Aeg Processing v. Dep't of Revenue & Regulation , 2013 S.D. 75 ( 2013 )

#26597-a-JKK
2013 S.D. 75
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
****
AEG PROCESSING CENTER NO. 58, Inc., Appellant,
v.
SOUTH DAKOTA DEPARTMENT
OF REVENUE AND REGULATION, Appellee.
****
APPEAL FROM THE CIRCUIT COURT OF
THE SIXTH JUDICIAL CIRCUIT
HUGHES COUNTY, SOUTH DAKOTA
****
THE HONORABLE MARK BARNETT
Judge
****
MICHAEL D. BORNITZ
JOSEPH M. DYLLA of
Cutler & Donahoe, LLP
Sioux Falls, South Dakota
and
JEFFREY A. SILVER of
AEG Processing Center No. 58, Inc.
Omaha, Nebraska
Attorneys for appellant.
ROSA YAEGER of
South Dakota Department
of Revenue and Regulation
Pierre, South Dakota Attorneys for appellee.
****
CONSIDERED ON BRIEFS
ON AUGUST 27, 2013
OPINION FILED 10/16/13
#26597
KONENKAMP, Justice
[¶1.] We review a circuit court’s dismissal of tax assessment appeal for lack
of jurisdiction under SDCL 10-59-9 and SDCL 1-26-31.
Background
[¶2.] On September 10, 2010, the South Dakota Department of Revenue and
Regulation issued AEG Processing Center No. 58, Inc. a jeopardy assessment
alleging unpaid sales tax, a penalty, and interest due for the reporting period of
September 2007 through June 2010. AEG requested an administrative appeal
under SDCL 10-59-9, and the parties submitted the matter to a hearing examiner
on stipulated facts.
[¶3.] On September 5, 2012, the hearing examiner entered findings of fact,
conclusions of law, and a proposed decision finding AEG liable for a jeopardy
assessment of $84,618.12. The Secretary of Revenue adopted the proposed decision.
AEG was served with notice of entry of final decision on September 17, 2012.
[¶4.] AEG appealed the Secretary’s final decision to the Sixth Judicial
Circuit on October 12, 2012. SDCL 1-26-31. The notice of appeal was filed on
October 15, 2012. AEG did not file a bond or pay the amounts affirmed by the
Secretary before commencing the appeal or within the thirty-day window for filing
an appeal. AEG posted a bond in the amount of the assessment on October 26,
2012, but it admits that the bond was filed after the notice of appeal and outside the
thirty-day window for filing a notice of appeal.
[¶5.] On October 12, 2012, the same day AEG appealed the Secretary’s final
decision, AEG contacted the Department to discuss stipulating to remand the case
-1-
#26597
to the office of hearing examiners to take additional evidence under SDCL 1-26-34. 1
The Department indicated it would consider the request. On October 22, 2012, AEG
again contacted the Department, but the Department indicated that it would not
stipulate to a remand. The next day, the Department informed AEG that it would
be filing a motion to dismiss under SDCL 10-59-9.
[¶6.] The Department moved to dismiss for lack of appellate jurisdiction
arguing that AEG’s failure to pay the amounts affirmed by the Secretary or file a
bond before commencing its judicial appeal violated the condition precedent
required by SDCL 10-59-9, and therefore, resulted in the failure to preserve
jurisdiction in the circuit court. Agreeing, the circuit court dismissed.
[¶7.] On appeal, we address the following three issues: (1) whether AEG’s
failure either to pay the amounts affirmed by the Secretary or obtain an appeal
bond required by SDCL 10-59-9, within the thirty-day time period for filing its
appeal set out in SDCL 1-26-31 is jurisdictionally fatal to its appeal; (2) whether
AEG substantially complied with SDCL 10-59-9 when it posted its bond nine days
after the expiration of the thirty-day time period for filing its appeal; and (3)
whether the doctrine of equitable tolling should apply to the ten-day time frame
1. The Department disputes that it discussed stipulating to remand on October
12, but rather the discussion first occurred after October 17. But the circuit
court found that AEG and the Department discussed stipulating to remand
on October 12. “The trial court’s findings of fact are presumed correct and we
defer to those findings unless the evidence clearly preponderates against
them.” Parsley v. Parsley, 2007 S.D. 58, ¶ 15, 734 N.W.2d 813, 817 (citations
omitted). Because the Department advances no showing of clear error, we
defer to the circuit court’s findings of fact.
