DEPT OF REVENUE v DAVIDSON CATTLE

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No. 80-292 I N THE SUPRE1F;E COURT OF THE STATE OF MONTANA 1980 THE DEPARTMENT O F REVENUE OF THE STATE OF MONTANA, P e t i t i o n e r and A p p e l l a n t , DAVIDSON CATTLE COMPANY, R e s p o n d e n t and R e s p o n d e n t . a1 f r o m : D i s t r i c t C o u r t of T h e T h i r t e e n t h J u d i c i a l D i s t r i c t , I n and f o r t h e C o u n t y of B i g H o r n , T h e H o n o r a b l e D i a n e G. B a r z , J u d g e p r e s i d i n g . C o u n s e l of R e c o r d : For Appellant: T h o m a s A. P o u l i o t , H e l e n a , Montana Tax Counsel, Dept. of R e v e n u e , For Respondent: Davidson, Veeder, Baugh, B i l l i n g s , Montana Broeder & Poppler, S u b m i t t e d on B r i e f s : Decided Y & ' Clerk October 23, :DE3 ~ 1980 M r . C h i e f J u s t i c e F r a n k I . H a s w e l l d e l i v e r e d t h e O p i n i o n of t h e Court. The B i g Horn C o u n t y D i s t r i c t C o u r t e n t e r e d a d e f a u l t j u d g m e n t a g a i n s t t h e S t a t e Tax A p p e a l Board (STAB) and subs e q u e n t l y d e n i e d t h e Montana S t a t e D e p a r t m e n t o f Revenue ' s ( D e p a r t m e n t ) motion to set t h e d e f a u l t a s i d e . The D e p a r t m e n t appeals. T h i s c o n t r o v e r s y commenced i n 1 9 7 8 when t h e D e p a r t m e n t ' s C o r p o r a t e Tax D i v i s i o n c o n d u c t e d a n a u d i t o f D a v i d s o n C a t t l e Company's s t a t e c o r p o r a t e l i c e n s e t a x r e t u r n s f o r t h e y e a r s 1 9 7 2 t h r o u g h 1976. Following t h e a u d i t , t h e Department a s s e s s e d t h e t a x p a y e r a n a d d i t i o n a l $10,525.00 i n t a x e s and i n t e r e s t . The t a x p a y e r p r o t e s t e d t h e a d d i t i o n a l a s s e s s m e n t b e f o r e t h e Department. 1 3 , 1978. The D e p a r t m e n t d e n i e d t h e p r o t e s t o n S e p t e m b e r An a p p e a l was t i m e l y f i l e d w i t h STAB. Following a h e a r i n g , STAB e n t e r e d i t s f i n d i n g s of f a c t , c o n c l u s i o n s o f l a w a n d f i n a l o r d e r a f f i r m i n g t h e D e p a r t m e n t ' s d e c i s i o n on O c t o b e r 3 , 1979. On O c t o b e r 22, 1 9 7 9 , t h e t a x p a y e r f i l e d a p e t i t i o n f o r j u d i c i a l r e v i e w o f t h e STAB d e c i s i o n i n t h e B i g Horn C o u n t y District Court. On O c t o b e r 23, 1 9 7 9 , t h e t a x p a y e r m a i l e d a c o p y o f t h e summons and p e t i t i o n t o t h e a t t o r n e y who r e p r e s e n t e d t h e D e p a r t m e n t a t t h e STAB h e a r i n g ; on O c t o b e r 29, 1 9 7 9 , a c o p y of t h e summons and p e t i t i o n was s e r v e d upon STAB. Taxpayer asserts i n its b r i e f t h a t its a t t o r n e y c o n t a c t e d a STAB member i n e a r l y December on s e v e r a l o c c a s i o n s to i n f o r m STAB t h a t a n a n s w e r t o i t s p e t i t i o n had b e e n d u e on November 1 9 , 1979. The STAB m e m b e r w a s r e q u e s t e d t o d i s c u s s t h e m a t t e r w i t h H e l e n P e t e r s o n , c h a i r p e r s o n o f STAB, and w i t h t h e a t t o r n e y r e p r e s e n t i n g t h e Department. The D e p a r t m e n t ' s memorandum f i l e d w i t h t h e D i s t r i c t C o u r t on i t s m o t i o n to s e t a s i d e t h e d e f a u l t j u d g m e n t a d m i t s t h a t t h e D e p a r t m e n t had k n o w l e d g e of t h e t a x p a y e r ' s i n t e n t to t a k e a d e f a u l t . It appears t h a t the Department ' s a t t o r n e y c o n t a c t e d t a x p a y