Swiss Oil Corporation v. Shanks, Auditor , 208 Ky. 64 ( 1925 )

Affirming on the direct and reversing on the cross appeal.

By this action the Swiss Oil Corporation attacks the validity of action 4223c-1 of the Kentucky Statutes, which imposes a tax upon oil producers, and seeks to recover $8,944.64 paid by it to the state thereunder, and also to require the auditor to make similar refunds to all other producers of like taxes paid by them.

The lower court refused to permit plaintiff to sue for and on behalf of the other oil producers, but held the act void, and awarded plaintiff a judgment requiring the auditor to issue to it a warrant for the amount paid by it. Complaining of so much of the judgment as refused to permit it to sue for and on behalf of other oil producers, plaintiff prosecuted this appeal, and the auditor has cross-appealed from that part of the judgment holding the act invalid and ordering a refund of the $8,944.64.

The single question presented by the direct appeal may be disposed of very briefly. Section 162 of the statutes empowers the auditor to issue his warrant on the treasury for taxes improperly paid, "in behalf of the person who paid the same." Section 163 provides he shall not issue his warrant for any money improperly paid for taxes "unless application be madein each case within two years from the time when such payment was made."

Hence it is clear that the auditor cannot issue his warrant for a refund of taxes improperly paid unless and until application is made therefor "in each case," and "in behalf of the person who paid the same." This necessarily implies, as reason dictates, that the application for a refund must be made by the party entitled thereto, or some one authorized by him to make such demand, and that each claim shall be made separately.

It is, therefore, clear that the demand made by the plaintiff upon the auditor for the aggregate claimed to be due it and others for whom it had no authority to act, was not such a demand as the statute contemplates.

Then again, the claims of the different producers for refund of taxes paid by them are necessarily separate and individual, and not of such character as that one of them may sue for the benefit of all under section 254 of the Code of Practice, and by reason of which appellant claims the right so to do. This question is conclusively settled against the appellant in Union Light Power Co. v. Mulligan, 177 Ky. 670, 197 S.W. 1081; Batman v. Louisville Gas Electric Co., 187 Ky. 659,220 S.W. 318; Barriger v. Louisville Gas Electric Co., 196 Ky. 268,244 S.W. 690, and upon authority of those cases, the judgment upon the direct appeal is affirmed.

Section 4223c-1 of the statutes, under which the taxes that appellant seeks to compel the auditor to refund were laid and collected, is an act of the 1917 session of the legislature, as amended at the 1918 session. As thus amended it was construed and declared valid by this court in Raydure v. Board of Supervisors, 183 Ky. 84, 209 S.W. 19, and again in Associated Producers Co. v. Supervisors, 202 Ky. 538, 260 S.W. 335.

It is insisted, however, for appellant that the question of the act's validity was not present in either case, and that these declarations of validity are therefore dicta and not controlling. Whether or not this is true is the first question for decision on the cross-appeal.

In the Raydure case, the board of supervisors assessed forad valorem taxation several oil leases owned by him, except five acres surrounding each producing well. He contested their right to do so upon three grounds, namely: (1) That oil leases are not property within the meaning of our taxing laws, (2) if so, their assessment against him, a nonresident, was discriminative and illegal because there was no provision for taxing same in the hands of a resident of the state, and (3) that his liability for a production tax on his producing wells, under section 4223c-1, supra, exempted him from liability for any tax of any and all kinds upon the leases upon which these producing wells were located.

This latter contention, presented not only by brief of counsel and upon the oral argument, but also by the agreed statement of facts upon which the case was tried in the courts below, clearly tendered to this court for decision both the validity and the meaning of the act levying the so-called production tax, since obviously unless that act was valid and actually allowed the claimed exemption, appellant's contention was unsound. So, after deciding that there was no merit in either of Raydure's first two contentions, the court took up section 4223c-1, considered its validity under sections 171 and 181 of the state Constitution, which involved the character of the tax it imposed, and whether or not it did in fact, as claimed by Raydure, exempt his leases from assessment forad valorem taxes.

