No. 14539
I N THE S P E J COUHT O THE STATE O ICNTANA
U R M3 F F
1979
M. F. KELT;ER, T M SEXSTAD, J
O I WODAHL,
M
AKI' WENZEK, GEORGE BUZZAS e t a1 , .
Petitionersand Appellants,
IlEPARRBW O FE t E O THE STATE O M T N ,
F ! WW F F XA A
an o f f i c i a l agency of the S t a t e of Wntana;
CASCADE COUNTY, MXTANA, a p o l i t i c a l subdivision
of the S t a t e of Wntana; and THE CITY O GREAT F
FALLS, PINTANA, a municipal corporation of the
S t a t e of Wntana,
Respondents and Respondents.
@ p a l from: D i s t r i c t C o u r t of t h e Eighth J u d i c i a l D i s t r i c t ,
Honorable Joel G. Mth, Judge presiding.
Counsel of Record:
For Appellants:
Graybill, O s t r e m , Warner & Crotty, G r e a t F a l l s , Wntana
Donald O s t r e m argued, Great F a l l s , Wntana
For Respondents:
R. Bruce MSinnis argued, Dept. of Revenue, Helena, mntana
J. Fred Bou~deau,County Attorney, Great F a l l s , Wntana
David V. G l i k o , City Attorney, G r e a t F a l l s , Wntana
Suhitted: June 1 2 , 1979
mid&: JUL 1 1 1373
- r;
,.
3
s t
Filed: 7 - . . - .
M r . J u s t i c e John Conway H a r r i s o n d e l i v e r e d t h e Opinion of
t h e Court.
T h i s a p p e a l i s b r o u g h t by t a x p a y e r s i n t h e C i t y of
G r e a t F a l l s from a n o r d e r o f t h e D i s t r i c t C o u r t , Cascade
County, d i s m i s s i n g t h e i r a c t i o n f o r d e c l a r a t o r y judgment.
P l a i n t i f f s - a p p e l l a n t s sought a d e c l a r a t i o n t h a t t h e defen-
d a n t S t a t e Department of Revenue had i l l e g a l l y d e n i e d them
t h e t a x a t i o n a p p r a i s a l and a s s e s s m e n t b e n e f i t s of t h e Mon-
t a n a Economic and Land Development Act (MELDA), which became
e f f e c t i v e on J a n u a r y 1, 1976. C h a p t e r 549, Laws of Montana
1975. The D i s t r i c t C o u r t r u l e d t h a t p l a i n t i f f s had n o t
e x h a u s t e d t h e i r a d m i n i s t r a t i v e r e m e d i e s and w e r e t h e r e f o r e
n o t e n t i t l e d t o j u d i c i a l review.
A b r i e f r e v i e w of M L A a s s i s t s a n u n d e r s t a n d i n g of t h e
ED
p a r t i e s ' contentions. A s o r i g i n a l l y enacted, M L A provided
ED
f o r c l a s s i f i c a t i o n of v a r i o u s t y p e s of l a n d a c c o r d i n g t o t h e
l a n d ' s d e s i r a b l e u s e and c r e a t e d a system of t a x a t i o n de-
s i g n e d t o encourage such d e s i r a b l e u s e . C h a p t e r 549, Sec-
t i o n s 7 t h r o u g h 20, L a w s of Montana 1975, c o d i f i e d a s s e c -
t i o n s 84-7507 through-7520, R.C.M. 1947, r e p e a l e d C h a p t e r
582, S e c t i o n 20, Laws of Montana 1977. One e l e m e n t of t h e
Act w a s a p r o v i s i o n f o r r e v i e w and a p p r o v a l of a l o c a l
g o v e r n i n g b o d y ' s own p l a n f o r c l a s s i f i c a t i o n of l a n d w i t h i n
its jurisdiction. S e c t i o n 84-7505, R.C.M. 1947, r e p e a l e d
C h a p t e r 582, S e c t i o n 20, Laws of Montana 1977. S e c t i o n 84-
7505(5) f u r t h e r p r o v i d e d t h a t i f a c i t y o r c o u n t y g o v e r n i n g
body had f a i l e d t o s u b m i t a s u i t a b l e l a n d u s e c l a s s i f i c a t i o n
p l a n by J a n u a r y 2 , 1978, t h e S t a t e Department of Community
A f f a i r s would p r e p a r e t h e p l a n .
