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Mountain Water Co. v. State, Department of Revenue

Supreme Court of Montana

May 16, 2017

MOUNTAIN WATER COMPANY, Plaintiff and Appellee,
v.
STATE OF MONTANA, DEPARTMENT OF REVENUE, Defendant and Appellant.

          Submitted on Briefs: April 5, 2017

         APPEAL FROM: District Court of the First Judicial District, In and For the County of Lewis and Clark, Cause No. DDV 15-18 Honorable Kathy Seeley, Presiding Judge

          For Appellant: Daniel J. Whyte, Courtney Mathieson, Special Assistant Attorneys General, Department of Revenue, Helena, Montana.

          For Appellee: Robert L. Sterup, Kyle A. Gray, Holland & Hart LLP, Billings, Montana.

          For Amicus Curiae: Natasha Prinzing Jones, Scott M. Stearns, Randy J. Tanner, Boone Karlberg P.C., Missoula, Montana.

          Jim Rice Justice.

         ¶1 Appellant Department of Revenue (Department) appeals from the entry of summary judgment by the First Judicial District Court, Lewis and Clark County, in favor of Appellee Mountain Water Company ("Mountain Water" or "Company"), declaring that the City of Missoula (City) shall be assessed and be responsible for property taxes accruing on Mountain Water's property during the pendency of the City's action to condemn the property, and that such taxes paid by Mountain Water must be refunded by the Department with applicable statutory interest. We reverse, and address the following issue:

         Did the District Court err in its interpretation of § 70-30-315, MCA, regarding proration of taxes in a condemnation proceeding?

         FACTUAL AND PROCEDURAL BACKGROUND

         ¶2 The parties and the District Court agreed that there were no conflicts of material fact. Mountain Water operates a water delivery system located in and around Missoula, which the City initiated an action to condemn, issuing a summons on April 2, 2014. The Fourth Judicial District Court issued a Preliminary Order of Condemnation under § 70-30-206, MCA, which this Court affirmed in City of Missoula v. Mt. Water Co., 2016 MT 183, 384 Mont. 193, 378 P.3d 1113. Compensation has been determined in the proceeding, but no final order of condemnation has been issued pursuant § 70-30-309, MCA, and title to and possession of the subject property remains with Mountain Water and its affiliated entities.[1]

         ¶3 Following initiation of the condemnation action, Mountain Water requested that the Department agree the Company was no longer responsible for property taxes and that the City be deemed responsible, citing § 70-30-315, MCA, which provides, in toto:

Proration of taxes. The condemnor must be assessed the condemnor's pro rata share of taxes for the land being taken as of the date of possession or summons, whichever occurs first. The condemnor must be assessed for all taxes accruing after the date of possession or summons, whichever occurs first.

         The City objected, stating that responsibility for taxes would shift after a judgment awarding possession was entered. In a letter to the parties, the Department acknowledged that § 70-30-315, MCA, "may be subject to either of [their] interpretations, " but concluded that, while the statute raised the issue of proration of taxes, "it is not conclusive evidence that there has been or is a transfer of ownership interest from Mountain Water to the [C]ity of Missoula." The Department thus determined to "change ownership records only upon receipt of a transfer certificate from the clerk and recorder, or upon completion of the forms from the parties reporting the transfer and after filing of a realty transfer certificate" under the Realty Transfer Act, codified in Title 15 of the Montana Code, and would not shift responsibility for taxes from Mountain Water. The Department has continued to issue property tax assessments naming Mountain Water as the responsible entity for the property taxes throughout the condemnation action. Mountain Water has paid taxes under protest.

         ¶4 Pursuant to § 15-1-406, MCA, Mountain Water filed a declaratory action against the Department, seeking a determination that § 70-30-315, MCA, required assessment of property taxes against the City from and after the date of the condemnation summons. The Department answered, seeking approval of its interpretation of the statutes. The City, as explained in its amicus curiae brief filed in this appeal, did not seek to intervene in the District Court based upon its understanding that Mountain Water's complaint was not requesting an order requiring payment of taxes by the City, but rather sought a refund of the taxes the Company had paid. The City notes that the Company's complaint specifically requested an order "declaring that if Missoula ...


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