Opinion handed down January 29, 2013
In 2010, the Missouri SAFE
Act was passed in response to the federal SAFE Act that was enacted in the wake
of the 2008 financial crises.[2] A
provision of the Missouri SAFE Act, section 443.713(2)(a), prohibited the
director of the division of finance from issuing a mortgage loan originator
license to anyone who had pleaded guilty to a felony seven years prior to the
date of the application.[3] Ray Garozzo,
who had been a mortgage loan originator for several decades, applied for a
license in 2010, but had pleaded guilty to a felony in 2006. [4] As a result, Garozzo’s
license application was rejected.[5]
Garozzo subsequently filed a suit claiming that section 443.713(2)(a)
violated portions of the Missouri Constitution, namely: article I, section 30’s
ban on bills of attainder; article I, section 13’s ban on retrospective laws;
and article I, section 10’s guarantee of due process.[6] Although the lower court held section
443.713(2)(a) unconstitutional, the Supreme Court of Missouri reversed the
ruling.[7]
I. Facts & Holding
Ray Garozzo had been working
as a mortgage loan originator since 1985.[8]
At that time, there was no licensing requirement for mortgage loan
originators.[9] In 2006, Garozzo pleaded
guilty to a class C felony of possession of a controlled substance and received
a suspended imposition of sentence that was conditioned on several provisions,
which he successfully completed.[10]
In 2008, the United States Congress
enacted the Secure and Fair Enforcement Mortgage Licensing Act (“SAFE Act”) as
part of a legislative response to the subprime mortgage crises.[11] The SAFE Act established a nationwide
licensing requirement for mortgage loan originators and provided that the
federal government will establish a licensing system in any state that declines
to adopt a licensing and registration law that complies with the minimum
requirements of the act.[12] As a
result, in 2010, the General Assembly enacted the Missouri Secure and Fair
Enforcement Mortgage Licensing Act (“Missouri SAFE Act”) and charged the
division of finance with the responsibility of administering the law.[13]
Like the federal SAFE Act,
the Missouri SAFE Act provides that “[n]o individual . . . shall engage in the
business of a mortgage loan originator … without first obtaining and
maintaining a license . . .”[14] The
Missouri SAFE Act also prohibits the director from issuing a mortgage loan
originator’s license to an applicant who has pleaded guilty to a felony within
seven years prior to the date of the application.[15]
In July 2010, Garozzo
submitted an application for a mortgage loan originator license, and the
application was denied pursuant to section 443.713(2)(a) because Garozzo had
pleaded guilty to a felony in 2006.
Garozzo subsequently filed a notice of appeal with the residential
mortgage board. However, the board
determined that section 443.413(2)(a) required the denial of Garozzo’s license
application.[16]
Garozzo then filed a
petition for review in the circuit court.[17]
The circuit court entered a declaratory judgment finding that section
443.713(2)(a) was unconstitutional as applied to Garozzo in that the statute
constituted a bill of attainder, violated the article I, section 13 ban on
retrospective laws, and violated Garozzo’s right to substantive due process. The circuit court ordered the director to
issue a license to Garozzo and the director appealed. After separately
analyzing each of the supposed constitutional violations, the Supreme Court of
Missouri concluded that section 443.713(2)(a) was not unconstitutional.[18]
In order to prove that
section 443.713(2)(a) amounted to a bill of attainder, the Court noted that
Garozzo had to show that the statute singled out a specifically designated
person or group and inflicted punishment on that person or group.[19] The Court noted that section 443.713 was a
licensing statute that was enacted to protect the public and not to punish the
applicant.[20] As a result, the court
determined that section 443.713(2)(a) did not inflict punishment on applicants
with felony records and held that section 443.713(2)(a) was not a bill of
attainder.[21]
Regarding Garozzo’s claim
that section 443.713(2)(a) violated the state’s constitutional ban on
retrospective laws, the Supreme Court of Missouri concluded that the ban on
retrospective laws did not prohibit the state from considering past conduct in
determining licensing eligibility in the future.[22] Therefore, the Court held that section
443.713(2)(a) did not violate article 1, section 13.[23] Furthermore, the Court struck down Garozzo’s
argument that section 443.713(2)(a) violated his right to procedural and
substantive due process.[24] The Court
stated that Garozzo’s right to procedural due process was triggered by the
denial of his license application and was satisfied by the review process that
led to the appeal. Also, the court noted
that the denial of Garozzo’s license application did not violate any of
Garozzo’s fundamental rights; therefore, section 443.713(2)(a) did not violate
his right to substantive due process.[25]
II. Legal Background
According to Supreme Court
of Missouri precedent, a bill of attainder is a legislative enactment that
inflicts punishment on a specific person or group without trial or judicial
action.[26] The historical meaning of
legislative punishment generally includes statutes that bar a specific person
or identifiable group from participating in a regulated business or profession.[27] For example, in Cummings v.
Missouri, the United States Supreme Court invalidated, as a bill of
attainder, a provision of Missouri’s 1865 Constitution that prevented a priest
from practicing his religious obligations without taking an oath that he had
not participated in the rebellion against the Union, which amounted to punishment.[28]
Although there are numerous
cases suggesting a historical trend of treating bans on employment as
punishment, Missouri and federal court’s look at second and third analytical
factors of challenged statutes to determine if challenged statutes are in fact
punitive in practice.[29] The second
analytical factor asks the court to determine whether the challenged statute
reasonably can be said to advance a non-punitive legislative purpose.[30] For instance, in Hawker v.
