DEPT OF REVENUE v BN INC

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No, 13090 I N THE SUPREME COURT O THE STATE O MONTANA F F 1975 THE DEPARTMENT O REVENUE F O THE STATE O MONTANA, F F Appellant, BURLINGTON NORTHERN I N C , , Respondent. ORIGINAL PROCEEDING: Counsel of Record: F o r Appellant : R. Bruce McGinnis argued, Helena, Montana Poore, McKenzie, Roth, Robischon & Robinson, B u t t e , Montana Robert Poore argued, B u t t e , Montana For Respondent: Gough, Booth, Shanahan and Johnson, Helena, Montana Ward Shanahan argued, Helena, Montana Submitted : Filed : ?, 7, 4- % - - , 14t i t December 9 , 1975 Chief J u s t i c e James T . H a r r i s o n d e l i v e r e d t h e Opinion of t h e Court. Mr. T h i s i s a n a p p e a l from an o r d e r and judgment o f t h e d i s t r i c t c o u r t , Lewis and C l a r k County, a f f i r m i n g t h e o r d e r of t h e S t a t e Tax Appeal Board s e t t i n g a s i d e t h e 1974 assessment made by t h e Department of Revenue o f t h e o p e r a t i n g r a i l r o a d p r o p e r t i e s o f t h e B u r l i n g t o n N o r t h e r n r a i l r o a d system i n Montana. B u r l i n g t o n Northern (BN) o p e r a t e s a n i n t e r s t a t e r a i l r o a d system, w i t h l i n e s e x t e n d i n g i n t o f o r t y - e i g h t c o u n t i e s o f Montana. Each y e a r t h e Department o f Revenue (Department) makes a n a s s e s s ment of t h e r a i l r o a d o p e r a t i n g p r o p e r t i e s of BN. A s r e q u i r e d by s t a t u t e , s e c t i o n 84-801, R.C.M. 1947, BN p r o v i d e d t h e Department w i t h a v e r i f i e d s t a t e m e n t o f t h e e x t e n t and v a l u e s o f B N 1 s o p e r a t i n g p r o p e r t i e s . The Department a s s e s s e d B N 1 s f r a n c h i s e , roadway, r o a d b e d , r a i l s and r o l l i n g s t o c k pur- s u a n t t o s e c t i o n 84-802, R.C.M. 1947. The a s s e s s m e n t was made by t h e u n i t method, whereby t h e entire. interstate BN system i s v a l u e d by t h r e e d i s t i n c t and d i f f e r e n t methods: (1) c a p i t a l i z e d income; plant; ( 3 ) s t o c k and d e b t . ( 2 ) p r o p e r t y and Under t h e c a p i t a l i z e d income method t h e Department a v e r a g e d B N 1 s e a r n i n g s f o r t h e p a s t two y e a r s and c a p i t a l i z e d such e a r n i n g s by 8.25%. The t o t a l d e p r e c i a t e d c o s t of t h e system g i v e s t h e p r o p e r t y and p l a n t v a l u e . To f i n d t h e s t o c k and d e b t v a l u e , t h e Department u s e s t h e a c c o u n t i n g t h e o r y t h a t l i a b i l i t i e s are matched by assets w i t h t h e s t o c k v a l u e d a t i t s p r i c e on n a t i o n a l s t o c k exchanges and d e b t v a l u e d a s shown on B N ' s books. The t h r e e v a l u e s a r e weighted depending on t h e t y p e of i n d u s t r y and t h e economics o f t h e t i m e . The 1974 weighted f a c t o r s w e r e : f o r p l a n t , and 30% f o r s t o c k and d e b t . 35% f o r r e v e n u e , 35% The t o t a l v a l u e o f t h e system i n 1974 w a s d e t e r m i n e d t o be $1,272,557,576. This t o t a l was f u r t h e r f a c t o r e d by 17.55% t o d e t e r m i n e t h e p r o p o r t i o n o f t h e system i n Montana ( $ 2 2 3 , 2 3 3 , 8 5 5 ) . T h i s Montana v a l u e w a s e q u a l i z e d a t 4 0 % t o g i v e BN a t o t a l a s s e s s m e n t of $89,333,542. D e s p i t e a s e r i e s of c o n f e r e n c e s between BN and t h e Department, t h e f i n a l a s s e s s m e n t d i d n o t r e s o l v e a l l t h e d i f f e r e n c e s between t h e p a r t i e s . BN r e q u e s t e d a f o r m a l h e a r i n g b e f o r e t h e Department t o show why t h e a s s e s s m e n t s h o u l d be lowered. S e c t i o n 84-802. The h e a r i n g was h e l d J u n e 1 9 , 1974. A t t h e h e a r i n g BN was r e p r e s e n t e d by two o f f i c e r s know- l e d g e a b l e i n t h e p r o p e r t y t a x a r e a , b u t n o