      TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN


                                      NO. 03-05-00411-CV



                                Nathan Wayne Stark, Appellant

                                                 v.

             Mike Geeslin, Commissioner of Insurance, and Texas Department
                               of Insurance, Appellees




     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 353RD JUDICIAL DISTRICT
        NO. GN403869, HONORABLE STEPHEN YELENOSKY, JUDGE PRESIDING



                                          OPINION


               Nathan Wayne Stark appeals from the district court judgment affirming the final order

of the Commissioner of the Texas Department of Insurance1 denying Stark’s application to acquire

Fidelity First Insurance Company of Dallas. In four issues, Stark complains that the Commissioner’s

order violates due process; exceeds the Commissioner’s authority under section 823.157 of the

insurance code; lacks evidentiary support; and improperly finds that Stark’s application failed to

meet the regulatory standards for approval. Finding no due process violation and concluding that

the Commissioner acted within his statutory authority and that his decision was supported by

substantial evidence, we affirm the judgment of the district court.


       1
       We substitute Mike Geeslin, successor to Jose Montemayor as Commissioner of the Texas
Department of Insurance, as the proper party on appeal. See Tex. R. App. P. 7.
                      FACTUAL AND PROCEDURAL BACKGROUND

                 On July 11, 2003, Stark submitted a Form A application with the Texas Department

of Insurance seeking approval to purchase Fidelity First Insurance Company of Dallas. In the cover

letter submitted with his application, Stark acknowledged that his Form A application was

incomplete, and he promised to submit additional documentation under separate cover. Stark’s cover

letter stated:


        We believe this to be a completed Form A except for the most recent audited
        financial statement for Mr. Stark which will be provided as a supplement under
        separate cover in approximately one week. In addition, a few of the biographical
        affidavits and fingerprint cards will also be provided under separate cover within a
        few days.


                 When the Department received Stark’s application, it was assigned to the

Commissioner’s staff for review. Staff identified several areas of concern and sent four letters to

Stark requesting additional information. These letters were dated July 18, September 18, October

16, and November 25, 2003. Although Stark responded to each of these requests, his responses did

not provide full and complete information requested by the Commissioner regarding Stark’s Form

A application. Stark’s application proposed using First Fidelity Risk Managers, Inc., as managing

general agent for Fidelity First. But the documentation submitted by Stark revealed that First

Fidelity Risk Managers, Inc., was not licensed to do business in Texas, or any other state.

Additionally, when the Commissioner requested updated financial information from Stark to

determine the source of cash for Stark’s purchase of Fidelity First, the answers Stark provided were




                                                 2
confusing. First, Stark said that he would fund the purchase out of his personal funds. But later,

Stark said that one of his subsidiaries, SkilStaf International, Inc., would provide the purchase money

funds to acquire Fidelity First. Based on the financial statements and other information provided by

Stark, however, the Commissioner concluded that SkilStaf International, Inc., was financially

incapable of providing Stark with a purchase money loan. The Commissioner also inquired about

Stark’s proposed plan for reinsurance,2 but Stark failed to provide a commitment letter from a

reinsurer.

               Even after the Commissioner’s four requests for additional information, Stark failed

to provide sufficient information to complete his Form A application. As of December 3, 2003, the

Commissioner still had not received the proposed policy forms to be used by Fidelity First or the

loan agreement from Stark. Accordingly, on December 16, 2003, the Commissioner issued Official

Order No. 03-1247 denying Stark’s application.

               Stark timely requested a hearing on the denial of his application, which the

Commissioner referred to the State Office of Administrative Hearings. See Tex. Ins. Code Ann.

§ 823.157 (West Supp. 2005). A hearing was convened before an administrative law judge on May

5, 2004. The ALJ recommended denial of Stark’s application on the grounds that Stark had failed

to meet the burden of proving, by a preponderance of evidence, that his Form A application should

have been approved and that Stark failed to provide all of the information regarding his Form A

application as required by the Commissioner’s rules. See 28 Tex. Admin. Code §§ 7.205, .209


       2
          Reinsurance is insurance of all or part of one insurer’s risk by a second insurer, who
accepts the risk in exchange for a percentage of the original premium. Black’s Law Dictionary 1290
(7th ed. 1999).

