Coleman v. Inland Gas Corporation

• Decision Date: 21 June 1929
• Parties: COLEMAN, Auditor of Public Accounts, et al. v. INLAND GAS CORPORATION.
• Court: Kentucky Court of Appeals

21 S.W.2d 1030

231 Ky. 637

COLEMAN, Auditor of Public Accounts, et al. v. INLAND GAS CORPORATION.

Court of Appeals of Kentucky

June 21, 1929

As Modified, on Denial of Rehearing, December 20, 1929.

Appeal from Circuit Court, Franklin County.

Suit by the Inland Gas Corporation against Clell Coleman, Auditor of Public Accounts, and others. From a judgment for plaintiff defendants appeal. Reversed and remanded, with directions.

Clay and Willis, JJ., dissenting.

J. W Cammack, Atty. Gen., Clifford E. Smith, Asst. Atty. Gen., and Earl R. Cooper, of Salyersville, for appellants.

H. H Ramey, of Salyersville, for appellee.

LOGAN J.

Appellee paid to the county court clerk of Magoffin county the tax provided for in section 4019a9, Carroll's Ky. Stats., 6th Edition, which section is section 9 of chapter 11 of the Acts of 1917, and is commonly referred to as the Mortgage Recording Tax Act. The constitutionality of the statute was declared by this court in the case of Middendorf v Goodale, 202 Ky. 118, 259 S.W. 59, and in the case of Louisville Gas & Electric Co. v. W. H. Shanks, Auditor of Public Accounts, 213 Ky. 762, 281 S.W. 1017. The Supreme Court of the United States, however, declared the unconstitutionality of the act in the case of Louisville Gas & Electric Co. v. Clell Coleman, Auditor, 277 U.S. 32, 48 S.Ct. 424, 72 L.Ed. 770.

After the decision of the Supreme Court appellee demanded of the county court clerk of Magoffin county a refund of the money which had been paid to him under the provisions of the statute declared unconstitutional. The clerk refused to refund and advised that the money paid to him by appellee had been forwarded to the auditor of public accounts of the state of Kentucky, except 5 per cent., the compensation to the clerk provided by the act. Demand was made on the auditor by appellee, and the refund was denied by the auditor upon the advice of the Attorney General. This suit was instituted in the Franklin circuit court seeking a mandatory injunction against the appellant, requiring that he draw his warrant in favor of appellee for the money so paid to the county court clerk of Magoffin county, or that he be required to draw his warrant for that portion of the money actually passing into the state treasury, and that the county court clerk of Magoffin county who was made a party be required to refund the 5 per cent. retained by him. The chancellor overruled a demurrer to the petition. The Attorney General declined to plead further, and judgment was rendered in favor of appellee in accordance with the prayer of its petition.

The petition alleged a state of facts that would authorize a recovery upon the principles announced by this court in the case of Craig, Auditor, v. Frankfort Distilling Co., 189 Ky. 616, 225 S.W. 731, and two or three opinions subsequently delivered by this court following that case. The pronouncement of the court in that case, which is regarded as sound law by counsel for appellee, is as follows: "On a more mature consideration of the question, the whole court sitting and concurring, we have reached the conclusion herein expressed, and hold that the auditor should in every case where it appears to him that money has been paid into the treasury as taxes when none were due, either through mistake, inadvertence, misapprehension of the law, or under a void or unenforceable statute, issue his warrant upon the treasury in favor of the payor of the money, reimbursing him in the full sum thus paid in."

The quotation from that opinion above given sounds well, and carries a high moral tone, and, if the court adheres to the principle of law thus stated, the appellee, and others, whether the claim be a few dollars or a few million dollars, may demand and receive a refund of money paid as taxes when no such taxes were in fact due, although such tax was paid voluntarily and without any notice to the state that it might be called upon at some time in the future by the taxpayer to make a refund.

