Jordan v. State

Annotate this Case

Jordan v. State (96-196); 166 Vt. 509; 702 A.2d 58

[Filed 3-Jul-1997]

NOTICE: This opinion is subject to motions for reargument under
V.R.A.P. 40 as well as formal revision before publication in the Vermont
Reports. Readers are requested to notify the Reporter of Decisions,
Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
any errors in order that corrections may be made before this opinion goes
to press.

No. 96-196

Kevin and Andrew Jordan Supreme Court

On Appeal from
v. Franklin Superior Court

State of Vermont, Agency of January Term, 1997
Transportation

Linda Levitt, J.

Colleen Conti, Underhill, for plaintiffs-appellants

Jeffrey L. Amestoy, Attorney General, and Scott A. Whitted, Assistant
Attorney General, Montpelier, for defendant-appellee

PRESENT: Gibson, Dooley, Morse and Johnson, JJ. and Allen, C.J.
(Ret.), Specially Assigned (FN1)

GIBSON, J. Kevin and Andrew Jordan appeal an order of Franklin
Superior Court dismissing their petition for review of an Agency of
Transportation (AOT) fuel-tax assessment. The Jordans argue that the court
erred in ruling that they failed to exhaust their administrative remedies
because they did not attend the administrative hearing where their appeal
was initially considered. We agree that failure to attend an
administrative proceeding does not necessarily preclude judicial review of
an agency action, and remand for a de novo hearing on the fuel-tax
assessment.

The basic facts are not in dispute. In August 1995, AOT informed the
Jordans by mail that a business audit indicated they owed $15,179 in fuel
taxes, interest, and penalties. The letter included notice that
administrative appeal was available but must be requested within thirty

days or they would lose their right to judicial review. The Jordans
submitted a timely notice of appeal to AOT, which scheduled a hearing for
September 1995. Following two postponements at the Jordans' request, a
hearing was scheduled for November 28, 1995. The Jordans failed to appear
on the day of the hearing, and on December 1, 1995, AOT informed the
Jordans that it had found the amount of the assessment, interest, and
penalty to be proper.

In January 1996, the Jordans filed a petition for de novo hearing of
the assessment in Franklin Superior Court pursuant to 23 V.S.A. § 3023.
Two months later the court granted AOT's motion to dismiss, holding that
the Jordans had failed to fully exhaust their administrative remedies
because they had not attended the November hearing, and consequently had
lost their right to judicial review of the assessment. This appeal
followed.

A party's failure to exhaust administrative remedies permits a court
to dismiss the action for lack of subject matter jurisdiction. DiLaura v.
Power Auth. of N.Y., 982 F.2d 73, 79 (2d Cir. 1992); 5A C. Wright & A.
Miller, Federal Practice and Procedure § 1350, at 194-95 (1990). Dismissal
for lack of subject matter jurisdiction, see V.R.C.P. 12(b)(1), is reviewed
de novo, with all uncontroverted factual allegations of the complaint
accepted as true and construed in the light most favorable to the nonmoving
party. See Love v. United States, 915 F.2d 1242, 1245 (9th Cir. 1990); cf.
Reynolds v. Sullivan, 136 Vt. 1, 3, 383 A.2d 609, 611 (1978) (similar
standard applies to motion for judgment on pleadings under V.R.C.P. 12(c)).

This Court has consistently held that when administrative remedies are
established by statute or regulation, a party must pursue, or "exhaust,"
all such remedies before turning to the courts for relief. In re D.A.
Assocs., 150 Vt. 18, 20, 547 A.2d 1325, 1326 (1988). This long-settled
rule of judicial administration serves the dual purposes of protecting the
authority of the administrative agency and promoting judicial efficiency.
McCarthy v. Madigan, 503 U.S. 140, 145 (1992). Therefore, where an agency
has jurisdiction to decide an issue, a court will not interfere with the
agency's decision-making unless and until all administrative remedies have
been invoked, In re R.L., 163 Vt. 168, 171, 657 A.2d 180, 183 (1995),
except where the party

qualifies for an exemption. See 2 C. Koch, Jr., Administrative Law and
Practice § 10.24[4] (Supp. 1996) (presumption is that exhaustion is
required; burden rests on party seeking to bypass administrative process to
show that exception applies); see, e.g., Stone v. Errecart, ___ Vt. ___,
___, 675 A.2d 1322, 1325 (1996) (futility exception has no place in face of
clear legislative command that exhaustion is required).

