Northern States Power Co. v. Bugher

• Decision Date: 18 January 1995
• Docket Number: No. 92-1634,92-1634
• Citation: 525 N.W.2d 723,189 Wis.2d 541
• Parties: NORTHERN STATES POWER COMPANY, Petitioner-Appellant-Petitioner, v. Mark D. BUGHER, Individually and as an Official, The Secretary of Revenue, Department of Revenue of The State of Wisconsin, Michael Ley, Individually and as an Official, The Former Secretary of Revenue, Department of Revenue of The State of Wisconsin, Karen A. Case, Individually and as an Official, The Former Secretary of Revenue, Department of Revenue of The State of Wisconsin, and all their Unknown Agents, Employees, Successors in Office, Assistants and all Others Acting in Concert or Cooperation with the current Secretary of Revenue, Department of Revenue of The State of Wisconsin, or at the direction of the current Secretary of Revenue, Department of Revenue of the State of Wisconsin, Respondents-Respondents.
• Court: Wisconsin Supreme Court

Page 723

525 N.W.2d 723

189 Wis.2d 541

NORTHERN STATES POWER COMPANY, Petitioner-Appellant-Petitioner, v. Mark D. BUGHER, Individually and as an Official, The Secretary of Revenue, Department of Revenue of The State of Wisconsin, Michael Ley, Individually and as an Official, The Former Secretary of Revenue, Department of Revenue of The State of Wisconsin, Karen A. Case, Individually and as an Official, The Former Secretary of Revenue, Department of Revenue of The State of Wisconsin, and all their Unknown Agents, Employees, Successors in Office, Assistants and all Others Acting in Concert or Cooperation with the current Secretary of Revenue, Department of Revenue of The State of Wisconsin, or at the direction of the current Secretary of Revenue, Department of Revenue of the State of Wisconsin Respondents-Respondents.

No. 92-1634.

Supreme Court of Wisconsin.

Argued Nov. 9, 1994.

Decided Jan. 18, 1995.

For the petitioner-appellant-petitioner there were briefs by Robert A. Schnur, Sara M. Berman and Michael, Best & Friedrich, Milwaukee and oral argument by Robert A. Schnur.

For the defendants-respondents the cause was argued by Gerald S. Wilcox, Asst. Atty. Gen., with whom on the brief was James E. Doyle, Atty. Gen.

WILCOX, Justice.

This is a review of an unpublished decision of the court of appeals, which affirmed the circuit court's dismissal of Northern States Power Company's 42 U.S.C. sec. 1983 claim relating to the constitutionality of sec. 71.04(5)(d) 1, STATS. (1975). ¹ Both the circuit court and the court of appeals held that Northern's claim was precluded from consideration. They did so, however, on different grounds. The circuit court of Dane County, Honorable Jack Aulick presiding, dismissed Northern's sec. 1983 claim based on res judicata principles. The court of appeals concluded that Northern had failed to avail itself of statutorily required administrative remedies prior to pursuing its sec. 1983 claim 179 Wis.2d 849, 514 N.W.2d 723. The issue on review here is: Whether a sec. 1983 claim, relating to the constitutionality of a state tax, is available to a taxpayer who has pursued all administrative and judicial remedies without fully presenting its constitutional arguments to the Tax Appeals Commission as required. We conclude that it is not.

This case has a chronologically long and procedurally complex history. Northern is a Wisconsin corporation engaged in the production and sale of electricity. In 1975 and 1976, Northern donated lands located in Wisconsin to the federal government for the creation of the St. Croix National Scenic Riverway. Northern then deducted the value of the donated lands pursuant to sec. 71.04(5)(d)1, STATS. (1975), which provides that donations to "[t]he state [of Wisconsin] or any political subdivision thereof" are deductible in calculating franchise taxes. ² With claimed carryovers from its Wisconsin franchise taxes, Northern thereby reduced its state tax payments for 1976, 1977 and 1978.

On September 12, 1983, the Wisconsin Department of Revenue (DOR) determined that the deductions did not fall within the purview of sec. 71.04, STATS. (1975) and were therefore improper. The DOR assessed Northern's withheld payments from 1976, 1977 and 1978 as increased tax liability, reasoning that charitable contributions made to the United States government were not deductible for state tax purposes. When Northern's petition to the DOR for redetermination was denied, it filed a petition for review with the Wisconsin Tax Appeals Commission based only on statutory arguments. On June 19, 1986, the Commission issued a decision and order holding that Northern's conveyance to the federal government was not tax-deductible for Wisconsin tax liability purposes. At that time, Northern and the DOR entered into an agreement stipulating that another entirely separate issue regarding accrued utility revenue would be held in abeyance pending federal litigation. The stipulation stated that the Commission would retain jurisdiction to hear and decide the accrued utility revenue issue at a later date.

On July 27, 1987, Northern appealed the Commission's decision to deny the tax deductions. The circuit court granted the DOR's motion to dismiss because Northern had not served the department with a copy of its appeal as required by sec. 227.53, STATS. In an unpublished opinion issued May 10, 1988, the court of appeals affirmed the circuit court's decision. Northern then petitioned this court for review. The petition was denied on June 21, 1988, for failure to file the petition in a timely manner.

