NO. 86-474
IN THE SUPREME COURT OF THE STATE OF MONTAEA
1987
DAN O'NEILL,
Petitioner and Respondent,
-vs-
DEPARTMENT OF REVENUE OF THE STATE
OF MONTANA,
Respondent and Appellant.
APPEAL FROM: The District Court of the Second Judicial District,
In and for the County of Silver Bow,
The Honorable Arnold Olsen, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Larry Schuster argued, Dept. of Revenue, Helena,
Montana
For Respondent:
Dunlap & Caughlan; Deidre Caughlan argued, Butte,
Montana
Submitted: April 2 9 , 1987
~ ~ ~ i d ~ d 22, 1987
June :
Mr. Chief Justice J. A. Turnage delivered the Opinion of the
Court.
The Department of Revenue (DOR) appeals a July 24,
1986, order of the Second Judicial District Court, Silver Bow
County. The order reversed the State Tax Appeal Board's
valuation of O'Neill's property in 1982, accepted O'Neill's
valuation of the property, and ordered that O'Neill's taxes
be adjusted accordingly. We vacate and remand to the Dis-
trict Court for further development of the record.
DOR presented five issues for our review:
(1) Did the District Court err by substituting its
judgment for that of STAB, thereby exceeding its scope of
authority under 5 2-4-704, MCA?
(2) Did the District Court err by allowing O'Neill to
testify at the judicial review of the STAB decision, without
the showing of good cause required by S 15-2-303(4), MCA?
(3) Did the District Court err by allowing O'Neill to
supplement the administrative record with an affidavit,
without the showing of good cause required by 5 15-2-303 (4),
MCA?
(4) Did the District Court err by infusing its own
opinion of O'Neill's property value into its decision?
(5) Did the District Court err by allowing O'Neill to
pay his delinquent taxes, without an accompanying payment of
accrued penalties and interest?
At oral argument, we also raised the following issue:
(6) Does 5 15-7-308, MCA, prohibit DOR from revealing
specific information about the relevant comparable sales
which DOR used in appraising O'Neill's property?
Daniel O'Nei11 owns two parcels of commercial real
estate on Harrison Avenue in Butte, Montana. The first
parcel is an unimproved acre at 3755 Harrison Avenue. The
second parcel consists of 7.5 acres containing a motel and
O'Neill's residence at 3655 Harrison Avenue. In 1982, the
Department of Revenue valued the first parcel at $63,398 and
the second parcel at $166,320, based on the realty transfer
certificates of comparable sales in the area.
However, O'Neill asserted that his property values were
$18,893 and $79,600, respectively. O'Neill unsuccessfully
appealed the DOR valuations to STAB. He then petitioned the
District Court for judicial review under the provisions of
S 15-2-303(1), MCA, which states: "Any party to an appeal
before the state tax appeal board who is aggrieved by a final
decision in a contested case is entitled to judicial review
under this [301 et seq.] part." The District Court reversed
the STAB decision, and DOR appeals.
Issues 1-3
Following its review, the District Court made these
findings of fact:
XII. The the use of [Lescovar Motors,
Copper King Inn, and Wendy's Hamburgers]
properties for comparable market values
is - - - true reflection - - market
not a of the
value - - sales are speculative and
as the
further (2) of the comparable~ are too
far from the subject to be of
value in establishing market value in
close proximity.
XIII. That such values set for purposes
of appraisal of the Plaintiff's property
are inconclusive as a test of true
market value. It is 2 personal observa-
- -of this Judge - - Plaintiff's
tion - that the
property - - generate business
does not
comparable to other motels, even minor
active motels on Harrison Avenue. One
motel larger than Defendant's [sic]
motel closes for the winter months
because of lack of occupancy. The
Butte-Silver Bow business community has
lost, as of the date of the appraisal
herein, at least one-third of its there-
tofore business. The Department of
Revenue is clearly wrong and it should
have to make another appraisal. [Empha-
sis added.]
