      TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN


                                        NO. 03-10-00719-CV



             Continental Imports, Ltd. d/b/a Mercedes Benz of Austin, Appellant

                                                   v.

L. David Brunke in his Official Capacity as Acting Director of The Motor Vehicle Division
of the Texas Department of Transportation, and The Motor Vehicle Division of the Texas
                        Department of Transportation, Appellees


     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 345TH JUDICIAL DISTRICT
      NO. D-1-GN-07-000508, HONORABLE LORA J. LIVINGSTON, JUDGE PRESIDING



                                MEMORANDUM OPINION


                Continental Imports, Ltd. d/b/a Mercedes Benz of Austin (“Continental”) appeals the

trial court’s order affirming a final order issued by the Motor Vehicle Division of the Texas

Department of Transportation (“the Division”). The Division’s final order found that Continental

(1) engaged in false, deceptive, unfair, or misleading advertising; (2) failed to notify the Division of

a name change; (3) failed to report to the Division the use of assumed names in two of its license

renewal applications; and (4) made material misrepresentations in two of its license renewal

applications. See Tex. Occ. Code Ann. § 2301.651(a)(2) (West Supp. 2011) (board may reprimand

license holder that makes material misrepresentation in any application); 16 Tex. Admin. Code

§§ 105.2 (2004) (Tex. Motor Vehicle Bd., General Prohibition) (person advertising motor vehicles

shall not use false, deceptive, unfair, or misleading advertising), 111.3(d) (2004) (Tex. Motor
Vehicle Bd., General Distinguishing Number) (dealer must record assumed name of legal entity on

application for general distinguishing number), 111.11(a)(7) (2004) (Tex. Motor Vehicle Bd.,

Sanctions) (civil penalties may be assessed against dealer who fails to notify board of dealer’s name

change).1 The final order imposed $76,000 in civil penalties and directed Continental to publish a

specific retraction in the automobile advertising section of the Austin American Statesman. We will

sustain some of Continental’s appellate issues and overrule others, reverse the trial court’s judgment,

and remand the case to the agency for further proceedings consistent with this opinion.


                                         BACKGROUND

               Continental has for many years been a franchised Mercedes-Benz dealer licensed by

the Division to do business as both “Mercedes-Benz of Austin” and “Continental Cars.”2

Continental operates its dealership from its licensed location at 6757 Airport Boulevard in Austin.

In February 2002, Continental filed with the Texas Secretary of State a set of assumed name

certificates, including “Mercedes-Benz of Georgetown” and “Georgetown Mercedes-Benz.” In

March 2002, Continental filed a second set of assumed name certificates that included

“Mercedes-Benz of Georgetown & Round Rock” and “Round Rock & Georgetown Mercedes-Benz.”

       1
          After the contested-case hearing in this case, the Division’s rules were recodified in the
Texas Administrative Code. The provisions of former rule 105.2 are now found in 43 Tex. Admin.
Code § 215.242 (2011) (Tex. Dep’t of Motor Vehicles, General Prohibition). The provisions of
former rule 111.3(d) are now found in 43 Tex. Admin. Code § 215.133(d) (2011) (Tex. Dep’t of
Motor Vehicles, General Distinguishing Number). The provisions of former rule 111.11(a)(7) are
now found in 43 Tex. Admin. Code § 215.141(a)(7) (2011) (Tex. Dep’t of Motor Vehicles,
Sanctions). Because the Administrative Law Judge’s proposal for decision and the Division’s final
order refer to the former rules, for clarity we will do the same in this opinion.
       2
         The recitations of fact in this section are derived primarily from unchallenged findings of
fact adopted by the Division in its final order.

                                                  2
Previously, in July 2001, Continental had filed for the assumed name certificate “Mercedes-Benz

of Round Rock.” Continental had not obtained approval from Mercedes-Benz USA for use of any

of these assumed names.       After filing the assumed name certificates, Continental placed

advertisements in the December 2002 issue of SBC’s Smart Yellow Pages and Business White Pages

for the Greater Austin 5-County Metro Area using the names “Mercedes-Benz of Georgetown” and

“Mercedes-Benz of Round Rock.” Calls made to the telephone numbers listed for each of the names

used were automatically forwarded to and answered at “Mercedes-Benz of Austin.” The address

listed for the telephone book listings and advertisements that Continental placed for “Mercedes-Benz

of Georgetown” and “Mercedes-Benz of Round Rock” was 6757 Airport Boulevard in Austin.

