author: KONENKAMP, Justice VON WALD, Circuit Judge

text:
    2001 SD 150
    Thomas BOZIED, Plaintiff and Appellee, v. CITY OF BROOKINGS, South Dakota, a Municipal Corporation, Defendant and Appellant, and Mills Construction, Inc., a South Dakota Corporation, Intervenor and Appellant.
    Nos. 21299, 21313.
    Supreme Court of South Dakota.
    Argued Sept. 20, 2000.
    Reassigned Feb. 26, 2001.
    Reassigned July 13, 2001.
    Decided Dec. 26, 2001.

      Terry D. Wieczorek, Brookings, Attorney for plaintiff and appellee.
    Sandra Hoglund of Davenport, Evans, Hurwitz & Smith, Sioux Falls, Attorneys for defendant and appellant.
    William G. Taylor and James E. Moore of Woods, Fuller, Shultz & Smith, Sioux Falls, Attorneys for intervenor and appellant.
    Mark Barnett, Attorney General, Jeffrey P. Hallem, Assistant Attorney General, Pierre, Attorneys for amicus curiae state.
   KONENKAMP, Justice

(on reassignment).

[¶ 1.] This is a taxpayer challenge to the legality of certain change orders executed by the City of Brookings on its Agri-Plex project. The circuit court granted summary judgment to the taxpayer, ruling that the change orders were void for violating statutory competitive bidding requirements. The court ordered the contractor to refund all amounts paid on the invalid change orders, resulting in a forfeiture of $548,001. We conclude that whether the change orders were void depends on whether they were “necessitated by circumstances not reasonably foreseeable at the time the underlying contract was let” and were “necessary to the completion of the project” under SDCL 5-18-18.3. These are questions of fact. Despite pleas to reexamine our longstanding rule, we adhere to the principle that equitable remedies and defenses are unavailable when public contracts are declared void. However, if the change orders are found to violate SDCL 5-18-18.3, we hold that in the absence of fraud, collusion, or undue influence, consistent with the precept that parties to a void contract must be left where they are found, the contractor may still retain those funds previously received on the two change orders. We affirm in part, reverse in part, and remand for trial.

A.

Background

[¶ 2.] In August 1997, the City of Brookings devised plans to build the Brookings Agri-Plex. It was to consist of an exhibition structure with an attached building for county offices and a separate agricultural research building. To fulfill this plan, business leaders and community officials formed various project committees. John Mills, owner of Mills Construction, Inc., chaired the designing and planning committee. This committee was responsible for estimating the approximate cost of the project and developing a project package to fit within the proposed budget. Brookings then advertised for bids.

[¶ 3.] Several bids were submitted, including one from Mills Construction. John Mills resigned from the planning committee when his company submitted its bid. As the Mills bid was $635,000 lower than the next lowest bid, Brookings awarded Mills the construction contract in September 1997. The contract called for the south parking lot to be graveled. For the research building, only 5,000 square feet would be finished. The contract called for no other improvements to the remaining 25,000 square feet. Project planners were actively searching for long-term tenants and anticipated that interior improvements would eventually be needed to accommodate these tenants. Planners also expected that the south parking lot would be paved when funds became available.

[¶ 4.] After the contract was awarded and the construction began, Brookings issued a series of twelve change orders. Change order # 1, dated October 22, 1997, stated, “YOU ARE DIRECTED TO MAKE THE FOLLOWING CHANGES IN THE CONTRACT.” Issued by the architect, it instructed Mills to pave the south parking lot at an increased cost of $107,000. The other change order in question here, # 12, was issued on July 17, 1998. This one directed $441,000 of tenant improvements for the unfinished section of the research building because Brookings had secured two tenants for the building. Neither change was advertised for bid. Mills and Brookings signed the change order forms, agreeing to the contract changes.

[¶ 5.] Both John Mills and his project manager, Scott Lardy, inquired about the propriety of accomplishing these improvements by change order. City attorney Alan Glover, whose law partner, Eric Rasmussen, represented Mills, opined that a negotiated change order, without public bidding, was permissible since the changes were precipitated by unforeseen circumstances necessary to the completion of the project. In a later affidavit, Lardy stated that Mills Construction relied on Glover’s opinion. John Mills also wrote the Agri-Plex Board inquiring whether the tenant improvements would be accomplished “by [cjhange [o]rder, by separately negotiated contract, or separate bid.” Bozied, a taxpayer and local businessperson, publicly questioned the legality of the last change order because it had not been submitted for public bidding.

[¶ 6.] In an audit report dated October 16, 1998, the State Auditor concluded that the change orders were unlawful. Bozied then sought to enjoin Brookings from paying Mills until a judicial determination regarding the legality of the change orders could be obtained. In response, the City adopted Ordinance 25-98, allowing Brook-ings to proceed even if the change orders were later judicially declared unlawful and void under SDCL 5-18-19. Noting that most of the contract money had already been expended, the circuit court denied Bozied’s motion for a preliminary injunction in a letter decision dated December 23,1998. The parties then moved for summary judgment. Following a hearing, the court granted summary judgment to Bo-zied.

[¶ 7.] The court ruled as a matter of law that the major portion of change order # 1 and all of change order # 12 violated SDCL ch. 5-18. It also concluded that Brookings City Ordinance 25-98 was invalid, as a violation of the South Dakota Constitution and established law. The court held that the defense of equitable estoppel was unavailable to Mills and ordered the company to refund amounts paid under the two unlawful change orders. Lastly, the court awarded Bozied $21,018.64 in attorney fees and expenses. Mills and Brookings appeal.

B.

Summary Judgment Standard

[¶ 8.] Under our familiar standard for reviewing summary judgments, we decide only whether genuine issues of material fact existed and whether the law was correctly applied. Harms v. Northland Ford Dealers, 1999 SD 143, ¶ 8, 602 N.W.2d 58, 61. Summary judgment is not the proper method to dispose of factual questions. Harn v. Continental Lumber Co., 506 N.W.2d 91, 94 (S.D.1993). Only when fact questions are undisputed will issues become questions of law for the court. Id. We will affirm the trial court’s decision if we find any legal basis to support it. De Smet Ins. Co. of South Dakota v. Gibson, 1996 SD 102, ¶ 5, 552 N.W.2d 98, 99; SDCL 15 — 6—56(c). Statutory and contract interpretation are questions of law reviewed de novo. State Farm Mut. Auto. Ins. Co. v. Vostad, 520 N.W.2d 273, 275 (S.D.1994). The existence of a legal duty is also a question of law. Poelstra v. Basin Elec. Power Coop., 1996 SD 36, ¶ 9, 545 N.W.2d 823, 825.

C.

City Ordinance — Home Rule

.[7-10] [¶ 9.] After Bozied sought to enjoin work on the change orders, the Brookings City Council passed Ordinance 25-98. In relevant part, the ordinance provides:

A. That in the event a contract, or any part thereof, is declared void pursuant to the provisions of SDCL 5-18-19 in a court of competent jurisdiction and there is no finding of fraud, corruption, collusion, or graft on the part of the contracting parties, then payment under said contract shall be made in the following manner, to-wit
1. If the terms of the contract were otherwise complied with, then the amount originally agreed to be paid shall be paid so long as it is deemed to be reasonable under the circumstances, and the City has received fair value for the services rendered.
2. In the event the conditions described in paragraph 1 above are not established, then the amount paid shall be derived on the equitable basis of quantum meruit.
3. In the event there is found to be fraud, collusion, corruption or graft, on the part of the contracting parties, in addition to any other civil or criminal penalties, no payments shall be made to the contractor and any payments previously made shall be recouped from the contractor.
B. The remedies set forth herein shall not be applicable if an action for preliminary and permanent injunction is initiated in a court of competent jurisdiction, seeking to enjoin performance of the alleged unlawful contract within ten (10) days following publication of the City’s approval of said contract.

[¶ 10.] This ordinance, in sum, allows the City to honor void contracts, overriding SDCL 5-18-19. The City believes it is empowered to enact such an ordinance because it holds a home rule charter, authorized by the South Dakota Constitution in Article IX § 2. This provision states in part:

A chartered governmental unit may exercise any legislative power or perform any function not denied by its charter, the Constitution or the general laws of the state. The charter may provide for any form of executive, legislative and administrative structure which shall be of superior authority to statute, provided that the legislative body so established be chosen by popular election and that the administrative proceedings be subject to judicial review.
Powers and functions of home rule units shall be construed liberally.

[¶ 11.] Although the power granted to home rule cities may be great, it is not absolute. The South Dakota Legislature limited home rule powers when it enacted SDCL 6-12-5:

Neither charter nor ordinances adopted thereunder may set standards and requirements which are lower or less stringent than those imposed by state law, but they may set standards and requirements which are higher or more stringent than those imposed by state law, unless a state law provides otherwise.

The City’s ordinance is less stringent than state law. Under South Dakota law, parties cannot be paid under void contracts. Not even the Legislature can enact statutes allowing such payments. The South Dakota Constitution Article XII § 3 provides:

The Legislature shall never grant any extra compensation to any public officer, employee, agent or contractor after the services shall have been rendered or the contract entered into, nor authorize the payment of any claims or part thereof created against the state, under any agreement or contract made without express authority of law, and all such unauthorized agreements or contracts shall be null and void; nor shall the compensation of any public officer be increased or diminished during his term of office: provided, however, that the Legislature may make appropriations for expenditures incurred in suppressing insurrection or repelling invasion. (Emphasis added.)