                                                  3
(2006). The Commissioner adopted this recommendation and issued a final order denying Stark’s

application on November 1, 2004.

               Stark filed a motion for rehearing, which was overruled by operation of law. Stark

then sought judicial review in district court. The district court granted judgment affirming the

Commissioner’s order. Stark appeals the district court’s judgment.


                                          DISCUSSION

The Controversy

               This appeal concerns the Commissioner’s construction of section 823.157 of the

Texas Insurance Code regarding the purchase of a domestic insurance company. See Tex. Ins. Code

Ann. § 823.157. In four issues, Stark complains that the Commissioner’s final order (1) violates due

process; (2) exceeds the Commissioner’s jurisdiction; (3) is not supported by a preponderance of

evidence; and (4) that the testimony and record evidence establish that his application met all of the

regulatory standards for approval. The Commissioner responds that neither due process nor the plain

language of section 823.157 requires the Commissioner to provide notice or a hearing before taking

adverse administrative action on Stark’s application. The Commissioner further responds that he

acted entirely within the scope of his jurisdiction under Chapter 823 of the Texas Insurance Code,

and his final order was supported by substantial evidence.


Standard of Review

               The Commissioner’s action is subject to judicial review under the substantial

evidence rule. Tex. Ins. Code Ann. §§ 36.201–.203 (West Supp. 2005); Tex. Gov’t Code Ann.



                                                  4
§ 2001.174 (West 2000). Under substantial evidence review, we may affirm the agency’s decision

in whole or in part, or we may reverse the agency’s decision if we determine that substantial rights

of the appellant have been prejudiced because the agency’s decision violates the constitution or a

statute; exceeds the agency’s statutory authority; was made through unlawful procedure; or, was

affected by other error of law. Tex. Gov’t Code § 2001.174. When conducting a substantial

evidence review, we must first determine whether the evidence as a whole is such that reasonable

minds could have reached the conclusion the agency must have reached in order to take the action

in dispute. Texas State Bd. of Dental Exam’rs v. Sizemore, 759 S.W.2d 114, 116 (Tex. 1998). The

test is not whether the agency reached the correct conclusion, but whether some reasonable basis

exists in the record for the agency’s action.         Texas Health Facilities Comm’n v. Charter

Medical-Dallas, Inc., 665 S.W.2d 446, 452 (Tex. 1984). In determining whether there is substantial

evidence to support the agency’s decision, we may not substitute our judgment as to the weight of

the evidence on questions committed to agency discretion. Id. We presume that the agency’s order

is supported by substantial evidence, and the challenging party bears the burden to demonstrate

otherwise. Id. at 453. So long as there is a reasonable basis for the agency’s order in the record, we

must uphold the agency’s order. Id. at 452.


Statutory changes

               We note at the outset that section 823.157 of the insurance code—the statutory

provision at issue in this appeal—has been amended and was recently codified as part of the

legislature’s ongoing process to re-organize Texas statutes. Prior to 2001, section 823.157 appeared




                                                  5
as article 21.49-1, section 5(c)(1), of the insurance code.3 Article 21.49-1, section 5(c)(1), provided

that “[t]he commissioner shall approve any acquisition or control referred to in Subsection (a)

unless, after a public hearing thereon, he finds that” the statutory requirements are not met.4 During

the 2001 legislative session, the legislature amended article 21.49-1, section 5(c)(1), to read:


       The commissioner shall approve or deny any acquisition or change of control referred
       to in Subsection (a) not later than the 60th day after the date the statement required
       by that subsection is filed. The 60-day period may be waived by the person filing the
       statement and the domestic insurer. On request of either the person filing the
       statement or the domestic insurer, the commissioner shall hold a public hearing on
       a denial . . . .5


                 There appears to be some confusion on Stark’s part as to whether this 2001

amendment reflected a substantive statutory change or was merely the result of the legislature’s

continuing recodification process. We observe, however, that the 2001 legislature enacted this

substantive amendment to article 21.49-16 and also codified the pre-amendment version into section




       3
         Act of May 27, 1987, 70th Leg., R.S., ch. 813, § 2, 1987 Tex. Gen. Laws 2816, 2819
(repealed 2001) (current version at Tex. Ins. Code Ann. § 823.157 (West Supp. 2005)).
       4
           Id. (emphasis added).
       5
        Act of May 27, 1987, 70th Leg., R.S., ch. 813, § 2, 1987 Tex. Gen. Laws 2816, 2819,
amended by, Act of May 8, 2001, 77th Leg., R.S., ch. 241, § 2, 2001 Tex. Gen. Laws 450, 450-51.
       6
           Id.

