First Nat L. Bank v. Sourdough Land

No. 13530

I N THE SUPREME COURT O THE STATE OF M N A A F OTN

197 6

FIRST NATIONAL BANK I N BOZEMAN, a t BOZEMAN, MONTANA, a n a t i o n a l banking c o r p o r a t i o n ,

P l a i n t i f f and Respondent,

SOURDOUGH LAND and CATTLE COMPANY, a Montana c o r p o r a t i o n , M N A A EDUCATIONAL OTN BROADCASTING COMMISSION, a n agency f o r t h e S t a t e o f Montana, and THE STATE OF MONTANA,

Defendants and A p p e l l a n t s .

Appeal from: D i s t r i c t Court o f t h e E i g h t e e n t h J u d i c i a l D i s t r i c t , Honorable W. W e L e s s l e y , Judge p r e s i d i n g .

Counsel of Record:

For Appellants :

Morrow, Nash and Sedivy, Bozeman, Montana Edmund Sedivy a r g u e d , Bozeman, Montana

For Respondent:

Hon. Robert L. Woodahl, A t t o r n e y General, Helena, Montana W a l t e r S . Murf i t t argued, S p e c i a l A s s i s t a n t A t t o r n e y G e n e r a l , Helena, Montana Berg, Angel, A n d r i o l o & Morgan, Bozeman, Montana

Submitted: October 28, 1976

DecidedDEC 3 0 1976 Filed : t ALG J IJ *.jLjfj

Mr. Justice John Conway H a r r i s o n d e l i v e r e d t h e Opinion o f t h e Court.

T h i s i s an a c t i o n i n i n t e r p l e a d e r brought by t h e F i r s t N a t i o n a l Bank i n Bozeman (Bank) naming Sourdough Land and C a t t l e Company (Sourdough), t h e Montana Educational Broadcasting Commission and t h e S t a t e o f Montana as defendants.

Sourdough sought t o s a t i s f y a judgment a g a i n s t t h e s t a t e o f Montana by g a r n i s h e e i n g S t a t e funds h e l d by t h e Bank. The judgment was i n t h e amount o f $220,000. I t arose o u t o f t h e r e f u s a l o f a s p e c i a l session o f t h e l e g i s -l a t u r e t o a p p r o p r i a t e money t o c o n t i n u e l e a s e payments on a l e a s e e n t e r e d i n t o by t h e Montana Educational Broadcasting Commission. The Commission was s p e c i f i c a l l y d i r e c t e d by t h e l e g i s l a t u r e n o t t o pay any f u t u r e monies t o Sourdough on t h e lease. Sourdough f i l e d s u i t a s k i n g damages o f $751,445.81 as t h e amount due f o r t h e breach o f t h e t e n y e a r lease. As p r o v i d e d by s e c t i o n 83-606, R.C.M. 1947, n e g o t i a t i o n s toward s e t t l e m e n t began. A stipu l a t i o n by t h e board o f examiners f o r t h e s t a t e o f Montana, such board cons i s t i n g o f Thomas L. Judge, Governor, Frank Murray, S e c r e t a r y o f S t a t e , and Robert L. Woodahl, A t t o r n e y General, was e n t e r e d i n t o f o r t h e compromise and s e t t l e m e n t o f t h e c o n t r a c t u a l c l a i m a g a i n s t t h e s t a t e i n t h e amount o f $220,000. Judgment was e n t e r e d i n t h a t amount and presented t o t h e s p e c i a l session o f t h e F o r t y - f o u r t h L e g i s l a t i v e Assembly which was c a l l e d by a p r o c l a m a t i o n o f t h e governor and l i m i t e d t o :

1. Enactment o f t h e s i x m i l l p r o p e r t y t a x l e v y a u t h o r i z e d by s e c t i o n 84-3804, R.C.M. 1947.

2. Amendment o f t h e general a p p r o p r i a t i o n b i l l s, House B i l l s 264, 269, 271, 289 and 712, t o a p p r o p r i a t e and a u t h o r i z e e x p e n d i t u r e funds, t h e r e c e i p t o f which was n o t a n t i c i p a t e d when t h e l e g i s l a t u r e met i n r e g u l a r session. No a c t i o n was taken by t h a t body t o s a t i s f y t h e judgment.

