Wolcotts Financial Services, Inc. v. McReynolds, 01-A-01-9006-CH00230
| Decision Date | 28 December 1990 |
| Docket Number | No. 01-A-01-9006-CH00230,01-A-01-9006-CH00230 |
| Parties | WOLCOTTS FINANCIAL SERVICES, INC., Plaintiff/Appellant, v. Elaine McREYNOLDS, in her official capacity as the Commissioner for the Tennessee Department of Commerce and Insurance, and Terry Dycus, in his official capacity as investigator for the Securities Division of the Department, Defendants/Appellees. 807 S.W.2d 708 |
| Court | Tennessee Court of Appeals |
W. Neil Thomas, III and Phillip E. Fleenor, Shumacker & Thompson, Chattanooga, for plaintiff/appellant.
Charles W. Burson, Atty. Gen. and Reporter and Albert L. Partee, III, Asst. Atty. Gen., Nashville, for defendants/appellees.
This is a suit to enjoin the Commissioner of Commerce and Insurance from enforcing a "cease and desist order" issued by the Commissioner on August 10, 1989, requiring plaintiff and others to cease and desist from engaging in business as an unregistered broker-dealer, or selling unregistered securities.
The "Memorandum and Order" of the Trial Judge states:
This case is before the Court on defendants' motion to dismiss. Plaintiff has asked the Court to enjoin defendant Commissioner and Department from enforcing their Cease and Desist Order against plaintiff. Defendants move to dismiss for lack of subject matter jurisdiction and failure to state a claim upon which relief may be granted.
On August 10, 1989 the Commissioner for the Department of Commerce and Insurance ordered plaintiff to cease and desist from alleged violations of state security laws. Plaintiff answered and filed a demand for hearing with the Securities Division on November 9, 1989. When no hearing date was set within thirty days, plaintiff then asked the Securities Division to dismiss the case.
On February 5, 1990 the Securities Division informed plaintiff that all pleadings should have been filed with the Administrative Procedures Division of the State Department. The Securities Division transferred all documents to the Administrative Procedures Division, and an administrative law judge was assigned to the case.
Plaintiff asserts that by filing its answer and hearing demand with the Securities Division it exhausted all its administrative remedies, and that the case now is properly before this Court as a denial of its due process rights. Defendants reply that plaintiff merely misfiled its pleadings and has not been prejudiced by any delay in receiving a hearing.
Whether plaintiff complied with administrative rules governing the filing of documents in a contested case is a matter of determination for the administrative law judge. Any adjudication of the merits of plaintiff's case by the Court would be premature at this time.
Accordingly, defendants' motion to dismiss is granted. Costs are assessed to plaintiff.
The sole issue presented by appellant is:
1. WHETHER THE TRIAL COURT ERRED IN DISMISSING PLAINTIFF'S COMPLAINT WHICH SOUGHT TO ENJOIN THE STATE FROM MAINTAINING AN EX PARTE CEASE AND DESIST ORDER AGAINST PLAINTIFF'S OPERATIONS WHERE THE STATE REFUSED TO AFFORD PLAINTIFF A HEARING ON THE CHARGES UNDERLYING THAT ORDER.
The failure to state a claim for which relief can be granted is determined from an examination of the complaint alone. Holloway v. Putnam County, Tenn.1976, 534 S.W.2d 292; Cornpropst v. Sloan, Tenn.1975, 528 S.W.2d 188.
The question of jurisdiction may be decided upon facts stated in the complaint and/or upon facts otherwise presented to the Court. As to this question, the facts are supplied, at least in part, by two certified administrative records and an affidavit which present uncontroverted evidence of the nature and status of the administrative proceeding. See Advisory Commission Comments to T.R.C.P. Rule 12.
The gravamen of the complaint is that the Commissioner has issued a cease and desist order against plaintiff accompanied by a notice that, upon demand, a hearing will be held within 30 days after demand or completion of discovery; that no discovery has been initiated and no hearing has been held within 30 days after plaintiffs demand therefor. The complaint does not pray for an administrative hearing, but for a dissolution of the cease and desist order and injunction against its enforcement.
The cease and desist order and attachments are exhibited to the complaint. It appears therefrom that the restraining order was issued by the Commissioner pursuant to Tenn.Code Ann. Sec. 48-2-116 which provides in pertinent part as follows:
48-2-116. Rules, forms, orders, and hearings.-- (a) The commissioner may from time to time make, promulgate, amend, and rescind such rules, forms, and orders as are necessary to carry out the provisions of this part, including rules, forms, and orders governing registration statements, applications, and reports, and defining any terms, whether or not used in this part, insofar as the definitions are not inconsistent with the provisions of this part. For the purpose of rules and forms, the commissioner may classify securities, persons, and matters within his jurisdiction, and prescribe different requirements for different classes.
(b) No rule, form, or order may be made, promulgated, amended, or rescinded unless the commissioner finds that the action is in the public interest, necessary for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of this part. In prescribing rules and forms, the commissioner may cooperate with the securities administrators of other jurisdictions, the Securities and Exchange Commission, or any national securities exchange or national securities association registered under the Securities and Exchange Act, as amended, with a view to effectuating the policy of this part to achieve maximum uniformity in the form and content of registration statements, applications, and reports wherever practicable.
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(2) No order may be entered under this part (except routine orders of effective registration, registration termination by operation of law, or registration abandonment) without:
(A) Notice to the affected parties (which shall be proper notice unless the commissioner determines that prior notice would not be in the public interest and would be detrimental to the protection of investors);
(B) Opportunity for a hearing before the commissioner; and
(C) Written findings of fact and conclusions of law.
It also appears that the cease and desist order was issued upon a complaint supported by affidavit that plaintiff was selling securities in violation of Tenn.Code Ann. Sec. 48-2-104, and that the Commissioner determined that the public interest required that the cease and desist order issue without prior notice to the plaintiff.
The order purported to restrain only unlawful conduct and was accompanied by notice of opportunity for a full hearing, and there is no allegation or evidence that the Commissioner has or is about to seek judicial enforcement of the cease and desist order. For these reasons, this Court is unable to find that the issuance of the cease and desist order by an administrative official without prior notice and hearing was so extreme and confiscatory as to invoke extraordinary judicial powers to vacate it. Accordingly, this Court has determined that the complaint does not state grounds for judicial relief on the basis of the issuance of the cease and desist order without prior notice and hearing.
The other ground of relief stated in the complaint is that plaintiff was not granted the prompt hearing to which it was entitled. The response of the Commissioner is that plaintiff's request for a hearing was sent to the wrong office. To the extent that plaintiffs suit is based upon an allegation that the hearing was arbitrarily and unreasonably delayed, the issue of the proper place of filing the request for hearing is relevant.
The "Complaint and Notice" which was sent to plaintiff on August 10, 1989; was captioned:
V.
Wolcotts Financial Services, Incorporated
The notice stated that:
A hearing on this matter will be held at Suite 680, Volunteer Plaza, 500 James Robertson Parkway, Nashville, Tennessee, 37219, after the parties have completed discovery or within 30 days receipt (sic) of Respondents' request for a hearing, whichever comes last.
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Any such hearing,...
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