Court Opinion

ID: 1081081
Source: CourtListenerOpinion
Date Created: 2013-10-09 20:45:51.170482+00
Date Added: 2024-06-11T12:06:49.357342
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
           MIDDLE SECTION AT NASHVILLE

NATIONAL LOANS, INC.,              )
                                                        FILED
Jackson, Tennessee,                )                      April 23, 1997
Memphis, Tennessee,                )
Milan, Tennessee,                  )                   Cecil W. Crowson
                                   )                  Appellate Court Clerk
      Petitioner/Appellant,        )     Davidson Chancery
                                   )     No. 92-1518-I
VS.                                )
                                   )     Appeal No.
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 Petitioner/Appellant:                 For the Respondent/Appellee:

William B. Hubbard                            Charles W. Burson
Brenner Lackey Van Meter                      Attorney General and Reporter
Weed, Hubbard, Berry & Doughty
Nashville, Tennessee                          Michael E. Moore
                                              Solicitor General
W.J. Michael Cody
Burch, Porter and Johnson                     Janet M. Kleinfelter
Memphis, Tennessee                            Assistant Attorney General

Lynn Fitch Mitchell
Holcomb, Dunbar, Connell, Chaffin & Willard   For the Intervenors:
Jackson, Mississippi
                                              Val Sanford
                                              Gullett, Sanford, Robinson
                                                    & Martin
                                              Nashville, Tennessee

       AFFIRMED IN PART; REVERSED IN PART;
                 AND REMANDED
      WILLIAM C. KOCH, JR., JUDGE

-2-
                                 OPINION

       This appeal involves the revocation of the certificates of registration of
three branch offices of an industrial loan and thrift company. The Commissioner
of Revenue, sitting for the Commissioner of Financial Institutions, revoked the
certificates after determining that the company’s real estate loan charges and its
handling of credit life insurance death claims violated the Industrial Loan and
Thrift Act. The company sought judicial review in the Chancery Court for
Davidson County.       After remanding the case for discovery relating to the
company’s selective enforcement claim, the trial court affirmed the revocation of
two of the branch offices’ certificates and reversed the revocation of the third
office’s certificate. The company asserts on this appeal that the administrative law
judge improperly limited additional discovery concerning its selective
enforcement claim, that the Department of Financial Institutions was selectively
enforcing the Industrial Loan and Thrift Act, and that the revocation of the
certificates of its two branch offices was not supported by substantial and material
evidence. The Department asserts that the trial court erred by reversing its
revocation of the third branch office’s certificate. We have determined that
additional discovery concerning the selective enforcement claim was not
warranted, that the Department did not selectively enforce the Industrial Loan and
Thrift Act, and that the evidence supports the revocation of all three branch
offices’ certificates of registration.

                                         I.

       National Loans, Inc. is an industrial loan and thrift company originally
incorporated in Mississippi in 1974. It opened its first Tennessee branch office
in Milan in 1986. Over the next two years, it opened other branch offices in
Collierville and Jackson. National Loans was operating twenty branch offices in
Tennessee and Mississippi at the outset of this enforcement proceedings.

       In 1990 the Department of Financial Institutions learned that an industrial
loan and thrift company doing business in both Mississippi and Tennessee had
been expelled from the Mississippi Independent Association. During a review of

                                         -3-
the examination records of three industrial loan and thrift companies doing
business in both Mississippi and Tennessee, the                         assistant commissioner
responsible for overseeing the regulation of the loan and thrift industry in
Tennessee discovered a transaction in which National Loans’ branch office in
Jackson had deposited the proceeds from a joint credit life insurance policy in its
own account rather than immediately paying over the proceeds to its customer’s
estate. The assistant commissioner eventually ordered examinations of all of
National Loans’ branch offices in Tennessee after verifying that the customer’s
estate had never received the insurance proceeds and after a review of six to eight
other examination files revealed that the company consistently retained credit life
proceeds rather than paying them over to its customers’ estates.