Thereafter, Sourdough caused t h e s h e r i f f o f G a l l a t i n County t o execute upon t h e $220,000 on d e p o s i t w i t h t h e F i r s t N a t i o n a l Bank i n Bozeman. The Bank f u r n i s h e d a c e r t i f i e d check i n t h a t amount from an account o f t h e s t a t e b u t b r o u g h t t h i s a c t i o n seeking t o have Sourdough and t h e s t a t e i n t e r p l e a d t h e i r c l a i m s and t o have t h e c o u r t a d j u d i c a t e t h e r i g h t s o f t h e p a r t i e s t o t h e money.

The d i s t r i c t c o u r t found ( 1 ) t h a t t h e s t a t e was n o t a judgment c r e d i t o r w i t h i n t h e meaning o f t h a t term as used i n Chapter 58, T i t l e 93, R.C.M. 1947; ( 2 ) t h a t t h e r e was one remedy f o r Sourdough pursuant t o s e c t i o n 83-607, R.C.M. 1947; ( 3 ) t h a t t h e s p e c i a l session was n o t t h e l e g i s l a t i v e assembly n e x t succeeding t h e d a t e o f judgment; and ( 4 ) t h a t t h e term r e f e r r e d t o was t h e F o r t y - f i f t h L e g i s l a t i v e Assembly meeting i n 1977.

The i s s u e s presented f o r r e v i e w a r e :

( 1 ) Is t h e s t a t e o f Montana a "judgment d e b t o r " w i t h i n t h e meani n g o f Chapter 58, T i t l e 93, R.C.M. 1947, thus a l l o w i n g Sourdough t o l e v y upon t h e monies o f t h e s t a t e on d e p o s i t w i t h t h e Bank?

( 2 ) I s s e c t i o n 83-607, R.C.M. 1947, t h e s o l e means o f o b t a i n i n g s a t i s f a c t i o n o f a judgment a g a i n s t t h e s t a t e ?

( 3 ) To what does t h e term " l e g i s l a t i v e assembly" r e f e r and was t h e s p e c i a l session t h e " l e g i s l a t i v e assembly o f t h e s t a t e o f Montana n e x t succeeding t h e d a t e o f judgment" w i t h i n t h e meaning o f s e c t i o n 83-607?

( 4 ) I f t h e s t a t e i s n o t s u b j e c t t o e x e c u t i o n and i f t h e s o l e means o f s a t i s f y i n g a judgment a g a i n s t t h e s t a t e i s pursuant t o s e c t i o n 83-607, and i f t h e s p e c i a l session was t h e l e g i s l a t i v e assembly n e x t succeeding t h e judgment, and s i n c e t h a t body d i d n o t a p p r o p r i a t e funds t o pay t h e judgment, then what remedy does Sourdough have?

On t h e f i r s t i s s u e , whether t h e s t a t e i s a "judgment d e b t o r " Sourdough makes s e v e r a l arguments. I t argues t h e r e i s n o t h i n g i n Chapter 58, T i t l e 93, R.C.M. 1947, which e i t h e r excludes o r i n c l u d e s t h e s t a t e . By analogy t o t h e d e f i n i t i o n o f d e b t i n s e c t i o n 18-101, R.C.M. 1947, which i s general and c o u l d be r e a d t o i n c l u d e t h e s t a t e as a debtor, Sourdough argues t h a t t h e r e f o r e t h e s t a t e can be a d e b t o r and t h u s a judgment d e b t o r . Sourdough p o i n t s t o S t a t e of Montana, Dept. o f Soc. & Rehab. Services v. H u l t g r e n ,

Mont . , 541 P.2d 1211, 32 St.Rep. 1091, wherein t h i s C o u r t found t h a t

the general rule the s t a t e i s not ordinarily considered within the pur- view of a s t a t u t e , however general, unless there i s a clear manifest intention to do so, has been relaxed in modern times. This i t claims i s a basis for including the s t a t e within the meaning of judgment creditor. Sourdough also argues that section 93-5814, R.C.M. 1947, which exempts certain property of the judgment creditor from execution,specifically certain property of c i t i e s and counties, by implication includes the s t a t e within the definition of judgment creditor or there would be no need t o exempt governmental property. Article VIII, Section 14, 1972 Montana Constitution provides: "Except for i n t e r e s t on the public debt, no money shall be paid o u t of the treasury unless upon an appropriation made by law and a warrant drawn by the proper officer in pursuance thereof. " I t i s argued that t h i s Article does n o t apply, and i f i t did, i t would operate to harm other rights chiefly due process guarantees. Sourdough i s undoubtedly correct in observing that the language of Chapter 58, T i t l e 93, does not explicitly include or exclude the s t a t e as a judgment debtor. The analogy to section 18-101, R.C.M. 1947, definition of debtor, f a i l s because that section i s specifically hedged by the phrase " * * * within the meaning of t h i s chapter * * *" indicating the intent that the definition not be generalized in the manner Sourdough wishes. State of Montana Dept. of Soc. & Rehab. Services v . Hultgren, Mont. , 541 P.2d 1211, 1213, 32 St.Rep. 1091, 1094, s e t s out the applicable rules: " ' * * * the rule to be observed in the construction of statutes i s that the s t a t e i s not included by general words therein creating a right and providing a remedy for i t s enforcement.' " ' * * * the general rule has been relaxed in modern times. Accordingly, the s t a t e may have the benefit of general laws; and the general rule has been held not to apply to statutes by which the government or a part or agency thereof i s given powers rather than deprived of them, or where no impairment of the sovereign powers will r e s u l t ** *"I (Emphasis supplied.) I n Hultgren, the Court was dealing with the term "third person" in the context

