Cathy's Kitchen & Diner, LLC v. Director of Revenue

• Court: Missouri Court of Appeals
• Decided: June 18, 2024
• Docket: WD86430
• Status: Published

Opinion

In the Missouri Court of Appeals Western District

CATHY'S KITCHEN ) & DINER, LLC., ) ) Appellant, ) WD86430 ) V. ) OPINION FILED: ) JUNE 18, 2024 DIRECTOR OF REVENUE, ) ) Respondent. )

Appeal from the Administrative Hearing Commission

Before Division Four: Gary D. Witt, Chief Judge, Presiding, Janet Sutton, Judge and Sarah Castle, Special Judge

Cathy's Kitchen & Diner, LLC ("Cathy's Kitchen"), appeals the order of the

Administrative Hearing Commission ("AHC") finding that the AHC had no authority to

reconsider its order dismissing Cathy's Kitchen's tax appeal. On appeal, Cathy's Kitchen

claims that: (1) the AHC's order is in error because the AHC misinterpreted section

621.189 to conclude that the AHC was not required to give Cathy's Kitchen actual notice

of the dismissal of Cathy's Kitchen's tax appeal; and (2) even if actual notice is not

required, the AHC erred in failing to give Cathy's Kitchen reasonable notice of the dismissal because the notice was sent to Cathy's Kitchen's counsel's ("Counsel")1 email of

record after she had left her law firm ("Law Firm"). We affirm the AHC's order.

Factual and Procedural Background

Cathy's Kitchen is a small business in the St. Louis metropolitan area. The

Director of Revenue ("Director") audited Cathy's Kitchen's financial records and found

that, for the period of October 1, 2016, to September 30, 2019, Cathy's Kitchen

underreported gross and taxable sales per annual sales summary reports. The audit found

a "tax difference" of $88,703.97 which the Director determined Cathy's Kitchen owed to

the State. After receiving the audit letter from the Director, Cathy's Kitchen, through

Counsel, filed a petition for review with the AHC challenging the Director's decision.

Counsel, who at the time worked for Law Firm, signed the petition as "ATTORNEY

FOR CATHY'S KITCHEN."

After the Director answered the petition, the AHC set the matter for hearing on

October 20, 2021, but the hearing was continued, and the AHC directed the parties to file

a status report by December 3, 2021. This order stated, "Failure to comply with this

order may result in dismissal of this case pursuant to 1 CSR 15-3.436(1)(C) and 1 CSR

15-3.425(1)(A)." Neither party filed a status report by the deadline, and on December 13,

2021, the AHC issued an order directing the parties to show cause by December 27,

2021, why the case should not be dismissed. Cathy's Kitchen, through Counsel, filed a

"SHOW CAUSE, STATUS REPORT AND UNOPPOSED MOTION FOR

1 In accordance with section 509.520, we do not use the names of witnesses other than parties. 2 CONTINUANCE" with the AHC, reporting that the parties were engaged in settlement

negotiations and asked the AHC to continue the matter to a later date so the parties could

continue to work toward a settlement. This filing was made by Counsel through

electronic filing and listed Counsel's email address consistent with all prior filings.

On December 29, 2021, the AHC directed the parties to file a joint status report by

June 15, 2022. This order also informed the parties that failure to comply with the order

may result in dismissal of the case. On or about May 1, 2022, Counsel left her position

with Law Firm. Counsel did not notify the AHC, opposing counsel, or even her own

client, Cathy's Kitchen, that she was leaving Law Firm. Counsel had apparently not

entered into an engagement letter with Cathy's Kitchen, and she did not notify Law Firm

that transition of the case to another attorney with Law Firm was necessary.

On July 18, 2022, more than a month past the status-report deadline, the AHC

dismissed the case for the parties' failure to comply with its order. The AHC notified the

parties of its dismissal by sending an electronic copy of its order to the email addresses of

the attorneys of record, including Counsel. Two other attorneys employed by Law Firm

eventually learned of this dismissal, contacted Counsel at her new place of employment,

and had discussions with Counsel to determine whether she had taken the case to her new

law firm, which she had not. Law Firm informed Cathy's Kitchen of Counsel's departure

and of the dismissal and entered into a formal engagement agreement with Cathy's

Kitchen on November 17, 2022. On December 16, 2022, Law Firm filed an unopposed

motion to set aside the order of dismissal and a request for substitution of counsel. The

3 motion argued "good cause" to set aside the dismissal asserting that Cathy’s Kitchen

should not be penalized for "the inadvertence of its counsel."

