Title: LARSON v STATE DEPT OF REVENUE
Citation: N/A
Docket Number: 12809
State: Montana
Issuer: Montana Supreme Court
Date: April 24, 1975

No. 12809 I N T H E S U P R E M E C O U R T O F THE STATE O F M O N T A N A 19 75 J. EINAR LARSON, e t a l . , P l a i n t i f f s , THE STATE O F M O N T A N A and T H E D E P A R T M E N T O F REVENUE, e t a 1. , Defendants. Appeal from: D i s t r i c t Court of the F i r s t J u d i c i a l D i s t r i c t , Honorable James D. Freebourn, Judge presiding. Counsel of Record: , L -4 I C L L (! ,' t--1 For ~lalLTitll!Zs : R. Bruce McGinnis appeared, Helena, Montana Randall Swanberg argued, Great F a l l s , Montana ,I '" { $ ( . Ll:4/J For &fen en s : - L - UI r L L ~ 4 ~ . A. Sa~,Wcrp,fi ~ f u d * Scribner and Huss , Helena, Montana Lawrence D. Huss argued, Helena, Montana Thoaas Dowling, County Attorney, Helena, Montana ~ e i E B. Erickson, Deputy County Attorney appeared, hi Lena, Montana William Leaphart, City Attorney, Helena, Montana Submitted March 3, 1975 Decided:APR 2 4 1975 Filed : APR 2 4 % ~ Y ' f i M r . J u s t i c e Frank I. Haswell delivered t h e Opinion of t h e Court. This appeal i s by defendants fr0m.a declaratory judgment and injunction entered a g a i n s t them i n t h e d i s t r i c t c o u r t , Lewis and Clark County. Defendants (hereinafter r e f e r r e d t o as t h e s t a t e ) a r e agencies and individuals responsible f o r t h e a p p r a i s a l of property i n Lewis and Clark County f o r t a x a t i o n pur- poses. P l a i n t i f f s (hereinafter r e f e r r e d t o a s taxpayers ) a r e owners of r e a l property i n Lewis and Clark County, and Helena Property Owners Association, a corporation. Taxpayers brought t h i s s u i t a s a c l a s s a c t i o n , representing themselves and a l l o t h e r owners of r e a l property i n L e w i s and Clark County s u b j e c t t o tax- a t i o n computed upon valuations a s appraised by t h e s t a t e . L e w i s and Clark County and t h e City of Helena appeared a s intervenors, supporting t h e taxpayers' position. A s is t h e p r a c t i c e i n many p a r t s of t h e country, Montana taxes r e a l property and improvements by an appraisal-assessment- levy method. This lawsuit involves t h e f i r s t of t h e s e s t e p s -- t h e a p p r a i s a l . P r i o r t o 1972, the l a s t county-wide a p p r a i s a l i n Lewis and Clark County was one completed i n 1 9 6 2 . A t t h e urging of t h e S t a t e Board of Equalization (predecessor t o t h e Department of Revenue, a defendant h e r e ) , Lewis and Clark County hired a p r i v a t e firm, James R. Laird & Associates, t o conduct a county- wide a p p r a i s a l i n 1972-1973. However, before Lewis and Clark County could use t h a t a p p r a i s a l t o a d j u s t i t s tax r o l l s , s t a t u t o r y and c o n s t i t u t i o n a l changes s h i f t e d r e s p o n s i b i l i t y f o r a p p r a i s a l s t o t h e s t a t e . Section 84-429.7, R.C.M. 1 9 4 7 ; A r t i c l e V I I I , Sec- t i o n 3 , 1972 Montana Constitution. When t h e s t a t e assumed these new r e s p o n s i b i l i t i e s , it w a s determined t h e Laird a p p r a i s a l would be used f o r 1974 Lewis and Clark County assessments. Notice of t h i s proposed a c t i o n prompted t h e taxpayers t o f i l e t h i s s u i t , seeking a d e c l a r a t i o n ~ h a c ~ ~ n p L s i e L O o I tile Laird a p p r a i s a l would v i o l a t e con- s c i t u t i o n a l and s t a t u t o r y l i m i t a t i o n s on t h e s t a t e ' s power t o t a x . The s t a t e h e r e a p p e a l s from t h e d i s t r i c t c o u r t ' s d e c l a r - a t i o n t h a t t h e proposed u s e of t h e Laird a p p r a i s a l would v i o - i a t e equal p r o t e c t i o n , due process, and uniformity requirements of t h e United S t a t e s and Montana C o n s t i t u t i o n s , and Montana s t a t u t e s . The d i s t r i c t c o u r t enjoined use of t h e a p p r a i s a l on t h e s e grounds, and t h e s t a t e a l s o a p p e a l s from t h a t r u l i n g . These i s s u e s a r e presented f o r t h i s C o u r t ' s determin- 1. Would implementation of t h e Laird a p p r a i s a l v i o l a t e c o r i s t l t u t i o n a l and s t a t u t o r y l i m i t a t i o n s on t h e s t a t e ' s power t o a p p r a i s e and t a x ? 