### No, 12908 

### INTHE SUPREME COURT OF THE STATE OF MONTANA 1975

MONTANA NATIONAL 

### BANK OF ROUNDUP, Plaintiffs and Respondents,

THE STATE OF MONTANA, DEPARTMENT OF REVENUE, 

### Defendants and Appellants.
Appeal from: District Court of theFirst Judicial District, Honorable Peter G, 

### Meloy, Judge presiding. Counsel of Record: 

### For Appellants

### : R. 

### Bruce McGinnis argued, Helena, Montana ForRespondents

### : Towe, Neely and Ball, Billings, Montana Neil 

### D. Enright argued, Billings, Montana

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### Submitted: June 18, 1975 Decided 

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### [ar. Justice John Conway Harrison delivered the Opinion of the Court.
This appeal isfrom a judgment entered in the district court, Lewis and Clark County. Appellant isthe StateDepartment of Revenue (hereinafter

11 referred toas the ~epartment"). Respondent is the Montana National Bank of Roundup (hereinafter referred to as the "Bank")

# . On March 13, 1973, the Bank filed its statement for tax assessment with theMusselshell County assessor. Two specific computations and one omission regarding that document are subjects of this appeal. The first contested computation created a $100,000 reserve to cover depreciation and possible losses within the Bank's bond account. The second resulted from an error in the printed instructions in the Statement forAssessment, which mistakenly allowed a deduction for "cash on hand". Rulings by the Montana StateTax Appeals Board and the district court allowed the Department tocorrect this mistake, and this particular issue isnot submitted for appeal to this Court. The third item concerned a deduction for real estate owned by the Bank
as of the date of assessment. The Bank mistakenly omitted the item on its statement to the tax authorities, and thereforewas not allowed the deduction. The Bank appealed its 1973 assessment of bank shares to the IYrusselshell County Tax Appeal Board and the Montana State Tax Appeal Board. Relief was denied atboth levels. The district court, however, reversed the StateTax Appeal Board on the issue of the reserve for bond losses and the deduction for real estate. The Department appeals and presents three issues. Before entering into discussion on the merits, we note the method employed by the Department tovalue the ~ank's property for purposes of taxation. Article 

### VIII, Section 

### 3, 1972 Montana

If Constitution imposes upon the statea duty to appraise, assess,

### and equalize the valuation of allproperty which istobe taxed in the manner provided by law. " 

### Under section 84-708.1(3), R.C.M. 

### 1947, the Department may exercise such authority and do allthings necessary to secure a fair, just and equitable valuation of alltaxable property. Taken together, these two provisions grant the Department a certain degree of discretion in determiningwhat method of valuation 

### willbe used for tax purposes. The Department's method of valuation is

### best described as a formalistic or "book value" method. The undivided profits, current earnings and surplus areadded tothe intrastate capital of the bank. From that sum isdeducted thebank's liabilities and other property assessed and taxed to thebank. The resulting figure is 

### thebook value of bank sharesupon which the property tax assessment 

### ismade. The Department firstcontends the ~ank's appeal to the district court was moot. Its 

### contention is 

### grounded on the fact theBank paid the first installment of itstaxes asbilled by the Musselshell County assessor fifteen days prior to the time the petition forjudicial review was filed. This Court has held tothe general effect that when a judgment has been paid it

### has passed beyond review; the satisfaction 

### i-s the end of the proceeding. In re

### lack's Estate, 32 Mont. 51, 79 P. 554; Peck v. Bersanti, 101Mont. 

### 6, 52 P.2d 168; Anno. 169 ALR 985, 988. The Department in support of itsargument of mootness relies on Blair v. Potter, 132Mont. 176, 315 P.2d 177, and Gallatin Trust & 

### Savings Bank v. Henke, 154Mont. 170, 461 P.2d 448. These cases are clearly distinguishable, particularly in view of the fact the legislature amended section 84-709.1, R.C.M. 

### 1947, which allows directjudicial review of the StateTax Appeals ~oard's decision by the district court. In effect there has been provided by statutean alternative method to paying taxes under protest. This isexactly what petitioner did and Blair and Gallatin Trust arenot controlling. Further, we find this rule tobe inappropriate in the context of the instant case.

### It isequally well recognized that payment of a money judgment by thejudgment debtor does not, by itself, render the
cause moot for purposes of appeal. Stateex rel. Hagerty v. Rafn, 130 Mont. 554, 304 P.2d 918, and cases cited therein. A 

### defeated party's compliance with thejudgment renders his appeal moot only where the compliance makes the granting of effective relief by the appellate court impossible. State ex rel. Begeman
v. Napton, 10 Mont. 369, 25 P. 

