Petition — Iowa Movers & Warehousemen's Ass'n v. Briggs

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JUN 14 1975

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In The

Supreme Court of the United States

IOWA MOVERS AND WAREHOUSEMEN'S

ASSOCIATION,

Petitioner,

vs.

DONALD C. BRIGGS, DIRECTOR OF IOWA

DEPARTMENT OF REVENUE, AND IOWA

DEPARTMENT OF REVENUE,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

SUPREME COURT OF IOWA

DonaLp A. WINE AND

Rosert F. Horz

THOMA, SCHOENTHAL, Davis, HOoCKENBERG

& WINE

2300 Financial Center

Des Moines, lowa 50309

Attorneys for Petitioner

E. L. Mendenhall, Inc., 926 Cherry St., Kansas City, Mo. 64106, 816-421-3030

i — a

ND go ba ose conse desucusaneceshanen 1

EE ne a eae ea ge kee eeu eee 2

SS ND cc us cnceucuaneseeoeucunes 2

Constitutional Provisions Involved ................ 2

Doeteras GF Chm GOOD wn cn ccc ccccccccepecccceces 2

Reasons for Granting the Writ ................... 3

SE. cnr ae-cesu eee ekateussee a ceeees weakens 7

Appendices:

A—(Opinion of the Supreme Court of Iowa) .... Al

B—(Order of Supreme Court of Iowa Denying

ME. os endd cas ehaihecaeies es eeeer es A47

Ce a ee ee eee eee eee A47

D—(C~-~stitutional Provisions Involved) ........ A49

List of Authorities Cited

CasEs

Board of Regents v. Roth, 408 U.S. 564 (1972) .... 4

Cohen v. Hurley, 366 U.S. 117 (1961) ............ 4

Fuentes v. Shevin, 407 U.S. 67 (1972) ............ 4

Goldberg v. Kelly, 397 U.S. 254 (1970) ........... 4

Metropolitan Water District of Southern Cali-

fornia v. Adams, 122 P.2d 257 (Calif. 1942) ..... 5, 6

Morrissey v. Brewer, 408 U.S. 471 (1972) ......... 4

Wagner Electric Manufacturing Company v. Linden,

Fe Se 2 errr errr Te 5

OTHERS

Amendment XIV, United States Constitution ....2, 5, 6

Article VI, Section 2, California State Constitu-

Pk ). vveercakas ha eves hs ees bee eee 6

In The

Supreme Court of the United States

No.

IOWA MOVERS AND WAREHOUSEMEN'’S

ASSOCIATION,

Petitioner,

vs.

DONALD C. BRIGGS, DIRECTOR OF IOWA

DEPARTMENT OF REVENUE, AND IOWA

DEPARTMENT OF REVENUE,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

SUPREME COURT OF IOWA

Petitioner prays that a Writ of Certiorari issue to

review the judgment of the Supreme Court of the State

of Iowa finalized in the Procedendo issued on March 15,

1976. The Supreme Court affirmed the District Court’s

decree on declaratory judgment making members of

Plaintiff's association liable for the collection of service

tax.

OPINIONS BELOW

The opinion of the Supreme Court of the State of

Iowa (Appendix, infra, pages A1l-A46) is reported at

237 NW2d 759 (lowa 1976).

2

JURISDICTION

The final judgment of the Supreme Court of the

State of lowa was made and entered into on March 15,

1976, and a copy of the Opinion, the Order denying re-

hearing, and the Procedendo is appended to this Peti-

tion (Appendix, infra, pages Al-A46, A47). The jurisdic-

tion of this Court is invoked under 28 U.S.C. 1257(3).

QUESTION PRESENTED

Whether it is a denial of due process to deny

a rehearing en banc to a party when a three-two ma-

jority of the five Justices having heard the parties’ oral

arguments de novo, attained in favor of the party ask-

ing for rehearing, is overcome in a five-four decision

en banc when the four Justices not having heard the

oral arguments are allowed to vote.

CONSTITUTIONAL PROVISIONS INVOLVED

The Fifth Amendment and the first section (Due

Process Clause) of the Fourteenth Amendment, to the

Constitution of the United Staves.

STATEMENT OF ':::E CASE

Members of Plaintiff association were obligated to

collect substantial amounts of service tax from their

patrons and submit it to the State, if any such tax

were due. Members claimed certain state officials ad-

vised them in 1967 that no tax was due, and in 1971

the Department of Revenue ruled to the contrary and

proceeded to collect taxes from the members, who

claimed an estoppel against the State. The Trial Court

held against Plaintiff.

3

Plaintiff appealec the adverse ruling to the lowa

Supreme Court. The Supreme Court granted oral hear-

ing after filing of the Appendix and Brief. The oral

hearing was held before a panel of the Court con-

sisting of the Chief Justice, together with four of the

remaining eight Justices.

The en banc opinion of the Sup: me Court was en-

tered on January 26, 1976, without further oral hear-

ing. A divided court affirmed the Trial Court. Of the

five Justices hearing oral argument, three joined with

the dissenting opinion, which would have held for plain-

tiff.

The majority opinion authored by a member of the

hearing panel was joined in by only one additional Jus-

tice on the original panel, together with three of the

four Justices who did not participate in the hearing.

The result was changed against Petitioner by non-mem-

bers of the panel; and although rehearing en banc was

requested, the same was denied on March 12, 1976,

and Procedendo issued on March 15, 1976, being the

final order in the Supreme Court of Iowa.

REASONS FOR GRANTING THE WRIT

It Is A Denial Of Due Process To Deny A Re-

hearing En Banc To A Party When A _ Three-Two

Majority Of The Five Justices Having Heard The Par-

ties’ Oral Arguments De Novo, Attained In Favor

Of The Party Asking For Rehearing, Is Overcome

In A Five-Four Decision En Banc When The Four

Justices Not Having Heard The Oral Arguments Are

Allowed To Vote.

This Court has distinguished the questions of a

right to a hearing and the type of the hearing which

4

would afford due process under the circumstances of the

particular case. Fuentes v. Shevin, 407 U.S. 67 (1972):

Goldberg v. Kelly, 397 U.S. 254 (1970). Thus, when

it is determined that a hearing shall be given to a

party, either because due process demands such a hear-

ing or because the Court decides to grant it, the issue

of whether the hearing given provided for such proce-

dural protection as the particular situation and circum-

stances demand still remains. Morrissey v. Brewer, 408

U.S. 471 (1972); Board of Regents v. Roth, 408 U-:S.

564 (1972); Fuentes v. Shevin, 407 U.S. 67 (1972):

Goldberg v. Kelly, 397 U.S. 254 (1970); Cohen v. Hurley,

366 U.S. 117 (1961).

An essential element of due process is a hearing,

or an opportunity to be heard on the merits. The bene-

fit of a hearing is not a matter of grace but is one of

right, safeguarded to all by virtue of the due process

clause of the federal constitution. The doctrine appiies

to every court and to all kinds of judicial proceedings.

16A C.J.S. 820. If a party is given a right of appeal,

but is in fact denied that right, such a denial of the

right may be a denial of due process. Jbid. p. 847.

In this case, the petitioner was granted an oral hear-

ing before a panel of five of the nine Supreme Court

Justices of Iowa, hearing the case de novo. Petitioner

contends that the circumstances which determine whether

an oral hearing before such a five-judge panel was one

commensurate with procedural due process must here

include the facts that although the petitioner attained a

three-two majority in its favor of those Justices hear-

ing its argument, it had lost a five-four en banc decision

because of the unfavorable votes of three of the four Jus-

tices who had not heard its argument. Under such cir-

cumstances, in a case being decided de novo by the Su-

5

preme Court, petitioner asserts that only a rehearing en

banc before all Justices deciding the case would be a due

process hearing, since its oral argument had already been

shown to be persuasive to a majority of those actually

hearing it.

In Wagner Electric Manufacturing Company v.

Linden, 262 U.S. 226 (1923), this Court apparently de-

cided that the mere fact that a Justice rendering an opin-

ion for a State Supreme Court had not heard the oral

argument in the c2se did not in any way affect the valid-

ity of the judgment or raise a substantial federal ques-

tion. However, the facts in that case were quite dis-

tinguishable from those in this case. In Wagner, three

of the Missouri Supreme Court Justices had heard oral

arguments in the case, and they all joined in the opinion

of the fourth Justice who wrote such opinion based on

the printed arguments heard by the other three Justices.

The Court looked upon such a situation as merely a harm-

less irregularity in the usual procedure of the Missouri

Supreme Court. It ventured no opinion as to the sub-

stantiality of the federal question raised by a situation

where Justices not hearing the oral argument had acted

to overcome the opinion of a majority of those who had

heard such argument. It is petitioner's contention herein

that such a situation does raise a substantial federal

question based on the due process clause of the Four-

teenth Amendment.

The Petitioner points to the California Supreme

Court case of Metropolitan Water District of Southern

California v. Adams, 122 P.2d 257 (1942) as a specific

example of a case where although the Court finds that

in the particular circumstances a party's rights have not

been injured by the participation in the pronouncement

of judgment by a Justice who had not heard the oral

6

argument, such Court would not tolerate the results in

this case based on its particular facts. In the Metropoli-

tan Water District case, four Justices who were present

at the argument concurred in the opinion of the Justice

who had not heard such argument. Since the California

Supreme Court has only seven Justices, there was in

that case no way in which a majority of those hearing

the oral argument could have been overridden due to the

votes of those Justices who had not heard such argument.

In fact, it is a constitutional requirement in California

that if Justices who have not heard the oral argument

are to participate in the pronouncement of judgment,

at least four of the Justices who were present at the ar-

gument must coiicur in any opinion of the Court. Cali-

fornia Constitution, Art. VI, §2. Such a constitutional

provision in California indicates strongly that that State

feels that once an oral hearing has been granted, a due

process hearing is one in which the judgment is comprised

of the opinion of a majority of those Justices having heard

the oral argument.

Petitioner contends that the policy implied by the

California Constit:» tional provision discussed in the

Metropolitan Water District case is demanded under

the due process clause of the Fourteenth Amendment,

and, therefore, a denial of rehearing en banc under the

circumstances of this case is a denial of petitioner's right

to procedural due process under the Fourteenth Amend-

ment.

