Extreme Auto Plaza, Inc. v. Iowa Department of Transportation, Office of Vehicle and Motor Carrier Services , 922 N.W.2d 105 ( 2018 )

IN THE COURT OF APPEALS OF IOWA
No. 17-0976
Filed July 18, 2018
EXTREME AUTO PLAZA, INC.,
Plaintiff-Appellant,
vs.
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. AFFIRMED IN PART, REVERSED IN PART,
AND REMANDED.
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.
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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
1
Extreme is owned and operated by Paul Moyer. We ascribe any actions taken by Moyer
or his employees to Extreme.
3
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:
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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
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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 § 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 must return the excess to the purchaser. Iowa Code
§ 321.105(1), (2), (5).
In its proposed decision, the ALJ went on to find:
There is little dispute that [Extreme] failed to properly disclose
vehicle prior history on multiple title applications when the damage
information was readily available. The Department’s exhibits contain
numerous examples of such vehicles. Moreover, [Extreme] has
admitted that nearly [it’s] entire inventory is obtained via online
insurance auctions which move salvaged vehicles almost
exclusively. To indicate [it] is unaware of any prior damage history
on a salvage vehicle is clearly a misrepresentation. These
misrepresentations resulted in the issuance of clean titles rather than
prior salvage titles at the eventual detriment of the purchasers.
Following the issuance of the Department’s notice of revocation,
[Extreme] identified 14 salvage vehicles on [it’s] lot that improperly
held clean titles.
Similarly, there is no dispute that [Extreme] failed to utilize the
online fee estimator, or to place a phone call to the county treasurer’s
office to properly determine registration fees, led to a significant
amount of incorrect charges. [Extreme] had admitted [it] simply
guessed the fee amount, presumably for years, until audited by the
Department in June of 2014. The subsequent investigation
confirmed consumers were overcharged approximately $11,000 and
undercharged $2000 in just one year of business. There is no way
to assure that refunds were properly issued by [Extreme] prior to
June 2014 as no records were maintained and payments were
purportedly made only in cash.
Extreme appealed the ALJ’s proposed decision.
In October 2015, the reviewing officer of the DOT affirmed the proposed
decision. In reaching the decision, the reviewing officer noted that while Extreme
claimed it had always refunded customers when mistakes in estimating
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registration fees occurred, Extreme had provided no documentation to support
the claim. Additionally, the reviewer noted a “greater concern” in “the evidence
supplied by the [DOT] regarding clean titles issued by the appellant on salvaged
titles—a clear violation of section 321H.6.” The reviewer concluded that Extreme
“never established a reasonable explanation for these actions.” Because the
“overriding purpose of chapter 322 is to protect consumers of motor vehicles from
fraud and deception,” and the one-year revocation “is a measured response to
the voluminous violations committed by” Extreme, the reviewer agreed the one-
year revocation was not too severe.
Extreme then filed a petition for judicial review and a request for an order
staying the revocations of its licenses pending the outcome of the appeal. The
district court denied Extreme’s motion to stay.
Before the court ruled on Extreme’s petition for judicial review, in February
2016, Extreme filed an application with the district court asking the court to
remand the matter to the ALJ to hear additional evidence that had not been
presented during the contested case hearing. In its application, Extreme
claimed—among other things—the DOT had purposely interfered with Extreme’s
ability to testify at the administrative hearing by having caused Extreme to be
served with six criminal complaints at the same time the civil, agency case was
proceeding. The DOT resisted the application. The district court granted the
application, ruling:
The facts and circumstances of this case are somewhat unusual with
the civil administrative matter proceeding at the same time as the
criminal matter regarding the same underlying factual situation.
While the court does not necessarily agree with [Extreme’s]
characterization of the intent and/or motive of the [DOT] in these
7
matters, the court finds that the application to present additional
evidence is meritorious. The court finds that the additional evidence
is material and there were good reasons for failure to present it in the
contested case proceeding before the agency. . . .
IT IS ORDERED that this matter be remanded to the agency
to allow additional evidence be taken before the agency. The
evidence shall include, but is not limited to, . . . the specific
information regarding each vehicle the DOT alleges was illegally
titled to be provided by the DOT, including the NADA[2] value before
it was damaged, and the cost to repair.
