No. 94-456

IN THE SUPREME COURT OF THE STATE OF MONTANA

1995

GARY R. GROSHELLE,

Plaintiff and Respondent,

APPEAL FROM: District Court of the Thirteenth Judicial District,

In and for the County of Yellowstone,

The Honorable Maurice R. Colberg, Judge presiding.

COUNSEL OF RECORD:

For Appellants:

James P. Heal-w, Sweeney & Healow,

Billings, Montana

For Respondents:

Larry D. Herman, Herman Law Office,

Laurel, Montana

Filed:

Submitted on Briefs: February 23, 1995

Decided: April 4, 1995
Justice William E. Hunt, Sr., delivered the opinion of the Court.

Appellants Melvin E. and Sheila Reid appeal from an order of

the Thirteenth Judicial District Court, Yellowstone County,

granting partial summary judgment in favor of respondent Gary R.

Groshelle, declaring that the provisions of a lease requiring the

transfer of a Montana Beer and Wine License from appellants to

respondent at the termination of the lease is valid and

enforceable, subject to approval by the Montana Department of

Revenue.

We affirm.

The issue on appeal is:

Did the District Court err in granting partial summary

judgment in favor of respondent?

On May 27, 1988, respondent filed an application with the

Montana Department of Revenue for the issuance of a Montana Retail

On-Premises Consumption Beer/Wine License for use at 105 East Main,

Laurel, Montana. On September 22, 1988, the Montana Department of

Revenue issued its order approving respondent's application for

Beer/Wine License No. 03-044-9153-301.

On May 15, 1989, respondent leased the bar and tavern space at

105 East Main to Clayton and Isabel Bertsch for two years, with an

option to renew. The Bertschs agreed to rent the premises for $400

a month, to be increased to $500 a month in the seventh month of

the lease. The lease provided that respondent would assign the

beer and wine license to the Bertschs, and that he would retain a

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security interest in the license. The Bertschs agreed to reassign

the license to respondent on the termination of the lease. On

July 20, 1989, the Montana Department of Revenue issued its order

approvrng the transfer of the license to the Bertschs, subject to

respondent's security interest.

After deciding to sell the business, the Bertschs filed an

application with the Montana Department of Revenue for transfer of

the license to appellants, subject to respondent's security

interest. On June 27, 1990, the Bertschs filed a continuation

statement signed by respondent and appellants with the Montana

Department of Revenue showing the continuation of respondent's

security interest in the license.

On August 22, 1990, a lease was executed naming respondent as

landlord and appellants as tenants of the bar and tavern space at

105 East Main, along with furniture and fixtures. The lease was

executed for a term of one year at $500 a month, with an option to

renew. On termination of the lease, the license would be

reassigned to respondent. On August 29, 1990, the Montana

Department of Revenue issued its order approving the transfer of

the license to appellants, subject to respondent's security

interest.

On December 27, 1991, respondent and appellants executed

another one-year lease for the premises, fixtures, and furniture.

The rent was increased to $525 a month. The new lease had similar

provisions as to the license. Appellants executed an assignment of

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the license to respondent as security to be used upon termination

of the lease.

On December 22, 1992, respondent and appellants executed

another one-year lease with terms similar to the previous lease

between the parties as to rent and the license.

On October 11, 1993, respondent notified appellants that he

would agree to another one-year lease, subject to a $50 a month

increase in rent. No agreement was reached between the parties.

On December 22, 1993, the one-year lease expired, and appellants

continued as hold-over tenants. On January 11, 1994, appellants

acknowledged that the lease had expired and demanded that

respondent release his security interest in the license. O n

January 19, 1994, respondent informed appellants that if a new

lease was not negotiated, the month-to-month lease would be

terminated. On February 7, 1994, respondent notified appellants

that the month-to-month lease would terminate on March 11, 1994,

and that respondent would apply to the Montana Department of

Revenue to transfer the beer and wine license to respondent. On

March 4, 1994, the Montana Department of Revenue denied

respondent's application and refused to transfer the license to

respondent pending a judicial determination.

On March 30, 1994, respondent filed a complaint seeking a

judgment declaring the reassignment provisions of the lease valid

and enforceable. Appellants counterclaimed, seeking a judgment

declaring the reassignment portion of the expired lease unlawful,

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void, and unenforceable, and discharging respondent's security

interest in the beer and wine license.

On August 11, 1994, the District Court entered final judgment

declaring that the provision of the lease requiring transfer of the

beer and wine license to respondent to be valid and enforceable as

between the parties, subject to the approval of the Montana

Department of Revenue. It is from the District Court's final

judgment that appellants appeal.

Did the District Court err in granting partial summary

judgment in favor of respondent?

Because factual matters outside of the pleading were relied

upon by the parties, the District Court treated the cross-motions

for judgment on the pleading as motions for summary judgment under

Rule 56, M.R.Civ.P. See Rule 12(c), M.R.Civ.P.

