Motor Vehicle Board and Motor Vehicle Division of the Texas Department of Transportation v. Prevost Car (US) Inc. ( 2006 )

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-04-00373-CV
Motor Vehicle Board and Motor Vehicle Division of the Texas
Department of Transportation, Appellants
v.
Prevost Cars (US) Inc., Appellee
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 261ST JUDICIAL DISTRICT
NO. GN303916, HONORABLE PATRICK O. KEEL, JUDGE PRESIDING
DISSENTING OPINION
The State of Texas has chosen to extensively regulate the sale and distribution of
motor vehicles within its borders. The legislature has delegated enforcement of this regulatory
scheme to the Motor Vehicle Board, and the statute requires any person who wishes to engage in
business as a dealer or sell motor vehicles in Texas to obtain an appropriate license. Ignoring this
legislative mandate, the majority confuses the issue of the Board’s jurisdiction to regulate the sale
and distribution of motor vehicles in Texas with the issue of the Board’s personal jurisdiction over
Prevost. Moreover, in contravention of the well-established standards of judicial review of agency
decisions, the majority improperly substitutes its own judgment for that of the Board on questions
committed to the Board’s discretion. For these reasons, I respectfully dissent.
The relevant issue is one of regulatory, not personal, jurisdiction
In its pleadings to the Board, Prevost conceded that “[p]ersonal jurisdiction has
nothing to do with whether [it] violated the Code. As a matter of fact, [Prevost] is qualified to do
business in Texas and personal jurisdiction over it is obvious.” Because Prevost does not dispute
the Board’s personal jurisdiction, the only relevant issue is whether Prevost has engaged in business
as a dealer in Texas. The majority overlooks this concession, focusing instead on whether the Board
could properly assert personal jurisdiction over Prevost. Thus, as a matter of law, the majority
applies the wrong analysis.
The legislature granted the Board “exclusive original jurisdiction” and authority to
regulate the business of selling and distributing motor vehicles because “[t]he distribution and sale
of motor vehicles in this State vitally affects the general economy of this State and the public interest
and welfare of its citizens.” Tex. Rev. Civ. Stat. Ann. art. 4413(36) §§ 1.02, 3.01 (West Supp. 2002)
(now codified at Tex. Occ. Code Ann. §§ 2301.001, .151 (West 2004)).1 Additionally, the
legislature has stated:
It is the policy of this State and the purpose of this Act to exercise the State’s police
power to insure a sound system of distributing and selling motor vehicles through
licensing and regulating manufacturers, distributors, converters, and dealers of those
vehicles, and enforcing this Act as to other persons, in order to provide for
compliance with manufacturer’s warranties, and to prevent frauds, unfair practices,
discriminations, impositions, and other abuses of our citizens.
1
In 2003, the motor vehicle commission code was codified in Chapter 2301 of the Texas
Occupations Code. For convenience, citation will be to the code as it existed at the time of the
Board’s decision.
2
Id. § 1.02 (now codified at Tex. Occ. Code Ann. § 2301.001 (West 2004)). This legislative policy
includes the protection of local governmental entities like the City of Beaumont. But the majority
fails to consider the significance of this comprehensive legislative mandate.
Assuming without deciding that Prevost’s bid and offer to sell two buses to the City
qualifies as “engaging in business as a dealer,” the majority concludes that Prevost’s bid, standing
alone, is insufficient to subject Prevost to liability in Texas. In support of this conclusion, the
majority relies on the Texas Supreme Court’s decision in Michiana Easy Livin’ Country, Inc. v.
Holten, 168 S.W.3d 777 (Tex. 2005). The majority’s reliance on Michiana is misplaced. Michiana
concerned whether an out-of-state manufacturer could be forced to defend itself against a lawsuit
brought in the Texas courts by a Texas resident. Id. The issue in Michiana was expressly one of
personal jurisdiction. That is not the issue here. Prevost concedes that it is subject to the Board’s
jurisdiction. As a matter of law, then, the only relevant issue is whether Prevost’s conduct in
offering, negotiating, and contracting to sell two buses to the City falls within the Board’s
jurisdiction under the former motor vehicle commission code. The court’s decision in Michiana is
inapposite.