The Second Hearing:
Additional evidence and argument were presented on remand to the same
ALJ on May 4, 2016—at which time Extreme’s license had been revoked for
approximately half of its one-year revocation. Counsel for Extreme opened the
hearing with an argument that explained about how the words “salvage” or
“wrecked” have a specific legal meaning within the context of titling vehicles. He
argued that words or descriptions had been used too freely during the initial
hearing to describe vehicles that may not have met the legal definitions. Pursuant
to the DOT’s administrative rule 761-405.6, a wrecked or salvage vehicle is a
damaged motor vehicle that “(1) had repair costs exceeding 50 percent of its fair
market value before it had become damaged, and (2) had a fair market value of
$500 or more before it became damaged.” The “fair market value” is “the average
retail value found in the National Automobile Dealers Association (NADA) Official
Used Car Guide.” Counsel for Extreme also asserted a number of errors in the
initial ruling by the ALJ, including the finding that Extreme “failed to properly
disclose vehicle prior history on multiple title applications when the damage
information was readily available.” As the executive officer of the DOT, Tim Allen,
2
NADA refers to the National Automobile Dealers Association Official Used Car Guide.
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conceded, there is not a place on the title application to indicate whether the
vehicle has suffered any prior damage, vehicle history, or values. Rather, the
person applying for the title simply marks either the “regular title” box or the
“salvage title” box. It is on the back of the title, once the vehicle is being signed
over to the new buyer, that the seller—here, Extreme—must mark whether the
vehicle has ever been titled as a salvage vehicle or has sustained “damage for
which the cost of repair exceeded 50% of the fair market value before it became
damaged.” The only option provided by the DOT form is to mark “yes” or “no.”
Similarly, the initial ruling stated Extreme had “admitted that nearly [it’s]
entire inventory is obtained via online insurance auctions which move salvaged
vehicles almost exclusively.” In fact, Extreme admitted that it purchased most of
its inventory through online auctions, which were often stocked with vehicles from
insurance companies and most of those vehicles had some damage. Extreme did
not admit it purchased vehicles at the online auctions that had damages greater
than 50% of the NADA value of the vehicle before the damage occurred or that
had been titled as salvage in another state.
During its testimony at the second hearing, Extreme claimed it had not
improperly applied for a regular title on a single salvage vehicle. In that testimony,
Extreme contradicted its previous affidavit listing fourteen vehicles that it retitled
as salvage in response to the December 2014 revocation letter warning Extreme
that if it did “not immediately remove from its sales inventory all vehicles that have
a salvage history or previous damage greater than 50 percent of their value, for
which the dealer possesses clear Iowa certificates of title, an injunction [would] be
filed.” Extreme testified that it knew at the time those vehicles were retitled to
9
salvage titles that their damage did not meet the 50% threshold but that it retitled
them anyway because of the “threatening letter.” Extreme reasoned, “So I thought
if I go down and salvage these, I can continue in business. If I don’t, they’re just
going to shut me down and worry about the record later.”
At the second hearing, Extreme provided exhibits relating to each of the
thirty-six vehicles the DOT had identified at the first hearing as improperly titled,
including a spreadsheet providing certain identifying information about each
vehicle, its “clean retail” NADA value, the costs Extreme had incurred in repairing
the vehicle, and the resulting percentage of the NADA value represented by the
costs of repair. According to Extreme’s calculations, the highest damage
percentage on any vehicle was 40%. Extreme’s records of the repair costs were
handwritten on note cards. Extreme testified that the cards were kept as a normal
part of business and were in the file on each of the cars when the DOT seized its
records—suggesting the cards were created before there was any reason to be
anything but accurate. Additionally, Extreme testified that it used the records in
order to determine its net profits on each vehicle, asserting there would be no
reason to underestimate or undervalue the costs of repairs because then the
amount of profit—an amount Extreme had to pay taxes on—would be skewed high.
Extreme testified that it advised buyers when a vehicle had been a total loss to
someone else in order to ensure that the buyer was aware that a vehicle history
may show that an insurance company had deemed that vehicle a “total loss.”
