Complete Auto & Truck Parts, Inc. v. Secretary of State

• Decision Date: 16 February 2005
• Docket Number: Docket No. 253578.
• Parties: COMPLETE AUTO & TRUCK PARTS, INC., and James Patton, Plaintiff-Appellees, v. SECRETARY OF STATE, Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

692 N.W.2d 847

264 Mich. App. 655

COMPLETE AUTO & TRUCK PARTS, INC., and James Patton, Plaintiff-Appellees, v. SECRETARY OF STATE, Defendant-Appellant.

Docket No. 253578.

Court of Appeals of Michigan.

Submitted December 7, 2004, at Lansing.

Decided December 28, 2004, at 9:00 a.m.

Released for Publication February 16, 2005.

Chimovitz and Chimovitz, PLC (by Jeffrey A. Chimovitz and Robert M. Chimovitz), Flint, for the plaintiffs.

Michael A. Cox, Attorney General, Thomas L. Casey, Solicitor General, and Stewart H. Freeman and Nancy A. Piggush, Assistant Attorneys General, for the defendant.

Before: O'CONNELL, P.J., and BANDSTRA and DONOFRIO, JJ.

DONOFRIO, J.

Defendant, Michigan's Secretary of State, appeals as of right an order entered in favor of plaintiffs, Complete Auto & Truck Parts, Inc. (Complete Auto), and James Patton, determining the limitation in MCL 257.248e(1) of two vehicle salvage agents for each dealer arbitrary and capricious and declaring the statute unconstitutional. As a result, the order compelled defendant to accept and review Complete Auto's request for additional salvage vehicle agent licenses. On appeal, defendant argues that the trial court erred in finding the two-agent limitation of MCL 257.248e(1) unconstitutional because it bears a rational relationship to legitimate government purposes and, therefore, may not be found arbitrary and capricious. Because we conclude that the two-agent limitation of MCL 257.248e(1) is rationally related to legitimate state interests, the statute is therefore constitutional, and we reverse the trial court's order.

I. Substantive Facts and Procedural History

This action arises out of a complaint filed by plaintiffs seeking a declaratory judgment determining that the two-agent limitation of MCL 257.248e(1) is arbitrary and capricious, and thus unconstitutional, and compelling defendant to accept and review Complete Auto's request to license more than two agents. Pursuant to MCL 257.248e(1), only a licensed automotive recycler, licensed used or secondhand vehicle parts dealer, or a licensed foreign salvage vehicle dealer (dealer) may apply for a salvage vehicle agent license. Each dealer may apply for and hold at most two salvage agent licenses. Only licensed salvage agents are permitted to purchase, acquire, sell, or otherwise deal in distressed, late model vehicles or salvageable parts through a salvage pool, and may do so only for the particular dealer indicated on their license.

Complete Auto is a dealer under MCL 257.248e(1). Patton is Complete Auto's sole shareholder and one of two licensed salvage agents for Complete Auto. Patton holds a vehicle dealer license and a used vehicle parts dealer license. Kenneth Brock applied for a salvage agent's license for Complete Auto as a dealer. Defendant denied his application for the sole reason that Complete Auto already had two licensed salvage agents. At the time of the lower court proceedings, Complete Auto had two licensed salvage agents, one of whom was Patton. Subsequently Complete Auto resubmitted Brock's application, and the application was granted because, at that time, Complete Auto only had one licensed salvage agent.

Plaintiffs filed this cause of action against defendant specifically alleging that the two-agent limitation harmed Complete Auto's business by unduly restricting the amount of business it could handle at one time to the human capacity of two individuals, regardless of the amount of capital and other resources available to it. Patton alleged that the two-agent limitation harmed him because, not only was he a dealer, he was also one of Complete Auto's salvage agents and thus was only entitled to one employee as a salvage agent other than himself. Plaintiffs argued that the two-agent limitation of MCL 257.248e(1) was arbitrary and capricious because no valid state interest supported the two-agent limit. Plaintiffs sought declaratory judgment and equitable relief in the form of compelling defendant to allow Complete Auto to apply for more than two salvage agent licenses.

Defendant filed a motion for summary disposition under both MCR 2.116(C)(8) and (C)(10), which the trial court denied. Thereafter, each party filed a trial brief. Before trial, the parties stipulated the facts in lieu of presenting testimony at trial. The court held a bench trial consisting only of counsels' oral arguments. At the close of the trial, the court granted plaintiffs' request for relief, concluding that the two-agent limitation of MCL 257.248e(1) was arbitrary and capricious, and, therefore, unconstitutional, and required defendant to accept and review additional requests for salvage agent licenses from Complete Auto. The court indicated that defendant presented persuasive evidence that a valid state interest exists for licensure of salvage vehicle dealers and agents, but that no evidence exists regarding the rationale for the two-agent limitation. The court acknowledged that defendant presented a host of reasons why the Legislature "may" have arrived at the two-agent number, but found the reasons to be only speculation and conjecture, and not sufficient to uphold the rationality of the limitation. The court found that the two-agent limitation imposed an unreasonable restraint on the right of private enterprise. It is from this order that defendant appeals.

