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April 14, 1995


Appeal from Madison Circuit Court. (CV-93-723).

Crawley, Judge, Robertson, P.j., and Thigpen, Yates, and Monroe, JJ., concur.

The opinion of the court was delivered by: Crawley


This is an appeal from the revocation of a license to operate a child-care facility.

In May 1988, the Department of Human Resources (DHR) issued to Kid's Stuff Learning Center, Inc. (KSLC), a license to operate a day-care facility. Two years later, DHR notified KSLC of its intent to revoke the license because of what it called KSLC's "consistent[] failure to maintain standards prescribed and published by the department." See Ala. Code 1975, § 38-7-8(1). By letter of June 26, 1990, DHR notified KSLC of 92 specific instances of noncompliance with DHR standards in the following areas: child/staff ratios and grouping of children; staff supervision of children; feeding programs; transportation, equipment, sanitation, reporting, and record-keeping requirements; and character and suitability criteria.

After a lengthy pre-revocation hearing, during which testimony was taken for 10 days between July 30, 1990, and November 15, 1990, the hearing officer entered an order revoking KSLC's license. Within 14 days of that order, KSLC requested a fair hearing pursuant to Ala. Code 1975, § 38-7-9. The fair hearing officer conducted a record review of the pre-revocation proceeding and concluded that the decision of the pre-revocation hearing officer was supported by substantial evidence and was not arbitrary or capricious.

KSLC filed a complaint in the circuit court for judicial review of the administrative proceedings. See Ala. Code 1975, § 38-7-9. The circuit court affirmed the decision of the hearing officer.

On appeal, KSLC maintains that the decision to revoke its license was arbitrary, capricious, and unsupported by the evidence. KSLC argues that the hearing officer relied on hearsay in reaching his decision. KSLC also contends that it was denied substantive due process because, it argues, the regulations it was charged with violating are unconstitutionally vague and overbroad. In addition, KSLC argues that it was denied procedural due process because, it says, DHR failed to follow its own rules regarding the license revocation.

This court reviews the trial court's ruling with no presumption of correctness, "since that court was in no better position to review the order of [the hearing officer] than we are." State Health Planning & Resource Development Administration v. Rivendell of Alabama, Inc., 469 So. 2d 613, 614 (Ala. Civ. App. 1985). Our standard of review of the agency decision is the same as that used by the circuit court: whether the administrative factfinder's decision "was illegal, capricious, or unsupported by the evidence." Ala. Code 1975, § 38-7-9. See Delavan v. Board of Dental Examiners, 620 So. 2d 13 (Ala. Civ. App. 1992).

Evidentiary Issues

KSLC argues that the hearing officer's decision was arbitrary and unsupported by the evidence because he relied on incidents that occurred before May 1988, when DHR issued KSLC's license. KSLC contends that Ala. Code 1975, § 38-7-4, prohibits the consideration of any prelicense violations of DHR standards. Section 38-7-4 provides:

"If, upon . . . examination of the facility and investigation of the persons responsible for care of children, the department is satisfied that the facility and the responsible persons reasonably meet standards prescribed for the type of child-care facility for which application is made, the department shall issue a license . . . ."

(Emphasis added.) KSLC submits that because DHR must be satisfied that a child-care facility meets DHR standards when it issues a license, DHR is estopped from later using against the licensee any incidents of noncompliance that occurred before the license was issued. The hearing officer considered that argument, but concluded:

"This argument ignores the fact that the vast majority of DHR charges in this case are based on the consistent failure to maintain standards and the chronic non-compliance with child/staff ratios and lack of adequate supervision of children. . . . In order to prove chronic or consistent failures, it is the opinion of the hearing officer that DHR is not limited to periods only after the issuance of the latest license to the licensee. Additionally, this allows DHR to issue warnings or issue notices to the licensee in question, giving the opportunity to the licensee to correct the problems without the necessity of revocation of the license in question."

KSLC's prior failures to met DHR standards were relevant and admissible because they tended to show that KSLC had knowledge of the prescribed standards, yet engaged in the routine practice of ignoring those standards. Evidence of routine mismanagement by a group or organization is admissible on the same theory that behavior which amounts to a habit or custom of a person is admissible. Dothard v. Cook, 333 So. 2d 576 (Ala. 1976). Both tend to "'increase or diminish the probabilities of an act having been done or not done, which act is the subject of contest.'" Id. at 579 (quoting Walker v. Barron, 6 Minn. 508, 512 (1861)).

Based on the evidence before him, the hearing officer could reasonably conclude that DHR notified KSLC of certain deficiencies before issuing KSLC a license in May 1988, and that KSLC had remedied those deficiencies before receiving a license. Evidence of KSLC's prelicense deficiencies was, therefore, admissible to show that KSLC had specific notice of its deviation from minimum standards. Based on that evidence, the hearing officer was authorized to find that KSLC continued a pattern and practice of deviating from those standards, i.e., that it "consistently failed to maintain standards prescribed and published by the department." Ala. Code 1975, § 38-7-8(1). The hearing officer did not err by admitting instances of KSLC's prelicense deviation from DHR standards.

KSLC maintains that principles of res judicata precluded a reconsideration of any prelicense deviations from DHR standards. We do not agree.

"A decision rendered by an officer or a board of state or municipal officers, or a commission, when acting judicially, or quasi-judicially, and within his or its jurisdiction, and having by law the force and effect of a judgment, is a bar to further actions on the same matter between the parties or their privies, but if such an officer or board does not act judicially in the particular matter, but ministerially or administratively, . . . it is no bar to further proceedings in the same matter, and the power of an administrative body or an agency to reconsider its own findings or orders has no relation to, and is not affected by, the doctrine of res judicata. The test [is] . . . whether the particular decision was judicial in its nature and effect, and not the mechanics of the proceeding."

McMahan v. Yeilding, 270 Ala. 504, 506, 120 So. 2d 429, 430-31 (1960)(quoted in Carden v. Personnel Board, 474 So. 2d 1155, 1156 (Ala. Civ. App. 1985)). The doctrine of res judicata applies to an agency decision only when that decision is made after a trial-type hearing, i.e., "when what the agency does resembles what a trial court does." II K. Davis & R. Pierce, Jr., Administrative Law Treatise § 13.3 at 250 (3d ed. 1994). "An administrative decision made without a hearing or anything resembling a hearing is not res judicata." Id. at 249. An administrative agency is acting in a judicial capacity only when it "resolves disputed issues of fact properly before it which the parties have had an adequate opportunity to litigate." United States v. Utah Construction & Mining Co., 384 U.S. 394, 422, 86 S.Ct. 1545, 1560, 16 L. Ed. 2d 642 (1966).

"An . . . administrative handling of a claim, such as responding with a yes or a no to a written application is not necessarily an adjudication, even though it may involve application of law and finding or interpreting facts. Such handling may precede adjudication and ...

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