Roosevelt v. Montana Dept. of Revenue

• Decision Date: 29 December 1998
• Docket Number: No. 98-495,98-495
• Citation: 975 P.2d 295,56 St.Rep. 125,1999 MT 30
• Parties: Theodore ROOSEVELT, IV, Petitioner and Respondent, v. MONTANA DEPARTMENT OF REVENUE, Respondent and Appellant. . Heard
• Court: Montana Supreme Court

Page 295

975 P.2d 295

1999 MT 30

Theodore ROOSEVELT, IV, Petitioner and Respondent, v. MONTANA DEPARTMENT OF REVENUE, Respondent and Appellant.

No. 98-495.

Supreme Court of Montana.

Heard Dec. 29, 1998.

Submitted Feb. 2, 1999.

Decided Feb. 19, 1999.

Lawrence G. Allen (argued) and Patrick N. Dringman, Tax Counsels; Department of Revenue; Helena, Montana, for Appellant.

James A. Hubble (argued), Attorney at Law; Stanford, Montana, for Respondent.

Donald R. Herndon (argued); Herndon, Sweeney & Halverson, P.C.; Billings, Montana, for amicus Jeffrey Vern Essmann.

Justice TERRY N.TRIEWEILER delivered the Opinion of the Court.

¶1 Theodore Roosevelt, IV, who was designated the petitioner, and the Montana Department of Revenue, which was designated the respondent, filed a joint petition in the District Court for the Tenth Judicial District in Fergus County for interlocutory adjudication pursuant to §§ 15-2-304 and-305, MCA, of legal issues raised before the Montana State Tax Appeal Board(STAB). The parties asked the District Court to determine whether the 2% phase-in of changes in real property value, as set forth in § 15-7-111, MCA, violated the United States or Montana Constitutions, or Montana statutory law. After considering written briefs submitted by the parties and hearing oral argument, the District Court concluded that § 15-7-111(1), MCA (1997), is unconstitutional on its face and in conflict with other statutory law pertaining to the valuation and assessment of real property in Montana. The Department appeals the judgment of the District Court. We affirm that judgment in part, as applied to the petitioner, Theodore Roosevelt, IV.

¶2 We limit our consideration of the issues raised on appeal to the question of whether, as applied to the petitioner, § 15-7-111(1), MCA(1997), violates his right to equal protection of the laws, as guaranteed by Article II, Section 4, of the Montana Constitution.

FACTUAL AND PROCEDURAL BACKGROUND

¶3 The following facts are taken from the parties' joint petition to the District Court. They are agreed upon by the parties and are the only facts of record.

¶4 Theodore Roosevelt, IV, owns real property and improvements to that property which are located in Fergus County, Montana. At issue in this case is the 1997 taxable value of two improvements to that real property.

¶5 In 1996, the market value of the property at issue was appraised by the Montana Department of Revenue at $890,850. In 1997, the Department appraised that same property at $701,890. Roosevelt filed an appeal with the Fergus County Tax Appeal Board challenging the 1997 valuation. For purposes of calculating the 1997 value, the county board reduced Roosevelt's 1996 appraised value to $820,597, and his 1997 appraised value to $658,840. Pursuant to § 15-7-111(1), MCA (1997), the Department then phased in the amount of change in valuation at the rate of 2% per year beginning in 1997. In other words, although the appraised value of Roosevelt's property declined by $161,757, he was given credit for only a $3,235 difference, and assessed property taxes based on a value of $817,362, rather than his actual 1997 appraised value of $658,840. The county board affirmed the Department's calculation of the 1997 phase-in value for Roosevelt's property.

¶6 Roosevelt appealed to the STAB to contest the legality of the 2% phase-in provision of § 15-7-111(1), MCA (1997). The parties then filed the joint petition to the District Court pursuant to § 15-2-305, MCA, which provides in relevant part that:

A district court may make an interlocutory adjudication of an issue pending before the state tax appeal board if that issue involves procedure, the admissibility of evidence, or a substantive question of law and does not require the determination of a question of fact.

¶7 The parties agreed that there were no disputed issues of fact and that the sole issue to be decided was as follows:

Whether the 2% phase in of changes in value, as set forth in § 15-7-111, MCA, is in violation of the United States and Montana constitutional requirements of equal protection and due process, and in violation of the Montana statutory requirement of property value equalization.

In the District Court, Roosevelt argued that:

¶8 1. The phase-in provision violates Article VIII, Section 3, of the Montana Constitution, § 15-9-101(1), MCA, and § 15-8-111(1), MCA, which require the equalization of property values for purposes of taxation.

