IN THE COMMONWEALTH COURT OF PENNSYLVANIA Ernie F. Markel, : Petitioner : : v. : No. 1800 C.D. 2013 : Submitted: March 7, 2014 Bureau of Professional and : Occupational Affairs, State Board : of Vehicle Manufacturers, Dealers : and Salespersons, : Respondent : BEFORE: HONORABLE DAN PELLEGRINI, President Judge HONORABLE MARY HANNAH LEAVITT, Judge HONORABLE JAMES GARDNER COLINS, Senior Judge OPINION NOT REPORTED MEMORANDUM OPINION BY JUDGE LEAVITT FILED: May 8, 2014 Ernie F. Markel petitions for this Court s review of an adjudication and order of the Bureau of Professional and Occupational Affairs, State Board of Vehicle Manufacturers, Dealers and Salespersons (Board), which revoked Markel s vehicle salesperson s license and levied a civil penalty of $4,000 against him. The Board accepted the hearing examiner s recommended civil penalty, but it rejected the hearing examiner s recommendation that Markel s license not be suspended or revoked. Markel has held a license to do vehicle sales since 1990. He and his wife own and operate a used car dealership in Harrisburg. On December 7, 2009, Markel pled guilty to one misdemeanor count of defrauding secured creditors in
violation of Section 4110 of the Crimes Code, 18 Pa. C.S. 4110. 1 The Dauphin County Court of Common Pleas sentenced Markel to 12 months of probation and ordered him to pay a fine of $500 plus costs and fees. On March 8, 2012, the Board issued a rule to show cause why Markel s license should not be revoked or suspended. Count One asserted that Markel s license was subject to revocation or suspension under Section 19(4) of the Board of Vehicles Act, 63 P.S. 818.19(4), 2 because he pled guilty to a crime involving moral turpitude. Reproduced Record at 4a (R.R. ). Count Two asserted that Markel s license was subject to suspension or revocation under Section 9124(c)(2) of the Criminal History Record Information Act (CHRIA), 18 Pa. C.S. 9124(c)(2), because he had been convicted of a misdemeanor related to 1 It states: A person commits a misdemeanor of the second degree if he destroys, removes, conceals, encumbers, transfers or otherwise deals with property subject to a security interest or after levy has been made thereon with intent to hinder enforcement of such interest. 18 Pa. C.S. 4110. 2 Act of December 22, 1983, P.L. 306, as amended, 63 P.S. 818.19(4). It states, in relevant part: In addition to any criminal or civil penalties otherwise provided in this act, the board shall have the power to revoke any license if after due notice of and hearing, the person charged is found guilty of committing any of the following acts: * * * (4) Being a vehicle dealer or salesperson, while his current license is in force pleaded guilty in a court of competent jurisdiction in this or any other state or Federal jurisdiction of forgery, embezzlement, obtaining money under false pretenses, extortion, conspiracy to defraud, bribery, odometer tampering or any other crime involving moral turpitude. 63 P.S. 818.19(4) (emphasis added). There is no dispute that defrauding a secured creditor is a crime involving moral turpitude for purposes of this section. 2
the practice of [his] profession. R.R. 4a. 3 The Board appointed the matter to a hearing examiner to conduct a hearing and issue a proposed adjudication and order. At the hearing, Markel testified that sometime prior to July 2008 he and his wife became social friends with Andrew Perry and a Mr. Rollo, who both live in New York. Rollo became interested in the Markels car business and offered them a $10,000 loan, which the Markels accepted and paid back with interest at a rate Markel believed was a little bit high. Notes of Testimony, January 25, 2013, at 10 (N.T. ). Rollo loaned the Markels an additional $20,000, which the Markels also paid back with interest. Finally, Rollo loaned the Markels $50,000, which the Markels orally agreed to pay back in monthly installments of $2,500 plus $1,500 interest. The Markels made several payments but when their business slowed, they became unable to continue the monthly installments. Markel tried to change the terms of repayment with Rollo, but he refused. The Markels stopped making payments on the loan. The proceeds of the loans from Rollo were used to purchase inventory in 2008. On July 15, 2008, Rollo obtained a judgment in the amount of $46,080 against the Markels and their business. Soon thereafter the sheriff visited Markel s business, at a time when there were approximately 20 cars in inventory. 3 Section 9124(c)(2) of CHRIA states: Boards, commissions or departments of the Commonwealth authorized to license, certify, register or permit the practice of trades, occupations or professions may refuse to grant or renew, or may suspend or revoke any license, certificate, registration or permit for the following causes: 18 Pa. C.S. 9124(c)(2). * * * (2) Where the applicant has been convicted of a misdemeanor which relates to the trade, occupation or profession for which the license, certificate, registration or permit is sought. 3
