[Cite as Diso v. Dept. of Commerce, 2012-Ohio-4672.]


                                       COURT OF APPEALS
                                   DELAWARE COUNTY, OHIO
                                   FIFTH APPELLATE DISTRICT

                                                               JUDGES:
RICHARD B. DISO                                        :       Hon. W. Scott Gwin, P.J.
                                                       :       Hon. William B. Hoffman, J.
                        Plaintiff-Appellant            :       Hon. Sheila G. Farmer, J.
                                                       :
-vs-                                                   :
                                                       :       Case No. 2012-CA-25
DEPARTMENT OF COMMERCE                                 :
                                                       :
                     Defendant-Appellee                :       OPINION




CHARACTER OF PROCEEDING:                                   Civil appeal from the Delaware County
                                                           Court of Common Pleas, Case No. 10CV-F-
                                                           07-1088



JUDGMENT:                                                  Affirmed



DATE OF JUDGMENT ENTRY:                                    October 8, 2012


APPEARANCES:

For Plaintiff-Appellant                                    For Defendant-Appellee

GLENN LITTLEJOHN                                           MICHAEL DEWINE
1500 Detroit Ave. #611                                     OHIO ATTORNEY GENERAL
Cleveland, OH 44113                                        HILARY DAMASER
                                                           30 East Broad Street, 26th Floor
RICHARD B. DISCO                                           Columbus, OH 43215-3428
523 Shanahan Road
Lewis Center, OH 43035
[Cite as Diso v. Dept. of Commerce, 2012-Ohio-4672.]


Gwin, P.J.

        {¶1}    This case is before the Court on appeal from the March 12, 2012 decision

of the Delaware County Court of Common Pleas that affirmed the Ohio Department of

Commerce, Division of Financial Institutions’ [“Division”], July 7, 2010 Order denying

appellant Richard Diso’s [“Diso”] 2008 loan officer's renewal application upon a finding

that his character and general fitness did not command the confidence of the public and

did not warrant the belief that the business will be operated honestly and fairly in

compliance with the purposes of R.C. 1322.01 through 1322.12.

                                       Facts and Procedural History

        {¶2}    Diso held a loan officer license between June 15, 2004 and April 30, 2008.

(State’s Exhibit 7).

        {¶3}    On or about February 26, 2008, Diso sent the Division a “Mortgage

Broker/ Loan Officer Notice of Judgment,” in compliance with Ohio Adm.Code1301:8-7-

19(C). (See, State’s Exhibit 6). This form, received by the Division on March 12, 2008,

informed the Division of default judgments entered against Diso for credit card debts on

October 30, 2007 (“Discover Bank”; $17,539.74 plus interest); December 7, 2008

(“FIACard Services”; $23,820.14 plus interest); and March 18, 2008 (“Capital One

Bank”; $12,935.53 plus interest). (T. Apr. 21, 2009 at 26; 34). Attached to the form was

a letter and documentation from Diso in which Diso explained his frustration with

recently enacted laws that permitted credit card companies to increase interest rates,

                At the time this law went into affect [sic.], I just had surgery and

        later complications from the surgery. Making my normal minimum

        payments was not a problem. However, when my rates shot up on all of
Delaware County, Case No. 2012-CA-25                                                        3


       my accounts, I was forced to use my IRA account funds to keep up with

       the outrageous payments. Eventually I emptied the account and called the

       companies and asked them to lower my payments. They refused and I

       went into default on all credit cards.

               Enclosed you will find my credit reports showing my perfect

       payment history on all my accounts and when the late payments started in

       2006. I wrote and had conversations with Senator Brown’s staff, {letter

       enclosed} and currently working with Senator Voinovich’s office to rectify

       this matter.

               I should not have to forfeit my license due to the greed of politicians

       and no fault of my own. The collection agencies will not take reasonable

       payments and I refuse to pay the entire amount with penalties and late

       fees and still have a bad credit rating. That is un American [sic.] and I will

       fight it forever.

               I am asking you not revoke my licenses. This will further destroy my

       life. I live a cash only life style, which is very difficult and almost impossible

       in a bad market.

State’s Exhibit 6. (Letter dated Feb. 26, 2008 from Diso to the Division of Finance).

       {¶4}    On or about April 24, 2008 the Division received Diso’s 2008 loan officer

license renewal application. (T. Apr. 21, 2009 at 13; 32; State’s Exhibit 4).

       {¶5}    On or about August 7, 2008, the Division sent Diso a “Letter of

Investigation” requesting Diso provide the Division with the facts surrounding the unpaid

civil judgments. (T. Apr. 21, 2009 at 28-29; State’s Exhibit 8).
Delaware County, Case No. 2012-CA-25                                                  4


       {¶6}   In response to its request for information, on November 5, 2008 the

Division received a response from Diso that included a letter, copies of the judgment

entries, certificates of judgment and three letters of recommendation. (T. Apr. 21, 2009

at 28; 30; State’s Exhibit 5; State’s Exhibit 9). In the letter, Diso stated,

              In Spring of 2006, interest rates on all my credit cards soared as

       high as 30%. Up to that point, I had not been late on any cards. I had

       called all the credit card companies to ask them why my rates were raised

       and they responded we are allowed by law to raise them. At the time I just

       had surgery and complications from it. I explained this to the card

       companies and told them I could make the payments at the original

       interest rates, but not at the higher rate. They a [sic.] told me they would

       not lower the rates. I kept making the outrageous payments, taking money

       from my IRA until it was gone. I then defaulted on the credit cards.

              I called my elected officials, letters enclosed, and asked them under

       what law was this allowed? To this day none of them has helped me or

       knew the laws. Imagine, lawmakers not knowing the law. One reason why

       this country is so screwed up.

              Currently I am not making any payments and have no plans on

       making payments until I get answers on the law that allows credit card

       companies to raise rates. I am talking with several law firms to represent

       me fighting these judgements. [sic.]

