State Ex Rel. Miller v. Dwyer

The opinion of the court was delivered by

Fontron, J.:

On March 24, 1971, the Director of the Property Valuation Department of the State of Kansas, Ronald F. Dwyer, (hereafter referred to as director) issued directives to the Boards of *438County Commissioners of 96 Kansas counties (being all of the counties which had completed reappraisals) directing each board to convene as a board of equalization and to adopt a resolution directing the county assessor to apply to each class of rural agricultural investment land the valuation per cent changes for the tax year of 1971 as shown in the directive. Each directive further provided that the resolution showing the percentage changes be published in a paper of general circulation within the county. The directives, which were identical except for addressees and percentage figures, were issued in an attempt to comply with the legislative mandate to equalize assessed valuations between adjacent counties as required by K. S. A. 79-1446. A reproduction of one of the directives — in this case issued to Ellis County — is shown as Appendix A following this opinion.

Some two weeks after the directives were issued, the State of Kansas, in the person of its Attorney General acting on the state’s behalf, filed the present action seeking a declaratory judgment that the statutes under which the director purported to act were unconstitutional and that his directives were void. The state further prayed for affirmative injunctive relief which would require the director to rescind the directives, to notify the county boards of commissioners to such effect, and to direct the county boards to repeal any resolutions which might have been adopted in compliance with the directives. A restraining order was issued two days after the lawsuit was filed.

After a hearing, the trial court entered judgment in favor of the director, upholding the validity of the directives which were issued and denying the injunctive relief sought. The state has appealed from that judgment, the enforcement of which was stayed by the trial court pending appeal.

Before defining the issues it may prove helpful to sketch, in thumbnail fashion, the procedures employed by the director in computing the blanket percentage changes by which equalization was to be accomplished.

As a first step, the director divided the state into nine districts comparable and homogeneous as to climate, rainfall, crops and cropping practices, hazards, income and expenses, and sales. Among the items considered in identifying soil and land capabilities were texture, depth, permeability, slope, drainage, erosion and terrain. A map is attached hereto as Appendix B, showing the nine districts and the counties encompassed in each.

*439Lands were classified on a statewide basis into eleven categories: Irrigated, 1 and 2; bottom cultivated, 1 and 2; upland cultivated, 1 and 2; tame grass, 1 and 2; native grass, 1 and 2; and waste. A table was prepared showing the acreage of each type of land in each of the 96 counties involved and the average assessed value per acre. Finally, three tables were prepared for each county: (1) Showing the percentage of adjustment for rural agricultural investment land in each of the categories, these being the percentage changes to be made in equalizing the assessed values in the county with the assessed values throughout the district; (2) disclosing the average assessed value per acre of land in each classification for the year 1970; and (3) containing the 1971 average assessed value per acre for each class of land after application of the percentage adjustments.

The average per acre assessed values for 1971 for the land in each category was computed on the basis of the median of the assessed values throughout the several counties comprising the district, it being assumed that each county assessor had assessed the real estate in his county at 30% of justifiable value (now fair market value).

The first issue raised on appeal is whether K. S. A. 79-1446 violates the due process and equal protection provisions of the federal and state constitutions. As a part of the due process question, the state challenges not only K. S. A. 79-1446 but K. S. A. 79-1602 (now K. S. A. 1971 Supp. 79-1602), as well.

K. S. A. 79-1446 implements K. S. A. 79-1404 Sixteenth which invests the director with authority to equalize valuations of property. 79-1446 reads as follows:

“Before September 15 of each year the state director of property valuation shall make a comparison of the fair market values in money of taxable property of each county with the fair market value in money of taxable property of counties adjoining thereto, and shall make a similar comparison with the statewide average of fair market values in money of taxable property. All countywide reappraisals of taxable property, after their final completion, shall be submitted to the state director of property valuation for such a comparison with adjoining counties and with the statewide average. In the event that any annual comparison or any appraisal so submitted shall fail to be substantially equal to that of any adjoining county in the judgment of the state director of property valuation, it shall be the duty of such director to order the county assessor of the offending county to increase or decrease the appraised values of his county to the level of surrounding counties to make all such counties comparable to adjoining areas.”

