Carwell Elevator Co., Inc. v. Leathers

101 S.W.3d 211

CARWELL ELEVATOR CO., INC., and Poinsett Rice & Grain, Inc. v. Timothy LEATHERS, Commissioner of Revenue; and Arkansas Rice Research and Promotion Board.

No. 02-240.

Supreme Court of Arkansas.

March 20, 2003.

COPYRIGHT MATERIAL OMITTED

Snellgrove, Langley, Lovett, & Culpepper, by Todd Williams, Jonesboro, for appellants.

Mark Pryor, Atty. Gen., by: Arnold M. Jochums, Asst. Atty. Gen.; and Friday, Eldredge & Clark, by William A. Waddell, Jr., for appellees.

JIM HANNAH, Justice.

Carwell Elevator Co., Inc., and Poinsett Rice & Grain, Inc., appeal the decision of the Circuit Court of Pulaski County finding that Carwell and Poinsett may not recover assessments of the Arkansas Rice Research & Promotion Board ("Board") that they paid as first-time rice buyers because the assessments were voluntarily paid. Carwell and Poinsett also appeal the trial court's finding that Carwell and Poinsett's claims that the assessments were illegal are precluded by laches.

Carwell and Poinsett allege that the trial court erred in failing to find that an illegal-exaction lawsuit creates a class suit. Carwell and Poinsett also allege that the trial court erred in failing to find that they are entitled to a refund of the assessments paid.

Facts

Act 344 of 1995, codified at Ark.Code Ann. § 2-20-511 (Repl.1996), authorized the Board to refer to the rice producers the question of whether the Board should levy an assessment of $1.35 per bushel to be paid by buyers of rice at the first point of sale. The producers approved the assessment, and beginning in August 1996, the assessment was collected. On August 14, 1996, Gulf Rice Arkansas, Inc. brought suit alleging that Act 344 constituted an unlawful delegation of taxing power under article 2, section 23, and an illegal exaction under article 16, section 13, of the Arkansas Constitution. The Gulf Rice suit was resolved at the trial level by summary judgment finding that Act 344 constituted an unlawful delegation of legislative authority. That summary judgment was appealed to this court and affirmed in Leathers v. Gulf Rice Arkansas, Inc., 338 Ark. 425, 994 S.W.2d 481 (1999).

In Gulf Rice, this court affirmed the trial court's holding that Act 344 constituted an unconstitutional delegation of legislative authority. In addition, we noted that we did not address the issue of whether the assessment constituted an illegal exaction. In Gulf Rice, we stated, "Because we agree with the Chancellor that Act 344 is unconstitutional as an unlawful delegation of legislative power, it is unnecessary to examine whether the Act's assessment is also invalid as an illegal exaction" Gulf Rice, 338 Ark. at 434 n. 1, 994 S.W.2d 481.

On February 15, 2000, Carwell and Poinsett filed an illegal-exaction suit in Pulaski County Circuit Court alleging that they are entitled to a refund of all assessments they paid after Gulf Rice filed its lawsuit in 1996. This case was tried before the circuit court on October 8, 2001.

In bench trials, the standard of review on appeal is not whether there is any substantial evidence to support the finding of the court, but whether the judge's findings were clearly erroneous or clearly against the preponderance of the evidence. Shelter Mut. Ins. Co. v. Kennedy, 347 Ark. 184, 60 S.W.3d 458 (2001); Schueck v. Burris, 330 Ark. 780, 957 S.W.2d 702 (1997).

Illegal Exaction

Carwell and Poinsett argue that the trial court erred in failing to find that an illegal-exaction lawsuit creates a constitutional class action entitling them to refunds of rice assessments they paid pursuant to the assessment levied under Act 344. Carwell and Poinsett rely upon the holding in Gulf Rice, supra, that Act 344 constituted an unlawful delegation of legislative authority. Carwell and Poinsett allege that they are members of the class of rice buyers in Gulf Rice, supra, and therefore there is already a finding that the assessment was illegal. On that basis Carwell and Poinsett allege they are entitled to a refund of the assessments they paid.

However, the trial court found that as a matter of fact and law, Gulf Rice was not a class action on behalf of all rice buyers subject to the assessment, and that the case only adjudicated the rights of Gulf Rice. Therefore, the trial court rejected Carwell and Poinsett's claims they were members of the class in Gulf Rice, supra.

We disagree with the trial court. The issues adjudicated in Gulf Rice, supra were not limited to Gulf Rice. The decree by the trial court in Gulf Rice, supra declared Act 344 unconstitutional and enjoined "assessments on first buyers of Arkansas Rice pursuant to Act 344 of 1995...." Thus, it is clear the decree in the Gulf Rice case reached all first buyers of Arkansas Rice, both because it declared the assessment unconstitutional, and because it enjoined further collection of the assessment. Gulf Rice was a class action on behalf of all first buyers of Arkansas Rice. It is true that the injunction was stayed by the trial court in Gulf Rice pending appeal, however, staying the injunction does not alter the finding stated in the decree that Act 344 was unconstitutional as to all first buyers of Arkansas Rice. Nor does staying the injunction alter that the injunction enjoined all collection of the assessments, not just the assessments against Gulf Rice.