[¶ 12.] South Dakota courts have consistently held that void public contracts cannot be later cured or ratified. Norbeck & Nicholson Co. v. State, 33 S.D. 21, 144 N.W. 658, 659 (1913) (Norbeck II). Legislation may not retroactively validate what it cannot originally authorize. Even if the ordinance could be deemed valid, the questioned change orders would not fall under this ordinance, but would be governed by the law in effect at the time the change orders were issued. “The validity of a municipal contract is to be determined by the laws in force at the time the agreement was made.” McQuillan, Municipal Corporations § 29.118 (3d ed. 1999).

D.

“Circumstances Not Reasonably Foreseeable”

[¶ 13.] Mills argues that it was legitimate to accomplish the paving and tenant improvements by change order instead of advertising for bids. The question is governed by SDCL 5-18-18.3:

Any amendment or change order to an existing construction contract need not be bid if the contract contains unit prices for the same type or class of work, or the change or extra work is necessitated by circumstances not reasonably foreseeable at the time the underlying contract was let and the change or extra work is necessary to the completion of the project. (Emphasis added).

Mills contends that the language “reasonably foreseeable” raises a factual question to be resolved by a jury, not by a court on summary judgment. “Competitive bidding provisions must be read in light of the reason for their enactment, or they will be applied to where they were not intended to operate and thus deny municipalities authority to deal with problems in a sensible, practical way.” 10 McQuillin, Municipal Corporations (3rd rev. ed. 1990) § 29.29 p. 375, fns. omitted. Certainly, requiring new bidding to finish a project rather than keeping with the present contractor may incur additional set up costs and thus result in added expense.

[¶ 14.] In most instances, foreseeability is a question of fact. E.P. v. Riley, 1999 SD 163, ¶ 33, 604 N.W.2d 7, 16. Foreseeability is determined under the “totality of the circumstances.” Small v. McKennan Hosp., 403 N.W.2d 410, 413 (S.D.1987) (Small I). According to SDCL 5-18-18.3, two factual determinations must be made: (1) whether “the change or extra work is .... not reasonably foreseeable,” and (2) whether “the change or work is necessary to the completion of the project.” Mills argues that the work authorized under the two change orders was unforeseeable because obtaining tenants at such an early date was unexpected. And because of the early arrival of unexpected tenants, the additional work inside the building and the paving of the parking lot were unforeseen. For summary judgment purposes, we must view the facts in a light favorable to the nonmoving party. SDCL 15-6-56(c). Under the totality of circumstances, we conclude that the fact finder must decide whether such events were not reasonably foreseeable.

[¶ 15.] Likewise, the fact finder must decide whether the improvements were “necessary” to complete the project. Mills argues that to accommodate the newly arrived tenants, it was necessary to pave the parking lot and conform the office space to suit the tenants. Without this, Mills asserts, Brookings would not have been able to fulfill its contractual duty to its new tenants under the lease because the property had to be built to suit the tenants’ businesses. These are disputed facts. After all, the City’s attorney opined that the changes were unforeseen and the State Auditor concluded just the opposite. The fact finder must hear the rationales behind these varying conclusions and only then determine the question. Therefore, summary judgment was improper. We reverse on this issue and remand for trial.

E.

Void Contracts — Remedies

[¶ 16.] This brings us to the crux of our case, to what Justice Henderson once called that “gnawing, aching question of conscience.” Carr Co. v. City of Sioux Falls, 416 N.W.2d 602, 604 (S.D.1987) (Henderson, J., concurring specially). The circuit court concluded that, in accordance with our precedent, equitable remedies were unavailable to Mills because the change orders were void. Since we are remanding this matter for fact determinations, this question may arise again if the fact finder rules that the change orders were not “necessitated by circumstances not reasonably foreseeable” and not “necessary to the completion of the project.” SDCL 5-18-18.3.

[¶ 17.] This Court has held that “under the proper circumstances” taxpayers may institute actions on behalf of themselves and other taxpayers to recover funds paid to a contractor under a void or illegal contract. Sioux Falls Taxpayers Ass’n v. City of Sioux Falls, 69 S.D. 93, 7 N.W.2d 136, 140 (1943). Though the issue in Sioux Falls Taxpayers was not before the Court, it recognized that the trial court in that case allowed the contractor “to retain what it thought was a reasonable value of the materials furnished, and the work and labor performed.” Id. at 141. Consequently, there was not a complete forfeiture in Sioux Falls Taxpayers.

[¶ 18.] Bozied seeks to recover money the contractor previously received. As the circuit court recognized when it denied Bozied’s motion for a preliminary injunction, “most of the moneys have already been expended.” Imposing a forfeiture of over a half-million dollars on a contractor is a harsh and perhaps devastating consequence. In denying any relief to contractors in cases of this sort, we have held steadfastly to the notion that “[c]ontrac-tors who do business with public entities do so at their peril. They are charged with the duty to be familiar with the statutory requirements and to adhere to them.” Carr, 416 N.W.2d at 604. Government integrity and public protection warrant this inflexible rule. The rule enjoys the virtues of simplicity and rectitude, but unfortunately, it suffers the vices of rigidity and injustice. Today, we reexamine this court-fashioned rule. In the end, we conclude that the rule should prevail; however, it should apply to both sides of a void public contract.

[¶ 19.] Typically, when a contract is within a city’s power to enter, but the contract is later declared void for violating some statutory requirement, a contractor who performs in good faith will end up suffering all the adverse consequences, while the public entity unjustly receives all the benefits from the contractor’s perfor-manee. Judges have long struggled with this question. Some courts take the position that no matter how innocent a contractor may be, there can be no recovery on a void contract, even to right a gross injustice. That has been our rule, and we continue to adhere to it. However, a contrary result may be warranted where a contractor has already been paid and a taxpayer seeks to recover the payment on behalf of a government entity.

[¶ 20.] Several courts faced with this situation have allowed a contractor to retain funds already paid but not to recover additional funds. Elview Construction Co., Inc. v. North Scott Comm. School Dist., 373 N.W.2d 138, 144 (Iowa 1985); Gamewell Co. v. City of Phoenix, 216 F.2d 928, 941 (9th Cir.1955); Tobin v. Town Council of Sundance, 45 Wyo. 219, 17 P.2d 666, 676 (1933); Village of Pillager, Cass County v. Hewitt, 98 Minn. 265, 107 N.W. 815, 816 (1906). See generally 33 ALR3d 397 (1970). This rule has been applied absent a showing of “haste, fraud, undue influence, or collusion, in the making of the payment.” Tobin, 17 P.2d at 674. These jurisdictions recognize the same principle promoted in many of our decisions and most memorably in the case of Norbeck & Nicholson Co. v. State, 32 S.D. 189, 142 N.W. 847 (1913) (Norbeck I). There, our Court recited what has now become a familiar refrain: the law leaves parties to illegal contracts where it finds them and gives them no assistance in extricating themselves from the situation in which they have placed themselves-no recovery can be had on an express or implied contract or on quantum meruit. Norbeck I, 142 N.W. at 849. Requiring Mills to pay a refund contravenes this precept. It places the City and the taxpayers in a far better position than they were before the contract: the City of Brookings has its new Agri-Plex structure but would receive a refund for its improvements. See Elview, 373 N.W.2d at 143 (citing Miller v. City of Des Moines, 143 Iowa 409, 122 N.W. 226 (1909)); see also Hewitt, 107 N.W. at 816.

[¶21.] This principle of leaving the parties where they stand is well illustrated in the case of Ellefson v. Smith, 182 Wis. 398, 196 N.W. 834 (1924). That case was a taxpayer suit to recover from a builder the amount paid on a contract for the construction of a reservoir. The contract was let without competitive bidding. The court affirmed judgment for the builder upon proof that the City had the power to enter the contract: the reservoir was a public necessity; the contract was for a fair price; city officials believed the welfare of the City would best be served by letting the contract without waiting for bids; and the work was done in full public view. In denying recovery against the contractor, the court said that equity does not exist to inflict punishment. See also Tobin, 45 Wyo. 219, 17 P.2d 666 (city could not recover money paid to contractor on invalid contract absent haste, fraud, undue influence, or collusion). But see D’Angelo v. Cole, 67 N.Y.2d 65, 499 N.Y.S.2d 900, 490 N.E.2d 819 (1986), 67 N.Y.2d 65, 499 N.Y.S.2d 900, 490 N.E.2d 819 (municipality was excused from any payment under void contract but could still recover any money already paid); Lincoln v. Thompson, 190 Ill.App. 586 (1914) (money expended recoverable as contract was absolutely ultra vires). But also see Losee v. Hettich, 74 S.D. 461, 54 N.W.2d 353 (1952) (violation of competitive bidding laws ultra vires as breaching statute).

[¶ 22.] Leaving the parties as we find them is consistent with our longstanding jurisprudence. In Hoiten v. City of Canistota, 1998 SD 44, 579 N.W.2d 12, the contractor sued to recover for services performed on a contract not in compliance with competitive bidding requirements. We refused to enforce the contract and thus left the parties where we found them. Likewise, in Bak v. Jones County, 87 S.D. 468, 210 N.W.2d 65 (1973), we cited an Iowa case, Horrabin Paving Co. v. City of Creston, 221 Iowa 1237, 262 N.W. 480 (1935), for the rule that a contractor cannot recover against a municipality on an invalid contract. Here we have the inverse situation. Just as a contractor cannot recover on an invalid contract against a city, so too a city, or one acting on its behalf, cannot recover money it paid on such a contract. See Tobin, 17 P.2d at 674 (contract invalid for both parties). To hold otherwise under these facts, we would rescue the City and punish the contractor when both violated the law.

[¶ 23.] A contractor who fully performs a contract of this character and then receives payment should not be compelled to refund the money. See Tobin, 17 P.2d at 674. Such a conclusion, will by necessity, be tempered by the facts of each case. However, where there is no showing that the amount paid was unreasonable, and the invalidity of the contract results, at least in part, from the City’s own actions, repayment should not be ordered. Elview, 373 N.W.2d at 143 (citing Miller, 122 N.W. at 232 (Iowa 1909)). If, however, the evidence shows fraud, undue influence, or collusion, then a different result would be required.

[¶ 24.] This Court has emphasized on numerous occasions that the law “abhors a forfeiture.” BankWest v. Gro-seclose, 535 N.W.2d 860, 864 (S.D.1995)(citing Ford v. Hofer, 79 S.D. 257, 261, 111 N.W.2d 214, 216 (1961)); Wandler v. Lewis, 1997 SD 98, ¶ 26, 567 N.W.2d 377, 383. “Forfeitures are considered odious in the law and are not favored by the courts.” BankWest, 535 N.W.2d at 864 (citations omitted). In the absence of collusion, fraud, or other impropriety, we cannot condone a forfeiture of $548,001.

[¶ 25.] To say that the taxpayers here are the ones truly aggrieved is to embrace a pious fable. The City was lawfully going to incur this expense or something close to it in any event. That had already been decided. Another contractor would have completed the improvements at issue had Mills not finished the job. In the end, what loss would the taxpayers have suffered? By forcing Mills to repay the City, we excuse the City from an expense it was going to incur anyway. Why should the taxpayers obtain free what otherwise would have required a substantial expenditure?

[¶ 26.] On the other hand, whether these change orders were occasioned by fraud, undue influence, or collusion remains to be decided in trial. Bozied suggests impropriety in the contractual relationship between the City and Mills:

Mills chaired the local committee charged with designing the project, [allowing him] a distinct advantage over all other potential contractors.... Mills and the City were represented by the same Brookings law firm. After Bozied brought this lawsuit to correct the wrongdoing, the same Brookings law firm drafted a new city ordinance to evade and circumvent the competitive bidding laws and protect its client, Mills.

These are serious charges, especially the ones against the law firm in purportedly advising both sides in this controversy. But these are still only allegations, not proofs. They are for the fact finder to resolve.

[¶ 27.] The circuit court awarded Bo-zied attorney’s fees and expenses citing SDCL 15-17-45. This statute allows reimbursement in a taxpayer action to recover funds misappropriated by a governing body or public official, “in the event of a recovery by [the] plaintiff.” Because we reverse the circuit court’s monetary judgment, we also reverse the award of attorney’s fees.

F.

Conclusion

[¶ 28.] We affirm the circuit court’s ruling that Brookings City Ordinance 25-98 was unconstitutional and invalid. We also affirm the court’s decision that equitable remedies are unavailable when a public contract is void for violating statutory competitive bidding requirements. However, whether the change orders violated SDCL 5-18-18.3 is a question of fact. We reverse summary judgment for Bozied on that issue. In the event the change orders are found to violate this statute, the contractor may nonetheless retain all payments received in the absence of proof of fraud, collusion, or undue influence. If the statute was not violated, then of course the contractor is entitled to any unpaid amounts, subject to the terms of the contract.

[¶ 29.] Affirmed in part, reversed in part, and remanded for trial.

[¶ 30.] GILBERTSON, Chief Justice, AMUNDSON, Justice, and MILLER, Retired Chief Justice, concur.

[¶ 31.] VON WALD, Circuit Judge, sitting for SABERS, Justice, disqualified, dissents.

VON WALD, Circuit Judge

(dissenting).

[¶ 32.] I respectfully dissent from the majority’s holding on its decision to remand for a trial on the issue of foreseeability (section D), and on the holding regarding remedies under a void contract (Section E). I agree with and concur on the majority’s holding regarding the unconstitutionality of the city ordinance (section C). I address only sections D and E.

Circumstances Not Reasonably Foreseeable

[¶ 33.] Did the trial court err in holding the use of change orders violated SDCL 5-18-18.3?

[¶ 34.] This Court’s review of summary judgments is indeed familiar. Summary judgment is authorized “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” SDCL 15-6-56(c).

[¶ 35.] In this case, after both sides had conducted their written discovery, each side made separate motions for summary judgment. A hearing was held on these motions. At the conclusion of the hearing, Mills asked for leave of court to amend its answer to include the issue of equitable estoppel, which the court granted. The memorandum decision entered by the court included the issue of equitable estoppel.

[¶ 36.] The issue of “foreseeability” is the only fact Mills claims is disputed. While generally “foreseeability” is a fact question, I believe that under the record of this case that “foreseeability” is clearly a matter of law for the court to determine. It can be determined by considering the evidence in the record in light of the statute and the contract between the parties; the construction of the statute and the contract are questions of law that may be determined by a court on summary judgment. See Auto-Owners Ins. Co. v. Hansen Hous. Inc., 2000 SD 13, ¶ 10, 604 N.W.2d 504, 509; see also Ward v. Midcom, Inc., 1998 SD 10, ¶ 9, 575 N.W.2d 233, 236.

[¶ 37.] SDCL 5-18-18.3 then provided: Any amendment or change order to an existing construction contract need not be bid if ... the change or extra work is necessitated by circumstances not reasonably foreseeable at the time the underlying contract was let and the change or extra work is necessary to the completion of the project.

(emphasis added). The circuit court focused on this statute when deciding whether the change orders should have been let out for bids. Mills contends SDCL 5 — 18— 18.3 should be interpreted to include unexpected opportunities and not just unexpected difficulties. That argument is antithetical to the plain meaning of the statute. This statute’s parameters for change orders are clear and unambiguous.

[¶ 38.] City and Mills argue an exception should be made for “unexpected opportunities” that may arise. City contends that because the project bid from Mills came in far below projected cost, City should be able to use the money not spent on the initial bid to enhance the project by change orders. The enhancements included paving the south parking lot (change order # 1) and making tenant improvements (change order # 12). Neither of these changes were “necessary” to the completion of the project that was let out on bid.

[¶ 39.] The term “necessary” does not equate with the term “opportunity.” The statute makes an exemption provision for necessary items, but specifically provides in SDCL 5-18-3 for changes to the project that may be defined as opportunities. An opportunity is not, by definition, necessary to the completion of the project. If the planners wanted to make provisions for expected (or unexpected) opportunities, they could have let alternate bids for the project. If City and Mills knew that these changes were going to be made at some point in the future, they were not unexpected and were reasonably foreseeable at the time the underlying contract was let.

[¶ 40.] Mills testified by affidavit to the fact that the changes were foreseeable to the project planners and architects. It stated that “[a]s initially conceived, the research building was intended to house tenants, and the south parking lot was intended to be paved.” These two changes were not part of the project that was let out for bid. Yet, they were foreseeable changes that would be made in the future. Neither change was necessary to the completion of the project.

[¶ 41.] It also is not unforeseeable that a bid might come in lower than anticipated. The anticipated cost of the Agri-plex building was based upon the average cost of similar projects. This average cost means that some cost estimates will be higher and others will be lower. It is clearly foreseen and anticipated that a bid may come in that is below the average or anticipated cost.

[¶ 42.] “It is settled law in South Dakota that a party to a lawsuit cannot claim the benefit of a version of relevant facts more favorable to his own contentions than he has given in his own testimony.” Connelly v. Sherwood, 268 N.W.2d 140, 141 (S.D.1978). In this case, Mills is held to its testimony that the planners and architects for City foresaw the building finished for tenants and the south parking lot paved. The work described in the contested change orders was not unforeseen as a matter of law.

[¶ 43.] It was undisputed at the time of the hearing on the motion for summary judgment, that these change orders were foreseeable at the time of the project issu-anee, not necessary to the project’s completion, and involved an expense above twenty-five thousand dollars. SDCL 5-18-18.3. These change orders are in direct violation of SDCL 5-18-19 and were correctly deemed void and of no force and effect. Hoiten v. City of Canistota, 1998 SD 44, ¶ 13, 579 N.W.2d 12.

Void Contracts — Remedies

[¶ 44.] Did the trial court err in rejecting the defense of equitable estop-pel?

[¶ 45.] The circuit court concluded that equitable remedies, in particular the defense of equitable estoppel, was unavailable to Mills because the change orders were void. This decision follows a long line of jurisprudence from this court. See Norbeck & Nicholson Co. v. State, 32 S.D. 189, 142 N.W. 847, 849 (1913) (court denying recovery on theory of quantum meruit due to contract being void and illegal); Carlson v. City of Faith, 75 S.D. 432, 67 N.W.2d 149, 151 (1954) (“[E]quity and the rules of natural justice cannot be applied to ‘interfere in the enforcement of a positive statute enacted for the protection of the public in the safeguarding of public funds.’ ”); Simpson v. Tobin, 367 N.W.2d 757 (S.D.1985) (court denying equitable defenses of laches, estoppel and quantum meruit due to void contract).

[¶ 46.] The majority has determined that the denial of equitable remedies now applies to both sides of a void public contract; that when a contract is determined to be void, the court leaves the parties as they find them. The majority reconciles the past decisions with this one by reasoning that never before has a contractor completely forfeited the entire price of the changes ordered. Also noted is the fact that Mills was “ordered” by the City to make these changes, and that City can not now gain a benefit from that order; that City’s hands are not clean.

[¶ 47.] This Court previously ruled that because the contract entered into is against public policy and in violation of law, City must be permitted to recover into the public treasury funds paid out to the contractor. See Sioux Falls Taxpayers Ass’n v. City of Sioux Falls, 69 S.D. 93, 7 N.W.2d 136, 140 (1942) (where a contract was null and void for failure to follow the proper bidding laws, city had no authority to enter into contract or pay contractor). The general rule of illegal contracts is stated succinctly in Norbeck and Nicholson Co., 32 S.D. 189, 142 N.W. 847. The majority cites the passage which says that “the law leaves the parties to illegal contracts where it finds them.... ” Exceptions to this rule must be pointed out as well. “[An] exception is where the parties are not in pari delicto, in which case the party not participating in the wrong may recover his consideration but not the other party.” Id. at 849. In this case Bozied brings this action on behalf of the taxpayers of the City of Brookings as authorized by this Court since 1896 as an exception to the “real party in interest” rule. Stumes v. Bloomberg, 1996 SD 93, 551 N.W.2d 590, 592 (citing State ex rel. Adkins v. Lien, 9 S.D. 297, 299, 68 N.W. 748, 749 (1896)). The taxpayers themselves are not parties to the illegal contracts.

