Oklahoma Tax Com'n v. Ricks

Citation1994 OK 115,885 P.2d 1336
Decision Date25 October 1994
Docket NumberNo. 83531,83531
Parties18 Employee Benefits Cas. 2856, 1994 OK 115 OKLAHOMA TAX COMMISSION, Petitioner, v. The Honorable Carolyn R. RICKS, District Judge, Respondent.
CourtSupreme Court of Oklahoma
Original Proceeding for a Prerogative Writ to Prohibit Respondent-Judge from Proceeding Further in a District Court Suit.

Oklahoma Tax Commission seeks to arrest a district court proceeding brought by taxpayers (federal retirees) to declare that they are entitled to an attorney's fee from a "common fund" claimed to have been created by their efforts (before the Commission and on appeal in Strelecki v. Oklahoma Tax Commission ), as a result of which state income tax became refundable to a large class of non-party federal retirees.


David Hudson, Gen. Counsel, Stanley P. Johnston, Deputy Gen. Counsel, Robert B. Struble, Asst. Gen. Counsel, Okl. Tax Com'n, Oklahoma City, for petitioner.

James A. Jennings, III, Elizabeth J. Bradford, Holloway, Dobson, Hudson, Bachman, Alden, Jennings, Robertson & Holloway, Oklahoma City, for real parties in interest.

OPALA, Justice.

The dispositive issues tendered by this original proceeding are (1) whether a "common fund " was created in Strelecki v. Oklahoma Tax Commission1 by taxpayers' protests before the taxing authority and on appeal (that enabled many other federal retirees to become eligible for state income tax refunds), from which an attorney's fee may be awarded in a district court action? and (2) whether the district court may exercise declaratory

                judicature to affect post-Strelecki administrative refund orders of the Oklahoma Tax Commission?   We answer both questions in the negative

In Strelecki this court retroactively applied a new rule of federal law first announced in Davis v. Michigan Dept. of Treasury.2 Davis held infirm a Michigan statute that exempted from levy benefits from the state to its retired employees but taxed like payments from all other employers, including the federal government.3 Following Davis, Strelecki declared invalid Oklahoma's similar (pre-1989) statutory income tax scheme insofar as it discriminated against federal retirees' tax liability. The cause was remanded to the Oklahoma Tax Commission [OTC] with directions to allow the six affected taxpayers' timely refund claims. By its rehearing clarification order, this court made the statutory refund remedy "available to all similarly situated taxpayers" and directed the OTC "to proceed to process the refund claims submitted by similarly situated taxpayers."4 On remand the OTC entered administrative refund orders and began processing timely-filed claims for issuance of refund checks to the affected federal retirees.

The Strelecki plaintiffs [or taxpayers] (who were successful in their refund quest on appeal) brought an action in the district court for declaratory and injunctive relief. The suit presses for recognition their right to an attorney's fee from a common fund (which they urge was created through their efforts before the OTC and later on appeal in Strelecki ) as benefactors of a large class of non-party federal retiree-taxpayers.5 The respondent-judge issued a temporary order by which she restrained the OTC from paying out to the respective claimants any interest earned on refunds then due them.

In this original action the OTC seeks to prohibit the respondent-judge from proceeding further in the taxpayers' declaratory judgment suit. The taxing authority argues its cognizance to determine all matters relating to the taxpayers' refund claims (including the interest on the refunds) is exclusive. A declaratory judgment will not lie, the OTC adds, to construe its administrative orders or to declare rights in these agency decisions. Any claim the taxpayers may have had to attorney's fees, the OTC urges, should have been pressed in the agency proceedings or on direct appeal. According to the OTC, there The taxpayers counter that because only a court having equity cognizance is authorized to determine the legal existence of a common fund, no quest for an attorney's fee could have been made in agency proceedings or on appeal. Moreover, until Strelecki became final, the taxpayers explain, no common fund had in fact been created. A declaratory judgment action, they urge, is appropriate to determine the existence of a common fund and the amount of their claim to an attorney's fee due from that fund. By order issued earlier in the instant case this court declared unenforceable the respondent-judge's temporary restraining order (by which she directed that the OTC withhold certain amounts from refund checks to be issued), holding that order facially void for want of notice to the individual taxpayer-claimants (non-party federal retirees) whose refunds were sought to be adversely affected. Based on the reasons stated in Parts III and IV, infra, we now assume original jurisdiction to prohibit the respondent-judge from proceeding further in the action below.

can be no "common fund" where the "benefits" of the proceeding are not to be shared in common, but must go directly to each individual.


