WASHINGTON PARISH SHERIFF OFFICE v. LOUISIANA MACHINERY COMPANY LLC (2013)

Louisiana Machinery Company, L.L.C. and Louisiana Machinery Rentals, L.L.C. (collectively “the Companies”), Louisiana's exclusive Caterpillar franchise dealers, sold, leased, and/or repaired Caterpillar equipment and machinery in parishes throughout Louisiana. Following a multi-parish audit, the taxing authorities from numerous parishes began tax collection proceedings against the Companies, alleging they incorrectly failed to charge and collect sales and use taxes from their customers on their taxable sales, leases, and/or repairs for certain tax periods, and that the Companies were liable for these taxes, penalties, and interest under the provisions of the Uniform Local Sales Tax Code (“ULSTC”).¹

In these cases, the tax collector for Washington Parish obtained partial summary judgments in the district court, declaring that the tax assessments it issued to the Companies are final and the executory judgments of the court and could not be challenged by the Companies. The Companies appealed to the First Circuit, which affirmed the grants of partial summary judgment.²

From this adverse ruling, the Companies applied for supervisory review to this court.³ We granted the Companies' writ application and consolidated these cases for argument with nearly identical cases emanating from the Third Circuit, wherein that court reversed the district court's grants of partial summary judgment.⁴ We granted certiorari to resolve this split in the circuits.⁵ For the reasons set forth below, we reverse the ruling of the court of appeal in these cases.

FACTS AND PROCEDURAL HISTORY

The Washington Parish Sheriff's Office (“Collector”) is the designated tax collector for Washington Parish. A tax audit of the Companies revealed deficiencies for the period December 1, 2003, through June 30, 2007. On November 23, 2009, the Collector began the tax collection process by sending each of the Companies a 30–DAY NOTICE OF INTENT TO ASSESS Additional Tax Due–La. R.S. 47:337.48B for the tax deficiency, plus penalties and interest.⁶ The Companies did not protest this notice, as provided for by La. R.S. 47:337.49.² On December 23, 2009, the Collector issued each of the Companies a formal NOTICE[S] OF ASSESSMENT 60–Day Assessment–La. R.S. 47:337.51.³ The Companies did not formally respond to the assessments, but instead provided additional tax records to the auditors. The Collector reviewed the additional audit documentation and subsequently reduced the assessment for one of the Companies and increased the assessment for the other. The Collector then issued to each of the Companies a REVISED–NOTICE OF ASSESSMENT 60–Day Notice–La. R.S. 47:337.51 (“revised notices of assessments”) dated May 5, 2010. The revised notices provided, in relevant part (emphasis in original):

NOTICE: As provided in La. R.S. 47:337.51 B, if you wish to protest, you have thirty (30) calendar days from the date hereof to file with this office a written protest, signed by you or you duly authorized agent, which shall be under oath, fully disclosing the reasons thereof, and request a hearing.

If you do not timely file a written protest and request a hearing, you have sixty (60) calendar days from the date hereof to:

1) Pay the amount set forth herein, or

2) Pay the total amount set forth herein above under protest as provided in La. R.S. 47:337.63 and file suit for recovery within thirty (30) days of payment, or

3) Within thirty (30) days of receipt of this Notice of Assessment, file suit in any state court of competent jurisdiction contesting the final assessment, and in connection therewith, post a commercial bond or other security as provided in La. R.S. 47:337.64 in accordance with the procedures set forth therein.

DO NOT DISREGARD THIS NOTICE. FAILURE TO ACT WITHIN THE TIME OR MANNER PROVIDED WILL RESULT IN THE ASSESSMENT BECOMING FINAL AND ENFORCEABLE BY WARRANT FOR DISTRAINT. ADDITIONAL PENALTIES, INTEREST AND COLLECTION FEES MAY BE ASSESSED AT THAT TIME.

