J. Jesus Carreras and Los Primos Auto Sales, LLC d/b/a Los Primos Auto Sales v. Iowa Department of Transportation, Motor Vehicle Division ( 2021 )

IN THE COURT OF APPEALS OF IOWA
No. 20-0963
Filed August 4, 2021
J. JESUS CARRERAS and LOS PRIMOS AUTO SALES, LLC d/b/a LOS
PRIMOS AUTO SALES,
Plaintiffs-Appellants,
vs.
IOWA DEPARTMENT OF TRANSPORTATION, MOTOR VEHICLE DIVISION,
Defendant-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Polk County, Jeanie K. Vaudt, Judge.
A dealership and its owner appeal a district court ruling affirming an agency
decision to revoke its license to sell cars. AFFIRMED IN PART, REVERSED IN
PART, AND REMANDED WITH DIRECTIONS.
Todd M. Lantz and Elisabeth A. Archer of The Weinhardt Law Firm, Des
Moines, for appellants.
Thomas J. Miller, Attorney General, and Michelle E. Rabe, Assistant
Attorney General, for appellee.
Heard by Bower, C.J., and Tabor and Ahlers, JJ.
2
TABOR, Judge.
Jesus Carreras1 appeals the judicial review of an agency decision to revoke
his motor vehicle dealer license based on his federal conviction for structuring
currency deposits. He contends his conviction should not have led to revocation
because it was not “in connection with selling or other activity relating to motor
vehicles” under Iowa Code section 322.3(12) (2019). Because the agency
correctly interpreted that phrase, we affirm the revocation of Carreras’s dealer
license. But we find the district court improperly tolled enforcement of the
revocation period. We reverse the tolling order and remand with instructions to
reinstate Carreras’s license five years from the date of his conviction.
I. Facts and Prior Proceedings
Carreras and his wife, Martha, have owned and operated Los Primos Auto
Sales, a used car dealership, for thirteen years. According to the agency record,
between January 2014 and April 2017, customers sometimes paid cash for used
cars. Either Carreras or Martha could deposit money into the business bank
accounts. The couple testified they split up the deposits to be less than $10,000
to avoid “additional paperwork.” They made several hundred deposits in this
manner totaling $1.4 million. On some days, they made several deposits at
different bank branches, all under the $10,000 reporting threshold.
In 2017, federal prosecutors charged Carreras with eight financial
offenses. Carreras entered an agreement to plead guilty to one count of
structuring transactions to evade reporting requirements, in violation of
1The petitioners include both Carreras and his business, Los Primos Auto Sales,
LLC. For ease of reference, we will refer to them collectively as Carreras.
3
31 U.S.C. § 5324(3). He received a probationary sentence. But as a collateral
consequence, the Iowa Department of Transportation (DOT) revoked his motor
vehicle dealer license under Iowa Code section 322.3(12).
Carreras challenged his license revocation before an administrative law
judge (ALJ) who rescinded the revocation, finding the structuring conviction was
not “in connection with selling or other activity relating to motor vehicles.” See
id. The DOT challenged the ALJ decision, and the reviewing officer reversed.
Carreras then petitioned for judicial review. He also requested a stay of
enforcement of the license revocation until the judicial review was decided. The
district court granted the stay in March 2020. In July, the court upheld the license
revocation. Carreras appealed the judicial review order and moved to extend the
stay. The court granted Carreras’s motion to extend the stay. But it also granted
the DOT’s request to toll the five-year license revocation period until the litigation
concluded.
Carreras now appeals both the license revocation and the tolling of the
revocation period.
II. Scope and Standards of Review
Section 17A.19(10) of the Iowa Administrative Procedure Act governs our
review of agency decision-making. Niday v. Roehl Transport, Inc., 934 N.W.2d 29,
34 (Iowa Ct. App. 2019). On judicial review of an agency decision, the district court
acts in an appellate capacity. Id. In assessing the judicial review order, “we apply
the standards of chapter 17A to determine whether the conclusions we reach are
the same as those of the district court. If they are the same, we affirm; otherwise,
4
we reverse.” Neal v. Annett Holdings, Inc., 814 N.W.2d 512, 519 (Iowa 2012)
(quoting Mycogen Seeds v. Sands, 686 N.W.2d 457, 464 (Iowa 2004)).
