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Kenai Borough v. Port Graham Corporation (4/8/94), 871 P 2d 1135
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Notice: This opinion is subject to formal correction
before publication in the Pacific Reporter. Readers
are requested to bring errors to the attention of the
Clerk of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501.
THE SUPREME COURT OF THE STATE OF ALASKA
KENAI PENINSULA BOROUGH, )
) Supreme Court No. S-4910
Appellant, )
) Superior Court No.
v. ) 3AN-90-4383 CI
)
PORT GRAHAM CORPORATION, ) O P I N I O N
)
Appellee. ) [No. 4070 - April 8, 1994]
______________________________)
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage,
Joan Katz, Judge.
Appearances: Gerald L. Sharp, Preston,
Thorgrimson, Shidler, Gates & Ellis,
Anchorage, for Appellant. Samuel J. Fortier,
Fortier & Mikko, P.C., Anchorage, for
Appellee.
Before: Moore, Chief Justice,
Rabinowitz, Matthews and Compton, Justices.
[Burke, Justice, not participating.]
MATTHEWS, Justice.
The Kenai Peninsula Borough appeals from a judgment
awarded by the superior court in favor of Port Graham Corporation
requiring the Borough to refund taxes paid under protest by Port
Graham on forty-one parcels of property for the tax years 1984-
1988. In addition, the Borough appeals from the superior court's
award of costs and attorney's fees in favor of Port Graham.
Port Graham is a village corporation authorized under
the Alaska Native Claims Settlement Act (ANCSA), 43 U.S.C.
1601-1629e (1988). Lands conveyed to village corporations under
ANCSA are exempt from real property taxation if they are not
"developed or leased to third parties." 43 U.S.C. 1620(d)(1).
As a part of its land entitlement under ANCSA, Port Graham
received land that had been tentatively approved by the Secretary
of the Interior for conveyance to the State of Alaska and
concerning which the State had entered into a timber sale
contract with Southcentral Timber Development, Inc. Although the
record is sparse as to subsequent dealings between Port Graham
and Southcentral, it does appear that on May 2, 1981, Port Graham
entered into a timber sale contract with Southcentral covering
some of the parcels in question, and that on January 11, 1983,
this contract was rescinded because storm damage to an important
road made further performance impossible.
For the tax years 1984-1988, Port Graham paid its real
estate taxes to the Borough under protest.1 With one exception
in 1984, each check was marked "Payment under Protest." The
checks did not explain the basis for the protest, nor did they
list the tax parcels for which the protest was made.
On April 8, 1985, a representative of Port Graham wrote
the assessor of the Borough claiming that thirteen parcels were
exempt from taxation because no development had taken place, and
no timber had ever been cut from them. The letter stated: "[I]f
we can't resolve this between the two of us then I will request a
hearing before the Board of Equalization." Port Graham's request
was honored, and the thirteen parcels were removed from the tax
roll from 1984 through 1988. In April 1988, the Borough
requested information from Port Graham concerning its logging
activities. Although Port Graham's response is not in the
record, it apparently caused the Borough to remove the remaining
twenty-eight parcels in question from the tax roll.
Port Graham then demanded a refund of all taxes paid on
the parcels from 1980-1988. The Borough denied the claim for
1980-1987. For 1988, the Borough promised to refund any taxes on
the parcels in question. A refund was never given, however,
apparently because of continuing questions as to allocation of
the 1988 payment between exempt and non-exempt property.
Port Graham filed a complaint in the superior court on
May 23, 1990, seeking a refund of taxes for the years "1980-
1989." The issue was joined and Port Graham moved for partial
summary judgment as to all forty-one parcels for a refund of
taxes paid for the five years 1984-1988. The motion was
supported by an affidavit of Patrick Norman, President of Port
Graham. Norman's affidavit attached a recision agreement between
Port Graham and Southcentral Timber dated January 11, 1983.
Norman averred that from 1980 through 1988, Port Graham "has
neither developed nor leased any of the parcels sought to be
taxed. . . ."
The Borough filed a cross motion for summary judgment
and opposition to Port Graham's motion for partial summary
judgment. The Borough's opposition was in part factual and in
part legal. Most importantly for the purposes of this appeal,
the Borough argued that the claim was barred by the applicable
statute of limitations.
The trial court granted Port Graham's motion for
partial summary judgment, ruling that the six-year statute
contained in AS 09.10.050 applied to suits for refunds of borough
taxes, and that no genuine issues of material fact existed
pertaining to whether on-going logging activity occurred during
the period 1984-1988. Subsequently, the court granted Port
Graham costs and attorney's fees based on a fully compensatory
norm under AS 29.45.500(a), amounting to $10,216.46 for services
prior to and during litigation.
On appeal, the Borough contends as follows:
1. Genuine issues of material fact exist which should have
precluded summary judgment;
2. The six-year statute of limitations does not apply, and
either the one-year period prescribed in AS 29.45.500(b) or the
two-year period of limitations applicable to liabilities created
by statute contained in AS 09.10.070 applies;
3. The suit should have been dismissed for failure to
exhaust administrative remedies and for failure to file a timely
administrative appeal; and
4. The award of costs and attorney's fees was improper.
We conclude that the two-year statute of limitations
applies to this case and bars the claims for back taxes for 1984
through 1987. Judgment on Port Graham's claim for refund of 1988
taxes is affirmed. The award of costs and attorney's fees is
vacated and remanded for recalculation. However, we agree that
AS 29.45.500(a) authorizes attorney's fees on a fully
compensatory basis for services prior to and during litigation.
The other issues are mooted.
I. STATUTE OF LIMITATIONS ISSUES
The six-year statute of limitations that the trial
court applied to this case is expressed in AS 09.10.050:
Actions to be brought in six years. No
person may bring an action (1) upon a
contract or liability, express or implied,
excepting those mentioned in AS 09.10.040 or
AS 09.10.055; (2) for waste or trespass upon
real property; or (3) for taking, detaining,
or injuring personal property, including an
action for its specific recovery, except
those mentioned in AS 09.10.055; unless
commenced within six years.
The one-year statute that the Borough contends should govern this
case is contained in AS 29.45.500(b). We set forth both AS
29.45.500(a) and (b) at this point.
Refund of taxes. (a) If a taxpayer pays
taxes under protest, the taxpayer may bring
suit in the superior court against the
municipality for recovery of the taxes. If
judgment for recovery is given against the
municipality, or, if in the absence of suit,
it becomes obvious to the governing body that
judgment for recovery of the taxes would be
obtained if legal proceedings were brought,
the municipality shall refund the amount of
the taxes to the taxpayer with interest at
eight percent from the date of payment plus
costs.
(b) If, in payment of taxes legally
imposed, a remittance by a taxpayer through
error or otherwise exceeds the amount due,
and the municipality, on audit of the account
in question, is satisfied that this is the
case, the municipality shall refund the
excess to the taxpayer with interest at eight
percent from the date of payment. A claim
for refund filed one year after the due date
of the tax is forever barred.
The two-year statute which forms the basis of the
Borough's alternative argument is expressed in AS 09.10.070:
Actions to be brought in two years. No
person may bring an action (1) for libel,
slander, assault, battery, seduction, false
imprisonment, or for any injury to the person
or rights of another not arising on contract
and not specifically provided otherwise; (2)
upon a statute for a forfeiture or penalty to
the state; or (3) upon a liability created by
statute, other than a penalty or forfeiture;
unless commenced within two years.
A. The One-Year Statute Does Not Apply
In Kenai Peninsula Borough v. Cook Inlet Region, Inc.,
807 P.2d 487, 492 (Alaska 1991), we stated that AS 29.45.500(b)
barred actions to obtain tax refunds if such actions were not
brought within one year after the due date of the tax. Subse
quently, in Saunders Properties v. Municipality of Anchorage, 846
P.2d 135, 139 n. 7 (Alaska 1993), we disapproved of this
statement:
After scrutinizing the language and
purpose of AS 29.45.500, we are convinced
that our comment concerning the application
of the one-year limitations period to
subsection (a) was incorrect. However, that
inaccurate dicta in no way disturbs our
holding in Kenai Peninsula.
We adhere to the position that we took in Saunders
Properties. Structurally, subsections (a) and (b) of AS
29.45.500 speak to separate, though in some cases overlapping,
situations. Subsection (b) is exclusively concerned with
overpayment of taxes that are otherwise legally imposed.
Subsection (a), on the other hand, speaks to the taxpayer's
payment of taxes under protest. Protested tax payments may
include taxes that are legally imposed but excessive, and they
may include taxes that are claimed to have been illegally
imposed. The one-year period set forth in subsection (b) applies
only to the narrower category of cases where taxes are legally
imposed but claimed to be excessive. It does not apply to cases
such as the present one, where the claim is that taxation is
illegal because the property is exempt.
