Montana Bank of Roundup v. Musselsh

No. 90-097
IN THE SUPREME COURT OF THE STATE OF MONTANA
1991
MONTANA BANK OF ROUNDUP, N.A.,
Plaintiff and Appellant,
MUSSELSHELL COUNTY BOARD OF
COMMISSIONERS, MUSSELSHELL COUNTY,
and DEPARTMENT OF REVENUE, STATE
OF MONTANA,
Defendants and Respondents.
APPEAL FROM: District Court of the Fourteenth Judicial District,
In and for the County of Musselshell,
The Honorable Roy C. Rodeghiero, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Thomas E. Towe, Esq., Billings, Montana
For Respondent:
Eric Fehlig, Esq., Department of Revenue,
Helena, Montana
Vicky Krause, Esq., Musselshell County Attorney,
Roundup, Montana
Submitted: October 30, 1990
Decided: April 30, 1 9 9 1
Filed:
r I
,
Justice William E. Hunt, Sr., delivered the Opinion of the Court.
The Montana Bank of Roundup appeals from an order of the
Fourteenth Judicial District Court, granting summary judgment in
favor of Musselshell County and the Department of Revenue and
denying summary judgment to the Montana Bank of Roundup.
We affirm.
Appellant and Respondents have raised several issues in this
appeal, but we need only resolve two of these to decide the
questions presented by the parties. These are:
1. Whether the Bank should have been permitted to proceed on
a claim for a tax refund pursuant to 5 15-16-601, MCA, after having
been denied its claim for a refund under 5 15-1-402, MCA.
2. Whether the Department of Revenue was prohibited from
taxing federal obligations for the years 1969 to 1973.
For the tax years 1969 through 1973, the former State Board
of Equalization, predecessor of the Department of Revenue (DOR),
assessed and collected a bank shares tax from the Montana Bank of
Roundup (Bank). In 1974, the DOR audited the Bank for tax years
1969 through 1974 and determined that the Bank had misrepresented
to the taxing authorities the value of the Bank's shares for tax
years 1969 through 1973. On or about September 19, 1974, the DOR
issued a reassessment, increasing the taxable value of the Bank's
shares. On November 21, 1974, the Musselshell County Treasurer
assessed a bank shares deficiency tax in the amount of $82,179.
Just prior to the DORIS 1974 audit of the Bank, the Bank
appealed its 1973 bank shares assessment to the Musselshell County
Tax Appeal Board and the State Tax Appeal Board (STAB), and then
sought judicial review of the STAB decision in District Court in
Lewis and Clark County. The District Court judgment permitted the
Bank to deduct reserves for bond losses and real estate. The DOR
appealed the order of the District Court, which was affirmed in
part and reversed in part in Montana National Bank of Roundup v.
Department of Revenue, 167 Mont. 429, 539 P.2d 722 (1975). No
judgment was entered in Lewis and Clark County on this cause.
On May 20, 1976, the Bank paid $90,621 under protest, the
amount representing the bank shares tax deficiency assessed in
November of 1974, plus additional penalties and interest accrued.
On July 2, 1976, the Bank filed a complaint in Lewis and Clark
County seeking refund of the May 20, 1976, payment. Venue was
subsequently transferred to Musselshell County. On May 8, 1978,
Musselshell County District Court dismissed the cause. On appeal
to this Court, we affirmed the decision of the District Court in
an order, dismissing the appeal for lack of jurisdiction for
failure to timely serve the Musselshell County Treasurer, and for
mootness, the protested funds having already been distributed.
That order is unreported.
The Bank then submitted a claim dated April 14, 1980, to the
Musselshell County Commissioners, seeking refund of the bank shares
tax deficiency, interest and penalty paid under protest by the Bank
3
in 1976. The Commissioners denied the claim by correspondence
dated April 21, 1980, on the grounds that the claim had already
been litigated, and the Musselshell County District Court and the
Montana Supreme Court had determined that the County was not
required to make a refund. The Bank submitted an amended claim for
refund which was denied on December 15, 1980, for the same reasons
that the April claim had been denied.
On January 7, 1981, the Bank filed a complaint in the present
cause seeking refund of the bank shares tax deficiency for the
years 1969 through 1973 and also for a refund of the original bank
shares tax assessment collected for the years 1969 through 1973.
The Bank stated in its briefs that it invoked the District Court's
jurisdiction pursuant to the provisions of 5 15-16-601, MCA. The
Bank claimed the c om missioners had erred as a matter of law when
they denied the Bank's claim for refund on April 21, 1980, and
again denied the amended claim on December 15, 1980.
The District Court entered judgment against the Bank on
December 28, 1989, holding essentially as follows:
1. The County Commissioners did not err when they denied the
refund claims on April 21, 1980, and on December 15, 1980, because
the Supreme Court order (unreported) of January 17, 1979, had
determined that the Bank's claim for refund was moot.
