No. 90-416
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
THE MONTANA DEPARTMENT
OF REVENUE,
Petitioner,
PATRICIA C. BARRON, and
the STATE TAX APPEAL BOARD,
Respondents.
ORIGINAL PROCEEDING:
COUNSEL OF RECORD:
For Petitioner:
David W. Woodgerd, Chief Legal Counsel, Geralyn
Driscoll, Tax Counsel, Department of Revenue,
Helena, Montana
For Respondents:
J. Vaughn Barron, Great Falls, Montana; State
Tax Appeal Board, Helena, Montana; Charles A.
Smith, Attorney for STAB, Helena, Montana;
submitted: September 7, 1990
Decided: October 12, 1990
Filed:
Justice John C. Sheehy delivered the Opinion of the Court.
On September 11, 1990, this Court in this cause handed down
a temporary order declaring that the application by the Department
of Revenue of the stratified sales assessment ratio study in Area
2.1 (Great Falls Downtown) to the valuation of Patricia C. Barron's
property was invalid for reasons to be later explained; we ordered
that for all other properties in the state to which the
Department's stratified sales assessment ratio studies for tax year
1990 had been applied, except for those instances now pending on
appeal or properly appealed by the property owners, the effective
date and application of our temporary order was prospectively
continued until December 31, 1990; and we reserved for future
decision the proper valuation of the property of Patricia C.
Barron.
The effect of the prospective stay in the Order of September
11, 1990, is that as to all property affected by the stratified
sales assessment ratio studies except for those stated in the
Order, the appraised values for property tax purposes for the tax
year 1990 shall be those found and applied by the Montana
Department of Revenue (DOR) under said studies.
Under our state constitutional duty to pronounce our decisions
in writing (Art. VII, 5 3, 1972 Mont. Const.), as an aid to the
legislature in its future enactments and by way of explanation to
affected Montana taxpayers, we come now to make permanent the
provisions of our temporary order and to set out the facts and
conclusions which form the basis for the temporary order.
2
This is an original proceeding in this Court brought by the
DOR which petitioned for a writ of review, a writ of supervisory
control, or other appropriate emergency writ for relief from an
order of STAB dated August 3, 1990. In that order, STAB had
concluded, upon the protest of Patricia C. Barron, that the DORIS
implementation of 5 5 15-7-111(4)(8), MCA, was unconstitutional.
(STAB contended here that it did not find the implementation
unconstitutional, but only that a court would find it
unconstitutional.) DORIS petition pointed to imminent statutory
deadlines in the property tax collection process which created an
emergency situation and said that a prompt ruling from this Court
was necessary to end the uncertainty. DOR contended that no other
adequate remedy existed that was speedy enough and that irreparable
harm to taxpayers and governmental entities would occur if the
controversy was not resewed well in advance of the issuance of tax
notices that had to be mailed by October 25, 1990.
On receipt of DORIS application, we ordered that we would
treat the proceedings as one for declaratory relief under Ch. 8,
Title 27, MCA, obtain a response from the respondents, and set an
oral argument date. Responses were filed and served, oral argument
was had, and thereafter, on consideration, we issued a temporary
order to which we have above adverted.
OVERVIEW
The Montana Constitution provides that the state shall
appraise, assess, and equalize the valuation of all property which
is to be taxed in a manner provided by law (Art. VIII, § 3). The
state must establish the assessed valuations (Art. VIII, 5 4) and
the legislature must provide independent appeal procedures for
taxpayer grievances, appraisals, assessments, equalization and
taxes, with a review procedure at the local government unit level
(Art. VIII, 5 7).
To implement the constitutional provisions, the legislature
provided for property appraisals in Ch. 7, Title 15, MCA. In 1975,
a scheme was adopted whereby the state would evaluate under a
comprehensive reappraisal plan all taxable property in the state
at least every five years. The DOR was required to adopt a plan
so that all property in each county was revalued at least every
five years or that no less than 20% of the property in each county
was revalued each year. Section 15-7-111, MCA (1987).
The current five-year cycle for reappraisal began in 1986.