        Department representatives examined National Loans’ three Tennessee
branch offices in August 1990. They were unable to examine the credit life
transactions at the Milan branch office because it did not provide them the
required insurance claim log. The examinations uncovered one loan at the
Jackson branch office and three loans at the Collierville branch office in which the
company had attempted to convert the credit life insurance proceeds to its own
use. In these transactions, National Loans’ employees had forged endorsements
on insurance checks made payable to its customers’ estates and had deposited
these checks in a central company suspense account. Later, the company issued
one or more checks to their customers’ estates but again deposited these checks
into a company account over another forged endorsement.

        The examinations also uncovered fourteen other transactions in which all
three branch offices had violated Tenn. Code Ann. § 45-5-403(1)(B) (Supp. 1996)
by charging customers a four percent service charge in addition to third-party
expenses.1 These transactions represented every real estate loan made by National
Loans’ three branch offices in Tennessee.

        1
          Tenn. Code Ann. § 45-5-403(1)(B) permits industrial loan and thrift companies to charge
either a four percent service charge or “the actual, bona fide, reasonable expenses, directly
incident to the loan, paid or to be paid . . . to third parties, including, but not limited to, expenses
for title examination or title insurance, surveys, preparation or necessary documents, credit
reports and appraisals” but not both.

                                                  -4-
       The Mississippi Department of Banking and Consumer Finance commenced
a special investigation into National Loans’ use of the proceeds of the joint credit
life insurance policies on September 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 the overcharges on its real estate
loans in Tennessee after the Department commenced the special examination at
issue in this case.

       Armed with the examination results, the Department of Financial
Institutions commenced administrative proceedings to revoke the registration
certificates of National Loans’ three branch offices in Tennessee. At the hearing
before an administrative law judge, the Department presented Mississippi and
Tennessee regulators as well as former National Loans employees to testify about
National Loans’ corporate policies with regard to real estate loan charges and
credit life insurance death claims. National Loans stipulated during the hearing
that its company-wide policy was to charge both the four percent service charge
and the third-party expenses on its real estate loans. National Loans’ president
and vice president for Tennessee operations also conceded that the company
routinely forged endorsements on checks payable to the estates of their deceased
borrowers and deposited these checks in a corporate suspense account.

       After the hearing, National Loans learned that the Department had also
examined American General Finance, Inc., a Tennessee industrial loan and thrift
company, for collecting excessive fees in real estate transactions. With the
Department’s permission, National Loans reviewed American General’s
examination file and discovered that the Department had permitted American
General to reimburse a number of customers for loan overcharges without
commencing formal enforcement proceedings. The administrative law judge later
denied National Loans’ request to reopen the record to present evidence of
discrimination by the Department.

       2
         Later, in July 1990, the Mississippi regulators commenced administrative proceedings
of their own to revoke National Loans’ license to do business in Mississippi. This action was
eventually settled.

                                            -5-
      On January 23, 1992, the administrative law judge issued an initial order
finding that the certificates of registration of all three of National Loans’ branch
offices in Tennessee should be revoked because of the illegal real estate loan
charges and the fraudulent handling of credit life insurance proceeds. In April
1992 the Commissioner of Financial Institutions affirmed the initial order.
National Loans filed a petition for review in the Chancery Court for Davidson
County in May 1992 and continued to review American General’s examination
files for evidence of additional overcharges. In August 1992 National Loans
sought the trial court’s permission to introduce additional evidence supporting its
selective enforcement claim and also requested the trial court to remand the case
for further discovery on the issue. The trial court thereupon remanded the case to
the administrative law judge to allow discovery and further consideration of
National Loans’ selective enforcement claim.

      The remand order triggered a discovery dispute that lasted eighteen months.
National Loans demanded virtually unlimited access to all the Department’s
enforcement records concerning every industrial loan and thrift company doing
business in Tennessee; while the Department sought to limit the discovery to
American General’s examination files. The administrative law judge permitted
National Loans to submit interrogatories to the Department’s examiners
concerning their memories of violations by any industrial loan and thrift company.
As the dispute wore on, the administrative law judge ordered the Department to
make available examination files involving first three, then eleven other industrial
loan and thrift companies. The administrative law judge also directed that these
records be placed under seal and made available only to National Loans’
attorneys.