The sheriff informed Markel that he was placing a levy on all of the vehicles and that they could not be sold. Markel testified that at the time of the sheriff s visit he had a revolving line of credit from Dealer Services Corporation (DSC), which he used to purchase cars. Under that line of credit, DSC had liens on the cars on the lot. After conferring with his attorney, Markel proceeded with business as usual and sold all of the cars that the sheriff had levied. Markel testified that notwithstanding the sheriff s announced levy, all of the customers received clear title to the vehicles they purchased from him. A few months later, the sheriff returned to seize the vehicles and discovered they had all been sold. Markel was charged with one count of defrauding secured creditors, a second degree misdemeanor, in violation of Section 4110 of the Crimes Code, 18 Pa. C.S. 4110. As noted above, he pled guilty to that charge on December 7, 2009, and was sentenced to 12 months of probation and to pay a fine of $500. Markel successfully completed his probation, paid the fine and paid back all monies owed to Perry and Rollo, with interest. At the conclusion of his testimony about the transactions with Perry and Rollo that led to his guilty plea, Markel testified as follows: So once again, I mean, everything s paid back. I mean, I learned a valuable lesson. I shouldn t have kept taking loans, because I found out later he was a loan shark, per se. Of course that s neither here nor there, but I learned a valuable lesson. I m deeply sorry that our friendship went south because they were very nice people. We had great times together. Something I will never, ever do again. So I mean, I did learn a valuable lesson by it. I don t think any harm was really done, because I mean, I did pay the man back in a timely fashion, at six percent interest, which was reasonable. And once again, I mean, I m sorry for what happened. 4
N.T. 13-14. Markel also testified that he no longer purchases cars for his inventory on credit. Neither Perry nor Rollo appeared at the hearing. Nor did the sheriff. The Commonwealth presented no witnesses to contradict Markel s recital of facts underlying his conviction, his expressions of remorse or his new way of doing business, i.e., purchasing inventory with cash. When the evidentiary portion of the hearing was completed, the Commonwealth s attorney informed the hearing examiner that the parties had stipulated to the appropriate sanction for Markel s violations. First, they agreed to a civil penalty of $4,000. Second, they agreed that Markel s license should not be suspended or revoked because this was Markel s first and only violation of the licensing statute in 20 years of doing business. In effect, the parties agreed to a consent order. The only purpose of the hearing was to allow Markel to present evidence to support the parties agreement on the sanction. The hearing examiner held that Markel s guilty plea proved that he had violated Section 19(4) of the Board of Vehicles Act, 63 P.S. 818.19(4), and Section 9124(c)(2) of CHRIA, 18 Pa. C.S. 9124(c)(2). This legal conclusion was never in doubt. Markel s hand-written answer to the order to show cause did not challenge the legal grounds cited in the order. The hearing examiner accepted the sanction for these violations that had been agreed to by the Commonwealth and Markel. The hearing examiner identified several mitigating factors that supported the discipline agreed upon by the parties. Citing the very personal nature of the circumstances, the hearing examiner observed that Markel exercised poor judgment in entering into an informal loan agreement with friends, who 5
were actually charging him a usurious rate of interest. R.R. 52a. The hearing examiner also found Markel s testimony credible and heartfelt on the point that he had learned a valuable lesson; the hearing examiner concluded that Markel was not likely to repeat this misconduct. Id. She noted that Markel successfully completed his light criminal sentence and had fully repaid the loans with interest. Finding no aggravating factors, the hearing examiner concluded that the mitigating factors made a suspension or revocation of Markel s license excessive and inappropriate. Rather, she concluded that a civil penalty of $4,000, which was substantially larger than his $500 criminal fine, was an appropriate sanction for Markel s violation of the licensing statute. Neither party filed exceptions with the Board. On February 13, 2013, the Board issued a notice of intent to review the proposed