Cite as 2021 Ark. App. 324 Elizabeth Perry I attest to the accuracy and ARKANSAS COURT OF APPEALS integrity of this document DIVISION II 2023.07.07 10:09:04 -05'00' No. CV-19-359 2023.003.20215 SWN PRODUCTION COMPANY Opinion Delivered September 8, 2021 (ARKANSAS), LLC APPELLANT APPEAL FROM THE CONWAY V. COUNTY CIRCUIT COURT [NO. 15CV-18-16] MARK STOBAUGH, IN HIS OFFICIAL CAPACITY AS CONWAY COUNTY ASSESSOR; CONWAY HONORABLE DAVID H. COUNTY BOARD OF MCCORMICK, JUDGE EQUALIZATION; CONWAY COUNTY, ARKANSAS; CONWAY COUNTY TREASURER; AND CONWAY COUNTY TAX COLLECTOR APPELLEES REVERSED AND REMANDED
PHILLIP T. WHITEAKER, Judge
Appellant SWN Production (Arkansas), LLC (SWN), appeals the decision of the
Conway County Circuit Court dismissing its complaint for failure to state sufficient facts
and for failure to join indispensable parties. SWN argues that the circuit court erred in both
rulings. We agree, and we reverse and remand.
I. Facts & Procedural History
SWN owns working interests in several mineral properties in Conway County.
Appellees are various Conway County officials involved in the assessment process, collectively, the County. 1 Pertinent to this appeal is the County’s 2017 assessment of SWN’s
interests. The Conway County Assessor, utilizing guidelines promulgated by the Arkansas
Assessment Coordination Division (ACD), calculated SWN’s working interests at $169 per
1,000 cubic feet of average daily production. In reaching this calculation, the assessor used
a Henry hub factor of $3.04 per 1,000 cubic feet and also used a factor of 13 percent for
expenses.
SWN disagreed with this calculation method and challenged the assessment, first
before the Conway County Board of Equalization and then before the Conway County
Court. It contended that a factor of $1.80 per 1,000 cubic feet should be used and that a
factor of 49 percent for expenses was more appropriate. SWN’s calculation is approximately
34 percent of the County’s assessment.
When its challenge to the assessment was unsuccessful before both the board and the
county court, SWN appealed to the Conway County Circuit Court by filing a notice of
appeal and a complaint. The County filed a motion to dismiss SWN’s complaint on several
grounds, including that the complaint failed to state sufficient facts or a claim for relief and
that SWN failed to join necessary parties—specifically, ACD and the school districts located
in Conway County. After a hearing on the County’s motion to dismiss, the circuit court
entered an order granting the County’s motion to dismiss for SWN’s failure to state a cause
1 The appellees include Mark Stobaugh, the Conway County Assessor; the Conway County Board of Equalization; Conway County; the Conway County Treasurer; and the Conway County Tax Collector. Stobaugh is the only official actually named in the caption of the complaint. However, the treasurer and the tax collector are named in the body of the complaint.
2 of action under Ark. R. Civ. P. 12(b)(6) and its failure to join a necessary and indispensable
party under Ark. R. Civ. P. 12(b)(7). 2 This appeal followed.
II. Standard of Review
In reviewing a circuit court’s order granting a motion to dismiss, our supreme court
has held that the standard of review is whether the circuit court abused its discretion in
dismissing the complaint. Brown v. Towell, 2021 Ark. 60, 610 S.W.3d 17. In determining
whether the circuit court abused its discretion in dismissing a complaint, the appellate court
treats the facts alleged in the complaint as true and views them in the light most favorable
to the plaintiff. Id.
III. Analysis
In this appeal, we are presented with two very straight-forward issues: whether the
circuit court abused its discretion in granting the County’s motion to dismiss for (1) failure
of the complaint to state sufficient facts or a claim for which relief can be granted under
Ark. R. Civ. P. 12(b)(6); and (2) failure to join necessary parties under Ark. R. Civ. P.
12(b)(7). 3 We conclude that it did.
As to the Rule 12(b)(6) dismissal, Arkansas is a fact-pleading state, and a complaint
must state facts, not mere conclusions, in order to entitle the pleader to relief. Ballard Grp.,
2 The court did not further explain its reasoning. 3 The arguments presented by the parties are not nearly so straight-forward. SWN labels its arguments somewhat differently. The County also argues the grounds of insufficiency of process and insufficiency of service of process as a basis for affirmance. However, the circuit court did not rely on these grounds in granting the motion to dismiss. Therefore, we need not consider them. See Sloop v. Kiker, 2016 Ark. App. 125, at 4, 484 S.W.3d 696, 699.
