Opinion
No. WD 65782.
December 26, 2006.
Appeal from the Circuit Court of Clay County, Honorable Janet L. Sutton, Judge.
Before JOSEPH M. ELLIS, Presiding Judge, HAROLD L. LOWENSTEIN, Judge, and PAUL M. SPINDEN, Judge.
Mina Elliott appeals from a judgment entered in the Circuit Court of Clay County ordering her to pay $5,712.85 in delinquent taxes, additions to tax, and interest. Because we find that she raises issues regarding the constitutionality of § 143.611 that are more than merely colorable, we must transfer this case to the Missouri Supreme Court.
This case was originally heard on March 9, 2006, and was decided by opinion handed down on May 9, 2006. In that opinion, the court found that Elliott's constitutional claim was merely colorable and affirmed the trial court judgment. Elliott filed a Motion for Rehearing citing Jones v. Flowers , 126 S.Ct. 1708, 164 L. Ed.2d 415 (2006), which had been handed down on April 26, 2006, asserting that Jones was controlling. Thereafter, on June 13, 2006, the Missouri Supreme Court handed down Conseco Finance Servicing Corp. v. Missouri Department of Revenue , 195 S.W.3d 410 (Mo. banc 2006), relying on the U. S. Supreme Court's decision in Jones . In light of these two decisions, this court granted Elliott's Motion for Rehearing, requested additional briefing and oral arguments, and the case was resubmitted on September 19, 2006.
For the tax years 1991 through 1995, Elliott did not file Missouri income tax returns or pay any income tax to the State of Missouri. In 1999, pursuant to § 143.611, the Director of Revenue estimated Elliott's tax liability for those years based upon federal income tax records and sent Elliott notices, via certified mail to her last known address, informing her of the amount of deficiency proposed to be assessed against her for each of the relevant tax years and informing her of her right to protest those assessments. Those notices were subsequently returned to the Director by the postal service as unclaimed. After Elliott failed to protest any of those assessments within sixty days from the date the proposed assessments were mailed to her, the amounts reflected in those proposed assessments were duly assessed against Elliott, and the Director issued notices to her demanding payment.
After Elliott failed to pay the amounts that had been assessed by the Director, on March 13, 2003, the Director filed a Petition for Delinquent Individual Income Tax in the Circuit Court of Clay County asking the court to enter judgment against Elliott for the amount of the assessments along with the interest and other additions allowed by statute. The case was tried on June 13, 2005. At the close of the Director's evidence, Elliott moved for dismissal, asserting that the Director's failure to provide her with actual notice of the proposed tax assessments and her right to appeal constituted a violation of her right to due process under the Fourteenth Amendment to the United States Constitution. After overruling Elliott's motion, the trial court entered judgment against Elliott for $5,712.85.
In her sole point on appeal, Elliott claims that the trial court erred in denying her motion to dismiss. Elliott contends that the lack of actual notice unconstitutionally deprived her of the opportunity to challenge the amounts assessed by the Director.
Section 143.611.2 provides that "[i]f [a] taxpayer fails to file an income tax return, the director of revenue shall estimate the taxpayer's income and the tax thereon from any available information and notify the taxpayer of the amount proposed to be assessed." Section 143.611.3 goes on to state that this notice "shall set forth the reason for the proposed assessment" and "shall be mailed by certified or registered mail to the taxpayer at his last known address." Pursuant to § 143.631, a taxpayer is allowed to file a written protest with the Director of Revenue challenging the assessment within sixty days of the mailing of the notice of deficiency. "In the event a protest is filed and a decision is rendered by the director adverse to the taxpayer, § 621.050.1 affords the taxpayer the right to appeal the director's decision to the Administrative Hearing Commission." State ex rel. Dir. of Revenue v. Anderson , 957 S.W.2d 800, 801 (Mo.App.S.D. 1997). Absent the timely filing of a protest with the Director, the notice of deficiency "constitute[s] a final assessment of the amount of tax specified together with interest, additions to tax, and penalties." § 143.621 .
Elliott concedes that the Director's mailing of the notices via certified mail complied with the relevant statutory provisions. Elliott contends, however, that the provision of § 143.611.3 allowing for notice by certified or registered mail is unconstitutional to the extent that it allows the assessment to become final without the taxpayer receiving actual notice of the assessment or their right to challenge the assessment. Elliott argues that she was denied due process, as guaranteed by the Fourteenth Amendment to the United States Constitution and article I, § 10 of the Missouri Constitution, when the assessments became final despite the fact that she had no actual notice thereof.
