Court Opinion

ID: 2875047
Source: CourtListenerOpinion
Date Created: 2015-09-06 05:57:02.442131+00
Date Added: 2024-06-11T12:33:07.364629
License: Public Domain

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

                                      NO. 03-05-00290-CV

                                Ford Motor Company, Appellant

                                                 v.

            Motor Vehicle Board of the Texas Department of Transportation and
                          Metro Ford Truck Sales, Inc., Appellees

                  DIRECT APPEAL FROM THE MOTOR VEHICLE BOARD
                  OF THE TEXAS DEPARTMENT OF TRANSPORTATION

                            MEMORANDUM OPINION

               Ford Motor Company appeals from the order by the Motor Vehicle Board of the

Texas Department of Transportation fining Ford $10,000 for improperly resisting the transfer of the

Ford truck sales franchise assigned to Metro Ford Truck Sales, Inc. We conclude that the Board’s

order must be reversed because of the Board’s failure to give proper effect to a previous decision in

a related case by this Court. Accordingly, we reverse the Board’s order and remand this cause for

further proceedings.

               This cause is part of a long-running dispute between Ford and Metro, a Ford

franchisee.1 In 1995, Ford attempted to terminate Metro’s franchise. Metro protested, prompting

       1
           A more detailed history of the dispute between these companies is set out in a previous
opinion by this Court in a related cause. See Ford Motor Co. v. Motor Vehicle Bd., 21 S.W.3d
744, 748-54 (Tex. App.—Austin 2000, pet. denied). Other aspects of the overall dispute are also
set out in separate opinions issued along with this one. See Sterling Truck Corp. v. Motor Vehicle
Bd., No. 03-05-00288-CV (Tex. App.—Austin May 1, 2008) (Metro V); Freightliner Corp. v. Motor
Vehicle Bd., 03-05-00289-CV (Tex. App.—Austin May 1, 2008) (Metro I).
a proceeding before the Board to determine whether Ford had good cause to terminate the franchise

(Metro I). See Tex. Occ. Code Ann. § 2301.453 (West 2004). That protest triggered entry of a

statutory stay that prevented the parties from committing any act or omission that would affect a

legal right, duty, or privilege of any party before the Board. Id. § 2301.803 (West 2004). In 1998,

the Board found that Ford had good cause to terminate the franchise, but imposed conditions

on the termination—including that Ford allow Metro to sell the franchise. The district court

affirmed the good cause finding, reversed the imposition of conditions on the termination

as unlawful, and remanded for further proceedings. This Court affirmed the district court’s

judgment. Ford Motor Co. v. Motor Vehicle Bd., 21 S.W.3d 744, 748-54 (Tex. App.—Austin 2000,

pet. denied). The supreme court denied review on April 5, 2001.

               Also in 2001, Metro proposed selling its franchise to the Cox Group. Ford opposed

the sale—in part because of the judicially affirmed finding that Ford had good cause to terminate

the franchise and in part because of alleged deficiencies in both the transfer application and the

Cox Group’s qualifications. A motor vehicle manufacturer may not unreasonably prohibit the sale

of a franchise. Tex. Occ. Code Ann. § 2301.359(e) (West 2004); see also id. § 2301.458

(West 2004). The manufacturer must state in writing its reasons for opposing the transfer. Id.

§ 2301.359(d). A dealer whose transfer is rejected may file a protest with the Board. Id. § 2301.360

(West 2004). The manufacturer must then establish that the proposed transferee is not qualified.

Id. If the Board finds that the proposed transferee is qualified, the transfer is effected by law.

