No. 90-491 IN THE SUPREME COURT OF THE STATE OF MONTANA 1991

RICHARD J. LINGSCHEIT, Plaintiff and Appellant,

-vsCASCADE COUNTY, a body politic, RICHARD J. MICHELOTTI and MONTANA DEPARTMENT OF REVENUE, Defendants and Respondents.

APPEAL FROM: District Court of the Eighth Judicial District, In and for the County of Cascade, The Honorable Joel G. Roth, Judge presiding.

COUNSEL OF RECORD: For Appellant: Robert P. Goff argued; Church, ~arris, Johnson & Williams, Great Falls,Montana. For Respondent: Geralyn Driscoll argued; Department of Revenue, Helena,Montana.

Filed: Submitted: June 18, 1991 ~ecided:September 9, 1991

Clerk1 

# . Justice R. C. McDonough delivered the Opinion of the Court.

The plaintiff taxpayer, Richard J. Lingscheit appeals the order of the Eighth Judicial District Court, Cascade County, granting summary judgmentto the defendants,Cascade County and the Montana Department of Revenue and denying taxpayer's request for

a refund of allegedly overpaidproperty taxes. Taxpayer requested

a refund pursuant to 5 15-16-601, MCA. The sole issue on appeal is whether the District Court erred in granting summary judgment to the defendants. We affirm. The taxpayer is the former owner of the Holiday Innmotel in Great Falls,Montana. Thepropertywas appraisedby the Department of Revenue (DOR) at $2,496,924 during the taxpayer's ownership. In 1986 and 1987,the Cascade County Commissioners levied taxes on the property based on that appraised value. Taxpayer paid the taxes based on that appraisal for those years without protest. Taxpayer sold therealproperty onNovember 24, 1987. The new

owner protested the appraised value for the 1988 taxable year and sought relief from the Cascade County Tax Appeal Board. A hearing took place on July 28, 1988. At that hearing, the DORIS appraiser testified that he had not followed the guidelines set forth under The Marshall-Swift Valuation Service Manual. The appraiser stated that the DORIS administrative regulation,A.R.M. 42.19.101(2) requiresuse of the manual. The manual requires an appraiser to use his independent judgment when appraising property. The appraiser also testified that he did not appraise the property by that method; rather, heutilized the DORISpolicy statement 83-1,which includesappraisal guidelines for franchises and provides a cost ranking of Holiday Inns.In its order, the County Tax Appeal Board did not address whether an incorrect appraisal method was used, but merely stated that I1[t]heBoard feelsthisproperty shouldbe given anadditional 20% reduction for Functional Obsoles~ence.~ On September 29, 1988, following the issue of that order, the taxpayer plaintiff petitioned for a tax refund for the years 1986 and 1987. TheCounty Commissioners tookno action on thepetition. On February 16, 1989, the taxpayer filed an action against the countyand its treasurer. The DOR intervened asaparty defendant. On July 10, 1989, the DOR moved for summary judgment. The motion was briefed and argued on May 16, 1990 and on May 23, 1990 the District Court issued its order granting summary judgment in favor of the defendants. Taxpayer now appeals. The statute at the center of the issue here is fj 15-16-601, MCA, which provides in pertinent part: Any taxes, interest, penalties, or costs paid more than once or erroneously or illegally collected 

# .

# . . w, by order of the board of county commissioners,be refunded by the county treasurer. Section 15-16-601,MCA. Taxpayer asserts that the relief afforded by the statute is available to him. In his complaint he alleges that due to the inconsistency between the policy incorporated by the DOR in The Marshall-Swift Valuation Service Manual and the DORIS internal policy statement 83-1, the taxes levied on his former property were either illegally or erroneously collected.The taxpayer relies primarily on Christofferson v. Chouteau County (1937), 105 Mont. 577, 74 P.2d 427; and Department of Revenue v. Jarrett (1985), 216 Mont. 189, 700 P.2d 985, in support of his position. In Christofferson, the County erroneously required the plaintiff to purchase a tax sale certificate when purchasing a parcel of state land. Several months prior, the Commissioner of State Lands had directed the county treasurer to cancel any assessments as well as unpaid taxes against the land. Theplaintiff requested a refundupon discoveringthat the landwas state land, the certificate of purchase had been cancelled,and he could not have a tax deed. This Court reversed the denial of the refund, holding that the predecessor to 5 15-16-601, MCA, was enacted to avoid theharshvoluntary payment common law rule in the

