FARMERS UNION v DEPARTMENT OF REVE
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NO. 95-130 IN THE SUPREMECOURT OF THE STATE OF MONTANA 1995 FARMERSUNION CENTRAL EXCHANGE, INCORPORATED, d/b/a CENEX, Petitioner and Appellant, v. THE DEPARTMENTOF REVENUE OF THE STATE OF MONTANA, and THE STATE TAX APPEAL BOARD OF THE STATE OF MONTANA, Respondents APPEAL FROM: ~~~-~~~~~~~~ CbG4K sljWli&ME OF &uwa and Respondents. District Court of the Thirteenth Judicial District, In and for the County of Yellowstone, The Honorable William J. Speare, Judge presiding. COUNSELOF RECORD: For Appellant: David A. Veeder; Veeder Law Firm, Billings, Montana For Respondents: Lawrence General, Montana G. Allen, Special Montana Department Submitted Assistant Attorney of Revenue, Helena, on Briefs: Decided: Filed: ClerK June 20, 1995 August 17, 1995 Justice Karla The Thirteenth affirmed the tax delivered the Judicial a decision proper Union M. Gray of District the State classification Central of Inc., the Court, Tax Appeal of Exchange, Opinion certain Yellowstone Board (STAB) property d/b/a Cenex. whether the Court. county, concerning owned by Farmers Cenex appeals. We affirm. The the issues correct before standard STAB's property rather of conclusion This than purposes, of is the class four and near Laurel, facility, and a product classified and appraised determined that property the pursuant Section here (c), fixtures . . property. The of filter fuel bed system, a Grabner upgrade, a plant CCA-V, air [and1 three drier, an alky tower parts oil The for the dispute and Revenue was that "all (DOR) 1992. class He eight MCA. equipment" header manufacturing is class included improvements, an opticrom ADV gasoline KOH scrubber, facility. year (o), refinery a refinery of a hydrocarbon 2 Cenex facility, of unit tax 1991. so classified cooling gas manifold, eight the Department in (c) property house class and storage MCA, provides machinery, items affirming state to storage the § 15-6-138(l) 15-6-138(l) in new property property to applied for blending for the in was added Montana, a raw material appraiser property machinery of An industrial erred classification, comprised processing it Court property. the equipment District and whether disputed involves complex complex are review that action refinery us two loss eight a boiler a coal recovery chromatograph, oxygen analyzers, asphalt product system two for tank spare oil in eight and carbon and tank Cenex that are taxation than for class The then appealed stone County the to in this are County eight air as hydrogen compressor, that as class eight a some items property. of a storage under lower Tax it of which Tax Appeal for facility 5 15-6-134, class the affirmed four on granted most the of MCA. property decision DOR's twenty-eight STAB's the of the items at Court decision, for thus disputed The the DOR Yellow- issue and here. review. The the DORIS upholding to this Court. 1 the 3 the appraisal judicial Cenex now appeals apply Cenex software. and affirmed District Court Board some computer reversed Board the Appeal requested exception STAB, District be taxed arguing property significantly and classification. the shall property category. components Issue Did and property. Cenex petitioned Court tester, other placed classified regarding classification "all a breathing four classification with appraisal monitors, class Yellowstone four unloading point part" DOR appraiser items is eight this DORIS assessment, these of District in gauges the The rate property, that truck flash class The level as a result, class product had been improperly contended and, other dioxide appealed of property crude MCA, provides co), property. manlift, a pumps. any sulfide It a heavy 15-6-138(l) included class improvements, storage, fuel Section not handling correct standard of review? The standards such as those has interpreted of fact are while an of for STAB, subject to agency's they (1990), of law fied in are 470, forth "[t]he of law 803 P.2d reviewed v. 601, eight." In court findings of to review, determine of Revenue 603. concluded have reviewing This Department STAB specifically properties MCA. standard are Inc. decisions, an agency's erroneous" Steer, disputed Court § 2-4-704, mean that a "clearly 474, of administrative in MCA, to case, class District set correct. present that review conclusions 245 Mont. the are § 2-4-704, whether In judicial as a matter been properly that classi- determination, the reasoned: At the outset this Court finds that despite [Cenex's] contentions that there are no disputes with the Tax Appeal Board's Findings of Fact, this Court disagrees. The whole matter of fixing