                                                 2
Id. § 2301.360(c). After Ford rejected the proposed transfer, Metro filed a protest with the Board

on July 20, 2001. That protest is this cause (Metro IV).2

               Ford asked the Board to resolve Metro I before considering this cause. When the

Board refused, Ford filed a petition for writ of mandamus with this Court, seeking to stay this

proceeding and thereby compel the Board to give precedence to Metro I. This Court denied

the petition. See In re Ford Motor Co., No. 02-03-00314-CV (Tex. App.—Austin May 31, 2002,

orig. proceeding). After learning that Metro no longer wanted to sell the franchise to the Cox Group,

but instead wanted to sell it to Stanley Graff, Ford sought dismissal of this cause as moot. The Board

declined to dismiss. Ford’s opposition to the sale to Graff prompted Metro to file a protest with

the Board. That cause is Metro V and is the subject of a separate proceeding that is decided

by this Court contemporaneously with this opinion. Sterling Truck Corp. v. Motor Vehicle Bd.,

No. 03-05-00288-CV (Tex. App.—Austin May 1, 2008).

               On February 3, 2005, the Board decided all three causes. In its reconsideration of

Metro I, the Board withdrew its good cause determination and concluded instead that Ford did not

have good cause to terminate Metro’s franchise. In this cause, Metro IV, the Board adopted the

proposal for decision of the administrative law judge (“ALJ”). The Board concluded that Ford’s

requirements for the Cox Group were unreasonable and contrary to applicable statutes. The Board

assessed a $10,000 civil penalty against Ford for violating the statutes by unreasonably opposing the

sale. The Board assessed the fine despite the Cox Group’s withdrawal, reasoning that Ford’s

       2
         The record contains references to other disputes (e.g., Metro II and Metro III) not before
this Court that the parties presented to the Board.

                                                  3
statutory violations were complete when Ford wrongly opposed the sale and did not become moot

when the Cox Group decided not to buy the property. Because the Cox Group was “no longer a

viable purchaser,” the Board determined that the statutory transfer to the Cox Group was not

required. In Metro V, the Board found that proposed transferee Graff was qualified, fined Ford for

resisting the transfer of the franchise to Graff, and ordered the franchise transferred pursuant to

statute. Ford has appealed all three orders.

               Ford raises several issues in this direct appeal challenging the Board’s decision in

Metro IV. Ford argues that the order in this cause violated the statutory stay imposed by the filing

of Metro I. Ford contends that the order is void because Metro never properly invoked the sale

approval process that led to this protest and order. Ford also asserts that this cause was moot when

filed, arguing that the affirmance of the good cause determination rendered a forced sale to the

Cox Group impossible. Ford also contends that the Cox Group’s withdrawal of its offer to purchase

the property mooted the controversy and stripped Metro of its standing to pursue this cause to force

a sale to the Cox Group. Ford argues that, in light of the judicially affirmed finding that Ford had

good cause to terminate Metro’s franchise and the Cox Group’s withdrawal of its offer, Ford

could not approve a transfer of Metro’s dealership, Metro did not have the ability to propose a

transfer, and the Board did not have the authority to penalize Ford for failing to allow Metro to

transfer the franchise.

               We review the Board’s order under the substantial evidence rule. Tex. Occ.

Code Ann. § 2301.751 (West 2004). Under that standard of review,

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       a court may not substitute its judgment for the judgment of the state agency on the
       weight of the evidence on questions committed to agency discretion but:

           (1) may affirm the agency decision in whole or in part; and

           (2) shall 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 (West 2000).

               Ford argues that the Board’s order in Metro IV violated the statutory stay

implemented by the filing of Metro I. The statute creating the stay provides as follows:

       (a) On the initiation of a board proceeding, whether by complaint, protest, or
           otherwise, 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:

           (1) violate this chapter or any rule, order, or decision of the board;

           (2) affect a legal right, duty, or privilege of any party before the board; or

           (3) tend to render ineffectual a board order in a pending proceeding.

                                                  5
       (b) A statutory stay imposed by this chapter remains in effect until vacated or until
           the proceeding is concluded by a final order or decision.

       (c) A person affected by a statutory stay imposed by this chapter may initiate a
           proceeding before the board to modify, vacate, or clarify the extent and
           application of the statutory stay.