              I have 18 plus years as a residential loan officer and have never

       been in legal or moral trouble. I plan on doing this years to come.[Sic.]
Delaware County, Case No. 2012-CA-25                                                        5


       Taking away my licenses will destroy my life. I can give you my resume'

       and you can check my past employment. I will continue to fight this and

       eventually win.

              Please contact me if further information is needed. I will work with

       the State, but I am pursuing legal action.

State’s Exhibit 5.

       {¶7}   In a "Notice of Intent to Deny Loan Officer License Renewal" dated

January 9, 2009, the Division informed Diso, of its intent to deny his 2008 loan officer

license renewal application pursuant to R.C. 119.07. Per R.C. 119.07, the Notice also

informed Diso that he had a right to request a hearing, which he did. (State’s Exhibit 1).

       {¶8}   On February 25, 2009, the parties appeared for the administrative hearing.

On the record at the hearing, Diso requested a continuance in order to obtain counsel,

which was granted by the hearing officer.

       {¶9}   The administrative hearing reconvened on April 21, 2009, at which time

the Division presented its case-in-chief. After the Division presented its evidence, Diso

asked for an additional continuance before presenting his case-in-chief, which the

hearing officer granted over the Division's objection.

       {¶10} The hearing was scheduled to reconvene for Diso's case-in-chief on June

30, 2009. However, the day prior, Diso filed for Chapter 7 bankruptcy, and provided

notice to the Division of the filing. Diso requested that the Division stay its administrative

proceedings in accordance with 11 U.S.C. 362(a)—the Bankruptcy stay provision.

Although the Division disputed the application of Section 362(a), the hearing officer

continued the hearing, and later stayed the matter until resolution of the bankruptcy.
Delaware County, Case No. 2012-CA-25                                                     6


       {¶11} On October 14, 2009, Diso obtained a bankruptcy discharge. Upon the

request of the hearing officer, the parties filed formal statements on their respective

positions on whether the Division could proceed. The Division indicated its intention to

proceed, and the matter was rescheduled to conclude the hearing on April 28, 2010. A

hearing was set for April 28, 2010. Counsel for both parties appeared at the hearing.

Diso did not personally appear on April 28; however, several Exhibits were submitted as

evidence on his behalf by his counsel. Diso’s counsel also strongly argued that the

Division could not proceed because of the automatic bankruptcy stay. The Division

presented additional testimony concerning the effect, or lack thereof, of the bankruptcy

on this case, since Diso had not filed for bankruptcy or given any indication he was

insolvent before the hearing began in April 2009.

       {¶12} On    May    14,   2010,   the   hearing   officer   issued   a   Report   and

Recommendation concluding,

              [Diso] accumulated over $100,000.00 in debt, which (was

       discharged in bankruptcy) demonstrates [Diso’s] lack of financial

       responsibility to command the confidence of the public to warrant the

       belief that his business would be conducted honestly and fairly in

       compliance with the purposes of the Ohio Mortgage Broker Act. R.C.

       1322.041(A)(10).

       {¶13} The report concluded that the Division had met its burden of proof, and

recommended that the Division deny Diso’s 2008 loan officer license renewal

application. Diso filed objections, again referencing the bankruptcy and arguing the

effect of the automatic stay.
Delaware County, Case No. 2012-CA-25                                                     7


       {¶14} On July 7, 2010, the Division issued a final order denying Diso's 2008 loan

officer renewal application. This order further stated,

              The   Division    modifies   paragraph      34   of   the   Report   and

       Recommendation to remove the words “financial responsibility” and the

       last sentence, “The superintendent shall not use a credit score as the sole

       basis for a license denial [.]” because those words and the last sentence

       were not included in R.C. 1322.041(A)(6) prior to January 1, 2012

       amendments. The Division also modifies paragraph 37 of the Report and

       Recommendation to substitute the words “lack of character and general

       fitness” for the words “lack of financial responsibility” because the words

       “financial responsibility” were not included in R.C. 1322.041(A)(60 prior to

       the January 1, 2010 amendments.

       {¶15} Diso did not file an application to renew his loan officer license in 2009.

Diso filed an appeal pursuant to R.C. 119.12.

       {¶16} On March 12, 2012, the Court of Common Pleas affirmed the Division's

Order. The trial court found,

              The [bankruptcy] stay was not in effect at the time of the April 28,

       2010 hearing or the July 7, 2010 Division Order. More importantly, the

       automatic stay provision does not prevent an administrative agency from

       taking necessary action pursuant to its regulatory authority. Ohio State Bar

       Association v Dalton, 124 Ohio 3d 154, 2010-Ohio-619.

       {¶17} The trial court further held that the Division Order was supported by

reliable, probative and substantial evidence.
Delaware County, Case No. 2012-CA-25                                                8


      {¶18} This case is before this Court on appeal from the March 12, 2012 decision

of the Delaware County Court of Common Pleas that affirmed the Division’s July 7,

2010 Order denying Diso's 2008 loan officer's renewal application upon a finding that

his character and general fitness did not command the confidence of the public and did

not warrant the belief that the business will be operated honestly and fairly in

compliance with the purposes of R.C. 1322.01 through 1322.12.

                                   Assignments of Error

      {¶19} Diso raises four assignments of error,

      {¶20} “I. THE COMMON PLEAS COURT ERRED IN AFFIRMING THE

DIVISION'S ORDER AS THE STATE ADMINISTRATIVE PROCESS GIVING RISE TO

THE ORDER VIOLATED THE AUTOMATIC STAY PROVISIONS OF THE FEDERAL

BANKRUPTCY ACT CODIFIED AT 11 U.S. 362(A), WHICH BECAME A PERMANENT

INJUNCTION VIA 11 U.S.C. 524(A).

      {¶21} “II. THE COMMON PLEAS COURT ERRED IN AFFIRMING THE

DIVISION'S ORDER AS THE ORDER VIOLATES THE PROHIBITIONS SET FORTH

IN THE FEDERAL BANKRUPTCY ACT AT II U.S.C. 525(A).

