No. 13627 

IN THE SUPREPIIF, COURT OF THE STATE OF MONTANA 

1977 

KAREN M. DOUGLAS, 

Plaintiff and Appellant, 

-vsTHOMAS L. JUDGE, Governor, et al., 

Defendants and Respondents. 

ORIGINAL PROCEEDING: 

Counsel of Record: 

For Appellant: 

Garrity and Keegan, Helena, Montana 

Donald A. Garrity argued, Helena, Montana 

For Respondents: 

Hon. Mike Greely, Attorney General, Helena, flontana 

Walter S. Murfitt, Special Assistant Attorney General, 

argued, Helena, Montana 

Submitted: June 13, 1977 

Decided: . . . ? 3; 2, , q-fit 

r- d,:. ;; Filed: :' - 
Mr. Justice Frank I. Haswell delivered the Opinion of the Court. 

Appellant brought this action in the district court, 

Lewis and Clark County, seeking a declaratory judgment that 

Chapter 533, Laws of 1975, is unconstitutional. On cross motions 

for summary judgment, the district court held the challenged 

legislation to be valid and enforceable. ~ppellant appeals 

the district court ruling to this Court. 

Appellant is a citizen of the United States and the State 

of Montana and is a resident of Lewis and Clark County, Montana. 

Appellant owns both real and personal property in Lewis and Clark 

County, and pays taxes thereon. Appellant is also a registered 

elector within the county. 

Respondents were at all times relevant to this action 

the duly elected, qualified and acting members of the Board of 

Examiners of the State of Montana. The Board of Examiners is 

the body authorized to issue and sell state revenue bonds. 

Chapter 533, Laws of 1975, was enacted by the 1975 Montana Legislature. This act, now codified as Title 89, Chapter 

36, R.C.M. 1947, is an act providing for the development of 

renewable natural resources. The purpose of this act and the 

policies to be promoted thereby are set forth in section 89-3601, 

R.C.M. 1947, as follows: 

"In the development of the natural resources of 

the state it is essential to distinguish between 

those which are and those which are not renewable; 

to make proper charges through taxation and otherwise for the depreciation of nonrenewable resources; 

and to invest a proper proportion of the tax and 

other revenues from nonrenewable resources in the 

replacement thereof with developments of renewable 

natural resources that will preserve for the citizens 

the benefit of the state's natural heritage and 

to ensure that the quality of existing public resources such as land, air, water, fish, wildlife 

and recreational opportunities are not significantly 

diminished by developments supported by this act. 

In order to finance such developments it is necessary to borrow in anticipation of the receipt of 

the revenues, so that replacement will not lag 
behind consumption. The purpose of this act is 

to provide a procedure for borrowing in the most 

economical way for this purpose, and to authorize the creation of debt to finance the first 

stage of the program, and to describe the types of 

projects, loans, and grants to be included in the 

program. " 

Three distinct programs for the development of renewable 

resources are contemplated by this act: (1) renewable resource 

development loans to farmers and ranchers, section 89-3603, R.C.M. 

development 

1947; (2) state renewable resource/grants to public agencies, 

section 89-3604, R.C.M. 1947; and (3) state and local renewable 

resource development loans to public agencies, section 89-3605, 

R.C.M. 1947. Only the first program is challenged by appellant 

in this action and therefore, all discussion found herein specifically relates only to this program. 

In furtherance of the stated purposes and policies, the 

act authorizes respondents, upon the request of the Department of 

Administration or the Board of Natural Resources and Conservation, to issue and sell general obligation bonds of the state in 

an amount not to exceed five million dollars. The purpose of 

the bond sale is to finance the renewable resource development 

program as described in and pursuant to the terms and conditions 

of the act. The full faith and credit and taxing powers of the 

state are pledged for the prompt and full payment of all renewable resource development bonds issued pursuant to this act. 

The proceeds of a11 renewable resource development bonds 

issued pursuant to this act, other than refunding bonds, are 

required to be deposited as received in a clearance fund account. 