      Both parties appealed the administrative law judge’s discovery orders to the
trial court. After the trial court quashed National Loans’ efforts to subpoena
additional witnesses after the discovery deadline, National Loans’ lawyers
requested the trial court to lift the protective order to enable their client to review
the documents and to aid in the presentation of its selective enforcement claim.
The trial court denied the motion, but not before it permitted four other industrial

                                         -6-
loan and thrift companies to intervene to protect the confidentiality of their
records.

      On March 4, 1994, the administrative law judge entered an initial order
confirming the findings of fact in its January 23, 1992 order as well as its
conclusion that the certificates of registration of National Loans’ three branch
offices in Tennessee should be revoked. The administrative law judge also found
that the evidence presented following the remand did not substantiate National
Loans’ selective enforcement claim. National Loans appealed the initial order to
the Commissioner of Financial Institutions.

      The Commissioner of Financial Institutions recused himself because
National Loans had filed a civil rights action against him in the Circuit Court for
Gibson County alleging that he was using the Industrial Loan and Thrift Act to
harass and selectively prosecute the company. The Governor, acting pursuant to
Tenn. Code Ann. § 4-5-302(e)(1) (1991), appointed the Commissioner of Revenue
to preside over the enforcement proceedings in place of the Commissioner of
Financial Institutions. Thereafter, the Commissioner of Revenue denied National
Loans’ renewed motion to lift the protective order and, on June 10, 1994, entered
a final order adopting the administrative law judge’s findings. The Commissioner
of Revenue revoked the certificates of registration issued to National Loans’ three
branch offices in Tennessee. In doing so, the Commissioner noted that “the record
reflects testimony by company employees that there was a company policy and
continuing practice with regard to charges in excess of the amounts statutorily
allowed on real estate loans.”

      The Department of Financial Institutions filed the supplemental record with
the trial court in July 1994.     On March 27, 1995, the trial court filed a
memorandum opinion affirming the revocation of the certificates of registration
of National Loans’ branch offices in Jackson and Collierville. The trial court
reversed the revocation of the Milan branch office’s certification of registration
on two grounds. First, the trial court pointed out that there was no proof that the
Milan branch office had misappropriated the proceeds of joint credit life insurance
policies; second, the court concluded that the Commissioner acted arbitrarily by

                                       -7-
applying the character and fitness standards in Tenn. Code Ann. § 45-5-201(a)
(Supp. 1996) to an industrial loan and thrift company that was already operating.

                                             II.
             NATIONAL LOANS’ SELECTIVE ENFORCEMENT CLAIM

       We turn first to the issues surrounding National Loans’ selective
enforcement claim. National Loans asserts that the administrative law judge
improperly limited its ability to substantiate this claim and that the proof
establishes that the Department was selectively enforcing the Industrial Loan and
Thrift Act. The intervening industrial loan and thrift companies assert that the
Department should not have been required to divulge the enforcement records
pertaining to them because National Loans had not made a threshold showing that
it was entitled to additional discovery.3 We have determined that National Loans
failed at the outset to come forward with some credible evidence tending to show
that improper selective enforcement had occurred. Accordingly, we pretermit the
discovery issues and find that the trial court erred by remanding the case for
additional discovery concerning National Loans’ selective enforcement claim.

                                              A.
                 SELECTIVE ENFORCEMENT CLAIMS IN GENERAL

       State and local officials have broad discretion with regard to their
enforcement and prosecution decisions as long as they have a reasonable basis to
believe that a violation of a statute or regulation has been committed. See
Bordenkircher v. Hayes, 434 U.S. 357, 364, 98 S. Ct. 663, 668 (1978); Patterson
v. Hunt, 682 S.W.2d 508, 517 (Tenn. Ct. App. 1984). Unwarranted judicial
intervention in enforcement or prosecution decisions can chill enforcement of the

       3
         We disagree with National Loans’ assertion that the intervenors’ arguments are either
moot or not properly before the court. The intervenors are aggrieved persons for the purpose of
Tenn. Code Ann. § 4-5-322(a)(1) (Supp. 1996). While the Department of Financial Institutions
has already divulged its enforcement records concerning the intervenors, the issue concerning
the disclosure of proprietary information contained in the Department’s enforcement records is
one of great public interest and importance to the administration of justice and is likewise
capable of repetition yet evading review. Walker v. Dunn, 498 S.W.2d 102, 104 (Tenn. 1972)
(recognizing an exception to the mootness doctrine for issues of great public interest and
importance); Bemis Pentecostal Church v. State, 731 S.W.2d 897, 903 (Tenn. 1987) (recognizing
an exception to the mootness doctrine for issues capable of repetition yet evading review).

