Mountain Water Co. v. Mont. Dep't of Revenue

• Decision Date: 04 August 2020
• Docket Number: DA 19-0262
• Parties: MOUNTAIN WATER COMPANY, Plaintiff and Appellant, v. MONTANA DEPARTMENT OF REVENUE, Defendant and Appellee, and City of Missoula, a Montana municipal corporation, Intervenor, Appellee and Cross-Appellant, and Missoula County, Intervenor, Appellee and Cross-Appellant.
• Court: Montana Supreme Court

400 Mont. 484

469 P.3d 136

2020 MT 194

MOUNTAIN WATER COMPANY, Plaintiff and Appellant,

v. MONTANA DEPARTMENT OF REVENUE, Defendant and Appellee,andCity of Missoula, a Montana municipal corporation, Intervenor, Appellee and Cross-Appellant,andMissoula County, Intervenor, Appellee and Cross-Appellant.

DA 19-0262

Supreme Court of Montana.

Submitted on Briefs: March 18, 2020

Decided: August 4, 2020

For Appellant: Dale Schowengerdt, Michael W. Green, D. Wiley Barker, Crowley Fleck PLLP, Helena, Montana

For Appellee: Daniel J. Whyte, David Burleigh, Special Assistant Attorneys General, Montana Department of Revenue, Legal Services Office, Helena, Montana

For Intervenor and Appellee City of Missoula: Scott M. Stearns, Natasha Prinzing Jones, Randy J. Tanner, Boone Karlberg P.C., Missoula, Montana

For Intervenor and Appellee Missoula County: Matt Jennings, Deputy County Attorney, Kirsten H. Pabst, Missoula County Attorney, Missoula, Montana

Justice Dirk Sandefur delivered the Opinion of the Court.

¶1 Mountain Water Company (Mountain Water) appeals the summary judgment of the Fourth Judicial District Court, Missoula County, ruling that the equitable doctrine of unjust enrichment precludes its claim under § 70-30-315, MCA, for a general property tax refund pursuant to §§ 15-1-402(1) - (2), (6)(b)(i), and -406(1)-(3), MCA, on taxes that accrued during the pendency of the condemnation action initiated by the City of Missoula (City) to take the subject property for public use pursuant to Title 70, chapter 30, MCA. The City and Missoula County (County) separately cross-appeal the court's related ruling that § 70-30-315, MCA, would entitle Mountain Water to a general property tax refund but for application of the equitable doctrine of unjust enrichment. The City further cross-appeals the court's additional ruling that Mountain Water did not breach the parties’ 2017 settlement agreement by asserting its subsequent property tax refund claim.¹ We address the following restated issues:

1. Whether the District Court erroneously concluded that the equitable doctrine of unjust enrichment precluded relief on Mountain Water's claim for property tax proration and relief under § 70-30-315, MCA ?

2. Whether the District Court erroneously concluded as a threshold matter that § 70-30-315, MCA, would entitle Mountain Water to a general property tax refund under §§ 15-1-402(1) - (2), (6)(b)(i), and -406(1)-(3), MCA ?

3. Whether Mountain Water contractually waived its right to property tax proration and reimbursement from the City pursuant to § 70-30-315, MCA ?

4. Whether the District Court erroneously concluded that Mountain Water's subsequent assertion of a general property tax refund claim did not breach the parties’ 2017 condemnation action settlement agreement?

We affirm the ultimate result reached by the District Court but on different grounds.

PROCEDURAL AND FACTUAL BACKGROUND

¶2 This is the most recent in the multitude of appeals and petitions spawned by the City's latest attempt to take Mountain Water's water distribution system for public use by eminent domain.² Eminent domain is the power to affirmatively take private property for public use upon just compensation in the manner prescribed by Title 70, chapter 30, MCA. Section 70-30-101, MCA. See also Mont. Const. art. II, § 29. The taking of private property by eminent domain is a two phase process—a determination of whether the condemnor can show the requisite public need for the taking and a compensation phase for the determination and payment of various statutory elements of compensation due to the property owner in return for the taking. See §§ 70-30-206 through -309, MCA.

¶3 Mountain Water is a private Montana corporation previously owned through various layered holding companies by Carlyle Infrastructure Partners, LP (Carlyle), a Delaware-chartered company.³ As a regulated public water utility, Mountain Water provided drinking water to Missoula area customers from an underground aquifer in the extraordinary absence of a publicly-owned water system.⁴ On April 2, 2014, in the wake of Mountain Water's rejection of a City offer to buy the utility for $50 million, the City commenced another action to acquire it by eminent domain.

