No. 14960 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1980 

THE DEPARTMENT OF REVENUE 

OF THE STATE OF MONTANA, 

Petitioner and Appellant, 

STATE TAX APPEAL BOARD, 

COUNTRYSIDE VILLAGE, INC., et al., 

Respondents and Respondents. 

Appeal from: District Court of the Eighth Judicial District, In 

and For the County of Cascade, 

Honorable H. William Coder, Judge presiding. 

Counsel of Record: 

For Appellant: 

R. Bruce McGinnis, Dept. of Revenue, Helena, Montana 

Randall Swanberg argued, Great Falls, Montana 

Swanberg, Koby, Swanberg & Matteucci, Great Falls, 

Montana 

For Respondents: 

Church, Harris, Johnson & Williams, Great Falls, 

Montana 

Robert P. Goff argued, Great Falls, Montana 

Crowley, Haughey, Hanson, Toole & Dietrich, Billings, 

Montana 

Mark D. Safty argued, Billings, Montana 

Church, Harris, Johnson & Williams, Great Falls, Montana 

Milton Wordal argued, Great Falls, Montana 

James R. Paul, Great Falls, Montana 

Bottomly and Gabriel, Great Falls, Montana 

James, Gray & McCafferty, Great Falls, Montana 

Jardine, Stephenson, Blewett & Weaver, Great Falls, Montana 

For Amicus Curiae: 

Scott, Linnell & Newhall, Great Falls, Montana 

Submitted: February 26, 1980 

Decided: J,uN 2 4 ]9& 

Filed: fVlJ : ,:f$? 
Honorable Gordon R. Bennett, District Judge, delivered the 

Opinion of the Court. 

This is an appeal by the Department of Revenue from a 

decision of the District Court of the Eighth Judicial District, 

in and for Cascade County, affirming a decision of the State 

Tax Appeal Board provided for a blanket 34 percent reduction 

in the Department's appraisal of the improvements on certain 

parcels of commercial real property in Cascade County. The 

Board is joined by thirty-eight taxpayers as respondents. 

Briefs amicae have been received from taxpayers of several 

other counties. The decision of the District Court is reversed. 

Respondent taxpayers applied to the Cascade County Tax 

Appeal Board for reduction of the valuation of their cornrnercia1 property improvements pursuant to section 15-15-102, 

MCA, after appraisal by the county assessor for the Department 

of Revenue. After hearing, the county tax appeal board denied 

relief and appeal was taken to the State Tax Appeal Board 

(hereinafter referred to as "the Board") under section 15-2- 

301, MCA. The Board overruled the county appeal board and 

ordered the Department to reduce all of the contested valuations by 34 percent. The Department petitioned for judicial 

review under section 15-2-303, MCA, seeking reversal of the 

Board decision and reinstatement of its valuations or, in the 

alternative, remand to the Board for determination as to whether section 42-2.22(1)-S2200 of the Administrative Rules of 

Montana (referred to hereafter as A.R.M.) is arbitrary, capricious or unlawful. The District Court denied relief, affirming the Board determination. By separate order, the Court 

denied the Department's motion to present additional evidence 

under sections 15-2-303(4) and 2-4-703, MCA, on the ground 

the Department had an opportunity to present such evidence at 
the county and state appeal board hearings and declined to do 

so as a "deliberate tactical decision." Both orders were 

appealed. 

The uncontested central facts in the case include the 

following: The Department in its 1978 appraisal procedures 

used replacement cost less depreciation as the basis for determining values of all real property improvements. In determining the replacement cost itused statistics contained in 

two manuals adopted under A.R.M. Section 42-2.22(1)-S2200. 

The Montana Appraisal Manual was used for appraising residentail property improvements and the Marshall Swift Valuation 

Service Manual was used for appraising commercial property 

improvements. The statistics in the Montana Appraisal Manual 

reflected 1971 replacement costs, while those in the Marshall 

Swift Manual reflected 1976 replacement costs. At the county 

appeal board hearing several witnesses testified the 1971 

replacement cost figures contained in the Montana Appraisal 

Manual were only 66 percent of the 1976 replacement cost figures 

contained in the Marshall Swift Manual. The Cascade County 

appraiser testified that impiementation of the regulation 

resulted generally in valuation of residential impro7aernents 

at 60 percent of market value and valuation of commercial 

improvements at 100 percent of market value. 

