Scott v. Donnelly

• Decision Date: 22 February 1965
• Docket Number: No. 8134,8134
• Citation: 133 N.W.2d 418
• Parties: John SCOTT et al., Plaintiffs and Appellants, v. John DONNELLY, W. S. Dean, and Louis Mondry, as the duly appointed, qualified, and acting members of North Dakota Potato Development Commission, Defendants and Respondents.
• Court: North Dakota Supreme Court

Page 418

133 N.W.2d 418

John SCOTT et al., Plaintiffs and Appellants, v. John DONNELLY, W. S. Dean, and Louis Mondry, as the duly

appointed, qualified, and acting members of North

Dakota Potato Development Commission,

Defendants and Respondents.

No. 8134.

Supreme Court of North Dakota.

Feb. 22, 1965.

Syllabus by the Court

1. The 'fee' not exceeding one cent per hundredweight of potatoes shipped, provided by Chapter 4-10A, N.D.C.C., to be fixed and collected pursuant to an order of the North Dakota Potato Development Commission, is an excise tax.

2. The power to tax is a legislative power which includes excise taxes.

3. The power to levy an excise tax is subject to the provisions of Section 175 of the North Dakota Constitution and to the rule that executive boards or officers may not be authorized to exercise uncontrolled discretion in determining the amount of a tax.

4. The power vested in the North Dakota Potato Development Commission by Chapter 4-10A, N.D.C.C., to fix fees and determine the area or areas in which they apply constitutes an unconstitutional delegation of legislative power to an executive board.

5. The referendum provisions of Section 4-10A-06(d). N.D.C.C., do not insure to the people or the taxpayers of an area made subject to the tax by an order of the North Dakota Potato Development Commission a fair opportunity to accept or reject the tax before it becomes effective.

Stokes, Vaaler, Gillig & Warcup, Grand Forks, for plaintiffs and appellants.

Degnan, Hager, McElroy & Lamb, Grand Forks, for defendants and respondents.

MORRIS, Commissioner.

The plaintiffs bring this action on behalf of themselves and others similarly situated against the defendants as the appointed, qualified, and acting members of the North Dakota Potato Development Commission, organized by virtue of Chapter 4-10A, N.D.C.C. The relief sought is a declaration of the rights, status, and other legal relations of the plaintiffs with respect to Chapter 4-10A, N.D.C.C., and a determination of the constitutionality of the chapter and various sections thereof and for such further relief as the court may deem proper.

The first challenge to the constitutionality of the law in question is that it constitutes an unlawful delegation of legislative authority contrary to Section 175 of the Constitution of the State which provides that:

'No tax shall be levied except in pursuance of law, and every law imposing a tax shall state distinctly the object of the same, to which only it shall be applied.'

In support of this contention, the plaintiffs point to Section 4-10A-06, N.D.C.C., which provides, among other things, for the collection of 'fees' not exceeding one cent per hundredweight of potatoes shipped and provides for the disbursement of the funds arising from such collection.

It is further alleged that the Commission promulgated an order which became effective July 18, 1956, which established a tax of one cent per hundredweight on all potatoes produced or sold within the area of the counties of Pembina, Walsh, Cavalier, Towner, Grand Forks, Nelson, Steele, Traill, Cass, Richland, and Ramsey in the State of North Dakota. The defendants admit the issuance of the order, which reads as follows:

'NORTH DAKOTA POTATO DEVELOPMENT COMMISSION

OPER RELATING TO FIXING OF ONE CENT FEE PER HUNDREDWEIGHT OF POTATOES SHIPPED OR SOLD IN THE RED RIVER VALLEY OF NORTH DAKOTA

'Under and by virtue of Chapter 94 of the Session Laws of North Dakota for 1951, and as amended, the North Dakota Potato Development Commission does hereby prescribe that Section 1 of Regulation No. 1 be amended to read as follows:

'There is hereby fixed and established a fee of one per [sic] cent per hundredweight on all potatoes produced and sold or shipped within the said Area, from and after August 1, 1956, and every person engaged in the production processing or shipping of potatoes in said Area is directed to pay said fee to the area control board. The said fee shall be paid by the person who first ships or sells said potatoes within the Area; provided, however, that the act of any producer in transporting potatoes grown by the respective producer to a grading, storing, or loading point in the Area for the purpose of having said potatoes thus graded, stored, or loaded for shipment shall not constitute an act of shipping in determining who is the person who first ships or sells potatoes and is liable for payment of the fee. In determining the person who must pay said fee the shipping will be deemed to take place when the potatoes are loaded at any place within the area in a railroad car, truck, or other conveyance in which the potatoes are to be transported for sale or otherwise. When the proper fee has once been paid on any lot of potatoes the same shall not be subject to any further payment of fee.