The moneys on hand in this account may be used only to pay costs 

of the renewable resource development program upon the order of 

the Department of Administration or the Board of Natural Resources 

and Conservation. 

The Board of Natural Resources and Conservation is authorized upon proper application and upon recommendation of the 
Department of Natural Resources to make renewable resource 

development loans from the account established by this act to 

farmers and ranchers of the state who, without regard to their 

form of business organization: 

(a) Are citizens of the United States and are citizens 

and residents of the State of Montana; 

(b) have sufficient farming or ranching training and 

experience which, in the opinion of the Department, is sufficient 

to assure the likelihood of the success of the proposed operations; 

and (c) are or will become owner-operators of farms and ranches. 

These private loans to farmers and ranchers may be made 

for any worthwhile project for the conservation, management, 

utilization, development or preservation of the land, water, fish, 

wildlife, recreational and other renewable resources in the state; 

and for the refinancing of existing indebtedness incurred in the 

expansion or rehabilitation of projects for those purposes. The 

loans may not exceed the lesser of $100,000 or 80 percent of the 

fair market value of the security given therefor, may not exceed 

a term of thirty years, and shall bear interest at a rate established by the Board of Natural Resources and Conservation not to 

exceed one percentage point greater than the prevailing interest 

rate on renewable resource development bonds authorized by the 

act. Private loans are to be secured by a lien upon the project 

constructed with the proceeds thereof. 

By a resolution adopted December 5, 1975, the Board of 

Natural Resources and Conservation requested the Board of Examiners 

to issue and sell bonds of the state to implement this act. his 

action was filed thereafter and the sale and issuance of the bonds 

has been stayed during the pendency of this appeal. 

Three issues are before this Court on appeal: 

(1) Whether the use of the bond moneys authorized by 
Chapter 533, Laws of 1975, for the purpose of lending money to 

private individuals is a violation of Article VIII, Section 1, 

1972 Montana Constitution, as authorizing the levy of taxes 

for other than a "public purpose"? 

(2) Whether the use of the proceeds of said bonds for 

loans to private individuals violates Article V, Section 11, 

1972 Montana Constitution, as an appropriation to a private 

individual not under control of the state? 

(3) Whether Chapter 533, Laws of 1975 constitutes an 

invalid delegation of legislative authority to the Department of 

Natural Resources and Conservation? 

Article VIII, Section 1, 1972 Montana Constitution provides: 

"Taxes shall be levied by general laws for public 

purposes." 

The crux of this issue is a determination of what is a "public 

purpose" within the framework of this action. 

The clear purpose of this act is to provide for the development of renewable resources in order that future generations of 

Montanans may enjoy such resources. 

In view of the mandate of Article I Montana Constitution that: "The state and each person shall maintain and 

improve a clean and healthful environment in Montana for present 

and future generations" we feel the purpose of this act is a 

"public purpose". Furthermore, we have previously stated that 

" * * * What is a 'public purpose' is a question primarily for 

legislative determination, with which we will not interfere unless there has been a clear abuse of power. * * *" Willett v. 

State Board of Examiners, 112 Mont. 317, 322, 115 P.2d 287; Huber 

v. Groff, Mont . , 558 P.2d 1124, 33 St.Rep. 1304. We 

find no hint of such abuse of power in the instant case. 

Appellant further charges that the renewable resource 

development act violates Article V, Section 11(5), 1972 Montana 
Constitution. This section provides: 

"No appropriation shall be made for religious, 

charitable, industrial, educational or benevolent 

purposes to any private individual, private association, or private corporation not under control 

of the state." 

In effect, appellant argues that the sale of the renewable resource development bonds and the lending of the proceeds therefrom to farmers and ranchers constitutes an appropriation of 

money for persons not under the control of the state. 

There can be no doubt that Article V, Section 11(5), 

1972 Montana Constitution, prohibits the appropriation of funds 

for the use of any private individual, association or corporation not under state control. We have previously held, however, 

that the sale of revenue bonds in order to raise money for residential loans to low income citizens under the supervision of 

the Montana Housing Board, a public corporation, was not a violation of this section. Huber, supra. We are confronted with 

a similar situation herein and the result must be the same. 