The C i t y o f G r e a t F a l l s a d o p t e d a p l a n f o r l a n d u s e
c l a s s i f i c a t i o n under M L A on A p r i l 26, 1977, by C i t y Com-
ED
m i s s i o n R e s o l u t i o n No. 6941. On August 1 7 , 1977, t h e S t a t e
Department o f Revenue n o t i f i e d t h e C i t y t h a t t h e p l a n d i d
n o t conform t o MELDA's p r o v i s i o n s , and t h u s p e r s o n s a c t i n g
i n r e l i a n c e upon t h e C i t y ' s l a n d u s e p l a n would n o t r e c e i v e
M L A tax treatment.
ED
P l a i n t i f f s a r e c i t i z e n s o f G r e a t F a l l s who expended
money f o r c o n s t r u c t i o n and improvement i n r e l i a n c e upon t h e
C i t y ' s M L A plan.
ED A f t e r l e a r n i n g o f t h e Department o f
R e v e n u e ' s d e t e r m i n a t i o n t h a t t h e p l a n d i d n o t conform, t h e y
s o u g h t d i r e c t r e l i e f from t h e Department by r e q u e s t i n g M L A
ED
treatment of t h e i r investments. The Department r e f u s e d t o
implement M L A t r e a t m e n t , and p l a i n t i f f s f i l e d t h e i r a c t i o n
ED
before t h e D i s t r i c t Court. The p e t i t i o n b e f o r e t h e D i s t r i c t
C o u r t r e q u e s t e d a d e c l a r a t i o n t h a t t h e Department o f Revenue
had a c t e d i l l e g a l l y i n r e f u s i n g t o implement t h e C i t y ' s
M L A p l a n , and f u r t h e r t h a t p l a i n t i f f s were e n t i t l e d t o
ED
M L A t a x t r e a t m e n t d e s p i t e t h e r e p e a l o f t h e A c t by t h e
ED
1977 L e g i s l a t u r e . Paragraphs X I , X I I I , and X I V of p l a i n -
t i f f s ' complaint.
A s n o t e d a b o v e , t h e D i s t r i c t C o u r t d i s m i s s e d t h e com-
p l a i n t , r u l i n g t h a t p l a i n t i f f s w e r e f i r s t required t o seek
a d m i n i s t r a t i v e r e v i e w o f t h e Department o f R e v e n u e ' s d e t e r -
m i n a t i o n b e f o r e t h e S t a t e Tax Appeal Board:
"The p r o v i s i o n s o f t h e s a i d s t a t u t e a r e a n y t h i n g
b u t s i m p l e a n d r e q u i r e s a g r e a t d e a l o f knowledge
a n d e x p e r i e n c e i n l a n d u s e and d e v e l o p m e n t , l a n d
c l a s s i f i c a t i o n , zoning, a p p r a i s a l s , assessments
a n d t a x a t i o n , i n o r d e r f o r t h e reader t o f u l l y
u n d e r s t a n d and comprehend t h e l e g i s l a t i v e i n t e n t
. .. I t i s t o be noted i n t h i s connection t h a t
t h e S t a t e Tax Appeal Board h a s j u r i s d i c t i o n t o
r e v i e w d e c i s i o n s o f t h e Department of Revenue i n
r e g a r d t o p r o p e r t y assessments, t a x e s and penal-
t i e s . S e c t i o n 8 4 - 7 0 8 ( 3 ) , R.C.M. 1947, as amended.
"Because of t h e c o m p l e x i t y of t h e s t a t u t e and t h e
n e c e s s i t y of b r i n g i n g s t a t e agency a d m i n i s t r a t i v e
e x p e r t i s e and knowledge t o b e a r on t h e implement-
i n g o f s u c h a comprehensive l a n d development and
t a x i n c e n t i v e program, t h i s c a s e i s a n example
of t h e reason f o r t h e r u l e r e q u i r i n g exhaustion
o f a d m i n i s t r a t i v e remedies b e f o r e c o u r t s w i l l
i n t e r f e r e with a d m i n i s t r a t i v e proceedings."
