STEVEN EDWARD KING V DEPARTMENT OF LABOR AND ECONOMIC GROWTH
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STATE OF MICHIGAN
COURT OF APPEALS
STEVEN EDWARD KING,
UNPUBLISHED
January 21, 2010
Plaintiff-Appellee,
v
STATE OF MICHIGAN; MICHIGAN
DEPARTMENT OF LABOR AND ECONOMIC
GROWTH, an Executive agency of the State of
Michigan, and KENNETH ROSS, solely in his
Capacity as Commissioner of the Office of
Financial and Insurance Regulation,
No. 288290
Ingham Circuit Court
LC No. 08-814-CZ
Defendant-Appellant.
Before: Bandstra, P.J. and Sawyer and Owens, JJ.
PER CURIAM.
In this insurance producer licensing case, defendants appeal as of right from the trial
court’s order granting plaintiff’s motion for summary disposition on his requests for an
injunction and for declaratory relief following defendants’ revocation of his resident insurance
producer license. We affirm.
I. Facts
Both parties agree upon the facts of this case. In 2000, plaintiff Steven King was
convicted of felony Operating Under the Influence of Liquor (OUIL), third offense. In 2004,
plaintiff applied for a Michigan license as a resident insurance producer.1 At the time, he fully
disclosed his prior felony conviction. The Michigan Office of Financial and Insurance Services2
1
An insurance producer is typically called an insurance agent. In Michigan, there are two types
of insurance producers that may be licensed: resident insurance producers, who reside in
Michigan, and nonresident insurance producers, who reside and are licensed in another state but
transact some business here. MCL 500.1205, MCL 500.1206a.
2
In 2008, this office was reorganized and its name changed to the Michigan Office of Financial
and Insurance Regulation (OFIR). We will use the acronym OFIS to refer to this agency because
(continued…)
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(OFIS) reviewed plaintiff’s application, and, in spite of his felony conviction, granted him a
resident insurance producer license.
Plaintiff engaged in insurance sales from 2004 until March 19, 2008 when he received
notification that OFIS would be rescinding his insurance producer license because of his felony
OUIL conviction.
OFIS claimed that the licensing staff who reviewed plaintiff’s application for licensure in
2004 were using review standards that were no longer supposed to be effective. Before the
Insurance Code, MCL 500.101, et seq. was amended in 2002, the Commissioner of the OFIS had
the discretion to determine whether a felony conviction indicated a lack of good moral character.
According to defendants, the 2002 amendment prohibited licensing anyone convicted of a
felony.3 Although then-Commissioner Linda Watters issued an unpublished administrative
decision4 that interpreted the 2002 amendments to the Insurance Code and determined that they
had removed the Commissioner’s discretion and replaced it with an outright ban on licensing
individuals convicted of a felony, plaintiff’s application and several others were nonetheless
reviewed under the former standard and approved.
An internal investigation at OFIS revealed that the Mazur decision was never published
or communicated to the public by way of rule, new guideline, or OFIS letter or directive.
Various OFIS employees reported that this decision was never formally communicated internally
and that even following the decision, the administrative procedure for deliberating upon and
considering applications for waiver under 18 USC § 1033 remained in place.
OFIS claims that once it discovered that a mistake had been made in granting plaintiff a
license, it immediately began administrative proceedings to revoke the license. OFIS sent
plaintiff a letter revoking his license in March, 2008 as a result of his OUIL conviction. Plaintiff
contends that this was not simply a case of a bureaucratic mistake, but rather a case of
intradepartmental politics gone awry.
Plaintiff filed the present action seeking a declaration that defendants violated MCL
338.41 (Michigan’s Former Offenders Act) and seeking an injunction to prevent defendants from
rescinding plaintiff’s insurance producer license. Plaintiff also asked the trial court to declare
that defendants failed to comply with Michigan’s Insurance Code, MCL 500.100, et seq and
(…continued)
most of the events that occurred giving rise to this case happened when the agency was still
called OFIS.
3
Although this is how OFIS claims to have interpreted the amendment to the statute, a document
complied by OFIS in 2007 detailing several other states’ interpretations of identical statutes and
the interplay between the language of other states’ statutes equivalent to MCL 500.1205 and
MCL 500.1239 indicates that Michigan was the only state in 2007 to interpret the statue in a
manner that gave the Commissioner absolutely no discretion to issue insurance controller
licenses to felons.
