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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1976
- **Citation:** 429 U.S. 832

## Text

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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.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_0120%3A1. Public record. Not legal advice.