P l a i n t i f f s b r i n g two i s s u e s on a p p e a l :
1. Whether t a x p a y e r s have a n a d m i n i s t r a t i v e remedy
b e f o r e t h e S t a t e Tax Appeal Board c o n c e r n i n g a d e c i s i o n by
t h e S t a t e Department of Revenue which d e c l a r e d a c i t y l a n d
u s e p l a n n o t t o b e i n compliance w i t h MELDA.
2. Whether, i f s u c h a remedy e x i s t s , t h e t a x p a y e r s
were r e q u i r e d t o p u r s u e t h a t remedy b e f o r e b r i n g i n g a n
a c t i o n i n D i s t r i c t C o u r t t o o b t a i n a d e c l a r a t i o n of t h e
meaning o f l e g i s l a t i o n .
Under t h e f i r s t i s s u e p l a i n t i f f s a r g u e t h a t t h e Depart-
ment o f Revenue d i d n o t i s s u e any o r d e r from which t h e y
could appeal. They c o n t e n d t h a t t h e C i t y of G r e a t F a l l s was
t h e o n l y e n t i t y c a p a b l e of p u r s u i n g a n a p p e a l on t h e Depart-
m e n t ' s r e f u s a l t o implement t h e G r e a t F a l l s M L A p l a n .
ED
P l a i n t i f f s w e r e n o t p a r t i e s t o any p r o c e e d i n g s b e f o r e t h e
Department of Revenue, and d i d n o t s u b m i t any p l a n t o i t .
T h e r e f o r e , t h e y a r g u e , t h e y have no s t a n d i n g t o a p p e a l t o
t h e S t a t e Tax Appeal Board.
The Department of Revenue r e s p o n d s t h a t i t had i s s u e d
two r u l i n g s , b o t h of which p l a i n t i f f s c o u l d have a p p e a l e d t o
t h e Tax Appeal Board. The f i r s t i s a l e t t e r of August 1 7 ,
1977, by which t h e Department informed t h e C i t y t h a t i t s
l a n d u s e p l a n d i d n o t comply w i t h MELDA. The second i s a
l e t t e r d a t e d December 1 9 , 1977, which w a s a d i r e c t r e s p o n s e
t o the p l a i n t i f f s 1 attorney. The Department c o n t e n d s t h a t
t h e s e c o n s t i t u t e d f i n a l d e c i s i o n s which a f f e c t e d t h e t a x -
p a y e r s , and t h e t a x p a y e r s c o u l d have a p p e a l e d t o t h e Tax
Appeal Board u n d e r s e c t i o n 8 4 - 7 0 8 ( 3 ) , R.C.M. 1947.
The s c o p e o f d e c i s i o n s by t h e Department of Revenue
which a r e a p p e a l a b l e t o t h e S t a t e Tax Appeal Board i s s e t
f o r t h i n s e c t i o n 8 4 - 7 0 8 ( 3 ) , R.C.M. 1947:
"To h e a r a p p e a l s from d e c i s i o n s o f t h e Department
i n regard t o business licenses, property assess-
m e n t s , t a x e s and p e n a l t i e s . "
Thus, when p r o p e r t y a s s e s s m e n t d e c i s i o n s a r e r e n d e r e d
by t h e Department o f Revenue, t h e p r o p e r t y owner a f f e c t e d
m u s t o r d i n a r i l y f i r s t s e e k r e v i e w b e f o r e t h e Tax Appeal
Board. Two e x c e p t i o n s t o t h i s r u l e , however, have been
r e c o g n i z e d by t h i s C o u r t i n p r e v i o u s d e c i s i o n s , t h e f i r s t o f
which i s r e l e v a n t t o t h i s i s s u e , t h e second t o p l a i n t i f f s '
second i s s u e .