Continental placed similar advertisements in the July 2003 issue of SBC’s Smart Yellow Pages for

the Austin Northwest Suburban area and the December 2003 issue of SBC’s Smart Yellow Pages

and White Business Pages for the Greater Austin 5-County Metro Area. The advertisements

appeared in additional telephone book publications in 2003 and 2004. Continental did not have

permission from Mercedes-Benz USA to place the advertisements or telephone listings, nor was it

authorized to do so by Garlyn Shelton, the owner of the dealership that in February 2002 received

approval from Mercedes-Benz USA to operate as a franchised dealership in the Georgetown area.3




       3
         In February 2002, Shelton received approval from Mercedes-Benz USA to relocate from
Temple to Georgetown, and he began construction of the Georgetown dealership in June 2003.
Although Shelton reserved a telephone number for the new dealership in January 2004,
Mercedes-Benz USA would not allow him to place an advertisement in the telephone book until the
dealership was operational. Thus, the only listings for a Mercedes-Benz dealership in the
Georgetown area were those placed by Continental, and all calls to those listings were forwarded to
Continental’s dealership located in Austin.

                                                 3
                 In May 2004, Shelton filed a complaint with the Division’s Enforcement Section to

report problems with the names and telephone numbers Continental was using. Thereafter, the

Enforcement Section’s Chief Investigator met with Bryan Hardeman, Continental’s owner and dealer

operator, to inform him that the advertisements appearing in the Yellow Pages and the Business

White Pages were in violation of the Division’s advertising rules. On June 7, 2004, the Enforcement

Section sent Continental a letter notifying it of two alleged violations of Division rule 105.24

as follows:


       1.        Representing that Mercedes Benz of Georgetown, telephone number
                 868-8630, and Mercedes Benz of Round Rock, telephone number 828-3274,
                 are authorized Mercedes Benz dealers located at 6757 Airport Blvd., Austin,
                 TX when in fact only Continental Imports Ltd d/b/a Mercedes Benz of Austin
                 d/b/a Continental Cars is licensed by the Board for the sale of motor vehicles
                 at 6757 Airport Blvd., Austin, TX in violation of 16 TAC § 105.2.

       2.        Representing that Mercedes Benz of Austin, telephone number 868-8630 is
                 located at 201 E[.] 10th St, Georgetown, TX when in fact Mercedes Benz of
                 Austin is licensed by the Board for the sale of motor vehicles only at
                 6757 Airport Blvd., Austin, TX in violation of 16 TAC § 105.2.




       4
            Rule 105.2 provides:

       A person advertising motor vehicles shall not use false, deceptive, unfair, or
       misleading advertising. In addition to a violation of a specific advertising rule, any
       other advertising or advertising practices found by the Board to be false, deceptive,
       or misleading, whether or not enumerated herein, shall be deemed violations of the
       [Texas Occupations] Code, and shall also be considered violations of the general
       prohibition.

16 Tex. Admin. Code § 105.2 (2004) (Tex. Motor Vehicle Bd., General Prohibition).

                                                   4
The letter stated that the advertisements at issue had been published in the July 2003 issue of the

SBC Austin Northwest Suburban telephone directory and the December 2003 SBC Greater Austin

5-County Metro Area telephone directory. The letter stated that its purpose was to give Continental

notice of the violations and afford it an opportunity to cure them. See Tex. Occ. Code Ann.

§ 2301.203(c) (West 2004) (board may not file complaint alleging violation of board rule relating

to advertising until board has notified license holder of alleged violation and given license holder

“an opportunity to cure the violation without further proceedings or liability”). The letter also

instructed Continental to respond in writing within 15 days to show that it “had received and

understood” the letter and to “detail the affirmative steps” it was taking to cure the violation. The

letter informed Continental that “[f]ailure to respond within this time period will be taken as a refusal

to cure the violation, and a formal complaint will issue.” The letter did not, however, specify any

particular means by which Continental was to cure the asserted violations.

                Continental did not respond to the letter in writing as instructed. Continental

contends, however, that it responded to the notice by canceling the advertisements in July 2004 and

by having the telephone numbers disconnected in August 2004. The cancellation, however, was too

late to prevent the advertisements from appearing in the July 2004 and December 2004 issues of

SBC’s Smart Yellow Pages and Business White Pages. Thereafter, in August 2004, the Enforcement

Section filed with the agency a complaint alleging that Continental had violated rule 105.2 and

seeking civil penalties and suspension or revocation of Continental’s license. As exhibits to

the petition, the Enforcement Section attached copies of the advertisements that appeared in the

July 2003 and December 2003 telephone directories.



                                                   5
                The case was ultimately tried on the Enforcement Section’s fourth amended petition,

which alleged 27 counts of acts and practices the Enforcement Section contended violated various

provisions of the occupations code and the Division’s rules. These included 15 counts related to

advertisements in telephone directories, three counts related to internet advertising, two counts

related to Continental’s alleged failure to notify the Division of a name change, six counts related

to Continental’s alleged failure to notify the Division of assumed names in its license renewal

applications, and one count related to violation of the Texas Deceptive Trade Practices Act.