e r ' s c o u n s e l p r i o r to a d e f a u l t b e i n g t a k e n and s t a t e d t h a t " n o t i c e and s e r v i c e n upon t h e D e p a r t m e n t were r e q u i r e d . On December 21, 1 9 7 9 , t h e t a x p a y e r m a i l e d a m o t i o n f o r d e f a u l t to t h e C l e r k of t h e D i s t r i c t C o u r t , t h e D e p a r t m e n t ' s a t t o r n e y and t o t h e c h a i r p e r s o n of STAB. On December 24, 1 9 7 9 , t h e C l e r k o f B i g Horn C o u n t y D i s t r i c t C o u r t e n t e r e d t h e d e f a u l t o f STAB. On J a n u a r y 3 0 , 1 9 8 0 , t h e D i s t r i c t C o u r t e n t e r e d a d e f a u l t j u d g m e n t a g a i n s t STAB f o r i t s f a i l u r e t o a n s w e r or The j u d g m e n t f u r t h e r s t a t e d t h a t STAB'S f i n a l o r d e r w a s appear. r e v e r s e d and t h a t t h e t a x p a y e r owed no a d d i t i o n a l c o r p o r a t i o n l i c e n s e t a x to t h e S t a t e f o r t h e y e a r s i n q u e s t i o n . The C l e r k o f t h e D i s t r i c t C o u r t m a i l e d n o t i c e o f e n t r y of t h e d e f a u l t judgment t o STAB and t h e D e p a r t m e n t on J a n u a r y 3 1 , 1980. On A p r i l 1 4 , 1 9 8 0 , t h e D e p a r t m e n t f i l e d a m o t i o n to s e t a s i d e t h e d e f a u l t judgment b a s e d o n l a c k o f j u r i s d i c t i o n . The District Court e n t e r e d its o r d e r denying t h e Department's motion o n J u n e 24, 1 9 8 0 . The D e p a r t m e n t a p p e a l s . The f i r s t i s s u e p r e s e n t e d i s w h e t h e r D a v i d s o n C a t t l e C o . complied w i t h p r o c e d u r a l requirements i n seeking j u d i c i a l review. The D e p a r t m e n t c o n t e n d s t h a t D a v i d s o n C a t t l e Co. f a i l e d t o comply w i t h s e c t i o n 2-4-702, MCA, t i o n o v e r t h e Department. 15-2-303, MCA, and t h e r e b y f a i l e d t o o b t a i n j u r i s d i c The t a x p a y e r a s s e r t s t h a t s e c t i o n is t h e a p p l i c a b l e s t a t u t e . S e c t i o n 2-4-702, MCA, is c o n t a i n e d i n M o n t a n a ' s A d m i n i s t r a t i v e P r o c e d u r e A c t and p r o v i d e s p r o c e d u r e s f o r i n i t i a t i n g j u d i c i a l r e v i e w of agency d e t e r m i n a t i o n s i n c o n t e s t e d cases. S e c t i o n 15-2-303, MCA, on t h e o t h e r hand, p r o v i d e s a p p e a l p r o c e d u r e s f o r i n i t i a t i n g j u d i c i a l r e v i e w of d e c i s i o n s o f STAB. T h e s e s t a t u t e s p r o v i d e i n p e r t i n e n t p a r t , as f o l l o w s : "2-4-702. I n i t i a t i n g j u d i c i a l r e v i e w o f con(1) a ) A p e r s o n who h a s e x h a u s t e d ( t e s t e d cases. a l l a d m i n i s t r a t i v e remedies a v a i l a b l e w i t h i n t h e a g e n c y and who is a g g r i e v e d by a f i n a l d e c i s i o n i n a c o n t e s t e d case is e n t i t l e d to j u d i c i a l review under t h i s c h a p t e r . T h i s s e c t i o n does n o t l i m i t u t i l i z a t i o n o f o r t h e scope of i u d i c i a 1 r e v i e w a v a i l a b l e u n d e r o t h e r means of pror e v i e w , r e d r e s s , r e l i e f , o r t r i a l d e novo vided - s t a t u t e . by -- L " ( b ) A p a r t y who p r o c e e d s b e f o r e a n a g e n c y u n d e r t h e terms o f a p a r t i c u l a r s t a t u t e s h a l l n o t be p r e c l u d e d f r o m q u e s t i o n i n g t h e v a l i d i t y o f t h a t s t a t u t e on j u d i c i a l review, b u t such p a r t y may n o t r a i s e a n y o t h e r q u e s t i o n n o t r a i s e d b e f o r e t h e a g e n c y u n