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Parliament Ins. Co. v. Dept. of Revenue

OPINION FILED JUNE 23, 1977.

PARLIAMENT INSURANCE COMPANY ET AL., PLAINTIFFS-APPELLEES,

v.

THE DEPARTMENT OF REVENUE, DEFENDANT-APPELLANT.



APPEAL from the Circuit Court of Cook County; the Hon. RAYMOND S. SARNOW, Judge, presiding.

MR. JUSTICE JOHNSON DELIVERED THE OPINION OF THE COURT:

Rehearing denied July 14, 1977.

The plaintiffs-appellees, surety companies authorized to do business in the State of Illinois, brought an action in the Circuit Court of Cook County, Illinois, County Department, Law Division, to reverse an administrative decision of the Illinois Department of Revenue (hereinafter referred to as the Department) not to accept surety bonds issued by plaintiffs, pursuant to statute (Ill. Rev. Stat. 1969, ch. 120, par. 440 et seq.; hereinafter referred to as the Retailers' Occupation Tax Act or the Act). On September 10, 1974, the circuit court reversed the decision of the Department and entered judgment for the plaintiffs. The Department appeals from the decision of the trial court.

The question on review is whether the Department is authorized to exercise discretion to determine the right of surety companies to issue bonds under section 2a (Ill. Rev. Stat. 1969, ch. 120, par. 441a), and to conduct hearings for that purpose.

The plaintiff surety companies issued bonds required to be posted by taxpayers under section 2a of the Act. That provision requires Illinois taxpayers to post such a bond with the Department as security for any moneys becoming due the State, within 30 days subsequent to engaging in the business of the retail selling of tangible personal property within the State, in order that the Department issue the requisite certificate of registration. The Department held a hearing on April 30, 1973, to determine whether it should continue to approve bonds issued by the plaintiff companies.

Mary K. Younger, supervisor of the Department's surety unit, testified for the Department. The record reveals that 60 files concerning 60 different taxpayers were admitted into evidence at the hearing. The designation at the top of each file referred to the "Parliament Insurance Company, in care of Transportation Motorist Association, Inc., 330 South Wells Street, Chicago, Illinois." When questioned as to one of the files, Mary Younger testified that it involved a defaulting taxpayer where a surety bond had been posted with the State of Illinois by the Parliament Insurance Company (hereinafter referred to as Parliament). A notice of tax liability issued. An assessment was issued by the Department's collection section and a notice of assessment was sent to Parliament. The case was eventually returned to the surety unit in order that a claim could be filed with the surety company. Attached to the case file was a letter, identified by Ms. Younger as one prepared by the Department under her supervision, which was sent to the surety notifying it of the notice of delinquent taxes. The letter outlined the amounts due and the interest accrued. Neither the taxpayer nor Parliament remitted to the Department any of the money due. Ms. Younger stated that her testimony regarding all of the case files would be substantially the same in reference to the collection procedure employed by the Department. She attested that as of January 31, 1973, the 60 case files represented outstanding liabilities on surety bonds posted by Parliament.

Plaintiff Parliament moved to strike the Department's complaint and dismiss the hearing on the ground that the Department was without statutory authority and lacked jurisdiction to conduct a revocation hearing; that is, to revoke the right of the plaintiffs to issue surety bonds. Parliament objected to the hearing, the admission and consideration of any evidence at hearing, and maintained that by its procedure the Department was denying Parliament a fair and impartial hearing, due process, and equal protection of the laws. The hearing referee denied the motion and found in favor of the Department. The referee recommended to the Director of Revenue that the Department no longer accept surety bonds posted by Parliament until all outstanding amounts due on the existing bonds were remitted. The referee recommended as follows:

"[T]he said Surety Company posted surety bonds * * * and collected [premiums] on these bonds. The posting of such bonds carries with it the obligation to remit to the Department of Revenue all sums due as a result of a final assessment against a taxpayer who has posted bond with the Department through said Surety Company. Such obligation is for the maximum amount of the bond posted. The position taken by the Surety Company is inconsistent in that while they are willing to collect [premiums] on bonds posted by them, they are not willing, and have failed to pay sums due the Department of Revenue when these sums become due as the result of a final assessment."

On January 25, 1974, the Director issued an order in accordance with the findings and recommendation of the hearing referee.

The plaintiffs filed a complaint for administrative review of the Department's determination. The Department filed as its answer the transcript of the administrative proceedings held before the Referee. On September 10, 1974, following a review of the administrative record, the trial court reversed the decision of the Department and entered judgment in favor of the plaintiffs. The trial court considered the sole issue to be the construction and interpretation of the authority promulgated by section 2a of the Retailers' Occupation Tax Act, and held that the Department was not authorized by statute to conduct the hearing or to impose the penalty that it imposed on the plaintiffs.

The Department argues on appeal that the conducted hearing was for a proper purpose since section 2a of the Act grants to the Department the discretionary authority to approve the security furnished by applicant taxpayers. It contends that section 2a does not require that the Department institute a civil suit on each bond as the sole remedy available against a defaulting surety company; the section should be so construed in order to facilitate the underlying legislative purpose of the statute. Further, the Department argues that the legislature delegated to the Department the authority to administer and enforce the provisions of the Act through administrative hearings and investigations by the enactment of section 8 of the Retailers' Occupation Tax Act. Ill. Rev. Stat. 1965, ch. 120, par. 447.

The plaintiffs maintain that the Department exceeded its statutory grant of authority when it held the hearing at issue and imposed a penalty upon plaintiffs. They insist that the only remedy available to the Department would be to bring a civil action for forfeiture of each bond in order to collect upon each bond. Plaintiffs contend that the Act grants to the Department only limited authority to hold hearings for specified purposes provided for in several sections of the Act (Ill. Rev. Stat. 1969, ch. 120, pars. 443, 448, 449). According to the plaintiffs, the Department erred when it employed section 8 as an independent source of authority for the hearing at issue where the Act contains no specific provision authorizing a hearing for the purpose of revoking plaintiffs' right to issue surety bonds.

• 1 We find that the Department of Revenue has not acted in excess of its express and implied authority to administer and enforce the provisions of the Retailers' Occupation Tax Act by conducting the hearing and imposing the "penalty" at issue. Therefore, the decision of the Director of Revenue not to accept surety bonds posted by Parliament until amounts due on existing bonds are paid is affirmed. The judgment of the circuit court is reversed.

• 2 The authority of the Department to act as it did in the instant case may be implied from the terms of the Act. (Fahey v. Cook County Police Department Merit Board (1974), 21 Ill. App.3d 579, 583, 315 N.E.2d 573, ...


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