Petition — Keyes v. District of Columbia

> sto elie 5 yy =

IN THE

Supreme Court of the Anited States

OctoBER TERM, 1976

No. 76-1169

ArTHuUR H. Keyes and Lucie Keyes, on behalf of

themselves and others similarly situated,

Petitioners,

Vv.

Tue District of CoLuMBIA, a Municipal Corporation

and WaLTEeR E. WASHINGTON, and KENNETH BAckK,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

DISTRICT OF COLUMBIA COURT OF APPEALS

Pune W. Amram

Grusert Haun, Jp.

11th Floor

1150 Connecticut Ave., N.W.

Washington, D. C. 20036

Attorneys for Petitioners

Mary Katuuszen Hire

JosepH S. Fin KELSTEIN

Worr, Brock, Scuorr anv Souis-Conen

1150 Connecticut Ave., N.W.

Washington, D. C. 20036

Of Counsel

INDEX

Page

Opinions Below. - +++ ++ +s « 2

Jurisdiction oo eo ee 3

Questions Presented --+-++ + «+ - 3

U. S. Constitutional Provision

OE ee a a ee Se 5

Statement of the Case - +++ « « 6

&

Reasons for Granting the Writ . .- 13

Conclusion - - « «© «© «© © «© © « « « 30 .

Appendix

Opinion of ‘the Court of Appveals- A-1l

Opinion and Order of the Superior

Court dated April 25, 1974 . .- A-16

Opinion and Order of the Superior

Court dated August 6, 1974 .- - A-60

Opinion of the Court of Appeals

in District of Columbia v.

Green . + . . . . . . . . . . A- 74

Order of the Court of Appeals

of February 26, 1976 -.- + + + A=-99

TABLE OF CITATIONS

Page

Cases: |

Atchison, Topeka & Santa Fe Ry. v. 16,19

O'Connor, 223 U.S. 280 (1912)... 29

Bolling v. Sharve, 347 U.S. 497

(1954) . . . . o o + . . + - . . . 15

Chicago, Burlington & Quincy R.

Co. v. Babcock, 204 U.S. 585

1907 7 > . a . . 7 . 7 > > ° > a. . 20

City of Franklin v. Coleman Bros.

Corpv., 152 F.2d 527 (lst Cir.,1945)

cert. denied, 328 U.S. 844 (1945). 19,20

Davis v. Wechsler, 263 U.S. 22

(1923) . - - - . a a . . . . . . 17

Demorest v. City Bank Farmers;

Trust Co., 321 U.S. 36 (1944)... 17

District of Columbia v. Green, 319 2,8,10,

A.2d 848 (D.C.App., 1973)... . . 14,15,

19,21,

27

Henry v. Mississippi, 379 U.S. 443

(1965) - . . . . . . . . . . . - - 17

Kingsford Chemical Co. v. Kings-

ford, 347 Mich. 91 (1956). .... 20

Lawrence v, State Tax Commission,

206 U.8. 276 (1932). « «© ec we eo @ 17

ii

Page

McLanahan v. State Tax Commis-

sion of Arizona, 4l1l U.S. 164

(1973) . * + o . . . . 7 . . 7 7 ‘ 29

Monger v. Florida, 405 U.S. 958

(1972) - . . - . . . . . . 7 . io > 17

Snowden v. Hughes, 321 U.S. 1

(1944) 7 . . - . - . . . - . . . . 16

Southern Pacific Company v.

Cochise County, 92 Ariz. 395, 377

DusG T7O (1963) « © © © © © © © o S5ea7

Ward v. Board of City Commissioners,

233 U.8. 17 (23920) « « © «© © « © © 4,49,

29,23,

24,30

Constitutional and Statutory Provisions:

Due Process Clause of the Fifth

ee a a a a a

6

7 Os SUPE sw wee oe 3

Title 1, D.C. Code §1501 et seq. . 7

iii

~ 7

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1976

ARTHUR H. KEYES and LUCILLE KEYES,

On behalf of themselves and others

similarly situated,

Petitioners.

Vv.

THE DISTRICT OF COLUMBIA, a Municipal

Corporation and WALTER E. WASHINGTON,

and KENNETH BACK,

Respondents,

PETITION FOR A WRIT OF CERTIORARI TO THE

DISTRICT OF COLUMBIA COURT OF APPEALS

Arthur H. Keyes, et al., petitioners,

appellees below, respectfully pray that a

writ of certiorari issue to review the

a2

judgment of the District of Columbia Court

of Appeals entered on July 23, 1976 in

District of Columbia v. Keyes, No. 8790.

OPINIONS BELOW

The Opinion of the Court of Appeals

in the instant case is reported at 362 A.

24 729 (1976) and is reprinted in the |

Appendix, infra, p. A-l.

The Opinions of the Superior Court of

the District of Columbia, Tax Division,

in the instant case, are unreported and are

reprinted in the Appendix, infra, p. A-16

and p. A-60- The Opinion of the District

of Columbia Court of Appeals in the prior

companion case of District of Columbia v.

Green is reported at 310 A.2d 848 (1973)

and is reprinted in the Appendix, infra,

p. A-74.

-3-

JURISDICTION

The judgment of the District of Colum-

bia Court of Appeals was initially entered

on July 23, 1976. Petitioners' Petition ~

for Rehearing or Rehearing En Banc was

timely filed on September 16, 1976, and

was denied by the Court of Appeals on

November 26, 1976. On December 27, 1976

the Court of Appeals filed an order

granting a stay of mandate for the period

of time permitted by law for the filing

of a petition for a writ of certiorari.

The jurisdiction of this Court is invoked

under 28 U.S.C. §1257(3).

QUESTIONS PRESENTED ,

1. Where a municipality has col-

lected from 34,000 of its 96,000 home-

owners unconstitutionally discriminatory

taxes, averaging less than $50 per tax-

payer, by concealing and misrepresenting

its assessment formulae, and by deceit of

-4-

its citizen-taxpayers, may the local

court frustrate the taxpayers’ enforce-

ment of their federal right to refund

by

(a) requiring the action for

refund to be brought under the local

statutory administrative procedure

and to be brought at a date prior to

the discovery of the concealment,

misrepresentation and deceit, and

(b) transforming the legal

right to a refund into a right based

on “equitable principles", and

(c) asserting invalid non-

federal grounds to avoid enforce-

ment of the federal right to refund,

particularly by asserting (1) that

a refund of the unconstitutionally

discriminatory taxes would be a

precedent; (2) that the municipality

has spent the taxes unconstitu-

-5-

tionally collected; (3) that the *

municipality has budgetary problems;

and (4) that the grant of an injunc-

tion against future collection of

the unconstitutionally discrimina-

tory taxes for future years is a

full and adequate remedy to the tax-

payers?

2. Can a federal right to refund of

an unconstitutionally discriminatory tax,

unknown to the taxpayer because of se-

crecy, concealment and deceit on the part

of.the taxing suthecity be frustrated by

the application of local rules of proce-

dure which forbid all recovery by the in-

jured taxpayer, who moves promptly for

recovery after the unconstitutionality is

revealed?

CONSTITUTIONAL PROVISION INVOLVED

The Fifth Amendment to the United

States Constitution provides in part:

-6=

---nor [shall any person] be |

deprived of...property, with- |

out due process of law... |

STATEMENT OF THE CASE |

Prior to fiscal year 1973 all the |

96,000 single-family residential proper-

ties in the District of Columbia were

assessed for real estate tax purposes in |

the same way. The fair market value of

the property was reduced to a fixed per-

centage known as the “level of assess-

ment". Prior to fiscal year 1973 the

"level of assessment" was 55 percent of

fair market value for all single-family

properties. (App. pp. A-2, A-77.)

In preparing the assessments for

fiscal year 1973, the responsible offi-

cials of the District of Columbia charged

with the administration of the tax laws,

acting secretly and without notice to the

public as required by the District of

Columbia Administrative Procedures Act,

-7-

Title 1 D.C. Code §1501 et seg., raised

the level of assessment for approximately

34,000 of the 96,000 homeowners in the

city from 55 to 60 percent. (App. pp.

A-63/65.) The tax for fiscal year 1973,

based upon these secret and unrevealed

unequal assessments was levied and col-

lected from the taxpayers in question.

(App. pp. A-63/65.)

In preparing the assessments for

the following fiscal year 1974, the same

officials of the District raised the

level of assessment for an additional

44,000 of the 96,000 homeowners from 55

to 60 percent. However, before the taxes

were levied and collected for fiscal year

1974, the discriminatory assessments were

"reluctantly made public" by the District

of Columbia officials in June, 1973, dur-

ing the trial of an action brought to

enjoin the fiscal year 1974 taxes and en-

titled Green v. District of Columbia.

Accordingly, the Superior Court of the

District of Columbia enjoined the levy

and collection of these taxes for fiscal

year 1974 as unconstitutional as denying

equal protection as read into the Fifth

Amendment. The District of Columbia Court

of Appeals affirmed. District of Columbia

v. Green, 310 A.2d 348 (1973). (App. p.A-74)

The trial court in Green, quoted in

the opinion of the Court of Appeals in

Green, supra, alternatively characterized

the conduct of the District as "surround-

ed by unfairness, secrecy and lack of

candor" and as "deceit of the populace”.

(App. p. A-80) For purposes of this Peti-

tion, we will refer throughout to the

shorter definition, "deceit".

The instant case (Keyes) was there-

upon filed as a class action to recover

the unconstitutional tax levied and paid

a ete ne ae eens A ee a ~

-9-

by the 34,000 homeowners for fiscal year

1973, at a time prior to the revelation

of the deceit of the District officials.

The trial court ordered a refund of the

unconstitutional tax collected. (App.

pp. A-69/73.) The trial court ignored

the defense of the District that tax-

payers had failed to take timely adminis-

trative appeals, and directed refund of

the unconstitutional taxes.

On appeal, the District of Columbia

Court of Appeals acknowledged the taxes

to have been unconstitutionally levied

and collected, but nevertheless reversed.

The court held that taxpayers were not

entitled to relief because they had fail-

ed to take timely administrative appeals.

The court rejected the position of the

trial court that the deceit on the part

| of the District officials excused the

taxpayers from taking administrative

-10-

appeals from secret and concealed offi-

cial action. (App. vp. A-5/8.)

The Court of Appeals also held that

the taxpayers were not entitled to re-

lief for fiscal year 1973 because, among

other reasons, refunding the unconstitu-

tional taxes would establish a precedent,

the District's budget was tight, the Dis-

trict had already disbursed the unconsti-

tutionally collected taxes, and the court

had already granted the taxvayers full

relief in Green, by enjoining the unconsti-

tutional taxes for the later fiscal year

1974. (App. pp. A-8/15.)

In effect, the Court of Appeals

treated the taxpayers’ suit not as a de-

mand for refund based on unconstitu-

tional action, but as a suit for refund

under the District of Columbia Code and

on "equitable principles".

The fundamental federal questions of

-ll-

the federal constitutional rights of the

taxpayers were first raised by taxpayers

in their initial pleading,the Petition

in the Tax Division of Superior Court,

as follows:

6. Petitioners and upon in-

formation and belief, the approxi-

mately 34,000 other taxpayers simi-

larly situated, were deceived by

respondents into believing that

their property taxes for Fiscal Year

1973 were being increased solely

because the estimated market value

of their homes had risen, and did

not know until their time for tak-

ing administrative appeals had

expired that the increased assess-

ments were not due entirely to

market value increases and that

all taxpayers were not assessed

at the same level of assessment

(debasement factor) for Fiscal

Year 1973.

* . . *

9. As a result of the res-

pondents' above stated actions,

the petitioners and the approxi-

mately 34,000 taxpayers similarly

situated have been deprived of

due process afforded them by the

Fifth Amendment to the United

States Constitution and have been

deprived of their rights under

the District of Columbia Adminis-

-12-

trative Procedure Act.

These questions were ruled in favor

of the taxpayers by the trial judge in

the Opinion of the trial court. (App.

pp. A-37, A-54/6, A-66/7.)

The question of the need for admin-

istrative appeals was raised sua sponte

by the Court of Appeals after argument in

its Order of February 27, 1976 (App. pp.

A-90/91) as follows:

- + are the appellees in this

case barred from the relief

sought by reason of their failure

to pursue their statutory reme-

dies in seeking refunds for the

fiscal year here involved?

After a detailed analysis of this

issue, Petitioners said:

No case in the District

of Columbia, and no case we have

found anywhere in the United

States, has ever held that a

municipal corporation, in ad-

ministeringits taxing author-

ity, may profit from its own

wrong and the defrauded citizen

will be without any remedy.

This would reach constitutional

-13-

levels of the taking of proper-

ty without due process of law.

Other alleged non-federal grounds for

avoiding enforcement of the taxpayers'

federal rights appear in the opinion of

the Court of Appeals.

REASONS FOR GRANTING THE WRIT

A. This proceeding involves impor-

tant questions of due process, with res-

pect to the refund to 34,000 homeowners

of unconstitutionally levied and collect-

ed real estate taxes, pursuant to uncon-

stitutional discrimination and deceit on

the part of the officials of the munici-

pality.

B. This proceeding involves an

important and novel application of the

principle that the enforcement of a fede-

ral constitutional right in a real estate

tax refund case may not be frustrated by

the application of inadequate local non-

federal grounds to avoid enforcement of

-14-

the federal constitutional rights of tax-

payers.

I.

This case involves no right under

local law. The only right which plain-

tiffs sought to enforce is a federal

right under the Constitution. This is

clear in the opinion of the Superior

Court (App. pp. A-66/68) and is conceded

in the opinion of the Court of Appeals

(App. p. A-5). The Court of Appeals

could not have done otherwise, since it

had already decided in Green that the

District's action was unconstitutional.

(App. pp. A-3, A-85/86) As the Court of

Appeals said in Green:

But the District did not follow

this course. Instead, as the

record shows, it chose to apply

different debasement factors to

the same class of property in

the same year and, in so doin

denied the a llees al pro-

tection of the laws by aiscetat-

nating among residential tax-

ee

-15-

payers.15/ (Apo. pp- A-85/86)

(Emphasis supplied.)

15/ Bolling v. Sharpe,

A

347 U.S. A§ 4) reads the

Fourteenth Amendment equal pro-

Ses chasse of tho Fife

Amendment to apply it to the

District of Columbia.

The Superior Court had enforced the

federal right here. The Court of Appeals

reversed and denied enforcement of the

federal right.

In so doing, the Court of Appeals

erroneously treated the plaintiffs’

cause of action, not as one for the en-

forcement of a federal constitutional

right, but as a cause of action (1)

under the District of Columbia Code,

and (2) under “equitable principles”.

(App. p. A-4.)

This Petition is filed to seek re-

view in this Court of the propriety of

the denial and destruction of the fede-

-16-

ral rights of the petitioner taxpayers.

The recognition of a federal right,

based on denial of equal protection,

to refund of unconstitutionally dis-

criminatory taxes is not novel. Ward v.

Board of City Commissioners, 253 U.S.

