NO. 83-166 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1983 

OLD FASHION BAPTIST CHURCH, 

Plaintiff and Appellant, 

VS . 

MONTANA DEPARTMENT OF REVENUE, et al., 

Defendants and Respondents. 

Appeal from: District Court of the Second Judicial District, 

In and for the County of Silver Bow 

Honorable Ma&+&&&%, Judue presiding. 

.+?@&OLD OLSE~ 

Counsel of Record: 

For Appellant: 

John Leslie Hammer argued, Butte, Montana 

For Respondents: 

Larry G. Schuster argued, Helena, Montana 

R. Lewis Brown, Butte, Montana 

Filed t NOV 3 - 1983 

Submitted: September 13, 19 83 

Decided: November 3, 1983 
Mr. Chief Justice Frank I. Haswell delivered the Opinion of 

the Court. 

Old Fashion Baptist Church appeals from a Silver Bow 

County District Court judgment disallowing its claimed 

property tax exemptions. We affirm in part and reverse in 

part, and remand for further proceedings. 

On July 23, 1975, the Church recorded a. gra.nt deed to 

lots 10-16 in a subdivision near Butte. On the same day a 

notice of purchasers interest was recorded by the Church for 

lots 6-9 in the same subdivision. All lots a.re surrounded by 

one fence. 

On lots 10-11, there is a building used as a. church 

school and place of worship. There is a house on lot 14 used 

as a parsonage. A road leading to the church crosses 1-ots 6, 

7, 8 and 9. Other portions of lots 6-9 as well as the rest 

of the lots a.re used for recreational.. a.ctivities by church 

members but are unoccupied and unimproved. A softball 

backstop has been erected on one of the lots. Reverend Gary 

Miller, pastor of the Church, testified that the property was 

purchased for convenience and usage and all of the property 

is used by the school ministry and youth ministry for 

religious services and fellowship. 

The Montana Department of Revenue (DOR) granted tax 

exemptions to lots 10-16 in 1980. However, the exemption for 

lots 6-9 was denied, and property taxes thereon were assessed 

for 1975 and all subsequent years. 

Since taxes were delinquent on lots 6-9, Lee MacDonald 

took a tax assignment on those lots and, without proper 

notice to the Church, obtained a tax deed and recorded the 

deed. On March 3, 1980, MacDonald quitclaimed his interest 

in lots 6-9 to James Walters by recorded deed. On May 22, 
1980, the Church recorded its deed from Marjorie Noland for 

lots 6-9. 

There is some evidence that MacDonald or Walters 

visited the pastor of the Church and demanded $6,000 to 

reconvey their alleged interest acquired by tax deed. There 

is also eviden.ce that threats of ouster were made. MacDonald 

would not clear title as requested by the Church. 

Thereafter, the Church filed this action to quiet title. 

The District Court found that the Church was the record 

owner of all lots in question and voided the tax deed. 

Further, it granted a tax exemption on lots 10, 11 and 14, 

concluding that the other lots were not reasonably necessary 

for the convenient use of the church buildings. Also, the 

court determined that ingress and egress could he achieved by 

means other than the road on lots 6-9. This appeal followed. 

The Church raises two issues for our consideration: 

(1 Is the Church entitled to an exemption, as a 

religious institution, on all lots surrounding the church 

buildings? 

(2) Did the District Court act without jurisdiction in 

disallowing exemptions previously granted by the Department 

of Revenue? 

The Church con.tends that the land surrounding the 

church buildings is reasonably necessary for convenient use 

of the church buildings; thus, the Church is entitled to an 

exemption under section 15-6-201 (1) (b) , MCA. The land is 

used exclusively by the Church, the school ministries, and 

youth ministries for religious purposes. Ingress and egress 

is accomplished by the road which is on lots 6, 7, 8, and 9. 

A DOR witness testified that he had only been on the property 

twice but saw no activity. Consequently, the Church argues, 
DOR failed to contradict the Church1 s evidence regarding the 

use of the property. 

The Church also a.rgues tha.t the legislative enactment 

of the exemption for adjacent lands necessary for the 

convenient use of buildings indicates an intent to liberally 

construe the exemption statute. 

DOR asserts that the tax exemption statutes must be 

strictly construed against exemptions and in favor of 

taxation. A tax exemption cannot be implied but must be 

expressed in clear, unambiguous language. 

