Diamond v. State , 302 Neb. 892 ( 2019 )


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    DIAMOND v. STATE
    Cite as 
    302 Neb. 892
    M ark Diamond, appellant, v. State of Nebraska,
    Department of Insurance, appellee.
    ___ N.W.2d ___
    Filed April 19, 2019.     No. S-17-1107.
    1. Administrative Law: Judgments: Appeal and Error. A judgment or
    final order rendered by a district court in a judicial review pursuant to
    the Administrative Procedure Act may be reversed, vacated, or modified
    by an appellate court for errors appearing on the record.
    2. ____: ____: ____. When reviewing an order of a district court under
    the Administrative Procedure Act for errors appearing on the record,
    the inquiry is whether the decision conforms to the law, is sup-
    ported by competent evidence, and is neither arbitrary, capricious, nor
    unreasonable.
    3. Judgments: Appeal and Error. An appellate court, in reviewing a dis-
    trict court’s judgment for errors appearing on the record, will not substi-
    tute its factual findings for those of the district court where competent
    evidence supports those findings.
    4. Statutes: Appeal and Error. Statutory interpretation presents a ques-
    tion of law, for which an appellate court has an obligation to reach
    an independent conclusion irrespective of the decision made by the
    court below.
    5. Insurance: Sales. The Insurance Producers Licensing Act, Neb. Rev.
    Stat. §§ 44-4047 to 44-4069 (Reissue 2010 & Cum. Supp. 2018), autho-
    rizes disciplinary actions against licensed insurance producers.
    6. Actions: Jurisdiction: Insurance: Sales: Time. Under Neb. Rev. Stat.
    § 44-4065 (Reissue 2010), if an insurance producer fails to report a
    civil action taken against the producer in another jurisdiction, within 30
    days of the final disposition of the civil action, the producer violates the
    reporting requirement of § 44-4065(1).
    7. Statutes: Appeal and Error. When statutory interpretation is one of
    first impression, the statutory language is to be given its plain and ordi-
    nary meaning, and an appellate court will not resort to interpretation
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    to ascertain the meaning of statutory words which are plain, direct,
    and unambiguous.
    8. Insurance: Sales: Fraud: Words and Phrases. Under Neb. Rev. Stat.
    § 44-4059(1)(g) (Cum. Supp. 2018), “fraud” of an insurance producer
    means any act, omission, or concealment which involves a breach of
    legal or equitable duty, trust, or confidence justly reposed, and injurious
    to another or by which an undue and unconscientious advantage is taken
    of another.
    9. Appeal and Error. To be considered by an appellate court, an alleged
    error must be both specifically assigned and specifically argued in the
    brief of the party asserting the error.
    Appeal from the District Court for Lancaster County: Susan
    I. Strong, Judge. Affirmed.
    Timothy P. Sullivan, of Sullivan Law, and Arthur W. Leach,
    of Law Office of Arthur W. Leach, for appellant.
    Douglas J. Peterson, Attorney General, and John L. Jelkin
    for appellee.
    Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke,
    Papik, and Freudenberg, JJ.
    Cassel, J.
    INTRODUCTION
    This appeal presents our first opportunity to consider the
    Insurance Producers Licensing Act.1 Addressing the regula-
    tory effect of a consent judgment previously entered against
    Mark Diamond, a licensed insurance producer, the Nebraska
    Department of Insurance determined that he had violated three
    provisions of the act and imposed an administrative fine. On
    review,2 the district court upheld the department’s order. On
    appeal to this court, he contests only one violation—arguing
    1
    Neb. Rev. Stat. §§ 44-4047 to 44-4069 (Reissue 2010 & Cum. Supp.
    2018).
    2
    See Neb. Rev. Stat. § 84-917 (Reissue 2014) (judicial review under
    Administrative Procedure Act).
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    that his confession of liability in the consent judgment did not
    “admit[]” to “fraud” within the meaning of § 44-4059(1)(g).
    Applying settled rules of statutory interpretation, we reject
    Diamond’s argument. Accordingly, we affirm the district
    court’s judgment.
    BACKGROUND
    Colorado Litigation
    In February 2012, the United States of America and the
    State of Colorado filed a civil action in the U.S. District
    Court for the District of Colorado against Bella Homes, LLC,
    and individuals within the company, including Diamond. The
    complaint alleged violations of Mortgage Assistance Relief
    Services (MARS)3 rules and related claims.