### 1045; Anno. 39 ALR2d 153, 179. Such 

### isnot the case here. The issues here arenot moot because this Court's decisionregarding them 

### willstrongly affect tax assessments by the Department in futureyears. We recognize and approve of the rule stated inMassell 

### v. Daley, 404 111.479,

"The question has not become moot merely by the payment of the amounts ordered by thejudgments, because the decrees purported toperpetually restrain the Stateofficials from collecting taxes 

# * f: fi

### from these plaintiffs, therefore, affecting future tax collections. It 

### The Department next urges the allowance by the district court of a $100,000 reserve tocover the possible depreciation of its

### bond account was error. The Court ruled on this precise issue inMiners National Bank of Butte v. County of SilverBow, 116Mont. 31, 148 P.2d 538. Thus our decision in the instant
casemust depend upon an interpretation of the holding inMiners. Section 84-307, R.C.M. 

### 1947, does not specificallyallow fora deduction on bond loss reserves. It 

### isclear that Miners rejected the claimed deduction forbond losses. Under the interpretation adopted by the Bank and the district court, the Miners rule disallowsbond reserves ifbased on conjecture or speculation, but allows such reserves when based on a "well defined evaluation" of the entire account towhich the reserve applies. The Bank urges that therequired well definedbasis exists in this case, and refers us to an evaluation of the entirebond account made by the assistant vice president and bond expert of the FirstNation. t. Paul, Minnesota. The evaluation shows that, within 'Levant time period, a net depreciation inmarket value of the totalbond account existed in the amount claimed. The Bank attempts to furtherbolster itsargument by pointing out chat reserves forbad debts arecommonly allowed, although not specificallyauthorizedunder section 84-307. It 

### is again suggested that these reserves are allowed because they arebased
on factors nonspeculative innature. We hold that the ~ank's interpretation 

### is an inaccurate appraisal of the law as set out inMiners, and that the district court erred in adopting it. The propriety of the deduction for


### a reserve account for possible bond loss does not rest solely
on the sufficiency or insufficiency of the supporting data upon which it isbased. Such deductions are disallowed by the'general principle that a liabilitydoes not accrue as long as it remains contingent. 

### 2 Mertens, Law of Federal Income Taxation, Section 12.67, p. 274. This Court inMiners reaffirmed this important concept:

IIA bank may not thus withhold from assessment a part of 

### itsundivided profits by setting same up as a reserve tomake good possible or anticipated losses on itsbonds and stocks which losses may never occur. 11 116Mont. 31,43. There isnothing in the record here to show that the Bank has suffered an actual loss in itsbond account, nor 

### is there a showing that the Bank actively trades or sells itsbonds. Therefore, the Bank acted improper1.y by creating a reserve for possible bond losses and by segregating this amount from itsundivided profits. The determination of the Department's final issuenecessitates an interpretation of section 84-307, R.C.M. 1947, which provides: "The shares of allstatebanking corporations engaged in thebanking business inMontana shall be valued and assessed for the purpose of taxation at the fullcash value thereof, less thebook value uf thereal estate, moneyed capital and other property of any such bank assessed and taxed as the property of saidbank. " (Emphasis added).Based on the foliowing facts the district court allowed che 3ank 

### a deduction for thereal estated owned but by mistake drnitted from the ~ahk's statement of assessment: 

### 1. Asof the firstMonday inMarch 1973, the Bank was the dmer of and liable for the taxes on certainreal estate valued at $150,000. 2. This ownership was filedand on record in the courthouse atMusselshell County. 

### 3. The Musselshell County assessor knew or should have known that the property was purchased by the taxpayer through
a sheriff's sale. 

### 4. The Bank mistakenly failed toplace this property on its statement for assessment. Clearly the Bank was the owner of the property on the first 14onday inMarch and 

### is liable for the taxes on the property, Under section 84-307 it is entitled to deduct the property from the value of its shares for the purpose of determining the tax
on such shares. The trialcourt found
I!+< ;k ;k since the allowance of a deduction for cash on hand was due toa mistake by the Department this Court finds that the Department is tobe allowed to correct that mistake atthis time and therefore disallows petitione?~ claim fora deduction for cash on hand. It 'L'hc same wisdom and common sense should apply to correct this honest mistake by theBank. The trialcourt so found and we find noerror in its finding. Judgment 

### is affirmed as tomootness, and for allowing deduction of the $150,000 real property mistakenly left off the statement of assessment. It isreversed astoauthorizing a bond reserve account. The cause isremanded to the trialcourt.We 

### Concur:

Chief Justice



# .................................. Justices.

Mr. 

### Justice Frank 

### I. Haswell, specially concurring: I 

### concur in the result, but disagreewith the discussion on mootness.