Metropolitan Life Insurance Co. v. Kinsman

#25085-a-DG

2009 SD 53

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

* * * *
METROPOLITAN LIFE INSURANCE COMPANY;
METROPOLITAN INSURANCE & ANNUITY
COMPANY; NEW ENGLAND LIFE INSURANCE
COMPANY; METLIFE INVESTORS USA
INSURANCE COMPANY; GENERAL AMERICAN
LIFE INSURANCE COMPANY; PARAGON LIFE
INSURANCE COMPANY; METLIFE INVESTORS
INSURANCE COMPANY; METROPOLITAN
PROPERTY & CASUALTY INSURANCE
COMPANY; METROPOLITAN GROUP PROPERTY
& CASUALTY COMPANY; ECONOMY PREMIER
ASSURANCE COMPANY; and METROPOLITAN
DIRECT PROPERTY & CASUALTY
INSURANCE COMPANY, Plaintiffs and Appellants,

v.

PAUL KINSMAN, Secretary of the South
Dakota Department of Revenue and
Regulation; MERLE SCHEIBER, Director
of the South Dakota Division of Insurance
and the STATE OF SOUTH DAKOTA, Defendants and Appellees.

* * * *

APPEAL FROM THE CIRCUIT COURT OF
THE SIXTH JUDICIAL CIRCUIT
HUGHES COUNTY, SOUTH DAKOTA

* * * *

HONORABLE KATHLEEN F. TRANDAHL
Judge

* * * *

CONSIDERED ON BRIEFS
ON MAY 26, 2009

OPINION FILED 07/01/09
RONALD G. SCHMIDT of
Schmidt, Schroyer, Moreno,
Lee & Bachand, PC
Rapid City, South Dakota Attorneys for plaintiffs
and appellants.

TIMOTHY M. GEBHART of
Davenport, Evans, Hurwitz and Smith, LLP
Sioux Falls, South Dakota Attorneys for defendants
and appellees.
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GILBERTSON, Chief Justice

[¶1.] In early 1981, Metropolitan Life and other foreign insurance

companies (collectively MetLife) notified the South Dakota Department of Revenue

and Regulation that they believed that certain provisions of the tax code were

unconstitutional and that they were paying these taxes in protest. At an

administrative hearing on this matter, MetLife’s claims were found to be barred due

to its failure to comply with procedural notice requirements in the “protest and suit”

tax statutes.

[¶2.] In 2004, MetLife sought to revive its claims and appealed from the

holding of the administrative hearing. Without considering other preliminary

matters, the circuit court ruled that the taxing provisions were unconstitutional.

On appeal to this Court, the circuit court was reversed and the matter remanded.

This Court concluded that the preliminary matters had not been resolved by the

circuit court, thus rendering the constitutionality issue non-justiciable. On remand,

the circuit court granted summary judgment against MetLife on numerous bases.

MetLife appeals. We affirm.

BACKGROUND

[¶3.] This appeal arises from the remanded proceedings held as a result of

Metropolitan Life Ins. Co., et al. v. Kinsman, 2008 SD 24, 747 NW2d 653 (MetLife

I). The underlying factual circumstances are identical.

Metropolitan Life Insurance Company, et al. (MetLife) brought
suit against the Secretary of the South Dakota Department of
Revenue and Regulation, the Director of the South Dakota
Division of Insurance, and the State of South Dakota
(collectively the State or South Dakota), asserting that the
State’s tax structure on insurance premiums and annuity

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considerations has been and is unconstitutional. According to
MetLife, from 1970 to the present, SDCL 10-44-2 and SDCL 10-
44-4 through SDCL 10-44-6 violate the equal protection clause
of the United States and South Dakota constitutions.

In 1981, MetLife filed an administrative claim for a refund of its
premium taxes paid. The claim was denied because of MetLife’s
failure to comply with certain statutory requirements. The
parties agreed to stay all appeals while the United States
Supreme Court considered the constitutionality of state
insurance tax structures. The Supreme Court answered the
question in 1982, but the parties continued to agree to stay all
appeals. Ultimately, in 2004, on appeal to the circuit court,
MetLife’s administrative claim was consolidated with its
constitutional challenge. The State and MetLife stipulated that
the circuit court should only consider whether South Dakota’s
insurance premium and annuity tax structure violated the equal
protection clause in the constitutions of the United States and
South Dakota. After a trial to the court in 2007, findings of fact
and conclusions of law and a judgment were entered declaring
SDCL 10-44-2, and SDCL 10-44-4 through SDCL 10-44-6
unconstitutional from 1970 to the present.

