Title: M & B Drilling and Const. Co., Inc. v. State Bd. of Equalization

State: wyoming

Issuer: Wyoming Supreme Court

Document:

M & B Drilling and Const. Co., Inc. v. State Bd. of Equalization1985 WY 130706 P.2d 243Case Number: 84-36, 84-37Decided: 08/30/1985M & B DRILLING AND CONSTRUCTION COMPANY, INC., APPELLANT (PLAINTIFF/PETITIONER), 

v. 

STATE BOARD OF EQUALIZATION; R.A. HAKALA, RUDOLPH ANSELMI, AND DORAN LUMMIS, IN THEIR OFFICIAL CAPACITIES AS MEMBERS OF THE STATE BOARD OF EQUALIZATION, APPELLEES (DEFENDANTS/RESPONDENTS). 

STATE BOARD OF EQUALIZATION; R.A. HAKALA, RUDOLPH ANSELMI, AND DORAN A. LUMMIS, IN THEIR OFFICIAL CAPACITIES AS MEMBERS OF THE STATE BOARD OF EQUALIZATION, APPELLANTS (DEFENDANTS/RESPONDENTS), 

v. 

M & B DRILLING AND CONSTRUCTION COMPANY, INC., APPELLEE (PLAINTIFF/PETITIONER).
Supreme Court of Wyoming
M & B DRILLING AND 
CONSTRUCTION COMPANY, INC., APPELLANT (PLAINTIFF/PETITIONER), 

v. 

STATE BOARD OF 
EQUALIZATION; R.A. HAKALA, RUDOLPH ANSELMI, AND DORAN LUMMIS, IN THEIR OFFICIAL 
CAPACITIES AS MEMBERS OF THE STATE BOARD OF EQUALIZATION, APPELLEES 
(DEFENDANTS/RESPONDENTS). 

STATE BOARD OF 
EQUALIZATION; R.A. HAKALA, RUDOLPH ANSELMI, AND DORAN A. LUMMIS, IN THEIR 
OFFICIAL CAPACITIES AS MEMBERS OF THE STATE BOARD OF EQUALIZATION, APPELLANTS 
(DEFENDANTS/RESPONDENTS), 

v. 

M & B DRILLING AND 
CONSTRUCTION COMPANY, INC., APPELLEE 
(PLAINTIFF/PETITIONER).

 
 
Appeal from the 
DistrictCourtofLaramieCounty, Alan B. Johnson, 
J.

 
 
Blair J. 
Trautwein, Hathaway, Speight and Kunz, Cheyenne, for appellant (plaintiff/petitioner) in 
Case 

No. 84-36 and appellee (plaintiff/petitioner) in 
Case No. 84-37.

A.G. McClintock, 
Atty. Gen., and Ron Arnold, Sr. Asst. Atty. Gen., for appellees (defendants/respondents) 
in Case No. 84-36 and appellants 
(defendants/respondents) in Case No. 84-37. 

Before THOMAS,* C.J., and ROSE, ROONEY,** BROWN and CARDINE, JJ.

* Became Chief Justice on 
January 1, 1985.

** Chief Justice at time of 
oral argument.

ROONEY,*** 
Justice.

*** This case was originally 
assigned to Chief Justice Thomas on August 31, 1984 for the rendering of a 
proffered majority opinion. No such opinion being forthcoming, it was reassigned 
to Justice Rooney on July 30, 1985. Justice Rooney distributed a proffered 
opinion to the court on August 12, 1985.

[¶1.]     M & B Drilling and 
Construction Company, Inc. (hereinafter referred to as "M & B") petitioned 
the district court to review an administrative action by the State Board of 
Equalization and by the three individual members of such Board (hereinafter 
referred to as "Board"); and additionally M & B filed an action for 
declaratory judgment

"primarily because the 
State was not providing a credit to M & B Drilling for the sales tax 
erroneously paid against its use tax assessment. As previously argued, this 
failure constitutes a violation of W.S. § 39-6-409(a)[1] and Article I, § 33[2] of the Wyoming Constitution. 
Declaratory Judgment Action lies where the issues involve interpretation of a 
statute or concerns the constitutionality of the statute."

The district 
court ruled that it did not have jurisdiction to act on the petition for review 
of administration action because it was not timely; that the declaratory 
judgment action was proper; and that the Board properly refused to provide a 
credit to M & B for erroneously paid sales tax against its tax assessment. M 
& B appealed from the resulting order, wording the issues on 
appeal:

"I. IS M & B DRILLING 
ENTITLED TO A CREDIT OF THE SALES TAX IT ERRONEOUSLY COLLECTED AND PAID AS A 
VENDOR TO THE STATE OF WYOMING'S LATER ASSESSMENT AGAINST IT OF SALES 
AND USE TAX FOR THE SAME TIME PERIOD.

