Attorney General v. Diamond Mortg. Co.

• Citation: 414 Mich. 603,327 N.W.2d 805
• Decision Date: 07 December 1982
• Docket Number: No. 6,Docket No. 66369,6
• Parties: ATTORNEY GENERAL of the State of Michigan, Frank J. Kelley, Plaintiff-Appellant, v. DIAMOND MORTGAGE COMPANY, a Michigan Corporation, Sheldon Greenberg and Barton Greenberg, Defendants-Appellees. Calendar
• Court: Supreme Court of Michigan

Page 805

327 N.W.2d 805

414 Mich. 603

ATTORNEY GENERAL of the State of Michigan, Frank J. Kelley Plaintiff-Appellant, v. DIAMOND MORTGAGE COMPANY, a Michigan Corporation, Sheldon Greenberg and Barton Greenberg, Defendants-Appellees.

Docket No. 66369.

Calendar No. 6.

Supreme Court of Michigan.

Argued Dec. 1, 1981.

Decided Dec. 7, 1982.

Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol. Gen., Frederick H. Hoffecker, Asst. Atty. Gen., Consumer Protection Div., Lansing, for plaintiff-appellant.

Barron & Knoppow, P.C. by Ronald M. Barron, Birmingham, for defendants-appellees; Lampert, Fried & Levitt, P.C. by David M. Fried, Gary E. Levitt, Birmingham, of counsel.

COLEMAN, Justice.

The Attorney General brings this action in quo warranto and under the Michigan Consumer Protection Act against Diamond Mortgage Company and its officers and directors. The case was dismissed in the trial court, and the Court of Appeals affirmed. Several questions need to be answered. First, under the doctrines of either the exhaustion of administrative remedies or primary jurisdiction, should this action against a licensed real estate broker initially have been brought before the Department of Licensing and Regulation? Second, are the defendants exempt from the Michigan Consumer Protection Act, M.C.L. Sec. 445.901 et seq.; M.S.A. Sec. 19.418(1) et seq., because of their license to engage in the real estate brokerage business? Third, is Sec. 5(1) of the Michigan Consumer Protection Act, M.C.L. Sec. 445.905; M.S.A. Sec. 19.418(5), a jurisdictional, as opposed to a venue, provision? Fourth, is an action in quo warranto inappropriate against a corporation allegedly involved in pervasive illegality under the usury and consumer protection laws? We answer all four questions in the negative and reverse the judgments of the lower courts.

I

The Attorney General instituted this action in quo warranto and under the Michigan Consumer Protection Act, M.C.L. Sec. 445.901, et seq.; M.S.A. Sec. 19.418(1) et seq., on June 13, 1979. Defendant Diamond Mortgage Company is a Michigan corporation, and defendants Sheldon Greenberg and Barton Greenberg are its officers and directors.

The Attorney General alleged, inter alia, that Diamond advertised and offered loans to homeowners. Diamond represented that the interest would be 11% per annum. At closing, a promissory note and mortgage were executed on which Diamond was the mortgagee. Also at the closing, Diamond allegedly imposed a brokerage or prepaid finance fee, the fee was taken from the loan, and the loan was increased to cover the amount of the fee. The entire amount was then owed at 11% interest per annum. This brokerage or finance fee, the Attorney General contends, is interest and is usurious, because Diamond allegedly is the lender. ¹ The Attorney General also alleged that the various documents used to complete the mortgage loan transaction were confusing and inconsistent concerning such matters as whether Diamond was acting as lender or broker, what amount was to be paid to the homeowner, what amount was to be financed, and what were the amounts of the annual percentage rate and the finance charge. The Attorney General contends that Diamond's methods of doing business violated the Michigan Consumer Protection Act and the usury statutes. Diamond allegedly has abused its corporate charter and has engaged in a gross misuse of the corporate privileges given to it by the State of Michigan. As remedies, the Attorney General seeks the revocation of Diamond's corporate privileges, relief for injured homeowners through the reformation of the mortgage loan transactions, and the imposition of penalties.

