Santander Consumer USA Inc v. State Treasurer
317 Mich. App. 316
| Mich. Ct. App. | 2016Background
- Ally Financial and Santander purchased retail installment contracts from auto dealerships and paid dealers the financed sales price (including sales tax), then pursued defaults and later wrote off uncollectible account balances as federal bad debts under 26 U.S.C. § 166.
- Plaintiffs sought Michigan refunds/deductions under the state bad-debt statute, MCL 205.54i, after the Department of Treasury denied claims.
- The Department denied refunds because (a) plaintiffs included amounts attributable to repossessed vehicles (which MCL 205.54i excludes), (b) plaintiffs failed to present RD-108 title/sales documentation the Department required to prove tax payment, and (c) Ally’s post-write-off “election” forms did not meet the statute’s written-election requirement.
- The Court of Claims granted summary disposition for the Department in three actions (Ally via MCR 2.116(C)(10); Santander via MCR 2.116(C)(8) and (C)(10)).
- On appeal, the Court of Appeals affirmed, holding: Ally’s election language applied only to “accounts currently existing or created in the future” (so not to already-written-off accounts); the Department may require RD-108 evidence under MCL 205.54i(4); and repossessed property is excluded from bad-debt deductions under the statute.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Ally’s written “election” forms satisfy MCL 205.54i(3) and entitle Ally to claim refunds for accounts already written off | Ally: the elections transfer refund rights to the lender for the accounts at issue | Department: the elections apply only prospectively or to "currently existing" accounts and do not cover already-written-off debts | Held: Elections were unambiguous and limited to “accounts currently existing or created in the future,” so they did not entitle Ally to refunds for previously written-off accounts |
| Whether the Department may require RD-108 forms (title/registration statements) as evidence under MCL 205.54i(4) | Plaintiffs: RD-108 requirement is an improper, artificial evidentiary barrier and cannot be imposed absent formal rulemaking | Department: statute authorizes it to require evidence it deems necessary; RD-108s reasonably prove tax remittance | Held: Department may require evidence it deems necessary; claimant bears burden to prove payment and the Department’s RD-108 practice is a permissible exercise of its authority |
| Whether repossessed property may be included when calculating bad-debt deductions under MCL 205.54i(1)(a) | Plaintiffs: statute should permit a pro rata deduction for net loss after accounting for repossessed property (pointing to other states’ approaches) | Department: statute expressly excludes repossessed property from bad-debt deductions | Held: Plain statutory text excludes repossessed property; Court defers to Department interpretation and prior appellate analysis, so repossessed property is not deductible |
| Standard of review and role of courts in statutory/contract interpretation | Plaintiffs: urge contextual or equitable readings to allow deductions/refunds | Department: statutory text controls; courts must interpret, not rewrite, the statute | Held: Court applies de novo review, enforces unambiguous text, and will not rewrite statute for fairness concerns |
Key Cases Cited
- Urbain v. Beierling, 301 Mich. App. 114 (discussing MCR 2.116(C)(10) factual-sufficiency review)
- Klein v. H-P Pelzer Auto Sys., Inc., 306 Mich. App. 67 (summary disposition standard and evidence viewed for (C)(10) motions)
- MacDonald v. PKT, Inc., 464 Mich. 322 (MCR 2.116(C)(8) tests legal sufficiency; only pleadings considered)
- White v. Taylor Distrib. Co., Inc., 289 Mich. App. 731 (contract interpretation is question of law reviewed de novo)
- Wells Fargo Bank, N.A. v. Cherryland Mall Ltd. P'ship, 295 Mich. App. 99 (unambiguous contract language governs; extrinsic evidence only if ambiguous)
- Klapp v. United Ins. Group Agency, Inc., 468 Mich. 459 (contract ambiguity principles)
- Farm Bureau Mut. Ins. Co. of Mich. v. Nikkel, 460 Mich. 558 (contract interpretation/ambiguity standard)
- Menard, Inc. v. Dep’t of Treasury, 302 Mich. App. 467 (tax exemptions/deductions strictly construed; taxpayer bears burden)
- Andrie Inc. v. Treasury Dep’t, 496 Mich. 161 (principles on tax exemptions and burden of proof)
- In re Complaint of Rovas, 482 Mich. 90 (agency constructions entitled to respectful consideration)
- Catalina Marketing Sales Corp. v. Dep’t of Treasury, 470 Mich. 13 (revenue bulletins are interpretive and not binding but merit consideration)
- JW Hobbs Corp. v. Dep’t of Treasury, 268 Mich. App. 38 (agency bulletin authority and interpretation)
- Trinova Corp. v. Dep’t of Treasury, 433 Mich. 141 (agency discretionary practices need not be formal rules)
- Guardian Indus. Corp. v. Dep’t of Treasury, 198 Mich. App. 363 (agency policy as exercise of discretionary authority)