No. 91-082 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1991 

HELENA AERIE NO. 16, F.O.E., a Montana corporation 

Plaintiff and Appellant, r]Ec 3 .- 1991 - -vsMONTANA DEPARTMENT OF REVENUE, 

Defendant and Respondent. 

APPEAL FROM: District Court of the First Judicial District, 

In and for the County of Lewis and Clark, 

The Honorable Thomas C. Honzel, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Chadwick H. Smith; Smith Law Firm, Helena, Montana. 

For Respondent: 

R. Bruce McGinnis, Department of Revenue, Helena, 

Montana. 

Filed: 

Submitted on briefs: September 24, 1991 

Decided: 
Chief Justice J. A. Turnage delivered the Opinion of the Court. 

Helena Aerie No. 16, F. 0. E. (Eagles Club) , brought this action 

for a declaratory judgment that its liquor license is transferable 

and assignable. On cross-motions for summary judgment, the 

District Court of the First Judicial District, Lewis and Clark 

County, ruled that the Department of Revenue (DOR) had properly 

classified the license as non-transferable and non-assignable and 

that this action is barred under any statute of limitations. The 

Eagles Club appeals. We reverse. 

The issue is whether the Eagles Club holds a transferable and 

assignable license to sell alcoholic beverages, and, if so, whether 

the Eagles Club may apply for and receive a non-transferable and 

non-assignable all-beverage license as a lodge of a recognized 

national fraternal organization under § 16-4-201(4), MCA. 

The Eagles Club first obtained a beer license in 1934, 

pursuant to the Beer Act, Ch. 106, L. 1933. In 1937, the Eagles 

Club was granted a liquor license pursuant to the newly-enacted 

Retail Liquor License Act, Ch. 84, L. 1937. From 1934 to the 

present, the Eagles Club has renewed its liquor licenses annually. 

In 1947, the legislature enacted a quota law limiting the 

number of beer and liquor licenses that could be issued in each 

city or town. Ch. 225 and 226, L. 1947. In 1949, non-transferable 

and non-assignable beer and liquor licenses granted to certain 
fraternal and veterans1 organizations were exempted from the quota 

system: 

the foregoing limitations shall not prevent the grantinq 

of non-transferable and non-assignable licenses to posts 

of nationally chartered veterans' organizations, and 

lodges of recognized national fraternal organizations, 

which said national organizations have been in existence 

for five (5) years or more prior to January lst, 1949. 

[Emphasis supplied.] 

Ch. 164 and 165, L. 1949. The quota system and the exemption for 

licenses issued to veterans' and fraternal organizations remain in 

effect today. Section 16-4-201, MCA. 

On March 15, 1961, the Montana Liquor Control Board adopted 

its regulation 3-23, providing that beer and liquor licenses issued 

to fraternal and veterans' organizations were not transferable or 

assignable. The regulation also provided that such organizations 

could sell liquor and beer only to bona fide members of the 

organization and their guests. The Benevolent and Protective Order 

of Elks, Helena Lodge No. 193, brought suit in the District Court 

of the First Judicial District, Lewis and Clark County, Cause No. 

28,573, to challenge regulation 3-23. The District Court held that 

regulation 3-23 was "unlawful, unenforceable and of no force and 

effect whatever." That decision was not appealed. 

In 1975, the Montana Alcoholic Beverage Code replaced the Beer 

Act, the Liquor Control Act, and the Retail Liquor Act. The Code 

replaced the separate licenses previously required with a single 

all-beverage license. All renewal of licenses issued to the Eagles 
Club between 1975 and 1989 have been marked with the words "nontransferable and non-assignable as to ownership." 

In 1989, the attorney for the Eagles Club wrote the Chief of 

the Liquor Division Licensing Bureau at the DOR, stating that it 

appeared the "non-transferable and non-a~signable~~ designation did 

not apply to the Eagles Club license. The Division stood behind 

that designation. In May 1990, the Eagles Club filed this action, 

seeking a declaratory judgment that the designation of its liquor 

license as non-transferable and non-assignable is contrary to the 

Fifth Amendment of the United States Constitution and Article 11, 

Section 17, of the Montana Constitution. 

On cross-motions for summary judgment, the District Court 

pointed out that the parties agree that there are no issues of 

material fact barring summary judgment under Rule 56, M.R.Civ.P. 

Because whether summary judgment should be granted is, under these 

circumstances, a question of law, our standard of review is whether 

the lower court's determination is correct. Steer, Inc. v. 

Department of Revenue (1990), 245 Mont. 470, 474, 803 P.2d 601, 

603. 