Id. ¶¶2-3, 747 NW2d at 655. As to the tax payments made from 1970 to 1981, this

Court reversed and remanded to the circuit court. The Court held that, as

presented, the constitutionality of these statutes was non-justiciable. Id. ¶10, 747

NW2d at 658. The Court observed, “[i]f MetLife fails to overcome all preliminary

issues yet to be decided by the circuit court, its constitutional challenge may never

come before us.” Id.

[¶4.] On remand, the circuit court considered these preliminary issues and

granted the State’s motion for summary judgment on the bases of non-compliance

with SDCL 10-27-2, SDCL Ch. 10-55, sovereign immunity, mootness, and laches.

MetLife appeals.

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STANDARD OF REVIEW

[¶5.] Our standard of review of a circuit court’s grant of summary judgment

is well settled:

[W]e must determine whether the moving party demonstrated
the absence of any genuine issue of material fact and showed
entitlement to judgment on the merits as a matter of law. The
evidence must be viewed most favorably to the nonmoving party
and reasonable doubts should be resolved against the moving
party. The nonmoving party, however, must present specific
facts showing that a genuine, material issue for trial exists. Our
task on appeal is to determine only whether a genuine issue of
material fact exists and whether the law was correctly applied.
If there exists any basis which supports the ruling of the trial
court, affirmance of a summary judgment is proper.

Wojewski v. Rapid City Reg’l Hosp., Inc., 2007 SD 33, ¶12, 730 NW2d 626, 631

(quoting Read v. McKennan Hosp., 2000 SD 66, ¶8, 610 NW2d 782, 784) (additional

citations omitted).

ISSUE

Whether the grant of summary judgment was proper in this case. 1

1. The issue statement has been rephrased. MetLife presents a variety of
arguments to show that its declaratory judgment action is a viable claim.
Many of these arguments simply address the constitutionality of the tax
statutes, rather than the preliminary issues remanded to the circuit court by
MetLife I. Because that case held that the preliminary matters must be
resolved before the constitutional claims are justiciable, some of MetLife’s
arguments simply seek to circumvent or retry the holding of MetLife I. Those
arguments are premature and are not considered in this opinion.

For some of MetLife’s other arguments to succeed, such as the mootness
issue, this Court would be required to overturn the holding in MetLife I that
found the 1982 tax revisions constitutional. See MetLife I, 2008 SD 24, ¶21,
747 NW2d at 661. MetLife recognizes this requirement, but only directly
addresses the issue by way of a footnote. (Appellant’s Br. 35-36, n6.) This
Court denied MetLife’s petition for rehearing on this matter.

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ANALYSIS

[¶6.] MetLife presents a variety of arguments that the grant of summary

judgment was inappropriate. However, many of these arguments do not address

the “preliminary matters” which provided the basis of the circuit court’s grant of

summary judgment. Instead, MetLife focuses on its request to have the taxing

scheme declared unconstitutional. MetLife suggests that its claims have two

aspects. First, as an appeal from the administrative proceeding. Second, as a

constitutional challenge to the taxing statutes in effect from 1970-1981.

Appeal from the Administrative Proceeding

[¶7.] MetLife’s claims arise as an appeal from the findings of fact and

conclusions of law resulting from the 1981 administrative decision. MetLife’s

claims were dismissed because it was concluded:

IV. That [MetLife’s] claims for refund of taxes paid in South
Dakota for the years 1970 through 1980, inclusive, are
barred by its failure to comply with the requirements of
SDCL 10-27-2.
V. That [MetLife’s] claims for refund of taxes paid prior to
March 19, 1981, is barred by its failure to comply with
SDCL Ch. 10-55.

(Findings of Fact, Conclusions of Law, and Order Op., Dated March 8, 1982.) In

essence, the administrative determination concluded that MetLife had not properly

availed itself to the remedies for tax refunds provided by these “protest and suit”

statutes.

[¶8.] SDCL 10-27-2 provides:

Any person against whom any tax is levied or who may be
required to pay the same, who pays the same under protest to
the treasurer authorized to collect the same, giving notice at the
time of payment of the reasons for such protest may, at any time

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within thirty days thereafter, commence an action against such
treasurer for the recovery thereof in any court of competent
jurisdiction, and if the court determines that the same was
wrongfully collected, in whole or in part, for any reason going to
the merits of the tax, it shall enter judgment accordingly, and
such judgment shall be paid in preference to any other claim
against the county, upon the final determination of the action;
and the pro rata share of the money so refunded shall be
charged to the state and each taxing district which may have
received any part of such tax. The right of appeal shall exist for
both parties as in other civil actions.