                                             -8-
law and can hamper or even frustrate government effectiveness. United States v.
Armstrong, ___ U.S. ___, ___, 116 S. Ct. 1480, 1486 (1996); Wayte v. United
States, 470 U.S. 598, 607-08, 105 S. Ct. 1524, 1530-31 (1985). Thus, the doctrine
of separation of powers embodied in Tenn. Const. art. II, §§ 1 and 2 counsels the
courts to proceed cautiously when asked to scrutinize enforcement or prosecution
decisions by state and local officials.

       Regulation based on personal dislike, vendetta, or some other impermissible
consideration is repugnant to the American tradition of the rule of law. See
Futernick v. Sumpter Township, 78 F.3d 1051, 1059 (6th Cir. 1996). Accordingly,
a public official’s enforcement discretion is subject to constitutional constraints.
United States v. Batchelder, 442 U.S. 114, 125, 99 S. Ct. 2198, 2204-05 (1979).
One of these constraints, imposed by the Equal Protection Clause of the
Fourteenth Amendment, Tenn. Const. art. I, § 8, and Tenn. Const. art. XI, § 8,4 is
that prosecution or enforcement decisions may not be based on some
impermissible consideration. Wayte v. United States, 470 U.S. at 608, 105 S. Ct.
at 1531; State v. Martin, 719 S.W.2d 522, 525 (Tenn. 1986); Irvin v. City of
Clarksville, 767 S.W.2d 649, 654 (Tenn. Ct. App. 1988). This “murky corner of
equal protection law” is commonly known as “selective enforcement” or
“selective prosecution.” LeClair v. Saunders, 627 F.2d 606, 608 (2d Cir. 1980).

       Persons asserting selective enforcement claims have a heavy burden to
overcome the presumption that public officials are performing their duties in good
faith, Williams v. American Plan Corp., 216 Tenn. 435, 441, 392 S.W.2d 920, 923
(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 enforced the law in some instances but not in others. State v. Martin, 719
S.W.2d at 525; Irvin v. City of Clarksville, 767 S.W.2d at 654. Equal protection
does not require that all evils of the same genus be eradicated or none at all.
Railway Express Agency, Inc. v. New York, 336 U.S. 106, 110, 69 S. Ct. 463, 466
(1949). Accordingly, there is no right to have the law go unenforced even if other

       4
         The Tennessee Supreme Court has equated Tenn. Const. art. XI, § 8 with the Fourteenth
Amendment in considering a challenge 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-
persons who may be equally or more culpable have gone unpunished. Futernick
v. Sumpter Township, 78 F.3d at 1056.

      Persons claiming selective enforcement must prove that the enforcement
decision had a discriminatory purpose and has produced a discriminatory 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. Thus, in order to make out a prima
facie case 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 same type of conduct and (2) that the decision to prosecute
them rests on an impermissible consideration. United States v. Hazel, 696 F.2d
473, 474 (6th Cir. 1983); United States v. Berrios, 501 F.2d 1207, 1211 (2d Cir.
1974).

      With regard to the first element of a selective enforcement claim, proof that
others have not been prosecuted for essentially the same type of conduct must
consist of evidence that (1) other non-prosecuted offenders engaged in essentially
the same conduct, (2) the non-prosecuted offenders violated the same statute or
regulation that the claimant is accused of violating, and (3) the magnitude of the
non-prosecuted offenders’ violations was not materially different from that of the
person claiming selective enforcement. United States v. Cyprian, 756 F. Supp.
388, 393 (N.D. Ind. 1991). The impermissible considerations required by the
second element of the claim consist of considerations based on race, gender,
religion, or some other arbitrary classification such as the exercise of statutory or
constitutional rights. Wayte v. United States, 470 U.S. at 608, 105 S. Ct. 1531;
Futernick v. Sumpter Township, 78 F.3d at 1056-59.

