                   COURT OF APPEALS OF VIRGINIA

Present: Judges Benton, Bray and Senior Judge Hodges
Argued at Norfolk, Virginia


BILLY M. WOODS
                                             OPINION BY
v.   Record No. 0284-97-1            JUDGE JAMES W. BENTON, JR.
                                          FEBRUARY 3, 1998
COMMONWEALTH OF VIRGINIA
 DEPARTMENT OF MOTOR VEHICLES


       FROM THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH
                  Robert B. Cromwell, Jr., Judge
           Martin A. Thomas (Decker, Cardon, Thomas &
           Weintraub, on brief), for appellant.

           Jeffrey A. Spencer, Assistant Attorney
           General, for appellee.



      Based upon the Department of Motor Vehicles' policy to

suspend or revoke the sales license of anyone convicted of a

felony within the preceding five years, the Commissioner revoked

Billy H. Woods' license to sell motor vehicles.     Woods contends

the Department's policy constitutes an improper promulgation of a

rule in violation of the Administrative Process Act and violates

his right to due process by arbitrarily revoking his license

without the process afforded by statute.   For the reasons that

follow, we reverse the order and remand for reconsideration.

                                I.

      The evidence before the administrative hearing officer

proved that Woods was first licensed by the Department as a motor

vehicle salesperson eighteen to twenty years ago.    On December

15, 1994, Woods, who was then working as a construction

supervisor, pleaded guilty in federal court to a felony charge of
credit card fraud in violation of 15 U.S.C. § 1644(a).          This

felony conviction did not arise out of the business of selling

motor vehicles.

     Following the conviction, Woods was again employed as a

motor vehicle salesperson.     After beginning his employment as a

salesperson, Woods mistakenly believed that his license to sell

motor vehicles had expired, and he applied for renewal of his

license on January 19, 1995.       In his application for renewal,

Woods disclosed his conviction and supplied the Department with

the pertinent court documents.      The Department then conducted an

administrative review to determine whether Woods' license should

be revoked pursuant to Code § 46.2-1575(13). 1         An informal fact

finding conference was held.       See Code § 9-6.14:11.     Following

the conference, the Department informed Woods that in accordance

with its policy his license was being revoked because he had been

convicted of a felony.     Woods then requested a hearing pursuant

to Code § 9-6.14:12.

     At the administrative hearing, Woods' supervising sales

manager testified that Woods was the automobile dealership's best
     1
      In pertinent part, Code § 46.2-1575(13) reads as follows:

          A license or certificate of dealer
          registration or qualification issued under
          this subtitle may be denied, suspended, or
          revoked on any one or more of the following
          grounds:

                       *   *   *     *     *   *   *

          13.     Having been convicted of a felony.




                                   - 2 -
employee.   He testified that Woods was honest and well-liked, had

a good sales record, had a strong work ethic, and had been the

top salesperson for four months in a row.    The vice president and

general manager of the automobile dealership testified as to

Woods' "impeccable" integrity and stated that the dealership

would like to keep Woods as a salesperson.

     L.S. Stupasky, the Department's representative, testified

that in 1994 the Department reviewed its policy concerning felony

convictions.    At that time, he and another Department employee

sent the following memorandum to the Commissioner of the

Department:
          This is a follow up to the "Felony
          Conviction" meeting held on Wednesday, June
          29th and to confirm the DMV management
          decision and current policy guidelines
          followed by the Dealer Licensing Section.
          The following policy addresses "denial" of an
          application for a license as a
          salesperson/motor vehicle dealer where the
          applicant has been convicted of a felony. If
          you affirm the prior decision and current
          process, please sign the attached approvals
          sheet.
            CURRENT POLICY GUIDELINES FOR DENIAL

            *    Currently on Probation/Parole status.

            *    Felony conviction occurred within five
                 years of the application date.

            *    Code Authority - § 46.2-1575 Grounds for
                 denying, suspending, or revoking
                 licenses or certificates for dealer
                 registration or qualification.

