IN THE SUPREME COURT OF THE STATE OF KANSAS
No. 99,791
BEN J. and LAVELLE FRICK, et al.,
Appellants,
v.
CITY OF SALINA, KANSAS,
A Municipal Corporation,
Appellee.
SYLLABUS BY THE COURT
1. Interpretation of a statute presents a question of law over which appellate courts exercise unlimited review. When a court is called upon to interpret a statute, the intent of the legislature governs if that intent can be ascertained. The legislature is presumed to have expressed its intent through the language it enacted. For this reason, when the language of a statute is plain and unambiguous, courts need not resort to statutory construction.
2. If the face of a statute is subject to more than one interpretation, a court attempting to discern legislative intent may employ rules of statutory construction and look to the historical background of the enactment, the circumstances attending its passage, the purposes to be accomplished, and the effects the statute may have under the various constructions suggested.
3. The Kansas Act for Judicial Review and the Civil Enforcement of Agency Actions, K.S.A. 77-601 et seq., does not apply to the actions of cities, counties, or other political subdivisions of the state.
4. Because K.S.A. 58-3509(a) states that an appeal of an administrative decision regarding relocation benefits due under the Kansas Relocation Assistance for Persons Displaced by Acquisition of Real Property Act, K.S.A. 58-3501 et seq., shall be a trial de novo, the standard of review provisions of the federal Administrative Procedure Act (APA), 5 U.S.C. § 702 et seq. (2006), and the Kansas Act for Judicial Review and the Civil Enforcement of Agency Actions, K.S.A. 77-601 et seq., do not apply.
5. When an appeal is taken from a purely administrative action, the doctrine of separation of powers restricts a reviewing court to a limited form of judicial review, even if a statute provides for de novo review. This narrow standard of review protects against a court's intrusion into an agency's legislative or executive powers. Under this limited review a district court may not, on appeal, substitute its judgment for that of an administrative tribunal and is restricted to considering whether, as a matter of law, (1) the tribunal acted fraudulently, arbitrarily, or capriciously, (2) the administrative order is substantially supported by evidence, and (3) the tribunal's action was within the scope of its authority.
6. Where an administrative agency performs a purely judicial function, the separation of powers doctrine does not prevent a court from conducting a de novo review when a party appeals an agency's action. There are several tests employed in determining whether an administrative agency performs judicial functions. One test is whether the court could have been charged in the first instance with the responsibility of making the decisions the administrative agency must make. Another test is whether the function performed by the administrative agency is one that courts historically have been accustomed to performing and had performed before the creation of the administrative body. A third test focuses on the nature of judicial actions, defining a judicial inquiry as one which investigates, declares, and enforces liabilities as they stand on present or past facts and under existing laws.
7. An administrative hearing examiner determining relocation benefits under the Kansas Relocation Assistance for Persons Displaced by Acquisition of Real Property Act, K.S.A. 58-3501 et seq., performs a judicial function.
8. Statutes allowing de novo review on appeal of an administrative action are to be strictly construed.
9. In natural and ordinary usage, an appeal does not signify a new, original action, it signifies a review of an existing decision. In light of this ambiguity and because statutes allowing for de novo review on appeal of an administrative action are construed strictly unless there is explicit legislative direction otherwise, a provision for de novo review of an administrative action does not alter the appellate nature of the district court's authority.
10. Under K.S.A. 58-3509(a), which provides for an appeal to district court of an administrative hearing examiner's determination of relocation benefits and states that any such appeal shall be a trial de novo only on the issue of relocation benefits, a district court should make independent findings of fact and conclusions of law regarding the question of relocation benefits based upon the record of proceedings before the hearing examiner.
Appeal from Saline district court; DAN D. BOYER, judge. Opinion filed June 5, 2009. Reversed and remanded with directions.
Joseph R. Borich, III, of Leawood, argued the cause, and Douglas J. Patterson, of Leawood, was with him on the briefs for appellants.
Jason B. Prier, of Foth & Orrick, L.L.P., of Overland Park, argued the cause, and Timothy P. Orrick and Anthony J. Orrick, of the same firm, were with him on the brief for appellee.
