      TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN


                                      NO. 03-04-00373-CV



                Motor Vehicle Board and Motor Vehicle Division of the Texas
                        Department of Transportation, Appellants

                                                 v.

                                Prevost Cars (US) Inc., Appellee


     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 261ST JUDICIAL DISTRICT
         NO. GN303916, HONORABLE PATRICK O. KEEL, JUDGE PRESIDING



                               DISSENTING OPINION


               The State of Texas has chosen to extensively regulate the sale and distribution of

motor vehicles within its borders. The legislature has delegated enforcement of this regulatory

scheme to the Motor Vehicle Board, and the statute requires any person who wishes to engage in

business as a dealer or sell motor vehicles in Texas to obtain an appropriate license. Ignoring this

legislative mandate, the majority confuses the issue of the Board’s jurisdiction to regulate the sale

and distribution of motor vehicles in Texas with the issue of the Board’s personal jurisdiction over

Prevost. Moreover, in contravention of the well-established standards of judicial review of agency

decisions, the majority improperly substitutes its own judgment for that of the Board on questions

committed to the Board’s discretion. For these reasons, I respectfully dissent.
The relevant issue is one of regulatory, not personal, jurisdiction

                In its pleadings to the Board, Prevost conceded that “[p]ersonal jurisdiction has

nothing to do with whether [it] violated the Code. As a matter of fact, [Prevost] is qualified to do

business in Texas and personal jurisdiction over it is obvious.” Because Prevost does not dispute

the Board’s personal jurisdiction, the only relevant issue is whether Prevost has engaged in business

as a dealer in Texas. The majority overlooks this concession, focusing instead on whether the Board

could properly assert personal jurisdiction over Prevost. Thus, as a matter of law, the majority

applies the wrong analysis.

                The legislature granted the Board “exclusive original jurisdiction” and authority to

regulate the business of selling and distributing motor vehicles because “[t]he distribution and sale

of motor vehicles in this State vitally affects the general economy of this State and the public interest

and welfare of its citizens.” Tex. Rev. Civ. Stat. Ann. art. 4413(36) §§ 1.02, 3.01 (West Supp. 2002)

(now codified at Tex. Occ. Code Ann. §§ 2301.001, .151 (West 2004)).1 Additionally, the

legislature has stated:


        It is the policy of this State and the purpose of this Act to exercise the State’s police
        power to insure a sound system of distributing and selling motor vehicles through
        licensing and regulating manufacturers, distributors, converters, and dealers of those
        vehicles, and enforcing this Act as to other persons, in order to provide for
        compliance with manufacturer’s warranties, and to prevent frauds, unfair practices,
        discriminations, impositions, and other abuses of our citizens.




        1
         In 2003, the motor vehicle commission code was codified in Chapter 2301 of the Texas
Occupations Code. For convenience, citation will be to the code as it existed at the time of the
Board’s decision.

                                                   2
Id. § 1.02 (now codified at Tex. Occ. Code Ann. § 2301.001 (West 2004)). This legislative policy

includes the protection of local governmental entities like the City of Beaumont. But the majority

fails to consider the significance of this comprehensive legislative mandate.

               Assuming without deciding that Prevost’s bid and offer to sell two buses to the City

qualifies as “engaging in business as a dealer,” the majority concludes that Prevost’s bid, standing

alone, is insufficient to subject Prevost to liability in Texas. In support of this conclusion, the

majority relies on the Texas Supreme Court’s decision in Michiana Easy Livin’ Country, Inc. v.

Holten, 168 S.W.3d 777 (Tex. 2005). The majority’s reliance on Michiana is misplaced. Michiana

concerned whether an out-of-state manufacturer could be forced to defend itself against a lawsuit

brought in the Texas courts by a Texas resident. Id. The issue in Michiana was expressly one of

personal jurisdiction. That is not the issue here. Prevost concedes that it is subject to the Board’s

jurisdiction. As a matter of law, then, the only relevant issue is whether Prevost’s conduct in

offering, negotiating, and contracting to sell two buses to the City falls within the Board’s

jurisdiction under the former motor vehicle commission code. The court’s decision in Michiana is

inapposite.