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IMPORTANT: The collector may, in his discretion, proceed to enforce the collection of any taxes due by means of any of the following remedies or procedures: (1) Assessment and distraint, as provided by R.S. 47:337.48 through 337.60, (2) Summary court proceeding, as provided in R.S. 47:337.61, (3) Ordinary suit under provisions of the general laws regulating actions for the enforcement of obligations, (4) Rule to cease business as provided in R.S. 47:337.33. The Collector by issuing this Notice does not waive the right to assert such other remedies.

The Companies did not respond to the revised notices of assessments. On October 25, 2010, the Collector filed in the district court a Petition for Rule to Show Cause in Summary Sales and Use Tax Proceeding against each Company as summary proceedings under the provisions of La. R.S. 47:337.33⁴ and La. R.S. 47:337 .61.⁵ The Collector alleged in detail the assessment procedures it followed, specifically asserting that the revised assessments were issued in accordance with all statutory requirements and erroneously alleging it gave notice to the Companies they had sixty calendar days to either (1) pay the amount assessed; (2) file a written protest under oath setting forth the reasons for the protest, and request a hearing; or (3) pay the amount assessed under protest and file suit for recovery. The petitions further alleged that because the Companies did not timely respond, the assessments are now final and constituted an established liability equivalent to judgments against the Companies. In addition to claiming the taxes due plus interest, the Collector sought injunctions pursuant to La. R.S. 47:337.33, enjoining the Companies from conducting business in the parish until payment was made in full, and further sought recognition of liens and privileges on the Companies' property pursuant to La. R.S. 47:337.65.⁶ The Collector attached to its petitions the affidavit of Mechelle Galloway, Chief Financial Officer for the Collector, who stated that the facts as alleged in the petitions were true and correct to the best of her knowledge and belief. Therefore, the Collector alleged it had established a prima facie case in accordance with La. R.S. 13:5034,⁷ 47:337.61 and comparable provisions of local ordinances, and that the burden shifted to the Companies to establish anything to the contrary.

On December 6, 2010, the Companies filed answers, exceptions, and affirmative defenses. On December 13, 2010, the Companies filed supplemental and amending answers and affirmative defenses, asserting to the extent the Collector might contend that provisions of the ULSTC preclude them from raising or presenting evidence relevant to defenses as to the validity and/or correctness of the audit and/or assessment with no right of judicial review, then those statutes, as interpreted by the Collector, are unconstitutional. The Collector moved to strike the Companies' supplemental and amending answers and affirmative defenses on the grounds that they were urged separately and weeks after their first responsive pleadings, and that these defenses had been rejected by both the Louisiana and United States Supreme Courts.

Additionally, the Collector filed partial motions for summary judgment, seeking a declaration that the revised notices of assessments are final and executory judgments of the court. The Companies opposed the motions, arguing the motions for partial summary judgment relied on the erroneous premise that the assessments are final and cannot be challenged. The Companies asserted there were issues of material fact related to the correctness of the amount of tax assessed and whether the audit was conducted in accordance with law. The Companies further challenged the adequacy of Ms. Galloway's affidavit which was made “to the best of [her] knowledge and belief,” pursuant to La. R.S. 47:337.61(4),⁸ rather than following the more stringent requirements for affidavits in summary judgment procedures pursuant to La. C.C.P. art. 966, et seq.⁹

Following a hearing, the district court granted the Collector's partial motions for summary judgment. The district court rendered judgments in favor of the Collector, declaring that the revised notices of assessments were the final and executory judgments of the court, reasoning that the ULSTC provides finality to an assessment after sixty days from the issuance of the assessment without a response by the taxpayer. The district court also granted the Collector's motions to strike, finding that La. R.S. 47:337.61(2)¹⁰ clearly requires that all defenses be presented at one time, and no court shall consider any defense unless so presented. The Companies appealed.

