text:
    2007 ND 135
    FARMERS UNION MUTUAL INSURANCE COMPANY, Plaintiff and Appellee, v. ASSOCIATED ELECTRIC AND GAS INSURANCE SERVICES LIMITED, Defendant and Appellant.
    No. 20060303.
    Supreme Court of North Dakota.
    Aug. 22, 2007.

      Chris A. Edison, Storslee Law Firm, P.C., Bismarck, N.D., for plaintiff and ap-pellee.
    Tiffany L. Johnson (argued) and Patrick W. Durick (on brief), Pearce & Durick, Bismarck, N.D., for defendant and appellant.
   CROTHERS, Justice.

[¶ 1] Associated Electric and Gas Insurance Services Limited (“AEGIS”) appeals from a summary judgment requiring AEGIS to submit to equitable allocation and intercompany arbitration under N.D.C.C. § 26.1-41-17. Because we conclude AEGIS’s issuance of an excess liability policy does not make it a “motor vehicle liability insurer” under N.D.C.C. § 26.1^41-17, we reverse.

I

[¶ 2] In October 2005, Farmers Union Mutual Insurance Company (“Farmers Union”) commenced this declaratory judgment action against AEGIS, a “non-admitted surplus lines carrier,” seeking a declaration that the equitable allocation and intercompany arbitration provisions of N.D.C.C. § 26.1-41-17 were applicable to AEGIS. AEGIS had insured Plains Marketing, L.P. (“Plains Marketing”) under an excess liability policy in an underlying action. In its complaint for declaratory judgment, Farmers Union asserted AEGIS was “transacting business in North Dakota on a surplus lines basis” under the law governing surplus lines insurance. See N.D.C.C. ch. 26.1-44.

[¶ 3] The facts in the underlying action are not in dispute. In March 2001, while driving his car on a North Dakota highway, Caleb Melberg was severely injured in a collision with a crude oil tanker semi-truck. At the time of the collision, Robert Taylor was driving the semi-truck and had entered the highway from a gravel road after leaving a crude oil pipeline station. Taylor was employed by Plains Marketing and was operating the oil tanker truck, owned by Plains Marketing, as a part of his employment.

[¶ 4] Farmers Union insured Melberg under a personal motor vehicle insurance policy, which provided basic no-fault benefits of $30,000. As a result of the severe injuries sustained by Melberg, Farmers Union paid its full $30,000 limit in basic no-fault benefits to Melberg. At the time of the collision, Plains Marketing was insured by Zurich-American Insurance (“Zurich”) under a primary commercial liability policy and by AEGIS under an excess liability policy.

[¶ 5] Melberg sued Plains Marketing for the injuries and damages he sustained in the accident. Melberg eventually settled his claim against Plains Marketing. Through a combination of a lump-sum payment and structured settlement, Zurich paid its $1,000,000 policy limits to Melberg, and Plains Marketing paid Melberg $407,370.83. AEGIS thereafter indemnified Plains Marketing for the amount of Plains Marketing’s settlement with Mel-berg.

[¶ 6] In July 2005, Farmers Union filed a request for intercompany arbitration against AEGIS under N.D.C.C. § 26.1-41-17, seeking to recover the $30,000 in no-fault benefits it had paid to Melberg. AEGIS refused Farmers Union’s requests for equitable allocation and arbitration. In October 2005, Farmers Union brought this declaratory judgment action against AEGIS. AEGIS moved to dismiss Farmers Union’s action, and Farmers Union moved for summary judgment. The district court denied AEGIS’s motion to dismiss and granted Farmers Union summary judgment, holding AEGIS was a “motor vehicle liability insurer” and the equitable allocation and arbitration provisions of N.D.C.C. § 26.1-41-17 applied to AEGIS.

II

[¶ 7] Summary judgment under N.D.R.Civ.P. 56 is “a procedural device for promptly resolving a controversy on the merits without a trial if either party is entitled to judgment as a matter of law, and if no dispute exists as to either the material facts or the inferences to be drawn from the undisputed facts, or if resolving disputed facts would not alter the result.” ACUITY v. Burd & Smith Constr., Inc., 2006 ND 187, ¶ 6, 721 N.W.2d 33. The party moving for summary judgment has the burden of establishing that there are no genuine issues of material fact and that the moving party is entitled to judgment as a matter of law. Hasper v. Center Mut. Ins. Co., 2006 ND 220, ¶ 5, 723 N.W.2d 409. In deciding whether the district court appropriately granted summary judgment, this Court views the evidence in the light most favorable to the party opposing the motion, and the opposing party will be given the benefit of all favorable inferences that can reasonably be drawn from the record. Id. On appeal, we decide “whether the information available to the district court precluded the existence of a genuine issue of material fact and entitled the moving party to judgment as a matter of law.” Id. Whether the district court properly granted summary judgment is a question of law that we review de novo on the entire record. Ernst v. Acuity, 2005 ND 179, ¶ 7, 704 N.W.2d 869.

III

[¶ 8] AEGIS argues the district court erred in concluding N.D.C.C. § 26.1-41-17 was applicable because AEGIS was an “excess insurer” rather than a “motor vehicle liability insurer.” AEGIS also asserts that even if N.D.C.C. § 26.1-41-17 applies, AEGIS still should not be required to participate in binding arbitration because Farmers Union failed to properly commence an arbitration proceeding before the August 1, 2005, effective date of the Legislature’s repeal of N.D.C.C. § 26.1-41-17.

[¶ 9] Statutory interpretation is a question of law and fully reviewable on appeal. GO Comm. ex rel. Hale v. City of Minot, 2005 ND 136, ¶ 9, 701 N.W.2d 865.

Words in a statute are given their plain, ordinary, and commonly understood meaning, unless defined by statute or unless a contrary intention plainly appears. N.D.C.C. § 1-02-02. Statutes are construed as a whole and are harmonized to give meaning to related provisions. N.D.C.C. § 1-02-07.... If the language of a statute is ambiguous or doubtful in meaning, a court may consider extrinsic aids, including legislative history, to determine legislative intent. N.D.C.C. § 1-02-39.

Stockman Bank of Montana v. AGSCO, Inc., 2007 ND 26, ¶ 18, 728 N.W.2d 142. However, we do not consider legislative history when statutory language is unambiguous. Rask v. Nodak Mut. Ins. Co., 2001 ND 94, ¶ 18, 626 N.W.2d 693. “A statute is ambiguous if it is susceptible to meanings that are different, but rational.” Amerada Hess Corp. v. State ex rel. Tax Comm’r, 2005 ND 155, ¶ 12, 704 N.W.2d 8. If statutory language is clear and unambiguous, the letter of the statute cannot be disregarded under the pretext of pursuing its spirit. N.D.C.C. § 1-02-05. Under N.D.C.C. § 1-01-09, “[w]henever the meaning of a word or phrase is defined in any statute, such definition is applicable to the same word or phrase wherever it occurs in the same or subsequent statutes, except when a contrary intention plainly appears.”

[¶ 10] The relevant statute in this case, N.D.C.C. § 26.1-41-17, was repealed by the Legislature effective August 1, 2005, and had authorized a basic no-fault insurer to seek equitable allocation and intercom-pany arbitration with the motor vehicle liability insurer of a secured person:

A basic no-fault insurer may recover no-fault benefits paid to or for the benefit of an injured person from the motor vehicle liability insurer of a secured person if:
1. The injured person has sustained a serious injury; or
2. The injury results from an accident involving two or more motor vehicles, at least one of which is a motor vehicle weighing more than six thousand five hundred pounds [2948.35 kilograms] unloaded.
The right of recovery and the amount thereof must be determined on the basis of tort law without regard to section 26.1-41-08 by agreement between the insurers involved, or, if they fail to agree, by binding intercompany arbitration under procedures approved by the commissioner. The amount of recovery under this section may not exceed the limits of liability of the secured person’s motor vehicle liability insurance policy or other security, reduced by the amount of the liability for tort claims against the secured person covered by the policy or other security.

(Emphasis added.)

[¶ 11] On appeal, AEGIS argues the phrase “motor vehicle liability insurer” in that statute does not include an excess insurer. AEGIS asserts that while its policy provides automobile liability coverage, its coverage is incidental to that of the primary liability policy provided by Zurich. Farmers Union responds by urging this Court to adopt a broad interpretation, arguing the phrase “motor vehicle liability insurer or other security” includes any liability coverage, even if provided by an excess liability policy.

[¶ 12] We conclude Farmers Union’s interpretation of “motor vehicle liability insurer” does not account for the modifying phrases “of a secured person” and “the secured person’s” as they are used in N.D.C.C. § 26.1-41-17. Under N.D.C.C. § 26.1-41-01(20) (emphasis added), a secured person is defined as “the owner, operator, or occupant of a secured motor vehicle, and any other person legally responsible for the acts or omissions of the owner, operator, or occupant.” A secured motor vehicle is defined as “a motor vehicle with respect to which the security required by this chapter was in effect at the time of its involvement in the accident resulting in accidental bodily injury.” N.D.C.C. § 26.1-41-01(19) (emphasis added). Based upon these definitions, the “motor vehicle liability insurer” contemplated under N.D.C.C. § 26.1-41-17 must be providing the security for the motor vehicle as required under N.D.C.C. ch. 26.1-41.

[IT 13] Section 26.1-41-02, N.D.C.C., which defines the security required under N.D.C.C. ch. 26.1-41, states, in part:

1. The owner of a motor vehicle required to be registered in this state, or the owner of a motor vehicle operated in this state by the owner or with the owner’s permission, shall continuously provide with respect to the motor vehicle during the period in which operation is contemplated in this state security for payment of basic no-fault benefits and the liabilities covered under the motor vehicle liability insurance.
2. The security may be provided by an insurance policy complying with this chapter issued by an insurer authorized to transact business in this state, or, by self-insurance as approved by the commissioner.

(Emphasis added.)

[¶ 14] Under N.D.C.C. ch. 26.1-41, an owner of a motor vehicle, registered or operated in this state, must provide security for payment of both “basic no-fault benefits” and “liabilities covered under the motor vehicle liability insurance,” either by an insurance policy complying with this chapter or by self-insurance.

[¶ 15] Under N.D.C.C. § 26.1-41-01(2), “ ‘[b]asic no-fault benefits’ means benefits for economic loss resulting from accidental bodily injury.” This section also provides the amounts of benefits payable for the economic loss incurred. Id. In providing the applicability of “motor vehicle liability insurance” in the context of chapter 26.1-41, N.D.C.C. § 26.1-41-15(1), provides in part, that such insurance “applies to the amounts which the owner is legally obligated to pay as damages because of accidental bodily injury and accidental property damage arising out of the ownership or operation of a motor vehicle.... ” This subsection then states, “Motor vehicle liability insurance must afford limits of liability not less than those required under the financial responsibility laws of this state.” Id. (emphasis added). See N.D.C.C. § 39-16.1-11 (defining “motor vehicle liability policy” and providing required coverage and provisions).

