Kaapa Ethanol v. Board of Supervisors

112 	285 NEBRASKA REPORTS
K aapa Ethanol, l.l.C., appEllEE, v. thE Board
of SupErviSorS of KEarnEy C ounty,
nEBraSKa, and thE C ounty of KEarnEy,
nEBraSKa, appEllantS.
825 N.W.2d 761
Filed January 25, 2013. 	No. S-12-035.
1. Administrative Law: Appeal and Error. In reviewing an administrative agency
decision on a petition in error, both the district court and the appellate court
review the decision to determine whether the agency acted within its jurisdiction
and whether sufficient, relevant evidence supports the decision of the agency.
2. Statutes: Appeal and Error. Statutory interpretation is a question of law, which
an appellate court resolves independently of the trial court.
3. Taxation. The general common-law rule is that taxes voluntarily paid cannot
be recovered.
4. Taxation: Words and Phrases. Taxes paid under a mistake of fact are considered
involuntary and thus recoverable under the common-law rule that taxes volun-
tarily paid cannot be recovered. A mistake of fact is an error or want of knowl-
edge as to a fact, past or present, or such belief in the past or present existence
as a fact of that which never existed, or such real and honest forgetfulness of a
fact once known, as that the true recollection or knowledge of the fact, or of its
existence or nonexistence, would have caused the taxpayer to refrain from mak-
ing the payment.
5. Taxation: Legislature: Statutes: Words and Phrases. Taxes paid under a mis-
take of law are considered voluntary at common law and cannot be recovered
unless the Legislature has enacted a statute authorizing recovery. A mistake of
law is a mistake as to the legal consequences of an assumed state of facts, which
occurs where a person is truly acquainted with the existence or nonexistence
of the facts but is ignorant of or comes to an erroneous conclusion as to their
legal effect.
6. Statutes. Statutes which effect a change in the common law are to be strictly
construed.
7. Statutes: Intent. Generally, a statutory construction which changes an express
common-law rule should not be adopted unless the plain words of the statute
compel it.
Appeal from the District Court for Kearney County: StEphEn
r. illingworth, Judge. Reversed and remanded with directions.
Charles W. Campbell, of Angle, Murphy & Campbell, P.C.,
L.L.O., for appellants.
Justin R. Herrmann and Daniel L. Lindstrom, of Jacobsen,
Orr, Lindstrom & Holbrook, P.C., L.L.O., and William E.
Peters, of Peters & Chunka, P.C., L.L.O., for appellee.
Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/01/2026 04:39 AM CST

KAAPA ETHANOL v. BOARD OF SUPERVISORS 	113
Cite as 285 Neb. 112
hEaviCan, C.J., wright, C onnolly, StEphan, MCC orMaCK,
M illEr-lErMan, and CaSSEl, JJ.
StEphan, J.
Kaapa Ethanol, L.L.C. (Kaapa), sought a refund from
Kearney County, Nebraska, of a portion of its 2006 personal
property taxes, alleging the taxes were paid as the result of
an “honest mistake or misunderstanding.”1 The Board of
Supervisors of Kearney County (Board) denied the refund,
and Kappa filed a petition in error with the district court
for Kearney County. That court sustained the petition in
error and ordered Kearney County to refund $480,411.50.
The Board and Kearney County filed this timely appeal, and
we granted their petition to bypass the Nebraska Court of
Appeals. We reverse.
BACKGROUND
nEBraSKa propErty tax law
In Nebraska, real property is taxed based upon its value
as of January 1 of each year, as determined by each county
assessor.2 The assessor then submits a real property tax bill
to each taxpayer.3 Taxation of personal property also involves
the county assessor, but only indirectly. Nebraska requires
the owner of personal property to compile a list of all its
tangible personal property having a tax situs in Nebraska.4
The list must be on a form prescribed by Nebraska’s Tax
Commissioner and must be filed as a personal property tax
return by the owner of the personal property on or before May
1 of each year.5 The county assessor then reviews all personal
property tax returns and changes the reported valuation of any
item of personal property to conform to net book value.6 The
assessor also adds any omitted personal property and assigns
1 Neb. Rev. Stat. § 77-1734.01(2) (Reissue 2009).
2 See, generally, Neb. Rev. Stat. § 77-1301 (Reissue 2009).
3 Id.
4 Neb. Rev. Stat. § 77-1201 (Reissue 2009).
5 Neb. Rev. Stat. § 77-1229(1) (Reissue 2009).
6 Neb. Rev. Stat. § 77-1233.04 (Reissue 2009).

