# FILED

Ap ril 23, 1997 Cecil W. Crowson Ap pellate Cou rt Clerk 

## IN THE COURT OF APPEALS OF TENNESSEE MIDDLE SECTION AT NASHVILLE

NATIONAL LOANS, INC., ) Jackson, Tennessee, ) Memphis, Tennessee, ) Milan, Tennessee, ) ) Petitione r/Appell ant, ) Davidson Chancery

) No. 92-1518-I VS. ) ) Appeal N o. TENNESSEE DEPARTMENT OF ) 01A01-9506- CH-00241 FINANCIAL

INSTITUTIONS, ) ) Respondent/Appellee. )

APPEAL FROM THE CHANCERY COURT FOR DAVIDSON COUNTY

AT NASHVILLE, TENNESSEE THE HONORABLE IRVIN H. KILCREASE, JR., CHANCELLOR

For the Petit ioner/App ellant : For the Re spondent/A pp ellee : William B. Hubbard Charles W . Burson Brenner Lackey Van Mete

r Attorney General and R eporte r Weed, Hubbard, Berry

& Doughty Nashville, Tennessee Michael E. Moore Solicitor General W.J. Michael C ody Burch, P orter and

Johnson Janet M. Kleinfelter Memphis, Tennessee Assistant Attorney General Lynn F itch Mitchell Holcomb, Dunbar, C onnell, Chaffin & Willard For the Intervenors : Jackson, M ississippi Val Sanford Gullett, Sanford, Robinso n & Martin Nashville, Tennessee 

## AFFIRMED IN PART; REVERSED IN PART;

AND REMANDED-2- WILLIAM C. KOCH, JR., JUDGE-3- 

## O P I N I O N

This a pp eal involve s the revoc ation of the certifi cates of registra

tion of three branch offices of an industrial loan and thrift company. T he Comm issioner of Revenue, sitting for the Comm issioner of

Financia l Institutio ns, revoke d the certificates after determining that the com pany’s real estate loan char ge s and its handling of credi t life insurance dea th claim s violated the Indus trial Lo an and Thrift Act. The com

pany sought judicial revi ew in the Chancer y Cour t for Dav idson County . Afte r remanding the c ase for di scovery relating t

o th e company’s selective enforcement claim , the trial court affirm ed the revoc ation of two of the branch offices’ certificates an d revers ed the revocation of the third offic e’s certifi cate. T

he com panyasserts on this appeal that the administrative law jud ge im

properly limit ed additiona

l discover

y conc erning its s elective enforce ment

claim , that the

Departm ent of Fina

ncial Inst itutions wa s selectiv ely enforcin g the Industrial Loan and Thrift Act, and that the rev ocation of the certificates of its two branch offices was not supported by substantial and material evidence. The De

partm ent a sserts that the tr

ial court e

rred by reversin g its
re vocatio n of the third branch office’s certificate. W e have determined that additional discovery concerning the selec tive e nforcem ent claim

was not
warran ted, that the D epartm

ent did not se lectively

enforce the Industrial Loan and Th rift Act, and that the evidence supports the revocation of all three branch offices’ certifi cates of registra tion.

I.

National Loans, Inc. is an i ndustrial l oan and thri ft com pany or iginally incorporated in Mississipp i in 1974. It opene d its first Tennessee branch office in Milan in 1986 . Over

the next tw o year s, it opene d ot her bran ch office s in Colliervi lle andJackson. National Loans was operating twenty branch offices in Tennesse e and Missi ssippi at the outset of this enforc emen t proceed ings.

In 1990 the Department of Financial Institutions learned that an industrial loan and thrift company doing busines s in both Mississippi and Tennessee had been expelled f

rom the Mississippi Independent Associat ion. Dur ing a revie w of1 Tenn. Code Ann. § 45 -5-403(1)(B) permits indust rial l oan an d thri ft com panie s to ch arge either a four percent service cha rge or “the actual , bona fide, re asonable expenses, directly incident to the loan, paid or to be paid . . . to thirdparties, including, but not limited to, expenses for titl e examin ation or ti

tle insura nce, sur vey s, prepa

ration or necessa ry document s, credit reports and appraisals” but not both. -4- the examination records of three i nd ustrial loa n and thrif

t comp anies doing business in both Mississippi and Tennes s ee, the assistant comm issioner responsible

for overs eeing the r

egulation of

the loan an d thrift ind ustry i n Tennessee discovere d a trans action in which Nati onal Loans ’ branc h office in Jackson had deposite d the proce eds from a joint c redit lif