(Emphasis added.)

[¶9.] MetLife argued to the circuit court that “[t]here was no requirement to

pay premium taxes under a written Notice of Protest as a condition precedent to the

filing of a refund claim prior to the effective date of Session Laws 1981, Ch. 10-55,

and MetLife did not pay its premium taxes for tax years 1970 through 1980 under

any written Notice of Protest.” (MetLife’s Br. in Supp. of Mot. on Remand for Summ.

J. 11 (emphasis added))

[¶10.] The emphasized section in the passage above expressly concedes that

MetLife had not timely availed itself of the remedies contained in SDCL 10-27-2.

The language of this statute has existed, as written, since the Revised Code of 1919,

§ 6826. 2 As a matter of an appeal from the administrative determination, MetLife’s

“no conditions precedent” argument is without merit.

[¶11.] The circuit court also found that MetLife did not comply with the

procedural requirements of Ch. 10-55. For taxes paid from March 19, 1981, until

June 30, 1982, including some taxes incurred in late 1980, SDCL 10-55-3 required a

2. The predecessor statute, SL 1915, Ch. 289, § 1, had slightly different
language.

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notice of protest that “shall be in writing and shall accompany the payment of the

tax.” SDCL 10-55-4 required service of a petition upon the agency within thirty

days of such a notice. The circuit court found that MetLife failed to comply with

these statutorily prescribed procedural requirements for payments made during

this period. MetLife has not challenged this finding or asserted that it complied

with these procedures. Instead, it argues that its compliance with these statutes is

irrelevant to its declaratory judgment claim, and, if the tax scheme is declared

unconstitutional, such procedural barriers should not impede a refund. This

argument is considered in the next section of this opinion. Because no challenge

has been raised as to the timeliness of compliance, any challenge to this finding has

been abandoned. Ray v. Downes, 1998 SD 40, ¶8, 576 NW2d 896, 898 (“[Plaintiff],

however, has failed to brief this issue and therefore we need not consider it because

‘[a]n assignment of error not briefed and argued is deemed abandoned.’”) (quoting

State v. Macy, 403 NW2d 743, 745 (SD 1987)).

[¶12.] The circuit court did not err by upholding the administrative ruling

and granting summary judgment on MetLife’s failure to comply with the procedural

requirements.

Declaratory Judgment as a Separate Action

[¶13.] MetLife asserts that its declaratory judgment claims should not have

been subject to summary judgment because it does not request a refund of taxes

paid, but only to have the tax statutes in effect from 1970 to 1981 declared

unconstitutional. Therefore, it argues, the procedural requirements of SDCL 10-27-

2 and SDCL Ch. 10-55 are irrelevant to these claims.

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[¶14.] MetLife goes to great lengths to suggest that it requests no refund as a

result of its declaratory judgment action. However, MetLife’s filings to the circuit

court and the Appellant’s Brief to this Court belie this position and its intent to use

such a declaration to permit a later refund. (See Am. Compl., Count III ¶57

(Seeking a declaratory judgment on the basis of the SD Constitution, seeking “such

other and further relief as the Court may deem just and proper”); Count IV ¶59

(Same, United States Constitution); Count V ¶61 (Protest and Suit, stating

“Plaintiffs are aggrieved . . . and are entitled to refunds thereof together with

interest thereon. . .” and “if the relevant [taxes] are declared unconstitutional

pursuant to Plaintiffs’ third and/or fourth causes of action, Plaintiffs pray for the

judgment of this Court for the refund of their premium taxes pursuant to the

protest and suit statutes. . .”); MetLife’s Mot. on Remand for Summ. J. ¶35 (“. . .

MetLife respectfully petitions this Court pursuant to SDCL 21-24-12 for further

relief in the form of tax refunds . . .”))

[¶15.] MetLife attempts to liken its claims to those of the plaintiffs in Dakota

Systems, Inc. v. Viken, 2005 SD 27, 694 NW2d 23, and Dan Nelson Automotive, Inc.

v. Viken, 2005 SD 109, 706 NW2d 239. It maintains that its complaint was

“essentially identical” to Dakota Systems’. However, the plaintiff in Dakota

Systems had complied with the “protest and suit” statutes of SDCL 10-27-2 in

seeking a refund and had not requested a refund pursuant to its declaratory

judgment claim. 2005 SD 27, ¶3, 694 NW2d at 26. Unlike the plaintiff in Dan

Nelson, who “only sought a prospective interpretation of the excise tax statutes” and

did not seek a refund, MetLife seeks a retrospective negation of these statutes and

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also suggests that a refund is available to it in a second, subsequent action. See

Dan Nelson, 2005 SD 109, ¶¶15-16, 706 NW2d at 244-45 (emphasis added).

