Master Craft Engineering, Inc. v. Department of Treasury

• Citation: 141 Mich.App. 56,366 N.W.2d 235
• Decision Date: 24 April 1985
• Docket Number: Docket No. 75806
• Parties: MASTER CRAFT ENGINEERING, INC., Petitioner-Appellant, v. DEPARTMENT OF TREASURY, Respondent-Appellee. 141 Mich.App. 56, 366 N.W.2d 235
• Court: Court of Appeal of Michigan — District of US

Page 235

366 N.W.2d 235

MASTER CRAFT ENGINEERING, INC., Petitioner-Appellant, v. DEPARTMENT OF TREASURY, Respondent-Appellee.

Docket No. 75806.

141 Mich.App. 56, 366 N.W.2d 235

Court of Appeals of Michigan.

Submitted July 18, 1984.

Decided Feb. 20, 1985.

Released for Publication April 24, 1985.

[141 MICHAPP 58] Rubenstein, Isaacs, Lax & Bordman by Robert D. Kaplow and Robert A. Kuhr, Southfield, for petitioner-appellant.

Frank J. Kelley, Atty. Gen., Louis J. [141 MICHAPP 59] Caruso, Sol. Gen., and Richard R. Roesch and Thomas J. Kenny, Asst. Attys. Gen., for respondent-appellee.

Before DANHOF, C.J., and HOLBROOK and SIMON ^*, JJ.

PER CURIAM.

Petitioner, Master Craft Engineering, Inc., appeals as of right from the final order of the Michigan Tax Tribunal, dated December 15, 1983, which affirmed the Department of Treasury's (Department) use tax assessment for the period from January 1, 1975, to September 30, 1977, in the total amount of $35,325.20 on two airplanes owned by Master Craft. We affirm.

Master Craft is incorporated in Michigan with its corporate headquarters located in Belleville, Michigan. Master Craft primarily manufactures automobile stampings. Master Craft Industrial (apparently a subsidiary) is incorporated in Delaware, has its main plant in Tifton, Georgia, and manufactures lift trucks. In 1975, Master Craft purchased a Mitsubishi "MU-2" airplane in New Jersey and hangared it at Willow Run Airport in Ypsilanti. In April, 1977, the MU-2 crashed. The radios and other instruments were salvaged. Thereafter, Master Craft purchased a Cessna 412C. This plane was bought in Illinois, registered in Alabama, and, immediately after its purchase, flown to Michigan where petitioner took delivery of it. The plane contained little instrumentation. It was first flown to Detroit, and later to Tri-City Airport in Freeland, Michigan. The plane was taken to Freeland in order to have an experienced mechanic install the salvaged MU-2 equipment in the Cessna. From June 30, 1977, to December, 1977, repairs were made at Tri-City Airport, Willow[141 MICHAPP 60] Run Airport, and the Cessna dealership located in Illinois. After the repairs were completed--and it is unclear whether the last repairs were made in Illinois--the plane was hangared in Georgia. Master Craft paid no out-of-state sales or use taxes on either of these planes prior to the Michigan assessment.

In 1977, the Department of Treasury's Revenue Division conducted an audit to determine Master Craft's potential tax liability. Although unclear, it appears that this audit included a use tax analysis for the two planes, under M.C.L. Sec. 205.91 et seq.; M.S.A. Sec. 7.555(1) et seq. The audit resulted in an order of determination of assessment dated July 26, 1979, in the amount of $28,706.16 plus interest of $6,619.04 for a total of $35,325.20. Master Craft argues that the Department conducted an impermissible second audit, while the Department counters that the audit was of a continuing nature.

In response to the assessment, Master Craft filed a petition for redetermination on August 24, 1979, with the State Board of Tax Appeals (Board). Master Craft also filed a "protective appeal" with the Tribunal, since the Board's continuing authority to decide these cases was questionable in light of the creation of the Tribunal and the transfers of jurisdiction wrought thereby. See Queen Airmotive, Inc. v. Dep't. of Treasury, 105 Mich.App. 231, 306 N.W.2d 461 (1981). A hearing was held before the Board on July 17, 1980. Master Craft's president, John W. Haswell, testified regarding the company's use of both planes during the tax period.

On February 11, 1981, the Tribunal informed Master Craft's counsel that it was dismissing the protective appeal because the parties had submitted the matter to the Board. Pursuant to the Tribunal's interpretation of 1980 P.A. 162, the letter also noted that the matter would be transferred to [141 MICHAPP 61] the Tribunal if the Board did not reach a decision by December 31, 1981. The Board failed to reach a decision by that date, and on November 17, 1982, when a decision was still not forthcoming, the Tribunal informed Master Craft that the matter had been transferred to the Tribunal. On July 28, 1983, a 14-page proposed judgment affirming the assessment was issued. On August 30, 1983, the Tribunal adopted and incorporated by reference the findings of fact and conclusions of law contained in the proposed judgment. After granting Master Craft's motion for rehearing, the Tribunal issued a final order dated December 15, 1983, which affirmed the assessment. This appeal ensued.

