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Brodigan v. AK Dept. of Revenue (7/28/95), 900 P 2d 728
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Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, telephone (907) 264-0607, fax (907) 276-
5808.
THE SUPREME COURT OF THE STATE OF ALASKA
JOHN and HELEN BRODIGAN, )
) Supreme Court No. S-6193
Appellants, )
) Superior Court No.
v. ) 3AN-92-5666 CI
)
ALASKA DEPARTMENT OF REVENUE, ) O P I N I O N
)
Appellee. ) [No. 4234 - July 28, 1995]
______________________________)
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage,
Glen C. Anderson,
Judge.
Appearances: Mark Rindner and Diane L.
Wendlandt, Lane Powell Spears Lubersky,
Anchorage, for Appellants. Marilyn May,
Assistant Attorney General, Anchorage, and
Bruce M. Botelho, Attorney General, Juneau,
for Appellee.
Before: Moore, Chief Justice,
Rabinowitz, Matthews, Compton and Eastaugh,
Justices.
EASTAUGH, Justice.
I. INTRODUCTION
John and Helen Brodigan appeal the decision of the
Department of Revenue, Permanent Fund Dividend Division
(Department) finding that the Brodigans were ineligible for the
1990 permanent fund dividend (PFD). They argue that John
qualified for an allowable absence for medical treatment, and
thus they should have received their PFDs. We affirm the
Department's finding that the Brodigans were ineligible in 1990.
II. FACTS AND PROCEEDINGS
The Brodigans moved to Alaska in 1962.1 John underwent
two coronary bypass operations and other vascular surgery in
1971, 1986, and 1987. He visits physicians in Alaska for these
problems annually and claims that because of his vascular
problems, his physicians advised him to spend the coldest winter
months in a warmer climate.
Since 1987, the Brodigans have lived in a motor home,
which is registered in Alaska. When in Alaska, they live in
their motor home at their son's house in Palmer, Alaska. They
travel in the Lower Forty-Eight during the colder months. The
Brodigans were outside Alaska from November 4, 1987, to May 9,
1988, from September 1, 1988, to April 29, 1989, and from
September 17, 1989, to May 2, 1990.
The Brodigans applied for the 1989 and 1990 PFDs. They
initially received their 1989 PFDs; however, the Department
demanded repayment, asserting that the Brodigans were not Alaska
residents for PFD eligibility because they were outside Alaska
for extended periods of time which were not allowable absences.
The Department also denied the Brodigans their 1990 PFDs.2
In November 1990 and May 1991, the Brodigans requested
an informal conference regarding the denial of the 1989 and 1990
PFDs, respectively. In August 1991 the Department tentatively
rejected the Brodigans' arguments and upheld the denial of the
1989 PFDs based on ineligibility. The Brodigans refuted the
denial, noting their ties to Alaska. They also noted that "[t]he
above argument will also hold true for our 1990 application for
the permanent fund checks."
The Department upheld its finding of ineligibility in
an informal conference decision in October 1991. The Brodigans
appealed the decision and requested a formal hearing for the 1989
and 1990 years. A hearing officer conducted a telephonic hearing
in February 1992 regarding the 1989 and 1990 PFDs. The
Department later informed the hearing officer that the hearing
should have concerned only the 1989 PFDs because the Brodigans
did not appeal the denial of the 1990 PFDs to the informal
conference level.
In May 1992 the hearing officer decided that the
Brodigans were not eligible for the 1989 PFDs, concluding that
they had not demonstrated an intent to return to Alaska and
remain permanently. After the Brodigans appealed to the superior
court, the Department informed the Brodigans that it would not
seek repayment of the 1989 PFDs because the Department's policy
did not require repayment of erroneously-issued PFDs. The
parties stipulated that the Brodigans' appeal of the 1989 denial
would be dropped, and that the appeal of the 1990 denial could
proceed on the record established in the appeal of the 1989
denial.
After oral argument, the superior court affirmed the
Department's denial of the 1990 PFDs and awarded the Department
$700 in attorney's fees.