a classification of property is factual as well as legal. In short it is a mixed matter of fact and law. This becomes important when the Court makes its determination as to the standard of review. The District standard Mut. Court of review Lee Rest v. applied for the three-part findings Logging of (1992), fact "clearly set 252 Mont. forth 97, erroneous" in 102, State Comp. 827 P.2d 85, 88. This Court has stated: In reviewing conclusions of law, questions of law, legal components of ultimate facts, or mixed questions law and fact, we will decide if the . . . determination as to law is correct. Maguire v. Maquire clarifies under the State clearly (1992), that 254 Mont. only erroneous "pure" test. 4 178, 182, findings The 835 P.2d 755, of are issue fact of the or of 757-58. reviewed proper classification of property tation" standard. (1991), 248 Mont. See United 297, The District District court's Mgt. & Trust proceed, 453, that will 872 P.2d (1993), 764, as a matter four its that the reaches regardless of the v. (19941, Norwest 859 P.2d 984, 264 Capital 990. STAB's decision We was of law. Did the District disputed for court Goodover of whether Issue the v. 143, 153-54, to an analysis that of review. 766 and Tisher 260 Mont. eight therefore, be affirmed Inc. Revenue STAB's conclusion where a district See Lindey's, therefore, correct however, of in class the wrong standard interpre- 558-59. We conclude, the decision reasoning. 449, Department the property of law. applied result, Mont. v. 811 P.2d 555, classified We have stated, the correct Grain 301-03, as a matter Court under the "correct Court should have reviewed the DOR had properly correctness is reviewed Court err property 2 in affirming was class eight STAB's conclusion property rather than that class property? The parties properly agree classified The property 15-6-138, within that the property as either these class four at issue in this or class eight case is property. classes is set forth in §§ 15-6-134 includes, in pertinent part, and MCA, respectively. Class four property ments, including except those trailers specifically or mobile included improve- homes used as a residence, in another 5 "all class." Section 15- 6-134(l) (b), MCA. storage facilities Class shall eight manufacturing property ARM 42.22.1303 property (c) and of facility might land. Therefore, class eight the four property testimony employed of the that its the of that the establishes turing process At the 389 U.S. classification is the property part of (1967). Perga, of the property, is not a storage contends in the engineer specific items the burden 428 P.2d sole admitted 6 cites that used class use examining of property the manufac- facility. 353, Cenex's as used is a chemical See Western 347, it to the not to directly It disputed is a storage items that He testified either was part (01, ,MCA. Perga, Cenex constitute of property. Martin Cenex bore 149 Mont. part a result, twenty-eight not twenty-eight and eight was incorrect. (1967), 952 class as property. STAB hearing, DORIS classification Michunovich than disputed or Section as improvements property and, many years. each other property and was not disputed for of use all [and] did consideration witness, of "all part." the each of the expert item that 5 15-6-138(c) process by Cenex each warrant under rather of this property reasoned process then manufacturing part, . in "all land." pertinent class Cenex STAR classified argues to equipment the It property, Cenex in that manufacturing which that MCA. "improvements." an overall in any other (o), STAR determined four includes, in elaborates as improvements fixtures, included 15-6-138(l) class be treated machinery, not further of proving Airlines, the Inc. v. 3, 7, cert. denied as to actual witness he did that not the have experience in property tax Montana property during his classification and had not reviewed tax classification testimony, the statutory of extent its contested argument rule bases for property. Thus, to overcome the presumption that hand, substantiated the classification of his we conclude is based upon Perga's relevant On the other DORIS appraiser and administrative each item statutes. the that testimony, to the Cenex failed the DOR's classifications are cor- rect. Cenex also relies where we stated Grain, 42.22.1303, facility requires it is properly 811 P.2d at 557. ly classified ing, heavily upon this that 'I§ 15-6-134, that if classified Cenex argues than Cenex s a storage, reliance on distinction we drew in that facilities. "significantly in United is used in with ARM a storage as class four." seventeen that items were incorrect- cc), MCA, as part