American Trucking Ass'ns, Inc. v. Conway

• Decision Date: 25 August 1989
• Docket Number: No. 88-156,88-156
• Parties: AMERICAN TRUCKING ASSOCIATIONS, INC., Chemical Leaman Tank Lines, Inc., and Anderson Trucking Service, Inc., Individually and On Behalf of All Others Similarly Situated v. William H. CONWAY, Jr., Vermont Commissioner of Motor Vehicles, Madeleine M. Kunin, Governor of the State of Vermont, Susan C. Crampton, Secretary of the Vermont Agency of Transportation, A. James Walton, Jr., Vermont Commissioner of Public Safety, and Emory A. Hebard, Vermont State Treasurer, Each Individually and In Their Official Capacities.
• Court: Vermont Supreme Court

Page 1335

566 A.2d 1335

152 Vt. 383

AMERICAN TRUCKING ASSOCIATIONS, INC., Chemical Leaman Tank Lines, Inc., and Anderson Trucking Service, Inc. Individually and On Behalf of All Others Similarly Situated v. William H. CONWAY, Jr., Vermont Commissioner of Motor Vehicles, Madeleine M. Kunin, Governor of the State of Vermont, Susan C. Crampton, Secretary of the Vermont Agency of Transportation, A. James Walton, Jr., Vermont Commissioner of Public Safety, and Emory A. Hebard, Vermont State Treasurer, Each Individually and In Their Official Capacities.

No. 88-156.

Supreme Court of Vermont.

Aug. 25, 1989.

Ralph A. Foote and Robert H. Moyer of Conley & Foote, Middlebury, Daniel R. Barney and Robert Digges, Jr., ATA Litigation Center, and William S. Busker, Vice President, Legal Affairs, American Trucking Associations, Inc. of counsel, Alexandria, Va., for plaintiffs-appellees.

Jeffrey L. Amestoy, Atty. Gen. and Thomas R. Viall, Asst. Atty. Gen., Montpelier, for defendants-appellants.

Before ALLEN, C.J., PECK and GIBSON, JJ., and BARNEY, C.J. (Ret.) and KEYSER, J. (Ret.), Specially Assigned.

GIBSON, Justice.

Defendants appeal from a decision of the Washington Superior Court ordering a refund to plaintiffs of taxes paid under 23 V.S.A. §§ 415, 3007 and 3010 and held pursuant to an earlier order of the court in an escrow account since April 21, 1986. At stake is a sum of almost $8 million, plus accrued interest of another million dollars. We affirm.

The history of the prior litigation between these parties is set forth in our opinion in American Trucking Associations, Inc. v. Conway, 152 Vt. 363, 566 A.2d 1323 (1989) (American Trucking 4 ), ¹ so we need not repeat it at length here. In brief, in our opinion in American Trucking Associations, Inc. v. Conway, 146 Vt. 579, 586, 508 A.2d 408, 413 (1986) (American Trucking 3 ), this Court struck down as unconstitutional a $50 fuel-user license fee (also called a "decal tax") imposed by 23 V.S.A. §§ 415, 3007 and 3010 as amended by 1981, No. 172 (Adj.Sess.). We did so on the ground that the fee facially discriminated against non-Vermont truckers because Act 172 simultaneously reduced registration fees for Vermont trucks by $50. 146 Vt. at 584, 508 A.2d at 412. We did not reach the second ground relied on by the trial court in its conclusion that the fee was unconstitutional: the tax's actual discriminatory effect on non-Vermont trucks when calculated on a cost-per-mile basis.

Immediately after that decision, which was issued on February 21, 1986, the Legislature reenacted the decal-tax provisions to eliminate the offsetting reductions in Vermont truck registration fees. 1985, No. 124 (Adj.Sess.). Act 124 did nothing, however to change the discriminatory effect of the decal tax when calculated on a cost-per-mile basis.

Act 124 was approved on April 18, 1986, with retroactive effect to March 3, 1986. Three days later, American Trucking Associations and two other named plaintiffs commenced an action challenging 23 V.S.A. §§ 415, 3007 and 3010 as amended by Act 124. Plaintiffs moved simultaneously in an ex parte proceeding for a temporary injunction to escrow the proceeds of the decal tax as reenacted; the motion was granted that same day. After briefing and a hearing, the superior court on May 29, 1986 issued a preliminary injunction continuing the escrow until further order.

The parties then requested various forms of relief: defendants moved to dismiss the action and for summary judgment, while plaintiffs moved to certify the case as a class action and also moved for summary judgment. All motions were considered together, and on May 5, 1987 the court issued a memorandum of decision, certifying the class action under V.R.C.P. 23(b)(1) and 23(b)(2), but denying the motions to dismiss and for summary judgment.

