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Extreme Auto Plaza, Inc. v. Iowa Department of Transportation

Court of Appeals of Iowa

July 18, 2018

EXTREME AUTO PLAZA, INC., Plaintiff-Appellant,
v.
IOWA DEPARTMENT OF TRANSPORTATION, OFFICE OF VEHICLE AND MOTOR CARRIER SERVICES, Defendant-Appellee.

          Appeal from the Iowa District Court for Polk County, Paul D. Scott, Judge.

         A motor vehicle dealership, which held licenses to sell and recycle automobiles, appeals from the district court ruling affirming the agency's decision to revoke both licenses for one year.

          Robert A. Nading II of Nading Law Firm, Ankeny, for appellant.

          Thomas J. Miller, Attorney General, and Michelle E. Rabe, Assistant Attorney General, for appellee.

          Considered by Vaitheswaran, P.J., and Potterfield and Tabor, JJ.

          POTTERFIELD, JUDGE.

         Extreme Auto Plaza, Inc. (Extreme)[1] appeals from the district court ruling affirming the decision of the Iowa Department of Transportation (DOT) revoking its motor vehicle dealership's licenses to sell and recycle automobiles for one year.

         I. Background Facts and Proceedings.

         In June 2014, the DOT performed an audit of Extreme's business after receiving a consumer complaint alleging Extreme failed to disclose to a purchaser that the purchased vehicle had a previous salvage title.

         In performing an audit of forty of Extreme's files regarding sales of vehicles, the DOT determined Extreme had overcharged the buyer for registration fees on nine of the sales. Based on this finding, the DOT applied for and received a search warrant and then seized Extreme's files for sales made between January 2013 and May 2014. After reviewing the files, the DOT found 122 buyers had been overcharged for registration fees by Extreme, totaling an amount more than $11, 000. In some cases, buyers had also been undercharged, with those amounts totaling approximately $1450.

         Additionally, in reviewing Extreme's records, the DOT noted a number of vehicles for which Extreme had applied for and received a "clear," non-salvage title by checking the box on the front of the title application form for a "regular title." Additionally, when Extreme later signed those vehicles over to its purchasers, Extreme certified "no"-again by checking a box on the form-when presented with the following statement: "I have knowledge the motor vehicle is now or was previously titled as salvage, rebuilt or flood in this state or any other state." However, on sales contracts for the same vehicles, Extreme included handwritten notes stating the new buyer understood the vehicle had been a total loss to someone else and having the purchaser sign next to the statement.

         As a result of these discoveries, the DOT sent a letter to Extreme in December 2014 notifying it that its motor vehicle dealer and recycler licenses were being revoked for one year, starting December 31, 2014. According to the letter, the revocations were based upon:

• The motor vehicle dealer has demonstrated a pattern of obtaining clear Iowa certificates of title for vehicles known to salvage or have damage greater than 50 percent of their value by making false statements or knowingly concealing material facts on title applications, which constitute violations of Iowa Code § 321.97 [(2014)] and are fraudulent practices.
• Vehicles with similar salvage and damage history continue to be offered for sale by the motor vehicle dealer with clear Iowa certificates of title.
• The motor vehicle dealer has overcharged consumers for vehicle registration fees as a routine course of business.

         Additionally, the DOT demanded Extreme "immediately remove from its sales inventory all vehicles that have a salvage history or current or previous damage greater than 50 percent of their value, for which the dealer possesses clear Iowa certificates of title" and threatened Extreme with an injunction if it did not comply.

         Extreme responded with an affidavit stating it had identified fourteen vehicles "that fail to conform with the notice" from the DOT, which Extreme was "in process of changing clear title to salvage title." Additionally, Extreme contested the revocation by requesting an evidentiary hearing in front of an administrative law judge.

         First Hearing:

         The administrative hearing took place in July 2015 with testimony and exhibits presented by both parties. At the hearing, Extreme stated it was challenging both the DOT's finding of violations and the DOT's chosen punishment of revocation, as the DOT had other, less severe options such as suspension. However, Extreme conceded that people had been overcharged registration fees. Extreme appeared to focus on contesting whether the violations had been intentional or accidental. Additionally, after the execution of the search warrant, Extreme refunded the customers the amount they were overcharged and provided receipts to the DOT to show that it had done so.

         Agency Decisions and Remand:

         In August, the administrative law judge (ALJ) who heard the case issued a proposed decision, which affirmed the DOT's findings of violations and sustained the decision to impose a one-year revocation of Extreme's licenses. In reaching its decision, the ruling recited the following conclusions of law:

Iowa Code § 322.9 provides that the Department may revoke or suspend the license of a retail motor vehicle dealer if, after notice and hearing by the department of inspections and appeals, it finds that the licensee has been guilty of an act which would be ground for the denial of a license under Iowa Code § 322.6. That section authorizes the Department to deny an application for a dealer's license if the applicant has not complied with provisions of chapter 322 or rules adopted by the Department pursuant to Chapter 322, or if the applicant is about to engage in a fraudulent practice or other indictable offense in connection with selling or other activity relating to motor vehicles. Iowa Code § 322.6(1)(b), (e).
Iowa Code § 321H.6 provides that a recycler license may be revoked if the Department finds the licensee has made any material misrepresentation to the Department in connection with an application for a license, junking certificate, salvage certificate, certificate of title, or registration of a vehicle. Iowa Code § 321H.6(2).
Iowa Code § 321.52 governs out of state sales and wrecked or salvaged vehicle. When a wrecked or salvage vehicle is repaired, an application can be made for regular title. A wrecked or salvage vehicle is defined as a vehicle for which the cost of repair exceeds fifty percent of the fair market value. Disclosure of the vehicle's history must be made and the resulting title and registration will be designated as a prior salvage vehicle thereafter. Iowa Code § 321.52(4)(b), (d).
Iowa Code ยง 321.105 requires the payment of annual registration fees for vehicles operated on the public highways. The annual registration fee is to be paid to the county treasurer at the time the application for registration is made. If the registration fee amount collected by a motor vehicle dealer exceeds the required fee, the dealer ...

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