[¶ 16] When construed together, the statutory language only permits a no-fault insurer’s recovery of no-fault benefits paid from “the motor vehicle liability insurer of a secured person.” In using the phrase “of a secured person,” and considering the definition of “secured person,” N.D.C.C. § 26.1-41-17 refers to the “security” required by N.D.C.C. ch. 26.1-41. By requiring an insurance policy, or self-insurance, to provide “security” for both basic no-fault benefits and liabilities covered under motor vehicle liability insurance, and by requiring the “motor vehicle liability insurance” to provide liability limits not less than mandated by this state’s financial responsibility laws, AEGIS’s excess liability policy does not provide the requisite security contemplated by this chapter.

[¶ 17] In Fuller-Austin Insulation Co. v. Highlands Ins. Co., 135 Cal.App.4th 958, 38 Cal.Rptr.3d 716, 722 n. 1 (2006) (internal citation omitted), the court explained the difference between an excess liability policy and a primary policy:

An excess insurance policy serves a different purpose than a primary policy. Whereas primary coverage generally provides immediate coverage upon the occurrence of a loss or event giving rise to liability, excess insurance provides coverage after other identified insurance is no longer on the risk. Excess coverage means coverage whereby, under the terms of the policy, liability attaches only after a predetermined amount of primary coverage has been exhausted.

[¶ 18] On appeal, Farmers Union urges this Court to broadly construe the phrase “motor vehicle liability insurance policy or other security” as that phrase is used in N.D.C.C. § 26.1-41-17, to permit Farmers Union to seek equitable allocation from an excess liability insurer. Farmers Union also asserts this broad construction is supported by a legislative intent to include all liability insurance or other security that may be applicable to the accident within the purview of this statute.

[¶ 19] Here, Farmers Union does not dispute AEGIS’s policy to Plains Marketing was an excess liability policy. In this declaratory judgment action, Farmers Union asserted AEGIS was transacting business in North Dakota on a surplus lines basis under N.D.C.C. ch. 26.1-44. Farmers Union also asserted AEGIS’s policy “was used [by Plains Marketing] to certify compliance with the financial responsibility requirements of the Motor Carrier Act of 1980.” Farmers Union points out that one of AEGIS’s policy endorsements states it insures for “negligence in the operation, maintenance or use of motor vehicle subject to the financial responsibility requirements of Sections 29 and 30 of the Motor Carrier Act of 1980 regardless of whether or not each motor vehicle is specifically described in the policy....”

[¶20] While an excess liability policy may provide automobile liability insurance after the limits of a primary liability policy are exhausted, in order to permit a right of recovery under N.D.C.C. § 26.1-41-17, the policy must provide the security required under N.D.C.C. ch. 26.1-41. Cf. Rask, 2001 ND 94, ¶¶ 15-19, 626 N.W.2d 693 (concluding that for purposes of triggering UIM coverage under N.D.C.C. ch. 26.1-40, the insured status of the vehicle, rather than the operator is determinative, even though the total amount the injured passenger received from the owner’s and driver’s liability insurers exceeded the UIM limits).

[¶ 21] Although Plains Marketing may have been required to maintain the AEGIS excess liability policy to comply with federal law, the excess liability policy, and in particular the automobile liability provisions, were not intended to provide the security required under N.D.C.C. ch. 26.1-41. Plains Marketing was indemnified under AEGIS’s excess liability policy only after Zurich’s $1,000,000 policy limits were exhausted by settlement in the underlying action. Standing alone, AEGIS’s excess liability policy did not provide the basic no-fault benefits mandated under N.D.C.C. ch. 26.1-41, nor did it provide “motor vehicle liability insurance” with liability limits that were not less than this state’s financial responsibility laws.

[¶ 22] Based upon the foregoing, we conclude AEGIS’s excess liability policy was not providing the security required by N.D.C.C. ch. 26.1-41. We further conclude based on the plain language of N.D.C.C. § 26.1-41-17, that Farmers Union’s payment of no-fault benefits to Melberg does not entitle it to seek equitable allocation from AEGIS under the excess liability policy issued to Plains Marketing. We hold the district court erred as a matter of law in denying AEGIS’s motion to dismiss and in granting Farmers Union summary judgment to require arbitration under N.D.C.C. § 26.1-41-17.

[¶ 23] Because we hold that the district court erred in denying AEGIS’s motion to dismiss, AEGIS’s argument that Farmers Union did not timely commence the arbitration proceeding is moot.

IV

[¶ 24] We reverse the district court judgment.

[¶ 25] GERALD W. VANDE WALLE, C.J., and DALE V. SANDSTROM, and CAROL RONNING KAPSNER, JJ„ concur.

MARING, Justice,

dissenting.

[¶ 26] I respectfully dissent.

[V27] Under N.D.C.C. § 26.1-41-17, which was repealed effective August 1, 2005, a basic no-fault insurer could recover no-fault benefits paid to an injured person from “the motor vehicle liability insurer of a secured person.” One of our basic rules of construction states that the “[code’s] provisions ... are to be construed liberally, with a view to effecting its objects and to promoting justice.” N.D.C.C. § 1-02-01.

[¶ 28] The Auto Accident Reparations Act defines “secured person” as “the owner, operator, or occupant of a secured motor vehicle, ...” N.D.C.C. §26.1-41-01(20). A “secured motor vehicle” means “a motor vehicle with respect to which the security required by this chapter was in effect at the time of its involvement in the accident resulting in accidental bodily injury.” N.D.C.C. § 26.1-41-01(19) (emphasis added). The “security required by this chapter,” ch. 26.1-41, the Auto Reparations Act, is set forth specifically as follows:

1. The owner of a motor vehicle required to be registered in this state, or the owner of a motor vehicle operated in this state by the owner or with the owner’s permission, shall continuously provide with respect to the motor vehicle during the period in which operation is contemplated in this state security for payment of basic no-fault benefits and the liabilities covered under the motor vehicle liability insurance.

N.D.C.C. § 26.1-41-02(1).

[¶ 29] Plains Marketing was the owner of the semi-truck, which was insured at the time of this accident for basic no-fault benefits and liability by Zurich-American Insurance. Plains Marketing was a “secured person” and its semi-truck was a “secured motor vehicle” under the Auto Accident Reparations Act.

[¶ 30] Under the equitable allocation provision the amount of recovery by Farmers Union may not exceed the “limits of liability of the secured person’s motor vehicle liability insurance policy or other security. ...” N.D.C.C. § 26.1-41-17. Plains Marketing’s primary motor vehicle liability insurance policy provided by Zurich-American Insurance paid its policy limits in settlement of Taylor’s claims. Ordinarily, this would mean that Farmers Union would not be able to recover the no-fault benefits it paid. However, Plains Marketing also carried an excess liability policy with AEGIS. Plains Marketing paid part of the settlement with the injured party, and AEGIS indemnified Plains Marketing. AEGIS does not claim that its policy limits were thereby exhausted; therefore, the limits of liability coverage have not been reached.

[¶ 31] “Our no-fault statutes are intended to provide adequate compensation to victims of motor vehicle accidents, and to avoid protracted litigation over issues of fault or causation by removing the bulk of motor vehicle accidents from the tort system.” Haff v. Hettich, 1999 ND 94, ¶ 33, 593 N.W.2d 383 (citations omitted). In light of the purpose of our no-fault law, it follows that “equitable allocation is a purely statutory remedy between insurers” and “creates a right of equitable allocation directly against the tortfeasor’s liability insurer through agreement or intercompany arbitration.” Isaac v. State Farm Mut. Auto. Ins. Co., 547 N.W.2d 548, 550 (N.D. 1996) (quoting Burgener v. Bushaw, 545 N.W.2d 163, 166-167 (N.D.1996)). I am of the opinion that the majority’s interpretation frustrates the public policy and purpose behind the equitable allocation theory. Courts should construe statutes to effectuate the legislative purpose which prompted their enactment.

[¶ 32] The damages covered by basic no-fault benefits are damages that would be recoverable from the tortfeasor and covered under the tortfeasor’s liability coverage. After the exhaustion of the Zurich-American Insurance policy limits, AEGIS would be liable for these damages, but for our no-fault law. Our no-fault law established a right of a no-fault carrier to seek reimbursement of basic no-fault benefits from a liability carrier, instead of a right of subrogation. Isaac, 547 N.W.2d at 550.

[¶ 33] In this case, the motor vehicle owner, Plains Marketing, had in effect at the time of the accident a policy of motor vehicle liability insurance or “security” with respect to the motor vehicle involved in the accident which provided basic no-fault benefits. Plains Marketing was a “secured person” at the time of the accident. The AEGIS policy provided motor vehicle liability coverage in excess of the motor vehicle liability coverage provided under the Zurich-American Insurance policy. I would interpret “the motor vehicle liability insurer of a secured person” under N.D.C.C. § 26.1-41-17 to include the AEGIS policy as well as the Zurich-American Insurance policy. Under the public policy at the time of the accident, I cannot see why Farmers Union should not be able to recover no-fault benefits it paid from AEGIS’ motor vehicle liability coverage.

[¶ 34] I would affirm the judgment of the district court.

[¶ 35] MARY MUEHLEN MARING, J.


source: Caselaw Access Project

author: MARING, Justice.

license: Public Domain

text:
    2007 ND 136
    Jamey M. STEPHENSON, Appellee, v. The Honorable John HOEVEN, as Governor of the State of North Dakota, and as Commander in Chief of the North Dakota National Guard, and Major General David Sprynczynatyk, Adjutant General of the North Dakota National Guard, Appellants.
    No. 20070055.
    Supreme Court of North Dakota.
    Aug. 22, 2007.

      Monty G. Mertz, Mertz Law Office, Fargo, N.D., for appellee.
    Douglas Alan Bahr, Solicitor General, Office of Attorney General, Bismarck, N.D., for appellants.
   MARING, Justice.

[¶ 1] John Hoeven, as Governor of North Dakota and commander in chief of the North Dakota National Guard, and Major General David Sprynczynatyk, the Adjutant General of the North Dakota National Guard (collectively referred to as the “Adjutant General”), appeal from a district court judgment reversing a decision to separate Jamey Stephenson from the North Dakota National Guard. We conclude the Adjutant General’s decision is not appealable, and we reverse the judgment denying the Adjutant General’s motion to dismiss Stephenson’s appeal.

