State Tax Commission v. Western Electronics, Inc.

BISTLINE, Justice,

dissenting.

This case was improperly decided by summary judgment disposition without due regard for the limited purpose of such proceedings. In Collord v. Cooley, 92 Idaho 789, 451 P.2d 535 (1969), this Court stated:

“The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to judgment as a matter of law.” (Emphasis added.)

92 Idaho at 795, 451 P.2d at 541.

The complaint alleged as to the liability of the individual defendants:

Steve Brown, Mike Brown and Pat Brown, as officers of the Western Electronics, Inc., were held individually liable for sales tax, penalty and interest to date in the amount of $6,348.02 owing by Western Electronics, Inc., to the State of Idaho under Idaho Code § 63-3627 .

The motion for summary judgment stated only

There is no genuine issue as to any material fact and Plaintiff is entitled to judgment as a matter of law on the undisputed facts appearing in the Complaint and records submitted therein,

with the supporting affidavit saying only

Western Electronics, Inc., a corporation, dba Freight Outlet, Steve Brown, Mike Brown and Pat Brown have not paid any of the sales taxes assessed them pursuant to the Notice of Deficiency Determination dated August 28, 1975.

The only “records submitted” were those papers attached to the complaint, being Western Electronics’ monthly sales tax returns for September, 1974, through February, 1975, totalling $5,138.97, none of which amounts were paid with the return, and notices of tax deficiency assessment and demand for penalty ($978.67) and for interest ($230.38). The notices were addressed to these individual defendants and Western Electronics, Inc., all at a Boise address on Fairview Avenue. The record is silent as to whether Western Electronics was still in business at that address or at all when the notices were mailed, but the mailing was some six months after the final tax return was received.

The plain and only thrust of the Tax Commission’s claim against the individual defendants was that they and each of them were somehow rendered individually liable for taxpayer Western Electronics’ unpaid taxes, supposedly by not responding to a notice of deficiency of penalty and interest assessed against Western Electronics. Before the individual defendants filed any responsive pleading, but after notice of appearance was served and filed, the Tax Commission moved for summary judgment — which in essence was no more than a motion for judgment on the complaint.

The individual defendants and Western Electronics, Inc., responded to the motion with a single affidavit which had nothing to do with the liability of the individual defendants. The individual defendants did not deny the averments of the complaint insofar as their liability was claimed.

The sole question presented to the trial court was one of law, i. e., as a matter of law were the individual defendants liable to the State for Western Electronics’ unpaid taxes?

*229I do not see from the majority opinion or from the record how the Tax Commission established that it was entitled to a judgment against the individual defendants. The deficiency determination statute has no applicability in determining individual liability for a corporation’s taxes. All that it does is provide a procedure whereby the Tax Commission can set the amount of a taxpayer’s monetary deficiency, which can become final absent protest.

The taxpayer here is Western Electronics, Inc., the liability of which corporation is not an issue. The individual defendants here are persons who might be liable for that corporation’s unpaid taxes under the provisions of I.C. § 63-3627.1 There is nothing in the statutory law entitling the State Tax Commission to determine that liability in a proceeding which is solely for the purpose of determining the amount of monetary deficiency of an established taxpayer. Nor is it believable that the legislature ever intended to give the Tax Commission power to declare administratively who may be liable for a corporation’s unpaid taxes. It could and did impose the liability on the person who is found to have had the statutory duty, but that determination belongs to a court, and with a jury trial if requested.

As a matter of law, the Tax Commission either was or was not entitled to an in personam judgment against the individual defendants. Obviously, it was not, and there was and could be no valid requirement that the individual defendants attempt to build up some sort of a factual dispute. The one California case cited by the majority does not support the total denial of due process inherent in the proceeding the Court approves today. The judgment should be reversed. I can not conceive that the Utah courts, into which jurisdiction the Tax Commission intends to take its judgment, will accord full faith and credit to an Idaho judgment based on a complaint which fails to state a claim for relief.

. 63-3627. Responsibility for taxes — Corporations. — (a) Every person with the duty to account for and pay over any tax imposed by this act on behalf of a corporation as an officer or employee of the corporation or on behalf of a partnership as a member or employee of a partnership shall be personally liable for payment of such tax, plus penalties and interest, if he fails to carry out his duty.

(b) Any such individual required to collect, truthfully account for, and pay over any tax imposed by this title who wilfully fails to collect such tax, or truthfully account for and pay over such tax, or wilfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over. No penalty shall be imposed under section 63-3046(b) for any offense to which this subsection (b) is applicable.