Initially, we must determine whether this Court has jurisdiction to entertain Elliott's constitutional challenge. "The Missouri Supreme Court has exclusive jurisdiction over appeals involving the constitutional validity of a state statute." State v. Dillard , 158 S.W.3d 291, 302 (Mo.App.S.D. 2005). "However, the mere assertion that a statute is unconstitutional does not deprive the court of appeals of jurisdiction." Higgins v. Treasurer of State of Missouri , 140 S.W.3d 94, 98 (Mo.App.W.D. 2004). "The constitutional issue must be real and substantial, not merely colorable." Id.
"In determining whether a constitutional claim is real and substantial, we make a preliminary inquiry as to whether it presents a contested matter of right that involves fair doubt and reasonable room for disagreement." Id. Jurisdiction properly rests with the Missouri Supreme Court as long as the claim is real and substantial, even in those instances where the challenge is likely to be rejected on the merits by unanimous decision. State v. Fields , 186 S.W.3d 501, 504 (Mo.App.S.D. 2006). On the other hand, "[i]f the initial inquiry discloses the claim is so legally or factually insubstantial as to be plainly without merit, the claim may be deemed merely colorable." Higgins , 140 S.W.3d at 98; see also Fields , 186 S.W.3d at 504 (quoting Dillard , 158 S.W.3d at 302) ("A constitutional claim is colorable when preliminary inquiry demonstrates that [the] contention is `so obviously unsubstantial and insufficient, in fact or in law, as to be plainly without merit.'").
Elliott claims that her right to Due Process was violated by the notice provisions of § 143.611.3. "[T]he Due Process Clause of the Fourteenth Amendment prohibits the States [ ] from depriving a person of property without `due process of law.'" Dusenbery v. United States , 534 U.S. 161, 167, 122 S.Ct. 694, 699, 151 L.Ed.2d 597 (2002). "From these `cryptic and abstract words'", the United States Supreme Court has "determined that individuals whose property interests are at stake are entitled to `notice and an opportunity to be heard.'" Id. Consequently, "prior to an action which will affect an interest in . . . property protected by the Due Process Clause of the Fourteenth Amendment, a State must provide `notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.'" Mennonite Bd. of Missions v. Adams , 462 U.S. 791, 795, 103 S.Ct. 2706, 2709, 77 L.Ed.2d 180 (1983) (quoting Mullane v. Central Hanover Bank Trust Co. , 339 U.S. 306, 314, 70 S.Ct. 652, 657, 94 L.Ed. 865 (1950)).
In asserting that § 143.611.3 is unconstitutional, Elliott relies in large part on Jones v. Flowers , 126 S.Ct. 1708, 164 L.Ed.2d 415 (2006), and Conseco Finance Servicing Corp. v. Missouri Department of Revenue , 195 S.W.3d 410 (Mo. banc 2006). In Jones v. Flowers , 126 S.Ct. 1708, 164 L.Ed.2d 415 (2006), which was handed down by the United States Supreme Court on April 26, 2006, Mr. Jones failed to pay property taxes on the house in which his wife, from whom he had separated, was living. Id. at 1712. The Arkansas Commissioner of State Lands mailed a certified letter to Jones at the property's address, stating that unless he redeemed the property, it would be subject to public sale in two years. Id. The letter was returned to the Commissioner as "unclaimed." Id. Two years later, the Commissioner published a notice of public sale in a local newspaper. Id. Before selling the house to Ms. Flowers, the Commissioner mailed another certified letter to Jones, which was also returned as "unclaimed." Id. After purchasing the property, Flowers had an unlawful detainer notice delivered to the property, which was served upon Jones' daughter, who notified him of the sale. Id. at 1713. Jones subsequently challenged the sale of the house on the grounds that the State's failure to provide adequate notice had resulted in the taking of his property without due process. Id.
