Colorado Interstate Gas Co. v. Beshears, s. 69,322

• Decision Date: 24 September 1993
• Docket Number: 69,323 and 69,442,Nos. 69,322,s. 69,322
• Parties: COLORADO INTERSTATE GAS COMPANY and ANR Pipeline Company, Appellants, v. Mark BESHEARS, Secretary of Revenue, et al., Appellees.
• Court: Kansas Court of Appeals

Page 56

860 P.2d 56

18 Kan.App.2d 814

COLORADO INTERSTATE GAS COMPANY and ANR Pipeline Company, Appellants, v. Mark BESHEARS, Secretary of Revenue, et al., Appellees.

Nos. 69,322, 69,323 and 69,442.

Court of Appeals of Kansas.

Sept. 24, 1993.

Review Denied Nov. 10, 1994.

Syllabus by the Court

1. Procedural due process requires a right to a fair trial in a fair tribunal. The right of a state assessed public utility to appeal its assessment is governed exclusively by K.S.A. 74-2438 and K.S.A. 79-5a05.

2. K.S.A. 79-1702 is not available to a state assessed public utility for a collateral challenge to the Director of Property Valuation's assessment and valuation of property. K.S.A. 74-2438 is the exclusive method for a public utility to challenge the Director of Property Valuation's assessment and valuation of property.

3. The doctrine of exhaustion of administrative remedies will not deprive a district court of jurisdiction in all cases. In cases where constitutional questions are in issue, the availability of judicial review is presumed, and a statutory administrative scheme should not be read as foreclosing jurisdiction unless the intent to do so is manifested by clear and convincing evidence.

4. As applied, K.S.A. 74-2426 was not intended by the legislature to preclude constitutional challenges as long as such claims are at least colorable.

Richard D. Greene, of Morris, Laing, Evans, Brock & Kennedy, Chartered, Wichita, for appellants.

William E. Waters, of the State Dept. of Revenue, for appellees.

Before ELLIOTT, P.J., GREEN, J., and CARLOS MURGUIA, District Judge, assigned.

GREEN, Judge:

This is a consolidated appeal. ANR Pipeline Company (ANR) and Colorado Interstate Gas Company (CIG) (collectively referred to as appellants or pipelines) appeal the decisions of the Board of Tax Appeals (BOTA) and the district court. Both BOTA and the district court have dismissed appellants' claim because of a lack of jurisdiction. The pipelines argue the denial of a review of their claims is a denial of their due process rights.

In order to properly understand the jurisdictional issues presented in this case, a brief overview of the appellants' underlying claim is necessary. Pursuant to K.S.A. 79-5a01, railroad and pipeline corporations are deemed public utilities for the purposes of valuation and assessment of ad valorem taxes. In a federal consent decree dated August 11, 1989, railroads were given much more favorable tax treatment. The consent decree was the result of a settlement reached between BOTA and certain railroads on a legal challenge to their 1989 assessment based on the Railroad Revitalization and Regulatory Reform Act, 49 U.S.C. § 11503 (1988). In this case, the pipelines have filed suit, claiming their disparate treatment for the tax year 1989 violated the Kansas Constitution. The pipelines contend Article 11, § 1 of the Kansas Constitution requires uniform and equal treatment for members of the same class for taxation purposes.

We note the pipelines have a separate appeal on this same claim for the tax years 1990 and 1991 pending before our Supreme Court (case No. 69,116).

The pipelines argue a denial of a hearing by both BOTA and the district court is a violation of their rights under the Due Process Clause of the Kansas and United States Constitutions.

Procedural due process requires a right to a fair trial in a fair tribunal. State v. Green, 245 Kan. 398, 404, 781 P.2d 678 (1989). The constitutional requirements of due process are satisfied where the taxpayer, at some stage of the assessment procedures, has an opportunity to appear and contest the assessment. Shields Oil Producers, Inc. v. County of Russell, 229 Kan. 579, 582, 629 P.2d 152 (1981). Currently, a public utility's right to appeal its assessment is governed by K.S.A. 79-5a05 and K.S.A. 74-2438.

K.S.A. 79-5a05 provides in pertinent part:

"Before the assessed valuation of public utility property is finally determined, the director of property valuation shall cause to be sent to each public utility a statement of the appraised valuation of the utility's property. The determination contained in such statement shall not require an adjudicative proceeding under the Kansas administrative procedure act. The statement shall inform the public utility of the right to an informal conference as provided in this section. The failure to request an informal conference shall not preclude any appeal under K.S.A. 74-2438 and amendments thereto. If a public utility has any objection to the statement as issued, the public utility shall, within 15 days of the date of mailing of such statement, notify the director in writing of such objection."