17 (1920); Atchison, Topeka & Santa Fe

Ry. v. O'Connor, 223 U.S. 280 (1912).

This is particularly true if the uncon-

stitutionality, as here, is "due to a

purposeful discrimination", evidenced

by "a systematic under-valuation of the

property of some taxpayers and a sys-

tematic over-valuation of the property

of others". Snowden v. Hughes, 321 U.S.

1, 9 (1944) and cases cited therein.

II.

The Court of Appeals refused to en-

force the federal right of the taxpayers.

Each reason given was an asserted invoca-

tion of a local non-federal ground.

-17-

Each reason was invalid and will be

separately discussed hereafter.

This Court has reserved to itself

the right to determine whether an assert-

ed non-federal ground (whether substan-

tive or procedural) is adequate to defeat

a federal right, and prevent review by

this Court. Demorest v. City Bank Far-

mers' Trust Co., 321 U.S. 36, 42 (1944)

and cases cited in footnote 5; Lawrence

v. State Tax Commission, 286 U.S. 276,

282 (1932); Davis v. Wechsler, 263 U.S.

22 (1923); Henry v. Mississippi, 379

U.S. 443 (1965). And see the excellent

collection of cases in Monger v. Flori-

da, 405 U.S. 958 (1972). |

This is a classic case for the appli-

cation of the rule.

Itt.

The principal ground stated by the

Court of Appeals to defeat the taxpayers'

-18-

federal right, which occupies four pages

of the court's opinion, is the failure

of the taxpayers to pursue the statutory

administrative procedure of the District

of Columbia Code.

The Court of Appeals applied the

following principle:

Recovery of taxes illegally or

erroneously assessed and volun-

tarily paid was not permitted at

common law and is a mater with-

in the purview of the legisla-

tive brach. Therefore, refunds

of taxes so assessed and paid

will not be made absent an

authorizing statute. (App. p.

A-5.)

From this, it imposed an absolute

duty in this case upon the taxpayers to

follow the statutory administrative reme-

dies for fiscal year 1973 (App. p. A-6).

All this would be relevant if the

payments here had been "voluntary". But,

by the very foundation of this case, the

payments for fiscal year 1973 by the Peti-

-19-

tioners were “involuntary”.

As the Court of Appeals said in

Green (App. p. A-80) quoting the Superior

Court in Green with approval:

10/ In its words: "The court

is not persuaded by this argu-

ment and cannot believe that

Congress intended that the

statute be subverted to include

deceit of the populace, by

either unintentional oral and

written misinformation (at

best) or by deliberate mis-

statement (or deliberate omis-

sion) of oral and written in-

formation (at worst).”

Where, as here, the payments were

innocently made by the taxpayers in

reliance upon the representations of the

taxing authorities, and without any know-

ledge of their "deceit", the payment

should be deemed "involuntary" for the

purpose of their refund. Atchison, Tope-

ka & Santa Fe Ry. v. O'Connor, 223 U.S.

280 (1912); Ward v. Love County, 253 U.S.

17 (1920); City of Franklin v. Coleman

-20-

Bros. Corp., 152 F.2d 527 (1945) cert.

den. 328 U.S. 844 (1945); Chicago, Burl-

ington & Quincy R. Co. v. Babcock, 204

U.S. 585 (1907); Kingsford Chemical Co.

v.. Kingsford, 347 Mich. 91 (1956).

As a result, the right of the tax-

payers to a refund in this case is not

statutory. It is a common law right,

"independent of any statute”, and with-

out any obligation to follow any statu-

tory administrative procedure. The

statutory administrative procedure is

not exclusive; the taxpayers need not

follow it. Ward, supra; City of Frank-

lin, supra.

Refusal of refunds of the unconsti-

tutional taxes cannot be based upon any

alleged failure of the taxpayers to pro-

ceed through the administrative process.

Further, even if the taxpayers were

required to undertake the administrative

el

-2l-

procedure, failure to undertake it could

not be used in this case to defeat the

federal right.

The Court of Appeals in Green (App.

p. A-80) had affirmed a findir; of the

trial court in that case that:

- « »Since the six named peti-

tioners (appellees) who by-

passed the Board could not have

known of the changed level of

assessment until it was reluc-

tantly made public in this law-

suit in June, 1973, they were

unable'to pursue the adminis-

trative remedy created by sta-

tute prior to cut off date of

April 1, 1973. —_

The trial court in Keyes, on the

basis of this earlier finding of the Court

of Appeals, found that the taxpayers:

- « ecould not have known of

the changed level of assess-

ment until June, 1973 and were

accordingly denied viable access

to the statutory administra-

tive procedure within the per-

missible time. (App. p. A-54)

In the face of the decisions of this

Court cited above, the Court of Appeals could

-22-

not validly refuse to enforce the federal

right because of an alleged procedural

errer of the taxpayers in failing to ini-

tiate an administrative proceeding at a

time when the existence of the claim for

refund was unknown and unknowable be-

cause of the "deceit" oi the District

officials.

IV.

The Court of Appeals suggests that

the refund of the taxes in this case

would be a precedent, ostensibly an un-

desirable one. The argument is a fallacy.

The precedents already exist in the

opinions of this Court cited above.

V.

The Court of Appeals suggests that

the refund of the taxes should be refused

because the District has already spent

the money which it received.

This point has already been rejected

oe Po

-23-

by this Court. In Ward, supra, the de-

fendant had disbursei a portion of the

moneys collected to the state and other

municipal bodies. This Court rejected

this as a defense and held that, in

legal contemplation, the county had re-

ceived the money "for the use and bene-

fit of the claimants and should respond

to them accordingly". Ward, supra, at

p. 24.

VI.

The Court of Appeals suggests that

the federal right to refund should be

rejected because of the budgetary pro-

blems of the District.

We have found no case in this Court

or in any United States Court of Appeals

which has denied taxpayers their federal

right to the refund of unconstitutional

taxes because of the financial burden on

the municipality to make the refund.

-24-

The actior of the Court of Appea,s -

in reversing the Superior Court on this

ground amounts to a negation of the

taxpayers’ federal right and, in the

words of Mr. Justice van Devanter, in

Ward, supra, constitutes a taking of

their property without due process of

law.

Further, as a practical matter, the

whole amount in issue here is in the

range of 1.1 to 1.6 million (App. p. A-13).

The District's budget, a matter of public

record, exceeds 1,000 million. The

amount in issue is at most 1/15th of 1%

of the District's current budget. One

major fire for which the District may

be responsible or a dozen or so major

trespass cases during the year could

lead to judgments of an equivalent

amount. Should recovery on such judg-

ments be denied because of budgetary

-25-

stringency? And can these deceived tax-

payers be put into a second-class status

because of budgetary stringency?

The only authority cited by the

Court of Appeals is Southern Pacific Co.

v. Cochise County, 92 Ariz. 395, 377 P.

2d 770 (1963). (App. p. A-11)

This was an action based on alleged

over-valuation of railroad property and

the refusal of the Board of Equalization

to grant relief. Suit was brought for

refund of a portion of the taxes and for

an injunction for the future.

The lower court dismissed the com-

plaint. The Supreme Court of Arizona

reversed and remanded the case for trial

on the request for injunction, but affirm-

ed the dismissal of the cause of action

for refund.

The opinion (377 P.2d at 777-8) in-

terprets the Arizona Constitution and

-26-

the powers of the State Tax Commission.

It finds (exactly the opposite of the

present case) that all the assessments

and all the actions of the Commission

and all the overvaluation of railroad

property were matters of public know-

ledge and “notoriety”, and that any

overvaluation had been in effect "for

many years”.

The court found, under these facts,

that the railroad's payments were "volun-

tary". It found that the railroad, having

had full knowledge of all the facts for

years, was required to "scrupulously fol-

low the statutory procedures” which it

had not done.

It found the railroad responsible

for its own position and chastised it

for its laches. It found that the rail-

road had permitted municipal bond issues

to be floated in reliance on the assess-

eee ee oe ——— TT

@-27-

ment system under attack. It noted criti-

cally that the railroad

- « ehas not until now sought

the assistance of this Court

to compel a discontinuance of

what has long been the settled

practice. Such non-action so

long continued culminates in

the present threat to the exis-

tence of government itself.

Southern Pacific Co. v. Cochise

County, supra, at p. 778.

It is difficult to conceive of a

case more inapposite.

Vit.

Finally, the Court of Appeals sug-

gests that the grant of the injunction

in Green against the unconstitutional

discrimination for fiscal year 1974 is a

full and complete remedy for the unconsti-

tutional discrimination for fiscal year

1973.

In other words, where there is an

admitted unconstitutional discrimination

and the exaction from 34,000 taxpayers of

-28-

unconstitutional taxes, the federal right

to refund, required by the constitution

and the decisions of this Court, will be

fully satisfied by a decree which says to

the municipality:

"Gentlemen, you may keep all

the money you unconstitutionally

exacted, but do not do it again

in any future years."

This is not hyperbole; it is exactly

what the Court of Appeals said (App. p.

A-15):

In Green, we went as far as

equity requires us to go and

so we will not go further here.

The Court of Appeals misunderstood

the nature of this case. The right in-

voked here is not a discretionary right,

which a chancellor may grant or refuse

as he chooses. The right invoked is a

legal right, constitutional and federal

in nature. Its rejection is a taking

of property without due process of law.

ae _—_ ——--. ee - +

-29-

It is true that this proceeding is

‘a class suit for 34,000 plaintiffs, but

the use of the class action device does

not convert the federal constitutional

right into a lesser right which the

court may reject in its discretion. cf.

McLanahan v. State Tax Commission of

Arizona, 411 U.S. 164 (1973).

As Mr. Justice Holmes said in Atchi-

son, supra, at p. 285, the taxpayer's

right is "an action at law to recover

back what he has paid". As we noted

earlier under point I, this is not an

action for refund under the District

of Columbia Code nor is it an action for

refund “under equitab’e principles".

(App. p. A-4)

The use of the form of a class

action cannot change the constitutional

nature of the federal right.

-30-

CONCLUSION

In the absence of review by this

Court, the Court of Appeals of the Dis-

trict of Columbia will have successfully

frustrated 34,000 homeowners of the City

of Washington in the enforcement of their

federal constitutional rights, and will

have permitted the District authorities,

in the words of Ward, supra, to appro-

priate their property without due process

of law.

Petitioners respectfully urge that

the writ of certiorari issue.

Respectfully submitted,

PHILIP W. AMRAM, ESQ.

GILBERT HAHN, JR., ESQ.

llth Floor

1150 Connecticut Ave.,N.W.

Washington, D. C. 20036

Attorneys for Petitioners

APPENDIX

A-1

DISTRICT OF COLUMBIA COURT OF APPEALS

No. 8790

THE DISTRICT OF COLUMBIA, a Municipal Corporation,

and

WALTER E. WASHINGTON, and KENNETH BACK,

APPELLANTS,

Vv.

ARTHUR H. KEYES, JR., and LUCILLE KEYEs,

On behalf of themselves and others similarly situated,

APPELLEES.

Appeal from the Superior Court of the

District of Columbia

(Argued December 5, 1974 * Decided July 23, 1976)

Louis P. Robbins, Principal Assistant Corporation

‘Counsel, with whom C. Francis Murphy, Corporation

Counsel at the time the brief was filed, Henry E. Wixon

and Richard L. Aguglia, Assistant Corporation Counsel,

were on the brief, for appellants.

Gilbert Hahn, Jr., with whom Jack C. Sando was on

the brief, for appellees.

Before KELLY and GALLAGHER, Associate Judges, and

Parr, Associate Judge, Retired.

* At the court’s request, supplemental post-argument mem-

oranda were submitted by the parties in March 1976.

A=-2

GALLAGHER, Associate Judge: This is an appeal

from the Tax Division of the Superior Court of the Dis-

trict of Columbia. The appellees, Arthur H. Keyes, Jr.

and Lucille Keyes, filed suit, on behalf of themselves and

others similarly situated, against the District of Colum-

bia, Mayor Walter E. Washington, and the Director of

the Department of Finance and Revenue, Kenneth Back,

appellants, for partial refunds of taxes paid in fiscal year

1973 on all single-family residential properties in the

District of Columbia which were assessed at 60% of

estimated market value. The trial court held that the

appellees are entitled to the relief sought. We reverse.

During calendar year 1971, the level of assessment’

on approximately one-third of the single-family residen-

tial properties* in the District of Columbia was raised

from 55% to 60% of estimated market value for fiscal

year 1973.* This change in the level of assessment was

part of a plan by the Department of Finance and Reve-

nue of the District of Columbia to achieve a phased in-

crease in the debasement factor (level of assessement)

for all single-family residential properties in the District

* The level of assessment is also known as the “debasement

factor” or “multiplier.” This element in the tax computation

is the percentage of estimated market value upon which the

tax is levied. The assessed value or assessment for an individ-

ual piece of real property is obtained by multiplying the esti-

mated market value of the property by the level of assess-

ment. Thus, a dwelling valued at $100, 000 is assessed at

$55,000 if a 55% debasement factor is applied and at $60,000

if a 60% debasement factor is applied.

* It is estimated that this suit involves approximately 34,000

properties.

* Assessments of real property are made an a calendar

year basis for the subsequent fiscal year. Fiscal year 1973 ran

from July 1, 1972 to June 30, 1973.

A-3

of Columbia. Appellants seek to have their refunds meas-

ured by the difference between their actual tax bills

which they paid for fiscal year 1973 (for which a 60%

debasement factor was applied) and the lower tax bills

which they would have received if a 55% debasement

factor had been applied, plus 6% interest per annum.

In May 1978, an earlier class action was brought by

several single-family residential property taxpayers to

enjoin the District of Columbia from using unequal levels

of assessment in taxing singie-family residential proper-

ties for fiscal year 1974. This court, in District of Co-

lumbia v. Green, D.C.App., 310 A.2d 848 (1973) (here-

inafter Green), affirmed the trial court and held that

the District of Columbia’s “stairstep” approach to achieve

an increased debasement factor for all single-family resi-

dential properties was unconstitutional as it resulted in

different debasement factors being applied to the same

class of property in the same year.‘ Injunctive relief

was granted for fiscal year 1974, and the “stairstep”

plan was prohibited.

The present suit was brought as an uncertified* class

‘action to recover that portion of fiscal year 1973 residen-

* District of Columbia v. Green, supra at 855. Yet not ail

inequalities in the assessment of property taxes are necessarily

unconstitutional. To illustrate, it has occurred frequently that

taxpayers pay different tax bills on property of identical

values due to the inability of the assessors to value all prop-

erty every year. This particular type of lack of equalization

between taxpayers has been held “permissible because caused

by logistical problems which may be temporarily beyond the

power of the city to correct.” District of Columbia v. Green,

supra at 856. We there concluded, in effect, that this —

factor was not reasonably established.

