Opinion ID: 2451499
Heading Depth: 1
Heading Rank: 5

Heading: Were the property owners required to exhaust administrative remedies?

Text: K.S.A. 60-907(a) states: [I]njunctive relief may be granted to enjoin the illegal levy of any tax, charge, or assessment, the collection thereof, or any proceeding to enforce the same. K.S.A. 60-907(a) has long been held to allow review of an administrative action taken without statutory authority or contrary to statutory authority or to action taken by an administrative official or board which is permeated with fraud, corruption or conduct so oppressive, arbitrary or capricious as to amount to fraud in connection with the levy of a tax, charge or assessment. Mobil Oil Corporation v. Reynolds, 202 Kan. 179, Syl. ¶ 1, 446 P.2d 715 (1968). Historically, Kansas courts only considered whether a petitioner alleged that the levy, charge, or assessment occurred under these circumstances when asked to determine whether jurisdiction exists under K.S.A. 60-907(a). See Blevins v. Board of Douglas County Comm'rs, 251 Kan. 374, 382, 834 P.2d 1344 (1992); Dutoit, 233 Kan. at 999, 667 P.2d 879; Mobil Oil Corporation v. McHenry, 200 Kan. 211, 234, 436 P.2d 982 (1968). But this court's J. Enterprises decision altered the analysis to include recognition that most tax claims must be determined first by the Board of Tax Appeals (BOTA) (now the Court of Tax Appeals) under the doctrine of administrative remedies. Therefore, to establish jurisdiction under K.S.A. 60-907(a), a plaintiff must not only allege an illegal tax as defined by those earlier cases, but must also make certain the alleged illegality is not administrative in nature because that would require exhaustion of administrative remedies before allowing court review. 253 Kan. at 555, 857 P.2d 666. In J. Enterprises, Harvey County assessed additional property taxes and a penalty after determining the taxpayers improperly excluded some rent-to-own property from their ad valorem personal property tax renditions. The taxpayers filed an action for declaratory and injunctive relief in the district court pursuant to K.S.A. 60-907(a), challenging the assessments. The district court granted an injunction after finding the rent-to-own property was exempt inventory under K.S.A. 1992 Supp. 79-201m. The County appealed. On its own motion, this court asked whether jurisdiction existed in light of its recent holding in another tax case that stated: In the realm of taxes, matters of assessment, exemption, equalization, and valuation are administrative in character. [Citation omitted.] Under Kansas law, it would be unwarranted for a court to entertain a tax suit on any of these matters of administrative expertise where administrative remedies had not been pursued. Dean v. State, 250 Kan. 417, 421, 826 P.2d 1372, cert. denied 504 U.S. 973, 112 S.Ct. 2941, 119 L.Ed.2d 566 (1992). After reviewing the existing statutory and regulatory scheme governing taxes, which appointed BOTA as the paramount taxing authority in the state, the J. Enterprises court held that the doctrine of exhaustion of administrative remedies applied to claims raised under K.S.A. 60-907(a). This meant that a claim for injunctive tax relief could only be filed directly with the district court if the plaintiff's claims were judicial in character. If the plaintiff's claims were administrative in nature, they must be filed with BOTA. We said this distinction maintained the proper relationship between the courts and administrative agencies. J. Enterprises, 253 Kan. at 555, 857 P.2d 666. The J. Enterprises court reconciled the exhaustion of remedies analysis with the previous K.S.A. 60-907(a) cases by finding that a claim was judicial in nature if the plaintiff alleged an official or board acted without authority or if their actions were permeated with fraud, corruption, or conduct so oppressive, arbitrary, or capricious as to amount to fraud. 253 Kan. at 559, 857 P.2d 666. When determining whether a claim is administrative or judicial, the J. Enterprises court held jurisdiction under K.S.A. 60-907(a) depends on the nature of the actual relief sought. 253 Kan. at 555-56, 857 P.2d 666. Otherwise, a plaintiff could bypass administrative review in nearly all cases simply by alleging the tax was illegal. 253 Kan. at 556, 857 P.2d 666. Applying these rules to the facts in that case, the J. Enterprises court looked beyond the plaintiffs' facial claim that an illegal tax was imposed and emphasized that none of the parties challenged the validity of the tax exemption statute. Instead, the question before the court was whether the County erroneously interpreted that statute. It then held that the plaintiffs' claim was not judicial in nature because the plaintiffs did not assert the County had acted without authority, or that the action was arbitrary, oppressive, or capricious. Instead, the claim was administrative in nature because it involved whether an exemption applied, which required statutory interpretation. 