Park v. Banbury, 32861.

• Decision Date: 21 December 2006
• Docket Number: No. 32861.,32861.
• Citation: 149 P.3d 851,143 Idaho 576
• Parties: W. Anthony PARK and Gail A. Chaloupka, husband and wife; Mahn Investments L.P., an Idaho limited partnership; Peter T. Johnson and Carolyn C. Johnson, husband and wife; and all other persons similarly situated, Plaintiffs-Respondents-Cross Appellants, v. Archie BANBURY and Karen Campbell, Valley County Assessors, and Terry Gestrin, F. Phillip Davis, and Thomas Kerr, Commissioners of the Valley County Board of County Commissioners, sitting as the Valley County Board of Equalization, Defendants-Appellants-Cross Respondents.
• Court: Idaho Supreme Court

149 P.3d 851

143 Idaho 576

W. Anthony PARK and Gail A. Chaloupka, husband and wife; Mahn Investments L.P., an Idaho limited partnership; Peter T. Johnson and Carolyn C. Johnson, husband and wife; and all other persons similarly situated, Plaintiffs-Respondents-Cross Appellants, v. Archie BANBURY and Karen Campbell, Valley County Assessors, and Terry Gestrin, F. Phillip Davis, and Thomas Kerr, Commissioners of the Valley County Board of County Commissioners, sitting as the Valley County Board of Equalization, Defendants-Appellants-Cross Respondents.

No. 32861.

Supreme Court of Idaho, Boise, November 2006 Term.

December 21, 2006.

Paine, Hamblen, Coffin, Brooke & Miller, LLP, Coeur d'Alene, for appellants. Peter C. Erbland argued.

Hall, Farley, Oberrecht & Blanton, P.A., Boise, for respondents. Phillip S. Oberrecht argued.

SCHROEDER, Chief Justice.

Lakefront landowners in McCall challenged the methodology for assessing value used by the Valley County Assessor. The county appeals from the district court's ruling that its use of "neighborhoods" rather than categories for assessment purposes violates Idaho law.

I. FACTUAL AND PROCEDURAL BACKGROUND

The respondents ("Property Owners") are owners of various parcels of land fronting Big Payette Lake in McCall, Valley County Idaho. In response to rapidly rising real estate prices in the area, the Valley County assessor ("Assessor") significantly increased the assessed values of certain properties for 2004. For properties not scheduled to be individually appraised that year, the assessment was effected by a process known as mass appraisal or "indexing" in which previously assessed values are adjusted to reflect changes in the market as evidenced by recent transactions involving similar properties. As a result of this indexing process, the Property Owners' properties were assessed at values between 41% and 49% higher than the previous year.

The Property Owners appealed their increased assessments to the county commissioners sitting as a board of equalization ("Board of Equalization" or "Board"), claiming that the increase in value assessed to their properties was disproportionate relative to properties in other parts of the county. The Board denied their appeals on July 12, 2004.

Rather than appeal the ruling to either the board of tax appeals or the district court, the Property Owners filed an independent action in the district court on August 12, 2004, challenging the assessments. The Property Owners claimed that the county's practice of calculating index adjustments on a neighborhood basis rather than by category violates Idaho law, including Article VII, Section 5 of the Idaho Constitution, which requires that "[a]ll taxes shall be uniform upon the same class of subjects within territorial limits, of the authority levying the tax," as well as various statutory and regulatory provisions. They also contended that other methods used by the Assessor were arbitrary and capricious, including the use of abstraction methods to determine lakefront land values and reliance on recent sales that were not time-adjusted to estimate property values elsewhere in the county. Finally, the Property Owners challenged the constitutionality and applicability of the so-called speculative homesite exemption, I.C. § 63-602FF, which allegedly allowed certain other properties in the county to be assessed significantly below their true market value, thereby shifting a greater burden to the remaining properties.

The district court granted partial summary judgment for the Property Owners, holding that their failure to exhaust available administrative remedies did not deprive the court of subject matter jurisdiction, and that the Assessor's reliance on neighborhoods rather than categories in assessing values was contrary to Idaho law. The district court rejected other contentions of the Property Owners, ruling that they had failed to demonstrate how the abstraction and time adjustment methods used by the Assessor were unlawful or unreasonable and that the speculative homesite exemption was constitutional. The district court also held that the Assessor's errors did not work a violation of the Property Owners' substantive due process and equal protection rights. The county's subsequent motion for reconsideration was denied.