‘The trial judge held that certification as a class action

and notice to members of the class were unnecessary because

A-4

tial property taxes paid which was attributable to the

increase of 5% in the level of assessment.‘ The District

of Columbia appeals the decision of the trial court grant-

ing refunds to the taxpayers on the grounds that (1)

under traditional principles of equity and tax reform

litigation only prospective relief should have been granted;

(2) refunds should not have been granted without proof

that appellees bore a substantially disproportionate share

of the real property tax burden; (8) the trial judge

erred in not permitting the District of Columbia to prove

that appellees did not bear a substantially dispropor-

tionate share of the real property tax burden; and (4)

the trial court erred in permitting appellees to proceed

as a class for refunds without certification and individual

notice. We hold that appellees are not entitled to refunds

either under the statutes of this jurisdiction or by virtue

of equitable principles.

The trial court held, insofar as pertinent here, (1)

that under the doctrine of collateral estoppel the legal

and factual issues as they relate to the conduct of appel-

lants are controlled by the result in Green, and (2) that

the rules applicable to the Tax Division omitted any mention

of class action procedures. We note that effective September

3, 1975, Super. Ct. Civ. R. 28, 23-I and 23-II were incor-

porated by reference into the Tax Division rules, and pur-

ported class action tax suits are now subject to the same

criteria with respect to prerequisites, maintainability, and

notice as other civil suits. See Super. Ct. Tax R. 8.

* Notices of tax assessments for fiscal year 1973 were sent

out during the period from November 1, 1971 to March 1,

1972. April 2, 1972 was the last day to appeal to the Board

of Equalization and Review for any tax assessment for fiscal

year 1973. In September 1972 the first installment on prop-

erty taxes for fiscal year 1973 was due, with the second and

final installment due during the month of March 1973.

A-5

under principles of equity it would be inappropriate to

deny refunds in this case. We believe that, even if the

first holding were assumed to be correct, the second is

not.

Preliminarily, we observe that this suit was brought

in equity and was decided solely on equitable grounds. No

statutory remedy was sought or granted and one of the

premises of appellees’ approach to this litigation is that

their potential legal remedies, if any, were inadequate.

The rationale of the trial court is essentially that because

appellees were held to be entitled to injunctive relief in

Green, they are ipso facto entitled to tax refunds in this

case.

Recovery of taxes illegally or erroneously assessed and

voluntarily paid was not permitted at common law and

is a matter within the purview of the legislative branch.

Therefore, refunds of taxes so assessed and paid will not

be made absent an authorizing statute. District of

Columbia v. McFall, 88 U.S.App. D.C. 217, 188 F.2d 991

(1951) ; Lindner v. District of Columbia, D.C.Mun.App.,

32 A.2d 540 (1943)." Under the statutory procedure

* See also, e.g., Snyderman v. Isaacs, 31 Ill. 2d 192, 201

N.E.2d 106 (1964); People ex rel. City of Highland Park v.

McKibbin, 380 Tll. 447, 44 N.E.2d 449 (1942), cert. denied,

$18 U.S. 778 (1948) ; People ex rel. Eitel v. Lindheimer, 371

Ill. 367, 21 N.E.2d 318, appeal dismissed sub nom., Illinois

ex rel. Eitel v. Toman, 308 U.S. 505 (1939); Drummond v.

Maine Employment Security Comm’n, 157 Me. 404, 173 A.2d

353 (1961) ; Baltimore County v. Churchill, Ltd., 271 Md. 1,

313 A.2d 829, appeal dismissed, 417 U.S. 902 (1974) ; Comp-

troller of the Treasury v. Campanella, 265 Md. 478, 290 A.2d

475 (1972); Wasena Housing Corp. v. Levay, 188 Md. 383,

52 A2d 908 (1947); Universal Film Exchanges, Inc. v.

Board of Finance and Revenue, 409 Pa. 180, 185 A.2d 542

(1962), cert. denied, 8372 U.S. 958 (1963) ; Calvert Distillers

Corp. v. Board of Finance and Revenue, 376 Pa. 476, 103

A.2d 668 (1954). -

A-6

applicable to this case, the recovery of refunds through

appeal to the Superior Court requires, as a first step, a

complaint to the Board of Equalization and Review.'

Subject matter jurisdiction of the Superior Court does

not attach until that prerequisite has been satisfied,’ and

a refund based on a final determination of the Superior

Court presupposes that the taxpayer has complied with

the procedure mandated by the legislature. If “ag-

grieved” for any reason, the taxpayer must appeal

within the permitted time to the Board of Equalization

and Review. D.C. Code 1978, § 47-709. This was not

done in this case. The taxpayers failed to follow their

administrative remedies for fiscal year 1973.

*D.C. Code 1973, § 47-709 reads in pertinent part:

Any person aggrieved by any assessment, equalization

or valuation made may within six months after October

1 of the year in which such assessment, equalization, or

valuation is made, appeal from such assessment, equali-

zation, or valuation in the same manner and to the same

extent as provided in sections 47-2403 and 47-2404; Pro-

vided, however, That such person shall have first made

his complaint to the Board of Equalization and Review

respecting such assessment as herein provided ....

This language is also codified in D.C. Code 1978, § 47-2405.

The relevant portions of these code provisions were repealed

effective June 30, 1975, and the above requirement is now

found in D.C. Code 1975 Supp., § 47-646 (i).

D.C. Code 1978, § 47-2407 reads:

Any sur finally determined by the Superior Court to

have been erroneously paid by or collected from the tax-

payer shall be refunded by the District to the taxpayer

from its annual appropriation for refunding erroneously

paid taxes in said District.

* Payment in full of the tax due is also jurisdictional. See,

e.g., George Hyman Constr. Co. v. District of Columbia,

D.C.App., 315 A.2d 175 (1974); District of Columbia v.

Berenter, 151 U.S.App.D.C. 196, 466 F.2d 367 (1972).

A-7

Appellees contend that the administrative remedies

could not have been pursued by any of the taxpayers for

fiscal year 1973 because of prior concealment of the

“stair-step” plan by District officials. In Green, how-

ever, we noted that three petitioners “ascertained the

existence of, and raised as an issue, the increased level

of assessment of their properties” before the Board of

Equalization and Review for fiscal year 1974. District

of Columbia v. Green, supra at 851. These taxpayers not

only pursued their administrative remedies but in the

process also discovered the now prohibited practice of

applying different debasement factors to similarly situ-

ated taxpayers. Consequently, we cannot assume, as the

trial court did in the case now before us, that a timely

administrative challenge to the 1973 taxes for the pur-

pose of obtaining refunds was unavailable or would have

been fruitless. The 1973 taxpayers were just as aware

as the 1974: taxpayers that their tax bills had been

increased.

In Green, we with the trial court that the cir-

an oe So es Seoacetaary ak rte Oa

jt would be inequitable to allow those who had bypassed

the Board to proceed immediately with the action for

before proceeding. Our conclusion was: “The evidence

a consequence, it was not error to entertain the [com-

plaint] for injunction.” District of Columbia v. Green,

supra at 853. Thus, we specifically limited our analysis

to the context of the relief sought.” That is to say,

we

%*° Tumulty v. District of Columbia, 69 U.S.App.D.C. 390,

102 F.2d 254 (1939) was cited in Green for the proposition

that when ar assessment is void, resort to equity may be had

A-3

held only that the circumstances before the court were

so extraordinary as to warrant a prohibitive writ re-

straining the practice for fiscal year 1974 and subsequent

years. Appellees argue that we should extend this hold-

ing to the instant refund case for the prior fiscal year of

1973. We disagree and hold that equitable intervention

is not justified in this case.™

Moreover, even assuming it were appropriate to apply

the principles of equity to the facts before us, we do not

without following statutory remedies. District of Columbia

v. Green, supra at 853. Tumulty, however, involved the ques-

tion of whether an invalid District of Columbia tax claim,

filed in a receivership proceeding, could be attacked in that

proceeding by parties with other claims against the company

in receivership. The United States Court of Appeals held

that equity would permit such a collateral attack on the tax

claim. Hence, the relief sought and granted in Tumulty was

preventive in nature (because it precluded assertion of the

invalid tax claim) and therefore analogous to the injunctive

relief sought and granted in Green, but not applicable to the

refunds sought here.

1 We note that the fiscal year 1974 taxpayers who resorted

to the Board of Equalization and Review and raised the issue

of unequal debasement factors found the Board unresponsive

to their arguments. Hence, in Green, where only injunctive

relief was sought, we stated that a taxpayer in that case had

“no meaningful ability to challenge his assessment at all”

A-9

believe that appellees would be entitled to refunds. Re-

gardless of the specific context involved, the distinguish-

of equity jurisdiction is “. . . the power of

to do equity and to mouid each decree to

necessities of the particular case.” Hecht Co. v.

Bowles, 321 U.S. 321, 329 (1944). Thus, it is charac-

teristic of a court of equity that it must take a compre-

hensive view of the issues before it; and as a result its

extraordinary remedies are to be meted out with care.

Where the public interest is involved,

{elourts of equity may, and frequently do, go

much farther both to give and withhold relief

in furtherance of the public interest than they

are accustomed to go when only private inter-

ests are involved. Pennsylvania v. Williams,

294 U.S. 176, 185; Central Kentucky Gas Co. v.

Railroad Commission, 290 U.S. 264, 270-273;

Harrisonville v. W. S. Dickey Clay Co., 289

U.S. 334, 338; Beasley v. Texas & Pacific Ry.

Co., 191 U.S. 492, 497; Joy v. St. Louis, [138

US. 1,] 47; Texas & Pacific Ry. Co. v. Marshall,

136 U.S. 393, 405-406; Conger v. New York,

W. S. & B. R. Co., 120 N. Y. 29, 32, 33; 23

N. E. 983. [Virginian Ry. v. System Federation

40, 300 U.S. 515, 552 (1937) (emphasis added).

See also United States v. First National City

Bank, 379 U.S. 378 (1965) and cases cited

therein at 383.]

This principle was applied in Blair v. Freeman, 125

U.S.App.D.C. 207, 370 F.2d 229 (1966) which involved

a marketing regulation of the Secretary of Agriculture

who authorized premium payments to dairy farmers in

certain locations. The payments were made from a

settlement fund or equalization pool intended to appor-

tion among producers the benefits and burdens of varia-

A-10

tions in the fluid milk market. One side effect of the

Secretary's order was to reduce statutorily mandated

uniform minimum prices received by other farmers not

in the specified geographical areas; and this adversely

affected group sought a declaratory judgment and an

injunction restraining enforcement of the regulation.

The trial court dismissed the complaint and the United

States Court of Appeals reversed and granted declara-

tory and injunctive relief but excluded the possibility of

refunds * for the following reason:

Appellants have invoked the aid of equity in

seeking a declaration of their rights and the

prevention of further interference with them.

We are concerned lest a declaration of invalidity

in the context of such an action be deemed to

require refund of moneys illegally paid and re-

ceived under an invalid order. A court of

equity may tailor its relief with a critical and

balanced view of the ramifications of its deci-

sion, including in the overall public interest a

consideration of the interests of those not before

the court. [125 U.S.App.D.C. at 217, 370 F.2d

at 239 (footnote omitted) .]

In treating the refund issue, the court considered a

variety of factors including the complexity of the re-

coupment and refund process, the large sums of money

and large number of farmers involved, the long delay in

filing suit, the difficulty in determining if the plaintiffs

% The court recognized that litigation as to refunds was

imminent because the appellants’ interest in the settlement

fund was sufficient to confer standing for such a suit and

because the appellants had sought an order requiring an es-

crow pendente lite. 125 U.S.App.D.C. at 217 n.89, 370 F.2d

at 239 n.39.

A-11

had received offsetting advantages from other aspects of

the equalization system, and the fact that the court was

convinced that under all of the circumstances “the pro-

ducers benefited are not necessarily to be held to ac-

count for an ultra vires action taken by the Secretary

in what he conceived to be the public interest.” 125

U.S.App.D.C. at 217, 370 F.2d at 239 (footnote omitted).

We do not mean to say that these considerations are

dispositive of the issue before us, or even that all are

relevant to the case at hand. Rather, we recite them

because they demonstrate the mode of analysis which

should be applied by a court of equity in cases such

as this.

Prospective application of judicial decisions is a prac-

tice often followed, particularly where retrospective

operation of a decision would create economic hardship

which would. outweigh the beneficial effect of retro-

activity.”

In Southern Pacific Co. v. Cochise County, 95 Ariz.

395, 377 P.2d 770 (1963) (en banc) it was held that

while real property taxes based on discriminatory assess-

ments had been illegally collected from a taxpayer rail-

road, only prospective injunctive relief would be

granted** because “[t]he refund which appellant seeks

13 This doctrine is sometimes applied when a decision over-

rules prior law or regulation. See, ¢.g., Safarik v. Udall, 113

U.S.App.D.C. 68, 304 F.2d 944, cert. denied, 371 U.S. 901

(1962) ; Arizona State Tax Comm’n v. Ensign, 75 Ariz. 376,

257 P.2d 392 (1953) ; State v. Martin, 62 Wash. 2d 645, 384

P.2d 833 (1963).

% Unlike the situation here, the practices complained of in

Southern Pacific, supra, had existed openly for many years

with only perfunctory protests from the affected taxpayer.

We do not believe, however, that the factual difference is a

A-12

together with other similar claims threatens the financial

solvency of many taxing units of the state... .”"* 95

Ariz. at ——, 377 P.2d at 778. Significantly, the court

so held despite the fact that the taxpayer relied upon a

statutory provision which allowed for refund of illegally

collected taxes. On this point, the court said:

The State’s grace does not extend to its own

destruction. Clearly this was not within the

contemplation of the legislature in the enact-

ment of the refunding statute. [95 Ariz. at

——, 377 P.2d at 778.]

In their presentations both here and in the trial court,

appellees have stressed that the District’s treatment of

this matter, although perhaps well intentioned, was not

characterized either by candor or adherence to principles

of good fiscal management, but this does not justify the

granting of refunds. However erroneous such practices

have been found to be, they cannot, consistently with the

objects of equity jurisprudence, be viewed in isolation

significant one. Although the Arizona Supreme Court was

critical of the inaction on the part of the railroad in the face

of long-standing discriminatory assessment, the refunds sought

were for only one-half of one fiscal year (rather than for the

entire period of discrimination) and the decision not to grant

refunds was based on that demand, which “together with

other similar claims” posed a threat to governmental sta-

bility.

* Although refunds were not at issue, much the same con-

siderations were taken into account by the three-judge dis-

trict court in Weissinger v. Boswell, 330 F. Supp. 615 (M.D.

Ala. 1971). In that case, Alabama’s ad valorem property tax

program was held discriminatory and unconstitutional but

expressing concern about the fiscal impact of its decision, the

court allowed the Commissioner of Revenue up to one year

from the date of its opinion to equalize assessments. Jd. at

625.

P-]3

or without regard to the practical consequences which

the requested retrospective relief would have. This court

is confronted with the task of attempting to reconcile

pe ag Fagen equity, these being the financial in-

terest of the assumedly wronged appellees on the one

hand, and the financial interest of the District of Colum-

as it relates to all of

hand.

bia

the other

the

aeaeaien aa to this court that an average of

yard taxpayer is at stake here and that the aggregate

to

people whom it serves, on

refunds aaah t in this, particular litigation would amount

from $1.1 million to $1.6 million. Appellees state

that 7 dhe refund amount would be insignificant in

light of the District’s budget of approximately $1 billion,

and a 4 District has recently foregone greater sums

by voluntarily reducing the debasement factor applied to

commercial property from 65% to 55%.

