No. 14539 INTHE SUPREMJ3 COUHT OF 

### THE STATE OFICNTANA 1979

M. F. KELT;ER, TOM SEXSTAD, JIMWODAHL, AKI' WENZEK, GEORGE 

### BUZZAS 

### eta1

# ., PetitionersandAppellants,

IlEPARRBW OF F!EWtWE OF

### THE STATEOF MXTANA, 

### an officialagency of 

### the Stateof Wntana; 

### CASCADE COUNTY, MXTANA, 

### a political subdivision of 

### the Stateof Wntana; and THE CITY OF GREAT FALLS, PINTANA, 

### amunicipal corporation of the Stateof Wntana, Respondents and Respondents.

@pal 

### from: DistrictCourtof theEighthJudicialDistrict, Honorable Joel G. Mth, Judge presiding. Counsel of Record: For Appellants: Graybill, 

### Ostrem, 

### Warner & Crotty, GreatFalls, Wntana Donald Ostremargued, Great Falls, Wntana For Respondents: R. BruceMSinnis argued, 

### Dept. of Revenue, Helena, mntana J. Fred Bou~deau,CountyAttorney, GreatFalls, Wntana David V. Gliko, CityAttorney, GreatFalls, Wntana

Suhitted: June 12, 1979 mid&: 

## JUL 

## 11

## 1373

3. - r;

, st Filed: 7 -. .-.Mr. Justice John Conway Harrison delivered the Opinion of the Court. This appeal isbrought by taxpayers inthe City of Great Falls from an order of the DistrictCourt, Cascade County, dismissing their action for declaratory judgment. Plaintiffs-appellants sought a declaration that the defendant StateDepartment of Revenue had illegally denied them the taxation appraisal and assessment benefits of the Montana Economic and Land Development Act (MELDA), which became effective on January 1, 1976. Chapter 549, Laws of Montana 1975. The DistrictCourt ruled that plaintiffs had not exhausted their administrativeremedies and 

### were therefore not entitled tojudicial review. A brief review of MELDA 

### assists an understanding of the parties' contentions. As originally enacted, MELDA provided for classification of various types of land according tothe land's desirable use and created a system of taxation designed toencourage such desirable use. Chapter 549, Sections 7 through 20, Laws of Montana 1975, codified 

### as sections 84-7507 through-7520, R.C.M. 1947, repealed Chapter 582, Section 20, Laws of Montana 1977. One element of the Act 

### was a provision for review and approval of 

### a local governing body's own plan for classification of land within 

### itsjurisdiction. Section 84-7505, R.C.M. 1947, repealed Chapter 582, Section 20, Laws of Montana 1977. Section 84- 7505(5) further provided that if a city or county governing body had failed to submit a suitable land use classification plan by January 2, 1978, the StateDepartment of Community Affairswould prepare the plan. The City of Great Falls adopted a plan for land use classification under MELDA on April 26, 1977, by City Com-mission Resolution No. 6941. On August 17, 1977, the State Department of Revenue notified the City that the plan did not conform toMELDA's provisions, and thus persons acting inreliance upon theCity's land use plan would not receive MELDA tax treatment. Plaintiffs are citizens of Great Falls who expended money for construction and improvement inreliance upon the City's MELDA plan. After learning of the Department of Revenue's determination that the plan did not conform, they sought directrelief from the Department by requesting MELDA treatment of their investments. The Department refused to implement MELDA treatment, and plaintiffs filed their action before theDistrictCourt. The petition before the 

### District Court requested a declaration that the Department of Revenue had acted illegally inrefusing toimplement the City's MELDA plan, and further thatplaintiffs 

### were entitled to MELDA tax treatment despite the repeal of theAct by the 1977 Legislature. Paragraphs XI, XIII, and XIV of plaintiffs' complaint. As noted above, the DistrictCourt dismissed the complaint, ruling that plaintiffs

### were firstrequired to seek administrative review of the Department of Revenue's determination before the StateTax Appeal Board: "The provisions of the said statute are anything but simple and requires a greatdeal of knowledge and experience inland use and development, land classification, zoning, appraisals, assessments and taxation, inorder for the reader tofully understand and comprehend the legislative intent



