GARY LIPPOLD and JANE MURPHY, and THE CITY OF STURGIS, a South Dakota Municipal Corporation v. MEADE COUNTY BOARD OF COMMISSIONERS, ALAN AKER, ROBERT BERTOLOTTO, ROBERT HEIDGERKEN, GALEN NEIDERWERDER, and LINDA RAUSCH, and BUFFALO CHIP CAMPGROUND, LLC
#27976, #27993-r-JMK
IN THE SUPREME COURT OF THE STATE OF SOUTH DAKOTA
01/24/18
2018 S.D. 7
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GARY LIPPOLD and JANE MURPHY, and THE CITY OF STURGIS, a South Dakota Municipal Corporation, Appellees,
v.
MEADE COUNTY BOARD OF COMMISSIONERS, ALAN AKER, ROBERT BERTOLOTTO, ROBERT HEIDGERKEN, GALEN NEIDERWERDER, and LINDA RAUSCH, Appellants,
and
BUFFALO CHIP CAMPGROUND, LLC, Intervenor and Appellant.
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APPEAL FROM THE CIRCUIT COURT OF THE FOURTH JUDICIAL CIRCUIT MEADE COUNTY, SOUTH DAKOTA
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THE HONORABLE JEROME A. ECKRICH, III Retired Judge
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MARK F. MARSHALL of Bangs, McCullen, Butler, Foye & Simmons, LLP Rapid City, South Dakota Attorneys for appellees Gary Lippold and Jane Murphy.
GREGORY J. BARNIER Sturgis City Attorney Sturgis, South Dakota Attorney for appellee City of Sturgis.
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ARGUED ON APRIL 25, 2017
OPINION FILED 01/24/18
JACK H. HIEB ZACHARY W. PETERSON of Richardson, Wyly, Wise, Sauck & Hieb, LLP Aberdeen, South Dakota Attorneys for appellants Meade County Board of Commissioners, Alan Aker, Robert Bertolotto, Robert Heidgerken, Galen Neiderwerder, & Linda Rausch.
KENT R. HAGG JOHN STANTON DORSEY of Whiting, Hagg, Hagg, Dorsey & Hagg, LLP Rapid City, South Dakota Attorneys for appellant Buffalo Chip Campground, LLC.
THOMAS H. FRIEBERG Frieberg, Nelson & Ask, LLP Beresford, South Dakota Attorneys for amicus South Dakota Municipal League.
[¶1.] The City of Sturgis, Gary Lippold, and Jane Murphy appealed the order of the Meade County Board of County Commissioners approving incorporation of the proposed municipality of Buffalo Chip City, South Dakota, and setting an election for voters to decide whether to assent to incorporation. The circuit court denied a request to stay the election. After the election, the court heard the appeal pursuant to
Facts and Procedural History
[¶2.] This case began with an attempt by area residents affiliated with the Campground to incorporate a new city in western South Dakota near the city of Sturgis, home of the famous Sturgis Motorcycle Rally.1 This event draws hundreds of thousands of motorcycle enthusiasts to Sturgis each year and usually occurs during the first full week of August. On February 11, 2015, twenty-six Meade County residents submitted a petition for the municipal incorporation of Buffalo Chip City to the Board. They withdrew the petition, however, when they discovered the boundary for the proposed city was impermissibly close to Sturgis.
[¶3.] On February 20, 2015, seventeen Meade County residents submitted a new petition for the municipal incorporation of Buffalo Chip City to the Board. The new proposed boundary for Buffalo Chip City was more than three miles away from Sturgis. The petitioners also filed a survey and map of the proposed city, which were verified by an affidavit of the surveyor. Additionally, petitioners filed a census for organization of the new city listing landowners and voters within the proposed territory. The February 20 petition, however, contained a discrepancy between the written legal description of the proposed boundary and the official map depicting the proposed boundary.
[¶4.] A few hours after the February 20 petition was filed, the Sturgis City Council passed a resolution to annex the Sturgis Municipal Airport, invoking an emergency provision under
[¶5.] On February 26, 2015, seventeen Meade County residents filed two documents with the Board: an amended version of the February 20 petition and a “new” petition for incorporation of Buffalo Chip City. The petitioners corrected the discrepancy between the description and the maр in both petitions. On February 27, 2015, the Board held a public hearing and spent several hours listening to testimony and discussing the petitions. Concluding the petitioners had satisfied the requirements of
[¶6.] On March 27, 2015, Lippold, Murphy, and several other Meade County residents asked the Meade County State‘s Attorney to appeal the Board‘s decision ordering the incorporation of Buffalo Chip City and setting an election on the matter. The Meade County State‘s Attorney deсlined to appeal.
