Opinion

Texas Real Estate Commission v. Josef Adam Riekers

Court: Texas Court of Appeals, 14th District (Houston)
Filed: Mar 3, 2020
Status: Published
Cited by: 0 cases
Authority: More cited than 11.1%

discussing school board’s authority under Education Code to change findings of fact made by hearing examiner where statute did not specifically provide for the board to find additional facts and permitted changes to findings only if supported by substantial evidence

How later courts described this case

discussing school board’s authority under Education Code to change findings of fact made by hearing examiner where statute did not specifically provide for the board to find additional facts and permitted changes to findings only if supported by substantial evidence
determining that the board complied with section 2001.058(e) where its order included explanation of its authority under statutes and rules of why modification of penalty was consistent with guidelines and board precedent
“Courts ‘do not lightly presume that the Legislature may have done a useless act.’” (quoting Liberty Mut. Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d 482, 485 (Tex. 1998))

Written by the judges who cited it.

The opinion

Affirmed and Memorandum Opinion filed March 3, 2020.

In The

Fourteenth Court of Appeals

NO. 14-18-00287-CV

TEXAS REAL ESTATE COMMISSION, Appellant

JOSEF ADAM RIEKERS, Appellee

On Appeal from the 345th District Court

Travis County, Texas

Trial Court Cause No. D-1-GN-17-001112

MEMORANDUM OPINION

In this real estate license revocation case, Appellant Texas Real Estate

Commission (the “Commission”) challenges the trial court’s judgment in favor of

Appellee Josef Adam Riekers (“Riekers”), on the basis that the trial court erred in

reversing the Commission’s revocation of Riekers’ real estate license (the “license”)

after he pled guilty to felony theft of government property. We affirm the judgment

of the trial court.1

I. Factual and Procedural Background

Riekers was employed by the federal government as a special agent and

firearms instructor for the Department of Health and Human Services in Dallas,

Texas. Riekers used ammunition at his job, and also kept personal ammunition at

his home. Riekers comingled the ammunition, and ultimately traded in some of the

commingled ammunition on the internet for different calibers of ammunition he

could use. He informed his employer of the trading, resulting in federal charges

against him in violation of 18 U.S.C. § 641.2

On November 19, 2014, pursuant to the terms of a plea agreement, Riekers

pled guilty in federal court to one count of theft of government property. He was

sentenced to three years of probation, 500 hours of community service, and was

required to pay a $100 assessment.

Following his conviction, the Commission initiated proceedings to revoke

Riekers’ State of Texas real estate license pursuant to Section 1101.652 (a)(1) of the

Texas Occupations Code. A contested case hearing was conducted before an

administrative law judge (“ALJ”) on July 29, 2016. See Tex. Occ. Code

§ 1101.657(a), (e); Tex. Gov’t Code § 2001.058. Following the evidentiary hearing,

The Texas Supreme Court ordered the Third Court of Appeals to transfer this case to this court. We must

therefore decide the case in accordance with the precedent of the Third Court of Appeals if our decision

otherwise would have been inconsistent with that court’s precedent. See Tex. R. App. P. 41.3.

“Whoever embezzles, steals, purloins, or knowingly converts to his use or the use of another, or

without authority, sells, conveys or disposes of any record, voucher, money, or thing of value of

the United States or of any department or agency thereof, or any property made or being made

under contract for the United States or any department or agency thereof . . . shall be fined under

this title or imprisoned not more than ten years, or both.” 18 U.S.C. § 641.

the ALJ issued a Proposal for Decision (“PFD”) in which he made findings of fact

and conclusions of law.

The ALJ found that Riekers’ criminal conviction for felony theft would

support revocation of Riekers’ real estate license, but that Riekers presented

substantial evidence of mitigation supporting a less severe penalty.

The ALJ noted the criminal charge, plea, and adjudication of guilt of Riekers,

that Riekers’ conviction was not one of youthful indiscretion, that the offense ended

on July 31, 2014, and also made findings regarding the exemplary record of service

and achievements before and after the offense, the letters of recommendation

submitted attesting to Riekers’ good character, his commendations, work in the

community, volunteer work, participation in accountability groups, and voluntary

attendance at counseling with his children.

In Finding of Fact No. 13, the ALJ further found Riekers was fit to hold a

revoked real estate license on a probated basis.