case of illegal and erroneous tax collections. The former rule provided that taxes voluntarily paid could not be recovered. Christofferson, 74 P.2d at 431-32. In Jarrett, the DOR mistakenly appraised the taxpayer's lot at $14,510.00 for 1978 through 1981 under the erroneous belief that the lot was included in a special improvement district which provided sewer facilities. The lot was not located within the district. DOR discovered the error in 1982 and reappraisedthe lot at $7,418.00. Taxpayer had paid the taxes for 1978 through 1981 without protest. After the lower appraisal, the taxpayer filed a claim for a refund of the overpaid taxes with the County omm missioners pursuant to 1 15-16-601, MCA. The commissioners denied his claim and he appealed to the County Tax Appeal Board.The County Tax Appeal Board awarded the refund as did the State Tax Appeal Board. DOR sought judicial review, and the district court affirmed therefund on summary judgment. ThisCourt affirmed the district court. In Jarrett, we noted that 5 15-16-601, MCA,

was only available to a taxpayer who has no recourse under 5 15- 1-402, MCA, which provides for payment of taxes under protest and

an action to recover. Jarrett, 700 P.2d at 988, see also Montana Bank of Roundup,N. A. v. Musselshell CountyBoard of Commissioners

(Mont. 1991), 810 P.2d 1192, 1195, 48 St.Rep. 392, 394. In this case, the taxpayer argues that at the time in 1986 and 1987 when hewould have had to commence the remedyprocess under 1 15-1-402, MCA,by filing an administrative appealwith theCascade County Tax Appeal Board, he did not know of the existence of the alleged illegal or erroneous valuation. The property no longer belonged to him in 1988. In this case,we first note that the use of theword ggmayw in the statute does not mandate that the county commissioners order

a refund in all casesof an erroneously or illegally collectedtax. The statute ispermissive rather thanmandatory. See 5 15-16-601, MCA. Thus, once a legal determination is made that taxes were erroneously or illegally collected, it is still within the discretion of the Board of County Commissioners to decide if the situationwarrants a refund to the taxpayer. Hence, we review the denial of the refund under the abuse of discretion standard. We conclude that the Board did not abuse its discretion in denying the refund. While the case is similar to Jarrett andChristofferson, both Jarrett and Christofferson involved mistakes in appraisals that were clerical in nature. In both cases the assessments at issue should never have been made. In this case, the taxpayer does not allege that the assessment should never have been made; rather, he alleges an error in the methodology used by the appraiser and the DOR. At the hearing on taxpayer's

successor~s refund, the DORIS appraiser gave the following testimony: Q. So you didn't use your own independent judgment in arriving at that cost ranking, is that correct? A. No, I didnot. Q. And you have no alternative but to assign a 3 ranking to the property? A. Itwasmy feeling that I was obligated touse their grade level, yes. The appraiser admitted that he used the DORIS cost ranking policy rather than exercising his own independent judgment in appraising theproperty. However,his testimonydoes indicate thathedid use his independent judgment in deciding that he was obligated to followtheDORIS cost ranking. Thus, the alleged errorhere isnot clerical, it involves the exercise of the appraiser's judgment in determining what method he should use. Furthermore, in its order reducing the taxes of the taxpayer's successor in interest, the board did not find that an incorrect appraisal method wasused,but merely stated that "the Board feels this property should be given

an additional 20% reduction for Functional Obsole~cence.~ Thus, unlike Jarrett and Christofferson,it isnot certain that the taxes9
8 levied against the property during this taxpayer's ownershipwere in fact excessive. The case of North Butte Mining Co. v. Silver Bow County (1946), 118Mont. 618, 169 P.2d 339, supports our decision in this

