Metzger v. Wisconsin Dept. of Taxation

Decision Date09 May 1967
Citation150 N.W.2d 431,35 Wis.2d 119
PartiesHenry METZGER et al., Appellants, v. WISCONSIN DEPARTMENT OF TAXATION, Respondent.
CourtWisconsin Supreme Court

John D. Cahill and James A. Kern, Milwaukee, for appellants.

Bronson C. LaFollette, Atty. Gen., James D. Jeffries, Asst. Atty. Gen., Madison, for respondent.

BEILFUSS, Justice.

The principal issue is whether the circuit court has jurisdiction in equity to enjoin the Wisconsin Department of Taxation from assessing gift taxes where the taxpayer has not exhausted his statutory administrative remedies.

The authority for the imposition of gift taxes is generally contained in secs. 72.75 through 72.81, Stats. Sec. 72.81(5) provides:

'All provisions of the income tax law, not in conflict with the provisions of sections 72.75 to 72.81, relating to the assessment of income taxes and hearing and appeal thereon, the preparation of assessment and tax rolls, the certification of taxes due, the correction thereof, and the collection and refund of income taxes, shall govern the assessment of taxes due under said sections. The provisions of sections 73.01 and 73.015 shall apply to the taxes due under sections 72.75 to 72.81.'

The procedure for challenging an assessment of a gift tax is therefore established by the income tax procedure of ch. 71 and secs. 73.01 and 73.015, Stats.

In sustaining the demurrer to the complaint on the ground that the plaintiffs failed to exhaust all of their administrative remedies, the trial court stated:

'Injunctive relief is not a substitute for the administrative procedure as clearly outlined and provided by legislative action. The rights of a taxpayer are not impinged upon by requiring him to exhaust his remedies as prescribed by Chap. 73 of the Laws of the State of Wisconsin.'

The trial court's decision that it had no jurisdiction to entertain an injunction suit is clearly supported by chapters 71 and 73 of the statutes.

Sec. 71.12(1), Stats., provides that a taxpayer feeling aggrieved by a notice of an additional assessment shall, within 30 days, make application to the assessor of incomes for abatement of the tax. If the application for abatement is denied the taxpayer may appeal to the Wisconsin board of tax appeals. However, if 'no application for abatement is made or if a petition is not filed with the board within the time provided * * * the assessment shall be final and conclusive.'

Sec. 71.12(3), Stats., provides in part, as follows:

'No person against whom an assessment of income tax has been made shall be allowed in any action either as plaintiff or defendant or in any other proceeding to question such assessment unless the requirements of section 71.12(1) shall first have been complied with, * * *.'

The appellants have made timely application to abate the assessment and have therefore invoked the administrative procedure of chapters 71 and 73 of the statutes.

Sec. 73.01(5)(a), Stats., in part, provides:

'Subject to the provisions of judicial review contained in the statutes, the board shall be the final authority for the hearing and determination of all questions of law and fact arising under the tax laws of the state, except such as may be otherwise expressly designated. * * *' Sec. 73.015, Stats., provides, in part:

'Review of determination of Wisconsin board of tax appeals. (1) The provisions of this section shall be the sole and exclusive remedy for review of any decision or order of the Wisconsin board of tax appeals, except as otherwise provided in chapter 76, and no person shall contest, in any action or proceeding, any matter reviewable by the board unless such person shall first have availed himself of a hearing before the board as provided in section 73.01.'

The statutes referred to above are unambiguous and mandatory. They provide that 'this section shall be the sole and exclusive remedy,' that 'no person shall contest * * * any matter reviewable by the board' without first complying with ch. 73, and that, subject to judicial review under ch. 227, 'the board shall be the final authority for the hearing and determination of all questions of law and fact.' A more positive provision of exclusive jurisdiction in the administrative procedure can scarcely be found in our statutes.

In a case quite parallel to this one this court held that under the statutes the determination as to liability or nonliability for gift taxes is for the taxing authorities, subject to review by the courts under ch. 227, Stats., and not for the county court. Indeed, in Estate of Michels (1958), 3 Wis.2d 353, 88 N.W.2d 726, an attempt was made to accomplish in a probate proceeding substantially what the instant plaintiffs have attempted to accomplish in a circuit court injunction action. In deciding that the lower court had no jurisdiction to decide questions of tax liability in the first instance, the court stated, at pp. 355--356, 88 N.W.2d at 727:

'In our view the provisions of sec. 72.81 (Stats.) thus summarized, and those of the income tax law incorporated by reference, make it clear that the sole authority to determine in the first instance whether or not gift taxes are due from any person or estate rests exclusively with the department of taxation, including the assessor of incomes, and that review of the department's determination lies solely with the board of tax appeals as provided by sec. 73.015(1), subject to further review by the circuit and supreme courts as provided by sec. 73.015(2) and c. 227, Stats.'

