Title: FIRST NAT L BANK v SOURDOUGH LAND

State: montana

Issuer: Montana Supreme Court

Document:

No. 13530 I N THE SUPREME COURT O F T H E STATE OF M O N T A N A 19 7 6 FIRST NATIONAL BANK I N BOZEMAN, a t BOZEMAN, M O N T A N A , a n a t i o n a l banking corporation, P l a i n t i f f and Respondent, SOURDOUGH LAND and CATTLE C O M P A N Y , a Montana corporation, M O N T A N A EDUCATIONAL BROADCASTING COMMISSION, an agency f o r t h e S t a t e of Montana, and T H E STATE O F M O N T A N A , Defendants and Appellants. Appeal from: D i s t r i c t Court of the Eighteenth J u d i c i a l D i s t r i c t , Honorable W. W e Lessley, Judge presiding. Counsel of Record: For Appellants : Morrow, Nash and Sedivy, Bozeman, Montana Edmund Sedivy argued, Bozeman, Montana For Respondent: Hon. Robert L. Woodahl, Attorney General, Helena, Montana Walter S . Murf itt argued, Special Assistant Attorney General, Helena, Montana Berg, Angel, Andriolo & Morgan, Bozeman, Montana Submitted: October 28, 1976 DecidedDEC 3 0 1976 F i l e d : t ALG J IJ *.jLjfj M r . J u s t i c e John Conway Harrison delivered the Opinion o f the Court. This i s an a c t i o n i n interpleader brought by t h e F i r s t National Bank i n Bozeman (Bank) naming Sourdough Land and C a t t l e Company (Sourdough), the Montana Educational Broadcasting Commission and the State o f Montana as defendants. Sourdough sought t o s a t i s f y a judgment against the s t a t e o f Montana by garnisheeing State funds held by the Bank. The judgment was i n the amount o f $220,000. It arose out o f the r e f u s a l o f a special session o f t h e l e g i s - l a t u r e t o appropriate money t o continue lease payments on a lease entered i n t o by the 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 the 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 the lease. Sourdough f i l e d s u i t asking damages o f $751,445.81 as the amount due f o r the breach o f the ten year lease. As provided by section 83-606, R.C.M. 1947, negotiations toward settlement began. A s t i p - u l a t i o n by the board o f examiners f o r t h e s t a t e o f Montana, such board con- s i s t i n g o f Thomas L. Judge, Governor, Frank Murray, Secretary o f State, and Robert L. Woodahl, Attorney General, was entered i n t o f o r the compromise and settlement o f the contractual c l a i m against the s t a t e i n the amount o f $220,000. Judgment was entered i n t h a t amount and presented t o t h e special session o f the 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 proclamation o f the governor and l i m i t e d t o : 1. Enactment o f the s i x m i l l property t a x l e v y authorized by section 84-3804, R.C.M. 1947. 2. Amendment o f the general appropriation b i l l s, House B i l l s 264, 269, 271, 289 and 712, t o appropriate and authorize expenditure funds, the 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 the 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 the s h e r i f f o f G a l l a t i n County t o execute upon the $220,000 on deposit w i t h the F i r s t National Bank i n Bozeman. The Bank furnished a c e r t i f i e d check i n t h a t amount from an account o f the s t a t e b u t brought t h i s a c t i o n seeking t o have Sourdough and the s t a t e i n t e r p l e a d t h e i r claims and t o have the c o u r t adjudicate the r i g h t s o f the p a r t i e s t o the money. The d i s t r i c t c o u r t found ( 1 ) t h a t the 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 the 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 section 83-607, R.C.M. 1947; (3) t h a t the special session was n o t the l e g i s l a t i v e assembly next succeeding the date o f judgment; and (4) t h a t the term r e f e r r e d t o was the 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 issues presented f o r review are: (1) Is the s t a t e o f Montana a "judgment debtor" w i t h i n t h e mean- i 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 the monies o f the s t a t e on deposit w i t h the Bank? ( 2 ) I s section 83-607, R.C.M. 1947, the sole 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 against the s t a t e ? ( 3 ) To what does the term " l e g i s l a t i v e assembly" r e f e r and was the special session the " l e g i s l a t i v e assembly o f the s t a t e o f Montana next succeeding the date o f judgment" w i t h i n the meaning o f section 83-607? (4) If the s t a t e i s n o t subject t o execution and i f t h e sole means o f s a t i s f y i n g a judgment against the s t a t e i s pursuant t o section 83-607, and i f the special session was the l e g i s l a t i v e assembly next succeeding the judgment, and since t h a t body d i d n o t appropriate funds t o pay the judgment, then what remedy does Sourdough have? O n the f i r s t issue, whether the s t a t e i s a "judgment debtor" Sour- dough makes several arguments. It argues t h e r e i s nothing i n Chapter 58, T i t l e 93, R.C.M. 1947, which e i t h e r excludes o r includes the s t a t e . By analogy t o the d e f i n i t i o n o f debt i n section 18-101, R.C.M. 1947, which i s general and could be read 