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Kenai Borough v. Cook Inlet Region & Salamatov Native Assoc. (3/15/91), 807 P 2d 487
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Notice: This is subject to formal correction before
publication in the Pacific Reporter. Readers are
requested to bring typographical or other formal errors
to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, in order that
corrections may be made prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
KENAI PENINSULA BOROUGH, )
a Municipal Corporation; and ) Supreme Court No. S-3117
DONALD E. THOMAS, Borough )
Assessor, ) Trial Court Nos.
) 3KN-86-486/3KN-86-841 CI
Appellants, )
)
v. ) O P I N I O N
)
COOK INLET REGION, INC.; )
SALAMATOF NATIVE ASSOCIATION, )
INC., )
)
Appellees. )
________________________________)
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Kenai,
Ralph Stemp, Judge.
Appearances: Gerald L. Sharp, Peggy A.
Roston, Preston, Thorgrimson, Ellis & Holman,
Anchorage, for appellants. Mark Rindner,
Lane, Powell & Barker, Anchorage, for
appellee Cook Inlet Region, Inc. Russell L.
Winner, Bruce A. Moore, Winner & Associates,
Anchorage, for appellee Salamatof Native
Association, Inc. Marjorie L. Odland, Gary
I. Amendola, Assistant Attorneys General,
Juneau, Douglas B. Baily, Attorney General,
Juneau, for Amicus Curiae State of Alaska.
Before: Matthews, Chief Justice,
Rabinowitz, Burke, Compton, and Moore,
Justices.
MATTHEWS, Chief Justice.
The Alaska Native Claims Settlement Act (ANCSA), 43
U.S.C. 1601-1628 (1982), extinguished all claims of the Native
people of Alaska based on aboriginal title in exchange for 962.5
million dollars and 44 million acres of public land. See United
States v. Atlantic Richfield Co., 612 F.2d 1132, 1134 (9th Cir.
1980). The act authorized the creation of 13 regional and over
200 village corporations to receive this money and land.
In enacting ANCSA, Congress declared as a policy that
"the settlement should be accomplished . . . without adding to
the categories of properties and institutions enjoying special
tax privileges . . . ." 43 U.S.C. 1601(b). Congress did,
however, provide for an exemption from real property taxation for
lands conveyed under the act. The exemption was limited in time
to 20 years, and in content to lands "which are not developed or
leased to third parties." 43 U.S.C. 1620(d)(1). This case
concerns the meaning of the term "developed"in the act.
PROCEDURAL HISTORY
A. Salamatof Native Association, Inc.
Salamatof Native Association, Inc. (Salamatof) is a
village corporation which received land under ANCSA. At issue in
this appeal are the tax years 1981 through 1985 and 161 tax
parcels. Salamatof paid real property taxes to the Kenai
Peninsula Borough (borough) on all parcels and appealed to the
borough assessor. The assessor found that taxes for 1981 through
1983 were not protested in a timely manner and denied the appeal
as to all parcels for those years. He found that taxes for 1984
and subsequent years were protested on time. On the merits, the
assessor found that a number of parcels were exempt. However, he
denied exemptions to some of the parcels presently before us on
the grounds that the parcels were developed. As to these, the
assessor stated, in relevant part:
a. That these parcels are within
a platted subdivision and are capable of
use for gainful and productive purposes
as they are now, they are presently
offered for sale; and
b. These parcels were created by
subdivision plat. A subdivision plat is
more than just mere surveying, and
creates new legally defined parcels and
rights regarding sale of the resulting
parcels. A subdivision constitutes a
purposeful modification of the land from
its original state and in this case,
makes it capable of a present productive
gainful use.
Salamatof took a timely appeal of this decision to the
superior court. The parties by stipulation added parcels on
which the assessor made no ruling. In the superior court this
case was consolidated with the appeal of Cook Inlet Region, Inc.1
B. Appeal of Cook Inlet Region, Inc.
Cook Inlet Region, Inc. (CIRI) is a regional
corporation under ANCSA and an Alaska business corporation. The
tax years in question are 1981 through 1986 involving some 67
parcels. CIRI paid its taxes and appealed to the borough
assessor. On January 27 and June 4, 1986, hearings were held
before the assessor. The assessor ruled that a number of parcels
were exempt, but denied exemptions as to many others. In
general, the grounds for denial were that the parcels are
considered developed as they are surveyed or subdivided lots
capable of gainful and productive present use and need no further
modification to be marketable. From this decision CIRI appealed
to the superior court.
COURSE OF PROCEEDINGS IN THE SUPERIOR COURT
After procedural skirmishes and a substantial period of
delay by the borough in filing its appellee's brief, the trial
court entered a written decision ruling that all the parcels,
with one exception, were "clearly undeveloped" and thus tax
exempt. The excepted parcel, the so-called Homer radio station
property owned by CIRI, was remanded to the assessor for further
proceedings. Final judgments in favor of CIRI and Salamatof were
entered pursuant to Civil Rule 54(b) as to all of the parcels
except the parcel containing the radio station.
CIRI moved for full attorney's fees and costs of
$30,761.48 and for an award of sanctions against the borough of
$2,500. Salamatof made a similar motion, requesting actual
attorney's fees of $64,258, actual costs of $4,088.92, and
sanctions of $2,400.
The borough asked for and received an extension in
which to oppose these motions. When this period ended it
requested a further extension. While this request was pending
the trial court awarded CIRI and Salamatof what they had asked
for in actual attorney's fees, costs, and sanctions, noting that
no opposition had been filed.
