Petition for Writ of Certiorari — V-1 Oil Co. v. Idaho Petroleum Clean Water Trust Fund

Supreme Court brief1996

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Text

FILED meee

7 No. 9G 518 SEP 3.019%

In The gpp@e OF THE CLERK

Supreme Court of the United States —

October Term, 1995

V-1 OIL COMPANY, an Idaho Corporation,

Petitioner,

vs.

IDAHO PETROLEUM CLEAN WATER TRUST FUND,

Respondent.

Petition for Writ of Certiorari to the Supreme Court

of the State of Idaho

PETITION FOR WRIT OF CERTIORARI

PETER STIRBA

Counsel of Record

STIRBA & HATHAWAY

215 South State Street

Suite 1150

Salt Lake City, Utah 84111

(801) 364-8300

KENT W. GAUCHAY

SIMPSON, GAUCHAY

& GARDNER

497 North Capitol Avenue

Suite 200

P.O. Box 50494

Idaho Falls, Idaho 83405

(208) 523-2000

Attorneys for Petitioner

Nargis (800) 3 APPEAL « (800) 5 APPEAL « (800) BRIEF 21

ervices, inc.

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QUESTIONS PRESENTED

I. Whether the decision of the Idaho Supreme Court,

denying V-1 Oil the right to a refund or other relief after paying

a tax found to be unconstitutional, violates the Fourteenth

Amendment Due Process Clause, depriving V-1 Oil a

meaningful opportunity to postpayment relief for taxes paid

pursuant to a tax scheme found unconstitutional.

Il. Whether the Idaho Supreme Court's opinion should be

vacated as to the refund/relief issue as violative of the

Fourteenth Amendment due process, when that issue was never

briefed, argued or a question raised on appeal.

LIST OF PARTIES

All parties to the Idaho Supreme Court proceedings below

whose judgment is sought to be reviewed include: Idaho Clean

Water Trust Fund, Respondent; Western Petroleum Marketer's

Association, Idaho Division, Amicus Curiae; Idaho Highway

Users, Inc., Amicus Curiae; V-1 Oil Company, (“V-1”") an

Idaho Corporation, Petitioner. Petitioner, V-1 Oil Company,

Inc., has no parent companies, subsidiaries or affiliates.

TABLE OF CONTENTS

Questions Presented ............ cece cece cece eens

SERENE TEC EE ETT PET PECL IUCR ECT

oe cy ee dk eee eeWeeee die seesse

ER Ue ie een eebeWeereeveeet

Opinions Below ........ ccc cccccecccccesersccess

OR os nk ee deeeceeeacceuees

Constitutional Provision and Statutes Involved .......

rr occa eeetccvesedes

Reasons for Granting the Writ ...............--5555

Il.

The decisions below violate V-1 Oil’s Fourteenth

Amendment right of due process, entitling an

opportunity to postpayment relief for taxes

already paid pursuant to a tax scheme found

unconstitutional, and directly conflicts with this

Court’s due process analysis established in

McKesson v. Division of Alcoholic Beverages and

Tobaccoand its progeny. ...........-++++55:

The Idaho Supreme Court’s sua sponteruling on

the refund/relief issue is a violation of the due

process clause because the ruling denied V-1 the

opportunity to brief and argue the issue, is

Contents

Page

contrary to regularized and orderly judicial

process, and ignores statutory and constitutional

provisions, therefore, this Court should vacate the

judgment as to that issue and remand for further

proceedings consistent with due process. ..... 13

CGD 5 iv is A xataad be seabesnkeneansdsbeeakeus 23

TABLE OF CITATIONS

Cases Cited:

Atchison, T. & S.F.R. Co. v. O’Connor, 223 U.S. 280

COPED s vaciainn wads bees 02 cake LES PERE 9,10

Automobile Club of Oregon v. State, 840 P.2d 674 (1992)

oOeR Sd bh Due oc Su dba ons see cena aheekecsEes 7

Boddie v. Connecticut,401 U.S.371 (1971) .......... 16

Dorchy v. Kansas, 264 U.S. 286 (1924) .............. 21

Epperson v. Howell, 154 P.621(1918) .............. 21

George v. Donovan, 757 P.2d 651 (Idaho 1988) ....... 20

Hammond Packing Co. v. Arkansas,212 U.S. 322 (1909)

cred nds twee ae Koteaeds Selena Nkerie eraeeer 18

Idaho County Property Owners Assn. v. Syringo Gen.

Hosp. Dist.,805 P.2d 1233 (Idaho 1991) .......... 20, 21

Contents

Page

McKesson Corp. v. Division of Alcoholic Beverages and

Tobacco, 496 U.S. 18(1990) ........... 5,6,7,8,9, 12,23

Montana National Bank of Billings v. Yellowstone

County, 276 U.S. 499 (1928) ......cccccccccccees 11,12

Mullane v. Central Hanover Tr. Co.,339 U.S. 306 (1950)

eee Eee PEEP OeTET PEC PTET TPP EL ere? 14

Northcutt v. Sun Valley Co.,787 P.2d 1159 (Idaho 1990)

FF Pe np pr EE Ee TT Pe 18

Patterson v. New York, 432 U.S. 197(1977) .......... 17

Sandpoint Convalescent v. Dept. of Health, 756 P.2d 398

SOUND ROE Silvan) odaouceseedeeseidincaes 18

State v. Hoisington,657 P.2d 17 (Idaho 1983) ........ 17

State v. Langdon, 785 P.2d 679 (Idaho Ct. App. 1990) .. 18

Sun Valley Shopping CTR. v. Idaho Power, 803 P.2d 993

CO TOBE DE oo os Fede nidie 0 eae su yn dee hide wns 18

Ward v. Love County Board of Comm’rs, 253 U.S. 17

I a a 10, 11

Contents

Page

Statutes Cited:

Fe CAs SOUS ba 6k Seba sanceciaceis gece needa. l

SS UDA COPE OUEE bee veccaderedeentbesecic wt 3

Ute tk fk EET PETE O TE ELLE LEO 3

eee eg REPEC T TES REET Pee T Tee PEE ey 20, 21

Tk PIE PEO MEETS TES ET ESTE TT REC eTy 21

hee eg a RORL ETT POR LEE TES PRUT ET Pe cles 20

EA DTU bs RSCREVSinaeabescta ce baveetEonses 19

BA. PPP ROROD As Capen ecWaReiwencdnse kiwekoa as 22

Be je ery ee Peer rere rer yy re 19, 20, 23

BAL. SOP ENUME 0 ccd akan buanes cdaN ss cudnetisexee 2,20

Pub. L. No. 99-499, 100 Stat. 1696 (1986) ........... 3

Pub. L. No. 98-616, 98 Stat. 3277 (1984) ............ 3

United States Constitution Cited:

Fourteenth Amendment .................... Ry ay bes Soa

vii

Contents

Page

Rule Cited:

Co eo. AREER gee ie 15

Other Authorities Cited:

Idaho Constitution Article VII,§13 ................ 20

Idaho Constitution Article VII,§17 ............. 2,3, 14,15

ers We 55.0655 54 es Oh OR hose bec hccs 3

APPENDIX

Appendix A — Opinion of the Supreme Court of the State

of Idaho Dated July 2,1996 ..................... la

Appendix B — Opinion of the Supreme Court of the State

of Idaho Dated April 16,1996 ............,...... 18a

Appendix C — Opinion of the Supreme Court of the State

of Idaho Dated August 3,1996 .................. 33a

Appendix D — Order Granting Summary Judgment of

the District Court of the Seventh Judicial District of

the State of Idaho Filed January 12,1994 .......... 48a

Appendix E — Memorandum Decision Granting

Plaintiff’s Motion for Summary Judgment in the

District Court of the Seventh Judicial District of the

State of Idaho Filed December 13, 1993 ........... 52a

vili

Contents

Appendix F — Letter from Idaho State Tax Commission

SE UR, BO ns ck ks ead ee bc deve Oaeeuniens

Appendix G — Memorandum in Support of Petition for

Rehearing in the Supreme Court of the State of Idaho

OUP BT BO han c hee eek lo 4s h das chains

Appendix H — Page 8 of Brief .....................

Appendix I — Relevant Statutes and Constitutional

FRI TCUOE op oid 65 6.5.05 bawecedsna hanes

Page

78a

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99a

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OPINIONS BELOW

The opinion of the Supreme Court of Idaho dated July 2,

1996 is unreported as of yet. It is reprinted in the Appendix

hereto at Appendix A at la-17a. The opinion of the Supreme

Court of Idaho dated April 16, 1996 is unreported as of yet. It is

reprinted in the Appendix hereto at Appendix B at 1 8a-32a. The

opinion of the Supreme Court of Idaho dated August 3, 1995 is

unreported as of yet. It is reprinted in the Appendix hereto at

Appendix C at 33a-47a. The Memorandum Decision granting

summary judgment, dated December 13, 1993, and the Order

granting summary judgment dated January 11, 1994, are

unreported. They are reprinted in the Appendix hereto at

Appendix D at 48a-5 1a and Appendix E at 52a-77a.

STATEMENT OF JURISDICTION

The Substitute Opinion of the Supreme Court of Idaho,

denying V-1’s Petition for Rehearing, sought to be reviewed

was entered July 2, 1996. It is unreported. It is reprinted in the

Appendix hereto at Appendix A. This opinion substitutes for

the April 16, 1996 opinion. This opinion is unreported. It is

reprinted in the Appendix hereto at Appendix B. This Petition

for Writ of Certiorari is timely filed September 30, 1996. This

Court has jurisdiction pursuant to Title 28 U.S.C. § 1257(a).

CONSTITUTIONAL PROVISION

AND STATUTES INVOLVED

United States Constitution, Amendment XIV, provides:

. .. Norshall any State deprive any person of

life, liberty, or property, without due process

oflaw...

Idaho Constitution, Article V1, Section 13, provides:

No money shall be drawn from the treasury,

but in pursuance of appropriations made by

law.

Idaho Constitution, Article VII, Section 17, is reprinted in

the Appendix hereto at Appendix | at 1 10a.

Relevant provisions of Idaho Code Title 63, Chapter 24,

are reprinted in the Appendix hereto at Appendix I at 100a-

104a.

Relevant provisions of Idaho Code Title 41, Chapter 49,

are reprinted in the Appendix hereto at Appendix I at 105a-108.

Idaho Code Title 67, Chapter 3511(2) is reprinted in the

Appendix hereto at Appendix I at 109a.

STATEMENT OF THE CASE

This case involves the fundamental principle of due

process in two areas. One, as it relates to a state’s requirement to

afford meaningful postpayment relief to a party for taxes

already paid pursuant to a scheme found unconstitutional. Two,

as it relates to the protection of individual property rights from

arbitrary termination when a state’s highest court chooses to

rule on an issue, sua sponte, without allowing for a party's

constitutional right to be heard.

