Burtkin Associates v. Tipton
| Citation | 845 P.2d 525 |
| Decision Date | 01 February 1993 |
| Docket Number | No. 92SA64,92SA64 |
| Parties | BURTKIN ASSOCIATES, a Colorado general partnership, Plaintiff-Appellant, v. John TIPTON, Executive Director, Department of Revenue, State of Colorado, Defendant-Appellee. |
| Court | Supreme Court of Colorado |
Harry L. Arkin & Associates, Frederic H. Poor, III, Denver, for plaintiff-appellant.
Gale A. Norton, Atty. Gen., Raymond T. Slaughter, Chief Deputy Atty. Gen., Timothy M. Tymkovich, Sol. Gen., Carolyn Lievers, Asst. Atty. Gen., Denver, for defendant-appellee.
The appellant, Burtkin Associates, appeals the trial court's entry of summary judgment in favor of the Colorado Department of Revenue, which seized the appellant's property for unpaid tax obligations. The appellant asserts that the various statutory provisions that authorized the seizure of a lessor's property for unpaid taxes owed by a lessee were facially unconstitutional under both the United States and the Colorado Constitutions. 1 We disagree and affirm the judgment of the trial court.
In May 1990, Burtkin Associates leased a building it owned to Valsamakis Konstantatos, Dimitrios Konstantatos, and Hecaterina Konstantatos for use as a restaurant, who subleased the premises to Ainos, Inc. for use as a restaurant. Under the terms of the lease, the lessees agreed to pay miscellaneous taxes imposed as the result of conducting business on the premises. The lessees failed to pay the taxes to the Department of Revenue during 1990 and subsequently vacated the premises in December, 1990. 2
In April 1991, the Department of Revenue seized equipment, fixtures, and miscellaneous possessions on the premises to satisfy the delinquent taxes. The appellant was the owner of the seized property. The Department of Revenue posted several notices on the premises stating that the property had been seized to satisfy a tax lien. The Department of Revenue also published a notice in the local newspapers regarding the seizure. The appellant was aware and on notice of the distraint warrants, but was not personally served.
The appellant filed a complaint challenging the constitutionality of the statutory provisions under which the Department of Revenue seized the property and sought an injunction to prevent the sale of the property. The appellant asserted that the statutory provisions in effect at the time of the seizure violated the Due Process Clauses of the Fourteenth Amendment of the United States Constitution and of article II, section 25 of the Colorado Constitution (hereinafter the Due Process Clauses) and the Taking Clauses of the Fifth Amendment of the United States Constitution and of article II, section 15 of the Colorado Constitution (hereinafter the Taking Clauses). The trial court rejected the appellant's arguments and entered summary judgment in favor of the Department of Revenue. We affirm.
This case presents the question of whether the statutory provisions authorizing the Department of Revenue to seize the property of a lessor, pursuant to a tax lien, to satisfy the tax delinquencies of a lessee were facially constitutional. 3 Section 39-26-117(1)(a), 16B C.R.S. (1982 & 1991 Supp.), created a lien on all property owned or used in the conduct of an employer's business for unpaid sales taxes. Section 39-26-117(1)(a) provided:
(a) The [sales] tax imposed by this part 1 shall be a first and prior lien upon the goods and business fixtures of or used by any retailer under lease, title retaining contract, or other contract arrangement, excepting stock of goods sold or for sale in the ordinary course of business, and shall take precedence on all such property over other liens or claims of whatsoever kind or nature.
However, section 39-26-117(1)(b) allowed property to be exempted from the lien on unpaid sales taxes upon compliance with the following procedure:
(b) The real or personal property of an owner who has made a bona fide lease to a retailer shall be exempt from the lien created in paragraph (a) of this subsection (1) if such property can reasonably be identified from the lease description and if the lessee is given no right to become the owner of the property leased. This exemption shall be effective from the date of the execution of the lease if the lease is recorded with the county clerk and recorder of the county where the property is located or based or a memorandum of the lease is filed with the department of revenue on such forms as may be prescribed by said department within ten days after the execution of the lease at a cost for such filing of two dollars and fifty cents per document. 4
Similarly, section 39-22-604(7), 16B C.R.S. (1982 & 1991 Supp.), created a lien on all the property owned or used in the conduct of an employer's business for unpaid wage and withholding taxes. Section 39-22-604(7)(a) stated:
(a) Every employer who deducts and withholds any amounts under the provisions of this section shall hold the same in trust for the state of Colorado for the payment thereof to the department in the manner and at the time provided for in this section, and the state of Colorado and the department shall have a lien to secure the payment of any amounts withheld and not remitted as provided in this section upon all of the assets of the employer and all property, including stock in trade, business fixtures, and equipment, owned or used by the employer in the conduct of his business, so long as any delinquency continues, which lien shall be prior to any lien of any kind whatsoever, including existing liens for taxes.
