NO. 87-462 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1988 

DOUG L. HAGFELDT and ANNETTE E. HAGFELDT, 

Plaintiffs and Appellants, 

-VSCITY OF BOZEMAN, MONTANA, 

Defendant and Respondent. 

APPEAL FROM: District Court of the Eighteenth Judicial District, 

In and for the County of Gallatin, 

The Honorable Thomas A. Olson, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Ben Berg, Jr., Berg, Stokes, Tollefsen & Hayes, P.C.; 

Bozeman, Montana 

For Respondent : 

Sarah M. Power, Gough, Shanahan, Johnson & Waterman; 

Helena, Montana 

Submitted on Briefs: February 18, 1988 

Decided: April 25, 1988 

Filed: 
Mr. Justice L. C. Gulbrandson delivered the Opinion of the 

Court. 

This is an appeal from an order of the Eighteenth 

Judicial District Court, Gallatin County, granting the City 

of Bozeman's (City) motion for summary judgment on grounds it 

sufficiently complied with statutory mandate in this class 

action claim brought by a number of Bozeman landowners 

(Landowners) . We affirm. 

The only issue for consideration is whether the City 

legally complied with the requirements of $ 76-2-402, MCA 

(1987), when it constructed a water tank contrary to its 

zoning regulations. 

Both parties agree there is no question of fact and 

summary judgment is appropriate as a matter of law. This 

appeal is based on the contention that the District Court 

should have granted the Landowners' motion for summary 

judgment rather than the City's. 

In April of 1985, the City began construction on a 

water tank in Josephine Park in Bozeman, Montana. This park 

is located in an area known as Graf's First Subdivision, 

Second Filing. The surrounding neighborhood and the land on 

which the tank was constructed are zoned R-2, single family 

dwellings and other permitted and conditional uses. 

The record indicates that a public hearing was held 

before the Bozeman City-County Planning Board to review the 

preliminary plat of Graf's First Subdivision, Second Filing, 

on February 10, 1983. At this hearing, the public was 

notified that the City planned to construct the water storage 

facility involved in this action. 

Plaintiffs are a number of landowners who live close to 

the area where the water tank was constructed. Landowners 
claim the City constructed the tank in violation of zoning 

regulations and because of this construction, the value of 

their property decreased. To support its defense, the City 

argues it is exempt from zoning regulations and relies on 

§ 76-2-402, MCA, which provides as follows: 

Whenever an agency proposes to use public 

land contrary to local zoning 

regulations, a public hearing, as defined 

below, shall be held. 

(1) The local board of adjustments, as 

provided in this chapter, shall hold a 

hearing within 30 days of the date the 

agency gives notice to the board of its 

intent to develop land contrary to local 

zoning regulations. 

(2) The board shall have no power to 

deny the proposed use but shall act only 

to allow a public forum for comment on 

the proposed use. 

Of further importance is the definitional section for 

this statute, § 76-2-401, MCA, which provides: 

As used in 76-2-402, the following 

definitions apply: 

(1) "Agency" means a board, bureau, 

commission, department, an authority, or 

other entity of state or local government 

Landowners claim that under 5 76-2-402, the City had an 

obligation to hold a public meeting prior to commencement of 

the April, 1985 construction of the water tank. Landowners 

claim the language "proposes to use" and "intent to develop" 

shows the statute cannot be applied in a retroactive fashion. 

The City attached affidavits to its memorandum in 

support of its motion for summary judgment showing it held a 

public meeting on June 24, 1985. It claims the meeting was 
sufficient to satisfy the statutory mandate and, nonetheless, 

it is exempt from any ordinance because of the legislative 

intent and history of § 76-2-402, MCA. Alternatively, the 

City claims the action is barred under the provisions of 

5 2-9-111, MCA, because it is a governmental entity "immune 

from suit for an act or omission of its . . . member, 

officer, or agent" of the legislative body. 

These claims raise interesting points that have not 

been addressed by this Court. Landowners rely on two cases. 

In Rich v. City of Englewood (Colo. 1983) , 657 P.2d 961, the 

Colorado Court of Appeals affirmed an injunction prohibiting 

the construction of a water tank that did not comply with 

local footage setback requirements. That decision, however, 

specifically points out that "an injunction is an appropriate 

remedy for violations of zoning ordinances." Rich, 657 P.2d 

at 962. Here, it is unclear what remedy the Landowners seek. 