*440The state contends this statute is constitutionally objectionable in that no provision is made for the giving of notice prior to the time the director acts to equalize the assessments. Since his directives have the effect in many instances of increasing assessed values, although some values are lowered, it is argued that due process requires notice to be given of prospective increases, and opportunity be afforded for hearing.

In our judgment this contention must be rejected. The law recognizes a distinction between the process of assessment, in which individual properties are valued separately, and equalization procedures by which blanket changes are made affecting all or an entire class of properties within a particular assessment or taxing district.

Where an increase in the value placed by the county assessor on a specific tract of real estate is contemplated by the county board of equalization, the statutory scheme of this state requires the owner be notified of the proposed increase and that he be given an opportunity to be heard. To this effect, K. S. A. 79-1602 provides in substance that where it becomes necessary, in the opinion of the county board, to increase the assessed valuation of specific tracts or individual items of real estate, “except where the assessment of a class or classes of property in any area or areas of the county is raised by a general order applicable to all property in such class or classes for .the purpose of equalization ,” the county clerk shall give ten days written notice to the person to be affected, stating the proposed increase and fixing the time and place of hearing. It is because of the exception which we have italicized that the state now claims K. S. A. 79-1602 is unconstitutional as violating the precepts of due process.

We are not without respectable precedent in concluding that prior notice is not required by constitutional mandate in the equalization process. The case of Bi-Metallic Co. v. Colorado, 239 U. S. 441, 60 L. Ed. 372, 36 S. Ct. 141, reflects a situation quite comparable to that which is now before us. That action was brought to enjoin the Colorado State Board of Equalization and the Colorado Tax Commission from putting into effect an order increasing the value of all taxable property in Denver by forty per cent. The suit was dismissed by the Supreme Court of Colorado.

In affirming the Colorado court’s judgment, the United States Supreme Court assumed, for the purpose of its opinion, that *441neither the taxpayer nor the local assessor, nor any representative of the city or county was provided an opportunity to be heard other than what they may have had by reason of the fact that the time of the boards meeting is fixed by law. The court went on to say:

“. . . On this assumption it is obvious that injustice may be suffered if some property in the county already has been valued at its full worth. But if certain property has heen valued at a rate different from that generally prevailing in the county the owner has had his opportunity to protest and appeal as usual in our system of taxation, ... so that it must be assumed that the property owners in the county all stand alike. The question then is whether all individuals have a constitutional right to be heard before a matter can be decided in which all are equally concerned — here, for instance, before a superior board decides that the local taxing officers have adopted a system of undervaluation throughout a county, as notoriously often has been the case. . . .
“Where a rule of conduct applies to more than a few people it is impracticable that every one should have a direct voice in its adoption. The Constitution does not require all public acts to be done in town meeting or an assembly of the whole. General statutes within the state power are passed that affect the person or property of individuals, sometimes to the point of ruin, without giving them a chance to be heard. Their rights are protected in the only way that they can be in a complex society, by their power, immediate or remote, over those who make the rule. If the result in this case had been reached as it might have been by the State’s doubling the rate of taxation, no one would suggest that the Fourteenth Amendment was violated unless every person affected had been allowed an opportunity to raise his voice against it before the body entrusted by the state constitution with the power. . . . There must be a limit to individual argument in such matters if government is to go on. . . .” (pp. 444, 445.)

In a more recent case, also arising in Colorado, People v. Hively, 139 Colo. 49, 336 P. 2d 721, the court had occasion to ponder the question of notice as applying to the equalization function as distinguished from the assessing function. In discussing a section of the Colorado code directing the tax commission to determine whether property within the several counties has been assessed at true and full cash value and should it find the property in any county not to have been so valued, then to determine the increase or decrease in the value required to place the property on the assessment roll at full value, the court said:

“This authorizes the commission to order horizontal increases or decreases in an aggregate flat sum or of a percentage rate. It applies to all property within a county and when exercising this function the commission is not required to make reappraisals, to give notice to or hold hearings for affected taxpayers. It performs in this role in September long after the determination *442of individual assessments. This section would be meaningless if the commission were required to notify each and every taxpayer in the county and hear complaints with respect to the increase in valuation. . . .” (pp. 58, 59.)