                 A license or certificate may be denied
                 on any one or more of the following
                 grounds:




                                - 3 -
               "13.   Having been convicted of a
                      felony;"


     Stupasky testified that pursuant to the policy contained in

this internal memorandum, he is required to recommend revocation

whenever a licensee has been convicted of a felony.    He further

testified that prior to 1994, the Department's practice regarding

felony convictions had been to revoke only the license of a

licensee who had been convicted of a felony related to the

business of selling motor vehicles.    That policy had been in

existence from 1988, when Code § 46.2-1575 was enacted, until the

Commissioner changed the policy in 1994.
     Stating that "[i]t is the policy of the Department of Motor

Vehicles to revoke the license [of] any salesperson that has been

convicted of a felony within the past five years," the hearing

officer recommended revocation of Woods' license.    The hearing

officer ruled that the endorsements of Woods' sales manager and

general manager were "not sufficient to overcome the statutory

authority and the Department's policy."

     The Commissioner accepted the hearing officer's

recommendation and revoked Woods' motor vehicle sales license for

five years from the date of his felony conviction.    The

Commissioner's decision stated that the revocation was consistent

with Code § 46.2-1575(13) and "the DMV policy to revoke the

salesperson license of anyone convicted of a felony within five

years of the date of the application."    The decision also stated

that "[a]lthough representation of your good character is



                               - 4 -
commendable, that information is not sufficient to allow you to

remain licensed in contravention of the Code of Virginia and DMV

policy."

     After the Commissioner entered his final decision revoking

Woods' license, Woods filed a petition for appeal to the circuit

court.   The circuit court judge affirmed the Commissioner's

decision revoking Woods' license.

                                  II.
     Code § 46.2-1508 states that "[i]t shall be unlawful for any

person to engage in business in the Commonwealth as a motor

vehicle . . . salesperson without first obtaining a license."      At

all times relevant to the issues in this case, the Commissioner

of the Department of Motor Vehicles was the entity charged with

issuing and enforcing the licensing requirements.     See Code

§ 46.2-1508 - 46.2-1527.8. 2   Indeed, Code § 46.2-1575 provided

that "[a] license . . . issued under this subtitle may be denied,

suspended or revoked [by the Commissioner of the Department of

Motor Vehicles] on any one or more of the following

grounds:   . . .   13.   Having been convicted of a felony."

(Emphasis added).   The statute specified eighteen grounds for

which a license may be denied, suspended or revoked.

     2
      In 1995, the General Assembly amended the provisions of
Article 2 (Motor Vehicle Dealer Licenses), Code § 46.2-1508 to
§ 46.2-1521, and Article 8 (Denial, Suspension, and Revocation of
Dealer Licenses), Code § 46.2-1574 to § 46.2-1579, to substitute
the Motor Vehicle Dealer Board, see Code § 46.2-1500, for the
Commissioner. See 1995 Acts of Assembly, ch. 767.




                                 - 5 -
     The evidence at the administrative hearing proved that the

Commissioner's statutory authority to deny, suspend, or revoke a

license for the conviction of a felony was first enacted in 1988.

 See 1988 Acts of Assembly, ch. 865.     The evidence also proved

that prior to 1994, the Department exercised its discretion under

this provision of the statute to revoke the licenses of those

licensees who had been convicted of felonies related only to the

business of selling motor vehicles.    However, in 1994, the

Commissioner acted on a recommendation from the Department's

management and instituted a policy that required the Department

to suspend or revoke, without exception, the license of any

licensee who had been convicted of any felony.     Indeed, the

Department's representative testified at the administrative

hearing that when an applicant or current holder of a license has

a felony conviction the employee who reviews the application

always recommends to the Commissioner, pursuant to the

Department's current policy guidelines, that the license be

denied or revoked.