report and established a briefing schedule. Neither party filed a brief. Following its deliberations at a regularly scheduled meeting, the Board issued a final adjudication and order on September 6, 2013. The Board adopted the hearing examiner s findings of fact, with the exception of factual finding 31 ( [Markel] learned a valuable lesson and will never do anything like this again. ). R.R. 46a. The Board also adopted the hearing examiner s legal conclusions. However, in fixing upon the appropriate sanction, the Board rejected the mitigating factors identified by the hearing examiner. The Board concluded that anyone who readily ignore[s] the directions of the sheriff s office presents a potential danger to the public. Board Adjudication at 4; R.R. 60a. The Board further found that Markel had not taken full responsibility for his actions, citing, inter alia, his testimony that no harm was really done. Id. The Board revoked his license and imposed a civil penalty of $4,000. 6
On appeal, 4 Markel argues that the Board deprived him of due process by rejecting the sincerity of his expressions of remorse without having actually observed his testimony or taken additional evidence. Markel argues, alternatively, that the Board abused its discretion in revoking his license. In his first issue, Markel challenges two aspects of the Board s administrative process in this case. First, he argues that even though a licensing board may make credibility determinations based solely on a transcript, the Board in this case erred by capriciously disregarding his uncontested testimony. support, Markel cites Treon v. Unemployment Compensation Board of Review, 453 A.2d 960 (Pa. 1982), and Karwowski v. Unemployment Compensation Board of Review, 74 A.3d 1179 (Pa. Cmwlth. 2013). In Treon, the claimant was the only witness to testify before an unemployment compensation referee. The Unemployment Compensation Board of Review took no additional evidence and, on review, rejected the referee s factual finding that the claimant had expressed concerns about his commuting distance and job-related expenses. In doing so, the Board did not assert that the referee s finding was either incredible or unsupported by evidence. On appeal, our Supreme Court held: The Board certainly had the right to disbelieve [claimant s] testimony, even though that testimony was uncontradicted. Nevertheless, the Board did not have the right to arbitrarily and capriciously disregard the findings of the referee after the referee had listened to the testimony of the only witness and In 4 We must affirm the Board s decision unless there has been a violation of the petitioner s constitutional rights, an error of law was committed, or necessary findings of fact are unsupported by substantial evidence. Section 704 of the Administrative Agency Law, 2 Pa. C.S. 704; Sentra, Inc. v. Pennsylvania State Board of Vehicle Manufacturers, Dealers and Salespersons, 720 A.2d 857, 859 n.1 (Pa. Cmwlth. 1998). 7
observed his demeanor, and had made findings of fact based upon that uncontradicted testimony. If particular findings are inconsistent, incredible or unsupported by the evidence, then the Board must so indicate. The Board may not, however, simply disregard findings made by the referee which are based upon consistent and uncontradicted testimony without stating its reasons for doing so. Treon, 453 A.2d at 962 (citations omitted) (emphasis added). Similarly, in Karwowski, the claimant was the only witness; the employer presented no evidence and conducted no cross-examination. The Board rejected certain findings the referee made based upon the claimant s uncontradicted testimony. This Court reversed, holding that [i]f the [Board] did not credit or believe Claimant s testimony, it needed to provide an explanation for disregarding the testimony to avoid abusing its discretion under the capricious disregard standard. Karwowski, 74 A.3d at 1183. In the case sub judice, Markel was the only witness to testify at the hearing. Neither the sheriff nor Rollo challenged Markel s sworn testimony that he had learned a valuable lesson and would not repeat his mistakes. The hearing examiner, who observed Markel s demeanor, found him credible and heartfelt. The Board rejected the hearing examiner s credibility determination. The Board explained that Markel undermined his statement of remorse by testifying that I don t think any harm was really done. N.T. 14. Notably, the Board did not consider the rest of that sentence where Markel explains because I mean, I did pay the man back in a timely fashion, at six percent interest. Id. In actuality, Markel s statement explains, simply, that the harm to Rollo was temporary because he had been fully repaid. The Board s explanation for rejecting the hearing examiner s finding that Markel s remorse was sincere is unfounded and not persuasive, but it is an explanation. This distinguishes this case 8