t by l e g a l c o u n s e l . BN o b j e c t e d t o i n c l u s i o n as d e b t t h e amount owed by BN t o i t s wholly owned s u b s i d i a r y , Spokane, P o r t l a n d and S e a t t l e Railway and o b j e c t e d t o t h e nonuse o f a n economic o b s o l e s c e n c e f a c t o r . A t t h e h e a r i n g a f i v e page l e t t e r from BN was i n t r o d u c e d and t h e company o f f i c e r s answered q u e s t i o n s from t h e h e a r i n g o f f i c e r and t h e Department a t t o r n e y p r i o r t o r e s t i n g . Other e v i d e n t i a r y m a t e r i a l may have been g i v e n t o t h e Department a t t h e series of m e e t i n g s conducted d u r i n g t h e a s s e s s m e n t p r o c e s s . The a s s e s s m e n t was upheld by t h e h e a r i n g o f f i c e r . BN a p p e a l e d t h e D e p a r t m e n t ' s h o l d i n g t o t h e S t a t e Tax Appeals Board (STAB). 28, 1974. A h e a r i n g was h e l d b e f o r e STAB on August BN w a s r e p r e s e n t e d a t t h i s h e a r i n g by l e g a l c o u n s e l . BN i n t r o d u c e d f i v e w r i t t e n e x h i b i t s , which were a l l o w e d i n t o e v i d e n c e o v e r t h e o b j e c t i o n o f t h e l e g a l c o u n s e l f o r t h e Department. The Department argued t h e m a t e r i a l and a d d i t i o n a l arguments were a t r i a l d e - novo beyond t h e a p p e a l power o f STAB a s c o n t a i n e d i n s e c t i o n 84-709, R.C.M. 1947. On September 1 8 , 1974, STAB r e v e r s e d t h e D e p a r t m e n t ' s a s s e s s m e n t and o r d e r e d t h e BN s y s t e m ' s t o t a l v a l u e be reduced by 2 5 % f o r economic o b s o l e s c e n c e ; t h e SP&S d e b t was t o t a l l y e l i m i n a t e d ; and t h e c o s t of p l a n t was augmented t o i n c l u d e t h e n e t v a l u e of l e a s e d equipment. The Department s o u g h t and w a s g r a n t e d , u n d e r s e c t i o n 82-4216, R.C.M. 1947, j u d i c i a l r e v i e w of t h e STAB f i n d i n g s , con- c l u s i o n s and o r d e r . The d i s t r i c t c o u r t found STAB, n o t t h e D e - p a r t m e n t , had r e p l a c e d t h e S t a t e Board of E q u a l i z a t i o n ; d e - novo t r i a l s by STAB were p r o v i d e d f o r by s e c t i o n 84-709, R.C.M. 1947; t h e a s s e s s m e n t made by t h e Department was n o t e n t i t l e d t o any presumption of c o r r e c t n e s s ; and STAB c o u l d h e a r s u c h e v i d e n c e a s i t d e s i r e d and form i t s own c o n c l u s i o n s a s t o a s s e s s m e n t v a l u e s . The Department a p p e a l s from t h e d i s t r i c t c o u r t o r d e r and judgment t o t h i s C o u r t under s e c t i o n 82-4217, R.C.M. 1947. The i s s u e s p r e s e n t e d f o r r e v i e w by t h i s C o u r t a r e : (1) Did STAB r e p l a c e t h e o l d S t a t e Board o f E q u a l i z a t i o n o r d i d t h e Department r e p l a c e t h e o l d s t a t e board w i t h STAB coming i n t o s e p a r a t e and d i s t i n c t a p p e l l a t e board s t a t u s w i t h powers o f r e v i e w o v e r a p p e a l s from t h e Department? d e novo ( 2 ) Does STAB have t h e power t o c o n d u c t t r i a l s - on a p p e a l s from t h e Department? ( 3 ) Are t h e f i n d i n g s and c o n c l u s i o n s o f t h e Department e n t i t l e d t o a presumption of c o r r e c t n e s s ? T h i s C o u r t h a s been asked t o i n t e r p r e t t h e p r o v i s i o n s o f t h e 1972 Montana C o n s t i t u t i o n and t h e l a w s e n a c t e d p u r s u a n t t o t h a t p r o v i s i o n c r e a t i n g an i n d e p e n d e n t a p p e a l p r o c e d u r e f o r aggrieved taxpayers. A r t i c l e V I I I , S e c t i o n 7 , 1972 Montana C o n s t i t u t i o n , p r o v i d e s : "Tax a p p e a l s . The l e g i s l a t u r e s h a l l p r o v i d e i n dependent a p p e a l p r o c e d u r e s f o r t a x p a y e r g r i e v a n c e s a b o u t a p p r a i s a l s , a s s e s s m e n t s , e q u a