New Mexico Taxation and Revenue Dept. v. Whitener

• Decision Date: 21 December 1993
• Docket Number: No. 13092,13092
• Citation: 117 N.M. 130,1993 NMCA 161,869 P.2d 829
• Parties: NEW MEXICO TAXATION AND REVENUE DEPARTMENT, Plaintiff-Appellant, v. Ray Charles WHITENER, Defendant-Appellee.
• Court: Court of Appeals of New Mexico

Page 829

869 P.2d 829

117 N.M. 130

NEW MEXICO TAXATION AND REVENUE DEPARTMENT, Plaintiff-Appellant, v. Ray Charles WHITENER, Defendant-Appellee.

No. 13092.

Court of Appeals of New Mexico.

Dec. 21, 1993.

Certiorari Granted Feb. 9, 1994.

[117 N.M. 131] Tom Udall, Atty. Gen., Margaret B. Alcock, Sp. Asst. Atty. Gen., Santa Fe, for plaintiff-appellant.

Carmen E. Garza, Las Cruces, for defendant-appellee.

[117 N.M. 132] Randi McGinn, New Mexico Defense Lawyers Ass'n, Albuquerque, for amicus curiae.

OPINION

CHAVEZ, Judge.

The New Mexico Taxation and Revenue Department (the Department) appeals the decision and order of its hearing officer which granted Ray Charles Whitener's (Defendant's) protest to taxes imposed upon him under the Controlled Substance Tax Act (the Act), NMSA 1978, Sections 7-18A-1 to -18A-7 (Repl.Pamp.1993). The hearing officer found and concluded that the tax violated Defendant's right against double jeopardy. This case presents the Court with the issue of the constitutionality of the Act as applied to Defendant. We affirm.

FACTS

In January 1990, Defendant was stopped by the New Mexico state police in Bernalillo County. Twenty-five pounds of marijuana were discovered in the trunk of Defendant's automobile. In addition to the drugs, police uncovered two firearms and $37,265 in cash.

Defendant was arrested and charged with possession of a controlled substance with intent to distribute, a fourth degree felony. In June 1990, pursuant to a plea agreement, Defendant was convicted of that offense. His sentence was deferred for eighteen months and he was placed on supervised probation. In addition to the standard conditions of probation, Defendant was required to pay a $75 laboratory fee, perform 100 hours of community service, and pay $15 per month in probation costs.

In February 1990, the State, through the Department of Public Safety, filed an amended complaint seeking the forfeiture of the firearms and cash seized from Defendant. In August 1990, the State and Defendant entered into a stipulated judgment in which Defendant forfeited the firearms and $33,365 in cash.

Prior to that, in March 1990, the Department levied an assessment against Defendant totalling $80,070.38, which represented the tax, penalty, and interest under the Act. In April 1990, Defendant timely filed a protest to the assessment. See NMSA 1978, Sec. 7-1-24 (Repl.Pamp.1990).

In December 1990, a hearing was held on Defendant's protest before Gerald Richardson, Hearing Officer for the Department. At the hearing, the parties stipulated that the tax assessment arose from the same set of facts and circumstances that triggered Defendant's conviction of possession of marijuana and the forfeiture of his property. Defendant argued at the hearing that the controlled substance tax was in fact a second punishment against him and, therefore, violated his right against double jeopardy. He further argued at the hearing that the tax bore no reasonable relationship to any State interest, and that the State had an obligation to prove that such a relationship existed. In response, the Department argued that the burden was on Defendant, not the State, to come forward and prove the invalidity of the tax. The Department argued that there was no double jeopardy violation, and it was acting within its authority to assess such a tax. No evidence was presented at the hearing regarding the value of the marijuana on which the tax was based or the State's costs in apprehending and prosecuting Defendant. The hearing officer had the parties submit briefs on the issue.

Thereafter, the hearing officer entered its decision and order. The decision noted that tax assessments are presumed to be correct, and, therefore, Defendant bore the burden of proof with respect to the amount of marijuana seized and the proper amount of tax liability. It was determined that Defendant failed to meet this burden. However, the decision stated that the remaining issue to be determined was whether, under the particular circumstances, the tax imposed constituted a second punishment in violation of the double jeopardy clause. It further noted that a review of the Act failed to reveal that the taxes were used to offset any particularized costs incurred with respect to drug enforcement or the societal costs of drug abuse, and instead the monies went to the State's general fund. The decision provided that, despite Defendant's failure to present evidence on the street value of marijuana, the $200 per ounce tax appeared "to at least equal, if not far exceed this decision maker's impression of the street value of marijuana." The hearing officer determined that, under the facts of this case, the drug tax constituted an additional punishment which bore no rational relationship to the goal of compensating the State for its costs. Having found a violation of double jeopardy, the hearing officer granted Defendant's protest. The Department appealed from that decision and order.