Master Craft first argues that the Tribunal's initial dismissal of the protective appeal was conclusive. It reasons that only the Board was empowered to decide the petition for redetermination and that, since the transfer contradicts 1980 P.A. 162 and 1981 P.A. 138, the Tribunal's decision is void. Master Craft maintains that the transfer was void because the Legislature intended to transfer only those cases to the Tribunal which had not been heard, there being no provision for transferring those cases which had been heard but not yet decided. Petitioner also concludes that it was denied an original and independent hearing because the Tribunal decided the case based on the transcript from the Board hearing, and that since the Board failed to make a decision within a reasonable period under M.C.L. Sec. 24.285; M.S.A. Sec. 3.560(185), it violated its statutory duty to proceed in a timely manner.

1981 P.A. 138, Sec. 4, provides as follows:

"(1) This amendatory act shall take effect September 16, 1980. All new appeals from an assessment, decision [141 MICHAPP 62] or order of the department shall be made to the tax tribunal effective September 16, 1980. An appeal to the state board of tax appeals filed prior to September 16, 1980 shall proceed as follows:

"(a) A matter which has not been heard, and submitted to the board for decision, on or before January 1, 1982 shall be transferred to the tax tribunal as of January 1, 1982.

"(b) A matter which has been heard, and submitted to the board for decision, on or before January 1, 1982 shall be completed and a decision issued before September 30, 1982.

"(2) An appeal having been filed in any court of record in this state prior to January 1, 1981 shall proceed in those courts until a decision is rendered. Appeals filed after January 1, 1981 shall be in accordance with this amendatory act." (Emphasis added.) ¹

The Board "heard" the matter on July 17, 1980, but failed to reach any decision by the date it ceased to exist. Master Craft argues that the Tribunal lacked the power to decide this case.

As is obvious from 1981 P.A. 138, the Legislature did not provide for what should happen in the event that the Board had "heard" a case but failed to render a decision by September 30, 1982. This Court is therefore faced with a question of legislative[141 MICHAPP 63] intent. The Tribunal's final order concluded as follows:

"We find that the only reasonable construction, considering the provisions of the Tax Tribunal Act, 1980 P.A. 162, and 1981 P.A. 138 together, is that it was intended by the Legislature that all tax appeals as to taxes enumerated in TTA Sec. 79 would come under the jurisdiction of the Michigan Tax Tribunal upon extinction of the State Board of Tax Appeals. Interestingly, Petitioner herein has not argued that this cause belongs within the jurisdiction of another existing court or quasi-judicial body, just that it does not belong before the Tribunal.

"We conclude that the Tribunal does possess jurisdiction over this appeal." (Emphasis in original.)

We agree.

Helpful to our analysis in this case is an analysis of HB 4238 (subsequently enacted into 1981 P.A. 138) prepared by the House Legislative Analysis section for the Taxation Committee, containing material complete as of June 15, 1981, which states in part:

"The enacting section of the law (Public Act 162 of 1980) also declared that all appeals of actions by the treasury department would have to be made to the tax tribunal with the effective date of the act (September 16, 1980). The act also repealed those sections of the law creating the tax appeals board as of December 31, 1981. Matters not heard before January 1, 1981, were to be transferred to the tribunal on that date. Matters heard before January 1, 1981 were to be 'completed' and decisions issued before December 31, 1981. Since the passage of the act in 1980, the appeals board has decided 162 cases, and is completing 42 others. However, it will still have around 200 cases pending (after receiving briefs, hearing witnesses, etc.) at the end of 1981, and would therefore not have legal existence to decide [emphasis in original] those cases, which would [141 MICHAPP 64] have to be heard again before the tax tribunal. (Emphasis added.)

This analysis evinces a clear intent by the Legislature to have appeals which had not been decided, but which had been "heard", come within the jurisdiction of the Tax Tribunal.

Master Craft additionally argues that the Tribunal's initial dismissal of this action was a conclusive determination regarding its lack of jurisdiction. However, the Tribunal's initial dismissal was correct, because the Board retained jurisdiction of the case at that time, i.e., until December 31, 1981, pursuant to 1980 P.A. 162. The Board's inability to clear its docket by the statutorily-mandated deadline will not be allowed to prohibit ultimate disposition of a pending case. The Legislature could not have intended that Master Craft's case simply disappear. Indeed, the above-noted legislative analysis belies this contention. Moreover, the Legislature provided that all new cases be submitted to the Tribunal. The fact that the Board failed to render a decision does not change the intended result, nor does it make the Tribunal's earlier declination of jurisdiction conclusive. A...