The Jordans contend the trial court erred in concluding that they
failed to exhaust their administrative remedies. We agree. A person
against whom diesel fuel taxes have been assessed may request appeal of
that assessment to the Commissioner of Motor Vehicles within fifteen days
of mailing of the notice. 23 V.S.A. § 3019. Failure to request appeal
within that period results in the assessment becoming final. Id. But a
person who timely appeals the assessment and who remains dissatisfied with
the result may have the "decision, order or finding of the commissioner . .
. reviewed under Rule 75 of the Vermont Rules of Civil Procedure" in
superior court. Id. § 3023(a). Judicial review is de novo, id., and
"shall be the exclusive remedy available . . . for review of a decision of
the commissioner." Id. § 3023(b).

The record indicates that the Jordans fully complied with these
procedures. On August 4, 1995, AOT mailed the Jordans a letter listing the
amount of the assessment and notifying them of their right to
administrative appeal.(FN2) Twelve days later, the Jordans returned a letter

expressing disagreement with the assessment and requesting an appeal. A
hearing was scheduled for November 28, 1995. Although the Jordans failed
to attend the hearing, a decision was issued on December 1, 1995, stating
that "[t]he hearing finds that the assessment, interest and penalty [were]
proper" and noting that a revised bill showing the amount now due would be
mailed separately. Having requested and received administrative review of
the assessment, the Jordans were within their statutory rights to seek de
novo review of the Commissioner's December 1995 decision in superior court
pursuant to 23 V.S.A. § 3023.

AOT argues, however, that the Jordans' failure to appear at the
November hearing resulted in the administrative equivalent of a default
judgment, and that they therefore failed to complete the administrative
appeal process. By implying that a default judgment would fail to satisfy
the exhaustion requirement, AOT raises the related, but distinct, issue of
ripeness of an action for judicial review. With limited exceptions, it is
our practice to decline to judge a case piecemeal and to require that the
order appealed from be final. In re Pelham North, Inc., 154 Vt. 651, 652,
578 A.2d 124, 124 (1990); see 2 Koch, supra, § 10.31, at 194 (judicial
review available only after agency has spoken decisively on issue and when
judicial involvement in dispute will settle it). "Finality insures that
the case has reached an administrative conclusion and any decision a court
reaches will be authoritative." 2 Koch, supra, § 10.31, at 194 (footnote
omitted). Therefore, finality is required even where the authorizing
statute does not expressly so state. See Carolina Power & Light Co. v.
United States Dep't of Labor, 43 F.3d 912, 914 (4th Cir. 1995) (judicial
review limited to final orders, although statute broadly phrased to allow
appeal of "order[s]"). Thus, even though the statute does not expressly
limit judicial review to final agency actions, but rather allows review of
"any decision, order or finding of the commissioner," 23 V.S.A. § 3023(a),
we agree with AOT that the trial court has jurisdiction to review only
final orders of the Commissioner of Motor Vehicles.

For an order to be final, it must have disposed "`of all matters that
should or could properly be settled at the time and in the proceeding then
before the [decision-making body].'"

In re Petition No. 152, 148 Vt. 177, 178, 530 A.2d 579, 580 (1987) (quoting
In re Estate of Webster, 117 Vt. 550, 552, 96 A.2d 816, 817 (1953)). AOT
argues, in essence, that the 1995 decision was not final because the
Jordans failed to attend the hearing, and that the Jordans therefore have
no right to judicial review.

