In re Tax Appeal of Aregger (ICA November 18, 2010)
Background. The Board of Taxation Review ruled on October 1, 2008, in favor of the Director of Taxation against the Areggers in an amount of $7,308.37. The Areggers filed a notice of appeal to the tax court on October 29, 2008. The certificate of service showed that a copy of the notice was mailed to the tax assessor. No copy was sent to the Director of Taxation. Notice of entry was filed by the clerk of the tax court on October 30. The notice was mailed to the Director. The Director challenged subject matter jurisdiction in his answer and later filed a motion to dismiss based on a lack of jurisdiction. The tax court granted the motion. The Areggers appealed.
Statutes Require Service on Director. Tax appeals are "properly commenced by the filing . . . of a written notice of appeal in the office of the tax appeal court within thirty days after the filing of the decision of the state board of review . . . and service of the notice of appeal on the director of taxation." HRS § 232-17. That did not happen here. The Director contends that because that did not happen here, there was no subject matter jurisdiction. The "failure to file a timely notice of appeal is a jurisdictional defect that can neither be waived by the parties nor disregarded by the court in the exercise of judicial discretion." Bacon v. Karlin, 68 Haw. 648, 650, 727 P.2d 1127, 1129 (1986).
That "Shall" is Mandatory. The ICA agreed with the Director that the statute is mandatory rather than directory. HRS § 232-17 used to read that the taxpayer-appellant "shall also file a copy of the notice of appeal in the assessor's office[.]" The HSC held that that "shall" was directory and that noncompliance was not a jurisdictional defect. Namore v. Kawafuchi, 112 Hawai'i 69, 71, 82, 143 P.3d 1271, 1273, 1284 (2006). In response to Namore, the Legislature amended the statute to its current state. In light of this history, the ICA agreed with the Director that this current statute is mandatory. The legislative fix rendered the statute mandatory and so the Areggers were required to serve a copy with the Director rather than the assessor.
The Mandatory-Directory Problem. This is a common problem that arises in statutory construction. Generally, "a statute is directory rather than mandatory if the provisions of the statute do not relate to the essence of the thing to be done or where no substantial rights depend on compliance with the particular provisions and no injury can result from ignoring them." Jack Endo Elec., Inc. v. Lear Siegler, Inc., 59 Haw. 612, 617, 585 P.2d 1265, 1269 (1978). In determining the mandatory or directory nature of the "shall," "the intention of the legislature must be ascertained." Id.
Here, the ICA went straight to the legislative record and found that the new language was a legislative fix for an earlier holding that the "shall" was directory. That was enough evidence for the ICA that the new language was intended to be mandatory. The ICA did not examine whether the newly amended statute "relate[d] to the essence of the thing to be done or . . . substantial rights depend[ed] on compliance." It seemed to be satisfied with the Legislative record. This raises an interesting question: can a statute be directory even if the Legislative history reflected showed an attempt to make it mandatory? Or, in broader terms, does a legislative fix always work in these kinds of cases?
But Rules Require Service on Assessor. Under the rules, an appeal is initiated by filing a notice of appeal with the clerk of the Tax Court. Rules of the Tax Appeal Court Rule 2(a). "The appellant shall file a copy of the notice with the assessor[.]" Id. The Areggers argued that the rules of the tax court--which were not amended to track to the statute--were controlling. The ICA rejected this argument. When there is a conflict between a rule and a statute, the statute prevails. In re Doe Children, 94 Hawai'i 485, 485, 17 P.3d 217, 218 (2008). The ICA further explained that while the Judiciary's rules "for all courts relating to process, practice, procedure and appeals . . . shall have the force and effect of law," Haw. Const. Art. VI, Sec. 7, these "rules shall not abridge, enlarge, or modify the substantive rights of any litigant, nor the jurisdiction of any of the courts, nor affect any statute of limitations." HRS § 602-11.