A preliminary issue is whether the Board has authority 

to review and determine the legal pro2riety of the ~epartment's 

appraisal methods. This gives us little pause. Article VIII, 

Section 7 of the 1972 Constitution calls for legislature provision of ". . . independent appeal procedures for taxpayer 

grievances about appraisals . . ." Pursuant to that requirement, section 15-2-201 (1) (c) MCA, was enacted to give the 

Board general authority to hear appeals from the ~epartment 
with regard to property assessments, and section 15-7-102(5), 

MCA, gives the Board specific power to determine appeals of 

appraisals. Certainly the power to hear apprsisal appeals 

includes the power to pass judgment on appraisal methods, and 

we so hold. 

The next question is whether using different cost data 

for appraising different types of property within the same 

statutory classification constituted unlawful discrmination 

and violation of the requirement for uniformity in taxation. 

We start with the factual premise that such disparate cost 

data was in fact used in assessment of respondent taxpayers' 

property improvements, as found by the Board and the District 

Court. The legal premise is that both residential and commercial improvements to real property are in the same legislative classification. Section 15-6-134, MCA. The constitutional and statutory requirements for equalization or uniformity 

within a legislative classification cannot be questioned. See 

Article VIII, Sections 3 and 7, 1972 Montana Constitution; section 15-7-103(1), MCA; section 15-9-101(1), MCA; Larson v. 

State and Dept. of Revenue (1975), 166 Mont. 449, 454-455, 534 

P.2d 854, 857; State ex rel. Schultz-Lindsay Constr. Co. v. 

Board of Equalization (1965), 145 Mmt. 380, 393, 403 P.2d 

635, 641-642. Failure to adhere to the uniformity rule also 

offends due process and equal protection principles. Larson, 

supra, 166 Mont. at 455, 534 P.2d at 857. Given the legal 

and factual premises noted, the method used by the Department 

in these cases would seem, on its face, to have violated uniformity, equal protection and due process requirements. I£ 

different valuation statistics are applied to different 

pieces of property in the same legal classification, an illegal disparity in valuation is likely to result. We cannot, 
however, reach such a conclusion as to any particular properties evaluated in this case because there is inadequate 

evidence in the record to do so. No evidence of comparable 

evaluations, as between particular commercial and residential improvements, under the Department's system, appears in 

the record. 

The Department contends, however, that even if the valuation did not meet equalization and due process/equal protection 

requirements, the assessments were part of a "rolling" or 

"cyclical" reappraisal system and were, therefore, an exception to these requirements. Such a system contemplates reappraisal of a portion of the property in a particular classification each year under a plan that is aimed at uniformity 

within the classification of the conclusion of all reappraisal. 

See discussion in Ernest W. Hahn, Inc. v. County Assessor for 

Bernalillo County (1978), 92 N.M. 609, 592 P.2d 965, 969; 

Maricopa County v. North Central Development Co. (1977), 115 

Ariz. 540, 566 P.2d 688, 691-692; Patterson v. State and Department of Revenue (1976), 171 Mont. 168, 176, 557 P.2d 798; 

Larson, supra, 166 Mont. at 455; Annot., 76 A.L.R.2d 1077 (1961). 

In Larson, supra, we recognized this exception whzre the inequalities are temporary, but there is no evidence in the 

record that the Department ever intended, much less planned, 

that the system be temporary, or that it was part of an overall plan that would eventually result in equalization. The 

District Court found there was no rolling or cyclical reappraisal 

system working that would permit an exception to the uniformity, 

equal protection,/due process requirements, and we agree. 

Thus, the Board had the authority to adjust and equalize 

these appraisals and had determined they were unequal. What 

should it have done? It apparently followed a 1923 rul-ing of 
the United States Supreme Court in Sioux CityBridgeCompany 

v. Dakota County (1923), 260 U.S. 441, 43 S.Ct. 190, 67 L.Ed. 

340, and reduced the commercial improvement appraisals by 34 

percent across the board in an attempt to equalize them with 

residential improvement appraisals. 

The key holding in Sioux City Bridge, supra, was stated 

as follows: 

"This Court holds that the right of the taxpayer whose property alone is taxed at 100 

per cent of its true value is to have his 

assessment reduced to the percentage of that 

value at which others are taxed even though 

this is a departure from the requirement of 

statute. This conclusion is based on the 

principle that where ----- it is impossible to se- 

--- cure both the standard ---- of the true value, and 

-- the uniformity - and equality required & - law, 

the latter requirement ---. is to be - preferred ~ - as 

--- the just and ultimate purpose --- of the law." 

(Emphasis added.) Sioux City Bridge, 260 U.S. 

at 446, 43 S.Ct. at 192, 67 L.Ed. 343. 

This disposes of the Department's argument that the appraisals 

could not be reduced, even though unequal, if they resulted in 

an assessment at true market value, or 100 percent of market 

value as required by section 15-8-111(1), MCA. Reduction is 

required where it is satisfactorily shown that under the system 

as applied it is impossible to meet both the true value and 

equality standards. It could have been concluded, as the 

Board and the District Court concluded, that application of 

the Department's system would work an inequality of assessment 

and that it would be impossible to have both full value assessment and equality under that system. If it were to be so concluded, reduction would be required and the remaining question would be, how much? 