Tex. Occ. Code Ann. § 2301.803. This statute bars various types of actions by “a person who

receives notice from the board of a statutory stay.” Id. It does not prevent the Board from taking any

action during the pendency of the stay. The Board is expressly empowered to vacate its own stay.

Id. In addition, the stay lasts only until final order or decision, and the final order after remand in

Metro I occurred essentially simultaneously with the final order in this cause. Id. We conclude that

the Board’s order in this cause did not violate its stay in Metro I.

                We next examine whether Metro gave sufficient notice and information to Ford about

the proposed sale to allow Metro to invoke the Board’s jurisdiction to review a protest of Ford’s

rejection. The process for approval or disapproval of the transfer of a franchise involves a series of

notices and responses between manufacturer and franchisee. See Tex. Occ. Code Ann. § 2301.359.3

       3
           The occupations code provides as follows:

       (a) A dealer must notify the manufacturer or distributor of a vehicle the dealer is
           franchised to sell of the dealer’s decision to assign, sell, or otherwise transfer a
           franchise or a controlling interest in the dealership to another person. The notice
           is the application by the dealer for approval by the manufacturer or distributor of
           the transfer.

       (b) Notice under Subsection (a) must:

            (1) be in writing and include the prospective transferee’s name, address, financial
                qualifications, and business experience; and

            (2) be sent by certified mail, return receipt requested.

                                                  6
The code provides that “[a] dealer whose application is rejected under Section 2301.359 may file a

protest with the board.” Id. § 2301.360(a).

               Ford contends that the Board had no power to hear this cause because Metro’s notice

to Ford of the sale was insufficient to start the manufacturer’s sale review process that precedes the

Board’s review of a protest. Ford complains that someone other than the seller sent the initial letter

       (c) The notice must be accompanied by:

           (1) a copy of pertinent agreements regarding the proposed assignment, sale, or
               transfer;

           (2) completed application forms and related information generally used by the
               manufacturer or distributor in reviewing prospective dealers, if the forms are
               on file with the board; and

           (3) the prospective transferee’s written agreement to comply with the franchise
               to the extent that the franchise is not in conflict with this chapter.

       (d) Not later than the 60th day after the date of receipt of a notice and application
           under this section, a manufacturer or distributor shall determine whether a
           dealer’s prospective transferee is qualified and shall send a letter by certified
           mail, return receipt requested, informing the dealer of the approval or the
           unacceptability of the prospective transferee. If the prospective transferee is not
           acceptable, the manufacturer or distributor shall include a statement setting forth
           the material reasons for the rejection.

       (e) A manufacturer or distributor may not unreasonably withhold approval of an
           application filed under Subsection (a). It is unreasonable for a manufacturer or
           distributor to reject a prospective transferee who is of good moral character and
           who meets the written, reasonable, and uniformly applied standards or
           qualifications, if any, of the manufacturer or distributor relating to the prospective
           transferee’s business experience and financial qualifications.

       (f) An application filed under this section is approved unless rejected by the
           manufacturer or distributor in the manner provided by this section.

Tex. Occ. Code Ann. § 2301.359 (West 2004).

                                                   7
informing Ford about the proposed sale, that the initial letter was not certified, that it did not include

required information (such as the proposed buyer’s name and address), and that it did not include

a completed application from the proposed transferee or a copy of the final agreement showing that

Metro had decided to transfer the franchise. See id. § 2301.359(b), (c). Ford contends that Metro’s

subsequent letter to Ford did not fill in all the gaps left by the Cox Group’s earlier letter. Metro’s

letter also was not sent by certified mail and included a non-binding letter of intent to sell, which

Ford argues did not notify Ford of a final decision to sell and, therefore, was not the pertinent and

required sales agreement. According to Ford, these deficiencies prevented Metro from invoking the

Board’s jurisdiction and rendered the Board’s subsequent order void.