Riekers filed exceptions to the PFD, which the ALJ found unpersuasive. The

Commission did not file any exceptions of its own but filed a Reply to Respondent’s

Exceptions to Proposal for Decision. At the February 13, 2017, quarterly meeting

of the Commission, the Commission reviewed the PFD and voted to adopt the ALJ’s

PFD with modifications. A Final Order was entered by the Commission on February

16, 2017, adding three findings of fact, deleting the ALJ’s Finding of Fact No. 13,

and modifying the ALJ’s Conclusions of Law 7, 8, and 9.

Riekers filed a Motion for Rehearing with the Commission on March 9, 2017,

complaining that the Final Order was an “arbitrary and capricious abuse of

discretion.” Riekers further alleged that he was denied due process and fair notice

because the Commission surprised him at its quarterly meeting by removing the

probationary recommendation from the ALJ’s PFD without having filed any

exceptions to the PFD. The Commission denied Riekers’ Motion for Rehearing on

March 29, 2017.

Riekers sought a temporary restraining order to stay the revocation, which was

denied. On April 18, 2017, Riekers filed a Petition for Judicial Review, Application

for Temporary Injunction and Notice of Hearing with the Travis County District

Court asserting that the Commission improperly surprised Riekers with its decision

to remove the probationary recommendation from the ALJ’s PFD, that the

Commission’s modifications to the PFD were not supported by the record, and that

Riekers was denied due process. The trial court granted Riekers’ Application for

Temporary Injunction on April 24, 2017. A bench trial on the merits was held on

November 14, 2017. After review of the file and hearing the arguments of counsel,

the trial court reversed and vacated the Final Order of revocation issued by the

Commission. See Tex. Govt. Code § 2001.171–.178 (providing for judicial review

of final order); Tex. Occ. Code § 1101.710. The Commission timely filed this

appeal.

A. The Commission’s Modifications to the ALJ’s Findings of Fact and

Conclusions of Law.

The ALJ made Findings of Fact that were modified or deleted by the

Commission, specifically:

ALJ’s Proposal For Decision The Commission’s

Modifications

No. 1 Josef A. Riekers holds a real estate Adopted

salesperson license, issued by the

Texas Real Estate Commission.

No. 2 On May 13, 2015, in the United Adopted

States District Court, Northern

District of Texas Dallas Division,

Case 3:14-CR-00478-P(1), United

States of America v. Josef A.

Riekers, Respondent pleaded

guilty to and was adjudicated

guilty of violating 18 U.S.C. § 641

(Theft of Government Property), a

felony. The offense ended July 31,

2014. Respondent was sentenced

to probation for three years,

subject to terms and conditions,

including payment of a $100

special assessment, due

immediately, and 500 hours of

required community service. It

was also ordered that Respondent

not possess a firearm,

ammunition, destructive device,

or any other dangerous weapon.

Added:

No. 2a

Respondent was employed as a

Special Agent for the Office of

the Inspector General of the

U.S. Department of Health and

Human Services, but was

required to terminate his

employment as a result of his

guilty plea and conviction.

No. 2b Added:

Respondent committed a

serious federal crime, which

involved stealing ammunition

from a federal armory on

multiple occasions and selling

the stolen ammunition on the

internet.

No. 3 The offense was not one of Adopted

youthful indiscretion–Respondent

was in his mid-40s at the time of

the offense.

Added:

No. 3a

Respondent’s theft conviction

correlates directly to the

fiduciary duties and

relationship Respondent has

with his clients as a licensed

real estate sales agent.

No. 4 Respondent had an exemplary Adopted

record of service and achievement

[with lists].

No. 5 Respondent submitted letters of Adopted

recommendation [listing six].

No. 6 Respondent received Adopted

commendations from employers

and various law enforcement

agencies [as well as a certificate of

recognition for his efforts as a

First Responder on September 11,

2001].

No. 7 Respondent has taken a number of Adopted

courses to make himself a better

real estate agent. He obtained

certificates from the Texas

Association of Realtors Graduate

Realtor Institute in Real Estate

Brokerage, Real Estate Finance,

and Real Estate Marketing.

No .8 Respondent continued volunteer Adopted

work . . . following his conviction.

No. 9 Respondent became involved in Adopted

the community, including church

groups and ministry after his

conviction.

No. 10 Respondent obtained part-time Adopted

employment with the City of

Rockport, as a Lifeguard

Supervisor and Water Safety

Instructor.

No. 11 Respondent went to counseling Adopted

with his children after his

conviction and continues to do so,

even though he has been

discharged and it is no longer

required.