[¶7.] On March 31, 2015, Lippold and Murphy appealed the Board‘s order to the circuit court as persons aggrieved by the Board‘s decision under
[¶8.] On April 29, 2015, Sturgis filed a motion to stay the election and requested a hearing before the circuit court. On May 1, 2015, the circuit court held a teleconference with Sturgis‘s attorney and counsel for the Board. The circuit court denied the motion for a stay, believing it could afford complete relief to Sturgis even after the election and formal incorporation of Buffalo Chip City if the Board‘s decision were later reversed. Sturgis did not cite
[¶9.] On May 7, 2015, the election occurred as sсheduled, and a majority of the voters chose to incorporate Buffalo Chip City. On May 13, the Board declared Buffalo Chip City formally incorporated pursuant to
[¶10.] On January 11, 2016, the South Dakota Municipal League moved to intervene in the suit. On March 4, 2016, the circuit court denied the motion but permitted the Municipal League to file an amicus brief.4
[¶11.] The Campground movеd to dismiss the appeal for a lack of subject-matter jurisdiction, arguing that the Board‘s order was not an appealable decision and that Sturgis, Lippold, and Murphy lacked standing because they were not persons aggrieved per
[¶12.] Sturgis, Lippold, and Murphy next sought summary judgment on the grounds that the petitioners failed to comply with the requirements of
[¶13.] On April 6, 2016, James Walczak, Buffalo Chip City‘s finance officer, filed an affidavit on behalf of Buffalo Chip City seeking a writ of prohibition from this Court. Buffalo Chip City petitioned this Court to prevent the circuit court “from continuing to assert jurisdiction over the subject matter of the action,” contending that
[¶14.] On May 11, 2016, the circuit court held a one-day bench trial. Lippold and Walczak testified in addition to Kirk Chaffee, the Meade County Director of Planning, and Fay Bueno, a finance officer for Sturgis. On May 20, the court issued a written opinion, and on August 24, the court issued detailed findings of fact, conclusions of law, and a judgment reversing the Board‘s February 27, 2015 order incorporating Buffalo Chip City and scheduling an election.
[¶15.] In reversing the Board‘s decision, the court found sеrious deficiencies in the filings as well as errors in the Board‘s procedural process. The court found the “lots” listed as residences on the incorporation documents were mere patches of dirt, which were unoccupied except during the Sturgis Motorcycle Rally. Further, the court found the amended petition and census for incorporating the proposed Buffalo Chip City was “rife with false information.” The court concluded: (1) that the amended petition was not prоperly filed with the Meade County Auditor; (2) that the area to be incorporated “contained less than one hundred (100) legal residents and contained less than thirty (30) legally registered voters” as required by
[¶16.] The Board and the Campground (Appellants) appealed the circuit court‘s judgment, raising multiple issues for review. Additionally, Sturgis, Lippold, and Murphy (Appellees) raised two issues by notice of review. However, we need only address whether the court possessed subject-matter jurisdiction because that issue is dispositive of the case.
Analysis and Decision
[¶17.] “Subject matter jurisdiction is the power of a court to act such that without subjеct matter jurisdiction any resulting judgment or order is void.” Cable v. Union Cty. Bd. of Cty. Comm‘rs, 2009 S.D. 59, ¶ 20, 769 N.W.2d 817, 825. “Subject matter jurisdiction is conferred solely
[¶18.] Relevant to the existence of subject-matter jurisdiction is the doctrine of standing. A litigant must have standing in order to bring a claim in court. Cable, 2009 S.D. 59, ¶ 21, 769 N.W.2d at 825-26. Although standing is distinct from subject-matter jurisdiction, a circuit court may not exercise its subject-matter jurisdiction unless the parties have standing. See Lake Hendricks Improvement Ass‘n, 2016 S.D. 48, ¶ 19, 882 N.W.2d at 313.
[¶19.]