This appeal followed.
III. DISCUSSION
To qualify for a PFD in 1990, an applicant needed to
meet three statutory requirements. The applicant had to be (1) a
state resident3 on the application date; (2) a state resident for
at least twenty-four months immediately preceding April 1 of the
current dividend year; and (3) physically present in the state at
some time during the period beginning July 1 two years before the
date of application and ending on the date of application. AS
43.23.005(a) (1990). The applicable regulation required that an
applicant who left Alaska must have been a resident of Alaska for
a minimum of six months immediately before departing Alaska, be
absent for one or more of the allowable reasons, and demonstrate
at all times during the absence an intent to return to and remain
permanently in Alaska. 15 Alaska Administrative Code (AAC)
23.175(a) (1990). Alaska Statute 43.23.095(8) allows absences
"only for any of the following reasons: . . . (D) medical
treatment"; 15 AAC 23.175(c) (1990) allows an applicant to be
"absent primarily for one of the following reasons: . . . (6)
receiving medical treatment if the treatment is on the advice of
an Alaska-licensed physician and does not include a seasonal or
permanent change of residence." Additionally, the Department has
the discretion to allow an absence for any purpose not expressly
listed "if the nature and duration of the absence are temporary
and are consistent with an intent to return to Alaska and remain
permanently in the state." 15 AAC 23.175(d) (1990).
A. Allowable Absence for Medical Treatment
The Department considered the Brodigans' extended
absences to have been for reasons not allowed for purposes of PFD
eligibility. It noted that a seasonal change of residency for
medical purposes does not qualify as an absence allowable for
medical treatment under 15 AAC 23.175(c)(6).4 Thus, it held that
the Brodigans were ineligible to apply for the 1990 PFD.5
The Brodigans argue that they should have received
their 1990 PFDs because John was absent for medical treatment, a
permissible reason under AS 43.23.095(8)(D) and 15 AAC
23.175(c)(6).6 They claim that as a result of John's vascular
problems, his doctor in Alaska recommended that he spend the
colder months in a warmer climate outside Alaska and thus their
travel constitutes "medical treatment."
In affirming the Department's decision, the superior
court stated that "medical treatment," as used in AS
43.23.095(8)(D), is not defined to include merely an absence from
the state on the advice of one's doctor. "Treatment means just
that. It implies some specific therapeutic application by
medical personnel. . . ."
We find the court's interpretation reasonable.
Allowing an absence for medical treatment recognizes that
prolonged absence from Alaska can be appropriate when some
"specific therapeutic application by medical personnel" is
necessary. Leaving Alaska for that purpose does not reflect
adversely upon one's intent to remain permanently in Alaska upon
completion of treatment.
We conclude that it was reasonable for the Department
to decide that the Brodigans did not qualify for an allowable
absence for "medical treatment,"although their absence may have
been medically advised. The Department consequently did not
abuse its discretion.7
B. 15 AAC 23.175(c)(6)
The Brodigans argue that even if this court agrees with
the Department's interpretation of "medical treatment," 15 AAC
23.175(c)(6) is invalid because it exceeds the Department's
statutory authority. They assert that AS 43.23.095(8) allows the
Department to establish additional allowable absences. They
claim, however, that 15 AAC 23.175(c) impermissibly limits the
statutory allowable absences by excluding certain types of
medical treatment (those involving seasonal travel) from the
statutory definition of allowable medical absences.
In deciding whether 15 AAC 23.42.175(c)(6), which
denies PFD eligibility to applicants who have a seasonal change
of residence, falls within the commissioner's delegated authority
to regulate PFD eligibility8 we consider whether the regulation
is consistent with the statutory purpose and is "reasonable and
not arbitrary."9 State, Dep't of Revenue v. Cosio, 858 P.2d 621,
624 (Alaska 1993) (quoting Kelly v. Zamarello, 486 P.2d 906, 911
(Alaska 1971)).
