No. 14539 

IN THE SUPREMJ3 COUHT OF THE STATE OF ICNTANA 

1979 

M. F. KELT;ER, TOM SEXSTAD, JIM WODAHL, 

AKI' WENZEK, GEORGE BUZZAS et a1 . , 

Petitionersand Appellants, 

IlEPARRBW OF F!EWtWE OF THE STATE OF MXTANA, 

an official agency of the State of Wntana; 

CASCADE COUNTY, MXTANA, a political subdivision 

of the State of Wntana; and THE CITY OF GREAT 

FALLS, PINTANA, a municipal corporation of the 

State of Wntana, 

Respondents and Respondents. 

@pal from: District Court of the Eighth Judicial District, 

Honorable Joel G. Mth, Judge presiding. 

Counsel of Record: 

For Appellants: 

Graybill, Ostrem, Warner & Crotty, Great Falls, Wntana 

Donald Ostrem argued, Great Falls, Wntana 

For Respondents: 

R. Bruce MSinnis argued, Dept. of Revenue, Helena, mntana 

J. Fred Bou~deau, County Attorney, Great Falls, Wntana 

David V. Gliko, City Attorney, Great Falls, 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 is brought by taxpayers in the City of 

Great Falls from an order of the District Court, Cascade 

County, dismissing their action for declaratory judgment. 

Plaintiffs-appellants sought a declaration that the defendant State Department 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 District Court ruled that plaintiffs had not 

exhausted their administrative remedies and were therefore 

not entitled to judicial 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 As originally enacted, MELDA provided 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 to the 

land's desirable use and created a system of taxation designed to encourage 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 Chapter 549, Sections 7 through 20, Laws of Montana 1975, codified as sections 84-7507 through-7520, R.C.M. 1947, repealed Chapter 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 

its jurisdiction. Section 84-7505, R.C.M. 1947, repealed 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 State Department of Community 

Affairs would 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 to MELDA's provisions, and thus persons acting 

in reliance upon the City's land use plan would not receive 

MELDA tax treatment. 

Plaintiffs are citizens of Great Falls who expended 

money for construction and improvement in reliance upon the 

City's MELDA plan. After learning of the Department of 

Revenue's determination that the plan did not conform, they 

sought direct relief from the Department by requesting MELDA 

treatment of their investments. The Department refused to 

implement MELDA treatment, and plaintiffs filed their action 

before the District Court. The petition before the District 

Court requested a declaration that the Department of Revenue 

had acted illegally in refusing to implement the City's 

MELDA plan, and further that plaintiffs were entitled to 

MELDA tax treatment despite the repeal of the Act by the 

1977 Legislature. Paragraphs XI, XIII, and XIV of plaintiffs' complaint. 

As noted above, the District Court dismissed the complaint, ruling that plaintiffs were first required to seek 

administrative review of the Department of Revenue's determination before the State Tax Appeal Board: 

"The provisions of the said statute are anything 

but simple and requires a great deal of knowledge 

and experience in land use and development, land 

classification, zoning, appraisals, assessments 

and taxation, in order for the reader to fully 

understand and comprehend the legislative intent 

. . . It is to be noted in this connection that 

the State Tax Appeal Board has jurisdiction to 

review decisions of the Department of Revenue in 

regard to property assessments, taxes and penalties. Section 84-708(3), R.C.M. 1947, as amended. 
"Because of the complexity of the statute and the 

necessity of bringing state agency administrative 

expertise and knowledge to bear 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 

interfere with administrative proceedings." 

Plaintiffs bring two issues on appeal: 

1. Whether taxpayers have an administrative remedy 

before the State Tax Appeal Board concerning a decision by 

the State Department of Revenue which declared a city land 

use plan not to be in compliance with MELDA. 

2. Whether, if such a remedy exists, the taxpayers 

were required to pursue that remedy before bringing an 

action in District Court to obtain a declaration of the 

meaning of legislation. 

Under the first issue 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 State Tax 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 first is 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 direct response 

to the plaintiffs1 attorney. The Department contends that 

these constituted final decisions 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 to the State Tax Appeal Board is set 

forth in section 84-708(3), R.C.M. 1947: 

"To hear appeals from decisions of the Department 

in regard to business licenses, property assessments, taxes and penalties." 

