CEDARBROOK REALTY, INC. аnd John W. Merriam and Thomas Wynne, Inc., t/a Cedarbrook Joint Venture, Appellants, v. Charles F. NAHILL, Jr., Tax Collector of Cheltenham Township, School District of Cheltenham Township, Montgomery County, Cheltenham Township, Montgomery County Institution District, Montgomery County Tax Claim Bureau, the Board of Assessment Appeals for Montgomery County, Appellees.
Supreme Court of Pennsylvania
March 16, 1979
399 A.2d 374 | 484 Pa. 441
Argued Nov. 16, 1978.
Charles Potash, Roger B. Reynolds, Samuel H. High, Jr., Michael D. Marino, Morristown, Clark F. Hess, King of Prussia, G. Alan Kramer, Harrisburg, for appellees.
Before EAGEN, C. J., and O‘BRIEN, ROBERTS, NIX, MANDERINO and LARSEN, JJ.
OPINION OF THE COURT
NIX, Justice.
Appellants, Cedarbrook Realty, Inc. and John W. Merriam and Thomas Wynne, Inc., t/a Cedarbrook Joint Venture (hereinafter collectively referred to as “Cedarbrook” or
Cedarbrook asserts that the Chancellor was incorrect in dеnying the requested injunctive relief arguing that Section 19 is unconstitutional in that it deprives the taxpayer of procedural due process by not providing for a hearing prior to (or after) seizure of the taxpayer‘s property and in the alternative that Section 19 was impliedly repealed by the provisions of the Real Estate Tax Sale Law of 1947. Act of July 7, 1947, P.L. 1368, No. 542, art. I; § 101, et seq.;
Normally, equity has no jurisdiction to restrain the collection of taxes and the parties should be made to seek the statutorily prescribed remedies. Rochester and Pittsburgh Coal Co. v. Indiana County Board of Assessment and Revision of Taxes, 438 Pa. 506, 266 A.2d 78 (1970). Where there is a challenge that the statutory remedy does not meet the mandate of due process, as is the case here, the claim is in essеnce an assertion of the inadequacy of the statutorily prescribed remedy and equitable intervention for the consideration of such a complaint is obviously appropriate.2 Thus, the Chancellor properly entertained the challenge and it
When an individual is deprived of property by governmental action, he must be afforded at some point in the proceeding an opportunity to be heard. The point at which this hearing must take place, however, varies with the circumstanсes. Earlier decisions of the United States Supreme Court clearly approved of tax collection procedures that only provided an opportunity for a hearing through a subsequent suit for redress.3 In Phillips v. Commissioner of Internal Revenue, 283 U.S. 589, 51 S.Ct. 608, 75 L.Ed. 1289 (1931), Mr. Justice Brandeis, writing for the Court, noted that the right of the government to collect its internal revenue by summary administrative proceedings “has long been settled“. Id. at 595, 51 S.Ct. 608.
Where, as here, adequate opportunity is afforded for a later judicial determination of the legal rights, summary proceedings to secure prompt performance of pecuniary obligations to the government have been consistently sustained. Compare Cheatham v. United States, 92 U.S. 85, 88-89, 23 L.Ed. 561; Springer v. United States, 102 U.S. 586, 594, 26 L.Ed. 253; Hagar v. Reclamation District No. 108, 111 U.S. 701, 708-709, 4 S.Ct. 663, 28 L.Ed. 569. Property rights must yield provisionally to governmental need. Thus, while protection of life and liberty from administrative action allеged to be illegal may be obtained promptly by the writ of habeas corpus, United States v. Woo Jan, 245 U.S. 552, 38 S.Ct. 207, 62 L.Ed. 466; Ng Fung Ho v. White, 259 U.S. 276, 42 S.Ct. 492, 66 L.Ed. 938,
In Nickey v. Mississippi, 292 U.S. 393, 396, 54 S.Ct. 743, 744, 78 L.Ed. 1323 (1934) the Court stated:
There is no constitutional command that notice of the assessment of a tax, and opportunity to contest it, must be given in advance of the assessment. It is enough that all available defenses may be presented to a competent tribunal before exaction of the tax and before the command of the state to pay it becomes final and irrevocable. Wells, Fargo & Co. v. Nevada, 248 U.S. 165, 39 S.Ct. 62, 63 L.Ed. 190; Bristol v. Washington County, 177 U.S. 133, 146, 20 S.Ct. 746, 44 L.Ed. 701; McMillen v. Anderson, 95 U.S. 37, 23 L.Ed. 335; see American Surety Co. v. Baldwin, 287 U.S. 156, 168, 53 S.Ct. 98, 77 L.Ed. 231.
