Title: In re Chapman v. J.P. Schmidt, Insurance Commissioner

State: hawaii

Issuer: Hawaii Supreme Court

Document:

*** NOT FOR PUBLICATION ***

a

No. 25630

IN THE SUPREME COURT OF THE STATE OF HAWAI'I

a

In the Matter of

 

ot 3

DUANE 188 CHAPUAN, Respondent-Appellant, val
vs Bef

. sa °

J.P. SCHMIDT, INSURANCE COMMISSIONER, =: =
Complainant -Appellee. | is =

 

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CIV. NO, 02-2-0129-01)

‘MEMORANDUM OPINION
Moon, C.J., Levinson, Nakayama, Acobi

   

and Duffy, 33.)
on March 30, 2005, petitioner/respondent-appellant
Duane Lee Chapman filed an application for writ of certiorari
thereinafter, application] to review the Intermediate Court of
Appeals (ICA) February 14, 2005 summary disposition order (S00)
affirming in part and vacating in part, the first circuit
court’s' January 13, 2003 judgnent affirming the state of
Hawai'i, Department of Commerce and Consumer Affairs, Insurance
Division's [hereinafter, Insurance Division or agency]
(a) october 28, 1997 Notice of Intent to Issue Order Revoking
license [hereinafter, the Notice] and (2) January 9, 2002 order

Genying Chapman’s motion for reconsideration of the Notice.

 

appeal

‘The Honorable Eden R. Wifo presided over the matter at issue on

 

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In his application, Chapman argues that: (1) the ICA
gravely erred in holding that the circuit court did not have
juriediction over his appeal from the Notice; and (2) the circuit
court erred in concluding that his due process rights were not
violated by the Notice. For the following reasons, we vacate the
ICA’s February 14, 2005 SD0, vacate the circuit court’s January
13, 2003 judgment to the extent that it affirms the Notice, and
remand the instant case to the circuit court with instructions
for the circuit court to, in turn, remand this case back to the
Insurance Division for proceedings consistent with this opinion.

I. BACKGROUND

Prior to October 1997, Chapman was issued a Hawai‘
general ineurance agent license which, at some point, became
“inactive.” On October 29, 1997, the Insurance Division issued a
notice of intent to issue an order revoking Chapman's general
agent's license due to Chapman’s repeated failures to return cash
and other forms of collateral, resulting in several clains being
filed with the Insurance Division. The Notice specified that it
would become a final order revoking Chapman's license on November
21, 1997 if he did not request a hearing prior to that date. see

BRS § 431:9-236 (1993).* Pursuant to Hawai'i Revised statutes

2 aRS § 432:9-236(2) provides.

 

 

 

‘The commissioner may suspend, revoke, or refuse to extend
any such license for any cause specified in this articl
(a) By order given to the licensee not less

than fifteen days prior co the effective

date thereof, subject to che Tight of the

Ulcensee to have a hearing 2° proviged i2
(oontinued...)

  

 
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(HRS) § 431:2-202(c) (2993),* copies of the Notice' were sent on
the same day (October 29, 1997), by registered mail, return

eceipt requested, to Chapman at 2357 S. Beretania street, #1132-

 

287, Honolulu, Hawai'i 96814 (Beretania address) and 1232 Waimanu

which were the

 

Street, Honolulu, Hawai'i 96814 (Waimanu addres!

two addresses the Insurance Division claims were on record with

 

the agency.
on October 31, 1997, the Notice mailed to the Maimanu
address was returned unopened to the Insurance Division as
undeliverable, with no forwarding address. On November 17, 1997,
the Notice mailed to the Beretania address was returned unopened
to the Insurance Division as “unclaimed.” There was no record
that Chapman had reported a written change of residential or
business address to the Insurance Division. However, Chapman
claims he notified the Insurance Division of his change of
address through oral communications with Cecilia chock, an
investigator at the Insurance Division. Inasmuch as Chapman did

not request a hearing prior to November 21, 1997, the Insurance

 

"4. seontdnued)
tion 431:2-308 snd pending such hearing
the License shall be suspended(.]