                                                  6
823.157 of the insurance code.7 Then, in 2003, the legislature enacted a conforming amendment to

section 823.157 to reflect the substantive change originally enacted in 2001.8


Due process

               In his first point of error, Stark complains that due process required the Commissioner

to provide notice and a hearing on Stark’s Form A application prior to taking any administrative

action on the application. We disagree.

               The United States Constitution guarantees that no person shall be deprived of life,

liberty, or property without due process of law. U.S. Const. amend XIV, § 1. The Texas

Constitution guarantees that “[n]o citizen of this State shall be deprived of life, liberty, property,

privileges or immunities . . . except by the due course of the law of the land.” Tex. Const. art. 1,

§ 19. The Texas Supreme Court has found no meaningful difference between the federal

Constitution’s guarantee of due process and the Texas Constitution’s guarantee of due course of law.

University of Tex. Med. Sch. v. Than, 901 S.W.2d 926, 929 (Tex. 1995). Thus, Texas courts have

traditionally followed contemporary federal pronouncements on procedural due process issues. Id.

(citing Mellinger v. City of Houston, 3 S.W. 249, 252-53 (Tex. 1887)); see also Spring Branch

Indep. Sch. Dist. v. Stamos, 695 S.W.2d 556, 560-61 (Tex. 1985); Tarrant County v. Ashmore, 635

S.W.2d 417, 422-23 (Tex. 1982). Although we are not bound by federal due process jurisprudence,




       7
         Act of May 22, 2001, 77th Leg., R.S., ch. 1419, § 1, sec. 823.157, 2001 Tex. Gen. Laws
3658, 3702-03.
       8
       Act of May 20, 2003, 78th Leg., R.S., ch. 1276, § 10A.203, 2003 Tex. Gen. Laws 4158,
4234. We cite to the current version of section 823.157 unless otherwise noted.

                                                  7
we consider federal decisions involving procedural due process to be persuasive authority when

considering Texas’s due course of law guarantee. Than, 901 S.W.2d at 929.

               Our review of Stark’s due process claim requires a two-part analysis. We must first

determine whether Stark has asserted a liberty or property interest entitled to procedural due process

protection. If so, we must determine what process is due. See Board of Regents of State Colleges

v. Roth, 408 U.S. 564, 569-70 (1972); Collins v. Texas Natural Res. Conservation Comm’n, 94

S.W.3d 876, 883 (Tex. App.—Austin 2002, no. pet.).

               The parties do not dispute that due process required the Commissioner to provide

notice and a hearing on Stark’s Form A application to acquire Fidelity First. The dispute centers,

instead, on the timing of the hearing required. Thus, the question of whether Stark has a protected

liberty or property interest in the State’s processing of his application to purchase Fidelity First is

not before us, and we consider only whether the hearing held by the Commissioner satisfies the

requirements of due process.

               In the context of administrative proceedings, the Supreme Court has long held that

due process does not require a hearing at any particular stage so long as the requisite hearing is held

before the final administrative order becomes effective. Ewing v. Mytinger & Casselberry, Inc., 339

U.S. 594, 598 (1950) (collecting cases); see also Lone Star Greyhound Park, Inc. v. Texas Racing

Comm’n, 863 S.W.2d 742 (Tex. App.—Austin 1993, writ denied). Unlike some legal rules, due

process “is not a technical conception with a fixed content unrelated to time, place and

circumstances.” Mathews v. Eldridge, 424 U.S. 319, 334 (1976) (quoting Cafeteria Workers v.

McElroy, 367 U.S. 886, 895 (1961)). Due process is flexible and calls only for those procedural



                                                  8
protections demanded by the particular circumstances. Morrissey v. Brewer, 408 U.S. 471, 481

(1972).