On appeal to this court, the borough challenges the
superior court's ruling that CIRI's and Salamatof's property is
exempt and the award of actual attorney's fees and sanctions.2
FAILURE TO ASSERT AN EXEMPTION
As a threshold matter, the borough argues that neither
CIRI nor Salamatof asserted that its property was exempt in a
timely manner for the tax years 1981-1985. The borough relies on
section 2 of Kenai Peninsula Borough (KPB) Ordinance 5.12.055,
passed in 1985, which sets forth the procedure for appealing tax
assessments to the borough assessor. Section 2 provides
[t]hat appellants who have claimed or
asserted that properties are exempt prior to
the time taxes were due for that year but
whose properties have been assessed by the
Borough assessing staff for the 1985
assessment year and all prior assessment
years, have until December 31, 1985 to appeal
such assessments pursuant to the procedures
established under Section 1 of the ordinance;
except that no appeal right under this
ordinance shall exist if the property claimed
to be exempt has been the subject of a final
determination of taxes due through a tax
foreclosure or other legal action.
The borough argues that the taxpayers under this section were
required to have asserted their exemptions prior to the yearly
tax due date of August 15, and that they did not do so.
The borough assessor found that Salamatof did not
protest the taxation of its parcels in a timely manner for the
tax years 1981-1983. The superior court reversed the assessor's
ruling on this point, stating that the ordinance "was enacted
especially to deal with the taxpayers' complaints."
The trial court's conclusion concerning the purpose of
the ordinance is warranted in part. The ordinance was designed
to accommodate the appeals of Native corporations for years prior
to 1985. However, the ordinance requires as a condition of
appeal that an appellant "have claimed or asserted"an exemption
"prior to the time taxes were due for that year." This condition
cannot be read out of the ordinance.
There was substantial evidence to support the
assessor's ruling that Salamatof failed to object to taxation of
its property in a timely fashion for the tax years 1981 through
1983. The first assertion of immunity appearing of record was
made January 23, 1984, when Salamatof made a late payment of its
1983 taxes under protest. Accordingly, the assessor's ruling
should have been affirmed.3
Although the ordinance on which the borough relies was
not enacted until 1985, statutory procedures existed prior to
that time for obtaining a refund of taxes paid under protest. AS
29.45.500. Such actions were barred if not brought within one
year after the due date of the tax. AS 29.45.500(b). In
addition, a statutory right of appeal from assessments existed
prior to the ordinance under AS 29.45.190 and AS 29.45.200(c).
These, however, had to be exercised within 30 days after the date
of mailing of the notice of assessment. The deadlines for both
of these methods had passed by the time Salamatof first initiated
action as to the tax years 1981 through 1983.
The assessor found that Salamatof's protests were on
time for the years 1984 and 1985. The ordinance only requires
that taxpayers claim or assert exemptions. KPB Ordinance
5.12.055(2). No particular form of claim or assertion is
required. Since it appears that Salamatof began protesting
taxation beginning January 23, 1984, prior to the time taxes were
due for 1984, we conclude that the assessor's decision that
Salamatof's protest for 1984 and 1985 were timely under the
ordinance is supportable.
By the same standard, CIRI's protests are timely for
all tax years in question as it had been protesting taxation
since 1981.
We thus conclude that the borough's argument concerning
the timeliness of Salamatof's appeal for 1981 through 1983 is
correct and that all of Salamatof's property involved in this
case was taxable for those years. The borough's timeliness
arguments concerning Salamatof's property for 1984 and 1985 and
CIRI's property for all of the tax years lack merit.
STATUTORY FRAMEWORK FOR THE CLAIMS OF EXEMPTION
There are four statutes which are relevant to the
exemption issue. The first is ANCSA, enacted by Congress in 1971
to extinguish Alaska Natives' claims to aboriginal title and to
grant compensation for those claims. As noted, section 21(d) of
ANCSA (43 U.S.C. 1620(d)) provided that lands conveyed under
ANCSA would be tax exempt for 20 years except for developed lands
or lands leased to third parties.4
The legislative history of section 21(d) of ANCSA has
been described as "sparse." Price, Purtich and Gerber, The Tax
Exemption of Native Lands Under Section 21(d) of the Alaska
Native Claims Settlement Act, 6 U.C.L.A. Alaska L. Rev. 1, 3
(1976) (hereafter "Price"). Price's explanation of the purpose
the exemption is as follows:
Section 21(d), as part of the Alaska
Native Claims Settlement Act, is most clearly
a provision implementing the policy of
gradual adjustment to the economic
mainstream. The twenty year moratorium on
taxation of undeveloped and unleased land
serves as a period during which the Natives
can experiment in financial and real estate
transactions and achieve managerial
capability, without fear of immediate tax
burdens arising from the ownership of vast
tracts of undeveloped land. Furthermore, the
tax moratorium permits the Natives to pursue
a traditional subsistence lifestyle, at least
temporarily, without the need to exploit
hunting grounds in order to raise revenue for
taxation. An exemption is also important
because of the danger of foreclosure for
nonpayment and the possibility of rapid
movement of land ownership from Native to non-
Natives.
Price at 6.
While this is an explanation for the moratorium on
taxation, it does not explain the exception to the moratorium for
developed or leased land. Price describes the draftsmen of ANCSA
as "generally hostile to [tax] exemptions." Id. at 5. However,
"[t]here is evidence that the moratorium on taxation was a
bargained-for compensation and part of the liquidation of the
Native claim." Id. at 6.