l i z a t i o n , and taxes. The l e g i s l a t u r e s h a l l i n c l u d e a r e v i e w p r o c e d u r e a t t h e l o c a l government u n i t l e v e l . " C h a p t e r 405, Laws o f 1973, w a s e n a c t e d t o implement t h e constitutional directions. C h a p t e r 405 i s e n t i t l e d : "An A c t t o P r o v i d e f o r a G e n e r a l R e v i s i o n o f t h e Tax Laws o f Montana t o Implement A r t i c l e V I I I , S e c t i o n s 3 and 7 o f t h e 1972 Montana C o n s t i t u t i o n by Designating the State Department of Revenue as the Tax Administration Agency for the State of Montana, by creating a State Tax Appeal Board, by Designating County Assessors as Agents of the State Department of Revenue and by Providing for County Tax Appeal Boards; and to Repeal * * *." Under the 1973 Act, the old State Board of Equalization (SBE) ceased to exist, its members becoming the first STAB, section 84-701, R.C.M. 1947. In section 84-402(3), R.C.M. 1947, the Department was given: " * * * full charge of appraising all property subject to taxation and equalizing values * * *." The Department's powers and duties include the following as set forth in section 84-708.1, R.C.M. 1947: "(1) To annually assess the franchise, roadway, roadbeds, rails, and rolling stock, and all other property of all railroads * * * constituting a single and continuous property operated in more than one (1) county in the state, and to apportion such assessments to the counties in which such properties are located on a mileage basis * * *." "(3) To adjust and equalize the valuation of taxable property among the several counties, and the different classes of taxable property in any county and in the several counties and between individual taxpayers; * * * and exercise such authority and do all things necessary to secure a fair, just and equitable valuation of all taxable property among counties between the different classes of property and between individual taxpayers." The STAB was formed pursuant to section 84-708, R.C.M. 1947, and given the following powers and duties: "(1) To prescribe rules and regulations for the tax appeal boards of the different counties * * * "(2) To hear appeals from decisions of the county appeals boards; "(3) To hear appeals from decisions of the department of revenue in regard to business licenses, property assessments, taxes and penalties. " (5) The state tax appeal board shall have the d u t i e s of a n a p p e a l board r e l a t i n g t o such o t h e r matters a s may be p r o v i d e d by law." Following t h e a s s e s s m e n t of r a i l r o a d s by t h e Department, i n s e c t i o n 84-802.1, R.C.M. 1 9 4 7 , it s t a t e s : " * * * any a g g r i e v e d p a r t y may a p p e a l t o t h e s t a t e t a x a p p e a l board a c c o r d i n g t o t h e r u l e s and r e g u l a t i o n s of s a i d b o a r d . " The Department a s k s t h i s C o u r t t o make a d e t e r m i n a t i o n a s t o which b o d i e s r e c e i v e d t h e powers o f t h e o l d S t a t e Board of E q u a l i z a t i o n . The Department c o n t e n d s it i s t h e s u c c e s s o r t o t h e SBE i n a l l r e s p e c t s , b u t a r e a d i n g o f t h e c l e a r l a n g u a g e of t h e p r e s e n t and former r e v e n u e s t a t u t e s i n d i c a t e s o t h e r w i s e . The Department r e c e i v e d t h e a d m i n i s t r a t i v e powers o f t h e SBE c o n t a i n e d i n former s e c t i o n 84-708. See s e c t i o n 84-708.1, and t h e t i t l e t o C h a p t e r 405, Laws o f 1973. The a p p e l l a t e powers of t h e SBE were t r a n s f e r r e d t o STAB by t h e new s e c t i o n 84-708. The i n t e n t of t h e l e g i s l a t u r e t o m a i n t a i n c o n t i n u i t y and t r a n s f e r S B E ' s t a x a p p e l l a t e powers t o STAB i s shown by S e c t i o n 51, C h a p t e r 405, Laws of 1973: " S e c t i o n 84-707, a s follows: R.C.M. 1947, i s amended t o r e a d "'84-707. C o n t i n u i t y of a c t i o n o f former