    According to the complaint, Bella Homes intended to buy
    homes from individuals who were struggling to make their
    mortgage payments and provide a 3- to 7-year repayment
    plan. Essentially, it was expected to purchase the home-
    owner’s mortgage from the existing lender and enter into a
    lease with the homeowner, where the homeowner would pay
    40 to 60 percent of their mortgage payment in “rent” to Bella
    Homes. It never purchased a home loan from a mortgage
    lender. Nor did it stop any foreclosure against a homeowner. It
    did take over $3 million in “rent” from more than 450 custom-
    ers nationwide.
    Diamond was the chief executive officer and president of
    Bella Homes. He formed Bella Homes at the request of Daniel
    Delpiano, who developed the idea for that enterprise. Because
    Delpiano had twice been convicted of fraud, he was prohibited
    from being a fiduciary or handling another’s finances.
    In March 2012, Diamond entered into a stipulated consent
    judgment and permanent injunction, wherein he “confess[ed]
    liability” to counts 6 and 7 of the complaint. Each of these
    two counts consisted of two numbered paragraphs. The first
    3
    See 12 C.F.R. § 1015 (2018) (previously found at 16 C.F.R. § 322 (2012)).
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    paragraph under each count incorporated the allegations in
    paragraphs 1 through 184 of the complaint. Those paragraphs
    described an “ongoing foreclosure-rescue scheme to defraud
    distressed homeowners nationwide,” “fraudulently obtain[ing]
    approximately $3,000,000 from over 450 homeowners,”
    “numerous material misrepresentations to convey the false
    and fraudulent impression that homeowners will be able to
    remain in their home,” and “misrepresentations to convey the
    false impression that Bella Homes will stop any foreclosure
    on the home.” The second paragraph under each count alleged
    that “[b]y virtue of the foregoing [allegations in paragraphs 1
    through 184],” Diamond and others were violating a particular
    rule in a specified manner.
    Thus, the second paragraph of count 6 asserted that
    Diamond was “violating [§ 1015.3(c)] of the MARS Rule”
    and that he did so “by making a representation, expressly or
    by implication, about the benefits, performance, or efficacy
    of any mortgage assistance relief service without competent
    and reliable evidence that substantiate[d] that the representa-
    tion [was] true.” The second paragraph of count 7 asserted
    that Diamond was “violating [§ 1015.5(a)] of the MARS
    Rule,” which makes it a violation to “‘Request or receive
    payment of any fee or other consideration until the consumer
    has executed a written agreement between the consumer and
    the consumer’s dwelling loan holder or servicer incorporating
    the offer of mortgage assistance relief the provider obtained
    from the consumer’s dwelling loan holder or servicer.’” In
    the consent judgment, Bella Homes admitted to the allega-
    tions in the complaint and acknowledged its role in defraud-
    ing homeowners.
    Nebraska A dministrative Action
    In December 2016, more than 4 years after the entry of
    the consent judgment, the Department of Insurance brought
    a petition against Diamond for violations of §§ 44-4065(1)
    and 44-4059(1)(g) and (h). After a hearing, the director found
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    that because Diamond admitted that he failed to report the
    consent order within 30 days of disposition, he violated
    § 44-4065(1). The director reasoned that although Diamond
    may not have been complicit in the fraudulent scheme, lend-
    ing his reputation and partnering with someone convicted
    of fraud showed irresponsibility in business and violated
    § 44-4059(1)(h). The director also determined that because
    Diamond admitted to violating MARS rule § 1015.3(c), he
    admitted liability to a count that included fraud and therefore,
    had violated § 44-4059(1)(g). The director concluded that
    because several years had passed and no Nebraska insurance
    consumers had been harmed, revocation of Diamond’s license
    was not warranted. The director levied an administrative
    fine of $2,500.
