Imerman Screw Products Co. v. City of Hamtramck

D. E. Holbrook, J. This is an appeal as of right from an order of the Michigan Tax Tribunal which denied plaintiffs motion for rehearing of an order of accelerated judgment dismissing plaintiffs petition and affirming a tax assessment against plaintiff Imerman by the City of Hamtramck. The City of Hamtramck made an assessment on personal property owned by plaintiff based upon a tax statement form filed by plaintiff on February 20, 1974. The tax statement listed the value of plaintiffs personal property and did not claim an import immunity exemption as provided for on line 9 of the tax statement for imported merchandise for resale without further processing, or imported merchandise not yet committed to use. The assessment was made on February 21, 1974, and the tax bill was mailed on July 10, 1974. Plaintiff paid the taxes in two installments, the last being on December 26, 1974. On January 8, 1975 plaintiff filed a petition with the Michigan Tax Tribunal *729 claiming an exemption, and seeking redetermination of its 1974 assessment and a refund of personal property taxes paid to the city. Plaintiff claimed that the tax paid was unconstitutionally levied. upon imported raw steel in its original, unbroken packages, in violation of US Const, art I, § 10, clause 2. Defendant City of Hamtramck and intervening-defendant County of Wayne moved for dismissal of plaintiff’s petition and entry of accelerated judgment under GCR 1963, 116, because of plaintiff’s failure to exhaust administrative remedies by protesting the original assessment to the Hamtramck board of review. The Michigan Tax Tribunal granted the motion of defendants, and rendered the following opinion with which we find ourselves in substantial agreement: "The issue squarely before this Tribunal is: '"MUST A PETITIONER APPEAR BEFORE THE LOCAL BOARD OF REVIEW AS A CONDITION PRECEDENT TO MAINTAINING AN ACTION WITH THE TAX TRIBUNAL CONTESTING ASSESSMENTS FOR AD VALOREM PROPERTY TAX PURPOSES.’ "Section 35 of the Tax Tribunal Act, being MCLA 205.735; MSA 7.650(35) provides: " '(1) A proceeding before the tribunal shall be original and independent and shall be considered de novo. In the case of an assessment appeal, the valuation of the same property must be protested before the board of review. ’[Emphasis added.] "It is clear that the Tribunal Act itself creates a distinct condition precedent to maintenance of an action of exhausting administrative remedies before the local board of review. "Petitioner concedes the requirement of an appearance before the board of review in 'assessment appeals,’ but characterizes its proceedings as one falling under § 31(b) of the Tribunal Act, MCLA 205.731; MSA 7.650(31)(b), which pertains to 'A proceeding for refund *730 or redetermination of a tax under the property tax laws.’ "In petitioner’s view, there are two distinct bases for invoking the jurisdiction of the Tax Tribunal; § 31(a) involving board of review action and § 31(b) not requiring board of review action. In our view, § 31 is not susceptible to such a construction. This Tribunal is the successor to well known statutory avenues of assessment contest. One involved appeal by aggrieved taxpayers to the State Tax Commission pursuant to MCLA 211.152; MSA 7.210. The other was the payment under protest and circuit court suit avenue provided by MCLA 211.53; MSA 7.97. Section 31 is the Tribunal’s jurisdictional counterpart of each; § 35 cannot be read to apply only to § 31(a), as § 31(a) and § 31(b) both refer to a methodology or procedure for correcting alleged wrongs associated with assessments and taxes under the property tax laws. "Moreover, in the instant matter, petitioner’s pleadings which indicate an intent to litigate an alleged erroneous 'assessment’ or 'valuation’ as relief sought is that 'this Tribunal redetermine petitioner’s 1974 personal property tax assessment * * * .’ "Furthermore, even if petitioner’s argument that a proceeding for 'refund’ is distinct from an 'assessment appeal’ and accepted as correct, pre-Tribunal case law requires exhaustion of administrative remedies before the board of review as a condition precedent to legal remedies by the courts. "The case of Michigan Savings Bank v City of Detroit, 107 Mich 246 [65 NW 101] (1895) is typical of cases which have held the failure to appear before the local board of review bars taxpayers from seeking further relief. In Michigan Savings Bank, supra, the plaintiff contended its failure to appear before the Detroit Board of Review was excusable because of alleged collusion between the board of review and the assessors. The Michigan Supreme Court held that plaintiff had shown no legal excuse for not appearing before the Detroit Board of Review. On page 247 [65 NW at 101] of its Opinion, the Court stated: " 'It is unnecessary to cite the numerous authorities *731 of this court to the proposition that boards of review are the proper tribunals for the correction of unjust assessments, and that parties will not be heard in the courts until they have exhausted their remedy before these tribunals.’ See also: Crawford v Koch, 196 [sic (169)] Mich 372 [135 NW 339] (1912), Hinds v Twp of Belvedere, 107 Mich 664 [65 NW 544] (1895), Traverse Beach Association v Twp of Elwood, 142 Mich 297 [105 NW 768] (1905). "A more recent case on point is Jack W Hutson v City of Royal Oak, 28 Mich App 393 [184 NW2d 558] (1970). In the Hutson case, the plaintiff alleged constructive fraud by the City of Royal Oak for its failure to assess owners of household goods with an aggregate valuation exceeding $5,000 while consistently assessing personal property of business and professional individuals. The plaintiff failed to appear before the Royal Oak Board of Review. At the trial, the City of Royal Oak moved for summary judgment on the grounds that the plaintiff had failed to exhause [sic] his administrative remedies. The trial judge denied the motion. The Michigan Court of Appeals reversed the order of the lower court, stating at page 395 [184 NW2d 559-560] as follows: " 'We are bound by the doctrine of stare decisis. It is this general rule that before one is entitled to sue for taxes paid under protest, he must show he has followed the proper procedural steps, such as application to the board of review. Michigan Savings Bank v City of Detroit, 107 Mich 246 [65 NW 101] (1895). It is clear that before resorting to the courts to recover taxes on the theory that property of another was fraudulently omitted from the tax roll or undervalued, the taxpayer should exhaust the remedies given him by the law. Fletcher Paper Co v City of Alpena, 172 Mich 35 [137 NW 640] (1912). The basis of exhaustion of administrative remedies is the presumption that the administrative agency, if given a chance to pass upon the matter, will decide correctly and will not fail in the performance of its duty.’ "The above cited cases dealt with taxpayers who paid their taxes under protest and then sued for refunds in Circuit Court. The Michigan Tax Tribunal Act (1973 PA *732 186, MCLA 205.701, et seq.; MSA 7.650(1), et seq.) has removed jurisdiction of these property tax cases from the Circuit Courts to the Tribunal. " 'A person or legal entity which, immediately before the effective date of this act, was entitled to proceed before the state tax commission or circuit court of this state for determination of a matter subject to the tribunal’s jurisdiction, as provided in section 31, shall proceed only before the tribunal.’ [MCLA 205.741; MSA 7.650(41)] "This Tribunal must acquire jurisdiction pursuant to § 35 of the Tax Tribunal Act, supra, page 3. Section 35 preserves and perpetuates the long line of Michigan cases which have held that before a taxpayer is entitled to protest his property tax assessment, he must have followed the proper procedural steps, i.e., appear before the board of review. "Petitioner argues, reinforced at oral argument, that the U.S. Constitutional rights of immunity from taxation causes the tax to be void and illegal and therefore absolves the need to exhaust administrative relief before seeking redress in the courts. This argument, assuming it to be true, was laid to rest in Price Paper Corp v City of Detroit, 42 Mich App 488, 491 [202 NW2d 523, 525] (1972) where a taxpayer was denied refund on taxes paid on immune property because it had not followed proper procedural prerequisites; in that case the timely protest and filing of suit. The Court’s ruling, equally applicable herein, was: " 'Plaintiff urges that payments constitutionally void must be repaid irrespective of compliance with the statute of limitations. We disagree. The provision of the Federal Constitution prohibiting state taxation of imports is not self-executing. Plaintiff’s failure to exercise the existing statutory remedy within the prescribed time limit does not deny the constitutional tax exemption on imports. It does, however, foreclose further assertion of the exemption in the courts. Even in the case of an illegal tax, failure to bring suit within 30 days after payment acts as a complete bar to recovery.’ "In conclusion, § 31 of the Tax Tribunal Act extends the Tribunal’s jurisdiction to, among other matters, *733 'assessment’ and 'valuation’ matters and 'proceedings for refund or redetermination of a tax.’ In the instant case, whether the action is called an 'assessment appeal’ or a 'refund or redetermination of a tax,’ under the general property tax laws, prior exhaustion of administrative remedies is required.” We believe that the above opinion of the Michigan Tax Tribunal adequately deals with all of the material issues of any substance in this case. However, plaintiff contends that the above opinion is invalid because of the recent case of Interstate Steel Corp v Detroit, 59 Mich App 438; 229 NW2d 491 (1975). We disagree with plaintiff. In the first place, the plaintiff in Interstate did not file a sworn personal property tax assessment form as did plaintiff in this case. As noted, plaintiff did not avail itself of the opportunity provided by that form to claim the immunity from taxation which it now claims it was unconstitutionally deprived of. Secondly, plaintiff in Interstate paid the tax under protest and filed for a refund in the circuit court. A careful review of the record fails to disclose that plaintiff in the instant case paid its taxes under protest, nor did it declare that it had exempt property on the sworn personal property tax assessment form. Plaintiff did not file such a suit in circuit court for repayment of the taxes paid under protest, as did Interstate Steel Corporation, although plaintiff could have done so from the date of the August 9, 1974 payment until September 30, 1974. See MCLA 205.774; MSA 7.650(74). The Court in Interstate said at p 439; 229 NW2d at 492: "We find the trial court’s reliance on Hutson, supra, [v City of Royal Oak, 28 Mich App 393; 184 NW2d 558 *734 (1970)] misplaced. That case involved a claim that property of another was fraudulently omitted from the tax roll. If true, the board of review could have corrected the situation, see MCLA 211.29; MSA 7.29. Thus, the Hutson court held that exhaustion of administrative remedies was required.” The Court then went on to hold that the question to be resolved in the Interstate case was one of law, and that plaintiff had no need to proceed through administrative channels to determine the answer to that question. In this case, the question is emphatically one of fact, and the Tax Tribunal’s reliance on Hutson, supra, was entirely valid. The question to be resolved is not the legal one of the constitutionality of taxing imported raw steel in unbroken packages riot yet committed to use or sale. Rather, the question is one of fact, and could have been answered by the board of review. We should note that the record discloses what plaintiff may have considered a good reason for avoiding a visit from an auditor of the Hamtramck board of review. As mentioned, plaintiff filed a tax statement which listed the value of plaintiffs personal property. The value shown was based on plaintiff’s average inventory for the previous 12 months. As such, it was approximately $400,000 lower than the actual value of inventory on hand as of December 31, 1973. This "average inventory method” is actually a valid and permissible method of valuation, and is provided for on the form supplied by the City of Hamtramck. However, when plaintiff brought its petition before the Tax Tribunal, plaintiff alleged that all of its inventory as of December 31, 1973was comprised of raw imported steel in its original unbroken packages. Of course a board of review would not have been interested in plaintiffs inventory as of December *735 31, 1973. Plaintiff had already made that somewhat irrelevant by choosing to value its personal property utilizing the "average monthly inventory” method. An auditor would very likely have insisted that plaintiff offer proof as to what portion of its average inventory had consisted of claimed immune property. Whatever the value of the immune property would have been, it would have most certainly been below the value of December 31, 1973. December 31, 1973 was the date of the highest inventory value for the relevant 12-month period. At any rate, the Hamtramck board of review should have been given an opportunity to decide the factual questions involved. We should here mention that we are aware of the recent case of Michelin Tire Corp v Wages, — US —; 96 S Ct 535; 46 L Ed 2d 495 (1976), decided January 14, during the pendency of this appeal. In Michelin the United States Supreme Court held that a non-discriminatory ad valorem property tax against imported goods in their original, unbroken packages is not violative of US Const, art I, § 10(2). The Michelin holding would thus seem to be dis-positive of this case, for it contradicts the very foundation of Imerman’s argument. But, assuming, arguendo, that Michelin is not retroactive, the question in this case is still one of fact, i.e., "is the property in question the type of property entitled to immunity from taxation?” The Hamtramck board of review could have answered this question and corrected the situation if it was justified. They should have been given the opportunity to do so. Therefore, the Tax Tribunal was correct in granting defendants’ motions for accelerated judgment, dismissing the petition and affirming the assessment on the ground that plaintiff failed to exhaust its administrative remedies. Affirmed.