The state of Idaho enacted the Idaho Petroleum Clean

Water Trust Fund Act of 1990, (“ACT”) which imposes a one

cent per gallon “transfer fee” upon distributors of petroleum

products and then used to fund a trust for underground storage

tank insurance. The state of Idaho enacted this ACT in order to

assist Idaho underground storage tank owners and operators in

complying with congressional legislation that provided for the

regulation of underground storage tanks and the clean up of

leaks and releases from these tanks. 42 U.S.C. §§ 6991-69911.

These implementing regulations set out a comprehensive

framework for the operation of underground storage tanks,

including requirements for technical performance standards,

corrective action to investigate and remediate tank releases,

and, as appiies here, financial responsibility standards. 40

C.F.R. § 280.'

On March 12, 1992, Petitioner V-1 Oil Company, (“V-1")a

distributor of petroleum products, filed a complaint against

Respondent, Idaho Petroleum Clean Water Trust Fund (“Trust

Fund”), alleging that (1) the transfer fee is actually a tax on

gasoline and motor fuels and its intended use therefore violates

Idaho Constitution Art. VII, § 17, (2) that all funds collected

pursuant to the Act should be refunded, and (3) the Act violates

the constitutional right to freedom of contract and anti-trust

laws. On September 17, 1992, the freedom of contract and anti-

trust claims were dismissed. On January 29, 1993, V-1 filed a

Motion for Summary Judgment in which V-1 requested the

court to rule as a matter of law that the transfer fee imposed

pursuant to the Act is unconstitutional. On June 1, 1993, the

Trust Fund filed a Cross-motion for Summary Judgment on the

constitutionality of the Act and a Motion for Summary

Judgment on V-1’s right to arefund. On December 13, 1993, the

trial court granted partial summary judgment in favor of V-1

on its first allegation holding that the transfer fee was a tax.

1. This legislation was enacted in two stages as amendments to the

Resource Conservation and Recovery Act of 1976. 42 U.S.C. §§ 6901-

6992k. The first provisions were added by the Hazardous and Solid Waste

Amendments of 1984. Pub. L. No. 98-616, 98 Stat. 3277 (1984). Additional

components of the program were enacted as part of the Super Fund

Amendments and Reauthorization Act of 1986. Pub. L. No. 99-499, 100 Stat.

1696 (1986).

(Appendix D, p. 49a). The court however, denied the Trust

Fund’s summary judgment and left for trial the resolution of V-

1’s refund claim asserting that the record was not sufficient to

determine what remedy was available to V-1. (Appendix D);

(Appendix C, p. 38a; Appendix A, p. 7a). The Trust Fund

subsequently appealed the issue of the constiutionality of the

transfer fee only, and on August 3, 1995, the Idaho Supreme

Court issued an opinion which correctly affirmed the trial

court’s finding that the transfer fee was a tax. The Trust Fund

then petitioned for a rehearing on this August 3, 1995 opinion.

The Idaho Supreme Court then issued a substitute opinion dated

April 16, 1996, which again reaffirmed that the transfer fee was

a tax. However, the Idaho Supreme Court took it upon itself to

revisit the issue of V-1’s refund claim upon which the trial court

had received no evidence, heard argument or ruled upon.

Without having a sufficient record, briefs submitted or

argument, the Idaho Supreme Court ruled that V-1 was not

entitled to a refund of the taxes paid pursuant to the

unconstitutional tax scheme. (Appendix B, 29a). In response to

the court’s opinion, V-1 filed a Petition for Rehearing, detailing

and indicating that the court’s decision on the refund issue was

contrary to Idaho and United States Supreme Court precedent,

in violation of state statutes and the United States Constitution.

(Appendix I). Despite V-1’s Petition pointing out the numerous

problems with the Idaho Supreme Court deciding on an issue

never raised before them, the court denied V-1’s Petition and

upheld its decision by reissuing a substitute opinion on July 2,

1996, (Appendix A) replacing the court’s opinion of April 16,

1996. V-1 now has timely filed this Petition for Certiorari.

REASONS FOR GRANTING THE WRIT

This case involves the fundamental principle of due

process in two areas. One, as it relates to a state’s requirement to

afford meaningful postpayment relief to a party for taxes

already paid pursuant to a scheme found unconstitutional. Two,

oe ee ee eee ee ee FS en eee ee ee

as it relates to the protection of individual property rights from

arbitrary termination when a state’s highest court chooses to

rule on an issue, sua sponte, without allowing for a party's

constitutional right to be heard.

The Supreme Court of Idaho erroncously ruled, sua

sponte, that V-1 Oil is not entitled to a refund for taxes paid

pursuant to a scheme the Idaho Supreme Court found

unconstitutional. In so doing, the court has gone beyond simple

error or misapplication of law; the court has made decisions that

reek of gross injudicious conduct. By precluding V-1, and

countless others who have paid into the insurance fund, from

making a rightful refund claim against the tax moneys

unconstitutionally taken, the Idaho Supreme Court has givena

$50,000,000 windfall to the state of Idaho. (Letter dated May 6,

1996 of Deputy Attorney General Theodore V. Spangler, Jr.,

Appendix F, p. 80a). In support of their ruling, the Idaho

Supreme Court has cited no constitutional, statutory, case or

policy arguments. The court simply dispenses with the

substance of the refund/relief litigation with six vague

sentences. (Appendix A, p. 12a). Without this Courts review,

the Idaho Supreme Court will have given a $50,000,000 gift to

the state in an arbitrary and patently unconstitutional manner.

The Idaho Supreme Court's decision denying any postpayment

relief also directly conflicts with this Court’s decision in

McKesson Corp. v. Division of Alcoholic Beverages and

Tobacco, 496 U.S. 18 (1990), and ignores this Court's

precedents that a state provide retrospective reliefto a party for

its payment of an unlawful tax. Further, the Idaho Supreme

Court’s ruling on the refund/relief issue, sua sponte, is &

violation of due process by, not allowing argument or briefing,

ignoring regularized, orderly judicial process, statutory and

constitutional interpretation and case precedent. Therefore, the

Idaho Supreme Court has deprived V-1 of its opportunity to be

heard before the final termination of its rightful property claim.

The sole issue on appeal before the Idaho Supreme Court

was whether a “transfer fee is a tax on motor vehicle fuels.”

(Appendix A, 10a). The trial court originally granted partial

summary judgment on this issue holding that the transfer fee

was a tax. The trial court also, at that time, denied Idaho

Petroleum Clean Water Trust Fund’s (Trust Fund) summary

judgment and left for trial the resolution of V-1's refund claim

because the record was not sufficient to determine what remedy

was available to V-1. (Appendix C, p. 38a; Appendix A, p. 7a).

On appeal, the Idaho Supreme Court issued a August 3, 1995

opinion which correctly affirmed the trial court’s finding that

the transfer fee was a tax. The Trust Fund subsequently

petitioned for a rehearing and the Idaho Supreme Court issued a

substitute opinion on April 16, 1996 which also reaffirmed that

the transfer fee was a tax. However, the Idaho Supreme Court

went one step further and addressed the issue of V-1’s refund

claim, notwithstanding it had not been at all developed or ruled

upon below, was not part of the appeal, and had not been briefed

or argued. Without having a sufficient record, briefs submitted

or argument, the court ruled that V-1 was not entitled toa refund

of the taxes paid pursuant to the unconstitutional tax scheme.

The Idaho Supreme Court’s decision on V-1’s refund claim

conflicts with this Court’s analysis in McKesson, and the

opinion provides no rational explanation or support for its sua

sponte ruling. In response to the court’s opinion, V-1 filed a

Petition for Rehearing, supported by memorandum (Appendix

G, 81a), outlining specific state and United States Supreme

Court precedent that were violated by that court’s ruling,

including the McKesson decision. Despite the apparent

constitutional and procedural problems and the fact that the

refund claim was not an issue on appeal, the Idaho Supreme

Court callously denied V-1’s petition without further argument

or briefing and upheld its decision by reissuing a substitute

opinion on July 2, 1996, replacing the court’s opinion of April

16, 1996. Since the nature of this ruling is contrary to

fundamental notions of due process, this Court's established

precedent and the fact that there is no support for the court’s

decision on issues not presented to it, the Idaho Supreme

Court’s ruling warrants review by this court.’

THE DECISIONS BELOW VIOLATE V-1 OIL’S

FOURTEENTH AMENDMENT RIGHT OF DUE

PROCESS, ENTITLING AN OPPORTUNITY TO

POSTPAYMENT RELIEF FOR TAXES ALREADY

PAID PURSUANT TO A TAX SCHEME FOUND

UNCONSTITUTIONAL, AND DIRECTLY CON-

FLICTS WITH THIS COURT’S DUE PROCESS

ANALYSIS ESTABLISHED IN MCKESSON V.

DIVISION OF ALCOHOLIC BEVERAGES AND

TOBACCO AND ITS PROGENY.

This Court’s precedents establish that:

if a State penalizes taxpayers for failure to

remit their taxes in timely fashion, this

requiring them to pay first and obtain review

of the tax’s validity later in a refund action,

the Due Process Clause requires the State to

afford taxpayers a meaningful opportunity

2. The result of this litigation has far reaching impact beyond the

borders of Idaho. Oregon has already ruled on this issue and held that their

underground storage tank assessment “tax” was unconstitutional.

Automobile Club of Oregon v. State, 840 P.2d 674 (1992). Cases are also

pending in Utah and Wyoming. Virtually every state has adopted similar

schemes to provide underground storage tank owners and operators

compliance with EPA mandated “financial responsibility” requirements for

the maintenance and use of underground storage tanks.

to secure postpayment relief for taxes

already paid pursuant to a tax scheme

ultimately found unconstitutional.

McKesson Corp v. Division of Alcoholic Beverages and

Tobacco, 496 U.S. 18,22 (1990).

McKesson is the most recent ina line of cases which stands

for the Constitutional principle that a taxpayer is entitled to a

clear and certain remedy for a state’s unlawful exaction of tax

moneys pursuant to an unconstitutional scheme. McKesson

involved a suit by a liquor distributor to recover taxes it had paid

under protest, alleging that the tax scheme violated the

Commerce Clause because a tax preference providing special

rate reductions was given to certain products grown within the

state and used in alcoholic beverages. McKesson’s products did

not qualify for the rate reductions. A Florida trial court granted

partial summary judgment invalidating the tax scheme. The

court however, declined to order a refund or any other form of

relief for the taxes previously paid under the unconstitutional

scheme. The Florida Supreme Court affirmed, ruling that the

tax scheme was unconstitutional and that the refusal to order a

refund was proper. This Court agreed that the tax scheme was

unconstitutional but disagreed with the Florida Supreme Court

and concluded that the liquor distributor was entitled to a refund

or, because the state court did not invalidate the scheme in its

entirety, the state was free to choose some alternative course in

providing a meaningful remedy. Justice Brennan, for a

unanimous Court explained:

Because exaction of a tax constitutes a

deprivation of property, the state must

provide procedural safeguards against

unlawful exactions in order to satisfy the

commands of Due Process. The state may

choose to provide a form of “predeprivation

process,” ... or [the state can allow]

taxpayers to withhold payment and then

interpose their objections as defenses in a

tax enforcement proceeding initiated by the

state... . To satisfy the requirements of the

Due Process Clause, therefore, in this

refund action the state must provide

taxpayers with, not only a fair opportunity to

challenge the accuracy and legal validity of

their tax obligation, but also a “clear and

certain remedy,” for any erroneous or

unlawful tax collection to ensure that the

opportunity to contest the tax is a

meaningful one.