    Diamond appealed to the district court. In disposing of
    the appeal, the court reasoned that Diamond clearly violated
    § 44-4065(1), because he admitted that he did not report his
    involvement in the Colorado civil action within 30 days of
    the consent judgment. The court found that in the consent
    judgment, Diamond admitted to paragraphs 1 through 184 of
    the Colorado complaint, to forming Bella Homes, to paying
    Delpiano through another company he owned, and to receiving
    plane ticket reimbursement. This, the court reasoned, provided
    credible evidence of fraud in violation of § 44-4059(1)(g) and
    (h). The court explained that it would be an abrogation of the
    department’s duty to disregard the substance of the consent
    decree and not exercise its disciplinary authority. For these
    reasons, the court affirmed the department’s order.
    Diamond filed a timely appeal, which we moved to our
    docket.4
    ASSIGNMENT OF ERROR
    Diamond assigns that the district court erred in affirming
    the department’s decision to levy a fine against him, because
    4
    See Neb. Rev. Stat. § 24-1106(3) (Reissue 2016).
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    the decision was “predicated on a finding that [Diamond] was
    involved in fraud, which [was] incorrect as a matter of law.”
    STANDARD OF REVIEW
    [1-3] A judgment or final order rendered by a district court
    in a judicial review pursuant to the Administrative Procedure
    Act may be reversed, vacated, or modified by an appellate
    court for errors appearing on the record.5 When reviewing an
    order of a district court under the Administrative Procedure
    Act for errors appearing on the record, the inquiry is whether
    the decision conforms to the law, is supported by competent
    evidence, and is neither arbitrary, capricious, nor unreason-
    able.6 An appellate court, in reviewing a district court’s judg-
    ment for errors appearing on the record, will not substitute its
    factual findings for those of the district court where competent
    evidence supports those findings.7
    [4] Statutory interpretation presents a question of law, for
    which an appellate court has an obligation to reach an inde-
    pendent conclusion irrespective of the decision made by the
    court below.8
    ANALYSIS
    [5] The Insurance Producers Licensing Act governs the
    qualifications and procedures for the licensing of insurance
    producers.9 An insurance producer is defined as “a person
    required to be licensed under the laws of this state, including
    the Insurance Producers Licensing Act, to sell, solicit, or nego-
    tiate insurance.”10 The act is intended to “improve efficiency,
    5
    Leon V. v. Nebraska Dept. of Health & Human Servs., ante p. 81, 
    921 N.W.2d 584
    (2019).
    6
    
    Id. 7 Id.
     8
    Patterson v. Metropolitan Util. Dist., ante p. 442, 
    923 N.W.2d 717
    (2019).
    9
    § 44-4048(1).
    10
    Neb. Rev. Stat. § 44-103(10) (Reissue 2010); § 44-4049(5).
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    permit the use of new technology, and reduce costs associated
    with issuing and renewing insurance licenses.”11 Diamond does
    not dispute that he is an insurance producer subject to the act
    or that the act authorizes disciplinary actions against licensed
    insurance producers.
    In Diamond’s brief, he contended that the district court inap-
    propriately predicated the determination of whether he violated
    § 44-4065 on a finding of fraud. There, he argued that what
    both the department’s hearing officer and the district court
    “ignored” was that “there was never an admission of ‘fraud’
    made by [Diamond] sufficient to find him in violation of
    . . . § 44-4065 (1)(g) which would have triggered the reporting
    requirements of section 1 of that statute.”12 Because § 44-4065
    does not have a subsection (1)(g), Diamond’s argument in his
    brief was difficult to follow.
    At oral argument, Diamond conceded that he does not
    contest the district court’s determinations that he violated
    §§ 44-4065(1) (failing to report) and 44-4059(1)(h) (irrespon-
    sibility in business). As clarified at oral argument, his sole
    contention on appeal is that the district court erred in finding
    that in the consent judgment, he admitted to fraud within the
    meaning of § 44-4059(1)(g). We disagree.
    [6] Before turning to that argument, we briefly address
    Diamond’s failure to report. Under § 44-4065(1), “An insur-
    ance producer shall report to the director any administra-
    tive action taken against the producer in another jurisdic-
    tion, . . . by another governmental agency within thirty
    days of the final disposition of the matter.” For purposes
    of § 44-4065(1), an “administrative action” includes, but is
    not limited to, “any arbitration or mediation award, discipli­
    nary action, civil action, or sanction taken against or involv-
    ing an insurance producer.”13 Diamond no longer contends
    11
    § 44-4048(1).
    12
    Reply brief for appellant at 4.
    13
    § 44-4065(4).