The legislature extended that cycle period in 1989 for an
additional two years, to end December 31, 1992, and postponed the
commencement of another five year revaluation cycle until January
1, 1993. Section 15-7-133, MCA. The DOR was given an additional
two years to complete the current revaluation cycle. Section 15-
7-132, MCA.
In the last two legislative sessions, however, the legislature
substantially amended the revaluation cycle. Ch. 613, Laws of
Montana (1987); Ch. 636, Laws of Montana (1989). While keeping
the five-year provision in effect, it provided in amended 5 15-7-
111, MCA, that for every taxable year beginning January 1, 1990,
and each taxable year thereafter, the DOR is to conduct a
"stratified sales assessment ratio studyff all residential land
of
and improvements (and other property not pertinent here). Under
the amendment, the DOR was to partition the State into as many as
100 areas of residential property, and as many as 20 of commercial
property. The areas in each are to be separately studied. Under
the study, the actual sales prices of real property parcels sold
for three taxable years prior to the study were compared with their
appraised values then in effect, and a ratio determined. If the
average appraised values of the properties in the study, compared
to the average of the actual sales amounts were less than 95% or
more than 105%, the assessments for each stratum within each area
were to be rescaled to bring all ratios to common value 1.
The criteria for establishing the residential areas were that
they should contain statistically sufficient numbers of sales and
be as economically and demographically homogenous as practicable.
Section 15-7-111(6), MCA. For tax year 1990, the DOR established
47 residential areas in the state, of which Area 2.1 (Great Falls
Downtown) was one.
Criteria for obtaining statistically valid samples of sales
in each area were also set out in the 1989 amendment. It is enough
to say that only armfs-length sales were to be considered in the
ratio study. The sales of remodeled residences were not to be
considered and sales which showed assessment ratios of less than
50% or greater than 200% were to be excluded.
If the result of the study in each area produced sales
assessment ratios of less than minus 5% of common value 1, or
greater than plus 5% of common value 1, then all of the assessments
in the area were to be adjusted to bring the ratios to common value
1. Section 15-7-111(8)(a), MCA. If the ratio for any area was
within plus or minus 5% of the common value 1, then the assessments
in the area were considered equalized and no rescaling was
necessary. Section 15-7-111(8)(c), MCA.
The legislature required the sales assessment ratio studies
to commence for the taxable years beginning January 1, 1990, and
for every taxable year thereafter and further provided that the
ratio so determined vtmust used to determine appraisals for the
be
immediately succeeding tax year." Section 15-7-111(4), MCA.
FACTS
Patricia C. Barron is the owner of a residence in Great Falls,
Cascade County, Montana. Her property is in an area designated by
the DOR as Area 2.1. Prior to 1990, the Barron property was
appraised by the DOR at a total value of $28,019 for land and
improvements. The DOR conducted a "stratified sales assessment
ratio studyu in that area for taxable year 1990. It used a sample
of 243 actual sales. It found therefrom an average sales price
of $39,545 and an average appraised value of $29,310. The DOR
determined that the weighed mean ratio of the figures was 0.7412,
which required an adjustment factor of plus 30% The appraised
value of Patricia C. Barronts residence was therefore fixed at a
total of $40,325.
Barron appealed to the County Tax Appeal Board on these
grounds:
Through H.B. 703, an arbitrary 30% increase was imposed
on my house. Such an arbitrary increase does not address
the mandate of Art. VIII, 5 3 of the Constitution that
the State equalize the valuation of all property and is
therefore unconstitutional.
The appeal was denied by the County Tax Appeal Board for the
reason that I1The Board was informed that an error was found and
that the necessary adjustment would be made by the DOR of Revenue."
Patricia C. Barron appealed to STAB, again on the same
grounds.
STAB made findings of fact and conclusions of law on August
3, 1990, relating to the appeal. Pertinent to the findings are
these:
The testimony indicatedthat approximately 1,000 of these
sales were chosen for Cascade County and that 243 sales
were analyzed and used to determine that the properties
located in Area 2.1 were underappraised by 30 percent.
