Mountain Water Co. v. State

• Decision Date: 16 May 2017
• Docket Number: DA 16-0469
• Citation: 394 P.3d 922,387 Mont. 394
• Parties: MOUNTAIN WATER COMPANY, Plaintiff and Appellee, v. STATE of Montana, DEPARTMENT OF REVENUE, Defendant and Appellant.
• Court: Montana Supreme Court

387 Mont. 394

394 P.3d 922

MOUNTAIN WATER COMPANY, Plaintiff and Appellee,

v.STATE of Montana, DEPARTMENT OF REVENUE, Defendant and Appellant.

DA 16-0469

Supreme Court of Montana.

Submitted on Briefs: April 5, 2017

Decided: May 16, 2017

For Appellant: Daniel J. Whyte, Courtney Mathieson, Special Assistant Attorneys, General, Department of Revenue, Helena, Montana

For Appellee: Robert L. Sterup, Kyle A. Gray, Holland & Hart LLP, Billings, Montana

For Amicus Curiae: Natasha Prinzing Jones, Scott M. Stearns, Randy J. Tanner, Boone, Karlberg P.C., Missoula, Montana

Justice Jim Rice delivered the Opinion of the Court.

¶1 Appellant Department of Revenue (Department) appeals from the entry of summary judgment by the First Judicial District Court, Lewis and Clark County, in favor of Appellee Mountain Water Company ("Mountain Water" or "Company"), declaring that the City of Missoula (City) shall be assessed and be responsible for property taxes accruing on Mountain Water's property during the pendency of the City's action to condemn the property, and that such taxes paid by Mountain Water must be refunded by the Department with applicable statutory interest. We reverse, and address the following issue:

Did the District Court err in its interpretation of § 70-30-315, MCA, regarding proration of taxes in a condemnation proceeding?

FACTUAL AND PROCEDURAL BACKGROUND

¶2 The parties and the District Court agreed that there were no conflicts of material fact. Mountain Water operates a water delivery system located in and around Missoula, which the City initiated an action to condemn, issuing a summons on April 2, 2014. The Fourth Judicial District Court issued a Preliminary Order of Condemnation under § 70-30-206, MCA, which this Court affirmed in City of Missoula v. Mt. Water Co. , 2016 MT 183, 384 Mont. 193, 378 P.3d 1113. Compensation has been determined in the proceeding, but no final order of condemnation has been issued pursuant § 70-30-309, MCA, and title to and possession of the subject property remains with Mountain Water and its affiliated entities.¹

¶3 Following initiation of the condemnation action, Mountain Water requested that the Department agree the Company was no longer responsible for property taxes and that the City be deemed responsible, citing § 70-30-315, MCA, which provides, in toto:

Proration of taxes. The condemnor must be assessed the condemnor's pro rata share of taxes for the land being taken as of the date of possession or summons, whichever occurs first. The condemnor must be assessed for all taxes accruing after the date of possession or summons, whichever occurs first.

The City objected, stating that responsibility for taxes would shift after a judgment awarding possession was entered. In a letter to the parties, the Department acknowledged that § 70-30-315, MCA, "may be subject to either of [their] interpretations," but concluded that, while the statute raised the issue of proration of taxes, "it is not conclusive evidence that there has been or is a transfer of ownership interest from Mountain Water to the [C]ity of Missoula." The Department thus determined to "change ownership records only upon receipt of a transfer certificate from the clerk and recorder, or upon completion of the forms from the parties reporting the transfer and after filing of a realty transfer certificate" under the Realty Transfer Act, codified in Title 15 of the Montana Code, and would not shift responsibility for taxes from Mountain Water. The Department has continued to issue property tax assessments naming Mountain Water as the responsible entity for the property taxes throughout the condemnation action. Mountain Water has paid taxes under protest.

¶4 Pursuant to § 15-1-406, MCA, Mountain Water filed a declaratory action against the Department, seeking a determination that § 70-30-315, MCA, required assessment of property taxes against the City from and after the date of the condemnation summons. The Department answered, seeking approval of its interpretation of the statutes. The City, as explained in its amicus curiae brief filed in this appeal, did not seek to intervene in the District Court based upon its understanding that Mountain Water's complaint was not requesting an order requiring payment of taxes by the City, but rather sought a refund of the taxes the Company had paid. The City notes that the Company's complaint specifically requested an order "declaring that if Missoula takes possession of the subject properties by eminent domain , then Mountain Water is entitled to an Order directing refund of the property taxes paid by Mountain Water under protest." (Emphasis added.)