While hearing may not need be granted in the first

instance, oral hearing, once granted must meet the stan-

dards of basic fairness implicit in the procedural due

process guarantees. Where, as here, the majority of

the hearing panel takes a position favorable to peti-

7

tioner, but the Court aolds against petitioner relying for

a majority upon the Justice not participating in hearing,

the grant of oral hearing has been futile. The right

granted has been effectively denied. Fairness demands

that an oral hearing granted be effective to allow presen-

tation to at least those who constitute a majority decision.

CONCLUSION

For the important reasons assigned, it is respect-

fully submitted that this Petition for Writ of Certiorari

should be granted.

Respectfully submitted,

DonaLp A. WINE

Ropert F. Howz

THOMA, SCHOENTHAL, Davis, HOCKENBERG

& WINE

2300 Financial Center

Des Moines, lowa 50309

Attorneys for Petitioner

Al

APPENDIX

APPENDIX A

IN THE SUPREME COURT OF IOWA

305

2-57422

IOWA MOVERS & WAREHOUSEMEN’S

ASSOCIATION,

Appellant,

vs.

DONALD G. BRIGGS, DIRECTOR OF IOWA DEPART-

MENT OF REVENUE, AND IOWA DEPARTMENT OF

REVENUE,

Appellees.

(Filed January 21, 1976)

Appeal from Polk District \ourt—Dale S. Missildine,

Judge.

Appeal by an association from adverse decision in

declaratory judgment action involving tax statutes. —

Affirmed in Part, Reversed in Part.

Donald A. Wine and Robert F. Holz, Jr., of Thoma,

Schoenthal, Davis, Hockenberg & Wine, and Buck &

Meade, of Des Moines, for appellant.

Richard C. Turner, Attorney General, George W.

Murray, Special Assistant Attorney General, and Harry

M. Griger, Assistant Attorney General, for appellees.

Considered en banc.

A2

UHLENHOPP, J.

In this de novo appeal we consider problems in con-

nection with the Iowa services tax and the Iowa income

tax on foreign corporations, §§422.43, 422.33, Code

1975.

Plaintiff is an association of Iowa warehousemen.

Plaintiff brought the present suit in equity for declara-

tory and injunctive relief against defendants Iowa De-

partment of Revenue and its Director, whom we will call

collectively the Department. In district court the suit

involved several main issues: (1) the constitutionality

of the application of the Iowa services tax to interstate

warehousing activities, (2) estoppel of the Department to

collect the services tax on such activities for a period

in the past, (3) applicability of the tax to certain wrap-

ping, packing, and packaging activities by warehouse-

men, (4) the constitutionality of the Iowa income tax

on foreign corporations which would be exempt but for

storing goods in Iowa, and (5) the standing of plaintiff

to raise that fourth issue. The trial court found for the

Department on all issues except the fourth, which it did

not reach. Plaintiff appealed.

On this appeal, plaintiff abandoned its first issue,

probably because of the 1947 decision of the United

States Supreme Court in Independent Warehouses, Inc.

v. Scheele, 331 U.S. 70, 67 S. Ct. 1062, 91 L. Ed. 1346

(tax upheld on warehousing goods under circumstances

such as those here). Plaintiff also omitted its fourth

issue, probably because of the trial court’s ruling on the

fifth issue. Plaintiff thus narrowed its appeal to the

issues we have numbered (2), (3), and (5). Hence we

proceed to the issues of estoppel, of wrapping, packing,

and packaging, and of standing.

A3

I. Estoppel. Iowa has had a sales tax and a com-

plementary use tax for a number of years. In 1967 the

General Assembly added as complementary to the sales

tax a tax on the gross receipts from enumerated ser-

vices, effective October 1 of that year. 62 G.A. Ch.

348, §§20, 25. See Code 1975, §§422.42, 422.43 (part

of the division of the sales tax). The act defined ser-

vices broadly as acts performed within this state with

respect to enumerated activities. Id. §19(1) and (4).

The enumeration included ‘‘storage warehouse and stor-

age locker’ and ‘‘warehouse”’ services, without stating

that storage of interstate goods is exempt.

On September 30, 1967, the Iowa State Tax Com-

mission promulgated services tax regulations. Regard-

ing storage and warehouses the regulations stated, with-

out any exception for interstate activities:

5.46(422) Storage, warehouse and_ storage

locker. Persons providing facilities for storing any

type of personal property are rendering, furnishing,

or performing a service the gross receipts from

which are subject to tax. ‘‘Storage warehouses and

storage lockers” shall include, but are not limited

to »-y facility provided for the purpose of storing

household or building furnishings, foods, clothes,

and furs, luggage, automobiles, airplanes, or any

other tangible personal property. (See ‘‘Ware-

houses”’ Infra.)

5.53(422) Warehouses. Persons engaged in

the business of warehousing goods for others are

rendering, furnishing, or performing a service the

gross receipts from which are subject to tax. A

“warehouse” is a building or place adapted to the

reception and storage of goods and merchandise,

A4

and, in a more limited sense, is a building or place

in which a warehouseman deposits the goods of

others in the course of his business. 1971 I.D.R.

915-916.

The Tax Commission's regulations also covered ad-

ministration of the services tax. The regulations stated

that the rules governing the administration of the sales

and use taxes apply to the administration of the ser-

vices tax. 1971 I.D.R. 910. Those rules had long re-

quired that a taxpayer desiring an opinion or informa-

tion make a written request stating all pertinent facts

and include copies or abstracts of documents, and that

a taxpayer desiring a formal ruling upon hearing before

the Tax Commission make a written application there-

for. Rules 1, 5, 1971 I.D.R. 839, 841.

The act also enumerated the service of advertising,

without stating an exception for interstate activities.

On September 28, 1967, broadcasters and newspaper pub-

lishers, and others allied with them, sued the Tax Com-

mission claiming inter alia that the act violated the

Commerce Clause in §8 of Article I, United States

Constitution. They showed, for example, that a news-

paper published in Davenport, Iowa, circulated in both

Iowa and Illinois, and that the signal of a Davenport

radio station beamed into both states. The Tax Com-

mission took the position that Iowa could tax the full

advertising revenue because the paper was published in

this state and the signal originated here. After trial

in district court that case came to this court, which

sustained the Tax Commission’s position on November

12, 1968. Lee Enterprises, Inc. v. lowa State Tax

Comm’n, 162 N.W.2d 730 (lowa). The plaintiffs in that

case petitioned the United States Supreme Court for a

A5

writ of certiorari but dismissed their petition after the

Iowa legislature repealed the tax on advertising al-

together. 63 G.A. Ch. 248, §1. That case was liti-

gated in the courts at the time of the events in the

present case and plaintiff's executive secretary, Frank

Burns, was aware of it. The Tax Commission's posi-

tion in that case has a bearing on the parties’ conduct

here.

The first part of plaintiff's appeal is largely factual.

We must thus deal with considerable evidence. We give

weight to the trial court's findings but are not bound

by them. Rule 344(f)(7), Rules of Civil Procedure.

Operators of lowa warehouses hoped that storage in

Iowa of interstate goods, that is, goods which had come

into Iowa from other states or which were destined to

leave Iowa, might be exempted under the Commerce

Clause. They became active regarding that question,

forming a committee to look into it and retaining an at-

orney to obtain a Tax Commission ruling on it.

Ernest Primmer, manager of a warehouse in

Davenport, Iowa, testified that on October 3, 1967, he

telephoned Earl Burrows, then chairman of the Tax

Commission (predecessor of the Iowa Department of

Revenue), to obtain some advice on the matter. Plain-

tiff offered as evidence of this call a telephone bill show-

ing that on October 3, 1967, a long-distance call was

made from Primmer’s warehouse to the number of the

Tax Commission in Des Moines. Plaintiff also offered

some hand-written notes Primmer allegedly made during

the call. Those notes stated among other things, “‘No

official Ruling for Tax Commission’ and ‘Unofficial

Ruling”’.

A6

Primmer testified he explained to Burrows that part

of his warehouse business involved the storage of mer-

chandise shipped on consignment by a manufacturer or

distributor and held in his warehouse until removal lot

by lot to fill local orders. Primmer said Burrows indi-

cated that the charge for storage of any goods which

came into Iowa from another state would be exempt

from the services tax, whether the goods were delivered

from the warehouse to someone in Iowa or to someone

in another state. Primmer also said he asked Burrows

about application of the tax to stored goods which orig-

inated in Iowa but were ultimately delivered outside the

state, and Burrows responded he did not know the

answer to that question and gave the telephone to a

person in his office named Bracewell, who he said was an

attorney. Primmer testified Bracewell indicated that

the receipts from storage of goods destined to leave

Iowa were also exempt.

In a deposition read into evidence at trial, Earl

Burrows said he did not recall the conversation with

Primmer, although it could have taken place. He did

indicate in his deposition that in 1967 he had felt ware-

house storage charges on goods destined to leave Iowa

were exempt from tax. Mr. Harold Bracewell, who was

an attorney for the Tax Commission in October 1967,

testified that he did not recall the conversation which

Primmer related. He also testified he definitely knew

he was not in October 1967 advising anyone on the

services tax.

The Iowa Department of Revenue replaced the Tax

Commission on January 1, 1968. William Forst was

director of the Department and Burrows was his deputy.

In February 1968, Burns and a warehouseman named

Little took Forst and other tax officials on a tour of a

AT

Des Moines warehouse in an attempt to increase under-

standing of the business. Forst testified by deposition,

“There was one thing I know, that when we left them

we did not make any statement to them that their gross

receipts from the performance of those services on tan-

gible personal property moving in interstate commerce

were exempt.’ In its brief plaintiff states that ‘‘the

warehousemen do not claim that any specific advice on

the taxation questions was given by Mr. Forst at [the

warehouse tour]. The warehouse tour was_ informa-

tional.”

Some confusion exists regarding the people who

were present on this tour. Earl Burrows testified that

he went on a tour of some warehouses; he thought this

occurred in 1967. But he appeared to have a poor rec-

ollection of the tour; he was unable to recall which

warehouses were toured or what other officials were

with him, although he indicated he did not think Forst

was along. Burrows testified that Forst went on some

subsequent warehouse tours which he did not attend.

Forst testified, however, that Burrows ‘‘may have been”

on the February 1968 tour. Warehouseman Frank

Burns seemed to have the clearest recollection of the

tour. He said that the tour took place in February

1968, and that he, warehouseman Little, Forst, Bur-

rows, and a tax official named Sheldahl were present.