Id. at 36-39 (citations omitted) (emphasis added).

In the case at hand, however, the Idaho Supreme Court did

not provide any safeguards against unlawful exaction of taxes

or allow for any “clear and certain remedy” for the

unconstitutional tax collection. In fact, the Idaho Supreme

Court did not allow V-1 even a fair opportunity to make a refund

claim because the court decided the issue without having

allowed the presentation of evidence below, much less briefs

and argument submitted by either party on appeal. This sua

sponte ruling ignores this Court’s additional case precedent

highlighting a state’s constitutional duty to provide

retrospective relief to a party for its payment of an unlawful tax.

In Atchison, T. & S.F.R. Co. v. O'Connor, 223 U.S. 280

(1912), this Court explained the scope ofa state’s obligation to

provide retrospective relief as part of its postdeprivation

procedures in a tax refund suit. Here, a railroad company

brought suit to recover taxes it had paid under protest, alleging

that the law under which the tax was levied was in violation of

the Commerce Clause because most of the franchise tax was

apportioned to business conducted wholly outside the state. In

ruling that the company was entitled to arefund, Justice Holmes

stated:

It is reasonable that a man who denies the

legality of a tax should have a clear and

certain remedy. ... [A]part from special

circumstances he cannot interfere by

injunction with the state’s collection of its

revenues, [therefore] an action at law to

recover back what he has paid is the

alternative left.

Id. at 285.

Here, the law was invalidated in its entirety. Therefore the

only appropriate relief was for this Court to order a refund. By

issuing a judgment entitling the railroad company to a refund

of the tax, the taxpayer was provided with a “clear and certain

remedy” for the state’s unconstitutional exaction of tax

moneys.

This Court in 1920, again, reiterated its due process

analysis when it ordered a refund of taxes paid when a taxing

scheme was ruled unconstitutional. In Ward v. Love County

Board of Comm'rs, 253 U.S. 17 (1920), members of the

Choctaw tribe filed a refund suit to recover moneys collected

from them by Love County, Oklahoma as taxes on their

allotments, which under the laws and Constitution of the United

States were nontaxable. In reversing the Oklahoma Supreme

Court’s refusal to award a refund for the unlawful tax this Court

stated:

Ea SSS

It is a well settled rule that ‘money got

through imposition’ may be recovered back;

... [and] [t]o say that the county could

collect these unlawful taxes by coercive

means and not incur any obligation to pay

them back is nothing short of saying that it

could take or appropriate the property of

these Indian allottees arbitrarily and without

due process of law. Of course this would be

in contravention of the Fourteenth

Amendment, ...

Id. at 24 (citations omitted).

Eight years later this Court again applied the same Due

Process analysis when it held that one forced to pay a tax in

violation of a federal law is entitled, in addition to prospective

relief, to a refund of the excess tax paid unless the disparity is

removed in some other manner. Montana National Bank of

Billings v. Yellowstone County, 276 U.S. 499 (1928). In

Montana, state officials had imposed a tax on shares of banks

incorporated under federal law but not on shares of state-

incorporated banks. The Montana National Bank of Billings

paid this tax and then brought suit for a refund. On appeal, the

Montana Supreme Court overruled a previous state court

decision and held shares of state banks should be taxed in order

to comply with a federal statute. Although the court ruled in

favor of the Montana National Bank of Billings, it declined,

however, to order a refund of the taxes paid. On writ of error,

this Court acknowledged the Montana Supreme Court’s

prospective relief that ensured equal treatment of banks in the

future. This Court expressed, however, that prospective relief

alone would not satisfy the notions of the Fourteenth

Amendment Due Process Clause. Justice Sutherland opined:

It is true that the state supreme court in the

present case expressly repudiated the

construction therefore put by it upon the

state statutes. ..and,... adopted one tothe

exact contrary. But that does not cure the

mischief which had been done under the

earlier construction. ... Plaintiff in error

cannot be deprived of its legal right to

recover the amount of the tax unlawfully

exacted ofit...

Id. at 504-505.

The following cases are similar to our case at hand. Each

time the state had wished to keep the money wrongfully taken

and had attempted to deprive the wronged parties of their

rightful claim to a refund or other appropriate relief. These

cases have demonstrated this Court’s traditional analysis when

determining a state’s constitutional duty to provide relief toa

party for its payment of an unconstitutional tax. “Because

exaction ofa tax constitutes a deprivation of property, the state

must provide procedural safeguards against unlawful exaction

in order to satisfy the commands of the Due Process Clause.”

McKesson, at 36 (footnote omitted).

In the instant case, Idaho has failed to provide the

necessary procedural safeguards to satisfy due process. In fact,

the Idaho Supreme Court has blocked any opportunity V-1 may

have had in further challenging their tax obligation. They have

stripped V-1 of their constitutional right to claim a refund or to

avail themselves to other forms of relief. Without allowing for

the opportunity to develop a sufficient record, brief, argue or

present a refund/relief issue, the Idaho Supreme Court has

effectively silenced V-1 before they have been given the

opportunity to speak. The Supreme Court of Idaho has

disregarded the Fourteenth Amendment Due Process Clause

and has turned its back on precedent established by this Court.’

Although the Idaho Supreme Court has ruled in a manner

which is inconsistent with this Court’s precedent and in total

disregard of the Due Process Clause, it is more shocking that the

court made these rulingssua sponte. V-1 was never given the

opportunity to develop a record, brief or argue the issue of a

refund or other appropriate relief.

II.

THE IDAHO SUPREME COURT’S SUA SPONTE

RULING ON THE REFUND/RELIEF ISSUE IS A

VIOLATION OF THE DUE PROCESS CLAUSE

BECAUSE THE RULING DENIED V-1 THE

OPPORTUNITY TO BRIEF AND ARGUE THE ISSUE,

IS CONTRARY TO REGULARIZED AND ORDERLY

JUDICIAL PROCESS, AND IGNORES STATU-

TORY AND CONSTITUTIONAL PROVISIONS,

THEREFORE, THIS COURT SHOULD VACATE THE

JUDGMENT AS TO THAT ISSUE AND REMAND FOR

FURTHER PROCEEDINGS CONSISTENT WITH DUE

PROCESS.

Early in this Nation’s jurisprudence, this Court voiced the

due process doctrine that “[w]herever one is assailed in his

person or his property, there he may defend.” Windsor v.

McVeigh, 93 U.S. 274, 277 (1876). The Fourteenth Amendment

stands for the fundamental principle that, as a matter of due

3. Itcan be noted again that this Court’s precedent was brought to the

attention of the Idaho Supreme Court in V-1’s Petition for Rehearing.

However, this precedent was disregarded as evidenced by the court's denial

out of hand of V-1’s Petition for rehearing and issuance of the July 2, 1996

Substitute Opinion.

process, parties whose rights are to be affected are entitled to an

opportunity to be heard. And although a precise definition of

the Due Process Clause cannot be penned, Justice Jackson in

1950 asserted, “there can be no doubt that at a minimum [the

words Due Process] require that deprivation of life, liberty or

property by adjudication be preceded by noticeand opportunity

for a hearing appropriate to the nature of the case.” Mullane v.

Central Hanover Tr. Co., 339 U.S. 306, 313 (1950) (emphasis

added). In the instant case, the Supreme Court of Idaho has

ignored V-1’s fundamental right to be heard by ruling on an

issue, sua sponte, without allowing for notice, presentation of

evidence below, briefs of authorities or an opportunity to be

heard. In so doing, the Idaho Supreme Court has deprived V-1

of their right to a refund or other relief in regards to

unconstitutionally exacted taxes in excess of 50 million dollars.

(Appendix F, 78a).

In March of 1992, V-1 filed a complaint in the district

Court of the Seventh Judicial District of the State of Idaho

seeking a reimbursement for fees paid under the Clean Water

Trust Fund Act. V-1 argued the transfer fee was actually a fuel

tax in violation of Article VII, § 17 of the Idaho Constitution.

V-1 moved for and was granted a partial summary judgment.

The district court agreed that the transfer fee was effectively a

tax and in violation of the Idaho Constitution (Appendix C,

p.38a; Appendix A, p. 7a). However, the district court held that

the record was not sufficient to determine, as a matter of law,

what remedy was available to V-1. Respondent, Trust Fund,

sought and was granted permission to appeal the district court’s

partial summary judgment.

In the opinion issued on August 3, 1995, the Idaho Supreme

Court affirmed the district court and the unconstitutionality of

the transfer fee was settled. V-1’s refund/relief issue was

properly left for the trial court. On rehearing, the Idaho

iain iia

Supreme Court issued a second opinion on April 16, 1996

which substantially reincorporated all of its earlier opinion

except that the court had inserted a new paragraph IV entitled,

V-1 OIL IS NOT ENTITLED TO A REFUND. However, the

trial court never ruled on that issue, V-1’s entitlement to a

refund was never briefed, argued or presented as an issue on

appeal. Despite these inadequacies, the court disposed of the

substance of the refund issue in summary fashion. Finally, after

denying V-1’s petition for rehearing, the Idaho Supreme Court

issued a substitute opinion which reiterated the April 16, 1996

holding.

V-1’s entitlement to a refund was never an issue on appeal.

The trial court never ruled on that issue, recognizing that there

were contested issues of fact and difficult legal issues involved

in the refund question. The only issue decided by the district

court’s partial summary judgment was its holding that the

petroleum transfer fee was, in effect, an excise tax on motor

fuels which violated Article VII, § 17 of the Idaho Constitution.

In fact, the sole issue raised and certified for appeal under

I.R.C.P. 54(b) was:

Whether the district court erred in failing to

construe Section 41-4908(7) as imposing a

constitutionally permissible charge

reasonably related to the pollution liability

insurance services made available by the

trust fund to licensed petroleum distributors

and their customers?

(Opening Brief of Appellant, p.8 - Appendix H, 99a).

The Idaho Supreme Court has also clearly acknowledged

that “the sole issue before this court is whether the transfer fee is

a tax on motor vehicle fuels.” (Appendix A, 12a). That was the

only issue which was briefed and argued by the parties; there

was never any discussion or analysis of V-1's entitlement to a

refund. By ruling on this refund/relief issue sua sponte, the

Idaho Supreme Court has denied V-1 a meaningful opportunity

to be heard and has scoffed at the procedure within our judicial

system that prides itself on fair and impartial operation.

