Zarda v. State

• Decision Date: 28 February 1992
• Docket Number: No. 66203,66203
• Citation: 250 Kan. 364,826 P.2d 1365
• Parties: Bernard A. ZARDA, Sr., et al., Appellants, v. STATE of Kansas, et al., Appellees.
• Court: Kansas Supreme Court

Page 1365

826 P.2d 1365

250 Kan. 364

Bernard A. ZARDA, Sr., et al., Appellants, v. STATE of Kansas, et al., Appellees.

No. 66203.

Supreme Court of Kansas.

Feb. 28, 1992.

Syllabus by the Court

1. The well-recognized rule in this state is that where a full and adequate administrative remedy is provided in tax matters by statute, such remedy must ordinarily be exhausted before a litigant may resort to the courts. Following State ex rel. Smith v. Miller, 239 Kan. 187, Syl. p 1, 718 P.2d 1298 (1986).

2. Where there are no issues raised which lend themselves to administrative determination and the only issues present either require judicial determination or are subject to judicial de novo review, it follows that plaintiffs should be permitted to seek court relief without first presenting the case to the administrative agency.

3. The Board of Tax Appeals is not vested with authority to determine the constitutionality of a statute or administrative regulation.

4. K.S.A.1991 Supp. 79-2005 and K.S.A.1991 Supp. 74-2426 provide plaintiffs seeking tax relief with a clear and certain remedy for full, adequate, and complete relief.

5. Plaintiffs' prayer in the district court for recovery of monies paid under the staggered registration and taxation system for motor vehicles established by K.A.R. 92-51-21 is an attempt to seek tax relief without first exhausting their administrative remedies available under K.S.A.1991 Supp. 79-2005 and K.S.A.1991 Supp. 74-2426.

Raymond L. Dahlberg, of Niewald, Waldeck & Brown, Overland Park, argued the cause, and Kenton C. Granger and Lisa A. Dunbar, of the same firm, Kansas City, Mo., John C. Frieden and Kevin M. Fowler, of Frieden, Haynes & Forbes, Topeka, and James L. Ungerer, Overland Park, were with him on the briefs, for appellants.

William E. Waters, of Kansas Dept. of Revenue, argued the cause and was on the brief, for appellee Kansas Dept. of Revenue.

LeeAnne Hays Gillaspie, of Johnson County Legal Dept., argued the cause and was on the brief, for appellee Bd. of County Com'rs, Johnson County, Kan.

ALLEGRUCCI, Justice:

The plaintiffs appeal from the order of the district court dismissing their action for mandamus, an accounting, declaratory and injunctive relief, recovery of taxes paid together with interest, and recovery of costs, including attorney fees, under 42 U.S.C. § 1983 (1988). The plaintiffs filed this action as a class action on behalf of taxpayers whose motor vehicle registration month was any month after February. The class was not certified, and plaintiffs' action was dismissed for lack of subject matter jurisdiction due to plaintiffs' failure to exhaust their administrative remedies. The primary defendants are the Kansas Department of Revenue and the Johnson County Board of Commissioners.

The single underlying issue is whether the alphabetical "staggered registration system" for motor vehicle registration and taxation, established by K.A.R. 92-51-21, unconstitutionally discriminated against persons whose registration month was any month after February. The sole issue in this appeal is whether the district court lacked subject matter jurisdiction on the ground that plaintiffs had failed to exhaust administrative remedies.

K.A.R. 92-51-21, which became effective May 1, 1982, established the staggered registration system for motor vehicles. This regulation was adopted as "[a]uthorized by and implementing K.S.A.1981 Supp. 8-134, 8-134a." Under the system, persons whose last names begin with a letter toward the end of the alphabet paid more in motor vehicle taxes than identically situated taxpayers whose names begin with a letter close to the beginning of the alphabet. This inequality resulted from the differential availability of depreciation. A new method of computing depreciation eliminated the discrepancies as of January 1, 1991. K.A.R. 92-55-2a. 9 Kan.Reg. 1513 (1990). An original petition in quo warranto filed by the attorney general was voluntarily dismissed upon adoption of this curative regulation.

In October 1989, a memorandum was prepared in the Kansas Legislative Research Department in response to a request for an example of the "application of the motor vehicle tax for two hypothetical taxpayers in the same county who purchase the same new car at the same time, but have surnames at different extremes of the alphabet." On a 1989 model vehicle valued at $15,000 with taxes calculated on a constant mill levy, Mr. T would pay $236 more in taxes during a 5 1/2-year period of ownership than Mr. A would pay. The same example was given in Attorney General Opinion No. 90-100, which concluded that the system violated constitutionally guaranteed equal protection.