      {¶22} “III. THE COMMON PLEAS COURT ERRED IN AFFIRMING THE

ORDER BECAUSE THE ORDER IS NOT BASED UPON RELIABLE, PROBATIVE,

AND SUBSTANTIAL EVIDENCE AS REQUIRED BY OHIO REV. CODE 119.12.

      {¶23} “IV. THE COMMON PLEAS COURT ERRED IN AFFIRMING THE

ORDER AS THE ORDER VIOLATES THE SUBSTANTIVE AND/OR PROCEDURAL

RIGHTS OF THE APPELLANT UNDER THE OHIO AND/OR UNITED STATES

CONSTITUTIONS.”
Delaware County, Case No. 2012-CA-25                                                     9


                                     Standard of Review.

       {¶24} R.C. 119.12 permits loan officer licensees to appeal decisions of the Ohio

Department of Commerce's Division of Financial Institutions to the common pleas court.

       {¶25} In an administrative appeal, the court of common pleas reviews an order

to determine whether it is supported by reliable, probative, and substantial evidence and

is in accordance with law. R.C. 119.12. The Supreme Court of Ohio has defined

reliable, probative, and substantial evidence as follows:

              (1) “Reliable” evidence is dependable; that is, it can be confidently

       trusted. In order to be reliable, there must be a reasonable probability that

       the evidence is true. (2) “Probative” evidence is evidence that tends to

       prove the issue in question; it must be relevant in determining the issue.

       (3) “Substantial” evidence is evidence with some weight; it must have

       importance and value.

Our Place, Inc. v. Ohio Liquor Control Comm., 63 Ohio St.3d 570, 571, 589 N.E.2d

1303(1992) (footnotes omitted).

       {¶26} R.C. 119.12 requires a court of common pleas to conduct both “a hybrid

factual / legal inquiry and a purely legal inquiry.” Bartchy v. State Bd. of Edn., 120 Ohio

St.3d 205, 2008-Ohio-4826, 897 N.E. 2d 1096, ¶ 37. As to the first inquiry, the court

“‘must give deference to the agency's resolution of evidentiary conflicts,’” even though

the agency's findings are not conclusive. Id., quoting Ohio Historical Soc. v. State Emp.

Relations Bd., 66 Ohio St.3d 466, 470–71, 1993-Ohio-182, 613 N.E.2d 591. In this

regard, the Supreme Court has explained, as follows:
Delaware County, Case No. 2012-CA-25                                                     10


             Where the court, in its appraisal of the evidence, determines that

      there exist legally significant reasons for discrediting certain evidence

      relied upon by the administrative body, and necessary to its de-

      termination, the court may reverse, vacate, or modify the administrative

      order. Thus, where a witness' testimony is internally inconsistent, or is

      impeached by evidence of a prior inconsistent statement, the court may

      properly decide that such testimony should be given no weight. Likewise,

      where it appears that the administrative determination rests upon

      inferences improperly drawn from the evidence adduced, the court may

      reverse the administrative order.

Univ. of Cincinnati v. Conrad, 63 Ohio St.2d 108, 111–12, 407 N.E.2d 1265(1980);

Bartchy at ¶ 37. As to the second inquiry, the court must construe the law on its own. Id.

at ¶ 38, 897 N.E. 2d 1096, citing Ohio Historical Soc. at 471, 613 N.E.2d 591.

      {¶27} In a plurality opinion, the Ohio Supreme Court delineated the standard of

review and the role of a court of appeals:

             The court of appeals is even more limited in its review and can

      overturn findings of fact “‘only if the trial court has abused its discretion.’”

      Rossford Exempted Village School Dist. Bd. of Edn. v. State Bd. of Edn.

      (1992), 63 Ohio St.3d 705, 707, 590 N.E. 2d 1240, quoting Lorain Cty. Bd.

      of Edn. v. State Emp. Relations Bd. (1988), 40 Ohio St.3d 257, 260–261,

      533 N.E.2d 264. A court of appeals has plenary review when deciding

      whether the decision is in accordance with the law. Bartchy, 120 Ohio

      St.3d 205, 2008-Ohio-4826, 897 N.E.2d **1065 1096, at ¶ 43. A majority
Delaware County, Case No. 2012-CA-25                                                   11

      of justices in Bartchy reinforced this standard of deference. The plurality

      opinion stated that “the standards of review in the common pleas court

      and the court of appeals are meant to ensure proper deference to the

      state board,” Id. at ¶95, while the concurring opinion found error because

      “the court of appeals substituted its judgment for that of the trial court on

      issues of fact.” Id. at ¶98 (Lanzinger, J., concurring in syllabus and

      judgment only).

Spitznagel v. State Bd. Of Edn., 126 Ohio St.3d 174, 2010-Ohio-2715, 931 N.E.2d

1061, ¶ 14. Accord, Castle v. Ohio Dept. of Commerce, 168 Ohio App.3d 74, 2006-

Ohio-3702, 858 N.E.2d 843, ¶7 (5th Dist.); Bennett v. St. Medical Bd. Of Ohio, 10th

Dist. 10AP-833, 2011-Ohio-3158, ¶12.

      {¶28} The term “abuse of discretion” however has been applied in a somewhat

rote manner by the courts without analysis of the true purpose of the appellate court's

role in the review of a trial court's discretionary powers. An excellent analysis of the

misconception surrounding the concept of “abuse of discretion” was set forth by the

Arizona Supreme Court sitting en banc:

             The phrase “within the discretion of the trial court” is often used but

      the reason for that phrase being applied to certain issues is seldom

      examined. One of the primary reasons an issue is considered

      discretionary is that its resolution is based on factors which vary from case

      to case and which involve the balance of conflicting facts and equitable

      considerations. Walsh v. Centeio, 692 F.2d 1239, 1242 (9th Cir.1982).