The U.S. Supreme Court noted that "before forcing a citizen to satisfy his debt by forfeiting his property, due process requires the government to provide adequate notice of the impending taking." Id. at 1718. The Supreme Court further stated that "assessing the adequacy of a particular form of notice requires balancing of the `interest of the State' against `the individual interest sought to be protected by the Fourteenth Amendment.'" Id. at 1715. Specific to that case, the Supreme Court sought to "evaluate the adequacy of notice prior to the State extinguishing a property owner's interest in a home." Id. Ultimately, the Supreme Court held that the State, having been made aware that its notice attempt via certified mail had failed, was required to take additional steps to attempt to provide notice to a taxpayer before selling his or her real property in a tax sale, if it is practicable to do so. Id. at 1718. The Supreme Court then determined that, under the circumstances, additional reasonable steps were available to the State, including the use of regular mail or the posting of a notice on the door of the property. Id. at 1719. Because the state failed to take any such steps, it was deemed to have violated Jones right to due process. Id. at 1721.
In Conseco Finance Servicing Corp. v. Missouri Department of Revenue , 195 S.W.3d 410 (Mo. banc 2006), homeowners purchased a manufactured home financed by Conseco Finance and placed the home on land rented from Lakehurst Investments. Id. at 412. Subsequently, Lakehurst applied to the Department of Revenue for an abandoned home title, alleging that the home had been abandoned pursuant to § 700.525 et seq. Id. Under the applicable statutory provisions, the Department of Revenue sent notice of Lakehurst's application to the address listed on the homeowners' title, the address Lakehurst was asserting had been abandoned. Id. The Department of Revenue sent no notice to Conseco Finance as a lienholder. Id. After neither the homeowners nor Conseco Finance redeemed the property within the thirty-days allowed under the statute, the Department of Revenue issued an abandoned home title to Lakehurst. Id. at 413. Once made aware of the issuance of the abandoned home title, Conseco Finance and the homeowners challenged the constitutionality of the notice provided by the Department of Revenue. Id.
In addressing the sufficiency of the notice, the Missouri Supreme Court began by noting that "'[f]or more than a century the central meaning of procedural due process has been clear: Parties whose rights are to be affected are entitled to be heard; and in order that they may enjoy that right they must first be notified.'" Id. at 415 (quoting Fuentes v. Shevin , 407 U.S. 67, 80 (1972)). The Court went on to state that "[t]o give meaning under the concept of notice, due process requires notice reasonably calculated, under all the circumstances to reach the person whose rights are affected" and "[w]hile what constitutes sufficient notice may vary, if feasible, notice must be reasonably calculated to inform parties of proceedings which may directly and adversely affect their legally protected interests." Id at 416 (internal quotations omitted). Then, citing Jones v. Flowers , 126 S.Ct. 1708, 164 L.Ed.2d 415 (2006), and Robinson v. Hanrahan , 409 U.S. 38, 93 S.Ct. 30, 34 L.Ed.2d 47 (1972), the Missouri Supreme Court held that knowledge on the part of the government that notice was ineffective triggered an obligation to take additional steps to provide notice to both the homeowners and Conseco Finance.
In Robinson v. Hanrahan , 409 U.S. 38, 93 S.Ct. 30, 34 L.Ed.2d 47 (1972), the appellant was arrested and taken into custody. While incarcerated, the state initiated forfeiture proceedings against his automobile and mailed the notice of the proceedings to his home. After the appellant's automobile was forfeited, he challenged the forfeiture based upon his failure to receive notice. Robinson held that because "the State knew that appellant was not at the address to which the notice was mailed," the notice mailed to the appellant's home address could not be deemed to be an effort reasonably calculated to provide notice to appellant, even though appellant failed to comply with a legal obligation to update his address. 409 U.S. at 40, 93 S.Ct. at 31-32.
While there are arguably reasons for differentiating Jones v. Flowers , 126 S.Ct. 1708, 164 L.Ed.2d 415 (2006), and Conseco Finance Servicing Corp. v. Missouri Department of Revenue , 195 S.W.3d 410 (Mo. banc 2006), from the case at bar because they involved real property, reasonable minds could differ on the propriety of doing so. Moreover, when, as here, "the challenge is one of first impression, this generally indicates that a constitutional challenge is real and substantial and made in good faith." Fields , 186 S.W.3d at 504. Elliott's claim is not so legally or factually insubstantial as to be plainly without merit and is, therefore, more than merely colorable. As such, exclusive jurisdiction over her claim rests with the Missouri Supreme Court, and we must, therefore, transfer the case to that Court.
"By virtue of Article V, § 3 of the Missouri Constitution, the Supreme Court has exclusive jurisdiction in all cases involving the constitutional validity of a statute." Higgins v. Treasurer of State of Missouri , 140 S.W.3d 94, 98 (Mo.App.W.D. 2004).
Joseph M. Ellis, Judge