The right to due process, at its core, reflects a fundamental

scheme of regularized, orderly process. It is this process that

gives those persons, like V-1, who are forced to settle their

claims of right through the judicial process a sense of comfort

that they will be given the opportunity to be heard before a final

determination of their rights. As Justice Harlan so passionately

stated:

Perhaps no characteristic of an organized

and cohesive society is more fundamental

than its erection and enforcement of a

system of rules defining the various rights

and duties of its members, enabling them to

govern their affairs and definitively settle

their differences in an orderly, predictable

manner. Without such a “legal system,”

social organization and cohesion are

virtually impossible; with the ability to seek

regularized resolution of conflicts

individuals are capable of interdependent

action that enables them to strive for

achievements without the anxieties that

would beset them in a disorganized society.

Boddie v. Connecticut, 401 U.S. 371, 374 (1971) (emphasis

added). It is this common-law model that the American society

has rested its “systematic definition of individual rights and

duties, as well as its machinery for dispute settlement.” Jd. at

er eer ON, ae

375. Without this due process of law, the State’s control over

methods for binding conflict resolution would be ineffectual.

By providing for, and enforcing, this social and legal

framework society can count on a regularized, orderly process

of dispute settlement. “It is upon this premise that this Court has

through years of adjudication put flesh upon the due process

principle.” /d.

The Idaho Supreme Court has deviated from this

regularized and orderly system of dispute resolution and, in so

doing, has violated V-1's due process rights. Specifically, by

ruling on the refund/relief issue that was reserved for the trial

court, the Idaho Supreme Court has denied V-1 the right to brief

and cite authorities in support or to argue their claim for a

refund or other relief for the unconstitutional taxes exacted

from them. In short, the court’s sua sponte ruling has stripped

V-1 of their property claim without the opportunity for a

hearing.

It is commonly known that a state may regulate the

procedure of its courts in accordance with its own conception of

policy and fairness. Patterson v. New York, 432 U.S. 197

(1977). However, as in this case, when the highest state court

deviates from the notions of fairness there must be an avenue

for relief to protect those property rights in jeopardy. It is

evident that the Idaho Supreme Court has turned its back on due

process and on notions of fairness within its own judicial

system. On several occasions, the Idaho Supreme Court has

made it explicit that they will not review an issue which neither

party raised or argued in their briefs. State v. Hoisington, 657

P.2d 17 (Idaho 1983). “This Court has consistently followed the

rule that it will not review the actions of a district court which

have not been specifically assigned as error[,] [e]specially

where there are no authorities cited nor argument contained in

the briefs upon the question.” Jd. at 23 (citations omitted).

Further, the Supreme Court of Idaho has held that it will not

review the actions of a trial court unless the action has been

listed as an issue on appeal, especially where no authorities are

cited and no argument is contained in the appellate briefs. Sun

Valley Shopping CTR. v. Idaho Power, 803 P.2d 993 (Idaho

1991); see Northcutt v. Sun Valley Co., 787 P.2d 1159 (Idaho

1990); Sandpoint Convalescent v. Dept. of Health, 756 P.2d

398 (Idaho 1988). Finally, even the Idaho Court of Appeals has

recognized the inherent unfairness of a sua sponte ruling. State

v. Langdon, 785 P.2d 679 (Idaho Ct.App.1990). “Where, as

here, the order has been entered sua sponte, without prior

notice and opportunity to be heard or to respond by

memorandum, concerning the reason for a contemplated

dismissal, we think justice requires an opportunity to seek the

court’s reconsideration.” Jd. at 681. Even with this case

precedent to reflect upon, the Idaho Supreme Court insisted on

taking a course of procedure that skewed away from the regular

and orderly procedure which is characteristic of due process.

There are some exceptions that allow acourt to stray from

its ordinary procedures without violating the fundamental

notions of due process. For example, a state can enter a default

judgment against a defendant who, after adequate notice, fails

to make a timely appearance. Windsor v. McVeigh, 93 U.S. at

278. Similarly, a state accords due process when it terminates a

claim for failure of a party to comply with a reasonable

procedural or evidentiary rule necessary for orderly

adjudication. Hammond Packing Co. v. Arkansas, 212 U.S.

322, 351 (1909). However, none of the circumstances which

allow for acourt to stray from its traditional procedures existed

here. In fact, the court has given no authority or reasoning to

support their sua sponte ruling and has not offered

authoritative support as to why V-1 is precluded from any type

of relief/refund. In support, the Idaho Supreme Court has

meagerly stated that the legislature had the authority to levy a

tax on motor vehicle fuels and that it was the appropriation of

the moneys from the taxing scheme that was unconstitutional,

and not the creation and collection of the transfer fee.

(Appendix A, 12a).

By ruling on the refund/relief issue sua sponte, the Idaho

Supreme Court has highlighted significant Statutory and legal

issues which, because of their difficult nature, ought not have

been addressed without the issues having been raised, briefed

and argued by the parties. First, while the court's opinion does

not directly state that the Idaho Tax Commission can continue

to collect the one cent per gallon “transfer fee” as an excise tax

on motor fuels, the court's July 2, 1996 opinion is being

construed to mean that the one cent per gallon fee is still

collectible as an excise tax on motor fuels because the language

of the court’s opinion states that “it is uncontested that the

legislature had the authority to levy a tax on motor fuels.”

(Appendix A, 12a). This result is contrary to several statutes

and constitutional provisions enacted by the Idaho legislature.

In Idaho Code Title 63, Chapter 24, the legislature

provided for the only, 21 cent per gallon, excise tax on motor

fuel. (I.C. § 63-2405, Appendix I). Specifically, the legislature

was clear and unambiguous that it did not want any other excise

taxes on motor fuels when it enacted I.C. § 63-2431, which

provides:

The taxes imposed by this chaptershall be in

lieu of all other excise taxes, license fees or

Property taxes imposed upon gasoline,

aircraft engine fuel or special fuels by this

State or any political subdivision of this

state.

(Emphasis added) (Appendix I, p. 104a).As the court’s opinion

reads today, the Idaho Supreme Court has disregarded the

legislature’s intent and has unilaterally and unconstitutionally

imposed another one cent per gallon excise tax on motor fuels.

Next, if we examine that the Clean Water Trust Fund Act as a

whole, it is clear that the legislature did not intend that the

transfer fee imposed in I.C. § 41-4908(7) (Appendix I, p. 107a)

to be anything other than a source of funding for the

underground storage tank insurance program. InI.C. § 41-4914

(Appendix I) the legislature declared that, “[a]ll moneys which

may come into the Idaho Petroleum Clean Water Trust Fund are

hereby perpetually appropriated to the manager of the State

Insurance Fund as Trustee. . .” There is no intimation that the

legislature would have intended the one cent transfer fee to be

upheld as an additional one cent tax on motor fuel in the event

the fee was found unconstitutional. I.C. § 63-2431 expressly

prohibits any other excise taxes or license fees on motor fuels.

The third procedural problem with the Idaho Supreme

Court’s holding on the relief/refund issue is that the court

attempts to reapportion the moneys in violation of I.C. § 67-

3511(2) (Appendix I, p. 109a) which states, in part,

“Legislative appropriations shall not be transferred from one

fund to another unless expressly approved by the legislature.”

(emphasis added). In addition, the holding is in conflict with

Article VII, § 13 ofthe Idaho Constitution which provides that

“No money shall be drawn from the treasury, but in pursuance

of appropriations made by law.” Therefore, the court could have

voided the transfer fee because it was unconstitutional, but the

fee cannot be transmuted into an excise tax on motor fuels. Not

only has the court disregarded the above mentioned

constitutional and statutory provisions, but it has also ignored

case precedent which has generally held that funds cannot be

constitutionally transferred from one funding program to

another. See George v. Donovan, 757 P.2d 651 (Idaho 1988);

Idaho County Property Owners Assn. v. Syringa Gen. Hosp.

Dist., 805 P.2d 1233 (Idaho 1991); Epperson v. Howell, 154 P.

621 (1918).

It also is important to note that even if the legislature had

not stated that the 21 cent per gallon motor fuels tax was “in lieu

ofall other excise taxes and license fees” on motor fuels, the one

cent transfer fee imposed in I.C. § 41-4908(7) is so integrally

intertwined with the entire Clean Water Trust Fund Act that,

under the standard established by this Court, the license fee

cannot reasonably be severed from the Act. Dorchy v. Kansas,

264 U.S. 286 (1924). In Dorchy, this Court opined, after

analyzing a state statutory scheme providing for compulsory

arbitration of industrial disputes, that:

[a] statute bad in part is not necessarily void

in its entirety. Provisions within the

legislative power may stand if separable

from the bad. But a provision, inherently

unobjectionable, cannot be deemed

separable unless it appears both that,

standing alone, legal effect can be given to it

and that the legislature intended the

provision to stand, in case others included in

the act and held bad should fall.

Id. at 289-290.

The transfer fee is integrally intertwined in the Trust Fund

in several ways. I.C. § 41-4908(10)(Appendix I, p. 108a)

provides that:

The director [of the Clean Water Trust Fund]

shall certify to the [Tax] commission when

the unencumbered balance in the trust fund

equals thirty million dollars ($30,000,000).

Effective the first day of the second month

following the date of such certification, the

imposition of the transfer fee shall be

suspended. Thereafter, the director shall

certify to the commission when the

unencumbered balance in the trust fund

equals twenty million dollars ($20,000).

Effective the first day of the second month

following the date of such certification, the

imposition of the transfer fee shall be

reinitiated.

As an executive branch officer, the director has been given

authority to suspend or reimpose the transfer fee. This control

is an integral part of the Clean Water Trust Fund Act which

cannot be ignored. Furthermore, the Trust Fund Act, by its own

terms, requires that collections of the license fee cease when the

unencumbered balance exceeds $50,000,000. If this Court had

a factually developed record it would demonstrate that the State

Tax Commission has collected over $50,000,000 since the

inception of the transfer fee. (Appendix F). Since the license fee

cannot constitutionally be collected to fund the trust fund

insurance program, the effect of the Idaho Supreme Court's

opinion is to unencumber all of the $50,000,000 collected to

date. The Act would then require the collections to cease, which

is inconsistent with treating the transfer fee as a motor fuels tax.

Finally, the court’s sua sponte holding is contradictory to

express statutory authority for V-1 Oil to claim a refund. I.C.

§ 63-2410(4) (Appendix I, p. 102a) provides:

Any licensed distributor paying the gasoline

tax. . .to the state of Idaho erroneously shall

be allowed a credit or refund of the amount

of tax paid by him if a written claim for

refund is filed with the commission within

three (3) years after the date those taxes were

paid.

The court makes no reference to or analysis of that statute in

Part IV of its opinion on rehearing.