The pertinent conclusion of law with respect to this case made
by STAB is found in paragraph 1. It includes:
It is the opinion of this Board that the taxpayer did not
satisfactorily challenge the DORIS constitutional
authority to appraise, assess, or equalize property
values. The DOR clearly has that authority and is
affirmed by the Montana Supreme Court in DOR of Revenue
v. Countrvside Villase, 205 Mont. 51 (1983); Hanley v.
DOR of Revenue, 207 Mont. 302 (1983). However, along
with that authority goes the duty, and the requirement,
to equalize property values throughout an area, county
to county, and statewide. It is clear to this Board from
the evidence and testimony provided that, for Area 2.1
at least, this has not been achieved. (Emphasis in
original.)
STAB then went on to examine the results of the application
of the 30% adjustment. Whereas before the adjustment, 40 of the
243 properties were overappraised and 203 were underappraised,
after the adjustment, 102 properties were overappraised in
comparison with their sales price, and 141 underappraised. STAB
pointed to the Barron property, saying that even after the 30%
correction was applied, the appellant's property was still
appraised at only 51% of its purchase price which was $75,000.
STAB then went on to analyze the results and eventually
decided that Patricia C. Barronls property should be assessed at
$75,000. It determined that DOR had failed to perform its
constitutional mandate of equalization within Area 2.1 under the
implementation of H.B. 703 and further concluded that based on the
evidence presented, "the Board believes that the District Court
would very likely rule that the implementation of H.B. 703 is
unconstitutional, only for the reason stated above, that
equalization within a specified area, has not been achieved." (H.B.
703 became Ch. 636, Laws of Montana (1989).)
Based on the determination made by STAB in Patricia C.
Barronls case, the DOR commenced the original proceeding in this
Court.
DISCUSSION
We have no issue of whether we should accept jurisdiction,
since we have decided to treat the matter as an original
proceeding for declaratory judgment.
The issue for us to decide is the constitutionality of the
appraisal method as applied to this case.
The DOR supports the constitutionality of the amendments to
5 15-7-111, MCA, which provides for the stratified sales assessment
ratio study. It contends that the purposes of the amendments were
to adjust current appraised values rather than to reappraise
property; to achieve equalization between areas in the state; to
change appraisal values during the 5-year cycle; and pursuant to
the amendments to 5 15-7-111, to adopt administrative rules
establishing the areas, and the methods of achieving the ratios,
subject to administrative and judicial review. The DOR argues the
taxpayer here is not in a position now to object to the adjustment
to her appraisal.
The DOR further contends that STAB has no power to declare an
administrative rule or a statute unconstitutional.
Patricia C. Barron contends that STAB was correct in
determining that the implementation of H.B. 703 was
unconstitutional as applied to her property but that STAB further
erred in appraising her property at $75,000, as her right to
constitutional equalization has thereby been violated. She argues
that equalization is not achieved by the DORIS method of
revaluation in breaking the county down into neighborhoods and
applying different adjustments to different neighborhoods. She
contends that the method of appraisal used in the five-year cycle
is the only proper one to be used and that the method used by the
DOR in fixing her 1990 appraised value does not achieve
equalization.
STAB has responded that it did not declare that the method
used by the DOR was unconstitutional, but merely said that it
believed that a district court would find the implementation of
the appraisal unconstitutional. Since STAB'S findings of fact were
not disputed by the DOR, its findings must be considered agreed to
and not subject to further argument. STAB contends that the net
result to the DOR1s adjustment to Area 2.1 is that there are now
more properties overappraised and fewer underappraised than before
the adjustment. u his means that 100% of the 243 properties are
still not appraised at market value after the application of the
implementation.
STAB attacks the methodology used by the DOR in reaching the
ratio. Cascade County has 40,699 improvements to real property;
the DOR found 1,057 acceptable sales in the County or 2.6% of the
total improvements in the County. There is no indication that this
is a representative sample relating to age, condition, size,
design, construction materials, location, utilities, city or county
services, or other factors that determine value. STAB further
contends that the appraisal values are not closer to market value
as a result of the implementation and there is no evidence that the
study brings the appraised property within the range of equality
and market value.
As an additional issue, STAB points out that the amendment to
9 15-7-102 (6), MCA, now provides that a property owner may not
appeal the yearly adjustments specified in 5 15-7-111, MCA, that
may be made as a result of the sales assessment ratio studies.
Since there is no savings clause in Ch. 636, Laws of Montana
(1989), H. B. 703, if the appeal provision is unconstitutional, STAB
says that the whole of the legislation should fail.
Like the policeman in the Pirates Of Penzance, taking one
consideration with another, the DORIS lot in property tax appraisal
is not a happy one. Hampered by inadequate staff and funds, its
task of individual appraisal of properties is almost impossible in
any annual revision. The legislature itself is strapped in
providing staff and additional funds. Yet, if our conclusions here
are properly drawn and if we have a truly representative sample,
property tax appraisals in Area 2.1 are seriously out of whack.
We are working, of course, with a fore-shortened record. We
have before us 243 actual sales which fall within the parameters
set up by the legislature. Other sales in that area are excluded.
We are not told how many residential properties in total are to be
found in Area 2.1. We assume, therefore, that because the
legislature required it (5 15-7-111(5)(b), MCA) , and because it was
not contested before STAB, that the 243 sales are a statistically
valid sample, and that they truly represent the status of all tax
appraisals in Area 2.1, before and after the application of the
adjustment of 30% under the study conducted by the DOR.
One of the exhibits in the record before STAB was the DOR
report containing the results of all stratified sales assessment
ratio studies done in Area 2.1, required to be published by the
DOR under 5 15-7-111(7)(b), MCA. That report includes all of the
243 sales relied on by the DOR. Shown on the report are the
appraised values as of 1989, the sales price for the individual
properties and the ratio, for each sale, of the sales price over
the 1989 appraised value. It was by averaging all of the appraised
values for the 243 parcels and averaging all of the sales prices
for the same parcels, that the DOR determined that a 30% adjustment
upward to the appraised values in Area 2.1 was necessary. Based
on this determination, every residential property in Area 2.1,
including those in the 243 sales, were raised by that percentage.
STAB produced for us the effect of the 30% increase on each
of the 243 sales. The following are some samples taken from that
exhibit:
Samples of effect on residential appraised
values used in Area 2.1 Analysis
1990
1989 Sale Adjusted
Appraised Value Price Ratio A~praisedValue
(The first three samples were at the top of the overappraised
scale; the middle three samples were appraised approximately at
their sales value; the last three samples are at the bottom of the
underappraised scale.)
It may be demonstrated by the above samples that equalization
is not achieved by the application of the 30% factor but rather
that any inequality of appraisal is exacerbated by the factor.
For example, the first property, which sold for $24,000 in 1989 but
was appraised for $46,497 is now assessed after the application of
the factor, at $61,346. That same property was overappraised in
relation to its sales price at 193% before the application of the
factor, but is overappraised 255% after its application.
Examples of unfairness are demonstrated by those properties
which were in 1989 appraised at or near their actual sales value.
The property whose sales price was $100,000 but was appraised at
$101,947 was 100.9% overappraised in 1989, but will be 132%
overappraised in 1990.
Strangely, the underappraised properties fare better in
comparison to others when the 30% factor is applied. The last
property, whose sales price was $42,600, was appraised at $21,386,
or at 50% of its value. After the application of the 30% factor,
the increase in its appraised value results only in the figure of
65% of its actual sales price.
We determine, therefore, from the record that the methodology
prescribed by the legislature and implemented by the DOR for yearly
equalization between areas unfairly discriminates against property
taxpayers in Area 2.1 whose properties in 1989 were appraised at
or above their market values.
If, as we are led to believe, the area study is statistically
sound, the remainder of residential properties in Area 2.1 beyond
the 243 parcels here studied must have the same resulting
unfairness in the same proportions. Therefore, all residential
properties in Area 2.1 which in 1989 were assessed or appraised at
or above their true market values are unfairly discriminated
against by the application of the 30% factor to the 1989 appraised
values.
