Title: WYOMING DEPARTMENT OF TRANSPORTATION v. LEGARDA

State: wyoming

Issuer: Wyoming Supreme Court

Document:

WYOMING DEPARTMENT OF TRANSPORTATION v. LEGARDA2003 WY 13077 P.3d 708Case Number: 02-191Decided: 10/15/2003

 

                                                                                                            
­­­ 

 

STATE 
OF WYOMING, ex rel.,

DEPARTMENT 
OF TRANSPORTATION,

 

Appellant(Respondent)

 

v.

 

SAMUEL 
LEGARDA, d/b/a

LARIS 
AUTO SALES,

 

Appellee(Petitioner).

 

 

Appeal 
from the District Court of Fremont County

The 
Honorable Nancy Guthrie, Judge

 

Representing 
Appellant:

            
Hoke MacMillan, Attorney General; John W. Renneisen, Deputy Attorney 
General; and 
Mary Loos, Assistant Attorney General 

 

Representing 
Appellee:

            
Robert O. Anderson of Robert O. Anderson, P.C., Riverton, Wyoming 

 

 

Before 
HILL, C.J., and GOLDEN, LEHMAN, KITE, and VOIGT, JJ.

 

 

            
KITE, Justice.

 

[¶1]      The State of 
Wyoming ex rel. Department of Transportation (DOT) revoked a Wyoming automobile 
dealer's license because the dealer violated certain statutes and regulations 
governing automobile sales.  The 
Office of Administrative Hearings (OAH) upheld the revocation.  On a petition for review, the district 
court reversed OAH, holding further regulations were necessary to specify the 
circumstances that would merit a license revocation.  We affirm but on different grounds than 
those relied upon by the district court.  

 

 

 

[¶2]      The question for 
our review is whether the OAH order must be set aside as arbitrary and 
capricious because it fails to adequately explain the basis for revocation of 
Laris Auto Sales' license.1 

 

 

 

[¶3]      Mr. Legarda, 
doing business as Laris Auto Sales (Laris), was in the used car business in 
Wyoming for nearly twenty years.  On 
April 3, 2000, the Fremont County Clerk contacted the DOT compliance 
investigation department concerning complaints she had received from individuals 
who were unable to obtain titles after purchasing used vehicles from Laris.  The county clerk asked DOT to look into 
the matter.

 

[¶4]      On May 3, 2000, 
DOT Compliance Investigator Kenny Roylance conducted a compliance review at 
Laris.  He found that Laris violated 
the following statutory provisions:  
Wyo. Stat. Ann. § 31-11-107(a) (LexisNexis 2003) requiring all records to 
be maintained at the principal place of business and all vehicles on the lot to 
be listed on the daily record; Wyo. Stat. Ann. § 31-16-103 (LexisNexis 2003) 
requiring copies of invoices, title reassignment papers, and odometer and damage 
statements to be provided to the purchaser and temporary license permit stubs to 
be forwarded to DOT; Wyo. Stat. Ann. § 31-2-104(d)(iii) (LexisNexis 2001) 
(repealed 2003) requiring delivery of certificates of title within ten days of 
purchase; and Wyo. Stat. Ann. § 31-16-126(b)(iv) (LexisNexis 2003) allowing a 
dealership to provide a full-use license plate for display on vehicles in the 
dealership's possession.  Based upon 
these violations, Mr. Roylance recommended revocation of Laris' dealership 
license and forfeiture of its bond pursuant to Wyo. Stat. Ann. § 31-16-103(c)(i) 
(LexisNexis 2003) and Chapter 5, Section 4(b) of the DOT rules and 
regulations.    

 

[¶5]      By letter dated 
August 10, 2000, DOT provided Laris notice of its intent to institute 
proceedings to revoke its license and forfeit its bond.  Although no such request appears in the 
record, Laris apparently requested a hearing, and a hearing was held before OAH 
on August 3, 2001.  At the hearing, 
Laris admitted many of the failures in the documentation but testified through 
Mr. Laris they were due to the actions of one employee who was fired as soon as 
the failures were known.  

