Estate of Wartenhorst v. State

DOYLE, Justice

(dissenting).

In Security National Bank v. Twinde, 1928, 52 S.D. 352, 217 N.W. 542, this court said:

“We think the word ‘erroneously,’ as used in subdivision 5 of section 6813, must be taken in its ordinary sense of ‘mistakenly.’ There was no error or mistake in the payment made by the plaintiff. It paid the very tax and the amount of tax that it intended to pay; nor was there any error in noting the payment or in issuing the receipt. In our view, the words ‘erroneously paid’ were *548clearly intended to cover cases where payment was made under a misapprehension as to what was being paid. But a tax intentionally and understanding^ paid, although the assessment was made or the tax levied incorrectly, is not erroneously paid, and we do not think that section 6813 was designed to allow a refund of taxes in such a situation.”

Conceding that Twinde is distinguishable because of the difference in the law between the refunding of real and personal property taxes and inheritance taxes, the interpretation of “erroneously paid” as set forth in Twinde is precisely the same one that other jurisdictions have followed when asked to interpret inheritance tax refund statutes quite similar to ours.

In the case of In re Brown’s Estate, 1925, 196 Cal. 114, 236 P. 144, their court construing California’s inheritance tax refund statute stated:

“It should be kept in mind that subdivision 4 repeatedly refers to amounts ‘erroneously paid’ — thus indicating an amount was ‘erroneously paid’ and not that the determination of the amount was erroneous.”

This position was upheld in Kelshaw v. Superior Court In And For San Luis Obispo County, 1934, 137 Cal.App. 189, 30 P.2d 432, wherein the court stated:

“the amount of inheritance tax paid was the exact amount provided for in the order fixing the amount of tax to be paid, the conclusion necessarily follows that there could have been no amount ‘erroneously paid’ * * *.”

Colorado has also applied the Twinde definition in explaining its inheritance tax refund statute. In State v. Newton, 1956, 134 Colo. 58, 300 P.2d 527, the court stated:

“The record shows that there was no error or mistake in the tax payment at the time it was made by plaintiff. He paid the very tax and the amount of tax *549that he intended to pay; nor was there any protest at time of payment, or error in the demand for payment, or in noting the payment or in issuing the receipt. The term ‘paid erroneously’ is clearly intended to cover cases where payment was made under a misapprehension as to what was being paid. A tax intentionally and understandingly paid, although the assessment was made or the tax levied incorrectly, is not erroneously paid. Security Nat. Bank v. Twinde, 52 S.D. 352, 217 N.W. 542, cited with approval in Pittsburgh Coal Co. v. School District of Forward Tp., 1951, 366 Pa. 489, 78 A.2d 253 and in Shea v. State Tax Commission, 101 Utah 209, 120 P.2d 274.”

Two more recent Colorado decisions reaffirm this interpretation. National State Bank of Boulder v. State, 1964, 156 Colo. 34, 396 P.2d 948; State v. Matthews, 1971, 29 Colo.App. 143, 480 P.2d 593. According to the latter case, Colorado has amended its statute to read as follows:

“ ‘[2] When any amount of inheritance tax has been incorrectly assessed and paid because of an error of fact or of law made either by the inheritance tax commissioner or by the representative of the estate, the state controller, upon receipt of a certificate of the inheritance tax commissioner, approved by the attorney general, shall refund the amount incorrectly paid * * ” Colo.Sess. Laws 1966, Ch. 41, § 1.

In regard to this amendment the court in Matthews stated:

“The effect of this amendment is to allow a refund of an inheritance tax which has been incorrectly assessed and paid because of an error of fact or of law, although such tax could not have been refunded as ‘paid erroneously’ under the prior statute.”

As noted in State v. Newton, supra, two other jurisdictions have followed the Twinde decision in interpreting the term “erroneously paid”. Shea v. State Tax Commission, 1941, 101 *550Utah 209, 120 P.2d 274 (diesel fuel tax included in motor vehicle registration fee); Pittsburgh Coal Co. v. School District of Forward Tp., 1951, 366 Pa. 489, 78 A.2d 253 (school tax).

Moreover, when the same question, as in the instant case, was posed earlier to the South Dakota Attorney General, he concluded:

“It is my opinion that by applying the same definition to the phrase ‘erroneously paid’ as used in Section 57.2306, as interpreted by our Supreme Court, that no refund can be had under the circumstances outlined in this letter. It seems to me that the tax in question was intentionally and understandingly paid both in the amount and the nature of the tax, and the failure to deduct an allowable claim and the payment of the tax, based upon the net value of an estate which includes a claim which should have been deducted, does not entitle the estate to a refund of that portion of the tax based upon the amount of the claim which should have been deducted.” 1939-40 A.G.R. 389, 391.

True, as the majority opinion points out, the Attorney General’s opinion was based upon the Twinde decision. Therefore, by distinguishing Twinde they apparently are able to totally disregard the Attorney General’s opinion. As this court stated in Jordan v. Mellette County, 1917, 38 S.D. 299, 161 N.W. 279:

“We are, however, impressed with the harm that may result from a needless disturbance of an established custom or practice that has arisen, based upon the rulings of the chief law officer of the executive branch of the state government. Such custom or practice should not be disturbed by this court, except when clearly unsupported by law, and then only when the issues presented require an opinion having such effect.”