The opinion of the court was delivered by
LUCKERT, J.: This appeal requires us to determine the standard of review to be applied by a district court when considering an appeal from a determination of relocation benefits under the Kansas Relocation Assistance for Persons Displaced by Acquisition of Real Property Act, K.S.A. 58-3501 et seq. (Kansas Act). The district court rejected the displaced property owners' argument that K.S.A. 58-3509(a), which provides an "appeal to the district court shall be a trial de novo," entitled them to a new trial and determined the separation of powers doctrine required a limited scope of review that considered if the hearing examiner's determination of benefits was supported by substantial competent evidence.
We conclude the district court erred in applying the narrow scope of review that is applicable if an agency makes a purely administrative decision. Here, the hearing examiner performed a judicial function which a court can review de novo. Nevertheless, in prior cases addressing similar statutory provisions which have allowed a trial de novo on appeal from an administrative decision, this court has held that the district court should make independent findings of fact and conclusions of law based on the record before the administrative agency. Applying this precedent, we reverse the district court's decision and remand for application of this standard of review.
Facts and Procedural Background
The City of Salina undertook a public improvement project, generally referred to as the North Ohio Street Improvement Project (the Project), which involved the reconstruction of North Ohio Street, the construction of a bridge over the Union Pacific railway lines, and the redesign and reconstruction of appurtenant side roads. This Project required the City to acquire real property of Ben and Lavelle Frick, on which the Fricks operated a large retail complex that housed numerous businesses. After unsuccessful negotiations for the purchase of the property, the City acquired the property through the power of eminent domain. Court-appointed appraisers awarded the Fricks just compensation for the property, after which the Fricks appealed. The appeal was later dismissed by mutual agreement of the parties.
Meanwhile, the City advised the Fricks of general eligibility requirements and procedures for obtaining relocation benefits for their displaced businesses. The City and the Kansas Department of Transportation (KDOT) had entered into an agreement which governed the Project and provided, in part, that the City and KDOT would share the costs, duties, and responsibilities associated with all aspects of the Project. The City agreed that "it will, in its own name, acquire by purchase, dedication or condemnation, the rights of way, easements and access rights" necessary to complete the Project. Although no federal funding was allocated to the Project, the City and KDOT mutally agreed that the Kansas Secretary of Transportation would provide relocation assistance for eligible persons as defined in the federal Uniform Relocation Assistance Act Amendments of 1987 (Federal Act), 42 U.S.C. § 4601 et seq. (2006), and in accordance with our state counterpart, the Kansas Act, K.S.A. 58-3501 et seq.
The Federal Act and its implementing federal regulations, which are designed to minimize the adverse impact of displacement, apply only in situations where the displacement is a direct result of programs or projects undertaken by a federal agency or with federal financial assistance. 42 U.S.C. § 4621(a)(1) (2006). The Kansas Act was established in order to comply with the Federal Act. K.S.A. 58-3502 provides in part:
"Whenever any program or project is undertaken by the state of Kansas, any agency or political subdivision thereof, under which federal financial assistance will be available . . . and which program or project will result in the displacement of any person by acquisition of real property . . . the state, agency, or political subdivision may:
"(1) Provide fair and reasonable relocation payments and assistance to or for displaced persons . . . .
. . . .
"(4) pay or reimburse property owners for necessary expenses as specified in . . . the federal act."
Attempting to meet these requirements in this case, the parties participated in extensive negotiations regarding relocation benefits. A team of relocation specialists examined the Fricks' relocation process on behalf of the City to determine any benefits to which the Fricks were entitled. The Fricks' requests for relocation benefits were eventually divided into two main categories–Category I consisted largely of move-out expenses and Category II consisted largely of reestablishment and reconnection expenses.
After working with the Fricks to obtain information on the relocation costs for their various businesses, the City paid the Fricks for the relocation of the personal property from the site, i.e., the Category I move-out expenses. The Fricks, dissatisfied with the amount of the payment, appealed and requested an administrative hearing. As required by K.S.A. 58-3509, the City selected an independent hearing examiner to conduct a review of the City's determination of eligible relocation benefits. After the hearing was conducted, the City paid the Category II benefits, the Fricks timely appealed that award, and a second hearing was conducted. Following each hearing, the administrative hearing examiner issued separate decisions that in large part upheld the awards made by the City.
