Collateral Management LLC v. Ohio Department of Commerce, Division of Real Estate & Professional Licensing

Columbus, Ohio - Real Estate attorney represented Collateral Management LLC with an adjudication order issued by the Ohio Real EBstate Appraiser Board

} Collateral Management is an appraisal management company ("AMC").

Collateral Management is licensed in over 40 states. Jessica Massad is the owner and

controlling person of Collateral Management. Massad testified she holds appraisal licenses

in several other states. Massad held a residential real estate appraiser license in Ohio from

2002 until she surrendered her license on February 7, 2011 by signing an affidavit. The

affidavit states:

Now comes affiant Jessica Massad-Turner * * * who for her

affidavit averts and states the following, to-wit:

1. I am currently a licensed residential real estate appraiser in

the state of Ohio per §4763, et. seq. of the Ohio Revised Code;

2. I am hereby voluntarily surrendering my Ohio residential

real estate appraiser license;

3. Upon surrender of my Ohio residential real estate appraiser

license I shall immediately cease and desist all activity for

which a residential real estate appraiser license is required in

the state of Ohio;

4. In voluntarily surrendering my Ohio residential real estate

appraiser license, I shall not apply for an Ohio appraiser

certificate, license or registration in the future.



5. I have had the opportunity to seek legal counsel and obtain

representation and advice before executing this affidavit. I

voluntarily, knowingly and intelligently execute this affidavit

with full knowledge of its significance.

Further affiant sayeth naught.

The record reflects the affidavit was received by the Ohio Department of Commerce

Division of Real Estate and Professional Licensing ("the division") on February 9, 2011.

{¶ 3} On December 19, 2018, Collateral Management filed an application for an

Ohio AMC license with the division. On April 23, 2019, the superintendent of the division

sent a letter to Massad denying Collateral Management's application. On April 30, 2019,

Collateral Management, by and through counsel, requested a hearing to have the denial of

Collateral Management's Ohio AMC application reviewed before the Board. A hearing was

held before the Board on August 15, 2019, which was comprised of a chairman and four No. 20AP-123 3

board members. Appearing before the Board were counsel for the division, counsel for

Collateral Management, and Massad, as owner and controlling person of Collateral

Management. Counsel for the Board provided a brief history of AMC regulation under 12

U.S.C. 3353 regarding the establishment of minimum requirements and limitations to be

applied by a state in the registration of an AMC in order to provide background on Ohio's

AMC statute which was enacted just eight months prior to the hearing. Massad was the

only witness, testifying on direct and cross-examination and answering questions from the

Board.

{¶ 4} At the conclusion of testimony, and after deliberation off the record, the

chairman of the Board moved for a decision to "approve and adopt the decision of the

Superintendent to deny Collateral Management's license application to be an Ohio

appraisal management company for the same reasons as set forth in the Superintendent's

denial notice dated April 23, 2019." (Tr. at 56.) After some discussion on the record by

members of the Board, the remaining four members voted to second the chairman's motion

and ruled that the superintendent's decision was approved and adopted. An adjudication

order adopting the decision of the Board was sent to Collateral Management, in care of

Massad, on August 21, 2019.

{¶ 5} On August 28, 2019, Collateral Management filed an administrative appeal

in the common pleas court in accord with R.C. 119.12. The common pleas court affirmed

the adjudication order issued by the Board on January 22, 2020 finding it was supported

by reliable, probative, and substantial evidence and in accord with the law.

{¶ 6} Collateral Management timely appeals.

II. Assignments of Error

{¶ 7} Appellant assigns the following three assignments of error for our review:

[I.] The Common Pleas Court erred in deferring to the Real

Estate Appraiser Board's ("Board's") unreasonable

interpretation of the law regarding "substantive reason" and

erred in affirming the Board's decision as it was not in

accordance with the law.

[II.] The Common Pleas Court erred in deferring to the Board's

unreasonable interpretation of the law regarding whether the

surrender was "in lieu of revocation" and erred in affirming the

Board's decision as it was not in accordance with the law. No. 20AP-123 4

[III.] The Common Pleas Court erred in affirming the Board's

decision, which violated Appellant's due process rights.

