No. 85-88 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1985 

THE DEPARTMENT OF REVENUE OF THE 

STATE OF MONTANA, 

Petitioner and Respondent, 

NEW LIFE FELLOWSHIP OF MONTANA, 

INC. , 

Respondent and Appellant. 

APPEAL FROM: District Court of the Sixteenth Judicial District, 

In and for the County of Carter, 

The Honorable R. C. McDonough, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Richard 0. Harkins, Ekalaka, Montana 

For Respondent : 

Larry G. Schuster, Dept. of Revenue, Ilelena, Montana 

Submitted on Briefs: July 11, 1985 

Decided: August 1, 1985 

Filed: ; \985 

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Clerk 
Mr. Justice Frank B. Morrison, Jr., delivered the Opinion of 

the Court. 

New Life Fellowship of Montana, Inc. (New Life) appeals 

the December 21, 1984, order of the Sixteenth Judicial District Court denying its motion to assess attorney's fees and 

costs against the Department of Revenue and awarding actual 

costs in the amount of $28.00 to New Life. We affirm. 

New Life is a non-profit Montana organization. It 

operates a religious and educational facility near Ekalaka , 

Montana, called Trails End Ranch. The Ranch consists of 

approximately 80 acres, plus improvements. It is used as a 

camp for groups of all ages. 

On July 24, 1981, New Life applied to the Department of 

Revenue for a property tax exemption for Trails End Ranch as 

a religious organization. The application was denied. 

Application for exemption as an educational institution was 

also made and denied. 

New Life appealed the denial of its exemption request to 

the State Tax Appeal Board (Board). The Board found on 

September 22, 1.983, that the "clear purpose of the camp is 

spiritual, moral and ethical training." Board's finding of 

fact VIII. The Board then concluded that pursuant to 

Flathead Lake Methodist Camp v. Webb (l.965), 144 Mont. 565, 

399 P.2d 90, New Life is an educational institution as "its 

clear purpose is education in nature." Board's conclusion of 

law #1. Since S 15-6-201(c), MCA, exempts from taxation all 

property used exclusively for educational purposes, the Board 

reversed the Department's denial of New Life's request for an 

exemption. 

The Department of Revenue thereafter appealed the 

Board's decision to the District Court, pursuant to 

S 2-4-702(1) (a), MCA. The District Court, after considering 
the six issues raised, dismissed the Department's appeal in 

an order dated July 2, 1984. That order reserved until a 

future time consideration of New Life's motion for attorney's 

fees and costs. That motion bras heard on December 4, 1984, 

following which the District Court judge issued an order 

denying New Life's motion. 

On appeal, New Life raises the following issue: 

Whether or not the Department of Revenue's appeal of the 

Board's decision to District Court constituted a frivolous 

appeal made in bad faith, thus entitling New Life to costs 

and attorney's fees under 5 25-10-711, MCA? 

Section 25-10-711, MCA, states: 

"25-10-711. Award of costs against governmental 

entity when suit or defense is frivolous or pursued 

in bad faith. (1) In any civil action brought by 

or against the state, a political subdivision, or 

an agency of the state or a political subdivision, 

the opposing party, whether plaintiff or defendant, 

is entitled to the costs enumerated in 25-10-201 

and reasonable attorney's fees as determined by the 

court if: 

"(a) he prevails against the state, political 

subdivision, or agency; and 

" (b) the court finds that the claim or defense of 

the state, political subdivision, or agency that 

brought or defended the action was frivolous or 

pursued in bad faith. 

"(2) Costs may be granted pursuant to subsection 1 

notwithstanding any other provision of the law to 

the contrary.'' 

Section 25-10-711(1) (b), MCA, requires that the District 

Court find bad faith or a frivolous action by the State 

before awarding attorney's fees to the opposing party. The 

District Court found that this appeal was neither frivolous 

nor made in bad faith. We refuse to substitute our judgment 

for that of the District Court where the District Court is 

acting as the trier of fact and there is substantial evidence 

to support the decision of the District Court. Robinson v. 

Schrade (Mont. 1985), 697 P.2d 923, 42 St.Rep. 401. 
New Life's allegations in its reply brief regarding the 

Department's selective reliance on this scope of review 

applies equally to New Life, which is appealing a decision of 

a District Court judge despite the fact that there is substantial evidence to support that decision. 

The sixth issue raised to the trial court by the Department questions the Board's retroactive application of New 

Life's exemption status. The trial court held the retroactive application to be erroneous, stating that only the 

respondent, and not the previous landowner, is entitled to a 

refund of taxes paid. Where a position on appeal "is well 

within the bounds of legitimate argument on a substantial 

issue on which there is a bona fide difference of opinion", 

an appeal is not frivolous. Albertson's Inc. v. Department 

of Business Regulation (1979), 184 Mont. 12, 18, 601 P.2d 43, 

46. Obviously, the Department's position on issue number six 

is "well within the bounds of legitimate argument." 

New Life's contention that the appeal was in bad faith 

because the Department challenged the existing law found in 

Flathead Lake Methodist Camp, supra, is also unfounded. An 

appeal of a decision based on a twenty-year-old case is not 

an appeal made in bad faith. The law is not static. It 

changes to meet the demands of a changing society. Furthermore, we agree with the District Court's finding that issue 

one, regarding whether New Life's property is used exclusively for educational purposes within the context of the 

law, was not resolved by Flathead Lake Methodist Camp, supra. 

The facts show Trails End Ranch is not a camp identical to 

the Methodist camp in that case. 

Since th~re is substantial evidence to support the trial 

court's determination that the Department's appeal was neither frivolous nor made in bad faith, the order denying New 
Life's motion to assess its attorney's fees against the 

/ 

Department is affirmed. 

We concur: 
Mr. Justice John C. Sheehy, specially concurring: 

I concur with the decision of the majority in this case. 

However, I would rule that the appeal by the Department of 

Revenue on the education exemption from taxation in this case 

was frivolous, though the Department did have a legitimate 

issue for appeal on the question of retroactivity. 

T