I

[¶ 2] In 2001, Stephenson was accepted for fighter pilot training in the North Dakota Air National Guard. Stephenson’s air national guard service agreement required him to remain a member of the Air National Guard of the United States for ten years after graduation from Undergraduate Pilot Training (“UPT”). It further provided that “entry into undergraduate pilot or navigator training results from a requirement with [his] parent ANG unit for a combat ready aircrew member, and that if for any reason [his] performance during training results in judgment by competent authority that [he was] not suited to pilot or navigate [his] unit’s mission aircraft, [he] may be separated from the Air National Guard. However, [he] may be transferred to the USAFR to fulfill the non-expired portion of [his] military service obligation.”

[¶3] Stephenson completed UPT but was not selected to continue to Introduction to Fighter Fundamentals (“IFF”) training. Stephenson claimed he successfully completed UPT but some of his scores had been incorrectly reported to his air guard unit in Fargo, and he was not permitted to continue IFF training with his unit because he had filed a complaint with his superiors. According to the commander of the 119th Fighter Wing of the North Dakota Air National Guard, Stephenson was not allowed to continue his training because of low scores in UPT and he was advised to seek a position with another guard unit that could utilize his flying skills, to find a line officer position with another unit, or to resign his commission.

[¶ 4] In March 2005, Stephenson was sent a letter addressing his failure to find a position in another unit, which provided:

1.It has been brought to my attention that you passed Undergraduate Pilot Training (UPT) in January 2004, but were subsequently not selected for Fighter Aircraft Training. At that time you were directed to find a new unit that could use your services. No specific time frame was given in regard to this order, however, our expectations were that you should have the initiative and drive to complete this order and find a unit that could utilize your skills. We are now far beyond a reasonable time frame for this to have been accomplished. We have had numerous student pilots who were in identical shoes who have found new units to transfer to in a few weeks or maybe a month or two at most. You have had 14 months and the situation is still unresolved. The matter was discussed with you numerous times, and it is clear that you have done little or nothing to bring this matter to conclusion.
2. More specifically it was pointed out to you that you had options to:
(1) Comply with the January 04 order and to find yourself an Air National Guard Unit that can utilize your skills.
(2) Find a line officer position with an Air National Guard, United States Air Force Reserve, or Active Duty United States Air Force unit. Be advised a line officer position is not being offered to you by the North Dakota Air National Guard (NDANG) at this time.
(3) Resign your commission
3. In light of the above, I am informing you that I intend to begin Administrative Discharge procedures under [Air Force Instruction]36-3209 Para. 2.34, Substandard Performance of Duty. You have until the close of business 15 April 2005 to provide written documentation to my desk indicating that one of the above choices has been complied with. If you fail to find a position or resign by that time, I will direct that the discharge process begin.

[¶ 5] In September 2005, a notification for involuntary discharge was sent to Stephenson, which provided:

1. I am recommending your discharge from the North Dakota Air National Guard of the United States and as a Reserve of the Air Force for Substandard Performance of Duty, in accordance with AFI 36-3209, Chapter 2, para. 2.34 and Non-availability of Paid Status Space, in accordance with AFI 36-3209, Chapter 2, para. 2.25.8. Copies of the documents to be forwarded to the separation authority, The Adjutant General, to support this recommendation are attached.
2. My reason for this action is: On 1 Nov 02, you started in Undergraduate Pilot Training (UPT) at Columbus, MS. Due to your low MASS score you were not allowed to proceed to Introduction to Flight Fundamentals (IFF) course held at Moody, AFB. Upon notification that you would not progress to IFF, you were instructed to search for another position that could utilize your UPT skills. Memorandum dated Mar 29, 2005, received by you on Apr 1, 2005, instructing you to inquire with other units about slot availability and update your unit with any contacts and/or progress you had made. As of August 20, 2005 your unit has received no feedback on your progress or if you have found another position. Since you have failed to locate a paid status space we are forced to start involuntary separation procedures.
3. This action could result in your separation with an Honorable, or General Under Honorable Conditions discharge. I am recommending that you be separated with an Honorable discharge.

[¶ 6] Stephenson elected to proceed to an administrative discharge board. The Adjutant General appointed a board of officers to consider whether Stephenson should have his federal recognition withdrawn and whether he should be discharged from the North Dakota Air National Guard for substandard performance of duty and for nonavailability of paid status space. After a hearing, the board of officers found Stephenson should be discharged because he had performed in a substandard manner and due to “nonavailability of paid status space.” The board of officers concluded the primary reason for discharge was substandard performance and recommended that Stephenson be “[djischarged from the Air National Guard and as a Reserve of the Air Force with his service characterized as Honorable.”

[¶ 7] The board’s proceedings were reviewed by a staff judge advocate, who found:

a. The board was properly appointed by the Adjutant General under the authority of the Secretary of the Air Force.
b. The respondent was properly notified of the board proceeding to include his right to military counsel or civilian counsel at his own cost. A Judge Advocate, qualified under Article 27(b)(1) of the UCMJ, represented the respondent.
c. The recorder, defense counsel, and board members were all in the Title 10 status for the hearing as required.
d. All testimony at the hearing was sworn properly and the respondent was properly advised of his rights under Article 31, UCMJ and his right to make an unsworn statement. The respondent elected to make an unsworn statement to the board through his counsel.
e. All board members were senior in grade to the respondent (all were Colonels 0-6). The legal advisor was a Lt. Col. The recorder was as a Judge Advocate with the rank of Major.
f. The legal advisor, recorder, and defense counsel have all authenticated the record and certified that the summarized transcript is a true and accurate record of the board proceeding, g. The board was timely convened and completed its deliberations.
4. I have determined that the appropriate instructions have been followed by the board and other participants. The board of officers has made specific findings and has recommended that lLt. Jamey Stephenson be separated from the North Dakota National Guard and that his Federal Recognition be removed.
5. I find that the record of the proceeding, by a preponderance of the evidence, supports their findings and recommendation. The finding of substandard performance was supported by government exhibits and the live testimony of several officers.

[¶ 8] The board’s recommendation for removal of Stephenson’s federal recognition was forwarded to the National Guard Bureau and was returned with the following statement:

1. We reviewed the case involving lLt. Stephenson. The recommended removal of federal recognition (or administrative discharge) is not complete or legally sufficient.
2. A board hearing was held 5 Dec. 05 in Fargo, ND. We received the file on 10 Feb. 06 and a 26-27 Feb. 06 legal review noted it was complete and legally sufficient to forward to the SAF/PC with a recommendation for discharge, except for a problem. The board was not convened by the “Convening Authority,” ANGRC/CC (see AFI 36-3209, paragraph 4.14 and Attachment 1). It was instead convened by the ND Adjutant General (see Government Exhibit # 3). The Respondent’s Counsel objected to the hearing (see transcript at page 3). We checked and found the case was not properly convened. The ND TAG does not have authority to convene a federal recognition/discharge board.
3. Because the ND TAG did not have the authority to convene this board, the case file was returned.

[¶ 9] In August 2006, the Adjutant General issued a memorandum for Stephenson’s administrative separation, addressing Stephenson’s claims:

4. The decision to not send lLt. Stephenson to Phase II of UPT was not based on “failure” of Phase I, but was the command decision based on professional judgment that lLt. Stephenson did not have scores sufficiently high enough to become a successful fighter pilot. This is in fact fairly common; of the 10 individuals selected for UPT training since 2001, only 5 were allowed to go on to Phase II. The remaining five were still eligible to fly other aircraft and all, with the single exception of lLt. Stephenson, secured a position with another unit. When lLt. Stephenson entered into his service agreement he agreed in writing that “if for any reason my performance during training results in judgment by competent authority that I am not suited to pilot or navigate my unit’s mission aircraft, I may be separated from the air National Guard.” The unit made the professional judgment, based upon years of past experience and upon the recommendation of lLt. Stephenson’s Phase I training squadron, that he had not developed the skill set that would permit him to be sent on to Phase II fighter pilot training.
Regarding the allegation that lLt. Stephenson has not been allowed to drill or perform any annual training, in late February of 2005 the Operations Group Commander had advised lLt. Stephenson to not attend drill. In April of 2005 a plan to resolve the situation was set in place where in lLt. Stephenson was to work with an NGB representative directly to seek assistance in finding a flying position with another unit. After not finding a new position for a few months, lLt. Stephenson requested to drill again in late summer or early fall of 2005. He did perform subsequent UTAs and was paid in September, November and December of 2005. After the board proceeding, lLt. Stephenson has made no attempt to contact the unit to perform any drill or AT even though he was advised that was the appropriate avenue if he wished to drill or perform any annual training.
The separation of an officer from the Air National Guard requires an efficiency board “as provided by federal regulation” (NDCC 37-04-15). lLt. Stephenson’s counsel references a North Dakota law requiring a 5 member board of officers. The only such statute referencing a board of officers is NDCC 37-04-17, which requires a 5 member board of commissioned officers before the Governor may place an officer on the retired list. There is no other statutory “board” requirement for separation of officers. In this case the Adjutant General is the appropriate conveying and separation authority for ANG Unique Separations under AFI 36-3209. Based on AFI 36-3209 and discussions with Air Force Reserve Personnel Center (Separations Division) the Adjutant General may direct separation from the ANG and transfer to the IRR for ANG Unique Separations.
5. Considering the matters raised by lLt. Stephenson, the entire record, and the recommendations of the chain-of-command, I find that lLt. Stephenson should be separated from the North Dakota Air National Guard and transferred to the Individual Ready Reserve (IRR). lLt. Stephenson will be issued an honorable discharge. The sole basis for the discharge is AFI 36-3209, Chapter 2, ANG Unique Separations, Non-Availability of Paid Status Space.

The Adjutant General thereafter issued “Special Orders AA-86” under Air Force Instruction 36-3209, Chapter 2, Section 2C, paragraph 2.25, which relieved Stephenson from assignment with the 8119th Student Flight of the North Dakota Air National Guard on the basis of nonavailability of paid status space, issued him an honorable discharge from the North Dakota Air National Guard, and transferred him to the Individual Ready Reserve.

[¶ 10] Stephenson appealed the Adjutant General’s decision to the district court under N.D.C.C. § 28-32-42(1) of the Administrative Agencies Practice Act, N.D.C.C. ch. 28-32. The Adjutant General moved to dismiss Stephenson’s appeal, asserting the district court did not have jurisdiction because the Adjutant General’s decision was issued under federal law that controls the review process. The Adjutant General argued the decision “was not issued pursuant to N.D.C.C. ch. 28-32[and] the challenged military personnel decision was regulated by the federal government.” The Adjutant General claimed the district court lacked jurisdiction because the appeal was not from an adjudicative proceeding and military personnel decisions were nonjusticiable in civilian courts. Stephenson responded that the Adjutant General’s decision was appealable and ultimately asked the court to deny the motion to dismiss and set a briefing schedule and date for oral argument.