There is no prayer for damages in the complaint and 

injunctive relief is not sought. Further, the reasoning in 

Rich was questioned by the Colorado Supreme Court in the 

subsequent case of City of Englewood v. Rich (Colo. 1984), 

686 P.2d 780, because the Englewood City Council amended its 

zoning ordinance expressly exempting the city from the zoning 

regulations thereby making the issue moot according to the 

court. 

The second case cited by Landowners, Hunke v. Foote 

(Idaho 1962), 373 P.2d 322, was a proceeding by residents for 

a writ of mandamus to force the city to remove an electrical 

substation that the city constructed in violation of its 

zoning ordinances. The Idaho Supreme Court applied a 

"governmental-proprietary" function distinction and denied 

the city an exemption from the zoning ordinance. The court 

stated "[wlhen operating in its proprietary capacity a 
municipal corporation is subject to the same burdens, 

responsibilities and liabilities as a private corporation or 

individual acting in the same capacity." Hunke, 373 P.2d at 

323. We find the rationale of these cases insufficient to 

decide the issue before us. 

Much has been written concerning exemption of a 

governmental agency from zoning ordinances although the vast 

majority of legal prose has dealt with two opposing 

governmental agencies, one of which wishes to be exempt from 

the other's zoning requirements. See 2 Anderson, 

American Law of Zoning, 55 12.02-12.04 (3d ed. 1986) ; Note, 

Governmental Immunity from Zoning, 22 B.C.L.Rev. 783 

(1980-81) ; Note, Governmental Immunity From Local Zoning 

Ordinances, 84 Harv.L.Rev. 869 (1971). A survey of the case 

law in existence unfurls four basic theories by which courts 

of this country have addressed this issue. 

The general rule is that municipalities are granted 

exemption from zoning ordinances in modulating degrees 

depending on the theory of exemption of the jurisdiction. 82 

Am.Jur.2dr Zoning and Planning SS 149, 150, 152 and 153 

(1976) indicates that municipalities are exempt: (1) by 

express language in the ordinance itself; (2) by immunity of 

the sovereign from suit; (3) by the distinction between the 

entity exercising a governmental or proprietary function; and 

(4) by the doctrine of eminent domain. In application of 

any of these tests, as the commentators have complained, 

problems are rampant. 

The governmental-proprietary distinction test is most 

prevalent, but it is not without fault. 

"Governmental functions" are those 

conferred or imposed upon the 

municipality as a local agency of limited 

and prescribed jurisdiction to be 
employed in administering the affairs of 

the state and promoting the public 

welfare . . . When a municipal 

corporation engages in an activity of 

business, rather than one of a 

governmental nature, such as the supply 

of light or water or the operation of a 

railroad which is generally engaged in by 

individuals or private corporations, it 

acts as such corporation and not in its 

sovereign capacity [proprietary]. 

State ex rel. Gebhardt v. City Council of Helena (1936), 102 

Mont. 27, 35-36, 55 P.2d 671, 675. 

This distinction has been criticized as oversimplistic 

and illusory. The wisdom of the governmental-proprietary 

function test is subject to question. City of Temple Terrace 

v. Hillsborough Ass'n for Retarded Citizens (Fla. 1975), 322 

So.2d 571, 577, aff'd (Fla. 1976), 332 So.2d 610; Township of 

Washington v. Village of Ridgewood (N.J. 1958), 141 A.2d 308. 

2 Anderson, American -- Law of Zoning, 5 12.03, pp. 481-482 

(1986) accurately shows the problem with the 

proprietary-governmental distinction, especially as it 

applies to the issue we are faced with here: 

A municipality may carry out its 

governmental functions without regard to 

zoning restrictions, but it is subject to 

such restrictions when it is engaged in a 

proprietary function. The great 

difficulty lies in determining which 

functions are governmental, and which are 

proprietary. The distinction is of 

ancient vintage, but it is neither clear 

nor stable. What is regarded as 

governmental for one purpose . . . is not 

necessarily so regarded for a different 

purpose. And a proprietary function of a 

municipal government of 1955 may become a 

governmental function in 1965 . . . A 

North Carolina court held that the 

erection of a water tank is a 

governmental function which may be 
carried out without regard to local 

zoning regulations. The same result was 

reached by the Supreme Court of Kansas, 

with some aid from a state statute. The 

courts of Alabama, Florida, Illinois, 

Michigan and Pennsylvania have described 

the municipal water service as a 

proprietary function which must be 

carried out consistently with the 

municipal zoning regulations. See 

McKinney v. High Point (N.C. 1953), 74 

S.E.2d 440; Puhr v. Kansas City (Kan. 