He said of Burrows’ presence on the tour, “I remember

him very well."’ We conclude that the tour Burrows re-

ferred to in his testimony did take place in February

1968. Burrows testified that on this tour he discussed

the interstate commerce question and may have indi-

cated his understanding that the tax would not apply

to storage of goods destined out of state.

A8&

In April 1968, the warehousemen received from

their attorney a written opinion that the services tax

did not apply to storage of goods coming into Iowa

from out of state or originating in Iowa and destined

out of state. The attorney did not testify at the trial

and the source of his information does not appear.

Burns and warehouseman Dickinson testified that

about February 1969 they met with Forst to discuss the

services tax on interstate goods. They further testified

they told Forst that since October 1967 they had col-

lected the services tax only on goods originating and

ultimately delivered in Iowa, and that they asked him

whether they should seek in the then session of the

General Assembly a legislative exemption on storage of

interstate goods. They stated that Forst told them

they had no problem and need not seek a legislative

exemption. Interestingly, however, in that 1969 session

the General Assembly did amend the definition of ser-

vices to exclude services performed on tangible personal

property ‘‘delivered into interstate commerce ;

63 G.A. Ch. 247, §2. This amendment became ef-

fective May 8, 1969. Since that date, therefore, stor-

age in lowa of goods destined out of state has been

exempt from the tax.

Although Forst said there seemed to him to have

been two meetings between the warehousemen and him-

self, he could not specifically recall a meeting with Burns

and Dickinson in 1969. He nonetheless indicated clearly

that he did not tell the warehousemen, at that meeting

or any other, that the storage charge on interstate goods

was tax exempt. At one point in Forst’s testimony, the

following exchange took place between him and an attor-

ney for the Department, Mr. Harry M. Griger:

A9

Mr. Forst. And the other items [of plaintiff's

petition], that I expressed to them or explained to

them that warehouse services performed on goods

moving into or out of the State of lowa in interstate

commerce were exempt from the application of the

sales tax but that loca! warehouse services performed

on goeds not moving into interstate commerce were

subject to the sales tax, I would have to say I did

not make that statement.

Mr. Griger. You did not make that statement?

Mr. Forst. No, I did not make that statement.

Mr. Griger. In other words, did you ever make

that statement orally to any warehouseman or his

representative?

Mr. Forst. No. It’s a statement that would

not have been made orally. It’s a formal position

that would have been taken, and we obviously would

have made that quite formal.

At another point Forst testified, ‘‘I don’t recall just how

many times [he met with the warehousemen]—it may

have been only once. It could have been as many as twice.

I'm quite certain that we did not give them any policy

as to whether these were taxable in our opinion, or in my

opinion because that’s what it was.”’

Although Burns and Dickinson both said Everett

Sheldahl, another tax official, was at the spring 1969

meeting, Sheldahl stated in a deposition that he could not

recall any meeting with the warehousemen other than the

February 1968 tour.

On August 18, 1970, after an audit, the Department

assessed taxes against Cedar Rapids Transfer & Storage

Al0

Company, a warehouser The assessment included tax

upon storage of goods which came into Iowa from other

States.

On January 28, !972, the Department issued a Sales

and Use Tax Bulletir which included the following:

Listed below are seven items connected with services

performed by warehouses with an explanation of each

item and the Department of Revenue’s position re-

lating to their taxability:

1. Storage on goods that are received either in-

trastate or interstate by an Iowa warehouse

and after storage are delivered within the state—

Taxable since October 1, 1967.

2. Storage on goods that are received either in-

trastate or interstate by an Iowa warehouse

and after storage are delivered into interstate

commerce— Taxable October 1, 1967 to May 8,

1969; exempt after May 8, 1969.

Plaintiff brought this suit on April 26, 1972. In the

part of the suit involved at this point, plaintiff asserts

that notwithstanding the services tax statute, the De-

partment is estopped from collecting the services tax on

interstate warehousing antedating January 28, 1972,

because of the Burrows, Bracewell, and Forst representa-

tions. The rule is that ‘the burden to prove and estab-

lish estoppel is on the party asserting it, with strict proof

of all the elements being demanded.’ Paveglio v. Fire-

stone Tire & Rubber Co., 167 N.W.2d 636, 639 (Iowa).

Plaintiff first relies on the alleged statements by

Earl Burrows and Haroid Bracewell to Ernest Primmer

in the telephone conversation of October 3, 1967, and on

the representations on the interstate commerce question

All

which may have been made by Burrows on his warehouse

tour with Forst and others in February 1968.

As to the alleged Bracewell representations, our ex-

amination of the record persuades us Mr. Bracewell is

a credible witness and his testimony that he was not

advising anyone on the services tax is true.

As to Burrows, the trial court found only, ‘“There

is evidence that one tax commissioner, Earl Burrows,

Jr., felt that transactions [where stored goods were des-

tined out of state] were not subject to the Iowa sales tax.”’

This finding is supported by evidence that Burrows prob-

ably did indicate to Primmer in the telephone conversa-

tion and perhaps indicated his understanding on the ware-

house tour that storage of such goods was exempt. The

question then becomes, is this a sufficient basis to hold

the Department estopped from collecting the tax from

Iowa warehousemen for the period prior to January 28,

1972?

This court stated in a sales tax case, S & M Finance

Co. v. Iowa State Tax Commission, 162 N.W.2d 505, 510

(lowa):

Equitable estoppel is based on the idea that one

who has made certain representations should not

thereafter be permitted to change his position to

the prejudice of one who has relied thereon. It is

resorted to when otherwise manifest injustice would

result. Sanborn v. Maryland Casualty Co., 255

J~wa 1319, 1327, 125 N.W.2d 758, 763, and citations;

28 Am. Jur. 2d Estoppel and Waiver. section 27,

page 627, section 28, page 629. It is not generally

invoked against the state, particularly when the

collection of revenue is involved. 28 Am. Jur. 2d,

Estoppel and Waiver, section 122, page 783, section

Al2

123, page 783, 31 C.J.S. Estoppel §138, page 675,

§140, page 690, §147, page 730; Annotations, 1 A.L.R.

2d 344.

As this quotation indicates, many cases can be found

which state generally that the doctrine of equitable estop-

pel will not be applied against a state where, as here,

the public revenue is involved; the legislature imposes

the tax and only the legislature can grant exemptions.

E.g. People v. Illinois Women’s Athletic Club, 360 IIl.

577, 579-580, 196 N.E. 881, 882; Comptroller of the

Treasury v. Atlas General Industries, 234 Md. 77, 84.

198 A.2d 86, 90. Several courts have concluded, how-

ever, that an exception to this rule should be made when

the tax involved is a sales tax, a services tax as in this

case, or a similar tax which is collected by the taxpayer

from customers or others. See §422.49, Code 1975.

In a California case an employer, relying on a com-

mission ruling that it need not withhold tax from its em-

ployees, refunded to the employees amounts previously

withheld. The commission later changed the ruling.

The court held the state was estopped to collect from

the employer the amount of the tax refunded to the em-

ployees but not estopped from collecting the employer's

matching contribution to the tax fund. The court said

that ‘‘the state may not in good conscience thus piace

on the employer a burden which the act itself did not

intend that he should bear.” La Societe Francaise De

Bienfaisance Mutuelle v. California Employment Comm'n,

56 Cal. App. 2d 534, 552, 133 P.2d 47, 56. Ina sales

tax case a California court stated, ‘If the taxpayer is a

mere collection agency the state may be estopped, but

not where the tax is imposed on the complaining tax-

payer. Murket Street Ry. v. California State Board

Al3

of Education, 137 Cal. App. 2d 87, 103, 290 P.2d 20, 30.

See also Crane Co. v. Arizona State Tax Comm'n, 63

Ariz. 426, 163 P.2d 656, Hoffman v. City of Syracuse,

2 N.Y.2d 484, 141 N.E.2d 605; cf. Schuster v. Commis-

sioner of Internal Revenue, 312 F.2d 311 (9 Cir.).

On the other hand, some courts refuse to apply

estoppel to sales tax cases even though the result is to

make the seller himself pay a tax which, but for incor-

rect advice, he would have collected from buyers—tax

administrators cannot change the tax statute which the

legislature has enacted. See State v. Maddox Tractor

& Equipment Co., 260 Ala. 136, 69 So.2d 426; Bennetts,

Inc. v. Carpenter, 111 Colo. 63, 137 P.2d 780; Claiborne

Sales Co., Inc. v. Collector of Revenue, 233 La. 1061, 99

So.2d 345; Henderson v. Gill, 229 N.C. 313, 49 S.E.2d 754.

In the S & M Finance Co. case, this court noted the

existence of cases which apply estoppel where ‘‘a later

determination of tax liability which contradicts a previous

opinion compels the taxpayer to pay from his own funds

a tax he could have collected from others except for the

erroneous representation.” The court did rot decide,

however, whether estoppel might be applicable against

the state in tax matters ‘‘because the facts [in S & M]

would not warrant such a result under any of the author-

ities.’ 162 N.W.2d at 510.

We reach a similar conclusion in this case. The

statute passed by the legislature taxed warehousing and

did not state that interstate warehousing was exempt.

The regulations adopted by the Tax Commission at the in-

ception state that warehousing was taxable and stated no

exception for interstate warehousing. The Tax Commission-

Department regulations at all times set forth the way to ob-

tain rulings from the Commission and the Department. Had

Al4

plaintiff's attorney by written request or application

secured a ruling that storage of interstate goods is not

taxable, had he accordingly advised plaintiff of nontaxa-

bility, had plaintiff passed that information on to its

members, had the members in reliance not collected the

tax, and had the Department then changed its ruling

retrospectively, we would have a situation comparable

to the California cases and would be obliged to decide

whether to follow them or the decisions going the other

way. But for reasons of their own plaintiff and its attor-

ney did not see fit to obtain such a ruling. Assuming

arguendo that the doctrine of estoppel applies against

the state in services tax cases, the Department is not

estopped on the present facts.

Estoppel applies only when the party asserting it

actually relied upon the alleged representations. S & M

Finance Co. v. lowa State Tax Comm’n, supra, 162 N.W.

