Northern Natural Gas Co. v. Bender, 46286

• Decision Date: 06 November 1971
• Docket Number: No. 46286,46286
• Citation: 208 Kan. 135,490 P.2d 399
• Parties: NORTHERN NATURAL GAS COMPANY, a Corporation, Appellant, v. Alice BENDER, County Treasurer of Clay County, Kansas, et al., Appellees.
• Court: Kansas Supreme Court

Page 399

490 P.2d 399

208 Kan. 135

NORTHERN NATURAL GAS COMPANY, a Corporation, Appellant, v. Alice BENDER, County Treasurer of Clay County, Kansas, et al., Appellees.

No. 46286.

Supreme Court of Kansas.

Nov. 6, 1971.

Syllabus by the Court

1. Where the property of an interstate public utility is assessed by the State Director of Property Valuation, as authorized by K.S.A. 79-1404 Fifteenth, the procedure and method of judicial review provided in K.S.A. 1969 Supp. 74-2426 (now L.1971, ch. 249, § 1) is exclusive and the assessment may not be challenged in an action to recover protested taxes under K.S.A. 79-2005 (now L.1971, ch. 303, § 1.)

2. In the construction and interpretation of legislation, courts may look to the purpose and intent of the legislature in enacting the same.

3. An orderly and timely system of assessment and collection of taxes is an imperative to the successful operation of government.

4. K.S.A. 79-2005 (now L.1971, ch. 303, § 1) must be considered, together with all other statutes relating to taxes, as an integral part of the overall pattern and scheme of taxation established by the legislature.

5. The assessment by the State Director of Property Valuation of oil and gas pipelines and properties, together with other properties listed in K.S.A. 79-1404 Fifteenth, while other property locally situated is assessed by county assessors, does not violate the provisions of either the State or the Federal Constitution so long as all properties are assessed on the same basis, are measured by the same yardstick and appropriate appeal provisions are provided for their review.

6. County officers having governmental functions which extend beyond the assessment, valuation and review of property for tax purposes are proper parties defendant in an action brought to recover taxes paid under protest.

7. The record is examined in an action to recover taxes paid under protest, and for reasons appearing in the opinion it is held: (1) The trial court did not err in ruling that it lacked jurisdiction to determine the validity of the assessment of plaintiff's property made by the State Director of Property Valuation and upheld by the State Board of Tax Appeals. (2) The trial court erred in dismissing the action as to the County Clerk of Clay County, the Board of County Commissioners of Clay County, and the individual members of said Board.

Mark H. Adams, II, of Adams, Jones, Robinson & Manka, Wichita, argued the cause, and Wm. S. Richardson, Wichita, F. Vinson Roach and Frank J. Duffy, Omaha, Neb., and Wayne W. Ryan, Clay Center, were with him on the brief for appellant.

Matthew J. Dowd, Asst. Atty. Gen., argued the cause, and Vern Miller, Atty. Gen., Clarence J. Malone, Chief Atty., John Bingham, Atty., Property Valuation Dept., John Royston, Chief Atty., State Board of Tax Appeals, and Bruce Wingerd, County Atty., were with him on the brief for appellees.

John Berglund, Clay Center, was on the brief amicus curiae.

FONTRON, Justice:

This is an action by Northern Natural Gas Company, (to whom we shall refer either as plaintiff on Northern), to recover taxes paid under protest to Clay County.

The plaintiff owns and operates an interstate system of pipelines and is subject to regulation by the Federal Power Commission. Some of its Kansas property is in Clay County. The defendants named in the caption are Clay County and State officials whose duties are related to the assessment or collection of taxes.

Northern predicates its right to recover its taxes on two bases: First, that the valuations placed on its Kansas properties by the State Director of Property Valuation (herein called Director) and on the percentage share thereof allocated to Clay County, as such were upheld by the State Board of Tax Appeals, (referred to herein as the Borad) are unreasonable, arbitrary and capricious. Second, that its property in Clay County is assessed at 30% of its justifiable value, while other property within the county is assessed at not more than 20%.

On June 22, 1970, the trial court sustained motions to dismiss all defendants except Alice Bender, the County Treasurer of Clay County, on the ground that she, alone, was a necessary party. Under this ruling the Clay County Clerk, ex officio County Assessor, the Clay County Board of County Commissioners and its individual members, the State Director of Property Valuation and the State Board of Tax Appeals (which constitutes also the State Board of Equalization) and its members were dismissed from the lawsuit. This ruling forms one of the grounds of Northern's appeal.

