Albright v. State, by and Through State

96-704

No. 96-704

IN THE SUPREME COURT OF THE STATE OF MONTANA

1997

RAYMOND and M. A. ALBRIGHT, et al.,

Plaintiffs, Respondents,
and Cross-Appellants,

v.

STATE OF MONTANA, by and through the
STATE OF MONTANA, and the MONTANA
DEPARTMENT OF REVENUE, et al.,

Respondents and Appellants.

APPEAL FROM: District Court of the Eighth Judicial District,
In and for the County of Cascade,
The Honorable Marge Johnson, Judge presiding.

COUNSEL OF RECORD:

For Appellants:

David W. Woodgerd (argued), R. Bruce McGinnis,
Deborah Harten, Brendan R. Beatty, Patrick N.
Dringman, Tax Counselors; Special Assistant
Attorneys General; Montana Department of
Revenue; Helena, Montana

For Respondents:

Larry G. Schuster (argued), and Jerry W. Schuster;
Attorneys at Law; Great Falls, Montana

For Amici Curiae:

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (1 of 21)4/11/2007 1:52:52 PM
96-704

David J. Patterson; University of Montana;
School of Law; Missoula, Montana
(Montana Association of Counties)

J. Cort Harrington, Jr.; Attorney at Law;
Helena, Montana
(Montana County Treasurers Association)

Allen B. Chronister; Chronister,
Moreen & Larson; Helena, Montana
(Montana Education Association)

David L. Nielsen; Helena City Attorney;
Helena, Montana
(Montana League of Cities and Towns)

Janice Frankino Doggett and Lance Melton;
Helena, Montana
(Montana School Boards Association)

Geralyn Driscoll; Montana Office of Public
Instruction; Helena, Montana
(Montana Superintendent of Public Instruction)

Submitted: February 18, 1997

Decided: February 27, 1997
Filed:

__________________________________________
Clerk

Justice Terry N. Trieweiler delivered the Opinion of the Court.

On December 30, 1993, a group of Montana taxpayers commenced
a class action suit in the District Court for the Eighth Judicial
District in Cascade County to challenge the constitutionality of
the statewide reappraisal of all residential and commercial
property conducted by the Montana Department of Revenue
(Department) pursuant to 15-7-111, MCA. The taxpayers filed

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (2 of 21)4/11/2007 1:52:52 PM
96-704

fifteen motions for partial summary judgment, and the Department
responded with fifteen cross-motions for summary judgment. On
December 5, 1996, following oral argument, the District Court
entered an order in which it (1) granted one of the taxpayers'
motions for partial summary judgment and held that by utilizing
more than one method of appraisal for both residential and
commercial property, the Department had failed to equalize the
values of the taxpayers' properties as required by both Article
VIII, Section 3, of the Montana Constitution, and 15-7-112, MCA,
and (2) granted another of the taxpayers' motions for partial
summary judgment and held that the Department had failed to assess
taxable property in four Counties before the second Monday in July
1993, as required by 15-8-201, MCA. The District Court stayed
enforcement of its decision pending an appeal of its order to this
Court. The Department appeals the District Court's order which
granted two of the taxpayers' motions for summary judgment. The
taxpayers cross-appeal on three grounds. We reverse the order of
the District Court which granted summary judgment in favor of the
taxpayers and remand to that court for entry of judgment consistent
with this opinion. Based on our conclusions, we do not reach the
issues raised on cross-appeal.
We address two issues on appeal:
1. Did the District Court err when it granted summary
judgment to the taxpayers based on its determination that the
Department's appraisal and valuation processes violate 15-7-112,
MCA, and Article VIII, Section 3, of the Montana Constitution?
2. Did the District Court err when it concluded that tax
assessments were invalid for those taxpayers whose assessment
notices were not sent before the second Monday in July 1993?
FACTUAL BACKGROUND
Pursuant to 15-7-111, MCA, the Montana Department of Revenue
is charged with the administration and supervision of a program for
the revaluation of all taxable property within the state for
ad valorem tax purposes. The Department began the revaluation or
reappraisal of property, which is the subject of this appeal, in
1987 and completed the process on or before December 31, 1992. As
part of its system of revaluation, the Department adopted a
comprehensive appraisal plan, as required by 15-7-111, MCA. That
plan is set forth in Rules 42.18.101 through 42.18.126, ARM. The
Department's original appraisal plan provided that, for the first
time, a Computer Assisted Mass Appraisal System (CAMAS) would be
implemented to assist the Department's appraisers in the valuation
process.
According to the Department's appraisal manuals, adopted
pursuant to Rule 42.18.123, ARM, the CAMAS system is "designed to
help the Appraiser create and maintain records and procedures
needed to arrive at a just, equitable, and defensible valuation for
each parcel of real estate within [each] county" in the state.

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (3 of 21)4/11/2007 1:52:52 PM
96-704