III. Analysis

A. Standard of Review

{¶ 8} Under R.C. 119.12, when a common pleas court reviews an order of an

administrative agency, the common pleas court must consider the entire record to

determine whether reliable, probative, and substantial evidence supports the agency's

order, and the order is in accordance with law. Univ. of Cincinnati v. Conrad, 63 Ohio

St.2d 108, 110-11 (1980); see also Andrews v. Bd. of Liquor Control, 164 Ohio St. 275, 280

(1955). Instead of appraising the weight of the evidence, an appellate court determines

whether the common pleas court abused its discretion in its examination of the record for

reliable, probative, and substantial evidence. Natoli v. Ohio State Dental Bd., 177 Ohio

App.3d 645, 2008-Ohio-4068, ¶ 13 (10th Dist.). An abuse of discretion occurs when a

decision is unreasonable, arbitrary, or unconscionable. Blakemore v. Blakemore, 5 Ohio

St.3d 217, 219 (1983). On questions of whether the agency's decision was in accordance

with law, we exercise plenary review. Gralewski v. Ohio Bur. of Workers' Comp., 167 Ohio

App.3d 468, 2006-Ohio-1529, ¶ 17 (10th Dist.).

B. First Assignment of Error

{¶ 9} Collateral Management argues in its first assignment of error that the Board

eliminated the "substantive reason" element of R.C. 4768.06(B)(4) and the common pleas

court erred in affirming the Board's misinterpretation and application of the same.

Collateral Management further argues that, in effect, the common pleas court eliminated

the requirement that a voluntary surrender be undertaken for a substantive reason to

trigger the prohibition on the granting of an AMC license. See R.C. 4768.06(B)(4). In

support of its premise that the Board misinterpreted the law, Collateral Management

maintains the Board must contemplate the reason behind the surrender, which would

include consideration of: (1) the guidance set forth in 80 Fed.Reg. 32671, (2) the merits of

the pending complaints filed by the division against Massad, and (3) the reason(s) for

voluntary surrender as given by Massad herself.

{¶ 10} R.C. 4768.06(B)(4) states: No. 20AP-123 5

Each owner and controlling person of an appraisal

management company shall * * * [h]ave not had a license,

certificate, or registration to act as an appraiser that has been

refused, denied, canceled, surrendered, or revoked in this state

or in any other state for a substantive reason. A designated

controlling person may have had a license or certificate to act

as an appraiser refused, denied, canceled, revoked, or

surrendered in lieu of revocation in a state for a nonsubstantive

reason if the license or certificate was subsequently granted or

reinstated[.]

(Emphasis added).

{¶ 11} In relevant part, the plain language states that the controlling person, in this

case Massad, shall have not had a license to act as an appraiser surrendered for a

substantive reason.

{¶ 12} In support of the argument that the Board and the common pleas court

eliminated the "substantive reason" element, Collateral Management first points to 80

Fed.Reg. 32671 and states that the Board was required to consider the same in determining

what constitutes a "substantive reason" for surrender of Massad's license. Collateral

Management asserts that 80 Fed.Reg. 32671 "unambiguously define[s]" "substantive

reason" as requiring a showing of fraud or a known failure to perform an appraisal in

compliance with the Uniform Standards of Professional Appraisal Practice ("USPAP") that

rose to the level of warranting a revocation as the definition of "substantive." 80 Fed.Reg.

32658, 32671. (Appellant's Reply Brief at 6-7.) In its brief, the Board also puts forth that

the federal register citation "specifically defines" the term "substantive," as revocation for

failure to comply with the USPAP. 80 Fed.Reg. 32671. (Appellee's Brief at 16-17.) The

Board argues the "unrebutted" allegations pending against Massad at the time of her

surrender would fall under the definition of substantive. (Appellee's Brief at 16.)

Conversely, Collateral Management believes the Board was required to look at the merits

of the complaints that reached the opportunity for hearing stage in order to determine

whether the basis would have risen to the level of a violation of the USPAP as given in the

discussion in the federal guidance. 80 Fed.Reg. 32671.

{¶ 13} Although Collateral Management did argue before the common pleas court

that the Board erred in its interpretation and application of R.C. 4768.06(B)(4) by not

considering whether the surrender was for a substantive reason, Collateral Management No. 20AP-123 6

did not specifically argue 80 Fed.Reg. 32671 in support thereof. The Board, however, did

point to the Federal Register before the common pleas court in support of its position that

"substantive" had acquired a particular meaning. The common pleas court did not address

either party's argument specific to 80 Fed.Reg. 32671.

{¶ 14} 80 Fed.Reg. 32671, Chapter III, Final Rule and Public Comments on the

Proposed Rule, Section 34.214(a),1 states:

Some commenters suggested that the Agencies consider

circumstances in which an appraiser's license lapsed or was

revoked for technical reasons unrelated to the quality of

appraisals performed by the appraiser. They asserted that

being barred from owning an AMC eligible for registration in a

State or included in the AMC National Registry in these cases

is potentially unfair. One example of this is when an appraiser

neglects to renew his or her appraiser's license on time.

Depending on the State law, an appraiser would typically be

able to be reinstated, pending payment of certain penalties. In

this situation, the lapse in the appraiser's license is unrelated to

fraud or a failure to perform an appraisal in compliance with

USPAP.

The Agencies agree that non-substantive grounds for the

revocation of an appraiser's license should not be construed to

be within the scope of the registration limitations in section

1124(d). n106 In connection with this, the Agencies agree that

an appraiser who is subsequently reinstated by the State

appraiser certifying and licensing agency should not be within

the scope of the registration limitations. For example, if an

appraiser's license lapses for non-payment of fees, and the

appraiser is later reinstated by the State appraiser certifying

and licensing agency after meeting his or her obligation, the

appraiser should not be barred from owning an AMC. If,

however, an appraiser's license or certificate is revoked, for

example, for violations of the TILA independence standards or

for failure to comply with USPAP, an AMC owned wholly or in

part by that appraiser should not be eligible to register in a

State or appear on the AMC National Registry. For these

reasons, the final rule clarifies that an appraiser is subject to

the ownership ban if the revocation of the appraiser's license or



1 According to Chapter III, supplementary information was provided within 80 Fed.Reg. 32671 that refers to

a section number of the proposed and final rule text for the Office of the Comptroller of the Currency and 12

C.F.R. 34.210 et seq. The reference to Section 34.214(a) would be found under Chapter 12 of the C.F.R. No. 20AP-123 7

certification was for a substantive cause, as determined by the

State certifying and licensing agency.

{¶ 15} We agree with Collateral Management that 80 Fed.Reg. 32671 supports its

argument that the Board was required to consider the reasons or circumstances for

surrender of Massad's license to determine if the surrender was for a "substantive reason."

However, we do not agree that 80 Fed.Reg. 32671 unambiguously or specifically defines a

"substantive reason" as Collateral Management and the Board suggest. The referenced

Federal Register citation, 80 Fed.Reg. 32671, Chapter III, Section 34.214(a), is a discussion

of public comments on a proposed rule. It is not a definition that was incorporated into the

final rule nor was it incorporated into Ohio's statute. See R.C. 4768.06(B)(4).

{¶ 16} The discussion does provide examples of what might be considered

"substantive" versus "technical." Examples of "substantive" reasons include fraud, failure

to perform an appraisal in compliance with USPAP, and violation of the Truth in Lending

Act independence standards. An example of a "technical" reason included neglecting to

renew the license. According to Massad's testimony before the Board, her purported

reasons for surrender were that she was sick, recently divorced, she did not intend to return

to Ohio to use her license, nor did she intend to renew her license. Collateral Management

argues that Massad surrendered her license "for her own convenience." The Board asserts

Massad voluntarily surrendered her license rather than defending against charges alleging

multiple violations of the USPAP by Massad. None of the purported reasons for Massad's

surrender fall under the examples of "substantive" or "technical" as provided in 80 Fed.Reg.

32671, Chapter III, Section 34.214(a).

{¶ 17} The final rule found in 12 C.F.R. 34.214(a)(1) requires:

An AMC subject to State registration pursuant to § 34.213 shall

not be registered by a State or included on the AMC National

Registry if such AMC, in whole or in part, directly or indirectly,

is owned by any person who has had an appraiser license or

certificate refused, denied, cancelled, surrendered in lieu of

revocation, or revoked in any State for a substantive cause, as

determined by the appropriate State appraiser certifying and

licensing agency.

However, the final rule does not define "substantive," suggesting that implementing

agencies have some discretion in determining what constitutes "substantive." See 12 C.F.R. No. 20AP-123 8

34.211 and 34.214. Furthermore, as we will discuss below, 12 C.F.R. 34.214(a)(1) differs

from R.C. 4768.06(B)(4) in that the federal rule modifies "surrender" with the phrase "in

lieu of revocation" as well as the phrase "substantive cause." Whereas the Ohio statute

modifies "surrender" with the phrase "substantive reason" only.

{¶ 18} As noted above, in enacting its own AMC registration law, Ohio requires:

Each owner and controlling person of an appraisal

management company shall * * * [h]ave not had a license,

certificate, or registration to act as an appraiser that has been

refused, denied, canceled, surrendered, or revoked in this state

or in any other state for a substantive reason. A designated

controlling person may have had a license or certificate to act

as an appraiser refused, denied, canceled, revoked, or

surrendered in lieu of revocation in a state for a

nonsubstantive reason if the license or certificate was

subsequently granted or reinstated[.]

