Frost v. COM'R, NEW HAMPSHIRE BANKING DEPT.
163 N.H. 365
| N.H. | 2012Background
- Frost sought declaratory and injunctive relief asserting the Department lacked subject matter jurisdiction to pursue proceedings against him for two seller-financed mortgage transactions by LLCs.
- The Department initiated an Order to Show Cause and a Staff Petition alleging Frost’s failures on disclosures and multi-role employment in violation of RSA chapter 397-A and related provisions.
- Frost became licensed as a mortgage loan originator on April 1, 2009, after the two transactions occurred in 2008, but the Department still proceeded administratively.
- The trial court granted a preliminary injunction, concluding the Department could not take action based on the 2008–2009 transactions and that penalties were not incurred, and treated the injunction as a final order.
- The Department appealed the injunction, and the petitioners cross-appealed for attorney’s fees; the trial court denied attorney’s fees, and the Department’s appeal challenged its jurisdiction and the injunction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Department lacked subject matter jurisdiction under RSA 397-A to regulate the LLCs. | Frost argues the LLCs were not engaged in the business of making or brokering loans. | Department contends it had jurisdiction over mortgage activities and licensing, including the LLCs’ involvement. | Department lacked subject matter jurisdiction over the LLCs’ single transactions. |
| Whether the trial court properly declined to defer to the Department under primary jurisdiction. | Frost contends the court should have abstained and allowed agency determination. | Department argues the legal question could be resolved by the court without agency input. | Trial court did not abuse discretion; primary jurisdiction not required. |
| Whether the exemptions in RSA 397-A:4 affect the scope of “engage in the business.” | Exemptions for natural persons and seller-financing support lack of regime over LLCs. | Exemptions do not remove non-natural entities from being engaged in the business; ambiguity exists. | “Engage in the business” requires more than a single transaction; the LLCs were not engaged. |
| Whether exhaustion of administrative remedies was required before challenging the Department’s action. | Frost argues exclusive review procedures existed (541) and exhaustion was required. | The challenge to jurisdiction can be raised in court without exhaustion due to lack of jurisdiction. | Exhaustion not required where the issue is one of law and jurisdiction. |
| Whether attorney’s fees were properly denied on the cross-appeal. | Petitioners contend fees should be awarded for bad faith or public benefit. | Department did not act in bad faith; substantial benefit not shown. | Trial court did not abuse discretion; attorney’s fees denied. |
Key Cases Cited
- Wisniewski v. Gemmill, 123 N.H. 701 (1983) (primary jurisdiction and agency expertise; board’s authority to decide jurisdictional issues absent exclusive remedy)
- Nashua v. Public Utilities Commission, 101 N.H. 503 (1959) (exhaustion of administrative remedies; exclusive review procedures)
- Konefal v. Hollis/Brookline Coop. School Dist., 143 N.H. 256 (1998) (exhaustion not required when issues are purely legal or agency discretion not implicated)
- Pheasant Lane Realty Trust v. City of Nashua, 143 N.H. 140 (1998) (explanation that exhaustion not required for dispositive legal questions)
- Bedard v. Town of Alexandria, 159 N.H. 740 (2010) (exception for attorney’s fees when public benefit or bad faith shown)
- Metzger v. Brentwood, 115 N.H. 287 (1975) (exposure to administrative procedures and exhaustion principles)
- Green Meadows Mobile Homes v. City of Concord, 156 N.H. 394 (2007) (single transactions do not establish “dealer” status; business meaning)
- Hughes v. DiSalvo, 143 N.H. 576 (1999) (private transaction not within consumer protection remedies; business use)
- Franklin v. Town of Newport, 151 N.H. 508 (2004) (legislative history can aid interpretation of ambiguous statutes)
- Wisniewski v. Gemmill, 123 N.H. 701 (1983) (reiterated)
- United States v. Western Pac. R. Co., 352 U.S. 59 (1956) (prudential nature of primary jurisdiction doctrine; no fixed formula)
- Ricci v. Chicago Mercantile Exchange, 409 U.S. 289 (1973) (agency expertise aiding judicial resolution)
- Verizon New England v. Maine Public Utilities, 509 F.3d 1 (1st Cir. 2007) (primary jurisdiction considerations in regulatory context)