W. R. Grace & Co. v. Department of Revenue

No. 13489
IN THE SUPREME COURT OF THE STATE OF MONTANA
1977
W.R. GRACE & CO., a Conn-
ecticut Corporation,
Plaintiff and Respondent,
THE DEPARTMENT OF REVENUE OF THE
STATE OF MONTANA,
Defendant and Appellant.
Appeal from: District Court of the First Judicial District,
Honorable Peter G. Meloy, Judge presiding.
Counsel of Record:
For Appellant:
William D. Dexter argued, Ol.ympia, Washington
For Respondent :
Hughes, Bennett and Cain, Helena, Montana
George T. Bennett argued, Helena, Montana
Submitted: March 23, 1977
Decided:jj ,
l
k # 'f)77
Filed: J b k'
U ;ii]i.
Mr. Justice Frank I. Haswell delivered the Opinion of the Court.
Respondent W. R. Grace and Co. (Grace) brought this
action in the district court, Lewis and Clark County, for a
declaratory judgment challenging the Department of Revenue's
(DOR) asserted right to compel Grace to answer certain inter-
rogatories. The interrogatories were propounded to Grace sub-
sequent to a deficiency assessment of corporation license taxes
by DOR, but prior to protest hearing concerning the amount of the
assessment. The district court granted Grace's motion for sum-
mary judgment in the declaratory judgment action and DOR appeals
to this Court.
Grace is a Connecticut corporation which was at all times
relevant, qualified to do, and doing business in Montana. For
the calendar years 1967 through and including 1971, which are the
taxable years in question, Grace filed Montana corporation license
tax returns with DOR's predecessor, the State Board of Equaliza-
tion. Thereafter, the auditors of the Multistate Tax Commis-
sion, of which Montana is a member, conducted a field audit of
Grace's records. There is no contention that the auditors were
denied access to any relevant documents or personnel during the
course of the audit. On the basis of this field audit, DOR
assessed additional corporation license taxes. The amount of
the deficiency assessment is the underlying cause of the instant
controversy.
DOR formally notified Grace by letter dated October 16,
1973, that it had made deficiency assessments for the taxable
years in question in the total amount of $123,706.38, including
interest. Pursuant to section 84-1508.1, R.C.M. 1947, Grace
timely filed a protest of DORIS deficiency assessments. This
notice of protest, dated November 7, 1973, requested an oral
hearing and opportunity to present evidence in support of its
protest. On April 24, 1974 and again on October 23 and 24,
1974, counsel for Grace met with counsel for and representatives
of DOR to discuss a possible solution to the dispute over the
amount of the deficiency assessments. At the latter meeting a
protest hearing was scheduled to begin on December 4, 1974.
On November 1, 1974, DOR sent to Grace a set of inter-
rogatories consisting of thirty-nine questions. On November 20,
Grace answered twenty-nine of these interrogatories and objected
to the remaining ten questions on grounds of irrelevancy or be-
cause compilation of the requested information by Grace would be
unreasonably burdensome. In addition, on or about November 1,
DOR requested that Grace submit to a re-audit of its books and
records at its corporate offices in New York City. Grace acquiesced
to the re-audit and DOR continued the hearing originally scheduled
for December 4, to April 9, 1975. Thereafter, on or about Feb-
ruary 10, DOR cancelled the April 9 hearing and informed Grace
that it had retained additional counsel. On February 18 DOR
served a second set of interrogatories upon Grace. Grace, deem-
ing the second set of interrogatories to be untimely, irrelevant,
and unreasonable, filed this action for a declaratory judgment
on April 30, 1975. On March 2, 1976, Grace filed a motion for
summary judgment. Following extensive briefing and oral argument,
the district court granted Grace's motion.
Two issues are presented for review in this appeal:
1. Whether DOR may discover additional information
from a taxpayer after entering deficiency assessment, but prior
to the protest hearing provided for by section 84-1508.1, R.C.M.
1947.
2. Whether the interrogatories submitted by DOR to
Grace are material and relevant in the instant case.