More than six printed pages — nearly half of the opinion — are devoted to a discussion as to the validity and meaning of that section of the statutes. Many opinions pertinent to those questions, from this and other courts, were reviewed, and, after a most careful consideration of both questions, from every possible angle, the conclusion was reached that while the act was valid, as contended by the appellant, it did not grant the claimed exemption, although it provided that the payment of the tax thereby imposed should be "in lieu of all other taxes on wells producing said crude petroleum."

If the court had stopped here, surely no one would ever have thought of calling its decision of either of these questionsobiter. But the court went farther and also held that if the provisions quoted above were construed to grant an exemption from ad valorem taxes, it would render the whole act violative of section 171 of the Constitution, and void.

By having decided not only that the act did not grant the claimed exemption, but also that if it did it would have been unconstitutional, it is now apparent that the court need not have decided the question of the validity of the act, and it is solely because the court did not waive that question that it is now insisted its decision thereof is dictum. Despite some apparent plausibility, this contention is, we feel sure, wholly unsound.

While statements made in an opinion that are not necessary to the decision of the question under consideration by the court are dicta, it does not follow by any means, and is not true, that the decision of either of two questions, presented by the record and in the arguments, is obiter simply because a decision of one of them disposed of the case and rendered a decision of the other unnecessary.

Despite some conflict in the authorities as to what is and what is not dictum in other circumstances, the rule is well settled, upon both reason and authority, that:

"Two or more questions properly arising in a case under the pleadings and proof may be determined though either one would have disposed of the entire case upon its merits without the other, and neither holding is a dictum so long as it is properly raised and determined. Nor can an additional reason for a decision, brought forward after the case has been disposed of on one ground, be regarded as dictum." 7 Rawle C. L. 1005; King v. Pauly, 159 Cal. 549, 115 P. 210, Ann. Cas. 1912C, 1244 and note; McFarland v. Bush, 94 Tenn, 538, 29 S.W. 899, 45 A.S.R. 760, 27 L.R.A. 662; Chicago B. Q. R. Co. v. Appanoose Co., 104 C.C.A. 573, 31 L.R.A. (N.S.) 1117.

It results, therefore, that the decisions in the Raydure case, that the act of 1917 as amended in 1918 is a license and not a property tax, and as such a valid exercise of legislative authority conferred by section 181 of the state Constitution, are not dicta but authoritative decisions of the court, and binding unless and until overruled.

The Associated Producers Company, in its case, claimed an exemption from ad valorem tax on the five acres surrounding each producing well, under section 4223c-1, supra, as construed in the Raydure case. As the opinion in the Raydure case had expressly refrained from deciding whether or not section 4223c-1 exempted five acres of land around a producing well for the reason that that question was not presented by the record, it was manifest that it was not intended that that question should be concluded or affected by anything said therein.

It necessarily resulted, therefore, that the particular statement therein upon which the Associated Producers Company's claim of exemption was based did not and could not support its claim, and the court had no trouble in reaching that conclusion, and that statement was withdrawn. It then became necessary, just as in the Raydure case, to decide whether or not the act itself granted the claimed exemption, and in disposing of that question the validity and meaning of the act were reconsidered by the whole court, and the conclusion again reached, as in the Raydure case, that it was valid under section 181 of the Constitution because it was a license upon the business of producing oil in the state, and that the provision therein that such tax should be "in lieu of all other taxes on the wells producing said crude petroleum" was intended to mean, and means, that there would be no other license or occupation tax thereon.

Judge Clay, who had not participated in the decision of the Raydure case, dissented, not because he did not agree with the conclusion of either case, but because, from a consideration of the history of the legislation, he did not believe that the act would have been passed by the legislature as construed by the court in both cases, and that it was, for that reason, unconstitutional.

It follows that the court's decision in that case, that the act is valid — as well as the reasons upon which that conclusion is rested — is not dictum, for the same reasons that the like decisions in the Raydure case were not of that character.

It is, therefore, clear that the court has twice had presented to it for decision, and each time, after the most careful consideration, has decided the act in question valid, and that it did not exempt from ad valorem taxes the whole or any part of an oil lease, and imposed only a license or occupational tax upon the business of producing oil in this state.

