No. 86-189 

IN THE SUPRENE COURT OF THE STATE OF MONTANA 

1986 

MONTANA TAVERN ASSOCIATION, 

et al.. , 

Plaintiffs and Respondents, 

STATE OF MONTANA, acting by and 

through the DEPARTMENT OF REVENUE, 

Defendant and Appellant. 

APPEAL FROM: District Court of the Second Judicial District, 

In and for the County of Silver Row, 

The Honorable Mark P. SuJ-livan , Judge presiding. 

COVNSEL OF RECORD: 

For Appellant: 

Michael G. Garrity, Dept. of Revenue, Helena, Montana 

For Respondent: 

Philip W. Strope, Helena, Montana 

Fi Led : 

Submitted on Briefs: Sept. 4, 1986 

Decided.: December 11, 1986 

DEC 1: 1986 

Clerk 
Mr. Justice John C. Sheehy delivered. the Opinion of the 

Court. 

The Department of Revenue, State of Montana, appeals the 

judgment of the District Court, Second Judicial District, 

Silver Bow County, enjoining the Department from enforcing 

its administrative rules to the detriment of the plaintiffs. 

We affirm the District Court for the reasons set forth below. 

In 1984, this Court held electronic poker machines were 

illegal under the Montana Card Games Act. Gallatin County v. 

D & R Music & Vending (Mont. 1984), 676 P.2d 779, 41 St.Rep. 

224. The 49th Legislature of the State of Montana passed 

H.B. 236, Ch. 720, Laws of 1985 the following year. This 

law, known as the Video Draw Poker Machine Control Law of 

1985, §§ 23-5-601 through -615, MCA, legalized the operation 

of electronic video draw poker ma-chines in the State of 

Montana. The effective date of the law was July 1, 1985. 

Pursuant to its authority under § 23-5-605(2), MCA, the 

Department promulgated emergency administrative rules to 

become effective July 1, 1985. The Department certified the 

Notice of Adoption of Emergency Rules to the Secretary of 

State on June 17, 1985. The reason cited for adoption of the 

emergency rules was the insufficient time after the end of 

the 49th Legislative session in which to promulgate permanent 

rules. The Department further found that the lack of 

permanent rules between the effective date of the law and the 

adoption of permanent rules posed an imminent peril to public 

health, safety, and welfare, and also worked economic 

hardship on potential licensees and local governments. 

On June 27, 1985, plaintiffs Montana Tavern Association 

and tavern owners Pavlovich, Keith, and Bullock, filed a 
complaint seeking to enjoin the Department from enforcing 

certain of its emergency rules. Plaintiffs claimed the Video 

Draw Poker Machine Control Law authorized three categories of 

video draw poker machines: (1) all used video poker 

machines in operation before February 3, 1984; (2) new 

video poker machines meeting the description and 

specifications of 5 23-5-606, MCA; and (3) used video poker 

machines in operation before February 3, 1984 meeting all the 

specificat.ions of 5 23-5-606 except subsections (4) (j) , 

(4) (k) , and (4) (0) . Plaintiffs argued that the Department's 

emergency rules denied the owners of used video poker 

machines in category 1 the right to operate their machines. 

Plaintiffs claimed immediate and irreparable economic injury 

if they were not allowed to license their unmodified, used 

machines after July 1, 1985. 

In its answer to the complaint, the Department responded 

that 5 23-5-612 (2), MCA, required all used video poker 

machines to meet the requirements of 5 23-5-606 except 

subsections (4) (j) , (4) (k), and 14) (0) as a condition 

precedent to licensure. The Department also argued that its 

emergency administrative rules complied with the provisions 

of the statute. 

The same day the complaint was filed, the District Court 

granted a temporary restraining order against the Department, 

restraining it from enforcing those sections of the emergency 

rules which imposed the specifications of 5 23-5-606, MCA, 

upon used video poker machines. The restraining order was to 

be in effect until a hearing was set on the issuance of a 

preliminary injunction. 

A hearing on the preliminary injunction was held July 8, 

1985. The District Court found that the Video Draw Poker 
Machine Control Law was ambiguous, in that it could be 

construed to authorize three types of machines. The court 

also found that plaintiffs would be irreparably injured if 

they were not allowed to operate their unmodified, used 

machines, and that plaintiffs at that time were unable to buy 

the necessary modification kits. The court found the public 

health, welfare and safety would not be endangered by 

licensing these used machines, and granted plaintiffs' 

preliminary injunction. 

The Department petitioned this Court for a writ of 

supervisory control, which was denied October 31, 1985. The 

District Court extended the preliminary injunction from 

November 7, 1985 until a final hearing in December, 1985. On 

February 3, 1986, the District Court entered its final 

judgment enjoining the Department from enforcing the Video 

Draw Poker Machine Control Law and its administrative rules 

in such a way as to deny plaintiffs the right to keep 

licenses for, and to maintain and operate, used video poker 

machines which were owned and operated in Montana before 

February 3, 1984. 