                                         B.
     DISCOVERY WITH REGARD TO SELECTIVE ENFORCEMENT CLAIMS

      Selective enforcement claims are difficult to prove. They generally require
evidence gleaned from government files that are not generally subject to
discovery. Wayte v. United States, 470 U.S. at 624, 105 S. Ct. at 1539 (Marshall,
J., dissenting); United States v. Bourgeois, 964 F.2d 935, 938 (9th Cir. 1992);

                                        -10-
United States v. Heidecke, 900 F.2d 1155, 1158 (7th Cir. 1990). Thus, when
persons claiming selective enforcement request access to government enforcement
records in order to obtain evidence to prove their claims, the courts must balance
the government’s legitimate interests with those of the party seeking to
substantiate a selective enforcement claim.

       Because of the unavailability of evidence to substantiate a selective
prosecution claim, the courts have generally applied a lesser standard of proof to
warrant discovery than is required ultimately to prove selective enforcement.
United States v. Berrios, 501 F.2d at 1211-12. In order to be entitled to discovery,
a party claiming selective enforcement must come forward with some credible
evidence tending to show the existence of discriminatory effect and discriminatory
intent. United States v. Armstrong, ___ U.S. at ___, 116 S. Ct. at 1488.5

                                                C.
                      NATIONAL LOANS’ THRESHOLD SHOWING

       National Loans’ threshold showing of selective enforcement consisted of
evidence of the Department’s enforcement activities involving American General.
National Loans did not claim to be a member of a protected class and did not
attribute an improper, discriminatory motive to the Department. Rather, it simply
asserted that the Department had not commenced enforcement proceedings against
American General even though the company had collected the same fees and had
violated the same statute.

       A regulatory agency’s decision to enforce a statute or regulation in some
cases but not in others may entitle the person subjected to formal enforcement
proceedings to an explanation from the agency. Baltimore Gas & Elec. Co. v.
Heintz, 760 F.2d 1408, 1419 (4th Cir. 1985). In this case, the Department went

       5
         Prior to the United States Supreme Court’s decision in United States v. Armstrong, the
state and federal courts had adopted several labels for the requisite showing needed to be entitled
to discovery. The most common label was “colorable basis." See, e.g., United States v. Lopez,
71 F.3d 954, 963 (1st 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. 1986); Jones v. Missouri 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-
beyond providing an explanation and actually granted National Loans access to
the enforcement files concerning American General.6 These records contained no
evidence of improper motive and also demonstrated that American General had
not engaged in the same type of conduct as National Loans.

       The Department’s enforcement records did not indicate that American
General had misappropriated credit life insurance proceeds by forging
endorsements on insurance checks.7 In addition, they demonstrated that American
General had not engaged in the same type of conduct as National Loans. All three
of National Loans’ branch offices in Tennessee had violated Tenn. Code Ann. §
45-5-403(1)(B) in every real estate loan they had made. On the other hand,
American General had violated the general usury laws in approximately seventy
of its 400,000 accounts. These loans were federally exempt from state regulation
under the Industrial Loan and Thrift Act, and American General had reimbursed
it customers.

       At the time National Loans first asserted its selective prosecution claim in
the trial court, the evidence showed convincingly that American General had not
violated the same statute that National Loans was accused of violating and that the
magnitude of American General’s violations was not the same as that of National
Loans. Accordingly, the trial court should have found that National Loans had not
presented credible evidence of selective enforcement and, therefore, should have
denied its request to remand the case to the administrative law judge for additional
discovery to substantiate its selective enforcement claim.

