title Insurance Section of the Department of Financial and Professional Regulation, Defendants–Appellees.
• Court: United States Appellate Court of Illinois

2013 IL App (1st) 113400

994 N.E.2d 636

373 Ill.Dec. 867

ALL AMERICAN TITLE AGENCY, LLC, and Title Zone, LLC, Plaintiffs–Appellants,

v.The DEPARTMENT OF FINANCIAL AND PROFESSIONAL REGULATION; Brent Adams, Secretary of the Department of Financial and Professional Regulation; and Harry Stirmell, Supervisor of the Title Insurance Section of the Department of Financial and Professional Regulation, Defendants–Appellees.

No. 1–11–3400.

Appellate Court of Illinois,

First District, Second Division.

July 16, 2013.

Paul H. Strecker and Christy J. Jepson, both of Strecker, Jepson & Associates, of Lake Zurich, for appellants.

Lisa Madigan, Attorney General, Chicago (Michael A. Scodro, Solicitor General, and Marcy C. Labrec, Assistant Attorney General, of counsel), for appellees.

OPINION

Justice SIMON delivered the judgment of the court, with opinion.

[373 Ill.Dec. 868]¶ 1 Plaintiffs, All American Title Agency, LLC (All American), and Title Zone, LLC (Title Zone), appeal from an order of the circuit court of Cook County affirming those portions of the final order of the Secretary of the Illinois Department of Financial and Professional Regulation (Department) permanently revoking plaintiffs' registrations under the Title Insurance Act (215 ILCS 155/1 et seq. (West 2004)). On appeal, plaintiffs contend that the Secretary and the circuit court erred by revoking their registrations and that their due process rights were violated in the administrative proceedings conducted by the Department. For the reasons that follow, we affirm.

¶ 2 BACKGROUND

¶ 3 In February 2006, SouthStar Funding (SouthStar) filed complaints against plaintiffs and five other title agencies, E.J.F. Title Agency, LLC, Palatine Title Agency, LLC, Popular Title Agency, LLC, Senior Title Agency, LLC, and Skyline Title Agency, LLC, regarding real estate transactions involving Charles White. The Department conducted an investigation of the title agencies and, on July 31, 2006, entered an order revoking the registrations of all seven agencies. The Secretary subsequently upheld the revocations of all seven title agencies; however, the circuit court reversed the revocations of five of the agencies and upheld the revocations of the registrations of plaintiffs, All American and Title Zone, on administrative review. As no appeal has been taken from that portion of the circuit court's order reversing the revocations of the registrations of the other five title agencies, our consideration is limited to the revocation of plaintiffs' registrations. See Deutsche Bank National v. Burtley, 371 Ill.App.3d 1, 9, 308 Ill.Dec. 510, 861 N.E.2d 1075 (2006) (the appellate court only has jurisdiction over those matters raised in the notice of appeal).

¶ 4 In its revocation order, the Department made a number of findings regarding “mortgage rescue” transactions that were engineered by White and for which All American acted as the title agent.¹ In such transactions, White would approach homeowners nearing foreclosure and propose an arrangement whereby they could remain in their property for a year while they restored their financial resources. White offered to locate an investor that would purchase the distressed property prior to foreclosure, lease the property to the homeowner for a year, and then resell the property back to the homeowner at the conclusion of that year. The Department found that several of the loan applications used in those transactions improperly stated that the investor intended to use the property as a primary residence and that several mortgage-related documents executed in those transactions were not properly notarized by the title agent. The Department also found that All American altered the HUD–1 settlement statements which had been approved by the lenders at the closings of some of the mortgage rescue transactions and redirected the proceeds from those sales to Eyes Have Not Seen, a property management company controlled by White.

¶ 5 In addition, the Department found that White maintained a financial interest in Title Zone because his grandmother owned a 30% interest in Title Zone and he was the executor of her estate and that All American owned the remaining 70% of Title Zone and shifted proceeds from the closings of the mortgage rescue transactionsfor which it had acted as the title agent to Title Zone. The Department further found that All American was the exclusive title agent for White's mortgage rescue transactions and that White and All American had violated the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. § 2601 et seq. (2000)) and section 18 of the Title Insurance Act (215 ILCS 155/18 (West 2004)) by failing to disclose White's financial interest in Title Zone to the consumers with whom they were doing business.

