Scoa Industries, Inc. v. Howlett

• Decision Date: 16 October 1975
• Docket Number: No. 59877,59877
• Parties: SCOA INDUSTRIES, INC., a Delaware Corporation, Plaintiff-Appellee, v. Michael HOWLETT, Secretary of State of the State of Illinois, Defendant-Appellant.
• Court: United States Appellate Court of Illinois

Page 305

337 N.E.2d 305

33 Ill.App.3d 90

SCOA INDUSTRIES, INC., a Delaware Corporation, Plaintiff-Appellee, v. Michael HOWLETT, Secretary of State of the State of Illinois, Defendant-Appellant.

No. 59877.

Appellate Court of Illinois, First District, Third Division.

Oct. 16, 1975.

William J. Scott, Atty. Gen., Chicago, for defendant-appellant; Ann Sheldon, Asst. Atty. Gen., of counsel.

Schuyler, Stough & Morris, Chicago, for plaintiff-appellee.

MEJDA, Justice.

This is an appeal from an order of the circuit court of Cook County denying defendant's motion to dismiss and for summary judgment, granting plaintiff's motion for summary judgment, and entering judgment for plaintiff and against defendant in the sum of $8,824.09, plus interest. Defendant seeks reversal of the judgment order and contends that:

1) the doctrine of sovereign immunity bars the action;

2) the tax was paid voluntarily and cannot be recovered;

3) the Illinois Court of Claims has exclusive jurisdiction;

4) plaintiff failed to exhaust its administrative remedies; and

5) the claim is barred by laches.

We reverse.

On March 30, 1970, plaintiff, Scoa Industries, Inc., a Delaware corporation (Scoa), filed a 'tentative' annual report with defendant, Illinois Secretary of State, using the printed form provided by defendant's office. (Ill.Rev.Stat.1969, ch. 32, par. 157.115.) In response to a question on the form plaintiff stated that it did not elect to pay a franchise tax based upon its entire stated capital and paid-in surplus. The election required answers to questions 10 through 14 to provide information designating the value of its property and gross money amount of business transacted, everywhere and only in the State of Illinois. Plaintiff printed thereon: '10--14 cannot be answered at the present time. As soon as the information is available we will forward.' On June 30, 1970, plaintiff wrote a letter to defendant which contained the supplemental information. The letter was returned to plaintiff with the handwritten notation on the bottom: 'Sorry, can not accept. Please execute the form enclosed.' On July 9, 1970, defendant's office caused to be issued a franchise tax assessment in the sum of $8,824.09, based upon the entire stated capital and paid-in surplus listed in Scoa's 'tentative' annual report. The assessment notice advised plaintiff that objection to the assessed amount could be made within 10 days, so that a hearing could be held as provided by statute, and also that the instant notice would be the only notice sent.

On July 20, 1970, plaintiff filed a supplemental annual report on the appropriate form which contained the previously omitted information in items 10 through 14. On July 20, 1970, defendant immediately sent to Scoa an assessment, designated 'In re adjusted supp.' based on the additional information contained in the supplemental report. Plaintiff was therein advised that $93.47 was owed and that plaintiff could, within 10 days, object to the assessment. On July 28, 1970, plaintiff paid to defendant the sum of $8,824.09, and on August 4, 1970, paid the sum of $93.47. No protest or objection was made at the time of either payment. In a letter to defendant's office, dated April 14, 1972, plaintiff requested a refund of the 'errroneous payment of $8,824.09' on the 'erroneous billing of July 9, 1970,' and stated:

'Due to a charge of personnel within the taxpayer's accounting office the erroneous bill was paid on July 28, 1970, and on August 4, 1970 the correct billing of $93.47 was also inadvertently paid by the taxpayer.'

On May 18, 1973, plaintiff filed a three-count complaint in which it sought a rescission of the payment and refund of the $8,824.09, together with interest. Each count alleged Inter alia that the payment 'was made under legal duress, and through mistake, inadvertence, and oversight, and without benefit of counsel.' Throughout the entire complaint plaintiff characterized the payment as erroneous.

Defendant filed a motion to dismiss the complaint, and alternatively, for summary judgment against plaintiff. Plaintiff answered and filed a cross-motion for summary judgment. Defendant's motion alleged that plaintiff's payment was voluntary, that no protest or objection was filed previously, that there are no statutory provisions allowing or providing for a refund of taxes erroneously paid, and that plaintiff's letter of August 14, 1972 clearly demonstrates that the tax was paid erroneously and not under duress. Plaintiff answered the motion by alleging that the payment constituted a mutual mistake of material fact. It was further alleged, for the first time and not in the alternative, that the tax payment was made under the threat or penalty of revocation of its certificate of authority to do busines in Illinois (Ill.Rev.Stat.1969, ch. 32, pars. 157.122(h) and 157.142), and that such threat constituted duress. On August 24, 1973, the trial court denied defendant's motion, granted plaintiff's motion and entered judgment for plaintiff in the sum of $8,824.09, plus interest from the date of payment.