The influential report of the Federal Field Committee
for Development Planning in Alaska, Alaska Natives and the Land
(U.S. Government, Anchorage, 1968) discusses the tax exemption
problem as follows:
Tax exemptions could have significant
fiscal implications for the state and local
government. The real estate exemption of
S.B. 3586, for instance, keeps all lands
granted off the property tax rolls whether
they are "in fee or in trust." This
provision applies as well to any minerals
associated with the land grant which could
otherwise be made subject to ad valorem
levies where tax bodies existed.
Conceivably, these sums might amount to
considerable amounts of public receipts
foregone. Some caution is appropriate here,
however, in that too early and too much land
taxation can result in confiscation of the
land, which result would clearly be counter-
productive to the policy resolution intended.
The problem here seems to be to
distinguish among the different purposes for
which land might be granted. In the case of
homesites, fishing camps, and the like, or of
lands granted to protect subsistence
activities, maximum insurance is required
against confiscation because of the owner's
inability to pay taxes. In the case of
grants of commercially valuable land for
income purposes, however, the point is to get
them into a productive, income-earning
position and, indeed, to get them on the tax
rolls. To the extent that these lands are in
fact capable of producing income, there is no
obvious justification for keeping them off
the tax rolls simply because they happen to
be owned by Natives or Native groups.
Id. at 531 (emphasis in original).
From the committee standpoint at least, land capable of
producing income which was selected for its income producing
potential should be taxable in fairness to the state and local
governments. This sentiment seems to have been carried forward
to the final enactment of ANCSA, as illustrated by the
Congressional declaration that there be no addition to the
categories of property enjoying special tax privileges, 43 U.S.C.
1601(b), and in the provision of section 21(d) of ANCSA itself,
providing that developed or leased property is immediately
taxable.
The next act of importance to this case is the Alaska
National Interest Lands Conservation Act of 1980, P.L. 96-487
(ANILCA). ANILCA, so far as relevant here, amended section 21(d)
to begin the running of the 20-year exemption period "from the
vesting of title pursuant to the Alaska National Interest Lands
Conservation Act or the date of issuance of an interim conveyance
or patent, whichever is earlier . . . ."
ANILCA also created the Alaska Land Bank program. 43
U.S.C. 1636. Under this program, private land owners,
including Native corporations, could make agreements with the
Secretary of the Interior so that their lands would be managed in
a manner compatible with the management plan for adjoining
federal lands. As to lands owned by Native corporations which
were included in such agreements, ANILCA provided that there
would be permanent immunity from state and local property taxes.
43 U.S.C. 1636(d).
In addition, ANILCA expanded the tax exemption to reach
property used "solely for the purposes of exploration"and added
language to the first proviso of section 21(d) of ANCSA which was
aimed at re-establishing tax exemption when property was no
longer "leased or being developed."5
In 1983 the Alaska Legislature passed Senate Bill 260
(effective January 1984), which added property exempt under ANCSA
to the list of property exempt from taxation. AS
29.45.030(a)(7). The legislature then defined the meaning of the
term "developed," among other terms used in ANCSA, "unless
superseded by applicable federal law"as follows:
"developed" means a purposeful
modification of the property from its
original state that effectuates a condition
of gainful and productive present use without
further substantial modification; surveying,
construction of roads, providing utilities or
similar actions normally considered to be
component parts of the development process,
but which do not create the condition
described in this paragraph, do not
constitute a developed state within the
meaning of this paragraph; developed
property, in order to remove the exemption,
must be developed for purposes other than
exploration, and be limited to the smallest
practicable tract of the property actually
used in the developed state;6
The last act of relevance is Public Law 100-241, 101
Stat. 1806, the Alaska Native Claims Settlement Act Amendments of
1987. This act extended the Alaska Land Bank tax exemption to
all lands conveyed under ANCSA, regardless of whether they are
subject to a Land Bank Agreement, "so long as such land and
interests are not developed or leased or sold to third parties
. . . ." 43 U.S.C. 1636(d)(1)(A)(ii). Also, the act defines
"developed" in terms which at the outset are substantially
identical to the terms used in the 1983 state statute, but which
go on to specify that land which is subdivided under an approved
and recorded subdivision plat is "developed".7 43 U.S.C.
1636(d)(2)(B)(iii).
The House explanatory statement to Public Law 100-241
discusses the term "developed"at length. The statement makes
clear Congress' intent that, whatever else the word "developed"
might mean, it encompasses lots in an approved and recorded
subdivision:
Land in Alaska is subdivided by the
State or by local platting authorities.
Action by the appropriate platting authority
enables development of the subdivided
property. Regardless of whether a tract of
land has been physically modified from its
original state, the tract is `developed' from
the date an approved subdivision plat is
properly recorded by the landowner or his or
its authorized agent.
House Explanatory Statement, 100th Cong., 1st Sess. 11,
reprinted in 1987 U.S. Code Cong. & Admin. News 3299, 3311.
DISCUSSION OF THE MERITS
The borough argues that there is a generally accepted
meaning of the term "developed"in the context of land. This
meaning is, "converted into an area suitable for residential or
business uses." The borough contends that this definition
encompasses land which has been platted and is ready for sale.
The borough argues that Congress intended that the term
"developed"would mean this in section 21(d) of ANCSA. Further,
the borough argues that if the state law definition of
"developed" exempts property that would not be exempt under
ANCSA, state law is unconstitutional because non-Native
corporation owners of property identical in character and use are
not afforded the same tax exemption.
The appellees argue that in order to be "developed"
under ANCSA, property must be actually productive of income
rather than merely potentially productive. Appellees contend
that AS 29.45.030 is consistent with ANCSA. Alternatively, they
argue that there is no common or ordinary meaning of the term
"developed,"that it is ambiguous, and that therefore the rule of
construction that in Indian law all ambiguities must be resolved
in favor of Indians should control this case and requires a
construction which exempts any parcel which had not been
purposefully modified and is not presently economically
productive.
