Parker v. Agosto-Alicea, AGOSTO-ALICEA

• Decision Date: 04 May 1989
• Docket Number: AGOSTO-ALICEA,No. 88-1627,88-1627
• Citation: 878 F.2d 557
• Parties: Eugene PARKER, et al., Plaintiffs, Appellants, v. Honorable Juan, et al., etc., Defendants, Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 557

878 F.2d 557

Eugene PARKER, et al., Plaintiffs, Appellants, v. Honorable Juan AGOSTO-ALICEA, et al., etc., Defendants, Appellees.

No. 88-1627.

United States Court of Appeals First Circuit.

Heard May 4, 1989.

Decided July 7, 1989.

William C. Watt with whom Robert G. Mullendore and Mullendore & Tawney, Missoula, Mont., were on brief, for plaintiffs, appellants.

Reina Colon De Rodriguez, San Juan, P.R., with whom Hon. Rafael Ortiz Carrion, Sol. Gen., and Norma Cotti Cruz, Deputy Sol. Gen., Ponce, P.R., were on brief, for defendants, appellees.

Before BOWNES and TORRUELLA, Circuit Judges, and RE, ^* Judge.

BOWNES, Circuit Judge.

The root issue in this case is whether the United States District Court for the Commonwealth of Puerto Rico had jurisdiction to entertain this taxpayers' suit against the Secretary of the Treasury of the Commonwealth of Puerto Rico. Plaintiffs-Appellants are civilian employees of the United States living in Puerto Rico. They sued the Secretary, Juan Agosto Alicea, alleging that the Commonwealth has illegally levied an income tax on their cost of living allowances (COLA) authorized by 5 U.S.C. Sec. 5941. ¹ The Secretary does not deny that plaintiff's COLAs have been taxed under the Puerto Rico Income Tax Code. The Secretary moved to dismiss on the grounds that the Butler Act, 48 U.S.C. Sec. 872, barred the district court from entertaining the suit. The district court agreed and dismissed the action. We affirm because of action taken by the Secretary subsequent to oral argument.

The pertinent part of the Butler Act is short: "No suit for the purpose of restraining the assessment or collection of any tax imposed by the laws of Puerto Rico shall be maintained in the United States District Court for the District of Puerto Rico." 48 U.S.C. Sec. 872. In United States Brewers Association, Inc. v. Perez, 592 F.2d 1212 (1st Cir.1979), we added a gloss to the words of the statute by approving the district court's approach which made an exception to the statute's absolute prohibition if no plain, speedy and efficient remedy was available in the courts of Puerto Rico. We noted that this judicially engrafted exception was akin to 28 U.S.C. Sec. 1341, which provides: "The district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State." After some prodding by the district court, which retained jurisdiction, the availability of a remedy in the Commonwealth Courts was obtained under a ruling issued by the Superior Court of Puerto Rico. We found the Butler Act applied and remanded for the district court to dismiss the case for lack of jurisdiction.

We are confronted by a somewhat similar situation. Plaintiffs allege that they lack a plain, speedy and efficient remedy in the Puerto Rico courts. Our main concern at the time of oral argument was that the refusal of the Secretary to respond to plaintiffs' claims for refunds effectively barred them from proceeding in the Commonwealth Courts.

P.R.Laws Ann. tit. 13, Sec. 3323 (1954) provides:

Sec. 3323. Suits for refund

(a) General Rule.--If a claim for credit or refund filed by a taxpayer is denied in whole or in part by the Secretary, the latter shall so notify the taxpayer by registered mail, and the taxpayer may appeal from such denial to the Superior Court by filing a complaint in the manner provided by law within 30 days after the date of the deposit of said notice in the mail. The failure to file the complaint within the period herein provided shall deprive the Superior Court of the right to hear the case.

(b) Limitation.--No suit or proceeding shall be entertained by the Superior Court for the credit or refund of any tax imposed by this subtitle unless there is a denial of such claim by the Secretary, notified as provided in subsection (a).

In April, 1985, plaintiffs filed refund claims for the COLAs on which they had paid taxes. There was no reply for a period of almost six months. Finally, on September 27, 1985, plaintiffs' attorney received a letter via regular mail signed by a subordinate of the Secretary. Since the letter was neither signed by or on behalf of the Secretary, nor sent by registered mail, it did not constitute a denial of the claims for refunds under the statute. On October 1, 1986, plaintiffs' attorney wrote to the Secretary restating plaintiffs' claims for refunds and asking the Secretary to either allow or deny the claims pursuant to the statute. The Secretary did not respond as requested but on October 20, the attorney for plaintiffs and the Treasury Department's Undersecretary met for a settlement discussion. This was followed by an exchange of correspondence and other communications. After it...