Title: V-1 Oil Co. v. State

State: wyoming

Issuer: Wyoming Supreme Court

Document:

V-1 Oil Co. v. State1997 WY 42934 P.2d 740Case Number: 96-127Decided: 03/14/1997Supreme Court of Wyoming

V-1 OIL COMPANY, an Idaho 
corporation,  

Appellant(Plaintiff), 

 

v. 

 

The STATE OF WYOMING,  

Appellee(Defendant).

 

Appeal 
from the District Court, Laramie County 

The 
Honorable Edward L. Grant, Judge

 

Representing 
Appellant: 

Robert O. Anderson, 
Riverton.

 Representing Appellee: 

William U. Hill, Attorney 
General; Thomas J. Davidson, Deputy Attorney General; Mike Barrash, Sr. 
Assistant Attorney General.

 

Before TAYLOR, C.J., and THOMAS, MACY, GOLDEN and 
LEHMAN, JJ.

 

GOLDEN, Justice. 

[¶1]      Appellant V-1 Oil 
Company (V-1), an Idaho corporation, appeals from dismissal of its complaint 
challenging the constitutionality of legislation distributing funding to the 
Underground Storage Tank Act.

 

[¶2]      We 
affirm.

 

ISSUES

 

[¶3]      V-1 presents the 
following issues:

1. Is Wyoming Statute § 39-6-302(g) unconstitutional 
due to there being no object clause within it?

2. Is the application of proceeds spent by § 
39-6-305(k)(vi) unconstitutional as applied?

3. Is the collection of and application of the 
proceeds generated by Wyoming Statutes § 39-6-215 and § 39-6-914 
unconstitutional?

 

[¶4]      Appellee State of 
Wyoming frames the issues as:

1. Does the mineral severance tax under W.S. 
39-6-302(g) violate Article 15, Section 13 of the Wyoming Constitution, which 
requires that every "law" imposing a tax shall have an "object" or "use of 
proceeds" clause directing how the revenue from such tax is to be 
distributed?

2. Does W.S. 39-6-305(k)(vi) provide for "ongoing" or 
only "one-time" distributions?

3. Are proceeds from the one cent per gallon fuel taxes under W.S. 39-6-215 and 
39-6-914 somehow being "fraud[ulently]" misused for purposes of the leaking 
storage tank accounts (W.S. 35-11-1424 and 1427), contrary to Article 15, 
Section 16 of the Wyoming Constitution, which requires that all fuel taxes go 
only to the state highway fund?

4. Did the District Court's March 28, 1996 Order 
(which V-1 now asks this Court to "reverse,") properly deny V-1's request for 
class action status and for designation as representative for the class under 
Rule 23(a)(4) of the Wyoming Rules of Civil Procedure?

 

FACTS

 

[¶5]      The State of 
Wyoming collects fuel taxes which are required by Art. 15, § 16 of the Wyoming 
Constitution to be distributed solely for highway funding. The State of Wyoming 
also collects mineral severance taxes but their distribution is not limited by 
the state constitution. Before 1989, a portion of these mineral severance taxes 
was distributed to highway funding. 1989 Wyo. Sess. Laws Ch. 270. In 1989, the 
Wyoming legislature enacted a statutory scheme called the Underground Storage 
Tank Act designed to abate contamination from leaking underground storage tanks 
and provide financial assistance to affected businesses. Id. The legislature 
funded this act with mineral severance tax revenues previously distributed to 
the state highway fund. WYO. STAT. § 39-6-305(k)(vi) (1989); 1989 Wyo. Sess. 
Laws Ch. 270; WYO. STAT. § 39-6-302(g) (1989). To offset the consequent revenue 
loss to the highway fund, the legislature levied a penny per gallon fuel tax 
which is directly distributed to the state highway fund. WYO. STAT. § 
39-6-215(b) and 914(b) (1989). 

 

[¶6]      V-1 filed a class 
action suit which requested that the district court find V-1 to be a proper 
party to represent the class, and sought a declaratory judgment and injunction 
establishing that the offsetting scheme was unconstitutional under Wyoming's 
state constitution. The district court denied the class action request for 
failure to satisfy the requirements of WYO.R.CIV.P. 23(a)(4) and dismissed the 
claims under WYO.R.CIV.P. 12 (b)(6) for failure to state claims on which relief 
can be granted. This timely appeal followed.

