United Air Lines, Inc. v. City and County of Denver, 97CA0151

• Decision Date: 30 April 1998
• Docket Number: No. 97CA0151,97CA0151
• Citation: 973 P.2d 647
• Parties: UNITED AIR LINES, INC., a Delaware corporation; and Air Wisconsin, Inc., a Wisconsin corporation, Plaintiffs-Appellants, v. CITY AND COUNTY OF DENVER, a home rule city and a Colorado municipal corporation, Defendant-Appellee. . II
• Court: Colorado Court of Appeals

Page 647

973 P.2d 647

UNITED AIR LINES, INC., a Delaware corporation; and Air Wisconsin, Inc., a Wisconsin corporation Plaintiffs-Appellants, v. CITY AND COUNTY OF DENVER, a home rule city and a Colorado municipal corporation, Defendant-Appellee.

No. 97CA0151.

Colorado Court of Appeals Div. II.

April 30, 1998.

As Modified on Denial of Rehearing June 25, 1998.

Certiorari Granted March 29, 1999. ^*

Skadden, Arps, Slate, Meagher & Flom, L.L.P., Pamela F. Olson, Washington, D.C., for Plaintiffs-Appellants,

Brownstein, Hyatt, Farber & Strickland, P.C., Hubert A. Farbes, Jr., Lynne M. Hufnagel, Denver, for Plaintiffs-Appellants.

Daniel E. Muse, City Attorney, Maria Kayser, Assistant City Attorney, Office of the City Attorney, Denver, for Defendant-Appellee.

Opinion by Judge TAUBMAN.

Plaintiffs, United Air Lines, Inc., and Air Wisconsin d/b/a United Express (collectively the airlines), appeal the judgment in favor of defendant, City and County of Denver, upholding the constitutionality of the Denver use tax as applied to the airlines, and the subsequent assessment of penalties imposed pursuant to Denver Revised Municipal Code (Denver Code) § 53-114(a). We disagree with the airlines' contention that the ordinance as applied violated their rights under the Commerce Clause, but agree that the imposition of penalties must be reversed.

The parties stipulated to the following facts. Denver audited the airlines and assessed a use tax on the storage, use, distribution, and consumption in Denver of rotable aircraft parts, i.e., parts which can be used more than once after rehabilitation and repair. The audit period for United Airlines was from January 1, 1991 through June 30, 1994. Air Wisconsin's audit period was from July 1, 1991 through December 31, 1993. There is no dispute that both airlines stored, used, consumed, or distributed such parts in Denver during the periods in question.

Air Wisconsin conducted operations at Stapleton International Airport for commercial passenger flights between Denver and Aspen, Colorado. Those flights were the only flights conducted out of Denver by Air Wisconsin. During the audit period, Air Wisconsin purchased aircraft parts from suppliers outside of Denver that were either shipped to Denver or installed on aircraft outside of Denver but subsequently removed in Denver. Air Wisconsin paid Denver use tax based upon the total value of aircraft parts shipped into Denver less the value of parts transported or shipped out of Denver. Air Wisconsin received an assessment from the Denver Manager of Revenue based upon the aforementioned audit for unpaid use taxes for depreciated values of all airplane parts shipped into Denver during the audit period. No other use tax was assessed against Air Wisconsin's aircraft parts by any other state or local jurisdiction.

United Airlines also conducted its air carrier operations from Stapleton International Airport. It received an assessment from the Denver Manager of Revenue based upon a calculation of the use tax owed by United Airlines for depreciated values of all rotable aircraft parts shipped into Denver during the audit period. The calculation included a credit for sales or use taxes paid to California state and local taxing jurisdictions to the extent such taxes were paid for particular parts equal to, or less than, the amount of use tax due to Denver for the same parts.

In separate administrative hearings, the hearing officer, on behalf of the Denver Manager of Revenue, concluded that Denver's assessment of the use tax was constitutional and upheld the imposition of penalties pursuant to Denver Code § 53-114(a). More specifically, the hearing officer concluded that Denver Revised Municipal Code § 53-92(c), which gives credit against its use tax for sales or use taxes previously paid to other municipalities, did not violate the Commerce Clause because it eliminates both the potential for, and the actuality of, greater taxation for interstate than intrastate goods.

The hearing officer determined that, because the ordinance's credit provision prevents Denver from assessing a higher tax against interstate articles when a taxpayer has paid taxes to other municipalities, Denver's use tax does not run afoul of the Commerce Clause. The hearing officer then concluded that, in the alternative, Denver Revised Municipal Code § 53-97(11) nonetheless insulates the use tax from constitutional attack because it exempts from the tax all sales which Denver is otherwise prohibited from taxing under the Constitution of the United States.