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 therefore the s t a t e can be a debtor and thus a judgment debtor. Sour- dough p o i n t s t o State of Montana, Dept. o f Soc. & Rehab. Services v. Hultgren, Mon t . , 541 P.2d 1211, 32 St.Rep. 1091, wherein t h i s Court found t h a t the general rule the state i s not ordinarily considered within the pur- view of a statute, 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 state 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 cities and counties, by implication includes the state within the definition of judgment creditor or there would be no need to exempt governmental property. Article VIII, Section 14, 1972 Montana Constitution provides: "Except for interest on the public debt, no money shall be paid o u t of the treasury unless upon an appropriation made b y law and a warrant drawn b y the proper officer in pursuance thereof. " I t i s argued that this 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, Title 93, does not explicitly include or exclude the state as a judgment debtor. The analogy to section 18-101, R.C.M. 1947, definition of debtor, fails because that section i s specifically hedged by the phrase " * * * within the meaning of this 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, sets out the applicable rules: " ' * * * the rule to be observed in the construction of statutes i s that the state i s not included b y 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 state m a y have the benefit of general laws; and the general rule has been held not to apply to statutes b y 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 statute empowering a t h i r d person, who i n good f a i t h supplies necessary a r t i c l e s t o a c h i l d , t o recover the reasonable value o f such a r t i c l e s from the parent. It i s clear t h a t such construction would give the state power and would not impair the sovereign powers o f the state. The broad construction o f judgment debtor does not r e s u l t i n the state gaining any beneficial powers and i t does impair the sovereign power o f the state. See Waterbury v. Board o f Commissioners o f Deer Lodge County, 10 Mont. 515, 26 P. 1002. I n Haterbury the Court came t o t h i s same conclusion and quoted w i t h approval the discussion i n Merwin v. City o f Chicago, 45 Ill. 133, 92 Am.Dec. 204. What was said i n Waterbury about the seizure o f revenues paralyzing government i s even t r u e r today than i t was i n 1891 because the f i n a n c i a l structure o f government i s i n f i n i t e l y more complex. To allow the s t a t e ' s creditors t o seize s t a t e funds where they f i n d them would cause chaos and allow the creditors t o weaken government. I n Klein v. City o f New Orleans, 99 U.S. 149, 25 L Ed 430, 431, the United States Supreme Court said: "Property and revenue necessary f o r the exercise o f these powers become p a r t o f the machinery o f government, and t o permit a c r e d i t o r t o seize and s e l l them t o c o l l e c t h i s debt would be t o permit him i n some degree t o destroy government i t s e l f . " W e hold t h a t the s t a t e as a "judgment debtor" and subject t o execution would r e s u l t i n the impairment o f i t s sovereign powers and would be contrary t o public policy. Sourdough next argues t h a t because section 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 properties from execution, t h i s implies t h a t the state i s a judgment c r e d i t o r because there would be no need t o exclude some types o f governmental property unless other types o f property were subject t o execution. Section 93-5814(10) i s not a model o f d r a f t - manship, i t has been amended several times, and as i t presently reads grants the exemptions only t o married judgment creditors. It seems u n l i k e l y t h a t there are many married judgment creditors who own county courthouses, j a i l s o r public offices. This section 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 things exempt under the 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 property somehow makes s t a t e monies subject t o seizure by a p r i v a t e c r e d i t o r i s t o read t o o much i n t o t h e statute. The s t a t e i s n o t a judgment debtor and i t s funds are n o t subject t o execution. The sole means o f c o l l e c t i n g a judgment against the s t a t e i n a contractual dispute i s t h a t provided i n section 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 the o b l i g a t i o n o f the 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 appropriated by the l e g i s l a t i v e assembly o f the s t a t e o f Montana next succeeding the date o f judgment." This section conforms w i t h the 1972 Montana Constitution, A r t i c l e V I I I , Section 14, which reads: "Prohibited payments. Except f o r i n t e r e s t on the p u b l i c debt, no money s h a l l be p a i d o u t o f the treasury unless upon an appropriation made by law and a warrant drawn by the proper o f f i c e r i n pursuance thereof." 