253 Kan. at 560, 857 P.2d 666. As such, jurisdiction did not arise under K.S.A. 60-907(a), and the case was dismissed for failure to exhaust administrative remedies. It is also important to note there is a distinction between the K.S.A. 19-223 analysis and the K.S.A. 60-907(a) analysis when it comes to the use of terms. Under a K.S.A. 19-223 analysis, the terms judicial, administrative, and legislative describe the nature of the governmental conduct, which in this case is the action by the Board. Dutoit, 233 Kan. at 998-99, 667 P.2d 879 (K.S.A. 19-223 affords jurisdiction when a board of county commissioners has engaged in judicial or quasi-judicial action.). In a K.S.A. 60-907(a) analysis, the terms judicial and administrative refer to the nature of the plaintiff's claims. Admittedly, the use of the same terms in our caselaw is confusing and imposes a more thoughtful consideration when determining whether K.S.A. 60-907(a) applies. Accordingly, we must determine whether the nature of the property owners' surviving claims as outlined above is judicial or administrative in character. To establish jurisdiction under K.S.A. 60-907(a), a claim must allege the County either acted without authority or that its actions were so arbitrary, oppressive, or capricious that they amounted to fraud. See J. Enterprises, 253 Kan. at 559, 857 P.2d 666. The property owners' claims that survived the jurisdictional bar of K.S.A. 19-223 as discussed above must be individually examined to determine if any pass muster under J. Enterprises. The claim that the Board exceeded its statutory authority in violation of the County Home Rule Act, K.S.A. 19-101 et seq., when it enacted the self-help and abatement remedy provisions in Section 6 of Resolution 2005-01 is clearly judicial in nature because the property owners allege the Board acted without authority. And unlike the claim in J. Enterprises involving a Board's interpretation of a tax exemption statute, the property owners' claim here pertains to whether the County had authority to act as it did by adopting Section 6 of Resolution 2005-01 under the County Home Rule statute. This requires judicial analysis of K.S.A. 19-101d to determine the constitutionality of the Board's resolution and actions. The other claims stemming from the remaining miscellaneous attacks essentially allege two wrongs because the property owners argue Resolution 2005-01 was unconstitutional as applied to them and that the County's conduct was arbitrary and capricious. These are the claims alleging the county environmental technician assured them the County would not initiate its own cleanup as long as work was progressing, shortly before they received a letter from the county counselor requiring compliance within 21 days; and the County's decision to enter the property and begin work despite the progress the property owners had made to comply with the order. Additionally, the property owners claim the County engaged in arbitrary and capricious conduct because the work performed exceeded any legitimate goals of abating dangerous conditions and the County acted arbitrarily by beautifying the property. And even though the property owners' claims could have been much better articulated, the nature of their claims clearly assert that the County acted without any authority and/or the County's actions were permeated with conduct so arbitrary and capricious that it amounted to fraud. We find these claims are judicial in nature and could be filed directly with the district court pursuant to K.S.A. 60-907(a). In summary, we hold the property owners satisfied the jurisdictional burdens under K.S.A. 60-907(a) on the following issues: (1) the County exceeded its statutory authority in violation of the County Home Rule Act when the Board enacted the Resolution's self-help and abatement remedy provisions; and (2) Resolution 2005-01 was unconstitutional as applied, and the County engaged in arbitrary and capricious conduct as noted above. Normally, our holding would require remand to the district court to determine the merits of the surviving claims, but the district court went beyond the jurisdiction question and found for the County on the merits. The property owners appealed both decisions to the Court of Appeals, but that court stopped short of considering the merits of any claims when it found the entire case was jurisdictionally barred by K.S.A. 19-223. Since we have found that the Court of Appeals erred in part in its jurisdictional ruling, we remand to the Court of Appeals to determine whether the district court erred on the merits as it relates to the surviving issues we have identified. The Court of Appeals must determine whether the district court properly granted summary judgment on those claims that were not jurisdictionally barred. The decision of the Court of Appeals is affirmed in part, reversed in part, and remanded with directions. JAMES A. PATTON, District Judge, assigned. [1]