   

> HRS § 421:2-202(¢) provides:

an order or notice say be given by delivery to the person to
be ordered or notitied or by mailing it, postage prepaid,
and registered with return receipt requestes addressed to
Ehe person at the person's residence or principal place of
business as last of record in the [Insurance Division

 

   

   

+ the record is unclear ae to whether the copies of the Notice mailed
to Chapman on October 25, 1997 were “certified.

 
 

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Division dened the Notice as a final order revoking Chapman’ s
License, effective November 21, 1997.

on January 9, 1998, an uncertified’ copy of the Notice
was sent, pursuant to Chapman's request, by registered mail to
P.O, Box 24, Commerce city, Colorado 80228 (Commerce city

address) .* On January 13, 1998, “Wesley D. Chapman"” signed the

 

return receipt for the Notice sent to the Conmerce City addre:

on November 9, 1999, Alice Barmore, who identified
herself as Chapnan’s Executive Assistant in Colorado, telephoned
the Insurance Division requesting the status of Chapnan’s license

and a copy of the Notice. An uncertified copy of the Notice was

 

sent by facsimile to Barnore and by certified mail to Chapman at
P.O, Box 281084, Lakewood, Colorado 80228 (Lakewood address). on
November 19, 1999, an individual (whose signature is illegible)
signed the return receipt for the uncertified copy of the Notice
mailed to the Lakewood address.

on April 28, 2000, John A. Chanin, Chapnan’s attorney
in Denver, Colorado, requested a copy of all complaints and
orders pertaining to Chapnan’s license from the Insurance

Division. On May 2, 2000, the Insurance Division sent Chanin, by

 

* As more specifically denonstrated, intra, Chapsan appears to take the
Position that any time requirenente placed upon him to take action in this
ease did not begin to run until he received a cextitied copy (es opposed to an
uncertified copy) of the Notice.

< the record is unclear as to how Chapman became aware of the Notice
such that he would be prompted to request that it be sent to the Commerce city
adaress.

 

* the record does not indicate the relationship between Neeley D.
Chapman and petitioner Duane Lee Chapman.

 
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certified mail, a written response and an uncertified copy of the
Notice. On May 5, 2000, “Bruce Lemberg” signed the return
receipt for the response and Notice. On August 17, 2000, Chanin
mailed the Ingurance Divieion a formal request to reinstate

@ retroactive suspension nune pro

 

Chapman's License and impo:
func. On January 11, 2001, the Commissioner responded in writing
that Chanin’s request was denied and that chapman could re-apply
for a license on November 21, 2002.

on December 6, 2001, Howard Glickstein, Chapman’s
attorney in Honolulu, requested a cextified copy of the Notice,
which the Insurance Division mailed to him on December 18, 2001.
on December 20, 2001, pursuant to Hawai'i Administrative Rules
(HAR) Rule 16-201-23 (1990),* Chapman filed a notion to
reconsider the revocation of his License with the Insurance
Division on the ground that the Notice deprived him of his
License without due process of law. Specifically, Chapman
contended that: (1) he did not receive the Notice prior to

November 21, 1997, the date the Notice became a final order

 

revoking his license; (2) service of the Notice was improps
because it did not comply with HAR Rule 16-201-12 (1990);? and
"Wan Rule 16-201-23 provides in pertinent part that *[alny party,

within ven days after receipt of any final order may move the [Insurance
Divisional to reconsider ite final ofder or decision."

 

+ MAR Rule 16-201-12 provides:

 

(a) valets otherwise provided by this chapter or by
other applicable law, whenever service is required to be
‘on any party to'a proceeding before the authority, the
jice shall be made personally or by first class sail, the
: (continued...)

