Case Title: Town of Acton v. McGary

Citation: 

Docket Number: 

State: maine

Court: Maine Supreme Court

Date: 1976-04-29T00:00:00Z

Document:
Town of Acton v. McGary  356 A.2d 700 (1976) TOWN OF ACTON et al. v. Carroll R. McGARY et al. Supreme Judicial Court of Maine. April 29, 1976. *701 Verrill, Dana, Philbrick, Putnam & Williamson by: Michael T. Healy, P. Benjamin Zuckerman, Portland, for plaintiffs. David M. Roseman, Harrison W. Wetherill, Jr., Jerome S. Matus, Asst. Attys. Gen., John W. Benoit, Jr., Deputy Atty. Gen., Augusta, for defendants. Before DUFRESNE, C. J., and WEATHERBEE, POMEROY, WERNICK and ARCHIBALD, JJ. WERNICK, Justice. A Justice of the Superior Court (Kennebec County) has reported this case to us, pursuant to Rule 72 M.R.C.P., ". . . upon the pleadings, agreed statement of facts . . . and upon so much of the evidence produced. . . as is legally admissible", and we are to ". . . render such decision as the rights of the parties require." The plaintiffs in the action are 31 municipalities of the State of Maine[1] and also 2 individual persons, Walter S. Reed, Jr., and E. Ward Logan, who live, own real property and pay taxes thereon in the Town of Boothbay Harbor (one of the plaintiff municipalities). The original defendants in the action were the State Board of Education; Carroll R. McGary, Commissioner of Educational & Cultural Services; Ernest H. Johnson, State Tax Assessor; Norman K. Ferguson, Treasurer of State and Jon A. Lund, Attorney General (whom the plaintiffs saw fit to join as a party defendant because the action attacks the constitutionality of a statute).[2] Since various of the *702 aforesaid public officials have ceased to serve in the several offices above described, under Rule 25(d) M.R.C.P. the present holders of the offices are substituted as parties defendant, namely: H. Sawin Millett, Jr., Commissioner of Educational & Cultural Services; Raymond L. Halperin, State Tax Assessor; Rodney L. Scribner, Treasurer of State; and Joseph E. Brennan, Attorney General. The instant proceedings were commenced on April 12, 1974 when plaintiffs filed their complaint seeking a declaratory judgment that the State property tax levied pursuant to Chapter 556, P.L.1973 "AN ACT Equalizing the Financial Support of School Units" be held null and void on the ground that its provisions for the determination of the tax rate involved a delegation of legislative power violative of Article III and Article IX, Section 9 of the Constitution of Maine.[3] In attacking the State property tax as unconstitutional plaintiff municipalities simultaneously seek to nullify the obligation imposed upon them by the State property tax statute to pay over to the Treasurer of State particular proceeds of the State property tax, i.e., that portion not allocated for local school purposes (as more fully explained infra). Accordingly, during the course of the litigation, under date of August 1, 1974, plaintiff municipalities and the State established an escrow agent to receive these monies from the plaintiff municipalities. In this manner, the municipalities aimed to avoid the risk that if they paid the monies in dispute to the Treasurer of State, to avoid penalty for delinquency, they might foreclose their opportunity to challenge the State's asserted right to payment. After various of the plaintiff municipalites had made deposits of monies with the escrow agent, plaintiff municipalities amended the complaint to add a claim that if the challenged statute be declared unconstitutional, the Court should order ". . . all proceeds held pursuant to the Escrow Agreement . . . paid or remitted . . ." to the several plaintiff municipalities which had made the deposits. Discharging responsibilities under the statute here at issue, as effective January 1, 1974, (1) on February 27, 1974 the Commissioner of Educational & Cultural Services certified to the State Tax Assessor the estimated public school costs for 1973-1974; (2) on March 14, 1974 the State Board of Education approved the Commissioner's estimate;[4] and (3) during *703 February and March of 1974 the other public officials required to act made the computations necessary to estimate, subject to later adjustments, the amounts to be allocated to the various municipalities for such school purposes as were local in respect to each municipality.[5] At the 1974 First Special Session of the 106th Legislature, Chapter 783, P.L. 1973 was enacted effective as emergency legislation on April 1, 1974. Section 45 thereof repealed the Section 451 (of 36 M. R.S.A.) which had been in effect since January 1, 1974 (by virtue of Section 6 of Chapter 556, P.L.1973) and replaced it with a new Section 451.[6] Pursuant to this legislation, the State Tax Assessor in April of 1974 established a State property tax rate of 21¾ mills consisting of the 14¾ mills directly fixed by the statute and an additional 7 mills as determined by the State Tax Assessor on the basis of computations in accordance with the statutory prescriptions relative to that part of the State property tax denominated as the "additional school" tax. *704 Further, in accordance with the statutory directive that the State Tax Assessor shall determine not only the rate of the State property tax but also the "amount to be assessed upon each municipality . . .", the Assessor made such determination. By virtue of Section 46 of the aforesaid emergency legislation another change in the law went into effect on April 1, 1974. Section 453 (of 36 M.R.S.A.), as it had been law since January 1, 1974 (under Section 7 of Chapter 556, P.L.1973),[7] was repealed and replaced by a new Section 453.[8] *705 Pursuant thereto, on April 18-20, 1974 (one week after the present litigation had been instituted), the Treasurer of State issued warrants requiring the appropriate local officials of the various municipalities, including the plaintiff municipalities, ". . . to issue their several warrants requiring the collectors of their several municipalities to collect and pay to the treasurers of their respective municipalities the sums against said municipalities. . ." as had been determined by the State Tax Assessor. These sums were in fact subsequently collected and paid over to the respective treasurers of the plaintiff municipalities. Said treasurers deducted from these monies the amounts allocated for use for local school purposes, as determined pursuant to 20 M.R.S.A. § 3713 (discussed ante). The remaining monies collected were deposited in the escrow account to await the outcome of this litigation.[9] By an amendment to their answer defendants included therein a motion for dismissal of this action as to the plaintiff municipalities on the grounds that: ". . . plaintiff municipalities are not taxpayers; ". . . plaintiff municipalities, pursuant to 36 M.R.S.A. § 453, collected the tax now alleged by them in this action to be unconstitutional from the individual taxpayers; ". . . plaintiff municipalities retained a portion of the tax so collected by them for local school purposes; ". . . plaintiff municipalities have made no effort to return any of the school tax collected by them pursuant to 36 M.R.S.A. § 453 to the individual taxpayers; ". . . plaintiff municipalities are not aggrieved by the setting of the tax rate pursuant to 36 M.R.S.A. § 451, which they allege to be an unconstitutional delegation of authority; ". . . plaintiff municipalities do not properly represent the interests of the individual taxpayers who might be aggrieved by an unconstitutional tax rate." We decide that the action must be dismissed not only as to the plaintiff municipalities but also as to the two other plaintiffs, Walter S. Reed, Jr., and E. Ward Logan, inhabitants and taxpayers of the Town of Boothbay Harbor. As owners of "estates" situated in the Town of Boothbay Harbor plaintiffs Reed and Logan had voluntarily paid the amounts, relative to the State property tax, sought to be collected from them by the tax collector of Boothbay Harbor. For this reason, regardless of whether the State property tax be constitutional or unconstitutional, under the precedents of Exxon Corporation v. King, Me., 351 A.2d 534 (1976) and Berry v. Daigle, Me., 322 A.2d 320 (1974), plaintiffs Reed and Logan are not entitled to be repaid, in whole or in part, the monies voluntarily paid by them as taxes. The instant complaint must, therefore, be dismissed as to them because it fails to state a claim upon which they may be granted relief. As to the 31 municipalities which are the other plaintiffs, we conclude that they can gain no benefit under the law, in terms of the particular interests they may here assert as entitled to protection, from an adjudication *706 of the constitutionality of the State property tax. Accordingly, since that is the only issue the complaint of plaintiff municipalities posits for decision, we must dismiss the complaint as to the plaintiff municipalities because it fails to state a claim entitling them to relief. The plaintiff municipalities here purport to assert an interest warranting judicial protection on the basis that the municipalities are the taxpayers of the State property tax. The municipalities contend that the statute they challenge requires that the State Tax Assessor ". . . shall determine . . . the amount to be assessed upon each municipality, township and lot and parcel of land not included in any township in the State." (emphasis supplied) That the Legislature thus carefully provided for assessment of the State property tax directly upon land which is not within the confines of any township but as to any other land required that the amount of State property tax be assessed upon the "municipality" or "township" makes plain, say the plaintiff municipalities, that the State levied the State property tax upon the plaintiff municipalities in such manner as to establish them, as corporate entities, the taxpayers. We find this argument without merit. As a property tax, the State property tax has been deemed subject to the mandates of Article IX, Section 8 of the Constitution of Maine as concerned with "[a]ll taxes upon real and personal estate, assessed by authority of this State. . . ." (emphasis supplied) See: Opinion of the Justices, Me., 339 A.2d 492, 510 (1975). Thus, the State property tax, as a tax on property, is a tax laid upon the estates of persons located within the boundaries of the several municipalities, and it is the persons who own the estates within the plaintiff municipalities who are the taxpayers of the State property tax, not the plaintiff municipalities as corporate entities.