Estate of Bell–Levine v. State ex rel. Okla. Tax Comm'n

• Decision Date: 18 December 2012
• Docket Number: No. 106,821.,106,821.
• Citation: 293 P.3d 964
• Parties: In the Matter of the ESTATE OF Patricia BELL–LEVINE, Deceased, The Estate of Patricia Bell–Levine, Appellee, v. State Of Oklahoma, ex rel., Oklahoma Tax Commission, Appellant.
• Court: Oklahoma Supreme Court

293 P.3d 964

In the Matter of the ESTATE OF Patricia BELL–LEVINE, Deceased,
The Estate of Patricia Bell–Levine, Appellee,
v.
State Of Oklahoma, ex rel., Oklahoma Tax Commission, Appellant.

No. 106,821.

Supreme Court of Oklahoma.

Dec. 18, 2012.

[293 P.3d 965]

CERTIORARI TO THE COURT OF CIVIL APPEALS, DIVISION II, ON APPEAL FROM THE DISTRICT COURT OF GRADY COUNTY, STATE OF OKLAHOMA, HONORABLE TIMOTHY A. BRAUER
¶ 0 The Oklahoma Tax Commission appealed a ruling by the District Court of Grady County, Honorable Timothy A. Brauer, which found Decedent's outstanding 1978–1985 income tax liability was barred from collection through Decedent's probate case. The trial court's ruling was based on the ten-year limitation imposed by 68 O.S.2001 223(A). The Court of Civil Appeals reversed, concluding 68 O.S.2001 223(A) operated as a statute of limitations and did not violate the Oklahoma Constitution; however, COCA also found that the Oklahoma probate code required satisfaction of the tax debt before distribution of the estate assets. We find COCA correctly held that 68 O.S.2001 223(A) is a statute of limitations and does not extinguish an underlying debt to the state in violation Article 5, § 53 of the Oklahoma Constitution. However, we conclude that neither 58 O.S.2001 591 nor 58 O.S.2001 635 of the probate code require payment of a debt otherwise barred by the statute of limitations.
THE COURT OF CIVIL APPEALS' OPINION VACATED; DISTRICT COURT'S FEBRUARY 3, 2009 ORDER REINSTATED; MATTER REMANDED FOR FURTHER PROCEEDINGS

Charles N. Woodward, Lisle & Woodward, Oklahoma City, Oklahoma, for Appellee.

Robert J. Hays, Hayes & Gordon, PLLC, Chickasha, Oklahoma, for Appellee.

Marjorie L. Welch, Julie M. Ezell, Geoffrey D. Long, Oklahoma Tax Commission, Oklahoma City, Oklahoma, for Appellant.

Facts and Procedural History
GURICH, J.

¶ 1 Patricia Bell–Levine died testate on April 9, 2006. Decedent's son, Michael Allen Bell filed a probate proceeding in Grady County on May 18, 2006. Bell was appointed personal representative of the estate without objection. On September 12, 2008, Bell filed a Petition for Release of Estate Tax Liability, which sought a determination from the trial judge that no estate tax was due. Following the procedure outlined in 58 O.S.2001 282.1, Bell set the matter for hearing and served notice on the Tax Commission.¹ The Tax Commission filed an objection to the petition based solely on Decedent's unpaid income tax liabilities. The Tax Commission

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also presented a Notice of Outstanding Tax Liability in the probate case, which reflected an income tax debt of $11,133.00 for the years 1978–1985, and $603.00 for years 1992, 1997, and 1998.² Together with penalties and interest, the Tax Commission alleged Decedent had accumulated an income tax obligation of $57,182.58 and urged the trial court to require payment of all unpaid income taxes prior to allowing any distribution of estate assets.

¶ 2 Bell responded to the Tax Commission's pleadings, filing an Objection to Notice of Outstanding Tax Liability. Bell argued that the ten-year limitation period in 68 O.S.2001 223(A) barred the Tax Commission's efforts to collect the 1978–1985 tax debt by pursuing the claim in Decedent's probate proceeding. Nevertheless, Bell voluntarily paid the tax bill for the years 1992, 1997, and 1998, utilizing a payment option specified in the Clean Slate '08 Voluntary Compliance Initiative.³ Bell's objection did not challenge the Tax Commission's assessment of the 1978–1985 income tax liability; rather his protest relied solely on the ten-year limitation period in 68 O.S.2001 223(A).

