Tax & Rev v. Carter

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1 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
2 SECRETARY, TAXATION AND
3 REVENUE DEPARTMENT,
4 Plaintiff-Appellee,
5 v. NO. 29,979
6 KENT CARTER, d/b/a
7 CARTER KENT BUILDERS,
8 Defendant-Appellant.
9 APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY
10 Daniel A. Sanchez, District Judge
11 Gary K. King, Attorney General
12 Lewis J. Terr, Special Assistant Attorney General
13 Taxation & Revenue Department
14 Santa Fe, NM
15 for Appellee
16 Kent Carter, Pro Se
17 Carlsbad, NM
18 for Appellant
1 MEMORANDUM OPINION
2 KENNEDY, Judge.
3 Kent Carter (Defendant), enjoined from “engaging in business” because of a
4 delinquent tax obligation, appeals the injunction. We determine that the injunction
5 does not infringe what he alleges is a “right to earn a living,” and hold that the
6 injunction was otherwise properly granted. We affirm.
7 I. BACKGROUND
8 Defendant was in the construction business from 1984 through 2005, when he
9 apparently ceased the business. He had a delinquent tax bill, which the Taxation and
10 Revenue Department (Department) had sought to collect. On August 18, 2008, the
11 Department, claiming authority pursuant to NMSA 1978, Section 7-1-53(A) (2003),
12 filed for an injunction to compel Defendant to cease “engaging in business” in the
13 State of New Mexico until such time his tax delinquency was cured. Defendant filed
14 no answer but, on October 8, 2008, he did file a motion to dismiss based upon various
15 constitutional arguments. Following a hearing on the merits a little more than a year
16 later, the district court denied the motions for summary judgment and judgment on the
17 pleadings that Defendant had filed and granted the injunction.
18 Defendant appeals from the order granting the injunction, asserting that the
19 statute allowing such an injunction is unconstitutional because it is vague and that it
2
1 deprives him of his constitutional right to make a living. He also asserts procedural
2 defects in the seeking of the injunction, namely, that the Department did not employ
3 the least severe means of collecting taxes and sought its injunction without alleging
4 that it was suffering irreparable harm. We discuss additional facts as necessary below.
5 II. DISCUSSION
6 Defendant’s quarrel is with the method of tax collection employed by the
7 Department. There are no other disputed facts in this case of which we have been
8 made aware. Nowhere in his briefing does Defendant contest the district court’s
9 finding that he is a delinquent taxpayer. Although he disputes that he owes what the
10 Department is seeking, his delinquent status, and not the amount of the delinquency,
11 is what underlies the injunction provided for in Section 7-1-53. The amount of
12 Defendant’s tax obligation is not at issue in this matter. There is no judgment against
13 him in this case for any sum.
14 Further, Defendant’s briefing failed to direct us to authority that established
15 what he alleges to be a general constitutional right to work or engage in business, and
16 we do not consider it. See ITT Educ. Servs., Inc. v. Taxation & Revenue Dep’t, 1998-
17 NMCA-078, ¶ 10, 125 N.M. 244, 959 P.2d 969 (stating that this Court will not
18 consider propositions that are unsupported by citation to authority).
3
1 A complaint seeking injunctive relief is directed to the sound discretion of the
2 trial court. Aragon v. Brown, 2003-NMCA-126, ¶ 9, 134 N.M. 459, 78 P.3d 913;
3 Wilcox v. Timberon Protective Ass’n, 111 N.M. 478, 485, 806 P.2d 1068, 1075 (Ct.
4 App. 1990). Where the district court applies an incorrect standard, incorrect
5 substantive law, or its discretionary decision misapprehends the law, it constitutes an
6 abuse of discretion. See N.M. Right to Choose/NARAL v. Johnson, 1999-NMSC-028,
7 ¶ 7, 127 N.M. 654, 986 P.2d 450 (stating a decision premised on a misapprehension
8 of the law may be characterized as an abuse of discretion). This deferential standard
9 guides our review here. Insofar as Defendant challenges the statute,
10 [w]hen construing statutes, our guiding principle is to determine and give
11 effect to legislative intent. We follow classic canons of statutory
12 construction, looking first to the plain language of the statute, giving the
13 words their ordinary meaning, unless the Legislature indicates a different
14 one was intended. When construing statutes related to the same subject
15 matter, the provisions of a statute must be read together with other
16 statutes in pari materia under the presumption that the [L]egislature acted
17 with full knowledge of relevant statutory and common law. Thus, two
18 statutes covering the same subject matter should be harmonized and
19 construed together when possible, in a way that facilitates their operation
20 and the achievement of their goals.
