Texas Real Estate Commission v. Josef Adam Riekers ( 2020 )

Affirmed and Memorandum Opinion filed March 3, 2020.
In The
Fourteenth Court of Appeals
NO. 14-18-00287-CV
TEXAS REAL ESTATE COMMISSION, Appellant
V.
JOSEF ADAM RIEKERS, Appellee
On Appeal from the 345th District Court
Travis County, Texas
Trial Court Cause No. D-1-GN-17-001112
MEMORANDUM OPINION
In this real estate license revocation case, Appellant Texas Real Estate
Commission (the “Commission”) challenges the trial court’s judgment in favor of
Appellee Josef Adam Riekers (“Riekers”), on the basis that the trial court erred in
reversing the Commission’s revocation of Riekers’ real estate license (the “license”)
after he pled guilty to felony theft of government property. We affirm the judgment
of the trial court.1
I. Factual and Procedural Background
Riekers was employed by the federal government as a special agent and
firearms instructor for the Department of Health and Human Services in Dallas,
Texas. Riekers used ammunition at his job, and also kept personal ammunition at
his home. Riekers comingled the ammunition, and ultimately traded in some of the
commingled ammunition on the internet for different calibers of ammunition he
could use. He informed his employer of the trading, resulting in federal charges
against him in violation of 18 U.S.C. § 641.2
On November 19, 2014, pursuant to the terms of a plea agreement, Riekers
pled guilty in federal court to one count of theft of government property. He was
sentenced to three years of probation, 500 hours of community service, and was
required to pay a $100 assessment.
Following his conviction, the Commission initiated proceedings to revoke
Riekers’ State of Texas real estate license pursuant to Section 1101.652 (a)(1) of the
Texas Occupations Code. A contested case hearing was conducted before an
administrative law judge (“ALJ”) on July 29, 2016. See Tex. Occ. Code
§ 1101.657(a), (e); Tex. Gov’t Code § 2001.058. Following the evidentiary hearing,
1
The Texas Supreme Court ordered the Third Court of Appeals to transfer this case to this court. We must
therefore decide the case in accordance with the precedent of the Third Court of Appeals if our decision
otherwise would have been inconsistent with that court’s precedent. See Tex. R. App. P. 41.3.
2
“Whoever embezzles, steals, purloins, or knowingly converts to his use or the use of another, or
without authority, sells, conveys or disposes of any record, voucher, money, or thing of value of
the United States or of any department or agency thereof, or any property made or being made
under contract for the United States or any department or agency thereof . . . shall be fined under
this title or imprisoned not more than ten years, or both.” 18 U.S.C. § 641.
2
the ALJ issued a Proposal for Decision (“PFD”) in which he made findings of fact
and conclusions of law.
The ALJ found that Riekers’ criminal conviction for felony theft would
support revocation of Riekers’ real estate license, but that Riekers presented
substantial evidence of mitigation supporting a less severe penalty.
The ALJ noted the criminal charge, plea, and adjudication of guilt of Riekers,
that Riekers’ conviction was not one of youthful indiscretion, that the offense ended
on July 31, 2014, and also made findings regarding the exemplary record of service
and achievements before and after the offense, the letters of recommendation
submitted attesting to Riekers’ good character, his commendations, work in the
community, volunteer work, participation in accountability groups, and voluntary
attendance at counseling with his children.
In Finding of Fact No. 13, the ALJ further found Riekers was fit to hold a
revoked real estate license on a probated basis.
Riekers filed exceptions to the PFD, which the ALJ found unpersuasive. The
Commission did not file any exceptions of its own but filed a Reply to Respondent’s
Exceptions to Proposal for Decision. At the February 13, 2017, quarterly meeting
of the Commission, the Commission reviewed the PFD and voted to adopt the ALJ’s
PFD with modifications. A Final Order was entered by the Commission on February
16, 2017, adding three findings of fact, deleting the ALJ’s Finding of Fact No. 13,
and modifying the ALJ’s Conclusions of Law 7, 8, and 9.
Riekers filed a Motion for Rehearing with the Commission on March 9, 2017,
complaining that the Final Order was an “arbitrary and capricious abuse of
discretion.” Riekers further alleged that he was denied due process and fair notice
because the Commission surprised him at its quarterly meeting by removing the
3
probationary recommendation from the ALJ’s PFD without having filed any
exceptions to the PFD. The Commission denied Riekers’ Motion for Rehearing on
March 29, 2017.
Riekers sought a temporary restraining order to stay the revocation, which was
denied. On April 18, 2017, Riekers filed a Petition for Judicial Review, Application
for Temporary Injunction and Notice of Hearing with the Travis County District
Court asserting that the Commission improperly surprised Riekers with its decision
to remove the probationary recommendation from the ALJ’s PFD, that the
Commission’s modifications to the PFD were not supported by the record, and that
Riekers was denied due process. The trial court granted Riekers’ Application for
Temporary Injunction on April 24, 2017. A bench trial on the merits was held on
November 14, 2017. After review of the file and hearing the arguments of counsel,
the trial court reversed and vacated the Final Order of revocation issued by the
Commission. See Tex. Govt. Code § 2001.171–.178 (providing for judicial review
of final order); Tex. Occ. Code § 1101.710. The Commission timely filed this
appeal.
A. The Commission’s Modifications to the ALJ’s Findings of Fact and
Conclusions of Law.