The classic rationale in tax collection cases was announced by Mr. Justice ROBERTS in Bull v. United States, 295 U.S. 247, 259-60, 55 S.Ct. 695, 699, 700, 79 L.Ed. 1421 (1935):
A tax is an exaction by the sovereign, and necessarily the sovereign has an enforcible claim against every one within the taxable class for the amount lawfully due from him. The statute prescribes the rule of taxation. Some machinery must be provided for applying the rule to the facts in each taxpayer‘s case, in order to ascertain the amount due. The chosen instrumentality for the purpose is an administrative agency whose action is called an assessment. The assessment may be a valuation of property subject to taxation which valuation is to be multiplied by the statutory rate to ascertain the amount of tax. Or it may include the calculation and fix the amount of tax payable, and assessments of federal estate and income taxes are of this type. Once the tax is assessed the taxpayer will owe the sovereign the amount when the date fixed by law for payment arrives. Default in meeting the obligation calls for some procedure whereby payment can be enforced. The statute might remit the Government to an action at law wherein the taxpayer could offer such defense as he had. A judgment against him might be collected by the levy of an execution. But taxes are the life-blood of government, and their prompt and certain availability an imperious need. Time out of mind, therefore, the sovereign has resorted to more drastic means of collection. The assessment is given the force of a judgment, and if the amount assessed is not paid when due, administrative officials may seize the debtor‘s property to satisfy the debt.
In recognition of the fact that erroneous detеrminations and assessments will inevitably occur, the statutes, in a spirit of fairness, invariably afford the taxpayer an opportunity at some stage to have mistakes rectified. Often an administrative hearing is afforded before the assessment becomes final; or administrative machinery is provided whereby an erroneous collection may be refunded; in some instances both administrative relief and redress by an action against the sovereign in one of its courts are permitted methods of restitution of excessive or illegal exaction. Thus the usual procedure for the recovery of
debts is reversed in the field of taxation. Payment precedes defense, and the burden of proof, normally on the claimant, is shifted to the taxpayer. The assessment supеrsedes the pleading, proof and judgment necessary in an action at law, and has the force of such a judgment. The ordinary defendant stands in judgment only after a hearing. The taxpayer often is afforded his hearing after judgment and after payment, and his only redress for unjust administrative action is the right to claim restitution. But these reversals of the normal process of collecting a claim cannot obscure the fact that after all what is being accomplished is the recovery of a just debt owed the sovereign.
[Emphasis added].
In the more recent United States Supreme Court decisions concerning the procedural due process requirement where a deprivation of the property of the individual was involved, the Court has become more critical of рrocedures that provide only for redress through subsequent suits. Matthews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976); North Ga. Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601, 95 S.Ct. 719, 42 L.Ed.2d 751 (1975); Mitchell v. W. T. Grant Co., 416 U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406 (1974); Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972); Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970); Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969). This new view of the mandate of due process has at least, in part, resulted from the rejection of the position that property rights are entitled to less constitutional protection than personal rights.
Such difficulties indicate that the dichotomy between personal liberties and property rights is a false one. Property does not have rights. People have rights. The right to enjoy property without unlawful deprivation, no less than the right to speak or the right to travel, is in truth a ‘personal’ right, whether the ‘property’ in question be a welfare check, a home, or a savings account. In fact, a fundamental interdependence exists between the personal
right to liberty and the personal right in property. Neither could have meaning without the other. Lynch v. Household Finance Corp., 405 U.S. 538, 552, 92 S.Ct. 1113, 1122, 31 L.Ed.2d 424 (1972).4
While the recent decisions in the due process area have not reached the point of prohibiting procedures where redress can only be obtained in subsequent suits, they have made clear that where the governmental action does not serve a particularly urgent need an individual deprived of his property is entitled to more than the availability of a subsequent suit for redress. See, e. g., Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972); Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970). Appellee has appropriately noted that many of these recent decisions involved state remedies providing for the resolution of private disputes. See, e. g., North Georgia Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601, 95 S.Ct. 719, 42 L.Ed.2d 751 (1975); Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972). We have been cautioned that “due process is flexible and calls for such procedural protections as the particular situation demands.” Morrissey v. Brewer, 408 U.S. 471, 481, 92 S.Ct. 2593, 33 L.Ed.2d 484 (1972). See also Matthews v. Eldridge, 424 U.S. 319, 334-35, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976).