I n S l e t t e n C o n s t r u c t i o n Company v . C i t y o f G r e a t F a l l s
( 1 9 7 3 ) , 1 6 3 Mont. 307, 516 P.2d 1149, a Montana c o n s t r u c t i o n
c o r p o r a t i o n , S l e t t e n , b r o u g h t a mandamus a c t i o n b e f o r e t h i s
Court i n a n o r i g i n a l proceeding. S l e t t e n sought t o have set
a s i d e a c e r t i f i c a t e o f r e s i d e n c y which t h e Department o f
Revenue had i s s u e d t o a n o u t - o f - s t a t e c o r p o r a t i o n , Acton,
a n d t o o b t a i n a w r i t o f mandamus d i r e c t i n g t h e c i t y t o
a c c e p t i t s b i d f o r a p u b l i c works p r o j e c t r a t h e r t h a n A c t o n ' s .
The Supreme C o u r t g r a n t e d t h e r e q u e s t e d r e l i e f d e s p i t e t h e
D e p a r t m e n t ' s o b j e c t i o n t h a t S l e t t e n had f a i l e d t o e x h a u s t
i t s a d m i n i s t r a t i v e remedy b e f o r e t h e Tax Appeal Board.
S l e t t e n , i t h e l d , was n o t bound by t h e r u l e b e c a u s e i t had
n o t p a r t i c i p a t e d i n t h e p r o c e e d i n g s by which t h e Department
had d e t e r m i n e d t h a t Acton q u a l i f i e d f o r a c e r t i f i c a t e o f
residency:
"We r e c o g n i z e t h a t g e n e r a l p r i n c i p l e t h a t o r d i -
n a r i l y a d m i n i s t r a t i v e remedies must b e exhausted
b e f o r e applying f o r j u d i c i a l review. However,
t h i s p r i n c i p l e h a s no a p p l i c a t i o n t o t h e i n s t a n t
c a s e . S l e t t e n was n o t a p a r t y t o t h e a d m i n i s t r a -
t i v e p r o c e e d i n g s awarding t h e c e r t i f i c a t e of
r e s i d e n c y t o Acton, had no n o t i c e t h e r e o f , and
c o u l d h a r d l y b e s a i d t o have a n a d m i n i s t r a t i v e
remedy under such c i r c u m s t a n c e s . " 163 Mont. a t
311, 516 P.2d a t 1151.
The Department s e e k s t o d i s t i n g u i s h S l e t t e n by a r g u i n g
t h a t while t h e p l a i n t i f f i n t h a t case d i d not p a r t i c i p a t e i n
t h e p r o c e e d i n g s by which Acton was g r a n t e d a c e r t i f i c a t e of
r e s i d e n c y , p l a i n t i f f s i n t h e p r e s e n t c a s e w e r e v e r y much
i n v o l v e d i n t h e d e t e r m i n a t i o n of whether t h e Department of
Revenue would implement t h e C i t y ' s M L A p l a n .
ED The Depart-
ment r e l i e s on two f a c t s t o s u p p o r t t h i s argument. First,
i t s t a t e s t h a t v a r i o u s i n d i v i d u a l s who a r e among t h e p l a i n -
t i f f s a p p e a r e d b e f o r e t h e Department i n a n a d m i n i s t r a t i v e
h e a r i n g on J u n e 9, 1977, b e f o r e t h e D e p a r t m e n t ' s d e t e r -
m i n a t i o n o f whether t o implement t h e p l a n w a s made. Second,
t h e Department s t a t e s t h a t p l a i n t i f f s b r o u g h t t h e m s e l v e s
w i t h i n t h e a d m i n i s t r a t i v e p r o c e s s by r e q u e s t i n g a recon-
s i d e r a t i o n o f t h e r u l i n g of December 6 , 1977. Without
f u r t h e r a n a l y s i s , t h e Department c o n c l u d e s t h a t t h e s e f a c t s
bring p l a i n t i f f s squarely within t h e provisions of Matter of