¶4 Later that month, in a letter to the Montana Department of Revenue (MDOR) and the County, Mountain Water asserted pursuant to § 70-30-315, MCA (required property tax proration between condemnee and condemnor), that it was "no longer liable" for taxes on the property because the City was now responsible for them as a result of its institution of the condemnation action. Mountain Water accordingly asserted that it and the City were each responsible to pay 50% of the first half taxes for 2014, due November 30th of that year, and that the City was thereafter exclusively responsible for all taxes due on the property during the pendency of the condemnation action. Mountain Water thus requested that MDOR immediately initiate the "process for assessing the City for the property taxes [thereafter] due" on the property. The City contrarily asserted to MDOR that the property tax proration required by § 70-30-315, MCA, would be not triggered until after a preliminary adjudication of the requisite public need for the taking under § 70-30-206(2), MCA. The City asserted that only then would the condemnation action proceed to the compensation phase and would the City become the "condemnor" of the property "being taken" as referenced in § 70-30-315, MCA.

¶5 In response, MDOR asserted that the language of § 70-30-315, MCA, was ambiguous, both on its face and upon resort to its limited legislative history. In the face of that ambiguity and the parties’ conflicting statutory interpretations, MDOR asserted that Title 15, chapter 7, part 3, MCA (Montana Realty Transfer Act), specified the exclusive process by which MDOR must assess property taxes to a new owner on a change of ownership. MDOR thus asserted that it had no duty or authority to change the record owner of the property for tax assessment purposes prior to receipt of a statutorily-mandated "realty transfer certificate" upon an actual transfer of ownership. Beginning with the first half taxes for 2014, due November 30, 2014, Mountain Water thereafter paid all property taxes under protest pursuant to § 15-1-402(1) - (2), MCA, based on § 70-30-315, MCA.

¶6 On January 9, 2015, prior to a preliminary public necessity determination in the condemnation action, Mountain Water filed a separate claim for declaratory judgment and general property tax refund against MDOR in the Montana First Judicial District pursuant to §§ 15-1-402(6)(b)(i) and -406(1)-(3), MCA. The claim sought declaratory judgment that § 70-30-315, MCA, required MDOR to immediately retroactively reassess taxes on the property to the City (from the date of the condemnation action summons) and that Mountain Water was thus entitled to a refund, with interest, of previously paid property taxes accruing thereafter.

¶7 On June 15, 2015, while the property tax action proceeded in the First Judicial District, the Fourth Judicial District Court issued a judgment in the condemnation action that the City had established the requisite public need for the taking pursuant to § 70-30-206(2), MCA, thus authorizing the condemnation action to proceed to the compensation phase. Mountain Water appealed and we later affirmed the preliminary judgment of condemnation on August 2, 2016. City of Missoula v. Mountain Water Co. (Mountain Water III ), 2016 MT 183, 384 Mont. 193, 378 P.3d 1113. On November 17, 2015, the condemnation commissioners determined in the condemnation action that the fair market value of the Mountain Water property was $88.6 million. In April-May 2016, the Fourth Judicial District Court subsequently determined the amount of interest due on that valuation and further concluded that Mountain Water and Carlyle were both entitled to recover necessary litigation expenses under § 70-30-305(2), MCA.

¶8 On June 7, 2016, in the parallel-pending property tax case, the First Judicial District Court granted summary judgment that § 70-30-315, MCA, "requires ... the City ... [to] be assessed for all taxes accruing on the subject property after April 2, 2014," and that Mountain Water was thus entitled to a general property tax refund to date. MDOR promptly appealed. On April 12, 2017, while the property tax appeal was still pending, the Fourth Judicial District Court issued a judgment in the condemnation action determining the amount of attorney fees and condemnation litigation expenses due to Mountain Water and Carlyle under §§ 70-30-306 and -307, MCA.

¶9 A month later, on May 16, 2017, we reversed the June 7, 2016, judgment of the First Judicial District Court in the property tax case. Mountain Water Co. v. Mont. Dep't of Revenue (Mountain Water IV ), 2017 MT 117, 387 Mont. 394, 394 P.3d 922. We held that Mountain Water's claim for property tax proration under § 70-30-315, MCA, was premature at that stage of the condemnation proceeding⁵ and that it accordingly remained obligated to continue to pay the assessed taxes on the property through the date of title transfer under § 70-30-309, MCA. Mountain Water IV , ¶¶ 13-18.

¶10 On June 5, 2017, Mountain Water and the City executed a written settlement agreement in the condemnation case.⁶ As pertinent here, the settlement agreement:

(1) specified that the City would pay Mountain Water the net sum of $83,863,336 "for all assets and claims asserted" in the condemnation case "other than [specified] Reserved Claims";

(2) "release[d] and discharge[d] the City ... from any and all claims relating to the Condemnation Lawsuit ... including, without limitation, any and all claims that were brought or could have been brought in [that] [l]awsuit";

(3) acknowledged and "agree[d] that Mountain Water reserve[d] [certain] rights and claims" but "settled and waived" "[a]ll other claims or appeals ... not specifically reserved" in the agreement;

(4) mutually

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