                  Stark does not challenge the adequacy of the hearing provided by the Commissioner.

The question here is solely one of timing. This case thus presents the same issue considered by the

Supreme Court in Mathews v. Eldridge, namely “the extent to which due process requires an

evidentiary hearing prior to the deprivation of some type of property interest even if such a hearing

is provided thereafter.” 424 U.S. at 333; see also Dixon v. Love, 431 U.S. 105, 112 (1977)

(considering whether due process requires evidentiary hearing prior to the state’s discretionary action

of suspending or revoking a driver’s license). We therefore apply the factors considered by the

Supreme Court in Mathews:


          Identification of the specific dictates of due process generally requires consideration
          of three distinct factors: first, the private interest that will be affected by the official
          action; second, the risk of an erroneous deprivation of such interest through the
          procedures used, and probable value, if any, of additional or substitute procedural
          safeguards; and finally, the Government’s interest, including the function involved
          and the fiscal and administrative burdens that the additional or substitute procedural
          requirement would entail.


Mathews, 424 U.S. at 335.

                  The private interest at issue here is the approval of Stark’s application to purchase

Fidelity First. Although we recognize that Stark may not be made entirely whole if his application

to purchase Fidelity First is later approved after an initial denial, we conclude that the

Commissioner’s denial of Stark’s application to purchase a domestic insurance company is not the

sort of deprivation considered by the Supreme Court in Mathews or Dixon that would require a



                                                       9
departure “from the ordinary principle . . . that something less than an evidentiary hearing is

sufficient prior to adverse administrative action.” See Mathews, 424 U.S. at 343; Dixon, 431 U.S.

at 113 (citing Goldberg v. Kelly, 397 U.S. 254, 264 (1970)).

               We next consider the risk of an erroneous deprivation and the probable value, if any,

of additional procedural safeguards. Id. at 335. Essential to our evaluation of the administrative

process is the nature of the relevant inquiry. Id. at 343. In determining whether to grant or deny

Stark’s Form A application, the Commissioner must consider the financial stability and expertise of

the acquiring entity as well as the financial and regulatory impact the acquisition will have on the

domestic insurance company. See Tex. Ins. Code Ann. § 823.157(b). In short, the statute requires

the Commissioner to conduct a financial assessment of the proposed transaction based upon

information submitted by the applicant—in this case, Stark. See id.

               Like the medical assessment required in Mathews, the financial assessment required

of the Commissioner is “a more sharply focused and easily documented decision.” See 424 U.S. at

343. In most cases, the Commissioner’s decision will turn upon routine or standard information and

financial reports submitted by the applicant as part of the Form A application itself. See Tex. Ins.

Code Ann. §§ 823.154, .157 (West Supp. 2005); see also 28 Tex. Admin. Code §§ 7.205, .209.

Under these circumstances, issues of credibility and veracity will not be a critical factor in the

Commissioner’s financial assessment and ultimate decisionmaking process. Compare Richardson

v. Perales, 402 U.S. 389, 404 (1971) (recognizing the “reliability and probative worth of written

medical reports”), with Goldberg, 397 U.S. at 269 (finding that written submissions provide an

unsatisfactory basis for decisions that turn upon issues of witness credibility and veracity). In this



                                                 10
context, we agree with the Supreme Court that the potential value of an evidentiary hearing is

substantially lessened. See Mathews, 424 U.S. at 344-45.

               The record in this case demonstrates that Stark had ample opportunity to submit all

of the necessary information to the Commissioner before the Commissioner issued the first official

order denying Stark’s application. Stark submitted his Form A application to the Commissioner in

July 2003. The Commissioner’s rules required Stark to submit detailed biographical and financial

information, as well as a proposed business and operational plan for the domestic insurer, as part of

his Form A application. See 28 Tex. Admin. Code § 7.205. The Commissioner requested additional

information and written documentation from Stark on four separate occasions, and Stark responded

to each of these requests. Thus, it is clear that the administrative process employed by the

Commissioner in considering whether to approve Stark’s acquisition of Fidelity First was controlled

in large part by the written submissions provided by Stark himself.