case. There, the taxpayer sought refunds of net proceeds paid to the County in 1942 and 1943. The value of the net proceeds reported in 1942 and 1943 had included a I1governmentbonus or subsidy8Iwhich in 1945 this Court held was not part of the net proceeds of a mine. The County denied the refunds and this Court upheld the refusal stating that "[a] mistake in the valuation of property resulting in an excessive tax is no ground of recovery under a statute such as section 2222 [the predecessor of 5 15-16- 601,MCA]." North Butte Mininq Co., 169 P.2d at 341. This Court further stated: It is our view that neither the levy,assessment nor the collection of the tax was wrongful or illegal. To constitute a wrongful or illegal levy, assessment or collection there must have been unwarranted or illegal action on the part of the taxing officials. There is none suchhere. The only assessment and levy that could have beenmade under the facts contained in the statement furnished by the plaintiff was the assessment and levy which was made and the only proper tax to be collected from the statement furnished was that which was collected. North Butte Mininq Co., 169 P.2d at 340. Here the taxpayer's allegations pertain strictly to the method used in appraising the property, there is no evidence that if the appraiser had followed the manual that a lower valuation would definitely have been reached. It is possible that use of his independent judgmentmay have resulted in a higher appraisal. The taxpayer each year wasprovided notice that he had available the administrative appeal procedures provided by 55 15-1-402, 15-7-102, and 15-15-102, MCA, if he felt the valuation for any reason was not the fair market value. He failed to use these remedies. In light of this and the discretion conferred by the statute to the County Commissioners,

we conclude that the commissionersdid not abuse their discretion in denying the refund. This being strictly a legal question, the District Court did not err in granting summary judgment to the DOR and the County. Rule 56(c), M.R.Civ.P. The order of the District Court is AFFIRMED.

We Concur: H

- - I Chief ~usticfl 

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# &,&d

Justice

JusticesI Justice John Conway Harrison, dissenting.

I dissent. Iwould find that this case is controlled by our holding in Department of Revenue v. Jarrett (1985), 216 Mont. 189, 700 P.2d 985, where this Court interpreted S 15-16-601, MCA, in favor of the taxpayer. In Jarrett, the taxpayer alleged that a portion of his taxes were erroneously collected from him. Under 5 15-16-601, MCA, that taxpayer in Jarrettwas entitled to recover that portion of the tax based on the erroneous assessment which he voluntarily paid in prior years. Jarrett, 700 P.2d at 989. Iwould hold that under this Court's holding in Jarrett, and the interpretation of 5 15-16-601, MCA, the taxpayer in the instant case is entitled to the recourseprovided under that code section. Here the taxpayer did not own the subject property at the time he learned that the erroneous or illegal taxes had been collected or at the time hemade claim for the recovery of those taxes. Nor do I find it significant to thedecisionthat the taxpayer's successor in interest and not the taxpayer made the appeal to the county board through which the erroneous or illegal tax collection was discovered. I would further note that in this decision the taxpayer has met the requirements in 5j 15-16-601, MCA, for illegal

or erroneously collected taxes. In an early case, ~hristofferson v. Chouteau County (1937), 105 Mont. 577, 74 P.2d 427, the Court recognized that the remedy created in § 15-16-601, MCA, is an exception to the common law "voluntary payment rule." That rule does not and should not barthe taxpayer from a remedy in this case. As Iview this section, it provides a taxpayer a remedy for illegally or erroneously collected taxes even though he or shevoluntarily paid those taxes when they became due and believed at the time that the taxes were being lawfully and correctly collected. Iwould reversetheDistrict Court's grant of summary judgment and allow the taxpayer topresent his case to the trier of fact for

a decision on the merits.Justice Terry N. Trieweiler dissenting. I dissent from the opinion of themajority. This case was dismissed by summary judgment for the wrong legal reasons. Themajority treats it as if it went to trial and failed for lack of proof. In plaintiff's affidavit in opposition to the Department of Revenue'smotion for summary judgment,hepointed out thathe owned theproperty in question fromJanuary 1, 1986,through November 24, 1987,but that itwas not until late 1987,after he could no longer file an appeal under 5 15-1-402, MCA, that he learned about the illegal and erroneous manner in which his property had been appraised. In late 1987, he learned that theDepartment of Revenue had issued Policy Statement 83-1 which resulted in an appraisal precluding independent judgment of the appraiser, contrary to the Marshall SwiftValuation ServiceManual which had been adopted by the Department of Revenue by administrative regulation, A.R.M. 42.19.101, as the acceptable method for appraising commercial improvements. Upon learning about the irregularity and the method by which his property had been appraised, plaintiff consultedhis attorney, who advised the party that had purchased plaintiff's property. Thatparty thenbrought anadministrative appeal before theCascade County Tax Appeal Board, which resulted in a reduction of the appraised value.George Tyner, the person who had appraised plaintiff's prolperty, testifiedat theappealhearing before theCascade County Tax:Appeal Board. A partial transcript of his testimony was prolvided to the District Court in opposition to the Department of Revenue's motion for summary judgment, and established the following facts: Q. Anyhow, in evaluating thisproperty for the current appraisal cycle,you thenwere given a directive by Helena to rank it as a 3, is that correct? A. Yes. Q. Okay. So the Department of Revenue in Helena just arbitrarilysaidthattheparticular franchise motel here will have a 3 regardless of what physical condition it's in, is that correct? A. They put out the policy. Idon't how they arrived at it; if itwas arbitrary, if they did somemarket analysis, or what they did. I don't know. They didn't 

# . .

# . Q. But somebody in Helena 

# . . .. A. Yes. 

### Q- 

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# ..determinedwhat thequality of thisparticular motel was here in Great Falls, is that a fair statement? A. Yes. Q. Did you personally determine it to be a 3? A. No. Q. You were simply told by Helena that it was 3? A. Yes. Q. So you didn't use your own independent judgment in arriving at that cost ranking, is that correct?No. I did not. And you have no alternative but to assign a 3 ranking to the property? Itwasmy feeling that Iwas obligated to use their grade level,yes. Isn't use of the Marshall Valuation ServiceManual mandated by the Administrative Rules of the State of Montana? Yes. And you're familiarwith

# . . .Does not theMarshall Valuation Service Manual require the use of independent judgment inarriving at thevalue of the subjectproperty? That'smy interpretationof it, yes. Is it a fair statement then that the Department of Revenue has made no attempt to follow its own guidelines in the Marshall Valuation Service which requires an appraiser to use his own independent judgment when you've arbitrarily taken the cost classification from Helena? I would say that's a fair statement. That's contrary to the manual, isn't that correct? Yes. Prior to this policy statement coming out, Iwould think that it's a fair statement that this office in Great Falls exercised its own independent judgment and found it to be a Class 2 building. They may have. I don't know because I don't have a grade entered. At any rate, the DOR say in Helena to place it at a Class 3 building, correct? Yes. Okay. How does Helena really knowwhat the quality of that building is?A. I don1 t know. I

### 'm assuming before theyput out the policy that they did somemarket analysis. I don't know if they did or not. I really don't know. Q. If they did any market analysis,you don't know if it included the Great Falls property or not? A. No, Idon't. It is clear from Tynerlstestimony that the taxes levied on plaintiff's property were based upon a method of appraisal which violated the Department of Revenue's own administrative rules. The method of assessmentwas, therefore, erroneous and illegal, and the CountyTaxAppeal Board found that the assessment which resulted from that method of appraisal was excessive. Plaintiff was not inpossession of this information within the time allowed for filing appeals under 1 15-1-402, MCA. Therefore, his situationis exactly thekindof situation for which 1 15-16-601, MCA, was intended. Section 15-16-601,MCA, provides in relevant part that:

(1) (a) Any taxes 

# . . . erroneously or illegally collected 

# . . 

# . may, by order of the board of county commissioners,be refunded by the county treasurer. InDepartmentofRevenuev.Jarrett (1985), 216Mont. 189, 700 P.2d 985, the issuewas simply whether thevalue ofproperty canbe changed for past tax yearspursuant to 1 15-8-601, MCA, when a taxpayer has not filed any administrative appeals as to those taxyears. We held that it could. Indisposing of the Department of Revenue's argument that the taxpayer was barred under 8 15-8-601, MCA, by failing to haveavailed himself of the appeal process under 1 15-1-402, MCA, we stated: This statute is permissive notmandatory. Ataxpayer can only use this protest procedure if he is aware that his taxes may be incorrect at the time he pays them. A taxpayerwho doesnot knowhe isbeing overtaxed will not pay his taxes under protest and can not receive a refund under section 15-1-402, MCA.

Section 15-16-601, MCA, provides thenecessary relief for respondent.

Clearly, section 15-16-601, MCA, was not meant tobe used in lieu of the section 15-1-402, MCA, requirements of paying under protest, but when the recourse of section 15-1-402, MCA, is not available, a taxpayer can obtain a refund under section 15-16-601, MCA. Jarrett, 216 Mont. at 192-94, 700 P.2d at 987-88. Furthermore, even thoughtherelief provided forby 1 15-16-601, MCA

## , is discretionary, this Court found that the discretion the county commissioners can be abused, and so held on appeal. We stated: Section 15-16-601, MCA, provides that taxes paid erroneously may be refunded by the county treasurer, 

### "by orderoftheboardofcountycommhsioners." The Yellowstone Board of County Commissioners denied respondent's request for a tax refund. However, respondent has followed the proper procedure for appealing that decision.

TheYellowstoneCounty Tax Appeal Board properly reviewed the respondent's case and determined respondent was due a refund.

# . . . The state board found an erroneous appraisal resulted in a mistaken levy. This findingwas contrary tothefindingofthecountycommissioners. The evidence was in dispute and the finding could go either way.

It is the opinion of the Court that under section 15-16-601, MCA, respondent should receive a tax refund for the erroneous assessment made on his land in 1978 through 1981. We remand to the Yellowstone Board of County Commissioners with instructions to order the Yellowstone County Treasurer to issue a refund to respondent. Jarrett, 216 Mont. at 194-95, 700 P.2d at 988-989.
In spite of the majority's efforts, the circumstances inJarrett are indistinguishable from the circumstances inthis case. InJarrett, the taxpayer's land was erroneously appraised based on inaccurate factual information. In this case, the taxpayer's land was erroneously

### and illegally appraised, based upon an improper method of appraisal which was based upon arbitrary and inaccurate information about its true value. In both cases, the taxpayer was unaware of the error or irregularityuntil after the timehad expired for filing appealsunder S 15-1-402,MCA. Therefore, inneither case could the taxpayer avail himself of the administrative appeal process. The majority emphasizes that the statute relied upon by plaintiff uses the word and is therefore permissive, rather thanmandatory. However, thepermissive language in the statutedid not prevent this Court from reversing a decision of the countycommissioners in Jarrett when its discretion was found to have been abused. Furthermore, the County Commissioners in this case failed to exercise the discretion which 5 15-16-601, MCA, requires that they exercise. The plaintiff filed a verified petition for a refund of taxes with the County Commissioners on September 29, 1988. As of February 16, 1989, five and one-half months later, the County Commissionershad taken no action on the plaintiff's petition. On February 16, 1989, plaintiff filed a complaint in the District Court for review of the commissioners1inaction. However, the District Court did not review the commissioners1 inaction to determinewhether itsdiscretionhadbeen abused. TheDistrictCourt erroneously dismissedplaintiff's complaintby summaryjudgmentbased upon its erroneous conclusions about the applicability of the Jarrett decision to this case. The District Court concluded that Jarrett was inapplicable for the following reasons: 1. In Jarrett, the Department of Revenue discovered its own error; 2. InJarrett, the same person owned the property at the time the error was made and at the time it was discovered; and 3. The person who succeeded plaintiff as the owner of the property in this case paid under protest and appealed to the County Tax Appeal Board.None of the factual distinctions relied upon by the District Court were in any way material to this Court's decision inJarrett. The County Commissioners gave no reasons for not granting plaintiff's petition, and the District Court failed to review the CountyCommissioners1inactiontodetermine whether they abused their discretion. Therefore,the factthat 5 15-16-601,MCA, ispermissive is irrelevant to our review of this case. How can we conclude that theboard did not abuse itsdiscretion when theboard neverexercised its discretion and we have absolutely no record from which to determine how it arrived at its decision to ignore plaintiff's petition? We do not even have anybasis to conclude that itdecided to ignore plaintiff's petition. For all we know, and for all plaintiff knows,thepetition couldhavebeen lost on a clerk's desk and the commissionersmay have never seen it. The majority tries to distinguishJarrett on the ground that the mistake in that case was clerical in nature and resulted in an assessment which should never have been made. However, that is not correct. There was ultimately a correct appraisal from which a tax