[¶ 11] The district court denied the Adjutant General’s motion to dismiss and decided the Adjutant General exceeded its authority in issuing Special Orders AA-86. The court said the National Guard is an administrative agency and rejected the Adjutant General’s argument that because Special Orders AA-86 was not issued as part of an adjudicative proceeding, the court lacked jurisdiction to review the order under N.D.C.C. § 28-32-42. The court said N.D.C.C. § 28-32-42 did not require an adjudicative proceeding to review Special Orders AA-86; rather, that statute only required “any proceeding” for review of the Adjutant General’s order. The court explained People to Save the Sheyenne River, Inc. v. North Dakota Dep’t of Health, 2005 ND 104, ¶22, 697 N.W.2d 319, allowed court review of an agency decision where there was “no adjudicative proceeding and preparation of findings of fact” and concluded Stephenson’s appeal was reviewable under N.D.C.C. § 28-32-42. The court reviewed the Adjutant General’s decision under the arbitrary, capricious, and unreasonable standard employed in People to Save the Sheyenne River, at ¶ 24. The court said most of Stephenson’s claims were nonjusti-ciable, but his claim that the Adjutant General exceeded its authority in issuing Special Orders AA-86 was justiciable under the second exception of the Feres doctrine, which authorizes limited judicial review if official military action is taken in excess of authority. See Feres v. United States, 340 U.S. 135, 71 S.Ct. 153, 95 L.Ed. 152 (1950). The court decided the Adjutant General’s decision was arbitrary, capricious, and unreasonable, because the Adjutant General lacked authority to convene the board of officers and its decision to separate Stephenson failed to comply with N.D.C.C. §§ 37-04-15 or 37-04-17. The court denied the Adjutant General’s motion to dismiss, reversed and rendered the Adjutant General’s decision null and void, and remanded to the North Dakota Air National Guard for disposition.

II

[¶ 12] The Adjutant General argues the district court lacked subject matter jurisdiction to hear Stephenson’s appeal under the Administrative Agencies Practice Act, because N.D.C.C. § 28-32-42(1) authorizes a district court to hear appeals of agency decisions issued only after adjudicative proceedings and the Adjutant General’s decision in this case was not issued after an adjudicative proceeding, which is defined in N.D.C.C. § 28-32-01(1) to mean:

[A]n administrative matter resulting in an agency issuing an order after an opportunity for hearing is provided or required. An adjudicative proceeding includes administrative matters involving a hearing on a complaint against a specific-named respondent; a hearing on an application seeking a right, privilege, or an authorization from an agency, such as a ratemaking or licensing hearing; or a hearing on an appeal to an agency. An adjudicative proceeding includes reconsideration, rehearing, or reopening. Once an adjudicative proceeding has begun, the adjudicative proceeding includes any informal disposition of the administrative matter under section 28-32-22 or another specific statute or rule, unless the matter has been specifically converted to another type of proceeding under section 28-32-22. An adjudicative proceeding does not include a decision or order to file or not to file a complaint, or to initiate an investigation, an adjudicative proceeding, or any other proceeding before the agency, or another agency, or a court. An adjudicative proceeding does not include a decision or order to issue, reconsider, or reopen an order that precedes an opportunity for hearing or that under another section of this code is not subject to review in an adjudicative proceeding. An adjudicative proceeding does not include rulemaking under this chapter.

The Adjutant General contends N.D.C.C. § 37-04-15(1) does not require the Adjutant General to hold an adjudicative proceeding to vacate a North Dakota Air National Guard member’s commission; rather, that statute requires an efficiency board as provided by federal regulation. Stephenson responds the Adjutant General is an administrative agency under N.D.C.C. § 28-32-01(2) and Horst v. Guy, 219 N.W.2d 153, 156 (N.D.1974), and his appeal to the district court is authorized by N.D.C.C. § 28-32-42(1).

[¶ 13] Under N.D. Const. art. VI, § 8, a district court has appellate jurisdiction conferred upon it by law for appeals from administrative agency decisions. See DuPaul v. North Dakota Dep’t of Transp., 2003 ND 201, ¶ 5, 672 N.W.2d 680. Section 28-32-42, N.D.C.C., authorizes appeals from an administrative agency order and provides, in part:

1. Any party to any proceeding heard by an administrative agency, except when the order of the administrative agency is declared final by any other statute, may appeal from the order within thirty days after notice of the order has been given as required by section 28-32-39. If a reconsideration has been requested as provided in section 28-32-40, the party may appeal within thirty days after notice of the final determination upon reconsideration has been given as required by sections 28-32-39 and 28-32-40. If an agency does not dispose of a petition for reconsideration within thirty days after the filing of the petition, the agency is deemed to have made a final determination upon which an appeal may be taken.
3. a. The appeal of an order may be taken to the district court designated by law, and if none is designated, then to the district court of the county in which the hearing or a part thereof was held. If the administrative proceeding was disposed of informally, or for some other reason no hearing was held, an appeal may be taken to the district court of Bur-leigh County. Only final orders are appealable. A procedural order made by an administrative agency while a proceeding is pending before it is not a final order.

[¶ 14] We construe statutes to ascertain legislative intent. People to Save the Sheyenne River, 2005 ND 104, ¶ 18, 697 N.W.2d 319; In re Juran and Moody, Inc., 2000 ND 136, ¶ 6, 613 N.W.2d 503. “We initially seek to ascertain the legislature’s intent from the language of the statute, and words in the statutes must be given their plain, ordinary, and commonly understood meanings.” People to Save the Sheyenne River, at ¶ 18. We construe statutes as a whole to give meaning, if possible, to every word, phrase, and sentence. Id. We also harmonize statutes to avoid conflicts between them. Id.

[¶ 15] An “administrative agency” is defined to mean “each board, bureau, commission, department, or other administrative unit of the executive branch of state government, ... and does not include ... [t]he adjutant general with respect to the department of emergency services.” N.D.C.C. § 28-32-01(2)(b). The department of emergency services is governed by N.D.C.C. ch. 37-17.1, and the plain language of N.D.C.C. § 28-32-01(2)(b) supports an interpretation that the Adjutant General is an administrative agency for other purposes. See Horst, 219 N.W.2d at 156. In Horst, 219 N.W.2d at 154-56, a career serviceman brought a class action to secure payment of a veteran’s bonus under the Vietnam Conflict Veterans’ Adjusted Compensation Act. Under that Act, the Adjutant General had promulgated a regulation for determining residency for purposes of receiving benefits. Id. at 156. In that context, this Court said “[i]t is agreed that the office of the adjutant general is an administrative agency under our law, and that the rules and regulations were promulgated in compliance with the requirements of the statutes.” Id. This Court held the Adjutant General’s regulation was valid and also construed the relevant statutory definition of resident to support the denial of the plaintiffs application for benefits in that case. Id. at 158-59. Although this Court’s decision in Horst said the Adjutant General is an administrative agency, that decision involved a lawsuit for payment of adjusted compensation benefits and did not involve an issue about appealability of an agency decision.

[¶ 16] In Hammond v. North Dakota State Pers. Bd., 332 N.W.2d 244, 248 (N.D. 1983), this Court construed a prior version of N.D.C.C. § 28-32-42 to authorize an appeal from a final decision by an “administrative agency,” as that term was defined in N.D.C.C. § 28-32-01. When Hammond was decided, the relevant statutory language authorized an appeal from an agency “decision” and said “[a]ny party to any proceeding heard by an administrative agency, except in cases where the decision of the administrative agency is declared final by any other statute, may appeal from such decision.” 332 N.W.2d at 248. This Court recognized a 1981 amendment to the definition of administrative agency had deleted language requiring the agency to have authority to issue an order “which by statute is subject to review in the courts of this state.” Id. at 247. We said “the current definition of an administrative agency no longer requires that there be an express statutory grant of a right of review under a statute located outside the provisions of Chapter 28-32, N.D.C.C.,” and under N.D.C.C. § 28-32-15, “decisions of administrative agencies which constitute ‘final orders or decisions’ ... are appeal-able to the district court.” Hammond, at 248.

[¶ 17] The relevant provisions in N.D.C.C. § 28-32-15 for appeals from administrative agency decisions have been reformatted and moved to N.D.C.C. § 28-32-42 since Hammond. See 1985 N.D. Sess. Laws ch. 356, § 1 (adding language about designation of parties); 1991 N.D. Sess. Laws ch. 342, § 23 (reformatting into six subsections, authorizing appeal from “order” instead of decision, and adopting language incorporating the reference to provisions about findings of fact and reconsideration); 1993 N.D. Sess. Laws ch. 329, § 4 (requiring filing of bond for costs and authorizing waiver of bond); 2001 N.D. Sess. Laws ch. 293, § 12 (moving N.D.C.C. § 28-32-15 to N.D.C.C. § 28-32-42).

[¶ 18] Here, the Adjutant General argues “any proceeding” in N.D.C.C. § 28-32-42(1) refers only to an “adjudicative proceeding” because that subsection incorporates the notice requirements for an adjudicative proceeding in N.D.C.C. § 28-32-39. We need not decide if “any proceeding” in N.D.C.C. § 28-32-42(1) refers only to an “adjudicative proceeding,” however, because we conclude Stephenson’s appeal is not authorized by other provisions of N.D.C.C. ch. 28-32 and N.D.C.C. ch. 37-04.

[¶ 19] Section 28-32-23, N.D.C.C., recognizes that notwithstanding the requirements for standardization of procedures in adjudicative proceedings, an agency may adopt specific rules of procedure not inconsistent with N.D.C.C. ch. 28-32 and may also adopt specific rules of procedure when necessary to comply with requirements elsewhere in the code or when necessary to comply with the requirements of federal law. Section 37-04-15(1), N.D.C.C., provides that a commission in the national guard may be vacated when it is determined by an “efficiency board as provided by federal regulation that the officer holding the commission is no longer fit for service by reason of the officer’s moral character, capacity, or general fitness for service.” The plain language of N.D.C.C. §§ 28-32-23 and 37-04-15(1), when read together to give meaning to each provision, contemplates procedures that are governed by federal regulation and are excluded from the requirements of an adjudicatory proceeding in N.D.C.C. ch. 28-32.

[¶ 20] In People to Save the Sheyenne River, 2005 ND 104, ¶¶ 12, 17, 697 N.W.2d 319, one statute, N.D.C.C. § 61-28-07, authorized an appeal to the district court from an adverse ruling by the Health Department on a water permit and another statute, N.D.C.C. § 23-01-23, specifically precluded application of the procedures for an adjudicative proceeding to a permit hearing for purposes of receiving public comment. In that case, the administrative proceeding did not result in an adjudicative proceeding and there were no findings of fact and conclusions of law under N.D.C.C. § 28-32-39. People to Save the Sheyenne River, at ¶ 21. Nevertheless, N.D.C.C. § 61-28-07 authorized an appeal, and we reviewed the decision under the arbitrary, capricious, and unreasonable standard. See People to Save the Shey-enne River, at ¶ 24.

