Case Title: UNITED STATES FIDELITY & GUARANTY CO. v. STATE EX. REL. OKLAHOMA TAX COMMISSION

Citation: 

Docket Number: 93488

State: oklahoma

Court: Oklahoma Supreme Court

Date: 2002-05-21T00:00:00Z

Document:
UNITED STATES FIDELITY & GUARANTY CO. v. STATE EX. REL. OKLAHOMA TAX COMMISSION  UNITED STATES FIDELITY & GUARANTY CO. v. STATE EX. REL. OKLAHOMA TAX COMMISSION 2002 OK 42 54 P.3d 1010 Case Number: 93488 Decided: 05/21/2002 Mandate Issued: 06/13/2002 THE SUPREME COURT OF THE STATE OF OKLAHOMA UNITED STATES FIDELITY & GUARANTY CO., Surety/Appellants and SUN RIVER DEVELOPMENT, INC., Taxpayer v. STATE OF OKLAHOMA, ex rel. OKLAHOMA TAX COMMISSION, Appellee ON CERTIORARI TO THE COURT OF CIVIL APPEALS, DIVISION III ¶0 Oklahoma Tax Commission issued an order forfeiting a surety bond more than ten years after the assessment of taxes. Tax Commission did not notify surety of assessment and did not conduct hearing before issuing forfeiture order. Surety appealed. This Court entered order denying motion to dismiss. Court of Civil Appeals reversed Tax Commission's order finding Okla. Stat. tit. COURT OF CIVIL APPEALS' OPINION VACATED; APPEAL DISMISSED. Evan B. Gatewood, Hayes & Magrini, Oklahoma City, Oklahoma, for Appellant Thomas E. Kemp, General Counsel, Sean R. McFarland, Assistant General Counsel, Oklahoma Tax Commission, Oklahoma City, Oklahoma, for Appellee. HODGES, J. I. Issue ¶1 The issue before this Court is whether the order forfeiting a surety bond issued on behalf of the Oklahoma Tax Commission (Tax Commission) is directly appealable to this Court. We answer in the negative and dismiss the appeal. II. FACTS ¶2 Upon obtaining a sales tax permit, Sun River Development, Inc. (Sun River) obtained an $18,000 surety bond from United States Fidelity & Guaranty Co. (USF&G). The bond was executed on August 28, 1986, and was in effect at the time this dispute arose. ¶3 On August 11, 1988, the Tax Commission sent Sun River two notifications of proposed assessments for $10,300.60 for additional taxes, interest, and penalties. There is nothing in the record showing that Sun River responded to the proposed assessments, see Okla. Stat. tit. ¶4 Over ten years later on May 25, 1999, the Tax Commission sent Sun River and USF&G letters notifying them that if the taxes, interest, and penalties of $20,267.60 were not paid within thirty days that the bond would be forfeited. The letter to Sun River was returned as undeliverable. USF&G responded that they viewed the notice as informational only and asked the Tax Commission to contact them if it intended to pursue the matter. The Tax Commission did not respond to this request. ¶5 On July 12, 1999, the Tax Commission ordered the surety bond forfeited. Notice was sent to USF&G on July 22, 1999. USF&G requested that the Tax Commission vacate the order and schedule a hearing. At the same time, USF&G filed an appeal "to protect [its] appeal rights". ¶6 The Tax Commission filed a motion to dismiss. In response, USF&G filed a dismissal of the appeal. Upon the initial review of the motion to dismiss, this Court denied the motion and, in the same order, denied USF&G's "conditional dismissal". The matter was assigned to the Court of Civil Appeals for disposition on the merits. ¶7 The Court of Civil Appeals, finding that it was bound by this Court's order denying the motion to dismiss, held that the Tax Commission's action was barred by the ten-year limitations period of section 223(A) of title 68 of the Oklahoma Statutes. This Court granted certiorari. III. PROPRIETY OF RE-EXAMINATION OF DISMISSAL ORDER ¶8 In LCR, INC. v. Linwood Properties, ¶9 If an order denying a motion to dismiss is silent as to its prejudicial effect, it may not be altered by the Court of Civil Appeals. Id. at ¶ 6. If the Court of Civil Appeals deems an order of this Court which is silent as to its renewability in need of reconsideration, it should request the case be recalled. Id. An order which is silent as to its prejudicial effect may be reconsidered by this Court either on certiorari or otherwise. Id. at ¶ 7. This Court's pre-assignment order