114 	285 NEBRASKA REPORTS
net book value to it.7 Any valuation added to a personal prop-
erty tax return or added through the filing of a personal prop-
erty tax return after May 1 but on or before July 31 is subject
to a penalty of 10 percent of the tax due on the value added.8
Any valuation added to a personal property tax return or added
through the filing of a personal property return on or after
August 1 is subject to a penalty of 25 percent of the tax due
on the value added.9
faCtS
Kaapa 	owns 	and 	operates 	an 	ethanol 	plant 	located 	in
Kearney County. On April 28, 2006, Kaapa filed its 2006
personal property tax return, reporting a total taxable value
of approximately $24.5 million. Several items listed on the
return were used by the plant in processing grain into ethanol;
these items are generally referred to in the record as “process-
ing equipment.”
Kaapa’s 2006 return was prepared by Shana Dahlgren,
Kappa’s chief financial officer. Dahlgren testified that prior
to filing the return, she consulted with several sources to help
her determine whether the processing equipment was real
or personal property. Specifically, Dahlgren consulted with
the Property Tax Administrator for Nebraska’s Department
of Property Assessment and Taxation and two licensed real
estate appraisers with experience appraising ethanol plants in
Nebraska. These sources advised Dahlgren that the processing
equipment was personal property. Dahlgren also reviewed the
personal property tax returns of other Nebraska ethanol plants
and concluded that those plants categorized similar equipment
as personal property. Based on this information, Dahlgren
included the processing equipment as personal property on
Kaapa’s 2006 property tax return.
Dahlgren also filed Kaapa’s personal property tax returns
in 2003, 2004, 2005, and 2007. She testified that she treated
the processing equipment as personal property in each of those
7 Id.
8 Id.
9 Id.

KAAPA ETHANOL v. BOARD OF SUPERVISORS 	115
Cite as 285 Neb. 112
years as well. The county assessor, however, treated the proc-
essing equipment as real property from 2003 forward.
The differing treatment of the processing equipment by
Kaapa and the county assessor in tax years 2003, 2004, and
2005 was resolved by settlement between Kaapa and Kearney
County. In 2006 and 2007, no settlement was reached. But in
2007, Kaapa protested both its personal property return and
the assessor’s real property valuation.10 After Kearney County
denied both of the 2007 protests, Kaapa appealed to Nebraska’s
Tax Equalization and Review Commission (TERC).11 On June
25, 2009, TERC held that the processing equipment was prop-
erly classified as real property in 2007, and ordered Kearney
County to refund Kaapa the 2007 personal property taxes it
paid on the processing equipment. We affirmed in a memoran-
dum opinion filed on March 10, 2010, in cases Nos. S-09-707
and S-09-717.
In 2006, the year at issue in this case, Kaapa did not settle
with Kearney County and did not protest its personal prop-
erty return. It did, however, protest the 2006 real property
assessment. Dahlgren explained that Kaapa did not protest
the 2006 personal property tax return, because it received
the county assessor’s valuation of its real property for 2006
after the May 1 deadline to protest the personal property tax
return. According to Dahlgren, she therefore did not know
until after May 1 that the assessor’s 2006 real property valua-
tion included the processing equipment. The assessor testi-
fied that she reviewed Kaapa’s 2006 personal property tax
return before finalizing Kaapa’s 2006 real property valuation.
According to the assessor, she could not determine from the
face of the 2006 personal property tax return whether items of
processing equipment she categorized as real property were
also being valued by Kaapa as personal property. The asses-
sor requested and received additional information from Kaapa
on this issue, but was still unable to determine that any items
of processing equipment were listed on both tax assessments.
10 See Neb. Rev. Stat. § 77-1502 (Reissue 2009).
11 See Neb. Rev. Stat. § 77-1510 (Reissue 2009).

