State of Ohio, Dept. of Taxation v. Kleitch Bros., Inc.

• Decision Date: 13 October 1959
• Docket Number: No. 17,17
• Citation: 98 N.W.2d 636,357 Mich. 504
• Parties: STATE OF OHIO, DEPARTMENT OF TAXATION, Plaintiff and Appellee, v. KLEITCH BROS., INC., a Michigan corporation, Defendant and Appellant.
• Court: Michigan Supreme Court

Page 636

98 N.W.2d 636

357 Mich. 504

STATE OF OHIO, DEPARTMENT OF TAXATION, Plaintiff and Appellee, v. KLEITCH BROS., INC., a Michigan corporation, Defendant and Appellant.

No. 17.

Supreme Court of Michigan.

Oct. 13, 1959.

Matheson, Dixon & Brady, Detroit, for defendant-appellant.

Snider, Feikens, Dice & Thompson, Detroit, for plaintiff-appellee.

Before the Entire Bench.

EDWARDS, Justice.

This suit represents an effort by the State of Ohio to enforce in the Michigan courts three tax judgments previously entered in Ohio courts against a Michigan corporation. The taxpayer, a Michigan trucking corporation, contested the suit filed in Wayne circuit court. It claimed that the Ohio judgments were void 1) because of failure to follow the Ohio highway use tax statute, 2) because the Ohio highway use tax was an unconstitutional burden on commerce, and 3) because the statute levying the tax failed to provide legal notice of suit, thus depriving the taxpayer of due process of law. Finding against appellant on all three grounds, and relying upon the full faith and credit clause of the United States Constitution (art. 4, § 1), the Wayne circuit court judge entered judgment. This appeal followed.

The facts which form the background for this controversy are not in dispute; and the Michigan proceedings were based on a motion for summary judgment after the taking of testimony under Michigan Court Rule No. 30.

The defendant corporation applied for and received licenses to use its trucks on Ohio highways. Under Ohio law, this act made the secretary of State of Ohio its agent for 'service of process or notice in any assessment, action or proceeding instituted in this state [Ohio].' Page's Ohio Rev.Code, title 57, Taxation, 1958 Supp. § 5728.12.

Subsequently defendant received Ohio highway use tax return forms from the State of Ohio department of taxation. In three instances defendant corporation's accountant prepared the required reports as to the axle mileage of its trucks in Ohio and forwarded the tax returns to the Ohio department of taxation.

Although defendant filed the tax returns, it did not (then or later) pay any tax.

It is undisputed that the Ohio judgments (and the Michigan judgments based thereon totaling $11,440.70) were arrived at by taking defendant's own estimate of tax due from these three reports--plus the statutory penalty provided by the Ohio statute for failure to pay by due date.

Subsequent to filing of its three reports, defendant was served in each instance with notice of assessment of the tax based on the amount shown on its own return. This notice of assessment was served on defendant through service on the Ohio secretary of state, and through registered mail at its business address in Michigan.

This assessment constituted a demand for payment and included the following notice to the taxpayer:

'Important

'This assessment is based on assessee's failure to comply with the Ohio highway use tax laws, and shall be deemed conclusive 30 days after receipt thereof if not contested.

'If the assessee wishes to contest the assessment or any portion of it, he may secure a hearing by filing with the tax commissioner within 30 days from receipt of this notice, a petition for reassessment in the form prescribed by section 5728.10 of the Revised Code. A printed form will be furnished by the department of taxation, division of sales and highway use taxes, 68 East Gay street, Columbus 15, Ohio at the request of the taxpayer.

'In addition to the filing of a petition for reassessment the assessee must post a cash or corporate surety bond satisfactory to the commissioner, in the amount of the assessment including penalty, conditioned upon payment of the tax finally determined to be due.

'If the assessment is paid in its entirety within 30 days after the date on which the notice of assessment is received by the person assessed, the tax commissioner may remit such part of the penalty as he may deem proper. Request for remission of the penalty must be filed in writing.'

The section of the Revised Code referred to above made available to the taxpayer the general appeal procedure provided by Ohio statutes in tax matters (Ohio Rev.Code and Ohio Rev.Code 1958 Supp. §§ 5717.02, 5717.03, 5717.04), including a hearing before the State tax board, and right of appeal therefrom to the supreme court of Ohio. In one instance appellant sought to appeal the final assessment, claiming it unconstitutional as a burden on commerce. However, it posted no bond and its appeal was dismissed for that reason.

Stapled to the assessment was still another notice which informed the taxpayer:

'Notice

'Unless the person to whom the attached order or assessment is directed pays the amount stated within 30 days after receipt thereof, or contests same in the manner provided by law, judgment will be entered in the proper county and all highway use permits issued to such person will be suspended.'