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    that in order to v­ iolate § 44-4065(1), the underlying action
    must be predicated on fraud. We hold that under § 44-4065,
    if an insurance producer fails to report a civil action taken
    against the producer in another jurisdiction, within 30 days
    of the final disposition of the civil action, the producer vio-
    lates the reporting requirement of § 44-4065(1). It is abun-
    dantly clear from the record that Diamond failed to report
    the consent judgment within 30 days and therefore violated
    § 44-4065(1). And at oral argument, he conceded that he had
    done so.
    Now, we turn to Diamond’s remaining argument: The district
    court erred in finding that in the consent judgment, Diamond
    admitted to fraud within the meaning of § 44-4059(1)(g).
    Diamond contends that because he never specifically admit-
    ted to fraud under MARS rule § 1015.3(c), nor was the word
    “fraud” used in that count, the court could not find that he
    admitted to fraud. We reject this argument.
    We recall the controlling statutory language. Under
    § 44-4059(1):
    The director may suspend, revoke, or refuse to issue or
    renew an insurance producer’s license or may levy an
    administrative fine in accordance with subsection (4) of
    this section, or any combination of actions, for any one or
    more of the following causes:
    ....
    (g) Having admitted or been found to have commit-
    ted any insurance unfair trade practice, any unfair claims
    settlement practice, or fraud.
    Here, resolution of Diamond’s argument requires us
    to consider two matters: the meaning of “fraud” under
    § 44-4059(1)(g) and the scope of his “admi[ssion]” in the con­
    sent judgment.
    The meaning of “fraud” in § 44-4059(1)(g) flows from the
    Nebraska act and not from another jurisdiction’s character-
    ization of a particular violation of a law or regulation. Thus,
    the meaning of “fraud” under § 44-4059(1)(g) is purely a
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    question of statutory interpretation. And settled principles of
    law dictate how we interpret this statute.
    [7] When statutory interpretation is one of first impression,
    the statutory language is to be given its plain and ordinary
    meaning, and an appellate court will not resort to interpretation
    to ascertain the meaning of statutory words which are plain,
    direct, and unambiguous.14 Here, we consider the meaning of
    “fraud” under § 44-4059(1)(g) for the first time. Thus, we look
    to the plain and ordinary meaning of the word “fraud” as used
    in the context of the act.
    The Legislature adopted the Insurance Producers Licensing
    Act in 2001 as a response to the federal Gramm-Leach-
    Bliley Financial Services Modernization Act.15 The act was
    crafted and promulgated by the National Association of
    Insurance Commissioners as the Producer Licensing Model
    Act.16 Although neither the model act nor the Nebraska enact-
    ment expressly defined “fraud,” the meaning of the word has
    long been understood in Nebraska insurance law. Over three-­
    quarters of a century ago, we relied upon two definitions of
    “fraud” in order to determine the meaning of that word under
    another insurance statute.17 In the first definition, fraud con-
    sists of some deceitful practice or willful device, resorted to
    with intent to deprive another of his or her right, or in some
    manner to do him or her an injury, and, as distinguished
    from negligence, is always positive, intentional.18 The second
    definition noted that fraud, in the sense of a court of equity,
    properly includes all acts, omissions, and concealments which
    involve a breach of legal or equitable duty, trust, or confidence
    14
    Pan v. IOC Realty Specialist, 
    301 Neb. 256
    , 
    918 N.W.2d 273
    (2018).
    15
    Committee Statement, L.B. 51, Committee on Banking, Commerce and
    Insurance, 97th Leg., 1st Sess. (Jan. 23, 2001).
    16
    Floor Debate, 97th Leg., 1st Sess. 449 (Jan. 29, 2001).
    17
    See Gillan v. Equitable Life Assurance Society, 
    143 Neb. 647
    , 
    10 N.W.2d 693
    (1943).
    18
    See 
    id. - 901
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    justly reposed, and are injurious to another, or by which an
    undue and unconscientious advantage is taken of another.19
    In § 44-4059(1)(g), context matters. This subsection groups
    the word “fraud” with the phrases “any insurance unfair
    trade practice” and “any unfair claims settlement practice.”20
    Significantly, the Legislature did not limit “fraud” to insurance
    fraud or claims fraud in the way that it did with the other two
    phrases. In this context, the word “fraud” works broadly and
    not in a narrow technical sense.