Discriminatory unfairness is countermanded by state
constitutional and statutory provisions. The state is required to
appraise property for tax purposes and to equalize the valuations
of all property to be taxed. (Art. VIII, 5 3). All taxable
property in the state is to be assessed at 100% of its market
value. Section 15-8-111(1), MCA. The DOR is required to adjust
and equalize the valuations of taxable property among the several
counties and the different classes of taxable property in any
county and in the several counties between individual taxpayers.
Section 15-9-101(1), MCA. For purposes of taxation, assessed value
is the same as appraised value, and with certain exceptions,
property is assessed at 100% of its market value; market value is
defined as the value at which property would change hands between
a willing buyer and a willing seller, neither being under any
compulsion to buy or sell and both having reasonable knowledge of
relevant facts. Sections 15-8-111(1) (2) (a), and (4), MCA. The DOR
and its agents may not adopt a lower or different standard of value
from market value in making official assessments or appraisals of
the value of property unless within certain exceptions set forth
in 5 15-8-111 ( 3 ) , MCA.
In Patterson v. State DOR of Revenue (1976), 171 Mont. 168,
557 P.2d 798, this Court held valid the statutory plan for the
five-year reappraisal cycle. The decision was based on features
of the plan in that all like property was to be appraised by a
uniform standard according to uniform valuation procedures set
forth in the same designated appraisal manual. The appraisal
rotation was fixed by a uniform rule requiring the property that
had gone longest since appraisal and was deemed to be the most
devious from current values to be appraised first. The Patterson
decision was based on a plan which allowed counties to reappraise
20% of the properties every year during the five-year cycle. That
provision was eliminated by the legislature in its 1989 enactment
and the yearly changes in individual valuations are now based on
studies conducted under the stratified sales assessment ratio
theory.
However, in Patterson, it was held that the placing of
revaluations on the tax rolls annually and sequentially as the
reappraisals are completed, which resulted in temporary inequities,
did not offend the constitutional equal protection and uniformity
requirements in the absence of intentional and systematic
discrimination, constructive fraud, or arbitrary action.
Patterson,
In Larson v. State and DOR of Revenue (1975), 166 Mont. 449,
534 P.2d 854, we had a case where the DOR had assumed its new
responsibilities under the 1973 legislative acts for statewide
appraisal, but the DOR had determined to use a county-financed
appraisal (called the Laird appraisal) for 1974 Lewis and Clark
County assessments. The District Court had found that the real
estate appraisals under the Laird procedure were not conducted as
a part of a uniform plan for appraisal within the state of Montana,
and that the appraisals were not equalized with other counties in
the state. The ~istrictCourt held that the use of the Laird
appraisal was unconstitutional, and the case came to this Court on
appeal. In upholding the decision of the ~istrictCourt that the
use of the Laird appraisal was unconstitutional, this Court stated:
Accepting as facts the absence of a state-wide appraisal
plan and the disproportionate appraisal made on Lewis and
Clark property, we return 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, 5 4, 1972 Montana Constitution. The use
of the appraisal was also found to violate the due
process requirements 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
require general and uniform appraisal, and assessment and
equalization of all taxable property in the state.
A "general and uniform method of appraising1'necessarily
requires that each appraisal or reappraisal must be a
part of a plan which provides that all similar properties
will be valued in like manner. The plain meaning of the
statutory language admits of no other interpretation.
The absence of such a plan, as discussed earlier in this
opinion, thus prevents lawful implication of the Laird
appraisal.
Larson, 534 P.2d at 857-58.
The Larson court noted that there was an abundance of
authority which finds no violation of constitutional or statutory
mandates in the temporary inequalities which accompany a cyclical
plan of reappraisal. Larson, 534 P.2d at 857. It also noted that
violations of statutory uniformity requirements generally result
in violations of equal protection requirements.
In this case, we have no way of knowing whether the inequities
in valuations in Area 2.1 are temporary or not. Presumably, the
DOR will annually make ratio studies and apply factors to increase
or reduce the valuations in Area 2.1 if the average valuations are
outside the 5% parameters. It might be hoped that any valuation
inequities resulting from the ratio studies might be rectified by
the values found at the end of the current revaluation cycle; yet,
those values under the law may not be placed on the tax rolls until
one year following the completion of the revaluation cycle, 5 15-
7-111 (2), MCA, which, if not again extended, would occur in tax
year 1994. Under the record here, the DOR itself will make no move
to rectify inequities because of its interpretation that it is
bound by law not to do so. Section 15-7-111, MCA. The legislative
provisions for the application of the ratio studies include no plan
for rectifying appraisal inequities which may fall upon individual
property holders through application of the factors derived through
the ratio.
