Brown v. Texas Department of Insurance

• Decision Date: 07 December 2000
• Citation: 34 S.W.3d 683
• Parties: (Tex.App.-Austin 2000) Mark Allen Brown, Appellant v. Texas Department of Insurance and Jose Montemayor as Commissioner of Insurance, Appellees NO. 03-99-00706-CV
• Court: Texas Court of Appeals

Page 683

34 S.W.3d 683 (Tex.App.-Austin 2000)

Mark Allen Brown, Appellant v. Texas Department of Insurance and Jose Montemayor as Commissioner of Insurance, Appellees

NO. 03-99-00706-CV

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

December 7, 2000

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 261ST JUDICIAL DISTRICT NO. 99-05408, HONORABLE MARY PEARL WILLIAMS, JUDGE PRESIDING

[Copyrighted Material Omitted]

Before Justices KIDD, YEAKEL and POWERS.^*

YEAKEL, Justice

Appellant Mark Allen Brown appeals the district court's judgment affirming the final order of appellees, the Texas Department of Insurance and the Commissioner of Insurance (together, the "Commissioner"), which revoked his Group I, Life, Health, Accident Insurance and HMO Agent's License. We will affirm the judgment of the district court.

FACTUAL AND PROCEDURAL BACKGROUND

In the fall of 1995, Mark Allen Brown submitted an application for a Group I, Life, Health, Accident Insurance and HMO Agent's License ("license"). See Tex. Ins. Code Ann. art. 21.07, § 2 (West Supp. 2000). The application inquired, inter alia, "Exclusive of traffic citations and first offense DWI, have you ever been charged (by indictment, information, or other instrument) or convicted of any crime or offense[.]" Brown included a handwritten sheet noting guilty pleas for DWI in 1984 and 1985 and stating that he had received probated sentences for both offenses. Brown claims to have included a second handwritten page that listed criminal-mischief and theft-by-check convictions. The Commissioner avers that he has no record of the second handwritten page and denies its existence. The Commissioner claims that the following information should have been included with Brown's application: (1) a 1984 guilty plea to criminal mischief, resulting in a probated sentence of twelve months in jail; (2) a 1985 guilty plea to misdemeanor theft by check, resulting in supervised probation for one year; (3) a 1987 guilty plea to misdemeanor theft by check, resulting in a sentence of incarceration for one day; (4) a 1987 guilty plea to misdemeanor theft by check, resulting in a sentence of incarceration for one day; (5) a 1988 guilty plea to felony theft by check, resulting in ten years deferred-adjudication probation and an order to pay $12,485.64 in restitution; and (6) a 1992 conviction for felony theft by check, resulting in the revocation of his previous deferred adjudication and a five-year jail sentence (collectively, the "other convictions").¹

After submitting his application, Brown called the department of insurance and spoke to Theresa Sanchez, an employee of the department's licensing division, who reviewed Brown's application for prior criminal convictions. Sanchez testified that, consistent with her routine when she speaks to applicants, she asked if there was any information, in addition to Brown's attachment, the department should be concerned about in regard to his application, and she "noted [he] didn't attach any certified documentation." After their conversation, Brown faxed information concerning only the two DWI convictions to Sanchez. Brown was issued his license.

The Commissioner later learned of Brown's other convictions. Sanchez testified that she again spoke with Brown and questioned him about his failure to reveal the 1988 felony theft-by-check conviction and his current probation for that crime. In response to her inquiry, Brown told Sanchez that the matter was "under appeal." Brown did not mention and Sanchez did not inquire about any additional convictions.

The Commissioner acted to revoke Brown's license.² Following a public hearing, an administrative law judge ("ALJ")³ issued proposed findings of fact and conclusions of law, which the Commissioner adopted in an order revoking Brown's license.⁴ Brown filed a motion for rehearing that was overruled by operation of law. Brown then sought judicial review in district court.⁵ The district court affirmed the Commissioner's order. By four issues, Brown appeals the district court's judgment.

DISCUSSION

Commissioner's Findings of Fact

By his first issue, Brown contends that the Commissioner's findings of fact do not comply with the Administrative Procedure Act. See Tex. Gov't Code Ann. § 2001.141 (West 2000). We will not address the merits of this issue, however, because Brown has waived it by not including it in his motion for rehearing before the Commissioner. See id. § 2001.145.

