Johnston v. Iowa Real Estate Com'n, 83-582

• Decision Date: 15 February 1984
• Docket Number: No. 83-582,83-582
• Citation: 344 N.W.2d 236
• Parties: M. Dwight JOHNSTON, Appellee, v. IOWA REAL ESTATE COMMISSION, Appellant.
• Court: Iowa Supreme Court

Page 236

344 N.W.2d 236

M. Dwight JOHNSTON, Appellee, v. IOWA REAL ESTATE COMMISSION, Appellant.

No. 83-582.

Supreme Court of Iowa.

Feb. 15, 1984.

Thomas J. Miller, Atty. Gen., and Frank E. Thomas, Asst. Atty. Gen., for appellant.

Bert A. Bandstra, Knoxville, for appellee.

Considered by REYNOLDSON, C.J., and UHLENHOPP, HARRIS, McCORMICK and WOLLE, JJ.

McCORMICK, Justice.

This appeal involves the procedure employed by the Iowa Real Estate Commission in denying a former broker's application for a new broker's license. The commission denied the broker's application after a hearing but without informing the applicant of any reason for the denial. Upon judicial review of the commission's decision, the district court reversed the decision and ordered the commission to issue a license. We affirm the district court's reversal of the commission but reverse the court's order that a license issue and remand the case to the commission for further proceedings.

Petitioner M. Dwight Johnston had been a licensed real estate broker in Iowa for seven or eight years when his license was revoked by the respondent Iowa Real Estate Commission on March 1, 1980. The present record discloses only that the revocation stemmed from a dispute between Johnston and a client over a real estate transaction. Johnston applied for a new license in March 1982, two years after the revocation. He passed the broker's examination and tendered the license fee. The commission summarily denied the application on June 9, 1982.

Johnston requested a hearing which was held on August 26, 1982. Although the commission notified Johnston of the time and place of the hearing, it did not notify him of the basis for its denial of his application. Johnston appeared without counsel at the hearing and was given an opportunity to present evidence. He called the commission director and commission counsel as witnesses. The director acknowledged that the commission had no new charges against Johnston and that the commission based its license denial on the prior revocation. The commission counsel testified he did not believe the commission was required to state a reason for denying a broker's license to an applicant whose license has previously been revoked. After the hearing the commission issued an order reiterating its denial of a broker's license, without stating a reason, but also providing that Johnston "be granted an Iowa real estate salesperson's license upon successfully passing the required salesperson's examination, completing the required thirty hour pre-license education course, submitting a proper application and paying the necessary fee."

Johnston subsequently brought the present action for judicial review of the commission's decision. After hearing, the district court found that the commission violated mandatory statutory duties in denying Johnston a license. The court ordered that the commission issue him a broker's license, and the commission appealed.

This appeal requires us to interpret several provisions of Iowa Code chapter 117 (1981), which "establishes the real estate commission and vests it with far-reaching authority to license, regulate and discipline brokers and salespersons." Milholin v. Vorhies, 320 N.W.2d 552, 554 (Iowa 1982). When a license has been revoked, the former broker must wait two years before applying for a new license. See § 117.15. No dispute exists that Johnston waited the required period, his application was in proper form, he passed the broker's examination and he tendered the proper fee. The dispute concerns alleged procedural violations by the commission in nevertheless denying Johnston a license and, after hearing, persisting in its denial.

When his application was initially denied, Johnston requested a hearing in accordance with section 117.19, which provides:

If the commission, after an application in proper form has been filed with it, accompanied by the proper fee, shall deny a license to the applicant, upon his application in writing, and within a period of thirty days of such denial, he shall be entitled to a hearing as provided in section 117.35.

Section 117.35 provides in material part:

The commission shall, upon request of the applicant as provided in section 117.19, or before revoking any license, set the matter down for a hearing and at least twenty days prior to the date set for the hearing it shall notify the applicant or licensee in writing, which said notice shall contain an exact statement of the charges made and the date and place of the hearing. (emphasis supplied).

Statutory hearing procedures are established in sections 117.36-117.40.

If the commission decides after hearing to persist in its denial of a license, section 117.41 applies:

If the majority of the commission shall determine that any applicant is not qualified to receive a license, a license shall not be granted to such applicant, and if the commission shall determine that any licensee is guilty of a violation of any of the provisions of this chapter, the license may be suspended or revoked. The commission, upon request of the applicant or licensee, shall furnish said applicant or licensee with a definite statement of its findings of fact and its reason or reasons for refusing to grant the license or for suspension of the rights of the licensee or for the revocation of the license, as the case may be. Judicial review of action of the commission may be sought in accordance with the terms of the Iowa administrative procedure Act. (emphasis supplied).

In passing upon the qualifications of applicants, the commission has authority to consider the applicant's character. See § 117.15. Revocation is authorized when broker conduct demonstrates specific breaches of the good character requirement. See §§ 117.29 and 117.34. Under the statutory scheme, the burden is on the applicant to establish good character, whether upon an initial application or upon an application for a new license after revocation of a prior one. Cf. In re Willis, 288 N.C. 1, 15, 215 S.E.2d 771, 780 (1975) (burden of proving good character is traditionally on the license applicant). Although the commission appears to be uncertain about its authority to initiate an investigation of an applicant's character, we believe this right is implicit in its duty to determine an applicant's qualifications. See § 117.15. The right is mirrored in the commission's duty to investigate alleged misconduct of licensees. See § 117.34.

Once the commission has determined that the applicant has failed to demonstrate the requisite good character, it may deny the applicant a license. In those circumstances, the applicant is entitled by section 117.19 to a hearing as provided in section 117.35. The commission asserts, however, that the requirement in section 117.35 of a prehearing notice containing "an exact statement of the charges made" does not apply in a case like this one where the commission is relying wholly on the prior revocation. It thereby seeks to excuse its failure to inform Johnston before the hearing of the reason for its denial of his application. The commission also alleges that Johnston had prior discussions with commission officials in which he was fully advised of the commission's reasons.

We agree with Johnston that section 117.35 required the commission to notify him officially before the hearing of the basis for its denial of his application. In doing so the commission should...