NO. 86-474

IN THE SUPREME COURT OF THE STATE OF MONTAEA
1987

DAN O'NEILL, Petitionerand Respondent,-vsDEPARTMENTOF REVENUE OF THE STATE OF MONTANA, Respondent and Appellant.

APPEAL FROM: TheDistrict Court of the Second JudicialDistrict, Inand for the County of Silver Bow, TheHonorableArnold Olsen, Judgepresiding.

COUNSEL OF RECORD:

ForAppellant: Larry Schuster argued,Dept. ofRevenue, Helena, Montana

For Respondent: Dunlap & Caughlan; Deidre Caughlan argued, Butte, Montana

Submitted: April 29, 1987 ~~~id~d: June 22, 1987Mr. Chief Justice J. A. Turnage delivered the Opinion of the Court.
The Department of Revenue (DOR) appeals a July 24, 1986, order of the Second JudicialDistrictCourt, SilverBow County. The order reversed the State Tax Appeal Board's valuation of O'Neill's property in 1982, accepted O'Neill's valuation of the property, and ordered that O'Neill's taxes be adjusted accordingly. We vacate and remand to the District Court for further developmentof the record. DORpresented five issues for our review:

(1) Did the District Court err by substituting its judgment for that of STAB, thereby exceeding its scope of authority under 5 2-4-704,MCA? (2) Did the District Court err by allowing O'Neill to testify at the judicial review of the STAB decision,without the showing of good cause required by S 15-2-303(4), MCA? (3) Did the District Court err by allowing O'Neill to supplement the administrative record with an affidavit, without the showing of good cause required by 5 15-2-303(4)

## , MCA? (4) Did the District Court err by infusing its own opinion of O'Neill's property value into its decision? (5) Did the District Court err by allowing O'Neill to pay his delinquent taxes,without an accompanying payment of accrued penalties and interest? At oral argument,we also raised the following issue:

(6) Does 5 15-7-308,MCA, prohibit DOR from revealing specific information about the relevant comparable sales which DOR used in appraising O'Neill'sproperty? Daniel O'Nei11 owns two parcels of commercial real estate on Harrison Avenue in Butte, Montana. The first parcel is an unimproved acre at 3755 Harrison Avenue. The second parcel consists of 7.5 acres containing a motel andO'Neill's residence at 3655 Harrison Avenue. In 1982, the Department of Revenue valued the first parcel at $63,398 and the second parcel at $166,320,based on the realty transfer certificates of comparable sales in the area. However,O'Neill asserted that hisproperty valueswere $18,893 and $79,600, respectively. O'Neill unsuccessfully appealed the DOR valuations to STAB. He then petitioned the District Court for judicial review under the provisions of S 15-2-303(1), MCA, which states: "Any party to an appeal before the state tax appealboard who is aggrievedby a final decision in a contested case is entitled to judicial review under this [301et seq.] part." The DistrictCourt reversed the STABdecision,and DOR appeals.

Issues 1-3 Following its review, the District Court made these findingsof fact: XII. The the use of [Lescovar Motors, Copper King Inn,and Wendy's Hamburgers] properties for comparable market values is not a true reflection of the market 

### --- -- value as the sales are speculative and 

### -- further (2) of the comparable~are too far from the subject tobe of value in establishing market value in close proximity.

XIII. That suchvalues set for purposes of appraisalof the Plaintiff'sproperty are inconclusive as a test of true market value. It is

### 2personal observa- tion of this Judge that the Plaintiff's 

### --- -- property 

### - does 

## - not generate business comparable to other motels, even minor active motels on Harrison Avenue. One motel larger than Defendant's [sic] motel closes for the winter months because of lack of occupancy. The Butte-Silver Bow business community has lost, as of the date of the appraisalherein, at least one-third of its theretofore business. The Department of Revenue is clearly wrong and it should have tomake another appraisal. [Emphasis added.]
The District Court made the following conclusions of law: 2. That the system of appraisal using speculative landpurchases as applied is inconsistent with providing a general and uniform method of classifying lands in accordance with true market value 