denying the motion to dismiss is silent with respect to its prejudicial effect. Thus, the Court of Civil Appeals correctly reasoned that it was bound by the order. However, it is subject to reconsideration by this Court. IV. REVIEW OF TAX COMMISSION'S ORDER OF FORFEITURE ¶10 From a preliminary review of title 68, it would appear that an order of bond forfeiture is directly reviewable by this Court. However, an in-depth review of the applicable statutes necessitates a contrary result making this Court's order denying the motion to dismiss to be in error. ¶11 Under the Sales Tax Code, the Tax Commission may require an entity holding a sales tax permit to furnish a surety bond. Okla. Stat. tit. ¶12 Subsection A of section 225 of title 68 of the Oklahoma Statutes provides: "Any taxpayer aggrieved by an order . . . of the Oklahoma Tax Commission directly affecting the taxpayer . . . may appeal therefrom directly to the Supreme Court of Oklahoma." Subsection 202(d)(1) defines "taxpayer" as "[a]ny person owing or liable to pay any state tax." Subsection 202(e) includes a corporation in the definition of "person", and subsection 202(g)(3) includes "insurance companies, including surety and bond companies" in the definition of "corporation". Under these provisions, a surety company may directly appeal to this Court [ 54 P.3d 1012] adverse decisions of the Tax Commission when the surety company is liable for taxes which it directly incurs. A review of the tax code shows that this conclusion only applies if the surety company is subject to liability for having incurred the tax liability in the first place, not by virtue of its surety status and not because of the failure of its principal to properly remit taxes. ¶13 Under Oklahoma's Uniform Tax Procedure Act, Okla. Stat. tit. ¶14 A tax is a pecuniary burden imposed upon a class of individuals, businesses, or other entities for support of government. Black's Law Dictionary 1307 (5th ed. 1979). A sales tax is a statutorily imposed burden "on the sale of goods and based on their value." Id. at 1308. A tax liability is incurred by operation of law, not by contract. See id. Because a surety's liability is contractual, it cannot be a tax liability. ¶15 Rather, a surety is defined as "one who, at the request of another, and for the purpose of securing to him a benefit, . . . hypothecates property as security therefor." Okla. Stat. tit. ¶16 The Oklahoma Legislature has recognized this difference in the manner provided for collection procedures. The collection procedures for taxes is statutorily different than for collection of the surety bond proceeds. When a tax assessment becomes final, the Tax Commission may issue a tax warrant for the collection of taxes. Okla. Stat. tit. ¶17 In contrast as a prerequisite to collecting on a surety bond, the Tax Commission issues an order of forfeiture. Unlike a tax warrant, the order of forfeiture is not a final order or judgment. It does not completely dispose of all the issues nor does it prevent judgment against the surety. Gilliland v. Chronic Pain Associates, Inc., ¶18 If the surety does not pay over the bond proceeds, then the Tax Commission "shall proceed" against the surety in district court. Okla. Stat. tit. The Tax Commission's forfeiture order is similar to that addressed in State ex rel. Okla. Dept. of Mines v. Jackson, V. CONCLUSION ¶19 USF&G is not liable for a tax but is liable, if at all, for the loss to the state for Sun River's failure to perform it sales tax obligations. USF&G, acting as a surety, is not a taxpayer for purposes of section 202 of title 68. Thus, the forfeiture order was not directly appealable to this Court under section 225 of title 68. The Court of Civil Appeals' opinion is vacated. The appeal is dismissed [ 54 P.3d 1014]. COURT OF CIVIL APPEALS' OPINION VACATED; APPEAL DISMISSED. ¶20 Hargrave, C.J., Hodges, Lavender, Summers, Boudreau, JJ., concur. ¶21 Winchester, J., concurs in result. ¶22 Kauger, J. (joins Opala, J.), concurs in part; dissents in part. ¶23 Watt, V.C.J. (joins Opala, J.), Opala, J. (by separate writing,), dissents. FOOT