Wharf Resources (USA) Inc. v. Farrier, s. 19050

• Decision Date: 28 August 1996
• Docket Number: Nos. 19050,19054,s. 19050
• Citation: 552 N.W.2d 610,1996 SD 110
• Parties: WHARF RESOURCES (USA) INC., and Wharf Resources, a Montana General Partnership, Plaintiffs and Appellants, v. Marie FARRIER, County Treasurer of Lawrence County, South Dakota, Defendant, and Lead-Deadwood School District #40-1, Intervenor and Appellant.
• Court: South Dakota Supreme Court

Page 610

552 N.W.2d 610

1996 SD 110

WHARF RESOURCES (USA) INC., and Wharf Resources, a Montana General Partnership, Plaintiffs and Appellants, v. Marie FARRIER, County Treasurer of Lawrence County, South Dakota, Defendant and Lead-Deadwood School District #40-1, Intervenor and Appellant.

Nos. 19050, 19054.

Supreme Court of South Dakota.

Argued Nov. 28, 1995.

Decided Aug. 28, 1996.

Marvin D. Truhe and Linden R. Evans, Marvin D. Truhe Law Offices, Rapid City, for plaintiffs and appellants.

Thomas E. Carr and Richard A. Pluimer of Carr & Pluimer, P.C., Belle Fourche, for intervenor and appellant.

John H. Fitzgerald, Lawrence County State's Atty., Deadwood, for defendant.

VON WALD, Circuit Judge.

¶1 This appeal consolidates two cases dealing with alleged errors in the assessment of and the taxes levied against properties owned by Wharf Resources (Wharf) from 1989 to 1992. For each year in question, Wharf paid the taxes levied by Lawrence County and challenged that levy. The Lead-Deadwood School District (school district), as beneficiary of the majority of those tax dollars, intervened in the original actions and now appeals the refund ordered by the circuit court for years 1989, 1991, and 1992. We affirm the trial court's ruling as to the refunds awarded by the court for these years.

¶2 Wharf appeals the circuit court's dismissal of its claim for refund for tax year 1990. We remand for rehearing as to 1990 taxes. In addition, Wharf appeals the manner in which interest was calculated on the ordered refunds. We remand for recalculation of interest.

BACKGROUND

¶3 Wharf Resources is the owner of certain properties located in Lawrence County, South Dakota, which include the "Annie Creek Mine," an active surface gold mine. Wharf was issued assessments and tax notices each year for the various properties which make up and surround that mine. For each of the years included in this appeal, Wharf paid its taxes under protest and filed suit against Lawrence County for refund. The Lead-Deadwood School District intervened in each action. ¹

¶4 Although there are some issues common to each tax year, a description of each year's proceedings is necessary to clarify the distinct issues presented by each assessment and tax levy. This Court shall provide separate analysis for each year and shall address common issues as they arise.

STANDARD OF REVIEW

¶5 The proper scope of review of a trial court's decision in a trial de novo of a tax assessment is whether the decision was clearly erroneous. Sabow v. Pennington County, 500 N.W.2d 257, 258 (S.D.1993). In making that determination, "the question for the appellate court is not whether it would have made the same findings the trial court did, but whether on the entire evidence it is left with a definite and firm conviction that a mistake has occurred." Hendriks v. Anderson, 522 N.W.2d 499 (S.D.1994)(quoting Yadco, Inc. v. Yankton Cnty., 89 S.D. 651, 237 N.W.2d 665, 670, (1975) ). Statutory interpretation, including whether a statute would impose a tax under a given factual situation, is a question of law and is therefore fully reviewable by this Court. Matter of Thermoset Plastics, Inc., 473 N.W.2d 136, 138 (S.D.1991).

DECISION

¶6 1989 Taxes

Facts

¶7 Certain legislation limiting property taxes was adopted by the South Dakota legislature in 1989. See SDCL, Ch. 10-12B. These "tax freeze" statutes acted to limit the taxes paid on property assessed in 1989 and 1990 to the total amount of property taxes levied in 1988. However, the freeze did allow for the assessment of and levying of taxes on "any additions, improvements, or change of use, either actual or legal, of property which were not assessed in 1988." SDCL 10-12B-4.

¶8 In 1990, the county director of equalization issued some 240 tax notices indicating the taxes due on each individual parcel owned by Wharf. The notices reflected the same tax as in prior years except as to twenty parcels. The increases on sixteen of those parcels were explained as stemming from reassessment of additions, improvements, or changes in use. ² Wharf did not appeal the assessment increases to the Lawrence County Board of Equalization. Instead, it applied for abatement to the Lawrence County Commissioners, which denied the application. Wharf did not appeal the commission's decision, but instead paid the assessed taxes under protest and brought an action under SDCL 10-27-2 for a refund.