CAMAS uses its files of property assessment data to produce
computer-assisted valuations for residential, agricultural,
commercial, and industrial properties.
According to a Department of Revenue public document entitled,
"What is CAMAS?" CAMAS uses three approaches to valuing property:
(1) the cost approach, (2) the market data approach, and (3) the
income approach. The cost approach involves estimating the
depreciated cost of reproducing or replacing the building and site
improvements. Depreciation is deducted from this cost for loss in
value caused by physical deterioration and functional or economic
obsolescence. To this depreciated cost is added the estimated
value of the land. The widest application of the cost approach is
in the appraisal of properties where the lack of adequate market
and income data preclude the reasonable application of other
traditional approaches.
The market data approach involves the compilation of sales and
offerings of properties which are comparable to the property being
appraised. The sales and offerings are then adjusted for any
dissimilarities and a value range obtained by comparison of those
properties. According to the Department's document "[t]he
significance of this approach lies in the ability to produce
estimates of value which directly reflect the attitude of the
market. Its application is contingent upon the availability of
comparable sales, and therefore finds its widest range in the
appraisal of vacant land and residential properties."
The income approach measures the present worth of the future
benefits of the property by the capitalization of the net income
stream over the remaining economic life of the property. This
approach involves making an estimate of the "effective gross
income" of a property, derived by deducting the appropriate vacancy
and collection losses from its estimated economic rent, as
evidenced by the yield of comparable properties. From this figure,
applicable operating expenses, including insurance and reserve
allowances for replacements, are deducted, resulting in an estimate
of net income which may then be capitalized into an indication of
value.
CAMAS's three approaches to the valuation of property are
consistent with the Department's appraisal plan, as set forth at
Rules 42.18.101 through 42.18.126, ARM. According to the
Department's appraisal plan, residential property is to be
appraised using the market data approach or the cost approach.
Rule 42.18.108(9), ARM. Commercial property is to be appraised
using the cost approach, the income approach, or, when possible,
the market data approach. Rule 42.18.111(9), ARM. Industrial
property is to be appraised using only the cost approach. Rule
42.22.1304, ARM. The CAMAS system functions in accordance with the
Department's appraisal plan by producing computer-assisted cost and
market estimates of residential properties, cost and income

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (4 of 21)4/11/2007 1:52:52 PM
96-704

estimates for commercial properties, and cost estimates for
industrial properties.
For the valuation of residential property, CAMAS produces both
a market value estimate and a cost estimate. CAMAS's market value
estimate is produced by averaging seven values. Five of the values
are comparable sales, which are determined by Realty Transfer
Certificates. The remaining two values are computer-driven values
from internal regression mathematics in CAMAS. The final market
value estimate is the result of arraying the seven numbers from
high value to low value. The two highest figures and the two
lowest figures are struck, and the middle three figures are
averaged to produce the market value estimate. A "Comparable Sales
Sheet" is generated when a residential parcel has been subject to
the market modeling tax appraisal process. When there are not a
sufficient number of comparable sales to create a market value
estimate, residential property is appraised solely by the cost
approach. CAMAS's cost estimate is produced by estimating the cost
of replacing or reproducing the residential structure, deducting a
depreciation value from this cost and adding the underlying land
value, as determined by Computer Assisted Land Pricing (CALP)
models. For those properties where there is sufficient data
available for both a market value estimate and a cost estimate,
CAMAS will produce both figures. Because it is unusual for both
figures to be identical, the appraiser reconciles the differences
by choosing the most accurate approach to value after a
consideration of the relevance of each approach to the subject
property, the amount and reliability of data collected in each
approach, and the inherent strengths and weaknesses inherent in
each approach. The appraisers choice of valuation approach and the
estimated appraisal of the property based on that approach are set
forth in a "Property Record Card," which is available to the
property owner for review.
For the valuation of commercial property, CAMAS produces a
cost estimate and, in some instances, an income estimate. The
income approach to valuation is the preferred method of valuation
of commercial properties in Montana. The Department's process for
income valuation of commercial property begins with the submission
of income and expense questionnaires to commercial property owners
to complete and return. The information on the statements is
reviewed by an appraiser and entered into the CAMAS system. Once
in the computer, it can be sorted and analyzed using selectability
criteria. The information is then correlated and commercial income
models are developed. Such models may only be created, however, in
areas where sufficient income and expense data has been collected.
Because commercial property owners are not required to provide such
information to the Department, the income approach to commercial
property valuation in Montana is limited to those six counties in
Montana in which ample data exists. In all other counties in

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (5 of 21)4/11/2007 1:52:52 PM
96-704

Montana, commercial property is valued using the cost approach to
valuation. Although the Department's appraisal plan provides that
commercial property may also be estimated by the market data
approach, the Department has not developed any market models for
commercial property in Montana. Therefore, the CAMAS system
estimates commercial property values based on either the income
approach in six Montana counties or the cost approach in the
remaining counties. The evaluation approach for commercial
property and its estimated market value, as established by that
method, are set forth on a "Property Record Card," which is
available for review by the commercial property owner.
For both residential and commercial property for which the
cost approach to property valuation is applied, the Department
adjusts property values based on an "Economic Condition Factor."
An "Economic Condition Factor" (ECF) is defined by the Department's
CAMAS users' manual as "extraordinary economic obsolescence that
impacts all property located in a specific neighborhood, community,
or geographic area." According to the CAMAS manual, "[t]he
Economic Condition Factor attempts to correct for the difference
between replacement cost less normal depreciation and market value
as they may differ from locality to locality."
The purpose of the ECF is to adjust the cost approach to
valuation to take local market influences, such as a depressed or
very active market area, into account. For example, if a new
residence is constructed in an economically depressed area, the
cost of the new construction may well exceed the selling price of
the residence. According to the Department, to value this new
residence with a strict unadjusted cost approach would create a
significant disparity from appraisals based solely on the market
data approach and frustrate the goal of equalization.
The Department of Revenue applies ECFs to adjust both
residential and commercial property valuation where the cost
approach is used. An ECF is calculated for residential property by
comparing an estimation of values using the market approach to an
estimation of values using the cost approach. The ratio determined
by dividing the average market value by the average cost value is
the ECF. An ECF is calculated for commercial property by comparing
an estimation of the average sales price to an estimation of the
average cost value. The ratio determined by dividing the average
sales price by the average cost value is the ECF. ECFs apply only
to the depreciated reproduction or replacement cost of the
improvements to the land, and not to the value of the land itself.
ECFs are not used for those residential properties whose value is
determined by the market value approach or for those commercial
properties whose value is determined by the income approach. In
addition, ECFs are never applied to industrial property valuation.
For the valuation of industrial properties in Montana, CAMAS
uniformly uses the cost approach to valuation. CAMAS applies the