We therefore determine in accord with Larson that the use of
the 1990 tax values derived from the ratio studies and the
application of the 30% factor to residential properties in Area 2.1
require certain taxpayers therein to bear a disproportionate share
of Montana's tax burden in violation of the Equal Protection
requirements of the Fourteenth Amendment of the United States
Constitution, and Art. 11, § 4, 1972 Montana Constitution, and the
Due Process requirements of the Fifth and Fourteenth Amendments of
the United States Constitution and Art. 11, §§ 17 and 29 of the
1972 Montana Constitution. This also violates the appraisal
provisions of our statutes which require general and uniform
appraisal, assessment and equalization of all taxable property in
this state.
This is not to say that the legislature does not have the
power to change appraisal values during the appraisal cycle. In
Hanley v. DOR of Revenue (1983), 207 Mont. 302, 309, 673 P.2d
1257, 1260, this Court said:
There can be no doubt that the power to equalize includes
the power to alter an appraisal cycle ... We therefore
hold that DOR has the authority, when acting under its
power to equalize, to change the taxable value of
property in this state within an appraisal cycle to
comply with its constitutional mandate to tax on a
uniform basis.
It behooves the Court to note that the result of the DOR
report relating to actual sales and appraised values in Area 2.1
should make clear to the DOR, and now to the legislature, that
there is a wide disparity in appraised values of residential
properties in that area when compared to actual sales values. In
that situation, the indiscriminate application of an across-the-
board 30% factor would necessarily exacerbate the values of those
properties which are already assessed at or near market value or
in excess thereof. Such a method may achieve equalization as
between areas, but not between individual properties in the areas,
where appraisal inequities already exist. Certainly the ratio
study indicates that Area 2.1 should be targeted for a complete
reappraisal even before the end of the valuation cycle.
~qualizationbetween areas will automatically result when all the
valuations in the individual areas are at or near market value.
THE POWER OF STAB AND THE RIGHT OF APPEAL
The DOR contends two issues arise in this case relating to
STAB. The DOR contends that STAB has no power to ignore the
administrative rules which are adopted in accordance with 5 15-7-
111, MCA, nor to declare a statute is unconstitutional. However,
the record shows that STAB skirted the constitutional issue by
declaring its belief that a court, if asked, would determine the
assessment ratio studies and the application thereof
unconstitutional. As to the administrative rules, 5 15-2-301(4),
MCA, provides that "the state tax appeal board must give an
administrative rule full effect unless the board finds any such
rule arbitrary, capricious or otherwise unlawful."
STAB in its response contended that this Court should throw
out the amendments adopted by the legislature in 1987 and 1989
because of the provision in § 15-7-102(6), MCA, to the effect that
"the property owner may not appeal the yearly percentage
adjustments that are specified in 15-7-111, and that may be made
as a result of the sales assessment ratio study, the stratum, or
area designations as specified in 15-7-111."
Article VIII, 5 7, of the Montana Constitution, provides:
Tax appeals. The legislature shall provide independent
appeal procedures for taxpayer grievances about
appraisals, assessments, equalization, and taxes. The
legislature shall include a review procedure at the local
government unit level.
Section 15-7-111(4), MCA, provides:
(4) For the taxable year beginning January 1, 1990, and
for every taxable year thereafter, the department shall
conduct a stratified sales assessment ratio study of all
residential land and improvements, agricultural 1-acre
homesites and improvements, and commercial land and
improvements. The sales assessment ratio based on
property sales finalized and recorded by no later than
November 1 must be used to determine appraisals for the
immediately succeeding tax year.
