No. 14522 

IN THE SUPREMF, COURT OF THE STATE OF MXTANA 

1979 

DAYID NORMAN, 

Plaintiff and Respondent, 

THE STATE OF MXTANA; THE STATE 

HIGHbmY ~SSION OF THE STATE 

OF MXTANA; et dl., 

Defendant and Appellant, 

and 

Defendant and Respondent. 

Appeal from: District Court of the Second Judicial District, 

Honorable James D. Freebourn, Judge presiding. 

Counsel of Wrd: 

For Appellants : 

N. A. Mtering, James R. Beck and Donald A. Douglas, Helena, 

Mntana 

Donald A. Douglas argued, Helena, mntana 

For Respondents: 

Corette, 9nith, Dean, Pohlman and Allen, Butte, Mntana 

Kendrick Smith argued, Butte, Mntana 

MTaffery and Peterson, Butte, Mntana 

William D. Murray, Jr., argued, Butte, Mntana 

Submitted: Wch 20, 1979 

Decided : JUN 13 1979 

-pr; 7 c &<.-7Q 

Filed : '- 
Mr. Justice John C. Sheehy delivered the Opinion of the 

Court. 

The State of Montana appeals from a judgment and order 

dated June 8, 1978, of the District Court, Second Judicial 

District, Silver Bow County sitting without a jury. The 

judgment and order quieted title to a certain parcel of land 

in David Norman and awarded damages against the State to 

William Gozden. 

On September 18, 1946, the State of Montana purchased a 

certain parcel of land in Butte, Montana, from William and 

Paul Gozden. The State Highway Department in 1974 decided 

to sell this parcel containing 5.3 acres as excess highway 

lands and published a notice to that effect asking for bids. 

Envelopes presumably containing bids were received by the 

Department including one from respondent Gozden, but the 

Department decided to withdraw the parcel of land from sale 

and returned the "bids" unopened. 

In February 1975, the State, acting through the Department 

of Highways, again sought to dispose of this same excess 

land and prepared an advertising copy for publication in the 

Montana Standard, Silver Bow County, Montana, and a letter 

of instruction for such publication dated February 6, 1975. 

This copy and letter were placed in the regular Department 

of Highways' office channels for mailing to the Montana 

Standard in the regular course of the Department's business. 

This copy, however, was never published by the newspaper. 

No bids were received by the Department of Highways by the 

time specified in the notice and the official in charge of 

excess lands, unaware no publication was made, assumed 
the lack of bids was due to a doubling of appraised value 

from 1974 to 1975. Subsequently, in the summer of 1975, 

respondent Norman was advised by another party that the land 

was available for sale. Norman visited the local office of 

the Department of Highways for information. 

As a result of his inquiries Norman wrote a letter to 

the official responsible for the sale of excess lands offering 

to purchase the parcel in question for $5,962.50 which was 

90% of the 1975 appraised value of $6,625.00. Norman was 

advised his offer would be considered. Thereafter, in 

September 1975, the offer was accepted and Norman secured a 

quit claim deed to the property from the State, paid the 

$5,962.50 and recorded the deed. He also erected a fence 

around the property. At no time prior to the sale did the 

officials involved ascertain whether in fact publication had 

been made as required by statute before a private sale may 

be consummated. Testimony at trial indicated the officials 

responsible for sale of excess lands customarily did not 

wait for proof of publication before sale of lands. 

In September 1976, the Department of Highways received 

a letter from an individual questioning the validity of the 

sale. The Department then inquired of the Montana Standard 

whether publication had been made. Receiving no answer, the 

Department searched the back issues of the newspaper and 

determined no publication had been made. Thereupon, in 

February 1977, the Department tendered to Norman the purchase 

price previously received and offered to pay him the cost of 

the fence that had been erected. Norman refused the offer 

and instituted this quiet title action. 

Norman named as defendants the State of Montana and 

William Gozden, original owner of the property. Norman claimed 

in the alternative, to quiet title to the property in question 
in himself, to estop the State of Montana from denying 

the validity of the sale, or to require the State to pay 

damages of $26,600 to Norman for its failure to convey the 

property to him. Defendant Gozden answered and crossclaimed 

against the State for $30,000 damages alleged to have arisen 

from the State's negligence. Gozden claimed the State's 

negligence in not ascertaining whether publication had been 

made, prevented him from exercising his right pursuant to 

statute as original owner to reacquire the property. 

At the trial before the Hon. James Freebourn, sitting without 

a jury, the testimony elicited the facts set forth above. 

In addition, Norman testified he had been offered $26,600 

for the land approximately three weeks after notification 

by the State that the sale was invalid. Gozden also testified, 

based upon his experience in land sales in the area, the 

property was worth $6,000 per acre in 1978. 

