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Parmar v. Madigan

Supreme Court of Illinois

May 24, 2018

PAMINDER S. PARMAR, Appellee,
v.
LISA MADIGAN, Attorney General, et al., Appellants.

          THEIS JUSTICE delivered the judgment of the court, with opinion. Chief Justice Karmeier and Justices Freeman, Thomas, Kilbride, Garman, and Burke concurred in the judgment and opinion.

          OPINION

          THEIS JUSTICE.

         ¶ 1 Plaintiff, Paminder S. Parmar, individually and as executor of the estate of Surinder K. Parmar, filed a complaint in the circuit court of Du Page County against defendants, the Attorney General and the Treasurer of the State of Illinois, challenging the application and constitutionality of an amendment to the Illinois Estate and Generation-Skipping Transfer Tax Act (Estate Tax Act) (35 ILCS 405/1 et seq. (West 2014)) and seeking a refund of all moneys paid to the Treasurer pursuant to the Estate Tax Act. The circuit court dismissed the complaint for lack of jurisdiction, pursuant to the State Lawsuit Immunity Act (745 ILCS 5/0.01 et seq. (West 2014)). The appellate court reversed and remanded for further proceedings. 2017 IL App (2d) 160286.

         ¶ 2 We now reverse the judgment of the appellate court and affirm the judgment of the circuit court.

         ¶ 3 BACKGROUND

         ¶ 4 On January 9, 2011, Dr. Surinder Parmar, a resident of Du Page County, died, leaving an estate valued at more than $5 million. Her son, plaintiff here, was appointed executor of the estate. At the time of Dr. Parmar's death, the estate was not subject to taxation under the Estate Tax Act. Two days after Dr. Parmar's death, however, the General Assembly adopted a bill that revived the tax for the estates of persons who, like Dr. Parmar, died after December 31, 2010. On January 13, 2011, the Governor signed the bill, and the new law went into effect immediately. See Pub. Act 96-1496 (eff. Jan. 13, 2011).

         ¶ 5 In September 2012, plaintiff paid $400, 000 to the Illinois Treasurer toward the estate's tax liability. The following month, plaintiff filed the estate's Illinois estate tax return and paid an additional sum of almost $160, 000 to the Treasurer for late filing and late payment penalties, as well as interest. In April 2013, plaintiff requested a waiver of penalties, which the Illinois Attorney General granted in September 2013.

         ¶ 6 In July 2015, after a downward adjustment in the estate's federal tax liability, plaintiff filed an amended Illinois estate tax return. The "Certificate of Discharge and Determination of Tax" issued by the Attorney General on July 24, 2015, states that the estate's tax liability, including interest and penalties, had been paid and that the certificate was evidence of the complete release of all estate property from lien imposed by the Estate Tax Act and the discharge from personal liability of the executor for the estate tax, penalties, and interest.

         ¶ 7 Shortly thereafter, plaintiff filed another amended return, based on his belief that the amendment to the Estate Tax Act did not apply to his mother's estate and no tax was due. The disposition of this amended return is not evident in the record, but on October 1, 2015, plaintiff filed a complaint challenging the retroactivity and constitutionality of the Estate Tax Act.[1]

         ¶ 8 Plaintiff claimed that retroactive application of the statutory amendment to the estates of persons who, like his mother, died after December 31, 2010, but before January 13, 2011 (the effective date of the amendment), was contrary to section 4 of the Statute on Statutes (5 ILCS 70/4 (West 2014)) and would violate the due process and takings clauses of the Illinois and United States Constitutions, as well as the ex post facto clause of the Illinois Constitution. U.S. Const., amends. V, XIV; Ill. Const. 1970, art. I, §§ 2, 15, 16. Plaintiff also claimed that the amendment was adopted in violation of the three readings clause of the Illinois Constitution (Ill. Const. 1970, art. IV, § 8(d)) and that the vote on the amendment was invalid because the General Assembly was given inaccurate information about the estate tax scheme. Plaintiff requested a declaration that the Estate Tax Act applies only to the estates of persons who died on or after the effective date of the amendment or that the Estate Tax Act is unconstitutional for the reasons identified in his complaint. Plaintiff expressly stated that he brought his declaratory judgment action to "recover his payments" made pursuant to the Estate Tax Act and requested a full refund of all moneys he paid to the Treasurer, along with interest and "loss of use." Finally, plaintiff sought certification of a class of all similarly situated persons damaged by application of the Estate Tax Act.

         ¶ 9 Defendants filed a combined motion to dismiss pursuant to section 2-619.1 of the Code of Civil Procedure (Code) (735 ILCS 5/2-619.1 (West 2014)). Defendants first argued that the complaint should be dismissed under section 2-619(a)(1) of the Code (id. § 2-619(a)(1)) because the circuit court lacked jurisdiction. Defendants maintained that, because the complaint seeks a money judgment against the State, it is barred under sovereign immunity principles embodied in the State Lawsuit Immunity Act (745 ILCS 5/1 (West 2014)) and the complaint must be filed in the Illinois Court of Claims. Defendants also argued that the complaint should be dismissed under section 2-619(a)(9) of the Code (735 ILCS 5/2-619(a)(9) (West 2014)) because the voluntary payment doctrine bars recovery. Finally, defendants argued that certain counts of the complaint should be dismissed pursuant to section 2-615 of the Code (id. § 2-615) for failure to state a claim upon which relief may be granted.

