People v. Sonleitner

• Decision Date: 17 October 1960
• Citation: 8 Cal.Rptr. 528,185 Cal.App.2d 350
• Court: California Court of Appeals Court of Appeals
• Parties: PEOPLE of the State of California, Plaintiff and Respondent, v. John P. SONLEITNER, doing business under the firm name and style of Sunlight Stations Company, Defendant and Appellant. Civ. 24210.

Page 528

8 Cal.Rptr. 528

185 Cal.App.2d 350

PEOPLE of the State of California, Plaintiff and Respondent, v. John P. SONLEITNER, doing business under the firm name and style of Sunlight Stations Company, Defendant and Appellant.

Civ. 24210.

District Court of Appeal, Second District, Division 2, California.

Oct. 17, 1960.

Samuel Duskin, David S. Smith, Los Angeles, for appellant.

Stanley Mosk, Atty. Gen., Dan Kaufmann, Asst. Atty. Gen., for respondent.

RICHARDS, Justice pro tem.

Defendant appeals from a judgment against him and in favor of the plaintiff in the amount of $130,264.49, together with interest and costs, in an action to collect motor vehicle fuel license taxes under the Motor Vehicle Fuel License Tax Law based upon a jeopardy determination made by the State Board of Equalization pursuant to art. 4, Chap. 5, Part 2, Div. 2 of the Revenue and Taxation Code.

For the privilege of distributing motor vehicle fuel a license tax is imposed upon distributors by Rev. & Tax.Code, § 7351. (All section references hereafter are to the Revenue and Taxation Code unless otherwise indicated.) A distributor of motor vehicle fuel is required to be licensed by section 7451. ¹ The defendant was not so licensed although during part of the period here involved he was licensed as a broker. The State Board of Equalization (hereinafter referred to as the 'board') ascertained that the defendant made taxable distributions of motor vehicle fuel within the State of California during the period from November 1, 1951, to and including July 31, 1955. Section 7726 provides, in part: 'If any person becomes a distributor without first securing a license, the license tax becomes immediately due and payable on account of all motor vehicle fuel distributions made by him.' Pursuant to section 7727, ² the board ascertained as best it could the amount of the unlicensed distributions and on November 14, 1955, determined the license tax on such amount, adding the mandatory penalty of 100 per cent of the amount of the tax and interest and gave defendant notice of the jeopardy determination as prescribed by section 7493. It is provided by section 7699 that if the total amount specified in the jeopardy determination is not paid within ten days after service of the notice, the determination becomes final unless a petition for redetermination is filed within said period.

Section 7700 provides, in part: 'The distributor against whom a jeopardy determination is made may petition for the redetermination thereof pursuant to Article 3.5 of this chapter. * * * At the time of filing the petition for redetermination, the distributor shall deposit with the board such security as it may deem necessary to insure compliance with this part.' Pursuant to said section the board fixed the amount of security which it deemed necessary to insure compliance in an amount equal to the total amount of the jeopardy determination and advised the defendant in the notice of determination that a petition for redetermination was required to be filed by November 29, 1955, and that the security fixed accompany the petition. Prior to November 29, 1955, the defendant, through his counsel, forwarded a letter to the board purporting to be a petition for redetermination but failed to post the required security, the letter stating that the 'licensee does not have the financial ability to post the security requested' but did not request a reduction in the required security nor offer to post security in any amount. Thereafter, on December 5, 1955, the board advised the defendant that it could not accept the letter as a petition for redetermination in view of the failure of the defendant to post the required security and that if the defendant believed the amount determined to be excessive, he should confer with the District Tax Administrator and if the defendant could establish that the tax as determined was excessive, an appropriate adjustment would be made.