 

DISCUSSION

 

Standard of Review

 

[¶7]      Although V-1 
questions the legislature's wisdom of the underground storage tank program and 
the legislature's intent in enacting the funding scheme, the State appropriately 
moved that V-1's complaint be dismissed under WYO.R.CIV.P. 12(b)(6). While that 
motion admitted the factual allegations of the complaint, it does not admit the 
legal conclusion that the State acted unlawfully. Sump v. City of Sheridan, 358 P.2d 637, 
639 (Wyo. 1961). V-1's attack on the funding of the underground storage tank 
program is based upon two constitutional grounds: whether the funding scheme 
involves a fuel tax in violation of Art. 15, § 16 of the Wyoming Constitution 
and whether the mineral severance tax levied for the purpose of funding the tank 
program states that purpose in a manner which satisfies Art. 15, § 13 of the 
Wyoming Constitution.

 

[¶8]      Issues of 
constitutionality present questions of law. We review questions of law under a 
de novo standard of review and afford no deference to the district court's 
determinations on the issues. Anderson v. 
Bommer, 926 P.2d 959, 961 (Wyo. 1996). In reviewing a constitutionally based 
challenge to a statute, we presume the statute to be constitutional and any 
doubt in the matter must be resolved in favor of the statute's 
constitutionality. Thomson v. Wyoming 
In-Stream Flow Committee, 651 P.2d 778, 789-90 (Wyo. 1982). V-1 bears the 
burden of proving the statute is unconstitutional. Pfeil v. Amax Coal West, Inc., 908 P.2d 956, 961 (Wyo. 1995).

 

Constitutionality of Funding 
Scheme

 

[¶9]      Article 15, § 16 
of the Wyoming Constitution provides as follows:

§ 16. 
Disposition of fees, excises and license taxes on vehicles and 
gasoline.

No 
moneys derived from fees, excises, or license taxes levied by the state and 
exclusive of registration fees and licenses or excise taxes imposed by a county 
or municipality, relating to registration, operation or use of vehicles on 
public highways, streets or alleys, or to fuels used for propelling such 
vehicles, shall be expended for other than cost of administering such laws, 
statutory refunds and adjustments allowed therein, payment of highway 
obligations, costs for construction, reconstruction, maintenance and repair of 
public highways, county roads, bridges and streets, alleys and bridges in cities 
and towns, and expense of enforcing state traffic laws.

 

[¶10]   This provision expressly requires 
that the proceeds of all state-levied vehicle and gasoline taxes must be 
distributed exclusively to public highway expenses. Appellants claim that 
revenue collected from mineral severance taxes and a one-cent fuel tax is being 
transferred "fraudulently" for the purpose of funding the underground storage 
tank program in violation of this constitutional provision. Appellants' proof of 
fraud is a bare allegation that the transfers were designed by the legislature 
with an intent to circumvent the constitution. Such proof is insufficient to 
state a claim for fraud which must be established by clear, unequivocal and 
convincing evidence, and will never be presumed. Osborn v. Emporium Videos, 870 P.2d 382, 
383 (Wyo. 1994) (quoting Lavoie v. 
Safecare Health Service, Inc., 840 P.2d 239, 252 (Wyo. 
1992)).

 

[¶11]   The funding scheme enacted by the 
legislature to fund the underground storage tank program is set out in several 
statutes. The revenues for the program result from a portion of an oil and gas 
severance tax of two percent (2%) levied in WYO. STAT. § 39-6-302(g). Before the 
program was enacted in 1989, this revenue went to the state highway fund as 
directed by WYO. STAT. § 39-6-305(k)(iii). Now it is distributed to accounts set 
up under WYO. STAT. § 35-11-1424 and 1427 for the underground storage tank 
program. As seen below, Section 305(k)(vi) instructs in the emphasized portion 
how the distribution to the tank program is to be 
accomplished:

 

(vi) Before making any distributions under paragraph 
(iii) of this subsection, distributions as provided in this paragraph shall be 
made. An amount equal to the amount of tax collected under W.S. 39-6-215 and 
39-6-914(c) shall be distributed to the general fund until the amount so 
distributed equals ten million dollars ($10,000,000.00). Thereafter an amount 
equal to the amount of tax collected under W.S. 39-6-215 and 39-6-914 shall be 
distributed to water development account I until the amount so distributed 
equals two million five hundred thousand dollars ($2,500,000.00). After the 
distributions are made to the general fund and the water development account I, 
distributions shall be made as follows. An amount equal to the amount of tax 
collected under W.S. 39-6-215 and 39-6-914 shall be distributed to the 
corrective action account created by W.S. 35-11-1424 and to the financial 
responsibility account created by W.S. 35-11-1427 in an inverse proportion to 
the amount in the two (2) accounts.

 

WYO. STAT. § 39-6-305(k)(vi) 
(Cum.Supp. 1996) (emphasis added).