While the DOT argued it was common sense that the insurance company would
not declare a vehicle a “total loss” if the damages did not exceed the value of the
vehicle—thus meeting the 50% threshold for a wrecked vehicle in Iowa—Extreme
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testified about instances where an insurance company would deem a stolen
vehicle a total loss (because the insurance customer would be compensated for
the vehicle), and then later sell the non-damaged vehicle when it was located.
Moreover, the term “total loss” is not a term used in the titling of vehicles in Iowa.
Additionally, at the second hearing, the DOT advanced a new interpretation
of section 321.52(4)(a); the section states, in part:
A vehicle rebuilder or a person engaged in the business of
buying, selling, or exchanging vehicles of a type required to be
registered in this state, upon acquisition of a wrecked or salvage
vehicle, shall surrender the certificate of title or manufacturer’s or
importer’s statement of origin properly assigned, together with an
application for a salvage certificate of title, to the county treasurer of
the county of residence of the purchaser or transferee within thirty
days after the date of assignment of the certificate of title for the
wrecked or salvage motor vehicle. This subsection applies only to
vehicles with a fair market value of five hundred dollars or more,
based on the value before the vehicle became wrecked or
salvage. . . . A vehicle on which ownership has transferred to an
insurer of the vehicle as a result of a settlement with the owner of the
vehicle arising out of damage to, or unrecovered theft of, the vehicle
shall be deemed to be a wrecked or salvage vehicle and the insurer
shall comply with this subsection to obtain a salvage certificate of title
within thirty days after the date of assignment of the certificate of title
of the vehicle.
The DOT claimed that the statute provided two situations in which it was
necessary to title a vehicle with a salvage title. The first was the situation both
parties acknowledged—where the damage of the vehicle exceeded 50% of the
NADA value of the vehicle before the damage. The second situation first
introduced at the second hearing by Allen during his testimony involved vehicles
bought by a recycler or dealer from outside of Iowa that was titled in an insurance
company’s name. The DOT conceded that the language of the statute speaks
specifically to insurers when it states, “A vehicle on which ownership has
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transferred to an insurer of the vehicle as a result of a settlement with the owner
of the vehicle arising out of damage to, or unrecovered theft of, the vehicle shall
be deemed to be a wrecked or salvage vehicle and the insurer shall comply with
this subsection to obtain a salvage certificate of title . . .” (Emphasis added.)
However, executive officer Allen testified:
In [section 321.]52 it breaks out insurers to include them in
requiring them to get a salvage title. It doesn’t say that only insurers
are required to get that salvage title.
We take the position that if dealers are allowed to circumvent
the process, the whole point of 321.52 unravels. If you say to a
dealer, “You can bring a wrecked car into the state,” just because it
has a clear title, but it’s clearly a wrecked vehicle, and obtained a
clear Iowa title, you’re doing an injustice to the consumers.
The DOT also challenged Extreme’s calculation of the percent of damage
its vehicles had sustained. While the administrative rule requires the use of the
“average retail value found in the” NADA, the NADA does not provide any “average
retail” category. Instead, a “low,” “average,” and “high” value is given under the
category “auction”; a “rough,” “average,” and “clean” value is given under “trade-
in”; and then there is a “clean loan” and a “clean retail” value. The “clean retail”
value—the value which Extreme used in all of its calculations—is the category with
the greatest values. The DOT agreed that the administrative rule did not provide
any guidance as to which category of the NADA was to be relied upon, but it
contested whether Extreme’s use of the “clean retail” value for each of the vehicles
was the appropriate value. Additionally, the DOT contested Extreme’s use of its
actual repair costs, as the DOT maintained Extreme was getting parts at wholesale
value and was receiving discounts on the repair work that was completed.
Extreme testified it “get[s] a little bit of a break on the parts” but maintained it was
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paying full price at the repair shops for the work being completed. The DOT’s
evidence that Extreme was not paying the same repair costs as the average
consumer was based on a comparison with estimates used by insurance
companies to determine that vehicle was a total loss. Most, if not all, of these
estimates from insurance companies were based on repair costs in another market
and state, such as Dallas, Texas. The administrative rule is silent as to how repair
costs should be determined. Still, the DOT maintained comparing a “clean retail”
NADA value to Extreme’s minimal “wholesale” repair costs did not provide an
accurate result when determining if the damage to the vehicle met the 50%
threshold. Rather, the DOT maintained that the retail estimate of repair costs was
the appropriate figure to compare to the vehicle’s average retail value.