2. No evidence supported the Bank's allegation that the
assessments for tax years 1969 through 1973 or the deficiency
assessment were either erroneously or illegally applied.
4
3. The case of Montana National Bank of Roundup v. Department
of Revenue, 167 Mont. 429, 539 P.2d 722 (1975), was never followed
by a judgment allowing a deduction of the value of the real
property, so the holding of this Court on January 17, 1979, that
the issue of the refund was moot, controlled.
4. The transfer of the stock of the Bank's holding company,
sixteen months prior to the bank shares tax deficiency assessment,
did not defeat the right of the County to collect the tax deficien-
CY
5. The holding in Montana Bankers Association v. Montana
Department of Revenue, 177 Mont. 112, 580 P.2d 909 (1978), that the
State could not tax the value of federal obligations in the
computation of the bank shares tax was res judicata to the parties
to that cause only and was a holding not clearly foreshadowed and
so not entitled to retroactive application.
There are two taxes at issue in this case. The first payment
is the original bank shares tax for taxable years 1969 through
1973. The original payments for years 1969 through 1972 were not
paid under protest, and this is the first time they have been at
issue.
The second tax at issue is the 1974 reassessed tax paid under
protest. The Bank action to recover those monies under the protest
statute, 5 15-1-402, MCA, was ultimately dismissed by this Court
in Roundup National Bank v. Dept. of Revenue, No. 14389, January
17, 1979. The Bank then filed a claim for refund and an amended
5
claim for refund with the Musselshell County Board of Commissioners
and the DOR under 5 15-16-601, MCA, the statute allowing relief for
illegally or erroneously collected taxes. These claims were denied
by the Commissioners on December 15, 1980, on the grounds that the
issue had already been litigated (under 515-1-402, MCA). The Bank
then filed its present complaint for the original and the reas-
sessed taxes under 5 15-16-601, MCA, claiming that the remedies of
5 15-1-402, MCA, and 5 15-16-601, MCA, may be pursued alternative-
The first issue before this Court is whether the Bank should
have been permitted to proceed on a claim for a tax refund pursuant
to 5 15-16-601, MCA, after having been denied its claim for a
refund under 5 15-1-402, MCA.
The Bank originally filed a claim for refund for the taxes
paid under protest pursuant to 5 15-1-402, MCA (formerly 5 84-
4502, R.C.M.). Section 15-1-402, MCA, states in pertinent part:
(1) The person upon whom a tax or license fee is being
imposed may proceed under 15-1-406 or may, before the tax
or license fee becomes delinquent, pay under written
protest that portion of the tax or license fee protested.
(2) After having exhausted the administrative appeals
available under Title 15, chapters 2 and 15, a person or
his legal representative may bring an action in any court
of competent jurisdiction against the officers to whom
said tax or license fee was paid or against the county
or municipality in whose behalf the same was collected
and the department of revenue.
After that action was dismissed, the Bank filed for refund for the
original and the reassessed tax under 15-16-601, MCA, which
provides in part:
(1) (a) Any taxes, interest, penalties, or costs paid
more than once or erroneously or illegally collected or
any amount of tax paid for which a taxpayer is entitled
to a refund under 15-16-612 or 15-16-613 or any part or
portion of taxes paid which were mistakenly computed on
government bonus or subsidy received by the taxpayer may,
by order of the board of county commissioners, be
refunded by the county treasurer.
The District Court held that since the Bank had originally pursued
a claim pursuant to S 15-1-402, MCA, which was subsequently
dismissed, it could not file a claim for refund under 5 15-16-601,
MCA .
The Bank appeals from this determination based on the language
of S 15-16-602, MCA, that provides:
Section 15-16-601 shall not be deemed or construed to be
in conflict with the provisions of part 4 of chapter 1,
but 15-16-601 and the provisions of such part 4 shall
provide and afford concurrent remedies. (Emphasis added.)
The Bank claims that the plain language of 5 15-16-602, MCA,
permits it to proceed under 5 15-16-601, MCA, after it lost on
procedural grounds under S 15-1-402, MCA. The Bank relies on
Uptegraft v. Dome Petroleum Corp., 764 P.2d 1350 (Okla. 1988), to
assert that "the doctrine of election of remedies does not apply
where the available remedies are concurrent or cumulative and
consistent."
Our reading of that case is that the remedies must be pursued
simultaneously, and when a judgment is reached, the remedy sought
7
in the alternative is terminated by the first judgment. As the
Oklahoma Court said in U~tesraft,764 P.2d at 1355:
Where the remedies are alternate or concurrent there is
no bar until satisfaction of the judgment has been
obtained. The plaintiff may pursue concurrent remedies
at the same time until there is a satisfaction of the
judgment. (Emphasis added.)