               There is no concern here that the written submissions provided by Stark would be an

ineffective means of communicating his case to the decisionmaker. In contrast to the welfare

recipients in Goldberg, persons like Stark who seek to acquire a domestic insurance company will

likely have both the “educational attainment necessary to write effectively” and the ability to afford

professional assistance. See 327 U.S. at 269. In this case, Stark was represented by counsel from

the date he originally submitted his Form A application to the Commissioner to the date of the

Commissioner’s final order and throughout his appeals. Most, if not all, of the information provided

in Stark’s Form A application and his supplemental responses to the Commissioner was prepared

by counsel or someone with the financial expertise necessary to address the Commissioner’s



                                                 11
inquiries. Given these circumstances, we conclude that the risk of an erroneous deprivation in the

absence of a prior evidentiary hearing is minimal, and the probable value, if any, of additional or

substitute procedural safeguards is negligible at best.

               In determining the appropriate process due in this context, the last factor in our

analysis is the public interest. See Mathews, 424 U.S. at 335. This factor includes both fiscal and

administrative burdens, as well as other costs associated with requiring, as a matter of constitutional

right, an evidentiary hearing prior to the Commissioner’s initial decision on a Form A application.

See id. at 347. The most obvious burden would be the incremental cost and expense of providing

each applicant with an evidentiary hearing prior to the Commissioner’s initial action on an

application. But this increased burden would not necessarily bring with it any added benefit. The

requirement to provide each applicant with an evidentiary hearing prior to administrative action on

a Form A application will create additional delays in the process, which may ultimately outweigh

any added benefit of a prior hearing. Although the actual hearing in this case took only two days,

it was not held until almost a full year after Stark originally submitted his application

to the Commissioner. As the Supreme Court recognized in Mathews, “experience with the

constitutionalizing of government procedures suggests that the ultimate additional cost in terms of

money and administrative burden would not be insubstantial.” Id.

               Of course, financial considerations alone do not control the outcome. We must also

consider the government’s, and hence the public’s, interest in conserving scarce fiscal and

administrative resources. Id. at 348. At some point, the benefit of providing additional safeguards

to individuals potentially affected by adverse administrative action may be outweighed by the cost.



                                                  12
Id. In striking the appropriate due process balance, we ask when, under our constitutional system,

we must impose judicial-type procedures upon administrative action to ensure fairness. “The judicial

model of an evidentiary hearing is neither a required, nor even the most effective, method of

decisionmaking in all circumstances.” Id.

                The legislature has spoken to the appropriate balance in this context. The insurance

code allows the Commissioner to act upon a Form A application without the need for an evidentiary

hearing in every case. See Tex. Ins. Code Ann. § 823.157. Our determination of what due process

is constitutionally required in this case is guided by the legislature’s policy choice, reflected in the

2001 statutory amendment to section 823.157, and the Commissioner’s rules, which provide an

applicant like Stark with an opportunity to present all of the information necessary for approval of

his Form A application prior to any administrative action. We note that the prescribed procedures

also provide Stark with the right to an evidentiary hearing in the event his application is denied, as

well as subsequent judicial review, before the denial of his application becomes final. See Mathews,

424 U.S. at 349. For these reasons, we conclude that the Commissioner was not required to provide

an evidentiary hearing prior to his initial denial of Stark’s Form A application and that the

procedures employed by the Commissioner in evaluating Stark’s application fully comported with

due process as required by both the United States and Texas Constitutions. We overrule Stark’s first

issue.


60-day period

                In his second issue, Stark complains that the plain language of section 823.157 of the

insurance code required the Commissioner to act upon Stark’s Form A application within 60 days

                                                  13
after Stark submitted the application, regardless of whether the application was complete. See Tex.

Ins. Code Ann. § 823.157. Stark further complains that the Commissioner’s failure to act within the

60-day period deprived the Commissioner of jurisdiction to take any subsequent action on Stark’s

application. The Commissioner responds that Stark’s application never triggered the 60-day time

period in section 823.157 because it was never complete and, therefore, was never deemed filed

within the meaning of the statute. See id.; 28 Tex. Admin. Code §§ 7.205, .209. Accordingly, the

Commissioner asserts that he was not required to act upon Stark’s Form A application within 60

days and any failure to act within the 60-day period does not deprive him of jurisdiction to take

action at a later date. The Commissioner’s denial of Stark’s application was based on his

construction of section 823.157. See 28 Tex. Admin. Code §§ 7.205, .209.