 

 
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(3) he provided his Colorado address to the Inaurance Division

 

during a telephone conversation with Insurance Division
investigator Chock, which had occurred sometime before the Notice
was mailed on october 29, 1597."

on January 9, 2002, the Insurance Division entered an

order denying Chapman’

 

motion for reconsideration on the ground
that, inasmuch as the Insurance Division complied with the
statutory notice requirenents of HRS § 431:2-202(c), and Chapman
failed to fulfill his statutory duty to provide the Insurance
Division with written notice of hie business address change

pursuant to HRS § 431:9-228(c) (1993),"! Chapman's due process

 

(B) If peraoaal service by mall is unsucce:
authority oF hearings officer my authorize service by
publication if permitted by statute. The authority or
hearings officer may require that personal service be
ateenpeed prior to permitting service by publication, Atter
service by publication has been authorised. whenever service
is required to be made on that party thereafter, service by
First class mail to the party's lest known addreas shall be
nufticient.

 

 

 

Ste ghould be noted that there is nothing in the record via affidavit
or otherwise ‘to substantiate Caapman's claim that iavestigator Chock
acknowledged or adnitted having received inforsation from Chapman regarding
hig current address, In support of hie assertion that the Insurance Bivieion
had actual knowieage of his Commerce City address, Chapman refere to thr
letters he received from chock prior to October 29, 1997. The letters ==
ated February 13, 1997, March 21, 1959, and April 18, 1397, -- however, are
all addressed to his Wainanu Screct address in Honolulu. Nevertheless,
Chapman apparently believes that he letters establish that, prior to the
Notice being sent on October 23, 1997, he wae in comminication with the
Inurance Division and that, during that period, he orally communicated his
current address to Chock. However, there is nothing in the letters
Feferencing any conversations between Chock and Chapma

 

 

   

 

 

Sams § 431:9-228(c) provides that ~{t]he Licensee shall promptly
notity the comissioner of change of business address." We nove that written
notice is not specified by the statute.

 

 
 

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rights were not violated. The Insurance Division also denied

untimely.

 

Chapman's motion on the ground that it wa

Specifically, the agency stated,

WAR § 16-201-23 (6/26/90) allows any party to file for
reconsideration of a final order within ten days after
Feceipt of the final order. Since the final crder wae
Served on October 29, 1997, [Chapman's] motion for
reconsideration is untimely, pursuant to HAR § 16-201-23.
Accordingly, (Chapsan’s] motion is denied on procedural
‘grounds.

on January 16, 2002, Chapman filed his notice of appeal
from (1) the Notice, which became a final agency order on
November 21, 1997, and (2) the Insurance Division's January 9,
2002 order denying his motion for reconsideration, to the first
circuit court. On appeal, Chapman contended that the Insurance
Division erred in concluding that: (1) he was required to
provide written notice of his change of address; and (2) his
motion was untimely inasmich as he filed his motion for
reconsideration on December 20, 2001, within ten days of receipt
of a certified copy of the Notice (on December 18, 2001),
pursuant to HAR Rule 16-201-23.

on January 13, 2003, the circuit court entered an order
affirming the Insurance Division, stating

The court finds that Appellant Chapman’s due proc
rights to notice and an opportunity to be heard were
fuitilted by actual receipe in January, 1998, of [en
uncertified copy of the Notice], and that he Aid have an
opportunity to seek relief fron’ (the Notice), by, among
Other things, seeking review of that order by notion for
Peconsideration, by appeal co the circuit court, or other
avenues of relict.

‘The court concludes that by failing to exercise the
opportunity to appeal or otherwise seck relief after
receiving actual notice of the entry of [ehe Notice) ina
timely manner after January 13, 1998, Appellant Chapman is

foreclosed from such relief in these proceedings.
Therefore, [the Notice], dated October 29, 1997, and Order

 

 
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Denying {Chapman's} [nJotion for {x} econsideration, entered
January 9, 2002, are hereby APPIRMED