No. 12 Respondent has joined some Adopted

accountability groups at his

church after his conviction.

No. 13 Respondent demonstrated that he Deleted

is fit to hold a revoked real estate

license.

The ALJ made Conclusions of Law that were modified by the Commission,

including:

ALJ’s Proposal for Decision The Commission’s Modifications

No. 4 Staff had the burden of proof by Adopted

a preponderance of the evidence

No. 7 The evidence regarding the 22 Modified:

Texas Administrative Code The evidence regarding the 22 Texas

Section 541.1(b)-(c) factors Administrative Code Section

supports Respondent holding a 541.1(b)-(c) factors supports the

license subject to probation. revocation of Respondent’s license.

No. 8 Staff met its burden of proof Modified:

demonstrating Respondent’s Staff met its burden of proof

license should be revoked at this

time, but did not meet its burden demonstrating Respondent’s license

of proof that the revocation should be revoked.

should not be probated.

No. 9 Respondent’s license should be Modified:

revoked, but the revocation Respondent’s license should be

should be subject to probation revoked.

for ten years. If at the end of ten

years, there has been no

violation of the terms of the

probation then the revocation

shall be lifted and Respondent’s

license shall be reinstated.

II. Standard of Review

We review the Commission’s final order under the “substantial evidence”

standard codified in the Administrative Procedures Act (“APA”). Tex. Gov’t Code

§ 2001.174. Whether the Commission’s order satisfies the substantial-evidence

standard is a question of law. Firemen’s & Policemen’s Civil Serv. Comm’n v.

Brinkmeyer, 662 S.W.2d 953, 956 (Tex. 1984). On appeal from the trial court’s

judgment, the focus of the appellate court’s review is the Commission’s decision.

See Montgomery Indep. Sch. Dist. v. Davis, 34 S.W.3d 559, 562 (Tex. 2000). Thus,

the trial court’s judgment is not entitled to deference on appeal. Texas Dep’t of Pub.

Safety v. Alford, 209 S.W.3d 101, 103 (Tex. 2006) (per curiam). The substantial

evidence standard requires that we reverse or remand a case for further proceedings

“if substantial rights of the appellant have been prejudiced because the

administrative findings, inferences, conclusions, or decisions” are not reasonably

supported by substantial evidence, are arbitrary and capricious, characterized by

abuse of discretion, or clearly an unwarranted exercise of discretion. Tex. Gov’t

Code § 2001.174(2).

A substantial-evidence analysis entails two component inquiries: (1) whether

the agency made findings of underlying facts that logically support the ultimate facts

and legal conclusions that are the ultimate basis for the order; and, (2) whether the

findings of underlying fact are reasonably supported by evidence. See Vista Med.

Ctr. Hosp. v. Texas Mut. Ins. Co, 416 S.W.3d 11, 26–27 (Tex. App.—Austin 2013,

no pet.). The second inquiry, which has been termed the “crux” of a substantial-

evidence review, is highly deferential to the Commission’s determination:

“substantial evidence” in this sense “does not mean a large or considerable amount

of evidence”—in fact, the evidence may even preponderate against the agency’s

finding—but requires only “such relevant evidence as a reasonable mind might

accept as adequate to support a [finding] of fact.” Slay v. Texas Comm’n on Envtl.

Quality, 351 S.W.3d 532, 549 (Tex. App.—Austin 2011, pet. denied). Likewise, we

“may not substitute [our] judgment for the judgment of the state agency on the

weight of the evidence on questions committed to agency discretion.” Id. at 549

(citing Southwestern Pub. Serv. Co. v. Public Util. Comm’n of Tex., 962 S.W.2d 207,

215 (Tex. App.—Austin 1998, pet. denied)). In contrast, the first inquiry,

concerning the extent to which the underlying facts found by the Commission

logically support its ultimate decision or action, may entail questions of law that we

review de novo. See Railroad Comm’n v. Texas Citizens for a Safe Future & Clean

Water, 336 S.W.3d 619, 624 (Tex. 2011); Davis, 34 S.W.3d at 565 (Tex.

2000) (citing Texas Health Facilities Comm’n v. Charter Medical-Dallas, Inc., 665

S.W.2d 446, 453 (Tex. 1984)); City of El Paso v. Public Util. Comm’n, 344 S.W.3d

609, 619 (Tex. App.—Austin 2011, no pet.); Buddy Gregg Motor Homes, Inc. v.

