Frost v. Delaney

168 N.H. 353

128 A.3d 663

Jeffrey FROST & a.

v.Michael DELANEY & a.

No. 2014–0580

Supreme Court of New Hampshire.

Argued: June 24, 2015

Opinion Issued: November 17, 2015

Douglas, Leonard & Garvey, P.C., of Concord (Richard J. Lehmann and Charles G. Douglas, III on the brief, and Mr. Douglas orally), for the plaintiffs.

Joseph A. Foster, attorney general (Brian W. Buonamano, assistant attorney general, on the brief and orally), for defendants New Hampshire Banking Department, Kathleen Sheehan, and State of New Hampshire.

CONBOY, J.

This appeal and cross-appeal arise out of a civil action by the plaintiffs, Jeffrey Frost, Frost Family, LLC (Frost Family), and Chretien/Tillinghast, LLC (Chretien), against Michael Delaney, individually and as former attorney general; the State of New Hampshire; the New Hampshire Banking Department (the Department); Karen Gorham, individually and as former assistant attorney general; Peter Hildreth, individually and as former commissioner of the Department; Maryam Torben Desfosses, individually and as hearings examiner for the Department; and Kathleen Sheehan, individually and as bank examiner for the Department, for their actions in the investigation and prosecution of Frost for alleged violations of RSA chapter 397–A. The plaintiffs appeal only orders of the Superior Court (Brown, J.) granting the defendants' motion for summary judgment on the plaintiffs' 42 U.S.C. § 1983 (2012) claim ( § 1983 claim) against Sheehan on the ground that she is entitled to qualified immunity, and dismissing their negligent supervision claims against Hildreth and Desfosses on the ground that they are entitled to absolute prosecutorial immunity. Defendants the State of New Hampshire, the Department, and Sheehan cross-appeal. We affirm.

I. Background

This is the second opinion we have issued in connection with the prosecution of Frost for allegedly violating RSA chapter 397–A. See Frost v. Comm'r, N.H. Banking Dep't, 163 N.H. 365, 42 A.3d 738 (2012). We begin by reviewing the statutory backdrop to this case and summarizing the relevant facts drawn from the trial court's orders, the record, and our prior opinion.

RSA chapter 397–A governs the licensing of nondepository mortgage bankers and brokers. See RSA ch. 397–A (2006 & Supp.2014). In March 2009, RSA 397–A:3 required persons engaged in the business of making or brokering mortgage loans to obtain a license from the Department. RSA 397–A:3, I (Supp. 2008) (amended 2012). RSA 397–A:4, II (2006) (amended 2009) exempted from licensure "[a]ny natural person making not more than 4 first mortgage loans within any calendar year." Effective July 2009, the legislature removed the exemption for natural persons making four or fewer mortgage loans within a year. See RSA 397–A:4 (Supp.2009) (amended 2011, 2012, 2013). In addition, effective July 2009, the legislature enacted RSA 397–A:1, XIII-a, which provides that " ‘[m]ortgage lender’ means a mortgage banker." Laws 2009, 290:7.

Chretien and Frost Family are New Hampshire limited liability companies organized for the purpose of real estate acquisition, holding, and development. Frost, 163 N.H. at 368, 42 A.3d 738. Frost is a member and designated manager of Chretien and a member of Frost Family. Id. In March 2009, Chretien sold one of its properties to Robert Recio and his housemate in a seller-financed real estate transaction. See id. at 368, 42 A.3d 738. In late December 2009, Recio filed a complaint against Chretien with the Consumer Protection Bureau of the Attorney General's Office alleging, among other things, that the plaintiffs had fraudulently induced him to enter into the sale. Id. The complaint was forwarded to the Department, which assigned investigation of the complaint to Sheehan.

On February 22, 2010, Sheehan, Gorham, and Manchester Police Department officials drafted an application for a warrant to search Frost's residence, which also served as the business address for Chretien, for evidence that the plaintiffs had participated in unlicensed mortgage lending in violation of RSA chapter 397–A. The supporting affidavit averred that Frost, as a member of Chretien, "had acted as a Mortgage Banker" with regard to the conduct complained of in Recio's complaint.

The next day, the Manchester District Court (Ryan, J.) granted the search warrant application. Judge Ryan noted on the application that he had "inquired of ... Sheehan regarding her investigation and what she had learned about Frost acting as a Mortgage Banker ... Sheehan informed the Court that she looked at [the] mortgage registered with [the] Registry of Deeds which listed Chretien/Tillinghast as the mortgage banker. Frost had been the representative of Chretien/Tillinghast." (Emphasis added.) In fact, the mortgage deed listed Chretien as the lender.