Carwell and Poinsett attempt to avail themselves of the rule that taxes paid after a complaint is filed in an illegal-exaction suit are deemed paid in protest and are recoverable. See Elzea v. Perry, 340 Ark. 588, 12 S.W.3d 213 (2000). Carwell and Poinsett are asserting a right to recover all assessments they paid after Gulf Rice filed its complaint in Gulf Rice, supra. They argue that as members of the class in Gulf Rice they are entitled to rely on Gulf Rice's complaint.

Taxes paid by a party after the filing of a complaint in illegal exaction are deemed paid in protest and are recoverable. Elzea, supra. However, because the trial court found that Gulf Rice, was not a class action, the trial court concluded Carwell and Poinsett could not rely on Gulf Rice's complaint and therefore the assessments were voluntarily paid and nonrecoverable. The trial court applied the common-law rule that taxes voluntarily paid are not recoverable. See Elzea, supra. Again we disagree.

The Gulf Rice litigation was a class suit because a suit in illegal exaction is a class suit as a matter of law. Worth v. City of Rogers, 351 Ark. 183, 89 S.W.3d 875 (2002). Any assessments paid by Carwell and Poinsett after the filing of the complaint in Gulf Rice were paid in protest. Elzea, supra.

However, the trial court also found that recovery by Carwell and Poinsett was precluded based on laches. As discussed below, notice to Carwell and Poinsett was fatally defective. Therefore, recovery may not be precluded based on laches. The trial court also found that there was no fund from which any recovery might be paid. We must note that the decree in the Gulf Rice case finding Act 344 unconstitutional and the injunction on behalf of all first buyers of Arkansas Rice put the Board on notice. Yet, rather than put the assessments collected in escrow to safeguard them pending the outcome of the litigation, the Board spent them. Assessments, however, have been collected under a subsequent act and continue to be collected.

Carwell and Poinsett argue correctly that an illegal-exaction suit arises as a class-action suit under the constitution. Worth, supra. In Martin v. Couey Chrysler Plymouth, Inc., 308 Ark. 325, 824 S.W.2d 832 (1992), this court stated:

The wording of Ark. Const. art. 16, § 13 is broad and not to be narrowed by statute or interpretation. We believe our cases are consistent with that concept. But we also think it clear that the provision was not intended to be the vehicle by which taxpayers air individual grievances in the methods by which taxes are assessed and collected. Rather, it was intended to be the means by which taxpayers, generally, in a collective capacity, resist illegal exaction.

Martin, 308 Ark. at 331, 824 S.W.2d 832. In Laman v. Moore, 193 Ark. 446, 100 S.W.2d 971 (1937), this court discussed an illegal-exaction suit where the original plaintiff who brought the suit had moved away from the city and Laman had intervened to continue the suit. An objection was raised that the only proper means for Laman to proceed was by a separate and independent action. This court stated:

The suit as originally brought was necessarily for the benefit of all taxpayers of the city and might as well be prosecuted in the name of one as of another. No prejudice whatever resulted to the defendants (appellees) by allowing appellant to become a party plaintiff for the purpose of prosecuting the suit. Neither the original plaintiff nor the appellant could recover a personal judgment against any of the appellees (defendants) except for the benefit of all taxpayers of the city.

Laman, 193 Ark. at 447-48, 100 S.W.2d 971.

Thus, it is this clear that an illegal-exaction suit is a collective single action prosecuted on behalf of all affected taxpayers. In 1944, this court stated an illegal-exaction suit under article 16, section 13, "is made a class suit in which any citizen may sue for the benefit of himself and all other interested citizens...." Samples v. Grady, 207 Ark. 724, 182 S.W.2d 875 (1944). See also, Nelson v. Berry Petroleum Co., 242 Ark. 273, 413 S.W.2d 46 (1967); Schuman v. Ouachita County, 218 Ark. 46, 234 S.W.2d 42 (1950). Moreover, this court has recently stated that an illegal-exaction suit is a class suit as a matter of law. Frank v. Barker, 341 Ark. 577, 20 S.W.3d 293 (2000); Carson v. Weiss, 333 Ark. 561, 972 S.W.2d 933 (1998).

Thus, the suit in Gulf Rice and the suit in the present case are both class suits under article 16, section 13, of the Arkansas Constitution based on the same alleged illegal levy. This raises the question of whether considering the issue of illegal...