Guardian Title Co. v. Bell

• Citation: 248 Kan. 146,805 P.2d 33
• Decision Date: 18 January 1991
• Docket Number: No. 64936,64936
• Parties: GUARDIAN TITLE COMPANY and Wichita Title Associates, Inc., Appellees, v. W. Fletcher BELL, as Commissioner of Insurance of the State of Kansas, Appellant.
• Court: United States State Supreme Court of Kansas

Page 33

805 P.2d 33

248 Kan. 146

GUARDIAN TITLE COMPANY and Wichita Title Associates, Inc., Appellees, v. W. Fletcher BELL, as Commissioner of Insurance of the State of Kansas, Appellant.

No. 64936.

Supreme Court of Kansas.

Jan. 18, 1991.

Syllabus by the Court

1. The constitutionality of a statute is presumed and all doubts must be resolved in favor of its validity.

2. It is the court's duty to uphold the statute under attack, if possible, rather than defeat it, and, if there is any reasonable way to construe the statute as constitutionally valid, that should be done.

3. In determining constitutional challenges for vagueness, greater leeway is afforded statutes regulating business than those proscribing criminal conduct.

4 A common-sense determination of fairness is the standard for determining whether a statute regulating business is unconstitutional for vagueness, i.e., can an ordinary person exercising common sense understand and comply with the statute? If so, the statute is constitutional.

5. Interpretation of a statute is a question of law, not a question of fact.

6. If the statute gives fair notice to those subject to the statute, the fact that academic questions might be posed over the statute's meaning will not defeat the statute's validity.

7. In construing statutes, the legislative intention is to be determined from a general consideration of the entire act.

8. The several provisions of any act, in pari materia, must be construed together with a view of reconciling and bringing them into workable harmony and giving effect to the entire statute if it is reasonably possible to do so.

9. A strict application of the separation of powers doctrine is inappropriate today in a complex state government where administrative agencies exercise many types of power, and where legislative, executive, and judicial powers are often blended together in the same administrative agency.

10. Where flexibility in fashioning administrative regulations to carry out statutory purpose is desirable in light of complexities in the area sought to be regulated, the legislature may enact statutes in a broad outline and authorize the administrative agency to fill in the details.

11. In determining whether a statute regulating an administrative agency sets standards definite enough to pass the separation of powers test, the character of the administrative agency is important.

12. Standards to guide an administrative agency in application of a statute may be implied from the statutory purpose.

13. Less detailed standards and guidance to the administrative agencies are acceptable in areas of complex social and economic problems.

14. Under the least strict level of scrutiny, legislation does not violate the equal protection clauses of the United States and Kansas Constitutions so long as it is reasonably (or rationally) related to a legitimate State interest.

Louis F. Eisenbarth, of Sloan, Listrom, Eisenbarth, Sloan & Glassman, Topeka, argued the cause, and Derenda J. Mitchell and Jeffrey W. Jones, of the same firm, and Timothy G. Elliott, Sp. Asst. Atty. Gen., Kansas Ins. Dept., were with him on the briefs, for appellant.

Phillip A. Miller, of Watson, Ess, Marshall & Enggas, Olathe, argued the cause, and Steven B. Moore, of the same firm, was with him on the brief, for appellees.

Thomas D. Kitch and David G. Seely, of Fleeson, Gooing, Coulson & Kitch, Wichita, were on the brief, for amicus curiae Kansas Ass'n of Realtors.

Donald Patterson and Steve R. Fabert of Fisher, Patterson, Sayler & Smith, Topeka, were on the brief, for amicus curiae Kansas Land Title Ass'n.

ABBOTT, Justice:

This is a title insurance law case in which the trial court held K.S.A.1989 Supp. 40-2404b(14)(f) and (g) unconstitutional.

Section 2404b prohibits unfair methods of competition and deceptive acts or practices in the insurance industry. In 1989 House Bill No. 2502 added subparagraphs (e), (f), and (g) to subsection 14 of K.S.A. 40-2404b. Subparagraph (e) was not challenged, but needs to be considered in determining whether (f) and (g) are unconstitutional.

The subparagraphs provide:

"(e) No title insurer or title agent may accept any order for, issue a title insurance policy to, or provide services to, an applicant if it knows or has reason to believe that the applicant was referred to it by any producer of title business or by any associate of such producer, where the producer, the associate, or both, have a financial interest in the title insurer or title agent to which business is referred unless the producer has disclosed to the buyer, seller and lender the financial interest of the producer of title business or associate referring the title insurance business.

