Crow v. Neb. Dep't of Revenue

1

316 Neb. 154

Allen Crow, appellant, v. Nebraska Department of Revenue, appellee.

No. S-23-060

Supreme Court of Nebraska

March 15, 2024

1. Administrative Law: Taxation: Final Orders: Appeal and Error. Any final action of the Tax Commissioner may be appealed, and the appeal shall be in accordance with the Administrative Procedure Act.

2. Administrative Law: Judgments: Appeal and Error. In an Administrative Procedure Act review proceeding, the district court reviews the agency's decision de novo on the record of the agency and may affirm reverse, or modify the decision of the agency or remand the cause for further proceedings.

3. ___ ___: ___. In an appeal under the Administrative Procedure Act, an appellate court may reverse, vacate, or modify the judgment of the district court for errors appearing on the record.

4. ___ ___: ___. When reviewing an order of a district court under the Administrative Procedure Act for errors appearing on the record, the inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable.

5. Estoppel. Although a party can raise estoppel claims in both legal and equitable actions, estoppel doctrines have their roots in equity.

6. Laches: Equity. The defense of laches is equitable in nature.

7. Equity: Appeal and Error. In reviewing judgments and orders disposing of claims sounding in equity an appellate court decides factual questions de novo on the record and reaches independent conclusions on questions of fact and law.

8. Taxation: Property. Nebraska imposes a tax on each item of tangible personal property in this state at some point in the chain of commerce, unless the item is specifically excluded from taxation. If the item is purchased in Nebraska, the sales tax applies, and if the item is purchased outside Nebraska, the use tax applies. Nebraska's sales and use taxes are thus interrelated, and together, they provide a uniform tax upon the sale, lease, rental, use, storage, distribution, or other consumption of all tangible personal property.

9. Taxation: Proof. In proceedings before the Tax Commissioner, the taxpayer generally has the burden of proof.

10. Judgments: Appeal and Error. In conducting such a review for errors appearing on the record, an appellate court will not substitute its factual findings for those of the district court where competent evidence supports those findings.

11. Intent: Proof: Circumstantial Evidence. Intent is a question of fact, which may be determined by circumstantial evidence.

12. Estoppel. Equitable estoppel generally bars a party from relief because of its prior actions.

13. Political Subdivisions: Estoppel: Equity. The State and its political subdivisions can be equitably estopped, but the doctrine of equitable estoppel will not be invoked against a governmental entity except under compelling circumstances where right and justice so demand; in such cases, the doctrine is to be applied with caution and only for the purpose of preventing manifest injustice.

14. Estoppel. The elements of equitable estoppel are, as to the party estopped: (1) conduct which amounts to a false representation or concealment of material facts, or at least which is calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (2) the intention, or at least the expectation, that such conduct shall be acted upon by, or influence, the other party or other persons; and (3) knowledge, actual or constructive, of the real facts. As to the other party, the elements of equitable estoppel are: (1) lack of knowledge and of the means of knowledge of the truth as to the facts in question; (2) reliance, in good faith, upon the conduct or statements of the party to be estopped; and (3) action or inaction based thereon of such a character as to change the position or status of the party claiming the estoppel, to his or her injury, detriment, or prejudice.

15. Laches. The defense of laches is not favored in Nebraska.

16. ___. Laches occurs only if a litigant has been guilty of inexcus able neglect in enforcing a right and his or her adversary has suffered prejudice.

17. Laches: Equity. Laches does not result from the mere passage of time, but because during the lapse of time, circumstances changed such that to enforce the claim would work inequitably to the disadvantage or prejudice of another.

18. Laches. What constitutes laches depends on the circumstances of the case.

19. ___. Laches cannot be applied where there has been no material change in a party's position.

20. Laches: Political Subdivisions. As a general rule, the doctrine of laches cannot be applied against public rights. In other words, laches is not available against the government or state in a suit by it to enforce a public right or to protect a public interest.

Appeal from the District Court for Lancaster County: Lori A. Maret, Judge. Affirmed.