Second Agency Decisions:
In the second proposed ruling, filed in July 2016, the ALJ noted:
The individual vehicle files contained in DOT’s Exhibit A are
not well organized. Additionally, they contain a mix of documents
taken from Extreme’s sales files, and documents gathered from other
sources during the course of the investigation. Some vehicle files
have more information than others. A review of every file in Exhibit
A identified five files that contain specific value and repair estimates
from an insurance company.
When the ALJ compared Extreme’s reported repair costs with those insurance
company’s estimated repair costs, it found the difference “striking” and “so vast
that their reliability is necessarily in question.” The ALJ continued:
Extreme now contends that a clean retail NADA value, and
[Extreme’s] reported actual repair costs, are the only appropriate
figures to use when determining if these vehicles were salvage. This
argument is not persuasive. In fact, Mr. Moyer did not use either of
those figures when he made the determination. The statute requires
an application for certificate of title be filed within thirty days of the
date of assignment. Iowa Code §321.52(4)(a). It is clear from the
13
vehicle files in Exhibit A[3] that Extreme routinely applied for and
secured an Iowa certificate of title in far less than 30 days. Mr. Moyer
acknowledged at hearing that the cars were often not repaired prior
to obtaining an Iowa title, and he relied on his own estimate for the
repair costs. This is consistent with the statute which allows the
owner to apply for a regular certificate of title after the vehicle has
been repaired and passes a salvage theft examination. See Iowa
Code § 321.52(4)(b). Mr. Moyer also relied on his own estimate for
fair market value. He testified he does not need to look up the NADA
value, or use any other source regarding repair costs for making the
determination to apply for a regular or salvage title. His own
estimates for these figures are based on his personal guess from
looking at the cars.
This calculation is important. If the repair costs exceed 50%
of the fair market value of the vehicle prior to damage, Extreme must
apply for a salvage title pursuant to Iowa Code section 321.52(4)(a),
(d). The figures that Extreme now argues must be used lead to a
less than 50% damage result for all thirty-six vehicles in Exhibit A.
This includes at least two vehicles that entered Iowa with a salvage
title from another state. Mr. Moyer testified at hearing that all of the
vehicles in Exhibit A came to Iowa with a regular title. This is not
accurate according to the documentation in evidence. Exhibit A, p.
829 contains a copy of a salvage title from the state of Missouri for a
2013 Volkswagen Jetta, and the final settlement statement showing
Extreme purchased the vehicle via Copart Auto Auction on April 11,
2014. Extreme contends that this vehicle was not salvage, and its
repair costs were only 19% of its prior damage value. These results
do not make sense. Mr. Moyer’s testimony is not consistent with
other evidence in the record. He has not submitted any
documentation verifying the accuracy of his reported repair costs. As
the owner of Extreme, he clearly has an interest in maintaining
licensure. His repair costs are dramatically less than other available
estimates, and lead to a “non-salvage” result in every instance. As
a result, Mr. Moyer’s testimony, and his reported repair costs at
Exhibit 40, lack credibility.
The DOT’s position that Mr. Moyer’s reported repair costs
grossly understate what a retail cost of repairs would be is clearly
bolstered by the comparison of Moyer’s costs to the insurance
company repair estimates. This type of retail repair cost estimate is
relied upon in section 321.52(4)(b) for the determination of damages
following theft. It is not unreasonable to give them weight in this
context as well. The applicable statute and rule require the use of
an average retail value when determining fair market value, it follows
3
Exhibit A is the DOT’s 941-page exhibit from the first hearing, which includes identifying
and supportive information that Extreme improperly titled thirty-six vehicles with a regular
title instead of a salvage one.
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that a retail repair cost should also be used. Mr. Moyer’s reported
repair costs appear to be of a wholesale nature, rather than retail.