(Emphasis added.) R.C. 4768.06(B)(4). "Substantive" was not defined in R.C. 4768.01 and

4768.06, suggesting that just as with 12 C.F.R. 34.214(a)(1), the board is afforded some

discretion in determining what constitutes surrender for a "substantive reason" and is not

limited to the examples set forth in 80 Fed.Reg. 32671 as suggested by Collateral

Management and the Board.

{¶ 19} In support of the argument that the Board and common pleas court

eliminated the "substantive reason" element, Collateral Management also asserts the Board

was required to examine the merits of the pending complaints filed by the division against

Massad and the reasons for voluntary surrender as given by Massad herself. In assessing

the merits of this posture, the findings made by the superintendent and the Board in this

matter are relevant.

{¶ 20} Collateral Management's application for an AMC license in Ohio was denied

by the superintendent by letter dated April 23, 2019. The superintendent detailed the

following as the basis for denial of the application:

In 2010, you maintained an Ohio residential real estate

appraiser license (License# 2001010113). The Division issued

charges against your Ohio appraiser license in case numbers

2010-259 & 2010-262 (see enclosure for copy of the charge

notice). On or about February 9, 2011, the Division received an

affidavit signed by you in which you voluntarily surrendered

your Ohio appraiser license to the Division arising out of a third No. 20AP-123 9

case (case number 2010-759). As a result of your surrendered

Ohio [a]ppraiser license, the Division closed all three case

numbers (2010-259[] 2010-262 & 2010-759) without further

action (see enclosure for copies of the notices). Consequently,

you had an Ohio real estate appraiser license that was

surrendered for substantive reasons. Based on these reasons,

your application has been denied based on your failure to

comply with or satisfy Ohio Revised Code Section

4768.06(B)(4).

{¶ 21} Collateral Management requested a hearing before the Board for review of

Collateral Management's AMC application. On August 15, 2019, Massad appeared before

five members of the Board, providing testimony on behalf of Collateral Management in

support of its application to become an AMC in Ohio. At the conclusion of the presentation

of evidence and Massad's testimony upon direct and cross-examination, the Board upheld

the superintendent's finding that Massad surrendered her license for a "substantive reason"

and the basis for this appeal. Prior to reaching their determination, the Board went off the

record for discussion at the conclusion of the hearing. Upon reconvening, three board

members stated their reasoning for moving to adopt the decision of the superintendent

denying Collateral Management's AMC application.

{¶ 22} Three of the five voting board members spoke on the record and provided the

basis on which they voted. The first, Chairman Lynch, voted to approve and adopt the

decision of the superintendent citing his approval on the same basis as stated in the

superintendent's decision. Chairman Lynch furthered: "I'm basing my opinion on the

affidavit signed by Ms. Massad back in 2011 indicated she would no longer be a licensee in

the state of Ohio. She had proper opportunity to have legal counsel at that particular time

and chose not to, and she's voluntarily surrendered her license." (Tr. at 57.) The second

board member, unnamed, concurred with the Chairman and stated: "The problem is is

what was done and when we can't go back and look at things prior. So with the signing of

the affidavit, I think that that was -- for whatever reason she did it, she did sign that and

that sets the course for what we're looking at at this point." (Tr. at 57.) The third, Ms. Hahn,

explained her review was based on state and federal regulations and the statutes. Ms. Hahn

stated:

Ms. Massad's counsel and Collateral Management's counsel

was very eloquent in his closing statement and other testimony No. 20AP-123 10

presented trying to urge us to look at the merits of the

complaints that were raised against Ms. Massad back in 2011

or 2010.

But I -- based on my review of state and federal regulations and

statutes, it appears that that is the wrong direction as to what

the Board should review and take into consideration. Instead

of the merits or trying to relitigate or litigate the underlying

complaints, we are bound to look to whether the surrender of

the license was substantive.

With those boundaries the -- the underlying complaints are not

being looked at to -- at least by me as to whether they are

meritorious or would have resulted in a revocation or other

actions by the Board at that time but whether the actions of the

surrender appeared to be based on any underlying issues and,

therefore, substantive as opposed to merely choosing no longer

to practice in Ohio.

And based on what was presented, the -- the fact that there

were three complaints pending at the time it reached the point

of a Notice of Opportunity for Hearing does appear to be new

grounds for assessing a surrender and, therefore, in my mind

the denial would be -- by the Superintendent was also. I concur

with the rest of the Board Members that have spoken so far that

it was appropriate.

(Tr. at 57-58.) The considerations of the two remaining Board members who voted to

approve and adopt the application denial were not stated on the record.

