Summary
finding exhaustion irrelevant where taxpayers challenged the constitutionality of the administrative procedures themselves
Summary of this case from Board of Ed., Sch. Dist. 1 v. BoothOpinion
No. 90SC329
Decided May 6, 1991. Rehearing Denied June 3, 1991.
Certiorari to the Colorado Court of Appeals.
Eiberger, Stacy, Smith Martin, Rodney I. Smith, Roy A. Adkins, Paul F. Hodapp, for Petitioners.
Patricia L. Wells, City Attorney, Robert F. Strenski, Assistant City Attorney, Donald E. Wilson, for Respondents.
We granted certiorari to review the unpublished opinion of the court of appeals in Fred Schmid v. City of Denver, No. 89CA0065 (Colo.App. April 1, 1990), which held that administrative remedies must be exhausted before a declaratory judgment action may be filed to determine whether a conflict in procedures for administrative review set forth in the Denver Municipal Code and the Colorado Revised Statutes renders Denver's procedure unconstitutional. We reverse and remand with directions.
I
Between November 1987 and June 1988, Denver assessed sales and use taxes against Fred Schmid Appliance and Television Co., The Denver Post Corporation, May Department Stores Co., and Treasure Chest Advertising Co., Inc., (taxpayers) for the use and sale of preprinted newspaper advertising inserts. Denver Revised Municipal Code §§ 53-56 (sales tax) and 53-124 (use tax). The taxpayers filed petitions for cancellation of the assessments and requested an administrative hearing.
The taxpayers assert that the Denver ordinance and the state statute provide different methods for challenging sales and use tax assessments. The state statutory procedure provides for three de novo reviews of an assessment: a nonbinding informal hearing before the local manager of revenue, an optional appeal review of that decision by the Executive Director of the Colorado Department of Revenue, and a judicial review of any administrative determinations after the administrative process is exhausted. Section 29-2-106.1(2)(a) (b), 12A C.R.S. (1986). The procedure under the Denver ordinance is more restrictive and only permits review of the local revenue manager's decision by the district court, and, "notwithstanding the provisions of section 29-2-106, C.R.S., the standard of review by the district court shall be to determine only whether the manager has exceeded the jurisdiction or abused the discretion vested by this article in such office." Denver Revised Municipal Code §§ 53-56 and 53-124.
The taxpayers assert that the General Assembly, in enacting the statute in 1985, expressly found that the resolution of sales and use taxes is a matter of statewide concern and determined the procedure that should be applied uniformly throughout the state. Section 29-2-106.1(1). Denver contends that the statutory procedure is unconstitutional and has no application because Denver is a home rule city. Colo. Const. art. XX. Denver claims that the city council properly enacted the procedural provision in sales and use tax ordinances providing that, notwithstanding section 29-2-106.1, all appeals of sales and use tax assessments shall be governed by the Municipal Code and C.R.C.P. 106(a)(4).
The taxpayers filed suit for an injunction and sought a declaratory judgment in order to determine whether the procedures set forth in the statute or those in the city ordinance governed their respective protests to the sales and use tax assessments. The taxpayers contend that the procedure for administrative review set forth in the Denver ordinance conflicts with the procedure required by statute and is unconstitutional. The taxpayers did not contend that the sales and use tax was unconstitutional.
Such a ruling differs from one that would overturn the substantive result of an administrative determination, which would clearly require exhaustion and finality of that process before a court would have jurisdiction. See State Personnel Bd. v. District Court, 637 P.2d 333 (Colo. 1981).
Denver filed a motion to dismiss the declaratory judgment action, alleging that the taxpayers failed to exhaust their administrative remedies. The district court granted Denver's motion and held that since the taxpayers might convince the city manager that they owed no taxes, the court did not have jurisdiction to decide the constitutionality of the city ordinance. The court of appeals affirmed, citing Colorado Health Facilities Review Council v. District Court, 689 P.2d 617, 621 (Colo. 1984), for the rule that "courts will not interfere with agency proceedings until the agency has taken final action." The court of appeals concluded that because it is not the function of courts to adjudicate administrative orders in the absence of a showing that a judgment, if entered, would afford taxpayers relief, the taxpayers were required to exhaust their administrative remedies before they could challenge the constitutionality of Denver's ordinance.
