No. 12294 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

STATE OF MONTANA, ex re1 ; CUARLES STEPHENS 

and NOLA M, STEPHENS, his wife; and FORREST 

G. HIGGINS and MILDRED L. FIGGINS, his wife, 

R-elators and Appellants, 

THE CITY OF HAMLT,TON , MONTANA, A Munic ipa 1 

Corporation, 

Respondent and Respondent. 

Appeal from: Distrj-ct Court of the Fourth Judicial District, 

Honorable Jack L. Green, Judge presiding. 

Counsel of Record: 

For Appellants : 

Boone, Karlberg and Haddon, Plissoula, IuIontana , 

Thomas H. Boone argued, Missoula, Montana. 

For Respondent : 

Taurence Petersen argued, Billings, Montana. 

Submitted: October 17, 1972 

Decided : DFf - J 1 ,972 

Filed: DF~ 1 972 
Hon. Peter G. Meloy, District Judge, sitting in place of Mr. 

Justice Frank I. Haswell, delivered the Opinion of the Court. 

This is an appeal from a judgment entered by the 

district court of Ravalli County. Involved is an ordinance 

of the City of Hamilton to extend its boundaries to include 

certain contiguous real property. The issue presented is 

whether or not the district court erred in concluding that 

the sellers and not the purchasers under contract for deed 

were "freeholders" and concluding that a majority of the freeholders failed to protest the annexation. 

Charles A. Stephens and Nola M. Stephens, his wife, 

and Forrest G. Higgins and Mildred L. Higgins, his wife, the 

appellants, brought an action seeking a writ of mandamus or 

other appropriate writ against the City of Hamilton, Montana, 

a municipal corporation, to set aside Ordinance No. 317 extending the boundaries of the City of Hamilton, Montana, to include 

the real property set forth in exhibit "A" to the petition for 

alternative writ of mandamus. The appellants, along with others 

who are owners of real property within the area sought to be 

annexed, protested the annexation by the City of Hamilton. 

The City of Hamilton is a city of the third class and 

is a municipal corporation organized and existing under the 

laws of the State of Montana. Proceeding under section 11-403(2) 

R.C.M. 1947, Hamilton city council passed Resolution No. 316 

which was a resolution of intention to extend the corporate 

boundaries and notice thereof was given. Protests were filed 

with the city clerk of Hamilton, Montana. 

On January 10, 1972, the Hamilton city council adopted 

Ordinance No. 317 extending the corporate boundaries to include 

the real property in question. This ordinance was to be effective 30 days after its passage. This action was commenced on 

February 9, 1972, at which time an alternatkwrit of mandamus 

was issued by the court. 

As of the final protest date, there were 670 individuals 

with recorded deeds of whom 315 registered their protests in 
writing with the clerk of the Hamilton city council. Of the 

670 there were 12 individual contract sellers (none protested) 

not owning other property in the area who were selling to individuals who have recorded notices of purchaser's interest with 

the Ravalli county clerk and recorder. Also of the 670 were 

40 individual contract sellers (none protested) not owning other 

real property in the area whose contracts were evidenced by a 

notation in the "in-care-of" files of the Ravalli county assessor. 

Not included in the 670 or in the protesters were 85 individuals 

(44 protested) who were contract purchasers of real property in 

the area, whose interest was evidenced by either recorded notices 

of purchaser's interest or in the "in-care-of" files of the 

Ravalli county assessor. The Hamilton city council determined 

that there were insufficient protests by freeholders within the 

area sought to be annexed, and passed the ordinance annexing the 

area. 

The City of Hamilton has agreed, if relevant, that the 

"in-care-of" file were contract purchasers of real property within the area. 

The parties in presentation of the issue to the district 

court stipulated the following conditional conclusions: 

"IT IS FURTHER AGREED that if the court 

determines: 

u(l.) That a freeholder is only the contract 

seller, then a majority of the freeholders 

failed to protest the annexation and the 

Relators' suit should be dismissed with 

prejudice. 

" (2.) That a freeholder is only the contract 

buyer, then a majority of the freeholders did 

protest the annexation and the City should 

revoke Ordinance No. 317. 

"(3.1 That a freeholder means both the contract 

seller and the contract buyer, then a majority 

of the freeholders failed to protest the 

annexation and the Relators' suit should be 

dismissed with prejudice. 
" (4.) That freeholder means contract sellers 

other than those selling to individuals who 

have filed or recorded Notices of Purchasers' 

Interest at the Ravalli County Clerk and 

Recorder's Office, and such individuals who have 

filed or recorded such notices, then a majority 

of the freeholders failed to protest the 

annexation, and the Relators' suit should be 

dismissed with prejudice." 

It is incumbent upon the Court to determine the intent 

of the legislature in the use of the language of section 11-403(2). 

In sub-section (1) the words used are "resident freeholders". In 

sub-section (2) the legislature curiously used the wordsl'property 

holders" when directing notice to be given but used the word 

"freeholders" as to those entitled to protest. 

The appellants contend that in a contract for deed 

situation it is only the purchaser who is the "freeholder". The 

respondent contends that the seller is the "freeholder". 

The case of First State Bank v. United States, 92 F.2d 

132, 134-135, (9th Cir. 1937), we think clearly states the legislative intent as to the character of a freeholder as follows: 

"Clearly, between these two parties, it is the 

vendee who is closest to the land; who is the more 

interested in its preservation; who is better able 

to take the safeguarding steps contemplated by 

the statute." 

This Court in Kunesh v. City of Gt. Falls, 132 Mont. 285, 

291, 317 P.2d 297, has reiterated the reason for the legislative 

intent in the approval of the following language: 

"' * * * the legislature intended those only 

should be permitted to act who had attained the 

status, standing, and dignity attributable to 

those who are owners of property of the stable 

character of real estate * * * It was evidently 

the purpose of the Legislature * * * to place 

the matter * * * primarily in the hands of those 

having their own homes and interests within the 

municipality or ward where the license was to be 

sought; hence the use of the words "resident 

freeholders" which must be construed to mean 

those living within the subdivision holding 

title to real estate.'" 

the situation contract for deed is the purchaser 

who usually may be characterized as the party with the real 

interest of owning and residing permanently upon the premises. 

The purchasers would be the ones who would have, as was said 
in Kunesh, the ones "having their own homes and interests within 

the municipality" and thus have the interest in subjecting the 

property to the regulatory authority. 

In Kunesh, at p. 290, this Court reiterated the statutory 

definition (section 67-506, R.C.M. 1947) of freeholder as "'one 

who holds an estate in real property, either of inheritance or 

for life.'" 

We are here concerned with the situation of a so-called 

"contract for deed". This Court in Kern v. Robertson, 92 Mont. 

concerned itself with the status of the vendor 

and the vendee in the instance of a contract for deed. This 

Court characterized the vendee to be the "real" or "beneficial" 

owner. There the Court said: 

"The authorities are in accord that an enforceable contract for the purchase and sale of real 

property passes to the purchaser the equitable 

and beneficial ownership thereof, leaving only 

the naked legal title in the seller, as trustee 

for the purchaser, and as security for the unpaid purchase price. If the purchaser dies 

while the contract is in force and effect, 

his interest passes to his heirs as real property. If the seller dies while the contract 

is in force and effect, his interest passes to 

his personal representative as personal property, 

and not to his heirs." 

The Court then quoted from 1 Pomeroyls Equity Jurisprudence, 

4th Ed. B 105, pp. 117, 118, as follows: 

"In short, equity regards the two contracting 

parties as having changed positions, and the 

original estate of each as having been lconverted', 

that of the vendee from personal into real property, and that of the vendor from real into 

personal property." 

The case of State v. Kistner, 132 Mont. 437, 318 P.2d 

223, follows the same equitable conversion principle as applied 

to inheritance tax. 

The above cases are cited by the respondent to support 

the contention that section 11-403(2), the annexation statute 

here involved, when it refers to "freeholders" means "legal 

title holders". 
This position presents an anomalous situation when reference is made to the position taken by this Court in Kunesh 

describing the legislative intent in enacting section 11-403(2). 

It would appear that the language used in Kunesh as to 

legislative intent would be consistent with the approved equitable conversion doctrine, i.e. the purchaser in effect being 

the "real" owner and having the statutorily defined inheritable 

interest. 

In Kunesh this Court was concerned only with the word 

"resident" in the term "resident freeholders". Likewise in the 

case of Brodie v. City of Missoula, 155 Mont. 185, 468 P.2d 

778, this Court was concerned only with residence. 

It will be noted that this Court, in Kunesh, at p. 292, 

stated as follows: 

"It would appear then that a resident freeholder 

qualified to protest annexation may be defined 

as one who is a resident within the area to be 

annexed, holding a present legal title to a freehold estate in real property * * *." 

The respondent relies on the Kunesh and Brodie cases. 

The respondent contends that since this Court used the words 

"present legal title to a freehold" that this Court meant 

"naked legal title" as occurs in a contract for deed situation. 

This Court was not there concerned with nor did it hear arguments 

upon a case involving a contract for deed. The intendment of 

the words in those cases is to the effect that there must be 

"title" to a freeho&d and it must be lawful. Had this Court 

have held as the respondent contends the result would have been 

obiter dictum. 

The respondent further states that examination of the 

records of the county, in order to determine the freeholders, 

extends only to recorded deeds. This, respondent states, leads 
to the conclusion " * * * that to be a freeholder, one must 

possess a recorded deed". Such is not the law under the Montana 

decisions in Swaim v. Redeen, 101 Mont. 521, 55 P.2d 1 and 

State ex rel. Wilson v. Musburger, 114 Mont. 175, 178-179, 133 

P.2d 586. These cases indicate that the obligation of examination of the county records extends to all of the records in 

the county including the clerk of the district court's records, 

the records of the clerk and recorder and the records of the 

county assessor's office. 

We therefore hold that the term "freeholder" as used 

in section 11-403(2), R.C.M. 1947, means the purchaser and not 

the seller under a contract for deed. To hold otherwise would 

contradict our prior interpretations of both the legisdative 

intent of this section and the statutory definition of "freeholder". It would also unjustly and unreasonably deprive the 

right of protest from those with substantial present and future 

interests in real property in favor of those retaining bare 

legal title. 

The district court erred in finding that a majority of 

freeholders failed to protest the annexation. 

The judgment is reversed and the cause is remanded with 

directions for further proceed sistent with this 

opinion. 

--------- 

strict 

Judge, sittingw$lace of Mr. 

Justice Frank I. Haswell. 

Associate ~u@es 

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