PUBLISHED OPINION
Case No.: 95-0438
†Petition for
Review filed
Complete
Title
of
Case:WISCONSIN
DEPARTMENT OF REVENUE,
Petitioner-Appellant,
v.
J. GERARD HOGAN,
AND DELORES M. HOGAN, ET AL.,
Respondents-Respondents.†
Submitted
on Briefs: November 10, 1995
COURT COURT OF
APPEALS OF WISCONSIN
Opinion
Released: December 21, 1995
Opinion
Filed: December
21, 1995
Source
of APPEAL Appeal from a judgment
Full
Name JUDGE COURT: Circuit
Lower
Court. COUNTY: Dane
(If
"Special" JUDGE: P.
Charles Jones
so
indicate)
JUDGES: Eich,
C.J., Gartzke, P.J., and Vergeront, J.
Concurred: Gartzke,
P.J.
Dissented:
Appellant
ATTORNEYSFor the petitioner-appellant the
cause was submitted on the briefs of James E. Doyle, attorney general,
with F. Thomas Creeron III, assistant attorney general.
Respondent
ATTORNEYSFor the respondents-respondents the
cause was submitted on the brief of Eugene O. Duffy and Gregory W.
Lyons of O'Neil, Cannon & Hollman, S.C., of Milwaukee.
COURT OF APPEALS DECISION DATED AND RELEASED December
21, 1995 |
NOTICE |
A party may file with the Supreme Court a petition to review an
adverse decision by the Court of Appeals.
See § 808.10 and Rule 809.62,
Stats. |
This opinion is subject to further editing. If published, the official version will appear in the bound
volume of the Official Reports. |
No. 95-0438
STATE OF WISCONSIN IN
COURT OF APPEALS
WISCONSIN
DEPARTMENT OF REVENUE,
Petitioner-Appellant,
v.
J.
GERARD HOGAN,
AND
DELORES M. HOGAN, ET AL.,
Respondents-Respondents.
APPEAL
from a judgment of the circuit court for Dane County: P. CHARLES JONES, Judge. Reversed
and cause remanded with directions.
Before
Eich, C.J., Gartzke, P.J., and Vergeront, J.
EICH,
C.J. We hold in this case that the
Wisconsin Tax Appeals Commission lacks authority to entertain a class-action
proceeding seeking refunds of state income taxes collected on the pension
income of retired federal government employees living in Wisconsin.
The
appeal is from a judgment of the Dane County Circuit Court dismissing a
petition by the Wisconsin Department of Revenue for judicial review of the
commission's decision and order directing that refunds be paid to the class
comprising all persons whose federal pensions had been taxed by the state. The court, ruling that the petition had not
been filed within the time prescribed by statute, entered judgment dismissing
the review proceeding and remanded the case to the commission for
implementation of its refund order.
We
reverse the judgment and remand to the circuit court with directions to enter
judgment reversing the commission's decision.
I. Facts and
Procedural History
The
trial court aptly described this case as traveling a "tortured ...
journey" through the agencies and various courts.
The
Hogans filed an attachment to their 1988 state income tax return indicating
that they were paying the tax on their federal pensions under protest, citing
the United States Supreme Court's decision in Davis v. Michigan Dep't of
Treasury, 489 U.S. 803 (1989). Davis
held that state taxation of federal retirement income violated federal law and
principles of intergovernmental tax immunity.
Id. at 817. The
Hogans subsequently filed a refund claim for tax years 1985 through 1988.
Several
months after they filed their individual refund claim, the Hogans and several
other federal retirees living in Wisconsin commenced a class action in circuit
court under 42 U.S.C. § 1983, claiming, as they did in their case before the
department, that the Davis decision entitled them to a refund of
state income taxes collected on their federal retirement benefits over the
years. They also sought damages for
"money had and received" under state law.
The
circuit court issued an order certifying the class and enjoining the department
from taxing any of the plaintiffs' retirement benefits pending trial on the
merits of their claims. The supreme
court reversed, dismissing the plaintiffs' action on grounds that they had
failed to exhaust their state administrative remedies before proceeding in
court under § 1983. Hogan v.
Musolf, 163 Wis.2d 1, 26-27, 471 N.W.2d 216, 226 (1991), cert.
denied, 502 U.S. 1030 (1992).[1]
In
early 1991, while Hogan was still pending in the circuit court,
the Hogans wrote to the department stating that they were changing their
individual refund claim to one seeking refunds on behalf of the class certified
by the circuit court in Hogan.[2] The department denied the purported
"amendment," concluding that state law did not authorize the
prosecution of class-action refund claims before the department. The denial was appealed to the department's
appellate bureau, where it was confirmed.
