No. 85-167 

IN THE SUPREI4E COURT OF THE STATE OF MONTANA 

1985 

THE DEPARTMENT OF REVENUE OF THE 

STATE OF MONTANA, 

Petitioner and Appellant, 

GROUSE MOUNTAIN DEVELOPMENT AND 

BRIAN T. GRATTAN, 

Respondents. 

APPEAL FROM: District Court of the Eleventh Judicial District, 

In and for the County of Flathead, 

The Honorable H. Gardner Brownlee, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Larry G. Schuster; Dept. of Revenue, Helena, Montana 

For Respondent: 

Fisher & Erickson; Leif B. Erickson, Whitefish, 

Montana 

Filed: 

Submitted on briefs: July 11, 1985 

Decided: October 31, 1985 

--- . . .- -- Clerk 
Mr. Justice John C. Sheehy delivered the Opinion of the 

Court. 

The Department of Revenue appeals from the judgment of 

the District Court, Eleventh Judicial District, County of 

Flathead, reversing the decision of the State Tax Appeal 

Board. relating to the method of determining the taxable 

valuation of respondents' golf course. We affirm in part and 

reverse in part. 

Grouse Mountain Development is a limited partnership 

which d.eveloped a golf course, residential subdivision and 

resort area near Whitefish, Montana. Brian Grattan was the 

partner largely responsible for the development project. 

During 1980, Grouse Mountain Development and Grattan 

commenced construction of a nine-hole golf course adjoining 

the residential subdivision. In order to secure financing 

for the project, Grouse Mountain Development had to encumber 

all of the property, including the golf course, with a 

mortgage. Grattan could not develop the residential area 

unless he convinced the City of Whitefish to annex the area 

to the City so that the lots would be served by city water 

and sewage. The City passed ordinance A-333 which required 

the developer to grant a perpetual use of the golf course to 

the public as a condition to annexation. 

Grattan determined that he did not wish to operate or 

manage the golf course. Consequently, he entered into a 

?5-year lease with the Whitefish Lake Golf Association 

whereby the Association would pay a nominal rent of one 

dollar per year and it would manage and operate the course. 

A clause in the lease required the Association to pay any ad 

valorem taxes levied against the qo1.f course. 
For tax year 1981, the Department of Revenue appraised 

the golf course land at $66,480 a.nd it appraised the golf 

course improvements at $225,000. Grattan, with the 

assistance of the Whitefish Lake Golf Association, appealed 

those appraised values to the Flathead County Tax Appeal 

Board. That Roard denied any relief and Grouse Mountain 

Development appealed to the State Tax Appeal Board. After a 

lengthy hearing, the State Tax Appeal Roard reduced the value 

of the land to $46,892 and it sustained the appraised value 

of the improvements at $225,000. Aggrieved by the decision 

of the State Tax Appeal Boa.rd, Grouse Mountain sought 

iudicial review in the District Court pursuant to S 15-2-303, 

MCA. The District Court reversed the State Tax Appeal Board.. 

The District Court found that the State Tax Appeal Board 

acted arbitrarily, capriciously and abused its discretion by 

adopting a method of valuation which failed to consider the 

public use restriction placed on the golf course. The 

District Court further ordered the State Tax Appeal Board to 

accept respondents method of valuation and to enter its order 

reducing the value of the property to an amount not in excess 

of $50,000. 

The only issue raised by the Department of Revenue on 

review is whether a District Court may reverse a State Tax 

Appeal Board valuation determination if there is substantial 

evidence in the record to support the State Tax Appeal 

Board's decision. 

The District Court as a reviewing court may reverse or 

modify the decisions of the State Tax Appeal Board and. remand 

the case for further proceedings if substantial rights of the 

appellant have been prejudiced because the administrative 

findings, inferences, conclusions, or decisions are clearly 
erroneous in view of the reliable, probative and substantial 

evidence of the whole record or are arbitrary, capricious or 

characterized by an abuse of discretion. Section 2-4-704, 

MCA . This Court, however, has stated that it is not a 

judicial function to act as an authority on taxation matters. 

Tax appeal boards are particularly suited for settling 

disputes over the appropriate valuation of a given piece of 

property, and the judiciary cannot properly interfere with 

that function. Northwest Land v. State Tax Appeal Board 

(Mont. 1983), 661 P.2d 44, 47, 40 St.Rep. 470, 473; Larson v. 

State (1975), 166 Mont. 449, 457, 534 P.2d 854, 858; Blair v. 

Potter (1957), 132 Mont. 176, 183, 315 P.2d 177, 180. 

Assessment formul-ations are within the expertise of the State 

Tax Appeal Board and we will uphold their decisions unless 

there is a clear showing of an abuse of discretion. 

Northwest Land, 661 P.2d at 47, 40 St.Rep. at 473. 

In the instant case, the State Tax Appeal Board rejected 

the appraisal of Roger D. Jacobson, respondents1 fee 

appraiser, who valued the land and improvements at $50,000. 

