Baltimore County v. Xerox Corp.

Orth, J., delivered the opinion of the Court. This appeal concerns the procedure required to be followed to obtain a refund of monies paid in excess of the amount properly chargeable as ordinary taxes on a corporation’s tangible personal property located in Maryland. I Tangible personal property belonging to any corporation, domestic or foreign, which is subject to ordinary taxation under the revenue and tax laws of Maryland shall be valued and assessed for purposes of State, county and city taxation by the State Department of Assessments and Taxation. Maryland Code (1957, 1975 Repl.

Vol.) Art. 81, § 13(b)(5). 1 ²²² Such property belonging to Xerox Corporation was valued and assessed by the Department for tax years 1970 through 1973. Aggrieved by the final action taken by the Department, Xerox protested the assessment, and the matter was heard in the Maryland Tax Court. Since, however, "[n]o appeal shall stay or in any manner affect the collection or enforcement of the assessment, tax, levy, or classification complained of ” unless the taxpayer file a bond "conditioned upon the payment of such assessment and aR interest accruing thereon until paid,” ;§ 260, Xerox paid the taxes. The Maryland Tax Court issued an opinion in favor of Xerox.

The Department appealed to this Court, and we remanded for further proceedings. St. Dep’t of A. & T v. Greyhound Comp., 271 Md. 575 , 320 A.2d 40 (1974). Further proceedings were had, but before decision was reached the Department and Xerox entered into a settlement agreement which recognized that there had been an overassessment of the property in question with the result that the taxes paid by Xerox were more than the amount actually due. Thereupon the Maryland Tax Court issued orders reducing the assessment of the property for each of the years in question.

As it is the duty of each county collector “to collect as certified to him [by the Department] all State and county taxes levied or to be levied,” § 51, the Department, on 30 March 1977, sent to all counties final certification of the reduced assessments and taxes to be levied. Pending the outcome of the dispute involving tax years 1970 through 1973, the Department had withheld assessing the property concerned for subsequent years. It, therefore, on 18 April 1977, certified to the counties original assessments and taxes to be levied on the property for tax years 1974 through 1976. Thus, based upon the reduced valuation of the property, Xerox was due a refund on the taxes it had paid for tax years 1970 through 1973 and owed taxes for tax years 1974 through 1976.

According to an affidavit by Xerox in the record before us, all counties concerned, except Baltimore County, resolved the matter of the refund by either sending Xerox a check for the excess paid upon receipt of Xerox’s payment of the taxes due or by crediting the overpayment to those taxes. Baltimore County, ²²³ however, took no action with respect to the refund. It billed Xerox under date of 6 May 1977 in the amount of some $600,000 for the taxes due on the property for tax years 1974 through 1976 and called for payment in full by 5 June. Xerox wrote Baltimore County explaining that under Maryland law it had become entitled to a refund upon settlement of the dispute over the assessment covering the tax years for which it had paid the taxes.

It submitted a check for the difference between the taxes due and the amount of the refund. Baltimore County returned the check and stated that upon payment in full of the taxes for tax years 1974 through 1976 and receipt of a copy of the agreement between the Department and Xerox whereby the assessment for tax years 1970 through 1973 had been determined, it would “review [Xerox’s] request for refunds in accordance with law.” On 9 February 1978 Xerox filed a Bill of Complaint in the Circuit Court for Baltimore County seeking a declaratory judgment and injunctive relief. In the interim, Xerox had made clear that it was willing to pay the difference between the taxes due by it and the refund owed it and that its view was that Baltimore County was required to refund the over payment without further action on Xerox’s part. Baltimore County held stubbornly to its position that all outstanding taxes should be paid in full and that Xerox must follow certain administrative procedures to obtain the excess monies it had paid.

The dispute was intensified when Baltimore County refused to accept Xerox’s payment for taxes as billed on 4 January 1978 for tax year 1977, because taxes previously billed had not been paid. The Circuit Court for Baltimore County granted an ex parte injunction and then an interlocutory injunction, effective 1 March 1978, enjoining Baltimore County from instituting a collection action which would duplicate the litigation then before the court. By its terms, this injunction was to dissolve upon a final determination of the rights of the parties. Baltimore County appealed the grant of this interlocutory injunction to the Court of Special Appeals, but before it was heard, the trial court entered a final judgment.

Thereupon, the Court of Special Appeals dismissed the appeal as moot. ²²⁴ The case proceeded to final disposition in the Circuit Court for Baltimore County on 31 May 1978. The court held that the final Maryland Tax Court orders of 7 March 1977 finally determined Xerox’s tax liability and were binding on Baltimore County. Baltimore County does not now dispute this. The court further found that Xerox was entitled to a refund of the excess taxes it had paid without further action on its part.

