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National Transportation, Inc. v. Howlett

OPINION FILED MARCH 29, 1976.

NATIONAL TRANSPORTATION, INC., PLAINTIFF-APPELLANT,

v.

MICHAEL J. HOWLETT, SECRETARY OF STATE, DEFENDANT-APPELLEE.



APPEAL from the Circuit Court of Cook County; the Hon. EDWARD F. HEALY, Judge, presiding.

MR. JUSTICE BURKE DELIVERED THE OPINION OF THE COURT:

Plaintiff, National Transportation, Inc. (National), is a motor carrier which is based in Nebraska and authorized to operate in 40 States, including Illinois. In 1972, National first applied for prorate privileges in Illinois and paid the appropriate fees based on its prospective estimated mileage traveled in Illinois. The Secretary of State of Illinois audited plaintiff's application in 1973 and assessed an additional $10,072.59 in fees and costs for the 1972 prorate year. The reassessed fees were upheld by the hearing examiner at an administrative hearing. The circuit court affirmed the hearing examiner's decision. On appeal, plaintiff raises issues concerning the validity and the constitutionality of the Secretary of State's interpretation of the Uniform Vehicle Registration Proration and Reciprocity Agreement (Uniform Compact).

• 1 The Secretary of State has broad authority to negotiate and enter into reciprocity agreements with other States and various other jurisdictions for the purpose of granting nonresidents benefits, privileges and exemptions from taxes with respect to the operation of vehicles in Illinois in exchange for reciprocal treatment of Illinois residents. (Ill. Rev. Stat. 1975, ch. 95 1/2, par. 3-402.) Pursuant to that authority, Illinois became a signatory to the Uniform Compact, effective for the 1963 license year. This agreement is an interstate compact despite the fact that it is not set forth in the statutes. (See F. Zimmerman and M. Wendell, The Law and Use of Interstate Compacts 8 (1961).) Fifteen States are presently members of the Uniform Compact.

The Uniform Compact was enacted for the stated purpose of prorating the registration of commercial motor carriers in each contracting State in which the interstate carrier operates on the basis of the proportion of miles operated within such State to the total fleet miles. Under section 50 of the Uniform Compact, the prorate applicant must pay fees for its first year of operations in a prorate State based on a sworn estimate of miles to be traveled in that State. In subsequent years the fees are based on the actual miles traveled in the State in the preceding year.

The following facts were adduced at the administrative hearing and stipulated to on appeal: National Transportation, Inc., is a commercial motor carrier which is based in Nebraska and commenced interstate operations in 1972. In January, 1972, National applied for prorate privileges in Illinois for the first time. In its application, the plaintiff estimated that its fleet would travel 5% of its total miles in Illinois and it paid fees based on that estimate. National also filed initial prorate applications in various other States in 1972 and paid fees in those States based on the estimate of miles traveled in those States. License fees for mileage to be traveled in noncompact States was reflected in National's prorate fees for Nebraska, the plaintiff's base State.

National applied for prorate privileges again in 1973 in Illinois and other States. Its application showed that National's vehicles had, in fact, traveled 23.5% of its total miles in Illinois in 1972. The Secretary of State conducted an audit and assessed the plaintiff an additional $9108.66 in fees based on the difference between National's estimate and the actual miles traveled. Interest in the amount of $881.93 and audit costs of $82 were also imposed.

In November, 1973, an administrative hearing was held at National's request. J. Harlin Seessengood, a reciprocity prorate auditor for the Secretary of State's office, testified that about one-half of all prorate applications are audited by the Secretary of State. Earl Searcy, who is also a reciprocity prorate auditor, testified that if the audit shows that the estimated mileage is within reasonable limits of the actual mileage, then the first-year estimates are accepted by the Secretary of State; however, if the estimates are far from the actual operations, then the first-year fees are adjusted to reflect the discrepancy.

Mr. Seessengood stated that the State also makes refunds if the applicant's estimated mileage is greater than his actual mileage. He indicated that the refunds are dispensed automatically when the audit figures are processed.

National introduced testimony and exhibits to establish that its 1972 estimated mileage figure was based on anticipated contracts with four shippers which failed to materialize. Lionel Fauss, the president of National, testified that his company is a contract carrier; thus its routes are irregular since it operates at the desire of its shippers. The Secretary of State stipulated that there had been no intentional misrepresentations as to National's estimate and that National may have had a valid reason for underestimating its 1972 Illinois mileage.

Mr. Fauss testified that National had overestimated mileage in 25 States and underestimated in 4 States, including Illinois, in 1972. National's underestimate was greater in Iowa than in Illinois. Except for Illinois, no State in which National had underestimated its operations had attempted to reassess prorate fees. National did not attempt to obtain refunds from those States where it had overestimated its mileage. Letters from officials in Nebraska, Missouri and Kansas were introduced to show that those prorate States do not reassess estimates of first-year applicants; further, in the event of overestimates, these States offer refunds, if at all, only in isolated cases.

The hearing examiner upheld the reassessment of National's 1972 prorate fees. The hearing examiner found as a matter of law that he did not have the authority to hold an Illinois statute, rule or regulation of the Secretary of State void or in violation of the State or Federal constitution. He made a finding that a good-faith estimate is not the only requirement placed on a first-time applicant in estimating first-year prorate fees, but that even if a good-faith limitation were placed on the Uniform Compact, that plaintiff failed to establish that it made a good-faith estimate. The hearing examiner also found that the reassessment does not impair but rather implements the provisions of section 60 of the Uniform Compact.

The circuit court affirmed the order of the hearing examiner without opinion.

Plaintiff claims that section 60 of the Uniform Compact does not give the Secretary of State the right to reassess fees whenever there is an unreasonable difference between the first-year estimate and actual mileage in prorate applications. It is National's position that such an interpretation by the Secretary of State destroys the fair and orderly method of assessment set up by the Compact's provisions. The Secretary of State argues that its interpretation of section 60, which authorizes it to audit first-year estimates, carries out the primary purpose of the Compact which is to give each Compact State its fair share of revenue.

The Secretary of State contends that the Uniform Compact was set up to apportion fees among the contracting States based on miles traveled within the particular State. In order to start the system initially, estimates of the first-year operations were used as a basis for fees since fees were paid a year in advance. Small variations between the first-year estimate and the actual mileage have only a minimal adverse effect on the Compact States and do not require an adjustment. However, National's ...


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