[¶20.] In their notice of appeal filed with the circuit court, Appellees directly challenged the legality of the Board‘s decision to order incorporation of Buffalo Chip City. Their proceeding was not “instituted by or on behalf оf the state,” as the State has taken no role in this litigation. Once Buffalo Chip City became an acting municipality—after voters assented to the Board‘s incorporation order—
[¶21.] This conclusion is supported by common-law precepts regarding de facto corporations, by our precedent, and by precedent from other jurisdictions. It is well established that
[a]n inquiry into the legal existence of a municipality is in general reserved to the state in a proceeding by quo warranto or other direct proceeding. With few exceptions, a private person cannot ordinarily, either directly or indirectly, usurp this function of government. Private individuals, as taxpayers or otherwise, cannot maintain an action challenging the legality of a municipal corporation nor can they collaterally attack its existence where it is at lеast a de facto corporation.
1 Eugene McQuillin, The Law of Municipal Corporations § 3:107 (3d ed.), Westlaw (database updated July 2017) (emphasis added). De facto means “[a]ctual; existing in fact; having effect even though not formally or legally recognized.” Black‘s Law Dictionary (10th ed. 2014). A de facto corporation is “one so defectively created as not to be a de jure corporation, but nevertheless the result of a bona [fide] attempt to incorporate under existing statutory authority, coupled with the exercise of corрorate powers, and recognized by the courts as such on the ground of public policy in all proceedings except a direct attack by the state questioning its corporate existence.” 1 McQuillin, supra, § 3.103. A de jure corporation stands in contrast to a de facto corporation and is “[a] corporation formed in accordance with all applicable
[¶22.] We acknowledgеd the distinction between de facto and de jure organizations and the general inability of the public to challenge the existence of a de facto organization in Merchants’ National Bank v. McKinney, 2 S.D. 106, 48 N.W. 841 (1891). In McKinney, we addressed whether certain warrants issued by Douglas County and sold to individuals were valid, which required “us to determine the validity of the organization of said Douglas [C]ounty.” Id. at 112, 48 N.W. at 842. Douglas County was “unorganized until the spring of 1881, when a petition purporting to be signed by the voters of said Douglas [C]ounty” was presented to the governor of the Dakota Territory. Id. at 113, 48 N.W. at 842. The petition failed to comply with the requirements for county incorporation, but “[t]he governor, without any knowledge ... that said petition was not what it purported to be” appointed several county commissioners. Id. Douglas County became an acting but “illegal organization” that “fraudulently issued” warrants, which were eventually sold to the aggrieved plaintiffs. Id. at 114, 48 N.W. at 843.
[¶23.] The territorial code at the time, Chapter 21, Code 1877, governed county organization and stated in relevant part:
Section 1. Whenever the voters of any unorganized county in this territory shall be equal to fifty or upwards, and they shall desire to have said county organized, they may petition the governor, setting forth that they have the requisite number of voters to form a county organization, and request him to appoint the officers specified in the next section of this act.
Section 2. Whenever the voters of any unorganized county in the territory shall petition the governor, as provided in the preceding section, and the said governor shall be satisfied that such county has fifty legal voters, it shall be the duty of the governor, and he is hereby authorized, to appoint three persons, residents thereof, county commissioners for such county[.]
(Emphasis added.) Under the statute and the governor‘s action, Douglas County became a “de facto organization.” McKinney, 2 S.D. at 118, 48 N.W. at 844. We explained why Douglas County, as a de facto organization, could not be collaterally attacked:
The legislature evidently intended to vest in the executive authority to organize new counties, and, to prevent questions involving the legality of such organizations being raised in a collateral proceeding, it intended to make his decision so far conclusive as to make such an organization at least a de facto organization. It cannot be presumed that the legislature intended to leave so important a matter as the organization of a new county, as respects the public and third persons, to be determined by the courts, years perhaps after the organization of such county, and when important rights have been acquired under such organization. Can the public be expected to re-examine the proceedings of the governor, ascertain whether or not the signatures to the petition are genuine, take a census of the county, and ascertain, at its peril, whether or not there actually existed the required number of voters in the cоunty to authorize the governor to organize it, before it can transact business with the county officers of such county? Should the public be required to look further than to see that a county organization actually exists, with officers performing the duties usually performed by county officers of a county? We think not.