The statements in Part IV of the Idaho Supreme Court’s

opinion on rehearing suggesting that the unconstitutional

transfer fee can survive as a valid excise tax on motor fuels, are

in direct violation of I.C. § 63-2431, and the clear intent

expressed in the Clean Water Trust Fund Act. In effect, Part IV

of the court’s opinion has imposed an additional one cent excise

tax on motor fuels. That result is contrary to the statutes and

Idaho Constitution. And in reaching this result the Idaho

Supreme Court has disregarded the due process rights of V-1,

the orderly and regularized judicial procedures inherent in the

Fourteenth Amendment, case precedent and constitutional and

statutory provisions.

CONCLUSION

The Fourteenth Amendment is preemptory. It provides no

state shall “deprive any person of life, liberty or property

without due process of law. . .”

Given the incomplete record, statutory and constitutional

contradiction, lack of authority, briefing and argument on the

issue, it baffles common sense that the Idaho Supreme Court

took it upon themselves to decide the relief/refund issue after it

had been left for the trial court. Under McKesson Corp. v.

Division of Alcoholic Beverages and Tobacco, 496 U.S. 18

(1990), and its progeny, this court has specifically provided for

a clear and certain remedy to taxpayers for a state’s unlawful

exaction of tax moneys pursuant to an unconstitutional scheme.

The Idaho Supreme Court has ignored this precedent, and in so

doing, the court has erroneously and arbitrarily extinguished

the rights of V-1 to make a legitimate property claim against the

moneys wrongfully exacted from them under the

unconstitutional tax scheme. We do not live ina system where a

person’s property rights can be so easily extinguished. V-1,

without this Court’s review, is without recourse and, with all

other payees into the Trust Fund, has bestowed what is

tantamount to a $50,000,000 gift to the state of Idaho.

As this Court has emphasized time and again, the Due

Process Clause grants an aggrieved party the opportunity to

present their case and have its merits fairly judged. No such

opportunity has been provided to V-1. Here, the deprivation of

V-1’sclaim for relief is final. Unlike aclaimant whose charge is

dismissed on the merits for lack of evidence or whose claim is

dismissed for failure to comply with procedural rules, V-1

cannot obtain further judicial review except to this Court. A

system or procedure that deprives persons of their claims ina

random manner, as is evident in the case here, cannot go

uncorrected. Therefore it is imperative that this Court give V-1

the due process opportunity it is entitled.

Respectfully submitted,

PETER STIRBA

Counsel of Record

STIRBA & HATHAWAY

215 South State Street

Suite 1150

Salt Lake City, Utah 84111

(801) 364-8300

KENT W. GAUCHAY

SIMPSON, GAUCHAY

& GARDNER

497 North Capitol Avenue

Suite 200

P.O. Box 50494

Idaho Falls, Idaho 83405

(208) 523-2000

Attorneys for Petitioner

APPENDIX A —OPINION OF THE SUPREME COURT

OF THE STATE OF IDAHO DATED JULY 2, 1996

IN THE SUPREME COURT OF THE STATE OF IDAHO

1996 OPINION NO. 86

Docket No. 21222

V-1 OIL COMPANY,

Plaintiff-Respondent,

IDAHO PETROLEUM CLEAN WATER TRUST FUND,

Defendant-Appellant.

Appeal from the District Court of the Seventh

Judicial District of the State of Idaho, Bonneville

County. Hon. Ted V. Wood, District Judge.

Appeal from partial summary judgment declaring

dedication of petroleum transfer fee to non-highway

purposes unconstitutional. Affirmed.

Holland & Hart, Boise, for appellant. B. Newal

Squyers argued.

Simpson, Gauchay & Gardner, Idaho Falls; Mofatt,

Thomas, Barrett, Rock & Fields, Boise, for

respondent. Robert E. Bakes, argued.

Appendix A

In response to a congressional mandate directing the

upgrading and cleanup of underground petroleum storage

tanks, the Idaho Legislature enacted the Clean Water Trust

Fund Act. This act provide a trust fund for storage-tank liability

insurance (Trust Fund). The Trust Fund is primarily funded

through a transfer fee levied on the first licensed petroleum

distributor to transfer title to petroleum in this state.

In March 1992, V-1 Oil Company (V-1 Oil) filed a

complaint in district court seeking reimbursement for the fees it

had paid under the Clean Water Trust Fund Act. V-1 Oil argued

that the transfer fee is actually a gasoline tax, and the proceeds

of the tax are not dedicated to highway maintenance and

construction projects as required by Article VII, Section 17 of

the Idaho Constitution.

V-1 Oil moved for and was granted a partial summary

judgment. The district court agreed with V-1 Oil that the

transfer fee is effectively a tax and the proceeds of that tax must

be dedicated to highway construction or maintenance. The

district court reserved ruling on the amount of the potential

refund. Respondent, Trust Fund, sought and was granted

permission to appeal the district court’s partial summary

judgment in favor of V-1 Oil. The Supreme Court granted

petitions by Western Petroleum Marketers’ Association and

Idaho Highway Users, Incorporated, to appear as amicus

curiae in this appeal. V-1 Oil seeks attorney fees on appeal

under Idaho Code Section 12-117 and the private attorney

general doctrine.

In an opinion issued on August 3, 1995, the Idaho Supreme

Court affirmed the district court. The Supreme Court held that

clearly the Legislature had the power to assess or impose the

Appendix A

“fee” but the Court further held that the fee assessed for

transferring title to petroleum products is not a charge for

services provided by the Trust Fund. The Supreme Court

concluded that the transfer fee is a tax on gasoline and like

motor vehicle fuels. Because Article VII, Section 17 of the

Idaho Constitution requires that the proceeds of fuel taxes be

dedicated exclusively to highway maintenance, construction,

and supervision, the Supreme Court held that the proceeds of

the fee cannot be allocated to the Trust Fund.

The Supreme Court rejected V-1 Oil’s argument that V-1

Oil was entitled to attorney fees on appeal. Noting that the Trust

Fund is not a “state agency” within the meaning of | Idaho Code

Section 12-117, the Court held that V-1 Oil could not recover

attorney fees under the statute. The Supreme Court also denied

V-1 Oil’s claim for attorney fees under the private attorney

general doctrine, noting that V-1 oil initiated and prosecuted

this action in an attempt to recover the transfer fees it has paid.

On rehearing, the Idaho Supreme Court held that clearly

the Legislature had the power to assess or impose the “fee” but

the Court further held that the transfer fee is a tax on gasoline

and like motor fuels, stating that “[t]he per-gallon transfer fee

assessed for engaging in the privilege of delivering petroleum

products in this state is not reasonably related to the benefits

provided by the Trust Fund. The transfer fee is thus a tax.” The

Supreme Court held that V-1 Oil is not eatitled to a refund of

transfer fees that have been paid, noting that the transfer fee

itself is not unconstitutional, but rather the appropriation of the

revenue raised from the transfer fee is unconstitutional.

The Idaho Supreme Court has issued a substitute opinion

for the Court’s prior opinion dated April 16, 1996, which has

Appendix A

been withdrawn. The Court revised the Ist sentence of section

IV, which now states that “[t}he revenue raised from the

imposition of the transfer fees must be appropriated by the

Idaho Legislature for uses consistent with Article VII, Section

17 of the Idaho Constitution.” In addition, the Court has added a

new section V, titled “Applicability of this Opinion.” In this

new section V, the Court states that its opinion will be applied in

a modified prospective fashion, applying the decision to the

case before the Court, to all pending actions at the date of the

Court’s decision, and to all actions arising in the future. The

Court specifically noted that its decision will not be

retroactively applied to insurance policies issued by the Trust

Fund, insurance reserves, or surplus existing prior to the

Supreme Court’s August 3, 1995 decision. The Supreme Court

denied attorney fees on appeal.

Appendix A

IN THE SUPREME COURT OF THE STATE OF IDAHO

Docket No. 21222

Boise, December 1995 Term

1996 Opinion No. 86

Filed: July 2, 1996

Frederick C. Lyon, Clerk

V-1 OIL COMPANY,

Plaintiff-Respondent,

IDAHO PETROLEUM CLEAN WATER TRUST FUND,

Defendant-Appellant.

SUBSTITUTE OPINION

THE COURT’S PRIOR OPINION

DATED APRIL 16, 1996 IS

HEREBY WITHDRAWN

Appeal from the District Court of the Seventh

Judicial District of the State of Idaho, Bonneville

County. Hon. Ted V. Wood, District Judge.

Appeal from partial summary judgment declaring

dedication of petroleum transfer fee to non-highway

purposes unconstitutional. Affirmed.

Appendix A

Holland & Hart, Boise, for appellant. B. Newal

Squyers argued.

Simpson, Gauchay & Gardner, Idaho Falls; Mofatt,

Thomas, Barrett, Rock & Fields, Boise, for

respondent. Robert E. Bakes, argued.

ON REHEARING

McDEVITT, Chief Justice

BACKGROUND AND FACTS

This case presents no disputed facts. V-1 Oil Company (V-

1 Oil) is a distributor of petroleum products licensed to do

business in Idaho. As to at least some of the petroleum products

V-1 Oil sells in Idaho, V-1 Oil is the first licensed distributor to

transfer the petroleum products within this state.' As the first

licensed distributor to transfer title to a petroleum product in

this state, V-1 Oil is required by the Idaho Petroleum Clean

Water Act to pay a one cent per-gallon transfer fee on those

petroleum products. The proceeds of that transfer fee are

committed to the Idaho Petroleum Clean Water Trust Fund

(Trust Fund), which insures the owners and operators of

petroleum storage tanks who participate in the program against

claims for personal injuries and property damage arising from

the accidental release of petroleum from the storage tanks. V-1

Oil does not participate in the Trust Fund.

1. The record establishes that V-1 Oil is both a primary and secondary

distributor of petroleum products in this state. As discussed below, the

district court denied V-1 Oil's motion for summary judgment on the issue of

to what extent V-1 Oil was impacted by the imposition of the transfer fee.

Appendix A

On March 2, 1992, V-1 Oil filed a complaint in district

court against the Trust Fund, seeking an order that the

petroleum transfer fee charged under the Idaho Petroleum

Clean Water Trust Fund Act, I.C. § 41-4908(7), constitutes a

gasoline tax. Because the Idaho Constitution requires that the

proceeds of any tax on gasoline be dedicated exclusively to the

construction, repair, maintenance, and traffic supervision of the

public highways of this state, V-1 Oil sought to obtain a refund

of the “fees” it had paid and to have the fee declared

unconstitutional under Article VII, Section 17 of the Idaho

Constitution. V-1 Oil filed a motion for summary judgment on

both the constitutionality of the transfer fee and V-1 Oil’s

entitlement to a refund of those fees it has paid. The Trust Fund

filed a cross motion for summary judgment on the

constitutionality of the transfer fee.