He acknowledged at hearing that he is given a break on the cost of
parts from auto shops. It is unclear from the index card notations if
labor costs have been included. Additionally, it is unclear whether
Moyer’s repairs actually returned the vehicles to their condition prior
to damage. Moyer testified at hearing, for example, that he has
declined to repair hail damage if he considers it to be light.
An Iowa title application requires an applicant to indicate if
they are seeking a regular or salvage certificate of title. By failing to
apply for a salvage certificate of title when repair costs exceed 50%
of the fair market value of the vehicle prior to damage, Extreme
obtained a regular Iowa certificate of title that did not properly
disclose prior damage. The back side of the certificate of title asks if
the vehicle was previously titled as salvage. If the answer is no, it
then asks if the owner has knowledge of the vehicle sustaining
damage for which the cost of repair exceeded 50% of the fair market
value before it became damaged. The same questions are asked
again on the Iowa damage disclosure statement which is filled out
when the vehicle is sold. Extreme applied for a regular certificate of
title for all of the vehicles in Exhibit A, and did not disclose prior
damage for which the cost of repair exceeded 50% of the fair market
value before it became damaged on any of the certificates or damage
disclosure statements.
In December 2014, Extreme identified fourteen vehicles on its
sales lot with titles that failed to comply with Iowa law. Mr. Moyer
submitted an affidavit attesting to this and reporting he would have
all of the vehicles properly titled as salvaged vehicles. The affidavit
and list of vehicles were submitted at the July 2015 hearing, as
evidence of Mr. Moyer’s willingness to cooperate with the DOT and
fix violations. Mr. Moyer subsequently testified at the May 4, 2016
hearing that his sworn affidavit was actually false, and all fourteen of
the listed vehicles were not salvage. He contends he changed the
titles on these vehicles and submitted the affidavit solely to avoid the
DOT seeking an injunction. Mr. Moyer’s explanation makes little
sense. He was represented by counsel at the time the affidavit was
submitted and was in the process of appealing the DOT license
revocation. The notion that he falsely identified fourteen examples
of his failure to comply with Iowa law to avoid further legal challenges
from the DOT is not believable and I give it no weight.
(Citations to the record omitted.)
The ALJ determined Extreme had improperly applied for regular titles when
it should have applied for salvage titles. In making this determination, the ALJ
15
relied upon the retail costs of repairs and either the “clean retail” or “clean trade-
in” value—either value resulted in damage exceeding 50%.
Next, the ALJ acknowledged section 321.52(4)(a) on its face only places an
obligation on Iowa insurance companies, it found persuasive the DOT’s contention
that the statute also placed an obligation on licensed dealers and recyclers to
obtain a salvage certificate of title when they purchase a vehicle with a foreign title
held by an out-of-state insurance company. In reaching this conclusion, the ALJ
relied on a decision by our supreme court, Mulder v. Iowa Department of
Transportation, 565 N.W.2d 348, 350 (Iowa 1997), in which the court discussed
that the legislative intent of section 321.52 was to “ensure that consumers were
informed about any significant damage and/or prior salvage designations which a
vehicle might have had.”
Finally, the ALJ noted that Extreme had admitted it overcharged customers
registration fees. While Extreme claimed it had paid customers back the overage
in the instances the customers noticed and requested it even before the execution
of the search warrant, Extreme had no receipts to support this assertion. It was
undisputed that after the search warrant was executed, Extreme paid each of the
122 customers back with a check and provided the receipts to the DOT. Based on
all of the foregoing, the ALJ concluded:
Extreme has a duty as a licensee to comply with the law.
[Extreme] has been in the car business for decades, and should be
well aware of the requirements. [It] has been directed by the
Department in the past to fix problems and has apparently done so.
Yet, problems persist. These violations support a significant
sanction. After full consideration of the additional evidence
submitted at hearing on remand, the sanction previously imposed by
DOT is sustained.