[C]onsideration of what procedures due process may require under any given set of circumstances must begin with a determination of the precise nature of the government function involved as well as of the private interest that has been affected by governmental action. Cafeteria & Restaurant Workers Union v. McElroy, 367 U.S. 886, 895, 81 S.Ct. 1743, 6 L.Ed.2d 1230 (1961). To say that the concept of due process is flexible does not mean that judges are at large to apply it to any and all relationships. Its flexibility is in its scope once it has been determined that some process is due; it is a recognition that not all situations calling for procedural safeguards call for the
same kind of procedure. Morrissey v. Brewer, supra at 481, 92 S.Ct. at 2600.
Even with the expanded perception of the requirements of procedural due process, the Court hаs nonetheless recognized the right of the government to seize property without affording the property owner a predeprivation or prompt postdeprivation hearing where the governmental interest involved is particularly urgent. See Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 94 S.Ct. 2080, 40 L.Ed.2d 452 (1974) (seizure of yacht carrying contraband); Ewing v. Mytinger & Asselberry, Inc., 339 U.S. 594, 70 S.Ct. 870, 94 L.Ed. 1088 (1950) (misbranded drugs); Coffin Bros. & Co. v. Bennett, 277 U.S. 29, 48 S.Ct. 422, 72 L.Ed. 49 (1928) (bank failure); Stoehr v. Wallace, 255 U.S. 239, 41 S.Ct. 293, 65 L.Ed. 604 (1921) (a wartime emergency); North Am. Cold Storage Co. v. City of Chicago, 211 U.S. 306, 29 S.Ct. 101, 53 L.Ed. 195 (1908) (a contagion that has threatened the public). This is particularly significant in view of the traditionally accepted importance of the tax collection process to the perpetuation and the continuing vitality of government. Supportive of the fact that the summary process may still be resorted to in the tax collection process was the relatively recent affirmance of the Phillips decision in Fuentes v. Shevin, supra at 92, 92 S.Ct. 1983 n. 24.
Cedarbrook argues that Commissioner of Internal Revenue v. Shapiro, 424 U.S. 614, 96 S.Ct. 1062, 47 L.Ed.2d 278 (1976), compels us to find that due process now requires, even in tax collection matters, a рredeprivation or at least a prompt postdeprivation hearing. Their reliance is placed upon the following language in that opinion:
This Court has recently and repeatedly held that, at least where irreparable injury may result from a deprivation of property pending final adjudication of the rights of the parties, the Due Process Clause requires that the party whose property is taken be given an opportunity for some kind of predeprivation or prompt post-deprivation hearing
at which some showing of the probable validity of the deprivation must be made. Commissioner of Internal Revenue v. Shapiro, supra at 629, 96 S.Ct. at 1072 (Footnote omitted).
Further that Court stated:
Accordingly, neither the holding nor the dicta in Phillips support the proposition that the tax collector may constitutionally seize a taxpayer‘s assets without showing some basis for the seizure under circumstances in which the seizure will injure the taxpayer in a way that cannot be adequately remedied by a Tax Court judgment in his favor. Instead it would appear to be entirely consistent with our more recent holdings. Id. at 632, 96 S.Ct. at 1073.5
Although at first blush the above quoted portions of the Shapiro decision would appear to provide impressive authority for Cedarbrook‘s position, we are not convinced that a careful analysis of that case requires such a result. At the onset, it is significant that the Shapiro Court was not squarely confronted with a due process question. As the first paragraph of the decision indicates, the Court was
Here, although the basis for the tax liability is disputed, it is known to the taxpayer. Further, it is apparent that the record at this preliminary stage does not justify a finding that the taxing authorities cannot prevail on their claims. Thus, we cannot agree that Shapiro requires a finding that the Chancellor erred in denying preliminary injunctive relief. Further, we do not accept the view that Shapiro mandates a blanket disavowal of our prior cases in which we have sustained tax statutes where relief was limited to suits for redress. See, e. g., Rockhill Iron and Coal Co. v. Fulton Co., 204 Pa. 44, 53 A. 530 (1902).
