State ex rel. Hardy v. State Bd. of Equalization

• Decision Date: 08 January 1958
• Docket Number: No. 9593,9593
• Citation: 319 P.2d 1061,133 Mont. 43
• Parties: STATE of Montana ex rel. Robert F. HARDY, Respondent, v. The STATE BOARD OF EQUALIZATION of the State of Montana et al., Appellants.
• Court: Montana Supreme Court

Page 1061

319 P.2d 1061

133 Mont. 43

STATE of Montana ex rel. Robert F. HARDY, Respondent, v. The STATE BOARD OF EQUALIZATION of the State of Montana et al., Appellants.

No. 9593.

Supreme Court of Montana.

Jan. 8, 1958.

Forrest H. Anderson, Atty. Gen., William F. Crowley, Asst. Atty. Gen., H. O Vralsted, Asst. Atty. Gen., Harold J. Pinsoneault, Deputy Tax Counsel, Bd. of Eq., Helena, for appellants.

H. O. Vralsted, Sp. Asst. Atty. Gen., argued orally for appellants.

F. F. Haynes, Forsyth, for respondent.

F. F. Haynes, Forsyth, argued orally for respondent.

HARRISON, Chief Justice.

This appeal is taken by the respondent State Board of Equalization from a judgment in favor of the petitioner, Robert F. Hardy, rendered by the district court of Custer County, Montana. The judgment held that section 84-4924, subd. (2), R.C.M.1947 (before the 1955 amendment), was invalid. Invalidity of the statute was predicated upon the ground that it contravened the provisions of the Fourteenth Amendment to the United States Constitution, and the provisions of sections 20 and 27 of article III of the Montana State Constitution.

The provisions of section 84-4924, subd. (2), were as follows when this controversy arose: 'If any person fails voluntarily to make a return of income or to pay a tax if one is due within sixty (60) days of the time required by or under the provisions of this Act, the tax shall be doubled and such doubled tax shall be increased by one (1) per centum for each month or fraction of a month from the time the tax was originally due to the date of payment.'

The respondent, in his oral argument on this appeal, stated that the sole issue to be determined is: Did the legislature have authority to impose a penalty of one hundred percent against a delinquent taxpayer irrespective of intent, fraud or other consideration?

Although the State has appealed upon four specifications of error, we feel that ultimately they resolve themselves into the issue set out above. Both the State and Hardy in their briefs refer to the problem of whether or not the amendment to section 84-4924 in 1955 was retroactive, however, the trial court made no holding on this question, the only reference being that such amendment 'should be considered in determining the constitutionality of the original statute.' Therefore the only issue before this court is as stated by respondent. Since no facts in this case are necessary for its determination a recitation thereof will be unnecessary.

The statute in the instant case comes up for review aided by the presumption that it is valid and enacted pursuant to a legitimate legislative function. Public Service Com. v. City of Helena, 52 Mont. 527, 159 P. 24; O'Connell v. State Board of Equalization, 95 Mont. 91, 107, 25 P.2d 114; House v. School Dist. No. 4, 120 Mont. 319, 324, 184 P.2d 285. If one relies on the invalidity of a statute he must show its invalidity beyond a reasonable doubt. Graham v. State Board of Examiners, 116 Mont. 584, 155 P.2d 956; House v. School Dist. No. 4, supra.

It has been frequently recited in Montana that the power of taxation is an incident of sovereignty and inherent in the state because government cannot exist or function without it. Valley County v. Thomas, 109 Mont. 345, 97 P.2d 345. This court has expressed a strong judicial policy in upholding taxing statutes, and enforcing their provisions. Buffalo Rapids Irr. Dist. v. Colleran, 85 Mont. 466, 471, 279 P. 369; Commercial Credit Co. v. O'Brien, 115 Mont. 199, 215-216, 146 P.2d 637; State ex rel. Anderson v. State Board of Equalization, Mont., 319 P.2d 221. This court has also expressed itself in those same cases that equality of taxation is imperative so that some are not burdened with more than their fair share, thus, vigilance of taxing officials is required so that some do not escape their burden at the expense of others.

To aid taxing officials in collection of taxes, this court has recognized the importance of penalties to induce payment and facilitate collection. Shubat v. Glacier County, 93 Mont. 160, 18 P.2d 614; State ex rel. Sparling v. Hitsman, 99 Mont. 521, 44 P.2d 747, 750. In the Shubat case 93 Mont. at [133 Mont. 46] page 164, 18 P.2d at page 615, the court stated this policy in the following manner:

'The power to levy taxes includes the power to provide such means as will tend to secure prompt payment. * * *

'The 5 per cent. panalty is the incentive to pay promptly.'

In State ex rel. Sparling, supra [99 Mont. 521, 44 P.2d 750], the same policy was enunciated when this court quoted approvingly from Islais Co. v. Matheson, Cal.App., 35 P.2d 1051, 1054, as follows: "The imposition of the original severe penalties was simply an incident of the power of sovereignty. In the exercise of the taxing power the imposition of a penalty is not for the purpose of enhancing the state but for punishing the taxpayer for nonpayment * * * and the threat of such penalty is used as a means of inducing property owners to promptly pay the amount due."

Petitioner argues, however, that granting the state has the power to impose penalties on taxpayers for failure to pay the tax, nevertheless such penalties are limited to ones which are not excessive or oppressive; if they are, then they violate the constitutional provisions set out hereafter.

Does Section 84-4924, subd. (2) (before amendment), violate article III, section 20 of the Montana Constitution? Section 20 of article III reads as follows: 'Excessive bail shall not be required, or excessive fines imposed, or cruel and unusual punishments inflicted.'

In Daily v. Marshall, 47 Mont. 377, 399, 133 P. 681, 687, this court held that 'A fine, in the sense in which the term is used in the Constitution [Art, III, Sec. 20], is a penalty exacted by the state for some criminal offense. The provision of the Constitution has no application to the liability involved here.'

In Shubat v. Glacier County, supra, this court stated that statutes which are designed to secure prompt payment of taxes are in the nature of penalties. However, there appears to be no direct holding on the question of whether such a penalty is a criminal or remedial sanction. It should be noted that in subdivisions (3) and (4) of section 84-4924 the legislature has enacted explicit criminal sanctions for failure to pay the tax. However subdivision (2) is clearly only remedial.

Mr. Justice Brandeis, in Helvering v. Mitchell, 303 U.S. 391, 399, 404, 58 S.Ct. 630, 633, 82 L.Ed. 917, illustrated the difference between criminal and civil sanctions in the following manner:

'Congress may impose both a criminal and a civil sanction in respect to the same act or omission; for the double jeopardy clause prohibits merely punishing twice, or attempting a second time to punish criminally, for the same offense. The question for decision is thus whether section 293(b) [26 U.S.C.A. (I.R.C.1939) Sec. 293(b)] imposes a criminal sanction. * * *

'Forfeiture of goods or their value and the payment of fixed or variable sums of money are other sanctions which have been recognized as enforcible by civil proceedings since the original revenue law of 1789. * * * In spite of their comparative severity, such sanctions have been upheld against the contention that they are essentially criminal and subject to the procedural rules governing criminal prosecutions. * * *

'The fact that the Revenue Act of 1928 contains two separate and distinct provisions imposing sanctions, and that these appear in different parts of the statute, helps to make clear the character of that here invoked. * * * we construe section 293(b) as imposing a civil administrative sanction * * *.' Emphasis supplied.

To the same effect see In re Rogers' Estate, 147 Neb. 1, 22 N.W.2d 297. The principles applied in Helvering v. Mitchell and In re Rogers' Estate are equally applicable to the instant statute and we find that it is civil or remedial in nature, not criminal. Being a remedial or civil sanction it does not violate the provisions of article III, section 20 of our Constitution. Daily v. Marshall, supra.

Does Section 84-4924, subd. (2) (before amendment), violate the provisions of the fourteenth amendment to the United States Constitution and the provisions of article III, section 27 of the Montana Constitution? In effect, is the one hundred percent penalty a taking of property without due process of law because it is excessive or oppressive?

It has been repeatedly held that the amount of a penalty is a matter for the legislature to determine in its discretion, Western Union Telegraph Co. v. State of Indiana, 165 U.S. 304, 310, 17 S.Ct. 345, 41 L.Ed. 725; Isbel v. Gulf Union Oil Co., 147 Tex. 6, 209 S.W.2d 762; Chicago, R. I. & P. Ry. Co. v. People, 217 Ill. 164, 75 N.E. 368, 371; Bankers Trust Co. v. Blodgett, 260 U.S. 647, 651, 43 S.Ct. 233, 67 L.Ed. 439; Cooley, Taxation, Sec. 1273, p. 2535, 4th Ed.; 51 Am.Jur., Taxation, Sec. 970, p. 848; 85 C.J.S. Taxation Sec. 1023, p. 581, and will not be declared unconstitutional unless plainly oppressive or excessive in relation to the offense. Chicago & N. W. Ry. Co. v. Nye-Schneider-Fowler Co., 260 U.S. 35, 43 S.Ct. 55, 67 L.Ed. 115; Chicago, R. I. & P. Ry. v. People, supra; Gooch v. Rogers, 193 Or. 158, 238 P.2d 274; Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714; Missouri Pacific Ry. Co. v. Tucker, 230 U.S. 340, 33 S.Ct. 961, 57 L.Ed. 1507; State v. Great Atlantic & Pacific Tea Co., 190 La. 925, 183 So. 219; 85 C.J.S., Taxation Sec. 1023, p. 581. It has also been stated that the penalty cannot deter the penalized from resorting to the courts. Missouri Pacific Ry. Co. v. Tucker, supra; Ex parte Young, supra, Gooch v. Rogers, supra.

In Gooch v. Rogers, supra, the Oregon court upheld a statute which imposed a penalty of eighty percent of the tax. The penalty was attacked as unconstitutional on much the same grounds as petitioner here contends. The following language, found at pages...