Court Opinion

ID: 9595677
Source: CourtListenerOpinion
Date Created: 2023-08-22 00:42:37.617723+00
Date Added: 2024-06-11T18:01:30.155112
License: Public Domain

COLER, Justice
(dissenting).
I would affirm the trial court.
Granting that this court is bound to sustain the validity of a legislative enactment unless it appears invalid beyond a reasonable doubt, Nelson v. Chicago, B. & Q. Ry., 1924, 47 S.D. 228, 197 N.W. 288, yet the question was squarely presented and we must be mindful that
“ * * * courts must not ignore the plain provisions of the Constitution, but should recognize that it is to the courts alone that the people can look to preserve for them those rights which have been guaranteed to them through restrictions placed upon legislation by such Constitution.” In re McKennan’s Estate, 1910, 25 S.D. 369, 376, 126 N.W. 611, 614; 33 L.R.A., N.S., 606; overruled on other grounds, In re McKennan’s Estate, 1911, 27 S.D. 136, 130 N.W. 33, Ann.Cas.l913D, 745.
I recognize that the Revenue Department, which instigated the statute in question, had a good motive in seeking federal dollars even if it meant to add a burden to local government and its citizens and taxpayers. The Tennessee statute, construed in United States v. Boyd, 1964, 378 U.S. 39, 84 S.Ct. 1518, 12 L.Ed.2d 713, was utilized in our legislation without the interrelationship between Article XI, §§2 and 5 of our State Constitution and SDCL §§ 10-46-1(2), 10-46-7 having been fully analyzed.
A good deal is made in the state’s argument and in the majority opinion of the Tennessee law and the Tennessee decision. *68The Tennessee Constitution, Article 2, § 28,* is not at all like our own constitutional provisions and no state constitutional issue was there involved. The only hurdle that the Tennessee courts and the United States Supreme Court had in United States v. Boyd, supra, was whether, under the federal act, the transaction was taxable as against the implied constitutional immunity of the United States as a contracting party. The principal point of the decision in United States v. Boyd, supra, is that the Congress had recognized prior Court decisions and had amended the Atomic Energy Act to allow such taxation. I see no relevance in the Tennessee statute or the Boyd case considering disparity of constitutional provisions and the issue before us.
The legislature cannot, as it attempts to do by SDCL 10-46-5, “either enlarge or restrict the meaning of the term ‘property’ as such term is used in the Constitution of this state.” National Surety Co. v. Starkey, 1919, 41 S.D. 356, 170 N.W. 582. I submit that the legislature is equally denied the right to declare that property which the city purchases in their own right is not in fact the property of the city. It is, as the trial court identified it, a subterfuge which is contrary to the Constitution and our statutes.
Even if we were free to disregard the property as such and its true ownership, what the act in question proposes is a tax on the “use” to which that property is put and the tax is declared to be “an excise tax * * * imposed on the privilege of the use * * *.” SDCL 10-46-2. The “privilege” of use is also a “property” of the municipality, South Dakota Constitution Article XI, § 2, and is *69therefore exempt. SDCL 10-46-7. This position is entirely consistent with decisions of this court which have declared excise taxes as taxes on a “privilege,” Barnes v. Stout, 1937, 65 S.D. 592, 596, 276 N.W. 920, 922; City of Pierre v. Stout, 1937, 65 S.D. 597, 599, 276 N.W. 922, 924; State v. City of Sioux Falls, 1932, 60 S.D. 330, 335, 244 N.W. 365, 367, thus placing such taxes squarely within the definition of property as defined by the South Dakota Constitution Article XI, § 2.
The legislature has recognized the mandate of the Constitution by declaring the exemption of the very property or use of the property sought to be taxed in this case. SDCL 10-46-7. This statute is not surplusage or merely a repetition of the constitutional exemption but declarative of the right of exemption. Scandrett v. Nord, 1945, 70 S.D. 527, 19 N.W.2d 344.
I recognize that what I propose would possibly overrule State v. City of Sioux Falls, supra, and cases that have relied upon its reasoning, but I am convinced the time has come to recognize that that line of reasoning is erroneous in light of the 1912 and 1918 amendments to § 2 of Article XI of our Constitution and the later amendments to Article XI, § 5 and other decisions of the court which have recognized the changes wrought in the entire Constitution by those amendments.
