Playmates Toys, Inc. v. Director, Division of Taxation

SYLLABUS
 

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

Playmates Toys, Inc. v. Director, Division of Taxation (A-70-98)
(The Court wrote no full opinion in this case. Rather, the judgment
is based on the opinion of Judge Levy of the Appellate Division.)

 
Argued September 27, 1999 -- Decided December 21, 1999

PER CURIAM

The issue in this appeal is whether the Division of Taxation (Division) can order the return of a tax refund that had been paid erroneously.

The Director of the Division conducted an audit of the Corporate Business Tax returns of Playmates Toys, Inc., (Playmates), a California corporation, for the years 1989 to 1992. In December 1995, the Director issued a notice of assessment stating a liability of $22,964 for 1991 and $1,929 for 1992. The notice further indicated that Playmates had overpaid its corporate tax liability for 1989 and 1990, in the amounts of $44,241 and $44,115, respectively. With credits applied due to the overpayments, the 1991 and 1992 tax liabilities were offset and no balance was due the State. The notice stated that the remaining balance of the overpayments, which amounted to $63,463, was not available because those years were "out of statute for refund." This was a reference to the statutory limit of N.J.S.A. 54:49-14, which requires that claims for refunds be made within two years of the date of payment of the tax.

Following receipt of the notice, Playmates filed a protest and also an application for a refund on 3/18/96. These were filed separately and without reference to each other. On 3/27/96, the Refund Section caused two checks totaling $63,463 to be forwarded to Playmates. Unaware that Playmates' refund had been processed, another branch of the Division rejected the protest and upheld the notice of assessment. Upon learning that the $63,463 had already been refunded, the Division directed Playmates to return the refund. Playmates responded by filing an action in the Tax Court challenging the Director's order.

The Tax Court granted summary judgment to the Division. The judge found that Playmates was not entitled to the refund because the statute of limitations had expired and that the payment of the refund did not amount to a waiver of the statute by the Director. Playmates appealed.

The Appellate Division affirmed in a unanimous decision. Playmates Toys v. Director of Taxation, 316 N.J. Super. 509 (App. Div. 1998). The Appellate Division held that where a government entity makes a mistake of law, a statute is not necessarily waived. It also noted that Playmates did not rely on any waiver by the Director. Finally, it found that the Director had the inherent authority to recoup mistaken disbursements.

The Supreme Court granted Playmates' petition for certification.

HELD: The Director of the Division of Taxation can recover a refund mistakenly paid to a taxpayer after the statute of limitations had passed on the taxpayer's right to seek the refund for overpayments in prior years.

1. The Court affirms substantially for the reasons stated by the Appellate Division. The Court adds only that the judgment does not confer on the Division unlimited inherent authority to correct and revise erroneous tax determinations once made. Given that the Division had earlier determined that the taxpayer was not entitled to a refund, and had communicated this to the taxpayer, the recovery of the funds here is more akin to the correction of a clerical error than the correction of an error in judgment.

CHIEF JUSTICE PORITZ and JUSTICES O'HERN, GARIBALDI, STEIN, COLEMAN, LONG and VERNIERO join in the Court's per curiam opinion.

 

SUPREME COURT OF NEW JERSEY
A- 70 September Term 1998

PLAYMATES TOYS INC., a California corporation,

Plaintiff-Appellant,

v.

DIRECTOR, DIVISION OF TAXATION,

Defendant-Respondent.

Argued September 27, 1999 -- Decided December 21, 1999

On certification to the Superior Court, Appellate Division, whose opinion is reported at 316 N.J. Super. 509 (1998).

Michael A. Guariglia argued the cause for appellant (McCarter & English, attorneys; Mr. Guariglia and Margaret C. Wilson, on the briefs).

Marlene G. Brown, Deputy Attorney General, argued the cause for respondent (John J. Farmer, Jr., Attorney General of New Jersey, attorney; Joseph L. Yannotti, Former Assistant Attorney General, of counsel).

PER CURIAM
We affirm the judgment of the Appellate Division allowing the Director of the Division of Taxation to recover a refund mistakenly paid to a taxpayer after the statute of limitations had passed on the taxpayer's right to seek a refund for overpayments in prior years. We do so substantially for the reasons stated by the Appellate Division in its opinion reported at 316 N.J. Super. 509 (1998). We add only that this judgment does not confer on the Division of Taxation an unlimited inherent authority to correct and revise erroneous tax determinations once made. The powers of the Division are not boundless. Rather, given the administrative history of the Division's earlier determination (communicated to the taxpayer) that the taxpayer was not entitled to a refund because of the statute of limitations, the recovery of the funds here is more akin to the correction of a clerical error that led to the mailing of a tax refund check to which the taxpayer was not entitled , rather than the correction of an error in judgment. See Lockwood v. Walsh, 137 N.J. Eq. 445, 450 (Prerog. Ct. 1946) (implying that State Tax Commissioner possesses inherent authority to correct error of mathematical calculation).
The judgment of the Appellate Division is affirmed.
CHIEF JUSTICE PORITZ and JUSTICES O'HERN, GARIBALDI, STEIN, COLEMAN, LONG, and VERNIERO join in this PER CURIAM opinion.

SUPREME COURT OF NEW JERSEY
 

NO. A-70

SEPTEMBER TERM 1998
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court

PLAYMATES TOYS INC., a California corporation,

Plaintiff-Appellant,

v.

DIRECTOR, DIVISION OF TAXATION,

Defendant-Respondent.

DECIDED December 21, 1999 Chief Justice Poritz

PRESIDING
OPINION BY PER CURIAM
CONCURRING OPINION BY DISSENTING OPINION BY
CHECKLIST
AFFIRM CHIEF JUSTICE PORITZ X JUSTICE O'HERN X JUSTICE GARIBALDI X JUSTICE STEIN X JUSTICE COLEMAN X JUSTICE LONG X JUSTICE VERNIERO X TOTALS
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