On December 13, 1993, the district court issued a

memorandum decision and order granting V-1 Oil’s motion in

part and denying the Trust Fund’s motion. The district court

concluded that the petroleum transfer fee is, in effect, a gasoline

tax. Because the proceeds of that tax are not dedicated to the

construction and maintenance of highways as required by the

Idaho Constitution, the district court held that the tax was

unconstitutional under Article VII, Section 17 of the Idaho

Constitution. The district court also held that the record was not

sufficient to determine, as a matter of law, what remedy was

available to V-1 Oil. The Trust Fund sought and was granted

permission to appeal the partial summary judgment. The Trust

Fund argues on appeal that the district court erred in concluding

that the transfer fee constitutes a “tax on gasoline and like motor

vehicle fuels” under the Idaho Constitution Article VII, Section

17. V-1 Oil seeks attorney fees on appeal.

Appendix A

IL.

STANDARD OF REVIEW

When reviewing a district court’s ruling on a motion for

summary judgment, this Court liberally construes the record in

favor of the party opposing the motion, resolving all inferences

that reasonably can be drawn from the record in that party’s

favor. E.g., Friel v. Boise City Hous. Auth., 126 Idaho 484, 485,

887 P.2d 29, 30 (1994); Farm Credit Bank of Spokane v.

Stevenson, 125 Idaho 270, 272, 869 P.2d 1365, 1367 (1994).

This standard is not lessened because both parties have moved

for summary judgment. City of Idaho Falls v. Home Indem. Co.,

126 Idaho 604, 606, 888 P.2d 383, 385 (1995); Kromrei v. AID

Ins. Co., 110 Idaho 549, 551, 716 P.2d 1321, 1323 (1986).

However, this Court has recently observed that “when both

parties move for summary judgment on the same issues and

legal theories based on the same, essentially uncontroverted

facts, the record is unlikely to reveal genuine issue of material

fact.” City of Chubbuck v. City of Pocatello, 127 Idaho 198, 200,

899 P.2d 411, 413 (1995). When reviewing a district court’s

ruling on such motions, this Court must examine each motion

separately, alternatively resolving the reasonable inferences

presented by the record in opposition to each party’s motion.

Id. at 201, 899 P.2d at 414.

Iti.

THE TRANSFER FEE IMPOSED UNDER THE IDAHO

CLEAN WATER TRUST FUND ACTIS A TAX ON

GASOLINE AND LIKE MOTOR VEHICLE FUELS |

The Idaho Constitution expressly provides that the

proceeds of all gasoline taxes must be dedicated exclusively to

the construction, repair, maintenance, and supervision of public

ee nnn men ee

Appendix A

highways. Article VII, Section 17 of the Idaho Constitution

provides:

GASOLINE TAXES AND MOTOR

VEHICLE REGISTRATION FEES TO BE

EXPENDED ON HIGHWAYS. On and after

July 1, 1941 the proceeds from the

imposition of any tax on gasoline and like

motor vehicle fuels sold or used to propel

motor vehicles upon the highways of this

State ... shall be used exclusively for the

construction, repair, maintenance and traffic

supervision of the public highways of this

state and the payment of the interest and

principal of obligations incurred for said

purposes; and no part of such revenues shall,

by transfer of funds or otherwise, be

diverted to any other purposes whatsoever.

Idaho Const. art. VII, § 17. This Court has held that this

provision is unambiguous, and the plain meaning of this section

prohibits the transfer of revenues collected from taxes on motor

vehicle fuels to any purpose other than construction, repair,

maintenance, and supervision of public highways. Williams v.

Swensen, 93 Idaho 542, 544, 467 P.2d 1, 3 (1970) (“The plain

meaning of Art. 7, § 17 of the Constitution is that all moneys

collected from the sources must be used for the

designated purpose and may not be diverted therefrom.”);State

ex rel. Moon v. Jonasson, 78 Idaho 205, 209-10, 299 P.2d 755,

757 (1956) (“The constitutional provision prohibiting the

transferring of revenues specified therein to any other purpose

than those enumerated is all inclusive; it was enacted by the

people of the State. It is plain and unambiguous and is not

10a

Appendix A

subject to the construction contended for by appellant.”). Based

upon our conclusion that there is no interpretation of the fund

that would bring the fund within the purposes provided for in

Article VII, Section 17 of the Idaho Constitution, the sole issue

before this Court is whether the transfer fee is a tax on motor

vehicle fuels.

The Trust Fund argues that the transfer fee is a charge

imposed on those who participate in the storage tank insurance

program. As such, the Trust Fund argues that the transfer fee is

a fee charged tc provide a service, rather than a tax on gasoline.

In support of this proposition, the Trust Fund relies on Kootenai

County Property Ass'n v. Kootenai County, 115 Idaho 676, 769

P.2d 553 (1989). In Kootenai, this Court held that an annual

solid waste disposal fee was not a tax because that fee was

“reasonably related to the services rendered by the county in

acquiring, establishing, maintaining and operating its solid

waste disposal system.” Jd. at 680, 769 P.2d at 557.

It is important to note at the outset that the prior cases in

which this Court was required to determine whether a fee

constituted a tax, involved municipal and county actions. In

those cases, the question of whether the fee constituted a tax

was relevant to the authority of the entity to assess the fee. In the

present case, there is no dispute that the legislature has the

authority to levy a tax on motor vehicle fuels, and the

significance of whether the petroleum transfer fee constitutes a

tax is relevant only to whether the proceeds of that fee must be

dedicated to the purposes required under Article VII, Section 17

of the Idaho Constitution.’

2. Although there is no dispute that the legislature is authorized to

assess and collect the fee at issue in this appeal, V-1 Oil’s standing to

challenge the constitutionality of the way in which the proceeds of that fee

are spent has not been challenged by the Trust Fund and therefore will not be

resolved by this Court on appeal.

lla

Appendix A

In order for the transfer fee to be a “fee for service” under

Kootenai, the fees collected must bear a reasonable relationship

to the service provided to those paying the fee. In the present

case, however, the transfer fee is not related to participation in

or the opportunity to participate in the Trust Fund's insurance

program. The fee is charged to the first licensed petroleum

distributor to transfer title to petroleum in Idaho “for the

privilege of engaging in the delivery or storage of petroleum

products[,]” I.C. § 41-4908(7), not for participating in the Trust

Fund’s insurance program.

This case is not analogous to Kootenai, where everyone

who paid the solid waste disposal fee was entitled to the benefit

of solid waste disposal services. Eligibility to participate in the

insurance program is not related to payment of the transfer fee.

Distributors who do not store petroleum in storage tanks in

Idaho are required to pay the transfer fee although they do not

participate in the insurance program, while people and entities

who store petroleum in storage tanks but are not licensed

petroleum distributors are entitled to participate in the Trust

Fund's insurance program without paying the fee. During oral

argument, counsel for both parties confirmed that persons or

entities are required to pay the transfer fee who cannot

participate in the Trust Fund.

The per-gallon transfer fee assessed for engaging in the

privilege of delivering petroleum products in this state is not

reasonably related to the benefits provided by the Trust Fund.

The transfer fee is thus a tax. Kootenai County Property Ass'n,

115 Idaho at 680, 769 P.2d at 557 (“The law only requires that

the fee be reasonably related to the benefit conveyed.”).

The parties do not dispute that the transfer fee is levied, in

12a

Appendix A

part, on “gasoline and like motor vehicle fuels” within the

meaning of Article VII, Section 17 of the Idaho Constitution.

The Idaho Petroleum Clean Water Act defines the terms

“petroleum” and “petroleum products” to expressly include

“motor gasoline, gasohol, other alcohol blended fuels, diesel

fuel, heating oil and aviation fuel.” I.C. § 41-4903(23).

Moreover, according to the affidavits submitted by V-1 Oil, the

only petroleum products relevant to this appeal are diesel fuel

and gasoline.

To the extent that the petroleum transfer fee has been

assessed against “gasoline and like motor vehicle fuels[,]” the

allocation of the proceeds of that fee to fund the Trust Fund

violates Article VII, Section 17 of the Idaho Constitution.

IV.

V-1 OIL IS NOT ENTITLED TO A REFUND

Although we agree with V-1 Oil that the revenue raised

from the imposition of the transfer fee cannot constitutionally

be used to finance the Trust Fund, we do not agree that V-1 Oil is

entitled to a refund. It is uncontested that the legislature had the

authority to levy a tax on motor vehicle fuels. The creation and

collection of the transfer fee was not unconstitutional pursuant

to Article VII, Section 17 of the Idaho Constitution, but rather

the appropriation of the revenue, raised from the transfer fee, to

the Trust Fund was unconstitutional. Article VII, Section 17 of

the Idaho Constitution mandates that all revenue raised from

any tax on gasoline, the transfer fee in this case, must go toward

the construction, repair, maintenance, and traffic supervision of

the public highways. V-1 Oil is not entitled to a refund of the

transfer fees it has paid, based upon our holding that the transfer

fee was not unconstitutional and that the appropriation of the

13a

Appendix A

transfer fees to the Trust Fund was unconstitutional. The

revenue raised from the imposition of the transfer fees must be

appropriated by the Idaho Legislature for uses consistent with

Article VII, Section 17 of the Idaho Constitution.

APPLICABILITY OF THIS OPINION

Since this action involves an interpretation of a statute, the

result of which is to declare the appropriation of the proceeds of

the transfer fee to be for an unconstitutional purpose, the

question of the applicability of this Court’s opinion to past,

pending and future cases must be addressed.

In Thompson v. Hagan, 96 Idaho 19, 523 P.2d 1365 (1974),

this Court set forth three different approaches for determining

the applicability of an opinion of this Court. Thompson, 96

Idaho at 25, 523 P.2d at 1371. The Thompson Court adopted

three criteria for determining which approach would be

appropriate for a given case. Jd. Under the first criteria, the

purpose of the new decision must be analyzed in connection

with the question of retroactivity. Jd. The second criteria is

reliance on the prior rule of law or the statutory procedure. Jd.

the third criteria is the effect on the administration of justice,

that is, the number of cases that would be reopened if the

decision was applied retroactively. Jd.

Subsequently, in Rogers v. Yellowstone Park Co., 97 Idaho

14, 25-26, 539 P.2d 566, 577-78 (1975), Baker v. Shavers, Inc.,

117 Idaho 696, 697, 791 P.2d 1275, 1276 (1990), and Potlatch

Corp. v. Idaho State Tax Comm'n, 120 Idaho 1, 2-3, 813 P.2d

340, 341-42 (1991), this Court further defined and applied the

criteria adopted in Thompson.

l4a

Appendix A

The purpose of this decision is to determine the

constitutionality of the appropriation of the proceeds of the

transfer fee imposed by the legislature. We recognize the

reliance on the statute at issue by the Executive Department of

the state in creating the insurance process contemplated by the

Idaho Petroleum Clean Water Act and the service it provided in

insuring hundreds of individuals and companies, who, in

reliance on this insurance program, installed or maintained

storage tanks. The expenditure by the State of Idaho of a

significant portion of the funds collected in claims and

administration of the Trust Fund is very compelling. The effect

of this decision on the administration of justice is slight based

upon the representation made to this Court that following this

Court’s August 3, 1995 decision, the transfer fee funds

collected have not been expended and have been held in a

separate account by the Idaho State Tax Commission.