A statement of valuation was sent to CIG on May 11, 1989, and a statement of valuation was sent to ANR on May 30, 1989. Neither pipeline objected to the Director of Property Valuation's (PVD) assessed valuations.

K.S.A. 74-2438 provides in pertinent part:

"An appeal may be taken to the state board of tax appeals from any finding, ruling, order, decision, or other final action on any case of the director of taxation or director of property valuation by any person aggrieved thereby. Notice of such appeal shall be filed with the secretary of the board within 30 days after such finding, ruling, order, decision or other action on a case, and a copy served upon the director concerned."

The pipelines concede they failed to follow the statutory procedures outlined above. However, they contend the action which gave rise to their claims did not occur until August 11, 1989. On that date, the PVD and the railroads entered into a consent decree giving railroads more favorable tax treatment than pipelines. The pipelines contend BOTA had authority to entertain their claims pursuant to K.S.A. 79-1702. They also contend the district court had power to entertain their case because of the constitutional challenge involved.

A. Authority of BOTA to hear the pipelines' claims pursuant to K.S.A. 79-1702.

K.S.A. 79-1702 in pertinent part provides:

"If any taxpayer or any municipality or taxing district shall have a grievance not remediable under the provisions of K.S.A. 79-1701 or 79-1701a, and amendments thereto, ... such grievance may be presented to the state board of tax appeals and if it shall be satisfied from competent evidence produced that there is a real grievance, it may direct that the same be remedied either by canceling the tax, if uncollected, together with all penalties charged thereon, or if the tax has been paid, by ordering a refund of the amount found to have been unlawfully charged and collected.

.... "Errors committed in the valuation and assessment process that are not specifically enumerated in K.S.A. 79-1701, and amendments thereto, shall be remediable only under the provisions of K.S.A. 79-2005, and amendments thereto."

The pipelines contend K.S.A. 79-1702 is a catch-all provision which provides remedies for grievances not otherwise remediable. According to the pipelines, their claim of discriminatory application of assessments falls within that description.

In its order denying rehearing, BOTA stated:

"The Board notes that the issue before it is a valuation and assessment issue. The issue is one of appraisal judgment and discretion. This is not a clerical type error or an error made by a county official remediable under K.S.A. 79-1702. K.S.A. 79-1702 is not intended to provide relief for state assessed property nor is it intended to provide relief in valuation issues. The applicant's only avenue for relief for this particular valuation issue is to first appeal in a timely manner to the Director of Property Valuation. The applicant failed to follow the proper procedures and the Board is without authority to hear the case. All procedures set forth in K.S.A. 79-5a05 and K.S.A. 74-2438 must be followed exactly or the Board is without authority to hear the case and must dismiss it for lack of jurisdiction. See Vaughn v. Martell, 226 Kan. 658 (1979). The Board, therefore, has no recourse but to dismiss the applicant's grievance for lack of jurisdiction. The order as originally issued is sustained and the request for rehearing must be denied."

The pipelines argue that BOTA's ruling is wrong because it mischaracterizes the issue and the scope of K.S.A. 79-1702. First, the pipelines contend the issue is not one of appraisal. The issue, according to the pipelines, is the PVD's discriminatory implementation of the ad valorem taxation system. However, the pipelines misunderstand BOTA's order denying a rehearing. In denying the rehearing, BOTA determined the issue in this case is one of valuation and assessment, which encompasses the more specific question of the PVD's discriminatory implementation.

The pipelines next contend that BOTA incorrectly determined the scope of K.S.A. 79-1702. BOTA's interpretation of K.S.A. 79-1702 appears to limit relief to clerical type error made to county assessed property.

To support their argument that K.S.A. 79-1702 is not limited to county assessed property, the pipelines cite three cases where, under the proper circumstances, the statute has been used by state assessed taxpayers. However, a closer examination of each case shows the pipelines' reliance is misplaced.

In Felten Truck Line v. State Board of Tax Appeals, 183 Kan. 287, 293, 327 P.2d 836 (1958), the court held G.S. 1949, 79-1702 (now K.S.A. 79-1702) was available to the appellants to challenge the state commission of revenue and taxation's assessment of their property and other acts of the commission in applying the motor carrier tax statutes, G.S. 1949, 79-6a01 et seq. (1955 Supp.). However, this statement is no longer a correct statement of the law. Prior to certain amendments in 1959, motor carriers' only means of challenging the tax assessment of the commission was either under G.S. 1949, 79-1702 or injunctive relief under G.S. 1949, 60-1121 (now K.S.A. 60-907[a] ). In 1959, 79-6a04 was...