# . 

# . . It 

### is tobe noted inthis connection that the State Tax Appeal Board has jurisdiction to review decisions of the Department of Revenue in regard toproperty assessments, taxes and penal

### ties. Section 84-708(3), R.C.M. 1947, 

### as amended."Because of the complexity of the statute and the necessity of bringing stateagency administrative expertise and knowledge tobear on the implementing of such a comprehensive land development and tax incentive program, this case 

### is an example of the reason for the rule requiring exhaustion of administrative remedies before courts will interferewith administrativeproceedings." Plaintiffs bring two issues on appeal: 

### 1. Whether taxpayers have an administrative remedy before the StateTax Appeal Board concerning a decision by the State Department of Revenue which declared a city land use plan not tobe incompliance with MELDA. 2. Whether, if such a remedy exists, the taxpayers

were required topursue thatremedy before bringing an action inDistrictCourt toobtain a declaration of the meaning of legislation. Under the firstissue plaintiffs argue that the Department of Revenue did not issue any order from which they could appeal. They contend that the City of Great Falls was the only entity capable of pursuing an appeal on the Department's refusal to implement the Great Falls MELDA plan. Plaintiffs

### were not parties to any proceedings before the Department of Revenue, and did not submit any plan to 

### it. Therefore, they argue, they have no standing to appeal to the StateTax Appeal Board. The Department of Revenue responds that it had issued two rulings, both of which plaintiffs could have appealed to the Tax Appeal Board. The firstis a 

### letter of August 17, 1977, by which the Department informed the City that its land use plan did not comply with MELDA. The second is a 

### letter dated December 19, 1977, which 

### was a directresponse to the plaintiffs1attorney. The Department contends that these constituted finaldecisions which affected the tax-payers, and the taxpayers could have appealed to the Tax Appeal Board under section 84-708(3), R.C.M. 1947. The scope of decisions by the Department of Revenue which are appealable tothe State Tax Appeal Board 

### is 

### set forth in section 84-708(3), R.C.M. 1947: "To hear appeals from decisions of the Department inregard tobusiness licenses, property assessments, taxes and penalties." Thus, when property assessment decisions arerendered by the Department of Revenue, the property owner affected must ordinarily firstseek review before the Tax Appeal Board. Two exceptions tothisrule, however, have been recognized by thisCourt inprevious decisions, the firstof which isrelevant to this issue, the second toplaintiffs' second issue. In SlettenConstruction Company v. City of Great Falls (1973), 163Mont. 307, 516 P.2d 1149, 

### a Montana construction corporation, Sletten, brought a mandamus actionbefore this Court inan originalproceeding. Sletten sought tohave 

### set aside a certificate of residency which the Department of Revenue had issued toan out-of-state corporation, Acton, and to obtain a 

### writof mandamus directing the city to accept 

### its bid for a public works project rather than Acton's. The Supreme Court granted the requested relief despite the Department's objection that Slettenhad failed toexhaust 

### its administrative remedy before the Tax Appeal Board. Sletten, it held, was not bound by the rule because it had not participated intheproceedings by which the Department had determined thatActon qualified for a certificate of residency: "We recognize that general principle that ordinarily administrativeremedies must be exhausted before applying forjudicial review. However,thisprinciple has no application to the instant case. Sletten was not a party tothe administrativeproceedings awarding the certificate of residency toActon, had no notice thereof, and could hardly be said tohave an administrative remedy under such circumstances." 163Mont. at 311, 516 P.2d at1151. The Department seeks todistinguish Sletten by arguing thatwhile the plaintiff inthat case did not participate in the proceedings by which Acton was granted 

### a certificate of residency, plaintiffs inthe present case 

### werevery much involved inthe determination of whether the Department of Revenue would implement the City's MELDA plan. The Department relies on two facts to support this argument. First, 

### it 

### states thatvarious individuals who are among the plaintiffs appeared before the Department inan administrative hearing on June 9, 1977, before the Department's determination of whether to implement the plan 

### was made. Second, the Department states thatplaintiffs brought themselves within the administrativeprocess by requesting a reconsideration of the ruling of December 6, 1977. Without further analysis, the Department concludes that these facts bring plaintiffs squarely within the provisions of Matter of DeWar (1976), 169Mont. 437, 548 P.2d 149. DeWar 