As in Thompson, this Court finds that the factor of reliance

on the constitutionality of the funds appropriated and the past

issuance of policies, which will produce claims and losses in the

future, and the reliance of significant number of individuals and

enterprises on the existence of that insurance, is very strong.

Therefore, this Court applies the decision adopted in this case in

@ modified prospective fashion, applying the decision to the

case before the Court, to all pending actions at the date of the

Court’s decision, and to all actions arising in the future. This

case will not be retroactively applied to insurance policies

issued by the Trust Fund, insurance reserves, or surplus existing

prior to this Court’s August 3, 1995 decision.

15a

Appendix A

VI.

V-1 OIL IS NOT ENTITLED TO

ATTORNEY FEES ON APPEAL

V-1 Oil seeks attorney fees on appeal under I.C. § 12-117

and the private attorney general doctrine. I.C. § 12-117 is

inapplicable. The Trust Fund is not a state agency within the

meaning of I.C. § 67-5201, which is incorporated into I.C. § 12-

117 by reference. I.C. § 12-117(4)(b). The definition provided

by I.C. § 67-5201 provides that an “agency” is “each state

board, commission, department or officer authorized by law to

make rules or to determine contested cases ....” I.C. § 67-

5201(2) The Trust Fund has no power to promulgate rules or

decide contested cases, and is not an agency subject to attorney

fees under I.C. § 12-117.

We also reject V-1 Oil’s invitation to award attorney fees

under the private attorney general doctrine. In Hellar v.

Cenarrusa, 106 Idaho 571, 682 P.2d 524 (1984), this

Court adopted a three-factor test to determine whether attorney

fees should be awarded under the private attorney general

doctrine. When making such a determination, this Court must

consider (1) the strength of the societal importance of the public

policy vindicated by the litigation; (2) the need for private

enforcement and the magnitude of the resultant burden on the

plaintiff; and (3) the number of people standing to benefit from

the decision sought. Jd. at 577-78, 682 P.2d at 530-31; see also

Miller v. Echohawk, 126 Idaho 47, 49, 878 P.2d 746, 748 (1994)

(applying Hellar test to review award of fees under private

attorney general doctrine).

V-1 Oil filed a complaint in district court seeking a refund

of all funds paid by V-1 Oil pursuant to the Idaho Petroleum

16a

Appendix A

Trust Fund Act. Regardless of whether V-1 Oil is entitled to

such a refund, the record of the proceedings below and the

arguments presented to this Court clearly establish that V-1 Oil

initiated and has pursued this litigation for the limited purpose

of obtaining a refund of the fees it has paid into the Trust Fund.

As such, we conclude that V-1 Oil is not entitled to an award of

attorney fees under the private attorney general doctrine.

Vil.

CONCLUSION

The district court’s order granting partial summary

judgment in favor of V-1 Oil and denying the Trust Fund’s

motion for summary judgment is affirmed. The issue of whether

V-1 Oil is entitled to a refund is not remanded to the district

court, as we hold that V-1 Oil is not entitled to a refund of the

transfer fees it has paid. This Court’s decision will be applied in

a modified prospective fashion. Costs to respondent; no

attorney fees are awarded on appeal.

Justices TROUT, SILAK and SCHROEDER,CONCUR.

Justice JOHNSON,CONCURRING IN THE RESULT.

I concur in the result reached in the Court’s opinion. In

doing so, I announce that I consider the opinion in this case

effectively to overrule Kootenai County Property Ass’n v.

Kootenai County., 115 Idaho 676, 769 P.2d 553 (1989).

The Court’s opinion attempts to distinguish Kootenai by

stating that in Kootenai “everyone who paid the solid waste

disposal fee entitled to the benefit of solid waste disposal

services,” while in this case, “[e]ligibility to participate in the

17a

Appendix A

insurance program is not related to payment of the transfer fee.”

Slip. op 5. In my view, this attempted distinction is not valid.

In Kootenai, the Court held that because any owner of a

habitable residential dwelling was eligible to use the county

waste disposal site, the charge imposed on them was a fee and

not a tax. 115 Idaho at 678, 769 P.2d at 555. The essence of this

logic was that it was up to the owner whether they chose to send

their solid waste, if they had any, to the county waste disposal

site. In the present case, anyone who pays the transfer fee is

eligible to participate in the Trust Fund’s insurance program, if

they choose to have storage tanks, as V-1 has. In Kootenai, only

those who chose to use the county waste disposal site received a

benefit. Here, only those who choose to have storage tanks

benefit. Having disagreed with the Court in Kootenai, and

having attempted without success to convince the Court that

Kootenai controlled, I now enthusiastically accept what I

consider to be the demise of Kootenai as precedent. “It is said

that there is nothing so dangerous to the status quo as an idea

whose time has come. More dangerour yet is the continuance of

an idea whose time has past.” Olsen » Olsen, 98 Idaho 10, 21,

557 P.2d 604, 615 (1976) (Shepard J., dissenting).

18a

APPENDIX B —OPINION OF THE SUPREME COURT

OF THE STATE OF IDAHO DATED APRIL 16, 1996

IN THE SUPREME COURT OF THE STATE OF IDAHO

1996 OPINION NO. 40

Docket No. 21222

V-1 OIL COMPANY,

Plaintiff-Respondent,

IDAHO PETROLEUM CLEAN WATER TRUST FUND,

Defendant-Appellant.

Appeal from the District Court of the Seventh

Judicial District of the State of Idaho, Bonneville

County. Hon. Ted V. Wood, District Judge.

Appeal from partial summary judgment dutiving

dedication of petroleum transfer fee to non-highway

purposes unconstitutional. Affirmed.

Holland & Hart, Boise, for appellant. B. Newal

Squyers argued.

Simpson, Gauchay & Gardner, Idaho Falls; Mofatt,

Thomas, Barrett, Rock & Fields, Boise, for

respondent. Robert E. Bakes, argued.

19a

Appendix B

In response to a congressional mandate directing the

upgrading and cleanup of underground petroleum storage

tanks, the Idaho Legislature enacted the Clean Water Trust

Fund Act. This act provide a trust fund for storage-tank liability

insurance (Trust Fund). The Trust Fund is primarily funded

through a transfer fee levied on the first licensed petroleum

distributor to transfer title to petroleum in this state.

In March 1992, V-1 Oil Company (V-1 Oil) filed a

complaint in district court seeking reimbursement for the fees it

had paid under the Clean Water Trust Fund Act. V-1 Oil argued

that the transfer fee is actually a gasoline tax, and the proceeds

of the tax are not dedicated to highway maintenance and

construction projects as required by Article VII, Section 17 of

the Idaho Constitution.

V-1 Oil moved for and was granted a partial summary

judgment. The district court agreed with V-1 Oil that the

transfer fee is effectively a tax and the proceeds of that tax must

be dedicated to highway construction or maintenance. The

district court reserved ruling on the amount of the potential

refund. Respondent, Trust Fund, sought and was granted

permission to appeal the district court’s partial summary

judgment in favor of V-1 Oil. The Supreme Court granted

petitions by Western Petroleum Marketers’ Association and

Idaho Highway Users, Incorporated, to appear as amicus

curiae in this appeal. V-1 Oil seeks attorney fees on appeal

under Idaho Code Section 12-117 and the private attorney

general doctrine.

In an opinion issued on August 3, 1995, the Idaho Supreme

Court affirmed the district court. The Supreme Court held that

clearly the Legislature had the power to assess or impose the

20a

Appendix B

“fee” but the Court further held that the fee assessed for

transferring title to petroleum products is not a charge for

services provided by the Trust Fund. The Supreme Court

concluded that the transfer fee is a tax on gasoline and like

motor vehicle fuels. Because Article VII, Section 17 of the

Idaho Constitution requires that the proceeds of fuel taxes be

dedicated exclusively to highway maintenance, construction,

and supervision, the Supreme Court held that the proceeds of

the fee cannot be allocated to the Trust Fund.

The Supreme Court rejected V-1 Oil’s argument that V-1

Oil was entitled to attorney fees on appeal. Noting that the Trust

Fund is not a “state agency” within the meaning of Idaho Code

Section 12-117, the Court held that V-1 Oil could not recover

attorney fees under the statute. The Supreme Court also denied

V-1 Oil’s claim for attorney fees under the private attorney

general doctrine, noting that V-1 oil initiated and prosecuted

this action in an attempt to recover the transfer fees it has paid.

On August 24, 1995, the Idaho Petroleum Clean Water

Trust Fund filed a petition for rehearing, which was granted by

the Idaho Supreme Court on September 25, 1995. in support of

its petition for rehearing, the Idaho Petroleum Clean Water

Trust Fund argued that the majority opinion in this case failed to

apply the fundamental rules of statutory construction, which

require a court to construe a statute with every presumption in

favor of its constitutionality. The Idaho Petroleum Clean Water

Trust Fund contended that the majority opinion failed to follow

Idaho precedent for analyzing whether a fee will be considered

a “tax” ora “fee,” and after determining it was a tax, failed to

consider whether the Idaho Petroleum Clean Water Trust Fund

was within the purposes of Article VII, Section 17 of the Idaho

Constitution.

21a

Appendix B

On rehearing, the Idaho Supreme Court held that clearly

the Legislature had the power to assess or impose the “fee” but

the Court further held that the transfer fee is a tax on gasoline

and like motor fuels, stating that “(t]he per-gallon transfer fee

assessed for engaging in the privilege of delivering petroleum

products in this state is not reasonably related to the benefits

provided by the Trust Fund. The transfer fee is thus a tax.” The

Supreme Court ruled that V-1 Oil is not entitled to a refund of

transfer fees that have been paid, noting that the transfer fee

itself is not unconstitutional, but rather the appropriation of the

revenue raised from the transfer fee is unconstitutional. The

Supreme Court concluded that “[t}he revenue raised from the

imposition of the transfer fees must be appropriated to the Idaho

Department of Transportation, for uses consistent with Article

VII, Section 17 of the Idaho Constitution.” The Supreme Court

denied attorney fees on appeal.

22a

Appendix B

IN THE SUPREME COURT OF THE STATE OF IDAHO

Docket No. 21222

Boise, December 1995 Term

1996 Opinion No. 40

Filed: April 16, 1996

Frederick C. Lyon, Clerk

V-1 OIL COMPANY,

Plaintiff-Respondent,

IDAHO PETROLEUM CLEAN WATER TRUST FUND,

Defendant-Appellant.

SUBSTITUTE OPINION |

THE COURT’S PRIOR OPINION

DATED AUGUST 3, 1996 IS

HEREBY WITHDRAWN

Appeal from the District Court of the Seventh

Judicial District of the State of Idaho, Bonneville

County. Hon. Ted V. Wood, District Judge.

Appeal from partial summary judgment declaring

dedication of petroleum transfer fee to non-highway

purposes unconstitutional. Affirmed.

