Title: Memorial Hosp. of Laramie County v. Department of Revenue and Taxation of State of Wyo.

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Memorial Hosp. of Laramie County v. Department of Revenue and Taxation of State of Wyo.1989 WY 60770 P.2d 223Case Number: 88-228Decided: 03/06/1989Supreme Court of Wyoming

MEMORIAL 
HOSPITAL OF LARAMIECOUNTY, APPELLANT 
(PLAINTIFF),

 
 
v.

 
 
DEPARTMENT 
OF REVENUE AND TAXATION OF THE STATE OF WYOMING, APPELLEE 
(DEFENDANT).

 
 
Appeal from 
the District Court, LaramieCounty, Nicholas G. Kalokathis, 
J.

 
 

W. Perry 
Dray and John E. Masters of Dray, Madison & Thomson, P.C., Cheyenne, for 
appellant.

 
 
Joseph B. 
Meyer, Atty. Gen., and Michael L. Hubbard, Senior Asst. Atty. Gen., Cheyenne, for appellee.

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

 
 

GOLDEN, 
Justice.

 
 

[¶1.]     MemorialHospital of LaramieCounty (hospital) asserts that the trial 
court erred in dismissing its declaratory judgment action against the Department 
of Revenue and Taxation (department) for lack of subject matter jurisdiction. We 
will reverse. Because the hospital's suit raises substantive issues identical to 
those raised in Sublette County School District No. 1 v. State Board of 
Equalization, 770 P.2d 218 (Wyo. 1989), we remand for disposition consistent 
with our decision in that case.

 
 

[¶2.]     On March 12, 1986, the 
hospital entered into a construction management agreement with Fru-Con 
Construction Corporation to build an addition to its facilities. That agreement 
established certain procedures for letting bids and purchasing materials which 
were designed to avoid the costs of sales and use taxes on construction 
materials. The hospital believed such procedures were consistent with advice 
received through its previous communications with the department. Accordingly, 
during the bidding process the hospital and Fru-Con structured certain material 
acquisitions as direct purchases by the hospital.1 However, due to the broad authority 
granted Fru-Con to subcontract for labor on the project, three distinct 
situations were created with respect to contractors supplying materials: (1) 
some contractors supplied only materials through a direct contract with the 
hospital; (2) others supplied both materials and labor through a single 
subcontract with Fru-Con; (3) still others supplied materials through a direct 
contract with the hospital while providing labor relating to those materials 
through a separate labor subcontract with Fru-Con. The hospital advised 
suppliers in the third class that such transactions for materials were exempt 
from sales and use taxation.

 
 

[¶3.]     On January 25, 1988, 
the department notified one member of this class of suppliers, Kelly Company, 
Inc. (Kelly), that the materials it had supplied and installed were subject to 
taxation. The hospital subsequently paid the tax assessed against Kelly under 
protest. Before payment, however, the hospital filed a claim for injunctive and 
declaratory relief, alleging that its tax-exempt status precluded such a tax on 
property purchased for its own use. The hospital further alleged that it would 
be contractually required to reimburse all vendors situated similarly to Kelly. 
At a hearing on June 23, 1988, the trial court dismissed the hospital's suit for 
lack of subject matter jurisdiction, characterizing that suit as a challenge to 
the taxability of the individual suppliers, and indicating that such issues were 
more properly the province of the administrative agency.

 
 

[¶4.]     The record does not 
clearly reveal the basis for the trial court's conclusion that it lacked subject 
matter jurisdiction over the hospital's declaratory judgment action. On the one 
hand, the trial court may have decided the hospital failed to exhaust its 
administrative remedies, and the case demanded the type of specific relief 
committed initially to an administrative body. See generally City of Cheyenne v. Sims, 521 P.2d 1347, 1350 (Wyo. 1974). 
Alternatively, the trial court may have concluded that, absent a final 
administrative determination that suppliers such as Kelly were properly taxed, 
the hospital was able to establish only a speculative or anticipated controversy 
- one insufficiently justiciable to invoke the jurisdiction of the court. See 
generally White v. Board of Land Commissioners, 595 P.2d 76, 79 (Wyo. 1979); and Mountain West Farm Bureau Mutual Insurance 
Company, Inc. v. Hallmark Insurance Company, 561 P.2d 706, 710 (Wyo. 1977). On either 
basis, the trial court improperly dismissed the hospital's cause of 
action.

 
 

[¶5.]     We have held that, in 
proper circumstances, a plaintiff challenging agency action may maintain a suit 
for declaratory judgment notwithstanding the filing of a petition for review. 
The presence of the alternative remedy does not preclude declaratory relief in 
those circumstances if a justiciable controversy is present. Rocky Mountain Oil 
and Gas Association v. State, 645 P.2d 1163, 1167-68 (Wyo. 1982) (RMOGA). 
Although that plaintiff cannot obtain full review of agency action by such 
means, he can seek a declaratory judgment to challenge the validity or 
construction of administrative regulations, or the construction or 
constitutionality of a statute on which agency action is based. State v. Kraus, 
706 P.2d 1130, 1133 (Wyo. 1985). That relief is not available, 
however, if providing that relief requires the judiciary to perform the 
administrative duties of the executive branch. RMOGA, 645 P.2d  at 
1168-69.