The Bank here did not pursue its remedies at the same time.
It received an unfavorable judgment on one theory and then tried
another for a more favorable result.
The issue of the relationship between the llprotestlt
statute
and the "erroneously collected1'statute was addressed by this Court
in Department of Revenue v. Jarrett, 216 Mont. 189, 700 P.2d 985(1985). In Jarrett, the value of the taxpayer's lot was erroneous-
ly assessed. The taxpayer obviously did not protest when he paid
his taxes for the years before the mistake was detected. When the
mistake was discovered, he was permitted to collect the overpayment
under 5 15-16-601, MCA. This Court stated:
Clearly, 5 15-16-601, MCA, was not meant to be used in
lieu of the 5 15-1-402, MCA, requirements of paying under
protest, but when the recourse of 5 15-1-402, MCA, is not
available, a taxpayer can obtain a refund under 5 15-
16-601, MCA.
Jarrett, 216 Mont. at 194, 700 P.2d at 988.
Here, the Bank tried to use 5 15-16-601, MCA, because its
remedy under 5 15-1-402, MCA, had failed. As we stated in Jarrett,
it is only when 5 15-1-402, MCA, is not available as a remedy that
5 15-16-601, MCA, may be used in place of it. The Bank, having
sought a remedy under 5 15-1-402, MCA, and having failed in that
effort, is now prohibited from seeking such remedy under 5 15-16-
601, MCA.
Section 15-1-402, MCA, provides for an action in any court of
competent jurisdiction; § 15-16-601, MCA, provides for a refund
from the county treasurer pursuant to an order from the county
commissioners. The concurrent remedies statute intended that
taxpayers against whom a tax had been illegally or erroneously
collected would not lose the option of pursuing relief through the
county government. It also permits the taxpayer to whom various
options are available to choose among statutory remedies. It does
not provide for a taxpayer to consecutively try different methods
of relief. To hold otherwise would destroy the rule of res
judicata in tax matters. We affirm the District Court on this
issue.
The second issue presents us with the question of whether the
Department of Revenue was prohibited from taxing federal obliga-
tions for the years 1969 through 1973. The Bank claims that
pursuant to this Court's decision in Montana Bankers Association
v. Montana Department of Revenue, 177 Mont. 112, 580 P.2d 909(1978), the federal obligations taxed by the State between 1969 and
1973 were exempt from taxation and that the assessment of them was
therefore illegal.
Retroactive application of a judicial interpretation is guided
by the principles enunciated in LaRoque v. State, 178 Mont. 315,
583 P.2d 1059 (1978). That case states:
9
First, the decision to be applied nonretroactively must
establish a new principle of law either by overruling
established precedent on which litigants have relied or
by deciding an issue of first impression whose resolution
was not clearly foreshadowed ... Finally, the inequity
of retroactive application must be considered, for where
substantial inequity will result by such application, a
ruling of nonretroactivity is proper.
LaRoque, 178 Mont. at 319, 583 P.2d at 1061. The District Court
here held that Montana Bankers had indeed established a new
principle of law deciding an issue of first impression whose
resolution was not clearly foreshadowed. This decision is
supported by the background outlined in Montana Bankers.
The 1959 amendment to 31 U.S.C. 5 742, the federal exemption
statute, states:
This exemption extends to every form of taxation that
would require that either the obligations or the interest
thereon, or both, be considered, directly or indirectly,
in the computation of the tax ....
Montana Bankers explains that the plain language of the statute
"provides an exemption to every form of state taxation that
requires United States obligations or interest to be considered
directly or indirectly in the computation of the tax." Montana
Bankers, 177 Mont. at 117, 580 P.2d at 912. This Court further
noted:
We note that neither the applicable Montana statutes nor
administrative regulations expressly authorize a deduc-
tion for the value of federal obligation in computing the
bank shares tax. However, the Montana statute must be
construed as permitting such deduction and administrative
regulations to the contrary must fall. Any other
construction would violate the federal exemption statute
and be unconstitutional under the Supremacy Clause of the
United States Constitution.
Montana Bankers, 177 Mont. at 118, 580 P.2d at 913.
While the 1978 decision does interpret a 1959 federal law, the
language of the Court indicates that the State of Montana had not
previously considered the effect of the law on state taxation
formulas. It was a matter of first impression whose resolution was
not clearly foreshadowed.
We hold that, under the doctrine of nonretroactivity, the
exemption for federal obligations does not apply prior to 1978.
The parties to this appeal raise other issues concerning fines
and penalties, bank ownership, vvescapedtt
taxable property, and
exhaustion of remedies. However, because we hold that the remedy
of 5 15-16-601, MCA, is not available to the Bank, we need not
reach the appropriateness of the reassessed taxes. Similarly, we
need not reach the issue of exhaustion of administrative remedies
as raised by the respondent DOR.
We concur: