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Justices divided on whether case should be before Tax Court

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The Indiana Supreme Court split Thursday on whether the attorney general’s attempt to recover an erroneously issued “tax refund” to a company should proceed in state court or in the Indiana Tax Court.

Because of clerical errors, the Indiana Department of Revenue issued a refund check to Aisin Manufacturing for its 2001 taxes in the amount of $1,146,062 in September 2003. The Department of Revenue discovered the error in October 2005 when Aisin filed an amended return for the 2001 tax year. Aisin had paid the proper amount of taxes for that year. The Department of Revenue was unable to recover the money erroneously sent to Aisin, so the matter was referred to the attorney general.

The state, on behalf of taxpayers, filed the complaint against Aisin for unjust enrichment, theft, and constructive trust in Jackson Superior Court. The trial court granted Aisin’s motion to dismiss for lack of jurisdiction, believing the matter was the exclusive jurisdiction of the Tax Court. The Indiana Court of Appeals affirmed, finding whatever mistakes were made were “quintessentially tax matters.”

In State ex rel. Gregory F. Zoeller v. Aisin USA Manufacturing, Inc., No. 36S01-1009-CV-469, Justices Frank Sullivan, Steven David, and Chief Justice Randall T. Shepard disagreed, and found the state’s claims could proceed in Jackson Superior Court.

The majority opinion determined that the matter doesn’t “arise under” Indiana tax law as interpreted in State v. Sproles, 672 N.E.2d 1353 (Ind. 1996). They rejected the trial court’s conclusion that this case involves the collection of a tax because the dispute involved a tax payer and tax collector because if every case involving the Department of Revenue was intended to fall within the Tax Court’s exclusive jurisdiction, then the General Assembly could have said so, wrote Justice Sullivan.

This is essentially an accounting case and “to hold that this ‘refund,’ issued solely because of accounting or clerical errors, represents part of a tax would not serve the legislative purpose of ensuring the uniform interpretation and application of the tax laws because the tax laws are not implicated,” wrote the justice.

The majority held that a refund issued because of an accounting error and that has nothing to do with the interpretation or application of substantive tax law doesn’t revive the original tax liability, where such liability has already been discharged by the taxpayer’s full payment. Because such a refund is issued to a taxpayer owing no tax, the state has a claim for restitution.

“… although Indiana tax statutes provide the exclusive remedy for a taxpayer to recover an overpayment of taxes, we perceive no limitation imposed by the tax law on the State’s common-law claim for restitution in this case,” wrote Justice Sullivan.

The majority reversed the trial court and remanded for proceedings on the merits of the state’s claims.

Justice Robert Rucker dissented in a separate opinion in which Justice Brent Dickson joined. Justice Rucker wrote that it’s reasonable to conclude the state, believing it could not obtain relief in the Tax Court because of a statute of limitation, attempted an end-run and filed the action in Superior Court.

“Given the lengths to which the majority was required to analyze Aisin’s various tax filings and the resultant repercussions, I agree this is a tax case and would affirm the judgment of the trial court,” he wrote.

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  1. A sad end to a prolific gadfly. Indiana has suffered a great loss in the journalistic realm.

  2. Good riddance to this dangerous activist judge

  3. What is the one thing the Hoosier legal status quo hates more than a whistleblower? A lawyer whistleblower taking on the system man to man. That must never be rewarded, must always, always, always be punished, lest the whole rotten tree be felled.

  4. I want to post this to keep this tread alive and hope more of David's former clients might come forward. In my case, this coward of a man represented me from June 2014 for a couple of months before I fired him. I knew something was wrong when he blatantly lied about what he had advised me in my contentious and unfortunate divorce trial. His impact on the proceedings cast a very long shadow and continues to impact me after a lengthy 19 month divorce. I would join a class action suit.

  5. The dispute in LB Indiana regarding lake front property rights is typical of most beach communities along our Great Lakes. Simply put, communication to non owners when visiting the lakefront would be beneficial. The Great Lakes are designated navigational waters (including shorelines). The high-water mark signifies the area one is able to navigate. This means you can walk, run, skip, etc. along the shores. You can't however loiter, camp, sunbath in front of someones property. Informational signs may be helpful to owners and visitors. Our Great Lakes are a treasure that should be enjoyed by all. PS We should all be concerned that the Long Beach, Indiana community is on septic systems.

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