Section 39-22-604(7)(b)-(c) also provided a means for property to be exempt from the lien on unpaid wage and withholdings taxes:
(b) The owner, conditional vendor, or mortgagee of any property, real or personal, or any stock in trade, business fixtures, or equipment owned or used by an employer subject to the lien provided by this subsection (7), may exempt such property from the lien granted in this section to the state of Colorado and the department by requiring the employer to procure a certificate from the department certifying that such employer has posted with the department security for the payment of the amounts withheld under the provisions of this section. When such certificate is procured by the employer and transmitted to the owner, conditional vendor, or mortgagee of any of the assets of the employer, such assets shall thereafter be exempt from attachment under the lien granted to the state of Colorado and the department by this subsection (7).
(c) The real or personal property of an owner who has made a bona fide lease to an employer shall be exempt from the lien created in paragraph (a) of this subsection (7) if such property can reasonably be identified from the lease description and if the lessee is given no right to become the owner of the property leased. This exemption shall be effective from the date of the execution of the lease if the lease is recorded with the county clerk and recorder of the county where the property is located or based or a memorandum of the lease is filed with the department of revenue on such forms as may be prescribed by said department within ten days after the execution of the lease at a cost for such filing of two dollars and fifty cents per document.
The appellant does not contend that it satisfied any of the statutory procedures to obtain an exemption in this case. Instead, the appellant asserts that the foregoing statutory provisions, which were in effect at the time of the seizure of the property in 1991, were facially violative of the Due Process Clauses and the Taking Clauses. In analyzing the statutory provisions, we presume that the statutes at issue were constitutional and note that the appellant has the burden of proving that the statutory provisions were unconstitutional beyond a reasonable doubt. See Dove v. Delgado, 808 P.2d 1270, 1273 (Colo.1991); People v. Fuller, 791 P.2d 702, 705 (Colo.1990).
The appellant first contends that the statutory provisions at issue violated the Due Process Clauses because the Department of Revenue was allowed to seize property owned by an individual or entity to satisfy the tax delinquency of another. 5 In Hodge v. Muscatine County, 196 U.S. 276, 25 S.Ct. 237, 49 L.Ed. 477 (1905), however, the Supreme Court rejected a similar due process challenge to an Iowa statute that created a lien "upon all property, both personal and real, used in connection with" the sale of cigarettes on an owner's premises regardless of actual ownership of the property. Hodge stated:
It was within the power of the legislature to make the tax a lien upon the property whereon the business was carried. If general taxes upon real estate and specific taxes for improvements thereto, including pavements, sidewalks, sewers, the opening of streets and keeping them clean, may be made liens upon the property affected, it is difficult to see why a tax upon the business carried on upon such property may not be made a lien as well as a claim against the owner. The owner is not only chargeable with a knowledge of the law in respect thereto, but he is presumed to know the business there carried on, and to have let the property with knowledge that it might become encumbered by a tax imposed upon such business.
Id. at 280-81, 25 S.Ct. at 239 (citations omitted).
Other jurisdictions have also rejected due process challenges to statutes that create a lien on an owner's property that the owner has leased and allowed the lessee to use on the premises. See, e.g., Territory of Alaska v. Craig Enter., Inc., 355 P.2d 397, 401-402 (Alaska 1960); Ogden Oil Co. v. Venture Oil Corp., 490 So.2d 725, 728 (La.App.), writ denied, 494 So.2d 328 (La.1986); Sargent v. Freeman, 204 La. 997, 16 So.2d 737, 739 (1943); State v. Rope, 419 S.W.2d 890, 894-97 (Tex.Civ.App.1967). 6
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