21 Attorney Gen. v. N.M. Pub. Regulation Comm’n, 2011-NMSC-034, ¶ 10, 150 N.M.
22 174, 258 P.3d 453 (internal quotation marks and citations omitted). As to Defendant’s
23 assertion of vagueness, we have previously recognized that determining vagueness is
24 governed by a lesser standard of definiteness when laws regulating business behavior
4
1 are involved. Dick v. City of Portales, 116 N.M. 472, 478, 863 P.2d 1093, 1099 (Ct.
2 App. 1993). We use these deferential standards to review the district court’s actions.
3 A. Enjoining “Engaging in Business” Does Not Prevent Defendant from
4 Working
5 Defendant asserts that the injunction prevents him from working. This is not
6 true. It prevents him from “engaging in business.” The Department brought suit
7 against Defendant not as an individual, but as a person doing business in the name of
8 a business enterprise he owned, which had engaged in the construction business. As
9 such, Defendant was required to pay gross receipts taxes as a sole proprietor. His tax
10 obligation had become delinquent. Defendant does not dispute that between August
11 1984 and July 2006, he had “engaged in the business of construction.” This is
12 precisely the assertion made by the Department in its application for injunction from
13 engaging in business. “Engaging in business” is defined by statute as “carrying on or
14 causing to be carried on any activity with the purpose of direct or indirect benefit[.]”
15 NMSA 1978, § 7-9-3.3 (2003). This activity is taxed “[f]or the privilege of engaging
16 in business, an excise tax equal to five and one-eighth percent of gross receipts is
17 imposed on any person engaging in business in New Mexico.” NMSA 1978, §
18 7-9-4(A) (1990) (amended 2010). Persons who engage in business in New Mexico
19 must be licensed or permitted to do so. NMSA 1978, § 3-38-4 (1993). Defendant
20 asserts that language in the statute defining “engaging in business” as carrying on
5
1 “any activity with the purpose of direct or indirect benefit” is vague and would
2 prevent him from holding a job. This problem has been recognized and is a matter of
3 settled law.
4 The statutory language involved here is virtually identical to the statute with
5 which our Supreme Court concerned itself in 1937 when it decided Comer v. State Tax
6 Comm’n with regard to the gross receipts tax. 41 N.M. 403, 69 P.2d 936 (1937). At
7 that time, the statute read: “The term ‘business’ when used in this Act shall include
8 all activities or acts engaged in (personal, professional and corporate) or caused to be
9 engaged in with the object of gain, benefit[,] or advantage either direct or indirect.”
10 Id. at 412, 69 P.2d at 941 (Sadler, J., dissenting) (emphasis omitted) (internal
11 quotation marks and citation omitted). The term “engaging” specifically did not
12 include “transactions by a person who does not hold himself out as engaged in
13 business.” Id. at 406, 69 P.2d at 938 (emphasis omitted) (internal quotation marks and
14 citation omitted). The conclusion of the Supreme Court was that the statute, although
15 broad when looking at the terms “business” and “engaging,” meant that “engaging in
16 business has reference to the person who owns the business, not mere employees.”
17 Id. (internal quotation marks and citation omitted). Comer went on to state that “the
18 [gross receipts] tax is levied against the business of an owner or operator, and not
19 against the employee acting as manager or agent for the principal who is “engaged in
6
1 business.” Id. (emphasis omitted) (internal quotation marks and citation omitted).
2 Comer remains the law to this day.
3 The business owner to whom the privilege of engaging in business is extended
4 by virtue of licensure as required by statute, and being obligated to pay the privilege
5 tax on gross receipts, carries on or causes to be carried on the business activity. Put
6 another way, an employee is engaging in his employer’s business, not his own.
7 Defendant, as a sole proprietor of Carter Kent Builders, was the person “engaging in
8 business,” was registered as a business, and obligated to pay gross receipts taxes.
