No. 84-438

I N THE SUPREME COURT OF THE STATE O F MONTANA

1985

OEA RESEARCH, I N C . , a M o n t a n a C o r p . ; and ANDREW J. SCHEET and V I R G I N I A M. SCHEET,

P l a i n t i f f s and A p p e l l a n t s ,

MARTHA B. McGEE, T r e a s u r e r of L e w i s & C l a r k C o u n t y ; L I L I A "LEE" WILLIAMS, A s s e s s o r of L e w i s & C l a r k C o u n t y ; and DEPARTMENT O F REVENUE OF THE STATE OF MONTANA,

D e f e n d a n t s and R e s p o n d e n t s .

APPEAL FROM: D i s t r i c t C o u r t of t h e F i r s t J u d i c i a l D i s t r i c t , I n and f o r t h e C o u n t y of L e w i s & C l a r k , T h e H o n o r a b l e G o r d o n B e n n e t t , Judge p r e s i d i n g .

COUNSEL O F RECORD:

For A p p e l l a n t s :

L e a p h a r t Law F i r m , Helena, Montana

For Respondents:

Mike M c G r a t h , C o u n t y A t t o r n e y , H e l e n a , M o n t a n a L a r r y G. S c h u s t e r , D e p t . of R e v e n u e , H e l e n a , Montana

S u b m i t t e d on B r i e f s : Jan. 24, 1985

Decided: A u g u s t 15, 1 9 8 5

Filed: AUG151985

Clerk Mr. Justice Fred J. Weber delivered the opinion of the Court. OEA Research, Inc., Andrew J. Scheet and Virginia M. Scheet appeal from an order of the District Court of Lewis and Clark County quashing a temporary writ of prohibition and dismissing the request for a permanent writ of prohibition. We affirm. Appellants raise two issues: 1. In the event that annual assessments are not dis-

patched pursuant to 5 15-8-201, MCA, may the Department of Revenue subsequently assess such escaped property pursuant to 5 15-8-601, MCA? 2. Have appellants been denied due process and equal protection of the laws by an assessment of escaped property? OEA Research, Inc. is a Helena-based consulting firm. Andrew J. Scheet and Virginia M. Scheet (Taxpayers) operate an excavating business in Lewis and Clark County, Montana. The Department of Revenue (DOR) and the County Assessor failed to assess the personal property of the Taxpayers in the normal manner for each of the years 1975 through 1983. On December 29, 1983, OEA Research, Inc. (OEA) received an assessment from DOR for $6,520.05 covering the years 1975 through 1983. OEA appealed that assessment to the County Tax Appeal Board. On March 9, 1984, OEA received a "Notice of Execution" from the County Treasurer's Office covering the December 29, 1983, assessment of $6,520.05. On March 29, 1984, the County Assessor sent a "revised assessment" to OEA in the same amount, but referred to § 15-8-601, MCA. On March 20, 1984, the Taxpayers received an assessment from the County Assessor in the amount of $23,564 for the

years 1975 through 1983. This assessment also reflected that DOR was relying on § 15-8-601, MCA, for authority to make the assessment. Taxpayers filed a petition for a declaratory judgment, writ of prohibition or other appropriate relief in the District Court. They alleged that the DOR, the assessor and the treasurer were proceeding in excess of their jurisdiction because the assessments in question were not timely under S 15-8-201, MCA. That section requires that assessments be completed on an annual basis before the second Monday in July. The District Court issued a temporary writ of prohibition. The District Court later determined that the DOR had acted properly, quashed the temporary writ of prohibition and dismissed the Taxpayers' petition for a permanent writ of prohibition.

In the event that annual assessments are not dispatched pursuant to S 15-8-201, MCA, may the Department of E.evenue subsequently assess such escaped property pursuant to § 15-8-601, MCA? Three statutes are pertinent. Section 15-6-101(1), MCA, provides : "All property in this state is subject to taxation, except as provided otherwise." Section 15-8-201 (I), MCA, provides in pertinent part as follows: "The department of revenue or its agent must, between January 1 and the second Monday of July in each year, ascertain the names of all taxable inhabitants and assess all properties subject to taxation in each county . . ." Section 15-8-601(1), MCA, provides in pertinent part: "Whenever the department of revenue discovers that any taxable property of any person has in any year escaped assessment, been erroneously assessed, or been omitted from taxation, the department may assess the same provided the property is under the ownership or control of the same person who owned or controlled it at the time it escaped assessment, was erroneously assessed, or was omitted from taxation. All such revised assessments must be made within 10 years after the end of the calendar y e a r i n which t h e o r i g i n a l a s s e s s m e n t was o r s h o u l d h a v e been made."

T a x p a y e r s a r g u e t h a t S 15-8-201, MCA, cannot be recon-

ciled with § 15-8-601, MCA. They a r g u e t h a t t h e r e q u i r e m e n t

of y e a r l y a s s e s s m e n t s by t h e second Monday o f J u l y i n e a c h

year negates any possibility of assessing a tax in later

years, even though S 15-8-601 provides that when the DOR

" d i s c o v e r s " t a x a b l e p r o p e r t y which h a s "escaped assessment"

o r "been o m i t t e d from t a x a t i o n , " t h e DOR may a s s e s s i t . In

view o f t h e s t a t u t o r y r e q u i r e m e n t t h a t t h e DOR must a s s e s s

p r o p e r t y by t h e second Monday o f J u l y and o u r i n t e r p r e t a t i o n

o f t h a t r e q u i r e m e n t i n B u t t e C o u n t r y C l u b v . Dept. o f Revenue

(1980), 186 Mont. 424, 608 P.2d 111, this apparent

c o n t r a d i c t i o n i n s t a t u t e s must b e c o n s i d e r e d .

A review of o l d e r cases w i l l a s s i s t i n p l a c i n g t h e i s s u e

i n perspective. I n H i l l v . Lewis and C l a r k County ( 1 9 1 8 ) , 54 Mont. 479, 1 7 1 P. 929, t h i s C o u r t c o n s i d e r e d § 2542, R e v i s e d

Codes ( 1 9 0 7 ) , which i n p e r t i n e n t p a r t p r o v i d e d :

"Any p r o p e r t y d i s c o v e r e d by t h e a s s e s s o r t o have e s c a p e d a s s e s s m e n t may b e a s - s e s s ~ da t a n y t i m e , i f s u c h p r o p e r t y i s i n t h e ownership o r under t h e c o n t r o l o f t h e same p e r s o n who owned o r c o n t r o l l e d it a t t h e t i m e it s h o u l d h a v e b e e n assessed."

This s e c t i o n i l l u s t r a t e s t h a t i n 1918, a s i n 1 9 8 4 , t h e law

provided f a r a s s e s s i n g p r o p e r t y which i s d i s c o v e r e d t o h a v e

escaped assessment. In H i l l , t h e c o n t e n t i o n was made t h a t

the assessment was invalid because the property has been

assessed long after the assessment deadline. This Court

r e f u s e d t o a c c e p t t h a t t h e o r y and u p h e l d t h e a s s e s s m e n t and

taxation of the property.

In a similar way in B u t t e & S u p e r i o r Mining Co. v.

McIntyre (1924) , 71 Mont. 254, 229 P. 730, t h i s Court held

t h a t t h e Board o f E q u a l i z a t i o n c o u l d a s s e s s and t a x p r o p e r t y

i n 1923 which had been o m i t t e d from t a x a t i o n i n 1920. This Court emphasized the plenary power of taxing authorities to assess property which has escaped assessment. It stated:

"In contemplation of our law it is the duty of every citizen to return his property for taxation and to pay the taxes levied upon it. It was the obliga- tion of the plaintiff to return this property for assessment in 1920, and to pay taxes thereon. That was settled in the Bourquin Case. These taxes are just 1920. present and subsistinq. The duty - - to = as much due now as they were in the year The legal obligation to is- - - continuinq, present obligation just is a as imperative to-day - - - - - - as it was in 1920." Butte & Superior Mining Co., 71 Mont. at 263, r29 P. at 733 (emphasis added). At the time these older cases were decided, the prede- cessor of 5 15-8-201, MCA, required the assessment of taxable property by the second Monday in July of each tax year. See 5 2510, Revised Codes (1907) & 2002, R.C.M. (1921). Nevertheless, this Court recognized that if property had been omitted from or escaped assessment, the taxing authority could correct the omission in order to see that all property liable to assessment and taxation is taxed so that burdens of government may fall in like proportion upon all. See Simpson v. Silver Bow County (1930), 87 Mont. 83, 93, 285 P. 195, 199. In Evans Products Co. v. Missoula County (Mont. 1982), 654 P.2d 523, 39 St.Rep. 2149, this Court applied $ S 15-8-601(1), MCA, to an erroneous assessment. In that case, the full value of real property was incorrectly shown for the 1978 tax assessment as $396,050. The correct figure was $990,125. On December 27, 1979, the County Assessor's Office informed the taxpayer of the error in the 1978 and 1979 tax and enclosed a new tax assessment notice for 1978 showing a tax balance of $11,507.89. The taxpayer claimed that the DOR was precluded from proceeding under § 15-8-601, MCA, because it had initially followed improper procedures. This Court concluded that the clerical error made in the tax assessment came w i t h i n t h e p l a i n meaning o f "erroneous as-

sessment" a s used i n t h e s t a t u t e . The C o u r t t h e n c o n c l u d e d

that because inadequate notice was given to the taxpayer

u n d e r $ 15-8-601, 3 MCA, t h e t a x e s had n o t b e e n p r o p e r l y a s -

s e s s e d and levied. Evans P r o d u c t s i s t h e most r e c e n t c a s e

involving an i n t e r p r e t a t i o n of S 15-8-601(1), MCA. While n o t

f a c t u a l l y on p o i n t , it d o e s d e s c r i b e t h e s t a t u t o r y r i g h t o f

t h e DOR t o c o r r e c t e r r o n e o u s a s s e s s m e n t s f o r a p e r i o d o f up

t o 10 y e a r s .

B u t t e C o u n t r y C l u b v. Dept. o f Revenue (19801, 186 Mont. 424, 608 P.2d 111, is the principal case upon which the

Taxpayers rely. It i s important t o consider t h e f a c t s i n

t h a t case. There t h e taxpayers w e r e r e g u l a r l y a s s e s s e d f o r

r e a l p r o p e r t y t a x e s and improvement t a x e s f o r t h e y e a r 1978.

O August 31, 1978, one t a x p a y e r r e c e i v e d a n o t i c e o f c h a n g e n

i n p r o p e r t y v a l u a t i o n from t h e DOR. The a s s e s s e d v a l u e o f

the land and improvements was increased from $239,570 to

$1,490,272. In l a t e August, the other taxpayers received

from t h e DOR a n o t i c e o f change i n p r o p e r t y v a l u e s o f land

and improvements from $43,179 t o $134,600. I n September, t h e

taxpayers filed notices of appeal t o the l o c a l Tax Appeal

Board. When t h e l o c a l Board was n o t a b l e t o h e a r a l l o f t h e

c a s e s by O c t o b e r 1, 1978, t h e a p p e a l s w e r e s e n t t o t h e S t a t e

Tax Appeal Board f o r h e a r i n g s .

The T a x p a y e r s i n t h e p r e s e n t c a s e r e l y upon t h e f o l l o w -

i n g l a n g u a g e i n B u t t e C o u n t r y Club:

". . . The words o f s e c t i o n 15-8-201, MCA, a r e p l a i n , unambiguous and c e r t a i n . T h i s s t a t u t e r e q u i r e s t h e DOR t o a s s e s s a l l p r o p e r t y s u b j e c t t o t a x a t i o n between J a n u a r y 1 and t h e second Monday o f J u l y . The s t a t u t e c o n t a i n s t h e word ' m u s t ' , and t h i s clearly indicates that the statutory commands a r e m a n d a t o r y , and n o t d i s c r e - tionary. The DOR must a s s e s s p r o p e r t y by t h e s e c o n d Monday i n J u l y , and t h a t was n o t complied w i t h i n t h e i n s t a n t c a s e . ' ' 186 Mont. a t 429, 608 P . 2 d a t 1 1 4 . Taxpayers here argue t h a t because no a n n u a l a s s e s s m e n t was

made a g a i n s t t h e m , it i s t o o l a t e f o r t h e DOR t o a t t e m p t t o

proceed under S 15-8-601, MCA. We reject that

interpretation.