In a consolidated appeal pursuant to C.R.C.P. 106(a)(4), the trial court affirmed the decisions of the hearing officer. The trial court, construing all provisions of the use tax together, determined that Denver Code § 53-97(11) exempts from the use tax all sales and purchases which Denver is otherwise prohibited from taxing under the Commerce Clause. Under the trial court's construction, the goods of the airlines passing in interstate commerce would be subject to the same tax as intrastate goods. Thus, so construing the ordinance, the trial court found it constitutional.

This appeal followed.

I. Standing and Mootness

At the outset, we address Denver's contention that because neither airline has suffered a cognizable injury, neither has standing to challenge the constitutionality of the use tax ordinance. More specifically, Denver argues that because Air Wisconsin had no potential tax liability to any other jurisdiction regarding the aircraft parts in question, it suffered no legal injury and, therefore, does not have standing to challenge the ordinance. Similarly, Denver argues that because United Airlines received a credit for all other taxes paid on its parts, including taxes paid to the state of California, it likewise does not have a cognizable legal injury.

Although both Denver and the trial court have addressed standing, we presume, based upon their reliance on City of Mesquite v. Aladdin's Castle, Inc., 455 U.S. 283, 102 S.Ct. 1070, 71 L.Ed.2d 152 (1982), that the challenge is also premised upon the doctrine of mootness. We disagree with both contentions.

Contrary to United's separate contention, an appellee may, without filing a notice of cross-appeal, raise arguments in support of a judgment which would not increase his or her rights under the judgment, whether or not the trial court has ruled on those arguments. City of Delta v. Thompson, 37 Colo.App. 205, 548 P.2d 1292 (1975).

Similarly, the failure to file a cross-appeal does not preclude review of jurisdiction by an appellate court. Best v. La Plata Planning Commission, 701 P.2d 91 (Colo.App.1984). The question of jurisdiction may be raised at any stage of the litigation, including for the first time on appeal. See 5050 S. Broadway Corp. v. Arapahoe County Board of Commissioners, 815 P.2d 966 (Colo.App.1991).

Accordingly, we address Denver's contentions concerning standing and mootness.

A. Standing

Denver contends that, because Air Wisconsin has not suffered an injury in fact, review of the constitutionality of the use tax ordinance is precluded. We are not persuaded.

The conventional inquiry on standing is whether a plaintiff has suffered injury in fact to a legally protected interest as contemplated by statutory or constitutional provisions. In re Application for Water Rights of Turkey Canon Ranch Limited Liability Co., 937 P.2d 739 (Colo.1997).

Therefore, if a party suffers no injury in fact, or suffers injury in fact but not from the violation of a legal right, no relief can be afforded, and the case should be dismissed for lack of standing. Wimberly v. Ettenberg, 194 Colo. 163, 570 P.2d 535 (1977).

A complaining party may satisfy the actual injury requirement by demonstrating that the challenged action has caused, or threatens to cause, economic injury. The injury must be direct and palpable. Hughey v. Jefferson County Board of Commissioners, 921 P.2d 76 (Colo.App.1996).

Here, it is undisputed that Air Wisconsin had not been taxed in other jurisdictions. However, even though Air Wisconsin had not been subject to multiple taxation under Denver's use tax, it nonetheless was, and continues to be, subject to the penalties and interest assessed against it pursuant to Denver Code § 53-114(a). Such injury is both direct and palpable and, therefore, satisfies the first requirement for standing. Further, because the party who bears the financial burden of a tax is the party aggrieved, the second requirement of standing is also met. See Hughey v. Jefferson County Board of Commissioners, supra.

B. Mootness

Denver next contends that United Airlines is precluded from seeking review in this matter because Denver's voluntary decision to credit United Airlines for state and local taxes paid in California has made United Airline's challenge moot. Again, we disagree.

Appellate courts will not generally render opinions on the merits of an appeal when issues presented in the litigation become moot because of subsequent events. A case is moot when a judgment would have no practical effect upon an existing controversy, or would not put an end to any uncertainty. Freedom From Religion Foundation, Inc. v. Romer, 921 P.2d 84 (Colo.App.1996).

However, a defendant's voluntary cessation of a challenged practice does not deprive a court of its power to determine the legality of the practice. This is so because there is no certainty that the defendant will not resume the challenged practice once the action is dismissed, thereby effectively defeating the court's intervention in the dispute. See City of Mesquite v. Aladdin's Castle, Inc., supra.

Here, United Airlines was taxed by both state and local taxing jurisdictions of California. Because the plain language of Denver Code § 53-92(c) allows a credit only for sales or use taxes imposed by other municipalities, United Airlines would have been subjected to multiple taxation, absent a credit for state and county...