Motor Vehicle Bd., 156 S.W.3d 91, 99 (Tex. App.—Austin 2004, pet. denied).

III. Analysis

The Commission raises five issues on appeal, asserting that: (1) the

Commission’s Final Order is supported by substantial evidence; (2) the Commission

did not abuse its discretion when issuing its Final Order; (3) the Commission had the

authority to change the PFD and adequately explained the changes made in the Final

Order; (4) Riekers received due process; and (5) the Commission did not prejudice

Riekers’ rights by failing to file exceptions to the PFD.3 Dispositive of all four of

the Commission’s first four issues is whether the Commission violated Riekers’

substantive rights by modifying the ALJ’s PFD and revoking Riekers’ real estate

license, instead of imposing the probated penalty recommended by the ALJ.

A. The Commission’s Statutory Authority to Modify, Amend or Change

the Proposal for Final Decision

The Commission argues that it has the authority to modify the PFD and

adequately explained the changes that it incorporated into the Final Order. Riekers

argues that the Commission improperly modified the PFD.

1. The ALJ’s Role As Factfinder

An ALJ is a “disinterested hearing officer” to whom the legislature has

delegated the duty of basic fact-finding. See Flores v. Employees Ret. Sys., 74

S.W.3d 532, 539 — 40 (Tex. App.—Austin 2002, pet. denied). An agency cannot

frustrate the delegation of the fact-finding role by ignoring an ALJ’s “findings with

which it disagrees and substitut[ing] its own additional findings.” Davis, 34 S.W.3d

at 564 (discussing school board’s authority under Education Code to change findings

of fact made by hearing examiner where statute did not specifically provide for the

board to find additional facts and permitted changes to findings only if supported by

substantial evidence). When the APA, or other applicable enabling statute, does not

specifically provide for an agency’s board to find facts in addition to those found by

the hearing examiner, the board exceeds its authority by so doing. See id. “If a

Riekers did not file a cross-appeal but presents four issues of his own rather than responses to

Appellant’s issues. Riekers asserts that the Commission’s “Issues” are not all issues and are

illogically separated. To the extent that Appellee’s proposed issues and arguments are responsive

to those raised by the Commission, we will address them. Otherwise, we decline to address

Appellee’s separate issues because he has not filed a cross-appeal.

board or commission could find additional facts, resolving conflicts in the evidence

and credibility disputes, it would then be serving as its own factfinder despite

delegating the factfinding role to a hearing examiner, and the process of using an

independent factfinder would be meaningless.” Id. Here, the APA and the agency

rules do not allow the Commission to sit as the fact finder. Rather, the Commission

is only allowed to “modify, amend or change.” Tex. Gov’t Code § 2001.058(e); 22

Tex. Admin. Code § 533.7(d)-(e).

Adjudicative facts are often the subject of conflicting evidence, which are

more appropriately resolved by the ALJ, who is better suited than an agency or board

in determining how much weight to give each side’s evidence and better suited to

make credibility determinations. See Hyundai Motor Am. v. New World Car Nissan,

Inc., 581 S.W.3d 831, 838 (Tex. App.—Austin 2019, no pet.)

2. APA Requirements Allowing Modification of the ALJ’s Findings

of Fact and Conclusions of Law

The APA controls the Commission’s ability to modify the findings of fact or

conclusions of law made by an administrative law judge. Tex. Gov’t Code

§ 2001.058(e). The APA provides:

(e) A state agency may change a finding of fact or conclusion of law

made by the administrative law judge, or may vacate or modify an order

issued by the administrative judge, only if the agency determines:

(1) that the administrative law judge did not properly apply or

interpret applicable law, agency rules, written policies provided

under Subsection (c), or prior administrative decisions;

(2) that a prior administrative decision on which the

administrative law judge relied is incorrect or should be changed;

(3) that a technical error in a finding of fact should be changed.

The agency shall state in writing the specific reason and legal basis for

a change made under this subsection.

Tex. Gov’t Code § 2001.058(e). The Commission must “explain with particularity

its specific reason and legal basis for each change made.” Granek v. Texas State Bd.

of Med. Exam’rs, 172 S.W.3d 761, 780–81 (Tex. App.—Austin 2005, no pet.);

see Garcia v. Texas Real Estate Comm’n, No. 03-14-00349-CV, 2016 WL 3068408,

at *3 (Tex. App.—Austin May 27, 2016, no pet.) (mem. op.). To meet this

requirement, the Commission must “articulate a rational connection between an

underlying agency policy and the altered finding of fact or conclusion of law.” Levy

v. Texas State Bd. of Med. Exam’rs, 966 S.W.2d 813, 815 (Tex. App.—Austin 1998,

no pet.) (quoting Employees’ Retirement Sys. of Texas v. McKillip, 956 S.W.2d 795,

800 (Tex. App.—Austin 1997, no pet.)).

