UPDATED AS OF NOV. 13
PIERRE — The South Dakota Supreme Court has ruled that Buffalo Chip is not a town.
The ruling, issued Tuesday, comes nearly 14 months after lawyers for both sides argued before the justices in the case.
At question was whether the circuit court erred by allowing the state to bring an action to vacate Buffalo Chip’s Articles of Incorporation and annul Buffalo Chip’s existence.
Also at issue was whether the circuit court erred by finding that SDCL 9-3-1 required both one hundred legal residents and thirty voters in the area before the Meade County Commission could set an election for Buffalo Chip to become a municipality.
Judges agreed unanimously that the state did have the right to bring action annulling Buffalo Chip’s existence.
Justice Janine M. Kern, writing the majority opinion concerning the state’s right said: “We therefore conclude that the circuit court properly allowed the state to institute this action against Buffalo Chip under SDCL 21-28-2(3) and SDCL 9-3-20.”
She said the state has the authority to inquire into the regularity of an organization of any acting municipality.
Justices split on the second issue, concerning the question of residents and voters, with Kern, Steven R. Jensen, Mark E. Salter, and Patricia Devaney concurring, and Chief Justice David E. Gilbertson dissenting.
Kern wrote that as the circuit court noted, under Buffalo Chip’s interpretation, a city within our state could be comprised only of residents who reside entirely outside of its boundaries, but who choose to register their voting addresses within the municipal boundaries.
“It would be illogical to hold that this was the Legislature’s intent when drafting the statute,” she said.
Undoing a municipality
Kent Hagg, who serves as the city attorney for the town of Buffalo Chip, said he doesn’t agree with the opinion. And he has questions about the ramifications of the decision.
“How do you give back sales tax? How do you unwind a municipality?” he asked.
If the town is to now be dissolved, it sets some very bad precedents going forward in the state, Hagg said.
“People have to know that they can have confidence in their public institutions that when they are formed, they’re formed,” he said.
Hagg said the next recourse in the case could be to appeal to the Eighth Circuit Court of Appeals.
Hagg pointed out that Chief Justice David Gilbertson had a scathing descent about the section of the law concerning “and” and “or.”
That goes to Hagg’s argument that he worked closely with the South Dakota Secretary of State’s office and other Meade County offices when laying the groundwork for Buffalo Chip to become a municipality.
Hagg said Buffalo Chip was formed under the constant review of state agencies responsible for that subject matter and in accordance with the office of the state’s attorney.
“To me how can you possibly do anything more correctly than to do exactly what the state says you can and cannot do which is exactly how it was created,” Hagg said. “Every step of the way this municipality was created in full concert with the review and condonation of the Meade County State’s Attorney, Meade County Auditor, South Dakota Secretary of State and Attorney General’s Office.”
Hagg believes the question of “and” and “or” was the state’s way of throwing the city of Sturgis a bone with which to proceed with the lawsuit.
Sturgis reacts to ruling
Sturgis City Manager Daniel Ainslie said Sturgis city officials are pleased that the rule of law in the state of South Dakota has been upheld in the Buffalo Chip decision.
“It’s over. They are not a city anymore,” Ainslie said.
He said there were many reasons the city of Sturgis was against Buffalo Chip being a municipality. Chief among them was that their incorporation violated dozens of state laws, especially when it came to the number of residents who purportedly resided there.
“The vast majority of individuals that signed, under the penalty of perjury, that they resided at that location, would speak on record that they don’t reside at that location,” Ainslie said.
Also, those who lived adjacent the town of Buffalo Chip worried that the town trustees would do forced annexation of their land and increase the property taxes on that land, Ainslie said.
“It would have made it unaffordable for anyone to remain in their homes,” he said.
Then, when the residents sold their property, the Buffalo Chip would swoop in and buy the land to expand the town, Ainslie said.
But Hagg has said that the city of Sturgis, not Buffalo Chip was the once seeking to annex the area of the Buffalo Chip Campground to supplement the towns tax base.
“They tried their hardest to make a land grab on the Full Throttle. When that didn’t work, it was clear they were moving eastward with great determination to try to annex voluntarily or otherwise to get their hands on any land parcels that produce sales tax dollars,” Hagg said before the Full Throttle moved further from the Sturgis city limits.
The Sturgis Buffalo Chip is a campground located just outside of the city of Sturgis and home to the “best party anywhere” during the annual Sturgis Motorcycle Rally.
History of the issue
The controversy began in 2015 when area residents petitioned the Meade County Commission to incorporate Buffalo Chip campground as a city. At the time, SDCL 9-3-1 provided that: “No municipality shall be incorporated which contains less than one hundred legal residents or less than thirty voters.”
After holding a hearing and considering testimony, the board concluded that the area of incorporation had more than 30 registered voters and that more than a quarter of the voters signed the petition as required by law.
The board, believing SDCL 9-3-1 had been satisfied, voted to incorporate Buffalo Chip. It scheduled an election for May 7, 2015, so that the voters in the proposed area could affirm the incorporation. The voters approved the request to incorporate, and Buffalo Chip filed its articles of municipal incorporation with the Secretary of State.
Following the election, several Meade County residents and the city of Sturgis appealed the county commission’s decision. After more than a year of litigation, the circuit court declared the incorporation of Buffalo Chip was void, found deficiencies in the petitioner’s filings and the county commission’s procedural process. Then Buffalo Chip and the county appealed the circuit court’s ruling to the South Dakota Supreme Court.
In the appeal, captioned Lippold v. Meade County Board of Commissioners, the Supreme Court reversed the circuit court’s judgment of dissolution because the court held that Sturgis and the petitioners lacked standing to challenge the board’s decision. Only the state of South Dakota, the Court explained, could seek to vacate the incorporation of a city when the challenged city is already acting as a municipality.
On May 29, 2018, in response to Lippold, the state filed a quo warranto proceeding to annul the existence of Buffalo Chip. Quo warranto is a legal action used to vacate a corporation’s charter or its articles of incorporation. Buffalo Chip moved to dismiss the lawsuit, contending the state lacked authority to commence the action.
The circuit court ruled the state to bring the action that SDCL 9-3-1 showed that at least 100 residents and 30 registered voters were needed to be incorporated. A contrary interpretation, in the court’s view, would mean that the Legislature intended to allow incorporation of a municipality that had no residents but 30 voters.
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