The District Court held that the Eagles Club has been on 

notice since at least 1975 that the DOR considers its license to be 

non-transferable and non-assignable and that the time for commencing an action has long passed. But this is a declaratory judgment 

action, not an action for damages. The DOR's notations on the 
Eagles Club licenses did not resolve the issue of the licenses' 

transferability and assignability. More importantly, the Eagles 

Club has not applied for transfer of its liquor license and 

transfer has not been refused by the DOR. Only after the Eagles 

Club applies for transfer of its all-beverage license and the DOR 

refuses would any applicable statute of limitations begin to run. 

We conclude that no statute of limitations precludes this action. 

The DOR argues that this action is barred by collateral 

estoppel as the result of the 1964 First Judicial District Court 

judgment in the Benevolent and Protective Order of Elks case. In 

that case, the District Court made a finding that the Eagles Club, 

which was a plaintiff in intervention in the lawsuit, is "the owner 

and holder of non-assignable retail beer and liquor licenses." The 

DOR's position is that the Eagles Club is bound by that finding. 

However, the regulation being challenged, regulation 3-23, itself 

provided that all licenses held by veterans' and fraternal 

organizations were nontransferable. The District Court ultimately 

determined that regulation 3-23 was "unlawful and of no force and 

effect whatever." We conclude that the existence of the above 

finding does not bar this action by collateral estoppel. 

Furthermore, contrary to the position taken in the dissent, 

the issues in the two cases are different. The issue in Benevolent 

and Protective Order of Elks was the validity of the restriction in 

regulation 3-23 that fraternal organizations could sell liquor only 
to members and their guests. That is not the issue in the present 

case. As discussed in the dissent, one element of collateral 

estoppel is that the issue must be identical to an issue previously 

decided. 

The DOR also asserts that the doctrine of laches bars the 

Eagles Club from bringing this action. Laches requires a showing 

that the passage of time has prejudiced the party asserting it or 

has rendered the enforcement of a right inequitable. Brabender v. 

Kit Mfg. Co. (1977), 174 Mont. 63, 67-68, 568 P.2d 547, 549. The 

DOR has made no showing that it has been prejudiced by the passage 

of time in this case. The DOR's argument that if this action is 

allowed to proceed, other liquor license holders will suffer harm 

and the public will lose the protection of the quota system is not 

persuasive. 

We now reach the central issue concerning the nature of the 

liquor license held by the Eagles Club. All licenses issued under 

the 1933 Montana Beer Act were transferable on application to the 

Board of Equalization. Ch. 46, Sec. 15, Extraordinary Legislation 

of 1933. All liquor licenses issued under the 1937 Retail Liquor 

License Act were "non-transferable except and only with the consent 

of the board." Ch. 84, Sec. 8, L. 1937. 

The DOR maintains that club licenses issued under the above 

statutes were transferable only to another club location. It 

argues that there was no need for transfer of ownership of a 
license in pre-quota days, because, at that time, there was no 

limit on the number of licenses issued. However, nothing in either 

the Beer Act or the Retail Liquor License Act said that a fraternal 

organization may transfer its liquor or beer license only to 

another location or, more importantly, only to another fraternal 

organization or club. 

The 1947 legislation limiting the number of beer licenses and 

liquor licenses that could be issued in each city or town provided 

that "licenses already issued which are in excess of said limitations and which are of issue on the date of the passage and 

approval of this act, shall be renewable." Ch. 225 and 226, 

L. 1947 (emphasis supplied). Chapters 164 and 165, L. 1949, in 

which the legislature adopted exemptions from quotas for licenses 

issued to veterans' and fraternal organizations, said nothing about 

converting licenses previously issued to veterans' and fraternal 

organizations to non-transferable and non-assignable licenses. 

The DOR urges that we apply the principle of granting judicial 

deference to the interpretation given a statute by the executive 

agency charged with its enforcement. In this case, that executive 

agency is the DOR. Such deference is appropriate when the statute 

is ambiguous. Mont. Tavern Ass'n v. State, Dept. of Revenue 

(1986), 224 Mont. 258, 265, 729 P.2d 1310, 1316. That is not the 

case here. 
We do not find it necessary to reach the constitutional issues 

raised because we conclude that the DOR's classification of the 

Eagles Club liquor license conflicts with the applicable statutory 

authority. Under the statutes in effect at the time the beer and 

liquor licenses originally were granted to the Eagles Club, those 

licenses were transferable and assignable, subject to the requirement that approval must be obtained from the Board of Equalization 

for the transfer of any license. The Eagles Club licenses remained 

renewable under the 1947 quota law, and the restrictions on 

transferability of licenses issued to fraternal organizations under 

Ch. 164 and 165, L. 1949, do not apply. We hold that there has 

been no showing that the license held by the Eagles Club has lost 

its original characteristics of being transferable and assignable. 