      Thus, the phrase “within the discretion of the trial court” does not mean
Delaware County, Case No. 2012-CA-25                                                   12


      that the court is free to reach any conclusion it wishes. It does mean that

      where there are opposing equitable or factual considerations, we will not

      substitute our judgment for that of the trial court.

State v. Chapple, 135 Ariz. 281, 296-97, 660 P.2d 1208, 1223-24(1983).

      {¶29} However, the Court further explained,

             The term “abuse of discretion” is unfortunate. In ordinary language,

      “abuse” implies some form of corrupt practice, deceit or impropriety.

      Webster's Third New International Dictionary (1976). In this sense, the

      application of the word to the act of a trial judge who ruled in accordance

      with all the decided cases on the issue is inappropriate. However, in the

      legal context, the word “abuse” in the phrase “abuse of discretion” has

      been given a broader meaning. In the few cases that have attempted an

      analysis, the ordinary meaning of the word has been considered

      inappropriate and the phrase as a whole has been interpreted to apply

      where the reasons given by the court for its action are clearly untenable,

      legally incorrect, or amount to a denial of justice. State ex rel. Fletcher v.

      District Court of Jefferson County, 213 Iowa 822, 831, 238 N.W. 290, 294

      (1931). Similarly, a discretionary act which reaches an end or purpose not

      justified by, and clearly against, reason and evidence “is an abuse.”

      Kinnear v. Dennis, 97 Okl. 206, 207, 223 P. 383, 384 (1924).

             The law would be better served if we were to apply a different term,

      but since most appellate judges suffer from misocainea, we will no doubt

      continue to use the phrase “abuse of discretion.” Therefore, we should
Delaware County, Case No. 2012-CA-25                                                   13


      keep some operative principles in mind. Something is discretionary

      because it is based on an assessment of conflicting procedural, factual or

      equitable considerations which vary from case to case and which can be

      better determined or resolved by the trial judge, who has a more

      immediate grasp of all the facts of the case, an opportunity to see the

      parties, lawyers and witnesses, and who can better assess the impact of

      what occurs before him. Walsh v. Centeio, supra. Where a decision is

      made on that basis, it is truly discretionary and we will not substitute our

      judgment for that of the trial judge; we will not second-guess. Where,

      however, the facts or inferences from them are not in dispute and where

      there are few or no conflicting procedural, factual or equitable

      considerations, the resolution of the question is one of law or logic. Then it

      is our final responsibility to determine law and policy and it becomes our

      duty to “look over the shoulder” of the trial judge and, if appropriate,

      substitute our judgment for his or hers. This process is sometimes,

      unfortunately, described as a determination that the trial judge has

      “abused his discretion ...”

State v. Chapple, 135 Ariz. 281, 660 P.2d 1208 at n. 18; State v. Garza, 192 Ariz. 171,

175-76, 962 P.2d 898, 902(1998). See, State v. Firouzmandi, 5th Dist. No. 2006-CA-41,

2006-Ohio-5823, ¶¶ 54-55.
Delaware County, Case No. 2012-CA-25                                                    14


                                                 I.

       {¶30} In his first assignment of error Diso contends that the Division’s order

violates the automatic bankruptcy stay provision set forth in 11 U.S.C. 362(a).

Therefore, Diso continues, the trial court erred in affirming the order.

       {¶31} In the case at bar, the trial court found,

               [Diso] asserts that the Division's order vacates the automatic stay

       provision set forth in 11 U.S.C. § 362 (a). This argument is without merit.

       [Diso’s] bankruptcy was discharged on October 14, 2009 and therefore the

       stay was not in effect at the time of the April 28, 2010 hearing or the July

       7, 2010 Division Order. More importantly, the automatic stay provision

       does not prevent an administrative agency from taking necessary action

       pursuant to its regulatory authority. Ohio State Bar Association v Dalton,

       124 Ohio St.3d 154, 2010-Ohio-619, 924 N.E. 2d 821.

       {¶32} The record in this case supports the trial court’s findings. Diso notified the

Division of his bankruptcy filing; the hearing officer continued the hearing set for June

30, 2009 and issued an order staying the proceedings. Report & Recommendation at 2.

On October 14, 2009, the United States Bankruptcy Court, Southern District of Ohio

discharged Diso from bankruptcy. (Respondent’s Exhibit A; B) On March 10, 2010, the

hearing officer issued an order reconvening the hearing on April 28, 2010, more than six

months after Diso’s bankruptcy discharge. (Report & Recommendation at 9; State’s

Exhibit 11).
Delaware County, Case No. 2012-CA-25                                                     15


       {¶33} Even if the automatic stay were still in effect, the stay does not apply to

this administrative action, which the Division brought pursuant to its regulatory authority.

Ohio State Bar Ass'n v. Dalton, 124 Ohio St.3d 514, 2010-Ohio-619, 924 N.E.2d 821.

       {¶34} We find Diso’s attempt to distinguish Dalton unpersuasive. The Automatic

Stay Provision is intended to “preserve what remains of the debtor's insolvent estate

and ... provide for a systematic equitable liquidation procedure for all creditors, secured

as well as unsecured, thereby preventing a chaotic and uncontrolled scramble for the

debtor's assets in a variety of uncoordinated proceedings in different courts.” Chao v.

BDK Indus., L.L.C., 296 B.R. 165, 167 (C.D.Ill. 2003) (citing Holtkamp v. Littlefield, 669

F.2d 505, 508 (7th Cir.1982)).

       {¶35} In Solis v. Caro, N.D.Ill. No. 11 C 6884, 2012 WL 1230824(Apr. 12, 2012),

the Court noted,

              Exceptions to the Automatic Stay Provision are listed in 11 U.S.C. §

       362(b). One such exception, which the Secretary contends applies in this

       case, is “the commencement or continuation of an action or proceeding by

       a governmental unit ... to enforce such governmental unit's ... police or

       regulatory power.” 11 U.S.C. § 362(b)(4) (the “Government Proceeding

       Exception”). Courts narrowly construe this exception “to apply to the

       enforcement of ... laws affecting health, welfare, morals and safety.”