As a general rule attorney's fees are not recoverable absent some statutory authority or an enforceable contract.6 The common-fund (or equitable-fund) doctrine affords a recognized exception to this rule. When an individual's efforts succeed in creating or preserving a fund which benefits similarly situated non-litigants, equity powers may be invoked to charge that fund with attorney's fees for legal services rendered in its creation or preservation.7 The doctrine is rooted in historic equity jurisdiction,8 but owes its sudden appearance in this country to U.S. Supreme Court jurisprudence of the last century.9 Oklahoma case law has long recognized the doctrine.10




The majority rule in state and federal courts is that, before a money pool may be subjected to a common-fund attorney's-fee The conceptual underpinnings for the chancery common-fund doctrine teach us that an equitable charge may be impressed in favor of its creator22 when the fund is within the direct control of the court.23 The "pre-existing The real impact of taxpayers' quest for declaratory judgment would divert monies from the ordinary course of the OTC's disbursement process. We are aware of no authority that would allow the district court to interrupt a lawful OTC tax collection/disbursement procedure to rechannel state money by applying it towards the satisfaction of attorney's fees.33 The money to be used for refunds comprises an unsegregated portion of the state fisc which was never brought before the district court for its direct supervision and control.34 Even assuming that a fund was created through the Strelecki litigation, the absence of direct and present district court control over monies subject to the OTC's authority would make inappropriate the allowance of a common-fund counsel-fee award.35

assessment, the created or preserved fund11 must be brought under the direct supervision and control of the court.12 Examples of fund creation/preservation are afforded by (a) the construction/administration of a trust estate,13 (b) the existence of a judgment,14 (c) an effect upon real property,15 and (d) court-ordered fund segregation.16 The claimant-beneficiary is not entitled to a counsel-fee award merely by bestowing a benefit on others.17 The fund must be within the reach of the court at the time attorney's fees are sought,18 and the court must have at least constructive custody or control over the money pool within the meaning of this rule;19 the sine qua non of control is the court's present authority to assess an attorney's fee proportionately and accurately from each beneficiary's traceable portion20 of a distinct pool of funds.21 fund"24 must be immediately subject to counsel-fee assessment,25 and the benefits conferred have to be traceable with some accuracy to each beneficiary.26 Because a state treasury is in no sense under the custody or control of the district court,27 any action by that court which would precipitate a flow of monies from the state treasury cannot be deemed one to "create, preserve or protect" a fund.28 Where a final order merely increases the taxing authority's liability, no segregable fund results from which attorney's fees may be awarded.29 Neither are indirect savings to overtaxed beneficiaries a fit ground for impressing a common-fund counsel-fee award.30 In the exercise of its equitable powers invocable for impression of a common-fund charge, a court's in personam jurisdiction may not be enlarged to reach non-party tax refund claimants.31 A few decided cases, representing a minority view, dispense with or relax the otherwise rigid requirement of present court control.32 We choose not to follow the course taken by those decisions.

Moreover, if the respondent-judge were to entertain the taxpayers' action below, she would be called upon to declare rights in a large number of OTC refund claims--separate and distinct from those of the Strelecki plaintiffs--which are not before the district court. Such action by her clearly would constitute an unauthorized use of judicial force over non-parties' refund claims by charging money, immediately to be disbursed

to absent owner-recipients, with adverse counsel-fee assessment.36


While the district court has broad declaratory powers,38 it is clearly barred by the remedial boundary of 12 O.S.1991 § 165739 from entertaining suits to declare rights in an agency decision.40 In short, administrative orders lie dehors the reach of the district court's declaratory judicature.41


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