We do not agree. The sums at issue here are not in-

significant by any realistic standard, whether absolute

or relative; and this decision may be considered to have

precedential effect in future class action tax refund cases.

‘ The funds collected for fiscal year 1973 have already

been disbursed for governmental purposes which have

benefited all of the citizens of the District of Columbia

and the refunds sought here would have to be financed

** Another implication of appellees’ arguments has been

that they seek by means of this suit to serve a general in-

terest in good government by encouraging fairness and open-

ness on the part of officials of the District. We believe, how-

ever, that this interest has been vindicated by the result in

Green.

17 Appellees’ estimates below were an average refund of

approximately $50 per taxpayer, with some as little as $10 or

less and a total of $1.5 to $1.75 million.

A-14

through increased taxes or decreased services. It has

been stated in a somewhat similar situation, ae

a]s government is dependent on taxation for

oe aniiaeantinn the local subdivision that levied

the illegal or unconstitutional tax would have

to tax the taxpayers to raise the necessary

money to return to them the illegal or unconsti-

tutional tax collected. In other words, the tax-

payers would have to be paid the illegal tax,

paid by them, out of their own pockets. Such

a ceremony would be idle and vain. [Dupre v.

City of Opelousas, 161 La. 272, ——, 108 So.

479, 481 (1926).]

Thus, not only did the taxpayers not pursue the statu-

hae procedures, but under these particular circumstances

the adverse impact of refunds on the entire citizenry of

the District outweighs the economic interest of the prop-

erty owners who paid the taxes at issue.”

~ Appellees in this case have come to the courts seeking

equity but equity has already been done by the first

Green case, supra, where a mandatory injunction was

affirmed despite this jurisdiction’s anti-tax injunction

statute. D.C. Code 1973, § 47-2410." After a balancing

28 The second opinion of this court in District of Columbia

v. Green, D.C.App., 348 A.2d 305 (1975) is not to the con-

trary. Our decision there was simply an implementation of

the first Green case (310 A.2d 848 (1973)) and it did not

run to tax refunds for a prior fiscal year.

*D.C. Code 1973, § 47-2410: “No suit shall be filed to

enjoin the assessment or collection by the District of Colum-

bia or any of its officers, agents, or employees of any tax.

Injunctive relief notwithstanding the existence of an anti-

tax injunction statute is not entirely unprecedented, but it

may be granted only in the most exceptional and stringent

circumstances. Bob Jones Univ. v. Simon, 416 U.S. 725 (1974) ;

A-15

of all interests in this case, we conclude that the public

interest would be disserved by a grant of the refunds

sought. In Green, we went as far as equity requires us

to go and so we will not go further here.

While application of the principles of equity occasion-

ally may be appropriate in tax litigation (¢.g., Green)

it would hardly aid the financial stability of this city if

this court were to relax the statutory requirements of

our Code as they relate to tax litigation and superimpose

equity jurisprudence on these statutory requirements.

This should be done only in a rare case (e.g., Green).

Otherwise, financial instability would be promoted. Tax

statutes are necessarily formalistic and often technical.

It is essential that we adhere to their technicalities, even

if at times a seeming hardship results to the taxpayer.

See, ¢.g., George Hyman Construction Co..v. District of

Columbia, D.C.App., 315 A.2d 175, 178 (1974). Among

other things, fiscal considerations require that this be

done. Where class action tax refunds for fiscal years in

the past are at issue, the relief sought would not ema-

nate from some inexhaustible treasury. The reality is

that the funds could only be supplied by an additional

tax on innocent taxpayers,” or the reduction of services,

in an already financially beleaguered city. Only in ex-

traordinary circumstances, not here present, should the

equity relief sought be afforded.

Accordingly, the judgment of the trial court is

Reversed with instructions

to dismiss the complaint.

moe v. Williams Packing and Navigation Co., 370 U.S. 1 °

1962).

“gi This would include taxpayers in the class here seeking

A-16

SUPERIOR COURT OF THE

DISTRICT OF COLUMBIA

TAX DIVISION

ARTHUR H. KEYES, JR., et al.,

Petitioners

Vv. NO. 2214

THE DISTRICT OF COLUMBIA,

et al.,

Respondents

OPINION AND ORDER

This matter is before the Court pursuant

to the action denominated as Taxpayers'

Suit for Refund of Tax for Fiscal Year

1973 Illegally Assessed which, in essence,

seeks refunds for approximately 34,000

persons owning single-family residential

property in the District of Columbia (in-

cluding residential garages and vacant

land zoned for single family residential

use).

It is alleged that these 34,000 persons

were taxed, and paid their taxes, for

Fiscal Year 1973 at a level of assessment

A-17

(debasement factor) of 60 percent of esti-

mated market value and that these tax-

payers should be assessed for taxation at

the same level of assessment (debasement

factor) of 55 percent of estimated market

value as were assessed some 62,378 other

owners of single-family residential pro-

perty in the District of Columbia for the

same Fiscal Year 1973.

The Petitioners aver that fixing a level

of assessment for real property is rule-

making within the meaning of the District

of Columbia Administrative Procedure Act

and that failure to give notice to the

District of Columbia single-family resi-

dential property owners that the level

of assessment of their properties was in

the process of change, deprived the tax-

payers of the due process afforded by the

D.C.A.P.A. and invalidated the increased

taxes assessed at 60% of estimated market

A-18

value.

It is also contended that the inten-

tional and arbitrary actions of Respon-

dents in applying unequal levels of

assessment (55% and 60%) to estimated

market value within the same class of

single-family residential properties is

violative of the Fifth Amendment rights

under the Constitution of the United

States of the Petitioners and others

similarly situated to them.

As a result of the above, the Peti-

tioners request refunds which are to be

measured by the difference between the

tax bill rendered and vaid for Fiscal

Year 1973 at a level of assessment of

60% of estimated market value and the

tax bill as it should have been assess-

ed for Fiscal Year 1973 at a level of

assessment (debasement factor) of 55% of

estimated market value, plus interest at

6% per annum.

eer a ae

A-19

The Respondents have answered that the

petition fails to state a claim upon

which relief can be granted and that this

Court is without jurisdiction to hear and

determine this matter; they also deny the

tax bills for Fiscal Year 1973 were in

any way illegally rendered, deny Petition-

ers can maintain this action as a class

action for themselves and all others claim-

ed to be similarly situated and deny they

have violated the D.C.A.P.A. or that the

taxpayers have been deprived of the due

process required by the D.C.A.P.A. They

do:

",..-admit that all taxpayers were

not assessed at the same level of

assessment (debasement factor) for

Fiscal Year 1973..."1/

At the same time the taxpayers’ suit

was filed and Respondents answered, the

District of Columbia Court of Appeals had

17 Answer of Respondents, Par. 6.

yet to hear argument and render decision,

on an expedited basis, in Green, et al

v. District of Columbia, et al., D.C.App.,

310 A.2d 848 (1973). Accordingly, ina

motion to place the instant case upon the

reserve calendar pending the Green deci-

sion, Respondents referred to Petitioners'

contention that the present case involves

the same Respondents and similar Peti-

tioners and a claim of res judicata for

facts and questions of law decided June

29, 1973 in Green, and said that "[w]hen

a decision is rendered by the appellate

court, this case may be governed by that

decision."

Thereafter, Respondents moved to ex-

tend the time in which to file their

response to Petitioners’ Motion to Sub-

mit Case Without Trial until 30 days

after final decision was reached in

Green, supra.

Pn Nid

nha Bekah WC Rae

A-21

"...According to Petitioners,

the final decision on that appeal

would be res judicata of the pre-

sent case for both facts and ques-

tions of law. Thus, in accor-

dance with Petitioners’ premise,

until that case is finally decided

it would be undesirable for this

Court to require an answer to

Petitioners’ Motion..."

After the appellate decision in Green,

although specifically stzting they had no

objection to the Green trial record becom-

ing part of this Keyes trial proceedings,

the Respondents formally opposed Petition-

ers' Motion to Submit Case Without Trial

because:

"Respondents herein wish to

proffer to this Court the testi-

mony of witnesses to fully pre-

sent the assessment system used

by the District for purpose of

real property taxation for Fis-

cal Year 1973."2/

"While the District of Columbia

presented explanations in a trial

A-22

before this Court in Clarzell

Green, et al. v. District of

Columbia et al, D.C. Tax Court

Case 3313, District of Columbia

Court of Appeals 7539, it was

limited in its amplification of

the tax assessment methods be-

cause the hearing was conducted

as an expedited proceeding."3/

Also, Respondents contended that, ab-

sent certain unspecified procedures to

be followed by Petitioners in order that

the matter be handled as a class action,

those procedures entered in a case before

another Judge of this Court could be fol-

lowed in this one.

The Respondents claimed that it did not

admit facts averred by the Petitioners

nor did they stipulate to any facts.

In consideration of the above on Novem-

ber 21, 1973 this Court denied Peti-

tioners' Motion to Submit Case Without

Trial and set the trial date, alterations

of which have resulted for several rea-

A-23

Subsequently, for the convenience of

the litigations and also in light of the

Court's other and continuing judicial

maton it was agreed between

counsel and the Court that there would

first be a determination of the Peti-

tioners' plea of res judicata or colla-

teral estoppel by judgment, and Respon-

dents’ Opposition to same, prior to the

commencement of testimony, if any, in

this cause. If the Court agreed with

Petitioners’ contentions, a hearing with

accompanying testimony and documentation

would become unnecessary. If the Court

agreed with Respondents’ position, the

hearing would be scheduled to completion

with temporary suspension of the Court's

other responsibilities.

Accordingly, Petitioners filed their

47 Felony II assignment through January 1974;

Arraignment Court for 1974;

Misdemeanor Trials for March 1974;

Preliminary Hearings for April 1974.

' Ap24

Motion for Judgment on the grounds of

collateral estoppel by judgment or res

judicata and Memoranda of Law in support

thereof. The Respondents have filed

their Opposition in the nature of a Mem-

Orandum and oral argument was heard on

the 5th of March 1974.

The Court agrees with the Petitioners,

as expressed in their oral argument, that

the principle of collateral estoppel, not

the principle of res judicata, is appli-

cable here. Lawlor v. National Screen

Service Corp., 349 U.S. 322, 75 S.Ct. 865,

99 L.Ed. 1122 (1955), relied on by both

parties, well defines the effect of the

doctrine of collateral estoppel.

"The basic distinction," said

Chief Justice Warren, "between the

doctrines of res judicata and

collateral estoppel, as those

terms are used in this case, has

frequently been emphasized. Thus,

under the doctrine of res judi-

cata, a judgment ‘on the merits’

in a prior suit involving the same

parties or their privies bars a

A-25

second suit based on the same

cause of action. Under the doc-

trine of collateral estoppel, on

the other hand, such a judgment

precludes relitigation of issues

actually litigated and determined

in the prior suit, regardless of

whether it was based on the same

cause of action as the second suit."

See, also, Tutt v. Doby, 459 F.2d 1195

(1972), 148 U.S.App.D.C. 171.

In the classic case of Cromwell v.

County of Sac, 2/ illustrating the dis-

tinction between the direct effect of a

judgment as res judicata and its colla-

teral effect, Justice Field stated:

"...where the second action be-

tween the same parties is upon

a different claim or demand,

the judgment in the prior action

operates as an estoppel only

as to those matters in issue or

points controverted, upon the

determination of which the find-

ing or verdict was rendered.

In all cases, therefore, where

it is sought to apply the estop-

pel of a judgment rendered upon

one cause of action to matters

arising in a suit upon a dif-

ferent cause of action, the in-

57 940.S. 351, 352-353, 24 L.Ed. 195 (1877).

A-26

guiry must always be as to the

point or question actually liti-

gated and determined in the origi-

nal action, not what might have been

thus litigated and determined. Only

upon such matters is the judgment

conclusive in another action."

The principle of collateral estoppel em-

braces matters both of fact and law, and

it is clear that one must look to the plead-

ings forming the issues and must examine

the record for a determination of the ques-

tions essential to the decision of the

earlier litigation:

1. Whether the issue sought to be

concluded is the same as that

involved in the prior action?

2. Was the issue litigated in the

prior action?

3. Was the issue judicially deter-

mined in the prior action?

4. Whether the judgment in the prior

action was dependent upon the de-

termination made of the issue?6/

67 CE. poited Shoe Machines Corp. v. United -

States, U.S. S.Ct. 363, 66 L.Ed.

708 (1922). If the parties could have reasonably

foreseen the conclusive effect of their action,

eminent authority holds the principle of colla-

teral estoppel properly applicable. Moore's Fed.

Prac.Vol.1B,§0.444; Tutt v. Doby, supra, at p.1200.

A-27

If the above questions are affirmative-

ly answered, the issue is concluded under

the doctrine of collateral estoppel.

Or, to put it another way: the essence

of collateral estoppel by judgment is

that some fact or question in dispute has

been judicially and finally determined by

a court of competent jurisdiction between

the same parties or their privies. If

the second action involved a different

claim, different demand or different

cause, the judgment in the first suit

operates as a collateral estoppel only

as to those matters which were in issue

or controverted and upon the determina-

tion of which the original judgment

necessarily depended.

As noted, the doctrine of collateral

estoppel is operative where the second

action is between the same persons who

were parties to the first action.

"A judgment for the plaintiff

A-28

in the first action may have

the effect of enabling him to

recover in the second action

without p i the facts con-

stituting~ “eause of action,

provided that those facts were

litigated and determined in the

prior action; but the defendant

is not precluded from defending

the second action on grounds not

litigated and determined in the

first action."7/

These rules are also applicable

"...to periodic taxes, such as

successive income taxes or pro-

perty taxes. If in an action be-

tween the taxing authority and

the taxpayer an issue of fact is

litigated and determined by a

judgment with reference to the

tax on one year, the determina-

tion is conclusive if the same

issue is raised between the tax-

ing authority and the taxpayer

with reference to the tax of a

subsequent year."8/

The doctrine of estoppel by judgment

has long been applied in the Federal

7/7 Restatement of Judgments (1942) §68a, at

p. 295.

8/ Restatement of Judgments (1942) §68c, at

p. 299.

A-29

Courts in the tax field. The case of

Com'r. v. Sunnen,= (concerning federal

income tax consequences of intra-family

assignments of income) held that a prior

income tax judgment is res judicata only

in

"...a subsequent proceeding in-

volving the same claim and the

same tax year",

and confined the doctrine of collateral

estoppel to

",..-Situations where the matter

raised in the second suit is

identical in all respects with

that decided in the first pro-

ceeding and where the control-

ling facts and applicable legal

rules remain unchanged."10/

With application of the doctrine of res

judicata it has been repeatedly held that

the parties are concluded in a suit for

one year's tax as to the right or question

adjudicated by a former judgment respect-

97 333 U.S. 591, 68 S.Ct. 715, 92 L.Ed. 898

1948).