       Matter of Cash Currency Exch., Inc., 762 F.2d 542, 555 (7th Cir.1985)

       (citation omitted). In determining whether it applies, courts typically apply

       two tests: the “pecuniary purpose” test and the “public policy” test. BDK
Delaware County, Case No. 2012-CA-25                                                    16

       Indus., 296 B.R. at 167 (citing Chao v. Hospital Staffing Servs., Inc., 270

       F.3d 374, 384 (6th Cir.2001)).

       Id. at *3.

       {¶36} Under the pecuniary purpose test, reviewing courts focus on whether the

governmental proceeding relates primarily to the protection of the government's

pecuniary interest in the debtor's property, and not to matters of public safety [or public

policy]. Those proceedings that relate primarily to matters of public safety are exempted

from the stay. Under the public policy test, reviewing courts must distinguish between

proceedings that adjudicate private rights and those that effectuate public policy. Those

proceedings that effectuate public policy are exempted from the stay. Chao v. Hospital

Staffing Services, Inc., 270 F.3d 374, 385-386 (6th Cir.2001).

       {¶37} In the case at bar, the Division has no pecuniary interest in Diso's

property, and its action seeks only to effectuate public policy.

       {¶38} Accordingly, the license disciplinary action commenced in this case is not

subject to the automatic stay, and the Division Order does not violate Section 362(a).

The Court below did not abuse its discretion.

       {¶39} Diso’s first assignment of error is overruled.

                                                 II.

       {¶40} In his second assignment of error, Diso contends that 11 U.S.C. 525(a)

prohibits a governmental agency from denying licensure solely because the applicant

sought bankruptcy protection. Diso argues the Division predicated its action solely on

his decision to file for Chapter 7 bankruptcy.
Delaware County, Case No. 2012-CA-25                                                    17


       {¶41} Section 525(a) prohibits a governmental agency from denying licensure

solely because the applicant sought bankruptcy protection,

              (a) * * * [A] governmental unit may not * * * refuse to renew a

       license * * * [of] a person that is or has been a debtor under this title or a

       bankrupt or a debtor under the Bankruptcy Act * * * solely because such

       bankrupt or debtor is or has been a debtor under this title or a bankrupt or

       debtor under the Bankruptcy Act, * * * or has not paid a debt that is

       dischargeable in the case under this title or that was discharged under the

       Bankruptcy Act.

       {¶42} The Division argues,

              The Division's concern in this case is not with the fact that Mr. Diso

       filed bankruptcy to avoid paying civil judgments, or even with the mere fact

       that Mr. Diso has unpaid judgments. See April 28, 2010 Transcript, pp. 22-

       23, 26-28. Mr. Diso never indicated that he lacked the financial means to

       pay the judgments. Rather, Mr. Diso's conduct with regard to his creditors

       and his stated basis for refusing to pay his debts were the ultimate factors

       in this case. Mr. Diso refused to pay the credit card companies because

       he disagreed with those companies on their legal right to raise his interest

       rates and fees: "Currently I am not making any payments and have no

       plans on making payments until I get answers on the law that allows credit

       card companies to raise rates." (Emphasis added.) CR, State's Exhibit 5.

Appellee’ Brief at 14.
Delaware County, Case No. 2012-CA-25                                                  18


      {¶43} The record reflects that Diso submitted letters of recommendation on his

own behalf, as well as numerous letters to and from elected state officials. See T. April

28, 2010 at 29-33.

      {¶44} The common pleas courts and the courts of appeals apply different

standards of review for administrative appeals. As the court noted in Henley v.

Youngstown Bd. of Zoning Appeals,

             This statute grants a more limited power to the court of appeals to

      review the judgment of the common pleas court only on “questions of law,”

      which does not include the same extensive power to weigh “the

      preponderance of substantial, reliable and probative evidence,’ as is

      granted to the common pleas court. * * * It is incumbent on the trial court

      to examine the evidence. Such is not the charge of the appellate court. * *

      * The fact that the court of appeals * * * might have arrived at a different

      conclusion than the administrative agency is immaterial. Appellate courts

      must not substitute their judgment for those of an administrative agency or

      a trial court absent the approved criteria for doing so.”

90 Ohio St.3d 142, 147, 735 N.E.2d 433, quoting Lorain City School Dist. Bd. of Edn. v.

State Emp. Relations Bd., 40 Ohio St.3d 257, 261, 533 N.E.2d 264, 267 (1988). Thus,

unless this court determines that the trial court abused its discretion, we are compelled

to affirm its decision as the court of appeals may not engage in what amounts to a

substitution of judgment of the trial court. Graziano v. Amherst Exempted Village Bd. of

Edn., 32 Ohio St.3d 289, 294, 513 N.E.2d 282(1987). (Douglas, J., concurring).
Delaware County, Case No. 2012-CA-25                                                   19


      {¶45} Regardless of the position that the Division now asserts, at the time the

Division sent Diso the Notice of Intent letter and also at the time the Division presented

its case-in-chief before the hearing officer, R.C. 1322.041(A)(6) and Ohio Adm.Code

1301:8-7-2(H) allowed the Division to consider the fact that Diso had unpaid civil

judgments in determining his character and fitness to hold a loan officer license. What

occurred next is what creates the conundrum in this case.

      {¶46} After the Division informed Diso of its intent to deny the renewal of his

license Diso sought the protection of the bankruptcy court and on October 14, 2009

Diso obtained a bankruptcy discharge, which included his unpaid civil judgments. Diso

now contends that the Division cannot base a decision to deny his license upon the

unpaid civil judgments.

      {¶47} Section 525 is a codification of the doctrine articulated in Perez v.

