### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

NO. 03-09-00548- CV

Ultim ate F ord, Inc., d/b /a Ultim ate F ord Giddings ; and Weatherby F ord, Inc.

d/b /a Ultim ate F ord, Appellan ts

v. MotorVehicle Division of the Texas De partm ent of Transp ortat ion and Ford Mot or Com pany, I nc., Appellees

DIRECT AP P EAL F ROM TH E MO TOR VEHI CLE DIVISI ON OF TH E TEXAS DEP ARTMENT O F TRANSP ORTATI ON

M E M O R A N D U M O P I N I O N

Ultimate For d, Inc. d/b/a Ult imate For d Giddings and Weatherby For d, I nc. d/b/a Ultimate For d (the Dea lerships) appea l a fi n al o rd er of the Motor Vehicle Division, Texas Depa

rtment of Transpor

tation (the Division), finding that g ood cause exis ted for For d Motor Company to terminate its fra nchise ag ree ments with the Dea lerships. The Dea lerships bring sever al 1 complaints on appea l that all cente r on the fac t that For d’s statutorily require d notice of termination
to the Dealerships was based on an outdated version o f t h e applicable statute. We will aff irm the Division’s order.

I n the interim, the leg islature has, eff ective November 1, 2009, transfe rre d the Division’s 1 functions to the newly cre ated Texas Depa rtment of Motor Vehicle s. See Act of May 18 , 2 0 0 9 , 81st L eg ., R.S., ch. 933, § 6.01(a) , 2009 Tex. Gen. L aws 2485, 2519. As it was the former Division that issued the orde r on appe al, we w ill refer to that entity

rathe r than its succe ssor for c larity

.BACK GR OUND The Dea lerships do not challeng e the Division’s finding s of underly ing fac t. These fin d i n gs ref

lect that betwee n 1999 and 2001, Mohammed Assadi acquir ed sole owner ship of
two fra nchised For d deale rships, Ultimate For d in Hubbar d (Hubba rd For d) and Ultima t e For d Giddings (Gidding s For d). Both Dea lerships encounte red financ ial distress for various rea sons. I n Marc h 2005, afte r Assadi’s floor plan lender , For d Motor Credit Company , notified Assadi that the Dea lerships wer e out of trust in the amount of $399,000, both Dea lerships filed bankruptc y petitions. Over the next eig hteen months, the Dea lerships wer e eac h in an d o u t of bankruptc y twice, and Hubbar d For d was twice seized and shut down for f ailure to pa

y local taxes. I n M ay 2006, the bankruptc y court authorized For d to beg in the proce s s of ter m i n at i n g t h e Dea lerships’ fra nchises. By letters dated J une 27, 2006, For d serve d Assadi with notices of termination for both Dea ler s h i ps. At rele vant times, section 2301.453 of the occupations code re quired the f ollowing of

For d: (a) Notwithstanding the terms of any fra nchise, a manufa cture r, d i s t ri butor, or repr esentative may not terminate or discontinue a fra nchise with a fra

nchised d ea l er . . . unless the manufa cture r, distributor, or repr esentative provides notice of the termination or discontinuance as require d by Subsection (c) and: (1) the manufa cture r, distributor, or re prese ntative re ceive s the dea ler’s informed wr itten consent; (2) the appropr iate time f or the de aler

to file a prote st under Subsection (e) has expired; or (3) the board makes a deter mination of g ood cause under Subsection (g ).

. . .

2(c) Ex cept as provided by Subsection (d), the m an u fa cture r, distributor, or repr esentative must provide written not ice by reg istered or cer tified mail to t h e d eale r and the board stating the specific g rounds for the termination or discontinuance . The notice must: (1) be rec eived not later than the 60th day befor e the eff ective date of the termination or discontinuanc e; and (2) contain on its first page a conspicuous statement that rea ds: “NOT I CE TO DEAL ER: YOU MA Y BE ENTI TL ED TO FI L E A PROTEST WI TH THE TEXAS MOTOR VEHI CL E BO ARD I N AUSTI N, TEXAS, AND HAVE A HEARI NG I N WHI CH YOU MAY PROTEST THE P R OP OSED TERMI NATI ON OR DI SCONTI

NUANCE OF YOUR FRANCHI SE UNDER THE TER MS OF CHAPTER 2301, OCCUPATI ONS CODE, I F YOU OPPOSE THI S ACTI ON.” (d) Notice may be provided not la ter than the 15th day befor e the eff ective date of termination or discont i n u an ce if a licensed deale r fails to conduct its customary

sales and service operations during its customary

business hours for se ven conse cutive business day s. . . .