On December 15, 1955, counsel for defendant forwarded another letter to the board requesting that it be considered as an appeal for a hearing of the petition for redetermination and for granting relief from the refusal of the board to entertain the petition, stating the licensee's purpose 'to exhaust his administrative remedies'. On December 22, 1955, the board advised defendant's counsel that it could not consider the purported petition by reason of the defendant's failure to deposit the required security and that in the absence of payment of the amount due, no further administrative remedy was provided under the act but that there would be a possibility of a refund after payment or an action for refund following payment under protest. At the trial the plaintiff introduced certified copies of the jeopardy determination and the correspondence between the board and defendant's counsel above referred to and then rested its case. Defendant then sought to put on evidence to rebut the determination, to which plaintiff objected on the ground that the defendant had failed to exhaust his administrative remedies. The objection was sustained although the defendant was permitted to introduce evidence relating to his financial condition at the time of the determination. The court found in favor of plaintiff substantially as above set forth and further found: '* * * that at no time did defendant furnish the plaintiff with any evidence of his financial status; nor did he post the required security or pay the amount of the determination, or any portion thereof; that as of the date of the receipt of the Board's determination of taxes due by defendant, the defendant was financially unable to post security in the amount of $129,827.44.' The court concluded that defendant was indebted to the State by reason of the board's determination having become final without payment by the defendant and further concluded that: 'Defendant is precluded from challenging the validity of the determination of the Board prior to payment of the determination by reason of the fact that the defendant failed to exhaust his administrative remedies for challenging such determination prior to payment by failing to file a petition for redetermination accompanied by security required by the Board as prescribed by Sections 7727 and 7700 of the Revenue and Taxation Code.'

Due Process in Taxation.

Defendant contends that he has been deprived of due process by the refusal of the trial court in this proceeding to permit him to attack the jeopardy determination by reason of his failure to exhaust an administrative remedy. This contention presents the question of what constitutes procedural due process in the levy and collection of taxes.

The California Legislature has established a pattern in excise tax acts for jeopardy determinations and administrative review thereof conditioned upon the posting of security. The Motor Vehicle Fuel License Tax Law here involved provides for jeopardy determinations both as to a bonded licensed distributor, sections 7698 and 7699, and as to an unlicensed distributor, sections 7726 and 7727, and then provides for a hearing and reconsideration of the determination by the board (sec. 7711) upon a petition for redetermination, provided the distributor shall have deposited with the board 'such security as it may deem necessary to insure compliance with this part.' Sec. 7700. The Sales and Use Tax Law likewise provides for jeopardy determinations (sec. 6536) and for reconsideration by the board (sec. 6562) upon a petition for redetermination, provided the petitioner shall have deposited with the board 'such security as it may deem necessary to insure compliance with this part.' Sec. 6538. Without detailed delineation, the Use Fuel Tax Law similarly provides for jeopardy determinations and right to redetermination by the board upon petition accompanied by security fixed by the board (secs. 8826, 8828 and 8852). Likewise, the Motor Vehicle Transportation License Tax Law (secs. 9911, 9913 and 9927). Provision for jeopardy assessments is made in the Personal Income Tax Law (sec. 18641) and for reassessment (sec. 18645) upon petition accompanied by security 'in such amount as the Franchise Tax Board may deem necessary, not exceeding double the amount (including interest and penalties and additions thereto) * * *.' Sec. 18643. Also, in the Bank and Corporation Tax Law (sec. 25761) where the posting of security as deemed necessary by the Franchise Tax Board 'not exceeding double the amount, including interest, penalties, and additions thereto' is a condition to a hearing (sec. 25761a). Similar provision for jeopardy determinations is made in the Alcoholic Beverage Tax Law (sec. 32311) and for redetermination upon petition and posting security as deemed necessary by the board (sec. 32312).

Thus we find under the law in question, as well as under other excise tax laws, the Legislature has provided that a designated administrative agency, where it appears that a person is engaging in a taxable operation without compliance with the tax law applicable thereto, may determine as best it may the tax due, and has further provided for an opportunity for the taxpayer to be heard by the designated agency to challenge the determination upon the posting of security as authorized by the Legislature and fixed by the board.

It may be stated as a general rule that the due process clause of the federal constitution, Amend. 14, is satisfied in matters of taxation if, at some stage before a tax becomes irrevocably fixed the taxpayer is given the right, of which he shall have notice, to contest the validity or amount of the tax before a board or tribunal provided for that purpose. Nickey v. State of Mississippi, 292 U.S. 393, 54 S.Ct. 743, 78 L.Ed. 1323, 1326; McGregor v. Hogan, 263 U.S. 234, 44 S.Ct. 50, 68 L.Ed. 282, 283; Turner v. Wade, 254 U.S. 64, 41 S.Ct. 27, 65 L.Ed. 134, 137; Hodge v. Muscatine County, 196 U.S. 276, 25 S.Ct. 237, 49 L.Ed. 477, 481; ...