Opinion
No. 4638.
Argued February 4, 1958.
Decided March 20, 1958.
1. In declaratory judgment proceedings to determine the liability of the plaintiff corporation for unemployment compensation contributions (RSA 282:1 (H) (4) (h)) the fact that the defendant state taxing agency had previously ruled that the plaintiff was exempt from such tax as a scientific or educational organization does not estop the state agency from collecting such tax.
2. However, where the retroactive application of tax liability in such case created an injustice to the plaintiff equity and fair play required that the statutory provision for adjustment by compromise (Ib., s. 12 (G)) be invoked to provide an equitable solution to the matter.
3. Where the sole issue litigated and decided on a previous transfer of a case was the question of exemption of the plaintiff from unemployment compensation contributions as a scientific or educational organization, the decision in that case was not res judicata of the issue subsequently presented of whether the State was estopped to collect such contributions by its agency's previous ruling that the plaintiff was exempt therefrom.
4. A corporation having failed to seasonably plead the statute of limitations under Superior Court Rule 21, to an action by the State to recover taxes assessed against it, was not entitled as a matter of law to file its plea late by leave of court under such rule where it was aware of the period for which the taxes were claimed in time to seasonably file such plea.
PETITION, for a declaratory judgment to determine whether the plaintiff is exempt from the payment of unemployment compensation contributions as a scientific or educational corporation under RSA 282:1 (H) (4) (h). It was decided that the plaintiff was not exempt under the Unemployment Compensation Act and the case was remanded. Institute for Trend Research v. Brown, 100 N.H. 286. After the case was remanded, the plaintiff paid all contributions, plus interest and penalties assessed for the period beginning in the first quarter of January, 1953, to date. The present case relates to contributions, interest and penalties assessed for a portion of 1949, and the years 1950, 1951, and 1952. There is no dispute as to the mathematical computation of contributions for those years. The plaintiff had been declared not subject to the provisions of the New Hampshire Unemployment Compensation Act on October 28, 1952, but this ruling was revoked by the defendant on April 6, 1953.
The Trial Court ruled that the defendant "as a result of its own ruling (October 28, 1952), is now estopped from collecting unemployment compensation taxes prior to January 1, 1953." The defendant excepted to this ruling and to the denial of its contention that the previous opinion of this court ( 100 N.H. 286) was res judicata of the issues raised in this proceeding. The plaintiff excepted to the Court's decree that it has not seasonably pleaded the statute of limitations. The exceptions of both parties were reserved and transferred by Wheeler, C. J.
Orr Reno and John W. Barto (Mr. Barto orally), for the plaintiff.
Winslow H. Osborne, James M. Riley, Jr. and Edward F. Smith (Mr. Osborne orally), for the defendant.
One of today's thorny problems is whether a government or a state should be subject to equitable estoppel when its tax officials seek to collect past taxes based on reversals of rulings that no taxes are due from taxpayers. Atlas, The Doctrine of Estoppel in Tax Cases, 3 Tax Law Rev. 71, 87 (1947). The taxpayer received little comfort from the dictum of Mr. Justice Holmes: "Men must turn square corners when they deal with the Government." Rock Island c. R.R. v. United States, 254 U.S. 141, 143. If that is true, possibly a more cogent rejoinder has been suggested: "it is hard to see why the government should not be held to a like standard of rectangular rectitude when dealing with its citizens." Maguire and Zimet, Hobson's Choice and Similar Practices in Federal Taxation, 48 Harv. L. Rev. 1281, 1299. However, occasional attempts at judicial relief in this field (Stockstrom v. Comm'r, 190 F.2d 283 (D.C. Cir. 1951)) have been disapproved in recent cases. Automobile Club v. Comm'r, 353 U.S. 180. The present situation is that estoppel against the government on behalf of the taxpayer is ordinarily ineffective except to the extent that relief is given by the taxing statute. 10 Mertens, Law of Federal Income Taxation, ss. 60.14 and 60.15 (1958).
In New Hampshire the right of the citizen to raise estoppel against the State likewise has been unsuccessful. State v. Hutchins, 79 N.H. 132; St. Regis Co. v. Board, 92 N.H. 164, 169; Ham v. Interstate Bridge Authority, 92 N.H. 268; Smith v. Epping, 69 N.H. 558, 560; State v. Cote, 95 N.H. 428. Recent cases have adhered to this rule with one minor qualification. Where the equities weigh heavily in favor of the citizen or taxpayer, we have attempted to point out equitable solutions to the problem while at the same time adhering to the doctrine that the State is not bound by estoppel for the acts of its agents. State v. Stafford Company, 99 N.H. 92, 99, 100. In the present case there is no indication of bad faith or misrepresentation on the part of either the plaintiff or the defendant. However the plaintiff in the interests of fair play should be allowed to rely on the ruling that it was exempt under the Unemployment Compensation Act. While not determinative, it may be noted that the plaintiff's case was so meritorious that two trial courts would have given it relief. Presumably the Legislature realized that there could be cases where the retroactive application of tax liability would create an injustice. Consequently it provided that the defendant should have the power, with the approval of the Attorney General, to adjust such matters by compromise "for the best interests of the state." RSA 282:12(G). This statute applies to the contributions due as well as the interest thereon which accumulates at the rate of twelve per cent a year. While we uphold the defendant's contention that estoppel does not lie against the State, we believe this is an appropriate case wherein the provisions of the statute allowing a compromise should be invoked to provide an equitable solution. Berger, Estoppel Against the Government, 21 U. of Chi. L. Rev. 680, 707 (1954).
In the previous transfer of this case (Institute for Trend Research v. Brown, 100 N.H. 286) the sole issue litigated and decided was whether the plaintiff was exempt from the payment of unemployment compensation contributions as a scientific or educational corporation under RSA 282:1 (H) (4) (h). The decision in that case was not res judicata of the issues involved in this one. Laconia Nat. Bank v. Lavallee, 96 N.H. 353; Lucas v. Cate, 99 N.H. 134.
The Trial Court's ruling that the plaintiff did not seasonably plead the statute of limitations (RSA 282:12 D) under Superior Court Rule No. 21 is sustainable. Yeaton v. Skillings, 100 N.H. 316, 320; LePage v. Company, 97 N.H. 46, 50, 51. While the rule permits late filing of such a plea by leave of court, the Trial Court could properly find that justice did not require that such leave be granted in this case since the plaintiff was aware of the period for which taxes were claimed at the outset of the litigation.
Remanded.
WHEELER, J., did not sit; the others concurred.