In accord is Estate of Adams (1937), 224 Wis. 237, 272 N.W. 19, 109 A.L.R. 1364, in which the court held that the lower court did not have subject matter jurisdiction to determine whether the statute of limitations barred certain tax claims against a decedent's estate for the reason that exclusive jurisdiction is vested in the administrative procedure provided by the statutes.

In light of the foregoing, we concluded that the trial court correctly decided that it has no jurisdiction to entertain the plaintiffs' suit to enjoin the department of taxation.

In the face of this rather overpowering authority, the plaintiffs assert that unless the circuit court has jurisdiction to entertain an injunction action plaintiffs will have no adequate remedy, which remedy they are guaranteed by sec. 9, art. I of the Wisconsin constitution:

'Remedy for wrongs. Section 9. Every person is entitled to a certain remedy in the laws for all injuries, or wrongs which he may receive in his person, property, or character; he ought to obtain justice freely, and without being obliged to purchase it, completely and without denial, promptly and without delay, conformably to the laws.'

The plaintiffs' most serious contention is that if this injunction action will not lie they will be forced to defend the assessments on the merits as well as on the affirmative defenses of laches and estoppel, statute of limitations, because the administrative procedure does not provide for a summary procedure to separately litigate these additional defenses. The plaintiffs complain that the time, expense and inconvenience of the administrative procedure would deny them the 'certain remedy,'--'promptly and without delay,' guaranteed them by sec. 9, art. I, Wisconsin constitution.

At this point we first notice that sec. 9, art. I concludes with the phrase 'conformably to the laws.' In this case the procedure of which plaintiffs complain as violative of the constitutional section is not only 'conformably to the laws,' it is the law established by the legislature.

The plaintiffs cite some federal authority and Warden v. Board of Supervisors of Fond du Lac County (1861), 14 Wis. 672 (*618), for the proposition that equity should enjoin a tax assessment where equity's remedy would be 'more adequate, comprehensive and effectual' than an available legal remedy. The federal cases cited apply to entirely different statutory procedures. The plaintiffs' position also overlooks the language of the Warden Case, wherein the court said, at p. 675:

'The collection of a tax, under the statute, is a legal proceeding to enforce the payment of a debt due the public, and like proceedings at law upon a private claim, equity will only interfere to prevent injustice by the unfair use of the process of the law. The primary and controlling principle in such cases is, that the proceedings to be stayed are inequitable and unjust, and that it will be against conscience to allow them to go on. (Cases cited.) It will not be enough to show they are irregular or even void. Courts of equity do not sit to reverse or correct errors and mistakes of law.'

We cannot agree that this long-standing administrative tax assessment procedure is 'against conscience,' especially when no irregularity in the proceedings is alleged.

Our court has consistently held that sec. 9, art. I of our constitution does not entitle Wisconsin litigants to the exact remedy they desire, but merely to their day in court. New York Life Ins. Co. v. State (1927), 192 Wis. 404, 412, 211 N.W. 288, 212 N.W. 801. Under sec. 9, art. I, the legislature may impose reasonable limitations upon the remedies available to parties. Hoffmann v. Milwaukee Electric R. & L. Co. (1906), 127 Wis. 76, 82--83, 106 N.W. 808; Neuhaus v. Clark County (1961), 14 Wis.2d 222, 229, 111 N.W.2d 180. The court has long recognized that certainty in tax collections is necessary for the continued function of government, and that this necessity is the policy foundation for the legislative limitations on the legal remedies available to taxpayers. Flanders v. Town of Merrimack (1880), 48 Wis. 567, 571--572, 4 N.W. 741. In Flanders the court went on to explain the operation of sec. 9, art. I, at pp. 574--575, 4 N.W. at p. 746:

'The constitutional declaration that every person is entitled to a certain remedy in the law, and ought to obtain justice freely, without being obliged to purchase it, completely without denial, promptly without delay,...

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