We further hold that nothing has been shown that would prohibit the 

Eagles Club from selling or otherwise disposing of its current 

liquor license and then applying for a non-transferable and nonassignable all-beverage license pursuant to 5 16-4-201(4), MCA. 

The decision of the District Court is reversed and the motion 

of the Eagles Club for summary judgment is granted. 
We concur: 

Justices 
Justice William E. Hunt, Sr., dissenting. 

I dissent. The majority should have affirmed the District 

Court because the statute of limitations has long since expired, 

and because appellant's claim is barred by collateral estoppel and 

laches. In addition, the majority's opinion undermines the DORIS 

regulatory authority to restrict the sale and ownership of liquor 

licenses granted to it by the legislature. 

I find the appellant's claim that it had just recently 

discovered that its license was restrictive to be unconvincing . 

The Montana Alcoholic Beverage Code was enacted in 1975. Ch. 387, 

1975, Mont Laws 786. The code replaced separate beer and liquor 

licenses with a single all-beverage license. Under this statute, 

the code required these licenses to be displayed in a prominent 

area on the premises where the business was being conducted. Since 

at least 2975, and possibly as far back as 1950, the licenses 

issued to the Eagles Club received a stamp which stated that the 

license was nontransferable and nonassignable. Because the Eagles 

Club received and posted its restrictive license yearly, it was 

placed on notice that the DOR considered the license to be 

nontransferable and nonassignable. 

With the exception of the tolling statutes, the longest 

statute of limitation allowed is ten years. Section 27-2-201(1), 

MCA. For the majority to grant a declaratory judgment on an issue 

that is at least 16, and perhaps 41, years old is alarming. This 

far exceeds any statute of limitation set forth in the code. The 

10 
granting of this declaratory judgment will allow persons to assert 

antiquated claims with evidence that is stale due to the passage of 

time . 

Appellant's action is also barred by collateral estoppel. 

Collateral estoppel bars the relitigation of an issue 

where the issue is identical to an issue previously 

decided, a final judgment as to the issue has been 

rendered, and the party against whom the claim is 

advanced remains the same or is a privy of the earlier 

party. 

Matter of Unfair Labor Practice No. 38-80 (1986), 222 Mont. 172, 

In 1964, when the Elks challenged the Montana Liquor Control 

Board's adoption of Regulation 3-23, the Eagles Club joined the 

Elks as a plaintiff in intervention. The Eagles Club admitted in 

its answer to the counterclaim filed by the Liquor Control Board 

that it had a nontransferable, nonassignable license. In addition, 

the District Court adopted by reference to the Eagles Club's 

proposed findings of fact that the club held a nontransferable, 

nonassignable license. It is clear from the pleadings and the 

District Court's decision in the Elks case, that the Eagles Club 

had a nontransferable, nonassignable fraternal license and that the 

Eagles Club recognized this restriction. If the Eagles Club did 

not have a fraternal license, but rather had a general retail beer 

and liquor license which was transferable, it would not have been 

subject to the rule. Therefore, it would not have been necessary 

for the Eagles Club to enter the lawsuit as a plaintiff in 
intervention challenging the rule. Although the District Court 

declared the regulation unlawful and of no force and effect, its 

decision did not change the classification of licenses because 

classification of licenses was based upon statute and not upon the 

challenged regulation. All of the elements of collateral estoppel 

were met and summary judgment should have been affirmed by this 

Court. 

Appellant's claim is also barred by laches. This Court has 

defined laches as: 

[A] creature of equity and means negligence in the 

assertion of a right. It exists where there has been a 

delay of such a duration as to render enforcement of the 

asserted right inequitable. 

Castillo v. Franks (1984), 213 Mont. 232, 241, 690 P.2d 425, 429. 

The purpose of laches is to discourage stale claims. It 

allows the court to refuse to intervene in a case where the party 

asserting the claim has been negligent in prosecuting his rights. 

Laches is appropriate when a person is aware of his rights yet 

fails to act. Johnson v. Estate of Shelton (1988), 232 Mont. 85, 

90, 754 P.2d 828, 831. 

Finally, the statute was sufficiently vague to grant the DOR 

judicial deference in the interpretation and implementation of 

liquor licensing law. For these reasons, I would affirm the 

District Court's granting of summary judgment in favor of the DOR. 

/ 
December 3, 1991 

CERTIFICATE OF SERVICE 

I hereby certify that the following order was sent by United States mail, prepaid, to the following 

named: 

Chadwick H. Smith 

Smith Law Firm 

P.O. Box 604 

Helena, MT 59624 

R. Bruce McGinnis, Tax Counsel 

Dept. of Revenue, Office of Legal Affairs 

Mitchell Bldg. 

Helena, MT 59620 

ED SMITH 

CLERK OF THE SUPREME COURT 

STATE ORMONTANA 

BY: 

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