State ex rel. Van Emmerik v. Janklow

• Decision Date: 19 May 1981
• Docket Number: No. 13354,13354
• Citation: 304 N.W.2d 700
• Parties: STATE of South Dakota ex rel. Larry VAN EMMERIK and all others similarly situated, Petitioners, v. William J. JANKLOW, Governor of South Dakota; Mark V. Meierhenry, Attorney General of South Dakota; David Volk, Treasurer of South Dakota; and R. Van Johnson, Secretary of Revenue of South Dakota, Respondents, and Black Hills Power and Light Company; Northern States Power Company; Montana- Dakota Utilities Company; Otter Tail Power Company; Northwestern Public Service Company; and Iowa Public Service Company, Parties Respondent added by Supreme Court.
• Court: South Dakota Supreme Court

Page 700

304 N.W.2d 700

STATE of South Dakota ex rel. Larry VAN EMMERIK and all

others similarly situated, Petitioners, v. William J. JANKLOW, Governor of South Dakota; Mark V.

Meierhenry, Attorney General of South Dakota; David Volk,

Treasurer of South Dakota; and R. Van Johnson, Secretary of

Revenue of South Dakota, Respondents,

and

Black Hills Power and Light Company; Northern States Power

Company; Montana- Dakota Utilities Company; Otter Tail Power

Company; Northwestern Public Service Company; and Iowa

Public Service Company, Parties Respondent added by Supreme

Court.

No. 13354.

Supreme Court of South Dakota.

Argued Feb. 19, 1981.

Decided April 15, 1981.

Rehearing Denied May 19, 1981.

George A. Bangs of Bangs, McCullen, Butler, Foye & Simmons, Rapid City, and Gale E. Fisher, Sioux Falls, for petitioner Van Emmerik.

Mark V. Meierhenry, Atty. Gen., Pierre, for respondent State Officials; John P. Dewell, Asst. Atty. Gen., Pierre, on the brief.

Brent Wilbur of May, Adam, Gerdes & Thompson, Pierre, for respondent Investor-owned Utilities.

Alan F. Glover of Denholm & Glover, Brookings, for amicus curiae South Dakota Rural Electric Assn.; Leo P. Flynn, Milbank, Vincent J. Protsch, Madison, on the brief.

Robert B. Frieberg of Frieberg, Frieberg & Peterson, Beresford, for amicus curiae South Dakota Municipal Electric Assn.

J. W. Grieves of Grieves & Rahn, Winner, for amicus curiae Rosebud Electric Cooperative, Inc. and Cherry-Todd Electric Cooperative, Inc.

FOSHEIM, Justice.

This is an original proceeding in which petitioner seeks writs of prohibition and mandamus. We deny the writs sought and quash the alternative writ of prohibition previously issued.

The present case has its origins in litigation commenced by petitioner in 1979. Petitioner originally instituted a class action seeking a one percent refund of sales taxes from the State of South Dakota and from all retailers engaged in the sale, furnishing or service of gas, electricity or water since January 1, 1976, which petitioner claimed were collected in excess of the rate imposed by SDCL 10-45-6. The utility companies eventually moved to dismiss because they had commenced an administrative action in June of 1979, seeking a similar one percent sales tax refund. Thereafter, petitioner moved to consolidate his action with the appeal taken to circuit court by the investor-owned utilities in the related administrative action following the denial of their applications for sales tax refunds by the Secretary of Revenue. On February 20, 1980, the circuit court rendered judgment denying the relief sought in the investor-owned utilities case. Subsequently, on April 1, 1980, the court entered an order dismissing petitioner's complaint based upon its determination in the related case that the State had not collected a sales tax in excess of that imposed by statute.

Petitioner and the investor-owned utilities then took separate appeals to this Court. In the appeal of the investor-owned utilities, we concluded that the sales tax rate imposed by SDCL 10-45-6 was three percent and that the State had, since 1969, collected a sales tax in excess of the amount imposed by statute. We accordingly reversed and remanded for determination of a credit or refund to be adjusted in favor of the utilities pursuant to the provisions of SDCL 10-45-53. See In the Matter of the Appeal of the Sales Tax Refund Applications of Black Hills Power and Light Co., 298 N.W.2d 799 (S.D.1980). Petitioner's appeal was decided the same day. In that case, we held that, due to the doctrine of sovereign immunity, petitioner had no standing to seek a refund from the State either as a representative of his class or in his individual capacity. At the same time, we determined that petitioner was entitled to proceed against the utilities to seek relief derivative of any remedy adjusted in favor of the utilities in the related litigation. See Van Emmerik v. State, 298 N.W.2d 804 (S.D.1980).

Following remand, and during the pendency of circuit court hearings in the two cases, the 1981 Legislature enacted Senate Bill 40, entitled "An Act to provide for a retroactive and prospective sales tax increase on utility services, amusements and athletic events; to allow credit for taxes already paid, to validate and ratify the collection of prior taxes, and to declare an emergency."