 

[¶6]      Following the 
hearing, both parties submitted findings of fact and conclusions of law.  OAH entered an order on September 24, 
2001, finding DOT's compliance review indicated certain failings in Laris' 
paperwork constituting violations of DOT statutes and rules, including that some 
records were at the accountant's office and not stored on site as required, four 
vehicles on site were not listed on the daily record, and DOT investigators were 
not able to determine the exact number of vehicles owned by Laris due to 
inadequate records.  Based on the 
evidence presented at the hearing, the OAH order found only that a temporary 
license permit record was not available, certain title documents for a 1986 
Mercury Sable were still in the dealer's possession, and numerous temporary 
license permit stubs were not timely forwarded to DOT.  OAH also found that, when Laris was 
inspected just over a year later, no violations were found.  Based upon these findings, OAH concluded 
Laris failed to provide a certificate of title to a purchaser of a vehicle 
within the time required pursuant to Wyo. Stat. Ann. § 31-2-104(a)(iii) 
(LexisNexis 2001) (repealed 2003), failed to keep and maintain at its place of 
business a permanent legible daily record of all vehicles as required by  § 31-11-107(a) and failed to properly 
maintain a written record in numerical sequence of every temporary license 
permit issued in compliance with Chapter 5, Section 8(e) of the Wyoming DOT 
Vehicle Dealers Rules.  Based upon 
these violations and DOT's discretion to revoke licenses when violations are 
found, OAH upheld DOT's proposed revocation of Laris' dealer license and bond 
forfeiture.  

 

[¶7]      Laris filed a 
petition for review in the district court pursuant to W.R.A.P. 12.01, claiming 
the OAH order was unsupported by substantial evidence, arbitrary, capricious, an 
abuse of discretion, and otherwise not in accordance with the law and the facts 
presented.  The parties filed briefs 
and presented oral argument, and, on July 9, 2002, the district court entered an 
order reversing the OAH order.  

 

[¶8]      In its order, the 
district court quoted § 31-16-103(c) and Chapter 5 of the DOT rules and 
regulations, which provide respectively that DOT "may" suspend or revoke a 
license for specified statutory violations and such violations "may" result in 
forfeiture of the bond.2  The district court then stated in 
pertinent part:

 

[I]t 
is impossible for this Court or any court to review the decision made by the 
Department.  The regulation and 
statute provide no "measuring stick" by which the courts can determine if the 
Department even handedly applies these sections.  The statute provides that the Department 
may suspend or revoke, yet there seems to be no guidance as to when the 
Department suspends rather than revokes a license.  Similarly, the bond regulation provides 
no guidance as to when the full bond is forfeited.  In other words, without further defining 
factors or standards the Department could decide in one case to only forfeit the 
bond, while in another similar case the Department could suspend the license 
while leaving the bond in place, or perhaps forfeit the bond and revoke the 
license.  In this case, there is no 
way for this Court to determine if action taken against the Petitioner is in 
fact appropriate, and any affirmance of the Department's action would simply be 
rubber stamped.  This Court is 
satisfied that, in the absence of regulatory standards, W.S. § 31-16-103(c) and 
Chapter 5 § 5(b) of the D.O.T. regulations are too amorphous to permit judicial 
review of the action of the D.O.T.  
Consequently, any such action inherently is arbitrary and 
capricious.  See e.g. 
Matter of Bessemer Mt., 856 P.2d 450 (Wyo. 1993).

 

The 
district court reversed the OAH order and "remanded for further determination to 
be made in the light of standards encompassing appropriate criteria and factors" 
for the sanctions adopted in the DOT rules and regulations.       

 

 

 

[¶9]      Our review is 
governed by Wyo. Stat. Ann. § 16-3-114(c) (LexisNexis 2003), which 
provides:

 

(c)  To 
the extent necessary to make a decision and when presented, the reviewing court 
shall decide all relevant questions of law, interpret constitutional and 
statutory provisions, and determine the meaning or applicability of the terms of 
an agency action.  In making the 
following determinations, the court shall review the whole record or those parts 
of it cited by a party and due account shall be taken of the rule of prejudicial 
error.  The reviewing court 
shall:

 

. 
. . .

 

(ii)  Hold 
unlawful and set aside agency action, findings and conclusions found to be:  

 

(A)  Arbitrary, 
capricious, an abuse of discretion, or otherwise not in accordance with 
law;

. 
. . .

 

(E)  
Unsupported by substantial evidence in a case reviewed on the record of an 
agency hearing provided by statute.

 

[¶10]   Our review is further governed by 
the following standards:

 

We 
do not afford any special deference to the district court's decision when we 
review a matter initiated before an administrative agency.  Rather, this court reviews the case as 
if it came directly from the administrative agency.  Our review must focus on the evidence 
and consider the reasonableness of the agency's exercise of judgment while 
determining if the agency committed any errors of law.  If the agency committed any errors of 
law, this court must correct them.