Initially it is important to recognize that the funds in 

question herein are not appropriated for the use of private 

persons, corporations or associations. The funds are appropriated 

for the use of the Department of Natural Resources and Conservation. This department is then in turn directed by the renewable 

resource development act to dispose of these funds as directed 

by this act. 

All funds derived from the sale of the renewable resource 

development bonds are to be deposited in the clearance fund 

account. Sections 89-3606 and 89-3609, R.C.M. 1947. These moneys 

are to be used by the Board of Natural Resources and Conservation 

to make loans to farmers and ranchers for the development and 

preservation of renewable resources. The loans may be made only 

upon the proper application and recommendation of the Department 

of Natural Resources and Conservation. Section 89-3603, R.C.M. 1947. 
Total control over the granting of these loans is vested in 

the Department of Natural Resources and Conseryation. We hold 

that sufficient control over the appropriated funds is vested 

in the state and the mandate of Article V, Section ll(5) is met. 

Finally, appellant assails this act on the grounds of 

an unconstitutional delegation of legislative power to the Board 

of Natural Resources and Conservation since the legislature 

failed to establish adequate standards and guides for the determination of projects eligible for renewable resource development 

loans. 

When the Legislature confers authority upon an administrative agency, it must lay down the policy or reasons behind the 

statute and also prescribe standards and guides for the grant of 

power which has been made to the administrative agency. Bacus 

v. Lake County, 138 Mont. 69, 354 P.2d 1056. The following general rule found in 73 C.J.S. Public Administrative Bodies and 

Procedure, S 29, pp. 324, 325, has been often cited by this Court: 

"The law-making power may not be granted to an 

administrative body to be exercised under the 

guise of administrative discretion. Accordingly, 

in delegating powers to an administrative body 

with respect to the administration of statutes, 

the legislature must ordinarily prescribe a policy, 

standard, or rule for their guidance and must not 

vest them with an arbitrary and uncontrolled discretion with regard thereto, and a statute or 

ordinance which is deficient in this respect is 

invalid. In other words, in order to avoid the 

pure delegation of legislative power by the creation 

of an administrative agency, the legislature must 

set limits on such agency's power and enjoin on it 

a certain course of procedure and rules of decision 

in the performance of its function; and, if the 

legislature fails to prescribe with reasonable 

clarity the limits of power delegated to an administrative agency, or if those limits are too broad, 

its attempt to delegate is a nullity. 

" * * * On the other hand, a statute is complete 

and validly delegates administrative authority 

when nothing with respect to a determination of 

what is the law is left to the administrative 

agency, and its provisions are sufficiently clear, 

definite, and certain to enable the aqency to know 

its rights and obligations." (Emphasis supplied.) 
Bacus, supra; City of Missoula v. Missoula County, 139 Mont. 

256, 362 P.2d 539; Huber, supra. 

What are the standards and guides supplied to the Board 

of Natural Resources and Conservation to be used in its determination of projects eligible for renewable resource development 

loans? Section 89-3603(3) authorizes the Board of Natural 

Resources and Conservation to make loans to farmers and ranchers 

" * * * for any worthwhile project for the conservation, management, 

utilization, development, or preservation of the land, water, fish, 

wildlife, recreational and other renewable resources in the 

state * * *". The act further specifies the eligibility requirements of prospective borrowers, maximum loan limits, maximum repayment periods and requires the establishment of a lien in favor 

of the state upon the project. 

The Montana rule to be used in the evaluation of the 

validity of delegations of power to administrative agencies was 

carefully analyzed in Bacus at pp. 80, 81, where we stated: 

"In the case of Chicago, M. & St. P. R. Co. v. 