[¶16.] MetLife argues that a successful declaratory judgment action allows

for a refund of taxes, based on the Due Process Clause. MetLife relies on McKesson

Corp. v. Div of Alcoholic Beverages & Tobacco, Dep’t of Business Regulation for this

proposition. 496 US 18, 110 SCt 2238, 110 LEd2d 17 (1990). In McKesson, the

Supreme Court assumed that the plaintiff had properly complied with statutory

requisites for preserving a claim for a refund and noted that the taxes were “timely

challenged,” before it granted relief to the plaintiffs. See id., 496 US at 24-25, 110

SCt at 2243-44. Here, MetLife had a meaningful opportunity to challenge the

payments at the time they were made, but did not comply with the statutorily

required procedures. MetLife simply did not “pay under protest” as did the

plaintiffs in McKesson or any of the cases discussed in that opinion. Therefore, the

McKesson authority is inapplicable. 3

[¶17.] The McKesson Court expressly addressed the validity of statutory

limitations on tax refunds:

The State might, for example, provide by statute that refunds
will be available only to those taxpayers paying under protest
or providing some other timely notice of complaint; . . . enforce
relatively short statutes of limitations applicable to such
actions; FN 28 . . . such that the State can predict with greater
accuracy the availability of undisputed treasury funds. The
State’s ability in the future to invoke such procedural
protections suffices to secure the State’s interest in stable fiscal
planning when weighed against its constitutional obligation to
provide relief for an unlawful tax.

3. Reich v. Collins, 513 US 106, 115 SCt 547, 130 LEd2d 454 (1994), also cited
by MetLife, is inapplicable for the same reasons.

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FN 28: See Ward v. Love County Board of Comm’rs, 253
US [17], 25, 40 SCt [419,] 422 (recognizing refund claim
could be barred if there was “any valid local [limitations]
law in force when the claim was filed”) . . .

McKesson, 496 US at 45, 110 SCt at 2254-55. See also id., 496 US at 50, 110 SCt at

2257. Such methods were not utilized by the defendant State in McKesson.

[¶18.] South Dakota has enacted such procedural limitations. As recognized

by the Court in Agar School Dist. No. 58-1 v. McGee,

In Lick v. Dahl, 285 NW2d 594, 599 (SD 1979), this Court
unanimously held:

There are two exclusive methods by which an aggrieved
taxpayer may seek recovery for alleged illegal taxes paid.
They are the Refund and Abatement Statute, SDCL 10-
18-1, and the Protest and Suit Statute, SDCL 10-27-2.

Recently in discussing the scope of SDCL 10-27-2, we stated that
“[w]hile we agree that this does indeed place an additional
burden on a taxpayer seeking recovery and repayment of
overpaid taxes, we do not believe that the statutes provide for
any other remedy.” Riverview Prop. v. Bd. of Equalization, 439
NW2d 820, 823 (SD 1989).

Agar School Dist. No. 58-1 v. McGee, 1997 SD 31, ¶14, 561 NW2d 318, 322. To the

extent Arneson v. Baker, 76 SD 262, 77 NW2d 325 (1956), suggests that a

declaratory judgment action permits a refund of taxes in the absence of one of these

“exclusive” methods, it has been overruled by Lick v. Dahl. See Agar, 1997 SD 31,

¶¶16-17, 561 NW2d at 323. Therefore, no refund is available to MetLife via its

declaratory judgment claims.

[¶19.] As the exclusive methods for receiving a refund were not complied

with, no refund is available to MetLife. Because no refund is available to MetLife,

the declaratory judgment claims seek only the bare relief of having the tax statutes

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declared unconstitutional. As the tax statutes have been ineffective for nearly

thirty years, there is no live or ongoing controversy. Thus, in the absence of a live

controversy, these claims are moot. The circuit court properly granted summary

judgment on this basis.

[¶20.] MetLife has failed to satisfy the preliminary matters concerning the

justiciability of the constitutional question; therefore, we do not reach the

constitutionality of the tax scheme.

[¶21.] Affirmed.

[¶22.] KONENKAMP, ZINTER, and SEVERSON, Justices, concur.

[¶23.] MEIERHENRY, Justice, deeming herself disqualified, did not

participate.

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