Tuxis-Ohr's, Inc. v. Gherlone

• Decision Date: 01 April 2003
• Docket Number: (AC 22392).
• Citation: 818 A.2d 799,76 Conn. App. 34
• Court: Connecticut Court of Appeals
• Parties: TUXIS-OHR'S, INC. v. LOUIS GHERLONE ET AL.

76 Conn. App. 34

818 A.2d 799

TUXIS-OHR'S, INC. v. LOUIS GHERLONE ET AL.

(AC 22392).

Appellate Court of Connecticut.

Argued January 13, 2003.

Officially released April 1, 2003.

Lavery, C. J., and Foti and Dupont, Js. Vincent T. McManus, Jr., for the appellant (plaintiff).

Bradley K. Cooney, for the appellees (named defendant et al.).

Opinion

FOTI, J.

The defendants¹ appeal from the judgment of the trial court, rendered after a trial to the court, in favor of the plaintiff, Tuxis-Ohr's, Inc., doing business as Astro Oil. The court concluded, on the basis of equitable subrogation, that the defendant corporation, Louis Gherlone Tree Farms and Excavating, Inc. (corporation), is indebted to the plaintiff because the plaintiff paid certain state fuel oil taxes for which the corporation had the primary obligation to pay. The court further concluded that the defendants Louis Gherlone and Linda Gherlone are personally indebted under a guarantee to the plaintiff for the corporation's debts.² The defendants claim on appeal³ that the court's conclusions were improper because (1) General Statutes § 12-458 places the legal burden on the plaintiff to assess, collect and pay such taxes, and the plaintiff failed to comply with its statutory obligations, (2) there was no legal basis for the court's finding that the defendants should have marked "off-road use" on the fuel delivery tickets that were submitted to the plaintiff each time the defendants obtained number two heating oil and (3) the plaintiff's failure to include the required taxes in its invoice bills to the defendants during the last four years precluded the corporation from filing a claim for tax refunds to which it would have been entitled. We affirm the judgment of the trial court.

The court found the following facts. The plaintiff is a wholesale distributor of number two heating oil. Number two heating oil is subject to state taxes when used for the purpose of fueling off-road heavy machinery; however, it is exempt from such taxes when used to heat homes. On October 25, 1995, for the purpose of securing credit from the plaintiff for fuel oil sales to the corporation, Louis Gherlone and Linda Gherlone executed a personal guarantee for any debts incurred by the corporation to the plaintiff. The plaintiff, through its president, James Vitale, entered into an agreement with the defendants to sell oil to the corporation. The parties formed an understanding that the primary purpose for the oil would be to fuel the corporation's off-road machinery—a taxable usage under state law.

On the basis of Louis Gherlone's conversations with Vitale, the defendants knew or should have known that their usage of the number two heating oil was taxable. They also knew or should have known that the fuel delivery tickets, which the defendants' agent was required to sign when obtaining oil from the wholesale delivery terminal, needed to be marked with the notation "off-road use." Such a notation on the fuel delivery tickets was necessary to alert the plaintiff, for the purpose of proper billing, whether state taxes needed to be collected on a particular sale.

From 1995 through 1999, the corporation obtained number two heating oil from the plaintiff. It used the oil primarily for the taxable purpose of fueling its off-road excavating machines.⁴ The defendants failed to ensure that their agent followed the procedure for properly marking the delivery tickets as "off-road use." Consequently, the plaintiff did not include the required state taxes for off-road usage when billing the corporation for the oil.

The invoices that the plaintiff generated and sent to the defendants were all marked "dyed diesel fuel, nontaxable use only, penalty for taxable use." The fuel delivery tickets and signs on the fuel pumps at the terminal from which the corporation obtained the number two heating oil also contained similar warnings noting a penalty for taxable usage. Between 1995 and 1999, the corporation received no less than thirty-nine invoices from the plaintiff, each clearly noting that the fuel purchased was number two heating oil and that there was a penalty for taxable use. The defendants never attempted to notify the plaintiff that the billing was incorrect in any way.

The plaintiff was subject to regular periodic audits by the department of revenue services. In December, 1999, the department conducted an audit that resulted in an assessment of state gross receipt tax of $3666.70 and a state diesel fuel tax of $26,824.68 on the plaintiff's account with the corporation. After adjustments, the plaintiff paid $23,382.32 to the state for the corporation's account as the combined taxes assessed against the plaintiff by the department.