     Thus, in 1994, the Department changed its earlier policy and

enacted a policy that eliminates any discretion from the

Department's review of the license status of a person who has

been convicted of a felony.   The current policy mandates, without

exception, the suspension or revocation of the license of any

salesperson convicted of a felony.     The Department applied this

changed policy to Woods' application.    Thus, the Department



                               - 6 -
enforced in a case decision a "policy guideline" that it adopted

as a standard for applying the statutory mandate of Code

§ 46.2-1575(13).




                              - 7 -
                              III.

     In Virginia Board of Medicine v. Virginia Physical Therapy

Association, 13 Va. App. 458, 413 S.E.2d 59 (1991), aff'd, 245

Va. 125, 427 S.E.2d 183 (1993), this Court ruled as follows:
          Under the [Administrative Process Act],
          "rule" and "regulation" are defined as "any
          statement of general application, having the
          force of law, affecting the rights or conduct
          of any person, promulgated by an agency in
          accordance with the authority conferred on it
          by applicable basic laws." Code
          § 9-6.14:4(F) (emphasis added). "Promulgate"
          means to publish or to announce officially,
          and is commonly used in the context of the
          "formal act of announcing a statute."
          Black's Law Dictionary 634 (5th ed. 1983).
          The [Administrative Process Act] and the
          Virginia Register Act provide the procedure
          for the promulgation and adoption of a rule
          or regulation. An agency's rule or
          regulation is invalid if the agency failed to
          comply with these statutes in the
          promulgation process.


13 Va. App. at 466, 413 S.E.2d at 64.   This Court noted that

rules that are not promulgated according to the statutory

procedure of the Administrative Process Act and the Virginia

Register Act are invalid as "de facto" rules.   Id.

     However, in Jackson v. W, 14 Va. App. 391, 419 S.E.2d 385

(1992), we noted that this Court has held that "[i]n order to

carry out its [statutory] purpose, an agency may adopt an

'"interpretative rule" without the binding force of law.'"      Id.

at 399, 419 S.E.2d at 390 (quoting Bader v. Norfolk Redev. &

Hous. Auth., 10 Va. App. 697, 702, 396 S.E.2d 141, 144 (1990)).

We held that when the legislature authorizes an agency to



                              - 8 -
supervise the administration of a regulatory act, the agency may

establish guidelines for its employees to use in applying the

statute so as to give effect to the intent and spirit of the

legislation.   See Jackson, 14 Va. App. at 399, 419 S.E.2d at

389-90.   Thus, we held that a state agency may issue to its

employees "guidelines . . . [that] are . . . interpretative rules

adopted in order to carry out the agency's purpose of

implementing the Commonwealth's policy [contained in the agency's

basic law]."   Id. at 400, 419 S.E.2d at 390. 3

     3
      Other jurisdictions recognize the power of administrative
agencies to adopt interpretative rules or guidelines. See, e.g.,
General Electric Co. v. Gilbert, 429 U.S. 125, 141-42 (1976)
(noting that interpretative rules need not be authorized by
legislative enactments and should be given weight if persuasive);
Waverly Press v. Department of Assess. & Tax., 539 A.2d 223, 227
(Md. 1988) (holding that "interpretative rules 'only interpret
the statute to guide the administrative agency in the performance
of its duties until directed otherwise by decisions of the
courts'"); Town of Northbridge v. Town of Natick, 474 N.E.2d 551,
556 (Mass. 1985) (ruling that agencies may adopt internal
policies for carrying out their duties; however, those "policy
statements do not have the legal force of a statute or
regulation"); Shenango Township Bd. of Supervisors v.
Pennsylvania Public Util. Comm'n, 686 A.2d 910, 914 (Pa. Cmwlth.
1996) (holding that "a statement of policy does not have the
force of law, . . . is merely interpretive in nature . . . [,
and] is only persuasive so long as it represents an accurate
interpretation of the relevant statute or other authorities from
which it is derived."); Great American Nursing Centers v.
Norberg, 567 A.2d 354, 356 (R.I. 1989) (recognizing that "an
interpretive rule is not specifically authorized by a legislative
enactment; rather, it is promulgated by an administrative agency
for the purpose of guidance and definition"); Appalachian Power
Co. v. Tax. Dept., 466 S.E.2d 424, 434 (W. Va. 1995) (holding
that "[i]nterpretative rules . . . merely clarify an existing
statute or regulation[,] . . . need not go through the
legislative authorization process[,] . . . do not have the force
of law . . . [, and are not] irrevocably binding on the agency or
the court.").




