Opinion ID: 1317361
Heading Depth: 1
Heading Rank: 3

Heading: lack of a hearing before the circuit court

Text: The appellant asserts that she was not given the opportunity to be heard before the circuit court to refute and to complain of the factual findings and conclusions of law made in the December 23, 1992, order of the hearing examiner. In her appeal to the circuit court, the appellant requested an opportunity to offer additional evidence to support her case. [6] The appellant never received such an opportunity. The issue before this Court is whether the circuit court is obligated to give a taxpayer a de novo hearing on appeal. We conclude the circuit court is not obligated nor constitutionally permitted to conduct a de novo appeal. Rather, we find, unless the request to receive new evidence comes within the limited exceptions we authorize in this opinion, the circuit court only may permit the introduction of additional evidence by remanding the case to the Tax Commissioner for a new or supplemental hearing so that a complete record can be developed for judicial review. A circuit court's review of an administrative decision issued under the Tax Commissioner is controlled by W.Va.Code, 11-10-10(e) (1986). W.Va.Code, 11-10-10(e), provides, in relevant part:  Hearing of appeal.  The [circuit] court shall hear the appeal and determine anew all questions submitted to it on appeal from the determination of the tax commissioner. In such appeal a certified copy of the tax commissioner's notice of assessment or amended or supplemental assessment and administrative decision thereon shall be admissible and shall constitute prima facie evidence of the tax due under the provisions of those articles of this chapter to which this article is applicable. (Emphasis added). This Court reviews questions of statutory interpretation de novo. See Mildred L.M. v. John O.F., 192 W.Va. 345, 350, 452 S.E.2d 436, 441 (1994). After examining our prior cases interpreting this statute, we must reject the contention of the appellant as to her right to a de novo hearing on appeal. There is no question that the statute seems to provide for a de novo hearing on appeal. W.Va.Code, 11-10-10(e), provides a circuit court shall hear the appeal and determine anew all questions submitted to it[.] The word anew is broad and is indeed the functional equivalent of  de novo.  Such an interpretation, linguistically speaking, is permissible. The dictionary states the words  de novo  and anew are synonymous. Black's Law Dictionary 435 (6th ed. 1990) (De novo.... Anew; afresh; a second time). However, any interpretation permitting either a de novo hearing or a de novo appeal would be inconsistent with our prior decisions. See Chesapeake and Potomac Co. of W.Va. v. State Tax Dep't, 161 W.Va. 77, 239 S.E.2d 918 (1977); Virginia Elec. and Power Co. v. Haden, 157 W.Va. 298, 200 S.E.2d 848 (1973), cert. denied, 416 U.S. 916, 94 S.Ct. 1624, 40 L.Ed.2d 118 (1974); Walter Butler Bldg. Co. v. Soto, 142 W.Va. 616, 97 S.E.2d 275 (1957). [7] Collectively, these cases hold the circuit court is unable constitutionally to consider additional evidence not presented before the Tax Commissioner. As we stated in Virginia Electric and Power Co. v. Haden, 157 W.Va. at 305, 200 S.E.2d at 853: To allow the circuit court to determine an issue on evidence not considered at the administrative hearing would cast the court in the role of performing an executive function. Under the acknowledged principle of separation of powers this cannot be permitted. Thus, the circuit court must decide the case on the evidence in the record as it was received or it must return the case to the Tax Commissioner for the further presentation of evidence on values. We have construed W.Va.Code, 11-10-10, narrowly and held that circuit courts are not to review de novo the Tax Commissioner's factual determinations. We have done so to avoid conflict with Section 1 of Article V of the West Virginia Constitution. Our cases, however, have not articulated fully why or how Article V is implicated. Although some of our earlier decisions [8] attempted to explain the Article V issue in terms of a functional analysis  that a directive to courts to review an agency's finding de novo would require judges to perform a legislative function  the attempt was not wholly persuasive. [9] Our cases that construe Article V recognize a role for administrative agencies in the distribution of powers. Necessarily, this constitutionalization of an agency's role largely has been one of judicial development with due respect accorded in that process to the views of the other branches. This result occurred because neither the framers of our Constitution nor George Mason and the other framers of the Virginia Declaration of Rights, from which Article V was extracted, could have envisioned the proliferation of administrative agencies, the formation of the modern bureaucratic state, and the construction of a body of administrative law. Despite the absence of specific textual treatment, we have developed doctrines that attempt to define this constitutional role for administrative agencies and to protect them from legislative and judicial overreaching. State ex rel. Barker v. Manchin, 167 W.Va. 155, 279 S.E.2d 622 (1981). Similarly, we have held that once the legislature creates an administrative agency and assigns adjudicatory decision making to that agency, then courts must defer to its decisions and cannot review factual determinations de novo. Walter Butler Bldg. Co., supra ; Hodges, supra . [10] As a result of these and other decisions, we have established that administrative agencies are active players in the division of powers, and, while always subject to properly enacted and valid laws and to constitutional constraints, their actions are entitled to respect from both the legislature and the courts. The accumulation of these various holdings makes it evident that courts will not override administrative agency decisions, of whatever kind, unless the decisions contradict some explicit constitutional provision or right, are the results of a flawed process, or are either fundamentally unfair or arbitrary. Our constitutionalization of judicial deference to agency determinations is presented starkly in the cases interpreting W.Va.Code, 11-10-10, and its predecessor statute, for in those decisions we have declined to follow what might appear to be a legislative directive to second guess the Tax Commissioner. As noted, we have in other contexts struck down statutes that clearly require de novo review of administrative determinations. E.g., Hodges, supra . Whether we should continue to hold that courts must defer to bureaucratic results despite directions from our popularly elected representatives to do otherwise is a question we need not decide today. [11] For nearly forty years, we have construed W.Va.Code, 11-10-10, to provide for only a limited review of the Tax Commissioner's factual determinations. It is too late in the day to change that practice, as we must infer legislative acquiescence in our interpretation. If the legislature wants to force the issue, it will have to do so affirmatively and explicitly. Our decisions have, in effect, limited judicial review of the Tax Commissioner's decision to the same scope permitted under the State's Administrative Procedures Act, W.Va.Code, 29A-1-1, et seq. This Act provides in W.Va.Code, 29A-5-4(g)(5) and -4(g)(6) (1964), that an agency action may be set aside if it is [c]learly wrong in view of the reliable, probative and substantial evidence on the whole record; or ... [a]rbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion. [12] Under this standard, the task of the circuit court is to determine whether the [agency's] decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment. Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 824, 28 L.Ed.2d 136, 153 (1971) (the Supreme Court was interpreting the judicial review of the Federal Administrative Procedures Act, 5 U.S.C. § 701, et seq. ). The clearly wrong and the arbitrary and capricious standards of review are deferential ones which presume the agency's actions are valid as long as the decision is supported by substantial evidence or by a rational basis. [13] When reviewing the administrative decision of the Tax Commissioner, the circuit court is required to engage in a substantial inquiry, but it must not substitute its own judgment for that of the Tax Commissioner. [14] We, therefore, make it explicit that the same standard set out in the State Administrative Procedures Act is the standard of review applicable to review of the Tax Commissioner's decisions under W.Va. Code, 11-10-10(e). Thus, the focal point for judicial review should be the administrative record already in existence, not some new record made initially in the reviewing court. Even under this limited and deferential standard of review, certain circumstances may justify expanding review beyond the record [15] or permitting some discovery [16] at the circuit court level. For example, an allegation that the Tax Commissioner (1) failed to mention a significant fact or issue having a substantial impact on the tax liability of the taxpayer, (2) failed adequately to discuss some reasonable alternative, or (3) otherwise swept stubborn problems or serious criticism under the rug may be sufficient to permit the introduction of new evidence outside the administrative record. Similarly, the circuit court may inquire outside the administrative record when necessary to explain the Tax Commissioner's action. When a failure to explain his action effectively frustrates judicial review, the circuit court may obtain from the agency, either through affidavits or testimony, such additional information for the reasons for the Tax Commissioner's decision as may prove necessary. The circuit court's inquiry outside the record is limited to determining whether the Tax Commissioner considered all relevant factors or explained his course of conduct or grounds for the decision. [17] In so holding, we recognize the controlling statute originally was enacted before the Tax Commissioner promulgated rules and regulations permitting administrative law judges to conduct administrative hearings. [18] However, we believe that permitting expansion of the record under these limited circumstances is most consistent with legislative intent. Federal courts repeatedly have held that review of matters beyond the administrative record may be appropriate where special review procedures are prescribed by the legislature. See Public Power Council v. Johnson, 674 F.2d 791, 794-95 (9th Cir.1982). [19] Once a full record is developed, both the circuit court and this Court will review the findings and conclusions of the Tax Commissioner under a clearly erroneous and abuse of discretion standard unless the incorrect legal standard was applied. See note 10, supra. We find the facts of this case compel a remand to the circuit court. Both at the administrative hearing and before the circuit court, the appellant requested an opportunity to supplement the record. At both levels, the request was denied. The record before us does not justify such a summary rejection of these requests. Upon remand, the circuit court, in light of today's decision and after hearing the nature of the proffered evidence, must decide whether it is better for the circuit court or the administrative law judge to receive the supplemental evidence. As we stated earlier, the circuit court upon judicial review must be able to examine such evidence to ensure there will be a full presentation of the issues before it.