Engle v. The Department of Financial and Professional Regulation

          Appeal from the Circuit Court of Cook County. No. 16 CH 04243 Honorable Sophia H. Hall, Judge, presiding.

          JUSTICE LAMPKIN delivered the judgment of the court, with opinion. Presiding Justice Reyes and Justice Rochford concurred in the judgment and opinion.

          OPINION

          LAMPKIN JUSTICE.

         ¶ 1 Plaintiff Elizabeth Engle filed a complaint for administrative review, which challenged the final administrative decision that revoked her real estate appraiser license after a default order for failure to file an answer was entered against her and the disciplinary board held its deliberations on the pleadings. The circuit court affirmed the final administrative decision against Engle.

         ¶ 2 On appeal, Engle argues that this court should reverse the administrative decision because she did not forfeit her right to a hearing and the agency violated her due process rights when it failed to consider and grant her timely motion to vacate the default order and denied her request to conduct a hearing on the merits. In the alternative, Engle argues that the revocation of her license based on the default order was improper without some type of prove-up proceeding and was an overly harsh penalty.

         ¶ 3 Based on the following, we reverse the circuit court's judgment that affirmed the final administrative decision revoking Engle's license. We remand this cause to the agency for further proceedings consistent with this opinion.

         ¶ 4 I. BACKGROUND

         ¶ 5 In 2013, Engle submitted an application to defendant, the Department of Financial and Professional Regulation (Department), for a certified residential real estate appraiser license. The Department, however, notified her about alleged discrepancies in her 2013 application. Engle, with the assistance of an attorney, engaged in meetings and conversations with Department employees and thereafter withdrew her 2013 application.

         ¶ 6 On September 11, 2014, Engle submitted another application and subsequently received her certified residential real estate appraiser license. However, on June 29, 2015, the Department filed a complaint containing 127 counts against her, alleging that she failed to sufficiently explain additional hours listed in her application, in violation of section 15-10(a)(2) of the Real Estate Appraiser Licensing Act of 2002 (Act) (225 ILCS 458/15-10(a)(2) (West 2014)) and her application included false information, in violation of sections 15-10(a)(1), (5), (10), and (26) of the Act (Id. § 15-10(a)(1), (5), (10), (26)).

         ¶ 7 Specifically, count I of the complaint alleged that Engle's 2014 application included work log forms that requested credit for 779 additional experience hours earned between August 1, 2014, and September 10, 2014, but failed to provide a sufficient explanation for the additional requested hours. Furthermore, counts II through CXXVII alleged that Engle's 2014 application included false information because the certified number of hours worked for 126 appraisals differed from the certified number of hours worked for those same appraisals as listed in her prior 2013 application. Based on the allegations of the complaint, the Department requested that Engle's license be suspended or revoked or that she be otherwise disciplined. The Department notified Engle that she was required to file an answer within 20 days, the failure to file an answer or otherwise plead "may result in a default being taken against [her], " and her attendance at a July 28, 2015, preliminary hearing was mandatory.

         ¶ 8 On July 17, 2015, Engle's counsel, Augustine, Kern and Levens, Ltd. (AKL), filed a motion for extension of time, incorrectly referencing an August 4, 2015, preliminary hearing and explaining that Jeffrey Levens, the AKL partner who had been handling Engle's case, died unexpectedly on July 6, 2015. On July 21, 2015, AKL partner Algis Augustine and junior associate James Ko filed appearances on behalf of Engle.

         ¶ 9 On July 28, 2015, neither Engle nor her counsel appeared at the preliminary hearing. The administrative law judge (ALJ) ordered Engle to answer or otherwise plead by September 8, 2015, or be held in default. The ALJ set the matter for a status hearing on September 29, 2015. The order warned that the "[f]ailure to attend or to file an answer shall result in the transferring of the matter to the Board on the pleadings, and the entry of a finding in favor of the Department on all allegations." According to documents in the record subsequently filed by Engle's counsel, they did not appear at the July 28 preliminary hearing because they requested but did not receive from the Department copies of all the pleadings and notices.

         ¶ 10 On September 8, 2015, Engle's counsel AKL filed a motion to dismiss the complaint. One of the attorneys who signed the motion was John Richardson, who was a partner of Richardson Maraj, LLC. (As explained in documents subsequently filed on Engle's behalf, Richardson shared office space at AKL and helped after the death of Levens by working as "of counsel" on Engle's case and many other AKL cases.) The motion argued that the complaint failed to allege any facts to support an inference that Engle acted knowingly and intentionally to deceive anyone. The motion explained that Engle withdrew her 2013 application because Department employees informed her that she (1) could not receive credit for 855 hours of appraisals where her supervisor did not sign those work logs before his death and (2) must report in her subsequent application the actual number of hours worked despite, according to Engle, contrary or confusing instructions on the Department's forms, which indicated that applicants must cap their appraisal work hours at a maximum of either 10 or 15 hours. Accordingly, Engle had underreported her number of hours worked in her prior 2013 application, and the certified number of hours worked in her 2014 application was correct and complied with the instructions of the Department's employees. Several exhibits were attached to the motion, including correspondence between the Department and Engle or her attorneys, the minutes of a Department meeting, portions of Engle's 2013 application, and her transcript and course completion certificates. The Department responded to the motion on September 15, and AKL filed a reply on September 29.

         ¶ 11 On September 29, 2015, AKL filed a motion to disqualify the Department's counsel, alleging that he was a necessary witness in this case. The ALJ set a schedule for the parties to file replies to the motion and continued the matter to December 1, 2015.

         ¶ 12 On October 14, 2015, the ALJ issued a written order denying Engle's motion to dismiss the complaint. The ALJ rejected Engle's argument that the complaint failed to allege sufficient facts to form a basis for discipline. The ALJ also ordered Engle to file her answer by November 2, 2015, and set the matter for a status hearing on December 1, 2015. The October 14 order, unlike previously served documents, was addressed to Engle's attorney Ko instead of the firm AKL.

         ¶ 13 In early October 2015 (according to documents ultimately filed on Engle's behalf), firm partner Augustine informed attorneys Richardson and Ko that he would retire and close the AKL firm at the end of the month. Richardson decided to purchase AKL's pending practice. He moved to a new office space and hired new employees. During this time, Richardson and Ko tried to make the transition as smooth as possible and "get up to speed" with all the cases.

         ¶ 14 On November 10, 2015, Richardson and Ko, now of Richardson Maraj, LLC, filed appearances on behalf of Engle. They did not file an answer or request an extension of time to answer.

         ¶ 15 On November 19, 2015, the ALJ denied, without prejudice, Engle's motion to disqualify opposing counsel.

         ¶ 16 On December 1, 2015, the ALJ issued an order holding Engle in default for failure to file an answer and transferred the matter to defendant, the Department's Real Estate Appraisal Administration and Disciplinary Board (Board), for its deliberations on the pleadings. The ALJ continued the matter for status to January 12, 2016.

         ¶ 17 On January 11, 2016, Engle's counsel filed a 118-page answer to the complaint and a motion to vacate the default. The motion petitioned the Department and the "Director of the Division of Real Estate" to vacate the default order. Counsel explained that AKL, Engle's previous counsel, had closed after the retirement of partner Augustine on October 30, 2015, which followed the death in July of partner Levens. Counsel explained their attempts to make a smooth transition from AKL to Richardson Maraj, LLC, despite the difficult circumstances, and stressed the extensive pleadings already filed in this case by AKL. Counsel stated that they had been retained by Engle on November 1, 2015, and urged, in the spirit of fairness, that Engle's license should not be lost due to an oversight by counsel during the transition from AKL to Richardson Maraj, LLC.

         ¶ 18 On January 12, 2016, the ALJ issued an order that noted the case had been transferred to the Board on the pleadings and continued the matter for a status hearing on March 1, 2016.

         ¶ 19 On January 13, 2016, the Board filed its report of findings of fact, conclusions of law, and recommendation that Engle's license be revoked. Specifically, the Board noted the ALJ's December 1, 2015, default order for failure to answer and concluded that Engle had violated the provisions of the Act as alleged in the complaint. The Board had signed its report on January ...