J-W Power Company VS State of Louisiana Through the Secretary of the Department of Revenue and Taxation
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STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT M NUMBER 2009 CA 2330 JW POWER COMPANY VERSUS STATE OF LOUISIANA THROUGH THE SECRETARY OF THE DEPARTMENT OF REVENUE TAXATION Judgment Rendered June 11 2010 Appealed from the Nineteenth Judicial District Court In and for the Parish of East Baton Rouge Louisiana Trial Court Number 530 238 Honorable Timothy Kelley Judge Presiding David R Taggart Misty Futrell Alexander Shreveport LA Counsel for PlaintiffsAppellants JW Power Company and Intervenors Appellants JW Operating Company and JW Gathering Company Frederick Mulhearn Baton Rouge LA Counsel for Defendant Appellee Louisiana Department of Revenue BEFORE WHIPPLE HUGHES AND WELCH JJ HUGHES J This is an appeal by JW Power Company J W Power JW Gathering Company JW Gathering and J W Operating Company JW Operating hereinafter sometimes collectively referred to as the JW Companies from a judgment of the district court sustaining an exception raising the objection of no right of action dismissing JW Power petition s with prejudice and denying a petition for intervention filed by JW Gathering and JW Operating For the following reasons we reverse the judgment of the district court FACTS AND PROCEDURAL HISTORY J W Power is a provider of gas compression services As part of its business JW Power entered into various Full Service Agreement contracts with its customers wherein JW Power agreed to provide the gas compression services including all labor equipment repairs and maintenance necessary to achieve the customer goals JW Gathering and s JW Operating are customers of JW Power and have executed full service agreements with J W Power In December of 2004 the Department of Revenue the Department issued Revenue Ruling 04 009 Pursuant to that ruling JW Power s customers owed sales tax on the full service agreement contracts Prior to that December ruling the customers did not pay a sales tax JW Power as the selling dealer was thereafter required to collect the new sales tax from its customers and remit those taxes to the Department Louisiana Revised Statutes 47 affords a taxpayer who protests 1576 any amount found due by the Department the right to file a suit to recover those amounts provided the taxpayer follows the procedures set forth in the J W Power and JW Gathering are individual wholly owned subsidiaries of JW Operating Company Neither JW Power nor J W Gathering own any part of the other 2 statute Citing LSAR 47 JW Power remitted the taxes that it had S 1576 collected from its customers under protest advised the Department that the taxes were paid under protest and filed a Petition for Refund of Sales Taxes Paid Under Protest On July 7 2008 the Department filed an exception raising the objection of no right of action arguing that JW Power was not the taxpayer and was therefore not entitled to seek a refund of tax money that it had not paid In response J W Power asserted that it was acting as an agent of its customers J W Gathering and JW Operating The district court granted the exception of no right of action but allowed JW Power the opportunity to amend the petition in order to remove the grounds for the objection On May 14 2009 JW Power filed an amended petition alleging that JW Gathering and JW Operating expressly directed and authorized J W Power Company to protest the application and payment of the sales taxes on the Full Service Agreements and designated J W Power Company as their agent in fact for the payment under protest and the prosecution of the suit for refund on their behalf Also on May 14 2009 J W Gathering and J W Operating filed a petition to intervene in the suit and join as plaintiffs The Department again pled the exception of no right of action arguing that under the tax laws there is no authority for JW Power to act as the agent for JW Gathering and JW Operating After a hearing on the exception and the petition for intervention the district court again granted the exception of no right of action and dismissed JW Power suit with prejudice By separate judgment the district court s denied JW Gathering sand JW Operating spetition for intervention Z The Department also filed an exception raising the objection of no cause of action which was denied 3 The JW Companies filed an appeal assigning as error the trial court s determinations that JW Gathering and JW Operating could not designate JW Power as agent for purposes of protesting the tax payments the JW Companies are not entitled to declaratory relief 3 and JW Gathering and J W Operating could not intervene in the lawsuit LAW AND DISCUSSION 1 Authorized Agent under LSA R S 47 1576 JW Power alleges error in the district court determination that a s taxpayer cannot designate an agent to file suit on its behalf under the tax laws Louisiana Revised Statutes 47 provides in pertinent part 1576 A 1 Except as otherwise provided in a Subsection B of this Section any taxpayer protesting the payment of any amount found due by the secretary of the Department of Revenue or the enforcement of any provision of the tax laws in relation thereto shall remit to the Department of Revenue the amount due and at that time shall give notice of intention to file suit for the recovery of such tax b In the case of sales or use taxes that are required to be collected and remitted by a selling dealer as provided for in R 47 the S 