3 Inc. v. BP Lubricants USA, Inc., 2014 Ark. 276, at 6, 436 S.W.3d 445, 449 (citing Ark. R.
Civ. P. 8(a) (2013)). Here, SWN filed a complaint alleging that the assessor valued SWN’s
working interests using the methodology prescribed in the ACD guidelines, that the
calculations contained in SWN’s SEC filings were the most accurate reflection of the fair
market value, that the assessor used a factor unrepresentative of SWN’s actual expenses, and
that the assessor’s assessment of the working interest exceeded its fair market value. SWN
prayed that the court find the assessment excessive and that the assessment be based on the
data SWN provided.
The County argued below and on appeal that because the complaint admitted that
the assessment was based on guidelines promulgated by ACD and that the County followed
those guidelines, the complaint failed to state sufficient facts to overturn the assessment. The
County relies heavily upon Arkansas Code Annotated section 26-26-1110(c)(4), which
provides:
(4) When a nonproducing mineral right begins producing minerals, the mineral right shall be assessed for tax purposes in accordance with rules established by the Assessment Coordination Division.
Ark. Code Ann. § 26-26-1110(c)(4) (Repl. 2020).
The County argues that compliance with the ACD guidelines is mandatory on the
assessor, that the assessor complied with the guidelines, and that the complaint does not state
sufficient facts to overcome the mandatory nature of the guidelines. We disagree.
Our supreme court has held that the guidelines are not mandatory. See Bd. of
Equalization v. Evelyn Hills Shopping Ctr., 251 Ark. 1055, 476 S.W.2d 211 (1972); Kitchens
v. Ark. Appraisal Serv., 233 Ark. 384, 386, 344 S.W.2d 853, 854 (1961). In fact, the ACD
4 guidelines are not ironclad rules to be followed with no deviation. Kitchens, supra. Rather,
assessors use different approaches (and often more than one approach), to arrive at the
current market value of property, and no one particular method is mandated by the General
Assembly. See Evelyn Hills, supra.
Most recently, our supreme court reiterated that the guidelines are not mandatory
but are merely guidance tools for the seventy-five county assessors across the state. Chaney
v. Union Producing, LLC, 2020 Ark. 388, 611 S.W.3d 482; The Chaney court reiterated that,
pursuant to Arkansas Code Annotated section 26-26-1101 (Repl. 2020), it is solely the
county tax assessors who have the authority and duty to assess property. Chaney, supra. In
Free access — add to your briefcase to read the full text and ask questions with AI
Cite as 2021 Ark. App. 324 Elizabeth Perry I attest to the accuracy and ARKANSAS COURT OF APPEALS integrity of this document DIVISION II 2023.07.07 10:09:04 -05'00' No. CV-19-359 2023.003.20215 SWN PRODUCTION COMPANY Opinion Delivered September 8, 2021 (ARKANSAS), LLC APPELLANT APPEAL FROM THE CONWAY V. COUNTY CIRCUIT COURT [NO. 15CV-18-16] MARK STOBAUGH, IN HIS OFFICIAL CAPACITY AS CONWAY COUNTY ASSESSOR; CONWAY HONORABLE DAVID H. COUNTY BOARD OF MCCORMICK, JUDGE EQUALIZATION; CONWAY COUNTY, ARKANSAS; CONWAY COUNTY TREASURER; AND CONWAY COUNTY TAX COLLECTOR APPELLEES REVERSED AND REMANDED
PHILLIP T. WHITEAKER, Judge
Appellant SWN Production (Arkansas), LLC (SWN), appeals the decision of the
Conway County Circuit Court dismissing its complaint for failure to state sufficient facts
and for failure to join indispensable parties. SWN argues that the circuit court erred in both
rulings. We agree, and we reverse and remand.
I. Facts & Procedural History
SWN owns working interests in several mineral properties in Conway County.
Appellees are various Conway County officials involved in the assessment process, collectively, the County. 1 Pertinent to this appeal is the County’s 2017 assessment of SWN’s
interests. The Conway County Assessor, utilizing guidelines promulgated by the Arkansas
Assessment Coordination Division (ACD), calculated SWN’s working interests at $169 per
1,000 cubic feet of average daily production. In reaching this calculation, the assessor used
a Henry hub factor of $3.04 per 1,000 cubic feet and also used a factor of 13 percent for
expenses.
SWN disagreed with this calculation method and challenged the assessment, first
before the Conway County Board of Equalization and then before the Conway County
Court. It contended that a factor of $1.80 per 1,000 cubic feet should be used and that a
factor of 49 percent for expenses was more appropriate. SWN’s calculation is approximately
34 percent of the County’s assessment.
When its challenge to the assessment was unsuccessful before both the board and the
county court, SWN appealed to the Conway County Circuit Court by filing a notice of
appeal and a complaint. The County filed a motion to dismiss SWN’s complaint on several
grounds, including that the complaint failed to state sufficient facts or a claim for relief and
that SWN failed to join necessary parties—specifically, ACD and the school districts located
in Conway County. After a hearing on the County’s motion to dismiss, the circuit court
entered an order granting the County’s motion to dismiss for SWN’s failure to state a cause
1 The appellees include Mark Stobaugh, the Conway County Assessor; the Conway County Board of Equalization; Conway County; the Conway County Treasurer; and the Conway County Tax Collector. Stobaugh is the only official actually named in the caption of the complaint. However, the treasurer and the tax collector are named in the body of the complaint.
2 of action under Ark. R. Civ. P. 12(b)(6) and its failure to join a necessary and indispensable
party under Ark. R. Civ. P. 12(b)(7). 2 This appeal followed.
II. Standard of Review
In reviewing a circuit court’s order granting a motion to dismiss, our supreme court
has held that the standard of review is whether the circuit court abused its discretion in
dismissing the complaint. Brown v. Towell, 2021 Ark. 60, 610 S.W.3d 17. In determining
whether the circuit court abused its discretion in dismissing a complaint, the appellate court
treats the facts alleged in the complaint as true and views them in the light most favorable
to the plaintiff. Id.
III. Analysis
In this appeal, we are presented with two very straight-forward issues: whether the
circuit court abused its discretion in granting the County’s motion to dismiss for (1) failure
of the complaint to state sufficient facts or a claim for which relief can be granted under
Ark. R. Civ. P. 12(b)(6); and (2) failure to join necessary parties under Ark. R. Civ. P.
12(b)(7). 3 We conclude that it did.
As to the Rule 12(b)(6) dismissal, Arkansas is a fact-pleading state, and a complaint
must state facts, not mere conclusions, in order to entitle the pleader to relief. Ballard Grp.,
2 The court did not further explain its reasoning. 3 The arguments presented by the parties are not nearly so straight-forward. SWN labels its arguments somewhat differently. The County also argues the grounds of insufficiency of process and insufficiency of service of process as a basis for affirmance. However, the circuit court did not rely on these grounds in granting the motion to dismiss. Therefore, we need not consider them. See Sloop v. Kiker, 2016 Ark. App. 125, at 4, 484 S.W.3d 696, 699.
3 Inc. v. BP Lubricants USA, Inc., 2014 Ark. 276, at 6, 436 S.W.3d 445, 449 (citing Ark. R.
Civ. P. 8(a) (2013)). Here, SWN filed a complaint alleging that the assessor valued SWN’s
working interests using the methodology prescribed in the ACD guidelines, that the
calculations contained in SWN’s SEC filings were the most accurate reflection of the fair
market value, that the assessor used a factor unrepresentative of SWN’s actual expenses, and
that the assessor’s assessment of the working interest exceeded its fair market value. SWN
prayed that the court find the assessment excessive and that the assessment be based on the
data SWN provided.
The County argued below and on appeal that because the complaint admitted that
the assessment was based on guidelines promulgated by ACD and that the County followed
those guidelines, the complaint failed to state sufficient facts to overturn the assessment. The
County relies heavily upon Arkansas Code Annotated section 26-26-1110(c)(4), which
provides:
(4) When a nonproducing mineral right begins producing minerals, the mineral right shall be assessed for tax purposes in accordance with rules established by the Assessment Coordination Division.
Ark. Code Ann. § 26-26-1110(c)(4) (Repl. 2020).
The County argues that compliance with the ACD guidelines is mandatory on the
assessor, that the assessor complied with the guidelines, and that the complaint does not state
sufficient facts to overcome the mandatory nature of the guidelines. We disagree.
Our supreme court has held that the guidelines are not mandatory. See Bd. of
Equalization v. Evelyn Hills Shopping Ctr., 251 Ark. 1055, 476 S.W.2d 211 (1972); Kitchens
v. Ark. Appraisal Serv., 233 Ark. 384, 386, 344 S.W.2d 853, 854 (1961). In fact, the ACD
4 guidelines are not ironclad rules to be followed with no deviation. Kitchens, supra. Rather,
assessors use different approaches (and often more than one approach), to arrive at the
current market value of property, and no one particular method is mandated by the General
Assembly. See Evelyn Hills, supra.
Most recently, our supreme court reiterated that the guidelines are not mandatory
but are merely guidance tools for the seventy-five county assessors across the state. Chaney
v. Union Producing, LLC, 2020 Ark. 388, 611 S.W.3d 482; The Chaney court reiterated that,
pursuant to Arkansas Code Annotated section 26-26-1101 (Repl. 2020), it is solely the
county tax assessors who have the authority and duty to assess property. Chaney, supra. In
so doing, the assessor must consider all the evidence bearing on the fair market value. Jim
Paws, Inc. v. Equalization Bd. of Garland Cty., 289 Ark. 113, 710 S.W.2d 197 (1986); Kitchens,
supra.
We now turn our attention to whether the complaint filed by SWN stated sufficient
facts to survive a Rule 12(b)(6) motion to dismiss. We hold that it does. SWN was not
required to plead that the assessment was manifestly excessive, clearly erroneous, or
confiscatory. Ark. Code Ann. § 26-27-318(d)(2) (Repl. 2020). Instead, it need only plead
the true and correct value of the property for ad valorem tax purposes. Id. SWN’s complaint
alleged that the assessor valued its working interests using the methodology prescribed in
the ACD guidelines, that the calculations contained in SWN’s SEC filings were the most
accurate reflection of the fair market value, that the assessor used a factor (13 percent)
unrepresentative of SWN’s actual expenses, and that the assessor’s assessment of the working
interest exceeded its fair market value. We must treat these facts as true for purposes of our
5 review. Panhandle Oil & Gas, Inc. v. BHP Billiton Petroleum (Fayetteville), LLC, 2017 Ark.
App. 201, 520 S.W.3d 277. When so considered, SWN has shown that the assessor’s
assessment of the working interest exceeded its fair market value. Therefore, the circuit
court abused its discretion in dismissing the complaint for failure to state sufficient facts.
As to the Rule 12(b)(7) issue, we hold that the circuit court abused its discretion in
dismissing its complaint for failure to join necessary and indispensable parties. Below, the
County asserted that ACD and the various school districts located in Conway County were
necessary and indispensable parties, and the circuit court agreed.
In Chaney, supra, the supreme court held that ACD and its director were not proper
parties to that case because ACD had no authority to direct how taxes are assessed at the
county level. The supreme court also held that the director was entitled to the protection
of sovereign immunity. If the ACD director in Chaney was entitled to sovereign immunity
and was therefore not a necessary party to an assessment appeal, then ACD cannot be a
necessary party in the present case. The circuit court erred in ruling otherwise.
Likewise, the circuit court erred in ruling that the school districts were necessary
parties. The County argues that the school districts are necessary parties to appeals of
property-tax assessments, relying on the supreme court’s decision in Lake View School District
No. 25 v. Huckabee, 351 Ark. 31, 91 S.W.3d 472 (2002). According to the County, Lake
View requires that school districts across the state levy a uniform rate of tax to fund and
support school operations and, therefore, the school districts in Conway County are
necessary parties. We are not persuaded.
6 Long before Lake View, the supreme court held that local school districts were
“obviously” not necessary parties to every proceeding for the determination of the assessed
value of taxable property. Pulaski Cnty. Bd. of Equalization v. Am. Republic Life Ins. Cos., 233
Ark. 124, 342 S.W.2d 660 (1961). The court reasoned that the prosecuting attorney had
the statutory duty of representing the public in such a proceeding and, if the rule were
otherwise, the county, the various cities, other school districts, the holders of municipal
bonds, and all the other beneficiaries of property taxation would also be necessary parties.
233 Ark. at 125–26, 342 S.W.2d at 662. The County does not discuss or even cite this case,
nor does it explain how having the school districts as parties would affect the assessment of
SWN’s working interests. Consistent with the supreme court’s reasoning in American
Republic Life, the Conway County school districts are merely the beneficiaries of tax
revenues; they do not have any role in the assessment or valuation of property for taxation
purposes.
Accordingly, we reverse the circuit court’s dismissal of SWN’s complaint and remand
for further proceedings consistent with this opinion.
Reversed and remanded.
ABRAMSON and GLADWIN, JJ., agree.
PPGMR Law, PLLC, by: G. Alan Perkins and Kimberly D. Logue, for appellant.
Mark J. Whitmore, for appellees.