                                             III.
               APPLICATION OF TENN. CODE ANN. § 45-5-201(A)(1)
                       TO REVOCATION PROCEEDINGS

       6
        We do not decide in this case whether a regulatory agency must in all circumstances
provide a person asserting selective enforcement with access to its enforcement files or whether
an explanation of its decision will suffice.
       7
        A Department representative stated he would not have hesitated to commence formal
proceedings had the Department discovered that American General had been forging documents.
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-
      We turn next to the trial court’s conclusion that the general fitness
requirements in Tenn. Code Ann. § 45-5-201(a)(1) cannot provide a basis for
revoking the registration of an industrial loan and thrift company. We do not
agree with the trial court’s restrictive interpretation that the general qualification
for registration apply only to applicants for initial registration.

      When construing a statute, the courts must ascertain and give the fullest
possible effect to the legislative purpose expressed in the words 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. 1996). We must derive the statute’s
purpose from the plain and ordinary meaning of its language, Tuggle v. Allright
Parking Sys., Inc., 922 S.W.2d 105, 107 (Tenn. 1996), without unduly restricting
or expanding the statute’s application or coverage. Worley v. Weigels, Inc., 919
S.W.2d 589, 593 (Tenn. 1996).

      The stated purpose of the Industrial Loan and Thrift Act is to provide the
people of Tennessee the “facilities and resources of regulated lending institutions
to meet their needs for loans at rates and charges reasonably commensurate with
economic realities.” See Tenn. Code Ann. § 45-5-101(a) (1993). All industrial
loan and thrift companies desiring to do business in Tennessee must obtain a
certificate of registration from the Commissioner of Financial Institutions for each
one of their proposed branch offices. See Tenn. Code Ann. § 45-5-103 (1993).
In order to qualify for a certificate of registration, an applicant must “demonstrate
such experience, character and general fitness as to command the confidence of
the public and warrant the belief that the business to be operated thereunder will
be operated lawfully and fairly.” See Tenn. Code Ann. § 45-5-201(a)(1).

      A company that obtains a certificate of registration under the Industrial
Loan and Thrift Act does not have a right to then operate perpetually. Tenn. Code
Ann. § 45-5-205(a)(2) (1993) empowers the Commissioner of Financial
Institutions to revoke a certificate of registration if the registrant has knowingly
and without exercising due care “[v]iolated any provision of this chapter or any
rule or regulation issued under this chapter.”

                                        -13-
      Tenn. Code Ann. § 45-5-201(a) and Tenn. Code Ann. § 45-5-205(a)(2) are
part of the same statutory scheme and, therefore, should be construed together, see
In re Gant, 937 S.W.2d 842, 845 (Tenn. 1996); State v. Blouvett, 904 S.W.2d 111,
113 (Tenn. 1995), in order to promote consistency and uniformity, see State ex rel.
Witcher v. Bilbrey, 878 S.W.2d 567, 571 (Tenn. Ct. App. 1994), and to avoid
placing statutes in conflict with each other. See Holder v. Tennessee Judicial
Selection Comm’n, 937 S.W.2d 877, 883 (Tenn. 1996); Cronin v. Howe, 906
S.W.2d 910, 912 (Tenn. 1995). Since Tenn. Code Ann. § 45-5-205(a)(2)
empowers the Commissioner to revoke certificates of registration for “any
provision of this chapter,” the Commissioner has the authority to revoke the
certificate of any registrant that does not satisfy the “experience, character, and
general fitness” requirement in Tenn. Code Ann. § 45-5-201(a)(1). Any other
interpretation would undermine the Department’s ability to protect the public and
would render the Commissioner’s enforcement authority meaningless.
Accordingly, the trial court erred when it found that the Department could not use
Tenn. Code Ann. § 45-5-201(a)(1) as a basis to revoke the certificates of
registration for National Loans’ three branch offices in Tennessee.

                                        IV.
            EVIDENTIARY SUPPORT FOR THE REVOCATION ORDER

      The remaining issue is whether the administrative record contains
substantial and material evidence supporting the decision to revoke the certificates
of registration for each of National Loans’ branch offices in Tennessee. We have
determined that the trial court erred by reversing the revocation of the Milan
branch office’s certificate of registration and that the record contains substantial
and material evidence supporting the revocation of all three of National Loans’
branch offices in Tennessee.