    [8] But more important, a broad definition of “fraud”
    comports with an obvious goal of the Insurance Producers
    Licensing Act: to protect the public from the unscrupulous
    behavior of licensees. Thus, we use the broad definition to
    fulfill that goal rather than to frustrate it. We hold that under
    § 44-4059(1)(g), “fraud” of an insurance producer means any
    act, omission, or concealment which involves a breach of legal
    or equitable duty, trust, or confidence justly reposed, and inju-
    rious to another or by which an undue and unconscientious
    advantage is taken of another.
    Having defined “fraud” under § 44-4059(1)(g), we turn to
    the scope of the “admi[ssion]” made by Diamond’s confes-
    sion of liability in the consent judgment. If the allegations
    of paragraphs 1 through 184 of the complaint are included
    in the scope of the admission, this is an easy call. Those
    paragraphs described an “ongoing foreclosure-rescue scheme
    to defraud distressed homeowners nationwide,” “fraudulently
    obtain[ing] approximately $3,000,000 from over 450 home-
    owners,” “numerous material misrepresentations to convey the
    false and fraudulent impression that homeowners will be able
    to remain in their home,” and “misrepresentations to convey
    the false impression that Bella Homes will stop any foreclosure
    on the home.” Those paragraphs described a blatantly fraudu-
    lent scheme.
    19
    
    Id. 20 §
    44-4059(1)(g).
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    But even without relying on those, Diamond’s confession
    of liability in the consent judgment admitted to fraud within
    the meaning of § 44-4059(1)(g). Under the consent judgment,
    he confessed liability under count 6 in the complaint, which
    stated, “Defendants are violating [§ 1015.3(c)] of the MARS
    Rule by making a representation, expressly or by implication,
    about the benefits, performance, or efficacy of any mort-
    gage assistance relief service without competent and reliable
    evidence that substantiates that the representation is true.”
    Diamond does not dispute that he was one of the “defendants”
    described in count 6. We apply the meaning of the word
    “fraud” as used in § 44-4059(1)(g) to Diamond’s confession
    of liability for a violation of § 1015.3(c) of the MARS rule.
    Our conclusion is: Diamond admitted to an omission in viola-
    tion of a legal duty by which an undue and unconscientious
    advantage was taken of another. Accordingly, the district court
    did not err when it determined that Diamond admitted to fraud
    in violation of § 44-4059(1)(g).
    Diamond also argues that evidence produced after the con-
    sent judgment showed that Diamond was merely a “dupe” of
    Delpiano. We do not believe that Diamond may collaterally
    attack the substance of his admission in the consent judgment.
    Moreover, adopting this argument would effectively permit an
    insurance producer to blindly act as a front man for a fraudu-
    lent scheme. This calls to mind the maxim of the three wise
    monkeys who see no evil, hear no evil, and speak no evil. We
    do not believe that when the Legislature regulated insurance
    producers, it intended to condone a producer’s blind and deaf
    participation in a fraudulent scheme.
    [9] We address one final matter. At least in Diamond’s brief,
    he argues that “[b]y making a finding of fraudulent conduct,
    the Department acted arbitrarily and capriciously, exceeding
    its authority under the Administrative Procedure[] Act.”21 To
    be considered by an appellate court, an alleged error must be
    21
    Brief for appellant at 17.
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    both specifically assigned and specifically argued in the brief
    of the party asserting the error.22 As this argument was not
    specifically assigned, nor was it specifically argued beyond the
    single sentence, we will not address the argument.
    CONCLUSION
    Because Diamond did not report the consent judgment
    taken against him in another jurisdiction within 30 days of the
    final disposition of the civil action, he violated § 44-4065(1).
    The department had the authority to levy an administrative
    fine. And within the meaning of § 44-4059(1)(g), Diamond’s
    confession of liability in the consent judgment constituted an
    admission of fraud.
    The decision of the district court conformed to the law,
    was supported by competent evidence, and was neither arbi-
    trary, capricious, nor unreasonable. Accordingly, we affirm the
    judgment of the district court.
    A ffirmed.
    22
    Chafin v. Wisconsin Province Society of Jesus, 
    301 Neb. 94
    , 
    917 N.W.2d 821
    (2018).