There is no indication from the record, however, that the December
1995 decision was not final. The letter noted that the Jordans failed to
appear, but in no way suggested that their absence affected consideration
of their claim. The language implies that the decision was issued on the
merits, stating that "[t]he hearing finds that the assessment, interest and
penalty [were] proper." In addition, there is no indication that AOT
requested a dismissal or default judgment, or that any such request was
considered by the hearing examiner. In the absence of any evidence in the
record to the contrary, we presume that the Agency's December 1995 decision
was issued on the merits and thus was final.

Contrary to AOT's assertion, the finality of the decision does not
fail simply because the Jordans did not attend the hearing. Finality does
not hinge on whether all parties to the appeal were physically present
during the proceeding, but rather whether the decision fully addressed the
issues and was based on the evidence. See Leiter v. Pfundston, 150 Vt.
593, 595, 556 A.2d 90, 92 (1988). Thus, in Leiter, the judgment was not by
default where the plaintiff went forward with presentation of evidence
despite the defendant's absence at trial. Id. at 594-95, 556 A.2d at
91-92. In comparison, in Reuther v. Gang, 146 Vt. 540, 542, 507 A.2d 972,
973 (1986), judgment was by default where, upon the defendant's absence at
trial, the plaintiff's attorney merely recited the facts supporting the
plaintiff's claim, without the plaintiff ever testifying as to the truth of
the statements. Here, the Jordans assert that they would have presented
evidence at the hearing to show that fuel taxes were properly paid "at the
pump," but their failure to present this evidence did not prevent the
hearing examiner from reviewing the assessment for error based on the
evidence before him at the time. Because the December 1995 decision was
capable of being decided, and appears to have been based, on the merits,
the

Jordans' absence does not affect the finality of that decision.(FN3) Having
received a final decision pursuant to 23 V.S.A. § 3019, the Jordans acted
within their rights in appealing that decision to the superior court
pursuant to 23 V.S.A. § 3023.

In light of our decision, we do not address the Jordans' assertion
that they were not required to exhaust their administrative remedies. We
also need not consider whether the trial court erred when it failed to
exempt them under the irreparable-injury exception.

Reversed and remanded.

FOR THE COURT:

_______________________________________
Associate Justice

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Footnotes

FN1. Chief Justice Allen sat at oral argument but did not participate
in this decision.

FN2. The Jordans apparently contest the adequacy of the notice
because it referenced the right to appeal under the Regional Fuel Tax
Assessment (RFTA) (pursuant to 23 V.S.A. § 3021(b)(3), Commissioner may
enter agreements for reciprocal enforcement of fuel use tax laws; notice
provisions under RFTA may vary from those under § 3019), instead of citing
23 V.S.A. § 3019. We find, however, that the RFTA notice provisions are
materially equivalent to or more generous than the notice requirements
under § 3019. The major distinction is that under § 3019, the Jordans
would have received only fifteen days from the mailing date of the notice
to file their appeal, whereas under RFTA they received thirty days from the
date they received notice. Thus, they received more time to file their
appeal under RFTA than they would have received under § 3019. More
importantly, the Jordans requested, and were granted, their administrative
appeal. Thus, they have failed to demonstrate how they were prejudiced by
receiving notice under RFTA rather than under § 3019. See Paradis v.
Kirby, 138 Vt. 524, 528, 418 A.2d 863, 865 (1980) (party claiming error has
burden of showing prejudice).

FN3. The dissent asserts that other jurisdictions have found
attendance and presentation of evidence to be determinative on the finality
issue. But in doing so the dissent misconstrues our holding. It is not
initiation of the appeal process that satisfies the exhaustion requirement.
Rather, we leave it to the agency to decide whether a party's failure to
appear precludes the agency from considering the merits of the appeal. If
so, the agency should dismiss the action, in which case there is no
decision on the merits and the party that failed to pursue its appeal is
foreclosed from subsequent judicial review. If, however, the agency moves
forward and addresses the merits, the absent party retains the right to
judicial review of that decision within the bounds of the law. The cases
cited by the dissent support this approach. See Boyd v. Supervisor of
Assessments, 471 A.2d 749, 751 (Md. Ct. Spec. App. 1984) (appealing party
failed to exhaust administrative remedies where assessment board dismissed
appeal after party's failure to appear); Marquart v. Director of Revenue,
896 S.W.2d 716, 717-18 (Mo. Ct. App. 1995) (licensee failed to exhaust
administrative remedies where administrative hearing officer entered
default judgment after licensee failed to appear at hearing); Mullenaux v.
State, 651 P.2d 724, 726-27 (Or. 1982) (plaintiffs forfeited right to
judicial review when hearing officer dismissed appeal after plaintiffs
failed to appear at hearing); cf. Purtill v. Harris, 658 F.2d 134, 138-39
(3d Cir. 1981) (remanded to allow plaintiff to amend complaint to allege
that agency's adverse decision on first count satisfied exhaustion
requirement).