Id. at 116-17, 48 N.W. at 844 (emphasis added). Accordingly, we concluded that the
[¶24.] While we decided McKinney based on the common law,
[¶25.] Further, the facts and legal issues in McKinney are substantively similar to the Buffalo Chip City conundrum. The Legislature delegated the authority to order the incorporation of proposed municipalities to the Board. Petitioners sought to incorporate Buffalo Chip City. The Board found the petitioners satisfied the statutory requirements, and the Board ordered incorporation and set an election for voters to assent to or reject incorporation. The voters assented and Buffalo Chip City became an acting municipality. Because it was at least a de facto corporation, its status and actions were “good as to the public and third persons.” McKinney, 2 S.D. at 115, 48 N.W.2d at 843. If the circuit court had stayed the election, Buffalo Chip City would not have become an acting municipality before the court decided the case. But Buffalo Chip City became and still is an acting municipality. The evidence established at trial reveals Buffalo Chip City is governed by an acting board of sworn trustees and is engaging in acts of a municipality, including taking out loans and obtaining licenses and sales-tax exemptions. It is at the very least a de factо corporation, and Appellees are barred from seeking relief under both McKinney5 and
[¶26.] Additionally, many courts have reached the same conclusion that the validity of acting municipalities may only be challenged by the state. See, e.g., Tulare Irrigation Dist. v. Shepard, 185 U.S. 1, 14 (1902); Nat‘l Life Ins. Co. of Montpelier v. Bd. of Educ. of City of Huron, 62 F. 778, 787 (8th Cir. 1894); Jefferson v. State, 527 P.2d 37, 41 (Alaska 1974); Stroiney v. Crescent Lake Tax Dist., 533 A.2d 208, 210 (Conn. 1987); Bishop v. Shawnee & Mission Twps. Turkey Creek Main Sewer Dist. No. 1, 336 P.2d 815, 818 (Kan. 1959); State v. Bailey, 118 N.W. 676, 677-78 (Minn. 1908). Here, it is undisputed that Buffalo Chip City is an acting municipality and that Sturgis, Lippold, and Murphy are not appealing on behalf of the State of South Dakota. Because the appeal from the Cоunty‘s decision inquired into the regularity of the organization of Buffalo Chip City,
[¶27.] Citing our denial of Appellants’ writ of prohibition, Appellees respond that even if
[¶28.] However, res judicata does not bar Appellants’ argument that
(1) a final judgment on the merits in an earlier action; (2) the question decided in the former action is the same as the one dеcided in the present action; (3) the parties are the same; and (4) there was a full and fair opportunity to litigate the issues in the prior proceeding.
Farmer v. S.D. Dep‘t of Revenue & Regulation, 2010 S.D. 35, ¶ 9, 781 N.W.2d 655, 659. We construe “the doctrine liberally, unrestricted by technicalities.” Id. ¶ 7. “However, because the doctrine bars any subsequent litigation, it should not be used to defeat the ends of justice.” Id. “A writ of prohibition is an extraordinary remedy.” Cummings v. Mickelson, 495 N.W.2d 493, 495 (S.D. 1993). Other courts have stated that generally, an unwritten denial of an application for a writ of prohibition does not constitute a decision on the merits. E.g., Kowis v. Howard, 838 P.2d 250, 253-54 (Cal. 1992); Topps v. State, 865 So. 2d 1253, 1258 (Fla. 2004); State ex rel. Albert v. Adams, 540 S.W.2d 26, 30 (Mo. 1976); Kennecott Copper Corp. v. Salt Lake Cty., 575 P.2d 705, 708 (Utah 1978).
[¶29.] Our order denying Buffalo Chip City‘s application stated we “considered the application and [were] fully advised in the premises[.]” But a short statement summarily denying an application does not give the denial preclusive effect. See Kowis, 838 P.2d at 253. “There are many reasons why [this] [C]ourt might have acted as it did,” Adams, 540 S.W.2d at 30, and “extraordinary writs may be denied for numerous and a variety of reasons, some of which may not be based upon the merits of the petition,” Topps, 865 So. 2d at 1257. Therefore, res judicata does not рrevent us from addressing whether
[¶30.] The circuit court erred in denying the motion to dismiss pursuant to
Conclusion
[¶31.] Buffalo Chip City operates at minimum as a de facto corporation, and
[¶32.] GILBERTSON, Chief Justice, SEVERSON, Justice, and WILBUR and MEIERHENRY, Retired Justices, concur.
[¶33.] MEIERHENRY, Retired Justice, sitting for ZINTER, Justice, disqualified.
[¶34.] JENSEN, Justice, not having been a member of the Court at the time this action was submitted to the Court, did not participate.