Kellogg v. Hoven School District No. 53-2

479 N.W.2d 147, 1991 S.D. LEXIS 182, 1991 WL 260502

• Court: South Dakota Supreme Court
• Decided: December 11, 1991
• Docket: 17332
• Status: Published

Opinions

SABERS, Justice

(On Reassignment).

Hoven School District appeals from a circuit court order which reversed a decision by the school board denying a minor boundary change. We affirm.

FACTS

In January, 1990 William Kellogg (Kellogg) petitioned to the school boards of the Gettysburg and Hoven school districts for a minor boundary change. He sought to have his property transferred from the Ho-ven School District to the Gettysburg School District. The land proposed for transfer was co-terminus with the common boundary of the two school districts as required by SDCL 13-6-84.1.

The land proposed for transfer had an assessed value of $934,422. At that time the Hoven School District had a total assessed valuation of $82,338,000¹ and the property to be transferred was less than two percent of the total assessed value of that district. The Kellogg petition was signed by a majority of the voters residing in the area proposed for transfer in accordance with SDCL 13-6-85.

Kellogg owns a large cattle-feeding operation. The majority of his business and social activities take place in Gettysburg. They attend church and participate in school activities there.

Kellogg has three children who were in the sixth, fourth, and kindergarten grades in the 1990-1991 school year. They have always attended school in Gettysburg, with the Hoven School District paying tuition and transportation.

The petition was approved by the Gettysburg School Board but denied by the Ho-ven School Board. The reasons for the denial by the Hoven School Board (Board) were set forth in a letter to Kellogg dated July 11, 1990:

a. The amount of land requested is much more than is needed to connect the two districts and is an excessive amount;

b. The loss and total assessed valuation of this territory to the Hoven School District is significant in light of uncertain school finances in South Dakota;

c. The excess loss, combined with numerous minor boundary changes already granted in past years is causing substantial financial impact to the Hoven School District; and

d. The Hoven School District is already paying tuition and mileage for the children to the Gettysburg school and the board’s decision should not adversely affect the children’s education.

It is interesting to note that had the transfer been approved, the income to the Hoven School District would be reduced by approximately $7,500, but tuition and transportation expenses of about $10,800 to educate the Kellogg children would be eliminated.

STANDARD OF REVIEW

On appeal, Hoven School District argues that the trial court erred in not giving the proper deference to its school board decision. It asserts that the trial court, rather than determining whether the Board abused its discretion, impermissibly substituted its judgment for that of the Board.

SDCL 13-6-85 provides in part:

A boundary change, affecting not more than two percent of the assessed valuation of the school district from which the area is to be taken, may be made upon an application for a boundary change to the school board of the school district from which the area is to be taken and to the school board of the school district to which the area is to be annexed, in the form of a petition signed by over fifty percent of the voters residing in the area to be transferred by the boundary change. Copies of the petitions shall also be delivered by the petitioners to the board of county commissioners having jurisdiction over the school districts affected. Any petitioner who is aggrieved by a decision of the school board under this section may appeal that decision.

An appeal from the decision of the school board may be made to the circuit court in the time and manner specified by § 13-46-1 or to the state superintendent of education within thirty days from the date of the decision of the school board by filing a notice with the superintendent of the school board and mailing a copy thereof to the superintendent of education.... Nothing in this section shall affect the right of an aggrieved party to appeal from the decision of the school board to the circuit court. (Emphasis added.)

SDCL ch. 13-46 applies to appeals on school matters. SDCL 13-46-6 provides:

The trial in the circuit court shall be de novo² according to the rules relating to special proceedings of a civil nature so far as such rules are applicable and not in conflict with the provisions of this chapter and the court shall enter such final judgment or order as the circumstances and every right of the case may require and such judgment or order may be enforced by writ of execution, mandamus, or prohibition, or by attachment as for contempt.

In Dale v. Board of Education, Etc., 316 N.W.2d 108, 112 (S.D.1982), we stated “on appeal to the circuit court, pursuant to SDCL 13-46-6, the doctrine of separation of power limits the scope of review to that provided in SDCL 1-26-36.”³

WHETHER THE CIRCUIT COURT WAS CLEARLY ERRONEOUS IN REVERSING THE BOARD’S DECISION WHICH DENIED KELLOGG’S PETITION FOR A MINOR BOUNDARY CHANGE

School boards may be “creatures of the legislature,” but when they rule on the petition of a taxpayer to transfer his property to another school district, the circuit court has appellate jurisdiction over the board’s decision, SDCL 13-6-85, and the decision may be overturned if it is “[a]rbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.” SDCL 1-26-36(6). In other words, the circuit court has the authority to reverse a school board’s arbitrary decision even when the board has acted “legally” in the narrow sense of being procedurally correct.

