Title: Wexler v. Wirtz Corp.

State: illinois

Issuer: Illinois Supreme Court

Document:

Docket Nos. 94127, 94128, 94171 cons.-Agenda 10-November 							2003.
SAUL R. WEXLER et al., Appellees and Cross-Appellants, v. THE 							
WIRTZ CORPORATION et al., Appellants and Cross-Appellees.
Opinion filed April 1, 2004.
	JUSTICE RARICK delivered the opinion of the court:
	Before us is a class action challenging the constitutionality of Public
Act 91-38, which amended provisions of the Liquor Control Act of 1934
(235 ILCS 5/1-1 et seq. (West 2000)), the State Finance Act (30 ILCS
105/1 et seq. (West 2000)) and the School Construction Law (105 ILCS
230/5-1 et seq. (West 2000)). On cross-motions for partial summary
judgment, the circuit court of Cook County held that the statute violated
the three readings and the single subject clauses of article IV, section 8(d),
of the Illinois Constitution of 1970 (Ill. Const. 1970, art. IV, §8(d)). It
rejected the contention that the statute violated our constitution's
uniformity clause (Ill. Const. 1970, art. IX, §2). Defendants appealed.
Plaintiffs cross-appealed. An intervening defendant filed a separate appeal.
Because the circuit court's judgment invalidated a state statute, the
appeals were taken directly to our court. 134 Ill. 2d R. 302(a)). For the
reasons that follow, we reverse and remand with directions to dismiss.
	Public Act 91-38, the statute challenged in this case, amended
section 8-1 of the Liquor Control Act (235 ILCS 5/8-1 (West 2000)) by
creating a single tax rate for manufacturers of wine and by raising the state
liquor tax, which is levied on manufacturers and importing distributors of
alcoholic beverages. It amended the State Finance Act (30 ILCS 105/1
et seq. (West 2000)) to authorize the expenditure of funds from the
General Revenue Fund for public infrastructure improvements. In addition,
it amended the School Construction Law (105 ILCS 230/5-1 et seq.
(West 2000)) to authorize certain grants for school construction and
maintenance projects.
	Shortly after the Public Act 91-38 took effect, an attorney named
Saul Wexler brought an action in the circuit court of Cook County to
challenge its constitutionality. Wexler is neither a manufacturer nor an
importing distributor of alcoholic beverages, nor does he have anything to
do with public infrastructure or school construction or maintenance
projects. He challenged the law as a retail purchaser of Smirnoff vodka.
He claimed that he bought several bottles of the vodka at Evanston First
Liquors after the statutory amendment took effect. Wexler asserted that
he had the right to challenge the law because the higher tax was passed
along to retailers and then to consumers in the form of higher prices. As
a result, he had to pay more for his Smirnoff vodka than he would have
absent the tax increase.
	Wexler's complaint named as defendants Sankar, Inc., the company
that owned Evanston First Liquors; the Wirtz Corporation, d/b/a Judge
and Dolph, the importing distributor that supplied the vodka to Sankar,
Inc.; Glen Bower, in his official capacity as Director of Revenue; Daniel
Hynes, in his official capacity as Comptroller of the State of Illinois; and
Judy Baar Topinka in her official capacity as State Treasurer. The circuit
court granted preliminary injunctive relief to Wexler, denied the state
defendants' claim that Wexler lacked standing to challenge the law, and
certified a plaintiff class. Various other motions were considered and
additional orders were entered. Cross-motions for summary judgment
were filed by plaintiffs and defendants. Anheuser-Busch intervened as an
additional defendant and filed its own motion for summary judgment.
	The circuit court ruled on the summary judgment motions in April of
2002. Wexler's challenge to the statute was successful. Although the court
rejected Wexler's contention that Public Act 91-38 violated our
constitution's uniformity clause (Ill. Const. 1970, art. IX, §2), it found that
the statute violated the three readings rule and the single subject clauses
of article IV, section 8(d), of the Illinois Constitution of 1970 (Ill. Const.
1970, art. IV, §8(d)).
