IN THE MATTER OF THE APPLICATION OF ALAN & SCOTT SHEPPARD (NEW JERSEY MOTOR VEHICLE COMMISSION)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2136-17T4
IN THE MATTER OF THE
APPLICATION OF ALAN &
SCOTT SHEPPARD
(SOUTH JERSEY MOTORCARS, LLC).
____________________________________
Submitted December 5, 2018 – Decided January 3, 2019
Before Judges Koblitz and Mayer.
On appeal from the New Jersey Motor Vehicle
Commission.
Schiller, Pittenger, & Galvin, PC, attorneys for
appellant (Thomas G. Russomano, of counsel and on
the brief; Jay B. Bohn, on the brief).
Gurbir S. Grewal, Attorney General of New Jersey,
attorney for respondent (Melissa Dutton Schaffer,
Assistant Attorney General, of counsel; Jennifer R.
Jaremback, Deputy Attorney General, on the brief).
PER CURIAM
South Jersey Motorcars, LLC, Alan Sheppard, and Scott Sheppard
(collectively SJM) appeal from a December 21, 2017 final decision of the Motor
Vehicle Commission (MVC), denying an application for a used motor vehicle
dealer license (license). The MVC denied the license because SJM's proposed
location for the dealership did not satisfy the requirements for a suitable place
of business by complying with the firewall regulation in accordance with
N.J.A.C. 13:21-15.4(d). We affirm.
The facility where SJM proposed to operate a dealership was located in
an industrial complex. The building to be occupied by SJM was approximately
150 feet by 300 feet. The larger building was divided into nineteen office units,
with each unit separated from the adjoining units. SJM was to occupy Unit 17,
which was bordered by Units 16 and 18 on each side and by Unit 10 in the rear.
A field inspection by the MVC revealed SJM's dealership would occupy
a single unit within the complex and would be adjacent to three different
businesses, all unrelated to SJM.
On May 19, 2015, SJM applied for a license, indicating the location for
SMJ's dealership was Type "C." A Type "C" facility is located in a building that
contains one or more business entities, where a New Jersey motor vehicle dealer
did not have a valid license as of March 6, 2006. A Type "C" building requires
firewalls between dealerships and other businesses in the same building.
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The MVC denied the license because SJM's proposed location failed to
meet firewall regulation pursuant to N.J.A.C. 13:21-15.4(d). SJM requested a
hearing, contesting the MVC's denial of the license. The MVC denied SJM's
request.
On December 21, 2015, SJM filed a second license application for the
same unit in the same building complex. This time, SJM claimed its location
was a Type "A" building1 and not a Type "C" building, contrary to SJM's earlier
license application. SJM argued the MVC regulation requiring a firewall was
inapplicable because the location had its own tax lot, no other businesses
operated out of the same space, and no licensed dealerships adjoined the
proposed location.
The MVC denied the second license application due to the lack of
firewalls between SJM's facility and the other businesses.
SJM requested a hearing on the denial of its second license application.
The MVC transmitted the matter to the Office of Administrative Law (OAL) as
a contested case for review by an administrative law judge (ALJ).
1
A Type "A" facility is "[l]ocated in a building where there is a single business
or multiple business with a single common identity of ownership." Firewalls
are not required for Type A facilities.
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Before the OAL, SJM filed a motion for summary decision, which the
MVC opposed. The ALJ determined the issue was "whether the MVC properly
exercised its power in failing to issue a location type 'A' Used Motor Dealer
License under N.J.A.C. 13:21-15.4(d) to [SJM] based upon the failure to provide
an appropriate certification regarding a firewall . . . ."
N.J.A.C. 13:21-15.4(d) provides:
A proposed place of business will not be considered
suitable for approval if there already exist one or more
licenses issued for, or other business entities present at,
the same premises . . . . A proposed place of business is
deemed to occupy the same premises as another
dealership if the two facilities: (1) [a]re not completely
separated by exterior walls or a firewall . . . .
The MVC regulation does not define the word "premises." Consequently,
the ALJ concluded he had to define the term to decide SJM's motion. SJM
argued "premises" applied only to the deeded property, identified as Unit 17, not
the entire building. The MVC maintained the term "premises" referred to the
entire building. The ALJ determined "premises" applied to the part of the
building which is deeded to an applicant, not the entire building, and
recommended the issuance of a license to SJM.