Alaska Statute 43.23.095(8) allows residents who
temporarily leave the state for limited purposes to retain their
PFD eligibility. Subsection (D) allows absences for medical
treatment. Because the Department must administer the PFD
program and apply the statutory standard, the commissioner needed
to decide the meaning of "medical treatment."10 Thus, 15 AAC
23.175(c)(6) explains that an absence may be allowed for
applicants receiving medical treatment if the absence "does not
include a seasonal or permanent change of residence."
"One objective of [AS 43.23.015(a), which grants the
commissioner authority to adopt regulations] is to require the
commissioner to make substantive regulations resolving questions
as to who is and who is not a permanent resident." Cosio, 858
P.2d at 625. We stated in Cosio that "[t]he objective of AS
42.23.095(8) is to limit payment of dividends to permanent
residents." Id. Those who leave Alaska from the fall through
the spring may reasonably be seen to fall outside this category
of permanent residents of Alaska. By excluding medical absences
involving a seasonal or permanent change of residence, the
regulation assures that eligibility is limited to those residents
who are temporarily outside actively attempting to treat their
medical conditions. The regulation is consistent with the
language and purposes of the statute. The regulation also eases
the administrative burden of attempting to determine what
treatment level is sufficient to merit eligibility for a PFD.
Under the Brodigans' interpretation of the statute, any
person whose physician advises that another climate would be
beneficial could qualify for a PFD simply by visiting Alaska
every year and establishing paper connections to Alaska, via
licenses, registrations, and the like. To protect against such
claims, the Department must be able to reasonably define
statutory terms to insure that the permanent fund is protected
for the legitimate claims of permanent residents. See State,
Dep't of Revenue v. Bradley, __ P.2d __, Op. No. 4221 at 8 (June
9, 1995) ("The purpose of the regulation [conditioning student
status upon full-time attendance] is to avoid unwarranted
dividend payments without unduly burdening the agency.").
Although the regulation is more restrictive than the statute
because it contains the seasonal change language, it is not
inconsistent with the statute. See Bradley, Op. No. 4221 at 8
(upholding a regulation which required an absent resident to be
enrolled as a "full-time student"although the relevant statute
used broader language of "secondary or postsecondary education"
to define state resident); Cosio, 858 P.2d at 624-25 (upholding a
regulation which denied PFD eligibility to illegal aliens
although the relevant statutes did not mention aliens at all).
Because the regulation is consistent with the statutory purpose
and is reasonable, we hold that the Department did not exceed its
authority in adopting 15 AAC 23.175(c)(6).
C. Discretionary Allowable Absence
The Department found that the Brodigans were not absent
for any of the reasons specifically allowed in AS 43.23.095 and
15 AAC 23.150 (1989).11 Therefore, it considered whether the
Brodigans satisfied 15 AAC 23.175(d), which grants the Department
discretion to approve absences for other purposes. The
Department concluded that "[t]he pattern demonstrates that they
are only temporarily in Alaska each year, for the warmer months,
and no longer have the intent to remain permanently in the state.
While they have the intent to return every year, they plan only
to be here temporarily, not permanently." Thus, the Department
did not find the Brodigans' absence allowable.
The Brodigans argue that the Department should have
found their absence allowable under 15 AAC 23.175(d). The
Brodigans assert that the Department's determination of their
intent is not supported by substantial evidence because the
Department failed to consider the totality of the circumstances
which demonstrate their intent to remain Alaska residents. They
claim that they have not established a residence outside Alaska
and have ties to Alaska, and that therefore the presumption that
absences should be shorter than the time spent in Alaska,
employed in State, Department of Revenue v. Gazaway, 793 P.2d
1025 (Alaska 1990), should not apply.
In Gazaway, the PFD applicants were children who had
resided in Alaska before their parents' divorce. 793 P.2d at
1026. Under the custody agreement, the children lived in
Oklahoma with their mother, but spent their summer vacations and
alternating Christmas and spring vacations with their father in
Alaska. Id. The Department denied the children PFDs, claiming
that their absence from Alaska was not allowable under a
predecessor regulation that was nearly identical to 15 AAC
23.175(d). Id. at 1027. The Department "interpreted its
regulation permitting absences from Alaska that are temporary in
nature and duration to include only absences that are not longer
in duration than the time spent in Alaska." Id. The Department
found that "[t]he children were in Alaska for less than a third
of the years in question. Their absences from the state were
regular and of longer duration than their presence in the state.