I have reached this conclusion upon the analysis of our case law predating these amendments and including decisions which were contemporaneous with H.J.R. #12 (introduced on February 9, 1911, delivered to Secretary of State on March 3, 1911) which was enacted and designated as Chapter 265 of the Session Laws of 1911 and when ratified in 1912 expanded the definition of “property” to include “privileges” under the South Dakota Constitution Article XI, § 2. This amendment recognized the distinction drawn by the court between taxation of property in the context of real and personal property as those terms then appeared in several provisions of the Constitution and, on the other hand, fees imposed in the exercise of the police power which were not covered by the constitutional limitations on the legislature.
*70Considering specifically the first decision of In re McKennan’s Estate, 1910, 25 S.D. 369, 126 N.W. 611, 33 L.R.A.,N.S., 606 written by Judge Whiting with all judges joining except Haney, who dissented but filed no opinion, which declared the inheritance tax law unconstitutional, the legislative enactment of Ch. 265, S.L. 1911, is quite understandable. Prior decisions had assured the legislature that occupational and privilege taxes or fees were not a tax on property and that the legislative power was supreme and unfettered. In re Construction of Revenue Law, 1891, 2 S.D. 58, 48 N.W. 813; In re Assessment and Collection of Taxes, 1893, 4 S.D. 6, 54 N.W. 818; In re Watson, 1903, 17 S.D. 486, 97 N.W. 463, 2 Ann.Cas. 321. The legislature could not have anticipated a reversal of the first McKennan’s opinion during the next legislative session, In re McKennan’s Estate, 1911, 27 S.D. 136, 130 N.W. 33, Ann.Cas.l913D, 745, or that on a three to two decision the court would uphold the insurance company tax law, Ch. 65, S.L.1907, Queen City Ins. Co. v. Basford, 1911, 27 S.D. 164, 130 N.W. 44, perhaps rendering the proposed amendment unnecessary or unwise. The amendment did, however, redefine property to assure continued legislative authority.
This court has heretofore recognized that the aforementioned amendments to Article XI, § 2 have:
(1) “obliterated” the portion of Art. VI, § 17 requiring that “all taxation shall be equal and uniform,” Wheelon v. South Dakota Land Settlement Board, 1921, 43 S.D. 551, 181 N.W. 359; Peterson Oil Co. v. Frary, 1923, 46 S.D. 258, 192 N.W. 366, affirmed in 264 U.S. 570, 44 S.Ct. 334, 68 L.Ed. 854; Commercial State Bank of Wagner v. Wilson, 1928, 53 S.D. 82, 220 N.W. 152;
(2) “superseded” the $200 property exemption limitation of Art. XI, §§ 6 and 7; State ex rel. Eveland v. Johns, 1920, 43 S.D. 279, 178 N.W. 945; Dakota Lodge No. 1, I.O.O.F. v. Yankton County, 1929, 54 S.D. 402, 223 N.W. 330, affirmed on rehearing in 56 S.D. 234, 228 N.W. 238; Egan Independent Consol. *71School Dist. No. 1, Moody County v. Minnehaha County, 1936, 65 S.D. 32, 270 N.W. 527, 108 A.L.R. 572; and
(3) “bestowed” power on the legislature that is not diminished by the provisions of Art. XI, § 6 National College of Business v. Pennington County, 1966, 82 S.D. 391, 146 N.W.2d 731.
I submit, that, in addition to the foregoing modifications, the 1912 amendments which were carried forward by the 1918 amendments to Article XI, § 2 have redefined “property” or at least “personal property” for the purposes of the Constitution. The term “property” is now defined as “including privileges, franchises and licenses to do business in the state” and that property of the municipality both physically and in its use is constitutionally exempt. South Dakota Constitution Article XI, § 2; SDCL 10-46-7.

 The then existing language of Article 2, § 28 of the Tennessee Constitution, since amended, reads in part as follows:
“All property real, personal or mixed shall be taxed, but the Legislature may except such as may be held by the State, by Counties, Cities or Towns, and used exclusively for public or corporation purposes, and such as may be held and used for purposes purely religious, charitable, scientific, literary or educational, and shall except one thousand dollars worth of personal property in the hands of each taxpayer, and the direct product of the soil in the hands of the producer, and his immediate vendee. All property shall be taxed according to its value, that value to be ascertained in such manner as the Legislature shall direct, so that taxes shall be equal and uniform throughout the State. No one species of property from which a tax may be collected, shall be taxed higher than any other species of property of the same value, but the Legislature shall have power to tax Merchants, Peddlers, and privileges, in such manner as they may from time to time direct.”