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The MVC filed exceptions to the ALJ's recommendation. SJM responded
to the MVC's exceptions. The matter was then referred to the agency for a final
decision.
The MVC's Chief Administrator (Administrator) denied SJM's license.
The Administrator rejected the ALJ's definition of "premises," determining the
issue was whether SJM's proposed business location occupied the same premises
as other businesses. The Administrator concluded the agency's reading of the
regulation was consistent with the regulation's plain language, the MVC's
historic interpretation of the regulation, and the deference accorded to the
agency when interpreting or enforcing a regulation within the agency's purview.
The MVC enforces the Motor Vehicle Certificate of Ownership Law
(MVCOL), N.J.S.A. 39:10-1 to -37. The MVCOL "regulate[s] and control[s]
title to, and possession of, all motor vehicles in this state, so as to prevent the
sale, purchase, disposal, possession, use or operation of stolen motor vehicles,
or motor vehicles with fraudulent titles . . . ." N.J.S.A. 39:10-3. In promulgating
N.J.A.C. 13:21-15.4, the MVC emphasized the need to protect consumers from
dishonest behavior in the sale of motor vehicles. The MVC's regulation
requiring firewalls was enacted to eliminate illegitimate motor vehicle
businesses operating out of non-conforming buildings.
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The Administrator explained that the 2005 changes to N.J.A.C. 13:21-15.4
"clarif[y] the requirement that each dealership be separated from every other
dealership and every other business entity unless there is a complete identity of
ownership of the two businesses . . . ." 37 N.J.R. 1002 (April 4, 2005).
According to the Administrator, the amendment to the regulation "reflect[s] the
ongoing efforts of the MVC to ensure the integrity of dealer facilities in the face
of abuses reported to the [MVC]." The Administrator considered the regulation
based on the "totality of the context of the regulatory and statutory regime[,]"
and concluded "a firewall must separate offices that are split in a shared building
that is separated into individual units."
The Administrator found reading the regulation to omit the requirement
for firewalls between different businesses would defeat the regulation's intended
purpose of protecting the public against fraud and illegitimate activities
associated with the sale of motor vehicles. The Administrator concluded that
the ALJ's interpretation of the term
"same premises" would apply only if Unit 17 itself were
subdivided in two. This would lead to the untenable
and ridiculous situation whereby Unit 17 would be
divided by a firewall, without requiring that a firewall
be constructed between each half of Unit 17 and the
other units in the multi-unit facility. Such a reading
would not make sense in the overall context of the
regulation.
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SJM appealed the license denial, arguing the Administrator erred by (1)
improperly interpreting the word "premises" as used in N.J.A.C. 13:21-15.4(d)
and (2) requiring firewalls pursuant to N.J.A.C. 13:21-15.4(d) because the
regulation usurps the power of the Commissioner of the Department of
Community Affairs (DCA) and its authority regarding building requirements.
Review of an administrative agency final determination is limited. In re
Carter, 191 N.J. 474, 482 (2007). "Judicial review of agency regulations begins
with a presumption that the regulations are both 'valid and reasonable.'" N.J.
Ass'n of Sch. Adm'rs v. Schundler, 211 N.J. 535, 548 (2012) (quoting N.J. Soc'y
for Prevention of Cruelty to Animals v. N.J. Dep't of Agric., 196 N.J. 366, 385
(2008)). "That deference 'stems from the recognition that agencies have the
specialized expertise necessary to enact regulations dealing with technical
matters . . . .'" N.J. Healthcare Coal. v. N.J. Dep't of Banking & Ins., 440 N.J.
Super. 129, 135 (App. Div. 2015) (quoting N.J. State League of Municipalities
v. Dep't of Cmty. Affairs, 158 N.J. 211, 222 (1999)). In light of its expertise,
we "give great deference to an agency's interpretation and implementation of its
rules enforcing the statutes for which it is responsible." In re Freshwater
Wetlands Prot. Act Rules, 180 N.J. 478, 488-89 (2004) (citing In re Distrib'n of
Liquid Assets, 168 N.J. 1, 10-11 (2001)).