II. Standard of Review

The constitutionality of a statute is a question of law we review de novo on appeal. People v. Abraham, 256 Mich.App. 265, 280, 662 N.W.2d 836 (2003). "A statute is presumed constitutional, unless its unconstitutionality is readily apparent." Tolksdorf v. Griffith, 464 Mich. 1, 5, 626 N.W.2d 163 (2001); Abraham, supra at 280, 662 N.W.2d 836 (stating that a statute must be construed as constitutional, if at all possible). "The constitutionality of a statute must be determined on the basis of provisions of the act itself," and the party challenging the constitutionality of the statute has the burden of proving the law's invalidity. TCG Detroit v. Dearborn, 261 Mich.App. 69, 77, 680 N.W.2d 24 (2004).

III. Analysis

Plaintiffs assert that the two-agent limitation of MCL 257.248e(1) is unconstitutional because it restricts Complete Auto's ability to acquire late model distressed vehicles to the human capacity of work that can be done by two individuals, without regard to the amount of capital and other resources available to it, and that its business has suffered financial harm as a result. Plaintiffs do not dispute that MCL 257.248e as a whole is a comprehensive, well-integrated law that legitimately requires salvage vehicle dealers and their agents to be licensed and outlines what conduct would disqualify dealers and agents from licensure, among other provisions. Plaintiffs challenge only the specific limitation of licensed salvage agents for each dealer to two, as opposed to some other higher number. In that regard, plaintiffs argue that the statute violates their substantive due process rights under the Michigan and United States constitutions, which provide that no person shall be deprived of life, liberty or property, without due process of law. US Const., Am XIV; Const. 1963, art. 1, § 17; Phillips v. Mirac, Inc., 470 Mich. 415, 435-436, 685 N.W.2d 174 (2004). Plaintiffs assert that the two-agent limitation has unjustly interfered with their business activity and economic interests.

Defendant argues that the two-agent limitation is constitutional because it bears a rational relationship to legitimate state interests and is not arbitrary and capricious. Defendant asserts that the statute and the two-agent limitation fulfill several legitimate governmental interests, including eliminating crime and enabling dealers to best oversee their agents. Defendant also argues that, in any event, the decision regarding the limitation on the number of agents is clearly within the purview of the Legislature.

When analyzing due process claims regarding an economic or general welfare matter, including an alleged interference with business activity, courts employ rational basis review. Detroit v. Qualls, 434 Mich. 340, 365, 454 N.W.2d 374 (1990). Under rational basis review, courts will uphold legislation as long as it is rationally related to a legitimate governmental purpose. Phillips, supra at 433, 685 N.W.2d 174. This is a highly deferential standard of review requiring a challenger to show that the legislation is "`arbitrary and wholly unrelated in a rational way to the objective of the statute.'" Crego v. Coleman, 463 Mich. 248, 259, 615 N.W.2d 218 (2000), quoting Smith v. Employment Security Comm., 410 Mich. 231, 271, 301 N.W.2d 285 (1981).

The United States Supreme Court has set forth standards this Court uses to determine if a law is arbitrary¹ or capricious.²Wysocki v. Felt, 248 Mich.App. 346, 359, 639 N.W.2d 572 (2001). Under rational basis review, a statute will pass constitutional muster "`if the legislative judgment is supported by any set of facts, either known or which could reasonably be assumed, even if such facts may be debatable.'" Harvey v. Michigan, 469 Mich. 1, 7, 664 N.W.2d 767 (2003), quoting Crego, supra at 259-260, 615 N.W.2d 218. A statute is not unconstitutional merely because it may appear undesirable, unfair, unjust, or inhumane. People v. Boomer, 250 Mich.App. 534, 538, 655 N.W.2d 255 (2002). Rational basis review does not test the wisdom, need, or appropriateness of the legislation, or whether it is made with "mathematical nicety." Harvey, supra at 7, 664 N.W.2d 767 (citation omitted). A court is not empowered to override the Legislature on these bases. Boomer, supra at 538, 655 N.W.2d 255. Redress for an unwise law or bad policy is properly sought with the Legislature. Proctor v. White Lake Twp. Police Dep't, 248 Mich.App. 457, 462, 639 N.W.2d 332 (2001).

Our Supreme Court has stated that legislative analyses are "entitled to little judicial consideration in resolving ambiguous statutory...