Sullivan v. Oklahoma Tax Commission , 283 P.2d 521 ( 1954 )

DAVISON, Justice.

The facts decisive of this appeal are that in 1919 J. A. Hull and Lina J. Hull, husband and wife, acquired a substantial number of shares of stock issued by the Oklahoma Central Oil Company, a corporation. Thereafter in 1922 the Hulls sold this stock for an amount substantially greater than the cost thereof to them.

On April 13, 1923, the Hulls filed their separate income tax returns for the yeár 1922 with the State Auditor. In his return J. A. Hull showed net taxable income in excess of one million dollars upon which he computed the income tax due thereon to be $19,943.21, which amount he paid to the State Auditor without protest June 8, 1923. The major portion of the income shown in J. A. Hull’s return accrued from the above referred to sale. In. her return, Lina J. Hull, showed net taxable income 'close to one million dollars, all of which accrued from the sale of stock and she computed the income tax due thereon to be $18,978.15, which amount, she. paid without .protest to the State Auditor on June-9, 1923. The returns so filed by the Hulls were prepared by tax accountants, but signed, subscribed and sworn to by each taxpayer or claimant.

On June 7, 1923, the State Auditor advised J. A. Hull that his income tax was as shown in his return, or $19,943.21, and that the tax was payable June 15, 1923, and delinquent if not paid by July 1, 1923, and that “The law provides for tax warrants to be issued covering delinquent taxes.” The records fail to show whether Lina J. Hull received a similar notice but the Commission conceded that she probably did and such will be assumed because under the provisions of the 1915 Income Tax Act, section 9943, C.O.S.1921, the State Auditor was required to make income tax assessments.

In 1928, the Hulls orally advised the State Auditor that in their opinion, income accruing from the sale of their stock was not subject to income tax and for such reason they were entitled to a refund of income taxes, paid by them on June 8 and 9, 1923, as above stated, and confirming this, a letter dated Dec. 10, 1928, was written by H. L. Sullivan in behalf of the Hulls to Mr. LeRoy LeFlore in care of the State Auditor in which he asked for a refund form to file a written claim for a refund with the State Auditor for the Hulls. A written claim for refund, however, was not filed with the State Auditor, and as suggested by the State Auditor in a letter to Mr. Sullivan,' the Hulls requested the Legislature to enact legislation granting them a refund which was never done.

On April 15, 1937, Senate Bill 304, Art. 12, Ch. 66, S.L.1936-1-93-7, of the Sixteenth Legislative Session became effective. The Act became generally known as the “Mar-land Act” probably because the late Governor E. W. Marland was the first one to séek a refund of income taxes thereunder. .It was provided i'n substance in the referred to Act that where a taxpayer had paid through error of fact or law income taxes for any period prior to 1931, he could, in the form and manner .set forth in the Act, obtain a refund of such taxes. At the Sixteenth Legislative Session, c. 66, art. 15, House Bill 607 was also enacted under the provisions of which a taxpayer, who, after July 1, 1931, paid under mistake of fact or law any tax was entitled to a refund thereof by complying with the Act. In 1939, Laws 1939, p. 393, S.B. 304 and H.B. 607 were repealed. This repealer was codified as' Secs. 12-12c, Title 68 O.S. 1941.

On March 23, 1938, the Hulls filed separate claims with the Commission for the refund of income taxes paid in 1923, which claims were numbered 103 and 104. In J. A. Hull’s claim the following quoted statement was made:

“Comes now J. A. Hull pursuant to Senate Bill Np. 304 of the Sixteenth , Legislature of the State of Oklahoma and files with the Oklahoma Tax Commission this. * * * claim. * * *”

An identical statement was made in the claim filed by Lina J. Hull..

The- Oklahoma- Broadcasting Company filed a claim for refund of sales tax under the provisions of H.B. 607.

Prior to the filing bf claims by the Hulls, a hearing was had before the Commission on Governor Marland’s claim which was filed pursuant to Senate Bill.304, and on the claim of the Oklahoma Broadcasting Company. Upon these claims being allowed by the Commission, the Attorney General perfected an appeal to this court and it appears that upon these appeals being taken, action on the Hulls’ claim 'and on the claims filed by others was held in abeyance. In this court the Marland appeal was styled In re Marland and is reported in 188 Okl. 475, 110 P.2d 901, and the Oklahoma Broadcasting Company case was styled In re Oklahoma Broadcasting Company and is reported in 188 Okl. 631, 112 P.2d 406. In the Marland opinion 'order of the Commission allowing refund pursuant to S.B. 304 was vacated and cause dismissed, and the merits of Governor Mar-land’s claim were not considered.. 'In .the Oklahoma Broadcasting Company’s appeal, order of the Commission allowing refund pursuant to H.B. 607 was vacated'with directions to dismiss the claim for reasons given in the Marland opinion.

In April 1947, H. L. Suliivan, as the Hulls’ assignee, filed his separate claims for refund with the Tax Commission, to which claims he attached copies of the claims that the Hulls had theretofore filed in 1938. The record shows assignments, both dated July 10, 1929, by the Hulls to H. L. Sullivan, who is hereinafter referred to as “plaintiff”. Said plaintiff filed this action in the District Court of Oklahoma County, Oklahoma, on June 4, 1947, against the defendant, Oklahoma Tax Commission, seeking the recovery of the amount paid as tax on the profit derived from the sale of stock as hereinabove outlined-. The basis of the action was the alleged payment of the tax under a mistake of fact and because of- notice from the State Auditor. As an affirmative defense, the Commission^ contended among other things that the plaintiff was withqut statutory authority to maintain this action; that he does not have an action at law. The Commission stresses our opinion in In re Marland, supra, wherein .we vacated, order of the Commission and dismissed cause based, on Governor Marland’s claim for refund of income taxes paid on income accruing in 1919, 1920 and 1922. Judgment of the trial court was for defendant, and plaintiff has perfectéd this 'appeal.