Prevost’s conduct falls squarely within the Board’s regulatory jurisdiction
The issue in this case is whether Prevost engaged in business as a dealer in
Texas—the issue that the majority simply assumes without deciding. The record in this case
demonstrates that Prevost submitted a formal bid to the City and offered to sell the City two buses.
The record further reflects that the City accepted Prevost’s offer and, thus, the contract was formed
in Texas. Moreover, the City’s original purchase order reflects that the buses were to be delivered
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to Beaumont. It was only after a representative of the Texas Department of Transportation inquired
about Prevost’s Texas dealers’ license information that the contract terms were changed to deliver
the buses to Prevost’s manufacturing facility in Roswell, New Mexico. The majority incorrectly
assumes that this after-the-fact amendment to the contract terms cures any previous violation of
Texas law.
The former motor vehicle commission code does not define what it means to “engage
in business as a dealer” in Texas. Because the legislature has given the Board exclusive jurisdiction
to regulate the business of selling and distributing motor vehicles in Texas, it is the Board, not this
Court, that is entitled to define the meaning of that term, as well as the conduct that falls within the
scope of that term. See Tex. Rev. Civ. Stat. Ann. art. 4413(36) § 3.01(a) (now codified at Tex. Occ.
Code Ann. § 2301.151(a)). As the reviewing court, we defer to the Board’s reasonable interpretation
of the statute it is charged with enforcing. Southwestern Bell Tel. Co. v. Public Util. Comm’n, 863
S.W.2d 754, 758 (Tex. App.—Austin 1993, writ denied); Texas Ass’n of Long Distance Tel. Cos.
v. Public Util. Comm’n, 798 S.W.2d 875, 884 (Tex. App.—Austin 1990, writ denied). More
importantly, we do not, as the majority does here, substitute our judgment for that of the agency on
questions committed to the agency’s discretion.
There is no question that the issue of whether Prevost has engaged in business as a
dealer in Texas is a question that has been committed to the Board’s discretion. The legislature has
delegated exclusive jurisdiction to the Board to regulate the sales and distribution of motor vehicles
in Texas. See Tex. Rev. Civ. Stat. Ann. art. 4413(36) §§ 1.02, 3.01(a) (now codified at Tex. Occ.
Code Ann. §§ 2301.001, .151). Notwithstanding this legislative choice, the majority impermissibly
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substitutes its own judgment for that of the Board when it states, “We have already clarified that the
relevant fact for determining where Prevost engaged in business is the location of the title transfer,
not the location of the contract’s initiation or acceptance.” In doing so, the majority usurps the
Board’s roles as factfinder and decisionmaker and contravenes the legislative mandate that the Board
“exercise the State’s police power to insure a sound system of distributing and selling motor
vehicles.” See id. § 1.02 (now codified at Tex. Occ. Code Ann. § 2301.001).
The Board’s interpretation of what it means to “engage in business as a dealer” in
Texas is reasonable. As the Board explained in Ford Motor Co., No. 00-0046-ENF (Motor Vehicle
Div. Mar. 29, 2001), aff’d, 264 F.3d 493 (5th Cir. 2001), a wide variety of activities may constitute
engaging in business as a dealer. Ford is relevant to the instant case only because the Board
describes the various activities that constitute “engaging in business as a dealer.” See id. In Ford,
as in this case, the Board found that “one who makes definitive offers for sale has engaged in
business as a dealer within the meaning of the [motor vehicle commission code].” See id.; see also
Prevost Cars (US) Inc., No. 02-0262-ENF (Motor Vehicle Div. June 5, 2003). The Board does not
look at each activity in isolation, but it examines the conduct in its entirety. See Ford Motor Co.,
No. 00-0046-ENF (Motor Vehicle Div. Mar. 29, 2001). Each transaction must be examined not as
a snapshot in time, as suggested by the majority, but on a continuum from beginning to end.
