Unreasonable delay in filing of administrative charges or commencement of hearing
Say you committed a crime twenty years ago (ex. theft, DUI, shoplifting, drunk in public, robbery, larceny, forgery, etc.) and 10 years after that you earned a real estate license (disclosing and explaining your prior convictions and showing that they were not substantially related to the duties, functions or qualification of the real estate profession). Then, 5 years ago you applied for your MLO (mortgage lending license) through the NMLS. You again disclosed your prior convictions in detail, but this time the Department of Business Oversight wants to conduct an administrative hearing based on your prior crimes and other issues recently learned regarding "financial responsibility" (ex. a recently filed chapter 7 or 13 bankruptcy). Can they deny your MLO licensing rights based on these prior crimes and recent BK? This blog explores this complex legal issue.
Unreasonable delay in filing suit
A court has the power to dismiss a case that is not diligently prosecuted. In Gates v. Dep't of Motor Vehicles, 94 Cal. App. 3d 921, 925-26, 156 Cal. Rptr. 791, 794 (Ct. App. 1979) the Court noted:
"We conclude, therefore, that the trial court has the inherent power to dismiss administrative proceedings brought to revoke a state issued license where there has been an unreasonable delay between the discovery of the facts constituting the reason for the revocation and the commencement of revocation proceedings, and where the licensee has been prejudiced by the delay. The trial court's determination here should be reversed only upon a showing of manifest abuse of discretion resulting in a miscarriage of justice. In none of the State Bar cases cited above was the attorney able to establish prejudice. In contrast, here the trial court made express findings that there was no reasonable explanation for the delay, and that respondent was prevented from getting a fair hearing as a result of that delay. The court found that as a result of the total delay, the memories of witnesses had diminished to a point where respondent could not engage in effective cross-examination. As we conclude that the trial court was justified in considering both the pre- and post-accusation periods, we find no abuse of discretion in the court's determination."
As this indicates, the licensee will need to be able to establish both: (a) unreasonable delay in the brining the action or commencing the hearing and (2) prejudice to the licensee (diminished witness memory appears to be one ground that can be asserted). But when does the time period for the first prong "unreasonable delay" begin? In Gore v. Bd. of Med. Quality Assurance, 110 Cal. App. 3d 184, 193, 167 Cal. Rptr. 881, 885 (Ct. App. 1980) the Court discussed when an administrative hearing can be brought:
"The record does not show when the board received that information or how soon thereafter the accusation was filed. Criticism of board delay in commencing the administrative proceeding should be premised on the time when the board learned or should have learned of the facts on which to base its accusation. (Gates v. Department of Motor Vehicles (1979) 94 Cal.App.3d 921, 925, 156 Cal.Rptr. 791.) The superior court approved settlement of the minors' malpractice suit on April 18, 1975. There is no evidence that the 12 months elapsing between the order approving settlement and commencement of the accusatory proceeding by the board's staff in April 1976 was unreasonable."
In administrative hearings, the burden will be on the licensee to show the delay and resulting prejudice to the case. This is also true when seeking to assert the "laches" defense.
Laches defense in California administrative hearings
The "administrative laches" defense is one often raised, but tough to prevail on. Nevertheless, it may be worth asserting your administrative hearing or accusation case. Here is some California case law on the point. In Miller v. Eisenhower Med. Ctr., 27 Cal. 3d 614, 624, 614 P.2d 258, 264 (1980) the Court noted:
"As we pointed out in Conti v. Board of Civil Service Commissioners (1969) 1 Cal.3d 351, 82 Cal.Rptr. 337, 461 P.2d 617, the affirmative defense of laches requires unreasonable delay in bringing suit “plus either acquiescence in the act about which plaintiff complains or prejudice to the defendant resulting from the delay.” Prejudice is never presumed; rather it must be affirmatively demonstrated by the defendant in order to sustain his burdens of proof and the production of evidence on the issue. Generally speaking, the existence of laches is a question of fact to be determined by the trial court in light of all of the applicable circumstances, and in the absence of manifest injustice or a lack of substantial support in the evidence its determination will be sustained. We have also suggested that in cases seeking review of an administrative decision there may be substantial reasons for supporting a finding of laches for delays “far less than” the period of the applicable statute of limitations."
