Case Title: Matter of Aloha Motors, Inc.

Citation: 750 P.2d 81

Docket Number: 

State: hawaii

Court: Hawaii Supreme Court

Date: 1988-02-16T00:00:00Z

Document:
750 P.2d 81 (1988) In the Matter of the Tax Appeal of ALOHA MOTORS, INC., Taxpayer-Appellant. No. 12240. Supreme Court of Hawaii. February 16, 1988. *82 Richard R. Clifton, Honolulu, (Amy E. Ejercito with him on the briefs; Cades, Schutte, Fleming & Wright, of counsel), for taxpayer-appellant. Kevin T. Wakayama, Deputy Atty. Gen., Honolulu, for appellee Director of Taxation. Before LUM, C.J., and NAKAMURA, PADGETT, HAYASHI and WAKATSUKI, JJ. HAYASHI, Justice. Taxpayer-Appellant Aloha Motors, Inc. (hereinafter "Aloha Motors") appeals the tax appeal court order dismissing with prejudice the case against Appellee the State of Hawaii Director of Taxation (hereinafter "Tax Director"). Aloha Motors had mistakenly paid use taxes from 1968 to 1981, discovered the error in 1981, and then sought a refund. But citing the three-year statute of limitations in Hawaii Revised Statutes (hereinafter "HRS") § 237-40(d), the Tax Director had 1) refunded only the 1978 to 1981 payments; and 2) refused to give back more claiming that Aloha Motors had failed to timely request refunds for the other periods. The tax appeal court had ruled that 1) it lacked the jurisdiction to decide the action; and 2) the statute of limitations had expired. Aloha Motors mainly contends that the tax appeal court erred since 1) jurisdiction existed; and 2) the statute of limitations did not begin running until the error had been found. We agree that the tax appeal court had the jurisdiction to decide the case but determine that Aloha Motors is not entitled to relief. The case was submitted on stipulated facts, so no dispute exists over the pertinent events. From 1966 to 1982, Aloha Motors was a franchised dealer of General Motors (hereinafter "GM") products in Hawaii. In 1966 when the franchise began, Aloha Motors became obligated to pay a 1/2% wholesale use tax on all GM imports purchased for sale in Hawaii under HRS § 237-13 (since GM had no business office here, it paid no taxes). This situation continued even when a GM subsidiary, the General Motors Overseas Distributors Corporation (hereinafter "GMODC"), was established in Honolulu on January 1, 1968 because the Tax Director determined that GMODC, which sold no GM products here, owed no general excise taxes. In November 1969, however, GMODC commenced accepting purchase orders from GM Hawaii retail dealers such that GMODC became solely responsible for the 1/2% wholesale use tax although franchise dealers, like Aloha Motors, continued *83 to import GM products. Aloha Motors' obligation thus ended but neither the Tax Director nor GMODC notified Aloha Motors about this change. Consequently, Aloha Motors was unaware that it no longer was required to pay and did not stop paying use taxes until the mistake was uncovered in 1981. Upon realizing the error, Aloha Motors asked for a refund of the 1968 to 1981 tax payments. The Tax Director agreed to give back the 1978 to 1981 payments, but refused to refund more arguing that Aloha Motors had neglected to seek repayment within the three years established by HRS § 237-40(d), so the claim was barred. Aloha Motors then sought review by the tax appeal court seeking $914,506.12 for the 1968 to 1977 tax payments. On appeal, the parties agreed to stipulated facts and requested the tax appeal court to decide whether the statute of limitations applied. The Tax Director also claimed that the case should be dismissed for the lack of jurisdiction or the failure to state a claim because 1) HRS § 237-40(d) was a non-waivable nonclaim statute (as opposed to an ordinary statute of limitations) which required that Aloha Motors have made a timely refund demand as a condition precedent to any repayment; and 2) Aloha Motors had voluntarily paid by mistake, so did not follow the proper tax appeal procedures. On May 13, 1987, the tax appeal court granted the motion to dismiss with prejudice ruling that 1) no jurisdiction existed because Aloha Motors had failed to either appeal a controverted tax assessment (HRS § 238-8) or pay taxes under protest (HRS § 40-35); and 2) even if jurisdiction were present, the nonclaim statute of HRS § 237-40(d), barred the claim. This secondary appeal then followed. 