Northern Natural Gas Co. v. Forst, 55227

CourtUnited States State Supreme Court of Iowa
Citation205 N.W.2d 692
Docket NumberNo. 55227,55227
PartiesNORTHERN NATURAL GAS COMPANY, Appellee, v. William H. FORST, Director, Department of Revenue of Iowa, Defendant, Donald G. Briggs, Director, Department of Revenue of Iowa, Substituted Defendant, Appellant.
Decision Date28 March 1973

Richard C. Turner, Atty. Gen., George W. Murray, Special Asst. Atty. Gen., Harry M. Griger and John A. Pabst, Asst. Attys. Gen., for appellant.

Duncan, Jones, Riley & Davis, by Eugene Davis and Glenn Smith, Des Moines, and Frank Duffy, Omaha, Neb., for appellee.


RAWLINGS, Justice.

Defendant appeals from trial court's final adjudication favorable to plaintiff on its declaratory judgment proceeding. We affirm.

At risk of oversimplification, this court is now, for the first time, called upon to determine the period during which a taxpayer is entitled to interest from the State on excess income taxes paid.

From 1955 to 1961 plaintiff and defendant's predecessor executed a series of waiver agreements pursuant to The Code 1971, Section 422.25(7). This enabling Act permitted the parties to periodically extend statutory limitation periods for computation of income taxes owing. These time extension agreements provide in relevant part: '(I)nterest due in excess of thirty- six (36) months on (a) * * * tax refund shall be waived.'

April 25, 1967, defendant's predecessor sent notice of overassessment to plaintiff. The latest extension agreement expired April 30, 1967. Plaintiff thereupon appealed to the State Tax Commission. The refund to be allowed was there increased by successor defendant in this case, but not to the extent desired by plaintiff taxpayer. With regard to the disallowed portion, plaintiff appealed to district court, but settlement was effected before trial. Thereafter plaintiff, by amendment to its petition, sought a declaratory judgment as to whether interest was owing on the amount refunded by defendant State for the period from April 30, 1967, aforesaid expiration date of the last extension agreement, to March 24, 1971, refund payment time. The parties stipulated, in event plaintiff's claim be allowed, then $43,648.13 interest would be owing to it by defendant State.

Defendant contends the waiver agreements and Code § 422.25(7), limit plaintiff's interest right to thirty-six months preceding April 30, 1967, above noted expiration date of the last agreement, which interest was included in the original refund, regardless of time the refund was paid.

On the other hand, plaintiff argues, upon expiration of the latest waiver agreement the ordinary rules concerning interest on income tax refunds, Code §§ 422.25(3) and 422.28, applied. Stated otherwise, plaintiff asserts, since defendant State failed to pay the refund before expiration of the last waiver agreement the above cited Code sections instantly come into play and interest resultantly accrued from such expiration date until actual payment of the refund due.

Defendant relies on these propositions in support of a reversal: (1) payment of interest on a tax refund is governed exclusively by statute; (2) statutory construction may only be invoked when a statutory enactment is ambiguous or uncertain in meaning; (3) the waiver agreements constituted contracts by which the parties are bound; and (4) entitlement to interest on a tax refund is statutory, not a matter of right.

I. Plaintiff concedes the first and fourth propositions, Supra, have merit. It also asserts, while existence of a contract is not conceded, it is essentially immaterial, since the contract, if any, could only operate to the extent allowed by law. See S & M Finance Co. Fort Dodge v. Iowa State Tax Comm'n., 162 N.W.2d 505, 510 (Iowa 1968); Michigan-Wisconsin Pipe Line Co. v. Johnson, 247 Iowa 583, 594, 73 N.W.2d 820 (1955); City of Ames v. State Tax Commission, 246 Iowa 1016, 1022, 71 N.W.2d 15 (1955); cf. Des Moines & C.I. Ry. Co. v. Tax Commission, 253 Iowa 994, 999, 115 N.W.2d 178 (1962). Thus the only remaining issues are, (1) is § 422.25(7) ambiguous, and (2) if so, what is the proper statutory construction to be given it?

II. Inceptionally it is understood, 'The legal or equitable nature of a declaratory judgment procedure is to be determined by the pleadings, the relief sought and the nature of the case.' Brammer v. Allied Mutual Insurance Company, 182 N.W.2d 169, 172 (Iowa 1970). See also Frederick v. Shorman, 259 Iowa 1050, 1055, 147 N.W.2d 478 (1966), Quoting Henderson v. Hawkeye-Security Ins. Co., 252 Iowa 97, 100, 106 N.W.2d 86 (1960).

As best we can determine from the record, this case was tried below as an equitable proceeding. It is accordingly entertained de novo on appeal. See Brammer v. Allied Mutual Insurance Company; Henderson v. Hawkeye-Security Ins. Co., both Supra. Therefore trial court's findings, though accorded weight, are not binding upon us. See Iowa R.Civ.P. 344(f)(7). Compare with Code § 422.29.

