Board of Assessment Appeals v. Benbrook

• Decision Date: 13 April 1987
• Docket Number: No. 85SC43,85SC43
• Citation: 735 P.2d 860
• Parties: BOARD OF ASSESSMENT APPEALS of the State of Colorado, and Property Tax Administrator of the State of Colorado, Petitioners, v. George E. and Lucille BENBROOK, et al., Respondents.
• Court: Colorado Supreme Court

Page 860

735 P.2d 860

BOARD OF ASSESSMENT APPEALS of the State of Colorado, and

Property Tax Administrator of the State of

Colorado, Petitioners, v. George E. and Lucille BENBROOK, et al., Respondents.

No. 85SC43.

Supreme Court of Colorado,

En Banc.

April 13, 1987.

As Modified on Denial of Rehearing

May 11, 1987.

Duane Woodard, Atty. Gen., Charles B. Howe, Chief Deputy Atty. Gen., Richard H. Forman, Sol. Gen., Billy J. Shuman, Deputy Atty. Gen., Denver, for petitioners.

Ben S. Wendelken, Sherman, Howard, Baker & Wendelken, Colorado Springs, for respondents.

Stephen H. Kaplan, Denver City Atty., Robert F. Strenski, Asst. City Atty., Denver, for amicus curiae City and County of Denver.

Patrick R. Mahan, Jefferson Co. Atty., George D. Theophiles, Asst. Co. Atty., Golden, for amicus curiae Board of County Com'rs of Jefferson County and Judy Cooper Pettit, Assessor of Jefferson County.

DUBOFSKY, Justice.

We granted certiorari to review the decision of the court of appeals in Benbrook v Board of Assessment Appeals, 695 P.2d 801 (Colo.App.1985), holding that taxpayers, who challenged an increase in property tax assessments because their apartments had been converted to condominiums, had a remedy under sections 39-1-113 and 39-10-114, 16B C.R.S. (1982) (abatement and refund provisions) without first seeking relief under section 39-5-122, 16B C.R.S. (1982) (protest and adjustment provision). The court of appeals determined that despite the fact that the taxpayers were seeking only a partial refund of taxes paid instead of an abatement of the entire amounts paid, they could obtain relief under the abatement and refund provisions because the increase in the assessed valuation of their condominiums was prohibited by statute and thus resulted in an illegal tax, as opposed to an overvaluation that could have been adjusted had the proper statutory procedures been followed. We affirm the judgment of the court of appeals, but we base our resolution on a different construction of the statutory scheme for tax refunds.

I.

The taxpayers are the owners of 41 of the 48 condominium units known as Valley Hi Condominiums in Colorado Springs. In 1979 the condominiums were converted from apartments and sold by the corporate owner to the taxpayers, many of whom had occupied the units as tenants before the conversion. No physical improvements to the units were made, but because the procedure for valuing individual condominium units differed from the procedure for valuing multi-unit apartment complexes, see Div. of Property Taxation, Dep't of Local Affairs, State of Colorado, Appraisal Procedures and Instructions for 1981 (AH300) at 5, the El Paso County assessor increased the assessed valuation of the total complex from $184,240 to $348,657, resulting in property taxes for each unit increasing from $299.44 in 1979 to $598 for 1980.

At the time the assessor increased the valuation, section 39-1-104(11)(b), 16B C.R.S. (1982), provided:

The provisions of subsection (9) and (10) of this section are not intended to prevent the assessor from taking into account, in determining actual value during the intervening years between base years, any unusual conditions in or related to any real property which would result in an increase or decrease in actual value. For the purposes of this paragraph (b), an unusual condition which could result in an increase or decrease in actual value is limited to the installation of an on-site improvement, addition to or remodeling of the structure, change of use of the land, the regulations restricting or increasing the use of the land, or a combination thereof, detrimental acts of nature, and damage due to accident, vandalism, fire, or explosion. When taking into account such unusual conditions which would increase or decrease the actual value of a property, the assessor must relate such changes to the base year level of values as if the conditions had existed at that time.

Ch. 494, sec. 5, § 39-1-104(11)(b), 1977 Colo. Sess. Laws 1728, 1732. ¹ Although section 39-1-104(9)(a), 16B C.R.S. (1982), required the assessor to determine the actual value of the condominiums according to the manual and associated data published for 1973 by the state property tax administrator, a directive issued by the administrator, AH300 at 46, required local assessors to consider condominium conversion as a "change of use of the land." Newly constructed condominiums had been assessed at a far higher rate than converted condominiums, and the directive was intended to equalize the tax rate for all condominiums by allowing the assessor to change the tax rate for converted condominiums in a year other than a base year.

