Cardellino v. Comptroller of Treasury

BISHOP, Judge. Pursuant to Md.Ann.Code art. 81, § 328, 1 appellee, the Comptroller of the Treasury, Retail Sales Tax Division (“the Comptroller”), levied an assessment in the amount of $4,865.80 in retail sales tax, interest and penalty for the period July 1, 1982 through March 9, 1983, against appellant, Margo Cardellino, because of her status as Secretary- ³³⁴ Treasurer of Prince Frederick Auto Parts, Inc. The assessment was affirmed by a Hearing Officer of the Retail Sales Tax Division, and that decision was affirmed by the Maryland Tax Court. The Circuit Court for Calvert County affirmed the ruling of the Tax Court. Appellant appeals that decision to this Court.

The issues raised by appellant may be stated as follows: I. Was the Tax Court correct in deciding that Prince Frederick Auto Parts, Inc. was a validly formed corpora^ tion?

II

Was the Tax Court correct in deciding that appellant was an officer of Prince Frederick Auto Parts, Inc. and therefore liable for unpaid sales tax owed by the corporation? FACTS On January 8, 1980, the State Department of Assessments and Taxation approved and received for record the articles of incorporation of Prince Frederick Auto Parts, Inc. One of the purposes of the corporation was to retail auto parts. Michael Finkle was the only director named, and Finkle testified that he owned, operated, and appointed himself president of, the corporation. After the filing of the articles of incorporation, none of the routine corporate formalities were undertaken; no by-laws were adopted, no shares of stock were issued, and no organizational or annual meetings were held.

Appellant was hired as a secretary and bookkeeper for the business, with duties which included sending out bills, keeping a record of inventory, answering the telephone, and writing checks. Appellant’s was an authorized signature on the Prince Frederick Auto Parts, Inc. checking account. About a year after beginning her employment, appellant was given the responsibility of filing monthly sales tax returns. Finkle testified that although the accountant had recommended that appellant be made secretary and treasurer, this was never actually done. ³³⁵ Three separate documents filed by Prince Frederick Auto Parts, Inc. were relied upon below to support the conclusion that appellant was a corporate officer.

The undisputed testimony was that appellant prepared and signed Retail Sales Tax Reports for May and June of 1982. At the bottom of each of the forms the following legend appears: I declare under the penalties of perjury that this return including any accompanying schedules and statements has been examined by me and to the best of my knowledge and belief is a true and complete return. Below the legend appellant’s signature appears in a blank labeled “Signature of Taxpayer or Agent.” Below the signature in a blank labeled “Title” appellant wrote “Secy. Treas.” The third document here involved is the Personal Property Tax return filed by Prince Frederick Auto Parts, Inc. with the Department of Assessments and Taxation on July 19, 1982.

On the first page of the return, under the heading “Name and Address of Officers” the following appears: [[Image here]] At the bottom of page three of the return the following appears: ³³⁶ PENAL CLAUSES DO NOT PAY PENALTIES AT TIME OP PILING REPORT Art. 81, Sec. 220. Failure to furnish information, answer interrogatories or make reports—Through negligence. Any person who either as principal or agent shall negligently or without due excuse fail to furnish any information, or to answer any interrogatory, or file any report or list at the time and in the manner required by this article, or who shall negligently give any incorrect, untrue or misleading information or answer to any such interrogatory, or make or file any report or list which shall be in any respect incorrect, untrue or misleading, shall be guilty of a misdemeanor, and upon conviction thereof shall be fined not exceeding five hundred ($500.00) dollars. 221. Same—Through wilfulness.

Any person who either as principal or agent shall wilfully or with intent to evade the payment, or prevent or hinder the collection, of any tax, fail to furnish any information, or to answer any interrogatory, or to file any report or list at the time and in the manner required by this article, or give any incorrect, untrue or misleading information or answer to any such interrogatory shall be guilty of a misdemeanor, and upon the conviction thereof shall be fined not exceeding five thousand ($5,000) dollars or imprisoned for not more than eighteen months, or in the discretion of the court, suffer both such fine and imprisonment; provided that nothing in this section shall relieve any such person from prosecution and conviction for perjury. I declare under the penalties of perjury, pursuant to Art. 81, See. 5 of the Annotated Code of Maryland, that this return (including any accompanying schedules and statements) has been examined by me and to the best of my knowledge and belief is a true, correct and complete return. The signature of George Grillo, the business’ accountant, appears below this legend, in a blank labeled “signature of person or name of firm, other than taxpayer, preparing return.” Appellant’s signature appears above a blank labeled “Signature of Officer of Corporation.” The testimony ³³⁷ was undisputed that Grillo prepared the return and that appellant signed it. Appellant did testify that she had not read the first page of the return, and the tax court accepted this testimony as true in its findings.

DISCUSSION In absence of errors of law, the tax court must be affirmed if a “reasoning mind reasonably could have reached the factual conclusion[s].” Comptroller v. Diebold, Inc., 279 Md. 401, 407 , 369 A.2d 77 (1977). See also Ramsay, Scarlett & Co. v. Comptroller, 302 Md. 825, 835 , 490 A.2d 1296 (1985); Comptroller v. World Book Childcraft International, Inc., 67 Md.App. 424 , 508 A.2d 148 (1986). In World Book, this Court summarized the standard of review set forth in Ramsay, Scarlett: 1. First, the reviewing court must determine whether the agency recognized and applied the correct principles of law governing the case.

The reviewing court is not constrained to affirm the agency where its order is premised solely upon an erroneous conclusion of law. 302 Md. at 834 [ 490 A.2d 1296 .] 2. Once it is determined that the agency did not err in its determination or interpretation of the applicable law, the reviewing court next examines the agency’s factual findings to determine if they are supported by substantial evidence, i.e., by such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Id. At this juncture, the Ramsay, Scarlett court reminds us that it is the agency’s province to resolve conflicting evidence, and, where inconsistent inferences can be drawn from the same evidence, it is for the agency to draw the inference.

Id. at 835 [ 490 A.2d 1296 ]. 3. Finally, the reviewing court must examine how the agency applied the law to the facts. This, of course, is a judgmental process involving a mixed question of law and fact, and great deference must be accorded to the agency. The test of appellate review of this function is whether, ... a reasoning mind could reasonably have reached the ³³⁸ conclusion reached by the [agency], consistent with a proper application of the [controlling legal principles].

Id. at 838 [ 490 A.2d 1296 ]. 67 Md.App. at 438-39 , 508 A.2d 148 . We conclude that, in the case sub judice, the Tax Court applied the proper law to factual