2d at 510. As to the Burrows-Primmer conversation of

October 3, 1967, the Department would not be estopped

in any event unless plaintiff's members relied on what

Burrows told Primmer in the conversation.

Although Primmer testified he told Burns about the

conversation with Burrows, we find no evidence in the

record that any warehouseman other than Primmer re-

lied on what Burrows told Primmer. Indeed on October

2, 1967, before the conversation or any other alleged

representation, Burns told Primmer he felt, for undis-

closed reasons, that the tax applied to intrastate storage

only. Primmer testified that shortly after he talked to

Burrows on October 3 he called Frank Burns again and

told him what Burrows had said. Burns apparently was

not surprised to hear this; Primmer said Burns ‘‘may

have told me that this pretty much dovetailed with what

Al5

”

an attorney he had out there was doing .. ."’ It seems

clear from this and Burns’ statement in the October 2

conversation with Primmer that Burns felt in the first

days of October 1967 that storage charges on interstate

goods were exempt—probably on the basis of what he

was told by plaintiff's attorney and quite apart from any-

thing he was told by Primmer.

Moreover, we find no substantial evidence in the

record that Burns relayed to plaintiff's members what

Primmer told him; although Burns testified at the trial,

he was not asked and did not say anything about this

second conversation with Primmer. We see no basis for

inferring that the plaintiff's members were ever told

anything as a result of the Burns-Primmer conversa-

tion. We think, rather, that the warehousemen relied

and acted upon their attorney's opinion, and not on the

Burrows-Primmer conversation.

As early as October 2, 1967, plaintiff's attorney had

apparently told Burns orally that the charge on inter-

state goods was exempt from the tax. Burns testified

that he also received a written opinion from the attorney,

in April 1968. The opinion said that ‘there will be no

taxes upon the gross receipts of the following: Goods

in interstate commerce, . . . ‘in-transit’ goods, and those

goods originating within the state that have bills of lad-

ing designating out-of-state designations.’’ Burns testi-

fied he had copies made of the opinion and sent to all

plaintiff's members. He further testified he told Forst

at the 1969 meeting that ‘‘our membership was collect-

ing 3 per cent service tax based on the interpretation

that we had mailed out to them’’ [Emphasis added.]

The only interpretation which the record shows had

been mailed at that time was the opinion of plaintiff's

Al6

own attorney. Also, Ernest Primmer testified that

when he heard Cedar Rapids Transfer and Storage Com-

pany had been assessed back taxes for storage of inter-

state goods he responded, *‘ ‘How could anything like

that happen when we have been following the guidelines

that have come from several sources;’ in my particular

case, right from a phone call to the office of the Commis-

sion, and in the other cases through the association,

through apparently an attorney named Mr. Wasker

[plaintiff's attorney] . . .". [Emphasis added. ]

Furthermore, this is not a case in which a lone me-

chanic telephones the Tax Commission to inquire whether

the services tax applies to his work. That a small oper-

ator might seek advice in such manner is not improb-

able. Here however we have substantial businessmen

joined together in a state association. They form a com-

mittee to obtain information. They retain legal counsel

to get a ruling on the applicability of the tax. The Tax

Commission rules prescribe a procedure to get a ruling.

The question the warehousemen have—application of the

tax to interstate activities—is one involving thousands

of dollars of tax throughout the state. Their counsel

informs them that storage of interstate goods is not tax-

able. We find it difficult to believe that on a matter of

such importance these warehousemen relied on the off-

hand reaction of a commissioner over the _ telephone

rather than on their counsel's opinion.

Even if we could say that the warehousemen relied

on the Burrows-Primmer conversation, the Department

would be estopped only if the warehousemen had a right

to rely—that is, if their reliance was reasonable. S & M

Finance Co. v. Iowa State Tax Comm'n, supra; 31 C.J.S.

Estoppel §7l(a) at 432. We do not believe that in a mat-

Al7

ter of this significance, reliance by the warehousemen on

what Burrows told Primmer in the telephone conversa-

tion would have been reasonable. Primmer himself

testified Burrows explicitly said that any advice he gave

was “‘unofficial.’’ Primmer’s notes stated, ‘‘No official

Ruling for Tax Commission.’’ Burrows was only one of

three tax commissioners and could not speak for the Com-

mission itself.

In addition, the Lee Enterprises case, which directly

involved the interstate commerce issue under the services

tax, was in the courts. Burns knew this. The Lee En-

terprises litigation told the warehousemen that the De-

partment asserted taxability. We hold that reliance by

warehousemen on the telephone conversation would not

have been reasonable.

We arrive at the same conclusion with respect to

Burrows’ alleged representations during the warehouse

tour. The evidence here provides even less basis for

estoppel. The record does not contain a shred of evi-

dence that the warehousemen relied on anything Bur-

rows said on the tour. On the contrary, plaintiff's ex-

ecutive secretary Burns was asked, ‘“‘Were there any

determinations [about the interstate question] that you

recall made on that particular day in February 19687"

He responded, ‘“There was nothing specific. We weren't

asking for an answer right at that moment. We were

trying to explain our situation and give them an idea

so that they could answer and give us an answer.”’ We

find no testimony that Burns or any other warehouse-

men even remembered what Burrows said that day, let

alone relied on it.

Here again reliance would not have been reasonable.

Our comments on the Burrows-Primmer conversation ap-

Al8

ply here. The Lee Enterprises litigation told the ware-

housemen the Department’s position regarding interstate

commerce. In addition, in February 1968 Burrows was

only deputy to Forst, who was director of the new De-

partment. The warehousemen admit Forst did not tell

them on the tour that storage of interstate goods was

exempt.

We finally consider the representations allegedly

made by Forst to Burns and warehouseman Dickinson

in the mevting in February 1969. Here we have a clear-

cut factual dispute. Dickinson testified Forst indicated

in the meeting that interstate warehousing activities

were not subject to the tax, that he said “I don’t see

any need for you at this time to go to the Legislature.

I'm telling you this is what we are going to rule once

this thing is out of Court.”

Forst directly contradicted this testimony. The

trial court believed Forst and found he made no rep-

resentations that storage of interstate goods was ex-

empt. The trial court’s findings are entitled to con-

sideration. Rule 344(f)(7), R.C.P.

We doubt Forst would indicate, after this court

had just decided the Lee Enterprises case favorably

to the Department, that he would ultimately rule stor-

age of interstate goods was exempt. Forst stated that

shortly after this court handed down its decision in that

case he happened to see plaintiff's attorney and ‘‘just

mentioned the fact that the Lee Enterprises decision re-

solved the question on the taxation of the services of

warehouses on goods in interstate commerce it seemed

to me.’ At another point in his deposition Forst testi-

fied, “I’m confident that the Supreme Court decision

cleared up any question that any of this [sic] ware-

Alg

”

housemen may have had .. .”” Forst thus clearly felt

in the spring of 1969 that the decision of this court in

Lee Enterprises indicated that the storage charges on

interstate goods were taxable. The plaintiff's petition

for certiorari in the Lee Enterprises case would make

Forst even less likely to give the warehousemen an

opinion of nontaxability. We find it difficult to con-

ceive of his making such a statement at that time. In

light of the trial court’s fact finding and all the evidence

including the circumstance of the Lee Enterprise case.

we find Forst did not represent to the warehousemen

that the storage of interstate goods was exempt.

Even if we assumed arguendo that tax officials

made the representations which plaintiff asserts, we do

not think plaintiff would be entitled to estoppel under

the cases which plaintiff cites. This case differs from

the ordinary tax estoppel case in an important respect.

Ordinarily the plaintiff in such a case is one taxpayer.

who shows he received information from a tax agency

and acted on it. E.g. La Societe Francaise De Bien-

faisance Mutuelle v. California Employment Comm'n,

56 Cal. App. 2d 534, 133 P.2d 47. Here however the

plaintiff is a statewide association of approximately 65

members. Plaintiff claims estoppel for each of those

members. But we find no substantial evidence that

plaintiff's representatives relayed the alleged representa-

tions to their individual members directly, or indirectly

by sending their own opinions to the members, based

on the alleged representations. Nor do we find evidence

that the individual members then relied on such rep-

resentations. On the contrary, the record does contain

evidence that from the effective date of the tax in

October 1967, plaintiff's leaders and members relied

upon the opinion of their attorney that interstate ware-

A20

housing was tax exempt; and the record does show

that opinion was disseminated in writing to all the

plaintiff's members in April 1968.

Specifically with reference to the 1969 meeting with

Forst, we find no evidence that any advice on the inter-

state commerce issue was disseminated to plaintiff's

members after such meeting. From the evidence we

have, we can only conclude that plaintiff's members

simply continued their reliance on their attorney's opin-

ion and that any alleged representations by Forst had

no effect on their conduct. Plaintiff has not proved

reliance by its individual members upon Forst’s alleged

representations.

In oral argument plaintiff appeared to suggest that

the Department should be estopped because it did not

affirmatively tell the warehousemen that storage of

interstate goods was taxable. But the statute at its

inception taxed warehousing and did not state an inter-

state commerce exception, and the Tax Commission's

regulations, adopted at the inception of the services

tax, likewise covered warehousing without an interstate

commerce exception. Plaintiff cites no case, and we

have found none, which holds that tax officials are

estopped if they do not affirmatively tell the taxpayer

his transactions are taxable under such circumstances.

Here again we have the fact that the Tax Com-

mission and the Department had regulations providing

the procedure—by letter or by application—to obtain

a ruling. Director Briggs testified the Department's

policy is only to rule on written requests ‘‘so we com-

pletely understand the question."’ Plaintiff did not

choose to proceed under those regulations.

A21

Finally, the California Supreme Court has said that

while the state may be estopped in some tax matters,

‘the case must be clear and the injustice great.’’

United States Fidelity & Guaranty Co. v. State Board

of Equalization, 47 Cal. 2d 384, 389, 303 P.2d 1034,

1037. The instant case, with its conflicting testimony

and sketchy evidence of alleged oral advice, does not

meet the test, nor does it meet the test applicable gen-

erally to estoppel cases. Paveglio v. Firestone Tire &

Rubber Co., 167 N.W.2d 636, 639 (lowa) (‘with strict

proof of all the elements be. ug demanded’’).

We conclude the trial court properly held that plain-

tiff is not entitled to application of the doctrine of

estoppel.