In determining whether the decision was legal, the circuit court reviews the decision in two aspects.. First, whether the school board acted legally, and second, whether the school board’s decision was arbitrary, capricious, or an abuse of their discretion.

Moran v. Rapid City Area Sch. Dist., 281 N.W.2d 595, 599 (S.D.1979) (citations omitted) (emphasis added). Moran stated:

The second aspect of the circuit court’s review is a determination whether or not the school board’s decision was arbitrary, capricious, or an abuse of discretion. A conclusion by the circuit court that the school board did act in such a manner is, similarly, yet independently, a ground for a determination that the school board acted illegally and its decision was illegal. We agree with that portion of Presiding Judge Hanson’s dissent in Dunker v. Brown County Board of Education, supra, wherein he stated:

‘... Accordingly, the legislature cannot constitutionally delegate unrestrained power and unlimited discretionary authority. To do so would constitute an unlawful delegation of legislative power_’ [80 S.D. 193,] 121 N.W.2d [10] at 18.

281 N.W.2d at 599 (emphasis added).

In this case, the trial court entered Conclusion of Law #3, which stated as follows:

3. That the Petitioners had the burden to show that the Hoven School District had acted arbitrarily or capriciously or unsupported by the evidence and the burden has been met. (Emphasis added).

Under Moran, this is a determination by the trial court that the board acted illegally-

The circuit court found that Board’s decision was arbitrary and capricious. That is the decision this court is reviewing, not Board's original decision.⁴ After a circuit court has decided an appeal from an agency or school board,

[a]n aggrieved party or the agency may obtain a review of any final judgment of the circuit court under this chapter by appeal to the Supreme Court. The appeal shall be taken as in other civil cases. The Supreme Court shall give the same deference to the findings of fact, conclusions of law and final judgment of the circuit court as it does to other appeals from the circuit court. Such appeal may not be considered de novo.

SDCL 1-26-37 (emphasis added). Although we have held that our review of an administrative agency’s decision is “unaided by any presumption that the circuit court’s decision was correct,” Appeal of Templeton, 403 N.W.2d 398, 399 (S.D.1987), that rule presupposes that a formal hearing was held at the agency level and that the circuit court reviewing the decision relied on the written record. See e.g., Strain v. Rapid City Sch. Bd., 447 N.W.2d 332, 334-335 (S.D.1989); Application of Koch Exploration Co., 387 N.W.2d 530, 536 (S.D.1986); Application of N.W. Bell Tel. Co., 382 N.W.2d 413, 415-416 (S.D.1986). In contrast, when the circuit court has essentially nothing in writing from a school board to review,

the trial court is mandated to hear evidence, and weigh the testimony of the witnesses. The trial court must then determine whether substantial evidence supports the board’s decision ... and must enter findings. To attack the trial court’s findings on appeal to this court, Board must show they are clearly erroneous.

Jager v. Ramona Bd. of Ed., 444 N.W.2d 21, 26 (S.D.1989) (emphasis added).

Board held no formal hearing and made no findings of fact or conclusions of law about Kellogg’s boundary change petition. The only written “record” of Board’s deliberations are a few sentences from the minutes of six board meetings and a one-page letter to Kellogg denying the petition. In contrast, the circuit court conducted a “trial de novo” on August 29, 1990, and took substantial testimony and evidence which produced a 65-page transcript, three pages of findings and conclusions, and an order reversing Board.

Under the applicable rules of appellate procedure, we must affirm the circuit court unless its determinations are clearly erroneous. SDCL 1-26-37; Jager, supra. Therefore, the question is not whether substantial evidence in the record supports Board, but whether substantial evidence in the record supports the circuit court.