On February 14, 2003, Chapman filed his notice of
appeal from the circuit court's January 13, 2003 order, in which
he contended that the circuit court erred in concluding that his
“due process rights to notice and an opportunity to be heard were
fulfilled by actual receipt in January, 1998, of [an uncertified
copy of the Notice]. specifically, Chapman contended that the
Insurance Division was obligated to afford him his due process
rights to notice and an opportunity to be heard prior to revoking
his license and, therefore, inasmuch as he received the Notice
after his license had already been revoked, the Insurance
Division violated his due process rights, Rather than rule on
the merits, the ICA held that “the circuit court had no
jurisdiction to review [the Notice] because Chapman’s [mJotion
for [rleconsideration [to the Insurance Division] was untimely
filed." As such, the ICA (1) vacated the circuit court’s January
33, 2002 judgment to the extent that it affirmed the Notice, and
(2) affizmed the judgment to the extent that it affirmed the
order denying Chapman's motion for reconsideration. on March 30,
2005, Chapman timely applied for a writ of certiorari, which thie

court granted.

 

  

 

fon appeal, Chapman did not assert chat the circuit court erred in
aftizming the Insurance Division's order denying his motion for
Feconsideration

 
 

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IT. STANDARD OF REVIEW

In granting a writ of certiorari, this court reviews
the decision of the ICA for (1) grave errors of law or of fact,
or (2) obvious inconsistencies in the decision of the ICA with
that of the supreme court, federal decisions, or its own
decisions, and the magnitude of such errors or inconsistencies
dictating the need for further appeal. HRS § 602-59(b) (Supp.
1997).

IIT. DISCUSSION

A. duriedies a lotic

Chapman contends that the ICA gravely erred in holding
that the circuit court did not have jurisdiction over his appeal
from the Notice. Appeals from a final ace: are governed
by HRS § 91-14 (1993) and Hawai'i Rules of Civil Procedure (HRCP)
Rule 72 (1996). See HOH Corp, v, Motor Vehicle Indus. Licensing
Bd. Dep't of Commerce & Consumer Affairs, 69 Haw. 135, 144, 736
P.2d 1271, 1276 (1987). HRS § 91-14(b) provides that
“proceedings for review shall be instituted in the circuit court
within thirty days . . . after service of the certified copy of
the final decision and order of the agencyl.]* (amphasis added)
see also HRCP Rule 72(b) ("The notice of appeal shall be filed in

 

the circuit court within 20 days after the person desiring to
appeal is notified of the rendering or entry of the decision or

order . . . in the manner provided by statute."). In Korean

 
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Appeals of Honolulu, 9 Haw. App. 298, 837 P.2d 321,
xeconsideration denied, 9 Haw. App. 659, 833 P.24 98, cert

granted, 73 Haw. 626, 834 P.2d 1315, cert. dismigned, 74 Haw.
651, 843 P.2d 144 (1992), overruled on other srounds by Rivera v,
tt of Labor & , 100 Hawai'i 348, 352 n.7, 60

P.34 298, 302 n.7 (2002), the ICA held that the thirty-day period
for filing an appeal under HRS § 91-14(b) begins when a certified
copy of a final agency order is deposited in the mail. Id. at
305, 637 P.2d at 324-25.

In Gealon v, Keala, this court held that a “final
order,” for the purposes of an agency appeal under HRS § 91-14 (b)
and HRCP Rule 72(b), is ‘an order ending the proceedings, leaving
nothing further to be accomplished. Consequently, an order is
not final if the rights of a party involved renain undetermined
or if the matter is retained for further action." 60 Haw. 513,
520, 591 P.24 621, 626 (1979) (citations omitted).

In the instant case, the Notice, when mailed to Chapman
on October 29, 1997, was merely a notification to him that his
License would be revoked on Novenber 21, 1997. According to the
Notice, Chapman was entitled to contest the revocation by
requesting a hearing before that date. Only if Chapman did not
request a hearing would the Notice take effect as a final order

revoking his license. However, if Chapman did contest the

 

proposed revocation, the Insurance Division would hold a hearing

on the merits before entering a final order. Thus, on October

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29, 1997, Chapnan’s rights were not yet determined and the
Insurance Division still retained the matter for further action.
As such, the Notice, by its own terms, was not a “final order
when it was mailed to Chapman on that date. See Gealon, 60 Haw.
at 520, 591 P.2d at 626. Therefore, the period of appeal did not

the Insurance Division

 

begin to run on October 29, 1997 becau
did not deposit a final order in the mail on that date. gee
Korean Buddhist Dae Won Sa Temple of Hawai'i, Inc., 9 Haw. App.
at 305, 837 P.2d at 314-35,