Prevost’s conduct falls squarely within the Board’s regulatory jurisdiction

               The issue in this case is whether Prevost engaged in business as a dealer in

Texas—the issue that the majority simply assumes without deciding. The record in this case

demonstrates that Prevost submitted a formal bid to the City and offered to sell the City two buses.

The record further reflects that the City accepted Prevost’s offer and, thus, the contract was formed

in Texas. Moreover, the City’s original purchase order reflects that the buses were to be delivered

                                                 3
to Beaumont. It was only after a representative of the Texas Department of Transportation inquired

about Prevost’s Texas dealers’ license information that the contract terms were changed to deliver

the buses to Prevost’s manufacturing facility in Roswell, New Mexico. The majority incorrectly

assumes that this after-the-fact amendment to the contract terms cures any previous violation of

Texas law.

               The former motor vehicle commission code does not define what it means to “engage

in business as a dealer” in Texas. Because the legislature has given the Board exclusive jurisdiction

to regulate the business of selling and distributing motor vehicles in Texas, it is the Board, not this

Court, that is entitled to define the meaning of that term, as well as the conduct that falls within the

scope of that term. See Tex. Rev. Civ. Stat. Ann. art. 4413(36) § 3.01(a) (now codified at Tex. Occ.

Code Ann. § 2301.151(a)). As the reviewing court, we defer to the Board’s reasonable interpretation

of the statute it is charged with enforcing. Southwestern Bell Tel. Co. v. Public Util. Comm’n, 863

S.W.2d 754, 758 (Tex. App.—Austin 1993, writ denied); Texas Ass’n of Long Distance Tel. Cos.

v. Public Util. Comm’n, 798 S.W.2d 875, 884 (Tex. App.—Austin 1990, writ denied). More

importantly, we do not, as the majority does here, substitute our judgment for that of the agency on

questions committed to the agency’s discretion.

               There is no question that the issue of whether Prevost has engaged in business as a

dealer in Texas is a question that has been committed to the Board’s discretion. The legislature has

delegated exclusive jurisdiction to the Board to regulate the sales and distribution of motor vehicles

in Texas. See Tex. Rev. Civ. Stat. Ann. art. 4413(36) §§ 1.02, 3.01(a) (now codified at Tex. Occ.

Code Ann. §§ 2301.001, .151). Notwithstanding this legislative choice, the majority impermissibly



                                                   4
substitutes its own judgment for that of the Board when it states, “We have already clarified that the

relevant fact for determining where Prevost engaged in business is the location of the title transfer,

not the location of the contract’s initiation or acceptance.” In doing so, the majority usurps the

Board’s roles as factfinder and decisionmaker and contravenes the legislative mandate that the Board

“exercise the State’s police power to insure a sound system of distributing and selling motor

vehicles.” See id. § 1.02 (now codified at Tex. Occ. Code Ann. § 2301.001).

               The Board’s interpretation of what it means to “engage in business as a dealer” in

Texas is reasonable. As the Board explained in Ford Motor Co., No. 00-0046-ENF (Motor Vehicle

Div. Mar. 29, 2001), aff’d, 264 F.3d 493 (5th Cir. 2001), a wide variety of activities may constitute

engaging in business as a dealer. Ford is relevant to the instant case only because the Board

describes the various activities that constitute “engaging in business as a dealer.” See id. In Ford,

as in this case, the Board found that “one who makes definitive offers for sale has engaged in

business as a dealer within the meaning of the [motor vehicle commission code].” See id.; see also

Prevost Cars (US) Inc., No. 02-0262-ENF (Motor Vehicle Div. June 5, 2003). The Board does not

look at each activity in isolation, but it examines the conduct in its entirety. See Ford Motor Co.,

No. 00-0046-ENF (Motor Vehicle Div. Mar. 29, 2001). Each transaction must be examined not as

a snapshot in time, as suggested by the majority, but on a continuum from beginning to end.

