Wilson v. Dep't of Fin.

• Decision Date: 24 May 2013
• Docket Number: Docket No. 1–12–1509.
• Citation: 2013 IL App (1st) 121509,372 Ill.Dec. 289,991 N.E.2d 779
• Parties: Chris WILSON, Plaintiff–Appellant, v. The DEPARTMENT OF FINANCIAL AND PROFESSIONAL REGULATION, Division of Banking of Department of Financial and Professional Regulation, and Manuel Flores, Director of the Division of Banking of the Illinois Department of Financial and Professional Regulation, Defendants–Appellees.
• Court: United States Appellate Court of Illinois

2013 IL App (1st) 121509

991 N.E.2d 779

372 Ill.Dec. 289

Chris WILSON, Plaintiff–Appellant,

v.The DEPARTMENT OF FINANCIAL AND PROFESSIONAL REGULATION, Division of Banking of Department of Financial and Professional Regulation, and Manuel Flores, Director of the Division of Banking of the Illinois Department of Financial and Professional Regulation, Defendants–Appellees.

Docket No. 1–12–1509.

Appellate Court of Illinois,

First District, Fifth Division.

May 24, 2013.

William C. Coughlin, of Law Offices of William C. Coughlin, P.C., of Worth, for appellant.

Lisa Madigan, Attorney General, of Chicago (Michael A. Scodro, Solicitor General, and Clifford W. Berlow, Assistant Attorney General, of counsel), for appellees.

OPINION

Presiding Justice McBRIDE delivered the judgment of the court, with opinion.

[372 Ill.Dec. 291]¶ 1 The issue in this appeal is whether a residential mortgage loan originator who was disciplined by the State of Illinois in 2007 for federal tax fraud convictions and then relicensed at the State's discretion in 2007, 2008, and 2009 became permanently disqualified from relicensing by a 2009 amendment to the Residential Mortgage License Act of 1987 (205 ILCS 635/7–3 (West 2010)) (Mortgage License Act) which indicates licenses “shall not” be issued to anyone convicted at any time of a felony involving fraud or dishonesty. Petitioner Christopher Mark Wilson contends the denial of his 2010 license renewal application by respondent Illinois Department of Financial and Professional Regulation (Department) due to his federal tax fraud convictions violates his state and federal constitutional rights because the 2009 law is being applied retroactively; is an ex post facto law; and has taken a property interest without just compensation. He also contends he is being punished a second time for the same conduct in violation of the doctrine of res judicata.

¶ 2 The relevant facts are straightforward and undisputed. Wilson, a resident of Lombard, Illinois, was first issued a residential mortgage loan originator license by the State of Illinois in 2005. The Mortgage License Act defines a “loan originator” as “any natural person who, for compensation or in the expectation of compensation, either directly or indirectly makes, offers to make, solicits, places, or negotiates a residential mortgage loan” and further specifies that no person “shall engage in the business of * * * originating * * * residential mortgage loans without first obtaining a license.” 205 ILCS 635/1–4(hh) (West 2010) (statute defining terms used in Mortgage License Act); 205 ILCS 635/1–3(a) (West 2010) (statute stating scope of Mortgage License Act and necessity of license). Wilson renewed the license without incident for the year 2006—the same year in which he entered a guilty plea in the United States District Court for the Northern District of Illinois and was convicted of the federal felony crimes of tax fraud in 2001 and impeding the Internal Revenue Service. See26 U.S.C. § 7206(1) (2000) (statute regarding fraud and false statements); 26 U.S.C. § 7212(a) (2000) (statute regarding obstruction of administration of internal revenue laws). Wilson was ordered to pay restitution for taxes owed and a $1,500 fine and put on two years' probation. He indicates the tax arrearage was $43,000, but the addition of interest and penalties increased his debt to $107,000. He also indicates he fully complied with the sentence.

¶ 3 Wilson disclosed the federal convictions when he applied for license renewal in 2007. He and the Department then agreed to disciplinary consequences that were documented in a consent order. The consent order indicates the convictions were potential grounds for denying renewal, but Wilson's annual license would be renewed and then immediately suspended for 30 days and he would be subject to probation for 2 years. See 205 ILCS 635/7–1 (West 2006) (statute indicating loan originators must be registered and authorizing the creation of rules and regulations prescribing relevant qualifications, fees, examinations, education, supervision, enforcement, and other criteria); 38 Ill. Adm. Code 1050.2110(a)(6) (2005) (administrative rule indicating applicants must disclose any criminal conviction or adverse civil judgment involving monies, breach of trust, moral turpitude, or misfeasance or malfeasance). Wilson complied with the terms of probation and his license was renewed for the years 2008 and 2009.

