Kelley v. ANR Pipeline Co. (In re ANR Pipeline Co.)

• Decision Date: 14 September 2011
• Docket Number: No. 11–379.,11–379.
• Citation: 73 So.3d 398
• Parties: In re Appeal of ANR PIPELINE CO., Mona Kelley, in her official capacity as Cameron Parish Tax Assessor v. ANR PIPELINE COMPANY, et al.
• Court: Court of Appeal of Louisiana — District of US

73 So.3d 398

In re Appeal of ANR PIPELINE CO., Mona Kelley, in her official capacity as Cameron Parish Tax Assessor

v.ANR PIPELINE COMPANY, et al.

No. 11–379.

Court of Appeal of Louisiana, Third Circuit.

Aug. 10, 2011.Rehearing Denied Sept. 14, 2011.

Hilton S. Bell, Angela W. Adolph, Milling Benson Woodward, L.L.P., New Orleans, LA, for Defendants/Appellants, Southern Natural Gas Company, Tennessee Gas Pipeline Company, ANR Pipeline Company.

Brian A. Eddington, Attorney at Law, Baton Rouge, LA, for Plaintiff/Appellee, Mona Kelley, Assessor for Cameron Parish.

Robert Dean Hoffman, Jr., Attorney at Law, Covington, LA, for Defendant/Appellee, Louisiana Tax Commission.

Court composed of ULYSSES GENE THIBODEAUX, Chief Judge, and JIMMIE C. PETERS, and SHANNON J. GREMILLION, Judges.

GREMILLION, Judge.

[3 Cir. 1] A group of interstate pipeline companies, ANR Pipeline Company, Tennessee Gas Pipeline Company, and Southern Natural Gas Company (the companies), appeal the decision of the district court that reversed the ruling of the Louisiana Tax Commission. This is but one of similar ad valorem tax disputes that have spread across the State like the pipelines these companies own. Specifically, Mona Kelley, Cameron Parish Tax Assessor, sought judicial review of the ruling, which reversed the assessments of the companies in parishes across the state, including Cameron Parish. The procedural history of the current dispute is intertwined with the others to a great degree, as other assessors have also sought judicial review in their respective parishes of the commission's ruling.

FACTS AND PROCEDURAL HISTORY

During the years 1994 through 2003, certain pipelines had their properties assessed for ad valorem tax purposes at 15% of their fair market values (FMVs). Not so the companies, whose properties were assessed at 25 percent. “Public service properties,” such as pipeline or gas companies, ¹ are required to be assessed at 25% of their FMVs. La. Const. art. 7, § 18.

These disparate assessments were challenged by the companies in a suit filed in the 19th Judicial District Court. Rather than granting the companies their requested relief, refunds of the ten percent difference, the trial court and the First Circuit Court of Appeal held that the companies' refunds should be based on reassessments employing the same methods and at the 15% rate their competitors had enjoyed. ANR Pipeline Co. v. La. Tax Comm'n., 05–1142–69 (La.App. 1 Cir. 9/7/05), 923 So.2d 81, writ denied, 05–2372 (La.3/17/06), 925 So.2d 547, cert. denied, 549 U.S. 822, 127 S.Ct. 157, 166 L.Ed.2d 38 (2006). The rationale supporting this remedy [3 Cir. 2] holds that the goal of courts in redressing disparate assessment cases is to achieve uniformity and equality in assessments. See Sioux City Bridge Co. v. Dakota County, Neb., 260 U.S. 441, 43 S.Ct. 190, 67 L.Ed. 340 (1923).

The Louisiana Tax Commission then ordered the assessors to reassess the companies' properties using the same valuation methods as they had used for the other pipelines. Bobby Conner, Cameron Parish Tax Assessor at the time, undertook such a reassessment. The companies argued that the reassessed value should factor all forms of depreciation, including the physical and external, or economic, obsolescence of the pipelines. The argument for factoring external obsolescence was based upon the fact that the pipelines were operating below their capacities.

In support of their obsolescence valuation, the companies submitted the affidavits of Ms. Sally Costley, their tax agent; Mr. Thomas K. Tegarden, an expert in public utility property appraisal; Mr. Richard Smead, an expert in regulation of interstate natural gas pipelines by the Federal Energy Regulatory Commission; and Dr. David E. Dismukes, an LSU economist and Associate Director of the Center for Energy Studies at LSU. These experts evaluated the total value of the companies' pipelines, then assigned values for the portion within Louisiana. This appraisal method is known as “unit appraisal.” The companies then supported their arguments for external obsolescence with data on the total capacities and loads of the pipelines.