On the back of the notice the applicable provisions of the Ohio highway use tax statute were printed.

The record shows that, in addition to being served on the Ohio secretary of State, these assessments and notices were actually received by defendant.

On continued failure of the taxpayer to pay, and after time for appeal had run, summary judgments were entered in the court of common pleas of Franklin county, Ohio. No summons or other notice than those referred to above were issued out of that court prior to entiry of judgments.

While this litigation was pending, the constitutionality of the Ohio highway use tax was upheld against a claim that it was an unreasonable burden upon interstate commerce. A decision on this point by the Ohio State supreme court (George F. Alger Co. v. Bowers, Tax Commissioner, 166 Ohio St. 427, 143 N.W.2d 835) was appealed to the United States supreme court. In a per curiam opinion, the United States supreme court refused to review the matter, finding no 'substantial federal question.' George F. Alger Co. v. Bowers, Tax Commissioner of Ohio, 358 U.S. 43, 79 S.Ct. 21, 3 L.Ed.2d 43, rehearing denied 358 U.S. 901, 79 S.Ct. 218, 3 L.Ed.2d 151. As to appellant's claim that the procedure outlined in the statement of facts above did not comply with the terms of the Ohio statute in that appellant was not served with process issuing out of the Ohio court prior to entry of judgment, we can only answer that we find no such requirement in the statute. The statute clearly contemplates a summary proceeding and requires entry of judgment 'immediately' on filing of a certificate of the final assessment by the tax commissioner. Ohio Rev.Code 1958 Supp. § 5728.10.

We note, of course, appellant's argument that the statute should be construed as imposing a requirement of process or notice out of the court itself to save it from unconstitutionality. This really poses the same basic issue as appellant's basic claim, namely, that absent notice or process issued out of the Franklin county common pleas court defendant was deprived of due process of law. This issue we shall turn to now.

Concerning the essential validity of the tax and the reasonableness of its application to defendant, we have no doubt. Ohio certainly has the right to tax even interstate commerce in reasonable relationship to its use of Ohio highways for the purpose of maintaining them. George F. Alger Co. v. Bowers, Tax Commissioner, supra; Postal Telegraph-Cable Co. v. City of Richmond, 249 U.S. 252, 39 S.Ct. 265, 63 L.Ed. 590; Interstate Busses Corporation v. Blodgett, 276 U.S. 245, 48 S.Ct. 230, 72 L.Ed. 551; Western Live Stock v. Bureau of Revenue, 303 U.S. 250, see cases cited, at page 254, 58 S.Ct. 546, 82 L.Ed. 823, 115 A.L.R. 944.

In addition, appellant by applying for a license and by sending its trucks over Ohio highways plainly submitted itself to the jurisdiction of that State and its highway use tax law. Hess v. Pawloski, 274 U.S. 352, 47 S.Ct. 632, 71 L.Ed. 1091; Henry L. Doherty & Co. v. Goodman, 294 U.S. 623, 55 S.Ct. 553, 79 L.Ed. 1097; International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95.

See, also, Olberding v. Illinois Central Railroad Co., Inc., 346 U.S. 338, 74 S.Ct. 83, 98 L.Ed. 39.

The objection we now consider is based on the 'due process' clause of the 14th Amendment and is addressed to a narrow--almost formalistic point. Appellant in effect admits operating its trucks in Ohio; it admits receipt of tax forms and filling same out; it does not dispute the accuracy of the computation of the tax which was based on its own returns; it admits notice of the final assessment of the tax and its rights of hearing and appeal; it admits notice likewise of the summary procedure set forth in the Ohio statute in event of failure to pay the tax; it concedes the reason it did not pay was it did not have the money; but it now claims that the judgments entered in the Ohio court are void as to it because no process or notices issued out of the common pleas court of Franklin county paior to entry of judgments.

Proceedings to enforce payment of taxes are generally summary in nature. Indeed, in many States, including Michigan, tax claims are customarily reduced to lien and execution without any judicial proceedings whatsoever. Any objection to such proceedings based on due process has long since been overruled. McMillen v. Anderson, 95 U.S. 37, 23 L.Ed. 335; Weimer v. Bunbury, 30 Mich. 201.

In the Weimer case, Justice Cooley wrote (at pages 210-212):

'In this case there has been no prosecution or suit; the county treasurer has adjudged the case without a hearing, and issued final process to seize property in enforcement of his conclusion. Such summary process, it is said, which gives the party whose property is seized no opportunity to contest the claim set up against him, cannot be due process of law.

'There is nothing in these words, however, that necessarily implies that due process of law must be judicial process. ...