2 . Must t h e taxpayers exhaust t h e i r a d m i n i s t r a t i v e remedies b e f o r e p r o t e s t i n g t h e a p p r a i s a l i n t h e c o u r t s ? 3 . Did t h e d i s t r i c t c o u r t err i n g r a n t i n g i n j u n c t i v e r e l i e f ? 4 . Is t h e judgment supported by s u b s t a n t i a l evidence? 5. Should t a x p a y e r s ' motion t o s t r i k e p o r t i o n s of t h e s t a t e ' s a p p e l l a t e b r i e f be granted? However, b e f o r e c o n s i d e r i n g t h e s e issues, two f a c t u a l d i s p u t e s must n e c e s s a r i l y he resolved. F i r s t , t h e s t a t e a l l e g e s t h e following f i n d i n g s of f a c t a r e c o n t r a r y t o t h e evidence presented a t t h e t r i a l : "The r e a p p r a i s a l of p r o p e r t y l y i n g w i t h i n L e w i s and Clark County conducted,by James R . Laird & Associates and adopted by t h e defendant DEPARTMENT OF REVENUE and i t s o f f i c e r s , a g e n t s and employees f o r t h e f i s c a l year 1974-1975 was n o t conducted as a p a r t of a uniform p l a n f o r r e a p p r a i s a l of a l l ;>roperty w i t h i n t h e S t a t e of Montana. " X I V . "The defendant DEPARTMENT OF REVENUE has n o t adopted o r implemented a uniform p l a n f o r t h e i i p p r a ~ s a l , assessment and e q u a l i z a t i o n of a l l l ~ r o p e r t y w i t h i n t h e S t a t e of Montana." Nnile a f a c t u a l d i s p u t e concerning t h e e x i s t e n c e and impiementation of a uniform p l a n i s p r e s e n t e d by t h e r e c o r d , w e f i n d ample evidence supporting t h e quoted f i n d i n g s . For example, t h e a d m i n i s t r a t o r of t h e p r o p e r t y v a l u a t i o n department of t h e Department of Revenue was c a l l e d a s an adverse w i t n e s s by t h e taxpayers. H e t e s t i f i e d t h a t , t o h i s knowledge, t h e r e was no state-wide p l a n f o r r e a p p r a i s a l a t t h e t i m e of t h e Laird a p p r a i s a l . He f u r t h e r t e s t i f i e d t h a t , although some p l a n s have s i n c e been formulated, none would employ t h e same methods used by James R. Laird & A s s o c i a t e s . A review of t h e r e c o r d f i n d s t h i s cestimony t o be u n c o n t r a d i c t e d , and c e r t a i n l y adequate t o support t h e quoted f i n d i n g s of f a c t . Second, is t h e comparison of a p p r a i s a l s between p r o p e r t i e s i n Lewis and Clark County and o t h e r c o u n t i e s . The d i s t r i c t c o u r t found : "The a p p r a i s e d v a l u e of r u r a l and urban improve- ments f o r p r o p e r t y l y i n g w i t h i n Lewis and Clark County f o r t h e f i s c a l year 1973-74 were a s h i g h o r higher than t h e a p p r a i s e d v a l u e of s i m i l a r p r o p e r t i e s l y i n g i n comparable c o u n t i e s o u t s i d e of Lewis and Clark County f o r t h e same p e r i o d of time." " X I . "T'he r e a p p r a i s a l o f p r o p e r t y l y i n g w i t h i n L e w i s and Clark County conducted by James R . Laird s A s s o c i a t e s and adopted by t h e defendant 3EPARTMENT OF REVENUE and i t s o f f i c e r s , a g e n t s and employees f o r implementation f o r t h e f i s c a l year 1974-75 has r e s u l t e d i n p r o p e r t y w i t h i n L e w i s and Clark County being a p p r a i s e d substan- t i a l l y higher than s i m i l a r p r o p e r t y i n comparable c ~ u n t i e s o u t s i d e of L e w i s and Clark County." Again, t h e s t a t e a r g u e s t h e quoted f i n d i n g s a r e con- c r a r y t o t h e evidence presented a t t h e t r i a l and, a g a i n , w e J i s a g r e e . Taxpayers c a l l e d an e x p e r t who, a f t e r being d u l y q u a l i f i e d and, a f t e r l a y i n g t h e proper foundation, formed similar conclusions on the basis of his investigations. The state called an expert who drew different conclusions on the basis of his own investigation. This Court has held on numer- ous occasions--the trier of fact is best situated to determine the credibility of witnesses and weigh