Boever v. South Dakota Bd. of Accountancy

• Decision Date: 21 May 1996
• Docket Number: No. 19415,19415
• Citation: 1997 SD 34,561 N.W.2d 309
• Parties: John W. BOEVER, Plaintiff and Appellant, v. SOUTH DAKOTA BOARD OF ACCOUNTANCY and Casey Peterson, Chairman of the South Dakota Board of Accountancy, Defendants and Appellees. . Considered on Briefs
• Court: South Dakota Supreme Court

Page 309

561 N.W.2d 309

1997 SD 34

John W. BOEVER, Plaintiff and Appellant, v. SOUTH DAKOTA BOARD OF ACCOUNTANCY and Casey Peterson Chairman of the South Dakota Board of Accountancy Defendants and Appellees.

No. 19415.

Supreme Court of South Dakota.

Considered on Briefs May 21, 1996.

On Reassignment Dec. 16, 1996.

Decided March 26, 1997.

Michael M. Billion of Woods, Fuller, Shultz & Smith Sioux Falls, for plaintiff and appellant.

Mark Barnett, Attorney General, Sherri Sundem Wald, Assistant Attorney General, Pierre, for defendants and appellees.

GILBERTSON, Justice (on reassignment).

¶1 John W. Boever (Boever) appeals the judgment of the circuit court upholding the constitutionality of SDCL 36-20A-15, which empowers the South Dakota Board of Accountancy (Board) to promulgate rules governing quality reviews of public accounting firms. We affirm.

FACTS AND PROCEDURE

¶2 A detailed recitation of the facts leading to this appeal is set forth in Boever v. South Dakota Bd. of Accountancy, 526 N.W.2d 747 (S.D.1995) (Boever I ), and will not be repeated herein. Boever is a certified public accountant, licensed under SDCL Ch. 36-20A. In June 1990, Boever's work was reviewed and eighteen problems were identified as a result. A second quality review also identified problems with Boever's work. The Department of Legislative Audit also filed a complaint against Boever alleging five other deficiencies with his work.

¶3 On June 30, 1992, the Board filed a notice of hearing alleging Boever had violated several administrative rules governing the practice of public accounting. Upon Boever's agreeing to all but one of the enumerated violations, the Board allowed Boever to retain his license to continue practicing as a public accountant.

¶4 On September 2, 1993, Boever filed a declaratory judgment action challenging the constitutionality of SDCL 36-20A-15, which delegates to the Board the authority to promulgate rules and regulations regarding quality reviews of public accounting firms, and 36-20A-20(9), which provides for the discipline of accountants based on certain enumerated reasons. Following a hearing, the trial court granted the Board's motion for summary judgment based on lack of ripeness.

¶5 On appeal, this Court affirmed as to SDCL 36-20A-20(9), holding that since Boever had not been disciplined, there was no real, present or imminent controversy. However, we reversed and remanded the circuit court's decision pertaining to SDCL 36-20A-15, holding that the matter was sufficiently ripe to consider a declaratory judgment action since conflict between Boever and the Board regarding future quality reviews was imminent and inevitable. Boever I, 526 N.W.2d at 750.

¶6 On remand, the circuit court held SDCL 36-20A-15 was not an unconstitutional delegation of legislative power, and did not violate Boever's due process rights. Boever challenges both rulings.

STANDARD OF REVIEW

¶7 Our review of a constitutional challenge to a statute is de novo. Green v. Siegel, Barnett & Schutz, 1996 SD 146, p 7, 557 N.W.2d 396, 398.

There is a strong presumption that the laws enacted by the legislature are constitutional and the presumption is rebutted only when it clearly, palpably and plainly appears that the statute violates a provision of the constitution. Further, the party challenging the constitutionality of a statute bears the burden of proving beyond a reasonable doubt that the statute violates a state or federal constitutional provision.

Id. (quoting State v. Hauge, 1996 SD 48, p 14, 547 N.W.2d 173, 175); accord Kyllo v. Panzer, 535 N.W.2d 896, 898 (S.D.1995); Simpson v. Tobin, 367 N.W.2d 757, 765 (S.D.1985).

ANALYSIS AND DECISION

¶8 1. Whether SDCL 36-20A-15 is an unconstitutional delegation of legislative authority?

¶9 SDCL 36-20A-15 was enacted by the South Dakota Legislature in 1984 and grants authority to the South Dakota Board of Accountancy to promulgate rules and regulations regarding the quality review of public accounting firms. The statute provides, in relevant part, that:

The Board may by rule promulgated pursuant to chapter 1-26 require, on either a uniform or a random basis, as a condition to renewal of firm permits pursuant to § 36-20A-14, that applicants undergo quality reviews conducted in such manner and producing such satisfactory result as the Board may specify. However, any such requirement shall include reasonable provision for compliance by means of an applicant furnishing evidence of a satisfactory quality review performed for other purposes.