Campbell, 402 U.S. 637, 91 S.Ct. 1704, 29 L.Ed.2d 233 (1971). In essence, Section

525 provides that no governmental unit may deny or revoke a license solely because a

person has not paid a debt that was discharged in bankruptcy. Conflicts with Section

525 have led some courts to either invalidate state statutes under the Supremacy

Clause of the U.S. Constitution, or enjoin creditors from proceeding with collection

efforts from third parties. See, Matter of Layfield, 12 B.R. 846 (Bankr.N.D.Ala.1981);

Green v. Yang, 29 B.R. 682 (Bankr.S.D.Ohio 1983).

      {¶48} The legislative history of the Bankruptcy Act indicates that Congress

intended to bar a per se rule which would make filing in bankruptcy an automatic bar to

a license or similar grant. Congress did not intend to preclude examination of the

circumstances surrounding bankruptcy. See, H.R.Rep. No. 95-595, 95th Cong. 1st
Delaware County, Case No. 2012-CA-25                                                  20


Session at 164 (1977), reprinted in 5 U.S.Code Cong. & Admin.News, 95th Cong.2d

Sess. 5787, 5963, 6126 (1978) providing in pertinent part:

             The prohibition does not extend so far as to prohibit examination of

      the factors surrounding the bankruptcy, the imposition of financial

      responsibility rules if they are not imposed only on former bankrupts, or

      the examination of prospective financial condition or managerial ability.

      The purpose of the section is to prevent automatic reaction against an

      individual for availing himself of the protection of the bankruptcy laws....

      (I)n those cases where the causes of bankruptcy are intimately connected

      with the license, grant or employment in question, an examination into the

      circumstances surrounding the bankruptcy will permit governmental units

      to pursue appropriate regulatory policies and take appropriate action

      without running afoul of bankruptcy policy.

In the Matter of Anonymous, 74 N.Y.2d 938, 939 550 N.Y.S.2d 270, 271, 549 N.E.2d

472, 473 (1989); In re Stewart, 2010 OK 61, 240 P.3d 666, 671(Watt, J. dissenting).

      {¶49} In a case analogous to that at bar, the New York Court of Appeals

considered a challenge brought by a bar applicant who was denied admission after the

Character and Fitness Committee concluded that the applicant lacked “the character

necessary to discipline himself to control his standard of living and the amount of his

indebtedness, thus showing a lack of financial responsibility necessary for an attorney.”

In the Matter of Anonymous, supra. The applicant contended that the Character and

Fitness Committee and the Appellate Division had denied his admission because of his
Delaware County, Case No. 2012-CA-25                                                    21


bankruptcy in violation of 11 U.S.C. 525. In analyzing the issue, the Court of Appeals

wrote,

                The distinction is subtle because the State's actions may not inhibit

         individuals from taking advantage of the bankruptcy laws to avoid

         jeopardizing a future legal career. Nor can the State use its power to

         examine Bar applicants as a means of coercing them into reaffirming

         debts previously discharged (see, Perez v. Campbell, 402 U.S. 637, 649–

         652, 91 S.Ct. 1704, 1711–1713, supra; Note, Evaluation of a Bar

         Applicant's Moral Character: May a State Consider the Circumstances

         Surrounding a Discharge in Bankruptcy?, 56 Ind.L.J. 703, 714). A

         determination of unfitness must rest not on the fact of bankruptcy but on

         conduct reasonably viewed as incompatible with a lawyer's duties and

         responsibilities as a member of the Bar. To successfully establish a claim

         that 11 U.S.C. § 525 has been violated, an applicant must establish that

         insolvency, the filing of bankruptcy or the discharge of debt is the sole

         reason for denial of the application (see, 11 U.S.C. § 525[a]; In re

         Hopkins, 66 B.R. 828 [Bank.Ct., W.D.Ark.]; see also, 11 U.S.C.S. § 525,

         History).

74 N.Y. 2d at 940, 550 N.Y.S. 2d at 271– 72, 549 N.E. 2d at 473-74. See also, Matter of

the Application of Taylor, 293 Or. 285, 647 P.2d 462 (1982) [Bankruptcy Act did not

prohibit examination of circumstances surrounding bankruptcy, as these circumstances

illustrate judgment of the applicant for admission to bar in handling serious financial

obligations.]; In re Fasse, 40 Bankr. 198(D. Col. 1984)[If factors other than the
Delaware County, Case No. 2012-CA-25                                                  22


nonpayment of the debt indicate the judgment debtor is unsuitable to hold a real estate

license, the state may commence a proceeding to revoke debtor's license. Hinders v.

Miami Valley Regional Transit Authority, 22 B.R. 810 (Bankr.S.D.Ohio 1982). However,

if the only reason for suspension or revocation of the license is a debt discharged in

bankruptcy, such action would be in direct contravention of § 525].

       {¶50} Courts have also concluded that for police jobs consideration of the fact of

prior bankruptcy was lawful. See Marshall v. District of Columbia Government, 559 F.2d

726, 729 (D.C.Cir.1977); Detz v. Hoover, 539 F.Supp. 532 (E.D.Pa. 1982); In re

Stewart, 240 P.3d at 674 [Perez presents no bar to determinations that circumstances

surrounding the filing of a bankruptcy petition may be considered in situations where the

professional licensure of an individual may implicate the duty to manage money

judiciously or where the filing may reflect character flaws of the applicant.]

       {¶51} In other words, Diso cannot resort to bankruptcy as a short cut to

obtaining a renewal of his license. More importantly, Diso cannot circumvent the

consideration of his financial conduct, which the Division is required to investigate

pursuant to R.C. 1322.041(A)(6) and Ohio Adm.Code 1301:8-7-2(H), by filing for

bankruptcy.

