Opinion
No. C1-94-1751.
March 21, 1995.
Andrew R. Clark, Kalina, Wills, Woods, Gisvold Clark, Minneapolis, for relators Minneapolis Van and Warehouse Co. and United Fire and Casualty Co.
Hubert H. Humphrey, III, Atty. Gen., Paul A. Strandberg, Asst. Atty. Gen., St. Paul, for respondent MN Dept. of Agr. Grain Licensing and Auditing Div.
Daniel Lidberg, pro se.
OPINION
Respondent Department of Agriculture, Grain Licensing and Auditing Division (Department), found that property owners were entitled to recover the repair and replacement costs of their property from relators, a warehouseman and its surety. Relators appealed at a contested case proceeding, where the administrative law judge (ALJ) determined that he lacked jurisdiction in an action against the warehouseman's surety. The ALJ also found that the warehouseman's negligence was not the proximate cause of damage to the owners' property, and therefore recommended that the owners' claim should be denied. The Department appealed to the Commissioner of Agriculture (Commissioner), who adopted the ALJ's findings of fact, conclusions of law and recommendation, but nevertheless reinstated the Department's ruling and required relators to pay the cost of repair and replacement. Because we hold that the statute then in effect did not give the Department jurisdiction over an action on a surety bond and that the Commissioner's conclusions were not properly supported by the ALJ's findings and the evidence, we reverse and remand for adoption of the ALJ's recommended order.
FACTS
Relator Minneapolis Van and Warehouse (the warehouseman), a licensed warehouseman possessing the statutory $25,000 bond, was hired by a law firm (depositor) to remove and store the household goods of Daniel and Darcie Lidberg when their mortgage was foreclosed. For insurance purposes the depositor declared the value of the Lidbergs' goods to be $.60 per pound.
Pursuant to the regulations of the Minneapolis Transportation Regulation Board, depositors of household goods from foreclosed properties have three options for insuring the property: the full declared value, the standard $1.25 per pound rate, or a lower rate of $.60 per pound if the depositor declares that to be the value of the goods. The regulations also provide that the warehouseman is not liable for those damages caused by, inter alia, damp or rust, and state that the warehouseman is not an insurer of the depositor against loss or damage.
Among the goods was the partially rusted, partially restored body of a 1969 car, lacking wheels, a hood and the left door; the rear window was set in place but not cemented. Spare parts, namely a transmission and an air cleaner, were on the car floor. The warehouseman covered the car with a shrinkwrap material prior to placing it in an outside impound storage lot with minimal security surveillance. Daniel Lidberg inspected the car in late September and again in mid-October. He removed some of the shrinkwrap and noted that the rust was expanding, and that the transmission and air cleaner were still on the floor. Neither Lidberg nor the depositor ever objected to the way the car was stored, requested or offered to pay for inside storage, or told the warehouseman that the spare parts were particularly valuable.
When Lidberg repossessed his car on November 21, 1992, all the unpainted portions were rusted and the spare parts were missing. After itemizing the damage and property loss, Lidberg claimed $6,552.92 from relators, who refused to pay for the missing car parts because they had not been listed on the inventory and for the surface rust because the tariff excluded damage from rust.
The Lidbergs then filed a claim on the surety bond with the Department, which on June 7, 1993, awarded them a total of $2,887.43: $1,987.43 for rust damage, $400 for the transmission, and $500 for the air cleaner. The Department notified relators of the Lidbergs' award in a letter, stating in relevant part:
The claimant has demonstrated that [relator] did not faithfully discharge the duties of a warehouse operator. Therefore, the claimant is eligible for reimbursement from the operator's bond.
* * * * * *
[a] person may appeal the Department of Agriculture's determination by requesting, within 15 days of the receipt of this letter, that the Department of Agriculture initiate a contested case proceeding.
Relators sought to appeal from this award and asked the Department to initiate a contested case proceeding.
After the contested case proceeding, the ALJ concluded that he lacked jurisdiction in a case on the surety bond and found that the warehouseman had not been negligent in failing to store the car inside, since no one had asked or offered to pay to have this done, but had been negligent in failing to secure the loose auto parts or guard the car so it was not subject to theft. Despite the warehouseman's negligence, the ALJ recommended that the Lidbergs not recover because Daniel Lidberg's failure to ask to have the parts secured was an intervening factor.
In the alternative, the ALJ recommended recovery be restricted to the limit set forth in the warehouseman's contract: $.60 per pound, or $1,200 for the 2,000 pound car; $6.00 for the ten-pound air cleaner; and $48.00 for the 80-pound transmission, a total of $1,254.00. On appeal, the Commissioner ruled that the ALJ inappropriately applied the $.60 per pound rate, and that relators were liable to the Lidbergs for $2,887.43.