23a

Appendix B

Holland & Hart, Boise, for appellant. B. Newal

Squyers argued.

Simpson, Gauchay & Gardner, Idaho Falls; Mofatt,

Thomas, Barrett, Rock & Fields, Boise, for

respondent. Robert E. Bakes, argued.

ON REHEARING

McDEVITT, Chief Justice

BACKGROUND AND FACTS

This case presents no disputed facts. V-1 Oil Company (V-

1 Oil) is a distributor of petroleum products licensed to do

business in Idaho. As to at least some of the petroleum products

V-1 Oil sells in Idaho, V-1 Oil is the first licensed distributor to

transfer the petroleum products within this state.' As the first

licensed distributor to transfer title to a petroleum product in

this state, V-1 Oil is required by the Idaho Petroleum Clean

Water Act to pay a one cent per-gallon transfer fee on those

petroleum products. The proceeds of that transfer fee are

committed to the Idazo Petroleum Clean Water Trust Fund

(Trust Fund), which insures the owners and operators of

petroleum storage tanks who participate in the program against

claims for personal injuries and property damage arising from

the accidental release of petroleum from the storage tanks. V-1

Oil does not participate in the Trust Fund.

1. The record establishes that V-1 Oil is both a primary and secondary

distributor of petroleum products in this state. As discussed below, the

district court denied V-1 Oil's motion for summary judgment on the issue of

to what extent V-1 Oil was impacted by the imposition of the transfer fee.

24a

Appendix B

On March 2, 1992, V-1 Oil filed a complaint in district

court against the Trust Fund, seeking an order that the

petroleum transfer fee charged under the Idaho Petroleum

Clean Water Trust Fund Act, I.C. § 41-4908(7), constitutes a

gasoline tax. Because the Idaho Constitution requires that the

proceeds of any tax on gasoline be dedicated exclusively to the

construction, repair, maintenance, and traffic supervision of the

public highways of this state, V-1 Oil sought to obtain a refund

of the “fees” it had paid and to have the fee declared

unconstitutional under Article VII, Section 17 of the Idaho

Constitution. V-1 Oil filed a motion for summary judgment on

both the constitutionality of the transfer fee and V-1 Oil’s

entitlement to a refund of those fees it has paid. The Trust Fund

filed a cross motion for summary judgment on the

constitutionality of the transfer fee.

On December 13, 1993, the district court issued a

memorandum decision and order granting V-1 Oil’s motion in

part and denying the Trust Fund’s motion. The district court

concluded that the petroleum transfer fee is, in effect, a gasoline

tax. Because the proceeds of that tax are not dedicated to the

construction and maintenance of highways as required by the

Idaho Constitution, the district court held that the tax was

unconstitutional under Article VII, Section 17 of the Idaho

Constitution. The district court also held that the record was not

sufficient to determine, as a matter of law, what remedy was

available to V-1 Oil. The Trust Fund sought and was granted

permission to appeal the partial summary judgment. The Trust

Fund argues on appeal that the district court erred in concluding

that the transfer fee constitutes a “tax on gasoline and like motor

vehicle fuels” under the Idaho Constitution Article VII, Section

17. V-1 Oil seeks attorney fees on appeal.

25a

Appendix B

Il.

STANDARD OF REVIEW

When reviewing a district court’s ruling on a motion for

summary judgment, this Court liberally construes the record in

favor of the party opposing the motion, resolving all inferences

that reasonably can be drawn from the record in that party’s

favor. E.g., Friel v. Boise City Hous. Auth., 126 Idaho 484, 485,

887 P.2d 29, 30 (1994); Farm Credit Bank of Spokane vy.

Stevenson, 125 Idaho 270, 272, 869 P.2d 1365, 1367 (1994).

This standard is not lessened because both parties have moved

for summary judgment. City of Idaho Falls v. Home Indem. Co.,

126 Idaho 604, 606, 888 P.2d 383, 385 (1995); Kromrei v. AID

Ins. Co., 110 Idaho 549, 551, 716 P.2d 1321, 1323 (1986).

However, this Court has recently observed that “when both

parties move for summary judgment on the same issues and

legal theories based on the same, essentially uncontroverted

facts, the record is unlikely to reveal genuine issue of material

fact.” City of Chubbuck v. City of Pocatello, 127 Idaho 198, 200,

899 P.2d 411, 413 (1995). When reviewing a district court’s

ruling on such motions, this Court must examine each motion

separately, alternatively resolving the reasonable inferences

presented by the record in opposition to each party’s motion.

Id.at201, 899 P.2d at 414.

Il. .

THE TRANSFER FEE IMPOSED UNDER THE IDAHO

CLEAN WATER TRUST FUND ACT IS A TAX ON

GASOLINE AND LIKE MOTOR VEHICLE FUELS

The Idaho Constitution expressly provides that the

proceeds of all gasoline taxes must be dedicated exclusively to

the construction, repair, maintenance, and supervision of public

26a

Appendix B

highways. Article VII, Section 17 of the Idaho Constitution

provides:

GASOLINE TAXES AND MOTOR

VEHICLE REGISTRATION FEES TO BE

EXPENDED ON HIGHWAYS. On and after

July 1, 1941 the proceeds from the

imposition of any tax on gasoline and like

motor vehicle fuels sold or used to propel

motor vehicles upon the highways of this

state ... shall be used exclusively for the

construction, repair, maintenance and traffic

supervision of the public highways of this

state and the payment of the interest and

principal of obligations incurred for said

purposes; and no part of such revenues shall,

by transfer of funds or otherwise, be

diverted to any other purposes whatsoever.

Idaho Const. art. VII, § 17. This Court has held that this

provision is unambiguous, and the plain meaning of this section

prohibits the transfer of revenues collected from taxes on motor

vehicle fuels to any purpose other than construction, repair,

maintenance, and supervision of public highways. Williams v.

Swensen, 93 Idaho 542, 544, 467 P.2d 1, 3 (1970) (“The plain

meaning of Art. 7, § 17 of the Constitution is that all moneys

collected from the enumerated sources must be used for the

designated purpose and may not be diverted therefrom.”);State

ex rel. Moon v. Jonasson, 78 Idaho 205, 209-10, 299 P.2d 755,

757 (1956) (“The constitutional provision prohibiting the

transferring of revenues specified therein to any other purpose

than those enumerated is all inclusive; it was enacted by the

people of the State. It is plain and unambiguous and is not

27a

Appendix B

subject to the construction contended for by appellant.”). Based

upon our conclusion that there is no interpretation of the fund

that would bring the fund within the purposes provided for in

Article VII, Section 17 of the Idaho Constitution, the sole issue

before this Court is whether the transfer fee is a tax on motor

vehicle fuels.

The Trust Fund argues that the transfer fee is a charge

imposed on those who participate in the storage tank insurance

program. As such, the Trust Fund argues that the transfer fee is

a fee charged to provide a service, rather than a tax on gasoline.

In support of this proposition, the Trust Fund relies on Kootenai

County Property Ass'n v. Kootenai County, 115 Idaho 676, 769

P.2d 553 (1989). In Kootenai, this Court held that an annual

solid waste disposal fee was not a tax because that fee was

“reasonably related to the services rendered by the county in

acquiring, establishing, maintaining and operating its solid

waste disposal system.”/d. at 680, 769 P.2d at 557.

It is important to note at the outset that the prior cases in

which this Court was required to determine whether a fee

constituted a tax, involved municipal and county actions. In

those cases, the question of whether the fee constituted a tax

was relevant to the authority of the entity to assess the fee. In the

present case, there is no dispute that the legislature has the

authority to levy a tax on motor vehicle fuels, and the

significance of whether the petroleum transfer fee constitutes a

tax is relevant only to whether the proceeds of that fee must be

dedicated to the purposes required under Article VII, Section 17

of the Idaho Constitution.”

2. Although there is no dispute that the legislature is authorized to

assess and collect the fee at issue in this appeal, V-1 Oil’s standing to

challenge the constitutionality of the way in which the proceeds of that fee

are spent has not been challenged by the Trust Fund and therefore will not be

resolved by this Court on appeal.

28a

Appendix B

In order for the transfer fee to be a “fee for service” under

Kootenai, the fees collected must bear a reasonable relationship

to the service provided to those paying the fee. In the present

case, however, the transfer fee is not related to participation in

or the opportunity to participate in the Trust Fund’s insurance

program. The fee is charged to the first licensed petroleum

distributor to transfer title to petroleum in Idaho “for the

privilege of engaging in the delivery or storage of petroleum

products[,]” I.C. § 41-4908(7), not for participating in the Trust

Fund’s insurance program.

This case is not analogous to Kootenai, where everyone

who paid the solid waste disposal fee was entitled to the benefit

of solid waste disposal services. Eligibility to participate in the

insurance program is not related to payment of the transfer fee.

Distributors who do not store petroleum in storage tanks in

Idaho are required to pay the transfer fee although they do not

participate in the insurance program, while people and entities

who store petroleum in storage tanks but are not licensed

petroleum distributors are entitled to participate in the Trust

Fund’s insurance program without paying the fee. During oral

argument, counsel for both parties confirmed that persons or

entities are required to pay the transfer fee who cannot

participate in the Trust Fund.

The per-gallon transfer fee assessed for engaging in the

privilege of delivering petroleum products in this state is not

reasonably related to the benefits provided by the Trust Fund.

The transfer fee is thus a tax. Kootenai County Property Ass'n,

115 Idaho at 680, 769 P.2d at 557 (“The law only requires that

the fee be reasonably related to the benefit conveyed.”).

The parties do not dispute that the transfer fee is levied, in

AIRE NO ARE LS GENIN ac RRER AE TD RS BR

- ac ag ne: SE OLEH

29a

Appendix B

part, on “gasoline and like motor vehicle fuels” within the

meaning of Article VII, Section 17 of the Idaho Constitution.

The Idaho Petroleum Clean Water Act defines the terms

“petroleum” and “petroleum products” to expressly include

“motor gasoline, gasohol, other alcohol blended fuels, diesel

fuel, heating oil and aviation fuel.” I.C. § 41-4903(23).

Moreover, according to the affidavits submitted by V-1 Oil, the

only petroleum products relevant to this appeal are diesel fuel

and gasoline.

To the extent that the petroleum transfer fee has been

assessed against “gasoline and like motor vehicle fuels[,}” the

allocation of the proceeds of that fee to fund the Trust Fund

violates Article VII, Section 17 of the Idaho Constitution.

IV.

V-1 OIL IS NOT ENTITLED TO A REFUND

Although we agree with V-1 Oil that the revenue raised

from the imposition of the transfer fee cannot constitutionally

be used to finance the Trust Fund, we do not agree that V-1 Oil is

entitled to a refund. It is uncontested that the legislature had the

authority to levy a tax on motor vehicle fuels. The creation and

r’ “section of the transfer fee was not unconstitutional pursuant

to article VII, Section 17 of the Idaho Constitution, but rather