Subsequently, the previously stipulated accrued utility revenue issue was resolved and a new stipulation was entered between the parties. On March 31, 1989, the Commission issued an order reflecting the new stipulation. Northern appealed from this order, arguing that "sec. 71.04(5)(a) and (d)1, STATS. (1975), were unconstitutional under the doctrine of intergovernmental tax immunity because the Wisconsin statute denied deductions for gifts to the United States Government while permitting deductions for identical gifts to the State of Wisconsin." On January 19, 1990, the circuit court issued a "Memorandum and Decision Order" granting the DOR's motion to dismiss the appeal since Northern had not timely raised its constitutional claim in the initial proceedings before the Commission. Northern appealed, and on March 21, 1991, the court of appeals upheld the circuit court's decision to dismiss the action. Northern petitioned this court for review which was denied on July 30, 1991.

On November 21, 1991, relying on Hogan v. Musolf, 163 Wis.2d 1, 471 N.W.2d 216 (1991) cert. denied, 502 U.S. 1030, 112 S.Ct. 867, 116 L.Ed.2d 773 (1992), Northern brought a third and separate action under 42 U.S.C. sec. 1983 in Dane County Circuit Court, naming as defendants, in both their official and individual capacities, Mark D. Bugher, Secretary of Revenue, two former Secretaries of Revenue and certain of their unknown agents, employees, successors in office, assistants, and others. Northern alleged that the Wisconsin tax unconstitutionally discriminated against donors to the federal government as compared with donors to the State of Wisconsin, thereby violating Northern's federal rights under sec. 1983. Northern requested that the circuit court take the following actions:

1. Enjoin the defendants from collecting the unconstitutional taxes until a final hearing and determination of the cause.

2. Permanently enjoin and restrain the defendants from collecting the unconstitutional taxes.

3. In the alternative, issue a mandamus to Mark D. Bugher, the current Secretary of Revenue, to make a reassessment of the taxpayer's Wisconsin franchise taxes.

4. In the alternative, issue a Declaratory Judgment that the taxpayer may collect from Mark D. Bugher, in his individual capacity, the extent of the damages it will suffer if and when he or other defendants collect such unconstitutional taxes.

5. In the alternative, award monetary damages to the taxpayer against the present and named former Secretaries of Revenue, for failing to properly reassess the taxpayer's Wisconsin franchise taxes.

6. In the alternative, if the unconstitutional taxes were collected prior to judgment of the court, award monetary damages to the taxpayer against Mark D. Bugher, in his individual capacity.

7. Award the taxpayer its costs, disbursements and attorney's fees, as allowed by Section 1983.

8. Award any and all other just and appropriate relief to the taxpayer.

On January 3, 1992, defendants filed a motion to dismiss, contending that the taxpayer's action was barred by principles of sovereign immunity, qualified immunity and res judicata. On June 15, 1992, the circuit court, in a "Memorandum and Decision Order," granted the DOR's motion to dismiss, concluding among other things, the claim was barred by the well-established principles of res judicata. Northern appealed and the matter was certified to this court for review on July 30, 1993. This court denied review. The court of appeals subsequently affirmed the circuit court's decision to dismiss the sec. 1983 claim, albeit on different grounds. The court of appeals concluded that Northern failed to exhaust its administrative remedies because it did not raise the sec. 1983 claim before the Commission in the first proceeding. Northern petitioned this court for review for the third time, and the petition was granted.

This case requires us to consider the preclusionary doctrine of res judicata. Res judicata has been afforded a variety of meanings, some of which reference and incorporate the concept of collateral estoppel. Res judicata and collateral estoppel are common-law doctrines that have as their underpinnings the policy considerations of fairness to the victor and judicial efficiency. Although they are related, the two doctrines are "independent preclusion concepts." See Gregory v. Chehi, 843 F.2d 111, 115 (3rd Cir.1988). Several courts, in an effort "[t]o reduce the confusion that resulted from the interchangeable use of these terms, ... have refined the nomenclature used in the preclusion doctrine." Id. The United States Supreme Court and the RESTATEMENT (SECOND) OF JUDGMENTS use the terms "claim preclusion" and "issue preclusion in lieu of res judicata and collateral estoppel respectively." See Migra v. Warren City School Dist. Bd. of Educ., 465 U.S. 75, 104 S.Ct. 892, 79 L.Ed.2d 56 (1984). ³ We join in this trend and adopt the terms "claim preclusion" and "issue preclusion." The term claim preclusion replaces res judicata; the term issue preclusion replaces collateral estoppel. See, e.g., Edmundson v. Borough of Kennett Square, 4 F.3d 186, 188 (3rd Cir.1993); Gregory, 843 F.2d at 116.

As this court recently explained, under claim preclusion " 'a final judgment is conclusive in all subsequent actions between the same parties [or their privies] as to all matters which were litigated or...