their testimony. For a recent discussion of the applicable principles see Holenstein v. Andrews , Mont . , 530 P.2d 476, 32 St.Rep. 41. The testi- mony of the taxpayers1 expert here is sufficient to support the quoted findings of fact. Accepting as facts the absence of a state-wide appraisal plan and the disproportionate appraisal made on Lewis and Clark property, we turn to the legal questions presented. The district court concluded that the adoption of the Laird appraisal would require taxpayers to bear a disproportionate share of Montana's tax burden, in violation of the equal protection requirements of the Fourteenth Amendment to the United States Constitution and Article 11, Section 4, 1972 Montana Constitution. The use of the appraisal was also found to violate the due process require- ments of the Fifth and Fourteenth Amendments to the United States Constitution and Article 11, Sections 17 and 29, 1972 Montana Constitution. Finally, the district court found the appraisal violated the provisions of Title 84, Chapter 4, R.C.M. 1947, which requires general and uniform appraisal, assessment and equalization of all taxable property in the state. In bringing this appeal, the state challenges all of these conclusions of law. We will not discuss the United States Con- stitutional questions in this opinion, since the appeal can be decided on the basis of Montana's Constitution and statutes. Section 84-429.12, R.C.M. 1947, provides in pertinent part : "It is hereby made the duty of the state department of revenue t o implement t h e pro- v i s i o n s of t h i s a c t by providing: " 2 . For a general and uniform method of appraising c i t y and town l o t s . " 3 . For a general and uniform method of appraising r u r a l and urban improvements." A "general and uniform method of appraising" n e c e s s a r i l y r e q u i r e s t h a t each a p p r a i s a l o r r e a p p r a i s a l must be p a r t of a plan which provides t h a t a l l similar p r o p e r t i e s w i l l be valued i n a l i k e manner. The p l a i n meaning of t h e s t a t u t o r y language admits of no other i n t e r p r e t a t i o n . The absence of such a plan, a s discussed e a r l i e r i n t h i s opinion, thus prevents lawful im- plementation of t h e Laird a p p r a i s a l . A r t i c l e 11, Sections 4 and 17, 1972 Montana Constitution compel t h e same r e s u l t . These s e c t i o n s guarantee equal protec- t i o n and due process t o t h e taxpayers aggrieved here. The Laird a p p r a i s a l was found t o increase Lewis and Clark County taxable valuations t o a l e v e l i n excess of valuations of s i m i l a r property i n other counties. The obvious r e s u l t , and t h a t found by t h e d i s t r i c t c o u r t , i s a disproportionate share of t h e t a x burden placed upon L e w i s and Clark County taxpayers. W e find t h e v i o l a t i o n s of t h e c i t e d c o n s t i t u t i o n a l pro- v i s i o n s a r e patent. However, since it has already been established t h a t use of t h e a p p r a i s a l was unlawful under the s t a t u t e c i t e d , we w i l l not lengthen t h i s opinion with a complete discussion of t h e s e c o n s t i t u t i o n a l v i o l a t i o n s . Authorities a r e i n accord, holding t h a t v i o l a t i o n s of s t a t u t o r y uniformity requirements generally r e s u l t i n v i o l a t i o n s of equal protection-due process requirements. 71 Am J u r 2d. S t a t e and Local Taxation, S158, and cases footnoted t h e r e . I n so holding, we a r e aware of t h e abund- ance of a u t h o r i t y which f i n d s no v i o l a t i o n of c o n s t i t u t i o n a l o r s t a t u t o r y mandates i n t h e temporary i n e q u a l i t i e s which accompany a c y c l i c a l plan of r e a p p r a i s a l . A n e x c e l l e n t discussion of a p p l i c a b l e law i n t h i s regard is found i n Hillock v. Bade, 22 Ariz.App. 46, 523 P.2d 97, and i n t h e Annotation, 76 ALR2d 1077. Here, t h e f a t a l flaw i n t h e s t a t e ' s p o s i t i o n i s t h e ab- sence of any plan. Without such a plan, t h e r e is no assurance of uniformity of a p p r a i s a l method o r of s e q u e n t i a l s e l e c t i o n property f o r