The meaning of the term "developed"under ANCSA is a
question of federal law. Consequently, the primary consideration
in determining meaning is the intent of Congress. Although it is
well established that ambiguities in ANCSA are to be resolved
favorably to Natives, Alaska Public Easement Defense Fund v.
Andrus, 435 F. Supp. 664, 670-71 (D. Alaska 1977); People of
South Naknek v. Bristol Bay Borough, 466 F. Supp. 870, 873 (D.
Alaska 1979), if congressional intent is clear, we must defer to
it. Hakala v. Atxam Corp., 753 P.2d 1144, 1147 (Alaska 1988).
One indication of congressional intent is the ordinary
meaning of the words used in the statute. In the context of raw
land,8 the common meaning of "developed" includes subdivided
property which is ready for sale. Webster's Third New
International Dictionary of the English Language, Unabridged
(1968), defines "develop"in a land context as follows:
to make actually available or usable
(something previously only potentially
available or usable) . . . .: as (1): to
convert (as raw land) into an area suitable
for residential or business purposes they
~ed several large tracts on the edge of
town¤; also: to alter raw land into (an area
suitable for building) the subdivisions that
they ~ed were soon built up¤ . . . .
Cases dealing with the term "developed"in the context
of land confirm that "develop"connotes conversion into an area
suitable for use or sale. Winkelman v. City of Tiburon, 108 Cal.
Rptr. 415, 421 (Cal. App. 1973) ("The term `developed' connotes
the act of converting a tract of land into an area suitable for
residential or business uses."); Muirhead v. Pilot Properties,
Inc., 258 So.2d 232, 233 (Miss. 1972) (same holding); Prince
George's County v. Equitable Trust Co., 408 A.2d 737, 742 (Md.
Ct. Spec. App. 1979) ("Develop [is defined as] the conversion of
raw land into an area suitable for residential or business uses."
(Quoting Webster's New International Dictionary, (2d Ed. 1959));
Best Building Co. v. Sikes, 394 S.W.2d 57, 63 (Tex. App. 1965)
(court approved trial court finding based in part on extrinsic
evidence that "developed"included subdividing, building streets,
and installing utilities).
The appellees' position that in order to be developed
property must actually be producing income is not supported by
any generally accepted definition of the term. It would mean,
for example, that a vacant office building located on a city lot
is undeveloped. Since having an income producing character is
not a necessary component of the word "developed" in ordinary
usage, we reject the appellees' interpretation.
At the hearing before the assessor, CIRI advocated a
different definition of developed. CIRI took the view that a
small tract of land was developed if profits from its sale would
be maximized without further physical or legal alteration.
CIRI's position was illustrated by Steve Planchon, its
land development manager:
[W]e do have . . . nine, ten properties
. . . that we decided not to appeal . . . .
They're one acre tracts. There's something
that we can't do anything further. We can't
subdivide them, we can't put a road in, the
power isn't there. These things are there --
it's something if a guy came to us tomorrow
and said, "[L]isten, I'd like to sell it to
you [sic]," and my boss came in and said
"[W]ell before we sell it to him, what else
can we do it, you know, can we make any more
money off of this piece of property?" I'd
say to him no. I'd say there's a fair market
value for that piece of land. I can't do a
thing else to enhance the value. That's a
piece of property that we leave out of our
appeals. . . . [I]f my boss came in
tomorrow and said we've got a guy in here
that wants to buy that 5-acre tract and . . .
he wants to develop it, he says "can you guys
do anything else to enhance the property
value on that?" My answer to him would be
yes . . . and we take that on as land
department project, enhance the values
. . . . We would put in roads. We would do
the subdivision design and we would carry
those costs up until we sell the property and
make the profit throughout the process.
There's no reason for us to give the profit
away.
. . . .
[S]eems that we're arguing about is do
you take it down to five acres. Do you take
it to two acres. Do you take it to one acre.
And our answer would be that, uh, from CIRI's
point of view, it's not developed unless we
can't get an additional dollar out of it from
doing something else to the property.
Mark Friedman, CIRI's land management officer, gave
another example:
And here it's probably a good instance
to look at the criteria that we've used to
determine what should be taxed and what
shouldn't be taxed, in terms of whether the
property is in a developed state or isn't in
a developed state. If we look at that one,
tract 8 is in fact appropriately being taxed.
We've got a parcel that's 1.86 acres. There
is a -- there's roads. Utilities are right
on the boundary of the property. The fact is
that we would not have to do anything, expend
any monies to sell that property . . . as a
developed state.
CIRI's position at the hearing before the assessor is
consistent with the common meaning of developed. CIRI regarded
its land as developed when it had been converted into an area
suitable for sale in both a legal and a practical sense. The
legal sense of suitability for sale is that a parcel of land may
not be divided into two or more parcels for sale without an
approved and recorded plat. AS 40.15.010. See Kenai Peninsula
Borough v. Kenai Peninsula Board of Realtors, Inc., 652 P.2d 471,
472 (Alaska 1982). The practical sense is that as to some
parcels which legally may be sold, a knowledgeable developer
desiring to maximize revenue would not sell without re-platting
or making additional improvements. In our view the word
"developed" as used by Congress in ANCSA includes parcels which
are not only legally but practically suitable for sale under
these standards.9
We do not mean that a particular piece of property is
"developed" simply because a market exists for its sale.