The portion of section 84-1508.1 which is controlling
in the instant case states:
"(a) Deficiency assessments. If, the state
department of revenue determines that the amount
of tax due is greater than the amount disclosed
by the return, it shall mail to the taxpayer a
notice of the additional tax proposed to be
assessed. Within thirty (30) days after the mail-
ing of the notice, the taxpayer may file with the
state department of revenue a written protest
against the proposed additional tax, setting forth
the grounds upon which the protest is based, and
may request in its protest an oral hearing or an
opportunity to present additional evidence relat-
ing to its tax liability. If no protest is filed,
the amount of the additional tax proposed to be
assessed becomes final upon the expiration of the
thirty (30) day period. If such protest is filed,
the state department of revenue shall reconsider
the proposed assessment, and if the taxpayer has
so requested, shall grant the taxpayer an oral
hearing. After consideration of the protest and
the evidence presented in the event of an oral
hearing, the state department of revenue's action
upon the protest is final when it mails notice of
its action to the taxpayer."
The crux of this case is the interpretation of that portion
of section 84-1508.1 which provides for a protest hearing before
DOR. DOR argues that the statute contemplates a full blown evi-
dentiary hearing at which both parties are allowed to present
evidence supporting their respective positions. Grace on the
other hand urges that the statute contemplates not an evidentiary
hearing, but merely an opportunity for the taxpayer to request
a review of the administrative procedures used to calculate the
assessment and to present evidence in support of his tax cal-
culations. We agree with the latter interpretation.
We recently examined the law dealing with statutory in-
terpretation in Department of Revenue v. American Smelting and
Refining Co., Mont . - 2d
P. , 34 St.Rep. 597, where
we stated:
"The function of the Supreme Court when constru-
ing a statute is simply to ascertain and declare
what is in substance stated therein, and not to
insert what has been omitted or to omit what has
been inserted. Dunphy v. Anaconda Co., 151 Mont.
76, 438 P.2d 660; In re Transportation of School
Children, 117 Mont. 618, 161 P.2d 901; Section
93-401-15, R.C.M. 1947. The fundamental rule of
statutory construction is that the intent of the
legislature controls. Matter of Senate Bill No.
23, Chapter 491, Montana Session Laws of 1973,
168 Mont. 102, 540 P.2d 975, 32 St.Rep. 954; Hammill
v. Young, 168 Mont. 81, 540 P.2d 971, 32 St-Rep.
935; Dunphy v. Anaconda Co., supra; Section 93-401-
16, R.C.M. 1947. Where the intent of the legis-
lature can be determined from the plain meaning of
the words used, the courts may not go further and
apply any other means of interpretation. State ex
rel. Huffman v. District Court, 154 Mont. 201,
461 P.2d 847; Dunphy v. Anaconda Co., supra."
Here, the plain meaning of the words used by the legis-
lature unmistakably discloses its intent. Section 84-1508.1
does not contemplate "a true adversary hearing" and accordingly,
there is no need for DOR to develop a "full and complete record"
at such hearing. Section 84-1508.1 provides the taxpayer with
a speedy remedy to be used to challenge possible administrative
error in the calculation of the proposed deficiency assessment.
By its terms this section grants DOR only the power to "reconsider
the proposed assessment." This necessarily means that it is
incumbent upon DOR to be prepared for a protest hearing on its
proposed deficiency assessment at the time such notice of assess-
ment is mailed to the taxpayer. To permit DOR to routinely com-
pel the taxpayer to submit to after-the-fact interrogatories
would be directly in opposition to the initial presumption that
the assessment was validly made after a complete investigation
of all the relevant facts by DOR. In sum, the protest hearing
is nothing more than a final opportunity for the taxpayer to
convince DOR that its deficiency assessment is in whole or in
part erroneous.
We find no merit in DOR's argument that the hearing
contemplated by section 84-1508.1 is a "contested case" governed
by the Montana Administrative Procedure Act (Title 82, Chapter
42, R.C.M. 1947). As stated above, section 84-1508.1 does not
provide for a true adversary hearing, but only for a presentation
of additional evidence by the taxpayer and a reconsideration by
DOR thereafter. This is not the type of hearing contemplated
by the MAPA. Secondly, the procedure outlined within section
84-1508.1 governs the protest hearing. This procedure is con-
trary to MAPA procedure thereby indicating a legislative intent
to prescribe procedure by statute to the exclusion of MAPA.
DOR will not suffer prejudice by this Court's refusal
to require Grace to submit to further discovery prior to the
protest hearing. At an oral hearing below, both parties agreed
that DOR cannot enlarge the amount of the deficiency assessment
following the protest hearing. Furthermore, any appeal to the
State Tax Appeal Board from DOR's final determination of tax de-
ficiency is a trial de novo. Therefore, DOR will have full
discovery power at the time of appeal from the protest hearing.
The resolution of the first issue renders discussion of
the second issue unnecessary. The judgment of the district
court is affirmed.
Justice
Justices L///