The District Court made the following conclusions of
law:
2. That the system of appraisal using
speculative land purchases as applied is
inconsistent with providing a general
and uniform method of classifying lands
in accordance - - market value
with true
fails to provide an equitable and uni-
form basis of assessment of the Plain-
tiff's property when compared with the
market value of the property.
3. That similar properties - - -
in the same
area of Harrison Avenue have been ap-
-- i
I
raised differentlv as the Plaintiff
.'
demonstrated by comparing his property
to that of the Hamm's Motel.
4. That a review of the entire record
together with the evidence presented at
the hearing indicates that the Board's
denial of the Plaintiff's appeal and
retaining the appraisal value of the
subject property on the tax rolls is
clearly erroneous in view of the r e l c
able probative and substantial evidence
on the whole record. [Emphasis added.]
DOR contends that the District Court exceeded its scope
of review under § 2-4-704, MCA. DOR argues that the District
Court has the expertise in ascertaining the law, but STAB has
the expertise in ascertaining the facts. DOR asserts that
STAB, as the trier of fact, was entitled to determine the
proper appraised value of O'Neill's property.
Issues 1, 2 and 3 are interrelated and require discus-
sion of § 2-4-703, 5 2-4-704, and § 15-2-303 (4), MCA. Our
ana.lysis of these issues begins with the Montana
Administrative Procedure Act (MAPA) S 2-4-703, MCA, which
requires prior permission of the court before any additional
evidence can be presented to an administrative agency:
If, before the date set for hearing,
application is made to the court for
leave to present additional evidence
-- -- . - court mav order - -
-
- the - - - -
- -
L
that the
additional evidence be taken before the
agency upon conditionidetermined -
the
court. [Emwhasis added.1
Under § 2-4-703, MCA, when the court has allowed such
additional evidence, it may be presented to the agency, but
not to the court. This limitation accords with the standard
of review of contested MAPA cases under S 2-4-704, MCA, which
confines the court's review to the record:
(1) The review shall be conducted by the
court without a jury and shall - -
be con-
fined - - record
to the ... The court,
upon request, shall hear oral argument
and receive written briefs.
(2) - court may not substitute its
The
judgment - - - - the agency - -
for that of as to
- fact. - - court may - questions
the weight of the evidence on
of The affirm the
- -
decision of the agency or remand the
case for further proceedings. The court
may reverse or modify the decision if
substantial rights of the appellant have
been prejudiced ... [Emphasis added.]
In contrast, the court's review of contested STAB
decisions is - confined to the record.
not Section
S 15-2-303 (4), MCA provides:
Notwithstanding the provisions of
2-7-704(1), the court may, for good
cause shown, permit additional evidence
to be introduced.
In other words, judicial review of MAPA contested cases
under § 2-7-704, MCA, is limited to the record, but judicial
review of STAB contested cases under S 15-2-303 (4), MCA,
allows the court to supplement the record. Dept. of Revenue
v. Davidson Cattle Co. (Mont. 1980), 620 P.2d 1232, 1235, 37
St.Rep. 2074, 2077. Under S 15-2-303(4), MCA, the court
reviewing a STAB decision may, on its own initiative or upon
motion of a party, find good cause and allow additional
evidence to be introduced before the court. Hi-Line Radio
Fellowship v. DOR (Mont. 1987), - P.2d , 44 St.Rep.
955. Once the additional evidence is introduced into the
record, the reviewing court must then make appropriate find-
ings of fact and conclusions of law. Rule 52(a), M.R.Civ.P.
On the day of the hearing on judicial review, O'Neill
moved the District Court for leave to introduce additional
evidence. The court granted O'Neillls motion, and he then
testified about the market value of his property. O'Neill
also introduced a Butte title officer ' s affidavit , which
stated that two parcels near J. C. Penney's sold for approxi-
mately $2O,OOO/acre, and that one parcel north of Lydia's
Restaurant sold for approximately $7,50O/acre at a tax sale.
