No, 12908 

IN THE 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 the First Judicial District, 

Honorable Peter G, Meloy, Judge presiding. 

Counsel of Record : 

For Appellants : 

R. Bruce McGinnis argued, Helena, Montana 

For Respondents : 

Towe, Neely and Ball, Billings, Montana 

Neil D. Enright argued, Billings, Montana 

- - 

Submitted: June 18, 1975 

Decided : !%FIG 7 

Filed : T i;,,;:~ ;.a it? p Fh. 5 ef-i.;~, , .". i 
[ar. Justice John Conway Harrison delivered the Opinion of the 

Court. 

This appeal is from a judgment entered in the district 

court, Lewis and Clark County. 

Appellant is the State Department of Revenue (hereinafter 

11 referred to as 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 the Musselshell 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 for Assessment, which 

mistakenly allowed a deduction for "cash on hand". Rulings by 

the Montana State Tax Appeals Board and the district court allowed the Department to correct this mistake, and this particular issue is not 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 therefore was 

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 at both levels. The district court, however, reversed the State Tax 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 to value the ~ank's property 

for purposes of taxation. Article VIII, Section 3, 1972 Montana 

If Constitution imposes upon the state a duty to appraise, assess, 
and equalize the valuation of all property which is to be 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 

all things necessary to secure a fair, just and equitable valuation of all taxable property. Taken together, these two 

provisions grant the Department a certain degree of discretion in 

determining what method of valuation will be 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 are added to the intrastate capital 

of the bank. From that sum is deducted the bank's liabilities 

and other property assessed and taxed to the bank. The resulting 

figure is the book value of bank shares upon which the property 

tax assessment is made. 

The Department first contends the ~ank's appeal to the 

district court was moot. Its contention is grounded on the 

fact the Bank paid the first installment of its taxes as billed 

by the Musselshell County assessor fifteen days prior to the time 

the petition for judicial review was filed. This Court has held 

to the 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, 

101 Mont. 6, 52 P.2d 168; Anno. 169 ALR 985, 988. 

The Department in support of its argument of mootness 

relies on Blair v. Potter, 132 Mont. 176, 315 P.2d 177, and 

Gallatin Trust & Savings Bank v. Henke, 154 Mont. 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 direct judicial review of the State Tax Appeals 

~oard's decision by the district court. In effect there has been 

provided by statute an alternative method to paying taxes under 

protest. This is exactly what petitioner did and Blair and 

Gallatin Trust are not controlling. Further, we find this rule 

to be inappropriate in the context of the instant case. 
It is equally well recognized that payment of a money 

judgment by the judgment debtor does not, by itself, render the 

cause moot for purposes of appeal. State ex rel. Hagerty v. 

Rafn, 130 Mont. 554, 304 P.2d 918, and cases cited therein. A 

defeated party's compliance with the judgment 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 is not the case here. The issues here are not moot because 

this Court's decision regarding them will strongly affect tax 

assessments by the Department in future years. We recognize 

and approve of the rule stated in Massell v. Daley, 404 111.479, 

"The question has not become moot merely by the 

payment of the amounts ordered by the judgments, 

because the decrees purported to perpetually restrain the State officials 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 to cover the possible depreciation 

of its bond account was error. The Court ruled on this precise 

issue in Miners National Bank of Butte v. County of Silver Bow, 

116 Mont. 31, 148 P.2d 538. Thus our decision in the instant 

case must depend upon an interpretation of the holding in Miners. 

Section 84-307, R.C.M. 1947, does not specifically allow 

for a deduction on bond loss reserves. It is clear that Miners 

rejected the claimed deduction for bond losses. Under the interpretation adopted by the Bank and the district court, the Miners 

rule disallows bond reserves if based on conjecture or speculation, but allows such reserves when based on a "well defined 

evaluation" of the entire account to which the reserve applies. 

The Bank urges that the required well defined basis exists in 

this case, and refers us to an evaluation of the entire bond account 

made by the assistant vice president and bond expert of the First 
Nation. t. Paul, Minnesota. The evaluation shows that, 

within 'Levant time period, a net depreciation in market 

value of the total bond account existed in the amount claimed. 

The Bank attempts to further bolster its argument by pointing out 

chat reserves for bad debts are commonly allowed, although not 

specifically authorized under section 84-307. It is again 

suggested that these reserves are allowed because they are based 

on factors nonspeculative in nature. 

We hold that the ~ank's interpretation is an inaccurate 

appraisal of the law as set out in Miners, 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 is based. Such deductions are disallowed by the'general 

principle that a liability does not accrue as long as it remains 

contingent. 2 Mertens, Law of Federal Income Taxation, Section 

12.67, p. 274. This Court in Miners reaffirmed this important 

concept : 

I I A bank may not thus withhold from assessment a part 

of its undivided profits by setting same up as a 

reserve to make good possible or anticipated losses 

on its bonds and stocks which losses may never occur. 11 

116 Mont. 31,43. 

There is nothing in the record here to show that the Bank has 

suffered an actual loss in its bond account, nor is there a showing 

that the Bank actively trades or sells its bonds. Therefore, the 

Bank acted improper1.y by creating a reserve for possible bond 

losses and by segregating this amount from its undivided profits. 

The determination of the Department's final issue necessitates an interpretation of section 84-307, R.C.M. 1947, which 

provides : 

"The shares of all state banking corporations 

engaged in the banking business in Montana shall 

be valued and assessed for the purpose of taxation 

at the full cash value thereof, less the book value 

uf the real estate, moneyed capital and other property 

of any such bank assessed and taxed as the property 

of said bank. " (Emphasis added). 
Based on the foliowing facts the district court allowed 

che 3ank a deduction for the real estated owned but by mistake 

drnitted from the ~ahk's statement of assessment: 

1. As of the first Monday in March 1973, the Bank was 

the dmer of and liable for the taxes on certain real estate 

valued at $150,000. 

2. This ownership was filed and on record in the courthouse at Musselshell 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 to place this property on 

its statement for assessment. 

Clearly the Bank was the owner of the property on the 

first 14onday in March 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 trial court found 

I!+< ;k ;k since the allowance of a deduction for cash 

on hand was due to a mistake by the Department this 

Court finds that the Department is to be allowed to 

correct that mistake at this time and therefore disallows petitione?~ claim for a deduction for cash 

on hand. It 

'L'hc same wisdom and common sense should apply to correct this 

honest mistake by the Bank. The trial court so found and we 

find no error in its finding. 

Judgment is affirmed as to mootness, and for allowing 

deduction of the $150,000 real property mistakenly left off 

the statement of assessment. It is reversed as to authorizing a 

bond reserve account. The cause is remanded to the trial court. 
We Concur: 

Chief Justice 

.................................. Justices. 

Mr. Justice Frank I. Haswell, specially concurring: 

I concur in the result, but disagree with the 

discussion on mootness.