SC20560
Conn.Mar 1, 2022Background
- 1st Alliance Lending, LLC held a Connecticut mortgage lender license and was required to maintain a surety bond issued by The Hartford.
- The Hartford notified both 1st Alliance and the Department of Banking that the surety bond would be cancelled effective July 31, 2019.
- On June 7, 2019 the Department sent a form letter warning that bond cancellation would "automatically" suspend the license unless the lender provided a bond reinstatement/new bond or ceased business and surrendered its license "in accordance with" applicable statutes; the Department later followed up.
- On July 29, 2019 1st Alliance emailed the Department saying it was "voluntarily surrendering" its license and would enter the surrender on NMLS; the Department did not accept any surrender.
- The Department entered an automatic suspension on July 31, 2019; after a hearing the Commissioner revoked the license for failure to maintain the required bond. 1st Alliance appealed to Superior Court and then to the Supreme Court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 36a-492(c) permits automatic suspension on bond cancellation | §36a-492(c) does not permit suspension after plaintiff surrendered the license | §36a-492(c) is mandatory — commissioner must suspend on bond cancellation unless exceptions met | Held: §36a-492(c) is mandatory; commissioner required to suspend absent reinstatement/new bond or effective surrender |
| Whether 1st Alliance effectively surrendered its license before bond cancellation | The July 29 email was a surrender (not a request) and thus effective | Surrender requires a request on NMLS and acceptance by commissioner; no acceptance occurred | Held: No effective surrender — statute requires a request and commissioner acceptance (and special rules when enforcement proceeding pending) |
| Whether commissioner abused discretion by declining to accept surrender | Commissioner had no discretion to deny a surrender once offered | Commissioner may decline/condition surrender when an enforcement action is pending (§36a-51(c)) | Held: No abuse — commissioner permissibly declined/conditioned surrender given an ongoing enforcement proceeding |
| Whether estoppel prevents suspension/revocation based on the June 7 letter | Plaintiff reasonably relied on the Department’s letter and was induced to surrender | The letter merely warned and referenced statutes; reliance was unreasonable as surrender must comply with statute | Held: No estoppel — reliance was unreasonable and letter explicitly referenced statutory requirements |
Key Cases Cited
- Celen tano v. Rocque, 282 Conn. 645 (2007) (standard of review for administrative decisions under UAPA)
- Dept. of Transportation v. White Oak Corp., 332 Conn. 776 (2019) (interpretation of "shall" — ordinarily mandatory; mandatory vs directory inquiry)
- Lopa v. Brinker International, 296 Conn. 426 (2010) (avoid rendering statutory language superfluous)
- Chotkowski v. State, 240 Conn. 246 (1997) (limitations and caution for estoppel against public agencies)
- A.C. Consulting, LLC v. Alexion Pharmaceuticals, Inc., 194 Conn. App. 316 (2019) (elements of reasonable reliance for estoppel)
- Board of Selectmen v. Freedom of Information Commission, 294 Conn. 438 (2010) (agency penalties within statutory limits reviewed for abuse of discretion)
- Felician Sisters of St. Francis of Connecticut, Inc. v. Historic District Commission, 284 Conn. 838 (2008) (distinct statutory terms carry distinct meanings)