The evidence presented to the county and state boards and 

to the District Court provides an inadequate basis for any reduction that is not conjectural or speculative. The burden 
is on the taxpayer to remove this determination from the 

realm of conjecture or speculation. Skinner v. N. M. State 

Tax Comm. (1959), 66 N.M. 221, 345 P.2d 750, 752. It is not 

sufficient to show the possibility or even the probability of 

an appraisal of commercial improvements that would be, generally, 

34 percent or 40 percent higher than appraisals of residential 

improvements, as was shown here. Workable criteria for concrete determination of discrepancy have been delineated by 

the Iowa Supreme Court: 

"In order to obtain relief upon the ground 

that his property is assessed inequitably, it 

is essential that the taxpayer prove (1) that 

there are several other properties within a 

reasonable area similar and comparable to his; 

(2) the amount of the assessments on these 

properties; (3) the actual value of the comparable properties; (4) the actual value of 

his property; (5) the assessment complained 

of; (6) that by a comparison his property is 

assessed at a higher proportion of its actual 

value than the ratio existing between the 

assessed and actual valuations of the similar 

and comparable properties, thus creating discriminations." Maxwell v. Shivers (1965), 

257 Iowa 575, 133 N.W.2d 709, 711. 

We would adopt these criteria as at least a starting place for 

actual comparison of true value to assessed value ratios. They, 

and other reasonable criteria that might be devised by the 

Department or the Board, should set the standard for proof in 

each case. See also Bynu!n t.. Alto Independent School Dist. 

(Tex. 1975), 521 S.W.2d 656, 660. Because no such criteria 

were followed, and because there was no comparison of actual 

true and assessed value ratios as between the commercial improvements of the respondent taxpayers and residential improvements of other taxpayers in the county, the decision of the 

District Court must be reversed and the State Tax Appeal 

Board's blanket reduction of 34 percent on commerical improvement appraisals must be set aside. 
In reversing we do not, however, hold that the appraisals 

of the Department are confirmed. We only hold that the taxpayers have not introduced sufficient evidence to justify a 

finding that the appraisal method employed by the Department 

violates uniformity, equal protection and due process requirements and to warrant a blanket 34 percent reduction of the 

assessments of commercial property. Therefore, the matter 

must be returned to the Board for its further consideration. 

On further consideration, the Board should hold a hearing at which evidence of the true and assessed values of commercial and residential property is introduced pursuant to 

the criteria adopted above. This will allow it to compare 

the actual difference in the true value to assessed value 

ratios between commercial and residential property resulting 

from the appraisal method adopted by the Department. The 

Board might find on such hearing that the Department's appraisal method is arbitrary, capricious or otherwise unlawful, 

but it may not amend or repeal the appraisal regulation. Section 15-2-301(4), MCA. It may, however, modify the appraisals 

by reducing the appraisals of commercial property to a ratio 

of true value to assessed value equal to the ratio applied to 

residential property. Section 15-2-301(4), MCA. 

If, upon a further hearing, the Board finds the Department's appraisal procedure arbitrary, capricious or unlawful 

and that a reduction in the appraisals of commercial property 

is justified, proof of an excessive appraisal must be made by 

each taxpayer who seeks relief. Bynum, supra, 521 S.W,2d at 

660. Each taxpayer should follow the above criteria to establish the amount of reduction the taxpayer is entitled to. 

This does not mean each taxpayer seeking relief must introduce 

evidence as to the value of all improvements to real property 
in a county. The taxpayer must, however, introduce evidence 

of enough property located near the taxpayer's property and 

in the same legislative classification so the Board can 

establish the proper true value to assessed value ratio for 

the property without speculation or conjecture. Skinner, 

supra, 345 P.2d at 752. Once the proper ratio has been 

established, the Board can determine the proper amount to 

reduce an individual taxpayer's property by applying the 

ratio to the property. 

Resolution of other issues raised on the appeal is not 

essential to this decision or its implementation and they, 

therefore, are not considered here. The cause is remanded 

to the District Court, which is directed to return it to the 

State Tax Appeals Board for further proceedings in accord 

with this opinion. 

I 

\ -r //a- ; \- - * '21 

Honorable ~or$on R. Bennett, 

District Judge, sitting in place 

of Mr. Justice Harrison 

We concur: 

4A 

Chief Justice 

QdW L. 

Justices 

Mr. Justice Gene B. Daly agrees with this Opinion but is 

unavailable to sign.