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IN THE SUPREME COURT OF THE STATE OF MONTANA

THE UNITED STATES NATIONAL BANK OF
RED LODGE, FARMERS CITIZENS BANK OF
WORDEN, and FIRST CITIZENS BANK OF
BILLINGS, MONTANA,

Plaintiffs and Appellants,

MONTANA DEPARTMENT OF REVENUE et al.,

Defendants and Respondents.

Appeal from: District Court of the Thirteenth Judicial District,
Honorable Robert Wilson, Judge presiding.

Counsel of Record:

For Appellants:

Berger, Anderson, Sinclair and Murphy, Billings,

Montana

Chris Nelson argued, Billings, Montana

Robert F. Conwell, Red Lodge, Montana

For Respondents :
Harold Hanser, County Attorney, Billings, Montana

R. Bruce McGinnis argued, Helena, Montana

Submitted: November 29, 1977

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Filed: 2~~~ 1iI
Appellants appeal from orders of the District Courts of
Yellowstone and Carbon Counties granting respondents1 motions to
dismiss.

In January, 1977, appellants, The United States National
Bank of Red Lodge, Farmers State Bank of Worden, Montana, and First
Citizens Bank of Billings, Montana, filed virtually identical com-
plaints in the District Courts of Yellowstone and Carbon Counties.
In their complaints appellants alleged that they are banking corpor-
ations engaged in the banking business in the State of Montana; that
appellants at all times material to the complaint were owners of
United States obligations within the meaning of 31 U.S.C. S742 (1970);
that, for the taxable year 1976, respondent Montana Department of
Revenue determined the assessed value of appellants1 shares of stock
without allowance of a deduction for the value of the UniOed States
obligations held by appellants during the taxable year 1976; that
appellants timely paid taxes on the total assessed value of its
stock under written protest; that the assessment and taxation of
appellants1 shares of stock, without allowance of a deduction from
assessed value equal to the value of appellants1 United States
obligations for the taxable year 1976, is an unlawful tax in vio-
lation of 31 U.S.C. S742 (1970). Appellants in their complaints
asked for a finding that the 1976 property taxes on their shares
of stock were illegal, and requested a refund of the taxes paid on
the shares.

Respondents filed Rule 12 (b) (1) , M.R.Civ.P., motions to dismiss appellants' complaints, alleging that the District Courts lacked jurisdiction over the subject matter of the cases. In its
briefs in support of the motions to dismiss, respondent Montana
Department of Revenue (hereinafter referred to as "the Department")

the banks' shares, and as such, appellants were required by Title

84, Chapters 6 and 7, R.C.M. 1947, to appeal to the county and state

tax appeal boards. The Department contended that appeal to the

tax appeal boards was a condition precedent to taxpayer appeal on

a valuation issue to the District Courts. Since appellants did not

first appeal these cases to the tax appeal boards, the Department

concluded that appellants had failed to exhaust their administrative

remedies and that the District Courts therefore lacked subject mat-

ter jurisdiction in these cases. It is from the District Courts'
orders granting the Department's motions to dismiss that appellants

appeal.

The sole issue on appeal is whether the District Courts
erred in granting the Department's motions to dismiss.

We first note that the District Court orders granting the motions to dismiss were appealable orders. Section 84-603, R.C.M. 1947, as it was in effect in 1976, required that appeals to the county tax appeal boards be made on or before the third Monday of July in the year in which the property was assessed. Since the section 84-603 statute of limitations for 1976 appraisals has long since passed, " * * * the practical effect of the district court's order is to leave appellant without opportunity for further judi- cial relief, just as if judgment had been rendered against him. Therefore, the order * * * is properly before this Court on appeal." Hasbrouck v. Krsul (1975), 168 Mont. 270, 272, 541 P.2d 1197.
In reviewing the propriety of an order granting a motion to dismiss, we repeat the oft-quoted rule that " * * * the allega- tions of the complaint must be viewed in a light most favorable to plaintiffs, admitting and accepting as true all facts well-pleaded." Board of Equalization v. Farmers Union Grain Terminal Assoc. (19621, 140 Mont. 523, 531, 374 P.2d 231. Admitting and accepting as true
Courts in this case did indeed have subject matter jurisdiction, and
the Department's Rule 12(b)(l) motions to dismiss were therefore
improperly granted. Appellants, in their complaints, alleged that
the Department had illegally taxed appellants' United States obli-
gations, in violation of 31 U.S.C. S742 (1970), which provides:

"All stocks, bonds, Treasury notes, and other obligations of the United States, shall be exempt from taxation by or under State or muni- cipal or local authority * * *."
The allegations of the complaints thus raised a question
as to the legality of the tax imposed, and did not put into issue
any question of valuation. Where the issue is one of an illegal
taxation, the courts, and not the tax appeal boards, have original'
jurisdiction to hear the case, under the rule of Larson v. State

(1975), 166 Mont. 449, 534 P.2d 854.

In Larson, as in this case, the Department contended that
the taxpayers should have been required to exhaust their statutory,
administrative remedies of appeal to the tax appeal boards before
bringing a court action. This Court held in Larson, however, that
where a case does not concern a property tax valuation, but rather
the state's use of an unconstitutional and illegal appraisal, the
determination is an appropriate function of the courts. Larson v.
State, 166 Mont. at 456-57. The legality of a taxation, the issue
raised by appellants in their complaints, like the unconstitutional
and illegal appraisal issue in Larson, is an issue for the courts
and not for the tax appeal boards.

Respondents contend that the Department is making no attempt
to tax the federal obligation of the banks. The question is, then,
whether the value of the banks' federal obligations are contained
in its capital,surplus,or undivided profits. The banks are claim-
ing it is and should be deducted. The Department contends this is
a question of valuation and properly presentable to the county tax
appeal board for its determination.

It is entirely possible the Department's interpretation of
the facts may later prove to be correct. If in subsequent proceed-
ings the Department proves that this case involves an issue of
valuation rather than imposition of an illegal tax, appellants
would be barred from court for failure to first exhaust their
administrative remedies of appeal to the tax appeal boards, as
required by Title 34, Chapters 6 and 7, R.C.M. 1947. By submitting
documentary evidence, the Department may be able to prove that they
did not tax appellants' United States obligations, but merely valued
the banks' shares; the Department might then be entitled to summary
judgment pursuant to Rule 56, M.R.Civ.P. By introducing testimony
or documentary evidence at trial, the Department might likewise
prove that this case involves a tax valuation and not an illegal
taxation. These considerations, however, are irrelevant to our
inquiry at this stage of the proceedings. The only relevant inquiry
in reviewing a District Court order granting a Rule 12(b) (1) motion
to dismiss is whether the complaint, standing alone, sets forth
facts which, if true, vest the District Court with subject matter
jurisdiction. The complaints, alleging an illegal tax, give the
District Court subject matter jurisdiction. The Department may
not, simply by making allegations refuting the contentions in appel-
lants' complaints, be granted their motions to dismiss.

As this Court stated in Harrington v. Holiday Rambler Corp.
(1974), 165 Mont. 32, 35, 37, 525 P.2d 556:
"The underlying issue is whether the denial of
jurisdiction, i.e. defendant's affidavit, over-
comes the allegations of the complaint. We find
it does not and hold that dismissal of plaintiffs'
complaint on that ground was premature.

"The most troublesome aspect here is that defendant was permitted simply to say 'May' upon affidavit and thereby prevent plaintiffs from having their day in court. * * * "
The District Courts' orders granting the Department's motions
to dismiss are reversed, and the cases are remanded for further pro-
ceedings consistent with this opinion.

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Chief Justice

1
We Concur:

Justices

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