Thus, when property assessment decisions are rendered 

by the Department of Revenue, the property owner affected 

must ordinarily first seek review before the Tax Appeal 

Board. Two exceptions to this rule, however, have been 

recognized by this Court in previous decisions, the first of 

which is relevant to this issue, the second to plaintiffs' 

second issue. 

In Sletten Construction Company v. City of Great Falls 

(1973), 163 Mont. 307, 516 P.2d 1149, a Montana construction 

corporation, Sletten, brought a mandamus action before this 

Court in an original proceeding. Sletten sought to have set 

aside a certificate of residency which the Department of 

Revenue had issued to an out-of-state corporation, Acton, 

and to obtain a writ of 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 Sletten had failed to exhaust 

its administrative remedy before the Tax Appeal Board. 

Sletten, it held, was not bound by the rule because it had 

not participated in the proceedings by which the Department 

had determined that Acton qualified for a certificate of 

residency: 

"We recognize that general principle that ordinarily administrative remedies must be exhausted 

before applying for judicial review. However, 
this principle has no application to the instant 

case. Sletten was not a party to the administrative proceedings awarding the certificate of 

residency to Acton, had no notice thereof, and 

could hardly be said to have an administrative 

remedy under such circumstances." 163 Mont. at 

311, 516 P.2d at 1151. 

The Department seeks to distinguish Sletten by arguing 

that while the plaintiff in that case did not participate in 

the proceedings by which Acton was granted a certificate of 

residency, plaintiffs in the present case were very much 

involved in the 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 that various individuals who are among the plaintiffs appeared before the Department in an administrative 

hearing on June 9, 1977, before the Department's determination of whether to implement the plan was made. Second, 

the Department states that plaintiffs brought themselves 

within the administrative process 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), 169 Mont. 437, 548 P.2d 149. DeWar is a case 

involving the jurisdiction of the city police 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 administrative bodies or 

commissions in the process of exercising their quasi-judicia1 functions and/or power." 169 Mont. at 445, 548 P.2d at 
It is not clear why the Department relies on DeWar, 

other than for its general statement that a party aggrieved 

by administrative action must first exhaust 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 lives within the jurisdiction of a 

governing body which seeks to have its MELDA plan implemented by the Department of Revenue. There is no basis 

suggested in the Department's brief for conferring that 

status on all persons who either appear at a public hearing 

on the proposed plan or who request a reconsideration of the 

Department's decision after it has already been made. There 

appears no reason then, to take the present case out of the 

Sletten rule by declaring that plaintiffs had sua sponte 

made themselves parties to the City's application. 

Plaintiffs' second issue is directed to the exhaustion 

of administrative remedies. Having found they are not 

proper parties for purposes of appeal to the Tax Appeal 

Board, the City being that party, we will examine the issue 

as to the action taken by the Department of Revenue as being 

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) to be 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 to the rule of exhaustion of 

tax appeal board remedies. The second applies to this 

issue. 
In Larson v. State (1975), 166 Mont. 449, 534 P.2d 854, 

the Court 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 or valuation of his property 

reviewed by the county and state boards 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. at 456,534 P.2d 

at 858, quoting Belknap Realty Co. v. Simineo 

(1923), 67 Mont. 359, 365, 215 P. 659, 661. 

In Larson the plaintiffs 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 to be 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 for which specific 

exception was made in Belknap. 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. at 456-57, 534 P.2d at 

858. 

In the present case, the same "anomaly" would arise if 

the Tax Appeal Board were first required to hear and determine plaintiffs' complaint. Plaintiffs do not challenge any 

particular appraisal or assessment but do challenge the 

Department's decision not to utilize 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 in Larson because 

they involve the "fundamental principles" to be utilized in 

an appraisal of and assessment on plaintiffs' property. 

Plaintiffs should not be required to present their case to 

the Tax Appeals Board. 

The judgment of the District Court is reversed with 

directions to hear and determine plaintiffs' action for 

declaratory judgment. 

We concur: 

4'A-U. %AA)e, 

Chief Justice