Havasu Heights Ranch and Development Corp. v. Desert Valley Wood Products, Inc.

• Decision Date: 20 December 1990
• Docket Number: CA-CV,No. 1,1
• Parties: HAVASU HEIGHTS RANCH AND DEVELOPMENT CORPORATION, an Indiana corporation, Plaintiff-Appellant, v. DESERT VALLEY WOOD PRODUCTS, INC., an Arizona corporation; State Land Department of the State of Arizona; and Jean Hassell, State Land Commissioner, Defendants-Appellees. 89-274.
• Court: Arizona Court of Appeals

Page 1119

807 P.2d 1119

167 Ariz. 383

HAVASU HEIGHTS RANCH AND DEVELOPMENT CORPORATION, an Indiana corporation, Plaintiff-Appellant, v. DESERT VALLEY WOOD PRODUCTS, INC., an Arizona corporation; State Land Department of the State of Arizona; and Jean Hassell, State Land Commissioner, Defendants-Appellees.

No. 1 CA-CV 89-274.

Court of Appeals of Arizona Division 1 Department A.

Dec. 20, 1990.

Review Denied April 23, 1991.

[167 Ariz. 385] Gammage & Burnham by Fred Ferguson, Jr. and James A. Craft, Phoenix, for plaintiff-appellant.

Robert Corbin, Atty. Gen. by Theresa M. Craig, Asst. Atty. Gen., Phoenix, for defendants-appellees State Land Dept. and Jean Hassell, State Land Com'r.

OPINION

LANKFORD, Judge.

Havasu Heights Development Corporation (Havasu Heights) appeals from a superior court judgment affirming two orders of the state land commissioner involving applications to lease state trust lands. After reviewing the record under the Administrative Review Act, A.R.S. §§ 12-901 to 12-914, the superior court found that there was no abuse of discretion by the agency. We affirm the superior court's judgment.

I.

Havasu Heights began leasing the 529.70 acres of state land which are the subject of this appeal in 1966. The property is located near Lake Havasu City and is largely undeveloped except for a mobile home park of approximately twenty acres and an industrial area of approximately thirty-six acres. The land department renewed the lease as commercial lease number 03-781 for a second ten-year term, which expired in 1986.

Prior to the expiration of lease 03-781, the land department, Havasu Heights and others were involved in disputes concerning certain subleases by Havasu Heights. To resolve these disputes, Havasu Heights and the land department entered into a stipulation, which was approved by an order of the deputy state land commissioner in 1981. In the stipulation, the land department agreed not to unreasonably withhold its approval of a lease renewal application by Havasu Heights. The department also acknowledged that Havasu Heights was entitled to reimbursement for various improvements upon the cancellation, surrender or relinquishment of its lease.

Shortly after Havasu Heights applied to renew its lease, Desert Valley Wood Products Inc. (Desert Valley) filed an application to lease a portion of the same property. Desert Valley had been a sublessee of Havasu Heights and sought a lease directly from the state. A hearing officer concluded a hearing on the competing applications, and Robert K. Lane, then state land commissioner, approved the hearing officer's recommendation to lease 3.65 acres to Desert Valley. Lane entered a final order in October 1986. Havasu Heights appealed to the superior court from the commissioner's decision, and sought a declaratory judgment that it was entitled to lease the entire acreage.

In April 1987, the land department scheduled an administrative hearing to address Havasu Heights' renewal application for the remaining 526.05 acres. The department also filed a motion to dismiss the declaratory judgment count in the superior court action. The court denied the motion to dismiss and ordered the department to conduct a hearing within 45 days.

Following a hearing conducted in July 1987, the hearing officer recommended that, because the land was "under consideration for urban planning and Havasu Heights does not appear to represent the type of developer that could achieve the highest and best use of this parcel, it is not in the best interest of the Trust to renew this commercial lease in its entirety." He also recommended that the department consider granting Havasu Heights a lease to that portion of the property on which the mobile home park is situated if Havasu Heights would agree to upgrade the facilities. Further, the decision provided that certain improvements are reimbursable under A.R.S. § 37-293. In 1988, M.J. Hassell, then state land commissioner, entered a final order approving the hearing officer's recommendations.

Following denial of its motion for rehearing of the latest order, Havasu Heights appealed to the superior court. This appeal was consolidated with the prior appeal from the 1986 order. After considering the parties' respective motions for summary judgment, the superior court affirmed both orders and Havasu Heights timely appealed to this court.

Havasu Heights contends on appeal that the superior court should have reversed the orders of the land commissioner because: 1) the department prejudged the renewal application; 2) the orders violate the parties' 1981 stipulation; 3) the department abused its discretion by cutting off trust revenues; 4) the 1988 order denies Havasu Heights immediate reimbursement for improvements it had made to the property; and 5) the 1988 order arbitrarily ignores parcels adjacent to the mobile home park.

II.

When an administrative decision is appealed to the superior court pursuant to the Administrative Review Act, A.R.S. §§ 12-901 to -914, the superior court decides only whether the administrative action was illegal, arbitrary, capricious or involved an abuse of discretion. Ethridge v. Arizona State Board of Nursing, 165 Ariz. 97, 796 P.2d 899 (App.1989); DeGroot v. Arizona Racing Comm'n, 141 Ariz. 331, 686 P.2d 1301 (App.1984). This court reviews the superior court's judgment to determine whether the record contains evidence to support the judgment and, in doing so, we reach the underlying issue of whether the administrative action was illegal, arbitrary, capricious or involved an abuse of discretion. Carley v. Arizona Board of Regents, 153 Ariz. 461, 737 P.2d 1099 (App.1987).

Havasu Heights argues that this court should review the record in a light most favorable to Havasu Heights because this is an appeal from summary judgment. However, this argument confuses the standards of review in appeals from summary judgments and appeals under the Administrative Review Act.

That the superior court made its determination by summary judgment does not change the nature of an appeal under the Administrative Review Act. There was no trial de novo in the superior court, and the superior court judge did not act as the trier of fact. The court based its decision on a review of the record in the administrative proceeding and on the parties' legal arguments. In appeals taken under the Administrative Review Act, neither this court nor the superior court weighs the evidence. Plowman v. Arizona State Liquor Bd., 152 Ariz. 331, 732 P.2d 222 (App.1986). In reviewing factual determinations, our respective roles begin and end with determining whether there was substantial evidence to support the administrative decision. Id.; Sundown Imports, Inc. v. Arizona Dep't of Transp., 115 Ariz. 428, 565 P.2d 1289 (App.1977).

The question whether substantial evidence supports the state land commissioner's order does not raise material issues of fact; it presents a question of law. See Milton v. Harris, 616 F.2d 968 (7th Cir.1980); Beane v. Richardson, 457 F.2d 758 (9th Cir.1972), cert. denied, 409 U.S. 859, 93 S.Ct. 144, 34 L.Ed.2d 105 (1972); 6 Moore's Federal Practice p 56.17 at 56-363 (2d ed. 1988). In Milton v. Harris, the court stated: "[I]t is of course mere sophistry to argue that the material issue of fact is whether substantial evidence exists. One might just as well say that summary judgment is never proper because there is always a dispute over whether a material issue of fact exists." 616 F.2d at 975, n. 10.

This court independently reviews questions of law. See Carley v. Arizona Board of Regents, 153 Ariz. at 463, 737 P.2d at 1101. Therefore, we make our own determination of whether substantial evidence supported the agency's decision.

III.

We first examine the claim that the department prejudged the application and therefore was too biased to render a fair decision.

Due process of law contemplates a "fair trial in a fair tribunal." United States v. Superior Court, 144 Ariz. 265, 280, 697 P.2d 658, 673 (1985) (quoting In re Murchison, 349 U.S. 133, 136, 75 S.Ct. 623, 625, 99 L.Ed. 942 (1955)). The concept of "bias" in an administrative hearing has several meanings. One commentator has identified five types of bias: the decision maker's personal attitudes toward a party, prejudgment of questions of law or public policy, prejudgment of legislative facts that help establish law or policies, advance knowledge of adjudicative facts, and an interest in the outcome of the decision. Davis, 3 Administrative Law Treatise § 19:2, at 371 (2d ed. 1980). See generally id. at §§ 19:2 to 19:6 (comparing and analyzing the types of bias which require disqualification).

Courts have developed certain principles to draw the line between those types of bias which require the disqualification of administrators as adjudicators and those which are not disqualifying. A previously announced position about law or policy is not a disqualification for the exercise of judicial power. See United States v. Morgan, 313 U.S. 409, 61 S.Ct. 999, 85 L.Ed. 1429, (1941). There is a "presumption of honesty and integrity of those serving as adjudicators." Withrow v. Larkin, 421 U.S. 35, 47, 95 S.Ct. 1456, 1464, 43 L.Ed.2d 712, 724 (1975). To show disqualifying prejudgment, a claimant must demonstrate that the mind of the decision maker is "irrevocably closed" on the particular issues being decided. See Federal Trade Comm'n v. Cement Institute, 333 U.S. 683, 701, 68 S.Ct. 793, 803, 92 L.Ed. 1010, 1034 (1948).

If a claimant demonstrates prejudgment of the specific facts that are at issue, then disqualification may be warranted. See Cinderella Career and Finishing Schools, Inc. v. F.T.C., 425 F.2d 583 (D.C.Cir.1970); Staton v. Mayes, 552 F.2d 908 (10th Cir.1977), cert. denied, 434 U.S. 907, 98 S.Ct. 309, 54 L.Ed.2d 195 (1977). However, that the agency is exposed to facts during the performance of its statutory functions does not necessarily disqualify it from...