Our standard of review on a grant of summary judgment is

identical to that of the district court. Cooper v. Sisters of

Charity (19941, 265 Mont. 205, 207, 875 P.2d 352, 353. Summary

judgment is only proper when there is no genuine issue of material

fact, and the moving party is entitled to judgment as a matter of

law. Rule 56(c), M.R.Civ.P.; Spain-Morrow Ranch, Inc. v. West

(1994) I 264 Mont. 441, 442, 872 P.2d 330, 332. The burden of proof

rests with the party seeking summary judgment to provide the court

with evidence which excludes any real doubt as to the existence of

a genuine issue of material fact. Berens v. Wilson (1990), 246

Mont. 269, 271, 806 P.2d 14, 16. Only after the moving party has

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met this burden of proof does the burden shift to the nonmoving

party to show that a genuine issue of material fact exists. Morton

v. N.W.M., Inc. (1994), 263 Mont. 245, 249, 868 P.2d 576, 579.

"When raising the allegations that disputed issues of fact exist,

the nonmoving party has an affirmative duty to respond by

affidavits or other sworn testimony containing material facts that

raise genuine issues; conclusory or speculative statements will not

suffice." Koepplin v. Zortman Mining (Mont. 1994), 881 P.Zd 1306,

1309, 51 St. Rep. 881, 882.

Appellants argue that the District Court erred by declaring

that the provision of the expired lease between the parties which

reassigned the beer and wine license to respondent was enforceable,

subject to the approval of the Montana Department of Revenue.

Appellants contend that respondent is not entitled to enforce the

reassignment provision of lease because his name did not appear on

the license as the owner of the license throughout the time he

claimed his security interest. Appellants argue that Feurherm &

Neiss v. Schmaing (1979), 181 Mont. 136, 592 P.2d 924, is

controlling. The issue in Feurherm is whether a person who claims

equitable ownership of a beer license and wishes to have that

license revert to him at the expiration of a lease may enforce his

claim when he has never been the record owner of the license, his

name has never been endorsed on the license in any other capacity,

and as a result, he has never been subjected to the scrutiny of the

Department of Revenue throughout the time he claimed his equitable

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interest. We reversed the district court's holding that Neiss was

the owner of the license and that reversion was proper. We

reasoned that Neiss's claimed interest was never made known to the

Department of Revenue, and therefore, his qualifications to own a

beer license had never been scrutinized by the Department of

Revenue.

We agree with the District Court's conclusion that Feurherm is

distinguishable. In Feurherm, we sought to prevent an undisclosed

license owner from avoiding the Department of Revenue's power to

revoke a license by revealing at the last minute that he or she,

rather than the named licensee, is the true owner. We reasoned

that in order for the Department of Revenue to have complete and

effective control over the sale of intoxicating beverages, it must

be notified of the nature and interest of each person who claims

some interest in the license. That was not the case in Feurherm.

However, as the original owner of the license, respondent in

the present case was subjected to Department of Revenue scrutiny

pending approval of his application. His security interest in the

license was filed with the Department of Revenue. His name

appeared on the license in his capacity as a secured party.

Respondent's first assignment of the license to the Bertschs was

approved by the Department of Revenue in 1989. In 1990, the

Department of Revenue approved the transfer of the license to

appellants, subject to respondent's security interest. In

connection with this transfer, a continuation statement was signed

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by respondent and appellants and filed with the Department of

Revenue. All subsequent transfers of the license from respondent

to appellants were approved by the Department of Revenue. It is

clear that the harm we sought to prevent in Feurherm does not exist

in the present case.

A beer and wine license is a privilege personal to the

licensee, and in no case shall the licensee lease the license to

another party. Section 42.12.206(l), ARM. However, the owner of

a beer and wine license may transfer the license, subject to

approval of the Department of Revenue. See Gartner v. Martin

(1977) I 173 Mont. 50, 566 P.Zd 66; Beard v. McCormick (1966), 147

Mont. 361, 411 P.2d 964. In order to secure the transferor's

interest, an alcohol beverage license may be subject to a mortgage,

security interest, and other valid liens. Section 42.12.205(l)

and (4), ARM. Nothing in the language of the various leases

respondent entered into subsequent to receiving the initial

Department of Revenue approval in 1989 creates a lease in the

license. Respondent received no fair market value compensation for

the license he transferred to appellants. Respondent leased the

premises, furniture, and fixtures to appellants, and in addition,

transferred the license to appellants, subject to his security

interest and the reassignment provision of the lease in order to

give value to the lease. There is nothing in the record to suggest

that respondent intended to relinquish his beer and wine license

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for the amount of rent collected from appellants over the course of

four years.

We agree with the District Court's conclusion that the lease

provision relating to reassignment of the beer and wine license is

lawful and enforceable, subject to approval of the Department of

Revenue. We hold that the District Court did not err in granting

partial summary judgment in favor of respondent.

We affirm.

Justic'e

We concur:
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