Bailey v. State

Justice MITCHELL

concurring in part and dissenting in part.

Like the majority, I believe that the trial court was correct in entering summary judgment for the defendants Powers and Boyles as to the claims made against them in their individual capacities. Therefore, I concur in Part IV of the opinion of the majority which affirms summary judgment entered by the trial court in favor of those two defendants.

I dissent from those parts of the opinion of the majority which (1) reverse the trial court’s partial summary judgment for the plaintiffs and (2) remand this case to the Superior Court, Wake County, for entry of summary judgment in favor of the remaining defendants.

*247The majority concludes that the taxpayer-plaintiffs could not bring this suit because they failed to follow the procedures mandated by N.C.G.S. § 105-267 for the refund of an invalid tax. I do not agree.

Clearly, N.C.G.S. § 105-267 does not expressly preclude collective — as opposed to individual--demands for refunds of taxes. In my view, the terms “person” and “taxpayer” as used in that statute must be held to encompass both individual and collective taxpayers. N.C.G.S. § 12-3 (1990) (words importing the singular to be construed as including the plural unless inconsistent with the manifest intent of the General Assembly). See Santa Barbara Optical Co. v. State Bd. of Equalization, 47 Cal. App. 3d 244, 120 Cal. Rptr. 609 (2 Dist. 1975) (terms in a tax statute similar to N.C.G.S. § 105-267 held to include a class). Therefore, the plaintiffs could make a collective demand for a refund under the statute.

Further, I believe that the legislative purpose behind the demand requirement in the statute simply is to give the Department of Revenue fair notice of a possible obligation to refund taxes and an opportunity to prepare to meet that contingency. The essential requirements of the statute in this regard were complied with, in that the Department was given sufficient notice as to both the basis for the challenge to the legitimacy of the tax and the scope of the protesting class. See Mercury Mach. Importing Corp. v. New York, 3 N.Y.2d 418, 426, 144 N.E.2d 400, 404, 165 N.Y.S.2d 517, 521 (1957). Therefore, the trial court correctly held that the plaintiffs’

demands constituted effective demand for refund on behalf of all named and unnamed class members and preserved their rights to claim and seek refunds of all monies unlawfully imposed and collected as a result of the enactment of 1989 Sess. Laws Ch. 792, which had the effect of removing an income exemption on benefits received or monies paid by virtue of State and Local Government Retirement plans or systems.

The trial court was correct in holding that the collective demand on behalf of the plaintiffs had sufficiently complied with any lawful conditions precedent to the bringing of an action such as that brought by these plaintiffs. Therefore, the majority errs in remanding this case for the entry of summary judgment for the defendants on these taxpayers’ claims for refunds of taxes allegedly collected unlawfully and unconstitutionally.

*248Even assuming arguendo that these taxpayers failed to follow the procedures established in N.C.G.S. § 105-267 and the administrative regulations adopted pursuant thereto, I believe that they are entitled to proceed with this action against the defendants. Under the facts presented here, the taxpayers were not required to pursue their administrative remedies before bringing this suit. Failure to exhaust administrative remedies does not bar judicial action, when those administrative remedies are inadequate. Orange County v. North Carolina Dept. of Transportation, 46 N.C. App. 350, 376, 265 S.E.2d 890, 908, disc. rev. denied, 301 N.C. 94 (1980); Daye, North Carolina’s New Administrative Procedure Act: An Interpretive Analysis, 53 N.C.L. Rev. 833, 907 (1975). The administrative rights and remedies provided by N.C.G.S. § 105-267 are inadequate in the situation presented by the facts of this case. See Gramling v. Maxwell, 52 F.2d 256, 260 (W.D.N.C. 1931) (administrative procedures provided by the statute held inadequate in case brought by over 400 individuals to enjoin enforcement of a license tax on the trucks of fruit and vegetable growers). Therefore, the taxpayer-plaintiffs were not required to exhaust the administrative remedies of N.C.G.S. § 105-267 before initiating this action.

Additionally, courts have not required that plaintiffs exhaust administrative remedies before bringing suit, where pursuing the administrative remedies would be futile. State ex rel. Utilities Commission v. Southern Bell Tel. & Tel. Co., 93 N.C. App. 260, 268, 377 S.E.2d 772, 776 (1989), rev’d on other grounds, 326 N.C. 522, 391 S.E.2d 487 (1990); Daye, 53 N.C.L. Rev. at 907. Pursuing an administrative remedy is “futile” when it is useless to do so either as a legal or practical matter. See Honig v. Doe, 484 U.S. 305, 327, 98 L. Ed. 2d 686, 709 (1988). If there has ever been a case in which it would be futile for the plaintiffs to exhaust their administrative remedies before pursuing their remedies in court, this is that case.

Here, the Department of Revenue has announced that it will not grant the refunds sought by the taxpayer-plaintiffs. In fact, as the majority points out in its opinion, the defendants do not have the power to pass upon the constitutionality of the tax under challenge in this case because decisions as to the constitutionality of tax statutes are exclusively for the judiciary. Thus, it is clear beyond any reasonable doubt that requiring these taxpayers to jump through the procedural hoops adopted and applied by the *249State bureaucracy under N.C.G.S. § 105-267 would be to force them to do an utterly vain and useless act, since the defendants are without authority to grant the relief requested. See Murphy v. Greensboro, 190 N.C. 268,129 S.E. 614 (1925) (taxpayer not required to exhaust condition precedent before bringing suit to challenge tax); Waddill v. Masten, 172 N.C. 582, 90 S.E. 694 (1916) (taxpayers not required to follow statutory procedures for requesting tax refund before bringing suit). I believe that the common law doctrine of lex neminem cogit ad vana seu inutilia peragenda — the law compels no one to do vain or useless things — applies in this situation. See N.C.G.S. § 4-1 (1986). Therefore, I strenuously disagree with the majority’s conclusion that the defendants are entitled to summary judgment in their favor because the taxpayer-plaintiffs have not, in the view of the majority, complied with the technical requirements of the statute — acts which clearly would be vain and useless in this case.

These taxpayers were entitled to institute and pursue this suit against the defendants. The majority errs in reversing the trial court’s judgment to that effect and further errs in remanding this case for the entry of summary judgment for the defendants. Accordingly, I dissent from those parts of the opinion of the majority.