'Said regulation and amendment affect the Red River Valley area, including the counties of Pembina, Walsh, Cavalier, Towner, Grand Forks, Nelson, Steele, Traill, Cass, Richland, and Ramsey, of the State of North Dakota.'

'This amendment to Regulation No. 1 shall become effective from and after 12:01 a. m., o'clock the 1st day of August, 1956, until such time as repealed by the Control Board.

'North Dakota Potato Development Commission

'CLIFFORD MOQUIST, PRESIDENT

'LLOYD ROBBIE, VICE-PRESIDENT

'ART NELSON, SECRETARY

'DATED AT:

'East Grand Forks, Minn.

'July 18, 1956'

The plaintiffs also allege that portions of Chapter 4-10A, N.D.C.C., are violative of Section 69, Subsections 21 and 23, and Section 186 of the Constitution of the State of North Dakota.

Both the plaintiffs and the defendants made motion for summary judgment.

The court denied the plaintiffs' motion for summary judgment for the relief prayed for in the complaint, and granted the defendants' motion for a dismissal of the complaint. Judgment was ordered and entered accordingly. The plaintiffs appeal.

The controlling issue is the challenge of the plaintiffs to the constitutionality of Chapter 4-10A, N.D.C.C., on the ground that it permits the levy of a tax against the plaintiffs and others similarly situated by an appointive commission through which the Legislature may not constitutionally delegate such power which the Commission has attempted to exercise by the issuance of its order of July 18, 1956, 'relating to fixing of one cent fee per hundredweight of potatoes shipped or sold in the Red River Valley of North Dakota.'

Section 4-10A-01 states the title of the law to be: 'Potato Improvement, Marketing and Advertising Act of North Dakota.'

Section 4-10A-03, N.D.C.C., recites the purposes:

'(a) To enable the potato producers and shippers of this state to better meet the competition from other states who are conducting potato improvement, maketing, and advertising programs.

'(b) To establish and promote orderly marketing of potatoes, to provide for potato inspection by the established federal-state inspection service or the use of special permits or identification to permit storage or processing in transit, and to provide methods and means for ascertaining and developing better methods of producing and marketing potatoes.

'(c) To provide means and methods for the development of new and larger markets for potatoes grown within the state.

'(d) To eliminate or reduce the economic waste in production, packing, and marketing of potatoes grown within the state.'

The next section defines the term 'potatoes' as 'any and all white Irish potatoes produced or handled within the state.'

Section 4-10A-05 states that the Governor shall appoint a commission consisting of three members, with certain specific qualifications, to be known as the 'North Dakota potato development commission.'

Section 4-10A-06 enumerates powers of the Commission and authorizes it 'to issue, administer, and enforce the provisions of the commission's orders hereunder regulating the shipment of cull potatoes and the collection of fees (not exceeding one cent per hundredweight of potatoes shipped), and the disbursement of funds as provided in this chapter.' The last paragraph of the section provides that,

'In order to effectuate the declared policy of this chapter, the commission shall have the power, after due notice and opportunity for hearing, to prepare a commission's order and submit same to the potato industry for approval. Such order shall not become effective unless it is approved in a public referendum by at least two-thirds of the potato growers voting in such referendum. The provisions of such commission's order shall be only those provisions provided for in subsection (a)(8) of section 4-10A-08.'

Section 4-10A-08 provides for the contents of and limitations with respect to orders of the Commission. It includes:

'(7) Provisions fixing fees and the method of collecting the same as hereinafter provided.'

This section also contains procedure for the termination of an order: A petition signed by at least one hundred fifty potato growers living in the counties affected by the program, of which there are at least five growers from each county signing, makes it mandatory that the Commission call a meeting at a central point with the same minimum attendance requirement and representation as that required for the petition. Two-thirds of the growers attending must vote in favor of a referendum in order to bring about a referendum vote. If a majority of the growers voting at such referendum favor termination, the order voted upon shall be terminated within thirty days after the results of the referendum are determined.

A 'grower,' as defined by the Act, is 'any person who grows or shares in the ownership of potatoes grown for market on one or more acres.' Sec. 4-10A-04(e).

In Section 4-10A-10 it is provided that:

'Orders issued by the commission under this chapter may be limited in their application by prescribing the areas or portions of the state in which a particular order shall be effective. * * *'

The Potato...