Title: EVANS PRODUCTS CO v MISSOULA COUN

State: montana

Issuer: Montana Supreme Court

Document:

No. 51-417 IN THE SUPREME COURT OF THE STATE OF MONTANA 1982 EVANS PRODUCTS COMPANY, a Delaware Corporation, Plaintiff and Respondent, MISSOULA COUNTY, a municipal corporation of the State of Montana; FERN HART, as Clerk and Recorder & Treasurer, et al., Defendants and Appellants. Appeal from: District Court of the Fourth Judicial District, In and for the County of Missoula Honorable John Henson Judge presidinq. Counsel of Record: For Appellants: Robert L. Deschamps,III, County Attorney, Missoula, Montana R . Bruce McGinnis, Dept. of Revenue, Helena, Montana For Respondent: Mulroney, Delaney & Dalby, Missoula, Montana Submitted on briefs: September 13, 1982 Decided: December 3, 1982 Filed: $kc-'j i98Z M r . J u s t i c e Gene B. Daly d e l i v e r e d the Opinion of the Court. Missoula County and the S t a t e Department of Revenue appeal from a summary judgment i s s u e d by t h e District Court of t h e Fourth J u d i c i a l District, Missoula County, i n which t h e p l a i n t i f f , Evans P r o d u c t s Company, was refunded real p r o p e r t y t a x e s it had paid under p r o t e s t . Evans P r o d u c t s Company (Evans) o p e r a t e d a plywood and wood p r o d u c t s m i l l i n Missoula County d u r i n g t h e t a x y e a r s 1977, 1978, and 1979. I n 1978 and 1979, Evans r e c e i v e d a t a x a s s e s s m e n t l i s t , s t a t i n g t h a t t h e market v a l u e f o r Evans1 b u i l d i n g s was $396,050, and t h e t a x a b l e v a l u e was $33,862. Evans paid both t h e 1978 and 1979 t a x e s on its b u i l d i n g s based on t h e s e f i g u r e s . Missoula County d i s c o v e r e d t h a t it had m i s c a l c u l a t e d t h e market v a l u e a s s i g n e d to Evans1 b u i l d i n g s f o r t h e y e a r s 1978 and 1979. On December 27, 1979, t h e Missoula County A s s e s s o r ' s O f f i c e s e n t Evans t h e f o l l o w i n g n o t i c e and e x p l a n a t i o n of t h e e r r o r : " T h i s is to inform you t h a t i n 1978 t h e r e was a n i n c o r r e c t assessment of t h e Evans P r o d u c t s Co. improvements on N.P. land h e r e i n Missoula. P r i o r to 1978 t h e improvement v a l u e s shown on a s s e s s m e n t n o t i c e s were a s s e s s e d v a l u e s and were 40% of f u l l or a p p r a i s e d v a l u e . Then 30% o f t h e a s s e s s e d v a l u e was used t o a r r i v e a t a t a x a b l e v a l u e which e q u a l l e d 12% o f f u l l v a l u e . I n 1978, a s a r e s u l t of t h e state-wide r e a p p r a i s a l of real p r o p e r t y t h i s - - - - method - - - - - w a s changed s o t h a t t h e - - - - -- - - - - - - - - f i g u r e shown on t h e a s s e s s m e n t n o t i c e would-be - - -- - - - -- - - f u l i marke-t --value and t h e n 8;55% would be - - -- appi-ied t o a r r i v e a t -a-taxable -value. Because - - - y o u r - - p l a n t - h a d n o t been r e a p p r a i s e d a t t h e time t h e 1978 a s s e s s m e n t s went o u t , - t h e 197-7 a s s e s s e d v a l u e o£ -the i m p r o v ~ e f i s - - w a s inad- -- - - v e r t e n t l y - - c a r r i e d forward---as f u l l --ma-rket - - - -- -- v a l u e . ~ h i - s - - ? i g u r e was $ 3 9 6 , 0 5 0 when it s h o u l d have been $990,125 as shown on t h e 1979 a s s e s s m e n t . T h i s r e s u l t e d i n an underassess- ment of $594,075 w i t h a t a x a b l e v a l u e of $50,794. "1978 method used i n error: $396,050 ( a s s e s s e d v a l u e ) x 8.55% = $33,862 t a x a b l e v a l u e "Should have been t $990,125 ( f u l l v a l u e ) x 8.55% = $84,656 t a x a b l e v a l u e - 2 - "A c o r r e c t e d 1978 a s s e s s m e n t n o t i c e is e n c l o s e d w i t h t h i s l e t t e r and a supplemental t a x b i l l w i l l be s e n t t o you f o r t h e b a l a n c e i n t h e amount of $11,507.89." A new 1979 a s s e s s m e n t n o t i c e was a l s o s e n t Evans w i t h t h e same c o r r e c t i o n s . Missoula County a d m i t t e d l y made t h e e r r o r i n a s s i g n i n g t h e p r o p e r market v a l u e t o Evans' b u i l d i n g . The e r r o r was made i n 1978, when a l l t h e r e a l p r o p e r t y and improvements i n t h e county were being r e a p p r a i s e d , and a t t h e same t i m e t h e county was making a change-over to a new d a t a p r o c e s s i n g system. P r i o r t o 1978, t h e Missoula County Assessor had o n l y r e c e i v e d a s s e s s e d v a l u e s ( 4 0 p e r c e n t of market v a l u e ) of p r o p e r t y from t h e - - - county a p p r a i s e r s and w i t h t h e s e f i g u r e s computed t h e t a x a b l e v a l u e . I n 1978, a l l of t h e s e a s s e s s e d v a l u e s were keypunched i n t o t h e new d a t a p r o c e s s i n g system: v a l u e s t h a t were t o be im- m e d i a t e l y r e p l a c e d by t h e market v a l u e when a r e a p p r a i s a l was - . -- - -. - done. For t h o s e p r o p e r t i e s missed by t h e r e a p p r a i s a l , t h e a s s e s s e d v a l u e had t o be m u l t i p l i e d by 2.5 i n o r d e r - t o - - - c a r r y - -. - . - - . - f o r - - - ward t h e market v a l u e . - - . . - - . . -- -- Evans' p r o p e r t y was never r e a p p r a i s e d . Evans' o l d a s s e s s e d v a l u e w a s e r r o n e o u s l y c a r r i e d forward as t h e f u l l market v a l u e . Someone i n t h e A s s e s s o r ' s O f f i c e , whoever keypunched i n t h e i n f o r m a t i o n , had f a i l e d t o m u l t i p l y t h e a s s e s s e d v a l u e by 2.5 i n o r d e r t o c a r r y forward t h e t r u e market v a l u e , r e s u l t i n g i n a s i g n i f i c a n t t a x d e c r e a s e f o r Evans. When Evans r e c e i v e d t h e n o t i c e s to pay i n c r e a s e d t a x e s f o r t h e y e a r 1978 and 1979, it paid them under p r o t e s t . I n 1980, Evans f i l e d a complaint s e e k i n g refund of t h e t a x e s paid under p r o t e s t . Both p a r t i e s moved f o r summary judgment, which w a s g r a n t e d t o Evans. On a p p e a l , Missoula County and t h e Department of Revenue ( D O R ) a d m i t t h a t t h e t a x e s should be refunded a t t h i s t i m e because t h e county i n i t i a l l y f a i l e d t o f o l l o w t h e p r o c e d u r e s set down i n s e c t i o n 15-8-601, MCA. S e c t i o n 15-8-601 p r o v i d e s t h a t whenever t h e DOR d i s c o v e r s t h a t any t a x a b l e p r o p e r t y h a s been " e r r o n e o u s l y a s s e s s e d " it may reassess t h e p r o p e r t y . DOR is given t e n y e a r s t o r e a s s e s s t h e p r o p e r t y . S u b s e c t i o n s ( 2 ) and ( 3 ) of s e c t i o n 15-8-601, MCA, t h e n p r o v i d e t h a t when t h e DOR proposes t o i n c r e a s e t h e p r i o r v a l u a t i o n , it must g i v e n o t i c e of t h e proposed change, w i t h t h e o p p o r t u n i t y f o r a c o n f e r e n c e and a p p e a l to t h e s t a t e t a x a p p e a l board. Here, Evans was n o t g i v e n t h e p r o p e r n o t i c e nor t h e oppor- t u n i t y f o r a c o n f e r e n c e and an appeal t o t h e state t a x a p p e a l board. Because DOR a d m i t s t h a t the t a x e s should have been refunded we must a f f i r m t h a t p a r t of t h e D i s t r i c t C o u r t ' s summary judgment. However, we r e v e r s e t h a t p a r t of t h e judgment which would p r e c l u d e DOR from proceeding anew under s e c t i o n 15-8-601, MCA. Evans c l a i m s t h a t t h e DOR is precluded from now proceeding under s e c t i o n 15-8-601, MCA, because i n i t i a l l y the p r o p e r proce- d u r e s were n o t followed. W e r e s o l v e d t h i s i s s u e i n d i c t a of t h e r e c e n t case Balock v. Town of Melstone ( 1 9 8 0 ) , I . . . -.- Mont. - .- -- . . 607 P.2d 545, 37 St.Rep. 288. While Balock d i r e c t l y involved - - - - -. - .- - - t a x a t i o n as a r e s u l t of a n n e x a t i o n , we noted t h a t a f i n d i n g of improper procedure does n o t p r o h i b i t t h e collect i o n of d i s p u t e d t a x e s under s e c t i o n 15-8-601, MCA: "As a p r a c t i c a l matter, f i n d i n g t h e improper p r o c e d u r e was followed by t h e r e s p o n d e n t s does n o t p r o h i b i t t h e c o l l e c t i o n of t h e d i s p u t e d t a x e s . S e c t i o n 15-8-601, MCA, a l l o w s t h e Department of Revenue t o reassess p r o p e r t y e r r o n e o u s l y a s s e s s e d w i t h i n t h e preceding t e n y e a r s . The s e c t i o n sets up p r o c e d u r a l guide- l i n e s f o r c o r r e c t i n g p a s t improper assess- ments. The r e s p o n d e n t s h e r e can f o l l o w t h e s t a t u t o r y p r o c e d u r e s and c o l l e c t t h e t a x e s on a p p e l l a n t s ' p r o p e r t y f o r t h e y e a r s i n q u e s t i o n . " 607 P.2d a t 549 DOR may t h e r e f o r e proceed p r o p e r l y under s e c t i o n 15-8-601, MCA, assuming 15-8-601, MCA, a p p l i e s to t h e type of e r r o r involved h e r e . S e c t i o n 15-8-601 ( I ) , MCA, p r o v i d e s : "Whenever t h e department of revenue d i s c o v e r s t h a t any t a x a b l e p r o p e r t y of any person has i n any y e a r escaped a s s e s s m e n t , been e r r o n e o u s l y -- - - - -- - -- - - - - - - - . . a s s e s s e d , o r been omitted from t a x a t i o n , the department may a s s e s s the same p r o v i d i n g t h e p r o p e r t y is under t h e ownership or c o n t r o l of t h e same person who owned o r c o n t r o l l e d it a t t h e time it escaped a s s e s s m e n t , was e r r o - n e o u s l y a s s e s s e d , o r was omitted from taxa- t i o n ." Here, Evans c l a i m s t h a t DOR may not proceed under s e c t i o n 15-8-601, MCA, because t h e error is not an "erroneous a s s e s s m e n t " b u t r a t h e r an " e r r o n e o u s a p p r a i s a l . " T h i s t e c h n i c a l d i s t i n c t i o n drawn by Evans is not c o r r e c t . The record simply does not s u p p o r t t h e s t a t e m e n t s made by Evans i n its b r i e f t h a t t h e e r r o r h e r e occurred i n t h e Missoula County A p p r a i s e r ' s Off ice and n o t i n t h e A s s e s s o r ' s Off ice. N e i t h e r does t h e record s u p p o r t the s t a t e m e n t made by Evans t h a t t h i s is s o l e l y an " a p p r a i s a l " error. The e r r o r h e r e a r o s e because a keypuncher i n t h e County A s s e s s o r ' s O f f i c e f a i l e d to m u l t i p l y t h e a s s e s s e d v a l u e by 2.5. An i n c o r r e c t market v a l u e was t h e r e f o r e c a r r i e d forward. T h i s error was merely a c l e r i c a l one. I t was not an e r r o r , a s c h a r a c t e r i z e d by Evans, of u n d e r v a l u a t i o n during t h e p r o c e s s of r e a p p r a i s a l . Such a c l e r i c a l error f a l l s under t h e p l a i n language meaning of " e r r o n e o u s assessment" a s it is used i n sec- t i o n 15-8-601, MCA. Evans a r g u e s t h a t t h i s case is s i m i l a r to those c a s e s where a county a s s e s s o r h a s , through an error i n - judgment, . - - - - - - - undervalued p r o p e r t y . The e r r o r h e r e was not one of judgment, b u t , a s noted above, o n l y a m i s c a l c u l a t i o n . The F l o r i d a Supreme Court h a s e x p r e s s e d w e l l t h e d i f f e r e n c e be tween v a l u a t i o n r e s u l t i n g from an error i n judgment and one r e s u l t i n g from a c l e r i c a l error: " W e must keep i n mind t h e d i s t i n c t i o n between changes and ' m i s c a l c u l a t i o n s ' by t h e a s s e s s o r which 'up ' t h e amount p r e v i o u s l y a s s e s s e d a f t e r t a x r o l l c e r t i f i c a t i o n , and t h e s i t u a t i o n h e r e where t h e r e has been no b i l l i n g a t a l l on t h e improvement ( o r it could be a s e p a r a t e , ' overlooked' p a r c e l of land ) which h a s been c o m p l e t e l y excluded from t h e t a x r o l l . T h i s is o b v i o u s l y a m i s t a k e , e r r o r , o v e r s i g h t , which cannot be p r e j u d i c i a l to t h e t a x p a y e r a s i n those c a s e s where a change i n -- - - -- -- - -- judgment by t h e t a x a s s e s s o r was involved, - .- -- - b e l a t e d l y i n c r e a s i n g t h e v a l u a t i o n which had i n f a c t e a r l i e r been a s s i g n e d , and e n t e r e d on t h e t a x r o l l . . . 1 I Korash v. M i l l s ( 1 9 7 2 ) , _ F l a . - - 263 So.2d 579, 581. Even i f t h e c l e r i c a l e r r o r can be termed s o l e l y a n " a p p r a i s a l " e r r o r , Evans argument f a i l s . The bulk of a u t h o r i t y and p r i o r Montana case l a w s u g g e s t t h a t a p p r a i s a l , t h e s e t t i n g of market v a l u e , is an i n t e g r a l p a r t of t h e t a x a t i o n p r o c e s s . Am. J u r . 2 d S t a t e and Local T a x a t i o n , S e c t i o n 704; and Larson v. S t a t e ( 1 9 7 5 ) , 166 Mont. 449, 534 P.2d 854. I n - L a r s o n , .--. - - - we s t a t e d t h a t t h e suggested d i s t i n c t i o n between t h e s t a t u t o r y use of t h e word " t a x " and t h e o p e r a t i v e f a c t of an " a p p r a i s a l " was w i t h o u t s u b s t a n c e because t h e a p p r a i s a l would have been used a s t h e b a s i s f o r t h e t a x computation. 534 P.2d a t 858. Likewise, h e r e , t h e m i s t a k e n l y used a s s e s s e d v a l u e was t h e b a s i s f o r t h e computation of t h e t a x a b l e v a l u e . Whether t h e error is termed an " a s s e s s m e n t " error, o r an " a p p r a i s a l " e r r o r , because it w a s a clerical e r r o r made while a s s e s s i n g t h e t a x a b l e v a l u e on Evans' p r o p e r t y , it was an " e r r o n e o u s a s s e s s m e n t " w i t h i n t h e meaning of s e c t i o n 15-8-601, MCA. W e t h e r e f o r e a f f i r m t h e summary judgment t o t h e e x t e n t t h a t t h e t a x e s must now be refunded to Evans because t h e mandatory p r o c e d u r e s of s e c t i o n 15-8-601, MCA, were n o t i n i t i a l l y f o l l o w e d . W e r e v e r s e t h e District C o u r t ' s d e c i s i o n t o t h e e x t e n t t h a t it would p r e c l u d e DOR from now proceeding p r o p e r l y under s e c t i o n 15-8-601, MCA. / -