Opinion ID: 1129577
Heading Depth: 1
Heading Rank: 3

Heading: retroactivity of 1988 amendment

Text: REQUIRING APPLICANTS TO PAY ADDITIONAL FEES In January 1988, when appellants' applications were filed, both K.S.A. 1987 Supp. 74-8813 and K.S.A. 1987 Supp. 74-8815 provided that the applications be accompanied by a nonrefundable fee of $5,000 and further provided that if a facility owner applicant planned to construct a racetrack, the applicant must deposit $500,000 with the Commission. K.S.A. 1987 Supp. 74-8813(a) and 74-8815(c) were amended effective April 7, 1988, as follows: If the application fee is insufficient to pay the reasonable expenses of processing the application and investigating the applicant's qualifications for licensure, the commission shall require the applicant to pay to the commission, at such times and in such form as required by the commission, any additional amounts necessary to pay such expenses. No license shall be issued to an applicant until the applicant has paid such additional amounts in full, and such amounts shall not be refundable except to the extent that they exceed the actual expenses of processing the application and investigating the applicant's qualifications for licensure. K.S.A. 1988 Supp. 74-8813(a) and 74-8815(c). The background investigations began on March 7, 1988. On August 4, 1988, the Commission notified WCEDC and KRM that the additional cost for background investigations totalled $58,864.88 and requested payment of this amount. Only the costs incurred in investigations conducted after the effective date of the amendment were included in the amount charged. It is appellants' contention that the assessment of additional fees is an impermissible retroactive application of the 1988 amendment which disturbs rights vested before the effective date of the amendment. Appellants reason that the amendment may only be applied to those who submitted applications to the Commission after the effective date of the amendment. The Commission argues that the applicants' interest in the license fees is not a vested right and, in the alternative, that the assessment of costs incurred after the effective date of the Act is a prospective application of the amendment. A retroactive law is one which takes away or impairs vested rights acquired under existing laws, or creates a new obligation and imposes a new duty, or attaches a new disability, in respect to transactions or considerations already past. 73 Am.Jur.2d, Statutes § 348, p. 486. A statute operates prospectively unless its language clearly indicates a legislative intent that it operate retroactively. This rule is normally applied when an amendment to an existing statute or a new statute is enacted which creates a new liability not existing before under the law or which changes the substantive rights of the parties. Davis v. Hughes, 229 Kan. 91, 101, 622 P.2d 641 (1981) (citing Nitchals v. Williams, 225 Kan. 285, 590 P.2d 582 [1979]). However, when a change in the law merely affects the remedy or law of procedure, all rights of action will be enforced under the new procedure without regard to whether they accrued before or after such change of law. Nitchals v. Williams, 225 Kan. at 291. The act of filing an application for a racing license fails to generate any vested rights as long as the application is still pending. Specifically, the appellants had no vested rights in the amount of the application fee while their applications were pending before the Commission. Furthermore, the statute is procedural and merely sets out the steps an applicant must follow when requesting a license from the Commission. We observe that, prior to the effective date of the amendment, any of the applicants could have withdrawn its application and escaped the additional cost. Instead, each applicant chose to proceed in the hope of obtaining a license. Finally, since the appellants were only charged for costs incurred after the effective date of the amendment, the application of the amendment was prospective. Arbitrary and Capricious Appellants claim that the Commission's decision to award the organization license to TRAK East and the facility manager and owner license to Sunflower was arbitrary, capricious, and an abuse of discretion. It is important to recognize that the legislature has limited our scope of review of grants or denials of original licenses under the Act. K.S.A. 1987 Supp. 74-8813 and 74-8815 originally provided that denials of organization as well as facility manager and owner licenses would be governed by the Kansas Administrative Procedure Act, K.S.A. 1987 Supp. 77-501 et seq. This language was repealed in 1988, and 74-8813 and 74-8815 were amended with identical language as follows: The grant or denial of an original organization license shall not be subject to the Kansas administrative procedure act. Such grant or denial shall be a matter to be determined in the sole discretion of the commission, whose decision shall be final upon the grant of a license to one of two or more competing applicants without the necessity of a hearing on the denial of a license to each other competing applicant. Any action for judicial review of such decision shall be by appeal to the supreme court in accordance with the act for judicial review and civil enforcement of agency actions, except that the scope of review shall be limited to whether the action of the commission was arbitrary or capricious or constituted an abuse of discretion. All competing applicants for the organization license shall be parties to such appeal. Any such appeal shall have priority over other cases except those having statutory priority. K.S.A. 1988 Supp. 74-8813(v) and 74-8815(m). The legislative intent in enacting this amendment is clearly to expedite any appeals of licensing decisions so that construction of the racing facilities can proceed in a timely manner. This intent is further demonstrated by the legislature's narrowing of our original scope of review under the Act for Judicial Review and Civil Enforcement of Agency Actions, K.S.A. 77-621(c), which provides: (c) The court shall grant relief only if it determines any one or more