Kleiboemer v. District of Columbia

• Citation: 458 A.2d 731
• Decision Date: 22 March 1983
• Docket Number: No. 79-123.,Bo. 81-1232.,Bo. 79-547.,79-123.
• Parties: Axel-Felix KLEIBOEMER, Richard A. Bishop, et al., Appellants, v. DISTRICT OF COLUMBIA, Appellee.
• Court: Court of Appeals of Columbia District

458 A.2d 731

Axel-Felix KLEIBOEMER, Richard A. Bishop, et al., Appellants, v. DISTRICT OF COLUMBIA, Appellee.

No. 79-123.

Bo. 79-547.

Bo. 81-1232.

District of Columbia Court of Appeals.

Argued November 3, 1982.

Decided March 22, 1983.

Bradley G. McDonald, Washington, D.C., with whom Philip L. Kellogg, James L. Lyons, John M. Bixler, Ronald D. Aucutt, and John F. Karl, Jr., Washington, D.C., were on the briefs, for appellants.

Richard L. Aguglia, Asst. Corp. Counsel, Washington, D.C., with whom Judith W. Rogers, Corp. Counsel, Charles L. Reischel, Deputy Corp. Counsel, and James E. Lemert, Asst. Corp. Counsel, Washington, D.C., were on the brief, for appellee.

Before KERN, PRYOR and BELSON, Associate Judges.

KERN, Associate Judge:

This appeal is the residuum of the convoluted litigation which ultimately resulted in a decision by this court en banc (one judge dissenting) that the City Council had impermissibly imposed a tax on non-resident unincorporated professionals and personal service businesses. Bishop v. District of Columbia, 411 A.2d 997 (D.C.App. en banc), cert. denied, 446 U.S. 966, 100 S.Ct. 2943, 64 L.Ed.2d 825 (1980).

Questions of statutory interpretation are presented in this appeal: the meaning and applicability to the instant case of D.C.Code § 47-1586j(a) (1973), requiring a taxpayer to file an administrative claim of overpayment of tax within a fixed period of time, and D.C.Code § 47-2413(c) (1973), providing for the payment of interest on overpayments of taxes.

I

The events pertinent to this appeal occurred as follows. In March 1976, appellant Kleiboemer paid the now invalidated tax and promptly filed an individual administrative claim for refund, which the District denied. Thereupon, he filed a class action petition for refund in the Tax Division of the Superior Court seeking a refund of "all amounts paid by all taxpayers who are members of the petitioner's class." (Record at 16.) In October 1977, the trial court granted appellant's motion for class action determination, pursuant to Super.Ct.Civ.R. 23(b)(1)(A)¹ and ordered that

the class shall consist of all nonresidents who are subject to the tax in question . . . and who have paid the tax.

(Record at 47.) The trial court during October 1977 entered two further orders holding the tax unlawful but declaring that appellant Kleiboemer and members of the class who were fiscal year taxpayers were entitled to a refund for all taxes paid prior to December 1, 1975, "provided they have complied with or comply with . . . § 47-1586j." (Record at 82.)

It is agreed by the parties that if § 47-1586j is applicable to all nonresident taxpayers who paid the tax in 1975, their claims for refund must have been filed by April 15, 1979. In December 1978, appellant Kleiboemer filed with the District, on behalf of the class, a claim for refund, which the District denied. Soon thereafter, the trial court ruled that the class claim for refund filed by appellant Kleiboemer did not comply with the provisions of § 47-1586j, but concluded that "individual notice to the members of the class of the statutory requirement to file a claim for refund is appropriate." (Record at 110.) Notice of the filing requirement was then included in the District's mailing of 1978 tax return forms. However, some erstwhile members of the class did not actually receive the mailing, because they no longer operated unincorporated businesses in the District and hence were no longer obligated to file a return. Accordingly, the court in March 1979 directed the District to issue a press

release to publicize the need by those who had paid the tax for 1975 to file a refund claim by April 15, 1979. On April 5, 1979, the court held that sufficient notice had been given to the class members regarding the administrative claim requirement. (Record at 138.) On April 15, the filing deadline for the 1975 tax year expired.

After the tax was held invalid, first by a division of this court, then by the full court en banc, the parties entered into a consent judgment, pursuant to which the class members were again notified, by a mailing, of the requirement that they file an administrative claim. At the time of that second mailing, however, the filing deadline for taxable years 1975 and 1976 had already expired.