The AHC indicated to the parties that it did not believe it retained authority to set

aside its prior dismissal as it was more than thirty days past the date of the dismissal, and

the AHC asked the parties to brief this legal issue. Cathy's Kitchen argued that its motion

to set aside the dismissal was timely as it was within thirty days of Cathy's Kitchen

having received actual notice of the AHC's dismissal in that Cathy's Kitchen did not

receive actual notice of the dismissal until November 17, 2022. The Director countered

that actual notice of the dismissal was not required, but merely reasonable notice, which

Cathy's Kitchen received when the AHC sent notice of its dismissal to Cathy's Kitchen's

counsel of record (Counsel). The AHC agreed with the Director that it lost its authority

to reconsider the dismissal order thirty days after it sent notice to Counsel. This appeal

follows.

Standard of Review

We affirm the decision of the AHC when: (1) it is authorized by law; (2) it is

supported by competent and substantial evidence upon the whole record; (3) mandatory

procedural safeguards are not violated; and (4) it is not clearly contrary to the legislature's

reasonable expectations. Charter Commc'ns Ent. I, LLC v. Dir. of Revenue, 667 S.W.3d

84, 86-87 (Mo. banc 2023). However, we review de novo all questions of law and

statutory interpretation raised in an AHC decision. Id. at 87. The issues in this appeal are

legal and subject to de novo review.

4 Analysis

Cathy's Kitchen's first point on appeal is that the AHC erred in determining that it

lacked authority to set aside its former order dismissing Cathy's Kitchen's tax appeal.

Specifically, Cathy's Kitchen argues that the AHC had authority to set aside its former

order because Cathy's Kitchen's motion to set aside was filed within thirty days of it

having received actual notice of the dismissal. We disagree.

First, we address whether the issue presented is one of authority versus

jurisdiction. In J.C.W. ex rel. Webb v. Wyciskalla, 275 S.W.3d 249, 254 (Mo. banc

2009), our Supreme Court declared that circuit courts are courts of general jurisdiction

with jurisdiction over all cases civil and criminal, and statutory limitations are therefore

only limits to the courts' authority to hear certain matters or to make certain

determinations. The AHC is not a body enjoying general jurisdiction granted by

Missouri's constitution. Rather, the AHC is a creature of statute and has only the

jurisdiction that is granted to it by the Legislature. Shaw v. Admin. Hearing Comm'n, 537

S.W.3d 881, 886 (Mo. App. W.D. 2018). Section 621.050.12 provides that a party may

appeal to the AHC decisions or assessments made by the Director "by the filing of a

petition with the [AHC] within thirty days after the decision of the director is placed in

the United States mail or within thirty days after the decision is delivered, whichever is

earlier." This limits the AHC's jurisdiction to cases falling within the provisions of the

statute for these cases. After making a final decision, the AHC retains jurisdiction over

All statutory references are to the Revised Statutes of Missouri (2016) as updated by 2

supplement. 5 the matter within the time provided by section 621.189. That provision reads, in

pertinent part:

Final decisions of the [AHC] in cases arising pursuant to the provisions of section 621.050 shall be subject to review pursuant to a petition for review to be filed in the court of appeals in the district in which the hearing, or any part thereof, is held or, where constitutionally required or ordered by transfer, to the supreme court, and by delivery of copies of the petition to each party of record, within thirty days after the mailing or delivery of the final decision and notice thereof in such a case.

Section 621.189 (emphasis added). During the thirty days following the decision, in this

case a dismissal, the AHC has the power to set aside the dismissal. "[A]n administrative

body has the inherent power to set aside a dismissal for good cause as a necessary

corollary to the power of dismissal and it has the inherent power to reinstate the appeal."

Eleven Star, Inc. v. Dir. of Revenue, 764 S.W.2d 521, 522 (Mo. App. W.D. 1989). After

the thirty days, the AHC loses jurisdiction over the matter. This Court cannot extend that

time. Id.

The 30 day limit on the appeal from the decision of the [AHC] simply means that the party appealing to this court from the [AHC] decision must file a motion to set aside the dismissal and obtain a final decision from the [AHC] reinstating the petition prior to the expiration of the 30 days following the final decision. If the [AHC] does not set aside the dismissal within the 30 day time limit, the order of dismissal would stand unless a petition for review were filed in this court within that time.

Id.

While Cathy's Kitchen apparently agrees that the AHC only retains the power to

set aside the dismissal for thirty days, it argues that its petition for review was filed

within the thirty days allowed because, according to section 621.189, "within thirty days

6 after the mailing or delivery of the final decision and notice thereof" means within thirty

days of when the appealing party has actual notice of the AHC's decision. We find that

neither the plain language of the statute nor the interpreting case law supports this

position.

Section 621.050.2 dictates that the procedures applicable to appeals from the

Director heard by the AHC "shall be those established by chapter 536." Section 536.090,

entitled "Decisions in writing—notice" states, "Immediately upon deciding any contested

case the agency shall give written notice of its decision by delivering or mailing such

notice to each party, or his attorney of record, and shall upon request furnish him with a

copy of the decision, order, and findings of fact and conclusions of law." (emphasis

added). The statutes expressly authorize "notice" to be provided to the attorney of record.

