Appeal of AT & T Information Systems, 15370

Decision Date22 April 1987
Docket NumberNo. 15370,15370
Citation405 N.W.2d 24
PartiesIn the Matter of the Appeal of AT & T INFORMATION SYSTEMS From the Assessment of Its Property Located In South Dakota for the Years 1984 and 1985. AT & T INFORMATION SYSTEMS, Plaintiff and Appellee, v. SOUTH DAKOTA STATE BOARD OF EQUALIZATION, Defendant and Appellant.
CourtSouth Dakota Supreme Court

Lawrence L. Piersol, of Davenport, Evans, Hurwitz & Smith, Sioux Falls, for plaintiff and appellee; James P. Kratochvill and Richard J. Sinton, of American Tel. and Tel. Co., Morristown, N.J., on brief.

John Dewell, Asst. Atty. Gen., Pierre, for defendant and appellant; Mark V. Meierhenry, Atty. Gen., Pierre, on brief.

KEAN, Circuit Judge.

This appeal considers whether a vendor and lessor of telephone equipment is a telephone company subject to ad valorem taxation and whether a person taxed by the Department of Revenue has a right to a de novo trial in the circuit court. The appellant is the State Board of Equalization (Board). The appellee is AT & T Information Services (ATTIS).

The South Dakota Legislature has enacted a statute authorizing the imposition of an ad valorem tax upon a telephone company's property. SDCL 10-33-10. Pursuant to this authority, the Department of Revenue (Department) in 1984 and 1985 imposed taxes upon certain personal property owned by ATTIS and leased to consumers in South Dakota. ATTIS resisted the imposition of this tax claiming it was not a telephone company either under statute or as that term is commonly used. After the imposition of the tax, ATTIS appealed to the Board. The Board upheld the Department's assessment and equalized the taxes. ATTIS appealed the Board's decision to the circuit court. A trial de novo was held although resisted by the Board. The circuit court reversed the decision of the Board, and, in an order which considered both the 1984 and 1985 assessments, ruled that ATTIS was not a telephone company subject to ad valorem taxation.

Prior to 1968, local telephone service in South Dakota was provided by AT & T subsidiary, Northwestern Bell Telephone Company and other local state independent phone companies. In those days telephone customers paid one charge for both the line transmission costs and the phone equipment. Phone equipment is known in the industry as customer premises equipment or CPE's. The charge for a CPE changed in 1978 when the Federal Communications Commission (FCC) determined that the CPE market had become adequately competitive and deregulation should be considered. Implications of the Telephone Industry's Primary Instrument Concept, 68 F.C.C.2d 1157 (1978). In 1980 the FCC ordered that CPE's would be deregulated and a new CPE would have to be offered to the customer separate from the regulated telephone transmission service. In the Matter of Amendment of Section 64.702 of the Commissions Rules & Regulations. (Second Computer Inquiry) (Final Decision), 77 F.C.C.2d 384, as modified on further reconsideration, 88 F.C.C.2d 512 (1980), aff'd sub nom., Computer and Communications Industry Ass'n. v. F.C.C., 693 F.2d 198 (D.C.Cir.1982), cert. denied sub nom. National Ass'n of Regulatory Utility Comm'n v. F.C.C., 461 U.S. 938, 103 S.Ct. 2109, 77 L.Ed.2d 313 (1983), cert. denied sub nom. Louisiana Public Service Commission v. F.C.C., 461 U.S. 938, 103 S.Ct. 2109, 77 L.Ed.2d 313 (1983). This phased deregulation plan began January 1, 1983. A new CPE was one that was not on the customer's premises or in inventory prior to that date. The deregulation of in-place (embedded) CPE's was deferred to a later date.

In response to the FCC's deregulation, AT & T formed American Bell, Inc. which ultimately became ATTIS in 1982. It was a wholly owned subsidiary of AT & T, but with a completely separate corporate structure. ATTIS began selling and leasing new CPE's in South Dakota in 1983. It has fourteen business locations in nine counties consisting of retail outlets, a sales office and installation and maintenance service locations.

By a consent decree in a federal antitrust case in 1982, AT & T also began a divestiture of its regional telephone company subsidiaries like Northwestern Bell. United States v. American Telephone and Telegraph Co., 552 F.Supp. 131 (D.D.C.1982), appeal dismissed, 714 F.2d 178 (D.C.Cir.), aff'd sub nom. Maryland v. United States, 460 U.S. 1001, 103 S.Ct. 1240, 75 L.Ed.2d 472 (1983). After the consent decree, the FCC ordered the transfer of all embedded CPE's owned by AT & T's subsidiaries to ATTIS on January 1, 1984. The majority of the property subject to this assessment consists of these in-place CPE's used by and located on the premises of the customers and previously owned by Northwestern Bell.



The Board objected to the circuit court's determination that the review of the Department's tax assessment on ATTIS should be de novo. It argues that SDCL 10-11-43 has been repealed by implication, if compared with SDCL 1-26-30 to 1-26-30.3, and that appeals of any state agency to the circuit court are limited to the record by the Administrative Procedures Act, SDCL 1-26.

It is provided in SDCL 10-11-43 that:

Any person, firm, corporation, taxing district, governmental subdivision or agency interested as described in Sec. 10-11-42 may appeal from a decision of the state board of equalization to the circuit court for the county in which the property which is the subject of the action is situated. The appeal shall be taken in the same form and manner as appeals are taken from the decision of the board of county commissioners to such court, except that the state board of equalization shall become the appellee and shall defend its decision on appeal. (Emphasis added)

SDCL 7-8-30, which refers to appeals of a board of county commissioners, provides in part: "All appeals thus taken to the circuit court shall be docketed as other causes pending therein and the same shall be heard and determined de novo." (Emphasis added). And, it is also provided by SDCL 7-8-32 that an "Appeal to the circuit court from decisions of the board of county commissioners, as provided in this chapter, is an exclusive remedy." (Emphasis added).

The Board's reliance on SDCL 1-26-35 is misplaced. While the Board correctly interprets this statute as a restriction upon de novo reviews, the language also provides other methods of appeal: "The review shall be conducted by the court without a jury and shall be confined to the record. A trial de novo shall not be granted unless otherwise authorized by law." (Emphasis added).

It is clear that SDCL 10-11-43, with its reference to SDCL 7-8-30 provides this other exclusive remedy authorized by law, that is, a review de novo of appeals from the Board when the assessment is made by the Board.

The Board's argument that SDCL 1-26-30 restricts a de novo review is likewise in error.

A person who has exhausted all administrative remedies available within any agency or a party who is aggrieved by a final decision in a contested case is entitled to judicial review under this chapter. If a rehearing is authorized by law or administrative rule, failure to request a rehearing will not be considered a failure to exhaust all administrative remedies and will not prevent an otherwise final decision from becoming final for purposes of such judicial review. This section does not limit utilization of or the scope of judicial review available under other means of review, redress, or relief when provided by law.... (Emphasis added)

The language of the statute itself rebuts the assertion that no other method of appeal is allowed. Moreover, such an interpretation of these statutory provisions has been one of solid consistency in allowing de novo reviews of appeals from the Board. See, e.g., Chicago, Milwaukee, St. Paul and Pacific R.R. Co. v. Board of Commissioners of Walworth County, 248 N.W.2d 386 (S.D.1976); Appeal of Butte County, 336 N.W.2d 151 (S.D.1983), aff'd in part, rev'd in part, 385 N.W.2d 108 (S.D.1986); Mortenson v. Stanley County, 303 N.W.2d 107 (S.D.1981).

The Board's argument that SDCL 7-8-32 and 10-11-43 have been repealed by implication by the APA, SDCL 1-26, is also flawed. While the general rule that repeals by implications are not favored is recognized, see, e.g., Matter of Sales Tax Refund Applications, 298 N.W.2d 799 (S.D.1980), such a detailed analysis is not needed in this case.

The APA was adopted in most respects between 1966 and 1975. Since that date some amendments have occurred and, as applied to this case, SDCL 1-26-30 was amended in 1978. However, SDCL 7-8-32 was reenacted in 1983. And, SDCL 10-11-43 was reenacted in 1985. It is inherent in the concept of repeal by implication that the statute which is doing the repealing be enacted subsequent to the statutes which are claimed to be repealed. Repeals by implication operate on statutes already existing, not statutes later enacted. Thus, the concept of repeal by implication is not applicable. Matter of Bode's Estate, 273 N.W.2d 180 (S.D.1979); Argo Oil Corp. v. Lathrop, 76 S.D. 70, 72 N.W.2d 431 (1955).



The primary issue before this court is whether ATTIS is a telephone company for purposes of taxation under SDCL 10-33-10. The taxation statutes do not define the term "telephone company." In such a situation the court may resort to the use of statutory interpretation, In the Matter of the Appeal of Sales Tax Refund Applications of Black Hills Power and Light Co., 298 N.W.2d 799 (S.D.1980), or the ordinary and common meaning of the term if the statutes give little aid in interpretation. Oahe Conservancy...

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