The El Paso County assessor mailed a notice of valuation to the owners of the Valley Hi Condominiums on June 17, 1980. ² After receipt of the notices, seven or eight of the condominium owners filed protests with the county assessor under section 39-5-122, 16B C.R.S. (1982). The assessor denied the protests, and two of the owners appealed to the county board of equalization, which also denied the protests. Only one of the owners, Melvyn Brooks, appealed to the Colorado Board of Assessment Appeals (the board), and the board ruled in Brooks' favor. The board determined that condominium conversion was not a "change of use of the land" under section 39-1-104(11)(b) and, therefore, the increased assessments were illegal. ³ The district court for El Paso County affirmed the board's decision. ⁴ The county did not appeal the district court ruling, and the correctness of that ruling is not before us. ⁵

The taxpayers, who are the owners of 41 of the other condominiums in Brooks' complex, paid their 1980 taxes and subsequently filed petitions with the El Paso County commissioners in June, July and August 1981, for a partial abatement and refund of 1980 taxes under sections 39-1-113 and 39-10-114, 16B C.R.S. (1982). ⁶ The county commissioners recommended to the state property tax administrator that a portion of the taxes be abated and the refunds granted, based on the decision in the Brooks' case. The administrator denied the commissioners' application for abatement under section 39-2-116, 16B C.R.S. (1982), because the taxpayers had failed to exhaust their administrative remedies in 1980 under the protest and adjustment procedures in section 39-5-122. Each taxpayer then appealed to the board under section 39-2-125(1)(b)(I), 16B C.R.S. (1982). The board consolidated the appeals and, after a hearing, affirmed the administrator's decision. The taxpayers appealed to the district court under section 39-8-108(2), 16B C.R.S. (1982), and the district court reversed the board's ruling on the basis that the taxpayers need not exhaust their administrative remedies under section 39-5-122 before challenging an illegal increase in assessment of their condominiums and qualifying for a partial abatement and refund of taxes paid.

The court of appeals affirmed the district court ruling, relying on a line of Colorado cases holding that if a tax is wholly illegal or entirely erroneous and incapable of adjustment, a taxpayer may file an abatement and refund petition. Benbrook, 695 P.2d at 803. The court of appeals agreed with the district court's characterization of the increase in the tax imposed on the taxpayers' condominiums as "wholly illegal and entirely erroneous because the increase in the assessed valuation of the condominium units ... was prohibited by statute." Id. The court of appeals rejected the board's determination that the taxpayers should have followed the protest and adjustment procedure because the increase in the assessed valuation of the units was an overvaluation capable of adjustment. Id.

II.

The court of appeals' bifurcated approach to administrative remedies in the property tax code--protest and adjustment for an overvaluation in assessment, and abatement and refund for a tax that is illegal--leaves unresolved the appropriate route to seek administrative relief if a tax is partially illegal. As reflected in a series of opinions from this court and the court of appeals, including the instant case, a taxpayer seeking a partial refund of taxes based on an illegal assessment does not have a clear choice of the appropriate administrative remedy. See City and County of Denver v. Athmar Park Buildg. Co., 151 Colo. 424, 378 P.2d 638 (1963); Simmons v. Board of County Com'rs of Jefferson County, 146 Colo. 392, 361 P.2d 769 (1961); Weidenhaft v. Board of County Com'rs of El Paso County, 131 Colo. 432, 283 P.2d 164 (1955); Northcutt v. Burton, 127 Colo. 145, 254 P.2d 1013 (1953); Coquina Oil Corporation v. Larimer County Board of Equalization, No. 85CA0756, slip op. (Colo.App. Mar. 5, 1987); Writer Corp. v. Board of Assessment Appeals, 721 P.2d 1212 (Colo.App.1986), cert. granted (July 16, 1986); Alpenrose Unit Week Ass'n v. Board of Assessment Appeals of State, 713 P.2d 932 (Colo.App.1985); Schmidt-Tiago Const. Co. v. Property Tax Adm'r for State of Colo., 687 P.2d 528 (Colo.App.1984). The confusion stems from a misapprehension of the property tax code's remedial scheme that first appeared in this court's decision in Northcutt.

The statutory provisions at issue in this case have been part of the general property tax law in Colorado since 1902. Miller v. Board of County Com'rs of City and County of Denver, 92 Colo. 425, 21 P.2d 714 (1933). To accommodate the dual needs in Colorado for a reliable constant source of revenue for the government and a remedy for taxpayers who sought to enjoin tax collections in the courts because they believed they were carrying a disproportionate share of the tax burden, Colorado established a statutory remedy that recognized some injunctive actions in equity under the "traditional equity head of fraud" but required a taxpayer to exhaust administrative remedies before going to court if an assessment is deemed excessive. Ela, Some Aspects of Colorado Taxpayers' Remedies, 23 Rocky Mtn.L.Rev....