Bethesda Management Services, Inc. v. Department of Licensing & Regulation

Levine, J., delivered the opinion of the Court. This appeal stems from an order issued by the Maryland Commissioner of Labor and Industry (the commissioner) revoking appellants’ licenses to operate as employment agencies. On appeal to the Circuit Court for Montgomery County (Mathias, J.), the order was affirmed. A further appeal was lodged in the Court of Special Appeals, but we granted a writ of certiorari prior to a decision by that court. ⁶²¹ The events leading to this appeal originated in November 1973 with the visit of David R. Santucci (Santucci) to appellants’ Bethesda office where he was interviewed for prospective employment.

The visit resulted in Santucci’s employment as a manager-trainee by a company to which he was referred by appellants. On the occasion of his interview at the employment agency by an “employment counsellor,” Santucci had been informed that the placement fee would be $665. When Santucci indicated that he lacked the necessary funds, the counsellor suggested that Santucci arrange for a loan from Maryland National Bank (Maryland National), an institution with which appellants had established a working relationship for just such purposes. Indeed, the counsellor furnished Santucci with a loan application form, a truth-in-lending statement and the form for a promissory note.

On November 28, 1973, Santucci executed the loan papers, including the note by which he promised to pay Maryland National the sum of $688.68 in six monthly payments of $114.78 commencing one month thereafter. Subsequently, appellants, in accordance with the discount plan which they had arranged with Maryland National, endorsed the note with recourse. 1 Santucci was advised that a payment book would be forwarded to him and that the check for the loan proceeds would be sent directly to the employment agency. On February 11, 1974, Maryland National drew a check, earmarked in part for the Santucci loan, and delivered it to the employment agency which deposited it on the following day. Also in February, at a date not specified in the record, the employment counsellor advised Santucci by telephone that he should apply for a loan with his own bank because appellants had not received a check from Maryland National.

Accordingly, Santucci went to his bank on February 18 and, aided by his parents’ credit, borrowed the ⁶²² necessary sum. Using the proceeds of that second loan, Santucci drew a personal check which he delivered to the employment agency on the 19th. At that time, the counsellor instructed him that if Maryland National should thereafter approve the first loan and send a payment book to Santucci, he was to forward it to the employment agency which would return it to Maryland National together with any check which the bank might have issued in payment of the loan. Approximately two weeks later, Santucci did receive a payment book from Maryland National which he sent to the employment agency.

In the ensuing months, Santucci received a succession of delinquency notices from Maryland National, which he forwarded to the employment counsellor with whom he had dealt at appellants’ Bethesda office. It developed that appellants had retained in their own bank account the funds received from Maryland National on Santucci’s behalf, allegedly pursuant to an understanding with an officer of the bank whereby Santucci’s account would be transferred to and assumed by appellants. Santucci was never informed of this arrangement, however, and Maryland National apparently failed to effect the necessary changes in its records. Ultimately, in October 1974, appellants made the final payment to Maryland National on the Santucci loan, but, in being late with two of the six payments, precipitated Santucci’s complaint on September 18,1974, to the Maryland Department of Licensing and Regulation, Division of Labor and Industry (the department).

Three months later, appellants received a letter from the department which stated that a hearing would be held 20 days thereafter, pursuant to Maryland Code (1957, 1972 Repl. Vol.) Art. 56, §§ 161-170 (“Fee-Charging Employment Agencies”), on the written complaint of Santucci, which recited the above facts in skeletal form. 2 Appellants were advised to “show cause” at the proposed hearing “why any or all of [the three] employment agency licenses [which they ⁶²³ held] should not be revoked or suspended . .. for violation of the [aforesaid] provisions of Article 56, ... more particularly section 167 (j)” which, in pertinent part, provides that no employment agency doing business in this State shall “[e]ngage in any ... conduct, whether of the same or a different nature than specified in this section, which constitutes fraud or dishonest dealing.” (emphasis added). Simultaneously, the commissioner, professing to act in accordance with the previously mentioned statutory provisions, appointed a “hearing officer” with instructions to conduct the hearing “in conformity with the appropriate provisions of Article 41, Sections 244-256, Annotated Code of Maryland, as amended, titled ‘Administrative Procedure Act.’ ” When the hearing convened on the scheduled date, counsel for appellants requested at the outset a continuance to produce witnesses, primarily representatives of Maryland National, who were then unavailable, and also complained that the commissioner’s lack of subpoena power would result in the denial of a fair hearing, since the bank officials were unwilling to appear voluntarily. The hearing officer denied the requested continuance.

Counsel for appellants also challenged the proceeding for lack of any specific charges against them, arguing that the complaint filed by Santucci could be construed as alleging more than one violation, to which the hearing officer responded: “Well, the charge is the complaint.” Following presentation of the department’s case, which proceeded along the lines indicated by our summary, appellants defended their conduct on the basis of the understanding reached with Maryland National. Their principal witness testified that appellants assumed direct payment of the note installments, rather than return the net proceeds of the loan, because Maryland National had already deducted the “penalty,” and “was willing to go along” with the transfer of responsibility. The confusion over late payments, he contended, resulted from “computer” errors on the bank’s part. At the conclusion of the hearing, the record was left open to afford appellants an opportunity to produce evidence ⁶²⁴ from Maryland National corroborating the agreement which they claimed to have made with it following approval of the Santucci loan.

Once again the bank officials refused to appear voluntarily, but directed a letter to appellants’ lawyer which contributed little of consequence except for its acknowledgment that “a past due notice” had been inadvertently sent to Santucci, and that the latter’s “credit rating [had] not been impaired” by reason of the bank’s error. Counsel forwarded the letter to the hearing officer who then prepared a narrative summary of the facts presented to him. This summary, in the form of a report, was submitted to the commissioner, but neither appellants nor their attorney was furnished a copy. Following receipt of the hearing officer’s report, the commissioner issued “Findings of Fact [and] Conclusions of Law.” The findings consisted essentially of the facts reported by the hearing officer and were the basis for the commissioner’s determination, without further specification, that the agency had violated § 167 (j).

As a consequence of this decision, the commissioner ordered that the three licenses held by appellants at their respective locations in Montgomery County be revoked. In affirming, the circuit court limited its ruling to the question whether the commissioner’s order was “supported by substantial evidence” and did not pass upon the remaining myriad questions presented there by appellants. In this Court, appellants advance several grounds for reversal: 1. That the commissioner, not having “heard the evidence,” failed to comply with Code (1957, 1971 Eepl.

Vol.) Art. 41, § 253, in rendering a final decision prior to service upon appellants of proposed findings of fact and conclusions of law, and without affording them an opportunity to present argument to the commissioner. 2. That the notice of the administrative hearing failed to comply with § 251 of Art. 41 because it did not state the “issues involved.” 3. That the commissioner lacked the statutory authority to appoint a hearing officer. ⁶²⁵ 4. That the hearing officer erred in denying the requested continuance. 5.

That the lack of power in the hearing officer to compel testimony resulted in a denial of due process of law. 3 6. That § 167 (j) is constitutionally infirm for lack of definite standards. 7. That § 169 (a) of Art. 56, the penalty provision, is also constitutionally defective because it is lacking in adequate standards for imposing the penalty of revocation. In the unique posture of this case, we need only reach the first contention, but prior to doing so, we shall consider a threshold question presented by appellee.

The department contends that this case is moot, and that therefore the appeal should be