DeWar ( 1 9 7 6 ) , 169 Mont. 437, 548 P.2d 149. DeWar i s a c a s e
i n v o l v i n g t h e j u r i s d i c t i o n of t h e c i t y p o l i c e commission of
G r e a t F a l l s and makes mention n e i t h e r o f t h e Tax Appeal
B o a r d ' s j u r i s d i c t i o n n o r of t h e S l e t t e n d e c i s i o n . I t does
r u l e , however, t h a t a d e c l a r a t o r y judgment a c t i o n i s n o t t h e
p r o p e r v e h i c l e f o r o b t a i n i n g r e l i e f from a n a d m i n i s t r a t i v e
r u l i n g "within t h e j u r i s d i c t i o n of a d m i n i s t r a t i v e bodies o r
commissions i n t h e p r o c e s s of e x e r c i s i n g t h e i r q u a s i - j u d i -
c i a 1 f u n c t i o n s and/or power." 169 Mont. a t 445, 548 P.2d a t
I t i s n o t c l e a r why t h e Department r e l i e s on D e W a r ,
o t h e r than f o r i t s general statement t h a t a p a r t y aggrieved
by a d m i n i s t r a t i v e a c t i o n must f i r s t e x h a u s t i t s a d m i n i s t r a -
t i v e remedies. The c a s e d o e s n o t d i s c u s s t h e s i t u a t i o n o f a
nonparty. Nothing w i t h i n M L A a p p e a r s t o c o n f e r p a r t y
ED
s t a t u s t o a t a x p a y e r who l i v e s w i t h i n t h e j u r i s d i c t i o n of a
g o v e r n i n g body which s e e k s t o have i t s M L A p l a n imple-
ED
mented by t h e Department of Revenue. There i s no b a s i s
suggested i n t h e Department's b r i e f f o r c o n f e r r i n g t h a t
s t a t u s on a l l p e r s o n s who e i t h e r a p p e a r a t a p u b l i c h e a r i n g
on t h e proposed p l a n o r who r e q u e s t a r e c o n s i d e r a t i o n of t h e
D e p a r t m e n t ' s d e c i s i o n a f t e r i t h a s a l r e a d y been made. There
a p p e a r s no r e a s o n t h e n , t o t a k e t h e p r e s e n t c a s e o u t of t h e
S l e t t e n r u l e by d e c l a r i n g t h a t p l a i n t i f f s had s u a s p o n t e
made t h e m s e l v e s p a r t i e s t o t h e C i t y ' s a p p l i c a t i o n .
P l a i n t i f f s ' second i s s u e i s d i r e c t e d t o t h e e x h a u s t i o n
of a d m i n i s t r a t i v e remedies. Having found t h e y a r e n o t
p r o p e r p a r t i e s f o r p u r p o s e s of a p p e a l t o t h e Tax Appeal
Board, t h e C i t y b e i n g t h a t p a r t y , w e w i l l examine t h e i s s u e
a s t o t h e a c t i o n t a k e n by t h e Department of Revenue a s b e i n g
o n e done u n d e r t h e " f u n d a m e n t a l l y wrong p r i n c i p l e s of a p p r a i s a l . "
P l a i n t i f f s a r g u e t h a t t h e d e t e r m i n a t i o n made by t h e
Department o f Revenue was n o t an a s s e s s m e n t d e c i s i o n such a s
c o n t e m p l a t e d by s e c t i o n 84-708(3) t o b e w i t h i n t h e Appeal
B o a r d ' s j u r i s d i c t i o n , b u t r a t h e r an i n t e r p r e t a t i o n o f law
which must b e d e t e r m i n e d by t h e j u d i c i a r y .
A s d i s c u s s e d above, t h e r e a r e two e x c e p t i o n s which t h i s
C o u r t h a s p r e v i o u s l y announced t o t h e r u l e of e x h a u s t i o n of
t a x a p p e a l board r e m e d i e s . The second a p p l i e s t o t h i s
issue.