 	 In a subsequent order, the circuit court granted permanent injunctive
relief to plaintiff. It stayed the permanent injunction pending appeal, but
ordered the tax owed by Judge and Dolph under the challenged law to be
paid into a protest fund until the appeal was resolved. Following resolution
of a motion to reconsider, the court made an express written finding under
Rule 304(a) (155 Ill. 2d R. 304(a)) that there was no just reason for
delaying enforcement or appeal. The matter is now before us for review.
	A threshold question on this appeal is whether the circuit court erred
in rejecting the state defendants' assertion that Wexler lacked standing to
challenge the statute. Under Illinois law, lack of standing is an affirmative
defense. A plaintiff need not allege facts establishing that he has standing
to proceed. Rather, it is the defendant's burden to plead and prove lack
of standing. Chicago Teachers Union, Local 1 v. Board of Education
of the City of Chicago, 189 Ill. 2d 200, 206 (2000). Where a plaintiff
has no standing, the proceedings must be dismissed. That is so because
lack of standing negates a plaintiff's cause of action. See Wood River
Township v. Wood River Township Hospital, 331 Ill. App. 3d 599, 604
(2002).
	The state defendants challenged Wexler's standing in a motion to
dismiss filed pursuant to section 2-619 of the Code of Civil Procedure
(735 ILCS 5/2-619 (West 2000)). A section 2-619 motion to dismiss
presents a question of law. So too does the issue of a plaintiff's standing.
Our review is therefore de novo. Robinson v. Toyota Motor Credit
Corp., 201 Ill. 2d 403, 411 (2002); see Kankakee County Board of
Review v. Property Tax Appeal Board, 316 Ill. App. 3d 148, 151
(2000).
	The function of the doctrine of standing is to insure that issues are
raised only by those parties with a real interest in the outcome of the
controversy. To have standing to challenge the constitutionality of a
statute, as Wexler sought to do here, one must have sustained or be in
immediate danger of sustaining a direct injury as a result of enforcement
of the challenged statute. The claimed injury must be (1) distinct and
palpable; (2) fairly traceable to defendant's actions; and (3) substantially
likely to be prevented or redressed by the grant of the requested relief.
Chicago Teachers Union, Local 1, 189 Ill. 2d  at 206-07.
 	In the case before us, Wexler claims standing to challenge the
constitutionality of Public Act 91-38 on the theory that he was injured by
having to pay the higher tax imposed by the statute when he bought the
bottles of vodka at Evanston First Liquors. To the extent that Wexler was
actually burdened by the higher tax, however, it was a burden he
shouldered willingly. Under Illinois law, a taxpayer can argue that tax
payments were involuntary in only two situations: (1) if he or she lacked
knowledge of the facts upon which to protest the taxes at the time they
were paid or (2) the taxpayer paid the taxes under duress. Geary v.
Dominick's Finer Foods, Inc., 129 Ill. 2d 389, 393 (1989). Neither of
those circumstances is present here.
	 In assessing whether a tax was paid under duress, Illinois law does
not require a showing that the taxpayer was actually threatened by anyone.
Implied duress will suffice. Geary, 129 Ill. 2d  at 402-03. Such duress
exists where the taxpayer's refusal to pay the tax would result in loss of
reasonable access to a good or service considered essential. Geary, 129 Ill. 2d  at 396-400. Goods or services deemed to be necessities have
included telephone and electrical service and, for women, sanitary napkins
and tampons. Geary, 129 Ill. 2d  at 398-99.
	Alcoholic beverages do not fall within the category of necessary
goods or services. Without commenting on the social utility of beer, wine,
and spirits, we note simply that they are not essential, in any objective
sense, to consumers such as Wexler. They were certainly not essential to
Wexler himself. There is no indication in the pleadings or the record that
Wexler had ever purchased Smirnoff vodka before or needed to do so in
the future. In fact, there is nothing to suggest that Wexler ever bought or
wanted to buy alcoholic beverages of any kind outside of the particular
purchases mentioned in his complaint. Under such circumstances, Wexler
cannot contend that he paid the tax under duress.