¶9 2. The phase-in provision violates Article VIII, Section 7, of the Montana Constitution, which guarantees a property owner the right to appeal appraisals and assessments because a property owner cannot, in fact, receive a reduction on appeal based on the true market value of his or her property.

¶10 3. The phase-in provision violates the rights to equal protection of laws and due process guaranteed by the United States and Montana Constitutions, as interpreted in Department of Revenue v. Barron (1990), 245 Mont. 100, 799 P.2d 533, and Department of Revenue v. Sheehy (1993), 262 Mont. 104, 862 P.2d 1181.

¶11 The Department responded that:

¶12 1. Article VIII, Section 3, merely provides for appraisal, assessment, and equalization of value, as provided by law. Section 15-7-111(1), MCA(1997), is the method of appraisal and assessment provided for by law and there is no requirement that property be assessed at 100% of current market value.

¶13 2. Article VIII, Section 7, of the Montana Constitution has not been violated because the Legislature has provided for tax appeal procedures at the local government level through §§ 15-15-101 to -106, MCA, and to the STAB through § 15-2-301, MCA.

¶14 3. Neither Roosevelt's right to equal protection nor his right to due process has been violated because he has been treated like every other property owner in the state. Rather than Barron and Sheehy, the Court should be guided on this point by Nordlinger v. Hahn (1992), 505 U.S. 1, 112 S.Ct. 2326, 120 L.Ed.2d 1.

¶15 Following written briefs and arguments by the parties, the District Court found that Roosevelt's taxes, based on the 1997 phased-in value, were$11,246.31, but that his taxes based on his actual market value would have been $9,065.13, for a difference of $2,181.18. The Court found that for the year 1997 the phase-in provision of the 1997 amendment to § 15-7-111(1), MCA, required that Roosevelt pay property taxes based on a valuation which is 124% of the market value of his Class Four property, and concluded, based on the statute, that it would take fifty years for Roosevelt's property to be assessed at its fair market value. Although the Department questions the District Court's fifty-year conclusion, the court's previously referred to findings are not challenged on appeal.

¶16 Based on its findings, the District Court agreed that the phase-in provision violates Article VIII, Sections 3 and 7, of the Montana Constitution, and the Equal Protection and Due Process Clauses of both the United States and Montana Constitutions.

¶17 On appeal, the parties' arguments are similar to those raised in the District Court, although the Department argues additionally that the District Court assumed facts not in evidence as the basis for its opinion.

¶18 Except where necessary, we will not repeat the parties' arguments in detail, nor do we find it necessary to address all of the issues raised in the District Court or decided by the District Court since we conclude that the District Court's judgment, as it applies to the parties who were before it, is correct based on the District Court's application of the Equal Protection Clause of the Montana Constitution. Therefore, we will limit our discussion to the following issue:

¶19 As applied to the petitioner and similarly situated property owners, does § 15-7-111(1), MCA (1997), violate the right to equal protection as guaranteed by Article II, Section 4, of the Montana Constitution?

DISCUSSION

¶20 Article VIII, Section 3, of the Montana Constitution, provides that "[t]he state shall appraise, assess, and equalize the valuation of all property which is to be taxed in the manner provided by law."

¶21 Pursuant to that mandate, the Legislature enacted the following requirement regarding the appraisal of real property in Montana: "The same method of appraisal and assessment shall be used in each county of the state to the end that comparable property with similar true market values and subject to taxation in Montana shall have substantially equal taxable values at the end of each cyclical revaluation program hereinbefore provided." Section 15-7-112, MCA.

¶22 The Legislature further provided, at § 15-8-111, MCA, that all taxable property must be assessed at 100% of its market value, except as otherwise provided, and at § 15-9-101(1), MCA, that:

The department shall adjust and equalize the valuation of taxable property among the several counties ... and between individual taxpayers and shall do all things necessary to secure a fair, just, and equitable valuation of all taxable property among counties ... and between individual taxpayers.

¶23 The combined effect of these provisions requires standardized appraisal methods throughout the state with the ultimate goal that the valuation of taxable property be equalized among the various counties in the state and among individual taxpayers, and that once equalized, that property be assessed for tax purposes at 100% of its market value, except as otherwise provided. As part of that statutory framework for appraisal, valuation, and assessment of real property, § 15-7-111, MCA (1995), required that property within the State of Montana be revalued by the Department by December 31, 1996, and revalued at least every three years. However, in 1997, the Montana State Legislature became concerned that general increases in the value of real property throughout the State of Montana would result in substantial increases in those taxes derived...