919 N.W.2d 346
S.D.2018Background
- American Legion Home Association Post 22 (American Legion) owns a Rapid City property containing a meeting hall and a bar/restaurant; it is undisputedly a "benevolent organization" under SDCL 10-4-9.2.
- For prior years the County allowed a partial exemption; for 2017 the County's Director of Equalization categorized the bar/restaurant use as non‑benevolent and recommended a 12% exemption; the Board of Equalization set a 32% exemption.
- American Legion administratively appealed, arguing the property is used exclusively for benevolent purposes (entitling it to a 100% exemption); a hearing examiner agreed and awarded 100% exemption; the circuit court affirmed.
- After the circuit court judgment, American Legion sought attorney fees under SDCL 10-11-45.1; it submitted an affidavit but did not file a formal motion under SDCL 15-6-54(d); the circuit court awarded fees ($14,704.99).
- Pennington County appealed both the merits (exemption) and the attorney‑fee award; the Supreme Court reviewed statutory interpretation de novo and agency factual findings for clear error.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether American Legion's property is exempt 100% under SDCL 10-4-9.2 | Operation of the bar/restaurant directly furthers its benevolent mission (veteran gathering, assistance, and funding of charitable programs); income generation does not defeat exemption | SDCL 10-4-9.2 requires the property itself be "occupied or directly used" to carry out benevolent objectives; income or commercial use defeats full exemption (relying on Hayes) | Affirmed: court held "purpose of the use" controls; direct use of bar/restaurant to advance benevolent mission supports 100% exemption (distinguishing Hayes where property was leased to non‑benevolent third parties) |
| Whether the circuit court properly awarded attorney fees | American Legion treated its filing and affidavit as adequate notice and complied in substance; fee affidavit gave sufficient detail | County: American Legion failed to file the required motion under SDCL 15-6-54(d) and failed to provide an itemized fee statement to establish reasonableness | Reversed in part and remanded: procedural defect excused (notice and hearing occurred), but lack of an itemized fee statement deprived the court of a basis to determine reasonableness; fee award vacated and remanded for itemization and findings |
Key Cases Cited
- Hayes v. Board of Equalization for Lawrence County, 16 S.D. 219, 92 N.W. 16 (1902) (use of property, not rents, controls exemption; lease to non‑benevolent third party defeats exemption)
- Lutheran Hospital Association of Sioux Falls v. Baker, 40 S.D. 226, 167 N.W. 148 (1918) (income‑producing use can qualify for exemption when receipts are devoted to charitable purposes and use is direct)
- Eveland v. Erickson, 44 S.D. 63, 182 N.W. 315 (1921) (the controlling test is the "purpose of the use," not mere physical use)
- In re Scottish Rite Temple Ass'n, 62 S.D. 204, 252 N.W. 626 (1934) (residence use was exempt where purpose of use advanced benevolent objectives)
- S.D. State Medical Ass'n v. Jones, 82 S.D. 374, 146 N.W.2d 725 (1966) (activities that primarily inure to members, not the public, defeat exclusive‑benevolent use)
- Loyal Order of Moose Lodge No. 1137 v. Pennington Cty., 1997 S.D. 80, 566 N.W.2d 132 (1997) (operation of bar/restaurant may be non‑benevolent where income primarily benefits members and social activities)