"II. IF W.S. § 
39-6-409(a) IS NOT CONSTRUED TO ALLOW A CREDIT OF THE ERRONEOUS PAYMENT OF SALES 
TAX TO LATER ASSESSMENT AGAINST M & B DRILLING OF SALES AND USE TAX, THEN 
HAS DOUBLE TAXATION OCCURRED IN VIOLATION OF ARTICLE I, SECTION 33 AND ARTICLE 
I, SECTION 35 OF THE WYOMING CONSTITUTION.

"III. IS A DECLARATORY 
JUDGMENT ACTION PROPER IN THIS CASE.

"IV. DID THE DISTRICT ERR 
IN RULING THAT M & B DRILLING DID NOT PROPERLY APPEAL THIS ACTION FROM THE 
BOARD OF EQUALIZATION."

In turn, the 
Board appealed from the resulting order, wording the 
issue:

"THE LOWER COURT ERRED IN 
NOT DISMISSING THE DECLARATORY JUDGMENT ACTION,"

even though the 
court found against M & B on the merits of the action.

[¶2.]     We affirm the dismissal 
of the petition for administrative review for lack of jurisdiction; we reverse 
the holding that the declaratory judgment action was an available remedy in this 
case; and we affirm the result, however, since the trial court found against 
appellant on the merits of the declaratory judgment action. Accordingly, the 
first two issues presented on appeal by M & B need not be 
addressed.

PETITION FOR REVIEW OF 
ADMINISTRATIVE ACTION

[¶3.]     M & B is in the 
business of drilling and constructing water wells, water systems and sewer 
systems. Pumps, engines, pipes and other materials are used and sold by M & 
B in the course of its business. On April 2, 1982, the Board sent a use and 
sales tax assessment notice to M & B reflecting an assessment of $30,143.69. 
He was assessed as a contractor.3 The audit resulting in the 
assessment revealed that M & B owed sales and use tax on materials consumed 
by it as a contractor and that it 
erroneously collected sales tax from customers. Vendors as distinguished from 
contractors are required to collect sales tax from purchasers and remit the same 
to the state. M & B does not deny the accuracy of the 
audit.

[¶4.]     On April 4, 1982, M 
& B requested a hearing and an informal hearing was held on June 23, 1982. 
On August 23, 1982, a revised assessment notice was sent to M & B followed 
by a letter dated August 26, 1982, which reflected the informal decision to 
approve the assessment. No payment was made on the assessment and interest. 
Payment of the penalty was waived by the Board. In March 1983, M & B filed 
an amended notice of appeal to the Board from the Board's informal decision. On 
March 17, 1983, the Board denied the amended notice of appeal as not having been 
timely made under Chapter XXI, §§ 3 and 5 of the Rules and Regulations of the 
Department of Revenue and Taxation which provide that an informal decision is 
appealable back to the Board within fifteen days of the 
decision.

[¶5.]     In its decision letter, 
the district court recited that relief was precluded by 
the

"* * * provisions of Sec. 
39-6-410(e) and 39-6-510(f) W.S. which each provide that no person who feels 
aggrieved by the payment of the taxes, penalty and interest imposed may appeal a 
decision of the board until all taxes, penalty and interest have been paid. 
Thus, payment of sales or use tax appears to be a condition to appeal from a 
decision of the board."

We agree. 
Accordingly the fact of an untimely appeal under internal procedures of the 
administrative agency as affecting the jurisdiction of the district court or as 
failing to exhaust administrative remedies is academic as far as this case is 
concerned.

[¶6.]     However, one facet of 
this case concerning the requirement that taxes must be paid before appeal must 
be noted. Can it be said that M & B did pay the taxes? In its first issue on 
appeal, supra, M & B contends that it should receive credit against the 
assessment of the "sales tax it erroneously collected and paid as a vendor." M 
& B does not contest the audit figures and, as set out in its statement of 
the issues on appeal, it acknowledges the fact that the taxes were "erroneously 
collected."4 Since the money in question is 
unquestionably that of third parties, logic dictates that M & B cannot use 
it to pay a debt of M & B. The district court quoted the following pertinent 
language from Walgreen Company v. State 
Board of Equalization, 62 Wyo. 288, 166 P.2d 960, 964, reh. denied 62 
Wyo. 336, 169 P.2d 76 (1946).

"`The vendor should, we 
think, not be permitted - unless the statute in clear and positive language so 
says, and this it is far from doing - to use the money of a vendee who for one 
reason or another has overpaid the sales tax on a purchased article to offset 
the failure of such vendor to collect the proper amount from another 
taxpayer.'"

We also said in 
the Walgreen case:

"There is no clause in 
the law which, either by express terms or even by reasonable implication, 
indicates that the over-collections such as are shown in the case at bar should 
become the property of the vendor. * * *" Id., 166 P.2d  at 964.

Section 
39-6-417(a), W.S. 1977, makes it a crime for:

"(a) Any vendor who under 
the pretense of collecting the taxes [sales tax] imposed by this article 
collects and retains an excessive amount or who intentionally fails to remit to 
the board the full amount of taxes when due * * *."