from Treon. Further, this Court may not substitute its discretion for the Board s. Blair v. Bureau of Professional and Occupational Affairs, State Board of Nursing, 72 A.3d 742, 750 (Pa. Cmwlth. 2013). Markel also argues that the Board commingled its prosecutorial and adjudicative functions, in violation of our Supreme Court s seminal decision in Lyness v. State Board of Medicine, 605 A.2d 1204 (Pa. 1992). Markel points out that he reached an agreement with the prosecuting attorney regarding a sanction, which the hearing examiner accepted when she issued her recommendation. Then, when the Board sua sponte decided to review the hearing examiner s proposed report, it act[ed] in a prosecutorial capacity by wrest[ing] the decision from the hearing examiner and impos[ing] its own idea of justice. Petitioner s Brief at 15. Markel asserts that this procedure is analogous to the procedure this Court rejected in Sentra, Inc. v. Pennsylvania State Board of Vehicle Manufacturers, Dealers and Salespersons, 720 A.2d 857 (Pa. Cmwlth. 1998). To begin, the procedure the Board followed is expressly permitted under the General Rules of Administrative Practice and Procedure (GRAPP). In defining what constitutes a final order, Section 35.226(a) of GRAPP provides, in relevant part: (a) Adjudications of an agency head shall be final orders, subject only to application for rehearing, if any, provided for by the statute under which the proceeding is initiated and conducted, except proposed regulations that may be issued in rulemaking. Final orders shall include: * * * (2) Adjudications by the agency head upon appeal of proposed reports by participants, by filing exceptions in the manner and time provided by 35.211 (relating to procedure to except to 9
proposed report), or upon review initiated by the agency head within 10 days next following the expiration of the time for filing exceptions under the section, or another time as the agency head may fix in specific cases. 1 Pa. Code 35.226(a) (emphasis added). There being no dispute that the Board complied with the ten-day deadline, its decision to review the hearing examiner s report was entirely proper. Markel mischaracterizes the Board s review as a prosecutorial function. It was the final step in the adjudicatory process. burden. Moreover, Markel offered no evidence of commingling, as was his See Foose v. State Board of Vehicle Manufacturers, Dealers and Salespersons, 578 A.2d 1355, 1359 (Pa. Cmwlth. 1990) (in case involving alleged commingling of prosecutorial and adjudicatory functions, a party claiming due process violations must show actual bias. ). Here, Wade Fluck, Esq., was the prosecuting attorney who issued the order to show cause and represented the Commonwealth at the hearing. Markel does not allege that Fluck played any role in the Board s decisions to review the hearing examiner s proposed report and impose the harsher sanction of license revocation. Compare Lyness, 605 A.2d 1204 (licensee s due process rights violated where licensing board members who initiated prosecution also acted as fact finders in determining whether a violation had occurred). We reject Markel s argument that the Board s procedure in this case is analogous to that rejected by this Court in Sentra, Inc., 720 A.2d 857. In that case, the licensee and the Commonwealth s prosecuting attorney entered into a consent agreement recommending a fine and conditional probation, subject to the Board s approval. The agreement also stipulated that the Board would be able to adjudicate the matter even if it disallowed the consent agreement. The Board did reject the 10
agreement and communicated its view to the prosecuting attorney that the facts set forth in the agreement supported revocation. The Board then held a hearing and revoked licensee s license. Because licensee s admission of certain facts during negotiation of the consent agreement may have improperly influenced the Board as fact finder, this Court vacated the Board s order and remanded for appointment of a neutral hearing examiner and a formal hearing. In the case at bar, the Commonwealth and Markel agreed on an appropriate sanction, which was the equivalent of a consent agreement. However, the Board did not in any way participate in the stipulation regarding the sanction. 