16
Extreme appealed the ALJ’s proposed ruling, and the DOT’s reviewing
officer affirmed, finding Extreme had failed to meet its burden to prove that no
customers were overcharged registration fees. Additionally, the review ruling
stated:
On [Extreme’s] second request for director review, [Extreme]
highlights documentation [it] did supply regarding clean titles on
salvaged vehicles. A wrecked or salvage vehicle is a damaged
motor vehicle that has repair costs exceeding 50 percent of its fair
market value before it became damaged. 761 Iowa Administrative
Code 405.6(1)(a). [Extreme] cites to thirty-seven vehicles bought at
salvage auctions primarily in 2013-14 that were identified by [the
DOT]. According to [Extreme]’s Exhibit 40, every one of the vehicles
show a repair cost between 0 and 40 percent of the fair market value.
The administrative law judge found that this evidence
stretched credulity. The manner in which these repair costs were
recorded by the appellant is also dubious. There is no substitute for
accurate record keeping; amounts for replacement parts scrawled on
index cards without supporting receipts and with indiscernible labor
costs does not constitute accurate record keeping. Of greatest
concern was [Extreme’s] questionable practice of applying for clean
title well before the vehicle had been repaired. Knowledge of the
total repair costs and proof they would be less than half the fair
market value could not have existed at that time.
The overriding purpose of Chapter 322 is to protect
consumers of motor vehicles from fraud and deception. State v.
Miner, 331 N.W.2d 683 (Iowa 1983). I believe the conclusions of the
administrative law judge are correct and supported by the extensive
record that was made. The proposed sanction of a one-year
revocation is a reasonable response to the appellant’s violations.
Exteme then filed a petition for judicial review.
Judicial Review Ruling:
The district court affirmed the agency ruling, finding substantial evidence
supported the DOT’s findings; that the agency’s determinations that the “clean
retail” category of the NADA was not the proper category to use pursuant to the
“average retail value” language from rule 761-405.6 and that it was more
appropriate to utilize the insurance company’s estimated repair cost rather than
17
Extreme’s claimed costs. The district court ruled these findings were neither
beyond the DOT’s authority, an erroneous interpretation, nor reached in an
arbitrary and capricious manner; and that the agency acted within its discretion
when it decided to impose a one-year revocation instead of a lesser sanction.
However, although the issue was raised, the district court did not rule on whether
the agency’s interpretation of section 321.52(4)(a)—that it applies to dealers and
recyclers and requires them to title any vehicle obtained from an out-of-state
insurance company as salvage—was in error.
Extreme appeals.
II. Discussion.
On appeal, Extreme asks us to conclude that that it did not make any
fraudulent title applications. In doing so, Extreme challenges both the DOT’s
interpretation of section 321.52(4)(a) as requiring recyclers and dealers to obtain
salvage titles for any vehicles bought from out-of-state insurance companies and
the DOT’s determination that at least some of the vehicles originally identified by
the DOT had more than 50% damage. If Extreme is meritorious in these claims, it
asks that we remand back to the DOT to impose a less-severe penalty on the
remaining violations (the overcharging of registration fees).
Standard of Review:
We begin by considering our role in reviewing this agency action. “The
district court functions in an appellate capacity to correct errors of law on the part
of the agency.” Willett v. Iowa Dep’t of Tranps., 572 N.W.2d 172, 173–74 (Iowa
Ct. App. 1997). “We review such action by the district court applying the same
standard of section [17A.19(10)] to the agency action to determine whether our
18
conclusions are the same as the district court.” Id. at 174. Insofar as the DOT’s
findings of facts are at issue, we are bound by the findings if they are supported
by substantial evidence in the record, when the record is viewed as a whole. Cobb
v. Emp’t Appeal Bd., 506 N.W.2d 445, 447 (Iowa 1993). “The possibility of drawing
two inconsistent conclusions from the evidence does not prevent an agency’s
finding from being supported by substantial evidence.” Gordon v. Iowa Dep’t of
Transp., 389 N.W.2d 390, 392 (Iowa 1986). Additionally, it is Extreme that bore
the burden to show compliance with all lawful requirements for the retention of its
licenses. See Mary v. Iowa Dep’t of Transp., 382 N.W.2d 128, 132 (Iowa 1986);
see also Iowa Code § 17A.18(3) (preventing the “revocation, suspension,
annulment, or withdrawal” “of any license” until after “the licensee was given an
opportunity to show, in an evidentiary hearing conducted according to the
provisions of this chapter for contested cases, compliance with all lawful
requirements for the retention of the license”).
