Mountain Water Co. v. State, DA 16-0469

• Docket Nº: DA 16-0469
• Citation: 394 P.3d 922, 387 Mont. 394
• Case Date: May 16, 2017
• Court: United States State Supreme Court of Montana

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.

387 Mont. 394

¶1 Appellant Department of Revenue (Department) appeals from the

387 Mont. 395

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

394 P.3d 923

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

387 Mont. 396

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:

394 P.3d 924

[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.

387 Mont. 397

¶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...