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (6 of 21)4/11/2007 1:52:52 PM
96-704

cost approach by determining the value of the underlying land,
according to a CALP estimation, and adding to that value the cost
of replacement of the industrial building and improvements minus
the depreciation, as determined by use of depreciation schedules
taken from the Marshall and Swift Valuation Service. The final
estimated market value, as determined by the cost approach to
valuation, is set forth in the property record card.
The culmination of the tax appraisal process is the
preparation of the "Property Record Card." That card reflects the
Department of Revenue's final tax appraisal activity for each
parcel of taxable property. The record card can be reviewed in the
paper format, or it can be reviewed through the CAMAS computer
program. Each property record card has a section entitled
"Appraisal Inspection Information." This section displays the
times that the Department's appraisers were physically present at
the subject property, the types of inspections, and the I.D. number
of the Department's employee who was at the premises. In addition,
each property record card has a section entitled "Summary of
Values." This section sets forth the final appraised land value,
the final appraised buildings value, the final adjusted appraised
market value for the property, and the appraisal approach used in
arriving at the final property valuation. If the cost approach to
property value was used to determine the final market value for the
property, the details of that approach, as well as the applicable
ECF, are detailed on the reverse side of the card. If the market
value approach was used, a separate "Comparable Sales Sheet" is
generated.
The Department of Revenue completed its reappraisal of
property which is the subject of this appeal on or before
December 31, 1992. Following the revaluation, the Department
mailed to each of the plaintiff taxpayers a notice of
classification and appraisal, pursuant to 15-7-102, MCA, and an
assessment notice pertaining to the assessment required by 15-8-
201, MCA. In Madison County, the final mailing of classification
and appraisal notices was completed on July 12, 1993. In
Beaverhead County, the final mailing was completed on July 13,
1993. In Gallatin County the final mailing date was July 15, 1993.
In Park County the final mailing date was July 19, 1993. In all
other counties, classification and appraisal notices were mailed
prior to July 12, 1993.
On December 30, 1993, a group of taxpayers filed a complaint
in the Eighth Judicial District Court in which they alleged, inter
alia, that (1) the Department had failed to equalize the values of
the plaintiffs' properties according to Article VIII, Section 3, of
the Montana Constitution, which provides that the State must
appraise, assess, and equalize the valuation of the plaintiffs'
properties in the manner provided by law; (2) the Department had
failed to equalize the values of the plaintiffs' properties and

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (7 of 21)4/11/2007 1:52:52 PM
96-704

taxable property in Montana according to 15-7-112, MCA; and
(3) the Department had failed to fulfill the duties and obligations
set forth at 15-8-201, MCA, which provides that the Department is
required to assess the plaintiffs' properties before the second
Monday in July 1993. On December 5, 1996, the District Court
entered an order in which it granted the plaintiff taxpayers'
motion for summary judgment and held that the Department of
Revenue, by utilizing more than one "method" of appraisal for both
residential and commercial property, had failed to equalize the
values of the taxpayers' properties as required by both Article
VIII, Section 3, of the Montana Constitution, and 15-7-112, MCA.
Although the court noted that the Department had "attempted to
apply the best market estimate appraisal method whenever possible,"
the court held that the application of three approaches to property
valuation was contrary to the constitutional goal of equalization.
In addition, the District Court held that the Department had failed
to assess all taxable property before the second Monday in July, as
required by 15-8-201, MCA, and that that section "imposes a
mandatory duty to send out the tax assessment notices to taxpayers
before the second Monday in July." The court therefore held that
tax assessments mailed out after July 12, 1993, in Gallatin County,
Park County, Beaverhead County, and Madison County were invalid
pursuant to 15-8-201, MCA, and that any tax increase based on
those assessments was unenforceable.
ISSUE 1
Did the District Court err when it granted summary judgment to
the taxpayers based on its determination that the Department's
appraisal and valuation processes violate 15-7-112, MCA, and
Article VIII, Section 3, of the Montana Constitution?
A. STANDARD OF REVIEW
Summary judgment is governed by Rule 56(c), M.R.Civ.P., which
provides, in relevant part, as follows:
The judgment sought shall be rendered forthwith if the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material
fact and that the moving party is entitled to a judgment
as a matter of law . . . .

In this case, the taxpayers and the Department moved for
summary judgment on the salient issues. Both parties agree that
there are no genuine issues of material fact. Therefore, we review
only the District Court's conclusions of law. When we review a
district court's conclusions of law, the standard of review is
whether those conclusions are correct. Carbon County v. Union
Reserve Coal Co. (1995), 271 Mont. 459, 469, 898 P.2d 680, 686.
B. SECTION 15-7-112, MCA
Section 15-7-112, MCA, provides as follows:

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (8 of 21)4/11/2007 1:52:52 PM
96-704

Equalization of valuations. The same method of appraisal
and assessment shall be used in each county of the state
to the end that comparable property with similar true
market values and subject to taxation in Montana shall
have substantially equal taxable values at the end of
each cyclical revaluation program hereinbefore provided.