9 Since the term “engaging in business” is construed to apply solely to the principal of
10 the business, not an agent or employee who earns ordinary wages or commissions, we
11 see nothing to prevent Defendant from working in any way, save for a business of
12 which he is the principal or proprietor. So long as Defendant may undertake to work
13 for another business as an agent or employee, he would no longer be “engaging in
14 business.” He is only enjoined from making a living by engaging in business on his
15 own behalf as a principal, and even that injunction has limits.
16 The injunction against “engaging in business” is not permanent, but conditional.
17 The injunction prohibits Defendant from engaging in business on his own behalf until
18 his taxes are paid or adequate arrangements are made to the Department’s satisfaction.
19 Therefore, Defendant is not precluded from working by being employed by any other
7
1 entity engaging in business, but just enjoined from “engaging in business” on his own
2 behalf until such time as arrangements are made to satisfy his tax delinquency.
3 B. The Form of Injunction in This Case is Statutory and Not One Requiring
4 Proof of Immediate or Irreparable Harm or Any Inadequate Remedy at
5 Law
6 The district court correctly rejected Defendant’s assertion that the Department
7 had not complied with Rule 1-066 NMRA by failing to allege irreparable harm or the
8 lack of an adequate remedy at law in its suit for the injunction, stating that the case
9 was statutory in nature. We agree. Defendant is relying on the requirements for an
10 equitable injunction. See, e.g., State ex rel. State Highway & Transp. Dep’t v. City of
11 Sunland Park, 2000-NMCA-044, ¶ 14, 129 N.M. 151, 3 P.3d 128. The action in this
12 case is one based upon statute, not equity. The statutory action itself is a remedy at
13 law. Section 7-1-53(A) provides an enforcement remedy against businesses that do
14 not pay their privilege tax, and the requirements for seeking an injunction under this
15 statute are no more than a showing that the taxpayer against whom the injunction is
16 sought “may be or may become liable for payment of any tax.” Granting the
17 injunction requires no more than “a showing by a preponderance of the evidence that
18 the taxpayer is delinquent and has been given notice of the hearing as required by
19 law[.]” § 7-1-53(B).
8
1 In significant respects, this is the converse of State ex rel. Marron v. Compere,
2 in which the Supreme Court held that, even though the Medical Practice Act afforded
3 an adequate statute remedy at law to enjoin Compere from the practice of medicine,
4 such a statutory injunction did not operate to preclude the district attorney from
5 obtaining an equitable injunction based on nuisance. 44 N.M. 414, 418, 103 P.2d 273,
6 275 (1940). Compere shows that the statutory injunction itself is an adequate remedy
7 at law and that equitable principles exist separately. In this case, the Department’s
8 remedy is only statutory and is a remedy sounding in law, not equity. There being
9 nothing to preclude the issuance of an injunction as a matter of law under the statute,
10 we hold for the Department on this issue.
11 C. Allegations of Delinquency Were Adequately Proven
12 By the same token in which Defendant was the person who was “engaged in
13 business” as the sole proprietor of his construction business, he was obligated to pay
14 the privilege tax on his gross receipts, an obligation he concedes was not discharged.
15 Further, at the hearing before the district court, the testimony of one of the
16 Department’s agents established the following facts. Defendant registered with the
17 Department on August 1, 1984 as a sole proprietorship. His business was issued a
18 taxpayer identification number. The Department determined that Defendant had not
19 filed gross receipts tax returns from 1992 through 1998. Although from 1984 through
9
1 1992, it is unclear whether Defendant filed any CRT tax returns. The Department
2 mailed notices of deficiency and demands for payment by certified mail, which were
3 received by Defendant, including demands that he deposit security against the amount
4 owed and which elicited no action. Defendant did not protest the assessment. It was
5 noted that Defendant, from 2004 through November 2008, had filed returns asserting
6 zero receipts by his business. Defendant had incurred a substantial delinquent tax
7 liability in excess of $145,000. Defendant did not cross-examine the witness. He
8 offered no witnesses and stood on the allegations of his pleadings concerning his
9 arguments regarding constitutional defenses, and his statement made to the court at
10 the hearing. He asserted that the Department had “pulled these figures from out of the
11 air somewhere” and asserted “no basis of law on what the [Department] is trying to
12 do here.” By contesting the amount but not the obligation, Defendant’s case was
13 finished with regard to the issuing of an injunction. The district court found that (1)
14 Defendant was a delinquent taxpayer, (2) an assessment had been made and not
15 protested, (3) a demand for security had been made and none was posted, and (4) the