of the following: (1) The agency action, or the statute or rule and regulation on which the agency action is based, is unconstitutional on its face or as applied; (2) the agency has acted beyond the jurisdiction conferred by any provision of law; (3) the agency has not decided an issue requiring resolution; (4) the agency has erroneously interpreted or applied the law; (5) the agency has engaged in an unlawful procedure or has failed to follow prescribed procedure; (6) the persons taking the agency action were improperly constituted as a decision-making body or subject to disqualification; (7) the agency action is based on a determination of fact, made or implied by the agency, that is not supported by evidence that is substantial when viewed in light of the record as a whole, which includes the agency record for judicial review, supplemented by any additional evidence received by the court under this act; or (8) the agency action is otherwise unreasonable, arbitrary or capricious. Pursuant to the legislature's amendment to the Act, our review is limited to a determination only of whether the Commission's decision was arbitrary or capricious or constituted an abuse of discretion. K.S.A. 1988 Supp. 74-8813(v) and 74-8815(m). Under our limited scope of review of the Commission's grant of a license, the arbitrary and capricious test relates to whether that particular action should have been taken or is justified, such as the reasonableness of the Commission's exercise of discretion in reaching the determination, or whether the agency's action was without foundation in fact. Pork Motel, Corp. v. Kansas Dept. of Health & Environment, 234 Kan. 374, 381, 673 P.2d 1126 (1983). Arbitrary or capricious conduct may be shown where an administrative order is not supported by substantial evidence. U.S.D. No. 461 v. Dice, 228 Kan. 40, 50, 612 P.2d 1203 (1980) (citing Neeley v. Board of Trustees, Policemen's & Firemen's Retirement System, 212 Kan. 137, Syl. ¶ 3, 510 P.2d 160 [1973]). Substantial evidence is evidence which possesses both relevance and substance, and which furnishes a substantial basis of fact from which the issues can be reasonably resolved. In re Petition of City of Shawnee for Annexation of Land, 236 Kan. 1, 21, 687 P.2d 603 (1984). This court may not try the case de novo or substitute its judgment for that of the administrative agency. In re Certif. of Need App. by Community Psychiatric Centers, Inc., 234 Kan. 802, Syl. ¶ 2, 676 P.2d 107 (1984). A rebuttable presumption of validity attaches to all actions of an administrative agency and the burden of proving arbitrary and capricious conduct lies with the party challenging the agency's actions. Appellants contend initially that the order in question is arbitrary and capricious since it is not based on sufficient findings of fact. Appellants cite the following language from Blue Cross & Blue Shield v. Bell, 227 Kan. 426, 607 P.2d 498 (1980): An administrative agency must assume the responsibility of expressing the basic facts on which it relies with sufficient specificity to convey to the parties, as well as to the court, an adequate statement of the facts which persuaded the agency to arrive at its decision. Thus, there must be findings on all applicable standards which govern the agency's determination, and the findings must be expressed in language sufficiently definite and certain to constitute a valid basis for the order, otherwise the order cannot stand. [Citation omitted.] Findings of ultimate fact expressed in the language of the applicable statute are not enough in the absence of basic findings to support them. 227 Kan. at 433-34. In Blue Cross, the applicable statute required the agency to make specific findings when denying a filing requesting an insurance rate increase. Similarly, in In re Tax Appeal of Horizon Tele-Communications, Inc., 241 Kan. 193, 734 P.2d 1168 (1987), the applicable statute required the Kansas Board of Tax Appeals to make written findings forming the basis for its determinations. We held that, although a more detailed and specific order would have been preferable, the order did contain sufficient facts and the record contained sufficient evidence supporting the agency's conclusions. 241 Kan. at 197. Here, the Act has no requirement that the Commission make written findings of fact. Specific findings of fact by an administrative agency, while desirable in contested matters, are not indispensable to a valid decision in the absence of a statute or rule requiring them. Olathe Hospital Foundation, Inc. v. Extendicare, Inc., 217 Kan. 546, Syl. ¶ 9, 539 P.2d 1 (1975). The Act does enumerate the qualifications for successful licensure and provides a list of factors which the Commission shall consider in reaching its decision. The Commission's order demonstrates compliance with the statutory criteria and factors. We observe that the Commission's order does not undertake a comparison of the competing applicants; however, there is no statutory requirement to do so. The order emphasizes that two of the primary considerations in awarding the licenses to TRAK East and Sunflower were the proposed dual horse and greyhound facility track and the fact that TRAK East's principals planned to invest $12.9 million of their own funds toward the project. Although the order could have been more specific, considering the unusual discretion vested in the Commission and considering the record as a whole, the order was supported by substantial evidence. K.S.A. 1988 Supp. 74-8813(e) authorizes the Commission to grant licenses if it finds that the issuance would be within the best interests of horse and greyhound racing within this state from the standpoint of both the public interest and the horse or greyhound industry, as determined solely within the discretion of the commission. For their final point on this issue, appellants contend that, despite the broad authority vested in the Commission, the grant of the licenses to TRAK East and Sunflower was an abuse of discretion. Appellants premise this argument on the allegation that the Commission disregarded material, knowing misrepresentations and omissions in the conditional