{¶ 23} Collateral Management argues the Board was required to consider the

reasons or circumstances of the surrender of Massad's license to determine if the surrender

was for a "substantive reason." Collateral Management asserts the Board failed to consider

Massad's testimony explaining why she chose to sign the affidavit and surrender her

license, and the substance of the allegations pending against Massad.

{¶ 24} As noted above, on questions of whether the agency's decision was in

accordance with law, we exercise plenary review. Gralewski at ¶ 17. This court held in Pour

House, Inc. v. Ohio Dept. of Health, 185 Ohio App.3d 680, 2009-Ohio-5475, ¶ 14 (10th

Dist.):

The interpretation of a statute is a question of law that we

review de novo. Washington Cty. Home v. Ohio Dept. of

Health, 178 Ohio App.3d 78, 2008-Ohio-4342, ¶ 27. In No. 20AP-123 11

interpreting a statute, a court's principal concern is

determining the legislative intent. State v. S.R. (1992), 63 Ohio

St. 3d 590, 594. A court must first examine the statute's

language to determine the legislative intent. Id.; Black v. Bd. of

Mecca Twp. Trustees, 11th Dist. No. 2004-T-0031, 2005-Ohio561, ¶ 9. An unambiguous statute need not be interpreted;

instead, a court simply must apply the words of the statute as

written. Guethlein v. Ohio State Liquor Control Comm., 10th

Dist. No. 05AP-888, 2006-Ohio-1525, ¶ 11; Marcum v. Rice

(July 20, 1999), 10th Dist. No. 98AP-717. Courts lack the

authority to ignore the plain and unambiguous language of a

statute under the guise of statutory interpretation or liberal or

narrow construction. Guethlein at ¶ 12; Boardman Twp. Bd. of

Trustees v. Fleming (1996), 110 Ohio App.3d 539, 542. "Rather,

a court must give effect to the words used in the statute, accord

the words their usual and customary meaning, and not delete

words used or insert words that are not used." Guethlein, citing

Cleveland Elec. Illum. Co. v. Cleveland (1988), 37 Ohio St.3d

50.

Doubts as to the interpretation of a statute should be resolved in favor of the agency if the

interpretation is reasonable. Clark v. State Teachers Retirement Sys., 10th Dist. No. 18AP105, 2018-Ohio-4680, ¶ 38. " '[I]f the statute is silent or ambiguous with respect to the

specific issue, the question for the court is whether the agency's answer is based on a

permissible construction of the statute.' " Lang v. Dir., Ohio Dept. of Job & Family Servs.,

134 Ohio St.3d 296, 2012-Ohio-5366, ¶ 12, quoting Chevron, U.S.A., Inc. v. Natural

Resources Defense Council, Inc., 467 U.S. 837, 843 (1984).

{¶ 25} In hearing Massad's appeal of the Board's adjudication order, the common

pleas court held:

[I]t is not disputed that Ms. Massad learned of [the] pending

disciplinary action and surrendered her license rather than

defend against the allegations. The Board concluded that, in

doing so, Ms. Massad surrendered her residential real estate

appraiser license "for a substantive reason." See R.C.

4768.o6(B)(4). "Substantive" is not defined by statute. The

Court must defer to the Board's interpretation of R.C.

4768.o6(B)(4) because it is reasonable. See Rings v. Nichols, 13

Ohio App.3d at 260.

(Decision at 6.) The common pleas court further held: No. 20AP-123 12

Collateral also argues that the administrative hearing was

fundamentally unfair because the Board allegedly failed to

consider Ms. Massad's testimony in determining whether she

had surrendered her license "for a substantive reason." Simply

put, the record does not support Collateral's claim. The Board

was entitled to assign weight to the conflicting testimony, and

the Court finds no error in the weight so assigned.

(Decision at 8.)

{¶ 26} Of the five voting Board members, Hahn was the only member to articulate

that it was necessary to consider whether the surrender was due to a "substantive reason,"

and in doing so, Hahn concluded the surrender appeared to be based on underlying issues,

rather than merely choosing to no longer practice in Ohio. The remaining two Board

members who articulated their reasons for upholding the superintendent's finding pointed

to Massad's signing of the affidavit itself, in which Massad averred she was agreeing to

never be licensed as an appraiser in Ohio after having the opportunity to consult with legal

counsel and choosing not to, as the basis for their vote rather than considering whether the

surrender was for a "substantive reason." We cannot discern the reasoning of the

remaining two Board members as the record is silent regarding the same.

{¶ 27} We agree with Collateral Management to the extent it argues it is necessary

for the Board to consider whether the surrender was for a "substantive reason." The

common pleas court stated as much and, in this regard, did not err. However, the common

pleas court erred in not applying the interpretation it correctly determined.

{¶ 28} The Board was required to consider the reason for the surrender and whether

it was "substantive." See R.C. 4768.06(B)(4). This court gleans from statements made by

two of the Board members, and that of the common pleas court, that at least two of the

Board members based their vote to approve and adopt the decision of the superintendent

solely upon the affidavit signed by Massad and, specifically, the assertions that she had

agreed to no longer be licensed in Ohio, she had legal counsel, and she voluntarily

surrendered her license. The unnamed Board member even reasoned that Massad signed

the affidavit "for whatever reason." The mere signing of the affidavit, for whatever reason,

without consideration of whether the surrender was taken for a substantive reason does not

comply with the interpretation of R.C. 4768.06(B)(4), which the common pleas court and

this court find to be correct. No. 20AP-123 13

{¶ 29} For the reasons stated herein, we agree with Collateral Management that the

common pleas court did not apply the interpretation of R.C. 4768.06(B)(4) that it is

necessary to consider whether the surrender was for a substantive reason, which the

common pleas court and this court find to be correct. We do not agree, however, that the

definition of a "substantive reason" is confined to 80 Fed.Reg. 32671 or that the Board is

required to look at the merits of the complaints pending at the time of Massad's surrender.

Furthermore, we do not agree that the Board is required to relitigate the underlying basis

for Massad's 2011 surrender. Rather, the Board is required to determine whether the

surrender was for a substantive reason, not for "whatever reason," and we afford the Board

discretion in determining whether the surrender was for a "substantive reason." We also

defer to the Board in assigning appropriate weight to the affidavit, testimony of Massad,

and any evidence presented by the division.

{¶ 30} Therefore, we sustain in part and overrule in part Collateral Management's

first assignment of error and remand to the common pleas court with instructions to return

this case to the Board for all members to review the record and consider whether Massad

surrendered her license for a substantive reason.

C. Second Assignment of Error

{¶ 31} Collateral Management argues in its second assignment of error that the

Board failed to examine whether Massad's surrender was "in lieu of revocation" and such

examination was required by R.C. 4768.06(B). Collateral Management reasons that R.C.

4768.06(B)(4) and 12 C.F.R. 225.194(a)(1), or 34.214(a)(1) as cited by the Board, require

an examination of whether the surrender was for a "substantive reason" and "in lieu of

revocation" to trigger an AMC registration restriction.2 Collateral Management argues the



2 12 U.S.C. 3353 governs appraisal management companies. The rules adopted pursuant to 12 U.S.C. 3353 are

set forth in Title 12 of the Code of Federal Regulations ("C.F.R."). Both Collateral Management and the Board

cite to Title 12, but cite to different parts and chapters within the C.F.R. Collateral Management cites to 12

C.F.R. Part 225, whereas the Board cites to 12 C.F.R. Part 34. Collateral Management's citation appears under

Chapter II of the Federal Reserve System, Subchapter A, Board of Governors of the Federal Reserve System,

Part 225 Bank Holding Companies and Change in Bank Control. The Board's citation falls under Chapter I,

Office of the Comptroller of the Currency, Department of the Treasury, Part 34 Real Estate Lending and

Appraisals. Both C.F.R regulations cited herein address the same issue within their respective subpart, the

minimum standards for appraisal management companies and the language of the regulations mirror one

another substantively. No. 20AP-123 14

Board erred in not considering whether the surrender was in lieu of revocation and that the

common pleas court erred in deferring to the Board on this.

{¶ 32} Interestingly, Collateral Management argued nearly the opposite before the

common pleas court and, therefore, it is no wonder the common pleas court did not address

surrender in lieu of revocation in its decision. Before the common pleas court, Collateral

Management argued the Board's reliance on federal law was misplaced because federal law

does not apply here. Collateral Management argued: "Federal law allows a state could

establish requirements in addition to those found in 12 USCS 3353. See 12 CFR 34.210(d).

Ohio did so. Surrenders in lieu of revocation are a ban for owners or controlling persons of

appraisal management companies. Ohio, however, also bans owners and controlling

persons of appraisal management companies who have surrendered their appraiser license

for substantive reasons." (Nov. 5, 2019 Collateral Management's Common Pleas Court

Brief at 5.) Therefore, Collateral Management argues "[f]ederal law is not akin to Ohio's

law in this matter." (Nov. 5, 2019 Collateral Management's Common Pleas Court Brief at

5.)

{¶ 33} We agree with the argument Collateral Management made before the

common pleas court but disagree with the argument Collateral Management now makes.