Clearly it does. The majority of Kellogg’s business and social activities take place in Gettysburg. They attend church and participate in school activities there. Kellogg has three children who have always attended school in Gettysburg. Kellogg lives 29 miles southwest of Hoven but only 7 miles west of Gettysburg. Aside from livestock butchering, he conducts all of his regular business in Gettysburg rather than Hoven. Furthermore, the Hoven district actually pays more to send the Kellogg children to school in Gettysburg than it would lose in property taxes if Kellogg were permitted to transfer his property to the Gettysburg district. Even more revealing is the attached map of the respective school districts and the Kellogg property which shows graphically how close the Kel-loggs are to Gettysburg and how far they are from Hoven. (See attached map). Kellogg argues that the Hoven school district pursues a policy of “land retention for the sake of land retention” despite the fact that it presently has 65% of the assessed property valuation of the total area but only 37% of the total enrolled pupils — including the 40 pupils it pays to send to the Gettysburg district. As the map shows, the Hoven district includes substantial land west of Highway 83 (approximately six complete townships extending up to 16 miles west of the highway) even thpugh it operates no schools west of Highway 83.

Although Hoven School District objects to the characterization, Kellogg concludes that “[w]hat you have and what the Court obviously saw is a school district that is a ‘tax shelter’ school district.” In contrast, Kellogg contends that he has a legal right and a moral responsibility to transfer sufficient land to the Gettysburg district to offset the increased burden his children will place on the Gettysburg system, even though it means that Kellogg would pay substantially more taxes there than he presently pays to the Hoven district.

Kellogg met all the threshold conditions and procedural requirements for a minor boundary change set forth in SDCL §§ 13-6-84.1, 13-6-85 and 13-6-86. In addition, the equitable factors considered in reviewing minor boundary changes — including the economic and social integration of the Kel-loggs into the Gettysburg community, the lack of a tax avoidance motive on Kellogg’s part and the physical placement to the Gettysburg district — also support the petition. See, e.g., Shumaker v. Canova Sch. Dist., 322 N.W.2d 869, 871 (S.D.1982).

On the other side of the ledger, there really are no sound arguments against this minor boundary change. Board’s reasons for denying Kellogg’s petition dwell almost exclusively on the hypothetical financial impact the boundary change could have on the Hoven district, and fail to discuss any of the compelling factors which support the granting of the petition. Considering the number and the persuasiveness of those factors, as well as the lack of any indication that Board adequately considered them in arriving at its decision, the circuit court was not clearly erroneous in concluding that Board acted arbitrarily, capriciously or abused its discretion. On that basis, we affirm.⁵

WUEST and AMUNDSON, JJ., concur. MILLER, C.J., and HENDERSON, J., dissent.

APPENDIX

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1 . The Gettysburg School District had an assessed valuation of approximately $45 million.

2 . "An appeal from a school board’s decision is not a trial de novo in the true sense of the phrase. The appeal has the limited function of receiving evidence for ‘determining the legality, and not the propriety, of the school board’s decision.’” Moran v. Rapid City Area School Dist., 281 N.W.2d 595, 598 (S.D.1979). "School boards are creatures of the legislature and are a part of the legislative branch of government. Therefore, the judiciary may not invade the province of the school board’s decision making unless such decision making is done contrary to law.” Id. at 598.

3 . SDCL 1-26-36 provides:

The court shall give great weight to the findings made and inferences drawn by an agency on questions of fact. The court may affirm the decision of the agency or remand the case for further proceedings. The court may reverse or modify the decision if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions, or decisions are:

(1) In violation of constitutional or statutory provisions;

(2) In excess of the statutory authority of the agency;

(3) Made upon unlawful procedure;

(4) Affected by other error of law;

(5) Clearly erroneous in light of the entire evidence in the record; or

(6) Arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.

A court shall enter its own findings of fact and conclusions of law or may affirm the findings and conclusions entered by the agency as part of its judgment. The circuit court may award costs in the amount and manner specified in chapter 15-17.

4 . We realize that the 1990 legislature amended SDCL 13-6-85 to remove any presumption favoring the appellate rulings of the state superintendent. However, since this decision was appealed directly from Board to circuit court under SDCL 13-6-85, bypassing the superintendent, the 1990 amendment is not relevant to this case.

5 . To hold otherwise is to hold Kellogg’s land hostage for the benefit of the Hoven School District for no reason other than because the district says so. If, on these facts, a circuit court’s finding of an abuse of discretion is not affirmed, then SDCL 1-26-36(6) is effectively repealed and there-is no longer any appeal from a procedurally correct school board decision on a minor boundary change, regardless of how patently unreasonable or unfair it is.