b o a r d . A l l r e c o r d s , books, documents, r e p o r t s , and correspondence r e l a t i n g t o t a x appeals, received and k e p t by t h e former s t a t e board of e q u a l i z a t i o n , s h a l l immediately, upon t h e o r g a n i z a t i o n o f t h e new board [STAB], be t r a n s f e r r e d t o it f o r i t s u s e and c o n v e n i e n c e . The board s h a l l c o n t i n u e and c o m p l e t e any and a l l work r e l a t i n g t o t a x a p p e a l s u n d e r t a k e n o r commenced and n o t completed by i t s p r e d e c e s s o r . ' " U n f o r t u n a t e l y , t h e l e g i s l a t u r e had e a r l i e r r e p e a l e d s e c t i o n 847 0 7 , R.C.M. t i o n 43-515, 1947, i n S e c t i o n 58, C h a p t e r 1 0 0 , Laws of 1973. SecR.C.M. 1947, p r o v i d e s : "An a c t amending a s e c t i o n of a n a c t r e p e a l e d is void." T h i s i s t r u e , even i f t h e r e p e a l w a s i n a d v e r t e n t . 7 0 Mont. 1 2 9 , 224 P . I n r e Naegele, 269; S t a t e v. Brennan, 89 Mont. 479, 300 P . 273. The c o n t i n u i t y s t a t u t e i s v o i d , b u t t h e i n t e n t of t h e l e g i s l a t u r e t o t r a n s f e r t h e a p p e l l a t e power t o STAB i s shown by t h e a t t e m p t e d amendment o f t h e s t a t u t e . legislature indicates its intent. The l a s t a c t of t h e I n r e Naegele, s u p r a . STAB i s i n d e p e n d e n t o f t h e Department. Article V I I I , S e c t i o n 7 , 1972 C o n s t i t u t i o n , mandated t h e t a x a p p e a l p r o c e d u r e s be i n d e p e n d e n t . STAB was t r a n s f e r r e d t o t h e Department of Ad- m i n i s t r a t i o n f o r a d m i n i s t r a t i v e purposes only. R.C.M. 1947. S e c t i o n 84- 702, I t i s s t a t e d i n 8 2 A - 1 0 8 ( 1 ) ( a ) , R.C.M. 1947, t h a t an agency a l l o c a t e d t o a d e p a r t m e n t f o r a d m i n i s t r a t i v e p u r p o s e s only s h a l l : "Exercise i t s quasi-judicial, q u a s i - l e g i s l a t i v e , l i c e n s i n g , and policy-making f u n c t i o n s independe n t l y of t h e d e p a r t m e n t and w i t h o u t a p p r o v a l o r c o n t r o l of t h e d e p a r t m e n t . " W e a r e r e q u i r e d by s t a t u t e , s e c t i o n 93-401-16, R.C.M. 1 9 4 7 , t o l o o k t o t h e p l a i n language of t h e l e g i s l a t i v e enactment t o f i n d t h e i n t e n t of t h e l e g i s l a t u r e . S t a t e v . Midland N a t ' l . Bank, 132 Mont. 339, 317 P.2d 880; Morrison v . F a r m e r s ' E t c . S t a t e Bank, 70 Mont. 146, 225 P. 123. The c l e a r i n t e n t o f t h e l e g i s l a t u r e , a s s e t f o r t h i n Chapter 405, Laws of 1973, was t o p l a c e t h e t a x a d m i n i s t r a t i v e powers i n t h e Department and t h e t a x a p p e l l a t e powers i n STAB. W must now d e t e r m i n e whether STAB, a s t h e t a x a p p e a l s e body, h a s t h e a u t h o r i t y t o r e c e i v e , d u r i n g a h e a r i n g on a n a p p e a l from a d e c i s i o n by t h e Department, e v i d e n c e n o t p r e s e n t e d t o t h e Department d u r i n g t h e t a x a s s e s s m e n t p r o c e d u r e . As was s t a t e d above, STAB i s a l l o c a t e d t o t h e Department of A d m i n i s t r a t i o n f o r a d m i n i s t r a t i v e p u r p o s e s o n l y . 702. S e c t i o n 84- The h e a r i n g p r o c e d u r e s p r o v i d e d i n t h e A d m i n i s t r a t i v e Pro- c e d u r e Act (Chapter 4 2 , T i t l e 8 2 , R.C.M. STAB s i n c e s e c t i o n 84-709, A c t on STAB. R.C.M. S e c t i o n 82-4223, 1947) d o e s n o t a p p l y t o 1947, l i m i t s t h e e f f e c t of t h e R.C.M. 1947. The STAB h e a r i n g procedures are contained in section 84-709: "Appeal to state tax appeal board--hearing. Any person, firm or corporation or the department of revenue in behalf of the state, or any municipal corporation, aggrieved by the action of any county tax appeal board, may appeal to the state board * * * at the time of