The District Court concluded that the Department's
market-based method--which utilizes, depending on the available
market data, the market data approach, the income approach, the
cost approach, or some combination of these approaches--violates
15-7-112, MCA. In essence, the District Court concluded that
15-7-112, MCA, requires the Department to utilize only one
"method" when it estimates statewide market values, and that the
Department's use of three different approaches, particularly the
market data approach, violates that requirement. Ultimately, the
District Court determined that in order to comply with 15-7-112,
MCA, the Department is required to appraise and assess all property
by utilizing only one approach, specifically, the cost approach, to
estimating market value.
On appeal, the Department contends that 15-7-112, MCA, does
not mandate the utilization of only one approach to estimating
market values statewide, and that its current method is, in fact,
the most effective way to approximate market values, given the
market data that is available. The Department, therefore, claims
that the District Court erred when it concluded that the
utilization of a market-based method, which utilizes and combines
three different approaches to estimating market value, violates
15-7-112, MCA. In support of this claim, the Department asserts
that when 15-7-112, MCA, is analyzed in light of other statutory
mandates placed upon the Department, it is clear that 15-7-112,
MCA, permits utilization of the market data approach, that this
approach, by necessity, will vary from place to place depending on
available data, and therefore, that the District Court's
interpretation of 15-7-112, MCA, is incorrect. The Department
further asserts that, accordingly, the District Court's narrow
interpretation of the term "method," as it is used in 15-7-112,
MCA, is also incorrect.
1. STATUTORY SCHEME
When we interpret a statute, our function is to effectuate the
intent of the Legislature. Pretty on Top v. Snively (1994), 266
Mont. 45, 47, 879 P.2d 49, 50. Furthermore, we have previously
concluded that when we construe a statute, "the whole act must be
read together and where there are several provisions or
particulars, a construction is, if possible, to be adopted that
will give effect to it all." Larson v. Crissmore (1987), 228 Mont.
9, 15, 741 P.2d 401, 405. Finally, it is well established that
"this Court presumes that the legislature would not pass

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (9 of 21)4/11/2007 1:52:52 PM
96-704

meaningless legislation, and the Court must harmonize statutes
relating to the same subject, giving effect to each." Montana
Contractors' Ass'n v. Department of Hwys. (1986), 220 Mont. 392,
395, 715 P.2d 1056, 1058. We will, therefore, analyze 15-7-112,
MCA, based on these rules of statutory construction.
Section 15-8-111, MCA, requires that "[a]ll taxable property
must be assessed at 100% of its market value except as otherwise
provided." This section provides the following definition of
market value:
Market value is the value at which property would change
hands between a willing buyer and a willing seller,
neither being under any compulsion to buy or to sell and
both having reasonable knowledge of relevant facts.

Section 15-8-111(2)(a), MCA (emphasis added). We conclude that
when the Legislature defined "market value" as the price at which
property would change hands in an arms-length sale, it evidenced
its intent that the market data approach to value--and not just the
cost approach--can and should be utilized by the Department when it
appraises and assesses property.
Our conclusion is further supported by our prior decision in
DeVoe v. Department of Revenue (1993), 263 Mont. 100, 866 P.2d 228.
In that case, we interpreted 15-8-111, MCA, and stated:
It is true that the very next paragraph found at
15-8-111(2)(b), MCA, states that the DOR may use
"construction costs as one approximation of market
value." However, we hold that evidence of construction
costs alone, without consideration of any market factors,
does not satisfy the requirement of 15-8-111(1), MCA,
that the assessed value equal market value. . . .

Market value depends on the price that a willing
buyer would pay a willing seller, taking into
consideration relevant facts. Presumably, relevant facts
would include the market and economic conditions
prevailing at the time of sale.

DeVoe, 263 Mont. at 112, 866 P.2d at 235-36.

Furthermore, 15-8-111, MCA, also states:
If the department uses construction cost as one
approximation of market value, the department shall fully
consider reduction in value caused by depreciation,
whether through physical depreciation, functional
obsolescence, or economic obsolescence.

Section 15-8-111(2)(b) (emphasis added). We conclude that the
language of 15-8-111(2)(b), MCA, provides strong evidence that

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (10 of 21)4/11/2007 1:52:52 PM
96-704

the Legislature did not intend for only one approach to value to be
utilized when property is appraised and assessed. In fact, if the
Legislature did intend for only one approach to be utilized, then
15-8-111(2)(b), MCA, would be superfluous.
Sections 15-7-301 through -311, MCA, are entitled the Realty
Transfer Act. This Act requires the parties to a real estate
transfer to submit to the Department a realty transfer certificate
which states the price of the subject property. The Department
then considers the information when it appraises property by the
market data approach to estimating market value. Pursuant to
15-7-302, MCA, the express purpose of this Act is "to obtain
sales price data necessary to the determination of statewide levels
and uniformity of real estate assessments by the most efficient,
economical, and reliable method." Section 15-7-302, MCA. We
conclude that when the Legislature enacted this Act, it clearly
intended to allow the Department to utilize the market data
approach when it estimates market value.
Finally, 15-7-401 through -403, MCA are entitled the
Appraisal of Residential Property in Areas of Changing Use. This
part provides that if residential property is located in an area of
commercial or industrial growth, the property owner can elect to
have the property assessed at its value as residential property,
rather than at its value as commercial property. It is designed to
protect homeowners from paying higher taxes when their property
could be sold for a higher price as commercial property than as
residential property. We conclude that if the Legislature
intended, as the District Court determined, that all property must
be assessed solely by one approach--the cost approach--to
estimating market value, then the protection provided by
15-7-401 through -403, MCA, would be wholly unnecessary.
When the above-referenced statutes are read as a whole and the
pertinent principles of statutory construction are applied, it is
clear that the Legislature intended the Department to utilize both
the cost approach and the market data approach, depending upon the
available market data, when it assesses property and estimates
market value. The next question is whether utilization of various
approaches is contrary to the statutory mandate that appraisals be
done by the same "method" statewide.
2. DEFINITION OF "METHOD," AS USED IN 15-7-112, MCA
As previously noted, the District Court concluded that
15-7-112, MCA, permits the Department to utilize one, and only
one, approach when it appraises property and estimates market
value. The District Court based its conclusion on the language of
15-7-112, MCA, which provides, in part, that "[t]he same method
of appraisal and assessment shall be used."
The key term in the statute is "method." Apparently, the
District Court concluded that the term "method" is the equivalent
of the term "approach," and that, therefore, "method" could only