Under the circumstances presented in this matter, we are satisfied that the taxpayer‘s rights are not violated by requiring in thе Third Class County Assessment Law that claims be channelled into an administrative hearing process followed ultimately by judicial review. The rationale for this procedure was forcefully delineated by this Court as follows:
. . . the imperative necessity for prompt payment gives the complaining taxpayer but one remedy, and that is through appeal to the courts from the assessment or valuation. The very law which gives the appeal directs immediate payment, and then refunding the excess collected if the appeal be successful. He cannot resist or delay by litigation the tax collector who attempts to levy what the taxpayer thinks an unjust tax. His one and only remedy against unjust and discriminatory taxation is the one pointed out by the act of the аssembly. And we must say that the legislature, in view of the absolute necessity of prompt payment, as well as the dissatisfaction and irritation caused by want of uniformity, was moved to make the remedy as ample as possible by the allowance of these appeals.
Rockhill Iron and Coal Co. v. Fulton County, supra, 204 Pa. at 47-48, 53 A. at 531.
The rationality of that legislative judgment is amply vindicated by the experience of municipalities and counties with
Cedarbrook further contends that Section 19 of the Local Tax Collection Law of 1945 was impliedly repealed by the provisions of the Real Estate Tax Sale Law of 1947 which does not authorize the remedy of sequestration of rents.11 Under the Pennsylvania Statutory Construction Act, a latter statute impliedly repeals the former only if it “purports to be a revision of all statutes upon a particular subject, or sets up a general or exclusive system сovering the entire subject matter of a former statute and is intended as a substitute for such former statute“; or “purports to establish a uniform and mandatory system covering a class of subjects” or the two statutes are “irreconcilable“.
. . . to say thаt the general Act of 1945 (the Local Tax Collection Law) which contains no local option provision, can be nullified as to certain counties of the state by their local exercise of an option conferred by an entirely different statute (the Real Estate Tax Sale Law) would be to carry repeal by implication to an unheard of extent.
Similarly, the optional nature of county, municipal and school district utilization of the tax collection process set up by the Real Estate Tax Sale Law of 1947 militates against any inference that the legislature intended by its enactment to set up “a general or exclusive system covering the entire subject of the former statute” and to “substitute for such former statute“. Additionally, the very title and preamble of the 1947 law indicates that it does not purport to cover the entire subject of the 1945 statute.12
Appellant also contends that the legislature intended repeal of prior statutes which deal with the particular subject of in rem collection of delinquent real estate taxes by enactment of the 1947 statute, hence precluding local authorities from availing themselves of the remedy of rent sequestration. This argument is untenable. The collection process envisaged by the Real Estate Tax Sales Law is triggered only when tax claims are delinquent until May of the year following that in which the taxes are due.
Finally appellant contends that the 1945 statute is “irreconcilable” with the 1947 Act in that the prior statute authorizes sequestration by the local tax collector instead of the Bureau; in that it permits sequestration by summary proceedings rather than by judicial proceedings; and in that it would permit sequestration two years before the tax claim becomes absolute and without regard to the taxpayer‘s right to file exceptions under the 1947 Act. Compare
Accordingly, the Order of the Commonwealth Court affirming the Decree of the Chancellor is affirmed. Appellants to pay all costs.
POMEROY, former J., did not participate in the consideration or decision of this case.
MANDERINO, J., filed a dissenting opinion.
ROBERTS, Justice, concurring.
I agree with the majority that appellant Cedarbrook is not entitled to equitable relief. I reach this conclusion, however, for entirely different reasons. Cedarbrook had available and took full advantage of the very оpportunity to be heard it alleges now, in this proceeding, does not exist. Cedarbrook‘s constitutional challenge to Section 19 of The Local Tax Collection Law of 19451 is, therefore, without merit. Further, on this record, equitable principles preclude the grant of injunctive relief Cedarbrook seeks.