The Business Corporation Act (Ill.Rev.Stat.1973, ch. 32, par. 157.1 Et seq.) substantially provides in pertinent part: (1) that the Secretary of State refrain from filing articles, papers, certificates, reports and the like until fees, franchise taxes and charges are paid by any corporation, and during the period of default in such payment that the corporation is prohibited from maintaining any action at law or suit in equity (par. 157.142); (2) that the Secretary of State give notice of the franchise assessed, and upon request, hear objections thereto for adjustment after a hearing, and providing that if the taxes are not paid by July 31 the Secretary certify that fact to the Attorney General who may institute action against the corporation for recovery of the tax and any penalty (par. 157.143); (3) that a foreign corporation may appeal to the circuit court, Inter alia, any revocation of the certificate of authority by the Secretary of State (par. 157.148); and (4) that the corporate annual report shall be filed on a form furnished by the Secretary of State and shall be verified (par. 157.151).

Defendant contends that the doctrine of sovereign immunity bars the instant proceeding for monetary recovery against the State.

Section 26 of Article IV of the Illinois Constitution of 1870 provided: 'The State of Illinois shall never be made defendant in any court of law or equity.' Section 4 of Article XIII of the 1970 Illinois Constitution substituted the following: 'Except as the General Assembly may provide by law, sovereign immunity is abolished.' The General Assembly promptly acted to retain sovereign immunity by enacting paragraph 801 of the Civil Administrative Code which became effective concurrently with the 1970 Constitution on January 1, 1972, and states: 'Except as provided in 'AN ACT to create the Court of Claims, to prescribe its powers and duties, and to repeal AN ACT herein named', filed July 17, 1945, as amended, the State of Illinois shall not be made a defendant or party in any court.' (Ill.Rev.Stat.1973, ch. 127, par. 801.)

Section 8 of the Court of Claims Act (Ill.Rev.Stat.1973, ch. 37, par. 439.8) in pertinent part provides:

'The court shall have Exclusive jurisdiction to hear and determine the following matters:

(a) All claims against the State founded upon any law of the State of Illinois, or upon any regulation thereunder by an executive or administrative officer or agency, other than claims arising under the Workmen's Compensation Act or the Workmen's Occupational Diseases Act.

(b) All claims against the State founded upon any contract entered into with the State of Illinois.

(d) All claims against the State for damages in cases sounding in tort, if a like cause of action would lie against a private person or corporation in a civil suit, * * *' (Emphasis added.)

The State is immune from suit without its consent. (Powers v. Telander (1970), 129 Ill.App.2d 10, 262 N.E.2d 342.) A suit brought against an officer or agency with relation to matters in which the defendant represents the State in action and liability, even though the State is not a party to the record, is in effect a suit against the State. (Struve v. Dept. of Conservation (1973), 14 Ill.App.3d 1092, 303 N.E.2d 32.) Whether a particular action falls within the prohibition is dependent on the particular issues involved and the relief sought. (Moline Tool Co. v. Dept. of Revenue (1951), 410 Ill. 35, 101 N.E.2d 71.) Although only the Secretary of State is named as a party defendant, the instant suit in effect is against the State for the recovery of a monetary judgment payable out of State funds.

Plaintiff argues that where administrative review in the circuit court is provided by statute, then sovereign immunity is not a bar to an original action against a State official. Plaintiff relies on E. H. Swenson & Son, Inc. v. Lorenz (1967), 36 Ill.2d 382, 223 N.E.2d 147, in which a declaratory judgment was entered to declare illegal certain deductions by the State on account of Retailer's Occupation Taxes and Service Occupation Taxes from payments due plaintiffs on certain State contracts. Plaintiff also relies on Struve, supra, in which, although declaratory judgment was sought to determine whether a park lease had been violated, the court affirmed the dismissal in the trial court, holding that the claim should be resolved in the court of claims. Neither of these two cases involved any monetary claim against the State. Plaintiff further cites Moline Tool Co., supra, which involved an administrative review pursuant to statute as to a denial by the Department of a tax refund. That case, as noted, was a review pursuant to statutory authority for such action and was not an original suit for a money judgment, as in the instant case. Plaintiff's action herein is for a refund of monies paid as franchise tax, a monetary claim. The...