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (11 of 21)4/11/2007 1:52:52 PM
96-704

entail either the market data approach, the income approach, or the
cost approach, but certainly not all three.
We conclude, however, based on the facts set forth previously,
that the term "method," as it is used in 15-7-112, MCA, does not
refer to any single approach; rather, the term "method" refers to
a consistent process for arriving at market value, the details of
which may vary from place to place, depending on available data,
and which will necessarily include a number of different
approaches--e.g., the market data approach, the income approach,
the cost approach--or some combination of these approaches,
depending on the market in the area where appraisals occur.
Accordingly, we hold that the District Court also erred when it
interpreted the term "method," as it is used in 15-7-112, MCA, to
include only one approach.
C. ARTICLE VIII, SECTION 3, OF THE MONTANA CONSTITUTION
Having already held that the Department's market-based method
of assessing property and estimating market values does not violate
15-7-112, MCA, we now must address the important question of
whether such a market-based method is constitutionally permissible.
The relevant provision of the Montana Constitution is
Article VIII, Section 3, which provides as follows: "Property tax
administration. The state shall appraise, assess, and equalize the
valuation of all property which is to be taxed in the manner
provided by law." Mont. Const. art. VIII, 3.
The District Court concluded that equalization, as mandated by
Article VIII, Section 3, of the Montana Constitution, can be
achieved only if a single approach to value is utilized for every
parcel of class four property within the state. On that basis, the
District Court found, as it did with regard to 15-7-112, MCA,
that the Department's market-based method--which necessarily
includes several approaches--violates Article VIII, Section 3, of
the Montana Constitution.
On appeal, the Department contends that the District Court
erred when it concluded that the utilization of a market-based
method to appraise property and estimate market values violates
Article VIII, Section 3, of the Montana Constitution.
Specifically, it asserts that a review of the 1972 Montana
Constitutional Convention's transcript reveals that, with regard to
Article VIII, Section 3, three "themes" prevailed: (1) the
delegates intended the provision to secure equalization between the
various counties; (2) the delegates intended the provision to be
flexible, so that future legislators would be able to define the
precise means of taxation; and (3) the delegates anticipated the
utilization of more than one approach to value as a legitimate
method of determining market values. In essence, it claims that
Article VIII, Section 3, contemplates a market-based method which
utilizes multiple approaches to estimating market values and that,
concomitantly, such a market-based method is constitutionally

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (12 of 21)4/11/2007 1:52:52 PM
96-704

permissible.
It is well established that the intent of the framers of a
constitutional provision must be given effect when the provision's
meaning is at issue. State ex rel. Nelson v. Ninth Dist. Court
(1993), 262 Mont. 70, 79, 863 P.2d 1027, 1032 (citing Keller v.
Smith (1976), 170 Mont. 399, 405, 553 P.2d 1002, 1006).
Furthermore, we have previously held that when we construe a
constitutional provision, we are obligated to "employ the same
rules of construction employed to construe statutes." State v.
Cardwell (1980), 187 Mont. 370, 373, 609 P.2d 1230, 1232. It also
follows then, as with the construction of statutes, that we are
occasionally called upon to consider the enacting history of a
provision. Department of Revenue v. Puget Sound Power & Light Co.
(1978), 179 Mont. 255, 263, 587 P.2d 1282, 1287; Guillot v. State
Highway Comm'n (1936), 102 Mont. 149, 155, 56 P.2d 1072, 1074.
Pursuant to Montana's 1889 Constitution, assessments were
conducted independently within each county by the County Board of
Equalization. See Mont. Const. art. XII, 15 (1889). The County
Board of Equalization consisted of county commissioners from that
county. All of the county boards were overseen by the State Board
of Equalization, which reviewed and "equalized" the valuations of
taxable properties between the counties in order to "secure a
fair, just and equitable valuation of all taxable property among
counties, between the different classes of property, and between
individual taxpayers." Mont. Const. art. XII, 15 (1889).
At the 1972 Montana Constitutional Convention, the proposed
adoption of Article VIII, Section 3, generated a substantial amount
of debate. Ultimately, the delegates elected to adopt
Article VIII, Section 3, and as a result, drastically changed the
administration of property taxation within the State of Montana.
One of the primary proponents of Article VIII, Section 3, Delegate
Rygg, commenced the debate with the following observations:
[Article VIII, Section 3,] would open the door to a whole
new concept of taxation . . . . However, it still would
be the Legislature's prerogative to decide how
far-reaching it wants the effects of the change to be
. . . . It is a duty of the Legislative branch to define
the tax administration system and the duty of the
Executive branch to administer that system. Let us
consider, for a moment, our present system of taxation.
Currently each county has its own administrating
personnel. Now, if there were no need for statewide
taxes and if our educational system was not funded at all
by property tax, this method would be adequate. However,
because much of the education equality is based on
property tax, it is necessary that we change from an
individual county system to a statewide system.