¶ 4 Around this same time, however, federal and state laws were enacted to combat extensive fraud and predatory lending practices in the subprime residential mortgage market. A new federal law known as the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 or “SAFE Act” imposed background and education standards and required fingerprinting and issuance of unique, lifetime identifiers to prevent unscrupulous mortgage loan originators from simply moving from jurisdiction to jurisdiction. 12 U.S.C. §§ 5101–5116 (Supp. III 2010); Bryce Gray, The Secure and Fair Enforcement for Mortgage Licensing Act of 2008, 31 Rev. Banking & Fin. L. 51 (2011). Among the SAFE Act's “minimum standards for licensing and registration” for mortgage loan originators was that:

“[t]he applicant has not been convicted of, or pled guilty or nolo contendre to, a felony in a domestic, foreign, or military court:

(A) during the 7–year period preceding the date of the application for licensing and registration; or

(B) at any time preceding such date of application, if such felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering.” 12 U.S.C. § 5104(b) (Supp. III 2010).

Consistent with the SAFE Act, Illinois law was amended effective July 31, 2009, to preclude the Department from issuing a mortgage loan originator license unless:

“[t]he applicant has not been convicted of, or pled guilty or nolo contendre to, a felony in a domestic, foreign, or military court:

(A) during the 7–year period preceding the date of the application for licensing and registration; or

(B) at any time preceding such date of application, if such felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering[.]” Pub. Act 96–112 § 5 (eff. July 31, 2009) (adding 205 ILCS 635/ 7–3(2)).

¶ 5 On June 18, 2010, the Department notified Wilson by mail of its determination that the new law rendered him ineligible for licensing and that the Department would no longer renew his annual registration. In the Department's opinion, both aspects of the statute were implicated in that Wilson's 2006 felony convictions were less than seven years old and they involved fraud or dishonesty. Accordingly, when Wilson applied for renewal in 2010, the Department denied his application. He appealed the decision to an administrative law judge who conducted a one-day hearing in 2011. At the hearing, Wilson argued that he otherwise met all requirements for license renewal and that the Department's decision violated various constitutional rights. The hearing officer noted but declined to rule on Wilson's constitutional arguments, because the officer considered arguments of that nature to be reserved for the courts. The hearing officer observed that the facts were not in dispute and that “[t]he gist of the disagreement between the parties is their different views concerning the effect of a recent change in the law.” The officer concluded the Department had proven that the Mortgage License Act required nonrenewal of Wilson's registration. The officer forwarded his recommendation to the Director of the Division of Banking, who entered a final order directing the Department to adhere to its decision of non-renewal.

¶ 6 Wilson filed a three-count complaint in the circuit court of Cook County, seeking administrative review based on his constitutional claims, a declaratory judgment based on his constitutional claims, and an injunction and damage award based on section 1983 of the federal Civil Rights Act. 42 U.S.C. § 1983 (Supp. I 2008) (statute providing for award of damages, as opposed to typical award of specific performance, to those whose constitutional rights have been violated by someone acting under state authority). After briefing and oral arguments, the court denied Wilson's administrative review arguments and “in light of the court's ruling,” dismissed his other claims.

¶ 7 We are reviewing the decision of the agency rather than the decision of the circuit court ( Zander v. Adams, 399 Ill.App.3d 290, 293, 340 Ill.Dec. 493, 928 N.E.2d 492, 495 (2010); White v. Department of Employment Security, 376 Ill.App.3d 668, 671, 314 Ill.Dec. 867, 875 N.E.2d 1154, 1157 (2007)), and we will apply the de novo standard to Wilson's arguments ( Jackson v. City of Chicago, 2012 IL App (1st) 111044, ¶ 20, 363 Ill.Dec. 351, 975 N.E.2d 153 (constitutionality of statute addressed de novo )); Currie v. Wisconsin Central, Ltd., 2011 IL App (1st) 103095, 356 Ill.Dec. 200, 961 N.E.2d 296 (relevance of res judicata addressed de novo ); Zander, 399 Ill.App.3d at 293, 340 Ill.Dec. 493, 928 N.E.2d at 495 (questions of law are subject to de novo review).

¶ 8 On appeal, Wilson argues that the felony-conviction provision does not apply to him and is constitutionally infirm. More specifically, he first contends the law speaks only to the “issuance” of a new mortgage originator license and not to a “renewal,” and thus the fact that he held a license prior to the 2009 legislation prevents the Department from denying his request for renewal. He emphasizes the subtitle of the statute, “ Issuance of license,” and its first sentence, “The Director shall not issue a mortgage loan originator license unless the Director makes [certain findings about the applicant, such as the lack of a felony conviction involving fraud or dishonesty].” (Emphases added.) 205 ILCS 635/7–3 (West 2010). Wilson contends these are indications that the law is applicable only to first-time licenses and not their...