Robert B. Creager, of Anderson, Creager & Wittstruck, P.C., L.L.O., for appellant.

Michael T. Hilgers, Attorney General, and L. Jay Bartel for appellee.

Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, Papik, and Freudenberg, JJ.

Per Curiam.

I. NATURE OF CASE

In 2007, the Nebraska Department of Revenue (Department) assessed a tax deficiency against Direct Media Marketing, Inc. (Direct Media), and Direct Media filed a protest and petition for redetermination. Direct Media did not request a hearing, nor did it make a payment to the Department. Years passed without a hearing, and Direct Media's petition for redetermination remained unresolved. Direct Media ceased operations in 2011.

In 2021, the Department issued a notice and demand for payment to Allen Crow as a responsible officer of Direct Media. Crow petitioned the Department for redetermination of the amount assessed and of his liability as the responsible officer for Direct Media's taxes. The Tax Commissioner (Commissioner) held a consolidated hearing on both Direct Media's petition for redetermination and Crow's petition for redetermination and, in two separate orders, ruled against Direct Media and Crow. Crow sought review in the district court for Lancaster County pursuant to the Administrative Procedure Act, see Neb. Rev. Stat. § 84-917 (Cum. Supp. 2022), specifically addressing the order concerning officer liability. The district court affirmed. Crow appeals from the order of the district court. We affirm.

II. STATEMENT OF FACTS

1. Direct Media Audit and Tax Deficiency Determination

Direct Media, a direct mail processor, operated from the 1980s through 2011. Crow was a corporate officer of Direct Media. In 2007, the Department audited Direct Media for the period from January 1, 2001, to January 31, 2007, and examined invoices for supplies Direct Media purchased for its business, mostly from out-of-state vendors. As a result of this audit, the Department issued a notice of deficiency determination to Direct Media and assessed unpaid use taxes against Direct Media. Crow received audit schedules and explanations of what was due from Direct Media. Crow was advised of the information that would be required to remove line items from the assessment. Crow's representative conceded that some deficiency was due. In September 2007, Direct Media filed a protest and petition for redetermination of the assessment, and several filings were made in Direct Media's protest case through October 2010. The hearing officer recused herself in 2010, and there is no evidence that any further action was taken on the case until 2021.

2. Direct Media Does Not Pay Taxes and Ceases Operations

Direct Media lost major customers in 2008 and 2009, and ultimately, it ceased operations in 2011. In his role as an officer, Crow made decisions for Direct Media regarding the disbursement of funds and the payment of creditors for Direct Media. According to Crow's testimony, when Direct Media ceased operations, it paid its bank loan with proceeds of the sale of hard assets, and there were some assets left over that Crow took to his next employer. The Commissioner found that Crow's testimony "made clear that lack of funds to pay bills was not the reason for the failure of [Direct Media] to pay the taxes. Instead, it was because [Crow] did not believe he had to pay the taxes yet" because the protest of the taxes had not been decided.

3. Corporate Officer Liability for Crow

The parties agree that Crow served as the president, vice president, secretary, and treasurer of Direct Media, which operated from the 1980s through 2011. Crow had significant ownership of Direct Media and oversaw its corporate financial affairs. He had the authority to hire and fire employees for Direct Media, controlled its bank accounts, and had checksigning authority. He made decisions regarding the disbursement of funds and the payment of creditors.

In February 2021, the Department issued a notice and demand for payment pursuant to Neb. Rev. Stat. § 77-1783.01 (Reissue 2018) that alleged that Crow was a responsible officer personally liable for the amount of Direct Media's assessed taxes. Crow filed a petition for redetermination and a request for hearing, which sought to redetermine the amount of any sales or use taxes found to be due and owing by Direct Media and to redetermine his liability as a responsible officer. Specifically, Crow alleged that he had acted reasonably and thus was not liable for the taxes. Crow asserted in the alternative that because of the Department's lack of diligence in Direct Media's protest case, the Commissioner should apply equitable principles to prevent injustice and forbear from ordering Crow to pay Direct Media's tax liability. Crow also...