                We conclude that the alleged deficiencies in notice and material supplied by Metro

to Ford did not deprive the Board of jurisdiction to hear Metro’s protest. The Board’s review

process is triggered by a protest filed by a dealer whose proposed sale has been rejected by the

manufacturer under section 2301.359. See Tex. Occ. Code Ann. § 2301.360(a). Regardless of any

inadequacies in materials sent to Ford about the sale, Ford’s letter rejecting the proposed sale is a

“statement setting forth the material reasons for the rejection” as described by the occupations code

(although it, too, allegedly was not sent by certified mail as required). See id. § 2301.359(d).

Metro’s protest of that rejection invoked the Board’s jurisdiction.            See id. § 2301.360(a).

Inadequacies in a notice of a proposed sale and supporting materials sent to a manufacturer may

make rejection of the sale more reasonable and, thus, may affect the assessment of the merits of a

protest of the rejection, but we are not persuaded that such inadequacies deprive the Board of the

                                                    8
power to consider the protest. The Board’s order is not void for want of jurisdiction based on these

reported notice deficiencies.

               Ford also contends that the withdrawal of the Cox Group’s offer rendered this entire

proceeding moot. Ford argues that the Board lacked the ability to review Ford’s rejection of the sale

because the Board could not mandate the transfer of the franchise. This argument is not supported

by the enabling statutes. The Board has the power to assess a civil penalty for statutory violations.

Id. § 2301.801. The Board concluded that Ford violated the statute by unreasonably rejecting the

proposed sale of the franchise to a qualified buyer. See id. § 2301.359(e). Whether the Cox Group

was a qualified buyer when Ford rejected the proposed sale was fixed at the time of the rejection.

Any impropriety in that rejection did not disappear with the withdrawal of the offer. This cause is

not a tort or breach of contract case where harm could be avoided or benefit of the bargain might be

achieved and the damages completely mitigated. This is an assessment of a civil penalty for

violations of statutory duties. The Board retained jurisdiction over the issue of whether Ford violated

the law at the time it rejected Metro’s proposed sale of the franchise to the Cox Group.

               Ford contends that this Court’s rejection of the forced sale in Metro I makes this

proceeding—reviewing the propriety of Ford’s rejection of a proposed sale—an improper collateral

attack on the decision in Metro I. See Ford, 21 S.W.3d at 766. “A collateral attack is an attempt to

avoid the binding force of a judgment in a proceeding not instituted for the purpose of correcting,

modifying, or vacating the judgment, but in order to obtain some specific relief which the judgment

currently stands as a bar against.” Browning v. Prostok, 165 S.W.3d 336, 346 (Tex. 2005).

Although Metro may have proposed the Cox Group sale to avert the ultimate practical effect of this

                                                  9
Court’s previous decision in Metro I, this proceeding does not attack the binding force of that

judgment. This Court’s opinion in Metro I did not terminate Metro’s franchise. Rather, it merely

affirmed the Board’s decision that Ford had good cause to terminate the franchise.4 This Court’s

determination that the Board lacked the authority to force a sale is limited to the context of a

proceeding to determine whether a manufacturer has good cause to terminate a franchise. See Ford,
21 S.W.3d at 764-66. Unlike the statutes defining the good-cause determination, the statutory

scheme for reviewing protests of rejected sales expressly empowers the Board to require

a manufacturer to permit a sale to a qualified buyer. Compare Tex. Occ. Code Ann. § 2301.453

(good cause), with id. § 2301.360(c) (rejected sale). In Metro I, this Court did not address a parallel,

statutorily authorized protest of a manufacturer’s rejection of a proposed sale. The protest of the

rejection of the proposed sale in Metro IV is not a collateral attack on the holdings in Metro I.

                Ford argues that this proceeding is barred by the doctrines of collateral estoppel

and res judicata. Collateral estoppel bars the relitigation of issues resolved in a previous suit if:

(1) the facts sought to be litigated were fully and fairly litigated in the previous suit, (2) those facts

were essential to the judgment in that suit, and (3) the parties were adversaries in that suit.