A 'r. v. Sunnen, supra, 333 U.S. 591,

9-600.

| A-30

ing the tax of an earlier year. City of

New Orleans v. Citizens' Bank, 167 U.S.

371, 17 S.Ct. 905, 42 L.Ed. 202:

"It follows, then, that the mere

fact that the demand in this

case is for a tax for one year,

and the demands in the adjudged

cases were for taxes for other

years, does not prevent the

operation of the thing adjudged,

if, in the prior cases the ques-

tion of exemption was neces-

sarily presented and determined

upon identically the same facts

upon which the right of exemp-

tion is now claimed." (at p. 398)

Compare, also, among others, Tait v.

Western Maryland Ry. Co., 289 U.S. 620, 53

S.Ct. 706, 77 L.Ed. 1405; Deposit Bank v.

Frankfort, 191 U.S. 499, 24 S.Ct. 154, 48

L.Ed. 276.

By application of collateral estoppel

both the government and the taxpayer are

relieved of "redundant litigation of the

identical question of the statute's appli-

, 11

cation to the taxpayer's status."

ay Tait v. Western Maryland Ry. Co., supra, at

A-31

Collateral estoppel attempts to pre-

clude the repeated controversy of mat-

ters once judicially determined, aiming

for judicial finality. It is considered

"...a reasonable measure calcu-

lated to save individuals and

courts from the waste and burden

of relitigating old issues."12/

Compare the applicability of collateral

estoppel to criminal proceedings as an

integral part of the protection against

double jeopardy guaranteed by the Fifth

and Fourteenth Amendments. Once an issue

of ultimate fact has been determined by

valid and final judgment, that issue can-

not again be litigated between the same

parties in any future law suit, Ashe v.

Swenson, 397 U.S. 436, 90 S.Ct. 1189, 25

L.Ed.2d 469; Harris v. Washington, 404

U.S. 55, 92 S.Ct. 183, 30 L.Ed.2d 212

(1971).

127 Tillman v. National City Bank of New York

(CCA 2d, 1941) F.2d 631, 634, cert. den.

(1941), 314 U.S. 650, 62 S.Ct. 96, 86 L.Ed. 521.

A-32 .

Even when the precise question for de-

termination in a second action (automo-

bile operator-host's negligence versus

his passenger) has not been litigated in

a technical sense, where the factual and

legal issues in the two actions (passen-

ger v. host and motorist; other motorist

v. host) are

"...SO interrelated that the re-

sult in General Sessions [deny-

ing recovery to the host against

the other motorist on the ground

that both parties were negligent]

is properly dispositive of the

subsequent action for contribu-

tions." Brightheart v. McKay, 420

F.2d 242, l U.S.App.D.C. 400

(1969):

"...The critical question in the

application of collateral estop-

pel is whether the parties have

had a full opportunity to liti-

gate the issue on which they are

estopped...Here, estoppel is in-

voked as against the person who

initiated the action in General

Sessions as plaintiff. There is

every reason to believe he exert-

ed his full energies to obtain

recovery, and sought to avoid any

determination of negligence on

his part..." (fn. 4)

A-33 .

In its dual function of protecting the

public interest in sound judicial adminis-

tration and protecting litigants against

needless, oft-times oppressive, court

action, collateral estoppel attains the

end result desired: final, but just, de-

termination of every suit.

Respondent's contentions that they now

wish to "fully" present the District's

assessment system, although *hey "present-

ed explanations" in the Green trial echoes

the refrain sounded by appellant in Tait

v. Western Maryland Ry. Co., supra.

Tait's appellant argued that the Circuit

Court of Appeals:

"...might well have reached a

different result on the merits,

if the former case had been

more fully and accurately pre-

sented."

The Supreme Court disagreed, holding:

"...the very right now contest-

ed arising out of the same facts

appearing in this record, was

adjudged in the prior proceeding

A-34

..-The [appellant] may not es-

cape the affect of the earlier

judgment as an estoppel by show-

ing an inadvertent or erroneous

concession 43 to the material-

ity, bearing or significance of

the facts, provided, as is the

case here, the facts and the

questions presented on those

facts were before the court when

it rendered its judgment..."

It has been held by the Maryland Court

of Appeals that where it was determined

that the taxpayer (a military preparatory

school) was entitled to a tax exemption

for the year 1950 for certain land by rea-

son of its use for educational purposes,

the doctrine of estoppel by judgment was

applicable to a claim for a tax on the

same properties against the same parties

for another tax year (1954). State Tax

Commission for Maryland v. Bullis School,

Inc., 218 Md. 558, 147 A.2d 849 (1959).

In the Bullis case appellee had made a

proper showing to establish a tax exemp-

tion for the year 1950 which necessi-

tated a finding that. the property's use

A-35

was for educational purposes entitling

an exemption under the appropriate Mary-

land statutes. Since the original case

there was

",..no material change in the

law, the parties and the proper-

ty are the same es in the pre-

sent case, and the only testi-

mony taken...showed that the use

of the property for the taxable

year 1954 was the same as in

1950."

Since the Maryland appellate court could

find no questions to be determined in the

second action that were not fully liti-

gated in the original case, it affirmed,

with costs, holding that the doctrine of

estoppel by judgment was properly applied

by the court below.

Determination in the case of Green, et

al. v. District of Columbia, et al., D.C.

App., 310 A.2d 848 (1973), was made after

_ Mumerous pretrial motions and rulings,

substantial discovery (primarily by de-

positions and computer runs), a full hear-

A-36

ing lasting five days, extending over

approximately 1,000 pages of transcript,

detailed findings of fact and conclu-

sions of law rendered in a 60 page

Opinion and order ,22/ and terminating

in a comprehensive 16 page Court of

Appeals affirmance 2’ which, as does the

trial court's Opinion and Order, dis-

cusses at length the history of real pro-

perty tax assessment in the District of

Columbia. Findings and conclusions are

made both in the trial and appellate

courts concerning not only Fiscal Year

1974 (the Green case enjoined Respon-

dents from unequally assessing a certain

Class of taxpayers for Fiscal Year 1974)

but also concerning Fiscal Year 1973.

137 Wash. L. — Vol. 101, No. 172, p. 1737;

No. 173, p. ; No. 174, p. 1761 (1973).

14/ Green, et al. v. District of Columbia, et

al., D.C-App. 310 A.2d 648 (1973).

A-37

The Keyes suit claims refunds for Fiscal

Year 1973 based on precisely the same

substantive issues that confronted the

Green trial court:

1. Whether the level of assessment

used to determine the assessed

value of single-family residen-

tial real properties in the Dis-

trict of Columbia was increased

from 55 percent of estimated

market value to 60 percent of

estimated market value in viola-

tion of the “rule-making” pro-

visions of the District of

Columbia Administrative Proce-

dure act?

2. Whether failure of the taxpay-

ers to timely avail themselves

of, and exhaust, administrative

remedies precludes the [refund]

relief now sought?

3. Whether the relief sought for

petitioners should be granted

for the benefit of all owners

of single-family residential

real property in the District

of Columbia?

4. Whether unequal levels of

assessment (55 to 60 percent of

estimated market value) were

used for single-family residen-

tial properties in the same tax

year in violation of the Fifth

Amendment to the Constitution

of the United States?

A-38

As they originally did in the Green

case, Respondents contend in the Keyes

case that the petition fails to state a

Claim upon which relief can be granted;

that this Court is witheuwt juvtebiontons

that the tax bills rendered for Fiscal

Year 1973 were in no way illegally ren-

dered; that this matter is not maintain-

able as a class action. The Respondents

further deny that they have violated the

District of Columbia Administrative Pro-

cedure Act or that the taxpayers have

been deprived of the due process required

by that Act.

It must be noted that when Respondents'

Answer to Keyes was filed the Green deci-

sion stili pended. Subsequently, three

months after the Green decision, Respon-

dents filed their Opposition to Motion

for Judgment on the Grounds of Collateral

Estoppel by Judgment or Res Judicata and

on March 5, 1974 presented oral argument

A-39

as to this matter. In both their written

and oral argument, after the Green deci-

sion, Respondents concede that a class

action might be appropriate but only if

done in some unspecified manner:

"We have a class action. Fine.

We're not contesting that this

May very properly be. We're

saying if we have a class

action, let's do it properly.

And let's do it, since we're do-

ing it with refunds, let's do

it in a way...that that will

close the question once and for

all." (transcript of proceedings,

Mar. 5, 1974, p. 13,14)

It is difficult, however, to comprehend

Respondent's position, which slips and

slides, dependent on whether it was formu-

lated in pleadings before the Green deci-

sion or in written/oral argument after

the Green decision. To wit:

Respondents are not objecting to Peti-

tioner's attempt to have this case tried

as a class action--

"...{but] failure to have this

case properly certified as a

A-40

class action may work to the detri-

ment of respondents should they

prevail..." (p. 6, Respondent's

Opposition to Motion for Judgment

on the Grounds of Collateral Es-

toppel by Judgment or Res Judicata).

Yet, in the very same paragraph, Respon-

dents state that "in no way [do they] waive

any objections that they may make at such

time as a proper motion to certify this

case as a class action is filed with the

court.”

In an incredible position, the Respon-

dents contend, three months after the

appellate decision in Green, that:

"Respondents note that they

are not certain that all sin-

gle family residential property

represents a class in a refund

suit and suggest that certain

questions such as whether each

single family residential pro-

perty is in fact solely occu-

pied by the owner, or is rental

property, or, although occupied

by the owner has income pro-

ducing units therein, may well

have to be addressed by the

Court at such time as a proper

motion is filed.”

A-41 15/

Even though the Court of Appeals

refers over and again to the "single-

family residential class" (p. 854),

"same class of property (residential

taxpayers),”" (p.855), “same class" (p.

855), “one class of real property”;

"single family residential property

and other classes of real property";

"one class of single-family residen-

tiel property owners", “single class

of residential property owners" (p.

857), Respondents are "not certain

that all single family residential

property represents a class in a re-

fund suit", and, in effect, would re-

quire some 34,000 separate hearings

to determine answers to the questions

they pose above.

Nowhere now, as to defenses, as to new

sy Seas SE ab. v. Hsteict of Columbia, ot

A-42

questions of fact, do Respondents claim

that the merits of the matter would en-

title them to prevail on the fiscal year

assessment and taxes. In effect, all

they say is that new sales assessment

ratio studies concerning Fiscal Year

1973 have been performed since the Green

trial. They say further, through their

attorney, that:

"The District of Columbia has

no intention of attempting...

to have the District rehash the

facts that were proven in the

previous case...the District was

not and did not see fit to put

on testimony in depth and detail

with regard to a claim for re-

fund...[{the Green case was an in-

junction suit concerning Fiscal

Year 1974]...finding that this

was an impermissible...level of

assessment, with regard to cer-

tain householders,...this does

not ipso facto give rise to a

refund...there is an entirely

different body of law that is in-

volved...”

And, later, continuing the same argument

in generalities:

"I will state...that under the

facts as already established and

A-43

under the additional facts that

the District of Columbia wishes

to put before the court with re-

gard to Fiscal Year 1973 that

under the overwhelming majority

law in the United States of

America, the petitioners are

not entitled to a refund of

taxes for Fiscal Year 1973,

whether they be brought in in-

dividual cases or whether they

be brought in the form of a

‘class action." (transcript of

oral argument, Mar. 5, 1974,

at pp. 21-22)

Let us, therefore, look to see what

Respondents have conceded by virtue of

their prior pleadings or briefs, and

what has been decided by the Court in

Green, et al. v. District of Columbia,

et al., which may permit or preclude

the use of the doctrine of collateral

estoppel.

Respondent's trial brief, filed in

the Green case, on June 23, 1973, is

clear:

"In calendar year 1971, the

level of assessment was raised

from 55% to 60% on approxi-

mately one-third of single

family residentia] properties

A-44

for FY 1973;..." (p. 31)

In the trial court's Opinion and Order

in the Green case it stated as follows:

"In fiscal year 1973 there were

37,290 changes of all kinds in

the assessments in the District

of Columbia of which approxi-

mately 34,193 (99.61%) were at-

tributable to changes in single

family residential property

levels of assessment.

"In fiscal year 1974 there were

45,364 changes of all kinds in

the assessments in the District

of Columbia, of which approxi-

mately 40,056 (88.3%) were at-

tributable to changes in single

family residential property

levels of assessment." (Trial

court's Opinion and Order)

Wash. L. Rep., Vol. 101, No.

173, at p. with

The taxpayer received and paid his tax

bill on real property in the same manner

in Fiscal Year 1973 as he was required to

do for Fiscal Year 1974. (See Opinion

and Order in Green detailing these steps,

Wash. L. Rep., Vol. 101, No. 173, at p.

1749.)

The Court of Appeals expostulated in

A-45

detail the way an individual real pro-

perty owner's tax liability was formu-

lated. Upon receipt of a tax bill there

were appeal procedures for an unhappy

taxpayer, first by complaint to the

Board of Equalization and Review and,

subsequently, by appeal to the Tax Divi-

sion of the Superior Court.

"...in a planned cyclical re-

assessment program, conceived

and orally implemented by the

Director of Finance and Revenue,

the level of assessment for

approximately 33,000 single-

family residential properties

was changed from 55% to 60% for

Fiscal Year 1973, and, in pre-

paring the tax rolls for Fiscal

Year 1974, an additional 44,485

single-family properties were

debased at 60%...”

The Green case further developed that

the public disclosure of the heretofore

secretive unequal assessment raises came

in June 1973, "far too late to afford the

customary relief to approximately 77,485

single-family residential real property

taxpayers who are being assessed at 60%

A-46 A-47

cee” meaning of the District of Columbia Ad-

For example, ministrative Procedure Act and its formu-

"Arthur Keyes, Jr., testified , lation was rulemaking. Accordingly, for

that he did not know the market

value of his property ($77,600 a number of years the meaning of "full

remained the same when he re-

ceived his notice of increase and true value” of single-family residen-

of assessment from $42,682 to

$46,560 in calendar year 1971 tial properties had been 55% of estimated

effective fiscal year 1973).

He was also neither aware nor market value (i.e., 55% debasement factor).

advised that the entire in-

crease came about as the re- This was an unpublished rule. The Court

sult of a change in the level

of assessment from 55% to 60%." of Appeals, in Green, has held that a

(Order and Opinion, Wash. L.

REP ay 101, No. 172, at change in the debasement factor is rule-

Pp.

making within the meaning of the District

It is now settled that the fixing of a

of Columbia Administrative Procedure Act,

level of assessment for real property is

. which must be published with an opportun-

rulemaking within the meaning of the Dis-

ity for a public hearing.

trict of Columbia Administrative Procedure ;

The District

Act, and it was undisputed in Green that

"...chose to apply different

no rules governing the method of assess- | debasement factors to the same

| class of property in the same

ment of real property have been published. year and, in so doing, denied

the [taxpayers] equal protec-

Interpretation or explanation of the tion of the laws by discrimi-

nating among residential tax-

words "full and true value" contained in payers.”