‘The record is clear that Chapman did not request a
hearing in the time allotted by the Notice and, thus, the Notice
became a final agency order on November 21, 1997. Consequently,
pursuant to Bu 1 a's 18
Haw. App. at 305, 637 P.2d at 314-15, the thirty-day appeal
period would begin to run when the Ineurance Division deposited a
certified copy of the Notice in the mail to Chapman on or after
November 21, 1997, Inasmuch as the first certified copy of the
Notice sent to Chapman after November 21, 1997 was mailed to him
fon December 18, 2001, the appeal time began to run on that date.
Because Chapman filed his notice of appeal on January 16, 2002,
within the thirty-day period for appeal, his appeal from the
Notice was timely. Therefore, the circuit court had jurisdiction
to review the Notice as a final agency order. Accordingly, we
hold that the ICA gravely erred in holding that the circuit court

did not have jurisdiction to review the Notice in the instant

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case. Moreover, inasmich as jurisdiction was proper, the circuit

court’s original judgment stands, and, therefore, this court mu

 

review ie.
3. Due Process

Chapman next contends that the circuit court erred in
concluding that his due process righte were not violated by the
November 21, 1997 final order revoking his license. “Due proces:
is not a fixed concept requiring a specific procedural course in
every situation. Due process is flexible and calls for such
procedural protections as the particular situation demands.”
Sandy Beach Def. Fund v, City Council, 70 Haw. 361, 378, 773 P.2d
250, 262 (1989) (citation, brackets, and quotation marks
omitted). “Except in emeraency situations[,] due process
requires that when a State seeks to terminate an interest such as
fan insurance license], it mst afford notice and opportunity for
hearing appropriate to the nature of the case before the
termination becomes effective.” See Gionorie v. Gomez, 301 F.
Supp. 2d 122, 133 (D.P.R. 2004) (brackets and quotation marks
omitted) (emphases added) (citing Bell v. Burson, 402 U.S. 535,
542 (1972)).

With respect to notice, the statutory notice
requirement applicable to notices and orders from the Insurance

Division is prescribed by HRS § 431:2-202(c), see supra note

 

which provides that notice may be given by “delivery to the

person to be ordered or notified or by mailing it, postage

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prepaid, and registered with return receipt requested addressed

to the person at the person's residence or principal place of

 

business as last of record in the [Insurance Division] .”

 

However, compliance with statutory notice requirements alone does

 

 

not establish that the notice requirements for due process have
been satisfied. See Pfeil v. Amax Coal W.. Inc., 908 P.2d 956,

962 (Wyo. 1995) (*{Clompliance with statutory requirements of
notice and hearing does not always satisfy constitutional
requirements of due process."). Thus, even though statutory
requirements are met, we mist also examine whether an agency's
notification passes constitutional mister.

Under constitutional due process principle:

 

An elementary and fundamental requizenent of due
process in any proceeding which is to De accorded finality

Te reo
apprise interested parties of the pendency of the action and
‘afford then an opportunity to pi The

 

Ince Herrick, 62 Hawai‘ 329, 343, 922 P.24 942, 956 (1996)
(citation omitted) (emphasis added). Moreover, when a party
seeking to affect a property interest is itself on notice of the
failure of a mailed notice to inform an interested party, the
party must take further action to determine a more accurate
address or otherwise ensure receipt of meaningful notice. For
example, in Plenons v. Gale, 396 F.3d 569 (4th Cir. 2005), the

Fourth Circuit Court of Appeals hel

 

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[Atthough} initial reasonable efforts to mail notice to one
threatened with lose of property will normally satisty the
Fequirenents of due process(,] when pronpe return of an
initial mailing makes clear that the original effort

notice har failed, the

 