### -- fails to provide an equitable and uniform basis of assessment of the Plaintiff's property when compared with the market value of theproperty. 3. That similar properties in the same 

### --- area of Harrison Avenue have been ap

### -- i raised differentlv as the Plaintiff I .' demonstrated by comparing his property to that of the Hamm'sMotel.
4. That a review of the entire record together with the evidence presented at the hearing indicates that the Board's denial of the Plaintiff's appeal and retaining the appraisal value of the subject property on the tax rolls is clearly erroneous in view of the relc able probative and substantial evidence on the whole record. [Emphasisadded.]

DOR contends that theDistrict Court exceeded its scope of reviewunder § 2-4-704,MCA. DOR argues that the District Courthas the expertise in ascertaining the law, but STABhas the expertise in ascertaining the facts. DOR asserts that STAB, as the trier of fact, was entitled to determine the proper appraisedvalue of O'Neill's property. Issues 1, 2 and 3 are interrelated and require discussion of § 2-4-703, 5 2-4-704, and § 15-2-303(4), MCA. Our ana.lysis of these issues begins with the MontanaAdministrative Procedure Act (MAPA) S 2-4-703, MCA, which requires prior permission of the courtbefore any additional evidence canbe presented to an administrativeagency: If, before the date set for hearing, application is made to the court for leave to present additional evidence

- 

## - - . the court mav order that the --- - - 

## - -- -- L 

### -- additional evidence be taken before the agencyupon conditionidetermined 

## - the court. [Emwhasisadded.1
Under § 2-4-703, MCA, when the court has allowed such additional evidence, it may be presented to the agency,but not to the court. This limitation accords with the standard of reviewof contestedMAPA cases under S 2-4-704,MCA,which confines the court's review to the record: (1)The review shallbe conducted by the court without a jury and shall 

### -- be confined to the record 

# . . . The court, 

### -- upon request, shall hear oral argument and receivewrittenbriefs.

(2)

## - The court may 

### not substitute its judgment for that of the agency as to 

### ---- -- the weight of the evidence on questions 

## - -- - of fact. 

### -- The court may affirm the decision of the agency or remand the case for further proceedings. The court may reverse or modify the decision if substantial rights of the appellanthave been prejudiced 

# . . . [Emphasis added.]

In contrast, the court's review of contested STAB decisions is 

### - not confined to the record. Section S 15-2-303(4)

## ,MCA provides: Notwithstanding the provisions of 2-7-704(1), the court may, for good cause shown,permit additional evidence tobe introduced.
In otherwords, judicial review ofMAPA contested cases under § 2-7-704,MCA, is limited to the record, but judicialreview of STAB contested cases under S 15-2-303(4), MCA, allows the court to supplementthe record. Dept. of Revenue

v. DavidsonCattleCo. (Mont. 1980), 620P.2d 1232, 1235, 37 St.Rep. 2074, 2077. Under S 15-2-303(4), MCA, the court reviewing a STAB decisionmay, on its own initiative or upon motion of a party, find good cause and allow additional evidence to be introduced before the court. Hi-Line Radio Fellowship v. DOR (Mont. 1987), 

### -P.2d 

## , 44 St.Rep. 955. Once the additional evidence is introduced into the record, the reviewing court must then make appropriate findings of fact and conclusions of law. Rule 52(a), M.R.Civ.P. On the day of the hearing on judicial review, O'Neill moved the District Court for leave to introduce additional evidence. The court granted O'Neilllsmotion, and he then testified about the market value of his property. O'Neill also introduced a Butte title officer

### 's affidavit

## , which stated that two parcels near J. C. Penney's sold for approximately $2O,OOO/acre, and that one parcel north of Lydia's Restaurant sold for approximately $7,50O/acreat a tax sale. DOR contends that O'Neill failed to showgood cause for the addition ofhis testimony and the affidavit,and that the sudden introduction of the evidence denied DOR the opportunity for effective rebuttal. DOR asserts thatOINeillfailed to show that the affiant was unavailable as a witness, and therefore the affidavitwashearsay. DOR further argues that O'Neill had ample opportunities to fully state his case before the SilverBowTaxAppeal Board and STAB,and thathis testimonywasunsupported and cumulative. We find that the showing of good cause under S 15-2-303(4) is permissive, not mandatory. Any legally sufficient reason meets the good cause requirement of S 15-2-303(4), MCA, and such sufficiency lies within the discretion of the reviewing court. Furthermore, theadditional evidence is not restricted to the parties. The court can accept evidence from a variety of sources. In the instant case, O'Neilllstestimony may have been cumulative, but itwas also probative of themarket value of theproperty and thus fulfilled the good cause requirement. The affidavit did notviolate the good cause requirementbecause it offered evidence of comparable sales. The availability of the affiant is a question of credibility, not admissibility. We hold that the District Court properly exercised its discretion under S 15-2-303(4) when it permitted the introduction of O'Neill's testimony and affidavit.

Issue 4 Did the District Court err by infusing its own opinion of O'Neilllsproperty value into its decision? DOR contends that the District Court, in essence, became a witness and advocate for O'Neill by permitting its personal views to become part of its decision. DOR asserts that a reviewing court should remain an impartial tribunal for all litigants. DOR argues that the court's personal observations are unilateral impressions which cannot be deemed judicially-noticed facts. Judicial notice of facts is governed by Rule 201(b)of the Montana Rules of Evidence which states: "A fact to be judicially noticed must be one not subject to reasonable dispute in that it is either (1)generally known within the territorial jurisdiction of the trial court or (2)capable of accurate and ready determination by resort to sources whose accuracy cannotbe reasonablyquestioned." We note that the District Court went far beyond the record when it observed that O'Neill's property does "not generate business comparable to othermotels." The District Court's observations could only be verified by the incomestatements of other motels on Harrison Avenue, or similar specific data. This data would not be "generallyknown'br "capable of accurate and ready determination." To qualify for judicial notice, an extrinsic fact must lie within the judge's immediate knowledge and not require thorough research. In the instant case, the District Court's empirical observations pass beyond the scope of judicial notice and border on judicial impression. The observations were not supported by the record, and are not sufficiently indisputable to qualify as judicially-noticed facts. We hold that the DistrictCourt erred on this issue.

Issue 5 Did the District Court err by allowing O'Neill to pay delinquent taxes without an accompanying payment of accrued penalties and interest? STAB had issued an order staying the collection of all O'Neill's taxes, penalties and interest while O'Neill's appeal was pending before STAB. O'Neill later attempted to pay his delinquent taxes to the Butte-Silver Bow Treasurer, who refused to accept payment of the taxes without an accompanying payment of the accrued penalties and interest. Upon motion by O'Neill on January 17, 1984, the District Court allowed O'Neill to pay his delinquent taxes to the Butte-Silver Bow Treasurer. However, the District Court did not require O'Neill to pay the accrued penalties and interest. DOR contends that theDistrict Court erred, because the taxpayer is required to pay the disputed portion of the tax under protest before it becomes delinquent. DOR argues that both STAB and the District Court acted beyond the scope oftheir lawful powers, when they stayed payment of penalties and interest. Our analysis of this issue is governed by § 15-1-402, MCA, which allows a taxpayer to pay his taxes under protest and recover the amountprotested if his challenge is successful. Section 15-1-402(1),MCA, states: The person upon whom a tax or license fee is being imposed may

# ... before the tax or license fee becomes delinquent, pay under written protest that portion of the tax or license fee protested. Thepaymentmust (a)bemade to the officerdesignated and authorized to collect it; and (b) specify the grounds of protest. [Emphasisadded.1

A taxbecomesdelinquentwhen the taxesare due and notpaid. Section 15-16-102,MCA. We held in Eagle Communications v. Treasurer of Flathead County (Mont. 19841, 685 P.2d 912, 918, 41 St.Rep. 1303, 1311, that the County Treasurer is the officer who collects tax funds under 5 15-1-402,MCA. The general rule is that a taxpayer must pay his taxes when due, as a condition precedent for preservinghis right to refund ofproperty taxes under § 15-1-402,MCA. Eagle Communications, 685 P.2d at 917. In the instant case,the Butte-Silver Bow Treasurer refused to accept payment of O'Neill's delinquent taxes without an accompanying payment of penalties and interest, because O'Neill failed to comply with the requirements of S 15-1-402, MCA. We hold that the Treasurer properly exercised his authorityby refusingpayment. However,we cannot ignore the fact that both STAB and the DistrictCourt stayed thepayment ofpenalties and interest by O'Neill. Therefore,we hold that O'Neill is required to pay penalties and interest on his 1982 taxes only to the date that he tendered payment of his 1982 taxes to theButte-Silver Bow Treasurer. O'Neill's failure to heretofore pay such penalties and interest on his 1982 taxes does not affect his standingtoproceedwith his contested case.

Issue 6 Does 5 15-7-308, MCA, prohibit the DOR from revealing specific information about the relevant comparable sales which DOR used in appraisingO'Neill'sproperty? Section 15-7-308, MCA, states that the disclosure of information on a realty transfer certificate (RTC) shall be restricted:The certificate required by this part and the information therein shall notbe apublic record and shallbe held confidential by the county clerk and recorder, county assessor, and department of revenue. This is because the legislature finds that the demands of individual privacy outweigh the merits of public disclosure. Throughout these proceedings, DOR asserted that it based O'Neill's tax assessment on data from relevant "comparable sales." This data was extracted from RTCs in the Harrison Avenue area. DOR's case is thereforepredicated on the validity and relevancy of those RTCs. Yet, nowhere in the record did DOR reveal any details of the RTCs it used. Without the relevant information from the RTCs, a taxpayer cannot effectively rebut DOR's assessments, the Tax Appeal Board cannotmake an informed decision,and the courts cannot conduct an adequate judicialreview. In oral argument before this Court,DOR contended that the confidentiality requirementsof 5 15-7-308,MCA,precluded DOR'sdisclosureofRTC informationto the taxpayerparty, tax boards or reviewing courts.In analyzing § 15-7-308,MCA,we note that the language protects the confidentiality of RTCs when the demand for individual privacy exceeds the merits of public disclosure. However,wemust draw a distinction betweenpublic disclosure and limited disclosure to the taxpayerparty, tax boards and reviewing courts in contested proceedings. When limited disclosure of relevant RTC information is crucial to a fair and informed decision by a tax appeal board or court, such disclosure outweighs individualprivacy. Therefore, in contested tax proceedings, we hold that relevant information from the RTCs shallbe disclosed to the taxpayerparty, tax boards, and reviewing courts. During the pendency of theproceedings, the RTC information shallnotbe available to the public. At the conclusion of the contested proceeding, any portion of the record which contains the disclosed RTC information shall be sealed and unavailable for public inspection. Such limited and transient disclosure of RTC information conforms to the confidentiality requirements of 5 15-7-308, MCA; while providing the benefits of substantive due process to the taxpayer in a contested case. Under this holding, a taxpayer may apply to the District Court for a subpoena to compel the DOR to release relevant RTC information, upon which DORbased its comparable sales data. In order to minimize the intrusion into the records, the subpoena must identify the specific information requestedby the taxpayer with asmuch precision aspossible. The issuance and scope of the subpoena shall lie within the discretion of the District Court. Any abuse of the subpoena process, or overbroad requests for RTC information, may be prevented by a protective order from STAB or the District Court.for We vacate and remand this case to the District Court furtherdevelopment of therecord.

We concur: 

## n

Langen, DistrictJudge