-2-
#26597
when AEG was awaiting the Department’s reply on whether it would stipulate to a
remand. 2
Analysis and Decision
1. Failure to pay ordered amount or file bond.
[¶8.] In administrative appeals, a circuit court’s appellate jurisdiction
depends on compliance with statutory conditions precedent. Schreifels v. Kottke
Trucking, 2001 S.D. 90, ¶ 9, 631 N.W.2d 186, 188 (quoting Claggett v. Dep’t of
Revenue, State of S.D., 464 N.W.2d 212, 214 (S.D. 1990)). A failure to comply with
such conditions precedent deprives the circuit court of appellate jurisdiction. Id.
(citing Claggett, 464 N.W.2d at 214).
[¶9.] When the Secretary accepts the hearing examiner’s proposed decision,
an appeal must be taken within thirty days from notice of the Secretary’s final
decision. SDCL 10-59-9; 3 SDCL 1-26-31. 4 Further, the appeal cannot be taken
2. The “standard of review of a trial court’s grant or denial of a motion to
dismiss is the same as our review of a motion for summary judgment—is the
pleader entitled to judgment as a matter of law?” O’Neill Farms, Inc. v.
Reinert, 2010 S.D. 25, ¶ 7, 780 N.W.2d 55, 57-58 (citations omitted). “We
review issues regarding a court’s jurisdiction as questions of law under the de
novo standard of review.” Id. (citations omitted). Furthermore, “statutory
interpretation is a question of law, reviewed de novo.” Hass v. Wentzlaff,
2012 S.D. 50, ¶ 12, 816 N.W.2d 96, 101 (citations omitted). Where the circuit
court has denied equitable tolling as a matter of law and the facts are
undisputed, the decision is reviewed de novo. Dakota Truck Underwriters v.
S.D. Subsequent Injury Fund, 2004 S.D. 120, ¶ 16, 689 N.W.2d 196, 201
(citing Rouse v. Lee, 339 F.3d 238, 247 (4th Cir. 2003)).
3. SDCL 10-59-9 states in relevant part:
[A]ppeals [are] taken pursuant to the provisions of chapters 1-26
and 1-26D . . . . If the secretary, pursuant to chapter 1-26D,
accepts the final decision of the hearing examiner, no appeal
from a final decision of the secretary upon an assessment may
(continued . . . )
-3-
#26597
unless the amount ordered to be paid by the Secretary is either paid or a bond is
filed to insure payment of the ordered amount. SDCL 10-59-9.
[¶10.] We addressed the condition precedent in SDCL 10-59-9 under similar
facts in Claggett. There, the taxpayer appealed the Department’s decision to the
circuit court within thirty days of the Department’s notice of final decision. 464
N.W.2d at 213. But the taxpayer failed to pay the amount assessed or post a bond.
More than seventy days after the Department’s final decision, the taxpayer paid the
tax deficiency. The Department moved to dismiss, but the circuit court denied the
motion. We reversed and held that “the circuit court’s failure to dismiss [the
taxpayer’s] appeal for lack of compliance with SDCL 10-59-9 was error.” Id. at 214.
We wrote that “only the payment of the tax or the posting of a bond prior to
commencing judicial appeal within the thirty-day window after the Department’s
notice of final decision as provided in SDCL 1-26-31 could have preserved the
appellate jurisdiction of the circuit court.” Id.
[¶11.] AEG acted similarly to the taxpayer in Claggett. AEG did not pay the
amount assessed nor did it post a bond before commencing its appeal as required by
SDCL 10-59-9. Although AEG, like the taxpayer in Claggett, remedied its failure to
pay, its failure to do so within the thirty-day window is fatal to its appeal.