The ALJ made Findings of Fact that were modified or deleted by the
Commission, specifically:
ALJ’s Proposal For Decision The Commission’s
Modifications
No. 1 Josef A. Riekers holds a real estate Adopted
salesperson license, issued by the
Texas Real Estate Commission.
No. 2 On May 13, 2015, in the United Adopted
States District Court, Northern
4
District of Texas Dallas Division,
Case 3:14-CR-00478-P(1), United
States of America v. Josef A.
Riekers, Respondent pleaded
guilty to and was adjudicated
guilty of violating 18 U.S.C. § 641
(Theft of Government Property), a
felony. The offense ended July 31,
2014. Respondent was sentenced
to probation for three years,
subject to terms and conditions,
including payment of a $100
special assessment, due
immediately, and 500 hours of
required community service. It
was also ordered that Respondent
not possess a firearm,
ammunition, destructive device,
or any other dangerous weapon.
Added:
No. 2a
Respondent was employed as a
Special Agent for the Office of
the Inspector General of the
U.S. Department of Health and
Human Services, but was
required to terminate his
employment as a result of his
guilty plea and conviction.
No. 2b Added:
Respondent committed a
serious federal crime, which
involved stealing ammunition
from a federal armory on
multiple occasions and selling
the stolen ammunition on the
internet.
5
No. 3 The offense was not one of Adopted
youthful indiscretion–Respondent
was in his mid-40s at the time of
the offense.
Added:
No. 3a
Respondent’s theft conviction
correlates directly to the
fiduciary duties and
relationship Respondent has
with his clients as a licensed
real estate sales agent.
No. 4 Respondent had an exemplary Adopted
record of service and achievement
[with lists].
No. 5 Respondent submitted letters of Adopted
recommendation [listing six].
No. 6 Respondent received Adopted
commendations from employers
and various law enforcement
agencies [as well as a certificate of
recognition for his efforts as a
First Responder on September 11,
2001].
No. 7 Respondent has taken a number of Adopted
courses to make himself a better
real estate agent. He obtained
certificates from the Texas
Association of Realtors Graduate
Realtor Institute in Real Estate
Brokerage, Real Estate Finance,
and Real Estate Marketing.
No .8 Respondent continued volunteer Adopted
work . . . following his conviction.
6
No. 9 Respondent became involved in Adopted
the community, including church
groups and ministry after his
conviction.
No. 10 Respondent obtained part-time Adopted
employment with the City of
Rockport, as a Lifeguard
Supervisor and Water Safety
Instructor.
No. 11 Respondent went to counseling Adopted
with his children after his
conviction and continues to do so,
even though he has been
discharged and it is no longer
required.
No. 12 Respondent has joined some Adopted
accountability groups at his
church after his conviction.
No. 13 Respondent demonstrated that he Deleted
is fit to hold a revoked real estate
license.
The ALJ made Conclusions of Law that were modified by the Commission,
including:
ALJ’s Proposal for Decision The Commission’s Modifications
No. 4 Staff had the burden of proof by Adopted
a preponderance of the evidence
No. 7 The evidence regarding the 22 Modified:
Texas Administrative Code The evidence regarding the 22 Texas
Section 541.1(b)-(c) factors Administrative Code Section
supports Respondent holding a 541.1(b)-(c) factors supports the
license subject to probation. revocation of Respondent’s license.
No. 8 Staff met its burden of proof Modified:
demonstrating Respondent’s Staff met its burden of proof
license should be revoked at this
7
time, but did not meet its burden demonstrating Respondent’s license
of proof that the revocation should be revoked.
should not be probated.
No. 9 Respondent’s license should be Modified:
revoked, but the revocation Respondent’s license should be
should be subject to probation revoked.
for ten years. If at the end of ten
years, there has been no
violation of the terms of the
probation then the revocation
shall be lifted and Respondent’s
license shall be reinstated.
II. Standard of Review
We review the Commission’s final order under the “substantial evidence”
standard codified in the Administrative Procedures Act (“APA”). Tex. Gov’t Code
§ 2001.174. Whether the Commission’s order satisfies the substantial-evidence
standard is a question of law. Firemen’s & Policemen’s Civil Serv. Comm’n v.
Brinkmeyer, 662 S.W.2d 953, 956 (Tex. 1984). On appeal from the trial court’s
judgment, the focus of the appellate court’s review is the Commission’s decision.
See Montgomery Indep. Sch. Dist. v. Davis, 34 S.W.3d 559, 562 (Tex. 2000). Thus,
the trial court’s judgment is not entitled to deference on appeal. Texas Dep’t of Pub.
Safety v. Alford, 209 S.W.3d 101, 103 (Tex. 2006) (per curiam). The substantial
evidence standard requires that we reverse or remand a case for further proceedings
“if substantial rights of the appellant have been prejudiced because the
administrative findings, inferences, conclusions, or decisions” are not reasonably
supported by substantial evidence, are arbitrary and capricious, characterized by
abuse of discretion, or clearly an unwarranted exercise of discretion. Tex. Gov’t
Code § 2001.174(2).
A substantial-evidence analysis entails two component inquiries: (1) whether
the agency made findings of underlying facts that logically support the ultimate facts
8
and legal conclusions that are the ultimate basis for the order; and, (2) whether the
findings of underlying fact are reasonably supported by evidence. See Vista Med.
Ctr. Hosp. v. Texas Mut. Ins. Co, 416 S.W.3d 11, 26–27 (Tex. App.—Austin 2013,
no pet.). The second inquiry, which has been termed the “crux” of a substantial-
evidence review, is highly deferential to the Commission’s determination:
“substantial evidence” in this sense “does not mean a large or considerable amount
of evidence”—in fact, the evidence may even preponderate against the agency’s
finding—but requires only “such relevant evidence as a reasonable mind might
accept as adequate to support a [finding] of fact.” Slay v. Texas Comm’n on Envtl.