DOR recognizes that the church, parsonage and land on 

which they sit is exempt from property tax. However, the 

adjacent land does not fall under section 15-6-201, MCA, as 

it is not reasonably necessary for convenient use of the 

church buildings. DOR points out that all of the lots were 

unimproved and vacant, and no activity was ever witnessed on 

the property. Under rules of strict construction an 

exemption cannot be granted on such property. 

Property tax exemptions for religious institutions a.re 

established in Art. VIII, Section 5, of the 1972 Montana 

Constitution, which reads in part: 

"Property - tax exemptions. (1) The 

legislature may exempt from taxa.tion: 

" (b) Institutions of purely public charity, 

hospitals and places of burial not used or 

held for private or corporate profit, places 

for actual religious worship, and property 

used exclusively for educational purposes. 

(c) Any other classes of property." 

Section 15-6-201 (1) (b) , MCA, provides: 

"Exempt categories. (1) The following 

categories of property are exempt from 

taxation : 
(b) build.ings, with the land they occupy 

and furnishings therein, owned by a 

church and used for actual religious 

worship or for residences of the clergy, 

together with adjacent land reasonably 

necessary for convenient use of such 

buildings;" 

Generally, property tax exemptions for religious 

institutions are strictly construed against the claimant. 71 

Am.Jur. State and Local Taxation, 5 381 at 688; Grace, Inc. 

v. Board of County Comm. (N.M.App. 1981), 639 P.2d 69; Yakima 

First Baptist Homes, Inc. v. Gray (1973), 82 ~ash.2d 295, 510 

P.2d 243; Board of Publication of the Methodist Church v. 

Oregon State Tax Commission (1964), 239 Or. 65, 396 ~.2d 212; 

see also, other cases cited in 15 ALR2d 1064, 1065. This 

Court so held in Flathead Lake Methodist Ca.mp v. Webb (1965), 

144 Mont. 565, 399 P.2d 90, citing Town of Cascade v. Cascade 

County (1926), 75 Mont. 304, 243 P. 806, and Cruse v. Fischl 

(1918), 55 Mont. 258, 175 P. 878. However, lathe ad Lake 

also recognized that each case must be viewed from a 

realistic standpoint, quoting language from a New York court: 

"'We must, as in all other judicial 

determinations, place in juxtaposition the 

two extremes of judicial interpretation. On 

the one hand is the policy of strict 

construction which frowns upon tax exemption. 

[Citin.g cases.] On the other hand, innocent 

collateral activities essential to the 

furtherance of the true purposes of the 

corporation should not blind the court to the 

genuineness of those purposes nor to the 

sincerity of their a.ctua1 accomplishment. ' 

[Citing cases.] 281 N.Y.S. 545 at page 546." 

144 Mont. at 573, 399 P.2d at 95. 

While strict construction of exemption statutes is the 

majority rule, the balancing approach adopted by this Court 

lays a foundation for construing our statute. 

We construe the exemption statute to allow an exemption 

for the actual land that is the access roadway. It was 
brought out in oral argument that because of the topography 

of the surrounding land, ingress and egress can only be 

achieved by the church access road, not by Wynne Avenue as 

determined by the District Court. This access road crosses 

lots 6, 7, 8 and 9. We find that roads for ingress and 

egress are certainly within the meaning of "adjacent land 

reasonably necessary for convenient use of such [church] 

buil-dings," stated in section 15-6-201 (1) (b) , MCA. Access to 

church buildings is necessary for the convenient use of such 

buildings. 

We exempt only the land on which the roadway sits, 

adhering to the policy of strict construction of tax 

exemption statutes. The balance is swung toward strict 

construction rather than a more permissive interpretation 

since the property is largely undeveloped and the use thereof 

is not clearly evident nor documented. Hence, it is 

difficult to ascertain whether such use is essential to the 

furtherance of the true purposes of the Church. Our holding 

is strictly limited to the facts of this case and does not 

foreclose other religious institutions from asserting tax 

exemptions on property adjacent to church buildings. 

The Church also asserts that the District Court had no 

jurisdiction to remove exemptions on lots previously exempted 

by DOR. The tax exempt status of those lots was not involved 

in the litigation and DOR did not challenge such status. 

DOR argues that the exempt status of the lots was 

raised by the Church and thus became subject to litigation. 

A District Court does not have jurisdiction to grant 

relief outside of the issues presented by the pleadings 

unless the parties stipulate that other questions be 

considered or the pleadings are amended to conform to the 
proof. Heller v. Osburnsen (19731, 162 Mont. 182, 510 P.2d 

13, National Surety Corp. v. Kruse (19481, 121 Mont. 202, 192 

P.2d 317; Welch v. All Persons (19271, 78 Mont. 370, 254 P. 