In an annotation in 84 A. L. R. Tax Assessment — Increase— Notice, p. 198, the rule is stated in this wise:

“In those states where the question has arisen, it has been generally held that notice to individual property owners affected is not required where a general increase is made by a board of equalization or review of the assessed valuations, of all the taxable property in a given division or district (or all the property therein of a certain class), the statutes being generally construed as not requiring such notice, and the requirement being held not essential to due process of law. . .

See, also, Colorado Tax Commission v. Pitcher, 56 Colo. 343, 138 Pac. 509; 51 Am. Jur., Taxation, § 779, p. 704.

A taxpayer is not left destitute or without remedy to protect himself against arbitrary or capricious action on the part of the director in his administration of equalization procedures. Avenues for the review and correction of arbitrary, inequitable or discriminatory assessments are contained among our statutes. K. S. A. 74-2438 provides that an appeal may be taken to the state board of tax appeals from any finding, ruling, order, decision or other final action of the director of property valuation by any person aggrieved thereby. K. S. A. 79-1413a furnishes another safeguard in providing that when on complaint of any taxpayer to the state board of tax appeals it is made to appear that the assessment of taxable real estate in any county is not in substantial compliance with the law, and that the public interest will be promoted by a reappraisal, the board shall order a reappraisal of all or any part of the taxable property in the district.

Not to be overlooked in this connection is K. S. A. 79-2005 (now K. S. A. 1971 Supp. 79-2005), pursuant to which a taxpayer may pay his taxes under protest and then bring suit for the recovery thereof within the time fixed by the statute.

In Felten Truck Line v. State Board of Tax Appeals, 183 Kan. 287, 327 P. 2d 836, a challenge was directed to the statute which imposed a tax upon motor carriers. The challenge was brought on the ground that due process was denied. In rejecting that argument the court stated:

“It is only necessary that at some stage of the assessment proceedings the taxpayer shall have an opportunity, after notice, to appear and contest the assessment.” (p. 296.)

*443The rationale underlying Felten was further expressed in the recent case of State, ex rel., v. Dwyer, 204 Kan. 3, 460 P. 2d 507, where an attack was launched against what is now K. S. A. 1971 Supp. 79-306c on the ground, among others, that it contravened the due process clause of the 14th Amendment. It was contended in that case that a taxpayer who purchased a car after June 15, the final day on which the county board of equalization met, had no opportunity to appeal his assessment to the board, and thus was deprived of due process and equal protection. In rejecting the argument we called attention to K. S. A. 79-1413a and K. S. A. 79-2005 and stated:

“These avenues of relief remain open to the aggrieved taxpayer after June 15. Their availability satisfies constitutional requirements. . . .” (p. 5.)

But, argues the state, some form of notice to the taxpayer is necessary before he can be placed in a position to avail himself of his statutory remedies of review. In other words, it is argued the taxpayer must be made aware of the change in his assessment. In advancing this argument the state apparently overlooks K. S. A. 79-1412a, (now K. S. A. 1971 Supp. 79-1412a) Third, which requires the county assessor, on or before May 1 of each year, to notify each taxpayer by mail as to the assessed value of his real property whenever the assessment has been changed from that of the preceding year.

In the present case, the equalization directives were issued March 24, 1971, and by their specific terms apply to the 1971 tax year. Under the mandate expressed in 79-1412a, it would have been the statutory duty of the county assessor, absent the restraining order issued herein, to notify each taxpayer on or before May 1st of the new assessed valuation resulting from the director’s equalization order. This notification would, in our judgment, be sufficient to alert the most comatose taxpayer to the realization that the assessed value of his property had been increased (or decreased, as the case might be) and, if he felt aggrieved, that he had best take advantage of the avenues available to him for review of his assessment. In this connection it would appear that an appeal to the county board of equalization would have been open at this time, as well as the other avenues already mentioned, since under K. S. A. 79-1602, the county board is required to meet not later than the first day in May (now May 15) for the hearing of appeals and remains in session *444until the last business day of that month, and thereafter reconvenes from June 5th to the 15th for the same purpose.