In June of 1987, the United States Supreme Court handed down its opinion in American Trucking Associations, Inc. v. Scheiner, 483 U.S. 266, 107 S.Ct. 2829, 97 L.Ed.2d 226 (1987), declaring flat highway user taxes inherently discriminatory against interstate commerce. The decision specifically referred to Vermont's decal tax as an example of such taxes, which "divide and disrupt the market for interstate transportation services." Id. at 285, 285 n. 17, 107 S.Ct. at 2841, 2841 n. 17. Relying on Scheiner, plaintiffs renewed their motion for summary judgment and defendants filed a statement conceding the unconstitutionality of 23 V.S.A. §§ 415, 3007 and 3010 in light of that decision. The trial court issued a preliminary injunction prohibiting the collection of the decal tax on September 30, 1987.

Defendants continued, however, to oppose plaintiffs' request that the proceeds of the unconstitutional tax be refunded. After a hearing, the superior court issued an opinion and order on February 11, 1988 holding that the plaintiffs were entitled to a refund of all taxes paid into the escrow fund plus accrued interest. Defendants have appealed all actions by the superior court with respect to the establishment and maintenance of the escrow fund, as well as the court's decision that the amounts in escrow must be refunded to the plaintiffs.

I.

Defendants first attack the validity of the escrow order of April 21, 1986. They do so on two grounds: first, that it violates the doctrine of separation of powers under both the Vermont Constitution and the United States Constitution; and second, that it violates Vermont law and constitutes an impermissible "end run" around Vermont's sovereign immunity.

Defendants concede that they failed to raise the separation of powers argument before the trial court, but contend that this Court should nevertheless consider the issue. The crux of their separation of powers argument is that under §§ 5 and 54 of chapter II of the Vermont Constitution, the escrow order's appointment of the State Treasurer as escrow agent renders him an officer of the court, thereby creating an unacceptable conflict with his duties as a member of the executive branch of government. Defendants invoke the United States Constitution's doctrine of separation of powers by analogy.

Because issues not raised before the trial court are waived on appeal, Persons v. Lehoe, 150 Vt. 582, 584-85, 554 A.2d 681, 682 (1988), our analysis of this claim could end here. We note, however, that even were we to consider this contention, it has no merit. The escrow order appointed defendant Emory A. Hebard, State Treasurer, as escrow agent, whose duties were to collect the taxes, segregate them into a separate account which "at no time shall ... become a part of or deposited in the State Treasury," and maintain adequate records as to who had paid the taxes. In administering the escrow account, the court declared that all defendants "shall be deemed to be acting pursuant to this order and under the court's jurisdiction."

We perceive nothing "judicial" in the State Treasurer's duties under the escrow order that would, or could, conflict with his normal duties as Treasurer. Instead, his obligations as escrow agent are purely ministerial. To argue that because defendants were under the trial court's jurisdiction, they (and specifically Mr. Hebard) became "judicial officers" is without merit.

Defendants next argue that the escrow order conflicts with 32 V.S.A. § 502(a) by compelling the State Treasurer to violate his duty to deposit monies collected by the state "without any deduction on account of ... [any] claim or demand of any description whatsoever." We rejected an identical claim in American Trucking 4, and adopt that same reasoning here. Similarly, we reject defendants' arguments as to the impermissibility of the escrow order in light of the doctrine of sovereign immunity. American Trucking 4, 152 Vt. at ---, 566 A.2d at 1331-32.

II.

Defendants next challenge the trial court's escrow order as not within the standards for equitable relief. The trial court found there to be both the likelihood of success on the merits, and the possibility of irreparable harm should the state be allowed to collect and deposit the disputed taxes during the pendency of the litigation. Defendants contend that these conclusions were erroneous.

In American Trucking Associations, Inc. v. Conway, 142 Vt. 17, 451 A.2d 42 (1982) (American Trucking 1 ), which challenged the validity of certain retaliatory taxes levied on foreign trucks, one of the two issues before the trial court had been whether the fees imposed on those trucks were disproportionate to those collected from Vermont truckers. Id. at 20, 451 A.2d at 44. In remanding to the court for further findings, we held that "[o]nly by comparing the cost per mile imposed by the fee systems on foreign as opposed to Vermont trucks can this Court assess whether the systems were actually discriminatory." Id. at 22, 451 A.2d at 45. Although in the succeeding appeal of that case we based our conclusion of unconstitutionality on the statute's facial discrimination, American Trucking Assns., Inc. v. Conway, 146 Vt. 574, 577, 508 A.2d 405, 407 (1986) (American Trucking 2 ), this statement nevertheless serves as a direct warning that actual discriminatory effect--as opposed to facial discrimination evidenced by the words of the statute alone--could serve to render a tax invalid.

Here, the Legislature's reenactment of the decal tax, which removed the provisions rendering it facially discriminatory, did not take into account the possibility that actual discrimination would still result from its imposition. In its escrow order, the trial court extensively analyzed the effect of the $50 decal fee at issue here, finding that under that scheme foreign trucks pay a much higher cost per mile traveled in Vermont than do domestic trucks. Applying American Trucking 1, the trial court concluded that this actual discriminatory effect would, in all likelihood, render 23 V.S.A. §§ 415, 3007 and 3010 invalid on the merits. As this conclusion is supported by the...