e insuranc e policy

in its
own acco unt rather

than im media tely pa ying ove r the proceeds to its cust omer’s
e state. The assi stant com missio ner event

ually ordered e xamin ations of all o f National Loans ’ branc h offi ces in Tenne ssee a fter v erifyin g tha t the c usto mer’s estatehad never received the insurance proceeds andafter a review of six to eig ht otherexam

ination fil es revea

led that the

company consistently

retained credit life proceeds ra ther than p aying them over to i ts custo mers’ estates.
Departm ent representatives e xamin ed Nation al Loans’ thr e e Tennessee branc h of

fices in August 1990. They were unable to exam ine the credit life transact ions at the Mil an branch office be cause it di d not pr ovide them t he required insurance cla im l og. The examin ations uncov ered one l oan at the Jackson branch office and three loans at the Collierville branch office in which th e compa ny had attempted to convert the c redit life i nsurance p roceeds to its own
use. In these transactions, National Loans’ em ployees had forged en dorsem ents
on insurance

checks m

ade pay able to its c usto mers’ estates a nd had deposited these checks in

a centra l comp any sus pense acc ount. Later, the com pany issued
one or more checks to their custome rs’ estates but again deposited these check s into a com

pany a ccount over

another f orged endor seme nt.

The examinations also uncovered fourteen other transact ions in which all three branch offices had violated T enn. Code Ann. § 45-5-403( 1)(B) ( Supp. 1996) by chargin g cus tomer s a four pe rcent ser vice char ge in additi on to third- party expenses. 1 These transactions represented ever y rea l estate loan made by National Loans’ three branch offices in Tennessee.2 Later, in J uly 1990 , the M issi ssip pi regu lator s comm enced a dmin istr ative procee dings

of their own to revokeNational Loan s’ licens e to do business in Mississippi. This action was eventually settled. -5- The Mississippi Departm

ent of Ban king and Con sumer Finance comm ence d
aspecial investigation

into Natio nal Loans ’ use of the proce eds of the j oint credi t life insurance

policies on

Septem ber 14, 1989. 2 Less than one week later, National Loans mailed the insurance proceeds to the estates of its insured customers. In similar fashion, National Loans began to refund t he overchar

ges on its re al estate loans in Tennessee after the Departm ent comm enced the special examination at issue in this case.

Armed with the examination results, the D epartment of Financial Institutions comm

enced adm

inistrativ e procee dings to revo ke the reg is t ration certificates of National Loans’ threebranch offi ces in Tenne ssee. At the he aring before an adm

inistrativ e law j udge, the Departm ent prese nted Mississ i pp i and Tennessee regulators as well as former National Loans employ ees to testify about National Loans’ corporat e policies with rega

rd to rea l estate l oan c har ges and credit life insurance death claims. N ational Loans stipulated during the heari ng thatits com

pany- wide policy was to charge both the four percent service charge and the third- party

expenses on

its r eal estate loans. N ational L oans’ pr esident and vice pres ident for Tennessee operations also conce ded that the com pan y routinely forged en dorsem

ents on checks paya

ble to the estates of their deceased borrowers an d deposi ted these c hecks in a c orporate s uspense a ccount.

After the heari ng, Nati onal Loans learned t h at the Departm

ent had als o examined American

General Finance, Inc., a Tennessee industrial loan and thrift compa ny, for colle cting exc essive fees in r eal estat e transac tions. W

ith the Depart ment’s permission, National Loans re viewe d America n Gene ral’s
exam ination fil e and discovered that the Department had perm itted American Gene ral to reim

burse a num

ber of cus tomer s for loan o verchar ges w ithou t
comm encing form al enforc emen tproceedin gs. The administrative law j udge later denied National Loans’ request to reo p en the rec ord to pres ent evidenc e of discrim ination by

the Depa rtment.-6- On Jan uary 23, 1992, the adm inistrative law judge issued an initial order finding that

the certificates of registration of all three of National Loans’ branch
o ffices in Tennes see should be revoked be cause of t

he illegal real est ate loa n charges and the fraudulent ha ndling of cr

edit life insurance

proc eeds. In April 1992 the Com

missio ner of Fi nanc ial Institutions affirmed the initial order. National Loans fil e d a petition for revi ew in the Chancer y Cour t for Da vidson County in May 1992 and cont

inued to re view Am

erican General’ s exam

in ati on files f or evide nce of add

itional over

charges. In August 1 992 Nationa l Loans sought the tr ial co urt’s permission to introduce additional evidence supporting it s selective enforce ment c laim

and also requested the trial court to r eman d the case for further dis covery on the i ssue. The tria l court the reuponrem anded the c ase to the administrative law judge to allow discovery and further considera ti on of Nat io nal Loa ns ’ se lec ti ve e nfo rce ment cla im.