l e s s it is shown t o t h e s a t i s f a c t i o n o f t h e c o u r t t h a t t h e r e was good c a u s e f o r f a i l u r e t o raise t h e q u e s t i o n b e f o r e t h e agency. " ( 2 ) ( a ) P r o c e e d i n g s f o r r e v i e w s h a l l be i n s t i t u t e d by f i l i n g a p e t i t i o n i n d i s t r i c t c o u r t w i t h i n 30 d a y s a f t e r s e r v i c e of t h e f i n a l d e c i s i o n o f t h e a g e n c y o r , i f a r e h e a r i n g is r e q u e s t e d , w i t h i n 30 d a y s a f t e r t h e d e c i s i o n thereon. E x c e p t as o t h e r w i s e p r o v i d e d by s t a t u t e , t h e p e t i t i o n s h a l l be f i l e d i n t h e d i s t r i c t c o u r t f o r t h e county where t h e p e t i t i o n e r r e s i d e s o r h a s h i s p r i n c i p a l p l a c e of b u s i n e s s o r where t h e agency m a i n t a i n s its p r i n of th c i p a l o f f i c e . C o p i e s - -e p e t i t i o n s h a l l b e p r o m p t l y s e r v e d -- a g e n c y - - p a r t i e s upon t h e and a l l (Emphasis added. ) o f r e c o r d . 'I "15-2-303. J u d i c i a l review of contested cases. (1) Any p a r t y to a n a p p e a l b e f o r e t h e s t a t e t a x a p p e a l b o a r d who is a g g r i e v e d by a f i n a l d e c i s i o n i n a c o n t e s t e d case is e n t i t l e d t o j u d i c i a l r e v i e w u n d e r -this part. " ( 2 ) P r o c e e d i n g s f o r r e v i e w s h a l l be i n s t i t u t e d by f i l i n g a p e t i t i o n i n d i s t r i c t c o u r t i n t h e c o u n t y w h e r e i n t h e t a x a b l e p r o p e r t y or some p o r t i o n t h e r e o f is l o c a t e d ( e x c e p t t h e t a x p a y e r may, a t h i s o p t i o n , f i l e i n t h e d i s t r i c t c o u r t o f t h e f i r s t j u d i c i a l d i s t r i c t ) and serving a co y on th -p-o f t h e p e t i t i o n - -e s t a t e t a x a p p e a l b o a r d w i t h i n 30 d a y s a f t e r s e r v l c e of t h e f i n a l d e c i s i o n of t h e s t a t e t a x a p p e a l board or, i f a r e h e a r i n g is r e q u e s t e d , w i t h i n 30 d a y s a f t e r t h e decision thereon. A l l p a r t i e s t o the appeal s h a l l c a u s e - - s e r v e d - -e s t a t e t a x a p p e a l to be on t h b o a r d a c o p y o f a l l p l e a d i n g s -- m e n t s t h e y and docu s h a l l File i n s u c h p r o c e d i n g s . " (Emphasis added -- -- -- . ) W e n o t e t h a t s e c t i o n 15-2-303, MCA, is a s p e c i f i c s t a t u t e g o v e r n i n g a p p e a l s f r o m STAB d e c i s i o n s and d o e s n o t r e q u i r e serv i c e o f summons or a copy o f t h e p e t i t i o n o n t h e D e p a r t m e n t . t h e o t h e r h a n d , s e c t i o n 2-4-702, MCA, On is a g e n e r a l s t a t u t e c o v e r i n g j u d i c i a l r e v i e w o f d e t e r m i n a t i o n s of a n y a g e n c y w h i c h is s u b j e c t t o t h e p r o v i s i o n s o f t h e Montana A d m i n i s t r a t i v e P r o c e d u r e A c t . I t r e q u i r e s s e r v i c e on t h e agency i n v o l v e d , h e r e t h e Department. s p e c i f i c s t a t u t e c o n t r o l s o v e r a g e n e r a l s t a t u t e t o t h e e x t e n t of any inconsistency. P.2d B r y a n t v. H a l l ( 1 9 7 1 ) , 1 5 7 Mont. 28, 3 3 , 482 1 4 7 , 149-150; F i c k e s v. M i s s o u l a C o u n t y ( 1 9 7 0 ) , 1 5 5 Mont. 258, 2 7 2 , 470 P.2d 287, 294; Monarch Lumber Company v. Haggard A ( 1 9 6 1 ) , 1 3 9 Mont. 1 0 5 , 1 1 4 , 3 6 0 P.2d 7 9 4 , 7 9 8 ; I n re S t e v e n s o n ' s E s t a t e ( 1 9 3 0 ) , 87 Mont. 486, 4 9 8 , 289 P. 5 6 6 , 570. Of more s i g n i f i c a n c e i n t h e p r e s