_________________________________
( . . . continued)
be taken unless any amount ordered paid by the secretary is
paid or a bond filed to insure payment of such amount.
4. SDCL 1-26-31 states in relevant part: “An appeal shall be taken . . . within
thirty days after the agency served notice of the final decision . . . .”
-4-
#26597
[¶12.] Further, the Legislature has not changed the condition precedent
language of SDCL 10-59-9 since Claggett was decided in 1990. “We presume the
Legislature acts with knowledge of our judicial decisions.” Sanford v. Sanford, 2005
S.D. 34, ¶ 19, 694 N.W.2d 283, 289 (citation omitted). In fact, on three separate
occasions since Claggett, the Legislature has made other amendments to SDCL 10-
59-9 without addressing this condition precedent. See 1992 S.D. Sess. Laws 161
(allowing amended statement of facts and errors of law to be made prior to the
hearing and mandating additional service requirements); 2001 S.D. Sess. Laws 112-
13 (adding requirement that Secretary must accept hearing examiner’s decision
before payment of assessment or bond is required and adding that no payment of
assessment or bond is required if Secretary rejects or modifies hearing examiner’s
decision); 2008 S.D. Sess. Laws 192 (changing the amount of time a taxpayer has to
file a request for hearing in response to an assessment from thirty days to sixty
days). Adherence to the condition precedent language in SDCL 10-59-9 suggests
that the Legislature agrees with our interpretation. And Claggett has never been
overruled. Therefore, Claggett and its interpretation of SDCL 10-59-9 remain solid
precedent.
[¶13.] AEG notes that while a failure to timely file a notice of appeal is
jurisdictionally fatal, it argues that the lesser omission of failing to file a bond
within the statutory period does not deprive the court of appellate jurisdiction.
AEG primarily relies on Vitek v. Bon Homme County Board of Commissioners, 2002
S.D. 100, 650 N.W.2d 513, and Bison Township v. Perkins County, 2002 S.D. 22, 640
N.W.2d 503, to advance this argument. These cases are not helpful to AEG.
-5-
#26597
[¶14.] In Vitek, the taxpayer timely appealed to the circuit court when the
County Board granted a variance for a hog confinement facility. 2002 S.D. 100, ¶ 2,
650 N.W.2d at 514-15. But the taxpayer did not file the requisite $250 cash bond
within the twenty-day window for serving a notice of appeal. Id. ¶ 5. In
interpreting SDCL 7-8-29, 5 we reasoned that the “; and” separating the two clauses
indicated that the clauses should be read in the disjunctive. Id. ¶¶ 17-18.
“Accordingly, the construction of the statute indicates the Legislature’s intent to
apply the [twenty]-day time limit only to the service of a notice of appeal.” Id. ¶ 18.
Therefore, the circuit court retained jurisdiction.
[¶15.] In Bison Township, an appeal was taken to the circuit court in
response to the County’s property tax assessments. 2002 S.D. 22, ¶¶ 3-4, 640
N.W.2d at 504-05. Just as in Vitek, the $250 cash bond was not filed as required by
SDCL 7-8-29 within the twenty-day time limit for serving a notice of appeal. Id. ¶¶
4-6. We held that the failure to file the bond within the statutory period did not
deprive the court of jurisdiction. Id. ¶ 13.
[¶16.] In Vitek, we distinguished the Claggett ruling from both Vitek and
Bison Township. We wrote,
Claggett, however, differs markedly from both Bison Township
and the case at bar for one very important reason: Claggett dealt
with SDCL 10-59-9, which specifically prohibits the initiation of
5. SDCL 7-8-29 states in relevant part:
Such appeal shall be taken within twenty days after the
publication of the decision of the board . . . ; and the county
auditor shall upon the filing of the required bond and the
payment of his fees . . . make out a complete transcript of the
proceedings of the board relating to the matter of its decision
and deliver the same to the clerk of courts. (Emphasis added.)