The Fricks appealed both administrative decisions to the district court, and the cases were consolidated. From the start, the parties disagreed about the standard of review to be applied by the district court. The Fricks contended that because the plain language of K.S.A. 58-3509 states that an appeal to the district court "shall be a trial de novo" on the issue of relocation benefits, they were entitled to a trial anew on the merits of the issue. The City argued that the Kansas Act for Judicial Review and the Civil Enforcement of Agency Actions (KJRA), K.S.A. 77-601 et seq., controls and, therefore, the district court's review had to be limited to the administrative record.
The district court issued an order on September 6, 2006, finding that "under either statutory authority the scope of review remains essentially the same; i.e., the court should review the record before the hearing [examiner] to determine if the decision is lawful, supported by the evidence, and reasonable, [not] arbitrary and capricious." The court ruled, however, that the Fricks would be permitted to present additional evidence relevant to the issue of "fair and reasonable relocation payments and assistance" as provided by K.S.A. 58-3502(1). The district court further determined that the KJRA does not apply to this case because the condemning agency and appointing authority is the City of Salina, and cities, by definition, as a political subdivision of the state, are not included in the coverage of the KRJA. Nevertheless, relying on Kansas case precedent, the district court held that because the Fricks sought review of an administrative action, the court's scope of review was limited in light of Rydd v. State Board of Health, 202 Kan. 721, Syl. ¶ 4, 451 P.2d 239 (1969). In Rydd, this court held that the separation of powers doctrine prohibits the legislature from imposing upon the judiciary "the function of a trial de novo of actions of an administrative agency in the sense of authorizing the court to substitute its judgment for that of the administrative agency in matters other than law or essentially judicial matters." 202 Kan. at 729. The district court, therefore, interpreted the term "trial de novo" in K.S.A. 58-3509 to mean a limited review of the administrative record.
Before trial, the Fricks filed their witness and exhibit lists which identified 24 witnesses and numerous exhibits. They also served 37 interrogatories and a broad request for the production of 27 documents. The City responded by filing a motion asking the district court to clarify its September 6, 2006, order. After conducting a hearing at which the parties argued their positions regarding the scope of review and the scope of discovery, the district court granted the City's motion to clarify and modified its previous order.
The district judge acknowledged that in the September 2006 order, "I was trying to have it both ways, make everybody happy, and very often you can't do that. . . . It was not strictly administrative review, because the Court did allow for such other evidence as might be necessary to hear. . . . I think I was wrong on that." On June 19, 2007, the court entered its modified order which prohibited the Fricks from supplementing the agency record with "additional evidence relevant to the issue of fair and reasonable relocation benefits and assistance as provided by K.S.A. 58-3502(1)."
Subsequently, the district court reviewed the transcripts and exhibits of the administrative hearings and concluded that the hearing examiner's findings and conclusions in both written decisions were supported by substantial evidence and the law, including the federal regulations applicable to relocation benefits for displaced businesses. Consequently, the district court affirmed both decisions of the hearing examiner, denied additional relocation benefits to the Fricks, and incorporated by reference the examiner's decisions into the court's order.
The Fricks appealed and filed a motion to transfer their appeal to this court; the motion was granted.
Analysis
Before us the Fricks contend that when they appealed the administrative hearing examiner's decisions regarding relocation benefits, they were entitled to receive a new trial on the merits, with the opportunity to conduct discovery, call new witnesses, and introduce evidence not included in the administrative record. They assert that the district court erred in refusing their requests and limiting the scope of its review.
A. Standard of Review
Determination of the issue of what standard of review should be applied by a district court in an appeal from an administrative hearing examiner's decision regarding relocation benefits requires interpretation of the Kansas Act. Interpretation of statutes presents a question of law over which appellate courts exercise unlimited review. Martin v. Kansas Dept. of Revenue, 285 Kan. 625, 629, 176 P.3d 938 (2008); LSF Franchise REO I v. Emporia Restaurants, Inc., 283 Kan. 13, 19, 152 P.3d 34 (2007).