I n L a r s o n v . S t a t e ( 1 9 7 5 ) , 166 Mont. 449, 534 P.2d 854,
t h e C o u r t h e l d t h a t a p l a i n t i f f need n o t e x h a u s t a d m i n i s t r a -
t i v e r e m e d i e s b e f o r e t h e Tax Appeal Board i f t h e q u e s t i o n t o
b e d e t e r m i n e d i n v o l v e d a n a l l e g a t i o n t h a t t h e Department o f
Revenue had u s e d a " f u n d a m e n t a l l y wrong p r i n c i p l e " o f ap-
praisal:
" ' T h e s t a t u t e s h a v i n g made ample p r o v i s i o n whereby
a t a x p a y e r may h a v e a n y a l l e g e d e x c e s s i v e o r er-
- -
roneous assessment o r v a l u a t i o n of h i s p r o p e r t y
r e v i e w e d by t h e c o u n t y and s t a t e b o a r d s o f equa-
l i z a t i o n , t h i s remedy- i s e x c l u s i v e e x c e p t i n
c a s e s where f r a u d - - a d o p t i o n o f - f u n d a -
or t g -a
m e n t a l l y wrong p r i n c i p l e o f a s s e s s m e n t i s shown.'
(Emphasis s u p p l i e d . ) " 1 6 6 ~ o n t .a t 456,534 P.2d
a t 858, q u o t i n g Belknap R e a l t y Co. v . Simineo
( 1 9 2 3 ) , 67 Mont. 359, 365, 215 P . 659, 661.
I n Larson t h e p l a i n t i f f s challenged a l o c a l a p p r a i s a l
s y s t e m which had been u t i l i z e d p r i o r t o t h e s t a t e w i d e ap-
p r a i s a l r e q u i r e d u n d e r t h e 1972 Montana C o n s t i t u t i o n . The
C o u r t h e l d t h a t t h i s came w i t h i n t h e Belknap R e a l t y r u l e
because such a l o c a l a p p r a i s a l w a s a l l e g e d t o be a "funda-
m e n t a l l y wrong p r i n c i p l e " o f a s s e s s m e n t , t h e r e b y r e q u i r i n g a
l e g a l , n o t a n administrative determination:
"The S t a t e ' s u s e o f a n u n c o n s t i t u t i o n a l and il-
l e g a l a p p r a i s a l h e r e i s t h e type of 'fundamentally
wrong p r i n c i p l e ' o f a p p r a i s a l f o r which s p e c i f i c
e x c e p t i o n was made i n Belknap. Were i t o t h e r w i s e ,
w e would h a v e t h e anomalous s i t u a t i o n o f a n ad-
m i n i s t r a t i v e , q u a s i - j u d i c i a l b o a r d p a s s i n g on con-
s t i t u t i o n a l and s t a t u t o r y q u e s t i o n s p r e s e n t e d by
t h i s appeal." 166 Mont. a t 456-57, 534 P.2d a t
858.
I n t h e p r e s e n t case, t h e same "anomaly" would a r i s e i f
t h e Tax Appeal Board w e r e f i r s t r e q u i r e d t o h e a r and d e t e r -
mine p l a i n t i f f s ' c o m p l a i n t . P l a i n t i f f s do n o t c h a l l e n g e a n y
p a r t i c u l a r a p p r a i s a l o r assessment b u t do c h a l l e n g e t h e
D e p a r t m e n t ' s d e c i s i o n n o t t o u t i l i z e MELDA. Additionally,
t h e y s e e k a d e t e r m i n a t i o n of t h e e f f e c t o f M E L D A ' s r e p e a l ,
c l e a r l y not an administrative question. These i s s u e s a r e o f
e q u a l l e g a l s i g n i f i c a n c e t o t h o s e r a i s e d i n Larson because
t h e y i n v o l v e t h e "fundamental p r i n c i p l e s " t o be u t i l i z e d i n
a n a p p r a i s a l of and a s s e s s m e n t on p l a i n t i f f s ' p r o p e r t y .
P l a i n t i f f s should n o t be required t o p r e s e n t t h e i r c a s e t o
t h e Tax A p p e a l s Board.
The judgment o f t h e D i s t r i c t C o u r t i s r e v e r s e d w i t h
d i r e c t i o n s t o h e a r and d e t e r m i n e p l a i n t i f f s ' a c t i o n f o r
d e c l a r a t o r y judgment.
W e concur:
4'A-U. % A A ) e ,
Chief J u s t i c e