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Dissenting

No. 96-196

Kevin and Andrew Jordan Supreme Court

On Appeal from
v. Franklin Superior Court

State of Vermont, Agency of January Term, 1997
Transportation

Linda Levitt, J.

Colleen Conti, Underhill, for plaintiffs-appellants

Jeffrey L. Amestoy, Attorney General, and Scott A. Whitted, Assistant
Attorney General, Montpelier, for defendant-appellee

PRESENT: Gibson, Dooley, Morse and Johnson, JJ. and Allen, C.J.
(Ret.), Specially Assigned (FN1)

MORSE, J., dissenting. Contrary to the Court, I do not believe that
merely stepping through the motions of the administrative process by filing
a timely notice of appeal comports with the exhaustion-of-remedies
doctrine. The taxpayers' total disregard of administrative procedure in
failing to appear and present evidence or argument at the administrative
hearing should result in a forfeiture of the right to judicial review on
the merits. The Court's holding to the contrary contradicts all of the
policy reasons for having an exhaustion rule. Accordingly, I would affirm
the well-reasoned decision of the superior court dismissing the taxpayers'
appeal for lack of subject matter jurisdiction.

After receiving notice that additional fuel taxes were owing,
taxpayers filed an appeal with the Commissioner of Motor Vehicles pursuant
to 23 V.S.A. § 3019. The Commissioner

subsequently notified taxpayers that a hearing on their appeal had been
scheduled and that they were to "appear through yourself and/or counsel to
show why the . . . assessment . . . was not proper." At taxpayers'
request, the hearing was twice rescheduled, each time followed by an
identical notice. Taxpayers ultimately failed to appear at the hearing,
either in person, through counsel, or by way of affidavit, resulting in an
administrative decision upholding the assessment. Taxpayers thereupon
appealed the Agency's decision pursuant to 23 V.S.A. § 3023, which provides
for a hearing de novo in superior court. The statutory appeal constitutes
a taxpayer's "exclusive remedy" from an adverse administrative decision.
Id. § 3023(b).

The Agency moved to dismiss the taxpayers' appeal on the ground that
they had failed to exhaust their administrative remedies by declining to
appear and argue their claim before the commissioner. The trial court
granted the motion, ruling that taxpayers may not complain about an
administrative hearing they elected not to attend, nor contest a result
they might well have avoided had they chosen to appear at the hearing to
address the merits. To hold otherwise, the court ruled, would circumvent
the statutory scheme, and defeat the underlying purposes of the exhaustion
doctrine.

The trial court's ruling was correct. Exhaustion of administrative
remedies is required to afford the parties and the courts the benefit of
the administrative agency's experience and expertise, and to afford the
agency the opportunity to cure its own errors. Allowing complainants to
bypass their administrative remedy would erode the agency's authority and
effectiveness. McKart v. United States, 395 U.S. 185, 193-95 (1969).
Exhaustion serves the interests of the courts as well, inasmuch as a
complaining party successful at the administrative level may never have to
seek judicial review. Id. at 195. Indeed, the whole purpose of the
administrative review process is to resolve the majority of complaints at
that level, thereby relieving the courts of a task for which they are not
nearly so well suited. Hence, the general rule is that a failure to
exhaust deprives the court of subject matter jurisdiction. Stone v.
Errecart, ___ Vt. ___, ___, 675 A.2d 1322, 1326 (1996).

