Case Title: Kunard v. Enron Oil & Gas Co.

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1994-02-18T00:00:00Z

Document:
Kunard v. Enron Oil & Gas Co.1994 WY 20869 P.2d 132Case Number: 93-149, 93-163Decided: 02/18/1994Supreme Court of Wyoming
Nylla 
KUNARD, Sublette County Treasurer; and Donald R. (Buzz) 
Wassenburg,

 Monte Skinner, Craig Crandall, Sitting as 
the Board of County Commissioners of 

Sublette 
County,  and as the Sublette County 
Board of Equalization,

 Appellants 
(Defendants),

 

v.

 

ENRON 
OIL & GAS COMPANY,

 Appellee 
(Plaintiff).

 

ENRON 
OIL & GAS COMPANY,

 Appellant 
(Plaintiff),

 

v.

 

Nylla 
KUNARD, Sublette County Treasurer; and Donald R. (Buzz) Wassenburg, Monte 
Skinner,

 Craig Crandall, Sitting as the Board of 
County Commissioners of Sublette County,

 and as the Sublette County Board of 
Equalization,

 Appellees 
(Defendants).

Appeal 
from the District Court, Sublette County, D. Terry Rogers, J.

 

Representing 
Appellants:

Van 
Graham, Deputy County & Pros. Atty., Pinedale. 

Representing 
Appellee:

Thomas 
F. Reese of Brown & Drew, Casper, Dante L. Zarlengo, Denver, CO.

Before 
MACY, C.J., and THOMAS, CARDINE, GOLDEN and TAYLOR, JJ.

GOLDEN, 
Justice.

[¶1]      Sublette County 
(County) appeals the district court's entry of summary judgment on Enron Oil 
& Gas, Co.'s (Enron) declaratory judgment action and action to recover 
interest paid on ad valorem taxes assessed against it. Enron cross-appeals the 
district court's decision that Enron must pay interest on underpaid ad valorem 
taxes, despite its net credit balance.

[¶2]      We 
reverse.

ISSUES

[¶3]      In Appeal No. 
93-149, appellant County presents the following issue for review:

Whether 
the trial court erred in not ordering interest on under-paid ad valorem taxes 
from the date said taxes should have been paid?

Appellee 
Enron restates the issue as:

Should 
Enron be required to pay interest on ad valorem taxes which were underpaid while 
the amount of underpayment was subject to review by the Wyoming Board of 
Equalization and was unliquidated?

[¶4]      On cross-appeal, 
Appeal No. 93-163, Enron presents the following issues:

A. 
Whether the trial court committed error in finding that Enron was required to 
pay interest to Sublette County when Enron was in fact entitled to a refund from 
Sublette County?

B. 
Whether or not Enron is required to pay interest to Sublette County on wells for 
which it has underpaid ad valorem taxes and no notice or certification of 
delinquent taxes and interest was provided to Enron as required by W.S.A., § 
39-3-102(c)?

[¶5]      County responded 
with the following statement of the issue:

Whether 
the trial court erred in finding Enron was required to pay interest on taxes for 
some production when entitled to a refund on taxes for other 
production?

FACTS

[¶6]      Enron operated a 
number of oil and gas wells in Sublette County during the years 1987, 1988, 
1989, and 1990. As to some of the wells, Enron reported and paid ad valorem 
taxes based upon the entire amount of production during that period. Chevron, 
U.S.A., Inc. (Chevron) owned an undivided interest in the same wells and 
separately reported and paid tax on its share of production for the same period, 
resulting in a double payment as to Chevron's interest. Other discrepancies in 
reported oil and gas production also existed. For the years in question, Enron 
had under-reported production on some wells and over-reported on others. For 
each of the years in question, Enron's overpayments exceeded its 
underpayments.

[¶7]      Following Enron's 
filing of amended tax returns in 1990, the State Board of Equalization issued 
Special Directives Nos. 91-116 and 90-541. The directives instructed the county 
assessor to adjust the tax year valuations by the amounts indicated in the 
directives, and to refund overpayments and collect underpayments. Sublette 
County issued a refund check to Enron for its overpayments, but deducted from 
the refund interest added to underpayments from the date the underpayments were 
due.

[¶8]      Enron petitioned 
the Board of County Commissioners of Sublette County to recover the interest and 
penalties withheld from its refund of the overpaid ad valorem taxes. On January 
7, 1992, the Board of County Commissioners passed a resolution denying Enron's 
petition. On February 4, 1992, Enron filed a complaint in district court seeking 
declaratory judgment that it was not required to pay interest on the underpaid 
ad valorem taxes, as well as a judgment against the County for the interest 
charged, and an injunction enjoining the County from collecting interest 
improperly assessed against Enron. Both parties moved for summary 
judgment.