People of New York[31] the Supreme Court held that a statute
prohibiting convicted felons from practicing medicine did not amount to
punishment in violation of the bill of attainder clause because a legitimate
legislative purpose was advanced by certifying that only persons of good
character practiced medicine.[32]
Moreover, Missouri courts have consistently held that “the purpose
behind licensing statutes is to protect the public rather than to punish the
licensed professional,” which indicates the legislature did not intend section
443.713(2)(a) to inflict punishment on potential applicants.[33]
Garozzo also asserted that
section 443.713(2)(a) violated article I, section 13 of the Missouri Constitution
which prohibits retrospective laws.[34]
Retrospective laws are “those which take away or impair vested rights
acquired under existing laws, or create a new obligation, impose a new duty, or
attach a new disability in respect to transactions or considerations already
past.”[35] However, Missouri courts have
consistently held that professional licenses do not amount to a vested right.[36] Furthermore, licensing requirements that
impose restrictions based upon an applicant’s previous criminal convictions do
not impose a new obligation or duty on the applicant, as prohibited by article
I, section 13.[37] Also, a licensing
statute that does not require a prospective applicant to do anything and
imposes the regulatory obligation on a government entity would not qualify as a
“new disability in respect to transactions or considerations already past.”[38]
The government must provide
procedural due process before depriving anyone of his or her professional
license because such licenses are “property” for the purposes of the Fourteenth
Amendment to the United States Constitution.[39] For professions that were historically
unlicensed, the Missouri courts have held that there is no such thing as a “de
facto” license and that there exists no right for the law to remain unchanged
or “be free from further collateral consequences of [a] prior guilty plea.”[40]
In order to establish a
violation of an individual’s substantive due process, a plaintiff must demonstrate
that the state’s conduct was conscience-shocking and violated “one or more of
the fundamental rights that are deeply rooted in [United States] history and
tradition, and implicit in the concept of ordered liberty, such that neither
liberty nor justice would exist if they were sacrificed.”[41] There is no Missouri precedent supporting the
proposition that the denial of a professional license to someone who has
pleaded guilty to a felony violates a deeply rooted fundamental right implicit
in the concept of liberty.
III. Comment
The Supreme Court of
Missouri correctly decided to reverse the lower court’s holding and find that
the denial of Garozzo’s license was constitutional. Garozzo, as the party challenging the
statute’s validity, bared the burden of proving the statute clearly and
undoubtedly violated the Missouri Constitution, a burden he clearly did not
meet. Numerous statutory licensing
requirements, both state and federal, contain provisions that deny applicant’s
the ability to obtain a license if they had previously been convicted of a
felony. Therefore, Garozzo’s claim that
section 443.713(2)(a) violated is substantive due process rights by denying him
a license was without merit. As the
Court pointed out, an individual’s ability to obtain a professional license is
a privilege, not a right. Therefore, the denial of such a license to one who
has pleaded guilty to a felony cannot be said to violate that individual’s
fundamental rights.
Also, it is clear, given the legislative
history, that section 443.713(2)(a) of the Missouri SAFE Act was not intended
to inflict punishment on a particular group of individuals as Garozzo claimed,
and therefore, did not amount to a bill of attainder. Furthermore, regarding Garozzo’s claim that
section 443.713(2)(a) violated the Missouri Constitution’s ban on retrospective
laws, Missouri precedent clearly establishes that a professional license is not
a vested right as Garozzo asserted, but is instead a privilege that may be
limited by the State. Moreover, section
443.713(2)(a) did not impose a new obligation, duty, or disability on Garozzo
because he was under no affirmative obligation to comply with section
443.713(2)(a) and only chose to comply with the provision because he decided to
continue to serve as a mortgage loan originator.
- Haden Crumpton
[1]
No. SC92152 (Mo. Jan. 29, 2013)(en
banc), available at http://www.courts.mo.gov/file.jsp?id=59611. The West
reporter citation is Garozzo v. Missouri Dept. of Ins., Fin. Institutions &
Prof'l Registration, Div. of Fin., 389 S.W.3d 660 (Mo. 2013) (en banc).
[2] Id. at 2.
[3] Id. at 3.
[4] Id. at 2.
[5] Id.
[6] Id. at 3.
[7] Id. at 14.
[8] Id. at 2.
[9] Id.
[10] Id.
[11] Id.
[12] Id.; see also 12 U.S.C. 5107.
[13] Id.
[14] §443706.1.
[15] §443.713(2)(a).
[16] Id. at 2.
[17] Id.
[18] Id. at 3
[19] Id. at 4.
[20] Id.
[21] Id. at 5.
[22] Id. at 11
[23] Id.
[24] Id. at 12.
[25] Id.
[26] Id. at 4.; see also Doe v. Phillips, 194
S.W.3d 833, 848 (Mo. banc 2006).
[27] Id. at 5; see also State ex rel. Bunker Res.
Recycling & Reclamation, Inc. v. Mehan, 782 S.W>2d 381, 386 (Mo. banc
1990).
[28] Id.
[29] Id. at 6
[30] Id.
[31] 170 U.S.189 (1898).
[32] Garozzo, slip op. at 6.
[33] Id.; see also Duncan v. Missouri Bd. of
Architects, Professional Engineers and Land Surveyors, 744 S.W.2d 524, 531-32
(Mo. App. 1988).
[34] Id. at 7-8.
[35] Id. at 8.
[36] Id.
[37] Id. at 9.
[38] Id. at 11.
[39]
Id.
[40] Id.
[41] Id.; see also Slusarchuk v. Hoff, 346 F.3d
1178, 1181-82 (8th Cir. 2003).
