Barnsdall Refining Corp. v. Welsh

Decision Date16 November 1936
Docket Number7910.
Citation269 N.W. 853,64 S.D. 647
PartiesBARNSDALL REFINING CORPORATION et al. v. WELSH, Director of Taxation, et al.
CourtSouth Dakota Supreme Court

Appeal from Circuit Court, Hughes County; John F. Hughes, Judge.

Action by the Barnsdall Refining Corporation and others against W C. Welsh, as Director of Taxation of the State, and others. From an order overruling their demurrer, defendants appeal.


Walter Conway, Atty. Gen., and R. F. Drewry, Asst. Atty. Gen., for appellants.

O'Keeffe & Stephens, of Pierre, for respondents.


This action was brought to enjoin the defendant officers from enforcing, or attempting to enforce, against the plaintiffs the provisions of chapter 204, Laws 1935. Under the provisions of this statute the operation of any store within this state without a license is made unlawful. The license fees to be paid are graduated according to the number of stores to be operated "under the same general management, supervision or ownership." Upon one store the annual license fee is $1; upon two or more, but not to exceed ten, $5 for each additional store; and in excess of ten stores, $10 for each additional store. A tax upon the combined gross sales of all stores "under a single or common ownership, supervision or management" is also imposed with an increase in rate graduated according to volume. It increases from the rate of one-eighth of one per cent. upon all gross sales at retail during the calendar year of $50,000 or less to a rate of three-fourths of one per cent. upon all gross sales at retail in excess of $1,000,000. All gross sales at wholesale regardless of amount are taxed at the rate of one-fifth of one per cent.

The complaint alleges that the plaintiffs are corporations engaged in the sale and distribution of petroleum products automobile accessories, and other merchandise at retail and wholesale; that each is engaged in the operation of two or more places of business in this state; and that the plaintiffs will be liable for license fees and taxes imposed under the provisions of this statute unless it is adjudged that said act failed of passage or is unconstitutional. It is alleged that this measure was introduced in the upper House of the Legislature as Senate Bill No. 154; that there were forty-five members elected to the Senate, and upon final passage there were yeas 27 and nays 18; that notwithstanding said appropriation bill did not receive an affirmative vote of two-thirds of the members elected, it was declared passed that the bill was transmitted to the House of Representatives, where it was amended; that on final passage of the bill as amended, 58 members voted yea and 38 voted nay; that 7 members were absent and not voting; that the bill not having received an affirmative vote of two-thirds of the members elected was declared lost by the speaker of the House; that an appeal was taken from the decision of the chair, and upon the question whether the chair should be sustained there were nays 50 and yeas 27; that the bill was then declared passed notwithstanding it did not receive an affirmative vote of two-thirds of the 103 members elected to the House; that thereafter the bill came before the Senate for concurrence in the House amendments; that upon a substitute motion "that the senate do not concur in house amendments to senate bill Number 154" there were yeas 19 and nays 25, and the president of the Senate then ruled that the substitute motion was lost and that the House amendments were thereby concurred in by the Senate; that no vote of the Senate was taken upon the question of the final passage of the bill as amended by the House of Representatives; and that the bill was signed by the presiding officers of the Senate and House, was approved by the Governor on March 14, 1935, and was thereafter filed in the office of the Secretary of State.

Plaintiffs claim that the classification of stores for payment of licenses according to the stores owned and the classification by reference to gross sales for the imposition of the tax is arbitrary and violates the equal protection clause of the Fourteenth Amendment and provisions of the Constitution of this state; that basically there is no distinction between the provisions of this statute and the Kentucky statute declared unconstitutional in a recent decision of the United States Supreme Court, Stewart Dry Goods Co. v. Lewis, 294 U.S. 550, 55 S.Ct. 525, 79 L.Ed. 1054, whose decision on the question whether state laws offend the Federal Constitution is binding on state courts. We need not undertake to detail the facts alleged to sustain these claims.

Defendants demurred to the complaint, but the demurrer was overruled, and defendants have appealed to this court.

A preliminary question with respect to the remedy by injunction is presented. Equity will not assume jurisdiction to grant relief by injunction or otherwise in tax cases if there is an adequate remedy at law. Chicago & N.W. Ry. Co. v. Rolfson, 23 S.D. 405, 122 N.W. 343; Duncan v. Corson County, 38 S.D. 623, 162 N.W. 395; Zimmerman v. Corson County, 39 S.D. 167, 163 N.W. 711. Defendants contend that there is such a remedy in the provisions that "it shall be competent for any person deeming himself aggrieved by the refusal of the state auditor to allow any just claim against the state, to commence an action against the state by filing with the clerk of the supreme court a complaint setting forth fully and particularly the nature of the claim." Section 2109, Rev. Code 1919. This section, however, does not authorize the bringing of an action upon a claim for the payment of which no appropriation has been made. Sigwald v. State, 50 S.D. 37, 208 N.W. 162; Brams v. State, 63 S.D. 571, 262 N.W. 89.

Section 11 of the act in question reads as follows: "Any and all expenses incurred by the Director of Taxation in the administration of this Act shall be paid out of the funds accruing from the collection of license fees and taxes herein imposed, and said expenses may be paid upon a warrant or warrants duly approved by said Director of Taxation. All money remaining after the payment of administration expenses shall be deposited by the State Treasurer in a fund to be known as the State Relief Fund and which fund shall be expended for the relief of the poor in a manner to be directed by the Governor of this State. Provided, that the money credited to the State Relief Fund during any one fiscal year shall not exceed the sum of three-hundred thousand dollars ($300,000). All collections in excess of said three-hundred thousand dollars ($300,000) shall be credited by the State Treasurer to the State General Fund."

A claim for taxes wrongfully exacted by the state would not be chargeable to expenses incurred by the Director of Taxation under section 11, and defendants do not contend that such claim could be paid from any other fund set apart by the Legislature.

But it is argued that if license fees and taxes be paid to avoid the penalties of the statute and the statute is unconstitutional, title to the money would not pass to the state. If the state under such circumstances became a trustee, an action, however, to recover the specific funds would not come within the contemplation of the provisions of section 2109 which applies only to claims which, if valid, render the state a debtor and not to equitable claims to specific funds. As the permission to be sued is entirely voluntary on the part of the sovereignty, it follows that it may submit itself to suits upon specified claims and the consent may be made subject to such conditions and limitations as are deemed desirable. In our opinion the granting of the relief suggested would be in excess of the authority conferred by statute.

Section 2, article 12 of the Constitution of this State, provides: "The general appropriation bill shall embrace nothing but appropriations for ordinary expenses of the executive, legislative and judicial departments of the state, the current expenses of state institutions, interest on the public debt, and for common schools. All other appropriations shall be made by separate bills, each embracing but one object, and shall require a two-thirds vote of all the members of each branch of the legislature." This section of the Constitution makes a distinction between "appropriations for ordinary expenses of the executive, legislative and judicial departments of the state, the current expenses of state institutions, interest on the public debt, and for common schools" which may be embraced within the general appropriation bill and enacted by a majority vote, and "all other appropriations" which require for enactment a two-thirds vote of all the members of each House of the Legislature. Section 11 of the act under consideration contains apt and suitable terms to constitute an appropriation, and required the assent of two-thirds of all members of each House.

Defendants contend that an enrolled bill which has been authenticated by the presiding officers of the two legislative bodies approved by the Governor, and deposited with the Secretary of State, is conclusive of its passage in accordance with all constitutional requirements. No court disputes the proposition that all legislation to be valid must be enacted in conformity with the Constitution. Marshall Field & Co. v. Clark, 143 U.S. 649, 12 S.Ct. 495, 497, 36 L.Ed. 294. When the enactment of a statute is challenged, the problem arises concerning the character of evidence which may be accepted in determination of that question. The sources of official information are the enrolled bills and legislative journals. The question whether the validity of an enrolled bill when it has been duly authenticated, approved by the Governor, and filed...

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