licensees' application. While we note that appellants have combed the record to discover discrepancies in documents submitted to the Commission, we cannot assume that these discrepancies were disregarded, but rather that the Commission considered them and found them immaterial to their decision. Appellants rely on K.S.A. 1988 Supp. 74-8813(j)(5), which provides that the Commission may suspend or revoke an organization license or impose a civil fine for violations including providing to the commission any information material to the issuance, maintenance or renewal of the licensee's license knowing such information to be false or misleading. Appellants' reliance on this provision of the Act is misplaced. The provision does not enable appellants to raise these issues on appeal nor does it prescribe penalties for violations occurring during the licensing process. Rather, the provision gives the Commission discretion to penalize licensees as it sees fit after it becomes aware of possible violations. The alleged misrepresentations are as follows: 1. TRAK East stated in its application that it had not been reincorporated or reorganized during the last five years. Appellants point out that an entity known as The Racing Association of Kansas East was incorporated in Johnson County May 1987 and dissolved in January 1988. Thereafter, another entity, The Racing Association of Kansas East was incorporated in Wyandotte County. It is TRAK East's position that the second entity was separate and distinct, with different incorporators, and that any omission on the application was inadvertent. What appellants fail to show, in any case, is how the earlier brief incorporation, with dissolution occurring before the corporation conducted any business, could have been material to the application process or material to the Commission's proper determination of TRAK East as a bona fide nonprofit corporation. 2. Appellants argue that contracts between TRAK East and Sunflower, which it alleges existed before the applications were filed, also affect the nonprofit status of TRAK East as well as the financial projections of Sunflower and TRAK East. Appellants point to a certified audit performed by Arthur Andersen & Co. covering the period July 11, 1986, to December 31, 1987, which indicates that executed contracts may have existed between TRAK East and Sunflower prior to March 1, 1988, which was the date of execution identified by both parties at the time of application. TRAK East and Sunflower maintain the auditors received final drafts of the contracts which were executed on March 1, 1988. Again, although appellants may have discovered a discrepancy in dates, they have not shown how the discrepancy would be material to the licensing decision. Further, since all the documents establishing the alleged inconsistent dates were before the Commission during the licensing process, we can assume the Commission did not consider the discrepancy to be material. 3. Appellants also claim that Sunflower failed to provide documentation for a loan of $1.75 million from Southeast Bank of Miami, Florida, which was guaranteed by Sunflower's stockholders, as required by K.A.R. 112-3-8(q)(13) and (14). They concede, however, that the loan was disclosed and they do not allege any discrepancy between the disclosure and the documents. Again, the Commission appears not to have considered this technical noncompliance to be material. 4. Appellants allege that Sunflower knowingly failed to disclose subordinated debt agreements between R.D. Hubbard, Richard J. Boushka, and Sunflower as well as a contract or option to purchase whereby Hubbard acquired 10% of Boushka's interest in Sunflower. However, an order dated October 28, 1988, reveals that all the documents evidencing these transactions were executed after the conditional license was awarded and that each was presented to the Commission and approved in the order. 5. Finally, appellants contend that the awarding of the licenses to TRAK East and Sunflower was an abuse of discretion because appellants were the better applicants. They argue that a comparison of the competing applications demonstrates that the Commission disregarded the interests of the horse and greyhound industries and the public interest in maximizing charitable returns. KRM bases this argument on a comparison of all four applicants prepared by one of its principals, Norman Rose, which it claims demonstrates the superiority of their facility over that of the licensees' in the following particulars: WCEDC, rather than private developers, would own the facility; more charitable funds would accumulate since WCEDC would receive a greater percentage of gross handle than TRAK East; and WCEDC's facility would be less expensive and generally more benefits would devolve on the community than on private developers. It must be remembered that the legislature delegated to the Commission the task of selecting licensees from a group of qualified applicants. The legislature presumably vested the Commission with the sole discretion for issuing licenses because of the expertise it possesses in this area. In performing this task, the Commission had to balance many competing interests, which we cannot reweigh on appeal. It would have been easier for this court to review the decision below had the Commission's order provided a more detailed reasoning for its choice. However, it is clear that the Commission found the personal investment of $12.9 million by the principal shareholders of Sunflower and the proposed dual racetrack facility to be important factors in the licensing decision. We cannot substitute our judgment for that of the Commission, but may only review its decision to determine whether it was arbitrary, capricious, or an abuse of discretion. Considering our limited scope of review on this issue, it cannot be said that the Commission abused its broad discretion in awarding the licenses to TRAK East and Sunflower. We find the Commission's grant of the organization license to TRAK East and the facility manager and owner licenses to Sunflower was neither arbitrary or capricious nor an abuse of its discretion. Affirmed.