.It has long been well established in this jurisdiction that the State cannot be sued for the recovery of taxes paid in the.absence of legislative consent,-and the right to recover taxes so paid must therefore be, found in a statute. In Antrim Lumber Company v. Sneed, 175 Okl. 47, 52 P.2d 1040, 1045, the right to recover corporation license taxes paid under an unconstitutional statute was denied where the taxpayer had failed to pursue the remedy provided by statute and instead instituted an action at law. The rule that here controls was stated thusly: ...

“Since the state has provided a method whereby illegal taxes may be ■ recovered and this remedy is exclu-. . sive, a. proceeding based on the theory of compulsion and involuntary payment is not authorized and may not be - maintained in this' state for the purpose of recovering taxes alleged to have been illegally exacted. This rule is applicable where the suit is for the recovery of the tax paid. *. * *”

The plaintiff’s-contention to the effect that the Hulls did not voluntarily pay the taxes in controversy is not in accordance with the record which shows that the Hulls reported the taxes in their return as being due and owing and paid same without protest before the-taxes became delinquent and therefore before same became a lien and before process could - issue to enforce payment. Therefore, the taxes must be considered as having been paid voluntarily. 51 Am.Jur., Taxation, Secs. 1094 and 1095, page 1025, and annotated notes beginning at page 38 of 64 A.L.R. In the instant case there was no mistake of fact for the reason that the Hulls knew the facts and sirice the taxes were voluntarily paid and no mistake of fact exists, our opinion in Louisiana Realty Co. v. City of McAlester, 25 Okl. 726, 108 P. 391, and Thompson v. Willis, 202 Okl. 538, 215 P.2d 850, precludes an action at law to recover the taxes paid.

The plaintiff has failed to cite any opinion of this court at variance with the above cited opinions and in fact bases the asserted right to maintain an action at law to recover the taxes in controversy on opinions handed down by Federal courts to the effect that where a tax is not voluntarily paid a taxpayer may maintain an action at law against the collector (not the United States in the absence of its consent to be sued) to recover the tax. These cases are hot in point. This action is against the state, and not the person collecting the tax, ánd an adequate statutory remedy was available. The plaintiff also asserts that Sec. 910, Title 68 O.S.1941, enacted in 1935, grants authority to, maintain an action at law but this contention is not borne out by the language of the statute to the ef-fedt that a “taxpayer resisting the collection of any income tax hereby or heretofore levied, or the enforcement of any provision of such laws” may pay his tax under protest and within thirty days file suit in the district'-court to recover the tax so paid. While neither the Hulls nor the plaintiff at any time had a remedy in the nature of an original action at law, a plain, speedy and adequate remedy was in fact afforded by statute.

■ The statutory remedy first available to the Hulls was provided in Secs. 9942 or 9971, C.O.S.1921. Section 12665, O.S.1931, repealed 1941, page 333, Sec. 64. The gist of this remedy was that if the Hulls felt aggrieved by the action of the State Auditor in assessing income taxes against them, they could appeal to the district court. This is made abundantly clear in Champlin v. Carter, 78 Okl. 300, 190 P. 679 and Champlin v. Oklahoma Tax Commission, 163 Okl. 185, 20 P.2d 904, and in other opinions that are cited in those cases. The first paragraph of the syllabus in the first above cited case reads as follows:

“The remedy of an income taxpayer, complaining at the action of the state auditor in revising, adjusting, and correcting his income tax assessment, is by appeal to the district court.”

The following statement is made in the first paragraph of the syllabus in Champlin v. Oklahoma Tax Commission, supra:

“In determining the amount due the state as income tax from a taxpayer under the 1915 Income Tax Law (chapter 164, Session Laws 1915), as amended by Session Laws 1921 (chapter 44), the state auditor acted in a ministerial capacity wherein he was required to exercise a discretion, judicial in nature, and, unless appealed from, his decision became final and conclusive in the absence of fraud or omission.”

It follows that since the Hulls failed to pursue their statutory remedy, the assessments made by the State Auditor against the Hulls are final and conclusive unless a remedy was afforded by some other statute, and apparently, such was not the case.

The substance of plaintiff’s contention is that if a taxpayer shows that he has erroneously paid a tax he is entitled to recover same notwithstanding his failure to follow the procedure outlined in statutes that afford him a remedy and notwithstanding the fact that if he had an action, at law, the action is barred by limitations. The statement of the United States Court of Appeals of the Fourth Circuit in McConkey v. Commissioner of Internal Revenue, 199 F.2d 892, 895, to the following effect is applicable to the-instant case:

“Congress, it seems to us, has created a correlated scheme in aid of federal income taxpayers who think they ■ have been unfairly treated. Such a taxpayer .may either (a) decline to pay the tax and seek relief from the Commissioner’s determination at the hands of the Tax Court, or, (2) he may pay the tax and then sue to recover it in a federal court. He may not, as petitioners seek to do here, mix up these two mutually independent procedures by taking a part of one procedure and a part of the other. In other words, he cannot pay the tax, then, upon an erroneous determination of a deficiency by the Commissioner, when there is in fact no deficiency since the tax has been paid, seek a review by the Tax Court.” (Emphasis ours.)

Finding no error in the judgment rendered by the trial court, the judgment is af-t firmed.

HALLEY, C. J., and WELCH, CORN and WILLIAMS, JJ., concur. BLACKBIRD, J., concurs in conclusion. JOHNSON. V. C. J., and ARNOLD and O’NEAL, JJ., dissent.