The
Hogans then appealed the bureau's denial to the tax appeals commission. The department moved to dismiss the appeal,
and the Hogans moved for an order "recognizing the class as certified in Hogan[]
... and directing that th[e] case continue [before the commission] as a class
action ...."
On
October 28, 1992, the commission denied the department's motion to dismiss and
granted the Hogans' motion to recognize and certify the class. The order was not accompanied by the notice
of appeal rights specified in § 227.48(2), Stats., as a precondition for commencing the time limits in
which petitions for rehearing or judicial review may be commenced.[3] Thereafter, the commission clarified its
class-certification order and then clarified it again, each time modifying and
altering the underlying rationale. Like
the October 28 order, none of the amended orders was accompanied by a §
227.48(2) notice.
On
November 20, 1992, the department filed a "Respondent's Rehearing
Petition" with the commission. The
commission treated the petition as a motion for reconsideration and denied it
in a lengthy decision restating its earlier conclusion that it possessed
statutory authority to certify a class and entertain a class refund proceeding. The order dismissing the department's motion
was also unaccompanied by a § 227.48(2), Stats.,
notice.
The
Hogans moved the commission for summary judgment on behalf of the class on the
merits of their claim, seeking a determination that all class members were
entitled to refunds. On May 27, 1993,
Commissioner Thomas Timken rendered an oral decision granting the motion and
ordering refunds to all members of the class, together with statutory interest.[4] Unlike all the decisions preceding it, the
transcript of the Timken decision provided to the parties was accompanied by
the § 227.48(2), Stats.,
notice.
On
June 16, 1993, twenty days after the oral decision, the department filed a
petition for rehearing.[5] Timken denied the petition in a written
decision issued on June 29, 1993, and the department filed a petition for
judicial review within thirty days of that date.
The
circuit court ruled that the department's petition for judicial review of the
Timken decision was untimely because it was not filed within thirty days of the
date the decision was rendered. The
court rejected the department's argument that because it had petitioned for
rehearing, the thirty-day limit was extended under § 227.53(1)(a), Stats.,[6]
concluding the oral-decision statute under which Timken proceeded, §
73.01(4)(dn), did not contemplate petitions for rehearing. The court affirmed Timken's decision and
this appeal followed. (Other facts will
be referred to in the body of the opinion.)
II. Timeliness of
the Petition for Judicial Review
The
trial court's decision that the department's petition for judicial review was
not timely filed involves the application of statutory and other legal
principles to the facts of the case. It
is a question of law, which we decide de novo.
See Braatz v. LIRC, 174 Wis.2d 286, 293, 496 N.W.2d
597, 600 (1993).
The
Hogans' arguments on the question are based on the department's failure to seek
judicial review of the commission's October 28, 1992, decision denying the
department's motion to dismiss the appeal and granting the Hogans' motion for
certification of the class. They point
out that the department's petition for rehearing of that decision was denied on
February 16, 1993, and no appeal was taken within thirty days thereafter. According to the Hogans, this failure
deprives the circuit court of competency to hear any challenge to the
commission's decision to entertain the class-action refund proceeding.
The
department argues, on the other hand, that the class-certification order was
not final but interlocutory in nature, and thus was not an "administrative
decision[] which adversely affect[ed] the substantial interests of [the
department]" within the meaning of § 227.52, Stats., the statute governing judicial review of agency
actions.[7]
It
is well settled that "not all decisions, orders or determinations which
might fit within a literal reading of [§ 227.52] are subject to judicial
review." Friends of the
Earth v. Public Serv. Comm'n, 78 Wis.2d 388, 404, 254 N.W.2d 299, 305
(1977). Nor does the form of the order,
or the label the agency happens to place upon it, determine whether it starts
the thirty-day clock ticking. YMCA
of Beloit v. DOR, 141 Wis.2d 907, 911, 417 N.W.2d 39, 41 (Ct. App.
1987). An appealable agency decision
under § 227.52, Stats.--one
"adversely affect[ing] the substantial interests of any [party]"--is
one that is "final and complete" in the sense that it
"`determine[s] the further legal rights of the [party] seeking
review.'" Id. at
910, 912, 417 N.W.2d at 41 (quoted source omitted).