{¶ 34} As noted above, 12 C.F.R. 34.214(a)(1)3 states:

An AMC subject to State registration pursuant to § 34.213 shall

not be registered by a State or included on the AMC National

Registry if such AMC, in whole or in part, directly or indirectly,

is owned by any person who has had an appraiser license or

certificate refused, denied, cancelled, surrendered in lieu of

revocation, or revoked in any State for a substantive cause, as

determined by the appropriate State appraiser certifying and

licensing agency.

(Emphasis added.)



To maintain continuity, this court will use Part 34 of Title 12 of C.F.R., which was cited by the court of common

pleas. This court notes that Collateral Management cites 12 C.F.R. 34.214 in its reply brief in the common

pleas court.

3 12 C.F.R. 225.194(a)(1) as cited by Collateral Management states: "An AMC subject to state registration

pursuant to section 225.193 shall not be registered by a state or included on the AMC National Registry if such

AMC, in whole or in part, directly or indirectly, is owned by any person who has had an appraiser license or

certificate refused, denied, cancelled, surrendered in lieu of revocation, or revoked in any State for a

substantive cause, as determined by the appropriate State appraiser certifying and licensing agency." No. 20AP-123 15

{¶ 35} As Collateral Management suggests, the federal statute prohibits state

registration if the owner surrendered their license in lieu of revocation. However, 12 U.S.C.

3353(b) states: "Relation to State law. Nothing in this section shall be construed to prevent

States from establishing requirements in addition to any rules promulgated under

subsection (a)." 12 C.F.R. 34.210(d)4 mirrors the aforementioned statute stating, "Rule of

construction. Nothing in this subpart should be construed to prevent a State from

establishing requirements in addition to those in this subpart." Consistent with 12 U.S.C.

3353(b) and 12 C.F.R. 34.210(d), Ohio enacted R.C. 4768.06(B)(4) establishing

requirements in addition to those outlined in subpart 12 C.F.R. 34.214. Specifically, Ohio

prohibits the granting of an AMC license unless certain criteria are met, including the

owners have not had a license surrendered for a "substantive reason."

{¶ 36} The relevant section of R.C. 4768.06(B)(4), the first sentence, states: "Each

owner and controlling person of an appraisal management company shall satisfy all of the

following criteria: * * * Have not had a license, certificate, or registration to act as an

appraiser that has been refused, denied, canceled, surrendered, or revoked in this state or

in any other state for a substantive reason." (Emphasis added.)

{¶ 37} As we noted above, this language is plain and unambiguous. See Guethlein

v. Ohio State Liquor Control Comm., 10th Dist. No. 05AP-888, 2006-Ohio-1525, ¶ 12. In

Ohio, even if a surrender was not in lieu of revocation, an applicant who surrendered his or

her license could still not be eligible for an AMC license if the surrender was for a

substantive reason.

{¶ 38} Furthermore, we are not persuaded by Collateral Management's argument

that the first sentence of R.C. 4768.06(B)(4) must be read in conjunction with the second

sentence in the context of this case. The second sentence of R.C. 4768.06(B)(4) states: "A

designated controlling person may have had a license or certificate to act as an appraiser

refused, denied, canceled, revoked or surrendered in lieu of revocation in a state for a

nonsubstantive reason if the license or certificate was subsequently granted or

reinstated." (Emphasis added.) This second sentence is not relevant in this case as

Massad's real estate appraiser license was not subsequently granted or reinstated.



4 As cited by Collateral Management, 12 C.F.R. 225.190(c) states "Rule of construction. Nothing in this subpart

should be construed to prevent a State from establishing requirements in addition to those in this subpart." No. 20AP-123 16

{¶ 39} Therefore, the common pleas court did not err in deferring to the Board's

interpretation and application of R.C. 4768.06(B)(4) by not considering whether the

surrender was "in lieu of revocation."

{¶ 40} Accordingly, we overrule Collateral Management's second assignment of

error.

D. Third Assignment of Error

{¶ 41} Collateral Management argues in its third assignment of error that the

common pleas court erred in affirming the Board's adjudication order because the Board's

application of R.C. 4768.06(B)(4) was a violation of due process for reasons of retroactive

application.

{¶ 42} It is not clear that Collateral Management preserved this argument at the

common pleas level. Even assuming, arguendo, Collateral Management did raise it at the

common pleas level, Collateral Management points us to no place in the administrative

record where the issue of either retroactivity or constitutionality was raised. Therefore, this

is an as-applied challenge.