Section 15-7-102(6), MCA, provides:
(6) ... The property owner may not appeal the yearly
percentage adjustments that are specified in 15-7-ill and
that may be made as a result of the sales assessment
ratio study, the stratum, or area designations as
specified in 15-7-111.
Clearly, Art. VIII, 5 7, Montana ~onstitution, guarantees the
constitutional right of appeal procedures for a taxpayer concerning
appraisals and assessments.
It is also equally clear that 5 15-7-111(4), MCA, required the
DOR to conduct an annual stratified sales assessment ratio study
beginning January 1, 1990, and for every taxable year thereafter
and that the sales assessment ratio derived therefrom must be used
to determine appraisals for the immediate succeeding tax year, and
5 15-7-102 (6) provides that the property owner may not appeal as
a result of the sales assessment ratio study.
Therefore, the provision of 5 15-7-102 (6), providing It [tlhe
property owner may not appeal the yearly percentage adjustments
that are specified in 15-7-111 and that may be made as a result of
the sales assessment ratio study, the stratum, or area designations
as specified in 15-7-111,1tis unconstitutional as a violation of
Art. VIII, 5 7, of the Montana Constitution.
Notwithstanding that the non-appeal provision of 5 15-7-
102(6), MCA, may not be essential to our decision in this case, we
believe it is important that the DOR and the legislature be made
fully aware of the requirements of Art. VIII, 5 7, with regard to
any future legislation or rule-making.
THE CASE OF PATRICIA C. BARRON
This whole case was brought about by the appeal of Patricia
C. Barron to the County Tax Appeal Board, and then to STAB itself
regarding the constitutionality of the increased adjustment to her
residential property valuation for tax purposes.
STAB, in determining that the application of the ratio studies
to Area 2.1 was improper, did not restore Patricia C. Barron to the
1989 appraisal of her residential property. Instead, it determined
that because the purchase price of the home in which she lives was
$75,000, it should be appraised at $75,000 as a reflection of its
market value.
In DOR of Revenue v. State Tax Appeal Board (1980), 188 Mont.
244, 249, 613 P.2d 691, 694, we quoted the United States Supreme
Court saying:
This Court holds that the right of the taxpayer whose
property alone is taxed at 100 percent of its true value
is to have his assessment reduced to the percentage of
that value which others are taxed even though this is a
departure from the requirement of statute. This
conclusion is based on the principle that where it is
impossible to secure both a standard and true value, and
the uniformity and equality required by law, the latter
requirement is to be preferred as the just and ultimate
purpose of the law.
While the valuation of the Barron property at its market value is
at 100% of its true value, it cannot be said that the application
of that valuation reaches the uniformity and equality required by
our laws. If anything, the study of Area 2.1 reveals that there
is very little equality or uniformity in the valuation of the 243
properties studied. Because Patricia C. Barron undertook to appeal
the application of the 30% adjustment to her residential property,
and bore the burden of litigation to bring the DOR and this
Court the problems arising out of the ratio studies, she is
entitled to the beneficial fruits of her litigation. We therefore
reverse the valuation of her residential property fixed at $75,000,
and direct that the valuation of that residence for tax purposes
shall be the valuation which obtained in 1989. Nothing herein
prevents a proper revaluation of her residential property in
accordance with statutory and constitutional principles in
subsequent years.
CONCLUSION
The power of supervisory control given to this Court does not
apply in this case because STAB is not a court in the contemplation
of Art. VII, 5 2(2) of the State Constitution.
We find and determine, however, in this original proceeding
proper grounds to award the following declaratory and affirmative
relief:
1. The provisions of 5 15-7-111, MCA, relating to
stratified sales assessment ratio studies of the
residential property situated in Area 2.1 (Great Falls
Downtown) as conducted and applied by the DOR are invalid
because they violate state constitutional and statutory
provisions which require general and uniform appraisal,
assessment and equalization of all taxable property in
the state; and further because the applications thereof
require certain taxpayers in Area 2.1 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 Art. 11, 5 4, 1972 Montana Constitution; and because
the application of the stratified sales assessment ratio
study to Area 2.1 violates the Due Process requirements
of the Fifth and Fourteenth Amendments of the United
States Constitution and Art. 11, 17 and 29, 1972
Montana Constitution.