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (13 of 21)4/11/2007 1:52:52 PM
96-704

Verbatim Transcripts, 1971-72 Montana Constitutional Convention,
Vol. V, pp. 1379-80 (March 3, 1972).
Another proponent of Article VIII, Section 3, Delegate
McDonough, expressed the following similar observations:
All it [Article VIII, Section 3,] does is give the
ultimate authority to appraise and equalize taxes in the
state . . . . Reclassification come [sic] into effect 14
or 15 years ago, and there still is not equalization
between counties. That is all we want to do by this
section--is to give the Legislature the power to equalize
the property tax in Montana . . . . They [the
Legislature] can do what they want, and that's what we
want to do by the--removing these restrictions on the
valuation of the property tax . . . . And that's why
we're here. We're allowing the Legislature to be able to
make a statewide valuation of property. They're the ones
. . . that have to pay the bill. They are the ones that
have to levy the taxes. Therefore, they're the ones that
have that responsibility, and they should also have the
responsibility of setting this thing up so it will work.

Montana Constitutional Convention Transcript at 1386-87.
A review of the transcript reveals that the observations of
Delegates Rygg and McDonough are accurate representations of the
framers' views. On that basis, we conclude that the framers
intended Article VIII, Section 3, to (1) equalize assessment among
the counties, and (2) provide the Legislature with the necessary
flexibility to achieve equalization in the most efficient and
equitable manner. The fact that the framers intended to provide
the Legislature with substantial flexibility is further evidenced
by the express language in Article VIII, Section 3, which states,
"in the manner provided by law."
Furthermore, additional comments in the transcript provide
strong evidence that the framers anticipated and intended that
various approaches to estimating market value, and not just a
single approach, could be utilized in order to achieve
"equalization." For example, Delegate Lorello asked Delegate
McDonough the following hypothetical question:
Let's get to the word "equalize." And let's suppose that
today we build a home in Billings costing $25,000. Let's
then build another home in Philipsburg, Montana, and it
too will cost $25,000. Now then, would you tell me what
the taxes would be on these two homes? Just what would
they be at the end of the year? How would you equalize
these things, between the two cities?

Delegate McDonough provided the following response:
What we do by this proposal, we don't tell anybody how

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (14 of 21)4/11/2007 1:52:52 PM
96-704

they're going to equalize these two taxes between these
two counties; we leave that to the Legislature. And one
thing I'd like to make clear on that here--that we don't
say anything has to be equalized in any one manner. We
leave that to the Legislature and the body that they set
up . . . . We don't say that land has to be taxed on
market value. And incidentally, houses are--residential
houses are in Montana. We don't say that other land
can't be taxed on productive value . . . . And there's
nothing in what we're proposing that you can't tax it on
productive value. This thing about changing--how do you
arrive at valuation, we're leaving that wide open,
because how to arrive at valuation of any piece of
property is very complex. And market value is just one
of the things you take in consideration. Now, on the
difference between the houses. Presently now, houses are
started off with--that class of property does start off
with market value. And if the house is only worth--you
build a house in Philipsburg and if there's not too much
market for a house and you pay $25,000 for it, it might
only be worth 20. And if the Legislature says that
houses will be on market value, then that house will be
20 in Philipsburg and 25 in Billings . . . . But I don't
know what the Legislature is going to do. They might
actually go to a rental value instead of a market value
. . . . And they should be allowed that flexibility
. . . .

Montana Constitutional Convention Transcript at 1391.
We conclude that the record from our Constitutional Convention
clearly indicates the framers' understanding that productive value
(the income approach) and the market data approach can both be
utilized by the State when it attempts to "appraise, assess, and
equalize the valuation of all property which is to be taxed in the
manner provided by law." Therefore, we conclude that, contrary to
the District Court's determination, the framers of Article VIII,
Section 3, did not intend for equalization to require the exclusive
utilization of a single approach to estimating market value.
Rather, the framers anticipated and intended that the State could
utilize a number of different approaches, including the utilization
of a market-based method, to "appraise, assess, and equalize the
valuation of all property."
The taxpayers argue that the ECFs, which are designed to
narrow the inconsistency between the cost approach and market data
approach, are no different than the "blanket multipliers," and
stratified sales assessment ratio studies (ratio studies), which we
condemned in Department of Revenue v. Barron (1990), 245 Mont. 100,
799 P.2d 533, and Department of Revenue v. Sheehy (1993), 262 Mont.

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (15 of 21)4/11/2007 1:52:52 PM
96-704

104, 862 P.2d 1181. We disagree. The ratio studies at issue there
were the statutorily mandated method of appraisal and the issue was
whether that method was constitutional. These studies produced
ratios utilizing historical data (actual sales prices and existing
appraised values) without any actual new appraisal. Barron, 799
P.2d at 534. We concluded that the non-uniform application of the
ratios unconstitutionally required certain taxpayers to bear a
disproportionate share of the tax burden. Barron, 799 P.2d at 540.
The use of ECFs is a recognized and accepted practice by fee
appraisers. The ECFs used here are an integral component of CAMAS;
are applied uniformly in the localized area; and appropriately take
into consideration and adjust cost approach appraisals on
individual parcels of property for current local economic and
market conditions. Absent the integration of such economic and
market influences, the results of the new appraisal produced by the
cost approach would be skewed.
We therefore conclude that the Department's market-based
method--which utilizes a combination of approaches--does not
violate Article VIII, Section 3, of the Montana Constitution.
D. CONCLUSION
We recognize that the Department's method of assessing
property and estimating market values is by no means perfect, and
will occasionally miss the mark when it comes to the Constitution's
goal of equalizing property valuation. However, perfection in this
field is, for all practical purposes, unattainable due to the
logical and historical preference for a market-based method, and
the occasional lack of market data. Nonetheless, we conclude that
the Department's interdisciplinary method--which utilizes the
market data approach, the income approach, the cost approach, or
some combination of these approaches--is a reasonable attempt to
equalize appraisal of real property throughout the State and that
it comports with the most modern and accurate appraisal practices
available.
Finally, we note that in those occasional situations when, due
to the inherent imperfections in the Department's market-based
method, fair, accurate, and consistent valuations are not achieved,
individual taxpayers can and should avail themselves of the
property tax appeals process set forth at 15-15-101, -102, -103,
and -104, MCA.
For these reasons, we hold that the District Court erred when
it concluded that the Department's appraisal and valuation
processes violate 15-17-112, MCA, and Article VIII, Section 3, of
the Montana Constitution.
ISSUE 2
Did the District Court err when it concluded that tax
assessments were invalid for those taxpayers whose assessment
notices were not sent before the second Monday in July 1993?
Section 15-8-201, MCA (1993), provides in relevant part that:

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (16 of 21)4/11/2007 1:52:52 PM
96-704

(1) The Department of Revenue or its agent must, between
January 1 and the second Monday of July in each year,
ascertain the names of all taxable inhabitants and assess
all property subject to taxation in each county . . . .

In 1993, July 12 was the second Monday of July.
The record does not indicate the date when the Department
completed its assessment of property subject to taxation in each
county. However, the District Court did find that in Madison
County notices of assessment were not sent out until July 12, 1993,
and in Beaverhead, Gallatin, and Park Counties, notices were sent
out between July 13 and 19, 1993. Based on these facts, and our
interpretation of 15-8-201, MCA (1993), in Butte Country Club v.
State (1980), 186 Mont. 424, 608 P.2d 111, the District Court held
that:
The subclass of plaintiffs whose property taxes were
increased pursuant to assessment notices and levies sent
out after the second Monday in July, 1993, are granted
summary judgment and that the assessments and levies, to
the extent they increased taxes for those taxpayers, are
invalid . . . .

On appeal from that holding, the Department requests that we
reconsider our decision in Butte Country Club, and that even if we
reaffirm that decision, we limit its effect to the facts in that
case for the following reasons respectively:
1. The plain language of 15-8-201, MCA (1993), does not
require that notices of assessment be sent by the second Monday of
July, but only that property be assessed by that date.
2. This Court misapplied 15-8-308, MCA (1993), in Butte
Country Club. That section provides that assessments are not
illegal simply because not completed within the time required by
law.
3. Even if Butte Country Club is affirmed, its effect should
be limited to the facts in that case in which the taxpayers were
actually precluded from appealing their assessments because their
assessment notices were late. Based on changes in the law, that
result is no longer possible.
The taxpayers simply respond that our holding in Butte Country
Club was recently reaffirmed in Canbra Foods Ltd. v. Department of
Revenue (Mont. 1996), 925 P.2d 955, 53 St. Rep. 954, and that our
decision in Butte Country Club requires that the District Court be
affirmed.
In Butte Country Club, the District Court issued writs of
prohibition restraining the Department from assessing the Butte
Country Club and the Grand Hotel at appraised values determined by
the Department in 1978. The Country Club received its notice of
change in property valuation on August 31, 1978. The owners of the

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (17 of 21)4/11/2007 1:52:52 PM
96-704

Grand Hotel also received their notice in late August 1978. Both
taxpayers filed notices of appeal with the Butte-Silver Bow County
Tax Appeal Board. However, those appeals were not filed in time to
be heard by the local Board.
In Butte Country Club, we affirmed the district court's
conclusion that untimely tax assessments were illegal and
unenforceable. We held that:
The words of section 15-8-201, MCA [1977], are plain,
unambiguous and certain. This statute requires the DOR to
assess all property subject to taxation between January 1
and the second Monday of July. The statute contains the
word "must", and this clearly indicates that the
statutory commands are mandatory, and not discretionary.
The DOR must assess property by the second Monday in
July, and that was not complied with in the instant case.

Butte Country Club, 186 Mont. at 429, 608 P.2d at 114.
We held that 15-8-308, MCA, did not save the Department's
late assessments for the following reasons:
The DOR's argument that section 15-8-308, MCA,
allows late assessments is without merit in the context
of the instant case. Section 15-8-308, MCA, provides:

"No assessment or act relating to assessment or
collection of taxes is illegal on account of informality
or because the same was not completed within the time
required by law."

The cases interpreting this statutory provision have
made a distinction between irregularities regarding
assessments which are informalities, and those which are
matter of substance. See Anderson v. Mace (1935), 99
Mont. 421, 45 P.2d 771; Perham v. Putnam (1928), 82 Mont.
349, 267 P. 305; Cobban v. Hinds (1899), 23 Mont. 338, 59
P. 1. A departure from a legal requirement is not an
informality, but rather is a matter of substance and is
vital. Perham v. Putnam, supra, 82 Mont. at 361.

Butte Country Club, 186 Mont. at 429, 608 P.2d at 114-15. We also
held that 15-8-201, MCA (1977), was a specific statute which must
prevail over 15-8-308, MCA (1977), because it is a general
statute. Although not specifically stated, it is obvious from the
context in which we arrived at our decision in Butte Country Club,
that critical to our conclusion was the fact that "[t]he DOR's late
assessment effectively precluded review by the Local Board in the
instant case." Butte Country Club, 186 Mont. at 432, 608 P.2d at
116.