The Administrative Procedure Act imposes procedural requirements for exercising the right to judicial review of agency decisions. See id. "[A] timely motion for rehearing is a prerequisite to an appeal in a contested case." Id. Such requirement ensures that the aggrieved party has exhausted all administrative remedies before seeking judicial review of the agency's decision. Lindsay v. Sterling, 690 S.W.2d 560, 563 (Tex. 1985). However, section 2001.145 is silent as to what a motion for rehearing must contain.

The purpose of a motion for rehearing is to put the agency on notice as to the errors alleged by the party seeking judicial review. Suburban Util. Corp. v. Public Util. Comm'n, 652 S.W.2d 358, 364 (Tex. 1983). Thus, motions for rehearing must be "sufficiently definite" to make the agency aware of the errors claimed and to allow the agency the opportunity to either correct the error or prepare to defend it. Id. at 365. Further, this Court has held that the complaining party must set forth succinctly (1) the particular finding of fact, conclusion of law, ruling, or other action by the agency that the complaining party asserts was error; and (2) the legal basis upon which the claim of error rests. See Dolenz v. Texas State Bd. of Med. Exam'rs, 899 S.W.2d 809, 811 (Tex. App.--Austin 1995, no writ).

Because Brown's motion for rehearing did not object to the failure of the findings of fact to conform to the Administrative Procedure Act, we overrule Brown's first issue. See Tex. Gov't Code Ann. § 2001.141.

Substantial Evidence

By his final three issues, Brown argues that there is not substantial evidence to show his conduct constituted fraud or that his convictions directly relate to the duties of an insurance agent.⁶ In a substantial-evidence review, we must first determine whether the evidence as a whole is such that reasonable minds could have reached the conclusion the agency must have reached in order to take the disputed action. See Texas State Bd. of Dental Exam'rs v. Sizemore, 759 S.W.2d 114, 116 (Tex. 1998). The test is not whether the agency reached the correct conclusion, but whether some reasonable basis exists in the record for the agency's action. Texas Health Facilities Comm'n v. Charter Medical-Dallas, Inc., 665 S.W.2d 446, 452 (Tex. 1984). We may not substitute our judgment for that of the agency and may consider only the record on which the agency based its decision. Sizemore, 759 S.W.2d at 116. Furthermore, the reviewing court is prohibited from substituting its judgment as to the weight of the evidence on questions committed to agency discretion. Charter Medical-Dallas, 665 S.W.2d at 452.

The agency's findings, inferences, and conclusions are presumed to be supported by substantial evidence, and the appealing party bears the burden of showing a lack of substantial evidence. Id. at 453. The appealing party cannot meet this burden merely by showing that the evidence preponderates against the decision. Id. at 452. Although substantial evidence is more than a mere scintilla, the evidence in the record actually may preponderate against the decision of the agency and nonetheless amount to substantial evidence. Id. If substantial evidence would support either affirmative or negative findings, the reviewing court must uphold the order, resolving any conflicts in favor of the agency's decision. Id. at 453.

A. Fraud

Brown's second issue on appeal attacks the sufficiency of the evidence that his convictions or past actions involved fraud.⁷ Once the Commissioner learns or is made aware of a licensee's violation of the insurance code involving fraud, the Commissioner must commence an action to sanction the agent within five years.⁸ However, if the violation does not involve fraud, the Commissioner must act by the earlier of (1) two years from the time he learned of the violation or (2) five years from the time of the violation.⁹ Brown argues that there is less than substantial evidence that his conduct involved fraud; therefore, the Commissioner's action is barred by the two-year statute of limitations. Thus, if the Commissioner based the license revocation on Brown's past convictions alone and there is insufficient evidence that those convictions involved fraud, the Commissioner's action came too late.¹⁰ However, we hold that the Commissioner's action was not time barred. First, Brown's omissions on his application provide an independent basis for revocation. Second, Brown's convictions did involve fraud.¹¹

Brown objects to the Commissioner's definition of fraud. The Commissioner states that his definition comes from the supreme court's decision in Formosa Plastics Corp. USA v. Presidio Engineers & Contractors, Inc., 960 S.W.2d 41, 47 (Tex. 1998). The Commissioner found that fraud is "a material misrepresentation, which [is] false, and which [is] either known to be false when made or [is] asserted without knowledge of its truth, which [is] intended to be acted upon, which [is] acted upon, and which cause[s] injury." Contrary to Brown's argument, the Commissioner's definition is not lacking because of its failure to require a showing of actual loss to an individual. To require that an applicant's or licensee's fraudulent act resulted in an actual pecuniary loss would be to ignore the public purpose behind licensing and regulating insurance agents. The insurance code allows the Commissioner to discipline a license holder or deny an application for an insurance license if he finds that the applicant has obtained or tried...