The claim that equal protection is denied by K. S. A. 79-1446 needs little discussion at this point. The same effective avenues for review remain open to those who feel aggrieved by the changes wrought in their assessed values by the equalization orders as are open to those who feel aggrieved for other reasons. The directive issued by the director applies to all owners of rural agricultural investment properties alike — none are treated unequally.

Passing to another feature, the state points out that in Board of County Commissioner v. Brookover, 198 Kan. 70, 74, 422 P. 2d 906, this court recognized that matters of valuation and assessment are administrative in character. It then asserts, since the equalization function is properly a part of the valuation process, that the legislature has not set up adequate standards to provide guidelines in equalization matters.

We have examined the authorities cited by the state and do not find them persuasive in supporting its position. In two of them, State, ex rel., v. Fadely, 180 Kan. 652, 308 P. 2d 537 and Cities Service Gas Co. v. State Corporation Commission, 197 Kan. 338, 416 P. 2d 736, this court upheld legislation as supplying sufficient standards for administrative guidance. The Cities Service case appears quite in point. There it was held that the statutes in question provided a sufficient standard to govern the commission s exercise of authority to approve or deny applications to waterflood oil and gas wells, the standard being to act in the interest of off and gas conservation.

Neither State, ex rel., v. Hines, 163 Kan. 300, 182 P. 2d 865 or Johnston v. City of Coffeyville, 175 Kan. 357, 264 P. 2d 474, are factually in point. The Hines case challenged the school reorganization act of 1945. That piece of legislation sought, among other things, to invest county committees with the power to adopt such orders as might be necessary to properly organize, reorganize and disorganize school districts. The lack of standards in this type of legislation is obvious. The statute involved in Johnston was likewise wanting in standards in providing that a per cent of construction costs of a highway be paid by the city on an equitable ratio among its taxpayers as the governing body should prescribe.

The duty enjoined on the director by 79-1446 is to equalize the assessed values of property in adjoining counties to the end that *445the values are comparable. The technical means of accomplishing this objective must necessarily be left to the director and members of his staff, but the standard seems clear enough, i. e., equalization in the assessed values of comparable property. We believe this to be a ready, comprehensible and sufficient guide for the administrative action required.

It is also claimed that K. S. A. 79-1446 and the action taken thereunder by the director, violates article 11, § 1 of the Kansas Constitution which provides, so far as material, that the legislature shall provide for a uniform and equal rate of taxation. The gist of the state’s contention on this point is not too clear, but it cites the case of Hines et al., v. City of Leavenworth et al., 3 Kan. * 186 [2d Ed., 180] which construes the amendment to mean that the rate of taxes must be uniform and equal throughout the jurisdiction which levies them. Apparently the state implies that 79-1446 ignores jurisdictional boundaries and extends the assessment function, through the medium of equalization, beyond territorial limits, thus violating the constitutional provision.

As we view the plan proposed by the director, it does not violate the “uniform and equal” provision as construed in Hines. Under K. S. A. 79-1411a the county is declared to be the governmental unit charged with the primary responsibility for the administration of laws relating to the assessment, review, equalization, extension and collection of real and personal property taxes, while 79-1411b provides that each county shall comprise a separate assessment district.

Each of the directives issued by the director applies to a single separate assessment district, namely, die county. The assessed values of the rural agricultural properties, after equalization, remain equal and uniform throughout each county. We find no merit in the suggestion that those values were computed on a district basis. Rather, they were completed on a county-wide basis and equalized thereafter with adjacent counties.

Finally the state would have us hold that the plan designed by the director, and implemented by the directives of March 24, 1971, does not accord with the provisions of K. S. A. 79-1446 but that it violates both the statute and the constitutional command of uniformity. The argument points out that equality exists only between counties which are not adjacent to interior district boundary lines; that as to counties which face each other across district borders, there remains inequality in assessed values. Some lack of *446equality cannot truthfully be denied, but we reject the concept that it vitiates or poisons the entire plan.