The county appeals from the district court's ruling on subject matter jurisdiction and from its order requiring the county to assess property "by category rather than neighborhood." The Property Owners cross-appeal, claiming the district court should have held the county's abstraction and time-adjustment methods were arbitrary and contrary to law. The speculative homesite exemption has since been repealed and is not part of this appeal. 2006 Idaho Sess. Laws ch. 233, § 1. Likewise, the due process and equal protection claims have not been raised on appeal. The Idaho State Tax Commission is also before the Court as amicus curiae.

II. THE DISTRICT COURT LACKED AUTHORITY TO HEAR THE PROPERTY OWNERS' CLAIMS

The threshold issue is whether the Property Owners' claims were properly before the district court. Pursuit of statutory administrative remedies is a condition precedent to judicial review. Fairway Dev. Co. v. Bannock County, 119 Idaho 121, 124, 804 P.2d 294, 297 (1990). "[T]he doctrine of exhaustion generally requires that the case run the full gamut of administrative proceedings before an application for judicial relief may be considered." Regan v. Kootenai County, 140 Idaho 721, 724, 100 P.3d 615, 618 (2004).

The doctrine of exhaustion serves important policy considerations, including "providing the opportunity for mitigating or curing errors without judicial intervention, deferring to the administrative process established by the Legislature and the administrative body, and the sense of comity for the quasi-judicial functions of the administrative body." Regan, 140 Idaho at 725, 100 P.3d at 619 (quoting White v. Bannock County Commissioners, 139 Idaho 396, 401-02, 80 P.3d 332, 337-38 (2003)). Consistent with these principles, courts infer that statutory administrative remedies implemented by the Legislature are intended to be exclusive. See, e.g., Castrigno v. McQuade, 141 Idaho 93, 96, 106 P.3d 419, 422 (2005); cf. I.R.C.P. 84(a)(1) (providing that actions of a local government or its officers "are not subject to judicial review unless expressly authorized by statute").

1. Overview of administrative procedures

The administrative remedies for property tax assessments are provided in Chapters 5 and 38 of Title 63 of the Idaho Code, which respectively govern the county board of equalization and the board of tax appeals. A taxpayer may appeal an assessment to the county board of equalization, subject to certain procedural requirements. I.C. § 63-501A(1). The board of equalization may consider an appeal only if it is timely filed, normally by the fourth Monday of June. I.C. §§ 63-501(1)(c), 63-501A(2). The board "must examine and act upon all complaints filed with the board in regard to the assessed value of any property entered on the property rolls and must correct any assessment improperly made." I.C. § 63-502.

Within 30 days after the board's decision the taxpayer may appeal to the board of tax appeals. I.C. §§ 63-511(1), 63-3811. The board of tax appeals "may affirm, reverse, modify or remand any order of the board of equalization, and shall grant other relief, invoke such other remedies, and issue such orders in accordance with its decision, as appropriate." I.C. § 63-511(4). From the decision of the board of tax appeals, the taxpayer may appeal to the district court in accordance with Idaho Rule of Civil Procedure 84. I.C. § 63-3812.

Prior to 1985 taxpayers were generally required to pursue their claims first to the board of equalization and then to the board of tax appeals before bringing an action in district court. In 1985 the Legislature amended the predecessor of section 63-511 by the addition of a new subsection (3), which provides as follows:

Any appeal that may be taken to the board of tax appeals may, during the same time period, be taken to the district court for the county in which the property is located.

1985 Idaho Sess. Laws ch. 219, § 1. The time period referred to is the 30-day limit specified in section 63-511(1).¹

The purpose of the amendment was to allow taxpayers to elect to bypass a portion of the administrative appeal process that would otherwise be required under the doctrine on exhaustion. See Statement of Purpose, 1985 Idaho Sess. Laws ch. 219 ("The purpose of the amendment to Section [63-511's predecessor] will allow a taxpayer to bypass the Board of Tax Appeals and go directly to District Court in appealing property values."). The amendment did not remove the exhaustion requirement but provides a limited mechanism for direct appeal to a district court by which a claimant can bypass one step in the administrative process, namely the board of tax appeals.

The Property Owners appealed their assessments to the county board of equalization, which denied their claims on July 12, 2004. Rather than appeal to either the board of tax appeals or the district court under section 63-511, the Property Owners filed a complaint in the district court on August 12, 2004, 31 days after the decision of the board of equalization. They do not argue that the complaint should be considered timely; rather they contend their claims constitute an independent action for which exhaustion is not required because the administrative body (i.e. the board of tax appeals) would be incapable of rendering the relief requested.

2. The district court's ruling

The district court denied the motion to dismiss for failure to exhaust, commenting on the exception for futility and a belief that the board of tax appeals would not take up constitutional issues. The district court also noted the bypass procedure available in section 63-511(3).

The right to pursue an...