Opinion ID: 1917346
Heading Depth: 2
Heading Rank: 1

Heading: Payment Under Protest

Text: In 1935, the Legislature passed Act No. 194, §§ 379-80, 1935 Ala. Acts 256, codified at Ala.Code 1940, Tit. 51, §§ 890-91; Ala. Code 1958 (Recompiled); Ala.Code 1975, §§ 40-1-11 to -12; repealed, Act No. 92-186, 1992 Ala. Acts 349, codified at Ala. Code 1975, § 40-2A-1 et seq. [2] Three years later, on August 2, 1938, J.R. Raible Company (Raible) commenced an action against the State Tax Commission of Alabama. J.R. Raible Co. v. State Tax Comm'n, 29 Ala.App. 184, 185, 194 So. 556, 557 (Ct.App.), rev'd, 239 Ala. 41, 194 So. 560 (1939). The two-count complaint sought refunds for license and sales taxes paid under protest. 29 Ala.App. at 186, 194 So. at 557. The action was commenced pursuant to §§ 379-80 of Act No. 194, which provided: Section 379. Whenever any taxpayer claims that any tax, except ad valorem taxes, herein levied, as fixed by the collecting officer is excessive or is invalid either in whole or in part, the taxpayer shall pay such tax under protest, and the officer receiving the same shall note on the receipt that such tax was paid under protest. Within sixty days after such payment under protest, the taxpayer shall commence suit against the officer for the recovery of such amount as is claimed to be excessive or invalid, and unless such suit is commenced within such period of sixty days from such payment, such payment shall be deemed voluntary. Upon hearing and judgment the Court shall determine what amount so paid is excessive or illegal, and shall order the same to be repaid by the State or its agencies receiving the same in the same manner as is provided in cases of appeals from the State Tax Commission, and such amount shall be refunded in the same manner. Section 380. Whenever any money for taxes paid to any officer authorized to receive or collect same is paid under protest, such officer shall distribute to the various governmental agencies the proportion due such governmental agencies in the manner and at the times provided in this Act, and at the time of such distribution, shall note the fact that such payment was made under protest, and the Treasurer or custodian of funds of such governmental agency, shall in giving his receipt therefor, note that such tax was paid under protest. Any Tax Collector or other officer authorized to receive and collect taxes noting such fact, shall not be personally liable for such payments should such taxes ultimately be held illegal or excessive. (Emphasis added.) After a nonjury trial, the court entered a judgment for the commission, and Raible appealed. The Court of Appeals reversed that judgment, and the commission sought certiorari review in this Court. On certiorari review, this Court reversed the judgment of the Court of Appeals. In doing so, it stated: To all intents and purposes, this is a common law action of indebitatus assumpsit against the State, and the circuit court was without jurisdiction to entertain it. 239 Ala. at 44, 194 So. at 561. It further held that §§ 379 and 380, to the extent they purported to authorize an action in the circuit court for a tax refund, patently violat[ed] § 14 of the Constitution, and any such judgment so rendered would be void. 239 Ala. at 44, 194 So. at 562 (opinion on rehearing). Four years after Raible was decided, the Legislature passed Act No. 402, 1943 Ala. Acts 369, which amended Tit. 51, §§ 379 and 380. Act No. 402 provided: Section 890. REMEDIES OF TAXPAYER.Whenever any taxpayer claims that any tax, except ad valorem taxes, levied under the provisions of this act, as fixed by the officer authorized to collect same is excessive or is invalid, either in whole or in part, the taxpayer shall pay such tax under protest, and the officer receiving the same shall note on the receipt that such tax was paid under protest. The taxpayer shall commence suit against the officer for the recovery of such excessive or invalid tax, as the case may be, within sixty days after the payment thereof under protest, and the unless such suit is commenced within that period of time, for the recovery of the amount of taxes claimed to be excessive or invalid, the taxpayer shall be deemed to have waived the payment of such taxes under protest and to have thereby become a voluntary taxpayer. If suit is filed for the recovery of any taxes paid under protest, within the specified period of time, and it is determined upon a hearing of the case that any part of the taxes so paid is excessive or illegal, the same shall be refunded as provided in the succeeding section. Section 891. DISPOSITION OF TAXES PAID UNDER PROTESTWhenever any money is paid to any officer authorized to receive or collect same, as