The problem of disparity in assessed values has long plagued the taxpayers of this state. It has become more acute with the proliferation of taxing districts, such as school and hospital districts, which may embrace territory in two or more counties and which have the power to adopt levies for their own operation, although, as we pointed out in McManaman v. Board of County Commissioners, 205 Kan. 118, 468 P. 2d 243, they possess no authority with respect to the valuation and assessment of property.

In the McManaman decision this court forcefully called attention both to the inequalities which then existed in the assessed values of real estate between counties and to the duties placed on the director to correct them. On page 127 of the opinion this language appears:

“These clearly defined official duties of the director of property valuation leave no doubt that he has full power and authority to enforce the assessment laws promulgated by the legislature and to insure that all property subject to tax is assessed uniformly and equally.”

The attainment of perfection in the area of taxation will seldom, if ever, be likely. So long as imperfection inheres in humankind, the institutions which mankind creates will doubtless be infected with the same virus. But progress does occur from time to time. This is exemplified, we believe, in the plan contrived by the director to equalize rural property values. It is obvious that a great deal of thought, study and research went into its preparation. One cannot read the record without concluding that the director made a sincere attempt to comply with the legislative mandate and the expressions found in the McManaman decision.

Although some inequality in assessed values will doubtless exist where counties border on opposite sides of a district boundary there is good reason to believe there will be less disparity and more equality after the the directive is put into effect than was the case when McManaman was decided. The change should be for the better. The director makes no claim that his plan is perfect, or that it cannot be improved with further study. But it does furnish, as the director suggests, a basis from which to work.

We find no reason for disturbing the judgment of the trial court and the same is affirmed.

O’Connor and Prager, JJ., not participating.

*447APPENDIX A

STATE OF KANSAS PROPERTY VALUATION DEPARTMENT DIRECTIVE

To: The Board of County Commissioners of Ellis County, Kansas.

Re: Equalization of Locally Assessed Rural Agricultural Investment Land.

This directive is issued this 24th day of March, 1971, by the Director of the Kansas Property Valuation Department, under authority granted him by the Statutes of Kansas, K. S. A. 79-1404, and all other applicable statutes.

The question of locally assessed rural agricultural investment properties was considered by the Director, and, upon consideration of all the information available to him, finds that there is need of equalization of the valuation of rural agricultural investment land between your county and other counties in your area.

If you are not presently sitting as the County Board of Equalization, then you are directed to convene or reconvene immediately as the 1971 County Board of Equalization.

The Board of County Commissioners, sitting as the 1971 County Board of Equalization, shall adopt the following resolution:

“We, the Ellis County Board of Equalization adopt this resolution at the direction of the Director of the Kansas Property Valuation Department issued March 24, 1971, and we do hereby direct the Ellis County Assessor to apply to each class, sub-class, grade or sub-grade of land, as shown on each field sheet or property record card in the county, the following valuation percent changes to be effective for the tax year of 1971:

Irrigated No. 1 .............................................. + 40%
Irrigated No. 2............................................. + 27%
Bottom Cultivated No. 1...................................... + 25%
Bottom Cultivated No. 2...................................... + 35%
Upland Cultivated No. 1...................................... NC
Upland Cultivated No. 2 ..................................... 10%
Tame Grass No. 1 ........................................... + 85%
Tame Grass No. 2 .......................................... + 100%
Native Grass No. 1 .......................................... + 27%
Native Grass No. 2 ......................................... + 129%
Waste [$6] per acre 9

*448and that the County Clerk publish this resolution in some newspaper having general circulation in the county.”

Further, you are directed to obtain approval from the Director prior to making any major changes in your present class, sub-class, grade, or sub-grade of rural agricultural investment properties in 1971.

The Board of County Commissioners are hereby further directed to provide the County Assessor with all necessary help and office supplies to implement this directive.

* A dollar amount per A. is to be used for equalization for waste land

NC — No Change.

/ s/ Ronald F. Dwyer

Ronald F. Dwyer, Director

Property Valuation Department

*449APPENDIX B