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

February 1, 1989





549 N.E.2d 586, 192 Ill. App. 3d 976, 139 Ill. Dec. 860 1989.IL.100

Appeal from the Circuit Court of Cook County; the Hon. Irwin Cohen, Judge, presiding.


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 Department). 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 December 2, 1981, the taxpayer was issued a notice of tax liability for retailers' occupation and municipal retailers' occupation tax deficiencies of $325,703, civil fraud penalty of $65,140.60 and interest computed through December 31, 1982, in the amount of $130,677.23. The notice covered the period of September 1979 through December 1981, showing a total liability of $521,520.83 with additional accumulated interest.

On December 19, 1986, a hearing was held by an administrative law Judge of the Department of Revenue. In opening statements, the attorneys indicated the liability was based on the lack of books and records and the disallowance of deductions. The Department proceeded with its case in chief. In regard to whether the taxpayer had previously seen the original and reaudit reports, a brief recess was held so that the taxpayer's attorneys could confer with its corporate president, Khalil Sweilem. Sweilem's attorney then informed the ALJ that he had just learned that the taxpayer's records and books were now available. In addition, Sweilem no longer wished that attorney to represent the taxpayer. The Department objected to counsel's motion to withdraw as taxpayer's counsel, due to the age of the case, the untimeliness of the motion, and the fact that the auditor had repeatedly requested records.

The ALJ requested that the auditor testify. Auditor Juricek testified regarding the written and verbal requests for the records. The ALJ then informed Sweilem that his law firm could withdraw if he wished, but there would be no continuance and Sweilem could not represent the corporate taxpayer. Sweilem, however, dismissed his attorneys. He asked for a new attorney, while acknowledging that he had signed a power of attorney contained in the original audit report appointing his previous attorneys. Sweilem insisted he had never been told about the request for records. The request for a continuance was denied, as was the Department's request for additional time to produce documentary evidence in support of the civil fraud penalty. Following Juricek's testimony, the hearing was closed, and the matter proceeded to judgment.

In a subsequent written decision, the ALJ found that the inconvenience to the parties, witnesses and Judge required that a continuance request be supported by grave reasons once a case reaches the trial stage (Schneider v. Seibutis (1972), 3 Ill. App. 3d 323, 279 N.E.2d 37), and that here the taxpayer "failed to give any explanation for the sudden availability of previously unavailable records, and so continuance on the ground of new evidence is unjustified." Similarly, substitution of attorney after the trial has begun is up to the discretion of the Judge (In re Marriage of Milovich (1982), 105 Ill. App. 3d 596, 434 N.E.2d 811), and was denied here because the taxpayer "gave no compelling reason for the seemingly last minute decision to change attorneys," which appeared to be nothing more than a delay tactic. Moreover, the ALJ refused to permit the corporate president to act on behalf of the corporation pursuant to section 2-416 of the Code of Civil Procedure, which provides that a corporate officer may represent the corporation in court only where the action was "for money not in excess of $2,500, exclusive of interests and costs, or for collection of taxes not in excess of that amount." Ill. Rev. Stat. 1985, ch. 110, par. 2-416.

The ALJ concluded that the notice of tax liability should be reduced in accordance with the reaudit results and finalized as amended, and that the civil fraud penalty would stand.

On January 26, 1987, following the 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. Defendant filed a motion to dismiss the complaint for failure to post an administrative review bond as required by statute. The trial court granted the motion to dismiss without reaching the merits of the appeal and entered judgment for defendant.

The taxpayer contends no meaningful hearing was given because the ALJ denied the taxpayer's request for a continuance after its president declared that he now had, and would give to the Department, all the requested records and books, and also wished to obtain new counsel. The result, it maintains, was an unfair hearing because final judgment was entered without review of the taxpayer's books and records.

The hearing was attended by Sweilem, represented by Messrs. William E. Borenstein and Ira M. Burman. Borenstein objected when the Department introduced exhibit 13, 90 pages of audit workpapers, and asked for a brief recess because his client had not seen those papers. After the recess, and no further objections by counsel, exhibit 13 was admitted. Sweilem then stated, "I have [an] objection." The ALJ replied, "I'm sorry, sir. You're represented by counsel."

Borenstein again objected when the Department introduced group exhibit 14, the reaudit workpapers. Borenstein explained that the auditor's comments and backup materials had never been sent to taxpayer's counsel. After an off-the-record Discussion, Borenstein stated:

"Your Honor, I have conferred with Mr. Sweilem, president of the Taxpayer, who advises me that he's in possession of the books and records of the corporation for the audit period in question.

As counsel for the Department realizes from the audit workpapers, there were no books and records made available to the auditor at the time of the initial audit and the reaudit, and he based his assessment and reductions of tax liability upon certain estimates and supplier information which, pursuant to his own comments, is incomplete.

As a result of the existence of these records and the statements by the Taxpayer's principal officer that he no longer wishes us to represent him, we would request and motion to this court that we be granted leave to withdraw as counsel for the Taxpayer and this matter be set over for a time when Mr. Juricek [Department's auditor] can review the records in question for purposes of arriving at an assessment based on the actual books and records."

The ALJ indicated she would like to examine the auditor regarding the request for books and records. The ALJ also found that neither a motion for a continuance nor for new counsel was timely. Borenstein asked the court for direction as to how to proceed. The court stated: "Well, I'll leave that up to the client. He can either allow you to finish representing him today, or he can allow me to make my decision on the evidence that's already been put into the record."

The Department then called Michael Juricek, its auditor, who testified that he had repeatedly requested, in writing and verbally, the books and records of the taxpayer. The ALJ asked Borenstein if he was going to cross-examine.

"BORENSTEIN: Your Honor, I don't know whether I'm employed by the client at the moment.


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