United Grain, of a manufactur- facility. United The distinction was language MCA, together the machinery under § 15-6-138(l) rather Court's Grain case between changed" ignores storage is based on whether from the material the important and manufacturing the end product entering facility: A review of case law indicates that whether a process constitutes "manufacturing" turns upon whether the end product of the disputed process is "significantly substance. The statutes do changed" from the original define "manufacturing" but the administrative not regulations define "manufacturing property" as that "used to transform raw or finished materials into something possessing a new nature or name and adopted to a new use. (8 7 the United Grain, resolution in 811 of this concluding, property part the on the or on number the of truck to blending of five While ratio within correct within opinion STAB's disputed property under Cenex products those of Cenex. from Thus, the 811 P.2d "the original at 558. in MCA, was United Grain. receives crude The processing storage tanks product streams to oil unit to make a are then Perga, a finished no transformation of of chemical the the product the occurred engineering, law. that crude Indeed, with may be it Perga's process process oil, from the a finished which is not testimony involved rather than processes crude oil it into received the a storage product. for intermediate and then Cenex does products intermediate process (c), Grain. differ into disputed According a manufacturing receives products necessary is the to produce that conclusion United which the purview the a "transformation." purview the tanks. product. was not the supports in in streams it our STAB erred that § 15-6-138(l) Several final product Perga's correct process a it, at Laurel it products. achieve before refinery Thus, on whether as we defined contained intermediate part under the oil omitted). large evidence and stores crude octane in facility that blended a grven (citations DOR classified testified by pipeline 558 depends a manufacturing Perga draws at case based which of P.2d separately; the achieving a finished product end product substance" The property . received the 8 is not market blending DOR classified any is marketable 'significantly by Cenex. blends a by changed' See United as class Grain, eight under of 5 15-6-138(l) (cl, transforming and, materials therefore, Grain, the into it constitutes at 811 P.2d between MCA, is used 558. facility be a storage in connection something case and the in Grain facility United a new nature property. summarized in this the process possessing manufacturing STAB cogently with See United the facility dissimilarity we determined to as follows: The most conclusive disparity in attempting to use United Grain as a probative foundation for Cenex, lies in the contrasts between the two firms in the performance of the acts of storage. United Grain is a storage business; it can provide a storage service for customers or for itself; it may accept products from a large clientele; it does no manufacturing; it sells its product to a large class of potential buyers and users. By contrast, from the record, Cenex does not have or solicit storage customers; no businesses bring materials or products to be stored; Cenex does not sell intermediate products for itself or others for purposes not related to its refinery function and activities, including the processing and sale of waste products. Cenex is an integrated manufacturer; its products are designed to be produced by it and to be sold through its own network of outlets. . . We repeat, Cenex performs storage functions but it is not a storage facility. Cenex Finally, includes While only it is property true manufacturing 138(l) (o), MCA, not "in part" 1, MCA, which property that clearly through directly § 15-6-138(l) as in captioned class twelve class eight class to all of in Title "Classification" property. 9 property a manufacturing equipment, class eight process. MCA, specifically cc), any other relate that in fixtures, includes included is asserts used machinery, property this incorrectly and tools, property this § 15-6"all part." 15, Chapter and includes Thus includes class eight other The words 6, part class property, one including the Co), is not eleven limited items here classified to property under used directly in subsection (1) a manufacturing process. We conclude items of hold that that Cenex property the District STAE? did not err as class Court eight did decision. Affirmed. 10 not in classifying property. err in the disputed Therefore, affirming we STAB's
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