Union Pacific Resources Co. v. State
| Decision Date | 23 September 1992 |
| Docket Number | No. 92-30,92-30 |
| Citation | 839 P.2d 356 |
| Parties | UNION PACIFIC RESOURCES COMPANY, Appellant (Plaintiff), v. STATE of Wyoming; Wyoming Department of Revenue; Earl Kabeiseman, in his official capacity as Director of the Wyoming Department of Revenue; Wyoming State Board of Equalization; Wyoming Tax Commission; Nancy D. Freudenthal, Marvin Applequist, II, and C.H. Brown, III, in their official capacities as members of the Wyoming State Board of Equalization and the Wyoming Tax Commission; Wyoming Department of Audit; Roger W. Dewey, in his capacity as Director of the Wyoming Department of Audit; Board of County Commissioners of the County of Uinta; Board of County Commissioners of the County of Sweetwater; Board of County Commissioners of the County of Laramie; Board of County Commissioners of the County of Carbon; Board of County Commissioners of the County of Crook; Board of County Commissioners of the County of Lincoln; and Board of County Commissioners of the County of Converse, Appellees (Defendants), and Board of County Commissioners of the County of Albany; Board of County Commissioners of the County of Big Horn; Board of County Commissioners of the County of Campbell; Board of County Commissioners of the County of Fremont; Board of County Commissioners of the County of Goshen; Board of County Commissioners of the County of Hot Springs; Board of County Commissioners of the County of Johnson; Board of County Commissioners of the County of Natrona; Board of County Commissioners of the County of Niobrara; Board of County Commissioners of the County of Park; Board of County Commissioners of the County of Platte; Board of County Commissioners of the County of Sheridan; Board of County Commissioners of the County of Sublette; Board of County Commissioners of the County of Teton; Board of County Commissioners of the County of Washakie; and Board of County Commissioners of the County of Weston, Appellees (Defendants/Intervenors). |
| Court | Wyoming Supreme Court |
Dennis W. Lancaster of Phillips, Lancaster & Thomas, P.C., Evanston, and Cynthia M. Lummis of Wiederspahn, Lummis & Liepas, Cheyenne, for appellant.
Joseph B. Meyer, Atty. Gen., and Michael L. Hubbard, Sr. Asst. Atty. Gen., for appellee State of Wyoming.
Bruce A. Salzburg and David D. Freudenthal of Herschler, Freudenthal, Salzburg, Bonds & Rideout, P.C., Cheyenne, and Peter C. Maxfield, Laramie, for appellee Counties.
Before MACY, C.J., and THOMAS, CARDINE, URBIGKIT * and GOLDEN, JJ.
This mineral tax assessment challenge was filed by a very large Wyoming corporate taxpayer in a district court declaratory judgment action. Complex issues were presented by this major oil and gas producer. The complaint named both county and state officials as defendants. As the appellant's brief states, this appeal "involves the proper method and manner in which the State, County and other named government officials * * * may value, audit, assess, collect and review taxes on Union Pacific Resources Company's * * * oil and gas production."
District court summary judgment dismissal of the complaint provides the final order for this appeal. The issues stated by Union Pacific Resources Company are:
1) The District Court has jurisdiction to decide the issues raised in Appellant's Complaint and has the authority to grant the relief requested therein.
2) The District Court erred in granting Appellees' motions and dismissing Count I of Appellant's Complaint, which requests a judicial declaration that the wellhead is the proper point of valuation to determine the taxable value of Appellant's oil and gas production for the years 1984 to 1988, inclusive.
3) The District Court erred in granting Appellee's motions and in dismissing Count II of Appellant's Complaint which requests a judicial declaration that certain statutes of limitation and other time limitations, restrict the audit and tax collection authority of Appellees.
4) The District Court erred in granting Appellees' Motions and in dismissing Count III of the Appellant's Complaint which requests a judicial declaration that the "county contract audits" are unconstitutional, illegal, unauthorized and violative of public policy.