On appeal by the Department, the Commissioner adopted the ALJ's findings of fact but used them to support a different result, concluding that the warehouseman was negligent in failing to properly protect and secure the car in storage and that the Department's retroactive application of Minn.Stat. § 231.18 (Supp. 1993) was correct.
ISSUES
1. Was Minn.Stat. § 231.18 (Supp. 1993) appropriately applied retroactively?
2. Was the warehouseman negligent in its treatment of the property?
ANALYSIS
Standard of Review
Minn.Stat. § 14.69 (1992) provides that:
In a judicial review under sections 14.63 to 14.68, the court may affirm the decision of the agency or remand the case for further proceedings; or it may reverse or modify the decision if the substantial rights of the petitioners may have been prejudiced because the administrative findings, inferences, conclusion or decisions are:
(a) In violation of constitutional provisions; or
(b) In excess of the statutory authority or jurisdiction of the agency; or
(c) Made upon unlawful procedure; or
(d) Affected by other error of law; or
(e) Unsupported by substantial evidence in view of the entire record as submitted; or
(f) Arbitrary or capricious.
"[O]n matters of statutory interpretation, this court is not bound by the determination of an administrative agency." Arvig Tel. Co. v. Northwestern Bell Tel. Co., 270 N.W.2d 111, 114 (Minn. 1978). This court, however, "cannot substitute its judgment for that of the administrative body when the finding is properly supported by the evidence." Vicker v. Starkey, 265 Minn. 464, 470, 122 N.W.2d 169, 173 (1963).
Relators' contentions that the application of Minn.Stat. § 231.18 (Supp. 1993) was unlawful and violated due process, and that the Commissioner's failure to apply the tariff and insurance limitations was based on errors of law, are subject to de novo review. The Commissioner's finding of relator warehouseman's negligence, however, is entitled to deference if it is properly supported by the evidence.
1. Was Minn.Stat. § 231.18 (Supp. 1993) appropriately applied retroactively?
August 1, 1993, was the effective date of Minn.Stat. § 231.18 (Supp. 1993). Claims against a bond.
See 1993 Minn. Laws ch. 212, § 7 (amending Minn.Stat. § 231.18 (1992) but not stating the date the amendment was effective); Minn.Stat. § 645.02 (1992) (unless stated otherwise, legislative enactments are effective August 1 next following final enactment).
* * * * * *
Subd. 6. Bond disbursement. Upon expiration of the claim filing period, the department shall promptly determine the validity of all claims filed and notify the claimants of the determination. An aggrieved party may appeal the department's determination by requesting, within 15 days, that the department initiate a contested case proceeding.
The cause of action in this matter arose no later than November 21, 1992, when the car was repossessed and the loss discovered. At that time, Minn.Stat. § 231.18 (1992) provided for an action to be brought against a warehouse operator by a complaint verified as pleadings in a civil action, Minn.Stat. § 231.21 (1992) provided for such an action to be pursued with a hearing before the department, and Minn.Stat. § 231.26 (1992) provided for the department's ruling to be appealed to a court of competent jurisdiction. In contrast, Minn.Stat. § 231.34 (1992) provided that an action "on the bond of [a] warehouse operator" was to be brought "in any court of competent jurisdiction" if the warehouse operator failed to perform a duty or violated a statutory provision.
On June 7, 1993, a letter from the Department told relators that the Lidbergs were "eligible for reimbursement from [the warehouseman's] bond" and that they could appeal the award to the Lidbergs "by requesting, within 15 days of the receipt of this letter, that the Department of Agriculture initiate a contested case proceeding." The Department's letter anticipated the new statute: it permitted a claimant to be reimbursed from a bond without going to district court.
Following the hearing in the contested case proceeding, the ALJ issued a memorandum quoting Minn.Stat. § 645.21 (1992), "no law shall be construed to be retroactive unless clearly and manifestly so intended," and finding that:
a recovery against the surety bond as a result of this contested case proceeding is inappropriate because Minn.Stat. § 231.18, subd. 6 (1993 Supp.) may not be applied retroactively to the Lidberg claim. * * * At the time the claim for relief arose, the only remedy available in an administrative proceeding was one directly against the warehouseman. The Commissioner of Agriculture and, derivatively, an administrative law judge * * * had no authority to hear or approve a bond claim. * * * [T]he Department of Agriculture applied the 1993 change previously noted to the Lidbergs' claim which arose in 1992. [It] allowed a claim against the bond of [relator.] * * * The statute in effect at the time * * * provided for a complaint and proceeding against a warehouseman, not a surety. Application of the amendment * * * [was] an impermissible retroactive application of the 1993 session law.
When reviewing the ALJ's decision, the Commissioner did not address Minn.Stat. § 645.21 but simply found that "[i]t was appropriate to utilize the procedural requirements of Minnesota Statutes § 231.18 (1993 Supp.)."
