Defenses and Objections to Personal Property Taxes for 1969 Assessment, In re, 44974--5

• Decision Date: 07 February 1975
• Docket Number: No. 44974--5,44974--5
• Citation: 226 N.W.2d 296,303 Minn. 66
• Parties: In re DEFENSES AND OBJECTIONS TO PERSONAL PROPERTY TAXES FOR the 1969 ASSESSMENT. GENERAL MILLS, INC., etc., Petitioning Taxpayer, Respondent, v. STATE of Minnesota and County of Hennepin, Appellants.
• Court: Minnesota Supreme Court

Page 296

226 N.W.2d 296

303 Minn. 66

In re DEFENSES AND OBJECTIONS TO PERSONAL PROPERTY TAXES FOR the 1969 ASSESSMENT GENERAL MILLS, INC., etc., Petitioning Taxpayer, Respondent, v. STATE of Minnesota and County of Hennepin, Appellants.

No. 44974--5.

Supreme Court of Minnesota.

Feb. 7, 1975.

Syllabus by the Court

A petitioner is entitled to interest on a refund of personal property taxes illegally collected upon exempt property from the date a petition for refund is filed until the date of actual refund.

Gary W. Flakne, County Atty., David E. Culbert and Paul R. Jennings, Asst. County Attys., Minneapolis, for appellants.

Johnson & Eastlund and Ralph W. Peterson, Minneapolis, for respondent.

Hayner N. Larson, Hubert V. Forcier and Faegre & Benson, Minneapolis, for North Star Research and Development Institute, amicus curiae seeking affirmance.

Heard before PETERSON, MacLAUGHLIN, and YETKA, JJ., and considered and decided by the court en banc.

PETERSON, Justice.

These appeals are from judgments in district court awarding petitioner interest on a refund of personal property taxes wrongfully levied on exempt property by Hennepin County.

General Mills, Inc., petitioner, has originally paid taxes on certain items of personal property assessed in 1969. Claiming that such property was exempt from taxation, petitioner filed suit in the Hennepin County District Court to claim a refund. In a related case, General Mills, Inc. v. Commr. of Taxation, 294 Minn. 175, 199 N.W.2d 636 (1972), involving a 1968 assessment on the same property, this court held that the property was exempt from personal property taxation.

A refund of 1969 taxes was paid, and petitioner moved for an order requiring the county to pay interest for the period the funds were held by the county. The district court ordered interest to be paid to petitioner at the statutory rate of 6 percent from the date petitioner filed its original petition for a refund until the actual date of refund. The county has appealed from the judgments entered pursuant to that order claiming that no interest should accrue. We affirm.

The issue of a taxpayer's right to interest on the refund of illegally levied personal property taxes is one of first impression in Minnesota. ¹ In deciding this question, it is important to consider the procedures established by the legislature for the payment of these taxes. As a condition precedent to contesting the legality of their assessments, taxpayers are now required to pay their personal property taxes in full. Minn.St. 277.011, subd. 3. ² If a taxpayer has not paid his disputed personal property tax, any judgment against him 'shall include any penalties or interest which have then accrued thereon for failure to pay the same.' Minn.St. 277.011, subd. 7. ³ If, on the other hand, the petitioning taxpayer has paid his tax and has sued for a refund, the statute is silent as to the question of interest. Minn.St. 277.011, subd. 9, states only that if 'upon final determination the petitioner has paid more than the amount so determined to be due, judgment shall be entered in favor of petitioner for such excess * * *.'

With the exception of hardship cases, this statutory scheme insures that the county will have possession and use of a petitioner's tax payments during the period in which the legitimacy of the assessment or levy is being contested. If an assessment or levy is adjudged to have been illegal, and a refund is thereby made, we believe that interests of fairness and equity require that the petitioners receive interest on that refund. ⁴ We do not perceive the silence of the legislature on the question of interest to be a deliberate legislative choice, for there appears no reason for granting interest with respect to some tax refunds but not to others. ⁵ This view was presented in an Arizona case, State Tax Comm. v. United Verde Ext. Min. Co., 39 Ariz. 136, 146, 4 P.2d 395, 398 (1931):

'* * * It is presumed that the sovereign state, in dealing with its citizens, intends to apply the same rules of abstract justice as it applies in actions between citizens. Certainly, it would be admitted to be both law and justice that when A sues B to recover money wrongfully obtained, if he recover he is entitled, not merely to the principal sum paid, but also to interest * * *. * * * And in reason and logic, when the state compels one of its citizens under pain of forfeiting all rights of recovery, to pay in advance of suit a sum of money which it is afterwards adjudged was illegally demanded, the same principle of common justice would require that the state, to make the citizen whole, should repay not merely the sum illegally so obtained, but interest from the date the money was paid to it. * * *

'In view of the statute, and the general principles of justice which apply alike to rich and poor, we are of the opinion that the trial court should have awarded interest on the amount of taxes found to have been illegally collected * * *.' ⁶

Similarly, the South Dakota Supreme Court recognized that when a statute requires a taxpayer to first pay his taxes and then sue for a refund the sovereign thereby consents that, for the purposes of that suit, it should stand as any other suitor. When the government consents to suit, therefore, it ought not to be given an unfair and arbitrary advantage beyond what is given to private litigants, unless necessity or the language of a statute so requires. Chicago, St. P.M.& O. Ry. Co. v. Mundt, 56 S.D. 530, 229 N.W. 394 (1930). See, also, Farmers Loan & Trust Co. v. State of Minnesota, 280 U.S. 204, 212, 50 S.Ct. 98, 100, 74 L.Ed. 371, 375, 65 A.L.R. 1000, 1004 (1930), in which it was said that '(t)axation is an intensely practical matter and laws in respect of it should be construed and applied with a view of avoiding, so far as possible, unjust and oppressive consequences.'

We have repeatedly recognized that interest is not a penalty, but rather is the payment of a reasonable sum for the loss of use of money. McCormack v. Hankscraft Co., 281 Minn. 571, 161 N.W.2d 523 (1968); Potter v. Hartzell Propeller, Inc., 291 Minn. 513, 189 N.W.2d 499 (1971). Since the legislature has provided a procedure to challenge the legality of taxes, that procedure should provide the taxpayer with an adequate remedy at law. In the absence of a contrary legislative determination, it can hardly be said that the denial of interest provides a taxpayer with an adequate remedy. As Judge Learned Hand wrote in Proctor & Gamble Dist. Co. v. Sherman, 2 F.2d 165, 166 (S.D.N.Y.1924):

'* * * (I)t seems to me plain that it is not an adequate remedy, after taking away a man's money as a condition of allowing him to contest his tax, merely to hand it back, when, no matter how long after, he establishes that he ought never to have been required to pay at all. Whatever may have been our archaic notions about interest, in modern financial communities a dollar to-day is worth more than a dollar next year, and to ignore the interval as immaterial is to contradict well-settled beliefs about value. The present use of my money is itself a thing of value, and, if I get no compensation for its loss, my remedy does not altogether right my wrong.'

See, also, Nutt v....