Jerome Hertis Phillips v. State of Tennessee Department of Revenue ( 2011 )

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
June 21, 2011 Session
JEROME HERTIS PHILLIPS v. STATE OF TENNESSEE
DEPARTMENT OF REVENUE
Appeal from the Chancery Court for Scott County
No. 9960 Billy Joe White, Chancellor
No. E2010-01839-COA-R3-CV-FILED-JULY 28, 2011
Jerome Hertis Phillips brought suit to contest a tax assessment made against him by the
Department of Revenue (“the Department”). The Department filed a motion to dismiss based
on a lack of subject matter jurisdiction. The trial court granted the motion based upon its
finding that Phillips failed to file suit within the time provided by law. Phillips appeals. We
affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
Affirmed; Case Remanded
C HARLES D. S USANO, J R., J., delivered the opinion of the Court, in which H ERSCHEL P.
F RANKS, P.J., and J OHN W. M CC LARTY, J., joined.
Mark W. Strange, Oneida, Tennessee, for the appellant, Jerome Hertis Phillips.
Robert E. Cooper, Jr., Attorney General and Reporter; Joseph F. Whalen, Associate Solicitor
General; and Nicholas G. Barca, Assistant Attorney General, Nashville, Tennessee, for the
appellee, State of Tennessee Department of Revenue.
OPINION
I.
On June 6, 2008, the Department issued a notice of assessment against Phillips in the
amount of $73,847.35. The assessment represents the amount of unremitted sales taxes owed
by Big John’s Household Foods, Inc., for a three-month period that year.1 The following
month, on July 2, Phillips requested an informal conference with the Department to discuss
the assessment. The conference was held on October 23, 2008. On April 9, 2009, the
hearing officer issued his decision upholding the assessment. On April 22, 2009, Phillips,
through his attorney, received a facsimile copy of the decision letter.
On June 22, 2009, Phillips filed suit contesting the assessment as being “unjust,
illegal, and incorrect.” The Department responded with a motion to dismiss for lack of
subject matter jurisdiction; the Department contends that the suit was barred as a result of
Phillips’ failure to file it within the 90 days permitted for challenging a tax assessment. See
Tenn. Code Ann. § 67-1-1801(b)(1)(2006). The trial court agreed and dismissed the suit.
Phillips timely filed a notice of appeal.
II.
Phillips presents the following issues for our review:
1. Did the trial court err in granting the Department’s motion to
dismiss by misinterpreting the ninety-day statute of limitations
provisions of Tenn. Code Ann. § 67-1-1801?
2. Did the trial court err in granting the Department’s motion to
dismiss where the procedures enacted under Tenn. Code Ann.
§ 67-1-1801, as applied by the Department in this case, violated
both the due process clause of the Fourteenth Amendment to the
Constitution of the United States, as well as Article I, Section 17
of the Constitution of the State of Tennessee?
III.
The Tennessee Supreme Court has set forth the standard applicable to a review of a
motion to dismiss based on lack of subject matter jurisdiction:
A motion to dismiss for lack of subject matter jurisdiction falls
under Tennessee Rule of Civil Procedure 12.02(1). The concept
of subject matter jurisdiction involves a court’s lawful authority
1
The record indicates that Phillips was held responsible for the debt in his role as a substantial
minority shareholder and the retired founder of the corporation.
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to adjudicate a controversy brought before it. Subject matter
jurisdiction involves the nature of the cause of action and the
relief sought and can only be conferred on a court by
constitutional or legislative act. Since a determination of
whether subject matter jurisdiction exists is a question of law,
our standard of review is de novo, without a presumption of
correctness.
Northland Ins. Co. v. State, 33 S.W.3d 727, 729 (Tenn. 2000)(citing Nelson v. Wal-Mart
Stores, Inc., 8 S.W.3d 625, 628 (Tenn. 1999)). We employ the same de novo standard to
review issues involving statutory interpretation, see Moore v. Town of Collierville, 124
S.W.3d 93, 97 (Tenn. 2004), and the interpretation of the state and federal due process
clauses, see Chenalt v. Walker, 36 S.W.3d 45, 51 (Tenn. 2001).
IV.
Phillips asserts that in dismissing his suit, the trial court misinterpreted the 90-day
filing period for challenging a tax assessment. He contends that a more liberal construction
of the statute in his favor, as a taxpayer, is warranted.