In another case, the Court defined the legal concept of laches. In Piscioneri v. City of Ontario, 95 Cal. App. 4th 1037, 116 Cal. Rptr. 2d 38 (2002) the Court stated:
Equity § 8--Laches and Stale Demands--Question of Fact.
Generally, the existence of laches is a question of fact to be determined by the trial court in light of all the applicable circumstances, and in the absence of a palpable abuse of discretion, the trial court's finding of laches will not be disturbed on appeal. The defense of laches is derived from the maxim that the law helps the vigilant before those who sleep on their rights, that is, equity frowns upon stale demands and declines to aid those who have slept on their rights. In practice, laches is defined as an unreasonable delay in asserting an equitable right, causing prejudice to an adverse party such as to render the granting of relief inequitable. Thus, if a trial court finds (1) unreasonable delay, and (2) prejudice, and if its findings are not palpable abuses of discretion, a finding of laches will be upheld on appeal."
In looking at our above example, the DBO can properly get away with the filing of the accusation regarding the older crimes, if recently learned of, unless an argument as to the administrative laches defense can be made. In regard to the recent filing of bankruptcy, as all MLO licensees have a burden to prove their financial responsibility, if this was recently discovered this would also probably be a proper grounds to mandate a hearing on the issue, assuming it was timely filed of course. So these are issues that should be examined in your case, but as you can see, the government is given pretty wide latitude to bring these cases and deny licensing rights to MLO loan officers under California Financial Code Sections 50140 and 22100.
22109.1. (a) The commissioner shall deny an application for a mortgage loan originator license unless the commissioner makes, at a minimum, the following findings:
(1) The applicant has never had a mortgage loan originator license revoked in any governmental jurisdiction, except that a subsequent formal vacation of a revocation shall not be deemed a revocation.
(2) (A) The applicant has not been convicted of, or pled guilty or nolo contendere to, a felony in a domestic, foreign, or military court during the seven-year period preceding the date of the application for licensing and registration, or at any time preceding the date of application, if the felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering. Whether a particular crime is classified as a felony shall be determined by the law of the jurisdiction in which an individual is convicted.
(B) For purposes of this paragraph, an expunged or pardoned felony conviction shall not require denial of an application. However, the commissioner may consider the underlying crime, facts, or circumstances of an expunged or pardoned felony conviction when determining the eligibility of an applicant for licensure under this paragraph or paragraph (3).
(3) The applicant has demonstrated such financial responsibility, character, and general fitness as to command the confidence of the community and to warrant a determination that the mortgage loan originator will operate honestly, fairly, and efficiently within the purposes of this division.
(4) The applicant has completed the prelicensing education requirement described in Section 22109.2.
(5) The applicant has passed a written test that meets the test requirement described in Section 22109.3.
(6) The applicant is employed by, and subject to the supervision of, a finance lender or broker that has obtained a license from the commissioner pursuant to this division.(b) Before denying a license under this section, the commissioner shall proceed as prescribed by Chapter 5 (c).
This is a tricky code section, and you should have your case reviewed by an experienced litigation counsel for best results.
Contact Lawyers for California Administrative Hearings
If you are facing an administrative hearing dealing with your broker's license, MLO lending license, escrow, notary, architect, appraiser or surveyor's license contact on of our administrative hearing lawyers. You have legal rights and a right to due process of law. We can help review your alternatives, seek to settle your case, and if not, to represent you in an administrative hearing. We offer low flexible legal fees and tenacious representation. We can be reached at (877) 276-5084. Please leave your phone number.