Former Maryland developer James B. Caine has sued the state for reinstatement of his real estate broker's license and for damages of $1.5 million.

Caine's real estate dealings caused Maryland's Real Estate Guaranty Fund to pay out nearly $600,000 to consumers who claimed damages. The Maryland Real Estate Commission found that Caine, a licensed real estate broker until Feb. 22, 1979, misappropriated clients' funds paid to him as deposits for property sold in a mobile home park he was developing adjacent to Montego Bay in Ocean City. More than 50 claims, ranging from about $6,200 to $48,000, were paid out by the fund to purchasers of lots from Caine.

Although Maryland law requires a broker whose license has been revoked to replenish the fund before becoming eligible for a new license, Caine contends that the claims against him were discharged by the Bankruptcy Court in February and that he is entitled, in effect, to an automatic reinstatement of his license. Caine had filed for bankruptcy in August 1978. The State of Maryland replied in court that it is not requiring Caine to repay the fund before getting a broker's license; it contended that Caine must follow the license application procedures that is required of every broker whose license has been revoked.

In his suit filed in the U.S. Bankruptcy Court in Baltimore in May and amended in June, Caine contended that the State of Maryland, in violation of the provisions of federal bankruptcy laws, filed suit in May 1981 in a state circuit court to recover from him the funds paid out by the guaranty fund.

The suit also contends that, after his debts were discharged by the bankruptcy court, Caine's attorney sought the reinstatement of Caine's real estate broker's license, but it was refused "based upon the alleged debt" that the state claims remains unpaid to the Real Estate Guaranty Fund.

The Bankruptcy Code provides protection against discriminatory treatment of bankrupts, so the refusal of the state to reinstate his broker's license violates the law, Caine's suit contends.

"The plaintiff is entitled to have his real estate broker's license reinstated immediately," the suit argues. "The refusal . . . to reinstate said license is not only in violation of the provisions of the Bankruptcy Code, but is an illegal and contemptuous act of the defendants," the suit said.

Caine sought damages on grounds that the state, in a course of conduct allegedly "malicious, willful and wanton and reckless and without regard" to his rights, had denied him the right to pursue his trade, precluding him "from earning the profits and income that he would otherwise have earned."

In a response filed with the court seeking to have Caine's suit dismissed, the State of Maryland said that the Real Estate Commission "stands ready" to consider an application from Caine "expeditiously." However, it said, Caine hasn't reapplied for a license, even though the commission requested that he do so and sent him an application form in the mail.

"While it is conceded that a discharge in bankruptcy will and should relieve a former licensee from the requirement of reimbursing the fund as a prerequisite to eligibility for a new license, it does not relieve the former licensee of the statutory requirements for licensure, including submission of a properly complete application," the state replied.

The state, in a memorandum signed by Attorney General Stephen H. Sachs, contended that the laws do not relieve bankrupts of nonmonetary licensing requirements that apply to any person seeking a broker's license. It also suggested that the commission may consider "other factors bearing on an applicant's qualifications" in considering an application, so long as its actions do not discriminate against a bankrupt.

The state can't be accused of discriminating against Caine when it merely requested Caine to follow the same procedure as any other applicant and has taken no other action, the state said. It noted that, in every case in which a former licensee whose license was revoked as a consequence of a fund payout sought a new license after reimbursement back to the fund, an application was considered by the commission. "In no case was reinstatement automatic or granted at staff level," the state contended.

"The Bankruptcy Code . . . does not grant Caine any greater rights than he would have outside bankruptcy," the state argued.

Maryland also contended that, when its Department of Budget and Fiscal Planning sued Caine in 1981 to recover monies paid from the Guaranty Fund, it didn't know of his bankruptcy petition; it also contended that Caine's response to the suit didn't raise the bankruptcy petition as a defense. When the state learned about the petition, it sought to stay the suit, and moved to dismiss it when Caine's debts had been discharged.

In the last filing with the court, attorneys for Caine said he would file an application with the commission "as a good-faith effort," even though he still feels the state must reinstate the license without requiring the formal application.