Quality, 351 S.W.3d 532, 549 (Tex. App.—Austin 2011, pet. denied). Likewise, we
“may not substitute [our] judgment for the judgment of the state agency on the
weight of the evidence on questions committed to agency discretion.” Id. at 549
(citing Southwestern Pub. Serv. Co. v. Public Util. Comm’n of Tex., 962 S.W.2d 207,
215 (Tex. App.—Austin 1998, pet. denied)). In contrast, the first inquiry,
concerning the extent to which the underlying facts found by the Commission
logically support its ultimate decision or action, may entail questions of law that we
review de novo. See Railroad Comm’n v. Texas Citizens for a Safe Future & Clean
Water, 336 S.W.3d 619, 624 (Tex. 2011); Davis, 34 S.W.3d at 565 (Tex.
2000) (citing Texas Health Facilities Comm’n v. Charter Medical-Dallas, Inc., 665
S.W.2d 446, 453 (Tex. 1984)); City of El Paso v. Public Util. Comm’n, 344 S.W.3d
609, 619 (Tex. App.—Austin 2011, no pet.); Buddy Gregg Motor Homes, Inc. v.
Motor Vehicle Bd., 156 S.W.3d 91, 99 (Tex. App.—Austin 2004, pet. denied).
III. Analysis
The Commission raises five issues on appeal, asserting that: (1) the
Commission’s Final Order is supported by substantial evidence; (2) the Commission
did not abuse its discretion when issuing its Final Order; (3) the Commission had the
9
authority to change the PFD and adequately explained the changes made in the Final
Order; (4) Riekers received due process; and (5) the Commission did not prejudice
Riekers’ rights by failing to file exceptions to the PFD.3 Dispositive of all four of
the Commission’s first four issues is whether the Commission violated Riekers’
substantive rights by modifying the ALJ’s PFD and revoking Riekers’ real estate
license, instead of imposing the probated penalty recommended by the ALJ.
A. The Commission’s Statutory Authority to Modify, Amend or Change
the Proposal for Final Decision
The Commission argues that it has the authority to modify the PFD and
adequately explained the changes that it incorporated into the Final Order. Riekers
argues that the Commission improperly modified the PFD.
1. The ALJ’s Role As Factfinder
An ALJ is a “disinterested hearing officer” to whom the legislature has
delegated the duty of basic fact-finding. See Flores v. Employees Ret. Sys., 74
S.W.3d 532, 539 — 40 (Tex. App.—Austin 2002, pet. denied). An agency cannot
frustrate the delegation of the fact-finding role by ignoring an ALJ’s “findings with
which it disagrees and substitut[ing] its own additional findings.” Davis, 34 S.W.3d
at 564 (discussing school board’s authority under Education Code to change findings
of fact made by hearing examiner where statute did not specifically provide for the
board to find additional facts and permitted changes to findings only if supported by
substantial evidence). When the APA, or other applicable enabling statute, does not
specifically provide for an agency’s board to find facts in addition to those found by
the hearing examiner, the board exceeds its authority by so doing. See id. “If a
3
Riekers did not file a cross-appeal but presents four issues of his own rather than responses to
Appellant’s issues. Riekers asserts that the Commission’s “Issues” are not all issues and are
illogically separated. To the extent that Appellee’s proposed issues and arguments are responsive
to those raised by the Commission, we will address them. Otherwise, we decline to address
Appellee’s separate issues because he has not filed a cross-appeal.
10
board or commission could find additional facts, resolving conflicts in the evidence
and credibility disputes, it would then be serving as its own factfinder despite
delegating the factfinding role to a hearing examiner, and the process of using an
independent factfinder would be meaningless.” Id. Here, the APA and the agency
rules do not allow the Commission to sit as the fact finder. Rather, the Commission
is only allowed to “modify, amend or change.” Tex. Gov’t Code § 2001.058(e); 22
Tex. Admin. Code § 533.7(d)-(e).
Adjudicative facts are often the subject of conflicting evidence, which are
more appropriately resolved by the ALJ, who is better suited than an agency or board
in determining how much weight to give each side’s evidence and better suited to
make credibility determinations. See Hyundai Motor Am. v. New World Car Nissan,
Inc., 581 S.W.3d 831, 838 (Tex. App.—Austin 2019, no pet.)
2. APA Requirements Allowing Modification of the ALJ’s Findings
of Fact and Conclusions of Law
The APA controls the Commission’s ability to modify the findings of fact or
conclusions of law made by an administrative law judge. Tex. Gov’t Code
§ 2001.058(e). The APA provides:
(e) A state agency may change a finding of fact or conclusion of law
made by the administrative law judge, or may vacate or modify an order
issued by the administrative judge, only if the agency determines:
(1) that the administrative law judge did not properly apply or
interpret applicable law, agency rules, written policies provided
under Subsection (c), or prior administrative decisions;
(2) that a prior administrative decision on which the
administrative law judge relied is incorrect or should be changed;
or
(3) that a technical error in a finding of fact should be changed.
The agency shall state in writing the specific reason and legal basis for
a change made under this subsection.