[¶ 21] Here, the decision of the Adjutant General was not made under N.D.C.C. § 37-04-15 or N.D.C.C. § 37-04-17, but rather was made in accordance with federal law. Whether the Adjutant General complied with the powers conferred under N.D.C.C. § 37-04-15 is therefore not at issue. This decision was a “unique separation,” specifically nonavailability of paid status space, governed by federal law and not covered by state statute. Any review or challenge to this decision is, therefore, governed by federal law. Under N.D.C.C. § 37-01-23, “[a]ll matters relating to the organization, discipline, and government of the national guard, not otherwise provided for in this title or in the general regulations, must be decided by the custom and usage of the armed forces of the United States.” In reviewing Stephenson’s brief on appeal, he claims that the basis cited for the discharge, which was Air Force Instruction 36-3209, paragraph 2.25.8 ANG Unique Separations/Nonavailability of Paid Status Space, does not apply to him. Stephenson claims the only authority for any board of officers is N.D.C.C. § 37-04-15 and N.D.C.C. § 37-04-17, yet he acknowledges the Adjutant General did not base Stephenson’s separation on any board decision. The record clearly indicates the Adjutant General unilaterally made the decision to separate Stephenson from the North Dakota Air National Guard and transfer him to the Independent Ready Reserve based on Air Force Instruction 36-3209, paragraph 2.25.8. Stephenson asks this Court to interpret military law and to conclude Air Force Instruction 36-3209, paragraph 2.25.8 does not apply to Stephenson. We decline to engage in the construction of this military law in this context.

[¶ 22] Stephenson’s reliance on Nyberg v. State Military Dep’t, 2003 WY 43, 65 P.3d 1241, is misplaced because that decision said Wyoming law for contesting the exercise of that state’s Adjutant General’s authority required compliance with the Wyoming Administrative Procedure Act. Id. at ¶¶ 29-30.

[¶ 23] In the absence of any statute specifically authorizing an appeal to the state district court of a decision based on this particular federal law and applying N.D.C.C. § 37-01-23, we conclude the district court erred in deciding it had appellate jurisdiction to hear Stephenson’s appeal and erred in denying the Adjutant General’s motion to dismiss the appeal.

[¶ 24] We decline the Adjutant General’s invitation to treat Stephenson’s attempted appeal as a petition for a writ of mandamus or other special proceeding. We conclude Stephenson’s appeal is not authorized by statute and we do not consider whether the Adjutant General exceeded his authority under Air Force Instruction 36-3209 and the doctrine emanating from Feres, 340 U.S. 135, 71 S.Ct. 153, 95 L.Ed. 152. See Nyberg, 2003 WY 43, ¶¶ 23-28, 65 P.3d 1241.

Ill

[¶ 25] We reverse the district court judgment denying the Adjutant General’s motion to dismiss Stephenson’s appeal.

[¶ 26] GERALD W. VANDE WALLE, C.J., and DANIEL J. CROTHERS, DALE V. SANDSTROM, and CAROL RONNING KAPSNER, JJ., concur.


author: SABERS, Justice.

text:
    2007 SD 63
    STATE of South Dakota, Plaintiff and Appellee, v. ONE 1969 BLUE PONTIAC FIREBIRD, VIN # 223379U128403, and $4,303.83 In American Currency, Defendant and Appellant.
    No. 24272.
    Supreme Court of South Dakota.
    Considered on Briefs April 23, 2007.
    Decided June 27, 2007.
    Lawrence E. Long, Attorney General, Pierre, South Dakota, Constance K. Larson, Assistant Attorney General, Sioux Falls, South Dakota, Attorneys for plaintiff and appellee.
    Richard L. Johnson, Attorney at Law, Sioux Falls, South Dakota, Attorney for defendant and appellant.
   SABERS, Justice.

[¶ 1.] After the State filed a complaint alleging One 1969 Blue Pontiac (Blue Pontiac) and $4,303.83 in American Currency were subject to forfeiture, Ora Mae Baade (Baade) filed a verified answer claiming the Blue Pontiac was hers and demanded a jury trial. The circuit court found there is no right to a jury trial in a forfeiture action and denied her request. Baade appeals and we reverse.

FACTS

[¶ 2.] According to the complaint, the car was seized because it had been used to transport, possess, or conceal controlled drugs or substances on the dates of July 13, 2006 through July 17, 2006. Baade is the registered owner of the Blue Pontiac. However, the complaint alleged the true owner is her son, Thomas Baade.

[¶ 3.] In her answer, Baade claimed that “she did not know, and in the exercise of ordinary care should not have known, that [her vehicle] transported, possessed, or concealed any quantity of controlled drugs” or was intended to be used in that manner. Baade requested the return of her Blue Pontiac and demanded a jury trial pursuant to the Seventh Amendment of the United States Constitution and Article VI section 6 of the South Dakota Constitution.

[¶ 4.] Later, Baade made a separate motion for a jury trial. The court held a hearing on the motion, but denied her demand for a jury trial. Baade filed a petition for discretionary appeal with this Court, which was granted. The sole issue on appeal is:

Whether Article VI, section 6 of the South Dakota Constitution provides for a jury trial in civil forfeiture actions.

STANDARD OF REVIEW

[¶ 5.] The parties agree that SDCL 34-20B-88 provides for a court trial in a contested forfeiture action. If the South Dakota Constitution provides for a jury trial in forfeiture actions, then the statute would be unconstitutional to the extent it denies the parties the right to a jury trial. The constitutionality of a statute is a question of law reviewed de novo. State v. $1,010 in American Currency, 2006 SD 84, ¶ 8, 722 N.W.2d 92, 94.

[¶ 6.] Article VI, section 6 of the South Dakota Constitution provides,

The right of trial by jury shall remain inviolate and shall extend to all cases at law without regard to the amount in controversy, but the Legislature may provide for a jury of less than twelve in any court not a court of record and for the decision of civil cases by three-fourths of the jury in any court.

This section of the Constitution guarantees both litigants the right to a jury trial. First Nat’l Bank of Philip v. Temple, 2002 SD 36, ¶10, 642 N.W.2d 197, 201. We have recognized that the right to a jury trial does not exist in all cases, id., but exists in cases “where such right existed at common law.” State v. Page, 2006 SD 2, ¶ 76, 709 N.W.2d 739, 764. “In cases where the pleadings seek equitable relief or where the legal relief is incidental, a jury trial is a matter for the trial court’s discretion. Conversely, when the action is at law, either party has a right to a jury trial.” First Nat’l Bank of Philip, 2002 SD 36, ¶ 10, 642 N.W.2d at 201 (quoting First W. Bank, Sturgis v. Livestock Yards, 466 N.W.2d 853, 856 (S.D.1991)) (additional citations omitted).

[¶ 7.] The State argues there are two reasons Baade should be denied a jury trial. First, forfeiture actions arise in equity, and there is no right to a jury trial when the ease arises in equity. Second, drug forfeitures did not exist when South Dakota ratified its Constitution; therefore, the Constitution did not preserve the right to a jury trial.

A. Equity

[¶ 8.] This Court has not considered whether forfeiture actions are equitable in nature. The State claims that forfeiture actions arise in equity because they involve “unjust enrichment of persons involved in the drug trade.” In support of its argument, it lists several circuit court orders that deny a jury trial in forfeiture cases. The State claims these circuit courts have “found drug asset forfeiture cases to be equitable in nature and have denied jury trials.” However, only one order denies a jury trial because it found a forfeiture case involving money to be equitable. The record does not indicate if the other circuit courts considered whether forfeiture is an equitable action as the other orders simply state the case will be heard by the court pursuant to SDCL 34-20B-88, the section of the forfeiture statutes relating to trials. Moreover, these circuit court orders are not binding on this Court.

[¶ 9.] Furthermore, forfeiture cases involving items allegedly used to transport drugs, as alleged in this case, may not involve unjust enrichment. It could be argued that forfeiture cases involving suspected drug proceeds would involve unjust enrichment. However, the statutes do not require the items to be derived from drug dealing in order to bring a forfeiture action. SDCL 34-20B-70. In that respect, the drug forfeiture statutes do not appear to be equitable.

[¶ 10.] In addition, as far back as 1823, the United States Supreme Court has found forfeiture actions to be proceedings at common law. United States v. One 1976 Mercedes Benz 280S, 618 F.2d 453, 459 (7thCir.1980) (quoting The Sarah, 8 Wheat. 391, 394, 5 L.Ed. 644 (1823)). The Supreme Court noted, “In the trial of all cases of seizure, on land, the court sits as a court of common law.” The Sarah, 8 Wheat, at 394, 5 L.Ed. at 644. “In all cases at common law, the trial must be by jury.” Id; see also C.J. Hendry Co. v. Moore, 318 U.S. 133, 137-140, 63 S.Ct. 499, 501-503, 87 L.Ed. 663 (1943) (noting that historically, a forfeiture proceedings was conducted as a trial by jury); One 1976 Mercedes Benz 280S, 618 F.2d at 464 (quoting C.J. Hendry, 318 U.S. at 153, 63 S.Ct. at 510) (noting that the common understanding was forfeiture cases were in common law).

[¶ 11.] Authority indicates civil forfeiture proceedings are proceedings at law and are not equitable. As proceedings at law, the right to a jury trial existed at common law. Therefore, our next inquiry is whether our Constitution preserved the right to a jury trial in forfeiture cases.

B. Jury Trial under South Dakota Constitution

[¶ 12.] As Baade concedes, the right to a jury trial under the Seventh Amendment to the United States Constitution is not applicable to the states. However, the underlying analysis and rationale when deciding a right to a jury trial exists in civil forfeiture actions in federal court is helpful in our inquiry. The wording of the Seventh Amendment is similar to Article VI section 6 and this section of our constitution is understood to “preserve the right to a jury where such right existed at common law” just as “[i]n Suits at common law ... the right of a trial by jury shall be preserved” under the Seventh Amendment. Moreover, our civil forfeiture actions predicated upon SDCL 34-20B-70 are based on the federal forfeiture statutes. State v. One 1995 Silver Jeep Grand Cherokee and $4,97 in American Currency, 2006 SD 29, ¶ 5, 712 N.W.2d 646, 649.

[¶ 13.] In One 1976 Mercedes Benz 280S, the United States Court of Appeals for the Seventh Circuit held the Seventh Amendment preserved the right to a jury-trial in civil forfeiture actions. 618 F.2d at 454. The Seventh Circuit noted that as far back as 1823 the United States Supreme Court has acknowledged that “[i]n the trial of all cases of seizure, on land, the court sits as a court of common law.” Id. at 459 (quoting The Sarah, 8 Wheat, at 394, 5 L.Ed. 644). The court of appeals found it an “inescapable” conclusion that prior to December 15, 1791 statutory forfeitures on land were conducted as jury trials. Id. at 466. Thus, the Seventh Amendment preserved the right to a jury trial in forfeiture actions conducted in federal court.