The court entered its findings, conclusions, judgment, 

and order on June 8, 1978. The court concluded the State was 

estopped from questioning the title of Norman and quieted 

that title in Norman. The court further concluded the State 

was negligent in not following the procedures for sale as 

outlined by statute. The court concluded with respect to 

Gozden that the State's negligence had precluded him from 

exercising his statutory rights to reacquire the property and 

awarded damages in the amount of $25,837.50. (The court arrived 

at this figure by deducting from the total price of 5.3 acres 

at $6,000 per acre, $31,800, the amount Gozden would have had 

to pay to reacquire the property, $5,962.50.) 

The issues raised by this appeal may be framed as follows. 

1. Was the District Court correct as a matter of law in 

concluding appellant State of Montana was estopped from 
denying the validity of its deed to respondent Norman? 

2. Are the findings and conclusions of the District 

Court supported by substantial, credible evidence? 

3. If the deed is held valid as to these parties, is 

respondent Gozden prevented by the prohibition against retroactivity from asserting his right as a prior owner to reacquire 

the property? 

With respect to the first issue, the State contends the 

constitutional and statutory framework for the sale of excess 

lands established publication of notice of an intended sale, a 

condition precedent to the grant of power to sell. Without 

such publication, appellant argues there was no authority to 

sell and the "sale" was therefore void. The State then asserts 

it cannot be estopped to deny the deed because its agents had 

no authority to make the "sale". In response, Norman asserts 

the State in disposing of excess lands was acting in a 

proprietary capacity and is therefore subject to estoppel 

both by deed and on equitable grounds. Therefore, Norman 

argues, the State is precluded from denying the validity of 

its deed to him and from asserting any right or title in 

derogation of the deed. 

The question presented to this Court by the first issue 

is whether the State may be estopped, either by deed or equitably 

from denying the validity of its deed to respondent Norman. 

If this Court decides the State may not be estopped then we 

need not consider the other issues raised. 

Estoppel by deed precludes one party to a deed from 

asserting as against the other party any right or title in 

derogation of the deed, or from denying the truth of any material 

facts asserted in it. 28 Am.Jur.2d Estoppel - and Waiver 84, 

p. 602. Equitable estoppel is a term applied to a situation 

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where, because of something which he has done or omitted to 

do, a party is denied the right to plead or prove an otherwise 

important fact. 28 Arn.Jur.2d Estoppel - and Waiver S27, p. 

627. Generally, the State, when acting in a proprietary 

capacity as it was here, is subject to either doctrine. 

Strand v. State (1943), 16 Wash. 2d 107, 132 P.2d 1011, 

1016; People v. Gustafson (1942), 53 Cal. App. 2d 230, 127 

P.2d 627, 634; 31 C.J.S. Estoppel SS49, 140, pp. 354, 695. 

However, it is widely recognized that regardless whether 

acting in a governmental or proprietary capacity, a state 

cannot be estopped by the unauthorized acts of its officers 

or agents. Murphy v. State (1947), 65 Ariz. 338, 181 P.2d 

336, 355; Strand v. State, 132 P.2d at 1017. See, Utah 

Power & Light Co. v. United States (1916), 243 U.S. 389, 37 

S.Ct. 387, 61 L.Ed. 791. Thus, this Court must decide whether 

the actions of the State in this cause were unauthorized or 

merely improper. 

The 1972 Montana Constitution provides in Article XI 

S11, that all lands of the State acquired by grant shall be 

public lands held in trust for the people. The section 

further provides that no such land shall be disposed of 

except pursuant to the statutes providing for such disposition 

The section also indicates "full market value" should be 

received for the property; this Court has indicated "full 

market value" as used in this provision means actual value. 

Rider v. Cooney (1933), 94 Mont. 295, 23 P.2d 261. The 

lands in question here were acquired by the State in 1946 by 

purchase from William and Paul Gozden and therefore fall 

within the ambit of the above constitutional provision. See 

section 70-1-507 MCA (formerly section 67-1508, R.C.M. 

1947. ) 

To effectuate the policy respecting lands held in trust 

for the people announced by Article XI S11, the legislature 

enacted, with respect to State lands designated as excess 

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highway lands, sections 60-4-202, -203, -204, -205 MCA 

(formerly sections 32-3910, -3911, -3912, -3913, R.C.M. 

1947). 

These sections provide for first a public sale and 

then, if necessary, a private sale. The Department of 

Highways must publish notice of the intended sale stating a 

value of the property based upon an appraisal made within 

three months of the date of sale. Section 60-4-203 MCA. 

The original owner or his successor in interest is given the 

opportunity to meet the highest bid received pursuant to the 

published notice. Section 60-4-204 MCA. If "after proper 

notice is published" no bid is received nor an offer by the 

original owner is made, the Department may sell the property 

at a private sale. Section 60-4-205 MCA. 