In its attempt to distinguish Ford, however, the majority misapprehends the Board’s
holding. The majority attempts to distinguish Ford on the grounds that all of the activities in Ford
occurred in Texas and all of the cars offered for sale by Ford were already in Texas. This attempt
is unavailing because it ignores the Board’s mandate to examine the full range of activities that occur
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in each transaction. Here, Prevost sent a bid to sell two buses to the City.2 Second, Prevost sent its
offer via U.S. mail to Beaumont, Texas. Third, the City accepted Prevost’s offer in Texas. The
contract was thus formed in Texas. Together, the Board determined these activities constituted
engaging in business as a dealer, and all of these activities occurred in Texas. Given the Board’s
exclusive jurisdiction to regulate the business of selling and distributing motor vehicles in Texas,
the Board acted well within its discretion to find that Prevost’s activities constituted “engaging in
business as a dealer” in Texas and in violation of the former motor vehicle commission code. The
Board’s interpretation of Prevost’s conduct is consistent with the Board’s jurisdiction under the
statute as well as its prior holding in Ford.
The majority ignores the Board’s rationale and holding in Ford in favor of its own
application of the Uniform Commercial Code. In support of its opinion that the transaction in this
case occurred in New Mexico, not Texas, the majority looks to the UCC for the definition of “sale”
in section 2.106, as well as the provision relating to the passing of title in section 2.401. See Tex.
Bus. & Com. Code Ann. §§ 2.106, .401 (West 1994 & Supp. 2006). Noting that section 2.106
defines “sale” as “the passing of title from seller to buyer for a price,” id. § 2.106, and section 2.401
provides that title passes at the time performance is completed, which occurs upon delivery of the
goods, id. § 2.401(b), the majority concludes that because the City picked up the buses in New
Mexico, title passed in New Mexico and performance was completed in New Mexico; therefore, this
was a New Mexico transaction. By focusing only on the end of the transaction continuum, the
2
The majority characterizes Prevost’s bid as merely a “response to the City’s solicitation.”
While Prevost’s bid may have been a “response” in the general sense of that term, it was also an offer
to sell new motor vehicles—namely, two buses—to the City.
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majority fails to consider Prevost’s activities at the beginning, much less Prevost’s activities as a
whole, as required under the statute and Ford.
Nowhere in the former motor vehicle commission code or the current occupations
code does the legislature provide that the UCC controls the Board’s interpretation and enforcement
of the law. Likewise, the first comment to section 2.401 of the UCC states that section 2.401 “deals
with the issues between seller and buyer in terms of step by step performance or non-performance
under the contract for sale.” Id. § 2.401 cmt. 1 (emphasis added). Section 1.102 of the UCC
provides that two of the underlying purposes and policies of the UCC are “to simplify, clarify and
modernize the law governing commercial transactions” and “ to permit the continued expansion of
commercial practices through custom, usage and agreement of the parties.” Id. § 1.103(a)(1)–(2)
(West Supp. 2006). These provisions make clear that while the UCC may apply to and govern
commercial transactions between private parties, the UCC does not govern the Board’s authority to
regulate the sale and distribution of motor vehicles in Texas. And neither party argues that the UCC
governs the Board’s authority nor cabins its discretion.
There is substantial evidence in the record to support the Board’s determination
Although the majority recites the applicable standards of review under the substantial
evidence rule, it gives only lip service to those standards, substituting its own judgment for that of
the Board. The correct substantial evidence rule test is whether the evidence as a whole is such that
reasonable minds could have reached the conclusion that the agency must have reached in order to
justify its action. Suburban Util. Corp. v. Public Util. Comm’n, 652 S.W.2d 358, 364 (Tex. 1983);
Dotson v. Texas State Bd. of Med. Exam’rs, 612 S.W.2d 921, 922 (Tex. 1981). Although substantial
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evidence is more than a mere scintilla, the evidence in the record may preponderate against the
decision of the agency and nonetheless amount to substantial evidence. Texas Health Facilities v.
Charter Medical–Dallas, Inc., 665 S.W.2d 446, 452 (Tex. 1984).