[¶9]      The district 
court granted and denied each motion in part. The court agreed with the County 
that Enron was required to pay interest on its underpaid ad valorem taxes, but 
held that interest should only be assessed from the time that Enron was notified 
of the amount of its underpayment. These appeals followed.

STANDARD 
OF REVIEW

[¶10]   Summary judgment is appropriate 
only when no genuine issue of material fact exists, and the prevailing party is 
entitled to judgment as a matter of law. Lynch v. Norton Constr., Inc., 
861 P.2d 1095, 1097 (Wyo. 1993); Brown v. Avery, 850 P.2d 612, 614-15 
(Wyo. 1993). The parties agree no question of fact exists; therefore, our only 
question is whether the district court properly applied the law. Using the 
standard of review in Wyoming State Tax Comm'n v. BHP Petroleum Co., 856 P.2d 428, 431 (Wyo. 1993), this court has stated it is "not bound by the trial 
court's determinations on issues of law."

DISCUSSION

1. 
Appeal No. 93-149 - Date from which interest must be paid.

[¶11]   In this appeal, the County appeals 
the district court's holding that interest can only be assessed from the time 
Enron was actually notified of its deficiency. The County contends interest 
should be assessed from the date the tax should have been paid. For the reasons 
that follow, we agree with the County's position.

[¶12]   A tax is delinquent "when a 
taxpayer or his agent knew or reasonably should have known that the total tax 
liability was not paid when due." WYO. STAT. § 39-2-214(f) (Supp. 1992); 
Moncrief v. Wyoming State Bd. of Equalization, 856 P.2d 440, 445 (Wyo. 
1993). In Moncrief, this court held that under a self-assessment tax 
scheme, where the statute requires the taxpayer to value and report gross 
production and then pay a percentage of the value as tax, it is the taxpayer's 
duty to ensure that the value is fully and accurately reported. Moncrief, 
856 P.2d  at 443, 446. We concluded that when a taxpayer excludes required 
elements from its reported production, and the exclusion causes an underpayment, 
the tax is delinquent upon the taxpayer's failure to pay on the date due, not at 
the later date when the taxpayer is presented with notice and demand of the 
deficiency.

[¶13]   In so holding, this court agreed 
with the taxpayers that assessment is an essential step in the taxing process, 
but we observed that "no assessment is necessary where the statute itself 
prescribes the amount to be paid." Moncrief, 856 P.2d  at 446 (quoting 3 
THOMAS M. COOLEY, THE LAW OF TAXATION, § 1045 at 2116 (1924)). Where the statute 
prescribes the amount to be paid or the items to be included in the property 
valuation, no discretion remains to be exercised by either the taxpayer or the 
taxing authority. Moncrief, 856 P.2d  at 446. The taxpayer knows or should 
reasonably know the entire tax liability, or the correct valuation for 
assessment, when the tax is due.

[¶14]   WYO. STAT. § 39-2-201(b) requires 
taxpayers to annually "sign under oath and submit a statement listing the 
information relative to the property and affairs of the company as the 
department may require to assess the [gross product of the mines and mining 
claims]." WYO. STAT. § 39-2-208 outlines the information necessary to value oil 
and gas for the assessment of taxes. Enron therefore knew or should have known 
the proper information to submit for valuation of its gross product.

[¶15]   The ad valorem tax scheme differs 
from the severance tax self-assessment scheme in that the county assesses the ad 
valorem tax after the taxpayer reports gross production. However, the same 
public policy which supported our reasoning in Moncrief applies in this 
situation.

If, 
as suggested by [Taxpayers], all taxpayers could intentionally undervalue the 
mineral and make an inaccurate payment on the undervaluation for severance tax 
purpose without fear of paying interest upon discovery, there would be no reason 
for the taxpayer to make the correct payment. In fact, from an economic 
standpoint, taxpayers would be foolish to make an accurate payment when they 
could make the correct payment in the future without any adjustment for the time 
value of the money. It is clearly a bonus to the taxpayers to be allowed to pay 
1981 taxes with 1990 dollars.

Moncrief, 
856 P.2d  at 445. The county must rely upon the taxpayer's reported gross 
production in assessing the ad valorem tax. The purpose of interest is to serve 
"as compensation for the use of money, or as a penalty, or it may constitute a 
part of the tax." Moncrief, 856 P.2d  at 445 (quoting 85 C.J.S. 
Taxation § 1054(c) at 638 (1954)). Assessing interest only from the date 
of notification and demand is contrary to these purposes. Such an interpretation 
would permit the taxpayer to undervalue gross production without risk of penalty 
and would allow the taxpayer the free use of the unpaid tax dollars.