      Our review of the Commissioner’s revocation order is governed by the
Uniform Administrative Procedures Act. Tenn. Code Ann. § 4-5-322(h)(5) (Supp.
1996) directs us to modify or reverse a final order if it is “unsupported by evidence
which is both substantive and material in light of entire record.” This standard of
review does not contemplate that we will reweigh the evidence, McClellan v.

                                        -14-
Board of Regents, 921 S.W.2d 684, 693 (Tenn. 1996), or that we will substitute
our judgment concerning the weight of the evidence for the administrative
agency’s. Sanifill of Tenn., Inc., v. Tennessee Solid Waste Disposal Control Bd.,
907 S.W.2d 807, 810 (Tenn. 1995). It does, however, require us to review the
record to determine whether the agency’s decision is based on the sort of relevant
evidence that a reasonable person might accept to support a rational conclusion
or to furnish a reasonably sound basis for the action under consideration. Clay
County Manor, Inc. v. State, 849 S.W.2d 755, 759 (Tenn. 1993); Southern Ry. Co.
v. State Bd. of Equalization, 682 S.W.2d 196, 199 (Tenn. 1984).

       The record contains substantial and material evidence that National Loans
had a company-wide policy to charge more fees for real estate loans than
permitted by the Industrial Loan and Thrift Act and that all three of its Tennessee
branch offices collected fees in violation of Tenn. Code Ann. § 45-5-403(1)(B).
The administrative law judge found National Loans’ elaborate justifications for
its conduct not worthy of belief. We give great weight to this determination, 2
Kenneth C. Davis & Richard J. Pierce, Jr., Administrative Law Treatise § 11.2, at
183-84 (3d ed. 1994); 2 Charles H. Koch, Administrative Law and Practice § 9.16
at 204 (Supp. 1997), because determining the credibility of witnesses is within the
province of the administrative finder of fact. 1 Charles H. Koch, Administrative
Law and Practice § 6.54A, at 290 (Supp. 1997). Like the administrative law
judge, the Commissioner, and the trial court, we place little credibility in National
Loans’ protestations that it was not aware of the fee limitations in the Industrial
Loan and Thrift Act.8

       In a similar fashion, the record contains substantial and material evidence
that National Loans had a company-wide policy to misappropriate the proceeds
of joint credit life insurance policies by forging endorsements on checks payable
to its customers’ estates. Two of National Loans’ branch offices in Tennessee
engaged in this practice. The record contains no evidence that National Loans’

       8
         We need not rely on the presumption that persons in a regulated business are aware of
the applicable regulatory statutes and regulations. One of National Loans’ branch managers read
Tenn. Code Ann. § 45-5-403(1)(B) to a corporate executive who informed her that National
Loans had chosen to “interpret” the law differently. In addition, the company was sufficiently
aware of 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-
branch office in Milan did not follow company policy. Direct evidence of the
Milan branch office’s conduct was unavailable because the office did not maintain
the records that would have enabled the Department to determine whether the
practice took place.

      The record shows by clear and convincing evidence that National Loans, as
a matter of corporate policy, knowingly engaged in practices that were neither
lawful nor fair. These practices were not isolated mistakes, but rather were
carefully calculated to enable National Loans to collect more fees than permitted
by the Industrial Loan and Thrift Act. The magnitude of National Loans’ conduct
is sufficient to undermine the public’s confidence that the company was operating
its business lawfully and fairly. Accordingly, the Department had sufficient
factual and legal grounds to revoke the certificates of registration of all three of
National Loans’ branch offices in Tennessee.

                                        V.

      We affirm the revocation of the certificates of registration of National
Loans’ Jackson and Collierville branch offices. In addition, we reverse the trial
court’s reversal of the administrative revocation of the Milan branch office’s
certificate of registration and remand the case for the entry of an order affirming
the revocation of the certificate of registration of National Loans’ Milan office.
We also tax the costs of this appeal to National Loans, Inc. and its surety for
which execution, if necessary, may issue.

                                               ____________________________
                                               WILLIAM C. KOCH, JR., JUDGE

CONCUR:

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

________________________________
SAMUEL L. LEWIS, JUDGE