Garozzo v. Mo. Dep't of Ins., Fin. Inst. & Prof'l Registration, Div. of Fin.

• Decision Date: 29 January 2013
• Docket Number: No. SC 92152.,SC 92152.
• Parties: Roy GAROZZO, Respondent, v. MISSOURI DEPARTMENT OF INSURANCE, FINANCIAL INSTITUTIONS & PROFESSIONAL REGISTRATION, DIVISION OF FINANCE, Appellant.
• Court: Missouri Supreme Court

389 S.W.3d 660

Roy GAROZZO, Respondent,

v.MISSOURI DEPARTMENT OF INSURANCE, FINANCIAL INSTITUTIONS & PROFESSIONAL REGISTRATION, DIVISION OF FINANCE, Appellant.

No. SC 92152.

Supreme Court of Missouri, En Banc.

Jan. 29, 2013.

Erwin O. Switzer III and Jennifer Mann Bortnick, Greensfelder, Hemker & Gale PC, St. Louis, for Garozzo.

James R. McAdams and James W. Gallaher, Missouri Department of Insurance, Financial Institutions & Professional Registration, Jefferson City, for the Division.

RICHARD B. TEITELMAN, Chief Justice.

Section 443.713(2)(a)¹ provides that the director of the Missouri Division of Finance shall not issue a mortgage loan originator license to an applicant who has been convicted of or pleaded guilty to a felony within seven years prior to the date of the application. The trial court held that the statute violates portions of the Missouri Constitution: (1) the article I, section 30 ban on bills of attainder; (2) the article I, section 13 ban on retrospective laws; and (3) the article I, section 10 guarantee of due process. The director appeals. The judgment is reversed.

FACTS

Ray Garozzo began working as a mortgage loan originator in 1985. At that time, there was no licensing requirement for mortgage loan originators. In 2006, Garozzo pleaded guilty to a class C felony of possession of a controlled substance. Garozzo received a suspended imposition of sentence that was conditioned on the completion of several provisions. Garozzo completed these conditions.

In 2008, Congress enacted the Secure and Fair Enforcement Mortgage Licensing Act of 2008 (SAFE Act). The SAFE Act established a nationwide licensing requirement for mortgage loan originators. 12 U.S.C. § 5101. The SAFE Act provides that the federal government will establish a licensing system in any state that declines to adopt a licensing and registration law that complies with the minimum requirements of the SAFE Act. 12 U.S.C. § 5107(a).

In 2010, the General Assembly enacted the Missouri Secure and Fair Enforcement Mortgage Licensing Act (Missouri SAFE Act).² The division of finance is responsible for administering the law. Section 443.703.1(6). As required by the federal SAFE Act, the Missouri SAFE Act provides that “[n]o individual ... shall engage in the business of a mortgage loan originator ... without first obtaining and maintaining a license....” Section 443.706.1. The Missouri SAFE Act also prohibits the director from issuing a mortgage loan originator's license to an applicant who has pleaded guilty to a felony within seven years prior to the date of the application. Section 443.713(2)(a).

In July 2010, Garozzo submitted an application for a mortgage loan originator license. The director denied the application pursuant to section 443.713(2)(a) because Garozzo had pleaded guilty to a felony in 2006. Garozzo filed a notice of appeal with the residential mortgage board. The board held a hearing and determined that section 443.413(2)(a) required the board to deny Garozzo's license application.³

Garozzo then filed a petition for review in the circuit court. The circuit court entered a declaratory judgment finding that section 443.713(2)(a) was unconstitutional as applied to Garozzo in that the statute constituted a bill of attainder, violated the article I, section 13 ban on retrospective laws, and violated Garozzo's rights to substantive and procedural due process. The circuit court ordered the director to issue a license to Garozzo. The director appeals.

ANALYSIS

I. Standard of Review

Where a contested case is decided by an agency and reviewed by a circuit court, this Court reviews the findings and decision of the agency rather than the circuit court. Morton v. Brenner, 842 S.W.2d 538, 540 (Mo. banc 1992). In this case, there is no factual dispute. The sole issue is whether section 443.713(2)(a) violates the constitutional provisions identified by Garozzo. This Court engages in de novo review of the agency's legal determinations. Stone v. Missouri Dept. of Health and Senior Services 350 S.W.3d 14, 20 (Mo. banc 2011). A statute is presumed to be constitutional and will not be invalidated unless “it clearly and undoubtedly violates some constitutional provision and palpably affronts fundamental law embodied in the constitution.” State v. Young, 362 S.W.3d 386, 390 (Mo. banc 2012)(quoting State v. Richard, 298 S.W.3d 529, 531 (Mo. banc 2009)). Garozzo, as the party challenging the statute's validity, bears the burden of proving the statute clearly and undoubtedly violates the constitution. Id.