[T]he legislature did not intend to authorize the review
of mere preliminary action by an agency.
"Instead, the legislative intent [underlying § 227.52] was to limit
judicial review of administrative agency actions to `final orders' of the
agency."
Madison Landfills, Inc. v. DNR, 180 Wis.2d 129, 139, 509 N.W.2d 300, 304 (Ct. App.
1993) (quoted source omitted).
A
preliminary or interlocutory order--one that does not start the clock
running--is an order "whe[re] the substantial rights of the parties
involved in the action remain undetermined and whe[re] the cause is retained
for further action." Pasch
v. DOR, 58 Wis.2d 346, 354, 206 N.W.2d 157, 161 (1973) (footnote omitted).
"`Courts are
averse to review interim steps in an administrative proceeding.... [R]eview of preliminary or procedural orders
is generally not available, primarily on the ground that such a review would
afford opportunity for constant delays in the course of administrative
proceedings for the purpose of reviewing mere procedural requirements or
interlocutory directions. Broad
language of statutes providing for judicial review of orders of regulatory
commissions has been construed as not extending to every order which the
commission may make, and mere preliminary or procedural, as distinguished from
final, orders have been held not to be within such statutes, especially where
the context of the provision indicates that the orders for which review is
provided are such as are of a definitive character dealing with the merits of a
proceeding ....'"
Id. at 354-55, 206 N.W.2d at 161 (quoting Wisconsin Tel. Co. v.
Wisconsin Employment Relations Bd., 253 Wis. 584, 591, 34 N.W.2d 844,
847 (1948)) (internal quoted source omitted).
In
Pasch, the appeal was from "an order which determined that
the commission had the authority to proceed to a hearing and determination upon
the merits," id. at 355, 206 N.W.2d at 162, and the court
held that such an order was not reviewable under ch. 227:
The order of the commission finding jurisdiction ... to
proceed to a hearing upon merits of the controversy does not directly affect
the legal rights, duties or privileges of the appellant. As provided in sec. [227.52, Stats.,] the jurisdiction of the
commission may be challenged upon review from the final decision of the
commission upon the merits of the controversy.
Appellant argues that the issue of the commission's jurisdiction should
be finally determined before appellant is put to the expense and inconvenience
of a lengthy proceeding before the commission .... We are mindful of the fact
that much time and expense might be saved if the courts would decide at this
time that the commission had exceeded its jurisdiction; however, this
consideration is outweighed by the resultant delay that would accompany review
of these agency determinations and the disruption of the agency's orderly
process of adjudication in reaching its ultimate determination.
Id. at 357, 206 N.W.2d at 162-63.
The
Hogans have not persuaded us that the commission's order purporting to certify
the class is a final, appealable order within the meaning of § 227.52, Stats., and the applicable cases. Rather, we see it as a decision to continue
with the proceedings--as a class action--to a determination of the merits of
the controversy: whether, and in what amount, refunds are to be paid to the
applicants. And the fact that the
commission certified the class does not necessarily determine the entitlement
to specific refunds. In our view, the
October 28, 1992, order is much more akin to the type of
"jurisdictional" order the Pasch court held to be
interlocutory in nature and thus not appealable under ch. 227, Stats.
And we note in this regard that the commission did not include with its
decision the appeal-rights notice under § 227.48(2), Stats., see supra note 3, and,
further, that the order itself set "[a] scheduling conference for further
proceedings" in the case.[8]
On
the other hand, the Timken oral decision of May 27, 1993, which held that the
state had illegally collected income taxes on class members' federal pensions
over the years and granted the Hogans' motion for judgment ordering refunds to
the class, is unquestionably a final, appealable order under § 227.52, Stats., and there is no question that
the department's petition for review of the Timken decision was filed within
thirty days of the commission's denial of its petition for rehearing of that
decision.
The
Hogans argue that we should nonetheless consider the petition untimely for two
reasons: first, because the petition for rehearing itself was not
"properly" filed within twenty days of the decision and thus was a
nullity which cannot toll the thirty-day requirement for filing a petition for
review;[9]
and, second, because the oral-decision provisions of § 73.01(4)(dn), Stats., do not permit petitions for
rehearing.
As
for the first, the Hogans contend that the rehearing petition "was not
properly served or filed until June 17, 1993--one day after the last date for
filing and service." As we have
noted above, the record establishes that the petition was filed on June 16,
1993--twenty days from the date of the Timken oral decision. The Hogans argue, however, that the petition
was not "properly" filed on that date because, contrary to the
requirements of § 227.49(4), Stats.,
the department did not serve copies on counsel for the class until the
following day, which, as indicated above, was the twenty-first day.