[¶16]   We hold, therefore, that when a 
taxpayer undervalues its gross production, the underpaid ad valorem tax is 
delinquent on the date it should have been paid, not on the later date of 
notification and demand. We next address the question whether Enron should have 
been charged interest at all when it maintained a credit balance for each of the 
years in question.

2. 
Appeal No. 93-163 - Interest when taxpayer maintains credit 
balance

[¶17]   WYO. STAT. § 39-3-101(b) (1990) 
provides:

The 
balance of any tax not paid as provided by subsection (a) of this section is 
delinquent after the day on which it is payable and shall bear interest at 
eighteen percent (18%) per annum until paid or collected.

Enron 
contends this statute imposes interest on underpaid taxes only when the 
taxpayer's total underpayments exceed its overpayments for a given year. In 
support of this argument, Enron refers to the statute's language which charges 
interest on the "balance of any tax not paid." Enron asserts the term 
balance refers to the taxpayer's annual net balance, after offsetting 
overpayments and underpayments. The County offers a different definition of 
balance, contending the term refers to the amount remaining due against 
the specific property assessed for ad valorem taxes, regardless of any 
overpayments on other taxable production.

[¶18]   Upon review of the statute as a 
whole and after application of our well-established rules of statutory 
construction, we must align with Enron's position. In construing statutes, our 
initial step is to determine the ordinary and obvious meaning of the words 
employed according to their arrangement and connection. Parker Land & 
Cattle Co. v. Wyo. Game & Fish Comm'n, 845 P.2d 1040, 1042 (Wyo. 1993). 
A statute "must be construed as a whole in order to ascertain its intent and 
general purpose and also the meaning of each part." Parker, 845 P.2d  at 
1042 (quoting Ross v. Trustees of Univ. of Wyoming, 31 Wyo. 464, 489, 228 P. 642, 651 (1924)).

[¶19]   Black's Law Dictionary defines the 
term balance as

[a]n 
equality between the sum total of the two sides of an account, or the excess on 
either side. The difference between the sum of debit entries minus the sum of 
credit entries in an account. If positive, the difference is called a debit 
balance; if negative, a credit balance.

Often 
used in the sense of residue or remainder, and, in a general sense, may be 
defined as what remains or is left over.

BLACK'S 
LAW DICTIONARY 130 (5th Ed. 1979).While either party's interpretation could be 
assigned to the term balance, as here defined, we find Enron's definition 
best fits with the statute and the act read as a whole.

[¶20]   Subsection (a) of WYO. STAT. § 
39-3-101 (1990) outlines when taxes provided by the act are due. It reads, in 
part:

Fifty 
percent (50%) of the taxes are due on and after September 1 and payable on and 
after November 10 in each year and the remaining fifty percent (50%) of the 
taxes are due on and after March 1 and payable on and after May 10 of the 
succeeding calendar year except as hereafter provided. If the entire tax is paid 
on or before December 31, no interest or penalty is chargeable.

[¶21]   We must read the language of 
subsection (b) in conjunction with the language of subsection (a). The language 
of subsection (a) clearly refers to the total tax liability of the taxpayer, not 
the individual taxes assessed against specific property. The language of 
subsection (b) then refers back to the taxes provided by subsection (a). Thus 
the phrase "the balance of any tax not paid" means the total balance of all 
taxes due from the taxpayer, not the balance on an individual piece of 
property.

[¶22]   This interpretation is also 
consistent with the manner in which the taxpayers are required to report gross 
production. WYO. STAT. § 39-2-201(b) requires taxpayers to submit a 
statement listing the information relative to the property and affairs of 
the company as may be required to assess the property. The valuations on the 
taxpayer's property are treated as a whole rather than individually.

[¶23]   Furthermore, none of the purposes 
to be served by interest charges are served by assessing interest against a 
taxpayer who has maintained a credit balance for the taxable period. The 
taxpayer does not benefit from the free use of the money, and clearly no penalty 
is necessary to discourage future reporting discrepancies which result in a 
credit balance.

[¶24]   Finally, this court has held that 
"[e]quitable considerations will not be entirely disregarded even in tax cases." 
Morrison-Knudson Co. v. State Bd. of Equalization, 58 Wyo. 500, 135 P.2d 927, 939 (1943). Because Enron's overpayments exceeded its underpayments for 
each of the tax years in question, the County was never deprived use of the 
underpayment dollars. Thus, it would be inequitable to allow the County to 
charge interest on the underpayment, particularly since the County has had free 
use of the overpayment dollars.

CONCLUSION

[¶25]   An underpayment of an ad valorem 
tax is delinquent after the date on which it should have been paid, not on the 
later date of notification and demand. However, in this case, the taxpayer 
maintained a credit balance for each of the tax years in question, and, thus, no 
balance existed upon which to impose interest.

[¶26]   The decision of the district court 
is reversed and remanded for proceedings consistent with this 
opinion.