 

 

daress before
constructive notice will be deemed sufficient

Id. at 576 (emphasis added); see also Malone v, Robinson, 614
A.2d 33, 38-39 (D.C. 1992) (“The return of the certified notice
marked ‘unclaimed’ should have been a red flag for some further
action." (Citations onitted.)); Schwartz v. Dey, 665 S.W.2d 933,
935 (Mo. 1984) (*[W]hen the party seeking to affect a property
interest is itself on notice of the failure of mailed notice to

inform an interested party, the party mist take further action to

ensure receipt of

 

(Citations omitted.) (Emphasis added.)) .

 

In the instant case, the circuit court concluded that
Chapman's due process rights were not violated on the ground that
he received an uncertified copy of the Notice in January 1998 and
could have, ‘among other thinga, [sought] review of [the Notice]

by motion for reconsideration, by appé

 

1 to the circuit court, or
other avenues of relief." As a preliminary matter, it is
undisputed that chapman’s license waa a constitutionally
protected property interest that could not be revoked without due
Process. As such, absent an emergency situation, Chapman was
entitled to notice and an opportunity to be heard before the
Insurance Division revoked his license. See Gomez, 301 F. supp.

2d at 133.

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When Chapman received the uncertified copy of the

Notice in January 1998, the Notice was already effective as a

 

final order of the Insurance Division revoking his lice: In
other words, the deprivation of property (e.a., Chapman’s
license) had already taken place. Thus, Chapnan’e ability to
move the Insurance Division for reconsideration of the license
revocation or appeal the revocation to the circuit court did not

satisfy due process because he was not afforded notice and an

 

opportunity to be heard before his license was revoked. See
Gomez, 301 P. Supp. 2d at 133; Sandy Beach Def. Fund, 70 Haw. at

378, 773 P.2d at 261. Moreover, the Insurance Division did not

 

allege, and the circuit court did not find, that an emergency
situation existed to justify an exception to the due process

equirements of notice and an opportunity to be heard. See

Gomez, 301 F. Supp. 2d at 133; see also Cit Bd.
Inspection Review v. 26 s,Inc., 661 A.2d 20,

22, rearcument denied, (Pa. Commw. Ct. 1995). Therefore, to the
extent that the circuit court’s conclusion that Chapman's due
process rights were not violated was based on Chapman's ability
to seek reconsideration of his license revocation from the
Insurance Division or appeal the revocation to the circuit court,
we hold that the circuit court was wrong. Consequently, our
inquiry turns on whether Chapman was afforded due process before

his license was revoked.

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We begin our inguiry by first examining the statutory
notice requirements of HRS § 431:2-202(c). See supra, note 3
Although the record is clear that the Insurance Division mailed
the Notice to Chapman, postage prepaid, and registered with
return receipt requested, the record does not establiah whether
the Notice was mailed to Chapman’s last address of record with
the Insurance Division. specifically, the Insurance Division
claims it mailed the Notice to Chapman at his last addresses of
record with the agency; however, Chapman contends that he had
provided an oral change of address to the Insurance Division
during a telephone conversation with an investigator for the
agency. Inasmuch as the agency did not make a finding as to
whether Chapman’s actual address was on record with the Insurance
Division when it considered his motion for reconsideration, this
court is without the means to determine whether the Insurance
Division complied with the statutory notice requirements of HRS
§ 431:2-202(¢) .

With respect to the constitutional due process notice
requirements, the record demonstrates that the copies of the
Notice that were mailed to Chapnan were returned undelivered.
However, the record does not indicate what, if any, efforte were
made by the Insurance Division to determine Chapman's actual
address after the mailings were returned as undeliverable. as

such, this court does not have the means to determine whether

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‘IV. CONCLUSION
are: wonatulu, Hewat, Mey 6, 2005,
wishes! diy crete oa Oro
on the writ Bt RtLirinne—
Pesssese cir eae anor

Annes SS

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