The procedure established by Tenn. Code Ann. § 67-1-1801, et seq., provides the
exclusive jurisdiction for determining liability with respect to taxes collected or administered
by the Department. See Tenn. Code Ann. § 67-1-1804. The statute provides that a taxpayer
may challenge an assessment by filing suit “within ninety (90) days from the date of the
mailing of the notice of assessment to the taxpayer by the commissioner. . . .” Tenn. Code
Ann. § 67-1-1801(b)(1). By Department regulation, “the date of the mailing of notice of
assessment shall be considered the date of the notice plus five (5) additional days thereafter.”
Tenn. Comp. R. & Regs. ch. 1320-1-2-.01. The statute further provides that the 90-day filing
period ceases to run if the taxpayer exercises his right to an informal conference and that it
thereafter resumes running as follows:
During the period of running of the ninety-day period for filing
suit as provided in subdivision (b)(1), and before suit is filed,
the taxpayer shall have the right to an informal conference with
the commissioner to discuss the assessment and to present such
matters as may be relevant to the assessment. . . .
* * *
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Upon the filing of a timely request for a conference, the
ninety-day period for the filing of suit challenging a tax
assessment . . . shall cease running until an informal conference
decision is issued.
Tenn. Code Ann. 67-1-1801(c)(3) (emphasis added).
In the present case, there is no dispute that the 90-day filing period commenced on
June 11 and ceased running – after 21 days – when, on July 2, Phillips requested an informal
conference. As Phillips puts it, the dispositive question becomes, “When does the ninety-day
period start running again after an informal conference?”
Our interpretation of the statute is guided by well-settled principles of statutory
construction:
When the statutory language is clear and unambiguous, we must
apply its plain meaning in its normal and accepted use, without
a forced interpretation that would limit or expand the statute's
application. However, if an ambiguity exists within the
language of the statute, then we must turn to the entire statutory
scheme and elsewhere to ascertain the legislative intent and
purpose. An ambiguous statute is one that communicates
multiple meanings. Lastly, we presume that the legislature
purposefully chose each word used in a statute and that each
word conveys a specific purpose and meaning.
State v. Hannah, 259 S.W.3d 716, 721 (Tenn. 2008) (internal citations omitted).
A recitation of the undisputed events in chronological order may be helpful to the
reader:
June 11, 2008 Effective date of mailing of Notice
of Assessment (this date is the date
of mailing plus five days)
July 2, 2008 Request for Informal Conference
by Phillips
October 23, 2008 Informal Conference Held
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April 9, 2009 Decision Upholding Tax Assessment
Issued
April 22, 2009 Copy of decision received by Phillips
June 22, 2009 Suit filed by Phillips
Phillips submits that a consideration of the language of Section 67-1-1801(c)(3), in the
context of the entire statute, reflects that the date the decision is received, rather than issued,
is the date which operates to restart the 90-day filing period. He concludes from this that the
filing period restarted on April 22 and, taking into account the 21 days that had already
elapsed, he had 69 remaining days, or until June 30, to file suit. Thus, according to him, his
suit filed June 22, 2009 was timely.
In its order of dismissal, the trial court resolved the question as follows:
[T]he 90-day period recommenced running on April 9, 2009,
when the Commissioner issued the informal conference
decision, and not on April 22, 2009, when [Phillips] claimed that
he first received a copy of the decision by facsimile. The Court
finds that Tenn. Code Ann. § 67-1-1801(c)(3) provides that the
90-day period recommences when the “informal conference
decision is issued,” not when the taxpayer receives written
notification of that decision. Accordingly, the Court finds that
the remaining sixty-nine (69) days of the 90-day period
completely ran on June 17, 2009. The Court finds that Plaintiff
did not file suit until June 22, 2009, and, thus, [his] suit is time-
barred . . . .
Again, Tenn. Code Ann. 67-1-1801(c)(3) provides that, once tolled by a timely request
for an informal conference, the “ninety-day period for the filing of suit challenging a tax
assessment . . . shall cease running until an informal conference decision is issued.”