Board of R. R. Com'rs, 76 Mont. 305, 314, 315, 

247 P. 162, 164, this court has stated: 

"'We think the correct rule as deduced from the 

better authorities is that if an act but authorizes the administrative officer or board to 

carry out the definitely expressed will of the 

Legislature, although procedural directions and 

the things to be done are specified only in general terms, it is not vulnerable to the criticism that it carries a delegation of legislative 

power.' This rule has been approved in Northern 

Pacific R. Co. v. Bennett, 83 Mont. 483, 272 P. 987; 

Barbour v. State Board of Education, 92 Mont. 321, 

13 P.2d 225; State ex rel. City of Missoula v. 

Holmes, 100 Mont. 256, 47 P.2d 624, 100 A.L.R. 581; 

State v. Andre, 101 Mont. 366, 54 P.2d 566; State 

ex rel. Stewart v. District Court, 103 Mont. 487, 

63 P.2d 141; and Thompson v. Tobacco Root Co-op 

State Grazing Dist., 121 Mont. 445, 193 P.2d 811. 

See also State v. Johnson, 75 Mont. 240, 243 P. 

1073. 

"We do not disagree with this established rule as 

enunciated by these Montana authorities. However, 

the case at bar does not fall within the purview of 

this rule." 
The Court in Bacus continued by laying down the following rule to be used to determine the sufficiency of guidelines 

laid down by legislative enactments: 

"In the case of State v. Stark, 100 Mont. 365, 

371, 52 P.2d 890, 892, this court has stated: 

"'Delegation of power to determine who are within 

the operation of the law is not a delegation of 

legislative power. * * * But it is essential that 

the Legislature shall fix some standard by which 

the officer or board to whom the power is delegated 

may be governed, and not left to be controlled 

by caprice.' 

"We agree with this statement of the law and go 

further by saying that the standard must not be 

so broad that the officer or board will have unascertainable limits within which to act." 

This rule has been followed closely by a number of subsequent 

cases. Pattie v. Oil & Gas Cons. Comm'n, 145 Mont. 531, 402 

P.2d 596; State ex rel. Bennett v. Stow, 144 Mont. 599, 399 P.2d 

221; City of Billings v. Smith, 158 Mont. 197, 490 P.2d 221. 

The standards and guides laid down by this act prove to 

be insufficient when analyzed by the Bacus test. In effect, the 

only limit on the power to loan money for a certain project is 

the Board of Natural Resources and Conservation's subjective 

determination of whether a project is worthwhile. The parameters 

which define a project eligible for the loans contemplated by 

this act must be more clearly defined. In its present form, insufficient guidelines are provided to the Department of Natural 

Resources and Conservation in order for it to fully know its rights 

and obligations under this act. 

The constitutional infirmity discussed above relating to 

the loan program to farmers and ranchers is not present in the 

remaining two programs contemplated by this action. Section 89- 

3604,which deals with state renewable resource grants to public 

agencies, provides : 

"The department of administration may recommend 

to the governor that grants from the renewable 
resource development account * * * be made to any 

department, agency, board, commission, or other 

division of state government. Unless specifically 

authorized by the legislature, no bond proceeds 

shall be used for the purpose of making grants * * **I' 

This section further provides: 

"The governor shall submit those grant proposals 

having his approval to the legislature. * * * 

Those grant proposals approved by the legislature 

shall be administered by the department." 

Section 89-3605, R.C.M. 1947, which deals with state 

and local renewable resource development loans,provides: 

"The department of administration may recommend to 

the governor that loans be made * * * to any department, agency, board, commission or other division of state government or to any city, county, 

or other political subdivision or local government 

body of the state." 

Again, legislative approval of these loans is required. 

In the programs contemplated by sections 89-3604 and 

89-3605 strict control is maintained by the legislature over the 

disbursement of funds from this program in the form of grants 

or loans. No unconstitutional delegation of legislative power 

is present herein. 

We therefore, reverse the judgment of the district court 

and remand this matter with instructions to declare those portions 

of Title 89, Chapter 36, R.C.M. 1947, which provide for renewable 

resource development loans to farmers and ranchers unconstitutional 

as an unlawful delegation of legislative power.