No Montana cases directly address the question presented, 

namely, whether the State's action here was unauthorized or 

merely improper; however, in Franzke v. Fergus County (1926), 

76 Mont. 150, 245 P. 962, an analogous situation was at issue. 

There the county commissioners attempted to sell county property 

via an executory contract. Although authorized by statute to 

sell county lands, the mode the commissioners chose did not 

conform exactly to the procedure provided by the statute. 

This Court held the county was without authority to sell the 

land in such a manner and the contract would therefore be void, 

stating, "since the Legislature has seen fit to indicate with 

particularity the essential steps necessary to be taken, and 

has prescribed the precise mode of procedure, the statute must 

be held to exclude any other." 245 P. at 964. 

In Murphy v. State (1947), 65 Ariz. 338, 181 P.2d 336, 

the Arizona Court was faced with a problem similar to 

the one presented by this appeal. In 1940, the State exchanged 

lands with Murphy without regard to provisions of ~rizona's 
Enabling Act, constitution and statutes requiring notice, 

bidding and amount of land that may be conveyed to an 

individual. When the State later sued to cancel the deeds, 

one of the arguments opposing its suit was that the doctrine 

of estoppel prevented the State from denying the validity of 

the transaction and resulting deeds. The Arizona Supreme 

Court disagreed, stating: 

"The state is not estopped to deny its deed 

against a bona fide mortgagee of its grantee 

where its officers were -- not authorized by 

law in the first to deed away its land and, 

as in this case, were positively prohibited 

from doing so without complying with -- the 

provisions of -- the [Enabling Act] --- and the 

Constitution." 181 P.2d at 355-356. (Emphasis 

added. ) 

See, Penner v. State (Okla. 1955), 302 P.2d 144, 150. 

The Montana Constitution unequivocally states that no 

lands shall be disposed of without complying with the 

appropriate statutory provisions. Those provisions require 

publication of notice before any sale is consummated. We 

conclude therefore that not having complied with the statute, 

the State through its Department of Highways, was without 

authority to make the sale and cannot be estopped from 

denying the validity of the deed. Franzke, supra; Murphy, 

supra; Strand v. State, 132 P.2d at 1017. See also, Utah 

Power & Light Co. v. United States, 243 U.S. at 409; Walsonavich 

v. United States (3rd Cir. 1964), 335 F.2d 96, 101; Stone v. 

United States (8th Cir. 1961), 286 F.2d 56, 59; Weatherly v. 

Jackson (1934), 123 Tex. 213, 71 S.W.2d 259, 266. Because 

there was no authority to make the sale, the resulting deed 

was void. Franzke, 245 P. at 965. 

We recognize it was the negligence of the State's agents 

that caused the situation which gave rise to this appeal. 

However, the interest we seek to protect is that of the citizens 

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of this State to receive the highest value from the sale of 

the lands their State government holds in trust for them. 

Strict compliance with the constitutional and statutory 

provisions relating to those lands is the best mode to 

insure that protection. It is generally conceded that while 

estoppel may be effected against State government, it may 

not be asserted where it would interfere with the protection 

of the public's interest in lands. People v. Bradford 

(1939), 372 Ill. 63, 22 N.E.2d 691; 28 Am.Jur.2d Estoppel 

and Waiver S122, p. 782. The United States Supreme Court 

has indicated that the government's efforts to enforce and 

maintain a policy respecting lands held in trust for the 

people stand on a different plane from an ordinary suit to 

regain title or remove a cloud upon it. --- Utah Power and 

Light Co., 243 U.S. at 409. 

Because we conclude the State was without authority to 

issue this deed and thus it is void, we need not consider the 

remaining issues of this appeal. The judgment of the District 

Court quieting title to this land in David Norman is reversed 

as is the injunction against the State and William Gozden 

enjoining them from asserting any claim or interest in this 

real property. The award of damages to William Gozden is 

also reversed. Because the sale and deed were void, Gozden 

has suffered no actual damage and can now assert his interest 

under the statute as a prior owner should the land be again 

put up for sale. The State of Montana is directed to tender 

again the purchase price of the property paid by Norman plus 

the cost of any improvements upon the land to the date of this 

opinion to David Norman. In addition, because its negligence 

has caused Norman to be without the use of the amount of his 

purchase price for almost five years, and because it is regaining 

property currently worth over $31,000, the State is directed to 
pay, pursuant to our authority as stated in section 3-2- 

204 MCA (formerly section 93-216, R.C.M. 1947), interest upon 

the sum of $5,962.50 at 6% per annum from September 16, 1975 

until the date of this opinion. 

Judgment reversed and remanded to the District Court with 

instructions to enter judgment according to this opinion. 

Because of the circumstances under which this case arose, we 

award costs on appeal to respondents Norman and Gozden against 

the State. 

Justice u 

We Concur: 

pie£ Justice