{¶ 43} Constitutionality of statutes is a question for the courts and not for a board

or commission. E. Ohio Gas Co. v. Pub. Util. Comm., 137 Ohio St. 225, 239 (1940). The

Supreme Court of Ohio has held that an appellant may raise a facial constitutional challenge

in an administrative appeal even where the appellant did not raise that challenge before the

commission or agency. See Reading v. Public Util. Comm., 109 Ohio St.3d 193, 2006-Ohio2181; see also Derakhshan v. State Med. Bd. of Ohio, 10th Dist. No. 07AP-261, 2007-Ohio5802, ¶ 25 (permitting an appellant to raise a facial constitutional challenge to the statute

upon which the medical board relied to revoke his medical license on appeal); Leon v. Ohio

Bd. of Psychology, 63 Ohio St.3d 683, 686-87 (1992) (considering argument that the

regulation upon which the board relied to revoke the appellant's psychology license was

unconstitutionally vague). A court may also consider an as-applied constitutional challenge

in an administrative appeal. State ex rel. Kingsley v. State Emp. Relations Bd., 10th Dist.

No. 09AP-1085, 2011-Ohio-428, ¶ 19.

{¶ 44} In contrast to a facial challenge, however, when a litigant challenges the

constitutionality of a statute as applied to a specific set of facts, extrinsic facts are needed,

and the litigant must raise the as-applied challenge in the first instance before the No. 20AP-123 17

administrative agency to allow the parties to develop an evidentiary record. Kingsley at

¶ 18, citing Reading at ¶ 15-16. Review of the testimony before the Board does not reflect

that Collateral Management raised the constitutionality of R.C. 4768.06(B)(4) as applied.

{¶ 45} Nevertheless, even if Collateral Management did present extrinsic facts

before the Board sufficient to preserve a claim of as-applied unconstitutionality, we note

that we are persuaded by the Board's argument that Massad had no vested right to an AMC

license. This court has held:

A "vested right" is a right that " 'so completely and definitely

belongs to a person that it cannot be impaired or taken away

without the person's consent.' " Harden v. Ohio Atty. Gen., 101

Ohio St.3d 137, 2004-Ohio-382, ¶ 9, quoting Black's Law

Dictionary (7th ed. 1999). "A right is not regarded as vested in

the constitutional sense unless it amounts to something more

than a mere expectation or interest based upon an anticipated

continuance of existing law." In re Emery (1978), 59 Ohio

App.2d 7, 11. "[W]here no vested right has been created, 'a later

enactment will not burden or attach a new disability to a past

transaction or consideration in the constitutional sense, unless

the past transaction or consideration * * * created at least a

reasonable expectation of finality.' " [State v. Cook (1998), 83

Ohio St.3d 404, 412, quoting State ex rel. Matz v. Brown

(1988), 37 Ohio St.3d 279, 281.]

Dukes v. Dir., Ohio Dept. of Job & Family Servs., 10th Dist. No. 09AP-515, 2009-Ohio6781, ¶ 20.

{¶ 46} In Dukes, we held a Medicaid provider agreement was not absolute and

therefore did not confer a vested or substantive right in the constitutional sense for

purposes of retroactivity. Dukes at ¶ 20. We reasoned the agreement had to be renewed

annually by the Ohio Department of Job and Family Services ("ODJFS"), but ODJFS was

prohibited from renewing the agreement if the appellant did not comply with the laws and

rules applicable thereto. Id. at ¶ 21. The agreement could also be revoked. Id. Likewise,

here, an AMC license must be renewed annually and can only be renewed if certain

requirements are met. See R.C. 4768.06, 4768.07, 4768.08. In addition, an AMC license

can also be revoked. R.C. 4768.13(I)(4). In Dukes, we found the appellant's Medicaid

provider agreement was similar to a day-care certification. Cosby v. Franklin Cty. Dept. of

Job & Family Servs., 10th Dist. No. 07AP-41, 2007-Ohio-6641, ¶ 21. In Cosby, we held that

the day-care certification at issue was a license as defined in R.C. 119.01(B). Id. at ¶ 26. We No. 20AP-123 18

further held that "[a] 'license' does not ordinarily confer an absolute or vested right." Id.

An AMC is a license, and Collateral Management points us to no authority that such a

license confers an absolute or vested right contrary to the general authority that a license

does not confer a vested right.

{¶ 47} Accordingly, we overrule appellant's third assignment of error.

For the aforementioned reasons, we sustain in part and overrule in part

appellant's first assignment of error and overrule the second and third assignments of error.



We remand this matter to the common pleas court with instructions to return the case to the Board to apply R.C. 4768.06(B)(4) consistent with the interpretation that it must consider whether Massad's license was surrendered for a substantive reason.



Judgment affirmed in part, reversed in part;

and cause remanded with instructions.