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02/01/89 Six-Brothers King Drive v. Department of Revenue

February 1, 1989







JUSTICE McNAMARA delivered the opinion of the court. FREEMAN, P.J. and RIZZI, J., concur.


Plaintiff Six Brothers King Drive Supermarket sought judicial review of final tax assessments made by defendant Illinois Department of Revenue. The trial court dismissed the cause for want of jurisdiction due to plaintiff's failure to file the required appeal bond, and the court entered judgment in defendant's favor. Plaintiff appeals.

On January 26, 1987, following an administrative hearing, defendant assessed over $300,000 of unpaid State and municipal retailers' occupation and use taxes against plaintiff. On March 13, 1987, plaintiff filed a complaint for administrative review.

Section 12 of the Retailers' Occupational Tax Act requires the filing, within 20 days of filing the complaint, of a "bond with good and sufficient surety" for a suit seeking judicial review of final assessments issued by the Department of Revenue. (Ill. Rev. Stat. 1987, ch. 120, par. 451.) Without the bond, the suit "shall be dismissed on motion of the Department or by the court on its own motion." In the alternative, "the court, in lieu of the bond, shall enter an order imposing a lien upon the plaintiff's property as hereinafter provided." (Ill. Rev. Stat. 1985, ch. 120, par. 451.) In the present case, plaintiff failed to obtain a bond, and failed to seek a lien in lieu of bond. The court, therefore, properly dismissed the suit.

The statutory bond requirement is jurisdictional. (Meyer Steel Drum, Inc. v. Dept. of Revenue (1987), 152 Ill. App. 3d 84, 504 N.E.2d 148; Piasa Motor Fuels, Inc. v. Illinois Dept. of Revenue (1985), 138 Ill. App. 3d 422, 486 N.E.2d 379.) In this case, therefore, the trial court was deprived of jurisdiction to review the administrative decision. (Meyer Steel Drum, Inc. v. Dept. of Revenue.) Accordingly, neither the trial court nor this court need reach the merits of plaintiff's contention that it was denied its right to counsel and was improperly denied a continuance at the administrative hearing level.

In addition, we note that the trial court retained the general jurisdiction necessary to make the Department's final assessment enforceable. (Meyer Steel Drum, Inc. v. Dept. of Revenue.) "Upon dismissal of any complaint for failure to comply with the jurisdictional prerequisites herein set forth, the court is empowered to and shall enter judgment against the taxpayer and in favor of the Department in the amount of the final assessment" plus interest and costs. (Ill. Rev. Stat. 1985, ch. 120, par. 451.) Thus, the trial court had the power to enter judgment in favor of defendant.

Plaintiff also argues that it had inadeqate assets to secure a bond. Plaintiff, however, failed to perfect the jurisdiction by the alternate method of obtaining a lien in lieu of bond. Ill. Rev. Stat. 1987, ch. 120, par. 451.

Plaintiff maintains that the bond requirement is unconstitutional as applied. Initially we note that the constitutionality of the bond requirement has been consistently upheld by this court in the face of due process and equal protection challenges. (Meyer Steel Drum, Inc. v. Dept. of Revenue; Collins Oil Co. v. Dept. of Revenue (1983), 119 Ill. App. 3d 808, 457 N.E.2d 118; Bee Jay's Truck Stop, Inc. v. Dept. of Revenue (1977), 52 Ill. App. 3d 90, 367 N.E.2d 173, cert. denied (1978), 435 U.S. 970.) Plaintiff's reliance on Boddie v. Connecticut (1971), 401 U.S. 371, and similar cases is misplaced. Those cases hold that a State may not deny a person a fundamental right by erecting financial barriers to the courts. The present case involves neither the denial of a fundamental right nor a denial of access to the courts because plaintiff could not afford the bond.

Furthermore, in Boddie, unlike the present case, the taxpayer was given no hearing at all. (See Collins Oil Co. v. Dept. of Revenue.) Notwithstanding our finding that the trial court properly dismissed the case for want of jurisdiction, we would go on to conclude that the hearings given to the taxpayer were fair.

The record reveals that while the ALJ did not permit plaintiff's president to examine the Department's auditor after the taxpayer discharged its attorneys during the hearing, the ALJ also refused the Department's request for additional time. The matter proceeded to judgment, but the ALJ gave taxpayer leave to reopen the proceedings, at which time the taxpayer fully presented its evidence.

On June 4, 1987, the matter was reopened at the taxpayer's request and a second hearing was held, where the taxpayer was represented by new counsel. The ALJ later wrote, "The Department having previously rested its case, the taxpayer was allowed to proceed." The taxpayer examined the Department's auditor, Michael Juricek. Juricek explained that on the original audit he assumed the confirmed purchases represented only 70% of actual purchases. On reaudit, however, he reduced the taxpayer's liability by almost half by giving credit for previously unsubstantiated deductions for food stamps.

The taxpayer questioned Juricek extensively regarding, e.g., his lack of personal knowledge of the outcome of the criminal proceeding based upon which he imposed a civil fraud penalty; the Department's inability to produce the data upon which its investigator and Juricek had relied; and Juricek's uncertainty about purchases from the taxpayer's major supplier. Juricek was questioned further about a possible error in supplier records indicating the taxpayer had been confused with other stores. Juricek stated he was unaware that the Secretary of State listed two stores at the address of taxpayer.

In questioning Juricek, the taxpayer reviewed various exhibits, including a franchise tax notice sent to taxpayer at a wrong address; Juricek's worksheets with notations of potential missing categories; a net sales report prepared by a supplier with taxpayer's name and the wrong address; and other documents.

The taxpayer's exhibits 1 through 7 were admitted and the hearing was concluded, with leave granted counsel to file briefs. The Department declined, and counsel for the taxpayer filed a memorandum. In her report, the ALJ addressed at great length each of the taxpayer's arguments in rebuttal of the assessments.

Finally, the ALJ concluded that she agreed with the taxpayer that the Department presented insufficient evidence to justify the civil fraud penalty. The ALJ found no compelling reason, however, to examine the taxpayer's voluminous records because Juricek had already examined the records obtained in response to the 1987 60-day letter and made no change in his findings. "Without specific information as to what the records contained, what the records would show and why they could not have been produced during the audit and re audit, the Administrative Law Judge feels it would not be justifiable or beneficial to further delay the resolution of this matter." The ALJ ordered that the tax liability be reduced in accordance with the re audit results and that a deficiency penalty be substituted for the civil fraud penalty.

Given this record, we find plaintiff received a fair administrative hearing. Thus, even were we to find jurisdiction existed on appeal, we would conclude that plaintiff's right to a fair hearing was not violated.

For the foregoing reasons, the judgment of the circuit court of Cook County is affirmed.


Judgment affirmed.


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