Tex. Occ

. Code Ann. § 2301.453 (West 2004). The letters notified Assadi that the terminations 2

wer e based in part on “fa il u re to function in the ordinary course of business for more than

seven consec utive busin es s d ay s , an d inability of the Dea ler to meet debts as they mature.” The letter set an eff

ective date for the termination of fiftee n day s afte r As s adi’s rec eipt of the notice, subject to extensions if Assadi reque sted and pursued a confe renc e with For d’s Dea ler Policy Boa rd. At the top of eac h of For d’s notice-of -termination letters was printed the following :

We cite the curr ent version of t h e code unless there are materia l intervening substantive 2 chang es. 3NOTICE TO DEALER: YOU MAY BE ENTITL ED TO FILE A P ROTES T

WITH THE TEXAS MO TO R V EH I C LE C OM M I SS I ON I N A U ST IN, TEXAS AND HAVE A H E AR I NG IN WHICH YOU MAY P ROTES T THE P ROP OSE D TERMINATION OR NONCONT I NU ANCE OF YOUR F RANCHISE UNDER THE TERMS OF THE TE XA S MOT OR VEHICLE COMMISSION CODE IF Y OU OP P OSE THIS ACTION.

This notice di d n o t p rec isely confor m to the form of notice specifie d in section 2301.453(c) (2) of the occupations code, but differ ed in two respe ct s . Fi rs t, For d’s notice ref err ed to the “Motor Vehicle Commi ssion” rathe r than t h e “Mot or Vehicle Boa rd,” trac king a version of the notice require ment found i n the prede cessor statute, the motor vehicle commission code, prior to 1997. See Act of Ma

y 20, 1997, 75th L eg ., R.S., ch. 639, § 30, 1997 Tex. Gen. L aws 2183, 2199. Second, For d’s notice ref err ed to t h e fo rm er m o tor vehicle commission code, while the form of notice specified by st at u t e h ad been updated to ref er to chapte r 2301, occupations code, when the former code was repe aled and rec odified without intended substantive chang e in 2001. See Act of May 22, 2001, 77th L eg ., R.S., ch. 1421, §§ 5, 14, 2001 Tex. Gen. L aws 4570, 4920, 5020.

I ntere stingly , by the time of Fo rd ’s notices to the Dea lerships, the “motor vehicle board” —the entity ref

ere nced in the applicable occupations code version of the statute—no longe r exis ted. I n 2005, the leg islature had abolished the board and transfe rre d its functions to the
motor vehicle division of the Texa s Department of Transpor tation. See Act of May 30, 2005, 79th L eg ., R.S., ch. 281, §§ 7.01-.06, 2005 Tex. Gen. L aws 778, 839-40. 3

And, as previously noted, the leg islature later m o v ed t h o s e functions y et ag ain to the 3 depar tment of motor vehicles. 4After unsucce ssfully

appea ling the te rminations to Ford’s D eale r Policy Boa rd, the Dea lerships timely filed protest s o f the t erminations wit h the Divi sion. See Tex. Occ

. Code Ann. § 2301.453(d). A contested- case hear ing was held befor e a Division administrative law judge (AL J ), wh o issued a proposal for decision rec ommending that the Dea lerships’ fra nchise ag re em en t s be terminated. I n support, the AL J made finding s of fac t addre ssing the considerations set forth in section 2301.455, occupa tions code, and co n cl u d ed that g ood cause had been established for termination of the fra nchises. See id. §§ 2301.454(d), .455 (West 2004). Additionally , the AL J found:

84. For d’s notices of termination identified the Texas Motor Vehicle Commi ssion rathe r than the Texas Motor Vehicle Boa rd, as the ag ency with which a te rmination protest should be filed. 85. Fo rd ’s notices of termination ref err ed to the Texas Motor Vehicl e Commi ssion Code, rathe r than Chapter 2301 of the Texas Occ upations Code, as the g overningstatute.

I n light of these finding s, the AL J conclude d that “F ord Motor Company ’s notice[s] of termination fail to comply with the require ments of Tex. Occ

. Code Ann. § 2301.453(c) .” The AL J further

rec ommended that the Division order that For d “ce ase and desist from failure to comply with the require ments of Tex. Occ

. Code Ann. § 2301.453(c) (2).” The AL J did not, howeve r, deter mine
t h at this non-complianc e should alter the Division’s ruling reg arding termination of the fra nchise a g ree ments.