¶ 3 Despite the Tax Commission's objection, the trial judge sustained Bell's petition, finding no estate tax liability. An Order Releasing Estate Tax Liability was filed on November 10, 2008, but it did not determine the validity of the alleged income tax debt. After a subsequent hearing, the trial judge entered an order on January 8, 2009, concluding the tax assessments for 1978 through 1985 could not be collected in the probate proceeding because of the limitations period in 68 O.S.2001 223(A).

¶ 4 The Tax Commission appealed the January 8, 2009 order.⁴ COCA reversed, holding (1) Article 5, § 53 of the Oklahoma Constitution forbids the Legislature from enacting any law which releases or extinguishes a debt owed to the State of Oklahoma; (2) 68 O.S.2001 223(A) must be interpreted as a statute of limitations, which extinguishes only the remedy, not the underlying tax obligation; and (3) the existing tax debt could be collected in the probate proceeding according to the terms of decedent's will and the statutory requirements imposed by 58 O.S.2001 591 and 58 O.S.2001 635 of the probate code. Bell petitioned this Court for review, and we granted certiorari on May 3, 2010, to address this first-impression controversy.

Standard of Review

¶ 5 Whether the time limit of 68 O.S.2001 223(A) prohibits collection of outstanding income tax liability through a probate proceeding after passage of the ten-year limitations period presents a question of law which we review de novo. Duncan v. Okla. Dept. of Corrections, 2004 OK 58, ¶ 3, 95 P.3d 1076, 1078. Likewise, whether the terms of 68 O.S.2001 223(A) violate Article 5, § 53 of the Oklahoma Constitution by extinguishing a debt owed to the state, also presents a question of law, reviewable under the de novo standard. EOG Res. Mktg., Inc. v. Okla. State Bd. of Equalization, 2008 OK 95, ¶ 13, 196 P.3d 511, 518–19. The de novo standard necessitates a plenary, independent, and non-deferential examination of the trial court's legal rulings. White v. Heng Ly Lim, 2009 OK 79, ¶ 2, n. 5, 224 P.3d 679, 681.

Analysis

¶ 6 This case requires us to interpret and balance three statutory provisions:

[293 P.3d 967]

68 O.S.2001 223(A), 58 O.S.2001 635, and 58 O.S.2001 591. It also mandates consideration of these sections in light of Article 5, § 53 of the Oklahoma Constitution.

¶ 7 Bell maintains that the plain language of 68 O.S.2001 223(A)—which authorizes taxes to be collected through a court proceeding only if commenced within ten (10) years after an assessment of tax has become final—applies to all court proceedings, regardless of who initiates the action. According to Bell, because a probate matter is a court proceeding, the plain terms of 68 O.S.2001 223(A) prohibit any efforts to collect the Decedent's tax liability through the probate case. Further, Bell asserts the delinquent taxes are not an enforceable debt of the estate. Because both 58 O.S.2001 591 and 58 O.S.2001 635 apply to income and estate taxes due the state, Bell claims the probate code does not mandate payment of a debt otherwise barred by the applicable statute of limitations.

¶ 8 The Tax Commission argues that 68 O.S.2001 223(A) places a ten-year limitation solely upon the issuance of a tax warrant or a court proceeding which the agency initiates against a taxpayer. Further, the Tax Commission contends that the limitation period does not preclude collection by other methods, including through submission of a claim in a probate proceeding. ⁵ Finally, the Tax Commission contends the application of 68 O.S.2001 223(A) extinguishes Decedent's tax debt in violation of Article 5, § 53 of the Oklahoma Constitution.

68 O.S.2001 223 (A) Does Not Extinguish a Debt to the State in Violation of Article 5, § 53

¶ 9 Article 5, § 53 provides:

Except as to tax and assessment charges against real property remaining delinquent and unpaid for a period of time as long or longer than that provided by law to authorize the taking title to real property by prescription, the Legislature shall have no power to release or extinguish, or to authorize the releasing or extinguishing, in whole or in part, the indebtedness, liabilities, or obligations of any corporation or individual, to this State, or any county or other municipal corporation thereof.

The relevant portion of 68 O.S.2001 223(A) reads as...