DOR contends that O'Neill failed to show good cause for
the addition of his testimony and the affidavit, and that the
sudden introduction of the evidence denied DOR the opportu-
nity for effective rebuttal. DOR asserts that OINeill failed
to show that the affiant was unavailable as a witness, and
therefore the affidavit was hearsay. DOR further argues that
O'Neill had ample opportunities to fully state his case
before the Silver Bow Tax Appeal Board and STAB, and that his
testimony was unsupported and cumulative.
We find that the showing of good cause under
S 15-2-303 (4) is permissive, not mandatory. Any legally
sufficient reason meets the good cause requirement of
S 15-2-303(4), MCA, and such sufficiency lies within the
discretion of the reviewing court. Furthermore, the
additional evidence is not restricted to the parties. The
court can accept evidence from a variety of sources. In the
instant case, O'Neillls testimony may have been cumulative,
but it was also probative of the market value of the property
and thus fulfilled the good cause requirement. The affidavit
did not violate the good cause requirement because it offered
evidence of comparable sales. The availability of the affiant
is a question of credibility, not admissibility. We hold
that the District Court properly exercised its discretion
under S 15-2-303(4) when it permitted the introduction of
O'Neill's testimony and affidavit.
Issue 4
Did the District Court err by infusing its own opinion
of O'Neillls property value into its decision?
DOR contends that the District Court, in essence,
became a witness and advocate for O'Neill by permitting its
personal views to become part of its decision. DOR asserts
that a reviewing court should remain an impartial tribunal
for all litigants. DOR argues that the court's personal
observations are unilateral impressions which cannot be
deemed judicially-noticed facts.
Judicial notice of facts is governed by Rule 201 (b) of
the Montana Rules of Evidence which states: "A fact to be
judicially noticed must be one not subject to reasonable
dispute in that it is either (1) generally known within the
territorial jurisdiction of the trial court or (2) capable of
accurate and ready determination by resort to sources whose
accuracy cannot be reasonably questioned."
We note that the District Court went far beyond the
record when it observed that O'Neill's property does "not
generate business comparable to other motels." The District
Court's observations could only be verified by the income
statements of other motels on Harrison Avenue, or similar
specific data. This data would not be "generally known'br
"capable of accurate and ready determination." To qualify
for judicial notice, an extrinsic fact must lie within the
judge's immediate knowledge and not require thorough
research.
In the instant case, the District Court's empirical
observations pass beyond the scope of judicial notice and
border on judicial impression. The observations were not
supported by the record, and are not sufficiently indisput-
able to qualify as judicially-noticed facts. We hold that
the District Court erred on this issue.
Issue 5
Did the District Court err by allowing O'Neill to pay
delinquent taxes without an accompanying payment of accrued
penalties and interest?
STAB had issued an order staying the collection of all
O'Neill's taxes, penalties and interest while O'Neill's
appeal was pending before STAB. O'Neill later attempted to
pay his delinquent taxes to the Butte-Silver Bow Treasurer,
who refused to accept payment of the taxes without an accom-
panying payment of the accrued penalties and interest. Upon
motion by O'Neill on January 17, 1984, the District Court
allowed O'Neill to pay his delinquent taxes to the
Butte-Silver Bow Treasurer. However, the District Court did
not require O'Neill to pay the accrued penalties and
interest.
DOR contends that the District Court erred, because the
taxpayer is required to pay the disputed portion of the tax
under protest before it becomes delinquent. DOR argues that
both STAB and the District Court acted beyond the scope of
their lawful powers, when they stayed payment of penalties
and interest.
Our analysis of this issue is governed by § 15-1-402,
MCA, which allows a taxpayer to pay his taxes under protest
and recover the amount protested if his challenge is success-
ful. Section 15-1-402(1), MCA, states:
The person upon whom a tax or license
fee is being imposed may ... before
the tax or license fee becomes
delinquent, pay under written protest
that portion of the tax or license fee
protested. The payment must (a) be made
to the officer designated and authorized
to collect it; and (b) specify the
grounds of protest. [Emphasis added. 1
A tax becomes delinquent when the taxes are due and not paid.
Section 15-16-102, MCA.
We held in Eagle Communications v. Treasurer of
Flathead County (Mont. 19841, 685 P.2d 912, 918, 41 St.Rep.