(emphasis added). Based on the authority provided it by this statute, the Board enacted various rules and regulations relating to an accounting firm's successful completion of the quality review program. Boever claims that the Legislature, by the language emphasized above, unconstitutionally delegated its rule-making authority in that it failed to provide sufficient guidelines or standards to guide the Board.

¶10 Our state constitution mandates that "[t]he legislative power of the State shall be vested in a Legislature...." SD Const. Art III, § 1. It is a fundamental principle of our law that the Legislature is prohibited from abdicating "its essential power to enact policies into law," or from delegating such power "to any other department or body." First Nat'l Bank of Minneapolis v. Kehn Ranch, Inc., 394 N.W.2d 709, 718 (S.D.1986). However, it is equally as fundamental that quasi-legislative power may be delegated by the Legislature to administrative agencies in order to execute or carry out existing legislation. In re Application No. 5189-3, 467 N.W.2d 907, 913 (S.D.1991); Oahe Conservancy Subdistrict v. Janklow, 308 N.W.2d 559, 563 (S.D.1981); Boe v. Foss, 76 S.D. 295, 77 N.W.2d 1, 11 (1956). Such a delegation is proper when accompanied by "(1) a clearly expressed legislative will to delegate power, and (2) a sufficient guide or standard to guide the agency." Application No. 5189-3, 467 N.W.2d at 913 (citing First Nat'l Bank of Minneapolis, 394 N.W.2d at 718; In re Ackerson, Karlen & Schmitt, 335 N.W.2d 342, 345 (S.D.1983)).

¶11 It is beyond argument that the State of South Dakota has a legitimate interest for the protection of its citizens to regulate the profession of public accountancy including licensing and supervisory powers which naturally must include the power to discipline or exclude the unqualified. Appeal of Schramm, 414 N.W.2d 31, 34 (S.D.1987). "In addition to its general interest in protecting consumers and regulating commercial transactions, the state bears a special responsibility for maintaining standards among members of the licensed professions." Id. (citing Ohralik v. Ohio State Bar Ass'n, 436 U.S. 447, 460, 98 S.Ct. 1912, 1920, 56 L.Ed.2d 444, 456 (1978)). ¹

¶12 To regulate the practice of public accountancy, the Legislature did not pass a single statute, but a full chapter, containing thirty-five separate statutes. The goal of the chapter is found in SDCL 36-20A-2 which views this chapter as regulating public accountancy so that it offers the public:

the performance or the offering to perform, for a client or potential client, of one or more kinds of services involving the use of accounting or auditing skills, including the issuance of reports on financial statements, or of one or more kinds of management advisory or consulting services, or the preparation of tax returns or the furnishing of advice on tax matters. ²

This statutory mandate is enforced by a Board of Accountancy. SDCL 36-20A-3. In order to regulate this profession, any who wish to practice it must obtain a certificate of public accountancy (SDCL 36-20A-8) and a permit which is subject to annual renewals. SDCL 36-20A-10.

¶13 Renewals are not automatic. The applicant must comply with requirements for continuing professional education. SDCL 36-20A-12. In addition, the Board may refuse a renewal for a violation of any one of ten professional requirements including "(10) [d]ishonesty or gross negligence in the performance of quality reviews." SDCL 36-20A-20. ³ The Legislature did not leave any doubt what it meant when it made reference to a "quality review." It specifically defined it in SDCL 36-20A-1(6) as "a study, appraisal or review by a licensee of this state or a person holding a certificate of any state, of one or more aspects of the professional work of a person or firm in the practice of public accountancy."

¶14 Pursuant to SDCL 36-20A-15, the Legislature granted the Board the following authority which is now under constitutional challenge,

The Board may by rule promulgated pursuant to chapter 1-26 require, on either a uniform or a random basis, as a condition to renewal of firm permits pursuant to § 36-20A-14, that applicants undergo quality reviews conducted in such manner and producing such satisfactory result as the Board may specify.

See also SDCL 36-20A-7(9) which authorizes the Board to adopt "rules regarding quality review pursuant to § 36-20A-15." Additional legislative guidance is to be found in SDCL 36-20A-33 wherein the Board is granted the authority to require attendance at a quality review seminar and/or to require the purchase of a quality review manual prior to the quality review itself.

¶15 As long as the Legislature provides a sufficient guide, standard or intelligible principle to the agency to direct the exercise the delegated authority, this does not constitute a forbidden delegation of legislative power. Application No. 5189-3, 467 N.W.2d at 913, Mistretta v. United States, 488 U.S. 361, 372, 109 S.Ct. 647, 654-55, 102 L.Ed.2d 714, 730-31 (1989). ⁴ In determining what the Legislature may constitutionally do in seeking the assistance from another branch of government by delegation, "the extent and character of that assistance must be fixed according to common sense and the inherent necessities of the government co-ordination." Mistretta, 488 U.S. at 372, 109 S.Ct. at 654-55, 102 L.Ed.2d 714, 730 (citing J.W. Hampton Jr. &...