Request By:
Mr. James Farris
Farris Marine
Route 1, Box 369
Old Highway U.S. 25E
Corbin, Kentucky 40701
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Carl Miller, Assistant Attorney General
You have requested an opinion of the Attorney General as to whether the Kentucky Motor Vehicle Dealer Board is properly withholding the granting of a permanent motor vehicle dealer license to you until you change the name of your business. You state that your business is a well known and established corporation and that you do not want to change the name and start again under an unknown name; you have been in the business of dealing in boats and marine equipment and you now want to expand your business to include dealing in camping type motor vehicles. You sent a copy of a letter dated March 13, 1978, from the Division of Inspections, Bureau of Motor Vehicle Regulation, Department of Transportation, in which it is stated that the Board has decided to approve a permanent license for you if you do the following:
"Change the name of your dealership to Farris Marine, Inc. DBA/Farris Motor Homes, or something similar. They feel that if you are going to be a licensed dealer you must let the general public know this. Also, it will be necessary that your insurance be changed accordingly. When you have done these things and sent pictures of your new sign to this office your license will be issued."
We have examined your question from the standpoint of the statutes, administrative regulations, Kentucky Constitution and court decisions. We find nothing in the statutes which requires that the name of a motor vehicle dealer indicate the nature of his business. KRS 190.035, in its last sentence, provides as follows:
"The dealer shall display a sign easily identifiable from the street identifying his business."
The statute does not say that the sign must identify the nature of the business. We see no reason why under this statute the name of the business may not be Farris Marine, Inc. A person or a corporation is identified by his or its name.
The definitions of terms are found in KRS 190.010, and a "motor vehicle dealer" means any person who meets special qualifications. A "person" means a person, partnership, firm, corporation or association. KRS 190.010(15). Since your business is a private corporation existing under KRS 271A, it is a legal entity authorized to operate under its corporate name. There is no statutory authority for the Board to require you to change your name before receiving a permanent license.
The Motor Vehicle Dealer Board has adopted administrative regulations which include the following:
"A motor vehicle dealer shall display on his premises a sign identifying his business, the letters on which shall not be less than 9 inches in height. " 601KAR 20:070 § 1.
The pertinent part of § 2 of the same regulation reads as follows:
"Section 2. An applicant for a dealer's license conducting more than one (1) business at his proposed location shall be scrutinized in regard to his fitness and ability properly to conduct the business of a dealer. (1) If an applicant for motor vehicle dealer's license will be conducting more than one (1) business at the proposed location, and if the primary business being conducted will not be that of a motor vehicle dealer, then the applicant must have the following:
(a) A sign in compliance with Section 1 clearly indicating he is a motor vehicle dealer in addition to any other signs he may have."
The above quoted regulations are the basis of the Board's ruling that you must change the name of your business. We do not believe that these provisions warrant the requirement that a corporation change its name in order to receive a license. We also doubt the validity of the regulations for reasons we will state hereafter.
Requirements that certain businesses display their name and identify their nature are unusual in the statute. There are more provisions restricting the posting of signs than there are which require the posting of signs. For instance, the statute pertaining to the licensing of optomotrists, KRS 320.310(t), provides that the sign of an optomotrist shall not be more than 4 inches in height.
Before a licensing agency can enact rules it must have reasonable grounds for the rules, and the rules must be within its statutory authority. In regard to licensing dealers and motor vehicles, in 57 ALR 2d, pp. 1274 and 1275, we find the following:
"Ordinances failing to lay down any norm or standard for the guidance of licensing officers have been condemned.
* * *
"In an ordinance licensing and regulating 'the business of selling or storing for sale any used or new motor vehicle on vacant lots or land,' the requirement that an applicant for a license to conduct a business involving the storage or display for sale of two or more motor vehicles file an application with the superintendent of the fire prevention bureau, and the provision that the license should not issue until after approval by the building inspector, the superintendent of the fire prevention bureau, and the town council, 'after hearing thereon,' is void for lack of appropriate standards, there being no escape from the essentiality of specific provisions plainly stating the norms or standards which are to guide and control the designated officials in determining whether the license shall be granted or denied. Gross v. Allan (1955) 37 NJ Super 262, 117 A2d 275."
A licensing agency may not constitutionally, under § 2 of the Kentucky Constitution which forbids arbitrary action, exercise discretion on a particular license application without basing its decision on expressed standards set forth in statutes or regulations. In Lovern v. Brown, 390 S.W.2d 448 (1965) it was held that a regulation of an administrative agency to be valid must be within limits contemplated by statutes and the regulation must be reasonable. In American Beauty Homes Corp. v. Louisville & Jefferson County Planning and Zoning Commission, Ky., 379 S.W.2d 450 (1964) it was held that action taken by an administrative agency which is not based upon reasonableness is arbitrary and violates Kentucky Constitution § 2.
In summary, we opine the following:
(1) There is no statutory authority for requiring a corporation to change its name in order to receive a motor vehicle dealer's license.
(2) We know of no reason why a motor vehicle dealer engaged in other business on the same premises would want to keep secret the fact that he is dealing in motor vehicles also. We, therefore, see no rational basis for the requirement that he have a business name which indicates he is dealing in motor vehicles. If there is a rational basis for such a police power requirement, the regulation should be enacted under an authorizing statute.
(3) In this particular case, we believe that the requirement placed upon the applicant, Farris Marine, Inc., by the Motor Vehicle Dealer's Board is arbitrary and therefore invalid.