304 purchaser in order to avail himself of the alternative remedy provided by this Section shall remit protested sales or use tax to the selling dealer and shall retain copies of documentation evidencing the amount of the sales or use tax paid to the dealer on the transactions On or before the twentieth day of the month following the month of the transactions on which the selling dealer charged the tax the purchaser shall inform the department by certified mail or other reasonable means of the dates and amounts of the protested taxes that were charged by the selling dealer and 3 In the original petition J W Power also prayed for a declaration that the new revenue ruling and its interpretation of LSA R 47 as applied to natural gas compressors and natural gas S 301 14 compression services be rejected Because J W Power suit was dismissed pursuant to the s exception the issue of the declaratory relief was never addressed 4 shall give notice of the purchaser intention to s file suit for recovery of the tax 3 If the taxpayer prevails the secretary shall refund the amount to the claimant with interest at the rate established pursuant to R 13 S 4202 B from the date the funds were received by the Department of Revenue or the due date determined without regard to extensions of the tax return whichever is later to the date of such refund Payments of interest authorized by this Section shall be made from funds derived from current collections of the tax to be refunded Emphasis added The Department argues that the language of LSAR 47 S 1576 provides that the purchaser shall inform the Department that he is protesting the payment of the sales tax and that the purchaser shall notify the Department that he intends to file suit The Department contends that because JW Gathering and JW Operating are the taxpayers and did not personally protest the tax payments the requirements of LSA R 47 S 1576 were not met An action can be brought only by a person having a real and actual interest which he asserts LSAC art 681 When the facts alleged in P C the petition provide a remedy to someone but the plaintiff who seeks the relief for himself is not the person in whose favor the law extends the remedy the proper objection is an exception of no right of action which the Department correctly filed However Louisiana Code of Civil Procedure article 694 provides for the use of an agent and states that An agent has the procedural capacity to sue to enforce a right of his principal when specially authorized to do so For all procedural purposes the principal is considered the plaintiff in such an action 5 The defendant may assert any defense available against the principal and may enforce his rights against the principal in a reconventional demand Emphasis added Therefore ifwe find that JW Power was the agent of JW Gathering and JW Operating then JW Power would be considered to be the same as JW Gathering and JW Operating and would therefore be capable of satisfying the statutory requirements on their behalf In support of its conclusion that no agents are allowed under the tax laws the Department cites a line of cases that comment as to the sui generis nature of the tax laws Specifically the Department cites Convent Marine Companies Inc v State 603 So 790 La App 1 Cir 6 2d 92 29 wherein the claimant paid the taxes without protest and later attempted to sue for refund Cox Cable New Orleans Inc v City of New Orleans 624 2d So 790 La 9 wherein the cable company without purporting to 93 3 be the agent of its consumers sought to recover tax monies paid by its customers United Artist Theater Circuit Inc v City of New Orleans 9517 U Dist Ct E La 2 1996 WL 46709 wherein the S D 96 5 operators of movie theatres sought to recover taxes paid by its customers but did not do so as an authorized agent of the taxpaying moviegoers and Larrieu v Wal Mart Stores Inc 20030600 La App 1 Cir 2 04 23 872 So 1157 wherein the taxpayers sued the dealers as opposed to the 2d Department and sought to impose liability on the dealers Clearly the cases relied upon by the Department are distinguishable from the situation before us The suits referenced by the Department are those in which the taxpayers claims were disallowed due to a failure to meet the specific notice requirements of the statute i the failure to protest the e payment when made or the failure to file a suit against the Department 4 Defined by Black Law Dictionary as Of its own kind or class unique or peculiar s R within the prescribed time The Department cites no cases that forbid the use of an agent to pursue an action on behalf of a principal provided that the agent met all the requirements that would have been expected of the principal And while we agree that courts have noted the sui generis nature of the tax law and have declined to extend certain provisions of the Louisiana Civil Code to tax cases we do not conclude that we must also limit the application of the Code of Civil Procedure To the contrary the rationale behind the limitation of certain Civil Code provisions is explained in Dupre v City of Opelousas 161 La 272 275 108 So 479 480481 2d 1926 which states After the taxes have been collected it would be unreasonable if not disastrous to permit a taxpayer after he has made a payment without having been coerced to do so to recover the taxes paid by him on the ground that the levy was unconstitutional or illegal If the law permitted one taxpayer to do so it would necessarily have to permit all taxpayers to do