Department of Treasury of Indiana v. Ridgely

• Decision Date: 16 November 1936
• Docket Number: 26786.
• Citation: 4 N.E.2d 557,211 Ind. 9
• Parties: DEPARTMENT OF TREASURY OF INDIANA et al. v. RIDGELY et al.
• Court: Indiana Supreme Court

4 N.E.2d 557

211 Ind. 9

DEPARTMENT OF TREASURY OF INDIANA et al. v. RIDGELY et al.

No. 26786.

Supreme Court of Indiana.

November 16, 1936

Appeal from Superior Court, Lake County; Bertram C. Jenkines, judge.

Action by Edgar A. Ridgely against Department of Treasury of Indiana and others. After the death of Edgar A. Ridgely, Iva B Ridgely, the executrix of his estate, and his heirs, were substituted as parties plaintiff. From a judgment in favor of the plaintiff, the defendants appealed to the Appellate Court. Cause was transferred from the Appellate Court under Burns' Ann.St.1933, § 4-215.

Reversed with instructions.

Superseding opinion of Appellate Court, 199 N.E. 421.

Philip Lutz, Jr., Atty. Gen., Jos. W. Hutchinson Asst. Atty. Gen., Geo. E. Hershman, of Crown Point, and Jos. P. McNamara, Deputy Atty. Gen., for appellants.

Hodges, Ridgely & Davis, of Gary, for appellees.

ROLL Judge.

Edgar A. Ridgely filed in the Lake superior court, room 3, his petition for an injunction against appellants, to enjoin them from proceeding farther in their attempt to collect certain taxes which they claimed was due the state of Indiana under what is known as the Gross Income Tax Law of this state, and which he contended was unlawful and unauthorized. After the commencement of this action, the said Edgar A. Ridgely died, and the executrix of his estate and his heirs were substituted as parties plaintiffs below by leave of court and are the appellees here.

The complaint alleged in substance that during all the time here in question the plaintiff and one Dale E. Belles were partners engaged in the sale of drugs and other commodities at their store located in Gary, Lake county, Ind., and doing business under the firm name of Ridgely Drug Store, and that plaintiff was the owner of two-thirds interest in said partnership, and that Dale E. Belles was the owner of a one-third interest therein. That as a part of their business they filled prescriptions, prescribed by various physicians, and presented to them by individuals for filling, for which they received a reasonable price. That the gross income by the partnership from their prescription business, for the taxable year of 1933, was $14,780. That he paid on his share of this business to the state of Indiana as gross income tax for 1933 the sum of $24.60, the said tax being computed at the rate of one-fourth of 1 per cent. on two-thirds of the total amount received from filling prescriptions. That after the payment of the sum above named the Department of Treasury of the state of Indiana, on or about April 9, 1934, served a written notice on plaintiff demanding an additional tax on said gross sales in the sum of $73.91. That within 30 days said notice was mailed to him of such additional assessment. He applied to the Department of Treasury of the state of Indiana for a hearing and correction of the amount of tax so assessed upon him, setting forth in the petition the reasons why such hearing should be granted, the reasons being the same reasons herein set out, and requesting a reduction in the tax assessed in the sum of $73.91. That said petition was properly considered and acted upon and denied and plaintiff was duly notified of the action taken. That said Department of Treasury again demanded payment of the balance of the tax which it claimed was due the state, and which plaintiff claimed was unlawful and unauthorized and which he again refused to pay. That the defendant Lillian M. Holley was the sheriff of Lake county and defendant George W. Sweigart was the clerk of the Lake circuit court. That on August 24, 1934, the Department of Treasury of Indiana issued a warrant under its official seal, directed to the defendant Lillian M. Holley, as sheriff of Lake county, Ind., commanding her to levy upon and sell the real estate and personal property of this plaintiff found within her county for the payment of the aforesaid unlawful tax levy, along with damages amounting to $7.39, and for the penalty as provided by the law for the failure to make payment of the lawful levy of taxes, etc. That said sheriff did within 5 days after the receipt of the warrant file a copy thereof with the clerk of the Lake circuit court, who thereupon entered it in the judgment record, all as provided by statute, the doing of which cast a cloud upon the real estate owned by plaintiff and located in Lake county. That the sheriff is now threatening to, and will if not enjoined, proceed to seize and levy, under and by virtue of said unlawful and unauthorized warrant above described, upon the personal property and real estate of this plaintiff and make sale of the same. The prayer asked for a temporary restraining order and upon final hearing issue a permanent injunction.