 
 

[¶6.]     The department 
interpreted Wyoming sales and use tax statutes to permit a 
tax upon contractors who both supplied materials and performed work on those 
materials. The hospital's complaint clearly questioned the constitutionality of 
that statutory interpretation as it applied to the hospital. Had the case 
required a determination of whether particular contractors fell within that 
taxable class, as the department contends, we would agree with the trial court's 
disposition of this case. However, the parties stipulated that some contractors 
indeed installed materials that they had supplied to the hospital. Since neither 
the trial court nor the department was required to make that factual 
determination, the trial court would not have intruded on the agency's 
fact-finding or administrative prerogative. Therefore, the trial court erred if 
it dismissed this declaratory judgment action solely because of the hospital's 
failure to exhaust administrative remedies.

 
 

[¶7.]     The trial court may 
have alternatively concluded that the hospital could assert no liability to 
reimburse contractors such as Kelly, and, therefore, could establish no 
justiciable controversy, in the absence of an agency decision which finally 
determined the taxability of such contractors. Declaratory relief should be 
liberally administered if the elements of a justiciable controversy exist to 
give the trial court jurisdiction. Brimmer v. Thomson, 521 P.2d 574, 577 
(Wyo. 1974). 
For that controversy to exist, a genuine right or interest must be at issue 
between adversarial parties, and the trial court must be able to make an 
effective judgment which will finally determine the rights of the parties. 
Id. at 578. 
Even these prerequisites, however, may properly be avoided or relaxed when 
matters of great public interest or importance are presented to the trial court. 
Id.; Kurpjuweit v. Northwestern Development 
Company, Inc., 708 P.2d 39, 44 (Wyo. 1985). If the hospital could establish 
the existence of an actual controversy with the department, there is no doubt 
the trial court could effectively and finally determine that dispute. Thus, the 
only question remaining is whether the department has so affected an interest of 
the hospital so as to create an actual controversy. "Standing is a concept 
utilized to determine if a party is sufficiently affected to insure that a 
justiciable controversy is presented to the court." Washakie County School 
District No. 1 v. Herschler, 606 P.2d 310, 316 (Wyo. 1980). A plaintiff has standing only if 
he has a tangible and legally protectible interest at stake in the litigation; 
his interest must be injured or threatened with injury by the administrative 
action of which he complains. Id. at 316-17; see also Board of Equalization v. 
Jackson Hole Ski Corporation, 737 P.2d 350, 353-54 (Wyo. 
1987).

 
 

[¶8.]     A governmental entity 
like the hospital is protected from the burden of sales taxes by the provisions 
of W.S. 39-6-405 and 39-6-505 (May 1985 Repl.), as noted above. This entity also 
receives protection from the burden of property taxes under the provisions of 
Wyo. Const. art. 15, § 12, which provides:

 
 
The 
property of the United States, the state, counties, cities, towns, school 
districts and municipal corporations, when used primarily for a governmental 
purpose, and public libraries, lots with the buildings thereon used exclusively 
for religious worship, church parsonages, church schools and public cemeteries, 
shall be exempt from taxation, and such other property as the legislature may by 
general law provide.

 
 
The 
hospital purchased construction materials and, after having taken title to those 
materials, made them available for installation by certain contractors. When 
contractors providing those materials are taxed by statute or an administrative 
regulation interpreting that statute, the hospital must eventually bear that 
additional "tax" cost. That "tax" cost to the hospital is equivalent to the cost 
it would assume had it been required to pay a sales tax on that material. The 
tax, as imposed, thereby injures the hospital's interest in its statutory and 
constitutional tax-exempt status. There is no doubt about the class of 
contractors which the department intended to tax. As previously noted, the 
parties have stipulated that contractors such as Kelly were members of that 
class.

 
 

[¶9.]     We do not decide 
whether the hospital was, under the circumstances of this case, immediately 
obligated to pay the tax assessed against Kelly. We hold, however, that the 
reasonable threat of such an obligation renders the injury to the hospital 
sufficiently imminent as to warrant judicial consideration. We note also that 
the issues raised by this case concerning the apportionment of state revenues 
are of such public import as to warrant a relaxation of the traditional 
jurisdictional prerequisites of justiciability. The hospital has presented a 
justiciable controversy sufficient to invoke the jurisdiction of the district 
court.

 
 

[¶10.]  We reverse and remand for proceedings 
consistent with our decision in Sublette County School District No. 1 v. Board 
of Equalization.

 
 
FOOTNOTES

 
 

1 W.S. 39-6-405 and 
39-6-505 (May 1985 Repl.) grant an exemption from sales and use tax liability to 
direct purchases by political subdivisions of the state.

 
 
W.S. 39-6-405 
provides, in pertinent part:

 
 
(a) The following 
sales or leases are exempt from the excise tax imposed by this 
article:

 
 
* * 
* * * *

 
 
(xi) Sales to the 
state of Wyoming or its political 
subdivisions;

 
 
* * 
* * * *

 
 
(xv) Sales which the 
state of Wyoming is prohibited from taxing 
under the laws or constitutions of the United 
States or Wyoming.

 
 
W.S. 39-6-505 
provides, in pertinent part:

 
 
(a) The following 
purchases or leases are exempt from the excise tax imposed by this 
article:

 
 
* * 
* * * *

 
 
(iii) Purchases which 
the state of Wyoming is prohibited from taxing 
under the laws or constitutions of the United 
States or Wyoming;

 
 
* * 
* * * *

 
 
(v) Purchases made by 
the state of Wyoming or its political 
subdivisions.