       {¶52} In the case at bar, the hearing officer considered, among other things,

evidence of Diso’s debts as submitted in his bankruptcy petition.(T., Apr. 28, 2010 at 5-

7; Respondent’s Exhibit B; Report and Recommendation at 6). The hearing officer

further considered letters of recommendation submitted on Diso’s behalf. (Report and

Recommendation at 5; 6).
Delaware County, Case No. 2012-CA-25                                                     23


       {¶53} The record reflects that the Division presented evidence that it did not

discriminate against Diso because he had unpaid debts or because he filed for

bankruptcy. Further, while there is evidence that the Division would consider, along with

all other evidence, if Diso paid his civil judgments, there is no evidence in the record

that the Division ever conditioned licensure on Diso’s paying his discharged civil

judgments. The record reflects that the Division often approves loan officer applicants

who have unpaid debts and applicants who previously filed for bankruptcy. The

testimony at Diso's hearing illustrated that as many as sixty percent of the individuals

who apply for the license Diso seeks are bankruptcy filers, and many of those

individuals obtain licenses from the Division. See, T. April 28, 2010 at 28-29.

       {¶54} In the case at bar, the Division did not condition the denial of Diso’s

application to renew his license on his failure to repay the discharged debts or on the

fact that he had filed for bankruptcy. The denial of his application to renew did not occur

automatically when the default judgments or the bankruptcy discharge were entered.

Rather, Diso was afforded a due process hearing in which he was represented by

counsel and had the opportunity to present evidence before his application was denied.

We also note that the statute does not preclude Diso from reapplying for a loan officer

license. (T., Dec. 1, 2010 at 23; 28; 38). At no time did the Division seek to compel

repayment of the discharged judgments as a condition to granting the license.

       {¶55} The decision in Diso’s case was not based upon the fact that Diso filed

bankruptcy; rather the decision rests upon conduct reasonably viewed as incompatible

to a loan officer’s duties. In deciding whether to issue a loan officer license the Division
Delaware County, Case No. 2012-CA-25                                                     24


may properly consider, as a factor, the fact that the applicant has been unable to

manage his financial affairs.

       {¶56} Therefore, the Division’s order denying Diso’s license renewal application

does not violate the prohibiting contained in 11 U.S.C. 525(a).

       {¶57} Diso’s second assignment of error is overruled in its entirety.

                                                III.

       {¶58} In his third assignment of error, Diso maintains that the trial court’s

decision in affirming the Division’s order denying Diso’s license renewal application is in

error because the order is not base upon reliable, probative and substantial evidence.

       {¶59} The Supreme Court of Ohio has delineated the standard of review and the

role of a court of appeals in an administrative appeal,

              If the judgment of the court of common pleas is then appealed to

       the court of appeals, review in the appellate court is strictly limited to a

       determination of whether the common pleas court abused its discretion.

       This scope of review is, of course, extremely narrow. The term ‘abuse of

       discretion’ has been defined as implying ‘“not merely error of judgment,

       but perversity of will, passion, prejudice, partiality, or moral delinquency.”’

       (Citations omitted.)

Graziano v. Amherst Exempted Village Bd. of Edn., 32 Ohio St.3d 289, 295, 513 N.E.2d

282(1987). (Douglas, J., concurring).

       {¶60} In the case at bar, the trial court issued a five page Judgment Entry that

includes a thorough discussion of the testimony and evidence presented to the hearing

officer. The record before the hearing officer contained three pages that Diso presented
Delaware County, Case No. 2012-CA-25                                                       25


from his bankruptcy petition Schedule F that indicated that Diso accumulated over

$100,000.00 in debts. (T., Apr. 28, 2010 at 5-7; Respondent’s Exhibit B; Report and

Recommendation      at   6).   The    hearing   officer   further   considered   letters   of

recommendation submitted on Diso’s behalf. (Report and Recommendation at 5; 6).

      {¶61} Diso argues in this appeal that because his debts were the result of poor

economic conditions, the civil judgments against him do not constitute reliable,

probative, or substantive evidence.

      {¶62} R.C. 1322.041(A)(6) and Ohio Adm.Code 1301:8-7-2(H) allowed the

Division to consider the fact that Diso had unpaid civil judgments in determining his

character and fitness to hold a loan officer license. Further, the hearing officer did

consider Diso’s letters setting forth his economic hardship.

       {¶63} “‘The fact that the court of appeals * * * might have arrived at a different

conclusion than did the administrative agency is immaterial. Appellate courts must not

substitute their judgment for those of an administrative agency or a trial court absent the

approved criteria for doing so.’” Rossford Exempted Village School Dist., 63 Ohio St.3d

at 707, 590 N.E.2d 1240, quoting Lorain City Bd. of Edn. v. State Emp. Relations Bd.

(1988), 40 Ohio St.3d 257, 260–261, 533 N.E.2d 264.

       {¶64} In the matter sub judice, we do not perceive an “unreasonable, arbitrary or

unconscionable attitude or one that is “not merely error of judgment, but [one of]

perversity of will, passion, prejudice, partiality, or moral delinquency. Diso’s arguments

go to the weight of the evidence, rather than demonstrating an “abuse of discretion.”
Delaware County, Case No. 2012-CA-25                                                        26


       {¶65} Diso next contends that the hearing officer did not consider his letters of

recommendation. We reject this argument. The hearing officer did consider letters of

recommendation submitted on Diso’s behalf. (Report and Recommendation at 5; 6).

       {¶66} Diso next reiterates the argument that we rejected in our discussion of his

second assignment of error, to wit, 11 U.S.C. 525(a) prohibits a governmental agency

from denying licensure solely because the applicant obtained a discharge in bankruptcy

of the underlying civil judgments. However, as we have previously found that in deciding

whether to issue a loan officer license the Division may properly consider, as a factor,

the fact that the applicant has been unable to manage his financial affairs.

       {¶67} Upon review, we conclude that the trial court did not abuse its discretion in

concluding that reliable, probative, and substantial evidence supported the Division’s

determination.

       {¶68} Diso’s third assignment of error is overruled in its entirety.

                                                 IV.

       {¶69} In his fourth assignment of error, Diso contends that the Division violated

his due process rights by not proving proper notice of the charges against him.

