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01/28/88 Charles Marx, v. the State of Illinois

January 28, 1988





519 N.E.2d 82, 165 Ill. App. 3d 332, 116 Ill. Dec. 492 1988.IL.96

Appeal from the Circuit Court of Adams County; the Hon. Dennis K. Cashman, Judge, presiding.


PRESIDING JUSTICE GREEN delivered the opinion of the court. LUND and SPITZ, JJ., concur.


On September 18, 1984, plaintiff Charles Marx pleaded guilty in the circuit court of Adams County to criminal charges consisting of eight counts of wilful failure to file retailers' occupation tax returns. He was subsequently sentenced to one year conditional discharge and ordered to pay restitution in the sum of $3,354.94 for taxes due for the time periods at issue in the various counts of the indictment. The defendant the Illinois Department of Revenue (Department) later notified plaintiff that there remained a balance due for civil interest and penalties for periods prior to the entry of his guilty plea. On July 3, 1986, plaintiff filed this action in the circuit court of Adams County for a declaratory judgment to estop the Department from collecting the interest and penalties due. The court denied the Department's request for summary judgment and attorney fees.

Following a bench trial, the court entered a declaratory judgment on July 10, 1987, estopping the Department from collecting additional sums of tax, penalty, and interest from plaintiff in excess of the amount of $3,354.94 for which he was required to make restitution in the criminal proceeding. The Department appeals, contending: (1) the evidence was insufficient to satisfy the requirement of extraordinary circumstances to invoke estoppel against the State; and (2) it was entitled to attorney fees pursuant to section 2-611 of the Illinois Code of Civil Procedure (Ill. Rev. Stat. 1985, ch. 110, par. 2-611), because plaintiff's suit was frivolous. We reverse the judgment estopping the Department from proceeding to collect penalties and interest from plaintiff, but affirm the court's denial of attorney fees.

At trial, the court heard testimony from plaintiff, his former attorney, Jerry Brennan, and Matthew Schneider, the assistant Attorney General who represented the Department in negotiations with the plaintiff. Plaintiff testified (1) he was aware the indictment alleged he had failed to pay $3,354.94 in tax plus $2,378.52 in interest; (2) pursuant to the plea agreement, he (a) waived his right to a jury trial, (b) pleaded guilty to misdemeanor charges of wilful failure to file retailers' occupation tax returns, and (c) was required to complete a term of probation and pay a fine in addition to repaying the principal amount due; and (3) he did not understand from the agreement that the Department was still "going to require [him] to pay an interest amount on [the] original bill." On cross-examination, plaintiff admitted his understanding that "interest was not involved" was not as a result of any conversation he had with the prosecuting attorney, and that he pleaded guilty because he was guilty of not filing on time, not because he was told he would not have to pay interest.

Brennan testified that he and the Department's attorney negotiated an agreement whereby the Department would dismiss the felony charges against plaintiff, and plaintiff would pay a fine plus restitution. He said it was his impression that they were trying to come up with a "package" agreeable to all parties, and he did not remember any Discussion on the question of interest. He further testified he understood the plea was the "total embodiment of the agreement," and he had no knowledge that any additional monies were going to be requested by the Department. He admitted, however, that the Department's attorney did not specifically waive the interest and penalties and that the question of plaintiff's civil liability was not discussed.

On examination by the court, Brennan testified he did not remember the amount initially requested by the Department in the order of restitution, but he said the Department "probably" started with a figure including principal and interest and he started with one substantially lower than that. He said his "best recollection" was that the Department wanted the total amount, but after negotiations, they finally agreed to the principal balance amount. He repeated the statement that there was no Discussion as to further civil action, one way or the other.

Matthew Schneider testified (1) he handled a number of other retailers' occupation tax cases, most of which were negotiated; (2) he had been reluctant to reduce the felony charges to misdemeanors because of aggravating circumstances, but the parties finally agreed to do so in return for the payment of taxes due; (3) there was no Discussion as to civil interest and penalties, because he was only interested in recovering taxes which were due and owing; (4) the interest and penalties were civil in nature and had nothing to do with the criminal prosecution; (5) he did not advise Brennan that payment of the tax would settle all claims the Department had against plaintiff; and (6) he had no authority to negotiate interest and penalties. Schneider testified that the eight counts of the indictment represented eight separate, distinct months for which plaintiff had a responsibility to file a tax return. He said it would be difficult to determine the interest due, because as long as there is some principal outstanding, a percentage of that would accrue as interest. Finally, Schneider indicated that he did not recall the negotiations starting with a higher figure and ending with a compromise between that figure and one offered by Brennan. Rather, he said, the negotiations concerned plaintiff's wish to prevent a felony conviction.

On July 10, 1987, the court entered an order finding for plaintiff and against the defendant. The court concluded, "based solely on the testimony of attorney Brennan," that the negotiations included payment of an amount of restitution in excess of the amount ultimately agreed upon, with the resulting inference that Assistant Attorney General Schneider had the authority to negotiate the final amount of tax, penalties and interest to be collected. The court found that "since plaintiff had the burden of proof by a preponderance of the evidence, it was more likely true than not that attorney Brennan's recollection of the negotiations in an isolated criminal case of this nature would tend to be better than the recollection of an Assistant Attorney General" who was handling numerous cases of this type during this time period even though he indicated he lacked authority to compromise revenue claims and did not do so.

The court also found that, although section 39c of the Civil Administrative Code of Illinois prohibits "any officer or employee of the Department of Revenue" from compromising a debt due the State, it is silent with regard to the authority of an assistant Attorney General to do so. (Ill. Rev. Stat. 1985, ch. 127, par. 39c.) The court concluded that the assistant Attorney General was not attempting to be deceptive or fraudulent in obtaining the negotiated plea, but rather that plaintiff had a right to be fully admonished as to the important aspects of his plea.

We recognize the trial court heard the testimony and was in a better position to determine the facts. We must give deference to the factual determinations of that court. (People ex rel. Edwards v. Livingston (1969), 42 Ill. 2d 201, 247 N.E.2d 417.) However, taking the facts to be as found by the court, the strong public policy against imposing estoppel against the State compels us to ...

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