1303, 1311, that the County Treasurer is the officer who
collects tax funds under 5 15-1-402, MCA. The general rule
is that a taxpayer must pay his taxes when due, as a condi-
tion precedent for preserving his right to refund of property
taxes under § 15-1-402, MCA. Eagle Communications, 685 P.2d
at 917. In the instant case, the Butte-Silver Bow Treasurer
refused to accept payment of O'Neill's delinquent taxes
without an accompanying payment of penalties and interest,
because O'Neill failed to comply with the requirements of
S 15-1-402, MCA. We hold that the Treasurer properly exer-
cised his authority by refusing payment.
However, we cannot ignore the fact that both STAB and
the District Court stayed the payment of penalties and inter-
est by O'Neill. Therefore, we hold that O'Neill is required
to pay penalties and interest on his 1982 taxes only to the
date that he tendered payment of his 1982 taxes to the
Butte-Silver Bow Treasurer. O'Neill's failure to heretofore
pay such penalties and interest on his 1982 taxes does not
affect his standing to proceed with his contested case.
Issue 6
Does 5 15-7-308, MCA, prohibit the DOR from revealing
specific information about the relevant comparable sales
which DOR used in appraising O'Neill's property?
Section 15-7-308, MCA, states that the disclosure of
information on a realty transfer certificate (RTC) shall be
restricted:
The certificate required by this part
and the information therein shall not be
a public record and shall be held confi-
dential by the county clerk and record-
er, county assessor, and department of
revenue. This is because the legislature
finds that the demands of individual
privacy outweigh the merits of public
disclosure.
Throughout these proceedings, DOR asserted that it
based O'Neill's tax assessment on data from relevant "compa-
rable sales." This data was extracted from RTCs in the
Harrison Avenue area. DOR's case is therefore predicated on
the validity and relevancy of those RTCs. Yet, nowhere in
the record did DOR reveal any details of the RTCs it used.
Without the relevant information from the RTCs, a taxpayer
cannot effectively rebut DOR's assessments, the Tax Appeal
Board cannot make an informed decision, and the courts cannot
conduct an adequate judicial review.
In oral argument before this Court, DOR contended that
the confidentiality requirements of 5 15-7-308, MCA, preclud-
ed DOR's disclosure of RTC information to the taxpayer party,
tax boards or reviewing courts.
In analyzing § 15-7-308, MCA, we note that the language
protects the confidentiality of RTCs when the demand for
individual privacy exceeds the merits of public disclosure.
However, we must draw a distinction between public disclosure
and limited disclosure to the taxpayer party, tax boards and
reviewing courts in contested proceedings. When limited
disclosure of relevant RTC information is crucial to a fair
and informed decision by a tax appeal board or court, such
disclosure outweighs individual privacy.
Therefore, in contested tax proceedings, we hold that
relevant information from the RTCs shall be disclosed to the
taxpayer party, tax boards, and reviewing courts. During the
pendency of the proceedings, the RTC information shall not be
available to the public. At the conclusion of the contested
proceeding, any portion of the record which contains the
disclosed RTC information shall be sealed and unavailable for
public inspection. Such limited and transient disclosure of
RTC information conforms to the confidentiality requirements
of 5 15-7-308, MCA; while providing the benefits of substan-
tive due process to the taxpayer in a contested case.
Under this holding, a taxpayer may apply to the Dis-
trict Court for a subpoena to compel the DOR to release
relevant RTC information, upon which DOR based its comparable
sales data. In order to minimize the intrusion into the
records, the subpoena must identify the specific information
requested by the taxpayer with as much precision as possible.
The issuance and scope of the subpoena shall lie within the
discretion of the District Court. Any abuse of the subpoena
process, or overbroad requests for RTC information, may be
prevented by a protective order from STAB or the District
Court.
W v a c a t e and remand t h i s c a s e t o t h e D i s t r i c t C o u r t
e
f o r f u r t h e r development o f t h e r e c o r d .
W concur:
e
n
Langen, D i s t r i c t Judge