Il. Wrapping, Packing, and Packaging. Among

other enumerated services, the tax applies to the ser-

vices of ‘‘storage warehouse and storage locker,’ “‘ware-

house,” and ‘“‘wrapping, packing, and packaging of

merchandise other than processed meat, fish, fowl and

vegetables.” Code 1975, §422.43. The statute also

states exemptions, one of which is “gross receipts from

the sales, furnishing or service of transportation ser-

vice.’ §422.45.

Plaintiff admits that when its members engage in

wrapping, packing, and packaging merchandise other

than processed meat, etc., the tax applies, and that the

tax applies of course when its members store mer-

chandise or non-merchandise, without more. On the

other hand, the Department admits that wrapping,

packing, packaging, and transporting non-merchandise,

without more, is not taxable, and that the mere moving

of goods is nontaxable. The parties’ dispute relates to

A22

wrapping, packing, and packaging, and then moving

and storing, non-merchandise.

Some of plaintiff's members, in addition to ware-

housing, engage in moving tousehold goods. We will

refer to those members as movers. Preparatory to a

move, the movers wrap and pack the goods. Since

the goods are not merchandise, the tax ordinarily would

not apply to the wrapping and packing. On some occa-

sions, however, the mover stores the goods in his ware-

house before transporting them to their destination,

for example, when he consoiidates loads or when the

owner is not ready to receive the goods at destination.

The Department asserts that when such storage occurs,

the charge for wrapping and packing the goods auto-

matically becomes taxable. Plaintiff claims this is

wrong.

In construing a tax statute, we resolve doubts in

favor of the taxpayer. Jowa National Industrial Loan

Co. v. Iowa State Dep’t of Revenue, 224 N.W.2d 437,

440 (lowa). We find taxability only if it appears to be

clearly intended from the language of the statute. In

re Estate of Dieleman v. Department of Revenue, 222

N.W.2d 459, 461 (Iowa). On the other hand, “[E]x-

emption statutes must be strictly construed and any

doubts must be resolved against the exemption and in

favor of taxation. The burden is on the one claiming

the exemption to clearly show his right thereto."’ Ameri-

can College Testing Program, Inc. v. Forst, 182 N.W.2d

826, 827 (Iowa). See also Aerie 1287, Fraternal Order

of Eagles v. Holland, 226 N.W.2d 22, 24 (Iowa).

The Department relies upon the definition of ‘‘ser-

vices’ found in §422.42(13), Code 1975: ‘‘all acts or

services rendered, furnished, or performed .. . for a

A23

valuable consideration by any person engaged in any

business or occupation specifically enumerated in this

division . . .’’ [Emphasis added.] The Department

argues that since warehousing is a specifically enumer-

ated service and since a mover who also stores the

goods is engaged in warehousing, all services rendered

by him with respect to the goods, including wrapping

and packing, are automatically taxable. The trial court

held for the Department.

We cannot go as far as the Department argues.

The next section, §422.43, goes on to provide, ‘The

following enumerated services shall be subject to the tax

herein imposed on gross taxable services .. .”’ [Em-

phasis added.}] Then follows an enumeration of ser-

vices including warehousing. We think the legislature

did not intend to make ail activities of a person auto-

matically taxable merely because some of his activities

are taxable. We believe the correct sule to be that the

tax applies only to the enumerated services. The ques-

tions in a given case are, what activities does an enu-

merated service encompass, and what service is involved

in the particular situation?

As to the first of these questions, the service of

transportation of household goods undoubtedly encom-

passes wrapping and packing the goods; transporting

unpacked household goods would be impractical if not

unfeasible. But the service of storage of household

goods also undoubtedly encompasses wrapping and

packing. A warehouseman could not practicably store

unpacked pots and pans, furniture, bedding, and articles

of clothing.

As to the second question—whether the _ service

involved in a particular situation is transportation or

A24

storage—the answer would appear to turn on the pre-

dominant service involved in the situation.

Thus an individual may be assigned to a two-year

tour of duty abroad. He may have a mover pack his

household goods and place them in the mover's ware-

house, to be kept there for the two-year period. The

individual may intend to have the mover transport the

household goods at the end of the period to a different

house which the individual owns. We could not fault

the Department for ruling here that storage is the pre-

dominant service, so that the packing is taxable.

On the other hand, the individual may be transferred

from one city to another in this country. He may have

a partial truckload of household goods, which the mover

packs. The mover may take the goods to his warehouse

to be placed with another partial load headed in the same

direction. The mover may leave the goods in the ware-

house overnight or even for several days, awaiting the

rest of the load. We think the predominant service here

is so clearly moving that the Department could not rea-

sonably rule the packing to be taxable.

Between these extremes cases will arise in which the

Department will have to determine from the situation

whether the predominant service is moving or storage.

Since the legislature has seen fit to place the administra-

tion of this law in the hands of the Department, the De-

partment’s decision in given situations will control

unless within §17A.19(8)(g), Code 1975. See also

§422.55(1).

We thus overturn the portion of the trial court's

judgment upholding the Department's position that stor-

age of household goods transported by a mover automati-

A25

cally renders the wrapping, packing, and packaging of

the goods taxable.

Ill. Standing. The third issue, somewhat inde-

pendent of the first two, stems from plaintiff's attack

upon the validity of the application of §422.33 of the

Code to foreign corporations which deliver goods from

points in Iowa to customers in Iowa.

Section 422.33 imposes an income tax on corpora-

tions. Section 422.33(1) provides in relevant part:

1. If the trade or business of the corporation

is carried on entirely within the state, the tax shall

be imposed on the entire net income, but if such trade

or business is carried on partly within and partly

without the state, t © tax shall be imposed only on

the portion of the net income reasonably attributable

to the trade or business within the state, said net

income attributable to the state to be determined

as follows:

(a) [Allocation of the class of income consisting

of interest, dividends, rents, and royalties. ]

(b) Net income of the above class having been

separately allocated and deducted as above provided,

the remainder of the net income of the taxpayer shall

be allocated and apportioned as tollows:

[Income from other than manufacture or sale of

tangibie personal property. |

Where income is derived from the manufacture

or sale of tangible personal property, the part thereof

attributable to business within the state shail be in

that proportion which the gross sales made within

the state bear to the total gross sales.

A26

The gross sales of the corporation within the

state shall be taken to be the gross sales from

goods delivered within the state, excluding de-

liveries for transportation out of the state.

Since 1959, a federal statute has prohibited any state

from imposing on a foreign corporaticn a net income tax

on income derived within the state from interstate com-

merce if the corporation’s only business activity within

the state is the solicitation of orders for sale of tangible

personalty, if the orders are sent out of state for approval,

and if the approved orders are filled by shipment from a

point outside the state. 15 U.S.C.A. §381.

Prior to 1971, gross sales ‘‘within the state’’ were

defined by §422.33(1)(b) of the Iowa Code as “gross sales

from goods sold and delivered within the state .

[Emphasis added.] An amendment effective January

1, 1971, deleted the [emphasized] words. 64 G.A. Ch.

165, §37. Thus since that date a foreign corporation

has been taxed on income from the sale of goods delivered

in Iowa from a point in Iowa even though the sale was

effected outside the state. As a result, if a foreign cor-

poration solicits orders in Davenport, Iowa, but approves

the orders and stores the merchandise in Moline, Illinois,

and makes delivery from Moline to Davenport, the sales

are not allocated to Iowa for Iowa income tax purposes.

But if the corporation stores the merchandise in Daven-

port and makes delivery from that point to the Daven-

port customer, the sales are allocated to Iowa. Plaintiff's

evidence indicates that because of the latter allocation.

some foreign corporations have taken their goods out of

Iowa warehouses and stored them in nearby states. This

of course decreases the business of plaintiff's members.

A27

Plaintiff attacks the validity of §422.33(1)(b) inso-

far as it taxes foreign corporations whose only con-

tacts with Iowa are solicitation of sales in Iowa and

storage of goods in Iowa warehouses. Plaintiff claimed

on trial that §422.33(1)(b) is invalid because it is con-

trary to the equal protection clause of the United

States Cons ‘tution, it creates an undue burden on inter-

state commerce in violation of the Commerce Clause

in §8 of Article I of the Constitution, it is ‘‘arbi-

trary and unreasonable,’ and it violates the federal

statute we have cited. The trial court did not reach

the merits of plaintiff's claim, holding that plaintiff

did not have standing to attack §422.33(1)(b) because

neither plaintiff nor any of its members is a foreign

corporation taxed by that section.

In arguing that it has standing, plaintiff relies

primarily upon federal cases. Since plaintiff's claims

are based upon the United States Constitution and a

federal statute, we look to the federal cases for en-

lightenment on standing.

Plaintiff stresses that its members have suffered

substantial economic losses because of §422.33(1)(b) and

relies upon such cases as Baker v. Carr, 369 USS.

186, 204, 82 S. Ct. 691, 703, 7 L. Ed. 2d 663, 678

(the gist of standing is a “‘personal stake in the out-

come’’). Plaintiff argues, reasonably, that its members

have a stake in overturning §422.33(1)(b)—they have

suffered ‘injury in fact’’ because of the statute.

But plaintiff overlooks the decisions which hold

that a party who has suffered injury in fact usually

may not assert the rights of third persons—jus tertii.

Warth v. Seldin, 95 S. Ct. 2197, 2205, 45 L. Ed. 2d

A28

343, 355 (U.S.); McGowan v. Maryland, 366 U.S. 420,

429, 81 S. Ct. 1101, 1107, 6 L. Ed. 2d 393, 401;

Barrows v. Jackson, 346 U.S. 249, 255, 73 S. Ct.

1031, 1034, 97 L. Ed. 1586, 1594.

Plaintiff does assert the rights of third persons

here—the foreign corporations taxed under §422.33(1)(b).

Plaintiff claims that those corporations are denied equal

protection of law. In contending that §422.33(1)(b) is

an unconstitutional burden upon interstate commerce,

plaintiff advances the right of the foreign corporations

to engage in such commerce. In its attack on

§422.33(1)(b) as ‘‘arbitrary and unreasonable,”’ plaintiff

apparently means that the statute deprives the foreign

corporations of due process. And in relying upon

the federal statute, plaintiff asserts the interests of

the foreign corporations which that statute attempts to

protect from burdensome taxation.

The general rule against raising jus tertii thus

applies in full force here. The courts have however

developed several exceptions to that rule. Do any of

the exceptions apply to this situation?

Some cases allow a party to raise a third person’s

rights where a peculiar relationship between the party

and the right-holder makes such allowance appropriate.

Thus the United States Supreme Court held a person

charged with being an accessory to the illegal use of

contraceptives to have standing to raise the rights of

the persons to whom he had allegedly acted as an

accessory. Griswold v. Connecticut, 381 U.S. 479, 481,

85 S. Ct. 1678, 1680, 14 L. Ed. 2d 510, 513. The

Court also held that a society engaged in private

education of children had standing, on the basis of the

rights of the parents and guardians of the children,

ee lain, i le

A29

to attack a statute requiring all children to attend

public schools. Pierce v. Society of Sisters, 268 U.S.

510, 534-536, 45 S. Ct. 571, 573-574, 69 L. Ed. 1070,

1078. The Court may have based standing in that case

on the close teacher-student relationship. Sedler, Stand-

ing to Assert Constitutional Jus Tertii in the Supreme

Court, 71 Yale L. J. 599, 642. The relationship in

the present case between the warehousemen and the

foreign corporation is an ordinary commercial one. Such

a relationship has not usually been held sufficient to

allow a party to champion third persons’ rights. Id.

at 638.

The Court has developed another exception, where

the rightholder has difficulty asserting his own rights.

Eisenstadt v. Baird, 405 U.S. 438, 446, 92 S. Ct.

1029, 1034, 31 L. Ed. 2d 349, 358; Sullivan v.

Little Hunting Park, Inc., 396 U.S. 229, 237, 90

S. Ct. 400, 404, 24 L. Ed. 2d 386, 393; Barrows

v. Jackson, supra, 346 U.S. at 257, 73 S. Ct. at

1035, 97 L. Ed. at 1596; Note, Standing to Assert

Constitutional Jus Tertii, 88 Harv. L. Rev. 423, 425

(1974). but the evidence here contains no _ indication

that foreign corporations are unable to attack the

validity of §422.33(1)(b) if they wish.

The Court has made a third exception where, un-

less assertion of the third person's rights were per-

mitted, those rights would be diluted and adversely

affected. Eisenstadt v. Baird, supra, 405 U.S. at 446,

92 S. Ct. at 1034, 31 L. Ed. 2d at 358; Griswold v.

Connecticut, supra, 381 U.S. at 481, 85 S. Ct. at

1680, 14 L. Ed. 2d at 513; N.A.A.C.P. v. Alabama

ex rel. Patterson, 357 U.S. 449, 459, 78 S. Ct. 1163,

1170, 2 L. Ed. 2d 1488, 1498; Note, 88 Harv. L.

ee ee

A30

Rev., supra, at 425. In the present situation, the

rights of foreign corporations will not be diluted or

adversely affected if plaintiff is not allowed to raise

them.

This case therefore falls within the rule developed

by the federal cases prohibiting a party to a _ suit

from raising the rights of others. Plaintiff's problem

is that the tax falls on entities which are not parties

to this action.

Our own decisions lead to the same conclusion.

This court has held in a number of cases that only a

member of the class subjected to discrimination may

raise an equal protection claim. Green v. Shama, 217

N.W.2d 547, 556 (lowa); Mid-America Pipeline Co. v.

lowa State Commerce Comm'n, 255 Iowa 1304, 1309,

125 N.W.2d 801, 804; Browneller v. Natural Gas Pipe-

line Co., 233 Iowa 686, 692, 8 N.W.2d 474, 477;

Iowa Life Ins. Co. v. Board of Supervisors of Black

Hawk County, 190 Iowa 777, 782, 180 N.W. 721,

723. See also 16 Am. Jur. 2d Constitutional Law §123

at 319; 16 C.J.S. Constitutional Law §88 at 260.

One case in Iowa involved a claim by the plain-

tiff that a statute outlawing studded snow tires unrea-

sonably interfered with interstate commerce. This court

held the plaintiff lacked standing to raise the claim

because he did not show that he himself was engaged

in such commerce. MKruck v. Needles, 259 Iowa

470, 479, 144 N.W.2d 296, 302.

The trial court held correctly that plaintiff lacks

standing to attack §422.33(1)(b).

Appeal costs are taxed two-thirds to plaintiff and

one-third to the Iowa Department of Revenue.

A3l

AFFIRMED IN PART, REVERSED IN PART.

All Justices concur except Moore, C. J., and

Reynoldson, Rawlings, and Harris, J. J., who dissent.

REYNOLDSON, J. (dissenting)

In our de novo review I have concluded the record

does not support the factual findings in division I of

the majority opinion. I! therefore respectfully dissent

from that division only.

The significant conduct of the people who popu-

late this record must be viewed against the backdrop

of voluminous legislation approved July 1967. 62

G.A., Chapters 342 and 348. Among other changes,

these enactments extinguished the state tax commission

effective January 1, 1968, substituted a department

of revenue, and raised sales and use taxes from two

to three percent. A three percent tax was imposed

on gross receipts from 59 enumerated services (§422.43,

The Code, 1971) which the “‘‘retailers’’, as in sales of

tangible property, were forbidden to absorb (§422.49,

The Code, 1971! and were required to extract from

the service consumer (§422.48, The Code, 1971).

The service tax was effective October 1, 1967.

62 G.A., Ch. 348, §35. The state tax commission

was charged with administration of the act. Commis-

sion chairman Earl A. Burrows, Jr. testified, ‘“‘we had

a relatively short time in which to get information

out for the administration of the collection of the

taxes, so we would make talks and also invite mem-

bers of associations or interested people, businessmen

or others in to discuss with us the various facets of

the law and get their ideas and also get ours. * * *

{[Tjrying to promulgate rules and regulations was very

axe ea

A32

difficult * * * it was my understanding that we would

stay away from the taxability of areas in which inter-

state commerce would come up.’”’ The rules hastily

promulgated September 30, 1967, the day before the

tax became operational, were, in the main, merely a

repetition of the statute and a loose definition of the

respective services affected. ,

Plaintiff's members, many of whom provided tempo-

rary warehousing of property moving in their interstate

transportation business, logically questioned whether

under the Commerce Clause, United States Constitu-

tion, they were required to charge tax on this part

of their business. There had always been an exemp-

tion in the sales tax law for “‘service of transporta-

tion service,’ §422.45(2), The Code, 1966; and for

sales of tangible personal property ‘‘which this state

is prohibited from taxing under the constitution or

laws of the United States * * *.’’ Section 422.45(1),

The Code, 1966. The new legislation amended the

latter provision by adding, following the word ‘‘prop-

erty’’, the words ‘‘services rendered, furnished or per-

formed.’’ 62 G.A., Ch. 348, §22(1).

Language in a number of federai decisions would

have encouraged questions from the new involuntary

tax collectors. Helson v. Kentucky, 279 U.S. 245,

252, 49 S. Ct. 279, 281, 73 L.Ed. 683, 687 (1929)

(‘‘tax which falls directly upon the use of one of the

means by which commerce is carried on directly bur-

dens that commerce’); Puget Sound Stevedoring Co.

v. Tax Commission, 302 U.S. 90, 94, 58 S.Ct. 72,

74, 82 L.Ed. 68, 72 (1937) (‘The business of loading

and unloading being interstate or foreign commerce,

the state of Washington is not at liberty to tax the

A33

privilege of doing it by enacting in return therefor

a percentage of the gross receipts’’); Federal Compress

& W. Co. v. McLean, 291 U.S. 17, 22, 54 S.Ct. 267,

269, 78 L.Ed. 622, 627 (1934) (‘Here the privilege

taxed [operating a warehouse] is exercised before inter-

state commerce begins, hence the burden of the tax

upon the commerce is too indirect and remote to

transgress constitutional limitations’’).

The regulations promulgated by the tax commission

totally avoided the above issue. Eminent legislators

told members of the plaintiff association it was the

legislature's intent to exempt interstate commerce. It

was only natural that Ernest Primmer and others in

like position, on the firing line and charged with col-

lecting the tax, should contact the commission. Nor

do I understand the department to be asserting here

that neither it nor the prior commission had a duty to

advise these collectors. Rather it seems to be arguing

it had no obligation unless the request was in writing

and in any event it could not be estopped by oral ad-

vice of its agents. I will touch on (these points, infra,

but note here the department has never challenged state

tax commissioner Burrows’ statement the tax commis-

sion had the assigned duty “to help taxpayers know

what is to be taxed and what is not.”

So Mr. Primmer on October 3, 1967 called the com-

mission and asked for the “top man’. After chairman

Burrows was placed on the line Primmer told him ‘‘we

were in the period now * * * that we were his * * *

unpaid tax collector, but we were going to do the job

for him as required by law but we needed some guid-

ance * * *."’ Primmer detailed the warehouse tax prob-

lem his moving and storage company encountered be-

A34

cause merchandise was sent to his company from out of

state suppliers, unloaded in its warehouse, then loaded

on company trucks to complete delivery to the ultimate

consignee. Burrows repliec, ‘If it came across the state

line coming into your warehouse, it is involved in in-

terstate commerce and that is exempt.”

Primmer then detailed the warehouse tax problem

created by Maytag, which shipped its product to his

company’s Davenport warehouse for delivery into both

Illinois and Iowa. At that point Burrows put “our at-

torney’ on the telephone who suggested the tax be

charged on warehouse services for merchandise which

stayed in lowa, but not on that delivered into Illinois.

Burrows testified it was ‘‘very possible’’ Primmer

could have made the telephone call; that the commis-

sion was receiving many calls and ‘‘we would try to

give guidelines for the collector of the tax.’ He testi-

fied it was his position there would be no warehouse

tax collected on goods coming into Iowa or going out

of Iowa and on this point among the three commis-

sion members “I probably had a majority opinion, if

not everybody’s.’’ Burrows further testified, ‘‘we were

going to apply the tax to that part of the charges that

were attributable to goods that would stay in Iowa.”

Thus regardless of an uncertainty concerning the

identity of the commission attorney who participated

in the Primmer conversation, the opinions Primmer said

he received were those held at that time by the state

tax commission. The record establishes on a later Des

Moines warehouse tour, conducted by representatives of

plaintiff organization for Burrows and other commis-

sion personnel, Burrows further confirmed his position

there should be no tax charged for warehousing mer-

ee eee ee On

A35

chandise moving in interstate commerce and he then ex-

pressed the same advice.

During this time plaintiff organization had only 55

to 65 members and little money. The executive secre-

tary, Frank R. Burns, received $15.00 per month. An

oral ‘‘pipeline’’ for the exchange of information about

the new legislation had been established among members

of the association through its executive secretary.

Primmer testified he fed the pipeline ‘in reverse’’, re-

laying the information he received from the commis-

sion to Burns, who confirmed the information ‘‘pretty

well dovetailed’’ with ‘“‘what had been given to an at-

iorney for the lowa Motor Truck Association.”’ (Em-

phasis supplied.) There is a clear inference to be drawn

from the record that the substance of the Primmer tele-

phone consultation, fed back into what he termed the

‘pipeline’, reached the members of plaintiff associa-

tion.

January 1, 1968, the state tax commission went out

of existence. The department of revenue stood in its

place and William H. Forst had just arrived in Iowa

to be its director. Burrows remained as deputy to the

director. Members of plaintiff organization had not yet

received any written guidelines, rules or regulations re-

lating to the impact of the commerce clause on their

tax collection duties. They were confronted with a new

“top man”.

Another tour of Des Moines warehouses was con-

ducted by plaintiff for director Forst. Several persons

from the industry were present, including executive

secretary Burns of Blue Line Storage and Dave Little

of Merchants Transfer and Storage. The department of

revenue was represented by director Forst, Everett A.

ae ES EE

A36

Sheldahl, director of the department's sales and use tax

division, Donald E. Cunningham, assistant sales tax di-

rector, and probably others whose identity in the record

is uncertain.

Forst testified the warehousemen ‘‘were concerned

about the many different kinds of services that they pro-

vided and which of these services would be taxed and

which might be exempt’’, they were “definitely looking

for advice and direction as to what they should do.”

Several times in his testimony Forst stated he could not

recall giving them any ruling. He did volunteer ‘I

may have made a statement that these goods are ob-

viously in interstate consignment * * * but I don't

recall making any positive statement on the levy * * *.”

On several occasions he carefully limited his response,

relying on the department’s failure to issue a ‘formal

ruling’’, which he defined as a written ruling. He

finally ventured, ‘Well, to my knowledge, I cannot re-

call any or all positions taken in relation to tangible

personal property moving in interstate commerce and

services performed on that property.”

Assistant sales tax director Cunningham agreed

the warehousemen obtained little information from Forst

on this tour. He testified they reported they were not

collecting anything except “what was purely intrastate

or local warehouse."’ They ‘‘wanted some guidance.”

Cunningham viewed with some awe that Forst ‘“‘didn’'t

give a direct answer on anything. * * * I admired * * *

his kind of defense.’’ He quoted Forst as saying ‘‘We

will give you something,’’ because ‘‘they needed some

finalities somewhere along the line.”’

Sales and use tax division director Sheldahl also

conceded the warehousemen on the Forst tour wanted

end een ee

A37

a determination of which services they had to ‘‘collect

and pay taxes on.’’ While he could not recall Forst’s

exact words, he got the impression “‘as long as it came

in interstate and was labeled to go out interstate and

continued on in interstate * * * [it] would be exempt

from the tax.’’ The apparent inconsistency between the

Cunningham and Sheldahl testimony may be explained

by the fact the group was not together at all times

during the tour.

The majority concludes the only warehouse inspec-

tion Burrows took was the Forst tour in February of

1968. Burrows testified he toured one warehouse in 1967

and Mr. Forst took a subsequent tour. Forst testified

to a single tour of two warehouses in February 1968.

As above noted, Cunningham and Sheldahl from the de-

partment were along. Sheldahl and Cunningham sepa-

rately denied any recollection of Burrows accompanying

them. Forst testified “* * * Al Burrows may have

been on the trip with us. That is quite possible, but

again I can’t resurrect anything that would speak di-

rectly to that.’’ The only person present who placed

Burrows on the Forst tour was plaintiff's executive

secretary Burns. Immediately after so stating he gave

the following testimony:

“Q@. Was Mr. Cunningham on the tour? A.

Yes. There was some that met us at the lunch-

eon. Now it is a possibility that maybe this is

where I became confused, because we had luncn

with these people afterwards.”

The inference is that Burrows may have met the group

for lunch, although he did not repeat his warehouse

visit. Majority’s conclusion there was only one tour

which was made by both Burrows and Forst is against

the great weight of the evidence.

DO

A38

When director Forst did not comply with his

promise to ‘‘give you something’’, Burns and Darrell

Dickinson, vice president of Mid-America Lines Public

Warehouses Household Goods Division of Kansas City,

Missouri, and a member of the plaintiff's board of di-

rectors, paid him an office call. Burns places the time

in March or April of 1969, Dickinson in late 1968 or

early 1969. Both testified Sheldahl was present. Burns

testified they explained to Forst again exactly how they

were handling the tax, and further,

‘Well, our primary purpose—As you know, we

had not received a written order in regard to the

interpretation of this thing * * * so we went to

him again and asked if an order could be given,

and he was not in a position at that time, because

of the lawsuits involved, to issue an order. We

asked him at that time point blank whether he

thought we should go to the Legislature and pos-

sibly tie onto one of the bills that were being pro-

posed at that time. His answer to us was that

we had no problem and there would be no reason

for us to spend our money.”

As a result of that meeting, plaintiff organization did

not pursue any legislation.

Dickinson's recollection of the meeting was fully as

specific. Forst could not recollect this meeting or any-

thing about it. While it seemed to him there were

two meetings, he testified, ‘“Well, quite possibly if there

had been a second meeting we would have had it here

because we would have already been to the field to look

at it. But I can’t recall a second meeting, nor can I

find any evidence of a second meeting.’’ The depart-

ment never produced its division director Sheldahl to

A39

refute the testimony of Burns and Dickinson, although

both placed him at the conference. Nor was Sheldahl’s

attention ever directed to this meeting Dickinson and

Burns testified about at trial. Sheldahl’s only testi-

mony was on plaintiff's pre-trial discovery deposition.

At the most he only gave a negative response to the

question, ‘Did you have any other discussions with any

group of warehousemen other than the one you de-

scribed in February of 1968?’’ (Emphasis supplied.) Of

course, the evidence discloses he was only an observer

and did not participate in the discussion with Dickinson

and Burns.

The majority not only overlooks the department's

failure to produce Sheldahl’s testimony about this

meeting, it refuses to give any weight to the testimony

of Burns and Dickinson regarding Forst’s statements

at this second meeting because “Forst directly contra-

dicted this testimony.’ I find no direct contradicting

testimony in the record. As in the case of Sheldahl,

Forst’s attention was never directed to the testimony

of Burns and Dickinson in this regard. While some

of his statements inferentially contradict their testimony,

other statements are evasive.

The majority's second reason for discounting the

Burns-Dickinson testimony is that this court had filed

the Lee Enterprise decision and there was no longer any

reason for Forst to delay a written guideline. But

the Lee Enterprise case was still in litigation and on

its way to the United States Supreme Court. Our

opinion was filed November 12, 1968. December 26,

1968, when the petition for rehearing was pending

here, plaintiffs filed application for stay of procedendo

upon any final decision adverse to them until final de-

A40

termination by the United States Supreme Court.

Following a ruling adverse to the Lee Enterprise

plaintiffs on their petition for rehearing, we entered

an order staying procedendo and continuing the lower

court injunction against collecting the tax from plain-

tiffs upon their posting a $100,000.00 bond, which

was filed. June 4, 1969, the service tax on adver-

tising was repealed. 63 G.A., Ch. 248. June 12,

1969, the appeal to the United States Supreme Court

was dismissed on appellant’s motion. Without ques-

tion, at the time of the Burns-Dickinson-Forst-Sheldahl

meeting, the department was still very much involved

in the Lee Enterprise litigation.

Thus the two reasons majority assigns for dis-

believing the clear, explicit and detailed testimony of

Burns and Dickinson concerning Forst’s representations

are not supported by the facts.

Although the department knew the warehousemen

were collecting tax only on storage of property moving

in intrastate commerce, no mass audits were made

until the Lee Enterprise appeal was dismissed. In a

classic Freudian slip, Forst testified that in the de-

partment there was ‘“‘discussion after the Lee Enter-

prise case that we needed to revise our—not revise

our position, but to enforce the rule.”” At another

time he said, “I do recall only saying with Mr. Briggs

prior to leaving—and that would have been in late

1969—that the audits in the warehousing area, you

know, we had to do because we had to address our-

selves to that policy that we had never issued any

rule on.”

The warehouse audits got underway in 1971 after

Briggs became the department director. He had not

A4l

been a party to the prior advice given the warehouse-

men. Apparently the “rules’’ quoted by the majority

were insufficient even for the field auditors. Accord-

ing to Sheldahl, they had questions and needed ‘‘guide-

lines’’. The response was not adoption of rules or

regulations but the communication (Sales and Use Tax

Bulletin) to the field staff dated January 28, 1972.

More than four years after the service tax went into

effect, the department finally stated in writing its

position on seven different warehousing services or situ-

ations, declaring some taxable and some _ exempt.

A close analysis of Forst’s deposition demonstrates,

contrary to department's argument, that he never

told the warehousemen that if they did not collect

the tax on storage of interstate goods, they proceeded

at their own risk. Forst said that was the position

he took with the advertising people. On cross-exam-

ination he was asked point-blank, “Did you tell that

to the warehousemen?”’ to which he responded, ‘Well,

I don’t know that I told that to the warehousemen.

* * * I do not recall telling them that. That is the

only area [warehousing] that I can see that I would

have said something that sounded as positive as what

they are saying that I said.”

Overall, Forst’s testimony was evasive and incon-

sistent. He continually hedged by stating the depart-

ment issued no ‘formal ruling’’. The implication is

plain he did not consider anything he or any other

employee said to be binding unless it was reduced

to writing. Although conceding the warehousemen

may have orally requested a formal ruling he main-

tained if they had only made a written request for

a formal ruling it would have been given. But on

A42

three occasions in his testimony, he maintained the

department would not take any position because the

constitutionality of the levy was before the Supreme

Court.