The methodology used by the appraiser was primarily a market 

data approach based on comparable sales. He found four golf 

courses that had sold in northwestern Montana in the years 

1977 and 1978. Allocations were made for the value of such 

things as liquor licenses, clubhouses, motels, swimming pools 

and additional land available for subdivision. He also took 

into account the age of the courses and the time factor 

involved and arrived at a value of $20,000 per hole. 

The appraiser then considered the effect of the public 

use restriction on the value of the property. The appraiser 

found that this limitation on use greatly decreased its value 

to a willing buyer. He then sought sales of land likewise 
restricted in use to determine the effect of such use 

restriction on the value of land. The appraiser found that 

the use restriction on the subject property reduced its value 

to 20 to 30% of its value had no restriction existed. 

The State Tax Appeal Board accepted the testimony of 

Mantz Hutchinson, appraisal supervisor for Flathead County. 

His methodology of appraisal was to consult the 1976 version 

of the Marshall-Swift Valuation Manual to determine 

replacement cost for various types of golf courses. Rased on 

the Marshall Manual, Hutchinson valued the golf course 

improvements at $25,000 per hole or $225,000 for the full 

nine holes. Hutchinson did not make any adjustment in val-ue 

for the public use restriction on the property with regard to 

the land or improvement. 

The District Court found the State Tax Appeal Board 

abused its discretion in arriving at a value based on the 

appraisal of Hutchinson because his appraisal was based on a 

cost of replacement approach which failed to take into 

account the effect on value of the public use restriction. 

Other courts have dealt with the effect of use 

restrictions on the value of golf course property. In Twin 

Lakes Golf and Country Club v. King County (Wash. 1976) , 548 

P. 2d 538, an eighteen-hole golf course was built as part of 

the Twin Lakes Development. Before approving the project, 

the county required the developer to construct a golf course 

on the realty and reserve it for common open space and golf 

course area. The assessor in Twin Lakes used a cost of 

replacement approach in arriving at a value. The assessor, 

however, did not take into account the restriction placed on 

the property. In construing R.C.W. 84.40.030, the Washington 

state equivalent to S 15-8-111, MCA, the Washington Supreme 
Court stated that the market value of realty is to be 

measured. by considering benefits to be garnered from the use 

of the property and the burdens placed upon it. Burdens are 

restrictions which may arise from zoning ordinances or other 

legal limitations on the use of land. Twin Lakes, 548 P.2d 

at 540. We hold that the public use restriction is a burden 

on the property that must be taken into consideration i.n 

determining the property's market value under S 15-8-111, 

MCA . 

Appellant contends that the State Tax Appeal Roard 

considered the public use restriction and cites the Court to 

the following language in the Board's decision in support of 

its contention: 

The restriction on use, as set forth in the City of 

Whitefish, Ordinance A-333 applies to the land 

involved. Under this ordinance the owner has given 

up an important right--the right to determine the 

use of the land. He has, however, retained two 

rights which are also of great importance, the 

right to mortgage and the right of reversion. 

Section 15-7-1.03, states in part: . . . (2) All 

lands shall be classified. according to their use or 

uses . . . . Although this section appears to 

relate to agricultural land, it is the opinion of 

the Roard. that land. use must be considered in 

setting a value, and since no other use can be made 

of the subject land, it should be appraised at a 

value comparable to other golf courses in Flathead 

County. The two courses on which the Board. has 

information are appraised at $800 per acre and. 

$1,000 per acre. The Board -- has no information as 

- to whether --- or not use restrictions apply to the= 

courses. It heretofore appears reasonable70 this 

Board to assign the lower figure, $800 per acre to 

the land occupied by the golf course. (Emphasis 

added.. ) 

The above langua-ge, however, refers only to the Board's 

determination of the value of respondents' land and not the 

value of the improvements thereon. The discussion also makes 

it abundantly clear that the Roard chose not to take the 
public use restriction into consideration in its valuation 

methodology. 

Although we do not hold that the cost of replacement 

approach is an improper method in valuing this property, we 

do hold that the State Tax Appeal Board must use a method 

which properly takes the use restriction into consideration. 

For that reason we affirm that portion of the District Court 

order which found that the State Tax Appeal Board abused its 

discretion for failing to take into account the public use 

restriction on the golf course. 

The District Court also remanded this cause to the State 

Tax Appeal Board with directions to enter an order reducing 

the value of the property, including improvements, to an 

amount not in excess of $50,000. We cannot say as a matter 

of law that the administrative bodies, charged with setting 

the taxable valuations, were bound to accept either the 

taxpayer's theory or the taxpayer's figures for tax 

reductions. The District Court clearly overstepped its 

bounds when it usurped the function of the administrative 

bodies charged with the responsibility of finding the facts 

and arriving at the proper taxable valuation. Department of 

Revenue v. Paxson (Mont. 1983), 666 P.2d 768, 769, 40 St.Rep. 

1210, 1211. We reverse that part of the order which 

determined that the value of the property, including 

improvements, should not exceed $50,000. 

We affirm in part and reverse in part, with directions 

that the District Court remand this cause to the State Tax 

Appeal Board for further proceedings in accordance with this 

opinion. 
We Concur: 

Chief Justice 

Justices