R Communications, Inc. v. Sharp

• Decision Date: 08 June 1994
• Docket Number: No. D-3058,D-3058
• Citation: 875 S.W.2d 314
• Parties: R COMMUNICATIONS, INC. f/k/a R N Communications, Inc., Petitioner, v. Honorable John SHARP, Comptroller of Public Accounts, Respondent.
• Court: Texas Supreme Court

Page 314

875 S.W.2d 314

R COMMUNICATIONS, INC. f/k/a R N Communications, Inc., Petitioner, v. Honorable John SHARP, Comptroller of Public Accounts, Respondent.

No. D-3058.

Supreme Court of Texas.

Argued March 30, 1993.

Decided April 28, 1994.

Rehearing Overruled June 8, 1994.

Mark H. How, Dallas, for petitioner.

Gregory E. Perry, Dan Morales, William E. Storie, Austin, for respondent.

DOGGETT, Justice, delivered the opinion of the Court, in which all JUSTICES join.

We consider the constitutional extent to which a Texas taxpayer may be impeded in challenging a tax. We hold that conditioning a taxpayer's right to initiate judicial review on the payment of taxes or the posting of a bond equal to twice the alleged tax obligation violates the open courts mandate of the Texas Bill of Rights. TEX. CONST. art. I, § 13. Taxes cannot be raised by means that make meaningless our constitutional guarantees.

R Communications sought relief from an assessment for additional sales taxes that resulted from an audit by the Comptroller of Public Accounts. After an administrative hearing, an Amended Proposed Comptroller's Decision rejected the company's arguments and found it liable for $127,574.46 in taxes, penalties and interest. R Communications sought judicial review. At the urging of the Comptroller, the trial court dismissed for want of jurisdiction because R Communications had not first paid the tax or posted a statutorily required bond. See TEX.TAX CODE §§ 112.051, 112.101. The court of appeals affirmed. 839 S.W.2d 947. We reverse.

R Communications asserts that four Tax Code provisions violate its rights under both the Texas and United States Constitutions: section 112.108, which denies a taxpayer any form of declaratory relief; section 112.051, which conditions the right to file suit attacking the tax's validity or its assessment or collection upon prior payment of the taxes; section 112.101, which precludes injunctive relief without prior tax payment or the posting of a bond, approved by both the court and the attorney general, equal to twice the amount of estimated tax liability; and section 111.022, which authorizes summary collection procedures without the State filing suit. R Communications essentially contends that, as a precondition to obtaining judicial review of a tax liability, it would be required to pay so much as to be forced out of business. It maintains that these provisions violate the equal protection, open courts, and due course of law provisions of the Texas Constitution, and the due process and equal protection provisions of the U.S. Constitution. See TEX. CONST. art. I, §§ 3, 13, 19; U.S. CONST. amend. XIV.

Where, as here, violations of both the state and federal constitutions are alleged, we look first to the Texas Constitution, "[b]asing decisions on [it] whenever possible." Davenport v. Garcia, 834 S.W.2d 4, 17 (Tex.1992). See also H.L. Farm v. Self, 37 Tex.Sup.Ct.J. 321, 322 (Jan. 5, 1994) (when presented with both state and federal constitutional claims, "we will examine our own Texas Constitution first"). If the challenged action violates our state constitution, consideration of any federal claim is unnecessary. Davenport, 834 S.W.2d at 17; H.L. Farm, 37 Tex.Sup.Ct.J. at 324 n. 6.

Of the various state constitutional claims, we focus on the taxpayer's assertion that the Tax Code violates the fundamental requirement that:

All courts shall be open, and every person for an injury done him, in his lands, goods, person, or reputation, shall have remedy by due course of law.

TEX. CONST. art. I, § 13. In Eustis v. City of Henrietta, 90 Tex. 468, 39 S.W. 567, 569 (1897), we held that a statute requiring tax payment as a precondition to defending title to property against a claim of title under a tax sale violated both sections 13 and 19 of the Texas Bill of Rights. On subsequent appeal, we again held "that the owner [of property subject to a tax levy] could not be required to pay the taxes as a condition precedent to making the defense" against the claim of title. Eustis v. City of Henrietta, 91 Tex. 325, 43 S.W. 259, 262 (1897); see also Town of Pleasanton v. Vance, 277 S.W. 89, 90 (Tex.Comm'n App.1925, judgment adopted) (Texas Constitution prohibits restriction on taxpayer's ability to contest liability in collection suit). These cases were consistent with our earlier decision that a statute requiring the posting of a bond as a precondition to access to the courts violated section 13 of the Texas Bill of Rights:

A law which practically takes away from either party to litigation the right to a fair and impartial trial in the courts ... denies a remedy by due course of law.... [A]n act of the legislature which makes the right of an individual or corporation to prosecute an appeal to depend on the giving of a supersedeas bond, without reference to the ability or inability of such corporation or individual to give such a bond, is violative of the Constitution.