- 4 -o f a s t a t u t e empowering a t h i r d person, who i n good f a i t h s u p p l i e s necessary a r t i c l e s t o a c h i l d , t o recover t h e reasonable value o f such a r t i c l e s from t h e parent. I t i s c l e a r t h a t such c o n s t r u c t i o n would g i v e t h e s t a t e power and would n o t i m p a i r t h e sovereign powers o f t h e s t a t e .

The broad c o n s t r u c t i o n o f judgment d e b t o r does n o t r e s u l t i n t h e s t a t e g a i n i n g any b e n e f i c i a l powers and i t does i m p a i r t h e sovereign power o f t h e s t a t e . See Waterbury v. Board o f Commissioners o f Deer Lodge County, 10 Mont. 515, 26 P. 1002. I n H a t e r b u r y t h e Court came t o t h i s same conclusion and quoted w i t h approval t h e d i s c u s s i o n i n Merwin v. City o f Chicago, 45 Ill. 133, 92 Am.Dec. 204. What was s a i d i n Waterbury about t h e s e i z u r e o f revenues p a r a l y z i n g government i s even t r u e r today than i t was i n 1891 because t h e f i n a n c i a l s t r u c t u r e o f government i s i n f i n i t e l y more complex. To a l l o w t h e s t a t e ' s c r e d i t o r s t o s e i z e s t a t e funds where they f i n d them would cause chaos and a l l o w t h e c r e d i t o r s t o weaken government. I n K l e i n v. City o f New Orleans, 99 U.S. 149, 25 L Ed 430, 431, t h e U n i t e d States Supreme Court s a i d :

"Property and revenue necessary f o r t h e e x e r c i s e o f these powers become p a r t o f t h e machinery o f government, and t o p e r m i t a c r e d i t o r t o s e i z e and s e l l them t o c o l l e c t h i s debt would be t o p e r m i t him i n some degree t o d e s t r o y government i t s e l f " . W h o l d t h a t t h e s t a t e as a "judgment d e b t o r " and s u b j e c t t o execution e

would r e s u l t i n t h e impairment o f i t s sovereign powers and would be contrary t o public policy.

Sourdough n e x t argues t h a t because s e c t i o n 93-581 4(10) s p e c i f i c a l l y excludes c e r t a i n county and c i t y p r o p e r t i e s from execution, t h i s i m p l i e s t h a t t h e s t a t e i s a judgment c r e d i t o r because t h e r e would be no need t o exclude some types o f governmental p r o p e r t y unless o t h e r types o f p r o p e r t y were s u b j e c t t o execution. S e c t i o n 93-5814(10) i s n o t a model o f d r a f t -manship, i t has been amended several times, and as i t p r e s e n t l y reads grants t h e exemptions o n l y t o m a r r i e d judgment c r e d i t o r s . I t seems u n l i k e l y t h a t t h e r e a r e many m a r r i e d judgment c r e d i t o r s who own county courthouses, j a i l s o r public offices. This s e c t i o n was probably o r i g i n a l l y enacted as a p a r t o f a l i s t o f those t h i n g s exempt under t h e common law from execution. C e r t a i n l y t o argue t h a t such exemption o f c i t y and county p r o p e r t y somehow makes s t a t e monies s u b j e c t t o s e i z u r e by a p r i v a t e c r e d i t o r i s t o r e a d t o o much i n t o t h e s t a t u t e . The s t a t e i s n o t a judgment d e b t o r and i t s funds a r e n o t s u b j e c t t o execution.

The s o l e means o f c o l l e c t i n g a judgment a g a i n s t t h e s t a t e i n a c o n t r a c t u a l d i s p u t e i s t h a t p r o v i d e d i n s e c t i o n 83-607, R.C.M. 1947, e n t i t l e d "Judgments--payment." which reads:

"A f i n a l judgment s h a l l be t h e o b l i g a t i o n o f t h e s t a t e o f Montana, and s h a l l be p a i d o u t o f funds a p p r o p r i a t e d by t h e l e g i s l a t i v e assembly o f t h e s t a t e o f Montana n e x t succeeding t h e d a t e o f judgment."

T h i s s e c t i o n conforms w i t h t h e 1972 Montana C o n s t i t u t i o n , A r t i c l e V I I I , S e c t i o n 14, which reads:

" P r o h i b i t e d payments. Except f o r i n t e r e s t on t h e p u b l i c debt, no money s h a l l be p a i d o u t o f t h e t r e a s u r y unless upon an a p p r o p r i a t i o n made by law and a w a r r a n t drawn by t h e p r o p e r o f f i c e r i n pursuance t h e r e o f . "

The Convention Notes i n d i c a t e :

"No change except i n grammar [ A r t . X I I , Sec. 101".

Sourdough argues t h a t a case i n t e r p r e t i n g t h e 1889 s e c t i o n s , S t a t e -3, L ex r e l . Toomey v. S t a t e Board o f Examiners, 74 Mont. 1, 238 P. -339, stands

f o r t h e p r o p o s i t i o n t h a t " a p p r o p r i a t i o n made by law" does n o t r e q u i r e a specific appropriation b i l l . I n Toomey t h e l e g i s l a t u r e r e q u i r e d by s t a t u t e t h a t an amount s u f f i c i e n t t o meet t h e p r i n c i p a l and i n t e r e s t on s t a t e t r e a s u r y notes be s e t a s i d e o u t o f t h e genera1 fund. Toomey was discussed i n S t a t e ex r e l . Dean v. Brandjord, 108 Mont. 447, 454, 455, 92 P.2d 2731

"The phrase c o n t a i n e d i n t h e c o n s t i t u t i o n a l p r o v i s i o n , ' a p p r o p r i a t i o n s made by l a w ' does n o t r e q u i r e t h e i n t r o - d u c t i o n o f an a p p r o p r i a t i o n b i l l , t h e requirement b e i n g met by an a p p r o p r i a t i o n sanctioned by law. ( S t a t e ex r e l . Toomey v. S t a t e Board o f Examiners, 74 Mont. 1, 238 P. 316.) The usual statement o f t h e requirement i s , ' t h a t no s p e c i f i c language i s necessary t o make an a p p r o p r i a t i o n , f o r t h e t e s t i s as t o whether o r n o t t h e people have expressed an i n t e n - t i o n t h a t t h e money i n q u e s t i o n be p a i d . ' [ C i t i n g cases.] I l l u s t r a t i v e o f t h i s t y p e o f compliance w i t h t h e c o n s t i t u t i o n a l requirement o f ' a p p r o p r i a t i o n s by l a w ' i n t h i s j u r i s d i c t i o n a r e t h e cases o f S t a t e ex r e l . R o t w i t t v. Hickman, 9 Mont. 370, 23 P. 740, 8 L.R.A. 403; S t a t e ex r e l . Buck v. Hickman, 10 Mont. 497, 26 P. 386; S t a t e ex r e l . Wade v. Kenney, 10 Mont. 485, 26 P . 197. These cases d e a l t w i t h s a l a r i e s f i x e d

by law and which were ordered paid, o r a t l e a s t warrants drawn t h e r e f o r w i t h o u t express a p p r o p r i a t i o n s having been made f o r t h e i r payment. "

There has been no express i n t e n t t h a t t h e money, i n t h i s case t h e judgment, be p a i d t h a t would s u b s t i t u t e f o r an express a p p r o p r i a t i o n by t h e l e g i s l a t i v e assembly. While i t i s c l e a r t h e s t a t u t o r y s e c t i o n imposes a d u t y upon t h e l e g i s l a t u r e t o pay t h e judgment, t h a t i s n o t enough. I n Brandjord, t h e Court said:

" * * * But t h e mere d u t y on t h e p a r t o f t h e l e g i s l a t u r e t o make an a p p r o p r i a t i o n does n o t s a t i s f y t h e requirement o f an ' a p p r o p r i a t i o n by l a w ' any more than does t h e promise o f t h e government t o pay money o r make an a p p r o p r i a t i o n . "

Sourdough argues i t i s denied t h e r i g h t t o f u l l redress i f i t cannot execute a g a i n s t t h e s t a t e , b u t t h i s i s n o t t h e case. Here t h e s t a t e has s e t up a procedure f o r s a t i s f y i n g judgments a g a i n s t i t which p r o t e c t s t h e i n t e r e s t s o f t h e s t a t e and prevents t h e d i s r u p t i o n o f t h e o r d e r l y processes o f government.

The reasons f o r t h e procedure s e t o u t i n s e c t i o n 83-607, R.C.M. 1947, a r e t h e same ones which deny Sourdough t h e r i g h t t o execute a g a i n s t the state. The payment o f t h e judgment here must be p a r t of an o r d e r l y budgetary process. The random s e i z u r e o f s t a t e assets would l i k e l y r e s u l t i n t h e d i s r u p t i o n o f o r d e r l y government. The p r e s e n t a t i o n o f t h e amount due t o judgment c r e d i t o r s a t t h e beginning o f t h e normal budgetary process a l l o w s t h e l e g i s l a t i v e assembly t o o r d e r i t s f u n d i n g p r i o r i t i e s , w h i l e t h e s e i z u r e o f funds from one agency o r one department would a l l o w chaos i n budgeting.

Sourdough contends i t complied w i t h t h e p r o v i s i o n s o f s e c t i o n Lc7 83-697-, R.C.M. 1947, when i t presented an a p p r o p r i a t i o n b i l l t o t h e s p e c i a l

session. The question r a i s e d by t h i s c o n t e n t i o n i s t h i s : Was t h e s p e c i a l session t h e " l e g i s l a t i v e assembly" n e x t succeeding? The term l e g i s l a t i v e

assembly i s used i n Chapter 2, T i t l e 43, R.C.M. 1947, which i s e n t i t l e d "THE LEGISLATIVE ASSEMBLY--ITS COMPOSITION, ORGANIZATION, OFFICERS AND EMPLOYEES." I n s e c t i o n 43-201, i t i s stated:

"The l e g i s l a t i v e assembly c o n s i s t s o f senators and r e p r e s e n t a t i v e s e l e c t e d f r o m t h e s e v e r a l s e n a t o r i a l and r e s p r e s e n t a t i v e d i s t r i c t s o f t h e s t a t e i n t h e number s p e c i f i e d by law."

T h i s p r o v i s i o n speaks o f t h e l e g i s l a t i v e assembly i n terms o f i t s members and n o t i n terms o f t h e t i m e a t which i t meets. There i s r e f e r e n c e t o "Each session o f t h e l e g i s l a t i v e assembly" i n s e c t i o n 43-205 and i n s e c t i o n 43-207 t h e r e i s r e f e r e n c e t o " t h e meeting o f any r e g u l a r session o f t h e l e g i s l a t i v e assembly". I t seems c l e a r t h a t when t h e l e g i s l a t u r e i n t e n d e d t o speak o f sessions o f t h e unique group o f senators and r e p r e s e n t -a t i v e s t h a t make up each l e g i s l a t i v e assembly t h a t i t chose t o do so by u s i n g t h e word "session". The r e f e r e n c e i n s e c t i o n 83-607, R.C.M. 1947 t o t h e " l e g i s l a t i v e assembly n e x t succeeding t h e judgment" i s a r e f e r e n c e , i n t h i s case, t o t h e F o r t y - f i f t h L e g i s l a t i v e Assembly meeting i n 1977. This i s c o n s i s t e n t w i t h t h e l o g i c behind t h e s t a t u t e which i s t o i n c o r p o r a t e t h e judgments i n t o t h e o r d e r l y budgetary process. I t i s p o s s i b l e , as was t h e case here, t h a t t h e n e x t session o f t h e l e g i s l a t i v e assembly would be a s p e c i a l session c a l l e d f o r l i m i t e d purposes and n o t one which was going t o go back through t h e budget and r e o r d e r i t . The n e x t session would n o t always be a proper p l a c e t o c o n s i d e r and i n c o r p o r a t e judgments a g a i n s t t h e s t a t e i n t o a c a r e f u l budget.

Because we f i n d Sourdough has n o t f o l l o w e d t h e p r o p e r procedure, t h e r e i s no need t o answer t h e l a s t q u e s t i o n r a i s e d by i t . The judgment o f

the d i s t r i c t court i s affirmed. /