State v. Miner

• Decision Date: 16 March 1983
• Docket Number: No. 67935,67935
• Citation: 331 N.W.2d 683
• Court: Iowa Supreme Court
• Parties: STATE of Iowa, Appellee, v. Jerry MINER a/k/a Jerome R. Miner d/b/a Wheels, Appellant.

Page 683

331 N.W.2d 683

STATE of Iowa, Appellee, v. Jerry MINER a/k/a Jerome R. Miner d/b/a Wheels, Appellant.

No. 67935.

Supreme Court of Iowa.

March 16, 1983.

Steven J. Kuehl of Bedell, Kunze, Maahs & Kuehl, Spirit Lake, for appellant.

Thomas J. Miller, Atty. Gen., and Richard E. Mull, Asst. Atty. Gen., for appellee.

Considered by LeGRAND, P.J., ^* and HARRIS, McCORMICK, McGIVERIN and CARTER, JJ.

McGIVERIN, Justice.

Defendant Jerry Miner appeals from a district court ruling which enjoined him from engaging in the business of brokering used motor vehicles at retail unless and until he is licensed by the Iowa Department of Transportation (DOT) as a used motor vehicle dealer under Iowa Code chapter 322 (1981). The injunction was stayed by the district court pending appeal. The many issues raised by defendant on appeal reflect two basic contentions: (1) Iowa Code section 322.3(2), which requires a person engaged in the business of selling used motor vehicles at retail to be licensed as a used motor vehicle dealer, does not apply to a broker of used cars; and (2) even if section 322.3(2) applies to brokers, its application to defendant's business violates constitutional and statutory provisions. We find no merit in defendant's arguments and affirm the district court's grant of an injunction.

Prior to the filing of this equitable action by plaintiff State of Iowa seeking to enjoin defendant from brokering used motor vehicles at retail without a license, two separate criminal prosecutions were unsuccessfully brought by the State against defendant.

The State then brought this civil action seeking an injunction. Iowa Code § 322.11 (1981). The case was tried by the court upon submission of stipulated evidence. Defendant's counterclaim for damages was denied and is not before us on appeal.

The essential facts of this case are not in dispute. In June 1980 defendant, who had previous experience as a licensed automobile dealer, launched his used car brokerage service under the name of "Wheels." Defendant solicits private owners of motor vehicles who wish to sell their vehicles. The prospective seller and defendant enter into a listing agreement which for 60 days gives defendant the exclusive right to obtain a buyer. An initial fee of $25 is paid to defendant to cover the costs of advertising and showing the vehicle to prospective buyers. If the vehicle is sold, defendant receives a commission of at least $250.

Defendant does not purchase the vehicles himself nor does he obtain title to any of the vehicles; his role is solely that of a middleman. The business of "Wheels" is conducted from a small office. Defendant does not maintain any repair or service facilities for the vehicles he brokers and he does not maintain a lot on which to display vehicles. However, he does have permission to park his clients' cars on his office parking lot, and the evidence shows that he often parks cars on that portion of the lot which abuts the highway.

At trial the evidence showed that defendant had obtained 86 buyers of used motor vehicles who entered into a written contract with sellers who had listed their vehicles with "Wheels." Fifteen of these transactions involved sellers or buyers who resided outside the state of Iowa.

After "Wheels" was in operation, defendant discussed licensing requirements with members of the DOT. He disregarded their assertions that even as a broker he was required to be licensed as a used motor vehicle dealer. At no time since he has been acting as a used car broker has defendant or his sole employee, Merlin Tritle, attempted to obtain a dealer's license under chapter 322. Sections 322.4-.8 contain provisions concerning application for, issuance and maintenance of a dealer's license. Section 322.4(7) also requires that the dealer furnish a surety bond in favor of any buyer of a motor vehicle damaged due to wrongdoing by the dealer in the sales transaction.

I. Applicability of section 322.3(2). Defendant contends that section 322.3(2) and its implementing regulations, 820 Iowa Admin.Code [07, D] ch. 10, do not and cannot apply to brokers of used cars because once licensed as a dealer, a broker lawfully could not broker motor vehicles and such an absurd and unreasonable result should be avoided. We find no merit in these contentions and agree with the district court's decision.

The language of section 322.3(2) is undeniably broad. It provides that:

No person, other than a licensed dealer in new motor vehicles, shall engage in this state in the business of selling at retail used motor vehicles or represent or advertise that he is engaged or intends to engage in such business in this state unless and until the department has licensed such person as a used motor vehicle dealer in the state and has issued to the person a license in writing as in this chapter provided.