                After a contested-case hearing, the Administrative Law Judge (ALJ) issued a Proposal

for Decision (PFD) that concluded that Continental committed five violations of rule 105.2 (alleged

in counts 3, 4, 5, 8, and 9), two violations of rule 111.11(a)(7) (alleged in counts 19 and 20),

four violations of rule 111.3(d) (alleged in counts 22, 23, 25, and 26), and two violations of

occupations code section 2301.651(a)(2) (alleged in counts 25 and 26). The ALJ recommended

that the Division assess civil penalties of $76,000 and that Continental be ordered to publish a

one-quarter page retraction in the automobile advertising section of the Austin American Statesman

newspaper for three days. Subsequently, the Division’s Acting Director signed a final order adopting

the PFD in its entirety, including the ALJ’s findings of fact and conclusions of law. As

recommended by the ALJ, the final order assessed $76,000 in civil penalties and ordered Continental

to publish a retraction. After exhausting its administrative remedies, Continental filed suit for

judicial review of the Division’s order. The district court affirmed the order and this appeal

followed. In eight issues, Continental challenges various aspects of the Division’s order and

contends that the district court erred in affirming it.



                                                   6
                                   STANDARD OF REVIEW

               Section 2301.751 of the occupations code provides that judicial review of the

Division’s orders is conducted under the “substantial evidence rule” as set forth in section 2001.174

of the Administrative Procedure Act (APA). See Tex. Occ. Code Ann. § 2301.751 (West 2004);

Tex. Gov’t Code Ann. § 2001.174 (West 2008). In a suit for judicial review of an agency order

pursuant to the APA, a reviewing court may affirm the agency decision in whole or in part, and must:


       reverse or remand the case for further proceedings if substantial rights of the
       appellant have been prejudiced because the administrative findings, inferences,
       conclusions, or decisions are:

               (A)     in violation of a constitutional or statutory provision;

               (B)     in excess of the agency’s statutory authority;

               (C)     made through unlawful procedure;

               (D)     affected by other error of law;

               (E)     not reasonably supported by substantial evidence considering the
                       reliable and probative evidence in the record as a whole; or

               (F)     arbitrary or capricious or characterized by abuse of discretion or
                       clearly unwarranted exercise of discretion.


Tex. Gov’t Code Ann. § 2001.174 (1), (2). Pursuant to section 2001.174(2), if the reviewing court

finds any of the six categories of “error” listed and determines that such error prejudiced the

“substantial rights” of the party seeking review, the court must reverse and/or remand the case for

further proceedings. Id. § 2001.174(2).




                                                  7
                                           DISCUSSION

                In its first issue, Continental asserts that the Division did not have the authority to

order it to print a retraction. The final order purported to order the printed retraction “in accordance

with Tex. Occ. Code Ann. § 2301.203(c) and [16 TAC § 105.32(c)].” Section 2301.203(c) provides:


        The board may not file a complaint alleging a violation of this chapter or a board rule
        relating to advertising until the board has notified the license holder of the alleged
        violation and given the license holder an opportunity to cure the violation without
        further proceedings or liability.


Tex. Occ. Code Ann. § 2301.203(c) (West 2004). Rule 105.32(c) provides in pertinent part:


        As part of the cure procedure, the Board may require a licensee, who allegedly
        violated an advertising provision, to publish a retraction notice to effect an adequate
        cure of the alleged violation.


16 Tex. Admin. Code § 105.32(c) (2004) (Tex. Motor Vehicle Bd., Enforcement).5 Continental

contends that the referenced statute and rule authorize the Division to order a retraction only as part

of a pre-contested case cure procedure. According to Continental, once the Enforcement Section has

filed a complaint, this statute and rule no longer apply and, consequently, the Division had no

authority to order the retraction as part of the punishment imposed on Continental after the

contested-case hearing. Even assuming that Continental is correct on that point, however, authority




       5
         The provisions of former rule 105.32 are now found in 43 Tex. Admin. Code § 215.270(c)
(2011) (Tex. Dep’t of Motor Vehicles, Enforcement).

                                                   8
for the Division to order a printed retraction is found in a separate provision—occupations code

section 2301.153.     See Tex. Occ. Code Ann. § 2301.153(a)(20)(b) (West 2004).                   That

section provides:


       Notwithstanding any other provision of law, the board has all powers necessary,
       incidental, or convenient to perform a power or duty expressly granted under this
       chapter, including the power to:

       ....

       (20) enter an order requiring a person to:

       ....

               (B) perform an act other than the payment of money.


Id. Therefore, regardless of whether the Division was without authority to order a retraction pursuant

to 2301.203(c) and rule 105.32(c) after the proceedings had gone beyond the pre-complaint cure

procedure, the Division was plainly authorized to order such a retraction pursuant to its general

powers as set forth in section 2301.153 once it found that Continental had engaged in false,

deceptive, or misleading advertising in violation of rule 105.2. See Tex. Occ. Code Ann.