Realizing no absolute compulsion, I, however, believe it proper in this instance to concur in the opinion of the Attorney General to *551avoid unsettling administrative practices of long standing absent a stronger basis than shown by the majority to rule otherwise. State v. Esmay, 1948, 72 S.D. 270, 33 N.W.2d 280.

Furthermore, I believe the majority inappropriately relies on the case of Boe v. Steele County, 1945, 74 N.D. 58, 19 N.W.2d 921. The North Dakota statute involved, in applicable part, is as follows:

“ * * In case an overpayment of such tax has been made, such overpayment shall be repaid out of any estate tax funds in the hands of the county treasurer upon an Order of the Court approved by the State Tax Commissioner. A certified copy of such order shall be filed with the State Treasurer and he shall credit the account with the amount of the state’s proportionate liability on such refund. In any case where the State Treasurer has collected the entire inheritance tax, refunds may be made upon approval of the State Tax Commissioner in the same manner as other claims against the state are paid.’ ” Laws 1927, Ch. 267, Sec. 9, N.D.R.C. 1943, 57-3724. (emphasis added)

It is patent the question of whether the inheritance tax paid in that case was “erroneously paid” was not before the court. As the court itself stated:

“* * * The sole basis of the right to payment of a claim for a refund is that it be shown that an overpayment of the legal tax has been made.” (emphasis added)

It is noted that SDCL 10-41-83 is entitled “Refund of erroneous or overpayment — Voucher and warrant — Refund of county portion. ” Etowever, under our rules of statutory construction, source notes, tross-references and titles do not constitute part of the statute and, consequently, are no basis for forming an interpretation thereof. SDCL 2-14-9.

The majority also cites the Boe decision for the proposition that the assessment of an inheritance tax is not to be given the *552force and effect of a final judgment. This may be the law in North Dakota but, in my opinion, it is not the statutory or case law in South Dakota.

SDCL 10-41-32 provides:

“The department of revenue shall have power to stipulate as to the value of any property where the estate is being probated, and any such stipulation when approved by the court shall be of the same force and effect as a decree to the same effect made by the court.”

SDCL 10-41-34 further provides:

“Unless an appeal is taken, the determination of the county court upon the amount of tax due shall be final as to all property described in the report or the findings of the court, except as provided in §§ 10-40-16 to 10-40-18, inclusive, but a new appraisement may be had in the county court at any time upon the discovery of further assets of the estate.”

Also in the recent case of In re Estate of Grimes, 1973, 87 S.D. 187, 204 N.W.2d 812, Chief Justice Biegelmeier, with all the justices concurring, stated:

“* * * A decree, even though erroneous, is final and conclusive and binding on the heirs — not only as to claims they made but also as to claims they could have made. White v. White, 76 S.D. 503, 81 N.W.2d 606.”

I believe that this language is applicable, although the cases are factually distinguishable, to the one at bar unless “a decree is not always a decree.”

Other jurisdictions have also been confronted with this question. In the previously cited case of In re Brown’s Estate, supra, the California court stated:

“If meaning is to be" given to section 18 of the act (Stats.1917, p. 900; Stats. 1921, p. 1520), which pro*553vides that an order fixing tax is to have the effect of a judgment in a civil action it would follow that if any such order has fixed an erroneous amount it would have to be in some manner modified or reversed before a refund of any portion of the tax paid thereunder could be accomplished, for the order otherwise would have the effect of a final judgment in a civil action.”

Colorado also noted this question in National State Bank of Boulder v. State, supra.

The answer, I believe, is found in SDCL 15-6-60(b), which provides:

“On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons:
(1) Mistake, inadvertence, surprise, or excusable neglect;
(2) Newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under § 15-6-59(b);
(3) Fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party;
(4) The judgment is void;
(5) The judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or
(6) Any other reason justifying relief from the operation of the judgment.
*554The motion shall be made within a reasonable time, and for reasons (1), (2), and (3) not more than one year after the judgment, order or proceeding was entered or taken. A motion under this subdivision (b) does not affect the finality of a judgment or suspend its operation. Section 15-6-60 does not limit the power of a court to entertain an independent action to relieve a party from a judgment, order, or proceeding, or to grant relief to a defendant not actually personally notified as provided by statute or to set aside a judgment for fraud upon the court.”

The record indicates that the appellant attempted to have the original decree corrected.* Using the proper procedure, it is my opinion that this is the correct approach to this situation in the face of the present wording of our statute.

In the present case the executor must be charged with knowledge that the time for filing claims had not expired and that additional claims might be filed when he made his report and had the tax liability determined. He stipulated as to the amount of the tax and paid it. He paid the amount he intended to pay. The tax was not “erroneously paid”.

The majority reaches a highly desirable result, but in seeking fairness and justice they trample over much-settled law. I believe an equitable and proper result can also be achieved without taking such a route and, therefore, I must respectfully dissent.

The record is not complete in this matter. However, in an Older dated September 2, 1971, the circuit court judge ordered:

“that Order of the District County Court made and entered on January 6, 1971 correcting the amount of Inheritance Tax due on the above estate be and the same is hereby vacated.” The Department of Revenue had appealed the above-mentioned District County Court order. In a memorandum opinion the circuit court judge held “that the District County Court had no jurisdiction to make the order.” It appears the order was issued ex parte without notice of hearing to the Department of Revenue.