Peterson v. Sundt, 5014
| Decision Date | 28 June 1948 |
| Docket Number | 5014 |
| Citation | 67 Ariz. 312,195 P.2d 158 |
| Parties | PETERSON v. SUNDT et ux |
| Court | Arizona Supreme Court |
Appeal from Superior Court, Pima County; J. Mercer Johnson, Judge.
Judgments reversed and causes remanded for new trials.
Evo De Conconi, Atty. Gen., and Charles D. McCarty, Asst. Atty Gen., for appellants.
Darnell Robertson & Holesapple, of Tucson, for appellees.
This is an appeal by the Arizona State Tax Commission and the State Treasurer from identical decisions of the Superior Court in two cases involving refund of income taxes paid to the State of Arizona. These two suits were separately filed by John S. Sundt and Marion S. Sundt, his wife (appellees), being suits numbered 28037 and 28038 in the Superior Court of Pima County. Since the issues of fact and law were identical, the cases were consolidated for trial and are jointly brought here on this appeal.
It appears from the abstract of record that on December 31, 1945, both taxpapers filed claims under section 73-1544, A.C.A.1939, for refunds from income taxes paid for the year 1942, each taxpayer claiming a refund in the amount of $ 11,453.96. The Commission, after reviewing the applications, entered an order on December 26, 1946, approving a refund to each taxpayer in the sum of $ 4,948.17. The taxpayers did not appeal from these orders, as they are permitted to under sections 73-1544(d) and 73-1539, nor did the Commission, before losing jurisdiction, take any further steps with reference thereto. The refund being for an amount in excess of $ 1,000, the appellees brought separate suits, pursuant to the provisions of Chapter 15, Session Laws of 1943, section 73-1549(d), A. C. A. 1939, as amended, alleging the facts as heretofore stated and praying that the court approve the refunds as allowed by the Commission.
We take judicial notice of the fact that between the date of the entry of the order here in question and the filing of the instant suits there was a change in the elected personnel of the Commission, resulting in the appointment of a new Director of the Income Tax Division. At the trial of this matter the plaintiff taxpayers introduced evidence of the payment of the tax and of the Commission's order for refund, and rested. The State, in an attempt to show the impropriety of the refund, sought to elicit testimony from Mr. Lockwood, the new director and the only witness in the case, to the effect that there had been a further audit of the taxpayers' rates, subsequent to the entry of the Commission's order, which disclosed that an error had been made. This testimony was objected to on the ground that "The decision under section 73-1538 becomes final and conclusive upon the Tax Commission or anyone else, and is not subject to collateral attack." The objection to this line of testimony was sustained by the court upon the ground that the court was without any right to inquire into the propriety or correctness of the Commission's order for a refund. Judgment was entered for both taxpayers as prayed for, and the Attorney General in behalf of the State has prosecuted this appeal from both of such judgments.
There are two assignments of error:
(1) The court erred in refusing to admit evidence offered by the State for the purpose of showing the impropriety of the tax refund.
(2) The court erred in ruling that the court was without right to inquire into the propriety of a tax refund under section 73-1544, A.C.A. 1939, where the amount of refund exceeds the sum of $ 1,000 and suit is filed pursuant to section 73-1549(d), A.C.A. 1939, as amended.
and the following proposition of law:
A proceeding under section 73-1549(d), A.C.A. 1939, for a refund of income taxes where the refund exceeds the sum of $ 1,000 contemplates a de novo inquiry by the court into the propriety of the refund.
At the outset it should be remembered that the recovery of taxes erroneously collected or paid is a matter of governmental grace, and in the absence of a statute authorizing a recovery there can be no recovery of taxes voluntarily though erroneously paid. O'Malley v. Sims, 51 Ariz. 155, 75 P.2d 50, 115 A.L.R. 634; Tucson Title Ins. Co., v. State Tax Comm., 59 Ariz. 334, 127 P.2d 341.
The Arizona Legislature, by enacting section 73-1544, supra, has provided the procedure, burdensome though it may be, which must be followed to obtain a refund of income taxes erroneously collected or paid. Prior to July 1, 1943, the effective date of Ch. 15, S.L. 1943, the Commission had plenary powers to make tax refunds. As amended the law now reads: "The state treasurer shall place in the 'income tax suspense fund' ten per cent of all other income tax receipts until the fund shall contain twenty thousand dollars, including such amount held therein as paid under protest, and thereafter only such amounts as may be necessary to maintain it at that figure. From the 'income tax suspense fund' the state treasurer shall pay all refunds to income taxpayers in any amount less than one thousand dollars upon the certificate of the state tax commission, and such refunds as are in excess of one thousand dollars by decree of a court of competent jurisdiction. (Emphasis supplied.)
From which it will be observed that the powers of the Commission as to making tax refunds has been greatly curtailed, in that, if the amount involved is in excess of $ 1,000, it can be made only after a suit has been brought in the Superior Court and a decree obtained. This action is in no sense an appeal since as a condition precedent to the action there has to be a favorable order by the Commission, nor is it a collateral attack upon the Commission's order, but rather a special statutory proceeding to obtain a tax refund. It is inconceivable that the Legislature in enacting this amendment intended to shackle the Superior Court in its independent inquiry as to the propriety of the refund by providing that the court is absolutely bound by a prior order of the Tax Commission. It is wholly foreign to our system of jurisprudence for a court of competent jurisdiction to be subservient to an inferior board, commission, or tribunal. If the court had no right to inquire, either on its own motion or at the behest of one of the parties to the action, into the correctness of the refund, there would be no reason for requiring the court to approve the allowance of a refund.
It is a basic rule of statutory construction that a statute should be construed in the light of the evil which it was designed to remedy. Bank of Lowell v. Cox, 35 Ariz. 403, 279 P. 257; City of Tucson v. Tucson Sunshine Climate Club, 64 Ariz. 1, 164 P.2d 598. The learned trial court neatly expressed (albeit did not follow) the purpose of the statute:
In keeping with what we believe to be the clear legislative intent, we hold that the action thus provided for under section 73-1549(d) contemplates a de novo inquiry by the court into the propriety of the tax refund. Doubtless in the great majority of suits arising under this statute, it will be more or less a perfunctory proceeding, but where, as here, the State seeks to show the impropriety of the refund upon any valid ground it should be permitted to do so.
The taxpayers (appellees) early filed a motion to dismiss the appeal upon the ground that appellants were barred by limitation of action from proceeding with said appeal under the provisions of section 73-1536, A.C.A. 1939, the pertinent part of which reads: "Corrections or additional assessments of income may be made at any time within three [3] years after the close of the period covered by a report of income; * * *." We reserved a ruling, passing it for consideration when the case was presented on its merits. It is our opinion that the motion to dismiss is without merit and should be denied as this appeal does not involve the power of the Tax Commission to change the assessment -- it involves the power of the court under section 73-1549(d), supra, as amended, to inquire into the propriety of the refund ordered by the Commission.
Appellees have advanced certain propositions of law in their answering brief upon which there is no disagreement, i. e., (a) it is conceded that the order of the Tax Commission became final thirty days after its entry as no petition for correction of assessment was made on behalf...
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