               In its attempt to distinguish Ford, however, the majority misapprehends the Board’s

holding. The majority attempts to distinguish Ford on the grounds that all of the activities in Ford

occurred in Texas and all of the cars offered for sale by Ford were already in Texas. This attempt

is unavailing because it ignores the Board’s mandate to examine the full range of activities that occur



                                                  5
in each transaction. Here, Prevost sent a bid to sell two buses to the City.2 Second, Prevost sent its

offer via U.S. mail to Beaumont, Texas. Third, the City accepted Prevost’s offer in Texas. The

contract was thus formed in Texas. Together, the Board determined these activities constituted

engaging in business as a dealer, and all of these activities occurred in Texas. Given the Board’s

exclusive jurisdiction to regulate the business of selling and distributing motor vehicles in Texas,

the Board acted well within its discretion to find that Prevost’s activities constituted “engaging in

business as a dealer” in Texas and in violation of the former motor vehicle commission code. The

Board’s interpretation of Prevost’s conduct is consistent with the Board’s jurisdiction under the

statute as well as its prior holding in Ford.

                The majority ignores the Board’s rationale and holding in Ford in favor of its own

application of the Uniform Commercial Code. In support of its opinion that the transaction in this

case occurred in New Mexico, not Texas, the majority looks to the UCC for the definition of “sale”

in section 2.106, as well as the provision relating to the passing of title in section 2.401. See Tex.

Bus. & Com. Code Ann. §§ 2.106, .401 (West 1994 & Supp. 2006). Noting that section 2.106

defines “sale” as “the passing of title from seller to buyer for a price,” id. § 2.106, and section 2.401

provides that title passes at the time performance is completed, which occurs upon delivery of the

goods, id. § 2.401(b), the majority concludes that because the City picked up the buses in New

Mexico, title passed in New Mexico and performance was completed in New Mexico; therefore, this

was a New Mexico transaction. By focusing only on the end of the transaction continuum, the


        2
          The majority characterizes Prevost’s bid as merely a “response to the City’s solicitation.”
While Prevost’s bid may have been a “response” in the general sense of that term, it was also an offer
to sell new motor vehicles—namely, two buses—to the City.

                                                   6
majority fails to consider Prevost’s activities at the beginning, much less Prevost’s activities as a

whole, as required under the statute and Ford.

               Nowhere in the former motor vehicle commission code or the current occupations

code does the legislature provide that the UCC controls the Board’s interpretation and enforcement

of the law. Likewise, the first comment to section 2.401 of the UCC states that section 2.401 “deals

with the issues between seller and buyer in terms of step by step performance or non-performance

under the contract for sale.” Id. § 2.401 cmt. 1 (emphasis added). Section 1.102 of the UCC

provides that two of the underlying purposes and policies of the UCC are “to simplify, clarify and

modernize the law governing commercial transactions” and “ to permit the continued expansion of

commercial practices through custom, usage and agreement of the parties.” Id. § 1.103(a)(1)–(2)

(West Supp. 2006). These provisions make clear that while the UCC may apply to and govern

commercial transactions between private parties, the UCC does not govern the Board’s authority to

regulate the sale and distribution of motor vehicles in Texas. And neither party argues that the UCC

governs the Board’s authority nor cabins its discretion.


There is substantial evidence in the record to support the Board’s determination

               Although the majority recites the applicable standards of review under the substantial

evidence rule, it gives only lip service to those standards, substituting its own judgment for that of

the Board. The correct substantial evidence rule test is whether the evidence as a whole is such that

reasonable minds could have reached the conclusion that the agency must have reached in order to

justify its action. Suburban Util. Corp. v. Public Util. Comm’n, 652 S.W.2d 358, 364 (Tex. 1983);

Dotson v. Texas State Bd. of Med. Exam’rs, 612 S.W.2d 921, 922 (Tex. 1981). Although substantial

                                                  7
evidence is more than a mere scintilla, the evidence in the record may preponderate against the

decision of the agency and nonetheless amount to substantial evidence. Texas Health Facilities v.

Charter Medical–Dallas, Inc., 665 S.W.2d 446, 452 (Tex. 1984).