The Department raises four issues on appeal: 

(1) Flhether the District Court properly issued the 

injuncticns requiring the Department to license unmodified, 

used video poker machines? 

(2) Whether the District Court erred in construing S 

23-5-612 (2), MCA? 

(3) Whether the District Court erred in admitting 

evidence on legislative intent? 

(4) Whether the District Court erred in ordering 

injunctive relief to persons who were not parties to the 

lawsuit? 
The plaintiffs respond that the issues raised by the 

Department are moot, since the relief prayed for by the 

Department (dissolution of the District Court's injunction? 

has been available to the Department since June 30, 1986, 

within the terms of the District Court's judgment.' We find 

that the issues are not moot. 

An issue is moot when, due to an event or passage of 

time, the issue has ceased to exist and no longer presents an 

actual controversy. State ex rel. Miller v. Murray (1979) , 

183 Mont. 499, 503, 600 P.2d 1174, 1176; Baker v. Bink (Mont. 

1986), 726 P.2d 822, 823, 43 St.Rep. 1801, 1803. In the 

instant case, the Department was forced to license a total of 

474 used video poker machines under the District Court's 

injunction. While most of the licenses for these used 

machines have expired, there are still 13 machines remaining 

whose licenses expire betvreen November 7, 1986 and January 

21, 1987. The District Court's judgment remains in effect as 

to these 13 machines until their present licenses expire. 

Thus an actual controversy exists as to the legitimacy of the 

licensure of these machines. 

The first issue raised by the Department concerns 

whether the District Court properly issued its injunction. 

1 The section of the judgment in question states: 

This order will terminate and have no force and effect 

after June 30, 1986, except for used video draw poker 

machines previously licensed by the Defendants for twelve 

(12) month periods. For these machines this order will 

terminate and have no force and effect after the expiration 

of the twelve (12) month license period, but not before. 

However, the Defendants will have the option of terminating 

such licenses on June 30, 1986, providing they allow 

licensees credit for the unexpired portion of their license 

period on said machine on any new license issued for the year 

commencing July 1, 1986. No used video draw poker machines 

will- he licensed for the first tjme nor relicensed for a 
Under S 27-19-103(4) and (6), MCA, an injunction cannot he 

granted either to prevent the execution of a public statute 

by officers of the law or to prevent the exercise of a public 

office in a lawful manner. The Department argues the 

District Court's injunctions prevent the Department, its 

Director, and employees from enforcing the Video Draw Poker 

Machine Control Law. We must turn to the terms of the 

District Court's injunctions to determine whether those terms 

are inconsistent with the Video Draw Poker Machine Control 

Law thereby preventing the Department's enforcement of it.. 

In reviewing the District Court's issuance of the 

injunctions, we will not interfere with the court's exercise 

of discretion unless there is a showing of manifest abuse of 

such discretion. Smith v. Ravall-i Co. Bd. of Health (Mont. 

1984), 679 P.2d 1249, 1251, 41 St.Rep. 716, 718; Erie v. 

State Highway Comm'n. (1969), 154 Mont. 150, 154, 461 P.2d 

207, 209. 

The District Court's first temporary restraining order 

set forth the license criteria to be used by the Department 

during the pendency of the order. The court ordered a.11 used 

video poker machines to meet the following basic requirements 

- in addition - to all other provisions of the Video Draw Poker 

Machine Control Law, and the emergency administrative rules 

not in conflict with the restraining order. The license 

criteria were: 

(a) Licensee must be a person who has been granted 

a license under section 16-4-401 (2), MCA, to sell 

alcoholic beverages for consumption on the premise 

[sic]. [See - § 23-5-611, MCA.] 

second period under the terms of this order after the date 

hereof, unless the used machine complies with the Defendants' 

administrative rules in effect upon application date. 
(b) The used machine must be a machine that was 

owned and operated in the state on or prior to 

February 3, 1984. County or city tax receipts, 

county or city license receipts, bills of sale, 

security documents for conditional sales 

agreements, or such other kinds of proof of 

ownership as the Department of Revenue may 

authorize will be sufficient to establish ownership 

or operation of a used machine on or before 

February 3, 1984. [First sentence corresponds to S 

23-5-602(4), MCA; proof of ownership was not 

described in the statutes or regulations--an 

applicant merely checked a box on the license 

application indicating ownership on or before 

February 3, 1984.1 

(c) The machine must have an expected payback 

value of one credit played to be at least 80% of 

the value of the credit. [See - S 23-5-607, MCA.1 

(d) Each used machine must have an electronic 

device that the department may use to verify the 

winning percentage. [See 23-5-607, MCA.] 