§ 2301.651(3) (West 2004) (authorizing board to reprimand license holder that violates board rule).

               In its second issue, however, Continental argues that the Division’s order that it print

a retraction cannot be upheld pursuant to section 2301.153 because the order specifically states that

the retraction was ordered “in accordance with” section 2301.203(c) and rule 105.32(c). Citing City

of El Paso v. El Paso Electric Co., 851 S.W.2d 896, 899 (Tex. App.—Austin 1993, writ denied), and

Professional Mobile Home Transport v. Railroad Commission, 733 S.W.2d 892, 904 (Tex.

App.—Austin 1987, writ ref’d n.r.e.), Continental maintains that when an agency specifically

                                                    9
identifies the legal basis for its decision, the reviewing court may not affirm the agency’s decision

on a different legal basis. The cases cited, however, employ the principle that a reviewing court may

not sustain the agency’s decision on a factual basis not addressed by the agency. See City of El Paso,

851 S.W.2d at 899-900 (refusing to uphold agency order on factual basis different from that relied

on by agency); Professional Mobile Home Transport, 733 S.W.2d at 903-04 (addressing argument

that evidence was insufficient to reasonably support agency’s findings and discussing whether

agency’s findings show that agency considered and ascertained satisfaction of certain statutory

criteria). This case presents a different issue—whether an agency order can be upheld by any legal

basis shown in the record. It is well established that a reviewing court is obligated to sustain an

agency order on any such legal basis. See, e.g., Public Util. Comm’n v. Southwestern Bell Tel. Co.,

960 S.W.2d 116, 121 (Tex. App.—Austin 1997, no pet.) (appellate court is obligated to sustain

agency order on any legal basis shown in record);6 City of League City v. Texas Water Comm’n,

777 S.W.2d 802, 807 (Tex. App.—Austin 1989, no writ) (“We are not bound by any particular legal

ground made a basis for the Commission’s ruling, provided that a valid basis exists for the action

taken.”) (citing Texas Health Facilities Comm’n v. Charter Med.-Dallas, Inc., 665 S.W.2d 446, 452

(Tex. 1984), Railroad Comm’n v. City of Austin, 524 S.W.2d 262, 279 (Tex. 1975), and Gulf Land


       6
           In Southwestern Bell Telephone, this Court observed:

       This principle is sometimes confused with the erroneous idea that a reviewing court
       must sustain an agency order on any “valid basis” shown in the record. This does not
       mean, however, that the reviewing court may sustain the agency upon a factual basis
       not passed upon by the agency. It means that the reviewing court may sustain the
       agency order upon any legal basis shown in the record.

Public Util. Comm’n v. Southwestern Bell Tel. Co., 960 S.W.2d 116, 121 n.7 (Tex. App.—Austin
1997, no pet.) (emphasis in original).

                                                 10
Co. v. Atlantic Ref. Co., 131 S.W.2d 73, 84 (Tex. 1939)); see also Pretzer v. Motor Vehicle Bd.,

138 S.W.3d 908, 914 (Tex. 2004) (“We are mindful of the rule that ‘[a] reviewing court is not bound

by the reasons given by an agency in its order, provided there is a valid basis for the action

taken by the agency.’” (quoting Texas Health Facilities Comm’n, 665 S.W.2d at 452-53)). Having

found that Continental violated one of its rules, the Division was authorized pursuant to

section 2301.153(20)(B) to order Continental to print a retraction. Because there is at least one valid

basis for the agency action, we are obligated to uphold it.

                Continental also argues that the ordered retraction cannot be upheld because, to

the extent it rests on a ground not identified by the Enforcement Section or the Division in the

notice of hearing, the fourth amended petition, or the final order, it violates government code

section 2001.152(a)(3), which requires that a notice of hearing in a contested case include, among

other things, “a reference to the particular sections of the statutes and rules involved.” See Tex.

Gov’t Code Ann. § 2001.052(a)(3) (West 2008). Continental reads the notice statute to require the

agency to include in the notice a reference to the specific statutory provision that authorizes the

agency to impose the penalty it ultimately chooses to impose. Nothing in the statute, however,

requires the agency to notify a party to a contested-case hearing of the specific penalty it will impose

in the event it finds a violation of a statue or rule or to apprise it of the agency’s general powers.

Rather, the purpose of the notice is to provide the party to a contested-case hearing with an

opportunity to respond and present evidence and argument on each issue in the case by informing

it of which statutes or rules it contends the party violated. See id. § 2001.051(2) (party to contested

case is entitled to opportunity to respond and to present evidence and argument on each issue

involved in case). The notice and attached petition that were provided to Continental gave adequate

                                                  11
notice of the statutes and rules it was alleged to have violated as well as the factual basis for the

alleged violations. This satisfied the statutory requirements. We overrule Continental’s first and

second issues.