On September 24, 1981, the trial court ruled as follows on the issues which had been left unresolved by the earlier consent judgment: (1) that "the timely filing of individual claims [for refund] at the administrative level by affected taxpayers is a prerequisite to refunds in this suit"; and (2) that interest should be computed "from the date such individual claims are timely filed until the date of the making of the refund." (Record at 176.) It is from these September 24 rulings that the present appeal is taken.

II

As to the requirement of an individual claim for refund, § 47-1586j(a) provides in pertinent part as follows:

No . . . refund shall be allowed after three years from the time the tax was paid unless before the expiration of such period a claim therefor is filed by the taxpayer. . . .

It is agreed that a number of nonresidents who paid the tax for the years 1975 and/or 1976 did not file a claim for refund of such tax payments within three years. Appellants, however, urge that the whole purpose of a class action pursuant to Rule 23(b)(1)(A) — to eliminate the possibility of inconsistent adjudications if each member of the class were to sue individually — is frustrated by requiring that each taxpayer who is a member of the class must have filed an administrative refund claim in order to obtain a refund after the tax has been judicially determined to be unlawful. However, in District of Columbia v. Keyes, 362 A.2d 729 (D.C.1976), cert. denied, 430 U.S. 968, 97 S.Ct. 1651, 52 L.Ed.2d 360 (1977), we held that a class action² for refund of taxes paid was incorrectly entertained by the trial court because the taxpayers seeking refund had not first filed an administrative claim for refund.

Appellants contend (Brief at 18) that the trial court's ruling "would undercut the policy of Rule 23 . . . to allow class representatives to vindicate the rights of those who lack the knowledge or resources to pursue a remedy individually and to obtain justice in the courts." However, as we pointed out in Keyes, the Congress enacted specific legislation in § 47-1586j requiring an individual to file a refund claim and we may not ignore such a legislative mandate.³ This is particularly true since, as we explained in Keyes, supra, 362 A.2d at 732, the remedy is purely statutory: "[r]ecovery of taxes illegally or erroneously assessed and voluntarily paid . . . is a matter within the purview of the legislative branch." We further noted, "Tax statutes are necessarily formalistic and often technical. It is essential that we adhere to their technicalities, even if at times a seeming hardship results to the taxpayer." Id. at 737. This is so particularly because the statutory prerequisite of a claim for refund is jurisdictional, as we also noted in Keyes. Id. at 733.⁴

Appellants also maintain that in this case Keyes does not require the filing of individual claims for refund by members of the class because the filing requirement — essentially an application of the doctrine of exhaustion of remedies — need not be met when resort to the administrative process would be futile. However, we specifically rejected that argument in Keyes. There we acknowledged tht, in District of Columbia v. Green, 310 A.2d 848, 856 (D.C.1973), we had permitted taxpayers who had bypassed the administrative process to proceed with an action in court in part because those taxpayers had "`no meaningful ability to challenge [the] assessment at all'" at the administrative level. Id. 362 A.2d at 734 n. 11. However, in Keyes we emphasized that the futility of the administrative appeal was only one of the several "extraordinary circumstances" on which we had based the Green decision; that "only injunctive relief was sought"; and that "it would be a rare instance when taxpayers would not bypass [the administrative procedure] at great peril." Id.⁵

Instead, we explained in Keyes that the extraordinary equitable considerations were not present which had led us in Green to permit a limited exception to an essential requirement of the purely statutory refund procedure. Nor are they present in the instant case. It was not until October 17, 1977, that the tax in question in this case was initially held unlawful — a year and one half after it first came due for the 1975 tax year. An appeal was taken promptly from that ruling. Thus it is not unreasonable to conclude that aggrieved taxpayers had ample opportunity prior to the ruling of October 17, 1977, to pursue their statutory remedy with some hope that they might be successful. Even following the trial court decision upholding the tax, the possibility of reversal endured until the appeals process was completed.⁶ During the period of litigation, extensive efforts were exerted, by mail and by publication, to inform taxpayers of the need to file a claim; and the trial court expressly held such notice to be sufficient. The trial court's orders of October 27, 1977 and January 3, 1979 made it clear to appellants that individual claims for refund were a necessary precondition to collecting refunds, yet appellants did not appeal from those orders. In fact, appellants conceded the necessity of claims for refund soon after the October 27 order issued. (Record at 84-85.)

In addition, although without question the District had "notice" of the class action challenging the legality of the tax, absent the expected filing of claims at the administrative level, the District could not know the full extent of its liability for refunds and could not plan its budget accordingly. As we noted in Keyes, supra, 362 A.2d at 786-37, the financial interests of the District and the public interest would not be served...