1935), 51 P.2d 911; Water Works Board v. 

Stephens (Ala. 1955), 78 So.2d 267; 

Treasure Island v. Decker (Fla. 1965), 

174 So.2d 756; Baltis v. Westchester 

(Ill. 1954), 121 N.E.2d 495; Taber v. 

Benton Harbor (Mich. 1937), 274 N.W. 324; 

Wilkinsburg-Penn Joint Water Authority v. 

Churchill (Pa. 1965), 207 A.2d 905. 

The proprietary-governmental function distinction has 

also been criticized as being irrelevant because the immunity 

concept was developed only to limit a governmental entity's 

exposure in tort and has been held to be inapplicable in 

zoning cases. City of Fargo, Cass County v. Harwood Township 

(N.D. 1977), 256 N.W.2d 694; Seward County Board of 

Commissioners v. City of Seward (Neb. 1976), 242 N.W.2d 849. 

This distinction is archaic and muddled and no creative 

argumentation should convince us to continue to apply the 

governmental-propietary function analysis. 

The City argues in this case that it is exempt from the 

zoning regulations under the theory of immunity pursuant to 

5 2-9-111, MCA, making any "governmental entity" immune. 

Section 18, Article I1 of the Montana Constitution and 

5 2-9-102, MCA, express the policy that governmental immunity 

is not favored in this state. Our legislature, however, has 

enacted B 2-9-111, MCA, and for us to totally disregard the 

City's claim that it is immune would be remiss on our part. 
Nonetheless, under the facts of this case and in light of 

5 76-2-402, MCA, we will not determine this case soley by 

granting the City blanket immunity. 

The common law sovereign-immunity rule has been 

addressed a number of times by state courts only occasionally 

resulting in allowances of agencies' uses in contravention of 

municipal zoning ordinances. City of ~ichmond v. Board of 

Supervisors (Va. 1958), 101 S.E.2d 641; viat ti on Services, 

Inc. v. Board of Adjustment (N.J. 1956), 119 A.2d 761. 

Generally, however, this rule has been implemented where 

there are two separate governmental entities, one being 

"superior1' to the other. The test has been widely criticized 

because it fails to recognize that municipalities are acting 

as agents of the state under state enabling acts and further 

does not provide a feasible means to determine which agent 

should prevail where "there are overlapping and conflicting 

territorial jurisdictions." Note, Governmental Immunity From 

Local Zoning Ordinances, 84 Harv.L.Rev. at 877. 

Critiques such as these have prompted many courts over 

the last several years to question seriously the continued 

viability of the sovereign-immunity rule in today's highly 

urbanized society. The reasoning of the court in City - of 

Temple Terrace, supra, 322 So.2d at 578-579, is most 

compelling. 

The old tests were adopted at a time when 

state government was much smaller. The 

myriad of agencies now conducting the 

functions of the state have necessarily 

resulted in a diminution of centralized 

control. The decision of a person 

administering an outlying function of a 

state agency with respect to the site 

where this function should be performed 

is not necessarily any better than the 

decision of the local authorities on the 

subject of land use. * * * 
Our burgeoning population and the rapidly 

diminishing available land make it all 

the more important that the use of land 

be intelligently controlled. This can 

only be done by a cooperative effort 

between interested parties who approach 

their differences with an open mind and 

with respect for the objectives of the 

other. 

Blackstone Park Improvement Ass'n, et al. v. State of Rhode 

Island (R.I. 1982), 448 A.2d 1233, 1237-1238. 

Generally, even where governmental immunity is found, 

it should not be exercised in a fashion that is unreasonable 

and arbitrarily overrides all important legitimate local 

interests. Blackstone, supra, 448 A.2d at 1239. There are 

in this case important, legitimate local interests that 

should be considered and to blindly adopt the immunity 

claimed by the City would be to entirely disregard these 

concerns. 

Further, the language of City of Temple, supra, dealt 

largely with the question of two governmental entities and is 

extremely close to the test of eminent domain. The rationale 

for the eminent domain test is the presumption that the 

legislature's grant of such power conclusively establishes 

the governmental entity's superiority where its proposed land 

use runs counter to local zoning provisions. Blackstone, 448 

A.2d at 1238, e.g., City of Kirkwood v. City of Sunset Hills 

(Mo.Ct.App. 1979), 589 S.W.2d 31; Mayor of Savannah v. 

