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Wisconsin Department of Natural Resources v. Timber and Wood Products Located in Sawyer County

Court of Appeals of Wisconsin, District III

December 19, 2017

Wisconsin Department of Natural Resources, Plaintiff-Appellant,
v.
Timber and Wood Products Located in Sawyer County, Lac Courte Oreilles Band of Lake Superior Chippewa Indians of Wisconsin and Unknown Defendants, Defendants-Respondents.

         APPEAL from an order of the circuit court for Sawyer County, Cir. Ct. No. 2015CV171 JOHN M. YACKEL, Judge. Affirmed.

          Before Stark, P.J., Hruz and Seidl, JJ.

          STARK, P.J.

         ¶1 This appeal involves an attempt by the Wisconsin Department of Natural Resources (DNR) to recover taxes that it alleges the Lac Courte Oreilles Band of Lake Superior Chippewa Indians of Wisconsin (the Tribe) owes under Wisconsin's Forest Croplands Law, Wis.Stat. §§ 77.01-77.17 (2015-16).[1] The circuit court granted the Tribe's motion to dismiss, concluding the Tribe's sovereign immunity barred the DNR's claims. We agree. We reject the DNR's argument that the Tribe waived its sovereign immunity. We further conclude that, in addition to barring in personam claims against the Tribe, the Tribe's sovereign immunity prevents the DNR from bringing an in rem claim pertaining to the timber and wood products located on the Tribe's property. We therefore affirm the order dismissing the DNR's claims.[2]

         BACKGROUND

         I. The Forest Croplands Law

         ¶2 Because this appeal involves taxes allegedly owed under the Forest Croplands Law, we begin with a brief overview of the relevant statutory provisions. The Forest Croplands Law was enacted in 1927. See 1927 Wis. Laws, ch. 454. Its stated purpose is

to encourage a policy of protecting from destructive or premature cutting the forest growth in this state, and of reproducing and growing for the future adequate crops through sound forestry practices of forest products on lands not more useful for other purposes, so that such lands shall continue to furnish recurring forest crops for commercial use with public hunting and fishing as extra public benefits, all in a manner which shall not hamper the towns in which such lands lie from receiving their just tax revenue from such lands.

Wis. Stat. § 77.01.

         ¶3 Before 1986, a landowner could petition the DNR (or its predecessor agency) to enroll land in the Forest Croplands program.[3] See Wis . Stat . § 77.02(1). The petition was required to allege, among other things, that the owner "believe[d] the lands … are more useful for growing timber and other forest crops than for any other purpose" and that the owner "intend[ed] to practice forestry thereon." Id. Upon making certain findings, including that the property was held permanently for the growing of timber under sound forestry practices and would produce a merchantable timber crop within a reasonable time, the DNR was required to enter an order granting the petition. Sec. 77.02(3)(a). The statutes provide that the Forest Croplands Law, the landowner's petition, and the order granting the petition "shall constitute a contract between the state and the owner." Wis.Stat. § 77.03.

         ¶4 Enrollment of a property in the Forest Croplands program "subject[s] the property to certain 'forestry' practices as well as substantial tax benefits." Sausen v. Town of Black Creek Bd. of Review, 2014 WI 9, ¶64, 352 Wis.2d 576, 843 N.W.2d 39. Owners of property enrolled in the Forest Croplands program are required, among other things, to notify the DNR of any timber harvests on the property and to permit public access for hunting and fishing. See generally Wis. Stat. §§ 77.03, 77.06. In return, land enrolled in the program is not subject to an annual real estate property tax. Wis.Stat. § 77.04(1). However, owners of enrolled property are required to make several other types of tax payments.

         ¶5 First, owners of land enrolled in the Forest Croplands program are required to pay a per-acre annual tax known as the "acreage share." Wis.Stat. § 77.04(2). For land-like the property at issue in this case-that was enrolled in the Forest Croplands program before 1972, the acreage share is computed "at the rate of 10 cents per acre." Id.

         ¶6 Second, during the time period at issue in this case, landowners were required to pay a "severance tax" whenever merchantable wood products were harvested from property enrolled in the Forest Croplands program. Wis.Stat. §§ 77.06(5), 77.07 (2011-12). The amount of the severance tax was ten percent of the value of the harvested wood products. Sec. 77.05(6) (2011-12). Pursuant to § 77.07(1) (2011-12), the landowner was "personally liable for any severance tax because of any wood products cut [from enrolled property], which tax shall also be a lien on such wood products wherever situated and in whatever form … until paid." The statutes imposing the severance tax-§§ 77.06(5) and 77.07 (2011-12)-were repealed in 2016. See 2015 Wis. Act 358, §§ 16-17.