The remand order triggered a discovery disputethat laste d eighteen months. National Loans dem

anded virtu ally un limited access to all the Dep artment ’s enforce ment

records c oncerning e very i ndustrial loan and thrift compa ny doing business i n Tennes see; whil e the De partm ent sought to l imit t

he discover

y to American General’s exam

ination files. The administrative law j udge permit ted National Loans to submit interrogatories to the Depar tment’s examiners concernin g their m

emor ies of viola

tions by any industrial loan and thrift compa ny. As the dispute wore on, the administrative law judge ordere d the Departmen t to make available exam ination fil es involving f

irst three, then eleven other industrial loan and thrift

compa nies. T he adm inistrativ e law j udge also directed thatthese records b e placed under seal and ma de availa ble only to Nationa

l Loans’ attorneys.

Both parties a

ppealed the

administrative

law judge’s discovery

orders to t

he trial court. Af

te r the tria

l court qua shed Nati onal Loans ’ eff orts to subpoena additional witnesses af

ter the discovery deadline, National Loans’ lawyers requested the trial

court to lift the pr

otective o rder to e nable their client to review the documents and to a

id in the pre sentation of

its selec ti v e en for ceme nt cla im. The trial cour

t denied the

motion, but not before it permitted four other industrial-7-

loan and thrift companies to intervene to protect the con fidential ity of

their records.

On March 4, 1994, the ad min istrative law judge entered an initial order confirm ing the finding s of fact

in its Janua

ry 23, 1992 order as well a s it s
c onclusion

that the c ertific ates of r egistrati on of Nati onal Loans ’ three br anc h offices in Tennes see should be revoked. The adm

inistrativ e law jud ge also found that the evidence presented following the remand did not substantiate National Loans’ selective

enforce ment

claim . Natio nal Loans appealed the initial or

der to the Com missio ner of Fi nancial Institutions.

The Comm

issioner of

Financia

l Institutio n s recused hi mself because National Loans had filed a civil right s action ag ainst him in the Cir

cuit Court

for GibsonCounty

alleging th at he wa s using the Industrial L oan and Thr i ft Act to harass and selec tively

prosecute

the com pany. The Gove

rnor, ac ting pursuant to Tenn. C ode Ann. § 4-5-302(e)(1) (1991), appointed the Comm issioner of R evenu e to preside over the en forcem entproceedi ngs in place of the Com

missio ner of Financial Institutions. Thereafter, the Com missioner of Revenue denied National Loans’ renewed motion to lift the protective order and, on June 10, 1994, entered
afinal order

adopting the administrative law judge’s findings. The Com missioner of Revenue revoked the certificates of registration issued to Nationa

l Loans’ three branch offices in Tennessee. In doing so, the Commissioner noted that “the record reflect s testim

ony by compa ny em ployee s that ther

e was a compa

ny polic y and continuing prac ti ce with r egard to c harges in excess of th e amounts statuto rily allowed on real estate l oans.”

The Departm

ent of Fina

ncial Inst itutions fil ed the supplementa l record with the t rial cour

t in July 1994. On M arch 27, 1995, the t rial cour t filed a
mem orandum opinionaffirming the revocation of the certificates of registration of National Loa ns’ branch of fices in Jac kson and Colliervi lle. The tria l court reversed the revoc ation of the Milan bra

nch offic e’s ce

rtifica tion of re gistration
on two grounds. First, the trial court pointed out thatthere was no pro of that the Milan branch office h ad mis appropria ted the pro ceeds of j oint credi tlife insurance policies; second, t

he court conc luded that t

he Com missio ner acte d arbitra

rily b y3 We disagree with National Loan s’ asser

tion that th

e interv enors’ a

rgumen ts are either mootor not properly be

fore the court. The intervenors are aggrieved persons for

the purpo se of Tenn. Code Ann. § 4-5-322(a)(1) (Supp. 1996). While the Department of Financial I nstitutions has already

divulged its enforcement records conc erning the interveno rs, the issue concerning the disclosure of

proprietary

information contained

in the Dep artment’ s enforc ement records is one of great public i nter est and imp ortance to the adm

inistration of justic e and is lik ewise capable of repetition yet eva

ding review. Walker v. Dunn, 498 S.W.2d 102, 104 (Tenn. 1972) (recognizingan exception to the mootness doctrine for issues of great pu bl ic interest and importan ce); Bemis Penteco sta l Church v. State, 731 S.W.2d 897, 903 (Tenn. 1987) (recognizing an exception to the mootness doctrine for issues capable of repetition y et evading review). -8- applyi ng the chara

cter and f itness stan dards in T enn. Code Ann. § 45- 5-201( a) (Supp. 1996) to an industri al loan and thrift co mpany

that was already

operating.