Collins (Ga. 1954), 84 S.E.2d 454. This test likewise 

disregards the important local concerns of development in a 

modern society and we choose not to adopt it here. 

The Blackstone court noted that all of the traditional 

tests are flawed because "they are overly simplistic and 

often lead to resolution of a multifaceted zoning-conflicts 
issue through the use of conclusive labels rather than 

through perceptive adjudication." Blackstone, 448 A.2d at 

1238; citing Brownfield v. State (Ohio 198O), 407 N.E.2d 

1365, 1367-1368, overruled on other grounds, 503 N.E.2d 1025, 

1028; Brown v. Kansas Forestry, Fish and Game Commission 

(Kan. 1978), 576 P.2d 230, 232. 

The more enlightened test, adopted in Blackstone and 

followed by a number of jurisdictions involves the so-called 

"balancing-of-interest" analysis developed by the New Jersey 

Supreme Court and the Minnesota Supreme Court at 

approximately the same time. Town of Oronoco v. City of 

Rochester (Minn. 1972), 197 N.W.2d 426; Rutgers State 

University v. Piluso (N. J. 1972), 286 A. 2d 697. The test is 

best laid out in Rutgers, 286 A.2d at 702 and first requires 

an analysis of legislative intent. The Rutgers court stated 

that this intent may be obscured but can be discerned from 

consideration of the following factors: (1) the nature and 

scope of the instrumentality seeking immunity; (2) the kind 

of function or land use involved; (3) the extent of the 

public interest to be served; (4) the effect local land-use 

regulations would have upon the enterprise concerned; and 

(5) the impact upon legitimate local interest. 

Oronoco , supra, and Rutgers, supra, can be 

distinguished from the case at bar because both dealt with 

competing governmental entities. In Oronoco, the question 

was whether the city of Rochester was exempt from the zoning 

requirements of Oronoco in the development of a sanitary 

landfill to benefit the town of Rochester but located in the 

township of Oronoco. Rutgers involved competing governmental 

entities in the form of the state university which wished to 

alleviate a shortage of education facilities by expanding a 

500-unit ceiling for student housing which was in violation 
of the local municipal zoning ordinance. In both cases, the 

courts allowed the exemption. The Rutgers court stated that 

in some cases the "broader public interest is so important 

that immunity must be granted even though the local interests 

may be great." Rutgers, supra, 286 A.2d at 703. However, 

the court cautioned that immunity was not completely 

unleashed: 

Even where [immunity] is found to exist, 

it must not * * * be exercised in an 

unreasonable fashion so as to arbitrarily 

override all important legitimate local 

interests. This rule must apply to the 

state and its instrumentalities as well 

as to lesser governmental entities 

entitled to immunity. * * * And, at the 

very least, even if the proposed action 

of the immune governmental 

instrumentality does not reach the 

unreasonable stage for any sufficient 

reason, - the instrumentality ought to 

consult with the -- local authorltles and 

sympathetically listen and give every 

consideration to local ob~ectlons, 

problems - and suggestions - in order - to 

minimize the conflict as - much - as 

~ossible. (Em~hasis added. 1- 

Rutgers, 286 A.2d at 703. 

The wbalancing-of-interests test," as the Blackstone 

court noted, has been followed in Florida, Hawaii, Kansas, 

Michigan, Minnesota, North Dakota, Ohio, Pennsylvania, and 

South Dakota. Citing cases, Blackstone, supra, 448 A.2d at 

1239. We feel that this is the most enlightened approach to 

this complex question. We recognize also that these courts 

have adopted the "balancing-of-interests test" in cases 

involving competing governmental entities. However, due to 

the existence of § 76-2-402, MCA, and its mandate to merely 

provide a public forum, and the distinguishable nature of 

this case where we have a communities' own citizens 
challenging the City for violating its own zoning ordinance, 

we need not apply the "balancing-of-interests test" in this 

case. 

As suggested in Rutgers, the legislative intent of the 

statute in question, 9 76-2-402, MCA, will first be 

considered. Landowners argue that the language "whenever an 

agency proposes to use public land contrary to local zoning 

regulations," and the fact that the board of adjustments can 

only act upon notice of the agency's "intent to develop land 

contrary to local zoning regulations" shows the statute 

contemplates approval of future action. The City claims the 

language requires only that a public hearing be held by the 

local board of adjustments within thirty days of the date the 

agency gives notice to the board of its intent to develop the 

land contrary to the zoning regulations. 