(e) The licensee must pay to the state of Montana 

the license fee of $1,500 and such other and 

additional charges as the city or county in his 

home district may require. [See S 23-5-612 (1) (b) , KCA. 1 

(f) Each licensee licensed under the authority of 

this temporary restraining order must make his 

machines available for inspection by the Department 

of Revenue at any reasonable time. [See S 

23-5-613, MCA.] 

It is well settled in Montana that the purpose of a 

temporary restraining order is to preserve the status quo 

until a hearing can be held to determine whether an 

injunction should be granted. Boyer v. ~aragacin (1978), 178 

Mont. 26, 32, 582 P.2d 1173, 1177. None of the criteria set 

forth by the District Court change or contravene the Video 

Draw Poker Machine Control Law. If licensees meet the above 

requirements plus the requirements of the statutes and the 

non-conflicting portions of the administrative regulations, 

the Department is required to issue the license. Licensure 

is mandatory, not permissive, under S 23-5-612(1) (a), MCA. 

Thus the District Court's temporary restraining order did not 
prevent the Department from executing its duties under the 

Video Draw Poker Machine Control Law. 

The District Court's preliminary injunction reiterated 

the above criteria and continued to enjoin the Department 

from denying licenses to owners of used video poker machines 

which met the criteria. For the reasons stated above, we 

again hold that the preliminary injunction did not prevent 

the Department from executing its duties under the Video Draw 

Poker Machine Control Law. 

The final judgment rendered February 3, 1986, enjoined 

the Department from enforcing the law in such a way as to 

deny plaintiffs the right to keep licenses which had been 

issued pursuant to the court's orders. The owners of these 

licenses were allowed to retain their licenses for a one year 

period from the date of licensure. The licenses could not be 

renewed, and new licenses for used video poker machines could 

not be issued for the first time under the terms of the 

court's order. Further, the court provided that its order 

would terminate after June 30, 1986. On that date, the 

Department was given the choice of terminating the licenses 

for the used machines and crediting those licensees for the 

unexpired portion of their licenses, or merely allowing the 

licenses to expire on their own. The Department has 

apparently chosen the second alternative--and the last of the 

licenses granted under the court's order will expire January 

21, 1987. 

We do not find any abuse of discretion in the District 

Court's final order. An injunction is an equitable remedy 

fashioned according to the circumstances of the case. 

Madison Fork Ranch \7. L & B Lodge Pole Timber Products (Mont. 

1980), 615 P.2d 900, 906, 37 Et..Rep. 1468, 1474; Brown v. 
Voss (Wash. 19861, 715 P.2d 514, 517. In this case, the 

Department adopted its emergency rules on June 27, to be 

effective July 1. The plaintiffs risked losing their used, 

unmodified machines on July 1 unless they could buy 

modification kits or new machines within three days. New 

kits were not available at that time. Their only remedy was 

to seek injunctive relief. Under these circumstances the 

District Court found that plaintiffs would suffer irreparable 

injury if they lost the use of the used, unmodified machines 

since the old machines would have to be abandoned or, 

alternatively, the owners would be forced to buy considerably 

more expensive new machines. The issuance of an injunction 

under these circumstances was not unreasonable. It was also 

proper for the court to structure the terms of the final 

order so as to protect the licensees and also limit the time 

for them to come into compliance with the new law. 

The seconc? issue concerns whether the District Court 

erred in construing 5 23-5-612(2), MCA.~ This subsection is 

a grandfather clause for used video poker machines, allowing 

their licensure until July 1, 1987. The Department argues 

the court either misconstrued the plain meaning of, or 

entirely disregarded, the provisions of 5 23-5-612(2). 

A general rule of statutory construction is that the 

intent of the legislature must first be determined from the 

2 5 23-5-612(2). A used video draw poker machine may 

be licensed under subsection (1) without meeting the 

requirements of 23-5-606 (4) (j), (4) (k), and (4) (0) if 

the applicant for licensure can establish to the 

satisfaction of the department that, on the date of 

application, he owns or possesses a machine which was 

owned or operated in the state prior to February 3, 

1984. A license issued under this subsection expires 1 

year from the date of issuance or on July 1, 1987, 
plain meaning of the words of the statute. Montana Ass'n. of 

Underwriters v. State, Dept. of Admin. (1977), 172 Mont. 211, 

215, 563 P.2d 577, 579. Where the statute is ambiguous, a 

court will show deference to the interpretations given the 

statute by the agency charged with its administration. State 

Dept. of Highways v. Midland Materials (Mont. 1983), 662 P.2d 

1322, 1325, 40 St.Rep. 666, 669. However, the agency ' s 

interpretation must be reasonable so as to avoid absurd 

results. - Id. Further, where the legislative intent appears 

contrary to the agency's interpretation, a court may overturn 

the interpretation as an abuse of discretion. City of 

Billings v. Billings Firefighters Local No. 521 (1982), 200 

Mont. 421, 431, 651 P.2d 627, 632. 