Subsequently, Manchester police officers executed the search warrant. Shortly thereafter, Frost was arrested and charged with four class A misdemeanors alleging violations of RSA chapter 397–A. The district court later granted Frost's motion to suppress the evidence obtained as a result of the search. The court found that Sheehan misrepresented that Chretien was listed as the "Mortgage Banker" in the Recio transaction and that her misrepresentation was material. The court, therefore, determined that the warrant application lacked probable cause. Thereafter, the court granted Frost's motion to dismiss the criminal charges.

On March 23, the Department initiated administrative proceedings against Frost. See Frost, 163 N.H. at 369, 42 A.3d 738. After unsuccessfully attempting to resolve those claims, the plaintiffs initiated a declaratory judgment action in superior court, seeking to stay the administrative proceedings until the issue of the Department's jurisdiction could be resolved. The trial court granted a preliminary injunction against further Department administrative proceedings, concluding that the Department lacked jurisdiction to take action against Frost for his conduct relating to the Recio mortgage transaction and to a separate seller-financed real estate transaction involving Frost Family. See id. at 370, 42 A.3d 738. The Department appealed, and we affirmed the trial court's decision. See id. at 367–68, 42 A.3d 738. We concluded that neither Frost Family nor Chretien "engaged in the business of making or brokering mortgage loans." Id. at 376, 42 A.3d 738 (quotation omitted); see RSA 397–A:2, I (Supp. 2014). We further held that Frost was not subject to disciplinary action by the Department based upon the two disputed transactions because when they occurred, neither Frost Family nor Chretien was a mortgage banker or broker under RSA chapter 397–A. Frost, 163 N.H. at 376–77, 42 A.3d 738.

The plaintiffs then brought this action against the defendants, asserting various claims, including a § 1983 claim against Delaney, Hildreth, Gorham, Desfosses, and Sheehan. Specifically, the plaintiffs alleged that, in the course of obtaining the search warrant, Sheehan misrepresented material facts when she told Judge Ryan that Chretien was listed on the Recio mortgage as a mortgage banker. They claimed that this misrepresentation violated their right to be free from unreasonable search and seizure under the Fourth Amendment to the Federal Constitution as well as Frost's rights to substantive and procedural due process under the Fourteenth Amendment to the Federal Constitution. The plaintiffs also brought negligent supervision claims against Delaney, Hildreth, Desfosses, the State of New Hampshire, and the Department for allegedly failing to supervise employees within the Department and the Attorney General's Office.

Subsequently, the trial court granted the defendants' motion to dismiss the negligent supervision claims. Following a hearing on the defendants' later summary judgment motion, the court found that the doctrine of official immunity bars the plaintiffs' state constitutional and intentional infliction of emotional distress claims. It further found that the doctrine of qualified immunity bars the plaintiffs' § 1983 claims. Accordingly, the court granted the defendants' motion for summary judgment on those claims. The plaintiffs unsuccessfully sought reconsideration of both the trial court's order dismissing their negligent supervision claims against Hildreth and Desfosses and the order granting summary judgment in favor of the remaining defendants on the § 1983 claims. This appeal and cross-appeal followed.

II. Plaintiffs' Appeal

A. Motion for Summary Judgment

We first consider the plaintiffs' argument that the trial court erred by granting summary judgment on their § 1983 claim against Sheehan on the ground that she was entitled to qualified immunity. We note that the plaintiffs do not appeal the trial court's ruling that official immunity bars their state constitutional and intentional infliction of emotional distress claims.

We review "a grant of summary judgment based on qualified immunity de novo. " McInerney v. King, 791 F.3d 1224, 1227 (10th Cir.2015) (quotation omitted). We consider the affidavits and other evidence, and all inferences properly drawn from them, in the light most favorable to the non-moving party. Hughes v. N.H. Div. of Aeronautics, 152 N.H. 30, 35, 871 A.2d 18 (2005) ; see also McInerney, 791 F.3d at 1227. If our review of that evidence discloses no genuine issue of material fact, and if the moving party is entitled to judgment as a matter of law, we will affirm the grant of summary judgment. Hughes, 152 N.H. at 35, 871 A.2d 18.

We begin by reviewing the doctrine of qualified immunity. The doctrine of qualified immunity is a creature of federal law. Id. at 42, 871 A.2d 18. Under the doctrine, "government officials performing discretionary functions, generally are shielded from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known." Harlow v. Fitzgerald, ...