	There is likewise no basis for holding that he lacked knowledge of the
facts upon which to protest the taxes at the time they were paid. Wexler
was clearly aware of the tax increase produced by Public Act 91-38 and
its effects on the price of alcoholic beverages. Despite that knowledge,
and despite the fact that he had no need for the vodka, Wexler
nevertheless went forward with the purchases. Based on that conduct and
the course of subsequent events, it seems clear that Wexler actually
bought the vodka precisely because of the tax increase. His goal was to
establish a legal foundation for challenging the new law, and he hoped the
transactions would provide one.
	The principal relief sought by Wexler in his complaint is a refund of
the additional tax required by Public Act 91-38. Where, as here, a
taxpayer has paid a tax voluntarily, he normally may not recover that
payment even if the taxing body assessed or imposed the taxes illegally.
Voluntary tax payments can only be recovered if such recovery is
authorized by statute. Geary, 129 Ill. 2d  at 393.
	Wexler claims the State Officers and Employees Money Disposition
Act (30 ILCS 230/1 et seq. (West 2000)) provides such authorization in
this case. That statute, sometimes known as the Protest Fund Act, allows
taxpayers to recovery voluntary tax payments if certain procedures are
followed. Under the statute, the taxpayer may contest a collection of a tax
by remitting payment to the relevant state entity under protest. The state
entity notifies the treasurer that the money has been paid under protest,
and the treasurer is then required to place the money so paid into a special
fund known as the protest fund. Once that has been done, the taxpayer
has 30 days to file a complaint and obtain a temporary restraining order
or preliminary injunction to restrain the treasurer from transferring the
funds. If the taxpayers succeeds in doing that and, within the same 30-day
period, also serves a copy of the temporary restraining order or injunction
on the treasurer and the entity to whom the payment under protest was
made, the funds will remain in the protest fund until the challenge is
resolved. If the challenge is resolved in favor of the taxpayer, the funds will
be returned to him. If it is resolved in favor of the state, they will be
transferred to whatever governmental fund they would have gone to
absent the protest. 30 ILCS 230/2a (West 2000).
	Wexler attempted to avail himself of this procedure by presenting
letters to the sales clerks at Evanston First Liquors at the time he
purchased the vodka. That effort, however, had no legal effect. By its
terms, the system for payment under protest created by the State Officers
and Employees Money Disposition Act pertains to situations involving
payments made by taxpayers to the taxing authorities. Such a situation is
not before us. As noted at the outset of this opinion, the taxes challenged
by Wexler are levied on manufacturers and importing distributors of
alcoholic beverages. Wexler is neither. He did not make the Smirnoff
vodka. He did not import it. He did not distribute it. He merely purchased
it at a local liquor store.
	As a consumer, Wexler was not responsible for paying or remitting
any part of the challenged tax to the state. Correspondingly, the retail
establishment where Wexler purchased the vodka was not responsible for
collecting the tax from him, nor did it have any responsibility for paying the
tax itself. Because the tax was levied only on manufacturers or importing
distributors, the entity liable for the tax on the alcohol ultimately bought by
Wexler was Judge and Dolph, the importing distributor which sold the
Smirnoff vodka to Evanston First Liquors.
	Evidence was presented to show that in order to offset the tax
burden, Judge and Dolph elected to increase the wholesale price it
charged to retailers for the vodka, just as it could have done if faced with
other types of additional costs. Although the higher wholesale price put
pressure on retailers to charge more to consumers, Judge and Dolph was
not required by law to pass the effects of the tax along to retailers.
Retailers, in turn, had no statutory obligation to pass on the higher costs
they faced to retail customers such as Wexler. Their choice to do so was
purely a business decision. Depending on their assessment of factors such
as consumer demand and price sensitivity, manufacturers, importing
distributors, and retailers were free to proceed differently. Had they
considered it prudent, they could have absorbed the tax's effects to keep
prices lower in the hope that a lower price would yield higher sales
volume, thereby generating sufficient additional profits to offset their higher
tax costs.
	That Judge and Dolph elected not to employ such a pricing strategy
does not alter the legal status of the parties before us. Consumers such as
Wexler cannot be considered the payers of the challenged tax for the
purposes of the State Officers and Employees Money Disposition Act.