The DOT, pursuant to section 322.13 which gives it authority to prescribe rules, has adopted the following definition of "engage in this state in the business": "... doing any of the following acts for purposes of sale of motor vehicles at retail; to acquire, sell, exchange, hold, offer, display, broker, accept on consignment or conduct a retail auction or to act as an agent for the purpose of doing any of the aforementioned acts." 820 Iowa Admin.Code [07, D] § 10.1(4). In section 322.3(2) the legislature expressly stated that no person shall "engage in this state in the business" of selling at retail used motor vehicles unless he is licensed as a used motor vehicle dealer. Therefore, the DOT in rule 10.1(4), in including brokering in the definition of the quoted phrase, was only verbalizing what section 322.3(2) had already directed. Brokers, such as defendant, are engaged in the business of selling motor vehicles at retail.

The inclusion of brokers in the category of persons required to obtain a dealer's license in order to engage in the business of selling motor vehicles at retail also is consistent with the statutory provisions of other states. See e.g. Conn.Gen.Stat.Ann. § 14-52 (Supp.1982) ("No person, firm or corporation may engage in the business of the buying, selling, offering for sale or brokerage of any motor vehicle ... without having been issued either a new car dealer's [or] a used car dealer's ... license."); Kan.Stat.Ann. § 8-2401(a) (Supp.1981) (" 'Vehicle dealer' means any person who: ... (3) for commission, money or other thing of value is engaged in the business of bringing buyers and sellers of vehicles together...."); Wash.Rev.Code Ann. § 46.70.011(3) (Supp.1982) (" 'Vehicle dealer' means any person ... engaged in the business of ... brokering ... the sale of new, or used vehicles....").

When the Iowa statute and regulations are read together, the plain meaning of the two is that defendant must be licensed as a dealer to sell used cars at retail. In like manner, the Ohio Court of Appeals held that the following statutory language required the licensing of brokers in that state: "No person shall engage in the business of displaying or selling at retail ... motor vehicles in this state or assume to engage in such business without first having a license therefor...." Ohio Rev.Code Ann. § 4517.02 (1975). Auto Reality Service, Inc. v. Brown, 27 Ohio App.2d 77, 272 N.E.2d 642 (1971).

In Iowa, and also Ohio, the inclusion of brokers within the dealer licensing requirement effectively precludes brokering because a licensed dealer must take title to the vehicles which he sells. Iowa Code §§ 321.104(2), 322.9(1); Ohio Rev.Code Ann. § 4505.18(B). ¹ In contrast to a dealer who buys to sell again, Black's Law Dictionary 359 (rev. 5th ed. 1979), a broker is a middleman whose business it is to bring buyer and seller together. A broker has neither possession, management or control of the property affected by the negotiation. Lawrence Gas Co. v. Hawkeye Oil Co., 182 Iowa 179, 183, 165 N.W. 445, 447 (1917). Consequently, once defendant broker obtains a dealer's license the law requires him as a dealer to obtain title to any vehicles he sells. And as a licensed dealer he would also be required to maintain a facility to repair and recondition vehicles. 820 Iowa Admin.Code [07, D] § 10.2(4)(b)(2). The practical result is that brokering of used cars at retail in Iowa is not allowed.

Consequently, defendant contends that the licensing requirement is unreasonable and therefore, inapplicable to his operation. We disagree. We do not believe that the DOT exceeded its authority by including brokers within the licensing requirement. The DOT was following what the legislature had already directed in section 322.3(2).

Our review of the licensing regulations is governed by principles discussed in Hiserote Homes, Inc. v. Riedemann, 277 N.W.2d 911, 913 (Iowa 1979). We presume that the rule including brokers within the definition "engage ... in the business" is valid, and defendant has the burden of proving that a "rational agency" would not have concluded that the rule was within its authority as delegated by the legislature.

Chapter 322 is a regulatory law and not merely a licensing act for raising revenue. State v. Lindsey, 165 N.W.2d 807, 808 (Iowa 1969). Its overriding purpose is to protect consumers of motor vehicles from fraud and deception. Id. The DOT is given "full authority to prescribe reasonable rules for the administration and enforcement of this chapter." Iowa Code § 322.13. We believe that a rational agency could conclude that this broad grant of authority included the authority to effectuate the regulation of vehicle sales by defining what activities constituted engaging in the business of selling motor vehicles. See generally Milholin v. Vorhies, 320 N.W.2d 552, 554 (Iowa 1982).

The fact that a broker who complies with the licensing requirements of chapter 322 cannot function as a broker, because he must take title to the motor vehicles he sells, is a result of a legislative not agency enactment. The acquisition of...