§47-713 of the Code was a rule within the It is clear that in Keyes, as in Green,

even if the taxpayer had known about the

flexible.

A-48

disparity of the level of assessment,

he would have had no chance to success-

fully challenge his assessment, since

the increased debasement factor (55% to

60%) was arbitrarily determined and in-

It was not a subjective art,

such as is appraisal.

"The lack of equalization [be-

tween taxpayers owning identi-

cally valued properties with dif-

ferent assessments] [was] caused

by an intentional and arbitrary

application of two different

debasement factors to identical

properties."

",..evidence before the trial

court demonstrated the assess-

ments in years where the ‘stair

steps' were being used caused

assessment increase that went

above and beyond the increases

that would have been caused by

property appreciation alone.

This should be no surprise,

for any raise in the debasement

factor must raise the assess-

ment. ...the facts of this case

have highlighted the importance

to the taxpayer of an accurate-

ly stated fair market value; it

is the only element in the tax

formula to which he can meaning-

fully object. If real increases

in his property assessment are

disguised in the form of a

A-49

higher debasement factor, he

is totally remediless within

the normal avenues for seeking

redress."

"...the District cannot now be

heard to say in this appeal

that in attempting to cure the

one allegedly discriminatory

method of assessment between

single-family residential pro-

perty and other classes of other

real property it can in the

process deliberately discrimi-

nate between members within the

one class of single-family resi-

dential property owners..."16/

The Opinion and Order discussed (Wash.

L. Rep., Vol. 101, No. 173, p. 1753) the

above oral directive to change the level

of assessment for single-family residen-

tial real properties from 55% to 60% "for

all those properties reviewed commencing

in calendar year 1971 (for fiscal year

1973) and for calendar year 1972 (for

fiscal year 1974)." (Emphasis supplied.)

It was admitted in Green that the Finance

Sam SO. V- District of Columbia, et

-, SUpra, at pp. 856, 857.

A-50

Director's "policy goal" of 65% was

-

never put into written form and when he

ordered the Fiscal Year 1973 level of

assessment (debasement factor) he did not

publish this change or give public notice

or other written notice to the taxpayers.

"As a result of this, and be-

ginning in calendar year 1971

(notices were mailed out to

taxpayers between November l,

1971 and March 1. 1972. but the

assessors' work was accomplish-

ed in calendar year 1971 (for

fiscal year 1973)) the bills

sent out in September 1972 to

approximately 34,000 (or to

1/3 of these taxpayers, Res-

pondents contend) of the 96,378

Single family residential pro-

perties had their level of

assessment changed from 55% to

60% of estimated market value.

"In calendar year 1972, for

fiscal year 1974, approximately

40,000 more (or to approxi-

mately 1/2 of these taxpayers,

Respondents contend) single

family residential properties

had their level of assessment

changed from 55% to 60% of

estimated market value.

"Presently, 18,893 single

family residential properties

remain at the 55% level of

assessment.

A-51 .

"The assessment increases in both

fiscal years 1973 and 1974 for

single family residential proper-

ties were represented to the

public as increases in property

value. But, in fact, the changes

of assessment in fiscal year 1373

were due, in over % of the

cases, solely to a rise in the

level of assessment. In fiscal

year 1974 about 50% of the rise

was due to increases in property

value and about 50% to rises in

the level of assessment from 55%

to 60%.

"Using data derived during testi-

money and, in particular, from

the Respondents’ own figures and

projectionsl7/ the following in-

formation was obtained for fiscal

years 1973 and 1974

"Total increased $203,794,400

assessment single

family residences

fiscal year 1972-1974

"Increased assess- $113,713,800

ment single family

residences fiscal year

1972 - 1974 due to

increase from 55% to

60% in the level of

assessment ("debase-

ment factor”)

“Testimony Of John E. Rackham, using the

lh of D.C. Department of Finance and

Revenue.

A-52 = - 18/

"Increased assess- $ 96,080,600—

ment single family

residences fiscal year

1972 - 1974 due to

increase in market

value (estimated market

value)

"This exhibit demonstrates that,

as a result of these acts of the

District of Columbia in raising

the level of assessment (debase-

ment factor) for two years for

part of the single Fanity resi-

dential properties from 55% to

60%, the assessment of that class

of property was increased by

$113,713,800 out of a total

assessment increase in the same

two year period of $209,;794,400.

The substantial nature of the

effect of this change in the level

of assessment over this two year

riod is evident." (Emphasis sup-

eited}

During. the trial, in the Green case, the

Respondents admitted that in calendar year

1971 (for Fiscal Year 1973), as well as

for calendar year 1972 (for Fiscal Year

1974) all changes in assessments were com-

puted at a level of assessment at only

60%, except for minor administrative error.

187 This was Petitioners' Exhibit 43 in the

Green case.

A-53

Accordingly,

"(t]he net result of these in-

tentional acts was that in fis-

cal year 1973 the level of

assessment was raised for

approximately one-third of the

taxpayers of this category--

"class" of 96,378 single

family residential properties

(excluding garages). (see

Wash. L. Rep., Vol. 101, No.

174, p- 176i, for Opinion and

Order)

An assessor-witness testified that "poor"

neighborhoods were assessed in Fiscal Year

1973, and when the estimated market

value was reduced for the Fiscal Year 1973,

then the level of assessment was raised

from 55% to 60%.

It was pointed out in Green, that in

Fiscal Year 1973 whole neighborhoods were

assessed from 55% to 60% level of assess-

ment, even those with less than 20% of

changes in the estimated market value.

Old City and Kalorama were illustrative.

As Assessor Beal testified in the

Green trial: He accomplished assessing

A-54

approximately 2,000 single family resi-

dential properties there for the Fiscal

Year 1973. There were a “lot of de-

creases" [in estimated market value] and

a “majority of increases". Probably

"all" of the 2,000 properties assessed

in Fiscal Year 1973 were changed; "I do

not think any did not go to 60%. However,

some may have kept the same estimated

market value." Whether the estimated

market value was reduced or increased

made no difference: the level of assess-

ment would still be 60%. (Wash. L. Rep.,

Vol. 101, No. 174, p. 1765).

Therefore, it was found that those tax-

payers who by-passed the Board of Equali-

zation and Review could not have known

of the changed level of assessment until

June 1973 and were, accordingly, denied

viable access to the statutory adminis-

trative procedure within the permissible

time. In any event, under the extraordi-

A-55

nary circumstances of the case, there

was, in reality, no effective administra-

tive remedy and any appeal thereto would

have been useless. “The evidence of

record supports the finding of the trial

court... "22/

"When the assessment is void,

the taxpayer must resort to

equity for relief, without fol-

lowing statutory eh

citing Tumulty v. District o

Columbia, 69 App.D.C. 390, 399-

400, 102 F.2d 254, 263-64 (1939).

How could the taxpayers in Keyes com-

plain timely to the Board of Equalization

and Review of an increase in their Fiscal

Year 1973 real property tax assessment

(from 55% to 60%) when they were clearly

unaware of any raise in the level of

assessment, and when they were unaware of

two levels of assessment existing for the

same class of single-family residential

properties. Just as in Green, they were

Green, et al. v. District of Columbia, et

-, Supra, at p. 853.

A-56

effectively denied an adequate adminis-

trative and legal remedy.

Respondents contend this Court is with-

out jurisdiction to entertain the present

action. The Court completely disagrees

and cites Green for authority. It would

be unbelievable to have jurisdiction to

enjoin an invalid, void, unconstitutional,

arbitrary, invidious tax assessment for

tailed, duplicative testimony, at sub-

stantial waste of taxpayers’ additional

monies to pay for the presentation of

testimony, covering identical matters,

for Respondents suggested 34,000 indivi-

dual hearings, to consider whether or

not the issues previously presented in

Green for Fiscal Year 1974 are the same

issues germane to a determination of

Keyes for Fiscal Year 1973.

As the trial court said in Green,

"Should the Court adopt Res-

A-57

pondents’' argument it would,

in effect, add yet another di-

mension of inequity to a situa-

tion already surrounded by un-

fairness, secrecy and lack of

candor. It would be tantamount

to telling a taxpayer that he

must pay thousands of dollars

and that he must yield days,

weeks and months of his effort

to develop testimony and docu-

mentation at his individual

high expense to reap, in return,

a few dollars in the majority

of cases (and hundreds or more

of dollars in other cases) just

to have the right to present

constitutional argument and to

exhibit that which is already

before this Court. Would not

this attitude in and of itself

be a coercive device on the

taxpayers to not pursue their

due remedies because of finan-

cial and time inability?"

‘The Court has gone into great detail

{and has avoided the temptation to cite

substantive and further examples] to

illustrate the multiple reasons the

Court finds that the principle of col-

lateral estoppel is significantly appro-

priate to the Keyes case. Accordingly,

there shall be no testimony taken in the

Keyes tax case.

A-58 j

Respondents pray the opportunity to

plead the law applicable to refunds in

general and to this case in particular.

Petitioners had earlier requested the

Court fix a time for filing briefs and

for oral argument. Both requests were

made prior to the written and oral argu-

ment concerning the applicability of

collateral estoppel, which necessarily

embraced--at least in part--the law

pertaining to refunds. Nevertheless,

fairness dictates that the parties have

the fuli opportunity, if they still so

desire, to develop in writing their res-

pective positions concerning applicable

law before a final determination of this

case. [There shall be no further oral

argument thereon. ]

Accordingly, if the parties, or any of

them, wish to file written briefs (op-

tional as far as the Court is concerned)

they may do so, as follows:

A-59

Petitioners to file written brief, if

any, on or before May 6, 1974; Respon-

dents to file written brief, if any, on

or before May 16, 1974, following which

the matter shall stand submitted.

/s/ Joyce Hens Green

Joyce Hens Green

Judge

April 25, 1974

Copies to counsel of record.

A-60

SUPERIOR COURT OF THE

DISTRICT OF COLUMBIA

TAX DIVISION

ARTHUR H. KEYES, JR., et al.,

Petitioners

Vv.

THE DISTRICT OF COLUMBIA,

et al.,

Respondents

OPINION AND ORDER

For fullest comprehension and compli-

ance this matter must be considered in

context with the Court's detailed

Opinion and Order of April 25, 19742/

holding the principle of collateral es-

toppel significantly appropriate to the

instant case as a resuit of Green, et

al. v. District of Columbia, et al.,

D.C. App., 310 A.2d 848 (1973).

Counsel had requested the opportunity

to file written briefs which have since

17 Wash. L. Rep., Vol. 102, Now 99, p.1029,

11974).

NO.2214

A-6l .

been filed and considered.

There are questions of law or fact com-

mon to the members of this class of tax-

payers, including equal protection under

the Fifth Amendment to the Constitution

of the United States and the statutes of

the District of Columbia, which predomi-

nate over any questions affecting only

individual members, and a class action

would be superior to other available

methods for fair and efficient adminis-

tration of the controversy. Members of

the class on behalf of whom petitioners

sue are so numerous that joinder of all

members is impracticable. The claims

of petitioners are typical of and appli-

cable to the claims of all members of

the class and petitioners have fairly

and adequately represented and protect-

ed the interests of all members of the

class. Prosecution of separate actions

by members of the class would create a

A-62

risk of inconsistency or varying adjudi-

cations with respect to individual members

of the class which would, as a practical

matter, be dispositive of the interests

of the other members of the class not

parties to the adjudications.

Nevertheless, Petitioners’ action does

not require certification as a class

action and notice to its members. Sepa-

rate rules have been adopted by the Board

of Judges for civil actions and for tax

actions, and the Tax Division has neither

adopted nor incorporated by reference the

Civil Division class action Rule 23 or

any other rule pertaining to class ac-

tions.

The facts in this case, as in Green,

supra, are so exceptional and extraordi-

nary as to merit extraordinary and excep-

tional relief that justice compels under

the inherent and general equity powers

of the Court. Accordingly, this cause is

A-63-

determined as a taxpayers’ suit in equity

in the nature of an uncertified class

action brought on behalf of the indivi-

dual petitioners and all others similar-

ly situatea.2’

Petitioners and the approximate 34,000

other similarly situated owners of single

family residential properties in the Dis-

trict of Columbia were taxed, and paid

their taxes, for Fiscal Year 1973 at a

level of assessment (debasement factor)

of 60 percent of estimated market value.

27 ¢ v. Zubrinskie, 101 U.S. 601, 25 L.

a. 1670 (ise0) . Yokley, Municipal Corporations:

"It is an essential element of a tax-

payer's suit that the suit be brought

in behalf of a plaintiff and other citi-

zens and taxpayers.

"A taxpayer's suit is necessarily a

Class action. It must be brought not by

individuals, but by individuals, for

themselves and for all of the citizens

similarly situated." Vol. 4, Sec. 602,

p.36.

A-64

Petitioners seek in the form of refunds

the difference between what was actually

paid by these taxpayers and what should

have been paid had a level of assessment

of 55 percent of estimated market value

been used, plus interest at 6 percent per

annum computed from the date payment was

made until the date of refund.

In applicable substance, Green held

that the increases in property tax assess-

ment from 55 percent to 60 percent of

estimated market value were invalid be-

cause they were based on an arbitrary, in-

tentional, and discriminatory change by

Respondents in the level of assessment

(debasement factor) applied to petition-

ers and some 34,000 other taxpayers for

Fiscal Year 1973 and not applied for the

same Fiscal Year 1973 to approximately

62,378 other owners of single family resi-

dential real property in the District of

Columbia. Green further held that the

A-65 '

changes were nullified by their creation

in violation and disregard of the Dis-

trict of Columbia Administrative Proce-

dure Act. The taxpayers had ". . .no

meaningful ability to challenge his

assessment at a11"2/ when the District

choose to apply different debasement fac-

tors to the same class of property in

the same year because the taxpayer was

not aware that he was being treated dif-

ferently from his neighbor and that he.

was being denied equal protection of the

laws. He was therefore effectively

denied his administrative remedy and his

timely complaint to court.

Put succinctly, as did the Court of

Appeals in Green:

". . irrespective of whether the

District may constitutionally dif-

ferentiate in the level of assess-

ment applied to residential real

37 Green, supra, at p. 856.

A-66 —.

property as opposed to commercial

real property,. . .it clearly may

not do so within the single class

of residential property owners."

at p.857.

Accordingly, Green ordered the level of

assessment for Fiscal Year 1974 reduced

to 55 percent of estimated market value

(by enjoining any other percentage level

of assessment) until and unless a level

of assessment was established after full

compliance with the District of Columbia

Administrative Procedure Act and further

provided that only equal levels of

assessment were to be used.

In cumary,_’ the Court finds that the

same factors exist here as in Green: the

taxpayers were deprived of due process

and there has been discrimination among

the citizens of the same class of single

family residential properties. Some

taxpayers have been assessed at 60 per-

47 For fuller expostulation, see the Opinion

and Order of April 25, 1974, Wash. L. Rep.,

Vol. 102, No. 99, p. 1029, (1974).

A-67

cent of estimated market value, and paid

their taxes accordingly, while others

in the same class were assessed and paid

their taxes at 55 percent of estimated

market value. This is clearly in viola-

tion of the due process clause of the

Fifth Amendment to the Constitution of

the United States as it applies to the

Petitioners individually and to those

similarly situated. >/

It is frequently stated that a taxpayer

must pay his just share for the just and

orderly functioning of his Government.

It is never proclaimed that a taxpayer

should pay his unjust, inequitable, dis-

proportionate share. If he does--and

errors can occur--then the (Federal)

Government upon review refunds the ex-

cess, with interest. It is manifest that

the municipal government should do no

less. “Monies illegally exacted from a

57 Bolling v. Sharpe, 347 U.S. 497 (1954).

A-68 fe

citizen taxpayer by its Government must

be promptly refunded. To hold otherwise

would be unconscionable.”

The Court concludes that the Petition-

ers and the approximate 34,000 others

similarly situated are, upon computation

of the appropriate sums, entitled to

prompt refunds of the amounts overpaid,

with corresponding interest, in considera-

tion of the above invalid assessment and

then collection of taxes not rightfully

due and owing. The Court further con-

cludes that Respondents, by access to the

District of Columbia's data sources, tax

rolls, finance department, and computers,

are in an unique position to exactly as-

certain and yield the information neces-

sary from which the full and fair refund

can be made.

A decision concerning counsel fees and

costs will be rendered upon the final

determination of the amounts to be refund-

A-6

ed to sach citizen.

Having determined the issues in this

matter, the Court is withholding entry of

the amount of refunds due to each member

of the class of single family residential

real property owners whose property was

incorrectly and illegally assessed at a

level of assessment (debasement factor)

in excess of 55 percent of estimated mar-

ket value, to allow the parties, pursuant

to Superior Court Tax Rule 15, to submit

computations of the amounts due to each

person pursuant to the findings and con-

clusions entered in this case.

It is therefore, this 6th day of August,

1974:

ORDERED:

(1) the [sic] the Respondents submit

to Petitioners by August 27, 1974 computa-

tions of the amounts due, in accordance

with the findings entered in this case,

to each owner of single family residen-

A-70 ,

tial real property whose property was

assessed in Fiscal Year 1973 at a level

of assessment (debasement factor) in

excess of 55 percent of estimated market

value. These computations shall include

the names and addresses of each person

entitled to a refund, each property for

which a refund is due, the amount of

taxes which were paid, the amount of

taxes which should have been paid, and

the basis on which this calculation was

made (e.g. estimated market value), and

the refund due.

(2) That the Petitioners shall examine

the computations prepared by the Respon-

dents and notify both the Court and Res-

pondents by no later than September 17,

1974 as to whether they are in agreement

with the computations of the Respondent

as to the amounts of refunds due.

(3) That the Respondents shall make

such information available to Petitioners

A-71 r

as will enable them to fully and ade-

quately review the computations made by

Respondents;

(4) That if the parties are in agree-

ment as to the amount of the refund due

to be entered as the decision pursuant

to the findings and conclusions made by

the Court, the Respondents shall file,

within three (3) days after being noti-

fied by Petitioners that they are in

agreement, with the Deputy Clerk for the

Tax Division an original and 2 copies

of a computation showing the amount of

the refund due, together with a state-

ment to the effect that there is no dis-

agreement and that the figures shown are

in accordance with the findings and con-

clusions of the Court. A decision will

then be entered accordingly.

(5) That if, however, the parties are

not in agreement as to the amount of the

A-72

refund due, they shall notify the Court

of the basis of their disagreement by no

later than September 20, 1974. Pursuant

to the procedure set forth in Superior

Court Tax Rule 15 (b) to be followed in

the absence of agreement, either party

may file with the Deputy Clerk for the

Tax Division a computation of the amounts

of refunds believed by such party to be

in accordance with the findings and con-

clusions of the Court and shall serve a

copy of those computations on the oppos-

ing party. The matter will then be

scheduled by the Court for argument. If

the opposite party fails to file an ob-

jection accompanied by an alternative

computation at least 5 days prior to the

date of such argument or any continuance

thereof, the Court may determine to enter

decision in accordance with the computa-

tion already submitted.

(6) That if computations are submitted

A-73

by the parties which differ as to the

amount to be entered as the decision,

the parties shall be afforded an oppor-

tunity to be heard in argument thereon

on the date fixed, and the Court shall

determine the amount of refund due and

enter its decision accordingly. Pursuant

to Superior Court Tax Rule 15(c), any

argument shall be confined to the con-

sideration of the correct computation of

the amount of refunds due resulting from

the findings and conclusions theretofore

made, and no argument shall be heard upon

or consideration given to any new issues

or to the issues or matters already dis-

posed of by such findings and conclusions.

The hearing shall not be regarded as

affording an opportunity for rehearing or

reconsideration.

/s/ Joyce Hens Green

Joyce Hens Green

Judge

Copies to Counsel

A-74

DISTRICT OF COLUMBIA COURT OF APPEAIS

No. 75389

DISTRICT OF COLUMBIA, A Municipal Corporation,

and

WALTER E. WASHINGTON,

and °

KENNETH BACK, APPELLANTS,

Vv.

CLARZELL GREEN, ET AL., APPELLEES.

Appeal from the Superior Court of the

District of Columbia

(Argued September 7, 1973 Decided October 9, 1973)

Louis P. Robbins, Assistant Corporation Counsel, with

whom C. Francis Murphy, Corporation Counsel, and

Henry E. Wixon, Robert E. McCally, Richard W. Barton,

David P. Sutton, Kenneth A. Pels and Richard L. Agu-

glia, Assistant Corporation Counsels, were on the brief,

for appellants.

Gilbert Hahn, Jr., with whom Jack C. Sando was on

the brief, for appellees. Philip W. Amram, Daniel G.

Grove and Steven L. Engelberg also entered appearances

for appellees.

A-75

Before Reilly, Chief Judge, and Kelly and Nebeker,

Associate Judges.

KELLY, Associate Judge: This appeal is from an order

entered in the Superior Court, Tax Division, enjoining

appellants from using, for purposes of taxation of single-

family residential properties within the District of Co-

lumbia, unequal levels of assessment of estimated market

value in determining the assessment, valuation or equali-

zation of such properties, and from assessing such prop-

erties at a level of assessment other than 55% of esti-

mated market value unless and until an equal level of

assessment is established by the District after full com-

pliance with the provisions of the District of Columbia

Administrative Procedure Act (DCAPA).' The issues

outlined by appellants for review are (1) whether the

trial court erred in holding temporarily unequal single-

family property levels of assessment (debasement fac-

tors)* of 55% and 60% to be unconstitutionally discrim-

inatory when such temporary inequality resulted from a

city-wide cyclical reassessment work program designed

to ultimately equalize all single-family property assess-

ments with the multi-family and commercial properties

debased at 65%; (2) whether the trial court’s holding

compels an unconstitutional discrimination against multi-

family and commercial properties and 20% of the single-

family properties in the District of Columbia; (3) wheth-

er the development of a cyclical as-essment program

designed to bring certain properties in, compliance with

constitutional and statutory mandates for equalization is

“rulemaking” within the meaning of the DCAPA, and

(4) whether the failure of some appellees to exhaust

* D.C. Code 1972 Supp., § 1-1501 et seq.

* The terms “level of assessment” and “debasement factor”

are used interchangeably throughout this opinion.

A-76

their administrative remedies and of others to pursue

their statutory legal remedies precluded the trial court

from granting injunctive relief. Appellees are in sub-

stantial agreement with the issues appellants present for

review, demurring only to the suggestion that any ques-

tion of a constitutionally prohibited discrimination

against owners of properties in categories other than

single-family properties is embraced within or even rele-

vant to this appeal.

I

In brief explanation of the essential background to

this appeal, there are three components of the mathe-

matical process used to determine the dollar amount of

tax due the District from an individual owner of real

property each year; namely, the market value of the

property, the debasement factor (level of assessment)

to be applied to that value to determine the assessment

(assessed value), and the tax rate. Market value (also

referred to as estimated market value) is the fair mar-

ket value of a particular property as determined from

time to time by District assessors. The debasement fac-

tor is the percentage of market value upon which the tax

will be levied. The tax rate is expressed in terms of dol-

lars per hundred and is currently $3.32 per each $100 of

an individual property’s assessed value.

The assessment for an individual taxpayer is de-

termined by multiplying the market value of the prop-

erty by the debasement factor or level of assessment.’

The tax rate applied to the assessed value of the prop-

erty is set by the City Council after notice published in

the District of Columbia Register and, like the level of

* Example: A house valued at $100,000 with a debase-

ment factor of 60% is assessed at $60,000 and taxed at the

rate of $3.32 per $100 of assessed value—$1,992.00.

A-77

assessment, is fixed. The third component of the above

equation, market value, is a variable with each individual

property having a unique estimated value. Upon receipt

of a tax bill, an aggrieved taxpayer may complain of an

alleged unfair assessment to the Board of Equalization

and Review (Board)* and, beyond that, appeal to the

Tax Division of the Superior Court.’

For several years immediately prior to calendar year

1969, if not before, all single-family residential prop-

erties in this city had a debasement factor of 55% and

all multi-family residential, commercial and industrial

real property was assessed at 65% of estimated market

value. Thereafter, in a planned cyclical reassessment

program, conceived and orally implemented by the Di-

rector of Finance and Revenue, the level of assessment

for approximately 33,000 single-family residential prop-

erties was changed from 55% to 60% for fiscal year

1973, and, in preparing the tax rolls for fiscal year 1974,

an additional 44,485 single-family properties were de-

based at 60%.° The level of assessment of nearly 19,000

single-family residential properties remained at 55%.

Of the 44,485 taxpayers who at the end of 1972 re-

ceived notices of assessments for fiscal year 1974, only

1,044 appealed, three of whom somehow ascertained the

existence of, and raised as an issue, the increased level

of assessment of their properties. Of the eleven named

petitioners below (appellees), five unsuccessfully com-

plained to the Board of Equalization and Review of

alleged unfair assessments; six did not so complain. This

*D.C. Code 1972 Supp., § 47-709; § 47-2405.

* D.C. Code 1972 Supp., § 11-1202.

* Assessment is done on a calendar year basis for the foi-

lowing fiscal year.

4-78

class action was brought by petitioners on behalf of them-

selves and others so situated to enjoin the respondents

(appellants) from applying the 60% debasement factor

against their properties unless and until the same level

of assessment was applied to all single-family residential

properties within the District after compliance by the

District with the pertinent provisions of the DCAPA.

After a lengthy trial the court granted appellees the

relief sought, accompanying its order with a compre-

hensive and learned memorandum opinion with which

we are in full accord.’

The critical factors upon which we focus in our de-

cision are (1) that the District’s cyclical reassessment

program was undertaken in a manner which resulted in

unequal levels of assessment within a single class of

assessed property, and (2) that no notice was given to

District of Columbia single-family residential property

owners that the level of assessment of their properties

was in the process of change.

ff

Relying upon D.C. Code 1967, § 47-709, appellants

challenge the jurisdiction of the trial court to determine

the claims of the six appellees who failed to complain

of their increased assessments to the Board, alleging a

failure to exhaust their administrative remedies; * assert

*WasH. L. REP., Vol. 101, No. 172, p. 1737; No. 178, p.

1749; No. 174, p. 1761 (1978).

* D.C. Code 1972 Supp., § 47-709:

The valuation of the real property made and equalized

as aforesaid shall be completed not later than the first

Monday of May annually. The valuation of said real

property made and equalized as aforesaid shall be ap-

proved by the Commissioners not later than July 1, an-

A-79

that the appellees who did complain to the Board are

barred from suit by language in D.C. Code 1972 Supp.,

$§ 47-2403—2405specifying that the court may not en-

tertain a taxpayer’s petition until after October 1, and

after payment of the tax in full, and claim that the

trial court erred in issuing an injunction in the face of

D.C. Code 1967, § 47-2410 which provides that

No suit shall be filed to enjoin the assessment

or collection by the District of Columbia or any

of its officers, agents, or employees of any tax.

These jurisdictional points are not pressed with vigor

here, each of the parties preferring a decision on the

merits. Consequently, we simply point out that appellants’

latter argument would be readily accepted except that

the trial court found the facts of this case to be so ex-

ceptional and extraordinary as to merit equitable relief

and, as the Court said in Miller v. Standard Nut Marga-

rine Co., 284 U.S. 498, 509 (1932):

nually, and when approved by the Commissioners shall

constitute the basis of taxation for the next succeeding

year and until another valuation is made according to

law, except as hereinafter provided. Any person ag-

grieved by any assessment, equalization or valuation

made may within six months after October 1 of the year

in which such assessment, equalization, or valuation is

made, appeal from such assessment, equalization, or val-

uation in the same manner and to the same extent as

provided in sections 47-2403 and 47-2404: Provided,

however, That such person shall have first made his com-

case of increase of valuation of real property over that

for the immediately preceding year, where no notice in

writing of such increase of valuation is given the tax-

payer prior to March 1 of the particular year, no such

complaint shall be required for appeal.

A-80

[W]here complainant shows that in addition to

the illegality of an exaction in the guise of a tax

there exist special and extraordinary circum-

stances sufficient to bring the case within some

acknowledged head of equity jurisprudence, a

suit may be maintained to enjoin the collector.

. [Citations omitted.] °

Additionally, the trial court found that since the six

named petitioners (appellees) who bypassed the Board

could not have known of the changed level of assessment

until it was reluctantly made public in this lawsuit in

June of 1973, they were unable to pursue the ad-

ministrative remedy created by statute prior to cutoff

date of April 1, 1973. It also found, in effect, that

under the extraordinary circumstances of this case, out-

lined at length in its memorandum opinion and not re-

peated here, the petitioners who did not appeal to the

Board were in reality afforded no effective administrative

remedy. Moreover, the court saw no reason to require

the parties who in good faith sought administrative re-

view to wait until October 1 to apply for relief, after

payment of tax, when those bypassing the useless ad-

ministrative procedure were permitted to proceed, stating

that to accept such an argument “would, in effect, add

yet another dimension of inequity to a situation already

surrounded by unfairness, secrecy and lack of candor.” ™

The evidence of record supports the findings of the

* See also Allen v. Regents of University System of Georgia,

304 U.S. 489 (1938).

1°In its words: “The court is not persuaded by this argu-

ment and cannot believe that Congress intended that the

statute be subverted to include deceit of the populace, by

either unintentional oral and written misinformation (at best)

or by deliberate misstatement (or deliberate omission) of

oral and written information (at worst).” R. at 666.

2 R. at 667.

A-?1

trial court and, as a consequence, it was not error to

entertain the petition for injunction. As the Circuit

Court said in Tumulty v. District of Columbia, 69 App.

D.C. 390, 399-400, 102 F.2d 254, 263-64 (19389):

We think it clear that all administrative rem-

edies in matters of taxation must be exhausted

before resort can be had to court action. Nelson

v. First Nat. Bank, 8 Cir., 42 F.2d 30, but

think it equally clear that when the assessment

is void, the taxpayer may resort to equity for

relief, without following statutory remedies. .. .

{Emphasis supplied. ]

III

Appellees successfully contended in the trial court that

the fixing of a level of assessment for real property

is rulemaking within the meaning of the District of

Columbia Administrative Procedure Act.* They con-

ceded there, and concede here, that prior to the effective

date of the DCAPA appellants had a right to make

a rule setting the level of assessment at 55% of market

value for residential property in the District and 65%

of market value for commercial property without notice

to or oppozcunity by the public to be heard. Conceded

also is appellants’ right at any time to change the level

of assessment of residential property to a higher per-

centage of market value if it is done in compliance with

the pertinent provisions of the DCAPA.

Appellants argue that the Constitution and the per-

* D.C. Code 1972 Supp., § 1-1507(c). The DCAPA, effective

October 21, 1969, required that al] administrative rules then

in effect be published in the District of Columbia Register by

October 21, 1970. It is undisputed that no rules governing

the method of assessment of real property have been published.

A-°2

tinent statutory provision * governing assessment of real

property compel the same level of assessment be applied

to all real property in the District of Columbia; con-

sequently, any change in the level of assessment for

single-family residential property in the process of ac-

complishing equalization in assessment does not consti‘ute

a rule within the meaning of the DCAPA.

D.C. Code 1972 Supp., $1-1502(6) and (7) defines

the terms “rule” and “rulemaking” as:

(6) the term “rule” means the whole or any

part of any Commissioner’s ,Council’s, or agency

statement of general or particular applicability

and future effect designed to implement, in-

terpret, or prescribe law or policy or to de-

scribe the organization, procedure, or practice

requirements of the Commissioner, Council, or

of any agency;

(7) the term “rulemaking” means Commis-

sioner’s, Council’s, or agency process for the

formulation, amendment, or repeal of a rule;

The trial court found, correctly we think, that the

interpretation or implementation of the words “full and

true value” contained in § 47-713 of the Code was a rule

within the meaning of § 1-1502(6) and its formulation

was rulemaking within the definition of $ 1-1502(7).

The meaning of “full and true value” of single-family

residential properties had for a number of years been

55% of estimated market value. This 55% debasement

factor, albeit unpublished, was, under the Code defini-

3 D.C. Code 1967, § 47-713, provides in pertinent part:

All real estate in the District of Columbia subject to

taxation, including improvements thereon, shal] be listed

and assessed at not less than the full and true value

thereof in lawful money.

A-83

tion, a rule. Both the tax rate and the debasement factor

are fixed values in the assessment equation. The setting

of the tax rate by the City Council is admittedly a rule

which must be published, with an opportunity for a

public hearing provided for by the DCAPA. Setting or

changing the debasement factor affects the final tax bill

in exactly the same manner as does the setting of the

rate, and to allow the debasement factor to be secretly

established or changed would completely frustrate the

purpose of being able to review the tax rate later when

it is set each year.

Appellants argue that since they are constitutionally

required to achieve equalization of the level of assessment

of all real property, commercial and residential, a change

of the debasement factor is not rulemaking within the

meaning of the DCAPA. Should this constitutional re-

quirement exist, however, it does not compel the con-

clusion that the District may not be required to ac-

complish its goal by constitutional means or that the

necessary changes of levels of assessment in the process

are not rules and rulemaking as defined in the DCAPA.

This court has held that a Commissioner’s Order di-

recting the Department of Human Resources to set the

level of public assistance payments at 75% of the public

assistance standards to be a rule, stating that “Com-

missioner’s Order No. 70-265, whether we consider it an

implementing directive, as Corporation Counsel char-

acterizes it, or prescribing policy, is a ‘rule’ as defined

by the D.C. APA... .” [Footnote omitted.] Junghans

v. Department of Human Resources, D.C.App., 289 A.2d

17, 23 (1972). A like holding is required here.

IV

Appellants contend that the tax policy of the District

has always been to uniformly apply a 65% debasement |

A-84

factor to all real property in the District of Columbia,

both residential and commercial. This “policy”, however,

has never been articulated to the general public and was

apparently unknown to some assessors. The facts are

that until 1969 the District compiled and used a real

estate assessment manual designed to achieve a debase-

ment of 65% of value, there being no identifiable market

value at that time to debase. Sales ratio studies under-

taken in 1968 revealed, however, that some single-family

residential properties were actually debased as low as

40%, although the desired 65% factor for multi-family

and commercial properties was substantially achieved.

As a result, the District developed a reassessment pro-

gram to equalize single-family residential properties with

other real property at a 65% level of assessment. In an

effort to accomplish a common debasement factor while

maintaining relative equalization within the single-family

residential class a “stair-step” approach was decided upon

as the means to attain the desired result over a period

of time, an approach necessitated both by budgetary and

manpower considerations. The debasement factor of all

single-family residential properties was first raised to

55%, the next planned step being to raise the level of

assessment to 60% and the final goal being to elevate

the debasement factor of all such properties to 65%.

Thus, the level of assessment on over 33,000 single-family

residential properties was raised to 60% in fiscal 1973,

and an additional 44,485, those at issue in this case, had

been entered on the tax rolls for fiscal 1974 at 60%.

Approximately 19,000 properties remain debased at 55%.

The District of Columbia has no rule dividing real

property into various classes for the purpose of taxation.

The only requirement of these ad valorem taxes is that

they be administered in a-fashion that results in equali-

a=85

zation of the tax burden on all property owners.“ The

amount of a property owner’s tax bill must be related as

nearly as possible to the value of his property as com-

pared to the value of the property of others. The ratio

of his property’s value to the total value of property in

the District should parallel the amount of tax he pays

compared to total taxes paid by all property owners.

Equalization depends directly on a fair and critical

assessment of each piece of real property in the District.

As expert witnesses for the District testified, assessment

is an art which requires an experienced eye. It is there-

fore important, if taxes are to be equalized, that indi-

vidual assessments be done thoroughly. Appellants have

stressed that they have been unable, due to fiscal and

manpower shortages, to effectuate an adequate assess-

ment of all property in the District each year, and this

is understandable. Under such circumstances a cyclical

assessment program may be permissible, provided any in-

equalities resulting therefrom are of an accidental and

temporary character. See, e.g., Sunday Lake Iron Co. v.

Wakefield, 247 U.S. 350 (1918); Johnson v. County of

Ramsey, 290 Minn. 307, 187 N.W.2d 675 (1971); Car-

konen v. Williams, 76 Wash.2d 617, 458 P.2d 280 (1969)

(en banc); Skinner v. New Mezico State Tax Commis-

sion, 66 N.M. 221, 345 P.2d 750 (1959). Indeed, appel-

lees agree that if the District had engaged in a cyclical

program of adjusting the fair market value of properties

in the city one group at a time, this case would not have

arisen. But the District did not follow this course. In-

stead, as the record shows, it chose to apply different de-

basement factors to the same class of property in the

* Allied Stores of Ohio v. Bowers, 358 U.S. 522, 526 (1959);

Hillsborough T P v. Cromwell, 326 U.S. 620 (1946); Colgate

v. Harvey, 296 U.S. 404, 423 (1935); Wells Fargo & Co. v.

Johnson, 214 F. 180 (8th Cir. 1914), aff’d, 239 U.S. 234

(1915).

A-86

and, in so doing, denied the appellees equal

caiaien ia “a laws by discriminating among residen-

we png B Ul, 330 F. Supp

the case of Weissinger v. Boswe A .

Py 621-22 (M.D. Ala. 1971), the court declared uncon-

stitutional under Alabama’s ad valorem property tax sys-

tem the application of two different levels of assessment

to the same class of property, stating that as while

the Fourteenth Amendment does not require precise equal-

ity or uniformity in taxation, or prohibit inequality in

taxation which results from mere mistake or error in

judgment of tax officials, it does ‘secure every person

within the state’s jurisdiction against intentional and

arbitrary discrimination, whether occasioned : by express

terms of a statute or by its improper execution through

duly constituted agents.’ . . .” [Footnotes omitted.)

The justification the District offers for the admitted

intentional disparity of debasement factor applied to tax-

payers within the same class is that the “stair-step ap-

proach was the only way to bring all properties to the

uniform level of assessment of 65% without seriously

frustrating the only long-range goal of the tax system—

equalization. The trial court did not accept the logic of

this conclusion, nor can we.

nly variable in the tax equation for real property

is - por. Mare fair market value. As the District ad-

mits, when the real estate market and other factors cause

the fair market value to fluctuate, nearly constant reas-

sessment is necessary, though not always feasible. If

actual fair market value is determined by the amount

realized in an arm’s length sale of property, a compari-

18 Bolling v. Sharpe, 347 U.S. 497 (1954), reads the Four-

weal pwn Ar Semen de protection clause into the due process

clause of the Fifth Amendment to apply it to the District of

Columbia.

A-27

son between the latest assessed value and this sales value

constitutes the assessment/sales ratio. The disparity be-

tween the two values is expressed by a dispersion co-

efficient. The higher the coefficient, the greater the dif-

ference between the last asses*2d fair market value and

the fair market value indicated by sale. Various factors

may account for such a difference, but in any event the

Board of Assessors is interested in minimizing the co-

efficient of dispersion.

The assessment/sales ratio may well vary in different

parts of the District, and even within the same block.

This disparity inevitably produces the undesirable result

of placing unequal tax burdens on persons owning prop-

erty with the same fair market value. For example, if

two different taxpayers own prcperty identical in fair

market value but one property is currently assessed at

a higher valye than the other due to the inability of the

assessors to value all property every year, taxpayers own-

ing property of identical values pay different tax bills.

As another example, if the property of each of these tax-

payers is currently assessed at the same market value

but as part of a “stair-step” approach to reach a uniform

65% debasement value one level of assessment rises to

60% while the other remains at 55%, the taxpayers

owning property worth the same amount in the taxable

year have different tax bills.

In neither of the above examples has the goal of equali-

zation been reached. Yet the two situations are distin-

guishable in important ways. In the first situation the

lack of equalization between taxpayers is undesirable

but permissible because caused by logistical problems

which may be temporarily beyond the power of the city

to correct. In the second case the lack of equalization is

“aused by an intentional and arbitrary application of two

A-88

different debasement factors to identical properties.** The

aggrieved taxpayer in the first example may complain to

the Board of Equalization and Review if he feels that

his assessment is too high and, since the assessment of

fair market value is admittedly a rather subjective art,

by requesting reconsideration of his valuation, he may be

successful in lowering his assessment. The facts of the

instant case show that in the second example the ag-

grieved taxpayer has no meaningful ability to challenge

his assessment at all. No judgment would be made in

his case as the new debasement factor was arbitrarily

determined as was its applicability to certain real prop-

erty.

Estimated market value, being the only variable in

the equation determining the amount of tax owed, would

appear to be the factor to be periodically adjusted to

reflect changes in property values which the District

recognizes occur for many different reasons that are

difficult to forecast. If the District desires, or feels com-

pelled, to apply an equal debasement factor across the

board to all real property within the District, however,

the proper course would be to formulate such a rule and

publish it in accordance with the procedure prescribed

by the DCAPA. An immediate raise to 655¢ might well

be politically unpleasant, as the District clearly recog-

nized but, if the need to raise the level of assessment

to 65% is as compelled as the District contends, this

result is unavoidable. Moreover, it is just as unavoid-

able using the “stair-step” approach although perhaps

not as visible. In fact, evidence before the trial court

demonstrated the assessments in years where the “stair

%* The District argues that one of its exhibits in evidence

demonstrates that in reality the differential in levels of assess-

ment resulted in greater equalization than before, but appellees

disagree and the trial court did not so find, nor was it required

to do so.

A-89

steps” were being used caused assessment increases that

went above and beyond the increases that would have

been caused by property appreciation alone. This should

be no surprise, for any raise in the debasement factor

must raise the assessment. The fair market value can-

not be held below its true level while the debasement

factor is inched towards 65% simply to keep taxes the

same, at least if the concept of fair market value is to

have any clear and understandable meaning. And as

already mentioned, the facts of this case have highlighted

the importance to the taxpayer of an accurately stated

fair market value; it is the only element in the tax

formula to which he can meaningfully object. If real

increases in his property assessment are disguised in the

form of a higher debasement factor, he is totally remedi-

less within the normal avenues for seeking redress.

Finally, appellants complaint that the trial court’s order

“convert(s] a relatively equalized tax roll into a patently

discriminating tax roll.”** The trial court determined

that the assessments at issue were void because of a

differential in levels of assessment within one class of

real property, and the District cannot now be heard to

say in this appeal that in attempting to cure one allegedly

discriminatory method of assessment between single-

family residential property and other classes of real

property it can in the process deliberately discriminate

between members within the one class of single-family

residential property owners. Therefore, irrespective of

whether the District may constitutionally differentiate in

the level of assessment applied to residential real property

as opposed to commercial real property, a question which

we need not and do not here decide, it clearly may not

do so within the single class of residential property

owners.

Affirmed.

* Appellants’ brief at 12.

A-90

DISTRICT OF COLUMBIA

COURT OF APPEALS

FILED FEB 27 1976

ALEXANDER L. STEVAS =.

Clerk

NO. 8790

THE DISTRICT OF COLUMBIA

A Municipal Corporation, and

WALTER E. WASHINGTON, and

KENNETH BACK,

Appellants,

Vv. Tax 2214

ARTHUR H. KEYES, JR., and

LUCILLE KEYES,

On behalf of themselves and

others similarly situated,

Appellees

BEFORE: Kelly and Gallagher, Associate

Judges, and Pair, Associate

Judge, Retired.

This cause came on for consideration

on the record on appeal and the Court heard

argument of counsel. A question has

arisen which the parties did not cover in

their briefs, and accordingly, the Court

desires the parties to submit supplemen-

tal memoranda addressed to the following

' A-91

question:

Bearing in mind (a) that this Court

in District of Columbia v. Green (310 A.

2d 848 (1973) specifically approved the

trial court's finding that an injunctive

remedy was available in that case due

to the "exceptional and extraordinary"

circumstances there presented (at 853)

and (b) that this Court recently reitera-

ted that proposition in District of

Columbia v. Burlington Apartment House

Co. T/A The Vurlington Hotel., D-.C.App.,

__ A.2d (no. 7986; January 29, 1976)

at pages 4-5 of the Slip opinion, are

the appellees in this case barred from

the relief sought by reason of their

failure to pursue their statutory reme-

dies in seeking refunds for the fiscal

year here involved? In addressing them-

selves to the question, the parties

should discuss District of Columbia v.

Berenter, 151 U.S.App. 196, 466 F.2d

367 (1972).

Counsel for appellants shall cause

their supplemental memorandum to be

filed on or before March 8, 1976, and

counsel for appellees shall cause their

memorandum to be filed on or before

March 15, 1976, and counsel shall

cause their respective pleadings to be

personally served on opposing counsel.

Per Curiam