[¶ 48.] Because Brookings taxpayers are not in pari delicto, or equally at fault, with city officials and Mills, it mandates recovery of consideration already paid. The taxpayers, specifically Bozied, gave notice at city council meetings that they believed the actions of City and Mills were illegal. That recognition by the taxpayers does not make them a party to the illegal contract and therefore they should recover those payments made illegally. “The allegation that City and its residents were not harmed but rather profited because of the illegal contract is completely irrelevant.” Himrich v. Carpenter, 1997 SD 116, 569 N.W.2d 568 (citing Norbeck and Nicholson Co., 32 S.D. 189, 142 N.W. 847). Even the best of motives do not give vitality to a contract which is void from its inception.

[¶49.] While it is commonly said that the law abhors a forfeiture, I must point out that the relief from a forfeiture is still equitable in nature. And therefore, under the majority’s holding that equitable defenses are not allowed with void contracts, the circuit court should be in a position to disallow any relief from forfeiture if the contract is determined to be void. Helm Bros., Inc. v. Trauger, 389 N.W.2d 600, 603 (N.D.1986).

[¶ 50.] Mills’ July 2, 1998 letter to the Agri-plex board confirms Mills was aware of the legal requirements of bidding public contracts and the ramifications of the change orders. From the wording of this letter, it appears Mills attempted to influence the board to execute a change order instead of letting bids on the changes. “When parties seek equity in the court, they must do equity, which includes entering the court with clean hands.” Himrich, 1997 SD 116 at ¶ 21, 569 N.W.2d at 573 (quoting Shedd v. Lamb, 1996 SD 117, 553 N.W.2d 241, 245). Although the majority has now remanded the matter to the trial court, I would suggest that in view of the record currently before us, perhaps Mills also did not have the cleanest of hands when entering into the change orders. “Contractors who do business with public entities do so at their peril. They are charged with the duty to be familiar with the statutory requirements and to adhere to them.” Hoiten, 1998 SD 44 at ¶ 23, 579 N.W.2d at 17 (quoting Carr v. City of Sioux Falls, 416 N.W.2d 602, 604 (S.D.1987)). Even though Mills and the City both perhaps did gain time and money from executing the change orders in that fashion, that is no excuse for violating the procedures set in place by statute, requiring compliance with the public bidding laws of this state. The forfeiture of all the money paid under the illegal change orders may seem harsh in this instance; but I believe the remedy to the taxpayers is appropriate if the public bidding laws of the State of South Dakota are to have any real meaning- in the future. As one renowned treatise has explained:

The provisions of statutes, charters and ordinances requiring competitive bidding in the letting of municipal contracts are for the purpose of inviting competition, to guard against favoritism, improvidence, extravagance, fraud and corruption, and to secure the best work or supplies at the lowest price practicable, and they are enacted for the benefit of property holders and taxpayers, and not for the benefit or enrichment of bidders, and should be so construed and administered as to accomplish such purpose fairly and reasonably with sole reference to the public interest. These provisions are strictly construed by the courts, and will not be extended beyond their reasonable purpose. Competitive bidding provisions must be read in the light of the reason for their enactment[.]

10 McQuillan, Municipal Corporations (3rd rev. ed. 1999) § 29.29 at 364 (footnotes omitted).

[¶ 51.] With these notes of disagreement from the majority’s opinion, I respectfully give my dissent on those two issues.

[¶ 52.] VON WALD, Circuit Judge, for SAJBERS, Justice, disqualified.

      . According to evidence elicited in the summary judgment hearing, Brookings decided to pave the parking lot when more funds became available because the Mills Construction bid was lower than anticipated.

      . This statute was amended in 2001, but we apply the pre-amendment version.

      . The record does not reflect that any party asked for a jury trial. SDCL 15 — 6—38(b) and (d). Thus, as the record now stands, the trier of fact would be the circuit court.

      .The contract did not contain unit prices; therefore, that portion of SDCL 5-18-18.3 is inapplicable.

      . In Sioux Falls Taxpayers, the Sioux Falls Water Commissioner permitted a contractor to engage in certain repairs, which exceeded the amount provided in the competitive bidding law. Id. at 94-95, 7 N.W.2d 136. The Water Commissioner did so without discussing the repairs with any members of the Commission and without its approval.

      . Many courts recognize two types of ultra vires contracts: (1) contracts ultra vires in the absolute sense because a government authority had no power at all to enter into them; and (2) contracts that a government authority was empowered to enter, but failed to execute in a lawful manner. See, e.g., Edwards v. City of Renton, 67 Wash.2d 598, 409 P.2d 153 (1965). When a public contract is ultra vires in the absolute sense, no equitable principle will extricate a contractor. Earthmovers of Fairbanks, Inc. v. Department of Transp. & Pub. Facilities, 765 P.2d 1360, 1368 (Alaska 1988).

      . The court in Elview noted: "[b]y allowing the recovery back of payments made to a contractor, the court is asked to take affirmative action and through the court’s action, one party, [the City] would be allowed to receive both the benefits of performance and the money.” Id. at 144.

      . South Dakota cases dealing with violations of the competitive bidding laws have primarily been actions by contractors. See Hoiten, 1998 SD 44, ¶ 10, 579 N.W.2d at 14 (contractor sued to recover balance due); Bak, 87 S.D. 468, 210 N.W.2d 65, 66 (1973)(contrac-tor suit for work done); Robert L. Carr Co. v. City of Sioux Falls, 416 N.W.2d 602 (S.D.1987)(contractor action for declaratory judgment to determine city’s liability); Northern Hills Sanitation, Inc. v. Board of Comm’rs of City of Lead, 272 N.W.2d 835, 836 (S.D.1978). Compare Fonder v. City of Sioux Falls, 76 S.D. 31, 71 N.W.2d 618 (1955)(taxpayer suit to enjoin city from further expenditures); Sioux Falls Taxpayers, 7 N.W.2d at 137-38 (included taxpayer claim to recover monies already expended).

      . SDCL 5-18-3 provided in 1997: "If the governing body of any public corporation intends to enter into a contract for the construction of a public improvement which involves the expenditure of twenty-five thousand dollars or more or a contract for the purchase of materials, supplies, or equipment which involves the expenditure of fifteen thousand dollars or more, the governing body of the public corporation shall advertise for bids for the project....”

      . SDCL 5-18-19 provides: "It shall be unlawful for any public corporation or its officers to enter into any contract in violation of the terms of this chapter or chapter 5-21, and any such contract entered into shall be null and void and of no force and effect."

      . In its letter, Mills urged the Board to act quickly on a number of change orders to avoid time delays and added expense. It urged a change order approach, stating, “You may certainly delay action on these items to include them with your total package approach but that delay will cost extra. Because of the interruption in our work, we will need an answer (signed Change Order) on these items by July 10 to avoid having to add additional $ to cover our extended overhead expense estimated at $825.00 per day for our portion alone.”


source: Caselaw Access Project

license: Public Domain

text:
    Warren F. SHELTON, Respondent, v. INDEPENDENT SCHOOL DISTRICT # 625, Self-Insured/Preferred Works, Relator, and Twin Cities Spine Center, Intervenor.
    No. C4-01-1781.
    Supreme Court of Minnesota.
    Jan. 18, 2002.
    Raymond R. Peterson, # 121563, McCoy, Peterson, Jorstad & Brabbit, Minneapolis, MN, Respondent’s Attorney.
    James S. Pikala, # 86903 Arthur, Chapman, Kettering, Smetak & Pikala, P.A., Minneapolis, MN, Relator’s Attorney.
   ORDER

Based upon all the files, records and proceedings herein,

IT IS HEREBY ORDERED that the decision of the Workers’ Compensation Court of Appeals filed September 17, 2001, be, and the same is, affirmed without opinion. See Minn. R. CivApp. P. 136.01, subd. 1(b).

Employee is awarded $600 in attorney fees.

BY THE COURT

R.A. Anderson

R.A. Anderson Associate Justice


text:
    In re Petition for DISCIPLINARY ACTION AGAINST James M. BURSETH, an Attorney at Law of the State of Minnesota.
    No. CX-00-2004.
    Supreme Court of Minnesota.
    Jan. 22, 2002.
   ORDER

The Director of the Office of Lawyers Professional Responsibility has filed a petition for amendment of probation and for further disciplinary action alleging that respondent James M. Burseth committed professional misconduct warranting public discipline, namely, violations of the terms of his public and private probations by using marijuana in violation of this court’s July 27, 2001 order, his private probation, and Minn. R. Prof. Conduct 8.4(d).

Respondent admits his conduct violated the Rules of Professional Conduct, waives his rights under Rule 14, Rules on Lawyers Professional Responsibility (RLPR), and has entered into a stipulation with the Director in which they jointly recommend that the appropriate discipline is a public reprimand and amendment of respondent’s current probation to add the following conditions:

a. Respondent shall continue on public probation until the later of January 14, 2003, or completion of six consecutive months of valid (non-dilute) random urinalysis test results. If respondent has another confirmed positive test result for alcohol or other mood altering chemicals, except for those allowed under paragraph (d) of this order, respondent shall be automatically suspended from the practice of law until such time that he can provide six consecutive valid (non-dilute) random urinalysis tests, at which time he may petition for reinstatement by affidavit pursuant to Rule 18(e), RLPR.
b. Respondent shall cooperate fully with the Director’s Office in its efforts to monitor compliance with this probation and promptly respond to the Director’s correspondence by the due date. Respondent shall cooperate with the Director’s investigation of any allegations of unprofessional conduct which may come to the Director’s attention. Upon the Director’s request, respondent shall provide authorization for release of information and documentation to verify compliance with the terms of this probation.
c. Respondent shall abide by the Minnesota Rules of Professional Conduct.
d. Respondent shall maintain total abstinence from alcohol and other mood-altering chemicals, except that respondent may use prescription drugs in accordance with the directions of a prescribing physician who is fully advised of respondent’s chemical dependency before issuing the prescription.
e. Respondent shall, at his own expense, submit to random urinalysis for drug screening at least four times per month at the Hennepin County Medical Center or such other facility as the Director’s Office may approve and shall direct the drug screening facility to provide the results of all urinalysis testing to the Director’s Office. If after three months, all such tests have been both negative and not suggestive of a dilute specimen, then the frequency of the random tests may be reduced. Respondent shall cooperate with the phone-in program established by the Director’s Office for the random tests. Any failure to call in without advance permission to deviate from the call in schedule shall be considered the same as a positive test.
f. Respondent shall participate in a relapse prevention program or other appropriate counseling approved by the Director’s Office.
g. Respondent shall attend at least two meetings per week of Alcoholics Anonymous, LCL or another abstinence support program acceptable to the Director. Respondent shall, by the tenth day of each month, without a specific reminder or request, submit to the Director an attendance verification on a form provided by the Director, which provides the name, address and telephone number of the person personally verifying the attendance.

This court has independently reviewed the file and approves the jointly recommended disposition.

IT IS HEREBY ORDERED that respondent James M. Burseth is publicly reprimanded and. shall continue on public probation until the later of January 14, 2003, or the completion of six consecutive months of valid (non-dilute) random urinalysis test results subject to the agreed-upon conditions set forth above.

BY THE COURT

Paul H. Anderson

Paul H. Anderson Associate Justice


text:
    In re Petition for DISCIPLINARY ACTION AGAINST Thomas M. BRUDVIG, an Attorney at Law of the State of Minnesota.
    No. C1-93-1092.
    Supreme Court of Minnesota.
    Jan. 22, 2002.
   ORDER

The Director of the Office of Lawyers Professional Responsibility has filed a petition for disciplinary action alleging that respondent Thomas M. Brudvig has committed professional misconduct warranting public discipline, namely, respondent neglected and failed to communicate with clients in eleven different representations, falsely told one client that he had filed a brief, failed to place client funds in his trust account, failed to make reasonably diligent efforts to comply with a legally proper discovery request by an opposing party, failed to comply with a court order, and failed to cooperate with the Director’s investigation in violation of Minn. R. Prof. Conduct 1.3, 1.4, 1.5(a) and (f), 3.4(c), 4.1, 8.1, and 8.4(c), and Rule 25, Rules on Lawyers Professional Responsibility (RLPR).

Respondent admits his conduct violated the Rules of Professional Conduct, waives his rights under Rule 14, (RLPR), and has entered into a stipulation with the Director in which they jointly recommend that the appropriate discipline is an indefinite suspension for a minimum of 12 months under Rule 15, RLPR. The parties recommend that the reinstatement hearing provided for in Rule 18(a) through (d), RLPR, not be waived, that respondent comply with Rule 26, RLPR, that respondent be required to successfully complete the professional responsibility examination under Rule 18(e), RLPR, and the continuing legal education requirement under Rule 18(e), RLPR, before seeking reinstatement, and that respondent pay costs in the amount of $900 under Rule 24, RLPR. The parties also recommend that upon reinstatement, respondent be placed on supervised probation for a period of two years under the following conditions:

a. Respondent shall cooperate fully with the Director’s Office in its efforts to monitor compliance with this probation and promptly respond to the Director’s correspondence by the due date. Respondent shall cooperate with the Director’s investigation of any allegations of unprofessional conduct which may come to the Director’s attention. Upon the Director’s request, respondent shall provide authorization for release of information and documentation to verify compliance with the terms of this probation.
b. Respondent shall abide by the Minnesota Rules of Professional Conduct.
c. Respondent shall be supervised by a licensed Minnesota attorney appointed by the Director to monitor compliance with the terms of this probation. Re- • spondent shall provide to the Director the names of four attorneys who have agreed to be nominated as respondent’s supervisor within two weeks of being reinstated to the practice of law. If, after diligent effort, respondent is unable to locate a supervisor acceptable to the Director, the Director will seek to appoint a supervisor. Until a supervisor has signed a consent to supervise, the respondent shall on the first day of each month provide the Director with an inventory of active client files described in paragraph d. below. Respondent shall make active client files available to the Director upon request.
d. Respondent shall cooperate fully with the supervisor in his/her efforts to monitor compliance with this probation. Respondent shall contact the supervisor and schedule a minimum of one in-person meeting per calendar quarter. Respondent shall submit to the supervisor an inventory of active client files by the first day of each month during the probation. With respect to each active file, the inventory shall disclose the client name, type of representation, date opened, most recent activity, next anticipated action, and anticipated closing date. Respondent’s supervisor shall file written reports with the Director at least quarterly, or at such more frequent intervals as may reasonably be requested by the Director.
e. Within thirty days after his being reinstated to the practice of law, respondent shall provide to the Director and to the probation supervisor, if any, a written plan outlining office procedures designed to ensure that respondent is in compliance with the probation requirements. Respondent shall provide progress reports as requested.

This court has independently reviewed the file and approves the jointly recommended disposition.

IT IS HEREBY ORDERED that respondent Thomas M. Brudvig is suspended from the practice of law for a minimum period of 12 months, effective 14 days from the date of this order, subject to the agreed-upon conditions set forth above. Upon reinstatement, respondent shall be placed on supervised probation for two years subject to the agreed-upon conditions of probation set forth above. Respondent shall pay $900 in costs under Rule 24, RLPR.

BY THE COURT

Paul H. Anderson

Paul H. Anderson Associate Justice


author: STRINGER, Justice.

text:
    GREAT LAKES GAS TRANSMISSION L.P., Respondent, v. COMMISSIONER OF REVENUE, Relator.
    No. CX-01-649.
    Supreme Court of Minnesota.
    Jan. 31, 2002.

      Mike Hatch, Attorney General, Thomas K. Overton, Assistant Attorney General, St. Paul, for relators.
    John W. Windhorst, Jr., Dorsey & Whitney LLP, Christopher Shaheen, Dorsey & Whitney LLP, Minneapolis, for respondents.
   OPINION

STRINGER, Justice.

The commissioner of revenue appeals a tax court ruling granting the refund of use taxes paid by taxpayer Great Lakes Gas Transmission Limited Partnership (“Great Lakes”) on natural gas consumed as fuel for compressor engines located at various points along a natural gas pipeline in Minnesota. We affirm the tax court and hold that the natural gas is subject to use tax under MinmStat. § 297A.14, subd. 1 (1994), but as it is consumed in the industrial production of personal property intended to be sold ultimately at retail, it is exempt from tax under MinmStat. § 297A.25, subd. 9 (1994).

Great Lakes transports natural gas through a pipeline that runs approximately 1,000 miles from the Canadian border near the northwest tip of Minnesota, through Minnesota, Wisconsin, and Michigan and back again to the Canadian border in Michigan. Approximately every 75 miles along the pipeline the gas passes through a compressor station. At each compressor station, natural gas passes through separators, which remove liquids and other impurities, and also through compressors where gas pressure is increased and gas temperature is regulated. The issue here relates to whether Great Lakes must pay use tax on the natural gas that is diverted from the pipeline and consumed as fuel for the compressor engines.

Great Lakes filed Minnesota tax returns for 1994 and 1995 paying use tax totaling $1,438,379 on the gas consumed in Minnesota to power the five compressors. It later filed an amended return claiming a refund for the taxes paid plus statutory interest. The commissioner of revenue denied the refund citing Notice 95-10 and ruled that the compressor fuel was purchased for use and consumption in Minnesota because shippers provide the natural gas to Great Lakes as partial consideration for Great Lakes’s gas transportation services.

Great Lakes appealed the commissioner’s ruling to the Minnesota Tax Court arguing that compressor fuel consumption should not be taxed for three reasons: Great Lakes did not technically use or purchase the gas; the gas is tax exempt under Minn.Stat. § 297.25, subd. 9 as material consumed in industrial production; and the tax is prohibited by several constitutional provisions. Pursuant to the process outlined in Erie Mining Co. v. Commissioner of Revenue, 343 N.W.2d 261, 264 (Minn.1984), the tax court referred the federal constitutional issues to the Ramsey County District Court, and the district court subsequently transferred the case back to the tax court for decision.

The tax court concluded that while Great Lakes’s consumption of compressor fuel for its pipeline is a taxable event under the use tax statute, it is tax exempt as material consumed in industrial production under Minn.Stat. § 297A.25, subd. 9. The, tax court therefore ordered a refund of the tax Great Lakes paid on the compressor fuel in 1994 and 1995, plus interest, and did not reach the constitutional issues. The commissioner’s motion for amended findings was denied, and the commissioner seeks certiorari review by this court. Great Lakes also filed a notice of review of the tax court’s ruling that the gas consumption was a taxable event and of the constitutional issues that the court declined to reach.

A final order of the tax court may be challenged on certiorari on the basis that “the tax court was without jurisdiction, that the order of the tax court was not justified by the evidence or was not in conformity with law, or that the tax court committed any other error of law.” Minn. Stat. § 271.10, subd. 1 (2000). The tax court’s factual determinations are justified if there is “ ‘reasonable evidence to sustain the findings.’ ” Morton Bldgs., Inc. v. Comm’r of Revenue, 488 N.W.2d 254, 257 (Minn.1992) (quoting Red Owl Stores, Inc. v. Comm’r of Taxation, 264 Minn. 1, 9-10, 117 N.W.2d 401, 407 (1962)). We review questions of law de novo, F-D Oil Company, Inc. v. Comm’r of Revenue, 560 N.W.2d 701, 704 (Minn.1997); Morton Bldgs., 488 N.W.2d at 257, but reverse factual findings only where a review of the entire record leaves us with “ ‘a firm conviction that a mistake has been made,’ ” see Krech v. Comm’r of Revenue, 557 N.W.2d 335, 338 (Minn.1997) (quoting Montgomery Ward & Co., Inc. v. County of Hennepin, 482 N.W.2d 785, 788 (Minn.1992)).

I.

We first consider whether the consumption of compressor fuel constitutes a taxable event for the purposes of the use tax statute. Minnesota Statutes § 297A.14, subd. 1, imposes a use tax on “the privilege of using, storing, distributing, or consuming in Minnesota tangible personal property or taxable services purchased for use, storage, distribution, or consumption in this state.” Three requirements must be met to impose a use tax: first, the item of tangible personal property must be used, stored, or consumed in Minnesota; second, the item of tangible personal property must be purchased; and third, the purchase of the item of personal property must have been for use, storage or consumption in Minnesota. See Morton Bldgs., 488 N.W.2d at 257.

As to the first requirement, the term “use” is broadly defined for tax purposes in pertinent part as “the exercise of any right or power over tangible personal property.” Minn. Stat § 297A.01, subd. 6 (1994). This court has explained that “[o]ur reluctance to narrow the [definition] of ‘use’ * * * is consistent with the general goal of the sales and use tax statutes, namely, to establish a complementary scheme whereby everything is presumed taxable unless specifically exempted.” Morton Bldgs., 488 N.W.2d at 258. The tax court concluded that the “use” element is satisfied because the gas is received by Great Lakes and is burned as fuel; therefore it is literally consumed in Great Lakes’s compressor engines. As Great Lakes has conceded that it consumes the fuel, we agree with the tax court’s eonclusion that consumption qualifies as a type of “use” — indeed, it could well be considered the ultimate use.

Great Lakes does not concede that the second requirement — purchase—is met, however. We disagree. Minnesota Statutes § 297A.01, subd. 3 (1994), provides that a “purchase” includes but is not limited to any “transfer of title or possession, or both, of tangible personal property, whether absolutely or conditionally * * * for a consideration in money or by exchange or barter.” The commissioner argues and the tax court ruled that Great Lakes purchased the fuel because there was a transfer of possession and the consideration was Great Lakes’s gas transport services. Great Lakes acknowledges that it receives compressor fuel from gas companies as part of the consideration for transportation services but contends that is not dispositive because under Generally Accepted Accounting Principles the transaction is not deemed a purchase. We may disregard a transaction’s form, however, and examine its economic substance to determine whether a purchase occurs. See Comm’r of Revenue v. Safco Prods. Co., 266 N.W.2d 875, 877 (Minn.1978) (citing Transp. Leasing Corp. v. State, 294 Minn. 134, 199 N.W.2d 817 (1972)). Here the substance of the transaction is an exchange of the compressor-consumed gas for transportation services. Minnesota Statutes § 297A.01, subd. 3 provides that a transaction qualifies as a purchase if it is “a transfer of * ⅜ ⅜ possession * * * for a consideration * * * or by exchange or barter.” As the substance of the transaction clearly falls within the statutory language, we agree with the tax court that the gas was purchased by Great Lakes.

The tax court ruled that the third requirement — -the item must be purchased for use, storage or consumption in Minnesota — was also met. We agree. It is clear that the purchase was for consumption in the five compressors located in Minnesota. Cf. Morton Bldgs., 488 N.W.2d at 258-59 (concluding that the third prong was satisfied where some portion of all raw materials purchased were to be used in Minnesota). We conclude that Great Lakes’s consumption of natural gas as compressor fuel meets the three statutory requirements for imposing a use tax under Minn. Stat. § 297A.14, subd. 1.

II.

Regardless of our conclusion that the transaction meets the statutory qualifications for imposing a use tax under section 297A.14, however, Great Lakes argues that it is still entitled to a refund because the compressor fuel was consumed in the industrial production of retail goods. The industrial production exemption in Minn. Stat. § 297A.25, subd. 9 exempts from use tax “the storage, use, or consumption of all materials, including chemicals, fuels, petroleum products * * * used or consumed in * * * industrial production of personal property intended to be sold ultimately at retail.” “Industrial production” is defined in Minn. R. 8130.5500, subp. 1:

Agricultural and industrial production includes any step or steps in the production process. * * * Generally, the production process begins with the removal of raw materials from stock for the purpose of commencing activities effecting changes thereon in the course of producing the intended product. The production process ends when the completed state is achieved. * * * If the product is not packaged, the process ends when it is placed into finished goods inventory. If the package is not placed into finished goods inventory prior to shipment, the process ends when the last process prior to loading for shipment has been completed.

As to natural gas specifically, the rule provides the following in pertinent part: “The purchase of fuel, electricity, gas, steam, and water that is used or consumed directly in agricultural or industrial production is not taxable.” Id., subp. 4a (emphasis added).

The tax court (relying on Bituminous Roadways, Inc. v. Commissioner of Revenue, 324 N.W.2d 799 (Minn.1982)) held that the fuel consumed in the compressors was exempt under the industrial production exemption because the fuel is consumed in a step of the natural gas production process. In Bituminous Roadways we determined that the item purchased must be acted upon in some way in order to qualify for the industrial production exemption. Id. at 801. The tax court reasoned that a series of processes including pressure regulation and the removal of impurities must occur in the process of refining the gas to make it “customer ready,” and those refining steps “act upon” the gas. The court thus concluded that Great Lakes is “engaged in a limited form of production by refining natural gas at its compressor stations” and that the compressor fuel is consumed in connection with that processing.

Testimony of Great Lakes’s witnesses support the tax court’s findings. One expert testified that burning compressor fuel is necessary for the constant refinement of the gas in the gas pipeline. The expert further testified that “the processing of natural gas is a continuous process” beginning at extraction from the ground and ending with delivery to the end customer and that the compressors are an integral part of the processing and production. Two witnesses testified that the quality of the gas improves as it flows through the compressor stations along the pipeline.

The commissioner contends that the industrial production exemption does not apply because the primary purpose of the fuel consumption is to transport gas and that transporting the gas has only an incidental and insignificant effect on the composition of the gas. The commissioner relies on Questar Data Systems, Inc. v. Commissioner of Revenue, 549 N.W.2d 925 (Minn.1996) to argue that the essence of the activity — transportation rather than industrial production — should determine whether the exemption applies. Reliance on Questar is misplaced however, because in Questar we examined the “essence of the transaction” to determine whether a taxpayer’s activity fell within the statutory definition of “use” — not to determine whether the essence of an activity fits within a statutory exemption. See Ques- tar, 549 N.W.2d at 928. Moreover, the purpose of the industrial production exemption is “to avoid ‘tax on a tax’ situations by postponing imposition of all sales taxes until the final sale of the finished product.” Safco Prods. Co., 266 N.W.2d at 877. Here the exemption serves to avoid double-taxing by postponing taxation until the final sale to the end consumer.

The tax court’s conclusion that the consumption of compressor fuel is a step in the production of consumer ready natural gas is amply supported by the testimony of Great Lakes’s witnesses describing the gas refining process that occurs in the compressor stations. We affirm the ruling of the tax court that the use of the natural gas to fuel the compressors is exempt from use tax under Minn.Stat. § 297A.25, subd. 9 as a part of industrial production of goods to be sold ultimately at retail.

Affirmed.

LANCASTER, J., took no part in the consideration or decision of this case.

      . Five such compressor stations are located in Minnesota. This case pertains only to the tax collected for the use of compressor fuel at those five stations.

      . Revenue Notice 95-10 reads in pertinent part:
      Natural gas that is purchased, consumed or used by a natural gas pipeline company in its operations or during the course of its operations in Minnesota is subject to sales or use taxation under Minn.Stat. Chap. 297A. If the gas is transferred to the pipeline company as reimbursement in-kind or as part of the consideration for the pipeline transportation services, the transaction will be considered a taxable transaction of pipeline services for natural gas and subject to sales or use tax.
      Minn. Rev. Notice 95-10 (March 8, 1995).

      . The industrial production exemption in Minn.Stat. § 297A.25, subd. 9 exempts from use tax "the storage, use, or consumption of all materials, including chemicals, fuels, petroleum products * * * used or consumed in * * ⅞ in(justrial production of personal property intended to be sold ultimately at retail.”

      . To this court Great Lakes argues that imposing a use tax on its compressor fuel violates the Supremacy Clause of the U.S. Constitution, U.S. Const, art. VI, cl. 2, and the Commerce Clause of the U.S. Constitution, U.S. Const, art. I, § 8, cl. 3. Great Lakes also argues that taxation of the compressor fuel is prohibited by the "statutory constitutional exemption” codified at Minn.Stat. § 297A.25, subd. 4 (1994). The statute provides in pertinent part "the gross receipts from the sale of and the storage, use or other consumption in Minnesota of tangible personal property ⅜ * ⅜ which under the Constitution or laws of the United States or under the Constitution of Minnesota, the state of Minnesota is prohibited from taxing, are exempt.” Great Lakes argues that because the federal constitution was interpreted to preclude use tax upon a transaction that is an integral part of interstate commerce in 1967, and the use tax section was enacted in 1967, that interpretation of the Commerce Clause should control this tax issue. In 2000 the legislature repealed Minn.Stat. § 297A.25. Act of Apr. 18, 2000, ch. 418, art. 1, § 45, 2000 Minn. Laws 796, 849-50. The revised statutory constitutional exemption is now codified at Minn.Stat. § 297A.67, subd. 24 (Supp.2001).