-6-
#26597
an appeal without payment of the tax assessment or [posting] of
a bond. Clearly, no such statute was at issue in Bison
Township. Nor is one at issue here. Thus, Claggett is not
determinative of the outcome in this case.
Vitek, 2002 S.D. 100, ¶ 21, 650 N.W.2d at 519. AEG argues that the rationale
distinguishing the cases is a distinction without a difference. Yet the cases AEG
cites do not address appeals from state agencies involving both SDCL 10-59-9 and
SDCL 1-26-31, but rather address appeals from counties, which are governed by a
different chapter within our statutes. 6 While failing to file a bond is not always
jurisdictionally fatal, the only time we have considered SDCL 10-59-9 and SDCL 1-
26-31 we determined that failure to pay the tax assessment or file a bond within the
thirty-day window for appeal is jurisdictionally fatal.
[¶17.] AEG also contends that SDCL 10-59-9 is ambiguous on when the
payment or bond should be filed (i.e. whether at the time of filing, before filing, or
any time before the thirty days to file expires) and therefore the late payment
should not be jurisdictionally fatal to its appeal. “We give words their plain
meaning and effect, and read statutes as a whole, as well as enactments relating to
the same subject.” State v. Litschewski, 2011 S.D. 88, ¶ 5, 807 N.W.2d 230, 232
(citations omitted). “When the language in a statute is clear, certain and
unambiguous, there is no reason for construction, and this Court’s only function is
to declare the meaning of the statute as clearly expressed.” Vitek, 2002 S.D. 100, ¶
8, 650 N.W.2d at 516 (citations omitted).
6. “An appeal from a county commission decision is not covered by chapter 1-26,
which refers to administrative appeals, because the term ‘agency’ does not
include ‘any unit of local government.’” Vitek, 2002 S.D. 100, ¶ 11, 650
N.W.2d at 517 (citing SDCL 1-26-1).
-7-
#26597
[¶18.] The statutes at issue here are not ambiguous. An analysis of the plain
language shows that “[a]n appeal shall be taken by serving a copy of a notice of
appeal . . . within thirty days after the agency served notice of the final decision[.]”
SDCL 1-26-31. In addition, “no appeal . . . may be taken unless any amount ordered
paid by the secretary is paid or a bond filed to insure payment of such amount.”
SDCL 10-59-9. This language clearly specifies that to take an appeal, a party must
pay the tax assessment (or post a bond) and serve notice of appeal within thirty
days of service of the agency’s final decision. See SDCL 10-59-9 and SDCL 1-26-31.
When the language is clear, our “only function is to declare the meaning of the
statute as clearly expressed.” Vitek, 2002 S.D. 100, ¶ 8, 650 N.W.2d at 516
(citations omitted).
[¶19.] AEG further argues SDCL 10-59-9 is ambiguous because there are
other bond requirement statutes in the code that more clearly articulate when a
bond is to be posted. 7 “When the question is which of two enactments the
Legislature intended to apply to a particular situation, terms of a statute relating to
a particular subject will prevail over the general terms of another statute.” Vitek,
2002 S.D. 100, ¶ 11, 650 N.W.2d at 517 (citation omitted). “[C]ourts have no
legislative authority, and should avoid judicial legislation, a usurpation of
legislative powers, or any entry into the legislative field.” Petition of Famous
Brands, Inc., 347 N.W.2d 882, 884 (S.D. 1984).
7. SDCL 15-26A-6 and SDCL 15-26A-23 (requiring that the bond be filed within
the same time limit as the notice of appeal). SDCL 10-50-50 (requiring the
bond and notice of appeal be filed together).
-8-
#26597
[¶20.] The terms of SDCL 10-59-9 apply to a list of several different taxes
levied by the Department. See SDCL 10-59-1. The statutes AEG relies on in
arguing an ambiguity are not subject to SDCL 10-59-9, but rather are subject to
separate statutory bond filing requirements. The Legislature has its own purposes
for using different language in SDCL 10-59-9. Circumventing this language would
equate to judicial legislation. Thus, we conclude that AEG’s failure to timely post
its bond in accordance with SDCL 10-59-9 and SDCL 1-26-31 is fatal to its appeal.
