State Ex Rel. Stephan v. Kansas Racing CommissionState Ex Rel. Stephan v. Kansas Racing Commission
- Reporters:
- , ,
- Before:
- Allegrucci
The opinion of the court was delivered by
This is an original action in mandamus brought by the attorney general against the Kansas Racing Commission (Commission), individual members of the Commission, and James R. Cobler, Director of Accounts and Reports. At issue is the $250,000 deposit paid by Sunflower Racing, Inc., (Sunflower) pursuant to
The facts are not in dispute. On November 4, 1986, the Kansas Constitution was amended to permit horse and greyhound racing with a parimutuel system of wagering.
On March 3, 1988, The Racing Association of Kansas-Southeast (TRAK) filed an application for an organization license to conduct greyhound races, and Sunflower Racing, Inc., (Sunflower) filed an application for facility owner and facility manager licenses to construct, own, operate, and manage a greyhound racing facility in Pittsburg, Crawford County, Kansas. TRAK contracted with Sunflower to conduct its races at Sunflower’s track. Initially, R.D. Hubbard and Richard J. Boushka owned equal stock in Sunflower. Sunflower’s owner and facility manager applications were accompanied by a nonrefundable application fee of $5,000 for each license for a total of $10,000.
On March 7, 1988, two additional groups applied for licenses to construct and operate a greyhound racing facility in Crawford County, Kansas. The Little Balkans Foundation filed an application for an organization license, Camptown Racing, Inc., filed for a facility manager license, and Camptown Development Limited Partnership filed for a facility owner’s license. This group will hereinafter be referred to as Camptown/Little Balkans. In addition, O.G.B. Charities, Inc., (OGB) applied for an organization and facility owner’s license, and Crawford County Racing, Inc., for a facility manager license.
On September 16, 1988, the Commission conditionally granted the following three licenses: An organization license to TRAK pursuant to
The owner and manager licenses issued to Sunflower were expressly conditioned upon providing a financial commitment approved by the Commission as required by
“(a) Sunflower Racing, Inc., shall promptly enter final negotiations with its lender or lenders and shall file with the commission within 150 days following the date of this order final loan documents of all lenders participating in the loan commitment, security documents and all other evidence of indebtedness, guarantees or assurances necessary to obtain closing of the construction loan described in the verified application. The documents shall be substantially in the form described in the verified application. Closing of the loan shall be completed to the commission’s satisfaction and approval within 150 days of this date, unless this order is extended.
“(d) Sunflower Racing, Inc., shall adhere to the plans and specifications and the construction schedule set forth in the application except as approved by the commission after applicant files a revised schedule with the commission in the same format used for its application. Applicant shall diligentlypursue the planning, acquisition, construction and completion of each phase of the project on the date set forth in the schedule subject to strikes, accidents, acts of God, weather conditions, documented shortage of labor and materials, litigation or other actions and circumstances beyond the control of the two applicants.” (Emphasis added.)
In the order, the Commission concluded that issuance of licenses to Sunflower for a greyhound racing facility in Pittsburg/ Crawford County would facilitate management development and minimize operating cost because Sunflower was similarly licensed in Kansas City, Kansas. Finally, the order provided that failure to abide by the terms of the license and the conditions set forth therein would be just cause for the Commission to pursue statutory remedies.
Kansas Racing Management, Inc., and Wyandotte County Economic Development, who were unsuccessful applicants for organization and facility owner licenses in the Kansas City, Kansas, area, appealed the Commission’s denial of their applications (KRM appeal). The Commission and Sunflower were both respondents in that litigation. The KRM appeal, which was decided February 27, 1989, in Kansas Racing Management, Inc. v. Kansas Racing Comm’n, 244 Kan. 343, 770 P.2d 423 (1989), decided many, but not all, issues that were presented in Camptown/Little Balkans litigation involving the Pittsburg/Crawford County racetrack.
Immediately after the Commission granted Sunflower a facility owner license, the Little Balkans Foundation petitioned this court for review of that decision, filing its petition on October 14, 1988. Camptown Racing, Inc., and Camptown Development Limited Partnership filed separate petitions for review with this court on October 17, 1988. These three cases were consolidated for briefing.
Meanwhile, on October 28, 1988, the Commission approved a change in stock ownership in Sunflower Racing, Inc., with R.D. Hubbard owning 60% and and Richard J. Boushka owning 40% of the stock but with the voting control remaining equally divided by proxy agreement. On January 27, 1989, Sunflower requested a minimum 60-day extension for presentation of financing documents for approval by the Commission. In light of the pending litigation regarding Sunflower and the Pittsburg/Crawford County facility, as well as other contingencies, on February 3, 1989, the
On March 11, 1989, Sunflower asked the Commission for an additional six months in which to file its loan documentation for the Pittsburg/Crawford County facility, pointing out that the pending appeals had caused potential lenders to refuse to finalize loans for the construction of the Pittsburg facility. The Commission took the request under advisement.
On April 21, 1989, Camptown/Little Balkans objected to any additional time for Sunflower’s submission of a financial commitment, but the Commission tabled the request for one week. On April 28, 1989, the Commission granted Sunflower an extension of six months to file financing documents or by the 15th day after an opinion issued by this court in the Pittsburg area licensing appeal. Thereafter, on May 2, 1989, Camptown/Little Balkans voluntarily dismissed their Pittsburg area licensing appeal. By this time, Sunflower’s original proposed lender, a Miami, Florida, bank, had withdrawn its financial support of the Pittsburg/Crawford County facility.
On May 12, 1989, the Commission granted Sunflower an extension until June 23, 1989, to seek alternative financing and to file financing documents. Documents were filed with the Commission on June 22, 1989, that included an assignment to a new partnership including a buyout of R.D. Hubbard’s interest in the Kansas City track. A principal of one of the new partners was Paul W. Bryant, Jr., who would assume primary responsibility for financing the Pittsburg/Crawford County racetrack. Bryant presented a $12 million letter of commitment from First Alabama Bank. The Commission was asked to approve an agreement in which TRAK assumed a management agreement identical to its
Pursuant to
In an order of July 14, 1989, the Commission approved assignment of the facility owner and the facility manager licenses of Sunflower Racing, Inc., to Sunflower Racing Partnership, a partnership to be formed by Sunflower Racing, Inc., and a subsidiary of the Greene Group, Inc.
Loan documents submitted by Sunflower contained a commitment for financing by First Alabama Bank that reflected a 90% ownership by Kansas Pari-Mutuel Management, Inc., a wholly-owned subsidiary of the Greene Group, Inc., and only 10% ownership by Sunflower Racing, Inc., a limited partner. The officers of the Kansas Pari-Mutuel Management, Inc., would be Bryant, Sam M. Phelps, and A. Wayne May. Sunflower’s limited partnership gave the general partner the right to dismiss any and all managers from employment, to sell the assets of the partnership without the consent of the limited partner, and to keep the books and records of the partnership in Alabama.
On August 4, 1989, Bryant and Sam Phelps, of the Greene Group, and R.D. Hubbard, of Sunflower, addressed the Commission, answering questions about financing and construction of parimutuel greyhound racing tracks. The Commission tabled the decision to consider the status of the $500,000 deposit, the fi
On August 11, 1989, Sunflower distributed a letter asserting its desire to have the Commission approve its financing proposal, but offered to voluntarily return the conditional manager and owner licenses for Crawford County in exchange for the return of Sunflower’s $500,000 application deposit. In the letter, Sunflower recognized that the $500,000 deposit was $250,000 more than was needed for a racing schedule that involved fewer than 150 days of racing in a calendar year but explained that it left the overdeposit of $250,000 in the account as a good faith gesture with the Commission on the chance that extensions of the racing season would be sought.
The Commission’s statutorily assigned legal counsel from the attorney general’s office then requested a formal attorney general’s opinion regarding the following inquiries:
“(1) What is the status of the application deposit required byK.S.A. 1988 Supp. 74-8815(d) if the facility owner licensee voluntarily returns the conditional facility owner license to the commission? May the deposit be refunded, and if so, under what circumstances and statutory procedure!?]
“(2) What is the status of the organization licensee’s license,K.S.A. 1988 Supp. 74-8813, when the facility owner licensee and facility manager licensee, contracted to construct and operate a racetrack, voluntarily return the conditional facility owner and conditional facility manager licenses to the commission!?]”
Potential competitors Crawford County Racing, Inc., OGB, and Camptown/Little Balkans favored refunding to Sunflower its entire deposit.
On August 25, 1989, the attorney general issued his opinion, No. 89-108, that the $250,000 application deposit required by
On September 22, 1989, the Commission rejected the proposal of the Bryant group to restructure and refinance TRAK’s facility owner and manager, which was to be done by the Greene Group and Sunflower. At that time, Sunflower had fully complied with the orders of the Commission to submit financing documents.
On October 13, 1989, the Commission determined that, if Sunflower’s $250,000 deposit was forfeited, it would not be used to benefit the racing industry but, instead, would go to the state gaming revenue funds. The Commission voted to request return of the facility owner and facility manager licenses from Sunflower because Sunflower had acted in good faith, but litigation and the Commission’s disapproval of the Bryant proposal prevented Sunflower’s fulfillment of the conditions. The Commission voted unanimously to accept Sunflower’s offer to return the licenses. When the attorney for Sunflower then asked for the remaining $250,000 application deposit, the Commission voted to return it because Sunflower complied with the Commission’s request for the license. The Commission also gave TRAK 60 days to propose a new facility owner/facility manager for the Crawford County racetrack project.
Sunflower never began construction of the Pittsburg/Crawford County racetrack facility. At no time did the Commission find Sunflower’s means and sources of financing were not feasible
The Commission’s formal order disapproved assignment of the facility owner and facility manager licenses of Sunflower Racing, Inc., to Sunflower Racing Partnership, a partnership to be formed by Sunflower Racing, Inc., and a subsidiary of the Greene Group, Inc.
The petition for mandamus was filed on October 18, 1989. This court denied the attorney general’s motion for a peremptory order but granted a temporary restraining order.
We must first determine if mandamus is an appropriate remedy. Mandamus is a proceeding “to compel some inferior court, tribunal, board, or some corporation or person to perform a specified duty, which duty results from the office, trust, or official station of the party to whom the order is directed, or from operation of law.”
Due to its summary and drastic nature, several safeguards have been developed to regulate use of the writ of mandamus. Issuance of the writ is discretionary with the court and a writ should not issue unless a respondent’s legal duty is clear.
Huser v. Duck Creek Watershed Dist. No. 59,
234 Kan. 1, 4-5, 668 P.2d 172 (1983). Mandamus is not available to require performance of an act that involves the exercise of discretion by the public official. This court has stated that “mandamus may not be invoked to control discretion and neither does it lie to enforce a right which is in substantial dispute, and further, that resort to the remedy may be had only when the party invoking it is clearly entitled to the order which he seeks.”
Lauber v. Firemens Relief Assn.
Respondents argue that mandamus is not appropriate here because the legislature has given the Commission enormous discretion. Numerous provisions in the statutes delegate broad discretion to the Commission, such as the granting or denial of licenses,
Although the legislature did give the Commission broad discretion in regulating the racing industry in Kansas, the question presented by this mandamus action does not involve the exercise of that discretion. The question presented is whether the statute requires forfeiture of the deposit submitted with the application for a license. If the statute is interpreted as urged by the attorney general, forfeiture of this deposit will be a ministerial act mandated by the language of the statute and will not involve the exercise of discretion by the Commission.
In many ways this case is similar to
State ex rel. Stephan v. Smith,
242 Kan. 336, 347-49, 747 P.2d 816 (1987), which was an original action in mandamus against two judges regarding their orders establishing rules and panels for indigent defense services. The judges argued that they were merely exercising their broad discretion in appointing attorneys to represent indigent defendants. This court recognized that the regulations concerning appointment of counsel in criminal cases gave the trial court broad discretion but also contained several nondiscretionary duties. The issue before the court was whether the statutory and regulatory requirements concerning appointment of counsel for criminal defendants were constitutional and enforceable. We concluded that the mandamus action, which sought an interpretation of the law to guide public officials and concerned a matter of great public
Similarly, although the Commission here was given broad discretion by the legislature, the attorney general’s interpretation of the statute would require forfeiture of this deposit without involving the exercise of the Commission’s discretion. The issue is whether the language of this statute places a ministerial duty on the Commission to forfeit the deposit once the license is issued regardless of the reasons why a racetrack facility is not built. This concerns a matter of public importance and of statewide interest because of the racing Commission’s ongoing efforts to regulate the racing business in Kansas. We conclude that mandamus is an appropriate and proper means to decide this issue and interpret the law to guide the Commission in the performance of its duties.
We turn to the issue of whether
“If an applicant for a facility owner license is proposing to construct a racetrack facility, such applicant, at the time of submitting the application, shall deposit with the commission, in such form as prescribed by rules and regulations of the commission, the sum of . . . (2) $250,000, if such number of racing days applied for is less than 150 days; .... If the application is denied by the commission, the deposit, and any interest accrued thereon, shall be refunded to the applicant. If the license is granted by the commission in accordance with the terms of the application or other terms satisfactory to the applicant, the deposit, and any interest accrued thereon, shall be refunded to the licensee upon completion of the racetrack facility in accordance with the terms of the license. If the licensee fails to complete the racetrack facility in accordance with the terms of the license, the deposit, and any interest accrued thereon, shall be forfeited by the applicant.” (Emphasis added.)K.S.A. 1989 Supp. 74-8815(d) .
This same language is contained in
Because we are required to construe the language of
In construing statutes, the legislative intent must be determined from a general consideration of the entire act. If possible, effect must be given to all provisions of the act, and different provisions must be reconciled in a way that makes them consistent, harmonious, and sensible. Adee, 241 Kan. at 829; Estes, 239 Kan. at 195. The language of a statute that is designed to protect the public must be construed in light of the legislative intent and is entitled to a broad interpretation so that its public purpose may be fully carried out. Furthermore, a construction that makes part of the legislative act surplusage should be avoided if reasonably possible. Adee, 241 Kan. at 829.
In determining legislative intent, we may look at the purpose to be accomplished, the necessity and effect of the statute, and the effect the statute may have under the various constructions suggested. Estes, 239 Kan. at 195; Kansas Krude Oil, 236 Kan. at 458; Jackson v. City of Kansas City, 235 Kan. 278, 319, 680 P.2d 877 (1984). A statute should not be given a construction that leads to uncertainty, injustice, or confusion if possible to construe it otherwise. Words and phrases used in a statute should be construed according to context and the approved usage of the language, which means that words in common use are to be given their natural and ordinary meaning. Jackson, 235 Kan. at 319.
The Commission notes that, in Weinzirl v. The Wells Group, Inc., 234 Kan. 1016, 1018, 677 P.2d 1004 (1984), this court recognized that neither the district court nor the appellate court may substitute its judgment for that of the administrative tribunal.
Usually, the legal interpretation of a statute by an administrative board or agency that is charged by the legislature with the authority to enforce the statute is entitled to great judicial de
This court has recognized that, when a statute is ambiguous, the interpretation placed upon it by an administrative agency whose duties are to carry the legislative policy into effect should be given great weight and may be entitled to controlling significance when the scope and limitations of the powers of the agency must be determined in judicial proceedings. Cities Service Gas Co. v. State Corporation Commission, 192 Kan. 707, 714, 391 P.2d 74 (1964); Southwestern Bell Telephone Co. v. Employment Security Board of Review, 189 Kan. 600, 607, 371 P.2d 134 (1962).
In response to arguments that this court must construe
Let us examine the arguments of respondents in light of the attorney general’s position and the rules of statutory interpretation as herein summarized.
The Commission argues that the provisions of
“It is a generally accepted rule of law that forfeitures are not favored; they are considered harsh exactions, odious and to be avoided when possible. A statute imposing a forfeiture should be construed strictly and in a manner as favorable to the person whose property is to be seized as is consistent with fair principles of interpretation. Courts will not search for a construction to bring about a forfeiture, nor will a constrained construction be indulged in order to create a forfeiture. For a statute to be construed so as to work a forfeiture, its language must clearly show such an intent, and forfeiture is never to be inferred from doubtful language. Courts will not force upon a forfeiture statute a construction which amounts to a reading into the law provisions not inserted therein by the legislature. (37 C.J.S. 8 to 10; 23 Am. Jur. 601-602.)” Christiansen v. Virginia Drilling Co., 170 Kan. 355, 360, 226 P.2d 263 (1951).
Because
The Commission further argues that, when the interpretation of one section of an act according to the exact and literal import of its words would contravene the manifest purpose of the legislature, the entire act should be construed according to its spirit and reason, even though that requires disregarding the strict letter of the law.
The Commission here argues that other provisions of the statute show the legislature could clearly require forfeiture of a fee if it intended to do so. In
Alternatively, in subsection (d) of 74-8815, the legislature merely required the applicant to deposit a sum of either $250,000
The Commission further argues that use of the phrase “fails to complete” could have a variety of meanings. The Commission asserts that the legislature was concerned about a licensee beginning construction of a racetrack but leaving it “half-finished in wheat fields.” The Commission argues that these concerns are not applicable when a conditional license is granted but construction never begins because the conditions required by the license are not fulfilled. Here, the Commission granted a conditional license to Sunflower requiring, among other things, that Sunflower present an acceptable plan for financing construction of the racetrack. The Commission rejected the plan presented by Sunflower. This occurred before Sunflower began construction of the racetrack. The Commission and Sunflower urge this court to interpret the phrase “fails to complete” to apply to those cases in which actual construction of the racetrack begins.
In support of their position, Sunflower and the Commission argue that the license granted to Sunflower contained several
conditions
precedent that had to be performed before actual construction of the racetrack was to begin. The parties argue that the phrase “in accordance with the terms of the license” requires that the license issued to Sunflower be incorporated into the seventh sentence of subsection (d) of 74-8815. They argue that, because the license was conditional and the conditions were not met, the licensee, Sunflower, did not fail under the terms of the license and, therefore, the deposit cannot be forfeited. We fail to see the merits in this argument. All regulatory licenses issued by the State are conditional because the licensee must meet certain standards and obligations. Various sanctions are imposed for a failure to meet those obligations and standards. Here, the consequences for failing to meet the conditions imposed by the Commission are not at issue. At issue is the consequence for
Sunflower argues that it complied with all the requirements of the condition by presenting its financial loan documents prior to July 31. The Commission agrees that Sunflower met its requirements, but the Commission refused the loan proposal. Because the Commission did not accept this loan proposal, the conditions of the license were never met, and Sunflower never became obligated to begin construction of the racetrack. In other words, under the conditional license, Sunflower was never obligated to begin construction until the conditions precedent were fulfilled, including approval of the financing proposal.
Although the Commission was unable to cite any Kansas cases dealing with the refund of a licensing fee in a case such as this, the Commission argues that the law concerning conditions precedent in contracts is analogous and applicable to conditional licenses, and should apply to the case at hand. We do not agree. We are not dealing with a contract but with a license created by statute.