Understood in the light of these purposes, it is readily apparent that
exhaustion of remedies does not mean the mere initiation of administrative
procedures. Rather, it means the initiation and pursuit of them to their
appropriate conclusion by appearing, presenting evidence or argument, and
receiving a final decision. Otherwise, the agency would effectively be
frustrated in its ability to render informed and reliable decisions, and
the courts would be burdened by unnecessary cases that might otherwise have
been terminated below. Thus, affording judicial review where the
complainant has requested an administrative hearing but failed to attend,
contradicts the purposes of the exhaustion rule.

For these reasons, other jurisdictions have specifically held that the
invocation of an administrative appeal followed by an unexcused failure to
appear at the subsequent hearing, amounts to a failure to exhaust
administrative remedies and is fatal to the complainant's judicial appeal.
See, e.g., Purtill v. Harris, 658 F.2d 134, 138 (3d Cir. 1981) (allowing
plaintiffs to abandon administrative remedies they initiated in order to
take their claims to court would "frustrate the ability of the agency to
deal with complaints . . . [and] unnecessarily burden courts with cases
that otherwise might be terminated successfully"); Roth v. City of Los
Angeles, 126 Cal. Rptr. 163, 169 (Ct. App. 1976) (property owners' failure
to attend administrative hearing "precluded [them] from attacking the . . .
procedure in this judicial action"); Boyd v. Supervisor of Assessments, 471 A.2d 749, 751 (Md. Ct. Spec. App. 1984) (taxpayer's failure to appear
before tax board "frustrated totally its ability to play its part in the
legislatively-established administrative process" and thereby failed
"precondition for Tax Court jurisdiction"); Marquart v. Director of
Revenue, 896 S.W.2d 716, 718 (Mo. Ct. App. 1995) (where "the licensee fails
to exhaust his or her administrative remedies, . . . the circuit court
lacks subject matter jurisdiction to hear a petition for review");
Mullenaux v. State, 651 P.2d 724, 727 (Or. 1982) (although plaintiffs
requested an administrative hearing, "their failure to appear at the
hearing or to offer any evidence or argument at all on their own behalf . .
. forfeited their right of judicial review on the merits"); Webb County
Appraisal Dist. v. New Laredo Hotel, Inc., 792 S.W.2d 952, 954-55 (Tex. 1990) ("[I]f the taxpayer is not required to
appear at the protest hearing in order to appeal to district court, the
administrative process would become useless. . . . [T]axpayers . . . must
appear . . . as a prerequisite to an appeal to district court.").

In some cases, as the Court notes, the agency may enter a default
judgment against the complainants; in others, it may simply deny the
protest. See, e.g., Webb, 792 S.W.2d at 952 (when tax protesters failed to
appear, agency "denied the protest and left the valuation unchanged").
There is no requirement, however, that the agency enter a default judgment
as a prerequisite to a finding of non-exhaustion. The onus is on the
complainant, not the agency.

The Court is nevertheless persuaded that taxpayers were entitled to
judicial review because, following the hearing at which they failed to
appear, the agency wrote them a letter stating that it had found the
assessment to be "proper." The Court construes this as a "final" decision
on the merits, and thus concludes that taxpayers "acted within their rights
in appealing that decision to the superior court." Ante, at 6. The
reasoning is unpersuasive. As noted, a final administrative ruling is a
necessary condition to judicial review, but it is not a sufficient
condition. The agency's ruling did not alter the fact that taxpayers
abandoned the administrative process they had initiated. They never
presented to the commissioner evidence they now claim would have shown that
their taxes were paid "at the pump," evidence which, if persuasive, would
have made the instant appeal moot. The circumstances thus present a
textbook example of the importance of exhaustion as a precondition to
judical review. Accordingly, I would affirm the judgment dismissing the
action for lack of subject matter jurisdiction.

_______________________________________
Associate Justice

FN1. Chief Justice Allen sat at oral argument but did not participate in
this decision.

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