taxes paid under protest, such officer shall certify such sum of money to the State Treasury, with notice to the Treasurer that said sum of money was paid under protest by the identified taxpayer and it shall be the duty of the Treasurer to hold such sum of money in an identified suspense account until it is judicially determined whether the taxes were legally levied and collected, or the taxpayer abandons the recovery of the money by failure to bring suit within the period of sixty days after the payment thereof. The Treasurer shall give notice to the Comptroller that such funds are set up in a suspense account and are therefore not available for allotment, allocation, or disbursement until the validity of the assessment and collection is determined by the Court. If it is determined by the Court, on suit brought by the taxpayer, that any portion of the taxes paid under protest was excessive or illegally assessed and collected, the Comptroller shall issue his warrant upon the Treasurer for a refund of such sum as may have been determined by the Court to be excessive or invalid, and the remainder of such fund, if any, shall be allocated and disbursed as authorized by law. (Emphasis added.) Thus, Act No. 402 amended the former law by requiring the establishment of an escrow account, in which the disputed taxes were to be held pending a determination of their proper disposition. The constitutionality of the amended sections was challengedand upheld only two years later. Glass v. Prudential Ins. Co. of America, 246 Ala. 579, 22 So.2d 13 (1945) (superseded by statute on other grounds as recognized by Mooney v. Weaver, 262 Ala. 392, 79 So.2d 3 (1955)). Glass involved a bill in equity filed by Prudential Insurance Company (Prudential), a foreign corporation, against Brooks Glass, superintendent of Insurance of the State of Alabama (the superintendent). 246 Ala. at 580, 22 So.2d at 14. The complaint sought a judgment declaring that a privilege or license tax imposed upon it violated the Commerce Clause, and enjoining the superintendent from cancelling Prudential's business license for nonpayment of the tax. 246 Ala. at 581-82, 22 So.2d at 14. The trial court issued a temporary injunction, and the superintendent appealed. 246 Ala. at 582, 22 So.2d at 14. The issue was whether Prudential had an adequate remedy at law. The resolution of that issue turned on whether the 1943 amendments had cured the constitutional deficiency found to exist in Raible. This Court held that they had. Accompanying the holding was an extended discussion of the effect of the amendments on the Raible holding: The Legislature attempted in what is now §§ 890 and 891, Title 51, Code 1940, to provide a remedy for a refund of the taxes so paid, if found to be illegally exacted of the taxpayer. This court in considering these provisions which were formerly §§ 379 and 380, General Acts 1935, p. 568, concluded and so held that the plan therein outlined contravened Art. 1, § 14, Constitution of 1901, to the effect that the State of Alabama should never be made a defendant in any court of law or equity. Raible Co. v. State Tax Commission, 239 Ala. 41, 194 So. 560.... In discussing the invalidity of the refund statute as found in §§ 890 and 891, supra, this court laid stress upon the fact that the taxes paid under protest were to be distributed to the various governmental agencies and that upon a judgment being rendered as to the illegality of the taxes, the same were to be repaid by the State or the agencies receiving the same. In an effort to remedy the difficulty as found by the court of the refund statute of 1935, the Legislature amended §§ 890 and 891, supra, by an act approved July 10, 1943, General Acts, 1943, p. 369, which amendatory statutes now appear in the 1943 Cumulative Pocket Part, Code 1940, as §§ 890 and 891. If these amended statutes are held to be valid, we are of the opinion that they present a plain and adequate remedy at law. They are designed to cover license taxes of this nature. The amended § 890 gives the taxpayer who claims that the tax is either excessive or invalid in whole or in part, the right to pay such tax under protest, with the duty of the official receiving the same to note on the receipt that it was so paid under protest. Within sixty days after the protest payment, the taxpayer must commence suit against the officer for the recovery of such excessive or invalid tax, as the case may be, and unless the suit is commenced within that period of time, the taxpayer should be deemed to have waived the payment under protest and to thereby become a voluntary taxpayer. If suit is filed for the recovery of any tax paid under protest within the prescribed time and it is