¶5 Mountain Water's motion for summary judgment was granted by the District Court, which reasoned as follows:

[Section 70-30-315, MCA,] sets forth an exception to the general assessment statutes when eminent domain is involved. Otherwise there would be no point to the statute—the general provisions of Montana Code Annotated § 15-7-304(2) would [always] govern.... [T]he City of Missoula, as condemnor, must be assessed for all taxes accruing on the subject property after April 2, 2014. Property taxes paid by Mountain Water under protest for any period after April 2, 2014 shall be refunded by [the Department], together with interest as required by the provisions of Montana Code Annotated § 15-1-402.

¶6 The Department appealed and the City moved to intervene before this Court, arguing that the assessment of taxes against the City was done in absentia and violated the City's due process rights. The Court denied the City's request to intervene, but granted its request to file an amicus curiae brief.

STANDARD OF REVIEW

¶7 We review de novo a district court's ruling on summary judgment, applying the criteria of M. R. Civ. P. 56(c)(3). Citizens for a Better Flathead v. Bd. of Cnty. Comm'rs , 2016 MT 256, ¶ 10, 385 Mont. 156, 381 P.3d 555 (citing Pilgeram v. GreenPoint Mortg. Funding, Inc. , 2013 MT 354, ¶ 9, 373 Mont. 1, 313 P.3d 839 ). We review a district court's conclusions of law to determine whether they are correct. Citizens for a Better Flathead , ¶ 10 (citing Pilgeram , ¶ 9 ).

DISCUSSION

¶8 Did the District Court err in its interpretation of § 70-30-315, MCA, regarding proration of taxes in a condemnation proceeding?

¶9 The Department argues that the District Court's order to assess taxes against the City violates the City's constitutional and statutory protections that exempt cities from property taxation, citing Article VIII, Section 5(1)(a) of the Montana Constitution ("The legislature may exempt from taxation ... property of ... municipal corporations...."), and § 15-6-201(1)(a)(iv), MCA ("The following categories of property are exempt from taxation: ... municipal corporations."). The Department also argues it is bound by the Realty Transfer Act and accompanying regulations, which require that it assess Mountain Water for property it owns until a final order of condemnation is issued and recorded with the clerk and recorder, citing § 15-7-304(2), MCA ("The department is not required to change any ownership records used for the assessment or taxation of real property unless the department has received a transfer certificate from the clerk and recorder and the transfer has been reported to the department as provided by rule."), and Admin. R. Mont. 42.20.204(1) ("The department shall not change to whom real property is assessed unless properly notified by means of an accurately prepared Realty Transfer Certificate...."). The Department also argues that the District Court's interpretation results in an "absurd" windfall to Mountain Water by allowing it to profit from use of the property while avoiding property taxes during the pendency of the condemnation action, and, further, that the protested taxes were paid to Missoula County, and thus, the Department is the incorrect agency to issue a refund. The Department states that, even if it possessed authority to refund the protested taxes, "those taxes constitute an asset and appear [to be] subject to condemnation."

¶10 Mountain Water argues that the District Court properly interpreted § 70-30-315, MCA, according to its plain meaning, and properly concluded that it controls as the more specific statute for condemnation matters over the general tax provisions of the Realty Transfer Act. Mountain Water argues that although the statute grants a "small favoring of the condemnee," it is not absurd, given the fact that "the condemnation power granted to the condemnor is so draconian." Mountain Water argues that its request for an immediate refund was not challenged before the District Court and that the "technicality" of the County, not the Department, collecting the taxes is harmless. Finally, regarding the City's claimed exemption from taxation, Mountain Water argues that "[a]ssessment does not equate to payment" and that the City has all legal avenues to pursue once it is assessed the taxes, which is "an issue between the City and the State entirely separate from this appeal by the State against a private taxpayer."

¶11 The City, as amicus curiae , argues that the District Court erred by ordering the Department to assess property taxes against the City because the City is tax-exempt. It argues that the District Court's order violated the City's due process rights because it ordered tax assessment against the City even though the City was not a party in the litigation. Finally, the City argues that the refund to Mountain Water ordered by the District Court, without ordering an accompanying refund to Mountain Water customers, will function as a windfall to Mountain Water because the property tax burden is a pass-through cost in the water rates approved by the Montana Public Service Commission and paid by water customers.

¶12 The parties' arguments tend to read more into this very short statute than is actually there, and extrapolate beyond the precise purpose of the legislation. "In the construction of a statute,...