2. The provision of § 15-7-102(6), MCA, that states:
"The property owner may not appeal the yearly percentage
adjustments that are specified in 15-7-111 and that may
be made as a result of the sales assessment ratio study,
the stratum, or area designations as specified in 15-7-
111," is in violation of Article VIII, 5 7, of the
Montana Constitution.
3. The valuation for tax year 1990 of the residential
property of Patricia C. Barron in Area 2.1 established
by STAB should be and is hereby reversed, and STAB and
all agents of the DOR shall fix the appraised value of
the said residential property of Patricia C. Barron at
the valuation which obtained in the tax year 1989.
4. Because of the statewide effect of this decision,
because of the short period of time remaining for state
and county offices to perform their duties in connection
with the collection of property taxes for the year 1990,
and the extenuating exigencies which would otherwise be
created by an immediate effect of this decision, we
hereby delay the effective date of this decision, and
make its effect prospective only to December 31, 1990,
except for those cases now pending on appeal, or properly
appealed by the property owners. (This means those cases
heretofore appealed within the time provided for taxpayer
appeals at the local or state level and now pending on
the grounds of unconstitutionality found to exist in this
proceeding, and includes those previously appealed on
those grounds and denied at the county or state level;
but, no other appeals on the grounds covered herein shall
be recognized.) The effect of this prospective stay is
that as to all property affected by the stratified sales
assessment ratio studies, except those herein stated, the
values for tax purposes for the tax year 1990 shall be
those found and applied by the DOR under said studies.
5. When copies hereof are served by ordinary mail by
the Clerk of this Court upon counsel of record, this
opinion shall have the effect of, and perfo m the office
of, a declaratory judgment granting affirmative relief
without further documents or process from this Court.
It shall be effective on the date of service.
We grant the stay only to prevent the disruption of the state
taxation process for the tax year 1990 and because the legislature
will meet and may address these problems in a session beginning on
the first Monday of January, 1991.
prospective application of the effect of this Opinion past the
1990 tax year as absolutely imperative should be at once apparent,
but some question prospective delay when the underlying act is
unconstitutional. How, it is argued, can a court allow to remain
legal what it has declared to be illegal? The answer lies in the
choice that must be made by the Court as to whether it will allow
government to continue in an orderly fashion at the expense of
some, or else permit virtual anarchy to exist. Were the illegality
in this case declared to take effect immediately, it would mean
that tax collections for the support of state, county, school
district and municipal government dependent on property taxes would
be thrown into immediate disfunction. There is lurking in this
case a huge legislative and executive problem, and these branches
must be given a chance to deal properly with that problem. Despite
the unconstitutionality of the appraisal system here involved, the
fashioning of a constitutional system is a proper duty of the
legislative department, and not of this Court.
This Court has not hesitated to delay the effect of its
decision that an act is unconstitutional when the immediate effect
of the decision would disrupt government, and the legislature can
be given an opportunity to rectify the unconstitutionality. Lee
v. State (1981), 195 Mont. 1, 11, 1635 P.2d 1282, 1287, cert.denied
456 U.S. 1006, 102 S.Ct. 2295, 73 L.Ed.2d 1300; Helena Elementary
School Dist. No. 1 v. State (Mont. 1990), 784 P.2d 412, 413. Other
state courts have done likewise. Edgewood Independent School
District v. Kerby (Tex. 1989), 777 S.W.2d 391, 399; Horton v.
Meskill (Conn. 1977), 376 A.2d 359, 376; Washakie County School
Dist. v. Herschler (Wyo. 1980), 606 P.2d 310, cert.denied 449 U.S.
824, 101 S.Ct. 86, 66 L.Ed.2d 28 (1980); Robinson v. Cahill (N.J.
1973), 303 A.2d 273, 298, cert.denied 414 U.S. 976, 94 S.Ct. 292,
38 L.Ed.2d 219.
C o s t s of p r o c e e d i n g s , b u t n o t a t t o r n e y s f e e s , t o P a t r i c i a C .
Barron.
6.
Justice
W concur:
e
Chief J u s t i c e