2. Substantial compliance with SDCL 10-59-9.
[¶21.] Substantial compliance with a statute denotes
actual compliance in respect to the substance essential to every
reasonable objective of the statute. It means that a court should
determine whether the statute has been followed sufficiently so
as to carry out the intent for which it was adopted. Substantial
compliance with a statute is not shown unless it is made to
appear that the purpose of the statute is shown to have been
served. What constitutes substantial compliance with a statute
is a matter depending on the facts of each particular case.
Larson v. Hazeltine, 1996 S.D. 100, ¶ 19, 552 N.W.2d 830, 835 (citation omitted).
[¶22.] AEG asserts that the intent of SDCL 10-59-9 is to insure payment of
the tax assessment and because it posted its bond before any decision was made on
the merits of the case, it substantially complied with SDCL 10-59-9. But this does
not fulfill “every reasonable objective of the statute.” Id. The clear language of the
statute shows intent not only to insure payment, but also to insure payment within
the thirty-day window for filing a notice of appeal. AEG failed to comply with the
reasonable objective of ensuring payment within the thirty-day window, and as a
result, failed to substantially comply with SDCL 10-59-9.
-9-
#26597
[¶23.] While we recognize the preference for determining a case on the
merits, we are bound to apply the legislative mandate. And the doctrine of
substantial compliance cannot be substituted for jurisdictional prerequisites. Were
it otherwise, substantial compliance could be used to rewrite any statute that places
a premium on timeliness, such as statutes of limitation and time limits for filing
notices of appeal.
3. Equitable tolling while awaiting the Department's response.
[¶24.] Equitable tolling allows a party to proceed after a limitations period
has expired when inequitable circumstances prevented the party from timely
proceeding. Anson v. Star Brite Inn Motel, 2010 S.D. 73, ¶ 15, 788 N.W.2d 822, 826
(citations omitted). Equitable tolling is generally applied in circumstances that are
“truly beyond the control” of a party and “should be applied where a party acts
diligently, only to [be] caught up in an arcane procedural snare.” Dakota Truck,
2004 S.D. 120, ¶ 20, 689 N.W.2d at 202 (internal citations omitted). Thus,
“imprudent legal practice is not reasonable conduct and would not invoke equitable
tolling.” Id. ¶ 23 (citations omitted). AEG must show “(a) timely notice, (b) lack of
prejudice to the [Department], and (c) [its] reasonable and good-faith conduct . . . .”
Star Brite, 2010 S.D. 73, ¶ 17, 788 N.W.2d at 826 (citations omitted).
[¶25.] AEG urges this Court to recognize an equitable tolling of the time for
posting bond from October 12 to October 22, 2012, the period the parties were
considering stipulating to remand the matter for taking additional evidence. AEG
timely filed its notice of appeal and has shown it acted in good faith throughout the
litigation. Further, the Department has failed to show any prejudice as a result of
-10-
#26597
AEG’s failure to file the bond within the thirty-day window. Yet AEG has not acted
reasonably.
[¶26.] While waiting for the Department’s reply in regard to the stipulation
to remand, AEG filed its appeal but failed to post a bond or pay the tax assessment.
The fact that AEG filed its notice of appeal makes clear that AEG knew it had
jurisdictional requirements to meet. Further, AEG had exclusive control over filing
the bond and its failure to do so until after the expiration of the time for appeal was
not “truly beyond [its] control.” Dakota Truck, 2004 S.D. 120, ¶ 20, 689 N.W.2d at
202. In addition, nothing in the records suggests that the Department misled AEG
or otherwise fostered the mistake. Therefore, the time for AEG to post its bond
cannot be equitably tolled.
[¶27.] Affirmed.
[¶28.] GILBERTSON, Chief Justice, and ZINTER, SEVERSON, and
WILBUR, Justices, concur.
-11-