B. Standard of Review for Modification of the ALJ’s Findings of Fact and

Conclusions of Law

Additionally, when an agency, here the Commission, changes “basic” or

“adjudicative” facts, we review its justifications under a stricter standard than we

review an alteration to legislative or ultimate facts. See New World Car Nissan, Inc.,

581 S.W.3d at 838; Texas State Bd. of Med. Exam’rs v. Dunn, No. 03-03-00180-CV,

2003 WL 22721659, at *4–5, *11 (Tex. App.—Austin Nov. 20, 2003, no pet.) (mem.

op.) (holding the board “failed to carry its burden to articulate a reasonable

evidentiary basis for rejecting the ALJ’s [adjudicative] findings of fact”); Flores, 74

S.W.3d at 540–41 (in making changes to adjudicative facts, board was not entitled

to “reweigh” evidence or make findings that were “not supported by any evidence”).

On the other hand, legislative or ultimate facts “do not usually concern the

immediate parties but are the general facts that help the tribunal decide questions of

law and policy and discretion.” New World Car Nissan, Inc., 581 S.W.3d at 838.

“A finding of ultimate fact is reached by inference from basic facts.” West Tex. Utils.

Co. v. Office of Pub. Util. Counsel, 896 S.W.2d 261, 270 (Tex. App.—Austin 1995,

no writ). A finding of ultimate fact “usually involves ‘a conclusion of law or at least

a determination of a mixed question of law and fact.’” Hunter Indus. Facilities, Inc.

v. Texas Nat. Res. Conservation Comm’n, 910 S.W.2d 96, 104 (Tex. App.—Austin

1995, writ denied) (quoting Helvering v. Tex-Penn Oil Co., 300 U.S. 481, 491

(1937)). Therefore, an ultimate finding pertaining to compliance with a statutory

standard, when that determination is statutorily within the discretion of an agency,

has the same legal effect as a conclusion of law. New World Car Nissan, Inc., 581

S.W.3d at 838 (citing Hunter Indus. Facilities, Inc., 910 S.W.2d at 104—5). When

reviewing an agency’s findings of ultimate fact, a reviewing court is “limited to the

inquiry of whether the agency’s findings of basic fact reasonably support its findings

of ultimate fact.” Professional Mobile Home Transp. v. Railroad Comm’n of Tex.,

733 S.W.2d 892, 899 (Tex. App.—Austin 1987, writ refused n.r.e.).

C. The Commission’s Basis for Modification of the ALJ’s Findings of Fact

The Commission added Findings of Facts 2a, 2b, and 3a, and deleted Finding

of Fact No. 13. The explanation provided by the Commission for these findings

was:

The record also reflects that, while employed in a position of public

trust as a federal peace officer, Respondent stole ammunition from a

federal armory on multiple occasions and sold the stolen ammunition

on the internet. As a result of Respondent’s conviction, Respondent

was required to terminate his employment as a Special Agent with the

Office of the Inspector General for the U.S. Department of Health and

Human Services. Respondent’s felony theft conviction correlates to the

fiduciary duties and relationship a real estate sales agent has to his

clients. See 22 Tex. Admin. Code § 531.1. For these reasons, the

Commission finds the ALJ did not properly apply or interpret the

Commission’s authority to discipline a license holder and probate a

revocation under Chapter 1101, Texas Occupations Code, and the

Commission’s Rules.

1. The Commission Failed to Provide a Reasonable Evidentiary

Basis to Support the Addition of Findings of Fact No. 2a and 2b

a. The Commission’s Addition of Finding of Fact No. 2a

2a. Respondent was employed as a Special Agent for the Office of the

Inspector General of the U.S. Department of Health and Human

Services, but was required to terminate his employment as a result of

his guilty plea and conviction.

One of the Commission’s findings, and part of its rationale for revocation, is

that Riekers was required to terminate his employment as a result of his guilty plea

and conviction. Riekers continued to work in his position until one day prior to the

date of his entry of a guilty plea in open court. As a condition of his plea, he was

required to resign. Because this is a plea agreement between the government and a

defendant, it is unclear whether the U.S. Department of Health and Human Services

requested Riekers’ resignation, or if the government was requiring the resignation

as a punishment for his crime. The Commission added this adjudicative fact to the

Final Order, however, there is no evidence in the record that the Department of

Health and Human Services required termination or terminated Riekers as a result

of his conviction. Because the Commission based its determination on facts that

were not supported by substantial evidence in the record, the Commission abused its

discretion in adding Finding of Fact No. 2a.

b. The Commission’s Addition of Finding of Fact No. 2b

2b. Respondent committed a serious federal crime, which involved

stealing ammunition from a federal armory on multiple occasions and

selling the stolen ammunition on the internet.

The Commission’s Finding of Fact No. 2b states Riekers committed a serious

federal crime. The range of punishment for Riekers based upon his sentencing

factors was zero to six months, with an applicable fine range of $500-$5,000. The

plea agreement accepted by the federal court between the United States and Riekers

reduced a 2 level enhancement and did not impose a fine.4 A letter from U.S. District

Court, Probation and Pretrial Services for the Northern District of Texas (“Probation

and Pretrial Services”) was submitted to the Commission on April 27, 2016 in

support of Riekers’ petition to maintain his real estate license. The letter

characterized Riekers as an offender suitable for low risk supervision, stating “Low

risk offenders have committed low severity violations; have a lower rate of

recidivism and are of lower risk to the safety of the community.” Theft is a serious

crime, however, the letter provided by Probation and Pretrial Services mitigates the

seriousness of the offense.

The Commission further states in Finding of Fact No. 2b that Riekers stole

ammunition from a federal armory on multiple occasions and sold the stolen

ammunition on the internet. In their appellate briefing, both parties raise the issue

of whether it was appropriate for the Commission to insert the word “armory” in the

Final Order. While Appellant contends that Riekers waived his right to complain

about the characterization of theft from an “armory” by failing to address the issue

in his Motion for Rehearing, the burden is on the Commission to show Finding of

Fact No. 2b is supported by substantial evidence. Accordingly, we review the

Commission’s addition of this adjudicative fact to determine whether it complied

with the APA and was supported by substantial evidence.

There is no evidence in the record to support the finding that Riekers stole

ammunition from a federal armory, sold it on multiple occasions, or sold the

ammunition. There is also no evidence to controvert the testimony of Riekers that

the ammunition was traded and gathered from a shared government vehicle or given

to Riekers by a co-worker. In fact, the Factual Resume from Riekers’ theft of

Riekers received a mandatory $100 assessment.

government property conviction specifically states that Riekers “traded” and

“exchanged” rather than “sold” ammunition.

Because the Commission based its determination on facts that were not

supported by substantial evidence in the record, the Commission abused its

discretion in adding Finding of Fact No. 2b. Flores, 74 S.W.3d at 540–41.

c. The Commission’s Addition of Finding of Fact No. 3a

3a. Respondent’s theft conviction directly correlates to the fiduciary

duties and relationship Respondent has with his clients as a licensed

real estate sales agent.

The Commission’s explanation cites to the language of 22 Tex. Admin. Code

§ 531.1.

A real estate broker or salesperson, while acting as an agent for another,

is a fiduciary. Special obligations are imposed when such fiduciary

relationships are created. They demand: (1) that the primary duty of the

real estate agent is to represent the interests of the agent’s client, and

the agent’s position, in this respect, should be clear to all parties

concerned in a real estate transaction; that, however, the agent, in

performing duties to the client, shall treat other parties to a transaction

fairly; (2) that the real estate agent be faithful and observant to trust

placed in the agent, and be scrupulous and meticulous in performing

the agent’s functions; and (3) that the real estate agent place no personal

interest above that of the agent’s client.

22 Tex. Admin. Code § 531.1; see also 22 Tex. Admin. Code § 541.1(a).

Commission staff presented evidence of Riekers’ plea of guilty, and the

conditions of that plea. Staff argued that Riekers’ conviction related to the abuse of

a position of trust, and the accounting and handling of funds on behalf of another

person, and was directly related to the duties of a real estate license holder.

Commission staff further testified that the ability to engage in “further criminal

activity of this nature” was a basis to deny Riekers a license. Because Riekers’

conviction is based on a breach of trust, consistent with the fiduciary duty of a real

estate agent in a real estate transaction, the Commission’s addition of Finding of Fact

No. 3a is supported by the record.

2. The Commission’s Deletion of Finding of Fact No. 13 is not

Supported by Substantial Evidence

The Commission deleted Finding of Fact No. 13:

13. Respondent demonstrated that he is fit to hold a revoked real

estate license.

As discussed supra, we review the Commission’s deletion of Finding of Fact

No. 13 under the substantial-evidence analysis. Here, the deletion of Finding of Fact

No. 13 concerns an ultimate or legislative fact, because it involves “a conclusion of

law or at least a determination of a mixed question of law and fact.” Hunter Indus.

Facilities, Inc., 910 S.W.2d at 104. In reviewing an agency’s findings of ultimate

fact, we are “limited to the inquiry of whether the agency’s findings of basic fact

reasonably support its findings of ultimate fact.” Professional Mobile Home Transp.,

733 S.W.2d at 899.

In part, the Commission’s justification for its finding is the correlation of

Riekers’ felony to the fiduciary duties and relationship a real estate agent has to his

clients. The Real Estate License Act (“RLA”) sets forth the grounds for suspension

or revocation of a license, which includes pleading guilty to or being convicted of a

felony. Tex. Occ. Code § 1101.652(a)(1).

a. Factors Determining Fitness to Hold a Real Estate License

Subsequent to a Conviction

There is no dispute that Riekers pled guilty to a felony. The Occupations

Code provides that the Commission “may suspend or revoke a license issued under

this chapter or take other disciplinary action authorized by this chapter . . .” Id. at

§ 1101.652(a). The RLA provides no guidance for evaluating the type of discipline

for violations. However, the Texas Administrative Code sets out the rules relating

to provisions of the Texas Occupations Code under Rule 541.1(a)-(c), entitled

“Criminal Offense Guidelines.” 22 Tex. Admin. Code § 541.1.

In his findings, the ALJ cited the factors the Commission must consider when

determining whether an individual with a criminal conviction is fit to hold a real

estate license5:

(1) the extent and nature of the person’s past criminal activity;

(2) the age of the person at the time of the commission of the offense;

(3) the amount of time that has elapsed since the person’s last criminal

activity;

(4) the conduct and work activity of the person before and following the

criminal activity;

(5) the person’s compliance with the court-ordered terms and conditions

while on parole, supervised release, probation, or community

supervision;

(6) the time remaining, if any, on the person’s term of parole, supervised

release, probation, or community supervision;

(7) evidence of the person’s rehabilitation or rehabilitative effort while

incarcerated or following release; and

(8) other evidence of the person’s present fitness, including letters of

recommendation from: prosecution, law enforcement, and

correctional officers who prosecuted, arrested, or had custodial

responsibility for the person; the sheriff and chief of police in the

community where the person resides; and any other persons in

contact with the person.

22 Tex. Admin. Code § 541.1(c); see also Tex. Occ. Code § 53.023(a).

The ALJ cited the factors contained within 22 Texas Administrative Code § 541.1(b)-(c). The

factors located in § 541.1(b) determine whether a criminal offense not listed in subsection (a) is

directly related to an occupation regulated by the Commission. Because Riekers’ crime is

specifically listed in subsection (a), we need not address the factors in subsection (b).

b. Application of Factors Determining Riekers’ Fitness to Hold

a Real Estate License

In regard to the first factor, Riekers has no other prior criminal activity, so this

factor weighs in favor of Riekers. The second factor would allow the Commission

to consider the youth of the individual at the time of the commission of the offense;

however, Riekers was in his 40s at the time of the offense. The third factor is

inapplicable to Riekers because he has no past criminal activity.

As to the fourth factor, the mitigation evidence provided by Riekers, and

adopted by the Commission, demonstrates his conduct and work activity were

exemplary, as evidenced by letters of recommendation, work commendations, and

proof of involvement and work in his community, dedication to helping others,

spiritual dedication, and commitment to his family. In the PFD, the ALJ details

Riekers’ “exemplary record of service and achievement,” “letters of

recommendation attesting to his good character,” Riekers’ commendations, Riekers’

real estate courses and “desirable designations,” Riekers’ post-conviction

community involvement, Riekers’ post-conviction counseling—which was no

longer required of him, but which he continued to attend, as well as his post-

conviction accountability groups. All of these factual findings were adopted by the

Commission into its final order.