5 Simply, there is no evidence of improper communications between the Board and the prosecuting attorney as there was in Sentra, Inc. In his second issue, Markel argues that even if the Board s manner of proceeding in this case was proper, it abused its discretion in revoking his license because this harsh penalty cannot be squared with the evidence of record. Markel contends that the Board should have considered that this was his first license violation, and that he completed his criminal sentence and repaid his judgment creditors. Our Supreme Court has cautioned that the proper review of [an] agency s action, assuming that it is not defective under the self-explanatory requirements of the Administrative Agency Law, [6] is not whether its order was 5 The Board deliberated at its regularly scheduled meeting on April 2, 2013, nearly two months after the hearing examiner issued her proposed report, and seven weeks after the Board issued its notice of intent to review. 6 Section 704 of the Administrative Agency Law requires a reviewing court to affirm an agency adjudication unless it shall find that the adjudication is in violation of the constitutional rights of the appellant, or is not in accordance with law, or that the provisions of Subchapter A of Chapter 5 (relating to practice and procedure of Commonwealth agencies) have been violated in the (Footnote continued on the next page...) 11
reasonable, but whether it was made in accordance with law (i.e., whether it was made in bad faith, and whether it was fraudulent or capricious). Slawek v. State Board of Medical Education and Licensure, 586 A.2d 362, 365 (Pa. 1991) (emphasis original, footnote omitted). A reviewing court may interfere in an agency decision only when there has been a manifest and flagrant abuse of discretion or a purely arbitrary execution of the agency s duties or functions. Id. (quoting Blumenschein v. Housing Authority of the City of Pittsburgh, 109 A.2d 331, 335 (Pa. 1954)) (footnote omitted). Here, because Markel does not allege that the Board acted fraudulently or in bad faith, our inquiry focuses on whether the Board s action was capricious or a flagrant abuse of discretion. conclude that it was. We cannot The Board explained in its adjudication why it imposed a harsher sanction than that recommended by the hearing examiner. The Board focused on Markel s conscious decision to ignore the sheriff s directive not to sell levied inventory, which led to his guilty plea. This conviction directly related to the vehicle sales profession, which relies on the availability of credit to facilitate the wholesale trade of new and used cars. As the licensing agency, the Board has decided to establish an enforcement policy of zero tolerance for such a crime. The Board found that Markel s compliance with the terms of his court-ordered probation and restitution was irrelevant because, in the Board s view, that did not outweigh the seriousness of his offense. (continued...) proceedings before the agency, or that any finding of fact made by the agency and necessary to support its adjudication is not supported by substantial evidence. 2 Pa. C.S. 704. 12
As noted, the Board appears to have mischaracterized the import of Markel s statement that no harm was done by leaving out the rest of his sentence wherein Markel explained that the harm was over because the creditor had been fully repaid with interest. However, the Board cited other portions of Markel s testimony to support its finding that he was not truly remorseful and had not learned his lesson. For example, when explaining his decision to enter into the loan agreements, Markel testified that he was kind of getting baited at that time. N.T. 10. At another point, he suggested that Rollo was not actually a secured creditor. The Board found Markel s reference to the misconduct of his lender to undermine his claim of remorse. We may disagree, but we cannot say the Board exercised its discretion arbitrarily in finding, as fact, that Markel was not sufficiently remorseful. The Board considered the mitigating factors identified by the hearing examiner and explained why it rejected them. The Board s decision to give no weight to Markel s mitigating evidence was a discretionary decision, solely within its province as fact finder. Storch v. State Board of Vehicle Manufacturers, Dealers and Salespersons, 572 A.2d 819, 822 (Pa. Cmwlth. 1990). This Court may not substitute its judgment for that of the Board in this case. of the Board. For all of the foregoing reasons, we are constrained to affirm the order President Judge Pellegrini concurs in result only. MARY HANNAH LEAVITT, Judge 13
IN THE COMMONWEALTH COURT OF PENNSYLVANIA Ernie F. Markel, : Petitioner : : v. : No. 1800 C.D. 2013 : Bureau of Professional and : Occupational Affairs, State Board : of Vehicle Manufacturers, Dealers : and Salespersons, : Respondent : O R D E R AND NOW, this 8 th day of May, 2014, the adjudication and order of the Bureau of Professional and Occupational Affairs, State Board of Vehicle Manufacturers, Dealers and Salespersons in the above-captioned matter, dated September 6, 2013, is AFFIRMED. MARY HANNAH LEAVITT, Judge