Opinion
NO. CIV-03-172-T
January 14, 2004
ORDER
Before the court is the motion of defendant to dismiss the amended complaint. Pursuant to Fed.R.Civ.P. 12(b)(1), defendant argues that the court lacks jurisdiction over the subject matter of plaintiffs' claims because the Oklahoma Ad Valorem Tax Code (the "Code") statutes provide an exclusive remedy and plaintiffs have failed to exhaust the administrative remedies provided by the statutes. Plaintiffs' response argues that defendant cannot raise this argument because it was not asserted in the motion to dismiss the original complaint; alternatively, plaintiffs contend that the Code is not an exclusive remedy and that they may pursue common law claims in this court.
Plaintiffs' argument that defendant has waived its challenge to subject matter jurisdictionis wholly without merit and is, in fact, contrary to the Federal Rules of Civil Procedure. While plaintiffs correctly state that Fed.R.Civ.P. 12(h) provides that certain defenses are waived if not consolidated and asserted in a motion to dismiss, the defense of lack of subject matter jurisdiction is expressly excluded by Fed.R.Civ.P. 12(h). The rule provides that "Whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action." Fed.R.Civ.P. 12(h)(3). Furthermore, the Advisory Committee Notes to the rule provide in pertinent part:
It is to be noted that while the defenses specified in division (h)(1) are subject to waiver as there provided, the more substantial defenses of failure to state a claim upon which relief can be granted, failure to join a party indispensable under Rule 19, and failure to state a legal defense to a claim (see Rule 12(b)(6), (7), (f), as well as the defense of lack of jurisdiction over the subject matter (see Rule 12(b)(1). are expressly preserved against waiver by amended subdivision (h)(2) and (3).
Fed.R.Civ.P. 12 Advisory Committee Notes, Subdivision (h) (emphasis added). Plaintiffs also ignore the numerous decisions in this circuit holding that the defense of lack of subject matter jurisdiction is not subject to waiver. See, e.g., Pittsburg County Rural Water Dist. No. 7 v. City of McAlester, 346 F.3d 1260, 1271 (10th Cir. 2003): Garrett v. Stratman, 254 F.3d 946. 951 (10th Cir. 2001).
Plaintiffs' waiver argument is thus rejected. Therefore, the court will consider defendant's argument that the court lacks jurisdiction because plaintiffs have an exclusive statutory remedy which was not exhausted prior to the filing of this action.
Plaintiffs' action is characterized as a common law fraud claim. Plaintiffs contend that defendant falsely represented its assets to the County Assessor, thereby causing the assessment of taxes to be inaccurate and insufficient.
Defendant argues that the Oklahoma Ad Valorem Tax Code prescribes a specific and exclusive remedy to the county when it claims that property was improperly undervalued or omitted. Furthermore, defendant points out, the statute expressly provides a remedial scheme for the adjudication of claims that property has been undervalued as a result of fraud, which is the allegation made by plaintiffs in this case. The statute provides in pertinent part:
A. Whenever real or personal property has in any year, through false representations or concealments willfully and fraudulently made by the owner or agent in listing the same for assessment, been grossly undervalued and has escaped for that year just and proper taxation, the county assessor or the State Board of Equalization, whose duty it is to assess such class of property shall, at anytime within two (2) years from the date of such original undervaluation, cause such property to be entered on the assessment roll and tax books for the year or years so undervalued.
B. After reasonable notice to the party affected, in order that he may be heard, the county assessor or State Board of Equalization shall reassess such undervalued property and cause same to be extended against such property on the tax list or rolls for the current year, with all arrearage of taxes thus properly accruing against it, including interest thereon at the rate of six percent (6%) per annum from the time such tax should have become delinquent.
Okla. Stat tit. 68 § 2846. The Oklahoma courts have long held that enforcement of ad valorem taxes is governed by statute and that the statutory method of enforcement is exclusive. "Ad valorem taxes are not debts but are positive acts of the government, are the creatures of statute, and must be enforced in the manner provided by statute."McDonald v. Duckworth, 197 Okla. 576, 173 P.2d 436, 438 (1946); see also Addison v. Goodin, 731 P.2d 391, 394 (Okla. 1987); United States v. Home Fed. Sav. Loan Assn., 418 P.2d 319, 326-27 (Okla. 1966).
That the statutory method of collecting ad valorem taxes is exclusive is also expressed in the Oklahoma statute:
The proceedings before the county assessor, boards of equalization and appeals therefrom shall be the sole method by which assessments or equalizations shall be corrected or taxes abated. Equitable remedies shall be resorted to only where the aggrieved party has no taxable property within the tax district of which complaint is made.
Okla. Stat. tit. 68 § 2885(A). As set forth in the express language of the statute, the statutory procedure is exclusive. Oklahoma State Board of Equalization v. Craig, 749 P.2d 1132, 1133-34 (Okla. 1988). Accordingly:
Oklahoma's statutory procedure for seeking judicial relief from an illegal tax has, since its initial enactment in 1915, been upheld as a plain, speedy, adequate and exclusive remedy within the legislative power to prescribe.Muskogee Fair Haven Manor Phase I. Inc. v. Scott, 957 P.2d 107, 112-13 (Okla. 1998) (emphasis in original). Where the plaintiff fails to exhaust the administrative statutory scheme, the court lacks jurisdiction to decide the case. Liddell v. Board of Commissioners, 46 P.3d 715. 717 (Okla.Ct.App.), cert. denied (2002); Muskogee Fair Haven, 957 P.2d at 113.
Plaintiffs acknowledge the statutory scheme and do not dispute the consistent holdings of the Oklahoma courts interpreting same as providing an exclusive remedy for claims related to ad valorem tax assessments. However, plaintiffs contend that the statutory remedies do not apply to this action because they do not seek to recover unpaid taxes but seek compensatory damages. Plaintiffs thus argue that the court decisions are inapplicable.
A review of plaintiffs' amended complaint reflects that the recovery sought, although characterized as tort damages, consists of the amount of increased taxes that plaintiffs contend would have been paid in the absence of the alleged fraudulent representations of defendant. Contrary to plaintiffs' argument in response to defendant's motion, an award of unpaid taxes is the recovery sought. Plaintiffs offer no persuasive authority, and the court has located none, which would permit them to escape the exclusive statutory scheme by labeling the recovery sought as compensatory damages instead of unpaid taxes.
Having My reviewed the file and having considered the applicable law, the court concludes that Oklahoma's statutes provide an exclusive remedy for a dispute involving underpayment of taxes resulting from fraud. This court lacks jurisdiction to consider plaintiffs' claims. Accordingly, defendant's motion to dismiss for lack of jurisdiction is GRANTED.
IT IS SO ORDERED.