[10] The correct interpretation of the statutory requirement that the State Tax Assessor shall "determine . . . the amount to be assessed upon each municipality. . ." (emphasis supplied) is that the State Tax Assessor determines the monetary quotas which the several municipalities have responsibility to collect from the owners of estates situated within their respective boundaries, the owners of such estates being the taxpayers. This legislative intendment appears most plainly in the further statutory specification that after the State Tax Assessor has determined the total amount which is each municipality's quota, the Treasurer of State is to issue warrants for the appropriate municipal officials to require ". . . the collectors of their several municipalities to collect . . . the sums against said municipalities . . . ." (emphasis supplied) Such collection is from the persons who are the owners of estates situated within the several municipalities. Thus, relative to the State property tax, the plaintiff municipalities have a judicially cognizable interest in the present litigation only by virtue of their status as collectors, for the State, of the State property tax subject, in such capacity, to penalty should they be delinquent in paying to the Treasurer of State the State property tax *707 proceeds which they have collected for the State.[11] Insofar as the monies deposited with the escrow agent are proceeds of the State property tax which the plaintiff municipalities collected in their capacities as agents for the State, and, as such agents, have statutory responsibility to pay over to the Treasurer of State, that the State property tax, as the source of the monies, might be an unconstitutional tax would not be legal justification for the municipalities, as collecting agents for the State, to withhold the monies from their principal. We have decided, ante, that since plaintiffs Walter S. Reed, Jr., and E. Ward Logan had voluntarily paid the State property tax laid against their respective estates in Boothbay Harbor, they have no right to a refund of the taxes paid even if it should eventuate that they were unconstitutionally levied. Similarly, all other owners of estates in the several plaintiff municipalities from whom said municipalities have already collected the State property tax have no right to a refund of the State property taxes already paid by them. Since the instant litigation cannot produce for the owners of estates who have paid the State property tax an adjudication entitling them to a refund of the monies paid, either in whole or in part, were the several plaintiff municipalities to undertake to make such refunds from the monies already collected, the municipalities would be making entirely gratuitous gifts of the monies produced by a State tax. In the absence of a statute authorizing such refunds as a matter of the State's grace, such action by the municipalities would be unlawful. Because the plaintiff municipalities would thus have no justification to withhold the escrow monies from the Treasurer of State on the grounds that said monies should be paid back to the owners of the estates from whom the municipalities collected the monies, the ultimate posture of the instant litigation is that the plaintiff municipalities must be taken to be claiming that the unconstitutionality of the State property tax justifies their refusal to pay the monies to the Treasurer of State because it entitles them to keep the monies for themselves; and that this remains true notwithstanding that said monies are (1) the proceeds of a property tax levied by the State as the sovereign; (2) the State as sovereign asserts itself entitled to said proceeds; and (3) the municipalities came into possession of the monies solely as agents authorized to collect for the State as the principal. This claim of the plaintiff municipalities fails as a matter of law. To resist lowering the standard of moral honesty by which fiduciaries must be governed, the conventional law of agency adheres to the principle that illegality in the underlying transaction pursuant to which monies come into the hands of an agent for his principal does not authorize the agent to disavow obligation to remit to the principal and to claim the monies for himself. Schultz v. Hinshaw, 20 Ariz.App. 524, 514 P.2d 277 (1973); Restatement, Second, Agency § 412(1). This principle must be held controlling, a fortiori, when, as here, we are concerned with municipalities as governmental subdivisions of the sovereign which are charged by the sovereign to act, governmentally, as agents on behalf of the sovereign to collect a tax which the sovereign has levied to fulfill its own purposes. It thus eventuates that even if the State property tax were to be held unconstitutional in this litigation, such *708 interests as the plaintiff municipalities may legitimately here assert as deserving of protection remain legally unaffected. The complaint of the plaintiff municipalities must, therefore, be dismissed because the claim it purports to state fails, as a matter of law, to constitute a claim warranting relief. The entry is: (1) As to all plaintiffs the complaint must be dismissed. (2) Case remanded to the Superior Court for entry of judgment accordingly. All Justices concurring. DELAHANTY, J., sat at argument but did not participate further in the case.