Cedarbrook admits that it received timely notice of its 1977 real estate assessments and 1977 tax obligations of nearly $2,000,000. Pursuant to the Act of May 22, 1933,2 Cedarbrook appealed its 1977 assessment to the Montgomery County Board of Assessment in August, 1976. The Board rejected Cedarbrook‘s claim, and Cedarbrook lodged an appeal from that ruling. Pursuant to Section 518.1 of The General County Assessment Law,3 a trial de novo was held in the Court of Common Pleas of Montgomery County, аnd Cedarbrook‘s claims were again rejected. After the Board‘s review and rejection of Cedarbrook‘s request for relief, appellees, local taxing bodies, notified Cedarbrook of their intention to notify Cedarbrook‘s tenants concerning rents due, pursuant to the provisions of Section 19 of The Local Tax Collection Law.
Although Section 5020-518.1 of The General County Assessment Law specifically provides “[t]hat the appeal shall not prevent the collection of taxes complained of, but in case the same shall be reduced, then the excess shall be returned to the person or persons who shall have paid the same,” Cedarbrook deliberately withheld payment of its 1977 taxes.
Since Section 5020-518.1 of The General County Assessment Law provides taxpayers ample opportunity to be heard on their objections both to assessments and taxes before there can be any recourse to the remedy provided in
Cedarbrook‘s delaying posture and the extraordinary supersedeas of enforcement proceedings granted Cedarbrook by a majority of this Court on November 22, 1977,5 after Commonwealth Court refused to stay appellees collection of delinquent taxes and before any decision in Commonwealth Court or a fortiori, a petition seeking allowance of appeal had been filed, required appellees to meet their governmental obligations with funds borrowed on the open market. Indeed, Cedarbrook‘s failure to pay its taxes has had a substantial adverse financial impact on appellees and the taxpayers. Cedarbrook‘s taxable real estate holdings comprise nearly ten per cent of appellees’ tax base.6 Equitable principles require that those who seek the protection of the Chancellor must themselves act in good faith. In light of
The trial court in full and complete accord with the applicable legal and equitable principles and in the exercise of its sound discretion properly denied the injunctive relief Cedаrbrook requested. To have granted that relief would have constituted a flagrant abuse of discretion and error of law.
The record clearly demonstrates that all costs of these proceedings should be imposed upon Cedarbrook.
MANDERINO, Justice, dissenting.
I must dissent. The provisions of the rent sequestration act,
“Our conclusion that the Court of Appeals correctly reversed the judgment of the District Court and remanded for further proceedings is fortified by the fact that construing the [Anti-Injunction] Act to permit the Government to seize and hold property on the mere good-faith allegation of an unpaid tax would raise serious constitutionаl problems in cases, such as this one, where it is asserted that seizure of assets pursuant to a jeopardy assessment is causing irreparable injury. This Court has recently and repeatedly held that, at least where irreparable injury may result from a deprivation of property pending final adjudication of the rights of the parties, the Due Process Clause requires that the party whose property is taken be given an opportunity for some kind of predeprivation or prompt post-deprivation hearing at which some showing of the probable validity of the deprivation must be made.11
The majority attempts to distinguish the above-quoted language from Shapiro because “it is clear” that appellant, the taxpayer, knew the basis of the tax assessment, and thаt the “right to injunctive relief is available only if the taxpayer can establish that the taxing authority could not possibly prevail in its tax claim.” (p. 381). What concerns me is the majority‘s complete disregard of the balancing test which takes into account the individual and governmental interests involved when an allegation of procedural due process is
Additionally, I must reject the majority‘s acceptance of appellee‘s contention that appellant‘s rights were protected because it received a hearing before the Court of Common Pleas. Whatever due process was afforded to appellant when it petitioned the court for a hearing did not arise from the application of the rent sequestration act. Rather, appellant petitioned the court to use its injunctive powers in a collateral proceeding. Yet, the majority justifies the application of a narrow scope of review because appellant seeks to obtain on its own the process which it cannot otherwise seek under the act. Such a Catch 22 situation cannot be said to meet even the minimum standards of due process.
As the provisions of