When a court is called upon to interpret a statute, the intent of the legislature governs if that intent can be ascertained. The legislature is presumed to have expressed its intent through the language it enacted. In re Adoption of G.L.V., 286 Kan. 1034, 1040-41, 190 P.3d 245 (2008). For this reason, when the language of a statute is plain and unambiguous, courts "need not resort to statutory construction." In re K.M.H., 285 Kan. 53, 79, 169 P.3d 1025 (2007), cert. denied 172 L. Ed. 2d 239 (2008). If the face of a statute leaves its construction uncertain, however, a court attempting to discern legislative intent may employ rules of statutory construction and look to the historical background of the enactment, the circumstances attending its passage, the purposes to be accomplished, and the effects the statute may have under the various constructions suggested. In re Adoption of G.L.V., 286 Kan. at 1041; State ex rel. Morrison v. Oshman Sporting Goods Co. Kansas, 275 Kan. 763, 768-69, 69 P.3d 1087 (2003).
These rules must be applied to the statutes governing the procedures for determining relocation benefits in order to determine the legislature's intent regarding the standard of review applicable to appeals of an administrative hearing examiner's decision.
B. The Kansas Act
Under the Kansas Act, the condemning authority must determine the fair and reasonable relocation benefits that conform to guidelines in the Federal Act and provide notice of the benefits to the displaced person. K.S.A. 58-3508. Within 60 days of receiving notice of the determination of such benefits, any displaced person entitled to relocation benefits may appeal to the "state, agency or political subdivision." K.S.A. 58-3509. The state, agency, or political subdivision must appoint an "independent hearing examiner" to render a decision on the appeal. K.S.A. 58-3509.
The statutes do not outline the procedure to be applied in the hearing, but administrative regulations fill the gap. See K.A.R. 36-16-1 et seq. Under the regulations, the hearing examiner must provide at least 10 days' notice of a hearing. K.A.R. 36-16-6. The regulations also require that a record be made of the hearing, which is to be "conducted in such a manner as to give the appellant an opportunity to be heard upon relevant issues." K.A.R. 36-16-7. The regulations, speaking in terms of KDOT's rights, allow attorney representation, examination of witnesses, and the introduction of documentary evidence. Following the hearing, the hearing examiner is required to prepare a report, make findings and recommendations, and prepare a proposed order containing the findings of fact and conclusions of law for the approval of the Secretary of KDOT or the Secretary's designee. K.A.R. 36-16-7.
As a final due process step, any displaced person may file an appeal in district court within 30 days of the written order. "Any such appeal to the district court shall be a trial de novo only on the issue of relocation benefits." K.S.A. 58-3509(a).
These requirements also apply to all acquisitions of real property by a county, township, or city if federal or KDOT funds are used to acquire property for a highway, road, or street. See K.S.A. 58-3502; K.S.A. 58-3503; K.S.A. 58-3506; K.A.R. 36-16-21. K.A.R. 36-16-21(b) specifies that KDOT will administer the relocation funds "except as otherwise agreed between the department and the governmental entity involved."
These procedures provide a displaced person the due process typically associated with a trial, including a record. See Kempke v. Kansas Dept. of Revenue, 281 Kan. 770, 776, 133 P.3d 104 (2006); Windholz v. Willis, 1 Kan. App. 2d 683, 685, 573 P.2d 1100 (1977); cf. K.S.A. 20-302b(c) (making necessary distinction between "civil cases where a record was made of the action or proceeding before the district magistrate judge, [in which] the appeal shall be tried and determined on the record by a district judge," and appeals without a record which must have new trial). Had this process not be guaranteed, the nature of appellate review would change or even be impossible.
C. Appeal by Trial De Novo
Even though the Fricks had the opportunity to present evidence to the hearing examiner and a review of the administrative record was possible on appeal, they argue that K.S.A. 58-3509(a) entitles displaced property owners to a new trial with additional witnesses and evidence. In making this argument, the Fricks focus on the phrase "trial de novo" and point to the definition of a "hearing" de novo, which is "[a] reviewing court's decision of a matter anew, giving no deference to a lower court's findings. A new hearing . . . [is] conducted as if the original hearing had not taken place." Black's Law Dictionary 725 (7th ed. 1999). In response, the City focuses on the word "appeal" and argues that a broad interpretation of the de novo language conflicts with (1) provisions of the KJRA, (2) the Kansas Legislature's intent to follow the Federal Act and its implementing regulations, (3) the separation of powers doctrine, and (4) this court's strict construction of de novo administrative appeal statutes. Hence, we must consider whether any of these provisions or doctrines applies and, if so, how it influences our interpretation of the phrase in K.S.A. 58-3509(a) that states the "appeal . . . shall be a trial de novo."