Section
227.49(4), Stats., does not
require that, in addition to filing the petition within twenty days, it must
also be served on the other parties to the proceeding within that time. All the statute says is that: (1) the person
or entity seeking rehearing "may, within 20 days after service of the
order, file a ... petition for rehearing"; and (2) in a separate
subsection, "[c]opies of petitions for rehearing shall be served on all
parties of record." Section
227.49(1) and (4), Stats.
The
Hogans offer no authority for the proposition that a petition properly filed
with the commission within the twenty-day time limit must be considered a
nullity under § 227.49, Stats.,
if service on the parties of record is not also completed by the twentieth
day. As the department points out, when
the legislature has intended such a result, it has plainly stated that intent
in the statute itself. The provisions
dealing with service and filing of petitions for judicial review, for example,
expressly state that the petition "shall be served and filed within
30 days" of the decision sought to be reviewed. Section 227.53(1)(a)2 (emphasis added). The Hogans do not explain why, if the legislature had intended to
impose a similar requirement in § 227.49, it did not say so, and they have not
persuaded us that the department's rehearing petition was not timely
filed.
As
for their argument that, as the circuit court ruled, the rehearing petition
cannot toll the thirty-day limit for petitions for review because rehearings
are not permitted by § 73.01(4)(dn), Stats.,
they have offered no authority to support the proposition, other than the
unamplified statement that the statute "expressly precludes
petitions for reconsideration of oral decisions" (emphasis the Hogans')
and a brief quotation from the trial court's decision so concluding.
We
have referred to § 73.01(4)(dn), Stats.,
see supra note 4. It states that
an oral decision may be appealed as provided in ch. 227; that the decision
itself constitutes notice for determining applicable time periods "in
which appeals may be taken"; and that other provisions of § 73.01 or ch.
227 "in conflict with this paragraph" do not apply to such an oral
decision.
Contrary
to the Hogans' assertion, we see nothing in the statute "expressly"
prohibiting petitions to rehear an oral decision.[10] We think it would indeed be poor policy to
bar rehearing or reconsideration of agency decisions merely because they are
rendered orally, rather than in writing.
The
purpose of a rehearing is to enable the agency to correct any errors in the
proceedings before the case goes any further in the adjudicative process. Village of Cobb v. Public Serv. Comm'n,
12 Wis.2d 441, 458, 107 N.W.2d 595, 604 (1961). We agree with the department that to hold that rehearing requests
are not permitted where the decision is rendered orally under § 73.01(4)(dn)
would render the commission powerless to correct mistakes made in a
single-commissioner proceeding at the request of one of the parties. Denying the parties the opportunity to ask
the agency to correct claimed errors in its decision, and requiring them
instead to sue in circuit court, would be contrary to the goals of judicial
economy and the efficient resolution of tax disputes.
In
Metropolitan Greyhound Management Corp. v. Racing Bd., 157 Wis.2d
678, 460 N.W.2d 802 (Ct. App. 1990), we rejected the argument that a circuit
court lacks the authority to reconsider its decision in a judicial review
proceeding after the decision has been appealed. We reasoned as follows:
Motions for
reconsideration pending appeal serve an important function. First, a trial court's reconsideration may
obviate the necessity for an appeal. If
so, the parties are not only spared unnecessary expense, but the interests of
judicial economy are served as well.
Second, even if an appeal is not avoided, a motion for reconsideration
that challenges the trial court's decision can hone its analysis, and thus
assist appellate review. There is
nothing in the law or in logic that persuades us of an intent to exclude
judicial review of administrative agency determinations from these benefits.
Id. at 698-99, 460 N.W.2d at 811.
We think that reasoning is equally applicable here.
Finally,
we note that the commission itself advised the parties that they had a right to
petition for rehearing of the Timken decision.[11] And, once the petition was filed, the
commission proceeded to consider and decide it. In light of these considerations, we find unpersuasive the
Hogans' argument that rehearing petitions are not permitted in oral
dispositions under § 73.01(4)(dn), Stats.
We
therefore reverse the trial court's ruling that the department's petition for
review was untimely filed.[12]
III. The Commission's Authority to Certify the Class
Because the circuit
court dismissed the department's petition for lack of subject matter
jurisdiction (competency to proceed), based on its conclusion that the petition
for review had not been timely filed, the court did not consider whether, as a
matter of law, the commission has the authority to certify and entertain a
class action in refund proceedings.