                 In its third issue, Continental contends that the district court erred in affirming the

Division’s findings and conclusion that it violated occupations code section 2301.651(a)(2) when

it failed to report the assumed name “Mercedes Benz of Round Rock” in its 2003 and 2004 license

renewal applications.7 Section 2301.651(a)(2) provides:


       The board may deny an application for a license, revoke or suspend a license, place
       on probation a person whose license has been suspended, or reprimand a license
       holder if the applicant or license holder:

       ....

                 (2)    makes a material misrepresentation in any application or other
                        information filed under this chapter or board rules[.]


Tex. Occ. Code Ann. § 2301.651(a)(2). Continental argues that its failure to report certain assumed

names when filling out its application is not a material misrepresentation, but rather an omission—a

failure to report, notify, or disclose. See 16 Tex. Admin. Code § 111.3(d) (dealer must record

assumed name on application for general distinguishing number). Consequently, Continental

maintains that while it may have violated a Division rule requiring that it inform the Division of all

its assumed names, its failure to include those names on its license renewal application did not


       7
          This issue challenges the Division’s findings and conclusions related to the portions
of counts 25 and 26 that allege that Continental’s failure to report an assumed name violated
occupations code section 2301.651(a)(2). See Tex. Occ. Code Ann. § 2301.651(a)(2) (West Supp.
2011) (board may reprimand license holder that makes material misrepresentation in
any application).

                                                   12
constitute a material misrepresentation that violated section 2301.651(a)(2). The Division counters

that it reasonably interpreted this section’s prohibition of material misrepresentations on license

renewal applications to include material omissions. This issue, therefore, turns principally on the

construction of a statute, a question of law that we review de novo. See First Am. Title Ins. Co.

v. Combs, 258 S.W.3d 627, 632 (Tex. 2008).

               Our primary objective in construing statutes is to give effect to the legislature’s intent.

Galbraith Eng’g Consultants, Inc. v. Pochucha, 290 S.W.3d 863, 867 (Tex. 2009). The plain

meaning of the text is the best expression of legislative intent unless a different meaning is supplied

by legislative definition or is apparent from the context, or unless the plain meaning would lead to

absurd or nonsensical results that the legislature could not have intended. City of Rockwall

v. Hughes, 246 S.W.3d 621, 625-26 (Tex. 2008); see Tex. Gov’t Code Ann. § 311.011 (West 2005)

(“Words and phrases shall be read in context and construed according to the rules of grammar and

common usage.”). We look to the entire act in determining the legislature’s intent with respect to

a specific provision. Upjohn v. Rylander, 38 S.W.3d 600, 607 (Tex. App.—Austin 2000, pet.

denied). A court should strictly construe a statute imposing a penalty and construe it against those

seeking to impose the penalty and in favor of those on whom such penalties would be imposed.

Howell v. Mauzy, 899 S.W.2d 690, 704-05 (Tex. App.—Austin 1994, writ denied).

               When a statute is ambiguous, we are required to give “serious consideration” to the

construction of the statute by the administrative agency charged with its enforcement, Railroad

Comm’n v. Texas Citizens for a Safe Future & Clean Water, 336 S.W.3d 619, 624 (Tex. 2011), and

uphold the agency’s interpretation if it is reasonable, First Am. Title Ins. Co., 258 S.W.3d at 632

(quoting Tarrant Appraisal Dist. v. Moore, 845 S.W.2d 820, 823 (Tex. 1993)). We do not defer to

                                                   13
an agency interpretation when a statute is unambiguous. See Texas Citizens, 336 S.W.3d at 624 &

n.6. We also “‘do not defer to administrative interpretation in regard to questions which do not lie

within administrative expertise, or [which] deal with a nontechnical question of law.’” Rylander

v. Fisher Controls Int’l, Inc., 45 S.W.3d 291, 302 (Tex. App.—Austin 2001, no pet.) (quoting

2B Singer, Sutherland Statutory Construction § 49.04, at 23-24 (6th ed. 2000)).