K.S.A.1991 Supp. 79-2005 and K.S.A.1991 Supp. 74-2426 set out the administrative procedure for protesting the payment of taxes and for recovery of protested taxes. It is uncontroverted that plaintiffs did not follow the procedure. It also is uncontroverted that the time has expired in which named plaintiffs could have followed these procedures for protesting motor vehicle taxes collected before the method of computing depreciation was reformed.

The administrative procedure for a taxpayer's protesting the collection of allegedly unlawful taxes has as its first step, at the time of paying the taxes, the filing of a written statement with the county treasurer stating the grounds for protest. K.S.A.1991 Supp. 79-2005(c) provides: "If the grounds of such protest shall be that any tax levy, or any part thereof, is illegal, such statement shall further state the exact portion of such tax which is being protested." The county appraiser must consider the taxpayer's grievance, and the taxpayer may appeal an unsatisfactory result to the State Board of Tax Appeals (BOTA).

K.S.A.1991 Supp. 74-2426(c)(4) provides that any action of BOTA may be reviewed by the district court of the county in which the property is located. Review must be "in accordance with the act for judicial review and civil enforcement of agency actions," K.S.A. 77-601 et seq. K.S.A.1991 Supp. 74-2426(c).

K.S.A. 77-612 provides, in pertinent part, as follows: "A person may file a petition for judicial review under this act only after exhausting all administrative remedies available within the agency whose action is being challenged and within any other agency authorized to exercise administrative review." This court's statement of the rule is less rigid: "The well-recognized rule in this state is that where a full and adequate administrative remedy is provided in tax matters by statute, such remedy must ordinarily be exhausted before a litigant may resort to the courts." (Emphasis added.) State ex rel. Smith v. Miller, 239 Kan. 187, Syl. p 1, 718 P.2d 1298 (1986).

There is no claim by plaintiffs that they exhausted, or even initiated, the administrative remedies. They argue, however, that, since the administrative remedies available to them are not "full and adequate," it was not necessary for them to do so. Plaintiffs contend that the district court has not only original jurisdiction of their claims, but also jurisdiction under 42 U.S.C. § 1983.

In support of their contention, plaintiffs argue that the controlling issue is "purely judicial" and the purpose in requiring exhaustion of administrative remedies is not served by deferring the matter to BOTA. In this regard, this court has stated:

"The doctrine of exhaustion of administrative remedies is directed toward promoting proper relationships between the courts and administrative agencies charged with particular administrative and regulatory duties. It promotes orderly procedure and requires a party to exhaust the administrative sifting process with respect to matters peculiarly within the competence of the agency." Jenkins v. Newman Memorial County Hospital, 212 Kan. 92, 95, 510 P.2d 132 (1973).

Under Kansas law, it would be unwarranted for a court to entertain a tax suit on any of these matters of administrative expertise where administrative remedies had not been pursued. Plaintiffs argue, however, that BOTA does not have authority to determine constitutional issues and, therefore, the issues involved in their action are not within the competence or expertise of BOTA. Plaintiffs contend that most of the cases relied upon by defendants for the proposition that exhaustion of administrative remedies is a condition precedent to filing suit in the district court involve challenges to administrative matters. For example, Tri-County Public Airport Authority v. Board of Morris County Comm'rs, 233 Kan. 960, 666 P.2d 698 (1983), was an action requesting an exemption from the payment of ad valorem property taxes assessed against property owned by the Airport Authority but rented to private citizens for various private uses. The plaintiff's claim that its property should enjoy tax-exempt status fell within the administrative agency's sphere of expertise, and the district court was without jurisdiction.

Another case cited by defendants is State ex rel. Smith, 239 Kan. 187, 718 P.2d 1298. There, an action was brought seeking relief based upon a determination that various statutes were unconstitutional. The action was dismissed for plaintiff's failure to exhaust administrative remedies.

In re Appeal of News Publishing Co., 12 Kan.App.2d 328, 743 P.2d 559 (1987), had as its underlying issue the abatement of a sales tax assessment, but the constitutionality of the imposition on the publisher of the duty to collect the sales tax also was raised. BOTA declined to rule on the constitutionality question because "as a quasi-judicial agency, it had to assume the statutes were constitutional." 12 Kan.App.2d at 334, 743 P.2d 559. The Court of Appeals remarked that "[s]ince administrative boards and agencies may not rule on constitutional questions, the issue of constitutionality must be raised when the case is on appeal before a court of law." 12 Kan.App.2d at 334, 743 P.2d 559.

Defendants...