        4
           In the conclusion of the 2000 opinion in Metro I, this Court wrote, “We affirm the
termination of the Metro franchise for good cause . . . .” Ford, 21 S.W.3d at 767. However, as set
out earlier in that opinion, this Court affirmed the finding of good cause to terminate the franchise,
not an actual termination. See id. at 766 (“there is substantial evidence to support the Board’s
finding of good cause to terminate Metro” (emphasis added)). The Board is authorized in transfer
proceedings to review whether a manufacturer has good cause to terminate a franchise, not to
order the termination. See Tex. Occ. Code Ann. §§ 2301.453, .455 (West 2004). The
2000 judgment of this Court merely affirmed decisions by the trial court and the Board which, as
discussed in our contemporaneous opinion in Metro I, affirmed the finding of good cause.
Freightliner, 03-05-00289-CV, slip op. at 19-20.

                                                   10
HECI Exploration Co. v. Neel, 982 S.W.2d 881, 890 n.2 (Tex. 1998). The doctrine of res judicata

“prevents a plaintiff from abandoning claims and subsequently asserting them when the claims could

have been litigated in the prior suit. For res judicata to apply, there must be: (1) a prior final

judgment on the merits by a court of competent jurisdiction; (2) identity of parties or those in privity

with them; and (3) a second action based on the same claims that were raised or could have been

raised in the first action.” Citizens Ins. Co. of Am. v. Daccach, 217 S.W.3d 430, 449 (Tex. 2007)

(citations omitted). The issues of whether Metro’s franchise should be terminated and whether the

Board could force a sale in a good-cause proceeding were litigated in Metro I, but those issues are

not present in this proceeding. The issues central to this proceeding—whether the Cox Group was

qualified to be a franchisee and whether Ford reasonably rejected the proposed sale—were not

litigated in Metro I. We are not persuaded that fact questions and claims relating to the proposed

Cox Group sale should have been brought in a proceeding focused on whether Metro had given Ford

good cause to terminate its franchise. The previous judgment in Metro I that Ford had good cause

to terminate Metro’s franchise did not bar Metro from protesting in this cause Ford’s rejection of the

proposed sale to the Cox Group under the doctrines of res judicata or collateral estoppel.

               Although our prior judgment in Metro I did not bar this cause, the Board’s

misapplication of our holding in Metro I fundamentally undermines its order in this cause. Ford

argued to the Board, as it does in this appeal, that the affirmance of the good cause determination

meant that Metro had no franchise to sell or that permitting a sale was inconsistent with the

occupations code. The ALJ found these arguments “unpersuasive” because they oversimplified

“a very complex set of decisions” and completely ignored the context of the other findings

                                                  11
and conclusions regarding Ford’s culpability for events leading to the good cause determination.

Tex. Motor Veh. Bd., Metro Ford Truck Sales, Inc. v. Ford Motor Co., Docket No. 01-0040 LIC,

at 29-30 (July 16, 2004) (PFD). The ALJ correctly stated that Metro held the franchise even after

the remand and that the good cause finding did “not force Metro to immediately and unconditionally

give up its franchise.” Id. at 30.5 However, the Board went further in its reconsideration of

Metro I, believing that the good cause determination itself was within the scope of the remand. As

we discuss at greater length in our opinion on the concurrent appeal in Metro I, however, the good

cause determination was affirmed and not remanded. See Freightliner Corp. v. Motor Vehicle Bd.,

03-05-00289-CV, slip op. at 19-20 (Tex. App.—Austin May 1, 2008). Thus, the Board assessed a

penalty against Ford in this case while under a key misapprehension regarding the context of Ford’s

resistance to the proposed transfer. This error of law in the related case concerning the security of

Metro’s hold on its franchise plainly affected the Board’s decision in this case.