11
Tex. Gov’t Code § 2001.058(e). The Commission must “explain with particularity
its specific reason and legal basis for each change made.” Granek v. Texas State Bd.
of Med. Exam’rs, 172 S.W.3d 761, 780–81 (Tex. App.—Austin 2005, no pet.);
see Garcia v. Texas Real Estate Comm’n, No. 03-14-00349-CV, 2016 WL 3068408,
at *3 (Tex. App.—Austin May 27, 2016, no pet.) (mem. op.). To meet this
requirement, the Commission must “articulate a rational connection between an
underlying agency policy and the altered finding of fact or conclusion of law.” Levy
v. Texas State Bd. of Med. Exam’rs, 966 S.W.2d 813, 815 (Tex. App.—Austin 1998,
no pet.) (quoting Employees’ Retirement Sys. of Texas v. McKillip, 956 S.W.2d 795,
800 (Tex. App.—Austin 1997, no pet.)).
B. Standard of Review for Modification of the ALJ’s Findings of Fact and
Conclusions of Law
Additionally, when an agency, here the Commission, changes “basic” or
“adjudicative” facts, we review its justifications under a stricter standard than we
review an alteration to legislative or ultimate facts. See New World Car Nissan, Inc.,
581 S.W.3d at 838; Texas State Bd. of Med. Exam’rs v. Dunn, No. 03-03-00180-CV,
2003 WL 22721659, at *4–5, *11 (Tex. App.—Austin Nov. 20, 2003, no pet.) (mem.
op.) (holding the board “failed to carry its burden to articulate a reasonable
evidentiary basis for rejecting the ALJ’s [adjudicative] findings of fact”); Flores, 74
S.W.3d at 540–41 (in making changes to adjudicative facts, board was not entitled
to “reweigh” evidence or make findings that were “not supported by any evidence”).
On the other hand, legislative or ultimate facts “do not usually concern the
immediate parties but are the general facts that help the tribunal decide questions of
law and policy and discretion.” New World Car Nissan, Inc., 581 S.W.3d at 838.
“A finding of ultimate fact is reached by inference from basic facts.” West Tex. Utils.
Co. v. Office of Pub. Util. Counsel, 896 S.W.2d 261, 270 (Tex. App.—Austin 1995,
no writ). A finding of ultimate fact “usually involves ‘a conclusion of law or at least
12
a determination of a mixed question of law and fact.’” Hunter Indus. Facilities, Inc.
v. Texas Nat. Res. Conservation Comm’n, 910 S.W.2d 96, 104 (Tex. App.—Austin
1995, writ denied) (quoting Helvering v. Tex-Penn Oil Co., 300 U.S. 481, 491
(1937)). Therefore, an ultimate finding pertaining to compliance with a statutory
standard, when that determination is statutorily within the discretion of an agency,
has the same legal effect as a conclusion of law. New World Car Nissan, Inc., 581
S.W.3d at 838 (citing Hunter Indus. Facilities, Inc., 910 S.W.2d at 104—5). When
reviewing an agency’s findings of ultimate fact, a reviewing court is “limited to the
inquiry of whether the agency’s findings of basic fact reasonably support its findings
of ultimate fact.” Professional Mobile Home Transp. v. Railroad Comm’n of Tex.,
733 S.W.2d 892, 899 (Tex. App.—Austin 1987, writ refused n.r.e.).
C. The Commission’s Basis for Modification of the ALJ’s Findings of Fact
The Commission added Findings of Facts 2a, 2b, and 3a, and deleted Finding
of Fact No. 13. The explanation provided by the Commission for these findings
was:
The record also reflects that, while employed in a position of public
trust as a federal peace officer, Respondent stole ammunition from a
federal armory on multiple occasions and sold the stolen ammunition
on the internet. As a result of Respondent’s conviction, Respondent
was required to terminate his employment as a Special Agent with the
Office of the Inspector General for the U.S. Department of Health and
Human Services. Respondent’s felony theft conviction correlates to the
fiduciary duties and relationship a real estate sales agent has to his
clients. See 22 Tex. Admin. Code § 531.1. For these reasons, the
Commission finds the ALJ did not properly apply or interpret the
Commission’s authority to discipline a license holder and probate a
revocation under Chapter 1101, Texas Occupations Code, and the
Commission’s Rules.
13
1. The Commission Failed to Provide a Reasonable Evidentiary
Basis to Support the Addition of Findings of Fact No. 2a and 2b
a. The Commission’s Addition of Finding of Fact No. 2a
2a. Respondent was employed as a Special Agent for the Office of the
Inspector General of the U.S. Department of Health and Human
Services, but was required to terminate his employment as a result of
his guilty plea and conviction.
One of the Commission’s findings, and part of its rationale for revocation, is
that Riekers was required to terminate his employment as a result of his guilty plea
and conviction. Riekers continued to work in his position until one day prior to the
date of his entry of a guilty plea in open court. As a condition of his plea, he was
required to resign. Because this is a plea agreement between the government and a
defendant, it is unclear whether the U.S. Department of Health and Human Services
requested Riekers’ resignation, or if the government was requiring the resignation
as a punishment for his crime. The Commission added this adjudicative fact to the
Final Order, however, there is no evidence in the record that the Department of
Health and Human Services required termination or terminated Riekers as a result
of his conviction. Because the Commission based its determination on facts that
were not supported by substantial evidence in the record, the Commission abused its
discretion in adding Finding of Fact No. 2a.
b. The Commission’s Addition of Finding of Fact No. 2b
2b. Respondent committed a serious federal crime, which involved
stealing ammunition from a federal armory on multiple occasions and
selling the stolen ammunition on the internet.