179; Wallace v. Goldberg (1925), 72 Mont. 234, 231 P. 56. In 

National Surety Corp., this Court recognized that "[tlhe rule 

in Montana as well as in other jurisdictions seems to be well 

settled that a judgment must be based on a verdict or 

findings of the court and -- must be within the issues presented 

-- to the court. " 121 Mont. at 205-206, 192 P.2d at 319. 

(Emphasis added.) This rule was clearly upheld in Heller, 

162 Mont. at 288, 510 P.2d at 16. 

We hold the District Court had no jurisdiction to 

remove the exempt status originally granted by DOR. In this 

case the original action was to quiet title on lots 6, 7, 8 

and 9, as the tax deed clouded the Church's title. As 

previously mentioned, the Church alleged that the tax deed 

was void since no delinquency occurred because the property 

should have been tax exempt. Therefore, the issues of the 

action embraced lots 6 through 9. The exemption granted on 

lots 10 through 16 by DOR was acknowledged in its answer. 

DOR's prayer for judgment specifically asked that the 

nonexempt status and subsequent assessment on lots 6 through 

9 be affirmed. Lots 10 through 16 were not mentioned. 

Finally, the Church's application for a writ of prohibition. 

only dealt with the tax assessment on lots 6 through 9, not 

lots 10 through 16. 

The above facts regarding the pleadings indicate that 

the tax exempt status of lots 10 through 16 was never brought 

into this litigation. Rather, the essence of the action was 

the validity of the tax deed which depended, in part, on the 

tax status of lots 6 through 9. Consequently, the District 
Court acted without jurisdiction in removing the exemption 

status of lots 10 through 16. 

The judgment is reversed a.s to lots 10 through 16. The 

judgment as to lots 6 through 9 is vacated and remanded to 

the District Court for determination of the actual, physical 

dimensions of the access road for tax exemption, which would 

refer back to time of acqui-sition. The remainder of the 

judgment is affirmed. 

'a-,+ qQq Chief Justice 

We concur: 

Justices 

&strict Judge, sitting in. place 

of Mr. Justice Frank B. Morrison, Jr. 
Mr. Justice John C. Sheehy, dissenting: 

I dissent from this improper and unworkable decision 

relating to the exemption of church-related property. 

The majority admit that Rev. Gary Miller, pastor of the 

church, testified that the property was purchased for 

convenience and usage and all of the property was used by the 

school ministry and youth ministry for religious services and 

fellowship. 

The majority ha.ve ignored that language in determining 

that a portion of the church property must be taxed. 

This is the testimony which bears on the question: 

"Q. I believe that you testified during the course 

of a direct examination that those particular lots 

were used for picnics, hayrides, tobogganing and 

activities of that sort, is that correct? A. 

(Rev. Miller) Yes, related to our ministries, our 

youth ministries, our school ministry . . . 

"THE COURT: You have a road and you have a 

baseball diamond on 6, 7 and 8 and 9. There is a 

road in all three or four. 

"THE WITNESS: The road has to be on all of them 

but maybe 6. That's not vacant. Its used 

everyday." 

In contrast, the Depa-rtment of Revenue employee 

testified that he had been on the premises only twice, not on 

a day when church or school activities were going on, and 

that he had no direct knowledge of any kind as to the use of 

the lots with respect to the church ownership. 

Lots 6 through 9, and lots 10 through 16 are all used as 

one unit, and are enclosed in a common fence. There is a 

baseball diamond located on lots 6 through 9, as well as a 

roadway which the majority have seen fit to exempt from 
taxation. The evidence is that the recreational portion of 

lots 6 through 9 in connection with the school ministry. 

This case should be controlled by Flathead Lake 

Methodist Camp v. Correan M. Webb, County Treasurer, (1965), 

144 Mont. 565, 399 P.2d 90. In that case, this Court held 

that that portion of church property used for recreational 

purposes in connection with its religious educational 

purposes was entitled to exemption from taxes. I see no 

difference in the situation existing here, particularly where 

the testimony indicates that the property is used "everyday" 

in connection with the ministry of the church. 

This case sets a danqerous precedent. Now al.1 church 

properties will be examined by the Department of Revenue, and 

those portions of the their properties which are not in 

active use on the two days the Department of Revenue may come 

by to observe will be subject to taxation. 

The real question in cases like this should be whether 

the church is attempting to gain an exemption for more land 

than is necessary for its purposes. No such situation exists 

here. I therefore dissent. 

: u& 8 J?/b7 

Justice