giving notice [to the county board and appellant] the state board may require the county board to certify to it the minutes of the proceedings resulting in such action and all testimony taken in connection therewith, and the state board may, in its discretion, determine the appeal on such record if all parties receive a copy of the transcript and are permitted to submit additional sworn statements, or may hear further testimony. * * * In connection with any appeal the state board shall have the authority to affirm, reverse, or modify any decision appealable to the state tax appeal board; the decision of the state tax appeal board shall be final and bindinq upon all interested parties unless reversed or modified by judicial review. To the extent this section is in conflict with the Montana Administrative Procedure Act, this section shall supersede the Montana Administrative Procedure Act. The state tax appeal board shall not have authority to amend or repeal any administrative rule or regulation. The state tax appeal board must give an-administrative rule or requlation full effect unless the board finds any such rule or requlation arbitrary, capricious or otherwise unlawful." (Emphasis added.) The Department places great emphasis on the fact that the final four sentences of section 84-709 (added by Chapter 277, Laws of 1974) do not contain language permitting additional statements or testimony, as does the preceding statute. portions of the We cannot place the same emphasis on this language. We must presume the legislature knew what it was doing and was cognizant of the statutes of Montana as then enacted. Helena Valley Irrigation Dist. v. St. Hwy. Comm'n, 150 Mont. 192, 433 P.2d 791. STAB had been transferred to the Department of Administration by Chapter 405, Laws of 1973, for administrative purposes only. Therefore, the executive reorganization statutes (Chapter 82A, R.C.M. 1947) would apply to STAB. The following two definitions in section 82A-103, R.C.M. 1947, apply to STAB: "(2) 'Agency' means an office, position, commission, committee, board, department, council, division, bureau, section, or any other entity o r i n s t r u m e n t a l i t y of t h e e x e c u t i v e b r a n c h of s t a t e government. " ( 9 ) ' Q u a s i - j u d i c i a l f u n c t i o n ' means a n a d j u d i c a t o r y f u n c t i o n e x e r c i s e d by a n agency, i n v o l v i n g t h e e x e r c i s e of judgment and d i s c r e t i o n i n makins d e t e r m i n a t i o n s i n c o n t r o v e r s i e s . The t e r m i n c l u d e s , b u t i s n o t l i m i t e d t o , t h e funct i o n s of i n t e r p r e t i n g , a p p l y i n g , and e n f o r c i n g e x i s t i n g r u l e s and l a w s ; g r a n t i n g o r denying p r i v i l e g e s , r i g h t s , o r b e n e f i t s ; i s s u i n g , suspending, o r r e v o k i n g l i c e n s e s , p e r m i t s , and c e r t i f i c a t e s ; d e t e r m i n i n g r i g h t s and i n t e r e s t s of a d v e r s e p a r t i e s ; e v a l u a t i n g and p a s s i n g on f a c t s ; awarding compensation; f i x i n g p r i c e s ; o r d e r i n g a c t i o n o r abatement o f a c t i o n ; a d o p t i n g p r o c e d u r a l r u l e s ; h o l d i n g h e a r i n g s ; and any o t h e r a c t n e c e s s a r y t o t h e performance of a (Emphasis added. ) quasi- j u d i c i a l function. " d The Department a r g u e s STAB i s n o t a q u a s i j u d i c i a l body; w e agree. STAB d o e s n o t q u a l i f y a s such a body a s d e f i n e d i n s e c t i o n 82A-112(1), R.C.M. 1947. But, q u a s i j u d i c i a l f u n c t i o n s c a n be performed by a g e n c i e s which a r e n o t q u a s i j u d i c i a l b o d i e s . I f t h i s were n o t s o , t h e t r a n s f e r of STAB t o t h e Department of A d m i n i s t r a t i o n would be m e a n i n g l e s s . S e c t i o n 84-702 r e f e r s t o s e c t i o n 82A-108 a s s p e c i f y i n g t h e l i m i t s o f t h e t r a n s f e r . The l a t t e r s e c t i o n p r