Here, the parties do not dispute the facts. “When factual findings are not
challenged on appeal, but instead the claimed error is in the agency’s interpretation
of law, we decide if that interpretation was erroneous.” Niday, 934 N.W.2d at
34. We defer to the agency’s interpretation only if the legislature “clearly vested”
the agency with discretionary authority to interpret the provision in question. Neal,
814 N.W.2d at 518. The parties appear to agree that the legislature did not vest
the DOT with discretionary authority to interpret section 322.3(12). So we do not
defer to the agency’s interpretation. See id. at 519. And we apply “our own
judgment if we conclude the [agency] made an error of law.” Id.
Yet the DOT contends reversal is appropriate only if the agency’s
application of the law was “irrational, illogical, or wholly unjustifiable” because the
legislature vested “administration” of this matter to the agency director under Iowa
Code section 322.1. See Iowa Code § 17A(11)(c). To the extent resolution of this
case involves the application of law to the facts, beyond the question of statutory
interpretation, we give the agency decision appropriate deference. See Drake
Univ. v. Davis, 769 N.W.2d 176, 183 (Iowa 2009).
Plus, Carreras raises a substantial-evidence claim. See Iowa Code
§ 17A.19(10)(f). Evidence is substantial if its quantity and quality “would be
deemed sufficient by a neutral, detached, and reasonable person, to establish the
fact at issue when the consequences resulting from the establishment of that fact
are understood to be serious and of great importance.” Id. § 17A.19(10)(f)(1). Our
task is not to decide whether substantial evidence supports a different finding but
5
whether it supports the finding made by the reviewing officer. Cedar Rapids Cmty.
Sch. Dist. v. Pease, 807 N.W.2d 839, 845 (Iowa 2011).
III. Analysis
A. Defining “In Connection With”
This first issue turns on the meaning of the phrase, “in connection with
selling or other activity relating to motor vehicles,” as it appears in section
322.3(12). Carreras argues the agency and the district court misinterpreted that
statute. We set out the whole provision for context:
A person who has been convicted of a fraudulent practice, has been
convicted of three or more violations of section 321.92, subsection
2, or section 321.99, has been convicted of three or more violations
of subsection 16 of this section in the previous three-year period, or
has been convicted of any other indictable offense in connection with
selling or other activity relating to motor vehicles, in this state or any
other state, shall not for a period of five years from the date of
conviction be an owner, salesperson, employee, officer of a
corporation, or representative of a licensed motor vehicle dealer or
represent themselves as an owner, salesperson, employee, officer
of a corporation, or representative of a licensed motor vehicle dealer.
Iowa Code § 322.3(12) (emphasis added).
The DOT argues: “Iowa Code section 322.3(12) is clear and unambiguous
on its face in barring individuals convicted of any crime connected to the selling of
motor vehicles from holding a dealer license.” Carreras disagrees,
contending: “The meaning of that phrase is neither obvious, self-evident, nor
clearly established.” On the way to addressing the parties’ dispute, we consider
the various interpretations reached in these proceedings.
1. Agency Interpretation
We start with the ALJ’s view of section 322.3(12). In an engaging and
well-researched proposed decision, the ALJ determined “Carreras was not
6
convicted of structuring in connection with selling or other activity related to motor
vehicles” because although his conviction was “related to” vehicle sales, selling
cars was not “integral to” the structuring conviction. The ALJ recognized the
structuring conviction “did not occur in a vacuum” and was “broadly speaking”
connected to the car sales. But the ALJ reasoned that “the structuring conviction
does not concern itself with the source of the unlawfully deposited currency.”
In the next step of the administrative process, the reviewing officer
reversed. That ruling on appeal criticized the ALJ for crafting “an elaborate
argument, contending ‘in connection with’ should be narrowly interpreted.” On the
contrary, the reviewing officer believed the license revocation was properly based
on a broad interpretation of the phrase, “in connection with,” which was designed
to “shield the general public” from dealers who engaged in “inherently fraudulent
and deceptive” conduct, such as structuring currency deposits.