Further, the one-year period expressed in subsection
(b) is not a statute of limitations governing the time for the
commencement of a lawsuit in court. Instead, it pertains to the
time for presentation of a claim for a tax refund to the
municipality. As the trial court observed, "claim,"as used in
subsection (b), is a term traditionally used in referring to the
initial administrative stage. See e.g., AS 29.45.480; 3 ch.
135 SLA 1957. By contrast, most statutes of limitations refer to
an "action." E.g., AS 09.10.050; 09.10.070.
The predecessor to subsection (b) was AS 29.30.040,
enacted as 3 ch. 135 SLA 1957. The final sentence of that
section stated: "A claim for refund not filed with the political
subdivision within three years after the due date of the tax is
forever barred." (Emphasis added.) This was recodified and the
period was shortened to one year in 1972 as part of the comprehen
sive revision of the statutes pertaining to municipalities. The
deletion of the clause "with the political subdivision" appears
to be technical in nature and not indicative of an intent to make
a substantive change. See Conference Committee Report, Senate
Journal, 1972.2 at 1042. We conclude that the language of
section 500(b) refers now to what it did when the statute was
first enacted in 1957: presentation of a claim for refund to the
taxing authority.
B. The Six-Year Statute Does Not Apply
We ruled in State v. Wakefield Fisheries, Inc., 495
P.2d 166 (Alaska 1972), that taxpayers had a cause of action at
common law to recover overpayment of taxes even though a
statutory remedy for overpayment existed. The consequence of
this ruling was that the six-year statute of limitations for
actions to recover personal property under AS 09.10.050 applied
rather than the two-year statute of limitations for liabilities
created by statute expressed in AS 09.10.070. We stated:
We cannot agree that the taxpayer
is limited to recovery according to the
statutory provision, AS 43.15.010 [requiring
payment under protest of taxes due the state
as a condition of refund suit]. The common
law has long recognized a cause of action in
assumpsit to recover overpayment of taxes.
Because the statutory remedies do not
explicitly supersede the common-law remedies,
we conclude that they are intended as a
supplement, and that the earlier remedy in
assumpsit is still available. Hence the
claim for a refund was timely under the six-
year statute of limitations applicable to
recovery of personal property.
495 P.2d at 172 (footnote omitted).
In Principal Mutual Life Ins. Co. v. State, Division of
Insurance, 780 P.2d 1023, 1030 (Alaska 1989), we overruled one
aspect of Wakefield and cast doubt on the above conclusion:
[W]e now question whether the common law
remedy of a cause of action in assumpsit
survived the enactment of AS 43.15.010 . .
. .
In our view, our statement in Principal concerning the
Wakefield holding was well advised, and we continue to believe
that this aspect of Wakefield was wrongly decided. Speaking
generally, statutes reflect a balance struck by the legislature
between the rights and obligations of competing interest groups.
To permit a common law remedy to exist side by side with a
statutory remedy carries the risk that the legislatively mandated
balance reflected by the statutory remedy will be subverted.
Since the common law is subservient to statutory law, statutory
remedies should generally supplant common law remedies where the
two are inconsistent. AS 01.10.010; Principal, 780 P.2d at 1030.
In the present case two parallel remedies of a
statutory nature are available: one created by an ordinance of
the Kenai Peninsula Borough,2 and the other created by
AS 29.45.500(a). While these remedies are not necessarily
consistent,3 they sufficiently occupy the field so that it is
reasonable to exclude, as a matter of legislative and borough
assembly intent, yet another remedy based on the common law. We
conclude therefore that the six-year statute of limitations does
not apply.
C. The Two-Year Statute Applies
It follows that the two-year statute of limitations
governs this case. The liability of a municipality for a tax
refund is a liability created by statute. As such, the liability
squarely falls within the express language of AS 09.10.070(3),
that "no person may bring an action . . . (3) upon a liability
created by statute . . . unless commenced within two years."
Because the two-year statute applies, only the claim
for the refund of 1988 taxes was timely. This action was brought
on May 23, 1990. The 1987 taxes were paid on November 13, 1987,
more than two years before this action was brought.
II. NO GENUINE ISSUES EXIST CONCERNING WHAT PORTION OF THE 1988
TAX PAYMENT SHOULD BE REFUNDED
The Borough's arguments that this case should have been
dismissed because Port Graham did not exhaust its administrative
remedies and that this case should be treated as an untimely
filed administrative appeal do not apply to the 1988 taxes. For
the 1988 tax year, the assessor concluded that all the properties
in question were tax exempt. Port Graham did not have to appeal
this decision as it was favorable to Port Graham.
We turn to the question of whether genuine issues of
material fact remain concerning the amount of the refund due for
1988. The parties agree that Port Graham paid $4,636.23 under
protest to the Borough for 1988 taxes with the notation:
"Borough Property Taxes: (minimum) Payment Made under Protest."
Port Graham has, at times, claimed that this entire payment was
for tax exempt property and thus it should all be refunded. The
Borough, on the other hand, asserts that the proceeds from the
1988 check were applied to taxable property of Port Graham, not
to the parcels that the Borough had agreed to remove from the tax
rolls. However, this assertion was presented in a pleading and
affidavit that were ordered stricken from the record by the trial
court on the grounds of untimeliness. Since the correctness of
this order is not questioned on appeal we may not consider the
Borough's assertion in deciding whether summary judgment was
properly granted.
The trial court concluded that there was no genuine
issue of material fact in connection with the amount due,
stating, "The monies paid on these parcels from 1984-88 have been
specified on [Exhibits] 5 and 6 to the memorandum in support of
plaintiff's motion for summary judgment." However, the amounts
relating to 1988 tax payments set forth in Exhibits 5 and 6 are
inconsistent. Exhibit 6 is the 1988 check for $4,636.23.
Exhibit 5 is a listing of the taxes assessed and levied for each
of the tax years in question listed by parcel. The total for
1988 is $2,118.55. This latter sum was incorporated in the final
judgment for the 1988 refund based on a memorandum prepared by
counsel for Port Graham. The fact that Port Graham's claim for a
refund of 1988 taxes was internally inconsistent is, taken alone,
insufficient to raise a genuine issue of material fact as to the
amount of the refund due, in view of the fact that Port Graham
and the court have selected the smaller of the two conflicting
sums. Nothing in the record before the trial court raised a
genuine issue concerning whether at least this sum should have
been refunded. We therefore affirm the grant of summary judgment
with respect to the refund of 1988 taxes.
III. ATTORNEY'S FEES UNDER AS 29.45.500(a)
Following the entry of the final judgment, Port Graham
moved for attorney's fees and costs in the sum of $15,371.50.
This motion was based on the second sentence of AS 29.45.500(a),
which provides:
If judgment for recovery is given
against the municipality, or, if in the
absence of suit, it becomes obvious to the
governing body that judgment for recovery of
the taxes would be obtained if legal
proceedings were brought, the municipality
shall refund the amount of taxes to the
taxpayer with interest at eight percent from
the date of payment plus costs.
(Emphasis added.) The trial court concluded that "the mandate to
award 'costs' under AS 29.45.500(a) should be construed to
include all reasonable attorney's fees incurred at the
administrative or judicial level." However, the trial court
awarded $10,216.46, a sum less than the full fee requested, to
account for the fact that Port Graham initially sought tax
refunds for some years in which no refunds were awarded and
because the time expended by the attorney for the plaintiff was
found to be somewhat excessive. In light of today's decision,
this award must be vacated and the court must make such further
adjustments as will be necessary to reflect the fact that Port
Graham is entitled to a refund of taxes only for 1988.
The question remains whether the trial court properly
construed AS 29.45.500(a) to cover attorney's fees as "costs,"to
apply to attorney's fees incurred both before and during litig
ation, and to require an award of full reasonable fees.
We explained the legal context for these issues in
Kenai Peninsula Borough v. Cook Inlet Region, Inc., 807 P.2d 487,
501 (Alaska 1991):
A superior court acting as a court
of appeal from the decision of an
administrative agency has authority to make
an award of attorney's fees under Appellate
Rule 508(e). Appellate Rule 601(b).
Ordinarily, where such an award is made it
should only partially compensate the
prevailing party for attorney's fees and be
limited to attorney's fees incurred in court,
not those incurred in a prior administrative
proceeding. . . . Appellate Rule 508(b),(c)
and (e). However, actual costs and
attorney's fees may be awarded where
authorized by statute.