 

[¶12]   The emphasized part of Section 
305(k)(vi) sets out a procedure for correlating the distribution of mineral 
severance taxes to the underground storage tank program with the collection of a 
one cent fuel tax imposed by WYO. STAT. § 39-6-215 and WYO. STAT. § 39-6-914. 
These statutes require the fuel tax revenues to be directly deposited in the 
state highway fund in WYO. STAT. § 39-6-215(b) and WYO. STAT. § 39-6-914(b). The 
collection of the one cent fuel tax ceases when the balances in the tank 
accounts each reach ten million dollars and resumes when the balance in either 
tank account falls below four million dollars. WYO. STAT. § 39-6-215(c) (1994); 
WYO. STAT. § 39-6-914(c) (1994). We agree with the State that the language from 
the three statutes is read as requiring collection of a one cent fuel tax and 
then distribution of the proceeds to the state highway fund in a manner 
offsetting the mineral severance taxes reallocated to the underground storage 
tank program.

 

[¶13]   Whether a statute is contrary to a 
constitutional prohibition or restriction is to be determined by the judiciary. Witzenburger v. State ex rel. Wyo. 
Community Dev. Authority, 575 P.2d 1100, 1117-18 (Wyo. 1978). Article 15, § 
16 of the Wyoming Constitution is unambiguous and plainly requires that any 
vehicle or gasoline tax be committed exclusively to public highway expenses. The 
plain language of the statutes set out above requires that the fuel taxes be 
directly deposited to the state highway fund, meaning the statute complies with 
the constitution. Neither reallocation of mineral severance taxes nor offsetting 
that reallocation by a fuel tax is specifically prohibited under Art. 15, § 16, 
and constitutional principles do not permit our finding a prohibition not 
definitely articulated. We must, therefore, rule that the reallocation and 
offsetting is constitutional. See Simms 
v. Oedekoven, 839 P.2d 381, 385 (Wyo. 1992).

 

[¶14]   We have considered V-1 Oil v. Idaho Petroleum Clean Water Trust 
Fund, 128 Idaho 890, 920 P.2d 909 (1996), cert. denied ___ U.S. ___, 117 S. Ct. 514, 136 L. Ed. 2d 403 (1996), in which the Idaho Supreme Court determined that 
their similar constitutional provision was violated by the legislative scheme to 
fund its storage tank program, and cannot derive any principles from that 
decision which would cause us to conclude that the Wyoming statutes are 
unconstitutional as applied. V-1 Oil, 
920 P.2d  at 912-913. The Idaho statute required distributors of petroleum 
products to pay a one cent per gallon "transfer fee" on petroleum products. Id. at 911. The proceeds of the fee were 
committed to the Idaho Petroleum Clean Water Trust Fund which insured storage 
tank owners. Id. The Idaho Supreme 
Court ruled that the fee constituted a gasoline tax and its use for storage tank 
expenses violated the constitutional provision requiring dedication of fuel 
taxes exclusively to public highway expenses. Id. at 913. 

 

[¶15]   The Wyoming statutory scheme is 
distinguishable. Proceeds from the one cent per gallon fuel tax are not 
committed to the underground storage tank program. The use of fuel taxes to 
offset the loss to highway funding caused by a valid reallocation of another 
type of tax does not present a situation where the legislature is attempting to 
do indirectly that which it cannot do directly. Witzenburger, 575 P.2d  at 1117. It is 
not, however, an illegal evasion to accomplish a desired result, lawful in 
itself, by discovering a legal way to do it. Clayton v. Kervick, 52 N.J. 138, 244 A.2d 281, 288 (1968). Using mineral severance taxes to fund the underground 
storage tank program, a lawful program, is not prohibited by our state 
constitution. We hold that the statutory scheme does not violate Art. 15, § 16 
of the Wyoming Constitution.

 

Constitutionality of Object 
Statement

 

[¶16]   V-1 contends that the two percent 
mineral severance tax imposed in WYO. STAT. § 39-6-302(g) does not state its 
object as required by the Wyoming Constitution. V-1's argument is not that it 
cannot determine the object of the tax which is specifically stated in § 
39-6-305(k), but that the object requirement of Art. 15, § 13 of the Wyoming 
Constitution should be strictly construed to compel the placement of the 
language describing the purpose of the tax in the same statutory subsection 
which imposes the tax.

 

[¶17]   These subsections were created by 
the 1981 Session Laws, Chapter 49 which states:

AN ACT to amend W.S. 39-6-302 by creating a new 
subsection (g) and 39-6-305 by creating a new subsection (k) relating to mineral 
severance taxes; providing for a 2% severance tax on oil and gas; providing for 
distribution of the tax proceeds; and providing for an effective 
date.