The First Circuit affirmed. Relying on its previous opinion in Livingston Parish School Board v. Louisiana Machinery Company, L.L .C.,¹¹ the court of appeal stated that because a prior assessment is not a prerequisite to bringing a summary proceeding, compliance with the notice provisions applicable to a formal assessment in La. R.S. 47:337.51 is not a condition precedent. However, because the Collector's summary proceedings were entirely premised and dependent upon the alleged finality of the revised assessments, compliance with the notice provisions was necessary. In finding the notices were sufficient, the court found they provided the Companies with notice of the amount of sales and/or use taxes, interest, and penalties owed for the specified period, and set forth the remedies available to the Companies as taxpayers under La. R.S. 47:337.51(A) and more specifically as dealers under La. R.S. 47:337.51(B). The court also found the revised notices went beyond the statutory requirements by setting forth an alternative remedy for dealers who pay under protest under La. R.S. 47:337.64.¹² The court of appeal concluded that because the notices complied with statutory notice provisions and the Companies chose not to avail themselves of any of the statutory remedies available, once the sixty-day period expired with no protest or payment from the Companies, the revised assessments were final and were the equivalent of final and enforceable judgments. Thus, the Companies were precluded from thereafter raising defenses, whether by exception or on the merits, in a summary rule to collect the sales tax. Finally, the court held that when the Collector established through the affidavit of Ms. Galloway that it had followed all of the steps of the assessment procedure without any response from the Companies, it satisfied its burden of proving that the assessments had become final, and that it was entitled to judgments in its favor as a matter of law.

We granted the Companies' writ application following this adverse ruling from the First Circuit.

DISCUSSION

For the reasons assigned this day in Catahoula Parish School Bd. v. Louisiana Machinery Rentals, LLC, 12–2504 (La.10/15/13), ––– So.3d ––––, we find the revised notices of assessments did not comply with the mandatory statutory notice provisions of La. R.S. 47:337.51(A) and, therefore, the assessments were not final. We also find for the reasons expressed in Catahoula Parish School Bd. v. Louisiana Machinery Rentals, LLC that the record does not support the Collector's motions for partial summary judgment absent reliance on the assessments. As a result, we find the court of appeal erred in affirming the district court's grants of partial summary judgment.

For these same reasons, the district court erred in prohibiting the Companies from pursuing their defenses on the basis of the alleged finality of the assessments. Because we remand this matter to the district court for further proceedings, we address the issue of whether the Companies' defenses were asserted timely. Although the specific issue of whether the notices complied with the requirements of La. R.S. 47:337.51 was not raised until this matter was before the court of appeal, we have already determined in Catahoula Parish School Bd. v. Louisiana Machinery Rentals, LLC that the issue of validity of the notices is not a defense in this case, but rather an element of the Collector's claims, which were based on the alleged finality of the assessments. In addition to challenging the validity of the notices, the Companies asserted numerous defenses. La. R.S. 47:337.61(2) requires all defenses to be “presented at one time” and filed “prior to the time fixed for the hearing,” otherwise the court is prohibited from considering the defense. In this case, the Collector filed its petition on October 25, 2010, and the hearing was set for January 14, 2011. The Companies filed defenses on December 6, 2010. Because these defenses were asserted prior to the time fixed for the hearing, they were timely asserted. The Companies also filed supplemental defenses on December 13, 2010. While these defenses were presented prior to the hearing, they were not “presented at one time” with the previously-filed defenses. Thus, based on the clear wording of the statute, any defenses asserted solely in the December 13, 2010, filings were not asserted timely and cannot be considered by the district court on remand.¹³

DECREE

REVERSED AND REMANDED TO THE DISTRICT COURT FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION.

For the reasons expressed in my dissent in Catahoula Parish School Bd. v. Louisiana Machinery Rentals, LLC, 12–2504 (La.10/15/13), So.3d ––––, (Guidry, J., dissenting), I also dissent from the majority decision in this companion case finding that the revised tax assessment notices sent to the defendant companies did not comply with mandatory statutory notice provisions in La.Rev.Stat. 47:337.51(A) and (B). The district court, in my view, correctly rendered judgments in favor of the Collector declaring that the revised notices of assessments were the final and executory judgments of the court. Therefore, the court of appeal properly affirmed the district court's grant of partial summary judgment in favor of the Collector.

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JOHNSON, Chief Justice.

GUIDRY, J., dissents and assigns reasons.