Shortly thereafter, the trial court further ruled that it did not have jurisdiction of one of the issues in this action, to wit, whether the valuation placed on Northern's property by the Director and upheld by the Board, was unreasonable, arbitrary or capricious. This ruling is challenged as erroneous and is the second point raised in this appeal.

We will discuss the two points raised by Northern in reverse order. Before doing so, however, we are impelled to chronicle the events which ultimately lead to the arrival of this appeal upon our doorstep.

In May, 1969, the Director of Property Valuation, whose duty it is under K.S.A. 79-1404 Fifteenth to appraise and assess, among other property, oil and gas pipelines and their properties, determined that the value of Northern's Kansas properties was $225,096,190 and further determined, applying the 30% assessment factor set out in L.1963, ch. 460, § 1 (since amended and now appearing as K.S.A. 79-1439) that the assessed value thereof was $67,528,850. Of this total assessed value, the Director allocated $5,163,193 to Clay County as its share thereof, and certified the same to the County Clerk.

Northern was dissatisfied with the Director's determination and appealed therefrom to the State Board of Tax Appeals pursuant to K.S.A. 1969 Supp. 74-2426 (now L.1971, ch. 249, § 1.) The provisions of this statute will later be noted in some detail.

After hearing Northern's appeal, the Board, on August 22, 1969, entered a final order upholding the Director's valuation and assessment of plaintiff's properties and denying the appeal.

On September 19, 1969, the plaintiff, again following the procedures outlined in 74-2426, appealed from the Board's final order to the District Court of Pawnee County, in which some of its properties were located. Subsequently, Northern made timely payment to Clay County, under protest, of the first half of its 1969 tax.

Northern instituted the present action under K.S.A. 79-2005 (now L.1971, ch. 303, § 1) to recover the protested tax. It was filed January 14, 1970, and while Northern's appeal from the final order of the Board (sometimes referred to herein as the direct appeal) was still pending in the Pawnee County District Court, and before the same had been heard. However, the direct appeal was later tried in Pawnee County and on July 31, 1970, the district court of that county entered judgment upholding the order of the Board. That decision of the Pawnee District Court was handed down shortly after the Clay County District Court ruled in the present case. Incidentally, the decision in the Pawnee County case (the direct appeal) was also brought to this court but has not yet been decided. If this maze of dates, actions and appeals seem confusing to the reader, we can only echo that sentiment.

Turning to the points raised on appeal, it is the position of the Clay County Treasurer, who alone remains a defendant, that the Director's appraisal of Northern's property (often referred to as the state appraisal, or state assessment) was upheld on appeal by the Board; that the Board's decision is final unless reversed on a direct appeal taken therefrom under K.S.A. 1969 Supp. 74-2426; that the appeal procedure contained in 74-2426 is exclusive where a state assessment is involved; and that the validity of a state appraisal and assessment may not be challenged, nor the Director's determination of justifiable value be attacked collaterally, in actions to recover protested taxes brought under 79-2005.

We find considerable merit in this approach. K.S.A. 79-1404 reads in pertinent part:

'That it shall be the duty of the director of property valuation, and he shall have the power and authority:

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'Fifteenth. To make appraisement and assessment of all railroads and the property of railroad corporations, * * * of all telegraph lines and property, of all telephone lines and property, the property of all express companies, sleeping car companies, and private car lines, doing business within the state of Kansas, of gas pipe lines and property, of all oil pipe lines and property, of all street railroads, electric lines and property, and all express company property, within and without corporate limits of cities, doing business in the state.'

K.S.A. 79-709 provides in substance that after the Director has completed the assessment, the amount thereof shall be apportioned among the several counties and other taxing districts concerned in proportionate ratios. The amounts so apportioned are then certified to the county clerk of each county who in turn notifies the proper taxing district officials thereof for their use in making their levies. (L.1959, ch. 365, § 15, now K.S.A. 79-5a06.) Essentially this procedure was pointed out by this court in Continental Pipe Line Co. v. Cartwright, 154 Kan. 430, 118 P.2d 1052.

Clearly, it seems to us, one of the principal objectives of this legislation must have been the attainment of uniformity in the valuation and assessment of public transportation and utility properties which extend throughout more than one county within the state, and which, from their nature, constitute a unitary system.

The procedure appears pointedly designed to eliminate those inequalities in the assessed values of utility properties which might well occur between counties if, in each of the counties affected, ...