"(f) No title insurer or title agent may accept an order for title insurance business, issue a title insurance policy, or receive or retain any premium, or charge in connection with any transaction if: (i) The title insurer or title agent knows or has reason to believe that the transaction will constitute controlled business for that title insurer or title agent, and (ii) 20% or more of the gross operating revenue of that title insurer or title agent during the six full calendar months immediately preceding the month in which the transaction takes place is derived from controlled business. The prohibitions contained in this subparagraph shall not apply to transactions involving real estate located in a county that has a population, as shown by the last preceding decennial census, of 10,000 or less.

"(g) The commissioner shall adopt any regulations necessary to carry out the provisions of this act." (Emphasis added.)

The Insurance Commissioner then adopted K.A.R. 40-3-43 (1990 Supp.), which provides, in part:

"(f) 'Controlled business' means any portion of a title insurer's or title agent's business in this state that was referred by any producer of title business or by any associate of such producer, where the producer of title business, the associate, or both, have a financial interest in the title insurer or title agent to which the business is referred."

Guardian Title Company and Wichita Title Associates, Inc., (petitioners) filed this case seeking a temporary injunction against Fletcher Bell, Commissioner of Insurance, (respondent) arguing that House Bill 2502 was unconstitutional. They also sought a declaratory judgment that subparagraphs (f) and (g) were unconstitutional and sought a permanent injunction against their enforcement.

The trial court found that subparagraph (f) violates the Due Process Clause of the United States Constitution and the Due Process and Equal Protection Clauses of the Kansas Constitution, Kansas Bill of Rights § 18 and Kansas Bill of Rights § 1, and that subparagraph (g) violates the constitutional requirement of separation of powers found in Article 2, Section 1 of the Kansas Constitution. The trial court also permanently enjoined the Insurance Commissioner from enforcing subparagraph (f) and any regulations promulgated by the Commissioner relating to K.S.A.1989 Supp. 40-2404b(14)(f).

In enjoining enforcement of the provisions, the trial court found that there is no statutory or judicial definition of the term "controlled business" and that there is no technical meaning of the term that is commonly understood by persons in the title insurance industry in Kansas. The trial court found it significant that legislation in numerous other states has used the phrase "controlled business" and that most other states have provided an expansive definition of "controlled business."

The trial court also concluded that the subparagraphs in issue lack sufficient standards to satisfy principles of nondelegation under article 2, § 1 of the Kansas Constitution and that the legislature cannot delegate to an administrative agency the task of defining an unconstitutionally vague term, because to do so violates the separation of powers doctrine (Kan. Const. art. 2, § 1). In addition, the trial court held that the classification in subsection (14)(f) exempting counties of 10,000 or less from the bill's prohibitions violates the equal protection clause because it is not rationally related to any legitimate state purpose.

1. Vagueness Argument

The constitutionality of a statute is presumed and all doubts must be resolved in favor of its validity. Before the statute may be struck down, it must clearly appear the statute violates the constitution. It is the court's duty to uphold the statute under attack, if possible, rather than defeat it, and, if there is any reasonable way to construe the statute as constitutionally valid, that should be done. State v. Huffman, 228 Kan. 186, Syl. p 1, 612 P.2d 630 (1980).

Most challenges against statutes for vagueness are against criminal statutes. With a criminal statute,

"[t]he test to determine whether a criminal statute is unconstitutional by reason of being vague and indefinite is whether its language conveys a sufficiently definite warning as to the conduct proscribed when measured by common understanding and practice. A statute which either requires or forbids the doing of an act in terms so vague that persons of common intelligence must necessarily guess at its meaning and differ as to its application is violative of due process." State v. Meinert, 225 Kan. 816, Syl. p 2, 594 P.2d 232 (1979).

K.S.A.1989 Supp. 40-2404b is not a criminal statute, although it is penal in nature because K.S.A.1989 Supp. 40-2407 provides that the commissioner may levy penalties against companies engaging in practices prohibited by section 40-2404b. The same standard is not applied, however, when the statute regulates a business as is applied when the statute is criminal or is regulating a constitutionally protected interest such as free speech. In In re Brooks, this court said, "In determining constitutional challenges for vagueness, greater leeway is afforded statutes regulating business than those proscribing...