16 Department was entitled to its injunction.
10
1 D. The Department is Not Required to Employ Less Restrictive Means Before
2 Seeking an Injunction
3 Section 7-1-53 prohibits the issuance of a restraining order or injunction against
4 anyone who has furnished security for their tax obligation under NMSA 1978, Section
5 7-1-54 (1986). It also provides that, at the time the taxpayer furnishes such security,
6 the court is compelled to dissolve or set aside the restraining order or injunction.
7 Defendant contends that Section 7-1-53 should be subjected to strict constitutional
8 scrutiny because it impacts his fundamental right to earn a living and because the
9 Department did not employ less restrictive means of collecting taxes owed, such as
10 liens under NMSA 1978, Section 7-1-40 (1979) or levies on his property pursuant to
11 NMSA 1978, Section 7-1-41 (1979) (amended 2001). Defendant has directed us to
12 no authority supporting this proposition, and we are aware of none. See ITT Educ.
13 Servs., 1998-NMCA-078, ¶ 10.
14 As we held above, Defendant is not precluded from earning a living. Section
15 7-1-53 itself has no requirement of exhausting any lesser remedies than enjoining a
16 taxpayer from engaging in business. However, we further note that the district court
17 found that a demand for security had been made prior to the Department seeking the
18 injunction. Had arrangements for security been made, an injunction would have been
19 precluded. We note that Regulation 3.1.10.12 (2001) of the Administrative Code
20 allows a taxpayer to avoid an injunction by paying the assessment and claiming a
11
1 refund, furnishing acceptable security, applying for an extension of time, or entering
2 into an installment agreement to pay. Nothing in the record indicates that Defendant
3 availed himself of any of these options. Defendant asserts in his reply brief that he
4 filed formal disputes to contest tax assessments between 1995 and 2005 and requests
5 for proof of the Department’s claims contemporaneously with the demand for security
6 filed herein, but his requests were ignored. Defendant does not direct us to anything
7 in the record proper indicating that this is true. He did not submit copies of any such
8 documents to the district court and has not directed us to any place in the record or
9 transcript where he asserted that he had done these things. “We will not search the
10 record for facts, arguments, and rulings in order to support generalized arguments.”
11 Muse v. Muse, 2009-NMCA-003, ¶ 72, 145 N.M. 451, 200 P.3d 104. The affidavit
12 from Agent Renee Casarez, accompanying the verified application for injunction,
13 appears that the Department had indeed filed liens against Defendant and “been forced
14 to serve bank levies against taxpayer.” These facts were not denied by Defendant.
15 State ex rel. State Highway Comm’n v. Quesenberry, 72 N.M. 291, 294, 383 P.2d 255,
16 257 (1963) (deeming any factual allegations that were not denied in answer to the
17 alternative writ of mandamus). In fact, they are precisely what Defendant urges would
18 have been some of the less restrictive collection methods.
12
1 For the reasons stated above involving failure to show sufficient facts or
2 specific legal authority to trigger our review, the citations that Defendant has made to
3 general law, requiring strict constitutional scrutiny for New Mexico’s tax enforcement
4 laws, are insufficient to trigger our action when he cites nothing in the record to
5 support his claim that he was somehow entitled to other treatment which was denied.
6 The Department engaged in a pattern of what appears to be normal collection activity
7 for delinquent taxes owed by Defendant, culminating in obtaining the injunction
8 herein. We hold that the injunction was correctly granted and based on substantial
9 evidence that satisfies the minimal requirements of Section 7-1-53(A).
10 III. CONCLUSION
11 For the foregoing reasons, we affirm the district court’s granting of the
12 injunction against Defendant enjoining him from “engaging in business” until such
13 time as his tax delinquency is satisfactorily discharged.
14 IT IS SO ORDERED.
15 _______________________________
16 RODERICK T. KENNEDY, Judge
13
1 WE CONCUR:
2 _________________________________
3 JAMES J. WECHSLER, Judge
4 _________________________________
5 MICHAEL D. BUSTAMANTE, Judge
14