      .The tax court was created by the legislature as an administrative agency of the executive branch. See Minn.Stat. § 271.01, subd. 1 (2000); In re McCannel, 301 N.W.2d 910, 919 (Minn.1980) (recognizing the tax court as “essentially an administrative agency, deriving its power from a grant by the legislature”). The tax court has limited jurisdiction and no original jurisdiction to hear constitutional matters; however it has subject matter jurisdiction to hear constitutional claims if the case comes to it from the district court. Erie Mining Co., 343 N.W.2d at 264; McCannel,
        301 N.W.2d al 919-20. In essence, the district court transfers its legal and equitable powers to the tax court, thereby giving the tax court jurisdiction to hear constitutional issues.

      . Generally Accepted Accounting Principles are the conventions, rules and procedures that define approved accounting principles at a particular time. The source of such principles is the Financial Accounting Standards Board. See Black's Law Dictionary 692 (7th ed.1999).

      . Great Lakes also argues that the transaction was not a purchase because according to the tariff it filed with the Federal Energy Regulatory Commission (FERC) — which contains information about the services that the pipeline offers, the general terms and conditions that apply to those services, and the rates for each service offered — Great Lakes is not authorized to purchase natural gas. A Great Lakes witness testified that in 1992 FERC began a process known as "unbundling” — that is, requiring gas pipeline companies to separate the business of gas transportation from the business of buying and selling gas. Great Lakes’s FERC tariff reflects its decision to become a transport-only company in 1990, and its lack of authority to buy gas. It could have chosen to participate in both gas transporting and gas trading however, and therefore its lack of authority to purchase gas is merely a reflection of its business decision to be a gas transporter rather than a regulatory ban on the purchase of gas. It does not preclude a conclusion that it purchased the gas to fuel its pipeline compressors.

      . Because we affirm the tax court s decision on the industrial production exemption, we need not address the constitutional issues raised in Great Lakes's appeal.


author: GORDON W. SHUMAKER, Judge.

text:
    Loren HENTGES, et al., Relators, v. MINNESOTA BOARD OF WATER AND SOIL RESOURCES, Rice Creek Watershed District, St. Paul Audubon Society, et al., and Minnesota Department of Transportation, Respondents.
    No. C7-01-799.
    Court of Appeals of Minnesota.
    Jan. 4, 2002.

      Paul R. Haik, Krebsbach & Haik, Ltd., Minneapolis, for relators.
    Mike Hatch, Attorney General, William A. Szotkowski, Assistant Attorney General, St. Paul, for respondent Minnesota Board of Water and Soil Resources.
    Harold H. Sheff, Michelle J. Ulrich, Smith, Gendler, Shiell, Sheff, Ford, & Maher, P.A., Minneapolis, for respondent Rice Creek Watershed District.
    A.W. Clapp III, St. Paul, for respondents St. Paul Audubon Society, et al.
    David L. Phillips, Office of the Attorney General, St. Paul, for respondent, Minnesota Department of Transportation.
    Gerald W. Von Korff, John C. Kolb, Rinke Noonan, St. Cloud, for Amicus Curiae Lac qui Parle County and Polk County.
    Considered and decided by GORDON W. SHUMAKER, Presiding Judge, HALBROOKS, Judge, and MULALLY, Judge.

       Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const, art. VI, § 10.

   OPINION

GORDON W. SHUMAKER, Judge.

Relators challenge the Board of Soil and Water’s affirmance of the Rice Creek Watershed District’s denial of relators’ petition for an exemption from the wetland replacement requirement. Specifically, re-lators allege that (a) the Board exceeded its statutory authority by adopting Minn. R. 8420.0122, subp. 3(A) (1999), which sets a standard for wetlands replacement that is different from MinmStat. § 103G.2241 (2000); (b) the District’s misapplication of 33 U.S.C. § 1344(f) regarding whether wetlands replacement was necessary resulted in a misapplication of Minn.Stat. § 103G.2241; (c) Minn. R. 8420.0122, subp. 3(A), deprives relators of equal protection, due process of law, and just compensation for property taken for public use by limiting their ability to maintain a county ditch; (d) the Board failed to address procedural errors made by the District in these proceedings; and (e) certain participants in the proceedings below did not appeal and cannot be participants in this appeal. Because we find no reversible error, we affirm.

FACTS

Relators own lands adjacent to Anoka County Ditch No. 53-62. They claim that the placement and obstruction of certain culverts in the ditch system cause water to overflow and to flood their lands. This appeal focuses principally on a culvert in the ditch at I-35W, in the Rice Creek Watershed District. The Minnesota Department of Transportation installed that culvert in the late 1950s. Over the years, the culvert has risen to a higher elevation as a result of natural forces. Relators want it to be lowered to the height of the original placement, and they want the sediment in the ditch removed.

The ditch work that relators propose will cause partial drainage of adjacent wetlands that have existed for over 25 years. State law requires that partially drained wetlands be replaced, unless the work that caused the drainage is exempt from the replacement requirement.

The local government unit with jurisdiction may determine eligibility for a replacement exemption. This is the Rice Creek Watershed District. Contending that the proposed project is simply ditch maintenance and that federal law exempts ditch maintenance from the replacement requirement, relators asked the District for an exemption.

The District denied the exemption, and on administrative appeal the Board of Water and Soil Resources affirmed, invoking one of its own rules that the federal exemption is inapplicable if the work will partially drain a wetland.

Relators have brought the Board’s denial to this court through certiorari for review. They challenge the authority, propriety, and constitutionality of the Board’s rule; the propriety of dividing the exemption process into two phases; and the propriety of participation by civic and environmental-advocacy groups in the appeal to the Board and in this appeal.

ISSUES

1. Did the Board of Soil and Water Resources exceed its statutory authority in adopting Minn. R. 8420.0122, subp. 3(A), to prevent maintenance of public drainage ditches as authorized by Minn.Stat. § 103G.2241, subd. 3(1) (2000)?

2. Did the Board of Water and Soil resources misapply 33 U.S.C. § 1344(f)?

a.If so, did this error affect the decision regarding the exemption authorized by Minn.Stat. § 103G.2241, subd. 3(1)?

3. Does Minn. R. 8420.0122, subp. 3(A), unconstitutionally deny relators their right to:

a. Equal Protection?

b. Due Process?

4. Are persons who did not file a notice of appeal parties to this appeal?

5. Did the Board engage in unlawful procedures that affected the outcome of the case and were prejudicial to relators by:

a. extending the deadline in which to render a decision without extenuating circumstances?

b. delegating the decisions to an administrator and technical evaluation panel?

c. bifurcating the exemption proceedings?

ANALYSIS

1. The Board’s Authority

In Minnesota, “wetlands may not be drained * * * unless * * * [they] are replaced by wetlands that will have equal or greater public value.” Minn.Stat. § 103G.221, subd. 1 (2000). However, a replacement plan is not required for “activities exempted from federal regulation under United States Code, title 33, section 1344(f) * * *,” the so-called “federal approvals” exemption. Minn.Stat. § 103G.2241, subd. 3(1) (2000).

The federal approvals exemption classifies as a “non-prohibited” activity “the discharge of dredged or fill material * * ⅜ for the purpose of maintenance * * * of currently serviceable structures * * 33 U.S.C. § 1344(f)(1)(B) (1994).

This federal exemption, which allows the discharge of dredged and fill materials into certain waters, is qualified by a state rule that (1) requires proof of eligibility for the exemption, and (2) provides that the exemption is not applicable to any project that will partly drain a wetland:

The local government unit may certify the exemption only if the landowner furnishes proof of qualification for one of the exemptions from the United States Army Corps of Engineers.
This exemption does not apply to a project with the purpose of converting a wetland to a nonwetland, either immediately or gradually, or converting the wetland to another use, or when the fill will result in significant discernible change to the flow or circulation of water in the wetland, or partly draining it, or reducing the wetland area.

Minn. R. 8420.0122, subp. 3A (Supp. II 2000).

Relators obtained the requisite proof from the Army Corps of Engineers that the ditch work meets the requirements of the federal exemption. But, applying the rule that limits the exemption, the Board of Water and Soil Resources denied the exemption. Relators contend that the Board exceeded its statutory authority in adopting Minn. R. 8420.0122, subp. 3A.

When an administrative agency’s authority is questioned, this court independently reviews the enabling statute. Weber v. Hvass, 626 N.W.2d 426, 431 (Minn.App.2001), review denied (Minn. June 27, 2001). Minn.Stat. § 103G.2242, subd. 1(a) (2000), gives the Board authority to adopt rules regarding wetland replacement plans. See also Minn. R. ch. 8420 (chapter of rules implementing act). “Generally, we will invalidate an agency rule only if the rule was adopted in excess of the agency’s statutory authority.” Drum v. Bd. of Water & Soil Res., 574 N.W.2d 71, 73 (Minn.App.1998).

In enacting the Wetland Conservation Act of 1991, the Minnesota legislature clearly stated its intent to “achieve no net loss in the quantity, quality, and biological diversity of Minnesota’s existing wetlands * * Minn.Stat. § 103A.201, subd. 2(b)(1) (2000). To achieve “no net loss” of wetlands, the legislature provided the requirement that partly drained wetlands be replaced. Minn.Stat. § 103G.222, subd. 1(a) (2000). On its face, rule 8420.0122, subp. 3A, comports with legislative intent because, if followed, the rule will ensure that even ditch maintenance that causes wetland drainage will not result in net loss of Minnesota wetlands.