The Department's argument that retroactive application is not prohibited if a statute is procedural rather than substantive contradicts case law.
The supreme court has consistently followed its ruling that, whether a statute affects substantive or procedural rights, it may not be applied retroactively unless the legislature so intended. Thus, although the statute in the present situation changed only the procedure for recovery against an employer, the * * * cases from our supreme court indicate that, in the absence of clear legislative intent, the [later] language cannot be applied retroactively.
In re Wage Hour Violations of Holly Inn, 386 N.W.2d 305, 312-13, (Minn.App. 1986). Holly Inn follows a line of analogous cases; see, e.g., Cooper v. Watson, 290 Minn. 362, 368, 187 N.W.2d 689, 693 (1971) (no retroactive application of a rule requiring a written agreement as a prerequisite to an indemnity claim); Muckler v. Buchl, 276 Minn. 490, 501, 150 N.W.2d 689, 697 (1967) (increase in the ceiling of recovery for a wrongful death action was not to be applied retroactively); Chapman v. Davis, 233 Minn. 62, 65-66, 45 N.W.2d 822, 824 (1951) (amended version of a statute concerning the service of a summons not to be applied retroactively); Ogren v. City of Duluth, 219 Minn. 555, 561-62, 18 N.W.2d 535, 539 (1945) (Minn.Stat. § 645.21 applies without difference to procedural and substantive laws).
Both cases cited by the Department to support the view that a contested case hearing in an action on a bond is not a retroactive application of the law are readily distinguishable. Larson v. Ind. Sch. Dist. No. 314, 305 Minn. 358, 362-63, 233 N.W.2d 744, 747 (1975) concerned a rule of civil procedure promulgated by the court and held that its effective date lay in the discretion of this court. Omdahl v. Hadler, 459 N.W.2d 355, 359 (Minn.App. 1990) held that the issue of retroactivity did not apply to an act that was a clarification of a statute.
Like the ALJ, we find no justification for the retroactive application of Minn.Stat. § 231.18 (Supp. 1993). We agree that the ALJ properly ruled he had no jurisdiction over an action against the surety bond.
2. Was the warehouseman negligent in its storage of the Lidbergs' property?
The ALJ's extensive findings of fact support his conclusions that the warehouseman was not negligent in regard to the rust damage and that the warehouseman's negligence was not the proximate cause of the theft of the loose parts. Concerning the rust, he noted that:
Daniel Lidberg controlled the length of time the car body was in storage. It could have been recovered immediately if he had paid the amounts owing. Further, he * * * visited the car after it had been in storage for less than three weeks and, once again, in the middle of October. On neither occasion does he report requesting indoor storage or offering to pay for such storage.
The ALJ found that the warehouseman had been negligent in regard to security, but that his negligence was not the proximate cause of the theft.
There is no evidence that [the warehouseman) should have recognized the value of the parts placed in the car body. With knowledge of how the parts were stored in the lot of [the warehouseman], the Lidbergs failed to bring the value of the property to the attention of [the warehouseman] or offer to pay for different storage. * * * [T]he Lidbergs ratified the storage practices of [the warehouseman].
The Commissioner adopted the ALJ's findings of fact "in their entirety * * * except as provided below." But without addressing the proximate cause issue, and without making any findings independent of the ALJ's, the Commissioner overruled each of the ALJ's determinations in one conclusory sentence.
There is a sufficient factual basis to determine that the warehouse breached its duty of care in handling the Lidbergs' property. The warehouse was negligent in failing to secure the loose auto parts inside of the Dodge SuperBee and in failing to properly protect and secure the car body in storage.
The Commissioner, in concluding that relator warehouseman was causally negligent, reached a conclusion directly opposite to that reached by the ALJ, whose findings of fact the Commissioner adopted without addition, rejection or modification. While the Commissioner had the authority to make additional findings, or to reject or modify those of the ALJ, he took none of these steps. The decision of the Commissioner is contrary to all findings and must be reversed. The conclusion and recommendation of the ALJ, being fully consistent with all findings, must be adopted. Because we reverse the Commissioner's determination of negligence, we do not reach the issue of the applicability of the contractual limitations and tariffs.
Finally, relators contend that the Commissioner's retroactive application of the 1993 statute and his reinstatement of the Department's decision demonstrate the Commissioner's bias in favor of the Department, which results in a violation of due process. Because we have rejected the retroactive application of the statute and reinstated the ALJs' recommended order, we do not address this issue.
DECISION
Because the retroactive application of Minn.Stat. § 231.18 (Supp. 1993) was unlawful and the Commissioner's conclusion on the warehouseman's negligence is unsupported by the findings, we reverse and remand for adoption of the ALJ's recommended order.
Reversed and remanded.