The Commission’s Finding of Fact No. 2b states Riekers committed a serious
federal crime. The range of punishment for Riekers based upon his sentencing
factors was zero to six months, with an applicable fine range of $500-$5,000. The
plea agreement accepted by the federal court between the United States and Riekers
14
reduced a 2 level enhancement and did not impose a fine.4 A letter from U.S. District
Court, Probation and Pretrial Services for the Northern District of Texas (“Probation
and Pretrial Services”) was submitted to the Commission on April 27, 2016 in
support of Riekers’ petition to maintain his real estate license. The letter
characterized Riekers as an offender suitable for low risk supervision, stating “Low
risk offenders have committed low severity violations; have a lower rate of
recidivism and are of lower risk to the safety of the community.” Theft is a serious
crime, however, the letter provided by Probation and Pretrial Services mitigates the
seriousness of the offense.
The Commission further states in Finding of Fact No. 2b that Riekers stole
ammunition from a federal armory on multiple occasions and sold the stolen
ammunition on the internet. In their appellate briefing, both parties raise the issue
of whether it was appropriate for the Commission to insert the word “armory” in the
Final Order. While Appellant contends that Riekers waived his right to complain
about the characterization of theft from an “armory” by failing to address the issue
in his Motion for Rehearing, the burden is on the Commission to show Finding of
Fact No. 2b is supported by substantial evidence. Accordingly, we review the
Commission’s addition of this adjudicative fact to determine whether it complied
with the APA and was supported by substantial evidence.
There is no evidence in the record to support the finding that Riekers stole
ammunition from a federal armory, sold it on multiple occasions, or sold the
ammunition. There is also no evidence to controvert the testimony of Riekers that
the ammunition was traded and gathered from a shared government vehicle or given
to Riekers by a co-worker. In fact, the Factual Resume from Riekers’ theft of
4
Riekers received a mandatory $100 assessment.
15
government property conviction specifically states that Riekers “traded” and
“exchanged” rather than “sold” ammunition.
Because the Commission based its determination on facts that were not
supported by substantial evidence in the record, the Commission abused its
discretion in adding Finding of Fact No. 2b. Flores, 74 S.W.3d at 540–41.
c. The Commission’s Addition of Finding of Fact No. 3a
3a. Respondent’s theft conviction directly correlates to the fiduciary
duties and relationship Respondent has with his clients as a licensed
real estate sales agent.
The Commission’s explanation cites to the language of 22 Tex. Admin. Code
§ 531.1.
A real estate broker or salesperson, while acting as an agent for another,
is a fiduciary. Special obligations are imposed when such fiduciary
relationships are created. They demand: (1) that the primary duty of the
real estate agent is to represent the interests of the agent’s client, and
the agent’s position, in this respect, should be clear to all parties
concerned in a real estate transaction; that, however, the agent, in
performing duties to the client, shall treat other parties to a transaction
fairly; (2) that the real estate agent be faithful and observant to trust
placed in the agent, and be scrupulous and meticulous in performing
the agent’s functions; and (3) that the real estate agent place no personal
interest above that of the agent’s client.
22 Tex. Admin. Code § 531.1; see also 22 Tex. Admin. Code § 541.1(a).
Commission staff presented evidence of Riekers’ plea of guilty, and the
conditions of that plea. Staff argued that Riekers’ conviction related to the abuse of
a position of trust, and the accounting and handling of funds on behalf of another
person, and was directly related to the duties of a real estate license holder.
Commission staff further testified that the ability to engage in “further criminal
activity of this nature” was a basis to deny Riekers a license. Because Riekers’
conviction is based on a breach of trust, consistent with the fiduciary duty of a real
16
estate agent in a real estate transaction, the Commission’s addition of Finding of Fact
No. 3a is supported by the record.
2. The Commission’s Deletion of Finding of Fact No. 13 is not
Supported by Substantial Evidence
The Commission deleted Finding of Fact No. 13:
13. Respondent demonstrated that he is fit to hold a revoked real
estate license.
As discussed supra, we review the Commission’s deletion of Finding of Fact
No. 13 under the substantial-evidence analysis. Here, the deletion of Finding of Fact
No. 13 concerns an ultimate or legislative fact, because it involves “a conclusion of
law or at least a determination of a mixed question of law and fact.” Hunter Indus.
Facilities, Inc., 910 S.W.2d at 104. In reviewing an agency’s findings of ultimate
fact, we are “limited to the inquiry of whether the agency’s findings of basic fact
reasonably support its findings of ultimate fact.” Professional Mobile Home Transp.,
733 S.W.2d at 899.
In part, the Commission’s justification for its finding is the correlation of
Riekers’ felony to the fiduciary duties and relationship a real estate agent has to his
clients. The Real Estate License Act (“RLA”) sets forth the grounds for suspension
or revocation of a license, which includes pleading guilty to or being convicted of a
felony. Tex. Occ. Code § 1101.652(a)(1).
a. Factors Determining Fitness to Hold a Real Estate License
Subsequent to a Conviction
There is no dispute that Riekers pled guilty to a felony. The Occupations
Code provides that the Commission “may suspend or revoke a license issued under
this chapter or take other disciplinary action authorized by this chapter . . .” Id. at
§ 1101.652(a). The RLA provides no guidance for evaluating the type of discipline
for violations. However, the Texas Administrative Code sets out the rules relating
17
to provisions of the Texas Occupations Code under Rule 541.1(a)-(c), entitled
“Criminal Offense Guidelines.” 22 Tex. Admin. Code § 541.1.