In that case, the trial court construed section 500(a) as the
trial court in the present case did. This was challenged on
appeal and we affirmed. However, we did so on a plain error
standard of review, as the taxpayer's motion for attorney's fees
had not been opposed in the trial court. We stated:
Alaska Statute 29.45.500(a)
provides that in tax refund suits the
successful taxpayer is entitled to a refund
with interest plus "costs." The trial court
evidently construed the term "costs"as used
in this statute to include attorney's fees.
Further, the attorney's fees included within
the statute were actual attorney's fees
rather than the partial standard ordinarily
contemplated under our rules. Finally, this
statute was construed to apply to prior
administrative proceedings as well as to
proceedings in court. We do not find plain
error with respect to any of these
conclusions.
Id. We now review the same conclusions under the de novo
standard of review applicable to questions of law in general and
find them to be correct.
First, the term "costs"is generally construed in
Alaska to include attorney's fees. McDonough v. Lee, 420 P.2d
459 (Alaska 1966); see also In re Soldotna Air Crash Litigation,
835 P.2d 1215, 1221 n.9 (Alaska 1992) ("Chapter 60 of the Code of
Civil Procedure uses the term 'costs' in the most general sense,
so that it encompasses both expenses of litigation and attorney's
fees."); Liberty National Ins. Co. v. Eberhart, 398 P.2d 997, 999
(Alaska 1965) (insurer's obligation to pay "all costs taxed
against the insured"includes obligation to pay "attorney's fees
allowed as part of the costs of the action").
Second, the fees to be allowed as part of costs under
section 500(a) are full reasonable fees rather than reasonable
fees computed on a partially compensatory standard as under Civil
Rule 82. We view section 500(a) as expressing legislative policy
that taxpayers who are entitled to tax refunds are entitled to a
full reimbursement for the reasonable expenses that they have
incurred in order to establish their right to a refund. This is
similar to the legislative policy pertaining to holders of
mechanic's liens. Boyd v. Rosson, 713 P.2d 800, 802 ("full fees
should be awarded to successful lien claimants so long as the
fees are reasonable,"construing AS 34.35.005(b)), modified on
reh'g, 727 P.2d 765 (Alaska 1986).
Third, section 500(a) plainly is intended to apply to
costs incurred outside of litigation. Costs along with interest
are expressly imposed as a part of the municipality's refund
obligation "in the absence of suit"where the municipality would
obviously lose if suit were filed. Since requiring the payment
of costs incurred outside of litigation where no suit is filed
but excluding such costs where suit is filed would make little
sense, we conclude that costs incurred both before and during
litigation are meant to be covered by the statute.
IV. CONCLUSION
The two-year statute of limitations encompassed in AS
09.10.070 pertaining to liabilities created by statute governs
suits for tax refunds under AS 29.45.500(a). Port Graham's claim
for tax refunds for the years 1984-1987 is therefore time barred.
The judgment of the court pertaining to tax refunds for 1984-1987
is REVERSED. The judgment of the court pertaining to the refund
of 1988 taxes is AFFIRMED. The court's award of attorney's fees
and costs is VACATED and REMANDED for recalculation.
AFFIRMED in part, REVERSED in part, VACATED in part,
and REMANDED for further proceedings.
_______________________________
1 It appears that most of the property in question was
placed on the tax roll in 1977. Port Graham appealed this
administratively in 1977 on the ground that the property was
exempt under ANCSA. The Board of Equalization minutes concerning
the appeal read as follows: "No one appeared at the hearing.
The assessor had been advised [that] the appellant would withdraw
the protest, but no letter of formal withdrawal was received by
[the] hearing date." Port Graham's appeal was then denied.
2 KPB Ordinance 85-70, 1B-F provides that property
owners who claim that their property is exempt from real estate
taxation must appeal to the borough assessor. The assessor, in
turn, is required to conduct a hearing and issue a written
determination within seven days after the hearing date. The
assessor's determination may be appealed within thirty days to
the superior court. This procedure is authorized by AS
29.45.200(c), which allows the bypassing of the Board of
Equalization in cases where the question is "whether property is
taxable under the law."
3 For example, the only pre-condition to filing suit
under section 500(a) is payment under protest; whereas under the
ordinance the owner must "appeal"to the assessor; briefly state
in writing the basis for the exemption claim; and, at least,
await the assessor's decision before appealing to the superior
court. KPB Ord. 85-70.
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