Omimex Canada, Ltd. v. State , 378 Mont. 490 ( 2015 )

April 14 2015
DA 14-0458
Case Number: DA 14-0458
IN THE SUPREME COURT OF THE STATE OF MONTANA
2015 MT 102OMIMEX CANADA, LTD.,
Plaintiff and Appellant,
v.
STATE OF MONTANA,
DEPARTMENT OF REVENUE,
Defendant and Appellee.
APPEAL FROM: District Court of the Second Judicial District,
In and For the County of Butte/Silver Bow, Cause No. DV-11-308
Honorable Brad Newman, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Jared M. Le Fevre, James P. Sites, Crowley Fleck PLLP, Billings,
Montana
For Appellee:
Courtney Jenkins, David R. Stewart, Special Assistant Attorneys General,
State of Montana, Department of Revenue, Helena, Montana
Submitted on Briefs: February 25, 2015
Decided: April 14, 2015
Filed:
__________________________________________
Clerk
Justice Laurie McKinnon delivered the Opinion of the Court.
¶1 Omimex Canada, Ltd., (Omimex) appeals from an order of the Second Judicial
District, Silver Bow County, granting partial summary judgment in favor of the State of
Montana, Department of Revenue (DOR). We reverse.
¶2 The issue presented for review is whether the District Court erred when it
concluded that a 2007 finding by the First Judicial District Court, Lewis and Clark
County, precludes Omimex from litigating the issue of whether it operates “a single and
continuous property.”
FACTUAL AND PROCEDURAL BACKGROUND
¶3 Omimex is an oil and gas exploration and production company which owns and
operates oil and gas production property in Montana, including flow lines and gathering
lines.1 Omimex presently contests DOR’s central assessment of its property for tax year
2011.
¶4 Pursuant to § 15-23-101(2), MCA, DOR centrally assesses “property owned by a
corporation or other person operating a single and continuous property operated in more
than one county or more than one state . . . .” Properties that are not centrally assessed
are locally assessed on a county-by-county basis. Centrally assessed properties may be
subject to classification as class nine property under § 15-6-141, MCA, and taxed at a
rate of 12 percent of market value. Oil and gas production equipment is otherwise
1
A description of Omimex’s property and operations may be found at Omimex Can.,
Ltd. v. State, 2008 MT 403, 347 Mont. 176, 201 P.3d 3 (Omimex I).
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classified under § 15-6-138, MCA, as class eight property and subject to a tax rate of 1.5
percent to 3 percent of market value.
¶5 For tax year 2004, DOR centrally assessed Omimex’s property and classified it
under class nine. Omimex contested that assessment in the Lewis and Clark County
District Court, claiming it did not operate “a single and continuous property,” and thus its
properties should be locally assessed and subject to the lower tax rate under class eight.
A bench trial was conducted before Judge Jeffrey Sherlock, who issued his Findings of
Fact, Conclusions of Law, and Order on February 2, 2007. Judge Sherlock found that
although Omimex’s properties were not physically connected, they operated as a single
and continuous property because they were centrally managed by Omimex’s head office
in Fort Worth, Texas. Judge Sherlock then addressed Omimex’s contention that its
property should be classified under class eight, concluding that class eight “would apply
only if the property were not centrally assessed. . . . Class eight property would be, in the
view of the Court, all gas production equipment that was not centrally assessed.” Judge
Sherlock concluded both central assessment and classification under class nine were
proper. He then directed counsel for DOR to prepare a judgment incorporating his
findings and conclusions.
¶6 Omimex appealed. On appeal, this Court began by stating, “Regardless of
whether Omimex’s property is centrally or locally assessed, its tax rate class is
determined by the application of the physical attributes of Omimex’s Montana properties
to the terms of the property classification statutes . . . .” Omimex I, ¶ 18. We looked to
the definition of class nine property at § 15-6-141, MCA (2003), which included
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“centrally assessed natural gas companies having a major distribution system in this state
. . . .” Omimex I, ¶ 20. We concluded that because Omimex did not have a major
distribution system in the state, its property was not subject to classification under class
nine, regardless of whether it was centrally assessed. Omimex I, ¶ 26. We therefore
considered it unnecessary to address the District Court’s conclusion that central
assessment was appropriate because Omimex operated a single and continuous property.
Omimex I, ¶ 27. We reversed the judgment and remanded for entry of an amended
judgment classifying the Omimex properties under class eight. Omimex I, ¶ 27. On
remand, Judge Sherlock entered an amended judgment, vacating and superseding the
earlier judgment.
¶7 In 2009, the Legislature amended § 15-6-141, MCA, deleting the phrase
“companies having a major distribution system in this state,” and specifically including
within class nine “common carrier pipeline[s]” and “pipeline carrier[s].” 2009 Mont.
Laws 487. Section 15-23-101, MCA, was also amended to list common carrier pipelines
and pipeline carriers among the types of property subject to central assessment. 2009
Mont. Laws 487. The amendments did not alter the provision of § 15-23-101(2), MCA,
requiring DOR to centrally assess properties operated as a single and continuous
property.
¶8 For tax year 2011, DOR again centrally assessed Omimex’s property and
classified it under class nine. Omimex filed a declaratory action in the Silver Bow
County District Court, claiming it did not operate as a common carrier pipeline or a
pipeline carrier. Omimex further argued it did not operate a single and continuous
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property, and thus did “not even meet the foundational statutory requirements for central
assessment . . . .” DOR moved for partial summary judgment, arguing that Judge
Sherlock had already determined during the previous litigation that Omimex operated a
single and continuous property. DOR claimed the doctrine of issue preclusion barred
Omimex from relitigating the issue.
¶9 In response, Omimex argued that issue preclusion was inapplicable because there
was no final judgment on the merits. The judgment issued by Judge Sherlock was
vacated on remand, and this Court did not reach the central assessment issue on appeal.
Omimex also submitted an affidavit by its vice president, Clark Storms, describing
changes to Omimex’s personal property since tax year 2004. Storms said Omimex had
drilled additional wells, rerouted the flow of gas from one of its fields, acquired
additional oil production property, and upgraded several items of equipment. Omimex
claimed central assessment may no longer be appropriate due to these changes.
¶10 The District Court granted partial summary judgment in favor of DOR,
determining that our decision on appeal “did not reverse the trial court’s ruling that
Omimex was properly subject to central assessment because it operated a single and
continuous property . . . .” The District Court further concluded that Judge Sherlock’s
amended judgment, which vacated the original judgment, “[did] nothing to undermine the
finality of Judge Sherlock’s determination that Omimex operates a single and continuous
property.” Omimex appealed the District Court’s order granting partial summary
judgment.
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STANDARD OF REVIEW
¶11 We review a district court’s ruling on a motion for summary judgment de novo.
Planned Parenthood v. State, 2015 MT 31, ¶ 11, 378 Mont. 151, 342 P.3d 684.
Summary judgment is appropriate where there is no genuine issue as to any material fact
and the movant is entitled to judgment as a matter of law. M. R. Civ. P. 56(c)(3).
DISCUSSION
¶12 1. Whether the District Court erred when it concluded that a 2007 finding by the
First Judicial District Court, Lewis and Clark County, precludes Omimex from
litigating the issue of whether it operates “a single and continuous property.”
¶13 Issue preclusion, also sometimes referred to as collateral estoppel, “‘bars the
reopening of an issue that has been litigated and resolved in a prior suit.’” In re B.N.Y.,
2006 MT 34, ¶ 20, 331 Mont. 145, 130 P.3d 594 (quoting Kullick v. Skyline Homeowners
Assn., 2003 MT 137, ¶ 18, 316 Mont. 146, 69 P.3d 225). The doctrine of issue preclusion
prevents litigants from reopening questions that were necessary to the determination of
the prior action. Baltrusch v. Baltrusch, 2006 MT 51, ¶ 18, 331 Mont. 281, 130 P.3d
1267. Courts apply the doctrine in order to prevent “incessant[] . . . piecemeal, collateral
attacks against judgments.” Baltrusch, ¶ 15. Issue preclusion applies where the
following four elements are satisfied:
1. Was the issue decided in the prior adjudication identical to the issue
raised in the action in question?
2. Was there a final judgment on the merits in the prior adjudication?
3. Was the party against whom preclusion is now asserted a party or in
privity with a party to the prior adjudication?
4. Was the party against whom preclusion is now asserted afforded a full
and fair opportunity to litigate the issue which may be barred?
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McDaniel v. State, 2009 MT 159, ¶ 28, 350 Mont. 422, 208 P.3d 817. There is no
dispute that the parties in the present action are the same parties involved in the 2007
litigation. Omimex contends that the remaining three elements of issue preclusion are not
satisfied.
¶14 Primarily, Omimex argues there was no final judgment on the merits regarding
whether it operates a single and continuous property because Judge Sherlock’s 2007
judgment was reversed and vacated on remand. DOR responds that although the
judgment was vacated, the finding that Omimex operated a single and continuous
property—upon which the judgment was based—was not. Issue preclusion bars a party
from reopening matters necessary to the determination of the previous judgment.
Baltrusch, ¶ 18; Haines Pipeline Constr. v. Montana Power Co., 265 Mont. 282, 288,
876 P.2d 632, 636 (1994); Boyd v. First Interstate Bank, N.A., 253 Mont. 214, 218,
833 P.2d 149, 151 (1992). In Omimex I, ¶ 27, we stated that it was not necessary to
address the question of central assessment. The amended judgment, which vacated and
superseded the previous judgment, was entered in accordance with Omimex I. Thus,
although the finding that Omimex operated a single and continuous property may have
been essential to the original judgment, it was not essential to our Opinion or to the
amended judgment, and should not be afforded preclusive effect. Baltrusch, ¶ 18; Haines
Pipeline Constr., 265 Mont. at 288, 876 P.2d at 636; Boyd, 253 Mont. at 218, 833 P.2d at
151.
¶15 Further, when a judgment is reversed, the “‘judgment cannot serve as the basis for
a disposition on the grounds of res judicata or collateral estoppel [issue preclusion].’”
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Cal. Dept. of Soc. Servs. v. Thompson, 321 F.3d 835, 847 (9th Cir. 2003) (quoting
Ornellas v. Oakley, 618 F.2d 1351, 1356 (9th Cir. 1980)). The judgment in the 2007
litigation was three sentences long and stated that it was based upon Judge Sherlock’s
previously-entered Findings of Fact, Conclusions of Law, and Order. The judgment itself
added no substantive legal analysis. A determination that the judgment was vacated, but
the extensive reasoning, findings, and conclusions upon which it wholly relied were not,
would elevate form over substance. Moreover, to reverse and vacate a judgment, yet
leave intact the findings and conclusions incorporated in that judgment, would lead to
contradictory and unclear results.
¶16 We next address whether Omimex was afforded a full and fair opportunity to
litigate the issue in the previous action. Omimex argues it was not afforded a full and fair
opportunity to litigate the question of whether it operates a single and continuous
property because the issue was not conclusively decided on appeal. DOR cites a number
of cases for the proposition that appellate review is not a required component of a full and
fair opportunity to litigate. The cases cited, however, are those in which the party against
whom preclusion was asserted never appealed from the first litigation. McDaniel, ¶ 40;
Johnson v. Hamilton, 2003 MT 199, ¶ 15, 317 Mont. 24, 75 P.3d 778; Burgess v. State,
237 Mont. 364, 365, 772 P.2d 1272, 1273 (1989). DOR also argues that our issue
preclusion inquiry has never focused on whether the issue was addressed on appeal. In
the cases cited by DOR as supporting examples, either no appeal was taken from the prior
decision, Burgess, 237 Mont. at 365, 772 P.2d at 1273; Nasi v. State Dept. of Highways,
231 Mont. 395, 396, 753 P.2d 327, 328 (1988), or the prior decision was squarely
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affirmed on appeal, Lindey’s v. Goodover, 264 Mont. 449, 453, 872 P.2d 764, 766
(1994).
¶17 Our issue preclusion analysis is instead focused on whether the parties had a full
and fair opportunity to litigate the issue. E.g., McDaniel, ¶ 45; Burgess, 237 Mont. at
366, 772 P.2d at 1273. Although we have adopted a relaxed requirement of finality for
purposes of issue preclusion, with the result that a judgment may have preclusive effect
even while an appeal is pending, Baltrusch, ¶ 21, a full and fair opportunity to litigate
nevertheless includes the opportunity to pursue an appeal, Bell v. Dillard Dept. Stores,
85 F.3d 1451, 1456-57 (10th Cir. 1996); Gray v. Lacke, 885 F.2d 399, 406 (7th Cir.
1989); Monat v. State Farm Ins. Co., 677 N.W.2d 843, 847 (Mich. 2004).2 If a party has
the opportunity, but chooses not to actually seek an appeal, issue preclusion may be
applied. McDaniel, ¶ 40; Johnson, ¶ 15; Burgess, 237 Mont. at 365, 772 P.2d at 1273;
Nasi, 231 Mont. at 396, 753 P.2d at 328. Where appellate review is unavailable,
however, issue preclusion should not be applied. See generally Restatement (Second) of
Judgments § 28 cmt. a (1982). For that reason, “[i]f the appellate court upholds one of
[the district court’s] determinations as sufficient and refuses to consider whether or not
the other is sufficient and accordingly affirms the judgment, the judgment is conclusive
as to the first determination,” but not the other. Restatement (Second) of Judgments § 27
cmt. o; see also People ex rel. Brown v. Tri-Union Seafoods, LLC, 171 Cal. App. 4th
1549, 1574 (Cal. Ct. App. 2009) (“Where . . . a court of first instance renders its
2
In Baltrusch, ¶ 20, we adopted the view that a judgment not regarded as final because
of a pending appeal or motion may, nevertheless, have preclusive effect. In that circumstance,
the judgment would cease to be final if it was in fact later set aside. Baltrusch, ¶ 21.
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judgment on alternative grounds and the reviewing court affirms on only one of those
grounds, the grounds not considered are not conclusively established.”).
¶18 Omimex did not forego the opportunity to seek review of the finding that it
operated a single and continuous property. To the contrary, Omimex pursued its right to
an appeal and specifically asked this Court to address the single and continuous property
issue. Omimex I, ¶ 3. We considered it unnecessary to do so in the context of that
appeal. Omimex I, ¶ 27. As a result, despite its diligence, Omimex was unable to obtain
review of Judge Sherlock’s findings. Because we addressed only one of the issues raised
in Omimex I, the other issues, including whether Omimex operated a single and
continuous property, were not conclusively determined. See Restatement (Second) of
Judgments § 27 cmt. o. Omimex is not precluded from now obtaining a determination of
that issue.
¶19 Finally, Omimex argues that the property assessed in tax year 2011 is not identical
to the property assessed in tax year 2004, and thus, genuine issues of material fact exist as
to whether Omimex continues to operate a single and continuous property. Though the
parties and the District Court have framed the issue as one of the existence of genuine
issues of material fact on the single and continuous property issue, we find that this
argument coincides with the first element of issue preclusion: whether the issue raised in
the current litigation is “‘identical in all respects’” to the issue decided in the previous
litigation. Planned Parenthood, ¶ 23 (quoting Comm’r v. Sunnen, 333 U.S. 591,
599-600, 68 S. Ct. 715, 720 (1948)). We recently addressed the identity of issues in
Planned Parenthood, where we considered whether a previously-decided constitutional
10
challenge to the 1995 version of a law precluded the State from defending a similar
constitutional challenge to the 2011 and 2013 versions of that law. Planned Parenthood,
¶ 2. We stated that although the same constitutional questions were raised in both the
first and second suits, the laws being challenged were not substantively identical, and
thus issue preclusion was inapplicable. Planned Parenthood, ¶¶ 15-17.
¶20 Here, although the same question—whether Omimex operates a single and
continuous property—has been raised in both the first and second suits, the property at
issue has changed, just as the laws at issue had changed in Planned Parenthood.
Omimex has drilled additional wells, diverted one of its gas lines, and acquired additional
oil production properties. The 2007 litigation did not determine, and indeed could not
have determined, whether these newly acquired properties are operated as a single and
continuous property. The issue raised in the present litigation is therefore similar, but not
identical in all respects to the issue raised in the 2007 litigation. Issue preclusion requires
not just similarity, but identity. Planned Parenthood, ¶ 23.
¶21 Further, we have previously observed that “each tax year is singular and
self-contained.” Eagle Commc’ns v. Treasurer of Flathead Cnty., 211 Mont. 195, 203,
685 P.2d 912, 916 (1984). DOR conducts a separate assessment and imposes a separate
tax for each year. See, e.g., § 15-1-212, MCA (referring to “centrally assessed property
or industrial property that is assessed annually by the department”) and § 15-23-101,
MCA (“The department shall centrally assess each year . . . .”). In the context of a
requirement for annual assessment and valuation, and where Omimex has produced
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evidence of changes in the characteristics of its property, application of issue preclusion
is not appropriate.
¶22 In treating the issue as one of whether genuine questions of material fact existed as
to the single and continuous property issue, rather than as to whether the issue litigated in
2007 was identical to the issue in the present litigation, the District Court concluded that
Storm’s affidavit describing changes to Omimex’s property did not speak to whether
Omimex operated a single and continuous property. This characterization is accurate, but
fails to account for the fact that the affidavit was submitted in response to a motion for
partial summary judgment based on issue preclusion. Thus, the affidavit was not
submitted to prove that Omimex did not operate a single and continuous property; it was
submitted to prove that the issue of whether Omimex operated a single and continuous
property in tax year 2004 was not identical to the issue of whether Omimex operated a
single and continuous property in tax year 2011. Because the current litigation addresses
a different tax year, and because Omimex has produced evidence that the characteristics
of its property have changed, Omimex has demonstrated the existence of genuine
questions of material fact regarding whether the issue in the current litigation is identical
to the issue in the 2007 litigation, precluding summary judgment under
M. R. Civ. P. 56(c)(3).
¶23 For the foregoing reasons, the Order of the District Court granting partial
summary judgment in favor of DOR is reversed.
/S/ LAURIE McKINNON
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We Concur:
/S/ MIKE McGRATH
/S/ MICHAEL E WHEAT
/S/ JAMES JEREMIAH SHEA
/S/ JIM RICE
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