r e a p p r a i s a l . The s t a t e ' s p o s i t i o n i s even weaker than t h a t of t h e t a x i n g o f f i c i a l s i n Sparks v . McCluskey, 84 Ariz. 283, 327 P.2d 295, 297, where t h e Arizona c o u r t held,: "We cannot subscribe t o t h e proposition t h a t g r o s s l y inequal values by t h e use of a s p e c i f i c method of assessment may be placed on a small p o r t i o n of a c l a s s of property and remain sub- j e c t t o t h e d i s p r o p o r t i o n a t e l y excessive value f o r an i n d e f i n i t e number of years i n t h e f u t u r e u n t i l t h e taxing o f f i c i a l s can g e t around t o using t h e same method upon t h e o t h e r l i k e prop- erties. " I t i s c l e a r t h e s t a t e ' s proposed implementation of t h e Laird a p p r a i s a l i s prohibited by Montana c o n s t i t u t i o n a l and s t a t u t o r y provisions. I n so holding, we do n o t p r o h i b i t t h e use of c y c l i c a l plans of r e a p p r a i s a l , nor do we hold t h a t such a plan could not begin with a r e a p p r a i s a l of t h e property i n Lewis and Clark County. The s t a t e has t h e l e g a l a u t h o r i t y t o determine t h e order of r e a p p r a i s a l . W e hold only t h a t t h e s t a t e ' s d e t e r - minations must be a p a r t of a general and uniform plan f o r re- appraising a l l l i k e property i n t h e s t a t e . The s t a t e a l s o contends t h e taxpayers should have been required t o exhaust t h e i r s t a t u t o r y , a d m i n i s t r a t i v e remedies before bringing t h i s challenge i n t h e c o u r t s . The procedure suggested would r e q u i r e hearings before t h e county t a x appeal board ( s e c t i o n 84-603, R.C.M. 1947) with a subsequent appeal, i f unsuccessful, before t h e s t a t e t a x appeal board ( s e c t i o n 84- 709, R.C.M. 1947). I n an e a r l y construction of t h e s e s t a t u t e s (which have since been amended in respects not relevant here), this Court held, in Belknap Realty Co. V . Simineo, 67 Mont. 359, 365, 215 "The statutes having made ample provision whereby a taxpayer may have any alleged exces- sive or erroneous 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 the sdo2tion of a kund,amentally wrong principle of assessment is shown. " (Emphasis supplied. ) 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 ir Belknap. Were it other- wise, we would have the anomalous situation of an administrative, quasi-judicial board passing on constitutional and statutory questions presented by this appeal. Tax appeal boards are particularly suited for settling disputes over the appropriate valuation of a given piece of property or a particular improvement, and the judiciary cannot properly interfere with that function. Blair v. Potter, 132 Mont. 176, 315 P.2d 177. The instant case does not concern the value of a specific tract of land within Lewis and Clark County, but rather the constitutional and statutory correctness of im- plementing a discriminatory reappraisal. That determination is an appropriate function of the courts. In Conrad v. Managhan, 157 Mont. 335, 485 P.2d 948, this Court noted that when a taxing authority lacks the statutory power to increase appraisals, an aggrieved taxpayer may seek equitable relief in the courts. Conrad speaks both to the ad- ministrative remedy issue and the injunctive relief issue raised by the state in the instant case. The state was outside its statutory authority in attempting to implement the Laird appraisal. Under these facts, taxpayers may proceed in the courts to seek injunctive relief. However, t h e s c a t e argues s e c t i o n 93-4203 (4) , R.C.M. L 9 4 7 , ; + r o n i b i t s i s s u a n c e of ail i n j u n c t i o n preventing execution af p u b l i c s t a t u t e s by p u b l i c o f f i c e r s , and t h a t t h e d i s t r i c t c o u r t h e r e ignored t h a t l i m i t a t i o n on its e q u i t a b l e powers. While t h e c i t e d s e c t i o n does p r o h i b i t e n j o i n i n g t h e execution of s t a t u t o r y d u t i e s , s e c t i o n 84-4505, R.C.M. 1947, provides f o r a n i n j u n c t i o n where t h e t a x , o r a p a r t t h e r e o f sought t o be 2njoined, is