               The proper construction of section 823.157 is a question of law, which we review de

novo. See Office of Pub. Util. Counsel v. Public Util. Comm’n, 185 S.W.3d 555, 564 (Tex.

App.—Austin 2006, pet. filed) (op. on reh’g). When construing a statute, our primary objective is

to determine and give effect to the legislature’s intent. Texas Water Comm’n v. Brushy Creek Mun.

Util. Dist., 917 S.W.2d 19, 21 (Tex. 1996). We give serious consideration to an administrative

agency’s construction of the statute it is charged with enforcing, so long as the agency’s construction

is reasonable and consistent with the plain language of the statute. Tarrant Appraisal Dist. v. Moore,

845 S.W.2d 820, 823 (Tex. 1993).

               An administrative agency’s interpretation of its own regulations is also entitled to

deference by the courts. Public. Util. Comm’n v. Gulf States Utils. Co., 809 S.W.2d 201, 207 (Tex.

1991). “Our review is limited to determining whether the administrative interpretation is plainly



                                                  14
erroneous or inconsistent with the regulation.” Id. We will reverse an administrative action as

arbitrary and capricious only if the agency fails to follow the clear, unambiguous language of its own

regulation.   Power Res. Group, Inc. v. Public Util. Comm’n, 73 S.W.3d 354, 357 (Tex.

App.—Austin 2002, pet. denied).

                Section 823.157(a) provides:


        The commissioner shall approve or deny an acquisition or change of control for
        which a statement is filed under section 823.154 not later than the 60th day after the
        date the statement required by that section is filed. The 60-day period may be waived
        by the person filing the statement and the domestic insurer. On the request of either
        the person filing the statement or the domestic insurer, the commissioner shall hold
        a hearing on a denial.


Tex. Ins. Code Ann. § 823.157. Under the Commissioner’s interpretation of section 823.157, a Form

A application is not considered to be filed within the meaning of the statute until it is complete, or

until “the date all such material required and sufficient to constitute a full statement has been

provided.” 28 Tex. Admin. Code § 7.205(b).

                Stark argues that he filed his Form A application within the meaning of section

823.157 on July 14, 2003, and that the Commissioner’s final order recites that Stark’s application

was filed on that date. In support of his position, Stark refers us to finding of fact number one in the

Commissioner’s final order, which reads “On July 14, 2003, the Applicant filed a Form A

acquisition for control of Fidelity First with the Department.”

                The Commissioner responds that even though this finding of fact states that Stark’s

application was filed with the Department on July 14, 2003, it means only that the Department

received Stark’s application on that date, not that the application was filed within the meaning of

                                                  15
section 823.157. Commissioner witnesses Betty Patterson and Diane Nowak testified that Stark

never submitted required documentation regarding the licensing status of his proposed managing

general agent, a commitment letter from his proposed reinsurer, or the policy forms to be used by

Fidelity First. Nowak also testified that Stark failed to provide sufficient financial information

regarding the nature, source, and amount of the purchase money funds to acquire Fidelity First.

Thus, Nowak testified that the Commissioner never considered Stark’s Form A application to be

filed within the meaning of section 823.157 because it was never complete.

               The legislature has delegated broad authority to the Commissioner to implement

Chapter 823 of the insurance code. Tex. Ins. Code Ann. § 823.012 (West Supp. 2005). The

Commissioner may adopt rules and establish procedures regarding the conducting of business and

proceedings in order to take appropriate actions authorized by statute. Id. The Commissioner has

exercised this authority to adopt rules regarding Form A applications to acquire domestic insurance

companies. See 28 Tex. Admin. Code §§ 7.205, .209.9 Section 7.205(b) of the Commissioner’s

rules states, “No statement required by subsection (a) of this section shall be deemed filed with the

commissioner until on the date all such material required and sufficient to constitute a full statement

has been provided.” Id. § 7.205(b). This rule also provides that “[a] failure to file complete and

accurate information in all material respects is grounds for a denial by the commissioner.” Id.