DISCUSSION AND ANALYSIS

The Double Jeopardy Clause, see U.S. Const. amend. V; N.M. Const. art. II, Sec. 15, embodies three protections: (1) it protects against a second prosecution for the same offense after acquittal; (2) it protects against a second prosecution for the same offense after conviction; and (3) it protects against multiple punishments for the same offense. See State v. Trevino, 113 N.M. 804, 808, 833 P.2d 1170, 1174 (Ct.App.1991), aff'd, 113 N.M. 780, 833 P.2d 1146 (1992). It is the third of these protections which is at issue in this appeal.

The Act provides authority for the Department to levy a tax on the unlawful possession of controlled substances at certain rates depending on the amount of drugs involved. See Sec. 7-18A-3(A). The Department is also charged with interpreting the Act and administering and enforcing the collection of taxes levied on controlled substances. See Sec. 7-18A-5(A) & (B).

Tax assessments or demands for payment are presumed to be correct. NMSA 1978, Sec. 7-1-17(C) (Repl.Pamp.1993). Therefore, Defendant bore the burden of overcoming this presumption of correctness. See Archuleta v. O'Cheskey, 84 N.M. 428, 431, 504 P.2d 638, 641 (Ct.App.1972). Once the presumption is rebutted, the burden shifts to the State to show the correctness of the assessed tax. See Cibola Energy Corp. v. Roselli, 105 N.M. 774, 777, 737 P.2d 555, 558 (Ct.App.1987).

The United States Supreme Court has dealt with the issue of whether state action, which is civil in nature, can nonetheless be violative of double jeopardy. In United States v. Halper, 490 U.S. 435, 109 S.Ct. 1892, 104 L.Ed.2d 487 (1989), the Court held that a defendant who had already been punished criminally may not be subjected to an additional civil sanction to the extent that the second sanction may not be fairly characterized as remedial but only as a deterrent or retribution. Halper had been criminally convicted of submitting $585 in false Medicare claims for reimbursement, was sentenced to two years in prison, and was fined $5,000. Id. at 437, 109 S.Ct. at 1896. Thereafter, the federal government instituted a civil action against him for submitting false claims and assessed a fine against him totalling $130,000. Id. at 438, 109 S.Ct. at 1896.

In reaching its decision, the Supreme Court noted that with respect to assessments, the labels "criminal" and "civil" were not of paramount importance and could not be utilized to defeat the applicable protections of constitutional law. Id. at 447-48, 109 S.Ct. at 1901-02. It further noted that the determination of whether a given civil sanction constituted punishment required a particularized assessment of the penalty imposed and the purposes that the penalty may be fairly said to serve. Id. at 448, 109 S.Ct. at 1902. With that in mind, the Court stated that for situations in which a fixed penalty provision subjects a prolific but small-gauge offender to a sanction overwhelmingly disproportionate to the damages the offender has caused, the offender is entitled to an accounting of the state's damages and costs to determine if the penalty sought in fact constitutes a second punishment. Id. at 449-50, 109 S.Ct. at 1902-03. Furthermore, the Court noted that the only proscription established by its ruling was that the state may not criminally prosecute a defendant, impose a criminal penalty upon the defendant, and then bring a separate civil action based on the same conduct and receive a judgment that is not rationally related to making the state whole. Id. at 451, 109 S.Ct. at 1903.

In Halper, the trial court found a tremendous disparity between the government's actual damages and the civil penalty authorized by statute. Id. at 452, 109 S.Ct. at 1903. The government did not challenge the trial court's approximation of its costs. Nonetheless, on appeal, the Court vacated the judgment below and remanded the case to allow the government to demonstrate that the trial court's assessment of its injuries was erroneous. Id. Since the government chose below to litigate only the legal issue decided in Halper, the Court thought it unfair to deprive the government of an opportunity to present the trial court with an accounting of its actual costs arising from the Medicare fraud. Id.

The analysis in Halper has specifically been utilized to strike down a state-imposed controlled-substance tax on the grounds that it was unconstitutional as applied. In In re Kurth Ranch, 986 F.2d 1308 (9th Cir.), cert. granted, --- U.S. ----, 114 S.Ct. 38, 125 L.Ed.2d 788 (1993), defendants pled guilty to various drug-related offenses based on the cultivation of marijuana on their family farm. Thereafter, the state assessed a drug tax totalling close to $865,000. Id. at 1310. Defendants filed bankruptcy, and in those proceedings, the bankruptcy court denied the state's claim for drug tax revenue. The district court affirmed that denial and the state appealed. Id.

In affirming the district court, and applying an...