116 	285 NEBRASKA REPORTS
The assessor therefore included the processing equipment in
the real property valuation.
Kaapa did not amend its 2006 personal property return after
receiving the assessor’s 2006 real property assessment.12 But
as noted, it did timely protest the 2006 real property assess-
ment. The Board denied the protest, and on September 18,
2007, TERC affirmed. In doing so, TERC determined that the
processing equipment was properly taxed as real property in
2006. TERC’s opinion did not address or resolve any double
taxation issues related to Kaapa’s 2006 personal property
return. Kaapa appealed from TERC’s decision but later dis-
missed the appeal.
In December 2008, Kaapa filed a claim for a tax refund with
the Kearney County treasurer pursuant to § 77-1734.01, argu-
ing it paid taxes on the processing equipment in 2006 twice
because it was taxed as both real and personal property. Kaapa
contended that because TERC, in addressing Kaapa’s 2006 real
property protest, found the processing equipment was properly
classified as real property, Kaapa’s listing of the equipment
as personal property and payment of personal property taxes
on it in 2006 was the result of an “honest mistake or misun-
derstanding,” and that thus, it was entitled to a refund of the
personal property taxes so paid. The Kearney County treasurer
found no refund was due. Kaapa asked the Board to review
the treasurer’s finding, and the Board conducted an evidentiary
hearing. The Board ultimately determined that because no
“agreeable solution” could be reached, Kaapa was not entitled
to the refund.
Kaapa then filed a petition in error in the district court.13
After reviewing the evidence, that court reversed the deci-
sion of the Board. The court found that Kaapa had paid the
2006 personal property taxes on the processing equipment as
the result of an “honest mistake or misunderstanding” and
was entitled to a refund under § 77-1734.01. The Board and
Kearney County timely appealed, and we granted their petition
to bypass the Court of Appeals.
12 See Neb. Rev. Stat. § 77-1230 (Reissue 2009).
13 See Neb. Rev. Stat. § 25-1901 (Reissue 2008).

KAAPA ETHANOL v. BOARD OF SUPERVISORS 	117
Cite as 285 Neb. 112
ASSIGNMENT OF ERROR
The Board and Kearney County assign, restated and consoli-
dated, that the district court erred in finding Kaapa was entitled
to a refund of the 2006 personal property taxes it paid on the
processing equipment.
STANDARD OF REVIEW
[1] In reviewing an administrative agency decision on a
petition in error, both the district court and the appellate court
review the decision to determine whether the agency acted
within its jurisdiction and whether sufficient, relevant evidence
supports the decision of the agency.14
[2] Statutory interpretation is a question of law, which an
appellate court resolves independently of the trial court.15
ANALYSIS
Kaapa’s refund claim is based on the premise that Kaapa
paid 2006 taxes on the processing equipment twice because the
equipment was classified as personal property by Kaapa and as
real property by the county assessor. Kaapa asserts that because
TERC ultimately held that the equipment was properly classi-
fied as real property, Kaapa committed an “honest mistake or
misunderstanding” when it listed the same property as personal
property, and thus should receive a refund under § 77-1734.01.
That statute provides in pertinent part:
In case of payment made of any property taxes or any
payments in lieu of taxes with respect to property as a
result of a clerical error or honest mistake or misunder-
standing, on the part of a county or other political sub-
division of the state or any taxpayer, the county treasurer
to whom the tax was paid shall refund that portion of the
tax paid as a result of the clerical error or honest mistake
or misunderstanding. A claim for a refund pursuant to this
section shall be made in writing to the county treasurer to
14 Banks v. Housing Auth. of City of Omaha, 281 Neb. 67, 795 N.W.2d 632
(2011); Fleming v. Civil Serv. Comm. of Douglas Cty., 280 Neb. 1014, 792
N.W.2d 871 (2011).
15 Connelly v. City of Omaha, 284 Neb. 131, 816 N.W.2d 742 (2012); Engler
v. State, 283 Neb. 985, 814 N.W.2d 387 (2012).

118 	285 NEBRASKA REPORTS
whom the tax was paid within three years after the date
the tax was due . . . .
. . . This section may not be used to challenge the
valuation of property, the equalization of property, or the
constitutionality of a tax.
[3-5] The general common-law rule is that taxes voluntarily
paid cannot be recovered.16 The rule’s purpose is to discourage
litigation and give stability to taxing authorities in conducting
their affairs.17 Taxes paid under a mistake of fact are consid-
ered involuntary and thus recoverable under the common-law
rule.18 A mistake of fact is
an error or want of knowledge as to a fact, past or pres-
ent, or such belief in the past or present existence as a
fact of that which never existed, or such real and honest
forgetfulness of a fact once known, as that the true rec-
ollection or knowledge of the fact, or of its existence or
nonexistence, would have caused the taxpayer to refrain
from making the payment.19
Taxes paid under a mistake of law are considered voluntary at
common law20 and cannot be recovered unless the Legislature
has enacted a statute authorizing recovery.21 A mistake of law
is “a mistake as to the legal consequences of an assumed state
of facts, which occurs where a person is truly acquainted with
the existence or nonexistence of the facts but is ignorant of or
comes to an erroneous conclusion as to their legal effect.”22
The mistake which Kaapa claims to have made with respect
to its 2006 taxes is clearly one of law, because the error was
with respect to whether the processing equipment legally was
real or personal property. Thus, the threshold question in this
16 Satterfield v. Britton, 163 Neb. 161, 78 N.W.2d 817 (1956).
17 See Texas Nat. Bank of Baytown v. Harris Cty., 765 S.W.2d 823 (Tex.
App. 1988).
18 85 C.J.S. Taxation § 1058 (2010).
19 Id. at 115.
20 72 Am. Jur. 2d State and Local Taxation § 972 (2012).
21 Satterfield v. Britton, supra note 16.
22 85 C.J.S., supra note 18, § 1057 at 114-15.

KAAPA ETHANOL v. BOARD OF SUPERVISORS 	119
Cite as 285 Neb. 112
appeal is whether § 77-1734.01 is merely a codification of the
common-law rule or whether it alters the common-law rule and
authorizes recovery of taxes paid pursuant to an error of law.23
Specifically, does the statutory phrase “clerical error or hon-
est mistake or misunderstanding” constitute the Legislature’s
expression that a taxpayer can recover in Nebraska for taxes
paid based on an error of law?
[6,7] In resolving this issue, we are mindful that statutes
which effect a change in the common law are to be strictly con-
strued.24 Generally, a construction which changes an express
common-law rule should not be adopted unless the plain words
of the statute compel it.25 Here, the phrase “clerical error
or honest mistake” clearly refers to errors of fact. The term
“misunderstanding” is less clear; it could perhaps include a
misapprehension or misapplication of law. But because the lan-
guage of the statute does not plainly reveal that the Legislature
intended to expand the common-law rule, we must conclude
that it did not.
Additionally, we note that § 77-1734.01 is included in chap-
ter 77, article 17, of the Nebraska Revised Statutes, which
bears the title “Collection of Taxes.” Also contained in article
17, immediately following § 77-1734.01, is Neb. Rev. Stat.
§ 77-1735 (Reissue 2009), which provides a procedure whereby
a taxpayer may obtain a refund of property tax payment based
upon a claim that a tax “is illegal for any reason other than
the valuation or equalization of the property.” The existence
of this separate statute governing refunds of certain taxes paid
based on mistakes of law further supports the conclusion that
the Legislature intended § 77-1734.01 to apply only to refunds
resulting from errors of fact. Accordingly, we conclude that
§ 77-1734.01 is merely a codification of the common-law
rule. Because Kaapa paid the 2006 personal property taxes
based upon a mistake of law, § 77-1734.01 affords it no relief.
23 See, generally, Satterfield v. Britton, supra note 16.
24 Alisha C. v. Jeremy C., 283 Neb. 340, 808 N.W.2d 875 (2012).
25 See In re 2007 Appropriations of Niobrara River Waters, 283 Neb. 629,
820 N.W.2d 44 (2012).

120 	285 NEBRASKA REPORTS
The district court erred in ordering Kearney County to refund
the $480,411.50.
We acknowledge that this construction of § 77-1734.01
leads to the harsh result of double taxation in this case. But
a contrary construction would have led to the harsh result of
Kearney County’s being required to refund tax receipts which
it collected and has long since paid over to other taxing author-
ities within its jurisdiction. In the end, we can only interpret
the existing statute under our established principles, as we have
done here. If the Legislature wishes to provide broader relief
to taxpayers under similar circumstances in the future, it has
the power to enact a statute or statutes specifically providing
such relief.
CONCLUSION
For the reasons discussed, we reverse the judgment of the
district court and remand the cause with directions to reinstate
the order of the Board denying Kaapa’s claim for a refund.
rEvErSEd and rEMandEd with dirECtionS.
JQh la viSta C onfErEnCE CEntEr dEvElopMEnt llC,
appEllant, v. Sarpy C ounty Board
of EQualization, appEllEE.
825 N.W.2d 447
Filed January 25, 2013. 	Nos. S-12-054, S-12-055.
1. Taxation: Judgments: Appeal and Error. Appellate courts review decisions
rendered by the Tax Equalization and Review Commission for errors appearing
on the record.
2. Judgments: Appeal and Error. When reviewing a judgment for errors appearing
on the record, an appellate court’s inquiry is whether the decision conforms to
the law, is supported by competent evidence, and is neither arbitrary, capricious,
nor unreasonable.
3. Taxation: Valuation: Presumptions: Evidence. A presumption exists that a
board of equalization has faithfully performed its official duties in making an
assessment and has acted upon sufficient competent evidence to justify its action.
That presumption remains until there is competent evidence to the contrary
presented, and the presumption disappears when there is competent evidence
adduced on appeal to the contrary. From that point forward, the reasonableness of