¶9 In that action, the trial court found the 1989 increase in taxes ($395,959.27) was not due to inclusion of additions, improvements or changes in use. Instead, the trial court found the increase in taxes was due to an overall increase in the assessed valuation of the property, which was prohibited by the tax freeze statutes. However, the trial court also found that Wharf had made improvements and other investments totalling $5,968,812 which constituted taxable additions or improvements that were not exempt under the tax freeze statutes. The court found the $5,968,812 value for additions and improvements resulted in an additional tax liability of $128,150.38 over Wharf's 1988 taxes. Because Wharf had already overpaid $224,202.38 on its 1988 taxes, the court found Wharf was entitled to a refund of $96, 051.99 plus interest.

¶10 The School District appeals on the following bases:

I. Wharf is precluded from attacking the 1989 assessment because it failed to appeal the assessment to the County Board of Equalization and beyond.

II. Even if Wharf has an additional remedy arising out of the 1989 assessment, Wharf elected its remedies by proceeding under SDCL 10-18. The denial of the abatement application of Wharf became a final determination, which has not been appealed, precluding additional relief under SDCL 10-27.

III. The trial court failed to properly value and include all improvements made by Wharf during 1988.

Decision

¶11 In 1990, SDCL 10-27-2 provided:

Any person against whom any tax is levied or who may be required to pay the same, who pays the same under protest to the treasurer authorized to collect the same, giving notice at the time of payment of the reasons for such protest may, at any time within thirty days thereafter, commence an action against such treasurer for the recovery thereof in any court of competent jurisdiction, and if the court determines that the same was wrongfully collected, in whole or in part, for any reason going to the merits of the tax, it shall enter judgment accordingly, and such judgment shall be paid in preference to any other claim against the county, upon the final determination of the action; and the pro rata share of the money so refunded shall be charged to the state and each taxing district which may have received any part of such tax. The right of appeal shall exist for both parties as in other civil actions. ³ (emphasis added).

The school district contends that Wharf was precluded from bringing suit under this statute because it failed to appeal the assessment to the county board of equalization.

¶12 It is well settled law in South Dakota that a party who fails to complain to his county board of equalization as to excessive valuation may not question the validity of the valuation assessed to his property via SDCL 10-27-2 (formerly RC 1919, § 6826). Yusten v. Morrison, 78 S.D. 426, 103 N.W.2d 653 (S.D.1960); Holbrook v. Gallagher, 56 S.D. 54, 227 N.W. 461 (1929). However, where a party alleges the assessment was illegal and void, and not a mere error in valuation, he is not required to challenge that assessment with the county board of equalization, but may apply directly for judicial relief. Yusten v. Morrison, 103 N.W.2d at 655 (stating "[i]t may be conceded that where an attempted assessment is a nullity because the property is tax exempt or outside the jurisdiction there is no question of valuation which must be presented to the local board of equalization for correction as a condition for judicial relief").

¶13 Wharf's 1990 complaint was based on the premise that the county's tax was levied in violation of SDCL 10-12B, the tax freeze chapter. Wharf challenged the legality of the tax levied, not the assessed value of its property. Wharf alleged the county treasurer improperly levied taxes in 1990, in violation of the tax freeze statutes, and therefore those improperly levied taxes are illegal. Wharf is entitled to apply for and receive a refund on the basis of illegality under SDCL 10-27, and its failure to appeal to the county board of equalization prior to commencing its circuit court action does not serve to preclude the action for refund under SDCL 10-27.

¶14 In the alternative, the school district argues Wharf chose its remedy when it challenged the tax under SDCL 10-18, providing for abatement, and is therefore precluded from challenging the tax under alternative grounds. In support of that position, the school district points to Dakota Lodge No. 1 I.O.O.F. v. Yankton County, 56 S.D. 234, 228 N.W. 238 (S.D.1929), which held an original action to recover an illegal tax was not maintainable where the plaintiff had not appealed from an abatement decision on the same issues.

¶15 In Dakota Lodge, supra, the question was whether the appellant was a charitable society and thus exempt from taxation. The court found it was not and ruled that because appellants case fell within one of the six categories identified specifically in the code (now SDCL 10-18-1), and the appellant sought abatement under that section, it was precluded from also seeking recovery and refund under RC 1919 § 8626 (now SDCL 10-27-2). However, here Wharf's challenge does not fall within any of the six subsections of SDCL 10-18-1, as the school district successfully argued at the county equalization board level, and thus Wharf's exclusive remedy is under SDCL 10-27-2. Security National Bank v. Twinde, 52 S.D. 352, 217 N.W. 542 (1928).

¶16 Last, the school district contends the trial court erred in failing to properly value and...