Dillingham v. Putnam, 109 Tex. 1, 14 S.W. 303, 304-05 (1890). ¹

Invalidating an increased filing fee as an unconstitutional litigation tax in LeCroy v. Hanlon, 713 S.W.2d 335, 341 (Tex.1986), we concluded that because the right of access to the courts is a "substantial right ..., the legislature cannot arbitrarily or unreasonably interfere." In accord with LeCroy, it is "[t]he government [that] has the burden to show that the legislative purpose outweighs the interference with the individual's right of access." Id. More recently, in Texas Ass'n of Business v. Texas Air Control Bd., 852 S.W.2d 440, 448 (Tex.1993), this Court explained that one of the protections afforded by the constitutional guarantee of "open courts" is the right of citizens to "access to th[e] courts unimpeded by unreasonable financial barriers." In determining whether "an unreasonable financial barrier to access" is posed, consideration must be accorded to "the state interest involved." Id. at 449; see LeCroy, 713 S.W.2d at 341 ("balanc[ing] the legislature's actual purpose in enacting a law against that law's interference with the individual's right of access to the courts.").

It is not enough for the State to justify a prepayment requirement simply by asserting that the government needs quick access to the funds. State v. Flag-Redfern Oil Co., 852 S.W.2d 480, 485 (Tex.1993). "Application of a constitutional balancing test is particularly dependent upon a fully-developed factual record." Brady v. Fourteenth Court of Appeals, 795 S.W.2d 712, 715 (Tex.1990); cf. Texas Ass'n of Business, 852 S.W.2d at 442 ("overview of the regulatory scheme ... essential" in resolving constitutional claim). Rather than demonstrating the need for the challenged provisions, the State asserts a threat to its financial stability arising from any prepayment access to the courts, since "no one would pay their taxes on time." ²

Such generalized fear of financial collapse is hardly realistic given the history of the statute in question. Until recently, taxpayers have been able to seek the very type of declaratory judgment of no tax liability sought here without regard to whether they had satisfied the prepayment provisions of section 112.051. See Hammerman & Gainer, Inc. v. Bullock, 791 S.W.2d 330, 331 & n. 1 (Tex.App.--Austin 1990, no writ); Cobb v. Harrington, 144 Tex. 360, 190 S.W.2d 709, 713-14 (1945). ³ This right to prompt, unimpeded declaratory relief was terminated by the enactment in 1989 of section 112.108 as an apparently minor element of a major revision of the Tax Code intended to ensure prompt payment by insurance companies. See SENATE FINANCE COMM., BILL ANALYSIS, Tex.S.B. 1573, 71st Leg., R.S. (1989). ⁴ Nor did any alleged threat to the foundation of state government from the longstanding practice of allowing taxpayers to initiate judicial review receive any apparent legislative consideration.

In Texas Ass'n of Business, 852 S.W.2d at 449-50, the Court decided whether a financial barrier to court access was reasonable by examining the availability of less restrictive means to further governmental interests. Among the less restrictive alternatives available here are accelerated administrative proceedings and expedited court procedures. The State's asserted interest in speedy tax collection is contradicted by the apparent languid pace of administrative proceedings and collection efforts in this case. Although the administrative process was invoked by R Communications immediately after the State made a determination of liability, the Comptroller did not hold a hearing for three years. Another two years passed before the Comptroller issued a final administrative decision. The objective of timely collection of taxes would seemingly be furthered by permitting the taxpayer to initiate judicial review. Previously, we have not only encouraged prompt resolution of liability disputes through injunctive and declaratory relief, but have penalized those who delayed challenges until the institution of collection proceedings. ⁵

While the open courts section affords a strong safeguard against unreasonable financial barriers to judicial review, it provides less protection against the imposition of prepayment and bond requirements on those seeking to stay enforcement or the collection of a judgment. See Texas Ass'n of Business, 852 S.W.2d at 450; Dillingham, 14 S.W. at 304. By authorizing expedited procedures in the event that normal collection may be jeopardized, and by requiring payment or other security before injunctive relief can be sought, sections 111.022 and 112.101 protect the State against delays that may impinge its ability to collect taxes that may legitimately be owed. R Communications has not shown that these sections, in and of themselves, wholly prevent its right to challenge liability in court before the contested taxes are paid, nor has it shown an interest in obtaining an injunction that outweighs the State's need to protect its ability to ultimately collect the...