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 sections, State -3, L ex r e l . Toomey v. State Board o f Examiners, 74 Mont. 1, 238 P. -339, stands f o r the p r o p o s i t i o n t h a t "appropriation made by law" does n o t r e q u i r e a s p e c i f i c appropriation b i l l . I n Toomey t h e l e g i s l a t u r e required 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 the p r i n c i p a l and i n t e r e s t on s t a t e treasury notes be s e t aside o u t o f the genera1 fund. Toomey was discussed i n State ex r e l . Dean v. Brandjord, 108 Mont. 447, 454, 455, 92 P.2d 2731 "The phrase contained i n the c o n s t i t u t i o n a l provision, 'appropriations made by law' does n o t r e q u i r e the i n t r o - duction o f an appropriation b i l l , the requirement being met by an appropriation sanctioned by law. (State ex r e l . Toomey v. State Board o f Examiners, 74 Mont. 1, 238 P. 316.) The usual statement o f the requirement i s , ' t h a t no s p e c i f i c language i s necessary t o make an appropriation, f o r the t e s t i s as t o whether o r n o t the people have expressed an i n t e n - t i o n t h a t the money i n question be paid.' [ 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 type 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 'appropriations by law' i n t h i s j u r i s d i c t i o n are t h e cases o f State ex r e l . R o t w i t t v. Hickman, 9 Mont. 370, 23 P. 740, 8 L.R.A. 403; State ex r e l . Buck v. Hickman, 10 Mont. 497, 26 P. 386; State 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 therefor without express appropriations 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 the money, i n t h i s case the judgment, be paid t h a t would substitute f o r an express appropriation by the l e g i s l a t i v e assembly. While it i s c l e a r the statutory section imposes a duty upon the l e g i s l a t u r e t o pay the judgment, t h a t i s not enough. I n Brandjord, the Court said: " * * * But the mere duty on the p a r t o f the l e g i s l a t u r e t o make an appropriation does not s a t i s f y the requirement o f an 'appropriation by law' any more than does the promise o f the government t o pay money o r make an appropriation." Sourdough argues i t i s denied the r i g h t t o f u l l redress i f i t cannot execute against the state, but t h i s i s not the case. Here the s t a t e has set up a procedure f o r s a t i s f y i n g judgments against it which protects the i n t e r e s t s o f the state and prevents the disruption o f the orderly processes o f government. The reasons f o r the procedure set out i n section 83-607, R.C.M. 1947, are the same ones which deny Sourdough the r i g h t t o execute against the state. The payment o f the judgment here must be p a r t of an orderly budgetary process. The random seizure o f state assets would l i k e l y r e s u l t i n the disruption o f orderly government. The presentation o f the amount due t o judgment creditors a t the beginning o f the normal budgetary process allows the l e g i s l a t i v e assembly t o order i t s funding p r i o r i t i e s , while the seizure o f funds from one agency o r one department would allow chaos i n budgeting. Sourdough contends i t complied w i t h the provisions o f section L c 7 83-697-, R.C.M. 1947, when i t presented an appropriation b i l l t o the special session. The question raised by t h i s contention i s t h i s : Was the special session the " l e g i s l a t i v e assembly" next 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 A N D EMPLOYEES." I n section 43-201, i t i s stated: "The l e g i s l a t i v e assembly consists o f senators and representatives elected from the several senatorial and respresentative d i s t r i c t s o f t h e s t a t e i n the number s p e c i f i e d by law." This 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 the time a t which i t meets. There i s reference t o "Each session o f t h e l e g i s l a t i v e assembly" i n section 43-205 and i n section 43-207 there i s reference t o "the meeting o f any r e g u l a r session o f the l e g i s l a t i v e assembly". It seems c l e a r t h a t when the l e g i s l a t u r e intended t o speak o f sessions o f the unique group o f senators and represent- 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 using the word "session". The reference i n section 83-607, R.C.M. 1947 t o t h e " l e g i s l a t i v e assembly next succeeding the judgment" i s a reference, i n t h i s case, t o the 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 consistent w i t h the l o g i c behind the s t a t u t e which i s t o incorporate t h e judgments i n t o the o r d e r l y budgetary process. It i s possible, as was the case here, t h a t t h e next session o f the l e g i s l a t i v e assembly would be a special 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 the budget and reorder it. The next session would n o t always be a proper place t o consider and incorporate judgments against the 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 followed the proper procedure, there i s no need t o answer the l a s t question r a i s e d by it. The judgment o f the d i s t r i c t c o u r t i s affirmed. /