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In re 2012, Inc.

Supreme Court of South Dakota

May 1, 2019




          JOSEPH R. LUX, SHANE M. PULLMAN of Costello Porter Hill Heisterkamp Bushnell & Carpenter, LLP Rapid City, South Dakota Attorneys for appellant Hunt Companies, Inc.

          JOHN S. DORSEY of Whiting, Hagg, Hagg, Dorsey & Hagg, LLP Rapid City, South Dakota Attorneys for appellee Meade County.

          KERN, Justice.

         [¶1.] Hunt Companies, Inc. (Hunt) built a housing development on land leased from the United States government. Hunt paid taxes assessed by Meade County (County) on the property for 2011, 2012, and 2013. Then, it appealed the assessed valuations, successfully challenging the County's valuations in circuit court. The County did not appeal the circuit court's decision; yet it subsequently denied Hunt's request for an abatement and refund. Hunt appealed, and the circuit court affirmed the denial. Hunt now appeals to this Court. We affirm.

         Facts and Procedural History

         [¶2.] The United States government owns land located near Box Elder in Meade County that includes Ellsworth Air Force Base. In the late 1980s, the federal government set aside approximately 235 acres within Ellsworth Air Force Base for Centennial Estates, a housing development for base personnel. On April 3, 1990, the federal government provided Hunt a 40-year land lease. The parties agreed Hunt would build 828 housing units on the property. For the first twenty years Hunt held the lease, the United States managed and maintained the development. The County did not assess taxes against Hunt during those twenty years.

         [¶3.] When the lease ended in August 2011, however, Hunt began managing the housing development, which is now known as Antelope Ridge. Because Hunt now acts as manager, the County assessed property taxes in 2011, 2012, and 2013 for the 2012, 2013, and 2014 tax years, respectively. For each of these years, the County valued Hunt's taxable interest in the leasehold at $35, 731, 200 by using the fee simple value of the property.

         [¶4.] Hunt paid the taxes assessed without invoking the pay-and-protest provisions of SDCL 10-27-2.[1] It then challenged the County's property-tax valuations by appealing to the Meade County Board of County Commissioners. The Board rejected Hunt's claims. Hunt appealed to the circuit court, filing a separate case for each of the three years the County assessed and taxed the value of Antelope Ridge. The appeals were consolidated for the circuit court's (Valuation court) consideration. Rather than focusing its attention on the County's constitutional authority to tax the leasehold interest altogether, Hunt argued to the Valuation court that the County erred by assessing the property at its fee simple value instead of its leasehold value.

         [¶5.] Following a trial, the Valuation court issued findings of facts and conclusions of law on July 15, 2016, finding that "[t]he methods of valuation employed by Meade County . . . [were] inaccurate and unreliable." The court observed that "Article XI, Section 5 of the South Dakota Constitution forbids the valuation of real property owned by the United States of America[, ]" and that the County "unconstitutionally valued the Antelope Ridge housing development as fee simple." Determining that Hunt only owed taxes on the leasehold interest, the Valuation court held that the "full and true value" of the leasehold interest was $14, 100, 000 for the 2012 tax year; $15, 500, 000 for the 2013 tax year; and $15, 100, 000 for the 2014 tax year. The court entered judgment reflecting its valuation. Neither Hunt nor the County appealed the Valuation court's rulings.

         [¶6.] On October 16, 2016, Hunt filed an application with the Meade County Commission (Commission) under SDCL 10-18-1 for an abatement and refund of taxes overpaid. That statute provides in relevant part that:

Unless otherwise expressly provided, if a person, against whom an assessment has been made or a tax levied, claims that the assessment or tax or any part of the assessment or tax is invalid for any reason provided in subdivisions (1) to (6), inclusive, the assessment or tax may be abated, or the tax refunded if paid. The board of county commissioners may abate or refund, in whole or in part, the invalid assessment or tax in the following cases only:
(1) If an error has been made in any identifying entry or description of the real property, in entering the valuation of the real property or in the extension of the tax, to the injury of the complainant;
(2) If improvements on any real property were considered or included in the valuation of the real property, which did not exist on the real property at the time fixed by law for making the assessment;
(3) If the complainant or the property is exempt from the tax;
(4) If the complainant had no taxable interest in the property assessed against the complainant at the time fixed by law for making the assessments;
(5) If taxes have been erroneously paid or error made in noting payment or issuing receipt for the taxes paid;
(6) If the same property has been assessed against the complainant more than once in the same year, and the complainant produces satisfactory evidence that the tax for the year has been paid.

Id. The Commission denied the application, reasoning that Hunt's claims did not satisfy any of the provisions within SDCL 10-18-1. It further concluded that even if any of the provisions applied, it was not "'satisfied beyond a doubt' that the assessment [was] invalid, inequitable, or unjust[, ]" citing SDCL 10-18-1.1.

         [¶7.] In December 2016, Hunt appealed the Commission's decision to the circuit court, arguing that subsections (1), (3), (4), and (5) applied. The County moved for summary judgment. The circuit court granted the motion on November 8, 2017, noting that "[a]s a threshold matter, . . . res judicata prevent[ed] re-litigation of the factual issues previously decided in the" Valuation court. The court then analyzed SDCL 10-18-1 and found that none of its provisions applied.

         [¶8.] With respect to SDCL 10-18-1(1), which permits relief when "an error has been made in any identifying entry or description of the real property," the court recognized that some of the findings of the Valuation court suggested the subsection applies. However, the circuit court noted that the previous appeal did not examine "the specific words contained in SDCL 10-18-1(1)[.]" Moreover, the circuit court relied on Security National Bank v. Twinde, and concluded that the errors referred to in SDCL 10-18-1(1) are clerical in nature, i.e., unintended mistakes, and that no such errors were made here. 52 S.D. 352, 217 N.W. 542, 544 (1928).[2]

         [¶9.] The circuit court next considered whether Hunt's request for relief implicated SDCL 10-18-1(3), which permits a refund if "the complainant or the property is exempt from the tax[.]" The court acknowledged that Antelope Ridge's fee simple owner-the United States-is tax exempt. However, the court stated that it would not "read the phrase 'exempt from tax' to mean 'partially exempt from tax[.]'" Thus, in the court's view, although the County could not tax the real property, it could tax the leasehold interest; accordingly, Antelope Ridge could not be considered "exempt from tax."

         [¶10.] Next, the circuit court reviewed SDCL 10-18-1(4), which allows a refund "if the complainant had no taxable interest in the property assessed[.]" The court observed that because "Hunt had a taxable interest in the Antelope Ridge property," the court was "similarly unwilling to substitute other language for 'no' from subsection (4), such ...

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