¶ 6 On August 2, 2006, the banking division of the Department issued an emergency order suspending White's loan originator registration for violations of the Residential Mortgage License Act of 1987 (205 ILCS 635/1–1 et seq. (West 2004)) and its accompanying rules. The Department examined a number of loans originated by White as a loan originator for Mutual Trust Funding Corp., and found that White had engaged in dishonest dealings related to the disbursement of approximately $1.5 million in loan proceeds to Eyes Have Not Seen and failed to disclose his financial interests in Title Zone and Eyes Have Not Seen in furtherance of those dealings.

¶ 7 Plaintiffs appealed from the Department's order revoking their registrations and, at the hearing on that appeal, Phil Stein, a financial institutions examiner for the Department, testified that he had conducted an investigation of the agencies and he believed White had been involved in mortgage rescue transactions and owned 30% of Title Zone through a trust. Stein testified about the files of a number of real estate closings conducted by All American and the alleged discrepancies he discovered therein regarding the identity of the seller, the timing of certain disbursements, and incomplete occupancy statements and financial interest disclosures. Stein also testified regarding a number of closing files that each contained multiple HUD–1 settlement statements.

¶ 8 One of the files contained a copy of a check from All American to Eyes Have Not Seen for $138,945.40 and three HUD–1 settlement statements, each of which had a disbursement and settlement date of October 25, 2006, and indicated that $138,945.40 of the funds due to the seller would be used as a “payoff of first mortgage loan.” The first settlement statement was stamped as “HUD approved,” but was not signed by the buyer or the seller, and indicated that the seller was due $50,045.62 in cash. The second statement was signed by the buyer and the seller and indicated that $50,509.30 of the funds due to the seller would be used for “payment on account” and that the seller was not due any cash. The third statement was signed by the buyer and the seller, did not include a notation for “payment on account,” and indicated that the seller was due $50,509.30 in cash. The file also contained a balance sheet from the transaction indicating that $49,095.62 was disbursed to Eyes Have Not Seen on October 26, 2005, and Stein testified that this disbursement was not accounted for in any of the settlement statements in the file.

¶ 9 A second file about which Stein testified contained two HUD–1 settlement statements with a settlement date of December 12, 2005. One statement was signed by the buyer and the seller and indicated that $125,058.87 of the funds due to the seller would be disbursed to Eyes Have Not Seen for “payment on account” and that the seller was not due any cash. The other statement was not signed by the buyer or the seller, indicated that the seller was due $137,187.45 in cash, and did not include a notation for “payment on account.”

[373 Ill.Dec. 871]¶ 10 A third file about which Stein testified contained two HUD–1 settlement statements with a settlement date of December 8, 2005. One statement was signed by the buyer and the seller and indicated that $8,219.70 of the funds due to seller would be distributed to Eyes Have Not Seen for “payment on account” and that the seller was not due any cash. The other statement was not signed by the buyer or the seller, had a stamp of “HUD approved” which had been crossed out, did not include a notation for “payment on account,” and indicated that the seller was due $58,480.70 in cash. The file also contained a receipt for a check from All American's escrow account to Eyes Have Not Seen for $48,219.70 for “payment on account” that was disbursed on December 9, 2005, and a disbursement ledger for the transaction which reflected payment having been made to Eyes Have Not Seen.

¶ 11 On cross-examination, Stein stated that the existence of multiple HUD–1 statements in a closing file does not alone establish that something was wrong with the underlying transaction and that Christy Jepson, an owner of All American, told him that White's grandmother owned a 30% interest of Title Zone and that White was the executor of her estate.

¶ 12 Harry Stirmell, the supervisor for the title insurance section of the Department, testified that he ordered the investigation of the title agencies in response to complaints submitted by mortgage lender SouthStar regarding disbursements to Eyes Have Not Seen that allegedly were not included in the HUD–1 statements reviewed and approved by SouthStar. Stirmell reviewed the files prepared by Stein and determined that the HUD–1 statements used at the closings were different from those approved by the lender and that the money that was supposed to go to the seller was diverted to Eyes Have Not Seen.

¶ 13 Michael Hardecopf, the Illinois agency manager for Ticor Title Insurance Co. (Ticor), testified that plaintiffs had been agents of Ticor and that Title Zone had filed an application for agency with Ticor which indicated that Charles White was a manager and...