Iowa Code section 321.52(4)(a):
We begin our analysis by considering the agency’s determination that
section 321.52(4)(a) requires licensed dealers and recyclers to obtain a salvage
certificate of title when they purchase a vehicle with a foreign title held by an out-
of-state insurance company.4 In considering the DOT’s interpretation of the
4
While Extreme raised this issue before the district court, the district court did not rule on
it. Additionally, although it was included in—and in fact, constituted the main portion of—
Extreme’s appellate brief, the DOT has not responded to Extreme’s argument on appeal.
However, we decide the issue as it was properly raised before and decided upon by the
agency. See Staff Mgmt. v. Jimenez, 839 N.W.2d 640, 647 (Iowa 2013) (stating error-
preservation rules are different for administrative law cases; the court has “held a party
preserves error on an issue before an agency if a party raises the issue in the agency
proceeding before the agency issues a final decision and both sides have had an
opportunity to address the issue”); Chauffeurs, Teamsters, & Helpers, Local Union No.
19
statute, we do not give the agency deference, as normally “the interpretation of a
statute is a pure question of law over which agencies are not delegated any special
powers by the General Assembly, so, a court is free to, and usually does, substitute
its judgment de novo for that of the agency.” Renda v. Iowa Civil Rights Comm’n,
784 N.W.2d 8, 11 (Iowa 2010) (citation omitted). Here, the enabling statute does
not expressly vest in the agency the right to interpret laws. See Iowa Code
§ 307.12 (listing the duties of the director of the department of transportation); cf.
Renda, 784 N.W.2d at 11 (noting that the enabling statute for the Iowa Department
of Education does explicitly grant the department the power to interpret school laws
and rules relating to school laws). Additionally, while the DOT has been given
rulemaking authority, see Iowa Code § 307.12(1)(n), “we have not concluded that
a grant of mere rulemaking authority gives an agency the authority to interpret all
statutory language.” Renda, 784 N.W.2d at 13. Moreover, the issue here—
whether the term “insurer,” as used in section 321.52(4)(a) is also meant to
encompass all recyclers and dealers—involves language that has “specialized
legal meaning and [is] widely used in areas of law other than the” department of
transportation arena. Id. at 14. Thus, we are not convinced the legislature
intended to vest the DOT with the authority to interpret the term insurer, and we
review for correction of errors at law. See Iowa Code § 17A.19(10)(c).
When interpreting statutory provisions, we utilize the well-established rules
of statutory construction. Id. at 15. “It is of course true that where the language
238 v. Iowa Civ. Rts. Comm’n, 394 N.W.2d 375, 382 (Iowa 1986) (finding error must be
preserved at the agency level, not on judicial review in the district court); Brewbaker v.
State Bd. of Regents, 843 N.W.2d 466, 471 (Iowa Ct. App. 2013) (“To preserve an issue
on appeal, the party must first argue the issue before the agency.”).
20
chosen by the legislature is unambiguous, we enforce a statute as written.”
Rhoades v. State, 880 N.W.2d 431, 446 (Iowa 2016). “A statute is ambiguous if
reasonable minds differ or are uncertain as to the meaning of the statute.” Id.
Neither here nor before the ALJ did the DOT claim that the term “insurer” as used
in section 321.52(4)(a) could reasonably be understood to mean insurers,
recyclers, and dealers. Rather, the DOT focused on the legislative intent of the
statute, arguing that because the legislature meant for the statute to ensure that
customers were informed about any prior damage, the statute must be applied
more broadly than written. See Mulder, 565 N.W.2d at 350. But we do not
consider the purpose of a statute when the language is unambiguous. See McGill
v. Fish, 790 N.W.2d 113, 118 (Iowa 2010) (“We do not search for legislative intent
beyond the express language of a statute when that language is plain and the
meaning is clear. . . . We only apply the rules of statutory construction when the
statutory terms are ambiguous.”).
The agency was in error when it interpreted section 321.52(4)(a) to require
Extreme, as a dealer and a recycler, to title any vehicle obtained from an out-of-
state insurance company as salvage. Thus, we limit the scope of our review to the
question whether Extreme improperly applied for regular titles when the vehicle
had sustained damage for which the cost of the repair exceeds 50% of the fair
market value, pursuant to the NADA.