In his findings, the ALJ cited the factors the Commission must consider when
determining whether an individual with a criminal conviction is fit to hold a real
estate license5:
(1) the extent and nature of the person’s past criminal activity;
(2) the age of the person at the time of the commission of the offense;
(3) the amount of time that has elapsed since the person’s last criminal
activity;
(4) the conduct and work activity of the person before and following the
criminal activity;
(5) the person’s compliance with the court-ordered terms and conditions
while on parole, supervised release, probation, or community
supervision;
(6) the time remaining, if any, on the person’s term of parole, supervised
release, probation, or community supervision;
(7) evidence of the person’s rehabilitation or rehabilitative effort while
incarcerated or following release; and
(8) other evidence of the person’s present fitness, including letters of
recommendation from: prosecution, law enforcement, and
correctional officers who prosecuted, arrested, or had custodial
responsibility for the person; the sheriff and chief of police in the
community where the person resides; and any other persons in
contact with the person.
22 Tex. Admin. Code § 541.1(c); see also Tex. Occ. Code § 53.023(a).
5
The ALJ cited the factors contained within 22 Texas Administrative Code § 541.1(b)-(c). The
factors located in § 541.1(b) determine whether a criminal offense not listed in subsection (a) is
directly related to an occupation regulated by the Commission. Because Riekers’ crime is
specifically listed in subsection (a), we need not address the factors in subsection (b).
18
b. Application of Factors Determining Riekers’ Fitness to Hold
a Real Estate License
In regard to the first factor, Riekers has no other prior criminal activity, so this
factor weighs in favor of Riekers. The second factor would allow the Commission
to consider the youth of the individual at the time of the commission of the offense;
however, Riekers was in his 40s at the time of the offense. The third factor is
inapplicable to Riekers because he has no past criminal activity.
As to the fourth factor, the mitigation evidence provided by Riekers, and
adopted by the Commission, demonstrates his conduct and work activity were
exemplary, as evidenced by letters of recommendation, work commendations, and
proof of involvement and work in his community, dedication to helping others,
spiritual dedication, and commitment to his family. In the PFD, the ALJ details
Riekers’ “exemplary record of service and achievement,” “letters of
recommendation attesting to his good character,” Riekers’ commendations, Riekers’
real estate courses and “desirable designations,” Riekers’ post-conviction
community involvement, Riekers’ post-conviction counseling—which was no
longer required of him, but which he continued to attend, as well as his post-
conviction accountability groups. All of these factual findings were adopted by the
Commission into its final order.
In regard to the fifth factor, the letter from Probation and Pretrial Services
supports a positive finding. The letter states Riekers remained on the low risk
caseload, complied with the terms of his probation, and maintained stable
employment. The probation officers further state Riekers is eligible for early
termination from probation based on his continued compliance. The sixth factor
weighs in favor of Riekers as at the time of the Commission’s consideration of the
ALJ’s decision, Riekers had completed one year of his three-year probation. But the
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possible early termination of probation for Riekers indicates the time remaining may
be less than two years. Riekers testified to his rehabilitation, including his real estate
education, volunteer work, current employment and counseling, supporting a
positive finding in regard to the seventh factor.
With respect to the eighth factor, letters of recommendation and
commendation were submitted to the Commission and should have been considered
by the Commission in making its decision. Riekers submitted letters supporting his
present fitness from six different individuals who were familiar with his character
before and after his conviction. Riekers’ supervising broker and employer also
provided a letter of recommendation and expert report for Riekers at the contested
case hearing on July 29, 2016. The letter from Probation and Pretrial Services was
positive in regard to Riekers’ compliance and low risk for recidivism.
The ALJ, in Finding of Fact No. 13, found that Riekers was fit to hold a
revoked real estate license on a probated basis. In reaching this finding, the ALJ
evaluated the extent and nature of Riekers’ past criminal activity; the conduct and
work activity of Riekers before and following the criminal activity; and evidence of
Riekers’ rehabilitation or rehabilitative effort, as well as other evidence of Riekers’
fitness to hold a license. The ALJ addresses Riekers’ felony plea and conviction and
acknowledges the fact that the offense was “not one of youthful indiscretion.” The
evidence in the record also demonstrates that Riekers was compliant with his
probation, though neither the Final Order nor the PFD reference Riekers’
compliance. The analysis narrative from the ALJ is also instructive:
Respondent has shown a remarkable history of good deeds, honesty,
and community involvement. He has presented unwavering support
from all who testified or submitted letters of recommendation. His
dedication to compliance with the law before the offense is apparent.
The fact that he committed a violation of the law is apparent as well,
but that violation appears to be an aberration. His pattern of activity
20
(both before and after the violation) points to a person who is essentially
honest and trustworthy. Staff makes much of the fact that Respondent’s
offense is very serious; no one questions that determination (even
though it is characterized as a “low risk” violation by the federal
probation office).
In modifying the PFD, the Commission struck Finding of Fact No. 13 in its
entirety. In its place, the Commission does not substitute any findings related to
Riekers’ then present fitness for licensure, other than those discussed, supra, that are
not based on evidence in the record. However, the Commission adopted all of the
ALJ’s other findings of fact, which leaves the Commission without substantial
evidence to support its deletion of Finding of Fact No. 13.