4
Mazur v OFIS, Case No. 03-384-L, Docket No. 2003-1515 (May 14, 2004). “The Mazur
Decision” or Mazur.
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asked that defendants be enjoined from rescinding plaintiff’s insurance producer license based
solely on his fully disclosed conviction for OUIL.
Both plaintiff and defendants moved for summary disposition and the trial court ruled in
favor of plaintiff.
II. Standard of Review
We review a trial court’s decision to grant injunctive relief for an abuse of discretion.
Pontiac Fire Fighters Union Local 376 v City of Pontiac, 482 Mich 1, 8; 753 NW2d 595 (2008).
“The trial court abuses its discretion when its decision falls outside [the] range of principled
outcomes.” Id. This Court reviews de novo the findings of fact supporting the decision in an
equitable action for clear error. Maatta v Dead River Campers, Inc, 263 Mich App 604, 607;
689 NW2d 491 (2004).
III. Analysis
The following sections of the 2004 Insurance Code are at issue in this case: MCL
500.205; MCL 500.1205; and, MCL 500.1239.
MCL 500.205 governs decisions of the Insurance Commissioner and provided:
Orders, decisions, findings, rulings, determinations, opinions, actions, and
inactions of the commissioner in this act shall be made or reached in the
reasonable exercise of discretion.
MCL 500.1205 provided, in relevant part:
(1) A person applying for a resident insurance producer license shall file with the
commissioner the uniform application required by the commissioner and shall
declare under penalty of refusal, suspension, or revocation of the license that the
statements made in the application are true, correct, and complete to the best of
the individual’s knowledge and belief. An application for a resident insurer
producer license shall not be approved unless the commissioner finds that the
individual meets all of the following:
* * *
(b) Has not committed any act that is a ground for denial, suspension, or
revocation under section 1239.5
5
In 2004, MCL 500.1205(b) stated that the individual “has not committed any act that is a
ground for denial, suspension, or revocation under section 1239.” In January 2009, Governor
Granholm signed into law two bills amending the Insurance Code. The bills specifically barred
issuance of an insurance producer’s license to individuals with prior felony convictions. (See
(continued…)
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MCL 500.1239 provided, in relevant part:
(1) In addition to any other powers under this act, the commissioner may place on
probation, suspend, revoke, or refuse to issue an insurance producer's license or
may levy a civil fine under section 1244 or any combination of actions for any 1
or more of the following causes:
* * *
(f) Having been convicted of a felony.
The crux of this case is whether defendants could rescind plaintiff’s license after the
agency had already granted the license when the agency was fully cognizant of plaintiff’s prior
OUIL felony conviction when it issued the license in 2004. When and whether the agency
actually did or did not have the authority to use its discretion to grant the license is beside the
point in light of the fact that the license was issued under full disclosure and utilized by plaintiff
for a period of years. If plaintiff were to attempt to obtain a license today, the agency could
properly deny the request pursuant to existing statutes because current language declares that the
Commissioner shall deny a license to an applicant convicted of a felony. MCL 500.1205.
In addition, there is no dispute that one possible interpretation (the one advocated in the
Mazur decision) of the interplay between the statutes, as they existed in 2004, would have
allowed the agency to deny plaintiff’s request for a license. The agency did not, however, deny
the application. Because the agency granted plaintiff his license in 2004, plaintiff had no reason
to seek to challenge the interpretation of MCL 500.1205 that the agency now claims it should
have utilized back in 2004. Plaintiff has relied upon the issuance of that license to pursue a
career that is contingent upon his retention of the license.
(…continued)
Plaintiff’s Exhibit 5). The new law made the following changes to the wording of the statue: in
the introductory language, it substituted “suspend, or revoke” for “suspend, revoke, or refuse to
issue”, and inserted “, and the Commissioner shall refuse to issue a license under section 1205 or
1206a”; and inserted “under section 1205 or 1206a”. MCL 500.1239(1) now reads, in relevant
part:
In addition to any other powers under this act, the Commissioner may place on
probation, suspend, or revoke an insurance producer’s license or may levy a civil
fine under section 1244 or any combination of actions, and the Commissioner
shall refuse to issue a license under section 1205 or 1206a, for any 1 or more of
the following causes [emphasis added]:
* * *
(f) Having been convicted of a felony. [MCL 500.1239]
The statue has been revised in such a way so as to eliminate the element of discretion that may
have existed in 2004.