2. Interpretation on Judicial Review
The district court upheld the agency decision. The court rejected Carreras’s
position that his “illegal structuring activities came after the motor vehicle sales,
thereby severing the connection of these activities to motor vehicle sales.” While
refusing to read “in connection with” as meaning “at the time of” or “simultaneous”
to the auto sales, the court stressed that the legislature did not include that kind of
“bright-line temporal rule” in section 322.3(12). The court reasoned that
7
superimposing such a time restriction onto the plain language would conflict with
the liberal construction demanded by section 322.15(1).2
Instead, the district court adopted a “but for” test when interpreting “in
connection with” under the revocation statute. The court noted the “entire basis”
for Carreras’s conviction was “structuring proceeds directly derived from motor
vehicle sales at his dealership.” Thus, “it follows that the entire basis for the
resulting state motor vehicle dealer license revocation was in connection with his
selling of motor vehicles at his dealership.” The court held: “But for the dealership
proceeds accumulated by Petitioner Carreras through selling motor vehicles, there
could have been no crime.” Boiled down, in the court’s view, the conviction was
“in connection with” car sales because the dealership was the way to produce the
funds that fed the structuring offense.
3. Our Approach
As we interpret this statute, we abide by basic rules. We begin (and often
end) with the words chosen by the legislature. State v. Nicoletto, 862 N.W.2d 621,
624 (Iowa 2015). If the meaning of the statute is clear from the text, we will not
search beyond its express terms. Neal, 814 N.W.2d at 519. But if reasonable
2 That provision states:
All provisions of this chapter shall be liberally construed to the end
that the practice or commission of fraud in the sale, barter, or
disposition of motor vehicles at retail in this state may be prohibited
and prevented, and irresponsible, unreliable, or dishonest persons
may be prevented from engaging in the business of selling, bartering,
or otherwise dealing in motor vehicles at retail in this state and
reliable persons may be encouraged to engage in the business of
selling, bartering, and otherwise dealing in motor vehicles at retail in
this state.
Iowa Code § 322.15(1).
8
minds may differ on how to define particular words in the statute, it is ambiguous,
and we may resort to interpretive tools to construe its overall meaning. State v.
Nall, 894 N.W.2d 514, 518 (Iowa 2017). When the legislature has not defined
those keywords, we can look to prior judicial decisions, as well as similar statutes,
dictionary definitions, and common usage. Good v. Iowa Dep’t of Hum. Servs.,
924 N.W.2d 853, 860 (Iowa 2019).
That last situation exists here. Section 322.3(12) does not define “in
connection with,” and no Iowa appellate case has addressed this subsection. In a
different context, our supreme court surveyed case law to find courts commonly
define the phrase “in connection with” as “related to, linked to, or associated
with.” Miller v. Cutty’s Des Moines Camping Club, 694 N.W.2d 518, 526 (Iowa
2005). The Miller court explained that “in connection with”—as related to
commercial activity—“plainly has a broader reach than the phrases ‘arising out of’
and ‘contained in.’” Id. Under that broader definition, the parties need only show
“some relation or nexus” between the activities being compared. Id. Black’s Law
Dictionary further defines “nexus” as “a connection or link, often a causal
one.” Nexus, Black’s Law Dictionary (11th ed. 2019).
Applying those definitions, we believe the DOT can show the necessary
causal link between Carreras’s structuring conviction and the used car sales or
other activity related to the Los Primos dealership. That belief is not shaken by
Carreras’s argument that the structuring offense did not depend on the source of
the funds. We agree how Carreras obtained the currency was irrelevant to his
9
conviction.3 But we keep in mind that section 322.3(12) is to be liberally construed
to protect consumers not just from “fraud in the sale, barter, or disposition” of cars
but also from “irresponsible, unreliable, or dishonest persons” in the business of
vehicle sales. Iowa Code § 322.15.
Granted, the record contains no allegation that Carreras engaged in illegal
conduct in the sale of cars. But when pleading guilty in federal court to structuring
currency deposits, Carreras admitted his purpose was to evade the reporting
requirement.4 In practice, he concealed the existence of a large amount of cash
from the government through his business. As the DOT argued on appeal, beyond
selling motor vehicles, the language of section 322.3(12) requires revocation if the
indictable offense is “in connection with other activity relating to motor
vehicles.” Depositing money into the dealership’s bank accounts qualified as other
activity relating to motor vehicles.
On the one hand, it is not material to the structuring conviction that the
source of the funds was car sales. On the other hand, it is material to the
revocation provision that the structuring was a dishonest business practice that
3 “[T]he purpose of § 5324(a)(3) is ‘to prevent people from either causing the
(usually innocent) bank to fail to file a required report or defeating the goal of the
requirement that large cash deposits be reported to the Internal Revenue Service
by breaking their cash hoard into enough separate deposits to avoid activating the
requirement.’” United States v. Gabel, 85 F.3d 1217, 1223 (7th Cir. 1996) (quoting
United States v. Davenport, 929 F.2d 1169, 1173 (7th Cir. 1991)).
4 Carreras’s plea agreement set out the elements of structuring as follows:
(a) The defendant knowingly structured, assisted in
structuring, or attempting to structure a currency transaction;
(b) The defendant knew of the domestic financial institution’s
legal obligation to report transactions in excess of $10,000; and
(c) The purpose of the structured transaction was to evade
that reporting obligation.
10
sustained the dealership for years. The latter is true because the purpose of
chapter 322 is to protect consumers from “fraud and deception.” State v. Miner,
331 N.W.2d 683, 687 (Iowa 1983). Thus, we interpret section 322.3(12)’s
description of an indictable offense “in connection with selling or other activity
related to motor vehicles” as broad enough to include the structuring conviction.
Our statutory interpretation is bolstered by the doctrine of ejusdem
generis. That interpretive aid instructs that “general words which follow specific
words are tied to the meaning and purpose of the specific words.” Iowa
Comprehensive Petrol. Underground Storage Tank Fund Bd. v. Shell Oil Co., 606
N.W.2d 376, 380 (Iowa 2000). Recall that section 322.3(12) has four specific
triggers: (1) conviction of a fraudulent practice; (2) convictions for selling a vehicle
with an altered vehicle identification number; (3) convictions for misuse or
falsification of vehicle registration; and (4) misuse of a vehicle dealer license. The
fifth, catch-all provision mandates revocation upon a conviction of “any other
indictable offense in connection with selling or other activity relating to motor
vehicles.” Given the range of prohibited conduct in the first four triggers—detailing
fraud, alterations, falsifications, and misuse—we can construe the catch-all
category to embrace the structuring offense based on its evasive nature. See
Sallee v. Stewart, 827 N.W.2d 128, 153 (Iowa 2013) (“[W]hen a phrase like ‘other
summer sports’ is added to a laundry list of terms all of which relate to outdoor
activity, we interpret ‘other summer sports’ to be similar in character to the other
activities, all of which relate to outdoor recreation.”).
In the end, the DOT can show a sufficient nexus between Carreras’s
structuring conviction and selling or other activity relating to motor
11
vehicles. Keeping the deposits below $10,000 was a regular business practice,
and he used dealership accounts to commit the offense. Contrary to Carreras’s
argument, no specific fraudulent sales are required because the fraud related to
“other activity” in the catch-all category.
Alternatively, Carreras argues the DOT failed to offer substantial evidence
that his conviction for structuring currency deposits was “inherently fraudulent and
deceptive.” Carreras contends the lack of substantial evidence is an independent
ground for reversal. The DOT counters that this contention “is ultimately of no
consequence as Iowa Code section 322.3(12) does not require a finding of fraud
or deception.” While we agree with the DOT, we still find substantial evidence to
support the license revocation.
Our search for substantial evidence requires us to view the record as a
whole. Iowa Code § 17A.19(1)(f)(1). In doing so, we judge all relevant evidence
that both supports and detracts from the agency’s findings, any credibility
determinations, and the agency’s explanation of why the relevant evidence
supports its fact-finding. Id. § 17A.19(1)(f)(3). Substantial evidence supports an
agency’s decision even if the interpretation of the evidence may be open to a fair
difference of opinion. Arndt v. City of Le Claire, 728 N.W.2d 389, 393 (Iowa 2007).
As part of his plea agreement, Carreras admitted he knowingly structured
the currency deposits despite being aware of his obligation to report transactions
over $10,000, and he did so to evade the reporting obligation. The agency did not
credit the couple’s claim that they wanted to “avoid the paperwork” associated with
the larger deposits. And that convenience argument was belied by their trips to
several bank locations, sometimes on the same day, to make deposits. The couple
12
made around 400 such deposits over a two-year period. These facts provide
substantial evidence to support the characterization of Carreras’s conduct as
“inherently fraudulent and deceptive.” So the agency properly revoked Carreras’s
dealer license.
B. Tolling of Revocation Period
Anticipating the possibility that we would affirm the judicial review order on
license revocation, Carreras next argues we should reverse the order tolling the
five-year revocation period. In response, the DOT argues “[i]t is illogical that a
licensee convicted of a crime that triggers mandatory license revocation should be
allowed to avoid any legal consequence by seeking and receiving stays of all
proceedings during the appellate proceedings while the enforcement period, on
the other hand, continues to run.”