The defendants raised several issues in their answer. They contended, inter alia, that the circuit court lacked jurisdiction because the Attorney General failed to exhaust his administrative remedies. The defendants asserted that he first should have sought the revocation of Diamond's real estate broker's license in a proceeding before the Department of Licensing and Regulation. See M.C.L. Sec. 451.213; M.S.A. Sec. 19.803. ² They also asserted that Diamond's activities as a licensed real estate broker were exempt from the proscriptions of the Michigan Consumer Protection Act. See M.C.L. Sec. 445.904; M.S.A. Sec. 19.418(4). ³ Defendants further alleged that the Michigan Consumer Protection Act violates the title-object clause of the Michigan Constitution of 1963. Const.1963, art. 4, Sec. 24. Additionally, they contended that the Ingham Circuit Court lacked jurisdiction over plaintiff's claim under the Michigan Consumer Protection Act because the defendants were not established or conducting business in Ingham County. See M.C.L. Sec. 445.905(1); M.S.A. Sec. 19.418(5)(1). ⁴

The circuit judge dismissed the action, stating several reasons. First, he held that even if the defendants could be prosecuted for usury "they would not be guilty per se of ultra vires acts that would justify a quo warranto action". Second, he cited Attorney General v. Shaw, 327 Mich. 648, 42 N.W.2d 774 (1950), for the proposition that quo warranto would not be appropriate when there existed an adequate statutory remedy. He concluded that in this case the real estate brokers licensing act offered an adequate remedy. Third, he agreed with defendants that because Diamond held a real estate broker's license it was exempt from the Michigan Consumer Protection Act. Finally, he stated that even if Diamond were subject to the Michigan Consumer Protection Act, under the act there was no jurisdiction in the Ingham Circuit Court because the defendants were neither established nor conducting business in Ingham County.

The Court of Appeals affirmed on the ground that plaintiff had failed to exhaust his administrative remedies. Attorney General v. Diamond Mortgage Corp., 102 Mich.App. 322, 301 N.W.2d 523 (1980). It concluded that although the Department of Licensing and Regulation could not provide all of the relief requested, plaintiff was yet required to exhaust the available administrative remedies. The Court stated:

"If the present lawsuit were allowed in circuit court, coming without any administrative proceedings, the cohesive administrative scheme of the Department of Licensing and Regulation and [the Administrative Procedures Act, MCL 24.201 et seq.; MSA 3.560(101) et seq.] specifically set forth by the Legislature could be totally avoided by claiming, in addition to remedies available through the administrative process, a remedy outside of the administrative scheme." 102 Mich.App. 326, 301 N.W.2d 523.

The Court noted that plaintiff had not shown that any prejudice would result through proceeding first through the administrative process.

This Court granted the application of the Attorney General for leave to appeal. 411 Mich. 1003 (1981).

II

A

The reasoning of the Court of Appeals in holding that the doctrine of the exhaustion of administrative remedies applied was premised upon a misstatement of the relief sought by the Attorney General. The Court stated that among the remedies plaintiff sought was "a court order revoking the defendants' real estate broker's license". 102 Mich.App. 324, 301 N.W.2d 523. Such relief, however, was never requested by the Attorney General. The Attorney General sought the dissolution of the corporation, the reformation of prior mortgages, and the imposition of the penalties for which provision is made in the Michigan Consumer Protection Act and the quo warranto statute, M.C.L. Sec. 600.4521; M.S.A. Sec. 27A.4521. Contrary to the Court of Appeals assertion, none of the relief which the plaintiff sought was available in the Department of Licensing and Regulation.

There is, therefore, no basis for requiring that administrative remedies in the Department of Licensing and Regulation be exhausted. There were no administrative remedies available in that agency. Although divesting Diamond of its corporate privileges and revoking Diamond's license may end in the same result, i.e., the cessation of corporate activities, there is no proposition of law that would require the Attorney General to seek the revocation of a corporation's license to act as a real estate broker prior to seeking the dissolution of the corporation. The real estate brokers licensing act, as it was in effect at the time this case arose, clearly provided that a license granted pursuant to it was not intended to shield the licensee from responsibilities under the civil and criminal laws:

"This act shall not be construed to relieve a person from civil liability or criminal prosecution under the general laws of this state." M.C.L. Sec. 451.213; M.S.A. Sec. 19.803.

Because the Attorney General did not seek to revoke Diamond's real estate broker's license, there was no need for him to exhaust the administrative remedies available for that purpose. Defendants conceded this at oral argument, but argued that nevertheless the Court of Appeals decision should be affirmed under the doctrine of primary jurisdiction.

B

The doctrine of primary jurisdiction originated in the decision of the Supreme Court of the United States in Texas & P.R. Co. v. Abilene Cotton Oil Co., 204 U.S. 426, 27 S.Ct. 350, 51 L.Ed. 553 (1907). In that case, a shipper sued a carrier alleging that the carrier had charged an unreasonable rate. The question was whether a state court could properly rule on the matter absent prior review of the rate by the Interstate Commerce Commission. The commission had been established by an act, the purpose of which was to assure that rates charged by carriers were uniform and reasonable. Carriers would file their rates with the commission, and the reasonableness of those rates could be challenged in proceedings before the commission. Although the act creating the commission stated that it did not abolish the commonlaw right to challenge such rates in court, the Supreme Court concluded that preliminary resort must be to the ...