In effect, the children were temporarily present in Alaska, not
temporarily absent." Id. We held that the Department's
interpretation of its regulation was reasonable. Id.
Similarly, the Brodigans left Alaska for the majority
of the year for three consecutive years. Their absences were
"regular and of longer duration than their presence in the
state." In 1990 they can be considered to have been "temporarily
present in Alaska, not temporarily absent." The Department did
not abuse its discretion in finding that the Brodigans' absence
was not temporary, and thus not allowable under 15 AAC 23.175(d).12
D. Due Process
The Brodigans argue that the Department
denied them substantive due process by imposing "an
irrebuttable presumption of nonresidence based on six
months' absence for other than a specifically listed
reason." They claim that the presumption implicates
their fundamental right to travel because it penalizes
them for traveling outside the state and fails to
survive strict scrutiny.
The Brodigans mischaracterize the presumption as
irrebuttable. The Department stated that an absence "that
exceeds over half of each year is presumed to be unallowable
because it is not temporary." The Department's notice denying
the 1990 PFDs demonstrates that the Department considered the
Brodigans' evidence: "Over the past 3 years you have established
a pattern of frequent, recurring, and lengthy absences. You can
not claim that you intend to return to Alaska and remain
permanently. You are not eligible for a 1990 [PFD] and your
application is denied." The Department considered that the
Brodigans' absence was part of a pattern and that they did not
produce evidence demonstrating that the pattern would change.
Thus, it is more accurate to state that the Brodigans failed to
rebut the presumption than to consider the presumption
unrebuttable. The Department's use of the six month presumption
did not deny the Brodigans due process.13
E. Attorney's Fees
The superior court awarded the Department attorney's
fees of $700, approximately twenty percent of the fees it
actually incurred. The superior court's order awarding
attorney's fees states:
The court finds that Appellants are not
public interest litigants, cf., Rosen v. St.
Bd. of Accountancy, 689 P.2d 478, but that
the economic incentive to pursue such claim
is small and that award of a large percentage
of actual attorney fees could deter good
faith litigants of limited means from
pursuing their claims.
The Brodigans argue that the superior court should have
denied the Department's motion for attorney's fees under
Appellate Rule 508 because it is unclear whether the Department
is a prevailing party, and because they are public interest
litigants.
A superior court acting as an intermediate court of
appeal from the decision of an administrative agency has broad
discretion to award attorney's fees under Appellate Rule 508.14
Messerli v. Dep't of Natural Resources, 768 P.2d 1112, 1122
(Alaska 1989); Alaska R. App. P. 508(e). The Brodigans'
arguments do not convince us that the superior court abused its
discretion in awarding fees to the State.15
IV. CONCLUSION
We AFFIRM the Department's decision that the Brodigans
were ineligible to receive the 1990 PFDs, and AFFIRM the superior
court's attorney's fees award to the Department.
_______________________________
1 The Brodigans' permanent mailing address is Palmer,
Alaska, and they have no other address. The Brodigans' children
and grandchildren reside in Alaska. The Brodigans have been
counted as Alaska residents in three censuses. They are
registered to vote in Alaska and have never voted in another
state. They have Alaska driver's licenses and own several
vehicles, boats, and trailers, all of which are registered in
Alaska. Their dog is also registered in Alaska. John belongs to
the Veterans of Foreign Wars and the American Legion in Alaska.
The Brodigans also have credit union accounts in the Mat-Su
Valley.
2 The Brodigans' 1990 PFD applications stated the dates
they were absent from Alaska and, under "Reasons for Absences,"
John checked both "Vacation"and "Other,"noting under "Other:"
"For theripeutic [sic] treatment of vasquilar [sic] system."
Helen checked both "Vacation"and "Out of state as the spouse or
dependent of an Alaska resident with an allowable absence."
3 A "state resident"is "an individual who is physically
present in the state with the intent to remain permanently in the
state or, if the individual is not physically present in the
state, intends to return to the state and is absent for"a reason
allowable by statute or regulation. AS 43.23.095(8) (1990).
4 We review the Department's interpretation of 15 AAC
23.175 under the reasonable basis standard. Handley v. State,
Dep't of Revenue, 838 P.2d 1231, 1233 (Alaska 1992). "[W]here an
agency interprets its own regulation . . . a deferential standard
of review properly recognizes that the agency is best able to
discern its intent in promulgating the regulation at issue." Id.
(quoting Rose v. Commercial Fisheries Entry Comm'n, 647 P.2d 154,
161 (Alaska 1982)).
5 As stated previously, the parties stipulated that the
appeal of the 1989 denial would be dropped, and that the appeal
of the 1990 denial could proceed on the record established in the
appeal of the 1989 denial. Thus, the hearing officer's decision
denying the 1989 PFDs is relevant to the 1990 appeal.
6 John argues that he should have qualified for an
allowable absence for medical treatment. Helen argues that she
should have qualified for an allowable absence because she was
"accompanying an eligible applicant as a spouse." 15 AAC
23.175(c)(13) (1990). Consequently, Helen has no independent
basis to claim an allowable absence.
7 Even if the Brodigans' travel outside Alaska was for
the purpose of receiving "medical treatment,"their absence was
not allowable because it was a "seasonal change of residence."
See 15 AAC 23.175(c)(6) (prohibiting absences for medical
treatment if the treatment includes a "seasonal or permanent
change of residence").
The Department found that the Brodigans were outside
Alaska from September 17, 1989, to May 2, 1990, for a total of
227 days or nearly two-thirds of the year-long eligibility
period. The record also demonstrates that the Brodigans were
outside Alaska for similar periods for the previous two PFD
eligibility periods -- from September 4, 1987, to May 9, 1988 and
from September 1, 1988, to April 29, 1989. Consequently, the
Department found that "[t]he pattern demonstrates that they are
only temporarily in Alaska each year, for the warmer months, and
no longer have the intent to remain permanently in the state.
While they have the intent to return every year, they plan only
to be here temporarily, not permanently." Therefore, the
Department correctly concluded that the Brodigans did not qualify
for an allowable absence for medical treatment, and did not err
in stating that "[s]easonal changes of residency for medical
purposes do not qualify for the absence for medical treatment."
8 In State, Dep't of Revenue v. Cosio, 858 P.2d 621, 624
(Alaska 1993), we concluded that "section .015(a) requires the
commissioner to adopt regulations setting substantive eligibility
requirements for permanent fund dividends."
9 We accord the administrative regulation a presumption
of validity; the party challenging the regulation bears the
burden of demonstrating invalidity. Cosio, 858 P.2d at 624. We
review a "legislative" type of regulation with considerable
deference. Id.
10 AS 43.23.095(8)(F) states that the commissioner may
establish by regulation other reasons for allowable absences.
11 In 1989 the regulation regarding allowable absences was
found under 15 AAC 23.150. Subsection (d) stated:
In the department's discretion, an
absence under this section may be disallowed,
depending on the length of the absence,
frequency and duration of that absence, and
other factors relevant to the length and
purpose of the absence in question.
In 1990, however, the regulation was renumbered as 15 AAC 23.175
and slightly altered.
15 AAC 23.175(d) states in relevant part:
An absence for any purpose other than
one stated in (c) of this section will, in
the department's discretion, be allowed by
the department if the nature and duration of
the absence are temporary and are consistent
with an intent to return to Alaska and remain
permanently in the state.
The 1990 regulation, 15 AAC 23.175, controls here.
12 The Brodigans unpersuasively argue that the Department
cannot determine their intent solely on the length of their
absence from Alaska because it must consider the totality of the
circumstances pursuant to 15 AAC 23.130(d). In its 1990 denial,
the Department considered other circumstances -- "the duration,
length, frequency and purpose of the absence in question." The
Department considered the Brodigans' absence to be a vacation,
noting that over the past three years, they established a pattern
of frequent, recurring, and lengthy absences.
Equally unpersuasive is their argument that they travel
in a motor home during their absences and did not establish a
permanent residence outside Alaska. They fail to acknowledge
that the residency requirement for PFD eligibility may differ
from other residency requirements. The Department's decision
states:
This case is an example of the different
definitions of residency in the Alaska
statutes. Though the applicants are not
eligible to receive Alaska Permanent Fund
Dividends for 1989, that does not mean that
they are not considered residents for other
purposes. Eligibility for PFDs includes
meeting a definition of residency tied to
physical contact to the state, which may be
more difficult to meet than the definition of
residency for other purposes.
Regardless of whether the Brodigans live in a motor home or in a
house with a street address, they reside outside Alaska for the
majority of the year on a seasonal basis. The fact they move
their home with them from place to place outside Alaska and do
not establish an outside residence does not prove they must be
Alaska residents.
13 The Brodigans also argue that 15 AAC 23.175(c)(6)
violates equal protection because it "distinguishes between two
distinct classes of Alaska residents: those whose medical
treatment involves seasonal absences from the state and those
whose medical treatment does not require such absences." They
contend that because they are members of the first class, the
regulation impinges on their right to travel, requiring a higher
degree of scrutiny in the equal protection analysis than that
accorded in a PFD, an economic interest.
The Brodigans' conclusion that the right to travel
requires a higher degree of scrutiny than that given to a PFD is
not necessarily correct. This court has stated that in the
"right to migrate context"
[W]e will no longer regard all
durational residency requirements as
automatically triggering strict scrutiny and
requiring a showing that such a
classification is absolutely necessary to
promote a compelling state interest.
Instead, we will balance the nature and
extent of the infringement on this right
caused by the classification against the
state's purpose in enacting the statute and
the fairness and substantiality of the
relationship between that purpose and the
classification.
Alaska Pacific Assurance Co. v. Brown, 687 P.2d 264, 271 n.10
(Alaska 1984) (quoting Williams v. Zobel, 619 P.2d 448, 453
(Alaska 1980), rev'd on other grounds, 457 U.S. 55 (1982)).
Applying this standard, however, it is clear that the State's
purpose in awarding PFDs only to permanent residents outweighs
the minor infringement on the Brodigans' choice of seasonal
residences.
14 Appellate Rule 508 states in relevant part:
Attorney's Fees. Attorney's fees may be
allowed in an amount to be determined by the
court. If such an allowance is made, the
clerk shall issue an appropriate order
awarding fees at the same time that an
opinion or order under Rule 214 is filed.
15 The Brodigans claim that because the Department agreed
not to pursue any claim for repayment of the 1989 PFD, it was not
the prevailing party regarding the 1989 PFD. They do not dispute
that the Department prevailed regarding the 1990 PFD. Thus, they
characterize the parties' status as a "tie." Such a
characterization is misguided. First, the Department stipulated
to drop the Brodigans' appeal of the 1989 denial, not because of
the Brodigans' efforts, but due to the Department's policy under
which assessments are not made when a PFD is erroneously issued.
Moreover, the parties also stipulated that the facts of the 1990
dividend year were "substantively identical"to those for 1989.
As previously mentioned, the Brodigans admit that they lost their
claim for the 1990 PFD. Thus, if the Department had proceeded
with the assessment for the 1989 PFD, it would presumably have
succeeded on that year as well. Consequently, the superior court
did not abuse its discretion in awarding the Department
attorney's fees for the action.
Additionally, the Brodigans do not qualify as public
interest litigants because they fail to satisfy the requisite
four criteria. See Anchorage Daily News v. Anchorage School
Dist., 803 P.2d 402, 404 (Alaska 1990) (stating that under the
fourth criterion, the "litigant [must] have a sufficient economic
incentive to file suit even if the action involved only narrow
issues lacking general importance").
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