i l l e g a l o r unauthorized by law. Heretofore, w e held implementation of t h e Laird a p p r a i s a l would be i l l e g a l and unauthorized. The suggested d i s t i n c t i o n between t h e s t a t u t o r y use of t h e word " t a x " and t h e o p e r a t i v e f a c t of an " a p p r a i s a l n here i s without substance. The ~ a i r d a p p r a i s a l would have been used a s t h e b a s i s f o r computation of t a x e s . This C o u r t ' s r e f u s a l t o recognize t h i s d i s t i n c t i o n i s admittedly c o n t r a r y t o d i c t a contained i n S t a t e e x rel. Keast v. ~ r i e y , 145 Mont. 521, 402 P.2d 405. I n Keast, an i n j u n c t i o n 2 r o h i b i t i n g u t i l i z a t i o n of a c e r t a i n v a l u a t i o n f o r t a x purposes was quashed. The i n j u n c t i o n had been i s s u e d without n o t i c e , and p l a i n t i f f s had shown no i r r e p a r a b l e i n j u r y . 'Those grounds, il-i themselves, were s u f f i c i e n t t o s u p p o r t quashing t h e i n j u n c t i o n , and tile Court e x p r e s s l y recognized t h a t f a c t . Nonetheless, it went on t o f i n d t h e i n j u n c t i o n was a l s o banned by s e c t i o n 93-4203, H.Z.M. 1947. For reasons h e r e t o f o r e s t a t e d , t h a t holding i s e x p r e s s l y o v e r r u l e d . The p r e f e r a b l e law is enunciated i n Hames v . C i t y of Polson, 123 Mont. 469, 479, 215 P.2d 950, where it was held: " * * * p u b l i c bodies and p u b l i c o f f i c e r s may be r e s t r a i n e d by i n j u n c t i o n from proceeding i n v i o l a t i o n of t h e law, t o t h e p r e j u d i c e of t h e p u b l i c , o r t o t h e i n j u r y of i n d i v i d u a l r i g h t s * * * . I ' The p r o p r i e t y of i n j u n c t i v e r e l i e f is a l s o recognized by Montana's s k a t u t e governing payment of t a x e s under p r o t e s t . S e c t i o n 84-4504, "The remedy hereby provided s h a l l supersede t h e remedy of i n j u n c t i o n znd a l l o t h e r remedies which might be invoked t o p r e v e n t t h e c o l l e c t i o n of t a x e s or l i c e n s e s a l l e q e d t o be i r r e a u l a r l v l e v i e d o r demanded, except i n unusual cases A where t h e remedy provided i s deemed by t h e c o u r t t o be inadequate. " (Emphasis s u p p l i e d . ) The i n t e n t of t h e L e g i s l a t u r e t o provide f o r t h e r e t e n t i o n of e q u i t a b l e remedies i n t a x a t i o n c a s e s where s t a t u t o r y remedies prove inadequate is e v i d e n t . To hold t h a t e q u i t a b l e remedies a r e n o t a v a i l a b l e f o r h a l t i n g u n c o n s t i t u t i o n a l and i l l e g a l a p p r a i s a l s would produce t h e s t r a n g e r e s u l t of p r o h i b i t i n g en- j o i n i n g u t i l i z a t i o n of an i l l e g a l a p p r a i s a l while allowing t h e e n j o i n i n g of l e v i e s computed upon t h a t a p p r a i s a l . S e c t i o n 84- 4505, R.C.M. 1 9 4 7 . W e w i l l n o t s o hold. The f a c t s d i s c u s s e d throughout t h i s opinion s u f f i c i e n t l y answer t h e s t a t e ' s c o n t e n t i o n t h a t t h e evidence does n o t support the d i s t r i c t c o u r t ' s judgment. The implementation of t h e Laird a p p r a i s a l f a i l s because t h e r e is s u b s t a n t i a l evidence t h a t it was n o t a p a r t of a g e n e r a l and uniform, state-wide p l a n . W e cannot approve u s e of an a p p r a i s a l which would r e s u l t i n a d i s - c r i m i n a t o r y , d i s p r o p o r t i o n a t e t a x burden on Lewis and Clark County taxpayers, when t h e a p p r a i s a l s u f f e r s t h e d e f i c i e n c i e s a l r e a d y noted. F i n a l l y , t h e t a x p a y e r s ' motion t h a t p o r t i o n s of t h e s t a t e ' s a p p e l l a t e b r i e f should be s t r i c k e n w i l l n o t be considered. Since our d e c i s i o n holds i n f a v o r of t h e taxpayers, t h e y have n o t been p r e j u d i c e d by t h e m a t e r i a l s i n t h e s t a t e ' s brief--whether p r o p e r l y included t h e r e i n o r n o t . The judgment of t h e d i s t r i c t c o u r t i s affirmed. J u s t i c e We concur: