TABC v. AGA Trading, Inc.  (Tex.App.- Houston [14th Dist.] Oct. 8, 2009)(Yates)
(liquor licence revocation, alcoholic beverage license, notice issue, default agency order)  
REVERSED AND RENDERED: Opinion by Justice Brock Yates      
Before Chief Justice Hedges, Justices Brock Yates and Frost  
14-08-00151-CV Texas Alcoholic Beverage Commission v. AGA Trading Inc., d/b/a San Diego Food
Appeal from 434th Judicial District Court of Fort Bend County
Trial Court Judge: The Honorable James H Shoemake

M E M O R A N D U M   O P I N I O N

This case involves a district court's reversal of an agency order.  In two issues, appellant Texas
Alcoholic Beverage Commission (“TABC") asserts that the district court erred by reversing a TABC
order cancelling an alcoholic beverage permit held by AGA Trading, Inc., d/b/a San Diego Food Mart
(“AGA").  For the reasons discussed below, we reverse and render judgment affirming TABC's original

TABC brought an enforcement action against AGA to cancel its Wine and Beer Retailer's Off-Premise
Permit, alleging that AGA made a false or misleading statement in connection with its permit
application.  According to a certificate of service signed by TABC's representative, on July 3, 2007,
TABC sent notice of a hearing on the enforcement action to AGA at AAga Trading Inc., d/b/a San
Diego Food Mart, 311 S Doctor Ee Dunlap St, San Diego, TX 783849998"; TABC's records show AGA's
address as “311 S. Doctor Ee Dunlap Street, San Diego, Texas 78384."  The signed green card was
returned and showed that the notice of hearing was delivered on July 5.  The typed portion of the
green card contains the same address as the certificate of service, but at some point, the part of the
typed address on the green card that indicates “St" was marked through and “Hwy" was handwritten
alongside it.  AGA failed to appear, and the hearing proceeded on a default basis.  The presiding
administrative law judge made findings of fact - including a finding that AGA “received the Notice of
Hearing on July 5, 2007" - and recommended that TABC cancel AGA's permit.  TABC's Assistant
Administrator subsequently issued an order adopting the administrative judge's findings and cancelling
AGA's permit.  AGA filed a motion for rehearing claiming it had not received actual notice of the hearing
and asserting a defense to the allegation that it had made a false or misleading statement.  Attached to
the motion was, among other things, an affidavit signed by Rafiq Merchant, AGA's president, asserting
he “did not receive actual notice of the hearing."  TABC denied the motion for rehearing, and AGA
appealed to the district court.  The district court reversed, finding that notice was ineffective because
there were “address problems" and the signature on the green card “clearly" was not Merchant's.  This
appeal followed.

In its first issue, TABC argues that the trial court erred in reversing its order because there was
substantial evidence to support a finding that AGA received notice of the hearing.  We review TABC's
order under the substantial evidence rule.  See Tex. Alco. Bev. Code Ann. § 11.67(b) (Vernon 2007);
Tex. Gov't Code Ann. ' 2001.174(2) (Vernon 2008).  The substantial evidence rule gives courts a
limited standard of review and grants significant deference to agency expertise.  R.R. Comm'n of Tex.
v. Torch Operating Co., 912 S.W.2d 790, 792 (Tex. 1995); Tex. Dep't of Pub. Safety v. Guajardo, 970
S.W.2d 602, 605 (Tex. App.- Houston [14th Dist.] 1998, no pet.).  “The true test is not whether the
agency reached the correct conclusion, but whether some reasonable basis exists in the record for the
action taken by the agency."  City of El Paso v. Pub. Util. Comm'n of Tex., 883 S.W.2d 179, 185 (Tex.
1994); see also Guajardo, 970 S.W.2d at 605.  Substantial evidence is more than a mere scintilla of
evidence, but the record may actually preponderate against the agency decision and nonetheless
amount to substantial evidence.  Torch Operating Co., 912 S.W.2d at 792-93.  The agency's findings,
inferences, conclusions, and decisions are presumed to be supported by substantial evidence, and the
party appealing the agency decision has the burden of proving otherwise.  City of El Paso, 883 S.W.2d
at 185.  If evidence can support either affirmative or negative findings, the agency's decision must be
upheld.  Tex. Health Facilities Comm'n v. Charter Med.-Dallas, Inc., 665 S.W.2d 446, 453 (Tex. 1984);
Guajardo, 970 S.W.2d at 605.  The substantial evidence rule applies to notice issues in an agency
setting.  See Anderson v. R.R. Comm'n of Tex., 963 S.W.2d 217, 219B20 (Tex. App.- Austin 1998, pet.

At the time TABC sent notice, the Texas Administrative Code provided that hearings could proceed on
a default basis where (1) the agency rules authorized service by sending notice of hearing to the
party's address of record with the agency and (2) there was credible evidence that notice was sent.  
See 1 Tex. Admin. Code ' 155.55(c) (2007) (State Office of Admin. Hearings, Default Hearings),
repealed in 33 Tex. Reg. 9451 (2008) (effective Nov. 26, 2008).  At the time, the Administrative Code
required that TABC send notice of hearings to permittees at their last known address as reflected in
TABC's records.  See 16 Tex. Admin. Code ' 37.3(b) (2004) (Tex. Alco. Beverage Comm'n, Service of
Pleadings & Notice of Hearing), repealed in 33 Tex. Reg. 2535 (2008) (effective Mar. 26, 2008).

TABC presented evidence that it sent the notice to AGA at the address indicated in TABC's records
and that it received a signed green card in return.  This is substantial evidence from which the agency
could have reasonably concluded that AGA had actual notice of the hearing.  See Anderson, 963 S.W.
2d at 219-20 (concluding that evidence of sending notices to address on file and receipt of signed
green cards was substantial evidence to support agency finding of proper notice, even though
defendant denied receiving notices); see also Morris v. State, 894 S.W.2d 22, 24B25 (Tex. App.- Austin
1994, writ dism'd w.o.j.) (finding sufficient evidence to prove ten days' notice of hearing based on
mailing notices to address on file, even though defendant denied receiving notices).

AGA argues that actual notice is required and claims it did not have actual notice, relying on
Merchant's affidavit.   We need not determine if constructive notice is sufficient or if actual notice is
required because the agency's finding of actual notice was reasonable and supported by the record.  
Merchant denied receiving the hearing notice, but his denial does not conclusively prove the truth of
his assertion.  See Anderson, 963 S.W.2d at 219B20; Morris, 894 S.W.2d at 24-25.  The agency was
entitled to resolve conflicts in the evidence, and when, as here, the evidence could support a finding
either way, the agency's decision must be upheld.  See City of El Paso, 883 S.W.2d at 185; Charter
Med.-Dallas, 665 S.W.2d at 453; Guajardo, 970 S.W.2d at 605.

The district court impermissibly substituted its judgment for that of the agency by focusing on what it
determined to be “address problems" and a green card signature that the district court did not believe
was Merchant's.  However, the agency's resolution of these issues against AGA was not unreasonable.  
As to the address issue, there is no evidence in the record regarding who made the handwritten
change in the address from “Dunlap St" to “Dunlap Hwy" or when that change was made.  It is just as
likely that the change (1) was made by AGA or a third party as by TABC or (2) was made after TABC
sent the notice rather than before.  Further, there is no evidence that the handwritten change made
AGA's address incorrect or would have prevented the notice from reaching AGA.

As to the signature issue, the district court concluded that the signature on the green card was not
Merchant's because it did not match the signature on his affidavit.  Nevertheless, the agency could
have reasonably concluded the signature was Merchant's or that of someone authorized to receive mail
for him.  Though the signature is mostly illegible, the signature clearly starts with an R, as does
Merchant's first name, Rafiq.  Further, that the signature on the green card does not appear to be the
same as the signature on the affidavit does not make the agency's determination unreasonable; the
agency could have determined that the style of Merchant's signature on his affidavit, in which he
effectively denied signing the green card showing receipt of the hearing notice, was not representative
of his usual signature.  Alternatively, the agency could have reasonably concluded that the notice was
sent to the proper address (as discussed above) and therefore whoever signed for it had authority to
receive mail for AGA.  Under either scenario, the agency could have reasonably determined that AGA
received the mailing of the hearing notice.  Accordingly, TABC's first issue is sustained.[1]

In conclusion, because the agency's finding that AGA received actual notice is reasonable based on
the record, the district court erred in reversing the agency's order.  We therefore reverse the district
court's judgment and render judgment affirming the agency's order.

/s/      Leslie B. Yates


Panel consists of Chief Justice Hedges and Justices Yates and Frost.

[1]  Because we have sustained TABC's first issue, we need not address TABC's second issue, in
which it asserts that the default judgment was supported by AGA's failure to comply with the
requirements of Craddock v. Sunshine Bus Lines, Inc., 133 S.W.2d 124 (Tex. 1939).