In regard to the fifth factor, the letter from Probation and Pretrial Services

supports a positive finding. The letter states Riekers remained on the low risk

caseload, complied with the terms of his probation, and maintained stable

employment. The probation officers further state Riekers is eligible for early

termination from probation based on his continued compliance. The sixth factor

weighs in favor of Riekers as at the time of the Commission’s consideration of the

ALJ’s decision, Riekers had completed one year of his three-year probation. But the

possible early termination of probation for Riekers indicates the time remaining may

be less than two years. Riekers testified to his rehabilitation, including his real estate

education, volunteer work, current employment and counseling, supporting a

positive finding in regard to the seventh factor.

With respect to the eighth factor, letters of recommendation and

commendation were submitted to the Commission and should have been considered

by the Commission in making its decision. Riekers submitted letters supporting his

present fitness from six different individuals who were familiar with his character

before and after his conviction. Riekers’ supervising broker and employer also

provided a letter of recommendation and expert report for Riekers at the contested

case hearing on July 29, 2016. The letter from Probation and Pretrial Services was

positive in regard to Riekers’ compliance and low risk for recidivism.

The ALJ, in Finding of Fact No. 13, found that Riekers was fit to hold a

revoked real estate license on a probated basis. In reaching this finding, the ALJ

evaluated the extent and nature of Riekers’ past criminal activity; the conduct and

work activity of Riekers before and following the criminal activity; and evidence of

Riekers’ rehabilitation or rehabilitative effort, as well as other evidence of Riekers’

fitness to hold a license. The ALJ addresses Riekers’ felony plea and conviction and

acknowledges the fact that the offense was “not one of youthful indiscretion.” The

evidence in the record also demonstrates that Riekers was compliant with his

probation, though neither the Final Order nor the PFD reference Riekers’

compliance. The analysis narrative from the ALJ is also instructive:

Respondent has shown a remarkable history of good deeds, honesty,

and community involvement. He has presented unwavering support

from all who testified or submitted letters of recommendation. His

dedication to compliance with the law before the offense is apparent.

The fact that he committed a violation of the law is apparent as well,

but that violation appears to be an aberration. His pattern of activity

(both before and after the violation) points to a person who is essentially

honest and trustworthy. Staff makes much of the fact that Respondent’s

offense is very serious; no one questions that determination (even

though it is characterized as a “low risk” violation by the federal

probation office).

In modifying the PFD, the Commission struck Finding of Fact No. 13 in its

entirety. In its place, the Commission does not substitute any findings related to

Riekers’ then present fitness for licensure, other than those discussed, supra, that are

not based on evidence in the record. However, the Commission adopted all of the

ALJ’s other findings of fact, which leaves the Commission without substantial

evidence to support its deletion of Finding of Fact No. 13.

The Commission’s statement that the ALJ did not properly apply or interpret

the Commission’s authority also fails to meet the Commission’s burden to explain

its modifications to the PFD. Tex. Gov’t Code § 2001.058(e). The ALJ correctly

cited the Commission’s authority, the RLA and the Commission Rules. The ALJ

heard from several witnesses and reviewed letters of recommendation that addressed

Riekers’ character and trustworthiness. After considering all the evidence, the ALJ

determined that Riekers was fit to hold a revoked real estate license on a probated

basis. It is not enough for the agency to simply say that the ALJ failed to properly

interpret and apply applicable law; the Commission must provide a specific basis for

modifying the findings of the ALJ. Id.; New World Car Nissan, Inc., 581 S.W.3d at

840.

The Commission must consider all eight of the factors outlined in its agency

rules. 22 Tex. Admin. Code § 541.1(c). The Commission abused its discretion by

disregarding the factors mandated by the Legislature in determining Riekers’ present

fitness to hold a real estate license.

D. The Commission’s Modifications to the ALJ’s Conclusions of Law

In justifying its modification of the ALJ’s Conclusions of Law in the PFD, the

Commission provided the following explanation:

While the ALJ correctly concluded that the Commission met its burden

of proof to revoke Respondent’s license, the ALJ incorrectly concluded

that the Commission did not meet its burden of proof that the revocation

should not be probated. Chapter 1101 of the Texas Occupations Code

allows the Commission to revoke a license issued by the Commission

if the license holder pleads guilty to or is convicted of a felony. See

Tex. Occ. Code § 1101.652(a)(1). Chapter 1101 also gives the

Commission, not the ALJ, discretion to probate a revocation under

reasonable terms determined by the Commissions. Id. § 1101.656(b).