II. Bill of Attainder

Garozzo asserts that section 443.713(2)(a) violates the state and federal constitutional bans on bills of attainder. U.S. Const. article I, section 10; Mo. Const. article I, section 30. A bill of attainder is a legislative enactment that inflicts punishment on a specific person or group without trial or judicial action. Doe v. Phillips, 194 S.W.3d 833, 848 (Mo. banc 2006); citing State ex rel. Bunker Res. Recycling & Reclamation, Inc. v. Mehan, 782 S.W.2d 381, 386 (Mo. banc 1990). To invalidate section 443.713(2)(a) as a bill of attainder, Garozzo must demonstrate that the statute “singles out a ‘specifically designated person or group’ ” and “inflicts punishment on that person or group.” Doe, 194 S.W.3d at 848, quoting Selective Service System v. Minnesota Public Interest Research Group, et al, 468 U.S. 841, 104 S.Ct. 3348, 82 L.Ed.2d 632 (1984). The first element is referred to as the specificity element and the second as the punishment element. Bunker, 782 S.W.2d at 386.

It is unnecessary in this case to determine whether the specificity element is satisfied because section 443.713(2)(a) does not inflict punishment. There are three factors that determine whether a statute inflicts punishment: (1) whether the challenged statute falls within the historical meaning of legislative punishment, (2) whether the statute, viewed in a light of the severity of burdens it imposes, reasonably can be said to advance a non-punitive legislative purpose and (3) whether the legislative record discloses an intent to punish. Bunker, 782 S.W.2d at 387; citing Selective Service System, 468 U.S. 841, 104 S.Ct. 3348 (1984).

The historical meaning of legislative punishment generally includes statutes that bar a specific person or identifiable group from participating in a regulated business or profession. Bunker, 782 S.W.2d at 387. For instance, in Cummings v. State of Missouri, 4 Wall. 277, 18 L.Ed. 356 (1866), the United States Supreme Court invalidated as a bill of attainder a provision of Missouri's 1865 Constitution that prohibited a priest from practicing his profession without taking an oath that he had not participated in the rebellion against the Union, which amounted to punishment. See also United States v. Lovett, 328 U.S. 303, 106 Ct.Cl. 856, 66 S.Ct. 1073, 90 L.Ed. 1252 (1946) (statute barring named individuals from ever receiving compensation for employment with the United States government was legislatively imposed punishment); United States v. Brown, 381 U.S. 437, 85 S.Ct. 1707, 14 L.Ed.2d 484 (1965)(statute barring members of the Communist party from becoming officers of labor unions was a punishment). These cases support a finding that there is a punitive aspect to statutes that exclude an individual or identifiable group from engaging in a particular profession.

Although there are a number of cases indicating a historical trend of treating bans on employment as punishment, history is not dispositive. Bunker, 782 S.W.2d at 387. This because the second and third analytical factors more directly look at the particular aspects of the challenged statute to determine if the challenged statute is punitive in practice and by design.

The second analytical factor requires a court to determine whether the statute, when viewed in light of the severity of burdens it imposes, reasonably can be said to advance a non-punitive legislative purpose. For instance, in Hawker v. People of New York, 170 U.S. 189, 18 S.Ct. 573, 42 L.Ed. 1002 (1898), the Court held that a statute prohibiting convicted felons from practicing medicine did not constitute a punishment in violation of the bill of attainder clause because a legitimate legislative purpose was advanced by ensuring that only persons of good character practice medicine. Section 443.713(2)(a) is analogous to the statute at issue in Hawker because it advances the non-punitive purpose of assuring that professional services are provided by law-abiding individuals. The non-punitive nature of section 443.713(2)(a) is further demonstrated by the fact that an applicant is barred from licensure for a maximum of seven years. Finally, section 443.713(2)(a) is a licensing statute, and Missouri courts have held consistently that “the purpose behind licensing statutes is to protect the public rather than to punish the licensed professional.” Duncan v. Missouri Bd. of Architects, Professional Engineers and Land Surveyors, 744 S.W.2d 524, 531–532 (Mo.App.1988). Considered in context, section 443.713(2)(a) does not reflect a punitive purpose.

The final factor requires courts to consider whether the legislative record discloses intent to punish. The legislative record leading to the enactment of section 443.713(2)(a) indicates no intent to punish. To the contrary, the stated goals of the federal SAFE Act are to enhance consumer protection, reduce fraud, provide for comprehensive licensing, and provide for increased accountability and tracking of loan originators. 12 U.S.C. § 5101. The Missouri SAFE Act was enacted to comply with the requirements of the federal SAFE Act. There is nothing in the legislative record that discloses any intent to punish.

Although the temporary license restriction imposed by section 443.713(2)(a) imposes an obvious hardship on Garozzo, the statute is, in practice and by design, a valid business and economic regulation as opposed to an invalid bill of attainder. As...