* 
* * * * *

Section 
1. W.S. 39-6-302 by creating a new 
subsection (g) and 39-6-305 by creating a new subsection (k) are amended to 
read:

 

39-6-302. 
Excise taxes on extraction of minerals.

(g) In addition to other excise taxes provided by 
this section there is levied a tax of two percent (2%) of the value of the gross 
product extracted upon the privilege of severing or extracting oil and 
gas.

39-6-305. 
Disposition of revenue collected.

(k) The state treasurer shall transfer revenue 
collected under W.S. 39-6-302(g) to the trust and agency fund to be distributed 
as follows:

(i) Three-eighths (3/8) to incorporated cities and 
towns; . . . .

(ii) One-eighth (1/8) to counties; . . . 
.

(iii) One-third (1/3) to the state highway 
fund;

(iv) One-twelfth (1/12) to the permanent mineral 
trust fund; and

(v) One-twelfth (1/12) to the Wyoming water 
development account to be distributed pursuant to W.S. 39-6-305(g) for the 
improvement of water projects completed and in use prior to 
1970.

* 
* * * * *

In 1989, in the same chapter 
of the session laws enacting the underground storage tank program, WYO. STAT. § 
39-6-305(k) was amended to add section (vi) which is set out above as amended in 
1990. 1989 Wyo. Sess. Laws Ch. 270. 1990 Wyo. Sess. Laws, Ch. 
98.

 

[¶18]   Article 15, § 13 of the Wyoming 
Constitution states:

No tax shall be levied, except in pursuance of law, 
and every law imposing a tax shall state distinctly the object of the same, to 
which only it shall be applied.

 

WYO. CONST. Art. 15, § 
13.

 

[¶19]   We have said that "[t]his provision 
is based on the general proposition that `a taxpayer has a right to know the 
purposes for which his money is appropriated.'" Bd. of Cty. Comm'rs v. Laramie County Sch. 
Dist., 884 P.2d 946, 953 (Wyo. 1994). In interpreting this provision, we 
have determined that it imposes at least three requirements: 1) that taxes be 
levied under statutory authority and in the manner provided by law, Kelsey v. Taft, 72 Wyo. 210, 217, 263 P.2d 135, 136-37 (Wyo. 1953); 2) that the law state the object of the tax, Sullivan v. Blakesley, et al., 35 Wyo. 
73, 86, 246 P. 918, 922 (1926); and, 3) that taxes be applied for the purpose 
for which they are levied. Campbell Cty. 
Sch. Dist. No. 1 v. Bd. of Cty. Comm'rs. of Campbell Cty., 884 P.2d 960, 963 
(Wyo. 1994).

 

[¶20]   Generally, constitutional 
provisions are to be broadly and liberally construed with a view to upholding 
acts of the legislature if, in doing so, the purpose of the constitutional 
provision is achieved. Simms, 839 P.2d  at 385; Brinegar v. Clark, 371 P.2d 62, 66 (Wyo. 
1962). The purpose of the constitutional provision, to state the object of the 
tax, was satisfied by the language of Chapter 49 of the 1981 Session Laws and as 
amended. We have said that we construe all parts of an act as a whole because it 
embodies the complete legislative act, and division of a law into sections has 
no substantive meaning. France v. 
Connor, 3 Wyo. 445, 454, 27 P. 569, 572 (Wyo. 1891). We find no violation of 
the constitution when the legislature chooses to state the disposition of the 
tax revenue in a different subsection from the one imposing the tax. This method 
permitted a complex distribution to be set forth in a clear, understandable 
manner in WYO. STAT. § 39-6-305(k) and met the requirement of the constitutional 
provision when the purpose of the tax was stated at the same time as the tax was 
levied.

 

Distributions

 

[¶21]   V-1 contends that the distribution 
of funding set out in WYO. STAT. § 39-6-305(k)(vi) provides for a one-time 
distribution which is unconstitutionally vague. We agree with the district 
court's determination that this statute provides continuing, not one-time, 
funding of the storage tank accounts each fiscal year on a "continuing, 
quarterly basis" as set out in WYO. STAT. § 39-6-305(a)(ii). V-1 presents no 
argument as to why this plain language of the statute does not apply to the 
funds and the issue will not be further considered.

 

CONCLUSION

 

[¶22]   The State was concerned that V-1 
had reserved an appeal of the order denying its class action. This claim and all 
other claims are resolved by the discussion above. The statutes are 
constitutional and the district court's order denying class action status and 
dismissing the complaint with prejudice is affirmed.