After the second hearing, when the ALJ was provided the NADA information
for each of the vehicles the DOT claimed were improperly titled, the ALJ identified
five vehicles on which Extreme had improperly applied for a regular title. Extreme
maintains this determination was in error, as the ALJ relied on the insurance
21
company’s estimate of repair costs, which was higher than Extreme’s actual costs.
But the ALJ found that Extreme’s claimed repair costs lacked credibility. In doing
so, the ALJ noted that Extreme failed to bring a single receipt to establish that the
costs listed on the handwritten note cards were correct. Additionally, because
Extreme’s numbers were so much lower than those estimated by the insurance
companies, the ALJ doubted their veracity. The insurance companies had found
the vehicles to be a total loss, while Extreme claimed that four of the vehicles
sustained damage 15% or less of the NADA value, with the outlier fifth vehicle
having sustained 22% damage. Extreme contends the ALJ could not rely on the
estimates of a third party to determine whether the vehicle needed to be titled with
a salvage title. First, we note that both the appropriate code section and the
administrative rule are silent as to how the “repair cost” is to be determined.
Second, we understand the ALJ’s use of the estimates as a comparison in
determining whether Extreme’s estimates were reliable, which we believe is
appropriate as Extreme had a motive for being dishonest about its repair costs.
Moreover, as the ALJ noted, because Extreme titled the vehicles under a regular
title immediately, the vehicles were never inspected to determine that the repairs
Extreme made to the vehicles actually fixed the damage the vehicle had sustained.
While the DOT did not have a witness who could testify as to what the actual costs
of repair would have been for the vehicles in question, Extreme bore the burden of
establishing that the vehicles had been properly registered, see Mary, 382 N.W.2d
at 132, and the ALJ determined Extreme’s evidence of such lacked credibility. The
DOT’s reviewing officer affirmed the ALJ’s ruling, adding its own statements about
Extreme’s credibility. We are not at liberty to reweigh the credibility of the
22
witnesses and the evidence. See Christiansen v. Iowa Bd. of Educ. Exam’r, 831
N.W.2d 179, 192 (Iowa 2013) (“The law is well-settled. It is in the agency’s duty
‘as the trier of fact to determine the credibility of the witnesses, weigh the evidence,
and decide the facts in issue.’” (citation omitted)). Because substantial evidence
supports the DOT’s determination that Extreme improperly titled five vehicles with
regular titles, we affirm the finding of violations in respect to those vehicles.
We recognize the DOT’s discretion in determining the appropriate
punishment5 and believe the DOT should be given the opportunity to review
whether the imposed punishment is appropriate in light of our conclusion that
section 321.52(4)(a) does not require recyclers and dealers to title all vehicles
bought from out-of-state insurance companies as salvage, thereby reducing the
number of violations the DOT believed Extreme committed.6 Thus, we remand to
the agency for a re-determination of the sanction imposed.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
5
Iowa Code section 322.9 concerns motor vehicle dealers and allows the department to
“revoke or suspend the license of a retail motor dealer if, after notice and hearing by the
department of inspections and appeals, it finds the licensee has been guilty of an act which
would be a ground for the denial of a license under section 322.6.” Similarly, Iowa
Administrative Code 761-425.62(1) concerns motor vehicle dealers and provides, “The
department may deny an application or suspend or revoke a certificate or license if the
applicant, certificate holder, or licensee fails to comply with the applicable provisions of
this chapter.”
Iowa Code section 321H.6 allows the DOT to deny, revoke, or suspend the license
of a vehicle recycler to deny the application for the recycler license if the department finds
the “licensee has violated any provision of the chapter” or “made any material
misrepresentations to the department in connect with an application for a license, junking
certificate, salvage certificate, certificate of title, or registration of a vehicle”—among other
things.
6
We note that Extreme has already served its one-year revocation. Still, Extreme has
asked us to remand for review by the DOT, as the DOT may use its determination that
Extreme failed to comply with the statutory provisions as grounds to deny Extreme’s future
applications to re-obtain its dealer and recycler licenses.