The appellee counties, which now include all twenty-three Wyoming counties, amplify the issues as:
A. Whether a declaratory judgment action filed by a mineral producer concerning the appropriate point of valuation for its production in prior years should be entertained when the producer has not first presented the issue to the State Board of Equalization?
i. Whether a declaratory judgment concerning point of valuation for mineral tax purposes is subject to a requirement of exhaustion of administrative remedies, or in the alternative, to the doctrine of primary jurisdiction?
B. Whether any statute of limitations prevents Wyoming counties from seeking out mineral production which was unreported for taxation in prior years?
i. Whether a record retention requirement established by rule or statute operates
as a statutory bar to Wyoming's counties seeking out mineral production unreported in prior years?
ii. Whether the limitation on county assessors' collection of taxes on "omitted property" operates as a five-year[ ] statute of limitations preventing counties from seeking out mineral production unreported for taxation?
iii. Whether the eight-year statute of limitations contained in W.S. 1-3-105 operates to prevent counties from seeking out production unreported for taxation?
C. Whether the practice of Wyoming counties of hiring private firms to review production reports made by mineral producers to various governmental agencies pursuant to contracts which compensate them, in part, based upon a percentage of taxes collected is unlawful as without statutory authority, void as against public policy, or subject to state preemption?
i. Whether Wyoming counties have statutory authority to enter into contracts for the services provided by the so-called "County Contract Auditors?"
ii. Whether the contingent fee provision of such contracts renders them void as contrary to Wyoming public policy?
iii. Whether the creation of the Wyoming Department of Audit has preempted the counties' authority to contract for the services provided?
The State, addressing the subjects intrinsic to its function, simplifies by stating:
1. Is declaratory judgment available where the taxpayer has failed to exhaust administrative remedies relating to an administrative request for refund, an incomplete audit and an administrative assessment of taxes to which taxpayer did not respond?
2. Is there an applicable statute of limitations against the Board's authority to review allegations of improper assessment and remedy such improper assessment?
We find three differentiated subjects litigatively created by the pleadings: (a) taxation point of valuation for either or both oil and gas production taxable within either the Wyoming ad valorem or severance tax systems and the ancillary question of whether this issue should now be judicially addressed before the appellant, Union Pacific Resources Company (Taxpayer), exhausts state tax agency administrative remedies; (b) what statutes, among possible statutes, provide a statute of limitation for collection of unpaid taxes by governmental entities for prior years; and (c) legality of the board of county commissioners entering into contracts with fee based private companies who check records to establish the existence of unpaid ad valorem mineral taxes.
There is a preliminary question of the propriety of the district court's decision since the first two general issues remain undetermined, and perhaps all three, resulting from the summary judgment disposition with a procedural decision that a prior requirement for the litigant to first exhaust administrative remedies existed.
We concur with the district court regarding the first issue, disagree with its procedural disposition failing to decide the statute of limitation issue, and agree with what the district court recognized but perhaps did not determine for decision with reference to the third issue. Consequently, we affirm the district court in decision on the first issue. With recognition of the basic and pervasive content of the second issue and the third as well, authenticating need for early judicial resolution for statewide application, we now elect to resolve the issues in this initial appeal. These tax issues involve tens if not hundreds of millions of dollars of state and local government revenues.
Following a complete course of cross pleadings, including motions to dismiss and motions for summary judgment, the district court issued a detailed and well-reasoned decision letter followed by an order of dismissal incorporating the decision letter. The order of dismissal dispositively stated:
ORDERED that the Motions be and the same are hereby generally granted, and that the Complaint be and is hereby dismissed, each of the parties to bear its own costs, and it is further
ORDERED that the Court's letter ruling of November 25, 1991, as amended, be and is hereby incorporated herein.
The decision letter, in consideration of the first issue--valuation point--determined that exhaustion of administrative remedies was required. Regarding the statute of limitation, it was considered to be a mixed issue of law and fact which should also wait primary and prior administrative agency review. The district court then determined that the county usage of the contingent fee contract with independent contracts to audit for tax underpayment was not illegal. Within the nature of the dismissal order, there is some question of whether the declaratory decision was made on the third issue in final form, although the decisional basis for resolution was clearly stated in the text of the decision letter.
We will conjunctively consider the umbrella issue of exhaustion of...
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