II
The issue is whether a party challenging the constitutionality of an administrative procedure must first complete administrative review before seeking a declaratory judgment. We do not address or decide whether Denver, as a home rule city under article XX of the Colorado Constitution, may enact a procedure for administrative review of city sales and use tax assessments that is substantially different from the state procedure for administrative review of state sales and use tax assessments, which the General Assembly has declared to be of statewide concern.
A
Denver contends the taxpayers are seeking a declaratory judgment on a quasi-legislative decision of an administrative agency, and that a court has no jurisdiction to review quasi-legislative decisions of an agency, but may only review quasi-judicial decisions. See State Farm Mutual Auto Ins. Co. v. City of Lakewood, 788 P.2d 808, 813 (Colo. 1990). In the declaratory judgment action, the issue did not involve whether there was a quasi-judicial or quasi-legislative decision, but instead centered on the validity of the administrative proceedings enacted by Denver.
Denver points out that Collopy v. Wildlife Commission, 625 P.2d 994, (Colo. 1981), Toncray v. Dolan, 197 Colo. 382, 593 P.2d 956 (Colo. 1979), Colorado State Board of Optometric Examiners v. Dixon, 165 Colo. 488, 440 P.2d 287 (1968), and Colorado-Ute Electric Association, Inc. v. Air Pollution Control Commission, 648 P.2d 150 (Colo.App. 1981), all cited by the taxpayers, address a review of a quasi-judicial decision by an agency. We find that irrelevant for the purposes of resolving whether administrative remedies would be exhausted prior to a constitutional challenge.
Denver further contends that both the General Assembly and the Denver City Council intended that the taxpayers exhaust all administrative remedies before seeking judicial review of an agency decision. Section 29-2-106.1; Denver Revised Municipal Code §§ 53-56 and 53-124. The intent of the General Assembly and the Denver City Council are not relevant to the resolution of this case since the taxpayers are not seeking a review of a decision made by the agency, but are challenging the constitutionality of the procedure available to the taxpayer to review the agency's decision.
B
In Hamilton v. City of Denver, 176 Colo. 6, 11-12, 490 P.2d 1289, 1292 (1971), we held that state employees challenging the constitutionality of the application of Denver's city occupation and privilege tax need not exhaust their administrative remedies because the issues in the case were purely questions of law, and that the manager of revenue's "presumed expertise would not be helpful in resolving legal as distinguished from factual issues." See also Collopy v. Wildlife Comm'n, 625 P.2d 994, 1006 ("The principal justification for the exhaustion doctrine . . . becomes less persuasive . . . when the matter in controversy raises questions of law rather than issues committed to administrative discretion and expertise.").
We have also held that a party is not required to exhaust its administrative remedies when the administrative agency does not have the "authority to pass on the question raised by the party seeking judicial action." Gramiger v. Crowley, 660 P.2d 1279, 1281 (Colo. 1983). Because an administrative agency cannot pass upon the constitutionality of the legislation under which it acts, Kinterknecht v. Industrial Comm'n., 175 Colo. 60, 485 P.2d 721 (1971); Lucchesi v. State of Colorado, No. 89CA0967 (Colo.App. July 5, 1990), a party seeking review of the constitutionality of an agency's enabling legislation need not exhaust its administrative remedies. See Bonacci v. City of Aurora, 642 P.2d 4, 7 (Colo. 1982) (declaratory relief proper when petitioner challenged constitutionality of amendment to city ordinance, not the action of the agency).
Cf. People ex rel., Orcutt v. District Court, 167 Colo. 162, 445 P.2d 887 (1968) (petitioner must exhaust administrative remedies before he may file a writ of prohibition under C.R.C.P. 106).
We therefore return this case to the court of appeals with directions to remand to the district court for a hearing to determine whether the conflict between the Denver Municipal Code and the Colorado Revised Statutes renders Denver's ordinance governing administrative review unconstitutional.