The City points to the affidavits attached to its 

motion for summary judgment showing that the board of 

adjustments did hold the hearing within thirty days of the 

date the board was given notice of the City's intent. 

Additionally, the City points out, and a reading of 

subsection (2) shows, the board of adjustments has no power 

to deny the proposed use but rather is only required to 

provide a public forum for comment. 

The City additionally argues that the legislative 

intent can be gleaned from the legislative history which 

shows that the bill which ultimately became 9 76-2-402, MCA, 

was originally introduced entitled: "An act requiring land 

development and use by governmental agencies to conform to 

local zoning regulations." The bill was finally passed 

entitled: "An act requiring land development and use by 

governmental agencies to be subject to public hearing." 

Therefore, the City claims, the end result was that the 
legislature recognized that government agencies are not 

subject to zoning regulations. 

We do not conclude that the intent of the legislature 

is clear merely by the changing of the title of the bill. 

However, we do affirm the ruling of the District Court in 

this case. The District Court properly noted that a reading 

of 5 76-2-402, MCA, shows that "[wlhether the use is proposed 

or construction underway, an analysis of Montana's zoning law 

discloses that a municipality's construction of a service 

facility which does not comply with the zoning ordinances is 

subject only to public comment and not prohibition by the 

Board of Adjustment." 

F7henever this Court determines legislative intent, we 

look first to the plain meaning of the words used in the 

statute. W. D. Construction, Inc. v. Bd. of County Comm. of 

Gallatin County (Mont. 1985), 707 P.2d 1111, 1113, 42 St.Rep. 

1638, 1641; Dorn v. Bd. of Trust. of Billings Sch. Dist. 

(1983), 203 Mont. 136, 144, 661 P.2d 426, 430. The issue 

presented is disposed of by the very terms of S 76-2-402, 

MCA. The section requires only an opportunity for a public 

forum, it does not give power to the board of adjustments to 

disallow any governmental action. The record shows the 

public was allowed the opportunity to present complaints at 

the June 24, 1985 meeting. The hearing was held, the public 

was allowed to comment. No governmental violation of 

§ 76-2-402, MCA, occurred and therefore no governmental 

entity committed an act or omission giving rise to a cause of 

action. 

We do not accept the caselaw cited by the Landowners 

because it turns on the antiquated and confusing 

proprietary-governmental function test. Further, we do not 

solely decide this case on the City's claim that it is immune 
from the ordinance merely because of its status as a 

governmental entity under 5 2-9-111, MCA. 

We note that the Landowners, to present the issue 

before the District Court regarding the City's action in this 

case, could have attempted to attain injunctive relief. See, 

Rich, supra, 657 P.2d at 962. The actions of the City, 

nonetheless, were not in violation of the law as it was 

required only to provide notice to the board of adjustments 

which provided the public hearing. 

We affirm. 

We concur: /7 

Justic /" 
Mr. Justice John C. Sheehy, dissenting: 

If the reader, having read the foregoing opinion, 

understands its reasoning, he or she may step to the head of 

the class. After giving judicial blessing to the balancing 

of interests tests of Oronoco and Rutgers, the opinion 

declines to apply them and then partly applies them; it 

chides the landowners for not seeking injunctive relief, and 

then tells them no injunctive relief was possible; it refuses 

to grant immunity from zoning regulations to cities, but 

grants it; and it sweeps away as "antiquated," without any 

necessity, the distinction between proprietary and 

governmental functions of municipalities. It tells the 

cities they are subject to their own zoning regulations, and 

then tells them they are not. The landowners here are even 

deprived of a right to question any abuse of discretion by 

the city, a right of landowners surely should have under an 

action for a writ of review. 

It is a farce to uphold a statute that guarantees a 

public hearing on an issue, but which statute also provides 

that the hearing is purposeless, of no account, a mere 

exercise in hearings. Who needs the exercise? 

Moreover, the statement of facts by the majority is not 

clear. The first notice to landowners that the city 

disregarded its own zoning regulations was when the city 

commenced building the water tank in April, 1985. It was not 

until June, 1985, that the city provided the public hearing 

required by S 76-2-402, MCA. A hearing after the fact is 

even more of a farce. 

I dissent. I would reverse the summary judgment. 

) &, &j&&b+ 

Justice u