Conner declined to factor obsolescence into the assessment because, he maintained, the companies had supplied insufficient documentation to support their figures. Specifically, Conner identified the companies' failure to furnish data demonstrating the degree to which their pipelines in Cameron Parish had suffered diminished use. Conner's reassessment resulted, largely, in the companies being [3 Cir. 3] billed for amounts in excess of the original 25% assessments. The companies then appealed to the Louisiana Tax Commission. During the proceedings before the commission, testimony was heard from several witnesses, including Costley and Conner. The commission reversed Conner and held that he had abused his discretion in failing to allow for obsolescence in determining the proper assessment.

Conner retired during the pendency of the proceedings and was succeeded as assessor by appellee, Mona Kelley. Kelley appealed the commission's ruling by filing the present action, a petition for judicial review, in the 38th Judicial District Court in Cameron Parish. The companies appealed the commission's ruling by filing for judicial review in the 19th Judicial District Court. In response to Kelley's petition, the companies filed exceptions of lis pendens, lack of subject matter jurisdiction, no right of action, and prescription. Those exceptions were rejected. The companies sought writs of supervisory review from this court, which were denied. The matter proceeded to trial on September 15, 2010. The trial court vacated the commission's ruling.

The companies appeal the trial court's ruling in favor of Kelley.

ASSIGNMENTS OF ERROR

The companies assign the following errors:

1. The trial court erred in denying Taxpayers' declinatory exceptions of lis pendens, improper venue and lack of subject matter jurisdiction and preemptory exceptions of no cause of action, no right of action and prescription.

2. The LTC and trial court erred in placing the burden of proof as to obsolescence on Taxpayers.

3. The evidentiary standard in overcoming a presumption of correctness in favor of an assessor is by a preponderance of the evidence.

4. The LTC and trial court erred in finding that the Assessor had [3 Cir. 4] utilized the same methodology as used for non-public service pipelines in Cameron Parishe.[sic]

5. The LTC erred in adopting the Assessor's determinations of fair market value and applying a deduction for throughput/capacity utilization.

6. The trial court erred in adopting the Assessor's determinations of fair market value.

7. The LTC and trial court erred in failing to recognize additional obsolescence in Taxpayers' property.

8. The LTC Guidelines, § 1301A, et seq., for the years 1998 through 2003 are invalid and conflict with La. R.S. 47:2323 C, which requires that Assessors recognize all depreciation under the cost approach, including all forms of obsolescence.

9. The use of the LTC Guidelines, La. Ad.Code 61 (Part V): 1301, et seq., in valuing the Taxpayers' property for the tax years 1994 through 2003 violates the due process and equal protection clause of the Louisiana and U.S. Constitutions since the Taxpayers were not provided notice that the Guidelines would apply to their property and were thus not provided an opportunity to participate in the LTC's annual rule-making process when adopting the Guidelines.

10. The LTC Guidelines, La. Ad.Code 61 (Part V): 1301, et seq., used by the Assessor in valuing the Taxpayers' property for purposes of determining refunds do not specify the information the Taxpayers were to provide to the Assessor for purposes of determining obsolescence in their properties and are thus so vague that the Guidelines violate the Taxpayers' rights to due process and equal protection under the Louisiana and U.S. Constitutions.

11. The Assessor's practice of disclosing the information the Assessor will consider in granting an allowance for obsolescence only after the tax rolls have closed violates the Taxpayers' rights to due process and equal protection under the Louisiana and U.S. Constitutions.

12. The actions of the LTC and the Assessor in valuing the Taxpayers' property for purposes of determining refunds violates the uniformity requirements of the Louisiana Constitution and the equal protection and due process clauses of the Louisiana and U.S. Constitutions.

ANALYSIS

This court is not the first to confront these issues. Our colleagues on the Second Circuit Court of Appeal have dealt with these same issues [3 Cir. 5] involving the same companies. See Jones v. S. Natural Gas Co., 46,347, 46,348, 46,351 (La.App. 2 Cir. 4/13/11), 63 So.3d 1080. We find the second circuit's analyses of these issues highly persuasive.

Standard of Review

This matter involves an appeal by Kelley of the actions of an administrative body, the Louisiana Tax Commission. The Administrative Procedures Act, La.R.S. 49:951, et seq., governs judicial review of decisions of administrative bodies in this case. See La.R.S. 49:964. The Act provides that an administrative body's decisions can be affirmed, remanded for further proceedings, or reversed or modified if substantial rights of the appellant have been prejudiced because of legal error or if the decision is “[n]ot supported and sustainable by a preponderance of evidence as determined by the reviewing court.” La.R.S. 49:964(G)(6). Only when the administrative body has the opportunity to judge the credibility of witnesses and the reviewing court has not is deference owed to the factual determinations made by the agency. Id. In this case, only the commission received testimony from any witness.

Assignment of Error 1:

The companies filed six exceptions to Kelley's action. The trial court denied those, and the companies sought writs with this court. In denying writs, we found no error in the...