determined that the tax so paid was excessive or illegal, it should be refunded as provided in amended § 891. This amended section requires that the officer receiving the money which is paid under protest shall certify such sum of money to the State Treasurer with notice to the Treasurer it was paid under protest by the identified taxpayer and the Treasurer is required to hold such sum of money in an identified suspense account until it is judicially determined whether the tax was legally collected or the taxpayer abandons recovery of the money by failure to bring suit within the period of sixty days after payment thereof. The Treasurer is required to give notice to the Comptroller that such sums were set up in a suspense account and are, therefore, not available for allotment, allocation or disbursement until the validity of the tax is determined by the court. If in the suit brought by the taxpayer it is determined that any portion of the tax paid under protest was excessive or illegally assessed or collected, the Comptroller shall issue his warrant upon the Treasurer for a refund of such sum. .... The question of difficulty, however, arises out of the contention that the amended statutes (§§ 890 and 891) are still invalid as violative of Art. [I], § 14, of the Constitution, prohibiting a suit against the State.... Amended §§ 890 and 891, the substance of which has hereinbefore been stated, constitute a remedy in the nature of a declaratory judgment. The money paid under protest is not to be mingled with the general funds of the state. It is not to be allocated or disbursed. It must be identified and held in the nature of a trust fund, awaiting the determination of the court as to the legality of the tax.... In Curry v. Woodstock Slag Corporation, 242 Ala. 379, 6 So.2d 479, 480 [(1942)], this court entertained a declaratory judgment suit against the Commissioner of Revenue for the State of Alabama, as the chief executive officer of the State Department of Revenue. The purpose of the bill was to have determined in advance the construction and validity of the statutes applicable to the sales tax. It was clear that in that case the complainant had no plain and adequate remedy at law and the court there observed: `It is not at all the necessary consequence of a suit to settle an actual controversy with such an officer before the deed is done that it be in essence one against the State. An officer is often confronted with the problem of what the law means which requires certain acts on his part and whether it is valid.... When such a controversy arises between him and an individual the Declaratory Judgments Act furnishes the remedy for or against him. When it is only sought to construe the law and direct the parties, whether individuals or State officers, what it requires of them under a given state of facts, to that extent it does not violate section 14, Constitution.' It is difficult to distinguish the holding in the Curry case in principle from that here involved in considering amended §§ 890 and 891.... If the tax is determined to be invalid, complainant would have been entitled to his refund. There is no judgment rendered against the State or against the officer collecting the money. It is in substance and effect the same as a declaratory judgment, which was declared available to the taxpayer in the Curry case. The one is in advance while the other is after the tax is due. The matters looking to a refund of the money call only for performance of ministerial duties and it will be assumed, of course, that the officer will perform his duty, but if he fails to do so, a writ of mandamus would be available. .... ... [W]e are impelled to the conclusion that a provision in a refund statute requiring a fund held separate and apart, not to be allocated or distributed pending the question of the determination of the legality of the tax, is a matter of some materiality. 246 Ala. at 582-86, 22 So.2d at 15-18 (emphasis added). The holdings and rationales of Raible and Glass material to this case may be summarized as follows: First, § 14 barred a direct action against the State for a tax refund. Second, an action to determine the disposition of funds held in escrow was in the nature of a declaratory judgment, and, therefore, was not a direct action against the State. Compliance with the statutory procedure for obtaining a refund of payments made pursuant to an illegal tax was, therefore, necessary and jurisdictional. Raible has never been overruled or limited. In fact, it was cited by this Court twice last year. Larkins v. Department of Mental Health & Mental Retardation, 806 So.2d 358, 364 (Ala.2001); Alabama State Docks Terminal Ry. v. Lyles, 797 So.2d 432, 435 (Ala.2001).