1. KJRA
In the district court, the City argued that the KJRA controlled and limited the court's standard of review. Although the district court agreed that its review of an administrative action should be limited, it found that the KJRA was not applicable under the definitions of K.S.A. 77-602(a) and K.S.A. 77-602(k) because the City of Salina was involved in the current action.
K.S.A. 77-602(a) provides that under the KJRA, the term "agency" means "a state agency." K.S.A. 77-602(k) provides the definition of "state agency":
"'State agency' means any officer, department, bureau, division, board, authority, agency, commission or institution of this state which is authorized by law to administer, enforce or interpret any law of this state but does not include any political or taxing subdivision of the state, or any agency thereof, or the judicial or legislative branch of state government." (Emphasis added.)
This court has reiterated what is contained in this plain statutory language–the KJRA does not apply to the actions of cities, counties, or other political subdivisions of the state. See, e.g., Kaplan v. Board of Johnson County Comm'rs, 269 Kan. 122, 125, 3 P.3d 1270 (2000); Landau v. City Council of Overland Park, 244 Kan. 257, 273, 767 P.2d 1290 (1989); Coffman, Procedures Under the Kansas Act for Judicial Review and Civil Enforcement of Agency Actions, K.S.A. 77-601 et seq., 76 J.K.B.A. (Feb. 2007).
Regardless, the City contends that the KJRA should apply to this case because the displacement of the Fricks' businesses resulted from a joint improvement project between the City and KDOT, a state agency. KDOT is a "department" of the State of Kansas under K.S.A. 2008 Supp. 75-5001, which also makes it a state agency under the K.S.A. 77-602(k) definition. The City argues that the KJRA would otherwise apply to KDOT and it should also apply to the City, which as the principal on the improvement project, decided to "step into the shoes" of KDOT and administer relocation benefits.
What cannot be ignored, however, is that under the agreement between the City and KDOT, the City was the principal in the Project and all property rights were to be acquired in the City's name. In compliance with this agreement, the City, not KDOT, was the condemning authority that actually acquired the Fricks' property. Thus, it was the City's action that caused the relocation expenses to be incurred, giving rise to the right to benefits, and in clear terms, the KJRA does not apply to city actions. The district court correctly concluded that the KJRA does not apply in this case.
2. Federal Act
Even if the KJRA does not apply, the City contends that a limited review should apply to the district court's consideration of the administrative hearing examiner's decisions regarding relocation benefits because of the Kansas Legislature's intent to follow the Federal Act, 42 U.S.C. § 4601 et seq. While the Federal Act itself does not apply in this case because federal funding was not utilized, the parties agree that the Kansas Legislature enacted the Kansas Act, K.S.A. 58-3501 et seq., for the purpose of implementing the Federal Act by requiring Kansas agencies and departments to comply with its provisions when providing relocation payments and assistance. See K.S.A. 58-3501.
The City takes this concept another step and argues that although the Kansas Act does not specifically direct courts to do so, the "consistent, harmonious and sensible conclusion" is that the legislature intended to apply the principles of administrative review that have been applied under the Federal Act. According to the federal courts, a denial of relocation benefits under the Federal Act is an administrative agency action that may be judicially reviewed under the federal Administrative Procedure Act (APA), 5 U.S.C. § 702 et seq. (2006). See Starke v. Secretary, U.S. Dept. of Housing, 454 F. Supp. 477, 480 (W.D. Okla. 1976).