o v i d e s f o r t h e e x e r c i s e of q u a s i j u d i c i a l , q u a s i l e g i s l a t i v e , l i c e n s i n g and p o l i c y making f u n c t i o n s i n d e p e n d e n t l y o f t h e Department. O f t h e d e n o t e d f u n c t i o n s , STAB c l e a r l y can perform none o f t h e s e , e x c e p t t h e q u a s i j u d i c i a l function. T h e r e f o r e , w e must presume t h e l e g i s l a t u r e i n t e n d e d STAB t o perform q u a s i j u d i c i a l f u n c t i o n s o r r e n d e r t h e s t a t u t o r y a c t i o n meaningless. A s s t a t e d i n Kish v . Mont. State Prison, 1 6 1 Mont. 297, 301, 505 P.2d 891, w e have h e l d many t i m e s : "The l e g i s l a t u r e d o e s n o t perform u s e l e s s a c t s . " S e e a l s o , Helena V a l l e y I r r i g a t i o n D i s t . v . S t . Hwy. Comrn'n, s u p r a ; Missoula R u r a l F i r e D i s t r i c t v . C i t y of M i s s o u l a , Mont . I STAB i s empowered t o e x e r c i s e i t s judgment and d i s c r e t i o n . To a s s i s t i n t h e e x e r c i s e of t h i s power STAB may do t h e f o l l o w i n g , p u r s u a n t t o s e c t i o n 84-708, R.C.M. 1947: "(4) H e a r i n g s , w i t n e s s e s , contempt, f e e s and subpoenas. Oaths t o w i t n e s s e s i n any i n v e s t i g a t i o n by t h e s t a t e t a x a p p e a l board may be adm i n i s t e r e d by a member of t h e board o r h i s a g e n t . I n c a s e any w i t n e s s s h a l l f a i l t o obey any summons t o a p p e a r b e f o r e s a i d b o a r d , o r s h a l l refuse t o t i o n s , o r t o produce r e c o r d s , books, p a p e r s , o r documents when r e q u i r e d t o do s o , such f a i l u r e o r r e f u s a l s h a l l be r e p o r t e d t o t h e a t t o r n e y g e n e r a l , who s h a l l t h e r e u p o n i n s t i t u t e p r o c e e d i n g s i n t h e proper d i s t r i c t c o u r t t o punish t h e witness f o r such n e g l e c t o r r e f u s a l . * * *I1 (Emphasis a d d e d . ) I f a w i t n e s s r e f u s i n g t o t e s t i f y o r p r o v i d e documents c a n be h e l d i n contempt, STAB must have t h e power t o c a l l w i t n e s s e s t o t e s t i f y o r p r e s e n t documents, n o t o n l y on a p p e a l s from c o u n t y b o a r d s , b u t a l s o on s u b j e c t s n o t p r e s e n t e d t o t h e Department d u r i n g t h e assessment procedure. I f t h i s were n o t t h e c a s e , STAB c o u l d o n l y d e c i d e m a t t e r s on t h e r e c o r d forwarded by t h e Department, w i t h s e c t i o n 8 4 - 7 0 8 ( 4 ) , R.C.M. from c o u n t y b o a r d s . 1947, l i m i t e d t o a p p e a l s W e have a l r e a d y d i s c u s s e d t h e presumption t h e l e g i s l a t u r e knows t h e l a w a s t h e n e n a c t e d , t h e r e f o r e t h e l e g i s l a t u r e must have i n t e n d e d STAB under C h a p t e r 277, Laws o f 1974 ( t h e l a s t f o u r s e n t e n c e s of s e c t i o n 84-709) would have t h e u s e o f t h e o a t h and contempt powers of s e c t i o n 8 4 - 7 0 8 ( 4 ) . To do s o , STAB must be a b l e t o t a k e a d d i t i o n a l t e s t i m o n y and r e c e i v e a d d i t i o n a l evidence. The Department c o n t e n d s t h e h e a r i n g b e f o r e STAB w a s a t r i a l -d e novo. I n t h e i n s t a n t c a s e t h e r e was no - d e novo t r i a l . STAB h e a r d e v i d e n c e a d d i t i o n a l t o t h a t p r e s e n t e d t o t h e Department, b u t d i d n o t d i s r e g a r d t h e D e p a r t m e n t ' s f i n d i n g s . The e v i - dence was supplementary t o , n o t i n r e p l a c e m e n t o f , t h e r e c o r d p r o v i d e d by t h e Department. The a s s e s s m e n t f u n c t i o n s remained i n t h e Department, w h i l e STAB reviewed t h e a s s e s s m e n t ( a s i t may under s e c t i o n 8 4 - 7 0 8 ( 3 ) , R.C.M. 1 9 4 7 ) , augmenting t h e r e c o r d so it might better perform its duty, as stated in section 8 4 709: " * * * to affirm, reverse or