         ¶7 Third, if enrolled land is either withdrawn from the Forest Croplands program by the owner or expelled by the DNR for noncompliance before the end of the contract period, the owner is required to pay what the DNR refers to as a "withdrawal tax." See Wis. Stat. § 77.10(1)(a), (2)(a)1. The amount of the withdrawal tax is equal to

the amount of tax due from the date of entry [in the Forest Croplands program] or the most recent date of renewal, whichever is later … with simple interest thereon at 12 percent per year, less any severance tax and supplemental severance tax or acreage share paid thereon, with interest computed according to the rule of partial payments at the rate of 12 percent per year.

Sec. 77.10(2)(a)1.

         ¶8 Fourth, if at the end of the contract period land enrolled in the Forest Croplands program is not enrolled in that program's successor, the Managed Forest program, the landowner is required to pay a ten percent severance tax on the remaining timber on the land "in the same manner as if the stumpage had been cut." Wis.Stat. § 77.03. The DNR refers to this fourth type of tax as the "termination severance tax."

         II. Factual background[4]

         ¶9 The property at issue in this case (hereinafter, "the Real Estate") is located in Sawyer County and is currently owned by the Tribe, which is a federally recognized Indian tribe.[5] On October 8, 1962, a previous owner of the Real Estate, the Owens-Illinois Glass Company, filed a petition to enroll it in the Forest Croplands program. The petition was approved, and the Real Estate was enrolled in the program effective January 1, 1963. At that time, each Forest Croplands contract had a statutorily prescribed length of fifty years. See Wis. Stat. § 77.03 (1963-64).

         ¶10 In 1992 and 1993, the Tribe purchased the Real Estate from Futurewood Corporation. On October 15, 1992, and May 24, 1993, two "Transfer of Ownership-Forest Crop Law" forms were executed regarding the Real Estate.[6]See Wis. Stat. § 77.10(1)(b) (discussing procedure for transfer of ownership of land enrolled in the Forest Croplands program). Both forms designated the Tribe as the grantee and were signed by a tribal representative. Each form stated:

[T]he Grantee accepts the transfer of the Forest Crop Law entry. The Grantee intends to continue to practice forestry on such land. Further, the Grantee agrees to comply with the terms of the Forest Crop Law and the contract applicable to the said lands including the payment of the severance taxes and the annual acreage share.

         ¶11 The transfer forms were submitted to the DNR, which subsequently executed transfer orders permitting the Real Estate to remain enrolled in the Forest Croplands program. Each order stated the Tribe "has petitioned [the DNR] to continue Forest Crop Law designation for the parcel, agreed to comply with the terms of the Forest Crop Law, and certified an intent to practice sound forestry on the land."

         ¶12 In April 2011, the DNR gave the Tribe written notice that the Real Estate's enrollment in the Forest Croplands program would expire on December 31, 2012. The notice advised the Tribe that it had two options: (1) enroll the Real Estate in the Managed Forest program; or (2) allow the Real Estate to expire from the Forest Croplands program. The notice further advised that, if the Tribe chose the second option, the Real Estate would be placed on the general property tax roll and the Tribe would be required to pay a "termination tax" that would be calculated "based on the volume of the standing timber multiplied by 10% of the average timber value in [the] area." The Tribe did not respond to this notice or apply to enroll the Real Estate in the Managed Forest program prior to the June 1, 2012 enrollment deadline.

         ¶13 In November 2012, the DNR hired a private forestry services company to conduct a volume estimate of the standing timber on the Real Estate. Based on that volume estimate, the DNR determined the amount of the "termination severance tax" that would be due upon expiration of the Tribe's Forest Croplands contract was $74, 819.74.

         ¶14 In April 2013, the DNR sent the Tribe a notice indicating that its Forest Croplands contract had expired and the Real Estate had not been enrolled in the Managed Forest Program. Attached to the notice was an invoice stating the Tribe owed a "termination tax" of $74, 819.74, which was due by May 31, 2013. The Tribe did not pay the termination tax. In October 2013, the DNR notified the Tribe that the April 2013 invoice was past due. The DNR sent the Tribe a revised invoice in the amount of $85, 931.44-comprised of the termination ...


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