               We cannot gauge, however, the extent to which the misapprehension regarding the

good cause determination affected the Board’s decision in this case. Nor can we discern the extent

to which the Board’s mistaken belief that the good cause determination was remanded affected the

determination that Ford improperly rejected the sale and that a fine was appropriate. It is possible

that the Board’s order may have been based on the merits of the Cox Group’s application irrespective

       5
           The legislature did not make termination automatic upon the finding of good cause to
terminate. See Tex. Occ. Code Ann. § 2301.453(g) (“After a hearing, the board shall determine
whether the party seeking the termination or discontinuance has established by a preponderance of
the evidence that there is good cause for the proposed termination or discontinuance.”). This
contrasts sharply with the statute governing reviews of protests of rejected sales, which provides for
automatic transfer of the franchise when the Board finds that the rejected prospective transferee is
qualified. See Tex. Occ. Code Ann. § 2301.360(c) (West 2004).

                                                 12
of the status of Metro’s franchise. Indeed, the Board found violations and imposed a fine even

though the Cox Group actually withdrew its offer to purchase and one investor in the prospective

purchasing group was later revealed to be morally unfit. On the other hand, it is more likely that the

Board’s assessment of Ford’s resistance to the sale would have been different had the Board

understood that the good cause determination in Metro I was not remanded and was not subject to

being revisited by the Board. Supporting this view is the ALJ’s remark—part of the proposal for

decision adopted by the Board—on the importance of the context of the complex set of decisions

made concerning the dispute between these parties. Assessing Ford’s opposition to the sale in the

proper context, the Director of the Motor Vehicle Division of the Texas Department of

Transportation6 may well conclude that no violation occurred or that any violations are less serious

and warrant a lesser fine. The Board’s error of law and the uncertainty it engenders regarding the

violations found and the fine imposed require that we reverse the Board’s order in this cause and

remand for reconsideration and further proceedings.

               Having determined to remand this cause based on the error of law regarding

the determination that Ford had good cause to terminate Metro’s franchise, we will not review

Ford’s remaining issues on appeal regarding the support for the findings of violations and

the assessment of a fine. Although Ford requests that we reject the Board’s holdings supporting

the assessment of the fine and render judgment in Ford’s favor, we are not authorized in this type

of case to render a judgment that we believe the agency should have rendered if, by doing so, we

       6
         The legislature has given the Board’s former responsibilities to the Director of the Motor
Vehicle Division of the Texas Department of Transportation. See Tex. Occ. Code Ann.
§ 2301.005(a) (West Supp. 2007).

                                                 13
would usurp the agency’s authority. See Tex. Gov’t Code Ann. § 2001.174; Ford Motor Co.

v. Butnaru, 157 S.W.3d 142, 149 (Tex. App.—Austin 2005, no pet.); Pantera Energy Co.

v. Railroad Comm’n, 150 S.W.3d 466, 474 n.9 (Tex. App.—Austin 2004, no pet.); Public Util.

Comm’n v. GTE-SW, 833 S.W.2d 153, 175 (Tex. App.—Austin 1992), aff’d in part, rev’d in part

on other grounds, 901 S.W.2d 401 (Tex. 1995); Consumers Water, Inc. v. Public Util. Comm’n,

774 S.W.2d 719, 722 (Tex. App.—Austin 1989, no writ); see also Marrs v. Railroad Comm’n,

177 S.W.2d 941, 950 (Tex. 1944). On the record presented, we believe that rendering judgment in

favor of Ford would be an unwarranted intrusion on the Board’s authority. Because resolution of

these remaining issues would not alter our disposition of this cause, consideration of them is not

necessary to the final disposition of this appeal. See Tex. R. App. P. 47.1. For the same reason, we

do not address Metro’s assertion that Ford waived the right to complain about one of the Board’s

findings.

               We reverse the Board’s order assessing a fine against Ford in this cause and remand

the cause to the Director of the Motor Vehicle Division of the Texas Department of Transportation

for reconsideration in light of a correct application of this Court’s holdings in Metro I and further

proceedings consistent with this opinion.

                                              G. Alan Waldrop, Justice

Before Justices Patterson, Pemberton and Waldrop

Reversed and Remanded

Filed: May 1, 2008

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