The Commission’s statement that the ALJ did not properly apply or interpret
the Commission’s authority also fails to meet the Commission’s burden to explain
its modifications to the PFD. Tex. Gov’t Code § 2001.058(e). The ALJ correctly
cited the Commission’s authority, the RLA and the Commission Rules. The ALJ
heard from several witnesses and reviewed letters of recommendation that addressed
Riekers’ character and trustworthiness. After considering all the evidence, the ALJ
determined that Riekers was fit to hold a revoked real estate license on a probated
basis. It is not enough for the agency to simply say that the ALJ failed to properly
interpret and apply applicable law; the Commission must provide a specific basis for
modifying the findings of the ALJ. Id.; New World Car Nissan, Inc., 581 S.W.3d at
840.
The Commission must consider all eight of the factors outlined in its agency
rules. 22 Tex. Admin. Code § 541.1(c). The Commission abused its discretion by
disregarding the factors mandated by the Legislature in determining Riekers’ present
fitness to hold a real estate license.
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D. The Commission’s Modifications to the ALJ’s Conclusions of Law
In justifying its modification of the ALJ’s Conclusions of Law in the PFD, the
Commission provided the following explanation:
While the ALJ correctly concluded that the Commission met its burden
of proof to revoke Respondent’s license, the ALJ incorrectly concluded
that the Commission did not meet its burden of proof that the revocation
should not be probated. Chapter 1101 of the Texas Occupations Code
allows the Commission to revoke a license issued by the Commission
if the license holder pleads guilty to or is convicted of a felony. See
Tex. Occ. Code § 1101.652(a)(1). Chapter 1101 also gives the
Commission, not the ALJ, discretion to probate a revocation under
reasonable terms determined by the Commissions. Id. § 1101.656(b).
The record also reflects that, while employed in a position of public
trust as a federal peace officer, Respondent stole ammunition from a
federal armory on multiple occasions and sold the stolen ammunition
on the internet. As a result of Respondent’s conviction, Respondent
was required to terminate his employment as a Special Agent with the
Office of the Inspector General for the U.S. Department of Health and
Human Services. Respondent’s felony theft conviction correlates to the
fiduciary duties and relationship a real estate sales agent has to his
clients. See 22 Tex. Admin. Code § 531.1. For these reasons, the
Commission finds the ALJ did not properly apply or interpret the
Commission’s authority to discipline a license holder and probate a
revocation under Chapter 1101, Texas Occupations Code, and the
Commission’s Rules.
1. The Commission’s Modifications to Conclusions of Law No. 7, No.
8, and No. 9 are not Supported by Substantial Evidence
a. Modification to Conclusion of Law No. 7
The Commission changed the ALJ’s Conclusion of Law No. 7 from: “The
evidence regarding the 22 Texas Administrative Code 541.1(b)-(c) factors supports
Respondent holding the license at this time subject to probation” to “[t]he evidence
22
regarding the 22 Texas Administrative Code 541.1(b)-(c) factors supports the
revocation of Respondent’s license.”
“An agency abuses its discretion in reaching a decision if it omits from its
consideration factors that the legislature intended the agency to consider, includes in
its consideration irrelevant factors, or reaches a completely unreasonable result after
weighing only relevant factors.” Texas Health Enters. v. Texas Dep’t of Health, 954
S.W.2d 168, 173 (Tex. App.—Austin 1997, no pet.) (citing Statewide Convoy
Transps., Inc. v. Railroad Comm’n of Tex., 753 S.W.2d 800, 804 (Tex. App.—
Austin 1988, no writ)).
In Garcia v. Texas Real Estate Comm’n., the Third Court of Appeals found
that the Commission violated Section 2001.058(e) of the APA when the Commission
modified a sanction recommended by an ALJ, but the Commission’s findings did
not support the additional discipline of a two-year suspension. 2016 WL 3068408
at *10; see also Froemming v. Texas State Bd. of Dental Exam’rs, 380 S.W.3d 787,
792-93 (Tex. App.—Austin 2012, no pet.) (concluding that board’s explanation met
requirements of section 2001.058(e) where it included discussion of aggravating
circumstances it considered in determining sanction); Texas State Bd. of Dental
Exam’rs v. Brown, 281 S.W.3d 692, 699–700 (Tex. App.—Corpus Christi 2009, pet.
denied) (holding the board complied with section 2001.058(e) where it identified as
support for action specific findings of fact and conclusions of law and explained why
additional disciplinary action was warranted); Pierce v. Texas Racing Comm’n, 212
S.W.3d 745, 755 (Tex. App.—Austin 2006, pet. denied) (determining that the board
complied with section 2001.058(e) where its order included three paragraphs
explaining specific reasons for modification of penalty); Grotti v. Texas State Bd. of
Med. Exam’rs, No. 03–04–00612–CV, 2005 WL 2464417 at *9 (Tex. App.—Austin
Oct. 6, 2005, no pet.) (mem. op.) (concluding the board properly modified PFD
23
where its order included an explanation of why the recommended sanction did not
address severity of conduct, was too lenient to be effective, and was insufficient to
protect public).
As discussed, supra, the Commission adopted Findings of Fact 1-12, and 14-
15, without change. The Commission is required to provide a “specific reason,” for
its modification of the PFD. In modifying Conclusion of Law No. 7, the
Commission offers no explanation based upon the 22 Tex. Admin. Code § 541.1(b)-
(c) factors that support its change from probation to revocation of Riekers’ license.
The explanation provided by the Commission relies on evidence not supported by
the record and ignores the voluminous evidence supporting Riekers’ fitness to hold
a probated license.
b. Modification to Conclusion of Law No. 8
The Commission changed Conclusion of Law No. 8 from: “Staff met its
burden of proof to demonstrate that Respondent’s license should be revoked at this
time, but has not met its burden of proof that the revocation should not be probated”
to “Staff met its burden of proof to demonstrate that Respondent’s license should be
revoked.”