[¶ 14.] In addition to the federal courts, several states have considered whether their state constitutions require a jury trial in civil forfeiture actions. A survey of states indicates the courts found a jury trial is available in California, Florida, Idaho, Illinois, Maine, Massachusetts, New York, Oregon, Pennsylvania, South Carolina, New Jersey, Vermont and Oklahoma.

[¶ 15.] On the other hand, Alabama, Georgia, Michigan, Minnesota, North Carolina, Tennessee and North Dakota have found a jury trial is not required in civil forfeitures.

[¶ 16.] In State v. $17,515.00 in Cash Money, the North Dakota Supreme Court found there is not a right to a jury trial in drug forfeiture cases. 670 N.W.2d 826, 828 (N.D.2003). The North Dakota court explained that the 1887 Compiled Laws of Dakota Territory only provided for forfeiture actions upon convictions “in cases of treason or when specifically provided by statute.” Id. at 827. Moreover, the 1887 Compiled Laws also specified that “[i]n this territory there is no common law in any case where the law is declared by the codes.” Id. at 828.

[¶ 17.] Due to these provisions, the North Dakota court found drug forfeitures were new statutory proceedings created after the constitution was adopted; eonse-quently, there is no right to a jury trial because “there was no available action in this state for forfeiture of proceeds from illegal drug transactions at the time the constitution was adopted.” Id. Following the reasoning of the North Dakota Supreme Court, the State argues that Baade has no right to a jury trial because no actions for drug forfeitures existed when South Dakota ratified our Constitution in 1889. However, the analysis set forth in One 1976 Mercedes Benz 280S, is more persuasive. See 618 F.2d at 456-69 and supra ¶¶ 10,13.

[¶ 18.] As demonstrated in other cases, the appropriate inquiry is not what type of forfeiture cases existed, but rather, whether forfeiture cases received a jury trial at the time the constitution was ratified. For example, in One 1990 Honda Accord, the New Jersey Supreme Court found drug forfeiture cases allowed for a jury trial even though “forfeiture never existed at common law [in New Jersey] and remains a disfavored remedy.” 712 A.2d at 1150. The New Jersey court explained,

Although forfeiture depends on a statute for its existence, it remains subject to common-law principles. When analyzing the right to trial by jury, the term “common law” refers to those principles of English law that evolved in the common-law courts such as the Court of the Exchequer, as opposed to those applied in the Admiralty, Chancery, or Ecclesiastical Courts. People v. One 1941 Chevrolet Coupe, 37 Cal.2d 283, 231 P.2d 832, 836 (1951); In re Forfeiture of 1978 Chevrolet Van, 493 So.2d 433, 435 (Fla. 1986); Commonwealth v. One 1984 Z-28 Camaro Coupe, 530 Pa. 523, 610 A.2d 36, 39 (1992); see also William B. Stoebuck, Reception of English Common Law in the American Colonies, 10 Wm. & Mary L.Rev. 393 (1968) (“ ‘Common law1 refers to that body of governing principles, mainly substantive, expounded by the common-law courts of England in deciding cases before them.”). Hence, the fact that common-law forfeiture did not become part o/New Jersey common law does not predetermine whether statutory forfeiture was subject to trial by jury in the colonial common-law courts. The subject forfeiture, which involves the seizure on land of innocent property, is the type of case in which the owner would have been entitled to a jury trial in the common-law courts of colonial New Jersey.

Id. at 1150-51 (emphasis added).

[¶ 19.] Likewise, in Idaho Dep’t of Law Enforcement v. Free, the Idaho Supreme Court found parties to civil forfeitures were entitled to a jury trial. 126 Idaho 422, 885 P.2d 381, 386 (1994). It noted that forfeitures existed at common law and it did not find any provision limiting the right to jury trial in forfeiture actions. Id. Importantly, the Idaho laws had a similar provision as our compiled laws, which provided that

[n]o conviction of any person for crime works any forfeiture of any property, except in cases in which a forfeiture is expressly imposed by law; and all forfeitures to the people of this Territory, in the nature of a deodand, or where any person shall flee from justice, are abolished.

Id. Compare with 1887 Compiled Laws of Dakota Territory § 6958. The Idaho court explained that while some types of forfeitures were abolished, some types of forfeitures existed at the time Idaho’s Constitution was ratified. Id. The court did not distinguish between different types of forfeitures, but instead found forfeitures were the type of case that entitles the parties to a jury trial. Id.

[¶ 20.] We find this rationale more persuasive. In the North Dakota case of $17,515 in Cash Money, the question was construed too narrowly. At the time the South Dakota Constitution was ratified, forfeiture cases were actions at law, requiring a jury trial. It is immaterial whether it is drug forfeiture, treason forfeiture, or some other statutorily created forfeiture. Therefore, Article VI, section 6 of South Dakota’s Constitution entitles Baade to a jury trial in this, civil forfeiture action.

[¶ 21.] The State argues that a jury trial is a waste of limited judicial resources and would result in the confusion of issues by the jury. The right to a jury trial may be an inconvenience to the State when it seeks to forfeit allegedly misused property. However, “mere inconvenience would be insufficient reason for denying a traditional and substantial constitutional right.” One 1976 Mercedes Benz 280S, 618 F.2d at 468 (citing Curtis v. Loether, 415 U.S. 189, 198, 94 S.Ct. 1005, 1010, 39 L.Ed.2d 260 (1974)) (additional citations omitted).

[¶ 22.] SDCL 34-20B-88 is unconstitutional to the extent it does not provide for a jury trial in a forfeiture action. Reversed and remanded.

[¶ 23.] GILBERTSON, Chief Justice, and KONENKAMP, ZINTER, and MEIERHENRY, Justices, concur.

      . This case only involves the Blue Pontiac as Baade signed a disclaimer of interest in the Currency.

      . Although Baade’s original demand for a jury trial was alleged under the Seventh Amendment to the United States Constitution along with South Dakota's Constitution, Baade concedes that the Seventh Amendment is not incorporated into the Fourteenth Amendment and not applicable to the states. Therefore, the right to a jury trial will only be examined using Article VI section 6 of the South Dakota Constitution.

      . The statute provides:
      If a verified answer is filed, the forfeiture proceedings shall be set for hearing on a day not more than sixty days therefrom; at the hearing, the state shall establish probable cause for instituting the forfeiture action following which any owner, party in interest or claimant who has filed a verified answer shall have the burden of proving that the property seized is not subject to forfeiture under this chapter. If the court finds that the property is not subject to forfeiture under this chapter, the court shall order the property released to the owner, party in interest or claimant as his right, title or interest appears; the court shall order the property forfeited if it determines that such property was subject to forfeiture. SDCL 34-20B-88 (emphasis added).

      . The State points out that unlike the United States Constitution, our Constitution does not specifically say “suits at common law.” However, this provision has been interpreted to mean a right to a jury trial exists in cases "where such right existed at common law.” Page, 2006 SD 2, ¶76, 709 N.W.2d at 764. See also State v. Piper, 2006 SD 1, ¶ 53, 709 N.W.2d 783, 805; Shaw v. Shaw, 28 S.D. 221, 133 N.W. 292, 293-94 (1911); Grigsby v. Larson, 24 S.D. 628, 124 N.W. 856, 858 (1910).

      . Most sections do not require the State demonstrate the object was derived from the use or distribution of illegal drugs. The statute provides in relevant part:
      The following are subject to forfeiture and no property right exists in them:

      (3) All properly which is used, or intended for use, as a container for property described in subdivisions (1) and (2);
      (4) All conveyances including aircraft, vehicles, or vessels, which transport, possess, or conceal, or which are used, or intended for use, to transport, or in any manner facilitate the transportation, sale, receipt, possession, or concealment of marijuana in excess of one-half pound or any quantity of any other property described in subdivision (1) or (2), except as provided in §§ 34-20B-71 to 34-20B-73, inclusive. This subdivision includes those instances in which a conveyance transports, possesses or conceals marijuana or a controlled substance as described herein without the necessity of showing that the conveyance is specifically being used to transport, possess, or conceal or facilitate the transportation, possession, or concealment of marijuana or a controlled substance in aid of any other offense ....
      The only section that appears to relate to unjust enrichment would be subsection (7): (7) Any assets, interest, profits, income, and proceeds acquired or derived from the unlawful purchase, attempted purchase, distribution, or attempted distribution of any controlled drug or substance or marijuana. SDCL 34-20B-70 (emphasis added).

      . Even though the State now argues forfeitures are in equity, according to the opinion in State v. $1,010 in American Currency, the State argued that "civil forfeiture actions are legal, not equitable....” See 2006 SD 84, ¶ 12, 722 N.W.2d 92, 95.

      . Compare United States Const Amend VII ("In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved ....”), with SD Const Art VI sec 6 ("The right of trial by jury shall remain inviolate and shall extend to all cases at law without regard to the amount in controversy....”).

      . This is the date that the procedure for adding the first ten amendments was concluded. One 1976 Mercedes Benz 280S, 618 F.2d at 456.

      . See State ex rel. Dugger v. Twelve Thousand Dollars ($12,000.00), 155 P.3d 858, 866 (Okla.Civ.App.Div. 2, 2007); Maine v. One 1981 Chevrolet Monte Carlo, 728 A.2d 1259, 1261 (Me. 1999); State v. One 1990 Honda Accord, 154 N.J. 373, 712 A.2d 1148, 1158 (1998); Idaho Dept. of Law Enforcement v. Real Prop. Located in Minidoka County, Idaho, 126 Idaho 422, 885 P.2d 381, 386 (1994); People ex rel. O'Malley v. 6323 North LaCrosse Ave., 158 Ill.2d 453, 199 Ill.Dec. 690, 634 N.E.2d 743, 746 (1994); Pennsylvania v. One Z-28 Camaro Coupe, 530 Pa. 523, 610 A.2d 36, 38 (1992); Medlock v. 1985 Ford F-150 Pick Up, 308 S.C. 68, 417 S.E.2d 85, 87 (1992); Dept. of Law Enforcement v. Real Prop., 588 So.2d 957, 967 (Fla.1991); Massachusetts v. One 1972 Chevrolet Van, 385 Mass. 198, 431 N.E.2d 209, 211 (1982); People v. One 1941 Chevrolet Coupe, 37 Cal.2d 283, 231 P.2d 832, 844 (1951); Oregon v. 1920 Studebaker Touring Car, 120 Or. 254, 251 P. 701, 706 (1926); Colon v. Lisk, 153 N.Y. 188, 47 N.E. 302, 303 (1897); Plimpton v. Town of Somerset, 33 Vt. 283 (Vt.1860).

        .See $17,515.00 in Cash Money, 670 N.W.2d at 828; State v. One 1921 Cadillac Touring Car, 157 Minn. 138, 195 N.W. 778, 780 (1923); State v. Morris, 103 N.C.App. 246, 405 S.E.2d 351, 352-53 (1991); Helms v. Tennessee Dep’t of Safety, 987 S.W.2d 545, 547 (Tenn 1999); Swails v. Georgia, 263 Ga. 276, 431 S.E.2d 101, 103 (1993), cert. denied, 510 U.S. 1011, 114 SCt 602, 126 L.Ed.2d 567 (1993); In re Forfeiture of $1,159,420, 194 Mich.App. 134, 486 N.W.2d 326, 337 (1992), cert. denied sub. nom., Hawkins v. Michigan, 510 U.S. 867, 114 S.Ct. 189, 126 L.Ed.2d 147 (1993); In re One Chevrolet Auto., 205 Ala. 337, 87 So. 592, 593 (1921).

      . The section provides,
      No conviction of any person for crime works any forfeiture of any property, except in the cases of any outlawry for treason, and other cases in which a forfeiture is expressly imposed by law.

      . As the circuit court noted, forfeiture actions did exist when we ratified our Constitution. See 1887 Compiled Laws of Dakota Territory, Member's forfeiture of office, §§ 6325, 6398; Punishment for false impersonation § 6815; Certain actions brought where cause of action arose § 4889(1); § 6981, Civil remedies not affected; Forfeitures to the territory § 5361; § 6958, Conviction does not work forfeiture, located at http;// home.sodaklive.com/histdocs.htm (viewed on April 10, 2007).


author: KONENKAMP, Justice.

text:
    2007 SD 66
    ASPEN STORAGE, INC., Plaintiff and Appellee, v. LAWRENCE COUNTY and Craig R. Hayes, Defendants, v. Brandon Flanagan, Defendant, Third Party Plaintiff and Appellant, v. Raymond Hertel and Delores Hertel aka Eloise Hertel, Third Party Defendants. Aspen Storage, Inc., Plaintiff and Appellee, v. Brandon Flanagan, Defendant and Appellant, The City of Deadwood, a municipal corporation, and Lawrence County, Defendants.
    Nos. 24212, 24213.
    Supreme Court of South Dakota.
    Considered on Briefs on Feb. 13, 2007.
    Decided July 3, 2007.

      Jerry C. Rachetto, Deadwood, South Dakota, Attorney for appellees Aspen Storage, Inc.
    Brandon Flanagan, Spearfish, South Dakota, Pro Se appellant.
   KONENKAMP, Justice.

[¶ 1.] In Aspen Storage, Inc. v. Flanagan (Aspen I), 2005 SD 107, ¶10, 705 N.W.2d 863, 866, we affirmed the circuit court’s judgment voiding a tax deed because a county official obtained it in violation of SDCL 6-1-1. However, while the appeal was pending, the county official acquired a quit claim deed from the owner of the same property. In a second suit, the circuit court voided the quit claim deed as another violation of SDCL 6-1-1. We affirm.

Background

[¶ 2.] On August 9, 1989, Lawrence County quit claimed to Craig Hayes the following described real property located in Lawrence County: “Inside Deadwood, Pt Wilmington P.C. 848 (22 acres more or loss [sic]),” and referred to as Mineral Survey (MS) 848. In 1997, Hayes became delinquent on his property taxes. On December 21, 1998, Lawrence County issued itself a “Treasurer’s Certificate of Tax Sale” reflecting that MS 848 was “sold” to Lawrence County for delinquent taxes.

[¶ 3.] On July 24, 2003, Lawrence County “assigned ... all right, title and interest in [the] Certificate” to Brandon Flanagan. After the certificate was assigned to Flanagan, he issued a “Notice of Intent to Take Tax Deed” informing Hayes that he had sixty days from the last day of the publication to redeem his interest in the property. Because Hayes did not redeem, on September 9, 2004, Lawrence County issued Flanagan a “Tax Deed” to the property.

[¶ 4.] At the time the tax sale certificate was assigned to him, Flanagan was a Lawrence County Commissioner. When the county issued him the tax deed, he was the Lawrence County Planning and Zoning Administrator. Because Flanagan was a county official at the time of the transaction, Aspen Storage, Inc., who owned land just south of MS 848, brought an action requesting that the circuit court declare the tax deed void. The circuit court applied SDCL 6-1-1 and voided the deed. Flanagan appealed. On October 25, 2005, we affirmed the circuit court’s ruling, holding that SDCL 6-1-1 “prohibits any county officer from obtaining an interest in or purchasing real property which is sold for taxes.” Aspen I, 2005 SD 107, ¶7, 705 N.W.2d at 865.

[¶ 5.] While Aspen I was pending, on June 17, 2005, Flanagan obtained a quit claim deed from Hayes for MS 848. On August 10, 2005, Aspen Storage brought a second action against Flanagan, requesting that the circuit court void the quit claim deed and award damages. According to Aspen Storage, SDCL 6-1-1 still precluded Flanagan from obtaining an interest in MS 848 because he was a county official. Moreover, it asserted that MS 848 was not Hayes’s property to convey because it was being held by Lawrence County. Flanagan argued that the quit claim deed was a transaction between two private individuals and, thus, outside the scope of SDCL 6-1-1. He further asserted that Hayes, not Lawrence County, had the transferable interest in MS 848 after this Court’s decision in Aspen I and the circuit court’s amended order. Flanagan counterclaimed against Aspen Storage, requesting the court to make a boundary determination between MS 848 and Aspen Storage’s property and alleging Aspen Storage intentionally inflicted emotional distress.

[¶ 6.] After multiple hearings, the circuit court issued an order granting Aspen Storage’s motion for summary judgment. The court cancelled the quit claim deed from Hayes to Flanagan as a violation of SDCL 6-1-1 because “at the time of the transaction Flanagan was a county official,” and it was “property which the county held for taxes.” In an amended order for summary judgment, the court declared that “Lawrence County is restored to its status as the holder of the tax sale certificate, as its interest existed on July 24, 2003, immediately prior to the sale to Flanagan.” Along with granting a judgment cancelling the quit claim deed, the court also dismissed Flanagan’s claims against Aspen Storage.

[¶ 7.] Contemporaneous with the suit to void the quit claim deed, Flanagan brought a declaratory action against Aspen Storage to determine the parties’ rights with respect to an easement across Aspen Storage’s property. Because the circuit court found that the easement had been relinquished, it extinguished the easement. Flanagan appeals both cases. As our decision on the quit claim deed issue moots the easement appeal, we consolidate both appeals in this opinion.

Analysis and Decision

[¶ 8.] According to Flanagan, SDCL 6-1-1 does not preclude him from acquiring an interest in MS 848 by quit claim deed from a private citizen. He asserts that our holding in Aspen I only prohibited him from obtaining an interest in property that the county held for taxes. MS 848, he argues, was not sold for taxes, but instead was sold by Hayes, an individual, to Flanagan, an individual. In Flanagan’s view, MS 848 “reverted back to the way it was the day Flanagan purchased the tax certificate” and, therefore, “ownership remained with Craig R. Hayes.” Aspen Storage, on the other hand, asserts that MS 848 is now, and was on June 17, 2005, being held by Lawrence County for taxes. Therefore, under SDCL 6-1-1, Aspen Storage maintains that Flanagan could not acquire an interest in the property.

[¶ 9.] Statutory interpretation is a question of law reviewed de novo. Town Square Ltd. P’ship v. Clay County Bd. of Equalization, 2005 SD 99, ¶ 9 n. 1, 704 N.W.2d 896, 899 n. 1 (citing Fall River County v. S.D. Dep’t of Rev., 1999 SD 139, ¶ 15, 601 N.W.2d 816, 821 (citations omitted)). It is undisputed that SDCL 6-1-1 prohibits Flanagan from having an interest in real property that “shall be sold for taxes.... ” Therefore, we must determine if, at the time Flanagan acquired MS 848 by quit claim deed from Hayes, MS 848 was property that was sold for taxes. Because of our ruling in Aspen I, the tax deed issued to Flanagan was declared null and void from the beginning. See 2005 SD 107, ¶ 10, 705 N.W.2d at 866 (relying on SDCL 6-1-1). In accordance with our ruling, the circuit court issued an amended order of summary judgment, restoring Lawrence County “to its status as the holder of the tax sale certificate, as its interest existed on July 24, 2003, immediately prior to the sale to Flanagan.”

[¶ 10.] When Hayes quit claimed MS 848 to Flanagan on June 17, 2005, MS 848 was property on which a tax deed had been issued. Following our remand in Aspen I, the property had not technically completed the sale process because Lawrence County was still the holder of the certificate of tax sale. However, Flanagan was a county official. Under SDCL 6-1-1, Flanagan could not obtain an interest in MS 848. Although Craig Hayes could quit claim whatever interest he had, Flanagan could not obtain such interest because the certificate had issued and the parcel remained property “which shall he sold for taxes. ...” Id. (emphasis added). Furthermore, Flanagan, as a county official, could not obtain indirectly (by quit claim deed) what he could not do directly (by acquisition of tax deed). The court’s judgment canceling the quit claim deed is affirmed. Because of our resolution of this issue we need not address Flanagan’s easement appeal, as he has no interest in MS 848.

[¶ 11.] Affirmed.

[¶ 12.] GILBERTSON, Chief Justice, and SABERS, ZINTER, and MEIERHENRY, Justices, concur.

      . Our review of the record does not reveal whether before deeding the property to itself the county first attempted to sell it at a public sale in accordance with SDCL chapter 10-23. However, because SDCL 10-23-24 permits a county to “bid off ... real property offered at such sale[,]” when “there are no other bidders offering the amount due,” we presume that Lawrence County first held a public sale drawing no bidders.

      . This amended order is included in the record for the pending appeal in #24213, of which we take judicial notice.


text:
    2007 SD 70
    COUNTRYSIDE SOUTH HOMEOWNERS ASSOCIATION, INC., Plaintiff and Appellee, v. Craig NEDVED, Defendant and Appellant.
    No. 24409.
    Supreme Court of South Dakota.
    Considered on Briefs May 21, 2007.
    Decided July 11, 2007.

      Jason M. Smiley of Gunderson, Palmer, Goodsell & Nelson, Rapid City, South Dakota, Attorneys for plaintiff and appellee.
    Richard E. Huffman, Michael V. Wheeler of DeMersseman Jensen Christianson Stanton & Huffman, LLP, Rapid City, South Dakota, Attorneys for defendant and appellant.
   KONENKAMP, Justice.