The same is true of First Evanston Liquor, the retailer which sold Wexler
the vodka. In the litigation before us, the only entity that qualifies as a
payer of the challenged tax attributable to the vodka Wexler bought is
Judge and Dolph, the importing distributor. It was the only entity under a
legal obligation to remit the tax to the state, and it was the only entity that
actually paid the tax. As a result, it was the only entity entitled to invoke
the protest fund procedures under the State Officers and Employees
Money Disposition Act. It did not do so and has made clear that it has no
desire to do so.
	In addition to this basic impediment to Wexler's attempted protest
under the State Officers and Employees Money Disposition Act, the
manner in which he proceeded failed to comply with the statute's
requirements. The Act requires that a notice of payment under protest be
directed to "every officer, board, commission, commissioner, department,
institute, arm or agency" authorized to receive the payment on behalf of
the state. 30 ILCS 230/2 A. 1 (West 2000). That was not done here.
Wexler's notices were addressed generally "to whom it may concern" and
given to sales clerks at the liquor store.
	The Act further requires the notice to state what portion of the
remittance being made under protest where the amount remitted exceeds
the amount being paid under protest. A specific dollar amount must be
given. Wexler's notices did not do that. The amount Wexler paid included
the retail price of the vodka, plus various taxes, including local, county and
state taxes. Wexler, however, did not identify the particular amount of the
remittance he was making under protest. His notices merely stated that he
was protesting that part of the purchase price "representing the State of
Illinois' Alcoholic Beverage Tax, including the increase in that tax made by
P.A. 91-38."
	The Act also requires that the notice of protest include the name and
address of the person making the payment under protest. 30 ILCS
230/2 A. 1 (West 2000). Again, that was not done. Although Wexler
ultimately made several vodka purchases, the purchase on which he
predicated his original complaint was accompanied by a notice that bore
only his name. It did not give his address or any address.
	Wexler's failure to comply with the statutory notice requirements is
no mere technicality. Under the express provisions of section 2a of the
State Officers and Employees Money Disposition Act (30 ILCS 230/2a
(West 2000)), one will not be considered to have made a payment under
protest within the meaning of the law unless the payment is made to the
pertinent governmental official or entity under protest in the form specified
by the Act. As we have discussed, Wexler met none of those conditions.
He remitted nothing to any governmental official or individual, what he
remitted to the liquor store did not include an amount for the challenged
tax, and his notice of protest did not comply with section 2a.1's
requirements. Wexler therefore cannot be said to have made payment
under protest. Without that, the legal predicate for his cause of action is
gone.
	Wexler's failure to comply with the statute is something we cannot
overlook. When a statute provides a procedure to be used for the
recovery of taxes, the taxpayer must comply with the statutory provisions
to enable a court to order a refund. Statutory compliance is a prerequisite
to a taxpayer's right to defend against a particular tax levy and the burden
of showing this compliance rests on the objecting taxpayer. That includes
compliance with the notice provisions governing tax protest funds. See
Yellow Freight System, Inc. v. Illinois Commerce Comm'n, 70 Ill.
App. 3d 95, 97-99 (1979).
	Wexler realized this flaw in his case after filing suit. He attempted to
cure the defect by seeking an injunction to compel the actual taxpayer,
Judge and Dolph, to begin making payments of the tax under protest in
conformity with the State Officers and Employees Money Disposition Act.
An injunction was necessary because Judge and Dolph itself harbored no
objections to the changes in the tax law made by Public Act 91-38. It was
perfectly willing to comply with the new law. For it, the expense and
difficulty associated with payment of taxes under protest were
unwarranted.
	Over Judge and Dolph's strenuous protests, the circuit court adopted
Wexler's approach and granted the injunction he requested. Since that
injunction issued, Judge and Dolph has been required, against its wishes
and at its own expense, to protest the tax in accordance with the statutory
protest fund procedures. In effect, Judge and Dolph is being forced to
serve as an involuntary surrogate for Wexler and the class he purports to
represent.