At the time the AHC dismissed Cathy's Kitchen's appeal, Counsel was Cathy's Kitchen's

attorney of record. She had been communicating with the AHC and with opposing

counsel via her Law Firm email address, which is the address to which notice of the

dismissal was sent by the AHC. Notice of the dismissal was sent in accordance with

sections 536.090 and 621.189, and, per the latter, the thirty-day time limit for the AHC to

set aside its dismissal began running on July 18, 2022.

The attorney-client relationship is based in agency and notice to an agent, acting in

that capacity, is imputed to the client. Brown as Tr. of George E. Heard Revocable Tr.,

Dated Feb. 24, 2000 v. Barnes, 641 S.W.3d 241, 247 n.3 (Mo. App. W.D. 2021). That

Cathy's Kitchen did not directly receive the notice and that Counsel did not read or pass

on the notice are not facts that render the notice inoperable. In Williams v. City of

7 Kinloch, 657 S.W.3d 236 (Mo. App. E.D. 2022), a party was sent notice of an

administrative body's action, where notice was similarly governed by section 536.090, by

sending it "to the business email address of Williams's counsel." Id. at 239, 241. The

court noted, that, although counsel claimed to have moved his office and his changed

address, "[t]he email was not returned as undeliverable, nor was there any other

indication that Williams's counsel did not receive notice of the Board's decision." Id. at

240. While Williams was not a review under section 621.189, the review in that case

operated under the same definition of notice found in section 536.090, and the court

found the email notice sent to counsel of record sufficient.

Similar to Williams, in this case, Cathy's Kitchen claims that the notice was

ineffective because it did not reach Cathy's Kitchen or Counsel. Cathy's Kitchen's brief

claims that Counsel's email had been "deactivated" and states that the AHC "would have

received an auto-response email indicating that the email was not delivered because the

intended recipient was no longer with the firm and provided an alternate person at the

firm to contact." But, as in Williams, there is no evidence of this in the record before this

Court. The citations to the record on appeal following this assertion in Cathy's Kitchen's

brief do not support this "fact." "[T]he allegations in the petition and argument by

counsel are not evidence. There was no evidence of counsel's change of address or that

the notice was returned as undeliverable." Williams, 657 S.W.3d at 242-43 (internal

citation omitted). We see no essential difference between this case and Williams.

Cathy's Kitchen makes much of the fact that, unlike some other statutes, section

621.189 expressly provides that review shall be "within thirty days after the mailing or

8 delivery of the final decision and notice thereof in such a case." (emphasis added).

Cathy's Kitchen argues that the addition of "and notice thereof" somehow alters the

definition of notice found in section 536.090 to mean actual notice to the party. Again,

we disagree. Section 536.090 provides that written notice of the agency's decision be

given, "and shall upon request furnish him with a copy of the decision, order, and

findings of fact and conclusions of law." We believe that these statutes, read together,

indicate that, where the party requests a copy of the decision, order, and findings of fact

and conclusions of law, that both be provided. However, where, as in this case, a matter

is dismissed by the AHC for inactivity after multiple warnings that the matter may be

dismissed if the parties do not update the AHC of the status, the parties presumably

would not need a written copy of the decisions, findings, and conclusions, and a written

notice of the decision would suffice. Although inartfully drafted, we find that section

621.189 provides for either situation. We do not find that "and notice thereof" changes

the definition of notice in section 536.090, which expressly applies to section 621.189.

Notice prescribed by the statutes was provided, the thirty-day time period began running

on July 18, 2022, and the AHC was therefore without jurisdiction to set aside its

dismissal of Cathy's Kitchen's appeal.

Point I is denied.

Cathy's Kitchen's second point on appeal is that, even if actual notice is not

required, the notice given to Cathy's Kitchen in this case was not reasonable in that it was

sent to a deactivated email account and not received by either Cathy's Kitchen or

Counsel.

9 For the same reasons discussed in our analysis of Point I, we find that there is no

evidence that the email of record for Counsel had been "deactivated" or that the notice

sent to Counsel's email of record was in any way insufficient. Further, if the account had

been deactivated, there is no evidence that the AHC was aware that the notice was not

received. The AHC gave the notice required by the applicable statutes. Counsel never

moved to withdraw from representation of Cathy's Kitchen, did not notify the AHC of an

updated email address, and did not even inform Cathy's Kitchen that she would not

continue the representation. If Cathy's Kitchen did not know Counsel no longer intended

to represent it, the AHC certainly had no way of knowing that Counsel would not read

the notice and pass it on to Cathy's Kitchen. The AHC notified Counsel and Cathy's

Kitchen of its show cause orders via Counsel's Law Firm email address and had received

responses from that address. The AHC had no reason to believe that notice to that email

address would no longer be read or passed on to Cathy's Kitchen. The notice given was

reasonable.

Point II is denied.

Conclusion

For the above-stated reasons, we affirm the order of the AHC.

__________________________________ Gary D. Witt, Chief Judge, Presiding

All concur