CITY & CTY. OF DENVER v. United Air Lines

• Decision Date: 11 September 2000
• Citation: CITY & CTY. OF DENVER v. United Air Lines, 8 P.3d 1206 (Colo. 2000)
• Docket Number: 98SC431
• Parties: CITY AND COUNTY OF DENVER, a home rule city and a Colorado municipal corporation; and CHERYL D. COHEN, Manager of Revenue, City and County of Denver, Petitioners/Cross-Respondents, v. UNITED AIR LINES, INC., a Delaware corporation authorized to transact business in the State of Colorado, Respondent/Cross-Petitioner.
• Court: Colorado Supreme Court

8 P.3d 1206

CITY AND COUNTY OF DENVER, a home rule city and a Colorado municipal corporation; and CHERYL D. COHEN, Manager of Revenue, City and County of Denver, Petitioners/Cross-Respondents, v.UNITED AIR LINES, INC., a Delaware corporationauthorized to transact business in the State of Colorado, Respondent/Cross-Petitioner.

No. 98SC431.

Supreme Court of Colorado, En Banc.

September 11, 2000.

J. Wallace Wortham, City Attorney, City and County of Denver Maria Kayser, Assistant City AttorneyRobert F. Strenski, Assistant City Attorney Denver, Colorado Attorneys for Petitioners/Cross-Respondents

Brownstein Hyatt & Farber, P.C.Hubert A. Farbes, Jr.Lynne M. Hufnagel Denver, Colorado Attorneys for Respondent/Cross-Petitioner

Justice BENDERdelivered the Opinion of the Court.

I.INTRODUCTION

In this appeal, we address the district court's jurisdiction to hear a taxpayer's challenge to certain use and sales tax assessments levied by Denver's Manager of Revenue.Because we conclude that the district court did not have jurisdiction, we do not reach the other issues raise by the parties.

Petitioners, the City and County of Denver and its Manager of Revenue (collectively, Denver) assessed respondent, United Air Lines, Inc., certain sales and use taxes under the Denver Revised Municipal Code(D.R.M.C. or Code).United brought suit in the district court, City and County of Denver, seeking a refund of the taxes.Denver filed a motion to dismiss, arguing that the district court lacked jurisdiction over the case because United failed to exhaust its administrative remedies.The district court denied Denver's motion and granted United's motion for summary judgment, ruling that there were no genuine issues of fact concerning the amount of the refund Denver owed United.

On appeal, the court of appeals affirmed in part, reasoning that Denver was not entitled to dismissal because United followed the proper review procedures.However, the court of appeals reversed the summary judgment in favor of United, holding that there were material issues of fact regarding United's entitlement to a refund.SeeUnited Air Lines, Inc. v. City & County of Denver,975 P.2d 1139, 1143-44(Colo.App.1998).Both parties petitioned this court for certiorari.

We hold that when an agency directs a party to follow certain administrative procedures consistent with the agency's governing statutes or ordinances, the party must exhaust those procedures or demonstrate that an exception from the exhaustion requirement excuses their failure to do so before the party may seek judicial review of the agency's decision.Because United failed to pursue the administrative procedures that Denver instructed it to follow which were provided for in the D.R.M.C., United did not exhaust its available administrative remedies.As a result, the district court lacked jurisdiction to hear the case.Thus, we reverse the court of appeals and remand the case to that court for return to the trial court with instructions to grant Denver's motion to dismiss.

II.FACTS AND PROCEEDINGS BELOW

In large part, we rely on the court of appeals' description of the facts of this case.SeeUnited,975 P.2d at 1140-41.At all times relevant to this proceeding, United conducted air carrier operations at Denver's Stapleton International Airport.Based on its operations at the airport, United was subject to sales, use, and occupational privilege taxes under the Denver Code.

In 1995, Denver's Manager of Revenue conducted an audit of United's records for the period January 1, 1991 through June 30, 1994.¹Although United had filed timely returns during this period, the Manager determined that United failed to pay use taxes on a substantial amount of property that was subject to Denver's use tax.The Manager also discovered relatively minor discrepancies in United's sales and occupational privilege tax returns.