There is no shred of evidence in this record the

warehousemen were ever told they should submit a

written request for ruling, or that a ‘formal’ ruling

only awaited such demand. What does come through

from all the evidence is the clear impression they

received oral but no written guidelines from the com-

mission in 1967 because of the chaotic state of that

body and its employees following the massive legis-

lation. After the Lee Enterprise case was instituted

(December 12, 1967) the department was _ reluctant

to reduce to writing what it was telling the warehouse-

men for fear the litigation might be adversely affected.

Burns testified because plaintiff organization had

no funds an ad hoc committee prevailed upon the

Motor Truck Association to lend assistance of its

lawyer in attempting to ‘find out what their [com-

mission] thinking would be in regard to our storage

portions of our business that were in interstate com-

merce.’’ This prevailed until ‘‘we received a final notice

from [the attorney] through the Motor Truck Associa-

tion in the spring of ‘'68."’ The reference is appar-

ently to a communication in March or April of 1968

from the attorney to the truck association, dealing

incidentally with service tax on storage and setting

out the same guidance Burrows gave the warehousemen.

The majority asserts plaintiff association's mem-

bers relied on this information from the attorney, not

the advice of Burrows and Forst. This is belied by

the fact the warehousemen from the beginning col-

reat ote ae

A43

lected tax only on storage of goods moving intra-

state, six months prior to the lawyer's communication.

This was in direct conformance with the opinion then

held by the majority of the commission. It goes

against all reason to assert ‘hat opinion was not

communicated to the warehousemen. Neither is there

any evidence the plaintiff hired an attorney to obtain

a ‘formal’ ruling, or that he was employed by plain-

tiff at the time Forst claims to have made the alleged

statement to the attorney relating to warehousing ser-

vice tax following the Lee Enterprise case.

The record is plain that Burrows, a department

lawyer, and Forst all made oral representations to the

warehousemen upon which they reasonably relied. But

taking the worst possible view of the evidence from

plaintiff's standpoint, then it must be conceded that al-

though repeatedly pressed for guidelines the department

played a cat-and-mouse game with the warehousemen,

in which they were forced to either coliect and remit

the tax at the peril of a class action by consumers

if they were wrong, or not collect it and pay it them-

selves upon assessment and levy by the commission

if that course of action proved to be in error. Nor was I

persuaded by defense counsel’s suggestion in oral argu-

ment the plaintiff could have sued the department

to obtain written guidelines. Those whom the state

placed on the cutting edge of tax collection ought to

have been furnished guidelines and I am _ convinced

in this instance they were, albeit in the form of

oral advice.

In 1958 when Professor Davis published his ‘‘Ad-

ministrative Law Treatise’’ he stated, §17.06, p. 519:

A44

“What the law of estoppel of governmental

units most needs is a larger measure of judicial

freedom from the rigidity of the oft-repeated

statements that a state or local government cannot

be estopped. Equity courts should restore their

own power to determine whether or not in any

particular circumstances justice requires resort to

the doctrine of equitable estoppel. The fortunate

fact is that a good many recent holdings do apply

that doctrine to governmental units.”’

A large number of decisions supporting the last quoted

sentence are cited and discussed at pages 520-525.

By date of publication of this ‘Administrative

Law Treatise 1970 Supplement’’ Professor Davis could

say, §17.09, p. 607:

“The movement toward allowing estoppel of

governmental units’ continues. Federal courts

often allow the government or its officers to be

estopped, and the highest courts of New York,

Illinois and California hold municipalities to be

estopped.”

Among the more recent cases cited and discussed in

K. Davis, Administrative Law Treatise, 1970 Supple-

ment §17.03, pp. 588-591, §17.06, pp. 594-597 are:

United States v. Fox Lake State Bank, 366 F.2d 962,

965-966 (7 Cir. 1966) (government held estopped to

bring action under Civil False Claims Act against a

bank); Schuster v. Commissioner, 312 F.2d 311 (9

Cir. 1962) (Commissioner of Internal Revenue held

estopped to impose tax liability on trustee bank where

Commissioner audited, determined trust not taxable,

which determination was relayed to the bank by the

beneficiary which then delivered corpus to _ benefi-

nn etieen cmcinalall

A45

ciary); Simmons v. United States, 308 F.2d 938,

945 (5 Cir. 1962) (holding government may be estopped

in a tax case by unpublished advice by a local tax

official); Rand v. Andreatta, 60 Cal.2d 846, 36 Cal.

Rptr. 846, 389 P.2d 382 (1964) (estoppel may be

used in a proper case to excuse the late filing of claims

against public entities or the filing of such claims

in a defective form); Trustees of Internal Improve-

ment Fund v. Lobean, 127 So.2d 98 (Fla. 1961) (es-

toppel by deed operates against State of Florida);

Johnson v. Oregon State Tax Commission, 248 Ore.

460, 435 P.2d 302 (1967) (county assessor estopped

from assessing because he had misled the taxpayer).

The majority concedes S & M Finance Co. Fort

Dodge v. lowa State Tax Comm'n, 162 N.W.2d 505

(lowa 1968) left open the question whether equitable

estoppel in a proper case would be applied against

the state where, as here, the persons to whom the

representations were made were essentially tax collectors

for the state. Although in a five-to-four decision we

refused to apply the doctrine in S & M Finance Co.,

the facts make that case clearly inapposite. There the

taxpayer obtained preliminary advice from a field agent.

The record neither disclosed the ‘nature of his work

nor the extent of his authority’. Jd. at 511. Here

the warehousemen went directly to the “top man”.

There the erroneous oral advice was promptly corrected

by a written communication. Here the oral advice was

corrected four years later. Nothing in S & M Finance

Co. prevents us from providing piaintiff relief in this

case.

Many of the older estoppel decisions from other

jurisdictions articulating hard-bitten rules in the state’s

favor, must be cautiously viewed in light of a modern

Te

A46

movement recognizing the state’s responsibility for its

agents’ acts in course of their employment. This duty

was extended to torts by the Iowa legislature in 1965.

61 G.A., Ch. 79. It was extended to contracts by this

court in 1973. Kersten Co., Inc. v. Department of

Social Services, 207 N.W.2d 117 (Iowa 1973). These

enlightened concepts are restless in the company of de-

partment’s theory these unpaid tax collectors had no

right to rely on advice offered by the head of the state's

tax collection agency.

On October 7, 1971, there was a meeting between

Director Briggs and Darrell Dickinson, Ernest Primmer,

and others of the association's leadership. According

to Dickinson, *‘We went down what we termed to be

at that time the Forst ruling, and Mr. Briggs was

very emphatic that he had a total{ly] different concept

of what was interstate commerce and that what we

were telling him was just null and void, that it had no

bearing on it since we had no formal rulings.” The

association was then relying on oral representations from

two prior heads of the tax collection agency. Upon re-

ceiving this advice from the new ‘‘top man” they could

no longer reasonably rely on the prior advice.

I would hold the department estopped from re-

quiring the association’s members to pay the tax they

were advised not to collect on charges for warehousing

property moving in interstate transit from October 1,

1967 to October 7, 1971. Of course, following the May

8, 1969 amendment, storage in Iowa of goods destined

out of state would be exempt in any event. 63 G.A.,

Ch. 247, §2.

Moore, C. J., and Rawlings, and Harris, JJ., join

in this dissent.

nec alll

A47

APPENDIX B

IN THE SUPREME COURT OF IOWA

No. 2-57422

IOWA MOVERS AND WAREHOUSEMEN'’S

ASSOCIATION,

Plaintiff-Appellant,

vs.

DONALD C. BRIGGS, DIRECTOR OF IOWA

DEPARTMENT OF REVENUE, AND IOWA

DEPARTMENT OF REVENUE,

Defendants- Appellees.

ORDER

Plaintiff-appellant’s petition for rehearing filed in the

above entitled appeal has been considered by the entire

membership of the court and is now denied.

Done this 12th day of March, 1976.

/s/ C. Edwin Moore

Chief Justice-lowa Supreme

Court

Copies to:

Thoma Law Firm

2300 Financial Center

Des Moines, Iowa 50309

Harry M. Gri, -

Assistant Attorney General

APPENDIX C

STATE OF IOWA

The State of Iowa, to the District Court of the

County of Polk and State aforesaid:

A48

Whereas, There was certified to the SUPREME

COURT of the State of Iowa, the record and proceed-

ings in a certain cause which was in said District Court,

the parties thereto being

Iowa Movers and Warehousemen’s Association,

Plaintiff, and,

Donald C. Briggs, Director of Iowa Department of

Revenue, and Iowa Department of Revenue, Defen-

dant,

wherein there was an appeal from the order and judge-

ment rendered in the District Court to the SUPREME

COURT, and the said Court having duly examined the

record and proceedings aforesaid, in the premises, at

Des Moines, in said state, on 26th day of January,

1976, did AFFIRM in part and reverse in part the

judgment aforesaid, as rendered in the Court below:

Therefore, You are hereby commanded that with

diligence and according to law you proceed in the same

manner as if no appeal had been taken and prosecuted

in this COURT, anything in the record or proceedings

aforesaid heretofore certified to the contrary notwith-

standing.

In Witness Whereof, I have hereunto set my hand

and affixed the Seal of said COURT. Done at Des

Moines this 15th day of March, A.D. 1976.

/s/ R. K. Richardson

Clerk of Supreme Court

A49

APPENDIX D

(Constitutional Provisions Involved)

AMENDMENT V

UNITED STATES CONSTITUTION

No person shall be held to answer for a capital, or

otherwise infamous crime, unless on a presentment or

indictment of a Grand Jury, except in cases arising in

the land or naval forces, or in the Militia, when in

actual service in time of War or public danger; nor

shall any person be subject for the same offence to be

twice put in jeopardy of life or limb; nor shall be com-

pelled in any criminal case to be a witness against him-

self, nor be deprived of life, liberty, or property, with-

out due process of law; nor shall private property be

taken for public use, without just compensation.

AMENDMENT XIV—Section 1

UNITED STATES CONSTITUTION

Section 1. All persons born or naturalized in the

United States, and subject to the jurisdiction thereof,

are citizens of the United States and of the State where-

in they reside. No state shall make or enforce any law

which shall abridge the privileges or immunities of citi-

zens of the United States; nor shall any State deprive

any person of life, liberty, or property, without due

process of law: nor deny to any person with.u its juris-

diction the equal protection of the laws.