modify any decision appealable to the state tax appeal board * * *I!. To perform this function, STAB may have a complete - de novo hearing, for the infrequent case in which the board is of the opinion that it should examine all of the record of the Department, and additional evidence, on a firsthand basis, so as to reach a fair, just and equitable holding. In the instant case STAB did not affirm nor reverse the decision of the Department; it modified the decision to include or exclude matters which it, in its judgment and discretion, believed should be taken into consideration in the process of assessing BN for its property in this state. The Department argues it should have a presumption of correctness, thereby saddling BN with the burden of proving the Department's conclusions were arbitrary or capricious or illegal. The Department does have a presumption of correctness if its decisions are pursuant to an administrative rule or regulation, and the rule or regulation is not arbitrary, capricious or otherwise unlawful. Section 84-709. The Department has not promul- gated a rule or regulation prescribing the method to be used in assessing railroad property. Without such a rule or regulation, STAB has the discretion to examine the procedures used by the Department, with any additional evidence it may receive, to determine whether the procedures, and decisions based on such procedures, are fair, just and equitable. The Department contends a rule or regulation describing the method of assessment of railroads would freeze the weight given each assessment factor. We do not agree. The Department can draft a rule or regulation setting forth the assessment methods without freezing the factor weights, if the method used to determine the weights on a year to year basis is included in the rule or regulation; e.g. a listing of the considerations to be used to determine the weights given each factor. The Department also raises the issue of whether a full de - novo hearing allows sufficient time to complete the tax assessment and allocation procedures in the time prescribed by statute (section 84-802). The legislature, in its wisdom, has decreed that the procedure as described in this opinion be used in assessing and contesting tax cases. If insufficient time to complete the procedure is a reality, the legislature may take action to correct the problem. recommend such legislation. The Department has the duty to Section 84-708.1(14), R.C.M. 1947. To summarize, we hold the powers and duties of the old SBE were divided between the Department (administrative) and STAB (appellate). STAB has the authority to receive, during a hearing, testimony and evidence not presented to the Department during the tax assessment procedure. STAB performs quasi judicial functions, although not a quasi judicial body. While performing these functions, it may conduct a - de novo hearing in the event the Department has (a) not promulgated administrative rules or regulations covering the tax matter over which the appeal arises, and (b) STAB is of the opinion firsthand knowledge of all facts of the matter is necessary. A decision of the Department is not entitled to a presumption of correctness if the decision is not pursuant to an administrative rule or regulation, or the decision, rule or regulation is arbitrary, capricious or otherwise unlawful. A rule or regulation describing the method of assessing rail- roads need not freeze the weight given assessment factors. Only the legislature may correct any problem arising due to any lack of s u f f i c i e n t t i m e t o complete a s s e s s m e n t and a l l o c a t i o n proc e d u r e s under t h e s t a t u t o r y scheme s e t o u t i n T i t l e 3 4 , R.C.M. W a f f i r m t h e judgment and o r d e r o f t h e d i s t r i c t c o u r t , e e x c e p t t h e h o l d i n g t h a t STAB r e p l a c e d t h e o l d SBE a s w e have h e l d b o t h t h e Department Chief J u s t i c e W e concur:

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