II. N ATIONAL L OANS ’ S ELECTIVE E NFORCEMENT C LAIM

We turn firs t to the issue s surroundin g Nationa l L oans ’ selec tive enforcemen t cla im. National Loans ass erts that the adm inistrativ e law j udge impro perly

limit ed its abili ty to sub stantiate this claim

and th at the proof establishes thatthe Depa

rtment was sel ectively

enforcin g the Industria

l Loan and Thrift Act. The inter

vening industrial

loan and thr

ift com panies asse

rt that the Departm ent should not hav e been re quired to di v ulge the enfor cement record s pertainingto them

because N ational L oans had not made a threshol d showing that itwas entitled to a ddi tio nal dis cov ery. 3 We have determ ined that National Loans failed at the outset to come forward with som e credibl e evidenc e tending to show thatimproper

selective enforcement had occurre d. Acc ordingly , we pr eterm it the discovery issues and f

ind that the

trial cour

t erred b y rem

andin g the case f

or add it io nal di sco ver y con cer ni ng Nat io nal Loa ns ’ se lec ti ve e nfo rce ment cla im.

A. S ELECTIVE E NFORCEMENT C LAIMS IN G ENERAL

Stateand local official s have broa d discreti on with re gard to the ir enforce ment

and prosec ution decisi ons as longas they have a re asonable ba sis to believe tha t a vio lation o f a statute o r regulati on has bee n committed. See Bordenkircher

v. Hayes , 434 U. S. 357, 3 64, 98 S. Ct. 663, 668 (1978); Patterson
v. Hunt , 682 S.W .2d 508 , 517 (Tenn. Ct. App. 1984). Unw arranted judicial interventi on in enforc emen t or prosecuti on decisions can chill enforce ment o f the4 The Tenness ee Supre me Co urt has equ ate d Te nn. Co nst . ar t. XI, § 8 with the Fourtee nth Amendment

in consi derin g a chall enge to a statute on the ground that it permitted prosecutorial selectivity. Goldston v. City of Harriman, 565 S.W.2d 858, 861 (Tenn. 1978). -9- law and can hamper or e ven frustr ate govern ment effectivene ss. United States v. Armstrong

,
___U .S. ___, ___, 116 S. Ct. 1480, 1486 (1996); Wayte v. United States, 470 U.S. 598, 607-08 , 105 S. C t. 1524, 15 30-31 (1985) . Thus, the doctri ne of separati on of power s embo died inTenn. C onst. art

. II, §§ 1 a nd 2 counsels the courts to procee d cautiously when aske d to scrutinize enfor cement or prose cution decisions by

state and l ocal offi cials.
Reg ulationbased on p ersonal d islike, ve ndetta, or so me other imper missib l e considera tion is repugn ant to the American traditio n of the rul e of law. See Futernick v. Sumpter

Township, 78 F.3d 105 1, 1 059 (6t h Ci r. 19 96) . Acco rdi ngl y,
apublic offic ial’s enforce ment d iscretion is subjec t to constitutional const raints. United Stat

es v. B atchelder, 442 U.S. 114, 125, 9 9 S. Ct. 2198, 2204- 05 (1979). One of these c onstraints, im posed by the Equal Pr otection C lause of th e Fourteent h Amendm

ent, Tenn. Const. art. I, § 8, and Tenn. Const. art. XI, § 8, 4 is that pro secution or

enforce ment decisions m ay not b e based on s o m e imper missib le consider ation. Waytev. United States , 470 U. S. at 608, 105 S. Ct. at1531; State v. M

artin , 719 S.W .2d 522, 5 25 (Tenn. 1986); Irvin v. City of Clarksvil le , 767 S.W .2d 649, 65 4 (Tenn. Ct. App. 1988). T his “m urky c orner of equal protection law” is comm only known as “selective enforc emen t” or “sele ctive prosecution.” LeClair v . Saunders, 627 F.2d 606, 608 (2d Cir. 1980).

Persons assertingselective enforce ment c laims have a hea vy bur den to
ov erc ome the presumption that public off

icials ar e perfor ming th eir

duties in good faith, Williams v. Americ an Plan Co rp., 216 Tenn. 435, 441, 3 92 S.W .2d 920, 92 3 (1965), and in accordance with the law. Reeder v . Holt, 220 Tenn. 428, 435-36 , 418 S.W.2d 249, 252 (1967). They must prove more than that the public official has enforce d the law in so me instances bu t not in o thers. State v. M artin , 719 S.W. 2d at 525; Irvin v. City of Cl arksville , 767 S.W .2d at 654. Equal pr otection does not require that al l evils of t he sam e genus be e

radicate d or none at

all. Railway Express Agency, Inc. v. New York, 336 U.S. 106, 110, 6 9 S. Ct. 463, 466 (1949). Accordi ngly, there is no right to have the law go unenforced even if other-10-

persons who may

be equally

or mo re culpab le havegone unp unished

. Futernick v. Sumpt er Township

, 78 F.3d at 1 056.

Persons claim

ing select ive enfor cement must

prove that the enforce ment decision had a discrim

inatory purpose and

has produce d adiscrim

inatory effect

. United States v. Armstrong, ___ U.S. at ___, 116 S. Ct. at 1487; Wayte v. United States, 470 U.S. at 608-09, 105 S. Ct. at 1531. T hus, in orde

r to m ake out

a pr ima facie c a se of selective enforcement, they must prove (1) that they have been singled out for prosecution while others similarly situated have generally not been prosecuted for the sa

me ty pe of conduct a

nd (2) that

the decisi on to prosec ute them rests on an

imper missib le considera tion. United Stat es v. H azel, 696 F.2d 473, 474 (6t

h Cir. 198 3); United

States v. Berrios, 501 F.2d 120 7, 1211 (2d Cir. 1974).

With

regard to the first

elem ent of a se lective enforcem ent cla im, proof that other s have not be en prosecuted for e ssentially the sam e type of conduc t mus t consist of evidenc e that (1) other non- prosecute d offende rs engage d in essenti ally the same conduct, (2) the non-prosecuted offen ders violated th e sam e statute or regulation

that the c laima

nt is accused o f

violating, and (3) the

magni tude of the non-prosecuted offender s’ viola tions was n ot mat

erially different from

that of the personclaim

ing select ive enforce ment. United Stat es v. Cy prian, 756 F. Sup p. 38 8, 393 (N.D . Ind. 19 91). The imper missib le considerations req uired by th e second elem ent of the c laim consist of c onsiderati on s based on race, gender, religion, or some other arbitrary classification such as the exercise of statutory or constitutional rights. Wayte v. Unite d States, 470 U.S. at 6 08 , 105 S. C t. 1531; Futernick v. Sum

pter Townsh ip, 78 F.3d at 1 056-59.

B. D ISCOVERY W ITH R EGARD TO S ELECTIVE E NFORCEMENT C LAIMS

Selectiv e enforce ment

claims are difficult to prove. T hey generally r

equire evidence gleaned f

rom go vernm

ent files that are not genera lly sub ject to dis cov ery. Wayte v. Unite d States, 470 U.S. at 624, 105 S. Ct. at 15 39 (Marsha ll, J., dissenting) ; Unite d Stat es v. B ourgeois, 964 F.2d 935, 938 (9th Cir. 1992);5 Prior to the United States Supreme Court’s decision in United States v. Armstrong , the state and federal courts had adopted sever al labels for the requisite showing needed to be entitled to discovery. The most common lab el was “colorab le basis." See, e.g., United States v. Lopez , 71 F.3d 95 4, 963 (1s t Cir. 1995) ; State v. Palmgren, 646 P.2d 1091, 1096 (Kan. 1982). Other courts required a “nonfrivolous showing,” see, e.g., United States v. Greenwood, 796 F.2d 49, 52 (4th Cir. 1 986); Jones v. Missou ri Dental Bd., 687 S.W.2d 579, 581 (Mo. Ct. App. 1985), or a “prima facie” showing. See, e.g., United States v. Parham, 16 F.3d 844, 846 (8th Cir. 1994); Federov v. United States, 580 A.2d 600, 608 (D.C. 1990).

-11- United States v. Heidecke, 900 F.2 d 1155, 1158 (7th Cir. 1990). Thus, when persons claim

ing selective enfo rcement request access to governm ent enforcem en t records in order to obtain evidence to prove their claim s, the cou rts m ust balance th e government’s legitimate interests with those of the party see king t o substan tiate a sele ctive enfo rcement claim.

Because of th e unavailabi lity of evidence to substantia

te a sele ctive prosecutio n claim , the cour ts have gene

rally applied a l esser sta

ndard of pr

oof to
warran tdis cov ery t han is required ultim ately

to prove se lective e nforcem ent. United States v. Berrios, 501 F.2d at 1211-12

. In order to be entitl ed to dis cov ery,
aparty claim ing select ive enfor cement must

come forwar d with so me cred ible evidence tendin g to show the existence of discriminatory effect and discriminatory intent. United Stat

es v. A rmstrong, ___ U.S. at ___, 116 S. Ct. at 1488. 5

C. N ATIONAL L OANS ’ THRESHOLD S HOWING

National Loans’ threshold s howing of selective e nforcem ent consi st ed of evidence of the De par tme nt’s enf orcem ent activi ties involvin g Ame rican General. National Loans did not claim to be a m ember of a protect

ed class a

nd did not attribute an improper, discrim

inatory motive to the Departm

ent. Ra ther, it simply asserted that the Departm

ent h ad not com

menc ed enforc emen

t proceed ings agains t American General even though the company had collected the sam e fees and had violated the same statute.

A regulator

y agen cy’ s decision to enfor ce a st atu te o r re gu lat io n i n s ome
cases but not

in o thers may ent

itle the pe

rson subje cted to for

mal enforcem

ent proceedin gs to an expl anation fr om the agency. Baltimore Gas & Elec. Co. v. Heintz, 760 F.2d 14 08, 141 9 (4th Cir. 1985). In this case, the Depa

rtment went6 We do no t d ec id e i n t hi s c as e w he th er a r eg ul at or y a ge nc y must in all circumstances

provide a person

asserting selective enf

orceme nt with ac cess toits enforcement files or whether an explanation of its decision will suffice.

7 A Department representative stated he woul d not have hesitated to commence formal procee dings had the Department discovered that America n General had been forgi ng docu ments. The administrative law judge also noted that the Department had revoked the registration of the only other entity “shown to have engaged in fraudulent activities through forging documents.” -12- beyond providing an

explanati on and actua

lly gr anted Na

tional Loa

ns a ccess t o the enforcement files concerning Am erican Genera

l. 6 These r

ecords co ntained no evidence of improper m

otive and also demonstrated that Amer ican General had not engaged

in the sam

e type of conduct as Nation al Loans.

The Department’ s enforc emen t records did not indicate that American General had m

i sappropria

ted credi t life insurance proc eeds by forging endorse me nts on insuranc e checks. 7 In addition, they demonstrated that Am erican General had not engaged in the same type of conduct as National Loans. All three of Nation al Loans’ branch offices in Tennessee hadviolated Tenn. Code Ann . § 45-5-403(1)(B) in every real estate loan they had made. On the oth er hand, American General had violate d the general usury laws in a pproxim ately

seventy of its 400,000 a

ccounts. These loans were federally exempt f rom state regul ation underthe Industrial Loan and Thrift Act, and Am erican General had reimbursed it custo mers.

Atth e ti me National Loans fir st asserte d its selec tive prose cution cla im in the trial cour

t, theevidence showed convincingly that America n General had not violated the sam

e statute t hat Natio nal Loans was acc used of viola ting and that

the magni tude of American General’s violations was not the sam e as that of

National Loans. Accordingly, the trial court should have found that National Loans had not presented credible evidence of selec tive enfor cement and, the

refore, should have denied its reques t to remand thecase to the administrative law judge for additional discover y to substan tiate its selective enforcement clai m.

III. A PPLICATION OF T ENN . C ODE A NN . § 45-5-201( A )(1)

TO R EVOCATION P ROCEEDINGS-13- We turn next tothe tr

ial court ’s conc lusion that t he genera

l fitness requirem ents in Tenn. Code Ann. § 45-5-201( a)(1) c annot provid e a basis f or revoking the regist ration of a n indus trial loan and thrift company. W e do n ot agree with the t

rial cour t’s res trictive

interpretation thatthe general qualifi cation for regis tration ap ply only to applica

nts for init

ial regist ration.

When c onstruing a statute, the courts must ascertain and give the fu lles t possibl e effect to the legis lative pur pose expre ssed in the w ords of the statute itself. Sharp v. Richardson , 937 S.W .2d 846, 849 (Tenn . 1996); Pursell v . First Am. Nat’l Bank, 937 S.W.2d 838 , 840 (Tenn. 1 996). We must de rive t he st atut e’s purposefrom the plain and ord in ary meaning of its la nguage, Tuggle v. Allright Parking Sys., Inc., 922 S.W.2d 105, 107 (Tenn. 1996), without undu ly re stricting or expand ing the s tatute’s app lication or coverage . Worley v. Weigels, Inc., 919 S.W.2d 589, 593 (Tenn. 1996 ).