Not only does the rule satisfy express legislative intent, but the process for promulgation disclosed no conflict between the rule and the statutory authority for the rule. In the administrative law judge’s report under Minn.Stat. § 14.15 (1992), no comments or concerns from the public were noted, and the report contained a recommendation that the rule be adopted. The chief administrative law judge approved the report. See Minn.Stat. § 14.16 (1992) (after chief ALJ approves the changes in the rules made in accordance with the ALJ’s report, the agency then may adopt the rules).

Although there is some ambiguity in how the federal approvals exemption is to be applied, relators’ interpretation seems clearly at odds with both the express language of the statutes and the state’s policy of achieving no net loss of wetlands. Thus, on this record, we conclude that the Board did not exceed its statutory authority in adopting rule 8420.0122, subp. 3A.

2. Application of 33 U.S.C. § 1344(f)

Relators argue that the Board misapplied section 1344(f) by failing to follow the law as set forth in United States v. Sargent County Water Res. Dist., 876 F.Supp. 1090 (D.N.D.1994).

In Sargent, the issue was whether the ditch work was an improvement or maintenance. If maintenance, it was exempt from section 1344(f) regulation. Id. at 1098-99. The federal district court determined that only ditch maintenance was involved, and that the discharge of the material into the wetland was a non-prohibited activity under section 1344(f). Id. at 1102-04.

Relators contend that here, too, only ditch maintenance is involved and that is an exempt activity. They also suggest that it is common sense that some drainage will occur with ditch maintenance, but because the runoff is part of a maintenance project no replacement of the runoff is required. Relators assert that the exemption is negated by a rule that does not apply the exemption to ditch maintenance.

As we have indicated, the relationship of the exemption and the statutory and policy language is not entirely clear. But the exemption refers to the activity of putting dredged and fill material into a wetland, thus obviously causing some loss of water. The record here shows that it is not depositing fill but rather draining part of 66.6 acres that will be the result of the ditch work. Thus, because the exemption has a focus different from what apparently will be done in this ditch work and because of the unassailable conclusion that the legislature intends that there be no net loss of Minnesota wetlands, we are not persuaded that the Board misapplied the law in denying the exemption.

3. Constitutional Issues

a. Due Process

Relators argue that the state unconstitutionally took their land without just compensation by passing laws and promulgating rules that prohibit or restrict the maintenance of the ditch. However, neither the District nor the Board has ever prohibited relators from maintaining the ditch; rather, the District and the Board require that if relators do lower the culvert, causing partial drainage of the nearby wetlands, the lost acreage of wetlands must be replaced by wetlands “that will have equal or greater public value.” Minn. Stat. § 103G.221, subd. 1. Thus, there is no due process violation in this case because relators have always been free to maintain the ditch.

Furthermore, Minnesota courts have recognized that the maintenance of ditches may be subject to environmental laws. See In re Christenson, 417 N.W.2d 607, 615 (Minn.1987) (finding that environmental laws prohibited the applicant from enlarging or draining private drainage ditches and drain a protected wetland). Thus, the Board’s denial of relators’ request to be exempted from the wetland replacement requirement did not constitute a violation of relators’ due-process rights.

b. Equal Protection

Relators also argue that the District’s and the Board’s actions violate rela-tors’ rights to equal protection. However, relators make this argument only in a conclusory fashion in their brief to this court. An assignment of error based on “mere assertion” and not supported by argument or authority is waived unless prejudicial error is obvious on mere inspection. State v. Modern Recycling, Inc., 558 N.W.2d 770, 772 (Minn.App.1997) (quotation omitted). It is not obvious on mere inspection how the denial of relators’ request for the “federal” exemption violates their right to equal protection. This issue is waived.

4. Parties to Appeals

Relators argue that the Board erred in allowing ABC League of Women Voters, the St. Paul Audubon Society, and the Izaak Walton League, Minnesota Division, to participate in the appeal to the Board. An appeal may be made by the wetland owner, by any party who is required to receive notice under Minn.Stat. § 103G.2242, subd. 7 (2000), or by 100 residents of the county in which a majority of the wetland is located. Minn.Stat. § 103G.2242, subd. 9 (2000); Minn. R. 8420.0250, subp. 1 (Supp. II 2000). Parties to an appeal are the appellant, the landowner, the local government unit, and in the case of replacement plan appeals, all those required to receive notice of the local government unit decision.

Minn. R. 8420.0250, subp. 3 (Supp. II 2000). A party required to receive notice is a member of the public who requests a copy of the decision. Minn.Stat. § 103G.2242, subd. 7. This case involves the requirement of a wetlands replacement plan, and ABC, Walton, and the Audubon Society requested, and received, a copy of the District’s decision, and thus are proper parties to the appeal. ABC, Walton, and the Audubon Society did not file notices of appeal because they agreed with the District’s decision.

Although Minn.Stat. § 103G.2242, subd. 9, limits the persons eligible to appeal a decision, it does not state that only one of the eligible parties may appeal. Thus, all of the eligible parties may appeal if they desire. Furthermore, Minn. R. 8420.0250, subp. 3, indicates that if an appeal is brought, ABC, Walton, and the Audubon Society are parties to the appeal because they were parties required to receive notice of the District’s decision. Since ABC, Walton, and the Audubon Society were all eligible parties to appeal the District’s decision, and they are considered parties to an appeal under the Board’s administrative rules, the Board did not err in allowing these parties to participate in the appeal.

5. Procedural Issues

a. Extensions

Relators argue that it was unlawful for the Board to deny their exemption request after the 60 day time limit as required by Minn.Stat. § 15.99 (2000), and in doing so, the Board effectively granted their request for a “federal” exemption. An agency must approve or deny within 60 days a written request for a permit. Minn.Stat. § 15.99, subd. 2. Failure to do so is approval of the request. Id. However, an agency may extend the time limit by providing written notice of the extension, which details the reasons for and the anticipated length of the extension, before the end of the initial 60-day period. Minn. Stat. § 15.99, subd. 3(f).

The record shows that two extensions were given. ■ The first extension letter refers to relators’ request for an exemption to lower the culvert, which was received by the District on September 27, 2000. The letter then notifies relators that, under Minn.Stat. § 15.99, the District is extending the time limit in which to render a decision to 30 days past the November 26, 2000, deadline, for the purpose of “consider[ing] evidence and legal issues regarding application of exemption.” This notice complies with the requirements of the statute. The record shows that the decision was rendered within this time period.

The District sent its second letter to relators on December 18, 2000. The letter notes that relators requested an exemption from the wetland replacement requirement under the “federal” exemption on October 25, 2000, and that the notice was being sent under Minn.Stat. § 15.99 extending the time limit by 60 days. A decision was rendered within that 60-day extension period.

The record shows that both decisions were timely, the extensions were authorized by law, and the notices complied with the law. Thus, these extensions were lawful, and relators have not shown how they were prejudiced.

b. Delegating Decisions

Relators argue that the District erred in delegating exemption determinations to the “Administrator.” However, there is nothing in the record indicating that anything was delegated to any “Administrator,” and relators do not explain the argument beyond this one-sentence conclusory statement. An assignment of error based on “mere assertion” and not supported by argument or authority is waived unless prejudicial error is obvious on mere inspection. Modern Recycling, 558 N.W.2d at 772 (quotation omitted). Furthermore, there is no indication that this argument was raised either before the District or the Board. This court will generally not consider matters not argued and considered below. Thiele v. Stick, 425 N.W.2d 580, 582 (Minn.1988).

c. Bifurcation

Relators argue that the Board’s bifurcation of this case into two phases, the first to determine jurisdictional issues, the second to determine issues on the merits, affected the outcome of the case and prejudiced relators. Relators first argue that they were denied the opportunity to be heard. However, the record shows that relators not only filed briefs at both phases of the hearings and participated in oral arguments, but they also filed “responses” to advisory reports to the Board at both phases of the proceedings. Relators had an opportunity to be heard, and took advantage of that opportunity.

Relators also argue that splitting the case into phases was done for the sole purpose of avoiding a final determination on the merits. A transcript of th e proceeding shows that the Board’s Dispute Resolution Committee (DRC) wanted to determine who had standing to be a party to the dispute before any arguments on the merits were considered. See Sundberg v. Abbott, 423 N.W.2d 686, 688 (Minn.App.1988) (a party must have standing in a dispute in order to have the court decide the merits of particular issues), review denied (Minn. June 29, 1988). Because it was important to determine who was able to participate in the proceedings before issues on the merits were considered, it was not unlawful for the DRC to bifurcate the proceedings to first determine who was entitled to be heard in this matter.

Lastly, relators provide no evidence showing how they were prejudiced, or how the bifurcation of the proceedings affected the outcome of the case. An assignment of error based on “mere assertion” and not supported by argument or authority is waived unless prejudicial error is obvious on mere inspection. Modern Recycling, 558 N.W.2d at 772 (quotation omitted). Prejudicial error is not obvious on mere inspection of this case. Furthermore, this court declines to address allegations unsupported by legal analysis or citation. Ganguli v. Univ. of Minnesota, 512 N.W.2d 918, 919 n. 1 (Minn.App.1994).

Although we hold that the Board did not exceed its authority in adopting or applying Minn. R. 8420.0122, subp. 3A, we are troubled by the potential inequity of requiring landowners to choose between forgoing the use of their lands and incurring considerable expense to replace wetlands. We are left with an apparent gap in legislation that we have no authority to fill, but that, in the interest of fairness, ought to be addressed by the legislature.

DECISION

Neither the Board nor the District misapplied the “federal” exemption, nor did these entities act unlawfully in the process that led to the decisions in this case.

Affirmed.