e n t case is t h e D i s t r i c t C o u r t ' s s c o p e of j u d i c i a l review. a r e p r o v i d e d by s e c t i o n 2-4-704, The g u i d e l i n e s i n t h i s r e g a r d MCA, which p r o v i d e s as f o l l o w s : (1) The r e v i e w 2-4-704. Standards of review. , h a l l be c o n d u c t e d b y T h e c o u r t w i t h o u t a j u r y In cases .nd s h a l l be c o n f i n e d t o t h e r e c o r d . of alleged i r r e g u l a r i t i e s i n procedure before t h e a g e n c y n o t shown i n t h e r e c o r d , p r o o f t h e r e o f may be t a k e n i n t h e c o u r t . The c o u r t , upon r e q u e s t , s h a l l h e a r o r a l a r g u m e n t and receive written briefs. " ( 2 ) The c o u r t may n o t s u b s t i t u t e i t s judgment f o r t h a t o f t h e a g e n c y as t o t h e w e i g h t of t h e e v i d e n c e o n q u e s t i o n s o f f a c t . The c o u r t may a f f i r m t h e d e c i s i o n of t h e a g e n c y o r remand t h e case f o r f u r t h e r p r o c e e d i n g s : he c o u r t may r e v e r s e or modify t h e d e c i s i o n i f s u b s t a n t i a l r i g h t s - t-e a p p e l l a n t -- p r e j u d i c e d of h have b e e n because t h e administrative findings, inferences, c o n c l u s i o n s , - d e c i s i o n s are: or " ( a ) i n v i o l a t i o n o f c o n s t i t u t i o n a l or s t a t u tory provisions; " ( b ) i n e x c e s s o f t h e s t a t u t o r y a u t h o r i t y of t h e agency; (c) "(d) made upon u n l a w f u l p r o c e d u r e ; a f f e c t e d by o t h e r error o f law; " ( e ) c l e a r l y e r r o n e o u s i n view of t h e r e l i a b l e , p r o b a t i v e , and s u b s t a n t i a l e v i d e n c e on t h e whole record ; " ( f ) a r b i t r a r y or c a p r i c i o u s or c h a r a c t e r i z e d b y a b u s e o f d i s c r e t i o n or c l e a r l y u n w a r r a n t e d e x e r c i s e of d i s c r e t i o n ; or " ( g ) b e c a u s e f i n d i n g s o f f a c t , upon i s s u e s e s s e n t i a l t o t h e d e c i s i o n , were n o t made a 1t h o u g h r e q u e s t e d I' . S e p a r a t e s t a n d a r d s o f r e v i e w f o r STAB d e c i s i o n s a r e n o t p r o v i d e d w i t h t h e e x c e p t i o n of s e c t i o n 15-2-303 ( 4 ) w h i c h s t a t e s t h a t t h e D i s t r i c t C o u r t may p e r m i t a d d i t i o n a l e v i d e n c e n o t w i t h s t a n d i n g s e c t i o n 2-4-704(1), MCA. T u r n i n g t o t h e d e f a u l t judgment e n t e r e d i n t h e p r e s e n t case, t h e D i s t r i c t C o u r t r e v e r s e d STAB'S d e t e r m i n a t i o n and g r a n t e d t h e r e l i e f r e q u e s t e d by t h e t a x p a y e r b a s e d o n t h e D e p a r t m e n t ' s f a i l u r e t o a n s w e r or a p p e a r . T h e r e is no b a s i s f o r t h i s judgment i n t h e r e c o r d , o t h e r t h a n t h e D e p a r t m e n t ' s f a i l u r e to appear. However, t h e f a i l u r e t o a p p e a r d o e s n o t s u s p e n d t h e s t a n d a r d s of review. I n s h o r t , t h e D i s t r i c t C o u r t was n o t e n t i t l e d t o e n t e r a d e f a u l t judgment r e v e r s i n g STAB w i t h o u t r e v i e w i n g t h e r e c o r d and c o m p l y i n g w i t h t h e s t a n d a r d s of r e v i e w c o n t a i n e d i n s e c t i o n 2-4-704, MCA. The d e f a u l t judgment e n t e r e d by t h e D i s t r i c t C o u r t is v a c a t e d and t h i s case is remanded f o r f u r t h e r p r o c e e d i n g s cons i s t e n t w i t h s e c t i o n 2-4-704, MCA, and t h i s o p i n i o n . Chief J u s t i c e

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