The tax payable by Xerox to Baltimore County included in the court’s order was computed by deducting from the tax bills for tax years 1974-1977 the State personal property taxes Xerox paid to the Comptroller of the State of Maryland, 2 the excess tax payments made by Xerox to Baltimore County, and interest on those excess payments. Due to a mathematical error in the calculations, a new tax determination was made on 23 June 1978 and the prior judgment was modified accordingly and became the final judgment. The judgment was affirmed on direct appeal. Baltimore County v. Xerox Corp., 41 Md. App. 465 , 397 A.2d 278 (1979).

We granted Baltimore County’s petition for a writ of certiorari. II The issue for decision is whether, upon a final determination that Xerox had paid money to Baltimore County in excess of the amount properly chargeable for ordinary taxes on tangible personal property, Baltimore County was obliged to refund such excess automatically without further action on the part of Xerox. 3 ²²⁵ It is manifest that all of the administrative remedies with regard to the assessment of Xerox’s tangible personal property subject to ordinary taxes had been exhausted. The assessment had been finally determined, and the amount properly chargeable to Xerox had been fixed once and for all. That Xerox was entitled to a refund in a certain amount was no longer open to question.

Xerox claims that § 261 was invoked thereby. That section, at the time of this case, provided, under the heading “Refunds”: Upon final determination of any appeal, any money paid in excess of the amount properly chargeable under such determination, shall be refunded with interest at the rate of six per cent. (6%) per annum from the date of payment to the date of refund. The sources of refund shall be [as] specified in the applicable provisions of §§ 213 to 219, inclusive, of this article. [4] This legislative mandate would appear to be dispositive of the issue before us.

But Baltimore County seizes on the reference to §§ 213 to 219 and urges that any refund must be made pursuant to the requirements of those sections. Those sections are subtitled “Refund of Taxes” and permit any person claiming to have erroneously or mistakenly paid more money than was properly and legally chargeable to or collectible from him for State taxes, § 213, or county taxes,4 5 § 214(a), to file a written demand for a refund. If such State taxes have been so paid into the treasury of the State the written demand may be filed with the Comptroller of the State, and if approved by him, “shall be refunded out of any funds appropriated for such purpose, or, if no such funds are available, shall be certified to the Governor for inclusion in the next budget.” If such State taxes have been so paid to any collector, claims for refund may be made to him, and he, if authorized by the Comptroller, may refund the taxes “out of any State funds in the hands of such collector____” § 213. If ²²⁶ such taxes were so paid to a county, written demand may be filed with the county collector, and, if approved by him, the county commissioners “shall levy and pay to [the claimant] any money that was so paid.” § 214(a).

As to both State and county taxes, no refund shall be made or approved in any case where it appears that the assessment upon which such taxes were levied and collected has become final and has not been modified on appeal, and the only basis for the refund is a claim that such assessment was erroneous or excessive. The prohibition does not apply where a person has paid a tax bill which is erroneous “by reason of any mere mathematical, mechanical or other clerical error by the taxing authority, exclusive of any error of valuation, in the computation, calculation or recordation of the assessment upon which said tax bill is based.” Also, as to both State and county taxes, the claim for refund must be filed within three years from the date of payment. §§ 213-214. Without doubt the refund provisions of Article 81 were enacted to modify the common law rule which established barriers to the recovery of taxes paid, presumably due originally to the reluctance of the sovereign to disgorge what had been given it. No principle is better settled than that where a person, with full knowledge of the facts, voluntarily pays a demand unjustly made upon him, though attempted or threatened to be enforced by proceedings ... it will not be considered as paid by compulsion, and the party thus paying, is not entitled to recover, though he may have protested against the unfounded claim at the time of payment made.... [Lester v. Mayor and City Council of Baltimore, 29 Md. 415, 418 (1868).] See White v. Prince George’s Co., 282 Md. 641, 651-653 , 387 A.2d 260 (1978).

An action will lie at common law for money paid under a mistake of the facts, or under circumstances of fraud and extortion, or as necessary to obtain possession of goods wrongfully withheld from the party paying the money, Lester at 418, but the general rule firmly established in ²²⁷ Maryland is that “a common law action will not lie to recover taxes erroneously paid under a mistake of law.” White at 651 , and cases cited therein at 651-653. We pointed out in White at 653, n. 7 , however, that our cases have recognized a circumstance under which a common law action in assumpsit is available to recover taxes voluntarily paid under a mistake