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The agency's decision will be affirmed unless the court "conclude[s] that
the decision of the administrative agency is arbitrary, capricious, or
unreasonable, or is not supported by substantial credible evidence in the record
as a whole." In re Adoption of Amendments to Ne., Upper Raritan, Sussex Cty.,
435 N.J. Super. 571, 582 (App. Div. 2014) (quoting J.D. v. N.J. Div. of
Developmental Disabilities, 329 N.J. Super. 516, 521 (App. Div. 2000)). We
"accord a 'strong presumption of reasonableness' to an agency's 'exercise of
statutorily delegated responsibilities.'" Ibid. (quoting City of Newark v. Nat.
Res. Council, 82 N.J. 530, 539 (1980)). "The burden of demonstrating that the
agency's action was arbitrary, capricious[,] or unreasonable rests upon the
[party] challenging the administrative action." In re Arenas, 385 N.J. Super.
440, 443-44 (App. Div. 2006).
A regulation should be read in accordance with its plain meaning and "in
a manner that makes sense when read in the context of the entire regulation." In
re J.S., 431 N.J. Super. 321, 329 (App. Div. 2013) (quoting Medford
Convalescent & Nursing Ctr. v. Div. of Med. Assistance & Health Servs., 218
N.J. Super. 1, 5 (App Div. 1985)). N.J.A.C. 13:21-15.4 governs an "established
place of business" for motor vehicle dealers and addresses how "books, records,
A-2136-17T4
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and files necessary to conduct business" shall be maintained. N.J.A.C. 13:21-
15.4(d) states,
[a] proposed place of business will not be considered
suitable for approval if there already exist one or more
licenses issued for, or other business entities present at,
the same premises . . . . A proposed place of business is
deemed to occupy the same premises as another
dealership if the two facilities: (1) [a]re not completely
separated by exterior walls or a firewall . . . .
In 2005, the MVC added "other business entities" to the regulation,
clarifying that dealerships must be separated by a "permanent wall," such as a
firewall, from other dealerships and businesses. N.J.A.C. 13:21-15.4(d); see
also 37 N.J.R. 1002(a) (April 4, 2005). This amendment was intended to
improve document security related to motor vehicle transactions and to protect
consumers from dishonest business practices consistent with the MVC's
regulatory authority. 37 N.J.R. 1003 (April 4, 2005).
SJM argues the MVC's interpretation of "premises" as used in N.J.A.C.
13:21-15.4(d) is unreasonable because "premises," as used in N.J.A.C. 13:21-
15.2(i), means a deeded property with a specific tax lot, not an entire building.
Because SJM submitted an individual deed for Unit 17, and Unit 17 has its own
tax lot, SJM contends the proposed location is its own premises and does not
require a firewall.
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SJM's proposed place of business is a unit in a business complex with
eighteen other businesses and is not separated from those businesses by
firewalls. SJM ignores the 2005 amendment to the regulation that added
language requiring dealerships to be separated from not only other dealerships,
but also other non-dealership business entities. The purpose of the regulation,
to protect the security of documentation regarding motor vehicle transactions
and prevent fraudulent dealings, would be rendered meaningless if read to
require a firewall only between adjoining dealerships and no other business
entities. Thus, SJM's interpretation of "premises" fails to "make[] sense when
read in the context of the entire regulation."
SJM also argues N.J.A.C. 13:21-15.4(d) is invalid because the firewall
requirement creates a new building code without approval from the DCA. SJM
contends the DCA has exclusive authority governing building code requirements
under the Uniform Construction Code (UCC) and the MVC regulation usurps
the DCA's authority.
We reject the argument that the firewall requirement is inconsistent with
the UCC and usurps the authority of the DCA related to building construction.
N.J.A.C. 13:21-15.4(d) requires a dealership be separated by firewalls built in
conformity with the UCC. The DCA promulgates building codes for the
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protection of people and businesses, regardless of the industry. N.J.S.A.
52:27D-123 to -123.1. The MVC regulates the motor vehicle industry, including
requirements for suitable places of business. N.J.S.A. 39:10-3, -19. The MVC
has determined a suitable place of business must be separated from other
businesses by exterior walls or firewalls built according to the UCC. N.J.A.C.
13:21-15.4(d). Because the MVC chose an existing firewall regulation as a
proper wall separating dealerships from other businesses, the MVC acted within
its statutory authority, consistent with the UCC. Thus, the MVC did not infringe
on the regulatory authority of the DCA.
Affirmed.
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