Fred Schmid Appliance & Television Co. v. City & County of Denver , 811 P.2d 31 ( 1991 )

Justice QUINN

dissenting.

I respectfully dissent from the court’s holding that under the circumstances of this case the taxpayers, prior to exhausting their administrative remedies, are entitled to a declaratory judgment on the constitutional validity of Denver’s administrative procedures for challenging sales and use tax assessments.

Subject to narrow exceptions, we have adhered to the principle that a court lacks jurisdiction to grant judicial relief to a party involved in administrative proceedings when adequate administrative remedies are available to the party and such remedies have not been utilized by the party challenging the administrative process. E.g., Colorado Health Facilities Review Council v. District Court, 689 P.2d 617, 622 (Colo.1984); Gramiger v. Crowley, 660 P.2d 1279, 1281 (Colo.1983); State Personnel Bd. v. District Court, 637 P.2d 333, 335 (Colo.1981). This salutary requirement of exhaustion of administrative remedies prevents piecemeal interference by the judiciary in the administrative process and prevents judicial encroachment on the executive functions of government. Moschetti v. Liquor Licensing Authority of Boulder, 176 Colo. 281, 285, 490 P.2d 299, 301 (1971). We have made exceptions to the exhaustion requirement in narrowly defined circumstances where declaratory relief would avoid a multiplicity of actions and the issues involve a question of law beyond the competency or jurisdiction of the administrative agency, Hamilton v. City and County of Denver, 176 Colo. 6, 11, 490 P.2d 1289, 1294 (1971), and where the parties would suffer “ ‘irreparable injury’ and the agency action is ‘clearly beyond the constitutional or statutory jurisdiction or authority of the agency,’ ” Colorado Health Facilities Review Council, 689 P.2d at 622. The mere fact that a declaratory action is based on a constitutional challenge to the administrative procedures does not provide a warrant for judicial interference with an administrative agency in advance of final agency action. State Personnel Bd., 637 P.2d at 334.

There is no justification in this case to allow the taxpayers to dispense with the exhaustion requirement. The Denver Municipal Code provides taxpayers with adequate administrative remedies for challenging sales and use tax assessments. Section 53-50 of the Municipal Code states as follows:

The manager shall notify the petitioning retailer claiming an error in assessment ... in writing of the time and place within the city fixed for hearing at least thirty (30) days prior thereto. After such hearing, at which the manager is authorized to administer oaths and take evidence, and hear argument, the manager shall enter findings and make such order in the matter as is proper and furnish a copy to the taxpayer. Said findings and order shall constitute final decision of the manager in the matter.

Section 53-56 of the Municipal Code provides:

Should the taxpayer be aggrieved by the final decision of the manager, the taxpayer may proceed to have the same reviewed under Colorado Rule of Civil Procedure 106(a)(4), or such similar procedure for the issuance of a writ in the nature of certiorari, only by the district court for the second judicial district of the state. The petition or complaint for review by the district court must be filed within thirty (30) days from the entry of the manager’s decision and shall be the exclusive remedy to review the decision. Court proceedings shall be governed by the Colorado Rules of Civil Procedure as amended from time to time. Any party, including the city, may appeal the decision of the administrative tribunal and, also, the decision of the district court, using all appellate and extraordinary proceedings available. Unless otherwise provided by the Colorado Rules of Civil Procedure, and notwithstanding the provisions of section 29-2-106.1 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.

To be sure, these municipal procedures are different in many significant respects from the procedures authorized by statute. The statutory scheme, for example, permits a taxpayer challenging a sales or use tax assessment to elect an informal hearing before the local government and then, upon exhaustion of local remedies, to request a review by the executive director of the department of revenue. § 29-2-106.l(2)(b), (2)(c)(I) and (3)(a), 12A C.R.S. (1986). The statutory scheme, specifically section 29-2-106.1(3)(b), 12A C.R.S. (1986), permits a taxpayer to appeal a decision of the executive director to the district court in the manner provided in section 39-21-105, 16B C.R.S. (1982). This latter section authorizes a trial de novo in the Denver District Court in accordance with the Colorado Rules of Civil Procedure and places on the taxpayer the burden of proof with respect to the issues raised in the notice of appeal, except issues relating to fraud and an intentional evasion of the tax. Although the municipal procedures do not allow the taxpayer to exercise the same options permitted under the statute, the procedures authorized by the municipal code do provide the taxpayers with a complete, adequate, and speedy process for the resolution of protests to sales and use tax assessments. In light of the availability and efficacy of these procedures, there is no basis in this record to support a claim that the taxpayers would somehow be irreparably injured if required to exhaust their administrative remedies.

The taxpayers’ protests filed with the manager of revenue raise fact-specific issues clearly within the competence and authority of the manager to resolve. Although the question relating to the alleged primacy of the taxpayers’ statutory remedies over the remedies authorized by the Denver Municipal Code is a matter beyond the jurisdiction of the manager, that issue would be rendered moot by an administrative decision in favor of the taxpayers on their respective protests to the assessments. Even if the taxpayers lose on that issue, there clearly would be a final administrative decision on which the taxpayers could seek judicial review of their constitutional challenge to the administrative procedures as well as the validity of the tax assessments. Requiring the taxpayers to exhaust their administrative remedies, therefore, might well avoid an unnecessary decision on a constitutional question. More importantly, the application of the exhaustion rule to the circumstances of this case precludes needless disruptions of administrative proceedings in derogation of the manager of revenue’s performance of his assigned task.

Preempting an administrative proceeding whenever a party alleges a nonfrivolous constitutional question produces the very interference with the administrative process that the exhaustion doctrine is designed to prevent. See Ticor Title Ins. Co. v. F.T.C., 814 F.2d 731, 739-43 (D.C.Cir.1987) (Edwards, J., separate opinion). If the history of this case shows anything, it demonstrates the practical utility of, and the need for, the exhaustion requirement. The taxpayers’ disregard of the administrative process has spawned a multiplicity of judicial proceedings without any effective resolution of the validity of the sales and use tax assessments. After the taxpayers protested the sales and use tax assessments with the manager of revenue, they requested a continuance of the administrative hearing. The hearing officer continued the hearings and, before any consideration could be given to consolidating the hearings, the taxpayers filed a petition for declaratory relief in the district court. The district court dismissed the taxpayers’ complaint due to their failure to exhaust administrative remedies, and the taxpayers then appealed the judgment of dismissal. The court of appeals upheld the judgment, again relying on the exhaustion requirement. This court subsequently granted the taxpayers’ petition for certiorari and now holds that the case should be remanded to the district court for a hearing to determine the merits of the taxpayers’ constitutional challenge to the administrative procedures authorized under the Denver Municipal Code. Whatever decision the district court reaches on that issue will not resolve the validity of the taxpayers’ protest to the sales and use tax assessments.

I would accordingly affirm the judgment of the court of appeals.

I am authorized to say that Justice VOL-LACK and Justice MULLARKEY join in this dissent.