Pointing to the statement in § 227.58, Stats., that, on appeal from the circuit court's judicial
review of an agency decision, the court of appeals "review[s] ... the
final judgment of the circuit court," the department argues that we may
not consider the issue because it was not encompassed in the court's judgment.
The
extent of the commission's statutory authority is a question of law, and legal
issues are generally reviewed de novo on appeal. Debeck v. DNR, 172 Wis.2d 382, 386, 493 N.W.2d 234,
236 (Ct. App. 1992). Because we review
the legal basis for the commission's decision independently, and because the
parties have fully briefed the issue, we proceed to decide it.
In
concluding that it had authority to certify a class on the Hogans' appeal, and
to proceed with the appeal as a class action, the commission reasoned as
follows: (1) Section 73.01(4)(b), Stats.,
provides that commission proceedings "shall be conducted in accordance
with rules of practice and procedure prescribed by the commission"; (2)
one such rule prescribed by the commission is Wis.
Adm. Code § TA 1.39, which states that "the practice and procedures
before the commission shall substantially follow the practice and procedures
before the circuit courts of this state"; and (3) because the statutes and
rules applicable to circuit courts include provisions for certification of
class actions, the commission has authority to do the same in refund
proceedings. The department argues that
such a conclusion is without legal foundation.
As
a preliminary matter, the parties dispute whether, and if so to what extent, we
should defer to the commission's resolution of this legal issue. The Hogans argue that the commission's
decision is entitled to "controlling weight" because it involves the
construction and interpretation of its own rules. See Pfeiffer v. Board of Regents, 110 Wis.2d
146, 154-55, 328 N.W.2d 279, 283 (1983) (agency's interpretation of its own
regulations entitled to controlling weight unless inconsistent with the
language of the regulation or clearly erroneous). The Pfeiffer rule is based on the following
rationale:
An administrative agency knows the specific purposes of
the regulations it has promulgated.
Moreover, an agency has a certain expertise in the area it is called
upon to regulate. Thus we believe that
an agency is in the best position to interpret its own regulations in
accordance with their underlying purposes.
For this reason, in construing such regulations, we ordinarily defer to
the adopting agency's interpretation.
Id. at 155, 328 N.W.2d at 283.
The
commission's decision, however, is much more than a simple interpretation of
one of its procedural rules. The jump from an administrative rule stating that
the commission will "substantially follow" circuit court procedures
to a decision that the rule permits the commission to entertain class-action
refund claims--in the face of other statutes and rules which, as we discuss
below, suggest quite the contrary--is, in our view, inconsistent with the
principles underlying the Pfeiffer rule.
Nor
does it appear from the record that the commission has considered or ruled in
the past that, in light of the statutes governing tax refund proceedings before
the commission and the department, it has the authority to either certify a
class or permit counsel for an individual refund claimant to file or prosecute
a class refund claim in an appeal from a ruling of the department. Indeed, as the department points out, the
fact that the commission, acting sua sponte, issued, then modified, then
modified yet again, its decision on the class certification, changing its
rationale each time, suggests that the question was indeed one of first
impression before the agency.[13]
We
said in Amsoil, Inc. v. LIRC, 173 Wis.2d 154, 165, 496 N.W.2d 150,
154 (Ct. App. 1992), that, while we will generally pay some deference to an
administrative agency's construction of a statute where the agency has
"special expertise and experience" in interpreting the statute, we
will not do so when the agency decision involves "novel questions of
statutory interpretation that the agency has not previously addressed
...." That is so because judicial
deference to an administrative decision is based on the agency's "uniform
interpretation [of the statute] over a period of time." Id. It is also true, of course, that an agency's decision dealing
with the interpretation and scope of its own powers is not binding on the
courts. Id. We conclude that the commission's ruling in
this case is reviewable de novo on this appeal.[14]
Claims
for tax refunds are governed by § 71.75, Stats. Indeed, § 71.75(1) states that, with
certain exceptions not relevant here, "the provisions for refunds and
credits provided in this section shall be the only method for the filing
and review of claims for refund of income [taxes]" and that "no
person may bring any action or proceeding for the recovery of such taxes other
than as provided in this section."
(Emphasis added.)
The
income tax refund process involves both the department of revenue and the tax
appeals commission. The process begins
in the department which, under the law, is the agency exercising "general
supervision over the administration of the ... tax laws of the state." Section 73.03(1), Stats. The commission,
on the other hand, exercises primarily appellate authority. A taxpayer aggrieved by the department's
denial of a claim for tax refund "may appeal to the tax appeals
commission," § 71.88(1) and (2), Stats.,
and the commission is authorized to hear and decide the cases so appealed as
"the final authority for the hearing and determination of all questions of
law and fact" with respect to the issues properly brought before it. Section 73.01(4)(a) and (e), Stats.
The
commission's class-action rulings in this case contravene two specific and
plainly worded statutes. The first is §
71.75, Stats., which sets forth
the requirements for filing and processing refund claims before the
department. Section 71.75(6) mandates
that "[e]very claim for refund" must be filed with the department
"in the manner, and on a form ... signed by the person ... who filed the
return on which the claim is based."
By permitting the Hogans to change their appeal from one based on their
individual returns to one representing a class of more than 25,000 other
taxpayers, many of whom have never filed their own claims with the department,
would effectively nullify the provisions of § 71.75(6) as to those
taxpayers.
Second,
the statutes dealing with the commission's appellate jurisdiction expressly
state that, in order to prosecute an appeal from the department's assessment of
a tax, the taxpayer must, among other things, testify under oath before the
commission as to his or her actual income.
Section 71.89(2), Stats. This provision, too, would be nullified if
the commission could add thousands of "absent" parties to the
proceeding by permitting the Hogans' individual appeal to proceed as a class
action.
Few
principles of law are as well established as the proposition that administrative
agencies, as entities created by the legislature as part of the executive
branch of government, have only such powers as are expressly granted to them by
the legislature, or as may be necessarily implied from the applicable statutes. The Avenue, Inc. v. La Follette,
183 Wis.2d 409, 415, 515 N.W.2d 339, 342 (Ct. App. 1994). In determining the nature and scope of an
agency's powers, its enabling statutes are to be "strictly construed to
preclude the exercise of a power not expressly granted," and "[a]ny
reasonable doubt as to the existence of an implied power should be resolved
against [the agency]." State
Public Intervenor v. DNR, 177 Wis.2d 666, 671, 503 N.W.2d 305, 308 (Ct.
App. 1993), rev'd on other grounds, 184 Wis.2d 407, 515 N.W.2d 897
(1994) (citation omitted).
However
broad its appellate jurisdiction, the statute authorizing the commission to
establish its own "rules of practice and procedure" cannot, in our
opinion, be reasonably construed to empower the commission to permit an
individual taxpayer, in an appeal from an adverse ruling of the department on
his or her individual refund claim, to undertake to represent a class of
thousands of other taxpayers in the appeal proceedings. For the commission to do so would
contravene--if not nullify--the plainly worded and mandatory statutes
prescribing refund procedures before both the department and the commission
itself, for it would permit the addition of thousands of parties and claims
never processed before the department as required by § 71.75(1) and (6), Stats., and would effectively nullify
the personal-appearance requirements of 71.89(2), Stats., dealing with procedure before the commission. We do not see the commission's statutory
powers as permitting it to add so greatly to its own jurisdiction--much less to
negate statutes and rules governing procedures before another agency.
Undoubtedly,
a class-action procedure before the commission--at least in extraordinary cases
such as this one--would greatly benefit the taxpayers by relieving them from
making individual application for the refunds.
Because, under well-established principles of law, we cannot expand the
commission's authority beyond that granted by the legislature, any such relief
will have to come from that body. Accordingly,
we remand to the circuit court with directions to enter an order reversing the
summary judgment issued by the tax appeals commission on May 27, 1993.
By
the Court.—Judgment reversed
and cause remanded with directions.
No. 95-0438(C)
GARTZKE,
P.J. (concurring). We have held that the Hogans and their
fellow plaintiffs have failed in their effort to pursue the class action
route. We have reached the correct but
perhaps an unjust result. Our decision
means that federal retirees whose federal pensions have been unconstitutionally
taxed by Wisconsin must individually seek refunds under § 71.75, Stats.
Section 71.75(2) provides in pertinent part, "With respect to
income taxes ..., refunds may be made if the claim therefor is filed within 4
years of the unextended date under this section on which the tax return was
due."
The
Hogans tell us that when this proceeding commenced in April 1989 over 20,000
retired civilian employees of the federal government and survival annuitants of
such deceased retirees, and 5,000 military retirees were subjected to
Wisconsin's unlawful tax. The Hogans
assert members of the class also made additional filings with the department of
justice, the legislature, the department of revenue and the claims board to
supplement, amend and perfect the class members' entitlement to full relief.
Moreover,
we are told that many class members are elderly citizens who live on fixed
incomes and have limited financial resources, several have been legally
incompetent since this case began and others are physically incapable of
indicating their rights. We are told
that many class members died during the first year of this proceeding and the
rate of death is increasing dramatically.
We are told that many class members, due to their age and circumstances,
require assistance to perfect their claims but cannot afford to pay the cost of
preparing an amended return. In other
cases, the cost of preparing an amended return equals or exceeds the refund
due.
Our
decision may thus result in persons otherwise entitled to refunds losing their
rights because they have relied on this class action and it is too late,
expensive or inconvenient for them to file individual claims for a refund. That result is unjust. Persons whose property has effectively been
taken by an unlawful tax should not be penalized because they relied on what
seemed a reasonable attempt to obtain their refunds through a class
action. If they will be penalized, then
the legislature should consider protecting those persons by extending the time
to file their claims for refunds and perhaps directing the department of
revenue to assist them in processing their claims.
I
am authorized to state that Judges Eich and Vergeront join this concurring
opinion.
[1] In 1989, the legislature added payments from
federal civil service and military retirement systems to the list of retirement
benefits exempt from income taxation under § 71.05(1), Stats., 1989 Wis. Act 31, § 1817m.
The law did not affect the liability of federal retirees for pre-1989
taxes, however.
[2] In their brief, the Hogans estimate the class
at something in excess of 25,000 persons, including over 20,000 retired
civilian employees and survivor annuitants of deceased retirees, and over 5,000
military retirees.
[3] Section 227.48(2), Stats., provides that agency decisions "shall
include" a notice of the right to petition for rehearing and judicial
review and that the time limitations for filing rehearing petitions under §
227.49(1), Stats., or petitions
for judicial review under § 227.53(1)(a), Stats.,
do not begin to run "until the agency has complied with this
subsection."
Section
227.49(1), Stats., states that a
party aggrieved by a final agency order may petition for rehearing within
twenty days after service of the order.
Section 227.53(1)(a)2, Stats.,
provides that, where no rehearing petition is filed, an aggrieved party must
file a petition for judicial review of the order within thirty days after
service of the order and that "[i]f a rehearing is requested under s.
227.49, any party desiring judicial review shall serve and file a petition for
review within 30 days after service of the order finally disposing of the
application for rehearing ...."
[4] By this time, Timken was the sole member of
the commission remaining on the case, all others having either recused
themselves or left the commission in the interim.
Timken proceeded to decide the
motion under § 73.01(4)(dn), Stats.,
which authorizes any member of the commission, with the consent of the parties,
to render an oral decision in any matter pending before the agency, and
provides:
Any party may appeal such oral decision as provided in
s. 73.015. Oral decisions
constitute notice for purposes of determining the time in which appeals may be
taken. Provisions of this section ch.
227 in conflict with this paragraph do not apply to decisions rendered under
this paragraph.
Section
73.015, Stats., referred to in
the statute, states simply that "[a]ny adverse determination of the tax
appeals commission is subject to review in the manner provided in ch.
227."
[5] The Hogans contend that the June 16th filing
was ineffective because the other parties were not served until the 17th, which
was one day beyond the thirty-day deadline.
As will be seen below, we reject that argument.
[7] Section 227.52, Stats., states, "Administrative decisions which
adversely affect the substantial interests of any person, whether by action or
inaction, whether affirmative or negative in form, are subject to review as
provided in this chapter ...."
[8] It is instructive that, in the federal courts,
orders granting certification are not considered final "in part because
every certification is subject to continuing reconsideration up to the time of
final judgment." 15B Wright, Miller & Cooper, Federal
Practice & Procedure, § 3914.19, at 63 (1992).
Finally,
we note that in their arguments on the merits of the commission's authority to
certify a class, the Hogans themselves argue that class certification "`is
a procedural right only, ancillary to the litigation of substantive claims'"
(quoting Deposit Guar. Nat'l Bank v. Roper, 445 U.S. 326, 345
(1980) (Powell, J., dissenting)) (emphasis the Hogans'), and also citing Harris
v. Palm Springs Alpine Estates, Inc., 329 F.2d 909, 912-13 (9th Cir.
1964)).
[9] As noted supra note 3,
§ 227.53(1)(a)2, Stats.,
requires petitions for review to be filed within thirty days after service of
the agency decision, unless rehearing is requested under § 227.49--in which
case the petition for review must be filed within thirty days of the decision
disposing of the rehearing application.
And § 227.49(1) requires a petition for rehearing to be filed within
twenty days of the decision.
[10] We do not agree that the statement in the
statute that other provisions of ch. 227 that are "in conflict" with
§ 73.01(4)(dn) are inapplicable may be considered an "express" bar to
rehearing petitions simply because such petitions are authorized elsewhere in
ch. 227. As we discuss in greater
detail below, we see no "conflict" between the oral-hearing
provisions of § 73.01(4)(dn) and the rehearing provisions of §
227.49. Indeed, as may be seen, we see
them as complementary.
[11] The notice of appeal rights accompanying the
Timken decision, in addition to informing the parties of their right to seek
judicial review, also states that "[a]ny party has a right to petition for
a rehearing of this decision within 20 days ...."
[12] The Hogans also argue that the department
should be estopped from petitioning for review of the May 27, 1993, Timken decision
(or, more properly, from the denial of its petition for rehearing of that
decision), because it had also sought rehearing of the commission's October 28,
1992, decision certifying the class.
According to the Hogans, a petition for rehearing under § 227.49(1),
Stats.--which states that
"[a]ny person aggrieved by a final [agency] order" may petition for
rehearing--assumes the finality, and thus the appealability, of the order. They see such action as inconsistent with
the position the department now takes--that is, that the 1992 decision was not
a final order for purposes of a ch. 227 review proceeding--and they claim that
the department should be prohibited from so arguing under the rule of judicial
estoppel.
Judicial
estoppel is "an equitable remedy" which "precludes a party from
asserting a position in a legal proceeding that is inconsistent with a position
previously asserted." Coconate
v. Schwanz, 165 Wis.2d 226, 231, 477 N.W.2d 74, 75 (Ct. App.
1991). The rule, however, applies only
in situations where the challenged actions constitute "cold[]
manipulat[ion]," rather than mistake or inadvertence. State v. Fleming, 181 Wis.2d
546, 558, 510 N.W.2d 837, 841 (Ct. App. 1993).
By its 1992 rehearing petition, the department was essentially seeking
reconsideration of the commission's interlocutory ruling on class
certification, and even if it could be considered that the motion, or its
title, had great legal significance, we have been provided with no evidence
that the department's description of its motion as one for "rehearing
under sec. 227.49" was anything other than inadvertent, much less the
result of "cold[]manipulat[ion]."
Indeed, the commission treated the motion as one for reconsideration,
titling its decision: "Ruling and Order on Motion for
Reconsideration."
[13] The department has also referred us to two
earlier decisions where the commission refused to permit the pursuit of relief
by the taxpayer on behalf of anyone but the taxpayer him- or herself. See Stege v. DOR,
Docket No. PTR-6740, 11 WTAC 81, Wis. Tax Rep. (CCH) ¶ 201-729 (Sept. 16,
1980); Morrissey v. DOR, Docket No. I-8189 (Apr. 1, 1981).
[14] The Hogans contend that our review need not
go further than Hogan v. Musolf, 163 Wis.2d 1, 471 N.W.2d 216
(1991), cert. denied, 502 U.S. 1030 (1992), which they suggest
establishes the validity of the class as a matter of law. We disagree. Hogan was a 42 U.S.C. § 1983 class action filed by
the Hogans in circuit court raising, among others, the same arguments they are
advancing here. The primary issue in Hogan
was whether the plaintiffs had to exhaust their administrative remedies before
pursuing relief in circuit court under § 1983.
An ancillary issue had to do with intergovernmental immunity claims
under 4 U.S.C. § 111, which preserves federal employees' immunity from
discriminatory state taxation.
The
Hogans base their argument on the supreme court's statement in the opinion that
the action must be dismissed because "[t]he plaintiffs have a plain,
adequate, and complete [administrative] remedy" which must be pursued
before coming to court under § 1983. Hogan,
163 Wis.2d at 27, 471 N.W.2d at 226. On
its face, however, the statement does not bear in any way upon the tax appeals
commission's authority to certify a class and entertain a class refund
proceeding. The issue was not before
the court in any guise, and the Hogans' argument on the point is unavailing.