It is admitted by counsel for appellee that Judge Cooley correctly stated the general application of the law which should govern in such matters in volume 2, page 1496, of his work on taxation to the effect that money voluntarily paid as taxes could not be recovered back when he said: "The principle is an ancient one in the common law, and is of general application." If there may be no refund of taxes paid when no taxes were due under the general principles applicable under the common law, there can be no such taxes refunded by a government except pursuant to a statute enacted repealing, or modifying, the common-law rule. An examination of many statutes, and the decisions of courts construing them, shows that all state governments have been slow indeed to open the doors of their treasuries and allow money to pass therefrom after it has once found lodgment within the governmental vaults. This is as it should be. The state is the sovereign, and its affairs must be conducted for the best interest and welfare of the people. That calls for the expenditure of large sums of money for governmental affairs, and such sums of money can be obtained only through taxation. The state should determine the amount which it will spend by the probable income which it will receive. When the income is collected it is allocated to different funds. The state uses the funds nearly always during the current year. It has been universally held, unless a contrary conclusion was forced by an ironclad statute, that no taxpayer should have the right to disrupt the government by demanding a refund of his money, whether paid legally or otherwise, unless the sovereign was made to know at the time the money was paid that the taxpayer would insist that the money should be refunded to him. If such acts were done as to indicate that the taxpayer did not pay the tax voluntarily, and this fact was brought home to the sovereign and in fact no tax was due, or should have been paid, the taxpayer, under some statutes, may have a refund of the money so paid. But the general rule is, in states where a refund is authorized, that money voluntarily paid as taxes to the sovereign may not be recovered by the taxpayer, although no tax was due and he may have defeated the payment if he had stood upon his rights and contested the authority of the government to exact the tax.

The only authority for refunding taxes paid when no such taxes were in fact due is found in section 162, Ky. Stats. That section as it now appears is the act of February 27, 1893. The material part of the section reads thus: "When it shall appear to the Auditor that money has been paid into the treasury for taxes when no such taxes were in fact due, he shall issue his warrant on the treasury for such money so improperly paid, in behalf of the person who paid the same."

This section is a re-enactment of the act of 1854 (Pub. Acts 1854, c. 848) which as far as is material was in this language: "That when it shall appear to the Auditor of Public Accounts, that money has been paid into the public treasury for taxes, when no such taxes were in fact due, he shall issue his warrant on the treasury for such money so improperly paid, in behalf of the person who paid the same."

The first act relating to the matter of refunding money paid into the state treasury for taxes when no such taxes were due was enacted January 23, 1813, and is found in Morehead and Brown Ky. Stats. volume 1, page 185. This act was restricted in its terms. The preamble set out that in some instances by mistake the auditor transmits to the register of the land office the same tract of land in different names for the collection of tax due thereon and as the result such tax is twice paid, and at other times taxes are sometimes charged when none were due and that the auditor was without authority to remedy the error. The act was to take care of the difficulties mentioned in the preamble. The auditor was authorized and directed to issue his warrant on the treasury for the money which had been twice paid, or improperly paid. It is from the act of 1813 that we get the proviso now found in section 162.

A citation of the numerous cases would but fill space, and the leading cases on the subject are referred to and some of them overruled in the case of Craig, Auditor, v. Security Producing & Refining Co., supra, and opinions in subsequent cases following that case. It is sufficient to say that the construction of the statute had been uniform prior to the last-cited case in so far as it related to the question of the right of the taxpayer to have taxes paid, when no such taxes were due, refunded to him. In all cases it had been held that taxes voluntarily paid could not be recovered. The definition of what was meant by "voluntary" was enlarged and broadened from time to time, but the rule was never departed from that the voluntary payment of taxes although no taxes were due, left the taxpayer remediless. The rule was well stated in the case of Louisville & N. R. Co. v. Com., 89 Ky. 531, 12 S.W. 1064, 11 Ky. Law Rep. 734. In that case the railroad company had paid taxes under a mistake of law. It sought to obtain a credit on its next year's taxes for the amount which it had paid the previous years when the taxes, or some part thereof, were not due for the previous years. The court stated the correct rule in the following language: "It is a general rule that a voluntary payment by the taxpayer leaves him remediless. If, however, distraint or a summary mode of collection may be adopted, then the payment will not be regarded as voluntary, and the taxpayer may sue to recover taxes collected without legal authority. A distinction is to be taken between cases where their collection can be enforced summarily, and those where...