Despite requests from the plaintiff, the defendants refused to reimburse the plaintiff. Consequently, the plaintiff filed a two count amended complaint against the defendants. Count one alleged that the corporation was liable for reimbursement of the taxes paid, and count two asserted the liability of the Gherlones under the valid personal guarantee.⁵ The court rendered judgment in favor of the plaintiff against the corporation in the amount of $23,382.32 plus interest of $3721.49 pursuant to General Statutes § 37-3a, and jointly and severally against the individual defendants in the amount of $23,382.32 plus interest of $6418.75 and attorney's fees of $13,850 pursuant to the terms of the personal guarantee.⁶ This appeal followed.

Before addressing the defendants' specific claims, we first set forth our standard of review. "With regard to the trial court's factual findings, the clearly erroneous standard of review is appropriate." Empire Paving, Inc. v. Milford, 57 Conn. App. 261, 265, 747 A.2d 1063 (2000). "A factual finding is clearly erroneous when it is not supported by any evidence in the record or when there is evidence to support it, but the reviewing court is left with the definite and firm conviction that a mistake has been made. . . . Simply put, we give great deference to the findings of the trial court because of its function to weigh and interpret the evidence before it and to pass upon the credibility of witnesses." (Citation omitted; internal quotation marks omitted.) American Heritage Agency, Inc. v. Gelinas, 62 Conn. App. 711, 717, 774 A.2d 220, cert. denied, 257 Conn. 903, 777 A.2d 192 (2001).

"The trial court's legal conclusions are subject to plenary review. [W]here the legal conclusions of the court are challenged, we must determine whether they are legally and logically correct and whether they find support in the facts set out in the memorandum of decision. . . ." (Internal quotation marks omitted.) Aubin v. Miller, 64 Conn. App. 781, 786, 781 A.2d 396 (2001).

I

The defendants first claim that it was improper for the court to conclude that the plaintiff was entitled to reimbursement by the defendants because § 12-458⁷ places the legal burden on the plaintiff to assess, collect and pay to the state any taxes that were applicable to the subject transactions and that the plaintiff failed to comply with its statutory obligations. We disagree.

The interpretation of a statute, or its applicability in a particular action, presents a question of law for the court, and our review, therefore, is plenary. Original Grasso Construction Co. v. Shepherd, 70 Conn. App. 404, 418, 799 A.2d 1083, cert. denied, 261 Conn. 932, 806 A.2d 1065 (2002). We conclude that our Supreme Court's decision in Wesson, Inc. v. Hychko, 205 Conn. 51, 529 A.2d 714 (1987), is dispositive of the defendant's first claim.

The defendants correctly assert that § 12-458 applies to the subject fuel oil transactions and that along with General Statutes § 12-457,⁸ it places the responsibility on distributors to assess, collect and pay the appropriate state fuel taxes. That responsibility, however, is placed on the distributors as an agent of the state, not as a taxpayer. See Wesson, Inc. v. Hychko, supra, 205 Conn. 55. In Wesson, Inc., our Supreme Court found that the legislature's intent in enacting § 12-458 was to impose the burden of that tax not on the distributor, but on the fuel purchaser or user, and that the distributor was responsible only for collection and payment "for the account of the purchaser . . . ." (Internal quotation marks omitted.) Id. Despite the defendants' arguments implying the contrary, that burden does not shift to the distributor simply by virtue of the distributor's failure to comply fully with statutory billing procedures.

The Wesson, Inc., court held that a distributor that was compelled by the state to pay a tax that it had failed to include in its invoice to a buyer because it mistakenly believed the sale was not taxable is entitled to recover from the buyer the taxes it paid on the buyer's behalf. Id., 59. In so holding, the court stated: "We are not persuaded that the absence of an express statutory provision for reimbursement of the motor vehicle fuel tax forecloses the distributor from resorting to appropriate equitable remedies where he has been legally compelled to pay a tax the incidence of which the legislature intended to impose upon the purchaser. Where property of one person is used in discharging an obligation owed by another . . . under such circumstances that the other would be unjustly enriched by the retention of the benefit thus conferred, the former is entitled to be subrogated to the position of the obligee . . . . This doctrine is inapplicable where the payment has been made officiously, i.e., where the circumstances do not justify the interference with another's affairs resulting from conferring a benefit upon him. . . . A person does not act officiously when he pays another's debt under a mistake or when he has discharged an obligation for which he is also liable, but which another should equitably have paid." (Citation omitted; internal quotation marks omitted.) Id., 56-57.

"The payment of taxes by one not...