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Although this Court could engage in an analysis of the statute as written in 2004, and
make a determination regarding the correct interpretation at that time, this would be a waste of
judicial resources, as defendants already granted plaintiff a license with full knowledge of
plaintiff’s felony conviction and plaintiff’s criminal record has not changed in the last five years.
Furthermore, as MCL 500.1205 is currently written, it prohibits the insurance
Commissioner from issuing a license to a convicted felon, but it does not prohibit a convicted
felon from being a licensed insurance producer, nor does it, as defendants argue, require that a
license previously granted to a felon, be revoked. MCL 500.1239(1) states that the
Commissioner may revoke an insurance producer’s license if an individual is convicted of a
felony. This is permissive, not mandatory language. Therefore, all of defendants’ arguments
that it was or is “required” to revoke plaintiff’s license are without merit. It is statutorily
permissible for plaintiff to retain his license.
We conclude that the present case is akin to Kern v City of Flint, 125 Mich App 24; 335
NW2d 708 (1983). In Kern, this Court reviewed the issuance of declaratory relief to a retired
police officer based on the equitable principle of estoppel. The plaintiff Kern retired from the
Flint police force after the City represented to him that his retirement benefit would exceed $700
per month. He received such benefits for a period of two years, until the City claimed error and
reduced payment. This Court upheld the trial court’s declaratory relief requiring the City to
reinstate the higher payment.
We agree with defendant’s contention that generally the rule in this jurisdiction is
that where one pays money to another by mistake, that person is entitled to
recover the amount of the overpayment even if the mistake is due to lack of
investigation. Montgomery Ward & Co v Williams, 330 Mich 275, 284, 47 NW2d
607 (1951); Couper v Metropolitan Life Ins Co, 250 Mich 540, 544, 230 NW 929
(1930). However, an exception to the rule exists where the party receiving the
money has changed his position in reliance upon his receipt of it so that it would
be inequitable to permit recovery. Lake Gogebic Lumber Co. v Burns, 331 Mich
315, 319, 49 NW2d 310 (1951). This exception comports with the general
principles of estoppel which apply to the actions of municipal officials.
* * *
“ ‘If under all the circumstances, the acts of the public body
have created a situation where it would be inequitable and
unjust to permit it to deny what it has done or permitted to be
done, the doctrine of estoppel will be applied to the
municipality.’ 2 Antieau, Municipal Corporation Law, §
16A.01, p 16A-6.” Parker v West Bloomfield Twp, 60 Mich
App 583, 591-592, 231 NW2d 424 (1975). [Kern, 125 Mich
App 28-29.]
Here we also uphold the trial court’s application of principles of equity. There is no question
that plaintiff has relied on defendants’ issuance of an insurance producer license to pursue and
establish a career over the last five years. The license was not issued because of any mutual or
factual mistake. Defendants are the ones who claim to have made a “mistake” in their
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application of their own internal procedures. However, even at the time the license was issued,
there is ample evidence that the “mistake” was actually an unresolved internal dispute over the
proper application of the statute, rather than a simple clerical error. As the old equitable maxim
states “equity regards that as seen which ought to be seen and having so seen, as done that which
ought to be done.” See Warren Tool Co v Stephenson, 11 Mich App 274; 161 NW2d 133
(1968).
Defendants argue that this is not an appropriate case in which to apply equitable
principles because equity cannot override the legal statutory mandates in the Insurance Code. As
we previously concluded, the current Insurance Code does not require that a license already
issued to one convicted of a felony, when the agency had full knowledge of that felony when the
license was issued, be revoked. Therefore, the equitable decision involved in this case does not
contradict the statute.
Defendants also argue that the trial court erroneously issued a writ of mandamus.
However, the trial court record indicates that the court never issued such a writ. The order
granting summary disposition in favor of plaintiff clearly states that it is “an order granting
summary disposition on counts II and III of plaintiff’s complaint.” Plaintiff’s request for a writ
of mandamus was in count IV of the complaint and the trial court’s records indicate that the
parties stipulated to the dismissal of “the Remaining Counts of Plaintiff’s Complaint” without
prejudice on September 26, 2009.
Affirmed.
/s/ Richard A. Bandstra
/s/ David H. Sawyer
/s/ Donald S. Owens
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