[¶ 1.] A homeowner sought to build a storage shed in a community governed by restrictive covenants. His request was denied, not because the proposed shed violated any specific provision of the covenants, but because it violated size limitation rules enacted by the homeowners’ association committee. In circuit court, the decision was upheld and an injunction was issued. Because the committee exceeded its powers when it adopted the new rules and denied the homeowner’s request based solely on those rules, we reverse and remand.

Background

[¶ 2.] Craig Nedved purchased a home on April 30, 1996. The home is located in the Countryside South Subdivision, Pennington County, South Dakota. On March 18, 1994, the Countryside South Homeowners Association, Inc. (Association) adopted the “Declaration of Covenants, Conditions and Restrictions, Countryside South Subdivision” (Covenants). They were recorded on April 4, 1994, with the Pennington County Register of Deeds. At some point after Nedved purchased his home, the Association’s Architectural Control Committee (Committee) adopted its “Architectural Control Committee Additional Rules, Regulations and Guidelines” (Rules and Regulations). These Rules and Regulations state that they apply to Article VII of the Covenants. They were adopted “to provide the Architectural Control Committee and Homeowners additional information and guidelines regarding interpretation of the covenants.”

[¶ 3.] The rule pertinent to this case provides:

Several homeowners have requested approval of yard sheds. The covenants provide little in the way of guidance to the Architectural Control Committee and homeowners regarding sheds. Sheds shall not exceed a footprint dimension of 10' x 12'. The finish and roof [sic] the shed shall be consistent with the color, style and materials used on the home. The walls shall not exceed 7' in height and the shed shall have a typical 4/12 pitch in the roof. All sheds constructed prior to August 15, 1999 have been approved and are hereby grandfathered.

Nothing in these rules indicates when they were adopted.

[¶ 4.] On February 28, 2006, Nedved submitted a request to the Committee to build an L-shaped 16' x 18' shed on his property. The minutes from the committee meeting state that “[t]he Board immediately took the position that the size of [the] structure was not in compliance with the covenants of the development.... It would not be approved unless modifications were made to his proposal to bring the size ... into compliance with established guidelines.” Jay Hoffman, the president of the Association, wrote to Nedved informing him that the Committee considered his request and had no “choice but to deny it as inconsistent with the covenants and architectural control guidelines. It is simply too big.... The board has already decided via the architectural control guidelines that a shed larger than 10' x 12' does not satisfy these standards.” On May 24, 2006, board member and attorney, Pamela Snyder-Varns, wrote to counsel for Nedved stating, “The Board stood by its decision to deny [Nedved’s] request. The shed is simply too big. Please consider this written notice of the Board’s decision.”

[¶ 5.] In July 2006, the Association learned that Nedved had leveled a building site for his proposed shed, spread gravel, and placed forms to pour a slab. Because the Association believed that Nedved intended to build in violation of its decision, the Association sought a temporary restraining order. The circuit court granted the order and set the matter for a hearing on whether a permanent injunction should issue.

[¶ 6.] The parties submitted stipulated facts along with briefs in support of their respective positions. The Association argued that under the Covenants and subsequently adopted Rules and Regulations, Nedved’s proposed shed was “too big.” The Association claimed that under Article VII, section 5, for Nedved to be permitted to build his shed the Committee must approve the “quality of workmanship and materials, harmony of external design with existing structures and ... location with respective topography and finished grade elevation.” Because the Rules and Regulations required that the shed not exceed 10' x 12', the Association asserted that Nedved’s request violated the Covenants.

[¶ 7.] Nedved, on the other hand, averred that the Association rejected his proposal only because the shed exceeded the 10' x 12' requirement in the Rules and Regulations, not because it violated the Covenants. And because the Association exceeded its powers when it adopted the Rules and Regulations, the Association’s decision to deny his request was unreasonable, arbitrary, and capricious.

[¶ 8.] In the court’s memorandum decision, later incorporated into its findings and conclusions, it ruled that there was nothing in the Covenants restricting the Committee from adopting the Rules and Regulations. Specifically, the court stated, “As the Board of Directors changes from time to time and as the Architectural Control Committee changes from time to time, the interpretation of this covenant may well change from time to time.” In granting a permanent injunction, the court concluded that the Committee could rightfully adopt new rules and the Association’s decision to deny Nedved’s request was not unreasonable, arbitrary, or capricious.

[¶ 9.] Nedved appeals asserting that the court erred when it granted the permanent injunction because (1) the Committee exceeded its authority when it adopted the Rules and Regulations, (2) the decision to deny his request was unreasonable, arbitrary, and capricious, and (3) his shed satisfied the Covenants as it was in harmony with the external design of existing structures. Since the court’s decision was based on stipulated facts and because covenants are essentially contracts, we review these questions de novo. Harksen v. Peska, 1998 SD 70, ¶ 11, 581 N.W.2d 170, 173 (citing Spring Brook Acres Water Users Ass’n, Inc. v. George, 505 N.W.2d 778, 780 (S.D.1993) (citing Baker v. Wilburn, 456 N.W.2d 304, 306 (S.D.1990))).

Analysis and Decision

[¶ 10.] The primary question here is whether the Committee exceeded its authority when it adopted the Rules and Regulations without following Article X of the Covenants. Article X requires a 75% vote of the members before the Covenants can be amended. It also requires that any approved amendment be recorded. The Association asserts that there exists an inherent power to adopt these rules. Specifically, it contends that because Article VII allows the Association to establish the Committee, implicit in that is a power to promulgate guidelines “to flesh out the language of the Covenants by limiting the size of sheds, among other things.” According to the Association, “[i]t is important for a body such as this, with a membership that changes from time to time, to have an aid such as the [Rules and Regulations] to help apply the restrictive Covenants on a fair and consistent basis.”

[¶ 11.] A covenant is a contract between the governing authority and individual lot owners. Armstrong v. Ledges Homeowners Ass’n, Inc., 360 N.C. 547, 633 S.E.2d 78, 84-85 (2006) (citations omitted); see also Wilson v. Playa de Serrano, 211 Ariz. 511, 123 P.3d 1148, 1150 (App.2005) (citations omitted). It “represents a meeting of the minds and results in a relationship that is not subject to overreaching by one party or sweeping subsequent change.” Armstrong, 633 S.E.2d at 84-85 (citations omitted). Because restrictive covenants are contractual in nature, we ascertain the intent of the parties at the time they contracted. Prairie Hills Water & Dev. Co. v. Gross, 2002 SD 133, ¶ 26, 653 N.W.2d 745, 751 (citation omitted); Piechowski v. Case, 255 N.W.2d 72, 74 (S.D.1977); see also Villas West II of Willowridge v. McGlothin, 841 N.E.2d 584, 597 (Ind.Ct.App.2006) (citation omitted); Riss v. Angel, 131 Wash.2d 612, 934 P.2d 669, 675 (1997).

[¶ 12.] From the language of the 1994 Covenants, the parties clearly intended for the Committee to have the power to amend Article VII, section 5. However, this power exists only when the Committee obtains a 75% vote of the lot owners and the amendment is properly recorded. Therefore, absent the 75% vote of the lot owners and proper recordation, lot owners are bound only by the restrictions contained in Article VII, section 5 of the Covenants. See Wilson, 123 P.3d at 1150; see also Raman Chandler Properties, L.C. v. Caldwell’s Creek Homeowners Ass’n, Inc., 178 S.W.3d 384, 391 (TexCtApp 2005) (if the power to amend exists in the covenants, “the amendment of a restrictive covenant must be in the precise manner authorized' by the dedicating agreement”) (citation omitted); Barris v. Keswick Homes, L.L.C., 268 Va. 67, 597 S.E.2d 54, 57 (2004) (express language of the covenants prevents interpretation otherwise).

[¶ 13.] When the Committee adopted the Rules and Regulations without a 75% vote of the lot owners, it improperly amended the Covenants. It is immaterial that the Board and Committee members change from time to time or need guidance in applying and interpreting the language of the Covenants. There is nothing in the Covenants that gives the Committee or Association the power to unilaterally adopt new rules and regulations simply to aid in interpreting and applying Article VII, section 5. See Johnson v. Dick, 281 S.W.2d 171, 175 (Tex.Civ.App. 1955) (the existing authority is found in the written instrument). If we were to adopt the Association’s position that it had an inherent power to amend Article VII, section 5, we would have to ignore the express language of the Covenants and disregard the lot owners’ right to vote. Had the Association desired the Committee to have the power to adopt new rules and regulations to aid in interpreting Article VII, section 5, it certainly could have provided for such, as it did with Article VII, section 10.

[¶ 14.] The Committee exceeded the authority granted to it by the Covenants when it failed to comply with Article X before amending Article VII, section 5, to restrict shed size to 10' x 12'. Therefore, the circuit court erred when it held that the language of the Covenants did not prohibit “the Architectural Control Committee from enacting rules or guidelines to assist it, and future Architectural Control Committees, in their interpretation of the covenant.”

[¶ 15.] The Association also argues that its denial was not based solely on the Rules and Regulations, but that Nedved’s request was denied because it was not in harmony with the external design of existing structures. Based on our review of the record, the Association’s argument cannot be sustained. Nedved and the Association submitted stipulated facts to the court indicating that Nedved’s request was denied because the shed was larger than 10' x 12'. There was no stipulation that the Committee rejected Nedved’s request based on the language of the 1994 Covenants. Moreover, there was no stipulation that the request was denied because it was not in harmony with the external design of existing structures. The 10' x 12' language clearly comes from the Committee’s Rules and Regulations. The denial was based solely on the Committee’s conclusion that the request failed to conform to the Rules and Regulations.

[¶ 16.] As we stated, the Rules and Regulations were not properly adopted and the Committee was only empowered to approve or disapprove Nedved’s request based on the language of the 1994 Covenants. The 1994 Covenants permitted the Committee to evaluate Nedved’s shed proposal to determine if it satisfied the “quality of workmanship and materials, harmony of external design with existing structures and ... location with respective topography and finished grade elevation.” This evaluation the Committee has not done. Thus, we reverse and remand for further proceedings consistent with this opinion.

[¶ 17.] Reversed and remanded.

[¶ 18.] GILBERTSON, Chief Justice, and SABERS, ZINTER, and MEIERHENRY, Justices, concur.

      . Article X of the Covenants states, "This Declaration may be amended during the first twenty (20) year period by an instrument signed by not less than seventy-five percent (75%) of the Lot Owners, and thereafter by an instrument signed by not less than sixty-six and two-thirds percent (66-2/3%) of the Lot Owners. The Amendment must be recorded.”

      . There is only one provision in the covenants that allows for the power of enacting rules. It is under Article VII, section 10. That provision relates only to "Landscaping” and gives the Committee the power to adopt rules and regulations for the "preservation of natural resources, trees, and grass....”

      . In his brief to this Court, Nedved correctly points out that the Committee was required to assess his proposal to determine whether it was in harmony with the external design of existing structures and that it "never engaged in any such analysis.”