1. Whether the tax appeal court erred by ruling that no jurisdiction existed to hear the case? YES. 2. Whether the tax appeal court erred by holding that HRS § 237-40(d) precluded Aloha Motors from seeking refunds prior to 1978? NO. Aloha Motors maintains that jurisdiction existed for the tax appeal court to review the Tax Director's erroneous acceptance of duplicative use tax payments notwithstanding that no assessments were made, no challenges were raised, and Aloha Motors never paid the taxes under protest. The Tax Director counters that Aloha Motors has not followed the proper procedures described in HRS chapters 237 and 238 so is not entitled to any refund. To resolve this dispute, we must ascertain and give full effect to the legislative intent of the controlling laws which, in the absence of a clearly contrary expression, is conclusively obtained from the statutory language. Lum v. Queen's Medical Center, 69 Haw. ___, 744 P.2d 1205 (1987). The legislative purpose must be implemented to the highest degree. Crawford v. Crawford, 69 Haw. ___, 745 P.2d 285 (1987). The relevant statutes provide in pertinent part (emphasis added): Obviously, as Aloha Motors concedes, the prescribed procedures were not adhered to because no assessments or payments under protest occurred. By not observing the required steps, therefore, Aloha Motors is at fault, but the tax appeal court was not thereby divested of the jurisdiction to entertain an action contesting the Tax Director's decision. See Aetna Life Insurance Co. v. Park, 5 Haw. App. 122, 678 P.2d 1104 (1984). The governing statutes do not rob the tax appeal court of the power to hear aggrieved taxpayer petitions from adverse rulings by the Tax Director. See e.g., In re Tax Appeal of Tradewind Tours of Hawaii, Inc., 6 Haw. App. ___, 718 P.2d 1122 (1986). *85 This court must preserve the integrity of the tax provisions and give force to all parts of the applicable statutes. See In re Tax Appeal of Ainoa, 60 Haw. 487, 591 P.2d 607 (1979); cf. In re Tax Appeal of United Meat Co., 69 Haw. ___, 735 P.2d 935 (1987). Because no statutory language supports the Tax Director's position on the tax appeal court's alleged lack of jurisdiction, we hold that the tax appeal court possessed the authority to review the merits of this use tax matter. See e.g., In re Tax Appeal of Puna Sugar Co., 56 Haw. 621, 547 P.2d 2 (1976). Aloha Motors was thus entitled to a judicial hearing. See e.g., In re Tax Appeal of Simpson Manor, Inc., 57 Haw. 1, 548 P.2d 246 (1976). Aloha Motors next asserts that the three-year statute of limitations did not commence running until the erroneous payments were discovered in 1981. The Tax Director responds that HRS § 237-40(d) cannot be tolled. HRS § 237-40(d) provides that "[n]o credit or refund shall be allowed ... unless a claim ... shall be filed within three years after the annual return was filed, or ... payment of tax... ." The purpose of this limitations statute is to discourage delay and the presentation of stale claims. Wiegand v. Allstate Insurance Cos., 68 Haw. ___, 706 P.2d 16 (1985). A timely claim, moreover, alerts the Tax Director to immediately 1) correct any perceived error; or 2) not spend the disputed funds to protect the parties' rights. No discovery tolling period applies to tax statutes. Refund claims based on overpayments must be filed within the prescribed time, regardless of when the error was actually found. See Hawaiian Airlines, Inc. v. State of Hawaii Department of Taxation, 68 Haw. ___, 716 P.2d 1138 (1986).[1] Accordingly, Aloha Motors loses under the clear and unambiguous language of HRS § 237-40(d). The parties have cited caselaw from other states on this question, and we recognize the conflicting authorities. See Board of County Commissioners of Morgan County v. Doherty, 114 Colo. 594, 168 P.2d 556 (1946) (en banc) (Colorado statutes required the recovery of property taxes mistakenly paid pursuant to the erroneous assessment of unrelated land where the taxpayer promptly filed suit after realizing the mistake and such that the six-year statute of limitations was inapplicable); Middleton Motors, Inc. v. Indiana Department of State Revenue, Gross Income Tax Division, 269 Ind. 282, 380 N.E.2d 79 (1978) (the taxpayer's failure to timely contest the denial of a refund divested Indiana courts of the jurisdiction to grant any relief); Atlantic Richfield Co. v. Board of the County Commissioners of the County of Sweetwater, 569 P.2d 1267 (Wyo. 1977) (the taxpayer's efforts to regain illegally collected taxes were not barred by the statute of limitations). HRS § 237-40(d), though, clearly bars Aloha Motors' claim for relief. There were other contentions raised by Aloha Motors but we find them without merit. Because the tax appeal court erred by concluding that it lacked the jurisdiction to decide this controversy, that part of the *86 May 13, 1987 decision is reversed. But since the tax appeal court correctly determined that HRS § 237-40(d) prevents Aloha Motors from recovering the 1968 to 1977 payments, we affirm the judgment denying Aloha Motors' claim since the right result was reached. See Armstrong v. Cione, 69 Haw. ___, 738 P.2d 79 (1987). Affirmed. [1] For tort claims in general (excluding specific statutes), the limitations period does not begin running until the injured plaintiff's cause of action accrues or when reasonable discovery would have uncovered the harm. Yamaguchi v. Queen's Medical Center, 65 Haw. 84, 648 P.2d 689 (1982). For contract lawsuits, no tolling occurs from when the wrong (the contract breach) happens, unless fraudulent concealment takes place. Au v. Au, 63 Haw. 210, 626 P.2d 173, aff'd, 63 Haw. 263, 626 P.2d 173 (1981).