Although these parcels did not present this situation, it is
conceivable that a Native corporation that is not itself a land
developer would sell raw land that would not generally be
considered developed. Land that common sense tells us is not
developed does not become taxable simply by virtue of a market
existing for its sale in its unimproved state; to be within this
definition of "developed" the land must be practically and
legally suitable for sale to the ultimate user.
It is our view that AS 29.45.030 is consistent with
ANCSA with respect to the meaning of developed. The definition
of developed in that statute is broad enough to include
subdivided land which is ready for sale. Subdividing is legally
a purposeful modification of property, for it enables separate
parts of the property to be sold. Similarly, as a sale of
property is a use, a subdivision which suffices to permit sales
effects a gainful and productive condition.
We reach this conclusion for two reasons. First, AS
29.45.030(a)(7) expressly exempts only property which is also
exempt under ANCSA. Second, if we were to construe the state
statute to exempt property which is not exempt under ANCSA,
serious questions concerning the constitutionality of the statute
as so construed under the equal rights clause of the Alaska
Constitution would be raised.10 Because statutes are to be
construed to avoid a substantial risk of unconstitutionality
where adopting such a construction is reasonable, we construe the
state statute to be co-extensive with ANCSA.11
IS SALAMATOF'S PROPERTY DEVELOPED?
Salamatof's property can be divided into the three
general categories; (1) subdivided lands in Moose Range Meadows
Subdivision, (2) unsubdivided parcels in Moose Range Meadows
Subdivision, and (3) two parcels in North Kenai. We discuss
these below.
(1) Moose Range Meadows Subdivision
This subdivision was created by Salamatof. Its plat
has been approved and recorded. Roads have been dedicated and
constructed and utilities are available to the subdivision lots
and Salamatof is actively marketing the property. The lots
themselves have not been leveled or cleared. There are 142 Moose
Range Meadows Subdivision lots involved in this appeal. As the
subdivision has made these lots suitable for sale, they are
developed within the meaning of section 21(d) of ANCSA.
(2) Unsubdivided parcels in Moose Range Meadows
These are four unsubdivided parcels ranging in size
from 80 acres to 27 acres. They are adjacent to subdivided lots
in Moose Range Meadows and they have road access. An electrical
line runs along the road which they front.
Since these four parcels have not been subdivided and
are substantially larger than the adjacent parcels which have
been subdivided, we conclude that they are not suitable for sale
from the standpoint of a knowledgeable owner wishing to maximize
profits and thus they should not be considered developed.
(3) North Kenai parcels
These are two vacant parcels which lie along the bluff
of the eastern shore of Cook Inlet, 14 miles north of the City of
Kenai. They are 36 and 42 acres in size and have no regular road
access. They have not been subdivided and according to the
testimony at the hearing before the assessor, cannot reasonably
be made marketable until roads are installed. Since these
parcels are not suitable for sale at present, they are not
developed under the standards announced above.
IS CIRI'S PROPERTY DEVELOPED?
CIRI's property is not easy to categorize. The borough
breaks it down into five categories, which are somewhat
overlapping. They are: (1) platted and subdivided parcels; (2)
surveyed land which is divided into government lots; (3) surveyed
land which has utilities available to it; (4) lake front
property; and (5) the Homer radio station property. The parties'
briefs contain no comprehensive discussion of the characteristics
of the parcels falling within the first four categories. Our
review of the record reveals that in none of the categories is it
clear that all of the property is either taxable or exempt.
With respect to the first category, platted and
subdivided parcels, it appears that most of the lots owned by
CIRI in the Stephenkie Subdivision are developed. However, at
least two lots, 066-380-21 and 065-530-17, are substantially
larger than the other lots in the subdivision and may not be
suitable for sale without resubdividing.
In the second category, surveyed land which is divided
into government lots, fall various township lots. CIRI claims
that some of these are too large to be suitable for sale, e.g.,
parcel 133-120-20, a 7.9-acre parcel in the township of Kasilof,
fronting the Sterling Highway. In other cases CIRI claims that
they are too small and would have to be replatted with adjoining
property, e.g., parcels 133-130-10 and 11, two quarter-acre lots
in the Kasilof townsite.
The third category, surveyed land which has utilities
available to it, seems to overlap with the second category as
utilities are available to some of the land which the borough has
placed in the earlier category. In any case, this category
includes two 2.5-acre lots in the city of Kenai, fronted by
streets and served by all utilities. (Tracts 045-070-03 and 045-
210-01.) The borough argued at the hearing before the assessor
that the parcels were appropriate for sale as is and CIRI
contended that it would not sell the tracts without first
subdividing them into parcels of one acre.
The fourth category is lake front property. Some of
these are clearly suitable for sale as they are. For example,
parcels 013-042-04, 12, 20 are parcels less than two acres in
size, not adjacent to other CIRI lands. CIRI acknowledged that
as to these properties there could be no further steps that could
be taken to improve their marketability. As to other parcels in
this category, CIRI contends that they should be subdivided,
e.g., parcel 012-010-14, a 5-acre tract bordering a lake and Cook
Inlet, which CIRI contends it would divide into two 2.5-acre
parcels.
Since the taxability or exemption of the property in
these four categories was not addressed in the superior court
under appropriate legal standards, a remand to the superior court
for such a determination is necessary. The superior court may in
turn remand some or all of these properties to the assessor if it
appears that the assessor's findings are inadequate or that he
used an improper standard.
The Homer radio station property must be remanded for a
different reason. This 16-acre parcel is in downtown Homer. It
is served by roads and utilities and contains various structures,
including several buildings, a radio tower and a network of
cables and antennae. The property is used by a public radio
station which pays CIRI $500 per year for the privilege. In our
view, that portion of the property which is built on is clearly
developed. A remand, however, is necessary to limit the land
subject to taxation to the smallest practicable tract which is
actually developed.12 AS 29.45.030(m)(1). Even though this
statute only applies to the tax years after 1984, we consider the
smallest practicable tract requirement of the statute to be a
sensible construction of ANCSA. The superior court is thus
directed to determine the smallest practicable tract which shall
be considered developed within the Homer property for all tax
years involved in this case.
SANCTIONS
The superior court awarded sanctions to CIRI of $2,500
and to Salamatof of $2,400 against the borough. The corporations
requested these amounts for the legal expenses expended
responding to two borough motions which the corporations claimed
were frivolous, and for legal expenses incurred preparing
revisions to their reply briefs after the borough had changed its
brief in violation of a briefing deadline.
Sanctions in administrative appeals are governed by
Appellate Rule 510.13 Part (a) of Appellate Rule 510 allows
sanctions in addition to interest, costs and attorney's fees
where an appeal or a petition for review is filed merely for
delay. Part (b) of Appellate Rule 510 allows the assessment of
costs or attorney's fees for any infraction of the appellate
rules. Part (c) allows the assessment of a fine not to exceed
$500 against any attorney who fails to comply with the appellate
rules or any rules promulgated by the supreme court. Although
the superior court did not specify under which subsection of
Appellate Rule 510 it made its sanction award, the award can only
be justified under subsection (b). Subsection (c) seems not to
have been intended because the sanctions were directed against
the borough rather than the borough attorneys. Subsection (a)
speaks to delay on the part of an appellant or a petitioner. It
is thus inapplicable to the dilatory conduct of the borough in
this case, as the borough was the appellee.
The borough did not file a timely opposition to the
corporations' motions for sanctions. Accordingly, the borough
has waived its right to object to them on appeal except on plain
error grounds. In re L.A.M., 727 P.2d 1057, 1059 (Alaska 1986);
A.R.C. Industries v. State, 551 P.2d 951, 961 (Alaska 1976). We
have observed that plain error exists where "an obvious mistake
has been made which creates a high likelihood that injustice has
resulted." Miller v. Sears, 636 P.2d 1183, 1189 (Alaska 1981).
We find that the possibility of plain error exists in
this case in one respect. The trial court awarded full
attorney's fees to the corporations independent of the award of
sanctions under Appellate Rule 510(b). Since 510(b) sanctions
are limited to costs and attorney's fees, there will be an
impermissible double recovery of attorney's fees if both the
awards of sanctions and the awards of attorney's fees were
allowed to stand. However, at this juncture the sanction awards
need not be reversed because, as noted below, the awards of
attorney's fees must be vacated.
ATTORNEY'S FEES
The superior court awarded both corporations their
actual attorney's fees. The awards included legal expenses
incurred at the administrative level at the hearings before the
assessor. The corporations' motions for attorney's fees were
combined with their motion for sanctions and were not opposed by
the borough. We thus will review the awards only for plain
error.
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. McMillan
v. Anchorage Community Hospital, 646 P.2d 857, 867 (Alaska 1982);
State v. Smith, 593 P.2d 625, 630-31 (Alaska 1979); Kodiak
Western Alaska Airlines, Inc. v. Bob Harris Flying Service, Inc.,
592 P.2d 1200, 1204-05 (Alaska 1979); Appellate Rule 508(b),
(c), and (e). However, actual costs and attorney's fees may be
awarded where authorized by statute. Further, actual costs and
attorney's fees may be awarded to a successful appellee where the
court finds that the appeal is frivolous or has been brought
simply for the purposes of delay. Appellate Rule 508(e). There
is no explicit authority authorizing the award of actual costs
and attorney's fees in favor of an appellee for frivolous conduct
of a case on the part of an appellant. However, for specific
misconduct on the part of either party, actual costs and fees may
be awarded under Appellate Rule 510(b).
The trial court held that the corporations were
entitled to actual attorney's fees and costs under AS
29.45.500(a) and, alternatively, that the corporations were
entitled to actual attorney's fees under Appellate Rule 508 on
the grounds that "the Borough's judicial action was replete with
unexcused delay and frivolous action." The court concluded "that
the entire Borough action was motivated by bad faith."
Alaska Statute 29.45.500(a) provides that in tax refund
suits the successful taxpayer is entitled to a refund with
interest plus "costs."14 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.
Nonetheless, we believe that the award of attorney's
fees should be vacated because the ultimate disposition on the
merits will be substantially different than the outright reversal
ordered by the superior court. See e.g., Appellate Rule 508(c)
(in cases of reversal, costs shall be allowed the appellant
unless otherwise ordered by the court; in cases of partial
affirmance and partial reversal the court will determine which
party, if any, shall be allowed costs). Further, it is apparent
that the trial court's opinion concerning the bad faith, as
distinct from the dilatory conduct, of the borough was influenced
by the trial court's mistaken view as to the merits of the tax
exemption issue. Finally, assuming AS 29.45.500(a) authorizes an
award of actual attorney's fees for administrative and judicial
proceedings, such fees should be apportioned and not awarded for
those parcels for which taxes are due.
CONCLUSION
For the above reasons we conclude:
As to Salamatof Native Association, Inc.:
1. As to all properties for the tax years 1981
through 1983, the judgment is REVERSED.
2. As to Moose Range Meadows Subdivision for the tax
years 1984 through 1986, the judgment is REVERSED.
3. As to the unsubdivided parcels in Moose Range
Meadows Subdivision and the North Kenai parcels for the tax years
1984 through 1986, the judgment is AFFIRMED.
4. The award of sanctions is AFFIRMED.
5. The award of attorney's fees and costs is VACATED.
As to Cook Inlet Region, Inc.:
1. As to all parcels, the judgment is REVERSED and
the matter is REMANDED for further proceedings in accordance with
this opinion.
2. As to sanctions, the judgment is AFFIRMED.
3. As to costs and attorney's fees, the judgment is
VACATED.
_______________________________
1 Both corporations also brought original actions seeking a
tax refund under AS 09.45.500(a). These cases were consolidated
with the present administrative appeal.
2 The borough includes within its appeal the trial court's
decision concerning the Homer radio station property. As there
has been no final judgment concerning this property, it should
not be considered part of the appeal. However, because the
issues concerning taxation of the radio station property are
closely related to the issues presented on appeal, we consider
this aspect of the borough's appeal to be a petition for review
from a non-final order. We grant the petition and consider the
taxability of the radio station property in this opinion.
3 Salamatof's claim that the borough ordinance allows the
filing of claims raised at any time prior to foreclosure is
without merit. The same is true of its contention that the
borough's decision to permit consideration of only those tax
protests raised prior to the tax due date is somehow violative of
due process.
4 Section 21(d) of ANCSA initially provided:
Real property interests conveyed,
pursuant to this chapter, to a Native
individual, Native Group, or Village or
Regional Corporations which are not developed
or leased to third parties shall be exempt
from State and local real property taxes for
a period of twenty years after [December 18,
1971]: Provided, That municipal taxes, local
real property taxes, or local assessments may
be imposed upon leased or developed real
property within the jurisdiction of any
governmental unit under the laws of the
State: Provided further, That easements,
rights-of-way, leaseholds, and similar
interests in such real property may be taxed
in accordance with State or local law. All
rents, royalties, profits, and other revenues
or proceeds derived from such property
interests shall be taxable to the same extent
as such revenues or proceeds are taxable when
received by a non-Native individual or
corporation.
5 43 U.S.C. 1620(d)(1) as amended by ANILCA reads:
Real property interests conveyed,
pursuant to this chapter, to a Native
individual, Native Group, Village or Regional
Corporation or corporation established
pursuant to section 1613(h)(3) which are not
developed or leased to third parties or which
are used solely for the purposes of
exploration shall be exempt from State and
local real property taxes for a period of
twenty years from the vesting of title
pursuant to the Alaska National Interest
Lands Conservation Act or the date of
issuance of an interim conveyance or patent,
whichever is earlier, for those interests to
such individual, group, or corporation:
Provided, That municipal taxes, local real
property taxes, or local assessments may be
imposed upon any portion of such interest
within the jurisdiction of any governmental
unit under the laws of the State which is
leased or developed for purposes other than
exploration for so long as such portion is
leased or being developed: Provided further,
That easements, rights-of-way, leaseholds,
and similar interests in such real property
may be taxed in accordance with State or
local law. All rents, royalties, profits,
and other revenues or proceeds derived from
such property interests shall be taxable to
the same extent as such revenues or proceeds
are taxable when received by a non-Native
individual or corporation.
6 AS 29.45.030 provides:
(a) The following property is exempt
from general taxation:
. . . .
(7) real property or an interest in
real property that is exempt from taxation
under 43 U.S.C. 1620(d), as amended.
. . . .
(m) For the purpose of determining
property exempt under (a)(7) of this section,
the following definitions apply to terms used
in 43 U.S.C. 1620(d) unless superseded by
applicable federal law:
(1) "developed" means a purposeful
modification of the property from its
original state that effectuates a condition
of gainful and productive present use without
further substantial modification; surveying,
construction of roads, providing utilities or
other similar actions normally considered to
be component parts of the development
process, but that do not create the condition
described in this paragraph, do not
constitute a developed state within the
meaning of this paragraph; developed
property, in order to remove the exemption,
must be developed for purposes other than
exploration, and be limited to the smallest
practicable tract of the property actually
used in the developed state;
(2) "exploration"means the examination
and investigation of undeveloped land to
determine the existence of subsurface
nonrenewable resources;
(3) "lease"means a grant of primary
possession entered into for gainful purposes
with a determinable fee remaining in the
hands of the grantor; with respect to a lease
that conveys rights of exploration and
development, this exemption shall continue
with respect to that portion of the leased
tract that is used solely for the purpose of
exploration.
(n) If property or an interest in
property that is determined not to be exempt
under (a)(7) of this section reverts to an
undeveloped state, or if the lease is
terminated, the exemption shall be granted,
subject to the provisions of (a)(7) and (m)
of this section.
7 The 1987 amendments to ANCSA provide:
43 U.S.C. 1636(d) Automatic
protections for lands conveyed pursuant to
the Alaska Native Claims Settlement Act.
(1)(A) Notwithstanding any other
provision of law or doctrine of equity, all
land and interests in land in Alaska conveyed
by the Federal Government pursuant to the
Alaska Native Claims Settlement Act [43
U.S.C.A. 1601 et seq.] to a Native
individual or Native Corporation or
subsequently reconveyed by a Native
Corporation pursuant to section 39 of that
Act [43 U.S.C.A. 1629(e)] to a Settlement
Trust shall be exempt, so long as such land
and interests are not developed or leased or
sold to third parties from--
. . . .
(ii) real property taxes by any
governmental entity;
. . . .
(2) Definitions. (A) For purposes of
this subsection, the term--
(i) "Developed"means a purposeful
modification of land, or an interest in land,
from its original state that effectuates a
condition of gainful and productive present
use without further substantial modification.
Surveying, construction of roads, providing
utilities, or other similar actions, which
are normally considered to be component parts
of the development process but do not create
the condition described in the preceding
sentence, shall not constitute a developed
state within the meaning of this clause. In
order to terminate the exemptions listed in
paragraph (1), land, or an interest in land,
must be developed for purposes other than
exploration, and the exemptions will be
terminated only with respect to the smallest
practicable tract actually used in the
developed state;
(ii) "Exploration" means the
examination and investigation of undeveloped
land to determine the existence of subsurface
nonrenewable resources; and
(iii) "Leased"means subjected to a
grant of primary possession entered into for
a gainful purpose with a determinable fee
remaining in the hands of the grantor. With
respect to a lease that conveys rights of
exploration and development, the exemptions
listed in paragraph (1) shall continue with
respect to that portion of the leased tract
that is used solely for the purposes of
exploration.
(B) For purposes of this
subsection--
(i) land shall not be considered
developed solely as a result of--
(I) the
construction, installation, or
placement upon such land of any
structure, fixture, device, or
other improvement intended to
enable, assist, or otherwise
further subsistence uses or other
customary or traditional uses of
such land, or
(II) the receipt of
fees related to hunting, fishing,
and guiding activities conducted on
such land;
(ii) land upon which timber
resources are being harvested shall be
considered developed only during the period
of such harvest and only to the extent that
such land is integrally related to the timber
harvesting operation; and
(iii) land subdivided by a State or
local platting authority on the basis of a
subdivision plat submitted by the holder of
the land or its agent, shall be considered
developed on the date an approved subdivision
plat is recorded by such holder or agent
unless the subdivided property is a remainder
parcel.
. . . .
(4) Exclusion, reattachment of
exemptions.
. . . .
(C) If the exemptions listed in
paragraph (1) are terminated with respect to
land, or an interest in land, as a result of
development (or a lease to a third party),
and such land, or interest in land,
subsequently reverts to an undeveloped state
(or the third-party lease is terminated),
then the exemptions shall again apply to such
land, or interest in land, in accordance with
the provisions of this subsection.
(5) Tax recapture upon subdivision
plat recordation. (A) Upon the recordation
with an appropriate government authority of
an approved subdivision plat submitted by, or
on behalf of, a Native individual, Native
Corporation, or Settlement Trust with respect
to land described in paragraph (1), such
individual, corporation, or trust shall pay
in accordance with this paragraph all State
and local property taxes on the smallest
practicable tract integrally related to the
subdivision project that would have been
incurred by the individual, corporation, or
trust on such land (excluding the value of
subsurface resources and timber) in the
absence of the exemption described in
paragraph (1)(A)(ii) during the thirty months
prior to the date of the recordation of the
plat.
(B) State and local property taxes
specified in subparagraph (A) of this
paragraph (together with interest at the rate
of 5 per centum per annum commencing on the
date of recordation of the subdivision plat)
shall be paid in equal semi-annual
installments over a two-year period
commencing on the date six months after the
date of recordation of the subdivision plat.
(C) At least thirty days prior to
final approval of a plat of the type
described in subparagraph (A), the government
entity with jurisdiction over the plat shall
notify the submitting individual,
corporation, or trust of the estimated tax
liability that would be incurred as a result
of the recordation of the plat at the time of
final approval
. . . .
(6) Savings.
. . . .
(B) Enactment of this subsection
shall not affect any real property tax claim
in litigation on the date of enactment
[February 3, 1988].
8 Since ANCSA contemplated a transfer of 44 million acres of
public land, an area larger than the state of Washington, raw
land is the general context in which Congress was speaking. As
the 1987 Senate Report states, the conveyance included "tens of
millions of acres of land which is only valuable as wildlife
habitat." S. Rep. No. 201, 100th Cong., 1st Sess. 21, reprinted
in 1987 U.S. Code Cong. & Admin. News 3269, 3271.
9 We do not imply that this is all "developed" means.
Obviously land which has been improved with buildings or other
structures is also developed. See Kenai Peninsula Borough v.
Tyonek Native Corp., __ P.2d __, Op. No. 3672 (Alaska, March 15,
1991).
10 The equal rights clause of the Alaska Constitution is
contained in article I, section 1, which provides "that all
persons are equal and entitled to equal rights, opportunities,
and protection under the law[.]"
11 State v. Fairbanks North Star Borough, 736 P.2d 1140, 1142
(Alaska 1987).
12 This point was raised by CIRI in its appeal to the
superior court.
13 Appellate Rule 510 provides:
(a) When Appeal Brought for Delay.
Where an appeal or petition for review shall
delay the proceedings in the trial court or
the enforcement of the judgment or order of
the trial court, and shall appear to have
been filed merely for delay, monetary
sanctions may be awarded in addition to
interest, costs and attorney's fees.
(b) Infraction of Rules. For any
infraction of these rules, the appellate
court may withhold or assess costs or
attorney's fees as the circumstances of the
case and discouragement of like conduct in
the future may require; and such costs and
attorney's fees may be imposed upon offending
attorneys or parties.
(c) Fines. In addition to its
authority under (a) and (b) of this rule and
its power to punish for contempt, the
appellate court may, after reasonable notice
and an opportunity to show cause to the
contrary, and after hearing by the court, if
requested, impose a fine not to exceed $500
against any attorney who practices before it
for failure to comply with these rules or any
other rules promulgated by the Supreme Court.
14 AS 29.45.500(a) provides:
(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.
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