§ 7.205(a). Stark’s failure to file a complete Form A application was sufficient grounds under the

rule for the Commissioner to deny his application to purchase Fidelity First.


       9
          Although rules 7.205 and 7.209 were adopted prior to the codification and amendment of
section 823.157 in 2001 and 2003, Stark does not challenge the applicability of those rules.
Therefore, that question is not before us and we do not address it.

                                                  16
               The Commissioner’s rules are a reasonable construction of section 823.157 and do

not contradict the plain language of the statute. We conclude the Commissioner acted within his

discretion to find that Stark’s application was incomplete and did not trigger the running of the 60-

day time period. To hold otherwise would lead to absurd results and encourage gamesmanship.10

This we decline to do.

               To the extent that Stark contends the Commissioner’s rules fail to give effect to the

waiver provision in section 823.157, we reject this contention. The waiver provision remains

operable under the Commissioner’s construction of section 823.157 because the parties may still

agree to waive the 60-day period once a complete Form A application has been submitted to the

Commissioner. We overrule Stark’s second issue.


Substantial Evidence

               In his two remaining issues, Stark attacks the evidentiary basis of the Commissioner’s

final order. Stark complains that the record evidence and testimony establish that Stark’s application

met all of the regulatory standards for approval and that the Commissioner’s order is not supported

by the evidence.

               The legislature has charged the Commissioner with determining whether Stark’s

Form A application met the regulatory standards for approval. See Tex. Ins. Code Ann. § 823.157.

We review the Commissioner’s decision under the substantial evidence rule. See id. §§ 36.201 (an


       10
            At oral argument, counsel for the Commissioner argued that, under Stark’s interpretation
of the statute, an applicant could trigger the 60-day period by filing one piece of paper regardless of
whether it included all of the information required in a Form A application. See 28 Tex. Admin.
Code § 7.209.

                                                  17
action subject to judicial review includes a decision, order, or other ruling of the Commissioner);

.203 (judicial review of the Commissioner’s action is under the substantial evidence rule in Chapter

2001, Government Code); Tex. Gov’t Code Ann. § 2001.174.

               Stark claims that the record evidence and testimony demonstrate that his Form A

application met the regulatory standards for approval. In support of this claim, Stark asserts that the

Oklahoma Department of Insurance approved his Form A application to acquire an Oklahoma

domestic insurance company, and that he was using the same business model here in his Form A

application to acquire Fidelity First. Regardless of whether Stark’s proposed business model

complied with Oklahoma law, it was incumbent upon the Commissioner to determine regulatory

compliance with Texas law. Based on the evidence that Stark submitted, the Commissioner

concluded that Stark’s application failed to meet the regulatory standards in section 823.157.

Because this question was committed to the Commissioner’s discretion, we decline to substitute our

judgment for that of the Commissioner. See Texas Health Facilities Comm’n, 665 S.W.2d at 452.

               Commissioner witness Diane Nowak testified that Stark failed to provide the

necessary materials to complete his Form A application: Stark failed to provide a commitment letter

from any reinsurer; the managing general agent that Stark proposed to use was not licensed in Texas

or in any other state; and Stark failed to provide the policy forms to be used by Fidelity First. Nowak

also testified that Stark failed to demonstrate the nature, source, and amount of funds or other

consideration that would be used to fund the purchase of Fidelity First. On this record, we conclude

that the Commissioner’s order was amply supported by substantial evidence. See id. We overrule

Stark’s third and fourth issues.



                                                  18
                                         CONCLUSION

               The plain language of section 823.157 requires notice and a hearing only in the event

the Commissioner first denies a Form A application. See Tex. Ins. Code Ann. § 823.157. We

conclude that this legislative policy choice does not violate due process, and the Commissioner was

not required to provide notice and a hearing prior to taking action on Stark’s application to acquire

Fidelity First. We also conclude that the Commissioner acted within his authority under Chapter 823

of the insurance code and that his final order was supported by substantial evidence. Therefore, we

affirm the district court’s judgment.




                                              __________________________________________

                                              Jan P. Patterson, Justice

Before Chief Justice Law, Justices Patterson and Pemberton

Affirmed

Filed: July 7, 2006




                                                 19