III. With regard to ambiguity was said in McKillip v. Zimmerman, 191 N.W.2d 706, 709 (Iowa 1971): 'If the language of a statute when given its plain and rational meaning is precise and free from ambiguity, no more is necessary than to apply to the words used their ordinary sense in connection with the subject considered.' See Maguire v. Fulton, 179 N.W.2d 508, 510 (Iowa 1970); Kruck v. Needles, 259 Iowa 470, 476, 144 N.W.2d 296 (1966); Jones v. Thompson, 240 Iowa 1024, 1036, 38 N.W.2d 672, 678 (1949). See also The Code 1973, Section 4.6.

Section 422.25(7) says:

'The periods of limitation provided by this section (regarding computation of tax) may be extended by the taxpayer by signing a waiver agreement to be provided by the department. Such agreement shall stipulate the period of extension and the year or years to which such extension applies. It shall further provide that a claim for refund may be filed by the taxpayer at any time during the period of extension. In consideration of such agreement, interest due in excess of thirty-six months on either a tax definciency or tax refund shall be waived.' (Emphasis supplied).

Defendant asserts the foregoing italicized sentence is clear and unmistakable in meaning, thus dispositive of this appeal. In other words, defendant contends no construction of this statute is necessary. We disagree.

Although a literal reading of the questionable sentence might lead to the conclusion asserted by defendant, 'It is a well-known * * * rule that the manifest intent of the legislature will prevail over the literal import of the words used.' Spencer Pub. Co. v. City of Spencer, 250 Iowa 47, 51, 92 N.W.2d 633, 635 (1958). See also Dingman v. City of Council Bluffs, 249 Iowa 1121, 1127, 90 N.W.2d 742 (1958).

As trial court implicitly found, it is unclear from referring only to § 422.25(7) whether the thirty-six month interest limitation in that section refers to the period of extension or to the entire relevant time surrounding a tax refund. For guidance in solving that problem resort must be had to pertinent standards of statutory construction.

IV. Since § 422.25(7) has not previously been before this court for construction, it is essential we examine 'both the language used and the purpose for which the legislation was enacted.' State v. Steenhoek, 182 N.W.2d 377, 379 (Iowa 1970). See also Crow v. Shaeffer, 199 N.W.2d 45, 47 (Iowa 1972); Langel v. Board of Supervisors, 186 N.W.2d 608, 610 (Iowa 1971); State v. Hanna, 179 N.W.2d 503, 506 (Iowa 1970); Dobrovolny v. Reinhardt, 173 N.W.2d 837, 840 (Iowa 1970); Mallory v. Paradise, 173 N.W.2d 264, 266--268 (Iowa 1969); Hedges v. Conder, 166 N.W.2d 844, 852 (Iowa 1969).

And in Bruce v. Wookey, 261 Iowa 231, 233, 154 N.W.2d 93, 94 (1967), this court stated: 'In seeking the meaning of a law the entire act should be considered. Each section must be construed with the act as a whole and all parts of the act considered, compared and construed together.' See Maguire v. Fulton, Supra; Cedar Mem. Park Cem. Ass'n. v. Personnel Assoc., Inc., 178 N.W.2d 343, 350 (Iowa 1970); Dobrovolny v. Reinhardt, Supra; Wilson v. Iowa City, 165 N.W.2d 813, 823 (Iowa 1969); Goergen v. State Tax Commission, 165 N.W.2d 782, 785 (Iowa 1969).

Additionally, 'the subject matter, effect, consequence, and the reason and spirit of the statute must be considered, as well as words, in interpreting and construing it.' Dobrovolny v. Reinhardt, 173 N.W.2d at 840. See also Overbeck v. Dillaber, 165 N.W.2d 795, 797 (Iowa 1969).

Finally, 'a statute should be given a sensible, practical, workable and logical construction.' Janson v. Fulton, 162 N.W.2d 438, 443 (Iowa 1968). See also Isaacson v. Iowa State Tax Commission, 183 N.W.2d 693, 695 (Iowa 1971).

V. Consideration will be first accorded the words used in the questionable Act. The first sentence of § 422.25(7), quoted above, makes provision for an agreement to extend, by waiver, the period within which taxes shall be assessed. The second clause then mandatorily states: 'Such agreement shall stipulate the period of extension and the year or years to which such extension applies.' Following a third sentence allowing taxpayers to file refund claims within an extension period, the clause we are here required to construe provides: 'In consideration of such agreement, interest due in excess of thirty-six months on either a tax deficiency or tax refund shall be waived.' It must be conceded no court, under the guise of judicial construction, may add words of qualification to the sentence in question. See State v. Hocker, 201 N.W.2d 74 (Iowa 1972); Davenport Water Co. v. Iowa State Commerce Com'n., 190 N.W.2d 583, 594--595 (Iowa 1971). It is only reasonable, however, to conclude that if the waiver of assessment is applicable only for the time period provided in the agreement, then waiver of interest applies for the same period.

VI. Next, as noted above, it is essential we compare and construe § 422.25(7) in light...

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