Butte Country Club involved a change in 1978 t a x as-

s e s s m e n t s t o s e v e r a l t a x p a y e r s i n which i n i t i a l a s s e s s m e n t s

were made, revised tax assessments were sent out in late

August, and no l o c a l Tax Appeal Board h e a r i n g was a l l o w e d .

It was based upon such late assessments that this Court

concluded:

"The a s s e s s m e n t s i n t h e i n s t a n t c a s e w e r e made a f t e r t h e s e c o n d Monday i n J u l y , and are therefore invalid. A valid assess- ment i s i n d i s p e n s a b l e t o t h e l e v y o f a tax." B u t t e c o u n t r y C l u b , 186 ~ o n t . a t 430, 608 P.2d a t 1 1 5 .

T h a t i s a c o r r e c t c o n c l u s i o n b a s e d upon t h e f a c t s i n v o l v e d i n

B u t t e Country Club, where a n a t t e m p t was made t o r a i s e t h e

assessment on various property after the second Monday of

July, i n derogation of S 15-8-201, MCA. However, t h a t does

n o t l e a d t o a c o n c l u s i o n t h a t a l l a s s e s s m e n t s made a f t e r t h e

s e c o n d Monday o f J u l y a r e i n v a l i d .

Section 15-8-601, MCA, was not involved in the Butte

Country Club c a s e . Under t h a t s e c t i o n , a s s e s s m e n t s p r o p e r l y

may be made after the second Monday of July under the

circumstances described i n t h a t section.

We conclude that under the facts of this case,

S 15-8-601, MCA, authorized t h e DOR t o a s s e s s t h e p r o p e r t y

which had escaped assessment or had been omitted from

taxation for a number of years. We therefore affirm the

q u a s h i n g of the w r i t of prohibition by t h e D i s t r i c t C o u r t .

I1

Have appellants been denied due process and equal

p r o t e c t i o n o f t h e l a w s by a n a s s e s s m e n t o f e s c a p e d p r o p e r t y ? Here, no due process right was denied the Taxpayers. Notice was given to the Taxpayers, conferences were held and ultimately an appeal was taken to the Lewis and Clark County Tax Appeal Board as provided in § 15-8-601, MCA. There is no showing of a denial of the right to a hearing, as was the case in Butte Country Club. We conclude that the Taxpayers have not been denied due process or equal protection of the laws. We affirm the District Court's order quashing the writ of prohibition and dismissing the petition for a permanent writ of prohibition.

We concur: /

Justices Mr. Justice John C. Sheehy, dissenting:

I dissent. The taxpayers contend that a valid and timely assessment each year as required by 5 15-8-201, MCA, is indispensable to the levy of a tax. They rely essentially on our decision of Butte Country Club v. Dept. of Revenue (1980), 186 Mont. 424, 608 P.2d 111. In that case, the Department of Revenue through its agent had delivered to Butte Country Club a 1978 assessment in August which purported to increase the assessment value of the Country Club's property. We said in that case that the word "must" in 5 1.5-8-201 was mandatory and that the late issuance of the assessment by the Department was a departure from legal requirements which resulted in invalidity. The District Court here, however, discounted the precedential value of the Butte Country Club case because in that case the Department of Revenue had made no contention that the property had escaped assessment or that § 15-8-601, was in any way applicab1.e. The District Court further relied as does the majority on three earlier cases from this Court in reaching its decision, Simpson v. Silver Bow County (1930), 87 Mont. 83, 285 P. 195; Butte & Superior Mining Co. v. McIntyre (1924), 71 Mont. 254, 229 P. 730; and Hill v. Lewis and Clark County (1918), 54 Mont. 479, 171 P. 929. In the Hill case, it appears that the executors of the estate of Samuel T. Hauser failed to list certain property belonging to the estate although the executors had a clear legal duty to do so. Upon discovery of the concealment, the county assessor assessed the property, long after the statutes then pertaining permitted him to do so. On appeal to this Court, we condemned tax avoidance in that manner, the purposeful concealment of taxable property until after the assessment roll went to the county treasurer. The cases at bar do not involve purposeful concealment from taxation. In Butte & Superior Mining Co. v. PlcIntyre, supra, the property in question escaped taxation due to active concealment by the taxpayer. In that case, the taxpayer filed a return deducting $2,719,000 of royalties to other companies as a "cost of owners purchase." As a consequence of the deduction, the company's books showed a loss of $1,500,000. The county attorney challenged the deduction quoted and was successful in getting the deduction declared unlawful. Again the case involved concealment. The Simpson case is not strong as authority for the problem involved in the case at bar. In Simpson, the Board of County Commissioners of Silver Bow County had hired Simpson, as a "tax ferret" to search out and furnish the Commissioners, sitting as the County Board of Equalization, information which would enable the Board to assess and tax net proceeds which had escaped taxation in 1920. Simpson had a 20 percent contract which entitled him to $9,069.27. The County refused to pay, and he received a judgment for that amount in the District Court. On appeal to this Court, the case principally turned on whether the County Board of Commissioners, sitting as a County Board of Equalization, had the authority, in the light of statutes granting like authority to the State Board of Equalization, to hire a tax ferret. The incidental comments of the Court with respect to the duty of assessments in Simpson are largely dicta, and have no precedential force in this case. We should come to grips in this case with the effect of the decision of the District Court: although the Department of Revenue has a mandatory duty to assess all personal property in each county before the second Monday of July in each year, under S 15-8-201, the d-ecision of the District Court allows the Department to neglect this duty, and up to ten years later, under § 15-8-601, still assess and collect the neglected taxes. The conflict in the statutes that arises in this case comes about because the Department did not do its duty under the first statute, 5 15-8-201. It did not complete its annual assessment of the property of the relators before the second Monday of January of each year. Had the Department performed its duty of annual assessments, there would arise no conflict between 5 15-8-201 and S 15-8-601., because then escaped property or omitted property could be assessed by the Department of Revenue and taxed under S 15-8-601, during the succeeding 10 years. The legislature must have comprehended, in adopting § 15-8-201 and S 15-8-601, that the Department would act in conformance with its mandated duties. It must not have comprehended the conflict that arises when the Department does not follow its mandated duty under S 15-8-201, and later attempts to make amends und.er § 15-8-601. The duty of courts in interpreting statutes is to harmonize conflicting statutes, and to make them produce the effects intended by the legislature. The statutes here will harmonize when the Department follows the mandate of S

15-8-201. The conflict in this case will persist through this and other cases if we condone the Department's nonfeasance of duties under S 15-8-201, by permitting it to recoup under S 15-8-601. The obvious design of S 15-8-601, is to allow the taxing authorities to assess and collect taxes on properties that escape or are omitted through no fault of the Department. We would preserve that design by holding that if the Department has followed its mandated duties under 5 15-8-201, it can thereafter proceed to assess and collect taxes which have escaped or been omitted for taxation under S 15-8-601. If the Department has failed its responsibilities under 5 15-8-201, and because of such failure the property escapes or is omitted from taxation, the Department shou1.d bear the responsibility for the loss of tax revenues resulting. This holding would do no more than require the Department to act a s the legislature directed. . This decision relates to the assessment and taxation of personal property only and would not be considered as authority with respect to the assessment of real property or interests therein. The provisions of 5 15-8-308, MCA, provide that no assessment or act relating to assessment or collection of taxes is illegal on account of informality or because the same is not completed within the time required by law. We specifically held in Butte Country Club, above cited, that 5 15-8-201, prevails over the provisions of S 15-8-308. I would reverse and remand with instructions to reinstate the petitions of the relators, and to issue a permanent writ of prohibition against the assessments charged here against the taxpayers.

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