 

            
Further, in appeals where both parties submit evidence at the 
administrative hearing, appellate review is limited to application of the 
substantial evidence test.  This 
court is required to review the entire record in making its ultimate 
determination on appeal.  The 
substantial evidence test to be applied is as follows:

 

            
"In reviewing findings of fact, we examine the entire record to determine 
whether there is substantial evidence to support an agency's findings.  If the agency's decision is supported by 
substantial evidence, we cannot properly substitute our judgment for that of the 
agency and must uphold the findings on appeal.  Substantial evidence is relevant 
evidence which a reasonable mind might accept in support of the agency's 
conclusions.  It is more than a 
scintilla of evidence."  Newman 
[v. State ex rel. Wyoming Workers' Safety and Compensation Division, 
2002 WY 91], ¶12[, 49 P.3d 163, ¶12 (Wyo. 2002)] (quoting State ex rel. 
Workers' Safety and Compensation Div. v. Jensen, 2001 WY 51, ¶ 10, 24 P.3d 1133.  ¶ 10 (Wyo. 
2001).

 

            
Even when the factual findings are found to be sufficient under the 
substantial evidence test, . . . this court may be required to apply the 
arbitrary and capricious standard as a "safety net" to catch other agency action 
which prejudiced a party's substantial right to the administrative proceeding or 
which might be contrary to the other WAPA review standards.   

 

Bryant 
v. State ex rel. Department of Transportation, 
2002 WY 140, ¶¶9-11, 55 P.3d 4, ¶¶9-11 (Wyo. 2002) (some citations 
omitted).  To survive judicial 
review, the record of a contested agency action must contain such factual 
findings as would permit a court to follow the agency's reasoning from the 
evidentiary facts on record to its eventual legal conclusions.  Newman v. State ex rel. 
Wyoming Workers' Safety and Compensation Division, 2002 WY 91, ¶16, 49 P.3d 163, ¶16 (Wyo. 2002).  
Similarly, a contested case hearing must provide, and the record of that 
proceeding must document, information sufficient to the making of a reasonable 
decision.  Absent such information, 
the agency decision must be set aside.  
Id.

 

 

 

[¶11]   DOT contends the district court's 
order must be reversed because substantial evidence was presented to support 
revocation of Laris' license and forfeiture of its bond.  DOT further asserts proof of Laris' 
violations of statutory provisions and DOT rules and regulations is all that is 
necessary to warrant revocation and, contrary to the district court's ruling, no 
"measuring stick" or additional standards were required.  The statutory provision authorizing 
license revocation and the rule allowing bond forfeiture are not, DOT claims, 
"too amorphous to permit judicial review" as the district court found.  Laris counters DOT's claims by arguing 
essentially that the district court's conclusions are correct and the OAH order 
is arbitrary, capricious, an abuse of discretion, not in accordance with the 
law, and not supported by substantial evidence.  

 

[¶12]   We hold the OAH order must be set 
aside but reach that conclusion for reasons different than those relied upon by 
the district court.  Unlike the 
district court, we do not conclude the statutory provision and agency rule 
authorizing revocation and forfeiture are too vague to permit judicial review, 
nor do we conclude DOT must establish standards clarifying the circumstances 
when revocation is warranted.  
Rather, we conclude the OAH order does not contain sufficient factual 
findings to enable this Court to understand the basis for the hearing examiner's 
conclusion that Laris' violations warranted revocation of its dealership license 
rather than suspension or some other lesser punishment.  That is, we hold the record does not 
contain such factual findings as would permit us to follow the agency's 
reasoning from the evidentiary facts on record to its eventual legal 
conclusions.  Newman, 2002 WY 
91, ¶16.  

  

[¶13]   Wyo. Stat. Ann. § 16-3-110 
(LexisNexis 2003) sets forth an agency's duty to support its action with 
sufficient factual findings:

 

            
A final decision or order adverse to a party in a contested case shall be 
in writing or dictated into the record.  
The final decision shall include findings of fact and conclusions of law 
separately stated.  Findings of fact 
if set forth in statutory language, shall be accompanied by a concise and 
explicit statement of the underlying facts supporting the findings. 

 

We 
have said:

 

In 
discharging its duty under § 16-3-110, the agency must "make findings of basic 
facts upon all of the material issues in the proceeding and upon which its 
ultimate findings of fact or conclusions are based."  Pan American Petroleum Corporation v. 
Wyoming Oil and Gas Conservation Commission, 446 P.2d 550, 555 
(Wyo.1968).  This Court needs to 
know "why" an agency decided the way it did.  When an agency does not make adequate 
findings of basic fact, we do not have a rational basis upon which to review its 
ultimate findings and conclusions.

 

Scott 
v. McTiernan, 
974 P.2d 966, 969 (Wyo. 1999) (citations omitted); see also Mayland v. 
Flitner, 2001 WY 69, ¶13, 28 P.3d 838, ¶13 (Wyo. 2001).  It is insufficient for an administrative 
agency to state only an ultimate fact or conclusion.  Each ultimate fact or conclusion must be 
thoroughly explained in order for a court to determine upon what basis the 
ultimate fact or conclusion was reached.  
Billings v. Wyoming Board of Outfitters and Guides, 2001 WY 81, 
¶13, 30 P.3d 557, ¶13 (Wyo. 2001).  
When an agency does not set forth the reasons for its actionsthat is, 
when its findings are conclusorythis Court cannot uphold its decision.  Juroszek v. City of Sheridan 
Board of Adjustment, 948 P.2d 1370, 1373 (Wyo. 1997); Basin Electric 
Power Cooperative, Inc. v. Department of Revenue, State of 
Wyoming, 970 P.2d 841, 854 (Wyo. 1998).    

 

[¶14]   In the present case, it is clear 
from the findings of fact in the order that OAH found Laris violated certain DOT 
statutes and regulations.  While we 
do not question the validity of those findings, we do observe their relatively 
minor nature.  Nothing in the record 
indicates Laris had a history of such violations despite its many years of 
operation in Fremont County.  While 
the violations may have resulted in minor inconveniences to those who purchased 
automobiles from Laris, no one alleged Laris was acting fraudulently or 
intentionally trying to take advantage of its customers.  Following the compliance review, a 
follow-up inspection revealed no violations.  Yet, DOT proposed revoking the license 
and forfeiting the bond, thus putting Laris out of business permanently.  What is not clear from the findings, and 
what is not apparent anywhere in the record before us, is the reason for the 
decision to revoke Laris' license rather than suspend or take some other less 
drastic action to obtain compliance.  
There is quite simply nothing in the record indicating what facts 
supported imposition of the most severe penalty available.  Under these circumstances, the OAH order 
cannot stand absent further findings explaining the reasons why revocation, 
rather than suspension or some other lesser penalty, is warranted.  Scott, 974 P.2d 966; 
Billings, 2001 WY 81, ¶13.    

 

[¶15]  In our review of cases arising from 
agency action, we have held that clear and convincing evidence is required in 
proceedings against a licensee involving allegations of quasi-criminal 
wrongdoing and potential loss of a license to engage in a business or 
livelihood.  Billings, 2001 
WY 81, ¶11; Painter v. Abels, 998 P.2d 931, 941 (Wyo. 2000).  That standard applied in this case.   On remand by the district court, 
OAH must make further findings to clarify what clear and convincing evidence 
justified revocation of Laris' license. 

 

The 
district court's order is affirmed with instructions that, when it remands the 
case to OAH, it do so for proceedings consistent with this 
opinion.

 

FOOTNOTES

 

1In 
its statement of the issues, Laris claims the OAH erred in allowing evidence at 
the administrative hearing of nolo contendre pleas entered by Mr. Legarda to 
criminal charges filed against him as a result of the alleged violations.  Because Laris did not file a cross 
appeal, we decline to address the issue.

 

2Section  31-16-103(c) 
provides:

 

            
(c) The department may deny, suspend, revoke or refuse to renew a license 
issued under this act if it finds the person, applicant, vehicle dealer, 
salesperson, agent or Wyoming based manufacturer:

 

(i) 
Knowingly violated any rule, regulation or statute or any federal law regulating 
dealers and manufacturers, or any federal vehicle safety standards applicable to 
dealers or Wyoming based manufacturers; 

 

(ii) Knowingly made a materially false statement in applying for a 
license, demo plates, full use plates, temporary registration permits, or dealer 
reassignment documents used by the applicant;

 

                        
(iii) Failed to furnish or keep in force the required 
bond;

 

(iv) Has any previous administrative or criminal actions or has lost a 
civil action in this state or any other state relating to the conduct of the 
business license or applied for during the ten (10) years preceding the date of 
the application;

 

(v) 
Used or permitted the use of demo or full use plates in an unauthorized manner 
or for an unauthorized purpose;

 

(vi) Used or permitted the use of temporary registration permits in an 
unauthorized manner or for an unauthorized purpose.

 

Chapter 5, Section 4(b) of the DOT rules and regulations 
provides:

 

(b)  A finding by the 
department that the dealer or manufacturer practiced fraud; made any fraudulent 
representation; or violated any statute, rule, or regulation relating to the 
conduct of the business for which the dealer or manufacturer license is issued 
may result in forfeiture of the full amount of the surety 
bond.