               The record in this case reflects that Prevost not only engaged in business as a dealer

by offering to sell new motor vehicles to the City, but that Prevost did so in Texas when it sent its

bid to the City and the City accepted, thereby forming a Texas contract. Based on the record

evidence described above, reasonable minds could have reached the conclusion reached by the

Board. Because Prevost was not licensed as a dealer in Texas, reasonable minds could have

concluded that Prevost’s activities violated Texas law—namely, sections 4.01 and 5.04 of the former

motor vehicle commission code. See Tex. Rev. Civ. Stat. Ann. art. 4413(36) §§ 4.01(a), 5.04(a)

(West Supp. 2002) (now codified at Tex. Occ. Code Ann. §§ 2301.251(a)(1), .252(a) (West 2004)).

The record evidence is “more than a mere scintilla” and certainly constitutes substantial evidence

to support the Board’s order. See Charter Medical–Dallas, Inc., 665 S.W.2d at 452.

               In contrast, the majority’s view that Prevost’s post-contractual amendment to deliver

the buses in New Mexico somehow cures the pre-delivery violations of Texas law is unsupported

by the record. The record reflects that this was not a one-time occurrence, but rather a pattern of

conduct engaged in by Prevost to exploit the Texas bus market. The record evidence admitted in this

case includes a price/cost analysis prepared by the City in anticipation of its purchase of these two

buses from Prevost. In that analysis, the City notes that Prevost sold ten buses to Citibus in

Lubbock, Texas, on June 23, 2000, at a bid price of $254,934 each, and five RTS coaches on August

8, 2001, at a bid price of $258,934 each. In addition, DART in Dallas, Texas, purchased 110 RTS



                                                 8
coaches on February 9, 2001, at a bid price of $303,036 each, and Texas A&M University purchased

22 RTS coaches on July 21, 2001, at a bid price of $250,000 each. These sales alone total more than

$42.6 million. Although these particular sales were not before the Board, Prevost did not object to

the admission of this evidence, and the Board was entitled to consider it when making its decision

in this case. Even assuming that Prevost arranged for the delivery of all of these buses outside the

State of Texas, that does not detract from the fact that many of its activities in offering, negotiating,

and contracting to sell these buses occurred within the State of Texas.

                For the majority to allow Prevost’s after-the-fact attempted cure to override its

repeated efforts to circumvent the Texas licensing and regulatory requirements directly contravenes

the statute. Section 1.04 of the former motor vehicle commission code provides that “[a]n agreement

to waive the terms of this Act is void and unenforceable.” See Tex. Rev. Civ. Stat. Ann. art.

4413(36) § 1.04 (now codified at Tex. Occ. Code Ann. § 2301.003(b) (West 2004)). Yet, that is

exactly what the majority condones in its decision here.

                By allowing Prevost to structure the terms of its contract with the City to avoid

regulation by the Board, the majority encourages other out-of-state businesses to do the same. Such

a result will have ripple effects across the state in other contexts. For example, the tax code provides

that each corporation that “does business in this state” is subject to franchise taxes. Tex. Tax Code

Ann. § 171.001(a) (West 2002). Under the majority’s interpretation, an out-of-state business could

avoid state franchise taxes altogether simply by contracting for its Texas buyers to pick up their

purchases at the state line. In addition, under the insurance code, the legislature has specified that

the mere act of “making or proposing to make” an insurance contract constitutes engaging in the



                                                   9
business of insurance and subjects a party to regulation by the Texas Department of Insurance. Tex.

Ins. Code Ann. § 101.051 (West Supp. 2006). But, under the majority’s view, the Board should not

even consider where the contract was formed. Where, as here, the legislature has delegated

exclusive jurisdiction to regulate the sale and distribution of motor vehicles to the Board, the

majority must refrain from substituting its judgment for that of the agency.


                                          CONCLUSION

               Because the legislature charged the Board, and not this Court, with exclusive

jurisdiction to regulate the sales and distribution of motor vehicles in Texas and the record reflects

that the Board’s order was supported by substantial evidence, I would reverse the trial court’s

judgment and affirm the Board’s order.




                                               ___________________________________________

                                               Jan P. Patterson, Justice

Before Chief Justice Law, Justices Patterson and Puryear

Filed: September 26, 2006




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