               Employing these rules of statutory construction, we conclude that the “material

misrepresentation” prohibited by section 2305.651(a)(c) does not encompass an omission or failure

to disclose such as Continental’s failure to disclose all of its assumed names on its license renewal

application.   In various places throughout the occupations code, the legislature expressly

distinguishes between acts and omissions. See, e.g., Tex. Occ. Code Ann. §§ 101.201(b)(1) (West

2004) (false advertising includes advertising that “makes a material misrepresentation of fact or

omits a fact necessary to make the statement as a whole not materially misleading”), .157(a) (West

2004) (“[T]he director or a board member, hearings examiner, or division employee is not personally

liable for damages resulting from an official act or omission unless the act or omission constitutes

intentional or malicious malfeasance.”), .803(a) (West 2004) (“[A] person who receives notice from

the board of a statutory stay imposed by this chapter may not allow or commit any act or omission

that would . . . violate this chapter.”) (all emphases added). And, significantly, the Division has a

separate rule that specifically covers the conduct at issue—rule 111.3(d), which requires an applicant

to record its assumed named on its application. See 16 Tex. Admin. Code § 111.3(d). Indeed, in

the present case the Division found that the same conduct it contends was a violation of occupations

code section 2301.651(a)(2) was also a violation of rule 111.3(d) and assessed penalties pursuant to

that rule.

                                                 14
                We conclude that the unambiguous language of section 2301.651(a)(2) indicates that

it covers only material misrepresentations—other statutes and rules apply to omissions and failures

to notify, or disclose information to, the Division. To the extent there is any ambiguity regarding

whether this section applies to omissions, we are obligated to construe the statute strictly and in favor

of those upon whom it would impose a penalty. See Howell, 899 S.W.2d at 704-05. Having

concluded that Continental’s conduct in failing to disclose all its assumed names on it license

renewal applications was not a violation of occupations code section 2301.651(a)(2), we sustain

Continental’s third issue.

                In its fourth issue, Continental asserts that the district court erred in affirming

penalties assessed for advertising violations for which it was not provided the statutorily required

notice and opportunity to cure. See Tex. Occ. Code Ann. § 2301.203(c) (board may not file

complaint alleging violation of board rule relating to advertising until board has notified license

holder of alleged violation and given license holder opportunity to cure violation without further

proceedings or liability).8 Continental contends that the only notice it received was the June 2004

letter advising it that the Enforcement Section considered the July 2003 and December 2003

telephone book advertisements to be false and misleading. Consequently, Continental takes the

position that the Division was not authorized to assess penalties for subsequent advertising violations

for which Continental never received a notice letter giving it an opportunity to cure. The Division,

however, argues that all the alleged advertising violations arose out of the same conduct—“the use

of assumed names coupled with misleading phone numbers”—and that once Continental was


        8
         This issue challenges the Division’s findings and conclusions related to counts 5, 8, 9, 19,
20, 22, 23, 25, and 26.

                                                   15
notified that such conduct constituted an advertising violation, the Enforcement Section was not

required to provide Continental notice and an opportunity to cure subsequent violations involving

the same conduct.

               This issue, too, turns on statutory construction. The statute plainly states that the

board “may not file a complaint alleging a violation . . . relating to advertising until the board has

notified the license holder of the alleged violation and given the license holder an opportunity to cure

the violation without further proceedings or liability.” See id. (emphasis added). This language

unambiguously requires separate notice and an opportunity to cure each advertising violation before

that particular advertising violation can be included in any complaint filed by the Enforcement

Section.   In its fourth amended petition, the Enforcement Section treated each deceptive

advertisement as a separate violation and sought discrete penalties for each such violation. It was

therefore required to give Continental notice and an opportunity to cure each violation before

including it in the complaint.

               The Division argues that such a reading of the statute creates an “unworkable”

scenario in which repeated violations of the same conduct require the Enforcement Section to

“re-send an opportunity-to-cure letter for each of those continuing violations” and that “cases would

be constantly halted and restarted.” While providing notice and an opportunity to cure each violation

might be inconvenient and time consuming, that is what the statute requires. We may not rewrite

the statute under the guise of construing it. See Stockton v. Offenbach, 336 S.W.3d 610, 619 (Tex.

2011). Moreover, in the event of a repeat violator, the Division has the power to “issue cease and

desist orders in the nature of temporary or permanent injunctions.” See Tex. Occ. Code Ann.

§ 2301.153(a)(18) (West 2004). We conclude that the Enforcement Section was not authorized to

                                                  16
include in its complaint counts related to advertising violations for which it did not give Continental

notice and an opportunity to cure.

               We do not, however, agree with Continental that this holding requires reversal of all

of the findings of fact and conclusions of law related to the violations alleged in counts 5, 8, 9, 19,

20, 22, 23, 25, and 26 of the fourth amended petition for which no notice was given. Rather, it only

affects those counts that relate to advertising violations. We therefore consider each of the counts

to determine whether it is an advertising violation.

               Counts 5, 8, and 9 relate to advertising Mercedes-Benz of Georgetown and

Mercedes-Benz of Round Rock in telephone directories. These are clearly advertising violations for

which no notice was given, and the Division should have dismissed those counts as Continental

requested. Thus, any findings and conclusions relating to those counts are erroneous.