[¶7.]     Inasmuch as the money 
in question belongs to third parties and should be returned to them,5 it cannot qualify as payment of M 
& B's taxes for the purpose of giving subject matter jurisdiction to the 
district court on appeal as required by § 39-6-410(e), (see quotation from 
district court opinion letter, supra).

DECLARATORY 
JUDGMENT

[¶8.]     The availability of a 
declaratory judgment in relation to a petition for review was discussed in 
detail in Rocky Mountain Oil and Gas 
Association v. State, Wyo., 645 P.2d 1163, 1168-1169 (1982), where we 
said:

"Ordinarily, a 
declaratory judgment action is not a substitute for an appeal. School Districts Nos. 2, 3, 6, 9, and 10, 
Campbell County v. Cook, Wyo., 424 P.2d 751 (1967); Stahl v. Wilson, Fla. App., 121 So. 2d 662 (1960); Sparks v. Brock & 
Blevins, Inc., 274 Ala. 147, 145 So. 2d 844 (1962); and Bryarly v. State, 232 Ind. 47, 111 N.E.2d 277 (1953). But such direct action is often available `even though there 
was a statutory method of appeal,' School 
Districts Nos. 2, 3, 6, 9 and 10, Campbell County v. Cook, supra, 424 P.2d  
at 755. Here, there is no appeal actually pending and the issues are not 
moot.

"However, there is a 
restriction on the availability of a declaratory judgment action with reference 
to its applicability to administrative matters. Where the action would result in 
a prejudging of issues that should be decided in the first instance by an 
administrative body, it should not lie. This is because, if it be otherwise, all 
decisions by the several agencies could be bypassed, and the district court 
would be administering the activities of the executive branch of the government. 
Public Service Commission of Utah v. Wycoff Co., 344 U.S. 237, 73 S. Ct. 236, 97 L. Ed. 291 (1952); and City 
of Cheyenne v. Sims, Wyo., 
521 P.2d 1347 (1974). This restriction on the scope of declaratory judgments is 
akin to the requirement that administrative remedies must be exhausted before 
judicial relief is available.

"Accordingly, where the 
relief desired is in the nature of a substitution of judicial decision for that 
of the agency on issues pertaining to the administration of the subject matter 
for which the agency was created, the action should not be entertained. If, 
however, such desired relief concerns the validity and construction of agency 
regulations, or if it concerns the constitutionality or interpretation of a 
statute upon which the administrative action is, or is to be, based, the action 
should be entertained. This is no more than that obviously and plainly provided 
for in the language of the Uniform Declaratory Judgments 
Act."

 [¶9.]    M & B contends that the 
issue presented in this case concerns "the constitutionality or interpretation 
of a statute," and, therefore, a declaratory judgment action is proper. The 
contention is premised on an inaccuracy. The premise for its argument is that 
the statutes in question require interpretation to determine the perimeters for 
granting credit for overpayment by a person to the person's present liability. 
That is not the situation in this case. Here, the question concerns the 
propriety of granting credit against a person's liability through application of 
monies resulting from overpayment by third parties. Since the statutes do not 
purport to concern such, an interpretation would be foreign to the issues in 
this case. The same can be said with reference to the constitutionality of the 
statutes.

[¶10.]  In Rocky Mountain Oil and Gas Association v. 
State, supra, a declaratory judgment action was held proper inasmuch as 
"jurisdiction and extent of the powers of the two agencies are questioned as 
they relate to each other." Id., 645 P.2d  at 1169. There is no such 
question in this case.

REMAINING 
ISSUES

[¶11.]  The foregoing disposition of the third 
and fourth issues presented by appellant on appeal makes it unnecessary to 
consider the other two issues except insofar as the same has already been 
done.

[¶12.]  Affirmed.

1 Section 39-6-409(a), 
W.S. 1977, provides in pertinent part:

"(a) As soon as 
practicable after the return is filed the board shall examine it and if it 
appears the tax to be remitted is incorrect it shall be recomputed. If the 
amount paid exceeds that which is due the excess shall be credited against any 
subsequent liability of the vendor. * * *"

2 Article 1, § 33, Wyoming 
Constitution, provides:

"Private property shall 
not be taken or damaged for public or private use without just 
compensation."

Article 1, § 35, 
Wyoming Constitution, also contended by M & B to have been violated, 
provides:

"No ex post facto law, 
nor any law impairing the obligation of contracts, shall ever be 
made."

3 Section 39-6-602(a), 
W.S. 1977, provides:

"(a) Any contractor who 
furnishes tangible personal property under contract or in the development of 
real property is the consumer or user of the tangible personal property within 
the meaning of the sales and use tax laws of Wyoming."

4 The claim or assertion 
of setoff was not made at the hearing before the Board. The contention was first 
made in the district court.

5 During the course of 
these proceedings, there was considerable discussion between the Board and M 
& B concerning the fact that the money paid to the State by M & B as a 
vendor and collected improperly belonged to customers of M & B and not to M 
& B. Methods to accomplish return of it to the customers were proposed. The 
Board should attempt to return the money to the third parties as determined by 
the audit. That not returnable due to inability to locate the customers will 
escheat under the usual conditions.