PERMANN v. DEPT. OF LABOR, UNEMP. INS. D.

MORGAN, Justice.

Claimant and appellant, Shirley Permann (Permann) appeals a decision of the circuit court that affirmed the decision of the Department of Labor (Department) which denied Permann unemployment insurance benefits. She was denied benefits for failing to make the employer contacts required for eligibility. We affirm.

Permann was employed as a school teacher for twelve years in Agar, South Dakota, prior to the school's closing in May of 1984. In June of 1984, Permann applied for and began receiving unemployment insurance benefits. During the succeeding ten months, Permann made numerous job contacts as required to be eligible for unemployment insurance compensation. Five of those contacts, however, were determined to be improper by Department and Permann was ordered to refund payments for those five weeks. Four of the claimed improper job contacts occurred when Permann went into her husband's tavern in Gettysburg, South Dakota, and acquired his signature as an employer on her job contact cards. The fifth contact involved the Brookings school system. As a practicing teacher, Permann was allowed to send resumes to various school systems rather than make in-person contacts. Permann sent a resume to the Brookings school system and received by return mail an application for employment. Permann failed to fill out this application and return it to the Brookings school system.

The issue heard by the hearing examiner was whether Permann adequately complied with the job contact requirements for receiving unemployment benefits under the provisions of SDCL 61-6-2(3) and ARSD 47:06:04:21. The hearing examiner's findings of fact and conclusions of law stated the five job contacts were improper and that Permann must refund the benefits. On appeal, the hearing examiner's decision was affirmed by the Secretary of Labor and the circuit court. Permann frames three issues for review as follows:

We believe that these issues, as framed by Permann, evidence confusion as to the correct standard of review applied in cases such as this. This confusion may have been brought on by the language of the statute. The decisions of this court may also have contributed to the confusion since in the past we have been unclear as to the correct application of the various standards of review.

Our statute dealing with a review of administrative procedures was enacted in 1966 and has been amended five times. SDCL 1-26-36 states as follows:

One of the problems with SDCL 1-26-36 is that it does not specifically set out which standards of review listed in subsections (1) through (6) apply to the appropriate item being reviewed, i.e., findings, inferences, conclusions, or decisions. Furthermore, since a decision of the agency must necessarily include findings of fact and conclusions of law (each of which have been historically reviewed under different standards) it is confusing to mingle these terms as was done in SDCL 1-26-36.

SDCL 1-26-36 can be interpreted in several different ways as is evidenced by some of our recent decisions. Prior to the 1978 amendment of SDCL 1-26-36, this court applied a substantial evidence review to findings of fact by an agency. Application of Mont.-Dak. Util. Co., 278 N.W.2d 189 (S.D.1979). In 1978, that standard was replaced with the language "clearly erroneous in light of the entire evidence in the record." The case of State, Div. of Human Rights v. Miller, 349 N.W.2d 42 (S.D. 1984), is often cited for its recitation of the standard of review used in administrative reviews. The Miller court specifically addressed the appropriate standard to be applied in the future and clearly indicated that agency findings of fact would be reviewed under the clearly erroneous standard. We have reiterated this holding in numerous other cases. Appeal of Jackpine Gypsies Motorcycle Club, 395 N.W.2d 593 (S.D.1986); Application of Northwestern Bell Tel. Co., 382 N.W.2d 413 (S.D. 1986); S.D. Wildlife Federation v. Water Mgt. Bd., 382 N.W.2d 26 (S.D.1986); Matter of S.D. Water Mgmt. Bd., 351 N.W.2d 119 (S.D.1984); Weltz v. Bd. of Educ. of Scotland Sch. Dist., 329 N.W.2d 131 (S.D. 1983).

Some of these same decisions, plus several others, seem to indicate, however, that the entire decision is reviewed under the clearly erroneous standard. Gratzfeld v. Bomgaars Supply, 391 N.W.2d 200 (S.D. 1986); Application of Koch Exploration Co., 387 N.W.2d 530 (S.D.1986); Raml v. Jenkins Methodist Home, 381 N.W.2d 241 (S.D.1986); Application of Northwestern Bell Tel. Co., supra; Matter of S.D. Water Mgmt. Bd., supra; S.D. Wildlife Federation, supra; In re Application of Southern Hills Bank, 339 N.W.2d 310 (S.D. 1983); Matter of Ackerson, Karlen & Schmitt, 335 N.W.2d 342 (S.D.1983); Dakota Harvestore v. S.D. Dept. of Revenue, 331 N.W.2d 828 (S.D.1983); Fraser v. Water Rights Commission, 294 N.W.2d 784 (S.D.1980). Still other cases indicate our standard of review of agency decisions should be a combination of SDCL 1-26-36(5) & (6). We have stated in three recent opinions: "We do not substitute our judgment for the agency's judgment on the weight of evidence pertaining to questions of fact unless the agency's decision is clearly erroneous, or is arbitrary, capricious, or characterized by an abuse of discretion or a clearly unwarranted exercise of discretion." Appeal of Templeton, 403 N.W.2d 398, 399 (S.D.1987) (emphasis added); Anderson v. Western Dakota Insurors, 393 N.W.2d 87, 90 (S.D.1986) (emphasis added); Deuter v. South Dakota Highway Patrol, 330 N.W.2d 533, 538 (S.D. 1983). In S.D. Wildlife Federation, we initially stated that the decision would be reviewed under the clearly erroneous standard, but went on to review the board's decision to see if it was "clearly erroneous, arbitrary, an abuse of discretion, or in error as a matter of law." 382 N.W.2d at 31.

Standing out from these somewhat confusing decisions are the cases of Johnson v. Skelly Oil Co., 359 N.W.2d 130 (S.D. 1984) and Hartpence v. Youth Forestry Camp, 325 N.W.2d 292 (S.D.1982). In Skelly Oil Co. we set out the proper scope of review for administrative findings of fact and conclusions of law.

359 N.W.2d at 132; S.D. Wildlife Federation, 382 N.W.2d at 32 (Wuest, J. dissenting). Skelly Oil Co. was preceded by Hartpence, wherein we stated: "Initially, we must determine whether the holding [below involves] a finding of fact or a conclusion of law. We draw this distinction for the purpose of determining the proper standard of review; that is, clearly erroneous as opposed to mistake of law. SDCL 1-26-36(4)(5)." 325 N.W.2d at 296. In addition to Skelly Oil Co. and Hartpence, we have stated on many occasions that conclusions of law made by an agency are fully reviewable by this court. Modern Merchandising v. Dept. of Revenue, 397 N.W.2d 470 (S.D.1986); Application of Trade Development Bank, 382 N.W.2d 47 (S.D.1986); Matter of Public Util. Com'n Declar. Ruling, 364 N.W.2d 124 (S.D.1985); Matter of Change of Bed Category of Tieszen, 343 N.W.2d 97 (S.D.1984); Nash Finch Co. v. South Dakota Dept. of Rev., 312 N.W.2d 470 (S.D.1981).

We note with interest that 5 U.S.C. § 706,1 the federal counterpart to SDCL 1-26-36, is somewhat similar to our statute and has been interpreted to allow free review of conclusions of law made by agencies. "Questions of law, unlike questions of fact, are freely reviewable by the courts; the courts are under no obligation to defer to [the agency's] legal conclusions." Coca-Cola Co. v. Atchison, T. & S.F. Ry. Co., 608 F.2d 213, 218 (5th Cir.1979); Pennzoil Co. v. F.E.R.C., 789 F.2d 1128, 1135 (5th Cir.1986); Pollgreen v. Morris, 770 F.2d 1536, 1544 (11th Cir.1985); United States v. McConney, 728 F.2d 1195 (9th Cir.1984); cert. denied, 469 U.S. 824, 105 S.Ct. 101, 83 L.Ed.2d 46; Missouri Pac. R. Co. v. Independent Mills, Inc., 706 F.2d 1080, 1083 (10th Cir.1983); Aberdeen & Rockfish R. Co. v. United States, 682 F.2d 1092, 1096 (5th Cir.1982).

Common sense dictates which standards apply to the different matters reviewed. The agency, after holding a hearing and listening to witnesses, is in a much better position to find facts than are we on appeal. On questions of law, however, it is well within our province to interpret statutes without any assistance from the administrative agency. It is well settled that conclusions of law made by a trial court are given no deference by this court on appeal, and lacking special circumstances,2 we see no reason to give deference to agency conclusions of law.

United States v. McConney, 728 F.2d 1195, 1201 (9th Cir.1984). "Errors of law are not insulated by the clearly erroneous rule and are freely reviewable. A question of law may be decided `de novo.' Appellate courts are foremost, of course, law courts." S. Childress, "Clearly Erroneous"; Judicial Review Over District Courts in the Eighth Circuit and Beyond, 51 Mo.L.Rev. 93, 131-32 (1986). Having differentiated the appropriate standards of review applied to administrative findings of fact and conclusions of law, we proceed to the merits.

In her first issue, Permann claims Department placed additional requirements relating to job contacts beyond what is contemplated by SDCL 61-6-2 and ARSD 47:06:04:21. We have held in the past that Department cannot make "eligibility requirements more restrictive than intended by the plain language enacted by the legislature." Red Bear v. Cheyenne River Sioux Tribe, 336 N.W.2d 370, 371 (S.D. 1983). This is a question of statutory interpretation which we review de novo. Matter of Change of Bed Category of Tieszen, supra; Nash Finch Co., supra. We do not believe that Department's interpretation of SDCL 61-6-2 and ARSD 47:06:04:21 places additional requirements not contemplated by the legislature.

Permann claims that the three requirements stated in ARSD 47:06:04:21(2)(a)-(c)3 are the sole requirements for a valid job contact. Although we agree that these requirements must be met, we also recognize that further requirements are set forth in the initial paragraph of that regulation. To be eligible for benefits one must be "actively seeking work" and "[i]n determining what constitutes `actively seeking work,' the secretary or his representative shall consider whether the efforts the claimant has made to obtain work have been reasonable and are efforts an unemployed individual is expected to make if he is honestly looking for work." ARSD 47:06:04:21. A requirement that one may not contact one's spouse in search of employment if it is known in advance that the spouse does not have the employment opportunity sought is not a requirement beyond what was contemplated by the legislature. A person making such a contact is not "actively seeking work" as defined by ARSD 47:06:04:21. Therefore, Department did not err as a matter of law in its interpretation of the statute and the rule.

In her second issue on appeal Permann claims that even if Department's interpretation was correct, its "decision" is "clearly erroneous." We perceive Permann's argument is that her particular facts applied to the law as set out in the first issue do not support Department's decision to deny benefits. Her contention that the standard of review is clearly erroneous intimates that this issue is a finding of fact. In actuality, we believe the issue presented here represents a mixed question of law and fact. As the United States Supreme Court stated in Pullman-Standard v. Swint, 456 U.S. 273, 289 n. 19, 102 S.Ct. 1781, 1790 n. 19, 72 L.Ed.2d 66, 80 n. 19 (1982), "mixed questions of law and fact [are] questions in which the historical facts are admitted or established, the rule of law is undisputed, and the issue is whether the facts satisfy the statutory standard, or to put it another way, whether the rule of law as applied to the established facts is or is not violated." Cf. Hartpence, 325 N.W.2d at 296. Neither party in this appeal disputes the historical facts. Likewise, SDCL 61-6-2 and ARSD 47:06:04:21, a regulation specifically authorized by SDCL 61-6-2, clearly apply in this case and set forth the requirements that must be met by a person prior to receiving unemployment insurance benefits.

By characterizing the question before us as a mixed question of law and facts, we are then faced with another dilemma, namely, the applicable standard of review.

2 S. Childress & M. Davis, Standards of Review § 17.2, at 335 (1986) (footnotes omitted).

Whether a court will characterize the question as being law or fact is very uncertain, which makes the appropriate standard of review likewise uncertain. "[T]he distinction between law and fact in many situations is so ephemeral that, until the [highest appellate court] speaks on the characterization of any specific issue, no one can really be sure how it will be treated." S. Childress & M. Davis, supra, § 17.1, at 329-30. To furnish some guidance in this area of the law, we adopt the reasoning of United States v. McConney:

United States v. McConney, 728 F.2d 1195, 1202 (9th Cir.1984) (emphasis added).

Since this issue is a mixed law-fact question and requires us to apply a legal standard, we will treat it as a question of law and freely review the issue. Permann essentially argues that Department erred in holding that she violated the requirements of SDCL 61-6-2 and ARSD 47:06:04:21. We agree with Department and hold Permann violated the letter and spirit of the statute and the rule. The test, as set forth by ARSD 47:06:04:21 is "whether the efforts the claimant has made to obtain work have been reasonable and are efforts an unemployed individual is expected to make if he is honestly looking for work." Permann admitted that she contacted her husband and had him sign her card even though she knew no employment was available. As for Permann's failure to return the employment application to the Brookings school system, we again agree with Department and hold that her actions did not meet the requirements of the statute and rule. Permann obviously had no chance for a job in the Brookings school system if she did not return the application as instructed by the school system. As a result, we cannot say that Permann honestly looked for work in the Brookings school system.

Finally, Permann contends that Department was clearly erroneous in finding her at fault for the overpayments. The hearing examiner specifically found that Permann was at fault because she knowingly made improper job contacts. The referee was in a much better position to make that determination than are we and we do not believe he was clearly erroneous in so finding.

We affirm on all issues.

WUEST, C.J., and SABERS and MILLER, JJ., concur.

HENDERSON, J., concurs in result.

HENDERSON, Justice (concurring in result).

At or about the time of this writing, there are several decisions in this Court involving a review, by this Court, of the standard of review on findings of fact and conclusions of law entered by the lower courts of this state. In an effort to comport my vote with previous writings that I have currently tendered by way of special writings to other cases in conference in this Court, at this time, I wish to refer to my special writings in Guardianship of Viereck, 411 N.W.2d 102, 107 (S.D.1987) (Henderson, J., specially concurring), and Lee v. Department of Health, 411 N.W.2d 108, 112 (S.D.1987) (Henderson, J., concurring in result).

Again, I wish to point out that the two United States Supreme Court decisions, cited in my earlier decisions, do not involve appeals from administrative agencies. SDCL 1-26-36 requires that great weight be given to the findings made and inferences drawn by an agency on questions of fact. Surely, the standard of clearly erroneous cannot be applied to conclusions of law since questions of law are fully reviewable.