T h e Di v i s i on’s direc tor amende d two of the AL J ’s proposed conclusions of law
to corr ect ty

pog raphic al err ors and, as amende d, adopted the AL J ’s proposed finding s, conclusions,

5and rec ommendations in their entirety

. The direc tor order ed that t h e De aler ships’ fra nchise ag ree ments would terminate on the date afte r the order beca me final and that For d “s h al l cea se and desist from failure to comply with the require ments of Tex. Occ

. Code Ann. § 2301.453(c) (2).”

After filing a motion for re h ea ri ng with the direc tor, which was denied, the Dea lerships soug ht judicial revie w in Travis County district court. For d subsequently remove d the proce eding to this C ourt. See Tex. Occ. Code Ann. § 2301.751( b) (West 2004).

ANALYSIS The Dea lerships do not challeng e the Division’s finding s an d conclusions that g ood cause exis ts to terminate their fra nchises, but bring a single issue complaining that their substantial rig hts wer e nonetheless prejudice d beca use For d’s notice letters did not, as the Division found, prec isely t ra ck the lang uag e specifie d in occupa tions code section 2301.453(c) (2), but identified the “Te x as Motor Vehicle Commi ssion” rathe r than the “Te x as Motor Vehicle Boa rd” as the ag ency

with which to file their pr otests, and identified the “ Texas Motor V ehicle Commission Code” rathe r than “Chapter 2301, Occ upations Code” as the g overning statut e. The Dea lerships emphasiz e t h at the leg islature repe atedly used the word “must”—a term denoting a condition prec edent—in requiring that a manufa cture r provide the notice specifie d in subsection (c) (2) befor e terminating a fra

nchised deale rship. See Tex. Gov’t Code Ann. § 311.016(3) (West 2005) (“‘ [m ]ust ’

cre ates or rec og nizes a condition prec edent.” ); Helena Chem. Co. v. W i lkins , 47 S.W .3d 486, 493 (Tex. 2001) (citing section 311.016). The Dea lerships emphasize the following statutory lang uag e:

6(a) Notwithstanding the terms of any fra nchise, a m anufacturer , distributor, or repr esentative m ay not ter m inate or discontinue a fran ch i s e with a franchised dealer

. . . unl ess the m anufacturer , distributor, or repr esentative provides notice of the term inati on or discontin uance as r eq u i r ed by Subs ection (c) and: (1) the manufa cture r, distributor, or re prese ntative re ceive s the dea ler’s informed wr itten consent; (2) the appr opriate time f or the dea ler to file a

protest under

Subsection (e) has expired; or (3) the board makes a deter mination of g ood cause under Subsection (g ).

. . . (c) Ex cept as pro v i ded by Subsection (d), the m anufacturer , distributor, or repr esentative m ust provide writt en notice by reg istered or cer tified mail to the dealer and the board stating the specific g rounds for the t erm i n at i o n o r discontinuance

. The notice m ust : (1) be rec eived not later than the 60th day befor e the eff ective date of the termination or discontinuanc e; and (2) contain on its first page a conspicuous statem ent t hat reads: “NOTICE TO DEALER : Y OU MAY BE ENTITLED TO FILE A PROTEST WITH THE TEXAS MOTOR V EHIC LE BOARD IN AUSTIN, TEXAS

, AND HAV

E A HEAR ING IN WHICH Y OU MAY PROTEST THE PROPOSED TE R M INATION OR DISCO NTINUANCE OF Y

OUR FRA NCHISE UNDER THE T E R MS OF CHAPTE

R 2301, OCCUPATIONS CODE, IF Y OU OPPOSE THIS A CTION.”

Tex. Occ

. Code Ann. § 2301.453 (empha sis added)

. T h e De aler ships further emphasize that this Court in B u d

d y Gregg Motor Homes, Inc. v. Motor Vehicle Board upheld a motor vehicle board

o rd er t h at a manufa cture r’s letter to a deale r threatening termination constituted an ineffe cti v e termination beca

use the letter “d[id] no t satisfy all of the statutory require ments.” 179 S.W .3d

75 89, 596, 605-07 (Tex. App.—Austin 2005, pet. denied)

. Fr om this, the Dea lership s co n cl u d e

that “[ e] ac h attempted noti ce of termination of a deale rship fra nchise MUST contain the EXACT word-f or-wor d langu ag e of an unambiguous st atutory disclaimer that was care fully draf ted by the leg islature and included in the statute,” that For d’s failure to comply rende red its termination letters ineffe ctive, and that the Division’s order there fore violated the occupations code, exceede d the Division’s a

uthority , resulted from “improper proce dure,” contained an err or of law, was an abuse of the Division’s discretion, and was not s upported by substantial evidenc e—in short, require s

re v ersal under ever

y cate g ory of err or listed in the APA’s definition of the substantial-ev i d en ce standard of revie w —in failingto enfor ce “the st atutory notice provision as a condition prec edent 4 to termination.” We disag ree .

Statutory construction prese nts que stions of la w that we r eview de novo. See State v. Shumak

e , 199 S.W .3d 279, 284 (Tex. 2006). Our primary objective in statutory

construction is
to g ive eff

ect to the leg islature’s intent. Id

. We seek that intent “first and fore most” in the statutory text

. Lexington Ins. Co. v. Strayhorn , 209 S.W .3d 83, 85 (Tex. 2006). We rely on the plain meaning

o f t h e text , unless a differ ent meaning is supplied by leg islative definition or is appar ent fr o m context, or unless such a construction leads to absurd results. City of Rock wall v. Hughes ,

See Tex. Gov’t C ode Ann. § 2001.174 (West 2 0 0 8 ) (re viewing court may not substitut e 4 its judgme nt on the weig ht of the evidenc e on q u es t i o n s committed to the ag ency ’s discretion, but must reve rse and rema nd the ag ency decision if the appellant’ s substantial rig hts have been prejudice d beca

use the ag ency ’s finding s, infere nces, conclusions, or decisions (1 ) v i o l ate a constitutional or statutory provision; (2) exceed the AL J ’s statutory aut h ority ; (3) wer e made throug h unlawful proce dure; (4) wer e aff ecte d by other err or o f l aw; (5) are not rea sonably supported by substantial evidenc e considering the reliable and probative evidenc e in the rec ord as a whole; or (6) are arbitra

ry or capr icious or char acte rized by abuse of discretion or clea rly unwar rante d exercise of discre tion). 8246 S.W .3d 621, 625-26 (Te x . 2008); see Tex. Gov’t Code Ann. § 311.011 (West 2005) (“ Words

and phrase s shall be rea d in context and construed acc ording to the rules of g rammar and common usag e.”)

. Howeve r, with reg ard to a s t at u t e that an ag ency is char g ed with enfor cing , we g ive “ser ious considera

tion” to the ag ency ’s construction of it, so long as that construction is rea sonable and consistent with the statutory lang uag e. See First Am. Titl e Ins. Co. v. Combs , 258 S.W .3d 627, 632 (Tex. 2008).

Although the Dea lerships are corr ect that “must” used in a code denotes a condition prec edent, see Tex. Gov’t Co d e Ann. § 311.016(3), it does not nece ssarily follow that, as the Dea lerships assume, any non-complianc e with the notice require ments by For d must automatically invalidate the Division’s ultimate g ood-ca use deter mination. To deter

mine the conseque nces of

a failure to satisfy a condition prec edent, we look to the legislative intent ref lected in the statute. See Helena Chem Co. , 47 S.W .3d at 49 4 -9 6

. Oc cu p ati ons code 2301.453 does not specify any particula r conseque nces if, as here , a termination notice does not prec isely trac k the form of notice in section 2301.453(c) (2). Thus, we look to that require ment’s underly ing purposes. See id. at 495. The evident purposes of this require ment is to ensure that a deale r fac ing termination is notified of its statutory rig hts to protest the termination and obtain a hear ing, and how to do so. The Division’s finding s and the re cord r efle ct that those purpose s were satisfied her e.

At the t o p o f eac h of For d’s letters was an all-ca ps, boldfac e notice informing the Dea lership of its rig hts to “ F ILE A P ROTES T WITH THE TEXAS MOTOR VE H ICLE COMMISS

ION [RATHER T H AN ‘BOARD’] IN AUSTIN, TEXAS, AND HAVE A HEARING IN WHIC H YO U MAY P ROTES T THE P ROP OSE D TERMINATION

9OR DISCONTINUANCE OF YOUR F RANCHISE UNDER THE TERMS OF THE

MOTOR V

EHIC LE CODE [RATHER THAN ‘CHAP TER 2301, OCCU P A TI ON S CODE’] IF YOU OP P OSE THIS ACTION .” T h e l etters also specifie d the g rounds for termination. See Tex. Oc c. Code Ann. § 2301.454(c)

