City of Puyallup v. Pacific Northwest Bell Telephone Co.

• Decision Date: 29 December 1982
• Docket Number: No. 48221-7,48221-7
• Citation: 98 Wn.2d 443,656 P.2d 1035
• Parties: The CITY OF PUYALLUP, a municipal corporation of the State of Washington, Respondent, v. PACIFIC NORTHWEST BELL TELEPHONE COMPANY, a Washington corporation, and Washington Natural Gas Company, a Washington corporation, Appellants.
• Court: Washington Supreme Court

Page 443

98 Wn.2d 443

656 P.2d 1035

The CITY OF PUYALLUP, a municipal corporation of the State of Washington, Respondent, v. PACIFIC NORTHWEST BELL TELEPHONE COMPANY, a Washington corporation, and Washington Natural Gas Company, a Washington corporation, Appellants.

No. 48221-7.

Supreme Court of Washington En Banc.

Dec. 29, 1982.

Cartano, Botzer, Larson & Birkholz, Paul W. Oden, Edward T. Shaw, Seattle, for appellants.

Roberts & Shefelman, William G. Tonkin, Blair B. Burroughs, Seattle, for respondent.

WILLIAM H. WILLIAMS, Justice.

Respondent, the City of Puyallup, brought suit against the appellants, Pacific Northwest Bell Telephone Company (PNB) and Washington Natural Gas Company (WNG), for business and occupation (B&O) taxes due for the period January 1, 1979 to April 30, 1980, plus applicable penalties. The trial court entered summary judgment in favor of the respondent for the amount of taxes claimed due and assessed penalties against appellants for the delinquent payment of those taxes. An appeal was taken to the Court of Appeals, Division Two. Pursuant to RCW 2.06.030(d) and RAP 4.2, the Court of Appeals certified the case to us. We reverse.

Appellants are both utility companies that have been engaged in business within the city of Puyallup from prior to January 1, 1957 to the present. By Ordinance No. 1299, dated December 16, 1957, the respondent established a B&O tax at the rate of 3 percent of the total gross income of certain businesses. The ordinance imposed a tax for the privilege of doing business within the city limits, payable semi-annually, based upon the gross subscribers' revenues of the preceding tax year.

The rate of tax imposed on businesses and utilities was increased periodically by subsequent ordinances. Ordinance No. 1520, passed and approved November 4, 1968, increased the rate of tax from 3 percent to 4 percent. Ordinance No. 1628, passed and approved December 17, 1973, increased the rate of tax from 4 percent to 6 percent. In each of the above enactments, however, the semi-annual due dates for the taxes were retained as was the applicable tax base: The preceding year's gross subscribers' revenues, e.g., for the privilege of engaging in business in 1970, the 1970 tax was based on 4 percent of 1969 gross subscribers' revenues.

In 1970, respondent codified its ordinances. Those provisions dealing with the respondent's B&O taxes were codified at sections 5.08.010-.100 of the Puyallup Municipal Code. On December 17, 1979, the Puyallup City Council passed Ordinance No. 1780 to amend chapter 5.08 of the Puyallup Municipal Code. That provision purported to increase the tax rate from 6 percent to 8 percent from and after January 1, 1980, and alter the collection dates from semi-annually to bi-monthly.

On April 7, 1980, the council passed Ordinance No. 1795 as an amendment to Ordinance No. 1780. The new provision attempted to apply the increased 8 percent tax rate retroactively to the entire year 1979 by substituting "1979" for "1980" as the effective date of the new tax rate. Section 2 of the ordinance sets out the Puyallup City Council's intent in passing Ordinance No. 1795:

SECTION 2. It is hereby declared by the Puyallup City Council that this ordinance is necessary to correct an error occurring in the drafting of the said Ordinance No. 1780, it being always the intent of the said City Council that there would be no interruption in the levying of the annual business and occupation taxes which are the subject of Chapter 5.08 of the Puyallup Municipal Code, the intent of the Council being only to change the rate of the said taxes and the time for collection thereof as is indicated by the title of the said ordinance.

(Italics ours.) Clerk's Papers, at 112.

After passing Ordinance No. 1795, the council enacted penalty provisions designed to encourage compliance with respondent's interpretation of its B&O taxing ordinances. Ordinance No. 1809 imposed penalties ranging from 10 percent to 50 percent for a failure to pay taxes due. Ordinance No. 1825 added a 12 percent interest provision to taxes and penalties delinquent for 90 days or more.

In a final attempt to clarify its earlier action, the council passed Ordinance No. 1829, which stated that the intention of the council in passing Ordinance No. 1780 was to increase the rate of its B&O tax effective with collections on and after January 1, 1980, not January 1, 1979, as previously stated.