With respect to Conclusion of Law No. 8, the Commission recites the burden
applicable to the case and explains its modification of Conclusion of Law No. 8, and
then states that the ALJ incorrectly concluded the Commission did not meet its
burden of proof that revocation should not be probated. In its brief, the Commission
argues that it has the exclusive discretion to determine the appropriate penalty. In
response, Riekers argues that pursuant to the APA, the Commission’s discretion to
change the recommendation(s) of the ALJ was limited, and that the Commission did
not have the authority to assign the burden of proof on the penalty or sanction.
24
Riekers further argues that he met his burden to demonstrate that he is “fit to hold a
revoked real estate license on a probated basis.”
In a contested case hearing, the ALJ determines which party bears the burden
of proof. 1 Tex. Admin. Code § 155.427. The ALJ, however, must determine the
burden of proof by considering the applicable statute, the referring agency’s rules,
and the referring agency’s policy. Id. The ALJ may consider other factors including:
(1) the status of the parties; (2) the parties’ relative access to and control over
information pertinent to the merits of the case; (3) the party seeking affirmative
relief; (4) the party seeking to change the status quo; and (5) whether a party would
be required to prove a negative. Id. Here, the ALJ determined that the Commission
had the burden of proof in the case. The Texas Occupations Code is silent as to the
burden of proof, other than affording the Commission the power to revoke, suspend
or probate licenses over which it has jurisdiction. Tex. Occ. Code §§ 1101.652,
1101.656. In this case, the Commission is the party seeking affirmative relief by
seeking to revoke Riekers’ license.
If the Commission can simply disregard the findings of the ALJ, then there is
a lack of meaningful review of the Commission’s findings, in contravention of the
Legislature’s express statutory provision for a SOAH hearing. See Facility Ins.
Corp. v. Patients Med. Ctr., 574 S.W.3d 436, 444 (Tex. App.—Austin 2018, pet.
filed); see also Texas Lottery Comm’n v. First State Bank of DeQueen, 325 S.W.3d
628, 637 (Tex. 2010) (“Courts ‘do not lightly presume that the Legislature may have
done a useless act.’” (quoting Liberty Mut. Ins. Co. v. Garrison Contractors, Inc.,
966 S.W.2d 482, 485 (Tex. 1998))).
The Commission supports its modification to Conclusion of Law No. 8 almost
entirely on its authority to impose sanctions under the Texas Occupations Code,
including the power to revoke a real estate license. While we agree that the
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Commission has the discretion to modify the sanction, the Commission must provide
a specific reason and legal basis for doing so. Tex. Gov’t Code § 2001.058; see also
Garcia, 2016 WL 3068408 at *3. Here, the Commission relied upon facts not
supported by the evidence, and other than stating that Riekers’ theft conviction
correlates to the fiduciary duties and relationship a real estate agent has to his client,
did not specify a sufficient factual or legal basis for the modification from a revoked
probated license to complete revocation. The ALJ was specific in his findings of
fact and conclusions of law as to the evidence presented and the basis for his
findings; the Commission, however, was not. In light of the analysis by the ALJ of
Riekers as a “person who is essentially honest and trustworthy” and the description
of Riekers’ offense as an “aberration,” the Commission fails to articulate a basis that
is supported by the evidence in the record for modifying the ALJ’s sanction
recommendation. See id. at *4 (concluding the Commission failed to comply with
section 2001.0508(e) of the APA in modifying the ALJ’s recommended sanction to
include a two-year suspension); see also Pierce, 212 S.W.3d at 755 (determining
that the board complied with section 2001.058(e) where its order included
explanation of its authority under statutes and rules of why modification of penalty
was consistent with guidelines and board precedent).
c. Modification to Conclusion of Law No. 9
Additionally, the Commission changed Conclusion of Law No. 9 from:
“Respondent’s License . . . should be revoked, but the revocation should be subject
to probation for ten years. If at the end of ten years, there has been no violation of
the terms of the probation then the revocation shall be lifted and Respondent’s
license shall be reinstated” to “Respondent’s License . . . should be revoked.”
In modifying Conclusion of Law No. 9, the Commission offers no explanation
based upon the 22 Tex. Admin. Code § 541(b)-(c) factors that support its change
26
from probation to revocation of Riekers’ license. Given that the 541.1(c) factors
provide the basis for the Commission determining a person’s fitness for holding a
license and require that the Commission evaluate eight different factors, the
Commission should have evaluated Riekers’ conduct and offense pursuant to those
factors. 22 Tex. Admin. Code § 541.1(c). The explanation provided by the
Commission relies on evidence not supported by the record and ignores the
voluminous evidence supporting Riekers’ fitness, which was introduced into
evidence and considered by the ALJ. Therefore, we conclude that the Commission’s
modifications of the PFD were not supported by substantial evidence, and in making
such modifications the Commission abused its discretion.
IV. Conclusion
We overrule the Commission’s first four issues and affirm the judgement of
the trial court.6
/s/ Margaret ‘Meg’ Poissant
Justice
Panel consists of Justices Christopher, Hassan and Poissant.
6
The Commission raised a fifth issue relating to whether the Commission’s decision to not file
exceptions to the PFD prejudiced Riekers. We need not address this issue because our resolution
of the first four issues is dispositive of this appeal.
27