. These letters prompted the Dea lerships to file protests of the terminations, which t h ey did timely , with the corr ect ag ency , and with citations to the corr ect g overningstatute (the occupations code ), and the Dea lerships went on to par ticipate vig orously

in the ensuing contested- case hear ing. There is no contention that any defe ct in th e ab o v e notices prejudice d the Dea lerships’ abilities to asser t their protest rig hts. I n fac t, the form lang uag e specifie d in the occupations code, like the lang uag e in F ord’s notice, also inac curately identified the a g ency with which the protest was to be filed. Whil e the corr ect entity was the Division, For d identified the ag ency as the “Motor Vehicle Commi ssion,” and the occupations code identified the ag ency as the “Motor Vehicle Boa

rd.” Despite these inacc urac ies, the Dea lerships manag ed to file their protests with the corr ect e ntity

—the Division. On this re co rd, we conclude that the Division’s decision that any defe ct in For d’s notice-of -termination letters did not rende r For d’s termination or the Division’s proce eding s invalid under the occupations code was rea sonable and consistent wit h t h e s tatute, and that we should defe r to it. See First Am. Titl e Ins. Co. , 258 S.W .3d at 632; Helena Chem Co. , 47 S.W .3d at 494-96. Contrary to the Dea lership’s arguments, Buddy Gr eg g d o es not stand for the proposition that any and all deviations from the statutory form of notice rende r a manufa cture r’s termination letter ineffe ctive as a

matter of la

w.

10Buddy Gregg involved a deter iorating relation s hip betwee n a motor home

manufa cture r (L iberty Coach) and a motor home deale r (B uddy Gre g g ). At one point, L iberty Coach
sent Buddy Gre g g a letter threa tening to terminate its franchise ag ree ment unless Buddy Gre g g ag ree d to numerous modifications of the ag ree ment within twenty -four hours. See id. at 596. As this Court observe d, “[t] he letter did not satisfy the require ments o f the occupations code” for a termination: “it did not contain the ‘notice to de aler ’ termination languag e”—i.e ., “a conspicuous
statement on the first pag e notify ing the deale r of its rig ht to protest the termination and have a hear i ng befor e the Boa

rd”—“ it was not sent to the Boa rd, and it did not specify the g rounds for termination.” Id. at 594, 596; cf. Tex. Occ

. Code Ann. § 2301

. 4 5 4(c)

. There afte r, the parties continued to neg o t i at e t h ei r ag ree ment and conduct business toge ther. Howeve r, afte r litigation

arose , Buddy Gre g g took the position that L iberty Coach’s letter was an unlawful termination of the ag ree ment. See Buddy Gregg , 179 S.W .3d at 596. The Boa rd eventua lly deter

mined that the letter instead constituted an ineffective termination attempt. See id. at 605-07. We g ave defe renc e to the Boa rd’s c onstruction of t he occupations code a s rea sonable a nd not inconsistent with the statute’s plain meaning

. See id. at 610 n.13 (citing Tarra n t A p p r a i s a l Dist. v. Moore ., 845 S.W .2d 820, 823 (Tex. 1993)).

I n sum, o u r h o l d i ng in Buddy Gregg was mere ly that, on that rec ord, the Boa rd’s construction of the occupa tions code to deter

mine the leg a l e f

f e c t o f L ib e r

ty Coa ch’s non-complianc e

was rea sonable, not inc onsistent with the statute’s plain meaning , and entitled to de fer ence . Her e,

as previously explained, the rec ord is vastly dif fe re n t , an d the ag ency rea ched a differ ent result when deter

mining the leg al eff

ect of a manufact u rer’s non-complianc e with occupations code

11section 2301.453. None theless, we should, just as i n Buddy Gregg , g ive defere nce to the B oard’ s

construction of the occupa tions code reg arding the conseque nces of that non-complianc e for the

same re asons. The Dea lerships’ arguments are eac h premised on the co n t en t i on that beca use For d’s notice-of

-termination letters wer e found n ot to have complied with occupa tions code section 2301.453(c)(2) , it follows that the Division committ ed ea ch ca teg ory of er ror identified in g overnme nt code section 2001.174 in proce eding to find g ood cause for For d to terminate the fra nchises. Ha

ving r ejec ted that cor e conte ntion, we over rule the D eale rships’ sole issue.

CONCLUSION Havingoverr

uled the De aler ships’ sole issue, we a ffirm the D ivision’s order.

__________________________________________ Bob Pembe rton, J ustice Be fore Chief J ustice Jones, J ustices Pury ear and Pember

ton Affir med Filed: August 27, 2010

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