Court Opinion

ID: 9771427
Source: CourtListenerOpinion
Date Created: 2023-08-29 16:43:12.043023+00
Date Added: 2024-06-11T07:31:31.236534
License: Public Domain

David Newbern, Justice, dissenting. Apparently realizing the error of its position, the Arkansas Department of Finance and Administration (ADFA) effectively admitted Couey Chrysler Plymouth, Inc., (Couey) did not owe the motor vehicle sales tax ADFA was attempting to collect. It attempted unsuccessfully to amend its pleading to state various contract and tort claims. So at this point, ADFA, Couey, and the Chancellor have all concluded the attempt to impose the tax on Couey was wrong and illegal, and yet this Court refuses to characterize the collection of the tax from one who is not even the “taxpayer” under the law as an illegal exaction. That means Couey will have to pay a tax all concede it does not owe, subjecting its property to lien and execution, before it can obtain judicial relief from an act by ADFA which no one can contend was proper. ADFA did not concede the error of its position until after the Chancellor entered summary judgment against it with respect to its tax claim. It then attempted to amend to state the alternative claims mentioned above. The Chancellor’s reaction is contained in part 4. of his statement of conclusions: The Court further concludes the two amendments should be stricken under a combined theory of estoppel and undue prejudice. After defendants completed an audit of new car sales by plaintiff, they determined that gross receipts taxes of over $60,000.00 had not been paid on vehicles purchased from plaintiff. Arkansas Code 26-52-510 is clear that payment of such gross receipts tax is the duty of the consumer, not the dealer. Therefore, defendants had the following possible options: A. Collect the unpaid taxes from the consumers who had allegedly underpaid, or B. File a civil action against plaintiff, or C. Both of the above. None of these remedies were chosen. Instead, defendants, or their agents, assessed the taxes against plaintiff and gave notice that a Certificate of Indebtedness would be filed. Defendants knew, or certainly should have known, that there was no authority for such action under Arkansas law. Therefore, their motives must be considered. The Court has no alternative but to find the defendants opted to shortcut and simplify collection by utilizing a despotic method intended to intimidate and frighten plaintiff into submission. Legal collection of the taxes from the hundreds of consumers would have been time consuming and burdensome. A civil action against plaintiff would have been time consuming with the result not as certain as of that afforded by a successful filing of a Certificate of Indebtedness. Such certificate provides for a judgment and lien on all property owned by plaintiff, and immediate execution is possible. This is an extreme measure which should not be utilized lightly. The plaintiff filed an action in this court for an injunction against the Certificate of Indebtedness. Even then, the defendants did not retreat from their incorrect position, but continued to attempt their bluff. Only after this Court granted plaintiffs Motion for Summary Judgment did they acknowledge the dealer was not liable for the tax. They should now be estopped from asserting such a blatantly inconsistent position. The plaintiff had no choice but to rely on the first course of action by defendants in the preparation of a defense against the Certificate of Indebtedness. To have ignored it could have invited immediate execution against his property. The Court can certainly take notice from the number of hearings, the size of the court file, and the briefs submitted that the plaintiff has incurred considerable legal expense. It would be fundamentally unfair and inequitable to allow a powerful state agency to knowingly assert an illegal position against one of its subjects and then change that position entirely after the Court has ruled in a manner which indicates that such tactics will not be allowed. Such change would unduly prejudice plaintiff and should be denied. To rule otherwise would be tantamount to condoning illegal exaction of taxes as opposed to legal civil actions any time private citizens or businesses are indebted to the state for any reason. The majority is willing to place this Court in the anomalous posture of condoning an illegal attempt at tax collection because this case cannot be placed in one of the illegal exaction categories we have previously described. We have cases in which we have broadly defined an illegal exaction as an exaction that is either not authorized by, or contrary to, law. Hartwick v. Thorne, 300 Ark. 502, 780 S.W.2d 531 (1989); Tedford, et al. v. Mears & Scott, 258 Ark. 450, 526 S.W.2d 1 (1975); Mackey v. McDonald, 255 Ark. 978, 504 S.W.2d 726 (1974). We have written, “the remotest effect upon the taxpayer concerning any unlawful act by a tax supported program or institution may be enjoined under Article 16, Section 13, of the Arkansas Constitution.” Starnes v. Sadler, 237 Ark. 325, 372 S.W.2d 585 (1963). Our refusal to follow those cases in this instance is perhaps the ultimate nit pick. The majority relies on Schuman v. Ouachita County, 218 Ark. 46, 234 S.W.2d 42 (1950), and Beard v. Wilcockson, 184 Ark. 349, 42 S.W.2d 557 (1931), for the proposition that a flaw in the tax assessment or collection procedure will not make the exaction itself illegal. The case now before us hardly involves a mere collection or procedural flaw, and the Schuman and Beard cases are irrelevant. In the Schuman case the Court recognized a property tax debt existed, and the sole defect was in the procedure used by the county in recording mineral interest ownership and in collection of the appropriate taxes. In the Beard case, we held there was no illegal exaction because the taxes were not illegal or unauthorized but were only excessive in amount. I cannot conclude these cases have anything to do with an attempt to collect a tax from one who is not even the taxpayer contemplated by the law. The majority also states that when the taxpayer only claims it is not the person or entity responsible for paying the taxes under law, no illegal exaction is presented, relying on Hardin v. Guatney, 204 Ark. 723, 164 S.W.2d 427 (1942). The Hardin case has been interpreted as meaning that only when the taxpayer claims “no tax due” could the venue of his own county be invoked. See, e.g., Scurlock, Comm. of Rev. v. Yarbrough, 224 Ark. 113, 271 S.W.2d 916 (1954). It cannot be interpreted as meaning when the taxpayer claims “no tax due” an illegal exaction is not present, as the majority suggests. The case no longer has any validity whatever, as the specific venue statute at issue in the Hardin case was repealed. We recognized that in Taber v. Pledger, 302 Ark. 484, 791 S.W.2d 361 (1990). The majority also relies on Taber v. Pledger, supra, for the proposition that, because Couey did not claim the basic gross receipts tax unconstitutional, no illegal exaction is presented. In the Taber case, the taxpayer claimed an exemption for gross receipts tax, and we held no illegal exaction existed. The taxpayer was not contending that the underlying tax was unconstitutional or void. If Couey were a taxpayer under the tax law as ADFA contended in its pleading prior to amendment, and if Couey were questioning the right to an exemption under the law, I would hold no illegal exaction had been stated. While Couey is not questioning the validity of an underlying tax law, the point is that there is no underlying tax law, and the attempt to collect this tax from Couey was wholly unauthorized. It should be clear that in no manner do I condone the actions ADFA alleges Couey took in attempting to assist its customers in evading full taxation on transactions with Couey. The case did not reach the proof stage, however, and Couey’s conduct is not at issue here. The issue rather is whether the actions of ADFA should be condoned in attempting to collect a tax from a citizen who had no liability-for it whatever under the law. While there may have been proper remedies for ADFA to have pursued against Couey, they were not properly pursued, and it was correct for the Chancellor to find that an attempt to collect an unauthorized “tax” was an illegal exaction. I respectfully dissent. Holt, C.J., and Corbin, J., join in this dissent.