	The result is a peculiar one. Judge and Dolph, which pays the tax,
does not wish to challenge it. Wexler, who seeks to challenge the tax, has
never paid it. As for Evanston First Liquors, the retailer from whom
Wexler bought the vodka, it neither paid the tax, nor challenged it.
	We find nothing in reason or the law that would justify extending the
tax protest procedures mandated by the State Officers and Employees
Money Disposition Act to such a situation. Wexler attempts to justify his
position by invoking our decision in Crane Construction Co. v. Symons
Clamp & Manufacturing Co., 25 Ill. 2d 521 (1962). That opinion does
not support his position.
	Crane involved a challenge to certain amendments to the Retailers'
Occupation and Use Tax Act which extended those taxes to leases. The
challenge was brought by a construction company that leased equipment
for use in its business. Under the amended law, it was required to pay use
tax to the lessor of the equipment. The lessor, in turn, would pay those
funds to the state in the form of retailers' occupation tax. Because the
construction company did not actually remit any of the tax money to the
state directly, it sought and obtained a injunction requiring the lessor to
remit payment under protest in accordance with the statutory provisions
governing tax protest funds until its challenge to the statutory amendments
was resolved.
	On appeal, the State argued that the company should not be
permitted to contest the retailers' occupation tax because that tax was
levied upon the lessor of the equipment, not the construction company.
We held that the State's argument would be well taken if only the retailers'
occupation tax were involved. We noted, however, that the construction
company was also challenging the use tax, which it clearly had the right to
do. Under the law, the use tax paid by the construction company was
directly linked to the retailers' tax paid by the lessor of the equipment.
Because of the complementary and interlocking nature of the two taxes,
we held that "[t]o the extent to
which the validity of the use tax and its application to [the construction
company] is dependent upon the validity of the retailers' occupation tax,
[the construction company] may also challenge that tax." Crane, 25 Ill. 2d 
at 528.
	What distinguishes Crane from the case before us is that, here, there
are no interlocking taxes. The various state and local sales taxes Wexler
paid when he purchased the vodka at Evanston First Liquors had no
connection whatever with the tax on manufacturers and importing
distributors of alcoholic beverages he sought to challenge. Accordingly,
whether the tax on manufacturers and importing distributors of alcoholic
beverages was valid or not, the taxes Wexler himself was required to pay
when he purchased vodka would be unaffected.
	The distinction is pivotal because it goes to basic principles underlying
the rules of standing. As we discussed earlier in this opinion, a prerequisite
of standing is that the plaintiff must face some injury substantially likely to
be prevented or redressed by the grant of the relief he requests. That
requirement was plainly met in Crane. It plainly cannot be met here.
	A successful challenge to the law in Crane case would have
necessitated a refund of the retailers' occupation tax to the leasing
company. That, in turn, would have resulted in a refund of the use tax by
the leasing company to the construction company that brought the suit. No
such interrelationship exists here. Even if the tax on manufacturers and
importing distributors of alcoholic beverages were unconstitutional and had
to be refunded, the refunds would go to the manufacturers and importing
distributors who paid it, not to retail customers, who did not. The
manufacturers and importing distributors would have no obligation to pass
any part of the tax savings on to retailers, and retailers, in turn, would have
no obligation to make any refunds to or lower any prices for customers
such as Wexler. Any benefits to Wexler and the class he represents are
therefore entirely speculative.
	Wexler's challenge to the tax on manufacturers and importing
distributors of alcohol is analogous to the situation we hypothesized in
Crane of the construction company challenging only the retailers'
occupation tax. Indeed, it is as if the construction company were
challenging the retailers' occupation tax and there were no use tax. Had
those circumstances been present in Crane, we would have concluded
that the construction company lacked standing. Because comparable
circumstances exist here, we hold that Wexler has no standing in this case.
Defendants' motion to dismiss for lack of standing should have been
granted.
	For the foregoing reasons, the judgment of the circuit court is
reversed and the cause is remanded with directions that the cause be
dismissed.
Reversed and remanded with directions.
	JUSTICE FREEMAN took no part in the consideration or decision
of this case.