The stated pur

pose of the

Ind ustrial Loan and T

hrift Ac t is to provide the peopleof Tenne ssee the “faciliti es and res ources of regulated lending insti tutions to meet their

needs for loans at r ates and c harges re asonably comm ensurate with
econom ic realit ies.” Se e Tenn. Code Ann. § 45-5-101(a) (1993). All industrial loan and thrift

compa nies desir ing to do bus iness in Tennessee m ust obtain a certifi cate of registration from the Com missio ner of

Financia l Institutio ns for

each
one of their pro posed bra nch offices

. See Tenn. Code Ann. § 45-5-103 (1 993 ). In order to qu alify

for a ce rtifica te of reg istration, an applica nt must “dem onstrate such experience , chara cter and g eneral f itness as tocomm

and the conf

idence of the public and

warra nt the belie f that the business to be operated thereunde

r will be operated lawfully and fairly .” See Tenn. Code Ann. § 45-5-201(a)(1).

A company that obtains a certific ate of registration under the Industrial Loan and Thri ft Ac t do es n ot h ave a rig ht t o th en o per ate p erp etu all y. Tenn. C ode Ann

. § 45-5-205( a)(2) ( 1993) em powers th e Com

missio ner of Fi nanc ia l Institutions to revoke a

certifi cate of r

egistrati on if

the registra

nt has knowi ngly and without ex ercising d

ue care “[v] iolated any provi sion o f this ch apter or any rule or regu lation is sued und er this cha pter.”-14- Tenn. Code Ann. § 45-5-201(a) and Tenn. Code Ann. § 45-5-205(a)(2) are partof thesame

statutory schem e and, therefore, sh ould be co nstrued t ogether, see In re Gant, 937 S.W .2d842, 845 (Tenn. 1996); State v. B louvett, 904 S.W .2d 111, 113 (Tenn. 1995), in order to promote consistency an d uniformity, see State e x rel. Witcher v. Bilbrey, 878 S.W .2d 567, 571 (T enn. Ct. App. 1994) , and to av oid placing statutes in

conflict with e ach other. See Holde r v. Ten nessee Jud icial Se lec tion Comm’n

, 937 S.W .2d 877, 88 3 (Tenn. 1996); Cronin v. Howe, 906 S.W. 2d 910, 912 (Ten n. 1995). Since T enn. Code Ann. § 45- 5-205(a)( 2) empowers the Com

missio ner to re voke cert i fica tes of re gistration for “ any provision of this cha

pter,” t he Com mis sioner has the aut

hority to revoke t

he certifi cate of anyregistra nt that does not satisfy

the “ experienc e, character, and general fitness” re quirement in Ten n. Code Ann. § 45-5-201 (a)(1). An y other interpretationwould under mine t he Departm

ent’s a bility to protect the public a

nd would ren der th e Co mmiss io ner ’s e nfo rce ment aut ho rit y me anin gless. Acco rdi ngl y, the trial cour t erred when it found

that the D epartm

ent could not

use Tenn. Code Ann. § 4 5-5 -201(a)( 1) as a bas is to revoke the cert ificates of registration for National Loans’ three branch offices in Tennessee.

IV. E VIDENTIARY S UPPORT FOR TH E R EVOCATION O RDER

The rem ainin g issue is whethe r the adm

inistrativ e record

contains
s ubstantial and material evidence supporting the decision to revoke the certificates of registra tion for ea

ch of National Loans’ branch

offices in Tennes see. We have determined

that the trial court erred by reversing the revocation of t he Mila n branch offic e’s certifi cate of r egistrati on and that t

he recor d contains substantial and m aterial evidence s upporting the revocati on of all thr

ee of Na tional Loa

ns’ branch offices in Tennessee.

Our rev iew of t he C ommi ssio ner’s revocati on order is governed by the Uniform Administrativ e Procedures Act. Tenn. Code An n. § 4-5-322(h) (5) (Supp

. 1996) directs us to modi fy or reverse a final or der if it is “unsupported by evidence which is both substa

ntive and m

aterial in light of ent

ire rec ord.” T

his standard o f
rev iew does not contemplate th at we will reweig h the evid ence, McCle llan v

.8 We need not rely on the presumption that persons in a regulated business are a ware of the applicable regulatory

statutes andregula

tions. One of National Loans’ br anch managers read Tenn. Code A

nn. § 4 5-5- 403( 1)(B ) to a corp orat e exe cutiv e who informed her that National Loan s ha d ch ose n t o “i nt erp ret ” th e la w di ffe ren tl y. In addition, the company was suff iciently awareof Tenn. Code Ann. § 45-5-403 to understand that the maximum service fee in Tennessee was 4%, while the maximum fee in Mississippi was only 2%. -15- Board of Regent

s, 921 S.W .2d 684, 69 3 (Tenn. 1996 ), or that we will substi tute
our judgm ent concer

ning the weight of the e vidence f or the adm

i nistrative agency ’s. Sanifil l of Tenn., Inc., v. Tenness ee Solid Wast e Disposa l Contro l Bd., 9 07 S.W.2d 807, 810 (Tenn. 1995). It does, however, require us to re view th e record to determ

ine whether

the agenc y’s decision is based on the sort of re levant evidence that a re asonable pe rso n might

accept to support a rational co nclusion
or to furnish a

reasonably sound ba sis for the acti on under c onsidera tion. Clay CountyManor, Inc. v. State, 849 S.W .2d 755, 75 9 (Tenn. 1993); Southern Ry . Co. v. State Bd. of Equa lization, 682 S.W.2d 196, 199 (Tenn. 1984).

The record contains substantial and material evidence that Nat ional Loa ns had a company- wide policy to charge m ore fees for real e state loans than permitted by the Industrial Loan and Thrift Act and that all three of its T ennessee branch offices collecte d fees in vi olation of Tenn. Code Ann. § 45-5-403(1)(B). The administrative law judge found National Loans’ elaborate j ustif ications f or its conduct n ot worthy of bel ief. We give great we ightto this d etermination, 2 Kenneth C. Davis & Richa rd J. Pierce, Jr., Administ rative Law

Treatise§ 11.2, at 183-84 (3d ed. 19 94); 2 Charles H. Koch, Administrative Law and Practice § 9.16 at204 (Supp. 1997), bec ause determining the credibility of witnesses is within t he province of the adm

inistrativ e finder of

fact. 1 Charles H. Koch, Administrative Law and Practice § 6.54A, at 29 0 (Supp. 1997). Like the administrative law judge, the Comm

issioner, and the trial court, we placelittle cr edibility in National Loans’ protestat

ions that it w as not awa

re of the fee lim itations in t

h e Industrial Loan and T

hrift Ac t. 8

In a sim ilar fas hion, the r

ecord contains substantial and material evidence thatNational Loa ns had a compan y-wi de p olicy t o misa ppropriate

the proce eds of joint cr edit life insurance

policies by

forging endorsem

ents on checks payab le to its custo mers’ estates. Two of Nat ional Loans’ branch offices in Tennessee engaged in this practice. The record contains no evidence that Nat ional Loa

ns’b ranch office i n Milan did no t follow c ompany policy . Dire ct evidenc e of th e Milan branch office’s conduct was unava

ilable bec ause the of

fice did no tmaintain t he records t

hat would ha

ve enable d the Depa

rtment to deter

mine whethe r th e practice to ok place.

The record shows by clear and convincing evidence that NationalLoans, as
amatte r of c orp ora te p oli cy, kn owi ngl y engag ed in practices that were neither lawful nor fair . These

practice s were n ot isola ted mistakes, but rather were careful ly calculated to enable National Loans to collect more fees than perm

itted by the Industrial Loan and T hrift Ac t. The magnitude of National Loans’ conduct is suffi cient to un dermine the pu blic ’s confidence that the c ompany was operating its business la

wfully and fair ly. Accordingly , the De partm ent had suf

ficient factual and legal grounds to re voke the ce rtifica tes of re gis trati on of all thr ee of National Lo ans’ branch o ffices in Ten nessee.

V.

We affirm

the revoc ation of the

certifi cates of registra

ti o n of National Loans’ Jackson and Collierville branch offices. In addition , we re verse the trial court ’s revers al of t he admin istra tive revoc atio n of th e Mila n bran ch office’s certifi cate of registration and r eman d the case

for the entry of an

order af firm ing the revocati on of the ce

rtifica te of registra tion of National Loans’ Milan office. We also tax t he costs o f this app eal to Natio nal Loans, In c. and its surety for which execu tion, if ne cessary, may issue.

____ _________________

_______ WILLIAM C. KOCH, JR., JUDGE CONCUR:

_________________

_______________ HENRY F. TODD, P.J., M.S.

_________________

_______________ SAMUEL L. LEWIS, JUDGE