In addition, both state officials and oil producers recognized the Raydure case, for more than five years and until the institution of this action, as a conclusive adjudication by this court that section 4223c-1 was valid, and that it, at least, did not exempt the whole, if any part, of an oil lease from ad valorem taxes. That this is true there can be no manner of doubt, since it is matter of common knowledge, and stated as such by counsel for appellant in brief, that the oil producers of the state, believing the court had misconstrued the legislative intention in the Raydure case, went before the legislature at its 1922 and 1924 sessions, and attempted, without success, to procure a modification by the legislature of the effect of that decision, subsequently reaffirmed in the Associated Producers Company case.

What oil men and administrative officials of the state may have believed the act meant prior to the court's construction thereof, is now relatively unimportant. What they have done since is of much more importance, since it has a direct bearing, under the stare decisis doctrine, upon whether that construction, if merely doubtful, should be abandoned.

That the legislative meaning, by the clause in the act "in lieu of all other taxes on wells producing said crude petroleum," upon which this whole controversy hangs, is not free from doubt, is clear, and that it is fairly susceptible of the construction that it does not include the entire lease, despite the fact that the words "in lieu of" were substituted for "in addition to" before the act was passed, is conceded in the dissenting opinion. It is no easier now than upon either of the two former considerations of the question to determine just what the legislature meant by what it said. The history of the legislation, that is said to make that meaning clear, was considered in that connection upon both of those occasions, and was the cause of a whole court consideration, and the basis of a dissent upon the last one.

These facts are quite sufficient, it would seem, to show that the legislative meaning by the above clause was a matter of such doubt as to warrant the court's adoption of a construction that would render the act valid, as it twice has done, rather than one that would have convicted the legislature of merely wasting its time, as it is now asked to do.

But even if this were not true, we are yet of the opinion that any reasonable consideration of the stare decisis doctrine demands that the court's construction of the act, since reaffirmed, shall not now be departed from and those cases overruled because of any lingering doubt of their soundness, after the state finances and the business of the oil producers in the state have been adjusted thereto, and two subsequent legislatures have, at least tacitly, approved such construction by refusing to modify it.

This conclusion disposes of appellant's contentions that the act of 1917 as amended in 1918, and now section 4223c-1 of the statutes, imposes a property tax rather than a license tax, and that it is violative of the state Constitution for any of the reasons considered in the two cases, supra.

Additional grounds upon which the validity of the act as amended is now attacked are, that: (1) Its subject is not expressed in its title, as required by section 51 of the Constitution, (2) it imposes a burden upon interstate commerce, forbidden by federal Constitution, and (3) it violates the due process of law provision of the 14th Amendment to that instrument, in that it imposes a tax without affording the taxpayer an opportunity to be heard at any stage of the proceedings.

We might, as in the Raydure case, dispose of each of these contentions upon its merits, and then show that, even if meritorious, that fact could not affect the decision of this case. We shall, however, for the sake of brevity, confine our discussion to an effort to show that the latter of these propositions is true.

Each of these criticisms is leveled at, and can affect only, the amendment of 1918, and there is, and could be, no criticism of the title of the original act passed in 1917, or any claim that it imposed any burden upon interstate commerce, or that it did not afford the taxpayer ample opportunity to be heard before the tax attached.

The original act imposes, just as does the amendment, a graduated occupational tax, measured by the amount of business done by each and every oil producer in the state. The amendment is simply a re-enactment of the original act, with the latter's administrative features so changed as to make the collection of the tax both more certain and less burdensome upon the taxpayer and the assessing and collecting officials. If any or all of the above contentions are sound, the amendment would be destroyed, but this would leave the original act in force, and unamended. Precisely the same tax would have been collected from oil producers in either event.

This is a proceeding by such a taxpayer to repossess himself of taxes paid the state, under authority of a statute which permits a refund thereof to him only if the taxes were improperly paid. If it be admitted that the amendment, for any of the reasons assigned, is invalid, it simply results that the same taxes paid thereunder, and in accordance with the method thereby prescribed, would have been due and payable under the method prescribed for assessment and taxation by the original act, and no matter which method for assessment and collection is approved, the tax is precisely the same, and in neither event is its recovery permissible.

Wherefore, the judgment is affirmed upon the direct appeal, and reversed upon the cross-appeal, with directions to dismiss the petition.

The whole court sitting, and Judge Dietzman dissenting.