We find no support for respondents’ arguments in the legislative history of
Sunflower, however, argues that the statute does not clearly create a ministerial duty to forfeit the deposit in this case because
To support its argument, Sunflower points to the interpretation of the act in
Kansas Racing Management, Inc. v. Kansas Racing Comm’n,
244 Kan. at 358. This court held that the provisions enacted by the legislature did not create a liberty or property interest in an
application
for a license. Once a facility owner license or a facility manager license is issued, the holder of that license has a property right and has a protected right to notice and a due process hearing if the Commission refuses to renew the license.
“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.” 244 Kan. at 369.
Sunflower reasons that, in light of the sole discretion the legislature placed with the Commission to determine whether a license should be issued at all, a concomitant authority and dis
Finally, Sunflower offers two alternative theories to support the Commission’s refunding of the deposit. First, Sunflower argues that the terms of the license excused Sunflower’s performance when the attempts to secure financing failed. Sunflower argues that the statute does not create a clear, ministerial duty for the Commission to forfeit the deposit but, instead, contains a negative implication that the deposit should be returned unless Sunflower’s failure to complete the racetrack is a breach of terms of the license. As support, Sunflower notes cases that hold a court cannot supply what appears to be an omission to a statute even though the question was never contemplated by the legislature. State v. Wood, 231 Kan. 699, 702-03, 647 P.2d 1327 (1982) (when terms of habitual violator statute specify inclusion of violations of city ordinance under the subsection relating to DUI, city ordinance convictions of other violations listed in the statute would not be counted toward the three convictions necessary to make the person a habitual violator). If the attorney general were attempting to collect a deposit or to force Sunflower to perform under the contract, then this theory might have merit. Here, the State has a $250,000 deposit, and the legislature specifically addressed what was to happen to the deposit in the event the racetrack was not completed.
Next, Sunflower argues that the doctrine of commercial frustration relieves Sunflower of its obligation to perform under the contract. Before making this argument, Sunflower makes clear its belief that the Commission drafted the license in anticipation of litigation problems and relieved Sunflower of its obligation to build the track in this case. But if the court rejects this position,
Sunflower directs this court to State Highway Construction Contract Cases, 161 Kan. 7, 66-67, 166 P.2d 728 (1946), which involved an attempt by several construction companies to have their contracts with the State Highway Commission cancelled on grounds of impossibility of performance due to hardships and increased prices incidental to our country’s involvement in World War II. The court rejected the argument, finding that the evidence established the work could be done, although it would take longer and cost more. 161 Kan. at 67. The court quoted the controlling rule as follows:
“ ‘The doctrine of commercial frustration is predicated upon the premises of giving relief in a situation where the parties could not reasonably protect themselves by the terms of a contract against the happening of subsequent events, but it has no application to a situation where the event that has supervened to cause the alleged frustration was reasonably foreseeable and could and should have been controlled by provisions of such contract.’ ” 161 Kan. at 66 (quoting Berline v. Waldschmidt, 159 Kan. 585, Syl. ¶ 2, 156 P.2d 865 [1945]).
The doctrine of commercial frustration is not applicable here. Sunflower notes in its brief that it anticipated the possibility of litigation. Furthermore, the license issued by the Commission anticipated litigation. Even though litigation was anticipated, and thus reasonably foreseeable by the parties, Sunflower entered into the contract. The statute provides for the granting of continuances and, as previously mentioned, are not limited in number or length.
We conclude that the provisions of
We concur with the attorney general that the respondent Commission had no authority or discretion to return the deposit. Sunflower Racing, Inc., was granted the license and, because it failed to complete the racetrack facility, the deposit was forfeited pursuant to
The petition for mandamus is granted. The respondent Kansas Racing Commission is ordered to rescind the orders directing the return of the $250,000 deposit to Sunflower Racing, Inc., and to order said money and any interest accrued thereon forfeited by operation of law.