To resolve this dispute, we are again called to interpret section
322.3(12). This time we look at the phrase “from the date of conviction.”5 And this
time Carreras contends the language is unambiguous. Meanwhile, the DOT
argues a plain reading of the statute would lead to an “illogical outcome” and thus
we should look to legislative intent.
Critical of that legislative-intent argument, Carreras contends the district
court incorrectly interpreted the statutory language as directory and not
5That language also stems from Iowa Code section 322.3(12):
A person who has been convicted . . . of any other indictable offense
in connection with selling or other activity relating to motor vehicles,
in this state or any other state, shall not for a period of five years from
the date of conviction be an owner, salesperson, employee, officer
of a corporation, or representative of a licensed motor vehicle dealer.
(Emphasis added.)
13
mandatory. The district court held that “for a period of five years from the date of
conviction” is “directory language.” In support, the court cited Taylor v. Iowa
Department of Transportation, 260 N.W.2d 521 (Iowa 1977), in which the supreme
court rejected a jurisdictional challenge by explaining that directory statutes fix a
particular time for a thing to be done but do not prohibit it from being done later
when the rights of interested persons are not injuriously affected by the delay.
Taylor compared and contrasted mandatory and directory statutes:
Mandatory and directory statutes each impose duties. The
difference between them lies in the consequence for failure to
perform the duty. Whether the statute is mandatory or directory
depends upon legislative intent. When statutes do not resolve the
issue expressly, statutory construction is necessary.
260 N.W.2d at 522.
Section 322.3(12) states that the revocation “shall” run from the date of
conviction, suggesting the enforcement time frame is not permissive. See Iowa
Code § 4.1. But the dichotomy between mandatory and directory does not refer
to “whether a statutory duty is obligatory or permissive but instead relates to
whether the failure to perform an admitted duty will have the effect of invalidating
the governmental action which the requirement affects.” Taylor, 260 N.W.2d
at 523.
Still, Carreras insists we need not look for legislative intent beyond the terms
of the statute. See State v. Mathias, 936 N.W.2d 222, 227 (Iowa 2019) (“We
determine legislative intent from the words chosen by the legislature, not what it
should or might have said.”). He also asserts “there is no reason to assume that
the Legislature did not intend Chapter 17A rights to affect the five-year revocation
period.”
14
We agree with both sentiments.6 “We assume the legislature was not
operating in a vacuum” when it imposed a five-year revocation starting on the date
of the conviction. See In re Det. of Fowler, 784 N.W.2d 184, 190 (Iowa 2010). As
Carreras points out, the legislature enacted the original Iowa Administrative
Procedure Act (now chapter 17A) more than two decades before the five-year
revocation provision in section 322.3(12). See 1974 Iowa Acts 165 (ch. 1090);
1998 Iowa Acts 127 (ch. 1075, sec. 26). When drafting the latter provision, the
legislature could have accounted for exhaustion of the licensee’s administrative
remedies. But it did not do so. As Carreras argues, the legislature knew stays of
enforcement of agency action were available under section 17A.19(5) but did not
include a tolling mechanism in section 322.3(12). Ultimately, the courts are bound
by the acts of the legislature. Thus, we must decline the DOT’s invitation to rewrite
the statute in the guise of finding legislative intent. See State v. Christopher, 757
N.W.2d 247, 250 (Iowa 2008) (“Under our rules of statutory construction, we are
obligated to apply the law as written.”).
We agree with Carreras that the district court lacked authority to toll the
enforcement period. Under the plain language of the statute, the five-year
revocation should run from the date of conviction—September 6, 2018.
6 We also question whether the triggering date for the five-year revocation period
is a “duty” imposed by the statute as envisioned in cases discussing mandatory
and directory duties. “The mandatory/directory analysis concerns whether a
governmental agency’s failure to comply with a statutory duty will invalidate the
governmental action to which the statute applies.” In re Det. of Johnson, 805
N.W.2d 750, 755 n.3 (Iowa 2011). Here, the DOT did not fail to comply with a
statutory deadline. Instead, it wishes to redefine a statutorily-mandated
enforcement period.
15
To recap, we affirm the license revocation but reverse the order tolling its
enforcement. We remand with directions to the district court to order the
revocation period to end in September 2023.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED WITH
DIRECTIONS.