### is a case involving the jurisdiction of the citypolice commission of Great Falls and makes mention neither of the Tax Appeal Board's jurisdiction nor of the Sletten decision. It does rule, however, that a declaratory judgment action 

### is not the proper vehicle for obtaining relief from an administrative ruling "within the jurisdiction of administrativebodies or commissions inthe process of exercising their quasi-judicia1functions and/or power." 169 Mont. at445, 548 P.2d atIt 

### isnot clear why the Department relies on DeWar, 

### other than for 

### its general statement that a party aggrieved by administrative action must firstexhaust 

### its administrative remedies. The case does not discuss the situation of a nonparty. Nothing within MELDA appears to confer party status to

### a taxpayer who liveswithin thejurisdiction of a governing body which seeks tohave 

### itsMELDA plan implemented by the Department of Revenue. There 

### isno basis suggested inthe Department's brief for conferring that statuson 

### allpersons who either appear ata public hearing

on the proposed plan orwho request a reconsideration of the Department's decision after it 

### has already been made. There appears no reason then, totake the present case out of the Slettenruleby declaring thatplaintiffs had sua sponte made themselves parties tothe City's application. Plaintiffs' second issue is 

### directed to the exhaustion of administrativeremedies. Having found they are not proper parties for purposes of appeal to the Tax Appeal Board, the City being thatparty, 

### wewillexamine the issue

as 

### tothe action taken by the Department of Revenue asbeing

one done under the "fundamentally wrong principles of appraisal." Plaintiffs argue that the determination made by the Department of Revenue was not an assessment decision such as contemplated by section 

### 84-708(3) tobe within the Appeal Board's jurisdiction, but rather an interpretation of law which must be determined by 

### the judiciary. As 

### discussed above, there are two exceptions which this Court has previously announced tothe rule of exhaustion of tax appeal board remedies. The second applies to this issue.InLarson v. State (1975), 166 Mont. 449, 534 P.2d 854, theCourt held that

### a plaintiff need not exhaust administrative remedies before the Tax Appeal Board if the question to be determined involved an allegation that the Department of Revenue had used a "fundamentally wrong principle" of appraisal: "'The statutes having made ample provision whereby a taxpayer may have any alleged excessive or 

### er-

- - roneous assessment orvaluation of hisproperty reviewed by the county and stateboards of equalization, this remedy-

### is exclusive except in cases where fraud 

### -- or

## tg adoption of 

### -- a fundamentally wrong principle of assessment 

### is shown.' (Emphasis supplied.)" 166~ont. at456,534 P.2d at858, quoting Belknap Realty Co. v. Simineo (1923), 67 Mont. 359, 365, 215 P. 659, 661. InLarson theplaintiffs challenged 

### a local appraisal system which had been utilized prior to the statewide appraisal required under the 1972 Montana Constitution. The Court held that this came within the Belknap Realty rule because such a local appraisal

### was alleged tobe a "fundamentally wrong principle" of assessment, thereby requiring a legal, not an administrative determination: "The State's use of an unconstitutional and illegal appraisal here 

### is the type of 'fundamentally wrong principle' of appraisal forwhich specific exception was made inBelknap. 

### Were it otherwise, 

### we would have the anomalous situation of an administrative, quasi-judicial board passing on constitutional and statutory questions presented by this appeal." 166 Mont. at456-57, 534 P.2d at 858. In the present 

### case, the 

### same "anomaly" would ariseif the Tax Appeal Board 

### were firstrequired tohear and determine plaintiffs' complaint. Plaintiffs do not challenge any particular appraisal or assessment but do challenge the Department's decision not toutilize

### MELDA. Additionally, they seek 

### a determination of the effect of MELDA's repeal, clearly not an administrative question. These issues are of

### equal legal significance to those raised inLarson because they involve the "fundamental principles" tobe utilized in an appraisal of and assessment on plaintiffs' property. Plaintiffs should not be required topresent their case to theTax Appeals Board. The judgment of the District

### Court is 

### reversed with directions tohear and determine plaintiffs' action for declaratory judgment.

We 

### concur:



### 4'A-U. %AA)e, 

### Chief Justice