                               - 9 -
     Based upon the evidence in this record, we cannot say that

the Commissioner's adoption of the guidelines in 1994 is the type

of "de facto" rule that this Court condemned in Virginia Board of

Medicine.   When the Department enforced Code § 46.2-1575(13)

prior to 1994, the policy of the Department was to exempt from

suspension the licenses of salespersons whose felony convictions

did not relate to the business of selling motor vehicles.   The

record does not establish whether this was a written policy or

unwritten practice.   However, in 1994, the Commissioner approved

a written policy guideline statement that informed Department

employees charged with reviewing licensees' applications of the

guidelines that were to be employed from that date forward.     As

in Jackson, we believe that the Commissioner adopted an
"interpretative rule" for the purpose of fulfilling the

Department's responsibility to administer the statute.

                                 IV.

     Although we find that the Commissioner did not adopt a "de
facto" rule when he approved the new interpretative guidelines,

we do find that the policy guidelines are inconsistent with the

statute.    See Jackson, 14 Va. App. at 400, 419 S.E.2d at 390.

     The General Assembly used discretionary language in drafting

Code § 46.2-1575.   The statutory language evinces a recognition

on the part of the General Assembly that, in some cases, license

revocation may not be an appropriate remedy.   Indeed, the General

Assembly specified eighteen separate grounds that "may" give rise




                               - 10 -
to adverse action.   The Department and Woods agree that the

statute granted the Department the discretion to suspend or

revoke a license to sell motor vehicles where the licensee has

been convicted of a felony.

     When the Department established its mandatory revocation

policy, however, it foreclosed any opportunity for a licensee who

was affected by the policy to appeal to the discretionary

authority of the Commissioner.   Although the statute authorizes

the use of discretion, the current policy guidelines allow no

discretion to be exercised in determining whether a felony

conviction will result in revocation or suspension of a license.

 The policy guidelines direct that a revocation or suspension

must be imposed following a felony conviction.    Clearly, the

decision to revoke Woods' license did not result from the

exercise of discretion; it was a mandatory act taken in

accordance with an internal policy which directly contradicted

the intent of the General Assembly when it enacted the statute.

     In granting the Department the discretion to revoke

licenses, the General Assembly intended for the Department to

determine, on a case-by-case basis, whether revocation properly

serves the interests of the public.    In those cases in which

revocation would not serve the interests of the public and would

work an injustice, the General Assembly intended for the

Department to exercise its discretion in applying the statute.

Under the mandatory revocation policy, however, the Department



                              - 11 -
fails to exercise its discretion and revokes licenses in all

cases involving felony convictions, without considering the best

interests of the public or the purpose of the statute.   We note

that the policy guidelines do not provide such a mandatory

feature for any of the other seventeen grounds specified in Code

§ 46.2-1575.

     The record of the informal fact finding conference, the

recommendation of the hearing officer, and the final agency

decision all reference "the [Department's] policy" to suspend or

revoke the license of anyone convicted of a felony without

exception or consideration of other circumstances.   We hold that

the Department's policy guidelines are inconsistent with the

statute because they remove from the Department's review of

licensees the discretion granted by statute.

     Accordingly, we reverse the decision and remand the case for

reconsideration in accordance with the discretionary standard

enacted within Code § 46.2-1575.
                                        Reversed and remanded.




                             - 12 -