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (18 of 21)4/11/2007 1:52:52 PM
96-704

While it was reasonable for the District Court to conclude
that our decision in Butte Country Club controlled the outcome of
the issue raised by late assessment notices, we conclude, for
several reasons, that that case should not be followed, based on
the facts in this case and subsequent developments in statutory
law.
First, the plain language of 15-8-201, MCA (1993), does not
require that assessment notices be sent by the second Monday in
July. It requires only that property be "assessed" by that date.
Black's Law Dictionary defines "assess" as "fix the value of."
Black's Law Dictionary 116 (6th ed. 1990).
There is no indication from the record before us that the
properties in the counties which are the subject of the District
Court's decision were not assessed before the second Monday of July
1993. The only evidence was that notices of assessment were not
sent out in those counties until or after that date. Furthermore,
our decision in Butte Country Club refers only to property which
was "assessed" after the deadline provided for in 15-8-201, MCA
(1977). Although it does seem to equate assessment with the date
on which notices of change in property valuations were sent,
nowhere does that decision specifically hold that assessments are
invalid simply because the notice of assessment is sent on or after
the second Monday in July.
Second, our interpretation of 15-8-308, MCA (1977), seems to
focus exclusively on the term "informality" and ignore the separate
independent part of that statute which provides that no assessment
is illegal "because the same was not completed within the time
required by law." In doing so, we concluded that time periods
which are mandated by statute are not an "informality," but ignored
the inescapable conclusion that if there were not time periods
required by law, there would be no need to excuse them in the
second part of the statute. In the process, we ignored the most
fundamental rule of statutory construction, which is that the role
of a court is simply to declare what the terms of a statute are,
and not to omit what the Legislature has seen fit to include.
Section 1-2-101, MCA. We also ignored those rules discussed
previously in this opinion to the effect that "this Court presumes
that the legislature would not pass meaningless legislation, and
the Court must harmonize statutes relating to the same subject,
giving effect to each." Montana Contractors' Ass'n v. Department
of Hwys. (1986), 220 Mont. 392, 395, 715 P.2d 1056, 1058.
Third, we concluded, without explanation, that 15-8-201,
MCA, is specific, but that 15-8-308, MCA, is general, and
therefore, that -201 must control if there is a conflict between
the two statutes. However, there is no apparent basis for
concluding that one statute is more specific than the other.
Section -201 is found in that part of Title 15, Chapter 8, which
pertains to "when property is assessed." Section -308 is found in

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (19 of 21)4/11/2007 1:52:52 PM
96-704

that part of Title 15, Chapter 8, which describes "how property is
assessed." If it was not for the time requirements found in
Part 2, there would be no logical need for the qualifications set
forth in -308.
Finally, our decision in Butte Country Club was based on the
substantive effect that late assessments had on the taxpayers'
ability to appeal their changed property valuations. Section
84-603, RCM (1977), which applied to the taxpayers in the Butte
Country Club case, provided that:
No reduction may be made in the valuation of property
unless the party affected or his agent makes and files
with the county tax appeal board on or before the first
Monday in June a written application therefore. The
application shall state the post office address of the
applicant, shall specifically describe the property
involved, and shall state the facts upon which it is
claimed such reduction should be made.

Because of this statute, we concluded in Butte Country Club that,
"[t]he DOR's late assessment effectively precluded review by the
Local Board in the instant case." Butte Country Club, 186 Mont. at
432, 608 P.2d at 116.
The successor to 84-603, RCM, which was in effect at the
time notices of assessment were sent out in this case, was
15-15-102, MCA (1979), which provides as follows:
No reduction may be made in the valuation of property
unless the party affected or his agent makes and files
with the county tax appeal board on or before the first
Monday in June or 15 days after receiving notice of
classification and appraisal from the Department of
Revenue, whichever is later, a written application
therefore. The application shall state the post office
address of the applicant, shall specifically describe the
property involved, and shall state the facts upon which
it is claimed such reduction should be made.

(Emphasis added.)
In other words, even if we assume that notice of assessment is
the equivalent of "assessment," the effect of a late notice no
longer has the substantive impact on a taxpayer that it had in the
Butte Country Club case. Therefore, even if we focused, as the
Court did in that case, on that part of 15-8-308, MCA, which
refers to "informality," rather than the part which refers to
timeliness, we could not come to the same conclusion that notices
of assessment are currently substantive, as opposed to an
"informality."
Neither is it correct that the rule from the Butte Country
Club case was recently affirmed in Canbra Foods Ltd. v. Department

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (20 of 21)4/11/2007 1:52:52 PM
96-704

of Revenue (Mont. 1996), 925 P.2d 855, 53 St. Rep. 954. Our
decision in Canbra Foods did not deal with the effect of late
"assessment" or "notice of assessment" on the legality of the
assessment. That case dealt only with the timeliness of the
taxpayer's application for reduction of property valuation.
Therefore, it is irrelevant to our decision in this case.
For these reasons, we reverse that part of our decision in
Butte Country Club which is inconsistent with this opinion. We
conclude that 15-8-201, MCA (1993), does not render those
assessments for which notices and levies were sent out on or after
the second Monday in July 1993 invalid to the extent that taxes
were increased by those assessments. The District Court's
conclusion to the contrary is reversed.
This case is remanded to the District Court for entry of
judgment consistent with this opinion.

/S/ TERRY N. TRIEWEILER

We Concur:

/S/ J. A. TURNAGE
/S/ WILLIAM E. HUNT, SR.
/S/ JIM REGNIER
/S/ JAMES C. NELSON
/S/ KARLA M. GRAY
/S/ W. WILLIAM LEAPHART

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-704%20Opinion.htm (21 of 21)4/11/2007 1:52:52 PM