On December 8, 1995, the Manager mailed United three separate documents, each titled "NOTICE OF FINAL DETERMINATION, ASSESSMENT AND DEMAND FOR PAYMENT" and signed by the Manager ("assessment letters").The assessment letters addressed United's payments of Denver's use tax, sales tax, and occupational privilege tax, respectively, stating that United underpaid each of the taxes in question.The letters informed United that the Manager assessed the airline additional taxes based on its underpayments, and the letters stated that United was liable for payment of the assessments, plus penalties and interest.The assessments totaled $3,368,459.64 for all three taxes.²The assessment letters stated that the amounts due were payable twenty days from the date the Manager mailed the letters and that unless United petitioned the Manager for review of the assessments within this twenty-day period, the assessments would become final:

PLEASE TAKE NOTICE: The amounts below are assessed against you.This assessment shall be final and due and payable 20 days from the date of mailing of this notice by certified mail, or if served personally, then 20 days from such service, UNLESS WITHIN SAID20 DAY PERIOD YOU PETITION the Manager of Revenue for review and modification of the assessment....Upon your failure to pay such taxes when due, the City and County of Denver will proceed to collect the taxes assessed in accordance with the provisions of Art. [II/III] of Chapter 53 of the Revised Municipal Code.

(Emphasis in original.)

Although the assessment letters cited no specific Code section, their descriptions of administrative protest procedures are identical to sections 53-49(c)and53-117(c) of the Code.³These sections provide that taxpayers may petition the Manager for review, modification, or cancellation of assessments within twenty days of the mailing of the assessment letters.⁴United received the assessment letters on December 12, 1995, but took no action within the stated twenty-day period from when the Manager had mailed the letters, which ended December 28.Sometime early the next month, Denver informed United that interest was accruing on the delinquent taxes and that it would commence collection procedures, including the seizure of United's property.On January 19, 1996, United paid the assessments in full, claiming that it made the payment "under protest."

On February 7, 1996-61 days after Denver mailed the assessment letters and 57 days after United received them — United submitted a "CLAIM FOR REFUND" for $1,084,516.00, slightly less than one-third of the amounts assessed.⁵In an attachment to the claim, United listed a variety of reasons why it claimed portions of the assessed amounts were exempt from tax.The Manager denied the refund request two days later.The Manager explained that the assessments were final because United failed to petition for review of the assessments within the Code's twenty-day deadline, as the assessment letters instructed.

After the Manager denied United's request for a refund, United protested the denial and requested a hearing.The Manager responded that "there is no provision in the Denver Revised Municipal Code to allow for a hearing as requested" because United had not filed its protest in a timely fashion.The Manager denied United's request for a hearing.

United then filed this action in the district court.In two claims under C.R.C.P. 106(a)(4),⁶ United claimed that the Manager abused his discretion by denying United's request for a refund, by denying United a hearing after it protested the Manager's denial of the refund request, and by failing to consider the substantive bases for United's refund claim.⁷

In addition to these claims, United also sought a declaratory judgment, asserting that "[a]pplicable Denver Municipal Code ordinances unequivocally entitle United to request and claim a refund for sales or use taxes paid so long as the claim or request is submitted within sixty (60) days of the initial notice or demand for payment of taxes."United asked the court to "[d]eclare that United's Protest of Denial of Claim for Refund was timely submitted" and to "[d]eclare that United is entitled to receive a tax refund in the amount of $1,084,516.00."The airline also asked the court, in the alternative, to order the Manager to conduct a hearing on United's refund claims.

In response to United's claims, Denver filed a motion to dismiss, arguing that the court lacked jurisdiction to hear the case because United failed to exhaust its administrative remedies.Denver contended that United's "claim for refund" occurred after the twenty-day deadline provided in the assessment letters and in sections 53-49and53-117.Denver asserted that because United failed to follow the procedures set forth in the assessment letters and in the Code, the district court lacked jurisdiction to hear United's claims.

United argued that because it followed the appropriate procedures at the administrative level, the district court could exercise jurisdiction over its claims.According to United's interpretation of the Code, United could claim a refund of taxes paid in error pursuant to sections 53-45and53-113.United argued that because it was seeking a refund under these provisions, it was not bound by the twenty-day deadline established in Denver's assessment letters.

Upon cross-motions for summary judgment by both parties, the district court ruled in favor of United.The district court found that United paid the tax assessment, although "involuntarily."The court determined that after paying the tax assessment, United "complied with the administrative processes prescribed by the Code for refund of use taxes by filing its refund request in a timely manner consistent with the Code's provisions."Thus, United was entitled to a refund of "all taxes wrongfully or illegally paid" to Denver.

Having determined that United followed the proper procedures for requesting a refund of sales and use tax, the court turned to the issue of the amount of the refund to which...