       {¶70} R.C. 119.07 states in pertinent part, “[n]otice shall be given by registered

mail, return receipt requested, and shall include the charges or other reasons for the

proposed action, the law or rule directly involved, and a statement informing the party

that the party is entitled to a hearing if the party requests it within thirty days of the time

of mailing the notice.” Under R.C. 119.07, the administrative agency is required to give

Appellants notice of the charges or other reasons for the proposed action. “The purpose

of such notice is to give the party charged with a violation adequate notice to enable the
Delaware County, Case No. 2012-CA-25                                                 27

party to prepare a defense to the charges.” Sohi v. Ohio State Dental Board, 10th Dist.

No. 96APD05-687, 1997 WL 275495(May 20, 1997), citing Geroc v. Ohio Veterinary

Medical Bd., 37 Ohio App.3d 192, 199, 525 N.E.2d 501(1987), quoting Keaton v. State,

2 Ohio App.3d 480, 483, 442 N.E.2d 1315(1981). “In addition, the due process clause of

the Fourteenth Amendment to the United States Constitution, to some extent, is

applicable to hearings before administrative agencies, and such procedural due process

includes reasonable notice of the subject matter of the hearing. State ex rel. LTV Steel

Co. v. Indus. Comm., 102 Ohio App.3d 100, 103-104, 656 N.E.2d 1016(1995) (citations

omitted). Hence, if relator was not given proper notice as required under R.C. 119.07

and as dictated under procedural due process principles, the [trial court] may reverse

the board's order.” Id.

       {¶71} Diso argues that the Division improperly amended the Notice of Intent sent

to him on January 1, 2009. (State’s Exhibit 1). Diso contends that he was not informed

that his conduct in refusing to pay the civil judgments would be considered in deciding

whether to approve his application for a renewal of his loan officer license.

       {¶72} The Notice of Intent clearly provides that the three default judgments were

considered as the basis for denying his renewal. However, the notice further provided,

              G. In March 2008, Respondent submitted to the Division a

       Notification of Judgment form, supporting documentation and a statement

       informing the Division of his refusal to pay the civil judgments entered

       against him.
Delaware County, Case No. 2012-CA-25                                                    28


              H. In November 2008, Respondent informed the Division that he

       had not paid and reiterated his refusal to pay the civil judgments entered

       against him.

State’s Exhibit 1. That Diso’s conduct as expressed in paragraphs G and H were

considered as a basis for denying the renewal of his license was addressed before the

hearing officer during the April 21, 2009 hearing. (T. Apr. 21, 2009 at 22-25). If Diso did

not realize that his conduct was going to be an issue, this discussion obviates that

concern. After the Division presented its case-in-chief on April 21, 2009, the hearing

was adjourned and would not recommence until after Diso’s discharge in bankruptcy.

The hearing recommenced on April 28, 2010 over one year from when the Division

presented its case-in-chief. If Diso was unaware that the Division was considering his

conduct in deciding whether to renew his license, he was certainly aware of it before the

April 28, 2010 hearing.

       {¶73} Given the record, we find that Diso has failed to demonstrate that he was

prejudiced. He had over one year after the Division presented its case-in-chief in which

to prepare his defense.

       {¶74} Diso next argues that the Division has punished him for exercising his

right to free speech.

       {¶75} Diso was given notice and an opportunity to be heard before his

application was denied. On May 14, 2010, the hearing officer issued a Report and

Recommendation concluding,

              [Diso] accumulated over $100,000.00 in debt, which (was

       discharged in bankruptcy) demonstrates [Diso’s] lack of financial
Delaware County, Case No. 2012-CA-25                                              29


      responsibility to command the confidence of the public to warrant the

      belief that his business would be conducted honestly and fairly in

      compliance with the purposes of the Ohio Mortgage Broker Act. R.C.

      1322.041(A)(10).

      {¶76} The report concluded that the Division had met its burden of proof, and

recommended that the Division deny Diso’s 2008 loan officer license renewal

application. Diso filed objections, again referencing the bankruptcy and arguing the

effect of the automatic stay. Both the Report and Recommendation and the Division’s

Final Order base the decision to deny Diso’s 2008 loan officer's renewal application

upon the fact that Diso has been unable to manage his financial affairs.

      {¶77} Accordingly, there is no evidence in the record that the decision to deny

Diso’s 2008 loan officer's renewal application was in response to his exercise of

constitutionally protected First Amendment freedoms.

      {¶78} Diso’s fourth assignment of error is overruled in its entirety.
Delaware County, Case No. 2012-CA-25                                                       30


                                            Conclusion

       {¶79} Having overruled each of Diso's assignments of error and having

concluded that the trial court did not abuse its discretion in affirming the Division's order,

we affirm the judgment of the Delaware County Court of Common Pleas.

By Gwin, P.J.,

Hoffman, J., and

Farmer, J., concur



                                               _________________________________
                                               HON. W. SCOTT GWIN


                                               _________________________________
                                               HON. WILLIAM B. HOFFMAN


                                               _________________________________
                                               HON. SHEILA G. FARMER




WSG:clw 0914
[Cite as Diso v. Dept. of Commerce, 2012-Ohio-4672.]


             IN THE COURT OF APPEALS FOR DELAWARE COUNTY, OHIO

                                   FIFTH APPELLATE DISTRICT


RICHARD B. DISO                                        :
                                                       :
                           Plaintiff-Appellant         :
                                                       :
                                                       :
-vs-                                                   :       JUDGMENT ENTRY
                                                       :
DEPARTMENT OF COMMERCE                                 :
                                                       :
                                                       :
                        Defendant-Appellee             :       CASE NO. 2012-CA-25




       For the reasons stated in our accompanying Memorandum-Opinion, the judgment of

the Delaware County Court of Common Pleas, Ohio, is affirmed. Costs to appellant.




                                                           _________________________________
                                                           HON. W. SCOTT GWIN


                                                           _________________________________
                                                           HON. WILLIAM B. HOFFMAN


                                                           _________________________________
                                                           HON. SHEILA G. FARMER