The record in this case reflects that Prevost not only engaged in business as a dealer
by offering to sell new motor vehicles to the City, but that Prevost did so in Texas when it sent its
bid to the City and the City accepted, thereby forming a Texas contract. Based on the record
evidence described above, reasonable minds could have reached the conclusion reached by the
Board. Because Prevost was not licensed as a dealer in Texas, reasonable minds could have
concluded that Prevost’s activities violated Texas law—namely, sections 4.01 and 5.04 of the former
motor vehicle commission code. See Tex. Rev. Civ. Stat. Ann. art. 4413(36) §§ 4.01(a), 5.04(a)
(West Supp. 2002) (now codified at Tex. Occ. Code Ann. §§ 2301.251(a)(1), .252(a) (West 2004)).
The record evidence is “more than a mere scintilla” and certainly constitutes substantial evidence
to support the Board’s order. See Charter Medical–Dallas, Inc., 665 S.W.2d at 452.
In contrast, the majority’s view that Prevost’s post-contractual amendment to deliver
the buses in New Mexico somehow cures the pre-delivery violations of Texas law is unsupported
by the record. The record reflects that this was not a one-time occurrence, but rather a pattern of
conduct engaged in by Prevost to exploit the Texas bus market. The record evidence admitted in this
case includes a price/cost analysis prepared by the City in anticipation of its purchase of these two
buses from Prevost. In that analysis, the City notes that Prevost sold ten buses to Citibus in
Lubbock, Texas, on June 23, 2000, at a bid price of $254,934 each, and five RTS coaches on August
8, 2001, at a bid price of $258,934 each. In addition, DART in Dallas, Texas, purchased 110 RTS
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coaches on February 9, 2001, at a bid price of $303,036 each, and Texas A&M University purchased
22 RTS coaches on July 21, 2001, at a bid price of $250,000 each. These sales alone total more than
$42.6 million. Although these particular sales were not before the Board, Prevost did not object to
the admission of this evidence, and the Board was entitled to consider it when making its decision
in this case. Even assuming that Prevost arranged for the delivery of all of these buses outside the
State of Texas, that does not detract from the fact that many of its activities in offering, negotiating,
and contracting to sell these buses occurred within the State of Texas.
For the majority to allow Prevost’s after-the-fact attempted cure to override its
repeated efforts to circumvent the Texas licensing and regulatory requirements directly contravenes
the statute. Section 1.04 of the former motor vehicle commission code provides that “[a]n agreement
to waive the terms of this Act is void and unenforceable.” See Tex. Rev. Civ. Stat. Ann. art.
4413(36) § 1.04 (now codified at Tex. Occ. Code Ann. § 2301.003(b) (West 2004)). Yet, that is
exactly what the majority condones in its decision here.
By allowing Prevost to structure the terms of its contract with the City to avoid
regulation by the Board, the majority encourages other out-of-state businesses to do the same. Such
a result will have ripple effects across the state in other contexts. For example, the tax code provides
that each corporation that “does business in this state” is subject to franchise taxes. Tex. Tax Code
Ann. § 171.001(a) (West 2002). Under the majority’s interpretation, an out-of-state business could
avoid state franchise taxes altogether simply by contracting for its Texas buyers to pick up their
purchases at the state line. In addition, under the insurance code, the legislature has specified that
the mere act of “making or proposing to make” an insurance contract constitutes engaging in the
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business of insurance and subjects a party to regulation by the Texas Department of Insurance. Tex.
Ins. Code Ann. § 101.051 (West Supp. 2006). But, under the majority’s view, the Board should not
even consider where the contract was formed. Where, as here, the legislature has delegated
exclusive jurisdiction to regulate the sale and distribution of motor vehicles to the Board, the
majority must refrain from substituting its judgment for that of the agency.
CONCLUSION
Because the legislature charged the Board, and not this Court, with exclusive
jurisdiction to regulate the sales and distribution of motor vehicles in Texas and the record reflects
that the Board’s order was supported by substantial evidence, I would reverse the trial court’s
judgment and affirm the Board’s order.
___________________________________________
Jan P. Patterson, Justice
Before Chief Justice Law, Justices Patterson and Puryear
Filed: September 26, 2006
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