We find, as did the District Court, that $ 23-5-612(2) 

is susceptible to two meanings. "A used video draw poker 

machine may be licensed under subsection (1) without meeting 

the requirements of $ 23-5-606 (4) (j) , (4) (k) , and 

(4) (0) . . ." could mean either that all used machines may be 

licensed without meeting the requirements of (4) (j) , (4) (k) , 

and (4) (o), or that the used machines must meet all the 

requirements of S 23-5-606, MCA, except for (4) (j) , (4) (k) , 

and (4) (0). In light of this ambiguity, the court was 

required to look at the Department's interpretation of this 

subsection, and to uphold the interpretation if reasonable. 

The Department interpreted S 23-5-612(2), MCA, to mean 

that all used video poker machines must meet all 

administrative rule specifica.tions and the requirements of $ 

23-5-606, MCA, except 4 j , 4 k. , and (4) (0). Rule 111 

whichever occurs first. (Subsection (2) terminates July 

1, 198?--sec. 15, Ch. 720, L. 1985.) 
(4) (a), Emergency Rules, 12 M.A.R. 805 (6/27/85). The resu1.t 

of this interpretation would have been to force all owners of 

used machines not meeting the above specifications to abandon 

or modify their machines within three days, since the 

effective date of the emergency rules was three days after 

their adoption. Even assuming owners were to try to modify 

the used machines in that time period, modification kits were 

not available in the marketplace at that time at a reasonable 

cost. The District Court's rejection of the Department's 

interpretation of 5 23-5-612(2! was proper, where an 

affirmance of that interpretation would lead to absurd 

results. 

The Department also argues the court should not have 

admitted evidence of legislative intent, since the meaning of 

(S 23-5-612(2), MCA, is clear on its face. As we stated 

above, S 23-5-612(2) is susceptible to two meanings, and in 

light of this ambiguity, the court was entitled to delve into 

the legislative history of the subsection in order to 

determine legislative intent. The evidence, consisting of a 

typed statement signed by members of the 49th Legislative 

Assembly and the oral testimony of two state representatives, 

was properly admitted where legislative intent could not be 

determined from the words of the statute. A reviewing court 

is not required to rubber-stamp an administrative rule which 

is inconsistent with a statutory mandate or which frustrates 

legislative policy. Hi-Craft Clothing Co. v. N.L. R.B. (3rd 

Cir. 1981), 660 F.2d 910, 914. 

3 Testimony of a bar owner at the July 8, 1985 

hearing indicated that the only kit available within the 

next few weeks would cost $2,000, whereas in three or 

four months, the components could be purchased for $7'5. 
The final issue raised by the Department is that the 

District Court exceeded its personal jurisdiction by granting 

injunctive relief to persons other than those specifically 

named as plaintiffs in the complaint. The Department argues 

that under the provisions of 27-19-104, MCA, in an action 

for injunctive relief initiated by a public interest 

association, a complaint must set forth the names and 

addresses of the injured members of the association. The 

Department reads S 27-19-104, MCA, together with § 27-19-105, 

MCA, to mean that an injunction may only be binding upon 

parties whose names and addresses appear on the complaint. 

We find no merit in this argument. The plaintiff 

Montana Tavern Association alleged in paragraph I1 of its 

complaint that it was a voluntary trade association 

representing persons holding liquor licenses in the State of 

Montana. The Department admitted this allegation in its 

answer. The Department will not now be heard to challenge 

the adequacy of plaintiff Montana Tavern Association's 

capacity. Under Rule 9la), M.R.Civ.P., challenges to a 

party's authority to sue in a representative capacity must be 

done by specific negative averment, including such 

particulars as are peculiarly within the pleader's knowledge. 

The Department did not meet this requirement by admitting 

paragraph I1 of plaintiffs' complaint. 

In the interests of judicial economy, it was within the 

District Court's equitable jurisdiction to grant temporary 

injunctive relief to the plaintiffs and others similarly 

situated where there were common subject matter, facts and 

issues. The scope of the injunctions was narrow--the 

preliminary injunction applied only to those liquor license 

owners who had owned and operated video poker machines before 
February 3, 1984; the final order merely restrained the 

Department from revoking the licenses of those tavern owners. 

Additionally, the final order had a built-in termination 

clause which foreclosed the possibility of relicensing the 

unmodified machines. The District Court did not abuse its 

di-scretion in fashioning this equitable result. 

We affirm the order of the District Court and order the 

parties to bear their own costs. 

Justice 

We Concur: 

/-