Section 1(1) of the act provides that "(a)t all times since July 1, 1969, and until May 1, 1980, §§ 10-45-6 (dealing with the rate of tax imposed upon the gross receipts from sales of utilities) and 10-45-8 (dealing with the rate of tax imposed upon the gross receipts from sales related to amusements and athletic events) as heretofore existing in the statutes of this State were intended by the Legislature to apply the same rates of tax as applied by § 10-45-2 (which imposed a tax of four percent upon gross receipts from sales of tangible personal property) ..."

Section 2 of the act specifically amends SDCL 10-45-6 to provide a four percent rate of tax upon sales of utility services, and Section 5 makes Section 2 effective retroactively from May 1, 1980, to July 1, 1969, and prospectively to commence when a tax increase levied by 1980 S.D.Sess.L., ch. 325 is removed. ¹

Section 3 of Senate Bill 40 amends SDCL 10-45-6 to impose a five percent rate of tax upon utilities sales, and Section 6 renders Section 3 effective retroactively from "the effective date of this Act" to May 1, 1980, and prospectively from "the effective date of this Act" until the tax increase levied by the 1980 Legislature is removed. ²

Section 8 of Senate Bill 40 protects retailers who may not have collected the full amount of the tax from their customers. ³ It provides that the retroactive taxes are effective only to the extent that taxes were theretofore actually collected by the retailer, and also provides that any tax previously paid under §§ 10-45-6 and 10-45-8 shall be credited to the taxes imposed by Sections 2, 3, and 4 of Senate Bill 40.

Section 9 of the act ratifies and validates the collection of taxes effectuated prior to passage of the act. Section 10 contains a severability clause and Section 11 declares an emergency to exist.

The act was passed by the Legislature, and thereafter approved by the Governor on January 30, 1981, as an emergency act in full force and effect as of that date. On that same day, petitioner instituted this original proceeding, challenging the constitutionality of Senate Bill 40 and seeking writs of prohibition and mandamus to restrain the State from enforcing or attempting to implement Senate Bill 40 and to order payment of refunds for excess sales taxes paid to the State. On February 3, 1981, we granted an alternative writ of prohibition ordering that the State desist and refrain from acting pursuant to Senate Bill 40 until further order of this Court.

Our analysis of petitioner's attack upon the validity of Senate Bill 40 begins with the recognition that statutes are presumed to have prospective application and may be construed as retroactive only when such intention plainly appears. SDCL 2-14-21; Johnson v. Kusel, 298 N.W.2d 91 (S.D.1980); In re Scott's Estate, 81 S.D. 231, 133 N.W.2d 1 (1965); Bahlkow v. Preston, 60 S.D. 151, 244 N.W. 93 (1932). There is no question here that Senate Bill 40 is expressly meant to be retroactive in much of its operation and must be construed as having such effect. We thus proceed directly to address the constitutional claims asserted by petitioner.

Petitioner recognizes that the mere fact of retroactivity is not sufficient in itself to establish the unconstitutionality of a statute. See Welch v. Henry, 305 U.S. 134, 59 S.Ct. 121, 83 L.Ed. 87 (1938); Hodges v. Snyder, 261 U.S. 600, 43 S.Ct. 435, 67 L.Ed. 819 (1923); United States v. Heinszen & Co., 206 U.S. 370, 27 S.Ct. 742, 51 L.Ed. 1098 (1907); Alatalo v. Shaver, 45 S.D. 163, 186 N.W. 872 (1922). Petitioner contends, however, that Senate Bill 40 constitutes a taking of property without just compensation in violation of the Due Process Clauses of the Fifth and Fourteenth Amendments to the United States Constitution and Art. VI, § 13 of the South Dakota Constitution. It is argued that the act unlawfully deprives petitioner of his right to recover from the utilities (for sales tax overcharges passed on by the retailers) as a result of this Court's determinations, in Matter of Black Hills Power and Light, supra, and Van Emmerik v. State, supra, that the utilities were entitled to a credit or refund as a result of the sales tax overcharge at issue in those cases, and that petitioner was entitled to seek relief from the utilities.

The validity of retroactive statutes, including those imposing retroactive taxes, has been challenged on many occasions in the courts of this nation. A review of United States Supreme Court decisions involving retroactive legislation does not reveal inflexible rules or immutable patterns of due process analysis with respect to such legislation. Rather, it is clear that the constitutionality of a retroactive statute depends upon a broad variety of policy considerations couched within a due process framework.

Senate Bill 40 expressly purports to ratify the unauthorized collection by state officials of sales tax overcharges and to that extent, the law is a curative act. The two leading cases in this area are United States v. Heinszen & Co., supra, and Forbes Pioneer Boat Line v. Board of Commissioners, 258 U.S. 338, 42 S.Ct. 325, 66 L.Ed. 647 (1922). Petitioner relies heavily upon Forbes, which involved the collection of tolls at a canal operated by the State of Florida. The Board of Commissioners, the agency charged with responsibility for maintenance of the canal, collected tolls for passage from the plaintiff, which sued for a refund. On the same day that the Florida Supreme Court held that the Board was not empowered to collect the tolls, the Florida Legislature passed a statute providing that all...