Under the APA, "'de novo review is appropriate only where there are inadequate fact finding procedures in an adjudicatory proceeding, or where judicial proceedings are brought to enforce certain administrative actions.' [Citation omitted.]" Kroger Co. v. Regional Airport Auth. of Louisville, 286 F.3d 382, 387 (6th Cir. 2002); see also K.S.A. 77-619 (under KJRA a court may "receive evidence, in addition to that contained in the agency record for judicial review, only if it relates to the validity of the agency action at the time it was taken and is needed to decide disputed issues regarding: [1] Improper constitution as a decision-making body; or improper motive or grounds for disqualification, of those taking the agency action; or [2] unlawfulness of procedure or of decision-making process.").
Usually, under the APA "'[t]he focal point for judicial review should be the administrative record already in existence, not some new record made initially in the reviewing court.'" Kroger Co., 286 F.3d at 387 (quoting Camp v. Pitts, 411 U.S. 138, 142, 36 L. Ed. 2d 106, 93 S. Ct. 1241 [1973]). The APA, like the KJRA, provides that a court will review an agency's findings of fact under a substantial competent evidence standard. Compare 5 U.S.C. § 706(2)(E) (2006) with K.S.A. 77-621(c)(7). In this case, the district court applied this standard, although through operation of the separation of powers rather than the KJRA. Nevertheless, the district court noted that the end result was the same–i.e., under either chain of analysis the substantial competent evidence became the standard of review.
The City suggests this commonality and the intent to implement the Federal Act require use of the substantial competent evidence standard and a recognition that de novo review is available only in the limited circumstances allowed under the APA. However, this argument is contrary to the plain language of K.S.A. 58-3509(a), which provides for a standard of review and states that standard as a "trial de novo." In contrast, the Federal Act does not mention a right to appeal, an omission which initially caused some uncertainty and gave rise to arguments that the Federal Act committed the determination of relocation benefits to the agency's discretion and the decision was not subject to judicial review. See, e.g., Starke, 454 F. Supp. 477. Federal courts have generally rejected this argument and concluded the APA applies. E.g., Kroger Co., 286 F.3d at 387; Starke, 454 F. Supp. at 480; see 5 U.S.C. § 702 (2006) ("A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof.").
The same framework could have been established in Kansas, at least when KDOT was the agency providing benefits. Had the Kansas Legislature followed Congress' lead, it could have said nothing about judicial review or about allowing an appeal to district court. Under that scenario, the standard of review specified in the KJRA would have applied to any determinations made by KDOT because by its express terms the KJRA "applies to all agencies and all proceedings for judicial review and civil enforcement of agency actions not specifically exempted by statute from the provisions." K.S.A. 77-603(a). Furthermore, the legislature could have extended the substantial competent evidence scope of review to all projects covered by the Kansas Act, even if the displacement resulted from an action by a political subdivision of the state, by simply restating the standard found in K.S.A. 77-621(c)(7) and 5 U.S.C. § 706(2)(E) or incorporating one of those provisions. Yet, the Kansas Legislature adopted K.S.A. 58-3509(a), specifically allowing for an appeal rather than judicial review and stating that "[a]ny such appeal to district court shall be a trial de novo only on the issue of relocation benefits" rather than adopting the standard of review in the APA or KJRA.
By adopting this process, the Kansas Legislature clearly deviated from the Federal Act. Thus, even though there is clear expression of intent by the Kansas Legislature to implement the federal scheme for relocation benefits, there is an equally clear adoption of a different standard of review for an appeal of the decision allowing relocation benefits.
3. Separation of Powers Doctrine
Next, the City argues true de novo review via a new trial is constrained by the separation of powers doctrine. Under this doctrine, even if a statute provides for de novo review, this court "has almost universally applied this doctrine of separation of powers to various appeal statutes providing for appeals from purely administrative tribunals, ruling that the court may not substitute its judgment on questions of fact for that of an administrative tribunal." (Emphasis added.) Gawith v. Gage's Plumbing & Heating Co., Inc., 206 Kan. 169, 174, 476 P.2d 966 (1970).
In such a circumstance–i.e., where the review is of a purely administrative action– the doctrine of separation of powers restricts a reviewing court to a limited form of judicial review, even if a statute provides for de novo review. This narrow standard of review protects against a court's intrusion into an agency's legislative or executive powers. Under this limited review:
"'A district court may not, on appeal,