likewise and what would be the result As government is dependent on taxation for subdivision that unconstitutional its maintenance levied the local the or illegal tax would have to tax the taxpayers to raise the necessary money to return to them the illegal or unconstitutional tax collected Such a ceremony would be idle and vain Citing the Dupre case this court in the case of Convent Marine wherein a taxpayer had failed to remit the tax payment under protest and thereafter attempted to file a suit under LSAC art 2301 for payment of a C thing not due held that Instead of the general provisions of the Louisiana Civil Code the legislature has provided a specific provision LSA R 47 S 1576 The dilemma outlined by the Louisiana Supreme Court in Dupre is avoided by requiring a payment of the tax under protest as a prerequisite to claiming a tax refund The requirement allows the taxing authority the opportunity to place the disputed amount in escrow thus avoiding the idle and vain action referred to by the court Convent Marine Companies Inc 603 So at 795 2d At the time that the taxes were paid to the Department JW Power advised the Department by letter that the payment was made under protest JW has collected and is remitting under protest sales tax on the monthly fees paid by customers on full service agreements It is these taxes that will be the subject of JW suit for refund and therefore as required by law s these amounts are to be held segregated pending the outcome of the refund litigation Emphasis added Additionally the Department was advised of the forthcoming suit which was timely filed In the petition JW Power stated that Beginning effective December 2 2004 JW began collecting sales tax from JW Operating and others under both the State and local sales tax ordinances on J W Full Service Agreements in s Louisiana It is clear that JW Power satisfied the prerequisites of LSAR S 1576 47 inasmuch as the payments were made notice was given to the Department that the payments were protested and the suit against the proper party was timely filed However the Department argues that even if JW Power could have acted as an authorized agent its failure to expressly disclose the agency relationship sooner precludes it from claiming such status now We disagree Louisiana Code of Civil Procedure article 700 states that When a plaintiff sues as an agent to enforce a right of his principal or as a legal representative his authority or qualification is presumed unless challenged by the defendant by the timely filing of the dilatory exception When so challenged the 0 plaintiff shall prove his authority or qualification on the trial of the exception At the hearing on the exception there was uncontradicted testimony that JW Power had express authorization to pursue the tax refund on behalf of JW Gathering and JW Operating The amended petition expressly clarifies that relationship Additionally the language of the paymentunder protest letters clearly indicates that JW Power is not itself the taxpayer J W Power has collected and is remitting under protest sales tax on the monthly fees paid by its customers Moreover the testimony of Wendy Comeaux a Revenue Management Consultant with the Department of Revenue establishes that J W Power paymentunder protest letters triggered the Department s s statutory duty to escrow the full amount of the tax payments sent by JW Power Consequently the use of an agent for payment and protest of taxes does not subject the Department to the Dupre dilemma There is no rational basis to refuse to allow a party to sue through a agent even in a tax refund case so long as the agent successfully complies with the statute so as to trigger the Department srequirement to escrow the disputed funds This assignment of error has merit 2 Declaratory Relief While the JW Companies assign error to the trial court sdenial of the declaratory relief sought in the original petition we note that this issue was not ruled upon by the district court presumably due to its dismissal of the entirety of JW Power claim pursuant to the exception Based upon our s determination that JW Power may act as an authorized agent of JW Gathering and JW Operating we pretermit this assignment of error Q 3 Petition for Intervention JW Gathering and JW Operating filed a petition to intervene in this suit By judgment dated August 17 2009 the trial court denied the intervention The Department defends this assignment of error claiming that no appeal was taken from the August judgment We agree The motion and order for appeal requests that the district court enter an order granting Plaintiffs a devolutive appeal from the July 30 2009 Judgment of this Court The July judgment granted the exception of no right of action but did not deny the intervention It was not until August 17 2009 that the judgment was signed denying JW Gathering and JW Operating petition s s for intervention And while it is clear from the briefs filed that the appellants intended to appeal both judgments the denial of the petition for intervention is not properly before us on appeal Nevertheless because we have decided that JW Power is acting as the agent of JW Gathering and J W Operating intervention is not necessary CONCLUSION The judgment of the trial court is reversed and this matter is remanded to the district court for further proceedings All costs of this appeal are assessed against appellee the Department ofRevenue REVERSED AND REMANDED 10
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