On June 23, 1980, respondent filed a complaint against appellants for taxes due in the amount of 8 percent of each company's gross subscribers' revenues for the period January 1, 1979 to April 30, 1980, less taxes paid, plus applicable penalties. Appellants answered, claiming payment of all taxes allegedly due and challenging the constitutionality of the ordinances. Both companies also counterclaimed for the recovery of taxes paid under protest.

All parties moved for summary judgment on February 6, 1981. The trial court granted respondent's motion, finding that the ordinances were proper and the presumption of legality persisted over the appellants' constitutional arguments. Penalties for the delinquent payment of taxes were assessed against PNB in the amount of $9,836.58, and against WNG in the amount of $11,361.30. Appellants' motions for reconsideration were each denied.

Appellants attack respondent's interpretation of section 5.08.050 of the Puyallup Municipal Code as an impermissible retroactive taxing measure. Further, appellants challenge the trial court's interpretation of respondent's penalty provisions for the delinquent payment of taxes. Since we find section 5.08.050 of the Puyallup Municipal Code to be ambiguous and respondent's interpretation of that ordinance to be beyond the Puyallup City Council's stated legislative intent, we deem it unnecessary to reach the other issues presented.

As a preliminary matter, we must dispose of the motion to allow additional evidence on review submitted by PNB, and joined in by WNG. Additional evidence on review may be taken by an appellate court pursuant to RAP 9.11(a), if the following criteria are met:

The appellate court may only on its own initiative direct that additional evidence be taken before the decision of a case on review if: (1) additional proof of facts is needed to fairly resolve the issues on review, (2) the additional evidence would probably change the decision being reviewed, (3) it is equitable to excuse a party's failure to present the evidence to the trial court, (4) the remedy available to a party through post-judgment motions in the trial court is inadequate or unnecessarily expensive, (5) the appellate court remedy of granting a new trial is inadequate or unnecessarily expensive, and (6) it would be inequitable to decide the case solely on the evidence already taken in the trial court.

The so-called "additional evidence" consists of a letter to PNB by John R. Adamson, Puyallup City Manager, demanding prompt payment of delinquent taxes under respondent's interpretation of its taxing ordinance. Attached to the letter is an opinion letter of respondent's legal counsel to Mr. Adamson which contains legal advice about a possible stance of respondent as to the taxing ordinance. Mr. Adamson invites counsel for PNB to review the opinion letter. PNB contends the letters are an indication of inconsistent legal positions taken by the Puyallup City Council on its legislative intent and interpretation of its ordinances, and is therefore admissible. The real issue in this case, however, is whether the Puyallup City Council intended to impose a tax on revenues for 1979 and 1980 and whether it effectively did so in its ordinances. The opinion letter of outside counsel to his or her client can hardly be said to reflect the City Council's legislative intent, especially when the intent was so clearly expressed by ordinance. These letters also fail to meet the rather specific requirements of RAP 9.11(a), since the case can easily be decided without such evidence. Therefore, we deny the motion to allow additional evidence on review.

To properly resolve the issues now before us, we must construe the Puyallup City ordinances so as to determine the legislative intent of those provisions. Amburn v. Daly, 81 Wash.2d 241, 501 P.2d 178 (1972). Williams v. Pierce County, 13 Wash.App. 755, 537 P.2d 856 (1975). The same rules of construction apply to interpretations of municipal ordinances as to interpretations of state statutes. Seattle v. Green, 51 Wash.2d 871, 322 P.2d 842 (1958). To the extent possible, all provisions should be harmonized so that no words or phrases are rendered superfluous or meaningless. Emwright v. King County, 96 Wash.2d 538, 543, 637 P.2d 656 (1981); Pearce v. G.R. Kirk Co., 92 Wash.2d 869, 872, 602 P.2d 357 (1979). If any doubt exists as to the meaning of a taxing statute or ordinance, it must be construed most strongly against the taxing authority and in favor of the taxpayer. See, e.g., Vita Food Prods., Inc. v. State, 91 Wash.2d 132, 587 P.2d 535 (1978); Department of Revenue v. Hoppe, 82 Wash.2d 549, 512 P.2d 1094 (1973); Dravo Corp. v. Tacoma, 80 Wash.2d 590, 496 P.2d 504 (1972).

The ordinances now at issue were first established by Ordinance No. 1780. The title of that ordinance reads as follows:

AN ORDINANCE amending Sections 5.08.030 and 5.08.050 of Chapter 5.08 of Title 5 of the Puyallup Municipal Code, the said amendments pertaining to a raise in the utility tax from six (6) to eight (8) percent and changing the dates for payment thereof.

(Italics ours.) Clerk's Papers, at 110. Section 5.08.030 contains several subsections applying the new tax rate to various businesses within the city of Puyallup. Section 5.08.030(2) applies to PNB, and section 5.08.030(3) applies to WNG. Each of those sections levies the new tax rate "[f]rom and after January 1, 1980," and imposes "an annual tax for the privilege" of carrying on certain businesses within the ...