was levied. Theproblem with the original appraisalwas simply that it was "erroneo~s.~ The basis of plaintiff's claim in this case is that when the appraiser failedtouse his own independent judgmentwhileappraising his property, he violated the regulations, rules, and laws established by the Department of Revenue. Therefore, the appraisalwas illegaland the tax leviedpursuant tothatappraisalwas illegal and erroneous. Themajority's effort to ignore thatundisputed fact is at best a classic example of sophistic reasoning. The majority states: The appraiser admitted that he used the DORIS cost rankingpolicyrather thanexercisinghisown independent judgment in appraising the property. However, his testimony does indicate that he did use his independent judgment in deciding that he was obligated to follow the DORIS cost ranking. Thus, the alleged errorhere is not clerical, it involves the exercise of the appraiser's judgment in determining what method he should use. In otherwords,what Tyner did was okaybecause he used his own judgment in deciding not to exercise his own judgment. Next, the majority concludes that w[t]hus, unlike Jarrett and Christofferson, it is not certain that the taxes levied against the property during this taxpayer's ownership were in fact excessi~e.~~ Of course, it is not clear that they were excessive. We can presume that they were excessive by the mere fact that the County Tax Appeal Board reduced themby 20percent when theywere appealed. However, we cannot know they were excessive because plaintiff was denied an opportunity to prove what the resultswould have been had the correct appraisal method been used when his claimwas dismissed by summary judgment for the wrong legal reasons. Finally,thisCourt relieson its previous decision inNorth

### Butte Mining Co. v. 

### SilverBow County (1946), 118 Mont. 618, 169 P.2d 339. However, the facts on which that decision was based are in no way similarto the facts in this case. InNorthButteMiningCo., plaintiffIsnet proceeds taxes were computed by the State Board of Equalization based upon figures submittedby plaintiff. The plaintiff's figures included government bonuses or subsidies which should not have been included. This Court found that any error in that case was a direct result of actions by the taxpayer and not by the government. That was the basis for our decision that !j 2222, R.C.M. (predecessorto !j 15-16-601,MCA)

## ,was inapplicable. We stated: To constitute a wrongful or illegal levy, assessment or collection there must have been unwarranted or illegal action on the part of the taxing officials. There is none suchhere. The only assessment and levy that could havebeenmade under the facts contained in the statement furnishedby plaintiff was the assessment and levy which wasmade and the onlyproper taxtobe collected fromthe statement furnishedwas that which was collected.

Since the statute does not authorize the refund of taxes voluntarily paid throuqh mistake of law on the part of the taxgaver,plaintiff's claim was properly disallowed by the county. NorthButte

### Mining Co., 118 Mont. at 620, 622, 169 P.2d at 340, 341

(emphasisadded). In this case, unlikeNorthButte

### MiningCo., the error or illegality complained of was committedby the State's appraiser. Theplaintiff had nothing to do with the conduct complained of. Therefore,North Butte

### Mining Co. has nothing to do with the facts in this case. For these reasons, I would find that, while the County Commissionershave somediscretion under !j 15-16-601,MCA, they have abused thatdiscretionby failingto act in anyway. Iwould reversethe District Court and remand this case to the Board of County Commissioners for Cascade County with instructions to properly considerplaintiff's petition, and either grant it, or 

### in the event that it isdenied,to set forth proper findingsand conclusionswhich form the basis for its denial so that that decision canbe properly reviewed by the District Court.