To this petition appellants filed a demurrer on the ground that the petition does not state grounds sufficient to constitute a cause for injunction. The court overruled the demurrer and appellants answered by a general denial.

The facts were stipulated by the parties and they are in substance as alleged in the complaint. The trial court entered judgment in favor of appellees and enjoined appellants from taking any further steps to collect the proposed tax. Appellants' motion for a new trial was overruled, and the only errors assigned on appeal are, first, the overruling of the demurrer to the petition; and, second, the overruling of the motion for a new trial. The reasons assigned in the motion for a new trial, are, (1) that the decision of the court is not sustained by sufficient evidence; and (2) the decision of the court is contrary to law.

These assignments of error present substantially the same question, and will be considered together.

As we understand the contentions of the parties, they may be stated as follows: (1) Appellants insist that a suit to enjoin the collection of the proposed tax is not available to appellees; that the gross income statute provides a complete and adequate remedy at law, and that under such circumstances injunction will not lie; and (2) it is the contention of appellants that the partnership herein was engaged in the retail business only, while appellees contend that they were engaged in the retail business and also in the business of compounding drugs; that is, that part of their income, to wit, $14,780 derived from filling prescriptions, was derived from compounding drugs, and therefore was not received from retail business, but from that of compounding of drugs, and is therefore subject to a rate of one-fourth of 1 per cent. as set out in subdivision (a) of section 64-2603, Burns' Ind.St.Ann.1933, section 15983, Baldwin's Ind.St. 1934, and not classified as gross income derived from a retail business which is taxed at 1 per cent. as claimed by the state.

As to the first question above stated, section 64-2612, Burns' Ind.St.Ann.1933, section 15992, Baldwin's Ind.St.1934, being section 12 of the gross income tax statute of the Acts of 1933, provides for a hearing by the Department of Treasury upon any assessment made against any aggrieved taxpayer upon a petition filed. After the hearing, the Department shall make such orders as to them appear just and proper. The statute further provides that any person improperly charged with any tax under this act and required to pay the same may recover the amount improperly collected, together with interest in a proper action against the Department of Treasury, and also provides that the circuit court of the county in which the taxpayer resides shall have original jurisdiction of such suits. This section further provides for an appeal by either party to such suit as in other civil actions. This statute nowhere expressly states that the remedy therein provided shall be exclusive. Under such conditions, and under the facts of this case, must a citizen of this state who is improperly and unlawfully assessed under the provisions of this act pay to the state a tax which he is not in any way liable, and which he does not owe, or permit his property to be sold to pay such a tax and then seek to recover it back by a suit against the Department of Treasury under the provisions of section 12, supra.

We are of the opinion that under the facts as they appear in this record appellees are not limited to the remedy provided for in section 12, supra. He is not compelled to pay the unlawful and unauthorized tax or permit the state to make sale of his personal property and real estate to pay said tax, but he may seek relief in a court of equity by a suit to enjoin the proper officers from collecting such a tax.

In the case of Toledo & Wabash R. Co. v. City of Lafayette (1864) 22 Ind. 262, this court said: ‘ If the taxes in question were assessed without authority by law, there can be no doubt that an injunction is a proper remedy to restrain the collection of them. Greencastle Township v. Black [1855] 5 Ind. 557; The City of Lafayette v. Jenners [1857] 10 Ind. 70.’

In Yocum, Auditor, v. First National Bank of Brazil (1896) 144 Ind. 272, 43 N.E. 231, 232, it was said: ‘ The remedy by injunction against an illegal and void tax is the proper one, as this court has many times decided.’ See cases there cited.

The court further said: " The owner of real estate may, by injunction, prevent a cloud being cast upon his title.' Thomas v. Simmons, 103 Ind. 538, 2 N.E. 203,3 N.E. 381; Bishop v. Moorman, 98 Ind. 1 .

" Where a tax is a lien upon property, equity interferes to remove cloud.' Cooley, Tax'n, pp. 746, 747, also, p. 761; Schulenberg, etc., Lumber Co. v. Town of Hayward [C.C.] 20 F. 422; Wells, Fargo & Co. v. Town of Dayton, 11 Nev. 161.'

There is no question in this case that the entry of the amount of the tax and damages in the judgment record by the clerk of Lake...