(Emphasis added). Giving effect to the statute’s plain language, the statute is subject to only
one logical interpretation – that the filing period ceases running until a decision is issued, at
which point it begins to run again. Because the meaning of “issued” is clear and, in the
context of the facts of this case, not subject to more than one interpretation, there is no basis
for looking beyond the plain language of the statute. Furthermore, using the date the decision
is received rather than issued, as Phillips suggests, would impermissibly expand the limited,
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90-day filing period established by the General Assembly. In short, there is no support for
Phillips’ position.
Lastly, we must reject Phillips’ reliance on that portion of the statute which provides
that “[w]ithin ten (10) days after the conference, the commissioner shall give the taxpayer
written notification of the commissioner’s decision” to achieve a different result in this case.
See Tenn. Code Ann. § 67-1-1801(c)(3). This provision is of no help to Phillips because the
statute further provides that the “commissioner shall not be prejudiced in any manner by
failing to act within the time periods prescribed in this section. . . .” Thus, the fact that the
Department did not issue its decision for nearly six months after the informal conference has
no bearing on the running of the 90-day filing period. Pursuant to Tenn. Code Ann. § 67-1-
1801(c)(3), the delay of the commissioner in issuing its decision “shall not be prejudic[al]”
to the commissioner. Contrary to the taxpayer’s position, extension of his time for filing suit
would amount to prejudice to the commissioner, in that it would arbitrarily re-open a claim
that would otherwise be barred by the plain meaning of the statutory scheme.
Applying the law to the facts presented, we conclude that the trial court correctly
decided the first issue now before us. The suit was time-barred.
V.
Phillips asserts that the trial court effectively eliminated his “day in court” when it
upheld the Department’s erroneous and arbitrary interpretation of Section 67-1-1801. We
must disagree. “The most basic principle underpinning procedural due process is that
individuals be given an opportunity to have their legal claims heard at a meaningful time and
in a meaningful manner.” Lynch v. City of Jellico, 205 S.W.3d 384, 391 (Tenn. 2006). In
this case, the evidence fails to support Phillips’ contention that he was denied an opportunity
to have a hearing to challenge the assessment.
As we have noted, Phillips acknowledges that he received a copy of the decision letter
on April 22, 2009. At that point, Phillips had 56 more days – before the limitation period
expired on June 17 – within which to file suit and secure his day in court. Notably, the
decision letter effectively advised him of the time remaining; the closing sentence provided
that “[p]ursuant to Tenn. Code Ann. § 67-1-1801(3), the ninety days during which you may
file suit to challenge this assessment resumes running upon the issuance of this letter” and
expressly reflected that it was “issued: April 9, 2009.” Moreover, Phillips acknowledges that
earlier in April he received a final notice of payment from the Department’s Tax
Enforcement Division, followed in May by a notice of its intent to begin a levy action that
month. Despite his receipt of the decision letter and these other filings well before the 90
days had completely run, Phillips failed to act in time.
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The Court of Appeals has held that the applicable statutory scheme satisfies due
process requirements by providing taxpayers with, “not only a fair opportunity to challenge
the accuracy and legal validity of their tax obligation, but also a ‘clear and certain remedy,’
for any erroneous or unlawful tax collection to ensure that the opportunity to contest the tax
is a meaningful one.” Wicker v. Commissioner, No. M2009-02305-COA-R9-CV, 2010 WL
2516894 at *11 (Tenn. Ct. App. M.S., filed Jun. 23, 2010)(quoting McKesson Corp. v. Div.
of Alcoholic Beverages and Tobacco, Dep’t of Bus. Regulation of Florida, 496 U.S. 18, 38,
110 S. Ct. 2238, 110 L. Ed. 2d 17 (1990)). In the present case, Phillips does not allege that
he received the decision letter after or even just before the filing period had passed and was
therefore unable to pursue the remedy provided. The fact of the matter is that Phillips had
ample time to pursue his complaint once he received notification of the Department’s
decision on April 22, 2009. In short, we conclude that the trial court’s decision does not
amount to a denial of due process; Phillips simply failed to take advantage of the process
provided in a timely manner.
VI.
The judgment of the trial court is affirmed. Costs on appeal are taxed to the appellant,
Jerome Hertis Phillips. This case is remanded to the trial court, pursuant to applicable law,
for enforcement of that court’s judgment and the collection of costs assessed below.
_________________________________
CHARLES D. SUSANO, JR., JUDGE
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