         ¶ 10 In response, plaintiff argued that his suit was properly brought in the circuit court because section 15 of the Estate Tax Act (35 ILCS 405/15 (West 2014)) vests jurisdiction in the circuit court to hear all tax disputes arising under the Estate Tax Act. Plaintiff also argued that he was not seeking payment from the State because his claim is not against the General Revenue Fund. Rather, his claim is against the Estate Tax Refund Fund, a special fund created under section 13 of the Estate Tax Act (id. § 13(c)). Plaintiff further argued that his complaint was not barred by the voluntary payment doctrine because he made the tax payments under "implied duress" created by the threat of penalties imposed by the Estate Tax Act. Plaintiff also defended the sufficiency of his constitutional claims.

         ¶ 11 The circuit court agreed with defendants that it lacked jurisdiction and dismissed the complaint without prejudice to refile in the Illinois Court of Claims. The court expressly ruled that section 15 of the Estate Tax Act "is not an explicit waiver of sovereign immunity."

         ¶ 12 The appellate court reversed and remanded for further proceedings. 2017 IL App (2d) 160286, ¶ 42. Relying principally on Leetaru v. Board of Trustees of the University of Illinois, 2015 IL 117485, the appellate court held that the officer suit exception to sovereign immunity applied and jurisdiction in the circuit court was proper. 2017 IL App (2d) 160286, ¶ 27. The appellate court also held that plaintiff's claims were not barred by the voluntary payment doctrine. Id. ¶ 40. The court agreed with plaintiff that the prospect of penalties, interest, and personal liability under the Estate Tax Act amounted to duress and, therefore, plaintiff's payment of taxes was not voluntary. Id. ¶ 35. Finally, the appellate court held that, because plaintiff paid the taxes involuntarily, he was not required to seek recovery under the State Officers and Employees Money Disposition Act (Protest Moneys Act) (30 ILCS 230/1 et seq. (West 2014)). 2017 IL App (2d) 160286, ¶ 40. Because the appellate court concluded that the circuit court erred in dismissing plaintiff's complaint on grounds of sovereign immunity, the appellate court did not consider whether the legislature waived immunity in section 15 of the Estate Tax Act (35 ILCS 405/15 (West 2014)). 2017 IL App (2d) 160286, ¶ 29.

         ¶ 13 We allowed defendants' petition for leave to appeal (Ill. S.Ct. R. 315 (eff. Mar. 15, 2016)) and allowed the Board of Trustees of the University of Illinois to file an amicus curiae brief in support of defendants (Ill. S.Ct. R. 345 (eff. Sept. 20, 2010)).

         ¶ 14 ANALYSIS

         ¶ 15 Defendants urge this court to reverse the appellate court and affirm the circuit court's dismissal of plaintiff's complaint, arguing that the officer suit exception to sovereign immunity does not apply in this case. Defendants argue in the alternative that even if sovereign immunity does not apply in this case, dismissal of plaintiff's complaint was proper under the voluntary payment doctrine because the mere threat of statutory penalties for nonpayment of taxes does not constitute duress. Defendants further argue that plaintiff had a simple and complete statutory remedy under the Protest Moneys Act and plaintiff's failure to follow this statutory procedure bars his claim.

         ¶ 16 Plaintiff argues that the appellate court correctly concluded that this case presents a "textbook instance of the officer-suit exception" to sovereign immunity (2017 IL App (2d) 160286, ¶ 27) but that, even if the exception does not apply, the General Assembly waived sovereign immunity in section 15 of the Estate Tax Act (35 ILCS 405/15 (West 2014)). Plaintiff also argues that neither the Protest Moneys Act nor the voluntary payment doctrine bars his complaint where his payment of estate taxes was made under duress and without knowledge of the facts upon which to frame a protest.

         ¶ 17 Because questions related to the circuit court's subject-matter jurisdiction and the interpretation of a statute both present issues of law, our review proceeds de novo. J&J Ventures Gaming, LLC v. Wild, Inc., 2016 IL 119870, ¶ 25; see also Leetaru, 2015 IL 117485, ¶ 41 (circuit court's grant of a motion to dismiss for lack of jurisdiction under section 2-619(a)(1) is reviewed de novo).

         ¶ 18 Sovereign Immunity and the Officer Suit Exception

         ¶ 19 Under the Illinois Constitution of 1870, the State of Illinois enjoyed immunity from suits of any kind. See Ill. Const. 1870, art. IV, § 26 ("The state of Illinois shall never be made defendant in any court of law or equity."); see also Coleman v. East Joliet Fire Protection District, 2016 IL 117952, ¶¶ 24-28 (discussing the origins and development of the sovereign immunity doctrine). With the adoption of the Illinois Constitution of 1970, however, sovereign immunity was abolished in this State "[e]xcept as the General Assembly may provide by law." Ill. Const. 1970, art. XIII, § 4. In accordance with this constitutional grant of authority, the General Assembly adopted the State Lawsuit Immunity Act, reinstituting the doctrine of sovereign immunity. See Pub. Act 77-1776 (eff. Jan. 1, 1972); Leetaru, 2015 IL 117485, ¶ 42. This statute provides:

"Except as provided in the Illinois Public Labor Relations Act, the Court of Claims Act, the State Officials and Employees Ethics Act, and Section 1.5 of this Act, the State of Illinois shall not be made a defendant or party in any court." 745 ILCS 5/1 (West 2014).

         ¶ 20 The Court of Claims Act (705 ILCS 505/1 et seq. (West 2014)) creates a forum for actions against the State. Healy v. Vaupel, 133 Ill.2d 295, 307 (1990). With some limited exceptions, the Illinois Court of Claims "shall have exclusive jurisdiction to hear and determine *** [a]ll claims against the ...


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