               Counts 19 and 20 allege that Continental failed to notify the Division of a “name

change” within ten days of the change, as required by rule 111.11(a)(7). See 16 Tex. Admin. Code

§ 111.11(a)(7). This rule provides:


       (a) Revocation/Denial. The director may deny, revoke or suspend a dealer’s license
       (general distinguishing number) or assess civil penalties if that dealer:

       ....

               (7)     fails to notify the Board of a dealer’s name change or ownership
                       within 10 days after such change; . . . .


Id. It is undisputed that Continental did not change its legal name. The Enforcement Section and

the Division, however, take the position that using the assumed names “Mercedes-Benz of

Georgetown” and “Mercedes-Benz of Round Rock” in the marketplace, specifically by advertising

                                                  17
in telephone books with those names, constituted a “name change” as that term is used in the rule.

In the PFD the ALJ stated that: “The plain meaning of a name change includes the use of the

two additional names in operating and advertising its business.” Continental disputes the Division’s

interpretation of the rule and asserts that “name change” means changing the entity’s legal name.

We need not decide which interpretation is correct, however, because under the Division’s theory,

Continental’s violation of the statute resulted from its use of the assumed names in its

advertisements. Consequently, those violations are ones “related to advertising” for which the

Enforcement Section was required to give Continental notice and an opportunity to cure

before including it in a complaint. The Division should have dismissed these violations, as

Continental requested, and any findings and conclusions related to these alleged violations are

therefore erroneous.

               Counts 22, 23, 25, and 26 allege that Continental violated rule 111.3(d) by not

reporting the assumed names “Mercedes-Benz of Georgetown” and “Mercedes-Benz of Round

Rock” on its license renewal applications filed in April 2003 and in March 2004.9 These counts do

not allege violations “related to advertising,” and the Enforcement Section was not required to give

Continental notice before including these counts in its complaint. In summary, we sustain

Continental’s fourth issue with regard to counts 5, 8, 9, 19, and 20 of the fourth amended petition

and overrule it with regard to counts 22, 23, 25, and 26.




       9
          Counts 25 and 26 also include the allegations that Continental violated the occupations
code’s section 2301.651(a)(2) prohibition on making a material misrepresentation in any application
filed with the Division. We have already concluded that the district court erred in affirming the
Division’s conclusion that Continental’s omission of the assumed names in its license renewal
application constituted a material misrepresentation.

                                                18
               In its fifth issue, Continental contends that the district court erred in affirming the

Division’s findings and conclusion that it violated rule 111.11(a)(7) by failing to notify the Division

of a “name change.” The Division’s allegations with regard to this rule violation were included in

counts 19 and 20 of the fourth amended petition. Because we have already concluded that the

Division should have dismissed these counts for lack of notice, we need not address this issue.

               In its sixth issue, Continental complains of the Division’s assessment of civil

penalties for violations of both rule 111.3(d) and occupations code section 2301.651(a)(2). In counts

25 and 26, the Enforcement Section alleged that Continental’s failure to report the assumed name

“Mercedes-Benz of Round Rock” in its April 2003 and its March 2004 license renewal applications

violated both rule 111.3(d) and section 2301.651(a)(2). The Division agreed and assessed penalties

under both the rule and the statute. Continental complains that this was improper “stacking” of

penalties and resulted in the imposition of penalties that violated the per-violation statutory caps

established by transportation code section 503.095 and occupations code section 2301.801(a). See

Tex. Transp. Code Ann. § 503.095(a) (West 2007) (person who violates rule adopted under this

chapter is subject to civil penalty of not less than $50 or more than $1,000); Tex. Occ. Code Ann.

§ 2301.801(a) (West 2004) (amount of penalty may not exceed $10,000 for each violation). We have

already concluded that the Division erred in finding that the failure to report the assumed name was

a “material misrepresentation” that violated section 2301.651(a)(2). Any penalties assessed for

violations of section 2301.651(a)(2) as alleged in counts 25 and 26 will necessarily be eliminated.

Continental’s sixth issue is therefore moot.

               Continental’s seventh issue asserts that the Division’s findings that its advertisements

were false, deceptive, unfair, or misleading were not supported by substantial evidence. Under

                                                  19
substantial evidence review of fact-based determinations, “[t]he issue for the reviewing court is not

whether the agency’s decision was correct, but only whether the record demonstrates some

reasonable basis for the agency’s action.” See State v. Public Util. Comm’n, 344 S.W.3d 349,

355-56 (Tex. 2011) (quoting Mireles v. Texas Dep’t of Pub. Safety, 9 S.W.3d 128, 131 (Tex. 1999)).

The evidence in the record may even preponderate against the decision of the agency and nonetheless

amount to substantial evidence. Texas Health Facilities Comm’n, 665 S.W.2d at 452.

               The record in the present case includes ample evidence that Continental’s

advertisements caused confusion and were misleading. For example, Shelton testified that when he

first opened his dealership in 2004 he was surprised by the low call volume. Eventually a customer

notified him that there was a listing for a “Mercedes-Benz of Georgetown” with a number different

from his company’s number. A number of customers told Shelton that they had a hard time finding

his location because they would call the other number and end up speaking with someone from

Continental. There was evidence that some customers arrived at Shelton’s dealership for a service

appointment only to find out that they had actually booked an appointment with Continental in

Austin. A sales manager for Shelton’s dealership testified that several customers came to the

dealership upset because, although they had seen the dealership in Georgetown, when they called

what they believed to be that location to ask a question or make an appointment, they were routed

to Continental’s Airport Boulevard location. Moreover, there is substantial evidence that the

advertisements themselves are deceptive on their face as they could lead a customer to reasonably

believe that they were calling an authorized Mercedes-Benz dealership located in Round Rock or

Georgetown, when in fact they were calling Continental in Austin. We are unpersuaded by

Continental’s argument that the “net overall effect” of the advertisements was not misleading or

                                                 20
deceptive. Applying the correct standard for reviewing agency findings, which “does not allow a

court to substitute its judgment for that of the agency,” Railroad Comm’n v. Torch Operating, Co.,

912 S.W.2d 790, 792 (Tex. 1995), we conclude that the Division’s findings that Continental’s

advertisements were false, misleading, or deceptive are supported by substantial evidence.

                In its eighth issue, Continental complains that the Division’s findings and conclusions

state that Continental violated statutes and rules that “cannot be violated,” specifically occupations

code section 2301.651(a)(3), rule 111.11(a)(23), and transportation code section 503.038(a)(14). See

Tex. Occ. Code Ann. § 2301.651(a)(3) (West Supp. 2011) (board may reprimand license holder that

“violates this chapter or a board rule or order”); Tex. Transp. Code Ann. § 503.038(a)(14) (West

Supp. 2011) (department may cancel dealer’s general distinguishing number if dealer “otherwise

violates this chapter or rule adopted under this chapter”); 16 Tex. Admin. Code § 111.11(a)(23)

(2004) (Tex. Motor Vehicle Bd., Sanctions) (director may assess civil penalties if dealer “violates

any state or federal law or regulation relating to the sale of a motor vehicle”).10 Continental argues

that these provisions each function as “catchall provisions” authorizing the Division to fine or

sanction an applicant or licensee for violating its rules and, as such, cannot themselves be violated.

We agree with the Division that this argument is academic because in this case there is no violation

that is found to be solely of one of the “catchall provisions.” Each of the challenged findings and

conclusions finds violations of rules that Continental concedes can be violated. For example, as the

Division observes in its brief, finding of fact 75 states that:




        10
          The provisions of former rule 111.11(a)(23) are now found in 43 Tex. Admin. Code
§ 215.141(a)(23) (2011) (Tex. Dep’t of Motor Vehicles, Sanctions).

                                                  21
        Respondent violated 16 TAC § 105.2 and Occupations Code § 2301.651(a)(3) by
        using false, deceptive, unfair, and misleading advertising related to Mercedes-Benz
        of Georgetown and Mercedes-Benz of Round Rock in a December 2003 SBC
        telephone directory.


Each violation is similarly linked to a statute or rule that Continental acknowledges can be violated

and can be the basis for assessing civil penalties or other punishment. The Division’s recitation in

a finding or conclusion of a separate provision, even if it is one that cannot be “violated,” does not

render the finding or conclusion erroneous. We overrule Continental’s eighth issue.


                                           CONCLUSION

                As set forth herein, we conclude that the trial court did not err in affirming the portion

of the final order directing Continental to publish a retraction. We also conclude that the Division’s

findings that Continental engaged in false, misleading, or deceptive conduct are supported by

substantial evidence. The trial court erred, however, in affirming the Division’s order assessing civil

penalties for violations of occupations code 2301.651(a)(2) as alleged in counts 25 and 26 of the

fourth amended petition because that provision prohibits material misrepresentations as opposed to

omissions. Additionally, we conclude that the Division should have dismissed counts 5, 8, 9, 19,

and 20 of the fourth amended petition because the Enforcement Section failed to provide Continental

notice and an opportunity to cure these advertising violations as required by statute. In summary,

we sustain Continental’s third issue and its fourth issue as to counts 5, 8, 9, 19, and 20. We overrule

Continental’s first and second issues, its fourth issue as to counts 22, 23, 25, and 26, and its seventh

and eighth issues. Our disposition renders Continental’s fifth and sixth issues moot. Consequently,




                                                   22
we reverse the trial court’s judgment and remand the case to the Division for further proceedings

consistent with this opinion.



                                            __________________________________________

                                            J. Woodfin Jones, Chief Justice

Before Chief Justice Jones, Justices Pemberton and Henson

Reversed and Remanded

Filed: December 30, 2011




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