APPEAL from the Circuit Court of Cook County; the Hon. DANIEL
A. COVELLI, Judge, presiding.
MR. JUSTICE SULLIVAN DELIVERED THE OPINION OF THE COURT:
At the request of defendants, we allowed this interlocutory appeal pursuant to Supreme Court Rule 308 (Ill. Rev. Stat. 1973, ch. 110A, par. 308). At issue is the validity of a provision in chapter 200.1 of the Municipal Code of Chicago (hereafter the tax ordinance) which imposes a tax upon transactions consummated in Chicago involving the lease or rental of personal property. *fn1 Plaintiffs are taxpayers who, as lessees of personal property on their own behalf and allegedly as representatives of a class, sought to enjoin the collection of taxes under the tax ordinance and a judgment declaring it invalid on constitutional grounds. The trial court, in denying defendants' motion to dismiss, certified four questions for our review, and we will address them in the order necessary for the disposition of this appeal.
The first question concerns whether plaintiffs' complaint states a cause of action in equity where it alleges that a city tax is unconstitutional because of unreasonable and discriminating classifications of property and persons subject to the tax.
• 1 It is the general rule that equity will not assume jurisdiction to grant relief where an adequate remedy at law exists. (Clarendon Associates v. Korzen, 56 Ill.2d 101, 306 N.E.2d 299; 7 Ill. L.&Pr. Chancery § 31 (1954).) Defendants initially contend that plaintiffs have no cause of action in equity because they have an adequate remedy at law. In any event, defendants argue, the allegations of plaintiffs' complaint do not fall within any of the exceptions to the general rule under which equity will act regardless of available legal remedies. These exceptions are set forth in Clarendon and allow equitable relief where the tax is either (1) unauthorized by law; or (2) levied upon property exempt from taxation. *fn2 Plaintiffs maintain that they have no adequate remedy at law but, assuming that there was such a remedy, that their complaint alleges many particulars in which the tax violates the State and Federal constitutions and, by reason thereof, was unauthorized by law the first exception to the general rule.
On oral argument, defendants' counsel stated that the adequate remedy at law available to plaintiffs appears in section 200.1-8A of the tax ordinance, which provides as follows:
"Whenever it appears that an amount of tax, interest or penalty has been paid in error to the Department of Revenue by a person, association, firm, partnership, corporation, receiver, executor, conservator, trustee or other representative appointed by any court (hereinafter referred to as `taxpayer'), who is required or authorized to collect and remit such transaction tax, whether such amount be paid through a mistake of fact or an error of law, such taxpayer may file a claim for credit with the Department of Revenue on forms provided by said Department for that purpose."
This section also requires prompt adjudication of the claim. A protest procedure is provided for those "taxpayers" dissatisfied with the Department's initial determination.
• 2 We believe that a close examination of the language in section 200.1-8 indicates that the administrative procedure set forth therein is intended solely for the benefit of the lessor. The remedy outlined is only available to the "taxpayer," who is "required or authorized to collect and remit such transaction tax." (Emphasis added.) Only the lessor is required or authorized to collect and remit the tax, and we therefore interpret the procedure for credits and refunds in section 200.1-8 to be a legal remedy available only to the lessor and not to the lessee herein. (Cf. Crane Construction Co. v. Symons Clamp & Manufacturing Co., 25 Ill.2d 521, 527, 185 N.E.2d 139.) This interpretation is supported by other provisions of the tax ordinance. Section 200.1-8E provides, in the first instance, not for a repayment of the funds erroneously collected but for a letter of credit to be used to offset future collections of the tax. Such a letter would only be of value to a lessor who would be collecting and remitting future taxes. Likewise, section 200.1-9C provides that the mayor may, after a hearing, revoke all city licenses held by the tax evader as a penalty for failure to pay the tax. Such licenses are, of course, held by lessors rather than by lessees. In view thereof, we believe it is evident that the intent of the tax ordinance was to provide administrative review only for the lessor who "collects and remits" the tax, and therefore the administrative remedy is not available to lessees. Applying this reasoning to the instant case, we conclude that the remedy provided in section 200.1-8 is not available to the plaintiff-lessees here and, further, inasmuch as this is the only remedy at law suggested by defendants and because we have found none in the ordinance, we hold that plaintiffs here do not have an adequate remedy at law and that they have stated a cause of action in equity.
Having so found, it will not be necessary to determine whether the allegations of plaintiffs' complaint fall within any of the Clarendon *fn3 exceptions set forth above which assume the existence of an adequate remedy at law.
The second question certified inquires whether a lessee of personal property who pays, but not under protest, a city tax to the lessor on transactions involving the lease or rental of certain items of personal property, has standing to challenge the constitutionality of the tax ordinance which places the ultimate incidence of and liability for payment of the tax on the lessee and the duty of collecting the tax on the lessor and, where the ordinance makes no provision, for payment of the tax under protest.
Defendants contend that because plaintiffs did not protest the taxes, the payments were voluntary and thus they had no standing to challenge the validity of the ordinance. The case principally relied upon by defendants is Snyderman v. Isaacs, 31 Ill.2d 192, 201 N.E.2d 106. However, we do not believe that case is supportive of defendants' position. Snyderman did not involve the question of standing to challenge the validity of a tax but was an attempt by a lessee of an automobile to maintain a class action on behalf of all lessors to obtain a credit for taxes paid under a statute which had been found to be invalid subsequent to the payment of the tax. There, the general rule was applied that taxes voluntarily though erroneously paid cannot be recovered. Here, plaintiffs' action does not seek a refund of taxes paid but rather sought a declaration that the tax is unconstitutional and a permanent injunction against its further collection.
We believe that Crane Construction Co. is controlling here. In that case, Symons, a lessor of property, was required to collect use taxes from its lessee (Crane) and to remit the Retailer's Occupation Tax to the Department of Revenue. No provision for protest by a lessee was provided in the statute. Plaintiff filed a complaint in chancery against its lessors (Symons) and joined as defendants the Director of Revenue, the State Treasurer and the Attorney General. The complaint alleged that unless equitable relief was granted to plaintiff and others similarly situated, they would be required to pay use taxes to Symons under duress and, unless restrained, they feared that the lessor would forward the taxes so received to the Department of Revenue without making such payments under protest or otherwise protecting the rights of plaintiff and other members of the class. Defendants contended that Crane had no standing to challenge the tax. The court held, however, that inasmuch as the statute provided no means of protest to lessees subject to the tax, they had standing to bring the action in their own right, stating at pages 527-28:
"Although the retailers' occupation tax is not laid on plaintiff, the use tax is. It pays use tax, however, not directly to the State, but to its suppliers, in this case Symons Clamp & Manufacturing Company. Symons collects use tax from Crane and remits retailers' occupation tax to the Department of Revenue. Crane obviously has standing to challenge the validity and applicability of the use tax and is not compelled to rely upon its lessor, Symons, to protect its interests. To the extent to which the validity of the use tax and its application to plaintiff is dependent upon the validity of the retailers' occupation tax, it may also challenge that tax. In this case, plaintiff has followed an appropriate method for litigating questions which it has a right to have determined."
Here, also in the absence of any means of administrative review, reason dictates that the lessees who bear the burden of the tax have ...